Sales

Question 1

Express Warranty

Answer 1

An affirmation of fact, promise or undertaking that becomes part of the basis of the bargain between the parties. Seller gives warranty that the goods will conform to the affirmation.

A description, media advertising, catalogue, brochure as well as a model or a sample can be the basis for an express warranty.

Can be given by Merchants and non-merchants alike.

Question 2

Implied warranty of merchantabilty

Answer 2

Can be given only by merchants.

Implied warranty that goods are fit for their ordinary purpose and will pass without objection in the trade.

Question 3

Implied warranty of Fitness for a particular purpose

Answer 3

Implied warranty- concerns a specific purpose for which buyer requires the goods rather than the ordinary use.

Can be given by merchants and non-merchants alike.
Buyer relies on seller’s skill and expertise.
Seller had reason to know of the buyer’s particular purpose and reliance on advice.

Question 4

Warranty of Title and Against Infringment

Answer 4

Good title is implied in every sales contract. This warranty implies that the transfer is proper and the title conveyed is free from encumbrances by any known security interest or lien.

To disclaim seller must alert buyer that they may not own proper title.

Question 5

Conflicting Warranties - Hierarchy

Answer 5

1. Exact or technical specifications trumps general description
2. Exact or technical specifications displaces inconsistent model or sample.
3. Sample or model trumps general description
4. Express warranties displace inconsistent implied warranties other then implied warranty of Fitness for a particular purpose.

Question 6

Equitable Estoppel

Answer 6

To the extent that a seller has led a buyer to believe that all of the warranties can be performed. Seller will be estopped from claiming inconsistency of warranties as a defense.

Question 7

Suing for Breach of Warranty

Answer 7

1. Defendant made warranty
2. Goods were defective and thus did not comply with warranty
3. Injury was proximately case by breach
4. Plaintiff suffered damages

Question 8

Affirmative Defenses

Answer 8

1. Disclaimer of Warranty
2. Lack of privity
3. Lack of notice
4. Assumption of the risk
5. Statute of limitations

Privity defense does not apply to personal injury actions.

Question 9

Predominant Factor Test

Answer 9

Look to the essence of the contract in determining whether it is a contract for the sale of goods or for the provision of services.

If sale of goods is the predominant Article 2 will apply
If services in predominant then common law will apply

Question 10

Good Faith and Fair Dealing obligation

Answer 10

The UCC imposes a standard of good faith in performance and enforcement of every contract

Question 11

Oral Contracts between Merchants

Answer 11

Oral contract between merchants is enforceable as long as confirmation was sent within a reasonable time and no objection to the confirmation was received within 10 days.

Question 12

Firm Offer

Answer 12

Firm offers by merchants stay open for a period of up to 3 months if signed and in writing.

If consideration is given the offer remains open for as long as the partys specify

Question 13

Battle of the Forms

Answer 13

New terms in an acceptance between merchants will become part of the contract UNLESS:

1. Offer expressly limits acceptance to the terms in the offer
2. The seller seasonably objects
3. The terms materially alter the offer

Question 14

Tender

Answer 14

Tender of deliver requires that seller hold conforming goods for buyer and gives buyer notice necessary to enable him to take delivery.

Question 15

Defect of Tender

Answer 15

Installment Contract- defect must substantially impair the value of installment and cannot be cured

If goods are tendered prior to the date of performance… seller has right to cure the defect even if extra time to cure is needed past the date of performance

Improper shipment contract caused late delivery. Buyer may reject only if a material delay or loss ensues

Question 16

Shipment Contract

Answer 16

1. Seller delivers goods to carrier and contracts for their transportation
2. Obtain and forward necessary legal documents to buyer
3. Promptly notify buyer of shipment

Failure to comply with either A or C is grounds for rejection if material delay or loss ensues

Question 17

Bailee and Tender

Answer 17

1. Tender to buyer the negotiable document of title.
2. Receive acknowledgment from bailee of buyers right to possess the goods

If Seller tenders a non-negotiatnle doc of title and the bailee refuses to turn over the goods then Tender is defeated

Question 18

Sellers Right to Cure

Answer 18

Seller has the right to cure when:

1. Buyer rejects prior to the date of performance
2. Seller sends non-conforming goods reasonably believing they would be accepted (course of performance, course of dealing, usage of trade)

Although, buyer may not reject if Seller successfully cures he may still sue for damages due to non-conforming initial tender.

Question 19

Statute of Limitation

Answer 19

4 years from the date the breach was discovered- when the buyer knew or should have known.

Question 20

Seller’s acceptance

Answer 20

An offer made by a buyer with a request that goods be ship promptly may be accepted:

1. Promising to ship goods promptly
2. Shipping goods and seasonably notifing the buyer that goods have been shipped.
3. Seller may ship non-conforming goods with prompt notice that this is only an accommodation

If no notice is given buyer may have a cause of action for breach and may also treat offer as having lapsed.

