Sales  Formation

 Scope of Article 2  There are at least four ways in which a UCC gap filler will be superseded.  1-302(a): if the contract itself specifies what that term should be.  1-303(a): the parties’ repeated occasions for performance within that contract may establish an agreement implication. “Course of Performance”  1-303(b): the parties’ past dealing with one another have established a particular way that the parties do business with one another. “Course of Dealing”  1-303(c): Custom in a particular industry concerning a performance term. “Usage of Trade”  Ragus v. City of Chicago (Rat Traps)  Reference to usage of trade is proper when K ambiguous  City of Chicago  Article 2 applies to “transactions in goods,” 2-102, and defines goods as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale. . .”  Adel v. Greenspring (Water is considered a good under the UCC)  An item can be a good under the UCC even if the seller did not create or manufacture it.  Two approaches to mixed contracts:  Predominant purpose test: by which the court decides whether the predominant purpose of the transaction is to sell goods or services. If it is goods, then Art. 2 applies to the whole transaction, even the services portion. If the predominate purpose is services then no Art.2.  Gravamen of the action test: the court determines whether the gravamen of the action (the source of the complaint) is with the goods or the services portion of the transaction. If the problem lies with the goods, then Art. 2 applies even if the predominant purpose of the transaction is services rather than goods. If the problem lies with the services, then Art. 2 does not apply.  Adel v. Greenspring (Water is considered a good under the UCC)  An item can be a good under the UCC even if the seller did not create or manufacture it.  Rejected Dakota Pork Indus. V. city of Huron’s reasoning that water is covered under UCC but implied warranty of merchantability does not apply.

Art. 2-104(1) tells us that a merchant is either a person “who deals in goods of the kind” or a person who “holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.  Comment 2 of 2-104 introduces the concept that there are three different categories of consequences to being a merchant.  The first category of consequences involves the Art. 2 rules surrounding general business practices like answering the mail and giving firm offers. “Almost every person in business” would be considered a merchant and therefore subject to the special rules of those sections  The second category covers mainly the implied warranty of merchantability. Only merchants who deal in goods of the kind get saddled with that particular responsibility.  The final category deals with merchant’s general duties of good faith and standards of fair dealing in the trade. Again, any person in business will be subject to the requirements of this group of special merchant provisions.  Cook v. Downing (Dentures)  Those who, for a fee, furnish their professional medical services for the guidance and assistance of others are not liable for breach of implied warranty in the absence of negligence of intentional misconduct

 Scope Issues with Leases, CISG, and Real Estate
 Scope of Art. 2A  The real question is whether any given transaction amounts to a “true lease” or a “disguised sale.” Art. 2A uses the economic realities test:  Considers 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. If there is a reasonable likelihood that the lessor will indeed retain some residual interest in the goods, then the economic realities test deems the transaction to be a true lease. If not, the transaction is considered to be a disguised sale intended for security. A sale intended for security is one in which the seller sells the goods on credit but retains a special right to foreclose on the goods in the buyer’s hands if the buyer fails to pay the price.  If a purported lease transaction is found to be a sale, typically the “lessor” will at least want the transaction to be treated as a secured sale rather than as an unsecured sale. If the sale is an unsecured sale, lessor would have no special rights to the leased goods. If the sale is considered a secured sale, then lessor would have the chance to qualify for the special Art. 9 rights of a secured creditor.

If the transaction is found to be a disguised sale, the penalty to the putative lessor for failing to meet the Art. 9 requirements is that the lessor may lose certain rights against the lessee as well as against third parties of the lessee.  Carlson:  Art. 1-203 to determine whether a contract (called a lease by the parties) is a “true lease” or a security agreement.  To determine intent of the parties, the court must adopt an economic analysis (realities test?): 1) If the obligations of the lessee under the lease are not subject to termination by the lessee 2) If the lessee may without further consideration acquire all rights in the goods from the full economic life of the goods 3) But if the lessor retains the reversionary interest in the goods, then the transaction is a true lease 4) If the lease includes a “full payout lease” or a “net lease,” then the transaction is a true lease.  Bailey: If there is no right to terminate, and none of the four conditions apply [203(b)(1)-(4)], the court must look into specific facts of the case to determine whether the economics of the transaction still suggest a security interest  Additional factors considered in Bailey when determining whether Tx is a true lease:  Lessee was not under an absolute obligation to purchase the leased property  Purchase price is not for a nominal sum  Art. 2A-103(1)(p) defines lease. Most of the provision in Art. 2A assume a basic twoparty, arms-length lease transaction in which the parties have roughly equal bargaining power. With respect to the consumer lease, however, the drafters did not assume equal bargaining power and therefore created some special protections for the consumer lessee.  2A-103(1)(e) and (f)? defines a consumer lease. Some of the unique benefits accorded to the consumer lessee include prohibitions against bad-faith accelerations by the lessor, special disclosure requirements, and heightened unconscionability protections. 2A-109, 208(2), 108(2).  The finance lease is treated differently.  Scope of CISG  Art. 1 & 6 say that unless the parties otherwise specify, the provisions of the CISG will apply to sales of goods contracts between parties with places of business in “Contracting States,” that is, countries that have ratified the CISG. CISG will apply only if the parties have reason to know by the time of contract formation that they have places of business in different Contracting States. Art. 1(2).  A party’s place of business is defined as the place “which has the closest relationship to the contract and its performance. . .” Art. 10(a). CISG applies to contracts for the

sale of goods Art. 1(1). The issue of a mixed goods contract is addressed in Art. 3(2) by excluding contracts where the preponderant part of the seller’s obligation consists in the supply of labor or other services.  Parties may opt out of the CISG (Art. 6).  Valero Marketing  To exclude the CISG a party must not only provide that the law of a particular state will apply, it must also state that the CISG will not apply  CISG does not cover the sale of consumer goods, unless the seller neither knew nor should have known that the goods were being purchased for a consumer purpose, Art. 2(a). Art. 5 says that the CISG does not apply to the liability of the seller for death or personal injury cause by the goods sold. The CISG specifically excludes from its coverage issues of whether the sale to the buyer cuts off the property interests of third parties in the goods that were sold. Art. 4(b).  In Art. 7(1), the CISG says that “questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.”  Real Estate  UCC does not apply directly (applies to some goods fixed to the land).

 The Process of Sales Contract Formation
 Hill v. Gateway  (Easterbrook’s approach) When there is just one form then do not apply 2-207 (Additional Terms in Acceptance or Confirmation or Battle of the forms) because the one form controls. K was formed once you receive goods and keep them.  (Other approach) If there is a k over the phone then 2-207 applies and any additional terms are excluded in a consumer contract.  Art. 2’s formation rules are contained in four consecutive sections: 2-204, 205, 206, 207.  2-204 sets out three broad principles about sales contract formation: (1) Sales contracts can be made “in any manner sufficient to show agreement,” even conduct; (2) we may still conclude that a contract existed if exact moment is not known; and (3) the only substantive detail that is crucial to the formation fo a sales contract is that there be some basis for calculating a remedy for breach.  2-206 are more particular offer-and-acceptance rules. Offers to makes sales contracts may be accepted “in any manner and by any medium reasonable under the circumstances.” When a buyer offers to purchase goods for immediate shipment, the seller may accept such an offer either by shipping the goods or by promising to ship them. Even shipment of non-conforming goods will count as an

” The terms of such a contract are terms on which the parties agree. 2-205.  2-207 changes that result by saying that an acceptance such as that can count as an acceptance “even though it states terms additional to or different from” those that were offered. In the absence of a stated time only open for a reasonable time. and in no event would such gratuitous firm offer remain irrevocable longer than three months. and no assent is forthcoming. “However.’” In other words. “together with any supplementary terms (could be course of performance . if an acceptance contains a clause conditioning the acceptance on assent to the additional or different terms. the additional terms in the acceptance are considered proposals and become part of the contract unless 2207(2) renders the proposed terms inoperative. the purported acceptance with the different terms would be considered a “counter-offer” that was accepted by virtue of the buyer’s performance (called the “last shot” doctrine).  If the acceptance is “expressly made conditional on assent to the additional of different terms. Belden  If a contract is formed under Section 2-207(1).” This might be the case if the acceptance came a long time after the offer was made. if acceptance is expressly conditioned on the offeror’s assent to the new terms. “Yet if the parties’ conduct recognizes the existence of a contract by performance it is sufficient to establish a contract for sale. the purported acceptance could not operate as a “true” acceptance.” This could arguably be accomplished by the offeree’s including conspicuous language in its form that tracks the relevant “expressly mad conditional” language of 2-207. 2-205 creates a limited exception to the common-law rule that “firm offers” are not binding without consideration. 2-207. Nevertheless. the ‘entire transaction aborts.   acceptance. unless the seller specifically indicates that the non-conforming shipment is offered merely as an accommodation to the buyer (counter-offer). or if the terms of the acceptance were wildly and fundamentally different from the terms of the offer. firm offers are binding even in the absence of consideration if the offeror is a merchant and the offer is in writing. the writings do not form a contract. If the parties nevertheless proceeded. unless two things:  If the acceptance is not “a definite and seasonable expressions of acceptance. The common law’s “mirror image rule” held that unless all of the terms of the purported acceptance agreed with the terms of the offer. the acceptance may differ in even “material” way s from the offer and still count as an acceptance.

” .  2A-205 creates for leases the same limited exception to the common-law unenforceability of firm offers without consideration as in 2-205.”  Formation of Contracts for International Sales  Hybrid of the common-law and 2-207. International Sales. Art. an offer to make a lease should be construed as inviting acceptance “in any manner and by any medium reasonable in the circumstances.  2A-206 is the lease version of the offer and acceptance section contains the same proviso that unless otherwise clearly indicated. 2-207(3) covers the situation in which the buyer and seller act as if there is a contract even though the purported written acceptance does not qualify as a valid written acceptance under 2-207(1). but are instead counteroffers (sounds like mirror image rule).      of dealing or usage of trade) incorporated under any other provisions of this act.  Most courts say that arbitration is a material alteration. 19(2) says that purported acceptances that contain additional or different terms do count as valid acceptances as long as the new terms are not material alteration or the offeror does not object to the discrepancy “without undue delay. Much will depend on whether the additional term is common in the buyer’s and seller’s industry.” 2-207(1) determines when a writing with different terms nevertheless constitutes an acceptance. Knock-out rule (majority): the court will “knock out” the different terms and use the UCC to fill the gap left by the knocked-out terms. and Real Estate  Formation of Contracts for Leases  2A-204: lease contracts may be form in any manner that shows agreement. 19(1) says that purported acceptances that contain additions or modifications are not acceptances. Different terms do not become part of the k (minority) The only way that 2-207(3)’s statutory knockout rule differs from the judicially created knockout rule for 2-207(2) is in its treatment of additional terms: the 2702(3) rules “knocks out” additional terms. Art. whereas under 2-207(2) additional terms between merchants will become part of the contract unless one of the three exceptions in 2-207(2) applies. we do not need to know exactly when a lease contract is formed in order to conclude that it has been formed. and the only substantive detail need in a lease contract is “a reasonably certain basis for giving an appropriate remedy.  Formation With Leases. Comment 3 uses the language additional or different terms. 2-207(2) is to tell us what to do with new terms in the acceptance.

