Sales Final Attack Plan PDF

**[SALES FINAL ATTACK PLAN]** **[Scope:]** 2-102 provides that Article 2 applies to transactions in goods. The UCC does NOT define transactions, but courts have held that it means the word sale. Sale is defined under UCC 2-106(1) as the passage of title from a seller to a buyer for a price. Passage...

**[SALES FINAL ATTACK PLAN]** **[Scope:]** 2-102 provides that Article 2 applies to transactions in goods. The UCC does NOT define transactions, but courts have held that it means the word sale. Sale is defined under UCC 2-106(1) as the passage of title from a seller to a buyer for a price. Passage of title is not defined anywhere in article 2, what they mean by passage of title is a passing of all the qualities of ownership. 2-103(1)(d) defines a seller as a person who sells or contracts to sell goods. 2-103(1)(a) defines a buyer is a person who buys or contracts to buy. Under 3-304(1) price is defined as payable in money or otherwise. Under Article 1, 1-201(b)(24), money is defined as any medium of exchange that is authorized by a sovereign. 2-105(1) defines goods as all things including specially manufactured goods that are moveable at the time of identification to the contract. There are three statutory exceptions for goods, (1) money when it is being used solely as a medium of exchange (money counts as goods if it is the target of the exchange ie. buying a coin from a collector), (2) investment securities under Article 8, and (3) choses in action (things in action) which is something that derives its value solely from your ability to enforce it in court (abstract rights, gym membership, car insurance, IP rights). A hybrid transaction is a transaction that involved both the sale of goods mixed with services. To determine whether or not the code or the common law govern the courts look to the predominant purpose test. The PPT is a factors test. The Court is required to review all factors if they are present and then weigh them against one another. There are 3 factors; (1) language of the contract (what the parties thought they were doing "client"/"buyer"/"seller," (2) nature of the business of the supplier (what type of business is the would be seller in, and (3) allocation of value (what kind of value is attached to the transaction labor = service, parts = goods). 2-107(1) & (2) governs goods mixed with real property. Goods attached to real property are governed by common law if severance would cause material harm to the real property UNLESS the seller is going to sever, then it is a transaction for the sale of goods (minerals, growing crops, selling a pool with concrete around it). If removing them from real property would NOT cause material harm, then they are governed by the code. Crops, livestock, standing timer, sod, etc. are always transactions for the sale of goods. **[Formation in General 2-204:]** (1) A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) A contract for the sale of goods can exist even though the moment of its making remains undetermined. (3) A contract for the sale of goods will not fail for indefiniteness even though one or more terms are left open, to have a competent code agreement you need three terms, the parties, the subject matter, and the quantity. - Purpose of 2-204: To be consistent with the common law and generate medium neutrality - OFFER: An offer is a manifestation of intent to enter into a bargain so made as to justify a reasonable offeree in believing acceptance is invited and will conclude it. - ACCEPTANCE: Acceptance is a manifestation of assent to the terms of an offer that is communicated to the offeror in the manner invited. - QUANTITY: To be a competent code agreement there must be a finite quantity or one that is subject to mathematical calculation. **[Offer and Acceptance 2-206:]** (1) Unless unambiguously indicated by the language or the circumstances, (A) an offer will invite acceptance through any reasonable manner or medium and (B) an order or other offer to prompt or current shipment will invite acceptance either by promising to ship or by shipping conforming or nonconforming goods. (2) If the seller is accepting by shipment and does NOT communicate that acceptance to the Buyer within a reasonable time, the Buyer is entitled to treat the offer as lapsed. - If seller ships nonconforming goods, this will still operate as an acceptance, but the seller will be in breach - If the seller ships non-conforming goods, the act of shipping will not constitute acceptance if the Seller notifies the buyer that the goods are for "accommodation" only, this is a rejection **[Firm Offer 2-205:]** An offeror maintains an unencumbered right to revoke an offer at any point prior to acceptance. The only exception to this rule is an option contract at common law. 2-205 was intended to operate as an option contract without requiring consideration. For an offer to be a firm offer, all 5 must be present. It must be an offer made by a merchant in a signed writing that by its terms gives assurances it will be held open. - Here the term merchant is used in the brad sense, meaning anyone who is both in the business and acting in their business capacity - Here the term signed means any mark or symbol made with a present intention to authenticate something (writing someone else's name can qualify) - Here the term writing means any intentional reduction to tangible form which can be a fax, email, text, bar napkin, t-shirt) - Here gives assurances means some language by which a reasonable person would expect the offer to be held open If all five elements are present a firm offer will exist. A firm offer is irrevocable for some period of time that is either the time stated or in the absence of a stated time, for a reasonable time not to exceed three months. A firm offer can appear in a form that is supplied by the offeree, but the firm offer is ineffective unless it is separately signed by the offeror. If the firm offer in a form is not separately signed, it is legally ineffective. - Here separately signed means a signature peculiar or specific to that firm offer provision **[Additional Terms in Acceptance or Confirmation 2-207:]** 2-207 is designed to deal with THREE factual scenarios, otherwise it does not apply. The first is that parties attempt to achieve formation through the transfer of standardized forms that have different or additional terms. - A standardized form is a pre-printed form with boilerplate language containing blanks to fill in dickered terms that are peculiar to the specific transaction - The mere fact that a contract comes back with different or additional terms does not mean that there is not acceptance. The second is that parties have a preceding oral agreement that is then followed by one or more confirmatory memoranda that have different or additional terms. And the third scenario are bar questions. The purpose of 2-207 is to destroy both the mirror image rule and the last shot rule. The mirror image rule is a common law rule that says that unless the acceptance mirrors the offer, then it is a rejection and a counteroffer. The last shot rule means that if the parties are in a negotiated transaction, the last set of terms sent will become the contract if the receiver of the terms then commences performance. Subpart 1 of 2-207 deals with whether or not formation occurred. If formation does occur move to subpart 2, if formation fails but the parties still act as if a contract exists, go to subpart 3. 