Sales Essay Rules Flashcards
Contracts for the sale of goods are governed by
Article 2 of the UCC
“Goods” are
All things moveable
T/F: One may seek both compensatory damages and to revoke acceptance
True
In addition to revocation of acceptance, the UCC allows for ________
Compensatory damages to be sought for any losses incurred
T/F A buyer is entitled to the cumulative relief of revocation of acceptance and $ damages
True
Perfect tender rule
Article 2 follows the perfect tender rule, meaning that if goods or delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest
Once goods are accepted, the buyer’s power to reject the goods generally is terminated and the buyer is obligated to pay the purchase price less any damages resulting from the seller’s breach
Perfect tender rule
Article 2 follows the perfect tender rule, meaning that if goods or delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest
Once goods are accepted the buyer’s power to reject the goods generally is ________ and the buyer is obligated to pay ________
Terminated, purchase price minus any damages resulting from the seller’s breach
Revocation of acceptance
Under limited situations, a buyer may revoke an acceptance already made. The buyer may revoke an acceptance of goods if the goods have a defect that substantially impairs their value, and
1) The buyer accepted them on the reasonable belief that the defect would be cured and it hasn’t been, or
2) The buyer accepted them because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conformed to the contract
Revocation of acceptance must occur
Within a reasonable time after the buyer discovers or should have discovered the defects and before any substantial change in the goods occurs (that isn’t cause by a defect present when the buyer took possession)
However, a buyer who revokes acceptances owes the same duties as a buyer who rejects the goods
After giving notice of revocation, the buyer holds the goods as bailee for the seller. The buyer cannot continue to use them as their own and still have the benefit of rescission (revocation of acceptance)
The continued use is wrongful against the seller, unless induced by the seller’s instructions or promises
T/F A buyer who revokes acceptance owes the same duties as a buyer who rejects goods
True
A buyer who revokes acceptances owes the same duties as a buyer who
Rejects goods
After giving notice of revocation, the buyer holds the goods
As bailee for the seller
T/F After giving notice of revocation, the buyer holds the goods as bailee for the seller
The buyer cannot continue to use them as their own and still have the benefit of rescission (revocation of acceptance)
True
[Ed should have surrendered the tractor or at least stopped driving it as soon as he sent notice that he wanted to return it and get a refund. The court will have to decide if the additional 300 miles of use was substantial enough to bar Ed from revoking his acceptance]
[Ed can argue that the use was commercially reasonable since Ed only drove the tractor 300 miles and needed the Tractor to work his farm. He could also counter that paying a reasonable rental fee would offset any harm caused by exceeding exercising ownership after the revocation]
T/F Once a buyer accepts, he loses his right to “cover” damages
True
Implied warranty of merchantability
Implied in every contract for sale by a merchant who deals in goods of kind sold there is a warranty that the goods are merchantable, which generally means fit for the ordinary purposes for which such goods are used
If a court decides that wrongful use of the tractor prevents Ed from revoking his acceptance, Ed’s only remedy will be
Warranty damages
When a buyer accepts goods that breach one of the seller’s warranties, the buyer may recover
The difference between the value of the goods as delivered and the value they would have had if they had been according to the contract [Value of tractor w issues - value of new tractor]
Incidental damages from a seller’s breach include
Expenses for caring for rejected goods as well as any other reasonable expense related to the breach
Consequential damages are
Special damages specific to a plaintiff’s circumstances
Consequential damages are
Special damages and reflect losses over and above standard expectation damages.
