/* Part two of the UCC on sales... */

2-402. Rights of Seller's Creditors Against Sold Goods.

(1) Except as provided in subsections (2) and (3), rights

of unsecured creditors of the seller with respect to goods which

have been identified to a contract for sale are subject to the

buyer's rights to recover the goods under this Article (Sections

2-502 and 2-716).

(2) A creditor of the seller may treat a sale or an

identification of goods to a contract for sale as void if as

against him a retention of possession by the seller is fraudulent

under any rule of law of the state where the goods are situated,

except that retention of possession in good faith and current

course of trade by a merchant-seller for a commercially

reasonable time after a sale or identification is not fraudulent.

(3) Nothing in this Article shall be deemed to impair the

rights of creditors of the seller

(a) under the provisions of the Article on Secured

Transactions (Article 9); or

(b) where identification to the contract or delivery is

made not in current course of trade but in satisfaction of or as

security for a pre-existing claim for money, security or the like

and is made under circumstances which under any rule of law of

the state where the goods are situated would apart from this

Article constitute the transaction a fraudulent transfer or

voidable preference.

2-403. Power to Transfer; Good Faith Purchase of Goods;

"Entrusting".

(1) A purchaser of goods acquires all title which his

transferor had or had power to transfer except that a purchaser

of a limited interest acquires rights only to the extent of the

interest purchased. A person with voidable title has power to

transfer a good title to a good faith purchaser for value. When

goods have been delivered under a transaction of purchase the

purchaser has such power even though

(a) the transferor was deceived as to the Identity of the

purchaser, or

(b) the delivery was in exchange for a check which is later

dishonored, or

(c) it was agreed that the transaction was to be a "cash

sale", or

(d) the delivery was procured through fraud punishable as

larcenous under the criminal law.

(2) Any entrusting of possession of goods to a merchant who

deals in goods of that kind gives him power to transfer all

rights of the entruster to a buyer in ordinary course of

business.

(3) "Entrusting" includes any delivery and any acquiescence

in retention of possession regardless of any condition expressed

between the parties to the delivery or acquiescence and

regardless of whether the procurement of the entrusting or the

possessor's disposition of the goods have been such as to be

larcenous under the criminal law.

(4) The rights of other purchasers of goods and of lien

creditors are governed by the Articles on Secured Transactions

(Article 9), [Bulk Sales (Article 6) and Documents of Title

(Article 7).

Note: If a state adopts the repealer of Article 6-Bulk Transfers

(Alternative A), the bracketed language should be deleted.

PART 5

PERFORMANCE

2-501. Insurable Interest in Goods; Manner of Identification of

Goods.

(1) The buyer obtains a special property and an insurable

interest in goods by identification of existing goods as goods to

which the contract refers even though the goods so identified are

non-conforming and he has an option to return or reject them.

Such identification can be made at any time and in any manner

explicitly agreed to by the parties. In the absence of explicit

agreement identification occurs

(a) when the contract is made if it is for the sale of

goods already existing and identified;

(b) if the contract is for the sale of future goods other

than those described in paragraph (c), when goods are shipped,

marked or otherwise designated by the seller as goods to which

the contract refers;

(c) when the crops are planted or otherwise become growing

crops or the young are conceived if the contract is for the sale

of unborn young to be born within twelve months after contracting

or for the sale of crops to be harvested within twelve months or

the next normal harvest season after contracting whichever is

longer.

(2) The seller retains an insurable interest in goods so

long as title to or any security interest in the goods remains in

him and where the identification is by the seller alone he may

until default or insolvency or notification to the buyer that the

identification is final substitute other goods for those

identified.

(3) Nothing in this section impairs any insurable interest

recognized under any other statute or rule of law.

2-502. Buyer's Right to Goods on Seller's Insolvency.

(1) Subject to subsection (2) and even though the goods

have not been shipped a buyer who has paid a part or all of the

price of goods in which he has a special property under the

provisions of the immediately preceding section may on making and

keeping good a tender of any unpaid portion of their price

recover them from the seller if the seller becomes insolvent

within ten days after receipt of the first installment on their

price.

(2) If the identification creating his special property has

been made by the buyer he acquires the right to recover the goods

only if they conform to the contract for sale.

2-503. Manner of Seller's Tender of Delivery.

(1) Tender of delivery requires that the seller put and

hold conforming goods at the buyer's disposition and give the

buyer any notification reasonably necessary to enable him to take

delivery. The manner, time and place for tender are determined by

the agreement and this Article, and in particular

(a) tender must be at a reasonable hour, and if it is of goods

they must be kept available for the period reasonably necessary

to enable the buyer to take possession; but

(b) unless otherwise agreed the buyer must furnish facilities

reasonably suited to the receipt of the goods.

(2) Where the case is within the next section respecting

shipment tender requires that the seller comply with its

provisions.

(3) Where the seller is required to deliver at a particular

destination tender requires that he comply with subsection (1)

and also in any appropriate case tender documents as described in

subsections (4) and (5) of this section.

(4) Where goods are in the possession of a bailee and are

to be delivered without being moved

(a) tender requires that the seller either tender a

negotiable document of title covering such goods or procure

acknowledgment by the bailee of the buyer's right to possession

of the goods; but

(b) tender to the buyer of a non-negotiable document of

title or of a written direction to the bailee to deliver is

sufficient tender unless the buyer seasonably objects, and

receipt by the bailee of notification of the buyer's rights fixes

those rights as against the bailee and all third persons; but

risk of loss of the goods and of any failure by the bailee to

honor the non-negotiable document of title or to obey the

direction remains on the seller until the buyer has had a

reasonable time to present the document or direction, and a

refusal by the bailee to honor the document or to obey the

direction defeats the tender.

