Terms of the Contract Flashcards
(50 cards)
1
Q
Warranties with Sale of Goods: 2-313, 2-314: What are the requirements to Recover on Warranty? (5)
A
- Warranty was made
- Warranty was breached
- Breached caused the alleged harm
- Extent of damage is proven
- No defense by warrantor: ex: disclaimer, SOL, Lack of notice, Lack of privity, Assumption of Risk, Estoppel, Fraud
2
Q
What are the Two Implied Warranties?
A
- Implied Warranty of Merchantability
- Implied Warranty Fitness for Particular Purpose
3
Q
UCC 2-314: Implied Warranty of Merchantability? (2)
A
- IWOM: Goods are as good as similar goods sold in the trade, and are fit for the ordinary purposes for which goods of that description are used
AND - Seller MUST BE: A merchant “with respect to goods of that kind” (automatically applies)
4
Q
What does IWOM Promise? (2)
A
- Goods are as good as similar goods sold in the trade AND
- Are fit for the ordinary purpose for which goods of that description are used
5
Q
UCC 2-315: Implied Warranty of Fitness for a Particular Purpose (IWFPP)?
A
Warranty applies when a buyer relies on the seller’s expertise to provide a product that meets a specific need, and the seller knows about that need
6
Q
When does IWFPP apply? (3)
A
- The seller knows the buyer’s specific need
- The buyer relies on the seller’s expertise: The buyer trusts the seller’s skill or judgement to provide the right product
- The goods must be fit for that purpose: If the conditions are met, the law automatically implies a warranty that the goods will be suitable for the buyer’s intended use
7
Q
Can IWFPP Be Excluded?
A
1.YES, but only if the seller properly disclaims it
- If there is no clear disclaimer, this warranty automatically applies
8
Q
UCC 2-313: Express Warranty?
A
Guarantee made by the Seller about the quality, performance, or characteristics of the goods being sold. Goods must conform to specific seller representations
9
Q
2-313: Express Warranties are Created in three ways: (3)
A
- Affirmation of Fact or Promise: if seller makes a factual statement or a promise about the goods, and this statement becomes part of the buyer’s decision to purchase
- Description of the Goods: If the Seller describes the goods in a way that influences the Buyer’s decisions, that description creates warranty
- Sample or Model: If the Seller shows a sample or model as an example of what the buyer will get, the final product must match the sample or model
10
Q
What does not count as an Express Warranty? (2)
A
- Opinion or Puffery: statements that are just opinions or exaggerated sales talk
- Statements about value: If a seller says anything about the value of anything increasing with time
11
Q
UCC 2-607(3)(a): Notice Requirement: Where a Tender Has Been Accepted
A
- Requires a Buyer to notify the seller of the breach “within a reasonable time after he discovers or should have discovered any breach.”
- Time depends on the circumstances
12
Q
Privity: To Whom does the Warranty Extend? (2)
A
1.Warranty (whether express or implied) is a term of a contract
2.Extended either through Horizontal Privity or Vertical Privity
13
Q
UCC 2-318: Horizontal Privity (Non-Buyers Affected by the Product)
A
The ability of a third party who uses or is affected by a product to sue a seller for breach of warranty.
14
Q
Horizontal Privity Warranties: Three Scenarios
A
- Alternative A: Narrowest
- Alternative B: Moderate
- Alternative C: Broadest
15
Q
What is Vertical Privity?
A
1.Manufacturer to Buyer Relationship
2.Buyer can sue Manufacturer, Wholesaler and anyone in the chain of distribution of a product who is NOT a direct seller
16
Q
UCC 2-607(5)(a): What is Vouching in With Warranties?
A
Allows a Seller to bring a Third Party (Manufacturer or Supplier) into a lawsuit when they are being sued for breach of warranty
17
Q
How does Vouching in Work?
A
- Buyer sues Immediate Seller, the Seller instead of being left to handle the lawsuit alone can “Vouch In” their supplier or manufacturer
- The Seller notifies the (third party) that they may be liable and gives them a chance to defend their case
- If Third Party refuses to participate in the suit, they are bound by the outcome of the case, meaning they cannot later argue that the Seller improperly lost
18
Q
2A-103: Warranties with Finance Leases: What is a Finance Lease?
