CHAPTER 1: BASIC CONCEPTS

I.

02/13/2014

Scope of Article 2s Transactions in Goods 2-102

A.
Transactions: not defined in the Code; but see 2-106 (contract for sale:
includes both a present sale of goods and K to sell goods at future time; serves
as guiding definition)
1.
Predominant Purpose Test: determine whether predominant
purpose of the transaction is to sell the goods or to provide the service;
courts apply UCC only if the sale of goods is the predominant factor
a)
Milau Associates, Inc.: holding that in case of pipe burst Ds
couldnt recover under Art. 2 b/c transaction was predominantly
service oriented
b)
Analyst Inter. Corp.: holding that purpose of K was for
software (considered good) and the programmers knowledge was
incidental to the dominant purpose
2.
Gravaman test: look at basis of complaint rather than overall nature
of transaction. If P is complaining about the goods component, Art. 2
applies; if complaining about service component, it doesnt
a)
Anthony Pools: Even though K for service (building
swimming pool) court found that implied warranty applied to diving
board b/c it retained character as consumer good after completion
of performance
3.
Goods: 2-105: Anything movable at the time of K; tangible goods
a)
Does not include real property, transactions in paper rights
(stocks or bonds), sale of services (memberships), intangibles
(insurance)
b)
BUT small exception to exclusion of real property: Art. 2
does apply to goods attached to realty, if severed and sold apart
from the land:
(1)
Crops, timber;
(2)
Minerals, ice, water, buildings, if severed by the seller
(2-107(1))
(3)
Fixtures (anything else attached to the land that can
be removed w/o material harm thereto) if it is severed by
some person- can be the buyer, seller, or third party (2107(2))
c)
Limitation on what can be goods: goods must be presently
in existence

(1)
Unborn young of animals is still included in goods
(2-105(1))
(2)
Goods that are specially manufactured or a work of
art to be created are subject to Art. 2 and considered goods
only when actually created or manufactured
d)
Fungible Goods 2-105(4): those in which each unit by its
very nature or by mercantile use, is the commercial equivalent of
every other unit
(1)
Examples: bushels of wheal, barrels of oil, bags of
jelly beans
(2)
Can be either identified (e.g., all the wheat in my
silo) or unidentified (e.g., 600 bushels from the wheat in my
silo)
(a)
Ordinarily, a sale of goods requires the goods
to be identified. However, there is an exception for
fungible goodsan agreement to convey an
undivided interest in an identified mass of fungible
goods is still effective as a present sale
Transactions Covered by UCC Art. 2:
Covered: the sale of:
Not Covered: the sale of:
Real estate
Goods, i.e., tangible chattels
Choses in action
Investment securities
Secured transactions (stocks, bonds, etc.)

II.

III.

Scope of Article 2s Merchants 2-104

A.
Art. 2 applies to both businesses and individuals
B.
Good faith: UCC imposes obligation of good faith in ever
performance/enforcement of K
1.
Good faith is defined subjectively as honesty in fact 1-201(19):
a)
This is a test of subjective honestly, whether or not
reasonable. This is NOT a reasonable person test
2.
Merchants are held to a higher standard than non-merchants
a)
Merchants standard: 2-103(1)(b): held to a higher objective
standard, that includes the observance of reasonable commercial
standards of fair dealings in the trade
C.
Merchant defined 2-104(1):
1.
A party who regularly deals in goods of the kind sold;
2.
Otherwise holds himself out as having special knowledge or skill as
to the practices or goods involved; or
3.
Employs an agent who fits within these categories
D.
2-104 Comment 2-3: Whether a merchant depends on facts of the case
E.
Certain provisions have certain definitions of merchants: ERASE
1.
Implied Warranty of Merchantability 2-314: deal in goods of that
kind but not by occupation or skill (Sieman: didnt deal in goods of kind b/c
isolated incident of selling saw)
a)
A merchant is held to certain implied warranties as to the
goods sold; nonmerchants have no such liability
Scope of Article 2A: Leases vs. Disguised Sales
A.
True lease governed by 2A (if state has adopted Article 2A of the UCC)
B.
Disguised sales governed by Art. 2 and 9
1.
Lessor is an Art. 2 seller of goods
2.
Lessor?? is an Art. 9 secured party
3.
disguised sales creates security interest in goods
C.
Lease vs. Disguised Sales 1-207(37), Determine:
1.
If termination clause= true lease
2.
For entire economic life of leases goods w/ or w/o renewal=
disguised sale
3.
Option to purchase= disguised sale

IV.

I.

4.
Other: case by case, not necessarily disguised lease if lessee: (i)
pays consideration + or = FMV of leased goods (as long as not entire
economic life); or (ii) assumed major duties (taxes, assuming risk of loss)
International Sales, CISG:
A.
General:
1.
Covers: K formation and rights and duties of parties
2.
Excludes: K validity (fraud, illegality)
B.
CISG 2: Does not apply to sales
1.
2(a): goods bought for personal, family, or household use unless
seller didnt know that goods were both for these uses
2.
(b): sales by auction
3.
(c): authorized by law
4.
(d): stocks, shares, investments, etc.
5.
ships, vessels, aircraft
6.
electricity
C.
CISG 6: Parties can stipulate in K to avoid CISG
The Statute of Frauds: Is there an enforceable K? 2-201
A.
Need a writing for some K of high value (sale: $500; lease: $5000 if lease,
governed by Art. 2A)
B.
Writing must:
1.
Have a signature of the party to be bound by the K (1-201 Official
Comment 39)
a)
Signature can be typed, stamped, or even be a printed
letterhead
2.
Specify the quantity term (K can be enforced even if a main term is
omitted or misstated)
C.
Certain Exceptions:
1.
Merchant confirmation letters (2-201(2)): writing can become
binding the the party to be charged even though that party never signed
anything; this is b/c merchants are held to higher standard. To determine if
exception applies:
a)
1st: make sure both parties qualify as merchants in the
goods or practices involved (look to 2-104)
b)
Sender within a reasonable time must send a writing
confirming K to the other party

