Article 2 Provisions on Interpreting Ks

Question 1

Gap-Filler Terms

Answer 1

• key to forming K for sale of goods = quantity term
• if other terms are missing from the agreement, Art 2 has gap-filler provisions to fill in missing terms

Question 2

Gap-Filler Terms - Price

Answer 2

Price = reasonable price at time for delivery IF:
1) nothing has been said as to price
2) price is left open to be agreed on by the parties + they fail to agree OR
3) price is to be fixed in terms of some standard set by a third person or agency and it isn’t set

Question 3

Gap-Filler Terms- Place of Delivery

Answer 3

• if not specified, place usually is the seller’s place of business, if they have one
• otherwise, it’s the seller’s home

Question 4

Gap-Filler Terms - Time for Shipment or Delivery

Answer 4

• if time isn’t specified, shipment or delivery is due w/in a reasonable time

Question 5

Gap-Filler Terms - Payment

Answer 5

• if time for payment isn’t specified, payment is due at time + place at which buyer is to receive the goods

Question 6

Gap-Filler Terms - Assortment

Answer 6

• if K provides that assortment of goods is to be delivered + doesn’t specify which party is to choose, the assortment is at the buyer’s option
• if a party who has right to specify the assortment doesn’t do so seasonably, the other party is excused from any resulting delay + may either proceed in any reasonable manner (ex: choose a reasonable assortment) or treat the failure as a breach

Question 7

Express Warranties

Answer 7

• any affirmation of fact or promise made by seller to buyer, any description of the goods, + any sample or model creates an express warranty if the statement/description/sample/model is part of the “basis of the bargain”
  -> need only come at such time that buyer could’ve relied on it when they entered into K
  -> buyer doesn’t need to prove actually relied on it, BUT seller can negate by proving buyer didn’t in fact rely
• not necessary that seller intended the affirmation of fact/description/model/sample to create a warranty

Question 8

Seller’s Statements of Value or Opinion

Answer 8

• DON’T create express warranty

Question 9

Implied Warranty of Merchantability

Answer 9

• implied in every K for sale by a merchant who deals in goods of the kind sold
• warranty that the goods are merchantable -> must at least be “fit for the ordinary purpose for which such goods are used”

Question 10

Implied Warranty of Merchantability - Seller’s Knowledge of Defect

Answer 10

• NOT relevant
• makes no difference that seller didn’t know of the defect or couldn’t have discovered it
• not based on negligence
  -> rather, based on absolute liability imposed on certain sellers

Question 11

Implied Warranty of Fitness for a Particular Purpose

Answer 11

Warranty implied in K for sale of goods whenever:
1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used + that buyer is relying on the seller’s skill + judgment to select suitable goods AND
2) buyer in fact relies on seller’s skill or judgment

Question 12

Warranty of Title

Answer 12

• any seller of goods warrants that the title transferred is good, that the transfer is rightful, + that there are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting
• warranty arises automatically + need not be mentioned in K

Question 13

Warranty Against Infringement

Answer 13

• merchant seller regularly dealing in goods of the kind sold automatically warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims
• BUT a buyer who furnishes specifications for the goods to the seller must hold the seller harmless against such claims

Question 14

Disclaimer of Warranties - Warranty of Title

Answer 14

• can be disclaimed or modified only by specific language or by circs that give buyer notice that the seller doesn’t claim title or that they’re selling only such rights as they or a third party may have (ex: sheriff’s sale)

Question 15

Disclaimer of Warranties - Implied Warranties

Answer 15

• implied warranties of merchantability + fitness for particular purpose can be disclaimed by either specific disclaimers or general methods of disclaimer

Question 16

Disclaimer of Warranty of Merchantability

Answer 16

• can be specifically disclaimed or modified only by mentioning merchantability
• if sales K in writing, disclaimer must be conspicuous

