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UCC Delivery and Risk of Loss - Coggle Diagram
UCC Delivery and Risk of Loss
Tender, Inspection, and Rejection
§ 2-301 General Obligations of Parties:
The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.
§ 2-503: Manner of Seller’s Tender of Delivery
(1) For tender of delivery, the seller must put and hold goods at the buyer’s disposition, give the buyer any reasonably necessary notification, and let the buyer take the deliver.
(5) Where the contract requires the seller to deliver documents, he must tender all such documents in correct form
(3) Where the seller is required to deliver at a particular destination tender requires that he comply with (1) and provide necessary documents
(4) Where goods are in the possession of a bailee and are to be delivered without being moved, there must be documentation
(1)(b) Buyer must furnish
reasonable facilities for delivery
§ 2-513: Buyer’s Right to Inspection of Goods
(1)
The buyer has a right, before payment or acceptance, to inspect goods
in a reasonable place, time, and in any reasonable manner. When the seller sends the goods to the buyer, inspection can wait until after the goods arrive.
(3) Certain contracts do not entitle the buyer to inspect the goods before payment.
(2) The
buyer pays for expenses of the inspection
but the seller may have to pay if the goods don’t confirm and are rejected.
§ 2-612: “Installment Contract”; Breach
(2) The buyer can reject a non-conforming delivery if it impairs the value of that delivery and can’t be cured or if the non-conformity is a defect in the required documents. If the non-conformity isn’t covered by (3), and the seller assures the buyer the non-conformity will be cured, the buyer must accept it.
(3) If a non-conforming delivery substantially impairs the value of the whole contract, then there is a breach of the whole. But the buyer reinstates the contract if they accept the non-conforming delivery and doesn’t notify the seller or if they take legal action only for past deliveries or demands for performance of future deliveries.
(1) An installment contract lets separate deliveries of goods to be accepted separately, even ig the contract contains a clause “each delivery is a separate contract” or its equivalent.
Rejection
§ 2-602: Manner and Effect of Rightful Rejection
§ 2-602(1) provides that rejection must occur within a reasonable time after delivery and the buyer must seasonably notify the seller.
(3) The seller’s rights for wrongfully rejected goods (§ 2-703).
§ 2-703: Seller’s Remedies in General:
(a) Withhold delivery of goods; (b) Stop delivery (per § 2-705); (c) Follow § 2-704 for goods unidentified to the contract; (d) Resell the goods and recover damages; (e) Recover damages for non-acceptance (§ 2-708) or recover the price (§ 2-709); or (f) Cancel.
§ 2-709: Action for the Price
(1)
If the buyer doesn’t pay the price when it becomes due, the seller may recover the price: (a) goods accepted or conforming goods lost and damaged within a reasonable time of the risk of loss passing to the buyer; and (b) goods identified in the contract if the seller couldn’t resell the product at a reasonable price or other circumstances show the effort was unavailing.
§ 2-708: Seller’s Damages for Non-acceptance or Repudiation:
(1)
The measure of damages for non-acceptance or repudiation by the buyer is the difference of the market price (at the time and place for deliver) and the unpaid contract price with any incidental damages, excluding expenses saved due to the buyer’s breach. Ex. (market price) – (unpaid contract price + incidental damages) – (expenses saved)
(2)
If section (1) doesn’t put the seller in the same position as performance of the contract would have, the measure of damages is the profit the seller would have made with full performance of the contract and any incidental damages for costs reasonably incurred and credit for payments or proceeds of resale.
(2) (a) After the buyer rejects goods, if they exercise ownership of the goods, it is wrongful against the seller. (b) If the buyer takes physical possession of the goods before rightful rejection, they are under a duty––after rejecting the goods––to hold the goods with reasonable care for a time sufficient to let the seller remove them. (c) The buyer has no obligations for rightfully rejected goods.
(1) Rejection of goods must be made within a reasonable time and the buyer must seasonably notify the seller.
§ 2-603: Merchant Buyer’s Duties as to Rightfully Rejected Goods
(2) When the buyer does sell goods, they are entitled to reimbursement from the seller (or out of the proceeds) for reasonable expenses from caring for and selling the goods. If there are no expenses, a selling commission. If there is no selling commission, then the commission that is usual in the trade. If there is none, a reasonable sum not exceeding 10% of the gross proceeds.
