Chapter 1: Legal Ethics
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Learning Objectives
1. What are the respective obligations of
the parties under a contract for sale or
lease of goods?
2. What is the perfect tender rule?
3. 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
4. What remedies are available to a seller
or lessor when the buyer or lessee
breaches the contract?
5. In contracts subject to the UCC, are
parties free to limit the remedies
available to the non-breaching party on
a breach of contract? If so, in what
ways?
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Performance Obligations
 General Principles:
–Seller must transfer and deliver
conforming goods.
–Buyer must accept and pay for
conforming goods.
–In the absence of an agreement
between seller and buyer, UCC Article 2
controls as set out below. 
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Obligations of the Seller or Lessor
 Tender of Delivery: occurs when seller
delivers conforming goods to buyer.
–Requires reasonable notice.
–Reasonable hour and manner.
–Generally, all goods in one installment
(unless agreed upon by parties).
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Obligations of the Seller or Lessor
 Place of Delivery.
–Parties can agree goods tendered at a
particular destination for buyer to take
possession.
–If the contract does not specify, then it
is the seller’s place of business (or the
location of the goods.) 
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Obligations of the Seller or Lessor
 Delivery via Carrier.
–Shipment Contracts.
• 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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Obligations of the Seller or Lessor
 Delivery via Carrier.
–Destination Contracts.
• Seller agrees to deliver conforming
contracts to the buyer at a particular
destination, along with necessary
documentation.
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Obligations of the Seller or Lessor
 Perfect Tender Rule.
–If goods, or tender of delivery, fail in any
respect to conform to the contract, the
Buyer has the right to:
• Accept the goods;
• Reject the entire shipment; or
• Accept part and reject part.
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
– Agreement of the Parties: agree that some
defective goods will be acceptable.
– Cure: seller has right to repair or replace
defective goods within the time of contract
performance. Substantially restricts right of
rejection; buyers must act in good faith and
give specific reasons for refusing acceptance.
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
– Substitution of Carriers. If a carrier becomes
impracticable or unavailable through no
fault of either party, a commercially
reasonable substitute is acceptable.
– Installment Contracts. 
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
– Commercial Impracticability.
• If unforeseeable event occurs, the perfect
tender rule no longer applies.
• Seller must notify the buyer as soon as
practicable the shipment is delayed or
undeliverable. 
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
– Commercial Impracticability.
• CASE 14.1 MAPLE FARMS, INC. V. CITY SCHOOL
DISTRICT OF ELMIRA (1974). Would you
consider a 23% price increase a
commercial impracticability? 
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
–Destruction of Identified Goods.
• If no fault of either party and it occurs,
• Before risk passes to Buyer then,
• Both Seller and Buyer are excused from
performance.
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Obligations of the Seller or Lessor
 Exceptions to Perfect Tender.
–Assurance and Cooperation.
• One party has “reasonable grounds” to
believe other party will not perform, she
can ask for written assurance, or ‘suspend’
performance or delivery.
• Failure to respond may constitute a
repudiation of the contract.
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Obligations of the Buyer or Lessee
 Payment: make payment at the time
and place the Buyer receives the
goods.
–Credit has to be prearranged.
–Pay with cash, credit card, check.
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Obligations of the Buyer or Lessee
 Right of Inspection.
–Buyer has absolute right to inspection
before payment, unless C.O.D.
–CASE 14.2 ROMERO V. SCOGGIN-DICKEY
CHEVROLET-BUICK, INC. (2010). Is the
right to inspect good policy?
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Obligations of the Buyer or Lessee
 Acceptance.
–Buyer can accept goods:
• By words or conduct.
• If Buyer had reasonable amount of time
and failed to reject.
• Buyer performs an act which indicates he
thinks he is the owner. 
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Obligations of the Buyer or Lessee
 Acceptance.
–Partial Acceptance.
• If some of the goods do not conform to
the contract, and seller has failed to cure,
buyer can make a partial acceptance.
• But buyer cannot accept less a single
commercial unit.
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Obligations of the Buyer or Lessee
 Anticipatory Repudiation.
