Statute Flashcards
2- (Warranty of title)
This means that the seller is promising that the good is free from another owner claiming that the good is theirs.
It is a promise that the title shall be good and rightful and that the transfer shall be free from security interest/other liens.
(2) the warranty under (1) excluded or modified only by specific language or circumstances which give the buyer a reason to know that the person selling does not claim title in themselves.
2-313 (The express warranty) Express warranties by affirmation, promise or description
The 3 ways to create an express warranty are…
- by affirmation of fact or promise made by the seller which becomes the basis of the bargain
- any description of the goods which is made part of the basis of the bargain
- through a sampke or model which creates the basis of the bargain.
Seller does not need to use formal words like warrant or guarantee.
In summary:
1. It is created by a seller so they cannot disclaim it.
2. Note the parole evidence issue; prior oral or written agreements cannot be introduced to contradict the terms of the contract.
3. Description need not be words.
4. Precise timing of a warranty is not essential so long as it is part of the basis of the bargain.
5. No specific or intent or knowledge to create a warranty from the statement is required.
2-314: An implied warranty, the warranty of merchantability
This is implied unless it is excluded or modified by the contract. This is implied if the seller is a merchant for goods of that kind. Containers at a restaurant are also considered a sale for the purposes of this section.
The fair average quality is to match the description (if you had thousands of oats, it would not be per oat but by the average quality). They have to be fit for the ordinary purpose for that good.
The goods have to be an even enough number of kind,quality and quantity of whatever variation is specified in goods description. they must be adequatelt contained packaged and labeled also and conform to any affirmations included on the label.
Can be eliminated by 2-316
2-315: Implied warranty- the warranty of fit for a particular purpose.
Under this, the seller does not have to be a merchant.
A seller
At the time of contracting
has reason to know a particular purpose the goods required for
the buyer is relying on the seller’s skill or judgment
this creates an implied warranty unless it is excluded under 2-316
2-403 Entrusting
A purchaser gets all title the transferor has or had the power to transfer. A person with voidable title can transfer goof title to a good faith purchaser for value.
If acquired via fraud/deception a good faith purchaser can still acquire good title.
if goods are entrusted to a merchant who deals in goods, merchant can transfer good title to a buyer in the ordinary course of business.
2-509- The risk of loss when there is no breach.
2-509 cannot happen without 2-501.
This section is relevant in any event that there is a shipping contract.
somebody has to bear the risk of loss.
There are 3 different ways that we evaluate the risk of loss. But risk of loss cannot occur until the goods are identified in the contract.
If the carrier is delivering the goods: If the contract is silent, it is a shipment contract and ROL passes to the buyer when goods are delivered to the carrier.
If the contract is not silent, the seller must get to a particular place, the ROL passes when the seller gets the goods to that place.
If the goods are held by bailee:
ROL shall pass…
a. when buyer gets receipt of possession or control of the goods; or
b. when bailee acknowledges the buyer has the right to possession, or
when bailee receives receipt or control over a non-negotiable instrument.
If neither of the above apply-
if seller is a merchant it is upon buyer’s receipt of goods.
if the seller is a non-merchant, it is upon the tender of delivery as defined under 2-503.
2-301
The sellers obligation is to transfer and deliver and the buyer has an obligation to pay in accordance with the contract.
Seller must tender conforming goods and the buyer must pay for them.
Unconscionability- The unconscionable contract or clause
2-302
(1) If a court finds a contract/clause unconscionable at the time it was made, they may:
- refuse to enforce it
- enforce it without the unconscionable clause
- limit tha application of the clause to prevent an unfair outcome.
(2) If contract/clause appears unconscionable, both parties -must- be given a fair chance to present evidence on:
- commercial setting
- the purpose of the contract
- its overall effect.
uncon measured at the time of K. There is a presumption of uncon but opposition may rebut it
Comments:
- code does not define Uncon.
- Comment 1…. test is whether in light of the general commercial background and the commercial needs of the particular trade/case.
- goal of unconscionability it to prevent oppression and unfair surprise.
- Cases cited in the comments suggest that an unfair balance of power is not enough.
- Common law principles of procedural and substantive unconscionability apply.
Open Price Term
2- 305
(1) A contract for the sale of goods can be valid even if the price is not fixed at the time of agreement. In such cases, the price will be:
A reasonable price at the time of delivery if nothing else is stated.
Set by the buyer or seller if one is given the right to do so.
Determined by an agreed market standard or third party.
(2) If the price is to be fixed by one party, they must do so in good faith.
(3) If the price is not set due to one party’s failure, the other may cancel the contract or set a reasonable price.
(4) If the parties intended not to be bound unless a price was fixed and it is not, there is no contract. If goods were already delivered, the buyer must pay a reasonable price.
Options and Cooperation in performance
2-311
(1) A contract may allow one party to specify details like delivery time, payment terms, or other performance aspects.