Question 17

Disclaimer of Warranty of Fitness for a Particular Purpose

Answer 17

• can be specifically disclaimed only by a conspicuous writing
• written disclaimer sufficient if it says, ex, “there are no warranties which extend beyond the description on the face hereof”

Question 18

Disclaimer - Meaning of “Conspicuous”

Answer 18

• term = conspicuous when “so written, displayed or presented that a reasonable person against whom it is to operate ought to have noticed it”

Language in body of a writing is conspicuous if:
1) in larger type than surrounding text
2) in a contrasting type, font, or color OR
3) set off from the text by marks that call attention to it

Question 19

Other Methods of Disclaiming Implied Warranties

Answer 19

• by “as is” or similar language
• by examination or refusal to examine
• by course of dealing, course of performance or usage of trade

Question 20

Disclaimer - By “As Is”, “With All Faults”, Etc

Answer 20

• unless circs indicate otherwise, the implied warranties of merchantability + fitness can be disclaimed by expressions such as “as is”, “with all faults”, or other expressions that in common understanding call buyer attention to fact that there are no implied warranties
• doesn’t have to be conspicuous BUT hidden or fine-print disclaimer of this type is not effective

Question 21

Disclaimer - By Examination or Refusal to Examine

Answer 21

• if buyer, before entering into K, has examined the goods or a sample or model as fully as they desire or has refused to examine, there’s no warranty as to defects that a reasonable examination would’ve revealed

Question 22

Express Warranties and Disclaimers

Answer 22

• UCC provides that words or conduct relevant to creation of express warranties and words or conduct tending to negate such warranties shall wherever possible be construed as consistent w/ each other
• BUT negation/limitation inoperative to the extent that such construction unreasonable -> means once express warranty made, VERY difficult to disclaim

Question 23

Warranties + Limitations on Damages

Answer 23

• parties can include in their K a clause limiting the damages available in case of breach of warranty
• BUT such limitation won’t be upheld if unconscionable
• warranty disclaimers that limit damages for personal injury caused by breach of warranty on consumer goods are prima facie unconscionable

Question 24

Timing - Disclaimers + Limitations on Liability in the Box

Answer 24

• to be effective, disclaimer of warranty or limitation on remedies must be agreed to during bargaining process
  -> although a few cts hold otherwise, most hold that a warranty disclaimer or limitation on remedy included inside packaging of goods isn’t effective against buyer

Question 25

Clickwrap

Answer 25

• computer software often comes w/ terms that appear on screen during installation -> purchaser must click to agree to terms before installing
• limits + disclaimers usually upheld on rationale that purchaser can return software if they disagree with the conditions

Question 26

Buyer’s Damages for Breach of Warranty - General for Differences Between Goods Tendered + as Warranted

Answer 26

• measure of damages generally difference between value of goods accepted + value of goods as warranted, measured at time + place of acceptance
• if there are special circs, damages may be measured differently to account for those circs
• in addition, buyer can recover appropriate incidental + consequential damages

Question 27

Remedy - Breach of Warranty of Title

Answer 27

• goods reclaimed by true owner or lienholder -> buyer dispossessed
• buyer can then rescind K, revoke acceptance of goods, or sue for damages
• value of goods accepted is deemed to be nothing -> damages = value of goods as warranted
  -> often same as purchase price (though not always)

Question 28

Remedy for Breach of Warranty of Title - Appreciation + Depreciation

Answer 28

• if there are special circs, value of goods is measured at t of dispossession rather than at t of acceptance
• great appreciation (ex: art) or depreciation (ex: car) in value from t of delivery to dispossession is usually considered a special circ

Question 29

To Whom Do Warranties Extend?

Answer 29

• UCC section 2-318 provides alt provisions determining to whom warranty liability extends beyond the initial buyer
• most states have adopted narrowest provision (Alt A) -> provides that seller’s warranty liability extends to any natural person who is in the family or household of buyer or who’s a guest in buyer’s home if reasonable to expect that the person may use, consume, or be affected by goods + that person suffers personal injury b/c of breach of warranty