Sales Article 2
Acceptance of goods 2-606
(1) Assumed to occur where after a reasonable opportunity to inspect the goods, the buyer indicates to the seller the goods conform, (2) After inspection the buyer fails to reject, or (3) The buyer takes any action inconsistent w/ the sellers ownership of the goods. (4) Mere possession of goods w/o the reasonable opportunity to inspect and put them to their intended use does not constitute acceptance. (5) Buyer must be allowed an opportunity to inspect at a reasonable time and place, and in a reasonable manner before payment is due
Rejection of goods 2-602
(1) Buyer can reject for any non-conformity (2) Rejection must occur w/in reasonable time after delivery, and (3) Buyer must seasonably notify seller of his rejection (4) Buyer must not take any action inconsistent w/ the sellers ownership of the goods (5) Buyer must take reasonable care of the rejected goods at the sellers expense (6) Generally, buyer should state rejection in writing to avoid waiving all defects not reduced to a writing.
Revoking Acceptance 2-608(1) and (2)
(1) Buyer may revoke only where - a) Non-conformity substantially impairs its value to him. b) Seller indicates to the buyer it would be cured and failed to do so, or c) Where difficulty in discovering the non-conformity and d) buyer must revoke w/in reasonable time after nonconformity is discovered or should have discovered.
Effect of Acceptance 2-607(1), (2) and (4)
(1) Once buyer accepts he must pay at the K price. (2) If the buyer accepts non-conforming goods he cannot later revoke the acceptance unless it was based on the reasonable assumption that the non-conformity would be cured. (3) The BOP is on the buyer to show the goods were non-conforming.
Purpose of Revoking Acceptance Rule 2-608
(1) Prevent the buyer from revoking for trivial defects, or (2) For preventing the buyer from letting the goods depreciate and then returning them.
Issues with Sellers Right to Cure
(1) Shaken Faith Doctrine - If any reasonable person in the buyers position would not have accepted the sellers remedy for cure because the buyers faith in the product has been so shaken, the seller may be denied the right to cure in that circumstance. (2) Seller can have the right to make repairs or adjustments w/o subjecting the buyer to inconvenience. (3) Buyer can hold the goods as a security interest after a rightful rejection.
Exceptions to Perfect Tender rule - Sellers right to cure 2-508
(1) The seller has an absolute right to cure if time for performance hasn't passed, or (2) Where the seller has reasonable grounds to believe that the buyer would accept nonconforming goods, the seller has a reasonable amount of time to cure (3) Where buyer rejects goods as non-conforming that the seller had reasonable grounds to believe would be acceptable, the seller has a further reasonable time to cure
Two Prong Test for damages related to nonconformity
(1) What is the value of the nonconformity to the buyer, taking into account the buyers particular needs and circumstances (Subjective). (2) Whether the nonconformity in fact substantially impaired the value in light of the buyers particular needs and circumstances (Objective)
Disclaiming Implied Warranties - Other issues
1. "as is" or "w/ all faults" written conspicuously will exclude all implied warranties. Unless circumstances indicate otherwise. 2. No implied warranty exist for defects that a reasonable examination of goods prior to sale would have discovered. Requires: 1. Seller must make demand to buyer to inspect goods prior to contract. 2. it is not enough for the seller to make the goods available to the buyer for inspection. 3. An implied warranty can also be excluded or modified by course of dealing between parties, course of performance, or usage of trade.
Disclaiming Express Warranties -2-316
1. Cannot disclaim express warranties once a seller makes an express warranty they are stuck with it. Best thing to do is not to make it in the first place.
Battle of the Forms 2-207(1) Terms of offer and Acceptance
1. Definite and Seasonable terms = Clear and Timely. 2. Mirror image rule is not necessarily applicable: Can have a K even though there was no mirror image. 3. Proviso language will only be the language listed in the handout ("subject to" is not proviso language) or we will be told in the question that classic proviso language has been provided (Expressional / conditional acceptance).
UCC Omitted K Term Gap Fillers - Quantity Required
1. For requirements or output K, Good faith requirement that seller will produce as many as possible in good faith and the buyer will buy as many as possible in good faith from the seller. 2. Good faith keeps the K from being illusory
Battle of the Forms 2-207(2) Acceptance / Counter offer / Merger
1. If Offer states it is limited to its terms = Cannot be changed, and if a change is attempted it will not be part of the K. 2. Where there is a conflict in the two forms, both parties are presumed to have objected to the other parties clause (knock out clause) - Notice of objection exception is presumed and the terms will not be part of the K. 3. Material Alteration - Arbitration clauses and disclaimer of warranties clauses are prima facie material alterations and will only be come apart of the document if both parites agree. All other alterations are determined by the two prong test.
