Chapter 18 Notes Flashcards
1
Q
To transfer and deliver or tender delivery the goods as stated in the contract. (conforming)
A
Basic Obligation of the Seller or Lessor
2
Q
Accept and pay for the conforming goods.
A
Basic Duty of the Buyer or Lessee
3
Q
Include those specified by the agreement, by custom, and by the Uniform Commercial Code (UCC).
A
Duties and Obligations
4
Q
Can never be disclaimed; “every contract ir duty within this Act imposes an obligation of good faith in its performance or enforcement.”
A
UCC’s Good Faith Provision
5
Q
Honesty in fact.
- Applies to both parties to a sales contract and provides a framework for the entire agreement.
A
Good Faith
6
Q
Honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
A
Good Faith for Merchants
7
Q
Goods that confrom to contract specifications in every way.
A
Conforming Goods
8
Q
A seller’s or lessor’s act of placing conforming goods at the disposal of the buyer or lessee and providing whatever notification is reasonably necessary to enable to buyer or lessee to take delivery.
- Must occur at a reasonable hour and in a reasonable manner.
- Must be tendered in a single delivery, unless the parties have agreed on installment.
A
Tender of Delivery
9
Q
Delivered in several lots.
A
Installment
10
Q
UCC provides for a place of delivery only if the contract does not indicate the place where the buyer or lessor will take possession. If contract does not indicate where the goods will be delivered, the place for delivery will be:
- The seller’s place of business
- The seller’s residence, if the seller has no business location.
- The location of the goods, if both parties know at the time of contracting that the goods are located somewhere other than the seller’s business.
A
Place of Delivery
11
Q
The seller fulfills the obligation to deliver the goods through either a shipment contract or destination contract.
A
Delivery Via Carrier
12
Q
The seller must do the following:
- Put the good in the hands of the carrier.
- Make a contract for their transportation that is reasonable according to the nature of the goods and their value.
- Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain posesession of the goods from the carrier.
- Promptly notify the buyer that shipment has been made.
A
Shipment Contracts
13
Q
- The seller fails to notify the buyer that shipment has been made
- A material loss of the goods or a significant delay results
A
Buyer can Reject the Shipment Only if:
14
Q
The seller must give the buyer appropriate notice about the delivery and hold the goods at the buyer’s disposal for a reasonable length of time.
- Must also provide the buyer with any documents of title necessary to enable to buyer to obtain delivery from the carrier.
A
Destination Contracts
15
Q
The sellor or lessor has an obligation to ship or tender conforming goods, and the buyer or lessee is required to accept and pay for the goods according to the terms of the contract. Under the common law, the seller is obligated to deliver goods that conformed to the terms of the contract in every detail.
- UCC preserves this rule by stating that if the goods or tender of delivery fail in any respect to conform to the contract, the buyer or lessee has the right to accept the good, reject the entire shipment, or accept part and reject part.
- Corollary to this rule- if the good conform in every respect, the buyer or lessee does not have a right to reject the goods.
A
The Perfect Tender Rule
16
Q
- Agreement of the parties
- The right to cure
- Substitution of carriers
- Installment contracts
- Commercial impracticability
- Commercial impracticability and partial performance
- Destruction of identified goods
- The right of assurance
- The duty of cooperation
A
Exceptions to the Perfect Tender Rule
17
Q
If parties have agreed, for instance, that defective goods or parts will not be rejected if the seller or lessor is able to repair or replace them within a reasonable period of time, the perfect tender rule does not apply.
A
Agreement of the Parties
18
Q
Refers to the right of the seller or lessor to repair, adjust, or replace defective or nonconforming goods. Can attempt to cure if the following are true:
- A delivery is rejected because the gods were noconforming
- The time for performance has not yet expired.
- The seller or lessor provides timely notice to the buyer or lessee of the intention to cure.
- The cure can be made within the contract time of performance.
A
The Right to Cure
19
Q
Even if this happens, the seller or lessor can still cure if he or she had reasonable grounds to believe tha the nonconforming tender would be acceptable to the buyer or lessee.
