UCC Perfect Tender Rule; Seller's Right to Cure

Authorautor
Pages174-186
174
Chapter 12. UCC Perfect Tender Rule; Seller’s Right to Cure
12.1. Material Breach versus Immaterial Breach. Under common law, a buyer may terminate
a contract and his obligation to pay for what he has agreed to buy only if the seller materially
breaches. If the breach is not material, the buyer still has a remedy for damages, but he cannot
terminate the contract or refuse to perform altogether.
12.1.1. The other side of the coin of “material breach” is “substantial performance.” If a
non-breaching party asserts a material breach on the part of the other party, the breaching
party most commonly defends with the argument of “substantial performance.”
12.1.2. For example, a seller agrees to sell a home, and also agrees before the sale to paint
the house and clean all the carpets. As of the day of closing, the house has been painted
and five of six carpets have been cleaned. The seller has substantially performed, her
breach in not cleaning one of the six carpets is immaterial, and the buyer will have to
close the purchase. Buyer can, of course, recover the cost she incurs in having the sixth
carpet cleaned, but she cannot avoid the contract entirely.
12.1.2.1. How do you protect your buyer client to allow the buyer to walk away
from the purchase of the home if all of the carpets are not cleaned? Instead of
framing the cleaning of the carpets as an obligation, you frame it as an express
condition; e.g., “Buyer’s obligation to close is expressly conditioned upon Seller’s
cleaning each and every carpet in the house prior to closing.” Express conditions
must be strictly complied with; substantial performance will not do.
12.2. Perfect Tender Rule. Having set forth the common law general rule that only a material
breach gives rise to the remedy of terminating the contract and discharging the non-breaching
party from his obligation to perform, of course there is an exception. Even under the common
law, when goods were involved (versus land or services), the buyer had a right to terminate the
contract and was discharged from his or her obligation to pay the purchase price if the goods
tendered did not perfectly conform to the contract. In other words, with regard to goods, a buyer
can reject the goods even for an immaterial defect, or immaterial breach. This is known as the
perfect tender rule. Section 2-601 provides that if the goods or the tender “fail in any respect” to
conform to the contract, the buyer has the right to reject the goods and terminate the contract, in
which event the buyer is discharged from his obligation to pay for the goods.
12.3. Qualifications to the Perfect Tender Rule. Does this sound too good to be true if you
represent a buyer? If a buyer orders a new car and when it arrives the spare tire is missing, can
the buyer reject the car and refuse to pay? If you read § 2-601 alone, it would appear so. But § 2-
601 has limitations.

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