NY UCC
Sales
Article 2, Part 3
GENERAL OBLIGATION
AND CONSTRUCTION OF CONTRACT
Section 2--301. General Obligations of Parties.
The obligation of the seller is to transfer and deliver and that of
the buyer is to accept and pay in accordance with the contract.
Section 2--302. Unconscionable Contract or Clause.
(1) If the court as a matter of law finds the contract or any clause
of the contract to have been unconscionable at the time it was made the
court may refuse to enforce the contract, or it may enforce the
remainder of the contract without the unconscionable clause, or it may
so limit the application of any unconscionable clause as to avoid any
unconscionable result.
(2) When it is claimed or appears to the court that the contract or
any clause thereof may be unconscionable the parties shall be afforded a
reasonable opportunity to present evidence as to its commercial setting,
purpose and effect to aid the court in making the determination.
Section 2--303. Allocation or Division of Risks.
Where this Article allocates a risk or a burden as between the parties
"unless otherwise agreed", the agreement may not only shift the
allocation but may also divide the risk or burden.
Section 2--304. Price Payable in Money, Goods, Realty, or Otherwise.
(1) The price can be made payable in money or otherwise. If it is
payable in whole or in part in goods each party is a seller of the goods
which he is to transfer.
(2) Even though all or part of the price is payable in an interest in
realty the transfer of the goods and the seller`s obligations with
reference to them are subject to this Article, but not the transfer of
the interest in realty or the transferor`s obligations in connection
therewith.
Section 2--305. Open Price Term.
(1) The parties if they so intend can conclude a contract for sale
even though the price is not settled. In such a case the price is a
reasonable price at the time for delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail
to agree; or
(c) the price is to be fixed in terms of some agreed market or
other standard as set or recorded by a third person or agency
and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price
for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the
parties fails to be fixed through fault of one party the other may at
his option treat the contract as cancelled or himself fix a reasonable
price.
(4) Where, however, the parties intend not to be bound unless the
price be fixed or agreed and it is not fixed or agreed there is no
contract. In such a case the buyer must return any goods already
received or if unable so to do must pay their reasonable value at the
time of delivery and the seller must return any portion of the price
paid on account.
Section 2--306. Output, Requirements and Exclusive Dealings.
(1) A term which measures the quantity by the output of the seller or
the requirements of the buyer means such actual output or requirements
as may occur in good faith, except that no quantity unreasonably
disproportionate to any stated estimate or in the absence of a stated
estimate to any normal or otherwise comparable prior output or
requirements may be tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive
dealing in the kind of goods concerned imposes unless otherwise agreed
an obligation by the seller to use best efforts to supply the goods and
by the buyer to use best efforts to promote their sale.
Section 2--307. Delivery in Single Lot or Several Lots.
Unless otherwise agreed all goods called for by a contract for sale
must be tendered in a single delivery and payment is due only on such
tender but where the circumstances give either party the right to make
or demand delivery in lots the price if it can be apportioned may be
demanded for each lot.
Section 2--308. Absence of Specified Place for Delivery.
Unless otherwise agreed
(a) the place for delivery of goods is the seller`s place of business
or if he has none his residence; but
(b) in a contract for sale of identified goods which to the knowledge
of the parties at the time of contracting are in some other place, that
place is the place for their delivery; and
(c) documents of title may be delivered through customary banking
channels.
Section 2--309. Absence of Specific Time Provisions; Notice of
Termination.
(1) The time for shipment or delivery or any other action under a
contract if not provided in this Article or agreed upon shall be a
reasonable time.
(2) Where the contract provides for successive performances but is
indefinite in duration it is valid for a reasonable time but unless
otherwise agreed may be terminated at any time by either party.
(3) Termination of a contract by one party except on the happening of
an agreed event requires that reasonable notification be received by the
other party and an agreement dispensing with notification is invalid if
its operation would be unconscionable.
Section 2--310. Open Time for Payment or Running of Credit; Authority to
Ship Under Reservation.
