Legal Definitions - Substantial Impairment

Substantial impairment is a term used in Article 2 of the Uniform Commercial Code. It applies to installment contracts for the sale of goods. When a buyer receives goods that are not perfect, they have the right to reject them if the defect substantially impairs the installment and cannot be fixed. If the defect is so severe that it substantially impairs the value of the entire contract, the buyer can reject the entire contract.

Let's say a buyer purchases a new car and discovers that the brakes don't work properly. If the defect is severe enough that it substantially impairs the car's value, the buyer can reject the entire contract and return the car for a refund.

Another example could be a buyer purchasing a new refrigerator that doesn't keep food cold. If the defect substantially impairs the refrigerator's ability to function as intended, the buyer can reject the installment and request a replacement or refund.

These examples illustrate how substantial impairment applies to installment contracts for the sale of goods. If the defect is severe enough that it substantially impairs the value or function of the product, the buyer has the right to reject it and seek a remedy.