N.D. Cent. Code § 41-02-75

(4) One of the requirements for rejection under subsection (2) is non-conformity substantially impairing the value of the installment in question. However, an installment agreement may require accurate conformity in quality as a condition to the right to acceptance if the need for the conformity is made clear either by express provision or by the circumstances. In this case the effect of the agreement is to define explicitly what amounts to substantial impairment of value. A clause that requires accurate compliance as a condition to the right to acceptance must, however, have some basis in reason, must avoid imposing hardship by surprise, and it is subject to waiver or to displacement by practical construction.

(5) Substantial impairment of the value of an installment can turn not only on the quality of the goods but also on such factors as time, quantity, assortment, and the like. It must be judged in terms of the normal or specifically known purposes of the contract. The defect in required documents refers to such matters as the absence of insurance documents under a contract that requires these documents, falsity of a bill of lading, or one failing to show shipment within the contract period or to the contract destination. Even in these cases, however, the provisions on cure of tender may apply if appropriate documents are readily procurable.

(6) Subsection (3) is designed to further the continuance of the contract in the absence of an overt cancellation. The question arising when an action is brought as to a single installment only is resolved by making such action waive the right to cancellation. This involves merely a defect in one or more installments, as contrasted with the situation where there is a true repudiation within the section on anticipatory repudiation. Whether the non-conformity in any given installment justifies cancellation as to the future depends, not on whether such non-conformity indicates an intent or likelihood that the future deliveries will also be defective, but whether the non-conformity substantially impairs the value of the whole contract. If only the seller’s security in regard to future installments is impaired, he has the right to demand adequate assurances of proper future performance but has not an immediate right to cancel the entire contract. It is clear under this Article, however, that defects in prior installments are cumulative in effect, so that acceptance does not wash out the defect “waived.” Prior policy is continued, putting the rule as to buyer’s default on the same footing as that in regard to seller’s default.

(7) Under the requirement of seasonable notification of cancellation under subsection (3), a buyer who accepts a non-conforming installment which substantially impairs the value of the entire contract should properly be permitted to withhold his decision as to whether or not to cancel pending a response from the seller as to his claim for cure or adjustment. Similarly, a seller may withhold a delivery pending payment for prior ones, at the same time delaying his decision as to cancellation. A reasonable time for notifying of cancellation, judged by commercial standard under the section on good faith, extends of course to include the time covered by any reasonable negotiation in good faith. However, during this period the defaulting party is entitled, on request, to know whether the contract is still in effect, before he can be required to perform further.

(8) Subsection (2) makes it clear that the buyer’s right in the first instance to reject an installment depends upon whether there has been a substantial impairment of the value of the installment to the buyer and not on the seller’s ability to cure the nonconformity. The seller can prevent a rightful rejection by giving adequate assurances of cure. Subsection (2) uses the words “to the buyer” to clarify that the standard for rejecting an installment consistent is the same standard for revoking acceptance under Section 2-608. Therefore, the test is not what the seller had reason to know at the time of contracting; the question is whether the non-conformity is one that will cause a substantial impairment of value to the buyer even though the seller had no knowledge about the buyer’s particular circumstances at the time of contracting.