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 if states dont like certain provisions they can pass non-uniform versions. . Because UCC is state law, it can be trumped by contrary federal law: federal bankruptcy law, federal law re!ulatin! farmers. etc. SCOPE OF ARTICLE 2 2-1 2! 2-1 "! 2-1 # "C#$% 1. Common law of contracts still applies, unless trumped by &rticle . &rticle applies to transactions in !oods a. "cope can be defined by s$%&e't matter and by nat$re of transaction i. 'oods ( "omethin! tan!ible and movable at time of identification 1. )uture !oods ( !oods which are not both e*istin! + identified . ,'oods- does .#/ include a. 0oney 1when it is the medium of payment2 b. 3nvestment securities c. 4eal estate d. "ervices e. 3nterest in realty 1leases, bailments2 f. 3ntan!ibles 1copyri!ht, contract ri!hts2 5. ,'oods- does include: a. Unborn youn! of animals b. 'rowin! crops c. 3dentified thin!s attached to realty 1which will be severed by the seller2 d. "pecially manufactured !oods ii. /ransaction ( 6 for sale 1as opposed to !ifts, leases, or bailments2, includes 6 for present sale of !oods + 6 for sale of !oods at later time b. 'oods to be "evered from 4eality i. 6 for sale of minera(s or t)e (i*e 1e.!., oil or !as2 or a str$'t$re or its materia(s is 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 and capable of severance without material harm is covered by &rticle re!ardless of who severs iii. )ocus on the permanency of the !ood and who is 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/& had been drafted to !overn information transactions, but UC3/& is so anti-consumer that only states adopted it. /hus, there is lar!ely no law !overnin! electronic information.

. 3nformation: Under U%/& includes data, te*t, ima!es, sounds, codes, computer pro!rams, software, databases, etc. ii. "mart !oods 1. 9hen transaction includes !oods and information . Courts determine whether covered by &rticle : a. &utomobile: cars containin! computer pro!rams ( '##8 b. &rchitectural plans on disk ( .#/ a !ood /wo /ests Used in :ybrid Circumstances: 1. Pre+ominant Fa'tor 1or Pre+ominant ,at$re2 /est. -a&ority R$(e. a. Characteri;e the transaction in an all-or-nothin! conte*t based on the primary thrust of the transaction. b. /his places you back on the common law of contracts which doesnt have as many direct and obvious answers as the UCC<this is why many =urisdictions have decided where its a close call to use the !ravamen test 1see below2. 2. /ra0amen Test. -o+ern Tren+. a. Characteri;es the transaction based on the point of !ravity, or the issue causin! the problem b. 3f the goods aspect is the focus of the dispute, then we apply UCC. 3f the service aspect of the transaction is the focus of the dispute, then we apply common law. LEASES 8ifference Between /rue >ease + 8is!uised )inancin! &!reement: ? 1-2 112#3 1. Tr$e Lease 'overned by &rticle & of the UCC /he test is based on economic realities. /he lessor must ,from the be!innin!- intend to retain a meanin!ful economic reversionary interest /here will be somethin! left at the end of the leasehold that still has value, and that will revert back to the lessor %.!., apartment rental: you pay fair market value for possession and use, and at the end of the lease, you leave and the premises revert to the lessor. /he lessor 1landlord2 never !ives up ownership interest, and if you default on the lease, the landlord still owns it. 3t does not matter if you file bankruptcy or have creditors come after you@ the apartment is always owned by landlord. 2. 4is5$ise+ Finan'e A5reement 16Fa*e Lease73 a. 'overned by &rticle A 1not an &rt. transactionB2 b. 3s actually 112 sale of !oods with 1 2 the !rantin! of a security interest in those !oods c. &!reement appears to convey possession and use to the lessee for the real economic lifetime of the !ood d. /he lessee !ets to possess and use the !ood until its value is e*hausted 2. Test Un+er 1-2 112#3 a. Can the lessee terminate the lease with no penaltyC 3f ,no- then there e*ists a ,warnin! fla!- of a possible security interest. :owever, you must see if there is at least one of the other factors in order to classify it as security interest.

b. #ther factors i. 3s the remainin! term of the lease eDual to the !oods economic lifeC ii. 3s the lessee obli!ated to renew the leaseC iii. 8oes the lessee have the option to renew the lease for the remainin! economic life of the !ood for nominal 1or no2 additional considerationC -ERCHA,T RULES 0erchant 4ules 1see 2-1 82 1. Bein! a merchant has nothing to do with whether the transaction comes within the scope of &rticle . &ll transactions in !oods are covered 1e*cept for those specifically e*cluded by &rticle or federal law2. . 9hether or not one is a merchant depends on the issue in dispute, and that, in turn, dictates which of the tests for merchant status are used. 9hether or not one is a merchant is a flexible standard and a functional 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 1even if you dont actually have any e*perience in the area2. i. &pplies to: 1. 2-2 1 "tatute of )rauds . 2-2 " )irm #ffers 5. 2-2 # Confirmatory 0emoranda 1battle of the forms2 F. 2-2 9 0odifications b. :$siness pra'ti'es +efinition: Eou maintain a place of business such that you should be familiar with and it is fair to char!e you with knowled!e of normal business practices. i. &pplies to: 1. 2-218 3mplied warranty of merchantability . 2-8 2 4etention of possession 5. 2-8 2 %ntrustin! of possession '. -i;e+ %a5 1eit)er or %ot) of t)e a%o0e3 i. &pplies to: 1. 2-1 2 Commercially reasonable standards of fair dealin! . 2-22#! 2-< 2! 2-< " 4esponsibility to follow sellers instructions 5. 2-" 9 4isk of loss F. 2-< 9 &deDuate assurances of performance 5. $oint of merchant rules is to hold merchants in some circumstances to different standards than others under &rticle . FOR-ATIO, )ormation 1. )ormation in 'eneral 1see ? 2-2 82 a. 6 may be made in any manner sufficient to show a!reement b. 0oment of makin! sufficient a!reement may be undetermined

5.

