LCT Unit 2

warranty against infringement

(for merchant sellers only) every merchant seller warrants that the goods will be delivered free of the rightful claim of any third person by way of patent, copyright or trademark infringement. Goods are not counterfeit and seller has the right to sell under that trademark

requirements for warranty of fitness for a particular purpose

1. Sellers knowledge of the buyer's purpose 2. Seller makes a statement 3. Buyer relies on seller's statement

requirements for tender of delivery

1. notify the buyer that the goods have arrived and are available at destination 2. let the buyer know goods are available for them to take possession (notification must take place during business hours and give the buyer reasonable time to pick them up)

3 terms the UCC "fills in the gaps" if terms are not stated

1. open payment terms 2. open price 3. open delivery term

what are the exceptions to the requirement for writing a sales contract

1. specially manufactured goods 2. receipt and acceptance 3. payment 4. admission in court/court documents

contract does not fail because its indefinite if the court can determine

1. the parties intended to create a contract 2. subject matter is stated and the quantity (gives the court a reasonably certain basis for giving an appropriate remedy)

what does the UCC do when terms are not clear and need interpretation

3 ways the court allows oral testimony for commercial sales to help interpret the contract: 1. course of dealings 2. usage in the trade 3. course of performance

where do implied warranties come from

Arises automatically from the fact that as ale has been made regardless of the seller's conduct.

how can a warranty of title be disclaimed

By specifically saying there is no warranty of title Or by certain circumstances: - If a buyer has reason to know that the seller does not claim to hold the title or - The seller is limited in what can be promised

how does the statute of frauds apply in a contract for the sale of goods

Contract must be in writing if the value of the goods is more than $500

limited warranty

Does not meet the requirements for a full warranty. in some way limits terms of repair. May cost the consumer some kind of fee for repair, is only limited to the first buyer, or only covers part of the product

No movement and goods are identified and no Document of title

Title passes from seller to buyer at time/place the contract is executed

if goods are to be moved when does the title to the goods pass from the seller to the buyer

Title passes from seller to buyer when the goods are moved depending on the type of movement contract

open payment terms

UCC provides that payment is due at time/place the buyer is to receive the goods

what is a document of title

a paper that represents title to the goods representing ownership of the goods. formal writing that exchanged in the ordinary course of business that evidences the right to possess the goods

4 kinds of defects that give rise to a breach of the warranty of merchantability

a. Manufacturing defect b. Design defect c. Inadequate instruction o how to use the product d. Inadequate warning against dangers involved in using the product

What are the general requirements for a disclaimer to be valid

a. Separate from warranty b. Labeled c. Written in plain language d. Must be conspicuously displayed e. Cannot be contrary to public policy or unconscionable

warranty against encumbrances

a. the goods will be delivered free from any security interest or any other lien or encumbrance of which the buyer at the time of sales transaction had no knowledge.

sale on buyer specifications

a. the same warranties arise as in the case of any other sale of such goods by a particular seller, however, no warranty of fitness for a particular purpose can arise. The buyer is purchasing on the basis of their own decisions and not relying on the seller's skill or judgment. The manufacturer is not liable for loss caused by a product that cases injury but that is not defective. Other warranties likely will still apply.

elements of a sales contract

agreement, consideration, capacity, mutual agreement, proper form, legal purpose

what is tender of delivery

all the seller has to do is get the goods to the destination (could be the buyers place of business or them specifically) but they could also deliver to a warehouse or storage facility specified by the buyer

special rule for merchants regarding an oral agreement and a signed, written confirmation of the agreement

an oral agreement that should be in writing can be enforced if: 1. it is a merchant sale 2. the confirmation of the oral conversation is sent to the other merchant within a reasonable time

what is the warranty of conformity

any sample or model which is made part of the basis of the bargain creates and express warranty that the whole of the goods shall conform to the sample or model.

