Sales & Leases

NC Products Liability

Applies to death, personal injury or property damage Sealed container doctrine • No products liability action except breach of express warranty can be against any seller when product was acquired and sold by seller in sealed container or did not have the chance to reasonably inspect it Lack of privity doesn't matter • Allows recovery for buyers, guest of buyer, member of buyer, family member of buyer, employer of buyer, etc., can bring claim directly against manufacturer of product involved for breach of implied warranty

UCC 2-201

Contract itself does not have to be in writing, only evidenced by a writing • But only a showing of negotiations is generally insufficient for most courts and you must show conclusively that a contract has been reached Must be signed by the party who denies enforceability Signed: includes using any symbol executed or adopted with present intention to adopt or accept a writing Writing: printing, typewriting or any other intentional reduction to tangible form Writing does not have to contain all of the terms of the agreement - the terms can be provided by other evidence and gap fillers • Official comment 1: the required writing need not contain all the material terms of the contract and such material terms as are stated need not be precisely stated. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction. It may be written in lead pencil on a scratch pad. It need not indicate which party is the buyer and which is the seller. The only term, which must appear, is the quantity term, which need not be accurately stated, but recovery is limited to the amount stated. The price, time, and place of payment or delivery, the general quality of the goods or any particular warranties may be omitted.

In re Bailey: Disguised Sale

- (1) did not have a legal right to cease payments and walk away from the agreement without liability for the deficiency, - (2) had an option to become the owner of the goods for nominal additional consideration upon compliance with the agreement, - (3) bore the risk of loss, - (4) had to pay applicable taxes, - (5) had to maintain insurance with creditor as loss payee, - (6) was responsible for maintenance and repair of the property, and - (7) was required to make a down payment before the lease commenced.

Rules that Hold Merchants to a Higher Standard

1. §2-314 Warranty of Merchantability 2. §2-202(2) creates an exception to the Statute of Frauds writing requirement to sales of goods over $500 where a merchant fails to object to the written confirmation of an oral contract that is sent by another merchant (thus, merchants who fail to read their mail may lose their ability to assert the statute of frauds defense)

SOF & Merchants

Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection 1 against such party unless written notice of objection to its contents is given within 10 days after its received SO - if after an oral agreement is made, one party sends a confirmation and the receiving party has reason to know its contents but doesn't object to it, then a confirmation that is a sufficient writing operates as if it were a writing signed by the receiving party The last provision means that the party must deny existence of the contract not merely object to its terms

Leal v. Holtvogt

Facts: Ferdinand Leal and his wife (the Leals) (plaintiffs) entered into a partnership agreement with Joseph and Claudia Holtvogt (the Holtvogts) (defendants). The partnership agreement afforded the Leals a one half interest in a horse that the Holtvogts owned in exchange for $16,000. Prior to the agreement, the Leals maintained a student-teacher relationship with the Holtvogts. The Holtvogts were experts in the equine industry and the Leals testified that they entered into the agreement based on representations the Holtvogts made. Specifically, the Holtvogts knew what type of horse the Leals were looking for and suggested that the Leals abstain from purchasing another horse and enter into their agreement. The Holtvogts also stated, among other things, that their horse could command high prices as a stud. The Holtvogts failed to disclose that the horse had been treated for lameness. Holding: If a seller should know the buyer's particular purpose for purchasing goods and that the buyer is relying on their expertise, then the transaction is subject to the implied warranty for a particular purpose, provided the buyer actually relies on the seller's expertise. Reasoning: If a seller should know the buyer's particular purpose for purchasing goods and that the buyer is relying on their expertise, then the transaction is subject to the implied warranty for a particular purpose, provided the buyer actually relies on the seller's expertise. The implied warranty for a particular purpose is limited Article 2 transactions. Article 2 governs the sale of goods. Goods are moveable items that are existing and identifiable at the time of sale. A sale is completed by passing title. However, full title need not pass in order to complete a sale. That is, a partial interest is sufficient to constitute a sale. Therefore, the transaction at issue in this case is subject to Article 2. This case is subject to Article 2 because the Leals purchased a partial interest in a horse, which is moveable and identifiable.

Phillips v. Cricket Lighters

Holding: A claim for breach of an implied warranty of merchantability will not stand if the good was used for an improper purpose that does not constitute an ordinary use.

Predominant Purpose Test

Majority rule ---Ask: whether the transaction is predominantly a sale of goods with services attached or predominantly a service transaction with sale of goods attached ---Value of goods is not necessarily the most important factor ---Court decides whether the predominant purpose of the transaction is to sell goods or services •If sale of goods is predominant factor in transaction then Article 2 of the UCC applies to the whole transaction •If its services then Article 2 of the UCC does not apply to any part of it

Article 2 w/ Sale of Goods

ONLY APPLIES TO THE TRANSACTION OF GOODS! ---2-102: unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyer ---Applies to barter situations 2-304(1)

Magnuson-Moss Warranty Exclusion of Remedies

M-M allows limitation of remedies, even though the seller cannot often limit warranties • Does not contain many restrictions on the seller's ability to limit remedies but if a seller creates a full written warranty then M-M creates 2 restrictions o First, the seller must make conspicuous on the face of the warranty any exclusions or limitation of consequential damages (15 USC 2304(a)(3) o Second, the seller must allow the buyer to get a replacement or a full refund for a defective product when the seller is unable to remedy the malfunctions in the product after a reasonable number of attempts (15 USC 2304(a)(4)) 2-719(1)(a) - (b): authorizes a seller to create certain remedies that will be the buyer's exclusive remedies but the seller must clearly bring to the buyer's attention the exclusivity of the remedy for it to be effective • Agreement may provide for remedies in addition to or in substitution of those provided in this chapter 2-719(2): if the exclusive or limited remedy fails of its essential purpose then the remedy may be had as provided in this Act • Ex: can only repair a couple of times until the remedy fails its essential purpose, or lemon laws 2-719(3): allows seller to limit or exclude consequential damages unless the exclusion or limit is unconscionable • Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable under 2-719 o But limitation of damages where loss is commercial there is a presumption that it is not unconscionable

Implied Warranty of Fitness For a Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section, an implied warranty that the goods shall be fit for such purpose • Implied whenever the seller knows that the buyer is buying the goods for a particular purpose and is relying on the seller's expertise to select or furnish the goods and promises that the goods are indeed fit for the buyer's particular purpose This warranty does not arise often No requirement that the warranty be in writing It can be given by sellers who are merchants and those who are not Analysis of whether this warranty applies in a situation • Seller must have reason to know of buyer's particular purpose • Seller must have reason to know that buyer is relying on seller's skill or judgment to furnish or select appropriate goods • Buyer must, in fact, rely upon the seller's skill or judgment

Parol Evidence Framework

---1st, look to the writing itself • Look for a merger clause or integration clause that is a term that states that the parties intended the writing to be a complete and exclusive statement of their understanding o NOTE: presence of one of these is not conclusive evidence on the issue of integration -for example if its located in boilerplate text then courts look disfavorably upon it • Whether the agreement appears to be carefully negotiated and drafted o If it was, even if it lacks a merger clause, then it was probably the parties' intention to include their final and complete agreement in the writing o Court is very likely to find agreement between two sophisticated parties resulting from negotiation was intended to be their complete and exclusive writing Less likely to come to this conclusion when writing is a contract of adhesion signed by a consumer • Comment 3: Are the additional terms are such that if agreed upon they would certainly have been included in the document in view of the court? o Objective test - not whether these parties actually made the agreement but whether reasonable parties in the circumstances would have done so o If they would have certainly been included they must be kept from the trier of fact

•Article 2 has an important gap-filing function in the sales system ---Common Law is a back-up of the UCC gap filing function

--UCC 1-103(a): [The Uniform Commercial Code] must be liberally construed and applied to promote its underlying purposes and policies, which are: (1) to simplify, clarify, and modernize the law governing commercial transactions; (2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) to make uniform the law among the various jurisdictions. ---UCC 1-103(b): code displaces any common law to the contrary but common law should continue to supplement provisions of the code •"Unless displaced by the particular provisions of the UCC, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy and other validating or invalidating cause supplement its provisions ---U.C.C. § 2-725(1) gives a FOUR YEARS to commence an action for breach of a sales contract measured from the time when the cause of action accrued, NOT when the plaintiff became aware of the defect.

