Chapter 402

subch. VI of ch. 402 SUBCHAPTER VI

BREACH, REPUDIATION AND EXCUSE

402.601 402.601 Buyer’s rights on improper delivery. Subject to s. 402.612 on breach in installment contracts and unless otherwise agreed under ss. 402.718 and 402.719 on contractual limitations of remedy, if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:

402.601(1) (1) Reject the whole; or

402.601(2) (2) Accept the whole; or

402.601(3) (3) Accept any commercial unit or units and reject the rest.

402.602 402.602 Manner and effect of rightful rejection.

402.602(1) (1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

402.602(2) (2) Subject to ss. 402.603 and 402.604 on rejected goods:

402.602(2)(a) (a) After rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and

402.602(2)(b) (b) If the buyer has before rejection taken physical possession of goods in which the buyer does not have a security interest under s. 402.711 (3), the buyer is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but

402.602(2)(c) (c) The buyer has no further obligations with regard to goods rightfully rejected.

402.602(3) (3) The seller’s rights with respect to goods wrongfully rejected are governed by s. 402.703 on seller’s remedies in general.

402.602 History History: 1991 a. 316.

402.602 Annotation Section 402.608 (2) provides that a revocation of acceptance must occur within a reasonable time after the buyer discovers a nonconformity, and sub. (2) (b) requires a buyer who rejects goods to hold the goods for a sufficient time for the seller to remove them. A truck purchaser who used the vehicle for 18 months, then transferred it back to the dealer and sought relief ten months after the transfer did not reject the vehicle in a timely manner or hold it as required and was not entitled to relief. Smyser v. Western Star Trucks Corp., 2001 WI App 180, 247 Wis. 2d 281, 634 N.W.2d 134, 00-2482.

402.602 Annotation When a seller refused to accept a return of goods upon notice of breach by the buyer, and the buyer thereafter used the goods for three months, the buyer could not recover for breach of warranty. Concrete Equipment Co. v. William A. Smith Contracting Co., 358 F. Supp. 1137 (1973).

402.603 402.603 Merchant buyer’s duties as to rightfully rejected goods.

402.603(1) (1) Subject to any security interest in the buyer (s. 402.711 (3)), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in the merchant buyer’s possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.

402.603(2) (2) When the buyer sells goods under sub. (1), the buyer is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding 10 percent of the gross proceeds.

402.603(3) (3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

402.603 History History: 1991 a. 316; 2009 a. 177.

402.604 402.604 Buyer’s options as to salvage of rightfully rejected goods. Subject to s. 402.603 on perishables, if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller’s account or reship them to the seller or resell them for the seller’s account with reimbursement as provided in s. 402.603. Such action is not acceptance or conversion.

402.604 History History: 1991 a. 316.

402.605 402.605 Waiver of buyer’s objections by failure to particularize.

402.605(1) (1) The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes the buyer from relying on the unstated defect to justify rejection or to establish breach:

402.605(1)(a) (a) Where the seller could have cured it if stated seasonably; or

402.605(1)(b) (b) Between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.

402.605(2) (2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.

402.605 History History: 1991 a. 316; 2009 a. 322.

402.606 402.606 What constitutes acceptance of goods.

402.606(1) (1) Acceptance of goods occurs when the buyer:

402.606(1)(a) (a) After a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that the buyer will take or retain them in spite of their nonconformity; or

402.606(1)(b) (b) Fails to make an effective rejection (s. 402.602 (1)), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or

402.606(1)(c) (c) Does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by the seller.

402.606(2) (2) Acceptance of a part of any commercial unit is acceptance of that entire unit.

402.606 History History: 1991 a. 316.

402.606 Annotation When a buyer accepts goods, the seller need not prove that the goods were not defective in an action to recover the purchase price. Central Soya Co. v. Epstein Fisheries, Inc., 676 F.2d 939 (1982).

402.607 402.607 Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

402.607(1) (1) The buyer must pay at the contract rate for any goods accepted.

402.607(2) (2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this chapter for nonconformity.

402.607(3) (3) Where a tender has been accepted:

402.607(3)(a) (a) The buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and

402.607(3)(b) (b) If the claim is one for infringement or the like (s. 402.312 (3)) and the buyer is sued as a result of such a breach the buyer must so notify the seller within a reasonable time after the buyer receives notice of the litigation or be barred from any remedy over for liability established by the litigation.

402.607(4) (4) The burden is on the buyer to establish any breach with respect to the goods accepted.

402.607(5) (5) Where the buyer is sued for breach of a warranty or other obligation for which the buyer’s seller is answerable over:

402.607(5)(a) (a) The buyer may give the buyer’s seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so the seller will be bound in any action against the seller by the seller’s buyer by any determination of fact common to the 2 litigations, then unless the seller after seasonable receipt of the notice does come in and defend, the seller is so bound.

402.607(5)(b) (b) If the claim is one for infringement or the like (s. 402.312 (3)) the original seller may demand in writing that his or her buyer turn over control of the litigation to the original seller including settlement or else be barred from any remedy over and if the original seller also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.

402.607(6) (6) Subsections (3), (4) and (5) apply to any obligation of the buyer to hold the seller harmless against infringement or the like (s. 402.312 (3)).

