THEMES THEMES OF THE THE UCC ► Preserve the agreement where where possible!! Will find enforceable contracts more often than common law doctrines of interpretation. ► Look to the intent of the parties!! Can override lots of things provided for as gap-fillers gap-fillers in the UCC. ► All transactions governed by an assumption of good faith.
Important Definitions Agreement.
Bargain of the parties as found in language or by implication implication of other circumstances circumstances (course of dealing, trade usage, etc.). etc.). May or may not have legal effect (see “contract). “contract).
Consequential Damages.
(Buyer) loss from general or particular needs that the buyer had at time of contract that the seller had reason to know of and could not be provided for by cover. Injury to person or property property as a result of breach of warranty warranty
Contract.
Total legal obligation resulting from agreement or other rules of law.
Cover.
Buyer makes a good faith purchase in a reasonable amount of time of goods in substitute for the goods that the breaching seller was supposed to deliver.
Goods
Movable things other than money and various intangible rights. §2-105.
Good Faith.
Honesty in fact in the transaction transaction concerned; for merchant, observance observance of reasonable commercial commercial standards of fair dealing.
Holder in Due Course.
Purchaser who takes property free of defenses of prior parties and conflicting claims to the property
Incidental Damages.
(Seller) Include charges in transportation and care of goods after the buyer’s breach or in connection connection with the the resale. (Buyer) expenses of inspection, receipt, transportation, care of goods rightfully rejected. Expenses of of effecting effecting cover.
Installment Contract.
Requires/authorizes Requires/authorizes delivery of goods in multiple lots that will be accepted separately.
Letter of Credit.
Irrevocable credit issued by financing agency, used to facilitate facilitate reliable payment for goods delivered/shipped. delivered/shipped.
Merchant.
Deals with goods regularly. regularly. Puts himself himself out as having particular skill/knowledge skill/knowledge with the goods he sells. ** Different rules apply to contracts involving one or more merchants!!!
Notice.
Having (1) actual knowledge, (2) received notification, or (3) reason to know something. Giving notice requires requires taking reasonable steps to inform, regardless of whether the other party comes to have actual knowledge.
Receipt.
Physical possession
Replevin.
Recovery of property taken
Sale
passing of title title from the seller seller to the buyer for price. §2-106(1) §2-106(1)
Security Interest.
Interest which secures the payment of an obligation
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Shipment.
Start of shipment (loading goods onto seller’s own truck) is not sufficient to constitute complete shipment. ** Might constitute “start of performance” under §2-206.
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UCC Subject Index Acceptance— 2-206, 2-606, 2-607 Acceptance, revocation— 2-608 Anticipatory Repudiation— 2-610 Anticipatory Repudiation, retraction— 2-611 Assignment— 2-210, 9-403, 9-404, 9-406 Assurances— 2-609 Buyer Remedies— 2-711, 2-712, 2-713, 2-714, 2-715, 2-716, 2-717 Conditions/Impracticability— 2-615 Consequential Damages— 2-715 Counter-Offer— 2-207 Course of Performance/Dealing— 2-208 Cover— 2-712 (buyer); 2-706 (seller) Cure by Seller— 2-508 Damaged Goods— 2-613 Delegation of duty— 2-210 Delivery— 2-307, 2-308, 2-309, 2-601, 2-705 Excuse, notice— 2-616 Firm Offers— 2-205 Forms— 2-207 Incidental Damages— 2-710, 2-715 Installment Contracts— 2-612 Letter of Credit— 2-325 Limitation of agreed remedies— 2-719 Liquidation Damages— 2-718 Modification— 2-209, 9-405 Offer— 2-206, 2-207 Opportunity to Reject— 2-208 Options— 2-311 Output Contracts— 2-306 Parol Evidence Rule— 2-202 Price— 2-305 Rejection— 2-602, 2-603, 2-604, 2-605 Repudiation— 2-708, 2-713 Requirements Contracts— 2-306 Resale— 2-706 Sale on Approval; Sale or Return— 2-327 Seller’s Remedy— 2-702, 2-703, 2-704, 2-705, 2-706, 2-708, 2-709, 2-710 Seller, retention of security interest— 2-310 Specific Performance— 2-716 Statute of Frauds— 2-201 Substituted Performance: Delivery & Payment— 2-614 Third Parties Beneficiary— 2-318 Unconscionability— 2-302 Warranties— 2-312, 2-317, 2-318 Warranties, exclusion— 2-316 Warranties, express— 2-313 Warranties, implied— 2-314; 2-315 3
UCC § 2-107 (Goods)
Description Minerals (goods attached to land) to be severed by the seller are only transferred to the buyer when they are severed from the land All other severable goods can be legally transferred to the buyer before they are severed (regardless of whether the buyer or seller does it).
