Contracts 3.txt

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twiggy924
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26610
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Contracts 3.txt
Updated:
2010-07-13 11:18:47
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Contract Terms Risk Loss
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Contract Terms
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  1. As a general rule, can a party use prior or contemporaneous WORDS to interpret a later writing?
    • Generally NO.
    • Parol Evidence Rule (PER) keeps out evidence of a prior or contemporaneous agreement (either written or oral) that contradicts a later writing. Rationale: The PER assumes that a later writing is more reliable than anything that came before it.
  2. What are the COMMON LAW exceptions to the PER?
    A party may use evidence of a prior writing to contradict (or interpret) a later writing where the earlier writing is used to

    • • correct a clerical error (e.g., a typo)
    • defend against K formation
    • • interpret a vague or ambiguous term, or
    • • supplement a partially-integrated writing–a final statement of the terms included, but not a complete statement of all the terms the parties agreed to (except when there is also a merger clause).
  3. Art. 2 Exception(s) to Parol Evidence Rule
    ONLY a merger clause will keep out parol evidence
  4. Can a party use evidence of subsequent WORDS to interpret a writing?
    YES

    The PER does not prevent a party from using SUBSEQUENT DEVELOPMENTS to interpret an agreement reduced to writing.

    Note: Rules of contract modification apply.
  5. Can CONDUCT between the parties explain terms or fill-in gaps in a contract?
    YES! There are 3 ways of doing this (in order of descending importance)

    • 1) Course of performance under the current K (best way)
    • 2) Course of dealing under prior Ks with each other (next best way)
    • 3) What others in the trade do in similar circumstances (least best, but still a way)
  6. UCC ART 2: A seller is liable for breach of an EXPRESS Warranty. What are some examples?
    • Statements of fact
    • Promises
    • Descriptions of the goods
    • Use of a sample or model (frequently tested)

    A general or subjective statement (i.e., opinion) is not an express warranty, and is not enforceable.
  7. UCC ART 2: Can a seller DISCLAIM liability for an express warranty?
    NO

    A seller can't make an express warranty and then disclaim it. (E.g., "All parts guaranteed for two years . . . all warranties disclaimed" would disclaim an express warranty, and is not allowed)
  8. UCC ART 2: Can a seller LIMIT a buyer's remedies for breach of an express warranty?
    Generally: Yes, a seller can limit a buyer's remedies for breach of any warranty (whether express or implied) so long as the limitation is not unconscionable.

    EXCEPTION: Limiting a buyer's remedies for personal injury in the case of consumer goods is presumed unconscionable, and therefore not allowed. Seller can rebut, but hard to do.
  9. UCC ART 2: What does the IMPLIED WARRANTY OF MERCHANTABILITY ("IWM") mean?
    Meaning: The IWM means that a seller impliedly warrants that a particular good is fit for its ordinary purpose.

    Applicability: In order for the IWM to apply, the ∆ seller must be a merchant who deals in goods of the kind. The key is whether the seller has specialized knowledge about the particular goods provided.

    Example: Foot Locker impliedly warrants shoes for their ordinary use, but would not impliedly warrant the ordinary fitness of a used delivery van it sells.
  10. UCC ART 2: What does an Implied Warranty of FITNESS for a PARTICULAR PURPOSE mean?
    Meaning: It means that seller warrants that goods are fit for a buyer's particular purpose.

    Applicability: The implied warranty applies where (i) the buyer has a special purpose in mind; (ii) the buyer is relying on the seller to pick out suitable goods; and (iii) the seller knows of the buyer's purpose.

    Need not be a "merchant": Note, the seller does not have to be a merchant at all, the seller could be someone on Craigslist, and the implied warrant could still apply.
  11. UCC ART 2: Can a seller DISCLAIM an implied warranty?
    YES

    A seller can disclaim an implied warranty through language such as "as is," "with all faults," or by referencing the word "merchantability" in the disclaimer (e.g., "no implied warranties of merchantability or fitness")
  12. UCC ART 2: Can a seller LIMIT a buyer's remedies for breach of an implied warranty?
    • Generally: Yes, a seller can limit a buyer's remedies for breach of any warranty (whether express or implied) so long as the limitation is not unconscionable.
    • Exception: Limiting a buyer's remedies for personal injury in the case of consumer goods is presumed unconscionable, and therefore not allowed.
  13. What warranties can a LESSOR OF GOODS (Article 2A) be responsible for? [NY ONLY]
    • General rule: the same warranties that apply to a seller of goods under Article 2 (express, implied (merchantability, particular purpose))
    • Finance Lease exception: A lessor of goods that is also a financial institution (e.g., Citibank) is not liable under any warranty. To recovery, an injured lessee must seek to enforce the appropriate warranty (express or implied) against the manufacturer of the goods.
  14. What does it mean for a party in a Sale of Goods K (Art 2) to bear the RISK OF LOSS (ROL)?
    • ROL on Seller: must provide new goods to buyer at no extra cost
    • ROL on Buyer: must still pay K price
  15. WHO bears ROL when goods are damaged before buyer takes possession, and neither party is at fault?
    • HIERARCHY:
    • (1) Agreement of parties controls
    • (2) Breach: Breaching party bears risk of loss (even if loss unrelated to breach)
    • (3) Common carrier**: ROL on buyer if shipment K or FOB-shipping point (ROL on seller for all others)
    • (4) Non-carrier, seller is merchant: ROL on seller until buyer takes possession
    • (5) Non-carrier, seller NOT merchant: ROL on seller "tenders" goods (i.e., makes them available)
  16. Shipment K v. Delivery K
    Shipment K: Seller must get goods to a common carrier, make delivery arrangements and notify buyer. Buyer bears ROL long before it gets the goods. "FOB [Seller's location]"

    Destination K: Seller mut get the goods to a specific destination. "FOB [Anywhere else]"
  17. WHO bears RISK OF LOSS in a Lease of Goods? (Art 2A) [NY ONLY]
    • General rule: ROL on the lessor
    • Exception for "Finance Lease": Risk of loss is on lessee (because the NY Legislature loves banks)

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