Transfer of Title and Risk of Loss Flashcards
(112 cards)
1
Q
When has passage of title happened?
A
NSNW - when seller has completed performance with reference to physical delivery of goods
WN - upon delivery of negotiable document - buyer must have taken actual possession of the document
WNN - upon delibery of nonnegotiable document - buyer must have taken actual possession of the document
BND - upon the last to occur of idnetification or contracting
2
Q
Unless otherwise agreed, title passes to the buyer at:
A
the time nd place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place
3
Q
Is the seller excused from performance under the contract?
A
No - the seller is not excused if the goods are “off-the-shelf” goods
Yes - the seller is excused if the goods are “one-of-a-kind” goods
4
Q
Warranties
A
Assurance or guarantee of conformity to a standard - with respect to, for example, title, quality, condition, durabiliyt or performance
5
Q
Sources of warrant law
A
a. ucc (state law)
b. Magnuson-Moss Warranty Act (federal law)
c. various state “lemon” laws
6
Q
Seller makes some statement of fact with respect to the goods
A
“the car has 25 miles on it”
- must relate to the goods
- must be part of the basis of the bargain
- fact vs opinion issues
*creates an express warranty
7
Q
Puffery
A
Is considered an expression of the seller’s opinion and, as such, the buyer has no right to rely on such statements
8
Q
Seller makes a promise with respect to the goods
A
“The computer will be defect-free for 90 days”
The type of express warranty that is most important to us as consumers
- must relate to the goods
- must be part of the basis of the bargain
9
Q
Conformity to description
A
“bonesless check” “20 cases of pepsi”
- must relate to the godos
- must be part of the basis of the bargain
- may be created by course of dealing or usage of trade
*creates express warranty
10
Q
Intent on the part of the seller to create an express wrranty:
A
not necessary to have one arise if the facts are right
In other words, the seller may not realize that a warranty has been created
11
Q
Meaning of “part of the basis of the bargain”
A
Must simply be one of the elements of the transaction from the buyer’s perspective which induced the buyer to enter into the transaction
Parol evidence rule problem - will you be permitted to introduce evidence of oral warranties given before the signign of a written contract?
Warranty given by seller after the contract is entered into - this is a contract modification which requies no consideration to be binding
12
Q
Not necessary for express warranties
A
Use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty
but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion of commendation of the goods does not create a warranty
13
Q
The effective duration of an implied warranty of merhantability is __________
A
4 years
14
Q
Elements of implied warranty of fitness for a particular purpose:
A
a. seller knows of buyer’s particular purpose for purchasing the goods
b. seller knows of buyer’s reliane on seller to select or furnish suitable goods
c. justifiable reliance by buyer on seller to select or furnish suitable goods
d. goods do not meet particualr purpose
15
Q
When the buyer relies on the seller’s skill or judgment to select or furnish suitable goods:
A
there is unless excluded or modified under the next section, an implied warranty that the goods shall be fit for such purpose
16
Q
Warranty of Title: Elements
(really an “implied warranty”)
A
Title conveyed is good
Transfer is rightful (transaction does not violate rights of any third parties)
Goods are free of any security interest of lien (unless buyer knows otherwise) - there are no amounts owed by the seller to a lender or a taxing authority that has a lien against the goods
17
Q
Potential waiver (loss of warranty protection) by pre-contract examination of the goods
A
- Buyer exmines goods pre-contract => no warranty protection as to obvious defects (if defect was obvious, you should have addressed the issue with the seller prior to contracting)
- Seller demands that buyer examine goods pre-contract and buyer refuses - no warranty protection as to defects buyer would have discovered had buyer examined the goods - if seller requests you examine the goods, do so
18
Q
Disclaiming express warranties
A
a. seller largely controls, during the contract-formation process, whether express warranties are made
b. generally, difficult to disclaim express warranties
c. parol evidence rule problem - how do you introduce proof that oral warranties were in fact created?
