Business Law Exam 4

Ch. 22 Name and define the buyer's remedies for a breach of a contract for the sale of goods under the UCC

1. Cancel contract 2. mitigate damages 3. Sue for compensatory damages 4. Keep the nonconforming goods and sue for the difference between value of goods delivered (Ex. Yacht, Went to the bottom before closing. Not good for the engine. Buyer has boat, he said he would keep the boat for the value of the boat after it went to the bottom, then he could buy a new engine. 5. Specific performance: item is unique

Ch. 22 Name and define the seller's remedies for a breach of a contract for the sale of goods under the UCC

1. Cancel the contract: breach by buyer, seller can cancel the contract 2. Withhold delivery of the goods (ex. buyer isn't paying) 3. Mitigate damages: finding different buyer 4. Sue for lost profits (consequential damages): still recoverable if foreseeable and proven. Ex. Boeing jets. Iran ordered 10 jets, didn't pay, Boeing recover the profit that they lost. 5. Recover contract price. If you've delivered the goods you can sue for the price. 6. In some cases the seller can recover possession of the goods from insolvent buyer, only done in certain cases.

Ch. 46 Discuss the main provisions of the Truth in Lending Act

1. Disclosure form (federal statute) Ex. lender says we will calculate closing costs, calculate them as interest. Expresses closing costs as a function of interest, even though they aren't. Limits liability up to $50 if someone uses your card.

Ch. 19 Define and give an example of the buyer in the ordinary course exception

2nd exception. Mortgage is a claim against the title of property. Security interest is to personal property what is a mortgage is to a rural property. When you buy one item out of the sellers inventory you take free of any security interest that the seller has placed in the inventory. Security Interest: claim against the title of personal property If default in payment of loan, accelerate balance, repossesses car, sell car to satisfy debt. Merchant seller puts security interest into all of their cars, you buy one car BITO, wipes off lien of the seller until you put your own on it. When you buy an item, you take it free from any security interest that the seller has placed. Ex. You have a merchant seller of cars and they finance cars. The seller puts security interest in all of their cars. You buy one car off of the lot and you take free of that security interest of the sellers cars.

Ch. 46 Discuss the main provisions of the Fair Credit Reporting Act

Additional rights to credit report. Get one free credit report per year, if there is an entry in credit report, you can reject it.

Ch. 21 Discuss what the UCC adds to the doctrine of anticipatory repudiation aka anticipatory breach

Anticipatory Breach: Clear unequivocal statement before performance is due that you won't be performing. The concerned party can demand adequate assurance from the other party that the contract will be performed.

Ch. 20 Define and give an example of the implied warranty of merchantability

Applied warranty that arises when the seller is a merchant (unless it's excluded) Assures the buyer that the goods are fit for their ordinary purpose (fair and average) Ex. Thermos to hold hot liquids used for two months and the thermos imploded. It isn't fair/average quality

Ch. 20 Define and give an example of an exclusion of a warranty

As-is exclude a warranty. Ex. you're selling a lawnmower and you say "As-is". You're not responsible. Ex. purchased camera for $89, police come and say they need the camera. Breach of implied warranty of the title. There was an as-is sign by the register. The buyer is out his money

Ch. 19 Briefly summarize the UCC provisions that we have discussed in prior units

State statute - UCC. Code = statute State statute pertaining to a particular type of contract (sale of goods) Good: item of tangible personal property (property that you can move) Merchant is someone who deals regularly with goods of its kind. UCC applies to merchants and non-merchants, but merchants are held to higher standards. Statute of frauds: up to $500 Battle of the forms: when large companies contract another for a sale of goods they have pre-printed documents they have terms in their contracts and they may contradict each other, but the last form sent out are held accountable in a contract. (both parties are need to be merchants) Firm offer: offer can be revoked before an offer being accepted. When a merchant in a signed writing promises to keep an offer open for a specific time, it will be held open. Buyers place more reliance on professionals sellers are better able to protect themselves.

Ch. 21 Discuss the basic obligations of a seller under a contract for the sale of goods under the UCC

Seller : deliver goods that conform to the contract (what does the contract call for?)

Ch. 20 Summarize the Bobhotz case on page 263

Boat winterized in excellent condition, after buying the boat the engine didn't sound good, engine cracked, buyer sued seller and breech of express warranty

Ch. 20 Discuss who can be a plaintiff and who can be a defendant in a breach of warranty lawsuit

Breach of contract is contract based. Plaintiff can be buyer, member of buyer household and guests of the buyer. Defendant: manufacturer = retailer in most states.

