Acceptance & Revocation (cont)
Tai Wah case (271) – lawyers and litigants
sometimes are TOO creative. Buyer held 2nd
shipment of allegedly defective goods as
security (leverage) to convince Seller to cure
allegedly defective first shipment. Buyer lost
under UCC? Why?
Basselen case (272)
Buyer drove car 19K miles after revoking
acceptance. Dents as well. Why is this a
problem in revoking acceptance?
See 2-608(2); see also 2-606
Prob 57 (271)
B discovered defect in car after driving on
highway for the 1st time (won’t exceed 40)
B has the right to ________ before
acceptance becomes effective. 2-606(1)a
How do you do this with a car?
On the other hand . . .
Prob 57 cont (271)
B arguably accepted by driving because he
acted inconsistent with ___________.
See 2-606(1)(c).
So, if B has accepted, what can B do after
discovering, upon driving on highway for
1st time, car will not exceed 40 mph?
...
Prob 57 cont (271)
B can revoke acceptance. 2-608.
But in this example B drove car after
supposedly revoking acceptance. Why is
this a problem for B? See 2-608(3)
(“rights and duties” of B after revocation of
acceptance)
...
Prob 57 cont (271)
Rights and duties of B after revocation of
acceptance same as rights and duties
after rejection.
So see 2-602(2); 2-604
How can B use to his advantage the fact
that he ran car to keep battery going?
Prob 57 cont (271)
B wants his $$ back but warranty limits his
remedy to repair or replacement.
In order to get his $$ back, B must prove the
limited remedy failed _______________.
What doctrine, often used by purchasers of
nonconforming cars, might help B?
Prob 57 cont (271)
B paid part of the purchase price, so 2711(3) gives him a security interest in the
goods, even if he is rejecting or revoking
acceptance.
What can B then do to get his $$ back. See
2-706
Seekings case (278)
Why did court hold that B NOT entitled to revocation (2608) against mobile home manufacturer?
What does privity mean? If can’t revoke acceptance as to
manufacturer, how does B litigate breach of warranty?
Diff b/w litigating breach of warranty and revocation?
Why DID the court permit revocation against dealer even
though dealer disclaimed implied warranties? (283)
Courts disagreeing with Seekings; why (286-87)
Kingston v. Champlain (288)
B had little choice but to accept non-conforming
goods. But is B required to pay full price? SEE
2-607(2):
Acceptance of goods by the buyer precludes
rejection of the goods accepted and if made with
knowledge of a non-conformity cannot be
revoked because of it unless the acceptance
was on the reasonable assumption that the nonconformity would be seasonably cured but
acceptance does not of itself impair any
other remedy provided by this Article for
non-conformity.
Kingston (cont)
How do 2-714 and 2-717 help B?
How does this compare with what you
learned in first year contracts (common
law)?
What notice must B give? 2-607(3)
Problem 58 (291)
a) If the SOL is 4 years and B brings suit
within 1 year, how can 2-607(3)(a) bar
the suit nevertheless?
b) Is filing and serving a lawsuit the same
as “notice” under 2-607(3)? What is the
purpose of the “notice” requirement?
c) 2-607 Comm 4: notice must inform S that
the transaction involves a “breach”
d) Notice of breach starts settlement talks
In Re Rafter (293)
Acceptance analysis in lease transactions
closely analogous to acceptance analysis
in sales transactions.
2A-515 – after reas opp to inspect, did
lessee act as if accepting?
What did lessee do in Rafter?
Note on 296-97
Finance Lease v. Sale involving manfacturer
Finance Lease
/
Manu. Sale
Lessee
Buyer
Finance Lessor
Seller
Supplier
Manufacturer
Lessee seeks warranty protection from Supplier,
similar to Buyer seeking warranty protection
from Manufacturer
Hell or High Water (2A-407)
Not for consumer leases; otherwise imposed by
operation of law on finance leases
Kicks in upon acceptance. See word
“independent” in 2-407(1)
Lessee (customer) must pay under lease come
“hell or high water;” even if problems with goods.
Why? Who is lessee paying? Who is responsible
for remedying goods?
Prob 60 p297
60(a) – can lessee reject? Did goods conform?
60(b) – This is a finance lease (2A-212(1). Did
lease bw lessor and lessee contain any
warranties? What about implied warranties bw
lessor and lessee. See 2A-103(1)(g)(i)
See 2A-209 – How does 3d party beneficiary
theory help lessee (customer)?
2-609 Right to Adequate
Assurance of Performance
•
•
•
•
(1) A contract for sale imposes an obligation on each party that the other's
expectation of receiving due performance will not be impaired. When
reasonable grounds for insecurity arise with respect to the performance
of either party the other may in writing demand adequate assurance of
due performance and until he receives such assurance may if
commercially reasonable suspend any performance for which he has
not already received the agreed return.
(2) Between merchants the reasonableness of grounds for insecurity and
the adequacy of any assurance offered shall be determined according to
commercial standards.
(3) Acceptance of any improper delivery or payment does not prejudice the
aggrieved party's right to demand adequate assurance of future
performance.
(4) After receipt of a justified demand failure to provide within a
reasonable time not exceeding thirty days such assurance of due
performance as is adequate under the circumstances of the particular case
is a repudiation of the contract.
