Reading 1

Implied Warranty of Merchantability

"A warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind" -->In this case, the plaintiff argues that the seller breached the warranty by selling unmerchantable goods and that the plaintiff should therefore recover damanges

Shipment Contracts

*Normal contract where the seller is required to send goods to the buyer but is not required to guarantee delivery at a particular location 1. FOB (Free on Board) 2. FAS (free alongside ship) 3. CIF (cost, insurance, and freight) 4. C & F (same as CIF)

1. Free on Board

-Calls for the seller to deliver the goods free of expense and at the seller's risk at the place designated

2. Free alongside ship

-Commonly used in maritime contracts and normally accompanies by the name of a specific vessel or port -Seller must deliver goods alongside the vessel at his own risk and expense

2. Negligent Inspection

-Manufacturer's have a duty to inspect their products for defects that create a reasonably foreseeable risk of harm

4. Negligent Design

-Manufacturers have a duty to design their products so as to avoid reasonably foreseeable risks of harm

Terms of the Agreement

-May specify who has the risk of loss in their agreement

3. Cost, Insurance, Freight

-Price of goods includes the cost of shipping and insuring them -Seller bears this expense and the risk of loading the goods

3. Assuming it becomes part of basis of the bargain, a sample or model of goods to be sold creates an express warranty that the goods will conform to the sample or model

-Sample = object drawn from an actual collection of goods to be sold -Model = replica offered for the buyer's inspection when the goods themselves are unavailable

3. Negligent Failure to Warn

-Sellers & manufacturers often have a duty to give an appropriate warning when their products pose a reasonably foreseeable risk of harm

Basis of the Bargain Requirement

-affirmation, promise, description, or sample/model in order for an express warranty to be created

Risk of Loss

-carrier of the goods may lose, damange, or destroy them -Who should bear the risk? it could be a natural disaster, etc. -IF, the buyer has the risk when the goods are damaged or lost, the buyer is liable for the contract price -IF, the seller has the risk, he is liable for damages unless substitute performance can be tendered -Common Law Placed the risk on the party who had technical title at the time of the loss

1. Negligent Manufactur

-claims alleging the manufacturer's improper assembly, materials, or packing can cause obstacles b/c evidence needs to prove a breach of duty is under defendants control

1. If an affirmation of fact or promise regarding the goods...

-express warranty that the goods will conform to the affirmation or promise -Ex) a computer has a certain amount of memory

Entrusting of Goods (exception 3)

-merchant has the power to transfer all rights of the entruster to a buyer in the ordinary course of business

2. Any description of goods that becomes part of the basis of the bargain creates an express warranty that the goods will conform to the descripotion

-statements that goods are of a certain brand, type or model -adjectives that characterize the product -drawings, blueprints, and technical specifications

3 Exceptions under the general rule of Good Title

1. A person who has a voidable title to goods can pass good title to a bona fide purchaser for value 2. a person who buys goods in the regular course of a retailer's business usually takes free of any interests in the goods that the retailer has given to others 3. a person who buys goods in the ordinary course of a dealer's business takes free of any claim of a person who entrusted those goods to the dealers

Express Warranty (UCC section 2-313) states that an express warranty can be created in any of the 3 ways...

1. If an affirmation of fact or promise 2. Any description of the goods 3. A sample or model of goods to be sold creates an express warranty

Negligence usually involves one or more of the following...

1.negligent manufacture of the goods 2. negligent inspection 3. negligent failure to provide adequate warnings 4. negligent design

Obtaining Good Title

A fundamental rule of property law is that a buyer cannot receive better title to goods than the seller had. Ex) Stealing and then reselling.

A buyer in ordinary course (exception 2)

A person who in good faith and without knowledge that the sale to him is in violation of the ownership rights of a third party buys goods in the ordinary course of a business of a person selling goods of that kind, other than a pawnbroker.

Express Warranties: Value, Opinion

Statements with value ($2,000) or opinion (I think) do not create an express warranty

Implied Warranty of Fitness

Section 2-315 1. The seller has reason to know a particular purpose for which the buyer requires the goods 2. The seller has reason to know that the buyer is relying on the seller's skill or judgement for the selection of suitable goods 3. The buyer actually relies on the seller's skill or judgement in purchasing the goods

Title and Third Parties

General Rule: a seller cannot pass better title to goods than he has.

______ _____ means "honesty in fact in the conduct or transaction concerned"

Good Faith

_____ ______ is a warranty created by operation of law rather than the seller's express statements

Implied Warranty

UCC section 2-314 created the code...

Implied Warranty of Merchantability

"Caveat Empter"

Let the buyer beware

"Caveat Venditor"

Let the seller beware

______ usually allege that the seller or manufacturer breached a duty to the plaintiff by failing to eliminate a reasonably foreseeable risk of harm associated with the product.

Negligence

Law of Product Liability

the body of legal rules governing civil lawsuits for losses and harms resulting from a defendant's furnishing of defective goods

In contract cases involving defective goods...

there usually was no liability unless the seller made an express promise to the buyer and the goods did not conform to that promise

A buyer has given _______ if he has given any consideration sufficient to support a simple contract.

Value

_________ _________ has the power to pass good title to a good faith purchaser for value

Voidable Title

The contract theories involve a product _______ - an express or implied promise about the nature of the product sold.

Warranty

UCC 2-314 Says:

goods must... 1. pass w/out objection in the trade 2. fit for the ordinary purposes for which such goods are used 3. be of even kind, quality, and quantity within each unit 4. be adequately contained, packaged, and labeled 5. conform to any promises or statements of fact made of the container or label 6. case of fungible goods, be of fair average quality **Most important: fit for the ordinary purposes for which such goods are used