2-207 subpart 1 says that a definite and seasonable manifestation of assent will constitute acceptance even if there are different or additional terms UNLESS there is a proviso clause (acceptance is made conditional on assent to the additional or different terms (proviso)) or there are different dickered terms. - Seasonable means within the time permitted by the contract, or if there is no time, within a reasonable time - Dickered means terms specific to an individual transaction There are two exceptions, the first is a proviso clause. A proviso clause is a clause that appears in the purported acceptance and makes acceptance expressly conditional on assent to the different or additional terms. A proviso clause will cause formation to fail. It is NOT a proviso clause if it appears in the offer, this language MUST appear in what purports to be an acceptance. The second exception is different dickered terms. Different dickered terms are not boilerplate language, they are terms that are specific to the contract and exist both in the offer and purported acceptance regarding a matter that is expressed inconsistently. If contract formation fails, one of three things happens. (1) nothing, (2) in response to the purported acceptance, the offeror could explicitly and specifically assent to the changes, or (3) both parties could start behaving as if they have a contract, if this is the case go to subpart 3. Subpart 3 requires that you look at both the offer and the purported acceptance, where the parties agree, that term will go into the contract, if the parties disagree the term will not go into the contract and it will be left blank, where there are gaps, they will be filled in with gap filling provisions. If formation has occurred under subpart one, the only option is to go to subpart 2. Under 2-207 subpart 2, the first question is to determine whether the terms are different or additional. Different terms are terms that appear in both the offer and purported acceptance that speak inconsistently on the same subject matter. Different terms of the boilerplate provisions will always knockout. Additional terms are terms that appear in the purported acceptance regarding a subject matter that is not discussed in the offer. If the term is an additional term, the next question is ALWAYS whether the transaction is between merchants. Here, the broad definition of merchant is used. The broad definition of a merchant is any who is both in business and acting in his her or its business capacity. If the transaction is NOT between merchants, then the additional terms are mere proposals and will never rise to more than a proposal unless the offeror explicitly and specifically assents to their addition. If the transaction is between merchants, the additional terms become automatically become part of the contract unless subpart 2(a), (b), or (c) kick it out. The three exceptions to offers between merchants are (a) the offer expressly limits acceptance to the terms of the offer that will prevent the addition or additional terms (this will not stop formation but will stop the addition of stuff), (b) adding the term will materially alter the contract, comment 4 states that if a party is attempting to prove a material alteration, they must prove both hardship and surprise, both of which are subjective and objective, and (c) notice of objection has been given or is given within a reasonable time, meaning by failing to object, the term is in the contract. Applying 2-207 to the second fact pattern where parties have a preceding oral agreement that is then followed by one or more confirmatory memoranda that have different or additional terms there are three situations to be concerned with. The first that the term(s) from the oral agreement differ from the confirmatory memorandum, the oral agreement terms will control. The second is that the confirmatory memorandum contains an additional term but confirms everything else perfectly, subpart 1 will not apply, must go to subpart 2, then look to see if the contract is between merchants, if it is not then it is a proposal, if it is, the terms are in unless 2(a), (b) or (c) kick it out. The third situation is that two confirmatory memorandums are sent, one by OR and one by EE, and they have different terms, the knockout rule will apply and neither get added. The third factual scenario are bar questions where the offer is given in varying levels or formality and when acceptance comes back it will come back highly informal and attempt to add a term, start with subpart one and see if formation occurred, if it is, go to subpart 2. **[Statute of Frauds 2-201:]** The statute of frauds is a defense to formation. If the contract invokes the SOF and SOF can be satisfied, that does not mean that the contract is enforceable, it means that the contract can survive the SOF and is not unenforceable due to the SOF. To invoke the statute of frauds, the contract must have a purchase price for \$500 or more. To satisfy the statute of frauds there must be some writing signed by the party against whom enforcement is sought and it must indicate the existence of a contract. A writing is any intentional reduction to tangible form. The party against whom enforcement is sought is the party that is denying the existence of the contract. A signature is any mark or symbol made with the present intention to authenticate. To indicate the existence of a contract, the signed writing must contain at least, the parties, the subject matter, and the quantity. The writing is not insufficient because it omits or incorrectly states a term, but if the writing incorrectly state the quantity, then the contract is only potentially enforceable UP TO the quantity stated in the writing. If the above subpart 1 is not satisfied, the statute of frauds may still be invoked if the transaction is between merchants. If both parties are merchants, the defense needs to meet a five part conjunctive test. There must be a confirmatory memorandum that was sent within a reasonable time, received by the party to be charged, the party has to have reason to know of its contents and it must be sufficient against the sender. - A confirmatory memorandum is a writing that by its terms confirms the existence of preceding agreement. Any objective reader of the memorandum would think a prior agreement exists. - To be sent within a reasonable time for this section, the time is anchored to the time of the oral agreement - Received by the party to be charged, the party to be charged and who needs to receive the memorandum is the party that is now asserting the SOF defense and denying the existence of the contract. This does not mean that the receiver has to have read of understood the contents, just that it was received. - Reason to know of its contents is an objective test asking what one should have known. Was it sent to the right place? - Sufficient against the sender means that the confirmatory memorandum must be in a