Ucc Article 2

Front 1

UCC article 2 “predominant factor test”

Back 1

Under the “predominant factor test”, when a contract involves both goods and services, article 2 applis to the entire contract, if the contract is “predominantly” for the sale of goods, and the services are merely incidental to the contract.

Front 2

Merchants are persons who ...

Back 2

1. regularly deal in goods of that kind
OR
2. by their occupation, hold themselves out as possessing knowledge or skill concerning the goods involved in the transaction. Almost every person in business is deemed to be a merchant.

Hint 2

However, the implied warranty of merchantability is only given by merchants who regularly deal in goods of that kind.

Front 3

4 year Breach of warranty SOL runs from ...

Back 3

the date the seller first tender the goods, except where the sellers warranty expressly extends to future performance of th goods (5 years of 50k miles).

Hint 3

The SOL on such extended express warranty claims accrues when the breach is or should have been discovered. It is not measured from the date of tender.

Front 4

PERFECT TENDER RULE
(Definition)

Back 4

PERFECT TENDER RULE
permits the buyer to reject goods and sue for Breach of Contract if the seller's goods or tender fail to conform to the contract in ANY respect (quantity, quality, or timeliness of delivery).

Front 5

THE PTR does not apply to (Mnemonic)

Back 5

ICOP

Hint 5

ICOP limits the Perfect Tender Rule:
I - INSTALLMENT contracts
C - Timely delivery was COMMERCIALLY IMPRACTIBLE by an event not contemplated by the parties.
O - Delivery in good faith, OBJECTIVELY and reasonably believing the goods would be acceptable to the buyer
P - PRIOR TO DELIVERY DATE set forth in the contract, conforming goods are delivered to replace the nonconforming goods

Front 6

I in ICOP

Back 6

I – INSTALLMENT contracts (divisible). A buyer can reject an installment only if the error substantially impairs the value of that installment and the non-conformity cannot be cured. A buyer cannot reject for trivial defect. Courts use the HAIL factors to help determine whether a substantial impairment exists.

Hint 6

RULE – a buyer can sue the seller to recover damages due to the non-conformity one one installment, but cannot treat the Contract as breached. If a non-conformity in one or more installments substantially impairs the value of the whole Contract, the entire Contract will be considered breached (VERY RARE).

Front 7

C in ICOP

Back 7

C – timely delivery is made COMMERCIALLY impracticable by an event that was not considered by the parties when the contract was executed (floods, snowstorms, civil unrest)

Front 8

O in ICOP

Back 8

O – if a seller in good faith delivers goods to buyer
1. OBJECTIVELY and reasonably believing that such goods would be acceptable to the buyer
AND
2. when notified of the non-conformity, the seller indicates to the buyer its intention to the breach
THEN ...

Hint 8

3. the buyer must give the seller reasonable time to send the conforming goods. If buyer does not give additional time, but instead invokes PTR and repudiates the K based on seller's breach, then it is the buyer who has breached.
VERY NARROWLY INTERPRETED

Front 9

P in ICOP

Back 9

P – if the buyer rejects non-conforming goods PRIOR to the date for performance, then the seller will not be in breach if the seller cures the tender before the performance date expires.

Front 10

THE UCC has modified Common Law offer acceptance rules by stating that unless otherwise unambiguously insisting on a specific type of acceptance, a unilateral or bilateral contract offer can be accepted by a promise or performance. Under UCC a seller can accept by (1, 2)

Back 10

1. a return promise
2. shipping conforming or non-conforming goods or by beginning performance provided the buyer is given notice within a reasonable time,

Hint 10

thus a seller who ships goods to a buyer, cuts off the buyers right to revoke the offer even though no acceptance was communicated prior to any attempted revocation. Shipping non-conforming goods constitutes an acceptance, but also gives rise to a buyers cause of action to BOC. Shipping the goods was a simultaneous acceptance and breach.

Front 11

UCC article 2 changed these common law rules through the battle of the forms doctrine which arises from the usual business practice of sending and receiving unread business forms containing different or unusual terms
UNDER UCC a contract can arise from an acceptance using different terms if it is a ...

