Breach, Repudiation And Excuse - - CA Commercial Law

Section § 2601

If you buy something that doesn't match what you agreed upon in the contract, you have a few options. You can either reject all of it, accept all of it, or keep some parts and reject the rest. This is unless other rules or agreements change these rights.

Subject to the provisions of this division on breach in installment contracts (Section 2612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2718 and 2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may

(a) Reject the whole; or

(b) Accept the whole; or

installment contracts contractual limitations remedy non-conforming goods tender of delivery buyer's rights reject goods acceptance options commercial unit Section 2612 Sections 2718 and 2719 contract terms goods conformity

(Enacted by Stats. 1963, Ch. 819.)

Section § 2602

If a buyer wants to reject goods, they need to do it within a reasonable time after getting them and must inform the seller. If the buyer rejects the goods but then behaves as if they own them, that's against the rules unless they have a security interest. After rejecting the goods, the buyer must take care of them and make it easy for the seller to pick them up, but they don't have to do anything else with them. If the buyer wrongfully rejects the goods, the seller has certain rights to remedy the situation.

(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

(2) Subject to the provisions of the two following sections on rejected goods (Sections 2603 and 2604),

(a) After rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and

(b) If the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this division (subdivision (3) of Section 2711), he is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but

(3) The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this division on seller’s remedies in general (Section 2703).

rejection of goods reasonable time notify seller exercise of ownership commercial unit security interest physical possession reasonable care seller removal wrongful rejection seller's remedies Section 2703 Sections 2603 and 2604

(Enacted by Stats. 1963, Ch. 819.)

Section § 2603

If a buyer who is a merchant rejects goods and the seller doesn’t have a local agent or office nearby, the buyer must follow any reasonable instructions from the seller about what to do with the goods. If there are no instructions, the buyer should try to sell the goods if they are likely to spoil or lose value quickly. The seller must cover the buyer’s reasonable costs if they do sell the goods, including a usual selling commission or up to 10% of the proceeds if there is no standard commission. The buyer only needs to act honestly and cannot be penalized for selling the goods in this situation.

(1) Subject to any security interest in the buyer (subdivision (3) of Section 2711), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

(2) When the buyer sells goods under subdivision (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding 10 percent on the gross proceeds.

(3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

merchant buyer rejection reasonable instructions perishable goods sell for seller's account reimbursement for expenses selling commission good faith conduct market of rejection security interest expenses indemnity decline in value buyer’s duty goods decline gross proceeds action for damages

(Enacted by Stats. 1963, Ch. 819.)

Section § 2604

If a buyer rejects goods and the seller doesn't give instructions soon after being notified, the buyer can either store the goods for the seller, send them back, or sell them on the seller’s behalf to get reimbursed. These actions don’t mean the buyer accepts the goods.

Subject to the provisions of the immediately preceding section on perishables if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller’s account or reship them to him or resell them for the seller’s account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.

rejected goods seller's instructions reasonable time store goods reship goods resell goods seller's account buyer reimbursement goods rejection storage for seller conversion perishables

(Enacted by Stats. 1963, Ch. 819.)

Section § 2605

If you buy something and find a problem with it, you need to point out that specific defect when you decide to reject the item. If you don't, you can't later use the unstated problem as a reason for rejection, especially if the seller could have fixed it or if the seller asks for a complete list of issues in writing. Also, if you pay for something based on documents without noting any problems, you can't later complain about obvious document issues to get your money back.

(1) The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach

(a) Where the seller could have cured it if stated seasonably; or

(b) Between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.

(2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.

buyer rejection defect notification reasonable inspection seller cure opportunity merchants written request payment against documents reservation of rights obvious document defects rejection justification breach of contract

(Amended by Stats. 2006, Ch. 254, Sec. 42. Effective January 1, 2007.)

Section § 2606

This law explains when a buyer is considered to have accepted goods. A buyer accepts goods if they decide to keep them after inspecting and finding them satisfactory, or even if they find some issues but choose to keep them anyway. Alternatively, acceptance happens if the buyer doesn't reject the goods properly after having a chance to inspect them, or if they use the goods in a way that contradicts the idea that the seller still owns them. Finally, accepting part of a set of goods means accepting the whole set.

(1) Acceptance of goods occurs when the buyer

(a) After a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or

(b) Fails to make an effective rejection (subdivision (1) of Section 2602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or

(c) Does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.

(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

acceptance of goods buyer inspection conforming goods nonconforming goods effective rejection commercial unit opportunity to inspect retain goods inconsistent act seller ownership reasonable opportunity part acceptance ratification by seller

(Enacted by Stats. 1963, Ch. 819.)

