UCC Sales: Lawrence Problems and Answers
UCC Sales Problems
Problems on Goods to be Severed From the
Land
1. Seller (S)
owned a building which she orally contracted to sell to Buyer (B), who was to
remove it from its concrete foundation, put it on skids, and drag it away.
Before removal, S repudiated.
S defends her action by asserting the statute or frauds.
(The statutes of frauds provisions specify which contracts must be in
writing in order to be enforceable).
Does the statute of frauds section of Article 2 apply to this contract?
In order for
the statute of frauds provisions to apply, article 2 of the UCC must apply to
this transaction. Therefore, it is
necessary to figure out whether the UCC applies to this type of transaction or
not.
§2-105
states that, “Goods” also includes…growing crops and other identified things
attached to realty as described in the section on goods to be severed from
realty (§ 2-107).
§ 2-107(1)
states that, A contract for the sale of minerals or the like (including oil and
gas) or a structure or its materials to be removed from realty is a contract for
the sale of goods within this Article if they are to be severed by the seller
but until severance a purported present sale thereof which is not effective as a
transfer or an interest in land is effective only as a contract to sell.
Buyer was to
remove the edifice, so this subsection does not apply.
In order for the UCC to apply, the seller must remove the good from the
land. The Statute of Frauds for
article 2 of the UCC does not apply, however the SOF for land transactions does
apply. Since the buyer is to sever,
this transaction is a contract is a contract effecting land and all problems of
the Statute of Frauds and of the recording of land rights apply to them.
2. Seller (S)
agreed to sell Buyer (B) timber to be severed by S.
S severed half of the timber.
Before B could haul it away, a fire destroyed all of the timber that B
agreed to buy, standing and severed.
Do the Article 2 provisions on the risk of loss apply?
Yes.
§ 2-107(2) if the wheat can be severed from the land without material
harm thereto, § 2-107(2) states that Article 2 governs the transaction.
The timber is a growing crop.
With this type of agreement, it is irrelevant whether or not the seller
or the buyer severs the crop from
the land. It doesn’t matter
if the buyer of the seller cuts the timber, it will be a sale of goods, not real
estate.
What if
instead of timber, it was gallons of oil, under the property, but you had to
drill it. Contract if the seller
does the drilling,
3. Farmer (F)
agrees to sell his wheat crop, yet to be harvested, to Buyer (B) for $55,000 or
$60 a bushel, whichever is higher.
Shortly before the harvesting is to begin, B repudiates.
Does Article 2 govern F’s remedial rights?
Does article
2 govern the buyer’s remedial rights?
2-107(2). This is a scope
questions. Will the remedial rights
be found in article 2, or the common law.
Article 2 will govern this transaction if it is for the sale of goods.
Yes.
§ 2-107(2) if the wheat can be severed from the land without material
harm thereto, § 2-107(2) states that Article 2 governs the transaction.
The wheat is a growing crop.
It does not matter who harvests the crop.
Made
explicit within the statute, you have parsed the statute, but you left out a
very important part of the requirement, it doesn’t stop where you stop.
BUT NOT DESCRIBED IN SUBSECTION I.
Questions on Offer and Acceptance
1.
§2-204 Formation in General
§2-205 Firm Offers
§2-206 Offer and Acceptance in Formation of Contract
§2-207 (Some aspects involve contract formation.)
2. Why so
little? There is a lot of law in
the common law. It would be tough
to codify all the holdings of contract law and reduce it to several provisions.
3. How is a
contract for the sale of goods formed?
Are offer and acceptance required?
According to §2-204 of the UCC, a contract for the sale of
goods may be made in any manner sufficient to show agreement.
On its face the UCC does not require offer and acceptance per se, as long
as there is an agreement.
4. If S sends
a telegram to B offering to sell B specified goods, does B have to respond by
telegram in order to accept? By a
means of transmission at least as fast as telegram service?
No, according to UCC § 2-206(1)(a), “an offer to make a
contract shall be construed as inviting acceptance in any manner and by any
medium reasonable in the circumstances.”