A
A lease transaction that involves three parties: The Supplier:
- Supplier: Supplies the goods
- The Lessor: Financier, typically a bank or financial institution, who pays for the goods
- The Lessee: After selecting the goods, leases the goods from the Lessor
19
Q
2A-103(1)(g): Requirements for Lease to be a Finance Lease? (3)
A
- The Lessor does NOT select, manufacture or supply the goods
- The Lessor acquires the goods or the right to possession and use of the goods specifically to lease them to the Lessee and
- One of the following occurs:
a. The Lessee Gets A Copy of the Supplier Contract before signing lease
b. The Lessee Must Approve the Supplier Contract
c. The Lessee Gets a List of Warranties and Limitations
d. If It’s Not a Consumer Lease, The Lessor Must Give Written Notice
20
Q
2A-407: What is the Hell or High Water Clause regarding Finance Leases?
A
Provision in a contract that states a party is obligated to pay the full amount to the lessor no matter what happens
21
Q
2A-515: Acceptance of Goods in a Lease: When does it occur? (3)
A
- After a Lessee has had a reasonable opportunity to inspect the goods AND
- The Lessee shows acceptance OR
- Lessee fails to reject the goods properly (if Lessee accepts part of the commercial unit, they accept the whole thing)
22
Q
2A-407: Irrevocable Promises Under Finance Lease (4)
A
- Only applies to Non-Consumer Finance Leases
- Once the Lessee accepts the goods, their obligations under the lease become irrevocable and independent and must keep making payments
- Lessee’s duty to pay is separate from any disputes with the supplier or manufacturer
- If goods are defective, Lessee must still make payments and deal with Supplier separately
23
Q
2A-210: Express Warranties in Lease Agreements
A
- When a Lessor makes an express warranty to the Lessee, such as:
a. Affirmation of fact or promise
b. Any description of the goods
c. Any Sample or model - You CANNOT disclaim an Express Warranty in Finance Leases
24
Q
Warranty Liability Reduction:
A
Allows seller to limit buyer’s remedies by contractual modification . . . BUT 2-719(3) points out that consequential damages cannot be limited or excluded if deemed unconscionable.
25
UCC 2-316(1): Exclusion or Modification of Warranties: EXPRESS WARRANTIES
If a Seller makes an Express warranty, any attempt to limit or negate the warranty (by disclaimer) must be interpreted in a way that makes both the express warranty and disclaimer interpreted in a way that makes them reasonable.
If cannot interpret them consistently, the express warranty stands
26
UCC 2-316(2): Exclusion or Modification of Warranties: IWOM (2)
Contract must:
1. Use the word Merchantability AND
2. Be in conspicuous writing (noticeable)
27
UCC 2-316(2): Exclusion or Modification of Warranties: IWFPP (2)
Contract must:
1. Be in writing and
2. Be conspicuous
28
Alternative Routes for Disclaimers of Implied Warranties – § 2-316(3): (3)
1. Language of Sale – § 2-316(3)(a): unless circumstances indicate otherwise, implied warranties are excluded by expressions like “as is” or “with all faults”
2. Examination of Sample or model – § 2-316(3)(b): the buyer is held to have refused to examine the goods only when the seller demands them to.
3. Course of Dealing – § 2-316(3)(c): an implied warranty can be excluded or modified by course of dealing, course of performance, or course of trade.
29
UCC 2-719: Contractual Modification or Limitation of Remedy
1. Allows the Seller to limit the Buyer’s remedies by contractual modification, unless they are unconscionable
2. Contract can provide additional or substitute remedies beyond what the UCC allows and can limit or change the amount of damages a Buyer can recover
30
2-613: Casualty to Identified Goods (4)
Where
1. the contract requires for its performance goods identified when the contract is made and 2. the goods are damaged or destroyed
3. through no fault of either party
4. before risk of their loss has passed to the buyer
31
2-613: Casualty to Identified Goods: What happens If Loss is Total or Partial (2)
1. If the Loss is TOTAL = contract is automatically canceled, neither party has any further obligations
2. If the Loss is PARTIAL = the Buyer has two options after inspecting the goods:
a. Cancel OR
b. Accept the damaged goods but pay a reduced price that reflects the loss in value or quantity (Seller cannot demand additional compensation)
32
2-615: Excuse by Failure of Presupposed Conditions (Seller's Excuse)
Provides a defense for sellers when unexpected events make it impossible or impracticable to fulfill a contract
33
2-615(a): When is the Seller Excused From a Delay or Failure to Deliver? (3)
1. The Seller is NOT in breach if unforeseen events would make performance impracticable
2. The event must be something that both parties assumed would NOT happen when they made the contract
3. The Seller is excused from a government regulation or order, even if it turns out to be invalid
Ex: War, Embargo, Local Crop Failure, Loss of Supplier, Fires, Sickness, Death
34
2-615(b): What if a Seller can only Partially Perform? (3)
1. Seller doesn't need to cancel all contracts
2. Must fairly allocate the available supply among their customers (fair and reasonable)
3. The seller can also include regular customers who don't currently have contracts
35
2-615(c): What must the Seller do? (2)
1. Must notify the Buyer as soon as possible about the delay or inability to deliver
2. If allocation is needed, the Seller must inform the Buyer of their estimated share
36
Restatement 261: Defense of Impracticability
Shift risk to the party better able to bear it, either because he is in a better position to prevent the risk from materializing or because he can better reduce the disutility of the risk (as by insuring) if the risk does occur
37
2-302: Unconscionability: Sale and Leases of Goods
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.
