Rejection, Revocation, and Cure Under Article 2 of the Uniform Commercial Code: Some Modest Proposals

Abstract

This article is about the proposed revisions in the early 1990's of Article 2 of the UCC.

When drafted in the 1940s and 1950s, Article 2 of the Uniform Commercial Code contained several innovations including the creation of a new concept of "revocation of acceptance" (section 2-608), which for the first time imposed more stringent substantive standards on the buyer's right to return goods for latent defects, and the grant to sellers of a broad, but not unlimited, right to "cure" defects in the goods they have tendered (section 2-508). Over the past thirty-five years, a substantial body of case law has developed around those provisions, as well as in connection with the much less innovative section 2-601, which purports to preserve traditional perfect tender rule by permitting the buyer to reject "if the goods or the tender of delivery fail in any respect to conform to the contract .... " While the buyer's right to reject and revoke, and the seller's right to cure, have also been treated extensively in the academic literature, the primary focus of almost all of those discussions has been upon decisions under and possible interpretations of the existing provisions of Article 2. There has been little consideration of potential revisions to the Code's rejection, revocation, and cure provisions.

The object of this Article is to contribute to the important dialogue concerning the prospective revision of Article 2. In particular, the Article focuses on the Code provisions that govern the crucial determination of when a buyer may return goods to the seller and obtain (at least) a refund of any payments made, and when, on the contrary, a buyer will be compelled to retain and pay for the goods, and at most will be entitled to recover monetary damages (under section 2-714) to compensate for any defects or other breach. Under the Code, those determinations are governed largely, although not exclusively, by the provisions on rejection (section 2-601), revocation of acceptance (section 2Q 608), and cure (section 2-508).

The body of the Article is in four parts. The first is purely descriptive, sketching briefly the basic statutory scheme relevant to rejection, revocation, and cure. Part II is both descriptive and evaluative, exploring the rules, standards, and practices that have evolved under these provisions. Particular attention will be paid to those matters about which there continues to be significant uncertainty or debate in the case law or among the commentators. Part III proposes three major criteria for judging contract remedies and then evaluates the standards and practices that have developed concerning rejection, revocation, and cure in light of those criteria. Finally, the last part of the Article will recommend some significant new directions for the rejection, revocation, and cure provisions of revised Article 2.

Keywords: UCC, Uniform Commercial Code, Article 2, buyer's right to returm goods, defects, 2-608, 2-601, 2-508, perfect tender rule, contracts, seller's right to cure, monetary damages

JEL Classification: K12, K19, K29, K39, F13