As long as the medium which the buyer chooses is deemed as
‘reasonable’ then there is offer and acceptance.
5. If an
offeror indicates that an acceptance must be by a return promise by telephone to
the offeror in two days, can the offeree nevertheless create a contract by other
means?
If the terms of the contract are unambiguously indicated by
the language of the circumstances, then no, offeree cannot create a contract by
other means. §2-206(1)
Offeror has
unambiguously indicated. What if
these two parties have dealt with each other in the past and the buyer never
complies and never pays any attention to the two day limitation and the seller
always goes along with it. The
circumstances do not suggest that this is an unambiguous demand.
6. Does a
contract for the sale of goods fail if the parties do not specify the price to
be paid for the goods?
No, not necessarily.
§2-204(3) states that “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 contract and there is a reasonably certain basis for giving and
appropriate remedy.”
Did the parties intend to make a contract?
Is there a reasonably certain basis for giving an
appropriate remedy?
Used to be
that a contract failed if any material terms were left open, and this lead to
considerable litigation to what is considered a material term.
A lot of courts literalize this and have become more willing to find a
contract formed even though certain basic terms are missing.
The drafting here is horrible according to the professor.
You must convince the court that the parties intended to make a contract.
The court must have an appropriate bases for determining what that term
is. Code drafts a number of default
provisions.
Indicate a
way in which the standard may be easily satisfied or fail.
Parties have the intent and agree on many of the terms over the sale of a
painting but can’t come to an agreement on a price.
They agree to designate an art appraiser, both pay the fee and that is
the contract price. Before he
appraises the painting the identified appraiser dies.
Why did the parties pick this particular appraiser?
Can the court select another appraiser, or did the parties want him for
his specific judgment, this contract will fail for indefiniteness.
Questions on Firm Offers
1. The offeror is a book salesman offering to buy an
electric range.
This is not a firm offer since the book salesman is not a
merchant in the strict sense of the term because he does not regularly deal with
electric ranges, he regularly deals with books.
See §2-104 for the definition of “merchant.”
A person who
is engaged in selling goods of that kind.
Is a book salesman a merchant, yes, in respect to books, but not in the
selling of an electric range.
2. The offer
is oral.
According to §2-205, a firm offer must be a signed writing.
What is a
writing? 1-201, no this is not a
writing.
3. The offeror
illegibly initials his written offer.
This is unclear, however §1-201(39) states that “signed”
includes any symbol executed or adopted by a party with present intention to
authenticate a writing. This sounds
like it will be a firm offer because it is assumed that the offeror had present
intent to authenticate the writing if he was signing it, regardless of whether
it was legible or not.
You can use
any symbol, even if you can read or write.
4. The offer
provides assurances that it will be kept open for seven months.
This is not a valid firm offer because it exceeds 3 months.
According to §2-205 a firm offer is not valid if it exceeds 3 months.
Potentially
would be valid for three months, but not beyond.
Advise you client to use additional consideration, or use multiple
promises. With multiple promises,
you have no legal recourse if the offeror does not renew the promise.
Therefore, use an option contract to bind this via consideration.
5. The offeror
signs a form drafted by the offeree.
§2-205 states, “any such term of assurance on a form
supplied by the offeree must be separately signed by the offeror.”
The offeror is signing a form drafted by the offeree, so this seems like
it is a valid firm offer.
Problem on Contract Formation
(a) Yes, a
contract is formed, §2-206(a) telephone is a reasonable medium.
(b) Yes, a
contract is formed, §2-206(a) telephone is a reasonable medium.
(c) Yes, a
contract is formed, §2-206(a) telephone is a reasonable medium.
1(b) medium
by which they respond would appear to be reasonable.
Acceptance made.
(d) Yes, a contract is formed, §2-206 (b) –prompt shipment
of conforming goods.
(e) Yes, a contract is formed, §2-206 (b) –prompt shipment
of conforming goods.
Is the
acknowledgment form going to be construed as a promise?
