The Agreement: (Terms/Conditions)

The Agreement: (terms/conditions)

UCC – Express/Implied Warranty

Implied Warranty for a particular purpose § 2–315
Implied Warranty of Merchantability (Ordinary purpose) § 2–314
Expressed Warranty created by seller § 2–313
Exclusion or Modification of Warranties. § 2–316.
Extension of Warranties Express or Implied to a Third Party § 2–318.
Statute of Limitations in Contracts for Sale § 2–725.

Commentary.Breaches that discharge duties of counter-performancece.

Default Terms:

GFFD

Compensatory Damages

Several others listed

Condition (Due or Discharge of Performance)

Event as a Condition § 226
Non-occurrence of a Condition – discharging duty § 225
“Satisfaction” as a condition § 228
Interpretation of Condition – Preference avoiding forfeiture§ 227
Condition Excused:
Breach contributes to its non-occurrence. § 245
Repudiation contributes to its non-occurrence. § 255
To Avoid Disproportionate Forfeiture § 229

Interpretation of Terms

Parole Evidence

Avoidance of Unconscionable Terms:

Court’s refusal to enforce the contract

Impossibility, impracticability, and frustration

-Discharge of Duty § 261

-Not a Breach if caused by unforeseen circumstances § 2–615.

-Casualty to the Goods without fault § 2–613

-Risk of Loss when no Breach § 2–509

-Risk of Loss when Breach § 2–510

-Tender of Delivery § 2–507(1)

-Improper Tender or Delivery - Cure by Seller § 2–508

Performance and Non-performance

-Order of Performance § 234

-Constructive Condition: Offering Performance § 238

-Suspend remaining duties, Material Breach § 237

-When is Breach “Material” § 241

-Time after Material Breach when Duties Discharged § 242

-When is “Total Breach” § 243

Money Damages(Default terms)

Expectation measure of damages: § 347

-Hadley: General v. Consequential Damages

Reliance Interest§ 349

Restitution Interest § 373

Limitations in recovery of damages:

-Foreseeability § 351

-Avoidability § 350

Wrongful Discharge Employee

-Reasonable Certainty § 352

-Loss due to Emotional § 353

-No Punitive Damages (Tort) § 355

Goods – Acceptance, Rejection, Reputiation:

-Improper Delivery to Buyer § 2–601

-Manner/Effect of Rightful Rejection by Buyer § 2–602

-Acceptance of Goods by Buyer. § 2–606

-Effect of Acceptance on Buyer § 2–607

-Revocation of Acceptance § 2–608

-Right to Assurance of Performance§ 2–609.

-"Installment Contract"; Breach § 2–612.

Remedies for Buyer when Seller Breaches:

-General remedies for Buyer § 2–711

-Covering § 2–712

-Non-delivery or Repudiation § 2–713

-Breach after acceptance, Breach of Warranty. § 2–714

-Incidental and Consequential Damages § 2–715

-Can Deduct Damages from Price § 2–717

Remedies for Seller when Buyer Breaches:

-General remedies for Seller § 2–703

-Seller’s options for any conforming goods left in his possession after breach § 2–704

-Seller reselling goods § 2–706

-Non-acceptance or Repudiation § 2–708

-Seller suing for Price § 2–709

-Seller’s Incidental Damages § 2–710

Good Faith and Fair Dealings 1-304, § 205

Definitions:

Parole evidence
Evidence (e.g. testimony) of the parties' oral or written agreement, prior to or contemporaneous with execution of a record, to a term or terms that are not included in the record
contract of adhesion - one party presents to the other a standardized written agreement that is not subject to negotiation or alteration prior to execution / Conspicuous1-201(10)
With reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:
(A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
(B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.
Common Law vs UCC
"Forfeiture" = denial of compensation that results when the obligee loses his right to the agreed exchange after he has relied substantially, as by preparation or performance on the expectation of that exchange. (Comment b §227)
Seasonably / Merchants?
- A person who deals in goods of the kind or
- Otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or
- To whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. § 2–104(1)
Comment 2: Only applies to a merchant in his mercantile capacity; a lawyer or bank president buying fishing tackle for his own use is not a merchant
Note: "merchant" for warranty of merchantability must "deal in goods"
“Goods” § 2–105
Good faith: § 1-201(19) as "honesty in fact in the conduct or transaction concerned." "In the case of a merchant" Uniform Commercial Code § 2-103(1)(b) provides that good faith means "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade."

