Sales Flashcards
(127 cards)
1
Q
To what transaction does the UCC Article 2 apply?
A
Sales of goods
2
Q
What is a good?
A
Moveable at the time they are identified
3
Q
What is a merchant?
A
One who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the particular goods involved
4
Q
Test for mixed services and goods?
A
Predominant purpose test:
Was the predominant purpose of the transaction the provision of goods or services? Factors:
1. The contract language
2. The nature of the suppliers business
3. The value of the materials and services provided
under the contract.
5
Q
Contract formation?
A
Anything sufficient to show agreement; intent + reasonably certain basis for remedy
6
Q
Firm offer:
A
Made by a merchant, in writing, with signature, gives assurance it will be held open, for a period of time. No need for consideration; or reasonable time; but can’t exceed 3 months.
7
Q
Acceptance of an offer: 3 ways
A
- In any reasonable manner of reasonable medium;
- Prompt shipment or promise to ship of conforming
or nonconforming goods; - Part performance
8
Q
Invitation vs Offer:
A
Things like lacking essential, material terms, and not directed at anyone in particular
9
Q
Additional terms upon acceptance (non-merchant):
A
The additional terms are to be construed as proposals for addition to the contract
10
Q
Additional terms upon acceptance (between merchants):
A
Additional terms become part of the contract unless:
the offer expressly limits acceptance to the terms of the offer;
they materially alter it; or
objection to them
11
Q
writing is insufficient to show agreement, but there is conduct? additional terms context
A
Terms consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under UCC.
12
Q
Different terms in the agreement:
A
If there are different terms in the acceptance, then they knock each other out and UCC gap filler rules fill the gaps.
13
Q
Expressly conditional acceptance:
A
If acceptance is made expressly conditional on agreement to new terms, it is simply a counter offer instead.
14
Q
What is a material alteration (additional term):
A
Change the risk
Change the remedy
In other words, hardship or unreasonable surprise
15
Q
Examples of material alteration:
A
Choice of forum, arbitration clause. Probably not choice of law.
16
Q
Statute of frauds:
A
$500 plus needs to be in signed writing
17
Q
Open terms:
A
A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing
18
Q
5 exceptions to writing requirement (statute of frauds):
A
Merchant’s confirmatory memorandum (between merchants)
Specifically manufactured goods
Admissions in pleadings
Part Performance (goods accepted and paid or accepted and rec’d)
Promissory estoppel
19
Q
Unconscionibility:
A
Substantive: deals with the substantive terms of the K (price, warranties, limitations of remedies)
Procedural: deals with bargaining process (lack of meaningful choice, deception, small print, language barriers).
20
Q
Effect of unconscionable clause:
A
Refuse to enforce the K;
Enforce the remainder of the K without the unconscionable clause; or
Limit the application of the clause so as to avoid an unconscionable result.
But hard for commercial parties to assert
21
Q
Course of Performance:
A
Post contracting sequence of conduct by the parties and arises when the contract calls for the same act to be repeated multiple times.
Often arises in an installment contract
Can modify the contract; and can result in a party implicitly waiving rights under the K
22
Q
Course of Dealing:
A
Precontracting conduct of the parties
It arises from the parties prior dealings or transactions with one another.
23
Q
Usage of Trade:
A
How members of the relevant industry or trade behave and informs the meaning they ascribe to particular terms. It is a set of standard practices and their lexicon for communicating with one another. Used so much that, unless expressly disclaimed, can fairly be said to be based on the expectation that such practices and meanings are apart of the agreement.
24
Q
Hierarchy in 1-303 (e) controls when there are inconsistencies:
A
Express terms prevail;
Assuming no express terms, Course of performance prevails;
If no 1 and 2, then Course of dealing prevails
If not 1, 2, or 3, then Usage of trade prevails.
25
Good faith
Every contract or duty within the UCC imposes an obligation of good faith in its performance and enforcement.