A
Time for Performace has Expired- Right to Cure
20
Q
A seller or lessor may tender nonconforming goods with this. This may also serve as “reasonable grounds” for the seller or lessor to believe that the buyer or lessee will accept the nonconfroming tender.
A
Price Allowance (Discount)- Right to Cure
21
Q
To reject, the buyer or lessee must inform the seller of the particular defect. If the defect is not disclosed, and if it is one that the seller or lessor could have cured, the buyer or lessee cannot later assert the defect as defense.
- Generally buyers and lessees must act in good faith and state specific reasons for refusing to accept goods.
A
The Right to Cure Substantially Restricts the Right of the Buyer or Lessee to Reject Goods
22
Q
In a situation where an agreed-on manner of delivery may become impracticable or unavailable through no fault of either party, if a commercially reasonable substitute is available, this substitute must be used and will constitute sufficient tender to the buyer.
- The seller or lessor is required to arrance for the substitute carrier and normally is responsible for any additional shipping costs (unless the contract states otherwise).
A
Substitution of Carriers
23
Q
A contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for seprately.
- Buyer or lessee can reject this only if the nonconformity substantially impairs the value of the installment and cannot be cured.
- If the buyer or lessee failts to notify the seller or lessor of the rejection, and subsequently accepts a nonconforming installment, the contract is reinstated.
A
Installment Contracts
24
Q
One or more of the nonconforming installments substantially impair the value of the whole contract.
- UCC strictly limits rejection of cases of substantial nonconformity.
A
The Entire Intallment Contract is Breached Only When:
25
Occurrences unforseen by either party when a contract was made may make performance commercially impracticable.
* Rule of perfect tender no longer applies
* Seller or lessor must notify the buyer or lessee as soon as practicable that there will be a delay or nondelivery.
* This doctrine does not extend to problems that could have been forseen. (such as cost rising due to inflation).
* The nonoccurrence of the contingency must have been a basic assumption on which the contract was made.
Commercial Impracticability
26
An unforseen event only partially affects the capacity of the seller or lessor to perform. The seller or lessor can partially fulfill the contract but cannot tender total performance.
* The seller or lessor is required to distribute any remaining goods or deliveries fairly and reasonably among the parties to whom it is contractually obligated to deliver the goods.
* The buyer or lessee must receive notice of the allocation and has the right to accept or reject it.
Commercial Impracticability and Partial Performance
27
If the goods were identified at the time the contract was formed, the parties are excused from performance.
* If the goods are partially destroyed, the buyer or lessee can inspect them and either treat the contract as void or accept the goods with a reduction of the contract price.
Destruction of Identified Goods
28
If one party to a contract has "reasonable grounds" to believe that the other party will not perform as contracted, he or she may "demand adequate assurance of due performance" from the other party.
* Demand must be made in writing or electronic record.
* Until such assurance is received, he or she may "suspend" further performance without liability.
* Reasonable grounds- determined by commercial standards.
* If not forthcoming within a reasonable time (not to exceed 30 days), the failure to respond may be treated as a repudiation of the contract.
The Right of Assurance
29
The UCC provides an exception to the perfect tender doctrine if one party fails to cooperate. When cooperation is not forthcoming, the other party can suspend her or his own performance without liability and hold the uncooperative party in breach or proceed to perform the contract in any reasonable manner.
The Duty of Cooperation
30
The main obligation of the buyer or lessee under a sales or lease contract is to pay for the goods tendered in accordance with the contract.
* Payment
* Right of inspection
* Acceptance
* Partial acceptance
Obligations of the Buyer or Lessee
31
In the absence of any specific agreement, the buyer or lessee must make payment at the time and place the goods are received.
* When sale is made on credit- buyer is obligated to pay according to the specified credit terms, not when the goods are received. The credit period usually begins on the date of shipment.
* Lease agreement- a lessee must make the lease payment that was specified in the contract.
* can be made by any means agreed on by the parties- cash, or any other method generally acceptable in the commercial world.
* If seller demands cash- buyer must be given reasonable time to obtain it.
