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102 Cards in this Set

  • Front
  • Back
What does art. 2 of the UCC apply to?
Sale of goods (moveable personal property)
Is oil, gas, or structures goods?
No, unless severed by the seller.
Are crops, timber, gravel or water goods?
Yes, regardless of who severs.
What law applies to mixed contracts of goods and services (UCC)?
Whichever element is more important to the contract.
What is NC's stance on mixed contracts of goods and services?
if the contract price is apportioned, you apply art. 2 if there's a problem with the goods, and the common law if there's a problem with the services
What is the policy of art. 2?
Facilitate contract formation.
What two types of irrevocable offers are there?
Firm offers
What is an option?
an option is a promise to keep an offer open that is paid for.
What is a firm offer?
a firm offer requires a signed, written promise to keep an offer open by a merchant [broadly defined to include almost everyone in business].
What is the maximum time period for a firm offer?
3 months
What is the UCC's stance on methods of acceptance?
Extremely flexible.
Can a seller accept by promising to ship or by shipping goods?
Yes, but if they're nonconforming, it's acceptance and breach.
Accommodation - seller tells buyer sending wrong goods to try to accommodate buyer's needs, then there is no acceptance, and therefore, no breach. It's a counter-offer, buyer free to accept or reject
What does a conditional acceptance do?
operates as a rejection, not an acceptance.
What is the rule for acceptance varying the offer under the common law?
acceptance must mirror offer (Mirror Image Rule)
What is the rule for acceptance varying the offer under the UCC art. 2?
adding a term does not prevent acceptance, but the offeree's term does not automatically become part of the contract! The offeree's term becomes part of the contract only if:
1) Both parties are merchants
2) The term is not a material change; and
3) Offeror does not object within a reasonable time.
Do an offeree's varied terms normally become a part of the contract?
What is a material change?
change that is likely to cause hardship or surprise for the offeror.
If the additional term is customary in the industry, it is not a material change.
When will a minor change be kept out of the contract?
Offereror's timely rejection.
How are different terms in an acceptance treated under NC law?
Exactly like an additional term.
How are open terms fulfilled?
UCC gap fillers
What are requirements contracts?
quantity of goods sold measured by buyer's needs.
What are output contracts?
quantity of goods sold measured by seller's output.
What is the rule regarding requirements and output contracts?
Party controlling quantity can't take the other party by surprise.
What is required for modification of a contract under common law.
Additional consideration.
What is required for modification of a contract under UCC art. 2?
Only good faith required, not consideration.
When is a writing required by the Statute of Frauds?
Sale of goods $500 or more.
If contract as modified is within the SoF.
When else might a writing be required for a modification of a contract?
By parties' creation of a private SoF in the original agreement.
What are the writing requirements to satisfy the SoF?
What exceptions take a contract that the SoF applies to out of the SoF?
1. Goods accepted or paid for by the buyer.
2. Judicial admission
3. Specially manufactured goods - seller starts production to sell to the party.
4. Merchant's confirmatory memo.
What is a merchant's confirmatory memo and what are its requirements?
Art. 2 makes an oral agreement enforceable by letting one merchant use its own confirmatory memo to satisfy SoF against another merchant. Can use a writing you signed to satisfy SoF against the other party if:
1) Both parties are merchants
2) The writing confirms a prior oral agreement and has a quantity term, and
3) The recipient doesn't object in writing within 10 days
What is the Parol Evidence Rule
bars you from using a prior or contemporaneous agreement (either oral or written) to contradict a later written contract. PER assumes a later writing is more reliable than what came before.
What does art. 2's PER allow you to do that you can't under common law?
lets you supplement a later written contract with evidence of consistent additional terms unless there's a merger clause.
What is the difference between the UCC and NC law in supplementing a writing?
UCC - can add to a writing only if there's no merger clause.
NC - presumption that you can add to a writing if there's no merger clause.
When can you always bring in parol evidence (exceptions to the rule)?
Course of performance - most important - how the parties acted under this contract.
Course of dealing - less important - how the parties behaved under prior contracts with one another.
Usage of trade - least important - what's customary in a trade or industry
How are subsequent developments relevant?
PER doesn't apply to subsequent events to the contract.
How are express warranties created?
Words - seller's statement of fact, promise, or description of the goods (but not seller's opinion)
Conduct - seller's use of sample or model
What must occur for an express warranty to be actionable under a breach?
It must be a basis of the bargain - buyer must have relied on it.
What is the implied warranty of merchantability?
Goods are fit for their ordinary purpose.
Seller must be a merchant who deals in goods of the kind, not just any merchant.
What doesn't have an implied warranty of merchantability in NC?
In NC, there is no breach of implied warranty of merchantability for goods that are sold in a sealed container.
What is the implied warranty of fitness for a particular purpose?
Seller must know/have reason to know buyer has a special purpose in mind and is relying on seller to select suitable goods.
Seller doesn't have to be a merchant.
What warranties can be disclaimed, and using what language?
Implied warranties can be disclaimed, express warranties can't. "As is" or "with all faults" will disclaim, also conspicuously disclaiming the warranties themselves will work.
When can seller limit buyer's remedies for breach of any warranty?
Seller can limit buyer's remedies for breach of any warranty if the limitation is not unconscionable.
Exception - limiting a buyer's remedies for personal injury in the case of consumer goods is presumed to be unconscionable. This exception operates as a kind of consumer protection clause. Can be rebutted, but difficult to do.
To whom to warranties extend (privity of contract)?
warranties extend to anyone in the buyer's family or household or to a guest in the buyer's house who suffers personal injury. A seller cannot limit NC's privity provision.
What two types of common carrier delivery contracts are there?
Shipment contracts and destination contracts.
What is a shipment contract?
seller must get the goods to a common carrier, make delivery arrangements and notify buyer what the arrangements are.
What is a destination contract?
seller must get the goods to a specific destination (usually where the buyer is located)
What are the abbreviations for common carrier deliveries, and which is a destination contract?
1) FOB - free on board (name of city)
2) FAS - free along side (name of ship or port)
3) CIF - cost, insurance, freight (name of city)
4) C&F - cost and freight (name of city)
- All these are shipment contracts except FOB (destination).
What must seller do if there isn't a common carrier?
must tender the goods at its place of business/residence.
when goods are damaged before buyer gets them and neither buyer nor seller is to blame, who bears the risk of loss? Pivotal question. What happens if seller bears RoL? Buyer?
If seller bears RoL - seller must provide new goods to buyer for no additional cost or be liable for breach of contract.