19
Q
Disclaiming implied warranties: use of catch phrases
A
- “as is”
- “with all faults”
- catch phrases can be orl or written
- a ctch phrase does not effectively disclaim the clean title warranty
- if the catch phrase is in writing, it must be conspicuous - reasonable person ought to have noticed it
- catch phrases will be ineffective as to intentional deception
- some states do not allow a merchant seller to sell consumer products “as is” or “with all faults”
20
Q
Merchantability - warranty specific disclaimer - when you dont want to use a catch phrase but want to disclaim the implied warranty of merchantability
A
- the disclaimer can be oral or written
- if in writing, the disclaimer must be conspicuous
- the disclaimer must incorporate the word “merchantability”
21
Q
When you dont want to use a catch phrase but want to disclaim the implied warranty of fitness for a particular purpose
A
- the disclaimer must be in writing and conspiruous
22
Q
The enforceability of disclaimers may be challenged on the basis of:
A
unconsciousability
23
Q
Barrer must be:
A
a notice of breach to seller or is barred from any remedy
24
Q
Plaintiff’s conduct as a defense
A
Contributory neglignece - not a defense because breach of warranty is not a tort action like a lwsuit based on negligence
Voluntary assumption of risk - probably a defense
25
Privity issues (who can sue and who can be sued for breach of warranty?)
Generally anyone in chain of distribution - privity of contract not a requirement
26
Who can be a plaintiff suing for breach of warranty?
3 alternatives
a. status of plaintiff ("in the family or household")
b. type of plaintiff (legal entity vs natural person)
c. types of damages recoverable ("injured in person" vs "injured")
27
Alternative A
Seller's warranty extends to any natural person who is in the family or household of his buyer if it is reasonable to expect that such person may use
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Alternative C
Seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty
29
Limitation of consequetional damages:
for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not
30
The contract may include provisions which limit available remedies -
limitaiton on buyer's remedies
typicall, to repair, replace or refund the purchase price - but the limited remedy must not "fail of its essential purpose"
\*a remedy fails in its essential purpose when, while it may have appeared fair and reasonable at the inception of the contract, as a result of later circumstances it operates to deprive a party of a substnatial benfefit of the bargain
31
The contract may include provisions which:
limit duration of express or implied warranties
32
Summary of seller's strategies to avoid or limit warranty claims:
do not create express warranties
disclaim implied warranties of merchantability or fitness
Limit duration of implied or express warranties
limit remedies to, for example, repair, replace, or refund purchase price
limit buyer's right to recover consequential damage
33
Magnuson-Moss Warranty Act 1975
Federal law - supercedes UCC as to transactions to which it applies
Applies to written warranties for consumer pdocuts purchased by consmers, if a written warrnty is given
34
"Consumer Product"
Any tangible personal property normally used for personal, family or household purposes
35
"Consumer"
A buyer (other than for resale of consumer product) of a consumer product
- a person to whom the product is transferred during the duration of the implied or written warranty
- an person entitled to enforce the warranty obligations
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Written warranties must be:
fully and conspicuously disclosed in simple and readily understood language
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If goods cost $10 or more, written warranty must be conspicuously designated as:
"full" or "limited"
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To be able to call a written warranty a "full" warranty, the seller must agree to the following:
a. if warranty is breached, seller must remedy the problem within a reasonable time without charge - free of charge
b. no limitation may be imposed on duration of any implied warranty
c. any limitation or exclusion of consequential damages must be consicuous and on the face of the warranty
d. if reasonable number of repair attempts does not remedy problem, seller must afford buyer the option of either replacement or refund of price
3e. warranty service must be provided to anyone who owns the product during warranty period
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Under either a full or limited warranty, seller cannot disclaim or modify:
the implied warranties of merchantability of fitness
40
Seller may limit the duration of:
an implied warranty
41
Elements of strit liability
1. product sold in defective condition
2. defendant must be engaged in the business of selling such products
3. product was unreasonably dangerous as a result of the defect
4. defect existed at time product left hands of defendant
5. defective condition attributable to the defendant
6. plaintiff sustained physical harm or property damage
7. defect caused the injuries/loss sustained by the plaintiff
42
Defective condition
Manufacturing defect
design defect
inadequate warning, instructions or packaging
43
Once engaged in the business of selling products who sells a defective product is subject to liability for harm to persons or property caused by the defect =\>
