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ACCA Applied Skills · Corporate and Business Law (Global) · Obligations of the seller and buyer, and provisions common to both

Under the CISG, Tanto Co (buyer) has received goods from Vela Co (seller) but intends to reject them as non-conforming. Tanto Co is in possession of the goods and a decision on rejection is pending. Which statement about Tanto Co's duty is correct?

Tanto Co must take reasonable steps to preserve the goods and can recover its reasonable expenses from the seller. Intending to reject does not remove the duty to preserve. Sale is only required in cases of rapid deterioration or unreasonable preservation cost.

  1. AIt must take reasonable steps in the circumstances to preserve the goods, and may recover its reasonable expenses from the sellerCorrect
  2. BIt may leave the goods to deteriorate because it intends to reject them
  3. CIt must sell the goods immediately at any price to limit the loss

Explanation

A buyer in possession of goods it intends to reject must take reasonable steps to preserve them and is entitled to retain them until reimbursed its reasonable expenses by the seller. Letting them deteriorate breaches this duty. Sale is required only where goods are subject to rapid deterioration or preservation costs are unreasonable, not in every case.

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