Tender, risk of loss, and rejection

Tender, risk of loss, and rejection

Published September 28, 2026

Tender, risk of loss, and rejection

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The Tender Trigger: What Delivery Facts Put Performance in Issue

Tender is the seller’s legally sufficient offer of the required performance; what follows depends on the goods’ conformity, the delivery term, and whether the buyer has rejected, accepted, or revoked acceptance. The first task is therefore to identify the governing law and the transaction’s delivery structure before deciding who bears a loss or whether the buyer’s response was effective.

For goods, Article 2 asks whether the seller made a conforming tender at the contractually required time, place, and manner. A tender may fail because the goods are defective, the quantity is wrong, required documents are missing, or the seller used the wrong delivery method. A shipment term generally makes delivery to a carrier the seller’s delivery event; a destination term requires tender at the destination. Words such as “FOB seller’s plant,” “FOB buyer’s warehouse,” “deliver to,” “freight prepaid,” and “carrier destroyed the goods” are recognition triggers.

Tender also includes the required transportation arrangements and notice when the seller is authorized to ship. Under the shipment rule, the seller must put conforming goods into the carrier’s possession, make a reasonable transportation contract, provide necessary documents, and promptly notify the buyer. Failure to give the required shipment notice can keep the risk on the seller even though the goods reached the carrier.

For a non-goods contract governed by common law, do not apply Article 2’s perfect-tender rule. Ask whether the performer completed or substantially performed the contractual duty. A minor deviation ordinarily does not justify treating the entire performance as rejected; a serious failure may. Whether a contractual term is a condition is a separate question covered in the sibling chapter on conditions and the duty of good faith.

This topic is not starred: legal resources may be supplied when it is tested, and where they are not, you need only demonstrate recognition that the topic is at issue. You are not required to hold this topic cold because resources may be supplied; the floor you must hold is the vocabulary-tender, shipment term, destination term, title, risk of loss, rejection, cure, acceptance, and revocation-and the order in which those questions are asked.

The Performance Floor: Separate Delivery, Title, and Risk

Title and risk are different allocations. Title concerns ownership; risk of loss concerns who bears an accidental loss such as fire, theft, or destruction. Under Article 2, title passes according to the parties’ agreement and otherwise when the seller completes performance with respect to physical delivery. In a shipment contract, that ordinarily occurs at shipment; in a destination contract, at tender at the destination. But title passage does not automatically answer risk.

If there is no seller breach, risk generally follows the delivery term: in a shipment contract, risk passes when conforming goods are duly delivered to the carrier; in a destination contract, risk passes when conforming goods are duly tendered at the destination. If the seller makes a nonconforming tender that gives the buyer a right to reject, risk remains with the seller until cure or acceptance. If the buyer rightfully revokes acceptance, the buyer may treat the risk as having rested on the seller from revocation to the extent of any insurance deficiency.

The crucial near-miss is destination delivery versus nonconforming tender. Destination tender ordinarily shifts risk at the destination. But if the lamps arrive at the destination with the wrong voltage and the buyer rightfully rejects them, the special breach rule keeps the risk on the seller. The delivery term does not erase the effect of the seller’s nonconformity.

A second near-miss is title versus risk. The buyer may have received title while the seller still bears risk because the tender was nonconforming. Conversely, a buyer may bear risk after a conforming shipment even though the seller retains some contractual interest. Always analyze the title rule and the risk rule separately.

The fastest reading method for a supplied provision is:

  1. Circle the operative event: “passes,” “remains,” “may reject,” or “may revoke.”

  2. Identify the status requirement: shipment, destination, nonconforming tender, acceptance, or revocation.

  3. Mark limiting words such as “unless,” “until,” “only if,” and “substantially.”

  4. Apply the facts in time order: contract term, delivery event, defect, buyer’s response, and later loss.

  5. Check whether an exception displaces the ordinary rule.

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The chart shows the ordinary delivery trigger only. If the tender is nonconforming and gives the buyer a right to reject, the breach-based risk rule may override the ordinary risk result.