(5) Where the contract requires the seller to deliver

documents

(a) he must tender all such documents in correct form,

except as provided in this Article with respect to bills of

lading in a set (subsection (2) of Section 2- 323); and

(b) tender through customary banking channels is sufficient

and dishonor of a draft accompanying the documents constitutes

non-acceptance or rejection.

2-504. Shipment by Seller.

Where the seller is required or authorized to send the goods

to the buyer and the contract does not require him to deliver

them at a particular destination, then unless otherwise agreed he

must

(a) put the goods in the possession of such a carrier and

make such a contract for their transportation as may be

reasonable having regard to the nature of the goods and other

circumstances of the case; and

(b) obtain and promptly deliver or tender in due form any

document necessary to enable the buyer to obtain Possession of

the goods or otherwise required by the agreement or by usage of

trade; and

(c) promptly notify the buyer of the shipment.

Failure to notify the buyer under paragraph (c) or to make a

proper contract under Paragraph (a) is a ground for rejection

only if material delay or loss ensues.

2-505. Seller's Shipment Under Reservation.

(1) Where the seller has identified goods to the contract

by or before shipment:

(a) his procurement of a negotiable bill of lading to his

own order or otherwise reserves in him a security interest in the

goods. His procurement of the bill to the order of a financing

agency or of the buyer indicates in addition only the seller's

expectation of transferring that interest to the person named.

(b) a non-negotiable bill of lading to himself or his

nominee reserves possession of the goods as security but except

in a case of conditional delivery (subsection (2) of Section 2-

507) a non-negotiable bill of lading naming the buyer as

consignee reserves no security interest even though the seller

retains possession of the bill of lading.

(2) When shipment by the seller with reservation of a

security interest is in violation of the contract for sale it

constitutes an improper contract for transportation within the

preceding section but impairs neither the rights given to the

buyer by shipment and identification of the goods to the contract

nor the seller's powers as a holder of a negotiable document.

2-506. Rights of Financing Agency.

(1) A financing agency by paying or purchasing for value a

draft which relates to a shipment of goods acquires to the extent

of the payment or purchase and in addition to its own rights

under the draft and any document of title securing it any rights

of the shipper in the goods including the right to stop delivery

and the shipper's right to have the draft honored by the buyer.

/* The right to stop shipment being the legal right to stop

delivery if one learns that the purchaser is insolvent or

bankrupt. */

(2) The right to reimbursement of a financing agency which

has in good faith honored or purchased the draft under commitment

to or authority from the buyer is not impaired by subsequent

discovery of defects with reference to any relevant document

which was apparently regular on its face.

2-507. Effect of Seller's Tender; Delivery on Condition.

(1) Tender of delivery is a condition to the buyer's duty

to accept the goods and, unless otherwise agreed, to his duty to

pay for them. Tender entitles the seller to acceptance of the

goods and to payment according to the contract.

(2) Where payment is due and demanded on the delivery to

the buyer of goods or documents of title, his right as against

the seller to retain or dispose of them is conditional upon his

making the payment due.

2-508. Cure by Seller of Improper Tender or Delivery;

Replacement

(1) Where any tender or delivery by the seller is rejected

because nonconforming and the time for performance has not yet

expired, the seller may seasonably notify the buyer of his

intention to cure and may then within the contract time make a

conforming delivery.

(2) Where the buyer rejects a non-conforming tender which

the seller had reasonable grounds to believe would be acceptable

with or without money allowance the seller may if he seasonably

notifies the buyer have a further reasonable time to substitute a

conforming tender.

2-509. Risk of loss in the Absence of Breach.

(1) Where the contract requires or authorizes the seller to

ship the goods by carrier

(a) if it does not require him to deliver them at a

particular destination, the risk of loss passes to the buyer when

the goods are duly delivered to the carrier even though the

shipment is under reservation (Section 2-505); but

(b) if it does require him to deliver them at a particular

destination and the goods are there duly tendered while in the

possession of the carrier, the risk of loss passes to the buyer

when the goods are there duly so tendered as to enable the buyer

to take delivery.

(2) Where the goods are held by a bailee to be delivered

without being moved, the risk of loss passes to the buyer

(a) on his receipt of a negotiable document of title covering

the goods; or on acknowledgment by the bailee of the buyer's

right to possession of the goods; or

(c) after his receipt of a non-negotiable document of title

or other written direction to deliver, as provided in subsection

(4)(b) of Section 2-503.

(3) In any case not within subsection (1) or (2), the risk

of loss passes to the buyer on his receipt of the goods if the

seller is a merchant; otherwise the risk passes to the buyer on

tender of delivery.

(4) The provisions of this section are subject to contrary

agreement of the parties and to the provisions of this Article on

sale on approval (Section 2-327) and on effect of breach on risk

of loss (Section 2-510).

2-510. Effect of Breach on Risk of Loss.

(1) Where a tender or delivery of goods so fails to conform

to the contract as to give a right of rejection the risk of their

loss remains on the seller until cure or acceptance.

(2) Where the buyer rightfully revokes acceptance he may to

the extent of any deficiency in his effective insurance coverage

treat the risk of loss as having rested on the seller from the

beginning.

(3) Where the buyer as to conforming goods already

identified to the contract for sale repudiates or is otherwise in

breach before risk of their loss has passed to him, the seller

may to the extent of any deficiency in his effective insurance

coverage treat the risk of loss as resting on the buyer for a

commercially reasonable time.

2-511. Tender of Payment by Buyer; Payment by Check

(1) Unless otherwise agreed tender of payment is a

condition to the seller's duty to tender and complete any

delivery.