Consumer Leases vs. Finance Leases

1. Consumer lease: 2A-103 ---A lease transaction between a lessor that is regularly in the business of leasing or selling and an individual who leases goods for personal, family or household use ---Generally receives more protections • Prohibitions against bad faith accelerations by lessors • Special disclosure requirements • Heightened unconscionability protections ---When a consumer lease is distinguished • 2A-516(3): Notice of Infringement o In a consumer lease, failure to give notice of a claim of infringement is not a bar to recovery • 2A-504(3)(b): Liquidated Damages o There is a limitation of a consumer lessee's liability for payments retained as liquidated damages • 2A-503(3): Consequential Damages o Limitation, alteration or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable • 2A-109(2): Option to Accelerate at will o In a consumer lease, the burden of establishing good faith under this provision is on the party who exercised the power • 2A-108: Unconscionability o Under subsection (2), in a consumer lease unconscionable acts include those in inducing the contract or collecting a claim. Subsection (4) provides for attorney's fees for the consumer if the court finds unconscionability or against the consumer if the court finds the claim was groundless and knew it was groundless • 2A-106: Choice of Law o A choice of the law of a jurisdiction other than where the lessee resides is not enforceable, nor is the choice of a forum that would not otherwise have jurisdiction over the lessee 2. Finance lease: ---Involves three parties rather than two and the putative lessor is really no more than a provider of financing to the lessee

Parol Evidence DOES NOT APPLY if offered for:

1. To prove that there has been an additional agreement supported by consideration 2. To show that the agreement is not effective Evidence of duress, fraud, mistake, unconscionability, lack of capacity and lack of consideration may be offered even if an agreement was intended to be final and exclusive because its not being offered to prove a term but instead to show factor that prevented formation of the contract 3. To show that performance is not due Ex: performance is subject to a condition 4. To prove that there has been a modification of the agreement Parol evidence rule applies to agreements made prior to or contemporaneously but modifications would be after the creation of the agreement so the parol evidence rule would not apply 2-209: unlike common law, no consideration is necessary for modification of a contrac • So parties may always introduce evidence of side agreements that occurred after the writing in question 5. To explain or interpret the terms of the written agreement All courts agree that parol evidence should be admitted for the purpose of resolving an ambiguity of the langue but disagree as to whether parol evidence should be used for the purpose of determining whether an ambiguity exists 6. To offer evidence of course of performance, course of dealing or trade usage 2-202 expressly states that evidence of COPCOPUOT to supplement the agreement should not be barred even if the parties intended the agreement to be final and complete • Because parties in a trade or accustomed to dealing with each other probably make unconscious assumptions that the practices they are familiar with will be incorporated into the agreement Unless parties specifically negated that possibility -2-208 • Specifically stating in your merger clause that COPCODUOT cannot be used to explain or supplement this contract

Merchants

2-104(i): "merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill •3 ways to be a merchant ---Goods merchant: has superior knowledge because of frequent dealings with goods involved in the transaction Ex: car dealership who sells D a car ---Practices merchant: might not deal in the particular goods, but is familiar with the practices of buying and selling Ex: University purchasing department ordering a gadget for the first time, they may have never dealt with gadgets before but are familiar with purchasing practices in general ---When a party uses an agent who has the knowledge Ex: John owns a car dealership and gets Mary, who is in the business of assisting car buyer to negotiate a deal for him. John is a merchant for A2 purposes because his agent has superior knowledge in the transaction

§ 2-318. Third Party Beneficiaries of Warranties Express or Implied.

Alternative A: A seller's warranty whether express or implied (ALL SELLER WARRANTIES) extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect (PROXIMATE CAUSE) that such person may use, consume, or be affected by the goods and who is injured in person (Physical Injury only, but an argument can be made that if suffers physical injury he can then recover property damage also!) by breach of the warranty. A seller may NOT exclude or limit the operation of this section. • This section makes very clear there is NO privity requirement so even though consumer bought through a middleman he can sue original manufacturer ALTERNATIVE B --A seller's warranty whether express or implied (ALL SELLER WARRANTIES) extends to any natural person who may be reasonably expected to use, consumer, or be affected by the goods and who is injured in person by breach of the warranty. **SELLER MAY NOT EXCLUDE OR LIMIT OPERATION OF THIS SECTION ALTERNATIVE C --A seller's warranty whether express or implied (ALL SELLER WARRANTIES) extends to any natural person who may reasonably expected to use, consume, or be affected by the goods and who is injured BY THE BREACH OF WARRANTY. **SELLER MAY EXCLUDE OR LIMIT this section, / respect to injury to the person of an individual to whom the warranty extends

Parol Evidence Partial Integration

CAN ADMIT CONSISTENT ADD'L TERMS o Means that it's the parties' final agreement as to at least one term -a complete and final expression of all the terms addressed in that written agreement but not a final and complete expression of all the terms the parties agreed upon o Unless the court finds the writing to have been intended as a complete and exclusive statement of the terms of the agreement So even terms that supplement the agreement are not admissible if the court finds that the writing was intended to be complete and exclusive (fully integrated)

Crews v. W.A. Brown & Son, Inc.

Facts: Calvary Baptist Church (Calvary) (defendant) purchased a walk-in freezer from Foodcraft (defendant). Foodcraft purchased the parts for the freezer from the freezer's manufacturer, W.A. Brown & Son, Inc. (Brown) (defendant). Foodcraft then assembled the walk-in freezer on-site at Calvary. The freezer's door came pre-assembled with inside and outside releases. After assembly, Foodcraft tested the door latch and found that it worked properly. Several months later, Vickie Crews (Crews) (plaintiff) was volunteering at Calvary. Crews thought she heard a noise coming from the freezer, and she walked inside. The door closed behind her. Crews tried to open the freezer door using the inside release, but she could not trigger the latch. More than an hour passed before Crews was discovered in the freezer. She had suffered severe frostbite to her extremities, requiring the amputation of nine toes and several skin grafts. Holding: Under the Uniform Commercial Code, states can only extend implied warranties of merchantability from the buyer to the buyer's: (1) household guests, (2) family members, and (3) employees. Reasoning: Privity is the contractual relationship between two parties. In general, an injured person must have privity with a manufacturer or seller before the injured person can sue for injuries caused by a defective product for her injuries. However, the Uniform Commercial Code (UCC) § 2-318 allows states to extend implied warranties of merchantability to persons who lack privity with a defective product's seller. In most states, the privity requirement is removed for a buyer's: (1) household guests, (2) family members, and (3) employees. However, in states that have adopted this rule, the privity bar remains in place for people who are further removed from the sale than household guests, family members, and employees. In this case, Crews did not have any privity with Foodcraft for the freezer.

DF Activities v. Brown

Facts: DF Activities Corporation (DF) (plaintiff) is led by an enthusiast of the work of Frank Lloyd Wright. Dorothy Brown (defendant) lived in a house designed by Frank Lloyd Wright, and owned a chair also designed by Wright. DF instructed its art director, Ann Briggs, to negotiate with Brown to convince her to sell the chair to DF. Briggs alleges that on November 26th, Brown agreed to sell the chair to DF for $60,000, payable in two installments. Brown denies ever making this agreement. On December 3rd, Briggs sent a letter to Brown confirming the agreement to sell the chair, and followed this with a check for $30,000. Brown returned the check and the letter, and wrote on the letter that she never agreed to a contract and had made "other arrangements" for the chair. Brown later sold the chair for $198,000. Holding: When a defendant raises a statute of frauds defense and submits a sworn affidavit denying the formation of a contract with the plaintiff, the plaintiff may not seek additional discovery to attempt to gain an admission from the defendant of the contract under oath. Reasoning: Brown submitted a sworn affidavit denying that she formed a contract to sell the chair with Briggs, and thus DF may not seek additional discovery. When a defendant raises a statute of frauds defense and submits a sworn affidavit denying the formation of a contract with the plaintiff, the plaintiff may not seek additional discovery to attempt to gain an admission from the defendant of the contract under oath. The UCC permits an exception to its statute of frauds where "the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made." UCC § 2-201(3)(b). This option to seek admission from a defendant in discovery is not available to a plaintiff, however, if the defendant has already submitted sworn documents or testimony denying the existence of a contract. Permitting additional discovery in this instance would involve providing the plaintiff with an opportunity to try to put words in the defendant's mouth, or to attempt to pressure the defendant into perjuring himself by admitting he gave incorrect testimony in his earlier sworn affidavit.

General Trading v. Wal-Mart

Facts: February 1999, Beth Gitlin, a seasonal buyer for Wal-Mart, began negotiating with Patrick Francis, the president of GTI • 250,000 vine reindeer for resale to Wal-Mart customers during the 1999 Christmas season. • March 1999, GTI executed Wal-Mart's standard vendor agreement. - vendor agreement provided that any changes in the agreement must be in writing and executed by both parties. - Wal-Mart issued separate purchase orders, covering price and quantity terms, to GTI for the purchase of the reindeer. Holding: Writings showing only a tentative agreement or negotiations do not constitute confirmatory writings for purposes of the Uniform Commercial Code's merchant exception to the statute of frauds. Reasoning: Section 2-201 of the UCC, which is known as the UCC's statute of frauds, generally requires that contracts for the sale of goods for more than $500 be evidenced by a writing and signed by the party against whom enforcement of the contract is sought. However, UCC § 2-201(2) contains an exception for merchants. This exception permits oral agreements between merchants, as long as the oral agreement is confirmed in writing by one of the parties and not objected to within 10 days of the confirmation's issuance. A confirmatory writing does not have to be signed by the party against whom enforcement is sought, but the writing must evidence a solid agreement between the parties. A writing indicating only a tentative agreement or ongoing negotiations does not satisfy the requirements of UCC § 2-201(2).

