Advanced Sales Flashcards
1
Q
A merchant is someone who ________ in the type of goods at issue
A
regularly deals
2
Q
You agree to buy 5 gallons of paint from lowes. Is this k governed by the UCC?
A
Yes.
3
Q
You agree to buy 5 gallons of paint from lowes. Is lowes a merchant?
A
Yes. They are in the business of selling paint all the time.
4
Q
You contract with Lowe’s to buy an old delivery truck that they no longer need. Is Lowe’s a merchant?
A
No, not for this contract, they are not regularly in teh business of selling this particular type of good.
5
Q
You contract to sell your home for $100,000. Is this governed by the UCC?
A
No, real estate is not a good.
6
Q
You contract to sell your ice fishing hut for $100,000. Is this governed by the UCC?
A
Yes, if the structure will be severed from the land by the seller.
7
Q
You contract to sell 100 trees for timber and 100 tons of potatoes growing underground. Are these deals governed by the UCC?
A
Yes, and it doesn’t matter who will sever the timber/crops from the land. If the buyer comes in and cuts down the trees - it doesn’t matter who severs these.
8
Q
Nokia contracts to sell a patent to Apple. Is this governed by the UCC?
A
No, intellectual property and other intangible assets are not goods.
9
Q
You contract to buy a share of Nokia stock. Is this governed by the UCC?
A
Yes, but the sale of investment securities is governed by Article 8, not Article 2, and outside our scope here.
10
Q
I agree to paint your house for $1,000 and I will supply the paint. Is our contract governed by the UCC?
A
No, it’s not. Two Rules:
The all or nothing rule: Mixed contracts must fall into one universe or the other.
The predominant purpose rule: Does a good or service play a bigger role in the overall nature of the contract?
The primary reason you’re paying someone 1000 dollars to pay the house is because they are painting the house, the service part is the predominant purpose.
11
Q
You commission the famous artist Andy Warhol to paint your portrait for $1 million. Does the UCC apply?
A
No, Under the all or nothing rule, and the predominant purpose rule - Andy Warhol would be supplying some physical items, but someone who is highly skilled is painting the portrait so it’s a service.
12
Q
You commission my mother-in-law, Mickey, to paint your portrait for $10. Does the UCC apply?
A
Yes, probably. Almost all of the value that you’re getting is the physical paint and the canvas. There is almost zero service value.
13
Q
The four main topics of formation are:
A
agreement, consideration, defenses to contract formation, and the statute of frauds.
14
Q
At common law, all ______ _____ must be covered in the agreement
A
essential terms. Typically means: parties, subject, price, and quantity
15
Q
In the UCC, to have a real offer, you need only identify the ________, the _______ and ________.
A
parties, subject matter, quantity. The price doesnt need to be stated. (trick)
16
Q
Bob offers to buy 500 windshield wiper blades next week from Sue for $5 each. Is it a valid offer?
A
Yes
17
Q
Bob offers to buy 500 windshield wiper blades next week from Sue for a “fair price.” Is this a valid offer?
A
Yes. It doesnt have the price but that’s ok under the UCC. The price is: a reasonable amount.
18
Q
Bob offers to buy windshield wiper blades from Sue for a “fair price.” Is this a valid offer?
A
No, this doesn’t include a quantity term.
19
Q
Sue offers to sell Bob “all the wiper blades that I make this week.” Is this a valid offer?
A
Yes, this is valid as an output contract. Both requirements and outputs contracts are specific enough even though they state no quantity term because there’s a formula for us to figure that out.
20
Q
I offer to sell you my car for $5,000, and I promise, promise, promise not to revoke this offer for a week. Five minutes later, I say, “Never mind…I revoke the offer.” Can you still accept?
A
No. The promise not to revoke is an unsupported gift promise.
21
Q
A _______ in the UCC universe can make a ________ to buy or sell goods. (It’s basically a binding free option)
A
merchant, firm offer.
22
Q
Requirements for a firm offer: _______, contain an ________ not to revoke the offer and ________ by the offeror.
A
written, explicit promise, signed
23
Q
A firm offer lasts for either as long as stated in the firm offer or for a reasonable tim period not to exceed ____ days.
A
90
24
Q
I offer to sell you my car for $5,000, and I promise via a signed writing not to revoke this offer for a week. Five minutes later, I say, “Never mind…I revoke the offer.” Can you still accept?
A
No, Professor Geis is not a merchant.
25
Cars.com offers to sell you a car for $5,000, and it promises via a signed writing not to revoke this offer for a week. Five minutes later, it says, “Never mind…I revoke the offer.” Can you still accept?
Cars.com is a merchant who is in the business of selling cars. Their offer is irrevocable.
26
Cars.com offers to sell you a car for $5,000. Five minutes later, it says, “Never mind…I revoke the offer.” Can you still accept?
No. They never made a firm offer. In order to have a firm offer they have to promise not to revoke.
27
Cars.com offers to sell you a car for $5,000, and it promises via a signed writing not to revoke this offer for a week. Ten days later, you write back to accept the offer. Can you still accept?
Yes, as long as a reasonable time has not passed. Cars.com made you a firm offer, you didn't accept within that one week period for one it was still effective, but all tha tmeant was that htey were not free to revoke within that first week but they still have the offer they put out there and they havent revoked it and 10 days still may be enough time, but cars.com could revoke it first but nothing here says they did that. The offer might only expire if a reasonable time has passed.
