Question

• How does the concept of good faith affect the buyer’s right of rejection under the Perfect Tender Rule?

• Under what legal theories will the seller have a right to withhold delivery of the goods to the buyer?

Answer 1

Under the perfect tender rule, the seller or lessor has an obligation to ship or tender conforming goods, and if goods or tender of delivery fail in any respect, the buyer or lessee has the right to accept the goods, reject the entire shipment, or accept part and reject part.

Exceptions to the perfect tender rule may be established by agreement. When tender is rejected because of nonconforming goods and the time for performance has not yet expired, the seller or lessor can notify the buyer or lessee promptly of the intention to cure and can then do so within the contract time for performance. Once the time for performance has expired, the seller or lessor can, for a reasonable time, exercise the right to cure if he or she had, at the time of delivery, reasonable grounds to believe that the nonconforming tender would be acceptable to the buyer or lessee. When an agreed-on manner of delivery becomes impracticable or unavailable through no fault of either party, a seller may choose a commercially reasonable substitute. In an installment contract, a buyer or lessee can reject an installment only if the nonconformity substantially impairs the value of the installment and cannot be cured. Delay in delivery or nondelivery in whole or in part is not a breach when performance is commercially impracticable. If an unexpected event totally destroys goods identified at the time the contract is formed through no fault of either party and before risk passes to the buyer or lessee, the parties are excused from performance. If a party has reasonable grounds to believe that the other party will not perform, he or she may in writing demand assurance of performance from the other party. Until such assurance is received, he or she may suspend further performance. Finally, when required cooperation is not forthcoming, the cooperative party can suspend her or his own performance without liability.