UCC 2 612 (Explained: Installment Contracts And Its Breach)

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What are the rights and obligations associated with installment contracts?

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Let me explain provision 2 612 of UCC!

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What Is UCC 2 612 

UCC 2 612 refers to Section 2 612 of the Uniform Commercial Code titled “‘Installment Contract’; Breach”.

In essence, Section 2 612 UCC provides for the buyer and seller’s rights and obligations when they have entered into an installment contract for the delivery of goods.

Under this provision, the installment contract is defined, the rights of the buyer to reject non-conforming installments, and instances where the contract is considered to be breached.

Let’s look at provision 2 612 of UCC in more detail.

UCC 2 612 Overview

§ 2-612 UCC is divided into three paragraphs.

UCC 2 612(1): Installment Contracts

Section 2 216(1) UCC defines an installment contract as one that requires the delivery of goods (or allows the delivery of goods) to be done in separate lots.

Each separate lot will be separately accepted even though the parties may have a contractual provision stating that each delivery is like a separate contract.

UCC 2 612(2): Buyer’s Rights

Section 2 216(2) UCC allows a buyer to reject the seller’s installment to the extent that the delivery is non-confirming and:

• Substantially impairs the value of the installment 
• Cannot be cured by the seller 
• The non-conformity is a defect in the required documents

However, if the non-conformity of the installment does not fall under Section 2 216(3) and the seller provides the buyer with assurances that it will cure the installment, then the buyer must accept it.

UCC 2 612(3): Breach of Contract

Section 2 216(3) UCC states that there is a breach of the entire contract when the seller’s non-conformity (relating to either one or many installments) substantially impairs the value of the entire contract.

However, if the buyer does not give the seller a notice of cancellation or brings an action with respect to the non-conformity of past installments or requests the performance of future installments, then the contract is reinstated.

UCC 2-612 Takeaways 

So there you have it folks!

What are the rights and obligations of installment contracts under UCC 2-216?

UCC 2-216(1) provides for the definition of “installment contracts” representing contracts where the goods can be or should be delivered in separate installments or lots.

Even though the contract may have wording such as “each delivery is a separate contract” or similar wording, the provision of UCC states that each lot should be accepted separately and part of the same contract.

UCC 2-216(2) requires that the installment deliveries be accepted if the seller can cure the non-conformity and provides a notice to the buyer to this effect.

Otherwise, the buyer will have the right to reject the installment that substantially impairs the value of the installment.

Finally, UCC 2-216(3) allows for a contract to continue in the absence of the buyer’s express exercise of cancellation rights or if the buyer accepts the non-confirming delivery pending future adjustments.

However, if one or several installments result in the substantial impairment of the value of the contract as a whole, the installment contract is breached as a whole.

If you are involved in a contract subject to the rules of UCC or need to assess your legal rights and obligations, you should consult a contract attorney or trial attorney for qualified advice.

Good luck!

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Now, let’s look at a summary of our findings.

Uniform Commercial Code 2 612 Overview

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