Performance

Conditions in the Performance Sequence: Events That Control Duties

A condition is an event, not a promise, that must occur before a duty becomes due, or that ends an existing duty. An express condition is stated in the parties’ language: “payment is due if the permit issues,” “only upon inspection approval,” or “unless the lender approves.” Express conditions generally require the specified event exactly; do not casually substitute substantial compliance for the condition’s stated requirement.

A constructive condition is supplied by law rather than expressed. It organizes the order of exchanged performances. A party ordinarily need not perform until the other party has performed or tendered the performance that must come first. Concurrent conditions arise when performances are due simultaneously, such as payment against delivery. Each party must be ready and willing to perform or make the required tender.

Keep promise and condition separate. A promise creates an obligation to act. A condition determines whether another obligation becomes due. Failure of a promise may create a performance dispute; failure of a condition may mean the related duty never became due.

Good faith governs performance decisions. Under common law, the implied covenant of good faith and fair dealing prevents a party from exercising contractual discretion dishonestly or for a purpose inconsistent with the bargain. Under Article 2, every contract imposes good faith in performance and enforcement. For merchants, that includes honesty in fact and reasonable commercial standards of fair dealing in the trade.

Good faith does not rewrite an express term. A party may insist on a genuine condition, reject goods for a genuine nonconformity, or exercise an agreed option. The problem arises when the party manufactures a failure, withholds approval for an improper purpose, or uses a technical term to defeat the exchange while pretending to perform honestly.

Promises About the Goods: Warranties Written Into the Bargain

An express warranty arises from a seller’s affirmation of fact or promise about the goods, a description of the goods, or a sample or model that becomes part of the basis of the bargain. No magic words such as “warrant” or “guarantee” are required. “This generator produces 5,000 watts,” “Grade A,” a catalog description, or a displayed sample can create a warranty. Mere opinion or puffery, such as “the finest generator available,” ordinarily does not.

An express warranty can coexist with implied warranties.

A warranty of title concerns the seller’s right to transfer what was promised. The seller ordinarily warrants that title conveyed is good, that the transfer is rightful, and that the goods are free of undisclosed security interests, liens, or other encumbrances. A merchant seller also ordinarily warrants the buyer’s quiet possession against a superior title claim. Facts about a stolen item, an undisclosed lien, or a third party’s ownership claim activate this warranty even when the goods themselves work perfectly.

Title language is treated separately from quality language. “As is” may address quality but does not automatically eliminate the seller’s title obligations. A title disclaimer must be specific, or the circumstances must give the buyer reason to know the seller claims only limited title. A seller who says it is selling only whatever interest it has may alter the ordinary title warranty if the transaction makes that limitation clear.

The Implied Baseline: Ordinary Use and Special Purpose

The implied warranty of merchantability generally arises when a merchant sells goods of the kind involved. Merchantable goods need not be perfect or the best available. They must, among other things, pass without objection in the relevant trade, be of at least average quality within the description, be fit for ordinary purposes, and be adequately packaged and labeled.

The implied warranty of fitness for a particular purpose arises when the seller has reason to know the buyer’s special purpose and has reason to know that the buyer is relying on the seller’s skill or judgment to select suitable goods. The buyer must communicate or otherwise make the particular purpose apparent. A buyer who simply purchases an ordinary product for its ordinary use has a merchantability issue, not necessarily a fitness issue.

The two warranties can overlap. A commercial refrigerator may be merchantable because it keeps food cold in ordinary restaurant use, yet violate fitness if the seller knew the buyer needed it to maintain an unusually low temperature for a specialized process. Express warranties, title warranties, merchantability, and fitness ordinarily exist together unless validly modified.

A buyer’s inspection does not automatically erase every implied warranty. It matters what the buyer had an opportunity to discover. A defect that a reasonable examination should have revealed is less likely to support an implied-warranty claim, while a latent defect may remain actionable. A buyer’s reliance on the seller’s judgment also becomes difficult to show when the buyer selects the goods independently after rejecting the seller’s advice.

Notice is a separate performance requirement. After accepting goods, a buyer who claims breach must notify the seller within a reasonable time after discovering or when the buyer should have discovered the breach. The notice must communicate that the buyer believes the contract has been breached; a vague complaint may be insufficient. Notice preserves the seller’s opportunity to investigate or correct the problem. It does not create the warranty and does not replace proof that the goods were nonconforming.

Seller Defenses and Disclaimers: Language That Narrows the Promise

A disclaimer of merchantability must mention “merchantability.” If written, it ordinarily must be conspicuous. A disclaimer of fitness must be written and conspicuous. General language such as “no implied warranties,” “as is,” or “with all faults” can exclude implied warranties when the language and circumstances make the exclusion clear.