(2) Tender of payment is sufficient when made by any means

or in any manner current in the ordinary course of business

unless the seller demands payment in legal tender and gives any

extension of time reasonably necessary to procure it.

(3) Subject to the provisions of this Act on the effect of

an instrument on an obligation (Section 3-310), payment by check

is conditional and is defeated as between the parties by dishonor

of the check on due presentment.

S 2-S12. Payment by Buyer Before Inspection.

(1) Where the contract requires payment before inspection

nonconformity of the goods does not excuse the buyer from so

making payment unless

(a) the nonconformity appears without inspection; or

(b) despite tender of the required documents the

circumstances would justify injunction against honor under the

provisions of this Act (Section 5-114).

(2) Payment pursuant to subsection (1) does not constitute

an acceptance of goods or impair the buyer's right to inspect or

any of his remedies.

2-513. Buyer's Right to Inspection of Goods.

(1) Unless otherwise agreed and subject to subsection (3),

where goods are tendered or delivered or identified to the

contract for sale, the buyer has a right before payment or

acceptance to inspect them at any reasonable place and time and

in any reasonable manner. When the seller is required or

authorized to send the goods to the buyer, the inspection may be

after their arrival.

(2) Expenses of inspection must be borne by the buyer but

may be recovered from the seller if the goods do not conform and

are rejected.

(3) Unless otherwise agreed and subject to the provisions

of this Article on C.I.F. contracts (subsection (3) of Section 2-

321), the buyer is not entitled to inspect the goods before

payment of the price when the contract provides

(a) for delivery "C.O.D." or on other like terms; or

(b) for payment against documents of title, except where

such payment is due only after the goods are to become available

for inspection.

(4) A place or method of inspection fixed by the parties is

presumed to be exclusive but unless otherwise expressly agreed it

does not postpone identification or shift the place for delivery

or for passing the risk of loss. If compliance becomes

impossible, inspection shall be as provided in this section

unless the place or method fixed was clearly intended as an

indispensable condition failure of which avoids the contract.

2-514. When Documents Deliverable on Acceptance; When on

Payment. Unless otherwise agreed documents against which a draft

is drawn are to be delivered to the drawee on acceptance of the

draft if it is payable more than three days after presentment;

otherwise, only on payment.

2-515. Preserving Evidence of Goods in Dispute.

In furtherance of the adjustment of any claim or dispute

(a) either party on reasonable notification to the other

and for the purpose of ascertaining the facts and preserving

evidence has the right to inspect, test and sample the goods

including such of them as may be in the possession or control of

the other; and

(b) the parties may agree to a third party inspection or

survey to determine the conformity or condition of the goods and

may agree that the findings shall be binding upon them in any

subsequent litigation or adjustment.

/* A built in "discovery" and "arbitration" provision. */

PART 6

BREACH, REPUDIATION AND EXCUSE

2-601. Buyer's Rights on Improper Delivery.

Subject to the provisions of this Article on breach in

installment contracts (Section 2-612) and unless otherwise agreed

under the sections on contractual limitations of remedy (Sections

2-718 and 2-719), if the goods or the tender of delivery fail in

any respect to conform to the contract, the buyer may

(a) reject the whole; or

(b) accept the whole; or

(c) accept any commercial unit or units and reject the

rest.

2-602. Manner and Effect of Rightful Rejection.

(1) Rejection of goods must be within a reasonable time

after their delivery or tender. It is ineffective unless the

buyer seasonably notifies the seller.

(2) Subject to the provisions of the two following sections

on rejected goods (Sections 2-603 and 2-604),

(a) after rejection any exercise of ownership by the buyer

with respect to any commercial unit is wrongful as against the

seller; and

(b) if the buyer has before rejection taken physical

possession of goods in which he does not have a security interest

under the provisions of this Article (subsection (3) of Section 2-

711), he is under a duty after rejection to hold them with

reasonable care at the seller's disposition for a time sufficient

to permit the seller to remove them; but

(c) the buyer has no further obligations with regard to

goods rightfully rejected.

(3) The seller's rights with respect to goods wrongfully

rejected are governed by the provisions of this Article on

Seller's remedies in general (Section 2-703).

2-603. Merchant Buyer's Duties as to Rightfully Rejected Goods.

(1) Subject to any security interest in the buyer

(subsection (3) of Section 2-711), when the seller has no agent

or place of business at the market of rejection a merchant buyer

is under a duty after rejection of goods in his possession or

control to follow any reasonable instructions received from the

seller with respect to the goods and in the absence of such

instructions to make reasonable efforts to sell them for the

seller's account if they are perishable or threaten to decline in

value speedily. Instructions are not reasonable if on demand

indemnity for expenses is not forthcoming.

(2) When the buyer sells goods under subsection (1), he is

entitled to reimbursement from the seller or out of the proceeds

for reasonable expenses of caring for and selling them, and if

the expenses include no selling commission then to such

commission as is usual in the trade or if there is none to a

reasonable sum not exceeding ten per cent on the gross proceeds.

(3) In complying with this section the buyer is held only

to good faith and good faith conduct hereunder is neither

acceptance nor conversion nor the basis of an action for damages.

2-604. Buyer's Options as to Salvage of Rightfully Rejected

Goods. Subject to the provisions of the immediately preceding

section on perishables if the seller gives no instructions within

a reasonable time after notification of rejection the buyer may

store the rejected goods for the seller's account or reship them

to him or resell them for the seller's account with reimbursement

as provided in the preceding section. Such action is not

acceptance or conversion.

/* Many woes befall the seller who delivers defective goods. The

risk of loss never passes (although the seller might think so_

and the buyer, if it does not receive any instructions, can

re-sell as best it can and bill the seller for losses

nevertheless. If the parties are fighting over who has breached,

good luck! */

2-605. Waiver of Buyer's Objections by Failure to Particularize.

