Sales

Front 1

What does the UCC govern?

Back 1

The sale of goods. The Code adopts much of the common law of contracts, but includes a number of modifications.

Front 2

What are some important differences

Back 2

CL: Option K requires consideration or prommissory estoppel; UCC: Merchant's firm offer is irrecocable w/o consideration.

CL: Acceptance must be absolute and unequivocal; otherwise it will be treated as a rejection and counteroffer; UCC: Proposal of additional terms does not consitutute rejection; terms may become part of contract per battle of the forms.

CL: Contracts cannot be modified w/o consideration; UCC: Modifications sought in good faith are binding w/o consideration

CL: Rule of subtantial performance (need not be perfect performance); UCC: Perfect tender rule (with exceptions)

Front 3

What is the subject matter of article 2?

Back 3

UCC article 2 deals with transactions in goods (i.e. all things that are moveable when they are identified under the contract). It does not apply to the sale of realty or intangibles.
1. goods associated with realty: Goods associated with realty fall under Article 2 if severance is to be made by the seller. Growing crops fall under Article 2 regardless of who severs. Other things (mostly fixtures) that can be removed from the land without material harm to the land are within Article 2. Contracts involving the sale of things other than goods are generally governed by the common law contracts rules.
2. Merchants v. Nonmerchants: A number of the rules under Article 2 differentiate betwen merchants and nonmerchants. A merchant is generally definied as one who reguarly deals in goods of the kind sold or who otherwise by his profession holds himself out has having special knowlege or skill sa to the practices or goods involved.
3. Good faith requirement: Article 2 requires all parties to act in good faith (i.e. with honesty in fact and in observance with reasonable commercial standards of fair dealing.

Front 4

When does merchant status matter?

Back 4

2-201 SOF-Merchant's confirmatory memo rule; 2-205- Merchant's firm offer rule; 2-207(2)- Additional terms in acceptance or confirmation - battle of the forms rule for merchants.; 2-209(2)- agreement excluding modification except by signed writing-form supplied by merchant; 2-312; Warrnty against infringment; 2-314 Implied warranty of merchantability; 2-316(2) Disclaimer or implied warranty of merchantability; 2-403(2) Entrusting goods to erchant gives her power to transfer rights to buyer in ordinary course; 2-509(3) Risk of loss in the absence of breach (noncarier cases)- passes on to buyer's reciept if seller is a merchant, otherwise on tender of delivery.

Front 5

What is the general rule of contract formation under the UCC?

Back 5

A contract for the sale of goods may be made in any manner sufficient to show agreement.

Front 6

What is the rule on Merchant's firm offers?

Back 6

Common law offers generally are revocable unless consideration is given to keep the offer open. Article 2 modifies the common law rule for certain offers made by merchants, a written offer signed by a merchant giving assurances that it will be held open will be irrevocable-without consideration- for the stated time period or a reasonable time if no period is expressly stated, not to exceed 3 months.

Front 7

What are the methods of acceptance?

Back 7

An offer is construed as inviting acceptance in any reasonable manner and by any reasonable medium. Generally, an offer to buy goods for current shipment is construed as inviting acceptance either by a promise to ship or by prompt shipment of conforming or nonconforming goods.

Front 8

What is the battle of the forms?

Back 8

Article 2 has abandoned the common law mirror image rule for acceptance. Any acceptance or written confirmation that shows an intention to contract is effective. Whether terms in the acceptance that are different from or in addition to the offered terms will be included in the contract depends on whether Both parties are merchants.
a. Contracts involving a non-merchant: contract will include only the terms of the offer.

Contracts between merchants: additional terms automatically become part of the contract unless: 1. they materially alter the original contract; 2. the offer expressly limits acceptance to the offer's terms; or 3. The offeror objects within a reasonable time.

Front 9

What is the rule on contracts beween merchants (acceptance containing different terms)?

