Source: https://www.scribd.com/doc/45080827/Commercial-Transactions-Outline-1
Timestamp: 2017-02-22 07:27:43
Document Index: 1823260

Matched Legal Cases: ['§201', '§2', 'art 2', '§101', '§104', '§104', '§103', '§104', '§104', '§101', '§102', '§108', '§110', '§110', '§110', '§104', '§110', '§101', '§101', '§101', '§101', '§110', '§101', '§104', 'art 700', '§103']

Commercial Transactions Outline 1 | Implied Warranty | Disclaimer
BrowseInterestsBiography & MemoirBusiness & LeadershipFiction & LiteraturePolitics & EconomyHealth & WellnessSociety & CultureHappiness & Self-HelpMystery, Thriller & CrimeHistoryYoung AdultBrowse byBooksAudiobooksNews & MagazinesSheet MusicBrowse allUploadSign inJoinI.UCC Article 2 a. Goods All things which are movable at the time of identification to the K, unborn young of animals and growing crops ( i. Does not include money in which the price is to be paid, investment, securities and things in action. j Milau v. North Avenue Development (sales v. service) When service predominates, and the transfer of personal property is but an incidental feature of the transaction, the exacting warranty standards for imposing liability without proof of fault will not be imported from the law of sales to cast purveyors of medical services in damages. Cannot separate the goods from the services, ´service predominatesµ y Factors/Test o Relative values of the goods portion and the service portion: if the value/price of the goods is greater than the value/price of the service portion. If, in the K, the buyer specifies that the goods are specific and particular may indicate that he is more interested in the sale of goods rather than the services portion of the hybrid. o Gravamen Test:focus on where the defect arose  Anthony Pool y The contract = hybrid transaction in part a contract for the rendering of services and in part a contract for the sale of goods. y The test = whether ´the predominant factor «, the thrust, the purpose, reasonably stated, is a transaction of sale with labor incidentally involved.µ If follows that, if ´the service aspect predominated, no warranties of quality were imposed in the transaction.µ y Used the majority test to determine what the predominant factor was: the P·s hired D to install a pool, the sale of the board was incidental to the construction of the pool. Although the diving board is ´goodsµ it was not purchased in a separate agreement and therefore not protected by implied warranty. o Predominance Test:fact intensive inquiry. Characterization of the transaction as a whole as either a sales transaction or a service transaction. This characterization is applied to all parts of the transaction. b. Merchant a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill. i. Person making an isolated sale is not a merchant and warranty of merchantability will not apply. j Sieman v Alden (rip saw) In order to evoke the protection of 2-314. In order to evoke the protection of 2-314 the seller must be a merchant. a. 2-315 fitness for particular purpose. D knew the particular purpose for which the product will be use and the buyer relied on the expertise of the seller. ii. Applies as soon as person hold themselves out to be expert. Does not matter if they are new to business. II. Contract Formation a. Statute of Frauds(2§201) even if a K was formed, the K is not enforceable. Court lacks the power to enforce a contract even if there was a breach. CL all its terms and conditions had to be in writing, or the contract was not enforceable i. Requirements y Sale of goods > $500
Requires only ´someµ writing to shows a K has been made (example) a. It is not insufficient if it omits a term or a term is incorrectly stated. y Signed by the party by which enforcement is sought. y Quantity has to be included, however, it doesn't have to be correct. K can't be enforced beyond the quantity stated. y Signed: includes using any symbol executed or adopted with present intention to adopt or accept writing. y Between M's; objection to the written conformation must be received within 10 days. This satisfies the writing requirement that must be signed by the party in which action is sought. ii. Exceptions (Common thread is objective evidence that there was a K) (This is not an exhaustive list, there is room here to be creative) y Specifically manufactured for the buyer y Payment has been made and accepted y Party admission (testified in deposition or pleading) iii. Public Policy: the legislature was trying to prevent fraud. Discourage people from making oral agreements. All substantial transactions should be included because the stakes are higher for both b/s. iv. If the P can successfully beat the SOF the next step is the enforcement action. SOF is simply proving that a K exists. Plaintiff has to overcome this obstacle. y
*A K for the sale of cable service does not qualify as the sale of goods. This is different than the sale of electricity and/or water. Reasoning: Because they do not generate the signals that they transmit to the subscribers. 2. Quantity is not easily identifiable. Kaplan v. Cable Vision of PA Inc. Merchant: a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill. Class #3: August 29, 2010 -In a sale of goods K you always have Buyers and Sellers, Merchants, Consumers Problem 2 (p.24) -Student sells car to another student. Does A2 Apply? 2-314? -Yes. No 2-314, because the seller is not a merchant. Sieman v. Alden (p. 24) Issue: Ruling: 2-314The B did not prove that he was relying on the expertise of S. The B already knew the type of saw he wanted to buy. 2-315 He was not found to be a merchant because this was an isolated sale. Problem 3 a) Teacher quit on Friday and opened hat store on Monday. Lack of experience isn't a defense for being a merchant. (...a person who is dealing in goods of a certain kind) As a matter of public policy we want to get people to get to know the area business. Encourages people to be informed about their business. Why are merchants held to a higher standard? because of the lack of equality in the bargaining process and
sophistication. Bright-line Rule: applies across the board. b) Farmer sells fish at farmers market. Are they a merchant?If there is an issue of consumer protection it is likely that the Seller will be considered a merchant. International Sales -Conventional allows parties to exempt themselves at the time the K is written. -The convention does not apply to sales of consumer products. Problem 5 Chapter 2: Statute of Frauds -Only applies when the K for the sale of goods over $500. -Some writing that shows a K has been made -Signed by the party by which enforcement is sought. -Only minimal writing is required. It is not insufficient if it omits a term or a term is incorrectly stated. -Quantity has to be included, however, it doesn't have to be correct. K can't be enforced beyond the quantity stated. -Signed: includes using any symbol executed or adopted with present intention to adopt or accept a writing. -Between M's; objection to the written conformation must be received within 10 days. This satisfies the writing requirement that must be signed by the party in which action is sought. Exceptions (Common thread is objective evidence that there was a K) (This is not an exhaustive list, there is room here to be creative) -specifically manufactured for the buyer -payment has been made and accepted -party admission (testified in deposition or pleading) Public Policy: the legislature was trying to prevent fraud. Discourage people from making oral agreements. All substantial transactions should be included because the stakes are higher for both b/s. -If the P can successfully beat the SOF the next step is the enforcement action. SOF is simply proving that a K exists. Plaintiff has to overcome this obstacle. St. AnsgarMilss v. Streit Next class will start with Problem 7 on page 43. Class #5 September 3, 2010: Formation Performance Breach/Remedies Parole Evidence Rule y See book/notes y Columbia Nitrogen Corp v. Royster Co. o Why do private parties want to enter into contracts? To make money and to hold the other part accountable to terms that are advantageous to them.  Fixed price terms: PP so that business can plan o They were shifting the risk of market fluctuation to the other party. o The ultimate goal of US K law is freedom of K o Royster could have included a merger clause that states no other evidence should be able to come in. However, merger clauses are often litigated. o Courts tend to decide in the favor of equity. Offer and Acceptance y 2-204: Formation in General o A K for the sale of goods may be made any manner (if you behave like you have an agreement than the law treats you as if you have an agreement) o Applies even if it is unknown when the K was made
Krack Corp. Between merchants such terms become part of the contract unless:  The offer expressly limits acceptance to the terms of the offer.µ An ´additional termµ can become part of the contract by is express acceptance by the original offeror. o (1)A definite and seasonable expression of acceptance or a written confirmation which is sent w/in a reasonable time (emphasizes both the principles of freedom of contract and the desirability of making judgments based on the circumstances of an individual transaction) operates as an acceptance (means to bind both parties) even though it states terms additional to or different from those offered or agreed upon. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. o (2)The additional terms are to be construed as proposals for addition to the contract.  They materially alter it. unless acceptance is expressly made conditional on assent to the additional or different terms. v. The Battle of Forms y 2-207 Additional Terms in Acceptance or Confirmation o This was intended to change mirror image rules. y The common law of ´offer and acceptanceµ was altered significantly by the UCC. Explicit attempt to vary the mirror image rule. It is the OR phrase that is causing the problem. y Under common law. Only requires the person holding offer open to be a merchant. y Generally. Much of the evolution of the common law has been brought about by Article 2 of the UCC. y Under §2-207. or  Notification of objection to them has already been given or is given w/in a reasonable time after notice of them is received. y 2-206: Offer and Acceptance in Formation of a K o See book y Problem 10 o When was the K formed? It was formed upon shipment. y Problem 12 y People in business tend to rely on form documents detailing all manner of terms and conditions. y It is now clear that a contract for sale may be created by the parties· having exchanged forms which contain different terms as long as the differences are not of the type which in the commercial environment usually make or break a deal. y y Diamond Fruit Growers. The acceptance is valid even when there are terms that differ from the offer. (1986)
. y Problem 11 o Firm Offers/option K have to include a signed writing. 2-205: Firm Offers o An offer buy a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open even if it is not supported by consideration. any additional terms/conditions were considered counteroffers. This seems to address when there was first an oral agreement. unless you basically copy the language of 2-207.o Even though one or more of the terms are left out. Tries to make all offers of acceptance valid. o (3)Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. together with any supplementary terms incorporated under any other provisions of this Act. in particular. the exchange of forms would probably not result in a binding contract ´mirror image ruleµ. Inc. the terms of the offer are the terms of the contract. there are 2 ways that an additional term in the acceptance can become part of the contract: y Implicit in the statement that such additional terms are to be ´construed as proposals for additions to the contract.
