Materiality of Breach, Perfect Tender Rule, Anticipatory Repudiation, Non-Monetary

Remedies
BREACH
1. When does a breach occur? If the promisor is (1) under an absolute duty to perform, and (11)
this absolute duty of performance has not been discharged, the failure to perform in accordance
with contractual terms will amount to a breach of contract.
2.Is the breach material or minor? A breach is minor if the obligee gains the substantial benefit
of her bargain despite obligor's defective performance.

 What is the effect of a minor breach? Provide a remedy. Aggrieved party is not relieved
of her duty of performance under the contract.
3. Is the breach major? If the obligee does not receive the substantial benefit of her bargain as
a result of failure to perform or defective performance, the breach is considered material.

 What is the effect of a major breach? They non breaching party (1) may treat the contract
as at an end, and (ii) will have an immediate right to all remedies for breach of the
entire contract, including total damages.
4. Is the minor breach coupled with anticipatory repudiation? Non breaching party may treat it as
a material breach. The U.C.C. modifies this to permit a party to complete the manufacture of
goods to avoid having to sell unfinished goods at the lower salvage value.
5. Is the Material Breach of Divisible Contract? Recovery is available for substantial
performance of a divisible part even though there has been a material breach of the entire
contract.
6. How is Materiality of Breach Determined?

 Amount of Benefit Received-The greater the extent the less material the breach.
 Adequacy of Damages- The greater the extent, the less material the breach.
 Extent of Part Performance- The greater the extent, the less material the breach.
 Hardship to Breaching Party- If a finding of materiality and termination of the contract
would cause great hardship to the breaching party, the breach is less likely to be found
to be material.
 Negligent or Willful Behavior- The greater the extent, the more material the breach.
 Likelihood of Full Performance- The greater the extent, the less material the breach.
7. Failure of Timely Performance

 As Specified by Nature of Contract-

 When Delay Occurs- Delay at the onset of performance before delaying party has
rendered any part of his agreed-on performance is more likely to be considered material
than delay where there has been part performance.
 Mercantile Contract- Timely performance as agreed is important, and unjustified delay
is material.
  Land Contracts- More delay in land contracts is required for materiality than in
mercantile.
 Availability of Equitable Remedy-Courts are generally much more lenient in tolerating
considerable delay. Court will tend to find the breach immaterial and award
compensation for delay.
8. Material Breach and Substantial Performance- If performance is substantial, the breach is
not material.

PERFECT TENDER RULE

1. Article II follows the perfect tender rule.
2. What is the Perfect Tender Rule? If goods or their deliveries fail to the contract in any way,
the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.
3. What is a commercial unit?

 A unit that by commercial usage is treated as a single whole for the purpose of sale, and
division of which materially impairs its value.
4. What is the test for a commercial unit?

 Not only what unit has been the basis of the contract, but also whether the partial
acceptance produces so materially an adverse effect upon the remainder as to constitute
bad faith.
5. When is a buyers right to reject cut off under the perfect tender rule?

 When buyer accepts.

6. When does a buyer accept under Article II?

 After a reasonable opportunity to inspect the goods, she indicates to the seller that they
conform to requirements or that she will keep them even though they fail to conform;
 She fails to reject within a reasonable time after tender or delivery of the goods or fails
to seasonably notify the seller of her rejection; or
 She does any act inconsistent with the seller's ownership.
7. If in connection with rejection the buyer fails to state that the goods have a particular defect
that is ascertainable by reasonable inspection, she cannot rely on that defect to justify rejection
or to show seller's beach if:

 The seller could have cured the defect if he had been told about it; or
 Between merchants when the seller has, after rejection, made a request in writing for
a full and final written statement of all defects upon which the buyer proposes to rely.
8. What is the Buyer's Responsibility for goods after Rejection?
  Buyer Must Hold Goods With Reasonable Care
 When Seller Gives No Instructions On Disposal of Goods- If seller gives no
instructions within a reasonable time after notification of rejection, the buyer may reship
the goods to the seller, store them for the seller's account, or resell them for the seller's
account.
 If buyer does resell rejected goods, she is entitled to have her expenses of selling any
commission ordinarily paid in the trade or, if there is none, a reasonable commission not
exceeding 10%,
9. Does the Buyer have a right to revoke acceptance?

 Once goods are accepted, the buyer's power to reject the goods generally is terminated
and the buyer is obligated to pay the price less any damages resulting from the seller's
breach.
10. When may acceptance be revoked?