Back 9

There is a split over whether different terms in the acceptance become part of the contract. Some courts treat different terms like additional terms, and they use the above test to determine whether the different terms should be part of the contract. Other courts follow the "knockout rule," which states that the conflicting terms in the offer and acceptance are knocked out of the contract and the terms are instead provided by the UCC.

1. Effect of performance: An offeror may object in advance to the addition of new or inconsistent terms by the offeree. If the offeree's response nonetheless proposes additional terms and states that the response is not an accptance unless the offeror consents to those terms, no contract is formed by the writings. However, if the parties proceed to act as if they have a K, there is a contract consisting of the terms on which the writings agree plus supplementary terms supplied by the UCC.

Front 10

What is the rule on open terms?

Back 10

The fact that one or more terms (incl. price) remains open does not prevent the formation of a contract if the parties intended such and there is a reasonable basis for giving a remedy. The court can supply reasonable terms for those that are missing.
a. Quantity: The one term that is essential is quantity. A quantity term must be included to create a sales contract. Contracts for a seller's output or a buyer's requiremetns satisfy the rquirement becasue the terms usually can be determined objectively.

Front 11

What is the rule on auctions?

Back 11

A sale by auction when the auctioneer so announces by the fall of the hammer or in another customary manner. Auctions are with reserve (i.e. the goods may be withdrawn at any time before the auctioneer announces they are sold) unless explicitly offered without reserve.

Front 12

What are defenses to contract formation?

Back 12

1. SOF: Contracts for the sale of goods at a price of $500 or more (including modifications) are not enforceable unless there is some writing that is signed by the party to be charged. A writing is sufficient even though it omits or incorrectly states a term, but a quantity must be stated because the contract is not enforceable beyond the quantity of goods shown in the writing.

ET: To be sufficient fro the SOF the writing may be informal. Quantity must be stated in writing.

Merchant's confirmatory memo rule: In K's between merchants, if one party within a reasonable time after an oral understanding has been reached, sends a written confirmation thereof to the other party that binds the sender, it will satisfy the SOF requirements against the recipient as well if he had reason to know of the confirmation's contents, unless he objects within 10 days in writing.
Look for party to be charged for signature req.

Front 13

When is a writing not required?

Back 13

-Goods specially made for the buyer and are not suitable for sale to others in the ordinary course of the seller's business, and the seller has started making them or committed for their procurement; 2. If the party admits in his pleading or court testimony that a contract was made; or 3. if the contract is performed (the goods are either received or accepted or paid for)
ET acronym for remembering when a writing is signed by the party to be charged is not required for a sale of goods, even for $500 or more...SWAP: Specially made goods, Written confirmation by merchant, Admission in court, or Performance.

*Unconscionability: If the contract was unconscionable when made, the court may refuse to enforce it or limit it to avoid unconscionable results. The test for unconscionabilty is whether at the time of execution, the contract or one of its provisions could result in unfair surprise and was oppressive to a disadvantaged party.

Front 14

Contract modification by agreement of the parties:

Back 14

At common law, contracts may not be modified without consideration. Article 2 does not follow this rule.
1. Modification Without Consideration: Contract modifications sought in good faith are binding without consideration. Contract modifications must meet the SOF requirements if the contract as modified is within the statute.
2. Writing prohibiting oral modification: A provision that a written contract cannot be modified or rescinded except by a signed writing is valid and binding.
3. Waiver of writing requirement: An invalid oral modification (e.g. one that violates the SOF) may serve as a waier of a party's right to enforce the contract as written if one of the parties relied to her detriment on the modification.
4. Waiver of condition: One having the benefit of a condition under a contract may indicate by words or conduct that he will waive that condition. Generally, consideration is not required for a valid waiver of condition. An exception exists when a waiver in an installment contract is not supported by consideration. The beneficiary of the waived condition may insist on strict compliance with the terms of the contract for future installments (assuming there has been no detrimental reliance on the waiver) by giving notice that he is revoking the waiver.