II.
202

(1)
If merchant receiving confirmation objects to its terms,
they must reject within 10 days after it is received or else the
recipient loses any defense based on the Statute of Frauds
(a)
St. Ansgar Mills: 2-201(2)
2.
Part performance: evidence that a contract was in existence
a)
Partial acceptance: K is made enforceable by the receipt and
acceptance of goods but only to the extent of the quantity of goods
actually received and accepted (2-201(3)(c))
b)
Partial payment: K is enforceable in respect to goods for
which payment has been made (2-201(3)(c))
(1)
Rationale is that the payment serves as evidence of
the existence of a K, but only as to the goods paid for
3.
Specially manufactured goods 2-201(3)(a): clear intention to form
contract if specifications are made
a)
Seller must have made a substantial beginning on the
manufacture, or
b)
Commitments for their procurement before receipt of the
buyers notice of repudiation
4.
Admission in legal proceedings 2-201(3)(b)
a)
If the party admits in the pleadings, testimony, or in court that
a sales K was in fact made, then that party loses the benefit of the
Statute of Frauds defense to the ends of the quantity admitted
The Parol Evidence Rule: Was there an agreement, and if so, what was it? 2A.
Operates to exclude evidence of oral representations/understandings
made prior to the signing of the K that would alter or vary the terms of a written
instrument
B.
UCC: rejects the assumption that because a writing has been worked out
it is final and all matters are agreed upon
C.
1ST STEP the courts ask is: Did the parties intend the writing to be the
complete and exclusive statement of the terms of the agreement?
1.
If YES: terms of the writing may still be explained or interpreted
a)
Can look to course of dealing, usage of trade, and/or course
of performance
2.
If NO: court will supplement terms by admitting consistent,
additional terms (i.e., terms not expressly or impliedly contained in the
writing)

a)
A term is NOT a consistent, additional term if it is the sort of
thing that if true would certainly already be in the writing; however, if
it is something that might naturally be left out, it is a consistent,
additional term and may be admitted (2-202 Official Comment 3)
b)
***Cant contradict w/ extrinsic terms***???
D.
Even though the UCC is silent on the subject, the CL exceptions to the
parol evidence rulefraud, mistake, etc.also apply in Sales transactions (see
1-103)
E.
Columbia Nitrogen Corp. v. Royster: held that evidence of usage of trade
and course of dealing should be excluded whenever it cannot be reasonably
construed as consistent w/ the terms of the K (test of admissibility)
III.
Offer and Acceptance: Was there an offer and was there an acceptance? 2-204,
2-205, 2-206
A.
Offer: In General 2-204
1.
2-204: sales K can be formed in any manner sufficient to show an
agreement, including conduct by both parties that recognizes existence of
such K
2.
2-204(3): A contract is created if:
a)
the parties so intend, and
b)
the court can fashion an appropriate remedy
B.
Irrevocable Firm Offer 2-205
1.
Firm offers are irrevocable, even without consideration if the
following requirements are met:
a)
The firm offer is made in connection w/ a contract to sell
goods
b)
The firm offer is made by a merchant
c)
The offer is in a signed writing and states that it will be held
open
(1)
Note: if the statement that the offer will be held open
is on a form supplied by the offeree, the offeror is not bound
by it unless the statement is separately signed by the offeror
2.
For how long is the offer irrevocable? Once it is determined that
there is a firm offer (the conditions above must be satisfied), the offer is
irrevocable for:
a)
The period of time specified in the offer, or
b)
If no period is specified, a reasonable timebut never longer
than 3 months

C.

(1)
Even if the offer specifies a period longer than 3
months, the offeror is only bound for 3 months
Acceptance 2-206
1.
2-206: the offeror can specify the medium of acceptance (e.g.,
reply by return by mail). If the offer was limited to this medium, that use is
the only possible way to make acceptancehowever courts sometimes
read the offerors statement as still permitting similar means of
acceptance.
a)
2-206(1)(a): unless unambiguously indicated by the
language or circumstances, an offer to make a K shall be construed
as inviting acceptance in any manner and by any medium
reasonable under the circumstances
2.
When a buyer offers to purchases goods for prompt or immediate
shipment, must the seller first notify the buyer that the offer is accepted, or
is the actual prompt shipment a sufficient acceptance?
a)
2-206(1)(b): the offer for prompt or current shipment is
accepted either by a prompt promise to ship [aka notifying buyer
that offer is accepted] or by the act of shipment
b)
What if the seller ships nonconforming goods? It may be
treated as either an acceptance or as a counteroffer depending on
the sellers actions:
(1)
If seller just simply ships nonconforming goods:
shipment constitutes an acceptance of the offer and a
breach of the K
(2)
If seller ships nonconforming goods and also promptly
notifies the buyer saying that he/she is not accepting the
offer but is simply shipping the goods as an accommodation
to the buyer, then seller has made a counteroffer and no
contract has been formed
(a)
Buyer then can either accept or reject the
counteroffer shipment. If accepted: K is created
3.
Can an offer to form a sales K be accepted through
commencement, but not completion of performance?
a)
2-206(2): commencement of the performance specified in
the offer constitutes acceptance of the offer, provided that:
(1)
Offeree/acceptor notifies the offeror

D.

