I.

Formation
A. Intro to the Course
1. Background to the UCC a. In the early-20th C Am law was rule oriented. Legal realism changed that with the belief that diff facts should yield diff results and the movement away from abstract rules. The UCC was the brainchild of Carl Llewelyn, the father of the legal realist movement. The UCC is thus very particular to facts. Title (abstract) was the crux of the law of sales b4 the UCC. Now its CoD, CoP and UoT (more fact-oriented). b. 1-102UCC shall be liberally construed. c. 1-203Parties to a K must act in good faith in performance/ enforceM. 2. Functions of Sales Systems a. Formulation: Sales systems help Bs and Ss create legally enforceable ownership xfers. b. Terms: Sales systems provide a set of stnd terms unless B and S choose to modify them. c. Performance: Sales systems provide a set of delivery institutions that facilitate the possessory, legal and symbolic xfer from S to B. d. Remedies: Sales systems enforce agreeMs to transfer ownership by giving the aggrieved buyer or seller various remedies for breach by the other.

B. The Role and Scope of Codes

1. The UCC is a Gap-Filler!

Express Terms Implied Terms (CoPCoDUoT) UCC CL a. Express terms trump all. b. Implied terms trump UCC and CL
i. 2-208(1)/R1-303(a) = CoP ii. 1-205(1) and (3)/R1-303(b) = CoD iii. 1-205(2) and (3)/R1-303(c) = UoT

c. The UCC fills gaps since parties to a sales agreeM cannot think of every contingency in advance. Makes transactions quicker when parties are willing to fall back on UCC. Plus it creates uniformity, as opposed to CL which varies by state. The content of UCC is itself mostly UoT. d. 1-103: The CL is the second gapfiller; helps define terms UCC leaves undefined like offer. e. Ragus Co. v. City of Chicago (1993)
i. Ragus entered K to supply City w/ a certain number of rodent traps. The city says that it meant pairs of rodent traps and refused delivery of ind traps. Ragus sued for damages. The City showed the UoT was pairs of traps; everyone sold them in pairs. Therefore, City wins SJ. (Note: This case kind of ignores the parol evidence rule, but the modern trend is to admit evidence liberally).

2. UCC applies to transactions in goods (movable at time of identification to K). a. 2-102: Art 2 applies to transactions in goods (has nothing to do w/ merchant status). b. 2-105/A2-103(1)(k): Goods are all things (including specially mfg goods) which are movable at the time of identification to the K for sale. (Also includes crops and unborn animals). c. Dakota Pork Indus. v. City of Huron (2002) i. DP gave City water rights in exchange for water supply. Is furnishing water the sale of goods? This ct (unlike some other cts) holds that the sale of water is the sale of goods governed by Art 2 bc it, like electricity, is a thing that is fairly identifiable as movable (by measure w/ flow meter) at the time of identification to the K of sale.

ii. i. ii. iii. iv. v. vi.

Note: Cts can still apply Art 2 principles and policies even if Article 2 does not technically apply. Sale by author of movable paper certificate representing authors rights to future royalties. 1) Answer: NOpaper is movable but it is not a good. The right/ability to sue/collect royalties is a thing in action, which the UCC specifically states is not goods. Therefore the CL applies. Sale of natural gas 1) Answer: YES (EXCEPT: If it will damage the realty, Art 2 only applies if the seller removes it. W/ natural gas you have to drill so probably will damage the land and must be removed by S.) Sale of compact disc to a consumer by a retail music store 1) Answer: YES. Buyer is buying the actual CD, not the IPmight be diff with a download but with a CD the form predominates. Recording artists sale of an original recording on CD to a producer to produce/distribute the CD. 1) Answer: NO. The artist is selling his IP; the IP predominates, not the technical CD form. A publishing companys contract with an author to write a book 1) Answer: NO- Book does not exist at time of identification to the K. Again this is an IP purchase. A manufacturers K w/ a merchant buyer to specially manufacture and sell a custom-made machine. 1) Answer: YES. 2-105(1) expressly includes SOME specially manufactured goods. Machine v. book. For machine, specs are submitted so the B gets exactly what B wants. With book, even if B doesnt nec know at time of identification to K exactly what finished product will be. A sculptors K w/ a patron of the arts to create and sell an original sculpture to the patron. 1) Answer: NOthis is a closer question, but still involves creativity so isnt precisely idd to the K. The sale of a raffle ticket for a new car. 1) Answer: NO- A chance to win the car is a thing in actiona right to claim the car IF your ticket gets picked. Any time a piece of paper represents something its almost always not a good.

d. Problem 1.5: Are these the sale of goods such that Art applies? 2-102, 2-105(1)/A2-103(1)(k).

vii. viii.

3. UCC applies to some Mixed Goods-Services Ks a. Predominant purpose test (maj): Is the predominant purpose of the transaction to sell goods or services? If goods, the UCC applies to the whole transaction. If services, UCC applies to none. b. Gravamen of the action test (min): Is the source of the complaint w/ the goods or the services portion of the transaction? (H prefers). c. Cook v. Downing (1994) i. D is a dentist who also sells dentures. P sued under IWF for ill-fitting dentures. IWF only applies to merchants. Dentists are medical service providers, not merchants under 2-104 and dentures are not goods under 2-105. JudgM for P revd. ii. Dissent: This is a mixed goods-services K. The predominance test applies, there was evidence that the dentures were the predominant part of the trans, and so judgM for P should be affd. Maj ignores the fact that nothing excludes dentures/dentists from the codes definitions of goods/merchants. d. Problem 1.3: Aunt takes old-fashioned reels of home movies to local camera shop for xfer to VHS tapes. Shop messes up xfer process and ruins reels. Will Art 2s warranties provide a remedy? i. Answer: 2-102: Art 2 only applies to transactions in goods. This is a mixed services-goods K. Art 2 probably will not apply to her claim bc: 1) Under the gravamen test it was the service that resulted in the damage. 2) Under the predominance test she is probably paying more for the service than the tapes. e. Problem 1.4: Specialty Optometrists make and fit contact lenses for the problem wearer. Should they make customers sign disclaimer of UCC warranties? i. Answer: 2-102 again. H doesnt know the answer bc its difficult to pull apart the goods from the services. If we go by Cook v. Downing then its not a transaction in goods, but medical services. But under normal UCC definitions, maybe? Primarily buying the specialty contact lensesso goods seem predominant. Plus the contacts and not the fitting will likely cause any damage. 4. Merchants

a. 2-104(1): a merchant is a person who deals in the goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employM of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. b. Three Types of Merchants under UCC ( 2-104 Cmt. 2):
i. For 2-201(2) (SoF), 2-205 (firm offers), 2-207 (confirmatory memoranda) and 2-209 (modification), almost every person in biz qualifies as a merchant by hold[ing] himself out as having knowledge or skill peculiar to the practices involved in the transaction This is bc the practices involved, e.g., answering mail, are typical biz practices for all bizs. Still must be in mercantile capacity. ii. 2-314 (IWM), 2-402(2) and 2-403(2) (entrustment) only apply to merchants who deal in goods of the kind (requiring professional status as to the particular kind of goods.) iii. 2-103(1)(b) (good faith = reas comm stnds), 2-327(1)(c), 2-603, 2-605, 2-509 (RoL) and 2609 apply to persons who are merchants under either of the above definitions: practices or goods so like i. every person in biz will qualify.

c. Problem 1.6: Drunk lawyer friend agrees to sell you her car for $8,000 at reunion. You were told to bring the check to her house at end of month for pickup. Sent letter to confirm agreeM but she didnt respond and refused to sell bc worth 15,000. Can you enforce oral K under UCC 2201(1) & (2), 2-104(1) & (3), and OC 2 to 2-104.
i. Answer: Under OC 2, for SoF issues, any person in business qualifies as a merchant, so long as they are acting in their mercantile capacitynot to a lawyer buying fishing tackle. For 2-201(2) to apply, the sale must be between merchants. Deborah might be acting w/in her mercantile capacity due to her expertise of Rolls Royces. But B (me) probably is notlike buying fishing tackle. So probably not merchants, K exceeds $500 and theres valid writing so Deborah can assert the SoF. H: This is the type of ? you dont want to give a definite answer to. Dont assume anything!

ii.

5. Scope of Article 2A for Leases a. 49 states plus DC have adopted Amended 2A and one state adopted current 2A. b. Art. 2A functions like Art. 2, allowing parties to make their lease Ks as they wish w/ 2A gap-fillers. 6. True Lease v. Disguised Sale (very difficult) a. Bright Line Test in 1-201(37): In re Bailey (2005) i. B leased two tractors from Lafayette with down payments and monthly payMs of 800/mo. B filed for bankruptcy. B had PO for 10% of the FMV of the unit at the end of the lease (although its not in the writing, which states this is a true lease). B could terminate, but would still be liable for payments until new lessee was found. ii. Lafayettes profit was derived from the down payment and the buyout and the mthly payMs were exactly the amt Layfayette owed his supplier each month. B paid license fees, insurance/repair and even pd personal property taxes on the tractors thinking it was a purchase. iii. The total principle payMs totaled 20,800 over the 36 mth lease. Units would be worth 14,000 to 15,000 at end of lease term, leaving B able to buy for just $1,400-$1,500 w/ 10% PO. iv. Ramifications: If this is a security interest Lafayette waits in line with everyone else. If a true lease, Lafayette gets back. v. HELD: This is a disguised sale so B must wait in line with all of the other collectors. vi. 1-201(37) Bright Line Test: 1) TERMINABLE? Does the debtor have a right to terminate the purported lease prior to expiration of its term? (If you still have to make payMs, its not a true right to terminate). a) No right to terminate here bc would still have to make payments. 2) STATUTORY CONDITIONS? If not terminable, are any of the four statutory conditions satisfied? 3) If terminable or none of the statutory conditions are satisfied, then the court must further examine the specific facts of the case to determine whether the economics of the transaction still suggest

b. If no bright line test, move on to on of the following fact-based tests per 1-201(37): c. Old [subjective] intent test: If the parties intended it to be a lease, it was a lease. d. Economic Realities Test: What is the likelihood, at the time the transaction is entered into, that the lessor will receive the goods back at a time when the goods still have meaningful economic life? (Endorsed by drafters of Art. 2A). IOW, is there a reas likelihood that the lessor will indeed retain some residual interest in the goods?
i. Carlson v. Giachetti (1993) Application of Economic Realities Test 1) C mfgs, leases and sells auto body repair equipM. C leased a machine to King. Terms: 2 month advance payM and 572/mo for 60 mths totaling $34,344. King sold to G, who was unaware of Cs interest since C failed to file appropriate financing stateMs. C sued G for conversion. 2) Ramifications: If a true lease, King had no power to xfer title and G may be liable for conversion. Tr judge said its a security agreeM, which C failed to perfect, so no action for conversion. 3) HELD: Revd bc this was intended by C and King to be a true lease. 4) Reasoning: a) 1-201(37): Under the bright-line rule, there is a security interest where (1) the purported lease K is not terminable by the lessee, AND (2) the lessee has a PO at end of the lease for no or nominal addl consideration. Here, there is no PO, so its not a security interest under this brightline rule. Therefore, the court resorts to the economic realities test, noting that it is an objective inquiry into the outward appearance of the facts and not a subjective inquiry. b) The court uses the economic realities test: Is there a reas likelihood that the lessor will indeed retain some residual interest in the goods? c) This looks like a secured sale bc its not cancelable. However, the most imp thing is that when the lease expires, the lessor must get sth back that has economic life and value. Here, C will get the equipM back after 6 mths w/ significant resale value. C reserved a significant reversionary int in the leased good, its a true lease and C can sue for conversion.

a security interest. a) Here the fourth condition applies: the lessee has an option to purchase for nominal addl consideration upon compliance with the lease agreeM. b) Nominal consideration means that given the facts and circs, there is no reas alternative but to exercise the PO. IOW, it would be completely unreasonable not to exercise the PO. Economic life testthe nominal PO shows that there is very little economic life left in the good for the lessor and hence no meaningful reversionary interest. c) This is the case here. After paying 20,000 already and only having to pay 1400-1500 more for something worth 14,000-15,000 any reas person would exercise the PO. If the debtor fails to exercise the option, he will lose approximately 12,000 in equipment value (FMV purchase price), which is much less than what he will lose if the option is not exercised. Therefore, the addl consideration is nominal bc it is less than the Debtors reas predictable cost of performing under the lease but not exercising the option. d) There is also evidence of a net lease (has to pay ins and taxes) and a payout lease (sellers profit is from payout and downpaymentmthly payments go directly to sellers creditor). These circs along with the debtor bearing RoL, the existence of a down payM, and the existence of a third-party supplier are all factors weighing in favor of a disguised sale.

e. Recall Ramifications of lease v. sale:

i. Tax and accounting: periodic expenses v. debt; certain tax advantages. ii. 2A (lease) v. 2 (sale) v. 9 (secured sale): what rights and remedies under each Code provision? iii. Bankruptcy

f.

Problem 2.2: Purported lease is for $300/mo for 10 ys. The ride has a 20 yr expected use life and is worth 30,000 at time of sale. Brigid can terminate at any time and has a 10,000 PO after one year. Term: BOTH PARTIES INTEND THIS IS A TRUE LEASE. Acme never filed financial stateM. B sells to Joe. Can Acme get it back? 1-207(37)/R1-203; 9-317(b); 9-505(b).
i. Answer: H: This leans more toward a disguised sale than a lease. Its not a disguised sale under the

ii.

bright-line test bc can terminate at any time, but it probably is under the economic realities test: What is the likelihood, at the time the transaction is entered into, that the lessor will receive the goods back at a time when the goods still have meaningful economic life? Bs ability to walk away is an imp one, but its not determinative. The PO seems nominal if exercised immediately after the 1st yr bc most reas ppl would pay the 13,600 total to own so its highly unlikely that Acme will get it back at all, let alone with meaningful economic life. Counter: the ride does have 10 yrs of life at the end and lessors wont all want to buy10,000 a lot of money. Its probably a security int, but Acme cant get it back bc Joe never filed fin stateM so int not perfected and no Art 9 protection. R1-203: Addl consideration is nominal if it is less than the lessee's reas predictable cost of performing under the lease agreeM if the option is not exercised.

g. Problem 2.3: First months rent 50% of purchase price. Remaining 35 monthly payMs only 1.5% of purchase price. May terminate any time after first month. May purchase at end or during lease with full credit toward purchase price for all lease payMs received. (same stats).
i. Answer: Joe needs to choose lease or disguised sale; cant have both. With his terms, the lessor can terminate at any time so fails bright line test but might meet the economic realities test. This is a front-loaded lease. Once you have sunk half of the expense into sth would you really reas terminate? The front-loaded-ness really diminishes that the lessor will get any value back. It might help if the lease payment credit could be used toward anything in the store.

7. Scope of CISG a. 60 countries have ratified the CISG. CISG only applies if parties have reason to know they are in different contracting states. A partys place of biz is the place that has the closest relationship to the K and its performance. The CISG does not define goods but it expressly excludes Ks where the preponderant part of the sellers obligation consists in the supply of labor or other services. b. Like UCC, CISG is a default mode that parties may opt out of. c. If its outside of the CISG then you default to international conflict of laws rules d. Three key matters included in UCC Art 2 but excluded from CISG i. Art 2(a): CISG does not cover sale of consumer goods unless the seller neither knew nor should have known that the goods were being purchased for a consumer purpose. ii. Art 5: CISG does not apply to the liability of the seller for death or personal injury caused by the goods sold iii. Art 4(b): CISG specifically excludes issues of whether the sale to the buyer cuts off the property interests of third parties in the goods that were sold. e. Viva Vino Import Corp. v. Farnese Vini S.r.l. i. P, PA corp and D, IT corp, entered into exclusive distributorship agreeMs. The agreeMs are considered Ks for the sale of goods under the UCC. ii. However, such agreeMs are not Ks for the sale of goods under the CISG bc the Ks 1) do not cover the sale of spec goods and 2) do not contain def terms regarding quantity or price. f. Problem 2.5: WBYU mfgs chairs for execs. Only fcty in Mexico, but corp office in Detroit. Detroit consultant goes to take order, faxes specs to Mexico, and fcty produces and ships to customer. Customer wants two chairs: one for office and one for home but doesnt tell consultant this. Covered by CISG? (Art 1, 10, 2, 3) i. Answer: Mexico probably has closest relp to K and its perf. However, there is no indication that CEO had knowledge of this fact since WBYU came to her from Detroit and faxed specs to Mexico for her. CISG probably n/a. If it did, it would cover both chairs, since WBYU didnt know one for home use. ii. Art. 1(2): The fact that the parties have their places of biz in diff States is to be disregarded whenever this fact does not appear either from the K or from any dealings btw, or from info disclosed by, the parties at any time b4 or at the conclusion of the K. Art 2(a): CISG does not apply to goods bought for personal, family or household use, unless the seller, at any time b4 or at the conclusion of the K, neither knew nor ought to have known that the

goods were bought for any such use; Art 3(2): CISG n/a to Ks in which the preponderant part of the obligations is supply of labor/services. iii. Art 10(a): When more than one place of biz, the place of biz is that which has the closest relp to the K and its perf, having regard to the circs known to or contemplated by the parties at any time b4 or at the conclusion of the K.

8. Real Estate a. There is no real estate code: instead form Ks serve the gap-filing function. b. Note that UCC 2-107(2) attempts to draw a line btw personal property and real property like with minerals, oil, gas, timber, etc. i. K for sale of minerals or a structure is sale of goods so long as they are severed by seller. ii. K for sale of other things attached to realty including crops that are capable of severance w/o material harm to the land are also sale of goods no matter who severs. iii. Problem 2.6: Covered by Art 2? 1) Sale of farmhouse to be severed from landYes, under 2-107(1) so long as seller severs it. 2) Farmhouse + Land: Noreal estate. 3) Six bushels of apples to be picked from landYes, sale of goods under 2-107(2)

C. Battle of the Forms under UCC 2-207

2-207 Flowchart OFFER

Definite and seasonable expression of acceptance which contains additional or different terms

Acceptance expressly conditional on offerors assent to additional or different terms?

NO = acceptance w/addl or diff. terms

YES = counteroffer, aka (expressly conditional acceptance)

Express assent to CO/conditional acceptance?

Do addl terms become part of the K?

YES = K on offerees (CO) terms

NO

Look to 2-207(2) to determine whether addl become part of K

Performance or conduct indicating existence of K?

B/t merchants? YES 2-207(2) NO terms do NOT become part of K unless expressly assented to

NO no K

YES K Terms per (3): agreed terms (conflicts fall away) AND UCC gapfillers

1. Common Law Background a. 2-207 is a poorly drafted provision that diverges significantly from CL in formation and terms.

b. CL Mirror Image Rule: Offeror is master of offer so if acceptance is at all diff w/ respect to material terms it is treated as a counteroffer. Article 2 explicitly rejects the mirror image rule. c. CL Last Shot Rule: Performance = acceptance of the counteroffer so the last shot governs. This creates huge problems for offerors and takes their power away. d. UCC: Acceptance is still valid even if it includes diff/addl terms, unless it says its a counteroffer.
2. Hill v. Gateway (1997) a. This is a merchant/customer case. H bought computer from G over the phone. Computer arrived with list of terms in box, including 30 day return policy and arb cl. Are these terms part of K? b. Judge Easterbrook frames G as the offeror and H as the offeree. Per Gs terms as master of its offer, H had 30 days to accept. H did not return w/in 30 days so H accepted and must arbitrate. Easterbrook says this is not a battle of the forms issue bc there is only one form: Gs offer. It does not matter that H paid before the K was officially formed by Gs offer and Hs acceptance. c. H: Generally, B sends a PO (offer) and S is the offeree. In fact, 2-206 implies that an order by a B is an offer and the offeree is the S! So really H made the offer by phone and G accepted by shipping so the terms in the box are either a written confirmation following an oral K or a modification of the oral K. If construed this way, H would have won. E might have done it the opposite way bc he favors arbitration or favors Ss? There is a cir split right now. d. Problem 3.1(a): Recall that under OC 1 to 2-719, any cl purporting to modify or limit the remedial provisions of the UCC in an unconscionable manner is subject to deletion and gapfillers apply. e. Problem 3.1(b) B calls G and places order. Can G call back and demand higher price? Yes under Easterbrooks reasoning. No if B is the offeror and G is the offeree bc the seller accepted by promising to ship under 2-206(1)(b). 3. Important UCC Provisions for K Formation a. 2-204 Formation i. Sales Ks can be made in any manner sufficient to show agreeM, including conduct that recognizes K. ii. K can still exist even if exact moment of formation is unclear. iii. K can be missing terms. The only substantive detail reqd is some basis for calculating breach. b. 2-206 Offer and Acceptance Rules i. Offers may be accepted in any manner and by any medium reas under the circs. ii. S may accept Bs offer for immediate shipM by shipping goods or by promising to ship. iii. Even shipM of non-conforming goods counts unless seller specifically indicates that shipM is offered merely as accommodation to buyer (then counteroffer). c. 2-205 Firm Offers i. Unlike CL, firm offers may be binding w/o consideration if the offeror is a merchant & offer is in writing. ii. May be open for stated time or if unstated, a reas time, neither to exceed 3 mths. d. 2-207 Battle of the Forms i. 2-207(1): 1) Written confirmations: There must be an existing completed K followed by a written conf. Multiple written confs is a mess. Written conf terms are compared w/ the terms of original agreeM (NOT other written confs). 2) Acceptances: Unlike the CL mirror image rule, acceptances that contain addl or diff terms are generally still valid. There are two ways that a purported acceptance can be invalid under 2-207: a) The acceptance is not a def and seas expression of accept (very late, terms wildly diff). b) The acceptance is expressly made conditional on assent to the addl or diff terms. H: Must track this language EXACTLY, or else it is a CO. If its a CO, there must be VERY specific express assent to the CO or NO K, unless by conduct. ii. 2-207(2) governs terms if (1) is met. Issue: it only says additional terms.

1) Addl terms are proposals for addition to K. Btw merchants they become part of K unless: a) the offer expressly limits acceptance to the terms of the offer, b) they materially alter the K (involve an element of unreas surprise like arb cls); or c) notification of objection has already been given or is given w/in a reas time of notice. If not merchants, addl terms do not become part of K unless offeror expressly assents. 2) Diff terms: 3 approaches a) Most cts apply the knockout rule to diff terms instead of 2-207(2), i.e. replace them with UCC gap-fillers. The knockout rule replicates the result under the 2-207(3), for diff, but not addl terms. b) However, OC 3 says that 2-207(2) governs whether addl OR diff terms become part of the agreeM. Only some cts have adopted this position bc the functional result under OC 6 is that diff terms still never become part of the K bc under 2-207(2)(c) offeror already implicitly objected by proposing the contrary). c) Third approach is the literal reading approach: diff terms never become part of K. iii. 2-207(3): Governs the terms of Ks by conduct only. Addl and diff terms knocked out and gaps filled.

e. Amended Article 2: Separates the issue of formation from the issue of terms.
i. ii. Formation is handled by 2-204, 2-205 and 2-206. 2-206(3) contains def and seasonable language. Unless acceptance is expressly made conditional on assent to the addl/diff terms deleted as unnec, but acceptance must still be reas understood as acceptance and not a CO under OC 2. 2-207 now governs the terms of all Ks, including conduct Ks. Terms include terms in the records of both parties, or to which they otherwise agree and gap-fillers.

4. Ionics, Inc. v. Elmwood Sensors, Inc. (1997) a. I bought thermostats from E for resale in water dispensers. They caused fire and I was sued, so I sued E for CDs. Is POs say I gets all remedies. It also has a 2-207(2)(a) cl. expressly limiting acceptance to the terms of the offer. Es ack form calls itself a CO, says no conseq dams, limits warranties and includes a 2-207(1) cl. making acceptance expressly conditional of Is consent to the addl or diff terms. b. HELD: Neither partys terms govern. I wins bc UCCs gap-filler happens to be favorable to it. c. Chart Analysis: i. Offer by Ionics. ii. Elmwoods acceptance was expressly conditional on Ionics assent to diff terms. iii. No express consent by offeror. (Therefore no written K). iv. However, there is performance indicating the existence of a K. v. Under 2-207(3), only the agreed terms are kept and the UCC gapfillers apply. Disagreed about remedies and warranties. UCC gap-fillers offer warranties, conseq dams, etc. so I wins. d. H: 2-207 can be used to manipulate. S can get around it by rejecting offer and sending new one. e. Problem 3.2: Bs PO says S liable for all remedies. S shipped goods but forgot ack form so sent later. Ack form disclaimed CDs in bold-faced language. Answer: 2-207 is not implicated here. Conduct of delivery was acceptance under 2-204(1) and 2-206(1)(b). Bs terms are the only terms. Ss ack form is merely a proposal for modification. Same result under A2-207. f. Problem 3.3(a): S recd PO (silent about dispute resolution) and sent ack form (requiring arbitration) but has not delivered machines. Can S cancel? Answer: Under CL mirror image rule yes. Under 2-207(1), so long as the ack form contained a definite expression of acceptance the addl term does not negate its effect as an acceptance so if S tries to cancel she will breach. Its not a counteroffer bc theres no 2-207(1) expressly conditional language. g. Problem 3.3(b): Same facts, but ack form purports to accept the offer to buy stationary bikes instead of weight machines. Answer: No K. This is not a definite/reasonable expression of acceptance under 2-206(1)(a). However, under 2-206(1)(b), if wrong product were actually shipped, it would constitute acceptance unless S specified that it was sent as an accommodation.

h. 3.3(c): Same facts as (a), but ack form has 2-207 expressly conditional language. Can S cancel? Answer: Probably. Expressly conditional cl makes the ack form a counter-offer. Therefore, a K can only be formed by conduct under 2-207(3). No shipM so prob no conduct. i. 3.3(d): Same as (c) but S shipped and accepted payM. Can S cancel? No. K by conduct. BUT arbitration is an addl term and under 2-207(2) its knocked out so UCC gap-filler applies (no arb). j. Problem 3.4(a) Bs PO reserved all remedies. Ss ack form disclaimed CDs, reqd arbitration, didnt have expressly conditional language. S shipped. K? What terms? Answer:
i. ii. PO should be the offer under 2-206(1)(b). Under 2-207(1), so long as ack form is definite and seasonable, its not expressly conditional so its a valid acceptance. So there is a K. Terms are determined under 2-207(2). B and S are probably merchants. 1) Arb clause is an addl termprobably doesnt become a term. a) Merchants so arb cl becomes part of agreeM unless (a),(b), or (c) apply. PO silent about dispute resolution so 2-207(2)(c) n/a. Also no expressly limits language so 2-207(2)(a) n/a. Under 2-207(2)(b), most cts have determined that arb cls materially alter the agreeM bc they involve an element of unreas surprise. 2) CDs is a diff termthree approachessame result S is on the hook for CDs. a) Under 2-207(2)(c) and OC 6, notification of objection has already been given by B when it reserved all remedies, so the diff no CDs term does not become part. b) However, 2-207(2) only says addl terms so for diff terms the majority of cts apply the knockout rule. Therefore, the UCC gap-filler applies, which happens to coincide with Bs ints. c) Literal Reading Approach: Diff term never becomes part of K.

k. Problem 3.4(b): B notices the arb term in the ack form, objects, but then says I guess so. The term is dickered/negotiated/agreed upon. 2-207 n/a: intended to apply to boilerplate provisions. l. Problem 3.4(c): Oral Kno CDs. B sent S written confirmation including machine, price, CDs reqd and This acceptance expressly conditional language. No performance. K? Terms? Answer: This written confirmation is not an acceptance; it is a proposed modification. Is this right? Ask about written confirmation language in 2-207.
5. Battle of the Forms for Leases a. LEASES: Article 2A has no battle of the forms since most leases are heavily negotiated and there is usually only one form. However, formation rules are the same. b. Formation Rules: 2A-204, 2A-205, 2A-206 pretty much the same as 2-204, 2-205, 2-206. c. 2A-205: Must be signed writing, no consideration reqd, time stated or reas time, neither > 3 mths. d. Problem 4.1(a): Offer + payM to keep offer open for 4 mths = an option K, NOT a firm offer. e. Problem 4.1(b): Firm lease offer cant stay open > 3 mths under 2A-205. f. Problem 4.1(c): Remember that under 1-103 the CL claims and defenses supplement the UCC. 6. Battle of the Forms for CISG a. CISG drafters rejected battle of the forms. CISG mixes BoF and CL mirror image rule. i. 19(1): Purported acceptances that contain additions or modifications are not acceptances, but instead are counteroffers. ii. 19(2): Purported acceptances that contain addl or diff terms count as valid as long as 1) the new terms are not material alterations or a) Definition of material differs significantly from UCC: Any addl or diff terms relating among other things to the price payment quality and quantity place and time of delivery extent of liability or settlement of disputes. 2) the offeror does not object to the discrepancy w/o undue delay. iii. No expressly conditional on consent to addl terms exceptions. iv. No 2-207(3) corollary. Last shot doctrine applies. b. Formation Rules:

i. ii. i. ii.

