McClammer's Comm. Sales
|Apply UCC or CL?|| Apply UCC if it is a "transaction in goods."|
"Goods" = all things movable at the time
- animals (including unborn young)
- growing crops
- computer software if completed
- oil, gas, minerals, if extracted
|UCC vs CL if a hybrid transaction of goods and services?||Apply "Predominant Thrust Test"|
|Typical CL K's include:|| 1. sale of land or rights in land|
3. employment/personal service
4. loans or guaranties of loans
2. times when important?
| 1. A merchant either deals in goods of that kind, or holds himself out as having knowledge or skill concerning the goods|
a. revocation of offer (merchant seller can make offer irrevocable for up to 3 months w/out consideration)
b. battle of forms (certain terms become effective btw merchants)
c. implied warranty of merchantability (only by merchant sellers)
d. duty w/ respect to rightfully rejected goods (greater for merchant buyer)
|2 ways to form K under UCC:|| 1. CL: through offer & acceptance under CL rules;or|
2. Through the CONDUCT of the parties, even if there is no offer and acceptance sufficient to form a CL K.
|If K formed via conduct, potential issues re. terms are resolved via these 2 things:|| 1. battle of the forms rules, and|
2. UCC gap-fillers (default provisions)
|Revocation of Offers: CL vs. UCC|| CL: Unless an option K, offeror can revoke at any time, regardless of what he said.|
UCC: Merchant seller can make offer irrevocable for up to 3 months; no separate consideration required.
|Acceptance of Bilateral K offer|| CL: made by promise of performance|
UCC: Can be by promise, or Seller can do so by shipping goods.
- even shipment of non-conforming goods creates the K; in that case, Seller may be in breach
|What's necessary for a K to exist under UCC?||Failure to agree on terms does not defeat K "if the parties have intended to make a K and there is a rsnbly certain basis for giving an appropriate remedy."|
|UCC and Statute of Frauds||? still enforced, other than quantity term??|
|Default Rules where parties do not agree (ie Gap-fillers)|| Price ~ "reasonable price" (unless intention was only to enter K upon certain price agrmt)|
Time of payment ~ due at time of delivery; no credit unless otherwise agreed
Time of delivery ~ "reasonable time"
Place of delivery ~ seller's place of business or where goods located, unless otherwise agreed
|4 Potentially implied terms under UCC:|| 1. implied duty of good faith & fair dealing|
2. implied warranty of title
3. implied warranty of merchantability
4. implied warranty of fitness for purpose
|Requirements and Output Contracts|| The parties can make an enforceable quantity agrmt based on:|
- the rqmts of the Buyer, or
- the output of the Seller.
Eg of requirements K: RV manufacturer agrees to purchase its rqmts of seats f/ seat manuf.
Eg of output K: Coal company agrees to sell the output of its Mine No. 3 to a utility
|3 principles governing quantities in calculation of requirements/output:||1. if quantity is estimated in K, actual quantity cannot be disproportionate to the estimate;|
2. if not estimated, actual quantity cannot be disproportionate to normal or comparable requirements;
3. duty of good faith applies
But - Buyer can reduce requirements for LEGITIMATE business purposes, so long as it isn't just to avoid the rqmts K.
|Battle of Forms - what's the factual issue this addresses?|| When the terms of confirmation differ from the terms of the offer.|
Generally parties are performing so a K exists; issue = what are the terms?
|Battle of Forms applied:||1. Where offer expressly forbids any change, confirmation w/ diff. terms is not an acceptance; If parties form K by conduct, then K = agreed terms + UCC gap-fillers|
2. Where not expressly forbidden in offer, varying terms in the Buyer's confirmation become part of the K btw 2 merchants UNLESS:
- forbidden by K
- materially alter the K (unrsnbly, surprise, or cause unrsnble hardship)
- objection to varying terms within rsnble time
3. If either party is not a merchant, add'l terms do not become part of the K unless that party agrees.
|Interpreting "material alteration" for Battle of Forms:||- exception has swallowed the rule; most provisions of interest have been held to = material alterations|
|General Battle of Forms rule has become:|| (Because most variations = material alterations...)|
1. where parties' conduct establishes a K, courts generally eliminate varying contradictory terms in writings, and
2. UCC gap-filling provisions apply.
|S of F applies to any K for:||sale of goods > $500|
|What does writing need to satisfy S of F?|| Only needs to show intent of parties to make a K.|
- Need not contain ALL terms of the K, BUT it will only be enforceable as to the Quantity shown in the writing.
- Signature - not much needed. Letterhead is even sufficient.
|Exceptions to S of F:||1. When there is a confirmation between merchants of an oral agreement:|
- Binding on merchant rc'ing confirmation UNLESS he objects within 10 days.
2. Specially manufactured goods or specially ordered goods, if seller has begun manufacture.
3. Admission of K in court documents (enforceable to extent of admission)
4. Goods paid for or rc'd and acc'd by Buyer
|Impracticability ...|| Seller can avoid an obligation based on "occurrence of contingency the nonoccurrence of which was a basic assumption on which the K was made..."|
Seller must then allocate goods among Buyers "in any manner which is fair and reasonable" if he has goods to disburse.
|Modifying Contract Term(s)|| CL: K cannot be modified w/out new consideration|
UCC: K CAN be modified w/out consideration, as long as there is an agreement.
