Sales

Question 1

Definition of goods

Answer 1

Tangible movable things -not services -not securities -not future rights that don’t currently exist

Question 2

Dominant Purpose Test

Answer 2

what is the purpose of the contract. What was the K for at it’s core? At the time of contract formation.

Question 3

Gravamen / Source of Complaint test

Answer 3

what has gone wrong - where as part of a commercial transaction, consumer goods are sold which retain their character as consumer goods after completion of the performance promised to the consumer, and where there is injury or loss from a defect in the goods, then UCC even if transaction is predominately one for the rendering of consumer services.

Question 4

Merchant Buyer / Seller - Narrow

Answer 4

People who are in the business of dealing in goods of that kind. Implied warranty of Merchantability applies the narrow ust look at how often you sell the item. One time sales aren’t usually regarded as a merchant seller. Once a year maybe not, but consistent litters of puppies, then, yes.

Question 5

Merchant Buyer/ Seller - Broad

Answer 5

by his occupation, having knowledge or skills of the goods OR practices involved in the transaction. (or practices is very important- see comment 2 of 2-104)

Question 6

Statute of Frauds - Generally

Answer 6

2-201(1) - Writing requirement for K’s worth $500 or more. 1) Needs quantity term. 2) Needs signature of person against whom enforcement is sought or agent/broker. 3) Needs a writing which 4) includes some evidence of the contract / sufficient to indication of the contract.

Question 7

Statute of Frauds - Merchant Confirmation Memo

Answer 7

if between merchants - RECEIVED in a reasonable amount of time(under facts and circumstances of the contract per St Ansgar) - party receiving has reason to know its contents - person receiving doesn’t give written rejection after 10 days. - Memo must contain everything in subsection one but must contain the sender’s signature instead of the receivers.

Question 8

Exceptions to Statute of Frauds - Generally

Answer 8

Statute of frauds may not apply to:

• Specially manufactured goods
• Admission in court proceedings/filings (not enforceable beyond quantity of goods admitted)
• Part performance of the K
• not enough started to perform K, must be payment and acceptance
• merchant confirmation memo

Question 9

Parol Evidence Rule

Answer 9

trying to argue that there was an additional term agreed to even though it was not evidence in the writing. Either before the writing was created or at the same time the writing was created - but it did not make it into the writing. The focus is on what was originally agreed to, not what do we change.

Question 10

Parol Evidence Steps

Answer 10

1. Is the writing integrated
2. is there a merger clause
3. Determine what comes in and what stays on if integrated or partial

Question 11

Parol Evidence - if Integrated

Answer 11

a. Must stay out - contradictory AND consistent additional terms
b. May come in - course of dealing, usage of trade, course of performance

Question 12

Parol Evidence - Merger Clause

Answer 12

TATES that it is a complete integration. If merger, then strong argument of completely integrated (pg 50 in Royster). Argument against is that both parties didn’t actually agree to it - form contract; location matters. But if not, then default is court considers it partial.

1) counter to merger clause - no evidence that both parties agreed to the merger clause. Sort of boiler plate.

Question 13

Parol Evidence - if Partial

Answer 13

a. Must stay out - contradictory terms (inconsistent with the K)
b. can come in - Course of dealing, usage of trade, course of performance , AND consistent additional terms.

Question 14

Parol Evidence - Consistent Additional Terms Test

Answer 14

a. If going against a term specifically addressed int he writing and another term is explicit in the K, then contradictory term.
b. If K is silent to a term, and arguing party is trying to get that term admitted, then it is an inconsistent term.
c. If the term is so important that it certainly would have been included in the writing, then it is going to be deemed to be INCONSISTENT and must be kept out.

Question 15

Course of Performance

Answer 15

how the parties have behaved in the course of performing that particular K - prior actions of the parties in this particular transaction

Question 16

Course of Dealing

Answer 16

how parties have dealt with one another in the past - prior to this transaction.

Question 17

Usage of Trade

Answer 17

how the industry generally behaves - especially in regard to the certain terms in the K.