(2)
Within a reasonable time that performance has
commenced
o Note: the notice is not the acceptance, rather the
acceptance and thus formation of the K stems from
commencing performance.
Counteroffers-- Battle of the Forms 2-207:
1.
CL mirror image rule: offerees acceptance must conform to the
exact terms of the offer (there must be a mirror image) and any variance
therefrom constitutes a counteroffer (i.e., a rejection of the original offer)
2.
UCC rule: attempts to resolve the mirror image problem by adopting
the idea that both parties are relying on the existence of a K despite their
clashing forms
3.
battle of the forms problem arises from 2 sources: 1) business
practices: negotiating deals orally and then exchanging printed forms that
nobody reads until dispute arises, or dealing at arms length w/ nonmatching purchase orders/acknowledgments 2) complexities of 2-207
4.
2-207(1): an acceptance adding new terms creates a K (operates
as an acceptance) based on the original offer, unless the acceptance
clearly states otherwise (aka acceptance is expressly made conditional on
assent to the additional/different terms)
a)
If the responding offeree specifically limits the K to these new
terms, the response is treated merely as a counteroffer a no K has
been created until the offeror expressly accepts
(1)
Diamond Fruit Growers v. Krack Corp.:
5.
2-207(2): new/additional terms are construed as mere proposed
additional to the K (i.e., they do not become part of the K); new terms must
be separately accepted to modify the original offer. However, course of
performance might show that terms were impliedly accepted by original
offeror.
a)
If BOTH parties qualify as merchants (2-104) the new terms
DO become part of the K, unless 1 of 3 exceptions occurs
[nonmerchants have to expressly agree to the terms?:
(1)
Original offer objected in advance to the addition of
terms-- then the new terms are not part of the K; 2-207(2)
(a)

(2)
The new terms would materially alter the original
termsthen the new terms are automatically stricken and
dont become part of the K; 2-207(2)(b)
(a)
Official Comment 4: gives examples of terms
that are material alterations
(b)
*NOTE: if new terms material alter the K, only
the material alterations do not become a part of the K;
the other parts of the offerees form do act as an
acceptance and create a K!
(c)
Bayway Refining Co. v. Oxygenated Marketing
& Trading:
6.
DIFFERENT TERMS???
7.
if parties exchange documents and there is a disagreement about a
major term of the K, no contract results and either party may back out of
deal if that party acts prior to the beginning of performance; if performance
has begin, 2-207(3) regulates the problem by creating the terms of the K
a)
if performance has begun, there is a K consisting of all terms
on which their writings agree, plus the supplementary terms
supplied by the UCC wherever the parties are silent
b)
Leonard Pevar Co. v. Evans Products
c)
Klocek?
I.

II.

E.
General
A.
Warranty: a contractual obligation by the seller to remedy certain possible
defects in K
B.
UCC divides warranties into 2 types :
1.
Warranties of title: a warranty that seller will convey good title and
that transfer is rightful
2.
Warranties of quality: express and implied warranties regarding the
goods
Warranty of Title 2-312
A.
What is warranted by the Warranty of Title? It is an automatic warranty
that:
1.
Seller will convey good title to the goods and that the transfer is
rightful (2-312(1)(a))

III.

2.
Seller warrants that the goods will be delivered free of any claim of
sellers creditors of which the buyer has no knowledgei.e., no security
interests or other liens ((2-312(1)(b))
3.
If seller is a merchant: Merchant sellers warrant that goods shall be
delivered free of the rightful claims of any 3rd person against claims based
on patent/trademark infringement or the like (2-312(3))
a)
Exception: If buyer makes specifications to seller, the buyer
automatically makes warranty to seller that protects seller from
infringement claims; this is the only situation under UCC where
buyer is the warrantor
B.
P. 56 in supplement???????
C.
Moore v. Pro Team Corvette: Moore purchased car that he later found out
was stolen. Pro Team said they sold car as is which excluded all warranties, inc.
warranty of title. Court says they need to be specific w/ warranty; as is doesnt
show reference to quality and needs to specifically state what buyer will receive
Warranty of Quality
A.
Express Warranties (Was there an express warranty made?) 2-313
1.
Arises when seller does something affirmative (oral or written fact or
promise) to create buyer expectations about characteristics/performance
of the goods
a)
Seller does not have to specifically state that he/she is giving
a warranty in order for the express warranty to exist (2-313(2))
2.
2-313(1)(a): Statements must:
a)
Have substance/be a fact or promise; must be more than
mere puffing
(1)
2-313(2): an affirmation merely of the value of the
goods purporting to be merely the sellers
opinion/commendation of the goods doesnt create a
warranty
(2)
Ex: This is a good engine is an opinion and not a
warranty, but this is a 102 horsepower engine is a fact and
therefore warranted
b)
Relate to the goods
c)
Become part of the basis of the bargain
(1)
Most courts hold that statement goes to basis of the
bargain if its natural tendency is to induce buyer to purchase
(do not require buyer to prove any specific reliance

B.