Back 11

DEFINITE and SEASONABLE expression of acceptance.(seasonable = timely)

Front 12

Additional terms will not be added to the contract when (Mnemonic):

Back 12

OCAN

Front 13

O in OCAN

Back 13

O – OFFEROR objects within a reasonable time

Front 14

C in OCAN

Back 14

C – original offer expressly CONDITIONED the acceptance exclusively to those terms contained in the offer. In such situations, any additional terms must be expressly accepted in writing to become binding.

Front 15

A in OCAN

Back 15

A – ADDITIONAL terms “materially alter” the contract offer.

Hint 15

additional term in the acceptance MATERIALLY alters the offer if it would cause “surprise or hardship” if the offeror was not made aware of its existence.

Front 16

N in OCAN

Back 16

N – either or both parties are NON-MERCHANTS. The offeror can remains silent and is not bound to accept material or non-material additional terms that have been added to the acceptance. The court considers them mere proposals that do not become part of the K.

Front 17

Common terms that do NOT materially alter

Back 17

1. sales taxes
2. fixing std. Credit terms if within the custom in the industry providing they do not involve bargained for credit.
3. interest on overdue invoices
4. restricting the buyer's right to reject defective goods falling within trade tolerances (limiting PTR)
commercial impracticability clause

Front 18

Under UCC there is no definite acceptance if a PDQ (price, delivery, quality/quantity) in the acceptance form conflicts with the offer. Such an acceptance is considered an counter-offer

Back 18

If the seller accepts but includes different PDQ in the invoice, then buyer accepts the goods, the code recognizes a contract through the conduct of the parties.

Front 19

UCC Statute of Frauds

Back 19

the code requires all contract for the sale of goods for $500 or more to be contained in a writing sufficient to indicate that a contract has been made and signed by the party to be charged.

Front 20

There are 5 exceptions for UCC SOF(Mnemonic)

Back 20

Exceptions to the Statute of Frauds requirement are SWAMP:

Front 21

S in SWAMP

Back 21

S – SPECIALLY manufactured goods. The elements of such a contract are
1. Circumstances indicting goods were made for buyer
2. Seller has made a substantial beginning, or has made a commitment for their procurement
3. goods are not suitable for resale to others in the ordinary course of the sellers business.

Hint 21

RULE – a mfg. Ordering raw materials is not a “substantial beginning” if the materials can be used for other orders.

Front 22

W in SWAMP

Back 22

W - Waiver the SOF is an affirmative defense that D MUST assert in the answer

Front 23

A in SWAMP

Back 23

A – Judicial ADMISSION of the contract. if the party against whom enforcement is sought judicially admits the existence of the oral contract in her pleadings, deposition, or trial testimony, this waives the SOF, but only to the extent of the quantity admitted.

Front 24

M in SWAMP

Back 24

M – Merchant Memorandum – oral contract between 2 merchants ARE enforceable if within a reasonable time after contracting either merchant confirms the oral contract in writing and the other merchant does not object within 10 days from its receipt.

Hint 24

The written memo must state the quantity, but it does not have to expressly refer to the prior oral agreement. If the merchant memo contains additional terms that would materially alter the contract, then those terms do not become part of the contract.

Front 25

P in SWAMP

Back 25

P – PART performance. An oral sales contract is enforceable to the extent of the D's performance. Thus ...

Hint 25

1. buyers part payment or acceptance of the good.
2. the sellers acceptance of part payment
3. sellers delivery of that good prevents the performing party from asserting the SOF

Front 26

OUTPUT and REQUIREMENTS CONTRACTS

Back 26

under UCC a buyer may enter a RC to exclusively purchase from a seller all of a particular product that a buyer needs in its business. Also a seller may enter an OC to exclusively sell to a buyer.

Hint 26

RULE – an estimate in an OK or RK implies that no quantity may be demanded or tendered that is disproportionately proportional to the stated estimate.
RULE – if there is no stated OK or RK requirement estimate in the K, then no quantity may be demanded or tendered unreasonably disproportionate to any normal or otherwise comparable output or requirement.