Question 18

Hierarchy in determining terms

Answer 18

xpress terms, COP, COD, then UOT.

Question 19

Indefinite Contract

Answer 19

a contract won’t fail if there are terms left open, including price or delivery date. As long as there as intent to contract and some way to come up with a remedy.

1. Open terms can be advantageous.
2. Underlying code to encourage commercial transactions

Question 20

Merchant Firm Offers

Answer 20

a. certain circumstances a merchant cannot revoke his offer.
b. Can’t take promise off the table if say “think about it” or something like that, even if unsupported by consideration.
c. Must be a merchant in the broad sense.
d. . If merchant firm offer that won’t be open indefinitely, then open for up to 3 months.

Question 21

Shipment of Nonconforming goods

Answer 21

Acceptance of contract (and breach of K)

UNLESS it includes an accommodation letter then, not acceptance and not contract.

Question 22

Battle of Forms Overview

Answer 22

1. How is it created - how do we know we have a 2-207 issue - (comment 1)
   a. Oral contract - followed with a conformation document that includes additional or different terms.
   b. Buyer sending order form, seller sending acceptance form which includes different things. The forms don’t match up. (common)

Question 23

Battle of the Forms - K formation

Answer 23

acceptance that includes additional or different terms still qualifies as a contract and forms a K.

(proviso clause - conditioning your acceptance on other party’s acceptance of conditional terms) It is not an acceptance if the acceptance is expressly made conditional on assent to the additional or different terms.

Question 24

Battle of Forms - if K based on writings

Answer 24

Determine if merchant or not
if merchant - additional terms become part of K. if not merchants, then additional terms must be assented to.

If not on writings, then knockout rule applies (inconsistent terms excluded, UCC fills gaps)

Question 25

Battle of forms - K based on writing re merchants

Answer 25

a) Re-imposing the mirror image rule - want your acceptance to mirror the offer. It’s a difference between “i want you to accept it as i put it” and “i won’t K with you unless you do.”
b) Between merchants (broad), additional terms become part of the contract
- If terms material alter K, then not part of the K - or if given notice of rejection of additional terms.
c. If terms not between merchants - additional proposal that needs to be assented to by the other side.

Question 26

Battle of the Forms - Knockout Rule

Answer 26

the knockout rule - where do the parties agree in the writing. Parts where parties don’t agree will be knocked out. And the UCC covers any gaps.

Question 27

Battle of the Forms - Proviso Clause

Answer 27

proviso clause - conditioning your acceptance on other party’s acceptance of conditional terms) It is not an acceptance if the acceptance is expressly made conditional on assent to the additional or different terms.

whether conduct is enough to accept the proviso clause: NO IT’S NOT. Court says have to specifically and unequivocally say yes, they agree.

Question 28

Battle of the Forms - Material Alteration

Answer 28

1. it would result in surprise or hardship if other party was unaware of it. Surprise is the major factor. (were you surprised, if so, should you have been) Person arguing material alteration has the burden of proof.
   a. Subjective element of surprise - what the party knew
   b. Objective element of surprise - what the party should have known
   c. Reasonable merchant standard. - a reasonable merchant would probably not have assented.
   
   2. Disclaimer of warranties are generally per se material alteration. Cmt 4 to 2-207
   3. Arbitration clause generally per se material alteration.
      Material alteration will eliminate that clause.

Question 29

Express Warranty - Generally

Answer 29

1. Representation must “relate to the goods” AND become part of the “basis of the bargain.”
   a. Basis of the bargain means a statement that goes to the basis of the bargain if its natural tendency is to induce the buyer to purchase.
   b. Burden is on the seller to prove that the buyer did NOT rely on the assertion.
   c. Stating an opinion can amount to puffery - sales talk - and not an assertion of a warranty.
   
   2. Difference between express and implied - express warranty is made through affirmative action by the seller. Implied warranty are imposed through statute.