writing, signed by the sender and indicate the existence of a contract (parties, SM, quantity) If the transaction is between merchants and all five elements are met, the party receiving the confirmatory memorandum must object in writing within ten (10) days of receipt or the party will lose the statute of frauds defense up to the quantity stated in the writing. Subpart 3 of 2-201 provides three exceptions to the statute of frauds. The specially manufactured goods exception, for this exception to apply, it must be true that the goods are specially manufactured, not suitable for sale in the seller's ordinary course of business, and either the seller has commenced production OR the seller has made commitments for procurement. The judicial admissions exception, which means that if in the context of a legal proceeding, a party admits to the existence of a contract, that party will lose the SOF defense up to the quantity admitted. The part performance exception provides that if the SELLER tenders goods and the BUYER accepts them, the SELLER can enforce up to a quantity not exceeding what was tendered and accepted OR if the BUYER tenders payment and the SELLER accepts it, the BUYER can enforce up to a quantity represented by the payment. **[Gap Filling Provisions 2-305, 2-306, 2-307, 2-308, 2-309, 2-310:]** The gap filling provisions run from 2-305 to 2-310. 2-305 is the open price term provision which says the price term will be a reasonable price at the time and place for delivery is (a), or (b), or (c). The price term will be a reasonable price at the time and place for delivery if there's no price, but parties have achieved contract formation, if they say nothing about the price, the price becomes a reasonable price at the time and place for delivery. The price term will be a reasonable price at the time and place for delivery if the parties have an agreement to agree on the price but then they cannot agree, price will become a reasonable price at time and place of delivery. The price term will be a reasonable price at the time and place for delivery is some third party is supposed to set price and price is not set, the price will become a reasonable price at time and place of delivery. Subpart 2 provides that if the contract provides that either buyer or seller will set the price then the code will gap fill with the obligation of good faith and fair dealing. Subpart 3 provides that if a third party is supposed to set the price, but due to the fault of one of the parties, the price is not set, the innocent party can either cancel the contract or set the price in good faith. Subpart 4 provides that if the parties do not have a price term and in the absence of a price term, did not intend to be bound. If you have an agreement to agree, but if we cannot agree, do not intend to be bound in the absence of a price term, this has the effect of unwinding the contract. **2-306** provides that to have a competent code agreement, there must be a finite quantity or one that is subject to mathematical calculation UNLESS it is a requirements contract, our outputs contract, or a contract for exclusive dealings. - A requirements contract is a contract that measures quantity by the buyer's needs, usually for a specific term and. At a specific price - In a requirements contract, gap fill with the obligations of good faith and fair dealing -- prevents a requirements buyer from suddenly needing more based on market change and from price gouging the seller - An outputs contract is a contract that measures quantity based on the seller's ability to produce, often for a stated period and a stated price - If an outputs contract, gap fill with the obligation of good faith and fair dealing - In a distributorship agreement, one party agrees to supply goods and another agrees to market and sell those goods, if a distributorship agreement, supplier will use "best efforts" to supply and the distributor will use "best efforts" to market and sell **2-307** gap fills with a single delivery transaction. In order to understand single delivery transaction, must understand its counterpart, which is an installment contract, an installment contract is one that authorizes or requires the seller to tender in multiple lots/tenders, a single delivery transaction is one where the seller must tender all of the goods at the same time in one tender. If the contract is silent, it will automatically become a single delivery transaction. **2-308** deals with absence of place for seller's tender. If the contract does not provide a place for seller's tender, then the place for tender will be the seller's place of business OR if the seller does not have a place of business, then the seller's residence. If at formation the goods are identified, and both parties have knowledge of the location of the goods, then that is the location. **2-309** deals with the absence of time. If the contract says nothing about the timing of an event AND the code does not otherwise provide for a timing, the time will be a reasonable time. If a contract for successive performances of an indefinite duration, the duration of the contract will be for a reasonable time BUT either party may terminate unilaterally. If a party wants to terminate OTHER than for a stated event (in the contract itself), that party must provide reasonable notice. **2-310** provides that if the contract says nothing about the timing of the Buyer's performance, then the Buyer's performance is due upon receipt of the goods EVEN IF the place for tender is somewhere else. - Buyer should not pay until the buyer receives goods to give buyer opportunity to inspect the goods (buyers payment isn't due until the goods make it from LAX to CHS when received by the buyer in CHE even though seller's obligation is fulfilled when the goods are delivered to fedex by LAX) **[Parole Evidence Rule 2-202:]** The parole evidence rule is a rule of evidence that under certain circumstance will prohibit the admission of extrinsic evidence for certain purposes. Parole evidence cannot ever make evidence admissible; it can only make it inadmissible. PER is intended to protect the terms of contracts. Certain circumstances here means in the event of an integration, an integration means reduced to a writing. The PER applies ONLY to agreements that are reduced to a writing, if the contract is not reduced to a writing, the PER does NOT apply, meaning PER does not apply to purely oral agreements. If a contract is integrated, it must be either a complete integration or a partial integration. Completely integrated means the writing was intended to be the final expression of the agreement, parties are prohibited from admitting evidence for the purposes of either contradicting or supplementing. Partially integrated means the writing was not intended to be a final expression of the parties agreement, the parties are prohibited from admitting evidence for the purpose of contradicting but are NOT prohibited from admitting extrinsic evidence for the purpose of supplementing. There are two schools of thought when determining the level of integration Williston and Corban. Williston is the minority which says that the only thing to look at is the four corners and if there