Not enough facts to make a final determination.
[44 minutes]
(f)
Yes, a
contract is formed by the current shipment of nonbinding goods with no
accommodation. (see recording)
Ask professor about this. A
contract is formed, but for what?
The 23 inch TV’s, the 21 inch TV’s?
(g)
No contract.
Under §2-206 (b) a shipment of non-conforming goods would be an
acceptance, but they saved it from being an acceptance by sending a seasonable
notice that the goods shipped are an accommodation.
This notice is basically a counter-offer.
It seems like an unambiguous statement as to the terms of
the contract, so the contract would not fall under the guidelines established by
§2-206.
Unless
otherwise unambiguously indicated by the circumstances.
It depends, on all the surrounding circumstances of the case.
Problem on U.C.C. §2-201
(a) There is
no contract under the statute of frauds provision of the UCC §2-201.
This contract is worth more than $500 and no writing pertaining to the
contract was ever made.
Is there any
possibility that
(b) This is
not a valid contract. There is a
writing, and the writing is signed.
§2-201(1) and §2-201(2).
There were 7
elements in subsection 2 and 1 is real problematic.
Is it sufficient against the sender?
Built on what is good for the goose is what is a good for the gander.
This is lacking a quantity, if the roles were reversed and the sender was
the plaintiff, could we successfully use this writing to counter the SOF?
No, without a quantity term, it is not enforceable beyond the quantity
stated. There is no indication of
quantity beyond 2, since there is “skillets” which is plural.
This writing is not sufficient and it doesn’t state the quantity.
(c)
§2-201(3)(a), this contract is probably enforceable.
This is not
an admission under oath, it is not a pleading, or admission in court.
Subsection a, there are a lot of elements that are satisfied.
Who knows, he has had one other order for a glass Christmas tree.
Must examine the market and the nature of his business.
The big hammer, circumstances that reasonably indicate that these are
goods for the buyer.
(d) Dependent
on whether or not a contract can be found…this contract is probably enforceable
under §2-201(2). In the case at
hand
Did not send
an objection within 10 days. No
contract, should they be concerned about that.
It is not a good idea to waive this defense.
It is just too easy to send a protest.
Problems on
Good Faith:
Won’t be
successful, is he under an obligation under good faith?
No, good faith does not apply to
the negotiation, only to its enforcement and performance.
Only 13 substantive provisions in article II that state that you have to
act in good faith.
Is there
anyplace else that we should consider?
Common law, 1-103. This is
at best a case of bare nondisclosure.
2 different
components, honest in fact.
Is the
honesty in fact, a purely subjective standard been breached in this case?
No. They are not lying, they
need and want 300 tons a month.
This would
be a good case for Ice, Inc.
What about
Sam McGee? He says, I don’t like
this answer.
The car
problem: Start out with 1-304, does
this standard apply? Yes, it’s
performance. So you must perform in
good faith. Article I defines good
faith. What about the objective
element? It doesn’t pass the
subjective standard.
Article II
provision that invokes the term good faith:
2-209 is the modification provision.
Modification needs no consideration to be binding.
2-209(1), no consideration, consideration is not an element involved with
a modification.
You must be very careful to refer to
comment 2. It says that
modifications there under must use good faith.
Risk of Loss
(ROL) Problems?:
2-509 and
2-510
2-510 if the
buyer or seller has breached.
Doesn’t say if parties breach, says effect of breach on ROL.
If a party breaches it may or may not have a ROL impact.
Allocate the
risk of loss only as between two parties, the buyer and seller.
First remedy
provision in article II, 2-709.
Once risk of loss passes, the seller has fully performed and he is entitled to
the return performance of payment.
What are the
legal consequences have not passed to the buyer?
I.e. an FOB destination contract.
2-509 is a
great, great provision.
2-509 (a) is
the shipment contract
2-509 (b)
destination
Same results
on ROL allocation under 2-319(1)(a)(b) as 2-509.
