CONTRACTS/SALES Flashcards
Acceptance
Rejection of Goods
Revocation of Acceptance
VA law allows revocation of acceptance as a remedy for the buyer if the buyer accepted goods on a reasonable belief that the defect would be cured and it has not been cured, or if the buyer accepted them because of the difficulty of discovering the defect or because of the seller’s assurance that they conformed to the contract
In addition, the revocation must occur within a reasonable time after the acceptance and the condition of the goods must not have substantially changed
UCC Acceptance
Under the UCC, an acceptance does not have to mirror the offer
Under UCC, the proposal of different or additional terms does not constitute a rejection and counter offer, but rather is effective as an acceptance unless it is made conditional on assent to the new or different terms
Application:
Example:
Detrimental Reliance
Insecurity
Under VA law, must have reasonable grounds for insecurity about party’s ability to pay under the contract
When reasonable grounds for insecurity arise with respect to performance of either party in a contract, a party may demand, in writing, adequate assurance of performance
A party may suspend performance for which he has not received an agreed return until he receives such assurance. The suspension may be commercially reasonable.
In addition, if a justified demand for reasonable assurances within a period not to exceed 30 days is made, and no satisfactory assurances are furnished, the party failing to so reassure the other will have in effect repudiated the contract.
Anticipatory Repudiation
When a party to a contract indicates that he will not perform through his words, actions, or circumstances, it is deemed anticipatory repudiation
The other party may (i) await performanceby the other party for a commercially reasonable time; (ii) resort to any remedy for breach even though he has urged the other party to perform; or (iii) suspend his own performance
Example:
UCC Statute of Frauds
Contract Enforcement
Under VA law, a contract for the sale of goods for the price of $500 or more is unenforceable unless there is some writing sufficient to indicate that a contract for sale has been made between parties and signed by the party against whom the enforcement is sought or by his authorized agent or broker
The exception to UCC SOF writing condition is if: (i) the goods are to be specially manufactured for the buyer; (ii) the goods are not suitable for sale to others in the ordinary course of business, and (iii) the seller has made either a substantial beginning in their manufacture or commitments for their procurement
UCC Statute of Frauds Exception for “Specially Manufactured” Goods
The exception to UCC SOF writing condition is if: (i) the goods are to be specially manufactured for the buyer; (ii) the goods are not suitable for sale to others in the ordinary course of business, and (iii) the seller has made either a substantial beginning in their manufacture or commitments for their procurement
Example:
Good Title to Goods
Virginia law states that an individual entrusting possession of goods to a merchant who deals in goods of that kind gives the merchant the power to transfer all rights of the entruster to a buyer in the ordinary course of business
Under VA law, a thief of goods can never pass/transfer good title and the person or business whom the thief gives the stolen goods to also has no power to pass/transfer title to anyone else
Fraudulent Misrepresentation
If a party induces another to enter into a contract by using fraudulent misrepresentation (asserting information he knows is untrue), the contract is voidable by the innocent party if she justifiably relied on the misrepresentation
Example:
MERCHANT
Defined as someone who regularly deals in goods of the kind sold or who otherwise, by his profession, holds himself out as having special knowledge or skills as to the practices or of the goods involved or sold
Express Warranty
Any affirmation of fact or promise, made by the seller to the buyer, or any description of the goods creates an express warranty, if the statement or description is part of the basis of the bargain
To be part of the basis of the bargain, it need only come at such a time that the buyer could have relied on it when he entered into the contract. The buyer does not need to prove that he actually did rely. Also, the seller need not intend to create a warranty.
