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Contracts Outline For Bar Exam 2001 |
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GENERAL; K: legally enforceable agreement. Express K: K that results from words; whether oral or written Implied K; K that results from conduct. A reasonable person would infer a promise to pay. Ex; rec’ a haircut. You pay after hair is cut.
Quasi K; implied in fact Elements; P has conferred a benefit on D; AND P reasonably expected to be paid; AND D would realize unjust enrichment if P not compensated. D knows that P expects to be paid.
Measure of recovery: it may as justice requires be measured by either: Reasonable value of the services render; “Quantum Meruits” The extent to which the other party’s property has been increases in value or his interests advanced.
Ex; Piano lesson and second kid sits in. Doctor confers a benefit on unconscious patient. Doctor s/ rec’ pmt. No express K; No implied K b/c patient was unconscious. Give 3 out of 10 singing lessons; didn’t substantially perform but under Quasi K would recover for reasonable value of services performed. “A” intentionally breached K. Breaching party can recover under Quasi K so long as party acted in gd faith. Cant be willful breach for party’s own convenience or financial advantage.
Bilateral K; K formed from an offer that is open to the method of acceptance “I will pay you $1K if you ship me 1K widgets. Can accept by promise or by act of shipping the gds.
Unilateral K; K formed from an offer & requires performance as method of acceptance. Uni offer is irrev if EE made a subst’l start. In this case ee “intensified his efforts”. B#48. Offer expressly requires you to perform “I’ll pay you $5K if you refrain from smoking”. Offer of a reward/prize/contest. No bargain so you must perform. An order for prompt or current shipment normally invites acceptance either by prompt promise or current shipment. R#30.
Waiver; explicitly or implicitly forgives a term or condition to be performed. Can waive delivery date by pushing it back & still reserve rt to sue for damages. R#50. Express condition subsequent and subsequent oral modification. Duty to pay was cont’l a condition maybe waived b/c it’s an int’l relinquishment of a known rt. Effective even if K states no oral modif. 2/88.
ART 2 APPLICABILITY; Art 2 applies to sale of gds. Look at: Type of transaction – a sale; passing of title from S to B for a price. Subject matter of transaction – gds; movable personal property. Art 2 does NOT apply to: Renting a car Buying real estate Service K’s
Art 2 does apply to: Sale of gds regardless as to whether S is a merchant; ex sell your toupe. Sale of pencil for 5cents is a Art 2 transaction. Hybrid K/mixed K transactions; both gds & services Predominant purpose test: 7/97; what is the main purpose of the K? gds or services? Factors to consider: How much $ was spent on the gds vs. services? How much time spent on labor How much sophistication was labor Does K have sales language?
Majority rule; if Art 2 applies, apply it to the entire transaction
OFFERS; What is an offer? An offer is a “manifestation of an intention to K.” The basic test is whether a reasonable person in the position of the offeree (EE) would believe that his or her assent creates a K. The key word is “manifestation”. Focus on what the person said or wrote or did. Addressed to 3 people is not a commitment. 6D
An offer must be definite and certain on its terms. Missing price terms: Real estate K’s; if no price is mentioned then offer is invalid. Sale of Gds; YES, UCC gap filler rules apply. Price is not required we will look to see if the parties intended to bind themselves. Cts will infer a reasonable price.
Vague or ambiguous material terms; S offers to sell to B 10 hogs for a “fair price”. Offer? NO because there was an effort to express the price but wasn’t done correctly b/c its an ambiguous material term.
Requirements K; B agrees to buy all of its wine requirements from S. B is obligated to buy in good faith through the requirements K. Not unreasonably disproportionate limitation; No quantity unreasonably disproportionate to any stated estimate, or if there is no stated estimate, to any normal or otherwise comparable prior output or requirements may be tendered or demanded. Gd faith reduction is allows 6D#32. Specific performance to remedy requirements K. 6D#33. Assignment; gd faith & cant materially change duties or increase burdens; no disproport quanity
Advertisement; General rule; an advertisement is NOT an offer. It is a mere invitation for offers. This is b/c demand could exceed supply. If unaware then can’t reply to it. 6D#6.
Exception; an advertisement can be an offer if it is specific as to quantity (10 Honda’s) and indicates who can accept (e.g. first come first served).