Front 15

Contract modification by operation of law:

Back 15

1. Destruction or injury to identified goods: If a contract requires for its performance particular goods identified when the contract is made and, before risk passes to the buyer, the goods are destroyed or damged without the fault of either party, the contract is avoided. For damaged goods, the buyer may elect to take the goods with a reduction in price. If the goods are destroyed or damaged after risk of loss has passed to the buyer, the buyer will bear the loss.
2. Failure of agreed-upon method of transportation: If the agreed-upon delivery facilities become unavailable or commercially impractical, any commercially reasonable transporation must be tenderd and must be accepted.
3. Failure of pressupposed conditions- impracticability: A seller will be discharged from performing a sales contract under the doctrine of impracticability if: 1. At the time the parties made their contract, a basic assumption of both parties was that a certain circumstance that would make performance extremely more burdensome would not occur; and 2. the circumstance does occur; The seller is discharged only to the extent of the impracticability.

a. Events sufficient for discharge: Unforseen wars, embargoes, and natural catastrophes will usually be sufficient if they make it extremely difficult for the seller to obtain or convert raw materials. If the event merely makes performance more expensive, the seller usually will not be discharged.

Front 16

what is the rule on a seller's partial inability to perform?

Back 16

a partial inability to perform does not excuse performance; the seller must allocate the available supply among his customers.

Front 17

PAROL EVIDENCE RULE

Back 17

The terms of a K set forth in the confirmatory memoranda of the parties or in a writing intended as a final expression of the parties' agreement cannot be contradicted by evidence of any other prior agreement or contemporaneous oral agreement. Such terms, however, may be explained or supplemented by: 1. consistent additional terms; 2. Course of dealing (a sequence of conduct concerning previous transactions between the parties to a transaction that may be regarded as establishing a common basis of understanding); 3. trade or business usage; 4. Course of performance (repeated occasions for performance and a party has opportunity to object to performance; any performance acquiesced to is relevant in determining the meaning of the contract).
note: there is no requirement that a contract term be ambigous before allowing an explanation by course of dealing, usage of trade, or course of performance.

Front 18

What is the rule on performance of the contract?

Back 18

1. Seller's obligation of tender and deliver: The extent of the seller's obligation depends on how the goods are delivered:
1. Noncarrier contracts: If the parties did nto intend that the goods be moved by a carrier, the seller must put and hold conforming goods at the buyer's disposition for a time sufficient for the buyer to take possession. In the absence of agreement, the place of delivery is the seller's place of business, or if he has none, residence.
2. Carrier contracts: If the parties intend that a carrier be used to move the goods, the seller may be obligated to deliver the goods for shipment or to deliver them to a particular destination.
a. Shipment contracts- seller has not agreed to tender at a particular destination: In a shipment contract, the seller need not see that the goods reach the buyer, but is not only required to put the goods in the hands of a carrier, make reasonable contract for their shipment, promptly tender requried documents, and promptly notify the buyer of the shipment.
Note: If the seller fails to make a contract for shipment or fails to notify the buyer, the buyer has grounds for rejection only if a material loss or delay occurs as a result.
b. Destination contracts- seller has agreed to deliver to destination: In a destination contract, a seller is required to see that the goods reach the buyer, and is required to put and hold conforming goods at the buyer's disposition for a time sufficient for the buyer to take possession of the goods at the destination specified.

c. FOB contracts: IN contracts that specify that delivery is free on board a particular point, the FOB point is the delivery point. The delivery point may be the seller's place of shipment or the goods' final destination. Depending on the type of contact (shipment or destination), the seller must tender delivery in the manner described in either a or b above.

d. FAS contracts: free alongsiide the seller msut deliver the goods alongside the vessel in the manner usual in the port of deliver or on a dock designated by the buyer, and tender a receipt for the goods.

Front 19

What is the buyer's obligation to pay-right to inspect?

