outline sales ucc_article2-1.doc

8/22/2019 Outline Sales UCC_Article2-1.doc

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History of UCC is important for two reasons:

1. UCC is state law: it bubbles up from the bottom, it isnt top down. But that means that ifstates dont like certain provisions they can pass non-uniform versions.

. Because UCC is state law, it can be trumped by contrary federal law: federal bankruptcylaw, federal law re!ulatin! farmers. etc.

SCOPE OF ARTICLE 2

2-12! 2-1"! 2-1#

"C#$%1. Common law of contracts still applies, unlesstrumped by &rticle . &rticle applies to transactions in !oods

a. "cope can be defined by s$%&e't matterand by nat$reof transactioni. 'oods ( "omethin! tan!ible and movable at time of identification

1. )uture !oods ( !oods which are not both e*istin! + identified

. 'oods does #/ includea. 0oney when it is the medium of payment2b. 3nvestment securitiesc. 4eal estated. "ervicese. 3nterest in realty leases, bailments2f. 3ntan!ibles copyri!ht, contract ri!hts2

5. 'oods does include:a. Unborn youn! of animalsb. 'rowin! cropsc. 3dentified thin!s attached to realty which will be severed

by the seller2d. "pecially manufactured !oodsii. /ransaction ( 6 for sale as opposed to !ifts, leases, or bailments2,

includes 6 for present sale of !oods + 6 for sale of !oods at later timeb. 'oods to be "evered from 4eality

i. 6 for sale of minera(s or t)e (i*ee.!., oil or !as2 or a str$'t$re or itsmateria(sis covered by &rticle if they are severed by the seller

ii. 6 for sale of !rowin! crops, timber, or other thin!s attached to land andcapable of severance without material harm is covered by &rticle re!ardless of who severs

iii. )ocus on thepermanencyof the !ood and whois doin! the severin!c. "oftware 7 3nformation

i. Under scope of &rticle , computer pro!rams are not !oods1. 'oods under 4evised &rticle : 8oes not include information.

3nformation was not included in new &rticle because UC3/& hadbeen drafted to !overn information transactions, but UC3/& is soanti-consumer that only states adopted it. /hus, there is lar!elyno law !overnin! electronic information.

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. 3nformation: Under U%/& includes data, te*t, ima!es, sounds,codes, computer pro!rams, software, databases, etc.

ii. "mart !oods1. 9hen transaction includes !oods and information. Courts determine whether covered by &rticle :

a. &utomobile: cars containin! computer pro!rams ( '##8b. &rchitectural plans on disk ( #/ a !ood

/wo /ests Used in ybrid Circumstances:1. Pre+ominant Fa'toror Pre+ominant ,at$re2 /est. a&ority R$(e.

a. Characteri;e the transaction in an all-or-nothin! conte*t based on the primarythrust of the transaction.

b. /his places you back on the common law of contracts which doesnt have asmany direct and obvious answers as the UCCease + 8is!uised )inancin! &!reement: ? 1-21#31. Tr$e Lease

'overned by &rticle & of the UCC/he test is based on economic realities. /he lessor must from the be!innin! intend

to retain a meanin!ful economic reversionary interest/here will be somethin! left at the end of the leasehold that still has value, and that

will revert back to the lessor%.!., apartment rental: you pay fair market value for possession and use, and at the

end of the lease, you leave and the premises revert to the lessor. /he lessorlandlord2 never !ives up ownership interest, and if you default on the lease, thelandlord still owns it. 3t does not matter if you file bankruptcy or have creditorscome after you@ the apartment is always ownedby landlord.

2. 4is5$ise+ Finan'e A5reement 6Fa*e Lease73

a. 'overned by &rticle A not an &rt. transaction2b. 3s actually 12 sale of !oods with 2 the !rantin! of a security interest in those

!oodsc. &!reement appears to convey possession and use to the lessee for the real

economic lifetimeof the !oodd. /he lessee !ets to possess and use the !ood until its value is e*hausted

. Test Un+er 1-21#3

a. Can the lessee terminate the lease with no penalty 3f no then there e*ists awarnin! fla! of a possible security interest. owever, you must see if there isat least one of the other factors in order to classify it as security interest.


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b. #ther factorsi. 3s the remainin! term of the lease eDual to the !oods economic life

ii. 3s the lessee obli!ated to renew the leaseiii. 8oes the lessee have the optionto renew the lease for the remainin!

economic life of the !ood for nominal or no2 additional consideration

ERCHA,T RULES

0erchant 4ules see 2-1821. Bein! a merchant has nothingto do with whether the transaction comes within the scope of

&rticle . &ll transactions in !oods are covered e*cept for those specifically e*cluded by&rticle or federal law2.