Why do we
have them both? Because 2-319 is an
Express Term and 2-509 is a gap filler.
Distinction is the source of the contract.
2-503
2-504 is
going to have relevance for 2-503(2), and also will have relevance for
2-509(1)(a). Nothing real
distinctive here.
1 exception:
Subsection
2, really tricky. We will not press
this. Responsible for ways in which
sellers try to distort what is in subsection 2.
Way in which
the bailee becomes legally responsible for the goods.
Who is the party who is the most likely to insure those goods?
PROBLEMS on
ROL IN ABSENCE OF BREACH:
1.
The buyer carries the ROL here.
Shipment K, the seller has placed the goods in the hands of the carrier.
2-509(1)(a). 2-503(2).
2-504. Why do we need 2-503
and 2-504? Do agree that
technically what is more accurate is 2-509(4), express term here.
Through 2-509(4). 2-319(1)(a).
FOB provision is an express term.
There really is no gap here.
What result?
The buyer has to pay for the goods.
Tie all your answers into the Code criteria.
2-709. What are the
consequences of ROL? If ROL has
passed to the buyer, the buyer is obligated to pay the price of those goods.
2.
Under those terms go to
2-319(1)(a) does look like a shipment contract, but note unless otherwise
agreed. Through the totality of the
agreement of the parties they do not intend a shipment contract by carrier.
2-509(1), (2) not the applicable standard.
Seems like the seller has incurred the obligation, not only to deliver
goods at sellers place of business.
Arguably we have an express provision that says that’s where the delivery will
take place. They never loaded these
goods onto the buyer’s truck.
(b)
How about the bailment situation?
What is the significance of driving the goods back and leaving them there
overnight? What does that do in
respect to 2-509
What is the
relationship between the nature of the parties?
This is an independent bailment contract.
Seller has done everything he has to do under the sales contract.
He has fully performed. Now
when those goods come back to him, he agrees that he can leave them there
overnight while he gets his truck fixed.
This is a separate agreement.
The seller has now taken on the role of a gratuitous bailment.
2-509 doesn’t apply to the bailment relationship.
PROBLEMS ON EFFECT OF BREACH ON RISK OF LOSS
1.
Section 2-510(1). Risk of
loss remained on the seller. The
buyer actually does reject the goods, but that is not required under 2-510.
It just says that he has the right to exercise rejection and risk remains
on the seller from the start. By
rejecting he basically precludes right of revocation (see recording).
Risk of loss is on the seller.
2.
Jenkins can sue for 2/3 2-510(2).
It’s going to pass 2/3 of the loss over to the seller.
Doesn’t tell us what result the court is going to tell the seller who is
suing for full purchase prince.
Sues for the price of the goods, what result?
What are the consequences of the buyer having risk of loss or the seller
having risk of loss. What is the
bottom line? The impact of passing
the risk of the loss to the buyer is
2-709--
what are the circumstances in which he can collect the price?
3 types of cases, the second one in subsection a.
2-510(2) is
the risk of loss allocation. This
is a partial allocation. If the
seller sues for total purchase price, he is going to lose in part.
He will have a good cause of action but it will be reduced to 1/3, the
amount paid by the buyer’s insurance.
The ROL does not reside with the buyer at the time the loss occurred.
The ROL with the 1/3 stays on the buyer, and you have a good cause of
action.
There can be
no good cause of action even with respect for the 1/3 ROL.
Read the conforming goods requirement out.
The better
way to approach the problem like this is to start with the question asked.
Impact if
any that the breach will have on the general risk of loss rules found in 2-319,
when he tendered non-conforming goods, it tendered risk on the seller.
Consider the impact of the revocation, if any.
Does that pass the ROL back to the seller?
Yes, but only to the extent to a deficiency in the buyer’s insurance.
Since that is the extent of ROL on the buyer, that is the extent of the
purchase price recovery on 209?
What is the test on correct ROL allocation?
3. What is
missing? We have to know when the
fire occurred. Under subsection (3)
ROL is on the buyer for a commercially reasonable time.