(2) the signature of the party who is trying to avoid the contract. . 16(2) offers which indicate that they are irrevocable may not be revoked for the time stated by the offeror (not a function of the offer being in writing and is not limited to a period of three months). 18(1) CISG)]  However. time or quantity) is considered under the CISG as an counteroffer. as is true under the UCC. Phillips ?  Throckmartin  Fraud is never presumed and must be established by clear.  2-201 does not apply at all where the contact for sale of goods is less than $500. payment. a long-term trade relationship which established a regular practice) silence can be interpreted as a constituted acceptance.   Statute of Frauds with Sales of Goods  There to enforce legit oral contracts and avoid fabricated contracts. place and time of delivery. 19(3) CISG)]  18(2) acceptances are effective only when received by the offeror. not when sent. [Art.  Under CISG if there is a situation like 2-207(3) then the common law’s “last shot” doctrine applies. and (3) a quantity term. the required writing need contain just elements under 2-201: (1) a sufficient indication that the contract for sale has been made. the contract formation process will be fairly straightforward. [Art. change of price. an “acceptance” with modification including material modifications of the contract (i. unequivocal.  Filanto  In general an acceptance to an offer needs a positive act to indicate an acceptance. and convincing evidence. under special circumstances (i.  Formation of Real Estate Contracts  With significant commercial real estate sales. Cummings  Heart of K is the intention of parties  K is construed as a whole and individual clauses are to be considered in context  Messler v. to the price. only that there be adequate documentary evidence of its existence and essential terms. 8(3) CISG)]  Additionally.e. extent of one party’s liability to the other or the settlement of disputes. quality and quantity of the goods.  Dysart v.Material alteration is defined broadly: any additional or different terms “relating among other things. [Art. silence is therefore not an acceptance. UCC does not require that the contract itself be in writing. Even when the requirement does apply.e.

. not mere negotiations. There are other ways in which the writing requirement might be met. substantial beginning of manufacture of special goods OR commitments for procurement of special goods.  The emails in this case failed to sufficiently indicate the formation or existence of any agreement between parties through inference or otherwise. One exception (2201(3)(a)) is for the seller to show that it relied to its detriment on the existence of an oral contract in beginning the manufacture of specially manufactured goods according to that contract.”  DF Activities Corp v. circumstances reasonably indicate goods are for party to be charged.  Nothing says that you cannot use subsequent contract?  Morgan Buildings and Spas  The inclusion of a merger or integration clause does not conclusively establish the written contract is fully integrated.” [in class: not suitable for sale in OCOB.  Parol Evidence with Sales of Goods  Bars the introduction into evidence (and therefore the enforceability) of certain terms that are not put into writing. the parol evidence rules do not bar the consideration of any evidence. Brown  The statute of frauds prevents a party from conducting additional discovery once the defense is raised. (unilateral confirmation?) One can take parol evidence on whether the k is fully integrated.  Fourth exception (2-201(2)) the merchant exception: between merchants.  General Trading Int’l v.  Exceptions: S. sufficient against the sender. neither party can deny existence of the oral contract. admission. received in reasonable time.  Third exception (2-201(3)(c)) “part performance” exception: to the extent that either the seller receives and accepts payment for the goods or the buyer receives and accepts the goods.P. Is parol evidence implicated? If not partial then no parol evidence. no written objection given (sent) within 10 days. See comment 2. The seller must also show that the special manufacture began “under circumstances which reasonably indicate that the goods are for the buyer.= specially manufactured. Wal-Mart Stores  Writings must indicate the consummation of a K. performance.A.  Second exception (2-201(3)(b)) where the party seeking to avoid the contract “admits in his pleading.  In determining whether an agreement is integrated. testimony or otherwise in court that a contract for sale was made. If partially integrated then you can use oral agreements of consistent additional terms. written (merchant exception).W.

 Requisites to Formalization in International Sales  There is no default rule in the CISG that bars the introduction of extrinsic evidence. and Real Estate Sales  Requisites to Formalization in Leases  The system for leases is roughly parallel to that of sales. 8(3) tells us that “due consideration is to be given to all relevant circumstances . There are a couple of categorical statements that can be made about the issue that 2202 covers:  If the writing that seeks to keep evidence out is not intended by both parties to be final expression of the parties’ agreement with respect to the terms included therein.  First difference in the writing requirement is the necessity for a writing with leases does not kick in unless the total lease payments are at least $1. no matter how comprehensive and final the earlier agreement seemed to be at the time. 2-209.  Even where there is a writing intended by both parties to be a final expression of their agreement.  Requisites to Formalization in Leases.  Even where there is a writing intended by both parties to be a final expression of their agreement. The “complete and exclusive” nature of the writing might be proven by the existence of a well-drafted and conspicuous merger clause that screams out the completeness and exclusivity of the writing. Art. International Sales.  Deggingers: ?  Prior consistent additional terms may be introduced to explain or supplement any writing except those that are intended by both parties to be a complete and exclusive statement of all the terms of the contract. or course of performance to explain or supplement the writing. a party may always introduce evidence of usage of trade. parties may always introduct evidence of side agreement that occurred after the writing in question. Parol evidence in leases is 2A-202 and SOF is 2A-201. then it will not serve to keep out any parol evidence.”  There is no merchant exception to the writing requirement in the cases of leases.000. Parties are always free to modify their earlier agreements that they made. it must also “describe the goods leased and the lease term. the absence in 2A-201(3) of the exception for payment received and accepted by the lessor. course of dealing. Also. in the words of comment 2. The one exception to this statement is that these terms may not explain or supplement a writing if the writing has “carefully negated” that possibility.  Second. Not onlyh does the lease writing need to include a signature of the party to be charged and an indication that a lease contract has been made.

possession. usages and any subsequent conduct of the parties. fitness for a particular use  The UCC provides two implied warranties that relate to the performance. and that the . that substitutes for the mission writing. similar goods in the trade. 11 indicates that there is no writing requirement in international sales contracts. 8 requires and examination of all relevant facts and circumstances when deciding whether the Merger Clause represents the parties’ intent. State statutes of frauds for real estate require that the writing include “material terms” of the sale.  Richard: Continued possession of property can adequately indicate the existence of or a purported oral K to constitute partial performance  Warranties with Sales of Goods  The Basic UCC Quality Warranties  The warranties include: title.  CISG Art. With the part performance exception. Typically these terms include party names. 6 is clear on the ability of the parties. Unless disclaimed or modified. identification of the property.  Requisites to Formalization in the Real Estate System (MY LEGS)  The writing requirement for the enforceability of real estate sales tends to be stricter than that for the sale of goods. 2-314(1).of the case including the negotiations. merchantability.  Extrinsic evidence should not be excluded. or improvements. express warranties. The good being sold are at least as good as other. any practices which the parties have established between themselves.”  Art. non-infringement. the more important is the implied warranty of merchantability found in 2-314. however. unless the parties actually intend the Merger Clauses to have this effect and CISG Art. There is also an implied title warranty. Art. the buyer takes some action in part performance: payment.  Equitable estoppels is one of the commonly accepted exceptions to the usual requirement that a contract to sell real estate must be in writing. and the price. this implied warranty arises in every sale of goods where the seller is a merchant with respect to goods of the kind being sold. Inc. Of the two implied warranties of quality. to “derogate from or vary the effect of any of the CISG’s provisions. the nature of the title to be conveyed. 96 allows a country to make a declaration that there will be a statute of frauds requirement in any contract involving parties that have their principal place of business in that country. A second exception is part performance.  TeeVee Toons.

Warranty for a particular purpose is another implied warranty. The fitness warranty promises that the goods are indeed fit for the buyer’s particular purpose. involves only such obligation as is appropriate to such goods for that is their contract description. as long as the are sold by merchants. 2-315. Seller has to defend buyer for infringement or he is collaterally stopped from defending against buyer. Phillips v. Leal v. the fitness warranty is implied whenever the seller knows that they buyer is buying the goods for a particular purpose and is relying on the seller’s expertise to select or furnish the goods. 2-314(2)(a) and (c).     goods are fit for the ordinary purposes for which goods of that description are used. and labeled as the agreement may require. are of fair average quality within the description. . and  Conform to the promises or affirmations of fact made on the container or label if any.  The concept of merchantability does not require that the goods be the best quality or the best obtainable but it does require that they have an inherent soundness which makes them suitable for the purposes for which they are designed.  Are adequately contained.  The fact that the product was tragically misused in such a way does not alter the ordinary purpose of the product. Comment 2 of 2-315 is clear that the implied warranty of fitness was not intended for the buyer whose use of the goods is ordinary.  In the case of fungible goods. “A contract for the sale of second-hand goods. however.  Are fit for the ordinary purposes for which such goods are used. Cricket Lighters  The statute defining implied warranty of merchantability states that in order for goods to be considered “merchantable.  Run. 2-314(2).” they must be at least such as:  Pass without objection in the trade under the contract description. Holtvogt  The test to determine whether an implied warranty of fitness for a particular purpose has been created:  The seller must have reason to know of the buyer’s particular purpose. See comment 3 to 2-314. Even used goods. packaged. of even kind. Unless disclaimed or modified. come with an implied warranty of merchantability. quality and quantity within each unit and among all units involved. within the variations permitted by agreement. CISG: seller must know and buyer cannot.