F.

c. 6 is not indefinite simply because parties leave one or more terms open, so lon! as parties inten+e+ to ma*e = 1ob=ectively manifested a mutual intent to be bound2 and there is a reasona%(y 'ertain %asis for 5i0in5 a reme+y 1must know enou!h about 6 to determine dama!es2. d. 6 cannot leave open the sub=ect matter or Duantity terms. #ffer + &cceptance a. #ffer ( ob=ective manifestation of present intent to be bound b. #ffer invites acceptance by any manner and by any medium reasonable under the circumstances. i. #fferor must unambi!uously indicate that a specific manner or medium is reDuired ii. "tatin! a preference is not sufficient c. #rder or offer to buy !oods for shipment invites acceptance by prompt promise to ship, or by prompt shipment of !oods 1re!ardless of whether those !oods are conformin! or non-conformin!2. i. /he shipment of non-conformin! !oods is .#/ acceptance if seller notifies buyer that shipment is only an accommodation to buyer. ii. /hat becomes a counter-offer, and the ori!inal offeror can either accept or re=ect. d. Be!innin! of performance may act as acceptance, but if offeror is not notified of acceptance within reasonable time, offeror may treat offer as e*pired. )irm #ffers 1see 2-2 "2 a. &n offer %y a mer')ant to buy or sell !oods in a si5ne+ writin5 which !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 is reasonable@ typically authentication should consist of at least initialin! the term of assurance ii. :and-written note on writers letterhead, or an authori;ed tele!ram may also count. c. 3f there is no si!ned writin!, then it reverts to common law rules, and some consideration is reDuired to hold the offer open. d. Time (imit: #ffer cannot be open for more than three months 1if consideration is !iven, parties can make whatever time they want2. 3f no time is stated, it will be assumed 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 assurance f. -er')ant: Business practice test: 3f the offer is made by a non-merchant, then consideration is reDuired 0odification 1see 2-2 92 a. 8oes not reDuire additional consideration b. &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 FOR-S

/he Battle of the )orms 1&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 formation and interpretation. a. 3s 6 formed under subsection 112C b. 3f ,yes- then interpret usin! subsection 1 2. c. 3f ,no- then subsection 152 may be used for both formation + interpretation. . )ormation a. >ook for pre-printed forms bein! e*chan!ed by businesses. i. )reDuently seen with purchase orders and acknowledgment of receipt 1AOR2 forms. ii. UCC acknowled!es the ,fine print- of these forms is usually i!nored, and business people simply behave as thou!h there is a 6 b. >ook for an oral 6 followed by a written confirmation that does not match the oral 6. 5. 3nterpretation: a. Between merchants, additional terms are added to 6 U.>%"" i. #ffer e*pressly limits acceptance to terms of offer, #4 ii. /erms materially alter 6 1create unreasonable surprise2, #4 1. Clauses materially alterin! 6: a. .e!atin! implied warranties that would normally apply b. 4eDuirin! !uaranty of AGH or 1GGH of deliveries c. 9here the usa!e of trade allows !reater Duantity leeway d. 4eservin! seller the power to cancel upon buyers failure to meet any invoice when due e. 4eDuirin! that complaints be made in time materially shorter than customary or reasonable . Clauses not materially alterin! 6: a. )i*in! reasonable time for complaints b. $rovidin! for interest on overdue invoices c. >imitin! ri!ht of re=ection for defects that fall within customary trade tolerances b. Between non-merchants, additional terms become part of 6 #.>E 3) there is a!reement to the new terms. c. .otification of ob=ection to additional terms is !iven within reasonable time after notice of them is received d. 9here there is a +ire't 'ontra+i'tion in terms, those are considered different terms, rather than additional terms. e. =no'* O$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 the parties 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 ,standard terms- do .#/ become part of the 6 unless plaintiff e*pressly a!reed to them. STATUTE OF FRAU4S

"tatute of )rauds 1see 2-2 12 1. $revents enforcement of oral 6s a. /he absence of a writin! has .#/:3.' to do with whether a contract e*istsB b. /he "tatute of )rauds 1,"#)-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 that 2-2 1 constantly refers to ,contract-, demonstratin! the presumption that 6 already e*ists. d. #fficial Comment F states that failure to comply with "#) does not render K void. . 6 must involve sale of !oods for price of JIGG or more 1the value of the !ood is irrelevantB2 a. 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%/& 1Uniform %lectronic /ransactions &ct2, which has been passed by over half the states includin! 3ndiana, the idea of a ,record- is substituted for ,writin!.. Si5ne+ %y t)e part a5ainst w)om it is to %e $se+: a. complete si!nature is not reDuired@ can be any symbol e*ecuted or adopted wit) t)e present intent to authenticate a writin! 1includes initials, thumbprint, stamp, etc.2 b. preprinted letterhead can be adopted as a si!nature for that writin! c. Use 2-2 1113 when you have a writin! si!ned by the 6 breacher 2. ?$antity term a. words can suffice@ e.!., sayin! ,the car- indicates ,one- car. b. no other terms are reDuired, and can even be misstated c. 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 1both parties must be merchants2 b. received within a reasonable time c. sufficient a!ainst the sender 1si!ned writin! includin! price term2 d. receivin! party had reason to know of its contents e. receivin! party does not provide written notice of ob=ection within 1G days f. %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 buyer b. 'oods are not suitable for sale to others in the ordinary course of sellers business c. "eller before repudiation is received has made substantial be!innin! of their manufacture or commitments 5. #ther times 6 enforceable even thou!h doesnt meet "#)

