Cross Border Sales Flashcards
Mid Term (93 cards)
1
Q
Canadian Sales of Goods Act: Goods
A
Chattels other than (1) things in action and money; (2) things attached/forming part of the land which are agreed to be severed under the contract of sale and services, or (3) services.
a. Lee v. Griffin : The test was whether the result of the contract would be the sale of chattel.
b. Isaacs v. Hardy: Some cases the substances of the contract is the materials and the work is ancillary or vise versa.
c. Robinson v. Graves: if the primary object of the contract is for property that was not originally the property of the buyer, the contract will be for the sale of goods, but if the primary purpose is the performance the provision of tasks, with goods incidental, the contract will for services.
2
Q
Canadian Sales of Goods Act: 1. Things in Action and Money
A
I.E. debts and shares. These things are not tangible movables. Although money is tangible it is not a good unless the currency is used as a collectible
3
Q
Canadian Sales of Goods Act: 2. Things From Land
A
Considered fructus naturales, (natural products of the land) are not goods because they are not capable of being sold under a contract as a good unless they are severed from the land. Land and buildings attached are not goods. When severed from the land they become goods. Fructus industrials (things that come from the land) are sold as goods.
4
Q
Canadian Sales of Goods Act: 3. Service Contracts
A
can include the transfer of goods, where services are involved in producing the good. Is it a service or goods contract? The Act attaches conditions to a contract for goods and not for services. I.E., conditions in the Act as to quality do not apply to a contract for services.
5
Q
Canadian Sales of Goods Act: Consideration
A
Consideration for a contract for the sale of goods must be money. If Consideration is for other goods the contract is one of barter or exchange. Specific provisions of the act cannot apply to barters.
6
Q
UCC Mixed Contract
A
If goods predominate the contract, the UCC governs, but if the predominant assets are services, common law applies.
7
Q
UCC Goods
A
Goods = all things (including specially manufactured goods) which are moveable at the time of identification of the contract for sale other than money in which the price is to be paid, investment securities and things in action.
8
Q
UCC Bartering 2-304
A
The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
9
Q
UCC Formation in General 2-204
A
(1) A contract for goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract
(3) even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy
10
Q
Firm Offers 2-205
A
A limited exception to the common law rule that firm offers require consideration. Firm offers are binding even in the absence of consideration if the offeror is a merchant and the offer is in writing. The firm offer is only open for a reasonable time if not time is stated in the offer. In no event, would such a firm offer remain irrevocable for longer than three months.
11
Q
Offer and Acceptance in Formation of the Contract
A
Offers to make sales contract may be accepted in any manner and by any medium reasonable under the circumstances. When a buyer offers to purchase goods for immediate shipment, the seller may accept either by shipping or by promising to ship. A shipment of non-conforming goods will count as an acceptance, unless the seller specifically indicates that the non-conforming shipment is offered merely as an accommodation to the buyer (in which case the shipment would constitute a counteroffer)
12
Q
UCC Battle of the Forms
A
Rejects the mirror image rule. Often leads to a contract being formed where offer and acceptance diverge.
i. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states te`rms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
ii. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
1. (a) the offer expressly limits acceptance to the terms of the offer;
2. (b) they materially alter it; or
3. (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
a. At least one party is a merchant: if at least one party is not a merchant, the additional term does not prevent the offeree response from giving rise to a contract, but the additional term becomes part of the contract only if the offeror explicitly assents to it.
iii. (3) Conduct by both parties recognizing contract establishes a contract although the writings of the parties do not establish a contract. The terms of the contract consist of those terms on which the writings agree, together with any supplementary terms incorporated under any other provision of this Act
1. Apply this section if there is no K and fail section 1. Only the terms upon which the parties agree will become part of the valid contract.
2. 1-205(1). Course of dealing: a sequence of previous conduct between the parties to a particular transaction which is to be regarded as establishing a common basis of understanding for interpreting their expression conduct.
3. Belden v. American Electronic When a contract is formed under 2-207(3) the terms consist of the standard gap fillers provisions of the UCC as well as sections relating to course of performance, course of dealing and trade usage.