Back 19

1. Delivery and payment concurrent conditions: In noncarrier cases unless the contract provides otherwise, a sale is for cash and the price is due concurrently with tender of delivery. However, unless otherwise agreed, when goods are shipped by carrier, the price is due only at the time and place at which the buyer receives the goos.

2. Shipment under reservation- Buyer pays prior to receipt of goods: In cases where there is no express provision as to payment or the contract specifies cash, and the contract is one for shipment by carrier, the seller may send the goods "under reservation" so that the buyer will be unable to get goods from the carrier until he pays.

3. Payment by check: Tender of payment by check is sufficient unless the seller demands legal tender and gives the buyer the time reasonably necessary to get cash. When payment is by check, payment is not final until the check is honored.
4. Installment contracts: An installment contract, allows seller to demand payment for each installment if the price cna be so apportioned, unless a contrary intent appears.
5. Buyer's right of inspection: unless the contract provides otherwise, the buyer has a right to inspect the goods before she pays (except if they are sent cod or against documents that indicate the buyer has promised to pay without inspecting goods).

Front 20

What is the rule on allocations of interest and risk of loss?
Identificatoin?

Back 20

A buyer obtains an interest in goods under a sales contract when the goods can be "idenified." Identification is a designation of specific goods as the ones to be delivered under the contract of sale. It gives the buyer an insurable interest in the goods and, in certain circumstances, the right to get the goods from the seller and the right to sue third parties for injury to them.

Front 21

Identification con't:

Back 21

1. specific, ascertained, and existing goods: Identification takes place at the time the contract is made if it calls for the sale of specific and ascertained goods currently existing.
2. Crops and unborn animals: If a sale is of unborn animals or crops to be harvested within 12 months (or the next harvest season), identification takes place when the young are conceived or when the crops are planted.

3. Other goods: In other cases, identification takes place when the goods are shipped, marked, or otherwise designated by the seller as the goods to pass under the contract.

Front 22

What is the rule on Insurable Interest?

Back 22

The buyer has an insurable interest in identified goods and may procure insurance covering goods even before the risk of their loss has passed to her. The seller also has an insurable interest in the goods as long as he has title to or a security interest in them.

Front 23

What is the rule on risk of loss?

Back 23

1. Risk in the absence of breach: a. Noncarrier cases: if the seller is a merchant, risk of loss passes to the buyer only upon taking physical possession of the goods. If teh seller is not a merchant, risk of loss passes to the buyer upon tender of delivery (e.g. seller has goods ready for buyer to pick up at time and place spec. in K).

b. Carrier cases: In a shipment contract, risk of loss passes to the buyer when the goods are duly delivered to the carrier. In a destination contract (i.e. the seller must tender delivery at particular destination), the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.

Front 24

What is the effect of breach on risk of loss?

Back 24

1. Defective goods: If the goods are so defective that the buyer has a right to reject them, the risk of loss does not pass to her until the defects are cured or she accepts the goods in spite of their defects. If the buyer rightfully revokes acceptance, the risk of loss is treated as having rested on the seller from the beginning for any losses not covered by the buyer's insurance.
b. Breach by the buyer: Where the seller has identified conforming goods to the contract and the buyer repudiates or otherwise breaches a contract before the risk of loss passes to her under the K, any loss occurring within a commercially reasonable time after the seller learns of the breach falls on the buyer to the extent any deficiency in the seller's insurance coverage.

Front 25

What is the risk in sale or return and sale on approval contracts
?

Back 25

For ROL purpose, a sale or return contract is an ordinary sale. If the goods are returned to the seller, the risk remains on the buyer while the goods are in transit. In a sale on approval contract, the risk of loss does not pass to the buyer until he accepts. If the buyer decides not to take the goods, return is at the seller's risk.

Front 26

What is the rule on Passage of title?

