GFI, Inc., a Hong Kong company, makes audio decoder chips, an essential component in the manufacture of smartphones. Egan Electronics contracts with GFI to buy 10,000 chips on an installment contract, with 2,500 chips to be shipped every three months, F.O.B. Hong Kong, via Air Express. At the time for the first delivery, GFI delivers only 2,400 chips. GFI explains, however, that although the shipment is 4 percent short, the chips are of a higher quality than those specified in the contract and are worth 5 percent more. Egan accepts the shipment and pays GFI the contract price.
At the time for the second shipment, GFI makes a shipment identical to the first. Egan again accepts and pays for the chips. At the time for the third shipment, GFI ships 2,400 of the same chips, but this time GFI sends them via Hong Kong Air instead of Air Express. While in transit, the chips are destroyed. When it is time for the fourth shipment, GFI again sends 2,400 chips, but this time Egan rejects the chips without explanation. Using the information presented in the chapter, answer the following questions.
1.) Did GFI have a legitimate reason to expect that Egan would accept the fourth shipment? Why or why not?
2.) Did the substitution of carriers in the third shipment constitute a breach of the contract by GFI? Explain.
3.) Suppose that the silicon used for the chips becomes unavailable for a period of time. Consequently, GFI cannot manufacture enough chips to fulfill the contract but does ship as many as it can to Egan. Under what doctrine might a court release GFI from further performance of the contract?
4.) Under the UCC, does Egan have a right to reject the fourth shipment? Why or why not?
