Advanced Contracts

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Fundamental aspects of sales Sales systems mean all of the people, institutions, laws and practices that are involved in transfers of ownership for a price. Sales systems generally perform four functions that facilitate the transfer of ownership from seller to buyer o First, they bring buyers and sellers together and enable them to create legally enforceable transfers of ownership. They provide legal rules to determine when formation occurs an provide people and institutions that enable formation to happen at all. o Second, systems provide a set of standard terms that govern the transfer of ownership, and act as a gap filler (ie, UCC). Common law and standard form Ks also act as gap fillers. o Third- provide a set of delivery institutions that facilitate the possessory, legal an symbolic transfer from buyer to seller o Fourth, enforce agreements to transfer ownership by giving the aggrieved buyer or seller various remedies for breach by the other. Three spokes that follow the article 2 hub in each assignment (formation, terms, performance, remedies) are personal property leases, international sales of goods, and real estate conveyance. International sales are generally governed by the Convention on Contracts for the International Sale of Goods (CISG) Professor Stewart Macaulay: non contractual relations in business There are at least three ways that sales law has an impact on sales systems o First, law of sales crucial when normal bus relationship breaks down and parties litigate o Second, parties to a sales agreement who negotiate informal settlements do so in the shadow of the law o Third, legal rules are important in sales systems because they help dictate the terms of the various forms that business people use in conducting transactions within a given sales system. Professor Russell Weintruab conducted and extensive survey of corporate counsel about K practices, noted the law should not be

contrary to practices the community perceives as normal and desirable. Scope of Article 2: Some industries shun 2; Professor Lisa Bernstein notes: the diamond industry and the grain industry dont. The diamond industry is unique in its ability to create and more important, to enforce its own system of private law. Grain industrys private legal system does not seek to explore the actual practices between two contracting parties, they use norms. o Calls into question one of the fundamental premises underlying Article 2, that courts should apply the rules in litigation with reference to how the parties acted when they were not in litigation. Another key consideration of article 2 coverage is whether the transaction will be subject to the gap filling role of the code. Usual areas of dispute are statute of limitations and warranty of merchantability. Adel v. Greensprings of Vermont Procedural Posture

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o Plaintiffs, a husband and a wife, filed an action to recover damages for personal injuries from defendants, a resort corporation, its president, and its water system manager, as well as a self-employed management consultant. Defendants filed a motion for summary judgment. o o Overview o The husband suffered from a severe case of Legionnaires' disease after returning from a ski vacation during which he stayed at the corporation's resort. The water at the resort was tested by health officials, and some of the samples contained Legionella bacteria. The court granted the summary judgment motion as to the president and the consultant because neither of them were personally involved in maintaining the resort's water supply. In denying the remainder of the motion, the court held that (1) water was a "good" under article 2 of the Uniform Commercial Code

(UCC), Vt. Stat. Ann. tit. 9A, 2-105 (2004); (2) the corporation was a "merchant" with respect to water pursuant to Vt. Stat. Ann. tit. 9A, 2-104(1); (3) because the condominium owners of the resort's units paid the resort for water, they were "buyers" of the water, and thus, the warranty of merchantability in Vt. Stat. Ann. tit. 9A, 2-314 (2004) applied; (4) the corporation was in the business of selling water for purposes of strict liability; and (5) the manager could be held liable for negligence because he was personally responsible for the resort's water supply at the time the husband got sick. o o Outcome o The court granted defendants' motion so as to dismiss the suit as to the president and the consultant. The court denied the remainder of the motion. o o Court said water is a good. (strict liability means youre not necessarily negligent, youre just strictly liable. We usually think of this in tort, but all K actions are strict liability including the implied warranty of merchantablilty) If youve made a warranty, and the goods arent merchantable, youre liable. We dont care why. COOK v. DOWNING o Procedural Posture o Appellant dentist sought review of an order of the District Court of Leflore County (Oklahoma), which entered judgment in favor of appellee patient in her action arising from a condition that was the alleged result of ill-fitting dentures. Damages were awarded pursuant to article 2 of the Oklahoma Uniform Commercial Code, (UCC), Okla. Stat. tit. 12A, 2104, 2-105 and 2-315 (1991) and the implied warranty of fitness for a particular purpose. o

o Overview o The dentist testified that the condition was generalized and not consistent with localized sore spots, which would have resulted from ill-fitting dentures. The dentist argued that any claim the patient might have had sounded in tort. The court agreed, holding that the trial court erred in entering judgment in favor of the patient based on the UCC. In Oklahoma, a dentist was not a merchant and dentures, furnished by the dentist, were not goods under the UCC.The fact that the dentist held himself out as specializing in the preparing and fitting of dentures did not remove him from the practice of dentistry and transform him into a merchant. The court ruled that those who, for a fee, furnished their professional medical services for the guidance and assistance of others were not liable in the absence of negligence or intentional misconduct. In general, dentists were required to use ordinary skill in treating their patients. The patient did not establish the elements of legal detriment by only showing nonsuccess or unsatisfactory results. o o Outcome o The court reversed the judgment of the trial court and remanded the matter with directions to enter judgment in favor of the dentist. Dissent basically said, no, this is a mixed transaction, and there is evidence in the record that could support the conclusion this was principally a sale of the good of he dentures, and those dentures were not fit for their ordinary purpose, and applied Article 2. Warranty of merchantability, there are stricter standards for merchants. Same is the case for SOF. 2 kinds of merchants, regular merchants, which almost any businessperson would be, and merchants in goods of the kind. Steverson notes, you dont need to be a merchant for 2-315 majority wrong dissent right.

CLASS NOTES: o 768 6667 steversons number o 70% final, 30% class expert, must do 3x, cases and problems o prepare to make arguments on both sides, read ucc comments, know the cases. You can talk to her about any problems youre having with your problems. o Sign up sheet on twen, sign up for three classes, figure out o o when to be class expert, sign up. Syllabus on twen next week, we go in order of the book, NOT doing real estate. There is an optional midterm, Oct 23, turn in by 8:10 pm oct 30. If you do the midterm, you can come to the review session. At the session, model answer and we go over. Dont just look at the code sections the problem says, you might want to look at other things. She will provide us a statute book for exam.

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o o Big picture outline of class: Scope What statute applies? Am I in Article 2, or 2A, or CISG, or Common law? If I am in Article 2 (LOOK AT SLIDE ON TWEN) Article 2, article 2a, and cisg are MUTUALLY EXCLUSIVE!!!!!! Formation Under the law Im focusing on, do I have a contract? Terms If I do have a K, what are the terms? Always look to the K FIRST. Look at the K and figure, do we have any unclear, ambiguous, missing terms? Parol evidence? Avoidance of the K

Can I get out of it? Performance & Breach If you cant get out, what were your obligations? Did you fulfill them? Did you breach the K? Anticipatory repudiation? Remedies If there is a breach, can the other party receive some compensation or other remedy because of that breach, in particular damages. Not talking about goods oriented remedies, that goes under performance and breach (ie, withholding goods)

Statutes were responsible for: Need one that includes article1, article 2, 2a, CISG, and Magnuson-Moss or MMWA warranty federal trade commission improvement act warranty act. (note, OR and WA have NOT adopted revised article 1!) if you start to get confused in article 2, look at the table of contents, it breaks it down nicely. we are using revised article 1. Look at 2-403 transfer of title, well use that. S says important. Transactions in most instances involve a sale, but the term in 2 102 is actually transactions, not sales, so if you have a good and its not a sale, dont automatically say it isnt governed by article 2 (gonna have to go back to property for title- look at prop notes)

Need to be able to apply both PPT and GA test AND KNOW POLICY BEHIND EACH!!!

8/24/2012 7:49:00 PM Mixed Transactions Problem 1.3 (side note CISG deals with if buyer supplies goods used, then mainly what youre asking of seller is ervices only, but UCC doesnt have that , so the question is should we analogize?) Plaintiffs argument: Transaction falls under article 2 of the UCC because o Its a good, because goods are all things moveable It is a DVD, and a dvd is moveable because you can pick it up and move it. Sale- 2-106 transfer of title (In exam, youd write, we dont know that this is for a price, it isnt in the facts) of dvds from shop to aunt millie for a price, 2-304 money or otherwise. (we assume shes paying money) (no evidence theres a lease) Defense response o NOT under UCC, article 2 does not apply o This is a mixed transaction, we look at predominant purpose o Predominant purpose was to transfer from a video to a dvd, otherwise aunt millie wouldnt purchase the dvds, so the predominant purpose was the service of transfer. Mixed because service of transfer and goods of the dvds. o Why choose ppt vs ga test? You need a policy argument. She says, it better reflects the parties intentions. Rebuttal: o Specially manufactured? If so, not a mixed transaction. A specially manufactured hybrid is by definition a good, so we dont even need to go there. If manufacture is act or process of producing, and specially is just for this customer, then sounds pretty specially manufactured. (videos are ip, here we are just using a machine to transfer)

Judge says: not specially manufactured, shes paying for the service of the camera shop to convert the movies to dvd format. The dvd isnt unique, she doesnt want blank dvds, she wanted the service. Court of appeals has reversed Class is supreme court. Ruling that it is not a specially manufactured good is upheld, Thats the binding law in our jurisdiction of make believe majority using raw materials definition, its not unique (special) because they transfer movies for everyone, so hers isnt special, and the dvd is just a dvd, not special, and it wasnt manufactured from raw materials. Remember that the ucc is supposed to be construed liberally Remember to fairly represent what the majority has to say, then counter it head on You need to do both tests, with policy arguments for each. Policy for GA test, PPT is too wishy washy, consumer protection Problem 1.4 Be careful looking at the facts- non goods aspects- tests didnt go into the manufacture of the specially manufactured goods if they are specially manufactured If we say the goods predominate, do we have to worry about the implied warranties? Yeah, they are merchants, so 314 applies and so we dont need to go to 315, but you could probably go that way too, steverson says wed probably go to 315 because they are special for the user, and you dont need to be a merchant in goods of the kind 314, you do need to be a merchant, so watch that in analysis. Policy about whether professionals should be merchants (ie, dentist) Look at 104(?) warranties should professionals be merchants?

ARTICLE 2A: Scope is in 2A102 applies to any transaction, regardless of form, that creats a lease. Lease is 2A103j:

Also look at lease vs. security interest in 2-103 o Make sure you understand tax, accounting, bankruptcy differences between lease and sale. Gonna get lost later if we dont understand. o If its a disguised sale, article 2 and article 9 apply o If a lease, 2a. mutually exclusive. o o Problem 2.1a: True lease according to class expert 1. 2A102 2. 2A103j 3.1-203 b Bright line bailey analytical framework a) consideration is an obligation for the term of the lease b) is not subject to termination by lesse c) 1 of 4 of the following if yes, then a disguised sale/security interest, not a true lease we dont fit, so then its determined by facts of case 1-203a, apply common law economic realities test ERT. (????)

Article 2A Scope

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1. 2A-102, then 2. 2A-103(j), then 3. 1-203 1-203(b) bright line test that is a partial codification of economic realities test o You definitely have a security interest if A. The consideration the lessee is to pay is an obligation for the term of the lease and is not subject to termination by the lessee; and B. Transaction fits within one of 4 categories (see (b) (1)-(4)} (make sure you at least have a vague idea of what these are) (you want to go through 1 203b At the end of the term, will the goods have any economic life? Does the salvage value exceed the use value, you measure at the time of entering the lease, projected. Option to purchase at the end? Must be for fmv, thats not nominal consideration, but nominal consideration is a problem 1 203 sets up some situations that do not necessarily set up a security interest merely because: be aware of those situations In the hypo, Martha was supposed to pay insurance and maintenance, thats a net lease, simply having a net lease does not, by itself, indicate that there is a security interest. Carlson agrees with this, Bailey in Dicta suggests net lease is a signpost (Factor towards disguised sale) If application of 1-203 b bright line test does not definitively sho a security interst, then look to facts of the case and apply ERT ERT- the likelihood, at the time the transaction is entered into, that the lessor will receive the goods back at a time when the goods still have meaningful economic life.

TWO STEP PROCESS: FIRST bright line test. If you get YES, security interest , YOURE DONE. If no definitive answer, then you go to the ERT. DONT conflate the two. So 1-203b, you get a NO on anything, you do ERT. If you get all YES, then no ERT needed. Breakdown of ERT True lease if (SEE TWEN SLIDE) Problem 2.1 cont. B.) consideration paid for the lease is more than the fmv, but that doesnt determinitevly make it a security interest. You got a bad deal, but that doesnt make it a disguised sale. Nothing has changed from a, no definitive answer, so we go to ERT, full payout doesnt tell us anything about reasonable likliehood, shed still have to pay FMV at the end of the lease. Still a true lease. Not too good a deal to pass up (at all) she still has to pay fmv. C) ERT says meaningful economic life, code says economic life, meaningful is relative. If the car was 20k, and now its worth $500, is that meaningful? D) nominal consideration (whats nominal? Make sure you define , define, define!!!!) 1 203 d give def of nominal, also see: In re Bailey, see the * that Steverson pointed out. Cite to white & summers treatise!! E) bc of option to terminate, we have to move to ERT. ERT asks, at time of K, is there a reasonable likliehood that the lessor will get the car back when it has meaningful economic life. Is it LIKELY (HIGHLY likely?) that she will exercise her OPTION? You have to look at what its gonna cost her. OF COURSE SHE WILL TAKE THE OPTION. Were asking, what would make economic sense to a reasonable person?? Remember, its based on TIME OF K, so you dont look at what might happen over the term of the lease. You look at the end, but based on the assumption of whats true at the time of the lease. F) its a lease. Just like A, doesnt change the analysis any. The fact she wore it out in 3 years is a red herring, because you look AT TIME OF K. Predicted useful life is 15 yrs, the fact she rode it hard is irrelevant

G) She can terminate, she just has to pay 5k. So for a formalist court, wed go to ERT, because you dont fit. Bailey is not quite as formalistic, and bailey finds no right to terminate where theyd have to pay three months rent to terminate, so some Js read that loosely, but lets assume formalistic J, and look at ERT. 2.3 extension of credit is a separate instrument so that doesnt affect lease or sale note, youre giving up 50% of purchase price to terminate, so you have to do the formalistic/bailey comparison (bailey would say, no right to terminate) ERT: Is there a reasonable likliehood ANYONE would terminate? No. So jay, this is NOT a true lease. fix it? Incentivise outside the lease- structure the lease so it looks like a true lease, but give them something that incentivizes them to either keep this one or buy a different one (exchanges, lessons, service), but the LEASE k is not binding them in such a way. Its unlikey she would terminate because it costs so much, thats like a years worth of lease payments. (remember its relative) SO g is a disguised sale.

How to

Question 2.5 Article 1, CISG- applies to sales in goods No def of sales or goods, however, goods, art 2 exception, consumer goods not covered by CISG if the seller knew or ought to have known at any time that the goods were for that purpose (so if no way to know its a consumer good, then thats covered) She ordered one for home and one for work, but could they know? Between king parties whose place of business are in different king states and theyve adopted the CISG.

8/24/2012 7:49:00 PM The CISG applies to the following: Contracts of sale of goods (but not consumer good); AND The contract is between parties whose place of biz are in different states if Such fact appears either From the contract or From any dealings beween, or information disclosed by, the parties at any time before or at the conclusion of the Contract; and Either The states are ocontracting states, ie, countries that are signatories to the CISG or The rules of private international law lead to the application of the law of a contracting state. (The US has OPTED OUT of this part) so in the US, you only fall into CISG if the states are both contracting states. What if they have different places of business? If a party has more than one place of business, then in deciding whether the places of biz are in different states (SEE TWEN SLIDE) Parties have to know about the other place of business (you cant be all, OH HA< I have this OTHER pob you didnt know about, cisg bitches!) Thats in article 10 of cisg

Learned that cisg applies to k of sale of goods, but it doesnt apply to consumer goods, unless the seller doesnt know that the buyer is buying as consumer goods. Make sure you dont fit in any exception in article 2 before you say CISG applies

ERT came from case law 1 203 codified part of it, so whatever part it doesnt supplant from the caselaw, still exists, so thats why we can go from 1 203 right to caselaw with ERT.

Problem 2.5: Article 3 of cisg- manufactured goods covered in this case Sale isnt defined where to look? Private international law? Article 7 cisg says about interpreting the convention, what are the parameters? Matters not settled should be in conformity with the law applicable by virtue of the rules of private international law we dont have those rules, we dont need them here, we are just familiarizing ourselves with cisg we dont have a def. of sale, so we look to principles of private intl law, and conflict of laws will come in too. (Steverson suggests taking conflict of laws) No def. of goods in cisg. But this falls under manufacturing goods in article 3 (1). If it didnt fit, cisg applies predominant purpose test to mixed transactions. Intended one of the chairs for consumer use, so if the seller doesnt know that, then its goods (not excepted, because the seller doesnt know that its consumer goods) but if the seller knew or ought to have known, it would be excepted from CISG because seller doesnt know. So what if he did know? Either has to have whole K not covered, or has to make two contracts. One would be cisg, one would not be. (Steverson told her this was an option. If there is no reason not to separate because they have totally different purposes, then you can separate them. The question is, can the separating lead to problems in the CISG? It doesnt say anything one way or another about personal goods vs. commercial.) Even if only one k is signed, you can still split. The predominant purpose thing is not designed for personal vs. commercial, as far as steverson knows, in this type case, you can split them into to ks. Remember if you are applying predominant purpose, you use article 3(2), NOT the one weve been using from American common law for ucc.

Judge could also rule to apply cisg to both because the buyer created the confusion. Is it between parties w place of biz in diff states? Is the place of business for the seller in Michigan or in Mexico? Article 10 has the test. Closest relationship to K and its performance.? Argument for Detroit/mi, is that this is where the people making the K are, mexico is where the goods are manufactured. (and we have no evidence she knew that there was a factory in mexico) (what is PERFORMANCE of the k mean? Isnt it the factory that performed it? But then, if there was a problem, wouldnt you contract MI?) Steverson says, well MI has the closest relationship to FORMATION of the K, whereas mexico probably mostly performance. But some performance could happen in MI, so thats one argument that the balance tips to Michigan. Other argument, the chair is put together in mexico, ships from mexico, etc. she didnt purposefully GO to an American place. But, someone from the corporate office came to herbut the specs get faxed to mexico . Question of closest relationship is not as straightforward as you might like. It would be irrelevant if the buyer iddnt know about mexico, if buyer thought it was a us company,t he companys choice to use a Mexican factory wouldnt cause CISG to apply. On test, make both arguments but then come to a conclusion. You can also say if the court decides differently, then you have to look at X In real life, steverson says, there arent many cases but youd want to try to find cases so you can figure this out. There are also a couple treatises you can look to in order to get more information. You just have to make arguments as a lawyer, give it your best shot, argue by analogy.

