Twomey & Jennings BUSINESS LAW

Twomey & JenningsBUSINESS LAW Chapter 25 Obligations and Performance

Good Faith • Every sales contract imposes an obligation of good faith and timely performance. • Good faith means honesty in fact in the conduct or transaction concerned. • For merchants, the UCC imposes the additional requirement of observing “reasonable commercial standards of fair dealing in the trade.”

Repudiation • A buyer’s or a seller’s refusal to perform a contract is called a repudiation. • A repudiation made in advance of the time for performance is called an anticipatory repudiation. • Repudiation is a breach of the contract.

Hornell Brewing Co., Inc. v Spry (1997) Were there adequate assurances by the Defendant? Adequate Assurance of Performance • If either party to a contract feels insecure about the performance of the other, that party may demand in writing adequate assurance of performance. • If that assurance is not given, the demanding party may treat the contract as repudiated.

Seller’s Duties • The seller has a duty to deliver the goods in accordance with the terms of the contract. • The time, manner and place of delivery are usually a part of the contract, or are determined by the usual course of dealing in that business. • In any case, this duty requires that the seller permit the transfer of possession of the goods to the buyer.

Buyer’s Right to Inspect • The buyer has the right to inspect the goods upon tender or delivery. • Inspection includes the right to open cartons and conduct tests. • Exception to this is a COD delivery. • Buyer has no right until payment is made.

Weil v Murray (2001) Did Murray properly reject the paintings? Buyer’s Right to Reject • If the inspection by the buyer reveals that the seller has tendered nonconforming goods, the buyer may reject them. • Subject to certain limitations, the seller may then offer to replace the goods or cure the problems.

Buyer’s Duties • The buyer has a duty to accept goods that conform to the contract, and refusal to do so is a breach of contract. • The buyer is deemed to have accepted goods either expressly or by implication through his conduct or by lapse of time. • The buyer must pay for accepted goods in accordance with the contract.

Buyer’s Right of Rejection • The buyer can reject goods in commercial units, accept the goods and collect damages for their problems, or reject the full contract shipment. • The buyer must give notice of rejection to the seller and cannot do anything with the goods that would be inconsistent with the seller’s ownership rights.

Jackson Hole Traders, Inc. v Joseph (1997) Did Joseph have the right to revoke her acceptance of the goods? Revocation of Acceptance • Even following acceptance, the buyer may revoke that acceptance if: • the problems with the goods substantially impair their value and the problems were not easily discoverable, or • the buyer kept the goods based on the seller’s promises to repair them and make them whole.

Alamance County Board of Education v Bobby Murray (2001) Was Murray excused from performance? When Duties are Excused • Commercial Impracticability: Performance can be excused but the seller must show objective difficulties that create more than cost increases.

Seller Buyer Contract Repudiation Performance Breach of Contract; Buyer may make substitutecontract & recover damages Delivery Right to Inspect Accept* Reject Correct performance if time allows Pay Revoke Acceptance (only in some cases) *May accept all, accept commercial units, or accept on condition of seller making repair or paying damages for nonconforming goods. Overview of Process

Twomey & Jennings BUSINESS LAW