Form & Formation of Contract 2-201 (SOF)
Must be in writing and signed if price of goods >$500. Omission or mistake of a term from the writing does not make a contract unenforceable. Exception: Contract between 2 merchants is enforceable if written confirmation of the contract is given within 10 days of offer. Exception: Enforceable if goods are specially-manufactured/not possible to sell to another buyer. Exception: Enforceable if party admits in court/pleading that the contract existed Exception: Enforceable if payment has been accepted Exception: Enforceable if goods have been accepted Terms in the “final expression” of the agreement cannot be contradicted by evidence of prior agreement or concurrent oral agreement . Exception: Terms in final expression may be explained by course of dealing/trade usage/course of performance unless carefully negated in the final agreement Conduct by both parties that recognizes a contract is sufficient to show agreement Don’t have to have definite time of formation for contract Omission of terms does not make contract invalid. As long as parties intend to be bound and there’s a reasonably certain basis for remedy Offer by merchant for the sale of goods; signed writing states that offer will be held open is irrevocable for up to 3 months. Exception: Separate consideration is given for longer term/renewal. Offer invites acceptance of any reasonable form unless specifying otherwise. Offer to buy goods can be accepted by shipment of goods or promise to ship goods. Exception: Shipment of non-conforming goods is not acceptance if seller notifies buyer that they are only an accommodation. Exception: If acceptance = beginning of performance, offeror must be notified of this acceptance within reasonable time. Under common law in a unilateral K, beginning of performance creates an option and bars revocation of offer (R2K 45).
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2-202 (Parol Evidence)
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2-204
2-205 (Firm Offers)
2-206 (Offer & Acceptance)
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2-207 (Battle of the Forms)
Intended to deal with (1) confirmation of a contract or (2) offer and acceptance (i.e.—exchange of purchase and acknowledgement forms). Additional or conflicting terms in the acceptance do not disqualify the acceptance. Additional terms between merchants become part of the contract unless: (1) offeror expressly excludes new terms,
(2) they materially alter the contract (examples given in comment 4 & 5), (3) terms of the offeror and offeree conflict , or ** Here, neither term will hold, CONTRACT IS SILENT!!! (4) offeror objects to them within reasonable time after receipt. Exception: Acceptance can be conditional on assent to the new terms. Where goods/payment have already been exchanged, contract exists. Only have to determine what terms govern it. Yeah, that’s a lot of help. Parties themselves know best what is meant in an agreement (comment 1). Behavior indicating waiver of term of agreement is given preference when it preserves the flexibility of a contract (comment 3) Repeated performance with known opportunity for rejection allows silence = acceptance. ** Single occurrences of silence addressed in §§2-605, 2-607. WIC, express terms > course of performance > course of dealing > trade usage Consideration not necessary for modification of a contract. However, cannot be unilateral, need mutual consent (comment 3). Contract can preclude modification or require writing (make own SOF). Exception: Preclusion of modification of a form by a merchant must be separately signed by consumer. Modification must be in good faith (not just trying to avoid performance). Unforeseen market shifts (which ordinarily would not excuse performance) can justify modification here (comment 2). SOF protects against false allegations of oral modifications. Waiver does not require modification. Waiver may be retracted if other party is notified within reasonable time and before that party has relied on the waiver. Can always be precluded by express agreement. Exception: Right