[if the seller truly doesn·t want to be bound unless the buyer assents to its terms. and K continued to buy.y
What constitutes an assent ? Is acquiescence enough to give consent? Facts: Krack (B) manufacturer of cooling units containing tubing supplied by Metal Matic (S). Evans Products Co. -MinorityRule: Permits the terms of the offer to control. Issue is whether the disclaimer was ever a part of the contract with K. (1981) Facts: Pevar (B) Evans (S) 1.C. but they were never changed. all the terms on which the parties· forms do not agree drop out. P sued breach of implied and express warranty. etc. 2-207 does away with common law·s ´last shot ruleµ which gives advantage to the party who sent the last form. MM was liable for 30%. it can protect itself by not shipping until it obtains that assent]. There is no valid consent because it was made expressly conditional on assent to the terms so there isn·t a 2-???K but there is a 207(3) the buyer will have a 2-314 warranty. 2. Problem 16: On May 6th when it was shipped was there a K? They were shipped so this was valid acceptance. that conduct did not amount to assent. 2010 Formation Performance breach/remedies Problem 15: ´knock-outµ rule. o MM·s acknowledgement form disclaimed all liability for consequential damages and limited MM·s liability for defects in tubing to refund of the purchase price or replacement or repair of the tubing. 2-207(3) o Accepting MM·s argument would in effect reinstate the last shot rule. but performs. Instead. the parties have a contract w/additional terms. he entered into an oral agreement for the purchase of plywood. then there is a contract w/additional terms. o At beginning of each yr.
. o K then sold one its cooling units to Diamond Fruit Growers (P). D sent his acknowledgement form in boilerplate fashion stating that the contract of sale would be expressly contingent upon P·s acceptance of all terms contained in the document. o K argues 2-207 applies (it does apply to commercial transactions in which parties exchange printed forms). and the UCC supplies the missing terms. In this case. Terms of the K include those upon which the parties agreed and gap fillers provided by the U. o Unit began leaking ammonia. v. o MM argues that K agreed based on conversations and then continued buying. The Majority of courts agree with this. ** in exam point out that you don·t know if the form has the ´unless provisioµ. Leonard Pevar Co. Did the S make a warranty? Provisio. if offeror doesn·t assent. if the offeror assents. o But. ¶acceptance made conditional on additional terms· [see reverse side for terms and conditions = printed on signature side of acknowledgement form] o K objected to the terms.C.
Class #6 September 13. S argues that there was no K because oral agreement is unenforceable: in violation of statute of frauds which holds that if an agreement is in excess of $500 it is unenforceable. Then B would send release orders and MM would respond w/acknowledgment form and shipping of tubing. K brought MM in as a third party complaint. Found a pin-hole leak in cooling coil. they exchanged forms w/ different terms. o 2-207 changes the common law mirror image rule: ´converts a common law counteroffer into an acceptance even though it states additional or different termsµ The only requirement is that the responding form contain a definite and seasonable expression of acceptance. P sent p/o but it didn·t mention warranties. Holding: Because K·s conduct did not indicate unequivocally that it intended to assent to MM·sterms. B sent blanket purchase order to MM stating how much tubing it would need for the year. (these terms were not found in K·s purchase order). o Jury found for P. P sued for lost produce.
Gateway said that we have a clause the if you keep the computer for 5 days then you assent to the terms Analysis: The court used 2-207(2) What hat was Klockek wearing? He was a consumer. if they do. S also argues that the B actually assented within the meaning of 2-207(1) actually received and paid for goods and therefore assented to the counter offer. The additional terms will be part of the agreement unless they materially alter it. then the oral agreement is enforceable. There is an exception because they are both merchants Section 2-201 however. This is familiar Acceptance of a counter offer is expressed by the conduct of the parties. Gateway. It is not insufficient if it omits a term or a term is incorrectly stated. There was sufficient writing sent and with merchants written confirmation is sufficient to satisfy the requirements. The Predominance Test and the Governance test. (depends on the nature and circumstances) y Exceptions o Customized goods o Party admission o Look up the third one y Parole Evidence Rule
. 3. then the standard ´gap fillersµ provisions of article 2 will provide the terms of the agreement. So we know that the second sentence doesn·t apply because we need two merchants to go on. -merely doing business is not enough to evoke. This is a fact intensive inquiry. holds an exception: if written confirmation is sent to the receiving party and party doesn·t object w/in 10 days. Court rejected the last shot rule (D·s argument) Class #7 (Mini Review) Formation Performance breach/remedies Formaction SOF PER FO O&A Klocek v.  Some writing that shows a K has been made  Signed by the party by which enforcement is sought. (This is the Diamond Fruit case) 4. y Predominance test you look at the facts. Issue: Whether the arbitration that came with the standard terms and conditions became part of the K. Where the parties have not entered into an oral agreement but have exchanged writings which do not contain identical terms. Where 2-207 applies: a. Where an oral agreement has been reached followed by sending of forms containing terms not discussed. The buyer was able to overcome the SOF.a. b. Formations -The first question you ask is Does the offer unambiguously indicate a manner of acceptance What is the first question you have to ask? y Does Article 2 Apply? o A2 is for the sale of moveable goods (see what these include) o There is a tricky situation when there is a hybrid contract (service goods and customized goods)  If you get this question then you need to talk about the tests. o How does the P overcome the SOF defense  Some writing to show that  Only applies when the K for the sale of goods over $500. Inc.  Only minimal writing is required.  If the P sends something within reasonable time. When additional terms are issued as proposals in order to make those apart of the K there needs to be express agreement. 5. y Governance test focus on where the defect arose (see diving board case) y Is the K in writing? o This raises a SOF question and especially if you see a number in the fact pattern.
don·t use implied warranty) Important to remember 2-316 doesn·t apply o Extremely difficult to disclaim. o Webster v. Fitness for particular use  Problem 28: Broken denture with olive pit  Problem 29: Hair dye burns people. y Merchantability o Shaffer V. September 27.  Problem 27: Paint didn·t match and it had an order. Ones standing in the community does not change this. o Daniell v.  Problem 26: There was an implied warranty because he had special knowledge of the room and knew that it would not be powerful enough.  Court held that IWM did not apply y The P·s use of the trunk was not foreseeable o Implied Warranty: Fitness for Particular Purpose  Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the sellers skill or judgment to select or furnish suitable goods.Firm Offer o This applies to merchants o This changes the CL rule that an option K is not enforceable unless accompanied with consideration o However.  Fish bone in fish chowder  Whether the restaurant breached the warranty y No.  Girl tried to kill her self by locking her self in the trunk and she was in there for 9 days. next to impossible. there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose. Ford Motor Co. it has to be a signed writing but it doesn·t have to be supported by consideration September 22. y The seller intention to create any implied warranty is completely irrelevant. Blue Ship Tea Room. 2010 y
. 2010 Formation-performance-remedies/breach Recap of last class Warrany y Title o 2-312 (Statutory imposed warranty. o Problem 25(b): There should be a minimum expectation of safety. she should reasonably anticipate and guard against eating a piece of shell/bone.  Broken wine glass  D argument was that they were a restaurant and they didn·t sell the wine glass  Casino giving away free drinks is it the same analysis y You are paying for your drink my gambling o How does this work in reality?  Can you sue cigarette manufactures o Problem 24(b): Only a merchant can give an implied warranty of merchantability. The implied warranty would fail here. Victoria Station. Inc. y Quality Implied Warranties y Only applies to a merchant seller y Are automatically part of the K unless the S or circumstance does something affirmative to get rid of them. Inc.
Warranty Disclaimers and Limitations Warranty disclaimer is a disclaimer of obligation. B claims that S is barred from recovery based on a disclaimer contained w/in a written. 4. ´with all faultsµ or other language which in common understanding calls the buyer·s attention to the exclusion of warranties and makes plain that there is no implied warranty. had the K stopped after the 5 year limited Warranty clause the case may have been decided differently. that ´There are no warranties which extend beyond the description on the face thereof. When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him. and color as the remainder of the text. and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. although contained in a separate paragraph w/in the warranty text. and c. and b. size. The lifts never functioned properly. it is an attempt to reduce or eliminate the scope of obligation it assumes. for example. and therefore wants to reduce the scope of the warranty of merchantability (that risk is then transferred to the buyer). is in the same typeface. Unless the circumstances indicate otherwise. but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable. An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. when a disclaimer is considered conspicuous. (section 2-718 and 2-719) (Limitation) Bell Sports. all implied warranties are excluded by expressions like ´as isµ. Cate v. D argues that a lesser standard of conspicuousness should apply to a disclaimer made to a merchant. Language to exclude all implied warranties of fitness is sufficient if it states. 2. Prof: P. but unwilling to pay the full damages if the goods are unfit. Yarusso Issue: Facts: Rules/Reasoning: 2-316(1) analysis. to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous. Dover Corp. here the obligation is unaffected. he may only wish to accept the obligation for ABC. Subject to subsection (3). Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other. the only thing changed is the amount of damages he must pay in the event there is a breach. Inv. 2-316 Remedy LIMITATION for consequential damages. Rules/Reasoning:
. It is very difficult to disclaim an express warranty 2-316 Exclusion or Modification of Warranties 1. (1990) Issue: enforceability of a disclaimer of implied warranty. possible to conclude that the disclaimer was not affective. then what the seller needs is a Limitation. the merchant/seller assumes that the goods are fit for purposes ABCD. Facts: P purchased 3 lifts manufactured and designed by Dover Corp. However. The disclaimer. express warranty. 108. If the seller is willing to assume goods are fit for ABCD. Without more.µ 3. Notwithstanding subsection (2) a. Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy. V.
