K Terms

Question 1

Words of the Parties and PER

Answer 1

Parol Evidence Rule (PER) = keeps out evidence of a PRIOR or CONTEMPORANEOUS agreement (either oral or written) that CONTRADICTS a LATER writing

Exceptions to PER (evidence gets in):

• Correcting a clerical error
• Establishing a defense against formation
• Interpreting a vague or ambiguous term (but keep in mind Plain Meaning Rule)
• Adding to a PARTIALLY INTEGRATED writing (a final statement of the terms is included, but not a complete statement of all terms agreed to; but watch out for merger clause “This K is limited to the terms herein”)

Question 2

The Parties’ Conducts

Answer 2

(Most to least important)
Course of Performance = how parties preformed under THIS K is best evidence of what parties intended

Course of Dealing = what parties did under PRIOR Ks with each other

Usage of Trade = what others in the trade do in SIMILAR Ks

Question 3

Seller’s Warranties of Quality in a Sale of Goods (Art. 2)

Answer 3

Express Warranty = any statement of fact about or description of the goods

• Seller’s use of sample or model still counts
• mere expression of seller’s opinion or fluff does NOT count

Implied Warranties

(1) Implied Warranty of Merchantability (IWM) = goods are fit for their ordinary purpose/use
- ONLY when seller is a MERCHANT who DEALS IN GOODS OF THE KIND (has special knowledge about the particular goods being sold)

Implied Warranty of Fitness for a Particular Purpose = goods are fit for buyer’s particular purpose

• Seller knows buyer has special purpose and is relying on seller to select suitable goods
• Seller does NOT have to be a merchant of any kind!

Question 4

Disclaimers

Answer 4

A seller can disclaim implied, but NOT express warranties

“As is” or “with all faults” = OK to disclaim implied warranties

Seller limiting buyer’s remedies:

• General rule = seller can limit buyer’s remedies for breach of any warranty (express or implied) if the limit is not unconscionable at the time of K
• Exception = limiting buyer’s remedies for personal injury in the case of consumer goods is PRESUMED unconscionable

Question 5

Risk of Loss (ROL) in Sale of Goods (Art. 2)

Answer 5

• If seller bears ROL = seller must provide new goods to buyer for no additional cost, or be liable for breach of K
• If buyer bears ROL = buyer must still pay the K price
• Terms of the agreement control
• Breaching party bears ROL, even if loss is UNRELATED to breach

Question 6

ROL: Delivery by Common Carrier

Answer 6

Delivery by Common Carriers = ROL shifts to buyer when seller completes its delivery obligations

• Shipment K = seller must get the goods to a common carrier, make delivery arrangements, and notify buyer (DEFAULT unless K clearly states otherwise!) and then price is due
• Destination K = seller must get the goods all the way to a specific destination (usually, where buyer is located) and then price is due

“Free on Board” (FOB) + city/place

• if where seller is located = shipment K
• if another city = destination K

Question 7

ROL: Non-Carrier Cases

Answer 7

i.e., buyer picking up or seller delivering

Merchant seller = seller bears ROL until buyer takes physical possession of the goods

Non-merchant seller = buyer bears ROL once seller “tends” the goods (makes them available to buyer)