Bar Exam — MBE (Multistate Bar Exam)ContractsMedium
A buyer and a seller entered into a contract for the sale of 10,000 pounds of Grade A coffee beans for $50,000, to be delivered in two equal installments. The first installment of 5,000 pounds arrived, but 10% of the beans were Grade B. The buyer immediately notified the seller of the non-conformity and rejected the first installment. The seller assured the buyer that the second installment would be fully conforming and offered a 5% discount on the first installment. The buyer, however, was concerned about the seller's ability to deliver conforming goods and the overall quality of the coffee. Can the buyer cancel the entire contract?
- AYes, because the non-conformity in the first installment substantially impaired the value of the entire contract.
- BNo, because the buyer can only reject the non-conforming installment and must accept the second if it is conforming.
- CNo, because the seller offered to cure the non-conformity and provided assurances for the second installment.
- DYes, but only if the buyer can prove that the seller intentionally delivered non-conforming goods.
Show answer & explanationAnswer & explanation
Correct answer: A. Yes, because the non-conformity in the first installment substantially impaired the value of the entire contract.
Under UCC 2-612, in an installment contract, a buyer can cancel the entire contract if a non-conformity in one installment substantially impairs the value of the whole contract. Here, the buyer's concern about the seller's ability to deliver conforming goods and the overall quality suggests such substantial impairment.
Why the other options are wrong
- B. This is incorrect. If the non-conformity substantially impairs the value of the whole contract, the buyer can cancel the entire contract, not just reject the installment.
- C. While cure and assurances are relevant, they do not prevent cancellation if the non-conformity substantially impairs the value of the whole contract.
- D. Proof of intentional delivery is not a requirement for canceling an installment contract under UCC 2-612; substantial impairment is the key.
UCC 2-612 Installment Contracts (Cancellation)
Under UCC Article 2, if a non-conformity in one or more installments of an installment contract substantially impairs the value of the whole contract, the buyer may cancel the entire contract.
- Applies to installment contracts (goods delivered in separate lots).
- A non-conformity in an installment must 'substantially impair' the value of the *whole* contract.
- If substantially impaired, the buyer may cancel the entire contract, not just the non-conforming installment.
Memory trick: Installments are like links in a chain; one weak link can break the whole chain.