These damages result from the nonbreaching party’s particular circumstances
Usually, consequential damages are lost profits resulting from the breach
Cover - If replacement goods cannot remedy the lateness issues, the measure of damages would likely be
The difference between the market value and the contract price
T/F Consequential damages may be recovered only if at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of the breach (typically lost profits)
To recover consequential damages, P must show that the breaching party knew or had reason to know of the special circumstances giving rise to damages
If the buyer is in the business of reselling goods, the seller is deemed to have knowledge of the resale
True
Consequential damages may be recovered only if
At the time the contract was made, a reasonable person would have foreseen the damages as a probable result of the breach (typically lost profits)
Consequential damages may be recovered only if at the time the contract was made,
A reasonable person would have foreseen the damages as a probable result of the breach (typically lost profits)
T/F To recover consequential damages, P must show that the breaching party knew or had reason to know of the special circumstances giving rise to damages
True
To recover consequential damages, P must show that the breaching party
Knew or had reason to know of the special circumstances giving rise to damages
T/F If the buyer is in the business of reselling goods, the seller is deemed to have knowledge of the resale
True
Seller is deemed to have knowledge of the resale if the buyer is in the business of
Reselling goods
Consequential damages - Seller is deemed to have knowledge of the resale if the buyer is in the business of
Reselling goods
Compensatory damages is to
Put the nonbreaching party in the position she would have been in had the promise been performed
There are two types of expectation damage measures
1) Cover damages which is the cost of buying replacement goods
2) Difference between the contract price and the market price
Plus incidental and consequential damages, if any, less expenses saved as a result of the seller’s breach
[Regardless of which measure is chosen, the buyer can also recover incidental and consequential damages, if any, less expenses saved as a result of the seller’s breach]
The most common expectation damage measure is
Cover damages
For cover damages, the buyer must
Make reasonable contract for substitute goods in good faith and without unreasonable delay
T/F Once a buyer accepts, he loses his right to cover
True
Regardless of which expectation damage measure is chosen, the buyer can also recover
Incidental and consequential damages, if any, less expenses saved as a result of the seller’s breach
T/F Lack of privity is not a defense to a breach of warranty by the manufacturer if it is a person whom the manu or seller might reasonably have expected to use, consume, or be affected by goods
True
Privity of contract is not required between the buyer and the manufacturer in a
Breach of warranty action
T/F A manufacturer is also liable for a breach of the implied warranty of merchantability, as long as the P was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods
True
A manufacturer is also liable for a breach of implied warranty of merchantability, as long as the P was a person whom the manufacturer or seller might reasonably have expected to
Use, consume, or be affected by the goods
Unlike a warranty action, ________ with the manufacturer is necessary to hold a manufacturer liable on
Privity of contract; other breach of contract action
Punitive damages are generally not recoverable under the UCC unless the conduct of the seller or manufacturer was
Fraudulent, malicious, or willful. These damages are meant to punish the defendant for egregious behavior and to deter similar conduct in the future
Punitive damages are generally not recoverable under the UCC unless the conduct of the seller or manufacturer was
Fraudulent, malicious, or willful
These damages are meant to punish the D for egregious behavior and to deter similar conduct in the future
In order for a contract to be enforceable there must be an
Offer, acceptance, and consideration
An offer is
A communication that creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
It’s terms should be certain and definite
T/F A party to a contract may assert that a contract will not become effective until a condition occurs
[Here, the order on which the proposed K was based was conditioned on Joe Bread’s plant manager’s approval. The condition never occurred because there was no Joe’s bread by the time the sample was approved and the plant manager was the Owens’s plant manager]
True
An acceptance is
A manifestation of assent to the terms of an offer
Under the UCC, an acceptance does not have to mirror the offer. The proposal of additional or different terms by the offeree in a definitely and timely acceptance does not constitute a rejection and counteroffer but rather is effective as an acceptance unless
It is made conditional on assent to the new or different terms
Unlike at common law, under the UCC, an acceptance can be valid even if it proposes additional or different terms
If an acceptance includes terms that weren’t in the offer, whether the new term becomes part of the contract depends on whether both parties are merchants
If they are, additional terms will be included in the K unless
1) They materially alter the original terms of the offer