- The Court here found that most cases involving the repeated exchange of forms does not establish a course of dealing sufficient to incorporate the terms of those forms into the contract. Course of dealings after the transaction does not establish a course of dealings. If the term at issue had been used in the past, it would establish a course of dealings, but since the limitation of liability clause had not been used in the past, e.o it was included in the contract, it does not create a course of dealings
13
Q
UCC 2-207 Comment 4 and 5
A
gives examples of material and non-material additional terms. Much will depend on whether the additional term is common in the buyers and sellers industry.
14
Q
UCC Knock-Out Rule
A
Remove conflicting terms and use the UCC gap fillers
15
Q
UCC Common Law Mirror Image Rule
A
The terms of the acceptance must mirror the terms of the offer in order to have a valid contract.
16
Q
UCC Last Shot Doctrine
A
When parties proceed to perform on a contract that would otherwise be invalid because the terms of the acceptance do not mirror the terms of the offer (they would otherwise be considered a counteroffer). The most recent terms control.
17
Q
Transactions where people pay before receiving the terms are valid - Hill v. Gateway
A
A contract does not need to be read to be effective, people who accept take the risk that the unread terms may in retrospect be unfavorable. Practical considerations support allowing vendors to enclose full legal terms within their products. Cashiers cannot be expected to terms to customers before the sale. Shoppers have multiple ways to discover the terms before they buy the product. By keeping the computer for the 30 days, the plaintiffs accepted the contract and are bound by the arbitration provision within.
18
Q
Carnival Cruise Lines
A
Forum-selection clauses included among the terms attached to the cruise ship tickets are enforceable
19
Q
ProCD
A
ProCD: Terms inside a package bind customers who use the product after they’ve had an opportunity to read and reject them (by returning it). Vendors are masters of the offer and invite acceptance by conduct. A buyer may accept by performing the acts proposed by the vendor
20
Q
Ways Buyers use purchase orders
A
(i)The offer to the seller. (ii) Used to confirm an oral agreement that has already been reached: The buyers purchase order and the sellers’ invoice/acknowledgment will usually be standard form documents that include boilerplate terms
21
Q
Open Account Sale
A
the seller checks the buyers credit. If the buyer’s credit is satisfactory, the seller will forward the buyers order to the shipping department which will then ship the goods to the buyer with a written invoice.
22
Q
International Law Contract Formation Application of the CISG
A
Applies to contracts for the sale of goods between parties from different states who adopted the CISG. Under A6 parties can exclude its application. In order for the contract to exclude the CISG it must include language which affirmatively states that the CISG does not apply.
- Rosier Technologies, CSN attempted to exclude the CISG in its standards conditions, which stated that “… shall exclusively be governed by German Law. Laws on international sales of moveable objects and on international purchase contracts on moveable objects is excluded” This attempted exclusion was ineffective. It does not explicitly reference the CISG. The CISG does not use the term moveable objects
23
Q
CISG deals with the battle of the forms different than the UCC
A
- Article 19(1): purported acceptances containing additions/modifications are not acceptances, they are counteroffers.
- 19(2): Purported acceptances containing additional/different terms are valid acceptances as long as the new terms are not material alterations and the offeror does not object to the discrepancy without undue delay. To add a terms the other party needs to be aware and acknowledge
24
Q
CISG Material Alteration
A
- additional or different terms relating, to the price, payment, quality, and quantity of the goods, place and time of delivery, extent of one party’s liability or the settlement of disputes
25
CISG Acceptance containing materially different terms
with conduct by both sides that indicates a contract, the CISG uses the last shot rule.
1. 18(1) the original offeror proceeding to perform under the contract would constitute conduct by which the original offeror will be deemed to have accepted the counteroffer.
2. 18(2) acceptances are effective only when actually received by the offeror, not when they are sent to the offeror
26
Master Agreement
signed by a buyer and seller at the beginning of on-going sales relationship, to outline terms and conditions of each subsequent sale. Subsequent sales are conducted without the benefit of individual signed writings and often it will specify that both parties agree to waive their ability to assert the statute of frauds as a bar to enforceability.
27
Statute of Frauds
Most contracts need to be in writing to be legally enforceable. Requirements: (1) a writing; (2) signature; (3) sufficient evidence of the contract
28
UCC 2-201 SOF Formal Requirements
(1) a contract for the sale of goods for the price of $500 or more is not enforceable unless there is a writing sufficient to indicate a contract and signed by the party against whom enforcement is sought. A writing is not insufficient because it omits or incorrectly states a term agreed upon.