The repudiation came late in the afternoon, and that night, the fire
struck. Have we satisfied the other
elements at that point? Appropriate
goods. Assume goods are conforming,
time frame is short, we have identified goods, now 2-510 will apply, but it will
still pass ROL to the extent that insurance doesn’t cover loss.
Anti subrogation provision.
(a)
ROL passes to the buyer, meets all elements of 2-503, 2-709(1)(a).
(b) No ROL
pushed over, you have no cause of action under ROL provision, your COA will
totally fail and you will not recover anything.
(c)
He can recover up to 2/3 which represents the deficiency of the goods.
(d)
SUBROGATION CLAUSE: To what
extent can the insurance company recover from Jenkins, the breaching party?
2-510(3) this is exactly how it is going to work, to the extent that the
insured has a good legal claim, that is what right you get through the
subrogation clause, but that is all you get.
The code drafters are saying that to the extent you pay it, we are
denying any claim to the aggrieved party, so you have nothing you can subrogate
to. You pay the claim, that’s it.
¾ of the
loss covered by insurance.
Insurance pays ¾ of the loss.
Insurance can’t recover this from a breaching buyer under 2-510(3).
With respect
to the remaining ¼, the buyer will have to pay the seller.
PROBLEMS ON
CREATING EXPRESS WARRANTIES
(1)
This is a model. There was
an express warranty created. The
question is whether or not the ease of operation became a factor from that model
as to create an express warranty as to the windows not conforming.
There are a lot of ways in which the windows delivered did conform.
No sense if the buyer complained that the windows were heavier.
The problem
here that the compliant is around is that the windows stick.
It is impossible to open or close the windows.
Attorney
representing the buyer, what factor do you stress to the jury that ease of
operation was a factor that fits into the scope of the warranty based on the
model? It was an operating model
and the ease of operation of the model is what made him buy the real life
counterparts. They buyer gets the
idea of ease of operation from the model.
(2)
Is the seller likely to have breached and express warranty?
Was this display that the seller referred the buyer to a sample or a
model? We don’t know.
The seller will argue that the only features are encompassed by the
express warranty are the general features.
If you are the buyer, what are you going to emphasize and stress here?
That he wouldn’t buy if it was not red.
Seller, he never said anything about the color of the handles?
Buyer—if the buyer said he wanted them with red handles, (c) is in there
for something less than (b).
If you are
representing the seller, give me a scenario in which the seller’s attorney could
make an extremely strong showing?
Expectations of the buyer was too narrow.
Nobody cares whether or not the handles are painted, they don’t care.
(3)
What are the prospects of the buyer being able to establish a breach.
You too if you have at least normal manual dexterity will have the same
results. Performance warranty to
achieve these results. [recording @
1 hour].
1(a) does
not say that the promise has to be the benefit of the bargain.
Part of the basis of the bargain.
A, b, and c, all say that part of the basis of the bargain.
If it was the basis of the bargain (not part) then it would be reliance.
Basis of the bargain, we are not talking about contract formation.
Additional
Problem on Creating Express Warranties:
Can’t answer
anything definitively here…
(f) probably
a warranty, there is adequate precision.
Also (h), proving it, if it is not new brake lines, you have a problem.
Mileage is mandatory government testing.
How are you going to prove that you didn’t get 16 mpg per town?
If the brakes have been replaced…those are the types of things that a
mechanic can testify to. There is
another reason for it, emphasize with the jury, imagine each juror that they are
the buyer. Catastrophic failure
with the brakes, this could have very dire consequences.
You are dealing with a psychological factor.
Which one if
you are going to represent the plaintiff would likely be a bad case on
contingency? (a)
What about
(b)? What is the scope, how much is
covered? I.e. what if the car works
fine, but the radio is on the fritz?
This would be a hard case, whereas if the transmission failed, it would
be a much easier case.
(c)—you
can’t drive this car ‘anywhere.’
These are totally dependent on the surrounding circumstances.