. 9hether or not one is a merchant depends on the issuein dispute, and that, in turn, dictateswhich of the tests for merchant status are used. 9hether or not one is a merchant is aflexible standardand afunctional test.

a. /oo+s-%ase+ approa'): Eou are a merchant if you deal in !oods of the kind,

and if you hold yourself out as a merchant in !oods of the kind even if you dontactually have any e*perience in the area2.i. &pplies to:

1. 2-21"tatute of )rauds. 2-2")irm #ffers5. 2-2#Confirmatory 0emoranda battle of the forms2F. 2-290odifications

b. $siness pra'ti'es +efinition: Eou maintain a place of business such that youshould befamiliar with and it is fair to char!e you with knowled!e of normalbusiness practices.

i. &pplies to:1. 2-183mplied warranty of merchantability. 2-824etention of possession5. 2-8%ntrustin! of possession

'. i;e+ %a5 eit)er or %ot) of t)e a%o0e3

i. &pplies to:1. 2-1Commercially reasonable standards of fair dealin!. 2-2#! 2-


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c. 6 is not indefinite simply because parties leave one or more terms open, so lon!as parties inten+e+ to ma*e =ob=ectively manifested a mutual intent to bebound2 and there is a reasona%(y 'ertain %asis for 5i0in5 a reme+ymust knowenou!h about 6 to determine dama!es2.

d. 6 cannot leave open the sub=ect matter or Duantity terms.

. #ffer + &cceptancea. #ffer ( ob=ective manifestation of present intent to be boundb. #ffer invites acceptance by any mannerand by any medium reasonableunder the

circumstances.i. #fferor must unambi!uously indicate that a specific manner or medium is

reDuiredii. "tatin! a preference is not sufficient

c. #rder or offer to buy !oods for shipment invites acceptance by prompt promise toship, or by prompt shipment of !oods re!ardless of whether those !oods areconformin! or non-conformin!2.

i. /he shipment of non-conformin! !oods is #/ acceptance if seller

notifies buyer that shipment is only an accommodationto buyer.ii. /hat becomes a counter-offer, and the ori!inal offeror can either accept orre=ect.

d. Be!innin! of performance may act as acceptance, but if offeror is not notified ofacceptance within reasonable time, offeror may treat offer as e*pired.

5. )irm #ffers see 2-2"2a. &n offer %y a mer')antto buy or sell !oods in a si5ne+ writin5which !ives

assurances that it will be held open is not revocable for lack of consideration.b. "i!ned writin!: #ffer of assurance must be in writin!

i. 3ncludes authentication: look at circumstances to determine what isreasonable@ typically authentication should consist of at least initialin! theterm of assurance

ii. and-written note on writers letterhead, or an authori;ed tele!ram mayalso count.

c. 3f there is no si!ned writin!, then it reverts to common law rules, and someconsideration is reDuired to hold the offer open.

d. Time (imit: #ffer cannot be open for more than three months if consideration is!iven, parties can make whatever time they want2. 3f no time is stated, it will beassumed to be a reasonable time not e*ceedin! 5 months.

e. Form s$pp(ie+ %y offeree: offeror must separately si!n the term of assurancef. er')ant: Business practice test: 3f the offer is made by a non-merchant, then

consideration is reDuiredF. 0odification see 2-292

a. 8oes not reDuire additional considerationb. &ny modification must be in 5oo+ fait)c. 0odifications to 6s sub=ect to statute of frauds must also be in writin!d. 0odification must be accepted

THE ATTLE OF THE FORS

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/he Battle of the )orms &dditional /erms in &cceptance or Confirmation2: ? 2-2#1. /his section !ets rid of the common law mirror-ima!e rule and performs functions related

to both formationand interpretation.a. 3s 6 formed under subsection 12b. 3f yes then interpret usin! subsection 2.

c. 3f no then subsection 52 may be used for both formation + interpretation.. )ormationa. >ook forpre-printed formsbein! e*chan!ed by businesses.

i. )reDuently seen withpurchase ordersand acknowledgment of receiptAOR2 forms.

ii. UCC acknowled!es the fine print of these forms is usually i!nored, andbusiness people simply behave as thou!h there is a 6

b. >ook for an oral 6 followed by a written confirmation that does not matchtheoral 6.

5. 3nterpretation:a. Between merchants, additional terms are added to 6 U>%""

i. #ffer e*pressly limits acceptance to terms of offer, #4ii. /erms materially alter 6 create unreasonable surprise2, #41. Clauses materially alterin! 6:

a. e!atin! implied warranties that would normally applyb. 4eDuirin! !uaranty of AGH or 1GGH of deliveriesc. 9here the usa!e of trade allows !reater Duantity leewayd. 4eservin! seller the power to cancel upon buyers failure to

meet any invoice when duee. 4eDuirin! that complaints be made in time materially

shorter than customary or reasonable. Clauses not materially alterin! 6:

a. )i*in! reasonable time for complaintsb. $rovidin! for interest on overdue invoicesc. >imitin! ri!ht of re=ection for defects that fall within

customary trade tolerancesb. Between non-merchants, additional terms become part of 6 #>E 3) there is

a!reement to the new terms.c. otification of ob=ection to additional terms is !iven within reasonable time after

notice of them is receivedd. 9here there is a +ire't 'ontra+i'tionin terms, those are considered different

terms, rather than additionalterms.e. =no'* O$t 4o'trine: 9hen the writin!s do not establish 6, but parties behave

as thou!h 6 was formed, the terms of 6 are those on which the writin!s of theparties a!ree. /he differin! terms are knocked out and filled in with !ap-fillers,course of performance, course of dealin!, or trade usa!e.

