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Course: Sales Outline Nofar Winter 2000
School: unknown
Year: 2000
Professor: unknown
Course Outline provided by Legalnut.com
 

 

  • MANDATORY DIRECTIVES-Some provisions of the UCC cannot be varied by agreement.

  • RISK ALLOCATIONS-Fail safe device where parties can reach their own deal. If parties don’t agree they the UCC presumptions apply

  • ENABLING PROVISIONS-Says how to achieve a particular result. Not mandatory.

  • INTERSTITIAL-gap fillers

  • OFFICIAL COMMENTS-Not legislature history

 

  1. FORMATION

    1. CONTRACT FORMATION

      1. MI Sct says that distributorships happen all the time and often do not mention a quantity and price and legislature would not want to invalidate them, so the court does not call this a sale/transaction in goods but will call it a service and not governed by §2-201

      2. The only thing required for formation is CONDUCT §2-204. (must show agreement including conduct) (speech or some other act) sufficient to show agreement. §1-201(3). In addition, to description the parties must agree to quantity.

      3. Moment of making the agreement doesn’t need to be determined§2-204(2)

      4. Terms may be left open. K doesn’t fail for indefiniteness if the parties intended to make a K & there is a reasonably certain basis for giving an appropriate remedy. §2-204(3)

      5. Good Faith §1-201(19)

    2. STATUTE OF FRAUDS

      1. The SALE OF GOODS (all things which are moveable at the time of identification) BY A MERCHANT for a price of $500 or more is not enforceable unless there is SOME writing (to show that the oral evidence rests on a real transaction) sufficient to indicate a K and SIGNED §1-201(39) BY the party to be charged, and GIVES ASSURANCES, & doesn’t exceed 3 MONTHS . (§1-201(39)). A writing is not insufficient because it omits or incorrectly states terms agreed upon but the K is not enforceable beyond the QUANTITY of goods shown in writing§2-201(1)

        1. Signed by the party to be charged: Almost anything can be construed as a signature (letterhead, memo §1-201(39). Defines Signed.

        2. This provision is mandatory, risk allocation & enabling.

        3. Make sure it is not a sale of SERVICES.§2-102 applies to the sale of goods. So its not barred by the S/F

          1. STOCK is not a good w/in §2-105(1)—goods are all things which are moveable at the time of identification of the K OTHER than money in which the price is to be paid, or securities

      2. Merchants Confirmation Memo: (merchant is a person who deals in goods of the kind) satisfies SOF. §2-201(2) Between merchants if w/in a reasonable time a writing in confirmation of the K and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of (1) against such party unless written notice of objection to its contents is given w/in 10 days after it is received (risk allocation & enabling provision)

      3. EXCEPTIONS to S of F

        1. Specially manufactured Goods & not suitable for sale to others in the ordinary course of business for the seller. Seller must have made a substantial beginning of manufacture or commitments. §2-201(3)(a)

        2. If the party against whom enforcement is sought admits in a pleading§2-201(3)(b)

          1. Receipt and acceptance either of price or goods constitutes an unambiguous overt admission by both parties that a K exists. Official Comment #2

        3. Partial Performance is a substitute for the required memorandum§2-201

        4. Promisorry Estoppel §1-201 to defeat the S of F must show:

          1. Promisor should reasonably have expected the agreement to induce action or forbearance

          2. such action or forbearance was induced AND

          3. enforcement of such agreement is necessary to prevent injustice.

 

  1. OFFER - definition of offer and acceptance is not found in the code because their definition is incorporated from Cmn law §1-103

    1. Effective upon communication and can be withdrawn at any time prior to acceptance. Unless it’s a firm offer. §1-206 sets forth the rules regarding NOTIFICATION which is defined by §1-201(26)

    2. FIRM OFFER

      1. An offer by a M to buy or sell in a signed writing which gives assurance that it will be held open is not revocable, lack of consideration, during the time stated or if no time is stated then a reasonable time-not to exceed 3 months (even if more than three months is stated unless consideration is given (OPTION K)). §2-205

        1. OFFICIAL COMMENT: The primary purpose of this section is to give effect to the deliberate intention of a merchant to make a current firm offer binding.