Unless otherwise agreed
(a) payment is due at the time and place at which the buyer is to
receive the goods even though the place of shipment is the place of
delivery; and
(b) if the seller is authorized to send the goods he may ship them
under reservation, and may tender the documents of title, but the buyer
may inspect the goods after their arrival before payment is due unless
such inspection is inconsistent with the terms of the contract (Section
2--513); and
(c) if delivery is authorized and made by way of documents of title
otherwise than by subsection (b) then payment is due at the time and
place at which the buyer is to receive the documents regardless of where
the goods are to be received; and
(d) where the seller is required or authorized to ship the goods on
credit the credit period runs from the time of shipment but post-dating
the invoice or delaying its dispatch will correspondingly delay the
starting of the credit period.
Section 2--311. Options and Cooperation Respecting Performance.
(1) An agreement for sale which is otherwise sufficiently definite
(subsection (3) of Section 2--204) to be a contract is not made invalid
by the fact that it leaves particulars of performance to be specified by
one of the parties. Any such specification must be made in good faith
and within limits set by commercial reasonableness.
(2) Unless otherwise agreed specifications relating to assortment of
the goods are at the buyer`s option and except as otherwise provided in
subsections (1) (c) and (3) of Section 2--319 specifications or
arrangements relating to shipment are at the seller`s option.
(3) Where such specification would materially affect the other party`s
performance but is not seasonably made or where one party`s cooperation
is necessary to the agreed performance of the other but is not
seasonably forthcoming, the other party in addition to all other
remedies
(a) is excused for any resulting delay in his own performance;
and
(b) may also either proceed to perform in any reasonable manner
or after the time for a material part of his own performance
treat the failure to specify or to cooperate as a breach by
failure to deliver or accept the goods.
Section 2--312. Warranty of Title and Against Infringement; Buyer`s
Obligation Against Infringement.
(1) Subject to subsection (2) there is in a contract for sale a
warranty by the seller that
(a) the title conveyed shall be good, and its transfer rightful;
and
(b) the goods shall be delivered free from any security interest
or other lien or encumbrance of which the buyer at the time
of contracting has no knowledge.
(2) A warranty under subsection (1) will be excluded or modified only
by specific language or by circumstances which give the buyer reason to
know that the person selling does not claim title in himself or that he
is purporting to sell only such right or title as he or a third person
may have.
(3) Unless otherwise agreed a seller who is a merchant regularly
dealing in goods of the kind warrants that the goods shall be delivered
free of the rightful claim of any third person by way of infringement or
the like but a buyer who furnishes specifications to the seller must
hold the seller harmless against any such claim which arises out of
compliance with the specifications.
Section 2--313. Express Warranties by Affirmation, Promise, Description,
Sample.
(1) Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the
buyer which relates to the goods and becomes part of the
basis of the bargain creates an express warranty that the
goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis
of the bargain creates an express warranty that the goods
shall conform to the description.
(c) Any sample or model which is made part of the basis of the
bargain creates an express warranty that the whole of the
goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that
the seller use formal words such as "warrant" or "guarantee" or that he
have a specific intention to make a warranty, but an affirmation merely
of the value of the goods or a statement purporting to be merely the
seller`s opinion or commendation of the goods does not create a
warranty.
Section 2--314. Implied Warranty: Merchantability; Usage of Trade.
(1) Unless excluded or modified (Section 2--316), a warranty that the
goods shall be merchantable is implied in a contract for their sale if
the seller is a merchant with respect to goods of that kind. Under this
section the serving for value of food or drink to be consumed either on
the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract
description; and
(b) in the case of fungible goods, are of fair average quality
within the description; and
(c) are fit for the ordinary purposes for which such goods are
used; and
(d) run, within the variations permitted by the agreement, of
even kind, quality and quantity within each unit and among
all units involved; and
(e) are adequately contained, packaged, and labeled as the
agreement may require; and
(f) conform to the promises or affirmations of fact made on the
container or label if any.
(3) Unless excluded or modified (Section 2--316) other implied
warranties may arise from course of dealing or usage of trade.
Section 2--315. Implied Warranty: Fitness for Particular Purpose.
Where the seller at the time of contracting has reason to know any
particular purpose for which the goods are required and that the buyer
is relying on the seller`s skill or judgment to select or furnish
suitable goods, there is unless excluded or modified under the next
section an implied warranty that the goods shall be fit for such
purpose.
Section 2--316. Exclusion or Modification of Warranties.
