|
|
|
|
MAIN PAGE
CONFERENCE
DRAFT
RESOURCES
ACKNOWLEDGEMENTS |
|
This is an unofficial draft of Article 2B from April 15, 1998. For the current official version, see the University of Pennsylvania Law School (Official NCCUSL) site at http://www.law.upenn.edu/library/ulc/ulc.htm SECTION 2B-605. CURE OF BREACH OF CONTRACT. (a) A party in breach of contract may cure the breach at its own expense if: (1) the time for performance has not yet expired, the party seasonably notifies the aggrieved party of its intention to cure and, within the contract time for performance, makes a conforming performance; (2) the party had reasonable grounds to believe the performance would be acceptable with or without money allowance, seasonably notifies the other party of its intent to cure, and provides a conforming tender within a further reasonable time after the contract time for performance; or (3) in cases not governed by (b) In a license other than a mass-market license, the party in breach shall promptly and in good faith make an effort to cure if: (1) it receives timely notice of a specified nonconformity and a demand for cure from the aggrieved party; (2) the nonconformity was in (3) (4 (c) A breach of contract that has been cured may not be used to cancel a contract or refuse a performance. However, mere notice of intent to cure does not preclude cancellation or refusal. Uniform Law Source: Sections 2-508; 2A-513 Reporter's Notes: 1. General Application. This section gives both the licensor or the licensee (whichever is in breach) an opportunity to cure under the stated conditions. For licensees' cure often relates to missed payments, failures to give required accounting or other reports, and misuse of information. For licensors, the issues often focus on timeliness of performance, adequacy of delivery product, breach of warranty and the like. The ideas that a breaching party may, if it acts promptly and effectively, eliminate the effect of its breach and preserve the contract is embedded in modern law. See, e.g., Restatement (Second) of Contracts ? 237. However, there is significant disagreement about the scope of the right.a. The UNIDROIT Principles go the furthest in establishing a right to cure providing that cure is not precluded by termination for breach and by not limiting the right to cure in any manner related to the timing of the performance. The UNIDROIT Principles condition cure on "prompt" action and if "appropriate in the circumstances" and if the other party has no "legitimate interest" in refusing cure. UNIDROIT art. 7.1.4 b. Article 2 distinguishes between cure made within the original time for performance (essentially a right to cure) and cure occurring afterwards (restricted to cases where vendor expected the tender to be acceptable). c. The UN Sales Convention does not distinguish between cure within or after the original agreed date for performance. It allows the seller to cure if it can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty. Sales Convention art. 48. However, the cure right is subject to the party's right to declare the contract "avoided" if the breach was a fundamental breach of contract. 2. Right to Cure. This Article employs the standard of materiality of breach as a precondition for cancellation or refusal of a performance and this may shape the scope of the cure right. The Section allows cure if it is prompt. The proposed language follows existing Article 2 in creating a right to cure if cure occurs before the end of the contract period for the performance or if there was a prompt cure after a reasonable expectation that the performance would be acceptable. 3. Permissive Cure. In all other cases, cure is subject to prior cancellation by the other party. This places control in the aggrieved party who suffered a material breach. In the mass market and in other cases of contracts involving rights in a copy of information, refusal of the tender of the copy may constitute cancellation because the entire transaction focused on providing rights and capabilities associated with the information delivered on a copy. In such cases, no special notice or words of cancellation are required. As indicate in subsection (c), the aggrieved party is not required to withhold cancellation because of a notice of intent to cure received from the other party. 4. Obligation to Cure. Subsection (b) applies to cases where the licensee accepts a performance because the material breach standard is not met even though some defect exists. It creates an obligation to attempt a cure. Failure to undertake the effort is a breach, but if the effort occurs and fails, there is no additional breach of contract. The obligation to cure is properly limited by a concept of proportionality. As drafted, no obligation arises if it would entail costs disproportionate to the direct damages caused by the nonconformity. Thus, for example, if a party delivers a one thousand name list for $500 that omits five non-material names, has no obligation to cure if obtaining those additional names would cost $50,000. The proper remedy this is the difference in value of the performance rendered and the performance promised. Recall, that the obligation to cure arises only in the case of non-material breach. |