28
The offeror is ______ of teh offer
master
29
If nothing is specified in the offer, the UCC permits acceptance to take place by _________ or by ________ (typically the shipping of the goods)
return promise, performance
30
Bob sends a letter to Sue, reading “please ship me 500 windshield wiper blades next week for $5 each.” Sue mails back a letter: “I accept.” Is there a contract?
Yes by return promise.
31
Bob sends a letter to Sue, reading “please ship me 500 windshield wiper blades next week for $5 each.” Sue ships 500 wiper blades the next day. Is there a contract?
Yes, by performance.
32
What if the seller tries to accept by shipping the wrong goods? The UCC generally treats this as an ______ plus a _______
acceptance, breach (TRICK)
33
Bob sends a letter to Sue, reading, “please ship me 500 Bosch windshield wiper blades next week for $5 each.” Sue ships 500 Sloshed wiper blades the next day. Is there a contract?
Yes, and a breach. (TRICK)
34
If the seller seasonably notifies the buyer that the wrong goods are being shipped as an __________, then no acceptance occurs and you have a _________.
accomodation, counter offer.
35
Bob sends a letter to Sue, reading “please ship me 500 Bosch windshield wiper blades next week for $5 each.” Sue ships 500 Sloshed wiper blades the next day, along with a short note: “I don’t have any Bosch blades; how about these Sloshed ones?” Is there a contract?
No, this is a counter offer because Sue is sending these as an accomodation.
36
The common law universe uses the ______________ rule.
mirror image
37
The terms in the acceptance must match the terms of the offer ______ or it is not an acceptance; it is a __________
exactly, counter offer
38
The UCC is more forgiving for acceptances that do no match the terms of the offer exactly.
Replaces mirror image rule with
2-207
39
Main intuition: A purported acceptance that does not match the terms of the offer exactly can still count as a legal acceptance in many circumstances.
Just because there is a contract, however, DO NOT assume that all of the terms in the purported acceptance are going to govern.
It does not matter whether the parties are _________ for 2-207(1)
merchants.
40
Just because a slightly different acceptance makes a contract, it does not mean that that the new term in the acceptance will control. It might control but must look at 2-207(2).
The new term will only come in if the following are all true:
(1) Both parties are merchants. (Me)
(2) The new term does not materially alter the deal. (MA)
(3) The initial offer did not expressly limit acceptance to its terms. (C)
(4) The offeror does not object within a reasonable time to the new term. (D)
(FAMILY)
Very difficult for these new terms to govern the contractual relationship.
41
What happens if there is not a real contract but the parties still act as if there is an agreement?
In that case, 2-207(3) gives parties a ________. All the terms are going to drop out except for those the parties have agreed to in writing. The court will look to the “gap-filling” provisions of the UCC for the other terms.
reset
42
Auctions. Each individual bid should be understood as ____________
an offer.
43
Auctions: Acceptance occurs with the __________
fall of the hammer.
44
What happens if someone bids exactly when the hammer falls?
Under the UCC the auctioneer has discretion either to ____ ______
declare the auction final, or reopen the auction.
45
A ____ _____ auction means the seller cannot withdraw the item after a bid has been received.
no reserve.
46
Can bidders retract their offers? ____ as long as the auction is not finished. Does this revive the prior bid? ____
Yes. No (there's now no bids out there)
47
The UCC _______ the preexisting duty rule.
totally rejects
48
On a UCC txn ask if the modification has been made in ____ ____. If so, it's binding even without ____ ____
good faith, new consideration.
49
Mickey contracts with Pabst to buy her weekly keg of beer for $75. Later in the week, Pabst calls back to say there is a worker shortage that week, and it can’t get her the beer unless she pays $100 so Pabst can outsource delivery. Mickey says, “OK charge what you must, I need my beer.” Is the price modification binding?
Yes, that's made in good faith.
50
Mickey contracts with Pabst to buy her weekly keg of beer for $75. Pabst knows that Mickey will do anything for her beer. On Friday morning, Pabst calls to say, “You better pay us $1,000 or we won’t deliver your keg.” Mickey says, “OK charge what you must.” Is the price modification binding?
No, this is not made in good faith.
51
There are 7 defenses to contract formation:
Misunderstanding, Incapacity, Mistake, (Fraud, Misrepresentation, Nondisclosure), Duress, Illegality, Unconscionability (MNM, DUII)
52
When it comes to unconscionability, under a UCC a term is unconscionable no _____ _____ in the position of the party would have agreed to it.
reasonable person
53
There are two parts of unconscionability in the UCC -
Procedural unconscionability is _________
A fundamental flaw in the way the contract has been negotiated, or a hidden term or absence of meaningful choice.
(This is only one of the two types of unconscionability) Some jdns require both types to be present, others may be willing to invoke unconscionability when only one is present.
54
There are two parts of unconscionability in the UCC -
Substantive unconscionability is _____________
Is it a rip off, is the term at issue a total rip off?
(This is only one of the two types of unconscionability)
Some jdns require both types to be present, others may be willing to invoke unconscionability when only one is present.