Payment
32
Unless the parties otherwise agree, or for C.O.D. (collect on delivery) transactions, the buyer or lessee has an absolute right to inspect the goods before making any payment.
* If goods are not what were ordered- the buyer or lessee has no duty to pay.
* An opportunity for inspection is therefore a condition precedent to the right of the seller or lessor to enforce payment.
* What is reasonable is determined by custom of the trade, past practices of the parties
* The buyer bears costs of inspecting the goods but if the goods are rejected because they are not conforming, the buyer can recover the costs of inspection from the seller.
Right of Inspection
33
After having had a reasonable opportunity to inspect the goods, the buyer or lessee can demonstrate acceptance in any of the following ways:
1. The buyer or lessee indicates (by words or conduct) to the seller or lessor that the goods are conforming or that he or she will retain them in spite of their nonconformity.
2. The buyer or lessee fails to reject the goods within a reasonable period of time
3. In sales contracts, the buyer performs any act inconsistent with the seller's ownership.
Acceptance
34
If some of the goods delivered do not conform to the contract and the seller or lessor has failed to cure, the buyer or lessee can make a partial acceptance.
* Same is true if the nonconformity was not reasonably discoverable before acceptance.
* A buyer or lessee cannot accept less than a single commercial unit.
Partial Acceptance
35
A unit of goods that, by commercial usage, is viewed as a "single whole" that cannot be divided without material impariment of the character of the unit, its market value, or its use.
* Can be a single article, a set of articles, a quantity, or any other unit treated in the trade as a single whole for purposes of sale.
Commercial Unit
36
* Possible responses to repudiation
* A repudiation by me retracted
Anticipatroy Repuidation
37
The nonbreaching party has a choice of two responses:
1. Treat the repudiation as a final breach by pursuing a remedy.
2. Wait to see if the repudiating party will deicde to honor the contract despite the avowed intention to renege (go back on a promise).
* In either situation, the nonbreaching party may suspend performance.
Possible Responses to Repudiation
38
The UCC permits the breaching party to "retract" his or her repudiation (subject to some limitations).
* Can be done by any method that clearly indicates the party's intent to perform.
* Once retration is made, the rights of the repudiating party under the contract are reinstated.
* There can be no retraction if since the tie of the repudiation, the other party has cancelled or materially changed position or otherwise indicated that the repudiation is final.
A Repudiation May be Retracted
39
These remedies range from retaining the goods to requiring the breaching party's performance under the contact. The general purpose of these remedies is to put the aggrieved party "in as good a position as if the other party had fully performed."
* Remedies under the UCC are cumulative
* A party still may not recover twice for the same harm.
Remedies for Breach
40
An innocent party to a breached sales or lease contract is not limited to one exclusive remedy.
Cumulative
41
Depend on the circumtances at the time of the breach. Relevant factors include which party has possession of the goods, whether the goods are in transit, and whether the buyer or lessee has rejected or accepted the goods.
Remedies of the Seller or Lessor
42
If the breach occurs before the goods have been delivered to the buyer or lessee, the seller or lessor has the right to persue:
1. Cancel (rescind) the contract
2. Withold delivery of the goods
3. Resell or dispose of the goods and sue to recover damages.
4. Sue to recover the purcahse price or lease payments due.
5. Sue to recover damages for the buyer's nonacceptance.
When the Goods are in Possession of the Seller or Lessor
43
If the buyer or lessee breaches the contract, the seller or lessor can choose to cancel (rescind) the contract. The seller must notify the buyer or lessee of the cancellation, and at that point all remaining obligations of the seller or lessor are discharged.
* Buyer or lessee is not discharged of obligations, she or he is in breach and the seller or lessor can pursue remedies available under UCC for breach.
The Right to Cancel the Contract
44
In general, sellers or lessors can withold or discontinue performance of their obligations under sales or lease contracts when the buyers or lessees are in breach.
* True whether the buyer or lessee has wronfully rejected or revoked acceptance of a payment, or repudiated the contract.
* Seller or lessor can also refuse to deliver the goods to a buyer or lessee who is insolvent, unless the buyer or lessee pays in cash.