A disclaimer cannot reasonably be used to erase an express warranty that directly conflicts with it. If a seller expressly promises “stainless steel” and then prints “no warranties whatsoever,” the court must address the inconsistency rather than automatically treating the express promise as meaningless. Read the specific factual commitment and the disclaimer together.

The seller may also show that the alleged statement was puffery, that the seller was not a merchant for merchantability purposes, that the buyer never disclosed the special purpose, or that the buyer did not rely on the seller’s judgment. A defect plainly revealed by an inspection that the buyer made, or reasonably should have made, can defeat an implied-warranty claim.

Do not treat a disclaimer as a defense to every warranty. Title, express warranties, merchantability, and fitness have different triggers and different language requirements. The seller must connect the defense to the particular warranty asserted.

Tender, Rejection, and Cure: The Buyer’s Decision Point

Tender of delivery requires the seller to put conforming goods and any required documents at the buyer’s disposition and give notice that permits the buyer to take delivery. Unless the contract or an installment arrangement changes the rule, Article 2 uses the perfect-tender rule: if the goods or tender fail in any respect to conform, the buyer may reject the whole, accept the whole, or accept commercial units and reject the rest.

The rule is powerful but not unlimited. Installment contracts use a different standard. Contractual limitations, agreed cure rights, and the buyer’s own conduct may matter. The buyer must reject within a reasonable time and seasonably notify the seller. After rejection, the buyer must hold the goods with reasonable care and follow reasonable instructions regarding return.

The seller may cure. If the time for performance has not expired, the seller may seasonably notify the buyer and make a conforming tender within the contract time. If the seller had reasonable grounds to believe the nonconforming tender would be acceptable, the seller may sometimes obtain a further reasonable time by timely notice.

Acceptance occurs after the buyer has had a reasonable opportunity to inspect and signifies acceptance, fails to make an effective rejection, or acts inconsistently with the seller’s ownership, such as reselling or using the goods as its own. After acceptance, the buyer generally cannot reject, but may retain the goods and assert a properly preserved claim.

Revocation of acceptance is different from rejection. It may be available when a nonconformity substantially impairs the goods’ value and acceptance was reasonably induced by difficulty discovering the defect or by the seller’s assurances. The buyer must revoke within a reasonable time after discovering the defect, notify the seller, and avoid a substantial change in the goods not caused by the defect. The buyer must then follow the rules governing goods after revocation.

Loading diagram…

Who Bears the Goods: Risk Following the Shipment

Start with the contract’s allocation. In a shipment contract, risk ordinarily passes when the seller duly delivers the goods to the carrier. In a destination contract, risk ordinarily passes when the goods are tendered at the destination. If the contract is silent, Article 2’s default rules distinguish merchant sellers, receipt, tender, and delivery through a bailee.

Then check breach. A nonconforming tender that gives the buyer a right to reject leaves the risk on the seller until cure or acceptance. Thus, the shipment rule does not necessarily end the inquiry when the goods arrive damaged or defective. A buyer’s rightful rejection generally leaves the seller bearing the risk while the buyer reasonably holds the goods.

If the buyer wrongfully rejects or otherwise breaches before delivery, risk may rest on the buyer for a commercially reasonable time, but the rule takes account of the seller’s effective insurance coverage. If the buyer rightfully revokes acceptance, the buyer may treat risk as having remained with the seller from the beginning to the extent of a deficiency in effective insurance coverage.

UCC § 2-313(1)(a): “Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.”

UCC § 2-601: “Subject to the provisions of this Article on breach in installment contracts and unless otherwise agreed under the provisions of this Article on contractual limitations of remedy, buyer may reject if the goods or the tender of delivery fail in any respect to conform to the contract.”

UCC § 2-510(1): “Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.”

Northstar, a merchant, agreed to sell Harbor 200 vacuum-sealed Grade A salmon fillets.

Before the contract was signed, Northstar’s salesperson emailed, “Every fillet will be vacuum sealed and Grade A.”

The contract required shipment by common carrier and contained no limitation on rejection.

Northstar delivered the shipment to the carrier on June 1.

When the shipment arrived at Harbor’s dock on June 3, Harbor discovered that 20 fillets lacked vacuum seals.

Harbor immediately notified Northstar that it rejected the entire shipment and kept the shipment segregated for pickup.

Before Northstar could arrange pickup, a fire not caused by Harbor destroyed the shipment.

Harbor had no insurance. Northstar argues that delivery to the carrier shifted the risk and that the salesperson’s email was only an opinion.

High-Yield Points - ⚡ Biggest Takeaways

Express conditions require the specified event before the related duty arises. Specific factual affirmations can create express warranties without magic words. Perfect tender permits rejection for any nonconformity unless an Article 2 exception applies. Nonconforming tender keeps risk on the seller until cure or acceptance. Notice preserves a buyer’s warranty and post-acceptance rights.