UCC Omitted K Term Gap Fillers - Promptness of shipment & Payment
1. If parties don't agree on shipment time it must be reasonable. 2. Payment is due at the time and place where the buyer is to receive the goods
Finance Leases Article 2A - Rules of Leases
1. Lessor cannot be in the business of selling goods, and the lessor must have acquired the goods in connection with the lease, and 2. Lessee must have knowledge of what the warranties are either by receiving a copy of the K between seller and lessor or by otherwise approving it. 3. Hell or High Water Clause - As soon as the lessee accepts the leased goods he must pay regardless of whether the goods work or not.
Defenses in Warranty Actions Horizontal Privity 2-318 Alternative C
1. No Limitations on who can claim (people or corps) 2. No requirements to be family, guest, or household. 3. No limit on damages can ger personal and property. 4. Injured person must demonstrate that it was reasonable to assume to expect him to consume, use, or be affected by the goods under all alternatives. No waiver of expressed or implied warranties.
Offer & Acceptance: Firm offer rule
1. Offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable for lack of consideration during the time stated. 2. If no time is stated the period of irrevocability is deemed to be a reasonable period of time, but can't exceed 3 months. 3. Buyer can pay for more time and 2-205 would not apply because of the consideration given.
Statute of Frauds when no writing is required 2-201 (3)
1. Part payment or part performance, but only for that part paid or for that part performed (on a non-divisible item - sufficient to get the whole item). 2. A party admits in a pleading, testimony, or otherwise in court that the K exists; or 3. Specially manufactured goods [aka white elephant goods] not suitable in the ordinary course of business for resale (unique color, design, size, texture, etc). **NOTE 2-201(3) Does not mean K was entered into, or what the terms of the K are; only means that the other party cannot raise the statue of frauds as a defense.
UCC Omitted K Term Gap Fillers - Price
1. Parties can have a K even though the price is not settled. 2. Price shall be a reasonable price at the time of delivery
Three Exceptions to Perfect Tender rule
1. Parties may agree that the goods don't always have to be perfect. 2. Sellers right to cure under 2-508; 3. Non-conforming shipments under Installments K's.
Offer & Acceptance: Formation of a K 2-204
1. Precise moment of K not required to have a K. 2. K will not fail for indefiniteness if all terms of it are not settled if the parties otherwise intended to make a K. 3. Court will apply the UCC gap-fillers to remedy the missing terms
Implied Warranties - Merchantability 2-314
1. Seller must be a merchant w/ respect to goods of that kind. 2. To be merchantable goods must be fit for the ordinary purpose for which such goods are to be used. 3. Unless excluded or modified the warranty of merchantability is implied when the seller is a merchant w/ respect to goods being sold.
Express Warranties 2-313
1. Seller must make an affirmative action or statement about the goods to create an express warranty (not automatic); must make an affirmation statement about the goods including a description, or provide a sample or model of the goods. 2. The affirmation statement or action must have induced buyer to buy, even if not the sole reason. (basis of bargin) 3. No formal language required such as "I warrant that..." or "I guarantee that...". 4. Mere "puffing" does not rise to the level of an express warranty: Puffing is an exaggerated opinion or statement. 5. If made after the K was signed it is not part of the deal
Installment Sales (Under Perfect Tender Rule Also) 2-612
1. Substantial performance is the law. The Seller is entitled to payment even where the tender of the goods fails to conform exactly to the K as long as it 'substantially' conforms.
Battle of the Forms 2-207(2) Two prong Material alteration test
1. Surprise - Objective and Subjective standard: a) Subjective - What party actually knew and b) Objective - What party reasonably should have known. 2. Hardship - Whether additional or changed term creates a prolonged and open-ended liability: Just suffering a loss is not enough for there to be a hardship.
Applying the PAROL EVIDENCE RULE , 3 Possibilities
1. Unintegrated--The writing is not, and never was intended to be the final expression of the parties. Just reflects preliminary negotiations. PER will not apply and judge will allow in extrinsic evidence. 2. Partial Integration — The writing IS the final expression of the parties relating to the terms in the writing, but not to other terms not included in the writing. Here, The writing can't be contradicted, but may be supplemented by Consistent, Additional TermS ("CATS"). 3. Total Integration — The writing is the total and complete written statement of the parties. Here The writing can't be contradicted by extrinsic evidence or supplemented by "CATS."
