Sales Flashcards
How are “goods” defined?
All THINGS MOVABLE at the time they’re identified as items to be sold under K.
Def’n of MERCHANT under UCC
One 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 goods involved
3 Main Questions re CREATION OF K
- Was there MUTUAL ASSENT between parties?
- Was there CONSIDERATION (or some substitute for CDN)?
- Are there any DEFENSES to creation of K?
When does UCC apply vs common law?
K for SALE OF GOODS
When does UCC apply to Hybrid K’s?
When PRIMARY PURPOSE was a sale, not a service
Under Article 2, how can offer be accepted when it’s an offer to buy goods for current or prompt shipment?
By a PROMISE TO SHIP or by CURRENT OR PROMPT SHIPMENT of conforming or nonconforming goods
Effect of Shipment of NONCONFORMING goods for CURRENT OR PROMPT SHIPMENT
Acts as an ACCEPTANCE (creating bilateral K) AS WELL AS A BREACH
UNLESS seller seasonably notifies buyer that the shipment is an ACCOMODATION
What’s the effect of a buyer rejecting nonconforming goods sent as an accommodation (as an acceptance of offer to buy goods for current or prompt shipment)?
Shipper NOT in breach and may reclaim the goods.
Accommodation Acceptance Rule
A shipment of nonconforming goods does not constitute an acceptance if the seller reasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
Treated as COUNTEROFFER
Does article 2 recognize Mirror Image rule?
No
MIRROR IMAGE RULE
Proposal of add’l or different terms by offeree does NOT constitute a rejection and counteroffer
Rather, it’s EFFECTIVE AS AN ACCEPTANCE (unless acceptance expressly made cond’l on assent to add’l/different terms)
Whether different/add’l terms become part of K depends on if parties are merchants
ADD’L/DIFFERENT TERMS: When a Nonmerchant involved
Terms of the Offer govern
Offeror must expressly agree to add’l/different terms
ADDITIONAL TERMS: Both parties are merchants
Add’l terms INCLUDED unless:
- they MATERIALLY ALTER original terms
- offer EXPRESSLY LIMITS ACCEPTANCE to original terms, or
- OFFEROR HAS ALREADY OBJECTED to the terms, or OBJECTS W/I A RSN TIME
Can a bilateral K be formed by the parties’ performance?
Yes, if no K formed by parties communications, but they begin to perform as if there is a K, A K IS FORMED
Does a good faith agreement modifying a K subject to UCC need consideration?
No, can be binding w/o CDN
Under UCC, when does K need to be in writing?
When K for the sale of goods for $500 or more
What is req’t of written K under UCC?
Must be signed by party against who enforcement is sought
What is limitation of written K under UCC that omits or incorrectly states a term agreed upon?
K not enforceable beyond the quantity of goods shown in writing
What are 3 situations in which K for goods over $500 is still enforceable though not in writing?
- SPECIALLY MANUFACTURED GOODS and not suitable for sale to others in ordinary course of business
- Party against whom enforcement is sought ADMITS IN PLEADING, TESTIMONY OR OTHERWISE IN COURT that K for sale was made
- PAYMENT OR RECEIPT OF GOODS (and accepted)
S.A.R.P.
What is CONFIRMATORY MEMO RULE?
In K’s between merchants, if 1 party, w/i a RSN TIME AFTER ORAL AGMT MADE, sends to the other party a WRITTEN CONFIRMATION of understanding, satisfies STATUTE OF FRAUDS
What term is the key to forming a K for the sale of goods?
QUANTITY
What warranties are automatically included in a sale of goods K?
WTY of TITLE
Need not be mentioned in K, it’s automatic
What is WTY of TITLE?
- Title is good and transfer rightful, and
2. Goods are free from any security interest, lien or encumbrance
Can WTY of Title be excluded?
Yes, by specific language or circumstances that give buyer reason to know that the person selling doesn’t claim title in himself or that he’s selling only such title as he or 3rd person may have
When is WTY AGAINST INFRINGEMENT implied in K?
a MERCHANT SELLER regularly dealing in goods of the kind warrants that the goods shall delivered free of the rightful claim of any 3rd person by way of infringement
But a BUYER WHO FURNISHES SPECIFICATIONS to the seller must hold seller harmless against such claims
What is WTY of MERCHANTABILITY?
that goods are MERCHANTABLE
Goods must be at least as such as PASS W/O OBJECTION IN THE TRADE UNDER THE K DESCRIPTION.