 

  1. MODIFICATION

    1. CONSIDERATION An agreement modifying a K within this Article needs no consideration to be binding. §2-209(1)

    2. ADDITIONAL TERMS

      1. If parties attempt to vary the terms of a K look at §2-209 (4)&(5) which introduce WAIVER but do not attempt to define it. §1-103 states that this general law of contracts term applies here.

      2. Additional terms in acceptance are construed as proposals (compare with mirror image rule): a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as acceptance even though it states additional terms to or different from those offered UNLESS acceptance is made conditional on assent to the additional terms or different terms§2-207 Cts want to keep the transaction alive rather than make the parties start all over again.

        1. Additional terms are considered proposals for addition to the K. Between MERCHANTS such terms become part of the K UNLESS: §2-207

          1. the offer expressly limits acceptance to the terms of the offer OR

          2. they materially alter it (quantity) OR

          3. notification of rejection to them has been given

        2. Conduct by both parties which recognizes the existence of a K is sufficient to establish a K although the writings of the parties do not establish a K §2-207(3)

        3. OFFICIAL COMMENT: #6 If no answer is received within a reasonable time after additional terms are proposed, it is both fair and commercially acceptable to assume that their inclusion has been assented to. This conflicts with §2-207(2)

      3. KNOCKOUT RULE: cancels out conflicting terms. Under this rule the Code supplies the ultimate K terms: course of performance §2-208; course of dealings §1-205; usage of trade §1-205; and implied warranty of fitness for a particular purpose§2-315.

    3. SOF 2-201

    4. PAROL EVIDENCE: (for ambiguous terms) Terms of the parties intended to be a final expression of their agreement may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement BUT may be explained or supplemented: §2-202

      1. §2-202(a) by course of dealing or usage of trade(§1-205) or by course of performance (§2-208)

      2. by evidence consistent additional terms unless the ct finds the writing to have been intended as a complete and exclusive statement of the terms of the agreement. §2-202(b)

    5. delegation of performance, assignment of rights. §2-210

    6. NO ORAL modifications-209(2)

    7. HIERARCHY OF TERMS;

      1. Express terms of agreement

      2. Course of performance

      3. Course of dealings

      4. Usage of trade

 

  1. GAP FILLERS

    1. MANDATORY TERMS

      1. Good Faith, reasonableness, care

      2. Unconscionable Contact clause: At the time the K was entered ; it’s a question of law subject to an appellate review; purpose is to prevent oppression and unfair surprise and not to disturb the allocation of risk because of superior bargaining power. §2-302

    2. OPEN TERMS—THESE SECTIONS ALLOCATE RISK!

        1. Price §2-305

          1. Reasonable price at time of delivery if price is left to be agreed and they fail to agree.

        2. Delivery §2-308

          1. A single delivery is presumed unless otherwise agreed and payment is due on tender of delivery§2-307

          2. Delivery is at sellers place of business §2-308

          3. Reasonable time of delivery is presumed unless otherwise agrees §2-209(1)

          4. Good faith requires reasonable notification before K may be treated as a breach because time of delivery has lapsed §2-309

          5. Can be terminated by either party at any time before breach §2-309(2)

          6. MANNER OF SELELRS TENDER OF DELIVERY§2-503

            1. GOODS: must be conforming & give Buyer NOTIFICATION so he can take delivery

            2. TIME: tender must be at a reasonable hour

            3. PLACE: buyer must furnish facilities reasonably suited to the receipt of the goods.

              1. BAILEE: goods in possession of a bailee and to be delivered without being moved require that the seller either tender negotiable document of title or procure acknowledgment by the bailee of the buyer’s rights to possession of the goods

          7. SHIPMENT (as contrasted to destination K’s) BY SELLER §2-504

            1. If the seller is required to deliver goods but the destination is unknown.

              1. he seller must put the goods in the possession of a carrier and make a K for their transportation that is reasonable (sub §(a)

              2. & properly deliver any document necessary to enable the buyer to obtain possession

              3. & promptly notify the buyer of the shipment.

          8. DELIVERY ON CONDITION: EFFECT OF SELLER’S TENDER §2-507

            1. Sub§(1) Tender of delivery is a condition to the buyer’s duty to ACCEPT the goods (providing that the goods are conforming) and to payment according to the K.

