Also known as: 2-612 · UCC 2-612 · UCC § 2-612 · § 2-612 · installment contract
Written by attorneys · grounded in primary & secondary sources — see below
A statutory rule that defines an installment contract as one requiring or authorizing delivery of goods in separate lots to be separately accepted and that treats a breach of one installment as a breach of the whole contract only when the breach substantially impairs the value of the entire contract.
Sapphire Holdings contracted with Sterling Manufacturing for monthly deliveries of custom parts over twelve months. The third delivery contained parts that deviated from specifications. Sterling Manufacturing offered to cure within a reasonable time. Sapphire Holdings rejected the entire remaining contract. The rejection is limited to the nonconforming installment because the deviation did not substantially impair the value of the whole agreement.
Skyline Construction ordered steel beams from Starlight Media for delivery in four quarterly installments. Starlight Media notified Skyline Construction of a material delay caused by a supplier shortage and proposed an allocation of available beams. Skyline Construction sent written notice terminating the contract as to the remaining deliveries. The termination is effective for the whole contract because the prospective deficiency substantially impairs its value.
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Stephen Shaw agreed to purchase custom machinery from Sapphire Holdings in three separate shipments. After the first shipment arrived and was paid for, Stephen Shaw notified Sapphire Holdings that he would accept no further deliveries and would not pay the remaining price. Sapphire Holdings withheld the second and third shipments. The seller may withhold delivery of the remaining goods because the buyer's repudiation affects the whole undelivered balance.
Samantha Stone contracted with Sterling Manufacturing for six monthly shipments of raw materials. Sterling Manufacturing failed to deliver the fourth shipment and gave no assurance of future performance. Samantha Stone canceled the contract and sought to recover the price paid for prior shipments. The buyer may cancel and recover the price paid because the seller's failure goes to the whole contract.
Sebastian Santos agreed to buy grain from Sasha Stone in three separate deliveries over the harvest season. Sasha Stone repudiated before the second delivery by stating that market prices had risen and no further grain would be supplied. Sebastian Santos purchased substitute grain at a higher price and sued for damages. The buyer may recover damages measured by the cost of cover because the repudiation substantially impairs the value of the remaining contract.
A breach of one installment constitutes a breach of the entire contract only when it substantially impairs the value of the whole contract to the injured party. The determination requires consideration of the contract terms, the course of performance, and whether the breach affects the remaining installments in a material way.
Section 2-601 permits rejection of nonconforming goods subject to the installment-contract rules in Section 2-612. A buyer may reject only the nonconforming installment unless the nonconformity substantially impairs the value of the whole contract.
When a buyer repudiates an installment contract the seller may withhold delivery of remaining goods and stop delivery by any bailee with respect to the whole undelivered balance if the repudiation substantially impairs the value of the contract.
A buyer may cancel the contract and recover damages for non-delivery when the seller's failure to deliver substantially impairs the value of the whole contract under Section 2-612.
…at the Owens’ home and discussed the matter with Mr. and Mrs. Owen. As a result, on November 6, 1962 they signed a “retail installment contract” for the purchase of 140 albums on the time payment plan proposed by Universal. Under the printed form of contract Universal sold and Owen bought “subject to the terms and conditions…