(2)
Burden is on seller to prove that buyer did not rely on
statement in making decision to purchase (2-313
Comments 3 and 8)
(3)
2-209: if a statement of fact is made after the sale is
closed and becomes part of the basis of the bargain, it can
be deemed a modification of the K and will be effective.
UNREAD WARRANTIES??? P. 59
Implied Warranties: (Are any warranties implied by law?)
1.
Are automatically part of K, irrespective of the sellers intentions
and despite the fact that seller has made no representations/promise
unless seller does something affirmative to get rid of them. Implied
warranties arise in every sale of goods, new or used.
2.
Implied Warranty of Merchantability 2-314
a)
Who makes the warranty? 2-314(1)
(1)
1st: sale must be by a merchant
(2)
2nd: merchant must deal in goods of that kind sold
b)
Item must be saleable and conform to the normal
expectations of the parties
(1)
Warrants that the goods are of merchantable quality
c)
2-314(2): When is an item merchantable/ What is
merchantability? Goods must meet at least all 6 standards:
(1)
Most important part of 2-314(2) is found in (2)(c): to
be merchantable the goods must be fit for the ordinary
purposes for which such goods are used; what is normally
expected of such goods aka that the goods will work
(2)
Shaffer v. Victoria Station: Shaffer- glass of wine; it
shatters; VS: claim they dont sell the glasses; claimed goods
werent fit for their ordinary purpose
(a)
there is both the tort claim and the sales claim
in this case (know for exam!)
(3)
Daniell v. Ford Motor Co.:
3.
Implied Warranty of Fitness for a Particular Purpose 2-315
a)
Goes beyond fit for ordinary purpose that is a part of the
implied warranty of merchantability; instead means that the goods
will do something different from their ordinary purpose
b)
Arises when:

(1)
Any seller (merchant or nonmerchant) has reason to
know of the use of the goods contemplated by the buyer, and
(a)
Actual knowledge by the seller is not required;
this is an objective test (would reasonable person in
sellers position have known?)
(2)
Seller is aware that the buyer is relying on the sellers
judgment to select suitable goods
(a)
Reliance is required here, but is not required
for implied warranty of merchantability
c)
Seller either selects or furnishes the goods (seller usually
does both
d)
Webster v. Blue Ship Tea Room: fish chowder
4.
Does warranty liability extend to abnormal reactions?
a)
Ex: Seller markets a hair styling product; buyer purchases
some and after using it buyers hair falls out. Evidence indicates
that buyers scalp is unusually sensitive to chemical contained in
the product. Is seller liable for breach of warranty of fitness for that
product?
(1)
Majority: warranty is not breached unless buyer can
show that the reaction is common to an appreciable number
of users
(2)
Minority: burden is on the seller to establish that
buyers injuries were abnormal and exotic (otherwise
presume buyers reaction is normal unless otherwise proven)
IV.
Disclaiming Express Warranties (Have any warranties been effectively
disclaimed?) 2-316(1)
A.
Disclaiming express warranty is virtually impossible; proper way to avoid
liability for express warranty is to not make it in the first place!
B.
Courts will construe disclaimers narrowly so as to preserve all express
warranties made by seller wherever reasonable
C.
Can express warranties be disclaimed at all?
1.
2-316(1): disclaimer shall be disregarded (inoperative) to the
extent that it is unreasonable
D.
Bell Sports v. Yarusso:

V.

E.
Example Fact Pattern: express warranty was made orally and not included
in K itself and K contains broad disclaimer of any warranties not K therein. Before
buyer can prove that express warranty was made (and thus avoid the disclaimer),
buyer must figure a way around the parol evidence rule. Courts will let evidence
in under one of 3 ways:
1.
Unconscionability
2.
Fraud
3.
Lack of agreement to merger clause
Disclaiming Implied Warranties 2-316(2) and 2-316(3)
A.
Much more easily disclaimed than express warranties
B.
There is less unfairness in disclaiming implied warranties as long as the
seller or circumstances alert the buyer to the disclaimer
C.
Disclaiming language must be part of the offer and acceptance process to
be effective; cannot be made after unless there is modification by agreement???
D.
4 WAYS TO DISCLAIM IMPLIED WARRANTIES:
1.
By specific language
a)
W. of Merchantability:
(1)
Must specifically mention merchantability
(2)
Can be oral or written, but if written it must be
conspicuous (2-316(2))
(a)
Conspicuous: must be noticeable
b)
W. of Fitness for PP:
(1)
Must be in writing, and writing must be conspicuous
(a)
Cannot be an oral disclaimer!
(2)
The word fitness doesnt need to specifically be
mentioned
c)
Layered contracts:
(1)
Sellers may include limitations and disclaimers inside
a packaged object as long as the remote buyer who objects
to such new terms is given the opportunity to reject the K if
he wishes
(a)
ProCD, Inc. v. Zeidenberg:
(b)
Rinaldi v. Iomega:
2.
As is or similar language

VI.

a)
If goods are sold as is or with all faults no implied
warranties arise. The language itself is sufficient to alert the buyer
that seller assumes no risk and all implied warranties are excluded
(2-316(3)(a))
b)
As is language must be conspicuous (even though rule
doesnt say it!)
3.
Buyers examination of the goods
a)
No implied warranties as to anything buyer should have
found if:
(1)
Buyer either examines the goods or
(2)
Seller demands that buyer examine and buyer does
not do so
b)
So, implied warranties w/ respect to patent defects may be
waived by buyers inspection of goods prior to sale
c)
Buyers inspection still does not affect the existence of
express warranties!
4.
Custom or usage
a)
2-316(3): Implied warranties may be excluded or modified
by:
(1)
Course of dealing/performance between the parties or
(2)
Custom and usage in the trade generally
5.
Cate v. Dover Corp:
6.
Bowdoin v. Showell Growers:
7.
Rinaldi v. Iomega Corp.:
Limitations on the Warranty 2-316(4) and 2-719
A.
Applies when seller wants to give warranty to buyer but wants in some way
to limit the scope of the liability that a breach creates; Code permits this but puts
restrictions on its use
B.
Parties can specify what remedy shall be available in the even of breach of
the warranty and to make such remedy exclusive (2-719(1)(b))
1.
So, a provision limiting sellers liability to repair or replacement of
defective parts, in lieu of all other warranties, express or implied is
generally effective as a disclaimer of any other fitness or merchantability
warranty
C.
Effective of any warranty disclaimer is limited as to:
1.
Judicial constructions: courts will construe disclaimers narrowly in
order to preserve an action for breach (2-719 Comment 1)

VII.

