Does a seller, after making delivery of what turns out to be defective goods, have the right to take them back and re-deliver quality goods or must he, if the buyer demands it, cancel the contract and return any payment made? For the answer to this question, just as with most questions concerning the law of sales, we must first look to the Uniform Commercial Code (UCC) and then to the court decisions that have interpreted the meaning of the applicable sections.

Section 2-508(1) of the UCC provides that when any delivery by the seller is rejected because it does not conform to the contract of sale—wrong color, wrong size, defects, etc.—and the time for performance has not yet expired, the seller may reasonably notify the buyer of his intention to cure the defect and may then, within the contract time make a conforming delivery.

Subsection (2) of the same section states that where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable with or without a money allowance, the seller may, if he reasonably notifies the buyer, have a further reasonable time to substitute a conforming tender.

What does all this mean? Both sections speak of goods which are “non-conforming.” These particular goods are defined as those that fail “in any respect” to conform to the contract. The contract of sale includes, along with everything that is written down, all of the warranties implied by law. This means that the delivered goods must be identical, within reason, to any sample used and must not contain any defects.

Assuming the goods are non-conforming, the buyer is obligated to notify the seller that he is rejecting them within a reasonable time. He must also specify the basis of his rejection. If the seller’s time for performance has not yet expired he must then immediately notify the buyer of his intention to cure and must actually make the redelivery within the original time to perform. If, as with most sales, the actual day of delivery is not stated, a “reasonable” period of time will be granted.

The second section appears to give the seller the same rights as the first but extends the time period beyond the original time of performance, provided that the seller had grounds to believe that the delivery would be accepted, possibly even with a money allowance. This belief of the seller may be based on the usual trade custom, prior dealing with that customer, or anything else that the seller may have relied on. Some judges have determined that this second subsection applies only when the seller knows that his delivery does not conform to the contract.

Under this reasoning a seller who delivers goods he believes conform to the contract but which, in fact, do contain defects is not allowed the extra time to “cure” his non-conforming delivery. Most courts however have not taken this view.

In one leading case on this subject, a flooring retailer sold an area rug to the buyer. When the rug was placed in her home, she noticed it had a reddish tint to it. In that case, although the time for performance had expired, the court permitted the seller to “cure” the defective delivery by exchanging it for a new one.

The defective rug in that case was delivered by the dealer. “A retailer,” said the court, “would certainly expect and have reasonable grounds to believe that merchandise such as an area rug, new and delivered and that, if defective in some way, he would have the right to substitute a conforming tender.” Thus even though the seller did not have any reason to believe he was delivering defective goods he was granted additional time to replace the item.

Some commentators disagree with this reasoning. They argue that routinely granting sellers the right to cure defective deliveries could undermine their incentive to perform correctly within the time specified in the contract. This would then extend the time for performance in nearly every contract by some undetermined “reasonable” time period, contrary to the agreement made at the time of contract.

The UCC, however, contains protections against these types of abuses. Under the code, in all sales, sellers must perform all contractual obligations in “good faith,” which, it has often been said, means more than “honesty in fact.” As the highest court of New York has stated in a similar case, “We hold that, if reasonable notice be given, …a seller may offer to cure the defect within a reasonable period beyond the time when the contract was to be performed so long as it has acted in good faith and with a reasonable expectation that its original goods would be acceptable to the buyer.”