3. Terms of the Contract - Risk of Loss/Warranties

Question 1

There are four risk of loss rules, of decreasing importance, they are:

Answer 1

1) The Agreement of the parties
2) Breach, the breaching party is liable for any uninsured loss even though breach is unrelated to problem.
3) Risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations
4) Catch-All: If seller is a merchant, risk of loss shifts to the buyer on the buyer’s physical receipt of the goods. Risk of loss shifts from a nonmerchant seller when she “tenders” (makes available) the goods.

Question 2

Warranties of Quality, 3 types:

Answer 2

1) Express; 2) Implied Warranty of Merchantability; 3) Implied Warranty of Fitness for a Particular Purpose.

Question 3

Express Warranties are created by:

Answer 3

words that promise, describe, or state facts. Or a sample/model item. Not created by sales talk/opinion talk.

Question 4

The Implied Warranty of Merchantability exists

Answer 4

when any person buys any goods from any MERCHANT, implied that the goods are fit for the ordinary purpose for which such goods are used

Question 5

The Implied Warranty of Fitness for a Particular Purpose exists when:

Answer 5

buyer has a particular purpose, is relying on seller to select suitable goods, and seller has reason to know of the buyer’s purpose and reliance.

Question 6

Limitations on Warranty Liability

Answer 6

1) Statute of Limitations; 2) Privity of Contract; 3) Buyer’s examination of the goods; 4) Disclaimer; 5) Limitation of Remedies

Question 7

Limitation on Warranty Liability - Statute of Limitations

Answer 7

There is a four-year statute of limitations, and generally starts running on possible warranty actions when the tender of delivery is made, not when defect is discovered.

Question 8

Limitation on Warranty Liability - Privity of Contract

Answer 8

If the plaintiff did not buy the goods from the defendant, there is a possible lack of privity issue.

Question 9

Limitation on Warranty Liability - Buyer’s examination of the goods

Answer 9

There are no implied warranties as to defects which would be obvious on examination

Question 10

Limitation on Warranty Liability - Disclaimer

Answer 10

1) Express warranties generally cannot be disclaimed; 2) Implied warranties of merchantability/fitness can be disclaimed using EITHER conspicuous language or “as is” or “with all faults”