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Article 2 defines goods as all things movable at the time they are identified as goods to be sold.
One who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved.
Types of contracts (generally)
- -Express contract: formed by language, oral or written
- -Implied in fact contract: formed by manifestations of assent
- -Quasi-Contract: not contracts but to avoid unjust enrichment
Types of contracts (promises)
- Bilateral contracts: exchange of mutual promises
- Unilateral contracts: acceptance by complete performance
- -offeror indicates completion of performance is the only manner of acceptance
- -offer to the public for a reward
Creation of a contract
- -mutual assent: offer and acceptance
- -consideration: Bargained for exchange or substitute
- -defenses: mistake, lack of capacity, illegality, statute of frauds
- Lack of capacity
- State of Frauds
creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
- Promise, undertaking or commitment: more than mere invitation to begin preliminary negotions
- Definite and certain terms: enough essential terms for the contract to be enforced
- Communication: the offeree must have knowledge of the offer before performance to accept
Merchant firm offer
- Offers to sell goods in a signed writing and
- Writing gives assurances that it will be held open
- NOT REVOCABLE for lack of consideration
- ONLY 3 MONTHS
Ways terminated by offeree
- -express rejection,
- -counter offer,
- -NOT mere inquiry
- Lapse of time: failure to accept in time provided or reasonable time
- Operation of law:
- -death or insanity of party,
- -destruction of proposed subject matter,
- -supervening illegality
Offers to buy goods for current or prompt shipment
Under Article 2 this invites acceptance by promise to ship or current or prompt shipment of conforming/nonconforming goods
If ship nonconforming goods: acceptance and breach UNLESS accommodation.
Battle of the forms:
- if additional terms after a contract between merchants for goods then this does not necessarily constitute rejection or a counter offer, but an effective acceptance UNLESS:
- -they materially alter the original terms of hte offer
- -offer expressly limits acceptance to the terms of the offer OR
- offeror has already objected to the particular terms or objects within a reasonable time.
- -the terms are material
Additional terms effect on acceptance
- Common law: rejection and counter offer
- Article 2: Battle of the forms
When the mailbox rule for acceptance does not apply:
- -offer stipulates taht acceptance is not effective until received
- -option contract: requires receipt
- -offeree sends rejection and then sends the acceptance
past or moral consideration:
- -bargained for exchange
- -that which is bargained for must be considered of legal value, constitute a benefit to the promisor OR a detriment to the promisee
if past obligation barred by a technical defense and a new promise in writing or partial performance then modern trend is that this substitutes for consideration.
Promissory estoppel OR Detrimental reliance
- -promisor should reasonably expect to induce action or forbearance
- -of a definite and substantial character
- -such action or forbearaance is in fact induced
Statute of frauds
- Executor or administrator promises personally to pay estate debts
- Promise to debt of another (NOT FOR YOUR BENEFIT)
- Promises in consideration of marriage
- Interest in land:
- -leases for more than one year
- -Easemetns for mroe than one year
- -minerals or structures if severed by buyer AND
- -mortgages and most security liens
- Performance not within one year
- Goods priced at $500 or more
- Modification of contracts for goods for more than $500
Statute of Frauds goods exceptions
- -specifically manufactured goods with a substantail begining
- -admissions in pleadings or court
- -payment or delivery of goods to the amount accepted or paid for
- -merchants' confirmatory memo rule: 1) has reason to know of confirmation's contents 2) does not object within 10 days of receipt
- Implied warranty of merchantability: that the product in fit for the ordinary purposes for which such goods are used
- Implied warranty for fitness for a particular purpose: 1) seller has reason to know the particular purpose which the goods are to be used and that the buyer is relying on it, 2) the buyer in fact relies on it.
- Express Warranties: statement, description, sample, or model that is part of the basis of the bargain adn the buyer could have relied upon when entering the contract
- Warranty of Title:
- Warranty against infringement:
family or household of buyer or guest in buyer's home if it is reasonable to expect that person may use, consume or be affected by the good.
Disclaimer of warranties (UCC)
- Disclaimer of warranty of merchantability: must mention merchantability and be conspicious writing
- Disclaimer of warranty of fitness: must be conspicious writing and specificaly disclaimed
- Limitations on damages: may limit the damages unless the limit is unconscionable
- General disclaimer: "as is" or "with all faults"
- Express warranties: usually once made, disclaimers are unreasonable. Extremely unlikely to be valid.
Shipment contracts vs. destination contracts
- Shipment contracts: seller has only agreed to ship but not deliver
- -put goods into hands of reasonable carrier and make reasonable contract for transportation to buyer
- -obtain and promptly tender any documetns requried by the cotnract or usage of trade or otherwise
- -promptly notify buyer of the shipment
- Destination contracts: agreed to tender at a particular destination.
- -done when teneded in the location.