(1) The buyer's failure to state in connection with

rejection a particular defect which is ascertainable by

reasonable inspection precludes him from relying on the unstated

defect to justify rejection or to establish breach

(a) where the seller could have cured it if stated

seasonably; or

(b) between merchants when the seller has after rejection

made a request in writing for a full and final written statement

of all defects on which the buyer proposes to rely.

/* Thus, within the arsenal of the seller one weapon is the right

to require the specification of the breach. */

(2) Payment against documents made without reservation of

rights precludes recovery of the payment for defects apparent on

the face of the documents.

2-606. What Constitutes Acceptance of Goods.

(1) Acceptance of goods occurs when the buyer

(a) after a reasonable opportunity to inspect the goods

signifies to the seller that the goods are conforming or that he

will take or retain them in spite of their nonconformity; or

(b) fails to make an effective rejection (subsection (1) of

Section 2-602), but such acceptance does not occur until the

buyer has had a reasonable opportunity to inspect them; or

(c) does any act inconsistent with the seller's ownership;

but if such act is wrongful as against the seller it is an

acceptance only if ratified by him.

(2) Acceptance of a part of any commercial unit is

acceptance of that entire unit

2-607. Effect of Acceptance; Notice of Breach; Burden of

Establishing Breach After Acceptance; Notice of Claim or

Litigation to Person Answerable Over.

(1) The buyer must pay at the contract rate for any goods

accepted.

(2) Acceptance of goods by the buyer precludes rejection of

the goods accepted and if made with knowledge of a nonconformity

cannot be revoked because of it unless the acceptance was on the

reasonable assumption that the nonconformity would be seasonably

cured but acceptance does not of itself impair any other remedy

provided by this Article for nonconformity.

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he

discovers or should have discovered any breach notify the seller

of breach or be barred from any remedy; and

(b) if the claim is one for infringement or the like

(subsection (3) of Section 2- 312) and the buyer is sued as a

result of such a breach he must so notify the seller within a

reasonable time after he receives notice of the litigation or be

barred from any remedy over for liability established by the

litigation.

(4) The burden is on the buyer to establish any breach with

respect to the goods accepted.

(5) Where the buyer is sued for breach of a warranty or

other obligation for which his seller is answerable over

(a) he may give his seller written notice of the

litigation. If the notice states that the seller may come in and

defend and that if the seller does not do so he will be bound in

any action against him by his buyer by any determination of fact

common to the two litigations, then unless the seller after

seasonable receipt of the notice does come in and defend he is so

bound.

(b) if the claim is one for infringement or the like

(subsection (3) of Section 2- 312) the original seller may demand

in writing that his buyer turn over to him control of the

litigation including settlement or else be barred from any remedy

over and if he also agrees to bear all expense and to satisfy any

adverse judgment, then unless the buyer after seasonable receipt

of the demand does turn over control the buyer is so barred.

(6) The provisions of subsections (3), (4) and (5) apply to

any obligation of a buyer to hold the seller harmless against

infringement or the like (subsection (3) of Section 2-312).

2-608. Revocation of Acceptance in Whole or in Part.

(1) The buyer may revoke his acceptance of a lot or

commercial unit whose nonconformity substantially impairs its

value to him if he has accepted it

(a) on the reasonable assumption that its non-conformity

would be cured and it has not been seasonably cured; or

(b) without discovery of such non-conformity if his

acceptance was reasonably induced either by the difficulty of

discovery before acceptance or by the seller's assurances.

(2) Revocation of acceptance must occur within a reasonable

time after the buyer discovers or should have discovered the

ground for it and before any substantial change in condition of

the goods which is not caused by their own defects. It is not

effective until the buyer notifies the seller of it.

(3) A buyer who so revokes has the same rights and duties

with regard to the goods involved as if he had rejected them.

2-609. Right to Adequate Assurance of Performance.

(1) A contract for sale imposes an obligation on each party

that the other's expectation of receiving due performance will

not be impaired. When reasonable grounds for insecurity arise

with respect to the performance of either party the other may in

writing demand adequate assurance of due performance and until he

receives such assurance may if commercially reasonable suspend

any performance for which he has not already received the agreed

return.

(2) Between merchants the reasonableness of grounds for

insecurity and the adequacy of any assurance offered shall be

determined according to commercial standards.

(3) Acceptance of any improper delivery or payment does not

prejudice the aggrieved party's right to demand adequate

assurance of future performance.

(4) After receipt of a justified demand failure to provide

within a reasonable time not exceeding thirty days such assurance

of due performance as is adequate under the circumstances of the

particular case is a repudiation of the contract.

2-610. Anticipatory Repudiation.

When either party repudiates the contract with respect to a

performance not yet due the loss of which will substantially

impair the value of the contract to the other, the aggrieved

party may

(a) for a commercially reasonable time await performance by

the repudiating party; or

resort to any remedy for breach (Section 2-703 or Section 2-

711), even though he has notified the repudiating party that he

would await the latter's performance and has urged retraction;

and

(c) in either case suspend his own performance or proceed

in accordance with the provisions of this Article on the seller's

right to identify goods to the contract notwithstanding breach or

to salvage unfinished goods (Section 2-704).

2-611. Retraction of Anticipatory Repudiation.

(1) Until the repudiating party's next performance is due

he can retract his repudiation unless the aggrieved party has

since the repudiation cancelled or materially changed his

position or otherwise indicated that he considers the repudiation

final.

(2) Retraction may be by any method which clearly indicates

to the aggrieved party that the repudiating party intends to

perform, but must include any assurance justifiably demanded

under the provisions of this Article (Section 2-609).