Hill v. Gateway

Facts: Hills bought comp over phone, only discussed price, later learn they had to return comp within 30 days to reject (paper came in box). Holding: Under the Uniform Commercial Code, a purchaser may be bound to terms included in product packaging if the purchaser has an opportunity to review the agreement and reject it by returning the product.

Belden, Inc. v. American Electronic Components, Inc.

Facts: In the 1990s, Belden assured AEC that Belden used a particular type of insulation to make the wire. Typically, AEC would send a purchase-order form with AEC's terms and conditions on the back page. Belden would then respond with a customer-order acknowledgement. This acknowledgement form contained boilerplate language on the back that limited Belden's liability. Belden's customer-order acknowledgement also stated that Belden's acceptance of the order "is expressly made conditional upon Buyer's assent solely to the terms of [Belden's form]," including this new term limiting Belden's liability. In 2003, Belden sold wire to AEC that used the wrong insulation. The insulation cracked when used for sensors in thousands of cars, and AEC was responsible for the cost of the recalls and repairs. AEC sued Belden for breach of contract Holding: Under Uniform Commercial Code § 2-207, if a party's acceptance of an offer contains new terms not included in the original offer, a sales contract is still created as long as the acceptance is not expressly conditioned on assent to the proposed new terms.

Cook v. Downing

Facts: Plaintiff sued from a condition that was the alleged result of ill-fitting dentures. Damages were awarded pursuant to for the implied warranty of fitness for a particular purpose. The dentist argued that any claim the patient might have had sounded in tort. The court agreed, holding that the trial court erred in entering judgment in favor of the patient based on the UCC. In Oklahoma (as in N.C.), a dentist was not a merchant and dentures, furnished by the dentist, were NOT goods under the UCC. The fact that the dentist held himself out as specializing in the preparing and fitting of dentures did not remove him from the practice of dentistry and transform him into a merchant. The court ruled that those who, for a fee, furnished their professional medical services for the guidance and assistance of others were not liable in the absence of negligence or intentional misconduct. In general, dentists were required to use ordinary skill in treating their patients. Dissent: The implied warranty of merchantability deserves a closer look. Dentist fits the definition of merchant and dentures fit the definition of goods. The transaction of a patient being fitted for and purchasing dentures from a dentist is actually a hybrid. It is not purely a sale of goods by a merchant, nor is it purely the providing of a service by a health care professional. Whether implied warranties under Article 2 apply to such a transaction should depend on whether the predominant element of the transaction is the sale of goods or the rendering of services. If the sale of goods predominates, it would be within the scope of Article 2 and the implied warranties contained therein. However, if the service aspect predominates, there would be no implied warranties.

Carlson v. Giacchetti

Facts: The lessor (King) leased equipment (heavy machine used to pull out dents in auto-body repair) to the lessee who defaulted and then sold the equipment to the purchaser, who had no notice of the lease. The court found that the lessee had no option to purchase at the end of the lease and was required to return the equipment, which had an economically significant reversionary interest. A transaction in the form of a lease does NOT create a security interest merely because: 1. The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into; 2. The lessee assumes risk of loss of the goods; 3. The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs; 4. The lessee has an option to renew the lease or to become the owner of the goods; 5. The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or 6. The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

Hebron v. American Isuzu Motors, Inc.

Facts: While Rachel Hebron (Hebron) (plaintiff) was driving her Isuzu Trooper on an interstate highway, another driver cut in front of her. This caused Hebron to swerve and roll over. Hebron was permanently injured in the accident. More than two years later, Hebron sued American Isuzu Motors, Inc. (Isuzu) (defendant) for $750,000 in damages. Holding: The Uniform Commercial Code's requirement to provide notice of a breach applies to sales to both merchants and retail consumers. Reasoning: The UCC's requirement to provide notice of a breach applies to sales to both merchants and retail consumers. Section 2-607 of the UCC requires that buyers to notify a seller of an alleged breach within a reasonable time after discovering the breach. The UCC defines a buyer as a person who buys goods. Consequently, both merchants and retail consumers are buyers for purposes of the UCC. Here, Hebron bought her Isuzu Trooper from a car dealer, making her a person who buys goods under the UCC. As a buyer, she was required by UCC § 2-607 to give Isuzu reasonable notice of any alleged breach. By waiting for more than two years to notify Isuzu of her vehicle's alleged defect, she made it impossible for Isuzu to inspect the vehicle, prejudicing Isuzu.

Crovatta v. Deggingers' Foundry, Inc.

Holding: The Uniform Commercial Code permits parties to supplement or explain a written contract using evidence from their course of dealing, usage of trade, or course of performance. Reasoning: UCC § 2-202 prohibits the use of parol evidence to contradict the terms of a contract. Parol evidence is any evidence of that is outside the contract. However, § 2-202 permits parties to use their course of dealing, usage of trade, or course of performance to supplement or explain the written terms of a contract. This type of evidence is allowed so long as the parties' contract is not intended to be a complete embodiment of their agreement. However, if a contract has an integration clause, then it is considered the final version of the parties' agreement and no parol or outside evidence may be introduced about extra terms, even if they are part of a course of performance or dealing.

TeeVee Toons, Inc. v. Gerhard Schubert GmbH

Holding: The United Nations Convention for the International Sale of Good does not contain a parol evidence rule barring the introduction of outside evidence to determine the terms of a written contract. Reasoning: The CISG does not contain a parol evidence rule barring the introduction of outside evidence to determine the terms of a written contract. Unlike the Uniform Commercial Code, the CISG does not have a parol evidence rule. Therefore, the CISG does not prohibit the introduction of outside or parol evidence to interpret a contract, even if that evidence contradicts the written terms of the contract. Indeed, under the CISG, parol evidence is even allowed to determine whether the parties intended for a merger clause to be part of their contract. A merger clause is a clause in a contract stating that the written agreement represents the complete agreement between the parties and prohibits introduction of evidence of prior dealings.

2-314: Implied Warranty of Merchantability; Usage of Trade

Implied Warranty of Merchantability; Usage of Trade (1) Unless excluded or modified, 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. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale • NOTE: if the seller is a practices merchant rather than a goods merchant then it does not give this warranty (2) Goods to be merchantable must be at least such as: • Pass without objection in the trade under the contract description • In the case of fungible goods, are of fair average quality within the description • Are fit for the ordinary purposes for which such goods are used o Most common definition of merchantable which basically means that the buyer can reasonably expect a certain level of performance from the goods Ex: new car v. used car • Buyer can only reasonably expect that it is fit for the ordinary purposes of a car of that age so if a used car salesman sells a used car with 50K miles on it and the transmission fails after you would have to ask the question whether a car transmission is ordinarily fit to last more than 50K miles • Run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved • Are adequately contained, packaged and labeled as the agreement may require • Conform to the promise or affirmation of fact made on the container or label if any (3) Unless excluded or modified (2-316) other implied warranties may arise from the course of dealing or usage of trade • Ex: a farm implement dealership has always sold its used tractors with the understanding that it would repair any defect that arose within 30 days of the sale then that would become part of the bargain because of course of dealing OR if understood in that trade that goods must live up to a certain level of performance Unless disclaimed or modified, this implied warranty of merchantability arises in every sale of goods where the seller is a merchant with respect to the goods of the kind being sold • 2 key promises in this warranty o Goods being sold are at least as good as other similar goods in the trade and o That the goods are fit for their ordinary purposes for which goods of that description are used NOTE: an implied warranty of merchantability dispute may arise because a particular safety feature was not included in the product • Even used goods, as long as they are sold by merchants of that kind, come with an implied warranty of merchantability, but they are not warranted to perform as if new goods, just only as appropriate to such goods for that is their contract description • Also, remember the Cricket lighter case Does not require goods be of the best quality or the best obtainable quality but does require they have an inherent soundness which makes them suitable for the purpose for which they are designed Ordinary = common or average

Contract Formation w/ Leases & Int'l Sales

Leases o Commercial leases are rarely concluded through the exchange of forms - they are likely the product of a negotiated contract o Article 2A does not have a battle of the forms o 2A-204 and 2A-205 are identical to its counterparts in 2-204 and 2-205 2A-204: Formation in General • A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract • An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined o So we don't need to know exactly when the lease is formed to conclude that it formed • Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy

Adel v. Greensprings of Vt., Inc.,

Plaintiff suffered from a severe case of Legionnaires' disease after returning from a ski vacation during which he stayed at the corporation's resort. The water at the resort was tested by health officials, and some of the samples contained Legionella bacteria. Holding: (1) water was a "good" under article 2 (2) the corporation was a "merchant" with respect to water (3) because the condominium owners of the resort's units paid the resort for water, they were "buyers" of the water, and thus, the warranty of merchantability (4) the corporation was in the business of selling water for purposes of strict liability; and (5) the manager could be held liable for negligence because he was personally responsible for the resort's water supply at the time the husband got sick.