Auctions; What is an offer? The bid, not the auctioneer asking for bids, is the offer. The auctioneer is inviting offers. Without reserve; if the auction is being conducted “w/o reserve” the auctioneer is OBLIGATED to sell to the highest bidder. Auction is “with reserve unless terms state that is “w/o reserve”.
TERMINATION OF OFFERS; Termination by lapse of time; If no time is stated as to the offer’s duration then the offer is open for a reasonable time. SNOW MELTING
Termination of an offer b/c of words or conduct; How? Offer ended at end of conversation 3D#183 Offer open for reasonable time. If snow melted then offer terminated. K says “not subject to countermand” (not revocable) can still revoke. MBE #199 Stmt by OR to EE indicating an unwillingness to K; OR need not say, “revoke” to revoke. Conduct of E that is inconsistent with an intention to make the K AND which the EE is aware. If S offers car to B and then sells the car to C w/o B knowing of the sale, B can accept the offer. If B sees C driving the car then B cant enforce offer by accepting it. Advertisement for lost dog/reward; to revoke; must give notice of termination publicity equal to that given to the offer. Telling B that car was sold even though it wasn’t is still revocation. 6D#14., MBE #350.
When does revocation become effective? Revocation of an offer sent through the mails is not effective until it is RECEIVED by EE. Mailbox rule only applies to acceptance not revocation. Offer can’t be revoked after it has been accepted. Offer can be revoked any time prior to acceptance.
Offers that cant be revoked (4); Option K; OR has promised to keep the offer open The promise is supported by consideration. 25cent S promises to keep offer open w/o consideration. S can revoke b/c no consideration given. Cts don’t inquire into the adequacy of consideration; But a mere “sham” then no consideration. Nominal consideration is sufficient to support an option K.
$1 can be “acknowledged” even if never paid and cts wont inquire into sufficiency of consideration. R#39. Ct will not use parol evidence to show that $1 wasn’t paid.
Firm Offer; An offer cant be revoked if its: A K for sales of gds; There is a written promise to keep open, mention quantity. The promise is made by merchant; If no time is stated; Irrevocable for 3 months. Must be in writing. Can’t be oral.
Offer can’t be revoked if there has been RELIANCE by EE that is reasonably foreseeable. G the general contractor (aka K’r) solicits bid from S the subk’r. G uses S bid in making his bid for a construction K. Can S revoke his bid? No b/s G relied on S’s bid and the reliance was foreseeable. L leases a bldg to T. L offers the bldg to T. T prior to accepting L’s offer makes improvements. L can still revoke offer b/c the improvements that T make were not reasonably foreseeable
An offer to enter into a unilateral K can’t be revoked if performance has begun. H K w/ P for P to paint H’s home. H starts painting; J cant revoke offer b/c of P’s performance has begun. If P only ordered the paint then P has merely “prepared to perform and therefore H can still revoke the offer. Divisible K; H hires P to paint 10 homes. If P paints 3 of the homes then H cant revoke his offer as to the 3 homes but can revoke as to the 7 un-painted homes.
Termination of an offer b/c of words or conduct of the EE – rejection. General; Rejection by the EE terminates any rt to accept the offer Rejection sent through the mail is effective when RECEIVED. A counteroffer serves as a rejection.
A counteroffer terminates the offer. But bargaining does NOT terminate the offer. Rejection: “S offers land to B for 10K & S responds: “I will only pay 9K”. B can’t later accept the offer b/c of rejection. If B responds: “will you take K” this is an inquiry and doesn’t kill the offer. If B’s response is in the form of a Q it usually ok.
A rejection or counteroffer doesn’t terminate the offer under an option K. In an option K the EE can reject the OR’s offer and still accept b4 the expiration of the option. BUT estoppel would apply; OR may have relied on EE’s rejection and sold property to someone else.
Conditional acceptance as rejection; A conditional acceptance terminates the offer. This rule applies to BOTH cmn law & UCC. If the reply has a condition then the letter is considered a counteroffer.
Acceptance with additional terms; Common Law; Acceptance must be a mirror image of the offer or it operates as a rejection. L sends T a lease. The lease is silent about pets on the premises. T adds a clause about having pets on the premises and signs. Result: cant change offer w/out killing it.