When is WTY of MERCHANTABILITY IMPLIED?
When seller is a MERCHANT W/ RESPECT TO THE GOODS SOLD
Can WTY of MERCHANTABILITY be waived?
Yes, by
- SPECIFIC DISCLAIMER MENTIONING MERCHANTABILITY
- language like “AS IS” or other language that calls buyer’s attention to exclusion of warranties and MAKES PLAIN there’s no implied WTY
- Buyer has EXAMINED GOODS or REFUSED TO EXAMINE GOODS there’s no disclaimer for any defect that would’ve been discovered
When will a WTY of Fitness for a Particular Purpose by implied?
Whenever:
- ANY SELLER (merchant or not) HAS RSN TO KNOW THE PARTICULAR PURPOSE for which goods are to be used and
- that BUYER IS RELYING on seller’s skill and j’ment to select suitable goods
How are EXPRESS WARRANTIES created?
- any AFFIRMATION OF FACT OR PROMISE MADE BY SELLER TO BUYER which RELATES TO THE GOODS
- any DESCRIPTION OF THE GOODS
- any SAMPLE OR MODEL made part of the basis of the bargain
Does seller have to use formal words like “warrant” or “guarantee” to create express warranty?
No
How to disclaim WTY OF TITLE?
SPECIFIC LANGUAGE
What warranties are disclaimed by AS IS type language?
Implied warranties of MERCHANTABILITY and FITNESS
What is the PERFECT TENDER rule?
If goods or their delivery fail to conform to K in any way, buyer generally may reject all, accept all, or accept any commercial units and reject the rest
What are the elements of FRAUD IN THE INDUCEMENT?
- INTENTIONAL MISREPRESENTATION of a MATERIAL FACT not discoverable by reasonable inspection,
- SCIENTER
- RELIANCE
- DETRIMENT
- DAMAGES
Are common law K remedies available under the UCC?
Yes
What does REVOCATION OF ACCEPTANCE require under UCC?
That a NONCONFORMITY SUBSTANTIALLY IMPAIRS the VALUE of the goods
ACCEPTANCE WAS REASONABLY INDUCED by the difficulty of discovering the nonconformity before acceptance
Buyer GAVE NOTICE of revocation WITHIN REASONABLE TIME after discovery and before any substantial change in the condition of the goods not caused by their own defects
When do terms materially alter the agreement?
If there’s HARDSHIP thru SIGNIFICANT SHIFTING OF BURDEN OR SURPISE
They change a PARTY’S RISK or the REMEDIES AVAILABLE
Under UCC, what are the IMPLIED WARRANTIES?
- FITNESS FOR A PARTICULAR PURPOSE
2. MERCHANTABILITY
Do implied warranties and their rules also apply to LEASES under UCC?
Yes
Does UCC apply to used goods (in addition to new goods)?
Yes
Can a plaintiff pursue both revocation of acceptance and money (compensatory) damages in the same suit?
Yes, buyer doesn’t have to pick between the 2.
When is a buyer entitled to revocation of acceptance?
When nonconformity SUBSTANTIALLY IMPAIRS THE VALUE of the goods (or he was assured nonconformity would be SEASONABLY CURED)
Acceptance was REASONABLY INDUCED by the difficulty of discovering the nonconformity before acceptance or by seller’s assurances to cure, and
buyer GIVES NOTICE of revocation within RSN TIME after discovery and BEFORE ANY SUBSTANTIAL CHANGES not caused by existing defects
Can a buyer still revoke acceptance after giving notice of revocation but still using the goods?
No, significant and avoidable use after notice is an exercise of ownership, depriving buyer of right to revoke
What is the measure of damages for breach of warranty?
EXPECTATION DAMAGES - Difference between VALUE OF GOODS ACCEPTED and VALUE THEY WOULD HAVE IF THEY’D BEEN AS WARRANTED (unless special circumstances show proximate damages of a different amount)
PLUS any INCIDENTAL and CONSEQUENTIAL DAMAGES
When seller fails to deliver or buyer rightfully rejects (or revokes acceptance), what damages may he recover?
Difference between CONTRACT PRICE and either
- MARKET PRICE, or
- COST OF BUYING REPLACEMENT GOODS (Cover)
PLUS ANY INCIDENTAL/CONSEQUENTIAL damages
What are COVER damages?
