Sale of Goods (UCC) Dispute Lawyer in NYC

Sale of goods disputes Reza Yassi handles

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Reza Yassi brings and defends claims for business buyers, sellers, lenders and borrowers:

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• Late, short, damaged or off-specification deliveries, and rejections or refusals to pay

• Breach of express and implied warranty, and disclaimer and limited-remedy defenses

• Conflicting purchase-order, acknowledgment and invoice terms

• Cancelled or repudiated supply contracts and unpaid invoices for goods

• Goods lost or damaged in transit

• Article 9 disputes: lien priority fights, repossession and deficiency claims

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Cases are heard in New York State Supreme Court (often its Commercial Division), in federal court in Manhattan or Brooklyn when jurisdiction exists, or in arbitration if the contract requires it.

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When does UCC Article 2 apply instead of ordinary contract law?

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Article 2 governs goods: things movable when identified to the contract, including specially manufactured goods, but not money, securities or legal claims (UCC § 2-105). For a deal mixing goods and services, such as equipment with installation, Article 2 applies to the whole deal if the goods aspects predominate; if not, only its rules relating primarily to the goods apply (UCC § 2-102).

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It matters because goods claims have four years instead of six (CPLR 213(2)), and Article 2 adds its own rules on rejection, notice and remedies, some stricter for merchants: businesses that deal in goods of the kind or claim skill in them (UCC § 2-104).

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Is there an enforceable contract? The $500 rule and the battle of the forms

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A sale of goods for $500 or more needs a record, paper or electronic, signed by the party you want to hold to it and showing a contract was made; it is enforceable only up to the quantity shown (UCC § 2-201). Exceptions: between merchants, a confirming record not objected to in a record within 10 days of receipt; goods specially made for the buyer and unsuitable for others, once the seller has substantially begun; a contract admitted in court; and goods paid for, or received and accepted.

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When a purchase order and the seller's acknowledgment carry different fine print, a definite acceptance still forms a contract unless expressly conditioned on agreement to the new terms (UCC § 2-207). Between merchants, added terms become part of the deal unless the offer limited acceptance to its own terms, they materially alter it, or the other side objects within a reasonable time. New arbitration, forum and warranty-disclaimer clauses are often challenged as material changes.

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Breach of warranty: express, merchantability and fitness

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A warranty is a promise about the goods' quality, made by the seller or implied by law:

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• Express warranty: a statement of fact, promise, description, sample or model that becomes part of the basis of the bargain; sales talk or opinion about value is not one (UCC § 2-313).

• Merchantability: a merchant seller impliedly promises the goods are fit for their ordinary purposes and would pass without objection in the trade (UCC § 2-314).

• Fitness for a particular purpose: arises when the seller had reason to know the buyer's purpose and its reliance on the seller's skill or judgment (UCC § 2-315).

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A merchantability disclaimer must mention merchantability and, if written, be conspicuous; a fitness disclaimer must be a conspicuous writing. "As is" generally excludes implied warranties (UCC § 2-316). See excluding warranties under UCC 2-316.

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A contract may make repair, replacement or refund the only remedy if it expressly says so, and may exclude consequential damages (UCC § 2-719). If the limited remedy fails of its essential purpose, ordinary remedies return; a consequential-damages exclusion falls only if unconscionable, which is not presumed for commercial losses. New York's highest court held that a clause barring claims after processing cannot cut off claims for defects that could not reasonably be found in time (Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398 (1968)).

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What is the perfect tender rule, and can a buyer reject nonconforming goods?

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If goods or their delivery fail to conform to the contract in any respect, the buyer may reject the whole, accept the whole, or accept some commercial units and reject the rest (UCC § 2-601). The contract can limit this, and an installment may be rejected only if the defect substantially impairs its value and cannot be cured (UCC § 2-612).

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Reject within a reasonable time after delivery and notify the seller, or the rejection is ineffective (UCC § 2-602). Say you reject and why, and hold the goods with reasonable care. You accept goods if, after a reasonable chance to inspect, you signal you will keep them, fail to reject effectively, or act as their owner (UCC § 2-606); see acceptance of goods.

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After promptly notifying the buyer, the seller may cure with a conforming delivery within the contract time, or a further reasonable time if it had reasonable grounds to believe the original delivery would be acceptable (UCC § 2-508). That can include a good-faith seller unaware of the defect, judged objectively (T. W. Oil, Inc. v. Consolidated Edison Co. of N.Y., 57 N.Y.2d 574 (1982)).

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Already accepted the goods? Notice of breach and revocation

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Acceptance ends the right to reject and you owe the price, but other remedies survive (UCC § 2-607). Notify the seller of a breach within a reasonable time after you discover it, or should have, or lose every remedy.

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You may revoke acceptance if the defect substantially impairs the goods' value to you and you accepted expecting a cure that never came, or without finding a defect that was hard to discover or masked by the seller's assurances. Revoke within a reasonable time, before any substantial change not caused by the defect, and tell the seller (UCC § 2-608).

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Worried the other side will not perform? Adequate assurance and repudiation

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With reasonable grounds for insecurity, you may demand adequate assurance in writing and, if commercially reasonable, suspend performance; no adequate answer within a reasonable time, at most 30 days, is a repudiation (UCC § 2-609). If a repudiation substantially impairs the contract's value to you, you may wait a commercially reasonable time or pursue remedies at once, suspending your own performance either way (UCC § 2-610).

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Who bears the loss when goods are damaged in transit?

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Unless the contract says otherwise, when the seller ships by carrier, risk passes to the buyer on due delivery to the carrier, or, if the seller must deliver at a named destination, on tender there (UCC § 2-509). Goods the buyer may reject stay at the seller's risk until cure or acceptance (UCC § 2-510).