Formation (Back into article 2, leaving cisg) Making sure we are all on the same page with the big picture

Formation of K 2-201 SOF 2-204 Formation in General (tells you that you are applying legal realism idea of contract formation, if its clear a k has formed, it exists, even if we dont know when it happened) you CANNOT USE 2-204 IF your K is governed by 2-207!!! If a specific provision applies, you have to use the specific one. ONLY use 2-204 if you are not in one of the specific ones. 2-205 firm offers 2-206 offer and acceptance in general 1a is general 1b is specific 2-207 battle of the forms re-look at getway/licitra!! Problem 3.2b 22061b order or offer to buy goods for prompt or current shipment it shall be construed as inviting acceptance by prompt promise to ship or prompt shipment, conforming or nonconforming order- because purchase order submitted (how do we know its for prompt or current shipment?) does PO say? Look at facts, see what it says. If it says ship in three months, not prompt or current shipment. As a general rule, with sale of goods, time is always of the essence in general. So in general, most POs are an order for prompt or current shipment unless there is something to the contrary. Remember for prompt promise, the promise itself must be prompt, not just a promist TO BE prompt. In these facts, we have no idea when they shipped, based on facts, it appears she shipped immediately. You can look at did they get in a reasonable time to construe. Author didnt say in the problem, so were just going to assume its for prompt shipment. Nonconforming goods with no notice of it. Do we have acceptance of the offer? Yes. The prompt shipment signified acceptance. If yes (yes) what are the terms? Its the terms on the PO, with gaps filled by UCC. The PO is the offer.

3.2 a, purchase order said seller liable for all remedies available under UCC HMIs acknowledgement disclaimed in bold face all consequential damages. Stairmasters were shipped and acknowledgement sent LATER. If the acknowledgement were treated as a confirmation, 2-207 will govern. (steverson rants about Easterbrook again. She has no idea what he was doing in pro cd and gateway) 2-207, battle of the forms. Common law give precedent to the last shot, even though that may not be what parties intended. 2-207 deviates from that common law rule, but it creates both solutions and problems. dicker terms or bargained for terms. If the forms agree, we have a definite expression of acceptance. If not, then we say the parties are not, the offeree is not accepting, you order apples and get an acknowledgement that says, yeah we will send you oranges, thats not an accepted offer. But 2-207 says, if you have aggreeement on dicker terms, you have an acceptance not a counteroffer. Also if you dont have an acceptance but parties act if you have a K, then section 3 comes in (look at notes and outlines) 3 hates 2. Willinteract with 1 only if 1 says no K. Never ever put three with two. Can have a section 1 k with acceptance, or k previously formed via 2204 or 2206 followed by a written confirmation. Gateway into 2 207 is an acceptance or confirmation with additional or different terms. If you dont have a confirmation or purported acceptance with additional or different terms youre not in 2207 Additional to or different from the offer in case of acceptance

Additional to or different from the previously formed K in case of confirmation. Had to be definite expression of acceptance Do they say they are accepting? Is there language of acceptance? (I.e., we will ship) Look to dicker terms? Is there agreement in dicker terms? If not, no definite expression of acceptance (See handout on TWEN) subject to doesnt make it EXPRESSLY conditional. Must be absolutely clear cut you will not accept unless buyer agrees to your terms. Has to be a seasonable expression of acceptance Not expressly made conditional on assent to additional or different terms (go through those three individaullY) we are only talking about the acceptance, if the acceptance says the acceptance is expressly conditional on our additional or different terms. See TWEN slide for steversons rewriting of 2-207 1 that makes it more clear. If you have a section ONE k, you look to section TWO to see which terms in the acceptance or confirmation are a part of the contract. (comment 6 is only talking about if you have 2 confirming forms) white made up his knock out doctrine. (Re look at white and summers and all that shit) if no section 1 acceptance, but conduct, go to section 3. (terms on which they agree) if a term is in one but not the other, its out, only terms in both writings come in, UCC is gap filler for any gaps created by this. REMEMBER YOUR GATES!!!!!!! Section 2 terms, 2 rules for merchants and non merchants, and they mean general merchants (everyone in business acting in their mercantile capacity) Between merchant and non merchant, they are only proposals for addition to the contract. They must be expressly assented to in order to come in.

CONDUCT IS NOT EXPRESS ASSENT. Simply performing will not constitute express acceptance. 3.2c is it seasonable? GOD I NEED MY NOTES. Seasonable is in 1-205 Not seasonable, 3 months 3.2d Dont get fooled, the expressly conditional language in this problem is NOT IN THE ACCEPTANCE OR CONFIRMATION. 2-207 says NOTHING about an OFFER with expressly conditional language. If you let the offer do that itd be counter to 2-207 but steverson can see a court saying theres no definite expression of acceptance because the seller didnt follow dictates of purchase order but steverson says thats counter to 2-207 and most courts agree. Itd be relevant in common law but NOT in 2207. Whats the counter? You can look to common law to see if you have an offer, so can we look to common law to see how to accept the offer? Whats wrong with that argument, 2-207 specifically lays out how to accept an offer, and nowhere does it say you have to accept on the terms that the offer creates, so most will say you have an acceptance in spite of the fact you have that language in the purchase order. Also remember the question of what terms come in (2 207b) is totally separate from whether or not you have a CONTRACT 9which is 2-207 1 . Start with 3.3 on Tuesday. And Gateway.

8/24/2012 7:49:00 PM Gateway: Easterbrooks an idiot, should have used 2-206. o They ORDERED the computer. It was an order or other offer under 2-2061b. o We dont KNOW that its prompt or current shipment, but general case, time is of the essence with goods, so we would say that, we have an order for prompt or current shipment under the general rule which we will apply because we have no evidence that it wasnt so. o We dont have specifics on ship time, but in the general case, they would have said on the phone that they would ship (prompt promise), or they at least currently shipped. o If thats the case, whats the effect of the terms in the box? They would be a proposal to modify (common law or 2209) Or, some argue its a confirmation of the K, and if it is, then we would look to 2-207 to see what we do with the additional or different terms. Hills are non merchants, acting as consumers, so additional terms would be proposals under 2-207 , that must be expressly assented to. Either way, it ends up a proposal. There is more than just silence here, they kept the merchandise, it said in the terms that if they keep it its theirs. But they already BOUGHT it. The seller cant say, if you keep that thing you ALREADY BOUGHT, its an

acceptance. They had a right to it. o The only way to get out of this, is if there was not yet a K when those terms came in. o EASTERBROOK says its a rolling K. o Offer from vendor, so vendor can say what constitutes acceptance. So they can say keeping it 30 days is acceptance.

o Offeror is master of the offer and can dictate the manner of acceptance. o As long as we arent in 2-207, thats fine. So Easterbrook just says were in 2-204. o o Who is master of the offer (says steverson) whoever made the damn offer! May be the vendor, may be the buyer. Theres nothing inherent, whoever makes the offer is the person in control of the terms of the offer. o Easterbrook apparently was paying no attention in 1st year Ks. o Why did Easterbrook say this is just like pro cd even though it isnt? o Wanted to simplify transactions, what are you going to do, read the terms over the phone? Practical and policy considerations. All the sellers are doing this, you buy anything and theres a bunch of crap in the box, theyve limited everything and its all in the box. Hes saying for practical reasons this is the only way to do it, who wants to sit on the phone? Is there a way to do what judge Easterbrook wants to do without butchering the UCC? They could just give notice on the phone, there are terms coming in the box. (in stuff you buy off the shelf, the notice is on the outside of the box), click box on the website, or notice saying terms are available on the website. Argument is , as long as you have notice of the terms, (in pro cd), and you can learn the terms before you agree, thats sufficient. (so here, if you can reviewe the terms before the 30 days) You could also use 2-204 3, to say, hey these terms are left open Even in 06 and 07, you can leave terms open.

To make this work you really have to say we are outside the UCC (gateway/pro cd) So this applies to rolling K in those js that have adopted the rolling k idea. Some have rejected that and applied article 2, and some apply 2-207 within a rolling K framework to terms and conditions. Some accept rolling k but say only reasonable terms come in Steversons biggest beef is not just the failure to follow ucc, but the failure to even acknowledge it and explain why they arent applying them.

We need to know BOTH ways to do this, and know problems and how to get out of it for practical reasons. Most consumers know products come with terms and conditions, so if they are reasonable theyll be implied as part of the offer (Think its from carnival) Seller could say, we dont consider this to be an offer, we will make you an offer and it will come when you get the box. Either party can say I am not accepting your offer, I am not considering it an offer, I am considering it an invitation to deal, and then I am sending you an offer She wants to point out that the arbitration clause was bad, brower v. gateway said it was unconscionable.

Problem 3.3a o We are in 2-207 because we have an acknowledgement with additional or different terms, which says all disputes must be brought to binding arbitration. o immediately is always reasonable. o So we have an acceptance, so she cant avoid the deal. o THEN you look to see what terms come in, but the question of the terms is NOT THE QUESTION OF DO WE HAVE A K.

o There IS a K, otherwise weve rendered that part superfluous. o So she cant avoid the deal. o Can she avoid it under common law? Mirror image rule, she could avoid the K, because the acknowledgement isnt the mirror image, so thats a counteroffer, and no conduct or words that accept that shipment/offer so no acceptance of the counter, NO K o o 3.3b o accept means an expression of acceptance, but its not definite because its not for what she offered to buy. So that is a disagreement with regard to a dickered term, so no definite expression of acceptance. (look at twen handout again) o this is apples and oranges o 3.3c ack. Says expressly made conditional on buyers assent to any additional or different terms in this form. So now she can avoid K, because it was expressly conditional, so it does not operate as an acceptance, it is a counteroffer. 3.3d same as above but seller ships, buyer accepts and pays, seller accepts payment So we go to section 3, because of the conduct. Terms are whatever terms on which the writings agree, with gap filler by UCC. agree means its in both, you cant agree with nothing, so if its in one and not the other they cant agree, so it falls out, if they are different, they dont agree and fall out. Why did court in Belden say that the buyer accepting and paying, is NOT accepting? Because we have this

section trying to get away from the common law lastshot doctrine, so it wouldnt be in line with the purpose. It would also be in contradiction to section 3, which says, if the writings dont establish a K, you use THIS, NOT common law. What if you have someone saying, yeah, I got your acknowledgement and Im fine with those terms? Then you have an express acceptance, you stay in 1 & 2, you do NOT go to section 3.

3.4a aaah, SUMMERS< DUSENBERG AND WHITE o know the difference between a different term and an additional term, because the treatment will be different. o o is there a K? YES o neither the remedies/arbitration are a dicker term, so we still have a definite seasonable expression of acceptance. So we have a section 1 k, so what do we do with the terms in the acknowledgement o o Summers: 2-207 2 only applies to additional terms so you dont use it because its a different term not an additional term, so it just drops out because subsection 2 is the only mechanism by which terms in the acknowledgement will come in. The different term drops out. Reserves all remedies stays. The different one falls out, because if you look at section 2 it just says additional not different even though 1 says both. o o Dusenberg: look at comment 3, that says additional OR different, this was an oopsie, it should have included both, so we apply section 2, its a drafting error. Its a contract between merchants, because they are general merchants, and that is all they have to be for 2

207. (they are arguably special merchants but definitely special) They become terms of the offer unless the stuff in 2. Dusenberg says it materially alters, and by putting a different term in you are giving notice you object, so the different term in the acknowledgment would fall out. Summers would say the language governs over comments, the comments are just comments, but if we are going to go that route, I agree with dusenbergs conclusions

Professor White: Majority rule, the knock out rule, different terms cancel each other out (THEY BOTH fall out, not just the term in the acceptance) so you use ucc gap filler (which here is the same result as the others because its reserving all remedies) Most fair, because otherwise its a sort of first-shot doctrine. (the original document controls) o Kind of in easterbrooks court, its fair, policy, ignore the code. 2207 was designed to do away with the prerogative of the offeror, if you allow the terms to come in you are giving it back. Summers says, theres no indication they intended to TOTALLy do away with that. o He also relies on comment 6 of the ucc. Summers would say that isnt official. o Also, 6 only applies to confirming forms. o (got through 3.4a) o section 2 deals also with confirmations, so if you had 2, they are BOTH subject to section 2 and only come in via section 2. Notice of objection has been given by the notices of the confirmations so they knock themselves out,b ut you cant use that to knock out terms in the OFFER because OFFERS ARE NOT SUBJECT TO SECTION TWO. o o So comment 6 doesnt support white.

 Subject to arbitration- it depends Does the offer expressly limit acceptance? We have no facts saying htats the case Notice of objection has been given within a reasonable time we dont have that Material alteration- remember to look at comment 4 and comment 5 Arbitration isnt mentioned by either, but 4 says if it results in surprise or hardship, its material, but courts disagree on whether it is surprise or hardship Some courts have said its not a question of fact its a question of law, as a matter of law, arbitration clauses materially alter. Other courts have said, no, as a matter of law, it does not alter. Remember arbitration clauses are in fact favored, some are innocuous, but you do have to look at the terms of the actual clause in question. Arbitration is cheaper than court, so companies prefer it to litigation Acceptance must be definite and unquivicol

3.4c expressly conditional is irrelevant because that only has to do with acceptance, this isnt an acceptance, we already have a K (oral) this is just a confirmation so no effect. 2-207(1) contract (we already had a K under 2-206) ; written confirmation sent within a reasonable time, that has additional or different terms, so thats 2-207 (2) confirmation with different terms, summers and dusenberg say the different terms(in confirmation) fall out, the oral contract is objecting to the different term in the confirmation. NEVER APPLY WHITE, because it unilaterally alters the terms of an existing contract. Youre left with a term in the oral k. Using whites knock out would let the confirmation unilaterally change. If you had 2 confirmations, and the oral k said nothing, and you have different terms in two confrimations, thats the comment 6 situation where those two knock themselves out.

Delivery CAN be a dicker term, but there was no delivery time before, so does the term materially alter the default term (within a reasonable period of time) does it cause undue hardship or surprise? I think not. (you could argue that one) What if the gg confirmation said delivery on 8/15 and HM sent a confirmation that said delivery on 9/1 Different terms in confirmations, they knock each other out, default to reasonable time. (So whats reasonable within the industry)

3.4b:

8/24/2012 7:49:00 PM 4.1 b 2A 205 offer from merchant- yes, 2-104 signed writing that will leave open 1-201 b 37 (writing is 43) Time limit of 3 months because no consideration. 4.1c another theory of enforcement? Promise- Deb said. Relianceyou waited for 4 months & never bought a car Promisor should have reasonably expected to induce reliance (she put it in writing, probably should have expected you could wait) Enforceing is only way to avoid injustice o Nature of detriment (substantial) o Justified o Nature of promise o Mitigation available? Promissory Estoppel might have trouble with the last four- the fourth element might be a sticky one for you (We are not responsible for remembering promissory estoppel, you CAN bring in common law its always worth bringing up.) 4.2 CISG is closer to the common law last shot doctrine? Yes. The terms of the counteroffer control, because that offer was ACCEPTED.

CONTRACT: o A. Promise o B. Consideration o C. Mutual Assent o D. In the appropriate case, compliance with the statute of frauds o

Statute of frauds, 2-2-1 Is the K governed by the SOF? If yes, then have the parties complied with the requirements of the SOF If the requirements have not been complied with then does the K fit within any of the exceptions Does it apply? K for sale of goods for price of $500 or more If yes, then the SoF applies, you must comply with the requirements or fit in an exception Writing sufficient to indicate that a k for sale has been made between the parties and signed by the party against whom enforcement is sought K is not enforceable beyond the quantity of goods shown in such writing (so, you have to state a quantity)

1 201 b 43 walmart 1201b 37 self explanatory if it doesnt comply with the requirements then does it fit within any of the exceptions? Remember 2-102 is scope, NOT 2-201!!! DonT MESS IT UP

2-104 practices AND acting in mercantile capacity, explain both

8/24/2012 7:49:00 PM 5.1 a mike and sara, both in furniture business oral k eight antique desks 12 k each, total kp 96k delivery in five weeks to saras out of state business confirmation from mike memo on company letterhead outlines deal including quantity has no signature

2-201 statute of frauds has been complied with if necessary? Is k governed by sof? If yes, then have parites complied with the reuqirements of the sof If the requirements have not been complied with does it fit in an exception? Merchants exception 2-201(2) 1. Between merchants (2-104 (3)) 2. A writing in confirmation of the contract is received within a reasonable time; 3. the confirmation against the sender (if we were trying to enforce against the sender, would the writing satisfy subsection 1 against the sender?) 1-201b43 has to indicate a k was made. Signed 1 201b37 and comment 37. 4. The party receiving the confirmation has reason to know its contents (we know bc she responded would a reasonable person situated as shes situated know what its about? Not reading something when you know what it is doesnt get you off the hook) 5. The receiving party does not send written notice of objection to its contents within 10 days after the confirmation is received.

o So in (a), she made oral objection, so she did not satisfy five, so it is within the merchants exception. So the K is enforceable. o Resist the temptation to go straight to the merchants exception if you see a confirmation, do section one FIRST< because if section one is satisfied, you DONT GO TO THE MERCHANTS EXCEPTION!!!! (b) now we have a writing, so you have to go through section 1. Doesnt have a quantity, so thats the ONLY reason this writing doesnt satisfy section one, so just because you had this you shouldnt go right to (2), ANY WRITING even one AFTER a confirmation can satisfy section 1. He CAN enforce the contract bc she didnt object to the existence of the agreement Remember they have to object to the existence of a CONTRACT, not just the terms. (see walmart, page 108) (c) check is a writing, but it doesnt state a QUANTITY (so if memo had said deal for 8 desks, thatd be good) 2-201 3 c partial payment- we dont know from the facts if he accepted the part payment 2-606 talks about acceptance of goods, but we dont know when payment has been, so we have to look at caselaw . Endorsement or negotiation of a check will generally equal acceptance. One court said its the ONLY way, some say you can evidence acceptance by holding the check for a sufficient time period. Another court has said if you keep the proceeds even if you later give the money back, that can be acceptanace. Given that he wants to utilize the exception, he will do whatever it takes to accept the payment to get into this exception and enforce the contract against her.