29
UCC 2-201(2) SOF Requirements between Merchants
(2) Between merchants, within a reasonable time, a writing to confirm the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
- General Trading Int'l v. Wal-Mart Stores: A writing indicating only a tentative agreement or ongoing negotiations does not satisfy the requirements of UCC § 2-201(2).
30
SOF 2-201 (3) A contract that does not satisfy (1) but is valid in other respects is enforceable if:
(a) specially manufactured goods for the buyer not suitable for sale in the ordinary course of the seller's business and the seller...has made either a substantial beginning of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and accepted.
- DF Activities Corp v. Brown: Brown submitted a sworn affidavit denying that she formed a contract to sell the chair with Briggs. When a defendant raises a statute of frauds defense and submits a sworn affidavit denying the formation, the plaintiff may not seek additional discovery to attempt to gain an admission.
SOF Canadian Law
recognizes the validity of a contract under seal or by implication by parties conduct. In Ontario future performance needs a writing. 10 day cooling off period where the consumer can repudiate without a penalty.
30/93
31
SOF Canadian Law
recognizes the validity of a contract under seal or by implication by parties conduct. In Ontario future performance needs a writing. 10 day cooling off period where the consumer can repudiate without a penalty.
32
Warranties
A key feature of any sales transaction is ensuring that the goods being purchased will work in the way they are supposed to.
33
UCC Warranty of Merchantability 2-314
(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is f the seller is a merchant with respect to goods of that kind.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade
- Phillips v. Cricket Lighters: § 2-314 must be applied to determine whether a lighter is fit for its ordinary purpose. Merchantability does not require that the goods be the best quality, but it does require that they have an inherent soundness which makes them suitable for the purpose for which they are designed. A claim for the breach of an implied warranty of merchantability will not stand if the good was used for an improper purpose that does not constitute an ordinary use. Ordinary is most often defined as common. Punitive damages will only be awarded if the plaintiff has presented sufficient evidence to prove that the defendant acted with a purposeful or reckless disregard for others.
34
Extension of UCC Merchantability Warranty 2-218
the warranty 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 person may use, consumer, or be affected by the goods and who is injured by a person by breach of the warranty.
35
Exclusion or Modification of Warranties 2-316
to exclude the warranty the language must mention merchantability and must be clear. The implied warranty will be excluded with the words "as is" "with all fault" or other language with common understanding to make clear there is no implied warranty. There is no implied warranty if the buyer has thoroughly inspected the goods or refused to inspect.
36
Warranty of Fitness for Practical Purposes 2-315
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 seller's skill or judgment to select suitable goods, unless excluded or modified, there is an implied warranty that the goods shall be fit for such purpose.
- Leal v. Holtvogt: The Leals testified that they did in fact rely on these representations. The Leals testified that they purchased the horse for the purpose of breeding it. The implied warranty was, therefore, breached because the horse was lame, the Holtvogts knew that the leas wanted to purchase the horse for breeding, the Holtvogts should have known the Leals would rely on their representation. Horse breeders don't want a lame horse
37
Two Major Warranty Issues
(1) sellers place outside time limits on warranties, but buyers who resell do not want time limits to begin until their resale; (2) resellers do not like to give greater warranties than they're getting.
- Buyers who resell are careful to ensure that the warranties that they give to buyers are no greater than warranties they receive from their sellers
38
Extended Warranties and Maintenance Agreements
Two Major Warranty Issues
(1) sellers place outside time limits on warranties, but buyers who resell do not want time limits to begin until their resale; (2) resellers do not like to give greater warranties than they're getting.
- Buyers who resell are careful to ensure that the warranties that they give to buyers are no greater than warranties they receive from their sellers
Extended Warranties and Maintenance Agreements
Manufacturer's warranty may be limited in scope or duration. The extended warranty is cheap insurance for the buyer if there is a problem not covered by the basic warranty. These are often serviced by a third party that has no formal connection to the seller. These third parties usually have an interest in coming up with reasons why the warranty will not be paid. The servicer may force the consumer to pay for the repaid then instruct the consumer to bill the seller directly.
