History of UCC is important for two reasons:

1. UCC is state law: it bubbles up from the bottom, it isn’t top down. But that means that if
states don’t like certain provisions they can pass non-uniform versions.
2. Because UCC is state law, it can be trumped by contrary federal law: federal bankruptcy
law, federal law regulating farmers. etc.

SCOPE OF ARTICLE 2

2-102, 2-105, 2-107

SCOPE
1. Common law of contracts still applies, unless trumped by Article 2
2. Article 2 applies to transactions in goods
a. Scope can be defined by subject matter and by nature of transaction
i. Goods = Something tangible and movable at time of identification
1. Future goods = goods which are not both existing & identified
2. “Goods” does NOT include
a. Money (when it is the medium of payment)
b. Investment securities
c. Real estate
d. Services
e. Interest in realty (leases, bailments)
f. Intangibles (copyright, contract rights)
3. “Goods” does include:
a. Unborn young of animals
b. Growing crops
c. Identified things attached to realty (which will be severed
by the seller)
d. Specially manufactured goods
ii. Transaction = K for sale (as opposed to gifts, leases, or bailments),
includes K for present sale of goods & K for sale of goods at later time
b. Goods to be Severed from Reality
i. K for sale of minerals or the like (e.g., oil or gas) or a structure or its
materials is covered by Article 2if they are severed by the seller
ii. K for sale of growing crops, timber, or other things attached to land and
capable of severance without material harm is covered by Article 2
regardless of who severs
iii. Focus on the permanency of the good and who is doing the severing
c. Software / Information
i. Under scope of Article 2, computer programs are not “goods”
1. Goods under Revised Article 2: Does not include “information.”
Information was not included in new Article 2 because UCITA had
been drafted to govern information transactions, but UCITA is so
anti-consumer that only 2 states adopted it. Thus, there is largely
no law governing electronic information.

1
 2. Information: Under UETA includes data, text, images, sounds,
codes, computer programs, software, databases, etc.
ii. Smart goods
1. When transaction includes goods and information
2. Courts determine whether covered by Article 2:
a. Automobile: cars containing computer programs = GOOD
b. Architectural plans on disk = NOT a good

Two Tests Used in Hybrid Circumstances:

1. Predominant Factor (or Predominant Nature) Test. Majority Rule.
a. Characterize the transaction in an all-or-nothing context based on the primary
thrust of the transaction.
b. This places you back on the common law of contracts which doesn’t have as
many direct and obvious answers as the UCC—this is why many jurisdictions
have decided where it’s a close call to use the gravamen test (see below).
2. Gravamen Test. Modern Trend.
a. Characterizes the transaction based on the point of gravity, or the issue causing
the problem
b. If the goods aspect is the focus of the dispute, then we apply UCC. If the service
aspect of the transaction is the focus of the dispute, then we apply common law.

LEASES

Difference Between True Lease & Disguised Financing Agreement: § 1-201(37)

1. True Lease
Governed by Article 2A of the UCC
The test is based on economic realities. The lessor must “from the beginning” intend
to retain a meaningful economic reversionary interest
There will be something left at the end of the leasehold that still has value, and that
will revert back to the lessor
E.g., 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. The lessor
(landlord) never gives up ownership interest, and if you default on the lease, the
landlord still owns it. It does not matter if you file bankruptcy or have creditors
come after you; the apartment is always owned by landlord.
2. Disguised Finance Agreement (“Fake Lease”)
a. Governed by Article 9 (not an Art. 2 transaction!)
b. Is actually (1) sale of goods with (2) the granting of a security interest in those
goods
c. Agreement appears to convey possession and use to the lessee for the real
economic lifetime of the good
d. The lessee gets to possess and use the good until its value is exhausted
3. Test Under 1-201(37)
a. Can the lessee terminate the lease with no penalty? If “no” then there exists a
“warning flag” of a possible security interest. However, you must see if there is
at least one of the other factors in order to classify it as security interest.

2
 b. Other factors
i. Is the remaining term of the lease equal to the good’s economic life?
ii. Is the lessee obligated to renew the lease?
iii. Does the lessee have the option to renew the lease for the remaining
economic life of the good for nominal (or no) additional consideration?

MERCHANT RULES

Merchant Rules (see 2-104)

1. Being a merchant has nothing to do with whether the transaction comes within the scope of
Article 2. All transactions in goods are covered (except for those specifically excluded by
Article 2 or federal law).
2. Whether 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. Whether or not one is a merchant is a
flexible standard and a functional test.
a. Goods-based approach: You are a merchant if you deal in goods of the kind,
and if you hold yourself out as a merchant in goods of the kind (even if you don’t
actually have any experience in the area).
i. Applies to:
1. 2-201 Statute of Frauds
2. 2-205 Firm Offers
3. 2-207 Confirmatory Memoranda (battle of the forms)
4. 2-209 Modifications
b. Business practices definition: You maintain a place of business such that you
should be familiar with and it is fair to charge you with knowledge of normal
business practices.
i. Applies to:
1. 2-314 Implied warranty of merchantability
2. 2-402 Retention of possession
3. 2-403 Entrusting of possession
c. Mixed bag (either or both of the above)
i. Applies to:
1. 2-103 Commercially reasonable standards of fair dealing
2. 2-327, 2-603, 2-605 Responsibility to follow seller’s instructions
3. 2-509 Risk of loss
4. 2-609 Adequate assurances of performance
3. Point of merchant rules is to hold merchants in some circumstances to different standards
than others under Article 2.

FORMATION

Formation
1. Formation in General (see § 2-204)
a. K may be made in any manner sufficient to show agreement
b. Moment of making sufficient agreement may be undetermined