Extremely
difficult to disclaim an express warranty (more on this later).
Problems on
Standards of Mechantability
(a)
(Aside from c) (a) and (d).
(a) should apply, see recording for (d).
For (a), the first standard is what was the contract description used?
Second standards is pass without objection in the trade.
What would the reasonable average business person do?
If most reasonable buyers would reject to that delivery under the
contract terms, the warranty is breached.
(b)
2-314(e) ‘as the agreement
may require’ does there have to be
express language requiring packaging?
Most courts have held that it is too restrictive to say that there has to
be something explicit about actual packaging.
There is nothing definitive with respect to that.
Some support in comment 10.
If you are the seller, what kind of responding argument might be available here?
This product is intended to be sold to people who know about rocker
panels. The reasonable part is on
the buyer. In other words pass the
liability to somebody else.
(c)
(a) is a possibility here.
Also, look carefully on (f). It all
comes down to what fish fillet means.
(d)
Issue whether or not the chain was fit for its ordinary purposes.
What did the defendant contend?
We have to affirmatively prove our case.
What do we need to come up with?
What are we going to do in respect to proving a breach of warranty.
If you are going to prove a breach of 2(c) on these facts, what are we
going to have to do in trial court.
Come in with witnesses who use logging chains for our purposes.
Need to get people who use logging chains.
Is this going to get us home free?
Must show seller is a merchant of that kind, also YOU must prove on a
factual basis that those goods were not fit for their ordinary purpose.
Problem on
Applicability of Implied Warranty of Merchantability
Is
applicable under 2-314, the first question is has there been a sale of goods?
No, there has not been a sale of goods.
All he has done is put the item into his cart.
They said
that the sale occurred when the buyer put the item in the cart when the seller
intended to purchase it. Clearly
what the courts are doing, or were doing was playing games, they had to find a
sale to get a recovery here. Why
would the courts engage in such a legal fiction?
The courts felt as a policy matter that the buyer should recover against
the store and the manufacturer. The
most logical way to handle the problem is strict tort theory.
402A.
Why did so
many courts not go that route? 402A
is not law, 402A was a concept that evolved from some of justice Traynor’s
decisions, this was more of a prestatement rather than a restatement.
I.e. this is the way the law ought to go.
How does
402A become law? It is not enacted
through statute, it is enacted by common law.
Would not
plead 2-314, it is clearly not a sale.
The easy result is strict tort.
2-315,
implied warranty for a particular purpose.
3 elements:
At the time
of selling, the seller must have a reasonable purpose to know of the goods are
required.
In reality
2-315 is a very narrow warranty.
Most of the claims under 2-315 fail.
The critical point to understand is that it has to be a particular
purpose. Why do we buy goods?
Most people purchase goods for an ordinary purpose, this is 2-314.
Particular means extraordinary.
Example, you
want to buy heavy equipment, but you want to use it for arctic temperatures.
If a seller gives advice and you take it and use it, then you get the
implied warranty. Most of the time this won’t work because the reason why we buy
goods is for the ordinary argument.
Problem on
Horizontal Privity—
(a)
If it qualifies under A, it will qualify under all other alternatives.
They all suffered physical injury, they were family or household members.
Can they be expected to use or consume
(b)
neighbor is a guest in the home, even under the most reasonable reading,
all of these injured parties are legitimate 3rd party beneficiaries.
(c) He is
not a member of the family or household, so it would not qualify under (a).
What if he was at the door delivering mail?
In litigation people try to stretch who qualifies as a guest.
Ascertain which alternative is applicable, look at all the cases that the
courts have decided in this state, how many of them are out there dealing with
interpretations being guests at home, then turn to cases coming out of other
jurisdictions.
(d)
This is injury to property.
There is physical harm that has been caused to other property in the kitchen.
Who are you going to claim as your plaintiff?
Only Mr. Miller can sue. Why
clutter it up with 2-318, we don’t need it.