39
Warranties Canadian Law
Express statements about the character or quality of goods identified have different legal effects according to their legal nature. Statements as to the nature of the goods or their fitness either in general or for a particular purpose or use. These can be contractual promises (the promisor should be bound) or mere representation (puff; not a contractual compromise, but made with the intent and has the effect of persuading the other party to enter into the contract)
40
Canadian Law Warranties: Terms Implied by Custom or Tacit Agreement
The Sales of Goods Act recognizes that parties may be affected by course of dealings, or by usage.
41
Canadian Law Warranties: Custom or Usage
- Must be notorious, certain ,reasonable and must not offend intention of any legislative enactment and cannot be inconsistent with the nature of the document as a whole. By not expressly contracting to exclude such customs, the parties may be taken to have tacitly agreed to be bound by any custom of the trade, business or market which may be said to be known to them by virtue of their general dealings.
42
Canadian Law Warranties: Course of Dealings
Canadian Law Warranties: Custom or Usage
- Must be notorious, certain ,reasonable and must not offend intention of any legislative enactment and cannot be inconsistent with the nature of the document as a whole. By not expressly contracting to exclude such customs, the parties may be taken to have tacitly agreed to be bound by any custom of the trade, business or market which may be said to be known to them by virtue of their general dealings.
Canadian Law Warranties: Course of Dealings
- Previous contracts between the parties that included terms which are not expressly agreed to in later contracts, may be inferred that they intended to contract on the same basis. Previous dealings are relevant only if they prove knowledge of the terms and assent to them
43
Difficult to introduce implied terms in written contracts
Because of the parole evidence rules, if the implied term adds to or interprets the express provisions of the written contract, it will be accepted. If it goes against the writing, it will not.
44
Terms implies by the Sales of Goods Act
Terms may be implied into a contract for the sale of goods, unless there is express agreement to the contrary. These include warranties of description and quality in sales of specific goods.
45
Sales of Goods Act Description
Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description.
- Sale by description: Look to the common intention of the parties. The product delivered must represent that which had been contracted for. Includes situation where there is a sale by description and where there was no opportunity for the buyer to do more than give a cursory glance at the goods displayed.
46
Sale by Sample and Description
Sales of Goods Act Description
Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description.
- Sale by description: Look to the common intention of the parties. The product delivered must represent that which had been contracted for. Includes situation where there is a sale by description and where there was no opportunity for the buyer to do more than give a cursory glance at the goods displayed.
Sale by Sample and Description
Look to the common intention of the parties. The product delivered must represent that which had been contracted for. Includes situation where there is a sale by description and where there was no opportunity for the buyer to do more than give a cursory glance at the goods displayed.
47
When Goods correspond with their description
look to the description by which the goods are identified and the meaning attached to the description. Each case is subjective. It is possible to introduce parol evidence to reveal what the parties meant by their description.
- Thomas v. Louisville a truck described as "new" corresponded to the description when there was no evidence of previous ownership.
- Arcos - the contract was for the sale of staves to be ½ inch thick. Some were that thick others were not. Despite this, the staves could still be used for the purpose for which the seller knew the buyer was going to use them (quality of the goods was not impaired) but
48
Sales of Goods Act Quality and Description
- The Ontario Sales of Goods Act implies into certain contracts conditions as to the fitness and quality of goods.
- Ceveat emptor: The general rule, excluded only where statute or custom permits the implication of a warranty or condition as to quality or fitness or the parties have expressly incorporated such a warranty or condition into their contract. Goods supplied not under contract, need not conform to the standards set out in the act.
a. In a case where a bottle of mineral water burst injuring the buyer, the retailer sued the manufacturer alleging breach of condition, it was argued that the bottle was not supplied under a contract since the contract provided that the bottles should be hired not sold. Since delivery of the bottles was essential to the sale of their contents, the sale of the contents in the bottles were supplied under a contract of sale even though the bottles themselves were not bought and sold under the contract.
49
Sales of Goods Act Fitness For Purpose
Where the goods are of description and the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required, three factors are relevant (1) the course of the sellers business (2) knowledge on the part of the seller of the purpose for the goods; (3) reliance on the sellers skill or judgment. - only if the contract of sale satisfies these requirements will it be possible to imply into the condition of fitness.