Then, we have the problem because it only gets him an obligation to send her 20k of product, but it doesnt get him to force her to pay him for the whole K. This is why usually its the person who paid (or a seller who shipped without payment) who uses this. So he could deliver 2 desks and seek the remaining 2K, or if she doesnt honor the check he can get the 20k. He cant use 3c to go after payment for the other 6. Court is likely to enforce to 2 desks here, because it said downpayment which would indicate more owed, but thats all. 5.1d 2-2013b two arguments- its not an admission, because she says even if but even if the court construes it to be an admission, the rule is that procedural admissions dont count, because its in a pleading. So, should the lawsuit end here, or should mike be allowed to go forward and get more discovery? DF Activities Corp says you can at least go into discovery enough to see if maybe shell admit something. Bare motion or answer without evidentiary materials might not be enough to dismiss Other courts dont agree with that, they say a bare motion to dismiss is enough, we arent going to force them to go under oath, we cut it off righ thtere, which of course gives no opportunity for an admission anywhere and probably defeats the purpose of 3b Look at white and summers (LOOK FOR EVERYTHING IF YOURE AN EXPERT)

Be aware of the various positions.

See twen slide for variation on 5.1d White and summers say you should go all the way to trial o They might crack you never know o o The other extreme says stop at motion to dismiss because its a waste of judicial resources. If she didnt admit it in the motion/affidavit, why would she do it now? Why should she have to incur those costs o o Df perspective o o Know all the different positions and policy reasons

5.1e reliance on the k how would she know he had to purchase the desks from someone else? Promissory estoppel? Can you utilize the common law exception to get around the SOF? When we look at 2-201, are those exceptions exclusive or may you utilize other. They are exclusive. These exceptions are the only exceptions that are available, so an argument can be made that you cant use PE. You can argue 1-103, but then you say, 2-201 displaces. Promissory estoppel can be used defensively or offensively, offensively meaning use it as an independent cause of action. Defensive is saying, Im suing for Breach of K, other side says no consideration, you say , well because of my reliance, I can sue for breach of k (HOFFMAN CASE) where you dont have trappings of k, you need an independent cause of action intdependt of k, so if you are using promissory estoppel as its own

cause of action, you do NOT HAVE TO MEET SOF, you doing a 90 k, and SOF is irrelevant to the Discussion.

But 1-103

8/24/2012 7:49:00 PM Recap questions 5.1e dealth with q of PE to exception of SOF, can common law come in and supplement, or are the exceptions exhaustive?

Various positions re PE and SOF Some courts say no estoppel esception to the SOF in general (SEE TWEN SLIDES FOR THE REST ) C is mostly the position of professor Summers (c on twen slide) because it is clear that the stated exceptions are not exhaustive, but he doesnt say why its clear. Steverson thinks hes out on a limb, not sure its not displacing the common law PE is also available as an independent cause of action, doesnt require compliance with SOF Some courts say only reliance on an agreement to reduce to writing, and then you dont (ie, reliance on the promise to make a writing) 5.2 See twen slides Can Arlene enforce the K? Yeah, probably, 2-201(3)a, custom made Custom made generally means specially manufactured, courts generally want to see that youre making something that you dont ordinarily make. Here, Arlene doesnt normally manufacture these. Some courts say they want the goods to have unique components that are not easily altered. Goods are not suitable for sale to others in the ordinary course- she doesnt usually sell for seniors so none of her usual buyers Has seller made either substantial beginning or commitments for their procurement (someone else will spcecially manufacture) etc

o Another part performance type exception. She has definitely made a substantial beginning with regard to the first machine before repudiation. BC of the lower weights, we can indicate they are for this buyer not her regular buyer. Difficulty is whether she can only enforce for the one or 3, is there a substantial beginning as to the whole K? o Some courts look to comment 2 by anology of 2-201, you should only enforce up to the limit of the part performance o Steverson says, note, that the comment really refers to 3c not 3a, and theres a good argument that it doesnt apply and theres a substantial beginning of the entire K here. (make all these arguments) o o White and summers agree with that latter position o o 5.3 yes, there are risks, but not as many as before UETA and ESIGN 49 states have UETA, everyone governed by ESIGN you could still have a court that you have to point this stuff out, but you can deal with these risks by having a master agreement that all electronic Ks constitute writings.

CLASS HYPO: o Yes we have mutual assent (my 2-206 was right) o WAL MART treated an email confirmation as a writing o Section 7 of UETA, if a law requires a record to be in writing, an electronic record constitutes a writing o She agreed to conduct the transaction via email bc she sent the order via email (UETA 5) o Can have more than one doc o Singed by party against whom enforcement is sought o UETA section 7D, if law requires signature, an electronic signature suffices, then section 2 that I picked

o Esign 7001 o 106(5) o o course of performance, course of dealing, usage of trade, part of the terms of the K (SEE TWEN SLIDE)] parties CAN contract out of course of dealing and trade usage. (hard to k out of course of perf, because thats to this one k) Hierarchy of terms (See TWEN) the closer you are to THIS k, the higher in the hierarchy you are Clear express terms trump everything Course of Perf Course of dealing Usage of trade UCC gap-fillers (if the above dont answer what the term is, you go to the default term) for when there really is a hole in the k

Courts are supposed to construe the first 4 as being consistent with each other to the extent possible. If you want to actually get RID of a course of dealing or usage of trade, you need to use explicit terms in the k to get rid of it, because if it isnt directly contradictory they might do an end run around you and find a way to apply them. 1.2a No. Course of performance. See twen slide (I had this right) Remember with course of performance there needs to actually be CONDUCT, not just words. If the k says it but they have never DONE it, no course of perf. Need at least 2 instances. See comments. B Course of dealing. Again it has to be conduct. No, cant insist on gap filler

C Usage of trade, cant insist on gap filler. BIG PICTURE SCOPE- What law applies o Article 2? 2-102, 2-105, 2-107, 2-106 o Article 2A? 2A1-2, 2A103J, 21061, 2-103 o CISG articles 1-6, and 10 o Common law (only IF none of the above) o o FORMATION Do we have an enforceable K (SEE TWEN SLIDES) Remember more specific statutes govern over more general statutes. Cisg has no SOF So if we have an enforceable k, what are the terms? 2-202 is the parol evidence rule for ucc look carefully at Cravotta case, and steverson will post parol evidence slides.

Problem set 6 6.1b this was after, so its a mod. 2-202 covers a prior oral or written or contemporaneous oral agreement remember a modification doesnt require consideration c

once you decide you have a writing that is covered by 2-202, questions progress as she lays out on the powerpoint final expression integration (doesnt have to be fully integrated) merger clause is evidence of it being a final and complete expression o when do we not take the merger clause as being a final and complete and exclusive expression? When the agreement itself doesnt contain everything needed to be complete merger clause is contradicted by the writing itself (note, remember dicker terms only matter for 2-207) some courts apply a certainly test (cmt 3) to decide if its complete and exclusive (without a merger clause) we dont have facts sufficient to tell us if the merger clause is contradicted by the written agreement itself. court in morgan case says if youre missing lots of terms, it cant be complete. In general though, merger clauses are conclusive evidence of complete integration. If you have a standard form k, and one party is taking advantage of the other, courts will second guess a merger clause, but generally when you have businesses w a merger clause, court wont usually go aroung it Ucc is more likely to go around merger clauses. Reme,ber parol evidence rule doesnt say what the court can look at to decide if the writing is INTEGRATED In c. it is probably a conclusive statement so you cant supplement except based on the oral statements, but you can use course of dealing (but, do we have CONDUCT? Nope. So not course of dealing.)

Custom in the industry o Complete and exclusive agreement, no supplementation of consistent additional term. o You can supplement with usage of trade, so she can introduce evidence of custom in the industry if it doesnt contradict This contradicts because its a variable price across the industry but its a set price in the contract. Courts are lenient, they dont like to find contradiction with regard to course of perf, course of deal , usage of trade, so if they dont gut the express term, they will say no contradiction. So the posted price is the ceiling, so to argue no contradiction you say, youre not contradicting it, it can just go lower.

Comment 2 carefully negating you say, I understand course of x is this, but we are doing this Nanacooley case(??) from 1st year ks)??) 6.2 o 2 rolls for 17K each

8/24/2012 7:49:00 PM 6.1a can she buy from the lower priced competitor? Remember in going through our questions, we first have to look to the writing and ask if it is a final expression (under common law we say integrated) 2-202 1. Is it a final expression ? here, we just have the one writing. Is it a final expression. Here we can say it is, it was a writing to which both parties assented, evidenced by the fact they both signed it and there is nothing indicating they expected further negotiations or that it was a draft. Since we said it is a final expression, we go to question 2, 2. is the extrinsic evidence covered by 2-202 o here we have a prior or contemporaneous oral agreement. o 3.Does it contradict? We talked about that last class, cant contradict. If not contradicting, we argue we are either explaining or supplementing. o 4.If we are supplementing, then we have to ask, is the written agreement a complete and exclusive (fully integrated rather than partially integrated) if complete and exclusive, you may not supplement. If partially, you may supplement with a complete and exclusive term. How do we decide if its complete and exclusive? What do we look at? Morgan bldgs. On pg 116, no evidence is barred in determining whether its complete and exclusive. Cravotta case pg 126 says it is a question of fact, most courts treat it as a question of law. They also say that you look at the facts and circumstances surrounding the execution of the written instrument and the instrument itself. Look at all evidence, side agreement, written agreement, surrounding circumstances Is there a test? Intent of the parties If the terms certainly would have been included in the written agreement if the parties had intended to be bound (Comment 3)

SO, if they certainly would have been included, you CANT introduce evidence, it IS a complete and exclusive agreement. Ie, if it were that important it would have been included in the main agreement. The fact that it wasnt indicates they did not intend to be bound. Re look up integration- liberal vs strict (check E&E) So we are also looking in particular about how these parties were situated and how this k was negotiated.

Things you might want to know: form K? drafted from scratch? When was the discussion? Where did negotiations take place? Relative sophistication of the parties How important does the term seem? One argument- not very- just a freebie, he was confident that hes the lowest price anyway. From his perspective no biggie, if she believes him, no biggie. On the other hand, if Jake were known for having high prices, this would be a fairly important term. (this is an argument it is NOT fully integrated)

o You could argue it was very important, reason why she agreed, locking herself into buying all her steel from him, so all is the quantity. So still using cmt 3, you could argue it is really important to her and so it is NOT fully integrated. Also, if we can find evidence it devaiates from the norm youd expect it to be in the written agreement.

o Courts do not give the same leeway with regard to side agreement as they do with trade usage so contradiction is a stronger argument with side agreements. o o If not complete and exclusive, then is the side agreement a consistent additional term? Argument one: it is not a complete exclusive writing and it is a consistent additional term. Its a forward looking term, it is consistent with the K Argument two, it is not consistent because it doesnt follow the term that they will buy all the steel from him, so it is not consistent, because if you can purchase from someone else that isnt all the steel purchased from jake. Could argue that contradicts, but definitely is inconsistent. Something outside the realm of the agreement is inconsistent. (example steverson gives of taking something off some other property being inconsistent with a real estate agreement

MAKE A FLOW CHART!!!!!!!!!!!!!!

6.2 o Two rolls royces at 17K each (SOF before 2-207) FIRST: PAROL EVIDENCE 2-202 IS THE WRITTEN evidence covered by 2-202 (confirmatory memoranda means TWO) and we dont have a writing intended by the parties as a final expression of their agreement because they didnt both agree to it. Here we just have a confirmation, that is not a final expression If you have an oral agreement and a writing, you want to make sure that the oral agreement can

come in, so you have to make SURE that you dont have final expression So, evidence of the oral agreement can come in Now, we have to figure out if we have an enforceable oral agreement SoF 2-201 We have a writing, sufficient to indicate that a contract has been made, signed by Debbie, it specified a quantity, only enforceable to that quanity, she put two so you can only make her sell two. The terms in the K are different than the terms of the oral agreement, do that then go to 2-207 What are the terms of the agreement? 2-207 oral agreement followed by written k, sent within a reasonable time.(1) (2)different, not additional terms (both not merchants) remember dicker terms only matter with respect to if its an acceptance dusenberg: proposals for addition, they dont come in, materially alters/notice of objection, different term falls out white, dont use. Dont want last shot Different term in confirmation fell out (summers?) Leaving us with price in oral k, but only enforceable as to 2 Why cant we say the 2 drops out and the 4 stands? Because if you bring the 4 in, then youre contradicting the SoF, and we dont want them to contradict each other, it would render that part of 2-201 meaningless

Conflict between 2-207 and 2-201, why does 2201 trump? Because it is formation. You cant get to terms unless you do formation first, so formation is always going to have to trump over terms.

o We did Parol Evidence first here because you had to get the evidence of the oral K in first in order to even get to formation. o Make sure you know details of parol evidence and SoF with respect to 2A and CISG!!!! In the text, make sure you understand the differences. Make sure you can distinguish merger clauses that will and will not be given effect tvtoons case nice scope analysis for CISG in this case look at it. Tv toons you can use oral evidence to introduce the evidence of the parties intent (article 8), no parol evidence rule in cisg so the oral evidence can come in. 7.2a Toronto breaches and Detroit files suit in Michigan Toronto moves for SJ pleading the SoF defense, attached to the motion is a signed affidavit denyig that Toronto ever entered into a K with Detroit. Does the CISG govern? We do have parties with their place of business in different states so CISG applies Article 11, no writing required Article 6 parties can derogate o How do we know that the selection of Michigan law is binding? o If choice of law provision is binding, you cant then use SoF even though you are in Michigan law, because you already had to decide you had an enforceable K, qustions of formation will ALWAYS BE GOVERENED by the CISG because you CANT GET OUT OF CISG without determining you have a binding k,

so you have a binding choice of law to get you out of cisg! So the Choice of law provision governs everything AFTER the decision you have an enforceable K. o So you go to Michigan ucc then, but NOT FORMATION! DONT GO TO SoF, you already have a K!!! 7.2b, written k, no merger clause, all releant terms included oral agreement prior to signing of writing, that said mich law exclude cisg applies Same as above, except not article 11. Article 8(3), all evidence is admissible, no parol evidence rule, dont have to worry about whether or not the agreement is integrated, so again CISG governs until you get the choice of law K Variation on 7.2b Written K says Michigan law applies Do the uccs remedy provisions apply rather than the CISGs? no. CISG applies, because Michigan law IS that CISG applies!!! (there is an American biophysicics case to the contrary, but that case is wrong, outlier). Because it didnt exclude CISG, michigan law is CISG, unless its specifically excluded. CISG preempts Michigan law. Warranties: Express and implied o Implied warranty of merchantability is the most important o o 1 . does a warranty exist? If yes , what kind? Implied warranty of merchantability Implied warranty of fitness Express warranty Due to the defendants breach of the warranty, did the plaintiff SUFFER A LOSS? o The warranty was breached o Plaintiff suffered injury to self or property

o The defect in the good caused in fact and proximately the injury (see comment 13 to 2-314) o 2-314 o There was a k for the sale of goods o AND o Seller was a merchant IN GOODS OF THE KIND o The warranty was breached, ie, the goods were not merchantable at time of sale (Only need ONE OF ThEM) 2-314 2 a-f (if it fails any of those, you gotta problem) 8.1a isolated sale not a merchant b- still not a merchant. But you might have breached duty of good faith under 1-304,(applies to everything in the code, because its in ONE, doesnt have to be an article 2 transaction) then look to 1-201(20) for good faith. (why? Why wasnt it good faith? Never forget steversons because..Because WHY?) because good faith requires honesty in fact and commercial standards of reasonable fair dealing, and because here there was no observance of reasonable fair dealing standards, because you failed to disclose a latent defect that you were aware of and that is a failure to observe reasonable commercial standards of fair dealing. Although the majority of states have adopted revised article 1, a significant portion of htose states have opted out of 1-201(20), enough that it is NOT THE MAJORITY POSITION. The marority position is unrevised, for merchants its both but for NON MERCHANTS IT IS ONLY HONESTY IN FACT. This is the majority rule and the standard we need to know. (idea is non merchants dont know what commercial standards of fair dealing are.) Does that change the answer? Proably yes since answer was based on second, but is there an argument its not honest in fact Other experts, (ME) 8..1d, 8.2 really quickly

8/24/2012 7:49:00 PM 8.1b comments tell us that fraudulent nondisclosure of a material LATENT defect even of a nonmerchant is violation of warranty 8.1c she said it doesnt meet any of the three factors, buyer could argue super is a description, but what does that convey? It doesnt affirm or describe anything, it just says its super. Where are you getting requirement it be definite? Specific language Context Reasonableness of buyers reliance What about common law fraud or misrepresentation? They can be used as a defense to breach of k or as a ground for avoidance/recission of the K, so that would put the parties back. So then you have to look at if your jurisdiction allows you to get out of a contract that has already been executed. Also, you CANT use misrepresentation if its puffing. Opinion is NOT actionable!!!! What about fraudulent nondisclosure you give some so they think theyre getting all, so a half truth, to allay buyers concerns, therefore you have a duty to disclose anything that would make it not-super (like characters fading after 20 minutes) you still have to show justified reliance. (fraudulent nondisclosure, duty to disclose could also be for latent defects only in knowledge of seller, but thats the liberal rule, the general rule is caveat emptor)

LECTURE: 2-313 there are a lot of comments, they help you to understand some of whats being said with regard to how to create a warranty, comments 5 and 6

note that there is no requirement in this version that the buyer has to state that they relied, it is not necessary that the buyer specifically rely on it, but it has to be part of the basis of the bargain, so whats that? Some courts say, in order to be part of the basis of the bargain, you have to show justified reliance, so some courts put that back in. Some courts think you had to at least partially rely on that affirmation in fact, and plaintiff must show reliance Comment 7 can be used to argue that you do not need to show reliance, just that its part of the bargain, and thats just , is this part of the contract or outside the contract? If its part of the bargain Comments 3, 6 and 8 clarify White summers dusenberg- any description becomes part of the basis unless seller rebuts the presumption Seller would have to show that it wasnt part of the bargain and you didnt rely on it, otherwise its a warranty. If youre on the cusp if its puffing, courts say, look at justified reliance. So, in many instances the courts just conflate it, they put it all together and look for justified reliance, then burden shifts to seller to rebut that. If its clear that they make an affirmation of fact, car has this engine, youre good to go as the buyer, that is an affirmation of fact and presumption its part of the bargain, and if the seller made that statement to tell you bouthe item, seller will have a hard time rebutting. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE: Buyer has a particular vs. an ordinary purpose Seller has reason to know of Buyers particular purpose Buyer relies on sellers skill and judgment in selecting goods and Seller has reason to know that b uyer is relying upon sellers skill and judgment to select or furnish suitable goods, Comment 1, 2 and 5 in particular.

