sales Flashcards
manufacturer may liable for breach of warranty claim under contract with third party retailer when
it is reasonable to expect that such persons would use, consume, or be affected by the goods being warranted.
A warranty that the goods are merchantable is implied in a contract for their sale whenever
seller is a merchant with respect to goods of that kind.
To be merchantable, the goods must at least be
fit for the ordinary purposes for which such goods are used.
Fitness for a particular purpose: If the seller at the time of contracting has reason to know of any particular purpose for which the goods are required, and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is
an implied warranty that the goods shall be fit for such purpose; unless excluded or modified
an express warranty is
Any promise, affirmation, description, or sample that is part of the basis of the bargain, unless it is merely the seller’s opinion or commendation of the value of the goods.
sellers mere opinion or commendation of the value of goods is not
an express warranty
Generally, a promise made to a person (i.e., the obligee) that the promisor (i.e., a surety) will be responsible for any debt or other obligation of a third party (i.e., the principal) resulting from the principal’s failure to pay as agreed is subject to
the Statute of Frauds, and the surety’s promise must be in writing.
if the main purpose of a surety in agreeing to pay the debt of the principal is the surety’s own economic advantage, rather than the principal’s benefit, then
the contract does not fall within the Statute of Frauds, and an oral promise by the surety is enforceable.
Under the Second Restatement of Contracts, a third party can enforce the contract if
the third party is an intended beneficiary.
Damages are recoverable if
1) they were the natural and probable consequences of breach, or
2) if they were in the contemplation of the parties at the time the contract was made, or
3) if they were otherwise foreseeable.
If a party to a contract clearly and unequivocally repudiates its contractual duty prior to its obligation to perform, the party has committed
an anticipatory breach of the contract.
A party’s demand for performance for a term not contained in the contract, accompanied by an unequivocal statement that the demanding party will not perform a contractual duty unless the other party meets the additional term, constitutes
an anticipatory breach of contract and excuses performance by the other party.
When obligations are delegated, the delegator is not released from liability, and recovery can be had against the delegator if the delegatee does not perform, unless
the other party to the contract agrees to release that party and substitute a new one (i.e., forms a novation).
Duress is
an improper threat that deprives a party of meaningful choice.
while a party may retract an anticipatory repudiation, such retraction is prohibited where
the other party has materially changed position as a consequence of the repudiation.
Restitutionary damages
restore to the plaintiff whatever benefit was conferred upon the defendant prior to the breach
If the plaintiff breached the contract, his damages are generally limited to
the value of the benefit conferred upon the defendant, which would take into consideration any damages suffered by the defendant.
Mutual mistake occurs when
both parties are mistaken as to an essential element of the contract
If Mutual mistake occurs, the contract may be voidable by the adversely affected party upon proof of the following:
(i) mistake of fact existing at the time the contract was formed;
(ii) the mistake relates to a basic assumption of the contract;
(iii) the mistake has a material impact on the transaction; and
(iv) the adversely affected party did not assume the risk of the mistake.
While the parol evidence rule generally prevents a party to a written contract from presenting prior or contemporaneous extrinsic evidence that contradicts or is inconsistent with the terms of the contract as written, it does not apply to
subsequent agreements
A buyer acquires an insurable interest in goods upon
the identification of the goods.
Where the contract is for future goods (i.e., goods that are not both existing and identified), the buyer does not acquire an insurable interest until
the seller designates goods as those to which the contract refers, unless the parties have explicitly agreed otherwise.
Generally, prohibitions against assignment in the contract
are strictly construed
even when an assignment is a breach of the contract by the assignor, the assignee takes
all of the rights of the assignor as the contract stands at the time of the assignment.
A contract is generally formed when
a mutual agreement is supported by valuable consideration
valuable consideration
a bargained-for exchange of promises or performance.
A promise to surrender a claim or defense can serve as consideration for a settlement agreement so long as:
1) the claim or defense is valid or subject to a good-faith dispute or
2) the surrendering party honestly believes that the claim or defense may be valid.
If the surrendering party knows that the claim or defense is invalid, an agreement to surrender it lacks
consideration and is therefore unenforceable.
settlement agreements are not subject to
the statute of frauds.
A unilateral contract is one in which
a party promises to do something in return for an act by the other party
a unilateral contract cannot be accepted by
a promise to perform—it can only be accepted by complete performance
under a unilateral contract, once the offeree begins performance
the offer is irrevocable for a reasonable time to allow for complete performance (unless there is a manifestation of a contrary intent).
merely preparing for performance is not enough.