7. however. Marketplace reality suggests that freedom of contract in the sale of goods is actually nonexistent. Can the car dealer win the legal dispute by arguing that the usage of trade permits the burial of warranty disclaimers in the fine print? 1. 5. 2. also course of dealing or usage of trade can also act as an exclusion of implied warranty). D failed to establish that P understood warranty·s limitations or exclusions. A statement buried in the fine print of a used car purchase agreement states that ´There are no express or implied warranties that are part of this sale. especially in boilerplate forms. the disclaimer is hidden among attention-getting language purporting to grant the best warranty available. But in a telegram. color. 4. It ignores the fact that governmental implication of protective terms into private contracts is commonplace and rests on the faulty premise that contractual disclaimers are generally freely bargained for elements of a contract. iii. ´Although the warranty in its entirety may be considered conspicuous. iv. Implicitly it adopts the position that disclaimers should be enforced because society benefits when parties to contract are allowed to set all the terms of their agreement. have the greatest control over the products. or by the seller specifically bringing the inconspicuous waiver to the buyer·s attention. Are the implied warranties effectively disclaimed? 1. 6. Whether a disclaimer is conspicuous is a question of law a term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. etc. inconspicuous language is immaterial when the buyer has actual knowledge of the disclaimer. Changes made the physical appearance of the contract would include a change in font or type face. a buyer can either take the contract w/the disclaimer attached or leave it and go w/o the good. The disclaimer was not conspicuous. this reality would seem to demand that the legislature prohibit implied warranty disclaimers by repealing 2-316 (w/o this action.µ i.µ S·s disclaimer fails to attract the attention of a reasonable person. What changes would you make in the physical appearance of the clause in the contract? Is it all right to put the disclaimer in the clause labeled WARRANTY? 1. what changes would you make in the language? 1. or separation from the rest of the warranty provisions. This knowledge can result from the buyer·s prior dealings with the seller. A printed heading in capitals is conspicuous. the usage of trade and course of dealing argument can be used the other way as well: it is a usage of trade and course of dealing presumption that buyers don·t read the fine print. PP: Purpose of implied warranty they create incentives to produce and market higher quality products. (code recognizes that buyer knowledge makes the inconspicuous waiver immaterial.
. any stated term in conspicuous. You would include ´as isµ or ´with all the defectsµ. Problem 31 a. ii. An implied warranty of merchantability arises in a contract for the sale of goods unless expressly excluded or modified by conspicuous language. they discourage shoddy workmanship and unethical trade practices. If the car dealership asks you to redraft this clause so as to comply with the Code. He may win. (1-201 section 10) 3. (Dissent) 2-316 undermines implied warranties. The seller has the burden of proving the buyer·s actual knowledge of the disclaimer.1. courts have to rely on the unconscionability or conspicuous requirements to reach a fair result. Also. they place responsibility on those who profit from the sale of goods. as a side note. NO. the disclaimer may have failed the unconscionability test as well. language in a body of a form is conspicuous if it is larger or of other contrasting type or color. and are better able to bear the risk of loss. You cannot put the disclaimer in the section labeled warranty because it would not call attention to itself. Because the object of the conspicuousness requirement is to protect the buyer from surprise and an unknowing waiver of his or her rights.
Timberline 2. however. Prof: Counter Argument: 2:316(c)(3). September 29. Inc. Argument failed because it must be conspicuous before the sale. disclaimer inside of the plastic package Issue: Whether the complaint should be dismissed because S disclaimer of implied warranty of merchantability was not conspicuous. Post-sale disclaimers are not effective because they do not for a part of the basis of the bargain b/w the parties of the sale. but w/o limitation. Rules/Reasoning: 1. term physically located outside the K was enforceable term of the K. Is this effective to disclaim implied warranties? Express warranties? Must the ´as isµ language be conspicuous? i. or warranty booklet that accompanies the goods. The disclaimer stated: ´The foregoing warranty is expressly in lieu of any and all other warranties. 2-719 Contractual Modification or Limitation of Remedy
. however. 2. B should be on notice because of prior dealings which manual contained the same provisions. a warranty of quality is a separate question. Conspicuous. 3.µ Effective disclaimer? i. Follows Hill v.b. the court found no case law to support. The commercial practicalities of modern retain purchasing make in reasonable for a seller to a product such as a zip drive to place a disclaimer of the IWM within the plastic packaging. An examination could have revealed defects. 2010 Formation-Performance-Breach/remedies Bowdoin v. The car salesman asks the buyer. who is in a hurry. the manual was delivered to Ps after the sale. D sales of the drives to P were not consummated until after each P had an opportunity to inspect and then to reject or to accept the product with the additional terms that were enclosed within the packaging of the Zip drive. Mortenson v. Facts: Spray rig. disclaimers and limitations. Question with all warranties. Are there implied warranties in this sale? i. the buyer had a responsibility to inspect the goods he was purchasing. Manufactures Argument: Argues that the B was a sophisticated B. Iomega Corp Facts: Defective Zip Drives. Showell Growers. Gateway: held arbitration clause was effective. etc. Remedy Limitations All of these issues will present themselves together. There is an implied warranty of fitness and merchantability. c. d. the implied warranties of merchantability and fitness for a particular purpose). ´NO. should meet the test of enforceability. The writing is specific and conspicuous. Remember Ted Traveler (problem 19) who walked into the men·s room of the bus depot and bought an expensive watch? We decided that there was no warranty of title in that transaction. The safety shield on the rig was defective and injured the B. implied. says. If buyer refused to examine the goods then the resulting injuries likely resulted from buyer·s own action rather than from breach of warranty. (1987) Issue: whether the S effectively disclaimed the implied warranties of fitness and merchantability w/respect to a high pressure spray rig that caused injury to B·s. The words AS IS are written with soap in large letters across the front windshield of the used car.
Rinaldi v. a post sale disclaimer is no effective merely because it was otherwise conspicuous. Yes. The disclaimer was included in the instruction manual. Seems to be arguing a pro se law. Rules/Reasoning: 1. express. ´Would you like to examine the car?µ and the buyer. The buyer is not bound by the disclaimer to which he had never agreed at the time of the sale and which first appears in the manufacturer·s manual delivered to the buyer with the goods or the manufacturer·s printed material brochure. statutory or otherwise (including. an implied warranty that the car will work.
a. quality or shade shall be allowed if made after weaving. The agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article. D·s defense is that P did not perform all of the conditions of the contract ´no claims relating to excessive moisture content. 3. remedy may be had as provided in this Act. 2. 3. Where circumstances cause an exclusive or limited remedy to fail of its essential purpose. LTD. (disclaimers are subject to stricter regulations than warranty limitations). or processing. attempt to warrant and then refuse to warrant goods creates ambiguity in which one term must yield to the other.) Warranty limitations and buyer disclaimers try to limit the liability of the seller trip back the scope of the warranty (there is no warranty for certain losses).1.µ. v. so that it would be viewed as a contractual relation stating that it would not cover any damages after 10 days. David Ferguson. or more than 10 days after receipt of shipment. Subject to the provisions of subsection (2) and (3) of this section and of the preceding section on liquidation and limitation of damages. 2010
. 2. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. (1968) Facts: Yarn purchased and B did not pay S. knitting. P alleges that the yarn had latent defects that could not have been detected until after the yarn was processed. Where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain. Wilson Trading Corp. Any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. a. P suing based on theory of unmarketability (yarn shaded). in which case it is the sole remedy. but the seller was disclaiming any damages brought to its attention after the period of 10 days (warranty disclaimer clause). Rules/Reasoning: 1. etc. twist. or it could be viewed as a contraction to the warranty. The warranty limited remedies to 10 days and before knitting & processing. these are difficult drafting decision that are faced because you have to account for the probability that any disclaimer. (top of page 13?: either that clause will be viewed as either seller·s warranty regarding defects in the product was unimpaired. it must give way to the general remedy provisions of this Article. but instead relies on the theory that P did not give notice of the breach of warranty until after the specified time had run. as by limiting the buyer·s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts. also included a merger clause. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not. count variations. D does not seem to argue that the yarn was unmerchantable. Issue: whether notice of the alleged breach of warranty for defect in shading was not given within the time expressly limited and is not now available by way of defense or counterclaim. Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive. will even stand up to the unconscionability test. and b. short weight. October 4. 4. 2-719: it is clear that it is the very essence of a sale K that at least minimum adequate remedies be available for its breach. The contract limits the remedies for the breach and tries to alter the warranty of merchantability.
etc. (disclaimers are subject to stricter regulations than warranty limitations). when it doesn·t. he noticed a rumble in the engine. In a proper case any incidental and consequential damages under the next section may also be recovered.µ Moreover. and lost the cost of vehicle. Does this argument work? o NO. the buyer is going to be able to argue that the limitation failed in its essential purpose and therefore should be excluded from the contract. the limited remedy has failed in its essential purpose. incurred hospital expenses. Could he recover from those losses? The contract limited liability for ´consequential damagesµ. but not consequential. This bargain should be made to function perfectly. no consequential damages. J used the car to get to work during the week in the winter and for fun on the weekends. limited Pierce v. The agreement to a limited remedy represents a bargain. attempt to recover damages for personal injury is precluded by 2-719 1b and 1a. what call would you make? It is still unconscionable and this argument still trumps the seller·s argument. 3. 2-719 1b seems to say that this is a limited warranty. K defended on the grounds that his liability was limited to the cost of repair or replacement. etc. The measure of damages for breach of warranty is the difference at the time and place of acceptance b/w the value of the goods accepted and the value they would have had if they had been aw warranted. 2010 Formation performance breach remedies Warranties. The distinction between failure of essential purpose and unconscionability is big. Where the buyer has accepted goods and given notification (subsection 3) of Section 2-607 he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller·s breach as determined in any manner which is reasonable. the problem is that w/ so many repeated failures. 2. 2. will even stand up to the unconscionability test. lost pay.
. As far as consequential damages. the same thing happened several times. but that. on the damages for non-consequential damages or damages that are injury. disclaimed. Catalina. the contract conspicuously stated that the seller was not responsible for ´any consequential damages. then he cannot recover.Problem 34: On Nov. the limitation is unconscionable. October 4. he lost the use of his arm. Warranty limitations and buyer disclaimers try to limit the liability of the seller trip back the scope of the warranty (there is no warranty for certain losses). J argued the remedy limitation was unconscionable. lost use of left arm. If you were advising the buyer facing these damages. The remedy limitations: 1. There must be some argument that the seller can use to offer an exemption from liability? What is it that makes a provision unconscionable? :Concealment. these are difficult drafting decision that are faced because you have to account for the probability that any disclaimer. 4 weeks later. etc. the only remedy is for replacement. unless special circumstances show proximate damages of a different amount. J was seriously injured. Jack bought a car from King. Yachts Facts: Issue: Reasoning: 2-714 Buyer·s Damages for Breach in Regard to Accepted Goods 1. How should the suit result? o The personal injury losses: hospital expenses. 1. The contract he signed stated that the seller warranted the vehicle was merchantable.µ One week after J received the car. in the event of breach. he took it back and the machine was allegedly repaired. etc. which may prevent recovery despite contract limitations. lost pay. any attempt to limit the liability for injury is an unconscionable attempt and they are excluded leads to the deletion of the objectionable clause 2-719 and 2-302. This is a matter of foreseeability. ´the buyer·s remedy was limited solely to repair or replacement of defective parts. o If the buyer cannot prove that the damages were caused as a proximate result.