55
I walk up to you one day and say, “I’m so glad that you agreed to sell me your car for just $1,000.” You stare at me puzzled and reply, “Who are you? We’ve never met.” I laugh and say, “See you in court.” Will I win the lawsuit?
No. This is a statute of frauds issue. This is a false assertion of a contract that was never created.
56
There are two threshold statute of frauds questions:
(1) Are we in sof world?
| (2) Has the sof been satisfied?
57
Typically the sof requires a _________ signed by the other side or __________ made on the purported deal.
writing, some performance.
58
The UCC will put parties in sof world for goods contracts for _____ or more.
$500.
59
Mickey buys beer on credit from Pabst, promising to pay $499 at the end of the month for her 5 kegs. Pabst sues her at the end of the month for failure to pay. Are we in SOF world?
No.
60
Mickey buys beer on credit from Pabst, promising to pay $500 at the end of the month for her 5 kegs. Pabst sues her at the end of the month for failure to pay. Are we in SOF world?
Yes.
61
A _______ _______ will satisfy sof but the requirements differ from common law. There is no need to mention the ______ but you do need to mention the ______. If you mention the wrong ______, you can only enforce that amount.
signed writing, price, quantity, quantity.
62
Mickey verbally contracts with Pabst to buy 100 kegs of beer for $75 each. Later, Pabst sends her a signed confirmation order stating that the parties agree to contract for 50 kegs of beer (no price is listed). Even later, Pabst asserts a SOF defense and refuses to sell Mickey any beer. Can Mickey satisfy the SOF?
Yes, but only for 50 kegs. That signed confirmation order which was mistaken will count but only for the 50 kegs. It doesn't matter that no price is listed, that's a red herring, it doesn't matter for the UCC.
63
____ _______ on a goods contract can satisfy the statute of frauds, but only for the quantity _______ and ________.
Part performance, delivered, accepted
64
Mickey verbally contracts with Pabst to buy 100 kegs of beer for $75 each. Mickey changes her mind and decides to order some kegs of Fat Tire beer. Later, Pabst delivers 25 kegs to Mickey, and she eagerly stores the kegs in her basement. Can Pabst satisfy the SOF?
Yes, but only for the 25 kegs delivered and accepted. Mickey is not contractually obligated to buy the other 75.
65
Custom made or specially manufactured goods are exempted from the sof. A maker can satisfy the sof as soon as it ____ ____ _____ the manufacturing of the goods.
substantially begins to perform
66
I contract verbally with Brooks Brothers to buy 100 white dress shirts with a GSG monogrammed on the pocket for $10,000. Brooks Brothers sends me the shirts but I change my mind and send the shirts back. Can I assert a SOF defense if Brooks Brothers sues for the $10,000?
No, custom goods exception. There's nothing in writing, however, it doesn't matter. Brooks Brothers wouldn't go to the trouble of making these if there was no contract.
67
A ____ _____ will satisfy the statute of frauds. (Something that happens in court)
judicial admission
68
The failure to object to a confirming memo within a ___ ____ period will satisfy the sof but only if _____ ____ ____ _____
10 day, both parties are merchants.
69
Mickey verbally contracts with Pabst to buy 100 kegs of beer for $7,500. Later, Pabst sends her a signed confirmation memo with all material terms. Mickey has changed her mind, crumples up the memo and throws it in the corner. Ten days later, does Pabst satisfy the SOF?
No, Mickey is not a merchant.
70
Whole Foods verbally contracts with Pabst to buy 100 kegs of beer for $7,500. Later, Pabst sends WF a signed confirmation memo with all material terms. WF has changed their mind, crumples up the memo and throws it in the corner. Ten days later, does Pabst satisfy the SOF?
Yes. This is a separate exception. Whole Foods has an obligation to deny.
71
Suppose you have a deal that is in SOF world and the SOF requirements are met. Now the parties want to modify that deal.
Must the modification also satisfy the SOF requirements?
Not automatically. Only if this separate modification would be in sof world. Otherwise, there is no sof requirements even though the initial deal was in sof world.
72
Mickey contracts with Pabst to buy 5 kegs of beer for $500. Are we in SOF world?
Yes
73
Mickey contracts with Pabst to buy 5 kegs of beer for $500. Pabst sends her a signed confirmation memo with all material terms. Mickey alleges that they later modified the deal to 3 kegs only for $300. Does she need to supply written proof of this alleged modification?
No, the modification would not be in sof world.
74
A contract modification is enforceable without new consideration (True/False)
True
75
FILL IN THE BLANK. Under the UCC, the only term that must be contained in the writing is the _____________________ term.
quantity
76
Under the Statute of Frauds, when is a writing not required?
(a) When the goods are specially manufactured and the seller has made substantial beginnings in their manufacture.
(b) When the party has made a judicial admission that a contract was made.
(c) When the goods have been received and accepted or paid for.
(d) All of the above
D
77
Which of the following statements is TRUE regarding the effect of the Statute of Frauds on a contract modification?
(a) If the original contract was for $500, any subsequent modification of the contract must satisfy the Statute of Frauds.
(b) If the original contract was for less than $500, any subsequent modification of the contract does not need to satisfy the Statute of Frauds.
(c) If the original contract was for more than $500, a subsequent modification of the contract that brings the contract price below $500 does not need to satisfy the Statute of Frauds.
