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Contracts • Performance Under UCC
K#116
Legal Definition
A buyer's right to reject goods in an installment contract is more limited. The buyer has a right to reject only if the nonconformity substantially impairs the value of that installment and cannot be cured. The whole contract is breached only if the nonconformity substantially impairs the value of the entire contract.
Plain English Explanation
In normal contracts, someone orders X amount of widgets, those widgets are delivered, and then the contract is complete. This means that if there is a defect, it requires the relationship between buyer and seller to extend beyond the life of the contract. As such, the courts give the buyer a lot of options to decide whether or not they want to work with the seller at all or give them another shot.
In contrast, in installment contracts, there is an ongoing relationship already built into the contract, where multiple deliveries are planned. This means that if a defect is discovered in one lot or one batch of goods, it's not that big of a deal to have the seller make up for it in the next batch. For example, imagine if a total of 1,000 widgets are purchased in 10 lots of 100 and, on the first delivery, 2 widgets were defective. It may not be ideal, but it also means that the seller may just have to make the second lot 102 widgets to make up for the broken ones.
Only where a defect is so drastic that it substantially impairs the value of the lot will it constitute a breach of the entire contract. In other words, on an exam, you'll need to argue this.
In contrast, in installment contracts, there is an ongoing relationship already built into the contract, where multiple deliveries are planned. This means that if a defect is discovered in one lot or one batch of goods, it's not that big of a deal to have the seller make up for it in the next batch. For example, imagine if a total of 1,000 widgets are purchased in 10 lots of 100 and, on the first delivery, 2 widgets were defective. It may not be ideal, but it also means that the seller may just have to make the second lot 102 widgets to make up for the broken ones.
Only where a defect is so drastic that it substantially impairs the value of the lot will it constitute a breach of the entire contract. In other words, on an exam, you'll need to argue this.
Visual Aids
Related Concepts
How may a buyer revoke acceptance of goods?
What does the "ability to cure" mean?
What factors limit a buyer's ability to reject goods?
What happens if a seller wishes to cure beyond the time obligated for performance?
What happens if a seller wishes to cure within the time obligated for performance?
What is the buyer's right of inspection?
What is the effect of a buyer accepting goods on his ability to reject them?
What is the perfect tender rule, and what is the consequence of less than perfect tender?
When is the price due in carrier cases, shipment contracts, and destination contracts?
When is the price due in non-carrier cases?
When may the seller demand payment in an installment contract?
