Sellers Right to Cure under the Hawaii UCC

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Over the past few weeks, I have addressed the sale of goods in Hawaii under the Uniform Commercial Code. Article Two of the Uniform Commercial Code has been adopted in every state (except Louisiana) and governs contracts for the sale of goods. Hawaii has adopted the Uniform Commercial Code. Obviously, the express terms of a contract for the sale of goods will control the manner in which the sale is to be carried out. If the seller tenders goods that are not timely rejected by the buyer, the buyer is obligated to make payment pursuant to the terms of the sales contract. What constitutes effective “rejection” by the buyer is discussed in my entry of April 23, 2007. This blog entry concerns the rights of a seller to cure any defects alleged by a buyer.

A seller has the right under the UCC to cure a buyer’s rejection of nonconforming goods if; (1) “the time for performance has not expired” or, (2) there were “reasonable grounds to believe” the imperfect tender “would be acceptable” as suitable substitution. HRS § 490:2-508. The seller must also “seasonably notify the buyer of his intention to cure.” HRS § 490:2-508. “Curing” by the seller basically entails repairing and/or replacing the good to make it conforming and free of defect(s). This ensures that a buyer gets what he bargained for in the contract and allows seller to “avoid injustice…by reason of a surprise rejection by the buyer.” Comments to HRS § 490:2-508.

If a seller seasonably notifies the buyer of its intention to cure an alleged defect, the buyer must not interfere. If a seller attempts to cure the nonconformity but is frustrated by the buyer in his attempts (ie. is prevented from picking up the good) then the buyer may be deemed to have accepted the nonconforming goods and waives his right to have the good cured. See Contours, Inc. v Lee, 10 Haw.App. 368 (1994). Moreover, if the buyer has used or modified the allegedly defective good before it could be cured, in some circumstances, Courts have determined that the buyer has waived its right to seek compensation.

Sellers and buyers should document all of their communication concerning efforts to cure (if you are the seller) or efforts to obtain a cure (if you are the buyer). Too often business persons hold written documents in disdain (as mere formalities) and, therefore, fail to protect themselves by documenting their reasonable efforts to solve a problem. It is wise for a businessperson to solve their own problems, and being reasonable is always the best course of action. But it may not do you any good to be the most reasonable party to a transaction, if you cannot prove that you were the most reasonable party. Any good trial lawyer will tell you that the outcome of a case is not always determined by what actually happened, but what the attorneys can prove through admissible evidence. The easiest way to ensure that you will be able prove that you were the most reasonable party to a transaction is to put all your communications in writing (and save your emails). And, of course, be the most reasonable party in all of your transactions.