(2) Such specifications must be made in good faith and within reasonable limits.
(3) If a party’s failure to specify prevents performance, the other party may either proceed in a reasonable manner or treat the failure as a breach.
Output, Requirements and Exclusive Dealings
2-306
(1) A contract for the sale of goods based on the seller’s output or the buyer’s requirements must operate in good faith. The quantity cannot be unreasonably disproportionate to past dealings or stated estimates.
(2) Exclusive dealing agreements impose an obligation on the seller to supply and the buyer to promote the sale of the goods in good faith.
Delivery in single or several lots
2-307
Unless otherwise agreed:
The seller must deliver goods in a single lot, and the buyer must accept and pay for them in one delivery.
If circumstances allow, the delivery may be in multiple lots, with payment required for each lot separately.
The Place of delivery
2-308
Unless otherwise agreed:
The default place of delivery is the seller’s place of business.
If the seller has no business location, delivery is made at their residence.
If the goods are identified and stored elsewhere, that location may be the place of delivery.
The time for delivery or actions
2-309
(1) If no time for delivery is specified, it must be done within a reasonable time.
(2) If the contract allows for successive performances without a fixed duration, it can be terminated by either party with reasonable notice.
(3) Termination requires reasonable notice unless agreed otherwise. Sudden termination without notice may be invalid.
Payment Terms
2-310
Unless otherwise agreed:
(a) Payment is due at the time and place the buyer receives the goods.
(b) If shipment is required, payment is due when the seller delivers the goods to the carrier.
(c) If goods are on credit, the credit period starts when goods are shipped.
Insurable Interest in Goods
2-501
(1) A buyer obtains an insurable interest in goods once they are identified in the contract, even before receiving them.
(2) A seller retains an insurable interest in the goods as long as they hold title or a security interest in them.
Risk of Loss in Absence of Breach
2-509
(1) If goods are shipped without requiring delivery to a specific place:
Risk of loss transfers to the buyer when the seller properly delivers the goods to the carrier.
(2) If goods must be delivered to a specific place:
Risk of loss transfers to the buyer when the goods are tendered at that place.
(3) For goods held by a bailee (third party holding goods):
Risk of loss transfers to the buyer when they receive the document of title, the bailee acknowledges the buyer’s rights, or the buyer can take possession.
(4) If neither of the above applies, risk of loss remains with the seller until the buyer takes possession.
F.O.B. (Free on Board) and F.A.S. (Free Alongside Ship) Terms
2-319
1) F.O.B. (Free on Board):
F.O.B. seller’s location – Buyer bears risk once goods are shipped.
F.O.B. buyer’s location – Seller is responsible for delivery and risk remains with them until goods reach the buyer.
(2) F.A.S. (Free Alongside Ship):
The seller must deliver the goods alongside the ship and bear risk until then.
(3) If the contract includes F.O.B. or F.A.S. terms, shipping costs and risks follow accordingly.
C.I.F. (Cost, Insurance, and Freight) and C.&F. (Cost and Freight) Terms
2-320
(1) C.I.F. (Cost, Insurance, and Freight):
The seller must pay for the cost, insurance, and freight of shipping.
The seller must ship the goods, obtain insurance, and provide shipping documents to the buyer.
(2) C.&F. (Cost and Freight):
Similar to C.I.F. but does not require the seller to provide insurance.
(3) The buyer must accept the shipping documents and make payment accordingly.
C.I.F. or C.&F. with “Net Landed Weights” or Similar Terms
2-321
If a contract specifies “net landed weights” or similar terms, payment is based on the final weight or quantity upon arrival.
The seller must still comply with shipping and documentation requirements.
Delivery- Ex Ship
2-322
(1) If goods are sold “ex-ship” (delivered from a ship), risk remains with the seller until the ship docks and goods are available for unloading.
(2) The seller must ensure no lien (legal claim) remains on the goods when they are delivered.
Manner and Effect of Rightful Rejection
2-602
(1) A buyer rejecting nonconforming goods must do so within a reasonable time and notify the seller.
(2) If rejected, the buyer must hold the goods safely for the seller’s retrieval.
(3) The buyer cannot use or take ownership of rejected goods.
Merchant buyer’s duties for rejected goods
2-603
(1) If the buyer is a merchant and the seller has no instructions, the buyer must make reasonable efforts to care for the rejected goods.
(2) If the goods are perishable, the buyer must try to sell them for the seller’s benefit.
(3) The buyer is entitled to reimbursement for reasonable expenses related to handling rejected goods
Buyer’s right to dispose of rejected goods
2-604
If the seller gives no instructions within a reasonable time, the buyer may store, resell, or return the goods.
If resold, the buyer can recover costs but must act in good faith.
The waiver of buyer’s objections by failure to state
2-605
A buyer who fails to specify defects when rejecting goods may lose the right to claim those defects later, unless the seller should have known of them.