to damages due to breach can always be assigned. Exception: Prohibition of assigning “the contract” only precludes delegation of performance. Assignment of “the contract” implies promise by assignee to perform duties. Enforceable by either obligor or assignor. Restrictions on assignment/delegation are especially intended for cases of output/requirements contracts (comment 4). No specifications of right of obligor and assignor to make modifications after assignment. DELEGATION OF DUTIES Allowed unless obligor has substantial interest in having the obligee perform. Delegation does not relieve obligee of liability. Obligor may request assurances from assignee. ASSIGNMENT OF RIGHTS Allowed unless it would materially change the duties of the obligor, increase his risk, or substantially impair chances of getting return performance. Exception: Creation of security interest that does this remains effective to the point that it does not conflict with the limitation. •
2-208 (Course of Performance; now deleted)
2-209 (Modification)
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2-210 (Delegation & Assignment)
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Obligation: Construction of Contract 2-302 (Unconscionability)
Courts may choose to (1) invalidate a clause that is found to be unconscionable, (2) invalidate the whole contract on the basis of an unconscionable clause, or (3) limit application of a clause so as to avoid unconscionable results. Must be so one-sided under the circumstances existing at the time of the contract in order to be declared unconscionable (comment 1). Should be used only to prevent surprise or oppression, not to reallocate risks because of superior bargaining power (comment 1). Finding unconscionability is the responsibility of the judge, not the jury. Risks allocated under UCC may be shifted or divided by agreement of parties. ► PRICE gap-filler!!! Rejects the idea that an agreement to agree is unenforceable. When price is (1) not specified and/or (2) parties fail to later agree on a price and/or (3) other party or standard fails to set price, it is taken to be whatever is reasonable price at the time of delivery . Price to be fixed by a party must be done in good faith. If the failure to fix price is the fault of one party, the other party may either (1) set the price himself, or (2) cancel the contract. One party’s choice of price may be more than just a measure of reasonableness, but an actual condition upon which the contract relies (comment 4). If parties do not intend there to be a contract without specified price term, then there is no contract. Received goods/payment must be returned or reasonable value of received goods must be paid. ► QUANTITY gap-filler!!! Quantities governed by good faith, may not be disproportionate to stated estimates or “normal” amounts in similar contracts. Exclusive dealing requires seller/buyer to use best efforts to promote supply/need (creates mutuality); exclusivity serves as consideration Sale of a company involved in such a contract does not constitute good faith reason for sudden increase/decrease in supply or demand (comment 4). ► MANNER OF DELIVERY/PAYMENT gap-filler!!! Should be delivered in single lot unless otherwise specified. Buyer can reject on the basis of non-conforming single-lot delivery (comment 2). Cannot reject multiple-lot delivery where quantity of that delivery is non-conforming , seller must have opportunity to cure. However, the remainder of the delivery must occur within a reasonable amount of time (comment 3). Payment due in full on single delivery or apportioned (if possible) where circumstance demand delivery in multiple lots be allowed. ► PLACE OF DELIVERY gap-filler!!! Seller’s place of business (residence if he has none). For identified goods that the parties know the location of , that is the location for delivery. Applies to goods that are in possession of a bailee, but seller has to notify bailee of delivery to buyer (comment 2). Title may be transferred through banking channels. Where parties agree that goods are to be delivered to buyer, governed by §2-504.
