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What are the conditions regarding payment, delivery, and tender of performance?
Tendering performance means to offer or attempt to perform the agreement. Often a party’s offer or attempt to perform is sufficient to satisfy the condition of performance and obligate the other party’s performance. That is, a party cannot avoid her obligation under the contract by failing to accept the other party’s tender of performance. One party offering or attempting to perform is a condition to the other party’s obligation to perform. Unless a contract states otherwise, the default rules under the UCC and Restatement place conditions on the delivery of services and the delivery of a product by a party to a contract.
UCC Condition of Performance – The UCC states the buyer tendering payment to the seller of a good is a condition that must be satisfied before the seller has the duty to deliver the good.
- Example: I offer to purchase an expensive jacket from you. You accept. I must offer to give you the money before you are obligated under the contract to give me the jacket.
Restatement Condition of Performance – Simiarly, the Restatement requires that a service provider must tender performance before the other party has a duty to pay for those services.
- Example: I offer to paint your house for $500. You accept. I must complete my obligation to paint your house before you are obligated to pay me $500. In this case, tendering performance is completing my duty to paint.
In either case, rejecting a party’s tender of performance can constitute a breach of contract if the tender of performance conforms to the requirements of the contract.
Discussion: Why do you think tending performance as a condition is treated differently under the UCC versus the Restatement?
Practice Question: Herman offers to purchase machinery for his business from Jamie. The offer is silent on who must perform first. Herman asks that Jamie ship the goods to his business location so that he can inspect it. If it meets inspection, he will pay for the machinery. Jamie refuses and asks Herman to pay first. If both parties refuse to perform first, who is likely legally liable for breach of contract?
- Under the provisions of the UCC on condition of performance regarding sale of goods, the seller’s primary obligation is to tender of delivery of the products to the buyer. This means that the seller is obligated to tender performance (which means bringing the products to the buyer – even if it means by way of shipping) before the buyer has the obligation to pay for them. Although in specific contracts the parties may agree that the seller maintains possession of the goods until the buyer can pay for them. Where such specific terms are not expressed in the contract, then the seller is obligated with bringing the goods to the buyer before he receives payment. It is Jamie’s obligation to deliver the goods to Herman, who has the right to inspect the goods, before he receives payment.