QuestionShipment termDestination termNonconforming tender
Seller’s delivery eventConforming goods placed with carrierConforming goods tendered at destinationOrdinary event does not end seller’s risk
Default title pointShipmentDestination tenderMay pass separately from risk
Risk without breachPasses on carrier deliveryPasses on destination tenderNot applicable
Risk after rightful rejectionSeller until cure or acceptanceSeller until cure or acceptanceSpecial rule controls

The Buyer’s Status: Reject Before Acceptance, Revoke After

A buyer who has not accepted goods may reject if the tender fails to conform in any respect to the contract-the Article 2 perfect-tender rule. The buyer may reject the whole shipment, accept a commercial unit and reject the rest, or accept the whole shipment. The rejection must be within a reasonable time and must be seasonably communicated. Silence alone is not a safe rejection.

The major exception is an installment contract. The buyer may reject a nonconforming installment only when the nonconformity substantially impairs the value of that installment and cannot be cured. The buyer may cancel the entire contract only when the nonconformity substantially impairs the value of the whole contract. A single defective installment therefore does not automatically justify rejecting every future installment.

Cure changes the timing analysis. If the contract time has not expired, the seller may notify the buyer of an intention to cure and make a conforming delivery within the contract period. If the seller had reasonable grounds to believe the nonconforming tender would be acceptable, the seller may, after seasonably notifying the buyer, have a further reasonable time to substitute conforming goods even after the deadline. The buyer’s initial rejection does not prevent a legally available cure.

Acceptance occurs when, after a reasonable opportunity to inspect, the buyer signifies that the goods are acceptable, fails to make an effective rejection, or acts inconsistently with the seller’s ownership. Using, reselling, altering, or retaining goods in a way inconsistent with the seller’s ownership can establish acceptance. Acceptance is not the same as merely receiving a shipment or having title pass. After acceptance, the buyer ordinarily cannot reject; the buyer must proceed under revocation if its demanding requirements are met.

Revocation of acceptance is narrower than rejection. The buyer must show a nonconformity that substantially impairs the value of the goods and either that acceptance was reasonably induced by difficulty discovering the defect or by the seller’s assurances that the defect would be cured. The buyer must revoke within a reasonable time after discovering or should have discovered the defect, before a substantial change in the goods not caused by the defect, and by notifying the seller. A buyer who simply regrets the purchase or discovers a minor defect cannot revoke.

Buyer’s responseWhen availableKey triggerImmediate consequence
RejectionBefore acceptanceAny nonconformity, subject to installment limitsTreat goods as not accepted; risk generally remains seller’s
CureBefore or, in limited circumstances, after deadlineTimely conforming substitution under the cure rulesSeller gets the specified opportunity to fix tender
AcceptanceAfter reasonable inspection opportunityAssent, ineffective rejection, or inconsistent ownership actBuyer cannot later reject merely for nonconformity
RevocationAfter acceptanceSubstantial impairment plus inducement or difficult discovery and timely noticeAcceptance is undone if all requirements are met

Thus, the fact that separates rejection from revocation is acceptance. Before acceptance, ask whether the tender conforms and whether cure is available. After acceptance, ask whether substantial impairment, inducement or difficult discovery, timing, notice, and absence of an unauthorized substantial change support revocation.

One Supplied Rule: The Destination Defect That Keeps Risk With the Seller

For this item, read the supplied provision by locating its operative words-“destination,” “rightfully reject,” “remains,” and “until”-then map the delivery term, defect, rejection, and loss onto them.

A destination delivery term requires the seller to tender conforming goods at the destination.

If a tender or delivery is nonconforming in a way that gives the buyer a right to reject, the risk of loss remains on the seller until the seller cures or the buyer accepts.

Unless the parties expressly agree otherwise, title passes when the seller completes performance with respect to physical delivery.

A buyer may reject the whole shipment when the tender fails to conform, subject to the separate rules governing installment contracts.

A contract requires a seller to deliver 100 lamps “FOB buyer’s store.” The seller delivers all 100 lamps to the buyer’s store, but 20 lamps have the wrong voltage. The buyer promptly inspects the shipment, rejects all of it, and notifies the seller. Before the seller can cure or retrieve the lamps, lightning destroys them in the store’s loading area. The seller argues that the destination term shifted the risk when the lamps arrived.

