Seller’s Remedies for Buyer’s Breach

- (2-703) Seller’s Remedies in General

o Triggering events:
 Buyer wrongfully rejects
 Buyer wrongfully revokes acceptance
 Buyer fails to make a payment (on or before delivery)
 Repudiates
o Seller may:
 Withhold delivery of such goods
 Stop delivery by any baliee as hereafter
 Proceed under 2-704 respecting goods still unidentified to the contract
 Resell and recover damages as hereafter provided (7-706)
 Recover damages for non-acceptance (2-708) or in a proper case the price
 Cancel
o Two situations: Buyer has the goods (delivery) and Seller has goods (pre-delivery)
 Buyer has the goods (and not paid for them)
1. Action for the Price - The seller’s remedy in this situation is to recover
the price of the hoods (2-709(1)(a)
o When the buyer fails to pay the price as it becomes due the
seller may recover:
 The price of goods accepted or
 Of conforming goods lost or damaged within a
commercially reasonable time after risk of their loss has
passed to the buyer AND
 Recover any incidental damages under 2-710.
 Seller has goods
o This could arise when:
 Buyer repudiated the contract OR
 Buyer wrongfully (wrongfully = no legal right to do so)
 (A) rejected the goods
 (B) revokes acceptance
o In both situations, returned them to the
Seller.
o In all these situations, Seller is likely to incur incidental damages
(2-710).
1. Recover for Contract Price (very rare)
a. Only arises when Seller cannot resell the goods to another
buyer (2-709(1)(b)
2. Resale (most common remedy)
a. Resell goods and recovery the difference between the contract
price and the resale price. (2-706)
i. Resale method must be done in good faith and in a
commercially reasonable manner.
 1. Failure to do so would mean that market price
formula should be used.
ii. Resale includes incidental damages – expenses saved by
the buyer’s breach.
iii. Resale formula: K price – Resale Price + incidental
damages – Expenses saved
3. Market (alternative to resale measure of damages)
a. (2-708(1) Seller’s Damages for Non-Acceptance or Repudiation
i. Market Formula: Market price (at time and place of
tender) – unpaid contract price + incidental damages –
expenses saved
b. This formula is applicable where there is no resale, but the
damages are calculated based on the basis of a hypothetical
resale.
c. Time and place of tender = the place where Seller goes to
deliver the goods.
4. Lost Profits (Applies to Volume Seller)
a. Provides an alternative to the measures of lost profits of
damages. (2-708(2)
i. If the measure of damages provided in subsection 1 is
inadequate to put the seller in as good as a position as
performance would have done, then the measure of
damages is the profit (including reasonable overhead)
which the seller would have made from full
performance by the buyer + incidental damages
ii. Formula: K price – Resale Price + Incidental Damages –
Savings

Buyer’s Remedies for Seller’s Breach

- (2-711) Triggering events of when Buyer can seek remedies:

o Fails to make delivery
o Repudiates
o Rightful rejection
o Rightful revocation
1. In all four cases, Buyer may cancel & recover for any balance paid to the Seller.
2. Seller may also recover for:
 “Cover”
 Recovery damages for non-delivery (repudiation or non-delivery) (2-713)
3. In the situation which Seller fails to deliver goods or repudiates
 Buyer may recover for identified goods (only if the goods have been
identified) OR obtain specific performance or replevin
4. In the situation in which a Buyer rightfully revokes or rejects:
 Buyer has a security interest in goods in his possession or control for any
payment made on their price AND any expenses reasonably incurred in
 their inspection, receipt, transportation, care, and customer, and may
hold such goods and resell them in like manner as an aggrieved seller.

- Two situations for Seller’s Breach: Seller has Goods and Buyer has Goods
o First case: Seller Breaches and Seller has Goods.
1. [If seller repudiates or fails to deliver] Buyer can seek special performance or
replevin under 2-716
 2-716(1): Special performance may be decreed where the goods are
unique or in other proper circumstances.
 2-716(3): Buyer has a right to replevin for goods identified to the
contract if:
o After reasonable effort he is unable to effect cover for such
goods OR
o The circumstances reasonably indicate that such effort will be
unavailing OR
o If the goods have been shipped under reservation and
satisfaction of the security interest has been made or tendered.
 The difference between obtaining specific performance and replevin
under 2-716 is identification because replevin requires that goods be
identified.

2. [Applicable to all breaches] Buyer can seek cover (2-712)  Cover means to
generally look for another Seller
 (1) After breach within the preceding section the Buyer may “cover” by
making in good faith and without unreasonable delay any reasonable
purchase of or contract to purchase goods in substitute for those due
from the seller.
o This implies Buyer must seek cover in good faith without
unreasonable delay and the cover must be a reasonable
purchase.
 IOW, Buyer must not increase the damages that the
seller is obligated to pay.
 Burden is on the breaching party to show that
the non-breaching party failed to mitigate
damages.
o If seller shows that the buyer paid too
much in the cover, then the calculated
damages should be as if the buyer had
paid the market price.
 (2) Formula for Cover Damages: Cover Price – Contract Price + Incidental
+ Consequential damages – Savings for Seller’s Breach.
o Incidental Damages (2-715(1): (BUT FOR TEST)
  (A) Expenses reasonably incurred in inspection, receipt,
transportation and care and custody of goods right
rejected AND
 (B) Any commercially reasonable charges, expenses, or
commissions in connection with effecting cover AND
 (C) Any other reasonable expense incident to the delay
or other breach. are those incurred by the buyer.
 Ex. of ID: Storage and shipment of rejected
goods, expenses after effecting cover to obtain
goods from another seller.
o Consequential Damages (2-715(2): Hadley Foreseeability Test
 (A) Any loss resulting from general or particular
requirements and needs of which the seller at the time
of contracting had reason to know AND which could not
reasonably be prevented by cover or otherwise.
 Consequential damages are:
o Foreseeable (OBJECTIVE STD) meaning
the seller “had reason to know” and it
had to be at the time contract was
made.
 Exception: A buyer cannot
recover for a loss that could
have been prevented by buying
the goods elsewhere.
 CD in Breach of Warranty (2-715(2)(b):
 Proximate Cause – Injury that follows use of
goods without discovery of the defect causing
damage.
o TEST:
 Whether it was reasonable for
the buyer to use the goods
without such inspection as it
would have revealed the
defects.
3. (2-713) Market Price (alternative to Cover)
 Formula: Market Price – K price + ID + CD – savings
o RULE: Market price is determined as of the place of tender OR
(in rejection after arrival or revocation of acceptance) as of the
place of arrival.
o Seller in Breach and Buyer has Goods
1. IOW, Seller breaches and Buyer keeps non-conforming goods.
 This situation arises in breach of warranty: Buyer who accepts the goods
with a warranty have a claim if the goods do not conform to the
warranty.
  (2-714) (1) In a situation in which the buyer has accepted goods and
given notification [of breach to Seller (2-607) he may recover as
damages for any nonconformity of tender the loss resulting in the
ordinary course of events from the Seller’s breach as determined in any
manner which is reasonable.
o NOTE: Buer must give notification of breach to Seller otherwise
it would not be deemed valid and Buyer recovers nothing.
o “Non-conformity of tender” can be either an express warranty
that relates to the goods or other non-related goods promises
such as time of delivery.
 TF if the seller is late delivering, then the buyer may
recover damages under 2-714(1).
 If seller is late in delivering goods  subsection (1)
 If seller breached warranty  subsection (2)
 Under both subsections, the buyer may seek
consequential and incidental damages.
 (2) The measure of damages breach of warranty is different at the time
and place of acceptance between the value the goods as accepted and
the value they would have had if they had been as warranted UNLESS
special circumstances show proximate damages of a different amount.
o Formula for Breach of Warranty: Value of accepted goods (at the
time and place of acceptance) – value they would have been as
warrant
 Unless special circumstances show proximate damages
of a different amount.
 Example of this would be a cost of repair to
have the goods be placed in condition
warranted.
 EX. Problem: Seller sells Buyer computer and represents
that computer has a specialized functions. Buyer
purchases the model for $25K. However, the computer
does not have the specialized functions and the
computer as delivered is $20K. If it did have specialized
functions, it would be worth $75K.
 The buyer may recover for $55K because the value of
the goods accepted is $20K minus the value they would
have been had they been warranted which is $75K.
 (3) In a proper case any incidental and consequential damages under the
next section may be recovered.
o NOTE: The buyer could deduct those damages from the
purchase price if the Buyer notifies the seller it was doing so
 2-717
o Expansions on the Buyer’s Damages
1. Loss of Goodwill (Type of consequential damage)
  IL does not allow loss of goodwill.
2. Punitive Damages
 Courts have allowed it when finding “willfulness, wantoness, malice, or
oppression” in the sale of goods and PL cases.
 Another situation where courts will find this is when there is no personal
injury or economic injury.
3. Negligent Infliction of Emotional Distress
 In IL, there is a cause of action for this that is limited by the zone-of-
danger rule.
 However, no recovery for emotional distress damages for purely
economic damages unrelated to the personal injury under the Moorman
Doctrine.
o Thomas case – safari hunter missed killing a tiger because gun
malfunctioned and sued the rifle company. Court found it is up
to the trier of fact to determine whether the breach of K caused
his emotional damages and “loss of honor, prestige, and
victory.”

- The Regulation of Buyer (and Seller’s Damages)

o UCC 2-717 (Deduction of Damages From the Price): The buyer on notifying the seller of
his intention to do so may deduct all or any part of the damages resulting from any
breach of the contract from any part of the price still under the same contract.
1. Occasionally, a party defending breach of K will counter-attach with a claim for
set-off under 2-717.
2. Essentially, a buyer can deduct damages (or price under the K) due to a breach
of the K.
3. Cases talked about:
 Berdex: A buyer could not offset a contract for scallops while defending
a claim based on a contract for frog legs because the court found the
two to be separate contracts.
o The “different contracts” analysis was used in Echo and Celex.
o UCC 2-718 (Liquidation):
 (1) “Damages for breach by either party may be liquidated in the
agreement but only at an amount that is reasonable in light of the
anticipated or actual harm caused by the breach, the difficulties of proof
of loss, and the inconvenience or unfeasibility of otherwise obtaining an
adequate remedy. A term fixing unreasonably large liquidated damages
is void as a penalty.”
 (2) “Where the seller justifiably withholds delivery of goods because of
the buyer’s breach, the buyer is entitled to restitution of any amount by
which the sums of his payments exceeds:
o The amount to which the seller is entitled by virtue of terms
liquidating the seller’s damages in accordance with subsection
(1) or
 o In the absence of such terms, twenty per cent of the value of
the total performance for which the buyer is obligated under
the contract or $500, whichever is smaller.”
 This section makes it clear that a buyer’s deposit will not
be considered liquidated damages. Instead, liquidated
damages must arise by the parties’ agreement. If the
amount qualifies for LD under subsection (1), then the
seller may keep it. If not, then it must be refunded.
 EXCEPTION: If seller can prove that it suffered
damages equal to or greater than the amount of
the deposit then it is not required to return the
deposit. (2-718(3))
 (3) “The buyer’s right to restitution under subsection (2) is subject to
offset to the extent that the seller establishes:
o A right to recovery damages under the provisions of this Article
other than subsection (1), and
o The amount of value of any benefits received by the buyer
directly or indirectly by reason of the contract.”
 (4) “Where a seller has received payment in goods their reasonable
value or the proceeds of their resale shall be treated as payments for
the purposes of subsection (2); but if the seller has notice of the buyer’s
breach before reselling goods received in part performance, his resale is
subject to the conditions laid down in this Article on resale by an
aggrieved seller (2-706).”
2. Liquidated damages clauses are allowed yet they set a severe limit on the
amount fixed by saying that an “unreasonably large” amount will result in the
“term” being void as penalty.
 Liquidation clause does not have to be entitled as such. (“additional loan
fee” was found to be a liquidation clause.”)
3. Liquidation clause will be enforceable if it reasonable in light of the (1)
anticipated or (2) actual harm.
4. Just because a buyer
- Contractual Modification or Limitation of Remedies (UCC 1-210(10) and 2-719)
o UCC 2-719(1): “Subject to provisions of subsections (2) and (3) of this section and of the
preceding section on liquidation and limitation of damages,
1. The agreement may provide for remedies in addition or in substitution of those
provided in this Article and may limit or alter the measure of damages
recoverable under this Article, as by limiting the buyer’s remedies to return of
the goods and repayment of the price or to repair and replacement of non-
conforming goods or parts; and
2. Resort to a remedy as provided is optional unless the remedy is expressly agreed
to be exclusive, in which case it is the sole remedy.
o (2) In a situation which circumstances cause an exclusive or limited remedy to fail of its
essential purpose, remedy may be had as provided in this Act.
 1. “Minimum adequate remedy” or “Fair Quantum of Remedy”
o (3) Consequential damages may be limited or excluded unless the limitation of exclusion
is unconscionable. Limitation of consequential damages for injury to the person in the
case of consumer goods is prima facie unconscionable but limitation of damages
where the loss is commercial is not.
o 719 founded in the principle of parties having freedom to contract.

o 2-719 applies throughout Buyer’s Remedies cases although its biggest impact on
damages for breach of warranty.
o Look at 719’s relationship with 718, 316 clause 2, and 201(10) definition of conspicuous.
1. Although not stated, many cases term on whether the written limitation is
conspicuous.
o General 2-719 test: The text must appear in haec verba (in specific words or language) in
the contract.
1. (Pavlak Exception – No need for Conspicuousness) Exception can arise if:
 Parties are merchants
 Contract was negotiated, not an adhesion contract
 Parties possessed substantially equal bargaining powers between parties
 The subject is not consumer goods.

Anticipatory Repudiation (UCC 2-610)

- When either party repudiates the contract with respect to performance not yet due the loss of
which substantially impair the value of the contract to other, the aggrieved party may:
o For a commercially reasonable time await performance by the repudiating party; OR
o Resort to any remedy for breach, even though he has notified the repudiating party that
he would await the latter’s performance by the repudiating party and has urged
retraction; and
o 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.”
1. RULE: A party who wrongfully believes repudiation occurs and acts on it 
breaching party.
- (2-611) Retraction
o Until repudiating party’s next performance is due he can retract his repudiation unless
the aggrieved party has since the repudiation cancelled or materially changed his
position or otherwise indicated that he considers the repudiation final.
o Retraction may be any method which clearly indicates to the aggrieved party that the
repudiating party intends to perform, but must include assurance justifiably demanded
under 2-609.
o Retraction reinstates the repudiating party’s rights under the contract with due excuse
and allowance to the aggrieved party for any delay occasioned by the repudiation.
- Demand for Assurance (2-609) – when a party may demand assurance
o For a party to demand assurance there must be:
1. Reasonable ground for insecurity
o Between merchants, reasonableness for grounds for insecurity
shall be determined according to commercial standards.
2. Written demand for assurances.
 At that point the party demanding assurances may suspend
performance.
o Between merchants, the adequacy of any assurance offered
shall be determined according to commercial standards.
o If creditor does not receive adequate assurances within a
reasonable time not to exceed 30 days  there is a repudiation.
 Also, the non-breaching party who suspended
performance is not in breach.
3. Other context that demands assurances
 When an oblige is concerned about a delegation of a duty (2-210)
 When a party to an installment contract needs to know whether a
breach with respect to one installment contract is a breach of the whole
(2-612)
4. Other points
 Farmers are held with an absolute standard of delivery.
o The seller bears the burden/risk of loss.
5. Oloffson v. Coomer
 Case deals with a dispute between a grain dealer (Oloffson) and a
farmer (Coomer). Olofsson agreed to buy 40K bushels of corner from
Coomer, to be delivered in two installments. Due to unfavorable
conditions, Coomer informed Oloffson on June 3, 1970, that he would
not be able to fulfill the contract.
o Anticipatory Repudiation
 Coomer’s communication on June 3, 1970 stating he
would not plan corn and advising Oloffson to arrange for
corn elsewhere constituted an anticipatory repudiation.
o UCC 2-610:
 Under 610, Oloffson (the aggrieved party) could have:
 Awaited performance by the repudiating party
(Coomer) for a commercially reasonable time
OR
 Resort to any remedy under 2-711 for breach
even if the aggrieved party initially indicated an
intention to await performance.
o Duty to Act in Good Faith
 Oloffson had a duty to deal with Coomer in good faith
per UCC 1-103(1)(b) and 1-203. The UCC imposes the
obligation to deal in good faith defined for merchants as
 “honesty in fact and the observance of reasonable
commercial standards of fair dealing in the trade.”
o Effecting Cover
 The court emphasized that “cover” was easily and
immediately available to Oloffson in the grain market.
Oloffson, acting in good faith, could have mitigated his
damages by promptly securing substitute goods.
o Damages Calculation
 The damages awarded to Oloffson were correctly
calculated based on the difference between the
contract price and the market price on June 3, 1970, the
day that Coomer repudiated the contract.
o Conclusion
 The court affirms the judgment in favor of Oloffson,
stating that a commercially reasonable time had expired
on June 3, 1970, and Oloffson had the right to proceed
on Section 2-711. The damages awarded align with 2-
712.

- Anticipatory Repudiation must be “clear and equivocal” before the time of performance is due.
o Code states “It is not necessary for repudiation that performance be made literally and
utterly impossible. Repudiation can result from action which reasonably indicates a
rejection for the continuing obligation.”

Warranties

- (UCC 2-313) (Express Warranties by Affirmation, Promise, Description, or Sample):

o “(1) Express warranties by the seller are created as follows:
1. Any affirmation of fact or promise made by the seller to the buyer which relates
to the goods and becomes part of the basis of the bargain creates an express
warranty that the goods shall conform to the affirmation or promise.
2. Any description of the goods which is made part of the basis of the bargain
creates an express warranty that the goods shall conform to the description.
3. Any sample or model which is made part of the basis of the bargain creates an
express warranty that the whole of the goods shall conform to the sample or
model.
 This section looks at the basis of the bargain.
o If affirmation of fact or promise, any description, or
sample/model becomes basis of the bargain  expressed
warranty.
 The standard view is that the buyer does not need to
show reliance of those three things for it to become a
basis of the bargain. Rather, buyer needs to show it was
a basis of the bargain.
  Challenge for basis of a bargain  if buyer knew
or should have known that the seller’s
representations were inaccurate.
o Issues with statements sub 1 (a):
 There is a question of whether post-bargain statements
could become basis of the bargain.
 Affirmation v. Puffery
 How specific must a statement be for it
constitute affirmation v. puffery
o EX. Manufacturer for a HD DVD players
states it products were for “today,
tomorrow, and beyond” and
discontinues the model two years later
 puffery (Toshiba America Litigation
case)
 Content; Extent; Meaning
 What did the seller mean by a particular
statement?
o (2) It is not necessary to the creation of an express warranty that the seller use formal
words such as “warrant” or “guarantee” or that he have a specific intention to make a
warranty, but an affirmation merely of the value of the goods or a statement purporting
to be merely the seller’s opinion or commendation of the goods does not create a
warranty.”
1. NOTE:
 Seller’s opinion, affirmation of the value of the goods, or commendation
of the goods  does not create an express warranty.
 Seller need not use “warrant” or “guarantee” or have specific intention
of making a warranty for an expressed warranty to exist.
- Goods that are not as warranted are a specialized category of non-conforming goods.
- Three important rules RE Warranties
o Buyer bears the burden of proving that warranty did not conform to the warranty; also,
if the buyer is defending against a seller’s action by claiming seller breached a warranty,
the buyer must raise that as an affirmative defense.
o The issue of whether a warranty was given or excluded is question of fact.
o The Code warranties operate on a “cubby hole” theory: if a buyer can’t fit the deal into
precise requirements of one of the stated warranties, he should not be able to proceed
on a general theory of warranty.
- Scope of Warranties Provisions
o Stang v. Hertz: involves an automobile accident caused by a blown-out tire from a
rented Hertz car. Plaintiff suffered fatal injuries.
1. This case addresses two main issues: Express warranty in the rental agreement
and the application of strict liability in tort to the lessor.
 Express Warranty
-
 o Plaintiff claimed the rental agreement contained an express
warranty, citing a statement that the vehicle was in good
mechanical condition.
 Defendant argued that “vehicle” does not include tire as
the rental agreement separately mentioned tires.
o A Hertz employee verbally assured one of the nuns that Plaintiff
was with that the car had “good tires.” Plaintiff asserts that is an
express warranty.
o The court determines that there was no evidence that the term
of the rental agreement or the reference to good tires
influenced the nuns’ decision to rent. Therefore, there was
insufficient evidence for an express warranty claim.
 Strict Liability in Tort
o Plaintiff argues that the adoption of strict liability, citing that a
defective tire caused the accident and the impact damage was
not discoverable through normal inspection.
o The court considers the adoption of 402A which imposes strict
liability on sellers for defective products, as a matter of public
policy.
o Economic factors, the unknown incidence of defective products
causing injury, and the lack of expertise make such a public
policy lead the court to decline adopting strict liability.
 Instead, the court says that decision should be to the
legislature.
o As no claim of negligence is made against Hertz, and the
evidence of express warranty is insufficient, the court affirmed
the directed verdict for Hertz.
2. UCC 2-313 implies that courts are free to extend Article 2 to bailments and
leases on a case by case basis.
o Express Warranty By Description (2-313(1)(b)
1. Best Buick v. Welcome (1975)
 D owned and traded in a model 1970 vehicle but registered it as a 1973
vehicle and sold it to the Plaintiff’s automobile dealership as a 1973. D
acting in good faith.
 Trial court found for the Defendant, noting that the defendant was an
innocent, non-expert individual, and P was an experienced automobile