as long as any of these become “part of the basis of the bargain.  The extent for your damages. samples. that argues in favor of an express warranty rather than puffing.  When the buyer does discover a defect in the goods. Comment 8 to 2-313. in most cases. the context in which the seller’s statement was made will normally be important in deciding whether the statement is an express warranty rather than puffing. a written statement is more likely to be considered an express warranty than is an oral statement. any one of a number of affirmative defenses. in fact. Inc. rely upon the seller’s skill or judgment. and assumption of the risk. 2-607(3)(a) makes it clear that the buyer that wishes to preserve its remedies must notify the seller of any defect within a reasonable time after the buyer “should have discovered any breach.  Express warranties must be affirmatively created by the seller to the immediate buyer through affirmations of fact. Second.  Notice and Privity  In order to recover on a warranty theory.  If the buyer’s reliance on the seller’s statement was reasonable under the circumstances. Third.  Extended Warranties and Maintenance Agreements  Sometimes the original warranty will extend without having to purchase the extension. and  Your ability to fend off. that argues in favor of the seller’s statement being characterized as puffing. or models. and  The buyer must.” but if a seller is merely giving its opinion of the goods. lack of privity. The seller must have reason to know that the buyer is relying on the seller’s skill or judgment to furnish or select appropriate goods.  That the warranty was breached. statute of limitations. you need to show a number of things:  That the warranty was made. including disclaimers. descriptions.  That the breach of warranty caused the harm complained of.  What counts as notice? Comment 4 paragraph 2: litigation is not sufficient notice in most jurisdictions. specific language is must more likely to be deemed an express warranty than is vague language. If the buyer’s reliance was not reasonable. promises.”  Hebron v.” 2-313(1) In order to create an express warranty a seller need not use any magic words like “guarantee” or “warranty. American Isuzu Motors. Reasonable time: after acceptance then discovery or should have discovered.  First. lack of notice. it must notify the seller within a reasonable time or lose all right to a remedy for the breach. Have to look at kinds of goods and industry standards. then such statements are considered “puffing” and do not give rise to a warranty 2-313(2). .

most manufacturers will treat their warranties as if they run directly to the ultimate purchaser. Art. Brown & Son.  This issue is one of vertical privity: the ability of a buyer to sue a seller other than its immediate seller. a guest of the buyer. remove horizontal privity problem for an even broader calls of plaintiffs than does A.  Where the cause of action is based on breach of express warranty. If the seller refuses to come in an defend for its buyer.  The two other alternatives in 2-318. In a case where a buyer is sued for an obligation for which its seller should be responsible. . B gives the privity-removing benefit to “any natural person who may reasonably be expected to use. B and C. A reasonable time for notification from a retail customer is to be judged by different standards. or be affected by the goods” and who suffers personal injury. the buyer may five the seller written notice of the litigation. . or an employee of the buyer. or. lack of privity between the plaintiffpurchaser and the defendant-manufacturer is not a bar. the Products Liability Act eliminates the privity requiremt where the claimant “is a buyer. Inc. of the product involved. is a member or guest of a member of the family of the buyer. that manufacturer cannot escape warranty liability due to lack of vertical privity.  Horizontal privity: the ability of a non-buyer who uses or is affected by a product to sue a seller for breach of warranty. W... 2-318 is to protect consumers. C would seem to allow its beneficiaries to recover even for property damage or economic loss. Even when the manufacturer is not “vouched in..  Lack of privity is another hurdle that many would-be warranty plaintiffs must struggle to overcome. consume. 2-607(5)(a). Most have adopted Alternative A which removes the horizontal privity barrier for family members or household guests of the buyer in cases where the non-buyers have suffered personal injury due to the seller’s breach of warranty.” most states provide by common law that when consumers are personally injured by a manufacturer’s product.  Crews v.  Where the cause of action against the manufacturer is based on breach of an implied warranty. C removes the requirement of B that the injury be a personal injury. In practice. 2 provides a mechanism by which the seller being sued can “vouch in” its own seller to defend the suit.”  . AL is a B jurisdiction.2-607(3)(a) comment 4: The time of notification is to be determined by applying commercial standards to a merchant buyer. then the seller will be bound by any finding of fact in the first litigation to the extent that its buyer later sues it.A. 2-318 gives three different approaches that states can adopt. Thus. as defined in the UCC. directed by the manufacturer to the ultimate purchaser.

 The finance lessor does not give the normal implied warranties to either fitness or merchantability that non-finance lessors give under Art. 2303. the duration of implied warranties. Inc. Lessor is more functionally a financier.  A party may not bring an implied warranty claim under Magnuson-Moss  In a case where the party injured by the consumer product is not the buyer. however. . 2304. Mazda  An award of attorney’s fees must be reasonable. Comment g 2A-103. Consumer products are “any tangible personal property which is distributed in commerce and which is normally used for personal.  McNiff v. the privity barrier has been removed legislatively to the same extent as it has been removed in actions against manufacturers for breach of express warranty. typically a bank or other financial institution.000. 2A-212(1). Inc.S. and the lessee. Nomeco Bld. 2A-213. and the lessee will also have an opportunity to review the purchase (or lease) contract between the supplier and the lessor.Where. The lessee in a finance lease is the party that identifies the goods to be leased. Supplier is the party that supplies the goods that will be leased to the lessee. Inc. 2A407 provides that in non-consumer finance leases the lessee’s promises under the lease contract become irrevocable once the lessee has accepted the goods.  Magnuson-Moss  Magnuson-Moss sets down a number of federal minimum warranty standards that relate to remedies. and Real Estate Warranties  Lease Warranties: The Case of Finance Leases  A finance lease is a lease transaction that involves three parties: the supplier. or household purposes.   Lease. and then requires consumer product warrantors wither to meet those minimum standards or to conspicuously designate the warranty as a “limited warranty.” 15 U. International. Federal jurisdiction is limited under the Act to cases over $50.  The presence of a fee agreement does not impose a ceiling on the award of fees  McCurdy v. Pfizer. This means that the lessee’s obligation to pay the lessor continues even if the lessee ends up having problems with the leased goods following acceptance.  The Act applies to implied warranties as well as written express warranties.  The Act only applies to consumer products. family. the lessor. 2301(1). MagnusonMoss’s definition of “consumer” allows a plaintiff to overcome the horizontal privity problem.C. Texas.  Kemp v. the products liability action is brought against the seller for breach of either express or implied warranty. 2. and the like.  McNamara v. Most sale-leaseback transactions will qualify as finance leases. 2A-103(1)(g). Specialties.

 Warranties with International Sales  The privity-extending benefits of the UCC were not made a part of the CISG. Fraud is the exception to “as is” in used home sales. but the requirements for merchantability include only two elements:  The goods must be “fit for the purpose for which goods of the same description would ordinarily be used. Reasonable inspection from the prospective of the buyer. 35(2)(c) says that the goods do not conform to the contract unless they “possess the qualities of goods which the seller had held out to the buyer as a sample model. whether express or implied. there will not be any implied warranties created in the sale of commercial real estate. Art. . 5 expressly disclaims the application of the CISG to a seller’s liability for personal injury or death caused by the goods.  Art. Art. As a general matter. and  They must be “contained or packaged in the manner usual for such goods or. quality and description required by the contract.” Art. With a new home.  .  Schmitz-Werke GmbH v.  Hershey  Warranties are limited to latent defects that would not have been discovered had a “reasonable inspection” been made prior to the purchase.”  The CISG also provides the buyer with an implied warranty of merchantability. there is a significant distinction between warranties in commercial real estate and warranties in residential sales. The finance lessee must see a copy of the sales or lease contract between the supplier and the finance lessor before signing its own lease contract with the finance lessor. . the transaction between the finance lessor and lessee must be a true lease. 35(1) requires the seller to deliver goods “which are of the quantity.2A-209(1): any warranty rights that the finance lessor gets from the supplier. Art. The special rules of the finance lease cause that warranty to run to the lessee as well. an a manner adequate to preserve and protect the goods. 35(2)(b) requires that the goods be fit “for any particular purpose expressly or impliedly made known to the seller. Rockland  Real Estate Warranties  Warranties Generally  First. It does not cover defects that are visible upon a reasonable inspection by the buyer.” CISG 35(2)(a). “as long as the buyer reasonably relied on the seller’s skill and judgment in providing the goods for the buyer’s particular purpose. In order for there to be a finance lease. rather than merely a disguised sale. most states create either by statute or by common law an implied warranty of habitability. where there is no such manner. 35(2)(d). run directly to the finance lessee.

the point in time or event on which the warranty term commences.”  Warranty Reduction with International Sales  Art. and how well the provisions complied with the technical requirements of Art. Some say provisions are dependent some say independent. Comment 4 to 2-313. 2-317 is sellers best shot at limiting full warranty. When it comes to enforcing warranty limitations.  The one limitation that even commercial sellers will fight for is a disclaimer of consequential damages. including how clearly the limitation of the usual warranty protection was brought home to the buyer.  Wilbur v. particularly where the buyer is a consumer.  When courts are faced with a case highlighting this tension. 2-719 (limitation on remedies)  2302(unconscionability) when a company cannot or will not fix it they you may get consequential.M 104(a) do not have to warrant the whole product.  An example of a sufficient fitness disclaimer that is much more specific: “There is no warranty that the goods will be fit for a particular purpose. course of dealing.  What the words of the contract actually said. they tend to consider the following factors either explicitly or implicitly:  The relative bargaining power and sophistication of the parties – is the buyer a consumer or a business person?  The price paid – did it appear that the buyer chose to sacrifice greater warranty protection by paying a lower than ussual price?  Usage of trade. Cannot charge one labor for full warranty but can with limited.  Reducing or Eliminating Warranty Liability: Basics  Warranty Reduction with Sales of Goods  [In Class]: M. courts will be very tough on the seller. The disclaimer must be worded “merchantability” to be effective. Toyota Motor  Under a written warranty. 2 on disclaimers and limitations of warranty. if different from the purchase date. Under a lease warranty of merchantability has to be in writing. and course of performance – these all provide some clues as to what the parties probably had in mind when they struck their deal.  Warranty Reduction with Leases  2A-214 reads almost like a carbon copy of 2-316 with two notable differences:  Under 2A-214(2) a lessor can disclaim the implied warranty of merchantability only by using a conspicuous written disclaimer. must be fully and conspicuously disclosed. 35 has two points on warranty reductions: .