Ch. 21 Discuss the basic obligations of a buyer under a contract for the sale of goods under the UCC

Buyer: to accept and pay for the goods provided that they conform to the contract

Ch. 21 Discuss the "Ethics in Action"

Seller sees market up and up, lamenting over low price. Ethically you have to fulfill your promise (can't change price) Popcorn contract- immaterial breach of buyer not paying seller laid real for buyer, court saw beyond it

Ch. 20 Define and give an example of the implied warranty of fitness for a particular purpose

Sellers representation that this good will fit the buyers individual needs Ex. Sears riding lawn mower, buyer has steep slope in lawn. Sears worker drove past the property and said it would work. Guy bought it and it flipped over. Buyer won

Ch. 22 Define and give an example of incidental damages

Smaller damages that accompany attempt to mitigate damages Ex. finding another boat buyer Ex. Storage, store it longer because buyer breached

Ch. 22 Define and give an example of a liquidated damages clause

Clause that fixes the amount of the damages has to be reasonable, good faith estimate of what damages would have been. Ex. $1500 negatives: if damaged, buyer punched holes in 37 of them. This liquidated damage is not reasonable, too high. Photographer has sold photos for $500, negatives are worth more than the prints.

Ch. 22 Define and give an example of compensatory damages in the context of the UCC

Direct damages that flow directly from the breach. Ex. $2000 in sale Honda Accord to get the benefit of his bargain, usually happens after there has been mitigation.

Ch. 21 Define and give an example of the rejection of the goods.

Done at the time that delivery is rendered grounded on inspection Should be communication of rejection and specify nonconformity

Ch. 22 Discuss whether any type of effort to mitigate damages is acceptable

Duty of non-breaching party to minimize the amount of damages. What is reasonable? Ex. Anticipatory breach by buyer (pool tables with pinball features) seller started disassembling pool tables and used them for firewood.

Ch. 19 Define and give an example of the entrusting rule exception

Entrusting: putting possession of an item temporarily in a third party. Ex. You have a ring and you take it to the jeweler to have it cleaned. You're entrusting that ring to the merchant. They set it on their counter and a new employee sells the ring. You find out about it and you try to get your ring back, but the buyer takes clear title of that ring. You'll get the value of the ring instead of the ring itself. If you entrust a good to a merchant and that merchant mistakenly sells it to a third party, the third party takes clear title. You put possession of the item temporarily 3rd party.

Ch. 19 Discuss the general rule regarding risk of loss when the seller is not a merchant and give an example of this rule's application

Ex. selling boat to Dillon, wrong hitch, agree to leave boat in parking lot, it gets hit. Whose Risk of loss? Sellers tender of delivery: risk of loss

Ch. 22 Define a statute of limitation and discuss what the UCC's statute of limitations generally provides for a breach of contract action

Four years unless the contract addresses it. Can be shortened to one year, but if you wait even one day over 4 years, its too late.

Ch. 21 Define good faith and discuss when the parties to a UCC contract must act in good faith

Honesty in fact (non-merchant) PLUS observance of reasonable commercial standards (merchant) Price is going higher and higher locked in to sell goods. As the seller you should keep your promise. Seller made a trap for buyer by not asking for money right away. Motive buy proponderence of evidence shows that seller put them into the trap

Ch. 19 Define, distinguish between and give an example of an output contract and a requirements contract

How much the seller can reasonably produce. Quantity term is not specified other than to say it is a function of the sellers output. Requirement contracts is that it is a function of the buyers contract. All that the buyer requires is that the buyer will buy from a particular person 10 bushels of corn vs all of the corn I produce in 2019. Must have good faith, can't just throw corn in the field. Implied term of good faith, makes these enforceable. Quantity term is expressed as a function of the sellers output (study session) Ex. Farmer Jones promises to sell all of his corn to ABC packaging he produces in 2019 for $2/bushel. Implied term that steps in and gives them enough of a quantity term (Good faith)

Ch. 20 Define and give an example of an express warranty

If the seller makes promises about the goods. Usually created by words, sometimes created by the display of a model. Warranty: specific and factual representation about the quality/characteristics of the goods. Ex. Cigarettes lawsuit: health problems- sued based on express warranty ads said they were "mild" TV ad claimed throat lung accessories affected by cigarettes Chesterfield breached express warranty

Ch. 19 Define and give an example of the good faith purchaser for value and without notice exception

In certain cases the buyer can get better title than his/her sellers title Grounded on the sellers having voidable title. Title that is not clear title, but it isn't flawed to the extent of being void. Ex. john saw an ad on craigslist for a stereo for $300. He called the guy and looked at it. The guy was firm with his price. John offered $250 and the guy said no. John agreed to the $300. It turns out that the seller had written a bad check for the stereo when he bought it. Now sams club is including John in their lawsuit to get the stereo back. Check has bounded for insufficient funds. John should qualify as a good faith purchaser. He was honest in his purchase and John was without notice of the title issues. Ex. Car dealer selling car to another car dealer. Two merchants involved. No certificate title. Seller had voidable title to the car and it was capable of being washed clean by a purchaser. Not good faith because hes a merchant buyer and he needs to observe reasonable commercial standards. Merchant buyer had to give the car back to the true owner.