Practice

Who bears the risk of loss for the destroyed lamps?

Three Decision Points: Delivery, Cure, and Revocation

Practice

A contract requires a seller to deliver conforming pottery to the buyer’s warehouse. The seller gives the conforming pottery to a carrier, but the carrier’s truck is destroyed before reaching the warehouse. Who bears the loss?

A seller’s contract requires delivery of 50 chairs by June 30. On June 20, the seller tenders five chairs with the wrong fabric, and the buyer seasonably rejects the shipment. The seller immediately gives notice that conforming chairs will be delivered by June 30. What is the seller’s best position?

A buyer accepts a machine after the seller repeatedly assures the buyer that an unusual vibration will disappear. The buyer later discovers that the vibration substantially impairs the machine’s value, promptly notifies the seller, and has not materially changed the machine. Which remedy is most directly available?

High-Yield Points - ⚡ Biggest Takeaways

Separate title from risk; a nonconforming tender can leave risk with the seller after title passes. Apply the delivery term first, then test whether breach-specific risk rules displace the ordinary result. Rejection precedes acceptance; revocation is the narrower post-acceptance remedy. Before the contract deadline, a seller may often cure a nonconforming tender.

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Practice Questions: Tender, risk of loss, and rejection

  1. 1. A medical clinic contracted with a technology company for a customized records system. The agreement allocated $70,000 to standard servers and networking equipment and $30,000 to data migration, configuration, and staff training. The servers could operate with other records software, but the clinic stated that its primary objective was obtaining an operational system tailored to its workflow. After delivery, the clinic discovered that the server specifications did not conform to the contract. The parties agree that Article 2 governs the transaction because the goods component predominates. Which of the following statements most accurately describes the company's right to cure the nonconforming server specifications under UCC Article 2?

    • A. The company may cure within the time for performance, and may also cure after that time if it had reasonable grounds to believe the nonconforming tender would be acceptable, so long as it seasonably notifies the clinic and makes a conforming delivery.
    • B. The company has no right to cure once the clinic has rejected the servers, regardless of whether the time for performance has expired.
    • C. The company may cure only if the clinic first consents in writing to accept a substitute performance.
    • D. The company has no right to cure because Article 2 imposes a strict perfect-tender rule that bars any post-rejection cure.
    Show answer

    Answer: A. The company may cure within the time for performance, and may also cure after that time if it had reasonable grounds to believe the nonconforming tender would be acceptable, so long as it seasonably notifies the clinic and makes a conforming delivery.

    The company may cure within the time for performance, and may also cure after that time if it had reasonable grounds to believe the nonconforming tender would be acceptable, so long as it seasonably notifies the clinic and makes a conforming delivery. - Under UCC § 2-508(1), if the clinic rejects the nonconforming servers while time for performance remains, the company may seasonably notify the clinic and deliver conforming servers within that time. - Under UCC § 2-508(2), cure after that time is available if the company reasonably believed its tender would be acceptable and, after seasonably notifying the clinic, makes a conforming delivery within a reasonable time. The company has no right to cure once the clinic has rejected the servers, regardless of whether the time for performance has expired. - Rejection does not itself end the company’s cure right; § 2-508(1) allows cure within the time for performance. - Even after that time, § 2-508(2) may allow cure if the company reasonably believed the nonconforming servers would be acceptable. The company may cure only if the clinic first consents in writing to accept a substitute performance. - Written consent from the clinic is not a condition of the company’s statutory right to cure under § 2-508. - The company must instead meet the applicable requirements for notice and conforming delivery, including the additional reasonable-belief requirement for cure after the time for performance. The company has no right to cure because Article 2 imposes a strict perfect-tender rule that bars any post-rejection cure. - Article 2’s perfect-tender rule permits rejection of nonconforming goods, but § 2-508 expressly preserves a seller’s opportunity to cure. - The clinic’s rejection of servers with incorrect specifications therefore does not automatically bar the company from delivering conforming servers.

  2. 2.