Section § 2607

When a buyer accepts goods, they must pay the agreed price. They can't reject the goods afterward, even if there's a problem they knew about unless they assumed it would be fixed in time. Still, they can seek other remedies for issues. If a buyer notices a problem, they must tell the seller quickly or lose any right to a remedy. If the problem leads to a lawsuit against the buyer, they must notify the seller promptly. It's the buyer's job to prove any issue with the goods. If the buyer is sued over a warranty or obligation tied to the seller, they can notify the seller to take part in the defense. If the seller wants, they can take control of the lawsuit if they cover all costs and consequences. These rules apply to any buyer duty to protect the seller from claims like copyright infringement.

(1) The buyer must pay at the contract rate for any goods accepted.

(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and, if made with knowledge of a nonconformity, cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this division for nonconformity.

(3) Where a tender has been accepted:

(A) The buyer must, within a reasonable time after he or she discovers or should have discovered any breach, notify the seller of breach or be barred from any remedy; and

(B) If the claim is one for infringement or the like (subdivision (3) of Section 2312) and the buyer is sued as a result of such a breach, the buyer must so notify the seller within a reasonable time after he or she receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

(4) The burden is on the buyer to establish any breach with respect to the goods accepted.

(5) Where the buyer is sued for breach of a warranty or other obligation for which his or her seller is answerable over:

(A) He or she may give the seller written notice of the litigation. If the notice states that the seller may defend and that if the seller does not do so he or she will be bound in any action against the seller by the buyer by any determination of fact common to the two litigation actions, then unless the seller after seasonable receipt of the notice does defend he or she is so bound.

(B) If the claim is one for infringement or the like (subdivision (3) of Section 2312) the original seller may demand in writing that the buyer turn over to the seller control of the litigation, including settlement, or else be barred from any remedy over and if the seller also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.

(6) The provisions of subdivisions (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subdivision (3) of Section 2312).

goods acceptance nonconformity breach notification reasonable time warranty breach litigation control seller defense infringement claims buyer obligations contract rate remedy for nonconformity notification of breach sued for breach seasonable cure assumption burden of proof

(Amended by Stats. 1995, Ch. 91, Sec. 20. Effective January 1, 1996.)

Section § 2608

If a buyer accepts goods that don't meet the agreed standards and this significantly reduces their value, they can change their mind and revoke acceptance. This can happen if they thought the problem would be fixed and it wasn't, or if they didn't notice the issue initially because it was hard to find or the seller assured them it was fine. To revoke acceptance, the buyer must act within a reasonable time after discovering the issue and notify the seller. Once revoked, the buyer's rights and responsibilities are the same as if they had rejected the goods from the start.

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it

(a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

goods nonconformity revoke acceptance substantially impairs value reasonable assumption seasonably cured difficulty of discovery seller's assurances reasonable time notify seller rights after revocation commercial unit initial acceptance

(Enacted by Stats. 1963, Ch. 819.)

Section § 2609

This law section details the obligations for both parties in a sales contract to maintain trust that the contract will be fulfilled as expected. If one party has reasonable doubts about the other's ability to perform, they can ask for written assurance. Meanwhile, they can pause their obligations if it makes business sense. For merchants, what's considered 'reasonable' depends on industry standards. Even if you accept a faulty delivery or payment, you can still ask for assurance of future performance. If someone doesn't provide assurance within 30 days after being asked reasonably, it counts as them backing out of the contract.

(1) A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.

(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

contract for sale obligation reasonable grounds insecurity adequate assurance suspend performance commercial standards improper delivery aggrieved party future performance repudiation contractual obligations commercially reasonable merchants assurance demand

(Enacted by Stats. 1963, Ch. 819.)

Section § 2610

If one party backs out of a contract before their part is due and this significantly affects the contract's value for the other party, the affected party can either wait for a reasonable time for the original party to fulfill their obligation, pursue remedies for breach of contract, or halt their own obligations while managing unfinished goods as permitted by the law.

When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may

(a) For a commercially reasonable time await performance by the repudiating party; or

(b) Resort to any rememdy for breach (Section 2703 or Section 2711), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and

(c) In either case suspend his own performance or proceed in accordance with the provisions of this division on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2704).

repudiation contract impairment aggrieved party commercially reasonable time remedy for breach suspend performance seller's right identify goods salvage unfinished goods performance not yet due breach of contract Section 2703 Section 2711 Section 2704 contract value impairment

(Enacted by Stats. 1963, Ch. 819.)

Section § 2611

This law section is about retracting a contract repudiation, which means taking back a statement that you won't fulfill a contract. You can do this as long as the other person hasn’t canceled the contract, significantly changed their position, or made it clear they consider the refusal final. Retraction can be done in any way that clearly shows you plan to complete your part of the deal, and it needs to include any assurance the other party rightfully asks for. When you retract your refusal, you regain your rights under the contract, but you must account for any delays your initial refusal caused the other party.

