A construction company contracted with a manufacturer to purchase 100 identical windows, to be delivered in four shipments. Payments were not specified in the contract. The manufacturer ships the first two shipments; the construction company pays one-fourth of the contract price upon each delivery. On June 1, the manufacturer demanded full payment before any further shipments. Which statement is true?

• A. The construction company must pay the manufacturer one-fourth of the contract price upon delivery of each conforming shipment of windows.
• B. The construction company must pay the entire remainder before further shipments.
• C. The construction company may suspend payment until all shipments are delivered.
• D. The contract is void for failure to specify payment terms.

Answer: (A)

The key idea is how the UCC handles payment when a contract for goods is to be delivered in installments and the contract doesn’t specify payment terms. In an installment sale, each shipment is treated as a separate unit for purposes of payment. Payment is due on delivery of each conforming installment, so the buyer pays a proportionate share with each delivery.

Here, four shipments are planned and the contract doesn’t set payment terms. The first two shipments were delivered and paid for, one-fourth of the price with each delivery. Since the shipments were conforming, the buyer’s obligation remains to pay one-fourth of the contract price on each subsequent delivery as it occurs. The seller’s demand for full payment before continuing shipments isn’t supported by the default rule, and the buyer isn’t entitled to suspend payments or to accelerate payment for the entire contract absent a breach or an agreement. The contract isn’t void for missing payment terms because the UCC supplies the default rule.

So the correct approach is that payment is due in one-fourth increments upon delivery of each conforming shipment.