The Perfect Tender Rule

Whenever the common law of Contracts differs from the Uniform Commercial Code ("UCC"), there's a good chance that the difference will be tested on the MBE. The UCC generally does not follow the common law doctrine of substantial performance. Instead it follows the "perfect tender rule." The perfect tender rule requires a strict adherence to the terms of the offer; if goods or their delivery fail to conform to the contract in any way the buyer can generally reject the goods, accept the goods, or accept some of the goods and reject the rest.

Although the buyer under the perfect tender rule has the right to reject the goods as stated above, that right is cut off once the buyer has accepted the goods. A buyer accepts the goods if the buyer after a reasonable opportunity to inspect the goods indicates to the seller that the goods conform to the contract or that they are accepted even though they don't conform. In addition, the buyer accepts the goods if the buyer fails to reject them within a reasonable time after they've been tendered or if the buyer acts in a way inconsistent with the seller's ownership. 

Although acceptance generally does cut off the right to reject, under limited circumstances, a buyer may revoke acceptance which will then equate to a rejection. The buyer may revoke acceptance if the goods have a defect that substantially impairs their value and the buyer accepted the goods on the reasonable belief that the defect would be cured (and it's not cured), or the buyer accepted the goods because of the difficulty of discovering the defects. In addition, the buyer can revoke acceptance if the buyer accepted because of the seller's assurance that the goods conformed to the contract (and they didn't). In any case, revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the defects and before any substantial change in the goods occurs.

There's a very commonly tested exception to the perfect tender rule to keep in mind. The buyer's right to reject (which would be absolute under the perfect tender rule) is limited when the contract is an installment contract. In an installment contract, an installment can be rejected only if the nonconformity substantially impairs the value of that installment. And the entire installment contract is breached only if the nonconformity substantially imparts the value of the entire contract. 

Further, even if the buyer has properly rejected as per the perfect tender rule, the seller might have the right to "cure." It's important to understand, though, that the seller generally can only cure within the time originally provided for in the contract. The seller can cure within that time by giving reasonable notice to the buyer of an intention to do so and then by making a new tender of conforming goods. 

Under very limited circumstances, the seller might even have an opportunity to cure beyond the time originally provided for in the contract. If the buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable, then the seller, upon reasonable notification to the buyer, will have a reasonable amount of time beyond the original contract time to cure by sending to the buyer conforming goods. Look for situations in which prior dealings with the buyer led the seller to believe that the goods would be acceptable or situations in which it would have been impossible or nearly so for the seller to have known that the goods were defective.