Front 27

“sale or return”contract

Back 27

1. a “sale or return”contract which usually is made by a mfg or wholesaler of goods delivered to merchants primarily for resale. The goods are sold with the understanding that buyer can resell, retain, or elect to return to seller even though the goods are conforming. Under a SoR contract risk of loss and title vest immediate in the buyer even thought the buyer has the right to rescind the K.

Hint 27

SORE V
Sale
Or
Returned
Early
Vesting

Front 28

Sale on Approval contract

Back 28

2. Sale on Approval contract
is used when goods are delivered primarily for use and not resale. ROL and title do NOT pass to the buyer until the buyer accepts title to the goods either in writing or by the buyer failing to timely return the goods under the contract terms.

Hint 28

RULE – goods held by buyer on SoA contract are not subject to the claims of the buyers creditors.
SOLEV
Sale
On
Approval
Late
Vesting

Front 29

Free on Board "FOB"

Back 29

A contract requiring a seller to ship gods to a buyer can be classified as
1. a shipment contract under which the sellers ROL transfers to the buyer when the seller puts the goods into a carriers possession.
2. a destination contract under which the sellers ROL only transfers to the buyer when the goods are tendered to the buyer at a particular destination.

Hint 29

RULE – shipping costs are borne by the buyer in a shipment contract and by seller in a destination K.

Front 30

Shipment contract

Back 30

the most common of these contracts are abbreviated FOB (Free on Board) sellers city or sellers place of business (a shipment K).

Hint 30

RULE – unless the parties explicitly use terms equivalent to FOB buyers place of business, the contract will be a shipment K

Front 31

Destination contract

Back 31

FOB buyers city or buyers place of business (destination K)

Front 32

FAS and CIF

Back 32

the term FAS vessel means Free Along Side and only requires the seller to place goods alongside a vessel at a port without having to load them on board. CIF stands for Cost Insurance Freight is a similar term more commonly used in international shipments requiring seller to pay all costs involved in shipping including customs and insurance on the goods.

Front 33

if the contract is silent, the UCC applies the following (Mnemonic) rules.

Back 33

CIDER

Front 34

C in CIDER

Back 34

C – seller is not obligated to extend CREDIT

Hint 34

RULE buyer must tender payment when goods are tendered unless seller has agreed to sell the goods on credit.

Front 35

I in CIDER

Back 35

I – buyer has the right to INSPECT the sellers tendered goods unless the contract expressly provides otherwise or the transaction involves an order bill of lading in which case there is no right to inspect.

Front 36

D in CIDER

Back 36

D – sellers tender of DELIVERY is implied to be at the sellers place of business unless both parties know the goods are elsewhere.

Hint 36

Under the code a seller is not obligated to ship the goods absent express delivery terms in the K.

Front 37

E in CIDER

Back 37

E – buyer and seller must EXCHANGE concurrently. Thus for a buyer to put the seller in default, the buyer must tender the purchase price or show that tender was excused. For seller to put buyer in default, the seller must tender the goods, or show that tender was excused. (tender is excused if the other party has repudiated the K).

Front 38

R in CIDER

Back 38

R – RISK of loss (page 8-9) – UCC puts ROL on party who has best ability to avoid it.

Front 39

Risk of Loss: Bailee

Back 39

1. if Goods are delivered to bailee not to buyer. ROL passes to who is in possession that they have a right to the goods or there is a negotiable bill of lading. Buyer will bear ROL a “reasonable time thereafter.”

Front 40

Risk of Loss: shipment contract

Back 40

Shipment contract– as soon as seller puts it in possession of shipper

Front 41

Risk of Loss: delivery contract

Back 41

delivery contract– when goods arrive and buyer takes possession.

Front 42

Risk of Loss: merchants place of business

Back 42

when buyer takes goods from merchants place of business, ROL to buyer when takes possession.