Under 18(2) acceptances are effective only when received by the offeror and not when sent. Under UCC, they are valid/effective when sent/dispatched. Under 16(2) firm offer doesnt have to be in writing and isnt limited to 3 mths.

c. Problem 4.2: Acceptance has a diff no CDs term and an addl arb term. Performance. K? Terms?
Canada and US are contracting states under Art. 1(1) so CISG applies. Under Art. 19, addl and diff terms are treated the same. Arb and CDs are material terms (under Art 19(3)) so they are both counteroffers. iii. However, under 18(1), performance qualifies as acceptance so there is a K by performance. iv. Last shot doctrine applies so no CDs and yes arbitration.

d. Filanto v. Chilewich International Corp. (1992)

i. ii. D entered Russian K to supply shoes to Russia. Russian K included an arb cl. D (US) kd w/ P (IT) to supply shoes for Russian K. Did P & D intend for arb cl in Russian K to govern their K? Basically P included an addendum to its acceptance disclaiming arb cl. HELD: Arbitration is favored bc of Arb Convention when theres sufficient agreeM in writing. Here there is. P failed to timely object after receiving notice of the Russian Ks arb cl. Ps addendum was ineffective under Art 19(2) bc arb cl was a material term. P failed to properly object and in light of their prior course of dealing silence can = acceptance under Art 18(1).

7. Formation of Real Estate Ks a. Usually form Ks are used and there are contingencies about financing, inspection, etc. b. When contingency term is for sale of Bs current house, good faith usually requires listing with a selling agent. c. Agents generally owe NO fiduciary duty to Bs!! d. Albright v. McDermond (2000) i. Real estate K w/ specific timeframes for inspection, objections and resolution of objections. Bs objected to 10 things after inspection and demanded repair. S refused to repair but offered $ and Bs rejected. Resolution timeframe passed so K automatically terminated. S kept deposit. ii. HELD: S must return deposit bc Bs didnt breach. The only thing that tempers Bs power under the unambiguous K w/ respect to the inspection/objection/resolution provisions is the implied duty of good faith and fair dealing. e. Problem 4.3: Advertised house as-is. PO had inspection contingency cl. Inspection, as expected, revealed lots of problems. Can B demand repairs? Answer: No, but B can cancel the K if S doesnt repair. The ad is not an offer or acceptance; only the PO is. f. Messler v. Phillips (1993) i. P sued D broker for also acting as Ss broker after S skipped town w/ money and P couldnt get title bc of liens and encumbrances. ii. HELD: Brokers only owe fiduciary duties to sellers unless theres written disclosure by B and S for the broker to represent both. However, brokers still owe a duty of honesty and fair dealing to Bs and also can be liable for negligent misrepresentations about their ability to represent Bs ints.

D. Formalization reqMs: SoF and PeR

1. SoF w/ Sale of Goods 2-201 a. The goals are to reduce the risk that a party will fabricate an oral K that doesnt exist and to keep parties from reneging on real oral agreeMs. b. 2-201: i. (1): A K for the sale of goods of $500 or more is not enforceable unless there is some writing sufficient to indicate that a K for sale has been made bgtw the parties and signed by the party against whom enforceM is sought. A writing is not insufficient bc it omits or incorrectly states a term agreed upon but the K is not enforceable beyond the quantity of goods shown in such writing.

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c. 1-201(39): Signed includes any symbol executed or adopted by a party w/ present intention to authenticate a writing. OC 39 says in some circs it can be a letterhead. d. Course of Dealing 1-205(1)/R1-303(b): A CoD is a sequence of previous conduct btw the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. e. Usage of Trade 1-205(2)/R1-303(c): A UoT is any practice or method of dealing having such regularity of observance in a place vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such usage are to be proved as facts f. Course of Performance 2-208/R1-303(a): Where the K for sale involves repeated occasions for performance by either party w/ knowledge of the nature of the performance and opportunity to 11

1) SoF only applies to sales of goods for $500+ ($5,000+ under A2-201). 2) The writing under 2-201(1) (or record under A2-201(1)) must only contain three elements: a) a sufficient indication that the K for sale has been made, b) the signature of the party who is trying to avoid the K, and, c) a quantity term. ii. (3) If theres no writing that meets these reqMs, there are four more options: 1) 2-201(3)(a): S can show that it relied to its detriment on the existence of an oral K in beginning the mfg of specially mfgd goods according to that K. S must also show that the special mfg began under circs which reas indicate that the goods are for the B. a) 5.1(e): No writing. S orders exact number/type of antique desks from supplier. Not specially mfgd so 2-201(3)(a) exception n/a. Estoppel argument unlikely. Prob not enforceable. b) 5.2: Phone order for custom made machines. S nearly finished first of three when B cancelled. S already pd 3,000 to consultant and mfgd one. The K is probably enforceable under 2-201(3)(a) exception bc this seems like a substantial beginning of mfg. 2) Admission Exception 2-201(3)(b): Either party can show that the party seeking to avoid the K admits in a pleading, testimony or otherwise in ct that a K for sale was made. a) Two problems: (1) lies are rewarded and truthfulness is penalized, and (2) Ps try to argue that they should get to go to trial to try to get D to admit to the K on the stand. b) A2-201(3)(b) just says under oath. c) 5.1(b) Oral K, Confirmation, B objected in writing. S cant enforce. Her objection is sufficient under the merchant exception. Admission is insufficient under 2-201(3)(b) bc not in court. d) 5.1(d): No writing. 12(b)(6) motion: Even if everything P says is true, K is unenforceable bc no writing. Could be construed as an admission. At the very least D hasnt denied the K so motion should be denied for P to get some discovery or D presents evidence of denial. 3) Part Performance Exception 2-201(3)(c): To the extent that either S receives and accepts payM for the goods or B receives and accepts the goods, neither party can deny the existence of the K. a) OC 2: receipt and acceptance of either goods or $ = overt admission that a K exists. b) OC 2: Part performance only validates the K for the goods accepted or for which payM recd. c) 5.1(c): Oral K. B sends check w/ desk deal in memo line. Under 2-201(1) desk deal is insufficient to be a writing bc no quantity. However, part perform exception applies. Under OC 2, only 20,000 was paid, which accounts for 1 whole desk and part of second. 4) Merchants Exception 2-201(2): iii. (2): Btw merchants if w/in a reas time a writing in confirmation of the K and sufficient against the sender is received and the party receiving it has reason to know of its contents, it satisfies the reqMs of (1) against such party unless written notice of objection to its contents is given w/in 10 days. 1) 5.1(a) B & S are probably both merchants. Oral agreeM > $500, S sent a confirmatory memoranda on letterhead outlining terms of deal, including quantity, no sig. Deliv time in memo may have been wrong so B reneged. Can S enforce? Yes. Even material terms can be missing or incorrectly stated in the memoranda so long as quantity is there. (2-201(2)). There is no sig reqM for the merchant exception.? B objected, but not in writing as required by 2-201(2).

object to ti by the other, any course of performance accepted or acquiesced in w/o objection shall be relevant to determine the meaning of the agreeM. g. Hierarchy: 2-208(2)/R1-303(e) Express Terms Implied Terms (CoPCoDUoT) UCC CL h. Diffs btw CoD, CoP and UoT:
i. ii. CoP and UoT differ w/ knowledge: Party must know or have reason to know of UoT, while party must have actual knowledge of CoP. CoP arises subsequent to K formation, while CoD arises prior to K formation.

i.

DF Activities Corp v. Brown (1988)

i. ii. D filed motion to dismiss w/ affidavit denying oral K. Ps want opp to depose and prove D lied. HELD: A remote possibility that D will admit to the K does not justify further proceedings. Once D has denied under oath, the safety valve of 2-201(3)(b) is closed. Dismissal affd. iii. Note: Most cts believe P should at least get some discovery before dismissal for lack of writing.

j.

General Trading Intl v. Wal-Mart Stores (2003)

i. HELD: While the merchants exception does not require a confirmatory writing to be signed by the party to be charged, the writing still must satisfy the dictates of 2-201(1). Most cts have interpreted the sufficient to indicate reqM to require the writing to indicate the consummation of a K and not just negotiations. The writing in this case didnt evidence the alleged oral agreement, just negotiations.

2. PeR w/ Sale of Goods 2-202 a. 2-202: Terms in a writing that is intended by the parties as a final expression of their agreeM with respect to such terms as are included therein may not be contradicted by evidence of any prior agreeM or of a contemporaneous oral agreeM but may be explained or supplemented: i. (a) by CoP, CoD or UoT; and ii. (b) by evidence of consistent addl terms unless the ct finds the writing to have been intended also as a complete and exclusive stateM of the terms of the agreeM. 1) OC 3: If the addl terms are such that, if agreed upon, they would certainly have been included in the doc in the view of the ct, then evid of their alleged making must be kept from the trier of fact. b. Four rules: i. If writing is not intended to be a final expression of the areeM it doesnt bar parol evidence. ii. If the writing is fully integrated, evid of side agreeMs that occurred AFTER it is always admissible. iii. If the writing is fully integrated, evid of CoP, CoD and UoT is ALWAYS admissible to explain/supplement the writing 1) OC 2 to 2-202: UNLESS the writing CAREFULLY negates a UoT, CoD or CoP. iv. Prior/contemporaneous consistent addl terms may be introduced to explain or supplement any writing except for completely integrated writings. Contradictory terms may not be introduced in this way. c. Diff btw CL and UCC PeR is that in UCC, a completely integrated agreeM can as a matter of default be supplemented by CoP, CoD, and UoT. At CL cant be supplemented by ANYTHING. Some states have adopted the UCC more liberal approach. d. This is a drastic legal realist redefinition of what a K isit is a writing that purports to be complete and final and also includes common practices in the trade, prior dealings, and prior performance. 3. Hs UCC PeR Outline Final expression (general): A writing intended as a final expression of an agreement re the terms therein -cannot be contradicted by prior or contemporaneous agreements, -BUT may be explained or supplemented (2-202(a)) by course of dealing, usage of trade, course of performance, AND by consistent additional terms. Completely integrated: A writing intended as a final expression and a complete and exclusive

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statement of the terms of the agreement cannot be contradicted, and cannot be supplemented with consistent additional terms (sub-b); but can be explained or supplemented by CoD, UoT, CoP (sub-a). Partially integrated: A writing intended as a final expression but not a complete and exclusive statement of the terms of the agreement cannot be contradicted, but can be supplemented by CoD, UoT, CoP (sub-a); and can be supplemented by consistent additional terms, UNLESS the judge determines they would, if agreed upon, have certainly been included in the writing (OC 3).
4. Exam Procedure: a. What is the nature of the writing? i. Partially integrated? ii. Completely integrated? 1) Recall Factors from Betaco. b. What kind of extrinsic evidence is this? i. Contradictory? 1) Recall jxns are split. Some require explicit contradiction, others more flexible. Cts are taking a liberal approach to the admissibility of evidence which means more strict approach to contradiction, like requiring the evidence to directly negate a term in the K. ii. Explanatory? iii. Consistent Additional Term? iv. Supplementary? c. Timing: Before, Contemporaneous or After? d. If after, no PeR issue, its a modification issue under 2-209. Recall that unlike CL, under 2-209 no consideration is reqd to modify. e. Problem 6.1(a): Price per ton in K, no merger cl. Contemporaneous oral low price guarantee. Admissible? Probably not. Even though theres no merger clause, price is super imp and reas parties would include a low price guarantee. These parties seem sophisticated since theyre merchants. Facts say they negotiated, though we dont know how much. No evidence of a disclaimer of warranties. Its a close call but price is SO imp for such a huge purchase so probably completely integrated and oral stateM inadmissible under PeR. If partially integrated, theres a contradiction issue: does low price guarantee contradict set price? In some jxns. In others, the term has to be VERY contradictorywould have to say NO LPGs! f. Problem 6.1(b): Same, but there is a merger cl and S gave LPG AFTER K was signed. This is a modification, not a PeR issue. g. Problem 6.1(c): Same as (a) but there is a merger cl and in all of their many prior deals S made same oral assurances. Prob completely integrated so no contradictory terms but CoD can explain or supplement. Issue: is this even a CoD? Never exercised the option. Can a CoD be a series of ineffective promises? If so, you need to argue it is contradictory, but slim chance. h. Problem 6.1(d): Same as (a) but there is a merger cl and a UoT for LPGs. Admissible unless contradictory. Cts are more liberal about admissibility and hence more strict about contradicting. i. 6.2 GOOD EXAM EXAMPLE! Oral Handshake deal w/ non-merchant B. 4 cars, 17,000 each, p/u in 30 days. S sent signed confirmation for 2 cars @ 25,000 each. B tried to reach for 2 wks. Finally did, and S said my way or the highway. Bs friend witnessed the handshake deal.

13

i. ii.

Formation: Oral K formed. Written confirmation would only affect terms, not existence of K. Enforceability: SoF 1) This was an oral K over $500. B has a written confirmation of a sale from S but only for 2 cars. iii. Terms: Oral K v. Written Confirmation 1) Ss strongest argument for the price term is that price is a dickered term that 2-207 doesnt reach. 2) Under 2-207 I think the knockout rule ends up applying so what is the result? iv. PeR? Justins friends testimony? The confirmation?

5. Betaco, Inc. v. Cessna Aircraft Co. (1996) a. B entered K to purchase jet from C, put down deposit and then cancelled bc the anticipated range of the jet was unsatisfactory. C kept deposit pursuant to a liquidated dams cl. B argues C made a side warranty in a letter that the jet would have more range than its predecessor. The purchase agreeM gave a more specific mileage capability and had a highlighted warranty disclaimer and an integration cl w/ a no oral modifications cl. b. HELD: The agreeM was intended to be fully integrated so extrinsic evidence of the addl term in the letter is inadmissible under the PeR. c. Factors for determining whether agreement is completely integrated: i. Merger/integration clause? 1) Strong evidence, but not conclusive. ii. Disclaimer of warranties clause? iii. Is the term such that certainly would be included in the doc if it were part of the agreeM? 1) Similar to but stricter than the collateral agreeM rule at CL. See also OC 3 to 2-202. iv. Sophistication of parties v. Nature and scope of both prior negotiations and any purported extrinsic terms. d. The merger/integration clause and disclaimer of warranties are unequivocal and highlighted in a relatively short agreeM. Bs evidence is weak. Considering ALL of these factors, the ct sends a normative msg about how biz ppl should enter Ks: must proceed carefully and not back out. 6. C-thru Container Corp. v. Midland Mfg. Co. (1995) a. M entered reqMs K to buy equipM from C in return for C buying all of its bottles from M. K said that if M failed to mfg bottles, C could require M to pay entire purchase price. M picked up equipM, C never ordered bottles and instead bought them from another mfg. In reqMs Ks you must buy everything you need from S and there is always a good faith obligation to buy sth. M said it was rescinding, C didnt respond. C then demanded payM and sued, claiming that it had no obligation to buy from M bc M failed, per industry stnd, to provide it with a sample bottle showing that the bottles would be commercially acceptable. M argues that the K says nothing about this condition precedent to Cs obligation to order bottles. b. HELD: Trade usage is permissible even for a fully integrated agreement under 2-202(a). i. OC 1 confirms that there is no reqM of ambiguity bf admitting UoT evidence. Still, jxns are split. ii. OC 2 says Ks are read on the assumption that the UoTs and CoDs were taken for granted. 7. SoF and PeR for Leases a. PER in 2A-202 is same as 2-202. b. However, SOF, 2A-201 differs in these ways: i. No writing reqM unless the total lease payMs are $1000. 1) Total lease payMs do not include options to renew or buy. 2) Problem 7.1(a): Oral lease K: $75/mo for 1 yr w/ $150 option to renew for another yr on same terms. SoF defense? No. Total payMs only 900 and $150 option is excluded under 2A-201(1)(a). ii. Writing must include sig of party to be charged, an indication that a lease K was made AND it must also describe the goods leased and the lease term.

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iii. There is no merchants exception to the writing reqM w/ leases iv. There is also no payM received/accepted exception to the writing reqM w/ leases. OC explains that this is bc a lease payM (usually 1 mth) is not enough to substitute the writing. 1) 7.1(b): Oral lease K: $100.mo for 1 yr all 1200 pd up front. SoF defense? Yes under 2A-201 bc greater than $1,000. But there is an arguM that rationale behind excluding the payM exception for leases is not served here. This lease is pd up front; on these facts, the act of payM IS a sufficient substitute for the reqd writing. 2A is liberally construed pursuant to underlying purpose of each Art so perhaps it would be enforceable. 2) 7.1(c): Oral lease K, good delivered. SoF defense? No under 2A-201(4)(c) part perf exception.

8. SoF and PeR for CISG a. No PeR in the CISG but parties can choose to include a PER in their K under Art 6. b. Art 8(3) requires that In determining the intent of a party or the understanding a reas person would have had, due consideration is to be given to all relevant circs of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. c. Under Art 11, there is no SoF writing reqM. However, Art 96 allows a country to declare that there will be a SoF for all Ks involving one if its residents. The US has not opted to do so. d. 7.2(a): USCAN K. Agreed orally that MI law would apply. Under Art 6, CISG doesnt apply, MI law does. Under 2-201, the sale is more than $500 so SoF applies. S filed in MI, B moved for SJ w/ affidavit denying K. By pleading SoF, B is essentially admitting to the K. B says no K, except for the great choice of law cl in the non-existent K. So SJ prob shouldnt be granted. e. 7.2(b): Written K. No merger cl, mentions all relevant terms except that MI law will apply. Choice of law provision was an oral side agreeM. Can B sue under MI law? Under Art 8(3) can introduce evidence of the side agreeM to get out of CISG jurisdiction. But the side agreeM will not be admissible under the PER in MI. f. MCC v. Ceramica Nuova DAgostino (1998) i. FL B contracted with IT S. Oral agreeM reached, memorialized, but D claims it never intended to be bound by the terms on the memorialization. D wants to admit testimony of Ps agents that AGREE that D never intended to be bound by the terms on the form and they knew this. ii. HELD: Even tho K lang is clear, there is an issue of material fact about subjective intent. There is no PER in the CISG. Art 8(3) requires consideration of all the circs, including negotiations, to ascertain the intent of the parties. CISG requires ct to consider subj intent, but only when the other party was aware of the subj intent at the time of K formation (so its really objective). iii. In this case, Ps agents are going to testify that they were aware. 9. SoF and PeR w/ Real Estate a. Most states have CL or stat SoFs that require a writing. b. Unlike Art 2, writing must usually include the material terms of the sale, including party names, identification of property, the nature of the title to be conveyed and the price. c. When state SoF not met, there are CL exceptions like equitable estoppel and part performance. d. Holbrook v. Holbrook (1996) i. Oral K to sell addl land to son/daughter in law (P). Divorced after making joint payMs for 7 years and building house/living on entire tract of land. P kept making payMs but the parents refused. P wants half interest in addl land. ii. HELD: SJ revd. Part perf estops Ds from asserting the SoF defense. Mere payM of the purchase price may not be sufficient, but payM in conjunction w/ possession or improveM is supportive of application of the part perf exception. Sounds like improveM/possession of the same tract is enough even if not the precise addl land in the K. e. 7.3(a) 2 year rental agreeM 500/month, then PO if Ps had kids. Ps had kids and D denies PO.

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f.

SoF defense? Regardless of whether 2A or real estate law applies, SoF defense applies. There has not been part performance of the PO yet, just rent payMs. No improveMs & Ps were merely occupying it pursuant to the lease. Equitable estoppel argument, had baby in reliance, but weak. 7.3(b) If they added a substantial addition, they would have a better part perf arguM bc can easily infer from the investM that Ps thought they were buying and acted in reliance on that promise.

II. Terms
A. Warranty COA
1. There is some kind of warranty, 2. That warranty was breached, 3. Breach of warranty caused the harm complained of, 4. Damages, 5. Ward off aff defenses including disclaimers, SoL, lack of notice, lack of privity and assumption of the risk.

B. Warranties w/ Sales of Goods 2-313

1. Express Warranties a. ReqMs under 2-313(1) i. Must be (a) an affirmation of fact or promise that relates to the goods OR (b) must be a description of the goods OR (c) must be a sample or model, AND ii. Must be made by S to the immediate buyer, AND iii. Must become PART of the basis of the bargain (reliance is then presumed unless S disproveshard.) b. Under any of the methods above, it is NOT necessary under 2-313(2): i. That the seller use magic words like warrant or guarantee ii. That the seller have a specific intention to make a warranty c. BUT none of the following are warranties under 2-313(2): i. An affirmation merely of the value of the goods ii. A statement purporting to be merely the sellers opinion or commendation of the goods (puffing). d. Factors to distinguish between puffing and express warranty: i. Specific language more likely express warranty than puffing ii. Written statement more likely express warranty than oral iii. Context: in response to request for opinion? iv. Ultimately the question is whether buyers reliance on the statement was reasonable. e. OC 8 to 2-313: Concerning affirmations of value or a sellers opinion or commendation under (2), the basic question remains the same: What statements of S have in the circs and in objective judgM become part of the basis of the bargain? This cmt also says that when no express warranty, B might be able to fall back on fraud or misrepresentation claims. But these are even harder to prove than express warranty! f. In reality, often dont even read warranty until after purchase so how can it be basis of bargain? But Bs prefer warranties to neg suits bc dont have to show duty of care, kind of like strict liab. g. OC 7 Timing: If language is used after the deal is closed, the warranty becomes a modification and need not be supported by consideration. Must be comply w/ other reqMs of 2-209. h. 2-209: i. Problem 8.1(c): What if I said the comp was super but knew about the problem? Saying the computer is super is probably better characterized as puffing than as an express warranty under

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2-313. B can still try a misrepresentation or fraud claim but really hard to win. j. 8.2(a): Calling car a Humdinger is puffing. Even more vague than super- cant reasonably rely. k. Problem 8.2(b): You ask what gas mileage? S says You know those Accords are like camels. Closer to an express warranty since its in response to a specific question. But its a hyperbolic stateM and reas ppl would ask what he meant. H: not quite there yetstill puffery. l. 8.2(c): What if you brought you mother and she first said good gas mileage and then S agrees w/ the camel comment? Better case for an express warranty. Raises an interesting reliance point: its perfectly acceptable that you rely on your mom AND S bc Ss representation only has to be PART of the basis of the bargain. S will argue you relied solely on your mom, but hard to prove. m. 8.2(e): You hand S the check. As youre leaving, you remember to ask about gas mileage. S says I promise youll get at least 30 mpg in the city. Express warranty? The deal was prob closed so not part of the basis of the bargain. You could try to use the theory of modification in OC 7 to 2313 and 2-209. If you asked while writing the check in the office, stronger case for express.
2. A2-313 Obligations a. Makes clear that Ss create express warranties only to their immediate buyer. However, mfgs can still be liable under new non-warranty provisions in A2-313(A) and A2-313(B). These two sections create obligations for original S when there are guarantees made in docs accompanying the product or in advertising. b. Similarities to Warranties: i. The doc or communication must still relate to the goods and must include either affirmations of fact descriptions or promises about the product. ii. Opinions and puffing also still do not give rise to obligations. iii. Seller can limit or modify remedies available under obligations as long as they are furnished to the purchaser no later than the time of purchase. iv. Seller is only liable for breach of these obligations when the breach existed at the time the goods left the sellers control. c. Differences from Warranties i. There is no basis of the bargain reqM in these two provisions. ii. The obligations only apply to new goods. iii. Remote purchaser must purchase in normal chain of distribution. iv. Seller never liable for lost profits suffered by the remote purchaser. d. For records w/ the product, S is only liable if it reas expects remote purchaser to be furnished w/ the record and only if the remote purchaser actually is furnished w/ it. For ads, remote purchaser must have known of the ad at the time of purchase and must have reas expected goods would conform w/ advertisement. e. 8.2(f): You ask if theres a warranty, S says yes and hands you a six page warranty that you dont read until after closing the deal. Express warranty? Under current Art 2 probably yes. In most cases w/ a written warranty you get over the reality that you didnt know the exact details by saying you relied on the fact that there was a warranty period. HOWEVER, under A2-313A(3) this does not create a warranty, just an obligation btw you and whoever wrote the warranty (prob mfg) 3. A2-103(1)(n) Remedial Promise a. A promise by the seller to repair or replace the goods or to refund all or part of the price upon the happening of a specified event. b. NOT a warranty bc it is not a promise relating to the quality of the goods but is rather a commitment by the seller to act in a certain way in the future. c. Has better SoL than warranties. For warranties, COA usually accrues at time of tender and

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usually only lasts 4 years (s/t 5). With remedial promises, the discovery rule applies an the COA does not accrue until the later of either four years or one year after the buyer knew or should have known of the breach. This is bc a remedial promise relates to promised action by the seller so the right of action does not accrue until the promise is not performed.
4. There are also separate Extended Warranties and Maintenance Plans 5. IWM (ordinary purpose 2-314) a. (1): Unless disclaimed (2-316) or modified, the IWM is in every K for the sale of goods where S is a merchant with respect to the goods sold. i. See 2-104(1): Merchant means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices/ goods involved ii. OC 3: If not a merchant, may still be an obligation to disclose known defects under good faith reqM. iii. 1-203: Every K or duty w/in this Act imposes an obligation of good faith in its perf and enforceM. iv. 1-201(19) good faith is defined as honesty in fact. v. R1-201(20) good faith id defined as honesty AND conformity to comm reas stnds of fair dealing. vi. Problem 8.1(a): I sell comp to friend. I am not a merchant of computers so IWM does not arise. vii. Problem 8.1(b): If I knew about the problem, under OC 3 I may have breached the good faith reqM by not disclosing a defect of which I was aware viii. Problem 8.1(d): What if law school sells comp in its annual sale? Law school is prob a merchant annual sale might show enough specialized knowledge to qualify under 2-104(1). Even if IWM applies, there might be an OC 3 argument that for second hand goods lesser quality/lifespan is okay. b. (2) To be merchantable, goods must be at least such as: (not exhaustive under OC 6) i. (a) pass w/o objection in the trade under the K description; and ii. (b) in the case of fungible goods, are of fair avg quality w/in the description; and iii. (c) are fit for the ord purposes for which such goods are used; and iv. (d) run w/I the variations permitted by the agreement, of even kind quality and quantity w/in each unit and among all units involved; and v. (e) are adequately contained, packaged and labeled as the agreeM may require; and 1) Problem 8.6: Milk not labeled to reflect that it clogs arteries. IWM claim based on 2-314(2)(e)? Maybe. Cost of printing warning label is low but extent of loss (death/heart disease) is extremely high. Everyone knows this so wont help. Is this really supposed to be a consumer prot provision? vi. (f) conform to the promose or affirmations of fact made on the container or label if any. 1) 8.3(a): B bought pants from store; tack sewn in. S merchant so IWM. Suit w/ tack is not fit for the ord purpose of wearing under 2-314(2)(c). Under 2-314(2)(a) wouldnt pass in the trade. H: Last resort weak gravamen of the transaction arguM: injury was bc of service, not goods so UCC n/a. 2) 8.3(b): What if S is careful to inspect suits for pins every night? Will this evidence help her? Under Cmt 13, when a merchant exercises due care under Cmt. 13 the evidence could come in to help Carol by showing that there is no prox cause btw S and injurydefect must have happened after p/up. The strict liability is limited to the condition of goods at the point of sale. 3) 8.3(c): Is this evidence helpful if it is shown that an angry customer did this before the point of sale? NO. Defect occurred b4 point of sale so strict liability. Its only when we have no idea about the timing that evidence of due care can be admitted to chip away at proximate cause. c. (3) and OC 12: Other implied warranties may arise under CoD or UoT and they are subject to exclusion or modification under 2-316. d. OC 13: Elements: i. Existence of warranty ii. Breach of warranty iii. Breach was proximate cause of loss sustained. 1) Evidence of Due Care under OC 13: The cutoff is point of sale. If the damage occurred prior to POS, theres strict liability so due care evidence is irrelevant. However, if time of damage is

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e. Two key promises in the IWM are (1) that the goods being sold are at least as good as other similar goods in the trade and (2) that the goods are fit for their ord purposes. f. IWM claims can be brought when particular safety features are missing from products. H says to think about the learned hand formula :B < PL for safety features and labeling claims only. g. Even used goods come w IWM if sold by merchants but OC 3 to 2-314 says that they dont have to perform as if they were new. h. Phillips v. Cricket Lighters (2004)
i. 2 yr old used mothers lighter and set house on fire. Everyone died but one son, who testified that the child set the fire. The lighter lacked safety feature to prevent young children from operating. D argues that the lighter was fit for its ordinary purpose to produce a flame. P argues that ord purpose encompasses some safety features like child-proofing. HELD: SJ Revd. 1) Ordinary Purpose Issue: The thing must conform to and be consistent with comm reas ind stnds and failure to conform to those stnds can be a defect constituting breach. There is at least a jury ? on whether safety features are required for ord purposes based on the state of the ind. 2) Privity issue: The IWM extends to any natural person in the HH of the B and any guest or any person who can be expected to be affected by it (2-318(Alternative A). Extends beyond users. 3) Public Policy Issue: Child use causing lots of deaths. Concerned mfgs are not being punished.

unknown, then due care evidence can be used to show that the damage happened AFTER the POS so S wasnt prox cause.

ii.

i.

8.4: Beer causes cirrhosis. Breach of IWM? No. Beer was fit for ord purpose of casual use and making you drunk 3-314(2)(c). Theres a strong arguM under 2-314(2)(a) that normal beer passes w/o objection in the trade. Theres also a prox cause arguMdid he always drink this brand of beer? Plus, wasnt the prox cause really this guy drinking too much? P will (prob unsuccessfully) argue there should be a warning label against the unintended use bc alcoholism is common. j. 8.5: Economy model car doesnt have passenger air bag. Breach of IWM? Maybe. Car will pass w/o objection in the trade under 2-314(2)(a) bc its an economy model and most dont have this feature. Its also fit for its ord purpose of drivingppl have driven for 80 yrs w/o them under 2314(2)(c). P will argue that crashes are frequent so alls cars should have passenger airbags; the entire industry is wrong. Think about the B < PL formula for safety features. The B (cost/burden) < P (probability of harm w/o safety feature probability of harm w/) x L (extent of loss). If H were suing bc airbags injure short ppl then weaker arguM bc unsafe for a lesser proportion of people. k. Problem 8.7: Cant use formula to defend other than for safety features or warnings.
6. Implied Warranty of Fitness for a Particular Purpose (2-315) a. Elements under 2-315: i. S knew or had reason to know B was purchasing the good to use for a particular purpose. ii. S knew or had reason to know B was relying on sellers expert knowledge/skill/judgM about the good. iii. B actually did rely. iv. BREACH b. In order to modify or exclude IWF under 2-316, it must be done in a conspicuous writing. c. This warranty guarantees that the goods will in fact be fit for the buyers particular purpose. d. Often arises where B furnishes S specs that indicate a particular purpose. e. OC 2 to 2-315: IWF is not intended for circs where B is making ORDINARY use of the goods; use must be PECULIAR f. OC 4: IWF can arise w/ non-merchants if they nevertheless have skill/knowledge. g. Leal v. Holtvogt (1998) i. Ls want to breed horses. H is like their mentor and convinces them to buy int in his great horse

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ii.

h. 8.2(d): You say the most important thing to me is gas mileage. S says Ive got the car for you and takes you to an accord. Express warranty is a close question. But this prob created an IWF.
7. Notice Defense to Art 2 Warranties a. 2-607(3)(a): When B discovers a defect in goods (or should have discovered a defect in goods) AFTER TENDER, B must notify S w/in a reas time or lose all right to a remedy for the breach. b. A2-607(3)(a): Bars B from a remedy only to the extent that S is prejudiced by Bs failure to give timely notice. c. OC 4 to 2-607: Reas time of notification for merchant Bs is determined by applying comm stnds, while consumers are judged by more lax stnd. Merchant Bs usually must have a process by which they determine whether goods conform and must give notice ASAP d. OC 5 to 2-607: When beneficiaries get rights for injuries sustained by a Ss breach, notice obviously doesnt have to be w/in a reas time of Bs unrelated acceptance. But beneficiary does have to notify S that injury occurred. H: When theres a personal injury, cts tend to be really lax with technicalities like notice and privity. If its just econ loss or prop dam, not so much, but still gets the regular reasonableness standard for notice. e. Three purposes: i. Promotes private resolution of disputes ii. Protects Ss ability to preserve evidence and defend themselves. iii. Gives Ss right of repose: at some point they dont have to worry about liability. f. Hebron v. American Isuzu Motors Inc. (1995) i. P was in an accident. Didnt bring suit against D, car mfg, for breach of IWM until 2 yrs later after truck had been disposed of. Complaint was Ds first notice of Ps claim. ii. HELD: SJ for D affd. P was reqd to give D reas notice of defects after she discovered the breach, i.e. after the accident. 2 years is unreas as a matter of law where no explanation of delay is given and the delay has resulted in actual prejudice to D (evidence is gone and D cant defend). Ct does this bc all of the purposes of the notice reqM are destroyed on these facts! g. Problem 9.1(a): Independent truck driver buys truck. Breaks down. 3 mths later she says shell sue bc she lost 6 jobs. Privity defense? B is prob a merchant bc shes buying the truck to use in her biz capacity. Thus she is held to the higher comm reas notice stnd. (1) S has lost opp to cure the defect, (2) evid isnt an issue, (3) 3 mths isnt that much to affect Macks right to repose, (4) priv resolution may be affected since dams piled up. Bs failure to mitigate and S losing the opp to cure both prejudice S, so privity is prob a good defense. Same result under A2-607(3). h. Problem 9.1(b): Same facts, but truck arrived three months late. B complains three days after delivery about losing six jobs. Notice defense? No. 2-607 only applies after acceptance of tender. D knew full well he was in breach bc he didnt deliver the truck so notice wasnt reqd. These circs are not contemplated by 2-607(3). 2-607(3) is geared more toward defect cases, not deliv cases. Safest bet is to give notice of dams piling up after delivery date missed. i. 9.1(c): Same as (a) but B gives immediate notice to S. S goes bankrupt so B must sue mfg. Does mfg have notice defense? No. S should have notified mfg per 2-607(5)(a). If S did, mfg has

instead of another one. Horse was lame and died; Ls want money back. HELD: JudgM for P affd but under IWF, not IWM. 1) Was there an IWF? a) Reason to Know of Purpose: There is evid that H knew Ls wanted to breed. b) Reason to Know of Reliance: There is evid that H knew Ls were relying on their expert opinion/knowledge bc of their student/teacher-esque relp. c) Actual Reliance There is evidence that Ls actually relied by buying the int. 2) Was the IWF breached? There was also evidence of breach in expert testimony that lame horses are unfit for breeding.

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j.

notice, which fulfills 2-607(3)(a). The issue is the meaning of S in 2-607(3)(a). Just direct S or remote S too? If reqd to notify S and mfg then 2-607(5)(a) is superfluous. UCC tends to be Bprotective and this puts a big burden on B. Notice to immediate S should be enough. 9.1(d): Same as (a) but now B swerves off road and hits pedestrian, who spends 2 mths in hospital and sues S a year later. B complained about defect after accident, but complaint 1 yr later is first notice from pedestrian. Notice defense? Maybe. Under Cmt 5 the pedestrian as a beneficiary must notify w/in a regular reas time that the injury occurred. Injured person will prob be given leeway and opp to explain delay. This has nothing to do w/ preserving evid. Plus once s/o is injured, UCC and CL become much more liberal for notice and privity issues. Its not right to disallow ppl who have been injured not to recover bc of technicalities like privity and notice. However, w/ prop loss and econ loss, UCC/CL more inclined to cut off liability w/ technicalities.

8. Privity Defense to Art 2 Warranties a. Vertical Privity: MfgSupplierRetailerB i. UCC doesnt really solve this prob for buyers. Since warranty law is based on K law, the warrantor is technically directly liable only to the other party to the K. However, most mfgs treat warranties as if they run directly to the ultimate B. ii. NOTE GENERALLY: In most states the CL allows the P to get over vertical privity if theres a pers injury. If just prop loss, then vertical privity is usually still a bar. iii. Problem 9.2(b): Same facts except nephew is suing mfg for breach of warranty. Privity defense? Prob no under both Alts. Alt A: Under OC 3, 2-607 is neutral on vertical privity. Most states CL will allow him to sue the mfg. Alt B: OC 3 suggests that Alt B jxns CL has already overcome vert priv probs so also prob could sue mfg. b. 2-318 Horizontal Privity: SBThird Party i. This is the only section that gives states three alternatives for adoption. ii. Alternative A (Majority-least broad): Ss warranties extend to family/HH members and guests in home if IF is reas to expect that such person may use, consume or be affected by the goods AND that person is personally injured by Ss breach of the warranty. S cant exclude of limit. iii. Alternative B: Ss warranties extend to any natural person IF reas expected to use, consume or be affected by the goods AND that person is personally injured by Ss breach of the warranty. S cant exclude or limit. iv. Alternative C (Broadest): Ss warranties extend to any person who is injured by breach of the warranty. S cant exclude w/ respect to personal injuries. (Includes prop damage and econ loss!) v. OC 1: Cant exclude or limit cls dont affect Ss ability to completely disclaim warranties. These disclaimers are effective against B and beneficiary alike. Just cant single out 2-318 beneficiaries. c. Crews v. W.A. Brown & Son, Inc. (1992) i. S sold freezer to church and D installed. Door didnt work and churchmember got stuck/lost toes. ii. HELD: SJ for D affd. This is an Alternative A state. A church is not a home in which people can be guests. Therefore, there is no privity btw P and D so no breach of warranty COA. d. 2-607(5)(a) Vouching in: In a case where a B is sued for an obligation for which its S should be responsible, if B gives S notice and S refuses to defend B, S will be bound by any finding of fact in the first litigation to the extent that B later sues it. e. 9.2(a) CLASSIC EXAM QUESTION: S sold ind mower to B. Bs nephew was using it while working for Bs lawn service when he smashed into clients garage. Nephew was hurt w/ med expenses of 20,000. Also suing for 6,000 in prop dam to garage to clients garage. Alt A: Nephew is fam member and pers injured so gets med dams. Might get garage dams. Two args: (1) the pers injury opens the door to dams for anything or (2) pers inj dams only! Alt B same. f. 9.2(c): Same as (a) but customer and nephew suffer personal injuries. Privity defense? Under Alt. A customer cant recover bc shes not a family/HH member or home guest. However, under Alt B

21

she prob can recover bc shes a person who could be expected to be affected as a customer since this is an industrial mower. g. 9.2(d) Would answer change if there was a bold cl saying only warranties are to direct purchaser? No under OC 1: While S can disclaim warranties, it cant disclaim the privity extensions of 2-318. In Alt. C cant limit for personal injury either but can for prop dam/econ loss. h. 9.2(e) IWM disclaimed completely in bold faced cl. Under OC 1 to 2-318 S can disclaim the IWM completely and it applies equally to B and beneficiaries. Makes sense: cant allow B to bargain away everyones rights but her own, but can allow to bargain hers AND everyone else. i. 9.2(f): Attempted disclaimer or beneficiaries only. Can customer sue for prop damage under any alternative? No. Shes not hurt so cant recover under A and B. Under C, disclaimer is effective against prop damage, just cant disclaim beneficiary privity for pers inj.
9. Magnuson-Moss Act 15 U.S.C. 2301-2312 (Relates to Art 2). a. MMA is a fed act enacted by Nader at the peak of the consumer protection mvmt. In UCC, many warranties are easily disclaimed and this was intended to provide better protection. b. MMA and Art 2 work together to give max cumulative protection. If they conflict, MMA prevails. c. MMA does not affect Ss ability to limit remedies, except (1) Under 2304(a)(3), S must make CD exclusions/limitations in full warranties conspicuous and on the face of the warranty, (2) under 16 CFR 701.3(a)(8) S must make CD excl/limits in limited warranties just conspicuous, and (3) for full warranties S must allow B to get a replaceM or refund when S is unable to remedy malfunctions after a reas # of attempts under 2304(a)(4). d. Jxn: 2310(d)(3)(B): There is a 50,000 amt in controversy reqM for fed jxn. But claims can also be brought in st ct under 2310(1)(A). For class actions, there must be at least 100 Ps under 2310(d)(3)(C), with claims of at least $25/each under 2310(3)(A) and totaling at least 50,000 under 2310(d)(3)(B). In addition, the FTC can bring an action on behalf of a class of consumers. e. MMA does not require S to give a warranty but when S chooses to give a warranty it mandates that the warranty have certain disclosures and met certain min fed stnds. MMA requires clear labeling of written warranties so consumers can quickly understand protections. f. MMA restricts the extent to which Art 2 warranties can be disclaimed and how (impacts 2-316) and it also restricts limitations on remedies. g. MMA applies to consumer product warranties! i. 2301(1): A consumer product is any tangible personal property which is distributed in commerce and which is normally used for personal family or household purposes. ii. Kemp v. Pfizer, Inc. (1993) 1) P is suing mfg under MMA bc husband died from defective heart valve. 2) HELD: SJ to D. A heart valve is not a consumer prod so not covered by MMA. Goods that are not customarily avail or normally used by ord ppl in the gen pub are not consumer prods. h. 2301(3) Privity: The MMAs definition of consumer allows Ps to overcome horizontal privity by including not only the purchaser, but also any person to whom such prod is xferred during the duration of an implied or written warranty (or service K) applicable to the product. i. Vertical privity can be a problem. Cts are split about suits for breach of implied warranties (some say you have to look at state law, others say vertical privity not reqd under MMA). Plus under amended Art 2, remote Ss can still have obligations to remote B. i. 2301(6): Def of written warranty, never went over. j. 2303(a): All written warranties must fully and conspicuously disclose all terms of the warranty AND if the good is being sold for more than $10, the terms must all be on one page? i. Express warranties arise out of 2-313 and can be created orally, by conduct or in writing. So there can be a MMA written warranty and a separate express warranty.

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k. 2303(a)(1): If the written warranty meets the reqMs of 2304, it must be conspicuously designated a full (duration) warranty.
i. Full warranty: In a full warranty, the warrantor can not limit, exclude or modify any UCC implied warranty (IWM, IWF) AND cant limit the duration of the implied warranties. Can only limit duration of extras the written warranty gives above and beyond the implied warranties.

l.

2302(a)(2): If the written warranty does not meet the reqMs of 2304, it must be conspicuously designated a limited warranty.
i. Limited warranty: In a limited warranty, the warrantor can not exclude any UCC implied warranty (IWM, IWF). The warrantor CAN limit the duration of implied UCC warranties so long as the implied warranty durations meet or exceed the duration of all other warranties provided. (1) Must at a min repair the consumer prod w/in a reas time and w/o charge in the case of defect, etc; (2) May not impose durational limits on implied warranties; (3) May only exclude/limit CDs w/ conspicuous exclusion/limitation on the FACE of the warranty; and (4) Must provide, at the consumers election, either refund or replaceM w/o charge after an unreas. number of repairs on the whole prod or parts are reqd.

m. 2304(a) To meet the Fed Min Stnds, the written warranty:

i. ii. iii. iv.

n. UCC v. MMA: If you have a full warranty, a disclaimer of implied warranties may meet the requirements of the UCC but still be ineffective under the MMA. Cos do this bc consumers wont know any better. Bottom of 213. The book makes a distinction btw 2-316(2) and A2-316(3). 2316 and A2-316 have same language? what is the distinction?
i. Ismael v. Goodman Toyota (1992) 1) P bought 4 yr old used car w/ high mileage from D as is. The car shook during the test drive that the salesman told P hed take care of it w/ a tune up. Also simultaneously purchased a service agreeM for $695 to cover car for 2 yrs/24,000 miles. D repaired 6x, P took to another shop but was told it was unrepairable bc of sludge. P continued payMs to protect credit. 2) HELD: As is was sufficient to disclaim IWM and IWF under 2-316(3)(a), but since D sold P a service K, under 2308(a) the disclaimer was ineffective. P can seek relief under MMA 2310(d)(1) or can also sue for breach of IWM. Only issue on remand is dams.

o. Remedy: 2310(d)(1) A consumer who is damaged by the failure of a supplier, warrantor or service Ker to comply w/ any obligation under this chapter, or under a written warranty, implied warranty, or service K, ay bring suit for dams and other legal and equitable relief.
i. ii.

2301(4): Supplier means any person engaged in the biz of making a consumer product directly or indirectly available to consumers. 2301(5): Warrantor means any supplier or other person who gives or offers to give a written warranty or who is or may be obligated under an implied warranty.

p. Atty Fees: Under 15 USC 2310(d)(2) of the MMA, prevailing Ps can recover atty fees and costs. Otherwise, these suits are expensive and claim values are low so unlikely to be brought.
i. Jordan v. Transnational Motors, Inc. (1995) 1) P won MMA suit. DC said the atty fees claimed by P were reasonable, but still only gave 40% of the jury verdict for fees considering the result obtained, the proximity of the mediation offer to the final judgM, and the low value of the case. 2) HELD: Revd. Ct cant focus on the dollar value and result of case bc that thwarts the remedial purpose of MMA to allow Ps to bring these claims. The ct must not always award the amt requested; it may consider normal factors but must also consider the special circs/goals of MMA.

q. 2308(a) Implied Warranty Provision: a supplier may not disclaim or modify any implied warranty to a consumer w/ respect to a consumer product if (1) such supplier makes any written warranty to the consumer w/ respect to the consumer product, or (2) at the time of sale, or w/in 90 days, the supplier enters into a service K w/ the consumer that applies to the consumer prod. r. 2301(7): Implied warranty means an implied warranty arising under State law in connection w/ 23

the sale by a supplier of a consumer good. s. Written Warranty Reqd? To bring an action under MMA, P must have been damaged by the failure of a S to comply w/ its obligations under a warranty or service K w/ respect to a consumer prod. Cts are split on whether S must have made a written warranty for a COA to be brought.
i. McCurdy v. Texar, Inc. (1991) 1) P sued D for alleged defects in her boat under MMA. The trial court held that P had no claim under the MMA bc D never gave a written warranty. 2) HELD: Revd. Ps can bring suit under MMA for breach of implied warranties even where there is no written warranty. Supported by 2310(d)(1) which sanctions COAs for implied warranties. McNamara v. Nomeco Building Specialties (1998) 1) Ps ordered window from D and told D it couldnt collect condensation bc they lived near lake. D guaranteed that condensation wouldnt be a problem w/ the new window. 2) HELD: MMA requires a written warranty. SJ for D recommended. While 2310(d)(1) mentions implied warranties, 2308(a) requires a written warranty. MMA was not intended to create a federal COA for every implied warranty that could arise under st law and to so hold would render 2308(a) inoperative. Plus the purpose of keeping merchants from manipulating written warranties isnt served. H: MM should only apply if you also have an accompanying written warranty. She thinks McNamara is correct and Texar is wrong. Problem 10.1(b): Sold crappy computer for 3,000 w/ no written warranty. MMA COA? Even tho MMA doesnt require written warranties, in a Texar jxn could claim breach of IWM under MMA in st ct only. Problem 10.1(c),(d): Lent comp to friend and it destroyed her game. Can she recover against retailer under UCC Alt A? No bc not pers injured and also not fam/hh member. Under MM, in a Texar jxn she can sue for breach of IWM and prob has privity bc of the broad def of consumers. S can argue that under def of consumer, xfer means leased/bought, not borrowed/given. S can argue that under 2301(7) implied warranties are defined under st law and you should revert to st law for privity as well. 10.1(e): 2 year full written warranty, let friend borrow and it broke her game. Under either Texar or McNamara this implied warranty action is permissible. Still a small issue with the def of consumer includes loaning the computer. 10.1(f),(g): No written warranty, lends to friend, game breaks and comp also breaks so B wants to sue retailer and mfg. UCC doesnt give vertical privity, so unless jxn happens to allow it you cant sue the mfg. Under MMA, theres the Texar issue. But if were in Texar jxn then it seems like under the def of supplier mfg is included.

ii.

iii. iv. v.

vi. vii.

10. Lease Warranties a. Art 2A warranty provisions are similar to Art 2 except for the finance lease, which is a 3 party trans btw supplier, finance lessor, and lessee. To be a finance lease, it must first be a lease and not a disguised sale! Is there a reas likelihood at the inception of the lease that the finance lessor will get the goods back at a time when they still have meaningful value left in them? b. Finance leases are treated like direct sales from supplier to lessee. c. 2A-103(1)(g): There are three reqMs for a finance lease. i. 2A-103(1)(g)(i): lessor does not select, mfg or supply the goods, ii. 2A-103(1)(g)(ii): the lessor acquires the goods or the right to possession and use of the goods in connection w/ the lease, and iii. 2A-103(1)(g)(iii) one of four options occurs: 1) \(A) lessee receives copy of acquisition K before signing the lease K. 2) (B) lessee is required to approve of the terms of the acquisition K. 3) (C) lessee gets a written stateM of what the warranties are 4) (D) for non consumer leases the lessor can just give certain info about the supplier. d. OC (g) to 2A-103: Most sale-leaseback transactions qualify as finance leases. e. It is always really hard to prove that a finance lease isnt a disgused sale. SO, under 2A-103 OC

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3, you should always make the terms of the K the same as the benefits of being a finance lessor. Do this bc K doesnt always hold up as a true lease but express K terms always hold up. f. 2A-103(1)(g): Finance lessee gets the opportunity to review the agreeM btw supplier and lessor. g. Finance Lessor-Lessee Relationship:
i. Under 2A-212(1) and 2A-213(1), finance lessors do not give IWM or IWF to lessees. ii. A finance lessor can still make express warranties to lessees. iii. Under 2A-407. the lessees promises become irrevocable upon acceptance of the goods so the lessees obligation to pay the lessor continues even if the lessee has problems with the leased goods. This is the statutory hell or high water provision.

h. Supplier-Lessee Relationship
i. ii. Under 2A-209(1), any warranty rights that the finance lessor gets from the supplier, whether express or implied, run directly to the finance lessee (does away w/ privity problem btw supplier and lessee). OC 1 to 2-209: The supply K can still have total disclaimers of warranties and remedies limitations.

i.

Problem 11.1(a) S is the finance lessee, FN is the finance lessor, B is the supplier. This finance lease probably meets the 2A-103(1)(g) reqMs bc (1) the lessee chose the goods, (2) the lessor acquired the trailers for this transaction, and (3) the lessee approved the acquisition K terms. S will have no remedy against FN bc under 2A-212(a) and 2A-213(1) finance lessees dont give finance lessor IWM or IWF. Plus under the hell or high water provision, 2A-407, S must keep paying FN. S will want to argue that this is actually a disguised sale. Trailers were specially mfgd so what will FN do w/ them after the lease? Unlikely to get them back while useful w/ financial life. j. Problem 11.1(b): Does answer change if leasing officer recommended this particular supplier? Under 2A-210(2) this recommendation doesnt create an express warranty bc it is a vague statement of opinion. Could argue the other way, but then even worse arguM for basis of bargain. I think theres also an argument under 2A-103(1)(g)(i) that this isnt a finance lease bc by highly recommending the suppliers trailers, it might have selected the goods. It would be a regular lease and the lessee would get IWM and IWF from FN. Or could even be a disguised sale. k. Problem 11.1(c): 2A-209(1). All of the promises to the finance lessor under the supply K extend to the lessee so S can sue B for breach of the express warranties in the supply K. l. 11.1(d): If S lessee told B supplier prior to sale that he needed good shocks on the trailers and didnt get them, then there should be an IWF in the supply K and S can enforce it. Is this right?
11. CISG Warranties a. Its imp to know how CISG parallels to express warranties, IWM and IWF. i. Express warranties: 35(1) and (2)(c) 1) 35(1) S must deliver goods which are of the quantity, quality and description reqd by the K. 2) 35(2)(c) Goods do not conform to the K unless they possess the qualities of goods which S has held out to B as a sample or model. ii. IWM: 35(2)(a) & (d) 1) CISG IWM only requires two elements for merchantability as opposed to UCCs six: a) Under 35(2)(a) goods must be fit for the purposes for which goods of the same description would ordinarily be used, and b) Under 35(2)(d) they must be contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. iii. IWF: 35(2)(b) 1) Under 35(2)(b) the goods must be fit for any particular purpose expressly or impliedly made known to the seller as long as the buyer reasonably relied on the sellers skill and judgment in providing the goods for the buyers particular purpose. b. Medical Marketing Intl (MMI) v. Internazionale Medico Scientifica (IMS) (1999) i. P (US) bought equipM from D (IT). FDA seized for non-compliance. MMI demanded mediation but

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lost and P got 357,000 in dams from arbitration. D says the judgment violates CISG. Art 35(2) requires fitness for ordinary use. Under Art 49, P cant avoid the K unless Ds breach was fundamental, which means under Art 25 that it results in such detriment that P s substantially deprived of what it is entitled to expect under the K, unless unforeseeable. ii. RULE: Non-conformity to laws or regs of Bs state is not a fundamental breach unless: 1) Rules and regs are identical in S and Bs states. 2) B advises S of the regs and laws. 3) Due to special circs, such as the existence of Ss branch office in Bs state, S knew or should have known about the regs at issue. iii. HELD: The third exception applies so it was a fundamental breach and the arb award is affd.

12. Real Estate Warranties a. Generally, there are no implied warranties w/ real estate bc the Ks are heavily negotiated. b. In new residential sales, most states, by CL or stat, create an IWH, which includes that the home is free from material defects and is fit for its intended purpose, but it does not cover defects that are visible upon a reas inspection by the B. c. Hershey v. Rich Rosen Construction Co. (1991) (Classic IWH case) i. P is third owner of house. D applied stucco 12 yrs ago in sub-par manner. At time of purchase, P inspected w/o prof. and noticed only normal cracks (prof insp would have noticed problem.) 1 yr later stucco deteriorated. Expert testified that stucco should last 30-50 yrs. ii. HELD: JudgM for P affd. 1) A reas inspection does not require a prof inspector to scrutinize for internal defects. The proper stnd is the AVG PURCHASER. 2) The SoL on IWH claims is a reas time. 12 yrs is a reas time based on the 30-50 yr lifespan. d. Used homes generally do not have implied warranties. Thats why ppl use prof home inspectors. e. Third party home warranties are common. Usually one year, as long as 10 yrs. f. Problem 11.3: Husband in construction and wife is not. Wife inspects the 4 yr old house and sees nothing wrong bc husband is out of town. After moving in, husband notices bad roof. Can they recover? 4 yrs seems w/in IWH as reas time. The stnd is the avg purchaser. Its prob irrelevant that the husband would have found the problem bc hes not an avg person. But if the theory under the IWH is more fact-intensive, there is a stronger arguM that he should have inspected.

C. Reducing or Eliminating Warranties (very imp.)

1. Sale of Goods a. Sellers ALWAYS try to disclaim or modify warranties. b. 2-316 Warranty Modification or Disclaimer i. (1): You cant disclaim express written warranties. 1) Express oral warranties can be disclaimed? OC 2 says PeR makes inadmiss; use merger cl. ii. (2): To exclude or modify the IWM or any part of it, the lang must mention merchantability and in case of a writing must be conspicuous, iii. And to exclude the IWF, the exclusion must be in writing and must be conspicuous. iv. Language to exclude all implied warranties is sufficient if it states for example that There are no warranties which extend beyond the description on the face hereof. v. (3)(a) In addition, unless the circs indicate otherwise, all implied warranties are excluded by expressions like as is, with all faults or other language which in common understanding calls Bs attn to the exclusion of warranties and makes plain that there is no implied warranty and vi. (3)(b) When B, before entering into the K has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty w/ regard to defects which an examination ought in the circs to have revealed to him, and 1) OC 8: In order for this exception to apply, S must demand that B inspect the goods fully. This

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demand puts B on notice that she is risking warranties. vii. (3)(c) An implied warranty can also be excluded or modified by CoD, CoP or UoT. viii. (4) Remedies can be limited per 2-718 and 2-719.

c. 1-201(10): Conspicuous means written so that a reas person ought to notice it. A printed heading in capitals is conspicuous. Lang in the body of a form is conspicuous if it is in larger or other contrasting type or color. d. Problem 12.1: P bought car, broke after 3 wks, read fine print disclaimer in K, There are no warranties express or implied included in this sale. Does she have a COA? Yes IWM. The disclaimer is ineffective under 2-316(2) bc its not conspicuousbig, allcaps, bold. S also failed to use the word merchantability under 2-316(2) so disclaimer cant be effective. The fact that B read it doesnt seem to matter bc 2-316 doesnt care about knowledge. Most cts would also say this disclaimer is ineffective under the 2-316(3)(a) as is exception. e. Problem 12.2: Jeep B discovers engine problem after a few wks. S asked her to check it out b4 buying it and B refused bc in a hurry. B would have noticed if shed looked bc she tinkers w/ cars. Under 2-316(3)(b): refusal to examine can open her up to not having recourse. Under OC 8, however, in order for her refusal to constitute a disclaimer, B has to demand an inspection. This was probably a request, not a demand so 2-316(3)(b) n/a. Demand must be enough to = youre taking this as is. B still has warranties. f. 12.3: Can S disclaim salespeoples oral express warranties? Written express warranties can never be disclaimed. But what about oral? OC 2 to 2-316 directs to PeRyou can use an effective merger cl speaking directly to oral express warranties. In addition, you can say that sales reps have no authority to make promises on behalf of dealership. g. 2-719 Remedy Limitations
i. (1)(a): An agreeM may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of dams recoverable under this Art, as by limiting the Bs remedies to return of the goods/repayM of the price OR to repair/replaceM of non-conforming goods or parts, and 1) (1)(a) tells us the Ss can limit to exclusive remedies. ii. (1)(b): resort to a remedy is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. 1) To make an exclusive remedy, S must clearly bring home to B the exclusivity of the remedy. iii. (2) Where circs cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided by this Act. 1) Failure of essential purposethe REMEDY ust fail in its essential purpose, not the PRODUCT. So you keep repairing the part but the car doesnt work. Usually arises in RR cases. iv. (3) CDs may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of CDs for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of dams where the loss is commercial is not.

h. 2-302(1): Is S limits CDs for personal injury, or if for some other reason the ct finds that a K or any cl. is unconscionable, the ct can take one of three approaches: it can (1) refuse to enforce the entire K, (2) exclude the clause, or (3) limit the clause. i. Disclaimers v. Limitations: Disclaimers are about there being no breach/liability. Limitations on remedies have nothing to do w/ breach, just limiting what remedies can be had for breaches. j. Problem 12.4: 1 mth after purchase brakes fail and B seriously injured. K conspicuously limited remedy to repair/replaceM of defective parts. This problem is about the distinction btw disclaiming warranties and limiting damages. As is cl wouldnt help bc it really goes to modifying warranties not limiting damages. Cant limit CDs for pers injury bc unconscionable. Answer?? k. Remember MMA comes into play here too. 27

l.

Ss generally stand behind goods except w/ CDs, esp w/ inexpensive goods. But a large class of Ss like car dealers dont have incentive bc they deal w/ large transactions and low repeat biz. m. Any ambiguity in a warranty disclaimer is likely to be construed strictly against S who drafted it.
i. Wilbur v. Toyota Motor Sales, U.S.A. (1996) 1) P bought demo car from D. D told P about an accident while demoed but said no structural dam. This was a lie so P sued for breach of warranty. Warranty language says that it doesnt cover accidents after the car was delivered or first put into service. D argues this dam not covered bc demo is when the car was first put into service. Theres support for Ds argument in the K lang. P argues the in service date is the date the dealer wrote on the warranty: the date P bought it. Therefore, accident damage is covered under the warranty bc the disclaimer doesnt apply by its terms. 2) HELD: The ct agrees w/ P. D is in a catch 22. Either the warranty disclaimer is ambiguous and therefore violates the MMA OR the warranty disclaimer n/a to these circs so D violated MMA by breaching the warranty. The ct says it is incorporating the K doctrine of contra proferentem that ambiguity is resolved against the drafting party. ii. Factors Wilbur ct and others use to resolve tension btw freedom of K and anti-oppression 1) Relative bargaining power/sophistication of parties 2) Price paid: Does the K price indicate that B chose to sacrifice sth like warranty protection in exchange for a lower price? What is the relp btw the discount B saves and what B is claiming? Did buyer really intend to bargain away warranties? 3) UoT/CoD/CoP 4) Lang in the K: Lang v. reqMs for disclaimers or other applicable stats. iii. In most of these cases the ct will go w/ the consumer.

n. 2-317: All warranties are cumulative and consistent, unless unreasonable, then express warranties displace inconsistent implied warranties other than the IWF. Express warranties are generally stackable with the IWM. Warranties accumulate to protect the consumer. o. 1-204: Whenever the UCC requires an action to be taken w/in a reas time, the parties can fix a time so long as it is not manifestly unreasonable.
i. OC 1: If the cl either by inadvertence or overreaching fixes a time so unreas that it amts to eliminating all remedy under the K it may be disregarded.

2. Leases under Art 2A a. 2A-214 is similar to 2-316 with two exceptions: i. Under Art 2 can disclaim IWM orally, while under Art 2A conspicuous written disclaimer is reqd. Under both Art 2 and Art 2A, must mention the word merchantability. Under Art 2, if disclaimer happens to be written, must also be conspicuous. ii. Under both Art 2 and Art 2A disclaimer of the IWF must be written and conspicuous. 2As example requires more specific fitness/purpose lang. b. As amended, 2 and 2A are even more alikeonly diff really is that 2A reqs writing more often. i. Under Art 2 S can use as is to disclaim implied warranties orally w/ both consumer & merchant Bs. ii. W/ merchant buyers, a S not using as is can still orally disclaim the IWM or IWF as long as S uses certain words like merchantability, or no warranties extend beyond the description on the face hereof. iii. Under Art 2A a lessor must put the disclaimer in a record even if the lessor uses as is. iv. Under 2A, even if a lessor uses key words like merchantability it cannot disclaim implied warranties orally for consumer lessees or merchant lessees. 3. CISG a. CISG 35(2) seems to imply that parties can agree to exclude the IWM and the IWF. b. Supermicro Computer, Inc. v. Digitechnic, S.A. (2001) i. P is a CA mfg of parts. D is a FR assembler/retailer. P (CA) ships products to D (FR) w/ a sales invoice setting forth a limited warranty and a user manual disclaiming CDs. D sued P in FR for CDs

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ii.

bc parts caused fire. While FR action is ongoing, P files action in CA seeking declaration that its disclaimers are valid. HELD: The ct refuses. CISG 35 is about Ss obligation to deliver conforming goods, not providing a right to disclaim. There is also no precedent so ct declines to make declaration.

c. 35(3) says S is not liable if B knew or could not have been unaware of the lack of conformity prior to the formation of the K. This is diff from UCC bc doesnt REQUIRE inspection. CISG is more inclined to defer to freedom of K bc it doesnt govern consumer sales.
4. Real Estate a. Builder must at least use clear and unmistakable disclaimer terms, even then might not work depending on jxn. b. Axline v. Kutner (1993) i. IWH is only implied when the K is silent. Ds K just said One Year Builders Warranty. The court said this is too ambiguous to limit the IWH to one year. There was also a general disclaimer/merger clause: Purchaser accepts property in existing condition, no warranties or representations having been made by seller or agent which are not expressly stated herein. Court said that this was also insufficient to disclaim. ii. HELD: SJ revd bc disclaimer is prob invalid. c. 12.5: Ind stnd for builders warranty is 10 yrs not 5 yrs. The five years goes directly to water seepage issues while Axline was more general. The merger clause is stronger too. So better for the warrantor. But there are some things that cut in favor of the ownersthe IWH should still extend through the six years. Express might be contradictory with IWH but also might not be owner will say they are consistent stackable warranties. There are lots of factors here. Hard to say who would win. In a question like this it depends on jxn so just discuss all of the factors.

D. Advanced Warranty Liability Reduction

1. Problems a. 13.1(a): FULL ONE YEAR WARRANTY: S cannot disclaim IWM or limit its duration under 2308a)(1). S can disclaim CDs under MMA so long as the exclusion is conspicuous and on te face of the warranty (however, he cant limit CDs for per inj or it will be unconsc. under 2-719(3)). S can make RR the excl remedy under 2304(a)(1) but it might violate 2304(a)(4)s incorporation of the shaken faith doctrine. After so many repairs S must offer repair or refund at Bs choice. b. 13.1(b): LIMITED ONE YEAR WARRANTY: S cannot disclaim the IWM under 2308(a)(1) bc S chose to make a written warranty, and S can only limit the duration of IWM to 1 yr min under 2308(b). Exclusive remedy of RR should be fine so. CDs can be excluded except pers inj. c. 13.2: Son injured on swingset. Warranty printed in book. Parents can sue under IWM 2314(2)(c) bc the disclaimer is ineffective under 2308(1) bc theres a written warranty. Swingsets shouldnt break after 4 mths so still w/in reas IWM SoL. The swingset is defective and even if it werent its unsafe under the Cricket case. No privity problem bc part of family. d. 13.3(a)(b): Hard problem about requiring notice of breach of IWM w/in 4 mths of sale. Comp breaks after 5 mths. B probably wins. The issue here is whether this is really a notification reqM, a limitation or a disclaimer. Go over this. Under (b), it is much more likely that S will win bc this deep discount shows that B chose low price over warranty. This was intentionally allocated risk.

E. Commercial Impracticability
1. Commercial Impracticability w/ Sales of Goods a. Impracticability is an equit defensewe excuse perf. It is very subj; you argue the facts. The outcome is very unpredictable but generally for B and S excuse claims are rarely successful.

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b. Sales Ks allocate risk so if the deal turns out to be unprofitable, the UCC says too bad EXCEPT:
i. ii. When there is unexpected failure of Ss source of supply S may be excused. When there is a dramatic price fluctuation S or B may be excused.

c. Parties can write their own excuse provisions, which supercede the UCC. d. RoL v. Impracticability: If S qualifies for excuse for destroyed goods it bears the RoL for, the impracticability excuse merely excuses S from paying damages, not from bearing the loss. e. UCC doesnt say B can be excused, just S, but some cts have been willing to consider Bs defense of excuse either by analogy to 2-615s commercial impracticability or simply by reference to the CL of excuse. f. 2-613 Casualty of Identified Goods: ONLY applies when the K requires goods identified at the time the K was formed AND the goods are damaged or destroyed through no fault of either party AND b4 RoL has passed to B. Only applies to rare cases of my tennis racket or that painting. In most cases the goods are fungible and this is n/a. Result: If theres a total loss, S is excused from performance. If partial loss, B has option to treat K as avoided OR to accept the damaged goods w/ a due allowance from the K price for the deterioration. g. 2-615: Commercial impracticability
i. (a): Delay in delivery or non-delivery in whole or in part by a S who satisfies (b) and (c) is not a breach of his duty under a K for sale if perf as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the K was made 1) The basic assumption language focuses on the foreseeability of the supervening event. 2) Later mentions the Ss good faith compliance with applicable govt regs as a basis for excuse. 3) Unlike 2-613, 2-615 doesnt explicitly say that it cant be Ss fault, but Cmt 5 makes it clear. 4) OC 4: Increased cost is not enough to excuse performance unless rise in cost is due to unforeseen contingency which alters the essential nature of the performance. 5) OC 5: As far as supplier failures are concerned, unless B and S had reason to believe that a particular source of supply was to be Ss exclusive source of supply, S should not be able to rely the inability of a partar supplier as a basis for its own excuse. In practice, cos are more lenient. ii. (b): Where the causes mentioned in (a) affect only a part of Ss capacity to perform, S must allocate production and deliveries among his customers but may at his option include reg customers not then under K as well as his own reqMs for further mfg. S may allocate in any way that is fair and reas. 1) OC 11: If Bs are affected generally, S must consider all in supplying one. Ss arent free to disregard long term commitMs in favor of short term higher paying Bs. In case of doubt, pro rata. 2) Cant give self unjustified share and it would be difficult to justify new customers during shortage. 3) 14.2(c): Only 30/60 machines flood. B1s order was for 20 and B2s order was for 40. Can S give B1 its 20 machines so one cust is happy (plus B1 is more likely than B2 to be a repeat customer) and B2 only 10 machines? B2 can argue that this is not fair and reasfair and reas means pro rata. But S also has a strong arguM under OC 11her biz depends on fostering repeat biz so its legit to consider that B1 is also more likely to be a repeat customer. iii. (c): S must seasonably notify B the delay or non-delivery or of the estimated quota under (b).

h. Most cts wont split the babyyou either qualify for excuse or you have to perform per the K. Judges often lack a sense of the ind and only have limited knowledge about the context in which the K was negotiated, plus it would introduce an element of randomness and uncertainty into Ks. i. Resources Investment Corp. v. Enron Corp. (1987)
i. Take or pay K where D was reqd to purchase a spec quantity of gas each yr no matter what. P claims D breached for 6-7 yrs and wants dams and decl judgM. Ds argue frustration and impracticability for numerous reasons bc of price fluctuations, weather and regs. 1) Frustration of purpose is supposed to be diff than impracticabilityits about frustration of purpose which is very diff from a basic assumption of the K but cts often treat them the same. HELD: While increased cost alone does not excuse perf through impracticability, Ds have valid impracticability arguMs based on abnormally warm weather and the enactM st and fed regs that

ii.

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affected the market. Market changes/price fluctuations are only a basis for impracticability when they can be tied back to an event outside of the parties control like weather or regs.

j.

Alamance County Bd. of Educ. v. Bobby Murray Chevrolet (1996)

i. ii. D agreed to provide Chevy brand chassis to P. EPA enacted new emission stnds in July, Ds supplier notified of possible delay in Aug, and inability to supply at all in Dec. D notified P same day in Dec that supplier backed out bc EPA reg would make the chassis illegal as of Jan 1st. HELD: SJ for Ps affd bc D doesnt qualify for comm impracticability. 1) D argues (1) failure of GM to supply the bus chassis was a contingency the nonoccurrence of which was a basic assumption of the underlying contracts, AND (2) The govt regulation was an intervening factor that should provide an excuse. a) Contingency Argument: Under OC 5 to 2-615, failure of an exclusive source of supply can excuse perf. However, in this case, GM trucks was not identified as the exclusive source of supply: D just said Chevy brand and status as a GM franchisee is not enough to show P knew exclusive supplier. Plus there is a term in the K that says mfg names are intended to illustrative, not restrictive. Gen, where S fails to make K w/ B contingent on adequate supply, cts are reluctant to excuse S. D should have used a single source cl. b) Regulations Argument: Gen, govt regs do not excuse perf where a party has assumed the risk of such reg. In this case, K specifically said D was responsible for reg changes.

k. 2-616: After B receives notice of delay or allocation under 2-615, if the deficiency substantially impairs the value of the whole K for installment Ks, B may by written notification to S (a) terminate the whole K or (b) modify the K by agreeing to take the quota in substitution. l. Problem 14.1: K to sell used 1993 Cadillac convertible that Ann Landers drove for $15,000. Hailstorm damaged; costs 18,000 to repair. Scrap value of $500. Excuse? Yes. This is a 2-613 case bc the car was identified at the time the K was made bc Ann Landers drove it. Hail dam is prob neither partys fault (maybe neg by S for leaving it out but most Ss do). Under 2-509(3) & OC 3 RoL has not passed to B even tho B paid bc S is a merchant and B hasnt received delivery/goods arent in Bs control. This loss seems total since it will cost more to repair the car than its worth. Scrap value might make loss partial, in which case B can inspect and buy w. due allowance for the damage, prob for $500 or maybe more since part of value to B is Ann Landers. m. 14.2(a): S agreed to fill large order last mth; delivery due tomorrow. Storm caused basement to flood and machines earmarked for B destroyed. S notified B as soon as she discovered. No source of supply cl. Excuse? Probably. This is not a 2-613 case bc goods werent required to be identified at the time of saletheyre fungible. S gave proper notice, so the only issue is whether this is a contingency Cts make a big deal about missing single source cls. We also need to know if her normal course of biz is to mfg all things ordered? What about ind practice? Under Cmt. 5, if S was known as a mfg, which it looks like she is then the circs show that B knew S was the exclusive source of supply so lack of single source cl wouldnt bar excuse. B will argue this was Ss fault under Cmt 5 for not taking all due measures to ensure that the supply wouldnt fail, i.e. shouldnt have stored in basement. Earmarked: if there are others, S must give them to B.
2. Commercial Impracticability with Leases a. 2-613s analogue is 2A-221 (casualty to identified goods). b. 2-615s analogue is 2A-405 (excused performance). c. 2-616s analogue is 2A-406 (procedure on excused performance) d. Main diff is 2As special treatM of non-consumer finance lessees. Under 2-613(b) B can demand partial performance at a reduced price and under 2-616(b) B can take the quota in substitution, while under 2A-221 and 2A-407(1) the non-consumer finance lessee can only terminate or go forward w/ no rent reduction bc of the HOHW cl. Under no excuse lang of 2A-407(1) can you
1) H: Even if B accepts allocation, B can still demand the remaining amt later.

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really even use excuse for non-consumer finance leases?

3. Commercial Impracticability with CISG a. Art 79 excuses a party from perf where the inability was due to an impediment beyond his control, as long as the impediment was unavoidable and the excused party could not reas have been expected to account for the impediment at the time of K formation. (Very sim to Art 2) b. Art 79 and Art 2 also both require the excused party to notify the other side of the basis for the excuse and of its effect on the excused partys ability to perform. c. CISG excuse rules are broader in two ways: i. Explicitly applies to Bs and Ss ii. Covers any obligation (not just delay in delivery or non-delivery) d. CISG excuse rule is narrower in one way: i. The supplier only provides an excuse for the S if the supplier itself is excused under CISG 79(2). Conversely, under OC 5 to 2-615, as long as Ss source of supply is assumed by both parties to be the sellers exclusive source, then S will always be excused, regardless of whether source is. e. 14.2(b): Single source cl and Ss supplier fails bc suppliers emps neg caused plant fire. In these circs w/ the single source cl and under OC 5 S will be excused under UCC bc this was a failure in production by an agreed source beyond the SELLERs control. It doesnt matter if it was in SUPPLIERS control. OC 5 just requires that S turn over its neg claim against the supplier to B. Under CISG Art 79 S would not be excused bc Supplier would not be excused. f. 14.2(d): Can she condition allocation on B1 agreeing to forget the rest of the K? Maybe no. H: Hard question. S already benefits from the excuse by delaying delivery. Should S get a second benefit of depriving B permanently? S shouldnt benefit from the unfortunate event twice. Under CISG Art 79, its much clearer that B cant get out of the whole K. Under 79(3) the excuse only lasts so long as the impediment exists. Plus it excuses individual obligations, not whole Ks. 4. Real Estate- No Comm Impracticability, Just Impossibility.

F. Unconscionability
1. UCC Unconscionability a. The UCC does not define unconscionability. b. Williams v. Walker Thomas Furniture definition used by most cts: An absence of meaningful choice on the part of one of the parties together w/ K terms which are unreas favorable to the other party. This is where the procedural/substantive reqMs come from. i. Look for facts that look like fraud and misrepresentation for procedural unconscionability. For substantive unconscionability look for oppression and one-sided terms in the K. c. 2-302(1): If the ct finds the K or any cl was unconscionable at the time it was made, it can (1) refuse to enforce the entire K, (2) exclude the clause, or (3) limit the clause. i. This is a question of law that the ct, not the jury, decides. ii. 2-302 seems more concerned w/ subst unconscionability. But a lot of cts apply two prong analysis. iii. OC 1: Hints at a definition: the basic test is whether, in light of the comm background and the comm needs of the particular trade or case, the cls involved are so one-sided as to be unconscionable under the circs existing at the time of the making of the K the principle is one of the prevention of oppression and unfair surprise and not of the disturbance of allocation of risks bc of superior bargaining power. d. 2-302(2): When it is claimed or appears to the ct that the K or any cl may be unconscionable, the parties shall be afforded a reas opp to present evid as to its comm setting, purpose and effect to aid the ct in making the determination. (You get a hearing bc of the factual nature). e. These claims rarely succeed but certainly arent dead, esp for credit terms.

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f.

Maxwell v. Fidelity Financial Services (1995)

i. ii. D2D salesman sold P solar water heater for 6,000 for their 40,000 home. D approved financing for 15 yrs @ 19.5% so it would cost 15,000 total plus they put a lien on Ps house. Heater never worked but Ps pd for 6 yrs and want out bc unconscionable. HELD: A claim can be established w/ a showing of substantive unconscionability alone. These terms are outrageous, they shock the conscience and are oppressive so we wont enforce. This might be a sliding scaleREALLY substantive so no procedural reqd. Some cts dont always require both.

g. Problem 15.1: Immigrant woman came w/ boss to buy used car. She pd the posted price, while most Bs bargain down 25% on avg. Boss read her the Kas is cl. Broke 3 days later. Unconscionable? This is a strong case for procedural unconscionabilityshes an inexperienced B, arms length trans, boss might cause pressure to buy. Substantively the K provisions arent so bad. Ss better bargaining power does not make the K unconscionable under OC 1 to 2-302.
2. Unconscionability w/ Leases a. 2A-108(1) is essentially the same as 2-302. There are two differences btw Art 2 and 2A: i. 2A-108(2) allows claims for unconscionable conduct in inducing a lease K or collecting a debt. ii. 2A-108(4) allows the possibility of atty fees for a prevailing consumer in an unconscionability action. Atty fees are only allowed against the consumer if the action was groundless. b. BMW Financial Services v. Smoke Rise Corp (1997) i. D corp leased BMW from P. There was a 16,000 PO or 15 cent/mi charge for mileage over 80,000. D returned w/ 190,000 miles and claims the 14,000 excess mileage charge is unconscionable. ii. HELD: This K was not unconscionable at the time it was made! SJ for P. 1) Procedural: This is a corp buying a luxury car. P knew the terms. 2) Substantive: These terms were reas when entered, only unreas after D put 190,000 miles on. This is essentially a fee for depreciationthe cars not worth much now! c. Problem 15.2(a): No other dealer would give B credit bc horrible credit. S leased him a Caddy for fun cruising for 2 yrs 400/mo. Double the rate for good credit and S took security int in car and Bs trailer and theres an acceleration cl. B misses payMs. Can S take trailer where wife/6 kids live? i. This is a good example of Posners arguM that Ss should be able to include these terms to protect themselves against high default costs and Bs should be able to get the things they want. ii. Procedural unconscionability: Did Joe have a meaningful choice? Under the BIG PICTURE analysis, S will argue that B did since this car was bought for luxury, not necessity. B will argue that ct shouldnt judge what he does w/ his $ and he had no choice bc no one else would finance him. iii. Substantive unconscionability: The cross-collateralization w/ the trailer is really harsh. Making the product collateral is stnd. Acceleration clses are prevalent. Cross-collateralization cl might not be okay on its own. But COLLECTIVELY, this K is very one-sided and excessive so prob unconscionable. BUT, judge can just get rid of bad cls, not nec whole K. iv. Wrongfully starting foreclosure proceedings might be unconscionable debt collection. d. Problem 15.2(b): B has great credit but confided in S he never leased b4. Offered special rate of $750/mo for 4 yrs. Typical rate $250/mo. B signed bc didnt want to shop around. Can he void it? i. Procedural Unconscionability: S has no obligation to tell B to shop around. Really no argument for B. ii. Substantive Unconscionability: This is prob unconscionable-- $500 extra/mo = $24,000 extra over 4 yrs! Better argument than (c). So if sliding scale analysis applies here, B might be able to void. e. 15.2(c): Basic car to drive to work for 150/mo (typically 50/mo) makes a weak proc arguMhe needs the carbut also a weaker subst unconscionability arguMextra $100/mo not as onerous. f. 15.2(d): If market rate just drops after lease entered bc of model defect B cant get outhave to look @ time K formed. B has to argue mutual mistakematerial and unknown @ K formation. 3. CISG- No unconscionability a. 2(a): Consumer transactions not covered. 4(a) not concerned w/ validity of Ks/provisions.

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4. Real EstateCL UnconscionabilityEssentially the same as UCC.

G. Title with the Sale of Goods

1. Intro a. Art 2 implies in EVERY sales K (2-312(1)) a warranty by S that it has good title to the thing that it is xferring to B. Prob the broadest warranty as far as coverage goes and its strict liability. b. 2-312(1): The warranty of title warrants that i. (a) title is good and transfer is rightful, and ii. (b) the goods are delivered w/o any 3d-party lien or encumbrance of which B is unaware. (2-312(1)). c. (2): Can only be disclaimed by specific language unlike other implied warranties unless the circs make it very clear that S doesnt have good title. i. Special circs include sheriffs executors and foreclosure sales. d. 2-403(1): A purchaser of goods acquires all title which his transferor had Even an innocent B who purchases goods from a thief will not have good title. Cts have read this to mean that a thief breaks the chain of title and no later party can have good titlethey have VOID title. e. 2-403(1): A person w/ voidable title has power to xfer a good title to a GFPV. Get voidable title when goods are delivered under a transaction of purchase and: i. (a) transferor was deceived as to Bs identity, or ii. (b) delivery was in exchange for a bad check, or iii. (d) delivery occurred through fraud or deceptive larceny. iv. You get voidable title when you trick the TO into voluntarily xfering possession. Must be voluntary under the 1-201(32) definition of purchase. Voidable title means you dont have good title, but you do have the power to xfer good title to a GFPV. f. GFPV: This term is defined fairly broadly. It is s/o who is unaware that sth is wrong w/ title. A reas person in a GFPVs position would think this is a reputable S. g. Policy Note: Relative fault justifies the diff btw theft and fraud. Dont punish the TO who involuntarily lost possession but punish him if he gives it away. Innocent GFPV v. somewhat neg (or blameworthy) TO weighs in GFPVs favor. Plus TO was in better position to prevent the loss. h. In re Simmons i. S used a bad/hot check to buy 15K diamond ring w/ certification for 70,000. Sold to V (pawn shop) for 40,000. A gave ring to S voluntarily so it was a transaction of purchase under 2-403 despite the fact the check was bad. Therefore, S got voidable title and could xfer good title to V if V was a GFPV. ii. ArcherSimmonsVerdult iii. (voidable) iv. HELD: Remd on the GFPV issue but 30,000 is a huge discount so it looks like A will win. A GFPV is a person who, among other things, takes delivery of the goods pursuant to a preexisting K for purchase and is honest in fact in the transaction. The RP stnd applies. If price is unusually low, a RP would suspect the goods were stolen/would be on notice that the transaction might be illegitimate. i. Rudiger Charolais Ranches v. Van de Graaf Ranches (1993) i. E bought cows from GR for 240,000; GR xferred to E b4 recing payM and E never pd. E sold to VDG for 200,000 and VDG accepted them w/o proper documentation reqd by st law. VDG hadnt bought from E b4 and they didnt have Es address or phone #. E got voidable title bc GR voluntarily xferred to cattle to him based on his false representation that he would wire the $. VDG argues they are a BFPV bc they followed ind practicexfer customarily occurs w/o proper documentation. ii. Gang RanchEthertonVDG iii. (voidable) iv. HELD: UCC requires GFPV to follow reasonable commercial standards. While this may be a comm stnd, it is not a reas comm stnd bc it is not reas to violate the law. GR wins.

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j.

Problem 16.1(a): C bought 70,000 painting from P w/ fake $100s. P cant find C, but found painting @ Ls gallery. L said she bought it from stranger for 20,000. Can P get back? Probably. There was a huge discrepancy and L bought it from a stranger. So L is probably not a GFPV. Pierre (70K)Critic (20K)Lucy (voidable) k. 2-403(2) Entrustment: Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to xfer all rights of the entruster to a B in ord course of biz.
i. 1-201(9) Ordinary course of business = from a person who is in the biz of selling goods of that kind + new owner cant have knowledge that the sale violates the ownership rights of a 3dt party. Cant be a B in ord course of biz when purchasing from a pawnbroker.

l.

2-403(3): Entrusting includes delivery or acquiescence of possession by the TO, regardless of any condition expressed btw the parties to the delivery or acquiescence.
i. i. ii. TO can still sue the converter for conversion but cant sue the new owner. EntrustM rule operates only when goods are entrusted to a merchant who deals in goods of that kind Instead of GFPV, entrustM requires the slightly narrower B in ord course of business.

m. Two diffs btw voidable title rule and entrustment rule: n. Problem 16.1(b): P lends to non-merchant F who sells to L. Can P recover painting from L? No. F had void title and therefore Lucy got nothing. Not entrustM bc friend isnt a merchant in paintings. o. Problem 16.2(a): P took painting to L to show her and her clerk mistakenly sold it to F. F pd w/ a check returned for insufficient funds but is willing to bring a cashiers check. Before F makes a new check, P realizes and demands F to return the painting. P can prob get painting back. A check is conditional payM. Under Art 4, the transaction hasnt yet occurred. So if P demands b4 F hands over a cashiers check, P wins. Isnt this an arbitrary distinction? Why should it be a beat the clock situation? This is a case where a bright line rule is convenient/predicable/consistent. P can still sue L for conversion. This gives entrustees incentive to be careful with others stuff. p. Problem 16.3(a): G Sr. bought w/ bad check for 50,000. G Sr. sold to family friend C for 40,000. C gave to G Jr. as birthday gift. It doesnt matter that G Jr. was not a purchaser for value. That only matters when voidable title is being xferred. CG Jr. was good title. P has superior title over G Sr. but not G Jr. So long s G Jr. is unaware of his fathers deceptive practices he wins. Pierre (50,000)George Sr. (40,000)Carla (0) George Jr. (voidable) (good title) (good title) q. Problem 16.3(b): Even if G Jr. was party to the fraud he still has good title (again bc this was good titlegood title) but P can try to sue him for fraud/misrepresentation. r. Problem 16.3(c): G Sr. gave to G Jr. as a birthday gift. G Jr. is not a GFPV bc he didnt pay for it. Therefore, he got what G Sr. had, voidable title, and P can get it back. s. Problem 16.3(d): G Sr. gave to G Jr. who sold to C. C has good title. PierreSeniorJunior ($$)Carla (BFPV) (voidable) (voidable) (good title) t. Problem 16.3(e): G Sr. stole, sold to C, who sold to G Jr. who sold to H. P gets the painting back. A true thief breaks the chain of title so nothing matters after Senior. u. Problem 16.4: P bought painting as is from J, who had voidable title. P has good title as a GFPV so he does not have to give the painting to D. As is does not effectively disclaim the IWT so P can sue J for failure to xfer rightful title and require J to vouch in and defend him if D sues P under 2-607(5)(a). If J refuses to defend, he will be bound by the cts findings in D v. P. DelgadoJulesPierre (voidable) (GFPV) 35

H. Title with Leases, International Sales and Real Estate

1. Leases a. Title rules for leases are significantly different. b. Warranty of Quiet Possession 2A-211(1): The lease warranty of title is given by all lessors and promises merely that no third party holds a claim or interest that arose from an act or omission of the lessor that will interfere with the lessees enjoyment of the leased goods. c. 2A-211(2): Lessors that are merchants dealing in goods of the kind ALSO warrant that the leased goods are free of any rightful claims of infringement by third parties. But, this second warranty does not exist in finance leases. d. 2A-304 and 2A-305 essentially mimic 2-304. i. 2A-304(1): Same goods leased by lessor to two lessees. The subsequent lessee must take subject to the existing lease contract. Also, a PURCHASER who tricks the TO of goods into delivering possession has voidable title and can xfer a good leasehold int to a subsequent lessee for value. So the effect is that the lessee retains possession but now pays rent to the TO rather than the trickster. ii. 2A-304(2): EXCEPT, when the lessor is a merchant with respect to goods of the kind and the existing lessee entrusts the goods back to the lessor during the course of the existing lease, the new lessees right to possession of the goods is superior to that of the existing lessee. iii. 2A-305(1): Subleasing. A buyer or sublessee from an existing lessee can only have rights to the goods that are no better than those of the existing lessee. So only get possession and only so long as the terms of the original lease, including rent payment, are met. iv. 2A-305(2): EXCEPT, where the lessee is a merchant that deals in goods of the kind and the goods were entrusted to the lessee/merchant by the lessor. In that case, the lessee has the ability to give to a buyer or sublessee in the ord course of business all the lessees and lessors rights to the goods, free of the existing lease K. e. OC 3 to 2A-304 directs to 2A-307(2): a creditor of a lessor takes subject to the lease K unless the creditor holds a lien that attached to the goods before the lease contract became enforceable. f. Problem 17.1(a): S entrusted to P, Ps clerk leased to M. M is not an ord B in course of biz; it is a lessee so 2-403(2) n/a. 2A-304 only applies when the lessor double leases and 2A-305 only applies when a lessee sells or subleases. So this case falls under 2A-307(2). S has a COA against P so she becomes Ps creditor under OC 3 to 2A-304. S takes subject to the lease. Therefore M gets to possess under the lease and S can sue P for the proceeds of the lease and possession once the lease term is up. g. Problem 17.1(b): P purchases painting from S w/ bounced check and leases to M for 1 yr. When can S recover the painting? P has voidable title. 2A-304 and 2A-305 n/a. So this goes under 2403 and the lease, so long as in good faith, makes S a GFPV so S gets back after 1 yr. h. Problem 17.2(c): S entrusts to P, P leases to M, M leases for 5 yrs to G. M can only xfer what it has under 2A-305(1), the remainder of its 1 yr lease. ShelbyPierreMuseumGallery (entrust) (lease) (lease) 2. CISG Warranty of Title a. Art 41 gives warranty of title but there are no further provisions about who gets superior title. The S must deliver goods which are free from any right or claim of a third party, unless the B agreed to take the goods subject to that right or claim. b. To figure out superiority of title, have to look to domestic law. c. Problem 17.2: MansonAlisonPierreLas Pinturas (voidable) (good) (good)

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M sued LP to get painting back so LP is threatening to sue P for IWT. For competing claims to title, domestic law applies. Everything in facts points to TX law being domestic law applicable. P was a GFPV so he got good title and therefore he xferred good title to LP so no breach of IWT.

3. Real Estate a. Sale of real estate has an IWT (usually created by stat) but not when the sale is by a quitclaim deed, in which S only promises to sell whatever title the seller may have in the propertynot that the deed is good or that they will defend actions against B. b. The IWT includes not only (1) the present promise by S that the title is good, but also (2) the warranty of quiet enjoyment, which promises that Bs future enjoyM of the premises will not be disturbed by either S or s/o claiming through S, and (3) the warranty of further assurances, which promises B that S will take steps to put B into possession of the title that S warranted. c. Keilbach v. McCullough (1996) i. K sold M land. M tried to sell but neighbor claimed AP. M filed quiet title, successful, sought dams from K and title co. for breach of IWT and atty fees etc. M does not get fees. ii. Rule: Where B is unsuccessful in defending her prop against a claim of AP, S breaches the IWT and B is entitled to reas atty fees and expenses incurred in defending title. However, when B successfully defends title, S has not breached the IWT cannot be held liable for costs of defending. d. Mortgage lenders require B to purchase title insurance. Title Insurance Policies include (1) promise to defend insured against all lawsuits related to defects in title that are covered by the policy and (2) promise to reimburse insured up to policy limits for any losses sustained by the insured as a result of covered title problems that materialize. Common exclusions from title insurance coverage include (1) easements that do not appear in public records, (2) mechanics liens and (3) claims of parties that are currently in possession of the property. i. Hatch v. First American Title Ins. (1995) 1) Ps had title insurance with D. Problem w/ title. D filed action to fix but judgM wasnt entered fixing the problem until 5 yrs later. Ins K is ambiguous about whether D has obligation to fix w/in a reas time or just an obligation to fix. 2) Rule: Ambiguities in ins policies must be construed against insurer, typically the drafter of the K. (Applies less strongly where insured and insurer have equal bargaining pwr.) e. Problem 17.3: B cant vouch in S or ins co bc this is not a UCC case. Under FRCP 14 he can implead them as third parties.

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III. Performance
A. Closing the DealNot tabbed bc too many!
1. UCC

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a. The process of closing the sale begins with Bs physical receipt of the goods. b. 2-513(a): B always gets a reas opp to inspect b4 payM or acceptance. c. Bs right to reject:
i. 2-601 Perfect Tender Rule: If the goods or tender of delivery fail in any respect to conform to the K B can reject, accept or accept only part. ii. 2-612 InstallM Ks: 1) (2) B can only reject an installM in an installM K if the non-conformity substantially impairs the value of that installment and cannot be cured. 2) (3) B can only reject a whole installM K if the non-conformity w/ one or more installM substantially impairs the value of the WHOLE K. 3) Problem 18.1(e): InstallM K for 4 comps 1 per month. B notices crack in frame of first comp. Options? Under 2-612(2), It depends on whether crack is a subst impairM that cannot be cured. Under 2-612(3) this is prob not egregious enough to shake faith and subst impair the value of the entire K. This is prob not subst enough for either. 4) Problem 18.1(f): Same, but first comp explodes! This prob meets both. Def cant be cured and is a subst impairM. Plus she can use shaken faith/2-612(3) to cancel the remainder of the K. 5) H: What if all USB ports on the first comp dont work. Prob cant cancel the whole K and might not be able to reject this installM bc is this really substantial? iii. 2-504(c) ShipM Ks: Failure to get B necessary docs or make a proper K for transport is a ground for rejection only if material delay or loss ensues.

d. 2-606(1) Acceptance: Acceptance occurs when:

i. (a) after reas opp to inspect B affirmatively signifies to S that the goods are conforming or he will take them in spite of their non-conformity, or ii. (b) after reas opp to inspect B fails to reject the goods under 2-602(1) iii. (c) B does any act inconsistent w/ Ss ownership, but if wrongful against S, S must ratify. 1) An act that amts to inspection is not an act inconsistent w/ Ss ownership. a) Problem 18.1: B receives comp, uses for 10 mins and discovers left side of screen frame cracked. Acceptance? No. Under 2-606(1)(b) B gets a reas opp to inspect b4 acceptance. 10 mins should be w/in her reas opp so this use is also not inconsistent under 2-606(1)(c). 2) An act that fundamentally changes the nature of the good IS inconsist w/ Ss ownership. a) 18.1(b): B drills holes in base of comp and screws into desk. Uses for 10 mins and notices screen frame cracked. Acceptance? Yes. Under 2-606(1)(c) it is inconsist w/ Ss ownership. 3) Addl use of the good after knowledge of defect can be inconsistent w/ Ss ownership. a) 18.1(c): B sees crack right away but still uses comp for 10 minutes. Acceptance? No. B can still inspect for more defects w/o acting inconsist w/ Ss ownership. But more use might be. 4) Post-rejection use can be inconsistent w Ss ownership. a) 18.1(d): B sees crack immediately, calls S and rejects. Then uses comp for 10 mins. Acceptance? Maybe. Ordinarily post-rejection use is acceptance under 2-606(1)(c), but here it was just for ten minutesmight just be curious about the condition of the rest of the comp. b) OC 4 deals w/ post-rejection actsfulfilling Bs duty upon rejection is not acceptance. 5) 2-602(2)(a): Any exercise of ownership by B after rejection is wrongful against S. a) Problem 18.2: B recd shipM of steel and discovered impurity that makes it more expensive for B to use. B rejected and is waiting for S to pick up. Price has shot up and B wants to know if she can un-reject and sell for profit. Plus S on verge of bankruptcy so unlikely to collect dams. Under 2-602(2)(a) if B sells its wrongful against S. Under 2-606(1)(c) S must ratify the sale as an acceptance for it to be an acceptance. It is up to S what B can do here. i. (1): Rejection must occur within this reasonable time after delivery and B must seasonably notify S. 1) 2-605(1): The rejection must state the specific grounds for the rejection (2-605(1)). 2) Under 2-601 (perfect tender rule) B can technically reject for anything, except remember: a) Substantial impairM and cure conditions for installM Ks above.

e. 2-602 Rejection: B can cancel the K in these circs:

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f.

Bs post-rejection obligations:
i. ii.

b) S/t B cant reject if theres a remedies limitation that precludes rejection. c) Ss right to cure tempers the perfect tender rule. d) OC 2 to 2-106: UoT, CoD and CoP also temper the perfect tender rule.

2-602(b): Non-merchant Bs must hold goods w/ reas care for a time sufficient to enable S to remove. 2-603(1): Merchant Bs must follow any reas instruction of S as to resale, storage or the like (if the goods are in Bs possession and S has no agents there at time of rejection). PLUS, if the goods are perishable or will lose their value quickly, B must sell them on Ss behalf.

g. 2-508 Ss has a right to cure if:

i. ii. (1) B rejects and the time for perf has not yet expired and S seasonably notifies B of intent to cure. (2) B rejects and S had reas grounds to believe rejected tender would be acceptable w/ or w/o monetary allowance, and S seasonably notifies B. Then S gets a reas time to cure. iii. Cts are split on whether there is a right to cure w/ revocation under current 2-508. A2-508 comes out the opposite way, allowing cure btw merchants but NOT for consumer Bs. iv. Berning v. Drumwright (1992) 1) Ps van broke. D recommended replacing engine w/ second hand one. Ps later found out D put a truck engine in their van, D tried to repair numerous times and Ps ended up having to buy a new engine elsewhere. Ps clearly qualify for revocation of acceptance under 2-608. Under 2-711 Ps can cancel the purchase (parts and labor) and recover what they paid. Ps got a security int in the engine and could retain it or resell it. Ps retained, so they must reimburse D for it. 2) HELD: A right to cure is relevant only when a B has rejected goods prior to a formal acceptance. The UCC give S the right to cure defects following a Bs acceptance. a) Theres no sense in a right to cure here bc S already tried to fix so its like shaken faith.

h. What is a satisfactory cure? S does not get to unilaterally define that is a satisfactory cure. It really depends and the shaken faith doctrine is incorporated. i. 2-608 Revocation of Acceptance: Even after acceptance, S can still revoke acceptance.
i.

ii.

(1): The goods non-conformity must substantially impair their value to B and 1) (a) B accepted on the reas assumption that the non-conformity would be cured and it has not been seasonably cured, or 2) (b) B was unaware of the problem bc of Ss assurances or bc the problem was too hard to discover b4 acceptance. (2): Revocation must be made w/in a reas time after B did or should have discovered grounds for revocation; and before any substantial change in goods that was not caused by their own defects.

j.

2-607(2) reiterates 2-608(1): Acceptance made w/ knowledge of a non-conformity cant be revoked unless acceptance was on reas assumption that non-conformity would be seas cured. k. Rejection and revocation are not effective until B notifies S. l. Last resort for B is to fall back on warranties. Problem 18.1(g): Acceptance doesnt impair ability to revoke or warranties but then issues w/ remedy limits/exclusions and warranty defenses. m. North American Lighting, Inc. v. Hopkins Mfg Corp. (1994)
i. H made system for N. H assured N that system would meet fed regs after software updates. After several updates still didnt meet so N revoked acceptance. ii. H: N knew of the problem under 2-607(2) so tender was perfect and N could only revoke if N made a reas assumption that seasonable cure would occur. 1) But the ct says you can argue that under 2-608(1)(b) N didnt really discover the non-conformity until it realized Ds assurances were false and system wouldnt work after updates. iii. Under 2-608(1), impairM is subj from Ns perspective and substantial is objective. Here, both met. Under 2-608(1)(a), it was reas to rely on Hs assurances bc this technology was sophisticated and H had expertise. Under 2-608(2) and 1-204(2), reas time for revocation depends on the nature purpose and circs of the transaction. The pd where revocation is allowable may be extended where S gives continuous assurances and where S fails, after repeated attempts, to repair.

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n. Look at problems 18.3-18.5? Never went over in class but were assigned.

iv. However, Ns use must be deducted from Ns dams. 2-711 doesnt specifically say this, but under 1-103, can supplement remedy, in this case quantum meruit (like unjust enrichM) restitution. N must disgorge the benefit it received from use from its dams. 1) Must prove performance of the services 2) Reasonable value of the services, and 3) Receipt by D from P of a benefit which it would be unjust for him to retain without paying.

2. Closing the Deal w/ Leases a. UCC 2A basically mirrors Art 2 except for finance leases. b. 2A-515(1): Acceptance occurs after the lessee has had a reas opp to inspect and i. (a) the lessee signifies or acts w/ respect to the goods in a manner that signifies to lessor or supplier that the goods are conforming or that lessee will take or retain them in spite of nonconformity, or ii. (b) the lessee fails to make an effective rejection. 1) 2A-509(2): Rejection must be w/in a reas time after tender or delivery of the goods and lessee must seas notify lessor. 2) 2A-515(2): Acceptance of part = acceptance of whole. c. 2A-407(1): For non-consumer fin leases, lessees promises under the lease K become irrevocable and independent upon lessees acceptance of the goods. d. 2A-407(2): A promise that has become irrevocable and independent under (1) i. (a) is effective and enforceable btw the parties and by or against 3d parties/assignees and ii. is not subject to cancellation, termination, modification, repudiation, excuse or substitution w/o the consent of the party to whom the promise runs. 1) CPLC v. JWCJR: Consent can be oral, written or even implied. It requires a meeting of the minds of the parties either expressly or impliedly w/ sufficient definiteness. The meeting of the minds must be subjective and objective. So theres an exception to 2A-407 if lessor consents. e. 2A-407(3): This section doesnt affect kal provisions. f. 2A-517(1): A lessee may revoe acceptance if the nonconformity subst impairs its value to the lessee and i. (a) except for finance leases, on the reas assumption that its nonconformity would be cured and it has not been seas cured; or ii. (b) w/o discovery of the nonconformity if lessees acceptance was reas induced either by the lessors assurances or, except for finance leases, by the difficulty of discovery bf acceptance. 1) Under 2A-517(1)(b) a fin lessee can revoke acceptance where it failed to discover some non-conformity/defect bf acceptance bc it was reas induced by the lessors assurances. 2) How is this consistent with 2A-407? Does it only apply to consumer finance lessees? 3) Unusual, bc fin lessor rarely assures. 4) Otherwise, lessor has to go after supplier for breach of warranty. 5) Problem 19.1(a): S selected a bus to fin lease for biz from FN w/ L as supplier. Kal HOHW cl w/ NO EXCEPTIONS. FN tells S not to have mechanic check out bc L is a good supplier. First trip she learns its an oil guzzler can she revoke acceptance? No. 2A-517(1)(b) only applies to a 2A407 HOHW cl, not a Kal one w/ extra NO EXCEPTIONS language. S must sue supplier for breach of warranty and may argue the cl is unconscionable or that FN breached good faith. 6) 19.1(b): Same but no Kal HOHW cl. S can revoke under 2A-517(1)(b) bc the fin lessor gave her assurances. Defense will argue Ss acceptance not REAS induced by reliance on its assurances. g. 2A-517(2): Except for finance leases that are not consumer leases, lessee may revoke acceptance if lessor defaults under the lease K and the default subst impairs the value to lessee. i. 19.1(c): S leases van for personal use, FN (fin lessor) gave no assurances and no kal HOHW cl. Van turns out to be oil guzzler. 2A-407 only applies to non-consumer fin leases. Since this is a consumer lease, 2A-517(2) applies and she could revoke if the lessor defaulted and subst impaired the value of the lease to her. But here, FN, the lessor, has not defaultedhow can a finance lessor really default?

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ii.

Bank not responsible for supply K. So S cannot revoke-must sue supplier for breach of warranty. 19.1(d): Same as (c) but there is a kal HOHW cl. S still cant revoke. This also raises the issue of the conscionability of kal HOHW cls in consumer fin leasesdepends on the jxn under OC 6 to 2A-407.

h. Colonial Pacific Leasing Corp. v. JWCJR Corp. (1999)

i. J entered fin lease w/ C for software pckg. J signed acceptance/acknowledgM form and made initial lease payM b4 receiving it. J confirmed it was operational shortly after receiving so C pd the supplier. Same day it crashed and J notified C and held for C to pick up. J asked C to pick up again and stopped payMs. 2 yrs later C sued. J also claims C consented to cancellation on phone. The tr ct said C had to pay under UCC HOWH. J argues alleged acceptance took place b4 Js reas opp to inspect. ii. HELD: The tr ct did not make findings about (1) reas opp to inspect, (2) rejection, and (3) consent to cancellation so remd. Reas opp to inspect/acceptance are ?s of fact. Neither taking possession, nor signing acceptance before receipt of the goods, nor making payM is determinative. iii. 19.2(e): S signed fin lease w/ kal HOHW no exceptions provision and before leaving suppliers lot she noticed defective steering wheel. Can she get out? Yes. She has not accepted yet. Under Colonial, signing the K isnt conclusive and she had to have a reas opp to inspect under 2A-515(1) bf acceptance. Both kal and 2A-407 HOHW cls arent triggered until acceptance. 1) If kal HOHW cl said irrevocable and independent upon signing the K instead of upon acceptance, S must argue unconscionable under 2A-108. If this were a regular lease this would probably be unconscionable to have auto acceptance b4 you see what youre buying. However, in this particular case, the fin lessor can argue that lessees remedies are REALLY only effective against supplier? So it doesnt really matter and isnt outrageously unfair. Can still sue supplier.

3. Closing under the CISG a. Art. 35: S must deliver goods which are of the quantity, quality and description reqd by the K and they must conform w/ samples S has held out to B. b. Art 36: S is liable for any lack of conformity. c. CISG is much more averse to letting Bs use goods-oriented remedies. Bs can avoid in only 2 situations: i. Art. 49(1)(a) Where S has committed a fundamental breach. 1) Art. 25: A breach is fundamental if it results in such detriment as to subst deprive him of what he is entitled to expect under the K unless the party in breach did not foresee and a reas person of the same kind in the same circs would not have foreseen such a result. 2) Art. 49(2)(b)(i): To declare a fundamental breach, B must give notice to S no later than a reas pd following when B knew or ought to have known of the defect. a) Ought to have known is where inspection issues come into play. ii. Art 49(1)(b) Where Ss delivery is later than agreed due date plus any addl time B has agreed to. 1) 47(2): Agreeing to give S more time for delivery does not prejudice Bs right to dams for delay. d. When there is a fundamental breach, B may either require delivery of substitute goods under Art 46 or declare the K void and seek damages under Art 49. e. Consequences of avoiding the K: i. Art 81(1): Both parties are relived of their obligations but B may sue for dams. ii. Art 81(2): Either party may claim restitution if their partial perf has resulted in a benefit to other party. iii. Art. 82(1): If B has already recd goods, B has obligation to return to S in subst the same condition. f. If the breach is less than fundamental, B must keep the goods but can sue for non-avoidance remedies under CISG Arts. 74-77 or demand cure under Art 46. g. Art. 48: For non-fundamental breaches, S gets the right to cure. h. Delchi Carrier SpA v. Rotorex Corp. (1995) i. R gave D specs and a model for compressors and D placed order. After first shipM, D discovered they didnt meet the specs/model so D cancelled and re-bought, but too late for release date. ii. HELD: This was a fundamental breach so D could avoid. H: B may still get restitution for use.

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i.

Problem 19.2(a) B bought suits from S, placed on rack w/o inspecting, and then received tons of coplaints about the cheap material. 3 mths after delivery B wants to avoid. This is prob a fundamental breach under Art 25. If just putting it on the rack is consistent with ind custom then it bolsters the reas arguM for timely notice under Art. 49(2)(b)(i). Plus, Even if B inspected its difficult to determine crappy fabric. So B can avoid under Art 49. j. 19.2(b): If just missing a few buttons, its probably not a fundamental breach AND its sth they prob would have noticed if they reas inspected the shirts. k. 19.2(c): B discovers defect 3 wks before kal deliv date. Can B avoid? Can S cure? This is not a breach bc the shirts are early and theres plenty of time to cure. Art 48 allows cure by deliv date.
4. Real Estate Closings a. The legal xfer of ownership takes place when S delivers the deed to B. Delivery of the deed requires actual physical xfer of the deed to B AND intent on Ss part to create a present ownership int in B as a result of the physical delivery. b. Gray v. First NH Banks (1994) i. Gs bargained w/ F to buy bowling alley w/ known septic problems. When septic problem got really bad, Gs tried to rescind K bc F failed to follow a technicality under local law of having Gs sign a sewage inspection. ii. HELD: While the stat reqM was not technically complied w/, Gs were aware of the problem and utilized it as a bargaining chip, so non-compliance didnt cause any dams they now suffer. The purpose of the stat is to inform and here Gs already knew. Dismissal affd. c. 19.3: Bs bought house, discovered tank underground that is going to cost tons to remove. S had no idea it was there. Can they rescind? W/o fundamental fraud or mistake rescission is really hard to get. In this case, this could be mutual mistakeboth parties mistakenly believed in the non-existence of this tank and this was a basic assumption of their K. It probably also has a material impact on their K--40,000 on 170,000 is pretty substantial. Might be dangerous under IWH. Mikes an engineer and he knows s/t ppl do audits for these things but theyre expensive?

B. Risk of Loss
1. Intro to RoL under the UCC a. 2-309 Talks about FOB Terms. b. Under 2-308(a), the default delivery term is FOB Sellers Place/ShipM K. c. Ss like shipM Ks bc RoL passes earlier and B has to pay for shipM. d. RoL rules define which party, as btw B and S, is responsible for destruction of or damage to goods btw the time the K is entered and the time B receives possession. RoL becomes an issue when goods are in transit by a carrier OR when theyre sitting in a whse. e. If the damage or destruction occurs through the fault of either party, then the neg party bears the loss and the RoL rules dont come into play. f. In reality, these fights involve ins cos. The carriers ins usually covers. g. 2-509(4): RoL rules are default rules and RoL can otherwise be allocated by agreeM.

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Risk of Loss in the Absence of Breach

Subsection 2-509(1)(a) Delivery type Shipment K, by carrier Destination K, by carrier Warehouse/ bailees When risk of loss passes When Seller duly delivers goods to carrier

2-509(1)(b)

When Seller duly tenders goods at particular destination, so as to enable Buyer to take delivery
Generally, RoL is on whoever has control over bailee. Specifically, RoL passes to B at first of 3: 1. When B receives negotiable document of title covering goods; 2. When bailee acknowledges to B its right to possession of goods; 3. When B receives non-negotiable document of title or other written direction to bailee to deliver.

2-509(2)

2-509(3)

No carrier -- B picks up goods from S, or Ss vehicle delivers goods

- If S is a merchant (either in terms of goods or practices), when Buyer receives goods; - If S is not a merchant; when Seller makes a tender of delivery

2. RoL in the Absence of Breach a. 2-509(1)(a):Establishes RoL for deliveries that do not require S to deliver the goods at a particular destination.; S must duly deliver goods to carrier. b. FOB Sellers Place = ShipM K 2-509(1)(a) Rules for RoL in Absence of Breach: i. B is responsible for paying the cost of freight. (The K does not require S to deliver to goods to a particular destination). ii. RoL shifts to B when the goods are duly delivered to the carrier. 1) 2-504 In order for there to be delivery to the carrier S must a) (a) Put the goods in possession of the carrier b) (a) Make a reas K for their transportation c) (b) Deliver any doc nec to enable the buyer to take delivery, and d) (c) Promptly notify the buyer of shipM. 2) Cook Specialty Co. v. Schrlock (1991) a) ShipM K. S delivered to carrier, carrier underinsured and machine was destroyed during shipM. S recd a cert of ins from carrier that said there was enough coverage. b) HELD: S doesnt have to investigate the amt and terms of the carriers insurance to create a reas K for trans and hence duly delivery under 2-504(a). Therefore, B bore the RoL. 3) 2-504 also says that Failure to notify B under (c) or to make a proper K under (a) is a ground for rejection only if material delay or loss ensues. For shipM Ks this is controversial. bc it might conflict w/ the perfect tender rule. a) Problem 20.4: Goods were conforming, S failed to give notice to B and carriers truck stolen. 2-504 required notice to be given when the goods were xferred to the carrier, but the only time failure to notify will be a problem is if theres material loss or harm caused by the lack of notification. Notification is supposed to encourage Bs to get insurance. B has RoL I think. c. FOB Buyers Place = Destination K 2-509(1)(b) Rules for RoL in Absence of Breach:

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i. ii.

d. 2-509(2) covers Ks where goods are held by a bailee to be delivered w/o being moved. RoL passes to B at the first of 3 events:
i. When B receives a negotiable doc of title covering the goods ii. When the bailee acknowledges to B the Bs right to possession of the goods; or iii. When B receives a non-negotiable doc of title or other written direction to the bailee to deliver.

S is responsible for paying the cost of freight. (The K does require S to deliver the goods at a particular destination.) RoL shifts to B when goods are duly tendered to B at the stated destination. 1) 2-503 In order for there to be TENDER, S must: a) Put and hold the goods at Bs disposition for the pd nec for B to take possession, b) Give B notice of tender, and c) Give B any docs that are needed for B to take delivery.

e. 2-509(3) is a catch-all provision that covers other types of deliveries, including when B picks up the goods from Ss biz or residence or seller delivers goods in its own vehicle.
i. ii. RoL passes to B on receipt of the goods if S is a merchant. If S is not a merchant RoL passes to B when S tenders delivery of goods to B. 1) A2-503(3) is diff! For both merchant and non-merchant Ss, RoL passes upon Bs receipt. 2) Problem 20.5(a): Priv ind sold mower. B said hed p/u in couple days. Next day it was stolen. S non-merchant so under 2-509(3) B gets RoL upon tender of delivery. Under 2-503, S made the goods available to B, but not for the couple days reas nec for B to take possession. S has RoL bc no tender of delivery bc mower hasnt sat for 2 days yet. 3) Problem 20.5(b): If a week had passed, B has the RoL. S made it avail for p/u for the couple days nec for B to p/u. Here, its Ed that has the risk of loss. Second, this could be B breach (you would have to make this arguM under A2-509. B failed to deliver check or p/u w/in promised time.

Fulfilling Tender Obligations

Section or Subsection 2-503(1) Delivery type Sellers Obligations

Buyer picks up Put and hold conforming goods at Buyers goods at Sellers disposition at reasonable hour and for place of business reasonable period, and give Buyer needed notice Shipment contract, by carrier Destination contract, by carrier or Sellers vehicle Warehouse Give goods to carrier, make reasonable carrier contract, get and deliver needed documents to buyer, promptly notify Buyer of shipment Put and hold conforming goods at Buyers disposition at reasonable hour and for reasonable period (if needed) for Buyer to take possession, and give Buyer any needed notice, plus tender documents per sub(5)* Seller has tender obligations were skipping this.

2-503(2) 2-504 2-503(3)

2-503(4)

*NB: 2-503(3) says that Seller must tender documents per (4) and (5), but (4) is not in fact applicable because (4) deals with warehouse deliveries, while (3) deals with destination contracts.

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Tender of Delivery and Payment of Freight

How does Seller complete tender of delivery? Buyer picks up goods at Sellers location Shipment K, by carrier Destination K, by carrier or Sellers vehicle Warehouse See 2-503(1)

Who pays freight? No freight paid

See 2-503(2); 2-504(a), (b), (c)

Buyer 2-504(a) Seller 2-503(3)

See 2-503(3)

See 2-503(4)

No freight paid

3. RoL w/ Breach a. 2-510 applies when theres been a breach. b. 2-510(1): Where a tender or delivery of goods so fails to conform to the K as to give a right of rejection the RoL remains on S until cure or acceptance. (Proper rejection precludes passage of RoL to B until cure or acceptance). i. For single delivery Ks, any non-conformity is enough to justify rejection and preclude passage of RoL to B under the 2-601 perfect tender rule. ii. For InstallM Ks, there must be a subst impairM bf B has a right to reject under 2-612. iii. For ShipM Ks, B has no right to reject where Ss failure to make a reas carrier K or to notify B of shipM does not result in material loss or delay under 2-504. c. In the case of such a breach, RoL only stays w/ S until cure or acceptance. So by its terms, after acceptance but before revocation, RoL is still on B. i. Problem 20.2: B returned car after a few wks bc of brake problem. She said fix or Ill revoke. Vandals damaged car on Ss lot b4 S could fix. S fixed brakes, must he fix damage too? No. B already accepted. She hasnt revoked and prob cant revoke now bc condition of the goods has subst changed. If Karen had said I hereby revoke until you fix brakes, diff resultRoL would be w/ S. ii. Problem 20.3: K for gold weights FOB Ss factoryshipM K. Carrier pd/u black weights and S notified B of shipM. Carriers trucks were stolen and its ins had lapsed. Who carried RoL? S prob has RoL bc it was in breach by shipping non-conforming goods. Any non-conformity at tender is imperfect tender entitling B to reject b4 acceptance. If there were a conspicuous RR remedy limitation cl, S could argue that B contracted away its right to reject so 2-510 n/a and B had RoL. d. Design Data Corp v. Maryland Casualty Co. (1993) i. DDC sold comp to HHBFOB Sellers Whse (ShipM K). Comp arrived and didnt work so B rejected. DDC took comp back and made ins claim but D denied coverage bc RoL passed to B when DDC duly delivered the comp to the carrier. Therefore, under ins K, this was not property for which DDC was legally responsible so not covered.

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ii.

HELD: The ins co is right under 2-509. But under 2-510(1), RoL remains w/ S when theres a nonconformity that entitles B to reject, unless/until S cures or B accepts. So ins co. has to pay.

e. 2-510(2): Where B rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the RoL as having rested on S from the beginning.
i. ii. So there are 2 conditions to RoL passing: rightful revocation and loss not covered by Bs insurance. If B does not rightfully revoke, B breaches the K and we go to 2-510(3)

f.

2-510(3): Where B repudiates or is otherwise in breach as to conforming goods already identified to the K, RoL will be on B for a comm reas time and then only to the extent that the loss is not covered by Ss ins coverage.
i. So there are four conditions to RoL shifting back to B: (1) B repudiates or is otherwise in breach, (2) goods are conforming, (3) the loss is not covered by Ss insurance, and (4) loss occurs w/in a comm reas time (presumably from the repudiation or other breach). ii. Problem 20.1: B pd for car and agreed to p/u in a couple days. After a wk B hadnt picked up so S called a couple times to p/u. What if sth happens? This is a 2-509(3) catch-all case so RoL doesnt pass to B until B actually receives the goods. S should write a provision that B must p/u w/in X days or breach so that 2-510(3) will apply and give B RoL. S might also store the car w/ a shell bailee corp or have emp drive car to B and deliver it. iii. 2-509(3): The RoL only rests on B in the case of B breach for a commercially reasonable time. Problem 20.6(d): Before tender, B calls and cancels. S reserved right to sue for breach. A wk later same steaks destroyed by fire at no fault of S. S has 1,000 ins deductible. B breached by anticipatory repudiation. Who had RoL? This is anticipatory repudiation, which is breach on the part of B. Under 2510(3) these goods were identified to the K so B had RoL. Under 2-510(3) RoL stays w/ B for a comm reas time. 1 week seems comm reas. 2-510(3) splits RoL btw B and Ss ins. What about deductible? More than Bs steaks were damaged so the equitable thing is to divide the deductible pro rata. B pays 2/5 or $400. If S brought action for price under 2-709 theres no reference to ins. S argues it should get the full deductible and B argues S should get no deductiblejust the original purchase price or its a windfall. Such a windfall doesnt create an incentive to insurea huge goal for the drafters.

g. Under 2-709 Action for Price, RoL shifts back to B after comm reas time!
i. Problem 20.5(c): What if six mths had passed? B breached after not tendering payM/picking up after a couple days so RoL passed to B. However, under 2-709(1)(a), S had to bring its action for the price w/in a comm reas time AFTER RoL passed. So sometime in the 6 mths after RoL prob passed, it also prob shifted back to B again bc the time was comm unreas. B would also have a strong estoppel argument hereS waived right to sue by waiting so long. ii. Problem 20.5(d): B already pd and stolen next day. RoL never passed to B bc the couple days needed for p/u havent passed yet so no tender. So S will have to refund B I think. iii. Problem 20.5(e): B already pd and stolen 6 mths later. S can argue breach for failing to p/u and besides, RoL passed bc S tendered. B already has $ so no action for price needed so theres no com reas time issue here. So if B comes to p/u S gets to keep $ and B is out of luck. iv. Problem 20.6(a): K to sell steaks. FOB Missoula (Ss Place of Biz) so shipM K. S shipped in nonrefrigerated truck for 400 miles, but after 10 accident and steaks destroyed. S notified B of shipM. S did not comply w/ 2-504(a) bc he didnt make a reas K for transport but the non-refrigeration did not destroy the steaks, the crash did. So under the last sentence of the last sentence of 2-504, S has a causation argument that the non-refrigeration did not cause the loss. B will argue that they would have been ruined anyways. B might also be able to argue that S breached the K bc these were perishable even outside of 2-504. H didnt give a clear answer. v. This is diff from 2-509(3): where shift of RoL is expressly limited to a comm reas time.

h. Intersection of 2-601 and 2-509(1):

i. For ShipM Ks, perfect tender is measured when RoL passeswhen goods are tendered to carrier. Problem 20.6(b): S used refrigerated truck, no accident but 40/500 steaks were ruined by rats. May B reject all or some of the steaks when they arrive? B cant reject any of the steaks!!! This problem shows the intersection of RoL and perfect tender rule. 2-601 doesnt say WHEN the non-

47

conformity must occur/when you measure the quality of tender/when tender must be perfect. Under 2509(1) the answer is that the quality of Ss tender is measured when RoL passes. Since this is a shipM K, the RoL passed when S tendered and delivered the steaks to the carrier, and given that the steaks were conforming at that point in time, S perfectly tendered the steaks so RoL passed to B. ii. Under 2-601(a) if any part of the goods is non-conforming B can reject ALL of them. Problem 20.6(c): 30 werent perfect when delivered to the carrier, so Grammas can reject ALL of the steaks

i.

Ins Cos prob cant get around RoL Rules under OC 3 to 2-510.
i. Problem 20.6(e): Subrogation cl in Ss ins K gives it right to collect against Bs w/ RoL. Under OC 3 to 2-510, it seems like RoL cant be disturbed by subrogation cls like this one. So it shouldnt affect B. Parties can contract around the provisions of the UCC unless the UCC says they cant in really limited circs like good faith. But this would be S and insurer unfairly bargaining away 3d parties rights.

4. RoL w/ Leases a. Pretty much the same as Art 2. b. 2A-219(1): 2As default rule is that except for fin leases, RoL never passes from lessor to lessee. W/ fin leases, RoL passes to the fin lessee. c. 2A-219 and 2A-220 apply where the terms of the agreeM provide that RoL will pass to lessee but the time for such passage is not stated. So if lease says 5 yr lease FOB Lessors Place of Biz, d. 2A-219(2)(a) dictates that RoL passes to lessee at the pt when the lessor delivered the goods to the carrier, just as would be the case under 2-509(1)(a) w/ the sale of goods. e. 2A-219(2)(b) is basically the same as 2-509s bailee rule. f. 2A-219(2)(c) is the same as current 2-509(3). g. 2A-220 similar to 2-510 for default. h. 21.1(a): 5 yr lease/$2,000/yr. Lessees emp destroys machine in 3rd yr of lease. No ins. is fired and cant afford to pay for it. Neither lessor or lessee have ins. Under 2A-219(1) lessor retains RoL. However, there is an exception bc the lessees agent caused the loss so lessee has RoL. i. 21.1(b): Same but its a fin lease and destroyed by accident. Fin lessee has RoL. j. 21.1(c): Regular lease, accidental fire destroys while lessee is two mths behind on payMs. State Law school has been in breach for two months. Under 2A-220(2), when lessee is in default, RoL passes to lessee for comm reas time. When lessee is in default lessor ordinarily repossesses so it doesnt seem like 2A-220(2) contemplates lessee still having the good. So RoL is only on law school for a comm reas time when the lessor REPOSSESSES. Here, its prob reas regardless for law school to have RoL on the machine bc its in law schools possession! k. 21.1(d): Regular lease, machine destroyed, lessee promised to insure but didnt. Failure to insure for 2 yrs probably a fund breach so RoL is w/ lessee. The very breach, failure to insure, caused the loss so law school should bear it. 5. RoL w/ CISG a. IMPORTANT: Incoterms in the K will govern passage of RoL. Incoterms are incorporated through Art. 9(2) bc though not global they are well known in international trade. b. Art 6: Parties can vary the provisions of the CISG. So they can use a stnd shipping term to K around CISGs default RoL rules. c. CFR: B pays shipping costs and RoL passes to B when goods pass the ships rail. Just like ShipM K. d. Art 36(1): S is liable for any lack of conformity which exists at the time when the risk passes to B, even though the lack of conformity becomes apparent only after that time. e. Art 36(2): S is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of

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f.

any guarantee that for a pd of time the goods will remain fit for their ord purpose or for some particular purpose or will retain specified qualities of characteristics. 3 RoL Situations under CISG
i. Goods to be delivered to B but goods arent in transit at time the K is entered into 1) Art 67(1): RoL passes to B when S delivers good to first carrier. ii. Goods are already in transit when the K is made 1) Art 68: RoL passes to B at the time the K is concluded. 2) S/t can pass retroactively if circs so indicate and S wasnt aware of damage when K entered. iii. B is to pick up the goods from S or some 3rd party. 1) Art 69(1): RoL passes to B when it takes over the goods or when its failure to p/u amts to breach. 2) Art 69(2): Where B will pickup at a 3rd party location, the stnd is stricter for B: RoL passes to B when deliv is due and B is aware that the goods are placed at his disposal at that place. i. ii. International sale for oil w/ CFR term. S hired a quality inspector who verified that the gum content met the limit in the K b4 loading the ship so S shipped. Upon arrival, B conducted second inspection and the gum surpassed the Kal limit so B refused the shipM. S resold for 2 mill. less. HELD: BP fulfilled its Kal obligations under the CFR term and Art 36(1) bc the oil was conforming when it passed the ships rail i.e. when RoL passed. However, under Art 40, S can still be liable for breach of the agreeM if it provided goods that it knew or could not have been unaware were defective when they passed over the ships rail. Remd to determine if S abused the CFR by spiking the gas so that it would pass inspection when it left but not when it arrived.

g. BP v. Empresa (2003)

h. CISG has no RoL provision for breach. It is handled indirectly bc when there is a fund breach the non-breaching party can avoid the K and avoidance essentially shifts RoL back to the breaching party. If goods are damaged and theres fund breach, non-breaching party doesnt pay, breaching party does so essentially the breaching party has RoL. i. 21.2: S gives black instead of gold weights to carrier, truck stolen, carrier no ins. Under Art 67, RoL passed to B once S handed to carrier. But if theres a fundamental breach under Art 70, then B can avoid which essentially shifts RoL back to S. The color of the weights is prob a fund breach thats the whole point Golds Gym, gold weights, so S will bear the loss.
6. RoL w/ Real Estate a. The majority CL default rule is that RoL during the pd btw the signing of the K and closing is on B. Tempered in a couple ways. i. S has to hold ins proceeds in trust for B. ii. Most real estate Ks contract around the CL rule. b. Voorde Poorte v. Evans (1992) i. V sold mobile home to Ds. K terms said the Ds get possession at closing and if destroyed bf closing, Ds can cancel the K (i.e. RoL doesnt pass until closing). Ds took possession early and fire destroyed. ii. HELD: Early possession doesnt affect the RoL provision. The terms of the K control and RoL was still w/ S. c. 21.3: Real estate K for 15,000 under FMV. B4 closing electrical fire causes $20,000 dam. S had homeowners w/ $5,000 deductible. What can B do? B can rescind or they can proceed and are entitled to the ins $ payable to S. Bs would prob have to pay the deductible. They should prob proceed bc after paying deductible they pay 125,000 total and house is now worth 120,000, so still getting 5,000 profit. Walking away might pressure S and it would eliminate stress for B. d. 21.3(b): If B neg causes the fire he gets RoL. Forgetting to turn light off prob isnt neg or reck.

IV. Remedies
A. Seller Remedies
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1. UCC Seller Remedies a. Parties rarely resort to these legal remedies but nonetheless theyre still really imp bc they still act as a background that really shapes the parties private negotiations. Plus, when they are used, the situation is usually high stakes. b. 1-106: Spirit of the remedies Provision i. The spirit of the remedies/goal under the UCC is expectation dams. This is true under CL too. Expectation dams are essentially putting the non-breaching/aggrieved party in the position they would have been in had the K been fully performed. Expectation dams are forward-looking, measure what the party would reas expect, must be foreseeable/reas, etc. This is the stnd for all breach of K dams. ii. CDs/PDs not allowed unless specifically provided for by the code. 1) This means NO CDs under pre-amended Art 2 for S unless the agreeM says so. S can only get IDs under 2-710. Ss often try to make CDs sound like IDs to get around this. 2) But A2-710(2) allows S to get IDs and also CDs in appropriate cases EXCEPT in consumer Ks. c. 2-703 Four Ways B can Breach (In all of these, B is failing to timely pay S the full price). i. B wrongfully rejects goods ii. B wrongfully revokes acceptance iii. B fails to make payment iv. B anticipatorily repudiates the K v. A2-703 adds a fifth way: wrongful failure to perform a contractual obligation. d. 2-703 Possible Remedies for Aggrieved S: i. Withhold delivery ii. Stop delivery by any bailee iii. Identify goods to the K in the case of anticipatory repudiation under 2-704. iv. Resell and recover resale damages under 2-706 v. Recover K market damages (or lost profits) under 2-708 vi. Sue for price under 2-709. vii. Cancel the K. viii. H: Can also recover lost profits for lost volume sellers (We are going to skip this for now and will only do it if we have time later.) Its not terribly important. ix. A2-703 adds specific performance, LDs, and a catch-all for any damages reasonable under the circs. e. OC 1 to 2-703: S/t more than one remedy is available. The UCC rejects the doctrine of election of remedies and thus the remedies under the code are cumulative in nature and include all of the possible remedies for breach. f. When the dams provision makes IDs or CDs available to S, they include: i. 2-710 IDs: IDs to an aggrieved S include any comm reas charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the Bs breach, inconnection with return or resale of the goods or otherwise resulting from the breach. ii. A2-710 CDs and IDs: (1) (2) CDs resulting from the Bs breach include any loss resulting from general or particular reqMs and needs of which the B at the time of contracting had reason to know and which could not reas be prevented by resale or otherwise. (3) In a consumer K, a S may not recover CDs from a consumer. g. 22.5: Certainly the breach caused them not to get the 20,000 bonus, but what is that 20,000 bonus? The bonus is clearly CDs so under pre-Amended Art 2 S cant get the 20,000. S will try to argue that the 20,000 is IDs but this argument is weak. IDs are like storage, etc. Under amended Art 2, S can get the bonus as CDs. White & Summers take the position that failing to include CDs in Art 2 was an oversight. H: disagrees. Some cts have adopted the White & Summers opinion. h. 2-709 Action for the Price: This is essentially spec perf, reqing B to pay the agreed upon price. S may only sue for the price in one of three circs (it is assumed that B has not yet paid): i. General Rule: S may only sue for the price where B has accepted goods. (2-709(1)(a) cl 1).

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1) Principal issue: Has B accepted goods ( 2-606); analysis may also implicate issues of rejection and revocation 2) Elements a) P/S and D/B had a K. b) B failed to pay the KP, and c) B accepted the goods under 2-606. ii. Exception 1: Where conforming goods, whether or not accepted, have been lost or damaged w/in a comm reas time after risk of their loss has passed to B under 2-709(1)(a) cl 2. 1) You have to properly apply the RoL provisions here. 2) 22.1(b): S rejects $1,000 offer and goods are destroyed in fire. S has no fire insurance. Can S recover the price from B? Under 2-510(3) B doesnt get RoL for repudiating unless/until the goods are identified to the K. Under 2-501, identification occurs when the K is made if it is for the sale of goods already existing and identified. Under OC 5 to 2-501, the beanie babies might have been identified to the K bc the K said that the 2,000 beanie babies would come from the 8,000 stock. This 8,000 stock may count as fungible bulk under OC 5, in which case mentioning the bulk in the K (there being no agreeM otherwise) may effect an identification of Bs 2,000 beanie babies. Under 1-201(17), fungible means goods of which any unit is the equivalent of any other like unit. So the answer is we need more facts. If all of the beanie babies are the same then theyre more likely to be fungible bulk, they were identified by the reference to the fungible bulk in the K, and then under 2-510(3) RoL was on B for the fire. If theyre not fungible bulk, S prob had RoL and will bear the loss. iii. Exception 2: Where S has identified goods to the K and there is no reas prospect of reselling them to a 3d party for a reas price (goods not readily resalable) under 2-709(1)(b). 1) What does identified mean under 2-501: Absent explicit agreeM, identification occurs (a) when the K is made if it is for the sale of goods already existing and identified; (b) if the K is for the sale of future goods when goods are shipped, marked or otherwise designated by the S as goods to which the K refers . . . a) FUTURE GOODS MEANS THAT THEY ARE NOT EXISTING AND IDENTIFIED. If they dont exist when K is made and arent identified when the time K is made, then they qualify as Future goods. 2) An action for the price under (1)(b) can be sustained only after a reas effort to resell the goods at a reas price has actually been made or where the circs reas indicate that such an effort will be unavailing. OC 3 factors: a) Are the goods specially manufactured for B? b) What inquiries did S make? c) At what price did S attempt to sell the goods? d) How long were the goods placed on the market? 3) Problem 22.1(a): B repudiates, S can only resell for $1,000 instead of $10,000 KP. Goods not idd to K yet. Can S bring action for price instead of reselling for $1,000? Under 2-704(1)(a) S can still id the goods to the K. Then, S will be eligible under 2-709(1) to bring an action for the price. However, can S reject the offer for $1,000? B will argue that $1,000 was a reas resale price given the market. B will argue it is not given the KP. Its prob not worth $1,000 to fight about! 4) 22.2(a): Under 2-709(1) S can bring an action for the price if the goods were accepted under 2606(1)(b). 30 days prob exceeds Ps reas opp to inspect. Under 2-602, Bs rejection was prob ineffective (not wrongful) bc B did not seasonably notify S. Therefore, under 2-606 B prob accepted and S can probably bring an action for the price under 2-709. B might still be able to sue for breach of warranty, but again this might not be a reas time so maybe not. In the interest of fairness, ct might give her an offset in the action for the price for the damage. The diff is that if it were wrongful rejection instead of ineffective rejection/acceptance, under 2-709(3) S could only get MDs under 2-708 instead of an action for the price. Also, can this be seen as a revocation under 2-608? Water damage is prob a subst impairM but we would need more facts and timing might STILL be an issue/it might be a wrongful revocation.

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i.

2-709(3): After the B has wrongfully rejected or revoked acceptance of the goods or has failed to make a payM due or has repudiated, a S who is held not entitled to the price under this section shall nevertheless be awarded dams for non-acceptance under the preceding section. j. OC 5: There is ambiguity about what happens with wrongful revocation. OC 5 makes it sound like its an acceptance so S gets an action for the price. But you can argue that 2-709(3) means that S only gets market dams under 2-708. k. 22.2(b): This is definitely a wrongful rejection under 2-602 OC 3 bc the good conforms in all respects. But 2-709 Action for the Price does not apply to wrongfully rejected goods. Therefore, pursuant to (3), Mels would be able to sue for damages under 2-708. l. 22.2(c): This is a wrongful revocation. The issue is how does this affect Ss right to sue for the price? Under 2-709(3) and OC 5 its not clear. If you read 2-709 too strictly you will always be booted back to 2-708. However, OC 5 suggests that wrongful revocation DOES entitle the S to the price bc then theres been an acceptance so 2-709(1) applies. m. 2-709 Formula: KP + ID (2-710) [ + CD under A2-709 only and then only if foreseeable and unpreventable]. n. Sack v. Lawton (2003)
i. Ps owned Modello drawing and entered K to sell to D. D refused to pay and Ps kept the drawing. Ps tried to find other Bs but could not. Ps want the purchase price of the Modello K 12,000,000 + interest + CDs of 3,000,000. Ps also Kd w/ D to BUY Bellini but later found out D didnt even own the painting so they want dams for the amt they expected to profit of 5,000,000 on resale of Bellini. ii. HELD: D breached the Modello K. Ps get expectation dams of 12,000,000 + IDs (interest only) under 2-709(1)(b). Ps do not get CDs bc not allowed under current 2-709. iii. For IDs, the expectation dams principle still governs, so IDs are limited to out of pocket expenses. This ct says that interest is recoverable but this is controversial.

o. 2-709(2): If S sues for the price, S must hold the goods for B. p. 2-709(2): While holding, S can resell and deduct resale proceeds from its action for the price. q. Remember, under A2-709 S gets CDs, which are defined in A2-710 (above).
2. Resale Damages 2-706 a. S is eligible for 2-706 resale dams under the following circs: i. Whenever B breaches [ 2-703; 2-706 OC 1] ii. Resale is [2-706(1), (2)] 1) made in good faith and 2) in a commercially reasonable manner iii. S reasonably identifies the goods being resold as referring to the broken K [2-706(2)] iv. S gives B notice of resale [2-706(3) & (4)] AND v. S resells the goods either at public or private resale. [2-706(2) (3) & (4)]. 1) Private Salespecific reqMs: a) Identify the resale K to the breached K (sub(2)); b) Give the B reas notification of the Ss intention to resell (sub (3)); and c) Resell in good faith and in a comm reas manner (sub (1),(2)). 2) Public Salespecific reqMs: a) Identify the resale K to the breached K (sub(2)); b) Resell only identified goods, except where there is a recognized market for goods of the kind in question (sub(4)(a)); c) Conduct the resale at the usual place for a public sale, if there is such a place (sub(4)(b)); d) Give B reas notice of the time and place of resale, except in the case of perishable goods or of goods which threaten to decline in value rapidly (sub (4)(b));

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b. 2-706 Formula: KP RP + IC (2-710) ES [+ CD (under Amended Art 2 only!!!)] c. To give S an incentive to obtain the highest possible resell price, 2-706(6) provides that S is not liable to account to the breaching party for any profit that it makes on a resale. d. Firwood Mfg. Co v. General Tire (1996)
i.

e) Keep goods on display at the time of resale, or provide for their reas inspection by potential bidders at the place where the goods are located (sub(4)(c)); and f) Resell in good faith and in a comm reas manner (sub(2)).

e. 22.1(c): S probably gets 10,000 6,000 = 4,000 in resale dams. S must argue that it had the right to treat an anticipatory repudiation as a breach and cover or they could wait and see if B really breached. So they were waiting to see if B was really breaching until they sold the last box. The problem says the boxes are identical, so its pretty arbitrary what name is on the box. $4,000 is likely bc this is the result if the ct cuts the baby too in the interest of fairness/under the spirit of the UCC. Another issue: is a flea market comm reas? What about the fact that the resale must be reas identified as referring to the broken K? f. 22.1(d): Cts could go either way on this question. Overall, S made a 1,000 profit on resale. So if the ct looks at it this way, S gets nothing and gets to keep the profit under 2-706(6). However, if the ct looks at this as two separate Ks, S can sue for 2,000 in resale dams for the digger frogs. Cts might view this as a windfall for S though. g. 22.4(c): Ben gave notice so he can get the 10,600 resale dams. OC 5 talks about whether the resale was comm reas. This depends on the industry and how easy/how long it takes to resell cattle. Firwood said 3 yrs is not unreas so also 1 mths prob not unreas here.
3. Market Damages 2-708(1) (K-market diff; w/o resale; unaccepted goods) a. MDs are available whenever B repudiates or wrongfully fails to accept b. 2-708(1) Formula: KP MP (at time and place for tender) + ID ES [+ CD (only under amended Art 2]. i. Time for tender is the stated performance date in the K. ii. Place for tender depends on the delivery term in the KshipM K or destination K. iii. FOB Shipment means MP measd at Ss location; FOB Destination means MP measd at Bs location. c. 22.3: Bc S failed to give notice of resale, under 2-706 and OC 2, S is relegated to MDs under 2708. This was a shipM K and the goods were duly delivered to the carrier on the 25th so time and place of tender was the 25th in Boston at sellers place. i. Resale Damages KP RP + ID ES

D entered K to buy 55 machines at $30,000/ea. D bought 22 and then closed. P sent D a reminder, informing D that the remaining 33 units were in various stages of production. S searched for alt Bs for 3 yrs bf he finally found one at a lower price than the original K price. W/in the 3 yrs, P had swapped parts from Ds originally identified machines for its spare parts biz. Jury awarded dams + tons of int. ii. HELD: The resale was comm reas considering the circs. The goods were fungible so theyre the same goods even though some of the parts were swapped. However, in this jxn interest is CD, not ID, so int was inappropriate under current Art 2. iii. B made two procedural arguments: (1) 3 years wasnt a comm reas resale and (2) These werent the goods identified bc the parts had been swapped out. iv. The court rejected these arguments: 1) OC 5 to 2-706: what is a comm reas time depends upon the nature of the goods, the condition of the market and other circs. P consistently for 3 yrs in good faith and reas tried to sell these machines but just couldnt bc of the market. Therefore, his resale was comm reas. 2) These are fungible goods and the resold machines are essentially the same machines. Truly fungible goods are exchangeable and it doesnt matter if you have original or a replaceM pieces.

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7500-6000 = 1500 (no IDs bc shoes were picked up by new B and no expenses saved bc B already paid).
ii. Market Damages: KP - MP(at time and place for tender)on 5/25).

7500-6700 = 800 While S would want Resale Dams, shes stuck with lesser market dams. Theoretical note: MP is supposed to mimic the hypo resale at the time of breach so it seems like 6,000 should be inserted as the MP since S learned of breach when the shoes were already in Chicago on June 1. Nonetheless, time and place for tender is the rule. d. 22.4: B wrongfully repudiated at p/u at Ss place of biz. S resold, but failed to give notice of resale, so under 2-706 and OC 2, S should get relegated to MDs. Relegated implies punishment, while here, MDs are way higher than RDs. So will argue that this is not unfair bc B breached and the UCC rejects the election of remedy doctrine. Dams are cumulative and the aggrieved party can choose the dams they want. S could have waited and didnt have to sell at all so this isnt really a windfall. But B has a strong equitable argument. The spirit of UCC dams is expectation dams and MDs put S in a MUCH BETTER position than it would have been in w/ performance. H: Not sure what a court would do here. B and S have strong arguments.
i. ii. Resale damages = 50000 49000 = 1000 + 600 ID = 1600 Market Damages = 50,000 45000 = 5000

There are no IDs in market dams bc they are mimicking a hypo resale at the date and time of tender so IDs dont come into play!!! So only for anticipatory repudiation then? e. 22.4(b): MDs are less than RDs here so this case is easy. S def gets relegated to MDs. This is exactly the situation contemplated by the drafters when they wrote OC 2. f. 22.4(d) Is Ben still eligible for 2-708(1) market damages? MDs are much higher than RDs. S should be able to get the higher dams bc he could have just waited until May 1 to resell. Why should he be penalized for reselling early? B will argue S should only get resale dams bc it puts him in a closer position to where hed be if the K were performed. If K performed S ended up with 50,000 and had to feed cattle for 2 mths. Here, 48,000 + 1400 in resale dams puts him right there. On the other hand, giving MDs puts him way over expectation dams. This is what B will argue. Why should S be rewarded? H: Again, ct could go either way!
i. KP 50,000 ii. 3/1 Repudiation by B iii. 3/15 Notice and resale for 48,000. iv. 5/1 Tender scheduled (MP is 45,000). Plus 400/month to feed the cattle (this will be an ES bc he was able to resell the cattle bf the tender/delivery date). Ss options were: treat 3/1 repudiation as breach OR wait and see until May 1st. Market Damages: 50,000 45,000 + 0 IDs 600 = 5000. MDs mimic tender on date of delivery so he presumably would have fed the cattle and we prob dont subtract the 600. If ct did, answer is 4,400. Resale Damages: 50,000 48,000 + 0 600 (definitely bc in reselling the cattle six weeks early he actually did save 600 at the resale) = 1,400

4. Lost Profits for Volume Sellers 2-708(2) 5. Lessors Remedies a. Bc leases are more long-term than sales and theres a residual int, they often contain terms defining what constitutes default and what happens when default occurs. Always remember to account for the residual int when calculating dams under Art 2A. b. In practice PVOL and PVNL requires discounting for present value. Never for this class. c. Under 2A, like Art 2, lessors dont get CDs while lessees do. d. 2A-523 outlines the ways lessees can DEFAULT and the lessors remedies.

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i. ii. i. ii.

Diff from 2-703 bc lessor gets right to repossess as a stnd remedy. Helps lessor preserve resid int. Also diff bc 2A-523(1)(f) specifically says that the terms of the lease trump for rights and remedies.

e. 2A-529 gives the lessor the remedy of Action for the Rent.
2A-529(1): UR + rent remaining in lease. 2A-529(2): Once the lessor sues for the rent, it must hold the goods for the lessee for the remaining term of the lease. iii. 2A-529(3): If the lessor re-leases the goods before the end of the lease term, the original lessee gets credit for the revenue gained on the re-lease. iv. 2A-529(4): If the lessee pays the judgM for the rent, it is entitled to possession and use of the leased goods for the remainder of the term

f.

2A-527 Re-Lease Damages:

i. ii. Lessor must re-lease goods in a lease agreeM that is SUBST SIMILAR to the original lease agreeM. Formula: UR + (PVOL PVNL) + ID ES (+CD in amended 2A-527) 1) UR = accrued but unpd rent on the original lease as of the date of the new lease term. 2) PVOL = present value, as of the date of the new lease term, of total remaining lease payMs for the original lease. 3) PVNL = present value, as of the date of the new lease term, of total lease payMs in the new lease for the term that is comparable to the remainder of the original lease. UR + (PVOL PVML) + ID ES (+CD in amended 2A-528). 1) UR = accrued but unpaid rent on original lease, measured as of the date of default where lessor has not repossessed OR the date of repossession where lessor has repossessed. 2) PVOL, PVML are measured as of the date above and market rent for PVML is measured at the place where the goods are located.

g. 2A-528 Lessors K-Market Damages:

i.

h. 2A-528(2) is a 4th remedy available to lessors when the other three measures of dams wont place lessor in the same position that perf by the lessee would have. It is the lost profits alt. i. 2A-532 is a 5th remedy entitled Lessors Rights to Residual Int. Lessor can seek this remedy in addition to the other four remedies to compensate it for any loss or damage to the lessors residual int in the goods caused by the default of the lessee. This covers damage to goods, etc.
i. These can also often be characterized as incidental damages. You cant double dip that way.

j.

C.I.C. Corp. v. Ragtime, Inc.

i. P leases vending equipM to retail establishMs like pool tables, jukeboxes and cigarette machines. It entered a 5 yr lease K w/ D. One mth into the lease D removed the machines so P sued for default. D admitted liability and agreed with Ps calculation of lost rent but argued P failed to mitigate dams and therefore was not entitled to the lost rent. HELD: P had no duty to mitigate. Theres no duty to mitigate under 2A on lost volume sales. Mitigation unnec bc the whole point is that you lost profit you couldve gotten regardless of Ds default. 1) P had a whse full of these things so prob would still lose the benefit of the bargain by re-leasing. Remd for jury to determine dams. 2) The court also notes that while the UCC was adopted after this case, it supports this conclusion. This is a 2A-532 situation bc any other calculation of dams would be inadequate to put the lessor in as good a position as performance would have.

ii.

a. 23.1: RL Dams: Charlie repudiated with respect to part of the lease under 2A-523 so he is in default and under 2A-527(1), Lou was entitled to dispose of the goods by lease or otherwise. In order to get re-lease damages under 2-527 the new lease had to be substantially similar to the old lease and had to be made in good faith and in a commercially reas manner. There is no indication in the facts that the new lease was not made in good faith or in a comm reas manner, so the main issue is whether the new lease is subst similar to the old lease. The differences btw the two leases are the price, the length of the lease, and the car wash term. A 3 yr vs. a 2 yr. lease is iffy. Its a lot different from the 1 mth v. 5 yr example in OC 7 to 2A-527. I think they are 55

still comparable or subst similar. The car washing term is pretty minor too, and OC 7 says its okay that the new lease term extends beyond the old lease term so long as theyre comparable and the ct cab apportion part of the rental payments under the new lease to the part of the term of the new lease that is comparable to the term of the old lease. RDs will prob be avail for $3910.
i.
3+2 x 400 21 x 400

UR + (PVOL PVNL) + ID ES (+CD in amended 2A-527). 2000 + (8400 6300) = 4100 + 50 (ID) = 4150 240 (ES) = 3910
21 x 300

Remember the 2000 was tricky bc it has to be UR as of date of new lease term! b. 23.2: Under 2A-529(1) and (2) and OC 1, Lou cant bring an action for the rent bc he repossessed the car and was able to dispose of it w/ reas effort at a reasonable price. Therefore, his only remedies are 2A-527, 2A-528 (and of course 2A-532.) In 2A-529 damage = destroyed beyond repair. Thats why the resale price fact is included. Its not damaged enough to fall under 2A-529. Then, bc he SOLD the car and didnt re-lease it, the circs dont fall under 2A-527(2), but instead fall under 2A-527(3), which states that 2A-528 MDs must govern.
i. UR + (PVOL PVML) + ID ES (+CD in amended 2A-528). 500 + (250 250) + 0 + 0 = 500 Market Damages +2A-532 $800 = 1300 (H: This $800 could also be characterized as IDs.)

6. CISG Seller Remedies a. Recall that S may only avoid a K under Art 64(1)(a) if there has been a fund breach. Under Art 25 a fund breach is a breach that subst deprives the other party of what he is entitled to expect under the K. Fund breach gives aggrieved party access to WIDE RANGE of CISG remedies. b. Under 81(1), avoiding the K releases both parties of their obligations under the K, so there is no action for the price when S avoids the K. The avoiding S may, however, sue for K-resale dams under Art 75 or K-market damages under Art 76. c. Under both 75 and 76, S may recover Art 74 CDs, which also include what Art 2 calls IDs. However, under Art 74, CDs and IDs must be reas foreseeable by B at the time of K formation. d. Interesting things: i. Art 75 combines cover and resale into one remedy ii. Art 74 combines B and Ss IDs and CDs in to one remedy. e. S can sue B for the price under Art 62. The S may require the B to pay the price, take delivery or perform his other obligations, unless the S has resorted to a remedy which is inconsistent w/ this reqM. This seems broad but its limited by: i. Art 77 duty to mitigate ii. Art 88(2) duty to resell if good will deteriorate iii. Art 28the forum ct is not bound to require spec perf unless the forum cts domestic sales law would similarly require spec perf of the party. In American cts, the suit for the price under CISG is circumscribed by 2-709. f. 23.3: Repudiation is a fundamental breach under Art 25 so under Art 64(1)(a) Steel Works can avoid. Steel works can either collect resale dams or market dams. i. OPTION 1: Avoid and collect resale damages under Art 75. KP RP + reas foreseeable ID & CD under Art 74.. 1) IA buyer: 70,000 45,000 = 25,000 2) CA buyer: 70,000 60,000 + 3000 + 1500 = 14,500. The shipping and install charges will be awardable under Art 74 so long as they were reas foreseeable. This will be met as long as delivery and install are the industry standard. 3) The IA buyer is safer bc it leaves S with exactly what he would have gotten from the original K no doors and 70K. Art 74 IDs and CDs arent guaranteed bc its not clear whether theyre reas foreseeable. Nonetheless, under Art 77, S MUST sell to the CA B in order to mitigate damages.

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ii.

OPTION 2: Avoid and collect market damages 1) Art 76(2) Damages are at time of avoidance and place of delivery (H says to treat this like tender) so Iowa 45,000 is market price. 2) 70,000 45,000 + 0 + 0 = 25,000 MDs. Selling to the CA B is better for S. iii. OPTION 3: S can choose not to avoid and sue for the price under Art 62. This will not work for two reasons (1) it prob violates the duty to mitigate under Art 7 and (2) if S sues in the US, under Art 28 the forum cts law also limits when spec perf is available. Under 2-709, its NOT avail if reas resale was possible, which here it was. So this would be REALLY risky. iv. Also no lost profits under Art 74 bc these were specially mfgd.

7. Real Estate Seller Remedies a. With real estate, Bs breach is almost always anticipatory repudiation: the K is signed but closing never occurs, like for inability to obtain financing. b. In most cases the default remedy for the aggrieved S is to keep Bs earnest money deposit. However, cts are reluctant to do so when the deposit is particularly large, B breached for reasons beyond his control, or where S cant show actual damages. c. Some states allow recovery of K-market dams, but only where S can prove that B overpaid and where S first returns Bs deposit. d. Ss usually arent entitled to K-resale dams, but actual resale shortly after Bs breach can be persuasive evidence of the propertys market value calculation. e. Most of these cases deal with deposits that usually serve as sort of liquidated damages clauses. f. Williams v. Ubaldo (1996) i. P S sued D B after B repudiated on a real estate K to buy Ss house. The K had a term that made Ds obligation to purchase contingent upon his ability to secure adequate financing and he put down a 10,000 earnest money deposit. In the event of breach, the K provided that Ps could retain the earnest-money deposit AND preserve their legal and equitable remedies. The price was $450,000. House was appraised at $480,000. D couldnt get a loan so Ds mother cosigned on the loan and it was approved for 360,000, w/ his mother paying the remaining 90,000 in cash on or b4 closing. However, his mother never pd the 90,000 and he couldnt get a loan for it. S sued for spec perf of the K but then sold the house for 430,000 so just sued for dams. Ps asked for the diff btw the K price and the resale price (20,000) + 3500 in taxes and 500 for snow removal. The tr ct said D breached the K and it awarded the whole amount requested for a total of 24,000 less the 10,000 deposit. ii. Rule 1: In a breach of a K for the sale of real prop, the claimant is entitled to the benefit of the bargain, which equals the diff btw the K price and the FMV at the time of breach. Reports of prof appraiser can be evid of FMV as can the price obtained in a subsequent sale. Resale dams arent allowed but in reality thats what they end up getting bc resale dams serve as a proxy for FMV. iii. Rule 2: Snow removal and taxes are not the kinds of things that are recoverable as IDs. If the problem was a double mortgage and a bridge gap B usually knows that so foreseeability is not an issue. But here, Ps retained ownership use and occupancy of a valuable asset during the time btw breach and re-sale so they cant avoid tax liabilitynot part of benefit of the bargain. D couldnt know at time of K that P sold snow removal equipM bc was moving to warmer climate. g. In real estate Ks, CDs tend to be the costs associated w/ resale that S would not have incurred had S proceeded w/ the original sale-like a broker if original sale was by owner. h. Spec perf is rare. The ability to retain deposit AND sue is rare. Most forms make S choose.\ i. 23.4: Joe should get 190,000 170,000/160,000 + 10,200 (broker) = 30,200/40,200 NO TAXES OR MORTGAGE! AC: Joe will argue that the FMV was 160 until the AC boosted it up to 170. So he will very likely get the extra 10,000.

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B. Buyers Remedies
1. UCC a. Often, when S breaches B can w/hold the price. Also often, S agrees to repair/replace the goods. Otherwise, B will just withdraw future biz. b. Bs get CDs under both pre-amended AND amended Art 2. c. Under 1-106(1), the expectation dams principle also underlies ALL Bs dams: want to put B in the position it would have been in had S performed. d. The Threshold Issue is Acceptance 2. Bs Damages for Accepted Goods a. If B has accepted and it is too late to revoke, Bs remedies are limited to an action for breach of warranty under 2-714. Under 2-714(1), i. B must have accepted the goods. ii. It must be too late to revoke acceptance. iii. B must have given S notice per 2-607(3)(a) w/in a reas time after B discovered or should have discovered any breach. iv. Then, B may recover damages for: 1) any nonconformity of tender (diff in value btw conforming and non-conforming), 2) the loss resulting in the ord course of events from Ss breach 3) as determined in any manner which is reasonable 4) IDs and CDs under 2-714(3)2-715. b. 2-714(2) Breach of Warranty Formula: VCG VNCG + ID + CD i. Think about the Ready Pipe case from contracts. If NG is subst same, dams will be nominal. ii. Theres always a way to fit each case into this formula. See first problem. iii. VCG VNCG can be determined in three ways: 1) S/t its the cost of repair, even though repair can cost more than the actual diff btw the nonconforming good received and the conforming good contracted for. Cts accept it bc of 1-106. 2) Cts s/t use diminution in value. 3) They also s/t use FMV at the time of acceptance (often KP). c. Recall 2-717: If B has not yet paid, B has the right to deduct from the price any dams that result from Ss breach. B must notify S of its intent to do so. d. 25.1: VCG = 40,000 (price B paid for goods, NOT the cost to S) (Usually the K price is VCG); VCNG is not 45,000, its the cost to repair under 1-106s expectation dams principle: 40,000 5000 = 35,000; So B will get 5,000 in warranty damages. Cover wont be an option for B bc that would be wasteful when the tile can just be hardened for $5,000. e. 25.2: Beasley should be able to get 15,000. VCG = KP = 55,000 (But it could be 0 here in the subjective sense). VCNG = 40,000. (If VCG 0, then VCNG would be 55,000). 15,000 is probably the right answer. But Jack has a strong arguM that Beasley has a better floor thats less expensive so why should he get 15,000 moreits a windfall! Why should B get a windfall for a product that turned out to be better for it? But if we let S eep the 15,000, S gets a windfall too! As btw the two, S breached. If one of them is going to get a windfall, B should get it. Or the ct might split the baby: S gives B back 7,500. f. 25.5(b): S breached the IWT. VCG = 3,000 bc its measured at time and place of acceptance under 2-714(2) (we dont need to use the KP as evidence of the market price bc we have a solic market price for baseball cards); VNCG = 0; CD = 800; Total 3800, which may be a windfall for B but thats the rule. The 800 counts as CDs (normally under the Am Rule atty fees not allowed; but here the action is not against S and the fees arose directly out of Ss breach of IWT).

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3. Damages for Non-Accepted Goods a. If B has either (1) failed to receive the goods, (2) justifiably rejected them or (3) revoked acceptance, Bs remedies are more varied under 2-711. Bs options for non-accepted goods: i. 2-712 Cover: Bs never have a duty to cover (unlike Ss where its unclear whether Ss have a duty to resell). But if B does choose to cover there are reqMs. Cover must be: 1) in good faith, 2) w/o unreas delay, and 3) the cover must be a reas substitute purchase a) Common Issues: Did B wait too long to cover? Were the goods B purchased as cover really the same as the K goods? Did B pay too much for the cover goods? Formula: RBPP + CC KP + CD + ID ES 4) 25.4(a): 42,000 35000 = 7,000. The issue is whether they effected a reas cover by getting a slightly better machine for 7,000 more. Under OC 2, there is no precise test to figure this out but this cover doesnt seem to be unreas as a substitute. So B gets a little bit of a windfall, but thats fair bc its one of the possible consequences when S breaches. Bs can cover for a diff price or for a slightly diff machine. 5) 25.4(b): Bs are not required to cover. But the fact that B could have covered for 40,000 w/ the same machine is evidence of what MDs should be (5,000). For Cover damages, B would get 40,500 35,000 = 5,500. It does not seem fair to give B the extra 500. Under the Cover dams formula we can try to call it an expense saved since if she sells it later she will get at least $500 more than she would if she resold what she ordered from S. Also, you can argue that the 50,000 number should be used; then you get negative dams! When you have a bunch of diff dam possibilities like here, look to the expectation dams principle. In that case, B only gets 5,000. 6) 25.4(c): 42,000 35,000 3000 ES = 4,000. B expected to make $4,000 and on resale made an additional 3,000. This should be an expense saved. The imp thing to note from 25.4(a) (b) and (c) is that the 500 has to come out somewhereeither by thinking about MDs or by thinking about the $500 as value added/an expense saved. H: Dont worry too much about 25.4(a)-(c). 7) 25.6(c): B wants to argue that the feed he used was cover and it was more expensive than the MP. 9600 6400 = 3200. However, this argument will probably fail bc he took the feed from storage. Under 2-713(1), in order for there to be cover, a purchase or K to purchase is required. Using his backup resources is not a purchase or K to purchase so hell prob get MDs of 1600. 8) 25.7(a): B can definitely recover the $2,000 diff btw KP and CP. 4 mths seems comm unreas to effect a cover. But its reas for a busy traveling salesperson. So B is going to argue that it is SUBJECTIVELY comm reas, and S is going to argue that it is OBJECTIVELY comm unreas. She may recover all of the rental price as IDs, or maybe part if the time for cover was comm unreas. 9) 25.7(b): B can get the 3000 back plus the towing and the storage. She prob cant refuse to give him the car back unless pays for towing and storage. B cant extort S. Even to the extent B gets a sec int, that sec int is only up to what he owes her. B has to sue for towing/storage costs. ii. 2-713 Market Damages (non-delivery or repudiation): B can choose MDs instead of cover! 1) MDs effect a hypothetical cover at the time B learns of the breach. MP is measured at the time B learns of the breach and at the place of tender UNLESS B rejects or revokes acceptance of the goods after arrival, in which case MP is measured at the place of arrival. (2-713(2)). Formula: RBPP + MP KP + ID + CD ES (careful) 2) A2-713 is DIFFuses a 2 pronged MD approach to try to get closer to expectation dams goal. 3) 25.5: Technically, breach did not occur until the 11th so MDs will be 1300. However, S will argue that on the 1st B had grounds for insecurity and on the 15th he demanded adequate assurances and S told him no so in reality the breach occurred on the 15th so MDs should only be 1000. B will argue that he made a second demand on the 15th when he said S had better buy it back. UCC says you cant make multiple demands bc thats harassM, but its not at that level here. The 15th seems like a good compromise. Amended 2-713 addresses this issue directly. There are two possibilities: (1) a wrongful failure to deliver or (2) a repudiation. If its wrongful failure to deliver, you measure MP as of the time for tender. However, if its repudiation, the time to

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iii. iv. v. vi.

measure the market price is at the expiration of a commercially reas time after B learns of the repudiation in no event to be later than the time for tender. Under Amended 2-713 the answer is prob also the 15th so that market damages are 1000. 4) 25.6(a): MDs will be 8000 6400 = 1600. Cover Damages: 600, 100 or 0. Cover is not required under Art 1 so he can get the 1600 here. Since he made three identical purchases in a months time, its unlikely that this was cover anyways. He prob would have made them regardless. If one of them is cover, its impossible to figure out which one is. 5) 25.6(b): MDs will be 0 so B must argue that the first sale was cover so he gets $600. B must argue that it was w/in a reas time at a reas effort. The other two sales get further and further away in time so the best indication of damages is cover damages for the first sale. Makes sense if we think about the benefit of the bargain. 6) 25.8(a): This is a shipM K and S must only get the shingles to the carrier in Nashville. Therefore, MP is measured in Nashville so 56,000 50,000 1500 (Bs ES for shipping) = 4,500. H: when the facts say he didnt cover, we know he saved shipping so it should come out. You could argue it shouldnt but it depends on when and where the breach occurred. Almost every time you have expenses saved in these problems it will be shipping costs or maybe insurance. 7) 25.8(b): This is a destination K, so S bears the cost of ShipM. Therefore, the answer is 6,000. 8) 25.8(c): The default delivery term is ShipM K. So the answer is same as (a) 4500. 9) 25.8(d): They arrive in Atlanta and you use the place of arrival to measure M when rejection occurs after arrival under 2-713(2) so the answer is 6,000. 10) 25.8(e): Write them a letter under 2-609 and 2-610. Filing bankruptcy isnt enough for reas belief. Wait for adequate assurances and then if they dont come you can treat it as breach. 2-716 Replevin (Bs spec perf) + 2-715 IDs and CDs Note: 2-711(3): In cases where the rightfully rejecting/revoking B still has the goods and B has already paid all or part of the purchase price, B may hold the goods as security for repayM of its purchase price as well as for any expenses B incurs in holding or storing the goods, Note: 2-706(1): B can resell the goods in like manner as an aggrieved S to recover its dams.

4. IDs 2-715(1) a. Typical kinds of IDs that can be recovered under 2-715(1) (must be reas and incurred incident to the delay or breach): i. IDs associated w/ rightful rejection 1) inspection, receipt, and storage 2) transportation and care and custody ii. IDs associated with proper revocation of acceptance; and iii. IDs involved in effecting cover/reselling 1) commercially reasonable charges, expenses, or commissions iv. PLUS any other reasonable expense incident to delay or other breach. 5. CDs 2-715(2): Bs CDs resulting from Ss breach include (two categories): a. 2-715(2)(a) BROAD CDs (foreseeability/unpreventabilty reqMs) i. (a) any loss resulting from gen or partic reqMs and needs of which S at the time of K had reason to know, and which could not reas be prevented by cover or otherwise. H: This section allows as CDs those dams resulting from Ss breach of any kind, including purely economic loss, IF: 1) S knew or had reason to know of the special dams that could flow from the breach; 2) Dams were caused in fact by Ss breach (mere but-for cause, not prox cause); 3) B can prove damages with reasonable certainty; 4) Damages could not be prevented by cover or otherwise (Bs duty to mitigate). ii. CDs may include sums for: 1) lost profits (at least normal ones) 2) loss of good will

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3) losses resulting from interruption of Bs production process 4) lost interest iii. 25.3: VCG = 1000; VCNG = 0; IDs = 0; CDs questionable. There as no personal injury or prop dam so she can only get CDs under the broad kind. Then, S might have reason to know she would miss out on the prize if the racket didnt work since she told him about it. But foreseeability is an issue bc the prize wasnt guaranteed and S might have assumed shed have a backup if it broke. Plus causation is hard bc was it really the racket that caused this or did she choke? Or, is it bc she was silly enough not to bring a backup racket! Cmt 2 and 3 to 2-715 The Tacit AgreeM Test is still alive in some CL jxns, but the UCC drafters flat out reject it. If S foresaw this, he always could have included a CDs limitation. This kind of tends to prove that he didnt foresee it!

b. 2-715(2)(b) CDs are additionally available for personal injury and property damage when:
i. ii. The injury to the person or prop was proximately caused by any breach. 1) Re property damage economic loss does not qualify here. 2) Re proximate cause mere but-for cause is not enough. These two categories are both broader and narrower than each other in some respects. (2)(b) is narrower bc B must show proximate cause, not mere but-for cause. However, it is also broader bc B need not show foreseeability and there is no express duty to mitigate. S/t dams will qualify for both.

6. 2-609/2-610 Anticipatory Repudiation: a. When one party gets info prior to the perf date that calls into question the other sides ability to perform, the insecure party can demand adequate assurance of future perf. If such assurance is not forthcoming, the insecure party may declare that the other side has committed an anticipatory repudiation of the K. This is a breach that effectively entitles the insecure party to all remedies. b. 2-609: When reas grounds for insecurity arise w/ respect to the perf of either party the other may in writing demand adequate assurance of due perf and until he receives such assurance may if comm reas suspend any perf for which he has not already received the agreed return. (4) After receipt of a justified demand, failure to provide w/in a reas time not exceeding 30 days such assurance of due perf as is adequate under the circs of the particular case is a repudiation. c. 2-610: When either party repudiates the K w/ respect to a perf not yet due the loss of which will subst impair the value of the K to the other, the aggrieved party may i. for a commercially reasonable time await performance by the repudiating party; or ii. resort to any remedy for breach (Section 2-703 or Section 2-711), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and iii. in either case suspend his own performance or proceed in accordance with the provisions of this Article on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2-704). d. In re Beach Systems i. B bought scaffolding from S for twice the rental price. Under the terms of the K, after B pd it off and finished w/ it, B could force S to buy it back at 50% of the price. Soon after entering the K, S filed for bankruptcy. There were some delays in S getting B the scaffolding. B sent S a letter demanding setoff and advised S that it would be liable if it didnt perform. B eventually got the scaffolding and still owes $47,000. B found out about the bankruptcy so it wants to exercise the buyback option now and not pay the rest of the K price to bankrupt S. ii. HELD: Under the terms of the K, S performed. B is the one not performing. The buyback doesnt kick in until B pays the full double rent purchase price. 1) B is tying to say that its letter was a demand for assurances and that S anticipatorily repudiated. The ct says that B had no reas grounds for insecurity bc S performed so far! Bankruptcy itself does not give reas grounds for insecurity. This would contradict the whole purpose of Chapter 11 bankruptcy, which is to allow you to keep fulfilling your Ks. The letter also wasnt an adequate demand for assurances bc it didnt demand perf; it demanded sth not reqd by the K: setoff.

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7. Lessees Remedies a. 2A tracks Art 2 for the most part. b. 2A-508 lists the lessees remedies. It contains one remedy w/ no Art. 2 analogue in 2A-508: the possibility that the lessor may be otherwise in default under a lease K. This applies if, for example, the lessor breaches its duty under the K to keep the goods in good repair. When this duty is failed, the lessee may pursue remedies under the lease or may look to 2A-519(3), which at min gives the lessee a right to recover from the lessor the cost of putting the leased goods back in working order. c. 2A-518 is the same as 2-712 EXCEPT i. 2A talks about discounting future streams of rent to present value and ii. For a new lease to qualify as cover, it must be SUBST SIMILAR to the original lease. Under OC 5 to 2A-518, subst similar includes not only the leased goods themselves, but also POs, covenants and services to be provided. 1) The consequences of the cover lease not being subst similar is not to bar dams, but instead just remits the lessee to MDs like Art 2. d. 2A-519(1) and (2) is like 2-713s MDs. e. 2A-519(3) and (4) is like 2-714s breach of warranty for accepted goods. f. 2A-520s CDs and IDs are pretty much the same as 2-715. g. 2A-521 gives specific performance h. 2A-522 gives a right to recover goods on the lessors insolvency. i. 26.1(a): 4 yrs 100/mo. bc car has engine trouble. Car breaks. Lessee gets permission from Lou to get engine fixed. Lessee sends bill to Lou for 2500 with new engine. Lou says that w/ new engine its worth 150/mth. Does he have to pay the 2500? Can he raise the rental price? The VCG of 100/month is the value of the car w/ the crappy engine. The VNCG is greater than the VDG at 150/month. Letting the lessee keep the car w/ the new engine puts him in a better position than he would have been in if the K had been performed. But we also cant lose sight of the fact that Lou is the one who breached here. H: I dont know. Making Lou pay the $2,500 and then making the lessee pay $150/month seems like a good compromise. j. 26.1(b): 3 yrs 300/mo. PO at FMV. 6 Free Tune-Ups @ 150/each. Lou breaches. Cover K: 4 yrs 400/mo. PO at FMV 10% of all payMs made. i. Is the cover lease subst similar to the original lease? Yes under OC 3-7. The goods are exactly the same. The elements of the lease are subst similarif we look at the bottom line she ends up paying about the same amt under each lease. Under one lease she pays more mthly but saves more if she exercises the PO. So prob subst similar. ii. Is this a disguised sale or true lease? Under the liquidated dams provision, the lessee can walk away at any time by just paying $500. This creates a good chance that she can walk away and Lou gets the value of the car plus 500. This is probably a true lease, but dont forget to analyze it. PVNL (36 x [400-40 = 360 (if she exercises the option)] = 12,960) PVOL (36 x 300 = 10,800) + IDs (900) = 3,060. It could be more if she doesnt exercise her option, but we should say she does to take all circs into acct. k. 26.1(c): Can Larry get the 300 out of Lou? Under 2A-520 they meet the CD definition. Lessor had reason to know of the specific needs of the lessee. Plus the lessee was prob unable to prevent the loss by cover or otherwise. The 100,000 is prob not recoverable under 2A-520 bc its not foreseeable and bc its a new biz, you cant ascertain w/ reas certainty what lost profits are. 8. Bs CISG Remedies a. CISG dams provisions are very simple.

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b. The threshold question here is whether B can avoid under Art 49(1)for delay or fund breach under Art 25. Then under 81(1) both sides relieved of K obligations, w/ avoiding party retaining right to sue for dams. And under 81(2) either party can get restitution for full or partial perf. c. If B cant avoid:
i. ii. B can demand deliv of the goods through Art 46(1) spec perf unless B has resorted to a remedy which is inconsistent w/ this reqM. However, remember that Art 28 restricts spec perf to circs where the forum jxn would give it. Or if goods are recd and are non-conforming (but not fund so), B gets loss suffered as a consequence of Ss breach under Art 74 (VCG VNCG). B can choose not to avoid and still demand delivery through Art 46(1) with the same Art 28 restriction. B can avoid and choose btw cover dams under Art 75 or MDs under Art 76. Both Cover Ds and MDs include CDs (prob including IDs) under Art 74. 1) Art 75 Cover: Cover must be done in reas manner and w/in reas time after avoidance. 2) Art 76 MDs: a) Art 76(1): There must be a current market price for the goods. b) Art 76(1): MP is measured at the time B avoided the K, unless B avoided the K after taking over the goods, in which case MP is measured at the time B took over the goods. c) Art 76(2): MP is measured at the place where delivery of the goods should have been made. This is the same hypothetical cover idea.

d. If B can avoid:
i. ii.

e. Art 74 CDs:

i. The loss, including loss of profit, suffered by the other party as a consequence of the breach. ii. Second sentence incorporates Hadley reason to know foreseeability standard. iii. Diff from UCC bc even prop damage/pers injury has to be reas foreseeablemakes sense bc CISG doesnt apply to consumer sales. iv. Art 77s gen mitigation policy also limits CDs. If party could have mitigated, dams are reduced accordingly. This is tantamount to 2-715(2)(a)s category of consequential damages, which are unavailable when the art 2 buyer could have reasonably prevented by cover or otherwise.

f.

26.2: B US S Canada. KP = 36,000 for 3 tons. Its FOB Bs factory so its a destination K. S bears cost of shipM. No cover. Possible cover Seattle = 45,000 + 500 shipping. No possible cover in MN. Bs expectation was to get the plastic at 36,000 and make a 14,000 profit. If they had covered with the Seattle S, cover dams would have been $9,500. The relevant market value is 45,000 too. So 9,500 MDs too. Art 77 says that fun factory can try to ask for 14,000 as expectation dams but bc they failed to mitigate and should have covered, theyll only get $9,500.

9. Bs Real Estate Remedies a. Where S refuses to deliver title: i. Bs standard remedy is an action for spec perf. B must show 1) Money damages are inadequate, and 2) B is fully capable of performing its side of the bargain, ii. B can alternatively choose to sue for money damages. 1) At least include out of pocket expenses, and in some states include benefit of the bargain damages if B can show its price was lower than MP. But benefit of the bargain dams are barred where S breached by defective title (rationalized as beyond Ss control). iii. Whether B seeks specific performance or money damages, B will also be entitled to CDs resulting from the delay in receiving title as long as they are reas foreseeable. (Like higher mortgage ratenot predictable, but the type of thing S should expect Bs to possibly face w/ delay.) b. Where B has possession/title but discovers defect after closing:

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i.

Most real estate Ks have as is clauses so this is rare. Generally, to prevail on this type of claim B will have to show fraud: not only that sth was wrong, but that S affirmatively misrepresented a material fact that induced B to purchase the house. Ps were led to believe by Ds realtor Tabaloff that Ds home was an authenticated Julia Morgan. Ps and D reached an agreeM, and Ps sold their prior home. Right before closing Tabaloff gave the Jues a supplement that disclaimed that this was a Julia Morgan since there were no records verifying this at City Hall. Ps went ahead and signed the addendum, closed, and then sued. HELD: Although Ps executed the K after knowing it wasnt a Julia Morgan home, they can still sue for dams. Otherwise, it would really penalize B. B is in a hard position bc refusal to close might make them liable for breach plus they already sold their home! While Ps werent reliant at closing, they were when they signed the binding purchase agreeM. and thats all that matters.

c. Jue v. Smiser (1994)

i.

ii.

d. 26.3: $200 is lost to the movers. He had to keep paying rent at $700/mo on a mth-mth lease instead of 500/mo on his yr long lease. But, he was able to get a 7.75% mortgage as opposed to the 8.5% mortgage he started with. points are roughly worth $3,000. B can absolutely get the 200 lost to the movers. Even if he can get the 700/mo, hes still saving 250 by not having to pay the 950/mo for his mortgage. Or should he just get the 700/mo-500/mo? Either way, he still saved 3,000 w/ the better interest rate! So the ct might say he should get no dams since he came out ahead. But Edgar can argue that he could have simply refinanced and got the 3,000 anyways. So if youre advising Edgar you prob tell him its not worth the trouble to sue, but if Edgar insisted he might be able to make this refinancing argument. You can even argue that Edgar should get the full 700/mo bc this is rent, not a mortgage, so not getting any equity for what hes paying. e. 26.4: Similar to Jue v. Smiser. In the problem, the diff is that they had reason to know that it wasnt a Frank Lloyd Wright before they made a binding agreeM with the seller. So theres no way they relied on this misrep bc they had reason to believe it was a misrep bf signing the K.

C. Special Remedies
1. 2-716 Specific Performance a. Ss action for the price is essentially specific performance; this is about when B can get spec perf. b. 2-716(1): Spec perf may be decreed when the goods are unique or in other proper circs. c. OC 1: the present section continues in gen prior policy as to spec perf and inj against breach, but this article seeks to further a more liberal attitude than some cts have show nin connection with spec perf of Ks of sale. d. OC 2: The test of uniqueness under this section must be made in terms of the total situation which characterizes the K. Output and reqMs Ks involving a particular or peculiarly available source or market present today the typical comm specific perf situation, as contrasted w/ Ks for the sale of heirlooms or priceless works of art which were usually involved in the older cases. e. Diffs btw when spec perf is granted under CL and UCC. i. Under CL there can be no adequate remedy at law, ie money damages. ii. Under the UCC spec perf has been a little liberalized by the unique and other proper circs lang. This has been used in circs where cover would wreak havoc like the huge Ks noted above. f. Under A2-716, a B and S can agree in advance that spec perf will be the remedy for breach, even where it wouldnt be avail under the UCC. There are two exceptions: (1) consumer Ks and (2) where the breaching partys sole remaining obligation is payment of money. g. 2-716(3): Gives B a right to replevin whenever cover is reas unavail and the goods have been identified to the K. This means B can take them away from S. This is a mystery and there are virtually no reported cases under it bc if cover is reas unavail, B will qualify for spec perf anyways.

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h. 2-716(3) also offers B a replevin right in the case where the goods have been shipped under reservation and satisfaction of the security int in them has been made or tendered. (See Reno ex) i. 2-716(2): The cts spec perf decree may include such terms and conditions as to payment of the price, dams or other relief as the ct may deem just. This is like the CL reqM that the B be ready willing and able to perform its side of the agreeM in order to get specific perf. j. Bander v. Grossman:
i. B entered K to buy Astin Martin from S. In Dec 1987 S breached. In 1989 the car was sold for a whole lot more money and then B decided to sue for breach of K. ii. The jury gave 20,000 in dams. The problem is that market value was fluctuating wildly over time. So we dont really know the value at the time of breach in order to award dams. iii. In order to give equitable monetary dams the ct will look at the market cost at the time of the decree. This is a speculative biz. The ct splits the baby. You can have your special equitable monetary dams, but you only get the diff btw the value of the car at the time of trial and the K price.

k. 28.2: K for 100 forts @ 25,000/ea. S repudiated. Now B cant get them at all! This is a case of efficient breachS thought it was better to breach and pay dams than get stuck in a crappy K. Can B force S to honor the K under 2-716(1)? The forts are not unique like a painting. However, Bs inability to cover is strong evidence of other proper circs. This is one of those cases where market factors make the sale unique. Unique and other proper circs are interconnected. There is a timing issue: does it have to be unique at the time of K or at the time of breach? H would argue that this should be a spec perf situation. l. 28.3: This is a service K and a goods K. Most cts use predominant purpose test. If its 50/50 what do you do? Do you split it and apply CL to services part and UCC to goods part? If this were on an exam, the goods v. services issue would take up the bulk of your response. For the specific perf, you just have to argue its other proper circs bc theres no market now.
2. Liquidated Damages a. At CL, reas LD cls are enforced but penalties and forfeitures are not. LD cls were not enforced with goods unless the LDs were reas in light of the harm anticipated at the time the K was entered into and there would be difficulties showing proof of loss. b. 2-718(1): Statutory Liquidated Damages: Allows LD clauses to be enforced whenever dams are in an amt which is reas in light of the anticipatory or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. i. LDs that are unreas large will be invalidated as a penalty under 2-718(1). ii. LDs that are unreas small may be struck down as unconscionable under OC 1 to 2-718. iii. This is diff than CL bc under CL some cts required actual harm and other cts required anticipatory harm while here, you get LDs if you show either one. iv. 28.1(g): The LDs are very close to the actual damaged suffered. However, at the time of K, the LDs were much greater than what S anticipated. Under 2-718(1) they only have to be valid in light of EITHER anticipated OR actual harm. When the market is unstable, it always supports the argument that the LD cl should be valid. In the end, if its valid she gets 3000 and if its invalid she gets 2900 so it really doesnt matter that much. v. 28.1(h): Here, it really matters if the LD cl is valid or else she gets nothing since she has no deposit and no actual damages. Same analysis as above. c. Two types of LDs. i. Breaching Bs restitution for its prepayments (B has breached and there is no valid LD cl): 1) 2-718(2)(b) & (3): R = P (< of .2t or $500 or P) SD BB. a) P = sum of the pre-payments made by B. b) t = value of the total perf for which the B is obligated under the K (normally KP)

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d. California & Hawaiian Sugar Co. v. Sun Ship, Inc.

i.

c) SD = Ss actual damages d) BB = Bs benefits from the K. 2) Neri Approach: R = P (> of [< .2t or $500 or P] or SD) BB. a) The Neri Approach says that the UCC is too generous to S and B should get more back despite breach. Under Neri, S only gets to retain either SD or stat liq dams, whichever larger. 3) A2-718 Art 2 has NO statutory LDs: R = P SD BB. 4) Remember: these are not penalties. Pre-amended is friendly to S bc the drafters took opp costs/lost investment opps into account when they came up with the original formula. ii. B has breached and there is a valid LD cl 1) 2-718(2)(a) & (3): R = P LD BB 2) A2-718 same. S agreed to build barge for C & H w/ a specific deadline. C & H also contracted w/ Halter to make the tug. S had to delivery the barge and the tug connected by June 30 or S would be responsible for 17,000/day in liquidated dams (this is a 20 mill K). There is a force majeure cl in Ss K so that if Halter is late, S is excused from delivering both on time. Halter was late and C & H was also late. S has been paying the LDs but want the $ back. ii. First S tries to argue that the LD provision isnt triggered until both arent delivered togetherthats the vessel. The ct says no- vessel means the barge. iii. S also tries to argue that this is a penalty so invalid. The ct relies on the fact that these parties were super-sophisticated and represented by giant law firms. Under UCC the LDs only have to reas in light of the anticipatory OR actual harm. Not both. The 17,000/day represents a reas amt of dams when you think of what could happen (even C & H actually suffered very little in actual dams). iv. S ended up having to pay 3-4 mill in dams. Thats a huge diff btw the 340,000 dams C & H suffered. But still reas so LDs REALLY important.

e. 28.1(a): S keeps 500 under current 2-718(2)(b) & (3). Under amended 2-718 S keeps nothing bc theres no stat LDs. Under the Neri approach, S also gets to keep 500. f. 28.1(b): S keeps 3500 under current 2-718(2)(b) & (3). Under amended 2-718 S keeps 3,000. Under the Neri approach, S keeps 3000 too. g. 28.1(c): S keeps the $100 deposit under current. S keeps nothing under amended. S keeps deposit under Neri. h. 28.1(d): B must pay S 3,000 in damages under current and S still gets to keep the $100. Under Neri, B must pay S 3,000 in damages but B gets back the $100 deposit so really its 2900. A2-718 is same result as Neri, B must pay 2900. i. 28.1(e): S keeps 3000 under current. If the down payment is less than the valid contractual LD provision B must pay S the remainder. j. 28.1(f): S keeps 2500 only. When there is a valid LD cl, thats what S gets, no actual dams!!!
3. Special Remedies when the Breaching Party is Insolvent: Aggrieved S a. Two sections protect aggrieved Ss who sell goods on unsecured credit to a B who is insolvent: 2-702 & 2-705. b. 2-702(1): When S discovers Bs insolvency prior to delivery, S can refuse delivery except for cash, including ayment for all goods theretofore delivered under the K. c. 2-705: When S discovers Bs insolvency while the goods are in rasit, the S has the right to stop the delivery when B repudiates or fails to make a payment due before delivery. i. 2-705(2) This right to stop the goods ends when B either receives the goods or is given acknowledgeM by a 3d party carrier or bailee that the B now has the right to possession of the goods.

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d. 2-702(2): Where S discovers that B has recd the goods while insolvent, S is given a right to reclaim the goods as long as S makes the reclamation demand upon B\ w/in 10 days of Bs receipt of the goods.
i. There is no 10 day limit where B has misrepresented its solvency in writing w/in three mths of the delivery in question. ii. A2-702(2): Removes the 10 day limit and only requires a reas time. The new reas stnd also eliminates the need for the exception for misrepresentation so it is deleted. iii. The reclamation right isnt that great bc 2-702(3) makes the reclamation right subject to the rights of a GFPV and cts have held that a secured lender of the B that has a lien on the Bs after-acquired property counts as a GFPV!

e. 546(c) of the Bankruptcy Code also limits the reclamation right:

i. ii. The reclamation demand must be in writing The bankruptcy time limit for the Ss written declaration demand is 45 days from receipt of goods by B and is not relaxed even B has misrepresented its solvency in writing. iii. However, if the bankruptcy petition is filed before the expiration of 45 days, then the written demand must be made w/in 20 days of the filing of the petition. Its an extension in the case where it expires one day after the filing of the bankruptcy petition, so they get 19 days. 1) Ss reclamation right is subject to the prior rights of a holder of a sec int in the goods in question.

f.

S can file an AEC (get in line w/ e/o else) when S did not comply with 546(c) reqMs. However, AEC is not available unless goods were recd by B w/in 20 days of commencement of BK. g. 28.5(a): Is B insolvent under 1-203(23)? Ceased to pay debts in ord course of biz/cant pay debts as they become due (EQUITY INSOLVENCY)/is insolvent under bankruptcy law (BALANCE SHEET INSOLVENCY). UCC allows both definitionsliberal. OM learns of insolvency 13 days after delivery. OM cant make the demand under 2-702(2) bc 10 days have passed. What else can he do? Sth about 2-507, 2-511 and is a check cash or conditional payment? Cts usually say that B gets reclamation rights when the check has bounced so 2-702 and 2-511 help OM a bit. Under amended 2-702(2) answer is diff bc demand just has to be made w/in a reas time. He promptly investigated after the check bounced: this was very reas. h. 28.5(b): OM can assert reclamation right under 2-702. They can also do it under BR w/ a written demand w/in 45 days but it would be subject to any secured creditors. 2-702 gives them better rights than BR If OM misses the 10 day deadline under 2-702 and then tries to make demand in writing to BR trustee w/n 45 days can they do it? Nothe reclamation right under 546(c) is not an indep right to reclamation. It arises/flows from rights under st laws. If S fails to make a good 2-702 reclamation demand, S cant use 546(c) later to fix it. You can only use the BR claim if you have preserved your state law claim by demanding within 10 days. i. 28.5(c): Its too late. No claim under UCC or BR. Would be diff under Am Art 2 reas time. Can file 503(b)(9) AEC and wait in line but then you dont get the salami or prob the full amt back. j. 28.5(d): A secured creditors perfected security int extinguishes OMs reclamation rights in the goods. 503(b)(9) AEC is available in this circ. Even if FN does not pursue its perfected security int, the hard-line reading of Art 2 is that the reclamation right is still extinguished. H agrees w/ the other reading: if FN doesnt pursue its int, OM should be able tootherwise its waste.

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Special Remedies When the Breaching Party is Insolvent: Aggrieved Seller: UCC 2-702, 2-705
S discovers Bs insolvency prior to delivery S discovers Bs insolvency while goods are in transit S can refuse delivery, except for cash. 2-702(1)

S can stop delivery when the B repudiates or fails to make a payment due before delivery 2-705. Ss right to stop delivery terminates when B receives goods, OR B is given acknowledgment by 3P carrier that B has right to possession of goods. 2-705(2). S has reclamation rights. 2-702(2). Demand: S must make reclamation demand on B within 10 days of Bs receipt of goods (but S need not demand if B has misrepresented its solvency in writing to S within 3 mths of delivery in question). Amended 2-702(2): 10-day limit replaced with reasonable time limit (and misrepresentation exception thus removed) 2-702(3) limitation on Ss reclamation rights: Ss reclamation rights subject to rights of GFPV (such as secured lender of B with lien on Bs after-acquired property).

S discovers Bs insolvency and B has goods

4. Special Remedies when the Breaching Party is Insolvent: Aggrieved B a. 2-502(1) gives a B that has paid all or part of the purchase price a right to recover goods from the S if the S becomes insolvent w/in ten days after receipt of the first installM on their price. The goods also have to have been identified to the K under 2-501 (shipped marked or otherwise designated) b. A2-502(1): A consumer B that has pre-paid all or part of the price has a right to recover the goods from the S in any case where the S has repudiated or failed to delivery the goods, whether or not the S has become insolvent. B, of course, must be willing to pay the remainder of the purchase price.

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Special Remedies When the Breaching Party is Insolvent: Aggrieved Buyer: UCC 2-502

B has pre-paid all or part of KP

Can recover goods from S if the S becomes insolvent within 10 days after Ss receipt of the first installment on their price. 2-502(1). Goods must be identified to the K under 2-501.

Amended 2-502: Consumer B can recover goods from S in B has pre-paid all any case where S has repudiated or failed or part of KP to deliver goods, whether or not S has become insolvent, but B must be willing to pay remainder of KP.

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