50
Merchantable Quality
The goods must comply with the description. Must be usable by the buyer or saleable. The state of the packaging could affect merchantable quality.
51
Impracticability
Sometimes the seller is unable to obtain the goods, the price of goods shifts significantly in a way that makes the original deal very unprofitable for either the buyer or the seller. Generally these are the inherent risks for sellers.
- Neither party could anticipate the occurrence of some events that might excuse performance by the adversely affected party. These fall into two categories:
- Unexpected failure of sellers source of supply: could be a basis for seller excuse
- Dramatic price fluctuation: might excuse either buyer or seller
52
Casualty to identified goods 2-613
Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a "no arrival, no sale" term (Section 2-324) then
- (a) if the loss is total the contract is avoided; and
- (b) if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.
53
Excuse by Failure of Presupposed Conditions 2-615
Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
- (a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
- (b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
- (c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.
Comment 5: unless both the buyer and the seller had reason to believe that a particular source of supply was to be the sellers exclusive source of supply, then the seller should not be able to rely on the inability of a particular supplier as a basis for its own excuse.
54
Turbines Ltd. v. Transupport
Cannot use 2-615 when a contract has been fully performed. To rescind a contract means to undo the transaction and return the parties to the same positions they were in before the contract, as if the contract had never existed. Here, Turbines paid Transupport for the nozzle in full, and then Transupport shipped the nozzle to Turbines. Thus, both parties fully performed their obligations. Turbines then attempted to ship the nozzle to Malaysia, Turbines learned they could no longer ship the nozzle to Monarch without facing criminal penalties. Turbines sued Transupport, seeking to have its contract rescinded. Monarch's criminal activities may have made it impossible for Turbines to fulfill its plans, but this unexpected turn of events did not make performance of the supply contract between Turbines and Transupport impracticable or impossible. The parties had already performed that supply contract in full.
55
Commercial Impracticability with lease of goods
2A-221; 2A-405; 2A-406
56
Commercial Impracticability International Sales
Article 79 of the CISG excuses performance as a result of an impediment beyond control when the impediment is unavoidable, and it could not reasonably have been expected at the time of formation. The excused party must notify the other side of the basis for the excuse and of its effect on the excused party's ability to perform.
- The CISG rules are broader than the UCC in two ways; its terms apply to both buyers and sellers rather than just sellers. They also cover a party's failure to perform any of his obligations whereas the UCC 2615(a) allows excuse only with respect to a sellers delay in delivery or non-delivery in whole or in part. CISG is more strict in that they allow a seller to excuse performance by failure of a third party to perform only when the third party's source has a valid excuse, whereas UCC places a requirement to procure an alternate source
57
Unconscionability 2-302 Unconscionable Contract or Clause
(1) If the court finds the contract or any clause of the contract unconscionable at the time it was made. The court may refuse to enforce the contract, or enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause to avoid any unconscionable result. Comment 1: the basic test is whether, the clauses involved are so one sided as to be unconscionable under the circumstances existing at the time of the making of the contract. The purpose is to prevent oppression and unfair surprise. Not to disturb the allocation of risk because of superior bargaining power.
- Williams v. Walker-Thomas; an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.
58
Two Types of Unconscionability
(1) Procedural (absence of meaningful choice). (2) Substantive (when the clauses themselves is unduly unfair and one-sided)
- Some courts will require a showing of both whereas others will only require a showing of one
59
Maxwell v. Fidelity Financial Services
The Maxwells financed the purchase of a $6,500 water heater with a loan from Fidelity at 19.5 % interest. There was two types of unconscionability. Procedural determined by factors such as age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, whether alterations in the printed terms were possible, and whether there were alternative sources of supply for the goods in question. Substantive concerns the actual terms of the contract and examines the relative fairness of the obligations assumed, encompassing situations where contract terms are so one-sided as to oppress or unfairly surprise an innocent party, or there is an overall imbalance in the obligations and rights imposed by the bargain or significant cost-price disparity. This case was unconscionable because there was a grossly-excessive price constituting substantive, but since the lending company could also repossess the house it is procedurally unconscionable.
60
Unconscionability With Leases
2A-108 mimics 2-302. The difference is that it grants relief where there is unconscionable conduct in the collection of a claim.
