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Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 26 Obligations and Performance Twomey Jennings Anderson’s Business.

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Presentation on theme: "Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 26 Obligations and Performance Twomey Jennings Anderson’s Business."— Presentation transcript:

1 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 26 Obligations and Performance Twomey Jennings Anderson’s Business Law and the Legal Environment, Comprehensive 20e Anderson’s Business Law and the Legal Environment, Standard 20e Business Law: Principles for Today’s Commercial Environment 2e

2 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 2 General Principles Obligation of Good Faith: Every sales contract imposes an obligation of good faith and timely performance. –Good faith means honesty in fact in the conduct or transaction concerned. –For merchants, the UCC imposes the additional requirement of observing “reasonable commercial standards of fair dealing in the trade.”

3 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 3 General Principles A buyer’s or a seller’s refusal to perform a contract is called a repudiation. A repudiation made in advance of the time for performance is called an anticipatory repudiation. Repudiation is a breach of the contract.

4 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 4 General Principles If either party to a contract feels insecure about the performance of the other, that party may demand in writing adequate assurance of performance. If adequate assurance is not given, the demanding party may treat the contract as repudiated.

5 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 5 Seller’s Duties The seller has a duty to deliver the goods in accordance with the terms of the contract. The time, manner and place of delivery are usually a part of the contract, or are determined by the usual course of dealing in that business. In any case, this duty requires that the seller permit the transfer of possession of the goods to the buyer.

6 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 6 Buyer’s Duty Upon Receipt The buyer has the right to examine the goods upon tender or delivery. –Inspection includes the right to open cartons and conduct tests. Exception to this is a COD delivery. –Buyer has no right until payment is made.

7 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 7 Buyer’s Duty Upon Receipt Right to Refuse or Return the Goods. –Right to Reject. If the inspection by the buyer reveals that the seller has tendered nonconforming goods, the buyer may reject all or part of the order. Seller’s Right to Cure: Subject to certain limitations, the seller may then offer to replace the goods or cure the problem.

8 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 8 Buyer’s Duty to Accept Goods The buyer has a duty to accept goods that conform to the contract, and refusal to do so is a breach of contract. The buyer is deemed to have accepted goods either expressly or by implication through his conduct or by lapse of time. The buyer must pay for accepted goods in accordance with the contract.

9 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 9 Buyer’s Right of Rejection The buyer can reject goods in commercial units, accept the goods and collect damages for their problems, or reject the full contract shipment. The buyer must give notice of rejection to the seller and cannot do anything with the goods that would be inconsistent with the seller’s ownership rights.

10 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 10 Even following acceptance, the buyer may revoke that acceptance if: –the problems with the goods substantially impair their value and the problems were not easily discoverable, or –the buyer kept the goods based on the seller’s promises to repair them and make them whole. – Buyer must hold the goods and await instructions from seller. Buyer’s Revocation of Acceptance

11 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 11 When Duties are Excused Commercial Impracticability: Performance can be excused but the seller must show objective difficulties that create more than cost increases.

12 Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 12 Overview Pay Revoke Acceptance (only in some cases) Correct performance if time allows Breach of Contract; Buyer may make substitute contract & recover damages Performance Repudiation BuyerSeller Contract Right to Inspect Accept* Rejec t *May accept all, accept commercial units, or accept on condition of seller making repair or paying damages for nonconforming goods. Delivery


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