What shall constitute acceptance of goods
2-606
(1) A buyer accepts goods when they:
Indicate they will keep them despite defects.
Fail to reject them within a reasonable time.
Use or resell them.
(2) Once accepted, goods cannot be rejected, but remedies may still be available.
Impact of acceptance and buyer’s obligations
2-607
(1) A buyer must pay for accepted goods.
(2) If defects are discovered after acceptance, the buyer must notify the seller within a reasonable time.
(3) Failure to notify may bar claims against the seller
The revocation of acceptance
2-608
(1) A buyer may revoke acceptance if a defect substantially impairs the goods and was:
Not initially discovered due to difficulty in detection.
Not disclosed by the seller despite assurances.
(2) Revocation must happen within a reasonable time and before significant use of the goods.
Right to Adequate Assurance of Performance
2-609
(1) If reasonable doubts arise about a party’s performance, the other party can demand written assurance.
(2) If assurance is not given within 30 days, the contract may be treated as repudiated (canceled).
Anticipatory repudiation
2-610
If one party clearly indicates they will not perform their obligations, the other party may:
Await performance for a reasonable time.
Cancel the contract and seek damages.
Retraction of anticipatory repudiation
2-611
(1) A party that repudiates a contract may retract their repudiation before performance is due unless the other party has already canceled or materially changed position.
(2) Retraction must include clear assurance of performance.
(3) If retracted, both parties must continue as originally agreed.
Installment contracts- breach
2-612
(1) An installment contract is one that requires or allows delivery of goods in separate lots, to be separately accepted.
(2) A buyer may reject an installment if:
It is nonconforming and substantially impairs its value.
The nonconformity cannot be corrected or cured.
(3) If one installment is defective but does not substantially impair the whole contract, the buyer must accept future installments if the seller provides assurances. However, if a nonconforming installment substantially impairs the value of the entire contract, the buyer may treat it as a total breach and cancel the entire contract.
Risk of loss § 2-510
2-510 (Effect of Breach on ROL)
Effect of Breach on Risk of Loss (§ 2-510)
1. If goods are nonconforming and subject to rejection, the seller retains the risk of loss until cure or acceptance.
2. If the buyer rightfully revokes acceptance, the seller bears the risk of loss retroactively if the buyer’s insurance is insufficient.
3. If the buyer breaches before risk of loss passes, the seller may place the risk on the buyer for a reasonable time if insurance is lacking.
Comments
the seller can’t shift the ROL if the seller is in breach of K
The purpose of this section is to distribute the ROL and not intended to be disturbed by other insurance agreements.
Risk of Loss, Breach and Impracticability
2-613- Casualty to Identified Goods
- Applies when goods are already identified to the K
- If loss is total, K avoided
- If loss is partial, buyer may inspect goods and choose
how to proceed - Must be a result of an occurrence not foreseen by
either party at the time of contracting and without
fault of either party. - Comment 1. If goods are destroyed without fault (no negligence
or willful conduct) buyer is relieved of obligation to accept. - Comment 1. Buyer can choose to accept surviving goods.
- Comment 2. Applies if goods are destroyed before risk of loss
passes to the buyer. - Comment 2. Issue of whether buyer has rights under this section
is “whether the seller has or has not undertaken the responsibility
for the continued existence of the goods in proper condition
through time of agreed or expected delivery.”
Risk of Loss, Breach and Impracticability
2-614- Substituted Performance
- If agreed facilities, carriers, or delivery methods become impracticable without fault, a commercially reasonable substitute must be used and accepted.
- If the agreed payment method fails due to government regulation, the seller may withhold delivery unless the buyer provides a commercially equivalent alternative. If delivery occurred, payment per the regulation suffices unless it is discriminatory, oppressive, or predatory.
In summary/comments….
Gives the seller the option of choosing a different method or carrier if the agreed one isnt commercially practicable.
Section goes to the matter of performance and not of conforming goods.
Risk of Loss, Breach and Impracticability
2-615
- Applies when goods not yet identified to the contract.
- Occurs when Seller’s delay or non-delivery is impracticable because of
a contingency, the non-occurrence of which was a basic assumption
on which the contract was made - Allows the seller to decide how to allocate remaining goods. Can even
give those goods to a buyer who did not have a pending contract so
long as seller acts reasonably.
Comment 1. Applies where performance becomes commercially impracticable because of
unforeseen supervening circumstances not within the contemplation of the parties at the time of
contracting.
Comment 2. This is an issue of fact decided on a case by case basis.
Comment 4. Increased cost alone is not sufficient for excuse unless increase is due to some
unforeseen contingency which alters the essential nature of the performance.
Difference between 2-613 and 2-615
2-613: Goods Identified, buyer may inspect
2-615: Goods not yet identified, seller may allocate