The Right to Withold Delivery
45
When a buyer or lessee breaches or repudiates the contract while the seller or lesser is still in possession of the goods, the seller or lessor can resell or dispose of the goods.
* Resale can be in good faith and in a commercially reasonable manner.
* Seller must give buyer a reasonable notice of resale, unless the goods are perishable or will rapidly decline in value.
* Seller or lessor can retain any profits made as a result of a sale or disposition and can hold the buyer or lessee liable for any loss.
The Right to Resell or Dispose of the Goods
46
Seller can recover any deficiency between the resale price and the contact price, and can also recover incidental damages (costs to the seller as a result of the breach).
In Sales Transactions- Resale or Disposal
47
The lessor can lease the goods to another party and recover damages from the original lessee. Damages include any unpaid lease payments up to the time the new lease begins. The lessor can also recover any deficiency between the lease payments due under the original lease and those due under the new lease, along with incidental damages.
In Lease Transactions- Resale or Disposal
48
The seller or lessor can do either:
1. Cease manufacturing the goods and resell them for scrap or salvage value.
2. Complete the manufacture, resell or dispose of the goods, and hold the buyer or lessee liable for any difference between the contract price and the sale.
* In choosing between these two alteratives, the seller or lessor must exercise resonable commercial judgement to mitigate the loss and obtain maximum value from the unfinished goods.
When Goods are Unfinished at the Time of the Breach- Resale and Disposal
49
Under the UCC, an unpaid seller or lessor can bring an action to recover the purcahse price or payments due under the lease contract, plus incidental damages.
* If seller or lessor is unable to resell or dispose of goods and sues for the contract price or lease payments due, the goods must be held for the buyer or lessee.
* The seller or lessor can resell or dispose of the goods at any time before collecting the judgement from the buyer or lessee.
* If the goods are resold, the new proceeds from teh sale must be credited to the buyer or lessee because of the duty to mitigate damages.
The Right to Sue to Recover the Purcahse Price or the Lease Payments Due
50
If the buyer or lessee repudiates a contract or wrongfully refuses to accept the goods, a seller or lessor can bring an action to recover the damages sustained.
* Ordinarily, damages equals the difference between the contract price or lease payments and the market price or lease payments at the time and place of tender fo the goods, plus incidental damages.
* When ordinary measure is insufficient to put the seller or lessor in the same position as the buyer's or lessee's performance would have, the UCC provides al alternative. The proper measure is the lost profits of the seller or lessor, including a reasonable allowance for overhead and other expenses.
The Right to Sue to Recover Damages for the Buyer's Nonacceptance
51
If the seller or lessor has delivered the goods to a carrier or a bailee, but the buyer or lessee has not yet received them, the goods are said to be in transit. In limited situations, the seller or lessor can prevent goods in transit from being delivered to the buyer or lessee:
* insolvency and breach
When the Goods are in Transit
52
If the seller or lessor learns that the buyer or lessee is insolvent, the seller or lessor can stop the carrier or bailee from delivering the goods regardless of the quantity of good shipped.
* If buyer or lessee is in breach but is not insolvent, the seller or lessor can stop delivery of goods in transit only if hte quantity shipped is at least a carload, a truckload, a planeload, or a larger shipment.
Effect of Insolvency and Breach
53
* Sellor or lessor must timely notify the carrier or other bailee that the goods are to be returned or held for the seller or lessor.
* If carrier has sufficient time to stop delivery, it must hold and deliver the goods according to the directions of the seller or lessor.
* The seller or lessor is liable to the carrier for any additional costs incurred.
Requirements for Stopping Delivery
54
1. The buyer or lessee obtains possession of the goods.
2. The carrier or the bailee acknowledges the rights of the buyer or lessee in the goods (by reshipping or holding the goods for the buyer or lessee)
3. A negotiable document of title covering the goods has been properly transferred to the buyer (in sales transactions only), giving the buyer ownership rights in the goods.
* Once the seller or lessor reclaims the goods in transit, she or he can persue the remedies allowed to sellers and lessors when the goods ar ein their possession.