Comment 1 to 2-609
Parties contract for ACTUAL performance, not
merely for a promise or a plus the right to win a
lawsuit. Also, elements dependent on one
another/build on one another:
Elements: 1) reas grounds to suspect other party
will not perform; 2) suspend performance; 3)
demand adequate assurance in writing; 4) treat
K as repudiated if no assurance w/i reas time not
to exceed 30 days
2-610 Anticipatory Repudiation
Repudiation is effective if value of K to other party
is substantially impaired (ie a material breach;
see materiality factors a-e p317 in Neptune
case)
If other party repudiates, non-repudiating party
may nevertheless await performance OR resort
to remedy in 2-711;
AND in either case suspend performance
(2-609 not the only way to show a repudiation)
Reasoning behind Anticipatory
Repudiation Law
Point is not to make non-breaching party
perform anyway; should seller have to
order goods from factory if buyer not going
to pay? (opposite of my friend in condo in
Michigan) If seller knows buyer is not
going to pay, should law hold seller in
“breach” for not first delivering goods and
waiting for payment that is not coming?
2-611 Retraction of Antic Repud
• (1) Until the repudiating party's next performance is due
he can retract his repudiation unless the aggrieved party
has since the repudiation cancelled or materially
changed his position or otherwise indicated that he
considers the repudiation final.
• (2) Retraction may be by any method which clearly
indicates to the aggrieved party that the repudiating party
intends to perform, but must include any assurance
justifiably demanded under the provisions of this Article
(Section 2-609).
• (3) Retraction reinstates the repudiating party's rights
under the contract with due excuse and allowance to the
aggrieved party for any delay occasioned by the
repudiation.
2-611 (in English)
If you repudiate you may nevertheless
perform if you do so by the original
deadline;
AND other party has not cancelled,
materially changed position or deemed
your repudiation FINAL;
AND you indicated to other party you now
intend to perform;
AND you provide written 2-609 assurance
Notes on 2-702: Seller’s Remedies
upon Discov. Buyer Insolvent
Typically, a seller will try to avail itself of 2609 if it finds out buyer cannot pay.
Policy behind 2-702 (in part) is to put seller
ahead of other creditors, at least with
respect to seller’s goods.
Neptune case (312)
Seller did not meet the INITIAL June
delivery date. Why did this not give buyer
the right to reject in June/July? 2-601
Did Neptune court hold that buyer had to
materially change its position; or could
buyer just “cancel?” 2-611(1)
What if Seller said, “not sure” he could
deliver by 9/5, instead of “no way?”
Problem 68 p321
Does Comment 1 to 2-610 help with a & b:
Comment 1 to 2-610: Repudiation “centers
upon an overt communication of intention
or an action which renders performance
impossible or demonstrates a clear
determination not to continue with
performance.”
Does word “overt” help with prob 68 c & d?
Prob 68: e, f
If not clear in e) that seller will not perform, what should you
advise elevator co (buyer) to do? (2-609)
Does Comment 2 to 2-610 help with 68(f)?:
Demand by one or both parties for more than the contract
calls for in the way of counter performance is not in itself
a repudiation nor does it invalidate a plain expression of
desire for future performance. HOWEVER, when under
a fair reading it amounts to a statement of intention not
to perform except on conditions which go beyond the
contract, it becomes a repudiation.
Prob 68 (f)
Was this a repudiation under 2-610?
Material?
What would you advise Crofter to do if you
were Crofter’s attorney? 2-609
Questions following 68 (322)
Prob 69 (323)
Without reading Gibbs case, do you think
Crofter SHOULD be able to pursue
Elevator for breach?
Gibbs says . . .
Prob 69 cont (323)
Gibbs says non-breaching party cannot go
after repudiating party for breach UNLESS
non-breaching party shows “it was capable
of performance notwithstanding the
anticipatory breach.”
Prob 70 (student counsel)
What language in 2-609 is the beginning of
the analysis?
What should you tell Crofter to do?
Koch case (323)
Did Plaintiff have “reasonable grounds” to
believe K would not be performed? Why?
Was atty’s letter to def a sufficient request
for adequate assurance? Why/Why not?
What about def’s response? Was that an
adequate assurance?
Prob 71 (329)
71a) Is this an installment K? 2-612. Can B
revoke/reject 1st delivery 2-612(b)? What about
later deliveries 2-612(c)?
Assuming B can’t get out of future deliveries yet,
what should B do? 2-609.What would be an
adequate assurance from seller in return?
71b) Does this rise to level of repud in 2-610?
Does B have better 2-609 case
71c) How does this factor into “reasonable
grounds” under 2-609?
Prob 71 cont (d, e & f)
d) Would the failure to provide adequate
assurance re: payment under these circs
be a “substantial impairment” under 2610?
e) Comment 3 to 2-609: can failure to
perform on OTHER K be reasonable
grounds for insecurity?
f) Does non-repudiating party’s problem
make insecurity more or less reasonable?
Notes and Qs after Prob 71 (330)
Buyer’s deadline not determinative if seller’s
response nevertheless reasonably timely.
Nor is specific type of assurance requested
the only type of assurance that will suffice.
See 2-609
Probs 72 & 73 (331)
Are rumors enough for reasonable grounds
for insecurity? See comment 4 2-609
Is it commercially reasonable for Greasy to
stop production? 2-609(1)
Is standard for proving insolvency (2-702)
same as reas grounds for insecurity in 2609?