Question 30

Express Warranty - Specifically

Answer 30

1. Affirmation of fact, sample, description or MODEL
   
   2. Relates to goods
   3. Basis of Bargain
   4. Post contract statements can become an express warranty. Comment 7. If language used after the closing of the deal, the warranty becomes a modification and does not need consideration.

Question 31

Implied Warranty of Merchantability

Answer 31

1. Have to be a merchant seller (narrow definition)
   
   2. Goods are fit for their ordinary purpose for which such goods are used; it will pass without objection in the trade.

Question 32

IW:Fitness for a Particular Purpose

Answer 32

1. Seller knows or has reason to know of the particular purpose
2. Seller knows or has reason to know buyer is relying on seller’s skill or judgment.
   B MUST be relying.

NOTE: if you have a product not good for ANY purpose, can proceed in action under either 2-314 or 2-315. See - 309 SC 438. court considers particular purpose may be the ordinary purpose and warranties can merge.

Question 33

Disclaiming Express Warranties

Answer 33

1. In the consistent language used to create the express warranty.
   a. In SC - can’t disclaim an express warranty. ever. In essence, the same idea is true as the UCC. The UCC seems to allow it, but in application it is not held to often be able to disclaim it.
2. Allows for parol or extrinsic evidence to show that the express warranty was never created to begin with.

Question 34

Disclaiming IW:M

Answer 34

1. has to mention merchantability
2. Does not have to be in writing, but if IS in writing, then writing must be conspicuous. But if in oral or written, MUST still use word merchantability.
   Section 1-201(10) defines conspicuous - written in such a way that a reasonable person ought to have a noticed it.

Question 35

Disclaiming IW:FPP

Answer 35

1. Must be in conspicuous AND
2. MUST BE in writing
3. but no “magic” words as in 2-316(2).
4. Can generally say “i disclaim all implied warranties” in writing.
5. Exceptions
   a. “as is” / “with or faults” or similar language.
   b. when buyer has examined the goods / or has refused to examine them, which, in the course of of the examination, the defects would have reasonably been revealed to him
   
   1. simply can’t just be a request to inspect by the seller. must be a DEMAND.
      c. course of dealing, course of performance, or usage of trade

Question 36

Warranty Disclaimers - Cases

Answer 36

Owner’s manual may be able to include an express warranty which will be deemed as a contract modification.

The disclaimer was hidden in a long section of text AND the paragraph was just titled warranty and not something like “disclaimer.”

warranty disclaimer delivered after the sale and therefore not a basis of the bargain. Guy got the item and disclaimer 2 weeks later after ordering.

Question 37

Limitations of Remedy Clause - Inclusion

Answer 37

Allowing to limit remedy to replacement, repair, or refund. Might be able to take away all monetary damage.

have to say EXCLUSIVE remedy if truly seeking limitation. (notice “in addition to or in substitution of.”

• if just say “you are allowed repair of the product,” then it’s just in addition to.
• conspicuousness not specifically required, just have to be conscionable

TEST: Look at if seller was willing and able to provide remedy. And then if there was a delay.

Question 38

Limitations of Remedy Clause - Failure of the Clause

Answer 38

1. In the event the limitation of remedy clause fails of its essential purpose, the limitation of remedy clause is stricken from the contract and all UCC remedies are allowed back in.
   a. fails meaning no remedy for the buyer, deprives value of the bargain, see comment 1. Minimum adequate remedies must be available.

Question 39

Limitations of Remedy - Consequential Damages

Answer 39

1. Consequential damages may be limited or excluded - but can’t limit it to personal injury in a consumer good transaction. Can only do so if it’s conscionable.
   a. Even if the limitations clause fails its essential purpose, the consequential damages clause may still survive.
   b. Must be 2 separate clauses.
   c. Analyze under dependent / independent. If dependent, then consequential clause fails. If independent, then survive.
   