8.6 think outside the box as a plaintiffs attonrey

8/24/2012 7:49:00 PM shiori sato and jed Jackson met in 2004 when Jed was on vacation in Tokyo. They fell in love, and maintained a long distance relationship until finally they were wed in a small ceremony in Jeds hometown of Eugene, Oregon in September of 2006. Shiori maintained her Japanese citizenship and obtained a resident visa. In 2007, the couple had their first child, . In 2010, the couple began to have marital difficulties. They divorced in 2011, with a court order which provided that the parties had joint legal and physical custody. In 2012, Shiori took the child to visit her parents in Tokyo, without permission from Jed. Shiori refuses to return, and Jed wants to enforce the Oregon custody order granting him joint legal and physical custody of .

PROBLEM 8.5 Arguments to defend against the lawsuit: The car is conforming to the description, a car with regular airbags not side airbags is what she purchased, the k description was an economy model car without airbags, and so it passes without objection in the trade under the contract description. Plaintiffs going to argue 314c, she was using the car for ordinary purposes and she got hurt. Defense would be a sort of cost benefit analysis that we saw in Phillips v lighters, where the court says if the price of a feature takes the product out of the market its a factor. She didnt buy the extra features and we dont have them as standard features because then we couldnt afford to sell this economy model vehicle. Steverson says, a little more information about passenger side airbags: The govt did require upgraded side impact protection but not side airbags, but the injuries that happened from side impact are actually quite severe, and more severe than being hit from front or rear because there is nothing between you and the car thats hitting you. So, that might change the cost/benefit analysis (B < PxL, remember the hand formula) So here, B would be the cost of putting side impact airbags in al lmodels, recalling other cars

The P would be the number of accidents involving side impat that occur in these types of cars and total number of these types of cars on the road L would be the aggregate average of the loss suffered from those types of accidents (whats the severity of the injury?)

Have to be careful, Ford pinto cases for example So no answer, but these are the things you want to think about as far as fit for ordinary purpose, you have to deal with every one of those six points in 314, if it is not fit for its ordinary purpose, it doesnt matter if it would pass without objection in the trade. 8.6 milk question- its not bad for everyone, you are supposed to give it to kids not skim milk point authors wanted was to alert you to other parts of 314, and labeling issues. Note it says adequately contained packaged and labeled as agreement- so whats the agreement, the express k or the implied agreement with the purchaser at the store? Questions to ask. 8.7 I had this right no cost benefit analysis because its clear they arent fit for their ordinary purpose. 9.1a different standard for merchant vs. consumer buyers, so remember that. I was right, question is notice, was it reasonable? Need to know what commercial standards are they will argue she didnt notify them in a reasonable period of time and three months isnt reasonable. So how do we figure out whats a reasonable period of time? Comment 4 offers some guidance. So a longer just driving the truck doesnt mean you are truck merchant, but she is a business person, so shes a general merchant, because she bought the truck for her business so she was acting in her mercantile capacity, so she

probably is a merchant buyer because it doesnt require you be a special merchant. So, how do we know what the commercial standards are for a merchant buyer? Minimizing prejudice is one function of the notice requirement, along with voluntary resolution of disputes and enabling the cure of the breech (from the case) We dont believe in tardy claims because we think if there was a defect people wouldnt perservere in the face of it, a seller has a right to repose, to know they arent going to be sued. Well, if she would have notified them earilier, she wouldnt have lost 6 jobs, didnt give them a chance to cure, etc. whats the counter to that? She wont get the extra loss anyway because she could have mitigated, and three months just isnt that long, they can still settle, they still have the evidence, etc. Argue both, construe the facts, usually notice is a question of fact, unless its soooo egregious that notice is insufficient as a matter of law as in the case in the book. Anyway, argue both and then pick a side, but 2 years with destroyed evidence, as a matter of law, she is barred because she failed to give reasonable notice but less is going to require argument 9.1b shane says, well first of all, tender was oct 1, so thats four days so thats ample notice, and shes really complaining about delivery which is a service but even if it accrued on July 1, with the purposes of reasonable notice, she didnt give the seller any chance to resolve because she waited till after delivery to complian so she isnt within the policy. How to distinguish from the other one? The damages there were open ended, here she waited till the damage is capped, and then she complains, and there is no way for the company to mitigate the issue, unlike before when they could cure, they cant cure now. NONCONFORMING is failure to comply with the contract, doesnt just have to do with the goods, conforming to the k, subsection 2 of 2 106.

Counter: she accepted tender oct 1, she notified 4 days later, bam thats reasonable. Damages are going to depend on if she could have mitigated, but steverson says dont conflate the damage mitigation question with the notice questions. Shes not barred from the claim under this argument, but shanes argument is a counter, he says that only applies when arguing about a breach with regard to the goods because thats the only way it makes sense, so notice should have come from when the delay did, on july 1, but you have a counter, that the company here KNEW they were late. So why does she have to tell them? They knew they were supposed to ship July first, why does she have to tell them? They HAVE notice. Steverson says, is there something in the language that gives a counterargument? 2 607 says the BUYER MUST NOTIFY THE SELLER, not that the seller must know. So does the buyer have to do something, does the buyer have to notify? Comment 4, needs to inform the seller that the transaction is claimed to have involved a breach, so the argument is if she doesnt give them notice, they dont know she cares, and it doesnt open the way to settlement. There are courts that go that way, that seller must be put on notice that buyer cares. But, the majority of courts say if the seller Must Know, then they have actual notice of the breach and that is sufficient to satisfy. 9.1c 2607 3a does the buyer have to give notice to a remote seller or just the immediate seller? Whos a seller? A person who sells. Acme is a seller. So why is shane saying acme is not a seller? 2-318 says HIS seller as opposed to THE seller so if they wanted to say HIS seller in 607, we assume they would have, because they did it earler. But what does THE seller mean as opposed to A seller, and THE means the same as HIS. THE seller in THIS transaction in question

So you are going to have to do case research to see how your jurisdiction is interpreting this. A Bare majority (cant rely on it) say that if you give notice to the immediate seller thats sufficient, but quite a few js say if you are going to sue the remote seller, for the same reasons as why you have to give notice to the immediate seller, you have to give notice to the remote seller. So what do we learn about notice, as a transactional attorney, tis in flux, so you give notice to anyone and everyone who might possibly be implicated in any possible lawsuit. Dont be a lawyer who loses because you failed to give notice!!! 9.1d shane says mack co probably doesnt have good defense, Mack co received notice from judy. Comment says reason extends to beneficiaries, so as defendant wed have to show bad faith on michaels part, he was hospitalized, etc, so in spite of comment five. Generally if you have a third party whose blood has been spilled, youre not going to have luck getting it dismissed for lack of notice, but may do so for only economic damages. 9.2 SEE TWEN SLIDES FOR PRIVITY 2-318, three alternatives. Most jurisdictions have adopted A. only 41 states have adopted 2-318 at all, and 6 and 6 for b and c. 9.2a J: adopted A, Jack is nephew=family; counterargument, no, hes an employee. So what if you are an employee AND family? 2318 doesnt say you cant also be an employee, it just says family, and hes family. So then, how far family? Fifth cousin once removed? Or is it only immediate family? Those are interpretive questions answered by caselaw.

So can a family owned business have family? Can a company also be a family? Does the holding of Crews bind us? She says a court would probably say family is still family with a family owned business. There are some cases that say nephew is only family if in close proximity. (2). Some say you arent in the family unless youre in the household. But thats stupid, says stererson, cause then why did it say household? She said theres little caselaw, so you have to argue the sense of the statute, likely to be foreseeably injured. reasonable to expect In B j, hes a natural person, its reasonable, but no on garage 9.2B horizontal privity the same. Q is, does A obviate vertical privity along with horizontal privity, the answer is NO, it does not because alternative A says HIS buyer. Majority of courts agree A does not obviate vertical privity, but you still have to look at your J to see if they have obviated vertical privity.

8/24/2012 7:49:00 PM

8/24/2012 7:49:00 PM 10.1d May the classmate recover from the retailer through MM action? macnamara says you cant bring a MM warranty without a written warranty. Steverson says macnamara is trying to, with the definition of disclaim, describe why 2308 is in conflict with 2310. When they denied liability, that is a disclaimer, but they arent using disclaim the way we normally do. May plaintiff bring an action under MMWA for IW where defendant has not given a WW? (a bare IW claim) McCurdy says yes McNamara says no McNamara does statutory interpretation Ambiguity or lack of clairity? If yes, then look for tools to assist with figuring out the purpose McNamara court says conflict between 08 and 10. Steverson agrees with their reading of 10. The court is construing 08 to also create a cause of action. So where does the court get that from? Suffice to say courts interpretation of 2308 seems to run counter to the language of 2308, and the definition of disclaim doesnt mean what disclaim means, and steverson says that she doesnt think that they didnt know anything about commercial law. If you read MMWA as only applying to written warranties, this makes sense, but steverson says that the purpose is to provide a federal cause of action in 4 distinct cases, and thats what 2310 does. Some courts are following mcnamara for no reason at all. Steverson says theres not really any conflict, our perception is right, that 2310 and 2308 are not in conflict, in fact you can enforce 2308 with 2310.

You DO HAVE TO DEAL WITH BOTH OF THEM. She doesnt think the courts reasoning is persuasive in and of itself. Try to explain the problems with the courts reasoingin, understand mccurdy and why it didnt see a conflict. All the commentators say mcnamara is wrong. THIS IS GONNA BE ON THE EXAM.

Even if an implied warranty can be brought on its own (mccurdy j), then can this particular plaintiff, a non buyer, sue on this? Comes down to definition of transfer, any person to whom the product is transferred, so yes. 10.1 f no, the manufacturer cant be joined under UCC alternative A. 10.1G May the manufacturer be joined in a suit under MM? Vertical privity obviated by MM with regard to implied warranty? One way of reading 2310 is to say manufacturer is a supplier , bc it fits within the definition of supplier in 2301(4), so they are a supplier that has failed to comply with implied warranty. Argument on the other side, that mm doesnt obviate vertical privity with implied warranty? Other jurisdictions focus on the definition of implied warranty instead of the definition of supplier. Def of implied warranty 101(7) means an implied warranty arising under state law as per 2304 and 2308, so those js interpret arising under state law to mean encompassing not only the existence of an implied warranty under 23-14 or 2-315 but also the privity requirements of that state. In these Js, the ONLY way to get to the manufacturer is through the common law of the state, and you have to hope your j has obviated vertical privity for both economic and personal injury So what do the first group (focus on supplier def) js say about arising under state law? they say arising under state law only applies to the EXISTENCE of implied warranty, not to the privity requirements, we dont need to look to state law its in 2310. The gerenal def of arising under is

does it exist, NOT the question of STANDING, which is WHO may bring suit. Arising under is simply existence. Go through mcnamara/mccurdy, go through the above (g) sides, make policy arguments on both sides. Pg 190, bottom of page, top of page 191, re read. ASK FOR THIS PODCAST. The definition of consumer encompasses the state horizontal privity, so that doesnt really come up.

10.1g would it have made a difference if the manufacturer had made a written warranty? If there is a written warranty, you go straight to MM, you dont do ANY OF THAT STUFF ABOVE, because that ALL Only arises because the def of implied warranty points us to state law, written warranty does not do so. MM obviates vertical privity on suits on written warranty, and many say that if there is a written warranty it can ride on the back of the written warranty (even in a J that wouldnt allow you to go after manufacturer on the implied warranty alone.) some courts use 110f to go after manufacturer bc they are the one who gave the written warranty. NOTE Kemp case, the FDA stuff, She said make sure, probably needit for final McNiff- just bc theres a contingency fee, that is NOT THE CEILING. Court CAN go beyond whatever the contingency fee agreement is. Schmitz case- look at it for warranties, 195, she pointed it out. Be aware of burden of proof for plaintiff, need only prove they were defective, need not prove nature of defect.

LEASES: When dealing with a straightforward lease agreement, warranty provisions are very similar to article 2 of UCC, so we already did that. One area they differ is with regard to finance leases. Sales transactions vs. lease transactions Sales: seller, passing title to a buyer for a price (SEE TWEN SLIDES) Lease: passing possession and right to use, NOT TITLE. If youre getting title, its a disguised sale. Sale with security interest (see twen slide) Finance lease: Example, supplier says I dont want to lease it to you, but I will sell it to the finance place, and they will turn around and lease it to you, and your relationship is with them. Finance lessor doesnt really want the interest in the item, so the first issue is , is the relationship between lessee and lessor a true lease? Often a disguised sale, so ALWAYS ALWAYS check to see if the finance lease is really a disguised sale, if the lessor doesnt really want the items back. If lessor is in the business, they can usually lease it to someone else after the lease term is up, thats why in the problems its the leasing branch of the credit company. They are buying the trucks for this lessee, who has to pick out the goods, otherwise it is not a finance lease. So if they cant re lease, and they want lessee to buy them, then that could be a disguised sale. In the book problems, we dont have enough to know, but she may give us such a thing later. 11.1

what rights does standard have first q: is it a lease or a disguised sale? Then, is it a finance lease? (CONSUMER??) We dont have enough facts to decide if its a true lease, so here we will assume it is, then decide if it is a finance lease. Is it a finance lease? 2A-103(1)(g) o Lessee selected the goods o Lessor only bought goods because of lease o Must have 1 of the 4 in iii, steverson liked b for this one, but any of them will suffice. o We have yes,yes,yes so it is a finance lease, SO What rights do you have? o We have no facts to support a written warranty, so we say they do not have one, so they cant go after first national o Warranties are in 2A-212 and 2A-213, they both say except in a finance lease, these warranties exist. So they cant sue under those for a finance lease o No goods oriented remedies either, under 2A-407 Says even if there is a breach by the lessor, you cant withhold payment, your obligation still exists. So the answer was no rights

11.1b now they highly recommend that we get trailers from Billings did they select? or is it a suggestion?yes, but not as to the GOODS, just as to the company. So its still a finance lease. 2A-210 (2), lessors opinion or commendation of the goodsetc so you dont have any of the implied warranties, but you may have an express warranty under 2A-210 depending, you still have to show you fit within all the elements of an express warranty and this statement probably isnt enough. So same basic answer as above. 11.1c

what rights does standard have against BILLINGS, the manufacturer of the trailers 2A-209 extends the rights of the lessor under the sale agreement to lessee, so whatever rights lessor has against supplier, lessee has, you still have to do the above lease/finance lease analysis 2-313, 2-314, 2-315 as opposed to 2A (because the lessors rights against the supplier were in a SALE) what if theres a disclaimer? Comment 1, it will operate against the lessee to the same extent as lessor

11.1d o statute doesnt say anythinga bout express warranty between supplier and lessee, this wasnt the lessor. So if we dont have an express warranty to lessor, do we have IWM or IWFPP? o He will say he told supplier what he needed and supplier made the rec, but what about reliance, because lessee relied not lessor. What language supports argument lessor has to rely? 2-315, buyer is relying the buyer here is the lessor, the lessee is not the buyer, and hes relying on the skill/judgment. o Lessee would argue that the lessor is relying on you to give his lessee what he needs. Why not 2-314? Bc they ARE fit for ordinary purpose.just not particular purpose

8/24/2012 7:49:00 PM Problem 13.1 b Lou wants to include the limitations in his limited warranty o (Steverson says, you cant disclaim the implied warranty of merchantability but you can get the same effect by limiting consequential damages except for personal damages, so that will provide some protection to your client. Make sure you read the Ishmael case, remember these cases are here for a reason, for example the west case for today walked you step by step thorough your title analysis.) 2-308b, you can limit duration, but not shorter than the written warranty. 2-304a3 and a4 only apply to full warranties. 2-719 he can replace the remedies to repair or replacement, so long as you arent completely doing away with any remedy. 2-719 exclusion of consequential damages, but not for a consumer with personal injuries. Regs we specifically point out, pay attention to. CFR 701.3a8 , (see pg 226, you need to know the CFRs and USCs that are listed in the text!) Re read this, you dont understand it. o Has to be clear and conspicuous. o Limitiation on duration of implied warranty of merchantablity, even though you can, limit has to be conscionable, unmistakable language, prominently displayed on the face of the warranty. Cant be less than duration of written warranty. o You CANNOT do #1, the complete disclaimer of the implied warranty of merchantablity. o 13.2 swingset problem does a warranty exist? NO- past date The written warranty doesnt say that seller warrants that the goods are free from defect. Seller is just warranting that they will provide any missing part or repair or replace any defectiveparts, but it doesnt warrant anything is free from defects. Even though they dont explicitly say goods are warranted (except maybe in title) courts will sometimes say you can infer from the language that the

So, now

goods contain all they should and that the parts are free from defect bc otherwise why would you warrant them. If you go ww under mm or ew under ucc, Whats the problem going under ww under mm? o This was a NINETY DAY warranty. He was injured four months later. You cant sue under the written warranty. Period. we have to go to implied warranty of merchantability. IWM? Section 2-314 yes, exists, but was it effectively disclaimed?(2-316) Yes, but not effective under MM b.c if you have a written warranty by supplier (a person engaged in making a consumer product directly or indirectly to consumers) (look up MM sections) So, NO effective disclaimer so the implied warranty of merchantability applies, remember with implied warranty of merchantability you have to first ask UCC, then ask MM. So it exists. Has it been breached? o Not fit for its ordinary purpose, which is to swing on it. 2314c. Defect in good caused injury. o 2-719 damages, you can limit consequential damages unless its unconscionable, here they didnt limit personal injury, so he can get personal injury damages. o

13.3a Peter represents acme Erin represents hard drive (see notes in book, maybe ask for podcast) Go through every possibility Creating express warranty Disclaiming implied warranty Modifying implied warranty Title with Sale of Goods Unless the parties explicitly agree otherwise, title passes to the buyer once the goods are delivered under a sales contract 401(2) In general, seller cannot get the goods back, ie, reclaim the goods, unless

o Buyer rejects the good 401(4) o Buyer revokes acceptance of the goods 401(4) (we will learn about the above two soon) o Seller has a security interest in the goods (see Article 9) o The sale is a cash sale and buyer has not paid 2-507(2); or o Buyer has received goods on credit while the buyer is insolvent 2-702(2) (bankruptcy, basically, dont worry too much, just know some courts use the ten day limit from this on cash sale even though there is nothing applying it) So you have warranty of title And, as between two alleged owners, who has the right to possession(performance and breach question) What is a cash sale? Delivery of the goods and payment of the goods happen at the same time. The default rule under ucc is a cash sale. Default is payment is due at the time of delivery.2-310a. encompasses payment by check, which is a conditional payment and if the check bounces you have not paid and seller can reclaim the goods. 2-403 is designed to give protection to the bona fide purchaser who gets title from someone who doesnt have lawful title. PULL UP TWEN SLIDES 2-403 a little bit of unhappy drafting. 2-403 doesnt define voidable title. such power is the power to pass to good faith purchaser for value. Commentators treat a-d plus transaction of purchase as creating voidable title. That isnt what it says, but thats how they treat it. Voidable title is 2 instances, voidable title under common law, or 2, transaction of purchase plus a-d. Steps for analyzing title issues 1. Did the transferor have power to transfer good title to the transferee? A. Did transferor have title? Of Did transferor have voidable title? Or Was the transferor an entrustee?

