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105 Cards in this Set

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  • Back
What is the threshold language for sales of goods under the UCC?
Any transaction in goods, that is, objects that are movable when they are identified in the contract, is governed by the the Uniform Commercial Code.
What is the rule for "goods associated with realty"?
Goods associated with realty fall under the UCC if severance is to be made by the seller, with the exception of crops, which are always under the UCC.
What is the definition of a merchant under the UCC?
A merchant is generally defined as one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skill as to the practices or goods involved.
What is the general good faith rule under the UCC?
All parties are required to act in good faith, that is, with honesty in fact and in observance of reasonable commercial standards of fair dealing.
Formation: what methods are allowed to form a contract?
Any manner sufficient to show agreement is allowed under the UCC.
What is the firm offer rule?
Under the UCC, offers made by merchants that are signed giving assurances that they will be held open are irrevocable without consideration for a stated time period or a reasonable time, but no greater than 3 months.
What methods of acceptance are allowed under the UCC?
An offer can be accepted by any reasonable means in a reasonable manner. An offer to buy goods is contrued as allowing acceptance by either prompt shipping of conforming or nonconforming goods or a promise to ship.
Is there a mirror image rule under the UCC?
No. Under the UCC, the mirror image rule is abandoned and specific rules for battle of the forms have been adopted. Any acceptance or written confirmation that shows an intention to contract is effective.
What are the "battle of the forms" rules for non-merchants?
If one of the parties is a non-merchant, the contract will only include the terms of the offer.
What about merchants in the "battle of the forms" context?
The rules depend on whether the acceptance contains additional terms or contradictory terms.
Battle of the forms - merchants - additional terms?
Additional terms automatically become part of the contract unless

1) They materially alter the contract,
2) The offer expressly limits acceptance to the offer's terms,

or

3) The offeror objects in a reasonable time.
Battle of the forms - merchants - different terms?
There is a split of authority here.

Some courts treat the contradictory terms as additional terms and use that test, above.

Some courts follow the knockout rule, which basically eliminates conflicting terms from the contract and fills in existing terms.
What is the knockout rule?
Conflicting terms are knocked out and terms are instead provided by the UCC.
What happens if the offeror objects to new terms within the acceptance?
If the offeree's response nonetheless proposes addtional terms and states that the response is not an acceptance unless the offeror consents to those new terms, no contract has been formed.

However, if the parties proceed to act as if there were a contract, there is a contract consisting of the terms on which the writings agree, plus supplementary terms supplied by the UCC.
What is the only term that may not be left open in a contract?
The quantity term must be supplied. A court can supply reasonable terms for those others that are missing. Contracts for a sellers output or a buyer's requirements satisfy this requirement.
When is a sale by auction complete?
When the hammer falls (or other customary manner). Auctions are with reserve (goods may be withdrawn before hammer falls) unless explicitly offered without reserve.
What is the UCC statute of frauds rule?
Contracts for the sale of goods at a price of $500 or more including modifications are not enforceable unless there is some writing by the party to be charged. A writing is sufficient even if 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.
What is a signature under the UCC SOF?
Any symbol meant to adopt or accept a writing. Thus, a note on a letterhead can be enough. (Still must be a quantity)
What is the confirmatory memo rule?
An exception to the statute of Frauds, this rule states that if one party, within a reasonable time after an oral understanding gas been reached, sends a written confirmation therof to the other party that binds the sender, it binds the recipeint as well if the recipient had reason to know of the confirmation's contents unless he objects in writing within 10 days.
When is a writing not required under the UCC SOF?
SWAP

Specially made goods, not suitable for sale to others in ordinary course of seller's business and the seller has started making them or commited for their procurement.

Written confirmation (confirmatory memo rule, above)

