Acceptance and Rejection III
Prof. Bill Long 3/15/05
The buyer also may reject a non-conforming tender. The section on rejection is in 2-602 and it provides:
"(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller."
If the rejection is to be rightful, it requires seasonable notice to the seller. Subject to 2-603 and 2-604 on rejected goods, any "exercise of ownership by the buyer with respect to any commercial unit is wrongful against the seller" (2-602(2)(a)). In addition, if the buyer has taken physical possession of the goods before rejection, the buyer "is under a duty to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them" (2-602(2)(b)).
Cmt 1 helps clarify the concept of rejection. It provides: "A tender or delivery of goods made pursuant to a contract of sale, even though wholly non-conforming, requires affirmative action by the buyer to avoid acceptance." Therefore, the responsiblity is on the buyer to initiate any act of rejection and make this rejection clear to the seller. "The buyer is given a reasonable time to notify the seller of his rejection, but without such reasonable notification his rejection is ineffective" Cmt. 1. But, then note (2)(c). After rightful rejection, the "buyer has no further obligations with regard to goods rightfully rejected." That is, if the goods are somehow in the buyer's possession, the seller has to come pick them up.
Once goods have been rightfully rejected, the seller may have an opportunity to cure the defect in the rejected goods. 2-508 speaks of this important issue of cure. I will quote the whole:
"(1) Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery." (2) "Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender."
This means of softening the perfect tender rule provides at least three things: (a) the seller gets a chance to cure defects if delivery was before the contracted date. The Code seems to suggest that b delivery, discovery and cure all happen before the original contract delivery date, but I think most courts (see, for example, the Midwest Mobile case) are willing to allow some leeway on this issue; (b) the seller gives reasonable notice to the buyer about intention to cure. I think the word "may" is misleading here because it suggests an option of the seller. How I read this section is that if the seller plans to cure, s/he must notify the buyer of that fact. Cmt 1 supports my reading, I believe--"upon reasonable notification to the buyer." (c) If the seller reasonably expected that the buyer would accept a non-conformity, and the buyer then reverses him/herself, the seller has a reasonable additional time to substitute a conforming tender. This reasonable additional time means a time outside of the originally contracted time for delivery. Cmts 1 and 2 to 2-508 are very helpful in giving additional information on cure.
I would like to say a few things about installment sales, because 2-612 looms large in the Midwest Mobile case (p.406) and is a second means by which the Code relaxes the rigidity of the perfect tender rule. First, the definition of such a contract:
"(1) An 'installment contract' is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause 'each delivery is a separate contract' or its equivalent."
The defintion of "lot" is in 2-105(5) and is seemingly not completely separate from a "commercial unit" under 2-105(6). The Midwest Mobile court says as much. It is essential to understand the distinction between 2-612(2) and (3). Under (2), the buyer may reject any intallment which is non-conforming if the non-conformity "substantially impairs" the value of that installment and cannot be cured. That is, when you have an installment contract, the seller has a little leeway to send goods that do not strictly conform to the contract without worrying whether s/he is in breach. According to the language just quoted, a seller under a 2-612 contract doesn't even have to bring things up to a "perfect tender" through cure.
Under 2-612(3), however, "whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole." So, the issue to determine in an installment contract is that when a delivery is made that does not conform to the contract, the nonconformity simply impairs the single shipment or "substantially impairs the value of the whole contract." Cmts 3,4,5, and 6 give additional helpful information about the distinction between a substantial impairment of one shipment and the substantial impairment of the contract as a whole.
Once you have managed to understand the flow of these sections, we will take up some examples of how they work. You should also know the facts and the legal reasoning of the Midwest Mobile case, which I believe goes through 2-612 better than any other case I have seen.
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