In simplified terms, performance of a contract means doing what you are required to do under the contract. If you fail to do what you are required to do under a contract—if you fail to perform under the contract—then you are in breach of the contract, which usually is sufficient grounds for a lawsuit. When it comes to contracts specifically related to the buying and selling of goods, the UCC contains various rules regarding the seller’s performance. Let’s take a quick look at the main points.
Seller's Performance: The Perfect Tender Rule Under the UCC
General contract law, as opposed to the UCC, generally allows for a party to fulfill contractual obligations through substantial performance. This means that it may suffice if a party substantially, though not exactly or perfectly, meets the requirements of the contract. For contracts for the sale of goods, however, the UCC requires "perfect tender” by the seller. Tender means, in essence, the delivery of goods to the buyer, and perfect tender means delivering goods that precisely meet the terms of the contract. According to the UCC, if the goods as tendered “fail in any respect to conform to the contract,” the buyer has various options, including rejecting the goods.
The Seller’s Primary Obligation
Under the UCC, a seller’s primary obligation is "tender of delivery." In other words, delivering the goods to the buyer. In some cases, tender of delivery will involve the seller shipping or otherwise transporting goods to the buyer. In other cases, it may mean that the seller holds the goods where the buyer can take possession of them. Often the manner in which the goods are to be tendered is specified in the sales contract. However, where the contract does not require the seller to ship the goods to the buyer, the two primary requirements for the seller under the UCC are:
- to “put and hold” the goods “at the buyer’s disposition;” and
- to give the buyer whatever notice is reasonably necessary for the buyer to take delivery.
Types of Delivery
The UCC covers several possible contractual arrangements for delivery of goods to the buyer other than by the buyer taking possession of the goods at the seller’s location:
- the seller might make the goods available at a separate location for the buyer to pick up
- the seller might hand off the goods to a third-party shipper, technically called a carrier, without the buyer specifying to the seller the ultimate destination for the goods; or
- the seller may use a carrier to deliver the goods to a destination specified by the buyer.
Regarding the first of these possibilities, the UCC states that if both the seller and the buyer know specifically what goods are involved, and also know that those goods are located “in some other place” than the seller’s place of business, than that other place is the place for delivery.
The second of the listed possibilities is known as a shipment contract. For shipment contracts, apart from promptly notifying the buyer of the shipment, the UCC requires that the seller make a “proper contract” with a carrier for the transportation of the goods, taking into account the specific nature of the goods involved (such as that they are perishable), and that the seller obtain and promptly deliver to the buyer any document that may be necessary for the buyer to obtain possession of the goods from the carrier.
The final listed possibility is known as a destination contract. Some destination contracts, in turn, will involve shipping goods to a third party, who will then hold the goods for the buyer. (The third party in this situation is technically known as a bailee.) Generally speaking, in such situations, the UCC requires the seller provide the buyer with the necessary documents to allow the buyer to take possession of the goods from the bailee.
As a final point, it is worth noting that where actual delivery to the buyer is involved, such as by shipping the goods to the buyer, the buyer has an obligation to provide facilities reasonably suited to receive the goods.
“Curing” Defective Goods
A key section of the UCC gives a seller the right to cure goods delivered to a buyer that are defective or non-conforming. In other words, if a seller delivers goods that don’t match the contract, and the buyer rejects those goods, the UCC gives the seller an opportunity to fix the problem. The seller has the right to cure in two specific situations:
- where goods were rejected because of non-conformity, but the seller still has time under the contract to provide conforming goods; or
- where the seller had reasonable grounds to believe that the non-conforming goods delivered to the buyer would be acceptable to the buyer, with or without a money allowance (discount).
An example of the first of these situations would be a seller who, under a sales contract, has until March 31 to deliver goods to a buyer, and delivers defective goods on March 15, which the buyer rejects. The seller would still have until March 31 to deliver conforming, non-defective goods to the buyer. An example of the second situation might involve a seller delivering "better" goods to a buyer—such as a more expensive, higher-quality model of a device, with more features, which the buyer nonetheless rejects. The seller likely would have the right, within a reasonable time, to provide the model actually ordered by the buyer.
The seller is not the only party to a contract for the sale of goods with rights and obligations under the UCC. Buyers, too, have rights and obligations, some of which are covered in other Nolo articles.
This article is based on the current version of the model Uniform Commercial Code (UCC). However, not all states have adopted all sections of the current model UCC. Moreover, the model UCC specifically leaves it to individual states to determine the precise wording of certain sections. Therefore, you should always check your own state’s commercial code for the most accurate information