a. 4eceipt + acceptance of !oods or payment b. $arty admits in court 6 was made TRA4E USA/E! COURSE OF 4EALI,/! @ COURSE OF PERFOR-A,CE "ee ?? 1-1 21231%3, 1-2 ", and 2-2 A. ? 1-2 1123 defines ,a!reement- as not bein! =ust the four corners of the document, but as encompassin! the bar!ain of the parties in fact. /his approach takes account of what the parties do, what they say, and how they act. :ierarchy of 3nterpretation 1. %*press terms . Course of performance: seDuence of conduct between parties for that particular transaction 5. Course of dealin!: seDuence of conduct between the parties for previous transactions F. /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 $arol %vidence 4ule 1,$%4-2 is to protect the investment that some contractin! parties make when they take the time and trouble to reduce their contract to a final version. $%4 acts as a barrier to e*trinsic evidence 1material outside the writin!2 of terms. $rohibits =ury from hearin! evidence of terms that did not appear in the final writin!. 8oes $%4 applyC )our /hin!s /hat 0ust Be $resent to /ri!!er the $%4: 1. Re'or+ 1$%4 does not apply to oral a!reements2 . Inte5rate+ 1in whole or in part2: 9hether a record is inte!rated is a Duestion of intent. 8id the parties intend for the record to be the final e*pression of their a!reementC 5. Term e0i+en'e that were tryin! to use to add to, e*plain, or contradict F. 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 time prior to or contemporaneous with the process of finali;in! and e*ecutin! that record. 8oes $%4 keep out the e*trinsic evidenceC 1. /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 terms a. /hese are thou!ht to be ,silent terms- of the a!reement b. &ssume these were ,taken for !ranted- when document was written . Consistent additional terms: %vidence of consistent additional terms may be shown U.>%"" court finds that parties intended the writin! to be complete and e*clusive a!reement of terms a. T)e Rea( Test: /erms are so material that they surely would have been included in the writin! if they had actually be a!reed upon

i. /est of si!nificant materiality ii. Burden of proof is on party wantin! to keep evidence out iii. 9ritin! must be inte!rated and the e*clusive a!reement b. -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 1unless specifically e*cluded by 6s terms2 . 2-2 1: 'eneral #bli!ations a. "eller must transfer and deliver conformin! !oods b. Buyer must accept and pay accordin! to 6 5. 2-2 2: Unconscionability a. 3f a court finds a contract or a clause to be unconscionable at the time it was entered into, it may refuse to enforce the contract, enforce the contract without the unconscionable clause, or limit the application of the unconscionable clause b. Test: &re the clauses involved so one-sided as to be unconscionable under the circumstances e*istin! at the time of the making of the contractC F. 2-2 8: 0ode of $ayment a. 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 receives b. 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. 2-2 ": $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. 2-2 <: #utput or 4eDuirement 6 1,indefinite- Duantity2 a. 6 for output7reDuirement is not ,too indefinite- because it ,is held to mean the actual !ood faith output or reDuirements of the particular party.b. "ee Comment : a shut-down or an e*pansion of a party in such a 6 is acceptable if it is in !ood faith. c. 3f 6 includes an estimated need or output, then no amount ,unreasonably disproportionate- to it may be tendered or demanded. L. 2-2 #: 8elivery via "in!le >ot or "everal >ots a. Unless otherwise a!reed, assume single lot deliveryM b. M unless circumstances indicate the parties clearly intended otherwise c. $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. 2-2 A: $lace for 8elivery a. Unless otherwise a!reed, se((erCs p(a'e of %$sinessDresi+en'e is place of delivery A. 2-2 9: /ime for $erformances a. &ll actions taken under a 6 must be taken within a ,reasonable- time if no time has been a!reed upon

b. /ime for payment is related to time for delivery, unless otherwise a!reed c. "urprise is to be avoided, !ood faith =ud!ment is to be protected d. 4e: early offers of or demands for delivery, see Comment F 1G. 2-21 : /ime for $ayment7"hippin! under 4eservation a. $ayment due at time + place where buyer receives !oods 1or documents of title2 b. "hippin! under reservation, see 1b2 11. 2-211: #ptions for &ssortment, "hippin! &rran!ements a. #ptions for assortment are left to buyers 1unless otherwise a!reed2 b. "pecifications or arran!ements for shippin! are left to sellers 1unless otherwise a!reed2 U,CO,SCIO,A:ILITE 9hat is UnconscionableC 1. & 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 mandatory arbitration is not unconscionable. 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 may be unconscionable<or it may be freedom of 6. F. & provision in a consumer mass-market 6 providin! for the confession of =ud!ment a!ainst the consumer in any dispute involvin! the transaction IS unconscionable. >ARRA,TE OF TITLE "ee ? 2-8 2: $ower to /ransfer ? 2-212: 9arranty of /itle 1. 3n every sale, seller promises that a. 'ood title is conveyed, &.8 b. 'oods are delivered free from any security interest7lien7encumbrance of which the buyer has no actual knowled!e. . "eller who is a merchant in !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!er true if a buyer orders !oods prepared or assembled to his own specifications<the buyer bears the risk of infrin!ement. 5. &ny sale 1includin! non-merchants2 include a warranty of title@ unless the sale e*ists in circumstances that !ive buyer a reason to know that the seller does not claim title to himself, or is sellin! only whatever ri!hts he personally has. F. 9arranty of title is strict liability, meanin! a seller can be held liable even if he was innocent and not ne!li!ent. I. /oo+ Fait): )or a non-merchant, it is honesty in fact. )or a merchant, it is honesty in fact plus observin! the reasonable standards of the industry.

K. L.

N.

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. O.ote that a purchaser includes situations other than outri!ht sales, but some value must be !iven for the item.P $ower to /ransfer a. 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 fide purchaser. 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 check 5. &!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 purchaser would have !ood title iii. $olicy: "eller is a!reein! to enter into the transaction, and therefore, seller bears risk of loss. %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 in the ordinary course of business. >ARRA,TIES OF ?UALITE

3ncludes 1. %*press 9arranties ? 2-212 a. Can be !iven by anyone@ does not have to be a merchant i. $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 warrantiesB :owever, parties are free to make whatever bar!ain they wish, so lon! as it is done in !ood faith. b. &ffirmation of fact or promise 1as opposed to puffery and opinions2 made by seller to buyer which relates to the !oods and becomes part of the basis of the bar!ain. i. $uffery ( ,finest,- ,prettiest,- ,youll feel your best,- ,this will make you more attractive,- ,it looks wonderfulii. &ffirmations can arise from description of product written on label, does not have be said iii. 8escription of the !oods, or a sample, or a model, that becomes part of the basis of the bar!ain is an e*press warranty c. /he time of 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 to be re!arded as part of the contract.- 3f the words, sample, or model forms part of the basis of the bar!ain, it is part of the e*press warranty, even if it appears at the tail-end of the bar!ain.