(1) Words or conduct relevant to the creation of an express warranty
and words or conduct tending to negate or limit warranty shall be
construed wherever reasonable as consistent with each other; but subject
to the provisions of this Article on parol or extrinsic evidence
(Section 2--202) negation or limitation is inoperative to the extent
that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied
warranty of merchantability or any part of it the language must mention
merchantability and in case of a writing must be conspicuous, and to
exclude or modify any implied warranty of fitness the exclusion must be
by a writing and conspicuous. Language to exclude all implied warranties
of fitness is sufficient if it states, for example, that "There are no
warranties which extend beyond the description on the face hereof. "
(3) Notwithstanding subsection (2)
(a) unless the circumstances indicate otherwise, all implied
warranties are excluded by expressions like "as is", "with
all faults" or other language which in common understanding
calls the buyer`s attention to the exclusion of warranties
and makes plain that there is no implied warranty; and
(b) when the buyer before entering into the contract has examined
the goods or the sample or model as fully as he desired or
has refused to examine the goods there is no implied warranty
with regard to defects which an examination ought in the
circumstances to have revealed to him; and
(c) an implied warranty can also be excluded or modified by
course of dealing or course of performance or usage of trade.
(4) Remedies for breach of warranty can be limited in accordance with
the provisions of this Article on liquidation or limitation of damages
and on contractual modification of remedy (Sections 2--718 and 2--719).
Section 2--317. Cumulation and Conflict of Warranties Express or
Implied.
Warranties whether express or implied shall be construed as consistent
with each other and as cumulative, but if such construction is
unreasonable the intention of the parties shall determine which warranty
is dominant. In ascertaining that intention the following rules apply:
(a) Exact or technical specifications displace an inconsistent sample
or model or general language of description.
(b) A sample from an existing bulk displaces inconsistent general
language of description.
(c) Express warranties displace inconsistent implied warranties other
than an implied warranty of fitness for a particular purpose.
Section 2--318. Third Party Beneficiaries of Warranties Express or
Implied.
A seller`s warranty whether express or implied extends to any natural
person if it is reasonable to expect that such person may use, consume
or be affected by the goods and who is injured in person by breach of
the warranty. A seller may not exclude or limit the operation of this
section.
Top of Page
Section 2--319. F. O. B. and F. A. S. Terms.
(1) Unless otherwise agreed the term F. O. B. (which means "free on
board") at a named place, even though used only in connection with the
stated price, is a delivery term under which
(a) when the term is F. O. B. the place of shipment, the seller
must at that place ship the goods in the manner provided in
this Article (Section 2--504) and bear the expense and risk
of putting them into the possession of the carrier; or
(b) when the term is F. O. B. the place of destination, the
seller must at his own expense and risk transport the goods
to that place and there tender delivery of them in the manner
provided in this Article (Section 2--503);
(c) when under either (a) or (b) the term is also F. O. B.
vessel, car or other vehicle, the seller must in addition at
his own expense and risk load the goods on board. If the term
is F. O. B. vessel the buyer must name the vessel and in an
appropriate case the seller must comply with the provisions
of this Article on the form of bill of lading (Section
2--323).
(2) Unless otherwise agreed the term F. A. S. vessel (which means
"free alongside") at a named port, even though used only in connection
with the stated price, is a delivery term under which the seller must
(a) at his own expense and risk deliver the goods alongside the
vessel in the manner usual in that port or on a dock
designated and provided by the buyer; and
(b) obtain and tender a receipt for the goods in exchange for
which the carrier is under a duty to issue a bill of lading.
(3) Unless otherwise agreed in any case falling within subsection (1)
(a) or (c) or subsection (2) the buyer must seasonably give any needed
instructions for making delivery, including when the term is F. A. S.
or F. O. B. the loading berth of the vessel and in an appropriate case
its name and sailing date. The seller may treat the failure of needed
instructions as a failure of cooperation under this Article (Section
2--311). He may also at his option move the goods in any reasonable
manner preparatory to delivery or shipment.
(4) Under the term F. O. B. vessel or F. A. S. unless otherwise agreed
the buyer must make payment against tender of the required documents and
the seller may not tender nor the buyer demand delivery of the goods in
substitution for the documents.