merchants firm offer

applies when a merchant gives assurance in a signed writing that the offer will remain open until date of its expiration

what article of the UCC governs sales

article 2

what is a warranty

assurance/promise/guarantee by seller regarding the quality, capacity, or performance of the goods

when does risk of loss pass to buyer if the goods are in possession of a 3rd party

at the same time as title (when the seller receives the document of title or other paper work)

basis of the bargain

buyer has purchased the goods because of what the seller has stated about those goods. statement by the seller regarding quality, capacity, r other characteristics of the goods

warranty of title

by the mere act of selling, every seller makes an implied warranty that the seller's title to the goods is good and that the seller has the right to transfer title to the goods

how do we identify goods

by their nature

which of the elements of a contract does the law presume exists

capacity and legal purpose

if parties opt out of the UCC what do we fall back on

common law rules of contract law

mixed contract

contract for goods and services

where is the place of delivery if the goods are not moved

either the sellers place of business, the seller residence or the location of the goods

how does a warranty of conformity arise

from any picture or depiction of the goods that becomes part of the basis of the bargain

how does an express warranty arise

from the statements of the seller. doesn't have to say there is a warranty being created, just has to assert a fact. forms part of the basis of which the sale has been made

if a warranty is made it must be labeled as what

full or limited warranty

when does risk of loss pass from seller to buyer

generally, when the title passes from seller to the buyer

warranty of merchantability or fitness for normal use

goods are fit for the ordinary purposes for which they are sold. Given in every sale unless disclaimed. Most broad of all 5 implied warranties.

fungibles

goods that are indistinguishable when mixed. part of a larger mass (Ex: milk, seeds, grains etc)

future goods

goods that aren't in existence or not owned by the seller at the time of transaction

Manguson-moss act (1975)

governs all goods valued greater than $10 Requires that the warranty and a disclaimer be separated seller is not required to make an express warranty but if they do: a. It must be stated in ordinary, understandable language b. Must be made available for inspection before purchasing for comparison shopping Must be labeled as full or limited

what is good faith as it relates to all sales

honesty in fact

what is good faith as it relates to merchant sales

honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade

how do future goods/fungibles become identified goods

identified when the seller acts in goods fail and they are shipped/marked or otherwise identified by the seller (buyer is generally not present here) as being the goods called for in the contract

nonmerchant sales terms

if acceptance contains additional terms, they don't become part of the contract unless they are accepted by the offeror

open delivery term

if place of delivery isn't specific or how/where it happens, UCC has a hierarchy: 1. sellers place of business 2. if no place of business then sellers residence 3. if neither of those two places, then at location of the goods

warranty of fitness for a particular purpose

if seller states that the goods will be fit for the buyer's purpose (typically for an unusual use) with the buyer relying on the seller's skill or judgement to select or furnish suitable goods, and the seller at the time of contracting knows or has reason to know of both the buyers particular purpose and the buyers reliance on the seller's judgment then the seller has created this warranty.

admission in court/court documents

if the buyer admits in court there was a contract even if its not in writing but is not enforceable beyond the quantity of the goods admitted

payment

if the buyer has already paid for the goods then the deal is finished, and the contract is enforceable to the extent the buyer paid

receipt and acceptance

if the buyer has received and accepted the goods (meaning they have domain over the goods). Contract is enforceable to the extent of the goods the buyer has accepted

how do we determine if a mixed contract is governed by the UCC

if the sale of goods is the dominant aspect of the transaction

when does risk of loss pass to buyer if there is a breach of contract

if the seller is in breach of contract (sent nonconforming goods) the risk of loss does not pass to the buyer

specially manufactured goods

if the value of the goods if $500 or more and they are customer goods made for the purchaser

merchant sales terms

if there are additional acceptance terms then they become part of the contract unless: 1. they are rejected by offeror 2. then the offer limits acceptance to the terms of the offer 3. when the new terms materially alter the offer

existing goods

in existence and owned by the seller at time of transaction (execution of the contract)

writing requirement for sales contracts

less stringent must be in writing if value of the goods is more than $500

course of performance

looks at conduct. what have the parties done since the alleged agreement was completed. have they taken any action or acted like they entered a contract

course of dealings

looks at the actions and communications that established the agreement in the first place. common basis of understanding/prior dealings. How were differences resolved in the past

agreement under UCC

may be difficult to determine when its completed and may contain different terms. does not have to be definite.