Requisites to Formalization in Real Estate Sales

Richard v. Richard Holding: To be enforceable, a contract for the sale of real property must be in writing, unless a party seeking enforcement is in possession of the property and has partially performed through payments and improvements, such that repudiation of the contract would be unjust. Reasoning: If it would be unjust to allow repudiation of the contract, partial performance may be an exception to the Statute of Frauds requirement that sales of real property be in writing. For this exception to apply, the partial performance must be substantial. The party seeking enforcement must demonstrate the following as evidence of their reliance on the agreement to purchase: (1) possession of the property, (2) improvements to the property which are permanent in nature, and/or (3) payments toward the purchase price of the property. In some cases, evidence of possession and one additional factor may be sufficient to demonstrate reliance on an agreement to purchase, but other cases require some combination of all three factors. In all cases, the partial performance must refer to the oral agreement on which the party seeking enforcement relies.

Scope Issues w/ Real Estate

Shimrak v. Goodsir Facts: Peter and Patricia Shimrak (plaintiffs) entered into a purchase agreement to buy a house from Susan Goodsir (defendant). The purchase agreement conditioned the sale on the Shimraks' ability to obtain financing within 30 days of Goodsir accepting the offer. If the Shimraks failed to obtain timely financing, the Shimraks had two option. The Shimraks could either request an extension or remove the financing contingency from the agreement. If Goodsir were to refuse a request for an extension, the purchase agreement would be voided. Holding: If a real estate contract is contingent upon two alternative options, the party to whom the contingency applies is obligated to choose one of those options. Real estate transactions are often made contingent upon the buyer's ability to obtain financing within a certain period of time. Here, the parties' purchase agreement provided that if the Shimraks failed to timely obtain financing, the Shimraks "may either" withdraw the financing contingency or seek an extension. This language obligated the Shimraks to pursue one of these two courses of action. The Shimraks were not entitled to reject both options in the event of a failure to obtain financing. The Shimraks' request for an amendment did not operate as a request for an extension, but was rather a request for an additional contingency. In rejecting the amendment, Goodsir was not refusing an extension and did not void the purchase agreement. By failing to choose one of the two options provided by the contract, the Shimraks failed to perform the purchase agreement within a reasonable period of time and thereby breached the agreement.

Bright Line Test of Whether Transaction is True Lease or Disguised Sale:

The court must first ask whether the debtor has a right to terminate the purported lease prior to expiration of its term. A provision in a contract requiring the lessee to remain financially liable to the lessor for payments that become due after the termination date does not constitute the right to terminate under the statute. • If the debtor does NOT have a right to terminate, the court then examines whether any of the four enumerated conditions have been satisfied. • A transaction creates a security interest (1) if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee, AND 1. the original term of the lease is equal to or greater than the remaining economic life of the goods, 2. the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods, 3. the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement, OR 4. the lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement. The test is whether the option price is so low that the lessee will certainly exercise it and will, in all plausible circumstances, leave no meaningful reversion for the lessor. • If there is NO right to terminate but also none of the four conditions apply, the court cannot find that, as a matter of law, the contract constitutes a security agreement. However, the analysis does not end there. The court must further examine the specific facts of the case to determine whether, despite failing the bright line test, the "economics of the transaction" still suggests a security interest. Among the relevant factors are: 1. Facts that the lessee was not under an absolute obligation to purchase the leased property and that the purchase option was not for a nominal sum. 2. The debtor bears all costs of insurance, taxes, and upkeep for the chattel 3. The debtor bears the risk of loss if the chattel is injured. 4. The debtor was required to pay advance rent / down payment. 5. The creditors did not own the chattel when they agreed to "lease" it to the debtor. Instead, the chattel was supplied by third parties, suggesting that movants were simply financing a sale.

What is a Good?

UCC 2-105(1) ----All things (including specially manufactured goods) which are movable at the time of identification to the contract for sale, other than the money in which the price is to be paid, investment securities and things in action. Also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (2-107) ----Includes minerals, or the like, including oil and gas (BEFORE EXTRACTION) or a structure or its material to be removed from realty. ---Transaction is only within A2 if the property is severed from the real property by the seller If the buyer is to sever then such transactions are considered contracts affecting land ---Sale of timber or growing crops or other things attached to realty and capable of severance without material harm thereto oProperty in this subsection includes fixtures oTransactions involving these things are included within A2 whether the property is removed by the buyer or the seller

SOF but doesn't meet 5 requirements

a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement • this is based on reliance (b) If the party against whom enforcement is sought admits in his pleadings testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted (c) With respect to goods for which payment has been made and accepted or which have been received and accepted • courts are divided upon the issues of partial performance such as a down payment - however, courts more inclined to find a deposit sufficient when enforcement is sought against the seller rather than the buyer

UCC 2-207-Battle of the Forms

o (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms: BUT NOT acceptance IF: - NOT "definite or seasonable expression of acceptance or - Expressly made conditional upon the acceptance of the additional or different terms Subsection 1 answers the question of whether there is a contract What is a definite and seasonable expression of acceptance? • Potentially, there must be an agreement on the essential terms and the boilerplate terms are the different ones o For example, agreement on price, quantity, etc. A party can contract around the default rule that a response that contains additional or different terms is an acceptance and therefore forms a contract by providing that acceptance is expressly made conditional on assent to the different or additional terms • What language is sufficient? Best practice is to include statutory language • If the language is effectively incorporated into its form, there is no acceptance if not expressly made to condition, and thus there is not a contract o If the goods are shipped and the buyer pays for them and they are accepted then you turn to 2-207(3) - the writings don't establish a contract but the contract is recognized because of their conduct So the terms of the contract are what both parties agree upon and then what they don't agree the terms are knocked out and gap fillers are used for the rest Often times parties enter into oral agreements • Written confirmation must be a proposal for additional terms under subsection 2 so it's presumptive so have to ask if additional terms materially alter the oral agreement? • If both parties submit confirmation and each contains an additional term but states it differently, one approach is to apply the knock out rule - this approach is supported by official comment 6 o (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: • The offer expressly limits acceptance to the terms of the offer • They materially alter it o Do not look at offeror's proposed terms in toto but look at each term individually o Examples of what materially alter and what do not are found in official comment 4 and 5 • Notification of objection to them has already been given or is given within a reasonable time after notice of them is received Although this provision does not specify what to do with different terms—the best thing is to treat them the same as additional terms?? Or apply the judicial knock out rule and apply UCC gap fillers If between merchants then additional or different terms are presumptively part of the contract unless it falls into one of the three ways to rebut that presumption If not between merchants than presumptively not part of the contract o (3) Conduct by both parties, which recognize the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writing of the parties agree, together with any supplementary terms incorporated under any other provision of this Act. Mere exchange of forms is not sufficient conduct to constitute course of dealing

Analysis to determine whether a transaction is a true lease or disguised sale

o 1st, ask the fundamental economic question What is the likelihood that a lessor will recover some meaningful residual interest at the end of the term of the lease (1-203(a)) • If it is unlikely that the lessor will receive the goods back while they still have value, then the transaction is a sale not a lease o 2nd, ask whether the lessee has the power to terminate the lease prior to the expiration of the lease? (1-203(a)) NOTE: a provision that requires the lessee to remain financially liable to the lessor for payments that become due after the termination does not constitute the right to terminate under the statute should always ask if the putative lessee is required to pay rent for the entire term of the lease! If the lessee has the power to terminate the lease prior to its expiration, would it be economically rational to do so? • If the lessee can rationally terminate the lease before its expiration, then the transaction is a lease, not a sale o 3rd, if the lessee is bound to the end of the lease or it would be irrational to terminate, consider the four enumerated alternative factors of 1-203(b)(1)-(4) If lessee is bound until end of the lease, its still a lease unless one of the four factors is satisfied - if one of them is satisfied then it is a sale not a lease 1-203(b): A transaction in the form of a lease creates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee AND 1. Original term of lease is equal to or greater than the remaining economic life of the goods 2. Lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods 3. Lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement OR a. Test: whether the option price is so low that the lessee will certainly exercise it and will, in all plausible circumstances, leave no meaningful reversion for the lessor i. 1-203(d): additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised 3. NOT NOMINAL: see 1-203(d) 4. Lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement

Express Warranties 2-313

o 2-313: Express Warranties by Affirmation, Promise, Description, Sample Express warranties by the seller are created as follows: • Any affirmation of fact or promise made by the seller to the buyer which relates to goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise • Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description • Any sample or model which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description It is not necessary to the creation of an express warranty that the seller use formal words such as warrant or guarantee or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty o Comment 3: in actual practice, affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods; hence no particular reliance on such statements need to be shown in order to weave them into the fabric of the agreement o Express warranties must be made affirmatively by the seller to the immediate buyer o Express warranties may arise from the following Oral representations Written representations Description of goods Any sample or model shown Plans or blueprints Technical specifications Reference to a market or official standard Quality of goods sent to the buyer in the past Brochures or advertisements

Notice Contract Terms

o 2-607(3)(a): where a tender has been accepted, the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy Comment 4: clarifies that the notice requirement applies to retail consumers and commercial buyers but reasonable notice may be more strictly applied to merchant buyers than retail customers. The requirement of notification is meant to defeat commercial bad faith, not to deprive a good faith customer of a remedy So a condition precedent to bringing a breach of warranty claim against a seller is notice TENDER triggers notification requirement Ex: seller agrees to deliver 1,000 widgets by June and the widgets are not tendered until June 8 so buyer accepts widgets but informs seller that it is seeking damages for the late delivery Clear that notice must be given to immediate seller but split of authority as to whether failure to give notice to remote seller such as a manufacturer precludes the ultimate purchaser from bringing a claim against that party o Buyer might waive right to recover if fails to follow customary inspection procedures for a given industry and only later finds out of defect that could have been discovered sooner o Because the third party beneficiary is not the buyer, courts have not required the third party beneficiary bringing a claim under 2-318 to provide notice to the seller o 2-607(5)(a): Where the buyer is sued for breach of warranty or other obligation for which his seller is answerable over: he may give his seller written notice of the litigation. If the notice states that the seller may come in and defendant and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defendant he is so bound Notification must only be general - notifying the seller of breach, not necessarily each specific objection ***Official Comment 5: ...the reason of this section does extend to requiring the beneficiary to notify the seller that an injury has occurred. What is said above, with regard to the extended time for reasonable notification from the lay consumer after the injury is also applicable here; but even a beneficiary can be properly held to the use of good faith in notifying, once he has had time to become aware of the legal situation."

UCC 2-205 Firm Offers

o Elements 1. An offer • Not defined in Article 2 so we look to common law • Offer: promise to do or not to do something conditional on getting something requested in return ----Generally, an advertisement is NOT an offer 2. By a merchant • As defined in 2-104(1) 3. To buy or sell goods 4. In a signed writing which by its terms gives assurances that it will be held open ---Has to inform the offeree that it will be held open -ex: this offer will be held open for X days or this offer is firm ---Writing: printing, typewriting, or any other intentional reduction to tangible form ---Signed: any symbol executed or adopted with present intention to adopt or accept a writing Consequence 1. Is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror • So if all elements are satisfied then the offer is irrevocable even though no consideration has been paid • Default rule of how long it stays open is a reasonable time but parties are allowed to state a time that the offer will stay open so long as it doesn't exceed three months • If the term of a firm offer is found in a form supplied by the offeree, the offeree must call it to the offeror's attention and have the offeror sign that term ----2-205 limited exception to common law rule that "firm offer" requires consideration IF OFFEROR = MERCHANT and OFFER IN WRITING "reasonable time" [not longer than 3 months]

Disclaimer of Express Warranties

o Express warranties that are part of the basis of the bargain are hard to disclaim 1st - was the express warranty made? • If an affirmation of fact or a promise is made during negotiations and the parties omit it when they reduce their agreement to a writing that they intended to be a complete and exclusive statement of the terms of the agreement then the parol evidence rule bars its introduction and the express warranty is not part of the contract 2nd- if an express warranty was made, was the warranty effectively disclaimed? o 2-316(1): Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit the warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this chapter on parol or extrinsic evidence negation or limitation is inoperative to the extent that such construction is unreasonable Thus, if an express warranty is admissible under the parol evidence rule because the writing is not a full integration, the warranty might nevertheless be effectively disclaimed if the disclaimer limited the warranties to those given in the writing The language creating the warranty and language disclaiming the warranty is to be read as consistent with each other, but where that is unreasonable, the disclaimer is not effective Ex: Car manufacturer provides in warranty terms: there are no warranties express or implied, including but not limited to the implied warranty of merchantability. For the first three years of 36K miles, whichever comes first, we will repair or replace any defective parts • Here the manufacturer has both disclaimed express warranties and given an express warranty and it is not reasonable to read the two terms as consistent so the language of the disclaimer is not effective to disclaim the express warranty given. This is a reasonable interpretation for the manufacturer's intention was to say there are no express warranties except the one given o Express warranties can be disclaimed orally with a statement such as "there are no express warranties" or with a more formal written statement

Magnuson Moss Distinctions

o Gives consumers a federal cause of action for breach of warranty, including the possibility of recovering costs and attorney fees to the prevailing party for breach of warranty o Applies to only to consumer products Consumer: buyer, other for purposes of resale of any consumer product or any person to whom such product is transferred during duration of implied or written warranty or any other person who is entitled to terms of such warranty or under applicable state law to enforce against the warrantor Supplier: any person engaged in business of making consumer product directly or indirectly available to consumers Warrantor: any supplier or to her person who gives or offers to give a written warranty or who is or may be under an implied warranty o Applies only to warrantors of consumer products Tangible personal property distributed in commerce that is normally used for personal, family or household purposes Medical devices and prescription drugs are NOT consumer products o 108(c) says a disclaimer, modification or limitation made in violation of this section shall be ineffective for purposes of this Act and State law Seller may try to exclude the implied warranties for at least two reasons • They know the average customer does not know that the disclaimer is legally ineffective • Written warranties may not apply to product but to product's missing or defective parts o Still the attempted disclaimer should be ineffective anyways o Does not require a seller to give any warranty but a seller who does give a written warranty must make certain disclosures Allows supplier who does not give any warranty to disclaim implied warranties Seller must designate the warranty as either full or limited • Warrantor who gives full warranty may not disclaim or limit the duration of implied warranties o 15 U.S.C. 2308(a): even if supplier does all the right things to disclaim implied or express warranties, no supplier may disclaim or modify (except as provided in subsection (b) of this section) any implied warranty to a consumer with respect to such consumer product if such supplier makes any written warranty to the consumer with respect to such consumer product • Warrantor who gives limited warranty may not completely disclaim implied warranties but may limit the implied warranties to duration of a written warranty of reasonable duration (15 U.S.C. 2308(b)) o Example: A seller making a limited 90 day warranty would be authorized to limit the duration of implied warranties to a period no shorter than 90 days but a seller making a full 90 day warranty is not allowed to limit the duration of the implied warranties

Requisites to Formalization in International Sales

o No default rule in the CISG that bars the introduction of extrinsic evidence No parol evidence rule and allows extrinsic evidence even if it contradicts the written documentation • The parties intent to include side agreements is a question of fact But remember Article 6 that parties may vary from the effects of the CISG provision so parties may create their own parol evidence rule with a standard merger clause that deems a particular writing complete and exclusive o Article 8(3): due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties Requires that when there is a merger clause and the court is deciding whether the merger clause represents the parties intent they should consider all relevant facts because if either party had a contrary intent then the merger clause would have no effect o Article 11: there is no writing requirement - contract may be proved by oral statements between parties

UCC 2-204 Formation

o Sales contracts can be made in any manner sufficient to show agreement, even conduct by both parties which recognizes the existence of such a contract o Even if we cannot pinpoint the exact moment a sales contract was formed, we may still conclude that a contract existed o Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy ---On gap that cannot be filled is the quantity term - if no quantity is stated and there is no objective basis for supplying a quantity, then no contract is formed • Exception: 2-306: Outputs, Requirements and Exclusive Dealings o The quantity is stated in terms of the output of the seller or the requirements of the buyer ---Default rule for price - 2-305(1)

Specific Disclaimer of Implied Warranties

o Specific Disclaimers Most common way to disclaim the implied warranties is through the use of a specific disclaimer 2-316(2): subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it, the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states for example, that "there are no warranties which extend beyond the description on the face hereto" Note that to disclaim the implied warranty for merchantability you must use the word merchantability but to disclaim the implied warranty of fitness for a particular purpose you do not have to use those words

UCC 2-206: Offer and Acceptance in Formation of Contract

o Unless otherwise unambiguously indicated by the language or circumstances An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium, reasonable in the circumstances • Refers to acceptance by promise (bilateral contract) or by performance (unilateral contract) or by either method where reasonable • Medium: medium used for communication o No requirement that same medium be used for offer and acceptance so long as the medium is reasonable in the circumstances An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer • Offer to buy can be accepted by promise to ship or by performance of shipping goods • So shipment is acceptance even if the goods shipped don't conform to the terms of the offer -if you don't give accommodation notice then it's an acceptance and simultaneous breach • So seller could accept offer to buy and breach contract by shipping non-conforming goods • If sends non-conforming goods and note that says non-conforming goods are an accommodation, this is not an acceptance but a counteroffer • Seasonably: an action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time o Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance Reminds us that when acceptance is by performance, the offeror might not reasonably know that the offeree so the burden is placed on the offeree to notify the offeror of its acceptance

§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.