2.Did transferee acquire good title? If you are under 1a, then ask, is the transferee a purchaser of goods? If you are under 1b, then ask, is the transferee a good faith purchaser for value? Under 1c, then ask, is the transferee a buyer in the ordinary course of business. Again, be sure to look at west case (wes?) 16.1a The critic had voidable title, lucy was a good faith purchaser for value, so pierre may not recover the painting. (because there was a transaction of purchase from pierre to the critic) see 403.

8/24/2012 7:49:00 PM Steps for analyzing title issues 2-403 1-3 1. Did the transferor have POWER to transfer good title to the transferee a) did transferor have title or the power to pass title? Or b) did transferor have voidable title (transaction of purchase with one of a-d) or c) was the transferor an entrustee? 2. Did the transferee acquire good title? If under 1a, then ask, is the transferee a purchaser of goods? If under 1b, then ask, is the transferee a good faith purchaser for 16.1a) 2-403 1 Power even though a-d Did the critic have the power to pass good title to lucy? o A) the goods were delivered to the critic under a transaction of purchase (see 1-201 (29); and o One of the four scenarios in 2-403(1)(a-d) occurred? (d here) o Did the transferee (Lucy) acquire good title? o (question of good faith kind of a shady deal, is that typical? Did she have good faith? (1-201 (20), or look to article 2 , 2103b, unrevised article 1, 1-201 19. Just remember the minority apply revised 20 to merchants and nonmerchants, majority of js have bifurcated good faith, 2-103 for merchants, unrevised 1-201 (19) honesty in fact for nonmerchants. In make believe, we use the bifurcated one. o So youd need to know if youre dealing with a merchant or a non merchant. Lucy is a merchant, owns a gallery. Shes even a specific merchant. So shes subject to 2-103(b) o So there is a strong argument she might be a purchaser for value but not good faith. value? If under 1c(look at twen)

o Case: unreasonably low price is evidence the buyer knows the goods are stolen, but theres also caselaw that art value is in the eye of the beholder (but maybe not for an art gallery owner) 16.1b 16.2d Pierre entrusted to Lucy and Lucy sold to Frank, as a buyer in the ordinary course of business. 2-403(2) gives power to entrustee 2-403 (3) entrusting 1-201 (9) buyer in the ordinary course 2-103 buyer 2-106 sale clerk was intending to pass title for the cashiers check good faith, and in ordinary course of business Pierre cannot retrieve the painting lending does not create an interest in the property. So no transaction, so no voidable title, so pierre can get his painting back. also not entrusting because non-art dealer friend is not a merchant in goods of the kind. So, no title, no voidable title, no entrustee, no powery to transfer.

16.2e nothing in ucc, look at common law; conversion 16.2a is he a buyer in the ordinary course if the check bounces? If the court says no, then pierre can get it back . If yes, then frank can keep it and pierre is out of luck. All the same as above only the question is about the buyer in the ordinary course of business. So the question is about buying 2-304 , money or otherwise, otherwise is anything that is consideration, a promise is consideration, the check is a promise.

SO even if he is a buyer, another argument, cash sale means good and payement at same time, under 2-507(2)and 2-511(3), arguably lucy can retrieve the goods. Question is, does lucy have to give him a chance to cure? Pretty strong argument that she does. If frank had done it deliberately, you could argue he wasnt a buyer in good faith. (SEE SLIDES) So if lucy can get it back, then pierre can get it back from lucy. 16.2b same as above, but pierre demands painting before frank makes good, but frank quickly makes good. IF hes a buyer in the ordinary course with a bad check, its same as above. But what if frank is not a buyer in the ordinary course when he gave the bad check? IF that is the argument, then has he become a buyer in the ordinary course by curing? But if pierre has interceded, then he is not a buyer of good faith without knowledge of violating the rights of another, so he would not be a buyer in the course, so pierre could get it back. Once he has the knowledge, he cant then become a buyer in the ordinary course. May lucy reclaim from frank pursuant to 2-507 and 2-511? Well, he paid. Once she has the money she cant reclaim it. Only argument is in real estate context. Theres not the same type of authority in sale of goods. So pierre can reclaim but lucy cannot. 16.2c gives cashiers check before pierres demand. Frank gets the painting, hes buyer in the ordinary course, pierre is out of luck. 16.3a see slides DONT FORGET UNDER A TRANSACTION OF PURCHASE for voidable title.

Carla is a good faith purchaser for value so Carla has good title (bc georg sr had power to transfer good title.) GIFT = PURCHASE. HE IS A PURCHASER!!!!! EVEN though it was a gift, EVEN THOUGh he knew about the check. 16.3b Georges are involved in a scam to wash the title clean. He could go after junior for fraud/tort, so that should step in to estop George jr. from profiting from his fraud, but the UCC isnt gonna get it back for him, need common law fraud. 16.3c jr is still a purchaser, and George sr, still has power to transfer good title. Is he a good faith purchaser for value? Probably not, because no value, and he knew about dads check so no good faith. 1-204 No consideration with the gift. So no value, so not a good faith purchaser for value. So HERE the gift doesnt suffice, because theres no Carla (Carla had good title, so gift was ok, but sr. only has voidable title.) 16.3d Purchaser acquires what transferor had, so jr only gets what sr had, which is voidable title. Carla was a purchaser for value, so she was able to get good title from jr because he had voidable title. (jr not good faith for value, but he WAS a purchaser, so he gets what transferor had) 16.3e Carla gets nothing bc bfp from theif gets nothing, sr has no power to transfer, so no matter how far down the line we go, no one gets anything, a theif breaks the chain, so after that, everyone is screwed in spite of 2403(1), The theif has VOID title, no one can get ANYTHING from someone with void title. 16.4 1) No. jules had voidable title, pierre acquired good title because he was a good faith purchaser for value. As is doesnt put him on notice that he was

violating anyones rights because the language was not specific enough to disclaim warranty of title (2-312) 2)recourse against jules by pierre? Warranty of title says shall be free of defects , then 2-312 says need specific language to modify, and this wasnt specific language. Comment 6 (read it) here the title was good, but the title of transfer wasnt rightful, even though he had the power to transfer title he didnt have the RIGHt as against Delgado, and the as is didnt disclaim warranty of title becase that warranty is not implied. How would you disclaim the implied warranty of title? Specifid language or circumstances (in the comment) (specific language like there is no warranty of title) Two warranties, title be good, and transfer be rightful So even if the title is good, fact transfer isnt rightful can subject party to suit so theyd want to make a claim of breach of warranty of title to get the attorney fees back.(3312)

8/24/2012 7:49:00 PM Situation One Lessor -----------Lessee 1 ________lessee 2 we sometimes go to 2-403 because purchase encompasses leases. Comment to 2A304 (cmt 2) makes clear the relationship with 2-403 So situation one, leases to lessee one then turns around and re-leases the goods to another lessee. Governed by 2A 304. (so original lessor leases to a second lessor) Different ways for the second lessee to obtain an interest, but keep in mind that lessees interest is subject to the first lessees contract. So, you cant ge the lease until the conclusion of the first lessees interest. You get what the lessor had to give, but subordinate to the first lessee to the extent they exercise their interest. Then, if the lessor only has a voidable title either by caselaw or bc its a transaction of purchase and you fit within a-d, then he can transfer a good lease interest to lessee 2 if lessee 2 is a good faith lessee for value but again its subordinate to lessee 1s interest. There is a VERY NARROW Exception in 2a-304(2), lessee 2s interest is not subordinate to lesse 1s interest if you fit three requirements Lessee 1 entrusts goods back to lessor o They have to do it before the second lease contract is executed Lessor has to be merchant goods of kind Lessee 2 has to be a subsequent lessee in ordinary course of biz Make sure you look at 2A303, particularly subsection 2 (by violating the lease provision you subject yourself to damages but the person can still have a valid lease interest. 2a-527 is a remedy provision, has goods oriented remedies and actual damages.

SITUATION TWO 2a-305 and 2-403 SELLER---sale contract--buyer/lessor---lease contract-lessee Two ways for lessee to have good lease hold interest; If lessor had good title and the lessee is a purchaser Then the lessee acquires all title lessor had, unless you purchase a limited interest Can also get good leashold if lessor didnt have good title but had voidable title, then you have to be a good faith purchaser for value, purchaser includes leasing. Even though the first person might net get the goods back, they might get the money on the lease White and summers would apply 2a304, not 2-403. Steverson thinks language and comments support idea that 2-403 works better, not 2a-403. She doesnt usually disagree with white and summers but she disagrees there. SITUATION THREE Lessor--lease contract-lessee/sublessor or seller-sublease K or sale K--sublessee or buyer 2A305 Ways for sublessee/buyer to get interst when you have a lessee selling or leasing. They will get a good leasehold interest under (1) if the lessee had a good leasehold interest, but they will only get what the lessee had power to give, and they take subject to the existing lease K. They only get up to what they purchased. (So if lessee had a five year lease and sublease for a year, they only get a year) Voidable title, then sublessee or buyer has to be sublessee or buyer (good faith for value) then they acquire a good leasehold interest, but no greater than the rights of the lessee. The only way to get more is through (2), exception to the general rule. Sublessee or buyer can take the rights of the lessee and lessor and free of existing lease k if: Original lesse/sublessor/sellor is merchant in goods of the kind

The goods have to have been entrusted to lessee by lessor Sublessee/buyer has to be a sublessee/buyer in the ordinary course of business. Both 304 and 305 have a subsection (3) that deals with certificate of title statutes. See In re M&S Grading, Inc. p. 282 o Plaintiff CIT group says, we own that. Sue debtor for possession to get it back. Nebraska statute says covered by cert of title, you cant transfer valid title without cert of title. Fehers didnt have cert of title under 2A-305(2), cant get title under(3), they couldnt transfer title. So Debtor never had title. o Section 3 is an exception to the exception. You cant transfer full ownership unless you transfer cert of title, so debtor cant be a buyer in ordinary course because cert wasnt transferred. Debtor responds o Says it should be 2-403, and that section doesnt require buyer in ordinary course to obtain title. Cites comments (7)that reference 2A 304, which says it should be interpreted consistently with supreme court rulings and 2-403. o Talk about Dugdale case, Neb. Supreme court does not require buyer in ordinary course to get a cert of title. Court sides with CIT o They distinguished Dugdale, 2-403 doesnt deal with cert of title, so you cant apply it. Plain language of the statute will ALWAYS trump the comments. If you knew you should get cert of title and dont, you arent a buyer in ordinary course anyway, but 3 is to make really sure. o There are plenty of courts that go the dugdale route for the SALE context, not the lease context. o BE AWARE OF DUGDALE with regard to 2-403, exact opposite of M&S in leasing context.

17.1a o can Shelby get caged compassion back immediately or does she have to wait a year? 2A 304 comment 3 She does entrust it 2-403(2); but in order for museum to get an interest, under that subsection, they would have to be a buyer in the ordinary course, which the museum is not a buyer in the ordinary course, because although purchase encompasses lease, buying does not encompass lease. Buy goes with sale and sale is transfer of title Leasing is not a sale;sale is not a lease. 2a-304(2) doesnt apply because it isnt a subsequent lease, there is no existing lessee 2A-304(1) 2A 305(1); have to have an existing lease k. 2A 305 (2); doesnt apply bc not a lessee. We dont have that situation here. Comment 3, says Shelby is a creditor, so THATS why 2A-307. Creditor takes subject to the lease K. Dont look tot tile statutes for this situation. She does get payments.

17.1b o This time its a sale, bad check, pierre leases to museum. Can Shelby get the painting back Pierre gets voidable title per 2-403(1) This can all be under 2-403 because transaction of purchase includes a lease. So if museum is a good faith purchaser for value under 2A 403, then the museum gets their lease. IN this case, they are, assuming its a fair price. (good faith), purchaser(lease is a purchase), for value (10K). The only problem with 403 is that it suggests that the museum gets title, but if you read that in conjunction with the first

sentence, that you only get what you purchased, then it makes sense. Remember, 403 is designed to circumvent, his transfer to a good faith purchaser for value cuts off her right to reclaim, but she can get it back under507 when the lease is up. She also gets the 10K. (Thats from caselaw and comments in the 2As) 17.1c o 2A 305, sublessee situation. The art gallery gets what the museum had, which is not five years but one year. o o Argument the art gallery can get their five years? Under subsection 2, art gallery is a sublessee in the ordinary course, museum is a lessee dealing in goods of the kind, pierre is the entrustor, so cant the sublessee get all of lessee and lessors rights, free of the existing lease. Up to what they purchased. So they get what Pierre had (?) But did Pierre HAVE anything? Nooope, not really, it was entrusted to him, but no rights were transferred to him. He has right to pass on the lease. BUT, it says FREE OF EXISTING LEASE K. So they get pierres right to pass a lease, free of the existing lease, so they get their 5 years. (they can pass a five year lease to themselves) Pierre entrusted to the museum , definition of entrust in 2-403 applies (2a 103 3) so he did acquiesce in possession and voluntarily delivers. Then, Shelby would not get it back for FIVE years.

17.2 CISG article 1 for scope CISG article 4 says only governs formation not validity or effect on goods sold NO governance to third party rights

CISG doesnt have a provision, so we go to domestic law, (Gonna have to apply conflict of law analysis to figure out which law applies) HERE, title is in US. So apply texas law; sellers domicile, etc etc 2-403; pierre had power to transfer, so Las Pinturas has good title; all he has to do under CISG title is show he delivered goods free of any claim on title, and he did, so hes good to go. (Free of claim means valid claim)

8/24/2012 7:49:00 PM 2-613 applies ONLY where the contract REQUIRES for its performance goods identified when the K is made. So if the goods are damaged or destroyed through no fault of either party before risk of loss passed to buyer, seller is excused from perf. Though buyer has a specific opportunity to buy the damaged goods at a reduced price. So this would never apply to fungible goods If it is determined that 2-613 applies, then there are two possibilities. First, if the loss is total, then the k is avoided completely. If the loss is partial, the buyer may demand inspection and either treat k as avoided or accept the goods with due allowance from the k price for the deterioration. Distinguish between risk of loss and excuse from performance If seller qualifies for excuse, that doesnt change risk of loss, seller still bears the burden and suffers the loss if they still owned the goods at time of destruction. However, qualifying for excuse means that the seller will not suffer a further loss, so they dont have to pay damages to buyer for sellers delay or nonperformance. Ucc doesnt really help defining what circmstances excuse a party from perf. Obligations, 613 to 616 speak strictly in terms of a sellers ability to BE excused. Som courts have considered a buyers defense of excuse by anaology to 615s commercial impracticability rules for sellers or simply by ref. to common law of excuse. Only successful in a very few cases of buyers. Resources investment corp increased cost alone wont cut it, a rise/collapse of market is the type of business risk fixed priced business Ks are intended to cover

UCC 2-615 a focuses on the foreseeability of the supervening event. Must be a contingency the non occurrence of which was a basic assumption on which the k was made. Also mentions sellers good faith compliance with applicable governmental regulations as a permissible basis for excuse Comment 5 says that unless both buyer and seller thought that a particular source of supply was to be sellers exclusive source of supply, then the seller will not be able to rely on the inability of a particular supplier as a basis for its own excuse.

Impracticability with Leases: 2a 221 in analogous to 2-613 and relates to casualty to identified goods. 2a 405 is analogous to 2-615 excused performance 2a 406 covers the procedure on excused performance. Lessees under 2a 221 and 2a 406 are generally given options that are comparable to those available above, EXCEPT, nonconsumer finance lessees only have a choice to terminate the k or go forward with the k with no reduction in rent (2a 221 b and 2a 406 1 b.) Commercial impracticability, international Article 79 of CISG Raw Materials case (RMI) imports UCC reasoning to interpret CISG 79 Under 2-615, three conditions must be satisfied to excuse perf. o A contingency has occurred o The contingency has made performance impracticable o The nonoccurrence of that contingency was a basic assumption upon which the k was made. o o Both UCC and CISG require the excused party to notify the other side of the basis for the excuse and of its effext on the excused partys ability to perform o

o Differences: CISG excuse rules are broader in two ways Applies to both buyers and sellers, not just sellers like 615. Covers a partys failure to perform any of his obligations whereas ucc 615 a only allows excuse with respect to a sellers delay in delivery or non delivery in whole o part Not really that different practically, many courts will allow buyers to claim excuse either by analogy or using common law. Not many cases of seller breach OTHER than delivery issues in whole or in part CISG narrower than 615- when sellers assumed source of supply fails to deliver to seller. Comment 5 of 615 suggests as long as both buyer and seller assumed that to be the exclusive source, seller will be excused. CISG 79 says that the party above is only excused if the source itself has a valid basis for excuse. Class notes: Common law frustration of purpose, buyer would use, still exists, but we are going to talk about statutory excuses. Keep in mind that these are extraordinary excuses, so it is unusual to be able to prevail. Normal market risks are a gamble you take. 14.1 You CAN use 2-615 for goods you identify at the time of contract, but 613 is for goods you cant substitute for, its not fungible. Identification of goods is goverened by 2-501 Not really helpful, but if the k identifies a particular item (here, probably the VIN)

501a does tell you goods have to be exisiting and there has to be some indication in the k that these are the goods.

she broke down into 2 goods suffer casualty without fault of either party fault includes negligence so thats some stuff youd want to look at. (what did the seller do to protect itself, and did it do enough to protect itself)cmt 1 says fault includes negligence. See also second sentence of cmt 2. 3 before risk of loss passes to the buyer. o 2-509 this is subsection 3, bc the seller is the merchant, so risk of loss doesnt pass until she receives them. (if he hadnt been a merchant, then it wouldve been tender of delivery, which is when the goods would have been delivered to her) receipt of goods, 2-103, means taking physical possession MAKE SURE YOU CHECK THE DEFINITIONAL CROSS REFERENCES AFTER THE COMMENT.