(d) None of the above
c
78
Does the PER apply to later written or verbal statements about the deal?
No, that's a modification. PER only blocks EARLIER statements.
79
Does the PER apply to earlier written documents?
Yes, PER applies to earlier written documents.
80
Gateway inquiry for the PER is whether ______
the parties have created an integrated writing.
81
Complete integration – the contract expresses ______ __ of the agreement.
all terms
82
Partial integration – there is a written and final writing, but___ _____ may not have been included.
some terms
83
Distinguishing between an agreement that is not integrated from one that is fully or partially integrated:
One powerful piece of evidence is whether...
there is a Merger Clause.
84
PER. The presumption under the UCC is that a writing is, at most, only a ________ integration, unless the parties would have “_______” included the disputed term in the writing.
partial, certainly
85
If the question does not have a signed writing, think _________.
SOF
86
If the question does have a signed writing, along with an earlier discussion of the deal, think ___ ___ ___.
Parole Evidence Rule.
87
A warranty is a ____________ about a term in the contract that _________________________ to the party making the promise.
promise, shifts the risk
88
I agree to sell you my Jeep for $5,000 but we don’t discuss any other terms. If the wheel falls off as you drive away, can you get out of the deal?
It's unclear. You need to go back and find a defense to contract formation, so it's not going to be easy to do.
89
I agree to sell you my Jeep for $5,000. If the wheel falls off as you drive away, can you get out of the deal if I include a warranty that the Jeep will run fine for the next 1000 miles?
Yes, you can back out of the deal or sue me for breach.
90
Warranty of Title: All sellers warrant that title is ____ and that the transfer is ____.
good, rightful.
91
I contract with Mickey to buy an antique chair. It turns out that Mickey stole the chair last weekend. Has she breached the contract?
Yes. She has breached the warranty of title.
92
Express Warranty: A promise that affirms or describes the good that is a part of _______, it is an express warranty, unless it is merely the seller's _____.
the basis of the bargain, opinion
93
The use of a ______ or ______ creates an express warranty that the goods sold will be like the sample.
sample, model
94
You walk into an AutoZone store to buy some hubcaps. The clerk shows you some floor samples that are bright gold and says, “These are our best model.” You buy that model of hubcaps, but find they are an ugly yellow when you pull them out of the box. AutoZone has breached an...
Express warranty.
95
Implied Warranty of Merchantability. Only triggered when seller is a _______
merchant. Remember that merchants are only merchants when they are dealing with the goods they regularly sell.
96
The merchant makes an implied warranty, unless disclaimed, that the goods are going to be fit for _____ ______ _____. This is true at the time of the _____
ordinary commercial purpose, sale.
97
You walk into an AutoZone store to buy some polish for your hubcaps. The clerk waves you over to aisle 12 where you pick up a can of hubcap polish. When you spray it on your hubcaps, they turn an ugly yellow color. AutoZone has breached an
Implied Warranty of Merchantability. Remember, Autozone is selling something they usually sell, therefore they are a merchant.
98
You walk into an AutoZone store and the clerk tells you that their delivery van is for sale. You buy it, but it breaks down right away. Has AutoZone breached the implied warranty of merchantability?
No, they are not a merchant as to this particular product.
99
Can a merchant disclaim the implied warranty of merchantability?
Yes, if very clearly done.
100
Can a merchant disclaim the implied warranty of merchantability? Yes, but only if very clearly done. Look for words like ___ ___ or very _____ language.
as is, conspicuous.
101
Implied Warranty of Fitness for a Particular Purpose
Triggered whenever the buyer relies on the seller’s _______ to select a particular good that is going to be used for a _____ ____
expertise, particular purpose.
102
You go to Autozone but you can’t decide between three different types of hubcap polish. You ask the clerk which one is right for your aluminum alloy hubcaps, and he picks up a can and says, “THIS is the brand you want.” When you spray it on your hubcaps, they turn an ugly yellow color. AutoZone has breached an...
Implied Warranty of Fitness for a Particular Purpose.
103
Can a non merchant extend the Implied Warranty of Fitness for a Particular Purpose?
Yes.
104
Can the Implied Warranty of Fitness for a Particular Purpose be disclaimed?
Yes, if very clearly done.
105
Which of the following statements is FALSE regarding the implied warranty of merchantability?
(a) A breach of this warranty must have been present at the time of the sale.
(b) A seller may only disclaim this warranty in writing.
(c) The seller warrants that the goods are fit for ordinary commercial purposes.
(d) None of the above
d
106
Under Article 2, which of the following will apply to goods sold by a non-merchant seller?
(a) The implied warranty of merchantability
(b) The implied warranty of fitness for a particular purpose
(c) Both A and B
(d) Neither A nor B
b
107
TRUE OR FALSE. If an agreement is fully integrated, the court may consider extrinsic evidence of prior agreements that contradict its terms.
False.
108
The constructive condition of exchange (common law) can be satisfied by _____ ______
substantial performance
109
The UCC requires ______ _____ to satisfy performance obligations
perfect tender. Do not discuss substantial performance, or material breach unless there's an installment contract.
110
There are two main obligations of perfect tender. What are they?
Perfect goods and perfect delivery.