F. 9hen a plaintiff is not a merchant, additional or different terms contained in standardterms do #/ become part of the 6 unless plaintiff e*pressly a!reed to them.

STATUTE OF FRAU4S

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"tatute of )raudssee 2-2121. $revents enforcement of oral 6s

a. /he absence of a writin! has #/3' to do with whether a contract e*istsb. /he "tatute of )rauds "#)2 is an additional reDuirement imposed on 6s that

may already be formed for reasons that have nothin! to do with formation.

c. /his falls under the headin! of )ormalities rather than formation. ote that2-21constantly refers to contract, demonstratin! the presumption that 6already e*ists.

d. #fficial Comment F states that failure to comply with "#) does not render Kvoid.

. 6 must involve sale of !oods for price of JIGG or more the valueof the !ood is irrelevant2a. 4evised &rticle reDuires sale of !ood for price of JI,GGG or more

/hree 4eDuirements for "#)1. >ritin5: any intentional reduction to tan!ible form sufficient to indicate that 6 for sale of

!oods has been made

a. Under U%/& Uniform %lectronic /ransactions &ct2, which has been passed byover half the states includin! 3ndiana, the idea of a record is substituted forwritin!.

. Si5ne+ %y t)e part a5ainst w)om it is to %e $se+:a. complete si!nature is not reDuired@ can be any symbol e*ecuted or adopted wit)

t)e present intentto authenticate a writin! includes initials, thumbprint, stamp,etc.2

b. preprinted letterhead can be adopted as a si!nature for that writin!c. Use 2-2113when you have a writin! si!ned by the 6 breacher

. ?$antity term

a. words can suffice@ e.!., sayin! the car indicates one car.b. no other terms are reDuired, and can even be misstatedc. 6 only enforceable to the e*tent of the Duantity indicated by the writin!

&pplications of "#)1. 9ritten Confirmation: 3f written confirmation of 6 is received, 6 is enforceable a!ainst

re'ei0in5 party

a. between merchants both parties must be merchants2b. received within a reasonable timec. sufficient a!ainst the sender si!ned writin! includin! price term2d. receivin! party had reason to know of its contentse. receivin! party does not provide written notice of ob=ection within 1G daysf. %ffect: 4emoves "#) as a defense. "endin! party still must prove that an oral

a!reement e*isted.. "pecially 0anufactured 'oods: 6 not meetin! "#) is still enforceable

a. 9hen !oods are specially manufactured for buyerb. 'oods are not suitable for sale to others in the ordinary course of sellers businessc. "eller before repudiation is received has made substantial be!innin! of their

manufacture or commitments5. #ther times 6 enforceable even thou!h doesnt meet "#)

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a. 4eceipt + acceptance of !oods or paymentb. $arty admits in court 6 was made

TRA4E USA/E! COURSE OF 4EALI,/! @ COURSE OF PERFORA,CE

"ee ?? 1-1223%3, 1-2", and 2-2.

? 1-213defines a!reement as not bein! =ust the four corners of the document, but asencompassin! the bar!ain of the parties in fact. /his approach takes account of what the partiesdo, what they say, and how they act.

ierarchy of 3nterpretation1. %*press terms. Course of performance: seDuence of conduct between parties for that particular transaction5. Course of dealin!: seDuence of conduct between the parties for previous transactionsF. /rade usa!e: practice or method havin! such re!ularity of observance so as to =ustify an

e*pectation that it will be observed with respect to the transaction in Duestion

PAROL EBI4E,CE RULE

T)e ain I+ea: $urpose of the $arol %vidence 4ule $%42 is to protect the investment thatsome contractin! parties make when they take the time and trouble to reduce their contract to afinal version.

$%4 acts as a barrier to e*trinsic evidence material outside the writin!2 of terms. $rohibits =uryfrom hearin! evidence of terms that did not appear in the final writin!.

8oes $%4 apply )our /hin!s /hat 0ust Be $resent to /ri!!er the $%4:1. Re'or+$%4 does not apply to oral a!reements2. Inte5rate+in whole or in part2: 9hether a record is inte!rated is a Duestion of intent. 8id

the parties intendfor the record to be the final e*pression of their a!reement5. Term e0i+en'ethat were tryin! to use to add to, e*plain, or contradictF. Ri5)t timin5: /he e*traneous stuff must crop up in the dan!er ;one from a

chronolo!ical perspective. 3t must come from a timeprior to or contemporaneous withtheprocess of finali;in! and e*ecutin! that record.

8oes $%4 keep out the e*trinsic evidence1. /o e*plain or supplement: %vidence of course of performance, course of dealin!, or trade

usa!e may be shown to e*plain or supplement any termsa. /hese are thou!ht to be silent terms of the a!reementb. &ssume these were taken for !ranted when document was written

. Consistent additional terms: %vidence of consistent additional terms may be shownU>%"" court finds that parties intended the writin! to be complete and e*clusivea!reement of terms

a. T)e Rea( Test: /erms are so material that they surely would have been includedin the writin! if they had actually be a!reed upon

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i. /est of si!nificant materialityii. Burden of proof is on party wantin! to keep evidence out

iii. 9ritin! must be inte!rated and the e*clusive a!reementb. er5er C(a$se: $resence of a mer!er clause is not conclusive, but is an element

court considers in determinin! whether the writin! is e*clusive.