UCC acceptance can add terms; Adding arbitration clause addition usually doesn’t materially alter the K.
Acceptance with different terms – Conflicting terms; Common law; acceptance must be mirror image of the offer or it operates as a rejection. UCC; acceptance can contain different terms (so long as still have a “definite and seasonable expression of acceptance” Under UCC if terms conflict both terms drop out; aka knock out doctrine; the UCC then fills in the gaps. If EE’s response calls for a different delivery date that OR’s offer then ask the Q: does it materially alter the K.
Termination of an offer b/c of death of the party prior to acceptance; General rule; death of a party terminates the offer Exceptions: death doesn’t terminate the offer when; Option K Part performance of offer to enter into a unilateral K
ACCEPTANCE OF AN OFFER; Who can accept? Generally only the person whom the offer is made can accept the offer. In addition, the person must be AWARE of the offer in order to accept it. I post a reward for whomever finds my lost dog. If you return my dog w/o knowing of the reward you get nothing. If offer was made to your friend then you can’t accept, only your friend can.
Methods of accepting an offer: EE starts to perform; Offers to enter into a unilateral K. If OR’s offer states that it can only be accepted by performance then once EE starts performance then the offer is irrevocable. EE can’t complete acceptance until he has finished performance.
Offers open as to methods of acceptance; If offer is silent as to acceptance then a bilateral K with open acceptance. That is starting to perform is valid acceptance.
EE promises to perform; B orders gds from S requesting immediate shpmnt. Can S accept this offer by sending a fax promising to ship the gds? YES can promise (even with different terms R#30) or perform. H offers P $1K to paint hm. The offer states that it can only be accepted by performance. P promises to perform. Has a K been formed? NO b/c offer for a unilateral K.
EE sends its acceptance through the mails; If it is reasonable for the EE to accept by mail then acceptance is effective when posted (upon dispatch) aka MAILBOX RULE. General rule; Revocation is effective upon receipt; acceptance is effective upon dispatch. What if the letter never arrives? Doesn’t matter its effective acceptance. However, there would be a problem with evidence.
Exceptions; p17 Cross communication; Rejection mailed 1st, then letter of acceptance; rejection rec’d 1st letter of acceptance operates as a counter-offer. Acceptance mailed 1st, then rejection sent—rejection rec’d 1st. If OR relied on letter of rejection b4 the acceptance is rec’d, estoppel may apply. Option deadlines; cant use mailbox rule to meet an option deadline.
The seller of gds sends the wrong gds; General rule; acceptance & breach Accommodations exception; If S made it clear that it was sending an accommodation then this is not acceptance but a counter offer. B can’t then sue for breach & B doesn’t have to accept.
The EE is silent; General rule; the OR cant unilaterally turn the EE’s silence into acceptance Exceptions; industry customs & prior dealings (e.g. every yr for 20 yrs)
CONSIDERATION OR A CONSIDERATION SUBSTITUTE; Elements of consideration; EE must suffer a legal detriment; The detriment must induce the promise; The promise must induce the detriment
Forms of “legal detriment”. Must induce conduct of EE and OR bargained for something. Performance Forbearance Promise to perform Promise to forebear
Issues; Conditional gift; If you come to my hm I’ll give you my TV. No benefit to OR. Need benefit to OR & EE.
Legal detriment; there is a bargained for exchange aka legal detriment in this example. If you stop listening the Barry Manalow I’ll pay you $200. You have a legal rt to listen to Barry.
Past consideration; General rule; not consideration. Past consideration can’t be bargained for. 7/86. I promise to give you $200 “in consideration” for your years of good service. NO consideration. A saves B’s luggage from falling & B promises to pay A. “value of services is too uncertain is WRONG answer. B#14.
Moral obligation; no consideration. Promissory estoppel; detrimental reliance and is valid consideration.
Adequacy of consideration. Cts don’t inquiry as to the adequacy of consideration. Cts will look for fraud. Pre-existing duty rule; Common law; the performance of a pre-existing legal duty is not consideration. No detriment Police officer is already under a duty to catch criminals. But if off duty? 3D#155 A K’s with B to play music for 15K. A later demands more $. IF B promises to give A more $ the promise to pay is not enforceable b/c of pre-existing legal duty. Pre-existing legal duty owed to 3rd person; Must owe a legal duty to 3rd P in order for 3rd P to enforce the K btwn A & B.