2. Defenses in Warranty Actions Notice In all warranty actions a buyer loses all UCC rights if he fails to give the seller notice of the breach w/in a reasonable time after the breach should have been discovered. courts tend to hold that disclaimer limiting consequential damages is enforceable despite the failure of the limited warranty. the opportunity to cure has lapsed. and b. If the claim is one for infringement or the like the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expenses and to satisfy any adverse judgment. then the opportunity to cure will likely lapse. course of dealing. there is a general obligation to inspect the goods). if the notice is given too late. o Dave·s argument would fail because he waited too long. The buyer must pay at the contract rate for any goods accepted. Fitl v. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the 2 litigations. b. The notice section allows the seller the right to cure the breach/problem. 4.NOTE: in a commercial setting where the buyer is not a consumer. Burden of Establishing Breach After Acceptance. industry practice. The burden is on the buyer to establish any breach w/respect to the goods accepted. then unless the seller after seasonable receipt of the notice does come in and defend he is so bound. 1. The buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy (time begins to run when buyer becomes aware or should have been aware. Where a tender has been accepted a. 6. Notice of Breach. If the claim is one for infringement or the like and the buyer is sued as a result of such a breach he must so notify the seller w/in a reasonable time after he receives the notice of the litigation or be barred from any remedy over for liability established by the litigation. then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred. 2-515 Preserving Evidence of Goods in Dispute
. Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over a. Apples are perishable. Notice of Claim or Litigation to Person Answerable Over. He may give his seller written notice of the litigation. and 5 apply to any obligation of a buyer to hold the seller harmless against infringement or the like. 5. y Problem 33 o The notice that Dave had given was too late. The provisions of 3. Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for non-conformity. he waited 60 days after delivery. Strek (Mickey Mantle Baseball Card) Issue: Whether a defective condition that was discovered two years after the date of purchase was timey Analysis: 2-607 Effect of Acceptance. 3. o 2-607 o What is S argument. 4.
. The parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment. Either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect. one could argue that those settlements are all short circuited by skipping the notice portion. Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired. it·s more difficult to hold them to a notice requirement because they lack the information necessary. Even if one wasn·t looking for a cure. o Does Sancho have to give notice in order to maintain an action? NO.
Problem 34 o Here. 2-508 Cure by Seller of Improper Tender or Delivery. seller argues that it is insufficient notice to satisfy 2-607. however. the retailer can protect itself. they may required to give notice of injury. then you·re left with no remedy. ´notification need only be such as informs the seller that the transaction is claimed to involve a breach. but the alternative that applies varies by jurisdiction). 2-607 speaks only of buyers. Was notice necessary? Here there is an installment contract. how would Sancho give notice? Sancho doesn·t know anything about Carrasco. you were facing imminent bankruptcy of the seller. the weak letter doesn·t tell the seller that something needs to be done. Would it make sense to require an non-buyer to give notice? The comment suggests that even though 3rd party beneficiaries are not required to give notice of breach. you are barred from any remedy. If the buyer files suit right away. the seller knew: the shipment was five months late. Comment 4 says that all is necessary to be included in the notice is that the transaction is troublesome. Seller could argue that 2-607 says that if there is no notice. the delay is not deemed to be important.µ Especially if you·ve attained legal advice on the matter. you should include the word breach and make it clear that the breach has not been waived. and thus opens the way for normal settlement through negotiation. test and sample the goods including such of them as may in the possession or control of the other.In furtherance of the adjustment of any claim or dispute A. Sancho is not a buyer. of course. However. o 2-607(5). if you were giving advice. Is there a real difference? Plus. The comment doesn·t make clear what a notice of injury is.). then those rights are taken away. However. etc. 2. Some courts have held that no serious negotiation occurs before filing of suit. you would not want to skip that step (unless. so notification of a breach in the first installment would give the seller the opportunity to make up for it in the second installment. the seller may seasonably notify the buyer of his intentions to cure and may then w/in the contract time make a conforming delivery. In a sense. Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to believe would be acceptable w/ or w/o money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender. when you include 3rd parties. and B. Notice of breach sections make a lot of sense when you·re talking about buyers and sellers (all the information is available). to be safe. Problem 36 o 2-318 extends to third party beneficiaries the warranty of merchantability. Without notice. (Alternative A is the most restrictive. Replacement 1. Even if the seller was aware of the importance of timely delivery. o When the second delay occurs. the buyer sends a notice. o If 2-607 is not satisfied. if he had been notified then the seller would reasonably be able to do something to avoid delay. o Would filing of a suit be sufficient? The purpose of notice is to give the seller time to cure the breach or offer a settlement. there are other means of settlement.
Gauss bring a tort action based on strict product liability? a defect in the product maintained by strict liability. If he·s suing on express warranty. etc. o Cayley could establish a direct contract w/manufacture (not the paint company though) and therefore was protected by the express warranty. consume or be affected by the goods and who is injured in person by breach of the warranty. Are there any other warranty claims? If you were representing Alonzo. does not limit it to family members or guests of a household) Alternative C A seller·s warranty whether express or implied extends to any person. Gauss could use alternative C (the jurisdiction would have to have adopted this provision) to sue. (This is broader than the first alternative. He would have to depend on Alternative C (as far as the dog is concerned). Problem 37 o Mr. o Can Mr. However. the representations then become express warranties). 2-318 Third Party Beneficiaries of Warranties Express or Implied (states select one alternative) Alternative A A seller·s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such a person may use.o
hold that individuals claiming under alternative A or B have held that they don·t need to give notice (a court can ignore the comment). A seller may not
. you·d want a stronger claim? How would you argue that there is a direct warranty to Alonzo? Can you find a contract b/w the manufacturer and Alonzo? This is a heavily advertised product. A seller may not exclude or limit the operation of this section. He could claim under alternative B because he in the foreseeable range of use of the product. What about Alonzo himself (the buyer) is held to a notice requirement? What if he wanted to sue La Mancha. or Alt B for injuries to himself. the representation made to buyers acts as a direct contractual relationship between the buyer and the manufacture. Would he have to give notice to La Mancha? Courts have tended to ignore the notice injury requirement for 3rd party. If the jurisdiction did not adopt C. consume or be affected by the goods and who is injured in person by breach of the warranty. With respect to mass circulation. highly advertised products. not Carrasco? Alonzo is claiming breach of merchantability w/contract to Carrasco. Buyer must establish that there was in fact and in law a contract b/w the parties = privity. It would be difficult to construct a contract out of that. and by acting upon that advertisement he directly engaged in a contract (consideration included. then he would have to satisfy the notice requirements under 2-607. he does fall w/in the term buyer (he bought from Carrasco). consume or be affected by the goods and who is injured by breach of the warranty. the immediate purchaser. All he would have to prove is a defect that is unreasonably dangerous. Courts still hold that he is a 3rd party and tend to hold that he is not required to give notice.
Privity Suits on warranties are contract actions. Alonzo could argue that he was persuaded by La Mancha·s advertisements. could he establish a direct warranty/contract b/w himself and the manufacturer? Consideration has to be something that is reasonably/conceivably conclusive on part of the seller. A seller may not exclude or limit the operation of this section. who may reasonably be expected to use. The problem of how far back up the distribution chain the buyer can go is said to be an Horizontal privity deals with identifying to whom the retail seller is liable other than issue of vertical privity. (This is the most restrictive alternative) Alternative B A seller·s warranty whether express or implied extends to any natural person who may reasonably be expected to use.
P was disappointed w/the product·s quality which was protected under warranty strict liability and negligence were not cognizable claims. it includes corporations as well as injuries that are not personal. The seller is engaged in the business of selling such a product. The user or consumer has not bought the product from or entered into any contractual relation with the seller. usually defective products fall under the contract law causes of action. East River Steamship Corp. time periods may vary significantly. (1986) Ruling: The Ct of Appeals held that damage only to a defective product is actionable in tort only when the defect creates an unreasonable risk of harm to persons or property other than the product itself. 4. A cause of action based on strict product liability is very similar to UCC implied warranty y Differences b/w strict liability action and breach of implied warranty of merchantability: 1. UCC warranty may be breached even if the product is not defective. UCC is governed by 2-725. liability in tort would create unnecessary costs to the public. 2. and b.