Application:
Example:
Warranty of Fitness for a Particular Purpose
The seller at the time of contracting has reason to know the particular purpose for which the goods are used and that the buyer is relying on the sellers skill or judgment to select or furnish suitable goods, and the buyer in fact relies on the seller’s skill or judgment in selecting such goods
Unless excluded or modified, there is an implied warranty that the goods shall be fit for such purpose
*A particular purpose differs from an ordinary purpose in that anticipates a specific use by the buyer which is particular or unique to the nature of his use for the goods or business
Application:
Example:
Breach of Implied Warranties
To establish a breach of implied warranty, the buyer must show: the existence of a warranty, that the warranty was breached, and that the breach was the cause of loss
Theories for UCC Breach of Contract
Implied Warranty of Merchantability Requirements
Some of the requirements for merchantability include that the goods: pass without objection in the trade under the contract description, are fit for the ordinary purpose for which the goods are used, and conform to any promises or affirmations of fact made on the label
*Of all above requirements, The ordinary purpose test is one of the most common/frequently used
UCC Notice of Breach
Where a tender has been accepted, the buyer must notify the seller of the breach within a reasonable time after he discovers or should have discovered the breach, or the buyer will be barred from any remedy
Also can be used as a defense by the seller as an argument against a breach for failure to notify seller of breach
Implied Warranty of Merchantability: Ordinary Purpose Test
Disclaimer of Warranty
To specifically disclaim warranty, there must be a writing mentioning merchantability with a conspicuous disclaimer
A general disclaimer may also be sufficient with expressions such as “as is” or “with all faults”
However, a buyer can disclaim a warranty. *see flashcard Buyer”Disclaimed” Warranty
Application:
Example:
Implied Warranty of Merchantability
Implied in every sale by a merchant who deals in the goods of the kind sold, there is a warranty that the goods are merchantable
Application: Merchant? Deals in the goods of the kind sold?
Example:
Buyer “Disclaimed” Warranty
When the buyer, before entering into the contract, has examined the goods or has refused to examine the goods there is no warranty, as to defects, which a reasonable examination would have revealed such defects
Additional and Different Terms
Whether the additional and different terms are part of a contract depends on whether the parties are merchants
If both parties are merchants, additional terms in the acceptance will be included in the K unless: they materially alter the original terms of the offer, the offer expressly limits acceptance to the terms of the offer, or the offeror has already objected to the particular terms or objects within a reasonable time after notice of them is received
If any party to the contract is not a merchant, additional or different terms are considered to be mere proposals to modify the contract and do not become part of the contract unless the offeror expressly agrees
Warranty Disclaimer Defense in relation to Warranty terms: material alteration of additional terms
Generally, a term that changes a party’s risk or remedies available is deemed to materially alter the terms
A disclaimer of warranties would clearly alter risk and remedies available, Unless there is an effective disclaimer of warranties
Conflicting Terms in the Offer and Acceptance
In Virginia, conflicting terms in the offer and acceptance are knocked out of the contract, because each party is assumed to object to the included terms
Under the knockout rule, gaps left by the knocked out terms are filled by the UCC gap- filler terms
Application:
Example:
Effective Disclaimer of Warranties
Proper methods of disclaimer
The implied warranties of merchantability and fitness for a particular purpose can be disclaimed by either specific or general methods of disclaimer
Merchantability can be specifically disclaimed only by mentioning merchantability. If the contract is in writing, the disclaimer must be conspicuous. Likewise, fitness for particular purpose can be specifically disclaimed only by a conspicuous writing.
Usually the implied warranties can be generally disclaimed by expressions such as “as is” or “with all faults” that call the buyer’s attention to the fact that there are no implied warranties
Expectation Damages
Reliance Damages
Cover Damages
It may measure damages by the difference between the the contract price and the amount it actually has to pay for replacement goods
In the case of a seller’s anticipatory breach, the buyer’s damages are always measured as of the time …
He learns of the breach
Incidental Damages
Buyer Remedies for Breach
Generally relate to costs of handling rejected goods
Consequential Damages
Buyer remedies for breach
Include any loss resulting from the buyer’s general or particular requirements and needs of which the seller had reason to know of at the time of contracting, and which could not be prevented by buying substitute goods
Order Confirmation