So risk of loss did not pass to buyer. SO, a) if the loss is total the K is avoided. Was it total? The damages was more than the k price. So it was probably total by the insurance definition, but do you want to use it? Well, we represent Rick, so yeah, because then he can avoid the K. B) if partial, then what I said. 14.2 if it is not foreseeable at all, its nonoccurance is a basic assumption if it was foreseeable but highly unlikely, then it is probably a basic assumption so the occurrence of the contingency has to change the k, go to the essence of the k, if parties had thought of it, no way they would have made the k, goes to heart of the k.

comment 4, increased cost alone does not excuse performance, unless the rise in cost is due to some unforeseen contengecy which alters the essential nature of the performance. Here, Heavey Metal is supposed to provide me with gym equipment. Thats the essential nature of the contract. He can still do so. argument is that the exclusive supplier provision applies to third parties you have no control over, he has control over everything. So it will all turn on whether the court will classify it as a manufacturing k, and let him out on the supplier basis. 14.2b remember, condition to her being excused is she has to turn over to golds any rights against the defaulting supplier. analyze section 1 by analogy to UCC, which says that fault includes negligence, and they are liable for the negligence of their employees. note, CISG article 79 goes all the way up the supply chain

14.2c

d) seems to suggest buyers only options are to terminate or accept proposed modifications, because if you dont then its going to modify by default.

11/6/12
Unconscionability 15.1

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Mary wants her money back. Will marys lawyer be successful in arguing unconscionability? 2-302: this is not a q for the jury, its for the judge, matter of law. Was any clause unconscionable at the time it was made without looking to what happened afterward? o Comment 1 has the basic test that most courts use. o Also look at cases, particular test- procedural or substantive unconscionability? Look at third full paragraph of Maxwell. Look at Williams vs walker Thomas furniture cite in there Procedure looks to behavior Why did you agree? Absence of meaningful choice, the other side took advantage of your absence of choice (not enough you had one, the other side had to take advantage) Substantive looks to the bargain itself. What did you agree to? And, is the bad deal unreasonable? The substantive aspect has been troublesome, since we said a peppercorn can be consideration, courts wont second guess, but looking at this you really are looking at it, youre saying this is a really bad deal. Most courts say a bad deal, even a really, really bad deal isnt enough, they really want some procedural unconscionability along with it. o Maxwell is one of a few cases that say substantive unconscionability alone is enough. Pay attention to the nature of it and why that was enough. o So, as to the problem: what makes it procedural unconscionability? She doesnt read English well, the person she is with is friends with the dealer.

Shes uninformed of her choices, she didnt understand the meaning of the as is clause, so thats her absence of meaningful choice argument. Ricks response: Paul read her the K, she doesnt have to buy a car, it was her choice to pick the car she wanted and to pay the price, it was the posted price he didnt jack it up. NO overreaching on their part. What about substantive? Mary says, its 25% more than is usually paid, and the as is term makes it a one sided deal in favor of Rick. Rick says: she said the fact most customers negotiate doesnt mean she got a bad deal, was posted price; hes allowed to have an As Is part, its prominent, did Paul read it prominently? But its displayed prominently, satisfies 2-316 Car dealership doesnt have an obligation to protect Marys interests, but we might want to find out more about paul/rick relationship, but on the face of it Mary doesnt have a very good argument on either. Unlikely mary can successfully argue unconscionability. 15.2a Any problem enforcing agreement as written? 2a-108 o We look at unconscionable conduct with regard to collection or any inducement Any procedural or substantive unconscionability? Is there a commercial reason for what they are doing? His bad credit might be a valid commercial reason for the higher payment What about argument he had no meaningful choice, because no other dealer in town would lease to him. Response? He doesnt HAVE to get a purple Cadillac at ALL. Remember absence of choice focuses on what you are King for. Do you NEED it? If yes, more likely to find absence of meaningful choice. Not being able to get a caddy for fast cruising is probably not going to get there. Plus, HE is the one that trashed his credit. Substantive: what about the security interest on his house? Maxwell case didnt like that. Might the court

strike that portion? Is there a business justification for the security interest? Is it typical in the industry to take a lien on the house? Is giving such bad risks unsecured credit really a good idea in the industry? What about freedom of contract? Joe agreed to the terms. If we say you cant take that security, we take away freedom of k bc now joe cant get a k at all. o To argue he was duped you need evidence that they hid this. If they hid it, or it was written in such a way it wasnt understandable to a reasonable person, that could be unconscionable. If they are up front with the draconian terms, youre SOL unless you can show you had no choice. Joe doesnt have that leg to stand on, so the terms could be substantively unconscionable, but its unlikely that they are here. We dont have evidence here he didnt have knowledge of the nature of the terms. Steverson says, court is unlikely to find unconscionability here. o Whats the difference between this and Maxwell? Maxwell had absence of meaningful choice. Why? The terms of the finance charges were hidden and difficult to understand. In Maxwell, even if they performed all the terms, they still got the horrible terms, here, only joes default will bring forth the terrible terms. Also, the Maxwells were targeted. They werent a credit risk, but the sellers thought they could get away with it. So this can be distinguished from Maxwell. o What about the 6 hungry kids? If fast eddie wants to foreclose? Would that be a problem? Court would probably say kicking wife and kids out is unconscionable conduct in collection fo the claim. ONLY in 2A, 2 doesnt have the collection part. So if youre in 2A with a REAL LEASE, not a disguised sale, then you would have this protection. The other difference between 2A and 2 is attorneys fees in 2A, not in 2. 15.2b

Theres no valid commercial justification. Its one sided. Is it unreasonably one sided? Does it unreasonably favor fast eddie with no reasonable justification? (see BMW case for commercial justification language) Authors are trying to ask, is the price so out of the ordinary youd say You paid WHAT? see BMW no sane manno honest man phrase. So arguably this is substantively unconscionable, no reason to charge that much other than you can. But is there any procedural unconscionability? No procedural unconscionability, really. Joe has great credit, he could get a lease anywhere, he chooses to not shop around. Do we protect Joe from his laziness? Generally courts say no, Joe, you chose not to do what you should> So Maxwell notwithstanding, we dont protect people from their own bad bargains; no justification for ignorance. So, court will likely not help joe because no procedural. 15.2c Purpose of driving to work. Nothing else really changes except the price is less, but still 3x the price. Maybe changes meaningful choice question, since he now needs the item, unlike fun cruising. But, he still is not doing his due diligence, so really same answer as above, he has the option to go elsewhere , research, shop around. Probably not unconscionable. 3x the market rate is 3x the market rate, so dont base it on how large it seems to YOU. Still ask, does it shock the conscience? 15.2d Now we know about the exploding gas tanks He didnt know about the report at the time, so not unconscionable. If he had known at the time, then that would be a problem. Collection only applies to default, so the fact he pays monthly doesnt matter.

Also, if Eddie knows, that would be fraudulent nondisclosure. Unconscionability RARELY wins. Closing:

Big picture Performance and Breach o Remedies for a breach Goods oriented remedies(what can buyer and seller do if other party breaches in addition to collecting damages) Breach- is a duty due and owing? If yes, has there been a failure to perform? If yes, what can a party do? Can they cure? Suspend performance? End K? Damages/equitable remedies o Look at cancellation outline (?) Note that with buyer, good oriented remedies, first q is Has the buyer accepted the goods? If no, then that tells you options buyer has If yes, buyers options are limited but they still have some goods oriented remedies. Look at 2-703, sellers remedies in general 2-711, buyers remedies in general 2-606, what is acceptance? These hypos flesh out 2-606 options, 3 ways to accept goods. 18.1a Has kim accepted the computer? Is 10 minutes a reasonable opportunity to inspect the goods? Likely not sufficient to inspect it in its entirety, and using it during that time is part of the inspection process. You want to go through 1a, 1b, and 1c. o Where do we look for reasonable opportunity? 2-602, seasonably notify, go to 1-205 for seasonable, 1-202 for notify o In this case she is still inspecting so she has time to reject. o So thats a and b. o For c, is it inconsistent, part of the bundle of sticks? Well, yeah, but it is also consistent with inspection, because using is part of inspecting. But if you use something you dont need to use in order to inspect it, that could fall under C. o

18.1 b, she has accepted it, under c, drilling the holes is not consistent with sellers ownership and she didnt need to do it to inspect it. General rule 1: an act inconsistent wit hthe sellers ownership occurs when a buyers act has changed the nature of the goods in some way 18.1 c She sees the crack, then she uses for 10 minutes. A) she might not be done inspecting, so thats probably ok B) stillin inspection mode, so she hasnt had time to not reject C) again, using it is not inconsistent, even though she saw the crack, because she is inspecting to see what else is wrong. Unless she knows immediately she will reject, if she KNOWS she will reject because of the defect, she shouldnt use it, but if she isnt sure then she can look for other things. General rule 2: Buyers use of the goods after buyer knows of the defect the defect which later forms the basis for buyers attempted rejection- is an act inconsistent w seller owner ship unless buyer has no choice but to use goods 18.1d She notifies them she is rejecting Then she uses it ten minutes. 2-606 c: using the goods is inconsistent. See 2-602 (2). It is wrongful as against the sller, it is an acceptance only if ratified by seller? So the answer is, it depends on if seller ratifies.

11/8

8/24/2012 7:49:00 PM

remember the connection between 2-606 and 2-602 (see 18.2d notes) o Single delivery- 2-601 (perfect tender rule) If it isnt an installment k. Any defect, no matter how minor, gives a right of rejection. o So if goods or tender of delivery fails in any way to conform to the kbuyer may a) b) c) Make sure to look at page 297 that lists various limits to this general rule If buyer rejects in bad faith, some courts wont allow it, they impose a good faith standard on the buyers rejection. Failure to conform to k in ANY respect. NO requirement of substantial impairment of value. So gate into 2-612 is 2-612 (1). If not there, dont use 612! o Installment 2-612 2-612 (2); buyer may reject any installment thats 1)nonconforming but only if 2) the nonconformity substantially impairs the value of that installment and 3) cannot be cured . (so those are the three things that it breaks down to) can be a defect in the documents, see comment 4, paragraph 2. Also look to comment 4 for meaning of substantial impairment With regard to cannot be cured, what the code says is if the nonconformity is curable, and seller gives adequate assurance of cure or gives adequate assurance of conforming replacement goods, buyer must accept the cure. Rejection of the goods depends on whether its a single delivery k or an installment k (several deliveries)

Remember buyer doesnt have to take nonconforming goods, but if the cure is forthcoming you must accept the cure. Whats an adequate assurance? Look to 2609. Look also to comment 5 to 612. If they dont give adequate assurance, it doesnt matter if its curable, they have to give adequate assurance. When can you cancel an installment K? 2-612(3) Basic answer- nonconformity substantially impairs value of ENTIRE k, not just one of the installments . We dont have much law on what substantial impairment of the whole k is. Probably look to the same concepts as divisible ks. (ie, where you can apportion the consideration in defined segments and basically turn a k into a bunch of little ks. So you have to look at if the defect infects the entire thing; for example, if parts of the k build on one another, losing one installment might impair the whole thing. If each part is individual, you might just get damages for the part thats impaired) Remember if youre the seller and they dont pay the first installment, that isnt automatically impairing the whole thing, but you can request assurances, if they dont give it, then you can treat that as repudiation, see 609.

18.1 e

May Kim reject the installment? o Its an installment K under 2-612 bc the computers will be shipped in in separate lots to be separately accepted (see 2105(5)) So were through the gate of 612 (1)

o (2) do we have a nonconformity? 2-106 defines conforming so nonconforming doesnt conform with the k bc not in accordance w obligations under the k. obligation under the k here was to deliver goods free of defect and a cracked computer is not free of defect Does that impair the value substantially? See caselaw - Hopkins- Subjective and objective components. (also see cmt 5) We might need more facts- what does this do to the computer? Impact the viewing? Processing? Is it just aesthetic? o Assuming its just aesthetic, she doesnt have right to reject, so she calls them and says, hey, theres a crack, send me a new monitor or fix this one. What if they say no? Isnt it just a regular breach? Yes. So, sue for damages. They cant just be sending you cracked computers. But the right to reject in 612 requires substantial impairment. o NOTE: shaken faith doctrine requires you to start with substantial impairment, too. What if it WAS a substantial impairment? o Must give seller an opportunity to cure (give adequate assurance or provide conforming goods) o So, if they say sure, well send you a new monitor she has to await the cure and accept the cure. (so yes, seller can cure defective installment) o If they DONT, then she can reject.

Can Kim cancel the rest of the K? (assuming substantial impairment) 2-612 (3) Does this substantially impair the value of the whole contract? o Unlikely, could just have been cracked in transit, thered need to be more. See 2-711. Says you can cancel. So you need 711 to go hand in hand with 612. TOGETHER they give buyer the right to cancel.

Doesnt impact the value of the whole k. 18.1f (note, everyone kept going to 2-508. Dont go there. Right to cure is IN 612. Get out of 508) o Now may Kim reject the installment? 2-612 (2) Yes. An exploded computer is nonconforming. An exploded computer has substantially impaired value. (to that installment) Can it be cured? Sure, they could send her a new computer. Will they be allowed to cure? Maybe: Whats kim going to argue? Shes afraid the new computer will blow up. Shaken faith doctrine, so I dont have to accept a cure of this installment, or any other installments. See Sinco case. They will get an opportunity to convince that it wont happen again convincing showing. She will have to accept if they can show why this wont happen again. Has to be specific to that incident and what caused it. reasonable person situated as kim is situated Can she cancel the remainder of the K? Only if successful on shaken faith doctrine argument. So this will depend on facts/evidence, same as right to cure in

this case. Now, if she gets another exploding computer, thats pretty much going to do it. 18.1g Once she accepts the goods, has she precluded herself from any remedy for the computers defects? o She may be able to revoke under 2-608 o She may also be able to sue for breach, and get damages. Always remember, if theres a breach, you can get damages, even if you cant get goods oriented remedies. o 18.3 what Lou really is asking, can they cancel the contract? (remember as is is a disclaimer of implied warranty of merchantability) If they reject, can I cure? o 2-508 governs two situations where seller has a right to cure 1) time for performance has not yet expired 2)seller had reasonable grounds to believe would be acceptable. Here, we need (2) because (1) doesnt apply, time for performance expires when they drive away in the car. So wed need to look at whether it is industry custom to have cars inspected by a mechanic. Does his 10 minute drive suffice in the industry? IS that how you can identify most defects? Or was the 6-7 hour examination typical? o So whether he has reasonable grounds to believe will depend on above. Its NOT good enough that he just doesnt know about the problems. Ignorance wont get you into (2). We might tell lou, he needs to do more than 10 minutes.

The fact he SAYS he anticipates problems belies any argument that he had reasonable grounds to believe they would be acceptable. You could probably put in the K that you have to give Lou an option to cure. If they revoke their acceptance, can I cure? o 2-608 1 a what gives our buyer the reasonable assumption that the nonconformity will be cured? They are thinking along the lines of where the buyer KNOWS about the nonconformity, in this case, we dont even know at time of sale that there is a nonconformity. o So o 2-608 1 b- could apply, wed need them to have sellers assurances reasonably inducing. So if Lou said, if you find any problem Ill fix it, thatd do it. (WE know that, but the facts dont say he told the buyers). Without that, we arent under 1b. o Also remember that you cant have a substantial impairment unless you gave an opportunity to cure, so he might be able to use that. Split in courts on whether 2-508 applies. Some courts say, clear language says rejection, doesnt apply to revocation. Other courts look to 2-608(3), same rights and duties as if he had rejected, so revocation same as rejection in this regard. (one of the duties of a rejecting buyer is to give opportunity to cure, so you have same obligation as a revoking buyer) Most acceptance is under 2-606 1 b, some courts will stretch the reasonable period of time, such that you havent actually accepted so you can reject (instead of revoking)

18.4 May the school avoid its deal with Big Als and get its money back? (2-711- Rightful rejection or justifiable revocation= cancel)

o Acceptance? (2-606) Yes Failed to make an effective rejection, 2-602 (1)? Could argue, she needed a longer time/more mileage to find out its a gas guzzler. Opposing argument, you only need to drive it for about an hour to see, not 100 miles and a week. (Note, it would be fine if they called and said, Hey, this bus is burning oil but we have to drive these kids back, that would not be against seller) No Justifiable Revocation?

Rightful Rejection? She probably has either JR or RR, reasonable people would give him an opportunity to cure. What Lou really wants to know is, if she is Unreasonable, can they get out of the k? We called it YES, acceptance. o So now we have to look at justifiable revocation (See cancellation outline) Right to revoke? Nonconformity that substantially impairs the value. Nonconformity- burning oil Substantially impairs- it was in the deal, was obviously important, putting it in the k raises the importance level. He assured her that it did not burn oil. So here, yes, substantial. Buyer accepted the goods With discovery? No Without discovery? Yes

o Reasonably induced by sellers assurances AND difficult discovery here. YES. So, can the assurances that induced you be the assurances under 2-608? North American lighting/Hopkins case o Yes, they can serve double duty. So, we may have justifiable revocation in this instance bc of assurances. They can say, it doesnt substantially impair if they can fix the burning oil. If its actually going to take a lot of time/effort to fix, then they will say 2-508 via 2-608, or we will stretch the period so we are in rightful rejection, which gets you into 2-508 Still has to figure if he had reasonable grounds to believe it would be acceptable He promised it wouldnt burn oil, it in fact burns oil bad, you might expect that the seller did NOT have a reasonable belief the goods would be acceptable, he wouldnt have a right to cure, and she CAN avoid the deal.

Cure:

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18.4 question 2 if can avoid deal, can school keep bus till Big Al give money back o they want you to look at remedies under 2-711(3) rightfully reject/justifiably revoke, and buyer has security interest for payments made on their price, may hold such goods and resell, thats assuming buyer hasnt given back money So if you have possession, and youve made payments, you have a security interest, you can hang on to it, and even sell it if necessary to get your money back So, yes. What duties regarding the goods would the college have if it DIDNT have a security interest? Merchant or non merchant buyer? 2-603 for merchant buyer, has more duties with regard to the goods than a non merchant has o duty follow reasonable instructions received by the seller with respect to the goods, etc. If they have an agent or place of business you can make them take care of it, if not buyer has these obligations non-merchant, 2-602 (2) no obligation other than to hold on to them and reasonable care. Dont use them. You dont have to take any further action, you dont have to ship back.