Unforeseen difficulty exception; Restatements; modification is enforceable so long as it is fair & equitable under the circumstances P wanted D to: “BE CAREFULL”; D wanted P to pay 300 more. Was 1st K RECINDED?, Can D claim RELIANCE? Not UCC K. P claims DURESS. 2/91
Cmn law; promise to pay add’l $ when unforeseen difficulty is severe that duty to perform would be excused b/c of impracticability.
Art 2; no consideration is required for modification; S contracts to sell jeans to B for $1000. S subsequently tells B that it must raise the price to $1300. No pre-existing duty rule. Modification is ok.
Art 2 good faith &commercial reasonableness.
Part payment for promise to forgive balance of debt. If debt is due & undisputed; if debt is due & undisputed; a promise by A to release B of remaining 1K is not enforceable b/c of lack of consideration. If debt was not yet due or disputed; then early pmt w/be consideration b/c not obligated to pay earlier.
Settlement of claim; P sues D. D promises to pay P $1K if P will dismiss the lawsuit. Can P enforce D’s promise to pay the $1K? YES so long as party giving up claim in gd faith believes its valid otherwise its extortion.
Promise to pay debt barred by the statute of limitation; General rule; a written promise to pay debt barred by statute of limitation is enforceable regardless of no consideration. Only the new promise is enforceable; not the old one barred by S of L.
Illusory promises; is a promise in form but not substance. Such a promise Is not consideration for the other promise; S offers to sell to B her hm for $100K. B responds that she will buy the home “if she decides that she wants it. NO K b/c no promise. Same as above but B conditions her acceptance on obtaining “satisfactory financing”. This is OK. Advertisement; “Reserve rt to revoke offer” 2/90 Promise to pay a bonus to be determined by the parties after profits have been ascertained is too indefinite and vague. May never have profits. R#72. Requirements K’s, B must purchase in gd faith. This is a valid promise.
Promissory estoppel as consideration substitute; k /subk’r creates an option K. R#16 Elements; Promise Reliance that is both foreseeable & justifiable (keep working & I’ll make payments to you B#23). Enforcement necessary to avoid injustice. Defense; D claims “prediction of future events & not a promise & its indefinite”.
Comparison of consideration and promissory estoppel; Relative promises to give you a lot of $. You quit your job & buy a new car. Is promise enforceable? YES promissory estoppel applies. Restatements; Remedy may be limited, as justice requires; ex: once pay for the car and not other costs.
DEFENSES – CAPACITY TO K; Who lacks capacity? Infants (minors): a person under 18 yrs of age. Void-able. R#58. Minor made offer to ratify make a settlement R#59.
Mental incompetents; a person who is unable to understand in a reasonable manner the nature and consequences of the transaction. Intoxicated person; the other party has reason to know that, by reason of intoxication, he is unable to understand in a reasonable manner the nature and consequences of the transaction, or he is unable to act in a reasonable manner in relation to the transaction.
Consequences of incapacity; Right to disaffirm; S sells bike to B (17yrs old). B may disaffirm while an infant or within a reasonable time after he reaches the age of majority/adult. This is regardless as to whether S knew or was lied to that B was under 18. S can’t disaffirm the K. Only the person who lacks capacity can disaffirm
Liability for necessaries; Minor is living on his own & purchases a motorcycle to get back & forth to work. Infant is not liable on the K but is liable for necessaries on quasi K. Must pay the reasonable value for what you rec’d.
DEFENSES – STATUTE OF FRAUDS; makes Ks void able. K’s w/in statue of frauds (aka S/F); Promise to answer the debt of another; Surety can’t orally promise to pay. X promises to pay C if D doesn’t pay. Must be in writing. Compare with X promises to pay C without mention to “if D doesn’t pay C”. This doesn’t need to be in writing b/c no “guaranty language”.
Primary benefits exception; “main purpose” exception Shareholder orally promises to pay back bank the money the corporation borrows. Promise was made to benefit the shareholder so not within S/F and the oral promise is enforceable. 25% owner guarantees loan for corp.