Difference between K price and cost of REPLACEMENT GOODS
Buyer must make REASONABLE K for substitute goods IN GOOD FAITH and W/O UNREASONABLE DELAY
Can a buyer sue a manufacturer for breach of warranty for a good he bought from a retailer?
Yes. LACK OF PRIVITY IS NO DEFENSE to a breach of WTY by manufacturer if buyer is a person whom the manufacturer might reasonably have expected to use, consume, or be affected by goods.
When are PUNITIVE DAMAGES available?
WILLFUL OR WANTON conduct or
SUCH RECKLESSNESS as evinces a CONSCIOUS DISREGARD for the safety of others
How can implied warranty of fitness by disclaimed?
Clear and conspicuous writing
Doesn’t have to specifically mention WTY of fitness
Just saying NO WARRANTIES EXTEND BEYOND THE DESCRIPTON ON THE FACE HEREOF is sufficient
In an installment K, a late delivered installment of goods can be rejected only when:
Because of the lateness, the value of the shipment was SUBSTANTIALLY IMPAIRED.
When a buyer of goods accepts non-conforming goods, what measure of damages is he entitled to receive?
May keep non-conforming goods and recover DAM for ANY LOSS RESULTING FROM BREACH, including lost profits.
When a buyer of goods lawfully rejects a shipment for lateness, what’s the correct measure of the buyer’s damages recoverable?
Different btwn MKT VALUE of goods and K PRICE plus LOST PROFITS
What happens when a term in an offer materially alters the agreement (both parties are merchants)? What’s the effect?
Court should use the knockout rule and apply gap-filler term.
What’s the UCC gap-filler term re a buyer’s right to reject or revoke acceptance of non-conforming goods?
Buyer may reject non-conforming goods that SUBSTANTIALLY IMPAIR the value, or
IF IMPAIRMENT DISCOVERED AFTER goods accepted, may REVOKE acceptance if non-conformity was REASONABLY INDUCED by the DIFFICULTY OF DISCOVERY at time of acceptance.
UCC def’n of MERCHANTABILITY
Goods are merchantable must be at least such as PASS WITHOUT OBJECTION IN THE TRADE, and FIT FOR ORDINARY PURPOSE they’re intended to serve.
What’s the effect on an implied warranty of a buyer’s inspection of goods? What if he refuses to inspect when given opportunity?
Warranty disclaimed if buyer inspects goods to his satisfaction to the extent the inspection would have RSNy revealed defects.
Warranty disclaimed AS TO WHAT A RSN INSPECTION WOULD HAVE REVEALED if buyer given chance to inspect goods but refuses.
Is a buyer entitled to both revocation of acceptance and money damages in the same suit?
Yes, both are available.
When are punitive damages allowed under UCC?
Willful or wanton conduct
such RECKLESSNESS as evinces a conscious disregard for the safety of others
When are “terms of art” enforceable in K for sale of goods?
Where the meaning of the term can be found in a USAGE OF TRADE.
What’s an INSTALLMENT K?
Authorizes the delivery of items in separate lots over time.
When can late delivered lots in a sales K be rejected?
Only when, b/c of the lateness, substantially impairs value.
To disclaim warranties of merchantability and fitness for a particular purpose, what must seller do?
Write “AS-IS”, or SPECIFICALLY DISCLAIM IMPLIED WARRANTIES
In writing such that a reasonable person would notice it
Is saying “No other warranties” sufficient to disclaim warranties of merchantability and fitness for a particular purpose?
Yes, it’s sufficient to waive them
What’s S/L for breach of K under UCC?
4 years
When does cause of action start to run for breach of warranty under UCC?
Upon tender of delivery
When does cause of action accrue when a warranty extends to future performance & discovery of the breach must await the time of performance?
cause of action accrues when the breach is or should have been discovered
When a buyer of goods accepts non-conforming goods, what measure of DAM is he entitled to receive?
He may keep non-conforming goods and recover DAM for any loss resulting from the breach, including lost profits.
STATUTE OF FRAUDS: Exceptions
Specially manufactured goods
Breaching party admits existence of K
Goods rec’d and accepted
When a buyer has rejected goods, what duty does he have to safeguard them before the seller picks them up?
Must hold them WITH RSN CARE