is a mergers clause it is dispositive that it was a complete integration. Corban is the majority view that says that the judge should look at everything, and if there is a merger clause it is at most persuasive. A merger clause is a clause that states this is the final expression of the agreement. The exceptions to PER are CREMIC, conditions precedent, rights in equity, explaining, modification, invalidity, and collateral agreements. Under explaining at common law if parties wanted to admit EE for the purpose of explaining parties would first have to demonstrate and ambiguity. Under 2-202 there are two exceptions that apply to big three evidence. If it is big 3 evidence, then parties are not prohibited from admitting EE for the purpose of supplementing even against a completely integrated agreement, supplementing is always on the table. If it is big 3 evidence, parties are not prohibited from admitting EE for the purpose of explaining even in the absence of an ambiguity. Big 3 evidence is under 1-303, course of performance (cop evidence is evidence of some conduct or sequence of behavior that has been repetitiously adopted by the parties in their performance of the contract, how have you guys been performing THIS contract), course of dealings (sequence of conduct or behavior repetitiously adopted by the parties in their performance of previous independent contracts between themselves, how have you guys been performing in other previous contracts), or trade usage (some conduct or behavior so readily observable in the location, vocation, or trade such that the parties should have known it would be part of the agreement). The hierarchy of these three is course of performance, course of dealing, and usage of trade. **[Warranties:]** To state a cognizable claim the plaintiff must plead and prove the existence, breach, and damages. To have a contract, plaintiff must plead and prove mutual assent plus consideration. MA is composed of offer and acceptance. An offer is a manifestation of intent to enter into a bargain so made as to justify a reasonable offeree into believing acceptance is invited and will conclude it. Acceptance is a manifestation of assent to the terms of an offer that is communicated to the offeror in the manner invited. Express warranty, affirmation of fact or. Promise or description or sample or model and it must relate to the goods and it must form the basis of the bargain. An affirmation of fact or promise is something that can be proven true at the time it was made. The buyer gets a presumption that the affirmation forms the basis of the bargain if it is made before or contemporaneously with full performance. An express warranty can never be abrogated because an abrogation of an express warrant is repugnant. Implied Warranties Implied warranty of title, an implied warranty of fitness for particular purpose and an implied warranty of merchantability. The implied warranty of title, unless subsection 2 applies, the implied warranty of title will automatically exist and will warrant that title is good and the transfer is rightful and that the goods are free from security interest, liens, or encumbrances. Subsection 2 is the only way to abrogate the IWOT. The seller must use specific language or circumstances that indicate to the buyer that the seller either does not have title or it only purporting to convey the title that the seller has. Under the power to transfer, if title is merely voidable the seller has the power to transfer perfect title to a good faith purchaser for value. Good faith is honesty in fact and observable of commercial standards of fair dealing. A purchaser is one who purchases, to purchase something is a voluntary transaction creating interest in property. Value means anything sufficient to constitute consideration. If title is void.....???? An entrustment is a voluntary delivery or acquiescence in possession. A seller who is a merchant who deals in goods of the kind and has acquired property via entrustment has the power to transfer perfect title to a buyer in the ordinary course of business. A BIOCB is one who buys in goods faith without knowledge of the sale that violated the rights of another from a person who deals in goods of the kind in the manner that is usual and customary in the industry or usual and customary for the seller. Subpart 3 provides an additional warranty and says that if the seller is a merchant who deals in goods of the kind, the seller will additionally warrant against infringement claims, if the buyer provides specifications for procurement then the buyer will agree to hold the seller harmless for compliance with those specifications. Implied warranty of merchantability only exists if the seller is a merchant who deals in goods of the kind and will warrant that the goods will pass without objection in the trade and that the goods are fit for their ordinary purpose. There can be additional facets of this warranty that exist through COD or UOT evidence. Implied warranty of fitness for a particular purpose. At the time of contract formation the seller has reason to know of the buyers particular purpose of which to use the goods and the seller has reason to know that the buyer is relying on the seller's skill or judgement for selection and the buyer actually relied. Abrogation: In order to indivially abrogate IWOFFPP if must be in writing and conspicuout In order to individually abrogate the IWOM it must use the word merchantability and if in writing must be conspicuous If seller wants to abrogate both warranties in the aggregate, the seller can use words like as is or with all faults and those must be in writing and conspicuous. May abrogate through conduct, if the buyer inspects the goods before formation to the buyer's satisfaction the buyer is precluded from maintaining a claim for defects that the buyer ought to have found through inspection. If the seller demands inspection before formation and the buyer declines the buyer is precluded from maintaining a claim for defects that the byer could have found and did not Finally, big three evidence. **[Contractual Modification/Limitation of Remedies 2-719:]** 2-719 attempts to limit remedies for breach of warranties. Subpart 1 permits a seller to create and alternate remedial system, they are presumed optional unless explicitly made exclusive. If they are explicitly made exclusive, this becomes the buyer's exclusive remedy. If a seller has created an exclusive ARS, and that system fails of its essential purpose the buyer may seek remedies available under the code. There are 3 ways to fail, seller is unwilling to exercise its own system, seller is unable to comply with ARS, or system effectively leaves buyer with no remedies. Subpart 3 attempts to limit/eliminate consequential damages. There are 4 types of CD envisioned by the code, personal injuries, other property damage, damages stemming from breach of collateral agreement and lost profits from collateral agreements. Subpart 3 does two things, it provides a general rule for attempts to limit CD and provides limitations. Parties in contract may limit/eliminate CD as long as provision is not unconscionable. If a seller attempts to use a consequential limitation against personal injury arising from consumer goods, the limitation is prima facie unconscionable. **[Performance and Breach 2-606, 2-601, 2-612, 2-601, 2-603, 2-604, 2-605, 2-508, 2-608, 2-607(3)(a):]** 2-606 sits at the top and is a watershed event in the context of performance and breach. If acceptance HAS NOT yet occurred, then the buyer is theoretically eligible to reject which means they are eligible for the beach section of the code, 2-601, 2-612, 2-602, 2-603, 2-604, 2-605, 2-508, if the buyer HAS accepted those goods and the buyer wants to push them back their only option is to REVOKE acceptance, which are 2-608, 2-607(3)(a). Assuming the buyer has NOT yet accepted go to the rejection sections. 