1G

5.

3mplied 9arranty of 0erchantability ? 2-218 a. &rises if the seller is a merchant with respect to !oods of the kind b. 9arranty asserts that: i. 'ood passes without ob=ection in the trade ii. '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 description iv. 4un, with permitted variations, of even kind, Duality and Duantity v. &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 of threatenin! surprise- because it is ,so commonly taken for !ranted.- "ee 221<123 for rules of e*clusion. 3mplied 9arranty of )itness for a $articular $urpose ? 2-21" a. /his warranty ,trumps- the other two b. :owever, all three warranties can overlap and sometimes even be inconsistent c. /his warranty arises when seller knows or has reason to know of the buyers particular purpose and the buyer relies on the sellers skill or =ud!ment to furnish suitable !oods 4ISCLAI-I,/ >ARRA,TIES @ RE-E4IES

/wo &reas of 4emedy in a 'oods /ransaction: 1. Bar!ain 3nterest a. /he sub=ect of the contract b. /he contract terms and promises . ConseDuential 8ama!es a. /he ,secondary effects- of the 6@ they relate to a separate transaction than the purchase or 6 itself b. $roperty dama!e c. $ersonal in=ury d. $ure economic loss e. #ld standard for collectin! conseDuential dama!es is foreseeability. /he dama!es must be reasonably foreseeable by the seller in order to be compensable. /his is to enable the seller to rationally factor the possible dama!es into their business and cost decisions. &naly;in! 9arranty 3ssues 1. 9hat kinds of warranties would be applicableC a. /he ability to disclaim depends entirely upon the type of warranty at issue b. 2-21< is the list of rules for how to disclaim . 3s the techniDue used by the "eller disclaiming or limitingC a. 8isclaimin! >iability ? 2-21< i. & disclaimer of warranty tells you what the seller promised to do. 3t !oes to the Duality of the !oods, and if the seller disclaims merchantability, he

11

is tellin! you that hes not promisin! to sell you somethin! very !ood. 3t limits the scope of the sellers promise under the 6. ii. /o disclaim the imp(ie+ warranty of mer')anta%i(ity: 1. 0ust use the word ,merchantability. 3f it is in writin!, it must be conspicuous 1see 2-2 111 32 5. "ee Q of 2-21<: /rade usa!e can be shown to disclaim this warranty, even if it is not e*pressly disclaimed. iii. /o disclaim the imp(ie+ warranty of fitness for parti'$(ar p$rpose: 1. /here are no ,ma!ic words. 3t must be in writin!. /his is tou!her to disclaim than merchantability because fitness ,trumps- the other warranties. iv. 9hy e*press warranties are not disclaimable like the implied warranties 1. Eou can control what youre promisin! with e*press warranties, and control your risk. . 3mplied warranties are imposed by operation of law, and the seller does not even need to intend to make them in order to do so. /hus, we allow sellers to disclaim the implied warranties, rather than the e*press warranties. v. 9ays to &void 3mplied 9arranties 1other than e*press lan!ua!e2 1. 6As Is7 or 6>it) A(( Fa$(ts7: "ellin! somethin! conspicuously marked ,as is,- in normal commercial usa!e, waives the implied warranties. :owever, the e*press warranties are not waived. 4emember, a !eneral disclaimer is not effective to waive e*press warrantiesB . Inspe'tion: 3f buyer has e*amined the !oods 1or had opportunity to do so but didnt2 there is no implied warranty for defects that would have been revealed durin! the inspection. a. 3t is not sufficient to make the !oods available for inspection@ there must be a demand for buyer to inspect. 5. Ot)er: 3mplied warranties can be e*cluded or modified throu!h trade usa!e, course of dealin!, or course of performance. b. >imitin! 4emedies ? 2-#19 i. /hese function in the performance, rather than the formation sta!e. /he techniDue of limitin! warranty concedes breach and says that even if there is a breach, there is a limited universe of remedies available. ii. "eller may limit buyers remedy to return of the !oods and repayment of the price, or to repair and replacement of non-conformin! !oods 1. E;'($si0e Reme+ies: 3f a seller wishes to create e*clusive remedies for a sales transaction, he must do so specifically and state that the remedies are exclusive. #therwise, the Code presumes the mentioned remedies are cumulative to the Code remedies. iii. 3f an e*clusive or limited remedy +oes not f$(fi(( its essentia( p$rpose, then buyer may resort to any remedy under &rticle 1. & limited remedy fails when seller is unwillin! or unable to make the !oods conformin!

. -a&ority Approa'): %*clusion of conseDuential dama!es does not fail when limited remedy fails of essential purpose unless the e*clusion was unconscionable 5. -inority Approa'): %*clusion of conseDuential dama!es 8#%" fail when limited remedy fails of essential purpose F. Courts are likely to find unconscionability when there is a consumer, when there is disparity in bargaining power, and when the parties use pre-printed forms. I. Courts are unlikely to find unconscionability when the limitations are freely negotiated between sophisticated parties, which most likely occurs in commercial settin!s. iv. /he courts will tolerate a lot more under the limitation provision than they will tolerate under the disclaimin! provision. /he Code disfavors disclaimers of warranty, but favors remedy limitations. 1:owever, from a functional perspective, they can land the "eller in the same place.2 v. ConseDuential dama!es may be limited or e*cluded unless the limitation or e*clusion is unconscionable 1. Persona( in&$ry: >imitation of conseDuential dama!es for personal in=ury due to consumer !oods is prima facie unconscionable . Commer'ia( in&$ry: .ot prima facie unconscionable Breach of 9arranty 8efenses 1. ,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 2-21A b. HoriFonta( Pri0ity: i. &lternative & 1used by most states2 1. &ny natural person . 3n the family or household of the buyer, or a !uest in buyers house 5. 3f it is reasonable to e*pect that such person may use, consume, or be affected by the !oods ii. &lternative B 1. &ny natural person . 9ho may reasonably be e*pected to use, consume, or be affected by the !oods iii. &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 privity ii. 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,TE ACT

