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Sales of goods · complete doctrine guide

Buyer's rights on nonconforming goods: rejection, acceptance, revocation, cure, cover, and damages

Once a buyer discovers nonconforming goods, everything that follows depends on which of three paths the buyer takes: rejecting the goods outright, accepting them, or revoking an acceptance already given, and each path opens a different set of remedies. A buyer may reject the whole shipment, accept the whole shipment, or accept some commercial units while rejecting the rest, but rejection must happen within a reasonable time after delivery and the buyer must seasonably notify the seller, after which any act of ownership over the rejected goods becomes wrongful. Acceptance occurs once the buyer has had a reasonable chance to inspect and then signals it will keep the goods, fails to make an effective rejection, or does something inconsistent with the seller still owning them, and once goods are accepted the buyer owes the full contract price for them, though acceptance alone does not waive other remedies for the nonconformity.

TESTED STATUSCurrent MBE, MEE where applicable, and NextGen foundational doctrine
01 · COMPLETE FRAMEWORK

Black-letter propositions

  1. 01

    If the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may reject the whole, accept the whole, or accept any commercial unit or units and reject the rest, subject to the rules on installment contracts and on contractual limits of remedy.

  2. 02

    Rejection must occur within a reasonable time after delivery or tender and is ineffective unless the buyer seasonably notifies the seller; after rejection any exercise of ownership by the buyer is wrongful as against the seller.

  3. 03

    Acceptance occurs when the buyer, after a reasonable opportunity to inspect, signifies that the goods are conforming or that it will take or retain them despite nonconformity, or fails to make an effective rejection, or does any act inconsistent with the seller's ownership.

  4. 04

    Acceptance of goods 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, and acceptance does not of itself impair any other remedy for nonconformity.

  5. 05

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

  6. 06

    The buyer may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the buyer if it accepted on the reasonable assumption the nonconformity would be cured and it was not seasonably cured, or without discovery of the nonconformity because acceptance was reasonably induced by the difficulty of discovery or by the seller's assurances.

  7. 07

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

  8. 08

    When a tender is rejected as nonconforming and the time for performance has not expired, the seller may seasonably notify the buyer of its intention to cure and make a conforming delivery within the contract time; if the seller had reasonable grounds to believe the tender would be acceptable, it may have a further reasonable time to substitute a conforming tender.

  9. 09

    In an installment contract, the buyer may reject an installment whose nonconformity substantially impairs its value and cannot be cured, and there is a breach of the whole contract when nonconformity in one or more installments substantially impairs the value of the whole.

  10. 10

    On the seller's failure to deliver or repudiation, or on the buyer's rightful rejection or justifiable revocation, the buyer may cancel and recover the price paid and either cover and recover damages or recover damages for nondelivery.

  11. 11

    A buyer who covers, by a good-faith and reasonable purchase of substitute goods without unreasonable delay, recovers the cost of cover minus the contract price, plus incidental and consequential damages, less expenses saved; failure to cover does not bar other remedies.

  12. 12

    Damages for nondelivery or repudiation are the market price at the time the buyer learned of the breach minus the contract price, plus incidental and consequential damages, less expenses saved; consequential damages include losses from needs of which the seller had reason to know that could not reasonably be prevented by cover, and injury to person or property proximately resulting from breach of warranty.

02 · ORDER OF ANALYSIS

Use this attack sequence under time

1

Frame the issue

Decide whether the buyer rejected, accepted, or revoked, and whether notice was given in time.

2

Resolve the next checkpoint

Check whether any act after delivery was inconsistent with the seller's ownership.

3

Resolve the next checkpoint

For revocation, test substantial impairment, the reason for acceptance, and reasonable time.

4

Finish the conclusion

Choose the damages measure: cover, market price, or accepted-goods warranty damages, and add incidental and foreseeable consequential damages.

03 · DISTINCTIONS THAT CREATE POINTS

Common wrong turns

  • A buyer who accepts must pay the contract rate for the goods, and its remedy is damages.
  • A buyer who uses rejected goods in a way inconsistent with the seller's ownership may be treated as having accepted them.
  • Cover is optional, and failure to cover does not bar market-price damages.
04 · WORKED APPLICATION

Worked example

A buyer orders 100 machines at $1,000 each, and the seller delivers machines with defects that cannot be cured. The buyer rejects them in a timely way and buys substitute machines for $1,150 each.

Model analysis

The buyer rightfully rejected and may cover. Damages are the difference between the cost of cover ($1,150) and the contract price ($1,000) per machine, $15,000 in all, plus incidental damages.