Back 26

In the absence of an agreement, title passes when teh seller completes his performance with respect to the physical delivery of the goods. Not that title does not control risk of loss, the seller's right to the sale price, or the buyer's right to the goods.
Note that title is not a central concept under the UCC. It has little or nothing to do with the rights and remedies of the parties to a sales contract. Rather, the UCC has replaced title with identification, insurable interst, and risk of loss. Thus, an answer choice in a sale of goods situation concerning title is probably the wrong choice.

Front 27

What are the buyer's remedies?

Back 27

1. Acceptance: Acceptance of goods occurs when: 1. The buyer, after reasonable opportunity to inspect them, indicates to the seller that they confirm or that she will keep them in spite of thier nonconformance; 2. The buyer fails to reject them within a reasonable time after tender or delivery of the goods or fails to seasonably notify the seller of her rejection; or 3. The buyer does anything inconsistent with the seller's ownership.

Rejection prior to acceptance: Right or rejection generally...when goods that do not conform to the K are tendered to a buyer, the buyer may either keep them and sue for damages or, under some circumstances, rejet the goods and either cancel k or sue.

Front 28

What is the right to rejection in single K's? Installment K's?

Back 28

1. in single delivery k's, if the goods or tender fail to conform, the buyer may reject all, accept all, or accept any commercial units and reject the rest.
a. Failure to make reasonable contract with carrier or notify buyer: The seller's failiure to make a reasonable contract with a carrier or his failure to notify the buyer that the goods have been shipped are grounds for rejection only if material loss or delay results.

2.In an installment contract, the buyer can reject an installment only if the nonconformity substantially impairs the value of that installment and cannot be cured. The whole contract is breached if the nonconformity substantially impairs the value of the ENTIRE K.

Front 29

What are the formal requirements for rejection?

Back 29

Rejection must be within a reasonable time after delivery or tender and before acceptance. The buyer must seasonably notify the seller. If the buyer fails to state that the goods have a particular defect ascertainable by reasonable inspection, he cannot rely on that defect to justify rejection or show seller's breach if: 1. the seller could have cured the defect had he been told about it; or2. in K's between merchants the seller has, after rejectino, made a request in writing for a full and final written statement of all defects upon which the buyer proposes to rely.

Front 30

What is the buyer's responsibility for goods after rejection?

Back 30

After rejection of goods in her physical possession, the buyer has an obligation to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them or give instructions as to what to do. If a seller gives no instructions within a reasonable time after notification of rejection, the buyer may reship the goods to the seller, store them for the seller's account or resell tehm for the sellr's account. The buyer has a security interest in rejected goods in her possessoin for any part of the price already paid and for expenses reasonably incurred in connection with handling the goods after rejection.

Front 31

What is the seller's right to cure?

Back 31

Where a buyer has rejected goods because of defects, the seller may within the time originally provided for performance "cure" by: 1. giving reasonable notice of intention to cure; and 2. making a new tender of conforming goods, which the buyer must then accept.
1. There is one circumstance wwhere a seller is allowed to cure after the original time for performance has passed: If the seller sends the buyer nonconforming goods that he reasonably believes will be acceptable to the buyer, but the buyer rejects, the seller will get a reasonable time to cure, even though the original time for performance has passed.
2. Seller's right to cure installment contracts: A defective shipment cannot be rejected if the defect can be cured.

Front 32

What is the rule on revocation of acceptance?

Back 32

The time of acceptance is important because it terminates the buyer's power to reject and obligates her to pay the price less any damages becaue of the seller's breach. However, the buyer may revoke her acceptance of goods if the defect substantially impairs their value to her and: 1. she accepted them on the reasonable belief that the defect would be cured and it has not been; or 2. she accepted them on the reasonable belief that the defect would be cured and it has not been; or 2. she accepted them because of the difficulty of discovering defects or because of the seller's assurances 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 defect and before any substantial change in the goods not caused by their own defects. A proper revocation of acceptance has the effect of rejection.