Front 43

Risk of Loss: Non-merchant

Back 43

Non-merchant – when tender of delivery. Non-merchant can only get restitution damages (no expectation)

Front 44

Risk of Loss: seller ships non-conforming goods

Back 44

when a seller ships non-conforming goods, ROL remains with seller until cover, or acceptance.

Front 45

Risk of Loss: buyer properly revokes acceptance after accepting

Back 45

If after acceptance, buyer properly revokes acceptance, (found latent defect), where a buyer decided to revoke acceptance, the ROL falls on the seller only to the extent of any deficiency in buyer's insurance.

Front 46

Risk of Loss: buyer repudiates before delivery

Back 46

When conforming goods are identified to the contract and buyer repudiates before delivery. ROL is on buyer until a reasonable amount of time passes for the amount deficient in the buyers insurance.

Front 47

Remedies available to a seller are (Mnemonic):

Back 47

SPARKLE
A buyer breaches a K for the sale of goods by (1,2,3) ...

Hint 47

1. wrongfully repudiating the K
2. wrongfully rejecting conforming goods
3. failing to pay K price for delivered goods.

Front 48

S in SPARKLE

Back 48

S - STOPPING goods in transit when a buyer (1,2,3) ...

Hint 48

1. wrongfully repudiates a k
2. fails to make a timely required payment
3. has received a proper demand for assurances from the seller.

Front 49

When can seller stop goods in transit?

Back 49

If the seller has shipped goods and shipment is in bulk (carload or truckload) then the seller can stop that shipment in transit. If the breaching buyer is insolvent, then any goods in transit can be stopped regardless of the size of the shipment (does not have to be in bulk or large quantity)

Hint 49

RULE – this seller's remedy is lost once the carrier acknowledges the buyers right to those goods.

Front 50

P in SPARKLE

Back 50

P - Suing for the entire contract PRICE
Only in 3 situations ...

Hint 50

1. when buyer accepts conforming goods on credit, but fails to pay for those goods.
2. when conforming goods are destroyed after ROL passed to buyer
3. when buyer wrongfully fails to accept conforming goods, and seller cannot resell them.
Right is limited to just these 3 situations, because in every other situation, the seller can hold the goods and resell them to a 3rd party and sue buyer for any resulting economic loss.

Front 51

A in SPARKLE

Back 51

A – demanding ASSURANCES of performance. If reasonable grounds exist for sellers insecurity, then if commercially reasonable, seller can cease performance then in writing demand adequate assurances of buyers future performance, requiring buyer to tender proof that he can and will pay the contract price. Reasonable grounds include:

Hint 51

1. Good faith rumors of buyers inability or unwillingness to pay
2. Buyers statement that he does not feel bound to perform
3. Buyers poor payment history
4. Buyers anticipatory repudiation that was retracted

Front 52

Seller's remedy for INSOLVENT buyer.

Back 52

Whenever a breaching buyer is insolvent, the seller may refuse delivery unless the insolvent buyer pays for the goods and any prior deliveries in cash.

Front 53

Adequate assurances can be ...
(1 - 5)

Back 53

1. a surety
2. a bank line of creditors
3. a bond
4. an audited financial report that clearly shows buyers solvency
5. a credit report prepared by the buyers bank

Hint 53

RULE – if adequate assurances of future performance are not given by the buyer within a reasonable time. Not to exceed 30 days, from the seller's written demand, then the seller can treat the contract as repudiated even thought the buyer was not insolvent.

Front 54

When buyer repudiates before seller has completed performance, seller may do ...

Back 54

anything likely to mitigate the breaching buyers damages including (1,2)

Hint 54

1.completing the goods and reselling them
2. selling the unfinished goods for scrap

Front 55

R in SPARKLE

Back 55

R – RESELLING goods to another buyer. When a buyer breaches a contract on goods not yet delivered, or on goods the seller has stopped in transit. Or on goods the buyer has wrongfully rejected, the seller can resell those goods and sue the buyer for the resulting damages which generally is the difference between (1,2)

Hint 55

1. breaching buyer's contract price, AND
2. lower resale price, plus any incidental damages suffered by the seller.