2 authorizes a seller to create certain remedies that will be the buyer’s exclusive remedies.  To disclaimed the implied warranties of merchantability and particular use one must specifically mention “merchantability. Under M. Any exclusive remedy may be . 2-719(1)(b). 2-202. says at 108(a) that “no such supplier may disclaim or modify (except as provided in subsection (b) of the section) any implied warranty to a consumer with respect to such consumer product if (1) such supplier makes any written warranty to the consumer with respect to such consumer product. 2308(b). . if the buyer either actually examined the goods before purchasing them or refused to do so.M. but they are (unlike “full warrantors”) authorized to limit the duration of the implied warranties.  Disclaiming the Real Estate Implied Warranty of Habitability  The builder’s only hope for a disclaimer of the implied warranty of habitability is to put the disclaimer in clear and unmistakable terms.” Section 108(c) then says that “a disclaimer.”  Supermicro  Art. and the implied warranty of fitness for a particular purpose. nor does M. 35(3) a seller is not liable for defects that a buyer ought to have discovered in an examination of the goods. they cannot be disclaimed.M. the seller must clearly bring home to the buyer the exclusivity of the stated remedy.  Axline:  Valid disclaimer must be clear and unambiguous  Buyer must be given adequate notice of implied warranty protections he is waiving by signing K  Disclaimer of implied warranty must be strictly construed against the seller   Reducing or Eliminating Warranty Liability: Advanced  The normal obligation of a warrantor does ot include acting as an insurer of the goods warranted. 2-316(1). The general rule about disclaiming express warranties is that once express warranties are made. implied warranty of merchantability. the parol evidence rule may prevent the statement from being introduced into evidence.. sellers who make “limited” rather than “full” written warranties are similarly prevented from disclaiming completely the implied warranties. If the express warranty is oral. 35(2) that warranties will not arise. . In order for the exclusive remedy provision to be effective.Art. “where the parties have agreed otherwise. modification. 2-719(1)(a).  M. such as repair or replacement of defective parts. 2 warranties are: express warranties.M. or limitation made in violation of this section shall be ineffective for purposes of this Act and State law. The three Art. the writing must be conspicuous.  Art. require such an obligation on the part of the warrantor.” and if this disclaimer is in writing. however.

This will hold true even when the seller is selling used consumer goods on an “as is” basis. Once 2-613 applies. however. Some courts have been willing to consider a buyer’s defense of excuse in a sale of goods case.” 2-719(2). Whenever a direct seller gives a written warranty or service contract to a consumer buyer.M. creates two minor restrictions on a seller’s ability to limit the buyers remedies for breach of warranty:  The seller must make conspicuous on the face of the warranty any exclusions or limitations of consequential damages. 2304(a)(4).  If the loss is “partial.  Ismael v.  The relevant sections on excuse of performance are 2-613 to 2-616 and those speak strictly in terms of seller’s ability to be excused. and  The seller must allow the buyer to get a replacement or a full refund for a defective product when the seller is unable to remedy malfunctions in the product after a reasonable number of attempts. If. Goodman Toyota  Commercial Impracticability  Commercial Impracticability with Sales of Goods  Some contingencies are thought to be so far out of the realm of what either party could reasonably anticipate that the occurrence of one of these contingencies might excuse performance by the adversely affected party. that seller has precluded its ability to disclaim the implied warranties of merchantability because of M. the M. 2-719(3) allows such exclusions of consequential damages unless the exclusion is “unconscionable.invalidated if the court determines that circumstances caused the remedy to “fail of its essential purpose.M. privity will not be a problem. If a warranty is being given by the consumer’s direct seller. then the aggrieved buyer will have to overcome lack of vertical privity in a warranty suit against the manufacturer.  2-613 applies ONLY where “the contract requires for its performance goods identified when the contract is made”. either by analogy to 2- .” then the “buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration.M.”  M.  Privity. These special contingencies generally fall into two categories: an unexpected failure of seller’s source of supply or a dramatic price fluctuation. 2304(a)(3). does not contain many restrictions on the seller’s ability to limit the buyer’s remedies.” then the contract is avoided completely. and the goods are damaged or destroyed through no fault of either party before risk of their loss has passed to the buyer. that section sets out two possibilities:  If the loss is “total (cost of repair more than value after repair). If the seller makes a full written warranty. the warranty is being provided indirectly by the manufacturer.

Enron Corp.615’s “commercial impracticability” rules for sellers or simply by reference to the common law of excuse. governmental regs do not excuse performance under a K where a party has assumed the risk of such reg  In cases where a seller that is claiming excuse under 2-615 has more than one buyer and has a limited capacity to perform.  Alamance County Bd.  Comment 5 suggests that unless both buyer and seller had reason to believe that a particular source of supply was to be seller’s exclusive source of supply.  Resources Investment Corp.” whereas 2-615(a) allows excuse .  Increased cost alone does not excuse performance and further makes clear that arise or collapse in the market is exactly the type of business risk which business contracts made at fixed prices are intended to cover. Comment 4. a delay in delivery or a complete non-delivery is not a breach of the seller’s duty under the contract. This is because such a right would be inconsistent with the policy behind the automatic “hell or high water clause” of 2A-407(1). It applies to both buyers and sellers rather than just sellers. It does provide that al seller may “include regular customers not then under contract as well as his own requirements for further manufacture. Of Educ. It also mentions the seller’s good-faith compliance with applicable governmental regulations as a permissible basis for excuse.  Commercial Impracticability with Leases  The lease analog to 2-613 is found in 2A-221.  Commercial Impracticability with International Sales  Art. Options under 2A-221 and 406 are not available to the nonconsumer finance lessee. 79.  Force Majeure clause  In 2-615. then the seller should not be able to rely on the inability of a particular supplier as a basis for its own excuse. 2A-221(b). V. 2-615(a) says that for the seller that qualifies for excuse. and the provision covering the procedure on excused performance is found in 2A-406. the lease version of 2-615 is found in 2A-405. 2-615(a) focuses on the foreseeability of the supervening event: that event must be “a contingency the non-occurrence of which was a basic assumption on which the contract was made. CISG cover a party’s failure to perform “any of his obligations. Bobby Chevrolet  Generally. the seller who wishes to claim excuse is require to notify the buyer of any delay or non-delivery occasioned by a justified excuse. whose only choice in these situations is to either terminate the contract or go forward with the contract with no reduction in rent. v. 2A406(1)(b). 2-615(b) requires that the seller allocate production and delivery among its customers in a “fair and reasonable” manner.

2-302(2) requires there be hearing afforded to the parties that gives them “a reasonable opportunity to present evidence as to its commercial setting.”  An absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. especially in cases involving either price-cost disparity or limitation of remedies. the clauses involved are so onesided as to be unconscionable under the circumstances existing at the tiem of the making of the contract.  Unconscionability  Unconscionability with Sales of Goods  2-302 does not define unconscionability. 79(2): a party is excused by the failure of a third-party source only when the thirdparty source itself has a valid basis of excuse. A judge who makes a finding of unconscionability has three options: (1) refuse to enforce the contract at all.  Commercial Impracticability with Real Estate  Use common law b/c there is no “real estate specific” doctrine of commercial impracticability that has been codified. The appropriate time for measuring the unconscionability of a contract or a clause in the contract is when the contract was made rather than in light of later events.  Maxwell v.only with respect to a seller’s “delay in delivery or non-delivery in whole or in part.  Unconscionability is a matter of law. Fidelity  A claim of unconscionability can be established with a showing of substantive unconscionability alone. 2-302(1). Comment 1 gives some hints at a definition: “the basic test is whether. .  Unconscionability with Leases  There are two key differences between 2-302 and 2A-108. (2) enforce the remainder of the contract without the unconscionable clause.” grants relief where there is unconscionable conduct in the collection of a claim. . or (3) limit the application of any unconscionable clause to avoid an unconscionable result. in light of the commercial background and the commercial needs of the particular trade or case.” “The principle is one of the prevention of oppression and unfair surprise and not of the disturbance of allocation of risks because of superior bargaining power. . . . thus taking this consumer-friendly defense out of the hands of the jury.  2A-108(2) refers to a lease contract or a clause in a lease contract being induced by “unconscionable conduct. purpose and effect to aid the court in make the unconscionability determination.

Sellers who have voidable title are those who have somehow tricked the true owner into voluntarily transferring possession of the goods to them. The seller is strictly liable when it breaches the title warranty.  Any party that acquires goods after a thief has stolen them is said th have “void title. 2312(2) is disclaimer of title warranty. BMW Financial  In the context of corporation leasing a luxury vehicle.  West v. since it is a warranty that attaches to a sale by any seller rather than.” In other words. the seller warrants that the title of the thing sold is good. If the answer is “yes.  Even the innocent buyer who unwittingly purchases goods from a thief will not have good title. just to sales by sellers who are merchants in goods of that kind. an excess mileage charge of 15 cents a mile is not unreasonable and certainly does not shock the conscience. .  The loss must fall on the party who by his conduct created the circumstances which enabled the third party to perpetuate the wrong.  In determining whether a particular transferee has “void” rather than “voidable title.” then the transferee will have at least .  Title with Sales of Goods  The ultimate aim of a sales contract is to transfer ownership of the thing sold from seller to buyer.” A seller who have “voidable title” does not itself have good title but nevertheless has the power to transfer good title to a good faith purchaser for value. The warranty of title is probably the broadest implied warranty created by Art. 2-312(1).  2A-108(4) possibility of attorney’s fees to the prevailing consumer in an unconscionability action. as with the warranty of merchantability. If the consumer not only loses but is also deemed groundless by the court. it is the sales law version of property law’s shelter principle: a purchaser takes what the seller has. that its transfer is rightful.” one useful test is to ask whether the transferor intended at the time of the exchange to transfer title to the goods. 2403(1). . and that the goods are delivered free of any third-party lien or encumbrance of which the buyer is unaware. since we are told in 2-403(1) that “a purchaser of goods acquires all title which his transferor had. UCC section 2-403 negates the stolen property statute so that “theft” in that provision does not include and theft in which an owner voluntarily relinquishes property to a thief under a transaction of purchase. 2-312(1). Roberts  Although “theft” in the criminal code includes theft by deception. 2. Whether or not the seller is innocent as to the title problems.” which is the same thing as saying “no title.