Service K not being capable of being performed w/in 1yr of the date that the K was entered into. Doesn’t matter how many trees are to be cut down If K for services is to take 9months but takes 15months no S/F problem. Look at the time of K if it c/have been performed w/in 1 yr. 3yr oral employment K must be in writing. Compare: employ X for life. Doesn’t need to be in writing b/c X could die sin 2 months. If A hires B to perform 2yrs from now no S/F problem.
Promise creating an interest in land; Easements for more than a yr must be in writing. B K’s with O to build a house. No S/F problem b/c no interest in land. This is a services K. 1 yr lease is not within S/F. Must be >than 1 yr. Equal dignity rule; since K for sale of land must be in writing; the person witnessing the writing to authorize in writing.
Sale of gd $500 or more; Modifications; Look at K as modified. If the K with the modification is w/in S of F, the modification agreement m/be in writing. If you have a 3 yr lease any modifications must also be in writing Reduce the duration of the lease from 3yrs to 11months? No writing is required. If original writing has a clause that requires that any subsequent modifications must be in writing the cmn law usually ignores this provision.
UCC; If original was in writing b/c $500 or more and then K quantity is increased then the modification must be in writing The original must be in writing but the modification takes it out of the statute of frauds then NO writing is needed for the modification. If original writing states that all modifications must be in writing then this is enforceable under UCC Art2. Compare w/ cmn law K’s.
How the S/F is satisfied. K’s other than the sale of gds; Writing; Contents: R#51 return memo m/ mention the following: ID the parties ID the K subject matter Contain all essential terms Signed by the party to be charged.
Part performance of oral agreement to but RE; this overcomes the S/F Part pmt alone is not enough need: Pmt + improvements OR Pmt + possession
Part performance of an oral agreement that cannot be performed w/in 1 yr. P orally agrees to work for D for 5yrs. P works for 6months and then is fired. Part performance doesn’t satisfy the S/F. No exception to S/F to a K that can’t be performed in 1yr. However, P can’t sue based on Quasi K & get paid for the reasonable value of the services performed. If P had fully performed the most cts w/enforce the K.
Estoppel to plead S/F MI; If A while relying on B’s oral promise changes his position by selling his home and moving; this reliance is foreseeable & reasonable & A can sue B based on estoppel. If B orally promised to draw up a written K the RULE is that when reliance to put an oral agreement into writing estoppel will apply.
Sale of goods for $500 or more. Contents: State the quantity – this is mandatory. Indicate that a K for a sale has been made. This affords a basis for believing there is a K. Signed by the party to be charged.
“I agree to buy 10 dolls”. This is a gd K b/c quantity, signed. Affords a reasonable basis for believing there is a K. Non-objecting Merchant Rule aka 10 day rule (6D#45); Exception to the S/F If merchant A rec’s a letter from another merchant B asserting the existence of a K, and A does not believe that such K exists, A s/respond. A delay in responding will result in a loss of the S/F defense under §2-201(2). Elements of 2-201(2) Both parties are merchants Writing claims that there is a K. Writing signed and states quantity Failure to object in writing w/in 10 days of receipt.
Part performance for K of sale of gds. Generally, part performance of a K for the sale of gds satisfies the S/F to the extent of performance. B orally orders 2000 dolls from S @ $1 and B rec 600 dolls. B Must pay for dolls rec’d. Suit for gds not shipped; S can can’t be sued for failure to deliver remaining dolls.
Specially mfg’rd gds. If B cancels order S can sue B if S has made a substantial beginning of mfgr. The K is enforceable. Not suitable for sale to others.
Judicial Admissions; part admits @ trial or in a pleading or discovery that an agreement was entered into.
Effects of failure to satisfy the S/F when the promise is w/in S/F If unenforceable, not “void” or “not unconscionable”.
FLAWS IN THE BARGINING PROCESS; Mistake: Ambiguity (mutual misunderstanding) There is no K if: Parties use terms in negotiations that are open to 2 reasonable interpretations AND Each party attaches different meaning to the terms AND Neither party knows or has reason to know the meaning that attached to the other party.
Mutual Mistake of material fact; thought cow could not have kids. There is no K if: Both parties are mistaken About a basic assumption of fact Which materially affects the agreed exchange Both though violin was XX & it wasn’t so rescind K. 6D#25 A thought performance required XX & B thought performance required XAX R#28. .
