Texas Imports v. Allday
36 U.C.C. Rep. Serv. (West) 491, 649 S.W.2d 730, 41 A.L.R. 4th 382 (1983)
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Rule of Law:
In contracts for the sale of goods governed by the Texas Business & Commerce Code (UCC), the 'perfect tender rule' applies, allowing a buyer to reject goods that fail to conform to the contract in any respect. The common law doctrine of substantial performance is not applicable to such contracts.
Facts:
- Texas Imports (TI) and Edwin Allday entered into a written contract for Allday to purchase 49 purebred Simmental cattle for $25,000 per head.
- The contract required TI to deliver the cattle in a 'good, sound and healthy condition' and gave Allday a three-day inspection period upon delivery to his Texas ranch.
- After an initial inspection in Japan, Allday confirmed the contract and made a 10% down payment of $122,500.
- On January 29, 1975, TI delivered the 49 cattle to Allday's ranch.
- During the inspection period, Allday and his veterinarians determined that at least ten of the cattle were not in a 'good, sound and healthy condition,' with some exhibiting genetic defects and another having an infectious growth.
- TI also failed to provide contractually required 'status reports' identifying the sires of fourteen pregnant heifers.
- Allday offered to accept and pay for 27 cattle he found to be conforming but rejected the remaining 22 non-conforming animals.
- TI refused Allday's offer of partial acceptance and payment, insisting he accept all 49 cattle.
Procedural Posture:
- Texas Imports (TI) sued Edwin Allday in Texas trial court for breach of contract.
- Allday filed a counterclaim seeking the return of his down payment.
- Following a trial, a jury returned a verdict on nine special issues, finding both that TI had 'substantially performed' and that several of the delivered cattle were non-conforming.
- Both parties filed motions for judgment based on the conflicting jury findings.
- The trial court entered a take-nothing judgment non obstante veredicto, decreeing that neither party recover any damages.
- TI appealed the trial court's judgment to the Court of Appeals of Texas, and Allday filed cross-points of error.
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Issue:
In a contract for the sale of goods, does the common law doctrine of substantial performance override the buyer's right under the Texas Business & Commerce Code § 2.601 to reject goods that fail to conform to the contract?
Opinions:
Majority - Colley, Justice.
No. The 'perfect tender rule' under the Texas Business & Commerce Code § 2.601 controls contracts for the sale of goods, not the common law doctrine of substantial performance. The court reasoned that the Code provides the controlling law for commercial transactions involving goods. Section 2.601, which codifies the 'perfect tender rule,' explicitly allows a buyer to reject goods if they 'fail in any respect to conform to the contract.' The jury's specific findings that ten cattle were not sound and healthy controlled over its general finding of substantial performance. The court held that the doctrine of substantial performance has no place in contracts for the sale of goods. Because the shipment contained non-conforming cattle, Allday was statutorily authorized to accept the conforming 'commercial units' (the 27 healthy cattle) and reject the rest. TI's refusal of Allday's rightful partial acceptance constituted a breach, entitling Allday to the return of his deposit.
Analysis:
This case solidifies the supremacy of the Uniform Commercial Code's 'perfect tender rule' over the common law doctrine of substantial performance in contracts for the sale of goods. The decision removes any ambiguity, providing a bright-line rule that buyers are entitled to strict conformity with the contract's terms. It significantly strengthens a buyer's position, as any non-conformity, regardless of its materiality, can be grounds for rejection. This precedent reinforces that specific statutory frameworks like the UCC displace more general, conflicting common law principles in their designated fields.
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