/AP FILLERS

'ap )iller "ections:1. Tra+e Usa5e! Co$rse of Performan'e! Co$rse of 4ea(in5: /hese are considered silent

terms of the a!reement and can always be used to interpret the 6 unless specificallye*cluded by 6s terms2

. 2-1: 'eneral #bli!ationsa. "eller must transfer and deliver conformin! !oodsb. Buyer must accept and pay accordin! to 6

5. 2-2: Unconscionability

a. 3f a court finds a contract or a clause to be unconscionable at the time it wasentered into, it may refuse to enforce the contract, enforce the contract without theunconscionable clause, or limit the application of the unconscionable clause

b. Test: &re the clauses involved so one-sided as to be unconscionable under thecircumstances e*istin! at the time of the makingof the contract

F. 2-8: 0ode of $aymenta. 3f the price is paya%(e in 5oo+s, in whole or in part, each party is a seller of the

!oods he transfers, and is a buyer of the !oods he receivesb. 3f price is paya%(e in an interest in rea(ty or in ser0i'es, the transfer of !oods is

an &rticle transaction, but the transfer of the realty interest or services is not.I. 2-": $rice

a. 3f price is to be set by one party, it must be set in good faith.b. 3f price term is left open, the price is a reasonable price at the time of delivery.

K. 2-ot or "everal >ots

a. Unless otherwise a!reed, assumesingle lotdeliveryMb. M unless circumstances indicate the parties clearly intended otherwisec. $artial delivery may not be sub=ect to re=ection for defect in Duantity only, if no

repudiation or default is indicated re!ardin! the remainin! !oods to be delivered.N. 2-: $lace for 8elivery

a. Unless otherwise a!reed, se((ers p(a'e of %$sinessDresi+en'eis place of deliveryA. 2-9: /ime for $erformances

a. &ll actions taken under a 6 must be taken within a reasonable time if no timehas been a!reed upon

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b. /ime for payment is related to time for delivery, unless otherwise a!reedc. "urprise is to be avoided, !ood faith =ud!ment is to be protectedd. 4e: early offers of or demands for delivery, see Comment F

1G. 2-1: /ime for $ayment7"hippin! under 4eservationa. $ayment due at time + place where buyer receives !oods or documents of title2

b. "hippin! under reservation, see b211. 2-11: #ptions for &ssortment, "hippin! &rran!ementsa. #ptions for assortment are left to buyers unless otherwise a!reed2b. "pecifications or arran!ements for shippin! are left to sellers unless otherwise

a!reed2

U,CO,SCIO,AILIT

9hat is Unconscionable1. & provision in a consumer mass-market 6 reDuirin! mandatory arbitration is not

unconscionable, but it should be easy to find and easy to understand.

. & provision in a transaction between two lar!e companies providin! for mandatoryarbitration is notunconscionable.5. /he sale of a car for a price 5GGH above the market price to a youn! man from 6uwait who

never owned or bou!ht a car previously maybe unconscionableARRA,T OF TITLE

"ee ? 2-8: $ower to /ransfer

? 2-12: 9arranty of /itle1. 3n every sale, seller promises that

a. 'ood title is conveyed, &8b. 'oods are delivered free from any security interest7lien7encumbrance of which the

buyer has no actual knowled!e.. "eller who is a merchantin !oods of that kind warrants that has duty to see that no claim of

patent or trademark infrin!ement by a third party mars the buyers title. /his is no lon!ertrue if a buyer orders !oods prepared or assembled to his own specifications


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K. P$r')aser: "omeone who takes by sale, discount, ne!otiation, mort!a!e, pled!e, lien,security interest, re-issue, !ift, or other voluntary transaction. Oote that a purchaserincludes situations other than outri!ht sales, but some value must be !iven for the item.P

L. $ower to /ransfera. Boi+ Tit(e: Buyer acDuires all title which seller had power to transfer. 3f seller

does not have !ood title, buyer has no title, even if buyer was a bona fidepurchaser.b. Boi+a%(e Tit(e: $erson with voidable title can transfer better title than he has to a

!ood faith purchaser.i. $erson receives voidable title throu!h

1. 8eceivin! seller as to identity of purchaser. $rocurin! !oods throu!h bad check5. &!reein! the transaction is a cash saleF. $rocurin! delivery throu!h fraud

ii. $erson can then sell !oods to a !ood faith purchaser, and that purchaserwould have !ood title

iii. $olicy: "eller is a!reein! to enter into the transaction, and therefore, sellerbears risk of loss.N. %ntrustment: %ntrustin! the possession of !oods to a merchant who deals in !oods of the

kind !ives the merchant power to transfer all ri!hts of the entruster to a !ood faith buyer inthe ordinary course of business.

