Damages & Risk of Loss

Question 1

Identification of the goods

Answer 1

Risk of loss does not transfer to the buyer unless the goods have been identified. Remember 12 month rule and fungible bulk rule.

Question 2

12 month rule

Answer 2

Applies to young animals, crop and wool. If
gestation period is more than 12 months, identification is when it is born, harvested. If it was less than 12 months identification would happen at time of contract.

Question 3

Fungible bulk rule

Answer 3

Does not have to be separated to be considered identified. Usually only applies to things like grain & oil and stuff like that.

Question 4

Risk of Loss General rules

Answer 4

Merchant: passes on receipt of goods.

Non-merchant: passes on tender of delivery.

Question 5

Delivery Terms

Answer 5

F.O.B. – (free on board)  
F.A.S. – free along side
C.I.F. – Cost, insurance, freight
C&F – Cost and freight
Ex-ship -  off the ship

Question 6

When does risk of loss transfer in a shipping contract?

Answer 6

F.O.B. Place shipping from

risk of loss passes to buyer upon DUE delivery from the seller to the carrier

Question 7

When does risk of loss transfer to a buyer in Ex-ship contract?

Answer 7

As soon as it is unloaded from the ship.

Question 8

When does risk of loss transfer in a delivery or destination contract?

Answer 8

F.O.B. Place delivering to

Goods must be delivered in order for risk of loss to transfer to the buyer.

Question 9

Obligations of Buyer & Seller

Answer 9

Buyer: Accept goods and pay; Seller transfer title and deliver goods

Question 10

Perfect Tender Rule

Answer 10

if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may

(a) reject the whole; or
(b) accept the whole; or
(c) accept any commercial unit or units and reject the rest

Question 11

What is an Installment Contract?

Answer 11

the delivery of goods in separate lots are authorized to be separately accepted

Question 12

What are the buyer’s options when goods in an installment contract are damaged?

Answer 12

The buyer may reject if the non-conformity SUBSTANTIALLY IMPAIRS the value of that installment.

If the non-conformity SUBSTANTIALLY IMPAIRS the value of the whole contract there is a breach of the whole.

Question 13

When may a seller who ships non-conforming goods cure?

Answer 13

When the time for performance has not yet expired

Question 14

Damages if Buyer covers

Answer 14

Contract Price - Cover Price + incidental damages

Question 15

Damages if Buyer does not cover

Answer 15

Market Price - Contract Price

Question 16

Damages for a lost volume seller

Answer 16

Lost Profit which is defined as Sales price minus the variable expenses.

Question 17

Two types of expenses for a lost volume seller?

Answer 17

Fixed expenses: Overhead etc.

Variable Expenses: Cost of material etc.

Question 18

?

Answer 18

?

Question 19

Sellers options if Buyer breaches Contract?

Answer 19

1. Withhold delivery of such goods;
2. Stop delivery by any bailee as hereafter provided
3. proceed under the next section respecting goods still unidentified to the contract;
4. Resell and recover damages as hereafter provided
5. Recover damages
6. Cancel.

Question 20

When can a buyer revoke his acceptance?

Answer 20

Buyer can only revoke is acceptance if there has been a substantial impairment.
TWO INSTANCES **
1. Whatever is wrong must have been difficult to find.
2. Where the seller has promised to fix something and never fixes it.

Question 21

?

Answer 21

?

Question 22

Effect of Sellers breach on risk of loss

Answer 22

Remains on the seller until cure or acceptance

Question 23

What must buyer do when rejecting goods?

Answer 23

Take care of the goods

Question 24

What must a merchant buyer do when rejecting goods?

Answer 24

Must follow any reasonable written instructions.

Question 25

What constitutes acceptance of goods?

Answer 25

1. Signify you accept
2. do not reject
3. does any act inconsistent w sellers ownership

Question 26

Shaken faith doctrine

Answer 26

Only applies to new cars. If it doesn’t work at first, likely to still have problems later.

Question 27

What steps must a seller take to reject non-conforming goods?

Answer 27

1. Notify seller within a reasonable time 2. take reasonable care of the goods

Question 28

Two situations when seller can cure?

Answer 28

1. time for performance is not up

2. seller thought goods would be acceptable.

Question 29

?

Answer 29

?

Question 30

If buyer resells goods what must he do?

Answer 30

Notify seller of resale. Sale for a commercially reasonable price.

Question 31

Two different measure of damages when buyer rejects for non-conformance

Answer 31

1. Sue for damages
   OR
2. resale

Cannot have it both ways.

Question 32

Measure of damages for a lost volume seller

Answer 32

Sales price minus the variable expenses.

Question 33

Incidental damages

Answer 33

Inspection, receipt, transportation and care and custody

Question 34

Consequential Damages

Answer 34

Damages arising directly from the breach.

Question 35

Retraction of anticipatory repudiation

Answer 35

As long as buyer has not covered seller can retract.

Question 36

Damages if buyer covers?

Answer 36

Difference between the contract price and the cover price.

Question 37

Damages if buyer does not cover?

Answer 37

Contract price minus Contract price.

Question 38

Who chooses which damage measure to use?

Answer 38

Buyer

Question 39

Who can request Adequate Assurances?

Answer 39

Either party can request Adequate Assurance in writing if there are reasonable grounds for insecurity.

MUST BE IN WRITING

Question 40

What can the buyer do upon anticipatory repudiation?

Answer 40

1. Suspend its own performance
2. Sue for breach
   OR
   Wait a commercially reasonable time

Question 41

Statute of Limitations

Answer 41

Four years. Unless parties agree otherwise, no more than 4, no less than 1.