New York Bar Exam - Sales
Terms
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- What is the scope of UCC article 2?
- Article 2 deals with transactions in goods.
- What are goods?
- All things that are movable when they are identified under the contract
- How does article 2 deal with goods associate with realty?
- “Goods associated with realty†(e.g., timber, minerals, structures to be removed) fall under Article 2 if severance is to be made by the seller.
- Who are merchants?
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A merchant is generally one:
1) who regularly deals in goods of the kind sold, or
2) who otherwise by his profession holds himself out as having special knowledge or skill as to the practices or goods involved. - What is the significance of being a merchant?
- A number of the rules under Article 2 differentiate between merchants and nonmerchants.
- What is the article 2 good faith requirement?
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Article 2 requires all parties to act in good faith.
i.e., with honesty in fact and in observance of reasonable commercial standards of fair dealing. - How may a contract be formed under the UCC?
- Any manner sufficient to show agreement.
- Are Art 2 offers revocable?
- Common law offers generally are revocable unless consideration is given to keep the offer open.
- What is a firm offer?
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1) A written offer
2) signed by a
3) assurances that it will be held open will be irrevocable (without consideration) for the stated time period or for a reasonable time if no period is expressly stated.
**The period of irrevocability may not exceed three months. - What methods may be used to effect acceptance under art 2?
- An offer is construed as inviting acceptance in any reasonable manner and by any reason able medium.
- Must the offer and acceptance be mirror images under the UCC?
- No. Any acceptance or written confirmation that shows an intention to contract is effective.
- How will additional terms in the acceptance be handled?
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1) If one of the parties to the contract is not a merchant, the contract will include only the terms of the offer.
2) If both parties are merchants, additional terms automatically become part of the contract unless:
(i) They materially alter the original contract;
(ii) The offer expressly limits acceptance to the offer’s terms; or
(iii) The offeror objects within a reasonable time. - How will offer and acceptance containing different terms be handled, when both parties are merchants?
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1) Some courts treat different terms like additional terms, and they use above test to determine whether they're included
2) Other courts follow the “knockout rule,†which states that conflicting terms in the offer and acceptance are knocked out of the contract and the terms instead are provided by the UCC. - What is the exception the battle of the forms rules?
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The offer may object in advance to new or different terms, which will prevent formation of a contract unless:
1) the offeror consents to new or different terms; OR
2) the parties proceed to act as if there's a contract, which invokes the knock-out rule. - What is the effect of open terms in the contract?
- The fact that one or more terms (including price) are left open does not prevent the formation of a K if the parties intended such and there is a reasonable basis for giving a remedy.
- How are missing terms determined?
- The court can supply reasonable terms for those that are missing.
- What is the one essential term under the UCC?
- Quantity.
- Do output or requirements contracts satisfy the quantity requirement?
- Yes.
- What is the statute of frauds requirment with respect to the sale of goods?
- Contracts for the sale of goods at a price of $500 or more (including any modifications) are not enforceable unless there is some writing that is signed by the party to be charged.
- What form can the writing take to satisfy the statute of frauds?
- The writing may be informal and need not be contained in a single document.
- What qualifies as a signature?
- The “signature†can be any symbol meant to adopt or accept a writing. Thus, a note on a letterhead can be enough (the letterhead acts as a signature).
- What is the confirmatory memo rule?
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Among merchants, if one party, within a reasonable time after an oral agreement is reached, sends a written confirmation to the other party that binds the sender, it will satisfy the SOF requirements against the recipient as well if he had reason to know of the confirmation’s contents.
unless he objects to its contents in writing within 10 days after it is received. - What other exceptions are there to the SOF?
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1) If the goods are specially made for the buyer and not suitable for sale to others in the ordinary course of the seller’s business, and the seller has started making them or committed for their procurement;
2) If the party admits in his pleading or court testimony that a contract was made; or
3) If the contract is performed (the goods are either received and accepted or paid for). - What is the acronym for the SOF exceptions?
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SWAP
S - Specially made goods
W - Written confirmation memo
A - Admission
P - Performance - What is the rule regarding modification under the UCC?
- Good faith modifications are binding w/o consideration.
- Must modifications be in writing?