Excuse from duty to perform:
- -condition not been met
- -other party's material breach
- -anticipatory reputiation
- -frustration of purpose
- -mutual rescission
- -accord and satisfaction
- -must be a bilateral contract with executory (unperformed) duties on both sides
- -repudiation must be unequivocal
- -may sue immediately
- -suspend own performance and wait to sue until the performance dates
- -treat repudiation as an offer to rescind and treat the contract as discharged
- -ignore repudiation and urge the promisor to perform
- -performance of each party divided into two or more parts
- -number of parts due from each party is the same AND
- -performance of each party by one party is agreed on as the equivalent of the corresponding part.
Discharge by impossibility
the occurrence of an unanticipated or extraordinary event may make contractual duties impossible or impracticable where neither party assumed the risk and the nonoccurrence was a basic assumption of the parties.
- must be objective
- must be after the contract has been entered into
acts as rescission where either party may sue for restitution. Party also has a possible quasi-contract
death or physical incapacity: does not relieve unless the person is necessary to effectuate the contract (ie unique)
Discharge by impracticability
- extreme and unreasonable difficulty and/or expense AND
- its nonoccurrence was a basic assumption of the parties.
- Article 2:
- -discharged to the extent of impossibility or impracticability.
- -shortage of raw materials or inability to convert them due to catastrophic event is sufficient for discharge
Discharge by frustration
- -supervening act or event leading to frustration
- -at contracting, the parties did nto reasonable foresee the act or event
- -purpose of the contract had been completely or almost completely destroyed by the act or event
- -both parties realized the purpose at the time of contracting
- -previous valid contract
- -agreement among all parties including the new party
- -immediate extinguishment of contractual duties between the original contracting parties
- -valid and enforceabel new contract
When acceptance may be revoked
- -when accepted on a reasonable belief that a defect would be cured and it wasn't
- -accepts them because of difficulty of discovering the defect or because of seller's assurances that the jobs conformed
Article 2 nonmonetary remedies
- Buyer's rights:
- 1) cancellation
- 2) buyer's rights to replevy for specific goods
- 3) specific performance
- Seller's rights:
- 1) right to withold goods
- 2) right to recover goods
- 1) right to demand assurance if reasonbly fear the other party will not perform
- - compensatory damages: put nonbreaching party where she woudl have been had the promise been perfomed
- - reliance damages: if EXPECTATION IS TOO SPECULATIVE to put the plaintiff in the position she woudl have been had the contract not gone through
- - consequential damages: losses from the breach that were reasonably foreseeable. For sale of goods only buyer may receive these
- - incidental damages: (goods) expenses such as inspection, receipt, transporation, care, shipping
- - punitive damages: not awarded in contracts
- - liquidated damages: may be allowed in anticipation of future losses. 1) damages must be difficult to ascertain at the time the contract was formed AND 2) the amount was a reasonable forecast of damages. If not it will be a penalty.
- certainty rule: damages must not be speculative but be calculated to a reasonably certainty.
- duty to mitigate:
Buyer damages (Goods)
difference between contract price and 1) market price (benefit of the bargain) or 2) cost to cover plus incidental and consquential damages less expenses saved
must notify seller within a reasonable time of discovering the defect.
measured at time the buyer learns of the breach.
Seller damages (goods)
- Benefit of bargain OR resale OR lost profits (lost sales volume) OR action for price
- Incidental damages: cost of storing, shipping
- Expenses saved
This is at the time delivery was supposed to be.
Quasi contract if:
- MAYBE IF:
- -plaintiff conferred a benefit on defendant by rendering services or expending properties
- -plaintiff conferred the benefit with reasonable expectation of being compensated
- -teh defendant knew or had reason to know the plaintiff's expectations ANd
- defendant was unjustly enriched.
Third party beneficiary
- Rights vest when:
- -manifests assent to a promise in teh manner requested by the parties
- -brings a suit to enforce the promise or
- -materially changes position in justifiable reliance on the promise
- Third party's rights:
- -can go after the promisor, but promisor can use any defenses agaisnt the promisee
- -can go against promisee if a creditor beneficiary or if a donor beneficiary detrimentally relied
Assignment of rights
- all rights may be assigned unless:
- - it would substantially change the obligor's duty or risk
- - an assignment of future rights to arise from future contracts
- - assignment prohibited by law (wage assignment)
- If for consideration the irrevocable
- If gratuitous may be irrevocable if:
- -obligor has already performed
- -token chose is delivered (ie stock certificate)
- -assignment of simple chose in writing
- -assignee detrimentally relied on the gratuitious assignment
Delegation of duties
- may assign all duties unless:
- -involve personal judgment and skill
- -delegation woudl change the obligee's expectancy
- -special trsut was reposed int he delegator by another party to the contract
- -contractual restrictions
- delegator is always liable to the obligee.
- delegate can be responsible only if there had been an assumption of the duty to perform (makes the obligee a third party beneficiary).
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