Ch. 21 Define and give an example of a right to cure

In some cases the seller will have the opportunity to fix the nonconformity the court will decide to give the seller the right to cure. Tv yes, toaster no. Lemon law - state law sale of motor vehicles under warranty (est. number of opportunities to cure - usually 4)

Ch. 22 Define and give an example of consequential damages in the context of the UCC

Indirect damages that are still recoverable if foreseeable and if they can be proven (harder to prove) Ex. burgalur alarm system - $36000 lost jewelry. The liability is limited to and does not include (limitation of warranty that excludes consequential damages) Ex. Loss of profits: loss, leader - sell item at or below cost to get customers through the door to get them to buy other high priced items.

Ch. 19 Define risk of loss

Not a function of title. Who is stuck with a bill if something bad happens to the goods? What are the bad things that could happen to the goods while the contract of sale is still going? Lost, damaged, destroyed, stolen the first thing the court will look to depends on what the contract provides (the contract might state who the risk of loss is given to), choosing particular shipment terms. Contract is silent on risk of loss, the UCC provides when the seller is a merchant and when the seller isnt a merchant (question 9 and 10) ****Dont worry about the information on page 254 ****

Ch. 46 Discuss the main provisions of the "lemon laws"

Only applies to merchants State statute Applies to sale of new motor vehicles under warranty. Seller has four opportunities to fix the defect, then the buyer declares it a lemon. Seller either has to give the money back or give a new vehicle.

Ch. 19 Discuss the general rule regarding the status of the title that a buyer of a good receives from his or her seller

Ownership - Ex. you're buying a good from somebody. If your seller had a good, clear title then you get a good, clear title. If your seller had void title then you get void title. Ex. if goods have been stolen. As a buyer, you get whatever title your seller had. Exceptions: good faith purchaser for value of notice, buyer in ordinary course, entrusting rule Chain of title: If stolen, Officer comes to collect stolen stereo you paid $300 for, you have to turn it over because it was void.

Ch. 46 Discuss the main provisions of the Fair Debt Collection Practices Act

Restricts what debt collectors can do. Doesn't apply directly to creditor. Ex. Not supposed to call after 9pm for debt collection. Act that restricts debt collection practices by third parties. Puts constraints on what they can do. Ex. Debt company sends collection letter, they are required to state that you can dispute it.

Ch. 21 Discuss the hierarchy of practices and discuss customs that a court will use when the contract has a missing term.

Poorly drafted, sometimes a definition. Course of performance - how parties have performed under this contract (wait month before disputing box size) Course of dealing: how the parties have performed under prior contracts between themselves Custom/usage of trade- how others in the industry handle the missing or unclear terms (what's commonly tendered)

Ch. 20 Define and give an example of a limitation of a warranty

There is a warranty, BUT certain damages are excluded. Ex. customer bought a burglaur alarm system. Contract had a limited warranty. Theft, burglar alarm failed. $36000 stolen of jewelry. Sue the alarm company. This alarm system is warranted, so if it fails, we will reimburse you or replace it. Limit damages that you can recover.

Ch. 22 Discuss the basic objective of most of the remedies that the UCC makes available to a party to a contract who has been injured when the other party has breached that contract

To put the plaintiff in the position the defendant would have been in had the defendant not breached. Ex. Honda accord sell for $5000, worth $7000 you owe $2000

Ch. 21 Define and give an example of revocation of acceptance of the goods

Undoing of the transaction grounded upon: Substantial impairment in the value of goods Having been a good reason for not rejecting goods at the time of delivery Ex. Hidden nonconformity or seller assured buyer that they would correct the nonconformity. Delivery of mobile home with siding missing

Ch. 19 Discuss the general rule regarding risk of loss when the seller is a merchant and give an example of the rule's application

When the seller is a merchant, the risk of loss passes to the buyer upon the buyers receipt of the goods. (have they received possession of the goods) True receipt: authorized receipt. Car dealer - title has passed, car stays in lot (not always fairlest, let's focus on fairness). Passing of the title is irrelevant who has possession. Ex. storm comes through while rust proofing, seller has Risk of loss because buyer hasn't taken possession.

Ch. 19 Discuss the relationship between risk of loss and insurable interest

You don't have to have title to have insurance if you have risk of loss, get insurance

Ch. 20 Define and give an example of the implied warranty of title

You have the right to assume that the seller had title, the right to sell that good. Eye protection from sunglasses. Guy wore them, got hit and went blind. Sunglasses protect from UV rays, shattering wasn't from UV rays

Ch. 19 Discuss whether the UCC requires consideration in order for a contract of the sale of goods to be modified

You're building the deck yourself, you buy the wood from ABC lumber for $500. They contact you and say they need $200 more. You agree to it. Are you bound to pay the $700? No consideration is required to modify contract of goods support modification of a contract for the sale of goods. Solution: Just say no - you don't have to pay extra. Don't agree to modification.