Section 2--326. Sale on Approval and Sale or Return; Rights of
Creditors.
(1) Unless otherwise agreed, if delivered goods may be returned by the
buyer even though they conform to the contract, the transaction is
(a) a "sale on approval" if the goods are delivered primarily for
use, and
(b) a "sale or return" if the goods are delivered primarily for
resale.
(2) Goods held on approval are not subject to the claims of the
buyer`s creditors until acceptance; goods held on sale or return are
subject to such claims while in the buyer`s possession.
(3) Any "or return" term of a contract for sale is to be treated as a
separate contract for sale within the statute of frauds section of this
Article (Section 2--201) and as contradicting the sale aspect of the
contract within the provisions of this Article on parol or extrinsic
evidence (Section 2--202).
Section 2--327. Special Incidents of Sale on Approval and Sale or
Return.
(1) Under a sale on approval unless otherwise agreed
(a) although the goods are identified to the contract the risk of
loss and the title do not pass to the buyer until acceptance;
and
(b) use of the goods consistent with the purpose of trial is not
acceptance but failure seasonably to notify the seller of
election to return the goods is acceptance, and if the goods
conform to the contract acceptance of any part is acceptance
of the whole; and
(c) after due notification of election to return, the return is
at the seller`s risk and expense but a merchant buyer must
follow any reasonable instructions.
(2) Under a sale or return unless otherwise agreed
(a) the option to return extends to the whole or any commercial
unit of the goods while in substantially their original
condition, but must be exercised seasonably; and
(b) the return is at the buyer`s risk and expense.
Section 2--328. Sale by Auction.
(1) In a sale by auction if goods are put up in lots each lot is the
subject of a separate sale.
(2) A sale by auction is complete when the auctioneer so announces by
the fall of the hammer or in other customary manner. Where a bid is made
while the hammer is falling in acceptance of a prior bid the auctioneer
may in his discretion reopen the bidding or declare the goods sold under
the bid on which the hammer was falling.
(3) Such a sale is with reserve unless the goods are in explicit terms
put up without reserve. In an auction with reserve the auctioneer may
withdraw the goods at any time until he announces completion of the
sale. In an auction without reserve, after the auctioneer calls for bids
on an article or lot, that article or lot cannot be withdrawn unless no
bid is made within a reasonable time. In either case a bidder may
retract his bid until the auctioneer`s announcement of completion of the
sale, but a bidder`s retraction does not revive any previous bid.
(4) If the auctioneer knowingly receives a bid on the seller`s behalf
or the seller makes or procures such a bid, and notice has not been
given that liberty for such bidding is reserved, the buyer may at his
option avoid the sale or take the goods at the price of the last good
faith bid prior to the completion of the sale. This subsection shall not
apply to any bid at a forced sale.
Section 2--322. Delivery "Ex-Ship".
(1) Unless otherwise agreed a term for delivery of goods "ex-ship"
(which means from the carrying vessel) or in equivalent language is not
restricted to a particular ship and requires delivery from a ship which
has reached a place at the named port of destination where goods of the
kind are usually discharged.
(2) Under such a term unless otherwise agreed
(a) the seller must discharge all liens arising out of the
carriage and furnish the buyer with a direction which puts
the carrier under a duty to deliver the goods; and
(b) the risk of loss does not pass to the buyer until the goods
leave the ship`s tackle or are otherwise properly unloaded.
Section 2--323. Form of Bill of Lading Required in Overseas Shipment;
"Overseas".
(1) Where the contract contemplates overseas shipment and contains a
term C. I. F. or C. & F. or F. O. B. vessel, the seller unless otherwise
agreed must obtain a negotiable bill of lading stating that the goods
have been loaded on board or, in the case of a term C. I. F. or C. &
F., received for shipment.
(2) Where in a case within subsection (1) a bill of lading has been
issued in a set of parts, unless otherwise agreed if the documents are
not to be sent from abroad the buyer may demand tender of the full set;
otherwise only one part of the bill of lading need be tendered. Even if
the agreement expressly requires a full set
(a) due tender of a single part is acceptable within the
provisions of this Article on cure of improper delivery
(subsection (1) of Section 2--508); and
(b) even though the full set is demanded, if the documents are
sent from abroad the person tendering an incomplete set may
nevertheless require payment upon furnishing an indemnity
which the buyer in good faith deems adequate.