>ARRA,TIES OF ?UALIT

3ncludes1. %*press 9arranties ? 2-1

a. Can be !iven by anyone@ does not have to be a merchanti. $resumed to arise in the sale of almost every !ood, because a 6 for sale is

usually for somethin! describable and described. "ee Comment F.ii. Clause !enerally disclaimin! all warranties, e*press or implied does not

waive these warranties owever, parties are free to make whateverbar!ain they wish, so lon! as it is done in !ood faith.

b. &ffirmation of fact or promise as opposed to puffery and opinions2 made byseller to buyer which relates to the !oods and becomes part of the basis of thebar!ain.

i. $uffery ( finest, prettiest, youll feel your best, this will make youmore attractive, it looks wonderful

ii. &ffirmations can arise from description of product written on label, doesnot have be said

iii. 8escription of the !oods, or a sample, or a model, that becomes part of thebasis of the bar!ain is an e*press warranty

c. /he timeof the affirmation of fact or description is not material. "ee Comment#. /he sole Duestion is whether the lan!ua!e or samples or models are fairly tobe re!arded as part of the contract. 3f the words, sample, or model forms part ofthe basis of the bar!ain, it is part of the e*press warranty, even if it appears at thetail-end of the bar!ain.

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. 3mplied 9arranty of 0erchantability ? 2-18a. &rises if the seller is a merchantwith respect to !oods of the kindb. 9arranty asserts that:

i. 'ood passes without ob=ection in the tradeii. 'ood is fit for the ordinary purpose for which such !oods are used

iii. )un!ible !oods will be of fair and avera!e Duality within the descriptioniv. 4un, with permitted variations, of even kind, Duality and Duantityv. &deDuately contained, packa!ed, and labeled

vi. Conforms to any promises or affirmations of fact made on the container,bo*, or label

c. "ee Comment 11: %*clusion or modification of this warranty is a matter ofthreatenin! surprise because it is so commonly taken for !ranted. "ee 2-1iability ? 2-1imitation of conseDuential dama!es forpersonal in=ury due to consumer !oods is prima facieunconscionable

. Commer'ia( in&$ry: ot prima facie unconscionable

Breach of 9arranty 8efenses1. ,oti'e: Buyer did not provide notice within a reasonable time of discoverin! defect. Pri0ity: 6 can only be enforced by parties who are in privity.

a. %*ception ( 6 created with clear intention of benefitin! a 5d party, see 2-1b. Horionta( Pri0ity:

i. &lternative & used by most states21. &ny natural person. 3n the family or household of the buyer, or a !uest in buyers house5. 3f it is reasonable to e*pect that such person may use, consume, or

be affected by the !oodsii. &lternative B

1. &ny natural person. 9ho may reasonably be e*pected to use, consume, or be affected

by the !oodsiii. &lternative C

1. &ny person. 9ho may reasonably be e*pected to use, consume, or be affected

by the !oods'. Berti'a( Pri0ity

i. &rticle is neutral on vertical privityii. 3ncorporates case law on whether the sellers warranties !iven to the

sellers buyer stay with the !ood when the buyer re-sells it

A/,USO, OSS >ARRA,T ACT

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4eDuirements1. Consumer product

a. ? 11states that the status of consumer product comes from the usual useof theproduct: any tan!ible personal propertyM which is normally used for personal,

family, or household purposes.i. Eou must e*amine the normaluse, rather than the actualuse. /hus, a)ord )ocus purchased and used by a business is still a consumer product,because it is normallyused for personal, family or household purposes,but a LFL Rumbo Ret purchased by Rohn /ravolta is nota consumer productbecause it is not normally used that way even thou!h he mi!ht use it assuch2.

b. ? 1defines a consumer as a buyer notfor the purposes of resale. /hus, 00does not cover an e*porter or a retailer buyin! products from a wholesaler.

c. /he way 00 defines consumer automatically rela*es privity reDuirements. 3fyou receive a transfer of a consumer product durin! a time while the 00

warranty protection e*ists, you !ain that protection even thou!h you werent theori!inal consumer.d. Sertical privity is also rela*ed under ? 1183which renders a supplier any

person en!a!ed inMmakin! a consumer product directly or indirectly available toconsumers.

. 4etail sale5. 9ritten warranty7service contract

4elationship to UCC1. 0a!nuson 0oss 002 supersedes the UCC because 00 is federal law whereas UCC is

state law. /hus, 00 displaces &rticle whenever they are inconsistent.. & document e.!., a >imited 9arranty for $roduct T2 may raise an alternative theory

distinct from &rticle .

9arranties under 0a!nuson 0oss1. )ull 9arranty:

a. /he 'ood ousekeepin! seal of approvalb. &lmost never !iven@ it is like an e*tra !uaranteec. 3f a supplier !ives a full 00 warranty, it should !ive e*tra remedial options to the

consumer, and cannot e*clude liability for conseDuential dama!es. 3t carriespossibilities of hu!e liability.

d. &nythin! that does not Dualify as meetin! the minimum standard of warrantyunder 00 is supposed to be specifically labeled as >imited

. >imited 9arrantya. /he re!ular warranty

5. 3mplied 9arrantiesa. /he implied warranties from state law UCC2 are tri!!ered, even when the 00

warranty attempts to disclaim them.

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b. Under 00, implied warranties cannot be disclaimed. "ee ? 1. /he seller canlimit the e*istence in time of the implied warranties basically a remedylimitation2 but cannot !et rid of them alto!ether.

c. #/%: if the seller !ives a f$(( warranty, the time cannot be limitedF. 9arranties must be conspicuous, and the warranty information must be available to the

consumer prior to purchase.I. &ny (imitation of reme+iesin 00 warranties must be conscionable. 00 borrows the ideaof conscionability from &rticle .

