Transfer of Title and Risk of Loss

Question 1

When has passage of title happened?

Answer 1

NSNW - when seller has completed performance with reference to physical delivery of goods

WN - upon delivery of negotiable document - buyer must have taken actual possession of the document

WNN - upon delibery of nonnegotiable document - buyer must have taken actual possession of the document

BND - upon the last to occur of idnetification or contracting

Question 2

Unless otherwise agreed, title passes to the buyer at:

Answer 2

the time nd place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place

Question 3

Is the seller excused from performance under the contract?

Answer 3

No - the seller is not excused if the goods are “off-the-shelf” goods

Yes - the seller is excused if the goods are “one-of-a-kind” goods

Question 4

Warranties

Answer 4

Assurance or guarantee of conformity to a standard - with respect to, for example, title, quality, condition, durabiliyt or performance

Question 5

Sources of warrant law

Answer 5

a. ucc (state law)
b. Magnuson-Moss Warranty Act (federal law)
c. various state “lemon” laws

Question 6

Seller makes some statement of fact with respect to the goods

Answer 6

“the car has 25 miles on it”

• must relate to the goods
• must be part of the basis of the bargain
• fact vs opinion issues

*creates an express warranty

Question 7

Puffery

Answer 7

Is considered an expression of the seller’s opinion and, as such, the buyer has no right to rely on such statements

Question 8

Seller makes a promise with respect to the goods

Answer 8

“The computer will be defect-free for 90 days”

The type of express warranty that is most important to us as consumers

• must relate to the goods
• must be part of the basis of the bargain

Question 9

Conformity to description

Answer 9

“bonesless check” “20 cases of pepsi”

• must relate to the godos
• must be part of the basis of the bargain
• may be created by course of dealing or usage of trade

*creates express warranty

Question 10

Intent on the part of the seller to create an express wrranty:

Answer 10

not necessary to have one arise if the facts are right

In other words, the seller may not realize that a warranty has been created

Question 11

Meaning of “part of the basis of the bargain”

Answer 11

Must simply be one of the elements of the transaction from the buyer’s perspective which induced the buyer to enter into the transaction

Parol evidence rule problem - will you be permitted to introduce evidence of oral warranties given before the signign of a written contract?

Warranty given by seller after the contract is entered into - this is a contract modification which requies no consideration to be binding

Question 12

Not necessary for express warranties

Answer 12

Use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty

but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion of commendation of the goods does not create a warranty

Question 13

The effective duration of an implied warranty of merhantability is __________

Answer 13

4 years

Question 14

Elements of implied warranty of fitness for a particular purpose:

Answer 14

a. seller knows of buyer’s particular purpose for purchasing the goods
b. seller knows of buyer’s reliane on seller to select or furnish suitable goods
c. justifiable reliance by buyer on seller to select or furnish suitable goods
d. goods do not meet particualr purpose

Question 15

When the buyer relies on the seller’s skill or judgment to select or furnish suitable goods:

Answer 15

there is unless excluded or modified under the next section, an implied warranty that the goods shall be fit for such purpose

Question 16

Warranty of Title: Elements

(really an “implied warranty”)

Answer 16

Title conveyed is good

Transfer is rightful (transaction does not violate rights of any third parties)

Goods are free of any security interest of lien (unless buyer knows otherwise) - there are no amounts owed by the seller to a lender or a taxing authority that has a lien against the goods

Question 17

Potential waiver (loss of warranty protection) by pre-contract examination of the goods

Answer 17

1. Buyer exmines goods pre-contract => no warranty protection as to obvious defects (if defect was obvious, you should have addressed the issue with the seller prior to contracting)
2. Seller demands that buyer examine goods pre-contract and buyer refuses - no warranty protection as to defects buyer would have discovered had buyer examined the goods - if seller requests you examine the goods, do so

Question 18

Disclaiming express warranties

Answer 18

a. seller largely controls, during the contract-formation process, whether express warranties are made
b. generally, difficult to disclaim express warranties
c. parol evidence rule problem - how do you introduce proof that oral warranties were in fact created?