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Only where:
1) If the contract as modified is within the SOF the modification must meet the SOF;
2) If the contract contains a provision that a written contract cannot be modified or rescinded except by a signed writing. - What is the rule regarding waiver of conditions under the UCC?
- One having the benefit of a condition under a contract may indicate by words or conduct that he will waive that condition. Generally, consideration is not required for a valid waiver.
- What is the rule with respect to destruction or injury to indentified goods?
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If a contract requires for its performance particular goods identified when the contract is made and the goods are destroyed or damaged without the fault of either party:
1) the contact is avoided if the destruction occures before risk passes to the buyer;
2) For damaged goods, the buyer may elect to take the goods with a reduction in price;
3) If the goods are destroyed or damaged after risk of loss has passed to the buyer, the buyer will bear the loss. - What happens if the agreed upon method of transportation becomes unavailable or impractical?
- Any commercially reasonable transportation must be tendered and must be accepted.
- When will a seller be discharged from performing the sales contract under the doctrine of impracability?
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The seller will be discharged to the extent of the impracticability if:
1) At the time the parties made their contract, a basic assumption of both parties was that a certain circumstance that would make performance extremely more burdensome would not occur; and
2) The circumstance does occur. - What events will be sufficient for impractiability?
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Very big events.
Unforeseen wars, embargoes, and natural catastrophes will usually be sufficient if they make it extremely difficult for the seller to obtain or convert raw materials. If the event merely makes performance more expensive (e.g., adds to shipping expenses), the seller usually will not be discharged. - What is the extent of the sellers' obligation of tender and delivery under a noncarrier contract?
- The seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession.
- What is the extent of the sellers' obligation of tender and delivery under a carrier-shipment contract?
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In a shipment contract, the seller need not see that the goods reach the buyer, but is required to:
1) put the goods into the hands of a carrier,
2) make a reasonable contract for their shipment,
3) promptly tender required documents, and
4) promptly notify the buyer of the shipment. - What is the extent of the sellers' obligation of tender and delivery under a carrier-destination contract?
- Seller is required to see that the goods reach the buyer, and is required to put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession of the goods at the destination specified.
- When is buyer's payment due?
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1) concurrently with tender in a noncarrier case
2) At the time and place the buyer receives the goods in a carrier case. - What is a shipment under reservation?
- In a shipment contract, If there is no express provision as to payment or the contract specifies cash, the seller may send the goods “under reservation†so that the buyer can't get them from the carrier until he pays.
- When is payment by check sufficient?
- It is sufficient unless the seller demands legal tender and gives the buyer reasonable time to get cash.
- What is the buyer's right to inspection?
- Unless otherwise provided, the buyer has a right to inspect the goods before he pays.
- Who has risk of loss in a nonbreach, noncarrier case?
- If the seller is a merchant, risk of loss passes to the buyer only upon the buyer taking physical possession.
- Who has risk of loss in a nonbreach, carrier case?
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1) In a shipment contract risk of loss passes to the buyer when the goods are duly delivered to the carrier.
2) In a destination contract, the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination. - What is the effect on risk of loss of breach by seller?
- If the goods are so defective that the buyer has a right to reject them, the risk does not pass until the defects are cured or he accepts the goods in spite of their defects.
- What is the effect on risk of loss of breach by buyer?
- Where the seller has identified conforming goods to the contract and the buyer repudiates or otherwise breaches the contract before the risk of loss passes to her under the contract, any loss occurring within a commercially reasonable time after the seller learns of the breach falls on the buyer to the extent of any deficiency in the seller’s insurance coverage.
- What are the buyer's remedies?
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1) Acceptance
2) Rejection prior to acceptance
3) Revocation of acceptance
4) Right to replevy identified goods
5) Right specific performance
6) Damages - What is the buyer's remedy of rejection prior to acceptance?
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When goods that do not conform to the contract are tendered to a buyer, the buyer may either:
1) keep the goods and sue for damages; or
2) under some circumstances, reject the goods and cancel the contract or sue. - When does acceptance of goods occur?
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1) The buyer, after reasonable opportunity to inspect them, indicates to the seller that they conform or that he will keep them in spite of their nonconformance;
2) The buyer fails to reject them within a reasonable time after tender or delivery of the goods or fails to seasonably notify the seller of his rejection; or
3) The buyer does anything inconsistent with the seller’s ownership. - What are the formal requirements for rejection?