- Pantoja-Cahue v. Ford. UCC § 2A-108 prohibits unconscionable conduct in inducing a consumer to enter a lease and collecting on a claim arising under a lease. Pantoja-Cahue purchased a Ford Webb dealership. Pantoja-Cahue spoke only Spanish, and he negotiated the sale with a Spanish-speaking sales associate. Ford provided financing for the transaction. Pantoja-Cahue found that he had leased the Ford rather than purchasing. Pantoja-Cahue argues that he was induced to purchase the Ford through Webb's unconscionable conduct of negotiating in Spanish but giving him a copy of the lease in English. However, Ford is just a creditor that came into the picture to finance the lease. Ford is not liable for the dealership's allegedly unconscionable sales tactics.
61
Accepting and Rejecting Goods
The buyer is given a reasonable opportunity to inspect the goods, the buyer may reject goods that do not conform. This right is limited, if the seller can satisfactorily cure of the non-conformity the deal will proceed.
- With breach of warranty the buyer has already accepting the goods. UCC 2-714(1) the buyer now has the burden of proof of non-conformity, and the buyer must give timely notice of a breach to recover any damages from the seller
62
3 Ways Buyer will be deemed to have accepted
Three ways a buyer will be deemed to accept (1) affirmative signification (2) failure to reject the goods following a reasonable opportunity to inspect, and (3) an act by the buyer that is inconsistent with the sellers ownership 2-606(1)
63
Rejection
Rejection: must occur within a reasonable time after delivery and is ineffective unless the buyer seasonably notifies the seller. 2-602(1) If the buyer fails to state the specific grounds for rejection, then the buyer may lose the ability to use the unstated rejection grounds to justify the rejection 2-605(1)
Right to Reject Exists When: the goods fail in any respect to conform to the contract 2-601
64
Exceptions to Right to Reject
1. With an installment contract (a series of separate deliveries) the buyer may reject an installment only if the non-conformity substantially impairs the value of that installment and cannot be cured 2-612(2)
2. The seller may contractually limit buyer remedies including the right to reject.
3. The sellers right to cure can often reverse a buyers rejection. 2-508
4. Usage of trade, course of dealing, and course of performance may allow the seller some commercial leeway in performance that will preclude the buyers rejection of a less-than-perfect tender
65
Responsibility towards the goods 2-602(2)(b)
non-merchant buyers need to hold goods with reasonable care for time sufficient to enable the seller to remove them. Merchant buyers have a heightened duty the seller has no agent at the place of rejection, the merchant buyer must follow any reasonable instruction of the seller as to resale, storage, etc. 2-603(1)
Perishable: or will lose value quickly, the buyer must sell them on the sellers behalf 2-603(1)
66
Revocation of Acceptance
buyer may have the right to revoke his acceptance when the non-conformity substantially impairs the value of the goods. 2-608(1)
1. The buyer may revoke its acceptance in one of two circumstance:
a. Where the buyer reasonably believed that the problem with the goods would be cured and it has not been or
b. Where the buyer was unaware of the problem because of sellers assurances or because the problem was too hard to discover before acceptance 2-608
67
Revocation of Acceptance Time Limits
Must occur within a reasonable time after the buyer actually discovered or should have discovered the defect, and it must also occur before there is any substantial change in the goods that was not caused by their own defect 2-608(2) Effective when the seller is notified.
North American Lighting v. Hopkins. Whether a time period is considered reasonable is subjective. Under the UCC, a buyer's reasonable time for revocation of acceptance may be extended if the buyer relied on the seller's repeated assurances that the defects would be cured but the seller failed to do so
68
Must Allow Seller to Cure 2-508
where the buyer rejects the sellers tender, the buyer must allow the seller an opportunity to cure if either
69
Shaken Faith Doctrine
The buyers faith in the seller was legitimately shaken where they cannot rely on the seller
70
Accepting or Rejecting Goods In International Contracts
a. CISG 49(1) Where the seller has committed a fundamental breach of contract.
b. Under the CISG the seller must deliver goods which are of the quantity, quality, and description required by the contract. Goods do not conform with the contract unless they possess the qualities of the goods which the seller has held out to the buyer.
c. Under the CISG if the breach is fundamental the buyer may either require delivery of substitute goods or declare the contract void and seek damages.