• A course of performance is a sequence of conduct between parties to a particular transaction that exists if: (1-303(a)) o The agreement of the parties with respect to the transaction involves repeated occasions for performance by a party o And the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection • A course of dealing is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct (1-303(b)) o Sequence means more than one -something that gives them the idea that what you had been doing will continue to be done • A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law (1-303(c)) • A COP, COD or UOT of which they are or should be aware of, is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement and may supplement or qualify the terms of the agreement. A UOT applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance (1-303(d)) •Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade. (1-303(e)) o Express terms of an agreement >COP>COD>UOT ****but remember that you can use COPCODUOT to define/ascertain the meaning or to supplement or qualify express terms • Subject to Section 2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance. (1-303(f)) • Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party. (1-303(g))

CISG Articles 1-5

• Article 1: this applies to contracts of sales of goods between parties who places of business are in different states when: (1) The parties are contracting states or (2) When the rules of private international law lead to the application of the law of a contracting state So if the application of choice of law rules concluded that US law applied as between US and non-CISG state, then CISG would still apply • BUT: Article 95: state may declare that it will not be bound but this rule o US has made this reservation so in this case CISG would still not apply and court would likely just apply general principles of contract because there is no federal contract law o The fact that the parties have their place of business in different states is to be disregarded whenever this fact does not appear either from the contract or from any dealings between or from information disclosed by, the parties at any time before or at the conclusion of the contract So it only applies if parties know or have reason to know at the time of contract formation that they have place of business in different contracting states • Party's Place of Business: the place which has the closest relationship to the contract and its performance • Article 2: CISG does not apply to sales: (1) of electricity, (2) of ships, vessels, hovercraft or aircraft, (3) of stocks, shares, investment securities, negotiable instruments, or money, (4) on execution of or otherwise by authority of law, (5) by auction, or (6) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use o So CISG applies only to commercial parties • Article 3: Preponderant Part Test for mixed goods/services contracts o CISG does not apply to contracts for which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services • Article 4: CISG govern only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract o Not concerned with Validity of the contract or of any of its provisions or any usage Effect which the contract may have on the property in the goods sold • Article 5: the CISG does NOT APPLY to the liability of the seller for the death or personal injury caused by the goods to any person o It only applies to monetary damages

Scope Issues w/ Leases

• Article 2A and Article 2 allow the parties to make their sales or lease contracts more or less as they wish with gap fillers • Significant differences between the two because the lessor, unlike the seller has a reasonable expectation of receiving the goods back at a time when the goods still have meaningful economic life • The characterization of a transaction as a lease or sale is an important first step in the analysis ---3 types of functional attributes that are different for sales and leases Tax/accounting related UCC related • If a purported lease transaction is found to be a sale, typically the lessor will at least want the transaction to be treated as a secured sale rather than an unsecured sale Bankruptcy related • Lease: payment for temporary possession, use, and enjoyment of goods with the expectation that the goods will be returned to the owner with some expected residual interest of value • Sale: unconditional transfer of absolute title to the goods, where a security interests is only an inchoate interest contingent on default and limited to remaining secured debt • 1-203(a): whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case key facts are those which indicate whether the lessor retains a meaningful residual interest -----If it's a true lease then the lessor is entitled to have the goods back • How do you tell the difference between a true lease and a disguised sale? o Intent of parties is irrelevant o Economic Realities Test ****This test considers the likelihood, at the time the transaction is entered into, that the lessor will receive the goods back at a time when the goods still have meaningful economic life (value). ----If there is a reasonable likelihood that the lessor will retain some residual interests in goods then it is a true lease ----If no, then the transaction is considered a disguised sale intended for security

Revised NC Contract Sale Form

• Eliminates many of the Buyer's separate contingencies; e.g., financing contingency or inspection contingency • INSTEAD: buyers have "due diligence period" - investigate property and - determine whether they will be able to obtain a loan. - at the end of the due diligence period, buyers can decide to continue/close contract or terminate it for any reason [or no reason] • Due Diligence Period -negotiated between buyer and seller. -depends upon what the buyer will do—if period is to cover getting loan approval, likely to be 30 or as long as 45 days. • Why would S take house of market during DDP? -Sellers may request due diligence fee -Fee paid directly to seller upon execution of contract -Fee non-refundable. • Earnest Money -[revised ]contract form provides for earnest money from the buyer. -Earnest money from buyer at contract execution and deposited in an escrow account. -Due diligence period begins and then--- 1. If buyer terminates contract prior to the end of due diligence period, seller keeps due diligence fee and earnest money is refunded to buyer. 2. If buyer continues transaction beyond expiration of due diligence period but fails to close, earnest money belongs to the seller. •At the end of DDP -Buyers can decide to "Buy or Not Buy" -Sellers can decide to "Sell or Not Sell".

Magnuson-Moss Warranty Act

• Federal law designed to protect consumers from deceptive warranty practices o But M-M claims can be brought in sate court - remember federal amount in controversy requirement • Supplements UCC warranty law • Allows only two kinds of written warranties with respect to goods to which it applies o Full (statement of duration) warranty Must comply with 104 Must not violate 108(a), which says that no supplier may disclaim or modify any implied warranty to a consumer with respect to such consumer product if such supplier makes any written warranty to consumer with respect to such consumer product o Limited (statement of duration) warranty Limited warranty duration can be no less than the express warranty duration • 103(a)(1): requires that if the written warranty meets the federal minimum standards set down in 104(a), then the warranty shall conspicuously be designated as a full (Statement of duration) warranty o Can limit duration only a reasonable time period • §2308(a): states that if at the time of sale or within 90 days thereafter, a supplier enters into a service contract with consumer, which applies to such consumer product, the supplier may not disclaim or modify any implied warranty with respect to that product. o Service contract: contract in writing to perform over a fixed period of time or specific duration, services relating to maintenance, repair or both of a consumer product

Disclaimer of Warranties

• In many cases, sellers can legitimately alleged the injury complained of by the buyer was caused by factors other than the products defect and that even if the product was defective, the seller could allege the defect was caused by the buyer following the purchase • Ambiguity in the language of a warranty disclaimer is likely to be construed strictly against the seller that drafted it • When courts are faced with the tension of freedom to contract and anti-oppression they use these factors: o The relative bargaining power and sophistication of the parties - is the buyer a consumer or business person? o The price paid - did it appear that the buyer chose to sacrifice greater warranty protection by paying a lower than usual price? o COPCODUOUT o What the words of the contract actually said, including how clearly the limitations of the usual warranty protection was brought home to the buyer and how well the provision complied with the technical requirements of A2 on disclaimers and limitations of warranty 1. Express 2. Implied

Scope of Issues w/ CISG

• Party's place of business is the place "which has the closest relationship to the contract and its performance" • The CISG does NOT cover contracts where the preponderant part of the seller's obligation consists in the supply of labor or other services. • The CISG does NOT cover the sale of consumer goods, unless the seller neither knew nor should have known that the goods were being purchased for a consumer purpose. • The CISG does not apply to the liability of the seller for death or personal injury caused by the goods sold. ONLY MONETARY DAMAGES! • The CISG specifically excludes from its coverage issues whether the sale to the buyer cuts off the property interests of third parties in the goods that were sold. To exclude the CISG (disclaim) as the governing law for a contract, a party must: 1. Provide that the law of a particular state will apply, AND 2. Expressly state that the CISG will NOT apply. ***Contracting States: US, Canada, Mexico, China, Japan, Italy -UK is NOT

Role/Scope of Codes in Sales Systems

-Ragus v. City of Chicago -Simulados v. Photon -Cook v. Downing -Mixed Contracts

Article 2 created rules for 2 kinds of special leases

1. Consumer Leases 2. Finance Leases **Most of Article 2A provisions assume a basic, 2 party, arms length transaction in which the parties have roughly equal bargaining power