111
Mickey contracts for 500 pints of Fireball whiskey for $5,000. Fireball only sends Mickey 495 pints. Is this perfect tender? _______________.
No. Mickey can reject all of the whiskey. Note that rejection of the goods is not rejection of the offer. There is a contract here.
112
In order to properly reject the goods, a buyer must: (3 things)
(1) Notify the seller of the rejection within a reasonable time;
(2) Notify the seller of the particular defect; and
(3) Hold the goods for a reasonable time so the seller can get them back.
113
If the goods are rightfully rejected and the buyer has paid some or all of the price, then she will have a _____ ______ in the rejected goods.
security interest
114
What if the seller fails to give reasonable instructions as to what the buyer should be doing once the bad goods have been delivered? Buyer has three options:
(1) Continue to store the goods on the seller’s account;
(2) Ship the goods back;
(3) Resell the goods for the seller.
115
A buyer may _____ acceptance of the goods.
revoke. This happens when the goods seem ok at delivery; but the defect is difficult to detect; and the buyer discovers the defect within a reasonable time.
116
Mickey contracts for 500 pints of Fireball whiskey for $5,000. Fireball delivers all 500 pints of the whiskey, and Mickey stores the bottles in her cellar. A month later, she cracks a bottle to find it is cola (not whiskey). What can she do?
She can revoke her acceptance and send the bottles back.
117
Mickey contracts for 500 pints of Fireball whiskey for $5,000. Fireball delivers all 500 pints of the whiskey, and Mickey stores the bottles in her cellar. A month later, she cracks a bottle to find it is cola (not whiskey). Mickey decides to use 50 bottles of the cola as a mixer. Can she revoke her acceptance of the goods by saying they were not perfect tender because they were not whiskey?
No the goods must not be substantially changed.
118
A buyer can revoke their acceptance as long as a ____ ____ has not passed.
reasonable time
119
The buyer must give the seller a chance to cure if the seller fails to tender perfect goods when (2 elements)
(1) There is time left on the contract
| (2) The seller had reasonable grounds to believe that the buyer would accept the tendered goods.
120
Mickey contracts for 500 pints of Fireball whiskey for $5,000. Fireball delivers all 500 pints of the whiskey, and Mickey stores the bottles in her cellar. A month later, she cracks a bottle to find it is cola (not whiskey). When Mickey notifies Fireball of the “cola problem,” Fireball apologizes and sends over 500 bottles of whiskey before the contract deadline. Does Mickey have to pay?
Yes. She rejected the cola, fireball cured by producing perfect tender...so now she has to pay.
121
Mickey contracts for 500 pints of Fireball whiskey for $5,000. Fireball delivers all 500 pints of the whiskey, and Mickey stores the bottles in her cellar. A month later, she cracks a bottle to find it is cola (not whiskey). When Mickey notifies Fireball of the “cola problem,” Fireball apologizes and delivers 500 bottles of scotch on the last day of the contract instead of whiskey, figuring this would be good enough for Mickey. If Mickey rejects the scotch, can Fireball still cure?
Yes, if they had reasonable grounds to believe Mickey would accept the scotch. How much time do they get? They get a little more time.
122
The default method of delivery is ___ delivery of the goods. The UCC does allow for _____ contracts, however, which is delivery in separate lots.
one, installment
123
The buyer can reject a specific delivery that is not perfect only when there is _______ ______ in that installment that cannot be cured.
substantial impairment (beware this is different than the perfect tender rule, it's relaxed a bit more)
124
Mickey contracts for 1 pint of Fireball whiskey to be delivered each day at 5:00 pm for 500 days. Delivery #345 comes at 5:15pm. Can Mickey reject that delivery?
No. It hasn't been perfect delivery but there hasn't been a substantial impairment.
125
There are three common options for tender. They are:
Seller's place of business; Shipment contract; Destination Contract.
126
A contract that calls for tender at the seller's place of business requires:
If the goods are tendered at the seller’s place of business, then the seller just needs to give the goods to the buyer.
127
When a contract is a "shipment contract" - the UCC requires (3 things) (This is the default UCC option)
(1) Get the goods to a common carrier; (2) Make arrangements for delivery; (3) Notify the buyer.
128
When a contract is a "destination contract" - the UCC requires:
Usually identified by “F.O.B. buyer’s business” - the seller must get the goods to the buyer’s business and notify the buyer.
129
I contract with Brooks Brothers to buy “100 white dress shirts for $10,000 F.O.B. Charlottesville.” Has Brooks satisfied its delivery obligation when it gives the shirts to FedEx and sends me an email saying they are coming?
No. Identify what type of delivery we are talking about. FOB means its a destination contract. They now have to get the stuff over to Charlottesville.
130
When there is a goods contract followed by damage or destruction of the goods before the buyer receives them you have a ___ ___ ___ problem
Risk of loss
131
When you have a risk of loss problem, you will need to work through four different rules to determine who will suffer from the loss. What are they?
(1) Have the parties agreed to who shall bear the risk? Then their agreement will control.
(2) Has either party breached? If so, the breaching party bears the risk of loss. This is true even if the breach is totally unrelated to delivery.
(3) If there's been no breach, ask what type of delivery contract there is. In a shipment contract the risk of loss during delivery rests with the buyer. In a destination contract, the risk of loss during delivery rests with the seller.