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Fundamental Breach In International Contracts
A fundamental breach: breach that amounts to a substantial deprivation of the aggrieved party's benefit of the bargain. Where the buyer wishes to declare a fundamental breach, it must give notice to the seller within a reasonable period following the time when the buyer knew or ought to have known of the defect.
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Allocating Risk of Loss
designed to cover the cases in which the destruction or damage to the goods occurs in a way other than the fault of either the buyer or seller.
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Parties to domestic transaction use two basic delivery terms
i. FOB Seller Place (shipments contract): risk of loss shifts to the buyer when the goods are delivered to the carrier, and the buyer is responsible for paying the cost of freight 2-509(1)(a)
ii. FOB Buyers Place (a destination contract): risk of loss does not shift to the buyer until the goods are tendered to the buyer at the stated destination and the seller is responsible for paying the costs of freight 2-509(1)(b)
1. FOB =free on board. Means the seller must pay all charges necessary for the merchandise to arrive, on board, at the designated and location, free of charge to the buyer
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When parties fail to specify a delivery term 2-308(1)
UCC default is a shipment contract
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Delivery Terms Stampede v. Productive
Stampede purchased flat-screen televisions from SaleADay. The invoice said that the televisions were to be shipped to Stampede's customer in Illinois. Stampede hired Productive to transport the televisions from SaleADay's warehouse in California to Stampede's customer in Illinois. The agreement between Stampede and Productive was set out in a bill of lading that said the goods were to be shipped "FOB Origin"
a. For shipment contracts the seller only needs to get the goods to the carrier for shipment. Here, Stampede and SaleADay had a shipment contract, not a destination contract. The purchase invoice does not expressly make SaleADay responsible for delivering the goods to a destination. Plus, the bill of lading says FOB Origin, and it identifies Stampede as the shipper. These facts imply shipment contract. The loss during transport falls on stampede, who hired the carriers that lost the televisions.
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Delivery Terms Cook v. Schrlock
Under UCC § 2-504, goods may not be considered duly delivered unless the seller has entered into a contract with the carrier that provides for the transportation of the goods "as may be reasonable having regard to the nature of the goods.". There has been only one case in which a seller's failure to obtain adequate insurance made the contract unreasonable. In that case, the seller's actions in shipping the package were completely reckless, with the seller greatly underinsuring, misaddressing, and inscribing a theft-tempting notation on the package. Official Comment 3 to UCC § 2-504 clarifies that it is a seller's duty to make arrangements that are reasonable under the circumstances, such as refrigeration, or protection against cold. It can therefore be inferred that the reasonableness of the transport has to do with the mode of transport and not the amount of insurance obtained.
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Manner of Sellers Tender of Delivery 2-503
(1) tender of delivery requires that the seller put and hold conforming goods at the buyers disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this article...
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Risk of Loss in the Absence of Breach 2-509
(1) Where the contract requires or authorizes the seller to ship the goods by carrier
(a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2-505); but
(b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer
(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
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Effect of Breach on Risk of Loss 2-510
1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
(2) Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.
- The buyer may treat the risk of loss as if it had rested on the seller from the beginning, but only to the extent of a deficiency in the buyers insurance coverage.
(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.
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Allocating Risk of Loss Canadian Law
Risk regulates the liabilities of the parties when incapable of complete fulfilment. Frustration discharges the contract and relieves parties from liability
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Canadian Law Risk of Loss
a. Risk: means that if goods are accidentally lost or damaged the loss thereby occasioned falls on a particular party.
i. the seller then he is liable to pay damages for non-delivery of the goods even though he cannot deliver them
ii. the buyer will have to pay the price agreed in the contract, even though he cannot be given the goods
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Canadian Law Who Bears Risk of Loss
under the common law (res perit domino) the risk relates to property not possession. Goods remain at the sellers risk until the property is transferred to the buyer, after which the goods are at the buyers risk whether or not delivery has been made.
1. Conary v. Harvery risk passed to the buyer once he paid for the goods and they were delivered
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Canadian Law even if the buyer is not yet in possession he could bear the risk of loss
H.B. McGinness goods were delivered by the seller to a carrier for the buyer. Property passed to the buyer upon such delivery. Risk also passed and the buyer could sue the carrier for the damages.
