Contract Terms

Question 1

What is the parol evidence rule?

Answer 1

Keeps out evidence of a prior or contemporaneous agreement (oral or written) that contradicts a later writing
Only applies to writings (oral contracts have SoF problems, not parol evidence)

Question 2

What are exceptions to parol evidence rule?

Answer 2

1. Correct clerical error
2. Establish defense against formation (eg, misrepresentation)
3. Interpret vague or ambiguous terms
4. Supplement partially-integrated writing (final but not complete statement of terms agreed to); merger clause negates

Question 3

Does the parol evidence rule apply to subsequent developments?

Answer 3

No application; parol evidence rule has nothing to do with what happens AFTER agreement reduced to writing

Question 4

How can conduct be used as a contract term to explain or fill in gaps? There are three.

Answer 4

1. Course of performance: what parties did under this contract; best evidence of what parties intended
2. Course of dealing: what parties did under prior contracts with each other; 2d best
3. Usage of trade: what others in trade do in similar contracts; worst evidence

Question 5

When is there liability for breach of express warranties?

Answer 5

Art. 2: seller liable for breach of express warranty if basis of the bargain (ie, if buyer could have relied on the express warranty)
Examples: statements of fact, promises, descriptions of goods, use of sample or model — NOT OPINION

Question 6

What are the two types of implied warranties?

Answer 6

1. Implied warranty of merchantability

2. Implied warranty of fitness for particular purpose

Question 7

What is the implied warranty of merchantability?

Answer 7

Definition: goods fit for ordinary purpose
Trigger: seller must be merchant who deals in good of the kind, with specialized knowledge of particular goods involved

Question 8

What is the implied warranty of fitness for a particular purpose?

Answer 8

Definition: goods fit for buyer’s particular purpose
Trigger: buyer has special purpose in mind; buyer relying on seller to pick suitable goods; seller knows that
Note: seller need not be merchant at all

Question 9

What is the situation of seller warranties for a lease of goods?

Answer 9

Same warranties as Art. 2

EXCEPT: finance lease, where warranties provided by merchant, not financier

Question 10

Can a seller disclaim warranties?

Answer 10

Seller can disclaim implied, but not express, warranties

Disclaimer must be conspicuous and use word “merchantability”

Question 11

Can I limit buyer’s remedies under warranties?

Answer 11

Seller can limit buyer’s remedies for breach of ANY warranty if limitation not unconscionable
EXCEPTION: limiting remedies for personal injury in case of consumer goods is presumed unconscionable

Question 12

What dictates risk of loss with a sale of goods?

Answer 12

The agreement of parties controls.

Question 13

What if the risk of loss is on the seller?

Answer 13

Seller must provide new goods to buyer at no extra cost

Question 14

What if the risk of loss is on the buyer?

Answer 14

Buyer must still pay full contract price

Question 15

Does it matter if the loss is unrelated to the breach? IE does that person breaching still bear risk of loss?

Answer 15

YES

Question 16

For delivery by a common carrier, when does the risk of loss shift?

Answer 16

When seller completes delivery obligations.

Question 17

For non carrier cases, when does risk of loss shift?

Answer 17

1) Where you are a merchant, seller bears risk of loss until buyer takes possession.
2) Where not a merchant, seller bears risk of loss until goods are tendered (made available)
3) Where it is a lease, generally risk of loss on lessor unless it is a finance lease.

Question 18

Where we have delivery by common carrier and a shipment contract governs, when does ROL shift?

Answer 18

Seller must get goods to common carrier, make delivery arrangements, and notify buyer — then ROL shifts to buyer

Question 19

Where we have delivery by common carrier and a destination contract governs, when does ROL shift?

Answer 19

Seller must get goods to specific destination — then ROL shifts to buyer

Question 20

When we have a delivery by common carrier and a free on board contract governs, when does ROL shift?

Answer 20

ROL shifts to buyer at named location
If place named is where seller is located, shipment contract
If place is anywhere else, destination contract