   1. If independent, may still fail for unconscionability.

Question 40

Notification of Breach of Warranty

Answer 40

1. It’s buyer’s responsibility to notify of breach of warranty. Must be done within a reasonable time after he discovers or should have discovered the problem.
2. If don’t give notice, lose the ability to sue or recover.
3. What should the notice say - vague or specific? (lenient or strict notification)
   a. This transaction needs to be washed. Or something isn’t working.
   b. I consider this to be in breach - strict. (use the word breach)
   c. courts can determine which standard they want to apply.
4. • why? to put seller on notice & give opportunity to fix

Question 41

Risk of Loss - Non-Breach Situations - Generally

Answer 41

1. Where seller is a merchant - the risk of loss passes to the buyer on the buyer’s ACTUAL receipt of the goods. (physical possession)
   Policy - business people mroe familiar with sending goods to buyers
2. On non-merchant seller - risk of loss passes to buyer when the seller tenders delivery of the goods.

Question 42

Risk of Loss - non Breach - defintion of tender

Answer 42

requires the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable him to take delivery.

Question 43

Risk of Loss - no breach - using a carrier

Answer 43

If not using a carrier, then use general rules. If usin g acarrier, meaning 3rd party carrier, then:

shipment contract - risk of loss shifts to buyer when goods are delivered to the carrier.
destination contract - risk of loss shifts to buyer when goods are tendered at the buyer’s destination.

Presumption is shipment contract because it better protects the merchant. Look at delivery terms to determine whether destination or shipment.

Question 44

Delivery Terms

Answer 44

FOB - Free on board: if buyer’s location, then destination contract. if seller’s location, then shipment K.
FAS - free along side - shipment K
CIF & C&F = shipment K (cost insurance freight & cost and freight)
Delivery ex-ship - destination K. ROL doesn’t pass to buyer until goods leave ship or are properly unloaded.

Question 45

Misc shipping rules

Answer 45

If don’t properly ship the goods, no risk shifting

Not sellers duty to make sure buyer is being made whole by insurance purchased so long as due diligence is done to get a reasonable carrier with reasonable amount of insurance.

Must give adequate notice of shipment

Question 46

Performance of Installment K

Answer 46

performance standard is “substantial performance” - shipments and delivery over a period of time. essentially a multiple performance contract.

Nonconforming goods is not an automatic breach of the contract. if nonconforming, the buyer can reject the goods or claim a breach occurred, depending on severity.

Question 47

Rejection of Installment K

Answer 47

Buyer can only reject if shipments if the defect “substantially impairs the value of the shipment/installment AND cannot be cured.”

if don’t meet the criteria, can’t reject the goods. Then buyer must accept the goods if seller is giving assurances to repair the problem.

If problems with multiple installments, and it begins to effect the value of the entire contract, would have right to cancel the whole contract. (if it impairs the value of the whole, then there is a breach of the whole.)

Question 48

Performance of Single Delivery K and rejection of same

Answer 48

Standard is “perfect tender”

for any non-conformity in ANY respect, can:
1) reject the whole, accept the whole, OR accept any commercial unit or units and reject the rest

Subjet to seller’s right to cure
Can K to determine how perfect “perfect tender” needs to be. Can also use usage of trade.

Question 49

Right to Cure

Answer 49

Seller given opportunity to cure under specific circumstances.

a. If prior to deadline of contract performance, seller has ABSOLUTE right to cure.
b. If after the contract performance deadline, may only cure if:
 1) the seller had reasonable grounds to believe the non-conformity would be acceptable (and would be allowed a reasonable amount of time to remedy the defect)

Nelson suggest that in a revocation to acceptance, the 2-508 does not give right to cure.

Question 50

Rejection of Goods

Answer 50

1. Need to act (notify the seller) within a reasonable period of time after their delivery or tender.
   a. If don’t act, then becomes an acceptance.
   b. Reasonable amount of time to inspect/trial the goods.
2. REJECTION Notice requirements found under 2-605 - needs to say rejecting the goods BECAUSE of something.
   a. Allows to inform seller of what he may need to do in order to cure.
3. Can’t exercise ownership of the goods / use the goods as if they’ve owned them.
4. Take reasonable care of the goods while they’re in the buyer’s possession.
5. Seller’s responsibility to remove the rejected goods, any expenses incurred such as shipment and taking care of goods can be recovered from the Seller. Important.