The Sellor or Lessor has the Right to Stop Delivery of the Goods Until the Time when the Following Occurs:
55
When the buyer or lessee breaches the contract while the goods are in his or her possession, the seller or lessor can sue.
* The seller or lessor can sue to recover the purchase price of the goods or the lease payments due, plus incidental damages.
When the Goods are in Possession of the Buyer or Lessee
56
* In a sales contract- if the buyer has received the goods on credit and the seller discovers that the buyer is insolvent, the seller can demand return of the goods.
* Ordinarily, the demand must be made within 10 days of the buyer's receipt of the goods.
* Seller's right to reclaim goods is subject to the rights of a good faith purchaser or other subsequent buyer in the ordinary course of business who purcahses the goods from the buyer before the seller reclaims them.
* Lessor- if the lease is in default, the lessor may reclaim leased goods that are in the lessee's possession.
In Some Situations, A Seller may Also Have a Right to Reclaim the Goods from the Buyer
57
When the seller or lessor breaches the contract, the buyer or lessee has numberous remedies available under the UCC. These remedies depends on the circumstances existing at the time of the breach. Relevant factors include whether the seller has refused to deliver conforming goods or delivered nonconforming goods.
Remedies of the Buyer or Lessee
58
1. Cancel (rescind) the contract
2. Obtain goods that have been paid for if the seller or lessor is insolvent
3. Sue to obtain specific performance if the goods are unique or damages are an inadequate remedy.
4. Buy other goods (obtain cover) and obtain damages from the seller.
5. Sue to obtain identified goods held by a third party (replevy goods).
6. Sue to obtain damages.
When the Seller or Lessor Refuses to Deliver the Goods (or Buyer or Lessee Rightfully Rejected the Goods).
59
When a seller or lessor fails to make proper delivery or repudiates the contract, the buyer or lessee can cancel, or rescind, the contract. On notice of the cancellation, the buyer or lessee is relieved of any further obligations under the contract but retains all rights to other remedies against the seller.
The Right to Cancel the Contract
60
If a buyer or lessee has made a partial or full payment for the goods that are in the possession of a seller or lessor who is or becomes insolvent, the buyer or lessee has a right to obtain the goods, for this right to be exercised, the goods must be identified to the contract, and the buyer or lessee must pay any remaining balance of the price to the seller or lessor.
The Right to Obtain Goods on Insolvency
61
A buyer or lessee can obtain specific performance when the goods are unique and the remedy at law is inadequate. Ordinarily, a successful suit for monetary damages is sufficient to place a buyer or lessee in the position he or she would have occupied if the seller or lessor had fully performed.
* For unique items- monetary damages may not be sufficient. Equity requires that the seller or lessor perform exactly by delivering the goods identified to the contract (specific performance).
The Right to Obtain Specific Performance
62
Purchasing or leasing other goods to subsitute for those due under the contract.
* This option is available when the seller or lessor repudiates the contract or fails to deliver the goods, or when a buyer or lessee has rightfully rejected goods or revoked acceptance.
* A buyer or lesee must act in good faith and without unreasonable delay.
The Right to Obtain Cover
63
1. The difference between the cost of cover and the contract price (or lease payments).
2. Incidental damages that resulted from the breach.
3. Consequential damages to compensate for indirect losses (such as lost profits) resulting from the breach that were reasonably forseeable at the time of contract formation.
* Buyers and lessees are not required to cover, and failure to do so will not bar them from using any other remedies available under the UCC.
* A buyer or lessee who fails to cover may not be able to collect consequential dmages that he or she could have avoided by purchasing or leasing substitute goods.
After Obtaining Subsitute Goods, the Buyer or Lessee can Recover the Following from the Lessor or Seller:
64
An action that can be used by a buyer or lessee to recover identified goods from a third party, such as a bailee, who is wronfully withholding them.
* Buyers and lessees usually must show that they are unable to cover for the goods after a reasonable effort.
The Right to Replevy Goods
65
If the seller or lessor repudiates the contract or fails to deliver the goods, the buyer or lessee can sue for damages.