        3. Payment §2-310 UNLESS otherwise agreed (a) the payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery

        4. Time §2-309 Reasonable time

        5. Quantity can be implied based on the relationship of the parties.

          1. Output, Requirement and Exclusive dealing §2-306: this is not too indefinite if:

            1. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur IN GOOD FAITH, except that no quantity UNREASONABLY DISPROPORTIONATE to any stated estimate or in absence to a stated estimate, comparable to prior output or requirements.

          2. EXCLUSIVE DEALINGS §2-306(2) imposes an obligation of the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

 

  1. ACCEPTANCE

    1. EFFECT OF ACCEPTANCE:

      1. Voluntary contract

      2. for the trier of fact to decide.

      3. unambiguous language §2-206(1)

      4. an offer to make a K shall be construed as inviting acceptance. Either by a promise or performance §2-206(1)(a)

      5. PAYMENT: Payment before inspection: Payment does not constitute acceptance of goods or impair the buyer’s right to inspect or any of his remedies. §2-512

        1. B must pay at the K rate for any goods accepted §2-607(1)

 

      1. NOTIFY: Where the beginning of performance (actual performance) is a reasonable mode of acceptance an offeror who is not NOTIFIED of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. §2-206(1)(c)

      2. PRECLUDES REJECTION: Acceptance of the goods by the B precludes rejection §2-607(2) of the accepted goods and if made with knowledge of the non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy. (3) burden is on the B to establish breach with respect to the goods accepted.

      3. BURDEN OF PROOF; buyer bears the burden of proof to establish breach.

    1. STMT BY BUYER

      1. After reasonable opportunity to inspect §2-606. More than a spin around the block at a dealership. (Zabriskie).

      2. Buyer signifies to the seller that

        1. The goods are conforming OR

        2. He will take the goods in spite of the nonconformity

    2. SILENCE OF BUYER

      1. After a reasonable opportunity to inspect

      2. Buyer fails to make an effective rejection under §2-602(1)

        1. Buyer does not reject goods within a reasonable time OR

        2. Buyer does not seasonably notify the seller

      3. Idaho Power: S's terms prevail as to liability because B's form was silent on the issue of liability. (just said it superseded all forms)

    3. CONDUCT OF BUYER

      1. Buyer acts inconsistent with seller’s ownership

        1. There is still the statutory duty to mitigate damages and act in good faith

      2. Buyer changing the goods irreversibly

      3. If buyer acts wrongfully then it is only acceptance if seller ratifies such wrongful action.

    4. RIGHT TO INSPECT §2-

      1. Acceptance: §2-606(a) occurs when B after a reasonable opportunity to inspect (MANDATORY PROVISION) WORDS OR ACTIONS OR SILENCE) to the seller that the goods are conforming or that he will take or retain them despite their nonconformity OR (b) Fails to make an effective Rejection; after B had a reasonable time to inspect OR (c) does any act inconsistent with the seller’s ownership

      2. C.O.D. §2-513(3)s entitled to hold delivery until cash is paid.

        1. If B doesn’t pay then he is in breach under §2-512(2). S should ask for assurance §2-608

        2. If B accepts then discovers a defect then B may revoke acceptance under §2-608(1)(a)

    5. NOT ACCEPTANCE

      1. If seller notifies buyer that he is sending a shipment of nonconforming goods and this is offered as an accommodation to the buyer, this is not an acceptance by the seller. §2-206(1)(b)

      2. Revocation of acceptance in whole or part §2-608; a buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value if he has accepted it (a) on the reasonable assumption that the non-conformity would be cured and it has not been cured. (b) without discovery of such non-conformity if his acceptance was reasonably induced by the DIFFICULTY OF DISCOVERY before acceptance or by S’s assurances. §2-608(2) revocation of acceptance must occur within a reasonable time after the B discovers or SHOULD HAVE DISCOVERED the problem and before any SUBSTANTIAL CHANGE in condition of the goods which is not caused by their own defects. B has the same rights and duties as if he had rejected them:

        1. Buyer’s duties upon rejection §2-603

          1. The B is under a duty to follow any reasonable instruction received from the seller with respect to the goods and in absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming. OFFICIAL COMMENTS: B is under a duty of good faith and commercial practice; commercial necessity.

