To allow an aggrieved party to cancel an installment contract, N.J. Stat. Ann. § 12A:2-612(3) requires (1) the breach be of the whole contract which occurs when the nonconformity of "one or more installments substantially impairs the value of the whole contract;" and (2) that seasonable notification of cancellation has been given if the buyer has accepted a non-conforming installment. What amounts to substantial impairment presents a question of fact. The test as to whether the nonconformity in any given installment justifies cancelling the entire contract depends on whether the nonconformity substantially impairs the value of the whole contract, and not on whether it indicates an intent or likelihood that the future deliveries also will be defective.
The parties entered into an installment contract for the delivery of food during a large event. The trial court determined that the relationship of the parties was noncontractual. On appeal, the court found that the determination below was incorrect, in that it reflected the pre-Uniform Commercial Code (code) contract law requiring acceptance that "mirrored" offers. As such, it was discordant with the code's reasoning that was based upon a determination of the intention of the parties as evidenced by their conduct or writings.
May a cancellation of an installment contract be made by a party when its supplier delivers nonconforming goods?
Holterbosch had the right to reject any installment that was nonconforming, provided that the nonconformity substantially impaired the value of that installment and could not be cured. N.J.S. 12A:2-612(2). "Cure," novel to New Jersey's jurisprudence, permits the seller to cure a defective tender through repair, replacement or price allowance if he reasonably notifies the buyer of his curative intention and, in effecting the cure, makes a timely conforming delivery.