Question 19

Disclaiming implied warranties: use of catch phrases

Answer 19

1. “as is”
2. “with all faults”
3. catch phrases can be orl or written
4. a ctch phrase does not effectively disclaim the clean title warranty
5. if the catch phrase is in writing, it must be conspicuous - reasonable person ought to have noticed it
6. catch phrases will be ineffective as to intentional deception
7. some states do not allow a merchant seller to sell consumer products “as is” or “with all faults”

Question 20

Merchantability - warranty specific disclaimer - when you dont want to use a catch phrase but want to disclaim the implied warranty of merchantability

Answer 20

1. the disclaimer can be oral or written
2. if in writing, the disclaimer must be conspicuous
3. the disclaimer must incorporate the word “merchantability”

Question 21

When you dont want to use a catch phrase but want to disclaim the implied warranty of fitness for a particular purpose

Answer 21

1. the disclaimer must be in writing and conspiruous

Question 22

The enforceability of disclaimers may be challenged on the basis of:

Answer 22

unconsciousability

Question 23

Barrer must be:

Answer 23

a notice of breach to seller or is barred from any remedy

Question 24

Plaintiff’s conduct as a defense

Answer 24

Contributory neglignece - not a defense because breach of warranty is not a tort action like a lwsuit based on negligence

Voluntary assumption of risk - probably a defense

Question 25

Privity issues (who can sue and who can be sued for breach of warranty?)

Answer 25

Generally anyone in chain of distribution - privity of contract not a requirement

Question 26

Who can be a plaintiff suing for breach of warranty?

3 alternatives

Answer 26

a. status of plaintiff (“in the family or household”)
b. type of plaintiff (legal entity vs natural person)
c. types of damages recoverable (“injured in person” vs “injured”)

Question 27

Alternative A

Answer 27

Seller’s warranty extends to any natural person who is in the family or household of his buyer if it is reasonable to expect that such person may use

Question 28

Alternative C

Answer 28

Seller’s warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty

Question 29

Limitation of consequetional damages:

Answer 29

for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not

Question 30

The contract may include provisions which limit available remedies -

Answer 30

limitaiton on buyer’s remedies

typicall, to repair, replace or refund the purchase price - but the limited remedy must not “fail of its essential purpose”

*a remedy fails in its essential purpose when, while it may have appeared fair and reasonable at the inception of the contract, as a result of later circumstances it operates to deprive a party of a substnatial benfefit of the bargain

Question 31

The contract may include provisions which:

Answer 31

limit duration of express or implied warranties

Question 32

Summary of seller’s strategies to avoid or limit warranty claims:

Answer 32

do not create express warranties

disclaim implied warranties of merchantability or fitness

Limit duration of implied or express warranties

limit remedies to, for example, repair, replace, or refund purchase price

limit buyer’s right to recover consequential damage

Question 33

Magnuson-Moss Warranty Act 1975

Answer 33

Federal law - supercedes UCC as to transactions to which it applies

Applies to written warranties for consumer pdocuts purchased by consmers, if a written warrnty is given

Question 34

“Consumer Product”

Answer 34

Any tangible personal property normally used for personal, family or household purposes

Question 35

“Consumer”

Answer 35

A buyer (other than for resale of consumer product) of a consumer product

• a person to whom the product is transferred during the duration of the implied or written warranty
• an person entitled to enforce the warranty obligations

Question 36

Written warranties must be:

Answer 36

fully and conspicuously disclosed in simple and readily understood language

Question 37

If goods cost $10 or more, written warranty must be conspicuously designated as:

Answer 37

“full” or “limited”

Question 38

To be able to call a written warranty a “full” warranty, the seller must agree to the following:

Answer 38

a. if warranty is breached, seller must remedy the problem within a reasonable time without charge - free of charge
b. no limitation may be imposed on duration of any implied warranty
c. any limitation or exclusion of consequential damages must be consicuous and on the face of the warranty
d. if reasonable number of repair attempts does not remedy problem, seller must afford buyer the option of either replacement or refund of price
3e. warranty service must be provided to anyone who owns the product during warranty period

Question 39

Under either a full or limited warranty, seller cannot disclaim or modify:

Answer 39

the implied warranties of merchantability of fitness

Question 40

Seller may limit the duration of:

Answer 40

an implied warranty

Question 41

Elements of strit liability

Answer 41

1. product sold in defective condition
2. defendant must be engaged in the business of selling such products
3. product was unreasonably dangerous as a result of the defect
4. defect existed at time product left hands of defendant
5. defective condition attributable to the defendant
6. plaintiff sustained physical harm or property damage
7. defect caused the injuries/loss sustained by the plaintiff