    • 3. Using only the supplied client file and legal resources, prepare an objective memorandum assessing Northline Events' strongest and weakest grounds for avoiding or rescinding the venue contract based on alleged misrepresentation and nondisclosure. Address enforceability of the reliance disclaimer, available remedies, counterarguments, and the most important investigation and preservation steps.

      • 4. Using only the supplied file and legal resources, prepare an objective memorandum assessing whether BrightPath Analytics may avoid or suspend its data-conversion contract based on economic duress or the disputed performance condition. Address the strongest arguments for both parties, identify the most important factual uncertainty, and recommend the client's next step before the June 30 conversion deadline.

        • 5.

          • 6.

            • 7. A manufacturing plant contracted with an industrial-equipment supplier for a new backup generator, control panel, and cooling system. The written agreement allocated $180,000 to the equipment and $30,000 to delivery, installation, and calibration. The supplier regularly sells this equipment and uses its own technicians for installation. The equipment was standard inventory, although the supplier selected models suitable for the plant's power needs and available space. After installation, the plant alleged that the cooling system did not conform to the specifications. The supplier contends that common-law substantial-performance principles govern because its technicians provided skilled services. Which of the following best identifies the law governing the agreement?

              • A. Article 2 governs because the industrial equipment is the transaction's predominant purpose, while installation is incidental.
              • B. Common law governs because any agreement requiring skilled installation is treated primarily as a services contract.
              • C. Article 2 governs the equipment obligations, while common law separately governs every obligation relating to installation.
              • D. Common law governs because the plant described operational needs before the supplier selected the equipment.
              Show answer

              Answer: A. Article 2 governs because the industrial equipment is the transaction's predominant purpose, while installation is incidental.

              Article 2 governs because the industrial equipment is the transaction's predominant purpose, while installation is incidental. - The agreement allocates $180,000 to standard equipment and $30,000 to delivery, installation, and calibration, making the sale of goods its predominant purpose. - Article 2 therefore governs the agreement, including the alleged cooling-system nonconformity, rather than common-law substantial-performance principles. Common law governs because any agreement requiring skilled installation is treated primarily as a services contract. - The supplier’s technicians perform skilled work, but that fact alone does not make installation the agreement’s predominant purpose. - Installation and calibration account for $30,000 of the $210,000 agreement, while the plant principally contracted to acquire equipment. Article 2 governs the equipment obligations, while common law separately governs every obligation relating to installation. - Under the predominant-purpose test, one body of law ordinarily governs a mixed goods-and-services agreement rather than automatically splitting its obligations. - Because equipment predominates here, the presence of installation obligations does not require separate common-law treatment. Common law governs because the plant described operational needs before the supplier selected the equipment. - Selecting standard-inventory models suited to the plant’s power needs and space does not turn the transaction into a services contract. - The agreement’s principal object remains the $180,000 generator, control panel, and cooling system, not the supplier’s advice in choosing them.

            • 8. A retail chain hired a vendor to design and install a customized point-of-sale computer network for $90,000. The written agreement allocated $58,000 to prefabricated computer terminals and network equipment, $12,000 to design work, and $20,000 to installation. The terminals could operate without structural changes to the building, and installation was expected to take four days. After delivery, the retail chain asserted that several terminals did not conform to the specifications and sought to reject them. The vendor argued that common-law substantial-performance principles governed because the transaction included design and installation services. The jurisdiction determines the governing law for a mixed transaction by examining its predominant purpose. Which of the following best states the law that should govern the agreement?

              • A. Common law should govern because the vendor agreed to perform both design and installation services.
              • B. Article 2 should govern because the agreement predominantly concerns movable computer equipment, with services incidental to that sale.
              • C. Common law should govern because the equipment was customized for use in a particular retail chain.
              • D. Article 2 should govern only the prefabricated components, while common law necessarily governs every other contractual obligation.
              Show answer

              Answer: B. Article 2 should govern because the agreement predominantly concerns movable computer equipment, with services incidental to that sale.

