Perfect Tender Rule (Legal Definition And Application To Contracts)

What is the Perfect Tender Rule?

How does this rule apply to the sale of goods contract?

What are the important elements you should know!

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Perfect Tender Rule Overview

The perfect tender rule is a rule or principle in the U.S. law requiring that a buyer of goods demand a “perfect tender” from the seller.

This rule is based on Article 2 of the Uniform Commercial Code or UCC applicable to the sale of goods.

Under the UCC, the buyer of goods can demand and insist that the seller deliver the goods with the right quality, quantity, and delivery method.

If the goods do not correspond to the buyer’s requirements and order, the buyer has the legal right to reject the goods.

When a party’s performance is perfect, it is said to be complete.

This means that based on the Perfect Tender Rule UCC, substantial performance is not adequate when the parties are involved in a contract for the sale of goods.

A seller cannot “substantially” conform to the buyer’s requirements but must “perfectly” conform to it.

Section 2-601 UCC titled “Buyer’s Rights on Improper Delivery”, states that if the goods or the tender of delivery fails “in any respect” to conform to the contract, the buyer will have the right to reject the goods.

Perfect Tender Rule definition

How do you define the perfect tender rule?

The “perfect tender rule” is a legal provision found in the Uniform Commercial Code where a buyer of goods is given the right to reject goods supplied by a seller if the goods do not correspond to the buyer’s order or demand.

When the buyer insists on the conformity of the goods, we say that the buyer is insisting on the “perfect tender”.

According to FindLaw, Perfect Tender Rule is defined as follows:

A rule that permits a buyer to reject goods if they or the tender of delivery fail to conform to contract in any respect [the perfect tender rule is preserved to the extent of permitting a buyer to reject goods for any defects “Ramirez v. Autosport, 440 A.2d 1345 (1982)”
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Contract for the sale of goods 

In a contract for the sale of goods, the seller’s performance consists of delivering the goods to the buyer in conformity with the buyer’s orders, specifications,s and delivery timelines.

In exchange, the buyer’s obligations towards the seller are to accept the goods and pay for them.

However, if the UCC applies to the contract, the buyer has the right to inspect the goods to ensure that they conform to the contract.

If the goods are not in conformity to the contract, the buyer has the right to reject the goods.

Essentially, UCC requires that the seller tender the goods to precisely and exactly meet the buyer’s requirements as per the terms of the contract.

Perfect Tender Rule Common Law

The perfect tender rule stems from the Uniform Commercial Code (UCC) applicable to instances where you sell goods.

However, when you have a contract for a service or a non-UCC contract, that’s when you may need to use the substantial performance doctrine to define what is a perfect performance or sufficient performance to satisfy the implied condition of performance.

When we refer to “substantial” performance, we are referring to a legal obligation that has been performed in its substance and where we can say that the performance of the obligations are complete, although certain aspects remain to be finalized.

Legal disputes can arise when a party claims to have performed its obligations substantially, whereas the other party claims that the performance was incomplete or imperfect.

In the event of a dispute, the court may need to draw the line between what’s considered a proper substantial performance justifying the completion of the contract versus an imperfect performance justifying a possible breach of contract.

Typically, the court will need to make the following determination:

  • Has the party substantially completed its obligations?
  • Are the obligations substantially in conformity with the terms of the contract or proper standards?
  • How much did the buyer benefit from the contract?
  • Was the alleged breach of contract due to bad faith?
  • To what extent will the award of damages for the breach make up for the imperfect performance? 

Perfect Tender Rule Exceptions

What are the exceptions applicable to the UCC perfect tender rule?

Considering the perfect tender is a high standard to achieve for sellers all the time, the UCC allows for two exceptions (particularly the right given to the seller to cure the non-conformity).

There are two exceptions where the goods may not be a perfect tender and the seller is not in breach of UCC:

  • When the seller’s time to perform the contract has not yet expired 
  • When the buyer and seller entered into an installment contract 

When the seller’s time to perform the contract has not yet expired, it may cure the default or non-conformity before the performance deadline expires under Section 2-508(1) UCC.

If a contract for the sale of goods is an installment contract, the “perfect tender” rule will not apply and the buyer will not be able to reject installments that do not correspond to the contract provided that:

  • There is no substantial impairment of the contract value due to the improper installments
  • The seller can cure the imperfect tender
  • The seller informs the buyer that it will cure the imperfect tender 

Remedies for imperfect tender 

What are the remedies for an imperfect tender?

In most cases, buyers and sellers enter into a sale of goods contract, perform their obligations, and are satisfied with the outcome.

In other cases, however, that may not be the case.

When the seller fails to deliver goods as per contract, the buyer has certain remedies:

  • File lawsuit for breach of warranty
  • Require the cancellation of the contract
  • Seek damages
  • Seek specific performance or replevin 

When the buyer breaches the contract, the seller has remedies as well:

  • Cancel the contract
  • Resell the goods to another buyer and seek damages
  • Sue the buyer for damages to recover the purchase price
  • Sue the buyer for damages due to the buyer’s nonacceptance of the goods
  • Withhold the execution or delivery of goods
  • Require the buyer to return the goods 

Takeaways 

So what is the legal definition of the Perfect Tender Rule?

Let’s look at a summary of our findings.

Perfect Tender Rule:

  • The UCC Perfect Tender Rule is a legal provision allowing a buyer of goods to reject the sale of goods if it does not conform in any respect to its requirements in quality, quantity, and delivery 
  • When UCC does not apply, the legal doctrine of substantial performance may be used 
  • There are two exceptions to the rule: 1) when the seller provides a non-conforming tender but notifies the buyer that it will cure it prior to the expiration of its performance delays or 2) if the parties had entered into an installment contract 
Actual damages
Anticipatory repudiation 
Bill of lading 
Civil lawsuit
Commercial reasonableness 
Compensatory damages 
Contract performance 
Delivery contract 
Duty of cooperation 
Express contract 
Good faith 
Letters of credit 
Non-carrier contract 
Payment term 
Peremptory writ 
Right of assurance 
Right of inspection 
Shipment contract 
Substantial performance
Tender of delivery
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