There is a possibly fact pattern in which Mr. Miller would not have a
cause of action, if for some reason he doesn’t have a property interest in the
home, if Mrs. Miller owns the home in her name only, Mr. Miller would have no
personal claim for damage to the real estate.
If he purchased these applicances as gifts and were given to her and
recognized exclusively as property to her marital estate and none to his, then
he would have no personal interest to her.
(see recording). Mrs.Miller
has a claim, but we would not add her as an additional party, since we don’t
want to clutter the jury with the outcome.
(e)
Direct economic loss. What
claim that would be applicable, breach of warranty claim here.
This is the claim that is applicable.
Mr. Miller is going to have that claim.
If Mr. Miller does not have a claim, Mrs. Miller has no claim under c.
She is the beneficiary of any warranty that extends to him.
When looking
at harm to property, looking to damage to item other than itself.
Vertical
privity, whom other than the immediate seller of goods is focused on the claim.
Most of the time for breach of warranty you are going to work with the
immediate person you bought it from.
Problem on
Vertical Privity:
(1)-Injury
to person, policy reason, it is the most compelling (this is the worst type of
loss), and beyond that it is the simple political step for the court to go
there. Privity won’t work as a
defense.
(2)-Most
courts will be sympathetic here because it is injury to property.
This the physical damage caused to his house.
Strict tort will extend to any physical harm to the consumer or his
property. Strict tort will always
recognize his claim
(3) direct
economic loss—totally the benefit of the bargain.
It doesn’t do anything, I am not getting any benefit from it, I’m not
going to recover in strict tort here, because it is not covered in 402A.
Bought something that doesn’t work the way you thought it would be.
Implied warranty—more courts than not will not allow recovery here, but a
number of courts have awarded privity and allowed this.
Western case is very illustrative of the kind of reasoning courts have
referred to.
(4)
Consequential economic damages.
Any court that doesn’t allow direct economic loss will not go the next
step. The rationale is almost like
a ritual. This is just too
difficult for the poor remote seller/manufacturer.
The immediate seller is going to
get hammered for the installation.
(5)
Much more likely to be consequential as opposed to incidental.
You have to prove there is a factual causation.
To the extent that I can’t get past the limiting 3 factors, I can’t get
past the damages. Foreseeability,
Hadley v. Baxendale. If it is not
reasonably foreseeable, buyer can’t recover.
CA-Song Beverly act, vertical privity eliminated.
Perfect
Tender Problem:
Cabinet
maker:
A.
Potential responses, are there any rights to cure under 2-508, is there
still time to render proper performance?
Even if the time has passed, then it basically comes down to making a
determination of why seller was five units short.
Also give consideration to potential course of usage or trade dealing.
500 units probably mean 500, if it is the situation where 480 mean 500
and it is a term of art, maybe.
Could be a trade usage to allow right to cure, or what happened between both
parties. Pervading requirement of
good faith. Must use 2-601 only if
it acts in good faith. Given the
fact that these are minor problems that could be easily corrected, it boils down
to will a buyer who rejects under the circumstances, will they be able to
establish a satisfactory explanation as to why they are rejecting.
If the price of cabinets has dropped and he can buy them cheaper
elsewhere, then the burden on the buyer is even higher.
B.
No way to provide cure for a late tender.
PROBLEM ON
REVOCATION
See the
problem if you start jumping into a or b here.
He cannot satisfy the preamble provision, there is simply no
non-conformity. It is a substantial
impairment to Van Burns, but he first of all has to prove the squeak is a
non-conformity. If it is quiet to
the average consumer, then it is quiet.
Procedural
requirement is basically the same, must revoke in a reasonable time, give
seasonable notification. One issue
that has arisen and some courts have been horrible in deciding this issue, let’s
say the buyers in Zabriske used the vehicle for 9 months and put a lot of miles
on it. Unjust enrichment for them
to have the vehicle and use it fully for 9 months and then tell the seller that
you eat the loss. Well use common
law unjust enrichment. The
amendments to the new article 2 do provide that.