the plaintiff is not required to show that the product was unreasonably deangerous
44
Holds sellers to a different standard of liability
strict liability regardless of the care taken by the manufacturer
if warnings could have reduced risk then defective
freasable alternatives test - used to determine whether product is defective
45
Other characteristics of strict liability in tort
1. Not dependent on contract
2. reliance not required
3. lack of privity not a defense
4. notice of defect is not required
5. liability generally cannot be disclaimed, excluded, or modified
46
Defenses
Comparative negliegence
Voluntary assumption of risk
3. misuse or abuse of the product by the buyer
4. subsequent alteration of the product by the buyer
5. economic loss doctrine
47
Anticipatory repudiation
Indicating an intention to not perform with regard to performance not yet due
48
Retraction by a breaching party of an earlier anticipatory repudiation
Generally this can be done
49
Seller thinks he or she will not be paid
Seller can withold delivery and demand cash
- only when buyer is insolvent =\> ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due
50
Seller can stop delivery of goods
a. if buyer is insolvent, this remedy is available as to any size of shipment or quantity stored
b. as to other breaches by buyer this remedy is only available with respect to large shipments
c. seller can still sue buyer for breach regardless of whether shipment could be stopped under this section
d. improper stoppage by a seller is breach of contract if delayed delivery results
51
Seller is required to give notice of the sale to buyer - different notice to breching buyer depending whether resale is public or private
1. negotiated sale - general notice to buyer
2. auction sale - specific notice
52
Buyer can reject the goods if has concerns
a. "As is" or other effective disclaimer may eliminate right to reject because of defects
b. title transfers back to seller - whether or not rejection was rightful
c. risk of loss remains on seller until the breach is cured or the goods are accepted by the buyer
53
How to reject the goods - buyer
Must occur within reasonable time
Buyer must give reasonable notice to the seller
54
A greater burden is imposed on merchant buyers who have rejected goods
1. merchant buyer must follow reasoable instructions from seller
2. if goods are perishables or threaten to decline in value speedily - a merchant buyer must attempt to sell goods for breaching seller if reasonalb instructions
55
Two requirments must be met in order to be able to revoke acceptance, nonconformity must be substantial and any one of the following must apply:
1. buyer accepted goods blieving seller would cure and seller has not
2. buyer accepted goods not kowing of the nonconformity because of difficulty of discovery
3. buyer was assured by seller that nothing was wrong
56
Revocation is not effective until:
notice is given to seller
57
Buyer can cover
Buyer purchases substitute goods
Damages that buyer can then recover - cover price less the contract price plus incidental and consequential damages
Cover ust occur in good faith and be reasonable
58
Seller can recover full purchase price plus incidental damages only if
a. buyer has accepted goods and fails to pay
or
b. goods destroyed after risk of loss has passed to buyer
or
c. of identified goods still in the seller's possession if seller cannot resell
59
If goods are not resold pursuant to 2-706 =\>
seller recovers contract price less market price plus incidentals
60
Buyer can sue seller for specific performance
This equitable remedy is only available to buyer when the "goods are unique or in other proper circumstances"
Difficult remedy for byer to get
Buyer must have "clean hands"
61
2 types of buyer's consequential damages
1. foreseeable losses - those losses suffered by the buyer that the seller ought to have realized would result from the seller's breach
2. breach of warranty losses - personal injury or property damage resulting from breach of warranty
62
Agency
Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the others so to act
The one for whom action is to be taken is the principal
The one who is to act is the agent
63
Agency is based on the concept of delegated authority -
you can authorize another to perform on your behalf
64
Utility of agency
Multiply our economic activiteis by acting through others (agents)
65
Master/servant relationship
servant under physical control of master - typical employment relationship
66
Employer/employee relationship
exact nature of relationship depends on facts and circumstances
67
Independent contractor
Not physically controlled by person who engages independent contractor
68
Creation of agency by expres or implied agreement results in a grant of actual authority - two aspects of actual authority
1. express authrotity - defined by the spoken or written word
2. implied (incidental) authroity - to do what is customary and in addition to express authority
69
Apparent agency
The principal creates impression in mins of third parties that an agency exists or that an agent has a certain scope of authority
Results in apparent authority from perspective of third parties
- apparent authority may coincide with agent's actual authority
- apparent authority may exceed/be less than agent's acutal authority
- the alleged agent may not in fact be an agent at all
70
What do third parties have a right to believe about an agent's scope of authority?