2.
Consumer protection statutes: state and federal enacted statutes
3.
Tort law: a disclaimer is effective only as to warranty (K) claim, and
doesnt bar an action for negligence or strict tort liability where a defective
product has caused personal injury or property damage
4.
***INC. STRICT PRODUCTS LIABILITY
D.
Wilson Trading Corp. v. David Ferguson Ltd.:
E.
Pierce v. Catalina Yachts:
1.
Read 2-719(2) and (3) as independent of one another, so that an
essential failure of the remedy limitations purpose doesnt automatically
create claim for disclaimed consequential damages
Defenses in Warranty Actions (Sellers Defenses)
A.
First, in an action for breach of warranty the buyer must always show that
the breach was the proximate cause of the loss sustained (2-715(2)(a)(b))
B.
Lack of Notice 2-607(3)(a) and Official Comment 4
1.
To recover, buyer must plead and prove that seller was given notice
of breach within reasonable time after breach should have been
discovered. Buyer will lose all UCC rights if there is a failure to give seller
notice.
a)
This requirement preserves sellers seller the right to inspect
the goods (2-515) and the right to cure (2-508) and to facilitate
early settlement of the dispute
2.
No particular form of notice is requiredcan be written or oral
3.
Notice doesnt need to contain any claim/threat of litigation. It is
enough to inform seller that transaction is troublesome
a)
Fitl v. Strek:
C.
Lack of Privity
1.
Buyer must establish that there was a legal connection (some
relationship showing parties had an agreement)
2.
Vertical privity: how far back up the distribution chain the buyer can
go
3.
Horizontal privity 2-318: deals w/ identifying to whom the retail
seller is liable other than the immediate purchaser [Who, other than the
buyer, can sue the seller for breach of warranty?]
a)
Under 2-318, there are 3 alternatives:

VIII.

IX.

(1)
Alternative A: Sellers warrantyexpress or implied
extended not only to the actual buyer, but also to any natural
person who was a member of his household/family, or a
guest in his home wherever it was reasonable to expect that
the other persons might use or come into contact w/ the
goods, and who in fact sustained personal injuries by breach
of such warranty
(2)
Alternative B: Extends sellers warranty liability to any
natural person who may reasonably be expected to use,
consume, or be affected by the goods (i.e., the innocent
bystander injured by defective car), but only for personal
injury
(3)
Alternative C: extends warranty liability for property
damage as well; also, is not limited to the protection of
natural persons
4.
Reed v. City of Chicago:
5.
East River Steamship Corp. v. Transamerica Delaval:
a)
STRICT PRODUCTS LIABILITY
UCC Warranties and the Magnuson-Moss Act (p.1129 and 1139 in supplement)
A.
Applies to all consumer products manufactured after 7/4/75 that are
covered by a written warranty
B.
FTC creates regulations under the Act
C.
Purpose: created to improve adequacy of info available to consumers,
prevent deception, and improve competition in the marketing of consumer
products
D.
When we refer to this act, it will be referred to as definitions as written in
2301; will refer to 101, 102 etc
E.
MM prohibits a disclaimer for any implied warranty
F.
101: for MM to apply, warranty must fall within its scope
1.
Ventura v. Ford v. Motor Corp.:
Warranties in International Sales: CISG
A.
Article 41 and 42?
B.
Warranty provisions of CISG for international sale of goods are very
similar to UCC
C.
Major difference is the terminology
D.
Express warranties: Article 35(1) and 35(2)(c); fitness for a particular
purpose: 35(2)(b) and 35(2)(d)

I.

II.

III.

E.
Filling in the Gaps 2-305 to 2-311
A.
If parties leave major term out of contract, courts are more willing to save
the K by implying reasonable terms where possible by gap-filling; in the past, if
major term was left out, courts found no legally enforceable agreement
1.
(*****use course of dealing, performance, etc. firstthen courts will
do this??)
a)
Landrum v. Davenport: purchase of Corvette, price left out of
K
Unconscionability 2-302
A.
Code provision tries to prevent adhesion Ks, which involved one party
being in the stronger position and other party is in unfair position
B.
2 types of unconscionability; both are required before a court will make a
finding of unconscionability:
1.
Procedural unconscionability: unfair conduct in the formation of K
2.
Substantive unconscionability: unfairness in the terms of the
resulting bargain
C.
Unconscionability decided by judge b/c it is question of law, not fact SEE
CLASS NOTES OCT 26
Identification of the Goods 2-501
A.
Identifying goods important when it comes to applying risk of loss,
casualty to goods, damages, etc,
1.
2-401(1): Before title to goods can pass, goods must be identified
B.
2-509: Goods must be identified as the specific goods to which the
contract refers; requires that the goods are the subject matter of the K have
somehow been singled out from others in the world
C.
Official Comment 2: general policy favoring early identification
D.
Methods of Identifying Goods:
1.
Identified by making of K 2-501(1)(a)
a)
Requires that the goods be in existence, and
b)
Must be clear what chattels the parties mean
2.
Identified by subsequent action 2-501(1)(b)
E.
2-501(2): Even though goods have been identified to the K, seller may
thereafter substitute other goods for those identified unless/until 1 of 3 events
occurs:
1.
Seller defaults on K
2.
Seller becomes insolvent

IV.