18.4 (3) o Yes, it will hurt her ability to undo the deal unless she has NO CHOICE but to use the goods Revocation- hurts ability to revoke, waiting another week is arguably not a reasonable time to revoke particularly for convenience

Rejection- hurts her ability because her use now that she knows about the defect that she wants to use to get out of the deal is an act inconsistent with the sellers ownership. In all cases, need to communicate with the seller, might be able to agree.

18.4 (4) right to cure- see last class. o Dont necessarily get into 2-508, but there are ways to get in (revocation o Get in 2-508 with rejection o Has time of performance passed? Probably yes o Did he have grounds to believe tender/delivery acceptable? Goes back to inspection procedures, reasonable in industry, etc. o Closing with leases and the CISG Read p 314 Be aware of Delchi carrier case, need to be aware of rights with regard to revocation/rejection, not as extensive with regard to ucc. NO perfect tender rule. Need a fundamental breach for goods oriented remedy under CISG So remedies under Delchi depend on their being a fundamental breach.

RISK OF LOSS: Who bears the risk of loss, ie, who is responsible for repairing or replacing the goods (or coping with their absence) if the goods sustain harm? In general, if you own them and have control of them, then risk of loss is on you. Risk of loss- on buyer as owner and possessor , has risk of loss So remember, in general, above.

Question is, what about when they are in transit, or one party owns but the other party controls (like when you already paid for the car and its being shipped on one of htose trucks) 2-509, 2-510 Comments tell you, 2-509, ROL in the absence of breach Attempts to place the risk on the party who is more likely, at the moment of loss, to have insurance on the goods 2-510, ROL when either party is in breach of the k at the time the loss occurs o so first question, is anyone in breach? Then you know which to use o Practical effect: risk of loss o Seller fails to deliver when goods are destroyed in transit and buyer refuses to pay o Question of which party has breached When was the breach? Who bore risk of loss at time of breach? In real life, its usually a fight among the insurance companies. Read case on page 344 carefully, design data corp burden of proof issues- know and understand

20.1

2-509 o 1) ship by carrier? No o 2) bailee? Well, you could argue lou is a bailee, but when you look it up this refers to a third party bailee, like a warehouse. o 3) any case not 1 or 2. Yep. Risk of loss passes to buyer on his receipt of the goods if the seller is a merchant. Lou is a merchant. Receipt is taking physical possession 2-103 So , risk of loss had not passed

Lou has the risk. If a non merchant, then on tender of delivery 2-503 for tender of delivery what can lou do to ensure customers pick up their cars? o Put something in the K saying you have to pick up immediately, but if buyer injured, then what? ( I mean, you could go to 2-510 bc you have a breach by the buyer, but you still have to go to his insurance) or put passing risk of loss to buyer in the k o Contact info for someone else? o Delivery information? Wouldnt want that in the k because then everyone would want it delivered. o Charge storage fees after a certain amount of time? o

20.2(1) brake problem, breach of K. 2-510 fails to conform, right of rejection, loss remains on seller 1)conform 2-106(2) 2) as to give a right of rejection o 2-601 AND 2-504 o Yes, under 2-601 right of rejection exists 3) risk of loss remains on seller until cure or until buyers acceptance despite non-conformity o So it remains until cure or until buyers acceptance. Hes fixed the brakes. But, they vandalized the car BEFORE he fixed the brakes. o But, she already accepted the car- did she? She hasnt revoked how do we know she accepted the goods? 2-606 not 1a what about 1b? reasonable time? 1c, inconsistent? Two weeks is a pretty long time. Arguably, shes already accepted the goods. A court could be lenient and say she hadnt accepted.

If she accepted, the risk of loss is on her.Why? She should have insurance on that car, shes had it two weeks, SHE has the insurable interest. The dealership no longer even HAS an insurable interest in the car anyway.

If Lou was at fault, then hed bear the loss (like if the car wasnt protected as it should have been.) see also 2-504 (maybe ask for podcast, this was not clear to you) o when you look at 504, which are requirements when seller has to ship, seller must to all these things in 504, one of which is notify buyer of shipment. Risk of loss is on you then, but if material delay or loss ensues, then its a ground for rejection, so thats the only time you have a right of rejection under 510 in that situation in those 2 instances from 504 with shipment. (With regard to THOSE TWO BREACHES) you read 601 with 504, but ONLY those two breaches.

o 509 and 510 are mutually exclusive would it change anything if upon hearing about the vandalism, Karen said I revoke my acceptance. 2-608 (2), she didnt revoke before substantial change in condition (not due to defect (brakes)). So, shes SOL. So it changes nothing. 20.2 2 this time she says, I hereby revoke until you get the brake system working properly. 2-510 (2) o Buyer rightfully revokes o Then rol is on seller to the extent of deficiency in the buyers insurance. o On seller from the beginning.

Rightfully revokes is in 2-608 o Only thing that might give pause is substantial impairment o Steverson says, cure shouldnt change her right to revoke Fact that seller can cure wont allow seller to say that she didnt give goods back to him, risk of loss would be on seller as per (1). IN this situation. o Seller is going to argue, (2) doesnt apply to this situation, because thats designed to deal with a situation where the buyer has given up an ownership interest but has retained control (possession) of the goods. Comment 3. o Steverson says, that probably IS what (2) is designed to deal with. o What is the comeback to seller? If you own or control goods, risk of loss is on you? If buyer revoked, seller owns. So risk of loss is on him. (then rol would be on seller COMPLETELY, not just to extent of deficiency) o

20.3(1) UNDERSTAND WHAT THE TERMS MEAN!!!!!!!!! o FOB Sellers o FOB Buyers 2-319 FOB sellers factory (Shipment contract) seller bears risk and expense of putting goods in the possession of the carrier Buyer is responsible for paying freight from carrier to buyers location/delivery Seller has to comply with all of the requirements under 2-504 Default term under ucc is FOB sellers place (this one) 2-308

o FOB buyers place Destination K

Seller must transport goods to that place in manner provided in this article See 2-503 for manner provided Seller bears risk and expense of getting goods to buyers place, so seller pays freight and has to tender in accordance with 503

20.3 (1) o as between heavy metal and golds gym, who has to pursue the carrier for loss? They shipped nonconforming goods Thats a breach (not realted to shipmetn 2-510 Risk of loss on seller until cure or acceptance Heavy metal has to fix it.

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20.4 (1) GET PODCAST FOR TONIGHT. conforming, failed to give notice of shipment FOB sellers factory Golds didnt insure Trucks stolen Who bears risk of loss?

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Risk of loss transferred to carrier when Seller put the goods in their care. 2-319 and 2-504 seller breached because he didnt notify. So, 2-510 o Tender or delivery fails to conform Tender -2-503(2), in order to tender with regard to a shipment K, you have to comply with the requirement of 2-504 MAY also have to comply with 503(1) in some situations. 2-510 (1), tender so failing to conform as to give a right of rejection does it give a right of rejection? 2-504 failure to notify only gives right of rejection if you have material loss or delay. Buyer didnt get insurance bc of no notice, so that is a material loss caused by no notice, so loss remains on seller until cure or acceptance Buyer cant accept, shipment is lost. Cant cure notice because the breach has happened. They could cure the goods but thats not the point here, because the risk of loss remains on the seller. 2-504 DOES NOT SHIFT RISK OF LOSS. Just talks about grounds for right of rejection. Note, Keating went under 2-509 for this, Steverson says her difficulty is that the comment to 509 says ANYTIME you have a breach, its 510.

Second comment, is it doesnt give you a clear path. SO ASK FIRST IF THERES A BREACH, then go from there.

o Would answer change if golds learned from a third party that shipment was made but still never insured the goods? 2-504 comment 6 most courts are going to say, you didnt insure for your own reasons, NOT bc seller didnt notify, bc you knew, so that error didnt cause your loss. (you should at least investigate if items have shipped)

2-509(3) if seller is a nonmerchant, risk of loss psses on tender of delivery, go back to 503 for that. (1) is general case, (2) is adding on w regard to shipment k. (3) is for destination k (FOB buyer) (4) is the bailee situation, delivered without being moved. (like a warehouse) Dont need to be too familiar with (4), know 1-3.

Risk of loss, leases: 21.1 o employee of lessee destroys machine 5 yr lease at 2k/yr agreement says nothing regarding risk of loss o theres fault. Lessee is responsible, at fault bc of employees actions. o Lessee is liable under 2A risk of loss provisions only come in when theres no fault, says caselaw. If theres fault, whoever is at fault bears risk of loss. (page 347 in the book, common law)

If the damage was an intentional tort, then employer wouldnt be liable, if you SAID that on her test, youd get full credit.

21.1b o Now we have a finance lease. Accidental fire Law school has risk of loss. 2A 219(1) Risk passed to lessee, hes got the goods. Generally risk of loss stays on lessor, but not in finance lease. You still have to figure out if its a true lease or a disguised sale, then finance lease or not.

Breach and Damages:

You only have a breach if the defendant had an obligation under the contract ,

and that obligation was due and owing, And defendant failed to perform. o And the failure has to lead to the damages o Vital with respect to remedy. UCC has some default provisions including the implied warranties and 2-301 (2-3s are your defaults) general obligations of the parties. General obligation of seller is to transfer/deliver, of buyer is to accept and pay. But buyer doesnt have to do that if seller doesnt tender, and seller doesnt have to deliver if buyer doesnt tender payment. So that gets to was the obligation due and owing, look at time in K. Also look at the conditions in the k , express conditions or constructive conditions (pay attention to latter) Sale of goods/cash sales, you have constructive concurrent conditions, pay/accept is dependent on seller tendring proper deliver. Simultaneous, both parties have to be ready willing and able 2-507 and 2-511. Obligations of buyer and seller.

Constructive concurrent conditions, all about tender, which is offering, not necessarily rendering, which is actually performing. So you just have to OFFER, be ready, willing and able to perform. Make sure you know 2-607(1 ) which says when buyer accepts, has obligation to pay at the contract rate. EVEN If they accept nonconforming goods. Sellers remedies: Remember that remedies compensate you for loss Remember, you have to figure out what the injured party wanted under the K. Usually, seller wanted money, buyer wanted the goods. Seller wants Expected Value (contract price ) minus Received Value(payment from buyer) o Seller can mitigate, you have to take into account that seller can mitiate. The code assumes that seller can mitigate. Seller is only entitled to extraordinary damages under 709 if he can SHOW he cant mitigate. UNABLE TO. o o So, seller has K to sell buyer toy wagon for $100. o Buyer doesnt pay. o Seller sells to another buyer (mitigates) for $90. Seller is happy except the $10. o Even if seller doesnt actually sell, if he shows market value is $90, (POSSIBLE resale price, aka , market price) then we use that. You could have mitigated. o o If he sells the one wagon to someone else its a substitute sale, so he doesnt get full K price, he gets K price minus resale/possible resale (and also take into account incidental)2-708(1) o Now, maybe seller has LOTS of toy wagons to sell instead of just one. Hes a toy wagon dealer.

So, seller wants his K price, which is composed of his profit and recouping cost (materials and labor) overall, he wants his profit. So, seller says I cant recoup that profit, because I could have always sold another one to someone else. So hes entitled to the profit, 2-708 (2) o So if youre actually building it and youre halfway done and buyer breaches, you want the profit and reimbursed for any materials and labor you cant recoup (again, (2) above) o 2-709 is an extraordinary remedy, specific performance for seller, buyer has to perform as promised under the K. Seller only gets this where seller CANNOT mitigate. Cannot resale, either bc no market or bc goods have been destroyed and risk of loss was on BUYER. o Also, if buyer accepted, buyer has goods, seller cant resale, so buyer has to pay as promised under the K. o The three instances in 2-709 are the only times seller can get full K price. o UCC assumes mitigation, so burden is on seller to prove he CANT and is entitled to 709 remedies.

22.1a

started with 2-703 then he went to 709 (we treat the repudiation as failing to pay when comes due, because youre saying you wont do it) o 1 buyer fails to pay price as it becomes due this is where anticipatory repudiation goes so you dont have to look at tender of delivery or time of payment due, we have repudiation under 2-610 o Seller may recover the price under 709 (1)(b) Goods identified to the contract if the seller is unable after reasonable effort to resell at a reasonable price Were the goods identified to the contract? Under 2-704, seller can identify after the breach, we assume he will here to go for the action for the price (704) 1 a

Reasonable effort? Yeah, he made efforts to sell them. Reasonable price? Depends. 1/10 of K price isnt reasonable, but if you base it off market price, and thats market, it might be reasonable. Whole point of K is to protect against crazy drops in price, so not using K price might not protect him under the k (these are arguments to make) o So, they can get the full 10K, and the

K buyer gets the beanie babies. If the court said it was a reasonable price, then seller would get damages under 2-708(1), market price, so hed get 9K, and the beanie babies. If he resells to EiD, hed be under 706, which again would give him 9k. In every case, seller ends up in the same position, 10k in pocket, its a question of who has to deal with the beanie baby hassle.

22.1b good destroyed, no fault of SD. SD has no fire insurance. o 2 510 3 2 501 (see cmt 5) is this an undivided share of a fungible bulk? So identified means, look to the K. Does it tell you which goods will be used to fulfill the K. 2-105 (4) undivided share 1-201 (18) fungible bulk o so, even though benie babie collectors might tell you that there is a big diff btwn beanie babies, they are fungible her bc the parties just said beanie babies they treated them as fungible.

(any of the 8K beanie babies would be fine to make up the 2K)

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22.1b seller probably can recover bc rol was on buyer to the xtent of defieciency sellers insurance, here there is no insurance, but only for a commercially reasonable time use 2-510 3 bc 1 ) a breach prior to the loss and 2) breach is by buyer bc 510 3 limits your recovery, and it answers the q so no neet to go to any other provision. 1. buyer repudiates or is otherwise in breach b4 rol passes to him? Yes 2. goods are conforming? Y, bc they are what the k was 3. good already identified to K, this is where we went through starting w id to k, 501, talks about how goods are identified to k, (a) says in absence of explicit agreement identification occurs when k is made if k is for sale of 1)existing goods (yes) and o 2) identified (see TWEN SLIDE) see comment 5 of 2-501 o also fungible if by agreement treated as equivalent, so even though beanie babies may arguably not be fungible, the k treated them as fungible bc it just said beanie babies. SO yes they are identified to the K, so seller can recover the price Remember rol is only on buyer for commercially reasonable time, look at trade usage to see how long it is going to take seller , after a period of time, rol returns to seller. If seller had insurance, they could only recover the deductible here, the defiecency in the insurance Firwood case: Talks about reasonably identified, and what is a commercially reasonable time, 3 yrs usually wouldnt be but here under circumstance it is, and sellers inability to recover consequential damages and that loss of use of money is consequential. Note that Michigan is more typical in identifiying that interest is not incidental, NY is the outlier. Remember 1-305 says no consequential unless a code says consequential, remember

SELLERS damages do NOT allow for con damages, only BUYERS do. 22.1c resale, so 2-706 we get there from 2-703 where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment when due on or before delivery or repudiates with respect to a part of the whole (d) resell and recover (SEE SLIDES) 2-706, satisfy prerequs, if you do, then KP-RP+I-ES note, 706 v 708, 706 is KP, whereas 708 says diff btwn mkt price and unpaid K price. If you actually have buyer pay, you have to take that into account, even though 706 just says K price. You can take it into account in formula (by making KP unpaid KP) but if buyer is suing for restitution (want money back they paid) then you always do KP not unpaid KP, SO, if we are using 706 and there has beena payment, use unpaid Kp, but if they want restitution, then use KP. In other words, ALWAYS use unpaid KP UNLESS buyer is suing for restitution, then use KP. Prereqs for 706 1) resale in good faith (2 -103 1 b) for merchants 2) resale made in commercially reasonable manner, cmt 5 and Firwood case 3) Seller provided requisite notice (706(3) private sale 706(4)(b) public sale. Here, SD is trying to mitigate as best they can, good faith, no evidence that resale is not commercially reasonable, did they give notice? Yes, they did. So KKs argument KP($10K) RP (6K) =I(0)-ES(0) = 4K Sd argument 10K-4K+I(0)-(ES)(0)=6K

court will say, whatever evidence we have to say which goods are identified to KKs contract, then that is the box we use for damages. 22.1d two separate ks K1- 1000 Dobie Dogs for 5k K2- box of 1000 Digger frogs for 5k KK repudieates k DD sold for 8k DF sold for 3k In calculating damages, do we treat as one k? then extra from dd would cut down damages on df. Or, is it two ks and the profit on the DD they dont have to account for, and they get damages for df. KK will say, one K, no damages cuz you made 1k more SD says, no, two ks , I have 2k in damages on the second k Specialty dolls will talk about 2 706 6, says seller not accountable to buyer for any profit made on any resale. Kk says, its arbitrary to treat as 2 ks. In reality its one. Steverson disagrees w author. Steverson likes SDs k. They had two ks, there was a reason for 2ks, dobie dogs and digger frogs are obvs 2 different items. Keating says KK has a better argument bc the substance of the deal was one deal and substance should control (103) so for equitable considerations. 22.2a NOT a cash sale bc payment due a month after delivery. On the exam, you dont have to keep starting with 703, but Starting w703, failed to make a payment SEE TWEN SLIDES 709 So constructive condition not fulfilled bc goods not conforming, but has buyer accepted the goods? Yes So its time to pay and buyer has accepted, go to 2 and see if any of the 3 apply, she failed to make an effective rejection after reasonable opportunity to reject, and justifiable revocation (608) problem she doesnt satisfy either

part, she had no assumption bc she never talked to seller, and she noticed damage right away, so so acceptatnce was with discovery, so she cant justifiabley revoke He still breached the warranty, he still gave nonconforming goods, so she has to pay the price but she can make claim for breach of warranty, and then can subtract those damages from the KP owed, 2-717. In order to do that, she has to go through with a claim for breach of warranty. See northam case on 358, burdens of proof. Keep in mind that bc buyer is setting up breach of warranty as offset, buyer will have burden of proof on breach of warranty Keep in mind, if in 709, and seller argues conforming goods were delivered so price is owed, burden of proof is on seller to prove goods are conforming (here he is using acceptance, not delivery of conforming goods, so thats why buyer has burden) burden depends on who has to show the elements to prove their claim/damages. 22.2b should mel be able to recover from Kathy in an action for price? No its a wrongful rejection, but its an effective rejection. So , he can get damages, but NOT an action for the price. Seller gets goods back. Mel can only recover price if (709) See slide; Mel has none, so no action for price An effective but wrongful rejection will preclude an action for price unless seller can get into the exceptions. So what are sellers options? (slide) 22.2c same as above only she calls 2 weeks later, not immediately. She accepted, so this is a wrongful revocation (not rejection) because its 2 weeks after she accepted the item So, can he recover? See slides Acceptance and action for the price No action for price under 709(1) if buyer:

Wrongfully but effectively rejected Rightfully and effectively rejected Justifiably revoked acceptance. Hierarchy of damages 2-706 Actual Resale 2-708(1) hypothetical resale 2-709 price because of inability to mitigate 2-708 2 lost profit- resale is not a complete mitigation of damages mitigation is built in to the structure of the damages provisions 22.4b 2-703 repudiatiion, resale 2-706 cant do 706 cuz no notice, so has to go to 2-708 UKP MP @ time and place of tender So, UKP is 50,000 MP is 45,000 (DOES NOT MATTER WHAT HIS RESALE WAS) So 5,000 is the difference Incidental expenses, cost of feed for 6 weeks= 600 (care and custody of goods after buyers breach) BUT- if youre doing hypothetical resale at time and place of tender, and if youre doing time and place of tender, then you wouldnt have any feed costs because were measuring at 6/1 what do we think of this argument? Well, 2-710 says inceientals are commercially reasonable, so youd look at the industry, so he probably WOULD get the 1 months, bc incidental refers to 2-710 so you argue its commercially reasonable. Keating disagrees with us, he says you measure at time of tender, but steverson says, then youd never get incidentals, and they SAID referring back to 710, they did not say incidental damages at the time and place of tender. So damages are 5600.