Admission that a contract was made in pleadings or testimony

Performance of the contract (goods are received and accepted or paid for).
What is the rule for unconscionability under the UCC?
If, at the time the contract was made, the contract or one of its provisions could result in unfair surprise and is oppressive to a disadvantaged party, a court may refuse to enforce it or limit it to avoid unconscionable results.
What is the rule statement for contract modification under the UCC?
Contract modifications sought in good faith are binding without consideration.
What is the rule statement for modification vis-a-vis the SOF?
A contract must meet the statute of frauds if the contract AS MODIFIED is within the statute.
What is the rule statement for a writing that prohibits oral modification?
Such a provision is valid and binding.
What is the effect of an invalid oral modification?
An invalid oral modification may serve as a waiver of a party's right to enforce the contract as written if one of the parties relied to her detriment on the modification.
What is the effect of a waiver of a 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.
What is the effect of a waiver of a condition without consideration with an installment contract?
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, by giving notice that he is revoking the waiver.
What happens if particular goods identified in a contract when contract is made are damaged or destroyed before the risk passes to the buyer?
The contract is avoided.
Who bears the loss if the risk has passed to the buyer when specific goods are destroyed?
Buyer.
Can the buyer elect to take damaged goods for a reduction in price?
Yes.
What if the agreed-upon method of transportation becomes unavailable or commercially impractical?
Any commercially reasonable transportation must be tendered and accepted.
What is the UCC doctrine of impracticability?
A seller will be discharged from performing a sales contract 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.
What are specific examples of impracticability?
Unforseen wars, embargoes, and natural catastrophes will usually be sufficient if they make it extremely difficult to obtain or convert raw materials. Simply making performance more expensive (e.g. adds to shipping expenses) the seller usually will not be discharged.
What about partial impracicability?
A partial inability to perform does not excuse performance, the seller must allocate the avaliable supply among his customers.
What is the UCC parol evidence rule?
The terms of a contract set forth in confirmatory memoranda of the parties in a writing intended as a final expression of the parties' agreement cannot be contradicted by evidence of any prior agreement or contemporaneous oral agreement.
What are the exceptions to the UCC parol evidence rule?
Such terms however, may be explained or supplemented by 1) consistent additional terms, 2) course of dealing, 3) usage of the trade or business, or 4) course of performance
Define 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.
Define 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.
Noncarrier contract: what must seller do with goods?
The seller must put and hold conforming goods at the buyer's disposition for a time sufficient for the buy to take possession. If there is no agreement, the place of delivery is the seller's place of business or if he has none, his residence.
Carrier contract: what are the sellers obligations?
The seller must put the goods into the hands of a carrier, make a reasonable contract for their shipment, promptly tender required documents, and promptly notify the buyer of the shipment. The seller need not see that the goods reach the buyer.
Carrier contract: what if the seller fails to make a contract for shipment or fails to notify buyer, does buyer have grounds for rejection?
No, only if the buyer has a material loss or delay occurs as a result.
What is a destination contract?
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.
What is a F.O.B. contract?
A Free On Board contract means that FOB x, x is the delivery point. Depending on what FOB is, buyer and seller can have obligations like destination or shipment contracts.
What is an F.A.S. contract?
The seller must deliver the goods alongside the vessel in the manner usual in the port of delivery or on a dock designated by the buyer and obtain and tender a receipt for the goods.
When is payment due in carrier and noncarrier contracts?
In a carrier contract, the price is due in cash at the time the buyer receives the goods. In a noncarrier contract, cash is due with tender of delivery.
What does shipment under reservation mean?
A seller may send goods by carrier under reservation so that the buyer will be unable to get the goods from the carrier unless he pays.
Is a check sufficient?
Yes, unless seller demands cash and gives the buyer reasonable time to get cash. Payment is not final until the check is honored.
What can the seller demand with installment contracts?
The seller may demand payment for each installment if the price can be apportioned, unless a contrary intent appears.
What are the buyers inspection rights?
The buyer has a right to inspect the goods before she pays, unless the goods are sent COD or against documents that indicate that buyer has promised to pay without inspecting the goods.
What is "identification" of goods?
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 to sue 3rd parties for injury to them.
When does Identification take place?
At the time contract is made if it calls for certain goods. Or when goods are shipped, marked, or otherwise designated by the seller as the goods to pass under the contract, or when unborn animals are conceived, or when the unplanted crops are planted.
When does a buyer's interest become insurable?
As soon as the goods are identified.
When does the risk of loss pass in noncarrier contracts?
If the seller is a merchant, risk of loss passes to the buyer upon the buyer taking physical possesion of the goods.

If the seller is a nonmerchant, the risk of loss passes to the buyer upon tender of delivery, that is, seller has them ready to pick up.
When does the risk of loss pass in carrier contracts?
In a shipment contract, risk of loss transfers when seller transfers goods to the carrier.