2-303 2-305 (Open Price Term)
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2-306 (Output & Requirements Contracts)
2-307 (Single/MultiLot Delivery)
2-308 (Place of Delivery)
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2-309 (Time of Delivery)
► TIME OF DELIVERY gap-filler!!! Reasonable amount of time under the circumstances (when time is unspecified). May be implied from another term in the contract or external circumstances (comment 1). Time of payment related to time of delivery (comment 2). Request for early delivery requires assent of other party to be enforceable (comment 4). Where time for successive performance are indefinite, may be terminated at any time by either party. Party terminating must give notice, must not be unconscionable. ► TIME OF PAYMENT gap-filler!!! Payment due at time and place of receipt of goods (when unspecified). Seller may ship while retaining rights until payment received. Buyer may retain right to reject before payment until after inspection of the goods. If delivery involves transfer of documents of title, then payment is to be made when title is received (regardless of when goods received). Any term left to be specified by a party must be done in good faith. Unspecified arrangements for shipping are at the seller’s option. Where specification is necessary but not seasonably made or cooperated with, the other party may (1) continue his performance as reasonable or (2) consider the other party to be in breach after passage of reasonable time. Sale of any good implies that there is no security interest attached to it that the buyer is not aware of . Can only be negated by specific language or circumstances that give the buyer reason to know that there is a security interest other the seller’s ownership. Merchants should deliver goods free of claim of 3rd persons. Buyer’s specifications do not permit him to hold the seller liable for claims arising out of those specifications. Created by things contributing to the “basis of the bargain” : Affirmation or promise seller makes to buyer regarding the goods Description of the goods (verbal, non-verbal, based on trade usage) Sample or model ** Notion that sale of goods is for the thing described. Therefore, descriptions of the essence of the thing cannot really be disclaimed under §2-316 (comment 4). Does not require specific language or intent of “warranty”. However, mere evaluation of goods or opinion of the seller does not create warranty (puffery; although in most cases, these are included in the description of the goods and therefore do create warranty) Warranty of merchantability is always implied in sale of goods if seller is a merchant . Includes: standards of the trade fitness for ordinary purpose adequately packaged and labeled conform to descriptions on container/label Other implied warranties arise out of course of dealing or usage of trade. Where seller has reason to know of the purpose and that buyer relies on seller’s judgment in the goods, implied warranty of fitness for that purpose is enforceable. The existence of this warranty is a question of fact (comment 1). Particular purpose differs from general purpose in the sense that it does not necessarily fall within the bounds of normal warranty of merchantability (comment 2).
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2-310 (Payment; Shipment w/ Retention of Security Interest)
2-311 (Options)
2-312 (Warranty of Title and Against Infringement)
2-313 (Express Warranties)
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2-314 (Implied Warranties)
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2-315 (Implied Warranty of Fitness for Particular Purpose)
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2-316 (Exclusion of Warranties)
Unconscionability limits the negation of express warranties and warranty of merchantability. Can only be excluded with specific language. Implied warranties can be negated through course of dealing/performance, usage of trade, “as is” statements, and buyer’s inspection of goods. Parol Evidence Rule protects seller from false allegations of warranty (Cmt 2). Intention of the parties controls in determining which warranty is dominant: Specifications trump sample or general descriptions Sample from stock trumps general description Express warranty trumps implied warranties except warranty of fitness for purpose Seller may not exclude 3rd parties from warranties that he extends to the buyer . 3rd parties do not have to have privity with the seller in order to get protection of warranties (comment 2).
2-317 (Cumulation & Conflict of Warranties)
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2-318 (3rd Party Beneficiaries of Warranties)
2-325 (Letter of Credit) 2-327 (Sale on Approval; Sale or Return)
Failure to furnish agreed letter of credit = breach.
SALE ON APPROVAL Risk of loss does not pass to buyer until acceptance (after approval). Action consistent with acceptance is not necessarily acceptance, but must notify seller of election to return goods within reasonable time. Acceptance of part is acceptance of the whole if all goods conform. Acceptance of only part of conforming goods is usually inconsistent with the intent of the parties (comment 1)!! SALE OR RETURN Return is at buyer’s expense and risk (in contrast to sale on approval). Option to return any commercial unit of the goods if done within reasonable time.