Does not apply to negotiation phases; only kicks in when there is a binding agreement between the parties.
Implied in all agreements under UCC
26
Definition of good faith:
Good faith means honesty in fact and observance of reasonable commercial standards of fair dealing (in the trade if you are a merchant).
27
Contract modification:
Must be made in good faith
Are binding without consideration.
Must meet SOF requirement if the K as modified falls within the SOF
28
No modification clause:
A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
29
Modification made for higher quantity:
If mod made for more than quantity in original, must be in writing; however, can be enforced for less than the quantity in original if modified, without SOF.
30
Express warranties:
Affirmation of fact or promise
Description of goods
sample of goods
that becomes BASIS OF BARGAIN
31
Basis of bargain
Reliance (some courts have presumption of reliance)
Reasonable expectation that statement is true
32
When does the warranty of merch apply?
In every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantable.
33
Merchantable:
Merchantable: to be merchantable, goods must be:
pass without objection in the trade under the contract description; and
in the case of fungible goods, are of fair average quality within the description; and
are fit for the ordinary purposes for which such goods are used; and
run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
are adequately contained, packaged, and labeled as the agreement may require; and
conform to the promise or affirmations of fact made on the container or label if any.
34
When is merchantability determined?
at the time of the sale, not the future condition.
35
Warranty of merch for used goods?
applies to used goods, but in a limited sense.
Only applies when appropriate
36
Implied warranty of fitness for particular purpose:
1. Buyer must have a particular purpose for the goods; and
2. Seller (does not need the be a merchant) must have reason to know two things:
3. The particular purpose for which the goods are to be used; and
4. That the buyer is relying on the seller’s skill set and judgment to select suitable goods
5. Buyer must in fact rely on Seller’s skill or judgment (must be reasonable reliance); and
6. Goods are not fit for a particular purpose
37
Warranty of title:
Any seller of goods (not have to be merchant) warrants the title transferred is good, the transfer is rightful, and there are no liens, security interests, or encumbrances against the title of which the buyer is unaware at the time of contracting.
This warranty will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
38
effect of void vs voidable contract:
Good-faith purchasers who buy goods from a party to a void contract have no title and must return the goods to the rightful owner upon demand. By contrast, good-faith purchasers who buy goods from a party to a voidable contract will receive good title to those goods
39
Two situations when a contract can be open as to quantity:
Requirements and output contracts.
Must be made in good faith
Reasonably proportionate to estimates agreed upon, or normal/comparable to prior requirements.
40
No price set:
The parties, if they so intend, can make a contract even though the price is not settled. In such a case, the price is a reasonable price at the time for delivery if:
nothing is said as to price; or
the price is left to be agreed by the parties and they fail to agree; or
the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
(2) The price is to be set by one of the parties (GOOD FAITH required).
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as canceled or himself fix a reasonable price.
41
Delivery and payment:
In absence of agreement otherwise, parties are to tender (of goods and payment, respectively) simultaneously.
42
Right to inspection
where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner.
43
Result of acceptance:
Buyer is precluded from rejecting the goods
Buyer becomes obligated to pay the contract price
If there is a problem with the goods, the buyer will have the burden of proving that the goods will fail to conform to the contract in order to be entitled to any remedy
44
Rejection:
If the buyer rejects the goods, he may not exercise ownership over them, and if he has possession of them, must take reasonable care for the goods and hold them for the seller.
45
Result of nonconforming goods:
If the goods fail in any way to conform to the contract requirements, the seller will have breached the contract. Buyer can either accept or reject the goods. If rejected in timely matter, then buyer can recover damages. If accepted, Buyer must pay but can recover damages for caused by the nonconforming goods.
46
Place of delivery:
Unless K states otherwise, the place of delivery is the Seller’s place of business, or if he has none, his residence. However, if at the time of contracting the identified goods are, to the knowledge of both parties, at some other place, that place is the place of delivery.