. o This COA would also attach if there was additional property damage (reasoning is that the case would distinguish itself from the warranty COA and make it a strict liability action). The seller has exercised all possible care in the preparation and sale of his product. 402A has the statute of limitations imposed by state law for tort actions. 402A damages are limited to physical injury 3.exclude or limit the operation of this section with respect to injury to the person or an individual to whom the warranty extends. The primary source of the doctrine is 402(1) Restatement of Torts y Section 402A Special Liability of Seller of Product for Physical Harm to User or Consumer 1. 402A does not consider privity 6. Inc.  Damage to a product is understood as a warranty claim. o These types of actions are ones where it is reasonably certain to place life and limb in peril.  Products liability was a policy judgment affording greater protection from dangerous products than warranty law provides. Transamerica Delaval. disappointment in a product·s failure can be insured as protection. (This is the broadest of the alternatives. It is expected to and does reach the user or consumer w/o substantial change in the condition in which it is sold. here. and b. One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer.  Rule A manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself. The rule stated in subsection 1 applies although a. 2010 Strict Products Liability in Tort y Strict products liability permits recovery by an injured consumer in a suit against the manufacture as long as the consumer can prove that the manufacturer distributed into commerce a product that contained a dangerous defect. or to his property. here D would be liable regardless of negligence b/c public policy demands responsibility to be fixed to reduce hazards to life and health caused by dangerous products. v. o However. if a. 402A does not require notice 2. 402A requires that the product contain a defect. such as financial). October 5. There is no necessity of proving either negligence or privity. 402A is not affected by disclaimers or remedy limitations 5.
which was then still under construction. they were inspected while in port. and newly designed parts were installed as permanent repairs that summer. the Bay Ridge experienced a unique problem. In 1978. Inc. The damaged part was replaced with a part from the #4 Bay Ridge. announced it would build four oil-transporting supertankers #1) T. whereas a tort action could subject the manufacturer to damages of an indefinite amount. a wholly owned subsidiary of Seatrain Lines. with the obligation afterwards to return the ship to the real owner. Disappointments over the product's quality. Stuyvesant. the ship was permanently and satisfactorily repaired with a ring newly designed and manufactured by D. and no one was injured y In 1969. Temporary repairs were made. Procedural History: y The DC granted SJ for the D.no other part of the ship was damaged. Brooklyn.T. It turned out that the astern guardian valve. The complaint appears to claim damages as a result of deterioration of the #4 Bay Ridge's ring that was installed in the #1 Stuyvesant while the #4 Bay Ridge was under construction. which in turn chartered the ship to one of the Ps. its title was transferred from the contracting subsidiary to a trust company (as trustee for an owner). located between the high-pressure and low-pressure turbines. and P (Richmond Tankers. respectively. and the COA affirmed. Inc. chartered the Bay Ridge. It contains five counts alleging tortious conduct on the part of the D and seeks an aggregate of more than $8 million in damages for the cost of repairing the ships and for income lost while the ships were out of service. Seatrain Shipbuilding Corp. Those inspections revealed similar turbine damage. P (East River Steamship Corp.T. the ship again was repaired. in August. Each charterer assumed responsibility for the cost of any repairs to the ships. P (Queensway Tankers. the engine began to vibrate with a frequency that increased even after speed was reduced. Facts: y Transamerica Delaval Inc. y When the #4 Bay Ridge was completed in early 1979. #2) T. chartered the Stuyvesant. (Shipbuilding). After repairs. this time with a part from the #2 Brooklyn. which is still generally enforced for such claims in a commercial setting. on the other hand. y Each tanker was constructed pursuant to a contract in which a separate wholly owned subsidiary of Seatrain engaged Shipbuilding. an examination of the high-pressure turbine revealed that the first-stage steam reversing ring virtually had disintegrated and had caused additional damage to other parts of the turbine. designed and manufactured propulsion systems for four supertankers. and #4) T. Inc. In addition. had been installed backwards. In January 1978. The propulsion systems eventually failed due to design and manufacturing flaws. Williamsburgh. Shipbuilding in turn contracted with the D (Transamerica Delaval Inc. Only the propulsion systems themselves were damaged . (Delaval)). to design. Because of that error.). In 1980. steam entered the low-pressure turbine and damaged it. o The COA held that damage solely to a defective product is actionable in tort if the defect creates an unreasonable risk of harm to persons or property other than the product itself. #3) T.. are protected by warranty law. y The #1 Stuyvesant which was the first tanker finished sailed on its maiden voyage in late July 1977. y The charters· second amended complaint invoked admiralty jurisdiction. when the ship was on its maiden voyage. P (Kingsway Tankers. manufacture.) chartered the Brooklyn. it contained the newly designed parts and thus never experienced the high-pressure turbine problems that plagued the other three ships. by which it took full control of the ship for 20 or 22 years as though it owned it. and supervise the installation of turbines y When each ship was completed. y The #2 Brooklyn and the #3 Williamsburgh were put into service in late 1973 and late 1974. In April 1978. which are also subsidiaries of Seatrain.). y Each P operated under a bareboat charter. the limitation derives from the requirements of foreseeability and of privity.
. chartered the Williamsburgh. in a warranty action where the loss is purely economic. the Bay Ridge resumed its travels. Inc. and harm materializes. Bay Ridge.T.).T. Finally. A warranty action also has a built in limitation on liability. as a result of the #1 Stuyvesant's problems. (Seatrain).
Such a holding would eliminate the distinction between warranty and strict products liability. The manufacturer was liable whether or not it is negligent because ´public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. These cases attempt to differentiate between ´the disappointed users . These courts reject the Seely approach because they find it arbitrary that economic losses are recoverable if a P suffers bodily injury or property damage. only to the product itself o ´Since all but the very simplest of machines have component parts. They also find no inherent difference between economic loss and personal injury or property damage. Buick Motor Co. find that the safety and insurance rationales behind strict liability apply equally where the losses are purely economic...µ distributed without reinspection.µ  Property damage is covered because it is so akin to personal injury.µ y 5th count negligent installation damaged the propulsion system y The injury suffered failure of the product to function properly is the essence of a warranty action. including the majority of the COAs sitting in admiralty that have considered the issue.
Issues: y Whether public policy requires manufacturers to be liable in tort to buyers in a commercial transaction when a product malfunctions.. Further. o Reasons why should be left to K remedies o Tort concern with safety when injury is only to the product itself o Economic losses can be insured o Increased cost to the publicThe court did not reach the issue whether a tort cause of action can ever be stated in admiralty when the only damages sought are economic. whether or not the defect created an unreasonable risk of harm. because all are proximately caused by the D's conduct. ´The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for
The charterers were dissatisfied with product quality: the defects involved gradual and unnoticed deterioration of the turbines' component parts. they believe recovery for economic loss would not lead to unlimited liability because they think a manufacturer can predict and insure against product failure. but not if a product injures itself. y In this case there was no damage to other property.µ permit only the latter to sue in tort. injuring only the product itself and causing only economic losses? Analysis: y Public policy argument regarding products liability action o The paradigmatic products-liability action is one where a product ´reasonably certain to place life and limb in peril. the K party can recoup the benefit of its bargain y Whether injury to a product itself (courts differing opinions) o Majority approach: the case that created the majority land-based approach). and the manner in which the injury arose. held that a manufacturer's duty to make nondefective products encompassed injury to the product itself. held that preserving a proper role for the law of warranty precludes imposing tort liability if a defective product causes purely monetary harm. MacPherson v. the type of risk. and the endangered ones. [a contrary] holding would require a finding of ¶property damage· in virtually every case where a product damages itself. o Intermediate approach  Permits a products-liability action under certain circumstances when a product injures only itself. and the only risk created was that the turbines would operate at a lower capacity. causes bodily injury. o Court adopts Seely/majority approach  a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself. The determination has been said to turn on the nature of the defect.  The courts adopting this approach. o minority based approach.
In exchange. Subject to liability for the physical harm. whereas a tort action could subject the manufacturer to damages of an indefinite amount. but rather for personal injury damages. Monty and the car manufactured. the court saw no reason to intrude into the parties' allocation of the risk. The court affirmed the entry of judgment for the D. Monty skidded across median and ran into Bystander. As Bystander attorney I would sue. o Parties are able to set the terms of their own agreements. 402A. be a foreseeable result of the breach. Since a commercial situation generally does not involve large disparities in bargaining power. on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. o whether stated in negligence or strict liability. no products-liability claim lies in admiralty when the only injury claimed is economic loss. rather. All you have to prove is that manufacturer distributed into commerce a product that contained a dangerous defect that caused actual harm. the damages are limited to personal injury.economic loss is not arbitrary and does not rest on the ¶luck· of one P in having an accident causing physical injury. within limits. part 2b states that it applies even if the user or consumer did not buy the product himself. Also.
. by disclaiming warranties or limiting remedies. Rule: A manufacturer in a commercial transaction has no liability in tort for a product malfunctioning and only causing damage to the product itself and other economic losses
Problem 37 The axle on Monty·s car snapped while driving. You don·t have to establish negligence or privity. o A warranty action also has a built-in limitation on liability.The court held that the fourth count should have been dismissed. What is the best cause of action: negligence. the purchaser pays less for the product. or 2-314? Whom should you sue? o 402A is probably the best COA. so you wouldn·t be suing for merchantability of the product.  The manufacturer can restrict its liability.µ When a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong. Although Bystander was not a consumer. and the company who manufactured the axel. The distinction rests. such as lost profits. The limitation in a contract action comes from the agreement of the parties and the requirement that consequential damages.
y There are two relevant sources of law in the area of consumer protection: o 1. 108 is also triggered by a ´service contractµ y The definition for ´service contractµ defined in §101(8): o Service contract means a contract in writing to perform over a fixed period of time or for a specified duration. family. The Magnuson Moss Act (MM Act) o 2. written warranties (under MM Act) are a subset of express warranties (under UCC) o For example: oral warranties are warranties under Article 2. but you can limit their duration y How to reconcile this with §104(a)? o
. you cannot place any limitations on any implied warranties y Every warranty that does not meet the standards of §104 must be labeled a limited warranty o As a practical matter: Almost always. or household purposes o A written warranty is what triggers application of the MM Act  All written warranties under the MM Act are also express warranties under the UCC The counter is not true: all express warranties under the UCC are not necessarily written warranties under the MM Act y That is. but are not warranties under the MM Act o §103  This provision basically says that every written warranty on a consumer product must be labeled either as a full warranty or a limited warranty To be labeled a full warranty: y The warranty must meet the requirements of §104. you do not have to meet the requirements of §104. this objective of the MM Act has not been met. ´consumer product is: y §101(1): any tangible personal property which is distributed in commerce and which is normally used for personal. o For example: if you want to have a full warranty.Consumer protection³Magnuson Moss et al. Additionally. services relating to the maintenance or repair (or both) of a consumer product  Section 108(b) gives the permissible disclaimers Basically this says that you cannot completely disclaim implied warranties. consumer protection regulations are relevant y MM Act  States the basic idea of the MM Act§102: This section applies only if a consumer product is sold To require certain disclosure of information with regards to consumer warranties.  Section 108(a) is triggered if there is a written warranty But unlike the disclosure requirement of 102 and 103. every written warranty is a limited warranty  The reason for this is by labeling a written warranty as a limited warranty. y The idea is that consumers. o §108:  This is one of the most important provisions of the MM Act. provided with this information. will be able to understand what protections that they are getting o in real life.
