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
a delivery form of a company will constitute
a signature by the party
SOF will be satisfied as long as the description of the goods included
the quantity
Article 2 allows a subsequent writing to
confirm a previously made contract
a subsequent fax after contract is formed that contains interest rate information and disclaimers of warranties is
a proposal for additional terms
Under Article 2, for contracts between two merchants, a proposal for additional terms is not considered
a counter-offer
unless a proposal for additional terms, materially alters the agreement or an objection is made, the term will
automatically become part of the contract
after contract is formed, a subsequent provision disclaiming all warranties will
materially alter the contract or limit the terms; and unless other party assents to these terms they will not be included.
excused from performance due to commercial impracticability elements
1) unforeseen circumstances
2) not contemplated by the parties
3) cause a seller’s timely delivery of goods
4) to become commercially impracticable
5) seller relieved of obligation
6) if he is not at fault for circumstances
Increased production or operating costs, are not grounds for commercial impracticability, as
the seller should factor this possibility into his contracts
a decrease in profits will not render delivery
commercially impracticable
Once a duty to perform exists, nonperformance is a breach of contract unless
the duty is discharged, such as by agreement, statute, inability to perform, or waiver.
A material breach of contract allows the non-breaching party to
withhold any promised performance and to pursue remedies for the breach, including damages.
A material breach occurs when
the non-breaching party does not receive the substantial benefit of its bargain.
If the breach is minor, the non-breaching party is entitled to
any remedies that would apply to the nonmaterial breach.
A breach is minor if
the breaching party has substantially performed her promises.
To form a valid contract under the UCC, there must be
offer, acceptance, and consideration.
under common law, where there are terms in the acceptance that are different than in the offer
a contract would not be formed because there terms are not mirror images
Under the UCC, acceptance need not
mirror the offer
when both parties are merchants and acceptance does not mirror the offer, the terms of the contract depend on whether
the acceptance had additional or different terms.
a contract term that shortens the time frame and requires rejection to be in writing would probably be considered
different terms
When a party includes different terms in an acceptance, the court would likely apply
the “knock-out rule”
knock-out rule
different terms in the offer and the acceptance between merchants nullify each other and are “knocked-out” of the contract.
Generally, when a buyer accepts goods, he must
pay the seller the contract price and relinquish any right to reject the goods.
when a buyer accepts goods only to discover later that they are non-confirming, he may
revoke the original acceptance of the goods.
A buyer may only revoke acceptance of the goods if
1) the defect substantially impairs their value to the buyer
2) and the buyer accepted the goods without discovery of the non-conformity,
3) and such acceptance was reasonably induced either by the difficulty of discovering the non-conformity before acceptance or because the seller gave assurances that the goods were conforming.
The buyer must also inform the seller of any defect within
a reasonable time after it was discovered or should have been discovered by the buyer.
If the buyer fails to exercise due diligence in discovering a defect
his notice to the seller may be untimely, and revocation will be barred.
Revocation must also occur before
any substantial change in the condition of the goods not caused by the defect.
Under the UCC, an additional term is automatically included in the final contract between merchants so long as
1) the terms do not materially alter the original contract,
2) the offer expressly limited acceptance to the terms of the offer, or
3) the offeror has already objected the additional terms, or objects within a reasonable time after notice of them was received.
A disclaimer of warranty provision is typically viewed as a term that
materially alters the original contract because it results in surprise or hardship if incorporated in the contract without the express awareness of the other party.
Merchants are allowed to disclaim both
express and implied warranties under the UCC.
In order to disclaim an express warranty
1) there need to be words or conduct tending to negate warranty
2) and they must be reasonable.
One way for the seller to disclaim the implied warranty of merchantability is to use the term
“merchantability.”
disclaiming implied warranty of merchantability using the word “merchantability” can be done
orally
disclaiming implied warranty of merchantability by writing, the disclaimer language must be
conspicuous
Unless the circumstances indicate otherwise, an implied warranty can also be disclaimed by stating that the goods are
sold “as is,” “with all faults,” or by using similar language that makes plain that there is no implied warranty.
a written disclaimer of the implied warranties contained on the standard form in the same style, color, and type of font as the rest of the contract, is not likely
conspicuous
One way for the seller to disclaim the implied warranty of fitness for a particular purpose is to
make the disclaimer in writing and use conspicuous language.
