Sales Law

Installment contracts have a few of their own special rules. An installment contract calls for periodic performances over a length of time. The parties may agree to make payments in any way, but if the sale price can be divided, the buyer usually makes payments on installment contracts upon each delivery of goods.

Buyers in installment sales do not have the same full rights of rejection as buyers in other sales. If a seller tenders an installment of nonconforming goods, the buyer may reject the installment only if it substantially impairs the value of that installment and cannot be cured. Under section 2–612 of the UCC, if the nonconformity is not substantial and can be cured by the seller, the buyer must accept a nonconforming installment and sue for damages.

The tender of one nonconforming installment in an installment contract for sale does not always constitute a total breach of the entire installment contract. Generally, a non-breaching party to an installment contract may cancel the contract only when a breach or cumulative breaches substantially impair the value of the entire contract.

The NCCUSL and the ALI began work in the late 1980s on a revision to Article 2 of the UCC. Work on the project seemed to be finished in 1999, when the ALI approved what it thought was the final draft of the revision. However, opposition from certain important industries, including software manufacturers, led to the withdrawal of the revision. It was feared that many states would refuse to adopt the changes because of this opposition.

The controversy surrounding the revision has centered on software, downloadable information and "smart goods." These types of goods, which include cars, refrigerators, and other appliances, use computer programs to enhance their performance. By 2002 the drafters' latest revision excluded "information" from the definition of goods, thus removing the downloading of electronic information from the reach of the Article. However, the comment section to the draft noted that Article 2 would cover the sale of smart goods, even though these goods include computer programs.

After years of work, the NCCUSL and ALI in May of 2003 adopted the revised version of Article 2. After its final review, which was being completed in 2003, the revised Article 2 will be sent to the states for their considerations in adopting the revised version. The process of state adoption will likely take a number of years.