15

4eDuirements 1. Consumer product a. ? 1 1 states that the status of ,consumer product- comes from the usual use of the product: ,any tan!ible personal propertyM which is normally used for personal, family, or household purposes.i. Eou must e*amine the normal use, rather than the actual use. /hus, a )ord )ocus purchased and used by a business is still a consumer product, because it is normally used for personal, family or household purposes, but a LFL Rumbo Ret purchased by Rohn /ravolta is not a consumer product because it is not normally used that way 1even thou!h he mi!ht use it as such2. b. ? 1 2 defines a consumer as a buyer not for the purposes of resale. /hus, 00 does not cover an e*porter or a retailer buyin! products from a wholesaler. c. /he way 00 defines ,consumer- automatically rela*es privity reDuirements. 3f you 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 the ori!inal consumer. d. Sertical privity is also rela*ed under ? 1 1183 which renders a supplier ,any person en!a!ed inMmakin! a consumer product directly or indirectly available to consumers.. 4etail sale 5. 9ritten warranty7service contract 4elationship to UCC 1. 0a!nuson 0oss 1,00-2 supersedes the UCC because 00 is federal law whereas UCC is state law. /hus, 00 displaces &rticle whenever they are inconsistent. . & document 1e.!., a ,>imited 9arranty for $roduct T-2 may raise an alternative theory distinct from &rticle . 9arranties under 0a!nuson 0oss 1. )ull 9arranty: a. /he ,'ood :ousekeepin!- seal of approval b. &lmost never !iven@ it is like an e*tra !uarantee c. 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 carries possibilities of hu!e liability. d. &nythin! that does not Dualify as meetin! the minimum standard of warranty under 00 is supposed to be specifically labeled as ,>imited. >imited 9arranty a. /he ,re!ular warranty5. 3mplied 9arranties a. /he implied warranties from state law 1UCC2 are tri!!ered, even when the 00 warranty attempts to disclaim them.

1F

F. I. K.

b. Under 00, implied warranties cannot be disclaimed. "ee ? 1 A. /he seller can limit the e*istence in time of the implied warranties 1basically a remedy limitation2 but cannot !et rid of them alto!ether. c. .#/%: if the seller !ives a f$(( warranty, the time cannot be limitedB 9arranties must be conspicuous, and the warranty information must be available to the consumer prior to purchase. &ny (imitation of reme+ies in 00 warranties must be conscionable. 00 borrows the idea of conscionability from &rticle . /here may be fact-specific statements about the product that are e*press warranties under the UCC, but are not 00 warranties. a. 00 warranties only relate to the normal consumer use of the !ood. b. %.!., .ormal product information 1e.!., ,/his product is made of IGH wool-2 is not a 00 warranty about the products functionality. :owever, that statement would still be an e*press warranty under &rticle . I4E,TIFICATIO, @ TE,4ER

3dentification 1. 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. . ? 2-8 1 professes 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 and insurance interest. F. Code prefers that identification occur early in the process, but parties can a!ree to have identification occur at whatever time they wish. I. "ee ? 2-" 1123: Code contemplates that buyer and seller can both have an identifiable interest 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 1described2 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 seller ii. e.!., bulk from sellers inventory c. Crops: 9hen planted if harvested within 1 months or the ne*t normal harvest season, whichever is lon!er d. Un%orn Eo$n5: 9hen conceived if the youn! are to be born within 1 months after 6 is made "ellers /ender

1I

1. . 5.

F.

3f the "eller tenders delivery of the !oods, the Buyer must act affirmatively to disavow the tender and re=ect the !oods. 3f Buyer does not do so, he ,accepts- the !oods and must pay for them. Unless otherwise a!reed, the "ellers tender tri!!ers his ability to !et paid. /o make proper tender: a. 0ake available 1put and hold for the buyers disposition2 conformin! !oods. "ee ? 2-" 2113. b. Buyer must be !iven a reasonable opportunity to take possession. c. 3f youre !oin! to ship !oods employin! a common carrier 1e.!., )ed %*, U$", etc.2, tender reDuires compliance with 2-" 8 as well. i. "eller must make 6 with carrier. ? 2-" 81a3. Code leaves it up to seller to choose a carrier unless 6 specifies otherwise. ii. "eller must !et the bill of ladin! 1and other paperwork the carrier !ave the seller2 to the buyer. ? 2-" 81%3. 9ithout these documents of title, buyer cannot prove to carrier that it is entitled to receive !oods. iii. "eller must notify buyer of the shipment. ? 2-" 81'3. Connect this back to 2-2 <, where a prompt promise to ship or the act of shipment may be an acceptance of 6. iv. :#9%S%4, failure to notify buyer or to make a proper 6 with carrier is only !round for re=ection if it causes material delay or loss 4isk of loss: a. 3n a non-merchant, face-to-face transaction, risk of loss passes to the buyer when tender occurs. b. &n improper tender does not shift the risk of loss to the buyer under 2-" 9. c. S)ipment = 1see 2-2191131a32 i. ,).#.B. "ellers >ocationii. "eller bears the risk of loss only until a proper tender is made to the common carrier and the seller !ets the appropriate +o'$ments of tit(e. &t that time, the risk shifts to the buyer. iii. /his section plays a 5ap-fi((er ro(e: Code presumes a 6 is a shipment 6 unless otherwise stated. iv. "ometimes called a ,send off- 6 because seller is only promisin! to send off the !ood<after that, the risk of loss is on buyer. d. 4estination = 1see 2-2191131%32 i. ,).#.B. Buyers >ocationii. 4isk of loss remains on the seller until the tender is completed at the place of 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 wind up. e. C.I.F. or C. @ F. ( "hipment 6s f. 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