The UCC allows that implied warranties may be excluded or modified by
the course of dealing, the course of performance, or the usage of trade.
Virginia generally follows the so-called American rule and prohibits
the award of attorney’s fees to a successful litigant in the absence of a specific law authorizing the recovery of such fees or an agreement of the parties.
Virginia does permit, at the discretion of the court, the award of attorney’s fee to a successful litigant when
a breach of contract action is coupled with a fraud action.
The UCC does not authorize the recovery of
attorneys fees
To determine who bears the risk of loss for a sale of goods, we must first examine
the interest each party had in the good
An entrustment occurs when
1) an owner (or agent in this case) delivers a piece of property to another party
2) and acquiesces to that party retaining possession for a period of time.
When property is entrusted to a merchant who deals in goods of that kind, the merchant has the power to
transfer all rights of the entruster to a buyer in the ordinary course of business.
Where an individual in good faith buys a good in the ordinary course of business and without knowledge of any title defect, that buyer obtains
good title to the good and does not bear the risk of loss.
The Uniform Commercial Code imposes an implied warranty of fitness on
leased goods.
The implied warranty of fitness of a particular purpose is applicable to
the sale or lease of goods.
there is an implied warranty that the leased goods will be fit for a particular purpose if
1) the lessor at the time the contract is made
2) has reason to know of any particular purpose for which the goods are required 3) and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods
The Uniform Commercial Code permits a lessor to disclaim
the implied warranty of fitness on leased goods.
An implied warranty of fitness for a particular purpose can be disclaimed by
1) stating that the goods are sold “as is,” “with all faults,” or
2) by using similar language that makes plain there is no implied warranty.
The UCC art. 2 does apply to the sale of
used goods.
The term “goods” is 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.
Article 2 applies to the sale of tangible things such as
auto parts, toys, gasoline, etc.
Article 2 does not apply to the sale of
real property, services, or intangibles.
A warranty that the goods are merchantable is implied in a contract for their sale whenever
the seller is a merchant with respect to goods of that kind.
To be merchantable, goods must
pass without objection in the trade under the contract description and be fit for the ordinary purposes for which such goods are used, among other requirements.
a breach of the implied warranty of merchantability
must have been present at the time of the sale
Among the ways in which a seller can exclude the implied warranty of merchantability is to
demand that the buyer inspect the goods before purchasing them. (must be a DEMAND, not simply asking if buyer would like to)
If the buyer refuses to inspect the goods before purchasing, after demand is made by seller; and is later injured by a defect that the buyer would have uncovered during an inspection, the buyer
will not be able to assert a breach of warranty.
The UCC implies a warranty of title in
all sales contracts
for warranty of title in a sales contract; The seller automatically warrants that
(i) he is conveying good title,
(ii) the transfer is rightful, and
(iii) the goods are delivered free from any security interest of which the buyer has no knowledge at the time of the contract.
Compensatory damages are meant to compensate
the nonbreaching party for actual economic losses.
Consequential damages are reasonably foreseeable losses to
a nonbreaching party that go beyond expectation damages, such as loss of profits.
Incidental damages may be awarded to the nonbreaching party as compensation for
commercially reasonably expenses incurred as a result of the other party’s breach
Under the UCC, a buyer may recover damages on a breach of warranty theory, or the buyer may instead, in certain circumstances
revoke the original acceptance of the goods.
A buyer may revoke an acceptance of the goods if the defect substantially impairs their value to the buyer and
(i) the buyer accepted the goods on the reasonable belief that the seller would cure the defect but the seller has failed to do so, or
(ii) the buyer accepted the goods without discovery of the non-conformity, and such acceptance was reasonably induced either by the difficulty of discovering the non-conformity before acceptance or because the seller gave assurances that the goods were conforming.
When there has been non-delivery, proper rejection, or proper revocation of acceptance, the buyer’s remedies are
the same; The buyer is entitled to either benefit of the bargain damages or cover, as well as any incidental and consequential damages that may be applicable.
Damages may be measured by calculating
the difference in the contract price and the market price at the time and place the seller fails to perform.
Damages may also be measured by cover, or more specifically, the difference between
the contract price and the price of replacing the goods.
The buyer’s cover must be
reasonable, in good faith, and made without unreasonable delay.