 

  1. REJECTION - BUYER'S

    1. REJECTION WITHIN A REASONABLE TIME after delivery of goods §2-601(1)

      1. Reasonable time: §1-204 is any time which is not manifestly unreasonable may be fixed by agreement. Was industry seasonal? This can be bargained away so it i not mandatory. §1-204

        1. A reasonable time can be bargained away by consent of the parties §1-204. NOT a mandatory directive.

      2. If the parties do not make an express agreement as to the time limit to inspect, then we look to the industry practices and the reasonability of the time to inspect. §1-201(3)

        1. Usage of trade is a practice or method of dealing having such regularity of observance in a trade or vocation §1-205(2)

      3. Must notify the seller to be effective §2-602

      4. INSPECTION: Crevitor Kitchens; 3 month delay in failing to inspect and accept the goods was reasonable in that particular industry

    2. BUYER’S REJECTION §2-601 if the goods or tender of delivery “fail in any respect to conform to the contract”, the buyer may

      1. Reject the whole §2-601 PERFECT TENDER RULE B’s rejection option

        1. §2-605 The B’s failure to state (commercial bad faith) in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach (a) where the S could have cured (S’s right to cure §2-508) it if stated seasonably. (b) where S’s time to cure has past, the S is entitled to a final statement of objections.

      2. Accept the whole

      3. Accept any commercial unit or units and reject the rest.

        1. OFFICIAL COMMENT The only limitation on partial acceptance is that good faith and commercial reasonableness must be used to avoid undue impairment of the value of the remaining portion of goods.

    3. BUYER’S OPTIONS AS TO SALVAGING RIGHTFULLY REJECTED GOODS .§2-604

      1. If the S gives no instructions within a reasonable time after notification of rejection the B may §2-604

        1. Store the rejected goods

        2. OR reship them to the S

        3. OR resell them for the S account. Such action does not act as acceptance.

      2. The B is under a duty to follow any reasonable instruction received from the seller with respect to the goods and in absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming. OFFICIAL COMMENTS: B is under a duty of good faith and commercial practice; commercial necessity Borges; UNDERR NO OBLIGATION TO OBTAIN THE HIGHEST PRICE.

      3. Rejection must be made in good faith §1-203

        1. Asko Engineering Corp: destruction of the goods did not constitute acceptance or ownership.

    4. MERCHANT BUYERS OPTIONS §2-603

      1. Merchants must follow S’s instruction & if none then make reasonable efforts to sell them for the S’s account if they are perishable or threaten to decline in value speedily. The standard is one of Good Faith in commercial dealings.

    5. SELLER’S RIGHT TO CURE §2-508 Suspending Rejection

      1. S must give a seasonable notification of intent to cure within the K time-deadline. §2-508(1)

      2. B’s failure to state in connection with the rejection a particular defect, which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach. This is also viewed as acting in good faith.

      3. Time for performance has not passed

        1. Where any tender of delivery is rejected and the time for performance has not yet expired, the S may reasonably notify the B of his intent to cure w/in the K time.

        2. Make a conforming delivery within the contract time

        3. This prevents the buyer from treating the early defective tender as anticipatory breach

      4. Time has passed

        1. If buyer said he would accept non-conforming tender, seller may

          1. seasonably notify buyer of intent to cure

          2. have a reasonable time to substitute a conforming tender

          3. MONEY ALLOWANCE: if the seller had reason to believe that the tender would have been acceptable at a discount in price, then he has the opportunity to cure.

    6. REVOCATION OF ACCEPTANCE §2-608

      1. B may revoke his acceptance of a lot whose non-conformity substantially impairs its value if he accepted it.

        1. On the reasonable assumption that its nonconformity would be cured and it has not been cured

        2. Without discovery of such non-conformity if his acceptance was reasonably induced either by difficulty of discovery before acceptance or by the sellers assurances

        3. Must occur within a reasonable time after B discovers or should have discovered it and before any substantial change in condition of the goods which is not caused by their own defects

        4. Not effective until the B notifies the S

          1. Eliminate S right to cure under §2-508(1)

        5. Burden of proof shifts to B because of change in control and possible alteration by B. B had benefit of utilization.

      2. If there is no ability or reason to inspect then there can be no acceptance until this is done. Once the goods have been accepted, one cannot reject anymore and the ability to revoke is not governed by §2-601; but rather by the revocation of acceptance §2-608. The test: is there a substantial impairment of the value of goods. If a repair or replacement can be done then there is no substantial impairment.