Disclaimer of Implied Warranties

1. Specific 2. General

Contract Terms

1. Warranties w/ Goods -Express -Implied 2. Notice & Privity 3. Magnuson-Moss 4. Lease, Int'l Leases, & Real Estate 5. Reducing/Eliminating Warranty Liability 6. Commercial Impracticability 7. Unconscionability 8. Title w/ Sale of Goods 9. Title w/ Leases, Int'l Leases, & Real Estate

Economic Loss Doctrine

A common law rule holding that when an injury is purely economic, and arises from a contract made between two businesses, the injured party may only sue under the UCC. "North Carolina recognizes the economic loss doctrine, which generally bars a tort action against a party to a contract who simply fails to properly perform the terms of the contract, even if that failure to properly perform was due to the negligent or intentional conduct of that party, when the injury resulting from the breach is damage to the subject matter of the contract." (emphases added) **Exceptions: fraud, deceit, negligent misrepresentation

Parol Evidence Full Integration

ALL EXTRINSIC TERMS EXCLUDED o Comment 1 rejects any assumption that because a writing has been worked out which is final on some matters, it is to be taken as including all the matters agreed upon **How do we determine if it's fully integrated? PARTIES INTENTION **Note that only objective evidence of intent should be used**

Ragus Co. v. City of Chicago

Facts: The City awarded a contract to Ragus for the fulfillment of rodent traps. Ragus delivered only half the number of traps the City expected to be delivered, and the City refused delivery. Procedural Posture: Ragus filed a complaint against the City, and the City filed a motion to dismiss. •Ragus/plaintiff's argument: Ragus had complied with the contract. •The City/defendant's argument: Usage of trade demonstrates that 24/case refers to 24 pairs per case. Holding: The Court found that the contract was ambiguous as to whether 24/case and 12/case referred to individual traps or to pairs of traps. Reference to usage of trade was proper.

Valero Marketing & Supply Co. v. Greeni

Holding: Although a corporation may use a choice-of-law provision to designate governing law other than the CISG, those provisions are not effective unless the parties expressly opt out of the CISG. • Article 6: the parties can vary from the effect of its provisions or contract out of the CISG, subject to Article 12 o In order to exclude the CISG, a party must (1) provide that the law of a particular state will not apply and (2) must also expressly state that the CISG will NOT apply NOTE: "IMPERIAL CLAUSE" ALLOWS US COURT TO APPLY US LAW IN ANY CASE WHERE THE COURT DEEMS TRANSACTION TO HAVE "APPROPRIATE CONNECTION" TO THE STATE (WHERE THE COURT IS LOCATED). Kristinus v. H Stern

Implied Warranties

o 2-312: Warranty of Title o 2-314: Implied Warranty of Merchantability; Usage of Trade o 2-315: Implied Warranty of Fitness For a Particular Purpose

Requisites to Formalization in Leases

o Parol Evidence Rule Rules governing extrinsic evidence for lease contracts in 2A-202 are precisely the same as in 2-202 o Statute of Frauds 2A-201 Takeaways: • Necessity for writing with leases does not kick in unless the total lease payments are at least $1,000.00 o NOTE: many states have an exception for consumer transactions that require any lease involving a consumer must be in writing • When a writing is required in a lease deal, slightly more must be in the writing than with a sale: o Signature of the party to be charged o Indication the lease contract was made o Describe the goods leased and describe the lease term • The statutory exceptions to the writing requirement for leases also differs slightly: o No merchant's exception to the writing requirement o No battle of the forms section o No exception for payment received and accepted by the lessor

To recover for a warranty claim the buyer must show:

o Warranty existed o Warranty breached o Breach caused harm (cause in fact) o Damages o Ability to fend off one of the defense

Process of Sales Contract Formation

• Article 2's formation rules o 2-204 o 2-205 o 2-206 o 2-207 • Formation of a contract is generally NOT an issue but the formation rules of A2 take significance with respect to determining the terms of the agreement

Statute of Frauds & Sale of Goods

• Similar to the common law, most contracts do not have to be in writing to be legally enforceable • 2-201 provides four circumstances where a sales contract is enforceable even without the existence of a writing o Transactions for a price of under $500 • A writing that omits or incorrectly states a term does not fail the SOF but the plaintiff only gets the lower term/price/quantity • Writing does not have to be delivered to satisfy the SOF UCC 2-201: Memorandum • It must evidence a contract for the sale of goods • It must be "signed"* • It must specify a quantity

Mixed Contracts

•Predominant Purpose Test: (Majority) Court decides whether the predominant purpose of the transaction was to sell goods or services. If goods then Article 2 applies to the whole transaction, even the services portion. If services then Art. 2 does not apply to any portion of the transaction, not even the goods portion. •Gravamen of the Action Test: (Minority) Court determines whether the gravamen of the action (the source of the complaint) is with the goods or services portion of the transaction. If the problem lies with goods, then Article 2 applies even if the predominant purpose of the transaction is services rather than goods.

Contract Terms Horizontal Privity Warranties

Used to describe the legal relationship between a party and a non-party even though there is no contract between them If the concept of privity were strictly applied, horizontal privity would prevent many people from recovering An exception to the rule of privity is that a third party beneficiary may be able to sue on the contract 2-318 was drafted to provide a breach of warranty claim to certain third party beneficiaries of the warranty • It's the only Article 2 provision that invites the adopting jurisdiction to enact one of three alternatives

Mixed Contracts & Computer Software

---Software is probably not movable and therefore not a good according to the A2 definition, but sellers or licensors often model their contracts, particularly the warranty provisions on contracts for the sale of goods, so it seems sensible to apply A2 to the transaction Many courts have done so expressly or by analogy

Simulados v. Photon

Article 2 of the UCC governs mixed contracts for services and goods if the contract is predominantly for the sale of goods.

Economic Realities Test

Courts use this to determine if the transaction is a lease or disguised sale. The test simply considers the likelihood, at the time the transaction was entered into, that the lessor will receive the goods back at a time when the goods still have meaningful economic value. If not, the transaction is considered to be a disguised sale creating a security interest in the goods. (reversionary interest) • The intent of the parties is irrelevant.

What is NOT a Good?

Intellectual property Money •BUT: remember that comment 1 to 2-105 states that goods is intended to cover the sale of money when money is being treated as a commodity but not to include when money is the medium of payment Documents •Ex: investment securities Instruments Accounts Chattel paper Services Real estate/real property Things in action •UCC does not define this •Also called choses in action •Ex: buying a chance to get a good or if you owe me money

Privity Contract Terms w/ Warranties

o Because warranty law is based in contract law, a warrantor is directly liable only to the party with which it has a contract But even when manufacturer is not vouched in, most courts provide by common law that when consumers are personally injured by manufacturers product, the manufacturer can't escape warranty liability due to vertical privity 1. Vertical Privity 2. Horizontal Privity

Defenses to Recovery for Breach of Warranty

o Duty to notify o Disclaimer o Assumption of risk o Lack of privity o Statute of limitations Generally 4 years NC is 3 years for most ordinary contract actions

Gravamen of the Action Test

---Looks to the source of the dispute ---Court determines whether the source of the complaint is with the goods or with the services portion of the transaction •If its with the goods, then Article 2 of the UCC applies •If its with the services, then Article 2 of the UCC does not apply ---Under this test a blood transfusion that claims contaminated blood could be a sale of goods so most hospitals have rules and regulations that transfusions are strictly services

Compare Contract Formation UCC vs. CISG

1. Offer -UCC: No definition. See Common Law definition §1-103 -CISG: Defined: Art. 14 2. Firm Offer -UCC: •From MERCHANT •Signed writing •Assurance of irrevocability •3 mo. Duration max -CISG: •No writing required •States fixed time for acceptance •"may" be irrevocable •No time limit on duration 3. Acceptance -UCC: EFFECTIVE ON DISPATCH See Common Law "Mailbox Rule" -CISG: EFFECTIVE ON RECEIPT by Offeror 4. Battle of the Forms -UCC: •Acceptance can contain "materially different" or "additional terms" •BUT to be in contract, Offeror must assent •Note: Common law "last shot" does not apply -CISG: •"Acceptance" containing material terms = rejection and counteroffer •See ART. 19 definition "material terms" including terms re dispute resolution •"last shot" rule may apply 5. SOF -UCC: •Contract for sale of GOODS for $500 or more must be evidenced by a writing •UNLESS an exception applies -CISG: •NO WRITING required •UNLESS party to contract resides in State that has opted out of CISG on this issue

4 ways a UCC Gap Filler can be superseded:

1.When the contract itself specifies what that term should be. 2.Where the parties' course of performance creates an agreement by implication. •Relates to that particular contract 3.Where parties' past dealings with one another have established a particular way that the parties do business with one another. (Course of dealing) •How the parties have dealt with each other in similar past transactions. 4.If there is a custom in a particular industry concerning a performance term. (Usage of trade) ****(This is a hierarchical system --COPCODUOT)

Is Article 2 the only default set of rules for the sale of goods? NOPE!