In addition to either of the damage remedies, the buyer may also be entitled to
incidental and consequential damages
Incidental damages are damages that are
incidental to seller’s failure to perform, such as the costs of warehousing, transportation, inspection, etc.
Consequential damages are
any loss resulting from general or particular requirements and needs of which the seller, at the time of contracting, had reason to know and which could not be reasonably prevented by purchasing substitute goods or otherwise.
Consequential damages must have been
foreseeable to the seller
a buyer may properly revoke acceptance of goods if
there is a defect that substantially impairs the value of the good to the buyer, at the time of acceptance, the discovery of defect was difficult, and buyer had no knowledge of the defect.
After discovering a defect, the buyer must
inform the seller within a reasonable time after it was discovered or should have been discovered by the buyer.
Under the UCC, a buyer is also allowed to revoke acceptance when
there is an unknown, hard to detect, substantial defect, and the buyer accepted the goods on the reasonable belief that the seller would cure the defect, but the seller has failed to do so.
Under the UCC, a revocation of acceptance is treated the same as
a rejection of non-conforming goods.
after a buyer has rejected non-conforming goods, he must
hold the goods with reasonable care until he receives instruction from the seller.
If the seller does not give instructions, the buyer must either
store the goods for the seller, reship the goods to the seller, or resell the goods for the seller.
The UCC does not allow a buyer to continue to
use the goods until the seller gives the buyer instructions.
Revocation of acceptance must occur before
any substantial change in the condition of the goods not caused by the defect
where a buyer receives non-conforming goods and later causes or allows a substantial change in the goods, the buyer may be
prevented from revoking his acceptance, despite the original non-conformity.
A warranty that the goods are merchantable is implied in a contract for their sale whenever
the seller is a merchant with respect to goods of that kind.
To be merchantable, goods must at least
(i) pass without objection in the trade under the contract description, (ii) in the case of fungible goods, be of fair average quality within the description, (iii) be fit for the ordinary purposes for which such goods are used, (iv) run, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved (v) be adequately contained, packaged, and labeled as the agreement may require and (vi) conform to the promises or affirmations of fact made on the container or label, if any.
The measure for breach of warranty damages is
the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been warranted unless special circumstances show proximate damages of a different amount.
Generally, punitive damages are
not allowed under the UCC.
the UCC provides remedies that
put the aggrieved party in as good a position as if the other party performed.
While the UCC does allow for incidental, consequential, and liquidated damages in specific situations, currently no provision of the UCC allows for
punitive damages
For contract for the sale of goods, the default statute of limitations is
four years
The statute permits the parties to agree to reduce the four-year period to
no less than one year; but they cannot agree to extend it to more than four years
For UCC contracts, the statute of limitations begins to run when
the breach occurs.
For a breach of warranty claim, the breach generally occurs when
tender of delivery is made
for purposes of a breach of warranty action with regard to the sale of goods, the statute of limitation generally begins to run when the goods are delivered, not when
the manufacturer discovered, or should have discovered the breach
although the default statute of limitations to bring a lawsuit under the UCC is four years, the parties may
agree to shorten this period to no less than one year.
Claims based on UCC contracts for the sale of goods must be brought within
four years
The parties may agree to reduce the four-year period to
not less than one year, but cannot agree to extend it to more than four years.
Under UCC can a buyer seek relief of by revocation of contract and compensatory damages in same lawsuit?
Yes, buyer can seek to revoke his acceptance of the sales contract, and if the revocation is valid, be awarded damages.
Under the UCC, a buyer may recover damages on a breach of warranty theory, or the buyer may instead, in certain circumstances
revoke the original acceptance of the goods.
A buyer may revoke an acceptance of the goods if
1) the defect substantially impairs their value to the buyer and
2) the buyer accepted the goods on the reasonable belief that the seller would cure the defect but the seller has failed to do so, or
3) the buyer accepted the goods without discovery of the non-conformity, and such acceptance was reasonably induced either by the difficulty of discovering the non-conformity before acceptance or because the seller gave assurances that the goods were conforming.
non-delivery, proper rejection, or proper revocation of acceptance, the buyer’s remedies are the same:
buyer is entitled to either benefit of the bargain damages or cover, as well as any incidental and consequential damages that may be applicable
Damages may be measured by calculating the difference in
the contract price and the market price at the time and place the seller fails to perform.
