What is a seller's obligation under the UCC?
To transfer and deliver the goods sold
What are carrier cases?
When the parties to a contract agree to use a specified common carrier (transporter) to deliver goods.
When does the risk of loss transfer from the seller to the buyer in:
- Shipment contracts?
- Destination contracts?
Risk of Loss in Carrier Cases:
- Shipment K's: Risk of loss transferred to buyer once seller delivers goods to common carrier
- Destination K's: Risk of loss transferred to buyer when goods are tendered at the destination
What does "FOB seller’s place of business" mean?
It is a shipment K: risk of loss passes to buyer once seller delivers goods to common carrier and arranges for their shipment.
What does "FOB buyer's place of business" mean?
It is a destination contract: risk of loss passes to the buyer after the goods are tendered at the destination point
FOB = "Free on Board"
What are non-carrier cases?
When the parties do not agree to use a common carrier to deliver goods.
In non-carrier cases, who bears the risk of loss (ROL)?
- If seller is not a merchant: ROL passes to the buyer upon tender of delivery
Only tender of delivery is required, not actual receipt by the buyer
- If seller is a merchant: ROL passes to buyer when the buyer physically takes possession of the goods
- Only tender of delivery is required, not actual receipt by the buyer
⚠️ Note: Risk of loss can also be specified in the K, or borne by the breaching party if there is a breach
When can a party request an assurance of performance?
If anticipatory repudiation cannot be established but there are reasonable grounds for insecurity
When can a party suspend performance after failing to receive adequate assurances?
If the other party does not respond:
- To the demand within a reasonable time (30 days under the UCC); or
- In a way that provides reasonable assurances
What is the perfect tender rule?
Requires absolute perfect tender of goods as specified in the contract
⚠️ Does not apply to installment contracts or when parties agree otherwise
What happens if the buyer does not properly reject the nonconforming goods? (after a reasonable opportunity to inspect)
The nonconforming goods will be deemed accepted
Once the buyer accepts the nonconforming goods, what can the buyer do?
Pay the contract price of those goods; and
Seek damages for any nonconformity if the seller is notified
Upon receipt of nonconforming goods that violate the perfect tender rule, what are a buyer's 3 options?
The buyer must inspect the goods, and "if the goods or tender of delivery fail in any respect to conform to the contract, the buyer may:
- Reject the whole; or
- Accept the whole; or
- Accept any commercial unit or units and reject the rest.
After delivering a shipment of nonconforming goods under the perfect tender rule, under what circumstances will the seller have a right to cure?
Before the window for performance on the K has elapsed, so long as the seller gives the buyer notice of the intent to cure; or
- If the seller reasonably thought that buyer would accept the nonconforming goods, the seller may substitute a conforming delivery, so long as the seller gives the buyer notice of their intent to cure and cures within a reasonable time
What are the requirements for a breaching seller to cure an imperfect tender?
- The seller must give the buyer reasonable notice;
- The seller must tender conforming goods within the contract time
Unless the seller had reasonable grounds to believe the buyer would accept the imperfect tender, in which case the seller has a reasonable time to cure the breach.
- Unless the seller had reasonable grounds to believe the buyer would accept the imperfect tender, in which case the seller has a reasonable time to cure the breach.
Can a buyer force the seller to cure?
When can a buyer reject nonconforming goods?
What constitutes a buyer's acceptance of nonconforming goods?
A buyer has accepted the goods if, after a reasonable time to inspect the goods, the buyer signifies acceptance by:
- Telling seller that the goods comply with the contract;
- Taking the goods despite their non-conformity;
- Not making a valid rejection of the goods;
- Taking action inconsistent with the seller still owning the goods;
If a buyer accepts nonconforming goods, under what circumstances can the buyer then later revoke their acceptance and reject the nonconforming goods?
The buyer may revoke her acceptance within a reasonable time after discovering the grounds for revocation (i.e. the fact that the shipment was not a perfect tender), and before there's any substantial change in the goods' condition (unless the change in condition is due to the goods' own defects).
To be effective, the buyer must notify the seller of the revocation.
What are the 3 UCC implied default warranties for the sale of goods?
- Fitness for a particular purpose
What is the warranty of merchantability, and when does it apply?
The warranty of merchantability guarantees that the goods are fit for the ordinary purpose for which they would be used. It applies only if the seller is a merchant.
In a K for the sale of goods where the seller is a merchant, how can the seller disclaim the implied warranty of merchantability?
- Expressly disclaiming the warranty, using the word "merchantability" in the contract in conspicuous writing (if written); or
- Using language or circumstances that are reasonably understood to exclude the warranty of merchantability
- Examples: "As is" written into the contract, or if there are patent (obvious) defects
What is the warranty of fitness for a particular purpose, and when does it apply?
The warranty of fitness for a particular purpose guarantees that the goods are fit for the particular purpose for which the buyer intends to use them.
It only applies when seller has reason to know:
- The particular purpose for the goods; and
- That the buyer is relying upon the seller's skill to select goods reasonably fit for that purpose
When is the implied warranty of fitness for a particular purpose negated?
- There is a written disclaimer that is clear and conspicuous, or
- The goods have patent defects that were easy to detect
What is an express warranty?
- An affirmation of fact or promise or description of the goods made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain; or
Sample or model made as part of the basis of the bargain that creates an expectation the item will conform to the sample or model
Can you limit recovery for breach of warranty?
Typically yes, unless unconscionable.