Key is whether the agreed upon subject matter exists; Mistake as to subject matter (SM): S sells a painting to B for 50K & both believe that it’s genuine Warhol. Its not. No K b/c Mutual mistake. A buys hot dog stand from B b/c its on fair grounds. If fair grounds closes then A claims MM. But its assumption of risk. 2/89. Mistake as to value of SM; If painting is worth 12K not 50K then no relief to B. Just bad decision.
Unilateral mistake; General rule; cts have been reluctant to allow a party to avoid a K for a mistake that was not shared by the other party. Ex. SubK’r bid 12K instead of 12.5K Exceptions; Obvious mistake; other party knew or s/have known of the mistake. Ct will grant relief. Avoidance b4 significant reliance by the other party. Allow a party to correct a clerical error.
Duress; Defined: a party is left with no reasonable alternative but to enter into a K. Personal duress (gun to head) Economic duress (aka ED) (day b4 wedding caterer demand more money) Pre-existing duty rule usually applies with economic duress. K is voidable under ED
Fraud in the inducement; cant be raised by HDC. Deceived about nature of what you’re signing. S to sell land to B and S lies about the total acreage. B understands what he is signing but lied to as about the subject matter. K is voidable.
Fraud in the Factum (in the execution) Real defense that can be raised by HDC Actually deceived about nature of document your signing. No mutual assent. K is VOID.
Innocent misrepresentation Claim hm is 2400 sq/ft but turns out to be 2000 sq/ft; If B reasonably relies he can void K. If home is 2375 sq/ft instead of 2400; this is not a material misrepresentation but rather a minor misrep. Not voidable b/c not material. Can sue for damages but cant sue to void K.
Un-conscionability; ex. Contract with an old man that cant reason. Based on “unfair surprise” and “oppression” Look for “procedural” and “substantive” unconscionability Procedural uncon goes to disparity of bargaining power; i.e. the terms are hidden. Substantive uncon – grossly unfair terms; ex. Low-income housing.
Judged at time K is entered into Decided by judge; no jury
Illegal K’s; Void. K maybe illegal as to subject matter. Ex. Gambling; sell drugs. K is VOID.
Illegal purpose; A leases plane to B-drug dealer. Lease of plane is legal but illegal purpose. A can enforce K if he didn’t know of B’s illegal purpose. Pay son to refrain from smoking pot. R#53
K’s considered illegal if against public policy.
TERMS; Sources; Words Custom & usage; how things are done in this trade. Past dealings btwn parties; UCC, if sale of gds, certain terms are implied like warranties and implied unless specifically excluded.
Parol evidence rule; this rule prevents terms from becoming part of the K. RULE; where the parties have agreed to a written K as a final expression of their agreement, a prior written or oral agreement, or a contemporaneous oral agreement cant be used to vary the terms of the agreement. Exception; Ambiguous terms Condition precedent; R#33 that cook has to accept quality of goods; yet not in K. Formation defects; 7/89 mistake in drafting- orally agreed to 800 in rent but K said 600. Consideration was never paid. Collateral agreement; omitted a term that’s naturally omitted (where $ is to be paid)
Judges look for; Merger clause See how complete the K looks
Comparison to the S/F; S/F relates to formation & Parol evidence rule deals with an existing K and want to know what the terms are.
Delivery obligations of seller of gds. Shipment K’s; FOB S’s business location or the loading dock. CIF C&F FAS
Destination K’s; FOB B’s business location Ex-ship
Risk of loss (ROL); Who has risk of loss? Agreement controls. Breach; were gds non-conforming so the B c/reject or revoke or did B wrongfully repudiate?
ROL shifts from S to B at time that S complete his delivery obligations. If no agreement the ROL shift to B upon “receipt” of gds if S is a merchant If S is not a merchant then ROL transfer to B upon S’s “tender” of the gds. Gds are tendered when the S is holding the gds for the B and lets the B know that the gds are available to be picked up. If FOB sellers place of business & if S holds goods for B & B never picks up the gds; after a commercially reasonable time its obvious that B will not show up & S is no longer entitled to K price. Sale or return; aka consignment; ROL is on B. Sale on approval; ROL is with S till B approves.
