Perfect Tender Rule and Contract Terms

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Table of Contents

Imaginary Scenario
Issue
Rule
Analysis

Imaginary Scenario

Laura is a small business owner and runs a flower store. As her business yields first positive results, Laura decides to expand the range of available options and purchase new sorts of flowers. To do this, the woman reaches out to a local flower supplier, “Mary & Co.”, who agrees to deliver tulips and carnations. The two parties enter a contract that prescribes Mary & Co. to deliver 100 tulips ($5 each) and 100 carnations ($) to the store on the first day of each month. For months, Laura is satisfied with her decisions as the new supplier never lets her down and provides the required goods on time.

Then, one day, the situation does not go as expected. The new delivery upsets Laura: not only does she discover that she has received only 80 tulips (20 tulips short of her usual orders), but also the company sent roses instead of carnations. As a business owner with little experience, Laura is confused and wonders exactly what she should do to rectify the situation. On top of her frustration, the business owner is also likely to run into some unpleasant problems. Laura needed carnations on the day of delivery to cater for an event. Because of the supplier’s negligence, Laura had to cancel on an important client, which might have hurt her reputation.

Issue

Does the situation described above fit the perfect tender rule?

Rule

The Uniform Commercial Code (UUC) was created for simplification, clarification, and modernization of the law of commercial transactions. One of the key UUC concepts is that of the so-called perfect tender rule. The perfect tender rule refers to a buyer’s legal right to demand that the goods ordered comply precisely with the product description in terms of quality, quantity, and manner of delivery. In case the goods do not conform to the initial description, the buyer has the right to reject them and file a lawsuit. The perfect tender rule is applicable even when the parties have a signed contract for the purchase of the goods.

Legally, there is often a certain conflict between the perfect tender rule and substantial performance. Substantial performance applies to cases when the contractor meets the conditions of the contract even if some of the aspects do not match precisely. To differentiate between the perfect tender rule vs. substantial performance when approaching a legal case, the amount of benefit received by the buyer should be considered. Other questions to ask include to what extent an award of damages to the buyer makes amends for the seller’s underperformance. Lastly, one more important aspect to consider is whether the breach or imperfect performance were done made in bad faith.

Analysis

From the description of the case, it is clear that the contractor, Mary & Co., breached the terms. Namely, the quality was not up to standards (roses instead of carnations) as well as quantity (80 tulips instead of 100). There are two parts to this case that need to be addressed separately. Regarding the tulips, the contractor may still be able to cure them by sending the rest of the flowers to the store. Given that the owner discovered the breach on the very day of delivery, the contractor can still make amends so that the situation does not interfere with business operations. However, in the second case (roses instead of carnations), one may speak of an incurable breach because Laura faced actual damages.

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Perfect Tender Rule and Contract Terms

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