2-601 and 2-612 deal with whether or not the buyer has the right to reject, 2-602 does two things, (1) tells us how to affect rejection and (2) begins our discussion of aftermath, 2-603, and 2-604 deal only with aftermath, 2-605 are the teeth, and 2-508 is the seller's right to cure. To determine whether to use 2-601 or 2-612, because they can never be used at the same time, we need to determine whether the transaction is a single delivery contract or instead an installment contract. If the transaction is a single deliver transaction buyer's right to reject is governed under 2-601. A single delivery transaction is a transaction that requires all of the goods to be tendered at once at the same time in the same lot. Under 2-601, if the goods or tender fail to conform in any respect, then the buyer may: (a) reject the whole, (b) accept the whole, or (c) accept some and reject others. - Fail to conform in any respect is known as the perfect tender rule. This rule provides that a buyer is entitled to a perfect tender and thus MAY reject for any nonconformity irrespective or its size. Failing to perform perfectly, they will fail in some respect and failing in some respect entitled the buyer to rejection. - Accepting some and rejecting other, still cannot split a commercial unit, the bar examiners love to test on this, 50% of tender does not conform, buyer accepts the non-conforming and not the conforming, the buyer is entitled to do this but it doesn't happen in real life. If the transaction is an installment contract, the buyer's right to reject is under 2-612. Under 2-612, an installment contract, authorizes or requires the seller to tender in multiple lots, that will remain true irrespective of how the parties might frame their intent (parties cannot write their way out of this). If the buyer wants the right to reject a single installment, buyer MUST prove BOTH (a) the nonconformities in that installment substantially impair the value of that installment AND (b) they cannot be cured. - Substantially impairs the value here is an OBJECTIVE test meaning would these nonconformities substantially impair the value to any buyer who wanted to use it in a normal way (look for assumptions with mathematical precision If the nonconformities of one or more installments substantially impairs the value of the whole contract, the Buyer is entitled to cancel. Here, it must be true that one or more installments have nonconformities that substantially impair the value of the WHOLE contract. - Cancel means the contract is over, no more performance occurs from either side, this means buyer will reject all future Ks, cancel and sue Note: if the contract says nothing, gap fill with a single delivery transaction. **2-602** deals with both affecting rejection, begins aftermath, and has a savings clause from preventing courts from doing something stupid. Under 2-602, to affect rejection a buyer need only seasonably notify the seller of intent to reject. 2-601(b) works with 2-602 (1), once the tender occurs, there is a reasonable time for inspection for the buyer and at the close of that, the buyer has either affected rejection or accepted because they failed to reject. - No medium for rejection, could do it orally, or through interpretative dance. Once a buyer has rejected any exercise of ownership over the goods is wrongful unless 2-711(3) applies. If the buyer has rejected, the seller then has all ownership interest in the goods, unless 2-711(3) applies. 2-711(3) provides for a security interest of a rejecting buyer, if the buyer is in possession of rejected goods and either the buyer has paid some portion of the purchase price, or, has expenses associated with rejection, then the buyer is entitled act as an aggrieved seller under 2-706 and resell the goods. The basic duty of a rejecting buyer absent 2-711(3) is to hold the goods with reasonable care. Then, buyer has no further obligations. 2-602 (3) deals with the circumstance where the buyer has rejected but was not entitled to. If the buyer wrongfully rejects, it is the Seller who is entitled to a remedy, cross reference to 2-703 which is the generally indexing section for seller's remedies. The seller is not the aggrieved party because the buyer wrongfully rejected. Hierarchy: - 2-712(3) as an aftermath section will win over any section - 2-603 - 2-604 - 2-602(2) -- if none of the above apply, apply 2-602(2) **2-603** only applies to MERCHANT buyers. Merchant is defined broadly. If a seller has no agent or place of business in the market of rejection, then a merchant buyer must follow any instructions from the seller and in the absence of instructions must make reasonable efforts to sell the goods if they are perishable or threaten to decline in value - Threaten to decline in value does not mean that they are perishable but rather that the market price will collapse In the event that the merchant buyer has sold the goods, first look at the contract and if it provides a commission structure, then that will control, if not then look at the commission that is customary in the trade, if there is not a customary commission then the buyer will be entitled to a reasonable commission not to exceed 10% of the gross proceeds. Finally, when the merchant buyer is making these choices, merchant buyer does not have to be right but they must be acting in good faith. (reasonable believed they would decline in value but was wrong, that's ok as long as acting in good faith) **2-604** provides that if a buyer has rejected and the seller has failed to provide instructions within a reasonable time, the buyer can either hold the goods with reasonable care at the seller's expense (recovery of the expenses under incidental damages), or reship the goods at the seller's expense (recovery of the expenses under incidental damages), or resell the goods. If the buyer resells the goods, the buyer is entitled to the commissions under 2-603(2). If 2-603 does not apply and no instructions are given then apply 2-604. **2-605** deals with content of a notice of rejection. 