One exception is where the sale is by “quitclaim deed. If the answer is “no” – that is. This second warranty does not exist in the case of a finance lease. if not good title. and Real Estate  Title with Leases  2A-211(1).” in which the seller is promising to sell only whatever title the seller may have in the property. found in (2). International Sales.  Title with International Sales  CISG 41 requires that the seller “must deliver goods which are free from any right or claim of a third party. unless the buyer agreed to take the goods subject to that right or claim.  The voidable title rule requires that there be a good-faith purchaser for value. lessors that are merchants dealing in goods of the kind also warrant that the leased goods are delivered free of any rightful claims or infringement by third parties. but the rent is now paid to the true owner rather than the trickster. Besides the warranty of “quiet possession” that is given by all lessors.  There are two differences between the voidable title rule and the entrustment rule:  The entrustment rule operates only when the goods are entrusted to a merchant who deals in goods of that kind. The warranty of title with real estate usually includes not only the present promise by seller that the title is good.voidable title. is where the lessee is a merchant that deals in good of the kind to who the goods were entrusted by the lessor. Section 2A-304 covers the case where a lessor with an existing lease makes a subsequent lease of the same goods to a different lessee. The basic rule in (1) is that 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. A purchaser who tricks the true owner of the goods into delivering possession to the purchaser has the power to transfer a good leasehold interest to a subsequent lessee for value. The lessee gets to retain possession of the goods. It also deals with voidable title in the lease arena.  2A-305 governs the sale or sublease of goods by an existing lessee.”  Title with Real Estate  Includes an implied warranty of title. but tow promises by seller that relate to the future: the warranty of quiet enjoyment (promises that the buery’s future enjoyment of the premises will not be disturbed by either rthe seller or someone claiming through the seller) and the warrant of further assurances . 2A211(2). One exception to this rule.  Title with Leases. if the transferor did not intend to transfer title to the goods – the then transferee will necessarily have void title. whereas the entrustment rule requires the slightly narrower category of a buyer in the ordinary course of business.

 Non-merchant buyers need merely to hold the rejected goods with reasonable care for the seller for a time sufficient to enable the seller to remove them. 2 are simply that the buyer has lost one particular remedy (rejection). The functional consequences for the buyer of acceptance under Art. a promise to reimburse the insured up to policy limits for any losses sustained by the insured as a result of covered title problems that materialize. Keilbach v. and it is ineffective unless the buyer seasonably notifies the seller. The buyer is always given a reasonable opportunity to inspect the goods. Virtually every title insurance policy includes two different dinds of protection for the beneficiary: first. the grantor has not breached his warranty of title. the merchant buyer must follow any reasonable instruction of the .  Closing the Sale with Sales of Goods  The process of closing a sale of personal property begins with the buyer’s physical receipt of the goods. cannot be held liable for expenses incurred in defending the title. The buyer’s right to reject technically exists whenever the goods “fail in any respect to confirm to the contract.  Rejection must occur within a reasonable time after delivery of the goods. 2-602(2)(b). The buyer’s second opportunity to unravel the transaction is revocation of acceptance. then the buyer may lose the ability to use the unstated rejection grounds to justify the rejection. and course of performance. course of dealing. and second.  Three ways a buyer will be deemed to have “accepted” goods:  (1) an affirmative signification that buyer has accepted  (2) a failure to reject the goods following a reasonable opportunity to inspect them. the buyer may reject an installment only “if the non-conformity substantially impairs the value of that installment and cannot be cured. If the buyer fails to state the specific grounds for rejection.” 2601. 2-605(1). a promise to defend the insured against all lawsuits related to defects in title that are covered by the policy. and.  Contractually limited the buyer’s remedies. 2-612(2). 2-602(1). When goods are in the buyer’s (who is a merchant) possession and the seller has no agent at the place of rejection. therefore. before which time the buyer may “reject” the goods and put them back into the seller’s hands.  (promises the buyer that the seller will take steps to put the buyer into possession of the title that the seller warranted). McCullough  When a grantee successfully defends her title. but there are a number of exceptions to this so-called perfect tender rule:  Installment contract. 2-606(1). and  (3) an act by the buyer that is inconsistent with the seller’s ownership. including the right to reject  The seller’s right to “cure”  Concepts of usage of trade.

If the buyer agrees to give the seller additional time to deliver.  Closing with International Sales  Only two situations in which the buyer may “avoid” its contract with the seller: Art. If the goods are perishable or will lose their value quickly. 2-608(2).  Shaken Faith Doctrine: the seller cannot unilaterally define what constitutes an acceptable cure under 2-508. the non-conformity must “substantially impair” the value of the goods to the buyer. Second. 49(1).seller as to resale. the buyer does not thereby prejudice its right to damages for the delay. revocation is not effective until the buyer notifies the seller of it.  Closing with Leases. 49(2)(b)(i). 25).  The buyer who wishes to revoke acceptance must overcome a number of hurdles that the rejecting buyer does not. 2-608(1).” the buyer must keep the goods but retains its rights to sue for any of the nonavoidance remedies under the CISG. Art. 47(2). First. and (2) the buyer was unaware of the problem because of the seller’s assurances or because the problem was too hard to discover before acceptance. Where thy seller’s breach is less than “fundamental. reject/accept. 2-603(1). and Real Estate  Closing with Leases  Tender. revocation  Colonial Pacific  2A-515  The only situation in which a finance lessee may revoke acceptance of the leased goods is where the finance lessee’s failure to discover the non-conformity before acceptance was reasonably induced by the lessor’s assurances. 2-608(1). the buyer must sell them on the seller’s behalf. storage. Fundamental breach of contract 49(1)(a). International Sales. or the like.  The second situation is where the seller’s delivery is later than the agreed-on due date plus any additional time that the buyer has agreed to give the seller to deliver. 2-603(1). receipt. and it must also occur before there is any substantial change in the goods that was not caused by their own defects. . A fundamental breach is a breach that amounts to a substantial deprivation of the aggrieved party’s benefit of the bargain (Art. Just as with rejection. the buyer may revoke only in one of two circumstances: (1) the buyer reasonably believed that the problem with the goods would be cured and has not been.  The revocation must occur within a reasonable time after the buyer actually discovered or should have discovered the grounds for the revocation. Art. Must give notice no later than a reasonable period following the time when the buyer knew or ought to have known of the defect Art. 2A-517(1)(b) states clearly that the finance lessee may not revoke acceptance of the leased goods in this (something not discoverable until put to use) situation. 49(1)(b).

2-308(a) comment 5.  In a shipment contract. The seller is also given the right to cure any non-fundamental breaches Art.  Cook v. risk-of-loss fights in actual practice tend to involve insurance companies. The specific requirements that the seller must meet in order to shift risk to the buyer are set out in 2-504. the Code says that the seller must “tender” the goods to the buyer at the state destination. or a demand by the buyer that the seller cure the problem. either against each other or against the buyer or seller. and (4) promptly notify the buyer of shipment. Third. 2-509(1)(a). and (3) give the buyer any documents that are needed for the buyer to take delivery.  With shipment contract. risk of loss shifts to the buyer when the goods are delivered to the carrier. (3) deliver any document necessary to enable the buyer to take delivery. are set out in 2503. business considerations may cause parties to agree to another result that is technically inconsistent with their legal obligations.  In a destination contract. Most significantly. then the negligent party must bear the loss.  The first point is that if the destruction or damage to goods occurs through the fault of either the buyer or the seller. Schrlock . The requirements of “tender.  Risk of Loss With Sales of Goods  Risk of loss rules define which party. risk of loss does not shift to the buyer until the goods are tendered to the buyer at the stated destination. 46. even where the legal rule would seem to dictate one result. Art. 74-77. and the seller is responsible for paying the cost of freight.Art. If the parties fail to specify a delivery term.  Real Estate Closings  Delivery requires both a physical transfer fo the deed from the seller to the buyer as well as an intent on the seller’s part to create a present ownership interest in the buyer as a result of the physical delivery. Those requirements are that the seller (1)put the goods in possession of the carrier. is responsible for the destruction of or damage to goods that occurs between the time that the contract is entered into and the time that the buyer receives possession of the goods. Second. (2) make a reasonable contract for their transportation.” in turn. 2’s default rule calls for a shipment contract. With a destination contract. 48. and the buyer is responsible for paying the cost of freight. tender requires that the seller (1) put and hold the goods at the buyer’s disposition for the period necessary for the buyer to take possession. between the buyer and the seller. the seller must “deliver” the goods to the carrier in order for risk of loss to pass to the buyer.  FOB Seller’s Place (a “shipment” contract) and FOB Buyer’s Place (a “destination” contract). Art. and the usual risk-of-loss rules do not come into play. 2-509(1)(b). (2) give the buyer notice of tender.

67(1). Art. Art. 69(1).  When the seller has committed a “fundamental breach” of its obligations under the k. An incoterm D puts the greatest responsibility and risk on the seller. 68.  Buyer’s risk of loss: FOB Seller’s Place.  If the goods are already in transit when the parties enter into the contact for those goods.  In setting out default rules for the passage of risk of loss. and (3) where the buyer is to pick up the goods from the seller or from some third party.A contract is improper if the seller agrees to an inadequate valuation of the shipment and thereby extinguishes the buyer’s opportunity to recover from the carrier. No arrival. Art. the CISG addresses three different situations: (1) where the goods are to be delivered to the buyer but the goods are not in transit at the time the contract is entered into. Art. C&F  Seller’s risk of loss: FOB Buyer’s Place. 69(2). An F intcoterm represents a slightly higher level of responsibility for the seller.  For the (1) category. International Sales. Ex-ship.  Where the buyer is to pick up the goods from the seller’s place or from some third party. the buyer retains all of its remedies for the seller’s breach. the standard is stricter for the buyer: risk will then pass to the buyer “when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that Place. CIF. and Real Estate  Risk of Loss with Leases  2A-219(1) sets out a default rule stating that risk of loss never passes from lessor to the lessee except with finance leases.  Risk of Loss with Real Estate  The common-law default rule in most states today is tha the risk of loss during the period between the signing of the contract and closing is on the buyer. 2A-219. This has had .  Section 2-510 cover the effect of breach by either the buyer or seller on the passage of the risk of loss. An incoterm C will often require the seller to pay for certain shipping and insurance charges. 2A-220  Risk of Loss with International Sales  Inco-terms are international trade terms that are understood well by any player in that system. (2) where the goods are already in transit when the contract is made. risk passes to the buyer at the time the contract is concluded. risk passes to the buyer when it “takes over the goods” or when its failure to pick up the goods amounts to a breach of the contract. An E intcoterm creates the lowest level of responsibility for the seller. FAS. risk of loss passes to the buyer when the seller delivers at the goods to the first carrier. No sale. In a case where the buyer’s pickup will take place at a third-party location. 70 and 82. Art. including the right to “avoid” the k.   Risk of Loss with Leases.