Although an offeror may terminate the unilateral offer before the offeree begins performance, expenses incurred by the offeree in preparing to perform may be
recoverable as reliance damages
Reliance damages are available when a party incurs expenses in
reasonable reliance upon the promise that the other party would perform.
The distinction between preparing for and beginning performance depends on many factors, including
the degree to which the offeree’s conduct is attributable to the offer, the extent to which that conduct benefits the offeror, communications between the parties, etc.
When a party to a contract has reasonable grounds for insecurity about the other party’s ability or willingness to perform, the insecure party can
demand assurances within a reasonable time.
Rumors about a party’s inability to pay are sufficient to establish
reasonable grounds for insecurity—even if such rumors are false.
Under the UCC, which governs contracts for the sale of goods, a demand for assurances must be made
in writing
a reasonable time within which to give adequate assurances
is limited to 30 days.
Once a proper demand for assurances is given, the insecure party may
suspend performance until adequate assurances are received.
A demand for assurances should be made before
the other party breaches the contract
UCC requires that assurances be given to the insecure party within
a reasonable time, not to exceed 30 days.
Since an accord is a new contract,
it must be supported by consideration
an accord agreement
agreed to accept different performance from the other parties in satisfaction of their existing duty.
If the new consideration is worth less than what was originally agreed to, then the new consideration is sufficient only if:
1) there is a good-faith dispute as to the amount owed or
2) the new consideration is of a different type than what was owed under the original contract (e.g., goods in lieu of cash).
A contracting party may generally avoid performance if a condition precedent
has not occurred.
a condition precedent
an uncertain future event that must occur before performance becomes due
nonoccurrence of a condition may be excused if
the party who would benefit from the condition waives it by words or conduct.
When a condition is waived before it is due to occur, the waiving party cannot retract the waiver and reinstate the condition if
the other party has detrimentally relied on the waiver.
For a contract to be subject to the UCC, the contract must constitute a sale of goods, rather than
services or real property.
When a transaction involves both the sale of goods and the rendering of services, the
“predominant purpose” test applies to determine whether the UCC or the common law governs the entire transaction.
Under the Statute of Frauds, a contract for the sale of goods for a price of $500 or more must be
in writing in order to be enforceable.
There is an exception to the writing requirement to the extent that
payment has been made and accepted.
A breach of the implied warranty of merchantability must have been present at
the time of the sale
To establish a breach of the implied warranty of merchantability in Virginia, the buyer must establish the following elements by a preponderance of the evidence:
(i) the seller sold the goods;
(ii) the buyer was a person reasonably expected to use the goods;
(iii) the seller was a merchant of the type of goods sold;
(iv) the goods were not of merchantable quality at the time of the sale;
(v) the breach of warranty caused buyer’s damages; and
(vi) within a reasonable time after the buyer discovered or should have discovered the breach; the buyer notified the seller of the breach.
To establish an implied warranty of fitness for a particular purpose, the buyer must prove by a preponderance of the evidence that
the seller had reason to know the particular purpose for which the buyer required the goods and that the buyer was relying on the seller’s skill or judgment to furnish appropriate goods; and The buyer in fact relied upon seller’s skill or judgment.
To establish a breach of this warranty, the buyer must prove by a preponderance of the evidence that
the seller sold the goods,
the buyer was a person reasonably expected to use the goods,
the seller impliedly warranted the goods to be suitable for a particular purpose for which they were not suitable,
the breach of warranty caused damages,
and the buyer notified the seller of the breach within a reasonable time after the buyer discovered or should have discovered the breach.
Under the UCC, a buyer may revoke an acceptance of goods if the nonconformity substantially impairs the value and
(i) the buyer accepted the goods on the reasonable belief that the seller would cure the nonconformity, but the seller has failed to do so, or
(ii) the buyer accepted the goods without discovery of the nonconformity, and such acceptance was reasonably induced either by the difficulty of discovering the nonconformity before acceptance or because the seller gave assurances that the goods were conforming.
To revoke its acceptance, the buyer must
inform the seller of its decision to revoke within a reasonable time after the nonconformity is discovered or should have been discovered by the buyer.
Attorney’s fees are generally not recoverable by a successful litigant in a contract action unless
the parties have agreed otherwise, there is specific law authorizing the recovery of such fees, or the breach of contract claim is paired with a fraud claim.
The UCC does not authorize the recovery of
attorney’s fees
An express warranty can be made
subsequent to the contract for sale.
an express warranty after the contract for sale would technically modify the originial agreement, but under the UCC
no consideration is needed to make a modification enforceable.