2) The offer expressly limits acceptance to the terms of the offer, or
3) The offeror objects to the additional terms within a reasonable time
Material alterations
Changing a party’s risk or remedies available (a disclaimer of warranties would clearly alter risk and remedies)
Disclaimer of warranties would be considered
A material altercation (to the terms of the offer)
Unlike at common law, under the UCC, an acceptance can be valid even if
It proposes additional or different terms
SOF - Goods 500+
For a contract to be enforceable under the SOF as adopted by the UCC, any contract for the sale of goods priced at $500 or more must be evidenced by a writing signed by the party being sued
The only essential term in a sale of goods K is
Quantity
If an acceptance includes terms that weren’t in the offer, whether the new terms become part of the K depends on whether both parties are ________
Merchants
In VA, conflicting terms in the offer and acceptance are
Knocked out of the contract, because each party is assumed to object to the inclusion of such terms in the contract
Under the knockout rule, gaps left by the knocked out terms are
Filled by the UCC gap-filler terms (reasonable time)
Merchant
One who regularly deals in the goods of kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved [Anyone in business would likely qualify as having knowledge of the practices involved in this Q]
For most Article 2 provisions, almost anyone in business can be deemed
A merchant
T/F The implied warranty of merchantability can be disclaimed by mentioning merchantability or by expressions such as “as is” or “with all faults” that the buyer’s attention to the fact that there are no implied warranties
If the K is in writing, the disclaimer must be conspicuous
[In this case, there was no mention of merchantability” and no use of the terms such as “as is.” MCW’s attempted disclaimer was not conspicuous, it was printed among several conditions in the same style, color, and size of type as other provisions of the confirmation form. Thus, the implied warranty of merchantability was not properly disclaimed]
True
Express warranty
Any affirmation of fact or promise made by the seller to the buyer or any description of the goods creates an express warranty if the statement or description is part of the basis of the bargain. To be a basis of the bargain, it need only come at such a time that the buyer could have relied on it when he entered into the contract
The buyer does not need to prove that he actually did rely. Also, the seller need not intend to create a warranty
Implied warranty of merchantability
Implied in every sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable. Some of the requirements for merchantability include that the goods: pass without objection in the trade under the contract description, are fit for the ordinary purpose for which such goods are used, and conform to any promises or affirmations of fact made on the label
Implied warranty of fitness for a particular purpose
A warranty is implied in a sale of goods whenever any seller has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and the buyer in fact relies on the seller’s skill or judgment
Particular purpose differs from an ordinary purpose in that it envisages
A specific use by the buyer which is peculiar to the nature of his business
Specific disclaimer of warranties
By mentioning merchantability. If in writing, must be conspicuous
General disclaimer of warranties
Expressions such as “as is,” “with all faults,” no need to be conspicuous; or by examination or refusal to examine
In cases where a buyer examines goods, there are no implied warranties as to
Defects that he should have discovered
[What a buyer should have found depends on the buyer]
T/F Purchaser may assert breach of warranties claims against Steve as seller of the boat
True
For implied warranty of merchantability, it makes no difference if the seller himself does not
Know of the defect or could not have discovered it
Implied warranties are based on absolute liability, not negligence
Implied warranties are based on
Absolute liability, not negligence
By examination or refusal to examine
When the buyer, before entering into the K, has examined the goods or has refused to examine them, there is no warranty as to defects that a reasonable examination would’ve revealed
T/F An oral contract is enforceable to the extent that the goods have been received and accepted
[Owens received and accepted the goods and thus the K is not unenforceable based on the SOF]
True
T/F Owens received and accepted the goods and thus the K is not unenforceable based on the SOF
True
Specially manufactured goods exception
An exception to the SOF is when the goods are specially manufactured
An oral contract is enforceable if the goods are
1) Specially manufactured for the buyer
2) Cannot be resold in the ordinary course of the seller’s business, and
3) Seller has made a substantial beginning on performance
3 exceptions to SOF
1) Specially manufactured goods
2) Admissions in pleadings or court
3) Payment or delivery of goods
Payment or delivery of goods exception to SOF
Under the VA UCC, a writing is not required if the goods are either received and accepted or paid for, but the contract is limited to the quantity accepted or paid for
[Even if the packaging didn’t fall within the exception for specially manufactured goods, it would fall within the exception foe accepted goods; Owens received and accepted the packaging, and thus, the K is enforceable to the extent of the goods received