We will analyze issue through application of Article 2 of the UCC because question involved a good (a thing moveable at the time of identification to the contract § 2–105). Common law of the relevant jurisdiction (R2d Contracts in this exam) will govern the extent where Article 2 does not furnish a rule of law applicable to the transaction.

What is the Governing Law for Mixed Goods?

Not good: Construction contract, service contract, real estate/property contract

For jx applying the “Gravaman of the action” test: Under this test, the court seeks to find the source of the complaint. If the complaint is with goods, court applies Article Two. If the complaint is with services, the court will not apply Article Two Used by "some" jurisdictions. / In jx that apply the Predominant purpose test:
UCC Article 2 can be applied where the predominant purpose of the transaction involved the furnishing of goods

Purpose of the agreement is or is not predominantly goods
XXX would be incidental to the YYY because without YYY, XXX would be useless. Value of YYY > value of XXX.
Which costs more

Implied, Expressed Warranties and Exclusion or Modification of Warranties

§ 2–315. Implied Warranty: Fitness for Particular Purpose.
Where the seller at the time of contracting 2)has reason to know any 1)particular purpose for which the goods are required and that the buyer is 4)relying on the 3) seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
Comment 2: A "particular purpose" differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question. For example, shoes are generally used for the purpose of walking upon ordinary ground, but a seller may know that a particular pair was selected to be used for climbing mountains.
There is implied warranty that good shall be fit for the particular purpose if:
-Buyer has “particular purpose” in mind for goods
-Seller had reason to know of this particular purpose
-Seller has reason to know that buyer is relying on the seller’s skill or judgment to select suitable goods for buyer’s particular purpose
-Buyer relied on seller’s skill or judgment to select suitable goods. Buyer can’t insist on a certain brand. Must be reliance.
§ 2–314. Implied Warranty of Merchantability (Ordinary purpose); Usage of Trade
(1) Unless excluded or modified (Section 2–316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the i) seller is amerchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible (mutually substitutable) goods, are of fair average quality within the description;
Comment 7: Paragraphs (a) and (b) of subsection (2) are to be read together.
and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
(See comments for detail definition of above)
(3) Unless excluded or modified (Section 2–316) other implied warranties may arise from course of dealing or usage of trade.
Breach of Implied Warranty of Merchantability if 1) Seller of goods was a merchant AND 2) goods sold by seller were not merchantable according to 2-314(2)
Remedies for breach U.C.C. 2-711
Implied Term: § 205 DUTY OF GOOD FAITH AND FAIR DEALING (Under default terms)
§ 2–313. Express Warranties by Affirmation, Promise, Description, Sample.
(1) Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods (describe what is the description of good) which is made part of the basis of the bargain (found in the agreement) creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty. (Puffing)
-To determine whether a statement is sufficiently factual to create an enforceable warranty same as for misrepresentation claim. More specific, quantifiable, verifiable and provable a statement, the more likely it will be held to be an actionable affirmation of fact
-Remedies for fraud 2-721.
§ 2–316. Exclusion or Modification of Warranties.
(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2–202) negation or limitation is inoperative to the extent that such construction is unreasonable. See comment 9
-If reasonable, words of express warrant and words of disclaimer should be construed as consistent:
-Eg: If disclaimer is broad “no expressed warranty”, but there is an expressed warranty stating specifically ‘21mpg’. If can harmonize, then 21mpg applicable. If can’t harmonize, then disclaimer is inoperative and still applicable.
-If can’t read consistently, then disclaimer is inoperative but subject to the parol evidence rule (2-202)
-Since disclaimers on receipt are written agreements, they will prevail over oral express warranties
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."
Exclude/Modify Implied warranty of merchantability:
-Must mention “merchantability” and if in writing, must be conspicuous (see 1-201(10) definition)
Exclude/Modify implied warranty of fitness:
-Must be in writing AND conspicuous (see 1-201(10) definition)
(3) Notwithstanding subsection (2)
(a)unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and
OK to use other language other than merchantability. Case law and Article 2A-214 (3)(a) in Bailey v. Tucker for leasing of goods interprets this as still requiring conspicuous if in writing as a matter of fairness
(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2–718 and 2–719).
Comment 9:
9. The situation in which the buyer gives precise and complete specifications to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded. The warranty of fitness for a particular purpose would not normally arise since in such a situation there is usually no reliance on the seller by the buyer. The warranty of merchantability in such a transaction, however, must be considered in connection with the next section on the cumulation and conflict of warranties. Under paragraph (c) of that section in case of such an inconsistency the implied warranty of merchantability is displaced by the express warranty that the goods will comply with the specifications. Thus, where the buyer gives detailed specifications as to the goods, neither of the implied warranties as to quality will normally apply to the transaction unless consistent with the specifications.
§ 2–318. Third Party Beneficiaries of Warranties Express or Implied. (Breach in Warranty)
Note: If this Act is introduced in the Congress of the United States this section should be omitted. (States to select one alternative.)
Alternative A
A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods AND who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.
Alternative B
A seller's warranty whether express or implied extends to any natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.
Alternative C
A seller's warranty whether express or implied extends to any person (corporations ok) who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section with respect to injury to the person of an individual to whom the warranty extends.
§ 2–725. Statute of Limitations in Contracts for Sale.
(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
(3) Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.
(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this Act becomes effective.