If buyer bears RoL - buyer must still pay the contract price
How do you determine who bears the risk of loss?
a. The agreement of the parties controls
b. The breaching party bears RoL, even if the loss is completely unrelated to the breach.
c. Delivery by common carrier - RoL shifts to buyer when seller completes its delivery obligations
1) Look for a shipment contract, where buyer bears RoL long before it actually gets the goods. Counterintuitive.
d. Non-carrier cases - answer depends on whether seller is a merchant.
1) If seller is a merchant - RoL remains on seller until buyer takes possession of the gods. Policy - merchant seller is in a better position to insure against the risk until that point in time.
2) If seller is not a merchant - RoL shifts to buyer when seller "tenders" the goods (i.e. makes the goods available to the buyer).
What does "Sale or return" mean?
RoL is on buyer until buyer returns the goods.
What does "Sale on approval" mean?
RoL remains on seller until buyer accepts the goods.
When does offer and acceptance occur with auctions?
bids are offers; the bang of the gavel is acceptance.
What is a right to "reserve"?
auctioneer may refuse to sell an item if he is not satisfied with the price. If the question does not expressly say that the auction is "without reserve," then reserve is presumed.
What is finality as related to auctions?
the auctioneer's decision is final.
What is the Perfect Tender Rule?
seller must deliver perfect goods in the right place at the right time. If tender is not perfect, buyer has the right to reject the goods
What is the seller's option to cure?
a seller who fails to make perfect tender may have an option to cure. It usually depends on whether the time for performance has expired.
When time for performance has not expired, does seller have option to cure?
When time for performance has expired, does seller have option to cure?
seller has no option to cure unless the seller could reasonably believe that the buyer would be flexible in taking nonconforming goods based on the past.
If seller's performance is not perfect in every respect, buyer has 3 options:
a. Accept all the goods
b. Reject all the goods
c. Accept any commercial units and reject the rest

Whichever option the buyer chooses, the buyer can get damages from the seller for breach of contract.
What exception applies to the buyer's right to reject goods?
Installment contracts
What is an installment contract?
Requires or authorizes delivery in separate installments (otherwise, the goods have to be delivered in a single delivery).
What is substantial impairment and how does it relate to installment contracts?
Perfect Tender Rule does not apply to installment contracts, so it is much harder for a buyer to reject. Policy - assumes seller will cure in the course of on-going performance (SUBSTANTIAL IMPAIRMENT)
When does a buyer have a right to reject an installment?
only if there is a substantial impairment in the installment that cannot be cured.
When does a buyer have a right to reject the entire installment contract?
only if a defect in an installment substantially impairs the value of the entire contract to the buyer.
What is an implied acceptance of goods?
when buyer keeps the goods without objection after having a reasonable opportunity to inspect.
What is the effect of acceptance as it relates to timing and damages?
Timing - once buyer accepts goods, it is too late for buyer to reject.