Question 42

Defective condition

Answer 42

Manufacturing defect

design defect

inadequate warning, instructions or packaging

Question 43

Once engaged in the business of selling products who sells a defective product is subject to liability for harm to persons or property caused by the defect =>

Answer 43

the plaintiff is not required to show that the product was unreasonably deangerous

Question 44

Holds sellers to a different standard of liability

Answer 44

strict liability regardless of the care taken by the manufacturer

if warnings could have reduced risk then defective

freasable alternatives test - used to determine whether product is defective

Question 45

Other characteristics of strict liability in tort

Answer 45

1. Not dependent on contract
2. reliance not required
3. lack of privity not a defense
4. notice of defect is not required
5. liability generally cannot be disclaimed, excluded, or modified

Question 46

Defenses

Answer 46

Comparative negliegence

Voluntary assumption of risk

3. misuse or abuse of the product by the buyer
4. subsequent alteration of the product by the buyer
5. economic loss doctrine

Question 47

Anticipatory repudiation

Answer 47

Indicating an intention to not perform with regard to performance not yet due

Question 48

Retraction by a breaching party of an earlier anticipatory repudiation

Answer 48

Generally this can be done

Question 49

Seller thinks he or she will not be paid

Answer 49

Seller can withold delivery and demand cash

• only when buyer is insolvent => ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due

Question 50

Seller can stop delivery of goods

Answer 50

a. if buyer is insolvent, this remedy is available as to any size of shipment or quantity stored
b. as to other breaches by buyer this remedy is only available with respect to large shipments
c. seller can still sue buyer for breach regardless of whether shipment could be stopped under this section
d. improper stoppage by a seller is breach of contract if delayed delivery results

Question 51

Seller is required to give notice of the sale to buyer - different notice to breching buyer depending whether resale is public or private

Answer 51

1. negotiated sale - general notice to buyer
2. auction sale - specific notice

Question 52

Buyer can reject the goods if has concerns

Answer 52

a. “As is” or other effective disclaimer may eliminate right to reject because of defects
b. title transfers back to seller - whether or not rejection was rightful
c. risk of loss remains on seller until the breach is cured or the goods are accepted by the buyer

Question 53

How to reject the goods - buyer

Answer 53

Must occur within reasonable time

Buyer must give reasonable notice to the seller

Question 54

A greater burden is imposed on merchant buyers who have rejected goods

Answer 54

1. merchant buyer must follow reasoable instructions from seller
2. if goods are perishables or threaten to decline in value speedily - a merchant buyer must attempt to sell goods for breaching seller if reasonalb instructions

Question 55

Two requirments must be met in order to be able to revoke acceptance, nonconformity must be substantial and any one of the following must apply:

Answer 55

1. buyer accepted goods blieving seller would cure and seller has not
2. buyer accepted goods not kowing of the nonconformity because of difficulty of discovery
3. buyer was assured by seller that nothing was wrong

Question 56

Revocation is not effective until:

Answer 56

notice is given to seller

Question 57

Buyer can cover

Answer 57

Buyer purchases substitute goods

Damages that buyer can then recover - cover price less the contract price plus incidental and consequential damages

Cover ust occur in good faith and be reasonable

Question 58

Seller can recover full purchase price plus incidental damages only if

Answer 58

a. buyer has accepted goods and fails to pay

or

b. goods destroyed after risk of loss has passed to buyer

or

c. of identified goods still in the seller’s possession if seller cannot resell

Question 59

If goods are not resold pursuant to 2-706 =>

Answer 59

seller recovers contract price less market price plus incidentals

Question 60

Buyer can sue seller for specific performance

Answer 60

This equitable remedy is only available to buyer when the “goods are unique or in other proper circumstances”

Difficult remedy for byer to get

Buyer must have “clean hands”

Question 61

2 types of buyer’s consequential damages

Answer 61

1. foreseeable losses - those losses suffered by the buyer that the seller ought to have realized would result from the seller’s breach
2. breach of warranty losses - personal injury or property damage resulting from breach of warranty

Question 62

Agency

Answer 62

Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the others so to act

The one for whom action is to be taken is the principal

The one who is to act is the agent

Question 63

Agency is based on the concept of delegated authority -

Answer 63

you can authorize another to perform on your behalf

Question 64

Utility of agency

Answer 64

Multiply our economic activiteis by acting through others (agents)