47
Time of delivery:
If left not agreed, it is a reasonable time
48
Delivery in single lot:
typically, goods must be tendered in one lot; except where it makes sense to have them in lots
49
Risk of Loss for Non-Carrier K's:
If seller is a merchant, the risk of loss passes to the buyer upon physical possession; If seller is a non-Merchant: the risk passes to the buyer on Tender of Delivery.
50
Perfect Tender for Non-Carrier Contracts
1. The seller puts and holds the conforming goods at the buyers disposition for a time sufficient for the buyer to take possession; AND
2. The seller gives the buyer notice reasonably necessary to enable the buyer to take possession of the goods; AND
3. The tender is at a reasonable hour; AND
4. Unless the contract says otherwise, Buyer furnishes facilities to receive the goods.
50
Effect of tender of delivery:
Buyer’s Entitlement- Tender of delivery is a condition to the Buyer’s obligation to:
accept the goods; and
pay for the goods (unless otherwise agreed).
Seller’s Entitlement- Tender entitles the seller to:
the buyer’s acceptance of the goods and
payment (according to the contract)
51
Conditional Delivery:
The Buyer’s right to retain or dispose of the goods is conditional paying the seller if: (a) payment is due upon delivery of goods (or documents of title to the Buyer) AND (b) Seller demands payment upon delivery of goods or documents of title to the Buyer.
52
Carrier contract vs non-carrier contract:
Non-Carrier Contracts: No third party delivers the goods; no currier
Carrier Contracts: A third party is hired to deliver the goods
53
Manner of sellers tender
seller put and hold conforming goods at the BUYERS DISPOSITION and give the buyer any NOTIFICATION reasonably necessary to enable him to take delivery.
tender must be at a REASONABLE HOUR, and if it is of goods they must be kept available for the PERIOD reasonably necessary to enable the buyer to take possession; but
unless otherwise agreed the BUYER must furnish FACILITIES reasonably suited to the receipt of the goods.
54
Buyers inspection:
Generally, buyer is responsible for paying for the costs of inspection, but costs may be recovered if the goods are nonconforming.
Unless K otherwise, buyer may inspect at a reasonable time and in any reasonable manner.
Even if buyer agreed to pay before inspection, he has right to inspect before acceptance.
Where the contract requires payment before inspection, non-conformity does not excuse the buyer from so making payment unless the non-conformity appears without inspection (easily seen).
55
Two scenarios for risk of loss:
1. Risk of loss in carrier contracts; and risk of loss in non-carrier contracts when the seller has satisfied its tender of delivery obligation; and
2. Risk of loss in contracts when the seller has breached the contract by not satisfying the tender of delivery contracts.
56
When does risk of loss pass in non-carrier cases:
If the seller is a merchant, risk of loss passes only when the buyer takes physical possession of the goods
If seller is not a merchant, risk of loss passes to buyer when seller tenders delivery.
57
Two types of carrier contract:
Shipment contract and Destination contract
58
Shipment Contract:
when a seller agrees to deliver goods by shipping them using a carrier. Risk lies with buyer after S’s tender to carrier. DEFAULT`
59
Destination Contract:
where seller has agreed to tender/ship the goods at a particular destination and seller has agreed to accept responsibility for the goods during shipment. “F.O.B. (location)” or “C.I.F.” turns K into a destination contract at that location. Risk lies with seller during shipment, tender when in possession of B.
60
Tender for Shipment Contract:
1. Delivers goods to carrier (along with necessary title documents);
2. Makes a reasonable contact with the carrier; and
3. Informs the buyer.
61
Tender for Destination Contract:
Must satisfy the tender rules for non-carrier contracts (i.e., when the carrier tenders the goods to the buyer).
Provide all documents of title, etc (bill of lading, showing buyer/seller agreement).
62
Right to inspection when presented with title docs only?
he does not waive right to reject goods for non-conformity.