If the buyer, before entering into the contract, has examined the goods or a sample or model as fully as the buyer desired, or has refused to examine the goods, there is no
implied warranty with respect to defects that an examination ought to have revealed to the buyer.
lack of questions about the goods value or condition can constitute a
refusal to examine the goods
One way for the seller to disclaim the implied warranty of merchantability is to use the term
“merchantability.”
disclaiming the implied warranty of merchantability by using the term “merchantability” can be done
orally or in a conspicuous writing.
The implied warranty of merchantability can also be disclaimed by use of
1) “as is,” “without faults,” or
2) similar language that makes plain that there is no implied warranty.
Article 2 of the UCC, as adopted in Virginia, applies to the sale of goods, including
warranties stemming from those sales
Goods are all things moveable at the time they are
identified under the contract between the buyer and the seller.
Unless the circumstances indicate otherwise, the warranty of merchantability can be disclaimed by use of
“as is,” “with all faults,” or similar language that makes plain that there is no implied warranty.
To specifically exclude the implied warranty of fitness for a particular purpose, the disclaimer must
be in writing and use conspicuous language.
When a warranty fails of its essential purpose, the buyer may
seek other remedies.
Under the UCC, the buyer must notify the seller of his intention to
return the goods within a reasonable time.
What constitutes a reasonable time depends upon
the facts and circumstances of each case.
If there is a long delay in notification because the seller had repeated opportunities to make repairs, such a delay
may be reasonable under the circumstances.
where a buyer asserts that an express warranty failed of its essential purpose, the buyer can resort to other remedies such as
cancelling the contract and receiving a refund of his purchase price.
Under Art. 2, an action for breach of a sales contract or warranty must be commenced within
four years after the cause of action accrues.
A breach of warranty generally accrues when
delivery is made.
if a warranty expressly extends to future performance, the cause of action will accrue when
the breach is or should have been discovered by the aggrieved party.
In Virginia, a contract provision that purports to release a defendant from liability for personal injury caused by the defendant’s future negligence is
prohibited bc of public policy
contract provisions releasing a defendant from liability for property damage caused by the defendant’s future negligence are
enforceable.
Because clothing constitutes goods (i.e., all things moveable) and the contract involved the sale of clothing, Article 2 of the Uniform Commercial Code (UCC) rather than
the common law governs this contract.
When interpreting an ambiguous term in a contract, the UCC provides that
course of performance is favored over course of dealing and trade usage, and course of dealing over trade usage.
The UCC requires a seller to make a
“perfect tender” of the goods
“perfect tender” of the goods
substantial performance will not suffice except for installment contracts or when the parties agree that it applies.
An installment contract is defined as one in which
1) the goods are to be delivered in multiple shipments, and
2) each shipment is to be separately accepted by the buyer.
If the seller makes a nonconforming tender or tenders nonconforming goods under one segment of an installment contract, the buyer can reject only if
the nonconformity
(i) substantially impairs the value of that shipment to the buyer and
(ii) cannot be cured.
If the seller makes adequate assurances that he can cure the nonconformity, then the buyer
must accept the shipment.
When there is a nonconforming tender or a tender of nonconforming goods under one segment of an installment contract, the buyer may
1) cancel the contract only if
2) the nonconformity substantially impairs the value of the entire contract to the buyer.
A valid rejection requires that the buyer
(i) give notice to the seller,
(ii) within a reasonable time, and
(iii) before acceptance.
Under the UCC, the buyer accepts goods by
(i) expressly stating acceptance,
(ii) using the goods, or
(iii) failing to reject the goods.
After rejection, the buyer is entitled to
1) a return of any payments made on the goods, and
2) has a security interest in the rejected goods for any payments made by the buyer to the seller for the goods.
After rejection, the buyer must hold for the rejected goods for a
reasonable time to allow for the seller to reclaim them
In addition, after rejection the buyer is entitled to
1) damages measured by difference between the market price at the time of the breach and the contract price
2) as well as incidental and consequential damages.
Consequential damages are any losses resulting from
1) general or particular requirements and needs 2) which the seller, at time of contracting,
3) had reason to know
4) could not be reasonably prevented by purchasing substitute goods or otherwise.
Under the UCC, if either the tender or the goods is nonconforming
then the buyer has the right to accept or reject the goods.