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 c. K is not indefinite simply because parties leave one or more terms open, so long
as parties intended to make K (objectively manifested a mutual intent to be
bound) and there is a reasonably certain basis for giving a remedy (must know
enough about K to determine damages).
d. K cannot leave open the subject matter or quantity terms.
2. Offer & Acceptance
a. Offer = objective manifestation of present intent to be bound
b. Offer invites acceptance by any manner and by any medium reasonable under the
circumstances.
i. Offeror must unambiguously indicate that a specific manner or medium is
required
ii. Stating a preference is not sufficient
c. Order or offer to buy goods for shipment invites acceptance by prompt promise to
ship, or by prompt shipment of goods (regardless of whether those goods are
conforming or non-conforming).
i. The shipment of non-conforming goods is NOT acceptance if seller
notifies buyer that shipment is only an accommodation to buyer.
ii. That becomes a counter-offer, and the original offeror can either accept or
reject.
d. Beginning of performance may act as acceptance, but if offeror is not notified of
acceptance within reasonable time, offeror may treat offer as expired.
3. Firm Offers (see 2-205)
a. An offer by a merchant to buy or sell goods in a signed writing which gives
assurances that it will be held open is not revocable for lack of consideration.
b. Signed writing: Offer of assurance must be in writing
i. Includes authentication: look at circumstances to determine what is
reasonable; typically authentication should consist of at least initialing the
term of assurance
ii. Hand-written note on writer’s letterhead, or an authorized telegram may
also count.
c. If there is no signed writing, then it reverts to common law rules, and some
consideration is required to hold the offer open.
d. Time limit: Offer cannot be open for more than three months (if consideration is
given, parties can make whatever time they want). If no time is stated, it will be
assumed to be a “reasonable time” not exceeding 3 months.
e. Form supplied by offeree: offeror must separately sign the term of assurance
f. Merchant: Business practice test: If the offer is made by a non-merchant, then
consideration is required
4. Modification (see 2-209)
a. Does not require additional consideration
b. Any modification must be in good faith
c. Modifications to Ks subject to statute of frauds must also be in writing
d. Modification must be accepted

THE BATTLE OF THE FORMS

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The Battle of the Forms (Additional Terms in Acceptance or Confirmation): § 2-207
1. This section gets rid of the common law “mirror-image rule” and performs functions related
to both formation and interpretation.
a. Is K formed under subsection (1)?
b. If “yes” then interpret using subsection (2).
c. If “no” then subsection (3) may be used for both formation & interpretation.
2. Formation
a. Look for pre-printed forms being exchanged by businesses.
i. Frequently seen with purchase orders and acknowledgment of receipt
(AOR) forms.
ii. UCC acknowledges the “fine print” of these forms is usually ignored, and
business people simply behave as though there is a K
b. Look for an oral K followed by a written confirmation that does not match the
oral K.
3. Interpretation:
a. Between merchants, additional terms are added to K UNLESS
i. Offer expressly limits acceptance to terms of offer, OR
ii. Terms materially alter K (create unreasonable surprise), OR
1. Clauses materially altering K:
a. Negating implied warranties that would normally apply
b. Requiring guaranty of 90% or 100% of deliveries
c. Where the usage of trade allows greater quantity leeway
d. Reserving seller the power to cancel upon buyer’s failure to
meet any invoice when due
e. Requiring that complaints be made in time materially
shorter than customary or reasonable
2. Clauses not materially altering K:
a. Fixing reasonable time for complaints
b. Providing for interest on overdue invoices
c. Limiting right of rejection for defects that fall within
customary trade tolerances
b. Between non-merchants, additional terms become part of K ONLY IF there is
agreement to the new terms.
c. Notification of objection to additional terms is given within reasonable time after
notice of them is received
d. Where there is a direct contradiction in terms, those are considered different
terms, rather than additional terms.
e. Knock Out Doctrine: When the writings do not establish K, but parties behave
as though K was formed, the terms of K are those on which the writings of the
parties agree. The differing terms are “knocked out” and filled in with gap-fillers,
course of performance, course of dealing, or trade usage.
4. When a plaintiff is not a merchant, additional or different terms contained in “standard
terms” do NOT become part of the K unless plaintiff expressly agreed to them.

STATUTE OF FRAUDS

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Statute of Frauds (see 2-201)
1. Prevents enforcement of oral Ks
a. The absence of a writing has NOTHING to do with whether a contract exists!
b. The Statute of Frauds (“SOF”) is an additional requirement imposed on Ks that
may already be formed for reasons that have nothing to do with formation.
c. This falls under the heading of “Formalities” rather than “formation.” Note that
2-201 constantly refers to “contract”, demonstrating the presumption that K
already exists.
d. Official Comment 4 states that failure to comply with SOF does not render K
void.
2. K must involve sale of goods for price of $500 or more (the value of the good is irrelevant!)
a. Revised Article 2 requires sale of good for price of $5,000 or more

Three Requirements for SOF

1. Writing: any intentional reduction to tangible form sufficient to indicate that K for sale of
goods has been made
a. Under UETA (Uniform Electronic Transactions Act), which has been passed by
over half the states including Indiana, the idea of a “record” is substituted for
“writing.”
2. Signed by the part against whom it is to be used:
a. complete signature is not required; can be any symbol executed or adopted with
the present intent to authenticate a writing (includes initials, thumbprint, stamp,
etc.)
b. preprinted letterhead can be adopted as a signature for that writing
c. Use 2-201(1) when you have a writing signed by the K breacher
3. Quantity term
a. words can suffice; e.g., saying “the car” indicates “one” car.
b. no other terms are required, and can even be misstated
c. K only enforceable to the extent of the quantity indicated by the writing

Applications of SOF
1. Written Confirmation: If written confirmation of K is received, K is enforceable against
receiving party
a. between merchants (both parties must be merchants)
b. received within a reasonable time
c. sufficient against the sender (signed writing including price term)
d. receiving party had reason to know of its contents
e. receiving party does not provide written notice of objection within 10 days
f. Effect: Removes SOF as a defense. Sending party still must prove that an oral
agreement existed.
2. Specially Manufactured Goods: K not meeting SOF is still enforceable
a. When goods are specially manufactured for buyer
b. Goods are not suitable for sale to others in the ordinary course of seller’s business
c. Seller before repudiation is received has made substantial beginning of their
manufacture or commitments
3. Other times K enforceable even though doesn’t meet SOF

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 a. Receipt & acceptance of goods or payment
b. Party admits in court K was made

TRADE USAGE, COURSE OF DEALING, & COURSE OF PERFORMANCE

See §§ 1-102(2)(b), 1-205, and 2-208.

§ 1-201(3) defines “agreement” as not being just the four corners of the document, but as
encompassing the bargain of the parties in fact. This approach takes account of what the parties
do, what they say, and how they act.

Hierarchy of Interpretation
1. Express terms
2. Course of performance: sequence of conduct between parties for that particular transaction
3. Course of dealing: sequence of conduct between the parties for previous transactions
4. Trade usage: practice or method having such regularity of observance so as to justify an
expectation that it will be observed with respect to the transaction in question

PAROL EVIDENCE RULE

The Main Idea: Purpose of the Parol Evidence Rule (“PER”) is to protect the investment that
some contracting parties make when they take the time and trouble to reduce their contract to a
final version.