Specially manufactured goods exception to SOF
If goods are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of business, the contract is enforceable if the seller has, under circumstances that reasonably indicate that the goods are for the buyer, made a substantial beginning of their manufacture
A buyer’s right to reject under the perfect tender doctrine generally is cut off by
Acceptance
A buyer’s right to reject under the perfect tender doctrine generally is cut off by acceptance
Under Article 2, a buyer accepts when
1) After a reasonable opportunity to inspect the goods, she indicates to the seller that they conform to requirements or that she will keep them even though they fail to conform
2) She fails to reject within a reasonable time after tender or delivery of the goods or fails to seasonably notice the seller of her rejection; or
3) She does any act inconsistent with the seller’s ownership
Under Article 2, a buyer accepts when
The buyer, having had a reasonable opportunity to inspect the goods, fails to make an effective rejection
To be effective, notice of the rejection must be given to the seller within a reasonable time
The issue whether notice of rejection was given within a reasonable time under the circumstances is ordinarily
One of fact for the jury
If notice of the rejection was given unreasonably late, the rejection is
Not “effective,” acceptance is then implied, and the burden of proof is on the buyer to establish any nonconformity of the goods to the contract
Indemnity involves
Shifting the entire loss between two parties
T/F An installment can be rejected only if the nonconformity substantially impairs the value of that installment and cannot be cured
In addition, the whole K is breached only if the nonconformity substantially impairs the value of the entire K
True
Indemnity is available by contract where
One promises to indemnify another against consequences of its own breach
The right to indemnification will not be read into the agreement unless
There is evidence that the right was clearly intended
If the parties to a sales contract do not set a specific time of performance for any obligation under the contract, the contract must be performed within
A reasonable period of time
When a buyer of goods lawfully rejects a shipment for lateness, what is the correct measure of the buyer’s damages recoverable if buyer sues seller?
The measure of damages would be the difference between the market value of the goods and the contract price, plus any lost profits
An installment of an installment K can be rejected only if the nonconformity
Substantially impairs the value of that installment and cannot be cured
In an installment contract situation, the whole contract is breached only if the nonconformity substantially impairs the value of
The entire contract
[Given the extent of the lateness River Road would also have the power to cancel the complete contract even as to the clothes that have not yet been delivered]
Usage of trade
Practice or method of dealing, regularly observed in a particular business setting so as to justify an expectation that it will be followed in the transaction in question
[The terms of the contract require delivery on the “June-August 2012 Delivery Cycle]
[This term can be interpreted by usage of trade]
[The express agreement between the parties addressed the time for delivery only as the “June-August 2012 delivery cycle.” The meaning of this term can be found in a usage of trade. The usage observed in Richmond (40-40-20), which Couture followed in its sales to other Richmond-based retailers]
An installment K authorizes the delivery of items in
Separate lots over time
Course of performance
Where a contract involves repeated occasions for performance by either party and the other party has the opportunity to object to such performance, any course of performance accepted or acquiesced to is relevant in determining the meaning of the contract
Late delivered lots can be rejected only if
The late delivery “substantially impairs” the value of the installment
[River Road’s need to discount the clothes by 50% indicates a substantial impairment and thus it has the power to reject them provided it does so within a reasonable time after deliver and with seasonable notice to Couture]
Course of dealing
The parties’ course of dealing may be used to explain a contract. A course of dealing is a sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding
Priorities of conflicting rules
Express terms
Course of performance
Course of dealing
Usage of trade
T/F An installment contract authorizes the delivery of items in separate lots over time. Late delivered lots can be rejected only if the late delivery “substantially impairs” the value of the installment
True
If the buyer accepts goods that breach one of the seller’s warranties, the buyer may recover as damages “loss resulting in the normal course of events from the breach.” The basic measure of damages in such a case is the difference between
The value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damages
If the seller does not deliver or buyer rejects goods or revokes acceptance, the buyer may recover as damages
The difference between the contract price and market price plus incidental and consequential damages
An exception to the perfect tender rule is the
Installment contract exception
Installment contracts follow a rule akin to
The common law substantial performance doctrine
An installment must be rejected within