              Article 2 should govern because the agreement predominantly concerns movable computer equipment, with services incidental to that sale. - The equipment accounts for $58,000 of the $90,000 price, and the movable terminals can operate without structural changes to the building. - Under the jurisdiction’s predominant-purpose test, the four-day installation and $12,000 design work are incidental to the sale of goods, so Article 2 governs the agreement. Common law should govern because the vendor agreed to perform both design and installation services. - Including services does not make common law controlling when the transaction predominantly concerns goods. - Here, design and installation total $32,000, less than the $58,000 allocated to equipment. Common law should govern because the equipment was customized for use in a particular retail chain. - Customization does not prevent movable computer terminals from being goods under Article 2. - The terminals’ ability to operate without structural changes supports treating this as an equipment sale rather than a construction-services contract. Article 2 should govern only the prefabricated components, while common law necessarily governs every other contractual obligation. - The stated predominant-purpose test generally selects the governing law for the mixed agreement, rather than automatically splitting its obligations. - Thus, the design and installation obligations do not necessarily fall under common law simply because they involve services.

            Flashcards: Tender, risk of loss, and rejection

            1. 1. What performance standard applies to the sale of goods under the UCC?

              Show answer

              The perfect-tender rule generally permits the buyer to reject goods if they fail in any respect to conform to the contract. The seller usually may cure a nonconforming tender within the time for performance, and an installment contract is governed by a substantial-impairment standard.

            2. 2. Under Article 2, what is the relationship between title, risk of loss, and a nonconforming tender?

              Show answer

              Title and risk of loss are separate issues. Under UCC § 2-510(1), when the seller makes a nonconforming tender, the risk of loss remains on the seller until cure or the buyer’s acceptance, even if title has passed. Otherwise, risk is allocated by the parties’ agreement (including shipment or destination terms) or, if the agreement is silent, the UCC’s default rules.

            3. 3. Explain the difference between subjective and objective satisfaction conditions, and state the role of good faith in both.

              Show answer

              A subjective satisfaction condition applies to personal taste or aesthetics, requiring genuine dissatisfaction. An objective satisfaction condition applies to commercial value or operative fitness, requiring a reasonable person's dissatisfaction. In both cases, the evaluator must act in good faith, meaning they cannot claim dissatisfaction for a fabricated reason or as a pretext to escape the bargain.

            4. 4. Under the UCC, what are the six standards goods must meet to be merchantable?

              Show answer

              Goods must: 1. Pass without objection in the trade. 2. Be of fair average quality. 3. Be fit for ordinary purposes. 4. Run evenly within units/lots. 5. Be adequately contained, packaged, and labeled. 6. Conform to promises on container/label.

            5. 5. Distinguish between a 'promise' and a 'condition' in contract law.

              Show answer

              A promise is an undertaking to act or refrain from acting, creating a contractual duty; failure to perform is generally a breach. A condition is an uncertain event, not a promise, whose occurrence triggers or discharges a duty. If a condition does not occur, the related duty may not become due or may be discharged, but nonoccurrence is generally not itself a breach unless a party also promised that the condition would occur.

            6. 6. What makes a contract divisible under the majority common-law rule?

              Show answer

              A contract is divisible when the parties’ performances are apportioned into corresponding pairs of parts, and each pair is the agreed equivalent of the other. A party may generally recover for completed units even if it breaches as to later units, subject to the contract’s terms.

            7. 7. When may a seller cure a nonconforming delivery under the UCC?

              Show answer

              The seller may seasonably notify the buyer of an intent to cure and make a conforming delivery within the contract time; after that time, cure is allowed when the seller reasonably believed the nonconforming tender would be acceptable and promptly gives notice. The buyer must allow the permitted cure.

            8. 8. What is the rule for demanding adequate assurance of performance?

              Show answer

              Under UCC § 2-609 and the majority Restatement approach, a party with reasonable grounds for insecurity may make a written demand for adequate assurance and, if commercially reasonable, suspend performance. Failure to provide adequate assurance within a reasonable time—no more than 30 days under the UCC—is treated as repudiation.

            9. 9. What is the UCC rule for breach of an installment contract?

              Show answer

              The buyer may reject a nonconforming installment only if the defect substantially impairs the value of that installment and cannot be cured as permitted by the UCC. The buyer may cancel the entire contract only if the breach substantially impairs the value of the whole contract.

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