(3) Retraction reinstates the repudiating party's rights

under the contract with due excuse and allowance to the aggrieved

party for any delay occasioned by the repudiation.

2-612. "Installment Contract"; Breach.

(1) An "installment contract" is one which requires or

authorizes the delivery of goods in separate lots to be

separately accepted, even though the contract contains a clause

"each delivery is a separate contract" or its equivalent.

(2) The buyer may reject any installment which is non-

conforming if the nonconformity substantially impairs the value

of that installment and cannot be cured or if the nonconformity

is a defect in the required documents; but if the nonconformity

does not fall within subsection (3) and the seller gives adequate

assurance of its cure the buyer must accept that installment.

(3) Whenever nonconformity or default with respect to one

or more installments substantially impairs the value of the whole

contract there is a breach of the whole. But the aggrieved party

reinstates the contract if he accepts a non-conforming install.

ment without seasonably notifying of cancellation or if he brings

an action with respect only to past installments or demands

performance as to future installments.

2-613. Casualty to Identified Goods.

Where the contract requires for its performance goods

identified when the contract is made, and the goods suffer

casualty without fault of either party before the risk of loss

passes to the buyer, or in a proper case under a "no arrival, no

sale" term (Section 2-324) then

(a) if the loss is total the contract is avoided; and

(b) if the loss is partial or the goods have so

deteriorated as no longer to conform to the contract the buyer

may nevertheless demand inspection and at his option either treat

the contract as avoided or accept the goods with due allowance

from the contract price for the deterioration or the deficiency

in quantity but without further right against the seller.

2-614. Substituted Performance

(1) Where without fault of either party the agreed

berthing, loading, or unloading facilities fail or an agreed type

of carrier becomes unavailable or the agreed mariner of delivery

otherwise becomes commercially impracticable but a commercially

reasonable substitute is available, such substitute performance

must be tendered and accepted.

(2) If the agreed means or manner of payment fails because

of domestic or foreign governmental regulation, the seller may

withhold or stop delivery unless the buyer provides a means or

manner of payment which is commercially a substantial equivalent.

If delivery has already been taken, payment by the means or in

the manner provided by the regulation discharges the buyer's

obligation unless the regulation is discriminatory, oppressive or

predatory.

2-615. Excuse by Failure of Presupposed Conditions.

Except so far as a seller may have assumed a greater

obligation and subject to the preceding section on substituted

performance:

(a) Delay in delivery or non-delivery in whole or in part

by a seller who cornplies with paragraphs (b) and (c) is not a

breach of his duty under a contract for sale if performance as

agreed has been made impracticable by the occurrence of a

contingency the non-occurrence of which was a basic assumption on

which the contract was made or by compliance in good faith with

any applicable foreign or domestic governmental regulation or

order whether or not it later proves to be invalid.

(b) Where the causes mentioned in paragraph (a) affect only

a part of the seller's capacity to perform, he must allocate

production and deliveries among his customers but may at his

option include regular customers not then under contract as well

as his own requirements for further manufacture. He may so

allocate in any manner which is fair and reasonable.

(c) The seller must notify the buyer seasonably that there

will be delay or nondelivery and, when allocation is required

under paragraph (b), of the estimated quota thus made available

for the buyer.

2-616. Procedure on Notice Claiming Excuse

(1) Where the buyer receives notification of a material or

indefinite delay or an allocation justified under the preceding

section he may by written notification to the seller as to any

delivery concerned, and where the prospective deficiency

substantially impairs the value of the whole contract under the

provisions of this Article relating to breach of installment

contracts (Section 2-612), then also as to the whole,

(a) terminate and thereby discharge any unexecuted portion

of the contract; or

(b) modify the contract by agreeing to take his available

quota in substitution.

(2) If after receipt of such notification from the seller

the buyer fails so to modify the contract within a reasonable

time not exceeding thirty days the contract lapses with respect

to any deliveries affected.

(3) The provisions of this section may not be negated by

agreement except in so far as the seller has assumed a greater

obligation under the preceding section.

PART 7

REMEDIES

2-701. Remedies for Breach of Collateral Contracts Not Impaired

Remedies for breach of any obligation or promise collateral

or ancillary to a contract for sale are not impaired by the

provisions of this Article.

2-702. Seller's Remedies on Discovery of Buyer's Insolvency.

(1) Where the seller discovers the buyer to be insolvent he

may refuse delivery except for cash including payment for all

goods theretofore delivered under the contract, and stop delivery

under this Article (Section 2-705).

(2) Where the seller discovers that the buyer has received

goods on credit while insolvent he may reclaim the goods upon

demand made within ten days after the receipt, but if

misrepresentation of solvency has been made to the particular

seller in writing within three months before delivery the ten day

limitation does not apply. Except as provided in this subsection

the seller may not base a right to reclaim goods on the buyer's

fraudulent or innocent misrepresentation of solvency or of intent

to pay.

(3) The seller's right to reclaim under subsection (2) is

subject to the rights of a buyer in ordinary course or other good

faith purchaser under this Article (Section 2- 403). Successful

reclamation of goods excludes all other remedies with respect to

them.

2-703. Seller's Remedies in General.

Where the buyer wrongfully rejects or revokes acceptance of

goods or fails to make a payment due on or before delivery or

repudiates with respect to a part or the whole, then with respect

to any goods directly affected and, if the breach is of the whole

contract (Section 2-612), then also with respect to the whole

undelivered balance, the aggrieved seller may

(a) withhold delivery of such goods;

(b) stop delivery by any bailee as hereafter provided

(Section 2-705);

(c) proceed under the next section respecting goods still

unidentified to the contract;

(d) resell and recover damages as hereafter provided

(Section 2- 706); recover damages for non-acceptance (Section

2-708) or in a proper case the price (Section 2-709);

(f) cancel.

