BUSINESS LAW TODAY
Essentials 9th Ed.
Roger LeRoy Miller - Institute for University Studies, Arlington, Texas
Gaylord A. Jentz - University of Texas at Austin, Emeritus
Chapter
12
Sales and Leases:
Performance and Breach
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Learning Objectives
 What are the respective obligations of the
parties under a contract for the sale or
lease of goods?
 What is the perfect tender rule? What are
some important exceptions to this rule
that apply to sales and lease contracts?
 What options are available to the
nonbreaching party when the other party
to a sales or lease contract repudiates the
contract prior to the time for
performance?
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Learning Objectives
 What remedies are available to a seller
or lessor when the buyer or lessee
breaches the contract? What remedies
are available to a buyer or lessee if the
seller or lessor breaches the contract?
 In contracts subject to the UCC, are
parties free to limit the remedies
available to the nonbreaching party on
a breach of contract? If so, in what
ways?
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Performance Obligations
 Good faith and commercial
reasonableness are implied in every
contract.
 Seller has a basic obligation to transfer
and deliver conforming goods.
 Buyer’s basic obligation is to accept
and pay for conforming goods that are
properly tendered.
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Obligations of the Seller or Lessee
 Tender of Delivery.
 Seller has duty to notify Buyer that conforming goods
are at the disposal of the Buyer to take delivery.
 Reasonable place and time.
 Place of Delivery (For Tender).
 Non-Carrier: Seller’s place of business.
 Delivery via Carrier.
• Shipment: Seller must put conforming goods in carrier’s
hands, notify Buyer shipment has been made and
provide relevant documents.
• Destination: Seller agrees to deliver goods at a
particular destination.
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Perfect Tender Rule
 Seller has duty to ship or tender
conforming goods.
 If goods fail to conform to the agreement
in any way, the Buyer has the right to:
Accept the entire shipment.
Reject the entire shipment.
Accept or reject part of the shipment.
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Exceptions to Perfect Tender
 By Agreement of the Parties.
Exceptions can be established by the sales
contract itself.
 Seller can “cure” within time for
performance.
Seller has a right to repair, adjust, or replace
nonconforming goods.
 Substitution of Carriers.
If agreed upon carrier is not practicable,
reasonable substitute carrier may tender.
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Exceptions to Perfect Tender
 Installment Contracts.
Only if substantially impairs value of
installment.
 Commercial Impracticability.
Extends only to unforeseeable circumstances.
CASE 12.1 Maple City Farms, Inc. v. City
School District of Elmira (1974). Maple City
sued to cancel the agreement based on 23%
increase in cost of milk. Court held the
increase was foreseeable and not
impracticable.
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Exceptions to Perfect Tender
 Partial Performance.
If unforeseen event affects partial performance,
seller is obligated to secure remaining
performance via third parties.
 Destruction of Identified Goods.
Parties are excused only if the goods were
identified at the time contract was formed.
 Assurance and Cooperation.
If reasonable grounds to doubt, then written
assurance. Parties have good faith duty to
cooperate.
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Obligations of the Buyer or Lessee
 Payment.
 Right of Inspection.
C.O.D. Shipment.
Payment Due-Documents of Title.
 Acceptance.
Expressly by words or conduct.
Presumed if Buyer had opportunity to inspect
and failed to reject within a reasonable time.
 Partial Acceptance.
Buyer does not have to accept less than a
single commercial unit.
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Anticipatory Repudiation
 Prior to performance, one party

communicates to the other his intention not
to perform.
The non-breaching party can either:
 Treat the repudiation as a final breach and pursue a
remedy, OR
 Wait to see if the repudiating party will honor its
obligations.
 In either case, the non-breaching party may
suspend her own performance.
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Anticipatory Repudiation:
Remedies of the Seller
 If buyer is in breach, and goods are in
the seller’s possession, seller has the
right to:
Cancel the Contract.
Withhold Delivery.
Resell or Dispose of Goods (Incidental
Damages).
Recover the Purchase Price Due.
Right to Recover Damages.
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Seller Remedies: When the
Goods are In Transit
 If goods are in transit and seller learns
that buyer is insolvent or will not
perform, it has the right to:
Stop the Carrier and Cancel the Contract.
Resell Goods.
Sue to recover the Deficiency between contract
price and market.
Right to Recover Damages.
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Seller’s Remedies: Goods In
Possession of Buyer or Lessee
 When Goods are in Buyer’s
Possession, Seller has the right to:
Recover the Purchase Price or Payments
Due.
Right to Reclaim Goods.
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Remedies of the Buyer or Lessee
 If seller refuses to deliver the goods,
the buyer has the right to:
Cancel the contract.
Obtain goods that have been paid for.
Sue for specific performance.
CASE 12.2 Houseman v. Dare (2009). A dog
can have unique value that requires specific
performance of returning the dog to its owner.
Right of “Cover”: buyer must act in good faith
and without unreasonable delay.
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Remedies of the Buyer or Lessee
 If seller refuses to deliver the goods,
the buyer has the right to:
Replevy Goods (action to recover specific
goods).
Recover damages (difference between the
contract price and market price).
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Remedies of the Buyer or Lessee
 If seller delivers non-conforming
goods, buyer has the right to:
Reject Goods: can obtain cover, cancel
contract or sue for damages.
Revoke Acceptance.
• Acceptance based on nonconformity would
be cured.
• If discovery happened after possession.
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Remedies of the Buyer or Lessee
 If seller delivers non-conforming goods,
buyer has the right to:
Recover Damages for Accepted Goods.
• Buyer may keep goods and sue for damages
(difference between value of goods as accepted and
value if delivered as warranted).
• What is a reasonable to revoke acceptance?
CASE 12.3 Fitl v. Strek (2005). Fitl bought
baseball card from Strek. Two years later learned it
was defective. Court held for Fitl and awarded him the
purchase price of $17,750.
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Limitation of Remedies
 Parties can agree to limit remedies.
 Parties can expressly agree to provide
additional remedies than available under
UCC.
 Exclusive Remedies: Parties can agree
that a particular remedy is exclusive (the
only remedy available).
 Limitations on Consequential Damages.
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Statute of Limitations
 Action for breach of contract under UCC
must commence within four years after
the injury.
 Plus, injured party must give adequate
notice of injury to other party within a
reasonable time.
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