        1. Erling: manufactured home and leaks were found in home. "substantial impairment of value"

        2. Rozmus: purchased auto; burden of proof shifts.

    7. INSTALLMENT K §2-612

      1. An installment K may be cancelled under §2-612(3) when the nonconformity of one or more of the installments substantially impairs Graulich Caterer, Inc.; the value of the whole K & seasonable notification of cancellation is given. UCC drafters wanted to encourage parties to keep long-term K’s alive.

        1. OFFICIAL COMMENT #6 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 future deliveries will also be defective, but whether the non-conformity substantially impairs the value of the whole K.

          1. How essential is the timing of delivery?

          2. Is there some sort of business reputation at stake?”

    8. SHIPMENT K

      1. NOT perfect tender rule; failure of notification of the buyer, or failure to make a proper contract is ground for rejection only if material delay or loss ensues.

 

  1. PERFORMANCE & BREACH §2-205

 

    1. ACTIONS AMOUNTING TO BREACH BY THE SELLER

      1. Failure to make delivery

      2. Repudiation

    2. ACTIONS AMOUNTING TO BREACH BY THE BUYER

      1. Wrongful rejection or repudiation

      2. Failure to make payment due on or before delivery

      3. Repudiation

    3. ANTICIPATORY REPUDIATION

      1. Repudiation must substantially impair the value of the contract to the other

        1. Material damage will result if the party is forced to wait until time of performance

      2. Anticipatory repudiation centers upon an overt communication of intention OR an action which renders performance impossible or demonstrates a clear determination not to continue with performance. CMT #!

      3. Requires overt communication or actions which demonstrate CLEAR determination not to continue with the contract. Grounds for insecurity are determined in accordance with commercial standards (not legal standards OFFICIAL COMMENTS #3)

      4. S cannot unilaterally change the terms of delivery. He must seek adequate assurance of payment from the Buyer. §2-609.

      5. CALCULATION: Where a party repudiates a K where performance is not yet due, the measure of damages is the prevailing market price for the goods minus the K price AS OF THE DATE OF REPUDIATION.

      6. Aggrieved party may:

        1. Await retraction for a commercially reasonable time

        2. Resort to any remedy for breach even if still urging retraction

        3. Suspend his own performance

        4. Salvage unfinished goods

      7. DEMAND OF ADEQUATE ASSURANCES

        1. When “reasonable ground for insecurity arises with respect to the performance” the other may:

          1. In writing demand adequate assurance of performance

          2. If commercially reasonable, suspend and executory portion of his performance

      8. BUYER'S RIGHTS:

        1. BUYER'S RIGHTS TO GOODS ON SELLER’S INSOLVENCY

          1. The buyer is given a right to the goods on the sellers insolvency occurring within 10 days after he receives the first installment on their price. §2-502(1)

          2. if the identification creating §2-502(2)

        2. his special property has been made by the buyer he acquires the right to recover the goods only if the goods conform to the K for sale. OFFICIAL COMMENT: this subsection is included to prevent the possibility of UNJUST ENRICHMENT which exists if the buyer were permitted to recover goods even though they were superior in quality or quantity to that called for by the contract for sale

          1. OFFICIAL COMMENT; this section gives additional rights to the buyer as a result of identification of the goods

      9. SELLER’S RIGHTS

        1. UPON IMPROPER TENDER; REPLACEMENT §2-508

          1. Where tender or delivery by the seller is rejected because of nonconformity and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may within the K time make a conforming delivery. OFFICIAL COMMENT: It applies even where the seller has taken back the nonconforming goods and refunded the purchase price.

        2. Seller in Process of Manufacture:

          1.  

        3. BFP

          1. Between non-contracting parties, the Code places the burden or Risk on the party who could have most easily or cheaply avoided the problem. S could have demanded CASH, or CREDIT HISTORY.

 

  1. RISK OF LOSS

    1. IF NO BREACH §2-509

      1. FOB-SHIPMENT terms: seller bears the risk of putting the goods into possession of the carrier §2-319(1)

      2. FOB-DESTINATION; seller bears the risk of transporting the goods to the destination and tendering delivery §2-319(2).

      3. BAILEE; when goods are held by bailee, the risk of loss passes to the buyer

        1. Upon receipt of title document from the bailee.

      4. ALL OTHER SITUTAIONS; ROL passes to the buyer:

        1. Upon receipt of the goods if the seller is merchant

        2. Upon “tender of delivery” if the seller is not a merchant

    2. BREACH §2-510

      1. If goods fail to conform the risk of loss remains on the seller until cure or acceptance.

      2. If B repudiates or is in breach the risk of loss rests on the B.

        1. OFFICIAL COMMENT: cure is a repair, partial substitution, sorting out from an improper mixture. Risk shifts only at the time of cure.