2-704. Seller's Right to Identify Goods to the Contract

Notwithstanding Breach or to Salvage Unfinished Goods.

(1) An aggrieved seller under the preceding section may

(a) identify to the contract conforming goods not already

identified if at the time he learned of the breach they are in

his possession or control;

treat as the subject of resale goods which have demonstrably

been intended for the particular contract even though those goods

are unfinished.

(2) Where the goods are unfinished an aggrieved seller may

in the exercise of reasonable commercial judgment for the

purposes of avoiding loss and of effective realization either

complete the manufacture and wholly identify the goods to the

contract or cease manufacture and resell for scrap or salvage

value or proceed in any other reasonable manner.

2-705. Seller's Stoppage of Delivery in Transit or

Otherwise.

(1) The seller may stop delivery of goods in the possession

of a carrier or other bailee when he discovers the buyer to be

insolvent (Section 2-702) and may stop delivery of carload,

truckload, planeload or larger shipments of express or freight

when the buyer repudiates or fails to make a payment due before

delivery or if for any other reason the seller has a right to

withhold or reclaim the goods.

(2) As against such buyer the seller may stop delivery

until

(a) receipt of the goods by the buyer; or

(b) acknowledgment to the buyer by any bailee of the goods

except a carrier that the bailee holds the goods for the buyer;

or

(c) such acknowledgment to the buyer by a carrier by

reshipment or as warehouseman; or

(d) negotiation to the buyer of any negotiable document of

title covering the goods.

(3)(a) To stop delivery the seller must so notify as to enable

the bailee by reasonable diligence to prevent delivery of the

goods.

(b) After such notification the bailee must hold and

deliver the goods according to the directions of the seller but

the seller is liable to the bailee for any ensuing charges or

damages.

(c) If a negotiable document of title has been issued for

goods the bailee is not obliged to obey a notification to stop

until surrender of the document.

(d) A carrier who has issued a non-negotiable bill of

lading is not obliged to obey a notification to stop received

from a person other than the consignor.

2-706. Seller's Resale Including Contract for Resale.

(1) Under the conditions stated in Section 2-703 on

seller's remedies, the seller may resell the goods concerned or

the undelivered balance thereof. Where the resale is made in good

faith and in a commercially reasonable manner the seller may

recover the difference between the resale price and the contract

price together with any incidental damages allowed under the

provisions of this Article (Section 2-710), but less expenses

saved in consequence of the buyer's breach.

(2) Except as otherwise provided in subsection (3) or

unless otherwise agreed resale may be at public or private sale

including sale by way of one or more contracts to sell or of

identification to an existing contract of the seller. Sale may be

as a unit or in parcels and at any time and place and on any

terms but every aspect of the sale including the method, manner,

time, place and terms must be commercially reasonable. The resale

must be reasonably identified as referring to the broken

contract, but it is not necessary that the goods be in existence

or that any or all of them have been identified to the contract

before the breach.

(3) Where the resale is at private sale the seller must

give the buyer reasonable notification of his intention to

resell.

(4) Where the resale is at public sale

(a) only identified goods can be sold except where there is

a recognized market for a public sale of futures in goods of the

kind; and

(b) it must be made at a usual place or market for public

sale if one is reasonably available and except in the case of

goods which are perishable or threaten to decline in value

speedily the seller must give the buyer reasonable notice of the

time and place of the resale; and

(c) if the goods are not to be within the view of those

attending the sale the notification of sale must state the place

where the goods are located and provide for their reasonable

inspection by prospective bidders; and

(d) the seller may buy.

(5) A purchaser who buys in good faith at a resale takes

the goods free of any rights of the original buyer even though

the seller fails to comply with one or more of the requirements

of this section.

(6) The seller is not accountable to the buyer for any

profit made on any resale. A person in the position of a seller

(Section 2-707) or a buyer who has rightfully rejected or

justifiably revoked acceptance must account for any excess over

the amount of his security interest, as hereinafter defined

(subsection (3) of Section 2-711).

2-707. "Person in the Position of a Seller".

(1) A "person in the position of a seller" includes as

against a principal an agent who has paid or become responsible

for the price of goods on behalf of his principal or anyone who

otherwise holds a security interest or other right in goods

similar to that of a seller.

(2) A person in the position of a seller may as provided in

this Article withhold or stop delivery (Section 2-705) and resell

(Section 2-706) and recover incidental damages (Section 2-710).

2-708. Seller's Damages for Non-acceptance or Repudiation.

(1) Subject to subsection (2) and to the provisions of this

Article with respect to proof of market price (Section 2-723),

the measure of damages for non-acceptance or repudiation by the

buyer is the difference between the market price at the time and

place for tender and the unpaid contract price together with any

incidental damages provided in this Article (Section 2-710), but

less expenses saved in consequence of the buyer's breach.

(2) If the measure of damages provided in subsection (1) is

inadequate to put the seller in as good a position as performance

would have done then the measure of damages is the profit

(including reasonable overhead) which the seller would have made

from full performance by the buyer, together with any incidental

damages provided in this Article (Section 2-710), due allowance

for costs reasonably incurred and due credit for payments or

proceeds of resale.

2-709. Action for the Price

(1) When the buyer fails to pay the price as it becomes due

the seller may recover, together with any incidental damages

under the next section, the price

(a) of goods accepted or of conforming goods lost or

damaged within a commercially reasonable time after risk of their

loss has passed to the buyer; and

(b) of goods identified to the contract If the seller is

unable after reasonable effort to resell them at a reasonable

price or the circumstances reasonably indicate that such effort

will be unavailing.