PER acts as a barrier to extrinsic evidence (material outside the writing) of terms. Prohibits jury
from hearing evidence of terms that did not appear in the final writing.

Does PER apply? Four Things That Must Be Present to Trigger the PER:
1. Record (PER does not apply to oral agreements)
2. Integrated (in whole or in part): Whether a record is integrated is a question of intent. Did
the parties intend for the record to be the final expression of their agreement?
3. Term evidence that we’re trying to use to add to, explain, or contradict
4. Right timing: The extraneous “stuff” must crop up in the “danger zone” from a
chronological perspective. It must come from a time prior to or contemporaneous with the
process of finalizing and executing that record.

Does PER keep out the extrinsic evidence?

1. To explain or supplement: Evidence of course of performance, course of dealing, or trade
usage may be shown to explain or supplement any terms
a. These are thought to be “silent terms” of the agreement
b. Assume these were “taken for granted” when document was written
2. Consistent additional terms: Evidence of consistent additional terms may be shown
UNLESS court finds that parties intended the writing to be complete and exclusive
agreement of terms
a. The Real Test: Terms are so material that they surely would have been included
in the writing if they had actually be agreed upon

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 i. Test of significant materiality
ii. Burden of proof is on party wanting to keep evidence out
iii. Writing must be integrated and the exclusive agreement
b. Merger Clause: Presence of a merger clause is not conclusive, but is an element
court considers in determining whether the writing is exclusive.

GAP FILLERS

Gap Filler Sections:

1. Trade Usage, Course of Performance, Course of Dealing: These are considered “silent
terms” of the agreement and can always be used to interpret the K (unless specifically
excluded by K’s terms)
2. 2-301: General Obligations
a. Seller must transfer and deliver conforming goods
b. Buyer must accept and pay according to K
3. 2-302: Unconscionability
a. If 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: Are the clauses involved so one-sided as to be unconscionable under the
circumstances existing at the time of the making of the contract?
4. 2-304: Mode of Payment
a. If the price is payable in goods, in whole or in part, each party is a seller of the
goods he transfers, and is a buyer of the goods he receives
b. If price is payable in an interest in realty or in services, the transfer of goods is
an Article 2 transaction, but the transfer of the realty interest or services is not.
5. 2-305: Price
a. If price is to be set by one party, it must be set in good faith.
b. If price term is left open, the price is a reasonable price at the time of delivery.
6. 2-306: Output or Requirement K (“indefinite” quantity)
a. K for output/requirement is not “too indefinite” because it “is held to mean the
actual good faith output or requirements of the particular party.”
b. See Comment 2: a shut-down or an expansion of a party in such a K is acceptable
if it is in good faith.
c. If K includes an estimated need or output, then no amount “unreasonably
disproportionate” to it may be tendered or demanded.
7. 2-307: Delivery via Single Lot or Several Lots
a. Unless otherwise agreed, assume single lot delivery…
b. … unless circumstances indicate the parties clearly intended otherwise
c. Partial delivery may not be subject to rejection for defect in quantity only, if no
repudiation or default is indicated regarding the remaining goods to be delivered.
8. 2-308: Place for Delivery
a. Unless otherwise agreed, seller’s place of business/residence is place of delivery
9. 2-309: Time for Performances
a. All actions taken under a K must be taken within a “reasonable” time if no time
has been agreed upon

8
 b. Time for payment is related to time for delivery, unless otherwise agreed
c. Surprise is to be avoided, good faith judgment is to be protected
d. Re: early offers of or demands for delivery, see Comment 4
10. 2-310: Time for Payment/Shipping under Reservation
a. Payment due at time & place where buyer receives goods (or documents of title)
b. Shipping under reservation, see (b)
11. 2-311: Options for Assortment, Shipping Arrangements
a. Options for assortment are left to buyers (unless otherwise agreed)
b. Specifications or arrangements for shipping are left to sellers (unless otherwise
agreed)

UNCONSCIONABILITY

What is Unconscionable?
1. A provision in a consumer mass-market K requiring mandatory arbitration is not
unconscionable, but it should be easy to find and easy to understand.
2. A provision in a transaction between two large companies providing for mandatory
arbitration is not unconscionable.
3. The sale of a car for a price 300% above the market price to a young man from Kuwait who
never owned or bought a car previously may be unconscionable—or it may be freedom of
K.
4. A provision in a consumer mass-market K providing for the confession of judgment against
the consumer in any dispute involving the transaction IS unconscionable.

WARRANTY OF TITLE

See § 2-403: Power to Transfer

§ 2-312: Warranty of Title

1. In every sale, seller promises that
a. Good title is conveyed, AND
b. Goods are delivered free from any security interest/lien/encumbrance of which the
buyer has no actual knowledge.
2. Seller who is a merchant in goods of that kind warrants that has duty to see that no claim of
patent or trademark infringement by a third party mars the buyer’s title. This is no longer
true if a buyer orders goods prepared or assembled to his own specifications—the buyer
bears the risk of infringement.
3. Any sale (including non-merchants) include a warranty of title; unless the sale exists in
circumstances that give buyer a reason to know that the seller does not claim title to himself,
or is selling only whatever rights he personally has.
4. Warranty of title is strict liability, meaning a seller can be held liable even if he was
innocent and not negligent.
5. Good Faith: For a non-merchant, it is honesty in fact. For a merchant, it is honesty in fact
plus observing the reasonable standards of the industry.

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6. Purchaser: Someone who takes by sale, discount, negotiation, mortgage, pledge, lien,
security interest, re-issue, gift, or other voluntary transaction. [Note that a purchaser
includes situations other than outright sales, but some value must be given for the item.]
7. Power to Transfer
a. Void Title: Buyer acquires all title which seller had power to transfer. If seller
does not have good title, buyer has no title, even if buyer was a bona fide
purchaser.
b. Voidable Title: Person with voidable title can transfer better title than he has to a
good faith purchaser.
i. Person receives voidable title through
1. Deceiving seller as to identity of purchaser
2. Procuring goods through bad check
3. Agreeing the transaction is a “cash sale”
4. Procuring delivery through fraud
ii. Person can then sell goods to a good faith purchaser, and that purchaser
would have good title
iii. Policy: Seller is agreeing to enter into the transaction, and therefore, seller
bears risk of loss.
8. Entrustment: Entrusting the possession of goods to a merchant who deals in goods of the
kind gives the merchant power to transfer all rights of the entruster to a good faith buyer in
the ordinary course of business.