    3. PAYMENT BY BUYER BEFORE INSPECTION §2-512

      1. Where K requires payment before inspection nonconformity of the goods does not excuse the B from making payment UNLESS:

        1. The non-conformity appears without inspection OR

      2. Payment does not constitute acceptance of goods or impair the buyer’s right to inspect or any of his remedies.

    4. BUYERS RIGHTS TO INSPECTION §2-513

      1. Buyer has the right to inspect (after arrival) before payment at any reasonable place ( reasonableness will be determined by trade usage, past practices between parties and other circumstances) and in any reasonable manner.

        1. OFFICIAL COMMENT: no agreement by the parties can displace the entire right of inspection except where the K is simply for the sale of “this thing”. Even in a sale of boxed goods marked “as is” inspection is a right of the buyer

      2. Sub§(2) expense of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.

      3. NO RIGHT TO INSPECT BEFORE PAYMENT IF K IS C.O.D.

  2. PROTECTION

    1. Who is in best position to avoid the risk of loss?

    2. Demand cash - COD

    3. Credit history

    4. Get it in writing

 

BUYER’S REMEDIES

    1. 2-711(1) - Return of purchase price paid

      1. upon breach by the seller, the buyer may:

        1. cancel the contract, and

        2. recover any amount of the purchase price paid, whether or not he has canceled the k.

    2. 2-712 - Cover (is OPTIONAL)

      1. To qualify as a proper cover, the purchase:

        1. Must be made in good faith

          1. doesn’t matter if hindsight proves that the purchase could've been had for less.

          2. purchasing from oneself requires good documentation to prove good faith

        2. without unreasonable delay

          1. depends on the nature of the volatility of the market

        3. be a reasonable substitute

          1. if the cover goods are either superior or inferior, the court should adjust the recovery accordingly.

      2. The measure of damages is cover price - contract price + incidental & consequential - expenses saved. Regardless if the covered goods were of superior quality and B had resale commitment. Look at §2-715 for Foreseeability.

      3. This § applies to installment Ks also.

    3. 2-713 Market Price - Contract Price Differential - APPLIES ONLY IF THERE IS NO COVER, THEREFORE THERE ARE NO CONSEQEUNTIAL DAMAGES IF NO COVER.

      1. measure of damages is market price - contract price + incidental & consequential damages - expenses saved

        1. the market place is the place of tender in the case of

          1. failure to ship under a shipment contract; or

          2. repudiation

        2. the market place is the place of arrival in the case of

          1. failure to ship under a destination contract; or

          2. rightful rejection or revocation after arrival

        3. the market time is “when the buyer learned of the breach”

          1. in the case of repudiation, this should be a commercially reasonable time after the buyer learns of the repudiation because he is entitled, under 2-610(a) to await performance for a commercially reasonable time after repudiation.

    4. 2-714 Damages for Accepted Goods

      1. 2-714(1) Recovery of Ordinary Losses

        1. after notifying seller of the defect, the buyer may recover the loss resulting “in the ordinary course of events” from the breach

          1. determined in “any reasonable manner.”

      2. 2-714(2) Breach of Warranty Damages

        1. difference between :

          1. “value of goods as accepted”; and

            1. typically cost of repair

          2. “value they would have had if they had been as warranted”

            1. usually the k price, but may be market price if k price is inadequate.

        2. value measured “at the time and place of acceptance.”

        3. unless special circumstances show damages of a different amount

          1. ex: if buyer does not discover defect until after acceptance, and the value has depreciated in the meantime.

      3. 2-714(3) Incidental and Consequential damages are also available.

    5. 2-715 Buyer’s Incidental and Consequential Damages

      1. Incidental damages include those incurred in fulfilling rights and obligations under the contract:

        1. inspection, receipt, transportation

        2. care and custody of goods

        3. charges or expenses in effecting cover

      2. Consequential damages are additional injuries that occur as a consequence of the breach and include:

        1. general requirements that the seller at the time of contracting had reason to know and could not have been prevented by cover or otherwise (mitigation).