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h. Use of :ai(ee: #nly applies to 5d party bailees. 4isk of loss passes to buyer when: i. Buyer receives ne!otiable document of title to the !oods ii. Bailee acknowled!es buyers ri!ht to possession of !oods, or iii. Buyer receives non-ne!otiable document of title to the !oods %ffect of Breach on 4isk of >oss a. 3f buyer had ri5)t to re&e't !oods, risk is on the seller re!ardless of the shipment term until seller cures or buyer accepts b. 3f buyer had ri5)t to re0o*e a''eptan'e risk can be shifted back to seller, but only to the e*tent that buyer is underinsured i. $olicy: Because buyer accepted !oods, buyer is in possession and probably procured insurance on them c. 3f %$yer %rea')e+ or rep$+iate+, and the !oods have been i+entifie+, and risk of loss has not yet passed to buyer, then seller can shift risk to the buyer, but only to 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 8elivery 1. 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 !oods ii. accept all the !oods, or iii. accept any !oods and re=ect the rest 1. 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 is irrelevant c. Can always ar!ue course of performance, course of dealin!, or trade usa!e d. 3f remedy is limited to repair, then buyers ri!ht to re=ect is limited . "ubstantial $erformance70aterial Breach: 2-<12 a. 3nstallment 6 ( 0ore than 1 delivery is reDuired or authori;ed b. &n installment may be re=ected if: i. .on-conformity substantially impairs 1materially breaches2 the value of the installment, &.8 ii. .on-conformity can not be cured. %ven if non-conformity substantially impairs value of installment, it cannot be re=ected if seller can cure c. /he entire installment 6 can be re=ected if: i. .on-conformity of one or more installments substantially impairs the value of the whole 6 ii. 3t is not sufficient that the non-conformity indicate a likelihood of future non-conformity 1althou!h that would !ive buyer !rounds to ask for adeDuate assurances2

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Cure 1see ? 2-" A2 a. /he 4i!ht to Cure i. 3f "eller performs early and Buyer detects a problem, "eller has an absolute right to 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 6 ii. S$rprise Re&e'tion: 9hen seller does not perform early, and buyer re=ects non-conformin! !oods that seller reasonably had !rounds to believe would be acceptable, then seller may substitute conformin! !oods in a reasonable time 3) he seasonably notifies buyer of his intention to cure. iii. Courts !enerally bend over backwards to accommodate "ellers ri!ht to cure. iv. "haken faith doctrine: 9hen buyer no lon!er has faith in the product because of the defect. .#/% that &rticle does not authori;e this e*ceptionB 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-conformity a. )ailure to act results in acceptance: !oods must be re=ected within a reasonable time after delivery b. 9hat Constitutes &cceptance 1see 2-< <2 i. 3ndicatin! to seller that !oods are conformin!, or that they will be taken in spite of non-conformity, after a reasonable opportunity to inspect 1. $ayment after tender may be such an indication, but it is not conclusive. %ven when buyer pays for !oods, he still has an opportunity to inspect. ii. )ailin! to make effective re=ection after reasonable opportunity to inspect iii. 8oin! any act inconsistent with sellers ownership c. %ffect of &cceptance 1see 2-< #2 i. 3f buyer accepts, he must 1. pay for !oods at 6 rate . notify seller of any breach within reasonable time to preserve ri!ht to remedy 5. have burden of provin! !oods are non-coformin! d. 4evocation of &cceptance 1see 2-< A2 i. Buyer may revoke acceptance 3): 1. .on-conformity substantially impaired value of 6, a. >ook at material breach from position of buyer. 3t is not completely sub=ective, but it is a ,personali;ed- ob=ective breach standard. & person ,similarly situated- to the buyer is the standard. A,4

1N

H-UST ALSO FIT O,E OF THE FOLLO>I,/ 2 FACT PATTER,SIJ . 'oods were accepted, butM: a. C$re: Buyer reasonable assumed that non-conformity would be cured, but seller failed to cure b. Latent 4efe't: 8efect was latent and could not be discovered even with reasonable inspection c. Ass$ran'es: buyer relied on sellers assurances 1promises or assertions by seller that product is or will become conformin!2 5. Buyer must revoke acceptance within reasonable time of discoverin! defect 1or when defect should have been discovered2 F. /here is no substantial chan!e in the condition of the !oods other than that caused by the defect I. 4evocation will not be effective until buyer notifies seller of the revocation a. 3t is not sufficient for buyer to merely indicate dissatisfaction or unhappiness@ must clearly indicate an intention 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. 2 prohibits the seller from attemptin! to cure in a revocation of acceptance in a consumer 6 . 4e=ection a. 0anner + %ffect of 4i!htful 4e=ection 1see 2-< 22 i. Buyer must re=ect !oods within reasonable time after delivery7tender ii. Buyers re=ection only effective after buyer notifies seller iii. Buyer must specify the defect. )ailure to specify precludes buyer from relyin! on that defect to =ustify the re=ection or breach, if seller could have cured that defect iv. "eller has ri!ht to inspect !oods v. 3f buyer does somethin! inconsistent with his status as re=ecter, buyer has either accepted or converted the !oods b. 8uties of 4e=ectin! Buyer 1see 2-< 2! 2-< 8! + 2-< "2 i. ,on-mer')ant %$yer: 'enerally only has duty to hold the !oods with reasonable care for sellers disposition. 3f seller does nothin! with the !oods, buyer may: 1. "tore them for sellers account . "hip them to seller 5. 4esell them for sellers account + receive reimbursement for costs associated with resale ii. -er')ant %$yer: 1. 8uty to follow any reasonable instructions received from seller re!ardin! reshippin!, storin!, delivery, and resellin!.