Front 33

What is the rule on the Buyer's right to replevy identified goods?

Back 33

In some circumstances, a buyer will want to replevy (obtain) goods in the seller's possession. The buyer may replevy identified, undelivered goods from the seller if the buyer has tendered full payment and made at least part payment and either: 1. the seller becomes insolvent within 10 days after receiving the buyer's first payment, or 2.the goods were purchased for personal, family, or household purposes. In other cases, where the seller has failed to deliver identified goods, the buyer may replevy them from the seller if the buyer is unable to secure substitute goods.

Front 34

What is the rule on the buyer's right to SP?

Back 34

The court may order SP where the goods are unique or in other proper circumstances even if the goods have not been identified to the contract.

Front 35

What is the rule on buyer's damages?

Back 35

1. For nondelivery or upon rejection or revocation of acceptance: The buyer's basic remedy where the seller does not deliver or the buyer properly rejects or revokes acceptance of tendered goods is the difference between the contract price and either the market price or the cost of buying replacement goods. (in either case the buyer is also entitled to incidental and consequential damages less expenses saved as a result of the seller's breach).
B. For accepted goods....if the buyer accepts goods that breach one of the sellers warranties, the buyer may recover as damages the difference between the value of the goods delivered and the value they would have had id they had conformed to the contract plus incidental an consequential damages. To recover damages for any defect as to accepted goods, the buyer must, within a reasonable time after he discovers or should have discoverd the breach, notify the seller of the defect.

Front 36

What are the seller's remedies?

Back 36

1. Seller's right to withhold goods: If the buyer fails to make a payment due on or before delivery, the seller may withold delivery of the goods.

2. Seller's right to recover goods.
a. From buyer on buyer's insolvency: When a seller learns a buyer has received delivery of goods on credit while insolvent, he may reclaim goods upon demand made within 10 days after the buyer's receipt of the goods.

b. from bailee: The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer is insolvent. The seller may stop delivery of carload, truckload, or other larger shipments of goods when the buyer breaches the contract or when the seller has a right to withhold performance pending receipt of assurances.

Front 37

What is the rule on the seller's right to force goods on buyer and recover full price-limited?

Back 37

The seller has a right to force goods on a buyer who has not accepted them only if the seller is unable to resell the goods to others at a reasonable price or if the goods have been lost or damaged within a reasonable time after the risk of loss has passed to the buyer.

Front 38

What is the rule on seller's damages?

Back 38

The Code provides three measures for damages for when the buyer wrongfully repudiates or refuses to accept conforming goods. The seller can:
1. Recover the difference between the market price and the contract price (UCC 2-708(1); Resell the goods and recover the difference between the contract price and the resale price (UCC 2-706; or 3. If applicable, recover under a "lost profits" measure the difference between the list price and the cost to the seller (UCC 2-708(2). Note that if the seller is a dealer his costs would be the costs incurred in obtaining the goods from the manufacturer or another dealer, whereas if the seller is a manufacturer, his costs would be the costs of manufacturing the goods.)

The seller also may recover incidental damages.

Front 39

Remedies available to both the buyer and seller?

Back 39

1. Right to demand assurances: If rx grounds for insecurity arise with respect to the performance of either party, the other may in writing demand adequate assurance of due performance. Until he receives adequate assurances, he may suspend his own performance. If proper assurances are not given within a reasonable time (not over 30 days), the party seeking assurances can treat the contract as repudiated.
2. Anticipatory Repudiation: In cases where the other party's words, actions, or circumstances make it clear that he is unwilling or unable to perform, the aggrieved party may: 1. for a commercially reasonable time, await perfromance by the other party; 2. resort to any remedy for breach even though he has also urged the other party to perfom. Thus, for example, I'm not going to perform- is an anticipatory repudiation, but- Im not sure if I can perform- most likely is only reason to demand assurnaces.