Damages may also be measured by cover, or more specifically, the difference between
the contract price and the price of replacing the goods.
buyer’s cover must be
reasonable, in good faith, and made without unreasonable delay.
In addition to either of the damage remedies, the buyer may also be entitled to
incidental and consequential damages
Incidental damages are
damages that are incidental to seller’s failure to perform
examples of incidental damages
costs of warehousing, transportation, inspection, etc
Consequential damages are
any loss resulting from general or particular requirements and needs of which the seller, at the time of contracting, had reason to know and which could not be reasonably prevented by purchasing substitute goods or otherwise
Consequential damages must have been
foreseeable to the seller
a buyer may properly revoke acceptance of goods if
1) there is a defect that substantially impairs the value of the good to the buyer,
2) at the time of acceptance,
3) the discovery of defect was difficult, and
4) buyer had no knowledge of the defect.
After discovering a defect, the buyer must
inform the seller within a reasonable time after it was discovered or should have been discovered by the buyer.
Under the UCC, a buyer is also allowed to revoke acceptance when there is an unknown, hard to detect, substantial defect, and the buyer accepted the goods on the reasonable belief that
the seller would cure the defect, but the seller has failed to do so.
Under the UCC, a revocation of acceptance is treated the same as
a rejection of non-conforming goods.
after a buyer has rejected non-conforming goods/revoked acceptance, he must
hold the goods with reasonable care until he receives instruction from the seller
after a buyer has rejected non-conforming goods/revoked acceptance, if the seller does not give instructions of what to do with the revoked/rejected goods, the buyer must
either store the goods for the seller, reship the goods to the seller, or resell the goods for the seller.
after rejection of nonconforming goods/revocation of acceptance, the UCC does not allow a buyer to continue to
use the goods until the seller gives the buyer instructions.
Revocation of acceptance must occur before
any substantial change in the condition of the goods not caused by the defect.
where a buyer receives non-conforming goods and later causes or allows a substantial change in the goods
the buyer may be prevented from revoking his acceptance, despite the original non-conformity
A warranty that the goods are merchantable is
implied in a contract for their sale whenever the seller is a merchant with respect to goods of that kind.
To be merchantable, goods must at least
(i) pass without objection in the trade under the contract description,
(ii) in the case of fungible goods, be of fair average quality within the description,
(iii) be fit for the ordinary purposes for which such goods are used,
(iv) run, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved
(v) be adequately contained, packaged, and labeled as the agreement may require and
(vi) conform to the promises or affirmations of fact made on the container or label, if any.
a breach of the implied warranty of merchantability must be present
at the time of the sale
The measure for breach of warranty damages is
the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been warranted;
unless special circumstances show proximate damages of a different amount
Under the UCC, generally punitive damages are
not allowed
instead of punitive damages, the UCC puts the aggrieved party in as good of a position as if
the other party had performed as agreed under the contract
punitive damages would only be recoverable in a contract situation, if
the buyer made a claim for products liability or negligence of the manufacturer and was successful, but not available in a strictly contract based claim
Where the seller at the time of contracting has reason to know (from any source, not just the buyer) 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)
For a seller to disclaim an implied warranty of fitness for a particular purpose, there must be
general language (including by the use of “as is”) and the disclaimer must be in writing and conspicuous.
supporting argument that “as-is” effectively disclaimed IWFPP, where written on the back of a reciept
“as-is” handwritten on the back was the only writing on the back, and buyer watched seller write it.
UCC article does not apply to
to the sale of real property, services (e.g., window cleaning, country club membership), or intangibles (e.g., intellectual property, goodwill)
the UCC does not make a distinction between
new and used goods
To be merchantable, goods must at least
pass without objection in the trade under the contract description and be fit for the ordinary purpose for which such goods are used.
The implied warranty of merchantability will be enforced regardless of whether
the seller was aware of any breach of the warranty
for a breach of implied warranty of merchantability, the seller is
strictly liable
for a breach of implied warranty of merchantability, the seller is strictly liable unless
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.
Under the UCC, statements of opinion, affirmations of the value of the goods, or statements of commendation
do not establish an express warranty.
Any affirmation of fact or promise made by the seller to the buyer that relates to the goods and becomes part of the basis of the bargain creates
an express warranty that the goods conform to that affirmation or promise
To create an implied warranty of merchantability the seller must be
a merchant with respect to goods of that kind.