38
What is Procedural Unconscionanbility?
Absence of meaningful choice in the bargaining process, unfair surprise, one person has the upper hand on the other person.
Problems in how the contract was formed (fine print, deceptive terms, pressure to sign)
39
What is Substantive Unconscionability?
Terms of the deal themselves, unreasonable harsh and oppressive terms. Shocks the conscious of the courts.
Unfair or one sided terms (extreme price gouging, waiving all legal rights)
40
2-302 (goods) 2A-108 (leases): What can the Court do if it deems a contract Unconscionable? (3)
1. Refuse to enforce the entire contract
2. Enforce the rest of the contract but remove the unfair part
3. Modify or limit the unfair clause to make it fairer
41
2-302: What will the Court consider to determine if a contract was Unconscionable? (3)
1. The Commercial Setting (industry norms, bargaining power)
2. The Purpose of the Contract
3. The Effect of the Clause (who benefits, who is harmed)
42
2A-108: Unconscionability For Lease Contracts: An unconscionable contract or term in contract in consumer lease:
A court can intervene if:
1. The lease was induced (persuaded) through unconscionable conduct (fraud, deception, high pressure tactics)
2. The collection of a payment from the lease involved unconscionable conduct (harassment, threats)
43
2A-108: What can the Court do if it finds a Consumer Lease to be Unconscionable?
1. Refuse to enforce, enforce everything but unfair terms, modify or limit unfair term AND
2. Grant relief such as: canceling the lease, reducing payment, or awarding damages
44
What's the difference between 2A-108 (Finance Leases) and 2-302 (Contract or Clause)
Lessee will have to pay the opposing parties fees if they lose: Pursuant to § 2A-108(a) and (b) the prevailing party
in an unconscionability of a lease dispute may recover attorney’s fees
45
Title with Sale of Goods: Four Types
1. Good Title
2. Voidable Title
3. Void Title
4. Entrustment
46
What is Voidable v. Void Title?
1. Voidable: appears valid but can be legally challenged and voided under certain circumstances. Instances such as goods were obtained through fraud, misrepresentation
-Good faith purchaser can obtain good title
-Original owner cannot reclaim the goods from good faith purchaser
2. Void: NOT a good title at all and is legally ineffective and person holding them has no legal right to them. Instances such as theft or fraud transaction when Seller had no authority to transfer ownership
-Even a good faith purchaser cannot acquire valid ownership
-Buyer cannot obtain good title from a thief, or from someone who has obtained title from a thief
47
2-312: Buyer's Obligations Against Infringement
The Seller Guarantees that:
1. The title is good and has the legal right to sell them
2. The goods are free from any debts or claims attached to them
48
2-312: A Seller can Exclude or Modify A Warranty, but only if:
1. There is specific language stating that the Seller is not guaranteeing good title
2. The circumstances would lead a reasonable Buyer to understand that the Seller may not have a clear title
49
2-403: What is an Entrustment?
When you put the goods under control of the Merchant who deals in goods of that kind
50
2-403: Situations Where Voidable Title Still Allows Transfer: (4)
1. Transferor was deceived as to the identity of the Purchaser
2. Buyer paid with a check that later bounced
3. The Sale was supposed to be payment upfront, but the goods were delivered before the Seller paid
4. The goods were obtained through fraud that is criminal