WARRANTIES OF QUALITY

Includes
1. Express Warranties § 2-313
a. Can be given by anyone; does not have to be a merchant
i. Presumed to arise in the sale of almost every good, because a K for sale is
usually for something describable and described. See Comment 4.
ii. Clause generally disclaiming “all warranties, express or implied” does not
waive these warranties! However, parties are free to make whatever
bargain they wish, so long as it is done in good faith.
b. Affirmation of fact or promise (as opposed to puffery and opinions) made by
seller to buyer which relates to the goods and becomes part of the basis of the
bargain.
i. Puffery = “finest,” “prettiest,” “you’ll feel your best,” “this will make you
more attractive,” “it looks wonderful”
ii. Affirmations can arise from description of product written on label, does
not have be said
iii. Description of the goods, or a sample, or a model, that becomes part of the
basis of the bargain is an express warranty
c. The time of the affirmation of fact or description is not material. See Comment
7. “The sole question is whether the language or samples or models are fairly to
be regarded as part of the contract.” If the words, sample, or model forms part of
the basis of the bargain, it is part of the express warranty, even if it appears at the
tail-end of the bargain.

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2. Implied Warranty of Merchantability § 2-314
a. Arises if the seller is a merchant with respect to goods of the kind
b. Warranty asserts that:
i. Good passes without objection in the trade
ii. Good is fit for the ordinary purpose for which such goods are used
iii. Fungible goods will be of fair and average quality within the description
iv. Run, with permitted variations, of even kind, quality and quantity
v. Adequately contained, packaged, and labeled
vi. Conforms to any promises or affirmations of fact made on the container,
box, or label
c. See Comment 11: Exclusion or modification of this warranty is “a matter of
threatening surprise” because it is “so commonly taken for granted.” See 2-
316(2) for rules of exclusion.
3. Implied Warranty of Fitness for a Particular Purpose § 2-315
a. This warranty “trumps” the other two
b. However, all three warranties can overlap and sometimes even be inconsistent
c. This warranty arises when seller knows or has reason to know of the buyer’s
particular purpose and the buyer relies on the seller’s skill or judgment to furnish
suitable goods

DISCLAIMING WARRANTIES & REMEDIES

Two Areas of Remedy in a Goods Transaction:

1. Bargain Interest
a. The subject of the contract
b. The contract terms and promises
2. Consequential Damages
a. The “secondary effects” of the K; they relate to a separate transaction than the
purchase or K itself
b. Property damage
c. Personal injury
d. Pure economic loss
e. Old standard for collecting consequential damages is foreseeability. The damages
must be reasonably foreseeable by the seller in order to be compensable. This is
to enable the seller to rationally factor the possible damages into their business
and cost decisions.

Analyzing Warranty Issues

1. What kinds of warranties would be applicable?
a. The ability to disclaim depends entirely upon the type of warranty at issue
b. 2-316 is the list of rules for how to disclaim
2. Is the technique used by the Seller disclaiming or limiting?
a. Disclaiming Liability § 2-316
i. A disclaimer of warranty tells you what the seller promised to do. It goes
to the quality of the goods, and if the seller disclaims merchantability, he

11
 is telling you that he’s not promising to sell you something very good. It
limits the scope of the seller’s promise under the K.
ii. To disclaim the implied warranty of merchantability:
1. Must use the word “merchantability”
2. If it is in writing, it must be conspicuous (see 2-201(10))
3. See ¶ 2 of 2-316: Trade usage can be shown to disclaim this
warranty, even if it is not expressly disclaimed.
iii. To disclaim the implied warranty of fitness for particular purpose:
1. There are no “magic words”
2. It must be in writing. This is tougher to disclaim than
merchantability because fitness “trumps” the other warranties.
iv. Why express warranties are not disclaimable like the implied warranties
1. You can control what you’re promising with express warranties,
and control your risk.
2. Implied warranties are imposed by operation of law, and the seller
does not even need to intend to make them in order to do so. Thus,
we allow sellers to disclaim the implied warranties, rather than the
express warranties.
v. Ways to Avoid Implied Warranties (other than express language)
1. “As Is” or “With All Faults”: Selling something conspicuously
marked “as is,” in normal commercial usage, waives the implied
warranties. However, the express warranties are not waived.
Remember, a general disclaimer is not effective to waive express
warranties!
2. Inspection: If buyer has examined the goods (or had opportunity
to do so but didn’t) there is no implied warranty for defects that
would have been revealed during the inspection.
a. It is not sufficient to make the goods available for
inspection; there must be a demand for buyer to inspect.
3. Other: Implied warranties can be excluded or modified through
trade usage, course of dealing, or course of performance.
b. Limiting Remedies § 2-719
i. These function in the performance, rather than the formation stage. The
technique of limiting warranty concedes breach and says that even if there
is a breach, there is a limited universe of remedies available.
ii. Seller may limit buyer’s remedy to return of the goods and repayment of
the price, or to repair and replacement of non-conforming goods
1. Exclusive Remedies: If a seller wishes to create exclusive
remedies for a sales transaction, he must do so specifically and
state that the remedies are exclusive. Otherwise, the Code
presumes the mentioned remedies are cumulative to the Code
remedies.
iii. If an exclusive or limited remedy does not fulfill its essential purpose,
then buyer may resort to any remedy under Article 2
1. A limited remedy fails when seller is unwilling or unable to make
the goods conforming

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 2. Majority Approach: Exclusion of consequential damages does
not fail when limited remedy fails of essential purpose unless the
exclusion was unconscionable
3. Minority Approach: Exclusion of consequential damages DOES
fail when limited remedy fails of essential purpose
4. 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.
5. Courts are unlikely to find unconscionability when the limitations
are freely negotiated between sophisticated parties, which most
likely occurs in commercial settings.
iv. The courts will tolerate a lot more under the limitation provision than they
will tolerate under the disclaiming provision. The Code disfavors
disclaimers of warranty, but favors remedy limitations. (However, from a
functional perspective, they can land the Seller in the same place.)
v. Consequential damages may be limited or excluded unless the limitation
or exclusion is unconscionable
1. Personal injury: Limitation of consequential damages for
personal injury due to consumer goods is prima facie
unconscionable
2. Commercial injury: Not prima facie unconscionable