K. /here may be fact-specific statements about the product that are e*press warranties underthe UCC, but are not 00 warranties.

a. 00 warranties only relate to the normal consumer use of the !ood.b. %.!., ormal product information e.!., /his product is made of IGH wool2 is

nota 00 warranty about the products functionality. owever, that statementwould still be an e*press warranty under &rticle .

I4E,TIFICATIO, @ TE,4ER

3dentification1. 0akes it possible for buyers to have insurable interests in !oods of which they may not yet

have possession, and may not yet have title.. ? 2-81professes the Codes disfavor for title and makin! other provisions hin!e on title.

3dentification is the substitute for the concept of title where insurance is involved.5. 9hile identification is primarily about insurance, a secondary effect is to facilitate

financin!. "ee ? 2-"1, which specifies that the buyer obtains a special property andinsurance interest.

F. Code prefers that identification occur earlyin the process, but parties can a!ree to haveidentification occur at whatever time they wish.

I. "ee ? 2-"123: Code contemplates that buyer and seller can bothhave an identifiableinterest in the same !oods at the same time.

K. 3n the absence of a!reement, identification occurs:a. >)en = is ma+e if:

i. !oods are already e*istin!ii. !oods are already identified described2

iii. Comment "deals with undivided share of identifiable fun!ible bulk.%.!., IGH of a farmers wheat stored in his !rain elevator.

%. F$t$re /oo+s

i. 9hen !oods are shipped, marked, or otherwise desi!nated by sellerii. e.!., bulk from sellers inventory

c. Crops: 9hen planted if harvested within 1 months or the ne*t normal harvestseason, whichever is lon!er

d. Un%orn o$n5: 9hen conceived if the youn! are to be born within 1 monthsafter 6 is made

"ellers /ender

1I


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1. 3f the "eller tenders delivery of the !oods, the Buyer must act affirmatively to disavow thetender and re=ect the !oods. 3f Buyer does not do so, he accepts the !oods and must payfor them.

. Unless otherwise a!reed, the "ellers tender tri!!ers his ability to !et paid.5. /o make proper tender:

a. 0ake available put and hold for the buyers disposition2 conformin! !oods. "ee? 2-"13.b. Buyer must be !iven a reasonable opportunity to take possession.c. 3f youre !oin! to ship !oods employin! a common carrier e.!., )ed %*, U$",

etc.2, tender reDuires compliance with 2-"8as well.i. "eller must make 6 with carrier. ? 2-"8a3. Code leaves it up to seller to

choose a carrier unless 6 specifies otherwise.ii. "eller must !et the bill of ladin! and other paperwork the carrier !ave the

seller2 to the buyer. ? 2-"8%3. 9ithout these documents of title, buyercannot prove to carrier that it is entitled to receive !oods.

iii. "eller must notify buyer of the shipment. ? 2-"8'3. Connect this back

to 2-2ocationii. "eller bears the risk of loss only until a proper tender is made to the

common carrier and the seller !ets the appropriate +o'$ments of tit(e. &tthat time, the risk shifts to the buyer.

iii. /his section plays a 5ap-fi((er ro(e: Code presumes a 6 is a shipment 6unless otherwise stated.

iv. "ometimes called a send off 6 because seller is only promisin! to sendoff the !oodocation

ii. 4isk of loss remains on the seller until the tender is completed at the placeof destination.

iii. /hese contracts are a rarity@ shipment 6s are the norm.iv. "ometimes called a 'et 3t /here promise, because the seller is

promisin! to !et the !oods all the way to where theyre supposed to windup.

e. C.I.F. or C. @ F.( "hipment 6sf. F.A.S.( "hipment 6 where buyer bears risk of loss when seller delivers !oods to

the dock!. E; S)ip( 8estination 6, seller bears risk until !oods e*it the bar!e

1K


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h. Use of ai(ee: #nly applies to 5d party bailees. 4isk of loss passes to buyerwhen:

i. Buyer receives ne!otiable document of title to the !oodsii. Bailee acknowled!es buyers ri!ht to possession of !oods, or

iii. Buyer receives non-ne!otiable document of title to the !oods

I. %ffect of Breach on 4isk of >ossa. 3f buyer had ri5)t to re&e't!oods, risk is on the seller re!ardless of the shipmentterm until seller cures or buyer accepts

b. 3f buyer had ri5)t to re0o*e a''eptan'erisk can be shifted back to seller, butonly to the e*tent that buyer is underinsured

i. $olicy: Because buyer accepted !oods, buyer is in possession andprobably procured insurance on them

c. 3f %$yer %rea')e+ or rep$+iate+, and the !oods have been i+entifie+, and riskof loss has not yet passed to buyer, then seller can shift risk to the buyer, but onlyto the e*tent that seller is underinsured

i. $olicy: Because seller is in possession of the !oods, seller probably still

carries insurance on them.