        2. personal injury or property injury proximately caused from breach of warranty (limited by 2-318 options)

          1. “proximate” turns on whether it was reasonable to use the goods without such prior inspection as would have revealed the defects.

      3. B must cover in order to receive consequential damages.

    6. 2-716 - Specific Performance

      1. may be decreed:

        1. “where the goods are unique”; or

          1. broader than “one of a kind”.

        2. “in other proper circumstances”

          1. inability to cover is “strong evidence” of other proper circumstances.

 

SELLER’S REMEDIES

    1. Seller's Remedies on Discovery of Buyer's Insolvency.

      1. §(1) if S discovers the B to be insolvent, he may REFUSE delivery except for cash

      2. §(2) if S discovers the B has received goods on credit while insolvent, HE MAY RECLAIM the goods upon demand within 10 days after the receipt (the 10 day rule does not apply if there has been a MISREPRESENTATION.

      3. BFP S has no right to reclaim.

    2. 2-706 Resale

      1. measure of damages is resale price - contract price + incidental damages - expenses saved, provided that:

        1. sale is made in “good faith” - can't make artificial sales to increase the damages

        2. in a “commercially reasonable manner”

        3. seller must give “reasonable notification” to the buyer. If no notice then S acted unreasonable and then go to §2-708

          1. additional req.’s for public resale include:

            1. only identified goods can be resold

            2. made at usual market place

            3. seller may buy

      2. not necessary that the goods be in existence or all have been identified to the contract

        1. 2-704 when goods are unfinished, seller may exercise reasonable commercial judgment in completing the goods and reselling them, or scrapping or salvaging them.

      3. good faith purchaser gets good title free of the breaching buyer even if the seller fails to comply with one or more requirements of this section.

      4. seller is not accountable to the buyer for any profit made on resale

      5. Resale accurately determines amount of floss. Easy to make you whole because you know the amount of loss.

    3. 2-708 Contract - Market Damages (NO RESALE)

 

      1. Sub §(1)

        1. Use this § if goods are not yet produced.

        2. measure of damages is market price - contract price + incidental damages - expenses saved

        3. market time and place is the place for tender regardless of when the seller learned of the breach (contrast w/buyer’s market damages).

      2. Sub §(2)

        1. Use this § if goods are produced and can't be resold.

        2. if Sub §(1) is inadequate: if the standard measure of damages would not put the seller in as good a position as performance would have done, then he is entitled to lost profits.

        3. ex: seller is a “lost volume” seller, then the measure of damages is

          1. the profit which the seller would've made from full performance by the buyer;

          2. plus incidental damages;

        4. a seller is a lost volume seller if:

          1. he has the capacity to make the additional sale

          2. the additional sale would have been profitable

          3. the seller probably would have made the additional sale even if the buyer hadn’t breached.

        5. ex: manufacturers of uncompleted goods where no resale market exists.

          1. ex: if under 2-704, seller decides to scrap or salvage, then he is entitled to lost profits, minus the proceeds from resale of the scrap.

    1. 2-709 Action for Price

      1. seller is entitled to the price of:

        1. goods accepted

          1. failure to make an effective revocation entitles seller to recover contract price

          2. however, a wrongful rejection still precludes acceptance (under 2-607) and seller is relegated to other remedies

        2. goods lost or damaged within a commercially reasonable time after risk of loss has passed to the buyer

        3. goods identified to the contract that can not be resold

      2. seller may resell at any time prior to collection of judgment.

    2. 2-710 Seller’s Incidental Damages

      1. as contrasted to buyer, the code only expressly provides for incidental damages for sellers, and not consequential damages.

 

  1. WARRANTY

    1. The warranty concept is supposed to provide a guarantee by S to B for the performance, and quality of the goods.

    2. Statute of Frauds; sometimes in causes of action where there is a tort alleged, it may be a good idea to assert a K cause of action because the statute of limitations may be longer.

    3. SELLER WARRANTS:

      1. The title conveyed shall be good and its transfer rightful §2-312(1)(a); AND

      2. The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge. §2-312(1)(b)

      3. HOWEVER; theses warranties may be modified or excluded only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title himself or that he is purporting to sell only such right or title as he or a third person may have.