Front 56

Seller resale of goods to recoup from insolvent buyer

Back 56

The resale must be performed in a commercially reasonable manner at a public or private sale, and it should be with notice to the breaching buyer. If notice is not given to the breaching buyer, then the seller can recover only the difference between
1. breaching buyers K price and
2. fair market price at time and place of tender (not necessarily sellers resale price).

Hint 56

This measure of damages is similar to a deficiency judgment after a mortgage foreclosures where courts never look to price paid, but instead look to fair market value.

Front 57

STOLEN GOODS

Back 57

A buyer from a thief gets void title because the thief has no tittle to transfer. However, under the "entrusting rule," ...

Hint 57

Whenever the owner entrusts the goods to a merchant who regularly deal with goods of that kind, the entrusting rule gives the merchant the power, but not the right to transfer whatever interests the owner had to transfer to a good faith buyer. The entrusting rule does not apply to pawnbrokers.

Front 58

K in SPARKLE

Back 58

K – KEEPING part of the buyers deposit.
If a breaching buyer paid a deposit on the K, the seller can keep from that deposit, 20% of the total purchase price or $500 dollars whichever is less, plus any damages caused by buyers breach.

Front 59

L in SPARKLE

Back 59

L – sue buyer for LOST profits. When UCC measure of damages is inadequate to put seller in as good a position as performance by the buyer would have put him in and the seller has an unlimited supply of goods, the measure of damages is the seller's lost profit on that contract.

Front 60

E in SPARKLE

Back 60

E - EXERCISING the right to reclaim goods delivered to the insolvent buyer. Absent a perfected UCC article 9 security interest, a seller of goods on credit, is merely a general unsecured creditor of the buyer.

Hint 60

Alternatively, the seller can demand a return of the delivered goods within 10 days of delivery provided the buyer received those goods on credit while insolvent. The same rule applies when an insolvent buyer pays for the goods with a check that bounces.

Front 61

Seller's priority over judgment creditors.

Back 61

RULE – UCC article 2 gives the seller the priority to reclaim the goods over the buyers other judgment or lien creditors, but seller's right to reclaim is defeated by a good faith purchase of those goods, who purchased in the ordinary course of the buyers business. If the seller successfully reclaims the goods, it is barred from using ALL OTHER SPARKLE remedies.

Front 62

BUYERS remedies (Mnemonic)

Back 62

When a seller breaches a K either because seller repudiated, failed to timely deliver, or where the delivered goods failed to comply with the contract the buyer has the following CIDSWAR remedies.

Front 63

C in CIDSWAR

Back 63

C - COVER enables the buyer to purchase similar goods without reasonable delay and then sue the seller for the difference in price.

Hint 63

RULE – a buyer does not have to cover, but buyer cannot sit back and let consequential damages accumulate and expect to recover them from the breaching seller. A buyer cannot recover consequential damages that could have been avoided by cover.

Front 64

If the buyer does not cover, then if the goods were not delivered or non-conforming goods were delivered and rejected, the buyers damages are:

Back 64

1. the market price at the place of tender when the buyer could have first covered, AND
2. the K price
PLUS any incidental damages

Front 65

CLAIMS for DEFECTIVE goods

Back 65

A Plaintiff injured by a defective product may bring claims under 1 or more overlapping PINE theories of liability.

Hint 65

P – tort claim for strict PRODUCTS liability
I – contract claim for breach of IMPLIED warranty
N – tort claim for NEGLIGENCE
E – contract claim for breach of EXPRESS warranty

Front 66

I in CIDSWAR

Back 66

I – INCIDENTAL and consequential damages are any costs incurred in a reasonable effort, whether successful or not, to avoid loss, such as the cost of inspecting, storing, shipping, or insuring goods.

Hint 66

Consequential damages are additional losses incurred by the P as a result of Ds breach, that usually arise in the area of lost profits following D's failure to perform on time.