V.

3.
Seller notifies buyer that identification is final
Risk of Loss: No Breach 2-509
A.
General Rules
1.
Once goods are identified, title passes from seller to buyer at
whatever time parties intend that it should pass. Intent can be determined
from provisions of sales K or parties conduct (2-401(2))
2.
Determining whether title has passed:
a)
1st: ask Have the goods been identified?
(1)
title cant pass unless goods have been identified to K
nd
b)
2 : ask When did the parties intend for title to pass?
(1)
if the parties didnt provide for passage of title, UCC
presumes title passed when seller has completed
performance (2-401(2))
3.
Rules as to who bears ROL have nothing to do w/ who has
technical title 2-401(1)
4.
Where should good be shipped (if they are to be shipped)?
a)
Shipment contract: K authorizes seller to ship goods to
buyer; delivery occurs and title passes when seller turns the goods
over to a carrier (2-401(2)(a))
b)
Destination contract: K requires delivery at a destination; title
passes only when goods are tenders at that destination (2-401(2)
(b))
5.
General Code rule on transfer of ROL:
a)
Where the seller is a merchant, the ROL passed to the buyer
on the buyers actual receipt of the goods; and
b)
Where the seller is not a merchant, ROL passes to buyer
when seller tenders delivery (2-509(3))
6.
2-509(3) applies only when 2-509(1) or 2-509(2) doesnt
7.
2-509(2): sets out rules as to when ROL passes to buyer when
bailee is involved
8.
2-509(1): applies to transportation contracts when seller is
required to shop goods by independent carrier to buyer; test as to when
ROL passes depends on whether K requires seller to deliver good at a
particular destination (see Delivery Terms)
Delivery Terms:
A.
Shipment contract: seller only has to get goods to the carrier and then
buyer will take the ROL

1.
2-503(3) Official Comment 5: presumption made by Art. 2 is in
favor of a shipment contract where K is silent on ROL
2.
2-504: Sellers Duties under shipment K:
a)
Seller must make a reasonable K w/ carrier on behalf of
buyer
b)
Seller must give prompt notification to the buyer of shipment
in all cases
c)
Seller must also provide buyer w/ any documents buyer will
need to take possession of the goods
B.
Destination contract: goods must be delivered by the carrier before ROL
passes from seller to buyer
1.
2-503: Sellers Duties under destination K:
a)
Seller must tender conforming goods to buyer at the
particular destination agreed upon and
b)
Give buyer reasonable notice to enable buyer to take the
delivery
C.
Delivery Terms: developed by merchants as shorthand methods of stating
whether sale calls for shipment or destination contract 2-319 through 2-324;
these terms define the passage of ROL and also the price terms that inform
buyer that price quoted includes freight paid to the point indicated
1.
C.I.F. and C.&F: shipment contracts 2-320
a)
C.I.F. cost, insurance, and freight
(1)
Means price stated to be paid by buyer includes the
cost of the goods, the appropriate insurance of safe delivery
for the shipment, and the freight charge to destination
b)
C&F: cost and freight
(1)
Same as C.I.F. but doesnt include insurance
c)
2-320(2): buyer bears risk of transit damage
2.
F.A.S. (free alongside): 2-319(2). Generally used in maritime
shipping K
a)
Seller must deliver goods free of expense to the buyer
alongside (on the dock next to) the vessel on which they are to be
loaded and is to obtain a receipt therefore, in exchange for which
the carrier is obligation to issue a bill of loading
b)
Buyer then bears the expense and risk of loading onto the
vessel
3.
Ex-ship: 2-322

a)
Seller can give it to any ship as long as its unloaded
b)
Seller is to bear full risk and expense until goods leave the
ships tackle (i.e., unloaded)
c)
Seller is required to discharge all liens arising out of the
carriage and furnish the buyer w/ such documents as are required
to enable buyer to take possession of goods
4.
F.O.B.: free on board can be either a shipment or destination
contract 2-319(1); always followed by a named place. ROL passes at the
named place. If named place is sellers warehouse, then its a shipment K;
if its buyers store, then its a destination K
a)
F.O.B. point of shipment: 2-319(1)(a)
(1)
Seller only required to bear ROL and expense of
putting goods into possession of the carrier
(2)
Seller does not bear expense or risk of loading
(3)
Ex: F.O.B. sellers factory
b)
F.O.B. vehicle of transportation: 2-319(1)(c)
(1)
Seller required to bear expense and ROL of having
goods loaded on board
(2)
Ex: F.O.B. Car 4029, Union R.R. Depot, Los Angeles
c)
F.O.B. point of destination: 2-319(1)(b)
(1)
Seller must arrange to transport the goods to the point
of destination at the sellers own expense and risk
(2)
Ex: F.O.B. buyers showroom
5.
Cook Specialty Co. v. Schrlock:
6.
Rheinberg-Kellerei GmbH v. Vineyard Wine Co.:
I.

