Anderson 19th Ed. 2005

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Chapter 26OBLIGATIONS ANDPERFORMANCE
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General Principles

• Obligation of Good Faith Every sales contract
  imposes an obligation of good faith and timely
  performance.
• Good faith means honesty in fact in the conduct
  or transaction concerned.
• For merchants, the UCC imposes the additional
  requirement of observing reasonable commercial
  standards of fair dealing in the trade.

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General Principles

• A buyers or a sellers refusal to perform a
  contract is called a repudiation.
• A repudiation made in advance of the time for
  performance is called an anticipatory
  repudiation.
• Repudiation is a breach of the contract.

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General Principles

• If either party to a contract feels insecure
  about the performance of the other, that party
  may demand in writing adequate assurance of
  performance.
• If adequate assurance is not given, the demanding
  party may treat the contract as repudiated.

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Sellers Duties

• The seller has a duty to deliver the goods in
  accordance with the terms of the contract.
• The time, manner and place of delivery are
  usually a part of the contract, or are determined
  by the usual course of dealing in that business.
• In any case, this duty requires that the seller
  permit the transfer of possession of the goods to
  the buyer.

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Buyers Duty Upon Receipt

• The buyer has the right to inspect the goods upon
  tender or delivery.
• Inspection includes the right to open cartons and
  conduct tests.
• Exception to this is a COD delivery.
• Buyer has no right until payment is made.

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Buyers Right to Reject

• If the inspection by the buyer reveals that the
  seller has tendered nonconforming goods, the
  buyer may reject all or part of the order.
• Subject to certain limitations, the seller may
  then offer to replace the goods or cure the
  problem.

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Buyers Duty to Accept Goods

• The buyer has a duty to accept goods that conform
  to the contract, and refusal to do so is a breach
  of contract.
• The buyer is deemed to have accepted goods either
  expressly or by implication through his conduct
  or by lapse of time.
• The buyer must pay for accepted goods in
  accordance with the contract.

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Buyers Right of Rejection

• The buyer can reject goods in commercial units,
  accept the goods and collect damages for their
  problems, or reject the full contract shipment.
• The buyer must give notice of rejection to the
  seller and cannot do anything with the goods that
  would be inconsistent with the sellers ownership
  rights.

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Revocation of Acceptance

• Even following acceptance, the buyer may revoke
  that acceptance if
• the problems with the goods substantially impair
  their value and the problems were not easily
  discoverable, or
• the buyer kept the goods based on the sellers
  promises to repair them and make them whole.
• Buyer must hold the goods and await instructions
  from seller.

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When Duties are Excused

• Commercial Impracticability Performance can be
  excused but the seller must show objective
  difficulties that create more than cost
  increases.

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Overview