1. Agent has usual and customary grant of authority gven the nature of the agency relationship
2. Third parties not boud by "secret" limitations unless they know of them
71
Who bears the risk that no agency in fact exists?
1. The third party bears the risk that the "agent" is not realy an agent
2. This is true unless apparent authority has been created by "principal" - then "agent" has apparent authority and principal will be bound
72
When can agent be liable for contracts entered into on behalf of a principal?
Exceeds authority - is agent going to be liable to principal
"agent" acts for a non-existent or incompetent "principal"
Agent acts for partially disclosed principal
73
Agent acts for partially disclosed principal
Third party must make election when identiy of principal becomes known
If agent held liable, agent can recover from principal
74
If agent has no actual authority - agent can be liable
Principal not liable to third party
agent potentially liable to third party based on either of these 2 theories
75
Agent potentially liable to third party:
1. misrepresentation - did agent advise third party he had authority?
2. breach of implied warranty of authority - agent impiedly warrants that he has the necessary authority when he enters into the contract with third party
76
Obligations of principal to agent
1. abie by agreement
2. maintain true acount of any money owed to agent
3. reimburse expenses paid by agent
4. warn agent of dangers
5. indemification (indemnify agent for any losses or expenses)
77
Obligations owed by agent to principal
1. abide by agreement
2. follow lawful and reasonable instructions of principal
3. carry out agency using reasonable care
4. duty to account to principal for any money in agent's possession that belongs to principal
5. duty to notify principal of any information learned by agent that bears on agency
6. undivided loyalty
7. agent must indemnify the principal for any loss caused by the agent's breach of a duty owed the principal
78
Sanctions for violation of duty of loyalty are severe:
1. Termination of agent
2. principal can recover compensation
3. principal can recover secret profits
79
In the context of the employment relationship =\>
the employer is the principal and the employee is the agent
80
Vicarious (derivative) or imputed liability of principal
"respondent superior" - let the superior respond for the acts of the subordinate
81
2 things for vicarious or imputed liability
1. Must have master/servant typeof relationship
2. tort must have been committed within employee's scope of employment
- if outside scope, only employee is liable to third party, if within scope, employer and employee are jointly and severally liable to third party
82
Termination by acts of parties or as a result of their agreement
1. fulfillment of purpose
2. lapse of time (per agreement or after reasonable period of time)
3. upon the occurrence of a specified event
4. mutual agreement of the parties
5. act of one party alone
83
Termination by operation of law
1. death or incompetency of princiapl or agent
2. bankruptcy
3. change of law
4. loss or destructoin of subject matter of agency
84
Effect of termination
Agent's actual authority terminates
But agent may continue to have apparent authority
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Types of notice required to cut off rights of third parties against principals because of agent's continuing authority
a. actual notice to those who have had contact with agency in the past
b. constructive notice to the public in general who may have merely known of the existence of the agency
86
Employment at will doctrine
Employee can be discharged at any time for any reason - employer need not show cause or any good reason
87
Exceptions to right to terminate an employee "at will"
1. Federal and state statutes regarding labor law and anti discrimination laws
2. contract theories - oral promises made that need to show reason for firing
3. public policy - whistle lower cases
4. Tort theories - fraud, intentional infliction of emotional distress, defamation of character, breach of the implied covenant of good faith and fair dealing
88
Worker's compensation
Workers are allowed to receive compensation for injuries that occur on the job
Injuries have to be job related
Employers are required by law to buy insurance to cover workers claims
89
Employer defenses to a worker's compensation claim:
1. Employee really an independent contractor and not covered by statute
2. injury not employment related
3. Employee engaged in horseplay
90
Occupational Safety and Health Act
Intended to promote safety in the work place - virtually all private employers are within scope of the act
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OSH
Act imposes record keeping and reporting requirements on employers and requires them to post notices in the work place informing employees of their rights
Establishes work places safety standards
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Compliance, Enforcement, and Penalties of OSHA
emplowered to conduct inspections
issues citations which require the employer to abate or correct the situation within 6 months
Various civil and criminal penalties
Employer defenses - compliance with the rule is not feasiable, employee misconduct caused violation of the rule
93
Burden shifting
Employee must make a prima facie showing that discrimination occurred
Burden shifts to employer to articulate a legitimate , nondiscrimitory basis for the decision
Burden shifts to employee to prove that alleged legitimate is pretextual
94
Equal Employment opportunity Commission (EFOC)
Federal agency responsible for enforcing most federal anti-discrimination laws
5 members
empowered to conduct investigations
95
Statutory criteria that justify or permit differential in wages
a. Bona fide seniority based system
b. bona fide merit based system
c. quantity or quality of product
d. "any other factor other than sex"
96
Disparte treatment discrimination
"one-on-one" discrimination
\*fired because of race
97
Disparate impact discrimination
a facially netrual rule or requirement of employer that, in fact, discriminates
ex. the following screening devices have a discriminatory disparate impact
\*credit status, arrest record, unwed pregnancy, educational requirement, marital status
98
Quid pro quo harassment
Employer conduct that conditions job benefits on acquiesence to sexual harasment or penalizes an individual for refusing to participate in harassing conduct
99
Hostile enviornment harasment
An employe e who is subjected to a hostile, intimidating or offensive work environment
100
Age discrimination
Applies to employees who are 40 and older
but not applicable to executives 70 or older
101
Disabled person - someone who has
A physical or mental impairment that substantially limits one or more of his or her major life activiities
a record of such impairment
regarded as having such impairment
102
When an emjployee refuses to work under conditions they believe to pose a risk of death or injury and dont have time =\>
he may refuse to expose himself to the dangerous situation without be subjected to "subsequent discrimination"
103
Hiring criteria based on gender:
is violative of the Civil Rights Act of 1964
104
Americans with Disabilities Act of 1990
Employers must make reasonable accomodations to accommodate people with disabilities
Preemployment medical examinations are forbidden before a job offer
Title I of the ADA is administered by the EEOC
105
What fiduciary relationship, if any, exists in an agency relationship?
The agent owes a fiduciary duty to his principal
106
Customers who dont receive right of inspection =\>
are allowed to refuse payment of goods
107
Person would maintain right to revoke if:
1. accepted on reasonable assumption that its non-conformity would be cured
2. it has not been reasonably cured
3. the non-conformity substantially impairs the value of the machine
108
The posessor of stolen goods, regardless of her knowledge of their origins:
cannot convey good title
109
Any entrusting of possession of goods to a merchant who deals in goods of that kind:
gives him power to transfer all rights of the entruster to a buyer in ordinary course of business
110
Title reverts back when:
goods are rejected by buyer
111
Article 2 of UCC with regard to buyer's rights and duties
If the contract is a C O D contract, the buyer has the right to reject the goods after inspecting them
The buyer must furnish the facilities reasonably necessary to permit the buyer to accept the goods
The buyer may reject the goods if they fail in any respect to conform to the contract
The buyer may accept the goods despite the fact that the seller's manner of delivery was not conforming to the contract and thereafter sue the seller for breach of contract
112