Front 40

Remedies available to b and s con't:

Back 40

Retraction of repudiation: a repudiating party may, at any time before his next performance is due, withdraw his repudiation unless the other party has canceled, materially changed his position in reliance on the repudiation, or otherwise indicated that he considers the repudiation final.

4. Right to sue third parties: Where a third party deals with goods identified to a contract for sale as to injure a party to the contract (e.g. a negligent bailee), the seller may sue if he has either title or a security interest in the goods; the buyer may sue if the goods have been identified in the contract.

5. Liquidated damages: The parties may liquidate damages at any amount that is reasonable. Unreasonably large liquidated damages are considred penalties and are void.

SOL: The SOL for actions for breach of a sales contract is four years from the time of the breach.

Front 41

What are the types of warranties?

Back 41

UCC:
1. Warranty of title and against infringment,
2. Implied warranty of merchantablity;
3. Implied warranty of fitness for a particular purpose.
4. Express warranties.

Front 42

What is the rule on warranty of title and against infringement?

Back 42

Warranty of Titel: Any seller of goods impliedly warrants that the titel transferred is good, the transfer is rightful and that there are no liens or encumbrances against the title which the buyer is unaware of at the time of contracting.
2. Warranty against infringement: A merchant seller dealing in goods of the kind sold warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims. But a buyer who furinishes specifications for the goods to the selller must hold the seller harmless against such claims.

Front 43

What is the implied warranty of merchantability?

Back 43

In every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantable. The most important test for the warranty is whether the goods are "fit for the ordinary purposes for which such goods are used," and a failure of such is the usual claim in a merchantability suit. As in all implied warranty cases, it makes no difference that the seller himself did not know of the defect or that he could not have discovered it.

Front 44

What is the rule on implied warranty of fitness for a particular purpose?

Back 44

The implied warranty of fitness for a particular purpose arises whenever any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and the buyer is relying on the seller's skill and judgment to select suitable goods.

Front 45

What is the rule on express warranties?

Back 45

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain (i.e. the buyer could have relied on it).

Front 46

What is the rule on disclaimer of warranties?

Back 46

1. Express: The Code requires that language limiting express warranties be read consistently with the warranty and to the extent that they are inconsistent, the disclaimer is not given effect. The effect of this requirement is to make it, for pracitical purposes, extremely difficult to negate an express warranty.
2. Implied warranties: The implied warranty of merchantability may be specifically disclaimed by mentioning merchantability and if the disclaimer is in writing, it must be conspicuous. The warranty of fitness for a particular purpose may be specifically disclaimed by a conspicuous writing. These two implied warranties may also be disclaimed by one of the following general disclaimer methods: 1. language such as as is or with all faults; 2. inspection, at least as to defects that a reasonable inspection would reveal; or 3. course of dealing, course of performance, or usage of trade.

Front 47

What is the rule on unconscionability?

Back 47

In addition to meeting the above requirements, disclaimers will also be tested by conscionability standards.

Front 48

What are the federal consumer products of 1975 laws?

Back 48

Magnuson-Moss: Under the federal consumer product warranties law of 1975 a consumer product manufacturer or marketer issues a full written warranty, implied warranties cannot be disclaimed. If the written warranty is described as a limited warranty, implied warranties cannot be disclaimed or modified, but hey may be limited to the duration of the written warranty.

Front 49

What is the rule on implied warranty of fitness for a particular purpose?

Back 49

The implied warranty of fitness for a particular purpose arises whenever any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and the buyer is relying on the seller's skill and judgment to select suitable goods.

Front 50

What is the rule on express warranties?

Back 50

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain (i.e. the buyer could have relied on it).

Front 51

What is the rule on disclaimer of warranties?

