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