Sales and Leases | 131
1. Installment Contract Defined An installment contract “requires or authorizes the delivery of goods in separate lots to be separately accepted. . . .” [U.C.C. § 2-612(1) (1951).] Put another way, in an installment contract, the parties have expressly or implicitly agreed that each lot is a separate delivery to be accepted or rejected separately. The mere fact that the buyer is to pay in installments does not make the contract an installment contract. In addition, the contract is not necessarily an installment contract just because practicalities require that the goods be delivered in separate shipments; rather, the contract itself must contemplate delivery in separate lots to be individually accepted or rejected. Further, a series of separate contracts will generally not be aggregated together to form an installment contract. [ See U.C.C. § 2-612(1) (1951); 2 Hawkland UCC Series § 2-612:1, Westlaw (database updated June 2021).] Examples : (1) A contract called for a coal mine to deliver 1.2 million tons of coal to a power plant. The buyer lacked the space to store that quantity of coal at once, so the mine made separate deliveries until the contract was fulfilled. Nothing in the contract expressly or tacitly contemplated separate deliveries. This contract is likely not an installment contract. The parties do not seem to have agreed that the coal would or could be delivered in separate lots to be accepted separately. Rather, the practicalities necessitated separate deliveries, because the buyer lacked the space to store all the coal at once. [ See 2 Hawkland UCC Series § 2- 612:1, Westlaw (database updated June 2021).] (2) Over time, a coal-powered electric plant entered 12 separate contracts with a coal mine. Under each contract, the mine was to (and did) sell the plant 100,000 tons of coal. Here, the overall arrangement between the plant and the mine was not an installment contract. Rather, there were 12 distinct contracts, each of which required delivery of a specified quantity of coal. [ See 2 Hawkland UCC Series § 2-612:1, Westlaw (database updated June 2021).] Compare : A contract called for a coal mine to deliver 1.2 million tons of coal to a power plant. Per the contract, the mine was to deliver 100,000 tons of coal each month for 12 consecutive months. Here, most courts would find the contract to be an installment contract. The contract expressly required delivery of the coal in 12 separate lots of 100,000 tons apiece. [ See 2 Hawkland UCC Series § 2-612:1, Westlaw (database updated June 2021).] 2. Rejecting a Nonconforming Installment In an installment contract, the buyer may reject a nonconforming installment, but only if either (1) the nonconformity both is incurable and substantially impairs the installment’s value or (2)
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