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All or Nothing Rule.
Either the UCC or the common law, but not both.
Predominant Purpose Rule.
Predominant purpose for contracting will determine the application of law in a mixed contract.
UCC Gap Filling.
- Essential terms of a contract need only state the parties, the subject matter and an objectively definable quantity, and the courts will fill the gaps for the remaining terms.
- Any absent term, such as price, will be filled into the contract as what is reasonable.
Output and requirement contracts.
Because quantity is objectively determinable - enforceable.
Merchants Firm Offer.
- (1) merchant
- (2) signed
- (3) written offer
- (4) with an explicit promise not to revoke the offer, the offer is irrevocable for the period of time stated in the offer, or a reasonable time not to exceed 90 days.
- If not specified, any reasonable method
- Acceptance may take place by return promise or return performance, such as shipping of the goods.
Wrong Goods Shipped.
Acceptance + breach
Seasonable notification to the buyer that the wrong goods are being shipped as an accommodation, counteroffer.
Counteroffer and UCC 2-207 - Between a non-merchant party.
- Formation - yes
- New term - counteroffer, unless expressly conditioned.
Counteroffer and UCC 2-207 - Between merchants.
- Acceptance - yes
- New term - controlling when (1) both merchants, (2) the new term does not materially alter the deal, (3) the initial offer did not limit acceptance to its terms, and (4) the offeror does not object within a reasonable time.
Counteroffer and UCC 2-207 - Estoppel
- No formation
- Parties act like formation
- Only terms in writing enforceable, and gap filling.
Auctions - offer, acceptance
- Individual bid: offer terminated by subsequent bids.
- Acceptance: fall of the hammer.
- Bid at fall of hammer: auctioneer's discretion.
Retracting bids in an auction
- Bidders can retract offers before acceptance
- No reserve: seller can't not withdraw after bid
- Reserve: seller can withdraw before reserve met.
Pre-existing Duty Rule.
- Good faith modification binding in the absence of any new consideration.
- When no reasonable person in the position of the party would have agreed to the deal.
- Procedural unconscionability
- Substantive unconscionability
Statute of Frauds
Any contract for the sale of goods $500 or more must satisfy the SOF through either a writing or by performance.
SOF - Writing.
- Writing identifies parties, the subject matter and the quantity.
- Must be signed by the person against whom enforcement is sought.
To what extent can you enforce a written contract?
Amount listed in the writing.
Partial performance on a goods contract
Quantity which is delivered and accepted.
Custom-made or specially manufactured goods
Upon seller's substantially beginning to perform.
Satisfies the SOF.
Confirming memo and SOF
- (1) Both parties are merchants
- (2) Failure to object to a confirming memo
- (3) within 10 days of receipt
- satisfies SOF
Statute of Frauds and Modifications.
- Still > $500 - writing required.
- If < $500 - no writing required.
Parol Evidence and Integration of the Writing.
Rebuttable presumption that any agreement is partially integrated unless the parties would have certainly included the disputed term in the writing.
Warranty of Title.
- All seller warrant that title is good and transfer of title is rightful.
- This warranty can be disclaimed.
- A promise which affirms or describes a good that is part of the bargain is an express warranty,
- Not seller's opinion or puffery.
- This warranty can be disclaimed.
Use of a model or sample creates
Express warranty that the goods sold will be like the sample.
Implied Warranty of Merchantability.
- A merchant makes an implied warranty that goods will be fit for their ordinary commercial purpose at the time of sale.
- This warranty may be disclaimed.
Implied Warranty of Fitness for a Particular Purpose.
- When a buyer relies on the sellers expertise to select a particular good for a particular purpose that the seller is aware of, the seller has made an implied warranty that the goods will satisfy the particular purpose.
- Can be disclaimed.
Disclaimer of Warranty.
Must be clear and conspicuous.
Perfect Tender Rule.
The UCC requires perfect tender in both the goods and the delivery.
The seller must provide the correct goods in the correct quantity.
Rejection of Goods.
The buyer can reject the goods by (1) notifying the seller of the particular defect (2) within a reasonable time and (3) hold the goods for a reasonable time for the seller to get them back.
Failure to Give Instructions about Rejected Goods
If the seller fails to give reasonable instructions as to what the buyer should do with the rejected goods, the buyer may continue to store the goods on the sellers account, ship the goods back or resell the goods for the seller.
- When goods seemed okay at delivery but the defect is discovered within a reasonable time.
- A buyer must notify the seller of any breach within a reasonable time or is barred from remedy.
