Rights of buyers in receipt of non-conforming goods

Under the Uniform Commercial Code (UCC, Article 2) Perfect Tender Rule, seller’s promises and performance as to quality, quantity, and manner of delivery of the goods must precisely conform to the purchase contract executed between buyer and seller.

If the goods or the tender of the delivery fail in any respect to conform to the purchase contract, the buyer may;

 

1. Reject the entire shipment; or

2. Accept the entire shipment; or

3. Accept any unit or units of the shipment and reject the rest.

For example, buyer contracts to buy 50 blue tee shirts from seller for $1000 but seller delivers yellow tee shirts instead. This is not a perfect tender under the UCC because seller delivered the wrong color so, buyer may accept all of the tee shirts, reject all of them or accept some or reject rest. Whichever the buyer chooses, buyer can get damages from seller.

Seller’s right to cure of non –conforming goods.

(i) Time for performance has not expired.
Under the UCC, a seller who fails to make a perfect tender may have an option to cure. However, this will depend on whether the time for seller’s performance has expired.

If the time for performance has not expired, then seller has an option to cure. For example, if the above mentioned contract provides for delivery no later than July 5. Seller delivers yellow tee shirts on June 4 and buyer rejects them, then seller has an option to cure the wrong shipment latest by July 5.

(ii) Time has expired
Seller has no option to cure unless seller has reasonable grounds to believe the goods would be acceptable to the buyer. For example, same facts, except seller delivers blue tee shirts on July 5 which is the contract deadline. Buyer rejects them. However, in the past, buyer had accepted blue tee shirts instead of yellow ones. In this case, seller still has an option to cure even though the contract deadline has passed because that is a sign that buyer has been flexible in the past so, it was reasonable for seller to think that buyer would accept the blue ones this time too thus entitling seller to cure it.

On the other hand, buyer who receives the non-conforming goods must seasonably notify the seller of the defect. When buyer keeps goods without objection after having an opportunity to inspect, then it is deemed buyer has impliedly accepted the goods unless the defect was difficult to discover (i,e., a latent defect).

In the meantime, UCC, Article 2, Perfect Tender Rule only applies to sale of goods (movable objects, i.e., personal property) between merchants. It does not apply to real property and service contracts. For example, A buys a house from B (real property contract), or A hires B to paint his house (service contract) thus Article 2 doesn’t apply in these circumstances.

In law context “Merchant” means a person who deals in goods of the kind. For example, if you buy a car from Ford, UCC, Article 2 would apply in this transaction whereas if you buy a car from your friend who is not in the business of selling cars then UCC, Article 2 wouldn’t apply.

Under UCC’s broad definition almost every business person is a merchant.

Published by Metin Caglar, Esq./ Contract Law Articles.