Breach of Warranty Defenses

1. Notice: Buyer did not provide notice within a reasonable time of discovering defect
2. Privity: K can only be enforced by parties who are in privity.
a. Exception = K created with clear intention of benefiting a 3d party, see 2-318
b. Horizontal Privity:
i. Alternative A (used by most states)
1. Any natural person
2. In the family or household of the buyer, or a guest in buyer’s house
3. If it is reasonable to expect that such person may use, consume, or
be affected by the goods
ii. Alternative B
1. Any natural person
2. Who may reasonably be expected to use, consume, or be affected
by the goods
iii. Alternative C
1. Any person
2. Who may reasonably be expected to use, consume, or be affected
by the goods
c. Vertical Privity
i. Article 2 is neutral on vertical privity
ii. Incorporates case law on whether the seller’s warranties given to the
seller’s buyer stay with the good when the buyer re-sells it

MAGNUSON MOSS WARRANTY ACT

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Requirements
1. Consumer product
a. § 101 states that the status of “consumer product” comes from the usual use of the
product: “any tangible personal property… which is normally used for personal,
family, or household purposes.”
i. You must examine the normal use, rather than the actual use. Thus, a
Ford Focus purchased and used by a business is still a consumer product,
because it is normally used for personal, family or household purposes,
but a 747 Jumbo Jet purchased by John Travolta is not a consumer product
because it is not normally used that way (even though he might use it as
such).
b. § 103 defines a consumer as a buyer not for the purposes of resale. Thus, MM
does not cover an exporter or a retailer buying products from a wholesaler.
c. The way MM defines “consumer” automatically relaxes privity requirements. If
you receive a transfer of a consumer product during a time while the MM
warranty protection exists, you gain that protection even though you weren’t the
original consumer.
d. Vertical privity is also relaxed under § 101(4) which renders a supplier “any
person engaged in…making a consumer product directly or indirectly available to
consumers.”
2. Retail sale
3. Written warranty/service contract

Relationship to UCC
1. Magnuson Moss (“MM”) supersedes the UCC because MM is federal law whereas UCC is
state law. Thus, MM displaces Article 2 whenever they are inconsistent.
2. A document (e.g., a “Limited Warranty for Product X”) may raise an alternative theory
distinct from Article 2.

Warranties under Magnuson Moss

1. Full Warranty:
a. The “Good Housekeeping” seal of approval
b. Almost never given; it is like an extra guarantee
c. If a supplier gives a full MM warranty, it should give extra remedial options to the
consumer, and cannot exclude liability for consequential damages. It carries
possibilities of huge liability.
d. Anything that does not qualify as meeting the minimum standard of warranty
under MM is supposed to be specifically labeled as “Limited”
2. Limited Warranty
a. The “regular warranty”
3. Implied Warranties
a. The implied warranties from state law (UCC) are triggered, even when the MM
warranty attempts to disclaim them.

14
 b. Under MM, implied warranties cannot be disclaimed. See § 108. The seller can
limit the existence in time of the implied warranties (basically a remedy
limitation) but cannot get rid of them altogether.
c. NOTE: if the seller gives a full warranty, the time cannot be limited!
4. Warranties must be conspicuous, and the warranty information must be available to the
consumer prior to purchase.
5. Any limitation of remedies in MM warranties must be conscionable. MM borrows the idea
of conscionability from Article 2.
6. There may be fact-specific statements about the product that are express warranties under
the UCC, but are not MM warranties.
a. MM warranties only relate to the normal consumer use of the good.
b. E.g., Normal product information (e.g., “This product is made of 50% wool”) is
not a MM warranty about the product’s functionality. However, that statement
would still be an express warranty under Article 2.

IDENTIFICATION & TENDER

Identification
1. Makes it possible for buyers to have insurable interests in goods of which they may not yet
have possession, and may not yet have title.
2. § 2-401 professes the Code’s disfavor for title and making other provisions hinge on “title.”
Identification is the substitute for the concept of title where insurance is involved.
3. While identification is primarily about insurance, a secondary effect is to facilitate
financing. See § 2-501, which specifies that the buyer obtains a special property and
insurance interest.
4. Code prefers that identification occur early in the process, but parties can agree to have
identification occur at whatever time they wish.
5. See § 2-501(2): Code contemplates that buyer and seller can both have an identifiable
interest in the same goods at the same time.
6. In the absence of agreement, identification occurs:
a. When K is made if:
i. goods are already existing
ii. goods are already identified (described)
iii. Comment 5 deals with “undivided share of identifiable fungible bulk.”
E.g., 50% of a farmer’s wheat stored in his grain elevator.
b. Future Goods
i. When goods are shipped, marked, or otherwise designated by seller
ii. e.g., bulk from seller’s inventory
c. Crops: When planted if harvested within 12 months or the next normal harvest
season, whichever is longer
d. Unborn Young: When conceived if the young are to be born within 12 months
after K is made

Seller’s Tender

15
1. If the Seller tenders delivery of the goods, the Buyer must act affirmatively to disavow the
tender and reject the goods. If Buyer does not do so, he “accepts” the goods and must pay
for them.
2. Unless otherwise agreed, the Seller’s tender triggers his ability to get paid.
3. To make proper tender:
a. Make available (put and hold for the buyer’s disposition) conforming goods. See
§ 2-503(1).
b. Buyer must be given a reasonable opportunity to take possession.
c. If you’re going to ship goods employing a common carrier (e.g., Fed Ex, UPS,
etc.), tender requires compliance with 2-504 as well.
i. Seller must make K with carrier. § 2-504(a). Code leaves it up to seller to
choose a carrier unless K specifies otherwise.
ii. Seller must get the bill of lading (and other paperwork the carrier gave the
seller) to the buyer. § 2-504(b). Without these documents of title, buyer
cannot prove to carrier that it is entitled to receive goods.
iii. Seller must notify buyer of the shipment. § 2-504(c). Connect this back
to 2-206, where a prompt promise to ship or the act of shipment may be an
acceptance of K.
iv. HOWEVER, failure to notify buyer or to make a proper K with carrier is
only ground for rejection if it causes material delay or loss
4. Risk of loss:
a. In a non-merchant, face-to-face transaction, risk of loss passes to the buyer when
tender occurs.
b. An improper tender does not shift the risk of loss to the buyer under 2-509.
c. Shipment K (see 2-319(1)(a))
i. “F.O.B. Seller’s Location”
ii. Seller bears the risk of loss only until a proper tender is made to the
common carrier and the seller gets the appropriate documents of title. At
that time, the risk shifts to the buyer.
iii. This section plays a gap-filler role: Code presumes a K is a shipment K
unless otherwise stated.
iv. Sometimes called a “send off” K because seller is only promising to send
off the good—after that, the risk of loss is on buyer.
d. Destination K (see 2-319(1)(b))
i. “F.O.B. Buyer’s Location”
ii. Risk of loss remains on the seller until the tender is completed at the place
of destination.
iii. These contracts are a rarity; shipment Ks are the norm.
iv. Sometimes called a “Get It There” promise, because the seller is
promising to get the goods all the way to where they’re supposed to wind
up.
e. C.I.F. or C. & F. = Shipment Ks
f. F.A.S. = Shipment K where buyer bears risk of loss when seller delivers goods to
the dock
g. Ex Ship = Destination K, seller bears risk until goods exit the barge