Front 67

to recover consequential damages P must show (1-4)

Back 67

1. causation -ie damages were the result of D's breach
2. damages were foreseeable at the time the parties entered the K
3. a reasonable certainty as to the amount of damages
4. the damages could not have been mitigated

Hint 67

RULE – UCC prohibits sellers from recovering consequential damages (ONLY BUYERS)
RULE – a seller can contractually limit a buyer's remedy to refund repair or replacement. If the seller limits to repair or replacement, but is unable to repair or replace, the buyer can recover full BOC damages INCLUDING consequential damages.

Front 68

Definition: Breach of Warranty

Back 68

If a product is defective, the liability for breach of warranty is not based on the fault or misconduct of the mfg or seller, but is based on the failure of the product to meet a user's reasonable expectations for performance under the contract terms.

Hint 68

RULE – in a breach of warranty claim for personal injury, P must show that the product posed unexpected dangers beyond those contemplated by the ordinary consumer
RULE – sellers of consumer goods (as opposed to purchased by a business) may not contractually limit damages for personal injury to repair-refund-replacement, because such limitations are unconscionable.

Front 69

D in CIDSWAR

Back 69

D - DAMAGES for lost benefit of the bargain, or for the price paid

Front 70

S in CIDSWAR

Back 70

S - SPECIFIC PERFORMANCE on a contract for unique goods

Front 71

W in CIDSWAR

Back 71

W - Breach of WARRANTY

Front 72

A in CIDSWAR

Back 72

A - ACCEPTANCE revocation

Front 73

R in CIDSWAR

Back 73

R - REJECTING non-conforming goods

Front 74

A sales contract contains (Mnemonic) warranties

Back 74

M FEET

Hint 74

M - Warranty of MERCHANTABILITY
F - Warranty of FITNESS for a particular purpose
E - Warranty against ENCUMBRANCES
E - EXPRESS warranties
T - Warranty of TITLE

Front 75

M in M FEET

Back 75

M - Warranty of MERCHANTABILITY
Unless expressly excluded, a merchant impliedly warrants that the goods sold are “fit for their ordinary purpose” the goods must pass without objection in the trade under the description in the contract. Of fair and average quality. The price at which a product is sold by a merchant is an indicator of the scope of merchantability.

Hint 75

RULE – the Implied Warranty of Merchantability is given only by a class of merchants who regularly deal in goods of that kind.
RULE – the only way a merchant can disclaim this warranty is to conspicuously use the terms “merchantability, as-is, or with all faults”

Front 76

F in M FEET

Back 76

F - Warranty of FITNESS for a particular purpose. Can be made by non-merchants. Means that good will work for what buyer wants it for. To establish, buyer must prove ...

Hint 76

To establish, buyer must prove
1. seller's expertise
2. buyers actual reliance thereon
3. the seller's knowledge of the buyer's purpose
RULE – this warranty can be excluded by GENERAL language eg sales slip. Even if a merchant does not disclaim these two IMPLIED warranties, she may nevertheless limit her economic liability for breach by conspicuously limiting the buyer's remedies to REPAIR REFUND or REPLACEMENT

Front 77

E in M FEET

Back 77

E - Warranty against ENCUMBRANCES – the goods will be delivered free from ...

Hint 77

1. UCC article 9 security interests
2. Patent infringements
3. other encumbrances
RULE – simply warrants that buyer will not be exposed to lawsuits

Front 78

E in M FEET

Back 78

E – EXPRESS warranties. EWs are created when a seller makes factual assertions regarding a product's quality or capabilities. NY requires that Plaintiffs plead and prove reliance on the factual assertion.

Hint 78

seller's disclaimer negating prior WRITTEN SAD EW is unenforceable.
S – sample or model that was basis of bargained
A – any written or oral AFFIRMATION of fact that becomes part of the bargain
D – any DESCRIPTION of the goods in an ad, brochure, or catalog.
*Specific disclaimer of prior ORAL warranties are enforceable under the parole evidence rule.

