Perfect Tender Rule

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The Perfect Tender rule is a term that refers to the legal right a buyer to insist that the goods purchased conform precisely to the product description in quality, quantity, and manner of delivery. If the goods fail to conform to the description, the buyer may legally reject the goods offered. The Perfect Tender Rule applies even when there is a signed contract for the purchase of the goods, requiring that the seller must supply goods that conform absolutely with the buyer’s stated demands. To explore this concept, consider the following Perfect Tender Rule definition.

Definition of the Perfect Tender Rule

Noun

  1. A provision of the Uniform Commercial Code that gives buyers of goods the right to insist upon “perfect tender” of goods that conform specifically to their demand.

Substantial Performance and the Perfect Tender Rule

Substantial performance takes place when a party fulfills the essential purpose of a contract, even if some of the aspects do not match the exact terms as stated in the agreement. In many cases, if substantial performance has been fulfilled, the contract is considered complete. Sometimes however, there is a fine line between substantial performance and imperfect performance when it comes to goods delivered, leaving a conflict over the issue to be decided by a judge. The first step in making the determination is to decide whether or not the performance fulfills the essential purpose of the contract. Other questions relevant in deciding a substantial performance vs. perfect tender case include:

  1. How much benefit did the buyer actually receive?
  2. To what extent will an award of damages to the buyer make up for the seller’s imperfect performance?
  3. Was the breach or imperfect performance done made in bad faith?

Sale of Goods and Perfect Tender Rule

The perfect tender rule is different for the sale of goods than it is for a contractual agreement. When pertaining to the sale of goods, substantial performance is not adequate, as the seller must provide products that comfort to the buyer’s demands. There are two main exceptions to the perfect tender rule when it comes to the sale of goods.

  1. If the contract date has not expired, the seller has the right to inform the buyer that the imperfect tender will be cured before the specified date of delivery.
  2. If a contract for the sale of goods is an installment agreement, the buyer cannot reject any installment if:
  3. The installment doe not impair the value as a whole
  4. The imperfect goods can be cured
  5. The seller assures the buyer that the imperfect tender will be cured within the time allotted for the contract

Imperfect Tender

When a seller provides imperfect tender, or imperfect performance, the buyer may file a civil lawsuit for damages suffered as a result of the imperfection. If the costs associated with curing the performance are too great, the amount of damages may be determined by the difference in the value of the product as it stands, and the amount that the product would have been worth had it been up to standards. When a seller fails to deliver perfect tender, the buyer should work with the seller directly to resolve the issue before filing a civil lawsuit.

Examples of Imperfect Tender

Curable Shortage

Bob enters into a contract with a fabric softener manufacturer in which the manufacturer agrees to send him 5,000 pounds of softener on the first day of each month, for which Bob is to pay the manufacturer $3 per pound. For the first three months, the manufacturer delivers the product as agreed. On the fourth month however, Bob receives only 4,500 pounds. While the delivery amount falls short of the contractual terms, the shortage or imperfect tender does not substantially affect the value of the contract. This is true since Bob pays the manufacturer a set amount per pound delivered, as well as the fact that the manufacturer assures Bob that the shortage will be cured.

Wrong Product

Mary enters into a contract with Bud-Me, a flower company. The contract states that Bud-Me will deliver 200 individual roses to Mary’s store on the first day of each month, for which Mary will pay $2 per rose. The contract goes smoothly for six months, then on the seventh month, Bud-Me delivers to Mary’s shop 200 carnations instead of roses. According to the perfect tender rule, Mary is not obligated to accept or pay for the carnations. If Bud-Me has time to make the correct delivery, however, and agrees to correct the problem, Mary will be obligated to accept the roses and pay for them as agreed.

Related Legal Terms and Issues

  • Actual Damages – Money awarded to compensate someone for actual monetary or property losses. Also referred to as “compensatory damages,” the amount of money awarded is based on the proven loss, injury, or harm proven by the plaintiff.
  • Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
  • Contract – An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
  • Performance – The act of doing that which is required by contract.