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 h. Use of Bailee: Only applies to 3d party bailees. Risk of loss passes to buyer
when:
i. Buyer receives negotiable document of title to the goods
ii. Bailee acknowledges buyer’s right to possession of goods, or
iii. Buyer receives non-negotiable document of title to the goods
5. Effect of Breach on Risk of Loss
a. If buyer had right to reject goods, risk is on the seller regardless of the shipment
term until seller cures or buyer accepts
b. If buyer had right to revoke acceptance risk can be shifted back to seller, but
only to the extent that buyer is underinsured
i. Policy: Because buyer accepted goods, buyer is in possession and
probably procured insurance on them
c. If buyer breached or repudiated, and the goods have been identified, and risk
of loss has not yet passed to buyer, then seller can shift risk to the buyer, but only
to the extent that seller is underinsured
i. Policy: Because seller is in possession of the goods, seller probably still
carries insurance on them.

BREACH, REPUDIATION, & EXCUSE

Buyer’s Rights on Improper Delivery

1. Perfect Tender Rule
a. In a single delivery K, if goods or tender fails in any respect to conform to the K,
buyer may
i. reject all the goods
ii. accept all the goods, or
iii. accept any goods and reject the rest
1. Buyer gets to “cherry pick”
2. If buyer does cherry pick, he must do it by commercial unit
b. Single delivery Ks are defined by number of deliveries; number of payments is
irrelevant
c. Can always argue course of performance, course of dealing, or trade usage
d. If remedy is limited to repair, then buyer’s right to reject is limited
2. Substantial Performance/Material Breach: 2-612
a. Installment K = More than 1 delivery is required or authorized
b. An installment may be rejected if:
i. Non-conformity substantially impairs (materially breaches) the value of
the installment, AND
ii. Non-conformity can not be cured. Even if non-conformity substantially
impairs value of installment, it cannot be rejected if seller can cure
c. The entire installment K can be rejected if:
i. Non-conformity of one or more installments substantially impairs the
value of the whole K
ii. It is not sufficient that the non-conformity indicate a likelihood of future
non-conformity (although that would give buyer grounds to ask for
adequate assurances)

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3. Cure (see § 2-508)
a. The Right to Cure
i. If Seller performs early and Buyer detects a problem, Seller has an
absolute right to try to fix it, regardless of how material the breach is.
1. Seller must seasonably notify buyer of intention to cure
2. Seller must cure within time of K
ii. Surprise Rejection: When seller does not perform early, and buyer
rejects non-conforming goods that seller reasonably had grounds to
believe would be acceptable, then seller may substitute conforming goods
in a reasonable time IF he seasonably notifies buyer of his intention to
cure.
iii. Courts generally bend over backwards to accommodate Seller’s right to
cure.
iv. Shaken faith doctrine: When buyer no longer has faith in the product
because of the defect. NOTE that Article 2 does not authorize this
exception!

RESCISSION AND REVOCATION

When seller tenders, buyer must either accept or reject the goods:
1. Acceptance = Buyer’s indication that he will take the goods because he believes they
conform to K, or despite their non-conformity
a. Failure to act results in acceptance: goods must be rejected within a reasonable
time after delivery
b. What Constitutes Acceptance (see 2-606)
i. Indicating to seller that goods are conforming, or that they will be taken in
spite of non-conformity, after a reasonable opportunity to inspect
1. Payment after tender may be such an indication, but it is not
conclusive. Even when buyer pays for goods, he still has an
opportunity to inspect.
ii. Failing to make effective rejection after reasonable opportunity to inspect
iii. Doing any act inconsistent with seller’s ownership
c. Effect of Acceptance (see 2-607)
i. If buyer accepts, he must
1. pay for goods at K rate
2. notify seller of any breach within reasonable time to preserve right
to remedy
3. have burden of proving goods are non-coforming
d. Revocation of Acceptance (see 2-608)
i. Buyer may revoke acceptance IF:
1. Non-conformity substantially impaired value of K,
a. Look at material breach from position of buyer. It is not
completely subjective, but it is a “personalized” objective
breach standard. A person “similarly situated” to the buyer
is the standard.
AND

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 [MUST ALSO FIT ONE OF THE FOLLOWING 3 FACT PATTERNS!]
2. Goods were accepted, but…:
a. Cure: Buyer reasonable assumed that non-conformity
would be cured, but seller failed to cure
b. Latent Defect: Defect was latent and could not be
discovered even with reasonable inspection
c. Assurances: buyer relied on seller’s assurances (promises
or assertions by seller that product is or will become
conforming)
3. Buyer must revoke acceptance within reasonable time of
discovering defect (or when defect should have been discovered)
4. There is no substantial change in the condition of the goods other
than that caused by the defect
5. Revocation will not be effective until buyer notifies seller of the
revocation
a. It is not sufficient for buyer to merely indicate
dissatisfaction or unhappiness; must clearly indicate an
intention to revoke.
b. Seasonable notification of revocation does not have to be
in writing, but it is a good idea.
ii. Buyer has same rights & duties to the goods as if buyer had rejected them
iii. Note that the revised Art. 2 prohibits the seller from attempting to cure in
a revocation of acceptance in a consumer K
2. Rejection
a. Manner & Effect of Rightful Rejection (see 2-602)
i. Buyer must reject goods within reasonable time after delivery/tender
ii. Buyer’s rejection only effective after buyer notifies seller
iii. Buyer must specify the defect. Failure to specify precludes buyer from
relying on that defect to justify the rejection or breach, if seller could have
cured that defect
iv. Seller has right to inspect goods
v. If buyer does something inconsistent with his status as rejecter, buyer has
either accepted or converted the goods
b. Duties of Rejecting Buyer (see 2-603, 2-604, & 2-605)
i. Non-merchant buyer: Generally only has duty to hold the goods with
reasonable care for seller’s disposition. If seller does nothing with the
goods, buyer may:
1. Store them for seller’s account
2. Ship them to seller
3. Resell them for seller’s account & receive reimbursement for costs
associated with resale
ii. Merchant buyer:
1. Duty to follow any reasonable instructions received from seller
regarding reshipping, storing, delivery, and reselling.