Warranties; Express warranties (can be given by merchant S or non-merchant S)
Words; words have a natural tendency to induce reliance. S/be in writing The more specific the better May depend on industry involved Puffing can’t be relied on; it’s NOT a warranty.
Conduct; use of a sample or model; become a basis of the bargain if B believes that gds will conform to the sample.
Implied warranty of merchantability; ONLY given by merchant S Implied provision that is automatically added to the terms of the K by operation of law – that the goods are FIT FOR THE ORDINARY PURPOSES for which they are to be used. Misuse of the product; no breach of warranty unless it was foreseeable misuse.
Implied warranty of fitness; can be given by merchant or non-merchant S. Gds are fit for the particular purpose. B tells Salesman that he need an air conditioner to cool a 5000sq/ft bldg. Salesmen sell him one that doesn’t do the job. Breach of warranty b/c B relied on S’s recommendation.
Implied warranty of title; can be given by merchant or non-merchant S S claims there are no liens on property.
Limitations on warranty liability; Contractual limitations; Disclaimer; eliminates implied warranties. 2/90 if breach of implied warranty can reject gds. An express warranty cant be disclaimed Implied warranty of merchantability and fitness for a particular purpose may be disclaimed. Must use “conspicuous” language; so that a reasonable person would notice it. Must mention “merchantability” or may be more general language which in cmn understanding calls B’s attention to the exclusion of warranties and makes plain there is no implied warranty. EX. “As is” or “with all faults”.
Implied warranty of title. Can only be excluded by specific language (not general language) EX. A sheriff’s sales, sale by foreclosing lienors.
Limitation of remedies; A limitation of remedies clause controls recovery for any breach of warranty. It doesn’t eliminate the warranty. Ex. S is not responsible for consequential damages. Such remedy limitation is valid so long as it is not unconscionable and so long as the limited remedy doesn’t fail of its essential purpose. Limitation of remedies is fine but if S is unable or unwilling to make repairs the limiting provision fails of its essential purpose.
Ex. Microwave starts a fire in B’s kitchen & S offers to replace the microwave but nothing else. You can claim this is unconscionable.
Statute of Limitations; 6yrs K’s non sale of gds 4 yrs for breach of warranty. Starts to run from tender of delivery. If breach occurs during the warranty period then you have 4yrs from the date pf the breach.
Exception; when warranty explicitly extends to future performance of gds. Ex 5yr warranty.
PERFORMANCE & CONDITIONS; Conditions; Conditions; modifies performance. Conditions coupled with a covenant: is an event that affects the duty to perform that is to some extent within the control of one of the parties and creates a legal obligation on the party to use reasonable good faith efforts to cause the event to occur. B agrees to buy S’s house if B can obtain financing. B has control b/c B may not go & get financing.
Constructive conditions; (implied) S to sell RE to B. Agreement is silent as to when B is to pay S. This is a constructive concurrent condition. In service K’s, unless stated otherwise the services are to be performed first b4 the $ is paid. Law creates a constructive condition to prevent injustice (A placed bet at diff casino b/c other one was closed) R#120
Excuse of conditions; IF B makes no attempt to get financing then condition is excused & B is absolutely liable on the K. Estopple/waiver; Estoppel is based on a stmt or conduct by the person protected by a condition B & the conditioning of an event that was to occur and requires a change of position. S relies on B’s stmt to
Waiver; stmt or conduct made AFTER the conditioning event was to occur and does not require a change of position. No reliance
Satisfaction of conditions; Express conditions; need strict compliance – it’s the std for satisfaction of an express condition. B to buys S’s RE base on the condition that the house is appraised for $175K. If appraisal returns at $170 – no K & B is excused from performance. Personal taste or judgment; When subject matter involves personal taste – cts apply SUBJECTIVE gd faith of buyer. B must at least look at the pictures and in gd faith decide if he wants them. If K purports to have product installed in a “workman like manner” then use OBJECTIVE gd faith.
Constructive conditions; Substantial performance card #39 (substl perform applies to constructive conditions not express conditions. It’s a general std for satisfaction of a constructive condition. Ex. Paint everything but one shutter on the house.
Ins co has an independent duty to pay unless K says pmt is dependant on premium rec’d
PERFORMANCE – SALE OF GOODS; Perfect tender rule; De minimus d
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