REACH! REPU4IATIO,! @ EGCUSE

Buyers 4i!hts on 3mproper 8elivery1. Perfe't Ten+er R$(e

a. 3n a sin!le delivery 6, if !oods or tender fails in any respect to conform to the 6,buyer may

i. re=ect all the !oodsii. accept all the !oods, or

iii. accept any !oods and re=ect the rest1. Buyer !ets to cherry pick. 3f buyer does cherry pick, he must do it by commercial unit

b. "in!le delivery 6s are defined by number of deliveries@ number of payments isirrelevant

c. Can always ar!ue course of performance, course of dealin!, or trade usa!ed. 3f remedy is limited to repair, then buyers ri!ht to re=ect is limited

. "ubstantial $erformance70aterial Breach:2-


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5. Cure see ? 2-"2a. /he 4i!ht to Cure

i. 3f "ellerperforms earlyand Buyer detects a problem, "eller has anabsolute rightto try to fi* it, re!ardless of how material the breach is.

1. "eller must seasonably notify buyer of intention to cure

. "eller must cure within time of 6ii. S$rprise Re&e'tion: 9hen seller does not perform early, and buyerre=ects non-conformin! !oods that seller reasonably had !rounds tobelieve would be acceptable, then seller may substitute conformin! !oodsin a reasonable time 3) he seasonably notifies buyer of his intention tocure.

iii. Courts !enerally bend over backwards to accommodate "ellers ri!ht tocure.

iv. "haken faith doctrine : 9hen buyer no lon!er has faith in the productbecause of the defect. #/% that &rticle does not authori;e thise*ception

RESCISSIO, A,4 REBOCATIO,

9hen seller tenders, buyer must either accept or re=ect the !oods:1. &cceptance ( Buyers indication that he will take the !oods because he believes they

conform to 6, or despite their non-conformitya. )ailure to act results in acceptance: !oods must be re=ected within a reasonable

time after deliveryb. 9hat Constitutes &cceptance see 2-


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USTALSOFITO,EOFTHEFOLLO>I,/ FACTPATTER,SJ

. 'oods were accepted, butM:a. C$re: Buyer reasonable assumed that non-conformity

would be cured, but seller failed to cureb. Latent 4efe't: 8efect was latent and could not be

discovered even with reasonable inspectionc. Ass$ran'es: buyer relied on sellers assurances promisesor assertions by seller that product is or will becomeconformin!2

5. Buyer must revoke acceptance within reasonable time ofdiscoverin! defect or when defect should have been discovered2

F. /here is no substantial chan!e in the condition of the !oods otherthan that caused by the defect

I. 4evocation will not be effective until buyer notifies seller of therevocation

a. 3t is not sufficient for buyer to merely indicate

dissatisfaction or unhappiness@ must clearly indicate anintention to revoke.b. "easonable notification of revocation +oes not )a0e to %e

in writin5, but it is a !ood idea.ii. Buyer has same ri!hts + duties to the !oods as if buyer had re=ected them

iii. ote that the re0ise+ Art. 2prohibits the seller from attemptin! to cure ina revocation of acceptance in a consumer 6

. 4e=ectiona. 0anner + %ffect of 4i!htful 4e=ection see 2-


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. 3n absence of instructions, buyer must make reasonable efforts toresell the !oods if they are perishable or may decline in valueDuickly

5. 3n absence of instructions for non-perishable !oods, buyer maystore, ship, or resell as stated for non-merchant buyer.

A,TICIPATOR REPU4IATIO, A,4

RE?UESTS FOR A4E?UATE ASSURA,CES OF PERFORA,CE

&nticipatory 4epudiation see 2-


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a. 9hen reasonable !rounds for insecurity arise about the other partys performance,innocent party may demand in writingadeDuate assurances of due performance.

b. Until such assurances are received, the innocent party may suspend his ownperformance.

c. 3f assurance is not !iven in a reasonable time not more than 5G days2 then

innocent party may treat 6 as repudiated.L. 4etraction of 4epudiation see 2-


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iii. /he idea is that whatever event occurred was assumed would not occurasa condition of parties performance.

b. 3ncreased costs or a chan!e in the market +oes notmake performanceimpracticable.

i. %nterin! a lon!-term 6 with fi*ed prices indicates a seller bears the risk of

loss if market price increases, and buyer bears risk of loss for market pricedecreases.ii. "evere s)orta5es of raw materia(sdue to war, embar!o, local crop

failure, or unforeseen shutdown of ma=or sources maymake performanceimpracticable

iii. 3t is not sufficient for a seller to demonstrate that performance under 6would result in a net loss to him or a deprivation of his profits.

c. &llocation amon!st customersi. "ee 2-


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1. >ost Solume "eller >S"2a. 3f 6 was not broken, >S" would have made profits rather

than 1i. "eller must be operatin! at 'apa'ity

ii. "eller must not %e at (imitand +eman+ m$st %e

ro%$stiii. $lenty of buyers who would pay the same priceb. 8ama!es ( $rofit includin! reasonable overheadW seller

would have made from buyers full performance Vincidental dama!es V costs reasonably incurred e*pensessaved

c. >abor costs are notpart of overhead. /hey are savedcosts. Courts presume that >S" have saved labor costs byonly havin! to make one, instead of two, sales.