(1) When the seller doesn’t have an agent or place of business in the area where the buyer rejects the goods, the buyer has a duty to follow reasonable instructions from the seller for the goods. If there are no instructions, the buyer must make reasonable efforts to sell the goods for the seller’s account if the goods are perishable or threaten to decline in value speedily
§ 2-604: Buyer’s Options as to Salvage of Rightfully Rejected Goods
Subject to § 2-603 (perishable goods), if the seller doesn’t give instructions with a reasonable time or being notified of the rightful rejection, the buyer can: (1) store the rejected goods; (2) reship the goods to the seller; or (3) resell the goods with reimbursement according to § 2-603. These are not acceptance or conversation
Yates v. Clifford Motors, Inc.
Substantial impairment of value is not required for rejection.
The filing of a complaint against the seller of goods constitutes adequate notice of the buyer’s rejection, continued sparing use of the goods is not inconsistent with rejection, and substantial impairment is unnecessary for rejection.
Cure
§ 2-703: Seller’s Remedies in General:
(a) Withhold delivery of goods; (b) Stop delivery (per § 2-705); (c) Follow § 2-704 for goods unidentified to the contract; (d) Resell the goods and recover damages; (e) Recover damages for non-acceptance (§ 2-708) or recover the price (§ 2-709); or (f) Cancel.
§ 2-508: Cure by Seller of Improper Tender or Delivery; Replacement
(1) When goods from the seller are rejected because of nonconformity, and the time for performance hasn’t ended, the seller can notify the buyer of their intention to cure and make a conforming delivery within the contract time.
(2) When the buyer rejects goods the seller believed would be acceptable, the seller may have further reasonable time to do a conforming tender, as long as the seller notified the buyer.
*§ 2-716: Buyer’s Right to Specific Performance or Replevin
(1) Specific performance can be ordered when the goods are unique, or other proper situations.
(2) The specific performance decree can include payment of the price, damages, or other relief from the court.
(3) The buyer has a right of replevin for goods in the contract if, after a reasonable time, the buyer if the buyer is unable to cover for the goods or circumstances reasonable indicate that the effort will be unavailing.
David Tunick, Inc. v. Kornfeld
if a buyer validly revokes acceptance of goods, the seller normally has a right to cure a nonconformity pursuant to § 2-508. A cure consists of substituting conforming goods for the allegedly nonconforming goods within a specified time. Fine art, however, cannot be readily substituted. If a buyer revokes acceptance of a delivery of fine art, the seller does not have a right to cure by providing a replacement piece of art.
Revocation of Acceptance
§ 2-607: Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over
(2)
Acceptance by the buyer doesn’t include rejection of accepted goods
. Knowledge of non-conformity cannot be revoked unless the
acceptance was under the assumption that the non-conformity would be cured
. Accept itself doesn’t impair any other remedy for non-conformity.
(3)
When a tender has been accepted
: (a) the
buyer must notify the seller of a breach
in a reasonable time or be barred from any remedy; and (b)
if the buyer is sued because of the breach
, the buyer must notify the seller within a reasonable time or be barred from remedy related to the litigation.
(4) The
buyer must establish any breach
with the accepted goods.
(5) When the
buyer is sued for breach of warranty or something else the seller is responsible
for...
(1) The
buyer must pay the contract rate for accepted
goods
§ 2-608: Revocation of Acceptance in Whole or in Part
(1) The
buyer can revoke their acceptance for a delivery when those goods
substantially impair the value to him if he accepted it: (a) that the non-conformity
would be cured and it hasn’t
been; or (b) his acceptance was reasonably
based on difficulty discovering the issue
before acceptance or the seller’s assurances.
(2)
Revocation of acceptance must be within a reasonable time of discovering
the non-conformity before any substantial change in the condition of the goods (not caused by defects). It is not effective until the buyer notifies the seller.
(3) A buyer who
revokes has the same rights and duties as rejecting
the goods.
Acceptance
§ 2-606(1), acceptance of goods occurs when the buyer advises the seller
the goods are conforming or otherwise acceptable after a reasonable inspection opportunity, fails to effectively reject the goods after a reasonable inspection opportunity, or acts in a manner inconsistent with the seller’s ownership rights.
§ 2-602: Manner and Effect of Rightful Rejection:
(1) Rejection of goods must be made within a reasonable time and the buyer must seasonably notify the seller.
§ 2-607: Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over
(1) The
buyer must pay the contract rate
for accepted goods
(2)
Acceptance by the buyer doesn’t include rejection of accepted goods
. Knowledge of non-conformity cannot be revoked unless the acceptance was under the assumption that the non-conformity would be cured. Accept itself doesn’t impair any other remedy for non-conformity.
(3) When a tender has been accepted: (a) the buyer must n
otify the seller of a breach in a reasonable time
or be barred from any remedy; and (b) if the buyer is sued because of the breach, the buyer must notify the seller within a reasonable time or be barred from remedy related to the litigation.
(4) The buyer must establish any breach with the accepted goods.