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 2. In absence of instructions, buyer must make reasonable efforts to
resell the goods if they are perishable or may decline in value
quickly
3. In absence of instructions for non-perishable goods, buyer may
store, ship, or resell as stated for non-merchant buyer.

ANTICIPATORY REPUDIATION AND

REQUESTS FOR ADEQUATE ASSURANCES OF PERFORMANCE

Anticipatory Repudiation (see 2-610)

1. At common law, each party had to be willing to perform until the party knew for sure that
the other would not perform; this was inefficient.
2. Anticipatory Repudiation: an overt communication of intention or an action which renders
performance impossible or demonstrates a clear determination not to continue with
performance
a. See Comment 3. If a party gets information from “an apparently trustworthy
source” that suggests a problem with the quality of a seller’s goods, or a problem
of a buyer’s inability to pay, that can be grounds for insecurity.
b. Note that a demand by one or both parties for more than K calls for (more money,
more widgets, etc.) is not in and of itself a repudiation. It is a request for
modification. Thus, a request for modification must include a statement of
intention not to perform except under conditions that go beyond K.
3. Code requires that repudiation not be trivial (it must be substantial impairment or material
breach). You do not get the benefit of perfect tender rule in anticipatory repudiation!
a. E.g., If 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.
4. Commercial Reasonability: When either party anticipatorily repudiates K before date of
performance, the non-breaching/non-repudiating (“innocent”) party may:
a. Wait for performance for a commercially reasonable time
b. Immediately resort to a remedy for breach, even if the party already notified the
repudiating party that it would await performance
c. Suspend its own performance
5. Damages: determining market value
a. If Buyer repudiates: market value of goods at time and place of tender
b. If Seller repudiates: market value of goods at time & place buyer learned of
breach
i. Buyer may, but is not required to, cover: buy substitute goods and recover
damages for the difference between cover price and K price
ii. If buyer does not cover, damages are market value minus K price
c. Meaning of “breach” in 2-713:
i. Is it the date buyer learned of seller’s repudiation, or should the buyer wait
until the date of performance in case seller retracts the repudiation?
ii. You should base the market price on whichever date a reasonable person,
similarly situated, would have covered
6. Adequate Assurances of Performance (see 2-609)

20
 a. When reasonable grounds for insecurity arise about the other party’s performance,
innocent party may demand in writing adequate assurances of due performance.
b. Until such assurances are received, the innocent party may suspend his own
performance.
c. If assurance is not given in a reasonable time (not more than 30 days) then
innocent party may treat K as repudiated.
7. Retraction of Repudiation (see 2-611)
a. Repudiating party may cancel repudiation at any time prior to date of performance
unless other party has cancelled K or materially changed its position in reliance
on the repudiation
b. Retraction may be by any method, but must include any assurance requested
under 2-609

EXCUSE

Excuse
1. Excuse to performance is different than K defenses, which go to the formation or to public
policy. Excuse concedes you’ve breached.
a. If you’re asking for excuse, you’re admitting you have not performed, but you’re
saying there is a justifiable reason for your non-performance.
b. If you’re asserting a defense, you are asserting that there may not have actually
been a K.
i. Defenses are not covered by Article 2. They come from common law.
1. Illegality: K violates law or public policy, provides a complete
defense
2. Duress, fraud, mutual mistake or unilateral mistake indicates
that the assent to K was not “real” and therefore should not be
enforced
2. 2-613: Casualty to Identified Goods
a. Loss must occur after the goods are identified to the K!
b. Loss must occur without fault of either party before risk of loss passes to buyer
c. If it is a total loss K is completely avoided (as if it never existed)
d. If it is partial loss, or goods have been damaged so that they do not conform to
K, then Buyer may inspect the goods and either:
i. treat K as avoided, or
ii. accept goods with “due allowance from K price” to make up for the loss
3. 2-614: Substituted Performance
a. If there is a problem with the contemplated shipping arrangements, but a
reasonable substitute is available, the seller may make that substitution.
b. The substitute must be commercially reasonable.
4. 2-615: Excuse by Failure of Presupposed Conditions
a. Requires:
i. An event occurs which was unforeseen at the time K was made
1. It must be something that goes to the core of the bargain
2. It cannot be trivial
ii. That occurrence renders performance impracticable

21
 iii. The idea is that whatever event occurred was assumed would not occur as
a condition of parties’ performance.
b. Increased costs or a change in the market does not make performance
impracticable.
i. Entering a long-term K with fixed prices indicates a seller bears the risk of
loss if market price increases, and buyer bears risk of loss for market price
decreases.
ii. Severe shortages of raw materials due to war, embargo, local crop
failure, or unforeseen shutdown of major sources may make performance
impracticable
iii. It is not sufficient for a seller to demonstrate that performance under K
would result in a net loss to him or a deprivation of his profits.
c. Allocation amongst customers
i. See 2-615(b): If event occurs that affects part of seller’s capacity to
perform, and seller must allocate his inventory amongst various
customers, the seller may “allocate in any manner which is fair and
reasonable.”
d. Notice: Seller must seasonably notify buyer of delay, non-delivery, or allocation

REMEDIES

The two main questions to answer: (1) Who is the victim? and (2) Have the goods been
accepted?