. Component "ellera. as choice between completin! manufacture or ceasin!

manufacture and sellin! for salva!eb. "eller only entitled to leastamount of dama!es, so sellermust make a reasonable choice

c. $roblem is that if seller stops manufacture and sells forsalva!e, the seller is not participatin! in the normal market

d. 8ama!es ( $rofit seller would have made from buyers fullperformance V incidental dama!es V costs reasonablyincurred those needed to finish manufacture2 payments,proceeds or resale

c. 4esale $rice see 2-#


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I. 4esale must be reasonably identified as referrin! to broken 6iv. 3f the seller violates -LGK, he is rele!ated to seekin! 0arket 8ama!es

5. "ellers 4i!ht to 3dentify 'oods to 6 see 2-#82a. on-identified !oods: &n a!!rieved seller may identify conformin! !oods not

already identified to 6 if seller learns of breach while !oods still in his possession

b. Unfinished 'oods: "eller may complete manufacture of !oods or seller maycease manufacture + resell for salva!eF. "ellers +o not!et conseDuential dama!es

Buyer 4emedies1. Buyer + &ccepted 'oods

a. 3f buyer accepts !oods, and does not revoke acceptance, he may sue for warrantybreach

i. 4eDuirements:1. 0ust be warranty protection. Buyer must notify seller within reasonable time after defect is

discovered. 3f buyer !ives no notice, buyer is barred from anyremedy. "ee 2-oss1. >oss must be certain: look to prior track

record and profits of similarly situatedparties

. >oss must have beenforeseeable5. Buyer must not have been able to prevent

the loss throu!h coverF. "eller can be liable even if he didnt

e*pressly a!ree to assume these risksii. $ersonal 7 $roperty 3n=ury: pro*imate cause

F


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iii. 8eduction of 8ama!es from $rice see 2-#1#21. "elf-help for buyer. Upon notifyin! seller, buyer may deduct all or part of dama!es

resultin! from any breach from any part of the price still due underthat same K.

iv. "ecurity 3nterest see 2-#121. Buyer has security interest for !oods in its possession for anyamount paid or amount of e*penses incurred2 for those !oods

. Buyer can resell the !oods to !et reimbursement for the amountpaid

5. Buyer may notkeep any profit. 3t may only keep the amount of theprice it paid and enou!h to reimburse the costs involved ininspectin! and handlin! the !oods.

. Buyer + Unaccepted 'oods or 4evoked &cceptance2a. 0arket $rice see 2-#12

i. Buyers dama!es for non-delivery or repudiation

ii. 8ama!es ( 0arket price at time when buyer learned of breach 6 price2V incidental dama!es V conseDuential dama!es e*penses savediii. >ocation of 0arket $rice ( p(a'e of ten+er, or place of arrival if re=ected

after !oods arrived or acceptance was revokediv. /ime of 0arket $rice ( w)en %$yer (earne+ of %rea')

b. Cover $rice see 2-#122i. Buyers procurement of substitute !oods

ii. 'oods do not have to be identical, but must have same functional purpose.iii. Buyer must act in !ood faith + in reasonable manner

1. "ee Comment 2: 3f buyer covers in !ood faith and iscommercially reasonable, then it is immateria(that hindsi!htproves the method of cover used was not the cheapest or the mosteffective.

iv. Buyer must cover without unreasonable delay. 3f market price is !oin! up,the lon!er a buyer waits to cover, the more likely a court will be to saybuyer took too lon! to cover.

v. 8ama!es ( cost of cover 6 price2 V incidental dama!es V conseDuentialdama!es e*penses saved

c. BUYER MAY CHOOSEbetween usin! 0arket $rice dama!es or Coverin!M butcover may foreclose the buyers ability to !et conseDuential dama!es.

d. Offsettin5 enefit R$(e: 3f buyer covers with somethin! much newer or morevaluable than the ori!inally contracted-for !ood, we would try to calculate thebenefit buyer !ets from replacin! the 6 !ood with this new7better !ood. /hen, ifwe could Duantify that, we would deduct that value the offsettin! benefit2 fromthe dama!es. Burden of raisin! and provin! offsettin! benefit is on seller.

e.5. Buyers 4i!ht to "pecific $erformance see 2-#1


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b. &t common law, specific performance was only available for uniDue !oodsreal estate, heirlooms, works of art2

c. "pecific performance may be !iven where !oods are $niK$eor under ot)erproper 'ir'$mstan'es!oods are the functional eDuivalent of uniDue2

i. )un!ible !oods ( scarcity in the market@ relates to cover: if buyer is

unable to cover because the market has dried up and seller still has the!oods on-hand, court may order performanceii. /ype of 6 ( output or reDuirements: 6, in its entirety, was uniDue

iii. /his may include lon!-term supply 6s like those for fuel2, where courtsmay consider the overall commercial feasibility of replacement, and whilethe !ood e.!., fuel2 may not be uniDue per se, overall circumstancesmay still call for specific performance. Courts reco!ni;e the disruption ofbuyers business + inconvenience to others down the chain of distribution,could be enormous in certain circumstances and difficult to evaluate withany certainty.

d. Buyer must show he cannot be made whole throu!h monetary dama!es

outline sales ucc_article2-1.doc

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