UCC Omitted K Term Gap Fillers - Quantity Delivered
1. Unless the parties agree otherwise, or circumstances dictate, all goods must be tendered in a single delivery before the buyers duty to pay arises. 2. Lots - Multiple deliveries (as opposed to single deliveries) are permissible where circumstances dictate
Merchants
A person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge in the type of goods sold. - The UCC applies to all transactions in goods (Biggest group) - Some only apply to merchants in 2-205 (Firm Offer Rule) -Some apply to merchants w/ respect to goods of that kind (Smallest group) -2-314: Warranty that goods are merchantable is implied in the K for their sale if seller is a merchant with respect to goods of that kind; - and for Farmers: Depends on the operations - Agribusinessmen are merchants; simple farmers are not
PAROL EVIDENCE RULE (2-202)
A writing intended by the parties to be the final written statement of their agreement (i.e. it is integrated) may not be contradicted by prior or contemporaneous statements, agreements, negotiations, etc.—whether oral or written (extrinsic evidence).
Implied Warranties - Fitness for a Particular Purpose 2-315
An implied warranty of fitness for a particular use will exist when: 1. Where seller at the time of contracting has reason to know how the buyer is planning to use the goods, and 2. the buyer relies on the sellers skill or judgment in selecting the goods. 3. This applies to all sellers, do not have to be a merchant of that type of goods.
Offer & Acceptance: Shipping Goods to accept
An order or offer to buy or sell goods that are to be shipped shall be construed as inviting acceptance either by 1. a prompt promise to ship or by 2. the prompt or current shipment of conforming or non-conforming goods. Exception: a shipment of non-conforming goods doesn't constitute acceptance if the seller seasonably (timely) notifies the buyer that the shipment is only being offered as an accommodation
Scope of Article 2
Applies to transactions in goods. Goods are all things which are moveable at the time of identification to the K for sale. Excluded from goods - Insurance polices, tort claims, sale of real property, contract for services, trademarks, patents.
Goods
Are all things (including specifically manufactured goods) which are movable at the time of identification to the contract, including investment securities (Article 8), things in action, unborn young of animals, growing crops, and items that can be severed from reality.
Exceptions to Perfect Tender rule - Installment K
Buyer can reject a particular installment/shipment where the non-conformity (1) Substantially impairs the value of that shipment, and cannot be cured, (2) or the seller refuses to give adequate assurances of cure (2-612). (3) Buyer can also reject the whole K, but only if a nonconformity of a particular shipment/installment impairs the value of the whole K.
Warranty limitations 2-719(3) - Consequential damages
Consequential damages may be limited or excluded unless they are unconscionable. Unconscionable limitations are usually damages for injuries to the person. Alternatively consequential damages for commercial property is not.
Warranty Limitations - Court's Factors of Unconscionableabilty [Pierce v. Catalina Yachats]
Four factors court will consider when looking at unconscionability: 1. Aggrieved party is a consumer, not commercial buyer. 2. There was a disparity in bargaining power and buyer could not negotiate it. 3. Disclaiming language was on a pre-printed form aka "Boiler Plate Language" and the buyer didn't have a chance to negotiate it. 4. Where seller acted in bad faith
Warranty limitations - Essential Purpose Rule 2-719(2)
If a parties limited remedy fails its essential purpose it will be void and they may pursue any other remedy under the code. A remedy has failed its essential purpose when it fails to provide either party with an adequate minimum remedy. This is usually the buyer's recourse, since the seller is usually limiting the remedy.
Three factors to distinguish between a sale and a true lease (D. Article 2A)
If lessee becomes owner of the property at the end of the lease for little or no additional consideration = disguised sale. If there no economic life in the goods at the end of the lease period = disguised sale aka (junk pile test). If there is a clause that allows the lessee to terminate at any time and return the goods = true lease (walk-away clause).
Defenses in Warranty Actions Horizontal Privity 2-318 Alternative A
Is the law in most states, MI included. Three elements - 1. Injured person must be a member of the buyers family, household, or a guest in the buyer's home. 2. Limited to any natural person no Corps. 3. Limited to personal injuries, no property losses allowed. 4. Injured person must demonstrate that it was reasonable to assume to expect him to consume, use, or be affected by the goods under all alternatives. No waiver of expressed or implied warranties.
Finance Leases Article 2A - Warranty Responsibility
Lessor makes no promises to the lessee, The lessee must look to the supplier for breach of warranty.
Disclaiming Implied Warranty of Fitness for a particular purpose 2-316 (3)
Must be in writing and must be conspicuous, but doesn't have to mention merchantability. A) Conspicuous based on reasonable objective person standard. B) Actual knowledge can override lack of conspicuousness.