* For the buyer (or lessee) - measure of recovery is the difference between the contract price (or lease payments) and the market price (or market lease payments) at the time the buyer (or lessee) learned of the breach.
* Buyer or lessee can also recover incidental and consequential damages, less the expenses that were saved as a result of the breach.
The Right to Recover Damages
66
Determined at the place where the seller or lessor was supposed to deliver the goods.
Market Price and Market Lease Payments
67
The buyer or lessee has several remedies availabe under the UCC.
* The buyer or lessee can reject the goods, revoke acceptance of the goods, and recover damages for accepted goods.
When the Seller or Lessor Delivers Nonconforming Goods
68
If either the goods or the tender of the goods by the seller or lessor fails to conform to the contract in any respect, the buyer or lessee can reject the goods in whole or in part. If the buyer or lessee rejects the goods, she or he may then obtain cover, cancel the contract, or sue for damages for breach of contract, just as if the seller or lessor had refused to deliver the goods.
The Right to Reject the Goods
69
The buyer or lessee must reject the goods within a reasonable amount of time after delivery and must seasonably (timely) notify the seller or lessor. If the buyer or lessee fails to reject the goods within a reasonable amount of time, acceptance will be presumed.
* Must designate specific defects that would have been apparent to the seller or lessor on reasonable inspection. Failure to do so precludes the buyer or lessee from using such defects to justify rejection or to establish breach when the seller could have cured the defects if they had been disclosed in a timely fashion.
Rejection of Goods: Timliness and Indentification Required
70
The merchant buyer or lessee has a good faith obligation to follow any reasonable instructions received from teh seller or lessor with respect to the goods.
* Buyer or lessee is entitled to be reimbursed for the care and cost entailed in following the instructions.
* The same requirements hold if the buyer or lessee rightfully revokes his or her acceptance of the goods at some later time.
* If not instructions are forthcoming and the goods are perishable or threaten to decline in value quickly, the buyer can resell the goods in good faith. The buyer can then take the appropriate reimbursement from the proceeds and a selling commission (not to exceed 10 percent of the gross proceeds).
* If the good are not perishable, the buyer or lessee may store them for the seller or lessor or reship them to the seller or lessor.
Rejection of Goods: Duties of Merchant Buyers and Lessees
71
Acceptance of the goods precludes the buyer or lessee from exercising the right of rejection, but it does not necessarily prevent the buyer or lessee from pursuing other remedies. In certain circumstances, a buyer or lessee is permitted to revoke her or his acceptance of the goods.
Revocation of Acceptance
72
Can be revoked if the nonconfirmity substantially impairs the value of the lot or unit and if one of the following factors is present:
1. Acceptance was predicted on the reasonable assumption that the nonconformity would be cured, and it was not cured within a reasonable time.
2. The buyer or lessee did not discover the nonconformity before acceptance, either because it was difficult to discover before acceptance or because assurances made by the seller or lessor that the goods were conforming kept the buyer or lessee from inspecting the goods.
Acceptance of a Lot or a Commercial Unit
73
Revocation of acceptance is not effective until notice is given to the seller or lessor. Notice must occur within a reasonable time after the buyer or lessee either discovers or should have discovered the grounds for revocation.
* A revocation must occur before the goods have undergone any substantial change (such as spoilage) not caused by their own defects.
* Once acceptance is revoked, the buyer or lessee can pursue remedies just as if the goods had been rejected.
Notice of Revocation of Acceptance
74
A buyer or lessee who has accepted nonconforming goods may also keep the goods and recover damages caused by the breach.
* Buyer or lessee must notify the seller or lessor of the breach within a reasonable time after the defect was or should have been discovered.
* Failure to give notice bars the buyer or lessee from pursuing any remedy.
The Right to Recover Damages for Accepted Goods
75
The measure of damages equals the difference between the value of the goods as accepted and their value if they had been delivered as warranted.
* Also entitled to incidental and consequential damages when appropriate.
* UCC also permits the buyer or lessee, with proper notice to the seller or lessor, to deduct all or any part of the damages from the price or lease payments still due under the contract.