 If the goods have a defect that substantially impairs their value to her and:
- She accepted them on the reasonable belief that the defect would be cured and
it has not been; or
- She accepted them because of the difficulty of discovering defects or because of
the seller's assurance that the goods conformed to the contract.
11. When does revocation of acceptance have to be made?

 Within a reasonable time after buyer discovers or should have discovered defect; and
 Before any substantial change in the goods occurs that is not caused by a defect
present at the time the seller relinquished possession.
12. What are the exceptions to the Perfect Tender Rule?

 Installment Contracts-more than one delivery. An installment contract can be rejected

only if the nonconformity substantially impairs the value of the installment and cannot
be cured. The whole contract is breached only if the nonconformity substantially
impairs the value of the entire contract.
 Sellers Right to Cure
1) Single Delivery Contracts
a) A seller can cure by notice and new tender within time for
performance. Requires reasonable notice and a new tender of
conforming goods.
b) Seller's Right to Cure Beyond Original Contract Time-
Ordinarily, the seller has no right to cure beyond the contract time.
In cases where the buyer rejects a tender of nonconforming goods
that the seller reasonably believed would be acceptable with or
without money allowance," the seller, upon reasonable notification
to the buyer, has a further reasonable time beyond the original
contract to make conforming tender.
 2) Installment Contracts- Article 2 provides that a defective shipment in an
installment contract cannot be rejected if the defect can be cured.
13. Remedies are available for breach of warranty.
III. REMEDIES
Nonmonetary Remedies
1. The primary nonmonetary remedy is specific performance.
2. Specific Performance is when the court orders breaching party to perform.

 Available for Land and Rare or Unique Goods.

 Not available for Service Contracts-courts do not want involuntary servitude.
 Courts can also enjoin a breaching party of a contract.
 Covenant Not to Compete- Most courts will grant an order of specific performance to
enforce a contract not to compete if: (1) the services to be performed are unique; and (2)
the covenant is reasonable.
- The covenant must be reasonably necessary to protect a legitimate interest of the
person benefited by the covenant;
- The covenant must be reasonable as to its geographic scope and duration; and
- The covenant must not harm the public.
3. Equitable Defenses

 Laches-Party delays in bringing an equitable action and the delay prejudices the
defendant
 Unclean Hands-When party seeking specific performance is guilty of some wrongdoing
in the transaction being sued upon. Wrongdoing must be related to the transaction being
sued upon.
 Sale to a Bona Fide Purchaser-If the subject matter of a goods or land contract has
already been sold to another who purchased for value and in good faith, the right to
specific performance is cut off.
Nonmonetary Remedies Under Article 2
1. Buyers Nonmonetary Remedies

 Cancellation-If buyer rejects goods b/c they do not conform to the contract, she can
cancel the contract.
 Buyer's Right to Replevy Identified Goods
- If buyer makes part payment of identified goods under a contract and seller has
not delivered the goods, buyer may replevy the goods from the seller in two
circumstances:
1) Seller becomes insolvent w/in 10 days after receiving buyer's first
payment.
2) The goods were purchased for personal, family, or household purposes.
 o Buyer must tender any unpaid portion of the purchase price to
seller.
 Buyer's Inability to Cover- Buyer may replevy undelivered, identified goods from the
seller if buyer, after reasonable effort, is unable to secure adequate substitute goods.
 Buyer's Right to Specific Performance-The court may order specific performance even
where the goods have not yet been identified to the contract by the seller.
2. Seller's Nonmonetary Remedies

 Seller's Right to Withhold Goods-If the buyer fails to make a payment due on or before
delivery, the seller may withhold goods. The seller must deliver if the buyer tenders cash
for their payment.
 Seller's Right to Recover Goods
- If buyer received goods on credit while insolvent, seller may reclaim the goods
upon demand within 10 days after buyer's receipt of the goods. 10 day limitation
does not apply if a misrepresentation of solvency has been made in writing to the
particular seller within 3 months before delivery.
- Seller may stop delivery if buyer is insolvent.
- Seller may stop delivery if buyer breaches contract.
- Seller may stop delivery of the goods to the buyer until the buyer receives: (i) the
goods or a negotiable document of title covering the goods; or (ii) an
acknowledgment from a bailee other than the carrier that it is holding the goods
for the buyer.
- The seller's notification must come in time to give the person in possession a
reasonable time to stop delivery.
 If a party reasonably fears that the other party will not perform, he may demand
assurances that the performance will be forthcoming at the proper time.