–A party communicates intention to not
perform.
• Constitutes breach of contract.
• Nonbreaching party may suspend
performance and treat the AR as material
breach and pursue a remedy; or wait a
reasonable time. 
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Obligations of the Buyer or Lessee
 Anticipatory Repudiation.
–A Repudiation May Be Retracted.
• Breaching party may ‘retract’ repudiation
by any method that clearly indicates their
intent.
• However, no retraction if the
nonbreaching party has materially
changed their position.
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Remedies of the Seller or Lessor
 When buyer breaches, seller has
various UCC remedies, depending on
circumstances:
–Who has possession of the goods?
–Are goods in transit?
–Has buyer rejected or accepted the
goods? 
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Remedies of the Seller or Lessor
 When Goods are in Possession of
Seller or Lessor, she has the:
–The Right to Cancel (Rescind) the
Contract.
• Seller must notify buyer.
• Buyer is not discharged from remaining
obligations. 
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Remedies of the Seller or Lessor
 When Goods are in Possession of
Seller or Lessor, she has the:
–Right to Withhold Delivery.
• If material breach by buyer, seller can
withhold delivery of all goods.
• If non-material breach, seller can withhold
delivery of this installment.
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Remedies of the Seller or Lessor
 When Goods are in Possession of
Seller or Lessor, she has the:
–Right to Resell or Dispose of Goods.
• Seller can resell and keep profits from sale
and hold buyer liable for difference.
• Seller must give buyer notice of sale,
unless goods are perishable.
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Remedies of the Seller or Lessor
 When Goods are in Possession of Seller
or Lessor, she has the:
–The Right to Recover Purchase Price.
• Seller can bring action to recover purchase
price or lease payments.
• If seller must sue, he must hold goods for
buyer, and sell any time before collecting
the judgment.
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Remedies of the Seller or Lessor
 When Goods are in Possession of Seller
or Lessor, she has the:
–The Right to Recover Damages.
• If buyer repudiates or wrongfully chooses to
accept goods, seller can bring action to
recover damages.
• Damages: market price at the time & place
of tender + incidentals.
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Remedies of the Seller or Lessor
 When Goods are in Transit, Seller 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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Remedies of the Seller or Lessor
 When Goods in Possession of the
Buyer or Lessee.
–Recover the Purchase Price or Payments
Due.
–Right to Reclaim Goods.
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Remedies of the Buyer or Lessee
 When Seller or Lessor Refuses to
Deliver the Goods, Buyer has the right
to:
–Sue for Specific Performance and
recover damages.
–Cover: in some situations.
–Replevy Goods. 
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Remedies of the Buyer or Lessee
 When Seller or Lessor Refuses to
Deliver the Goods, Buyer has the right
to: Recover Damages.
• CASE 14.3 LES ENTREPRISES JACQUES
DEFOUR & FILS, INC. V. DINSICK EQUIPMENT
CORP. (2011). When did the Buyer fully
perform? How did the Seller breach the
contract?
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Remedies of the Buyer or Lessee
 When Seller Delivers Nonconforming
Goods, Buyer has the:
–Right to Reject Goods.
• Buyer must timely notify seller of rejection
and reasons and follow seller’s directions.
• Merchant-buyer has good faith obligation
to follow reasonable instructions.
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Remedies of the Buyer or Lessee
 When Seller Delivers Nonconforming
Goods, Buyer has the:
–Right to Revoke Acceptance, if
• Acceptance assumed defect would be cured,
• Nonconformity was discovered after
acceptance, or
• Effective upon notice to seller.
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Remedies of the Buyer or Lessee
 When Seller Delivers Nonconforming
Goods, Buyer has the:
–Right to Recover Damages for Accepted
Goods.
• Buyer may keep the goods and recover any loss
in ordinary course of events.
• Measure of damages: difference between value
of accepted goods and goods as warranted.
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Limitations of Remedies
 Additional Provisions Affecting
Remedies.
–Exclusive Remedies.
–Consequential Damages.
–Lemon Laws.
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