When Goods are not Delivered as Promised- Recovering Damages for Accepted Goods
76
Any agreed on remedy is in addition to those provided in the UCC unless the parties expressly agree that the remedy is exclusive of all others.
Limitations of Remedies
77
If the parties state that a remedy is exclusive, then it is the sole, or exclusive remedy.
* When circumstances cause an exclusive remedy to fail in its essential purpose, it is no longer exclusive, and the buyer or lessee may pursue other remedies available under the UCC.
Exclusive Remedies
78
Special damages that compensate for indirect losses resulting from a breach of contract that were reasonably forseeable. Under the UCC, parties to a contract can limit or exclude consequential damages, provided that the limitation is not unconscionable.
* When buyer or lessee is a consumer- any limitation of consequential damages for personal injuries resulting from consumer goods is prima facie (presumptively, or on its face) unconscionable.
* The limitation of consequential damages is not necessiarly unconscionable when the loss is commercial in nature.
Limitations on Consequential Damages
79
An action for breach of contract under the UCC must be commenced within 4 years after the cause of action accrues. (4 years after the breach occurs).
* A buyer or lessee who has accepted nonconforming goods usually must notify the breaching party of the breach within a reasonable time, or the aggrieved party is barred from pursuing any remedy.
* The parties can agree to shorten the period to not less than 1 year, but cannot extend it beyond 4 years.
* A cause of action accrues for breach of warranty when the seller or lessor tenders delivery. This is the rule even if the aggrieved party is unaware that the cause of action has accrued.
Statute of Limitations
80
Three types of title warranties can automatically arise in sales and lease contracts:
1. Good title
2. No liens
3. No infringements
Warranties of Title
81
In most sales, sellers warrant that they have good and valid title to the goods sold and that transfer of the title is rightful.
* There is no warranty of good title in lease contracts because title to the goods does not pass to the lessee.
Good Title
82
Sheields buyers and lessees who are unaware of any encumbrances, or liens against goods at the time the contract is made.
* Protects buyers who unknowingly purcahse goods that are subject to creditor's security interest.
* If a creditor legally reposses the goods from a buyer who had no actual knowledge of the securty interest, the buyer can recover from the seller for breach of warranty.
No Liens
83
An encumbrance on a property to satisfy a debt or protect a claim for payment of a debt.
Lien
84
A warranty against infringement of any patent, trademark, or copyright. When a seller or lessor is a merchant, he or she automatically warrants that buyer or lessee takes the goods free of infringements.
No Infringements
85
A seller's or lessor's promise as to the quality, condition, description, or performance of the goods being sold or leased.
Express Warranties
86
1. That the goods conform to any affirmation or promise of fact that the seller or lessor makes to the buyer or lessee about the goods. Such affirmations or promises are usually made during the bargaining process.
2. The goods conform to any description of them.
3. That the goods conform to any sample or model of the goods shown to the buyer or lessee.
Express Warranties Arise when a Seller or Lessor Indicates any of the Following:
87
To create an express warranty, a seller or lessor does not have to use words such as warrant or guarantee. It is only necessary that a reasonable buyer or lessee would regard the representation of fact as part of the basis of the bargain.
* It is a question of fact in each case whether a representation was made at such a time and in such a way that it induced the buyer or lessee to enter into the contract.
Basis of the Bargain
88
Only statements of fact create express warranties. If the seller or lessor makes a statement about the supposed value or worth of the goods, or offers an opinion or recommendation about the goods, the seller or lessor is not creating an express warranty.
* Puffery- the reasonableness of the buyer's or lessee's reliance is controlling criterion
Statements of Opinion and Value
89
A warranty that arises by law because of the circumstances of a sale and not from the seller's express promise.
* Merchantability
* Fitness for a particular purpose
* Prior dealings or trade custom
Implied Warranties
90
A warranty that goods being sold or leased are reasonably fit for the general purpose for which they are sold or leased, are properly packaged and labeled, and are of proper quality.