(1) Until the repudiating party’s next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation canceled or materially changed his position or otherwise indicated that he considers the repudiation final.

(2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this division (Section 2609).

(3) Retraction reinstates the repudiating party’s rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

contract repudiation retract repudiation next performance due aggrieved party materially changed position final repudiation assurance demanded Section 2609 rights reinstatement delays due to repudiation performance intention cancel contract indicate final repudiation retraction method contract rights reinstated

(Enacted by Stats. 1963, Ch. 819.)

Section § 2612

An 'installment contract' lets goods be delivered in batches, and each batch can be treated like a separate contract. If any batch of goods does not meet required standards and significantly reduces its value, the buyer can reject it, but only if it can't be fixed or if there are issues with the necessary paperwork. If the seller can assure it will be fixed, the buyer has to accept it. If issues with one batch mess up the whole contract's value, the entire contract is considered breached. However, the contract can be put back in force if the buyer accepts a problematic batch without quickly canceling or only complains about past deliveries instead of future ones.

(1) An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.

(2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subdivision (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.

(3) Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

installment contract separate lots nonconforming installment value impairment adequate assurance reject installment document defect substantial impairment breach of whole reinstates contract cancellation notice future installments past installments default delivery acceptance

(Enacted by Stats. 1963, Ch. 819.)

Section § 2613

This law is about what happens if specific goods in a purchase contract get damaged or lost before they officially become the buyer's responsibility. If the goods are completely lost and no one is at fault, the contract is canceled. If the goods are only partly damaged or have deteriorated, the buyer can either cancel the contract or accept the damaged goods and pay a reduced price for them, depending on the extent of the damage or loss.

Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (Section 2324) then

(a) If the loss is total the contract is avoided; and

(b) If the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

contract performance identified goods casualty risk of loss buyer inspection total loss partial loss deteriorated goods contract cancellation contract avoidance no arrival no sale demand inspection accept goods with allowance duty of buyer contract price reduction

(Enacted by Stats. 1963, Ch. 819.)

Section § 2614

This section addresses what happens if the original plans for transporting or delivering goods become impossible without anyone's fault. If the set facilities or type of transportation can't work out, but a reasonable substitute is available, the substitute should be used and accepted. If the payment method fails because of government rules, the seller can stop delivery unless the buyer finds a similar way to pay. Once the goods are delivered, the buyer's payment method is fine unless the rules are unfair.

(1) Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.

(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer’s obligation unless the regulation is discriminatory, oppressive or predatory.

commercially impracticable substitute performance berthing facilities loading facilities unloading facilities means of payment governmental regulation stop delivery commercially reasonable domestic regulation foreign regulation discriminatory regulation oppressive regulation predatory regulation substantial equivalent

(Enacted by Stats. 1963, Ch. 819.)

Section § 2615

This law explains that if a seller can't deliver goods on time or at all due to unexpected situations or complying with government rules, it's not considered a contract breach. However, the seller must fairly distribute available goods among customers and promptly inform the buyer about any delays or changes in delivery.

Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:

(a) Delay in delivery or nondelivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

(b) Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.

(c) The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

delay in delivery nondelivery seller obligation contract for sale contingency governmental regulation partial capacity allocate production fair and reasonable customer notification estimated quota unexpected situations substituted performance compliance good faith

(Enacted by Stats. 1963, Ch. 819.)

Section § 2616

If a buyer is informed of a delay or an allocation affecting their order, they can either end the contract for undelivered parts or agree to accept what is available instead. If the buyer doesn't act within 30 days, the affected deliveries are canceled. This rule can't be overridden unless the seller agrees to more responsibility in another part of the deal.

(1) Where the buyer receives notification of a material or indefinite delay or an allocation justified under the preceding section he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this division relating to breach of installment contracts (Section 2612), then also as to the whole,

(a) Terminate and thereby discharge any unexecuted portion of the contract; or

(b) Modify the contract by agreeing to take his available quota in substitution.

(2) If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding 30 days the contract lapses with respect to any deliveries affected.

(3) The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under the preceding section.

material delay indefinite delay allocation notification to seller modify contract unexecuted portion prospective deficiency substantially impairs breach of installment contracts terminate contract lapse of contract reasonable time 30 days greater obligation whole contract value

(Enacted by Stats. 1963, Ch. 819.)

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Sales

Chapter 6Breach, Repudiation and Excuse

Section § 2601

Section § 2602

Section § 2603

Section § 2604

Section § 2605

Section § 2606

Section § 2607

Section § 2608

Section § 2609

Section § 2610

Section § 2611

Section § 2612

Section § 2613

Section § 2614

Section § 2615

Section § 2616

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