Question 51

Acceptance

Answer 51

1. Technical acceptance by not rightfully rejecting the goods.
2. clearly accepting through notification
3. Exercise ownership of the goods.
4. once accepted by the buyer, can no longer be rejected

Question 52

Rejection/Acceptance Rules

Answer 52

1. when going back and forth, can still be deemed to be under the “inspection period.”
2. All UCCs remedy available after properly rejecting the good.

Question 53

Revocation of Acceptance (not a rejection)

Answer 53

1. If the goods substantially impair the value to HIM
   a. nonconformity causes substantial impairment if it “shakes the buyer’s faith or undermines his confidence in the reliability and integrity of the purchased item.”
   
   2. AND
      a. accepted the goods under assumption the defects would be cured.
      b. OR non-discovery of the defect due to difficulty to discover or seller’s assurances there was no problem.

Question 54

Revocation Tests

Answer 54

a. Subjective Test - calls for a consideration of the needs and circumstances of the plaintiff, not the average buyer.
b. Objective test - calls for evidence of something more than plaintiff’s assertion that the nonconformity impaired the value to him;

Exam purposes
1. Show - under what performance standard are goods allowed to be objected. And how the fact pattern applies. And if it wasn’t met, do we have a proper rejection under 2-602. And then is revocation an option?

Question 55

Risk of Loss - Breach Situation

2-510

Answer 55

(1) If goods fail to conform, Buyer has right of rejection and the risk of loss on seller until cure or acceptance.
a. Make sure to give the reason why buyer has the right of rejection
b. as soon as cure happens, risk of loss shifts back to buyer.
c. can’t use after accepted goods. at all.

2) Where buyer has RIGHTFULLY revoked acceptance, risk of loss goes back to the seller, subject to the extent insurance does not cover the loss.
a. if no right to revoke, then 2-510(2) not going to be of help. Have to discuss revocation rules.
b. there must be a rightful revocation which occurred, not just taking steps.

(3) when BUYER is in breach - if buyer repudiates or is otherwise in breach before the ROL passes to him, ROL passes to the buyer for a “commercially reasonable time,” but offset by insurance coverage.

If can’t go under this rule, goes back to a non-breach situation.

Question 56

Seller’s Remedies - Generally

Answer 56

A. used when the buyer wrongfully rejects or revokes acceptance of goods or fails to make payment due on or before delivery (not remedies specifically)

1. Withhold delivery of goods
2. Stop delivery by bailee
3. Proceed under 2-704 regarding identification of goods
4. Resell and recover damages as provided in 2-706
5. Recover damages for non-acceptance
6. cancel the K.

Question 57

Seller’s Remedies - When Buyer Accepted Goods - action for the price

Answer 57

1. When buyer fail to pay the price as it becomes due, the seller may recover the price:
   a. of goods accepted or of the conforming goods lost or damaged within a commercially reasonable time after ROL passed to buyer.
   b. Of goods seller unable to resell the goods OR circumstances deem resell is impractical.
2. Seller must hold onto the goods FOR buyer which have been identified to the contract and still in his control.
   a. Except can resell if possible prior to collection of judgment
   b. net proceeds of resell credited to buyer - if judgment, any goods not resold buyer gets.
3. Expectancy - getting parties to full position parties would have been had contract been performed.

Question 58

Seller’s Remedies when buyer has NOT accepted the goods

Answer 58

1. Measure of damages for non-acceptance or repudiation by the buyer is the difference between the resale price and the unpaid contract price minus any incidental damages, less expenses saved.
   a. Resale price - contract price - incidental damages + expenses saved
   5k resale - 10k contract - 0 + 0 = -5k. seller “out” $5k.
   
