Wa Bar Sales

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7 things you should Discuss

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1. Scope – Governed by Art. 2?
2. Merchant status – Which parties are merchants under Art 2?
3. Contract Formulation – Did the parties for a sales K?
4. Statute of Frauds – Was it satisfied?
5. Contract content – what are the terms of the K that are relevant to the dispute?
6. Breach – Did Seller breach the K? What notice given by buyer?
7. Remedies – What remedies does the nonbreaching party have

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Does Article 2 apply

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Article 2 governs sales of goods, things that are moveable at the time of sale.
A. Does not include services or real property
B. If mixed K, Art. 2 applies if the predominant purpose is a sale of goods. Filling a tooth = services, buying furnace to be installed = goods, construction K = governed by common law under WA statute, Writing a book = services

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Which parties are merchants or merchant-dealers

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Any person in a business or profession is a merchant. In addition, a seller is a merchant who deals in goods of a particular kind if she regularly sells them.

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How is a sales contract formed: basic principle

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A sales contract is made in any manner that shows agreement, including conduct.

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Contract Formation by Offer and Acceptance

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1. Valid offer: an offer is the manifested willingness to enter a contract inviting acceptance.
2. Acceptance.
a. An offer can be accepted in any reasonable manner.
b. A buyer’s offer to buy seeking prompt shipment can be accepted either by seller’s promise to ship or by shipment of conforming or non-conforming goods

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Contract Formation: Acceptance/battle of the forms

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a. A definite, timely expression of acceptance creates a contract even if the acceptance contains terms that differ from the offer.
b. Between merchants, additional terms become part of the contract unless either the offeror objects within a reasonable time, or the new terms are material (causing hardship or surprise).
c. Different terms cancel out inconsistent terms in the offer and gap fillers are used instead (“knock-out rule)
d. Contracts by Conduct – if the parties’ oral or written expressions fail to coincide sufficiently to show agreement, but they proceed to manifest an agreement by shipping, accepting and paying for goods, then they have formed a K by conduct. Apply the knockout rule to K’s formed by conduct, the terms are those on which the writings agree, plus gap fillers.

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Contract Formation: Writings confirming a prior oral agreement

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If a later writing contains different terms they have no effect unless expressly agreed to. Additional terms will modify unless they are material or objected to within a reasonable time

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Contract Formation: Modification

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– can be done without consideration, but the modification must be in good faith

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Contract Formation: Essential Terms

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Parties need agree only on the identity of the goods and quantity to have a valid K.

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Statute of Frauds: basic rule

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A contract for the price of $500 or more is not enforceable unless the defendant has signed (could be signature, or letterhead, or e-signature) a writing indicating a contract between the parties and stating the quantity. – Can be satisfied by any writing from which one could infer a K was made – doesn’t have to be formal or intended to memorialize the agreement, and does not have to be in same document. The writing need not state terms correctly to satisfy, the K will not be enforced beyond the quantity stated but evidence may be used to show lower quantity – it is a ceiling, not a floor.

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Statute of Frauds: Exceptions

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CaPS: merchant Confirmation, Performance, Specially manufactured goods

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Statute of Frauds Exceptions: Merchant Confirmation

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: If a merchant gives a sufficient signed writing to another merchant, who does not object in writing within 10 says, the statute is satisfied as to both parties. Battle of the forms still applies to this

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Statute of Frauds Exceptions: Performance

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Delivery and acceptance of goods or payment satisfies the statute for the quantity of goods accepted or paid for.

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Statute of Frauds Exceptions: Specially Manufactured Goods

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as to which seller has made a substantial beginning of performance or procurement of an oral contract for specially manufactured goods.

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What terms define performance obligations: Supplemental terms

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Supplement express terms with trade usage, course of dealing, and course of performance unless these terms are expressly contradicted

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What terms define performance obligations: Code gap-fillers

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including price, supply missing terms.
a. A reasonably price at the time of delivery
b. the place for tender (seller’s place)
c. Time of performance (within a reasonable time)
d. When payment is due (at time of deliver)
e. THERE IS NO QUANTITY GAP FILLER. Any amount actually delivered and accepted becomes the K quantity

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What terms define performance obligations:

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Quantity can be defined by seller’s output or buyer’s requirements.

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Warranties: Express Warranties

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Any description of goods (or the giving of a sample) that becomes part of the basis of the bargain creates an express warranty that the goods will conform to that description. Sellers statement of opinion is not a warranty

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Implied Warranties: Implied Warranty of Merchantability

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Goods sold by a merchant who deals in goods of that kind are warranted to be fit for ordinary purposes. Warranty automatically arises in this situation

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Implied Warranties: Implied warranty of fitness for a particular purpose

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Goods sold by a seller who is aware that the buyer is relying on seller’s skill to provide goods fit for buyer’s particular purpose are warranted to be fit for that purpose. Buyer must tell seller of the particular purpose and seller have reason to know that they buyer is relying on her to select appropriate goods.