PROBLEMS ON
RESPONDING TO IMPAIRED EXPECTATIONS
Problem 1:
You agreed
to those payment terms, you can’t unilaterally change because you are antsy
about something. What are we going
to do in the letter? You need to
put teeth into the letter; you have to spell out assurances.
What are the sorts of things you can ask for?
Here is what an adequate assurance is: pay us today, give us a letter of
credit, give us a guarantee of a bank.
Maybe we might get an assignment.
Problem 2:
Installment
contract.
(1) Not
likely to be upheld
(2) No, this
is not true because the code is not going to allow them to define it in a purely
subject standard, has to be read in the context of commercial practice,
sufficiently objective and measurable.
(3) This
exactly the type of case where the clause applies.
In the absence of the clause they would have to invoke 2-609.
There are
wise clauses to include in contracts.
Problem 3:
Definitely
an anticipatory repudiation, but assurances are given.
Not much ground to go anywhere with 2-609 here.
Section
2-610 on anticipatory repudiation comes into play.
Aggrieved buyer can resort to any remedy, but can do so only when
performance not yet do will substantial impair the buyer’s expectation.
Will ‘wreak
havoc.’ Trivoli will be liable for
damages for this delay. The long
term prospect looks really good.
PROBLEMS ON
CONTRACT DAMAGES:
See hand
notes.
2.
First requirement of cover price: must be reasonable and made in good
faith, buyer behaves honestly and observes reasonable standards of good friend.
If it can be established that the motivation that induced them was
punitive, the buyer must show a rational commercial reason to support this
change.
PROBLEMS ON
DAMAGES FOR BREACH OF WARRANTY
1.
Obviously he must pay, the starting point is that he must pay the 15,000.
His solution starts at section 2-717.
15-11 would yield damages of 4,000.
Difference in value.
2.
Cost to repair would establish the difference in value of the motorcycle
as warranted and as delivered.
Second part,
he entered into a bad bargain, agreed to pay 300 more than he should have.
Breach by the seller opened the opportunity to reject, he should have
rejected. He didn’t do that, he
accepted, now he is limited to his measure under 2-714(2) and he is not entitled
to recover the 300 based on the bad bargain.
PIG FARMER
PROBLEM
My argument
is prove those numbers.
(d)
recoverable as consequential damages 2-715(2) but only if it is proximate
causation, so find out the nature of the disease.
Maybe the problem is not the diseased pigs but the failure of the farmer
to quarantine his stock.
(a) Where
did you come up with the 4,370 figure?
2-714(2). Tracking manner of
damages.
Says in
addition you are entitled to consequential damages.
PROBLEM ON
SPECIFIC PERFORMANCE
Televisions
sets—don’t have a right of replevin because the seller never identified the
goods to the contract. Cannot cover
and therefore as a result I should be entitled to specific performance and make
them deliver 300 sets to me at the K price.
Pretty much
it for the buyer’s remedies. The
only other alternative for alternative damages is 2-713.
The buyer
who accepts the goods must use section 2-714,
Seller does
have corollary monetary damage provisions, 2-706—if the buyer breaches, go out
and sell the goods to somebody else.
Additional
useful aspect here
2-708(2)—sometimes measure of damages would be inadequate to put seller in
position as if performance has occurred.
Lost volume
seller and the special manufacturer.
PROBLEMS ON
SELLERS’ DAMAGES ABSENT RESALE
1.
Just in one context of the sale/resale it doesn’t work.
Any dealer in this country can get as many Fords from the manufacturer as
they can sell. 2-708(2)? <see
recording>
2.
800 dollars, back out the contract price (-600) which means that there is
a 200 dollars gain which would have been realized per bicycle.
Must back out salvage price that was received, (-150) gives us 50 per
unit, times 25 units is 1250. We
must add back in the costs, what were the costs that had been incurred by the
seller in acquiring the materials and how much labor had they already expended?
Undesirable
to force goods on the buyer that he no longer wants or has need for.
Incidental
damages, commercially reasonable damages.
No consequential damages for sellers.