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Canadian Law: Agreements Between parties concerning risk of loss
the parties may expressly or impliedly agree to allocate risk.
1. Gallant v. Hobbs the sale was for a race horse, which, unknown to the parties was infected with rabies at the time of the sale. The horse had to be put down. The seller sued for breach of contract. The industry assumed risk of loss on the seller of the horse. The judge held that since the risk of a horse dying from rabies was very small the parties had not considered the risk at the time of the sale, had they done so, the evidence indicated that they would have allocated the risk to the seller.
2. When the goods are shipped f.o.b. the general rule is that risk is on the buyer once the goods are shipped. Any loss in transit is borne by the buyer. I.e. if a frost damages potatoes. There are three imitations, (1) if the parties otherwise agree, expressly or by implication. (2) if the seller deviates from any shipping instructions given to him by the buyer, (3) if the seller has not yet delivered the goods to the place where the goods are sold f.o.b until such time delivery is not complete and risk is on the seller
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Canadian Law delayed delivery no risk of either party
vi. Where the delivery has been delayed through the fault of either the buyer or the seller, the goods are not the risk of the party in default as regards any loss which might not have occurred but for such fault. Only losses that might not have occurred but for the delay of the party in question may be recovered in an action
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Canadian Law Frustration
a party will only be discharged from his obligation to fulfil the contract if it can be said that a state of affairs has arisen which has displaced what was a fundamental condition or basis of the contract.
i. Frustration, refers to the impossibility of a contract being performed either (1) because of a change of circumstances which makes it legally or physically impossible to do so (2) because of a change of circumstances which makes a contract no longer the same commercial venture as it was when the parties originally contracted though still capable of physical and legal performance
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Canadian Law when doctrine is frustration is applicable
1. Supervising illegality: a contract originally legal becomes illegal by a change in the law, will become a contract which cannot be performed; it will be frustrated.
2. Destruction of Goods:
a. Without any fault on the party of the seller or buyer, the goods perish before the risk passes to the buyer, the agreement is thereby avoided. The contract is not frustrated, it is avoided. Neither party has a right to recover expenses incurred. The seller will be excused from the liability for non-delivery.
b. Unascertained goods: there is no frustration of a contract to sell unascertained goods on the basis of the perishing or destruction of the goods.
3. Impossibility of Physical Performance:
4. Change of circumstances rendering performance pointless
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UCC Sellers Remedies
i. 1-305 (a) the aggrieved party restored to the position had the other party fully performed neither consequential or special damages nor penal damages may be had except as specifically provided.
1. Sellers are eligible for incidental damages.
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UCC Ways in which a buyer may breach
-703 gives four different ways in which a buyer might breach: wrongfully rejecting goods, wrongfully revoking acceptance, failing to make payment, or anticipatorily repudiating the contract
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UCC Seller Possible Remedies
iii. 2-703 gives the seller 7 possible remedies: withhold delivery, stop delivery by any bailee, identify goods to the contract in the case of an anticipatory repudiation, resell and recover damages under 2-706, recover contract-market damages (or lost profits under 2-708, sure for the price under 2-709 or cancel the contact.
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Resale damages (2-706)
- 706 Seller's Resale Including Contract for Resale.
1. Under the conditions states in section 2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this article, but less expenses saves in consequence of the buyers breach.
a. KP-RP+ID-ES
(1) KP: Contract Price; RP: Resale Price; ID: Incidental Damages; ES: Expenses saves as a consequence of the buyers breach
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Resale Damages - Firwood
When a seller resells good with fungible parts after a buyer's breach, the seller may recover resale damages if the resale is commercially reasonable. Reasonableness depends on the available market. 3 years for resale may not be ideal, factors like the lack of an available market at the time of a resale is a factor
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UCC Seller's Damages for Non-Acceptance 2-708
(1) The measure of damages form non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided, but less expenses saved in consequence of the buyer's beach.
1. KP-MP+ID-ES
a. MP: Market Price, measured as of the time and place for tender, the time for tender will be the performance date, and the place for tender will be a in the delivery term.
(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position they would have been, then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this article, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.