Question 65

Master/servant relationship

Answer 65

servant under physical control of master - typical employment relationship

Question 66

Employer/employee relationship

Answer 66

exact nature of relationship depends on facts and circumstances

Question 67

Independent contractor

Answer 67

Not physically controlled by person who engages independent contractor

Question 68

Creation of agency by expres or implied agreement results in a grant of actual authority - two aspects of actual authority

Answer 68

1. express authrotity - defined by the spoken or written word
2. implied (incidental) authroity - to do what is customary and in addition to express authority

Question 69

Apparent agency

Answer 69

The principal creates impression in mins of third parties that an agency exists or that an agent has a certain scope of authority

Results in apparent authority from perspective of third parties

• apparent authority may coincide with agent’s actual authority
• apparent authority may exceed/be less than agent’s acutal authority
• the alleged agent may not in fact be an agent at all

Question 70

What do third parties have a right to believe about an agent’s scope of authority?

Answer 70

1. Agent has usual and customary grant of authority gven the nature of the agency relationship
2. Third parties not boud by “secret” limitations unless they know of them

Question 71

Who bears the risk that no agency in fact exists?

Answer 71

1. The third party bears the risk that the “agent” is not realy an agent
2. This is true unless apparent authority has been created by “principal” - then “agent” has apparent authority and principal will be bound

Question 72

When can agent be liable for contracts entered into on behalf of a principal?

Answer 72

Exceeds authority - is agent going to be liable to principal

“agent” acts for a non-existent or incompetent “principal”

Agent acts for partially disclosed principal

Question 73

Agent acts for partially disclosed principal

Answer 73

Third party must make election when identiy of principal becomes known

If agent held liable, agent can recover from principal

Question 74

If agent has no actual authority - agent can be liable

Answer 74

Principal not liable to third party

agent potentially liable to third party based on either of these 2 theories

Question 75

Agent potentially liable to third party:

Answer 75

1. misrepresentation - did agent advise third party he had authority?
2. breach of implied warranty of authority - agent impiedly warrants that he has the necessary authority when he enters into the contract with third party

Question 76

Obligations of principal to agent

Answer 76

1. abie by agreement
2. maintain true acount of any money owed to agent
3. reimburse expenses paid by agent
4. warn agent of dangers
5. indemification (indemnify agent for any losses or expenses)

Question 77

Obligations owed by agent to principal

Answer 77

1. abide by agreement
2. follow lawful and reasonable instructions of principal
3. carry out agency using reasonable care
4. duty to account to principal for any money in agent’s possession that belongs to principal
5. duty to notify principal of any information learned by agent that bears on agency
6. undivided loyalty
7. agent must indemnify the principal for any loss caused by the agent’s breach of a duty owed the principal

Question 78

Sanctions for violation of duty of loyalty are severe:

Answer 78

1. Termination of agent
2. principal can recover compensation
3. principal can recover secret profits

Question 79

In the context of the employment relationship =>

Answer 79

the employer is the principal and the employee is the agent

Question 80

Vicarious (derivative) or imputed liability of principal

Answer 80

“respondent superior” - let the superior respond for the acts of the subordinate

Question 81

2 things for vicarious or imputed liability

Answer 81

1. Must have master/servant typeof relationship
2. tort must have been committed within employee’s scope of employment
   - if outside scope, only employee is liable to third party, if within scope, employer and employee are jointly and severally liable to third party

Question 82

Termination by acts of parties or as a result of their agreement

Answer 82

1. fulfillment of purpose
2. lapse of time (per agreement or after reasonable period of time)
3. upon the occurrence of a specified event
4. mutual agreement of the parties
5. act of one party alone

Question 83

Termination by operation of law

Answer 83

1. death or incompetency of princiapl or agent
2. bankruptcy
3. change of law
4. loss or destructoin of subject matter of agency

Question 84

Effect of termination

Answer 84

Agent’s actual authority terminates

But agent may continue to have apparent authority

Question 85

Types of notice required to cut off rights of third parties against principals because of agent’s continuing authority

Answer 85

a. actual notice to those who have had contact with agency in the past
b. constructive notice to the public in general who may have merely known of the existence of the agency

Question 86

Employment at will doctrine

Answer 86

Employee can be discharged at any time for any reason - employer need not show cause or any good reason

Question 87

Exceptions to right to terminate an employee “at will”

Answer 87

1. Federal and state statutes regarding labor law and anti discrimination laws
2. contract theories - oral promises made that need to show reason for firing
3. public policy - whistle lower cases
4. Tort theories - fraud, intentional infliction of emotional distress, defamation of character, breach of the implied covenant of good faith and fair dealing