1A

. 3n absence of instructions, buyer must make reasonable efforts to resell the !oods if they are perishable or may decline in value Duickly 5. 3n absence of instructions for non-perishable !oods, buyer may store, ship, or resell as stated for non-merchant buyer. A,TICIPATORE REPU4IATIO, A,4 RE?UESTS FOR A4E?UATE ASSURA,CES OF PERFOR-A,CE &nticipatory 4epudiation 1see 2-<1 2 1. &t common law, each party had to be willin! to perform until the party knew for sure that the other would not perform@ this was inefficient. . &nticipatory 4epudiation: an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance a. "ee Comment 2. 3f a party !ets information from ,an apparently trustworthy source- that su!!ests a problem with the Duality of a sellers !oods, or a problem of a buyers inability to pay, that can be !rounds for insecurity. b. .ote that a demand by one or both parties for more than 6 calls for 1more money, more wid!ets, etc.2 is not in an+ of itse(f a rep$+iation. 3t is a reDuest for modification. /hus, a reDuest for modification must include a statement of intention not to perform except under conditions that !o beyond 6. 5. Code reDuires that repudiation not %e tri0ia( 1it must be substantial impairment or material breach2. Eou do not !et the benefit of perfect tender rule in anticipatory repudiationB a. %.!., 3f party indicates that a shipment will be delayed, the innocent party must demonstrate that the delay would substantially impair the value of that shipment in order to declare that indication a repudiation. F. Commercial 4easonability: 9hen either party anticipatorily repudiates 6 before date of performance, the non-breachin!7non-repudiatin! 1,innocent-2 party may: a. 9ait for performance for a commercially reasonable time b. 3mmediately resort to a remedy for breach, even if the party already notified the repudiatin! party that it would await performance c. "uspend its own performance I. 8ama!es: determinin! market value a. 3f :$yer rep$+iates: market value of !oods at time an+ p(a'e of ten+er b. 3f Se((er rep$+iates: market value of !oods at time @ p(a'e %$yer (earne+ of %rea') i. Buyer may, but is not reDuired to, 'o0er: buy substitute !oods and recover dama!es for the difference between cover price and 6 price ii. 3f buyer does not cover, dama!es are market value minus 6 price c. 0eanin! of ,breach- in 2-#12: i. 3s it the date buyer learned of sellers repudiation, or should the buyer wait until the date of performance in case seller retracts the repudiationC ii. Eou should base the market price on whichever date a reasonable person, similarly situated, would have covered K. &deDuate &ssurances of $erformance 1see 2-< 92

L.

a. 9hen reasonable !rounds for insecurity arise about the other partys performance, innocent party may demand in writing adeDuate assurances of due performance. b. Until such assurances are received, the innocent party may suspend his own performance. c. 3f assurance is not !iven in a reasonable time 1not more than 5G days2 then innocent party may treat 6 as repudiated. 4etraction of 4epudiation 1see 2-<112 a. 4epudiatin! party may cancel repudiation at any time prior to date of performance unless other party has cancelled 6 or materially chan!ed its position in reliance on the repudiation b. 4etraction may be by any method, but must include any assurance reDuested under 2-< 9 EGCUSE

%*cuse 1. %*cuse to performance is different than 6 defenses, which !o to the formation or to public policy. %*cuse concedes youve breached. a. 3f youre askin! for e*cuse, youre admittin! you have not performed, but youre sayin! there is a =ustifiable reason for your non-performance. b. 3f youre assertin! a defense, you are assertin! that there may not have actually been a 6. i. 8efenses are not covered by &rticle . /hey come from common law. 1. I((e5a(ity: 6 violates law or public policy, provides a complete defense . 4$ress, fra$+, m$t$a( mista*e or $ni(atera( mista*e indicates that the assent to 6 was not ,real- and therefore should not be enforced . 2-<12: Casualty to 3dentified 'oods a. >oss must occur after t)e 5oo+s are i+entifie+ to t)e =I b. >oss must occur wit)o$t fa$(t of eit)er party before risk of loss passes to buyer c. 3f it is a tota( (oss 6 is completely avoided 1as if it never e*isted2 d. 3f it is partia( (oss, or !oods have been +ama5e+ so that they do not conform to 6, then Buyer may inspect the !oods and either: i. treat 6 as avoided, or ii. accept !oods with ,due allowance from 6 price- to make up for the loss 5. 2-<18: "ubstituted $erformance a. 3f there is a problem with the contemplated shippin! arran!ements, but a reasonable substitute is available, the seller may make that substitution. b. /he substitute must be commercially reasonable. F. 2-<1": %*cuse by )ailure of $resupposed Conditions a. 4eDuires: i. &n event occurs which was unforeseen at the time 6 was made 1. 3t must be somethin! that !oes to the core of the bar!ain . 3t cannot be trivial ii. /hat occurrence renders performance impracticable

iii. /he idea is that whatever event occurred was assumed would not occur as a condition of parties performance. b. 3ncreased costs or a chan!e in the market +oes not make performance impracticable. 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 price decreases. ii. "evere s)orta5es of raw materia(s due to war, embar!o, local crop failure, or unforeseen shutdown of ma=or sources may make performance impracticable iii. 3t is not sufficient for a seller to demonstrate that performance under 6 would result in a net loss to him or a deprivation of his profits. c. &llocation amon!st customers i. "ee 2-<1"1%3: 3f event occurs that affects part of sellers capacity to perform, and seller must allocate his inventory amon!st various customers, the seller may ,allocate in any manner which is fair and reasonable.d. ,oti'e: "eller must seasonably notify buyer of delay, non-delivery, or allocation RE-E4IES /he two main K$estions to answer: 112 9ho is the victimC and 1 2 :ave the !oods been acceptedC "eller 4emedies 1. "eller + &ccepted 'oods a. &ction for the $rice 1see 2-# 92 i. 9hen buyer fails to pay, seller may recover unpaid price on: 1. &ccepted !oods . Conformin! !oods lost or dama!ed, within a reasonable time after risk of loss shifts to buyer 5. 'oods identified to 6 if seller is unable to resell them after reasonable effort to do so at a reasonable price b. /wo functionally eDuivalent patterns to accepted !oods: i. 4isk of loss shifted to buyer but !oods are in sellers possession ii. "eller is makin! a !ood that it cannot readily resell 1specialty !oods2 . "eller + Unaccepted 'oods a. "eller can choose between dama!es under mar*et pri'e or resa(e pri'e b. 0arket $rice 1see 2-# A2 i. "ellers dama!es for non-acceptance or buyer repudiation ii. 8ama!es ( 10arket price U unpaid 6 price2 V incidental dama!es U e*penses saved 1. /ime of market value is the time of ten+er . >ocation of market value is p(a'e of ten+er iii. %*ceptions to this dama!e eDuation 1when seller wont be adeDuately compensated2

