Performance and Breach of Sales Contract
Upper Iowa University
BA 302: Business Law
Instructor: Paul Croushore
Jun 3, 2009
A sale occurs when there is an exchange of goods or other property from the seller to the buyer for money. In order to create in each party a duty to do or not to do something and a right to performance of the other’s duty or a remedy for the breach of the other’s duty, we need to set up a contract. Obligations of the parties:
The obligations of the parties, as assigned in the terms of the contract, are governed by the general law of contracts. The obligation of the seller is to furnish the goods, as agreed upon, the buyer to pay therefore. Thus, when the seller offers to turn the goods over to the buyer and when the buyer offers to pay for them, tender of performance occurs. The seller must make tender of delivery and the buyer must make tender of payment. Tender of delivery by Seller: To be in a position to bring suit on a sales contract, the seller of goods must make tender of delivery, that is, offer to turn the goods over to the buyer. Failure to make this offer is an excuse for buyers not to perform their part of the bargain. The seller must put and hold the goods at the buyer’s disposition and notify the buyer that the goods are being tendered during reasonable hours and for a reasonable period of time. In a shipment contract, the seller must put the goods in the possession of a carrier and contract with that carrier for their transportation. Any necessary documents must be sent to the buyer, who must be promptly notified of the shipment. If the seller does not make a reasonable contract for delivery or notify the buyer and a material delay or loss results, the buyer has the right to reject the shipment. Suppose the goods are perishable, such as fresh produce, and the seller does not ship them in a refrigerated truck or railroad car. If the produce deteriorates in transit, the buyer can reject the produce on the ground that the seller did not make a reasonable contract for shipping it. Sometimes the goods are in the possession of a warehouse and are to be turned over to the buyer without being moved. When this situation occurs, tender requires that the seller either tender a document of title covering the goods or obtain an acknowledgement by the warehouse of the buyer’s right to their possession. The risk of loss as to the goods remains with the seller until the warehouse agrees to hold them for the buyer. Tender of payment by Buyer: Tender of payment by buyer means offering to turn the money over to the seller. Normally, the buyer has the right to inspect the goods before accepting or paying for them. However, when a contract requires payment before inspection, as when the goods are shipped c.o.d. (cash on delivery), the buyer must pay for them first, even if they turn out to be defective when they are inspected. Of course, if the defect is obvious, the buyer would not have to accept or to pay for the goods. Payment by the buyer before inspecting the goods does not constitute an acceptance of them. Unless the seller demands cash, the buyer may pay for the goods by personal check or by any other method used in the ordinary course of business. If the seller demands cash, the seller must give the buyer a reasonable amount of time to obtain it. Payment by check is conditional on the check’s being honored by the bank when it is presented for payment. If the check clears, the debt is discharged. If the check is dishonored, the debt is revived. In that case, the buyer does not have the right to retain the goods and must give them back to the seller. Buyer’s rights and duties upon delivery of improper goods: Except when a contract requires payment before inspection, as when the goods are shipped c.o.d. as mentioned above, the buyer has the right to inspect the goods before...