(2) Where the seller sues for the price he must hold for

the buyer any goods which have been identified to the contract

and are still in his control except that if resale becomes

possible he may resell them at any time prior to the collection

of the judgment. The net proceeds of any such resale must be

credited to the buyer and payment of the judgment entitles him to

any goods not resold.

(3) After the buyer has wrongfully rejected or revoked

acceptance of the goods or has failed to make a payment due or

has repudiated (Section 2-610), a seller who is held not entitled

to the price under this section shall nevertheless be awarded

damages for non-acceptance under the preceding section.

2-710. Seller's Incidental Damages.

Incidental damages to an aggrieved seller include any

commercially reasonable charges, expenses or commissions incurred

in stopping delivery, in the transportation, care and custody of

goods after the buyer's breach, in connection with return or

resale of the goods or otherwise resulting from the breach.

/* The battle of the forms always includes the seller insisting

on having incidental damages and the buyer's forms always

rejecting them. */

2-711. Buyer's Remedies in General; Buyer's Security

Interest in Rejected Goods.

(1) Where the seller fails to make delivery or repudiates

or the buyer rightfully rejects or justifiably revokes acceptance

then with respect to any goods involved, and with respect to the

whole if the breach goes to the whole contract (Section 2-612),

the buyer may cancel and whether or not he has done so may in

addition to recovering so much of the price as has been paid

(a) "cover" and have damages under the next section as to

all the goods affected whether or not they have been identified

to the contract; or

(b) recover damages for non-delivery as provided in this

Article (Section 2- 713).

(2) Where the seller fails to deliver or repudiates the

buyer may also

(a) if the goods have been identified recover them as

provided in this Article (Section 2-502); or

(b) in a proper case obtain specific performance or replevy

the goods as provided in this Article (Section 2-716).

/* "Replevy" refers to a "replevin" an equitable action to obtain

physical possession of personal property. It has other names in

other states. */

(3) On rightful rejection or justifiable revocation of

acceptance a buyer has a security interest in goods in his

possession or control for any payments made on their price and

any expenses reasonably incurred in their inspection, receipt,

transportation , care and custody and may hold such goods and

resell them in like manner as an aggrieved seller (Section 2-

706).

2-712. "Cover"; Buyer's Procurement of Substitute Goods.

(1) After a breach within the preceding section the buyer

may "cover" by making in good faith and without unreasonable

delay any reasonable purchase of or contract to purchase goods in

substitution for those due from the seller.

(2) The buyer may recover from the seller as damages the

difference between the cost of cover and the contract price

together with any incidental or consequential damages as

hereinafter defined (Section 2-715), but less expenses saved in

consequence of the seller's breach.

(3) Failure of the buyer to effect cover within this

section does not bar him from any other remedy.

2-713. Buyer's Damages for Non-delivery or Repudiation.

(1) Subject to the provisions of this Article with respect

to proof of market price (Section 2-723), the measure of damages

for non-delivery or repudiation by the seller is the difference

between the market price at the time when the buyer learned of

the breach and the contract price together with any incidental

and consequential damages provided in this Article (Section 2-

715), but less expenses saved in consequence of the seller's

breach.

(2) Market price is to be determined as of the place for

tender or, in cases of rejection after arrival or revocation of

acceptance, as of the place of arrival.

2-714. Buyer's Damages for Breach in Regard to Accepted

Goods.

(1) Where the buyer has accepted goods and given

notification (subsection (3) of Section 2-607) he may recover as

damages for any non-conformity of tender the loss resulting in

the ordinary course of events from the seller's breach as

determined in any manner which is reasonable.

(2) The measure of damages for breach of warranty is the

difference at the time and place of acceptance between the value

of the goods accepted and the value they would have had if they

had been as warranted, unless special circumstances show

proximate damages of a different amount.

(3) In a proper case any incidental and consequential

damages under the next section may also be recovered.

2-715. Buyer's Incidental and Consequential Damages.

(1) Incidental damages resulting from the seller's breach

include expenses reasonably incurred in inspection, receipt,

transportation and care and custody of goods rightfully rejected,

any commercially reasonable charges, expenses or commissions in

connection with effecting cover and any other reasonable expense

incident to the delay or other breach.

(2) Consequential damages resulting from the seller's

breach include

(a) any loss resulting from general or particular

requirements and needs of which the seller at the time of-

contracting had reason to know and which could not reasonably be

prevented by cover or otherwise; and

(b) injury to person or property proximately resulting from

any breach of warranty.

2-716. Buyer's Right to Specific Performance or Replevin.

(1) Specific performance may be decreed where the goods are

unique or in other proper circumstances.

(2) The decree for specific performance may include such

terms and conditions as to payment of the price, damages, or

other relief as the court may deem just.

(3) The buyer has a right of replevin for goods identified

to the contract if after reasonable effort he is unable to effect

cover for such goods or the circumstances reasonably indicate

that such effort will be unavailing or if the goods have been

shipped under reservation and satisfaction of the security

interest in them has been made or tendered.

2-717. Deduction of Damages From the Price

The buyer on notifying the seller of his intention to do so

may deduct all or any part of the damages resulting from any

breach of the contract from any part of the price still due under

the same contract.

2-718. Liquidation or Limitation of Damages; Deposits.

(1) Damages for breach by either party may be liquidated in

the agreement but only at an amount which is reasonable in the

light of the anticipated or actual harm caused by the breach, the

difficulties of proof of loss, and the inconvenience or

nonfeasibility of otherwise obtaining an adequate remedy. A term

fixing unreasonably large liquidated damages is void as a

penalty.