1. >ost Solume "eller 1,>S"-2 a. 3f 6 was not broken, >S" would have made profits rather than 1 i. "eller must be operatin! at 'apa'ity ii. "eller must not %e at (imit and +eman+ m$st %e ro%$st iii. $lenty of buyers who would pay the same price b. 8ama!es ( $rofit 1includin! reasonable overheadW seller would have made from buyers full performance V incidental dama!es V costs reasonably incurred U e*penses saved c. >abor costs are not part of ,overhead.- /hey are saved costs. Courts presume that >S" have saved labor costs by only havin! to make one, instead of two, sales. . Component "eller a. :as choice between completin! manufacture or ceasin! manufacture and sellin! for salva!e b. "eller only entitled to least amount of dama!es, so seller must make a reasonable choice c. $roblem is that if seller stops manufacture and sells for salva!e, the seller is not participatin! in the normal market d. 8ama!es ( $rofit seller would have made from buyers full performance V incidental dama!es V costs reasonably incurred 1those needed to finish manufacture2 U payments, proceeds or resale c. 4esale $rice 1see 2-# <2 i. 8ama!es ( 14esale price U 6 price2 V incidental dama!es U e*penses saved ii. "eller must act in !ood faith and in commercially reasonable manner in resellin! products. iii. 4esale may be 1. at private sale a. "eller must notify buyer of intention to resell b. .otice need not be in writin! c. .otice reDuired because we worry that a private sale may not be an arms len!th transaction + Buyer should have notice so they can police the transaction for commercial reasonableness . at public sale a. only identified !oods b. at a place or market where such public sale would usually be made c. seller must notify buyer of time + place of public sale 5. as unit or in parcels F. at any time or place 1but method, manner, time, place, + terms must be commercially reasonable2

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F.

I. 4esale must be reasonably identified as referrin! to broken 6 iv. 3f the seller violates -LGK, he is rele!ated to seekin! 0arket 8ama!es "ellers 4i!ht to 3dentify 'oods to 6 1see 2-# 82 a. .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 may cease manufacture + resell for salva!e "ellers +o not !et conseDuential dama!es

Buyer 4emedies 1. Buyer + &ccepted 'oods a. 3f buyer accepts !oods, and does not revoke acceptance, he may sue for warranty breach 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 any remedy. "ee 2-< #1231a3. ii. Buyers 8ama!es for Breach for &ccepted 'oods 1see 2-#182 1. Buyer cannot recover dama!es for accepted !oods unless notice was !iven to seller . 9arranty Breach a. 8ama!es ( value of !oods as warranted U value of !oods as accepted b. /ime of dama!es ( time and place of acceptance 5. .on-conformity a. any failure of seller to perform accordin! to 6 b. 8ama!es ( any manner which is reasonable F. Buyer also entitled to any incidental + conseDuential dama!es that may apply a. In'i+enta( 4ama5es: 0ana!ement of the breach i. %*penses incurred in inspection, receipt, transportation, care, + custody of !oods ri!htfully re=ected ii. Char!es or e*penses incurred in effectin! cover %. ConseK$entia( 4ama5es i. $ure %conomic >oss 1. >oss must be certain: look to prior track record and profits of similarly situated parties . >oss must have been foreseeable 5. Buyer must not have been able to prevent the loss throu!h cover F. "eller can be liable even if he didnt e*pressly a!ree to assume these risks ii. $ersonal 7 $roperty 3n=ury: pro*imate cause

5.

iii. 8eduction of 8ama!es from $rice 1see 2-#1#2 1. "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 under that same K. iv. "ecurity 3nterest 1see 2-#122 1. Buyer has security interest for !oods in its possession for any amount paid 1or amount of e*penses incurred2 for those !oods . Buyer can resell the !oods to !et reimbursement for the amount paid 5. Buyer may not keep any profit. 3t may only keep the amount of the price it paid and enou!h to reimburse the costs involved in inspectin! and handlin! the !oods. Buyer + Unaccepted 'oods 1or 4evoked &cceptance2 a. 0arket $rice 1see 2-#122 i. Buyers dama!es for non-delivery or repudiation ii. 8ama!es ( 10arket price at time when buyer learned of breach U 6 price2 V incidental dama!es V conseDuential dama!es U e*penses saved iii. >ocation of 0arket $rice ( p(a'e of ten+er, or place of arrival if re=ected after !oods arrived or acceptance was revoked iv. /ime of 0arket $rice ( w)en %$yer (earne+ of %rea') b. Cover $rice 1see 2-#122 i. 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 is commercially reasonable, then it is immateria( that hindsi!ht proves the method of cover used was not the cheapest or the most effective. 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 say buyer took too lon! to cover. v. 8ama!es ( 1cost of cover U 6 price2 V incidental dama!es V conseDuential dama!es U e*penses saved c. BUYER MAY CHOOSE between usin! 0arket $rice dama!es or Coverin!M but cover may foreclose the buyers ability to !et conseDuential dama!es. d. Offsettin5 :enefit R$(e: 3f buyer ,covers- with somethin! much newer or more valuable than the ori!inally contracted-for !ood, we would try to calculate the benefit buyer !ets from replacin! the 6 !ood with this new7better !ood. /hen, if we could Duantify that, we would deduct that value 1the ,offsettin! benefit-2 from the dama!es. Burden of raisin! and provin! offsettin! benefit is on seller. e. Buyers 4i!ht to "pecific $erformance 1see 2-#1<2 a. "pecific performance is a form of in=unction@ forces seller to perform accordin! to 6

b. &t common law, specific performance was only available for ,uniDue !oods1real estate, heirlooms, works of art2 c. "pecific performance may be !iven where !oods are $niK$e or under ot)er proper 'ir'$mstan'es 1!oods are the functional eDuivalent of ,uniDue-2 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 performance ii. /ype of 6 ( output or reDuirements: 6, in its entirety, was uniDue iii. /his may include ,lon!-term supply 6s- 1like those for fuel2, where courts may consider the overall commercial feasibility of replacement, and while the !ood 1e.!., fuel2 may not be ,uniDue- per se, overall circumstances may still call for specific performance. Courts reco!ni;e the disruption of buyers business + inconvenience to others down the chain of distribution, could be enormous in certain circumstances and difficult to evaluate with any certainty. d. Buyer must show he cannot be made whole throu!h monetary dama!es