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.
If Bob is successful on his breach of warranty claims, he will be entitled to
damages; measured by difference at time and place of acceptance between value of the goods accepted and the value they would have had if they had been warranted; can also possibly recover incidental and consequential damages, like cost of mechanic to inspect goods
common law governs
a contract for the rendering of services
When a transaction involves both the sale of goods and the rendering of services
the “predominant purpose” test applies to determine which law applies to the entire transaction.
A legally enforceable contract is typically created through the process of
mutual assent (i.e., offer and acceptance) and consideration, provided no valid defense to contract exists.
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 a person to be legally bound to a contract.
An acceptance is
an objective manifestation by the offeree to be bound by the terms of the offer.
If the buyer requests that the goods be shipped, then the buyer’s request will be construed as
inviting acceptance by the seller either by a promise to ship or by prompt shipment of conforming or nonconforming goods.
If the seller ships nonconforming goods in response to buyers request that goods be shipped, then the shipment is
both an acceptance of the offer and a breach of the contract.
Valuable consideration is evidenced by
a bargained-for change in the legal position between the parties.
For a contract to exist, the terms of the contract must be
certain and definite.
For a contract governed by the UCC, the only essential term is
quantity
Under UCC, a contract may be formed even though one or more terms are left open if
the parties intend to form a contract.
To be enforceable, contracts for the sale of goods for $500 or more must
satisfy the Statute of Frauds (“SOF”).
The SOF requires the contract to be
in writing, identify the parties, list the essential terms, and be signed by the party against whom enforcement is sought.
an exception to the SOF for what type of goods
specifically manufactured goods
A writing is not required if the goods are to be
1) specially manufactured for the buyer,
2) are not suitable for sale to others, and
3) the seller has made a substantial beginning of their manufacture.
A buyer who refuses to pay the price agreed upon in a contract for the sale of goods is
in breach of the contract
Among the remedies available to the seller when a buyer breaches the contract after receiving the goods is
an action for the price
When the goods have been returned to the seller, the seller is required to
mitigate damages if possible by reselling the goods to another buyer.
if seller cant mitigate damages because they are specifically manufactured, and thus not sellable to another buyer, the seller is entitled to
full contract price
Under the UCC, if the goods are nonconforming, then the buyer has the right to
accept or reject all of the goods
The buyer has the right to
inspect the goods before deciding whether to accept or reject.
A valid rejection requires that the buyer
(i) give notice to the seller (ii) within a reasonable time and (iii) before acceptance.
The buyer accepts goods by
(i) expressly stating acceptance, (ii) using the goods, or (iii) failing to reject the goods.
Acceptance of the goods
precludes rejection of the goods
The buyer can revoke acceptance if the defect substantially impairs the value of the goods to the buyer and either
(i) the buyer accepted the goods on the reasonable belief that the seller would cure the defect, 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 of the seller’s assurances that the goods were conforming.
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.
revocation of acceptance must occur before
any substantial change in the condition of the goods not caused by the defect
Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty are construed as
consistent with each other
regarding express warranty negation or limitation by words or conduct is inoperative to the extent such construction is
unreasonable.
When the buyer accepts goods that violate one of the seller’s warranties, the buyer may recover damages measured as
the difference (at the time and place of acceptance) between the value of the goods as accepted and the value they would have had if they had been as warranted, plus any appropriate consequential and incidental damages.
Typically, the amount of such damages associated with a breach of one of the seller’s warranties is
the cost to repair or replace the goods
The implied warranty of merchantability, as well as the implied warranty of fitness for a particular purpose, may generally be disclaimed by the seller stating that
the goods are sold “as is,” “with all faults,” or by using similar language that makes plain that there is no implied warranty
The UCC provides that, unless displaced by the provisions of the UCC, other laws, including the common law
supplement the UCC
Under the common law, fraud in the inducement occurs when
a fraudulent misrepresentation is used to induce another to enter a contract.