05 · CLOSED-BOOK RETRIEVAL

Practice this topic

06 · FROM THE PRIMARY TEXT

Rejection, acceptance, and revocation

UCC section 2-601 gives the buyer a perfect-tender right: if the goods or the tender fail in any respect to conform to the contract, the buyer may reject the whole, accept the whole, or accept any commercial unit and reject the rest, subject to the installment-contract rules and contractual limits on remedy. Section 2-602 requires rejection within a reasonable time after delivery and seasonable notice to the seller, and makes any exercise of ownership after rejection wrongful against the seller.

Section 2-606 says acceptance occurs when the buyer, after a reasonable opportunity to inspect, signifies that the goods are conforming or that it will take or retain them despite nonconformity, or fails to make an effective rejection, or does any act inconsistent with the seller's ownership. Section 2-608 lets the buyer revoke acceptance where a nonconformity substantially impairs value and the buyer accepted on the reasonable assumption of cure or without discovery because of the difficulty of discovery or the seller's assurances, within a reasonable time and before substantial change in the goods, effective when the buyer notifies the seller.

07 · FROM THE PRIMARY TEXT

Cure and installment contracts

Section 2-508 allows a seller whose tender was rejected as nonconforming to notify the buyer seasonably of its intention to cure and make a conforming delivery within the contract time, and gives a further reasonable time to substitute a conforming tender where the seller had reasonable grounds to believe the tender would be acceptable, with or without a money allowance.

Section 2-612 defines an installment contract as one requiring or authorizing delivery of goods in separate lots to be separately accepted, lets the buyer reject a nonconforming installment if the nonconformity substantially impairs its value and cannot be cured, and finds breach of the whole contract when nonconformity in one or more installments substantially impairs the value of the whole. The aggrieved party reinstates the contract if it accepts a nonconforming installment without seasonably notifying of cancellation, or sues only for past installments or demands performance of future installments.

08 · FROM THE PRIMARY TEXT

Buyer's damages

Section 2-711 provides that when the seller fails to deliver or repudiates, or the buyer rightfully rejects or justifiably revokes acceptance, the buyer may cancel and recover the price paid and either cover under section 2-712 or recover damages for nondelivery under section 2-713. Under section 2-712, cover damages are the cost of cover minus the contract price, plus incidental and consequential damages, less expenses saved, and failure to cover does not bar other remedies.

Under section 2-713, damages for nondelivery or repudiation are the market price at the time the buyer learned of the breach minus the contract price, plus incidental and consequential damages, less expenses saved, with market price determined at the place for tender. Section 2-715 defines incidental damages as expenses reasonably incurred in inspection, receipt, transportation and care of rejected goods and in effecting cover, and consequential damages as losses from requirements the seller had reason to know that could not reasonably be prevented by cover, and injury to person or property from breach of warranty.

09 · QUICK ANSWERS

Frequently asked questions

What is the controlling rule for buyer's rights on nonconforming goods: rejection, acceptance, revocation, cure, cover, and damages?+

Say whether the buyer rejected, accepted or revoked, apply the notice and timing rules, then choose the remedy and compute damages.

May a buyer reject goods that fail in a minor way?+

Yes, in a single-delivery contract the buyer may reject if the goods fail in any respect to conform, under UCC section 2-601, subject to the seller's right to cure.

How does a buyer reject goods?+

Within a reasonable time after delivery, and it must seasonably notify the seller or the rejection is ineffective, under section 2-602.

When may a buyer revoke acceptance?+

When a nonconformity substantially impairs value and the buyer accepted expecting a cure or without discovery because of assurances or difficulty, within a reasonable time, under section 2-608.

What is cover?+

A good-faith, reasonable purchase of substitute goods without unreasonable delay, and the buyer recovers the excess of the cost of cover over the contract price, under section 2-712.

What are the buyer's damages for nondelivery?+

The market price when the buyer learned of the breach minus the contract price, plus incidental and consequential damages less expenses saved, under section 2-713.

SOURCE DESK

Primary sources

UCC section 2-601, Cornell LII↗UCC section 2-602, Cornell LII↗UCC section 2-606, Cornell LII↗UCC section 2-608, Cornell LII↗UCC section 2-508, Cornell LII↗UCC section 2-612, Cornell LII↗UCC section 2-711, Cornell LII↗UCC section 2-712, Cornell LII↗UCC section 2-713, Cornell LII↗UCC section 2-715, Cornell LII↗

Governing text for buyer's rights on nonconforming goods: rejection, acceptance, revocation, cure, cover, and damages

Uniform Commercial Code (Uniform Law Commission) ↗