rule of revocation of a merchants firm offer

merchant has the liability to fulfill it

does warranty of conformity need any specific language

no

identification

occurs when the goods are specifically chosen/specified/set aside as being the goods called for in the contract. distinguishes these particular goods from the mass of goods

how do rules of acceptance of an offer differ from common law regarding acceptance

offeror must be notified by reasonable manner/means whereas in common law it is accepted when it was dispatched. there is also no mirror image rule or counteroffer rule

implied warranty

one that was not expressly made by the seller but that is implied in certain circumstances by law

how are warranties of conformity created

orally: something seller says sample/model: matching the sample on the wall to the box below demonstration description in advertising

merchant

person that deals in goods of the type that are involved in the sales transaction SKEEET

open price

price can always be determined by what was the reasonable market price at the time/place of delivery for similar goods

what term is unforgiveable by UCC if left out or forgotten

quantity

time limit on the merchants firm offer

reasonable time, not to exceed 3 months

what contracts are the exception to the unforgiveable term

requirements contracts and output contracts

what is a full warranty

requires that a product be replaced/repaired with no burden to the consumer. runs with the product and lasts for its full term regardless of who owns the product. if product cannot be fixed the buyer has the choice of a cash refund or a free replacement

risk of loss in merchant sale

risk of loss is not passed to the buyer until the goods are actually in the possession of the buyer (not passed with title)

risk of loss in shipment contracts

risk of loss passes from S to B with title. at time/place goods are tendered to carrier. belongs to the buyer while goods are in transit

risk of loss in nonmerchant sale

risk of loss passes when goods are tendered

what kind of sales does article 2 of the UCC apply

sale of personal goods

do statements of opinion give rise to a warranty

sales talk or puffery does not create a warranty and the seller cannot be held liable unless it is obvious that a reasonable person would rely on the statement, then it is treated as basis of the bargain

risk of loss in destination contracts

seller has to tender goods to buyer so risk of loss in transit belongs to seller until tender

purpose of the uniform commercial code

simplify and streamline commercial transactions in all jurisdictions

parol evidence rule

stands to exclude any extrinsic evidence that would alter the terms of a final writing. The difference in the sale of goods is that the writing is not presumed to represent the entire contract of the parties unless the court specifically decides that it does.

source of law

statutory law

goods

tangible personal property (has physical existence) 3 kinds: 1. existing goods 2. future goods 3. fungibles

risk of loss

tells which party bears the loss if the goods are damaged, destroyed, or lost in transit

the UCC uses a broad definition of delivery

tender of delivery

sale of goods

the passage of title from the seller to the buyer for a price

what is a destination contract

the seller is required to deliver the goods to the buyer at the destination. ACTUAL delivery. Title passes to the buyer when the goods are tendered to the buyer at the destination

what is a shipment contract

the seller is required to get the goods to the carrier. title passes when the goods are selectively given to the carrier for delivery

No Movement and goods are identified and there is a document of title

then title passes when the buyer received the document

basis tenets of warranties

they can be expressed or implied, some apply to all sales and some only apply to merchant sales

when does title pass when there is a document of title

title passes from the seller to the buyer when the buyer receives the document.

general rule for goods

title to the goods passes to the buyer when the seller's performance regarding physical delivery is complete

usage in the trade

truly looks at industry standards. what are the regularly observed business practices in this industry

modifications of a contract for sale of goods

under UCC, we can modify terms of an agreement without additional consideration because prices fluctuate but the changes must be made in good faith

sale of food or drink

warranty of merchantability applies. Food must be of average quality and fit for its ordinary purpose which is consumption by humans. Some courts refuse to impose the warranty liability if the thing in the foods that caused the harm was naturally present (complex situation) such as crab shell in can of crabmeat but other courts reject this. If the courts don't accept that view, then there is a breach of implied warranty of fitness for normal use

sale of secondhand or used goods

warranty of merchantability in sale of both new and used goods. With used goods, what is considered "fit for normal use" under that warranty is set at a lower standard.

when does the buyer have insurable interest

when goods are identified

what is breach of warranty

when the product fails (if the express warranty is false) it makes the seller liable for the value/cost of the product

disclaimer

when the seller takes any action that limits/denies the terms of the warranty. Changes the scope of the warranty. Only applies to implied warranties and is done by the seller.

how do existing goods become identified goods

when they are set aside and marked by the seller, the buyer, or both as being the goods called for in the contract

when does the seller have insurable interest

when they have the goods and the title of the goods because they have possession and ownership of the goods