Prior Uniform Statutory Provision: Section 42, Uniform Sales Act.
Changes: Rewritten by this section and section 2-507.
Purposes of Changes:
1. The requirement of payment against delivery in subsection (1) is applicable to noncommercial sales generally and to ordinary sales at retail although it has no application to the great body of commercial contracts which carry credit terms. Subsection (1) applies also to documentary contracts in general and to contracts which look to shipment by the seller but contain no term on time and manner of payment, in which situations the payment may, in proper case, be demanded against delivery of appropriate documents.
In the case of specific transactions such as C.O.D. sales or agreements providing for payment against documents, the provisions of this subsection must be considered in conjunction with the special sections of the article dealing with such terms. The provision that tender of payment is a condition to the seller's duty to tender and complete "any delivery" integrates this section with the language and policy of the section on delivery in several lots which call for separate payment. Finally, attention should be directed to the provision on right to adequate assurance of performance which recognizes, even before the time for tender, an obligation on the buyer not to impair the seller's expectation of receiving payment in due course.
2. Unless there is agreement otherwise the concurrence of the conditions as to tender of payment and tender of delivery requires their performance at a single place or time. This article determines that place and time by determining in various other sections the place and time for tender of delivery under various circumstances and in particular types of transactions. The sections dealing with time and place of delivery together with the section on right to inspection of goods answer the subsidiary question as to when payment may be demanded before inspection by the buyer.
3. The essence of the principle involved in subsection (2) is avoidance of commercial surprise at the time of performance. The section on substituted performance covers the peculiar case in which legal tender is not available to the commercial community.
4. Subsection (3) is concerned with the rights and obligations as between the parties to a sales transaction when payment is made by check. This article recognizes that the taking of a seemingly solvent party's check is commercially normal and proper and, if due diligence is exercised in collection, is not to be penalized in any way. The conditional character of the payment under this section refers only to the effect of the transaction "as between the parties" thereto and does not purport to cut into the law of "absolute" and "conditional" payment as applied to such other problems as the discharge of sureties or the responsibilities of a drawee bank which is at the same time an agent for collection.
The phrase "by check" includes not only the buyer's own but any check which does not effect a discharge under article 3 (section 3-310). Similarly the reason of this subsection should apply and the same result should be reached where the buyer "pays" by sight draft on a commercial firm which is financing him or her.
5. Under subsection (3) payment by check is defeated if it is not honored upon due presentment. This corresponds to the provisions of the Article on Negotiable Instruments. (Section 3-310). But if the seller procures certification of the check instead of cashing it, the buyer is discharged. (Sections 3-409, 3-414, and 3-415).
6. Where the instrument offered by the buyer is not a payment but a credit instrument such as a note or a check postdated by even one day, the seller's acceptance of the instrument insofar as third parties are concerned, amounts to a delivery on credit and his or her remedies are set forth in the section on buyer's insolvency. As between the buyer and the seller, however, the matter turns on the present subsection and the section on conditional delivery and subsequent dishonor of the instrument gives the seller rights on it as well as for breach of the contract for sale.
Point 1: Sections 2-307, 2-310, 2-320, 2-325, 2-503, 2-513, and 2-609.
Point 2: Sections 2-307, 2-310, 2-319, 2-322, 2-503, 2-504, and 2-513.
Point 3: Section 2-614.
Point 5: Article 3, especially sections 3-310, 3-409, 3-414, and 3-415.
Point 6: Sections 2-507 and 2-702 and article 3.
Definitional Cross References:
"Buyer". Section 2-103.
"Check". Section 3-104.
"Dishonor". Section 3-502.
"Party". Section 1-201.
"Reasonable time". Section 1-204.
"Seller". Section 2-103.