Seller Remedies
1. Seller & Accepted Goods
a. Action for the Price (see 2-709)
i. When buyer fails to pay, seller may recover unpaid price on:
1. Accepted goods
2. Conforming goods lost or damaged, within a reasonable time after
risk of loss shifts to buyer
3. Goods identified to K if seller is unable to resell them after
reasonable effort to do so at a reasonable price
b. Two functionally equivalent patterns to accepted goods:
i. Risk of loss shifted to buyer but goods are in seller’s possession
ii. Seller is making a good that it cannot readily resell (specialty goods)
2. Seller & Unaccepted Goods
a. Seller can choose between damages under market price or resale price
b. Market Price (see 2-708)
i. Seller’s damages for non-acceptance or buyer repudiation
ii. Damages = (Market price – unpaid K price) + incidental damages –
expenses saved
1. Time of market value is the time of tender
2. Location of market value is place of tender
iii. Exceptions to this damage equation (when seller won’t be adequately
compensated)

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 1. Lost Volume Seller (“LVS”)
a. If K was not broken, LVS would have made 2 profits rather
than 1
i. Seller must be operating at capacity
ii. Seller must not be at limit and demand must be
robust
iii. Plenty of buyers who would pay the same price
b. Damages = Profit (including reasonable overhead_ seller
would have made from buyer’s full performance +
incidental damages + costs reasonably incurred – expenses
saved
c. Labor costs are not part of “overhead.” They are saved
costs. Courts presume that LVS have saved labor costs by
only having to make one, instead of two, sales.
2. Component Seller
a. Has choice between completing manufacture or ceasing
manufacture and selling for salvage
b. Seller only entitled to least amount of damages, so seller
must make a reasonable choice
c. Problem is that if seller stops manufacture and sells for
salvage, the seller is not participating in the normal market
d. Damages = Profit seller would have made from buyer’s full
performance + incidental damages + costs reasonably
incurred (those needed to finish manufacture) – payments,
proceeds or resale
c. Resale Price (see 2-706)
i. Damages = (Resale price – K price) + incidental damages – expenses
saved
ii. Seller must act in good faith and in commercially reasonable manner in
reselling products.
iii. Resale may be
1. at private sale
a. Seller must notify buyer of intention to resell
b. Notice need not be in writing
c. Notice required because we worry that a private sale may
not be an arm’s length transaction & Buyer should have
notice so they can police the transaction for commercial
reasonableness
2. at public sale
a. only identified goods
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
3. as unit or in parcels
4. at any time or place (but method, manner, time, place, & terms
must be commercially reasonable)

23
 5. Resale must be reasonably identified as referring to broken K
iv. If the seller violates 2-706, he is relegated to seeking Market Damages
3. Seller’s Right to Identify Goods to K (see 2-704)
a. Non-identified goods: An aggrieved seller may identify conforming goods not
already identified to K if seller learns of breach while goods still in his possession
b. Unfinished Goods: Seller may complete manufacture of goods or seller may
cease manufacture & resell for salvage
4. Sellers do not get consequential damages

Buyer Remedies
1. Buyer & Accepted Goods
a. If buyer accepts goods, and does not revoke acceptance, he may sue for warranty
breach
i. Requirements:
1. Must be warranty protection
2. Buyer must notify seller within reasonable time after defect is
discovered. If buyer gives no notice, buyer is barred from any
remedy. See 2-607(3)(a).
ii. Buyer’s Damages for Breach for Accepted Goods (see 2-714)
1. Buyer cannot recover damages for accepted goods unless notice
was given to seller
2. Warranty Breach
a. Damages = value of goods as warranted – value of goods
as accepted
b. Time of damages = time and place of acceptance
3. Non-conformity
a. any failure of seller to perform according to K
b. Damages = any manner which is reasonable
4. Buyer also entitled to any incidental & consequential damages that
may apply
a. Incidental Damages: Management of the breach
i. Expenses incurred in inspection, receipt,
transportation, care, & custody of goods rightfully
rejected
ii. Charges or expenses incurred in effecting cover
b. Consequential Damages
i. Pure Economic Loss
1. Loss must be certain: look to prior track
record and profits of similarly situated
parties
2. Loss must have been foreseeable
3. Buyer must not have been able to prevent
the loss through cover
4. Seller can be liable even if he didn’t
expressly agree to assume these risks
ii. Personal / Property Injury: proximate cause

24
 iii. Deduction of Damages from Price (see 2-717)
1. Self-help for buyer
2. Upon notifying seller, buyer may deduct all or part of damages
resulting from any breach from any part of the price still due under
that same K.
iv. Security Interest (see 2-713)
1. Buyer has security interest for goods in its possession for any
amount paid (or amount of expenses incurred) for those goods
2. Buyer can resell the goods to get reimbursement for the amount
paid
3. Buyer may not keep any profit. It may only keep the amount of the
price it paid and enough to reimburse the costs involved in
inspecting and handling the goods.
2. Buyer & Unaccepted Goods (or Revoked Acceptance)
a. Market Price (see 2-713)
i. Buyer’s damages for non-delivery or repudiation
ii. Damages = (Market price at time when buyer learned of breach – K price)
+ incidental damages + consequential damages – expenses saved
iii. Location of Market Price = place of tender, or place of arrival if rejected
after goods arrived or acceptance was revoked
iv. Time of Market Price = when buyer learned of breach
b. Cover Price (see 2-712)
i. Buyer’s procurement of substitute goods
ii. Goods do not have to be identical, but must have same functional purpose.
iii. Buyer must act in good faith & in reasonable manner
1. See Comment 2: If buyer covers in good faith and is
commercially reasonable, then it is immaterial that hindsight
proves the method of cover used was not the cheapest or the most
effective.
iv. Buyer must cover without unreasonable delay. If market price is going up,
the longer a buyer waits to cover, the more likely a court will be to say
buyer took too long to cover.
v. Damages = (cost of cover – K price) + incidental damages + consequential
damages – expenses saved
c. BUYER MAY CHOOSE between using Market Price damages or Covering… but
cover may foreclose the buyer’s ability to get consequential damages.
d. Offsetting Benefit Rule: If buyer “covers” with something much newer or more
valuable than the originally contracted-for good, we would try to calculate the
benefit buyer gets from replacing the K good with this new/better good. Then, if
we could quantify that, we would deduct that value (the “offsetting benefit”) from
the damages. Burden of raising and proving offsetting benefit is on seller.
e.
3. Buyer’s Right to Specific Performance (see 2-716)
a. Specific performance is a form of injunction; forces seller to perform according to
K

25
b. At common law, specific performance was only available for “unique goods”
(real estate, heirlooms, works of art)
c. Specific performance may be given where goods are unique or under other
proper circumstances (goods are the functional equivalent of “unique”)
i. Fungible goods = scarcity in the market; relates to cover: if buyer is
unable to cover because the market has dried up and seller still has the
goods on-hand, court may order performance
ii. Type of K = output or requirements: K, in its entirety, was unique
iii. This may include “long-term supply Ks” (like those for fuel), where courts
may consider the overall commercial feasibility of replacement, and while
the good (e.g., fuel) may not be “unique” per se, overall circumstances
may still call for specific performance. Courts recognize the disruption of
buyer’s 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 through monetary damages

26