402.607 History History: 1991 a. 316.

402.607 Annotation Under the facts of the case, a two-month delay in giving notice was not unreasonable. Paulson v. Olson Implement Co., 107 Wis. 2d 510, 319 N.W.2d 855 (1982).

402.607 Annotation Ordinarily, what constitutes a reasonable time is a question of fact for a jury. However, a delay may be for such a long period that as a matter of law the court must hold that the notice was not given within a reasonable time. Absent evidence of circumstances excusing or justifying the delay, ten months is not a reasonable time to delay giving notice as a matter of law. Wilson v. Tuxen, 2008 WI App 94, 312 Wis. 2d 705, 754 N.W.2d 220, 07-1964.

402.607 Annotation Sub. (3) (a) requires pre-suit notice. One of the purposes of the notice requirement is to enable the seller to take corrective action and avoid litigation. Thus, service of a summons and complaint cannot function as the notice required by sub. (3) (a). Brame v. General Motors LLC, 535 F. Supp. 3d 832 (2021).

402.607 Annotation A buyer must give a seller notice of an alleged breach even if the seller would not have cured the breach after receiving the notice. Brame v. General Motors LLC, 535 F. Supp. 3d 832 (2021).

402.608 402.608 Revocation of acceptance in whole or in part.

402.608(1) (1) The buyer may revoke the buyer’s acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the buyer if the buyer has accepted it:

402.608(1)(a) (a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

402.608(1)(b) (b) Without discovery of such nonconformity if the buyer’s acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.

402.608(2) (2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

402.608(3) (3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if the buyer had rejected them.

402.608 History History: 1991 a. 316.

402.608 Annotation Sub. (2) provides that a revocation of acceptance must occur within a reasonable time after the buyer discovers a nonconformity, and s. 402.602 (2) (b) requires a buyer who rejects goods to hold the goods for a sufficient time for the seller to remove them. A truck purchaser who used the vehicle for 18 months, then transferred it back to the dealer and sought relief ten months after the transfer did not reject the vehicle in a timely manner or hold it as required and was not entitled to relief. Smyser v. Western Star Trucks Corp., 2001 WI App 180, 247 Wis. 2d 281, 634 N.W.2d 134, 00-2482.

402.608 Annotation When the trial court found that the plaintiff’s employees were told by the defendant that a part of a system purchased from the defendant would not work and there was no evidence presented at trial as to any further discussion of additional work, the plaintiff could not reasonably assume that the nonconformity would be cured, making revocation under subs. (1) (a) and (2) unavailable. Viking Packaging Technologies, Inc. v. Vassallo Foods, Inc., 2011 WI App 133, 337 Wis. 2d 125, 804 N.W.2d 507, 10-2067.

402.609 402.609 Right to adequate assurance of performance.

402.609(1) (1) A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until the demanding party receives such assurance may if commercially reasonable suspend any performance for which the demanding party has not already received the agreed return.

402.609(2) (2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

402.609(3) (3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.

402.609(4) (4) After receipt of a justified demand failure to provide within a reasonable time not exceeding 30 days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

402.609 History History: 1991 a. 316.

402.610 402.610 Anticipatory repudiation. When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:

402.610(1) (1) For a commercially reasonable time await performance by the repudiating party; or

402.610(2) (2) Resort to any remedy for breach (ss. 402.703 or 402.711), even though the aggrieved party has notified the repudiating party that the aggrieved party would await the latter’s performance and has urged retraction; and

402.610(3) (3) In either case suspend the aggrieved party’s performance of the contract or proceed in accordance with s. 402.704 on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.

402.610 History History: 1991 a. 316.

402.610 Annotation A party doesn’t repudiate by asking for a contract modification, but, if a seller informs a buyer that the seller simply won’t be able to perform at the promised time, that may qualify as a repudiation. In this case, the parties’ contracts included estimated fulfillment dates, not strict deadlines. But the seller was still required to perform within a reasonable time, and the estimated dates provided a benchmark for determining what an unreasonable delay would be. If the seller’s new projected fulfillment date was outside the scope of what would be a reasonable time for performance, that would qualify as repudiation. What constitutes a reasonable time under the circumstances is a question of fact. Oregon Potato Co. v. Kerry Inc., 575 F. Supp. 3d 1064 (2021).

402.611 402.611 Retraction of anticipatory repudiation.

402.611(1) (1) Until the repudiating party’s next performance is due the repudiating party can retract the repudiation unless the aggrieved party has since the repudiation canceled or materially changed position or otherwise indicated that the aggrieved party considers the repudiation final.

402.611(2) (2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under s. 402.609.

402.611(3) (3) Retraction reinstates the repudiating party’s rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

402.611 History History: 1991 a. 316.

402.612 402.612 “Installment contract”; breach.

402.612(1) (1) An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.

402.612(2) (2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within sub. (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.

402.612(3) (3) Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole; but the aggrieved party reinstates the contract if the aggrieved party accepts a nonconforming installment without seasonably notifying of cancellation or if the aggrieved party brings an action with respect only to past installments or demands performance as to future installments.

402.612 History History: 1991 a. 316.

402.613 402.613 Casualty to identified goods. Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (s. 402.324) then:

402.613(1) (1) If the loss is total the contract is avoided; and

402.613(2) (2) If the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at the buyer’s option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

402.613 History History: 1991 a. 316.

402.614 402.614 Substituted performance.