Right to cure.
If a seller sends imperfect goods while there is time left on the contract or the seller had reasonable grounds to believe that the buyer would accept, the seller is given a chance to cure.
The default method of delivery is a single delivery of the goods, and when the seller fails to deliver all the goods at the same time, the buyer may reject the goods.
When an agreement authorizes or requires delivery in separate lots, a buyer cannot reject an imperfect specific delivery unless there is substantial impairment in that installment that cannot be cured.
Method of Tender/Delivery - Sellers place of business.
If goods are tendered at the sellers place of business, the seller needs to give goods to the buyer.
Method of Tender/Delivery - Shipment contract.
- Default assumption in UCC.
- (1) Get goods to a common carrier,
- (2) make arrangements for delivery and
- (3) notify the buyer.
Method of Tender/Delivery - Destination contract (FOB Buyers Business).
Get the goods to the buyers business and notify the buyer.
Risk of Loss.
- A four step analysis.
- 1. Agreement will control risk of loss. If no agreement, then
- 2. If a party has breached the contract, then the breaching party bears the risk of loss. If no breach, then
- 3. Delivery contract controls. Shipment contract ROL buyer, destination contracts ROL seller. If no shipment, then
- 4. Merchant. If seller is a merchant, ROL with seller until buyer receives goods. If not a seller, ROL moves to buyer upon tender of the goods.
Insurable interest - seller
A seller has an insurable interest as long as he has title or a security interest.
Insurable interest - buyer
A buyer has an insurable interest when the goods are specifically identified.
Payment is due
At the time and place where the buyer is to receive the goods.
Tender of payment
A condition to the sellers duty to complete its obligation.
A seller may ship under reservation
Entitled to hold the goods until the buyer pays.
Tender of payment
- Any reasonable manner
- The buyer can demand a reasonable amount of time to procure cash.
- Installment contracts can be paid or demanded for each installment.
Buyer's right to inspect
- Prior to the payment except for COD contracts.
- The buyer pays for any expenses associated with buyer inspection unless goods do not conform and are rejected.
- When a contract may only be performed with great difficulty.
- Performance becomes illegal, a particular source of supply fails. NOT just more expensive to perform.
- The act of performance, not the cost of performance.
- A partial inability to perform due to a supply deficiency does not excuse the seller from performing, and the seller must allocate available supply among customers in a fair and reasonable manner.
Increased expenses with delivery
If agreed-upon method of delivery becomes impracticable without the fault of either party, any commercially reasonable method of delivery must be tendered and accepted.
- When the opposing side informs you clearly and unequivocably that it will not perform when performance is due, the nonbreaching party has two options.
- 1. Breach and sue immediately for damages that exist at the time of the repudiation.
- 2. Ignore repudiation and see what happens.
Anticipatory repudiation - awaiting payment
- If entire performance complete
- Waiting for the other side to pay
- You cannot sue early.
Retraction of repudiation permitted
- Allowed except when
- (1) lawsuit commenced
- (2) other party acted in reliance on that repudiation by changing its position.
Adequate assurance of performance.
- When there are reasonable grounds for insecurity about the other sides performance, a party may demand an adequate assurance of performance.
- If the other party fails to respond within a reasonable time, the requesting party can treat it as repudiation of the contract.
Expectation damages put the nonbreaching party in the same economic position had the contract been performed as promised.
Expectation damages must be calculated with reasonable certainty.
- Damages must foreseeable or known at the time of contracting
- May be limited or excluded (per se unconscionable for personal injury).
Damages must be mitigated.
Lost Volume Profits.
- (1) merchant
- (2) in the business of selling a type of product
- (3) may recover lost profits when he sells in volume and has product available.
- Mitigation will not serve as a defense to damages.
- (1) Not a penalty
- (2) Reasonable at time of contracting
- (3) Difficult to calculate damages
If goods are unique, a buyer may request a writ of replevin.
A buyer can assert replevin when partial payment is made and the seller goes insolvent within 10 days of the payment.
Right of Reclamation.
An unpaid seller may reclaim goods when the buyer goes insolvent if (1) buyer is insolvent at the time of the purchase, (2) seller demands return of the goods within 10 days of receipt or within a reasonable time if misrepresentation, and (3) buyer still has the goods.
Goods in transit.
If a seller learns that the buyer is insolvent or the buyer fails to make payment on time, the seller may stop goods in transit.
Statute of Limitation.
SOL for UCC is typically four years, but may be modified by contract down to 1 year (no less).