(5)
When the buyer is sued for breach of warranty or something else the seller is responsible for
: (a) the buyer can give the seller written notice of the litigation. If the notice states the seller may appear to defend themselves and will be bound by litigation if they don’t, the seller will be bound if they don’t show up; (b) the seller may demand in writing that the buyer turn the control of litigation over to the seller.
Excuses for Non-Performance
§ 2-613: Casualty to Identified Goods
If the goods are damaged or ruined without fault of either party, before the risk of loss passes to the buyer:
(a)
total loss
voids the contract; and
(b) if the loss is partial or the goods no longer conform, to
buyer can demand inspection
and treat the contract as voided or accept the goods with due allowance from the contract price for the damage.
Performance is impossible if the contracted-for good or service is unique and its loss or destruction cannot be made good by substituting something that is fungible.
§ 2-614: Substituted Performance
(1) When, without fault of either party, the
agreed manner of delivery becomes unavailable or commercially impracticable
, if a commercially reasonable substitute is available, that substitute must be tendered and accepted.
Performance is impracticable if it is commercially unreasonable to absorb the extraordinary effort or cost needed to offset the contingency.
§ 2-615: Excuse by Failure of Presupposed Conditions
(a)
Delay in delivery or non-delivery is not a breach of the seller’s duty if the agreed performance was made impracticable
due to a contingency of which the non-occurrence was a basic assumption on which the contract was made.
(b) When a contingency
affects only part of the seller’s capacity to perform
, he must allocate the goods among his customers, but may do so in any manner which is fair and reasonable.
(c) The
seller must notify the buyer
of the delay or non-delivery in a reasonable time.
Examples
Chainworks, Inc. v. Webco Industries, Inc.
Increase in the cost of raw materials alone generally does not render a contract impracticable
. The event must have been unforeseeable.
An increase in costs of production or materials based on market forces is foreseeable and will not alone support an impracticability defense.
Specialty Tires of America v. CIT Group/Equipment Financing
Judicial relief is most justified if the unexpected
contingency leaves one party with a windfall gain
and inflicts a loss on the other party. The court should adjust the contract so that the first party’s gain leaves the other party in no worse condition than it would have been without the contract.
The court should
adjust the contract so that the first party’s gain leaves the other party in no worse
condition than it would have been without the contract.
Risk of Loss
§ 2-303: Allocation or Division of Risks
Where this Article allocates a risk or a burden as between the parties “unless otherwise agreed”, the agreement may not only shift the allocation but may also divide the risk or burden.
§ 2-510: Effect of Breach on Risk of Loss
(1)
When a tender or delivery of goods doesn't conform with the contract, the risk of loss remainds with the seller until cure or acceptance.
(2)
When the buyer rightfully revokes acceptance he may (regarding deficiency in insurance coverage) treat the risk of loss as being on the seller from the beginning.
(3)
When the buyer repudiates or has breached the contract, the seller (for deficiency in insurance coverage) treat the risk of loss as with the buyer for a commercially reasonable time.
§ 2-509: Risk of Loss in the Absence of Breach
Requires or Authorizes Seller to Ship Goods by Carrier
(a) No Specific Destination:
the risk of loss passes to the buyer when the goods are delivered to the carrier
(b) Specific Destination:
the risk of loss passes to the buyer when the goods are tendered as to enable the buyer to take delivery
Goods Held by a Bailee
(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:
(a)
When the Buyer receives a negotiable document of title covering the goods.
(c)
When the Buyer receives a non-negotiable document of title covering the goods.
(b)
The bailee acknowledges the buyer's right to possession of the goods.
(Jason's Foods, Inc.)
Both parties are able to insure goods held by the bailee because both parties might suffer a loss, and thus, the insurability of the goods does not help resolve the issue.
Because the warehouse acknowledgement was not given to Eckrich before January 14, the risk of loss did not pass to Eckrich.
Acknowledgement is to be made to the buyer for risk of loss to pass.
Directly from Buyer to Seller
(In re Woolridge)
Merchant Seller:
risk of loss passes to the buyer upon receipt of the goods
Non-Merchant Seller:
risk passes to the buyer on tender of delivery
Wooldridge was not a merchant; he was not in the business of selling boats and had only ever sold two. Ritchson delivered his assets as agreed, and Wooldridge provided Ritchson with the boat keys and proper ownership documentation and notified the marina of the sale, which was sufficient for Ritchson to take possession of the boat. Wooldridge thus tendered delivery on February 9, and risk of loss passed to Ritchson on that date.
(In re Woolridge)
Tender of delivery requires that the seller place conforming goods at the buyer’s disposition and give the buyer reasonable notification that allows the buyer to take delivery. (In re Woolridge)