Acceptance and Rejection of Goods
Prof. Bill Long 3/15/05
Understanding the Flow of the 500 and 600 series in Article 2
The purpose of this and the next few essays is to give an overview of the various ways that goods may be presented, accepted or rejected under Article 2. That is, now we are moving to contract performance. Once we are clear on these issues, the only thing left for us to do is to understand the complex structure of remedies that the Article provides. I will introduce several concepts here, and then spend most of my time working through Code definitions and cases on acceptance and rejection of goods.
We should first pause for a minute to consider where we are in our study of Article 2. At first we handled definitional issues and issues of contract formation and modification. This was covered in the 100 and 200 series of Article 2. Then, we looked at the terms that are either implied in the contract or are expressly or impliedly there by way of warranty. This was the 300 series of Article 2. The 400 series is very brief and deals with issues of title and rights of creditors. We will not consider these sections. The 500 and 600 series concern performance of the contract, acceptance or rejection of goods, and breach of contract. Our focus will be on these sections.
Getting Our Bearings
It might be helpful to begin with an acronym: TARR. TARR stands for tender, acceptance, rejection and revocation. Though these four words do not capture all of the 2-500s and 2-600s [recall our consideration of "risk of loss" in 2-509 and 2-510 earlier], they describe the flow nicely. These four words will be behind my treatment now.
We can form all the contracts we want, and be familiar with the structure of warranty protections and disclaimers but until the contract is actually performed we have an incomplete knowledge of a transaction. As the Code itself says, "The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract" (2-301). So, let's get to this process of transfer and acceptance.
The term used by Article 2 to describe the presentation of goods is tender (verb or noun). You may tender goods. Or, alternatively, the presentation of goods is a tender. 2-503 addresses the important issue of when a tender has taken place:
"(1) Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery."
Thus, we see that a proper ("conforming") tender consists of two things: to "put and hold" the goods at the buyer's disposition and "notify" the buyer reasonably about the availability of the goods. What happens when tender has taken place? 2-507(1) helps us:
"(1) Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract."
Tender changes what you might call the power relations between buyer and seller. Once goods have been tendered, a duty rests on the buyer to accept and pay for them. As one scholar has noted, once goods have been tendered Article 2 never gives the buyer the privilege of "hemming or hawing."
However, not every tender is a proper or conforming tender. As a matter of fact, since this is a law course, most of the time we are interested in when things go wrong rather than when things go right. Let's first turn to the Code sections on duties when there has been a conforming tender.
If the tender has been conforming, the duties of the buyer are to accept under 2-606 and then pay under 2-607(1). 2-606 is a major section of Article 2, and we should pause to understand the scope of the concept of acceptance. Buyers can accept tendered goods in three ways: (1) by indicating to the seller, after reasonable opportunity to inspect, that the goods are conforming or that s/he will take them despite their non-conformity*, (2) by failing to make
[*You can always accept non-conforming goods. But the Code will limit your remedies significantly if you accept these goods and then seek redress. The better course is to reject the non-conforming goods and give the seller an opportunity to cure under 2-508, if that is appropriate. Of course, you can always accept non-conforming goods and just "live with them."]
an effective rejection under 2-602 [see below] or (3) to do any act inconsistent with the seller's ownership, such as taking the goods home and using them, paying for them and taking them with you, etc. Thus, acceptance may be made by word, deed, or silence. I will direct your attention also to Cmts 1,3,4 of 2-606, but do not want to reproduce them here.
Once you have accepted the conforming goods, you must pay for them. How do I know? The Code tells me. 2-607(1) provides: "The buyer must pay at the contract rate for any goods accepted." It is refreshing to have such an obvious concept so clearly stated.
A conforming tender, however, might be rejected by the buyer for a lot of reasons. The next essay begins with how the Code handles this situation.
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