you cannot fully disclaim an implied warrant. 223 CB) Issue: allegation that Gm had stated. though arbitration is allowed under the MM Act 110(b) This provision says that you can sue to enforce a written or implied warranty under MM Act y §110(d)(2) gives a reason why you would want to bring suit: o 110(d)(2) permits you to recover attorney·s fees  Under Article 2. in this particular case. that transmissions would perform in a way that they didn·t actually perform The consumers wanted to sue under the MM Act Rule: y In order to sue under §110(d)(1) of MM Act. o §110  
§104 only applies if you want to label your warranty a full warranty  If you are willing to label your warranty a limited warranty. Ruling: Court disagreed with the above argument y That is. 227 CB): Issue: whether a consumer is bound to arbitrate because of an arbitration agreement y The argument is that a requirement of a consumer to arbitrate is inconsistent with the MM Act. people try to bring their actions under MM Act³to recover attorney·s fees Skelton case (p. that the MM Act does allow for arbitration and does not limit resolution to things in §110(a) o However. the consumer was not bound to arbitrate. notice of the arbitration clause was not given to the consumer in a single written document. the Court here held that the arbitration clause had not been promulgated to the consumer in compliance with the MM Act  That is. in writing.  As a result. bringing suit for violation of a warranty will not allow a party to recover attorneys fees This is why in consumer actions. the consumer had to sue to find a breach of implied warranty (which was not here) or written warranty (which was not here) o §101(6) provides a definition of ´written warrantyµ:  A written warranty is a: Written affirmation of fact or promise (present in this case) Made in connection with consumer product (present in this case) Between buyer and seller (present in this case). but you can limit its duration Section 109 does not apply to consumer sales unless there is either a written warranty or a service contract o This section governs remedies Cunningham case (p. which: Relates to the nature of the
. then 108 applies That is.
there is no amount in controversy requirement  Saying that a product is ´newµ is not a written warranty under the MM Act Reason: the definition of a written warranty under the MM Act is really geared towards classic warranties that you get on consumer products y These warranties basically say that a product is warranted from defects §101(6) is a narrow definition for a written warranty. You can recover attorney·s fees under the MM Act  2. can be limited in certain circumstances  3.  To see if the dealer is careful or not careful to adopt the manufacturer·s warranty is left up to state law. that makes promises that the material is defect free (not met here). meet 101(6)  What if a car dealer doesn·t himself make a written warranty. Disclosure requirements in the MM Act Miscellaneous  The minimum amount in controversy requirement for suit under the MM Act is $50k But this is only if you want to sue in federal court If you want to sue in state court. or that makes promises that the material will meet a specified level of performance over a specified period of time (not met here) It seems like the writing here is not a written warranty under §101 Basic thing to take away from this case: y In order to sue for breach of ´written warrantyµ under the MM Act.  Examples of what is and is not a consumer product [under §101(1)]: 1. o But if the dealer is not careful and does actually adopt the manufacturer·s warranty. implied warranties cannot be completely disclaimed Durations of implied warranties. but rather conveys the manufacturer·s warranty to the buyer? Is the car dealer making a ´written warrantyµ under MM Act? §110(f) addresses this: y Says that if the dealer just passes along the manufacturer·s warranty. and saying that something is ´newµ does not. as defined by the MM Act. If a consumer product is sold with a written warranty. the dealer cannot be sued under the MM Act. it is a consumer product 2. If someone purchases a 27µ TV for her home? y Yes. If someone purchases a 27µ TV for the waiting room in her office at work? y This is likely a consumer product o But see regulation 700.o
workmanship (might be present here) or. however.1  This regulation asks if the product is ´normally usedµ (as opposed to the use in the particular case) The reason for the ´normal useµ requirement versus a ´particular useµ requirement is because the seller must be able to know whether or not it is governed by the MM Act before the sale occurs
. by itself. then the dealer might be liable. it must meet the definition of §101(6) Three important things about the MM Act:  1.
the aircraft is being bought in the particular case for personal purposes y But the aircraft is not normally used for consumer purposes o As a result. then the product is classified as being a consumer product. How should this person comply with the MM Act·s disclosure requirements?
. however.µ then no duration limits can be placed on the implied warranty Question in this situation: can you use a warranty registration card in a transaction with a written warranty subject to the MM Act? y §104(b)(1) provides guidance: o This section makes it sound like you cannot use a warranty registration card. Upon delivery. Does G have a claim under the MM Act? Because this appears to be a written warranty under the MM Act. (2) a ´warranty registration cardµ which stated that the buyer had to fill out the card and return it or the limited warranty would be void.7 of the regulations:  Warranty registration cards cannot be used for full warranties.11(c) This basically says that a post-formation written warranty is probably a service contract This means that you can sue under 110(d)(1) and recover attorney·s fees. this is t i a consumer product y Note that when it is unclear whether it is for personal or commercial use. G discovers a defect in the pot 30 days later. it may not meet the reuqrirements under the MM Act for written warranty definition. o But see 700.  Part 700. but they might be used for limited warranties A person sells consumer products through its web site. A does not receive a written warranty. The products are covered by written warranties within the meaning of the MM Act.
3. G buys a coffee pot. §103 requires that this warranty be labeled either ´fullµ or ´limited. A receives a written warranty o Is this a written warranty under MM Act?  Remember that though this can meet the requiremens under Article 2.11 of the regulations address the question: The basis of the bargain requirement for purposes of the MM Act must be given at the time the contract is entered into Note that this is a different definition of the ´basis of the bargainµ under Article 2  But look at section 700. If an investor purchases a $3M jet aircraft for flights to a vacation home? y Here. G neglected to return the card. When he opens the package. y This warranty is labeled as ´limitedµ because it is seeking to limit the duration of the implied warranty o Note that if the warranty was labeled ´full. he finds two documents: (1) a folded printed sheet containing a ´limited warrantyµ warranting the pot against defects in materials and workmanship for a period of 90 days and limiting the implied warranty of merchantability for a like period. Is a post-formation ´written warrantyµ valid under the MM Act? Suppose that A buys a consumer product y At the time of purchase.
2010 formation Exam Figure out situations where the merchant rule would apply and figure out a way to memorize that (SOF. Talk about each disclaimer separately i. Pay attention to the timing i. If you are a seller the Rinalidi/Zip Drive case would be good for you because the post sale disclaimer doesn·t void the warranty ii. Implied The second question is whether the disclaimer is valid 2.3: y Basically. WARRANTY REVIEW You are representing the seller --? What is the first question you want to ask? 1. Quality i. Did this come at the time the K was made or post sale (computer purchase where the The third question is if there is a limited remedy 3. Express 1.Read and find the advantages and disadvantages of having a K in the convention or out of the convention. P Argument: .3(c)³are these regulations close enough so that they apply to websites? A note about 702. ii. When did the buyer get the disclaimer. Disclaimer of Implied 1. This is not an implied warranty b. What kind of warranty has the seller given to the buyer a. A replace and repair is usually okay (sailboat case. car had problems and P sued for damages. **be very familiar with 2-316** a. this regulation says that a direct seller that makes no written warranties is not liable for manufacturer·s warranties unless the seller adopts it. (lemon law case)***did not read this case*** Facts: bought car. Valid only if it cam be construed consistently with the express warranty b. i. performance breach/remedies
Ventura v. breached in bad faith issue: limited remedy fails and can the seller still limit consequential damages
. One exception that the sellers are allowed to do is a certain amount of ´puffingµ. Warranty (remember the four situations) Economic law doctrine *** do not talk about title warranties as implied warranties****
Look at 702. Disclaimer of Expressed 1. It is difficult to disclaim. except in situations where circumstances suggest there was no warranty in the first place. Firm Offer. if it leaves the buyer without any remedy then it is not minimum and it would fail of its essential purpose. Under 2-719 the seller can limit the remedy but it is invalid if it fails its essential purpose. (buyer will likely argue this. Look at and know the line of cases (necessary language) 2.October 11. you need to find facts to rebute this) a. a. Ford Motor Corp. Title i. The limited remedy has to provide adequate limited remedy.MMA as it relates to the awarding of attorneys fees Warranties in International Sale of Goods .
2-305 Open Price Term 2. 2010 Chapter 4: Terms of The Contract Formation performance breach remedies ***There is a preference to find a K under Article 2. Today courts try to save a contract by implying reasonable terms where possible: ´gap fillingµ 2-305 ² 2-311 Problem 43:Is there a valid K where the price term is missing? Under 2-305 a K existed. or b. if the parties intended to K then that is what matters this is where the gap fillers come in**** ***One of the goals is to encourage commercially reasonable behavior and trade usage*** Gap Fillers At common law if parties left terms out of contract.
Warranties Disclaimers Limitation Defenses MMWA/Statute of Limitations October 13. The price is left to be agreed by the parties and they fail to agree. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith. courts could find n o legally enforceable agreement. Nothing is said as to price. In such a case the price is a reasonable price at the time for delivery if a. except that no quantity unreasonably
. What are the defenses anyone to blame a. When a price left to be fixed otherwise than by agreement of the party fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. however. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract.If you are Seller you want to adopt Pierce (independent approach). The price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. Where. The fourth question is what are the defenses 4. Requirements and Exclusive Dealings 1. The parties if they so intend can conclude a contract for sale even though the price is not settled. or c. 5. 4. 3. Gives the seller two shots to limit its damages. In such a case the buyer must return any goods already received or if unable to do so must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account. Privity c. P bad faith breach rendered the limit on consequential damages invalid. Breach b. Vouching in (2-607) Other proof issues -Causation and damages (if this is not there do not spend time writing about this) Other theories that affect warranty issues
ii. 2-306 Output.
and b) If the seller is authorized to send the goods he may ship them under reservation. and c) If delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received. 2-308 Absence of Specified Place for Delivery Unless otherwise agreed a) The place for delivery of goods is the seller·s place of business or if he has none his residence. Notice of Termination 1. Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. 2-310 Open Time for Payment or Running of Credit. and d) Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period. and
. 2) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer·s option and except as otherwise provided in subsections (1)C and (3) of 2-319 specifications or arrangements relating to shipment are at the seller·s option. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. 2-307 Delivery in Single Lot or Several Lots Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot. 3. but b) In a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place. 2. the other party in addition to all other remedies a. The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time. that place is the place for their delivery. 3) Where such specification would materially affect the other party·s performance but is not seasonably made or where one party·s cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming. Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. 2-311 Options and Cooperation Respecting Performance 1) An agreement for sale which is otherwise sufficiently definite to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties.disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. and c) Documents of title may be delivered through customary banking channels. 2-309 Absence of Specific Time Provisions. and may tender the documents of title. Authority to Ship Under Reservation Unless otherwise agreed a) Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery. Is excused for any resulting delay in his own performance. Any such specification must be made in good faith and w/in limits set by commercial reasonableness. 2. but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract.