In accepting goods, the buyer does not forego the right to
1) sue the seller for damages resulting from a breach
2) if the buyer timely gives the seller notice.
where buyer accepts the nonconforming tender/goods, by timely notifying seller of the breach, would be entitled to also recover
damages for any loss that results in the ordinary course of events from the seller’s breach, including incidental and consequential damages.
A legally enforceable contract is created through the process of
mutual assent (offer and acceptance) and consideration
An offer is
an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.
an offer must express
the present intent of the offeror to be legally bound to a contract.
In Virginia, the required writing to enforce a contract for the sale of goods for the price of $500 or more must be
signed by the party against whom enforcement is sought but need not contain all the material terms of the contract or indicate which party is the buyer and which is the seller.
All that is required is that the writing afford a basis for
believing that the offered oral evidence rests on a real transaction
an exception to the Statute of Frauds when the goods are
to be specially manufactured for the buyer, the goods are not suitable for sale to others, and the seller has made a substantial beginning to their manufacture.
A buyer may revoke an acceptance of goods if
the defect substantially impairs the value and the buyer accepted the goods without discovery of the nonconformity when acceptance was reasonably induced by the difficulty of discovery or by assurances from the seller.
The buyer must inform the seller of its decision to revoke within
a reasonable time after the nonconformity is discovered or should have been discovered
revocation must occur before
any substantial change in the condition of the goods not caused by the defect.
an alleged services contract that is not performable within 1 year is subject to
the statute of frauds
the statute of frauds prevents the enforcement of a parol contract to
to convey land by will in an action at law.
When the party is a merchant, good faith includes an observance of
reasonable commercial standards of fair dealing in the trade.
In Virginia, modification to a contract for the sale of goods, does not require
new consideration; but must be made in good faith
In Virginia, a buyers right to retain or dispose of goods is conditional upon
making payment to the seller
When a seller discovers of a buyer’s insolvency, and the buyer has received the seller’s goods on credit, the seller may
reclaim the goods from the buyer, provided they make demand on the buyer within 10 days after receipt of the goods.
In Virginia, a seller’s right to reclaim goods delivered to an insolvent buyer is subject to
the rights of a buyer in the ordinary course, other good faith purchasers, and lien creditors.
Sufficient writings under the statute of frauds include
a receipt, letter, or a check with details on the memo line.
For an action based on an oral contract, the statute of limitation is
three years
The statute of limitations begins to run upon
the breach of the contract
for an oral contract, the statute of limitations begins to run on date of the breach of the contract, not on the date that
the contract was formed.
The Uniform Commercial Code (“UCC”) Article 2 governs
transactions in goods.
“Goods” are defined as
all things movable at the time they are identified as the goods to be sold under the contract between the buyer and the seller.
Under Article 2, if the goods or tender of delivery fail in any respect to conform to the contract, then the buyer may
reject the goods or choose to accept the goods despite the nonconformity.
If, before rejection, the buyer has taken physical possession of goods in which he does not have a security interest, then the buyer is obligated to
hold the rejected goods with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them.
Because Suffolk failed to hold the rejected goods with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them
Suffolk is liable to Waverly for the value of the 15 missing sheets of plywood.
if the goods or tender of delivery fail in any respect to conform to the contract, then the buyer may choose
to accept some of the goods while rejecting the rest.
In order to properly reject goods, the buyer must
1) notify the seller of the rejection within a reasonable time;
2) the buyer must notify the seller of the particular defect.
3) the buyer must hold the goods with reasonable care for a time sufficient to permit the seller to remove them.
when notifying the seller of a particular defect the notice must be
“seasonable”
where a buyer notifies the seller of the rejection and thereafter chooses to keep some of the goods without notifying the seller of his decision, buyer has
wrongfully converted the goods; will be liable for the value of the converted goods and the remaining rejected goods
The remedy for conversion is
the fair market value of the goods at the time of the conversion.
A contract requires
an offer, acceptance, and consideration.
to be enforceable, certain contracts for the sales of goods must satisfy
the Statute of Frauds (“SOF”).
The SOF states that a contract for the sale of goods over $500 must be
in writing, identify the parties, list the essential terms including quantity, and must be signed by the party against whom enforcement is sought.
a phone call placing an order would constitute an offer b/c its
an objective manifestation of an intent to be bound by the terms of a contract.
acceptance can be made by emailing a response thanking for the order, and indicating a shipping date, bc:
Article 2 allows acceptance to be made in a different form than how the offer was made.
buyers offer to pay $ + sellers promise to ship=
consideration
a fax is a writing for SOF purposes if
it describes the goods, price and terms of payment
