Contract Law for Paralegals: Traditional and E-Contracts © 2009 Pearson Education, Upper Saddle River, NJ 07458. All rights reserved Remedies for Breach of Sales and Lease Contracts Chapter 12
Dec 31, 2015
Contract Law for Paralegals: Traditional and E-Contracts
© 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Remedies for Breach of Sales and Lease
ContractsChapter 12
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Tender of Delivery
Transfer or delivery of goods to the buyer or lessee in accordance with sales or lease contract
Requires: Conforming goods to be put aside and held for
buyer or lessee Notification be made to buyer or lessee Goods must be tendered in single delivery
unless otherwise noted in contract Payment due upon delivery unless otherwise
noted
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Place of Delivery
Contract usually states place and time of delivery
If contract silent, place is seller’s or buyer’s place of business
If they have no place of business, it is their residence
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Place of Delivery (continued)
If goods at warehouse and are to be delivered without being moved, delivery occurs when seller: Tenders buyer negotiable document of
title Produces acknowledgement from
bailee of buyer’s right of possession Tenders nonnegotiable document of
title or written direction to bailee to deliver goods to buyer
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Delivery in Carrier Cases Shipment Contracts
Do not name destination Seller must put goods in carrier’s possession and
contract for delivery Obtain and deliver all documents necessary for
buyer to obtain possession Notify buyer of shipment
Destination Contracts Names destination Delivery must be made at reasonable time
and in reasonable manner
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Perfect Tender Rule If goods fail to conform,
buyer/lessee may: Reject entire shipment Accept whole shipment, or Reject part and accept part
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Exceptions
Agreement of Parties Parties may contract to limit perfect tender
rule Defective or nonconforming goods may be rejected Seller/lessor may replace nonconforming goods Buyer/lessee accepts nonconforming goods with
compensation
Substitution of Carriers Commercially reasonable carrier may be
substituted if agreed-upon delivery manner fails or becomes unavailable
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Cure
UCC gives seller/lessor opportunity to cure time has not expired must notify buyer/lessee of intentions
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Installment Contract
Goods delivered and accepted at different times
Requires specific knowledge Seller can only reject entire
contract if default impairs value of entire contract
Seller can reject non-conforming shipments
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Destruction of Goods
Contract void If goods are totally destroyed through no fault
of either party before risk of loss passes Both parties excused from performance
Contract voidable If goods are partially destroyed through no
fault of either party before risk of loss passes Buyer may inspect goods and choose to void
the contract
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Buyer’s and Lessee’s Performance Once seller/lessee has tendered
delivery, buyer/lessee is obligated to accept and pay as per sales/lease contract.
If contract silent, UCC controls.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right of Inspection
Buyer has the right to inspect goods before paying for them
Buyer may reject nonconforming goods
Parties may agree as to time and place of inspection
If contract silent, inspection must occur at reasonable time and place
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Payment
Due from buyer when and where goods delivered
Contract may set terms Can be paid in any manner
acceptable in ordinary course of business
If cash required, buyer must be given an extension to secure cash
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Acceptance
Contract is created when the offeree sends an acceptance to the offeror, not when the offeror receives the acceptance.
The UCC permits acceptance by any reasonable manner or method of communication.
Acceptance occurs if buyer acts inconsistently with seller’s ownership rights.
Buyers/lessees must accept “commercial unit”.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Revocation of Acceptance
Buyer can revoke acceptance if: Goods are non-conforming The nonconformity substantially impairs the
value of the goods The seller’s promise to timely cure is not met Goods were accepted before non-conformity
was discovered and the nonconformity was difficult to discover
The goods were accepted before the nonconformity was discovered and the seller/lessor assured the buyer/lessee that the goods were conforming
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right to Withhold Delivery
Delivery of goods may be withheld if: Seller/lessor is in possession of goods when
buyer/lessee breaches contract Buyer/lessee fails to make payment when due Buyer/lessee repudiates contract
If part of the shipment has been delivered at time of breach, seller/lessor may withhold delivery of remainder.
If seller/lessor discovers that buyer/lessee is insolvent, they may require cash payment.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right to Stop Goods in Transit Seller/lessor may stop shipment in
transit if: He discovers buyer’s/lessee’s
insolvency Buyer/lessee repudiates shipment Buyer/lessee fails to make
payment when due Seller/lessor must give sufficient
notice to allow bailee to prevent delivery
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right to Reclaim Goods
Seller/lessor may reclaim goods if: The buyer misrepresented their
solvency in writing within 3 months before delivery
Paid for goods with a check that bounced
If the lessee is in default of the contract
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right to Dispose of Goods Must be made in good faith Seller/lessor must give notice to
buyer/lessee of intention Notice not required with
perishable goods or goods that will quickly decline in value
Seller/lessor may recover damages
Profit does not revert to original buyer
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Right to Recover the Purchase Price or Rent
Seller/lessor may sue to recover if: Buyer/lessee fails to pay as due Buyer/lessee breaches contract after
goods have been identified and seller/lessor cannot resell or dispose of them
Goods are damaged or lost after risk passes to buyer/lessee
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Additional Rights
Seller/lessor may sue to recover damages caused by buyer’s or lessee’s breach.
Seller/lessor may recover lost profits.
Seller/lessor may cancel contract if buyer/lessee breaches.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Buyer’s and Lessee’s Remedies
Buyer may reject nonconforming goods or improperly tendered goods. May reject the whole, accept the whole, or
accept any commercial unit and reject the rest Must reject within a reasonable time period. Must follow reasonable instructions for return
of goods. If goods are perishable, must make
reasonable effort to sell them on seller’s behalf.
Buyer entitled to reimbursement for shipping, holding, storage expenses.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Buyer’s and Lessee’s Remedies (continued)
If buyer makes full or partial payment before goods are received and seller/lessor becomes insolvent within ten days of receiving payment, they can recover goods .
If goods are unique, buyer can obtain specific performance
Buyer/lessor may cover. Buyer/lessee has right to replevy goods,
if they are wrongfully withheld.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Buyer’s and Lessee’s Remedies (continued)
Buyer/lessee may cancel contract if seller/lessor fails to deliver conforming goods or repudiates contract Buyer/lessee may recover damages
Buyer/lessee may recover damages for accepted nonconforming goods
Buyer/lessee may recover damages for loss from seller’s breach
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Additional Performance Issues Assurance of
Performance An adequate assurance of
due performance may be demanded in writing by either party.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Anticipatory Repudiation
Occurs when a party repudiates the contract before performance is required.
Wavering is not sufficient. Aggrieved party may:
Await performance for a commercially reasonable time.
Treat contract as breached at time of anticipatory repudiation.
Indicate repudiation is considered final.
Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved
Statute of Limitations The UCC provides that an
action for breach of any written or oral sales or lease contract must commence within four years after the cause of the action accrues.