Chapter 22 Business Law text and cases - TEMBA

Consequential Damages

consequential damages are special damages that compensate for indirect losses (such as lost profits) resulting from a breach of contract that were reasonably foreseeable. Under the UCC, parties to a contract can limit or exclude consequential damages, provided the limitation is not unconscionable.

When the Goods are in the Possession of the Seller

1. Cancel (rescind) the contract. 2. Resell the goods and sue to recover damages. 3. Sue to recover the purchase price or lease payments due. 4. Sue to recover damages for the buyer's nonacceptance of goods.

Shipment Contracts

1. Place the goods into the hands of the carrier. 2. Make a contract for their transportation that is reasonable according to the nature of the goods and their value. (For example, certain types of goods need refrigeration in transit.) 3. Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain possession of the goods from the carrier. 4. Promptly notify the buyer that shipment has been made [UCC 2-504].

Requirements for Stopping Delivery

1. The buyer or lessee receives the goods. 2. The carrier or the bailee acknowledges the rights of the buyer or lessee in the goods (by reshipping or holding the goods for the buyer or lessee, for example). 3. A negotiable document of title covering the goods has been properly transferred to the buyer in a sales transaction, giving the buyer ownership rights in the goods.

Place of Delivery

1. The seller's place of business. 2. The seller's residence, if the seller has no business location [UCC 2-308(a)]. 3. The location of the goods, if both parties know at the time of contracting that the goods are located somewhere other than the seller's business [UCC 2-308(b)].

Statute of Limitations

An action for breach of contract under the UCC must be commenced within four years after the cause of action accrues.

Installment Contracts

An installment contract is a single contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.

When the Goods are in Transit

If the seller or lessor learns that the buyer or lessee is insolvent, the seller or lessor can stop the delivery of the goods still in transit, regardless of the quantity of goods shipped.

Destination Contracts

In a destination contract, the seller agrees to deliver conforming goods to the buyer at a particular destination.

The right of cover

In certain situations, buyers and lessees can protect themselves by obtaining cover— that is, by buying or leasing substitute goods for those that were due under the contract.

Payment

In the absence of any specific agreements, the buyer or lessee must make payment at the time and place the goods are received.

The right to replevy goods

Replevin is an action to recover identified goods in the hands of a party who is unlawfully withholding them. To maintain an action to replevy goods, buyers and lessees must usually show that they were unable to cover for the goods after making a reasonable effort

Tender of Delivery

Tender of delivery occurs when the seller or lessor makes conforming goods available and gives the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery

Exceptions to the Perfect Tender Rule

The UCC does not specifically define the term cure, but it refers to the right of the seller or lessor to repair, adjust, or replace defective or nonconforming goods

Limits Right to Rejects Goods

The right to cure substantially restricts the right of the buyer or lessee to reject goods. To reject, the buyer or lessee must inform the seller or lessor of the particular defect.

Conforming Goods

To fulfill the contract, the seller or lessor must either deliver or tender delivery of conforming goods to the buyer or lessee.

The perfect tender rule

Under the common law, the seller was obligated to deliver goods that conformed with the terms of the contract in every detail.