A reasonable amount of time with notice
Usually, consequential damages are
Lost profits resulting from the breach
T/F If the buyer is in the business of reselling goods, the seller is deemed to have knowledge of the resale
True
Avoidable damages (mitigation)
Under the common law, the nonbreaching party cannot recover damages that could have been avoided with reasonable effort
Under the common law, the nonbreaching party cannot recover damages that could have been
Avoided with reasonable effort
To recover damages for any defect as to accepted goods, the buyer must,
Within a reasonable time after they discover or should have discovered the defect, notify the seller of the defect
Seller to buyer: “I ran all the maintenance on the boat for the past five years and it ran like a dream” can be construed as
An express warranty
T/F Parole evidence rule would prevent a purchaser from introducing a verbal warranty. Purchaser’s best chance would be to convince the court that he did not intend the writing to be a complete and exclusive expression of their agreement
True
Good faith and fair dealing
Every contract within the UCC imposes an obligation of good faith in its performance and enforcement
Alteration of maintenance records by Owner
Purchaser would have claim against owner for breach of duty of good faith as well as breach of an express warranty
Alteration of maintenance records by owner - Purchaser would have claim against owner for
Breach of duty of good faith as well as breach of an express warranty
T/F UCC specifically states that, unless displaced by particular UCC provisions, the existing law relating to fraud and misrepresentation supplements the UCC
True
T/F UCC states that remedies for material misrepresentation or fraud include all remedies available under the UCC for nonfraudulent breach
[The rejection or return of the goods does not bar this claim for damages or any other remedy]
True
Good faith and fair dealing
UCC requires all parties to act in good faith, which is defined as, “honesty in fact and observance of reasonable commercial standards of fair dealing”
UCC requires all parties to act in good faith, which is defined as,
“Honesty in fact and observance of reasonable commercial standards of fair dealing”
Fraudulent misrepresentation
If a party induces another to enter into a contract by using fraudulent misrepresentation (e.g., by asserting information they know is untrue), the contract is voidable by the innocent party if they justifiably relied on the misrepresentation [The time period to bring an action doesn’t begin to run until the purchaser knows or should have known of the fraud
In addition to rescission, remedies for misrepresentation include
All remedies available for breach
In a contract for the sale of goods, neither rescission nor the return of the goods is inconsistent with
A claim for damages
Acceptance is a ________ under the VA UCC
Term of art
If a transaction involves both sales and services, but the majority cost is for the sale, the predominant purpose of the contract is
The sale of goods
Attorney’s fees
VA follows the American Rule: attorney’s fees are not recoverable by the prevailing party absent special circumstances such as an enabling contractual provision or statute
[No written K; oral agreement said nothing about attorneys’ fees; facts indicate no relevant statute]
A disclaimer mentioning “merchantability” in writing is conspicuous if larger, bold type makes it noticeable by
“A reasonable person against which it is to operate”
T/F The warranty of fitness is effectively excluded by conspicuous writing. There is no need to use the phrase, “warranty of fitness.” Saying that no “other warranties” exist is equivalent to the statutory example, “There are no other warranties”
True
Attorneys’ fees recovery available only if provided for in
K or statute
Shipment K (carrier contract)
Seller must deliver to shipper
Destination K (carrier contract)
Seller must tender delivery of goods to the buyer at the destination
Carrier K - time for payment
When buyer receives goods
Shipment K (carrier contract) - when does the risk of loss shift from the seller to the buyer?
When goods are delivered to the shipper
Destination K (carrier contract) - when does risk of loss shift from the seller to the buyer?
When seller tenders delivery of goods to the buyer at the destination
FOB stands for
Free on board
T/F The letters FOB are always followed by a location and the risk of loss passes to the buyer at the named location. These contracts can be either shipment contracts or destination contracts, depending on the location named
True
The letters FOB are always followed by a location and the risk of loss passes to the buyer at
The named location
Carrier cases - Shipment K (risk)
Risk passes on delivery to carrier
Carrier cases - Shipment K (risk)
Risk passes on delivery to carrier
Carrier cases - Destination K (risk)
Risk passes on tender at destination
FOB (risk)
Risk passes on delivery to FOB location (can be carrier or destination)
P’s burden of persuasion in a conversion action
Preponderance of evidence
T/F As long as the requested discovery is reasonably calculated to lead to the discovery of admissible evidence, an objection on the ground that the information sought is inadmissible should be overruled
True
As long as the requested discovery is reasonably calculated to lead to the discovery of admissible evidence
An objection on the ground that the information sought is inadmissible should be overruled