In a destination contract, the rick of loss passes to the buyer when the goods are tendered to the buyer at the destination.
When does the risk of loss pass if goods are defective?
If 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 of the buyer or buyer accepts despite defects. If a buyer rightfully revokes acceptance, the risk remains on the seller from the beginning for any losses not covered by the buyer's insurance.
When does the risk of loss pass if the buyer breaches or otherwise repudiates?
If the seller has identified conforming goods to the contract and the buyer repudiates or otherwise breaches the contract before the risk of loss passes to the buyer, any loss occuring within a commerically reasonable time after the seller learns of the breach falls on the buyer to the extent of any deficiency in the seller's insurance.
When does the risk of loss pass in a "sell or return" contract?
This is an ordinary sale, the risk remains on the buyer when goods are being shipped back.
In a "sale on approval" contract, (a contract where buyer takes goods for use but may return them even if they conform), when does the risk of loss pass?
The risk of loss does not pass to the buyer until he accepts. If he decides not to take the goods, return is at the seller's risk.
When does title pass?
Title is not a central concept in the U.C.C. However, title passes when seller completes his performance with respect to physical delivery of goods.
What are creditors rights under sale or return / sale on approval contracts?
1) Yes, creditors may make claims while in buyer's possession
2) No, creditors may not make claims unless buyer has accepted
What are the buyer's options?
1) Acceptance
2) Rejection
3) Acceptance and revocation
4) Replevy
5) Specific Performance
Define acceptance under the UCC.
Acceptance of goods occurs when:

1) The buyer, after reasonable opportunity to inspect them, indicates to the seller that they conform of that she will keep them in spite of their 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 seller's ownership
Define seasonably under the UCC.
An action is taken "seasonably" when it is taken at or

within the time agreed or if no time is agreed at or within a

reasonable time.
Define rejection under the UCC.
When goods do not conform to the contract, the buyer may keep them and sue for damages, or, under some circumstances, reject the goods and cancel or sue.
What are the rules for rejection in a single delivery situation?
In a single delivery situation, if the goods or tender fail to conform, the buyer may reject all, reject some, or accept all units.
What are the rules for rejection in an installment situation?
A buyer can reject the installment if the nonconformity substantially impairs the value that installment and cannot be cured. The whole contract is breached if the nonconformity substantially impairs the value of the entire contract.
What are the formal rules for rejection?
Rejection must be made within a reasonable time and the buyer must seasonably notify the seller.

If the buyer fails to state that the goods have a particular defect ascertainable by a reasonable inspection, he cannot rely on that defect to justify rejection or show the seller's breach if the seller could have cured the defect if he has been told about it, or in contracts between merchants the seller has, after rejection, made a request in writing for a full and final written statement of all defects upon which the buyer proposes to rely.
What are the buyers responsibilities after rejection?
The buyer must hold goods with reasonable care for a reasonable time. If no instructions are forthcoming, the buyer may reship the goods to the seller, store them, or resell them. The buyer has a security interest in rejected goods for a price paid.
What is the seller's right to cure?
When a buyer has rejected goods because of defects, the seller may within the time originally provided for performance cure by giving reasonable notice of intent to cure and making a new tender of conforming goods, which the buyer must then accept.
What is the seller's limited right to cure beyond original contract time?
If the seller ships nonconforming goods that he reasonably expects the buyer to accept, he may have a reasonable time to cure beyond the original time for performance.
What is the seller's right to cure in an installment contract?
The seller has a right to cure in an installment contract situation - the shipment cannot be rejected if the defect can be cured.
Can acceptance be revoked?
Yes, if 1) a defect is discovered that substantially impairs the value of the goods and [2) buyer accepted them on the reasonable belief that the defect was cured and it was not, or 3) She accepted them due to seller's assurances of conformity or the difficulty in discovering defects.]
When can buyer revoke acceptance?
Within a reasonable time after buyer discovers the defects or should have discovered the defects, and before any substantial change in the goods not caused by their own defects.
What is the effect of a revocation of acceptance?
A revocation of acceptance has the same effect as a rejection.
Describe the buyer's right to replevy goods.
A buyer may replevy goods from the seller if they are identified, undelivered goods if the buyer has tendered full payment and made at least partial payment and either 1) the seller becomes insolvent within 10 days after receiving buyer's first payment, or 2) the goods were purchased for personal, family, or household purposes.

Replevy is also avaliable when buyer is unable to secure substitute goods.
What does tender mean in the UCC?
To present for acceptance = to tender
When is specific performance avaliable under the UCC?
Where goods are unique or in other proper circumstances even if the goods have not been identified to the contract.
What are the buyer's damage remedies for nondelivery, rejection, or revocation of acceptance?
The damage is the difference in the contract price and either the market price or the cost of buying replacement goods, plus incidental and consequential damages.
What are the buyer's remedies for accepted goods?
If the buyer accepts goods that breach one of the seller's warranties, the buyer may recover the difference between the goods delivered and the value the goods would have had if they had conformed, plus conseqential and incidental damages.

The buyer must notify the seller within a reasonable time of discovering (or should have discovered) of breach to recover.
What are the seller's remedies for non-payment before delibvery?
The seller may withhold delivery of the goods.
What are the seller's remedies after delivery?
Seller may recover goods from buyer if buyer has accepted goods on credit while insolvent and seller makes demand within 10 days of buyer's receipt.

Seller may recover goods from a bailee or carrier as well if he discovers that buyer is insolvent.

Seller may stop delivery when buyer breaches or when seller has a right to demand assurances.
Can seller force goods on a buyer?
Yes, only if the seller is unable to resell or the goods have been lost or damaged within a reasonable time after the risk of loss has passed to the buyer.
What are seller's damages?
There are 3:

1) Recover the difference between market price and contract price,

2) Recover the difference between contract price and resale price, and

3) Recover, under a lost profits measure, the difference between the list price and the cost to the seller. This one is only avaliable when the other measures would not put the seller in as good a position as he would have been if the buyer had not breached.

+ incidentals
What is the right to demand assurances?
Avaliable to the seller and buyer, if reasonable grounds for insecurity with respect to performance of the other party, the other may in writing demand adequate assurance of due performance. Until he receives said assurances, he may suspend his own performance.

If such assurances are not given in a reasonable time (no more than 30 days) the party can treat the contract as repudiated.
What is anticipatory repudiation?
If words or conduct make it clear that the contract will not be performed by one party, the other party may 1) await performance for a commercially reasonable time, 2) resort to any remedy for breach, or 3) suspend his own performance.
Can repudiation be retracted?
Repudiation may be retracted before the next performance if the other party has cancelled, materially changed his position in reliance on the repudiation, or otherwise indicated that he considers the repudiation final.
When can a third party be sued?
The seller may sue if there is a title or security interest, the buyer may sue if the goods have been identified to the contract.
What is the deal with liquidated damages under the UCC?
The parties may liquidate damages at any amount that is reasonable. Unreasonably large liquidated damages are considered penalties and are void.
What is the statute of limitations for a breach of a sales contract?
Four years from the time of the breach.
What are the different warranties under the UCC?
1) Warranty of title and against infringment
2) Implied warranty of merchantibility
3) Implied warranty of fitness for a particular purpose
4) Express warranties
What is the warranty of title?
Any seller of goods impliedly warrants that the title transferred is good, the transfer is rightful, and that there are no liens or encumbrances which the buyer is unaware at the time of contracting.

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. A buyer who furnishes specifications must hold the seller harmless against such claims.
What is the implied warranty of merchantibility?
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 purpose for which such goods are used.

Includes sale of food and drink.
What is the implied warranty of fitness for a particular purpose?
This warranty arises when 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.
What is an express warranty?
Statement made (use statement loosely here, basically anything but puffery) is an express warranty if it forms a basis of the bargain.
What are the rules for disclaiming an express warranty?
Any express warranty disclaimer that is inconsistent is not given effect. The formal rule is that the disclaimer must be read "consistently" with the express warranty.
What are the rules for disclaiming the implied warranties?
Merchantibility:

1) If in writing, must be conspicuous. Must mention word merchantability.

Particular Purpose:

2) Must be disclaimed by a conspicuous writing, no mention of particular words neccessary.

Bonus: These two warranties can be disclaimed with the following language: With all faults, as is.

Also, disclaimed through inspection (at least reas inspection would reveal defects) and course of dealing, trade, or course of performance.
Are disclaimers subject to unconscionability?
Yes - test against unconc standards.
What is the effect of the Magnuson Moss act?
If a consumer product manufacturer or marketer issues a full written warranty, implied warranties cannot be disclaimed. If described as a limited warranty, cannot be disclaimed, but can be limited to the duration of the written warranty.
How are limits on damages for warranty breach to be measured?
Unconscionability test. For example, consequentials may be limited for a commerical loss but not a personal injury loss. May be liquidated but must be reasonable in light of anticipated or actual harm.
How do the seller's warranties effect 3rd parties?
In most states, the warranty 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 the person to use, consume, or be affected by the goods and he suffers personal injury because of a breach of warranty. This cannot be escaped by the contract.
What are the rules for entrustment to 3rd parties?
Entrustment of goods to a merchant who normally 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.
What is the rule for voidable title?
A sale induced by fraud can be rescinded by the seller unless the goods have passed to a good faith purchaser for value.
Can a thief pass good title?
No, except with cash, negotiable instruments, the buyer has made valuable improvements, or the true owner is estopped because he has asserted that the thief had title.
What are the rules for fraudulent possession?
Retention of sold goods is conclusively fraudulent, unless in good faith in course of dealing / course of performance. Retention for a commericially reasonable time after identification is not fraudulent. Creditors can get at these goods.
What is the most obscure rule in all of the UCC?
If the buyer takes goods and has a right to return them, his creditors have claims against them while they are in his possession.