Damages & Risk of Loss Flashcards
Identification of the goods
Risk of loss does not transfer to the buyer unless the goods have been identified. Remember 12 month rule and fungible bulk rule.
12 month rule
Applies to young animals, crop and wool. If
gestation period is more than 12 months, identification is when it is born, harvested. If it was less than 12 months identification would happen at time of contract.
Fungible bulk rule
Does not have to be separated to be considered identified. Usually only applies to things like grain & oil and stuff like that.
Risk of Loss General rules
Merchant: passes on receipt of goods.
Non-merchant: passes on tender of delivery.
Delivery Terms
F.O.B. – (free on board) F.A.S. – free along side C.I.F. – Cost, insurance, freight C&F – Cost and freight Ex-ship - off the ship
When does risk of loss transfer in a shipping contract?
F.O.B. Place shipping from
risk of loss passes to buyer upon DUE delivery from the seller to the carrier
When does risk of loss transfer to a buyer in Ex-ship contract?
As soon as it is unloaded from the ship.
When does risk of loss transfer in a delivery or destination contract?
F.O.B. Place delivering to
Goods must be delivered in order for risk of loss to transfer to the buyer.
Obligations of Buyer & Seller
Buyer: Accept goods and pay; Seller transfer title and deliver goods
Perfect Tender Rule
if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may
(a) reject the whole; or
(b) accept the whole; or
(c) accept any commercial unit or units and reject the rest
What is an Installment Contract?
the delivery of goods in separate lots are authorized to be separately accepted
What are the buyer’s options when goods in an installment contract are damaged?
The buyer may reject if the non-conformity SUBSTANTIALLY IMPAIRS the value of that installment.
If the non-conformity SUBSTANTIALLY IMPAIRS the value of the whole contract there is a breach of the whole.
When may a seller who ships non-conforming goods cure?
When the time for performance has not yet expired
Damages if Buyer covers
Contract Price - Cover Price + incidental damages
Damages if Buyer does not cover
Market Price - Contract Price
Damages for a lost volume seller
Lost Profit which is defined as Sales price minus the variable expenses.
Two types of expenses for a lost volume seller?
Fixed expenses: Overhead etc.
Variable Expenses: Cost of material etc.
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Sellers options if Buyer breaches Contract?
- Withhold delivery of such goods;
- Stop delivery by any bailee as hereafter provided
- proceed under the next section respecting goods still unidentified to the contract;
- Resell and recover damages as hereafter provided
- Recover damages
- Cancel.
When can a buyer revoke his acceptance?
Buyer can only revoke is acceptance if there has been a substantial impairment.
TWO INSTANCES **
1. Whatever is wrong must have been difficult to find.
2. Where the seller has promised to fix something and never fixes it.
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Effect of Sellers breach on risk of loss
Remains on the seller until cure or acceptance
What must buyer do when rejecting goods?
Take care of the goods
What must a merchant buyer do when rejecting goods?
Must follow any reasonable written instructions.
What constitutes acceptance of goods?
- Signify you accept
- do not reject
- does any act inconsistent w sellers ownership
Shaken faith doctrine
Only applies to new cars. If it doesn’t work at first, likely to still have problems later.
What steps must a seller take to reject non-conforming goods?
- Notify seller within a reasonable time 2. take reasonable care of the goods
Two situations when seller can cure?
- time for performance is not up
2. seller thought goods would be acceptable.
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If buyer resells goods what must he do?
Notify seller of resale. Sale for a commercially reasonable price.
Two different measure of damages when buyer rejects for non-conformance
- Sue for damages
OR - resale
Cannot have it both ways.
Measure of damages for a lost volume seller
Sales price minus the variable expenses.
Incidental damages
Inspection, receipt, transportation and care and custody
Consequential Damages
Damages arising directly from the breach.
Retraction of anticipatory repudiation
As long as buyer has not covered seller can retract.
Damages if buyer covers?
Difference between the contract price and the cover price.
Damages if buyer does not cover?
Contract price minus Contract price.
Who chooses which damage measure to use?
Buyer
Who can request Adequate Assurances?
Either party can request Adequate Assurance in writing if there are reasonable grounds for insecurity.
MUST BE IN WRITING
What can the buyer do upon anticipatory repudiation?
- Suspend its own performance
- Sue for breach
OR
Wait a commercially reasonable time
Statute of Limitations
Four years. Unless parties agree otherwise, no more than 4, no less than 1.