EXCEPTION: diamond and grain industry ---1-302: (a) except as otherwise provided in subsection (b) or elsewhere in the UCC, the effect of provisions of the UCC may be varied by agreement; (b) the obligations of good faith, diligence, reasonableness and care prescribed by the UCC may not be disclaimed by agreement. The parties, by agreement, may determine the standard by which the performance of these obligations is to be measured if those standards are not manifestly unreasonable

Contract Formation w/ Real Property

Minimum "essential" terms to be enforceable 1. Names Seller and Buyer 2. Description of the property 3. Signature of party to be charged 4. Price • Memorandum of the Contract - May be more than one "writing" - IF all relate to the same transaction - AND when considered together supply the essential elements to be enforceable

UCC 2-317 Cumulation and Conflict of Warranties Express or Implied

o Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply: (a) Exact or technical specifications displace an inconsistent sample or model or general language of description. (b) A sample from an existing bulk displaces inconsistent general language of description. (c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

UCC 2-202 Final Written Expression: Parol or Extrinsic Evidence

• 2-202: Final Written Expression: Parol or Extrinsic Evidence o Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties [BOTH PARTIES] as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: By court of performance, course of dealing or usage of trade and By evidence of consistent additional terms unless the court finds the writing to have been

Agreements vs. Contracts

•Agreements -----1-201(b)(3) "Agreement", as distinguished from "contract", means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including COPCODUOT as provided in Section 1-303. o Agreements can be inferred from other circumstances including COPCODUOUT ****Agreement starts with the bargain the parties in fact made, which could come from their words, their conduct and the circumstances. In addition an agreement includes COPCODUOT o Whether an agreement has legal consequences is determined by applicable provisions of the UCC and to the extent provided by 1-103, by the law of contracts • Contracts ----1-201(b)(12): "Contract" as distinguished from "agreement" means the total legal obligation that results from the parties agreement as determined by the UCC as supplemented by any other applicable laws

4 Functions of Transfer of Ownership From Seller to Buyer

•Brings buyers and sellers together and enables them to create legally enforceable transfers of ownership ----Provides legal rules to define when formation occurs AND also provides people and institutions to help enable formation •Provide a set of standard terms that govern the transfer of ownership unless the buyer and seller choose to modify the standard terms ----Gap filling function fulfilled by code such as UCC or CL or standard forms •Facilitate performance by providing a set of delivery instructions that enable the possessory, legal and symbolic transfer from seller to buyer •Enforce agreements to transfer ownership by giving the aggrieved buyer or seller various remedies for breach by the other that may be non-legal or consist of various damage formulas

Disclaimer of General Implied Warranties

2-316(3): Notwithstanding subsection (2) • (a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and o Unless the circumstances indicate otherwise? The court may find such circumstances exist in a consumer transaction in which the purchaser does not understand the meaning of the term or when the language is not conspicuous o NOTE: the Federal Trade Commission Used Motor Vehicle Regulation Rule states that a window stick must be on the used vehicles of merchant sellers to inform the buyer whether its purchased with or without warranty (AS IS- NO WARRANTY) Also requires that used car dealer post a prominent buyer's guide in the window of each used car, indicating to the consumer whether or not the car is being sold with a warranty and, if so, whether the warranty is a full warranty or a limited one • (b) When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or refused to examine the goods there is no implied warranty with regard to the defects which an examination ought in the circumstances to have revealed to him; and o Offical Comment 8: examination is not synonymous with inspection made before acceptanace or any other time Must be a demand by the seller the buyer examine the goods fully • (c) An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade o Just as warranties can be created through course of dealing or usage of trade, they may be disclaimed through this as well o 2-316(4): Remedies for breach of warranty can be limited in accordance with the provisions of this article on liquidation or limitation of damages and on a contractual modification of remedy

Contract Terms Vertical Privity Warranties

Used to describe the legal relationship between the parties to a chain of distribution, such as a manufacturer, distributor, retailer and buyer • Each party in the chain has a contract only with the party on either side of it Vertical privity is mostly governed by common law Case law in most jurisdictions has developed to allow a claim by a third party against the manufacturer for breach of express warranties made by the manufacturer Most jurisdictions allow remote purchaser to sue a manufacturer for breach of an express warranty Comment 3 to 2-313: Although this section is limited in its scope and direct purpose to warranties made by the seller to the buyer of a contract for sale, the warranty sections of this Article are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined either to sales contracts or to the direct parties to such a contract. They may arise in other appropriate circumstances such as in the case of bailments for hire, whether such bailment is itself the main contract or is merely a supplying of containers under a contract for the sale of their contents. The provisions of 2-318 on third party beneficiaries expressly recognize this case law development within one particular area. Beyond that, the matter is left to the case law with the intention that the policies of this Act may offer useful guidance in dealing with further cases as they arise.

Sales Provisions

--UCC 1-203: provisions of the Code displace any common law to the contrary, but that the common law shall continue to supplement the provisions of the Code. --Article 2: the most prevalent set of default rules for sales of goods. There are some sales systems that specially shun Article 2, including the diamond industry and the grain industry

Warranties w/ Sale of Goods

1. Express o Require no magic words and no intention on the part of the seller to make them So seller does not need to use magic words like warranty or guarantee o But, remember that 2-607(4): its up to the buyer to prove that the seller both gave a warranty and breached it o Anyone selling goods can make express warranty o Warranties are affirmations of fact or promises, not opinions or statements of value Often hard to draw the line between warranty and mere puffing • Merely giving an opinion, statement of value or commendation is puffing not warranty • Ask—can it be objectively measured? If so, its likely an express warranty not puffing • Factors to consider when deciding if seller's statement is mere puffing o Specific language More like an express warranty than vague language o Written statements More likely express warranty than oral statements o Context of seller's statement If buyer requests seller give his opinion of the product, then it is likely puffing o Reasonableness of buyer's reliance on seller's statement If reliance was reasonable under the circumstances o What statements under the circumstances and in objective judgment becomes part of the basis of the bargain o Another issues is whether the express warranty is part of the basis of the bargain Most authorities hold that basis of the bargain means that the buyer must have relied on the bargain 2. Implied o 3 Implied Warranties Title Merchantability Fitness for Particular Purpose

Roser Technologies v. Carl

Reasoning: Under the common law mirror-image rule, an acceptance that contains terms different from those of the offer is a counteroffer. Like the mirror-image rule, Article 19 of the CISG provides that a reply purporting to be an acceptance constitutes a counter-offer if the reply contains material alterations to the offer. The CISG additionally provides that standard conditions are not incorporated into a contract unless one party attempts to incorporate the standard conditions and the other party has reasonable notice of that attempt. Holding: The United Nations Convention for the International Sale of Goods (CISG) incorporates the common law mirror-image rule.

CISG Articles 6-10

• Article 6: the parties can vary from the effect of its provisions or contract out of the CISG, subject to Article 12 ---In order to exclude the CISG, a party must (1) provide that the law of a particular state will not apply and (2) must also expressly state that the CISG will NOT apply • Article 7: questions concerning matters governed by the CISG which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or in the absence, in conformity with the law applicable by virtue of other private international law • Article 10: If a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or after the conclusion of the contract ---If a party doesn't have a place of business then, reference is to be made to his habitual residence

Parol Evidence w/ Sale of Goods

• When parties do have a contract in writing they are limiting their ability to enforce terms not contained in the writing • 2 variables to consider o What is the nature of the writing that seeks to exclude extrinsic evidence? o What is the nature of the extrinsic evidence sought to be excluded? • The Parol Evidence Rule bars introduction into evidence of certain terms not put into writing • Parol Evidence Rule only applies when extrinsic evidence is being offered to supplement or contradict the terms of the written agreement • The rule does not say that an agreement cannot be found partly in writing and partly in oral statements o Rather its saying that where the agreement is found is a questions of the parties' intent • Confirmatory memorandum: contract or purchase order and confirmation • A confirmation, purchase offer sheet, and purchase order are all writings that are NOT intended by BOTH parties to be a final expression of the agreement • So according to the rule, if after both parties negotiate and they set for their agreement in writing and their writing is intended as a final expression of their agreement then they cannot offer evidence to contradict the terms that are included o A writing signed by both parties when the negotiations are over is at least a partial integration because the writing is considered to be a final integration of the parties' understandings with respect to the terms it contains