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1) must occur within a reasonable time;
2) buyer must seasonably notify the seller;
3) any defect not stated cannot be relied upon to justify rejection if seller could have cured or the contract is between merchants and the seller made written request for statement of all defects. - What is the buyer's responsibility after rejection?
- buyer must hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them or give instructions as to what to do.
- What if the seller gives no instructions within a reasonable time after notification?
- the buyer may reship the goods to the seller, store them for the seller’s account, or resell them for the seller’s account.
- What is the seller's right to cure?
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Where a buyer has rejected goods because of defects, the seller may within the time originally provided for performance “cure†by:
1) Giving reasonable notice of intention to cure; and
2) Making a new tender of conforming goods, which the buyer must then accept. - What right to cure exists beyond the original contract time?
- The seller may still cure if he sends the buyer nonconforming goods that he reasonably believes will be acceptable to the buyer, but the buyer rejects, the seller will get a reasonable time to cure.
- When can the buyer revoke acceptance?
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buyer may revoke her acceptance of goods if the defect substantially impairs their value to her and:
1) she accepted them on the reasonable belief that the defect would be cured and it has not been; or
2) she accepted them because of the difficulty of discovering defects or because of the seller’s assurance that the goods conformed to the contract. - When can revocation occur?
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must occur within a reasonable time after the buyer discovers or should discovered the defect and before any substantial change in the goods not caused by
own defects. - What is the effect of proper revocation?
- A proper revocation of acceptance has the effect of rejection.
- When may the buyer seek to replevy goods as a remedy?
- The buyer may replevy identified, undelivered goods from the seller if the buyer has tendered full payment and made at least part payment or either: (i) the seller becomes insolvent within 10 days after receiving the buyer’s first payment, or (ii) the goods were purchased for personal, family, or household purposes.
- When may the buyer seek specifc performance?
- The court may order specific performance “where the goods are unique or in other proper circumstances†even if the goods have not been identified to the contract.
- What damages may buyer seek for non-delivery or upon rejection/revocation?
- May seek the difference between contract price and either market price or replacement cost.
- What damages may buyer seek for accepted goods?
- Difference between the value of the goods delivered and the value they would have had if they had conformed to the contract plus incidental and consequential damages.
- What remedies does the seller have for the buyer's breach?
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1) Withhold goods if buyer fail to make payment;
2) Recover from buyer or bailee on buyer's insolvency;
3) Force goods on buyer and recover full price where the seller is unale to resell
4) Damages and incidental damages. - What are the 3 measures for seller's damages?
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1) The difference between market price and contract price
2) Resell the goods and recover the difference between contract and sale price
3) Recover "lost profits" - the diff between list price and cost to the sell - When can lost profits measure of damages be used?
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Only when other measurse will not put the seller in as good a position.
Generally used when seller's supply of goods is unlimited. - What remedies are available to both the buyer and seller?
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1) Right to demand assurances when there's a reasonable ground for insecurity
2) Anticipatory repudiation
3) Retraction of repudiation
4) Right to sue 3rd parties
5) liquidated damages - What are the 4 types of warranties unde the UCC?
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1) Warranty of title and against infringement
2) Implied warranty of merchantability
3) Implied warranty of fitness for particular purpose
4) Express warranties - What is a warranty of title?
- Implied warranty by merchant that the title transferred is good, the transfer is rightful, and that there are no liens or encumbrances against title of which the buyer is unaware at the time of contracting.
- What is a warranty again;k infringement?
- A merchant seller dealing in goods of the kind sold warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims.
- What is an implied warrant of merchantability?
- In every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are “fit for the ordinary purposes for which such goods are used.â€
- What is an express warranty?
- Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain.
- What is the rule for disclaimer of an express warranty?
- that language limiting express warranties be read consistently with the warranty and to the extent they are inconsistent, the disclaimer is not given effect.
- What is the rule for disclaimer of an implied warranty?
- The implied warranty of merchantability may be specifically disclaimed by mentioning “merchantability,†and if the disclaimer is in writing, it must be conspicuous
- What role does unconscionability play in warranties?
- Any disclaimer of warranty must be conscionable.
- How far do warranties extend?
- The seller’s warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in her home if it is reasonable to expect that such person be affected by the goods and he suffers personal injury