Note: S of F still applies to oral modification - particularly important for quantity.
|Parol Evidence Rule|| UCC = CL|
1. Did parties intend K to be fully integrated or partially integrated?
2. If K fully integrated, cannot introduce evidence of consistent or contradictory terms.
3. If K is partially integrated, can show consistent add'l terms, but NOT contradictory terms.
|BUT - Under UCC, despite Parol Evidence Rule, the fully integrated writing may be explained/supplemented by:|| 1. course of dealing|
2. usage of trade
3. course of performance
|And, as with CL, Parol Evidence doesn't block introduction of evidence for purposes of showing:|| lack of consideration|
any other fact that wld make the agrmt void or voidable
|Two types of Warranties in sale of goods:|| 1. Implied Warranties - which are terms in sale of goods K's unless effectively disclaimed; and|
2. Express warranties, which arise from parties' conduct or K terms
|The 4 Implied Warranties|| (TNMF)|
1. Implied warranty of title
2. Implied warranty of non-infringement
3. Implied warranty of merchantability
4. Implied warranty of fitness for purpose
|Implied Warranty of Title:||Seller cannot pass good title to stolen goods, even if Seller didn't know they were stolen.|
|Implied Warranty of Non-infringement:|| Warranty that goods will not infringe a patent or copyright.|
But - note - if Seller makes goods to Buyer's specifications, Buyer assumes the implied warranty of non-infringement rather than Seller.
|Implied Warranty of Merchantability|| Seller must be a merchant.|
Defined as goods that:
1. wld pass in the trade w/out objection under the K description, and
2. are fit for ordinary purpose for which such goods are used.
|2 Rqmts for Valid disclaimer of warranty of merchantability:|| 1. disclaimer must be CONSPICUOUS (larger type, bold, etc), AND|
2. disclaimer must use term "merchantability" or "as is," "with all faults," or similar language (but really -- people should probably use these terms)
|Implied Warranty of Fitness for Purpose|| Seller need not be a merchant.|
1. Buyer's need described to Seller, AND
2. Buyer relied on Seller's skill or judgment to choose suitable goods.
|Disclaiming warranty of fitness for purpose - rqmt(s)|| 1. must be CONSPICUOUS|
No magic words needed, like with merchantability.
|Express warranties =||any statement of fact or promise about the goods that becomes part of the basis of the bargain.|
|Steps for acceptance or rejection of goods||1. When goods delivered, Buyer must accept or reject.|
2. If goods, as tendered, breach the K in any way, Buyer can reject.
3. But if time for performance has not passed, Seller has the right to cure and then Buyer wld have to accept.
4. Buyer can accept non-conforming goods - and Seller is still in breach - Buyer can pursue remedy, but Buyer must pay the CONTRACT price for accepted .
5. If rejects, must do so w/in a reasonable time & it must be communicated to Seller
|3 ways to Accept:|| 1. Buyer signifies acceptance to Seller after opportunity for inspection,|
2. Buyer acts inconsistently w/ the Seller's ownership of the goods (uses or resells them), OR
3. Buyer fails to make effective rejection
|If Buyer accepts but wants to pursue remedy for some sort of breach:|| 1. Buyer has to give Seller NOTICE of breach w/in a rsnble time or be barred from any remedy, and|
2. Buyer bears burden of proving a breach w/ respect to accepted goods
|Revoking acceptance|| Acceptance may be revoked if a non-conformity "substantially impairs" the value of the goods, AND:|
- Buyer rsnbly failed to discover the defect before acceptance, OR
-Buyer accepted w/ knowledge of defect but rsnbly assumed a cure and seller failed to cure.
|Buyer's duties with rejected goods||Must:|
- hold goods w/ rsnble care to allow Seller to remove, but
- Buyer has no other obligations with respect to rejected goods unless he's a Merchant.
- If Seller fails to provide instructions, Buyer may store and reship rejected goods at Seller's expense or resell for Seller's account, deducting sales expenses.
|Merchant buyer's more extensive obligations w/ rejected goods:|| must follow Seller's rsnble instructions;|
must resell perishable goods for seller's account.
Note: a Merchant is protected if he acts in good faith and in accordance w/ rsnble commercial practices
|Risk of loss for direct delivery||Easy - risk of loss passes from Seller to Buyer on direct delivery.|
|Risk of loss in transit|| Where 3rd party carrier delivers, risk of loss in transit depends on the nature of the K:|
- Shipment Contract/"FOB place of shipment" = Buyer at risk during transit
- Destination Contract/"FOB destination" = Seller at risk during transit
|Default risk of loss in transit:||If K is silent on the issue, it is a shipment contract and buyer bears risk in transit|
|Formula for measure of Buyer's damages for non-delivery|| Difference btw K price and market price, if any, +|
Incidental damages, +
|Incidental damages =|| relate to the goods themselves.|
Egs: transportation, storage, inspection, etc.
|Consequential damages =|| "Any loss resulting from general or particular rqmts and needs of which the Seller at the time of contracting had rsn to know and which cld not rsnbly be prevented by cover/mitigation or otherwise."|
^ this = the general foreseeability rule of Hadley v. Baxendale
|Covering||Buyer not obligated to do so, but not covering may lead to less recoverable damages.|
|Seller's Remedies||Depends upon whether or not Seller is a "volume seller." Key question: whether or not the Seller lost volume for the year. Or, put differently, whether or not the Seller has limited output (like specially made yachts)|
If not, he can recover diff. btw K price and market price and that's it, bc they can be resold.
If volume seller, can also recover lost PROFITS.
|Remedy Limitations in K's - enforceable unless:|| if it fails its essential purpose, Buyer has recourse to all remedies provided in UCC - sometimes.|
Only applies to Limited remedies such as "repair or replace." Does not apply to limited remedies such as exclusion of consequential damages or limitation of damages to purchase price