The Legal Basis for Retailer Deductions
Under UCC 2-717, a buyer, on notifying the seller of its intention to do so, may deduct damages resulting from a breach of the contract from the price still due under the same contract. UCC 2-607(4) puts on the buyer the burden to establish any breach with respect to the goods accepted.
This guide explains the uniform text of the Uniform Commercial Code. States adopt the code, and a state's enacted version can differ. An agreement can change the effect of the code's provisions, except where the code says otherwise. This is not legal advice and makes no claim about any state.
Can a buyer deduct from a price still due?
UCC 2-717 says a buyer, on notifying the seller of its intention to do so, may deduct damages resulting from a breach of the contract from any part of the price still due under the same contract. This guide uses the text's own words, buyer and seller, and does not say who holds either role in any deal.
The text names three things:
- Notice of the buyer's intention
- Damages resulting from a breach of the contract
- The price still due under the same contract
Unless the context otherwise requires, the sales article of the code applies to transactions in goods (UCC 2-102). The buyer must pay at the contract rate for any goods accepted (UCC 2-607(1)).
What does the text name for a deduction?
UCC 2-717 names notice of the buyer's intention and damages resulting from a breach of the contract. The text says a buyer may deduct "on notifying the seller of his intention to do so", and it refers to damages "resulting from any breach of the contract".
A separate provision, UCC 2-607(3)(a), says the following. Where a tender has been accepted, the buyer must notify the seller of breach within a reasonable time after it discovers or should have discovered any breach, or "be barred from any remedy". This guide does not say how that notice bears on any deduction.
Who has the burden after acceptance?
UCC 2-607(4) says: "The burden is on the buyer to establish any breach with respect to the goods accepted."
What does an unexplained deduction leave open?
In the text, a deduction is tied to notice of the buyer's intention and to damages resulting from a breach of the contract, so a line that states neither leaves open what it rests on.
That describes what a line shows. It is not a finding about any deduction, and a line may also rest on an agreement between the parties.
A line on a remittance advice that shows only a code, with no stated breach, does not say what it rests on. UCC 1-302(a) says the effect of the code's provisions may be varied by agreement, except where the code says otherwise.
This explains cited text. It is not legal advice, and it makes no statement about any particular deduction or any retailer.
Related reading: the deductions hub, chargeback vs deduction, and a companion guide on retailer terms.
Questions
Can a buyer deduct damages from the price still due?
- UCC 2-717 says a buyer, on notifying the seller of its intention to do so, may deduct damages resulting from a breach of the contract from the price still due under the same contract. Source: UCC 2-717.
Who has the burden after acceptance?
- UCC 2-607(4) says: "The burden is on the buyer to establish any breach with respect to the goods accepted." This explains cited text. It is not legal advice, and it makes no statement about any particular deduction or any retailer.
Does this guide cover every state's version?
- No. It explains the uniform text only. States adopt the code, and a state's enacted version can differ (Cornell UCC index note). An agreement can change the effect of the code's provisions, except where the code says otherwise (UCC 1-302(a)).
Talk through your own deductions with ROIAI One.
Sources: Cornell Legal Information Institute, UCC 2-717; UCC 2-607, subsections (1), (3)(a) and (4); UCC 2-102; UCC 1-302, subsection (a); and the Cornell UCC index, a publisher's note, not a statute.