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Warranties: Disclaimers

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Cannot disclaim express warranties. For implied warranty of merchantability, must be conspicuous and must have the word “merchantability” or “as is.” For Fitness for a particular purpose it must be written and conspicuous. In a sale from a merchant to consumer, any disclaimer of implied warranty must state the qualities being disclaimed with particularity. A buyers examination of the goods before the K is formed operates to disclaim any implied warranty regarding any defect that should have been discovered in the examination. Sellers may also exclude remedies from breach of sales contracts, including consequential damages if it would not be unconscionable to do so, or may provide for an exclusive remedy of repair or replacement.

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Who Bears the risk of loss

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a. No agreement. Non-carrier - upon buyer receiving possession from a merchant seller
b. No agreement. Carrier (RoL shifts when goods delivered to carrier). But seller must give notice to buyer, this enables buyer to insure goods in transit.
c. Agreement (FOB names point RoL shifts). Called a shipment K if it is Seller’s location, called a destination K if buyer’s location
d. No shift if goods are non-conforming, risk of loss remains on seller until cure or acceptance. If buyer wrongfully rejects, the risk of loss remains on the buyer for a reasonable time.

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Breach: Repudiation

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– party who states unequivocally that she will not perform – can be sued immediately for total breach. Upon repudiation, other party may cancel K and sue for breach. Can also await performance a reasonable time.

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Breach: Insecurity

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if party has reasonable grounds to doubt other party will perform, may demand assurances of performance and suspend his performance until they are given. If no assurances given within a reasonable time, or 30 days, he may treat the insecurity as repudiation.

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Tender of Delivery and Acceptance

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a. Buyer’s right to inspect.
b. Acceptance occurs if buyer does not reject in time.

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Buyer's right to reject non-conforming tender

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a. In single delivery cases (perfect tender rule) – if non-conforming in any respect, buyer
can reject whole or any part of delivery or may accept the whole or any part
b. In installment cases (substantial non-conformity) – buyer may reject delivery only if it
is substantially non-conforming (material breach). Buyer must accept goods with minor non-conformities, and sue for breaches.
c. Timely notice of rejection required – if no timely notice of rejection to seller, then
rejection ineffective and buyer will be deemed to have accepted.

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Buyer's right to revoke acceptance

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Latent defect, that substantially impairs (material effect)
value to buyer, timely notice of revocation in a reasonable time after he should have discovered
defect AND return of goods substantially unchanged

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Buyer's duty to care for rejected/revoked goods

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Any good rejected by buyer belongs to the
seller. Buyer’s wrongful use may be conversion or belated acceptance. But buyer who has paid part of purchase price in rejected goods has a security interest, after notifying the seller, the buyer may make a reasonable resale of the goods to liquidate the interest. Resale not wrongful

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Seller's Defenses

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a. Destruction of goods identified to contract (impossibility) – must be something that \ can no longer be provided – like a specific horse
b. Failure of basic assumption (impracticability) – performance has become
commercially impracticable because of failure of a basic assumption on which the K was
made. Seller must give notice

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Remedies: Basic Rule

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Award non-breacher damages equivalent of full performance.

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Remedies: Seller's breach for undelivered or rejected goods -

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Cost of cover (or market)
minus contract price, plus consequential and incidental damages and return of any price already
paid minus costs saved by the breach.
a. Cover (price difference plus consequential and incidental.)
b. Market formula (price difference plus C & I).
c. Consequential damages (foreseeable at time of contract and unavoidable by buyer).
d. Incidental damages.

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Remedies: Seller's breach but accepted goods

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B must give S notice of breach. They are entitled to value of conforming goods, minus value of accepted goods plus consequential and incidental damages and return of any price already
paid minus costs saved by the breach

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Remedies: Seller's breach for special goods

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specific performance (goods unique or buyer cannot cover).

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Buyer's breach/Seller's action for K price

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Accepted goods, goods lost while Buyer has RoL, un-re-sellable goods

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Buyer's breach/Seller's action for damages

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Resale – upon giving notice to buyer, a seller may make a commercially reasonable resale of the goods. If so, damages are contracts minus resale plus incidental damages

b. Market formula – if seller fails to recover
c. Lost Volume – if buyer’s breach costs seller a sale, seller can recover lost profit plus incidental damages.