have been lost or damaged “within a commercially reasonable time after risk of their loss has passed to the buyer”. and (3) where the seller has identified goods to the contract and there is no reasonable prospect of reselling them to a third party for a reasonable price. (3) failing to make a payment when due. . (2) stop delivery by an bailee. These remedies are not mutually exclusive of one another. universally available. the seller cannot sue for the price. the last four remedies represent various measures of damages. or (7) cancel the contract. thus limiting the significance of the default rule to cases of inadequate insurance.  Action for the Price  2-709: this remedy is in effect the seller’s right of specific performance: it allows the seller to file suit forcing the buyer to pay the agree-upon price. however. (3) identify goods to the contract in the case of an anticipatory repudiation.  2-703 give four different ways in which a buyer might breach: (1) wrongfully rejecting goods. One thing in common with all is that the buyer has failed to pay.  The first three remedies are actions that the seller can take to limit damages. (6) sue for the price under 2-709. (5) recover contract-market damages (or lost profits) under 2-708. (4) resell and recover damages under 2706.  Seller’s Remedies with Sales of Goods  What Are a Seller’s Legal Remedies?  First remember 1-305 as the spirit of the remedies section. whether or not accepted. (a) sets down two principles that are significant for a seller’s remedies: (1) tha the goal of all the remedy provisions in the Code is “that the aggrieved party may be put in as good a position as if the other party had fully performed. (2) wrongfully revoking acceptance. or (4) anticipatorily repudiating the contact. If none of those three circumstances exists. It is not.” and (2) that consequential damages are not allowed unless there is specific provision made for them in the Code.  Most standard real estate sales contract forms include an express provision contracting around the common-law rule. (2) where conforming goods.  2-703 lists seven different possible remedies that an aggrieved seller might pursue: (1) withhold delivery. The seller is eligible to sue for the price in any of the following three circumstances (all of which assume that the buyer has not yet paid the price): (1) where the buyer has accepted the goods.only a limited practical effect in modern real estate practice. for at least two reasons:  Courts almost always require the seller to hld any insurance proceeds in trust for the buyer.

If the buyer ultimately pays the judgment for the price. Lawton: If the seller sues for the price.  Lessor’s and Seller’s Remedies with leases. care and custody of goods after the buyer’s breach. in the transportation. and Real Estate  Lessor’s Remedies  The most fundamental difference between a sale and a lease is that the lessor has a residual interest in the goods that are leased. The Code provides that the seller is not liable to account to the breaching buyer for any profit that it makes on a resale. expenses or commissions incurred in stopping deliver. in connection with return or resale of the goods or otherwise resulting fromt eh breach. 2-709(2). both of which are defined by the contract.  Firwood Mfg.  The damages formula for the reselling seller that is given under 2-706 is KP – RP + ID – ES. 2709(2). the seller reasonably identifies the goods being resold as referring to the broken contract. The seller is eligible for these damages whenever the buyer breaches. Section 2A-523 categorizes both the lessor’s . the seller must hold for the buyer the goods that are the subject of the contract. and the seller resells the goods at either a public or private resale. but the seller has no continuing interest in the goods that are sold. Lost Profits  The last major remedy is “lost profits” measure of 2-708(2). 2-706(6).  The seller who sues for the price is also eligible to recover incidental damages. Whenever the buyer repudiates or wrongfully fails to accept.     Sack v.” Resale Damages  A second standard seller’s remedy available under the Code is the seller’s right to resale damages. General Tire: Contract-Market Difference (Without Resale)  Another basic seller’s remedy is the contract-market difference under 2-708(1). International Sales. v. then the seller may resell and must deduct from tis action for the price any proceeds or resale. the seller gives the buyer notice or fresale. If while the seller is holding the goods for the buyer. resale becomes possible. 2-706. the buyer is entitled to the goods. Incidentals are defined in 2-710 to include “any commercially reasonable charges.  The market price under 2-708(1) is measured as of the time an dplace for tender. the seller’s damages under 2-708(1) equal KP – MP + ID – ES.

 If the re-lease is not “substantially similar” to eth original lease.  The lessor who sues for rent is also eligible for incidental damages under 2A-530.  2A-529: The lessor’s “price” equivalent consists of both unpaid past rent plus the present value of any future rent.remedies and the various ways in which the lessee can breach. avoidance of a contract by either party releases both parties of their obligations thereunder. 62 says that he can unless the seller has resorted to a remedy which is inconsistent with this requirement.  C. 81(1). although the avoiding party retains its right to sue for damages.”  Seller’s Remedies with International Sales  Art. the lessor is entitled to UR + (PVOL – PVNL) + ID – ES. the the lessor must seek damages under 2A-528 formula of UR + (PVOL – PVML) + ID – ES.I.  2A-527: is the lessor’s analogue to contract-resale. 76. the the original lessee gets credit for the revenue gained on the re-lease 2A-529(3). Art. If the lessor re-leases the goods in a lease agreement that is “substantially similar” to the original lease agreement. Once the lessor sues for the rent. it must hold the leased goods for the lessee for the remaining term of the lease. is given the right to repossess the goods as one of its standard remedies in 2A-523. The seller that chooses to avoid the contract can no long bring what we think of as an action for the price.  If the seller in an international transaction wishes to sue the buyer for the price Art. This remedy compensates the lessor for “any loss or damage to the lessor’s residual interest in the goods caused by the default of the lessee. 75 or contract-market under Art. the seller will not normally have a right to repossess upon the buyer’s failure to pay the price. Art. 2A-529(4). Corp v. unlike the seller. 28 says that in a dispute under the CISG the forum court “is not bound” to require specific performance. Unless the seller has a security interest in the goods it sells on credit. If the lessor re-leases the goods before the end of the lease term.C. Art. it is entitled to possession and use fo the leased goods for the remainder of the term. 77 sets up a general mitigation rule. If the lessee pays the judgment for the rent.  Seller’s Remedies with Real Estate Sales . but can sue for contract-resale under Art. 2A-529(2). Ragtime: 2A-528(2)  2A-532 is the Lessor’s Rights to Residual Interest. The lessor. 2A-523(1)(f) mentions that the lessor may “exercise any other rights or pursue any other remedies provided in the lease contract. 88(2) creates a duty on the seller’s party to resell the goods for the buyer’s benefit where the goods are subject to deterioration. Plus the seller can get incidental and consequential damages but only to the extent that they are reasonably foreseeable by the buyer at the time of contract formation.

Westinghouse Engineering:  Young v. Frank’s Nursery .  Profit for the seller in any given sale will consit of the contract price minus the seller’s dirct costs for that item minus an allocable share of the seller’s fixed costs or overhead: KP – DC – FC. when consequential damages are recovered by sellers. Sellers are generally not entitled to contract-resale damages. by contrast. consist of things we tend to think of as “overhead” THE REAL ONE IS KP – DC + ID.  Seller’s Remedies: Advanced Problems  The Lost-Volume Seller  The first question under 2-708(2) is to figure out which sellers can qualify for the special relief afforded there. together with any incidental damages provided in this Art.    The typical default remedy for the aggrieved seller in this situation is the seller’s contractual right to keep the buyer’s earnest money deposit. However. Fixed expenses.. Depending on the terms of the particular sales contract. due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.  Once it is determined which seller qualifies for lost-profits damages.  Sure-Trip. th next issue is figuring out exactly how those damages are measured. or where the seller is unable to show any actual damages sustained by the buyer’s breach. Inc. Ubaldo: Some states will permit the aggrieved real estate seller to recover consequential damages in addition to contract-market damages. where it is clear tha the buyer breached for reasons beyond its control. The rules requires the seller to make two separate but related showings: (1) that its ultimate sale to a third party of the goods as to which the buyer breached would have occurred even if the buyer had not breached. but only where the seller can prove those damages and where the seller first returns the buyer’s deposit. Williams v. Some courts are cautious about letting the seller keep the buyer’s deposit especially where the deposit is particularly large. The seller’s direct costs are sometimes called “variable costs” – costs that vary with the sale or production of the particular item in question. 2-708(2) describes the appropriate recovery as “profit (including reasonable overhead) which the seller would have made from full performance by the buyer. some states may allow the seller to recover contract-market damages against the buyer. the damages tend to be for costs associated with resale that the seller would not have incurred had the seller proceeded with the original sale. v. and (2) that the seller’s ability to sell these goods was greater than the current buyer demand for them.

RBPP + CC – KP + ID + CD – ES (RBPP = return of any purchase price paid by buyer). 2711)3) gives a special self-help remedy: the buyer may hold the goods as security for repayment of its purchase price plus expenses in holding the goods. as described in 2-711. the buyer’s remedies are limited to an action for breach of warranty. The buyer must give the seller notice of the breach “within a reasonable time after *the buyer+ discovers or should have discovered any breach. The buyer is explicitly give the right in 2-717 to deduct from the price any damages that result from seller’s breach but buyer must first notify the seller.  Buyer’s Remedies with Sales of Goods  If the buyer has accepted the goods and it is too late to revoke acceptance. (2) of which the seller . (2) how mus the seller could get for the scrap if it stopped and sold the scrap at the time it learned of buyer’s repudiation (Scrap Value or SV). and (3) how mus the seller could likely get from a third party were it to complete production (Resale of Finished Product or RFP).  The aggrieved buyer’s (who has no goods for one reason or another) option is set out in 2-711.  For the buyer that has accepted the goods and may no longer revoke its acceptance. If the buyer has either failed to receive the goods or has justifiably rejected them or revoked acceptance of them. The buyer must make “in good faith and without unreasonable delay any reasonable purchse of or contract to purchase goods in substitute for those due from the seller. 2 buerys.  2-609 and 610 reasonable assurances. The reasonableness of a seller’s decision to complete or stop in these circumstances will necessarily be a function of three separate variables: (1) how must more it will cost the seller to complete from the point when the seller learns of the breach (the Marginal Cost of Completion or MCC).  2-713: the contract-market measure. the damages formula for seller’s breach of warranty is found in 2-714: VCG – VNCG + ID + CD.” 2-607(3)(a). (2)(a) allows as buyer’s consequential damages thoe damages resulting from a seller’s breach: (1) of any kind. MCC < RFP – SV. as outlined in 2-714. Both categories of aggrieved buyers are eligible for incidental and consequential damages as defined in 2-715. Cover is strictly an optional remedy for buyer. including purely economic loss. Where such a buyer has already paid all or party of the purchase price. the buyer’s remedies are more varied. RBPP + MP – KP + ID + CD – ES.  The buyer’s right to cover is described in 2-712.  In re Beeche Systems:  2-715(2) sets down two different categories of consequential damages available to Art. (VCG = value of conforming goods). In some cases the rightfully rejecting or revoking buyer will still have ht egoods in its hands.