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Creditors & Good Faith Purchasers Performance 2-508 (Cure by Seller)
Rejects common law Perfect Tender Rule Non-conforming Delivery prior to expiration of K time [ Premature Failure] Seller may seasonably notify buyer of his intention to cure and make a conforming delivery within the K time. [Faultless Failure] When Buyer rejects goods that Seller thought was conforming, if Seller notifies seasonably, he will have additional reasonable time to tender conforming goods. Subsection (2) tries to avoid injustice to seller by buyer’s surprise rejection. (Cmt. 2)
Breach, Repudiation, & Excuse 2-601 (Improper Delivery: Buyer’s Rights)
If goods do not conform, buyer can accept or reject whole or any commercial unit. Exception: installment contracts (§2-612) Acceptance with knowledge of the seller is final unless seller indicates that he is keeping tender open. Buyer must pay seller’s reliance costs if he rejects and then attempts to accept . CAN ONLY REJECT NON-CONFORMING GOODS (comment 3)!!! Must be within reasonable time after delivery, must notify seller (requires affirmative action in order to reject). Buyer may not exercise ownership over the goods after rejection. Buyer has duty to hold rejected goods until seller can remove them, however he has no more obligations to the rejected goods.
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2-602 (Rightful Rejection)
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2-603 (Rejected Goods: Merchant Buyer)
Must follow instructions of seller or make reasonable effort to sell the goods if they are perishable or in absence of instructions (salvage sale). However, duty only enforceable where the seller has no means of selling the goods himself at the time of rejection. Entitled to reimbursement from seller for care and sale of goods. In absence of other instructions, buyer may store rejected goods or ship them back to seller at seller’s expense. Exception: merchant buyers may have duty to resell (§2-603) Buyer’s failure to indicate particular defect precludes him from relying on that defect in justifying rejection if: (1) seller could have cured it, or (2) buyer is merchant and seller requests description of defects. Buyer has opportunity to inspect and either finds that they are conforming or indicates that he will keep them despite non-conformity. Failure to make effective rejection Any act inconsistent with buyer’s rejection or seller’s ownership of the goods. Only constitutes wrong against the seller. Buyer may attempt to effect acceptance after rejection, but does not bind unless the seller re-tenders the goods (comment 4). Acceptance of part = acceptance of whole. Payment is not necessarily conclusive acceptance (comment 3). Acceptance precludes rejection of goods If made with knowledge of non-conformity, acceptance cannot be revoked on that basis unless it was assumed that seller would cure. Burden on buyer to establish existence of breach notify seller of any breach ASAP after discovery of breach. If seller receives notification of liability due to warranty over buyer’s goods and fails to defend, he is bound in the action against the buyer. May revoke on the basis of a defect that substantially impairs the value of the good to the buyer if: (1) Buyer assumed that seller would cure and he didn’t, or (2) Acceptance was induced by seller’s assurances or difficulty of discovering the defect. Revocation must occur within reasonable time after discovery of defect or when buyer should have discovered the defect. Also before any deterioration in the value of the goods due to the buyer’s use. However, time should be allowed for the time taken in attempt to reconcile and adjust problems. Revocation only effective upon notification of seller. Revocation allows retention of rights to damages from breach. Party may demand assurance of performance when reasonable insecurity arises. May suspend own performance until assurance is received. Adequacy of assurances between merchants is determined by commercial standards. Otherwise, governed by good faith. Acceptance of prior improper delivery does not preclude the accepting party from requesting assurances in future deliveries. Failure to provide assurances within reasonable time < 30 days = repudiation (may still be retracted/cured). Repudiation need not make performance impossible (comment 2). Where repudiation involves substantial impairment of the value of the contract to the aggrieved party, that party may: (1) await performance for reasonable amount of time, (2) resort to remedy for breach (still awaiting performance), and ** Will not be able to recover for breach if he waits too long (comment 1)! (3) suspend own performance.
