STU18 Flashcards
Under the Sales Article of the UCC, describe what entails a liquidated damages clause.
A liquidated damages clause in a contract specifies the damages to be paid in the event of breach. The UCC permits such a clause provided it is reasonable in light of the (1) anticipated losses, (2) difficulties of proof of loss, and (3) inconvenience of otherwise obtaining a remedy. If excessive, it is a penalty and is unenforceable. If a seller has properly withheld delivery of goods, the buyer may receive a refund of payments minus any liquidated damages agreed on. If no liquidated damages have been provided for, the seller may retain 20% of the value of the total contract price or $500, whichever is less (UCC 2-718).
How is an implied warranty of merchantability determined?
Unless excluded, an implied warranty of merchantability is included in every sale by a merchant who deals in goods of the kind sold. The most important component of this warranty is that the goods be fit for the ordinary purposes for which such goods are used. There is, therefore, a legal basis for defense.