63
Tender of Delivery Bailees
Tendering a negotiable document (bill of lading or warehouse receipt) over to buyer;
Delivering to the buyer a non-negotiable document issued by the bailee;
The seller may fulfill its tender obligation by obtaining an acknowledgement from the bailee that the buyer has the right to possess the goods.
Providing Buyer w/ a written document which instructs the bailee to deliver the goods to the buyer.
64
Risk of Loss for Bailee (warehouse, etc):
Risk passes to Buyer on One of the following :
The buyer’s receipt of a negotiable document of title covering the goods; or
An acknowledgment by the bailee of the buyer’s rights to the goods; or
The lapse of reasonable time for the buyer to notify the bailee of the buyers’ rights in the goods after the buyer’s receipt of a nonnegotiable document of title or other direction to the bailee to deliver
65
Overriding gap filler :
Obligations of food faith, diligence, and reasonableness, and care cannot be disclaimed, although the parties may determine standards for fulfillment of those obligations, as long as those standards are not manifestly unreasonable
66
Disclaim warranty of Merch:
The warranty of merchantability can specifically be disclaimed or modified only by mentioning the word merchantability AND if the sale contract is in writing the disclaimer must be conspicuous.
67
Disclaim warranty of fitness:
The warranty of fitness for a particular purpose can specifically be disclaimed only by a conspicuous writing.
68
Conspicuous writing:
a reasonable person (of opposing party) would notice it.
Be in bold, capital letters, contrasting text, font, color, etc.
69
3 ways to disclaim implied warranties:
General disclaimer
Inspection or refusal to inspect
By Course of Dealing/Performance/Trade Dealing
BUT cannot be UNCONSCIONABLE
70
Limitation of Damages/Remedies:
Parties may limit or substitute remedies under 2-719(1)(b)
Courts may use unconscionability to determine enforceability of remedy limitation
71
Limit/exclude consequential damages
Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable
72
Remedy fails for its essential purpose:
if fails for essential purpose, then normal remedies apply
73
Limitation of remedies AND disclaimer of incidental + consequential damages:
Dependent approach: if your limited remedy fails, then your disclaimed remedy also automatically fails.
Independent approach: Even if your limited remedy fails, the disclaimer of remedies can still stand unless unconscionable. Court adopts this approach.
74
Integration
whether the parties’ writing was intended to be a final expression of the agreement with respect to its terms.
75
Partial integration
there is a final expression of the parties’ agreement, but it does not contain all of the terms that the parties agreed to.
75
Full integration
Parties’ intent writing to be final, complete, and exclusive expression of agreement. Merger clause is presumptive evidence of full integration.
76
Exceptions to PER
Oral Conditions Precedent are an exception to PER
Ambiguity: If reasonably susceptible to other understandings, then extrinsic evidence may be introduced to solve the ambiguity.
Avoidance Factors: Fraud, Mistake, Duress are exceptions to PER
Collateral agreements and equitable reform
77
PER with warranties:
PER can prevent a buyer from claiming an express warranty not reduced to writing, when the contract contains a broad disclaimer of warranties b/c its contradictory and is a prior oral agreement.
Buyer can get around this by showing that buyer did not intend that the writing be the complete and exclusive expression of the parties agreement or that the disclaimer is unconscionable
78
Default for assignment/delegation?
Freely assignable delegatable
79
Two limits to freedom of assigment/delegation:
Prohibiting, by express agreement; and
If it would materially change duty of other party, or materially increase risk or burden.
80
Magic word to prevent assignment:
“any attempted assignment is void.”
Otherwise, assignment is merely a breach.
81
Effect of delegation:
permits the delegator to discharge its duty through the delagatee’s performance; however, it does not normally relieve the delegator of the obligation to perform, if the delegatee fails to perform.
