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Performance and Remedies CHAPTER 22 Click your mouse anywhere on the screen to advance the  text  in each slide.  After th...
Quote of the Day <ul><li>“ Truth is the most valuable thing we have.  Let us economize it.” </li></ul><ul><li>Mark Twain, ...
Good Faith <ul><li>Good faith means  honesty in fact .  </li></ul><ul><li>Between merchants, it also means the use of reas...
Seller’s Obligations  (and a Few Rights) <ul><li>Conforming goods satisfy the contract terms.  Non-conforming goods do not...
Considerations when Applying the Perfect Tender Rule <ul><li>Usage of trade: any practice that members of an industry expe...
Cure <ul><li>When the buyer rejects non-conforming goods, the seller has the right to cure, by delivering conforming goods...
Substantial Impairment <ul><li>The Code puts a tighter restriction on buyers in the following two cases.  A buyer who clai...
Destruction of Goods <ul><li>If identified goods are totally destroyed before risk passes to the buyer, the contract is vo...
Commercial Impracticability <ul><li>A supervening event excuses performance of a contract, if the event was not within the...
Buyer’s Obligations  (and a Few Rights) <ul><li>The buyer must provide adequate facilities to receive the goods. </li></ul...
Buyer’s Obligations  (and a Few Rights) –  (cont’d) <ul><li>May  revoke  acceptance only if the nonconformity substantiall...
Remedies: Assurance <ul><li>When there are reasonable grounds for insecurity, a party may: </li></ul><ul><ul><li>demand wr...
Remedies: Repudiation  <ul><li>A party repudiates a contract by indicating that it will not perform. </li></ul><ul><li>Whe...
Seller’s Remedies <ul><li>Cancel the contract </li></ul><ul><li>Stop or refuse delivery </li></ul><ul><li>Identify goods t...
Seller’s Remedies  (cont’d) <ul><li>Damages for Non-Acceptance </li></ul><ul><ul><li>A seller who does not resell, or who ...
Buyer’s Remedies <ul><li>Cancel the contract </li></ul><ul><li>Recover money paid </li></ul><ul><li>Cover </li></ul><ul><u...
Buyer’s Remedies  (cont’d) <ul><li>Non-Delivery </li></ul><ul><ul><li>The difference between the market price at the time ...
Buyer’s Remedies  (cont’d) <ul><li>Incidental and Consequential Damages </li></ul><ul><ul><li>An injured buyer is generall...
Damage Limitations and Exclusions <ul><li>A court generally will not enforce a limitation that leaves the injured party wi...
“ Performance and remedy under the Code reflect contemporary commercial practices but also demand a satisfactory level of ...
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Performance and remedy