(4) If none of the above rules apply, ask if the seller a merchant. If yes, then the risk of loss stays with the seller until the buyer receives the goods. If not, the risk of loss moves to the buyer once the seller has tendered the goods.
132
(Element 3 of Risk of Loss Workflow) In a shipment contract the risk of loss during delivery rests with the ____.
buyer
133
(Element 3 of Risk of Loss Workflow) In a destination contract, the risk of loss during delivery rests with the _____.
seller
134
I contract with Brooks Brothers to buy “100 white dress shirts for $10,000.” Brooks calls to tell me that the shirts are ready, and I can pick them up at the store when I like. That night, the store burns down, and my shirts are destroyed. Do I have to pay for them?
No. (1) Contract doesn't deal with the risk (2) Neither party has breached (3) The goods are not being shipped (4) Because the seller is a merchant, the risk of loss stays with them until the buyer actually receives the goods.
135
I contract with the law school bookstore to sell 10 used copies of my book for $10 each. I tell the bookstore manager that I’ve left the books outside my office, so she can get them whenever. That night, a pack of law review editors steal and burn all the books. Does the bookstore have to pay for them?
Yes. (1) The contract hasn't dealt with the risk (2) There's no breach (3) The goods are not being shipped (4) The seller is not a merchant, therefore the bookstore has the risk because the seller has tendered the goods.
136
A seller has an insurable interest as long as she has _____ ___ __ ____ ____
title or a security interest
137
A buyer has an insurable interest when the goods are
specifically identified
138
I contract to sell you my Jeep for $5,000. Do you have an insurable interest?
Yes. That good has been specifically identified. You can take out insurance against the Jeep even before performance.
139
I contract to sell you all of the potatoes that I harvest in my garden for $500. Do you have an insurable interest?
Yes, as soon as they are planted.
140
TRUE OR FALSE. Following a proper rejection, the seller has an absolute right to cure.
F
141
Which of the following is required for a buyer to properly reject goods?
(a) The buyer must notify the seller of the rejection within a reasonable time.
(b) The buyer must notify the seller of the particular defect.
(c) The buyer must hold the goods for a reasonable time.
(d) All of the above
d
142
Which of the following statements is FALSE regarding a buyer’s obligation after rejection if the seller fails to give instructions within a reasonable time?
(a) The buyer can store the goods for the seller’s account.
(b) The buyer can reship the goods to the seller.
(c) The buyer can resell the goods for its own profit.
(d) None of the above
c
143
TRUE OR FALSE. In an installment contract, a buyer may reject any nonconforming installment.
F
144
Which of the following statements regarding the risk of loss is FALSE?
(a) Before the parties have formed a contract for the sale of goods, the seller bears the risk of loss.
(b) If the parties have a destination contract and the goods are lost in transit, it is the buyer’s loss.
(c) If the parties have a shipment contract and the goods are damaged in transit, it is the buyer’s loss.
(d) None of the above
B
145
Payment is going to be due at the ____ and ____ at which the buyer is going to receive the goods.
time, place
146
The tender of payment is a ________ to the seller's duty to complete its obligation
condition
147
A seller may ship under ________ - it is entitle to hold onto the goods until the buyer pays
reservation
148
Tender of payment may be made in any reasonable manner but a seller can demand _____ _____ if she gives any extension of time necessary to procure it
cash payment
149
For installment sales payment may be made or demanded _______
with each installment
150
The buyer enjoys a right to _______ prior to payment. However, beware a contract that requires payment on delivery (COD) - in this situation the buyer does not have this right.
inspect
151
___________ pays for any expenses associated with buyer inspection, unless the goods do not conform and are rejected.
the buyer
152
The primary excuse to performance in the UCC is the doctrine of __________.
impracticability
153
A common impracticability fact pattern on the bar is when performance becomes _______ after the contract is formed. Or when there is a failure of a particular ____ ___ _____. But something that just makes performance more _______ than was anticipated will not normally excuse performance.
illegal, source of supply, expensive
154
For impracticability, look for something that hinders the _________ at all, not just the cost of performance.
ability to perform
155
Does partial inability to perform due to a supply deficiency excuse the seller from performing?
No. If you're running out of goods the seller has to allocate the available supply among all customers in a fair and reasonable manner.
156
If the agreed upon method of delivery becomes commercially impracticable without the fault of either party then _________________.
any commercially reasonable method of delivery must be tendered and accepted.
157
If identified goods are destroyed, then there are three elements, what are they:
First, ask whether the risk of loss has passed to the buyer, then the buyer is on the hook.
Second, ask whether there has been a total destruction. In that case the contract is avoided and neither side must perform or pay.
Third, if the goods are damaged but not destroyed, the contract is avoided unless the buyer wishes to take the damaged goods at a reduced price. If so, the buyer has no claim against the seller.
158
When it comes to remedies in the UCC, remember that the UCC uses the perfect tender rule in all situations except for __________, where the rule is that the seller is in breach only when the breach is material, not imperfect.
installment contracts
159
I agree on Jan. 1 to buy 100 white shirts from Crooks Brothers for $1,000. Shortly thereafter, I let it slip that I’m broke and never going to pay this money. Does Crooks have to keep making the shirts?
No, as long as my repudiation is clear and unequivocal.
160
When you see a clear and unequivocal repudication, the non breaching party has two options:
(1) Treat the repudiation as a present breach and sue immediately for damages; or ignore the repudiation, demand performance and see what happens.
Note: If you have completed the entire performance and are only waiting for the other side to pay you and the time of the contract has not come due, you cannot sue early.
161
A party can retract its repudiation as long as...
the other side has not commenced a lawsuit for breach or acted in reliance on that repudiation by changing its position.
162
What if you are unsure if the other side has repudiated?
UCC - reasonable grounds for insecurity about the other sides performance allows you to demand an adequate assurance of performance.
If the questionable party fails to respond within a reasonable time, the other party can treat it as a repudiation.
163
I agree on Jan. 1 to buy 100 white shirts from Crooks Brothers for $1000. Half the money is due on Feb. 1; the balance and the shirts are due Mar. 1. In the middle of January, I see a news exposé about financial trouble at Crooks Brothers and they fail to return my phone calls. I send a letter demanding adequate assurance of performance on Jan. 15. If they say, “Don’t worry, we’re almost done with the shirts,” must I make the $500 Feb. 1 payment?
Yes. And if Crooks Brothers does not respond, then you don't have to make that payment.
164
Which of the following statements is TRUE regarding the buyer’s obligation to pay?
(a) Payment is due at the time and place at which the buyer is to receive the goods.
(b) A seller may send the goods under reservation, which permits the carrier to hold the goods until the buyer pays.
(c) Tender of payment may be made in any reasonable manner unless the seller demands payment in cash and gives any extension of time reasonably necessary to procure the cash.
(d) All of the above
d
165
TRUE OR FALSE. When a seller is partially unable to perform due to a deficiency in supply, the seller is fully excused from the contract.
False.
166
Which of the following statements regarding anticipatory repudiation is FALSE?
(a) Anticipatory repudiation can occur if one party fails to provide adequate assurances of performance within a reasonable time after demand by the other party.
(b) A party can retract its repudiation unless the non-breaching party has since canceled the contract, changed her position, or otherwise indicated a belief that the repudiation is final.
(c) Upon repudiation, the non-breaching party must immediately seek available remedies under Article 2 for breach of contract.
(d) None of the above
c, because it's anticipatory repudiation, so the non breaching party can ignore the repudiation and demand performance also.
167
Buyer breach. Mickey contracts with Pabst to buy a keg of beer for $100. Mickey repudiates the contract, and Pabst sells the keg to a liquor store for $80. What are Pabst’s expectation damages?
$20. Their contractual price was $100. They resold for $80. 100-80 = 20
168
Same facts as Example 56 but no one else wants to buy this beer and Pabst cannot resell the keg at any price. What are Pabst’s expectation damages?
$100. They tried to mitigate but nobody wants it.
169
Buyer refusal to pay. Mickey contracts with Pabst to buy a keg of beer for $100. Mickey gets the keg but breaches the contract by refusing to pay. The current price for a keg of Pabst has risen to $110. What are Pabst’s expectation damages?
$100. Don't get slipped up by market value because it is irrelevant. Contract price is all that matters.
170
Seller breach. Mickey contracts with Pabst to buy a keg of beer for $100. Pabst fails to deliver the keg, and Mickey has to buy her keg from Blatz for $120. What are Mickey’s expectation damages? _________________. When Pabst refuses to deliver, can Mickey buy a keg of Utopia Beer for $25,000 and sue Pabst for $24,900?
(1) $20. (2) No, she can't do that because the cover must be similar.
171
Mickey contracts with Pabst to buy a keg of beer for $100 (paid up front). When Pabst delivers the keg, it is only half full but Mickey is desperate to have her beer and keeps the half keg. It can be shown that a half keg of Pabst costs $60 at the corner liquor store. What are Mickey’s expectation damages? Same facts as Example 60. Can Mickey send the keg back instead?
$60. That is going to give her the benefit of her contract.
Yes.
172
Unforeseeable consequential damages are not recoverable unless
the breaching party had some reason to know about these damages.
173
__________ damages are the types of losses almost anyone would suffer if there was a breach.
general. This can include things like incidental damages such as the cost of storing rejected goods, finding a new buyer, or finding a replacement vendor.
174
__________ damages are losses that are unique or special to this plaintiff.
consequential
175
consequential damages are only recoverable if
Only recoverable if reasonably foreseeable or if the non-breaching party notified the other party at the time of contract about the special damages if a breach was to occur.
176
I hire FedEx to deliver Super Bowl tickets to a buyer on eBay for $20. FedEx refuses to honor the contract, and I have to pay UPS $50 for rapid delivery to get the tickets there in time. I also use up $5 in gas driving over to UPS. What are my expectation damages against FedEx?
(50 - 20) + 5 = 35.
177
I hire FedEx to deliver Super Bowl tickets to a buyer on eBay for $20. FedEx refuses to honor the contract. I cannot get another carrier to deliver the tickets in time and as a result the buyer doesn’t pay me the $2,000 ticket price. Since I bought the tickets for $200, can I sue FedEx for my lost profits of $1,800?
No, this is an unforeseeable consequential damage.
178
I hire FedEx to deliver Super Bowl tickets to a buyer on eBay for $20. FedEx refuses to honor the contract. I cannot get another carrier to deliver the tickets in time and as a result the buyer doesn’t pay me the $2,000 ticket price. Since I bought the tickets for $200, can I sue FedEx for my lost profits of $1,800 if I also provide FedEx with the exact details of my transaction?
Yes, unless there are other disclaimers.
You can't recover unforeseeable damages unless you tell seller at the time about the potential consequential damages, which you've done here.
179
Consequential damages can be limited or excluded entirely unless
it would be unconscionable.
180
Limiting consequential damages for personal injury is
prima facie unconscionable. We want people to be responsible for things that cause personal injury.
181
Limiting consequential damages for commercial loss is
ok and common, such as when FedEx puts this in their shipping contract.
182
Lost Volume Profits arise when the paying party breaches. In this case the seller normally has to attempt to sell the goods to someone else. In some circumstances, if the seller is a retailer, if they then sell the good to someone else it isn't right to count the new sale as a mitigation. LVP says we should ....
award the seller the lost profits from that first lost sale in order to compensate them for the breach of the original contract.
183
Outrigger contracts to sell Mickey a speedboat for $15,000 which cost Outrigger $10,000 to buy from the manufacturer. The following week Mickey repudiates the sale. The very next day, Tronald Dump walks in to buy the same boat for $15,000. Mickey argues that Outrigger’s damages are zero because it fully mitigated her breach with the sale to Dump. Is she right?
No, as long as outrigger can show it had plenty of boats and only a few buyers. Calculate LVP 15-10 = 5.
184
Which of the following statements is FALSE regarding consequential damages?
A Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.
B Limiting consequential damages for commercial loss is prima facie unconscionable.
C Limiting consequential damages for personal injury in the case of consumer goods is prima facie unconscionable.
D None of the above
B
185
```
FILL IN THE BLANK. _______________ damages include the cost of storing rejected goods, finding a new buyer, or finding a replacement vendor.
A Incidental
B Consequential
C Liquidated
D Punitive
```
a
186
TRUE OR FALSE. Under UCC Article 2, if the buyer has breached the contract, the seller’s damages can be measured by lost profit if the seller could have supplied both the breaching purchaser and the resale purchaser with the goods.
True
187
Liquidated damages are going to be ok as long as the amount is not __________
a penalty because its unreasonably large.
188
A buyer may request specific performance if the goods
are unique or in other proper circumstances
189
Mickey contracts for 500 pints of Fireball whiskey for $5,000. The whiskey is specifically identified from a special month of production. Fireball breaches and Mickey cannot locate similar whiskey elsewhere. Can Mickey get her whiskey?
Yes. She has a good argument for replevin because the whiskey has been specifically identified.
190
_________ is where the buyer can recover specifically identified goods when she cannot cover a breach by the seller after making reasonable efforts.
replevin
191
A buyer can also assert replevin when partial payment has been made and the seller goes insolvent within ___ days of the payment.
10
192
Mickey contracts for 500 pints of Fireball whiskey for $5,000 with $1,000 down. The whiskey is specifically identified from a special month of production. Fireball becomes insolvent one week later. Can Mickey get her whiskey? __________________. Does she have to pay the other $4,000? ___________.
Yes. Yes. She can't get away from paying the 4k because that's the contractual bargain.
193
_____________ is an equitable right of an unpaid seller to reclaim the goods when the buyer goes insolvent.
Right of reclamation
194
Right of reclamation elements:
(1) Buyer is insolvent at the time of purchase and
(2) The seller must demand return of the goods within 10 days of receipt, or within a reasonable time if the buyer misrepresented his solvency to the seller; and
(3) the buyer must still have the goods.
195
Mickey is broke, but she contracts for 500 pints of Fireball whiskey for $5,000. Fireball sends all 500 pints but learns of her financial situation and asks for the whiskey back five days later. Must Mickey return the whiskey?
Yes.
196
The seller may stop goods that are in transit if
(1) it learns that the buyer is insolvent or
(2) if the buyer fails to make a payment that is due.
However, the goods may not be stopped once the buyer or its bailee receives the goods.
197
The UCC governs whether a buyer or seller can sue a third party for damage to the contract goods.
The seller can sue if she retains title or has a security interest.
The buyer can sue if the goods are specifically identified.
198
Statute of limitations is normally __________ after the cause of action occurs. This can be modified down by the contract, but not to less than ______. It cannot be increased.
4, 1
199
A buyer who obtains title unlawfully possesses a _________ title.
voidable
200
A person with voidable title can transfer good title to a ________________ for value.
This is true even when: (3)
But title cannot be obtained through ______
Exceptions: (2)
good faith purchaser
-
The seller was deceived by the buyer’s identity;
The buyer’s check bounced; and
Delivery was procured through fraud.
-
Theft
-
The buyer has made improvements to the goods; or
• The true owner indicates, by words or conduct, that the thief had good title.
201
```
FILL IN THE BLANK. Under Article 2, a seller who has delivered goods to an insolvent buyer has the right to reclaim the goods if the seller demands their return within __________ of the buyer’s receipt of the goods.
A 7 days
B 10 days
C 21 days
D one month
```
b
202
TRUE OR FALSE. Under Article 2, an action for breach of any sales contract must be commenced within two years after the cause of action accrues.
ATRUE
BFALSE
B