2-602(1) is designed to tell us how a buyer can affect rejection, this still remains true, 2-605 deals with content requirements, but the failure to comply with 2-605 will not prevent a notice from affecting rejection but it may mean that the buyer has now wrongfully rejected but it will not stop the notice from operating as a rejection. If in connection with rejection, the buyer fails to particularize defects that are ascertainable upon a reasonable inspection then the buyer is precluded from using those defects to justify either rejection or breach if (a) the seller could have cured OR (b) the transaction is between merchants (defined broadly) and following the rejection the seller makes a written request for a full and final list of defects. - The reason we require buyers to particularize defects is because 2-508 is an empty promise of a right to cure if the buyer will not tell the seller what is wrong - 2-605 is intended as compulsion - If the seller could have cured but the buyer didn't particularize defects then they are precluded from using the defects to justify either rejection or breach - The purpose to 1(b), the seller could not fix the problem or sure under a, the rejection didn't have particularity, if the seller makes that request, the assumption is that the seller is trying to get a full and final list of the problems so that the parties can start coming up with a solution between themselves instead of running to the courts **2-508** deals with the seller's right to cure. If the time for performance has not yet passed, the seller has an unencumbered right to cure. In order to exercise that right, the seller need only provide notice to the buyer of intent to cure. Seller must cure before the time for performance lapses, otherwise section 2 applies. Subpart 2 states that is time for performance has passed, the seller will have a reasonable time to cure if at the time of tender, the seller reasonably believed the goods would be acceptable with or without a money allowance. Subpart 2 means that if they reasonably believed the goods would be acceptable, the seller is able to add a reasonable cure time. - Unencumbered means the absolute right to cure, no limitations - If time for performance has not yet passed AND the buyer has rejected, seller has an absolute right to cure - Reasonably believed goods would be acceptable meaning that maybe they didn't know about the nonconformities or the seller tendered goods with these same nonconformities in the past and the buyer was ok with it - Money allowance is a credit or a discount IF ACCEPTANCE HAS OCCURRED, NONE OF THE REJECTION SECTIONS ARE AVAILBLE, IF THE BUYER WANTS TO PUSH THE GOODS BACK AFTER ACCEPTANCE HAS OCCURRED, BUYER MAY ONLY REVOKE ACCEPTANCE UNDER 2-608 AND 2-607(3)(a). **2-608** is the test to determine whether of not the buyer has the right to revoke. If a buyer wants to be eligible to revoke (have the right to revoke) it is a 3-part conjunctive test but the second element is internally disjunctive. (1) It must be true that the nonconformities substantially impair the value to this buyer AND (2) Acceptance was induced by at least one of the following, (1) with discovery under a reasonable assumption of cure, or (2) without discovery due to the difficulty of discovery, or (3) without discovery due to seller's assurances AND (3) Before any substantial alteration to the condition of the goods that was NOT cause by the defect itself. - Substantially impair here is a subjective standard meaning you must look at this buyer specifically - Induced with discovery under a reasonable assumption of cure meaning the buyer knew the goods didn't conform but they were operating under a reasonable assumption that the seller would cure it - Induced without discovery due to the difficulty of discovery means that the buyer did not know there were defects present, they were latent defects or didn't want to pop the boxes open because you intended for resale - Maybe chemical inspection was necessary, this would be unreasonable - Induce without discovery due to seller's assurances meaning the buyer accepted the goods and didn't know there were problems because they never looked because the seller assured the buyer that if there were problems, the seller would solve it - If the buyer is going to revoke, pushing all the goods back against the seller, only allowed to do that if the buyer can return those goods substantially in the same condition they were in upon the tender, because if not it diminishes the sellers ability to get at least salvage value out of the goods BUT if the defect is the reason WHY the buyer cannot return the goods to the Seller in the same condition the buyer is not precluded If the buyer wants to affect that right to revoke, the buyer first must provide notice within a reasonable time, and reasonable time is anchored to the failure of inducement and then the buyer must meet the content requirements of 2-607(3)(a). - Failure of inducement, whatever of the 3 ways that induced that acceptance that would give rise to having the right to revoke, whenever that failed is when the clock will start -- failure of inducement is when the seller is not going to cure, know or should have known about the defects inducement fails, or once it is clear that seller will not comply with assurances inducement fails **2-607(3)(a)** states that the only content requirement in comment 4 Under comment 4, the content of a notice of revocation must at least indicate that the transaction remains "troublesome." Must somehow alert the seller that this is no longer a final transaction. Lawsuit is insufficient notice!!! Failure to notify within a reasonable time of nonconformities under 2-607(3)(a) bars any remedy under the code **[Anticipatory Repudiation 2-610, 2-609, 2-611]:** Anticipatory repudiation must occur, if at all, after formation but BEFORE the time for performance. An anticipatory repudiation is an unequivocal unambiguous manifestation of intent not to perform when performance is due. Unequivocal means that maybe will not work. Unambiguous means that it is not subject to multiple reasonable interpretation. Whatever I have said or done can only be read one way and that one way is that I am not going to perform. - The mere fact that a party is insolvent or suggests a modification to a contract is NEVER sufficient to constitute a repudiation BUT a suggestion of a contract modification PAIRED with a threat of breach DOES count as a repudiation - If there is a contract with goods specific to the contract and they are sold to someone else, that is a repudiation, but the goods need to be identified to the K at formation **2-610** is the primary prevision for AR under article 2. 2-610 holds that if a party has repudiated and it substantially impairs the value of the contract then the aggrieved party (the non-repudiating party) may either (a) await performance, or (b) resort to remedies, but in either event (c) suspend performance. - Substantially impair here is an objective test, must have an actual impairment on the value of the contract **2-609** governs demands for adequate assurances. 2-609(1) says that in a contract for the sale of goods parties have the right to not have their expectation for performance impaired. If a party has reasonable grounds for insecurity, that party MAY in writing demand an adequate assurance and while waiting, suspend performance. 2-609(2) if the contract is between merchants (broad definition), both the grounds for insecurity and the adequacy of assurances are governed by commercial standards. 2-609(3) acceptance of an improper payment or performance does not prejudice a party's right to demand an adequate assurance for future performance. 