The last two remedies are specific performance (2A-521) and the right to recover goods on the lessor’s insolvency (2A-522).  2A-519(1) and (2) set out the lessee’s contract market damages.ahd reason to know at the time of contracting. This is a reference to the not uncommon duty of a lessor in a lease agreement to keep the leased goods in good repair. 49(1). Art. 2: the possiblility that the lessor may be “otherwise in default under a lease contract. International Sales. and Real Estate  Lessee’s Remedies  2A-508 gives a laundry list of lessee’s remedies.  Buyer’s Remedies with International Sales  The buyer under the CISG may declare the contract “avoided” only if the seller’s breach is “fundamental” or if the seller fails to deliver the goods on time or within any grace period that the buyer chooses to give the seller beyond the originally scheduled deliver date. If the lease is not substantially similar then the lessee gets contract-market measure of damages 2A-518(3).  Buyer’s and Lessee’s Remedies with Leases. The lease remedy section here provides for the difference between the value of the use that the lessee was promised and the value of the use that the lessee actually got given the lessor’s default. and (4) that could not be prevented “by cover or otherwise.”  (2)(b) consequential damages.  2A-520 defines the lessee’s incidental and consequential damages. the lessee may pursue remedies under the lease or may look to 2A519(3). which would at a minimum give the lessee a right to recover from the lessor the cost of putting the leased goods back in working order. (3) that were “caused in fact” by seller’s breach. The two differences between 2A-518 and 2-712 are ones that we have seen before the context of a lessor’s remedies: (1) 2A-518(2)’s formula speaks in terms of discounting future streams of rent to present value. and (2) for a new lease to qualify as a valid cover under 2A-518. When a lessor fails in this duty. the right to cover. Art. 2A519(4). includes one remedy that has no counterpart in Art. it must be “substantially similar” to the original lease. which are mostly analogous to 2-713 except again with the addition of the “resent value” and “substantially similar” concepts. 2 damage section. those damages must be (1) personal injury or property damage (economic loss does not qualify here). 46(1) gives the buyer who has not received the goods a right to specific performance “unless the buyer has resorted to a . a concept that we do not see in Art.  2A-518 is the lessee’s analogue to 2-712. 2A-519(3) and (4) provide a remedy for the lessee that does not reject or revoke acceptance. and (2) proximately caused by seller’s breach (mere but for causation is not enough)). (3).

 The buyer’s contract-market damages under Art. The only other limit on consequential is Art. the market price is measured at the place “where delivery of the goods should have been made. it must be done “in a reasonable manner and within a reasonable time after avoidance.  Buyer’s Remedies with Real Estate  Where the seller simply refuses to close. which says that if a party could have reasonably mitigated it damages but did not.  The buyer can also choose to sue for damages which would at least included his outof-pocket expenses.” The properly covering buyer is also eligible for “further damages recoverable under Art. 76(1).  Buyer’s cover rights under CISG are Art. 74 [consequential damages]. 76(1). and. he may. . the buyer’s standard remedy is an action for specific performance. 28 allows a court to restrict specific performance to whatever right would exist with the forum court’s own sales law. and (2) the buyer must show that the buyer itself is fully capable of performing its side fo the bargain. All buyer that are aggrieved by a seller’s refusal to close. instead of rescinding. even if they choose to demand specific performance. the its damages must be reduced by the amount that they could have been mitigated. 77. Art.  Jue v. Under the CISG.” Art. In order to obtain specific performance. Under CISG there must be a current market for the goods.  Art.  When a party learns that he has been defrauded.” 76(2). The market price is measured at the time the buyer aboided the contract (unless the buyer avoided the contract after “taking over the goods. in such case his continued performance of the agreement does not constitute a waiver of his action for damages. 5. 2 buyer’s rights under 2-713. In order for the buyer’s cover to be valid.” in which case the market price is measured at the time the buyer took over the goods rather than at the time of avoidance. will also be eligible for consequential damages resulting form the delay. 76 also look very much like the UCC Art. 75. elect to stand on the contract an sue for damages. Some states give the benefit-of-the-bargain damages if it can show that the price it agreed to pay was less than the market price for that property.remedy which is inconsistent with this requirement. CISG expressly excludes from its coverage “liability of the seller for death or personal injury caused by the goods to any person. Smiser: A purchaser of real property who learns of potential material misrepresentations about the property after execution of a purchase agreement – but before consummation of the sale – close escrow and sue for damages. the buyer must (1) demonstrate that money damages are inadequate. 74 measure of consequential contains a sentence limiting such damages by the Hadley “reason to know” standard.

Grossman:  Liquidated Damages  2-718(1 allows liquidated damages clauses to be enforced whenever those damages are in an amount “which is reasonable in the light of the anticipated or actual harm caused by the breach.:  TexPar Energy. Comment 1  California & Hawaiian Sugar v.” whereas liquidated damages that are unreasonably small may be struck down as unconscionable. In this situation. Sun Ship:  The formula for the breaching buyer’s restitution for its prepayments under 2718(2)(b) may be espress as follows: R = P – (< of . and therefore does not by itself change the common law standard very much.” Comment 1 elaborates. Inc. Liquidated damages that are unreasonably large will be held void as a “penalty. “Other proper circumstances has created an expansion in particular to aggrieved buyers in longterm output or requirements contracts involving fuel or other natural resources. . 2’s specific performance section. the contract-market measure.  Bander v. Murphy Oil USA: 2-713 remedy serves the purpose of discouraging sellers from repudiating their contracts as the market rises. the buyer is left to claim damages under 2-713. Fresh Network:  Special Remedies  Specific Performance  The traditional common law rules says that the aggrieved buyer is entitled to specific performance only when it can demonstrate to the court that its remedies at law are inadequate. Section 2-716(2) has the practical effect of carrying forward the common law requirement that a buyer requesting specific performance must demonstrate that it.  Section 2-716 give a buyer a right to replevin whenever cover is reasonably unavailable and the goods have been identified to the contract. 2-716.  Jetpac Group. the buyer. t = the value of the total performance for which the buyer .  KGM Harvesting v. 2-716(1) says that “specific performance may be decreed when the goods are unique or in other proper circumstances. Ltd. Bostek. Inc. and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. and the ubyer is unable or unwilling to cover. and able to perform its side of the agreement. willing. v. the difficulties or proof of loss. Art. Unique seems more or less to account for the situation in which the remedy at law is inadequate. Buyer’s Remedies: Advanced Problems  The Lost-Profits Buyer  The case in which the buyer never receives the goods or validly rejects or revokes acceptance of them. is ready. . v. rejects the common law’s fairly limited approach to awarding specific performance to the buyer.2t or $500 or P) R= pre-paying buyers right to restitution.

. the seller is given a right to reclaim the goods under 2-702(2) as long as the seller makes the reclamation demand upon the buyer with 10 days of the buyer’s receipt of the goods.” R = P – (< of .  In the case were the seller discovers that the buyer has received the goods while insolvent. v. Metro-North Commuter R. the seller has the right to stop the delivery under 2-705 “when the buyer repudiates or fails to make a payment due before delivery. but also when the parties have included a liquidated damages clause that is valid under 2-718(1). SD=sellers damages BB = buyer’s benefit. In the case where the seller does not discover the buyer’s insolvency until the goods are in transit. Sinco. or (b) any benefits that the buyer has received “directly or indirectly by reason of the contract. and where the seller repeatedly fails to repair defects of which the buyer complains. 2-702(1).2t or $500 or P) – SD – BB.  2-718(3) says that the buyer’s right to restitution as defined tin 2-718(2) is “subject to offset” to the estent that the seller establishes: (a) actual damages occasioned by the buyer’s breach. Where the seller discovers the buyer’s insolvency prior to deliver. Hopkins Manufacturing Corp. -The period where revocation of a purchase contract is allowable may be extended where the seller gives continuous assurances. the seller can refuse delivery except for cash. Cases for Sales (Assignments 18 – 28) North American Lighting. Co.  Special Remedies When the Breaching Party Is Insolvent  2-702 and 2-705 protect a seller who sells goods on unsecured credit to a buyer who is insolvent. v. “including payment for all goods theretofore delivered under the K. The bankruptcy time limit for the seller’s written reclamation demand is not relaxed even where the buyer has misrepresented its obligated under the contract and P= the sum of the pre-payments made by the buyer. Inc. Inc. The seller’s reclamation demand must be in writing.  Section 2-718(2) and (3) cover the breaching buyer’s right to restitution of its prepayments not only when the parties have failed to create their own liquidated damages clause.

First NH Banks . six weeks was an unreasonable amount of time. the seller holds the burden of performance. in this case.-In order to effectively cure a breach. and the buyer must accept the tender. In re Rafter Seven Ranches. the buyer may either require delivery of substitute goods or declare the contract void under the CISG.P. -If a breach is fundamental. . -The reasonable time period is tied to the difficulty of discovering the nonconformity -Acceptance occurs when lessee does any of three things after a reasonable opportunity to inspect the goods: (a) signifies acceptance (b) fails to make an effective rejection (c) does any act that signifies acceptance Delchi Carrier SpA v. and cannot shift any part of that burden to the buyer. -Keeping and using a nonconforming good constitutes acceptance. One only has a reasonable amount of time to inspect and reject nonconforming goods. A breach is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract. Gray v. a seller must make a conforming tender. or for testing to verify its capability to perform as intended.A reasonable time to inspect under the UCC must allow an opportunity to put the product to its intended use. L. Mere suggestions of solutions regarding potentially curative performance by the seller are not enough. Rotorex Corp. unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.

