UCC § 2-612
Installment Contract; Breach
(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. (2) The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment. (3) Whenever non-conformity 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 he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
Professor's notes
Section 2-612 carves out installment contracts from the perfect-tender rule of § 2-601. An installment contract requires or authorizes delivery in separate lots. Under § 2-612(2), the buyer may reject a nonconforming installment only if the nonconformity substantially impairs the value of that installment and cannot be cured. Under § 2-612(3), a nonconformity or default as to one or more installments is a breach of the whole contract only if it substantially impairs the value of the whole.
The doctrinal move is to protect ongoing commercial relationships from destruction by single-installment defects. The policy tension is between the seller's interest in fulfilling a long-term contract and the buyer's interest in getting conforming goods each time. Section 2-612 resolves the tension by requiring substantial impairment for both installment rejection and whole-contract cancellation — a standard closer to common-law materiality than to perfect tender.
Paradigm for installment breach not triggering whole-contract cancellation: A has a 12-month supply agreement. In month 4, seller delivers goods 5% below specification. The defect substantially impairs that installment's value and cannot be cured — buyer may reject installment 4. But unless the pattern of defects substantially impairs the value of the whole contract, buyer may not cancel all future deliveries. Paradigm for whole-contract breach: seller has defaulted on three of twelve installments and signaled inability to perform future deliveries — substantial impairment of the whole.
Students trip on the two distinct substantial-impairment tests in § 2-612(2) and (3) — one for the installment, one for the whole contract — and they conflate them. Ask: can the buyer cancel future deliveries just because one installment was defective? No, unless the defect substantially impairs the whole. Ask: what reinstates the contract after a breach — see subsection (3)'s reinstatement provision (accepting a non-conforming installment without seasonable notice of cancellation).
Connect to UCC § 2-601 (perfect tender for single-delivery contracts), UCC § 2-508 (right to cure), R2d § 241 (materiality of breach), and the Chapter 20 materials on Jacob & Youngs v. Kent. The § 2-612 / § 2-601 contrast is a key doctrinal comparison the course develops across goods and service contracts.
Text
UCC § 2-612. “Installment Contract”; Breach.
(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.
(2) The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
(3) Whenever non-conformity 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 he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
Note: The supplement reproduces this provision as N.H.R.S.A. 382-A (New Hampshire’s codification of the UCC). The text reflects the post-2022 UCC Article 2 amendments as adopted in New Hampshire.