Front 79

T in M FEET

Back 79

T – TITLE – a sellers good title is implied in every sales contract. The seller of stolen goods breaches this warranty.

Hint 79

RULE – the WoT can only be disclaimed by specific language or circumstances that give the buyer reason to know that the seller does not claim title in himself.

Front 80

when facing claims for defective goods, D can raise the following defenses (Mnemonic)

Back 80

G.P.S. LAMP can use the following defenses against a breach of warranty claim:

Front 81

G in G.P.S. LAMP

Back 81

G – GOVERNMENT contract defense – mfg cannot be held liable for a defectively designed military product if ...

Hint 81

1. gov approved the product specifications and the particular feature that caused injury
2. product conformed to those specifications
3. mfg notified the gov of any known dangers.

Front 82

P in G.P.S. LAMP

Back 82

P – lack of PRIVITY of contract (ONLY FOR WARRANTY claims) – BOW claims arising from the sale of goods requires some form of privity of contract with the seller who has expressly or impliedly warranted the performance of the product. Parties who have entered a K with each other are in direct privity.

Hint 82

At common law only buyers in direct privity could recover for the harm caused by a defective unsafe product.

Front 83

NY privity rule
(vertical privity determines who can be a defendant in a warranty cause of action, horizontal privity determines who can be a plaintiff. )

Back 83

IN NY –TPB warranty protection (horizontally privity) is extended beyond the buyer to include ANY natural person who reasonably could be expected to use or be affected by the defective good.

Hint 83

RULE – in a majority of states (NJ CT) a sellers express or implied warranties extend horizontally beyond the buyer to any natural person (NOT A CORP) who suffers personal injury, provided the injured plaintiff was the buyer, in buyers household or family, or buyer's guest (not an employee or tenant). If it was reasonable to expect such a person would use, consume, or be affected by the goods.

Front 84

what damages are available to injured Breach of Warranty Plaintiff?

Back 84

RULE - P must not only prove the warranty and its breach, but must also show the breach was the proximate cause of the injury.
RULE – when suing solely for economic loss (loss profits or cost to replace or repair defective goods ), direct privity is required.
The rules for direct and horizontal do not apply to claims solely for economic loss.

Front 85

S in G.P.S. LAMP

Back 85

S – STATUTE of LIMITATIONS.

Front 86

L in G.P.S. LAMP

Back 86

L – LACK (only applies to BOW) of timely notice to seller. A Plaintiff who within a reasonable time fails to give written or oral notice of the defect to each potential D in the chain of vertical privity is prevented from suing that D for breach of warranty. Notice to a mfg is not notice to retailer.

Front 87

A in G.P.S. LAMP

Back 87

A – ASSUMPTION of risk. P was aware of the defect, but unreasonably and voluntarily continued to use the product. In NY with the exception of participants or spectators of athletic activities, this defense has been supplanted with comparative negligence. The Assumption of risk arises when

Hint 87

1. Plaintiff knew of the dangerous characteristics of the defective product or the danger was so obvious the Plaitiff must have known it.
2. Plaintiff voluntarily exposed himself to that danger.
3. decision to encounter the known risk was unreasonable.

Front 88

M in G.P.S. LAMP

Back 88

M – unforeseen MISUSE of the good. If a Plaintiffs negligence, alteration, or misuse of a product in an unforeseeable manner or for an unforeseeable purpose is a superseding cause of P's injury, the mfg will NOT be liable for D's injuries related to the use of a defective product. if not superseding, but contributes, use comparative fault.

Front 89

P in G.P.S. LAMP

Back 89

P – under the constitution's supremacy clause, a claim under state or common law is PREEMPTED if it is prohibited by or conflicts in some way with a federal statute or regulation. The key to a preemption question is the intent and scope of congress to preempt state law. If congress defines the preemptive reach of the federal statute it infers that matters beyond that reach have not been preempted.

Front 90

STRICT PRODUCTS LIABILITY
(Mnemonic)

Back 90

A mfg or a regular seller of a DUD D - DEFECTIVE, and an
U - UNREASONABLY
D - DANGEROUS product is strictly u liable for physical harm proximate caused by the products dangerously defective condition.

