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35. Was the bakery legally justified in rejecting the tender of the 5,000 pounds of flour?
A wholesaler contracted in a signed writing to sell to a bakery 10,000 pounds of flour each week for 10 weeks, the flour to be delivered to the bakery on Mondays and payment to be made on Wednesdays of each week. The bakery did all of its weekly bread baking on Tuesdays. On Monday morning of the first week, the wholesaler tendered delivery of 8,000 pounds of flour to the bakery, and the bakery accepted it on the wholesaler's assurance that the remaining 2,000 pounds would be delivered later that evening, which it was. The bakery paid for both deliveries on Wednesday. On Monday of the second week, the wholesaler tendered delivery of 5,000 pounds of flour to the bakery and said that the remaining 5,000 pounds could not be delivered on Monday but would be delivered by Wednesday. The bakery rejected the tender.
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A divisible contract is one in which both parties have divided up their performances into corresponding pairs of part performances, so that each part of each pair is regarded by the parties as agreed-upon equivalents. Typically, this means that one party promises to deliver a series of part performances, and the other party promises to pay a separately quoted amount for each of those part performances.
The UCC discourages the treatment of contracts for the sale of goods as being divisible. UCC § 2-307 provides that unless the parties have agreed to permit delivery in installments, all goods called for by a contract for sale must be tendered in a single delivery. This means that if no installment deliveries are agreed upon, but the seller delivers only a partial shipment, he has breached the entire contract and may not recover on it for that installment, even though the price of that installment could be calculated by pro-rating the contract price.
Even where the parties agree to allow installment deliveries, the UCC frequently penalizes the seller who delivers a defective installment or fails to deliver a particular installment at all. The buyer may reject a defective installment if the defect substantially impairs the value of that installment. The buyer may treat that defective installment or default in making the installment as a total breach if the defect or default substantially impairs the value of the contract.
The perfect tender rule refers to the legal right for a buyer of goods to insist upon «perfect tender» by the seller. In a contract for the sale of goods, if the goods fail to conform exactly to the description in the contract (whether as to the quality, quantity, or manner of delivery) the buyer may nonetheless accept the goods, or reject the goods, or reject the non-conforming part of the tender and accept the conforming part. UCC Article 2 adopts the perfect tender rule, but that rule is inapplicable to assess the conformance of a seller's performance under an installment contract.
B is correct. When the wholesaler tendered the second delivery (or installment) of only 5,000 pounds of flour, rather than the full 10,000, and would not be able to deliver the other 5,000 pounds until Wednesday, which was the day after the bakery needed the flour to bake bread, it substantially impaired the value of that installment and could not be cured. The wholesaler was attempting to make an installment delivery, which is permissible under the UCC, but the wholesaler will be penalized for delivering defective installment, and the bakery was able to reject it.
A is incorrect. This answer reaches the correct answer with the wrong reasoning. The bakery rightfully rejected the shipment, but not because of the fact that the shipment was non-conforming, as indicated in this choice. The perfect tender rule typically allows a buyer to reject a non-conforming shipment, however, in the case of an installment contract, such as the one here, the substantial impairment standard will apply. In other words, even if the delivery of goods is non-conforming, under an installment contract, a buyer may not reject it if it does not substantially impair the value of the contract.
C is incorrect. The perfect tender rule regarding installment contracts will allow a buyer to reject a non-conforming shipment that substantially impairs the value of the contract, even if the seller offers to cure it. Here, even though the wholesaler promised to deliver the other 5,000 pounds of flour on Wednesday, that cure would be ineffective because the bakery baked its bread on Tuesdays.
D is incorrect. Accepting the first 8,000 pounds on Monday of the first week (i.e., the delivery on the first installment) did not waive the bakery's right to reject a later shipment that was defective to the point that it substantially impaired the contract. That first defective installment was cured by the wholesaler's delivery of the remaining 2,000 pounds later that same day, which was still before the bakery needed it to bake bread on Tuesday. However, the non-conforming shipment of only 5,000 pounds could not be cured by the Wednesday shipment of the remainder, as stated above. Allowing the wholesaler to cure the first shipment does not bind the bakery to accept any level of non-conforming shipments going forward.