Question 21

Merchant

Answer 21

1. A person who deals in goods of the kind

2. Holds themselves out as having particular knowledge or skill pertaining to the goods sold.

Question 22

Buyers Acceptance

Answer 22

After a reasonable opportunity to inspect buyer notifies seller that goods are conforming or that he will keep them despite their defect.

After reasonable opportunity to inspect buyer fails to reject the goods

Buyer acts inconsistently with seller’s ownership of the goods.

Question 23

Consequences of Buyers Acceptance

Answer 23

1. Must pay contract price
2. Loses right to reject
3. Buyer may seek right to revoke acceptance but only if:
   a. He accepted the goods with knowledge of the defect but with sellers promise to promptly cure or that the defect would go away.
4. Time starts to run with which buyer must complain or he may be barred from any remedy
5. Burden shifts to buyer to establish breach
6. Statute of Frauds no longer available as a defense

Question 24

Battle of the Forms

Answer 24

Article 2 provides that if there has been a definite and seasonable expression of acceptance sent within a reasonable time there is a binding contract despite the presence of additional terms

Question 25

Statute of Frauds Exceptions

Answer 25

1. Oral contract with written confirmation 2. Specially manufactured goods and substantial beginning or procurement under circumstances which indicate that the goods were for buyer 3. Partial performance by buyer r partial delivery by seller (buyer accepted goods or seller accepted payment) 4. Admission by party in pleadings 5. Estoppel- party reasonably expected to induce action or forbearance on the part of the promisor and which does in fact produce said action or forbearance to the detriment of the promisee

Question 26

Parol Evidence Rule

Answer 26

When a dispute arisings over the contents of a writing the parole evidence rule determines what is admissible If the writing is a complete expression of the parties intentions, oral amendments will not be admissible

Question 27

Integrated Contract

Answer 27

if the parties intended a writing to be a final, complete and exclusive expression of their agreement. The writing alone constitutes the contract. It may not be contradicted by evidence regarding any prior or subsequent oral agreements.

Question 28

Merger Clause

Answer 28

Parties may eliminate doubts about whether a contract is integrated by including a merger clause. This effectively provides that the written terms may not be waived by prior oral agreements b/c all such agreements have been merged into the single written doc.

Question 29

Extrinsic Evidence and Parol Evidence Rule

Answer 29

UCC provides that even though a contract is totally integrated the terms of the contract may be supplemented through: 1. course of dealing 2. course of performance 3 usage of trade

Question 30

Parole Evidence Forum Selection

Answer 30

Whether the contract is integrated and thus can not be altered by prior oral agreements is determined by the law of the forum selected by the parties. If no forum selection clause then it is determined by the state with the most significant relationship[.

Question 31

Real Property

Answer 31

It is a firmly established principal that interests involving real property are governed by the laws of the jurisdiction in which the properly is located.

Question 32

Law of the Situs

Answer 32

In the absence of any effective choice of law clause. Contracts involving the title to real property in clouding deeds, mortgages, leases, contracts for sale. The law of the situs: Effectiveness of POA effect or marriage upon interest in land. Effect of legitimacy up succession should be interpreted according to the sits

Question 33

Formalities of Execution

Answer 33

Contract is valid as long as it it is executed in accordance with local formalities or with formalities of the state of execution

Question 34

When can Seller sue for the price of the contract?

Answer 34

1. Buyer accepted goods but will not pay 2. Conforming goods were destroyed a commercially reasonable time after risk of loss had passed to the buyer 3. Seller cannot resell goods

Question 35

Seller's options with Unfinished Goods

Answer 35

1. finish and re-sell 2. cease production and sell goods for scrap 3. Proceed in any commercially reasonable way

Question 36

Gap Fillers

Answer 36

If the contract is silent and there is no applicable course of dealing course of performance or usage of trade then the UCC applies gap fillers to make the contract whole. 1. Delivery - at sellers place of business or if seller has none at seller's residence 2. Buyer must pay cash and seller is not obligated to extend credit 3. Buyer may inspect goods before he makes payment. However, if COD contract buyer has no right of inspection prior to payment. Additionally buyer has no right of inspection in Bill of Lading shipment contract. 4. Price- Reasonable market price 5. Quantity- in requirement contract all that buyer requires in output contract all that seller produces- If parties intended for price to be determined then contract may be unenforceable. If one party is to determine price they must do so in good faith

Question 37

Written Modifications

Answer 37

To modify a sales contract that expressly precludes oral modifications or recession such a modification must be contained in a signed writing

Question 38

Sale on Approval

Answer 38

Where goods are delivered for use on a trial basis or on a satisfaction basis. Risk of loss remains with seller until buyer accepts the goods. Buyers creditors can not touch the goods until acceptance

Question 39

Sale or Return

Answer 39

Where goods are delivered to a merchant for resale and may be returned to the Manufacturer even though goods are conforming. Risk of loss passes to buyer on possession and creditors can gain access on possession.