82
Assignment of right to payment:
can always assign this
83
Cancellation:
when either party puts an end to the contract for breach by the other party and its effect is the same as a termination, except that the canceling party also retains any remedy for breach of the whole K or any unperformed balance
84
Termination:
the effect is to discharge all executory (i.e., unperformed) obligations of the parties without further liability
85
Adequate assurances:
When (objective) reasonable grounds for insecurity arise with respect to the performance of either party, the other may, in writing, demand adequate assurance of due performance and until he receives such assurance, may, if commercially reasonable, suspend any performance for which he has not already received the agreed return.
86
Reasonableness of grounds for insecurity for merchants?
commercial reasonableness
87
After receipt of a justified demand for assurances, failure to provide, within a reasonable time not exceeding thirty days, such assurance:
= is a repudiation of the contract
88
Reasonable grounds for insecurity, examples:
Statutory: delegation of duties and insolvency.
Example of reasonable grounds: late payment, demand for a deposit; defects in goods.
Examples of unreasonable assurance: full, early payment; moving delivery date.
89
Repudiation
Unequiviocal, advance breach
90
Retraction of repudiation:
Can retract repudiation unless the aggrieved party has since the repudiation canceled or materially changed his position or otherwise indicated that he considers the repudiation final
91
Excuse from performance: 3 ways
Casualty to identified goods
Substituted performance
Failure of presumed conditions (commercial impracticability
92
Casualty to identified goods:
1. The goods must have been identified to the contract at the time it was formed
2. The destruction of the goods must occur without the fault of either party
3. The loss must occur before the risk of loss passes to the Buyer
93
How are goods identified to a K?
absent agreement, when the K is made if its for the sale of goods already existing and identified at the time of contracting.
Special rules for livestock and crops
94
Result of casualty of goods:
Total loss = the contract is avoided and the seller’s only obligation is to return any payments that have been made.
Partial loss = buyer may inspect the goods and either accept or elect to treat the contract as avoided. If buyer accepts the goods its only right against seller is a reduction in the contract price to reflect the lessened quantity or quality of the goods
95
Substituted performance (partial excuse):
1. The agreed method of delivery must become unavailable or commercially impracticable without fault of either party; or
2. The agreed method of payment fails b/c of governmental regulation
96
Commercial impracticability:
Casualty of goods + sub performance MUST NOT APPLY:
1. Supervening event that affects an essential aspect of a contract. Focus is on foreseeability of the supervening event.
2. Extreme and unreasonable difficulty. The increased costs must be severe, extreme, excessive or unreasonable.
97
Buyer's damages for seller's breach:
Cover damages;
Market damages
Incidental and consequential damges
98
3 ways buyer can recover goods from seller:
Specific Performance
Replevin
Recovery of pre-paying buyer
99
Replevin:
1. Can get undelivered, identified goods from seller if the buyer, after reasonable efforts, cannot cover or if cover would likely be unsuccessful.
2. Can get goods if they have been identified by the contract, and seller has shipped goods under reservation, thereby retaining a security interest.
100
Recover of prepaying buyer:
If partial payment + non-delivery by seller, 2 situations:
1. Seller becomes insolvent within 10 days after receiving the buyer’s first payment or
2. The goods were purchased for personal, family, or household purposes.
In either case the Buyer must tender any unpaid portion of the purchase price to the seller.
101
Basic formula for Buyer's damages:
cost of cover minus K price OR market price minus contract price, plus incidental damages plus consequential damages, minus expenses saved.
102
Cover damages:
must be made in good faith, commercially reasonable, and reasonable time.
103
Date for calculating damages in a repudiation situation:
when buyer regards repudiation as final.
104
Place for calc damages for repudiation:
look at price at place they were going to be delivered
105
Rejection of non-conforming goods (Buyer remedy)
buyer who has rightful rejected or revoked goods has a security interest in the goods in possession or control for any payments made on price and expense reasonably incurred in inspection, transportation, care and custody.
106
Exceptions to the perfect tender rule:
Installment contracts.