Hint 90

Knives or axes are not defective merely because they are dangerous.

Front 91

SPL for a casual or occasional seller?

Back 91

NO - At most the duty of a casual or occasional seller is to warn the buyer of known latent defects that are not obvious or readily discernible (negligence std).

Hint 91

Cannot assert SPL against an isolated seller.

Front 92

SPL for njuries caused to a third person

Back 92

the user of a defective product is not liable under SPL for injuries caused to a third person thus a doctor or dentist that uses a DUD product, is not liable in SPL to the injured patient. Only those who REGULARLY SELL the product are liable for SPL

Front 93

SPL allows recovery only for ...

Back 93

SPL allows recovery only for physical injury (PI or injury to property other than product itself) but not solely for economic loss.

Hint 93

When a product injures only itself, the claim is for BOW which requires direct privity.
Where the defect is discovered before any PI, and P sues for economic damages incurred in repairing replacing or renting a substitute product, or for loss profits, then P's remedy will be against the seller, who is direct privity with the buyer. No claim for SPL or negligence lies to recover solely economic loss.
RULE – economic loss includes the decrease in value of the product, the cost to repair the defect, and any resulting consequential damages a result of the defect. These damages are recoverable only against one in direct privity

Front 94

RULE – a product owner in the absence of direct privity HAS NO REMEDY for economic losses

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P who suffers economic loss is limited to whatever remedy the underlying sales contract provides.
This direct privity rule is applied to construction contracts for claims against contractor architects or subcontractors for defective workmanship. It also applies to claims for economic loss against attys, title insurance companies, accountants, or negligent polygraph operators. The P in all these cases generally must rely on some direct, contractual privity with the D.

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RULE – when asserting an SPL claim, P must prove that some (Mnemonic) dangerous defect in the product proximately caused a physical injury.

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When asserting a strict products liability claim, P must prove that a DIM dangerous defect in
the product proximately caused a physical injury:

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D - DESIGN defect
I - INADEQUATE warning
M - Mistake in the MANUFACTURING process

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D in DIM

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D - Design – product was fundamentally flawed. Unreasonable defect existed when design used generates unreasonable danger that outweighs its utility and benefits. Courts look at whether the product could have been made safer without an unreasonable sacrifice in its functionality and without substantially increasing its cost.

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Defective design claim arises where there was a reasonable alternative design that the mfg could have adopted and its failure to adopt the design rendered the product unreasonably dangerous for its intended use.
RULE – courts look to the state of the art at the time the product was mfg'd and not subsequent improvements made thereafter.
RULE – where a buyer elected not to purchase an optional safety device, mfg is not liable for defective design unless the product is inherently dangerous without the additional safety device.

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I in DIM

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- Inadequate warning – a flawlessly designed and produced product may be rendered unreasonably dangerous because of mfg's inadequate warning of latent hazards in its foreseeable intended and unintended uses. This claim focuses primary on the foreseeability of the risk and the effectiveness of the warning.

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The warning must clearly describe the nature and degree of the product's specific risks. In considering adequacy, think about the placement of the warning and whether the warning clearly describes the specific risk of injury. Warnings need to be actually effective in their placement and location of warning.
RULE – if the P was aware of the danger or it was so “open and obvious” that it was likely to be appreciated by the user, this will defeat an inadequate warning claim bc the inadequate or absent warning did not proximately cause the P's injury,

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RULE – an inadequate warning claim gives rise to the PRESUMPTION that ...

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the user would have read and heeded the warning. The presumption can be rebutted if D shows that P did not read or ignored the other warnings he was given.

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The learned intermediary rule

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mfgs of a prescription drug or medical devcie only have to warn the doctor or the hospital of the drug's dangers and NOT THE PATIENT since patients must rely on doctors to fully inform them of unknown dangers.

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M in DIM

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M - Manufacturing – an imperfection in production or distribution of the particular product making it more dangerous than identical products sold.