   2. Resale provisions regarding private v public sale. Public sale usually regards an auction type system. Anything outside of that is generally considered a private sale.
   3. SELLER MUST NOTIFY BUYER OF INTENTION TO RESELL, for both private and public.
      a. not required to be in writing.
   4. Resale must be in good faith and commercially reasonable.

Question 59

Seller’s Remedies - Buyer hasn’t accepted, unable to resell

Answer 59

(1) Hypothetical Resale - use same formula under 2-706 except using the market price instead of the resale price.
a. The difference between the market price at the time and place for tender of deliver and the unpaid K price together with any incidentals, less expenses saved.
1) market price - K price - incidentals + expenses saved.

(2) - Lost Profit for a Lost Volume Seller - what if sells for exact K price or MORE than the original K price. But as a result of buyer’s breach, still losing profit because lost a sale where there are multiple sales of the same good.
a) essentially gets right of lost profit. K price - cost of production/manufacturing = Seller’s profit. Problem 71= 2000 - 1200 = 800 profit.

Question 60

Seller’s Remedies - Identification of Goods

Answer 60

identification of goods after repudiation.

a. identification - determining which goods are for a particular buyer - not on final.
b. allows for completion of project so long as it is commercially reasonable to do so. (burden on buyer to show unreasonable)
c. Repudiation is when the breacher specifically indicates they are not going to perform.

Question 61

Buyer’s Remedies - Generally

Answer 61

1. Cancel K
2. Cover
3. Recover damages for non-delivery.

Question 62

Buyer’s Remedies - Cover

Answer 62

1. Equation generally: K - Cover - Incidentals - Consequential Damages + Expenses Saved.
   
   2. (3) Buyer is not required to cover - but may do so if he chooses
   3. Goods must be commercially reasonable
   4. If chooses to cover, must do so in good faith and without unreasonably delay.

Question 63

Buyer’s Remedies - Incidental and Consequential Damages

Answer 63

1. If choose to not cover, then may not be able to recover certain incidental and consequential damages.
2. Consequential - regarding particular requirements of the need for the goods - if buyer could have covered the damages, but didn’t, the failure to do so will limit the damages able to be recovered here.
   b) consequential for injury to person or property 2-715 (2)(b) - edit later

Question 64

Buyer’s Remedies - Hypothetical Cover

Answer 64

1. formula generally: K - market price - Incidental - Consequential + ES
2. What market do you look at - depends on if breach occurred pre-delivery or post delivery.
   a. (2) location to be used
   
   • if pre-delivery, then place of tender
   • if post delivery, then place of arrival.
     time of market = when buyer learned of the breach

Question 65

Buyers Remedies - After Acceptance of Goods

Answer 65

2-714

1. (1) Provides for damages for any nonconformity of tender - in a manner that’s reasonable. Get a reasonable amount of damages for whatever breach occurred. Like lateness.
2. (2) if breach of warranty - then formula
   a. value received - valued as warranted/promised - I - C = result
3. (3) In a proper case, incidentals and consequential damages can be recovered under 715. (buyer’s incidental and consequential damages)

Question 66

Buyer’s Remedy - Of Specific Performance OR Replevin

Answer 66

1. Applies when buyer has not accepted the goods but still wants them.
   
   2. 2-716 (1) can be decreed when goods are unique or other “proper” circumstances
   3. (2) decree can include terms and conditions court deems just.

Question 67

Repudiation of the Contract

Answer 67

1. 30 days “reasonable notice” when asking for adequate assurances.
   a. Idea is at a stand still, and waiting for an assurance. Not repudiated yet.
   b. If no grounds for insecurity, sending requests for assurances which is not responded to, then can’t suspend performance under 2-610.
   
   2. Don’t have to be in writing, but a good practice to do so.

Question 68

Statute of Limitations

Answer 68

1. (1) 4 years to bring action. Can’t reduce to less than one, can’t extend SOL.
2. (2) breach of warranty action occurs when tender is made. But can make a warranty extension that extends future performance. SOL occurs on breach is or should have been discovered.