2-609(4) if after receiving a demand, a party fails to comply, within a reasonable time, not to exceed 30 days, then the failure to comply is a repudiation and it automatically substantial impairs. - Reasonable grounds for insecurity are something less than a repudiation, what would reasonable impair someone's expectation for performance, what would make someone feel cold and prickly, insolvency could be reasonable grounds for insecurity - MAY has two camps of judicial interpretation -- for US you don't have to do it but if you do it MUST be in writing! - Adequate assurance something that makes me feel warm and fuzzy again, ameliorate that impairment of expectation. Adequate assurances muse be reasonable and have some linkage or logical relationship with the grounds for insecurity - Ex. insolvency, a reasonable demand would be a letter of credit from financial institution - Suspend performance - Commercial standard: look at status and trade **2-611** deals with retraction of a repudiation. Under subpart 1 a repudiating party has an unencumbered right to retract at any point prior to one of four things; (1) a material change in position by the non-repudiating party, or (2) communication of finality by the non-repudiating party, or (3) a lawsuit, or (4) time for performance comes. - Material change in position -- no communication requirements, you repudiate with me (seller) the buyer goes and purchases substituted goods, the change in position cuts off your right to retract - Communication of finality, the non-repudiating party has to say something to the repudiating party, I perceive your repudiation as final, I'm cancelling the contract - Lawsuit - Time for performance comes, no longer a repudiation, it converts to a breach when the time for performance comes Under subpart 2 a repudiating party can retract through any medium, but if the reason the repudiation exists is a failure to comply with 2-609 then the repudiating party cannot retract until the repudiating complies. - Complying with the demand for adequate assurances, cannot retract until the party complies!! Under subpart 3 once a party retracts, the duties and obligations of both parties are reinstated with due excuse and allowance for the aggrieved party for any delay associated with the repudiation. - The non-repudiating party will not be in breach for any delay in their performance due to the repudiation **[Risk of Loss 2-319, 2-320, 2-322, 2-504, 2-503, 2-509, 2-510:]** In the event of a breach, someone has to bear the ROL or be on the hook if something happens to the goods. The seller still has to tender the goods if they have the ROL and if the buyer bears the ROL they still have to buy them. First there are four questions to ask. 1) is there a delivery term (governed by 2-319, 2-320, and 2-322) 2) what kind of contract is it? 3) has the seller met its tender obligations under the proper section (governed by 2-503 and 2-504)? 4) was there a breach (governed always by 2-509 and sometimes 2-510)? **Question 1:** is there a delivery term? **2-319** covers two acronyms, FOB and FAS, free on board and free along side - FOB is free on board can result in either a shipment contract or a destination contract. A shipment contract is a contract where the buyer bears the risk of loss while the goods are in transit. A destination contract is a contract where the seller bears the risk of loss while the goods are in transit. Under **2-319** if FOB is followed by a vessel name, Seller is required to load the goods on the specified vessel, if it merely lists FOB, seller is required to get the goods on the specified port. - FAS will ALWAYS result in a shipment contract, the seller will never be required to load the goods. - Not on the ship, but alongside/beside it **2-320** covers two acronyms, CIF and CF, cost insurance freight and cost freight. - CIF ALWAYS results in a shipment contract, meaning the seller is required to load the goods and tells the buyer that the purchase price includes the cost of goods, insurance on goods that pays out to buyer and the cost to get them shipped to the buyer. - CF ALWAYS results in a shipment contract, meaning the seller is always require to load the goods before tender. If the buyer already has insurance, they will want a CF contract. The purchase price in a CF contract includes cost of the goods and to get them shipped ot the buyer. **2-322** covers Ex Ship Contracts which ALWAYS result in a destination contract and the seller is always required to unload the goods **Question 2:** What kind of Contract is it? There are four different types of contract envisioned by the code. 1. **Shipment contracts:** a shipment contract is a contract where the buyer bears the risk of loss while the goods are in transit 2. **Destination contracts:** a destination contract is a contract where the seller bears the risk of loss while the goods are in transit 3. **Bailee contracts:** a bailee contact is a contract where the goods will be tendered without moving in the hands of a third party 4. **True no movement contracts:** a no movement contract is a contract where the goods are tendered without movement in the hands of the seller Depending on what type of contract dictates which code section to use either 2-503 or 2-504. **Question 3:** Has the seller met its obligations under the proper section. **2-504** governs the seller's tender obligations in a shipment contract, under 2-504 the seller has 4 tender obligations. 1. Seller must put the goods in the hands of the carrier at the point of shipment; and a. Whatever the delivery term says 2. It must be pursuant to a reasonable contract of carriage; and b. Some shipment mechanism that is reasonable given the kinds of goods 3. Seller must tender any necessary documents; and c. Can be explicitly required by contract, most important is a document of title, if this paper exists and represents the goods, it is equivalent to ownership of the goods 4. Seller must provide notice d. Notice is either: seller has shipped or seller is prepared to ship **2-503** governs the seller's tender obligations in other types of contracts. Under 2-503 the seller has 4 obligations. 1. Get the goods to the point of tender, if necessary (only destination contract); and 2. Everything about the tender has to be reasonable; and 3. Tender any necessary documents; and 4. Provide notice **Question 4:** was there a breach? **2-509** is the primary ROL section to determine whether the ROL has passed. 