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Performance and remedy

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Performance and remedy

  1. 1. Performance and Remedies CHAPTER 22 Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide .
  2. 2. Quote of the Day <ul><li>“ Truth is the most valuable thing we have. Let us economize it.” </li></ul><ul><li>Mark Twain, </li></ul><ul><li>American author </li></ul>
  3. 3. Good Faith <ul><li>Good faith means honesty in fact . </li></ul><ul><li>Between merchants, it also means the use of reasonable commercial standards of fair dealing. </li></ul><ul><li>The Code requires good faith in the performance and enforcement of every contract. </li></ul>
  4. 4. Seller’s Obligations (and a Few Rights) <ul><li>Conforming goods satisfy the contract terms. Non-conforming goods do not. </li></ul><ul><li>The seller must tender the goods, which means to make conforming goods, available to the buyer. </li></ul><ul><li>Perfect Tender Rule </li></ul><ul><ul><li>Under the perfect tender rule , the buyer may reject the goods if they fail in any respect to conform to the contract. </li></ul></ul>
  5. 5. Considerations when Applying the Perfect Tender Rule <ul><li>Usage of trade: any practice that members of an industry expect to be part of their dealings. </li></ul><ul><li>Course of dealing: previous commercial transactions between the same parties. </li></ul><ul><li>Course of performance: the history of dealings between the parties in this one contract. This assumes it is a contract demanding an ongoing relationship. </li></ul>
  6. 6. Cure <ul><li>When the buyer rejects non-conforming goods, the seller has the right to cure, by delivering conforming goods before the contract deadline. </li></ul><ul><li>The seller has the right to cure even after the contract deadline if the seller: </li></ul><ul><ul><li>reasonably believed the goods to be conforming, and </li></ul></ul><ul><ul><li>promptly notified the buyer of his intent to cure within a reasonable time. </li></ul></ul>
  7. 7. Substantial Impairment <ul><li>The Code puts a tighter restriction on buyers in the following two cases. A buyer who claims goods are non-conforming must show that the defects substantially impair their value if: </li></ul><ul><ul><li>the buyer is revoking acceptance of goods, or </li></ul></ul><ul><ul><li>the buyer is rejecting an installment. </li></ul></ul>
  8. 8. Destruction of Goods <ul><li>If identified goods are totally destroyed before risk passes to the buyer, the contract is void. </li></ul><ul><li>If identified goods are partially destroyed, the buyer may choose whether to accept the goods at a reduced price or void the contract. </li></ul>
  9. 9. Commercial Impracticability <ul><li>A supervening event excuses performance of a contract, if the event was not within the parties’ contemplation when they made the agreement. </li></ul><ul><ul><li>Sometimes natural disasters such as tornadoes and earthquakes may relieve a party from performing. </li></ul></ul>Click here for online advice on avoiding some disasters.
  10. 10. Buyer’s Obligations (and a Few Rights) <ul><li>The buyer must provide adequate facilities to receive the goods. </li></ul><ul><li>Inspection -- The buyer generally has the right to inspect the goods before paying or accepting. </li></ul><ul><li>Partial Acceptance -- The buyer may accept some goods and reject others if the goods can be divided into commercial units. </li></ul>
  11. 11. Buyer’s Obligations (and a Few Rights) – (cont’d) <ul><li>May revoke acceptance only if the nonconformity substantially impairs the value and only if she had a legitimate reason for the initial acceptance. </li></ul><ul><li>May reject non-conforming goods by notifying seller within a reasonable time. </li></ul><ul><li>May reject a non-conforming installment , only if it substantially impairs the value of that installment and cannot be cured. </li></ul>
  12. 12. Remedies: Assurance <ul><li>When there are reasonable grounds for insecurity, a party may: </li></ul><ul><ul><li>demand written assurance of performance from the other party, and </li></ul></ul><ul><ul><li>until he receives it, generally may suspend his own performance. </li></ul></ul>
  13. 13. Remedies: Repudiation <ul><li>A party repudiates a contract by indicating that it will not perform. </li></ul><ul><li>When either party repudiates the contract, the other party may: </li></ul><ul><ul><li>for a reasonable time await performance or </li></ul></ul><ul><ul><li>resort to any remedy for breach of contract. </li></ul></ul><ul><li>In either case, it may suspend its own performance. </li></ul>
  14. 14. Seller’s Remedies <ul><li>Cancel the contract </li></ul><ul><li>Stop or refuse delivery </li></ul><ul><li>Identify goods to the contract </li></ul><ul><ul><li>If the seller has not yet identified goods to the contract, he may do so as soon as he learns of the breach. </li></ul></ul><ul><li>Resell </li></ul><ul><ul><li>The seller may recover difference between the resale price and contract price, plus incidental damages, minus expenses saved. </li></ul></ul>
  15. 15. Seller’s Remedies (cont’d) <ul><li>Damages for Non-Acceptance </li></ul><ul><ul><li>A seller who does not resell, or who resells unreasonably, may only recover the difference between the contract price and the market value of the goods at the time of delivery. </li></ul></ul>Action for the Price The seller may recover the contract price if: the buyer has accepted the goods, or the seller’s goods are conforming and he is unable to resell after a reasonable effort.
  16. 16. Buyer’s Remedies <ul><li>Cancel the contract </li></ul><ul><li>Recover money paid </li></ul><ul><li>Cover </li></ul><ul><ul><li>If the seller breaches, the buyer may ”cover” by reasonably obtaining substitute goods. </li></ul></ul><ul><ul><li>Buyer may then obtain the difference between the contract price and the cover price, plus incidental and consequential damages, minus expenses saved. </li></ul></ul>
  17. 17. Buyer’s Remedies (cont’d) <ul><li>Non-Delivery </li></ul><ul><ul><li>The difference between the market price at the time the buyer learns of the breach and the contract price, plus incidental and consequential damages minus expenses saved. </li></ul></ul><ul><li>Acceptance of Non-Conforming Goods </li></ul><ul><ul><li>Buyer may recover damages for the difference between the goods as promised and as delivered, plus incidental and consequential damages. </li></ul></ul>
  18. 18. Buyer’s Remedies (cont’d) <ul><li>Incidental and Consequential Damages </li></ul><ul><ul><li>An injured buyer is generally entitled to incidental and consequential damages. </li></ul></ul><ul><li>Specific Performance </li></ul><ul><ul><li>Allowed if the contract goods are unique, or the buyer is unable to obtain cover. </li></ul></ul><ul><li>Liquidated Damages </li></ul><ul><ul><li>Enforceable, but only in an amount that is reasonable in light of the harm. </li></ul></ul>
  19. 19. Damage Limitations and Exclusions <ul><li>A court generally will not enforce a limitation that leaves the injured party with no remedy. </li></ul><ul><li>A court will not enforce an unconscionable exclusion of consequential damages. </li></ul>
  20. 20. “ Performance and remedy under the Code reflect contemporary commercial practices but also demand a satisfactory level of sensible, ethical behavior.”

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