Under 706, he wouldve gotten 10,600, so those prerequisites are VERY important!!!

22.3 Shoe Works Make sure you KNOW market price at TIME AND PLACE OF TENDER, and know WHATS THE DELIVERY TERM to know when tender happens, because shes gonna give you a bunch of different market prices. 2-703- wrongfully rejected didnt give notice (even tho they picked them up , that was AFTER they sold, statute says notice of INTENTION to resale) so, cant use 706 bc no notice, cant use 709 cause we sold em, so we go with 708 2-708(1) tender occurred when seller gave goods to carrier, so $6700. So plug that into formula, 7500-6700+0 -0= $800 (so, if it had been seller who had to pay shipping, and they didnt ship, so they didnt pay, youd subtract that under expenses saved) 22.4a now, ben, no notice, sells cattle for 49k. same cattle costs. 703- repudiates 2-708 UKP is 50k-MP is 45k Still has 600 So its the same as above in b). 5,600 damages buyer says, noooo, I want them under 706, which would give him $1,600 in damages. (note, rememeber, there is no PROFIT here, so no 706-6)

Can buyer do that? Buyer says, notice is to protect me. I waive lack of notice. So were in 706. Can seller say, no, I can choose, and were in 708

The code is written so seller can freely elect at their option, their best choice. White and summers said, thats how the code is set up, its to allow the loss value seller to get into 2-7082. But, if allowing a seller to elect 2 8=7081 runds afoul of the wholeputting them back thing, In reality, buyer will have a hard time proving that they resold for more,and they have burden of proof, so seller essentially can freely elect GET THIS PODCAST, FF to the last 10 minutes

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22.4c comment 5- look at factors to decide if 1.5 months was a commercially reasonable time, nature of goods, condition of markets (firwood case), why did it take that time? As well as other circumstances. If reasonable, then 2-706 SEE TWEN SLIDE if not reasonable, then 2-708(1) SEE TWEN SLIDE (question mark is bc of the time of tender issue discussed last class) 22.5 is the 20K incentive consequential or incidental damages? Seller cant get consequential damages under UCC, look at 2-703, 2-706, 2-708, 2-709 (all 3 talk about incidentals) 1-305 says, no consequential damages except as specifically provided in the ucc or in the law its not specifically provided in any of those sections, therefore no consequential damagaes. Seller can get Incidental damages according to 2-710 usually just expenses, but some courts use otherwise resulting from the breach language to expand and include some expenses that would otherwise be consequential. White and summers think you should get consequential in the proper case Sellers Damages LiV+OL-CA-LA Loss in value plus other loss minus cost avoided minus loss avoided YOU DONT NEED THIS IF THE SPECIFIC FORMULAS MAKE SENSE, its just if that universal formula makes sense you can use it. There are TWEN SLIDES if you want to look LiV [expected value (EV) under the k minus the value actually received under the K (RV)]

Expectd value under the k is expected profit plus reimbursement for any costs incurred in making or acquiring the good to be sold. KP(EV)-any payments made by buyer (RV) Unpaid KP or UKP +other losses suffered bc of breach incidental damages CA (passive mitigation ) is expenses saved LA (loss avoided) is active mitigation 2-704 Remember a lost profit seller can never completely mitigate the loss o So thats when you use 2-708(2) o Sellers car Buyer 1, K to purchase, Breach Sells to buyer 2 But what if you had 2 cars? o Now you havent recouped your lost profit on the first car, because you still have more cars that you could sell, that is not a substitute sale/mitigation. o Lost volume seller definition on page 399. 2 parts to it. In some jurisdictions, they only go to 2 sales, others go by the def in the book, others use ucc, any fixed priced good. WE ARE RESPONSIBLE FOR the test on page 399, the two part test. Remember that 2-708 (1) is the GATE to 2-708(2), how to prove inadequate? Prove you are a lost profit seller, one of the 3 kinds in the book. But, you dont add the damages from 2 to 1, its one or the other, you just have to go through 1 first. Sometimes you have to do 706, so sometimes you have to get from 7-06 to 708 (1) to get into (2). GET TODAYS PODCAST

Steverson says author makes mistake, says under 708(2) you only use profit plus incidental, you ignore cost reasonably incurred and due credit for payments or proceeds, technically you dont ignore it, its just with a lost volume seller, the cost reasonably incurred is cancelled out by proceeds of resale, so you are mitigating the loss of the cost but not the profit. You do NOT ignore due credit for payments, you have to take into account money you received from your buyer. 24.1a 2-703 leads to 2-706, then 2-708 1 (this does NOT put a lost volume seller in the position theyd have been in, go to 2-708 2) UKP MP-ES+I REMEMBER PROFIT IS GROSS PROFIT NOT NET PROFIT So KP direct costs, we dont subtract overhead or fixed costs So not net profit, note 708-2 says profit including reasonable overhead 8k is kp, 7k is mp, so under 708 1, you get 1000 in damages LOOK AT THE SLIDE FOR THE RIGHT FORMULA

So its KP Anticipated direct costs payments plus I So 8000-4000=4000-0=0 24.1b the only thing thats different is they have expenses saved, the $450, so subtract that and you get 8000-4450 (anticipated direct costs). (so its not technically ES, it adds to direct costs) remember adc= variable costs so damages are 3550 24.1c now st is not a lost volume seller, because they couldnt keep up with demands. So now we use UKP MP-ES+I (here we dont have the

information about mp, shed give it on the exam) realistically, in real life mp would probably go up and thered be no damages, but if it didnt youd do 708(1) 24.1d same as a NET PROFIT IS IRRELEVANT!!!!!!!!!!!!!!!!IGNORE IT!!!!!!!!!if variable costs remained the same, ignore! 24.1e UKP-MP-ES+1 damages are 1000, you wouldnt want to use (2) (this is 708(1), you arent a lost profit seller because kp is less than ADC, you didnt lose a profit, so use (1) 24.1g no evidence they cant keep up with demand, but we have a big impact of breach, but nothing indicates they are no longer a lost volume seller, so you can still use 708 2, 800,000-445,000-0+0=355,000 damages (include 45k saved to not pay the guy in adc) RUN 708-1 calc FIRST, then explain why that isnt adequate, explin that they are still al ost profit seller, then do 708 2

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Problem 24.3 Reasonably ceasing production is passive mitigation Problem tells us it was reasonable, dont guess, just do what it says Sale would not have happened but for the breach, so its a substitute sale KP 500K ADC 240K materials, 70K labor Expenditures at point of repudiation, 110K in mats 30k labor, WPIs mitigation efforst, see twen 2-703, , leads to 2-704 1 b and 2 they may resell, bc reasonable commercial judgment, so that leads us to 2706, you could also use 2-708 2 bc specially manu so (1) would be insufficient but, under 706, see TWEN slide ES is the money they would have spend in ADC to complete, take original ADC and subtract So damages are 140k You can use either 706 or 708 2, but you have to say you are doing it because you can freely elect , but here you arent doing it as a lost volume seller so be careful with your reasoning. 24.4 see slides for numbers here we are looking at commercially reasonable so if she chooses to sell scrap, whats damages? Depends on whether it was commercially reasonable to scrap at that point. Look at franks nursery v. young, burden is on the buyer to show that it was commercially UNREASONABLE. Mitigation is an affirmative defense, so if its a close call the court is unlikely to say it is commercially unreasonable. Marginal cost of completion, less than or equal to RFP sv, then yes seller should complete (thats the book forumul) but remember that there is only a 75% chance bill would buy, so we have to trust her commercial judgment. But if steverson gives you a 100% chance, then use the formula.

See slides for math 24.4b what if she finishes and resells to bill again can use either 706 or 708 2, see slides. Technically theya rent a lost profit seller, though. Remmeber that, here you really should go under 706 bc of that, but you get the same number either way. On slide she put the 5k as incidental (delivery to bill) if you make resale price minus the delivery thats ok, but she says just make it totally clear to her what youre doing. 24.4c If bill doesnt buy- as long as commercially reasonable to finish (and it probably was) then she can go for action for the price under 709 BUYERS REMEDIES: Start with 2-711. Return of any protion of purchase price paid, plus other cataloged remedies. So basically buyer gets credit for payments made 712- cover 713 is hypothetical cover. Pay attention to where and when they measure market price, its different than with seller. 714- buyer has accepted the goods and is suing for breach of warranty 715- buyers incidental and consequential damages. The possible results of breach Detrimental effects, ie, losses or costs suffered Loss in value Other loss (this is usually the main loss for buyer, cover, etc) loss in value is usually cancelled by loss avoided, because you substutitue ie cover Breach of warranty is about the only place youll see loss in value for buyer (see slide) Vncg value nonconforming good Vga value goods accepted

Most buyers suffer the cover/hypothetical cover loss. Usually exclusive, because if you covered, you usually cancelled out your loss in value 712 and 713 dont have liv or la, because they cancel out. If you dont canecel it out you can get it under consequential values Hypothetical One: KP is 100 MP of juice is 70 MP of navel is 110 2-714, B has accepted B has given notice VCG at time and place acceptance is the 110, bc you want them to get the good deal So $110-$70=$40 Could add incidental or consequential if applicable VCG-VGA+I/C=$40 2-717, $100-$40=$60, so youd pay $60, you owed the $100, but you offset what you owed by the damages. (2-607, once you accept you owe kp, then offset w/notice) HYPO Two: Call of the q is damages, so you plug in .45 When buyer enters a bad deal, they get the same deal as a good deal, you DONT use K price, you use market price. You can tell her that buyer might choose NOT to accept nonconforming goods, demand cure, and if not cured, go buy the cheaper oranges on the market. They could reject those juice oranges, and give chance to cure. (508 and all that, 711), so like, what would you advise buyer, talk about this stuff. If

they dont cure you can buy at .45 a lb. if you accept, damages are based on the .45 market price. 25.3 just accept she can produce convincing evidence, thats what it says. Start with 711 Go to 714 because no cover options So the racket is worth 1000, so look at consequential damages 2-715 a 1) loss 2) resulting from the requirements that 3)seller knew or had reason to know Hadley v. Baxendale foreseeability requirement) 4.) Mitigation requirement- general causation (but for), not proximate causation argue both sides, dont set up a straw person. Eg, she was winning, then she lost, but is that the racquet or her head? did he know/have reason to know? He knew she was up and coming and would use racquet in tourney, but is that enough to say seller knew or had reason to know of her needs? Foreseeability has to be pretty specific, why does he have to have specific knowledge? Because if he expected it, then wed expect him to have a chance to protect himself. Did he have enough to know hed be on the hook for 60K? you can go either way, but whatever way you go, make it in light of the policy behind baxendale about his ability to protect himself, get insurance, charge more, whatever. What about mitigation? Should she have had more racquets? Was borrowing another racquet attempted mitigation? Usually mitigation is post breach, and here after theb reach she seems to have done everything she could have done at the time, so from a policy perspective, should we say mitigation should also be pre-breach?

Youd make trade arguments at foreseeability (ie, he would have no reason to foresee, because most people have more than one racquet, etc.)

25.4 breach under 711 cover 712 good faith reasonable purchase issue, reasonable purchase? Look at comment 2 If she has no choice but to buy the more extravagant machine, then she gets to use it for cover (even if it was WAY more money) if she did her best to get a comparable machine, but all she could find was a way better one. (what if it was way more than the potential loss? Ask in email. Like, what if her potential lost profits from not having something at the show was 12k, but the machine was 200K?) 25.4 (2) not reasonable, because she could have bought the exact same machine so buyer would have to use 713 for cover, so theyd get the $5000 difference between the KP and MP. RBPP +MP-KP+I/C-ES So here 0+40K-35K+0-0=5k Reasonable is in the eye of the seller with respect to whether it was a reasonable mitigation. Remember breaching seller has to show that it wasntr easonable 25.4(3) isnt it just 7K? isnt resale irrelevant? 0+42k-35k+0-0=7K common law? What do you do with the superior added value if something is partly superior?

Cost to complete minus any superior value added, so if you decide that you have to take into account that gain, you would say cover minus superior or additional value and subtract it out) keating subtracts it as an expense saved but htat makes no sense. Remember we are trying to put buyer into the position they would have been in, so buyer makes more, so theyd be double dipping if they got full damages, because they made 6k on the sale, and if they got 7k, thatd be 13k, so if you deduct the 3k gain, youd get 4k damages. Which gives you 10k total. 27.1 supply k/resale k SEE TWEN So position TI expected to be in was a profit of 18K Text par and Allied case (3 requirements to worry about allied, from KGM case) 713 takes into account damages you have to pay to forward buyer, that is the allied dispute, they couldnt show they would be liable for forward damages, That was under 712, here they WILL be liable So, 2-713 KNOW DELIVERY TERMS. SHES NOT GONNA BE NICE. MULTIPLE TIMES/PLACE/PRICES SEE SLIDE We use Tulsa, but you dont do two calculations for each k.

8/24/2012 7:49:00 PM 27.1 Sale of Asphalt note, a possible reading of 713 that is INCORRECT SEE TWEN SLIDE Reason you dont approach it that way, dont add in lost profit is because 713 already takes those into account. If you cover, then you dont have forward damages, because they are already in so it would be double recovery if you plugged them in. 27.1b use allied factors did seller know about forward/resale? Buyer cannot show that will be liable to forward buyer (in order for seller to show that buyer CANNOT show, would they need to show SOL passed or written from forward buyer that they will not?) Good faith ends up with 18k What about KGM case? Talks about trouble with allied reasoning Why are white and summers persuaded by allieds reasoning? Remember redding pipe casecost to complete disproportionate to damages claim if your attempt to mitigate is substantially higher than your lost profit (liV) then youre not getting that, you get your lost profit. Texpar, 408K damages Be able to talk about allied, talk about texpar, white & summers, come out on what side you think makes the most sense formalist texpar, legal realist, allied. If not sure, pick one. (see slide) 27.1C can buyer elect remedy like seller? Nope

If you cover, you are stuck with 712. If you cover, as a buyer, YOU MAY NOT use 713. If you have NOT covered, you can elect to choose between the two. 27.1d Buyer could have mitigated, but didnt. Can we use allied reasoning? Youre counter to 1-305, youre getting a windfall/overcompensation. GET TODAYS PODCAST Lots of considerationCertainty in applying 713, and disincentive to breach.But that only works if theres an alternate market that has a lower price. (or higher price for resale) 27.1e Only thing changed is its not FOB buyers, subtract out expense saved. No incidentals, TI has no delivery cost. 27.2 Keep track of supply K, resale K and cover K. 6/1 supply K LCI Seller, sells to GA 3k tons at 60K, fob buyers place. (So Seller pays delivery. 6/2 resale k GA sells to FNS 3k tons 81,000K kp predicted profit of 21k FOB Sellers (FNS pays deliver) Delay by LCI GA covers 3rd party seller sells to GA(for FNS k)

22/ton 66K FOB buyers (3rd party seller pays delivery) Then LCI delivers, but late GA sells to another buyer 23/ton 69k FOB seller(3rd party buyer pays delivery) How to calculate damages? GA wants to say, 2-712 cp 66k 60k kp + I/C 0- ES O= 6K Ignore the second new resale k. You breached, I had to cover, period. I expected to make 21 K and I only made 15K. What about 711 (3) and 706 (6)?? Thats LCIs argument. GA says, they are separate contracts. But how do you argue the language in 711 (3) isnt applicable? You say, that I am not a rightfully rejecting or justifiably revoking buyer, I accepted the goods. Fertigo(sp) case majority agreed with GA, dissent agreed with LCI and said you have to account for the 9k. SPECIAL REMEDIES Ignore monetary damages part of case Just focus on general idea of specific performance under 716 and how it broadens the specific performance remedy under common law, pages 455 and 456 and vander case to the extent it talks about uniqueness, and then the sugar company damages case, understanding the effect that an actual

harm that is significantly less than liquidated damages, does that indicate that liquidated damages was a penalty? Rmeember in case though they didin Ts ay it was a penalty it was because damages were difficult to calculate even at the end, so even though it was disporoportionate, thats why. 28.1 718 (2) Under b, seller can keep $500, 4500 has to go back to buyer 28.1b See slide Neary- you take the 20% or 500, here, 500, compare to actual damages, take the greater, which is 3k, so she gets her 3k, and buyer gets back 2k. L28.1c Seller keeps it, buyer gets no restitution, lesser of 500 or 20% of k price, but you dont get to say oh I didnt get my full 500, you just get the $100. 28.1d keep 100, but if you want your other 2900, you arent getting it from 718, you want to go to your sellers damages here, but you have to bring suit and sue for damages. 28.1e 718, assuming LD are reasonable, it would be D minus LD, so she keeps 3k. Dont worry about neary v literal bc they lead to the same result. 28.1f LD of 2500, damages of 3k Cant get both, you get LD unless theres some reason to throw them out, so she gets 2500 not 3k. LOOK AT TWEN FOR THE REST

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