(3) A shipment by water or by air or a contract contemplating such
shipment is "overseas" insofar as by usage of trade or agreement it is
subject to the commercial, financing or shipping practices
characteristic of international deep water commerce.
Section 2--324. "No Arrival, No Sale" Term.
Under a term "no arrival, no sale" or terms of like meaning, unless
otherwise agreed,
(a) the seller must properly ship conforming goods and if they arrive
by any means he must tender them on arrival but he assumes no obligation
that the goods will arrive unless he has caused the non-arrival; and
(b) where without fault of the seller the goods are in part lost or
have so deteriorated as no longer to conform to the contract or arrive
after the contract time, the buyer may proceed as if there had been
casualty to identified goods (Section 2--613).
Section 2--325. "Letter of Credit" Term; "Confirmed Credit".
(1) Failure of the buyer seasonably to furnish an agreed letter of
credit is a breach of the contract for sale.
(2) The delivery to seller of a proper letter of credit suspends the
buyer`s obligation to pay. If the letter of credit is dishonored, the
seller may on seasonable notification to the buyer require payment
directly from him.
(3) Unless otherwise agreed the term "letter of credit" or "banker`s
credit" in a contract for sale means an irrevocable credit issued by a
financing agency of good repute and, where the shipment is overseas, of
good international repute. The term "confirmed credit" means that the
credit must also carry the direct obligation of such an agency which
does business in the seller`s financial market.
Section 2--320. C. I. F. and C. & F. Terms.
(1) The term C. I. F. means that the price includes in a lump sum the
cost of the goods and the insurance and freight to the named
destination. The term C. & F. or C. F. means that the price so includes
cost and freight to the named destination.
(2) Unless otherwise agreed and even though used only in connection
with the stated price and destination, the term C. I. F. destination or
its equivalent requires the seller at his own expense and risk to
(a) put the goods into the possession of a carrier at the port
for shipment and obtain a negotiable bill or bills of lading
covering the entire transportation to the named destination;
and
(b) load the goods and obtain a receipt from the carrier (which
may be contained in the bill of lading) showing that the
freight has been paid or provided for; and
(c) obtain a policy or certificate of insurance, including any
war risk insurance, of a kind and on terms then current at
the port of shipment in the usual amount, in the currency of
the contract, shown to cover the same goods covered by the
bill of lading and providing for payment of loss to the order
of the buyer or for the account of whom it may concern; but
the seller may add to the price the amount of the premium for
any such war risk insurance; and
(d) prepare an invoice of the goods and procure any other
documents required to effect shipment or to comply with the
contract; and
(e) forward and tender with commercial promptness all the
documents in due form and with any indorsement necessary to
perfect the buyer`s rights.
(3) Unless otherwise agreed the term C. & F. or its equivalent has the
same effect and imposes upon the seller the same obligations and risks
as a C. I. F. term except the obligation as to insurance.
(4) Under the term C. I. F. or C. & F. unless otherwise agreed the
buyer must make payment against tender of the required documents and the
seller may not tender nor the buyer demand delivery of the goods in
substitution for the documents.
Section 2--321. C. I. F. or C. & F.: "Net Landed Weights"; "Payment on
Arrival"; Warranty of Condition on Arrival.
Under a contract containing a term C. I. F. or C. & F.
(1) Where the price is based on or is to be adjusted according to "net
landed weights", "delivered weights", "out turn" quantity or quality or
the like, unless otherwise agreed the seller must reasonably estimate
the price. The payment due on tender of the documents called for by the
contract is the amount so estimated, but after final adjustment of the
price a settlement must be made with commercial promptness.
(2) An agreement described in subsection (1) or any warranty of
quality or condition of the goods on arrival places upon the seller the
risk of ordinary deterioration, shrinkage and the like in transportation
but has no effect on the place or time of identification to the contract
for sale or delivery or on the passing of the risk of loss.
(3) Unless otherwise agreed where the contract provides for payment on
or after arrival of the goods the seller must before payment allow such
preliminary inspection as is feasible; but if the goods are lost
delivery of the documents and payment are due when the goods should have
arrived.