In General
A.
2-301: sellers basic obligation is to transfer and deliver (tender goods)
1.
Sellers tender: 2-503 and 2-504
a)
What constitutes tender of delivery?
(1)
By manual transfer of possession
(2)
By constructive tender
(3)
Goods in possession of bailee
b)
Tender= offer; seller only needs to make offer to delivery the
goods, and doesnt require actual delivery
2.
Conforming: 2-106(2)
3.
Acceptable means of payment by buyer: 2-511(2) and 2-511(3)

B.
II.

III.

2-301: Buyers basic obligation is to pay in accordance w/ K

1.
What constitutes acceptance? P. 111
Installment Contracts 2-612(1)
A.
Installment K: any K that requires or authorizes the delivery of goods in
separate lots to be separately accepted
B.
2-612(2): Seller is entitled to payment even where the tender of the
goods fails to conform exactly to K as long as it substantially conforms;
technically perfect performance of K not required, just needs to be substantial
C.
2-612(3): Only if 1 or more installments substantially impairs the value of
the whole K is there a breach of the entire K by the seller
D.
Cherwell-Ralli, Inc. v. Rytman Grain Co.:
1.
2-609-assurance****
2.
2-609: party can demand adequate assurance that performance
will be forthcoming when due, if there are reasonable grounds for
insecurity with respect to the other partys performance
3.
Adequate assurance:
a)
Must be demanded in writing
b)
Upon receipt of written demand, recipient must furnish
adequate assurances of due performance within a reasonable time
not exceeding 30 days
c)
Until assurance is received, aggrieved party is entitled to
suspend any performance for which that party hasnt already
received the agreed return performance
(1)
At the end of reasonable time period, failure to
supply assurance is a repudiation of the K
d)
If deal is between merchants, reasonableness of grounds for
insecurity and adequacy of any assurance offered are to be
determined in accordance w/ commercial standards
E.
In theory, substantial performance rule has never applied to single-delivery
contracts between merchants
Perfect Tender Rule 2-601: Constitutes Sufficient Tender
A.
To prevail in a single-delivery sale, seller must: make a perfect tender that
complies w/ all the terms of the K and then show that buyer refused to take the
goods (higher standard than installment K)
1.
Policy: higher standard b/c buyer doesnt have same bargaining
position as a buyer in an installment K (where the seller needs to keep
dealing w/ buyer on repeated occasions)

IV.

V.

VI.

B.
2-601: of goods or the tender of delivery fail in any respect to conform to
the K, the buyer may reject the whole, accept the whole, or accept part and reject
part
1.
Commercial unit definition: 2-105(6)
Cure 2-508
A.
If seller hasnt made perfect tender and buyer has rejected goods, seller
sometimes has the right to cure the defective performance
B.
If sellers original tender of delivery is rejected b/c it is nonconforming and
the time for performance has not yet expired, seller may prompty notify buyer of
an intention to cure and then within K time for performance, seller may tender a
conforming delivery
1.
Notice requiredbuyer must be notified of sellers intention to cure
a)
Notice must be given seasonably, which means a
reasonable time unless otherwise agreed upon
b)
Doesnt need to be in any particular form, but should state
approximate date by which substitution will be accomplished
2.
SURPRISE REJECTIONS???????
3.
PERFORMANCE BY BUYER???
C.
Wilson v. Scampoli:
Performance by Buyer
A.
Buyers first duty is to furnish facilities reasonably suited for receipt of the
goods 2-503(1)(b)
B.
Buyer has right to inspect the goods before payment or acceptance 2513(1)
1.
Inspection must be made within reasonable time after receipt of
goods, or right is lost
2.
Buyer is permitted to make inspection at any reasonable place
Rejection and Acceptance
A.
Buyers basic duty is to accept and pay for the goods 2-301
B.
When seller makes a tender of the goods, buyer has 2 options:
1.
Rejection 2-601
a)
Must reject within reasonable period of time after delivery
b)
Failure to act within reasonable time results in technical
acceptance
c)
Note: buyer is entitled to a reasonable trial use period to see
if goods conform (reasonable opportunity to inspect 2-513)
2.
Acceptance 2-606 (definition) and 2-607 (legal consequences)

VII.

a)
On acceptance, burden of proof as to defects shifts to buyer
2-607(4)
b)
Prior to acceptance, seller must prove that perfect tender
was made under 2-601
(1)
Ramirez v. Autosport:
(2)
Plateq Corp. of North Haven v. Machlett Laboratories,
Inc.:
Revocation of Acceptance 2-608
A.
Opportunity for rejection has already passed and buyer has made
technical acceptance; buyer can make revocation of acceptance by rescinding K
and trying to get payment back if buyer then discovers something wrong w/
goods
B.
****After making technical acceptance buyer may still bring a breach of
warranty action as long as proper notice (2-609(3)(a)) has been given
1.
If buyer wins, damages based on 2-714 and 2-715 will be
awarded and buyer can keep goods
2.
If buyer doesnt want goods, and instead wants return of the price,
he can revoke acceptance (essentially disclaiming the goods)
C.
Revocation of acceptance: called rescission at CL but differs from
rescission b/c buyer not only recovers the price but may recover consequential
damages as well
D.
Standards for revoking acceptance are more difficult to meet than
standards for rejection
1.
Rejection: buyer can reject if goods fail in any respect
2.
Revocation of acceptance: buyer must show that defect
substantially impairs the value of the goods
a)
Waddell v. L.V.R.V. Inc.: 2 part test of prove substantial
impairment:
(1)
Objective element: whether the nonconformity in fact
substantially impair value of goods to buyer, considering his
particular needs
(2)
Subjective element: considers the needs and
circumstances of the personal seeking to revoke, not those
of the average buyer
E.
2-608(2): buyer must give notice to seller of revocation of acceptance
within a reasonable time after buyer should have discovered defect

VIII.

IX.

I.

II.

F.
After revoking acceptance, buyer must stop using the goods, take
reasonable care of them, may claim a possessory security interest in them for
expenses, etc.
Risk of Loss: Breach 2-510
A.
ROL where breach has occurred: 2-510; ROL where neither party has
breached K: 2-509
1.
2-510 deals w/ if the seller or buyer was in default at time of
accidental damage or destruction of goods
B.
Sellers shipment of nonconforming goods:
1.
If good shipped by seller so fail to conform to K as to give buyer the
right to reject them, ROL remains on seller until cure or acceptance
a)
Where buyer discovers defects in the goods only after
accepting them and defect is so substantial that it justifies buyers
revocation of acceptanceROL will be treated as having been on
the seller from the beginning (2-510(2))
C.
Buyers repudiation
1.
Where seller has shipped conforming goods but buyer has
wrongfully repudiated and goods are damages and not covered by sellers
insurance, seller may treat ROL as resting on buyer for a commercially
reasonable time 2-510(3)
a)
Only apply where seller is uninsured and has other acted in
a commercially reasonable manner!!
D.
Jakowski v. Carole Chevrolet, Inc.:
Impossibility of Performance 2-613 to 2-616
A.
4 UCC provisions designed to straighten out the legal problems created by
unexpected events that make performance of the contract impossible, aka
commercially impracticable
1.
Arabian Score v. Lasma Arabian Ltd.:
2.
Louisiana Power & Light Co. v. Allegheny Ludlum Industries, Inc.:
3.
Special Remedies: General
A.
Remedies can be divided into 2 parts:
1.
Sellers remedies when buyer is in breach 2-703 to 2-710
2.
Buyers Remedies when seller is in breach 2-711 to 2-717
Special Remedies: Remedies on Insolvency

III.

IV.
V.

A.
Reclamation 2-502 and 2-702: when one party becomes insolvent while
in possession of goods that have been identified to the K, the other party may
elect to forgo damages and try to get the goods themselves
B.
An unpaid seller has right to reclaim goods in 2 situations. In either
situation, seller may reclaim goods by demanding their return within 10 days after
buyer receives them:
1.
Cash sales 2-507(2): buyer pays by check at time of delivery, but
check is returned for insufficient funds
2.
Credit sales 2-703(2): after delivery of goods to buyer, seller
discovers that buyer is insolvent
Special Remedies: Liquidated Damages 2-718(1)
A.
CL: if parties put liquidated damages clause in K, it was upheld by court
only if:
1.
Parties truly intended the amount named to be compensatory, and
2.
Had made in good faith and attempt to pre-estimate the damages
3.
**If court decide parties intend amount to be penalty amount to be
forfeited in event of breach, court struck the clause and made aggrieved
party prove actual damages
B.
UCC provision: similar to the CL rule except it provides that the validity of
the liquidated damages clause be tested, in part, against the actual harm caused
by the breach (amount has to correlate to actual loss; have to reasonably
estimate what your losses will be when K)
C.
Art. 2A: liquidated damages provision for leasing of goods no longer refers
to actual damages; now allows a formula to be used to compute damages, and
drops all reference to the effect of an unreasonably large liquidated damages
clause
Special Remedies: The Breaching Buyers Restitution???
A.
Problem 68:
Sellers Remedies 2-703
A.
Accepted GoodsSellers recovery of damages is measured by 2-709 if:
1.
Buyer has made a technical acceptance of the goods, or
2.
The goods are destroyed within a commercially reasonable period
of time after ROL shifts to buyer
B.
Unaccepted Goods
1.
If buyer repudiates [where seller has shipped conforming goods but
backs out of it wrongfully]before delivery of goods, or rejects the goods:

VI.

VII.

a)
Seller can resell the goods to someone else and then 2-706
applies, or
b)
If seller does not resell the goods, damages are measured
under 2-708
c)
Teradyne v. Teledyne:
Buyers Remedies 2-711
A.
Accepted Goods:
1.
Buyer can sue for breach of warranty or other breach of K when/if:
a)
If buyer has made a technical acceptance of goods (2-606)
and it is not later revoked,
b)
Buyer has given notice of defect to seller
c)
Notice was given within a reasonable time after defect
should have been discovered (2-607(3)(a))
2.
Damages are then measured by 2-714 and 2-715
B.
Unaccepted Goods
1.
Under 2-711, buyer may recover price of goods and other
damages if:
a)
Seller never delivers the goods, or
b)
Where the buyer rejects or revokes acceptance
2.
Other damages:
a)
Generally include incidental and consequential damages
under 2-715, or
b)
Buyer can seek specific performance or replevin (action to
recover the goods) under 2-716. 2-716 allows specific
performance not only when goods are unique but also in other
proper circumstances 2-716(3)
3.
2-712 authorizes the buyer to cover, aka purchase substitute
goods.
a)
If buyer covers properly, damages are measured by
comparing the original contract price to the cost of the cover
b)
If buyer fails to cover in an appropriate situation,
consequential damages that could have been avoided are denied
(2-715(2)(a)).
c)
If buyer does not cover, damages may be measure under 2713
(1)
Tongish v. Thomas:
CISG Damage Provisions

A.
B.

Apply to international sale of goods

Articles 74-78