1. ROL in a shipment K a. Seller will pass ROL once the goods are duly tendered i. Duly tendered means when the seller has complied with its tender obligations under 2-504 2. ROL in a destination K b. Seller transfers ROL in a destination contract once the goods are duly tendered ii. Complies with 2-503 3. ROL in a bailee contract c. To transfer ROL in a bailee contract, the seller has to comply with its obligations under 2-503 and either iii. Transfer a document of title to the buyer OR iv. The bailee has attorned (bailee has acknowledged to the buyer that the bailee is now holding the goods at the buyer's disposition) 4. ROL in a true no movement contract d. If the seller is a merchant (broad definition), seller cannot pass ROL until the buyer takes receipt of the goods. In all other cases (where the seller is not a broad merchant), seller can pas ROL once the goods are duly tendered 5. Safe harbor e. These rules for ROL are default rules and subject to agreement by the parties (AKA can be contracted out of) **2-510** applies to the ROL section only in the event of a breach or repudiation. If a party can comply/is eligible, the party can push ROL back. Subpart 1 provides that is the buyer has a right of rejection and something bad happens to the goods, the buyer can treat the ORL as never having passed. Subpart 2 provides that is the buyer has rightfully revoked, the buyer may to the extent of the deficient in the buyer's insurance treat the loss as resting with the seller. Subpart 3 provides that it MUST BE TRUE that the good conformed AND the goods were identified to the contract BEFORE the buyer breached or repudiated AND AFTER The buyer breached or repudiated, the goods suffered a casualty AND before the ROL passed to the buyer. If all of that is true, in the evet of a deficiency in the Seller's insurance coverage, Seller can treat ROL as resting with the buyer. **[Defenses 2-613, 2-614, 2-615]:** These defenses are in addition to the statute of frauds defense. 2-613 deals with casualty to identified goods. For a successful defense under 2-613 it must be true that the goods were identified at formation, those goods suffered a casualty, without fault of either party before the risk of loss transferred to the buyer. If those things are true, the loss is a total loss and the contract is avoided, if the above are true and it is a partial loss, the buyer can either avoid the contract OR accept a partial tender with due allowance. Due allowance means that the buyer will only pay for what the buyer keeps or if they already paid, they will get money back. In either event, without further right meaning that parties cannot sue for not tendering the remainder portion subject to the defense. 2-614 provides that if the facilities fail or the type of carrier is unavailable or the manner of delivery is impracticable THEN seller is required to offer a reasonable substitute if available AND the buyer is required to accept it 2-615 is the excuse by failure of presupposed conditions. To be eligible for 2-615, it must be true that performance has become impracticable dur to the occurrence of a contingency, the nonoccurrence of which was a basic assumption of the contract. Party can still perform, but now performance is too costly, risky, or pointless. Increased costs alone are never sufficient. Must be as a result of the event parties did not think would occur. Subpart 2 provides that if the impracticability is only to part of the tender, then the seller is required to offer an allocation to existing customer and may include regular customer not currently under contract. The only restraint on the decision making is that is must be fair and reasonable. Subpart 3 provides that if the seller is going to use this defense, seller must provide seasonable notice and if there is going to be an allocation. **[Buyer's Remedies 2-711, 2-502, 2-716, 2-717, 2-713, 2-712, 2-714, 2-715: ]** *[Non-Monetary 2-502, 2-716, 2-717]* **2-711** is the general indexing section for buyers remedies that lists the remedies available. **2-502** provides that if a buyer is going to have the right to recover, it must be true that the buyer has made some payment towards the purchase price AND must have a special property interest in the goods AND either the goods are consumer goods OR seller becomes insolvent within 10 days of receipt of the first installment of the purchase price. If the buyer meets the criteria, buyer is entitled to this remedy, court cannot deny. - Special property interest means goods have been identified to the contract - Insolvent within 10 days means that the seller made a misrepresentation of their solvency **2-716** provides that a court can (discretionary) decree specific performance if the goods are unique or in other appropriate circumstances. Subpart 2 provides that a court has the power to include relief as justice demands. Subpart 3 provides two elements required for buyer to be eligible for replevin, the first that goods must have been identified AND buyer must be able to prove that buyer is unable to cover. - Unique means this specific good - In other appropriate circumstances means when the good are not unique, but courts do this sparingly with outputs and requirements contracts because those relationships are unique - Cover means purchase substitute goods **2-717** covers deductions. If a buyer is seeking deductions, deductions will permit a buyer to deduct its damages from any amount still due and owning on the same contract where the seller has breached or repudiated. Buyer must provide notice to exercise this remedy saying buyer is activating their right to deduction. - If buyer has paid 100% of the PP, buyer cannot deduct, if buyer has paid 50% of a \$50k contract with \$10k in damages, buyer would be eligible to deduct and pay \$40k *[Monetary 2-713, 2-712, 2-714, 2-715]* **2-713** is the default damages calculation, if the buyer is ineligible for either 2-712 or 2-714. The calculation is the difference between market price and contract price PLUS any incidental/consequential damages under 2-715 MINUS expense saved through non-performance, - Market price depends on where and when, timing is the time the buyer learns of the breach and geographical locks at the place for tender unless it is a rejection or revocation in which case it is the place of arrival **2-712** is cover. A buyer is eligible for the cover calculation if the Buyer has covered in good faith and everything is reasonable. The calculation is the difference between the cover price and the contract price PLUS any incidental/consequential damages under 2-715 MINUS any expenses saved through non-performance. A failure to cover will not bar any other remedy, there are two exceptions here, replevin and consequential damages -- if you could have covered you have to **2-714** the damages here will only apply if the buyer has accepted the goods and is not revoking acceptance. The calculation here is the value as warranted MINUS the value as accepted PLUS any incidental/consequential damages under 2-715. **2-715** governs incidental and consequential damages. Incidental damages are costs that a Party incurs in an attempt to mitigate or preserve the status quo. Consequential damages are split into two. Beach of collateral agreements or loss profits of those agreements or personal injury or other property damage. If the buyer is seeking consequential damages under subpart a beach of collateral agreements or loss profits of those agreements, buyer must prove four things, that seller had a reason to know at the time of contract that these types of damages could arise as a result of the breach (foreseeability), reasonable certainty, causation and an inability to cover. If buyer is seeking consequential damages under subpart b personal injury or other property damage, buyer must only prove causation. Seller's Remedies 2-703, 2-702, 2-704, 2-705, 2-706, 2-708, 2-709, 2-710: