Advanced Sales

Question 1

“Goods” in UCC context

Answer 1

All things moveable at time identified to be sold.

Question 2

Goods associated with real property governed by Art. 2

Answer 2

• Sale of structures to be removed from land, minerals, each severed by Seller
• Sale of growing crops or timber
• Fixtures that can be severed without material harm

Question 3

“Merchant”

Answer 3

Person who deals in kind of goods involved in the transaction or holds himself out as one with special knowledge or skill concerning practices or goods involved in transaction

Question 4

“Good Faith”

Answer 4

Any seller - subjective standard

Merchant - observance of reasonable commercial standards of fair dealing (objective standard)

Question 5

Merchant’s firm offer

Answer 5

1) words of firmness
2) in writing
3) signed by merchant
4) reasonable time, not to exceed 90 days

Question 6

Price gap-filler

Answer 6

Reasonable price at time of delivery

Question 7

Effect of shipment of nonconforming goods

Answer 7

Acceptance and breach

-Unless it’s in accommodation, in which case it’s a counteroffer

Question 8

Battle of the forms with at least one nonmerchant

Answer 8

Additional/different terms not part of contract unless the original offeror expressly assents

Question 9

Battle of the forms with two merchants

Answer 9

Additional terms in contract, unless:

1) term materially alters K
2) offer expressly limits acceptance to terms of offer; or
3) offeror objects to term within reasonable time

Different terms get knocked out

Question 10

Auction bid contemporaneous with falling of hammer

Answer 10

Auctioneer’s choice

Question 11

Default auction type

Answer 11

Reserve auction

Question 12

Bid by Seller

Answer 12

-Winning bidder may avoid sale or take goods at price of last good-faith bid, unless:

1) Forced sale
2) Seller specifically gave notice of reservation of right to bid

Question 13

Defenses to contract formation

Answer 13

Statute of Frauds

Question 14

Statute of Frauds

Answer 14

1) Writing
2) Signature of the party to be charged
3) Sale of goods for over $500
4) Merchant’s confirmatory memo - merchant who fails to object within 10 days of receipt is bound

Question 15

Exceptions to Statute of Frauds

Answer 15

1) Specially manufactured goods unsuitable for sale to another buyer in the ordinary course of business and seller made substantial beginnings in manufacturing goods or commitments for purchase of goods
2) Court admission
3) Performance - to extent of goods received/accepted
4) Partial payment for indivisible item

Question 16

Standard for unconscionability

Answer 16

Contract or term that is so unfair to one party at the time contract entered into that no reasonable person would have agreed to it.

Question 17

Destruction or injury to identified goods without fault of either party

Answer 17

Before risk of loss passes to buyer:

• Total destruction - contract avoided
• Partial destruction - contract avoided or buyer can take goods at a reduced price

-After risk of loss passes to buyer - Buyer must perform

Question 18

Impracticability

Answer 18

• Occurrence of circumstance that both parties assumed would not occur, and that circumstance has material effect on seller’s ability to perform (basically, force majeure)
• Including a failure of a particular source of supply specified in the contract

Question 19

Reasonable time for providing adequate assurances

Answer 19

Up to 30 days

Question 20

Retraction of repudiation

Answer 20

May be retracted unless:

1) Repudiating party’s next performance is due
2) Aggrieved party cancelled the contract
3) Aggrieved party changed position
4) Aggrieved party otherwise indicated belief that repudiation was final

Question 21

Explanation or supplementation of terms

Answer 21

1) consistent additional terms if only partially integrated
2) course of performance of contract
3) course of dealings
4) use of trade or business

Question 22

Shipment contract

Answer 22

Default under the UCC

Seller is obligated to:

1) put goods in hands of carrier
2) make reasonable contract for shipment
3) promptly tender shipping documents to buyer
4) promptly notify buyer of shipment

Question 23

Expenses of inspection

Answer 23

Borne by buyer, unless the goods are defective

Question 24

Goods insurable by buyer

Answer 24

Identification of goods under contract.

1) At time of contract for specific goods already in existence
2) Otherwise, when goods are designated for delivery

Question 25

Risk of Loss for a non-carrier contract

Answer 25

Non-merchant seller: After seller tenders goods to buyer

Merchant seller: When buyer takes physical possession

Question 26

Non-carrier contract

Answer 26

Seller must tender delivery at seller’s place of business or where goods located at time of contract if both parties know location of goods.

Question 27

Destination contract

Answer 27

Seller obligated to:

1) tender delivery at specified destination
2) promptly notify buyer of delivery
3) provide necessary documentation for buyer to obtain possession

Question 28

Risk of loss for a carrier contract

Answer 28

Shipment - when seller gives possession of goods to carrier, makes an appropriate contract, and notifies buyer that goods have been shipped;
Destination - when seller tenders goods to buyer at destination point

Question 29

Exceptions to risk of loss rules

Answer 29

1) Nonconforming goods (not until defect is cured or buyer accepts goods despite nonconformity)
2) Justifiable revocation of acceptance (remains with seller to the extent not covered by buyer’s insurance)
3) Breach or repudiation by buyer (Stays with buyer for commercially resaonable time to extent seller’s insurance does not cover loss

Question 30

Passage of title for non-carrier cases

Answer 30

When goods have been identified at the time of contracting and no document of title needs to be delivered, passage of title occurs at time and place of contracting

Question 31

Exceptions to perfect tender rule

Answer 31

1) Shipment contract - Failure to contract with carrier or notify the buyer can be rejected only if material loss or delay results
2) Form of delivery commercially impracticable - rejection only if seller fails to use commercially reasonable substitute
3) Installment contract - Installment can be rejected only if it substantially impairs the value of that installment and cannot be cured; contract can be rejected only if nonconformity substantially impairs the value of the contract and cannot be cured.
4) Course of dealing/performance or trade usage
5) Agreement by parties

Question 32

Buyer’s responsibilities after rejection

Answer 32

Buyer with security interest may sell goods in good faith and commercially reasonable manner, but must account to seller for excess over security interest

Buyer without security interest in goods, may hold with reasonable care. If seller fails to give instructions, may:

1) store the goods for seller’s account
2) reship them to seller
3) resell them for seller’s account

Question 33

When acceptance may be revoked

Answer 33

1) Defect substantially impairs value; and
2) Buyer accepted goods on reasonable belief that seller would cure defect but seller has failed to do so; or
3) Buyer accepted goods w/o discovering defect and acceptance was reasonable because induced by difficulty in discovering defect or seller gave assurances that goods were conforming

Question 34

Buyer’s damages

Answer 34

• “Benefit of the bargain” - market price less contract price, determined at place of tender and time buyer learns of breach
• Cost of replacement less contract price (cover)
• Incidental damages (such as inspection damages)
• Consequential damages - if foreseeable at the time of contract

Question 35

Buyer’s right to replevin

Answer 35

Goods must be identified in contract:

1) Cover unavailable
2) Goods undelivered, partial payment by buyer and seller becomes insolvent within 10 days of initial contract
3) Consumer goods undelivered and partial payment made by buyer

Question 36

Buyer’s right for specific performance

Answer 36

Unique goods

Question 37

When Buyer resells goods and is sued by subsequent buyer

Answer 37

Seller can defend action (“vouching in”)

Question 38

Seller’s right to recapture goods

Answer 38

1) Goods delivered to insolvent buyer on credit within 10 days after buyer’s receipt of goods, unless there has been a written misrepresentation of solvency within the last three months
2) Goods delivered to buyer who pays with dishonored check
3) Stoppage in transit if seller learns of insolvency or breach

Question 39

Seller’s damages

Answer 39

1) Full contract price (only if (i) buyer has accepted goods, (ii) conforming goods lost or damaged after risk of loss passed to buyer, or (iii) identified goods unable to be sold
2) Contract price less market price (measured at time and place for delivery)
3) Contract price less resale price ((i) must be commercially reasonable, (ii) seller must give buyer reasonable notice of sale, unless perishable or decline in value quickly, (iii) Buyer may purchase goods)
4) Lost profits for lost volume sellers (needs to show only that it could have supplied both the breaching purchaser and resale purchaser
5) Incidental damages (commercially reasonable charges, expenses, or commissions)

Question 40

Warranties

Answer 40

1) Warranty of title
2) Warranty against infringement of copyright (merchant who regularly deals in goods of kind warranted)
3) Express warranties
4) Implied warranty of merchantability ((i) given by merchant seller or (ii) serving food and drink for value, and seller need not be aware of breach, it is strict liability)
5) Implied warranty of fitness for particular purpose (seller with reason to know at time of contracting from any source of purpose of goods required, and buyer relies on seller’s skill or judgment to select or furnish goods)

Question 41

Exclusion/Modification of warranties

Answer 41

1) Express - negation or limitation inoperative to the extent construction is unreasonable;
2) Implied warranty of merchantability - disclaimer may be oral, but must be conspicuous if in writing
3) Implied warranty of fitness for particular purpose - Disclaimer must be in writing and conspicuous (including “as is”)
- Buyer has a chance to examine goods as to any defects exam would have revealed

Question 42

Statute of limitations for breach of contract

Answer 42

Four years, may be reduced to not less than one year, may not be extended.

Begins to accrue when breach occurs.

Question 43

Thief passing title

Answer 43

Thief cannot pass good title even to good-faith purchasers unless (i) buyer has made improvements to goods or (ii) true owner indicates thief had good title