C. the risk of their loss remains with the lessor. the risk of loss remains on the seller. even though it failed to pass same test when received by buyer. -Where the revocation of acceptance is timely. -Under UCC § 2A-407. v. in the case of a finance lease that is not a consumer lease the lessee’s promises under the lease contract become irrevocable and independent upon the lessee’s acceptance of the goods. Empresa Estatal Petroleos de Ecuador -Here. Schrlock -A contract is improper under U.C. gasoline shipment sent “CFR” was conforming where it passed gum content test at time of loading on to ship at port of delivery. the supplier. Cook Specialty Co. Inc. -Therefore. v. unless it could be shown that seller knowingly sent cargo with hidden defect. v.-Although lack of strict compliance with the statutory mandate may give rise to the remedy of rescission. Maryland Casualty Co. so it did not owe rental payments on those goods. the lessee did not accept the goods. v. §2-504 if the seller agrees to an inadequate valuation of the shipment and thereby extinguishes the buyer’s opportunity to recover from the carrier. if a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection. in the case of a finance lease. or. -Here. Design Data Corp. the risk of loss passed to the buyer at the point of departure. under CISG. Foley -Under UCC § 2A-220. until cure or acceptance. Jaz. BP Oil Int’l. plaintiffs must first prove that the failure to comply caused their injuries. .

Inc. Sack v. -Under the CISG. v. Interpretation of an unambiguous contract is a question of law. -Even when an early possession amounts to a breach of a sales contract. -If a contract is unambiguous. -Although New York’s commercial code provides for incidental damages in the event of a breach by a buyer. Northam Food Trading Co. the general rule for measuring damages for a breach of contract is “the amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract. the buyer of goods in a contract bears the burden of proving nonconformity of the goods to the contract. care and custody of goods after the buyer’s breach. -An aggrieved seller may also recover incidental damages. that is. there is no comparable provision allowing an aggrieved seller to recover consequential damages. Voorde Poorte v. the CISG allows parties to international contracts to vary the provisions of the CISG by using standard shipping terms (in the form of Incoterms) to contract around the CISG’s default rules for risk of loss. the early possession does not affect the risk of loss. if the early possession has nothing to do with the loss that occurs. summary judgment is proper even if the parties dispute the legal effect of a certain provision. . Chicago Prime Packers. Evans -Early possession does not have a legal affect on contractual provisions that allocate risk of loss. “commercially reasonable charges incurred in [for example] stopping delivery [or] in the transportation. Lawton -In New York.-“Incoterms” were applied to this contract.

I. v. If he would have entered into both transactions but for the breach. -Where a buyer commits an anticipatory breach of a contract and the seller proceeds under UCC § 2-704(2) and § 2-708 for his remedy.C. . Sure-Trip. Therefore. Westinghouse Engineering -If a plaintiff fails to meet its burden as to proof of damages. v. In that case the second transaction is not a “substitute” for the original one. Corp. the burden of proving that the seller acted in a commercially unreasonable fashion in deciding to cease manufacturing is on the buyer. Co. Ubaldo -In an action for breach of contract for the sale of real property. Inc. Inc. C. -a seller’s damages under UCC § 2-708(2) equal the contract price less the seller’s costs associated with performing the contract (“direct costs”) plus incidental damages. the formula is KP – DC + ID. Inc. Young v. A claimant is entitled to special damages resulting from the unique needs and characteristics of the parties. Williams v. he has “lost volume” as a result of the breach. v. Ragtime. -The mere fact that an injured party can make arrangements for the disposition of the goods or services that he was to supply under a contract does not necessarily mean that by doing so he will avoid loss. Then the remedies are based on the net profit that he has lost as a result of the broken contract. this burden cannot be shifted upon the court. Frank’s Nursery & Crafts. if the parties were reasonably aware of those circumstances at the time of contracting. the claimant is entitled to the “benefit of the bargain” which equals the difference between the contract price and the fair market value at the time of breach.Firwood Mfg. General Tire -Lost use of money or funds is considered a consequential damage.

but less expenses saved in consequence of the seller’s breach. and the court here decided that if . -When a party has already performed all that was required of it under an agreement. and does not give any indication that it will not honor its obligations under the agreement. instead of rescinding. Smiser -When a party learns that he has been defrauded. depending on the market. elect to stand on the contract and sue for damages. and. -For breaches of contract. there are no reasonable grounds for insecurity sufficient to trigger the provisions of UCC § 2609(1). Jue v. Bostek. he may. in doing so.” -For breaches of warranty. his continued performance of the agreement does not constitute a waiver of his action for damages. Jetpac Group v. -Limiting the buyer’s damages in breach cases to the buyer’s out of pocket losses could. Inc. Murphy Oil -The measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in UCC § 2-715. create a windfall for the seller. a buyer is entitled to damages in the amount of the difference “between the value of the goods accepted and the value they would have had if they had been as warranted.In re Beeche Systems -The mere fact that a party to a contract is in bankruptcy and fails to disclose this fact to the other party to the contract does not amount to an anticipatory repudiation of the contract.” Texpar Energy v. a buyer is entitled to damages in the amount of any loss that resulted “in the ordinary course of events from the seller’s breach as determined in any manner which is reasonable.

shifting market prices are going to give somebody a windfall. -This allows the awarding of damages even when there wasn’t any actual damage done. gravamen test) o Includes sales disguised as leases Article 2A (true leases) CISG o International sale of commercial goods (Article 2 of CISG) o Can assume any foreign countries mentioned are signatories – don’t have to memorize them . -When a buyer does not cover the difference between the market price when it learns of the breach and the contract price. Grossman -A court of equity should not grant an award that would be disproportionate in its harm to defendant and its assistance to plaintiff. KGM Harvesting Co. this is true even if damages are reasonable in light of anticipated harm but are not reasonable in light of actual harm.” Bander v. that buyer may recover from the seller as damages the difference between the cost of cover and the contract price. contract damages are to be given under the standard of UCC § 2-713. Review 1. v. it ought to be the non-breaching party rather than the breacher. -Under UCC § 2-718(1).    Does the UCC Apply/ what law applies Article 2 o Sale of goods (predominant purpose. California & Hawaiian Sugar Co. Fresh Network -Where a buyer “covers by making in good faith and without unreasonable delay any reasonable purchase of goods in substitution for those due from the seller. the amount of liquidated damages must be reasonable in light of either the anticipated or actual harm caused by the breach. v. Inc. Sun Ship.

2-510: risk with breach Have the parties performed: Has the seller tendered? 2-503: tender.    6. Magnuson-Moss o Mostly only applies where there’s a written warranty **He won’t ask us an essay question on real estate law** 2. 2-507 & 2-511: conditions precedent Excused by unexpected circumstances? 2-615: changed conditions (instead of the common law impossibility doctrine) Excused by damage or destruction w/o fault? 2-613. 2-614  5. 2-507: tender condition precedent o Can the seller cure? 2-508: cure rights Has the buyer accepted? 2-606: acceptance o Has the buyer paid? 2-511: payment condition precedent **note: payment is not an absolute sign of acceptance** Remember adequate assurance 2-609: adequate assurance If not.      if the breach by buyer.      3. insist on cash (2-702) stop delivery. what remedies? Insolvency: o Reclaim goods. insolvency or by truckload/carload (2-705) identify goods and resell or complete production of goods in process (2-704) resell and recover damages (2-706) recovery damages for non-acceptance (2-708) o market-contract .     4. is performance excused? Excused by other party’s failure to perform? 2-610J: anticipatory repudiation.   Is there an enforceable K? Offer – 2-205: firm offers Acceptance – 2-206: acceptance methods Consideration – 2-304: types of consideration Certainty – 2-204(3): formation Statute of Frauds – 2-201 What are the terms of the K? Parties’ agreement – 2-207: battle of the forms Custom and usage – 2-202: parol evidence rule  look to see what kind of things can come in Gap-fillers .2-300s: various gap-fillers – including warranties Risk of loss – 2-509: risk in absence of breach.

 What damages could Jay seek under his warranty claims.         8.  the SOF defense is a loser.     o contract-expenses saved. was excluded because it was oral and said “merchantability” o Warranty of fitness  Does it apply?  Is it a particular purpose rather than the ordinary purpose?  Was it disclaimed? No – must be in writing. o 2-711 applies to both rejection and revocation – need to analyze if he did either of these . and what are his chances of recovery? o 2-715 does not require a writing to disclaim consequential damages. o Warranty of title  Not specific enough to disclaim title – must be very specific  How should the court resolve the Mule Trader’s statue of frauds defense? o The performance is the key here. 7. what remedies? Reject goods 2-601 Revoke acceptance 2-608 Cover and collect damages 2-712 Recover damages for non-delivery 2-713 Security interest in nonconforming goods to extent of payments 2-711(3) Recover identified goods on seller’s insolvency 2-502 Pay only part of price. if lost volume seller recover contract price (2-709) If breach by seller. subject to Rule of Thumb 2-718 Limitations on remedies 2-719 o If conscionable o Provide minimum adequate remedy Notice issues? 2-607(3) Privity issues? 2-318 Sample Problem  What warranties are at issue and which should Jay pursue? o Express warranty – probably puffery o Warranty of merchantability – applies b/c it’s a merchant. o Is the towing expense a consequential damage? Could also be incidental. set off for damages 2-717 Specific performance 2-716 Other Remedies Considerations Liquidated damages clauses 2-718 o (if breach by buyer who had made partial payments:  restitution of amounts paid.

C. o Can he revoke? 2-608. is he likely to recovery attorney’s fees? Why or why not? o This is where the courts are divided. He can’t get this in addition to the contract-market difference. under the implied warranties. he can get under either theory. but we do have an implied warranty.  McNamara courts would all say he can’t recover atty’s fees. and also the car was basically worthless at the time of delivery because no title. Look at § 110/ 15 U. § 2310. o The only way he can get the cost of the Saturn is if it’s cover – and only if it’s reasonable cover (not a much better car. o Can he reject? Probably not. etc).. o He can probably get consequentials and incidentals either way (I’m not sure what the ways are). o 2-714 ….S. and then even longer before it was impounded. this is probably beyond the reasonable inspection period. o We don’t have a written warranty. or if they are properly disclaimed. Once the reasonable inspection period is over. o The code says you don’t get consequential sunless the code provides for it. McCurdy and McNamara are the relevant cases for the split. If Jay pursues a claim under Magnuson-Moss. He’s had the car a couple weeks. This is the issue here. He had it for probably a month total. o The $1000 that he paid. . you have accepted by silence.  McCurdy courts would say yes.

Sign up to vote on this title
UsefulNot useful