Back 51

1. Express: The Code requires that language limiting express warranties be read consistently with the warranty and to the extent that they are inconsistent, the disclaimer is not given effect. The effect of this requirement is to make it, for pracitical purposes, extremely difficult to negate an express warranty.
2. Implied warranties: The implied warranty of merchantability may be specifically disclaimed by mentioning merchantability and if the disclaimer is in writing, it must be conspicuous. The warranty of fitness for a particular purpose may be specifically disclaimed by a conspicuous writing. These two implied warranties may also be disclaimed by one of the following general disclaimer methods: 1. language such as as is or with all faults; 2. inspection, at least as to defects that a reasonable inspection would reveal; or 3. course of dealing, course of performance, or usage of trade.

Front 52

What is the rule on unconscionability?

Back 52

In addition to meeting the above requirements, disclaimers will also be tested by conscionability standards.

Front 53

What are the federal consumer products of 1975 laws?

Back 53

Magnuson-Moss: Under the federal consumer product warranties law of 1975 a consumer product manufacturer or marketer issues a full written warranty, implied warranties cannot be disclaimed. If the written warranty is described as a limited warranty, implied warranties cannot be disclaimed or modified, but hey may be limited to the duration of the written warranty.

Front 54

What is the limitation of damages for breach of warranty?

Back 54

Limits on damages for breach of warranty will be judged by an unconscionability test. for example, consequential damages for breach of warranty may be limited where the loss is commercial, but not, in the case of consumer goods, where damages are for personal injury. Damages for breach of warranty may be liquidated, but only an amount that is reasonable in light of the anticipated or actual harm.

Front 55

What is the rule on warranties and third parties>

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In most states, the seller's warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in her home if it is reasonable to expect such person may use, consume, or be affected by the goods and he suffers personal injury because of a breach of warranty. The seller cannot escape the effect of this section by contract (i.e. he cannot provide that his warranties extend only to the buyer).

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What is the rule on strict liability?

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Many states have adopted a strict tort liability theory to make a manufacturer or seller of goods liable for injuries to persons or property caused by defects in goods sold. The theory also allows a purchaser to recover from all sellers in the distributive chain without regard to privity of contract. It also allows an injured person who is not a purchaser to recover from teh same parties.

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THIRD PARTY RIGHTS
(entrustment)

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Entrusting goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business.

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Voidable by title:

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Generally if a sale is induced by fraud, the seller can rescind the sale and recover goods. Except the defrauded seller may not recover goods from a good faith purchaser for value from the fraudulent buyer. Specifically, the good faith purchaser for value cuts off the defrauded seller's rights, even though: 1. the seller was deceived as to the identity of the buyer; 2. The delivery was in exchange for a check later dishonored; 3. The sale was a cash sale; 4. the fraudulent conduct of the buyer is punishable as larceny.

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Can a thief pass good title?

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Generally no, if a thief steals goods from a true owner and then sells them to a buyer, the thief is unable to pass good title to the buyer. Therefore, in such a situation, the true owner can recover the stolen goods from the buyer, even if the buyer is a good faith purchaser for value. Except: A thief can pass good title if: 1. the goods are money; 2. the goods are negotiable instruments that were transferred to a holder in due course; 3. The buyer has made accessions (valuable improvements) to the goods; 4. The true owner is estopped from asserting title (e.g. if the true owner expressly or impliedly represented that the theif had title).

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What are the fraudulent retention of possession rules?

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Retention of possession by a seller of sold goods is conclusively fraudulent unless the sale is evidenced by a written bill of sale. Thus, the seller's creditors can reach the goods while they are in the seller's hands. However, retention of possession in good faith and current course of trade by a merchant seller for a commercially reasonable time after sale or identification is not fraudulent.

The buyer has the right in certain cases to get goods from the seller even though title has not passed. This right apparently exists as against the seller's creditors as well, unless the fraudulent possession rules prevent it

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What is the rule on sale or return?

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If the buyer takes goods for resale and has a right to return them "sale or return" if they are not sold the goods are subject to the claims of the buyer's creditors while they are in his possession.