BUS 241 Chapter 16

Commercial Impracticability

A doctrine that may excuse the duty to perform a contract when performance becomes much more difficult or costly due to forces that neither party could control or contemplate at the time the contract was formed.

Warranties

An assurance, either expressed or implied, by one party that the other party can rely on its representations of fact; in sales, a binding promise regarding a product in the event that the product does not meet the manufacturer's or seller's promises.

Warranties of Title

An assurance, inferred in every UCC sales transaction, that the seller has good and valid title to the goods and has the right to transfer the title free and clear of any liens, judgments, or infringements of intellectual property rights of which the buyer does not have knowledge.

Implied Warranty of Merchantability

An assurance, inferred in every sale unless clearly disclaimed, that merchantable goods will conform to a reasonable performance expectation. The purchaser must have purchased or leased the good from a merchant.

Specific Performance

An equitable remedy in which the court orders the contract to be performed as agreed to by the parties.

Under the UCC, the goods must be merchantable, meaning that they must:

Be able to pass without objection in the trade or market for similar goods. In the case of fungible goods, be of fair average quality within the description. Be fit for the ordinary purposes for which such goods are used. Be produced, within the variations permitted by the agreement, with even kind, quality, and quantity in each unit and among all units involved. Be adequately contained, packaged, and labeled as the agreement may require. Conform to the promises or affirmations made on the container or label, if any.

Although no warranties automatically arise under the common law, the UCC assumes that the seller:

Has good and valid title to the goods Has the right to transfer title free and clear of any liens, judgments, or infringements of intellectual property rights of which the buyer does not have knowledge.

Consequential Damages

In a contract, foreseeable damages that result from special facts and circumstances arising outside the contract itself. The damages must be within the contemplation of the parties at the time the breach occurs. Also called special damages.

Cure

a breaching party's right to provide conforming goods when nonconforming goods were initially delivered; subject to a reasonable time test

substantial impairment

a concept, used to modify the perfect tender rule, whereby a buyer can revoke acceptance of goods and, with installment contracts, a buyer/lessee can reject an installment of a particular item only if the defects substantially impair the value of the goods

What are buyers and lessees obligated to do under the UCC?

accept and pay for conforming goods in accordance with the contract

Implied warranty of trade usage

an assurance, inferred in the context of certain UCC sales, depending on the circumstances, that can be created through a well-accepted course of dealing or trade usage

Express warranty

any description of a good's physical nature or its use, in either general or specific circumstances, that becomes part of the contract

Usage of trade

any practice that members of an industry expect to be part of their dealings

Liquidated Damages

damages identified before the breach occurs

conforming goods

goods that conform to contract specifications

course of dealing

previous commercial transactions between the same parties

commercial reasonableness

reasonable commercial standards of fair dealing, required of merchants in addition to honesty in fact

tender of delivery

requirement that the seller or lessor have and hold conforming goods at the disposal of the buyer or lessee and give the buyer or lessee reasonable notification to enable him or her to take delivery

Perfect Tender Rule

requirement that the seller to deliver goods in conformity with the terms of the contract, right down to the last detail

Magnuson-Moss Warranty Act

requires that if a seller decides to issue a written warranty for a consumer good (the seller is not required to do so), the seller must indicate whether that warranty is a full warranty or a limited warranty. This applies to any consumer good sold for more than $10. If the written warranty is silent, it is presumed to be a full warranty, which means that if the good fails or is defective, the good or its defective part will be replaced. If replacement cannot be timely effected, the buyer has the right to a refund or a full replacement. If the good is sold for more than $15, the written warranty must disclose a number of items of information—names and addresses of the warrantors, any limitations on the warranty, and the procedures required to activate the warranty remedies—all in readable and easily understood language, in other words, not in legalese.

The obligations of sellers/lessors and buyers/lessees are determined by

terms the parties outline in agreements, custom, and rules outlined by the Uniform Commercial Code (UCC)

course of performance

the history of dealings between the parties in the particular contract at issue

What can the buyer/lessee do if goods or tender of delivery fails in any respect to conform to the contract?

to accept the goods, reject the entire shipment, or accept part and reject part

What are sellers and lessors obligated to do under the UCC?

transfer and deliver conforming goods

Implied warranty of fitness for a particular purpose

when a seller or lessor knows or has reason to know (1) why the buyer or lessee is purchasing or leasing the goods in question and (2) that the buyer or lessee is relying on him or her to make the selection. Under this warranty, a seller or lessor does not have to be a merchant

Substantial Performance

when all the material elements of a contract are satisfied even if some nonmaterial requirements may not be satisfied