Can only reject individual installment, if nonconformity of that installment substantially impairs value of that installment, and the nonconformity is not be curable.
Can accept/reject only some of the goods, as long as they are whole units.
If it substantially impairs the WHOLE contract, can reject WHOLE contract
107
Formal requirements for rejections
Reasonable time;
and state the particular reason if: if defect is ascertainable by reasonable inspection, and buyer requests, or notice would allow for a cure.
108
Buyers responsibilities after rejection
Cannot exercise ownership over the goods
Must take reasonable care for goods
109
Three ways to accept goods:
Overt acceptance after opportunity to inspect
Acceptance by omission by failing to effectively reject
Act inconsistently with sellers ownership
110
Revocation of Acceptance:
1. Acceptance pursuant to sellers assurance that goods conformed to contract or reasonable belief that defect would be cured and has not been cured; or if there was difficulty in discovering defects; AND
2. There was a substantial nonconformity (substantially impaired value of goods); AND
3. Revocation takes place before buyer makes substantial change in the condition of goods (in addition to the goods defects); AND
4. Revocation occurs within a reasonable time.
5. Give reasonable notification to the seller.
111
Seller's right to cure
Within original time for delivery:
by giving reasonable notice of intention to do so and by making a new tender of conforming goods
Outside of original time:
If buyer rejects a tender that seller reasonably believed would be acceptable;
Seller can show it had cause to believe acceptable via trade practice/prior dealing
Must seasonably notify the buyer, and then fix w/in reasonable time.
112
Incidental vs consequential:
Incidental damages: out of pocket expenses (directly flow from breach)
Consequential damages: indirect damages (lost income, lost customers, other financial hardship).
113
Ways buyer can breach:
Repudiating its obligation to pay for or accept the goods
Failing to make a payment when due
Wrongfully rejecting the goods
Wrongfully attempting to revoke acceptance
Wrongfully refusing to allow the seller to cure when seller has a right to cure.
114
Seller’s right to withhold delivery of goods
If buyer repudiates, or fails to pay, can withhold goods.
If goods are sold on credit and before the goods are delivered, the seller discovers that the buyer is insolvent; if buyer offers cash, must sell.
115
Right to recover or reclaim goods:
When seller learns that Buyer has rec’d delivery of goods on credit while insolvent, seller may reclaim goods upon demand made within 10 days of buyer’s receipt of the goods.
The 10-day limitation does not apply if buyer made a misrepresentation of solvency in writing to the seller within 3 months before delivery
116
Right to stop delivery:
1. if goods with carrier, if buyer is insolvent
2. on buyer's breach if it is a large shipment
117
When Goods May Not be Stopped:
receipt of goods by buyer
acknowledgement to buyer by carrier/bailee
negotiation of negotiable document
118
Seller's right to identify and resell goods:
A seller is authorized to identify conforming goods at breach and base seller’s damages off those goods or resell and collect damages using the resale formula
119
Seller's right to cancel the contract:
provides that in the event that buyer repudiates the contract, fails to pay, wrongfully rejects, or wrongfully revokes acceptance of the goods Seller may cancel the contract.
120
4 ways for the Seller to recover damages.
Resale Damages
Market Damages
Loss of profits and incidental damages
Contract Price
NO CONSEQUENTIAL DAMAGES FOR SELLER
121
Resale damages:
Must be in good faith and commercially reasonable
Contract price MINUS resale price PLUS incidental damages MINUS expenses saved EQUALS total damages.
122
Market price damages for Seller:
contract price MINUS market price PLUS incidental damages MINUS expenses saved EQUALS total damages.
123
Lost Profits Damages:
Volume seller or specially manufactured goods
But for the buyer’s breach, seller would have made 2 sales.
124
measure of Lost Profits damages:
if seller is not placed in as good a position by market/resale damages, then the measure of damages is the profit (including reasonable overhead) which seller would have made from full performance + incidental damages.
125