Express Terms, Implied in Fact Terms, Default Terms:

EXPRESSED TERMS:
Agreed terms between the parties.
§ 204 SUPPLYING AN OMITTED ESSENTIAL TERM
When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.
IMPLIED TERMS:
Contract doesn’t make commercial sense without that term. Terms that are necessary to make the contract meaningful.
DEFAULT TERMS:
§ 205 DUTY OF GOOD FAITH AND FAIR DEALING
Include business partners. Partners owe a fiduciary duty toward one another, a duty that certainly would encompass consultation and agreement before raising prices.
Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement

Market Street Associates v. Frey – GE Pension Trust claims that Mkt street didn't act in good faith by not informing them of clause 34 when they asked for the loan based on clause 25.
CL reads a duty of good faith into every contract. "Good faith"' is a compact reference to an implied undertaking not to take opportunistic advantage in a way that could not have been contemplated at the time of drafting, and which therefore was not resolved explicitly by the parties.

Comment a:
"good faith - UCC§1-201(19) "honesty in fact in the conduct or transaction concerned."
For a merchant" UCC§2-103(1)(b) good faith means "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade."
Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving "bad faith" because they violate community standards of decency, fairness or reasonableness. The appropriate remedy for a breach of the duty of good faith also varies with the circumstances.
§ 1-304. Obligation of Good Faith. Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement.
OTHER COMMON DEFAULT TERMS:
U.C.C. 2-305 (open price term); U.C.C. 2-306 (terms in output and requirements contracts); U.C.C. 2-307 (delivery in single lot or several lots); U.C.C. 2-308 (place for delivery); U.C.C. 2-309 (time for delivery or other actions); U.C.C. 2-310 (time for payment); U.C.C. 2-311 (options and cooperation respecting performance); U.C.C. 2-503 (manner of seller's tender of delivery); U.C.C. 2-504 (shipment by seller).
to the extent that the parties have, by a term of their agreement, clearly made an event a condition, they can be confident that a court will ordinarily feel constrained strictly to apply that term, while the same court may regard itself as having considerable latitude in tailoring a similar term that it has itself supplied.

Conditions