dealer with means to determine the make and model of the car.
 Appellate court reversed findin that “a statement by the seller of a
motor vehicle as to its model year is such an affirmation of fact” and
such “a description of the goods.” Thus, it constituted an expressed
warranty.
- Implied Warranties
o Like express warranties, we use words, trade usage, course of dealings, and course of
performance to determine whether an implied warranty existed.
1. Implied Warranty of Merchantability
 UCC 2-314(1)
o Definition of “merchant with respect to goods of that kind”
 Includes both: (1) merchants who deal in goods of that
kind and (2) one who holds himself out as having
knowledge or skills
 UCC 2-314(2): 6 factors which establish the minimum standards for
goods:
o For goods to be merchantable they must be at least as such:
 Pass without objection in the trade under the contract
description; and
 In the case of fungible goods, are of fair average quality
within the description; and
 Are fit for the ordinary purposes for which such goods
are used; and
 Run within the variation permitted by the agreement; of
even kind, quality and quantity within each unit and
among all units involved; and
 Are adequately contained, packaged, and labeled as the
agreement may require; and
 Conform to the promise or affirmation made on the
container or label if any.
o The Plaintiff must establish five facts to prevail:
 That merchant dealing in “goods of that kind” sold the
goods;
 That goods were not merchantable at the time of sale;
 That goods caused injury or damage to the Plaintiff or
his property;
 That the injury or damage was caused proximately and
in fact by the defective nature of the goods;
 That the Plaintiff gave the seller-defendant notice of
that defect.
o The seller-defendant raises one or more of these three
defenses:
 The warranty was disclaimed;
 The buyer did not give notice; or
 The statute of limitations expired.
 Webster v. Blue Ship Tea Room:
o Case significance: Fish bone in chowder did not breach implied
warranty of merchantability per reasonable expectations of
consumers. IOW, it could be reasonably expected that a fish
bone would be in chowder due to the culinary creation of the
chowder soup.
  The court here applied the “natural v. foreign” test
which states that in food cases, if the object causing
harm is natural to the food  no breach.
 In Illinois, it is the reasonable expectation test  if
consumer could reasonably expect it  no breach.
 REASONABLE EXPECTATION TEST IS THE
PRIMARILY USED TEST BY THE COURTS.
 Implied Warrant: Fitness for a particular purpose
o (2-315): Where [when] (1) the seller at the time of contracting
has reason to know any particular purpose for which the goods
are required and (2) that the buyer is relying on the seller’s skill
or judgment to select or furnish suitable goods, (3) there is an
implied warranty that the goods shall be fit for such purpose
 UNLESS excluded or modified under 316.
o (Significant case od Implied Warranty) Paul Lewis v. Mobil Oil
2. Culmination and Conflict in Warranties
 If warranties conflict with one another  courts will treat them as
culminating over one another.
3. Fraud and Misrepresentation (UCC 2-721)
 Although the code does not mention actions for fraud or
misrepresentation, they are viable alternatives based upon a breach of
express warranty.
o Seller’s Defenses to Breach of Warranty (UCC 2-202 and 2-316)
1. Courts are invariably hostile to disclaimers of express warranties.
2. In analyzing an express disclaimer of warranty
 The first issue is whether it is possible to disclaim warranties as well.
 The second is whether the words of creation and the words of
negation/disclaimer are reconcilable.
 The third issue is what happens when words of creation have become
part of the agreement and are irreconcilable with words of
negation/disclaimer
o Words of creation prevail over the words of negation.
 2-316(1) makes this clear.
3. Disclaimer of Implied Warranties Under 2-316(2)
 Most litigated issues are post-contracting disclaimers and consciousness.
o Post-contracting disclaimers have been strongly ruled in favor of
the buyer and against the Seller.
o Conspicuousness is judged by an objective test (UCC 1-201(10)
 “A term or clause is conspicuous when it is so written
that a reasonable person against whom it is to operate
against ought to have noticed it. A printed heading in
capitals (as: NON-NEGOTIABLE BILL OF LADING) is
conspicuous if it is larger or other contrasting type or
 color. But in a telegram any stated term is conspicuous.”
Whether a term is conspicuous is a question of law.
 3 types of cases involving conspicuousness:
 The print
o Factors that favor conspicuousness are
large type in all print of the writing, a
disclaimer in larger print than that of
the surrounding language, a disclaimer
in italic, disclaimer in different color
(preferably red) and a disclaimer in
boldface.
 Placement
o Disclaimer should be easy to find in
writing not buried. It should be on the
obverse of a two sided one-page
contract. If not, there should be an
obverse calling the buyer’s attention to
the disclaimer.
 Readability/Content/No misleading heading
o