SECTIONS 2601-2616 - California Statutes

COMMERCIAL CODE

SECTION 2601-2616

2601. Subject to the provisions of this division on breach in
installment contracts (Section 2612) and unless otherwise agreed
under the sections on contractual limitations of remedy (Sections
2718 and 2719), 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.

2602. (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 2603 and 2604),
(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 division (subdivision (3) of Section 2711), 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 division on seller's remedies
in general (Section 2703).

2603. (1) Subject to any security interest in the buyer
(subdivision (3) of Section 2711), 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 subdivision (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 10 percent 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.

2604. 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.

2605. (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.
(2) Payment against documents made without reservation of rights
precludes recovery of the payment for defects apparent in the
documents.

2606. (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 (subdivision (1) of
Section 2602), 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.

2607. (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.
Acceptance does not of itself impair any other remedy provided by
this division for nonconformity.
(3) Where a tender has been accepted:
(A) The buyer must, within a reasonable time after he or she
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 (subdivision
(3) of Section 2312) and the buyer is sued as a result of such a
breach, the buyer must so notify the seller within a reasonable time
after he or she 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 or her seller is answerable over:
(A) He or she may give the seller written notice of the
litigation. If the notice states that the seller may defend and that
if the seller does not do so he or she will be bound in any action
against the seller by the buyer by any determination of fact common
to the two litigation actions, then unless the seller after
seasonable receipt of the notice does defend he or she is so bound.
(B) If the claim is one for infringement or the like (subdivision
(3) of Section 2312) the original seller may demand in writing that
the buyer turn over to the seller control of the litigation,
including settlement, or else be barred from any remedy over and if
the seller 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 subdivisions (3), (4) and (5) apply to any
obligation of a buyer to hold the seller harmless against
infringement or the like (subdivision (3) of Section 2312).

2608. (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 nonconformity would be
cured and it has not been seasonably cured; or
(b) Without discovery of such nonconformity 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.

2609. (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 agrieved 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 30 days such assurance of due
performance as is adequate under the circumstances of the particular
case is a repudiation of the contract.

2610. 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
(b) Resort to any rememdy for breach (Section 2703 or Section
2711), 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 division on the seller's right
to identify goods to the contract notwithstanding breach or to
salvage unfinished goods (Section 2704).

2611. (1) Until the repudiating party's next performance is due he
can retract his repudiation unless the aggrieved party has since the
repudiation canceled 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 division (Section 2609).
(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.

2612. (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 nonconforming 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 subdivision (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 nonconforming installment without
seasonably notifying of cancellation or if he brings an action with
respect only to past installments or demands performance as to future
installments.

2613. 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 2324) 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.

2614. (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 manner 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.

2615. 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 nondelivery in whole or in part by a
seller who complies 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
nonoccurrence 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.

2616. (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 division relating to breach of installment
contracts (Section 2612), 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 30 days the contract lapses with respect to any deliveries
affected.
(3) The provisions of this section may not be negated by agreement
except insofar as the seller has assumed a greater obligation under
the preceding section.