* Can be breached even though the merchant did not know or could not have discovered that a product was defective
Implied Warranties of Merchantability
91
Reasonably fit for the ordinary purposes for which such goods are used. They must be of at least average, fair, or medium-grade quality- quality adequate to pass without objection in the grade or market for goods of the same description.
* Must be adequately packed and labeled, and they must conform to the promises or affirmations of fact made onthe contaner or label, if any.
Merchantable Goods
92
UCC recognizes the serving of food or dirnk to be consumed on or off the premises as a sale of goods subject to the implied warranty of mercantability. This is food that is fit to eat.
Merchantable Food
93
A warranty that goods sold or leased are fit for the particular purpose for which the buyer is lessee will use the goods. The seller or lessor knows both of the following:
1. The particular purpose for which a buyer or lessee will use the goods.
2. That the buyer or lessee is relying on the skill and judgement of the seller or lessor to select suitable goods.
* A particular purpose differs from the ordinary purpose for which goods are used. Goods can be merchantable but unfit for a particular purpose.
* The sellor or lessor need not have knowledge of the buyer's or lessor's particular purpose. Sufficient to have reason to know the purpose.
* The buyer or lessee must have relied on the skill or judgement of the seller or lessor in selecting or furnishing suitable goods.
Implied Warranties of Fitness for a Particular Purpose
94
In the absence of evidence on the contrary, when both parties to a sales or lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that trade custom to apply to their contract.
Warranties Implied from Prior Dealings or Trade Custom
95
The rule under the UCC is that express and implied warranties are construed as cumulative if they are consistent with one another. If they are inconsistent, courts establish following rules to establish which warranty has priority:
1. Express warranties displace inconsistent implied warranties, except for implied warranties of fitness for a particular purpose.
2. Samples take precedence over inconsistent general descriptions.
3. Exact or technical specifications displace inconsistent samples or general descriptions.
Overlapping Warranties
96
The UCC generally permits warranties to be disclaimed or limited by specific and unambiguous language, provided that the buyer or lessee is protected from surprise. Because each type of warranty is created in a different way, the manner in which a seller or lessor can disclaim warranties varies with the type of warrranty.
Warranty Disclaimers
97
A seller or lessor can disclaim all oral express warranties by including a statement in the written contract.
* Language is clear and conspicious, caled to the buyer's or lessee's attention.
* Buyer or lessee must be made aware of any warranty disclaimers or modifications at the tie the contract is formed. (needs consent)
Disclaiming Express Warranties
98
Generally, unless circumtances indicate otherwise, the implied warranties of merchantability and fitness are disclaimed by the expressions "as is", "with all faults", or other similar phrases. Both parties must be able to clearly understand from the language used that there are no implied warranties.
Disclaiming Implied Warranties
99
A seller or lessor must mention the word merchantability. The disclaimer need not be written, but if it is, the writing must be conspicious.
Disclaimer of the Implied Warranty of Merchantability
100
Written or displayed in such a way that a reasonable person would notice it.
Conspicious
101
The disclaimer must be in a writing and must be conspicious. The word fitness does not need to be mentioned.
Disclaimer of the Implied Warranty of Fitness
102
If a buyer or lessee examines the goods as fully as desired, there is no implied warranty with repect to the defects that a reasonable examination would reveal or defects that are found on examination.
* Refusal to inspect- there is no implied warranty with respect to reasonably evident defects.
Buyer's or Lessee's Examination or Refusal to Inspect
103
Purcahsers of defective automobiles (lemons) may persue remedies in addition to those provided by the UCC under state lemon laws. These provide remedies to consumers who buy automobiles that repeatedly fail to meet standards of quality and performance because they are "lemons."
* Typically apply to automobiles under warranty that are defective in a way that significantly affects their value or use.
* Do not necessarily over used cars or vehicles that are leased.
* If the seller fails to cure the problem despite a reasonable number of attempts, the buyer is entitled to a new car, replacement of defective parts, or return of all consideration paid.
* Generally must submit complaint to arbitration program specified in the manufacturer's warranty before taking the case to court.
* Buyers who prevail- reimbursed for attorney fees
Lemon Laws
