A buyer and a seller entered into a contract for the sale of 500 custom-made widgets for $5,000, to be delivered on October 1st. The contract included a clause stating, 'Time is of the essence.' On September 25th, the seller informed the buyer that due to an unexpected machine breakdown, only 450 widgets would be ready for delivery on October 1st, with the remaining 50 to follow a week later. The buyer refused to accept the partial delivery and informed the seller that they considered the contract breached. Which of the following best describes the buyer's rights?
- AThe buyer must accept the 450 widgets and sue for damages for the delay of the remaining 50.
- BThe buyer can reject the partial delivery and sue for total breach, as 'time is of the essence' makes any delay a material breach.
- CThe buyer can suspend performance but not cancel the contract until the seller fails to provide adequate assurances.
- DThe buyer can only reject the entire delivery if the defect substantially impairs the value of the whole contract.
Show answer & explanationAnswer & explanation
Correct answer: B. The buyer can reject the partial delivery and sue for total breach, as 'time is of the essence' makes any delay a material breach.
This contract is for the sale of goods, governed by the UCC. While the UCC generally allows for perfect tender, the 'time is of the essence' clause emphasizes that timely performance is a material condition. The seller's failure to deliver the full quantity on the specified date, especially with a 'time is of the essence' clause, constitutes a material breach, allowing the buyer to reject the non-conforming tender and treat the contract as totally breached.
Why the other options are wrong
- A. The perfect tender rule allows rejection for non-conforming goods; the buyer is not obligated to accept a partial shipment unless the contract allows it.
- C. Adequate assurances are typically requested when there are reasonable grounds for insecurity; here, there's an actual breach of a material term.
- D. This statement is generally true for installment contracts, but not for a single delivery contract where 'time is of the essence' is stipulated.
Perfect Tender Rule (UCC)
Under the UCC, a buyer can reject goods if they fail in any respect to conform to the contract. The 'time is of the essence' clause emphasizes the materiality of timely delivery.
- Applies to contracts for the sale of goods.
- Buyer can reject goods if they are not 'perfect'.
- Seller has a right to cure within the contract time.
- Exceptions exist for installment contracts and good faith.
Memory trick: Perfect Tender, or no deal, says the UCC!