Fraudulent misrepresentation requires proof that
1) the misrepresentation is fraudulent (i.e., a false assertion of fact made knowingly or recklessly with the intent to mislead),
2) it induced assent to the contract, and
3) the adversely affected party justifiably relied on the misrepresentation.
for fraud in the inducement in a contract action, a contract is voidable by the adversely affected party if
he justifiably relied on the misrepresentation in entering into the agreement.
where there was fraud in the inducement, the fact that a contract provides for a limitation or disclaimer of warranties or provides for the sale of goods “as is” does not preclude
a fraud action; may void the contract or recover damages from seller, even though the contract called for the good to be “sold as is, no warranties.”
Often, a buyer’s acceptance of the goods
completes the contract and terminates the parties’ obligations to each other.
a buyer may revoke an acceptance of the goods if the defect substantially impairs their value to the buyer and the buyer accepted the goods on the reasonable belief that
the seller would cure the defect, but the seller has failed to do so.
a buyer may also revoke when 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.
if the buyer fails to exercise due diligence in discovering a defect, then his notice to the seller may
be untimely, and revocation will be barred.
when a buyer receives nonconforming goods and later causes or allows a substantial change in the goods, the buyer may be prevented from
revoking his acceptance despite the original nonconformity.
A buyer who timely revokes acceptance may either
cancel the contract and recover the purchase price plus any damages or retain the goods and seek damages, which are generally based on the cost to repair the goods.
A contract (or part of a contract) is unconscionable when it is so unfair to one party that
no reasonable person in the position of the parties would have agreed to it.
for unconscionability, The contract or part of the contract at issue must have been offensive at the time
it was made.
Boilerplate contract provisions that are inconspicuous, hidden, or difficult for a party to understand have been held
unconscionable.
Courts have also applied the doctrine of unconscionability when the contract is a contract of
adhesion (a take-it-or-leave-it contract) and there is greatly unequal bargaining power between the parties.
Under the UCC, a buyer may demand specific performance for
rare or unique goods, or in other circumstances, such as when there is a breach of a requirements contract and there is not another convenient supplier.
Under Virginia law, a party seeking specific performance must demonstrate that there is
no adequate remedy at law and that the terms of the contract sought to be enforced are sufficiently definite.
The UCC has recognized that a requirements contract can satisfy the UCC mandate for
an enforceable contract; even without a quantity term
Typically, a buyer must wait until the seller breaches the contract to
sue for enforcement.
Virginia permits a party to sue on the basis of an anticipatory repudiation by the other party without waiting for
the time of the other party’s performance.
Anticipatory repudiation refers to
words or actions that clearly, voluntarily, and unequivocally indicate a contracting party’s intention not to perform or will materially breach the contract before the time for performance arises or elapses.
once a party indicates they will not perform, to prevent a party from entering into a contract with another party regarding the same goods, a party should seek
a temporary injunction until a hearing on the merits
The court will consider a number of factors when deciding whether to issue a temporary injunction, including:
(i) will suffer irreparable harm if the motion for a temporary injunction is not granted,
(ii) whether there is an adequate remedy at law,
(iii) the likelihood of winning on the merits,
(iv) whether the balancing of the equities favors, and
(v) whether prepared to post an injunction bond.
Detinue is a legal claim that allows a buyer to recover identified, undelivered goods from the seller if
(i) the buyer is unable to effect cover;
(ii) the circumstances reasonably indicate that reasonable effort to obtain cover will be unavailing; or
(iii) the goods have been shipped under reservation, and satisfaction of the security interest in the goods has been made or tendered.
Virginia law defines a requirements contract as an agreement wherein
1) one party agrees to supply all of a party’s requirements for a particular product or service and
2) the other party agrees to purchase all of the particular products or services that it requires from the supplying party.
consideration exists in requirements contracts because
the buyer suffers a legal detriment in foregoing purchasing that product from another source while the seller agrees to provide the buyer with as much of the product as the buyer needs, foregoing sales to other potential buyers.
requirements contracts require
good faith
A misrepresentation is an assertion that is
contrary to the existing facts and can be innocent, negligent, or fraudulent.
A misrepresentation may
prevent the formation of the contract or make the contract voidable by the adversely affected party.
Whether a misrepresentation defense will succeed will depend on whether the misrepresentation was
innocent, negligent, or fraudulent, and whether, if the misrepresentation was not fraudulent, the matters misrepresented were material
The provision in the contract giving Catawba the right to refuse the apples for any reason is unenforceable given the requirement that the buyer in a requirements contract must
exercise good faith in purchasing goods from the seller.
