P A R T
4
Sales
Formation & Terms
Product Liability
Performance of Sales Contract
Remedies for Breach of Sales
Contracts
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
C H A P T E R
21
Performance of Sales Contracts
“Business
neglected is
business lost.”
Daniel Defoe, novelist, The
Complete English
Tradesman (1726)
Learning Objectives
 General
rules of performance under the
Uniform Commercial Code
 Delivery, inspection, and payment
 Acceptance, revocation, and rejection
 Assurance, repudiation, and excuse
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General Rules of The UCC




Parties must act in good faith in performance of a
sales contract [1–203]
If express terms conflict with trade usage or
past course of dealing, express terms prevail [1–
205(4)]
Consideration not required for modification,
but parties may require a writing [2–209]
A party must object to repeated failure of other
party to perform or waive rights [2–209(4)]
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UCC Delivery & Inspection
Basic duty of seller is to deliver (at seller’s
place of business) goods that conform to the
contract with buyer and basic duty of buyer is
to accept and pay for goods if conforming to
contract [2–301]
 Buyer has right of inspection


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If goods conform, buyer pays inspection
costs; if non-conforming, buyer may recover
expenses from seller [2–513(2); 2–715(1)]
Payment Under The UCC
Once goods accepted, buyer obligated to pay
 Buyer and seller may agree to payment in
money, goods, services, or real property
 International sales often use irrevocable letter
of credit (diagram on page 526)

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Revocation & Rejection
Buyer may revoke accepting nonconforming
goods if (a) non-conformity substantially
impairs value, (b) buyer did not know of
non-conformity, (c) buyer relied on seller’s
promise to cure [2–608(1)]
 If buyer rejects a delivery of goods, buyer
must act within reasonable time after delivery
and give seller notice of rejection, [2–602]

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Assurances & Excuses

If one party is reasonably concerned other
party may not perform, concerned party may
demand assurance (reasonable time) from
other party that contract will be performed


See Koch Materials Co. v. Shore Slurry Seal, Inc.
Commercial impracticability may be excuse for
non-performance if performance highly
impracticable, unreasonably expensive, or
little value to promisee [UCC 2–615]
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Test Your Knowledge

True=A, False = B
Goods are to be delivered at buyer’s place
of business unless otherwise specified by
contract
 If goods delivered conform to the contract,
the buyer must pay any expenses of
inspection.
 Buyer may revoke its acceptance of goods
not conforming to the contract if the
nonconformity substantially impairs the
value of the goods

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Test Your Knowledge

Multiple Choice
 Jersey Steel contracted to deliver 50 M12
metric threaded rods to HomeCo each week
for nine months. Four months later, Jersey
Steel erected a new sign at their site with
name “United Steel.” HomeCo may:
(a) Cancel the contract
 (b) Demand assurances of performance from
Jersey Steel
 (c) Stop any payments until all nine months of
deliveries have been received
 (d) None of the above

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Thought Question

If you contracted with another party for a
long-term sale of goods contract, what kind
of activities would prompt you to demand
assurances of performance?
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