Question 40

Shipment and Risk of Loss

Answer 40

Shipment Contracts- Risk of Loss usually passes to buyer upon shipment Destination Contracts- Risk of loss passes on tender Bailee- Risk of loss passes when buyer has negotiable document of title, and bailee has acknowledged buyers right to possess the goods- Risk of loss on tender.

Question 41

Breaching party risk of loss

Answer 41

Seller tenders non-conforming goods- risk of loss remains with seller until cure or acceptance Buyer rightfully revokes acceptance- may treat risk of loss as with seller but only as to deficiency with insurance Buyer rejects conforming goods- seller may treat risk of loss as remaining with the buyer but only to the extent of deficiency in coverage

Question 42

F.O.B. Contract

Answer 42

Free on board - risk of loss passes on delivery to carrier

Question 43

F.O.B. Destination Contract

Answer 43

Free on board + destination - risk of loss passes upon tender at destination

Question 44

C.I.F. Contract

Answer 44

Cost of Insurance and Freight- risk of loss passes to buyer upon delivery to carrier. Buyer must seek recovery against the carrier for any loss.

Question 45

F.A.S contract

Answer 45

Risk of loss passes on tender at place of destination

Question 46

Anticipatory repudiation- Seller's Options

Answer 46

1. Cancel contract 2. Seek recovery from breaching party immediately 3. seek damages for substitute (cover) 4. Await performance by other party. However if aggrieved party waits beyond a commercially reasonable time they will not be able to recover resulting damages which they could have / should have avoided

Question 47

Retraction of Repudiation

Answer 47

Repudiation may be retracted before next performance is due so long as aggrieved party has not: 1. Cancelled contract 2. Materially changed his/ her position 3. Other indicated that he considers the repudiation final

Question 48

Buyer's Remedies

Answer 48

1. Replevin 2. Revoke 3. Reject 4. Specific Performance 5. Cover 6. Damages Example of Seller's breach- repudiates, fails to deliver, Sends non-conforming goods

Question 49

Replevin

Answer 49

If buyer is unable to cover after reasonable efforts he may replevy the identified goods front he breaching seller.. He may also recover identified gods if seller becomes insolvent within 10 days after receiving installment on price Buyer may also replevy when he has bought that goods for personal family or household purposes and seller has repudiated or failed to deliver as required by the contract and buyer has paid part or all of the contract price

Question 50

Reject

Answer 50

If the goods or tender was Not delivered on time or failed to conform to the contract a buyer may: 1. Reject the whole 2. Accept the whole 3. Accept any commercially reasonable unit Buyer must seasonably notify the seller of rejection and give seller specifics on which rejection is based.

Question 51

After rejecting goods or revoking acceptance

Answer 51

Buyer must hold goods with reasonable care and allow seller to remove. If seller provides no instructions after a reasonable time buyer may reship, store, or resell or sellers account When seller has not place of business or agent in the area merchant seller must follow reasonable instructions. Seller must indemnify or any instructions are unreasonable.

Question 52

Revocation of Acceptance

Answer 52

Buyer may revoke acceptance if defect is so substantial that it impairs the value of the good and buyer accepted with knowledge but with sellers assurances that defect would be promptly cured or defect was difficult for buyer to initially detect. Must notify seller of revocation of acceptance within a reasonable time.

Question 53

May Contract put a specific time period on inspection and revocation

Answer 53

Yes as long as it is not manifestly unreasonable

Question 54

Damages of Defective Goods

Answer 54

A buyer who accepts defective goods and who fails to revoke his acceptance may nevertheless seek recovery from seller for the difference in value between what he should have received under the contract and what he did recieve

Question 55

Damages for lost bargain

Answer 55

the measure of damages for non-delivery or repudiation is the difference between the market price and the contract price + any incidental damages but less any expense saved as a result of the seller's breach

Question 56

Incidental Damages

Answer 56

Incidental to the delay or other breach by the sell

Question 57

Consequential Damages

Answer 57

These damages do not flow directly from the act of breaching they flow from some of the foreseeable consequences or results of the breach.

Question 58

Seller's Remedies

Answer 58

1. Refuse to deliver 2. Sue for price 3. Resell goods and recover damages 4. Recover damages 5. Keep part of buyer's deposit (up to 20% or 500.00) 6. Reclaim goods from insolvent buyer (any size)