Defenses in Warranty Actions Horizontal Privity 2-318
One of three alternatives can be adopted by the states. With each alternative the injured person must demonstrate that it was reasonable to assume or expect him to consume, use, or be affected by the goods. And express or implied warranties cannot be excluded under this section
Warranty limitations 2-719(1)(a)
Parties may agree to limit warranties to the return of the to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts.
Defenses in Warranty Actions - Privity
Privity Determines if person has standing to sue and exists where there is a contract between the buyer and the seller in law and in fact. Two types Vertical & Horizontal. Vertical (not addressed in the code, tort issue) - Is how far back up the distribution chain a buyer can go in order to obtain relief; who can be sued. Horizontal - Whom the retailer seller is liable other than the immediate buyer; who can sue?
Statute of Frauds 2-201 (2) [MERCHANTS MUST READ THEIR MAIL
when a deal is between merchants, If written confirmation is sufficient to bind the sender, it binds the recipient too unless the recipient objects in writing w/in 10 days. This rule keeps buyers from playing sellers against one another by using the aka "Whipsawing"
Perfect Tender Rule 2-601
The goods to a K must conform 100%, if they fail to conform to the K in any respect, the buyer may reject the whole, accept the whole, or accept any commercial unit and reject the rest.
Implied Warranties - Harmful Substances in Food test
There are two test that must be applied analyzed for exam. 1. Natural substance/foreign object test - If the substance found in food is a natural substance, no liability is found; but if the substance is a foreign object, liability is found (Majority Test). 2. Reasonable expectation test: Even if it is a natural substance, if there was a reasonable expectation that the substance would have been removed, liability is found.
Finance Leases Article 2A - Parties to lease
Three parties involved; A. Lessee -The party who wants to use the equipment (usually a business). B Lessor -The party who actually purchases the equipment and leases to the lessee (usually a bank or finance company who extends credit to lessee). C. Supplier/seller - The party who manufactures, sells, or supplies the equipment to the lessor.
Disclaiming Implied Warranty of Merchantability - 2-316 (2)
To disclaim seller MUST 1. mention merchantability and 2. if in writing it must be conspicuous (but doesn't have to be in writing)
Defenses in Warranty Actions Horizontal Privity 2-318 Alternative B
Two elements - 1. Limited to any natural person no Corps. 2. Limited to personal injuries, no property losses allowed. 3. No requirement that injured person be a member of the buyers family, household, or a guest in the buyer's home. 4. Injured person must demonstrate that it was reasonable to assume to expect him to consume, use, or be affected by the goods under all alternatives. No waiver of expressed or implied warranties.
Hybrid transactions - contracts with Goods and services
Two test that must be applied to this issue. A. Predominant purpose test -If goods predominate UCC applies; if services predominate the common law applies. B. Gravamen test - 1. Looks at the portion of the transaction that went wrong and whether that was a good or service. 2 If good, the UCC applies; if service, the common law applies
PER - Determining Total vs. Partial Integration
UCC 2-202 Assumes that the writing is a partial integration unless the judge determines that the writing was intended to be a total integration. The test is whether the parties would have "certainly" included the term in the writing. If the answer is "yes", the writing is deemed to be a total integration. Note that whether the writing is deemed to be a partial or total integration, it may only be explained or supplemented NEVER contradicted by course of dealing, usage of trade, or course of performance (see 2-202(a)).
UCC Omitted K Term Gap Fillers - Place of Delivery
Unless otherwise agreed, the place for delivery is the sellers place of business.
Statue of Frauds Writing Requirements 2-201 (1)
a. A K for the sale of goods for $500 or more must be in writing and contain three things. 1. Quantity. 2. An indication that a K has been made. 3. Signed "by the party to be charged (party disputing the existence of a K)."
Defenses in Warranty Actions - Buyer's Notice Requirement 2-607(3)(a) & comment 4
a. After discovering a breach the buyer must notify the seller, w/in a reasonable time. Reasonableness is a fact based determination. b. A retail consumer is going to be given a longer time to provide notice than a commercial buyer. c. The notification does not have to list every aspect of the buyer's objections, only has to put the seller on notice there is something wrong with the product. d. Filing a lawsuit is not sufficient notice in and of itself that there was a breach.
Warranties of Title 2-312
a. Seller warrants that title to the goods conveyed is good; (1)(a). b. Seller warrants they do not know of a security interest or lien on the goods (1)(b). c. Can modify or exclude warranties of title in some circumstances with very specific language (2). D. If seller merchant has created the goods on specification of the buyer, the buyer is liable if the seller has complied with the buyers specifications (ex. Trademark infringement dispute)