Identification of the Goods 2-501 Insurable Interest in Goods. May also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods. 3. P bought the car for the increased price but protested. D agreed to deal. When the contract is made if it is for the sale of goods already existing and identified. But. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting. 4. Trial court found that no contract was formed because there was no express price on the purchase order. or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
. Court reversed and ordered a new trial. caveat emptor. b) Substantive unconscionability: unfairness in the terms of the resulting bargain. 5. the market value had increased. and the duty to read. or where a party recognizes the validity of a transaction and accepts benefits from it and then attempts to repudiate it. Such identification can be made at any time and in any manner explicitly agreed to by the parties. when goods are shipped. Landrum v. P gave D $100. y Professor divided ´unconscionabilityµ into: a) Procedural unconscionability: unfair conduct in the formation of a contract. Estoppel was not established: estoppel arises when a representation or act by one party causes the other to do an act which would operate to his detriment if the first party is allowed to complain. y He said that both should be required before a court can make a finding of 2-302 unconscionability. Manner of Identification of Goods 1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are non-conforming and he has an option to return or reject them. In the absence of explicit agreement identification occurs a. by the time the car came in. 6. the contract was otherwise complete: both parties had signed and P had tendered performance. or it may enforce the remainder of the contract without the unconscionable clause. In the name of freedom of contract. 2-305 establishes that even if the price was not expressed. the law will imply that a reasonable price was intended. D didn·t want to continue on w/the agreement. Devenport (1981) Facts: 1. P brought act for breach of contract & violations of Texas Deceptive Trade Practices ² Consumer Protection Act. P wanted to buy Indy Pace Car for sticker price. courts have permitted some rapacious merchants to insulate themselves in legally formidable contracts that have bordered on fraud and were filled with ´I win³you loseµ provisions adhesion contracts (because the lesser party had to adhere to the will of the stronger). Unconscionability 2-302 Unconscionable Contract of Clause (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract. marked or otherwise designated by the seller as goods to which the contract refers.b. b. he wanted to raise the price. If the contract is for the sale of future goods other than those described in paragraph C. 2. purpose and effect to aid the court in making the determination.
Comment 2 if identification in tentative or contingent. 2) If the contract left it up to W (implicitly or explicitly) then identification would occur when W makes the selection (picks it out and marks it as pertaining to the contract). Identification takes place on the conception of the unborn young (which in this case was also the date of the contracting). Does the identification occur on the date of contracting. then identification would occur when B made his selections. all alike. identification occurred when he packaged the fish w/ a label indicating they belonged to that particular buyer. the portion of the grain is part of an undivided share of identifiable bulk with presumably equal units. on the calf·s birth. in this case. Its warehouse contained 2 million. by nature or usage of trade. contracts to sell his entire catch for the coming season. the question of who bore the risk of loss was dominated by the notion of title. Does the identification occur on the making of the contract. Note: the comments state that the code favors the earliest possible identification of the goods. or when the calf is marked for shipping? 1) The identification was made on the date of contracting because the calf had already be conceived by then. Comment 3 makes clear that the attempt in these sections is to place the risk on that party who is more likely at the moment of loss to have insurance on the goods. Goods which are not fungible shall be deemed fungible for the purposes of this Act to the extent that under a particular agreement or document unlike units are treated as equivalents. If the contract stated that B would go by the warehouse and pick out the items. 2-501 1C o Carl agreed to sell ½ of the grain he stored in a place where it was mixed w/other grain. When the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within twelve months after contracting or for the sale of crops to be harvested within twelve months or the next normal harvest season after contracting whichever is longer. on the catching of the fish. a fisherman. 2) The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified. it is the general policy to resolve all doubts in favor of identification. the contract was made when Nancy was 2 months pregnant.  Comment 1 of 2-509 ´the underlying theory of these sections on the risk of loss is the adoption of the contractual approach rather than an arbitrary shifting of the risk with the ¶property· in the goodsµ. The UCC however eliminated all mention of title in considering risk of loss problems. Does identification occur on contracting or when the goods are picked out and marked as pertaining to this contract? 1) 1-201 [17] ´Fungibleµ with respect to goods or securities means goods or securities of which any unit is. 3) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law. the equivalent of any other like unit. o W contracted to sell 5000 widgets to a buyer.c. So. Problem 45 o Seller. o Circus contracted to sell the unborn calf of Nancy the elephant as soon as it was born. marked or otherwise designated by the seller. Does the identification occur on contracting or on segregation of the grain? 1) Identification occurs at the time of contracting. 
. Risk of Loss When There is No Breach  Prior to the adoption of the UCC. or on their packaging with a label indicating they belong to this particular buyer? 1) 2-501 1B when the contract is for future goods (not growing crops or unborn young) identification is when goods are shipped.
the risk of loss passes to the buyer on the buyer·s actual receipt of the goods. Did the risk of loss pass from J to B? (2-503) If B never picked up the piano and if it was destroyed in a fire 6 months after the sale. ´take itµ. and o Where the seller is not a merchant. B said she·d be back the next day. time and place for tender are determined by the agreement and this Article. On Mon.2-509 Risk of Loss in the Absence of Breach 1) Where the contract requires or authorizes the seller to ship the goods by carrier a. and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession. Who had the risk of loss? o J has risk of loss. has no control of the goods and it is extremely unlikely that he will carry insurance on goods not yet in his possession. If it does not require him to deliver them at a particular destination. J said. 2-103) of the goods if the seller is a merchant. what result? (2-709 1a) 2-503 Manner of Seller·s Tender of Delivery 1) Tender of delivery requires that the seller put and hold conforming goods at the buyer·s disposition and give the buyer any notification reasonably necessary to enable him to take delivery. otherwise the risk passes to the buyer on tender of delivery. The buyer. Tender must be at a reasonable hour. but
. and the piano was destroyed. this section sets out the rules as to when the risk of loss passes to the buyer in this situation) a. the risk of loss passes t the buyer when the goods are there duly so tendered as to enable the buyer to take delivery. but b. the risk of loss passes to the buyer on his receipt(means taking physical possession of them. He paid price in full and J promised delivery on the next Mon. he is NOT actually responsible for them getting where they are going) (section 2-505). After his receipt of a non-negotiable document of title or other written direction to deliver. Problem 46 J decided to have a garage sale to clean up her home. Problem 46 W bought car from J. the car was ready and J called W to come ´take it awayµ. J who was to make actual delivery at his own place continues meanwhile to control the goods and can be expected to insure his interest in them. 3) In any case not within subsection 1 or 2. W said he was busy and that he would pick it up the next day. That night the car was stolen from the lot due to no fault of J who had taken reasonable precautions against such a thing. the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (this is shipment contract. as provided in subsection 4b of section 2-503. On his receipt of a negotiable document of title covering the goods. or c. J agreed. o Where the seller is a merchant. the risk of loss passes to the buyer(In many contracts. (applies only when paragraph 1 and 2 do not) 4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this Article on sale on approval (section 2-327) and on effect of breach on risk of loss (section 2-510)
The general rule on the transfer of the risk of loss is that. In the course of the sale. That night J·s home burned to the ground. On acknowledgment by the bailee of the buyer·s right to possession of the goods. B offered J $200 for the piano. If it does require him to deliver them at a particular destination and the goods are there duly tgsvzcendered while in the possession of the carrier. The manner. (this is a destination contract. on the other hand. seller has an added layer of obligation and takes ultimate responsibility that the goods will get if not literally into Buyer·s hands as least to the ¶particular destination·) 2) Where the goods are held by a bailee(a person engaged in the business of storing goods for hire) to be delivered without being moved. the seller must arrange for the warehouse company (bailee) to change its records to show the buyer as the new owner. W had to take actual receipt of the car. risk of loss passes to the buyer when the seller tenders delivery. absent contrary agreement. or b. and in particular a.
17. a clerk at the warehouse noted the transfer immediately on the books but did not send receipt until Jan 17 or 18. Of goods accepted or of conforming goods lost or damages w/in a commercially reasonable time after risk of their loss has passed to the buyer (Once the risk of loss has shifted to the buyer. He must tender all such documents in correct form. The net proceeds of nay such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
. Jason argues that the risk transferred on the 13th because he lost all rights to the goods and should not bear the risk of loss. 2. If the risk of loss transferred to E before the fire. Case can·t be decided by reference to what the parties knew or didn·t know. 24. 3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (section 2-610). and b. Unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods. Inc. Inc. Facts: 1. Tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer·s right to possession of the goods. b. can·t be decided on the basis of which party could have insured against the loss. Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions. but b. 2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. except as provided in Article with respect to bills of lading in a set. defendant maintains that acknowledgment must be to the buyer. then Jason·s is entitled to the contract price. together with any incidental damages under the next section. E did not receive notice of the transfer till Jan. Tender to the buyer of a non-negotiable document of title or of a written direction to the bailee to deliver is sufficient tender unless the buyer seasonably objects. The goods were destroyed in a fire on Jan.