Damages - buyer who accepts non-conforming goods can still get damages, because seller breached the contract.
Can buyer revoke acceptance of goods?
No, unless the non-conformity substantially impairs the value of the goods and was difficult to discover (i.e., it was a latent defect)
What are the consequences of a rejection/revocation of acceptance?
return, refund, damages
Under art. 2, what are the buyer's payment obligations?
under art. 2, the buyer may pay for goods by check, but the seller may refuse the check. If seller refuses check, buyer has extra time to get cash even though the contract deadline has passed.
What is commercial impracticability?
Where a later unforeseen event substantially affects the seller's ability to perform or the cost of the seller's performance.
Commercial impracticability rarely excuses the seller on the MBE, especially if all you've got is an increase in cost of the seller's performance.
How/when does a destruction of goods excuse a seller?
seller is excused only if the damaged or destroyed goods had been "identified to the contract."
Identified to the contract = tagged or set aside for this particular buyer.

Risk of loss - seller who bore RoL when goods were damaged or destroyed is excused by impracticability, but a buyer is not!
Can supervening government regulation excuse a manufacturer/seller's obligation?
When does increase in cost of performance make a contract impracticable?
MBE: virtually never excuses seller.
NC: Look at absolute amount and relative amount of the increase.
Are punitive damages available?
When are liquidated damages available?
upheld if damages were difficult to estimate in advance and are reasonable in light of the anticipated or actual harm. A term fixing unreasonably large liquidated damages is void as a penalty.
What are expectation damages?
put an injured party in as good a position as full performance. Expectation damages are the general rule.
What are the 3 options for expectation damages available to the buyer?
Cover damages
Market Damages
Loss in value
How are cover damages available to the buyer determined?
cover price - contract price if buyer covers in good faith.
How are market damages available to the buyer determined?
market price - contract price if buyer does not cover in good faith or does not cover at all.
How is a loss in value for the buyer determined?
value as promised - value delivered if buyer keeps non-conforming goods
What are the 4 options available to seller for expectation damages?
Resale damages
Market damages
Lost profit
Contract price
How are resale damages available to the seller calculated?
contract price - resale price if seller resells in good faith.
How are market damages available to the seller calculated?
contract price - market price if seller does not resell in good faith or does not resell at all
When are lost profits available to a seller as expectation damages?
lost profit if seller is a lost volume dealer.
Bar exam tip - this is how it always appears on the MBE - a dealer resells the same goods for the same price. The bar examiners are trying to trick you into saying the dealer's damages are $0, but don't be fooled. The dealer has lost the profit it would have made on the initial sale.
When is the contract price available to the seller as expectation damages?
contract price if seller cannot resell goods
What are incidental damages and who are they available to?
cost of transporting or caring for goods after breach and costs associated with arranging a substitute transaction. Available to both buyer and seller.
What are consequential damages and who are they available to?
injury to person or property, lost profits and damage to reputation if it was foreseeable at the time of the contract. Available only to the buyer.
What are avoidable damages?
an injured party cannot get damages he could have avoided ("mitigated") with reasonable effort. However, under art. 2, the injured party does not have to arrange a substitute transaction and can still get market damages.
What are the non-monetary remedies?
Specific Performance
Anticipatory repudiation
Right to request adequate assurance
Unpaid seller's right to reclaim goods
When is specific performance available?
if goods are unique (art, antiques, custom goods) or no market to replace the goods, buyer can get specific performance from seller.
When does anticipatory repudiation occur and what can the non-breaching party do?
arises before performance is due.

a. Wait
b. Sue for breach
c. Treat as offer to rescind/cancel
What is a right to request adequate assurance? And what can buyer do if it's not given?
buyer can, in writing, request adequate assurance from the seller about the goods the seller is going to deliver under this contract.
Treat as anticipatory repudiation.
What can't a buyer use a right to request adequate assurance for?
Can't use this provision to rewrite the contract or demand a particular kind of assurance.
What does entrustment entail?
an owner who entrusts goods to a merchant who deals in goods of the kind has no rights against a BFP.
What is the unpaid seller's right to reclaim goods and what exceptions are there?
No right to reclaim under art. 2.
Exception - seller may reclaim if buyer was insolvent when it received the goods and seller demands return within 10 days thereafter.

Exception - seller can reclaim at any time if buyer misrepresented its insolvency to seller in writing within 3 months before delivery.
What does the NC products liability statute (Ch. 99B) do?
Abolishes strict liability in products liability cases.
How does the NC products liability statute expand liability from the UCC art. 2?
can sue seller or manufacturer of defective product. (Under art. 2 can only sue seller)
What is the scope of the NC products liability statute?
applies only in suits seeking damages for personal injury, death or property damage, not for pure economic loss.
Who else can be a plaintiff under the NC products liability statute beyond those in UCC art. 2?
include buyer's employee, as well as those who can sue under art. 2.
What is the Statute of Limitations for causes of action arising under the NC products liability statute?
within 3 years after the injury or damage becomes, or should have become, apparent, but no more than 6 years after initial purchase.
What are the defenses under the NC products liability statute?
1. art. 2 defense
2. Use contrary to express and adequate instructions
3. Alteration or modification - unless done with consent of the seller or manufacturer, or pursuant to their instructions.