Question 88

Worker’s compensation

Answer 88

Workers are allowed to receive compensation for injuries that occur on the job

Injuries have to be job related

Employers are required by law to buy insurance to cover workers claims

Question 89

Employer defenses to a worker’s compensation claim:

Answer 89

1. Employee really an independent contractor and not covered by statute
2. injury not employment related
3. Employee engaged in horseplay

Question 90

Occupational Safety and Health Act

Answer 90

Intended to promote safety in the work place - virtually all private employers are within scope of the act

Question 91

OSH

Answer 91

Act imposes record keeping and reporting requirements on employers and requires them to post notices in the work place informing employees of their rights

Establishes work places safety standards

Question 92

Compliance, Enforcement, and Penalties of OSHA

Answer 92

emplowered to conduct inspections

issues citations which require the employer to abate or correct the situation within 6 months

Various civil and criminal penalties

Employer defenses - compliance with the rule is not feasiable, employee misconduct caused violation of the rule

Question 93

Burden shifting

Answer 93

Employee must make a prima facie showing that discrimination occurred

Burden shifts to employer to articulate a legitimate , nondiscrimitory basis for the decision

Burden shifts to employee to prove that alleged legitimate is pretextual

Question 94

Equal Employment opportunity Commission (EFOC)

Answer 94

Federal agency responsible for enforcing most federal anti-discrimination laws

5 members

empowered to conduct investigations

Question 95

Statutory criteria that justify or permit differential in wages

Answer 95

a. Bona fide seniority based system
b. bona fide merit based system
c. quantity or quality of product
d. “any other factor other than sex”

Question 96

Disparte treatment discrimination

Answer 96

“one-on-one” discrimination

*fired because of race

Question 97

Disparate impact discrimination

Answer 97

a facially netrual rule or requirement of employer that, in fact, discriminates

ex. the following screening devices have a discriminatory disparate impact

*credit status, arrest record, unwed pregnancy, educational requirement, marital status

Question 98

Quid pro quo harassment

Answer 98

Employer conduct that conditions job benefits on acquiesence to sexual harasment or penalizes an individual for refusing to participate in harassing conduct

Question 99

Hostile enviornment harasment

Answer 99

An employe e who is subjected to a hostile, intimidating or offensive work environment

Question 100

Age discrimination

Answer 100

Applies to employees who are 40 and older

but not applicable to executives 70 or older

Question 101

Disabled person - someone who has

Answer 101

A physical or mental impairment that substantially limits one or more of his or her major life activiities

a record of such impairment

regarded as having such impairment

Question 102

When an emjployee refuses to work under conditions they believe to pose a risk of death or injury and dont have time =>

Answer 102

he may refuse to expose himself to the dangerous situation without be subjected to “subsequent discrimination”

Question 103

Hiring criteria based on gender:

Answer 103

is violative of the Civil Rights Act of 1964

Question 104

Americans with Disabilities Act of 1990

Answer 104

Employers must make reasonable accomodations to accommodate people with disabilities

Preemployment medical examinations are forbidden before a job offer

Title I of the ADA is administered by the EEOC

Question 105

What fiduciary relationship, if any, exists in an agency relationship?

Answer 105

The agent owes a fiduciary duty to his principal

Question 106

Customers who dont receive right of inspection =>

Answer 106

are allowed to refuse payment of goods

Question 107

Person would maintain right to revoke if:

Answer 107

1. accepted on reasonable assumption that its non-conformity would be cured
2. it has not been reasonably cured
3. the non-conformity substantially impairs the value of the machine

Question 108

The posessor of stolen goods, regardless of her knowledge of their origins:

Answer 108

cannot convey good title

Question 109

Any entrusting of possession of goods to a merchant who deals in goods of that kind:

Answer 109

gives him power to transfer all rights of the entruster to a buyer in ordinary course of business

Question 110

Title reverts back when:

Answer 110

goods are rejected by buyer

Question 111

Article 2 of UCC with regard to buyer’s rights and duties

Answer 111

If the contract is a C O D contract, the buyer has the right to reject the goods after inspecting them

The buyer must furnish the facilities reasonably necessary to permit the buyer to accept the goods

The buyer may reject the goods if they fail in any respect to conform to the contract

The buyer may accept the goods despite the fact that the seller’s manner of delivery was not conforming to the contract and thereafter sue the seller for breach of contract