2-709 1A Action for the Price 1) When the buyer fails to pay the price as it becomes due the seller may recover. seller is entitled to payment of the price).2) 3)
b. E owned them and would be covered by insurance. Jason·s Foods. a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section. (1985) Issue: Whether acknowledgment to the seller complies with the statute. and receipt by the bailee of notification of the buyer·s rights fixes those rights as against the bailee and all third persons. Jan 13 Jason·s requested the transfer be made to E·s account. Tender through customary banking channels is sufficient and dishonor of a draft accompanying the documents constitutes non-acceptance or rejection. of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing. v. and a refusal by the bailee to honor the document or to obey the direction defeats the tender. Where the seller is required to deliver at a particular destination tender requires that he comply w/subsection 1 and also in any appropriate case tender documents as described in subsections 4 and 5 of this section Where goods are in the possession of a bailee and are to be delivered w/o being moved a. Peter Eckrick& Sons. the price a. 3. Jason·s on the other hand did not own them and therefore would not be insured for the loss. but risk of loss of the goods and of any failure by the bailee to honor the non-negotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction. Where the contract requires the seller to deliver documents a.
(Comment 5 of 2-503 says that this is the normal type of contract) y Destination Contract: the parties agree that the goods must be delivered by the carrier before the risk of loss passes from seller to buyer. same as C. except buyer doesn·t agree to pay for insurance because usually a blanket insurance policy already covers goods the buyer owns. y Ex-ship = ´off the shipµ 2-504 Shipment by Seller Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination.B.B.B. (this is the variant type) y F.F.O. and (c) promptly notify the buyer of the shipment. Jason argues that it was sufficient to make the acknowledgment to the seller (part B of 2 doesn·t say to whom the acknowledgment must be made).S. can indicate a shipment or destination contract. (always a shipment K) = ´cost and freightµ. Failure to notify the buyer under paragraph C or to make a proper contract under paragraph A is a ground for rejection only if material delay or loss ensues. freightµ. one would think they would have said so.I. the provisions on manner of tender of delivery apply on the point of transfer of risk. insurance. also. BUT. then unless otherwise agreed he must (a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case. but the risk of loss did not pass until the transfer was ´acknowledgedµ. (always a shipment K)= ´cost. and (b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade.B.I. Section 2-509 (2) separates title from risk of loss. and F.A. and the freight charge.O. Title to the ribs passed to E when the warehouse made the transfer on its books from Jason·s account to E·s. the insurance premium. 2010 Formation performance breach/remedies Delivery Terms (only need to remember shipment vs. the place of shipment. = ´free along-sideµ y C.O.F. always indicates a shipment contract. or
. (which means ¶free on board·) at a named place.O. Comment 4 states ´where the agreement provides for delivery of the goods as b/w the buyer and seller w/o removal from the physical possession of the bailee. = ´free on boardµ.µ October 19. the risk of loss transfers at the named place. is a delivery term under which a. here buyer agrees to pay insurance y C & F. the seller must at that place ship the goods in the manner provided in this Article 2-504 and bear the expense and risk of putting them into the possession of the carrier. Terms 1) Unless otherwise agreed the term F.S.4. always indicates a shipment contract. 5.A. 2-319 F. 6. and not complicate life by requiring ´acknowledgmentµ. if the draftsmen of B had meant the risk of loss to pass when the transfer was made. When the term is F. destination not all the terms) **exam will not have ships** y Shipment Contract: in sales contracts the parties often agree that the seller need only get the goods to the carrier and then the buyer will take the risk of loss. even though used only in connection with the stated price. o FOB(Seller location)=Shipment o FOB (buyer location)= Destination y F. means the stated price includes the cost of the item.
means that the price so includes cost and freight to the named destination. the term CIF destination or its equivalent requires the seller at his own expense and risk to a. Prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract.F.B.O.I. Forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer·s rights. 4) Under the term F. vessel at a named port. of a kind and on terms then current at the port of shipment in the usual amount. but after final adjustment of the price a settlement must be made with commercial promptness. shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.B.O. Load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for.I.S. vessel or F. and b.S or F. 4) Under the term CIF or C&F unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents. is a delivery term under which the seller must a. unless otherwise agreed the seller must reasonably estimate the price. vessel. He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment. the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article 2-503 c. 2) Unless otherwise agreed and even though used only in connection with the stated price and destination.F. ´Payment on Arrivalµ.F. the seller must in addition at his own expense and risk load the goods on board. The term C&F or C. in the currency of the contract. including when the term is F. the place of destination. and C & F Terms 1) The term C. When either (a) or (b) them term is also F.
. 2-321 CIF or C&F: ´Net Landed Weightsµ. and d. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. the loading berth of the vessel and in an appropriate case its name and sailing date. but the seller may add to the price the amount of the premium for any such war risk insurance.A.O. The payment due on tender of the documents called for by the contract is the amount so estimated. The seller may treat the failure of needed instructions as a failure of cooperation under this Article 2-311. 3) Unless otherwise agreed in any case falling w/in subsection 1a or c or subsection 2 the buyer must seasonably give any needed instructions for making delivery. 3) Unless otherwise agreed the term C&F or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a CIF term except the obligation as to insurance. car or other vehicle.O. ´delivered weightsµ. Put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination.O. and b.A. vessel the buyer must name the vessel and in an appropriate case the seller must comply w/the provisions of this Article on the form of bill of lading (2-323) 2) Unless otherwise agreed the term F. If the term is F.B.b. 1) Where the price is based on or is to be adjusted according to ´net landed weightsµ.B. including any war risk insurance. Warranty of Condition on Arrival Under a contract containing a term CIF or C&F. and c.B. even though used only in connection with the stated price. Obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading. Obtain a policy or certificate of insurance. 2-320 C. ´out turnµ quanitity or quality or the like.A. At his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer. and e. When the term is F.
2-323 Form of Bill of Lading Required in Overseas Shipment. the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded in board or. and (b) where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time. (destination contract) Problem 49 S in MI contracted to sell and ship 50 T·s to B in AL. the risk shifted to the buyer. this is a shipping contract. 2-324 No Arrival. Must B pay anyway? What if the delivery term had been ´ex-ship SS Seaworthy. no saleµ or terms of like meaning. the dock collapsed. but before they are loaded on board the railroad car that was to take
. and b. Due tender of a single part is acceptable w/in the provisions of the Article on cure of improper delivery (2-508 subsection 1). shrinkage and the like in transportation but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss. Savannahµ and the boxes had been properly unloaded just before the dock collapsed. received for shipment. NYCµ. (a) the seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but he assumes no obligation that the goods will arrive unless he has caused the non-arrival. but if the goods are lost delivery of the documents and payment are due when the goods should have arrived. unless otherwise agreed. if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate. Once the seller put the goods in the hands of the carrier. Even if the agreement expressly requires a full set a. otherwise only one part of the bill of lading need be tendered. unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set. the buyer may proceed as if there had been casualty to identified goods (2-613) Problem 48 Seller in NY contracted to sell 80 boxes to B in Ga. financing or shipping practices characteristic of international deep water commerce. 2) Under such a term unless otherwise agreed a. The seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods. 3) A shipment by water or by air or a contract contemplating such shipment is ´overseasµ insofar as by usage of trade or agreement it is subject to the commercial.  Part two: the buyer still assumes the risk of loss because the ex-ship section specifies that the risk transfers when the goods are properly unloaded. in the case of a term CIF or C&F. The risk of loss does not pass to the buyer until the goods leave the ship·s tackle or are otherwise properly unloaded. and b. Under 2-319(2) the seller need only deliver and tender a receipt. Delivery term was ´$1800 FAS SS Seaworthy. Even though the full set is demanded. 2-322 Delivery ´Ex-shipµ 1) Unless otherwise agreed a term for delivery of goods ex-ship (from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged. 2) Where in a case w/in subsection 1 a bill of lading has been issued in a set of parts. 3) Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible. S delivered the goods to the dock alongside the ship and received a bill of lading from the ship as a receipt. Before the boxes could be loaded. destroying all vehicles after the carrier has received them. Assume lightning strikes. and everything thereon disappeared into the water. No Sale Term Under a term ´no arrival.2) An agreement described in subsection 1 or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration. Would 2-322 make B pay?  Part one. ´overseasµ 1) Where the contract contemplates overseas shipment and contains a term CIF or C&F or FOB vessel.
 Buyer. this is a shipment contract. Cook Specialty Co. a hurricane destroyed all five cars and their contents. but before he could do so. However. this is a shipment contract. risk passed. however. v. The dispatcher agreed to divert one of the cars to GK. while in transit to P·s warehouse good was damaged. 2010 Formation ² Performance breach/damages pl
. (1981) Facts: Problem 51 CSIG Articles 67-68.  Seller. Who bears risk of loss?  2-501 identification problem we don·t know what box car the items were in. Upon signing of the K the buyer has assumed the risk of loss. Holding. Illinois.them to AL. P got $5000 from carrier·s insurance but the machine was worth $28000. (d) Risk of loss passes to the buyer when the goods are duly delivered to the carrier. Schrlock(1991) Facts: (a) Terms: FOB MSI·s warehouse in Schaumburg. this is a shipment contract however the goods never reached the RR cars in Detroit so the risk never passed. court held that ´reasonableness of shipper·s conductµ regards the mode of transportation selected.just finished loading 5 boxcars of product on board the cars of an independent RR carrier when he received notice from PPI·s sales department that it agreed to sell one of them to GKFS ´FOB seller·s processing plantµ. Buyer bore the risk of loss in transit. Commercially reasonable buyer would purchase insurance which is why this area of law doesn·t have much litigation. (B) the contract said FOB railroad cars Detroit. Rheinberg-Kellerei GmbH v. if seller met all the requirement of 2-320 then the risk shifted to the buyer. Inc. Problem 50 Dispatcher of PP. 2010 (didn·t take notes Performance of the K) October 27. (C) the contract said CIF Birmingham?  Buyer . (b) Carrier took possession of goods from warehouse. Vineyard Wine Co. Who had the risk of loss if (a) the contract said FOB Detroit. The risk is never passed to the buyer because there was no identification of goods. (e) P argues that the goods were not duly delivered because seller did failed to ensure that carrier had sufficient insurance coverage to compensate P for a loss in transit. goods were delivered to the carrier. seller must satisfy 2-504. Problem 52 October 25. (c) Carrier was negligent.
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