    4. SELLER’S EXPRESS WARRANTIES §2-313

      1. Express (Off cmt: negotiations; dickered aspects of the individual bargain) warranties are creates as follows:

        1. any affirmation of fact or promise by S to B which relates to the goods and become part of the basis of the bargain creates an EW that the goods shall conform to the affirmation or the promise.

        2. Any description of the goods (Cmt #5 all descriptions by S must be read against the applicable trade usage’s with the general rules as to S’s resolving any doubts

        3. Any sample or model

            1. no particular reliance need to be shown. Off Cmt #4

            2. Focus on S’s conduct Off Cmt #4

            3. A clause disclaiming “all warranties, express or implied” cannot reduce S’s obligation with respect to such description and therefore cannot be given literal effect under §2-316 Off Cmt #4

      2. EX saying a horse is a “good one” & in sound condition. This is an OPINION and not a statement of fact. Opinion of value vs description or promise. The court looked to the trade custom to see if it is common to guarantee soundness.

    5. SELLER’S IMPLIED WARRANTIES §2-314

      1. Seller must be a merchant with respect to goods of that kind, not just a merchant.

        1. Does not apply in the absence of a contract for the sale of goods. EX. Bottle explodes on store shelf. §2-314 is inapplicable

      2. It is implied that the goods shall be Merchantable; shall PROVE AT LEAST ONE:

        1. Pass w/o objection in trade under K description

        2. fungible goods are of fair average quality w/in the description

        3. are “fit for the ordinary purpose for which the goods are used”

          1. based on consumer expectations

          2. a bone in fish chowder is not a breach of implied warranty

        4. quality & quantity are w/in variations permitted by agreement

        5. adequately contained, packaged & labeled as the agreement may require.

          1. List warnings or dangers of operation

        6. Conform to the promise or affirmations of fact made on the container or label

            1. A person making an Isolated sale is not is not a merchant w/in this §

            2. Nonmerchant warrant; if a S states that the goods are guaranteed, then he is bound by this §

      3. If seller has reason to know any particular purpose for which the goods are required & B is relying on S’s judgement to select suitable goods, there is unless excluded or modified an implied warranty that the goods are fit for the particular purpose. §2-315. Orally is OK under this §.

    6. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE §2-315

      1. Seller must have reason to know of the particular purpose

      2. Buyer must be relying on the seller’s skill or judgment to select or furnish suitable goods.. Buyer cannot select the goods himself.

    7. SELLERS DISCLAIMER OF WARRANTIES §2-316

      1. EXPRESS WARRANTIES: Words or conduct (seller’s) that create an express warranty & negate or limit are subject to parol evidence or extrinsic evidence §2-202 & are negated if they are unreasonable. CANNOT BE DISCLAIMER ORALLY!

      2. IMPLIED WARRANTIES: To exclude or modify the implied warranty of merchantability must mention “merchantability” and in case of a writing must be conspicuous THIS IS A QUESTION OF LAW (bold lettering or ALL CAPS).

        1. Notwithstanding the previous subsection:

          1. All implied warranties are excluded by expressions like “as is” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion. AND

          2. When the B before entering into the K has examined the goods or the sample, there is no implied warranty with regards to defects which an examination ought in the circumstances to have revealed to him.

          3. An implied warranty can also be excluded or modified by course of dealing or course of trade.

            1. Off Cmt: #8 Caveat Emptor is rejected by this Article 2.

            2. Off Cmt. #1 an inconsistency between the advertised quantity and the actual amount do not negate the express warranty .

    8. WARRANTY RULES:

      1. The more specific and detailed stmt seems to be a greater the likelihood that the stmt can be construed as warranties.

      2. The more formal the stmt, technical specifications delivered w/ pkg.

      3. Written stmt;

      4. Focus on S’s conduct, not B’s reliance

      5. In a breach of warranty action, lost profits are foreseeable and therefore recoverable if they are proximately caused by the natural result of the breach.

      6. Even if B MISUSES the product this would not negate a warranty, However the consequential damages would be limited.

    9. 3 WAYS FOR SELLER TO LIMIT LIABILITY;

      1. State that verbal discussion are off the record in the WRITTEN K. PAROL EVIDENCE §2-202

      2. Exclusion or modification §2-316, if this is not used then implied warranties automatically arise. Words or conduct.

      3. Contractual modification §2-719, expressly limit future damages

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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