(2) Where the seller justifiably withholds delivery of

goods because of the buyer's breach, the buyer is entitled to

restitution of any amount by which the sum of his payments

exceeds

(a) the amount to which the seller is entitled by virtue of

terms liquidating the seller's damages in accordance with

subsection (1), or

(b) in the absence of such terms, twenty per cent of the

value of the total performance for which the buyer is obligated

under the contract or $500, whichever is smaller.

(3) The buyer's right to restitution under subsection (2)

is subject to offset to the extent that the seller establishes

(a) a right to recover damages under the provisions of this

Article other than subsection (1), and

(b) the amount or value of any benefits received by the

buyer directly or indirectly by reason of the contract.

(4) Where a seller has received payment in goods their

reasonable value or the proceeds of their resale shall be treated

as payments for the purposes of subsection (2); but if the seller

has notice of the buyer's breach before reselling goods received

in part performance, his resale is subject to the conditions laid

down in this Article on resale by an aggrieved seller (Section 2-

706).

2-719. Contractual Modification or Limitation of Remedy.

(1) Subject to the provisions of subsections (2) and (3) of

this section and of the preceding section on liquidation and

limitation of damages

(a) the agreement may provide for remedies in addition to

or in substitution for those provided in this Article and may

limit or alter the measure of damages recoverable under this

Article, as by limiting the buyer's remedies to return of the

goods and repayment of the price or to repair and replacement of

nonconforming goods or parts; and resort to a remedy as provided

is optional unless the remedy is expressly agreed to be

exclusive, in which case it is the sole remedy.

(2) Where circumstances cause an exclusive or limited

remedy to fail of its essential purpose, remedy may be had as

provided in this Act.

(3) Consequential damages may be limited or excluded unless

the limitation or exclusion is unconscionable. Limitation of

consequential damages for injury to the person in the case of

consumer goods is prima facie unconscionable but limitation of

damages where the loss is commercial is not.

/* Probably a needless statement since the modern law of products

liability already says this; perhaps it is intended as a

concession that the remedies cannot be limited as to personal

injury. */

2-720. Effect of "Cancellation" or "Rescission" on Claims for

Antecedent Breach.

Unless the contrary intention clearly appears, expressions

of "cancellation" or "rescission" of the contract or the like

shall not be construed as a renunciation or discharge of any

claim in damages for an antecedent breach.

2-721. Remedies for Fraud.

Remedies for material misrepresentation or fraud include all

remedies available under this Article for non-fraudulent breach.

Neither rescission or a claim for rescission of the contract for

sale nor rejection or return of the goods shall bar or be deemed

inconsistent with a claim for damages or other remedy.

2-722. Who Can Sue Third Parties for Injury to Goods.

Where a third party so deals with goods which have been

identified to a contract for sale as to cause actionable injury

to a party to that contract

(a) a right of action against the third party is in either

party to the contract for sale who has title to or a security

interest or a special property or an insurable interest in the

goods; and if the goods have been destroyed or converted a right

of action is also in the party who either bore the risk of loss

under the contract for sale or has since the injury assumed that

risk as against the other;

(b) if at the time of the injury the party plaintiff did

not bear the risk of loss as against the other party to the

contract for sale and there is no arrangement between them for

disposition of the recovery, his suit or settlement is, subject

to his own interest, as a fiduciary for the other party to the

contract;

(c) either party may with the consent of the other sue for

the benefit of whom it may concern.

2-723. Proof of Market Price: Time and Place.

(1) If an action based on anticipatory repudiation comes to

trial before the time for performance with respect to some or all

of the goods, any damages based on market price (Section 2-708 or

Section 2-713) shall be determined according to the price of such

goods prevailing at the time when the aggrieved party learned of

the repudiation.

(2) If evidence of a price prevailing at the times or

places described in this Article is not readily available the

price prevailing within any reasonable rime before or after the

time described or at any other place which in commercial judgment

or under usage of trade would serve as a reasonable substitute

for the one described may be used, making any proper allowance

for the cost of transporting the goods to or from such other

place.

(3) Evidence of a relevant price prevailing at a time or

place other than the one described in this Article offered by one

party is not admissible unless and until he has given the other

party such notice as the court finds sufficient to prevent unfair

surprise.

2-724. Admissibility of Market Quotations.

Whenever the prevailing price or value of any goods

regularly bought and sold in any established commodity market is

in issue, reports in official publications or trade journals or

in newspapers or periodicals of general circulation published as

the reports of such market shall be admissible in evidence. The

circumstances of the preparation of such a report may be shown to

affect its weight but not its admissibility.

2-725. Statute of Limitations in Contracts for Sale.

(1) An action for breach of any contract for sale must be

commenced within four years after the cause of action has

accrued. By the original agreement the parties may reduce the

period of limitation to not less than one year but may not extend

it.

/* This section is often changed state by state to conform to

their time limit for such suits. */

(2) A cause of action accrues when the breach occurs,

regardless of the aggrieved party's lack of knowledge of the

breach. A breach of warranty occurs when tender of delivery is

made, except that where a warranty explicitly extends to future

performance of the goods and discovery of the breach must await

the time of such performance the cause of action accrues when the

breach is or should have been discovered.

(3) Where an action commenced within the time limited by

subsection (1) is so terminated as to leave available a remedy by

another action for the same breach such other action may be

commenced after the expiration of the time limited and within six

months after the termination of the first action unless the

termination resulted from voluntary discontinuance or from

dismissal for failure or neglect to prosecute.

(4) This section does not alter the law on tolling of the

statute of limitations nor does it apply to causes of action

which have accrued before this Act becomes effective.