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Buyer's remedies: cover, market-price damages and warranty damages

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If the seller fails to deliver or repudiates, or the buyer rightfully rejects or revokes, the buyer may cancel, recover what it paid (UCC § 2-711), and claim:

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• Cover: the extra cost of substitute goods bought in good faith without unreasonable delay (UCC § 2-712).

• Or market damages: market price when you learned of the breach minus the contract price (UCC § 2-713).

• For accepted goods: generally the value as warranted minus the value as accepted (UCC § 2-714).

• Incidental costs, and consequential losses from needs the seller had reason to know of at contracting that cover could not reasonably prevent (UCC § 2-715).

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Lost profits are generally consequential damages; for interest and attorney's fees, see the breach of contract page.

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Seller's remedies when the buyer will not accept or pay

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If the buyer wrongfully rejects or revokes, fails to pay when due, or repudiates, the seller may withhold or stop delivery, cancel and recover (UCC § 2-703):

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• The contract price minus the price of a commercially reasonable resale, with notice to the buyer of a private sale (UCC § 2-706).

• The contract price minus market price, or lost profit with reasonable overhead where that falls short (UCC § 2-708).

• The full price for accepted goods, or goods it cannot reasonably resell (UCC § 2-709), plus incidental costs (UCC § 2-710).

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To collect an unpaid goods invoice or judgment, see collecting unpaid invoices.

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Secured-transaction disputes under UCC Article 9

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Article 9 governs credit secured by personal property (not real estate), such as equipment, inventory and receivables (UCC § 9-109). Three kinds of dispute are common:

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• Priority fights: perfected security interests generally rank by the earlier of filing or perfection, and a perfected interest beats an unperfected one (UCC § 9-322). A purchase-money lender on equipment and other non-inventory goods comes first if it perfects within 20 days after the debtor gets them (UCC § 9-324). A buyer in the ordinary course of business takes free of a security interest its seller created (UCC § 9-320).

• Repossession: after default, a secured party may take the collateral through the courts or on its own, but only without a breach of the peace (UCC § 9-609).

• Sale and deficiency: every aspect of the sale must be commercially reasonable (UCC § 9-610), and the lender generally must first send the debtor and any guarantor a reasonable signed notice (UCC § 9-611), which in a business transaction is timely if sent at least 10 days before the sale (UCC § 9-612). The debtor gets any surplus and owes any deficiency (UCC § 9-615).

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In a business transaction, once the debtor or guarantor disputes compliance, the lender must prove it followed Article 9's repossession and sale rules. If it cannot, a proper sale is presumed to have covered the debt, expenses and fees, erasing the deficiency, unless the lender proves a lower value (UCC § 9-626).

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How long do you have to sue for breach of warranty in New York?

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Four years from the breach, even if you did not know of it (UCC § 2-725). A warranty is breached when delivery is tendered, unless it explicitly covers future performance; then the clock starts when the breach is or should have been discovered. The original contract can shorten it to no less than one year but not extend it.

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What to do now: preserve the record and send the right notice

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Keep:

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• Purchase orders, acknowledgments, invoices and back-of-form terms

• Specifications, samples and emails describing the goods

• Delivery records, inspection reports and photos

• Every rejection, notice and cure message, and proof of substitute or resale prices

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A notice letter should identify the contract and goods, describe the problem, say whether you reject, revoke or claim damages, and reserve rights. If lies induced the deal, consider a fraud and misrepresentation claim.

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Fees and working with Reza Yassi

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Most commercial matters are billed at $450 an hour under a written engagement letter; contingency or hybrid fees are exceptions for special cases. The first consultation is free. Reza Yassi can review your contract and forms when a dispute is brewing; the firm does not draft contracts.

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Guides on this topic

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• What is the perfect tender rule?: when a buyer may reject a delivery that is off in any respect.

• What is a seller's right to cure?: when a seller may replace a rejected delivery.

• What is the battle of the forms?: whose fine print governs when purchase orders and invoices conflict.

• UCC 2-719: limiting liability and when it fails: when repair-or-replace and no-consequential-damages clauses hold.

• Buyer's right to cover: how substitute purchases set the buyer's damages.

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Frequently asked questions

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What is a breach of warranty claim, and what must you prove?

A claim that goods did not meet a promise about their quality, express or implied. You must show the warranty, the breach and the resulting loss and, for accepted goods, timely notice to the seller (UCC § 2-607(3)(a)). Common defenses are a disclaimer, an exclusive remedy, late notice and the four-year deadline.

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What is the difference between breach of warranty and breach of contract?

A warranty is a promise about the goods themselves; breach of contract covers any failed obligation, such as not delivering or not paying. For goods, both fall under Article 2 and its four-year deadline.

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What does the perfect tender rule require?

Goods and delivery that conform to the contract in every respect (UCC § 2-601), subject to contract limits, the installment-contract rule and the seller's right to cure.

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What is the statute of limitations for breach of warranty in New York?

Four years from tender of delivery, known or not, unless the warranty explicitly covers future performance (UCC § 2-725). The contract may shorten it, but not below one year.

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What does UCC 2-209 say?

A change to a goods contract needs no new consideration. But a signed clause requiring changes in a signed record is enforced, and a failed change may still act as a waiver (UCC § 2-209).

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What can I recover if a supplier never delivers?

What you paid, plus either the extra cost of substitute goods or the market price minus the contract price, and incidental and some consequential damages (UCC §§ 2-711 to 2-715).

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If a shipment was rejected, a supplier stopped performing, or a customer refuses to pay for goods, call (646) 992-2138 or send an inquiry for a free consultation with Reza Yassi.