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2-604 (Rejected Goods: Buyer’s Option of Salvage) 2-605 (Waiver of Buyer’s Objection)
2-606 (What is Acceptance)
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2-607 (Effect of Acceptance; Notice of Breach)
2-608 (Revocation of Acceptance)
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2-609 (Assurances)
2-610 (Anticipatory Repudiation)
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2-611 (Retraction of Anticipatory Repudiation)
May retract up until the performance is due unless the other party has already cancelled or relied upon the repudiation. May be in any reasonable form, must include response to assurances demanded. Allowance may be given to the other party for delay due to repudiation. Installment may be rejected if its non-conformity is substantially impairing . Exception: Seller gives assurance of intent to cure. Rejection of one installment = breach of the whole contract. Contract reinstated if buyer: (1) fails to notify seller (2) brings action only with respect to past installments, or
2-612 (Installment Contracts)
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(3) demands delivery of future installments. 2-613 (Accidental Casualty of Identified Goods)
If goods are accidentally fully damaged, contract is avoided . If goods are accidentally partially damaged , buyer may still accept upon inspection with allowance for the deterioration of the value in the price. Waives further right against the seller. Applies even if damage occurs before contract as long as the parties did not have knowledge of the damage. Commercially-reasonable substitute for manner of delivery/payment is allowed where the specified method accidentally becomes unavailable. Must be true impracticability to justify substitution (comment 1). Does not include specifications that lie at “the heart of the agreement” (comment 1). Delay or non-performance does not constitute breach where a contingency occurred that the contract made a basic assumption of the nonoccurrence. Market fluctuations do not constitute impracticability (comment 4). Non-existence of specific purposes does constitute impracticability (EX: subcontracting bid in pursuit of prime bid) (comment 9). With multiple deliveries that are made impracticable but not impossible, seller may allocate his resources and goods at his reasonable discretion (may include past, current, and future customers. Don’t have to do “first-come, firstserve”). Seller must notify buyer of the delay/non-delivery and what allocation he is making available for that buyer. Provides certainty as to when delay is excused or contract is discharged in failure of conditions. Where buyer receives notice on delay due to failure of condition and value of contract is substantially impaired by that delay, he may: (1) terminate unexecuted portion of the contract, or (2) modify to take portion of existing goods that seller has allocated to him. No consideration necessary for this modification (comment). Failure to modify within reasonable time < 30 days = lapse of contract with respect to affected deliveries. Provisions in this section may NOT be negated by agreement of parties, buyer never required to “stand ready” to take excused delayed delivery (comment).
2-614 (Substituted Performance: Delivery & Payment)
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2-615 (Excuse by Failure of Conditions)
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2-616 (Notice Claiming Excuse)
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Remedies
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2-702 (Seller Remedy: Buyer Insolvency)
May refuse delivery except for cash payment. May reclaim goods received on credit within 10 days of receipt. ** Receipt of goods on credit amounts to tacit misrepresentation!! (comment 2) Where insolvency has been misrepresented in writing within 3 months of receipt, no time limit on reclamation. Reclamation bars all other remedies against buyer. Where buyer wrongfully rejects, revokes acceptance, or repudiates, seller may: Withhold delivery (by himself or by bailee) Resell and recover damages Recover damages for non-acceptance Cancel the contract. Allows seller to identify finished goods that will be available for resale or action for the price of the goods if not re-sellable. Seller may complete manufacture of unfinished goods that are repudiated by the buyer unless the buyer shows that such completion would be commercially unreasonable. May stop delivery where buyer is insolvent, repudiates, or fails to make a payment due before delivery. May stop delivery up until receipt of goods (by buyer or representative) or acknowledgement of bailee to buyer . Seller must notify bailee so as to reasonably prevent delivery. Seller is liable to bailee/carrier for damages due to stoppage of delivery (comment 5). Carrier is not under duty to stop delivery, but the seller’s right to stoppage still remains effective (comment 2). Stoppage of delivery that interferes with buyer’s right to due tender = breach. Only condition to resale is breach by buyer (comment 1). When commercially-reasonable resale is made in good faith, seller may recover from the original buyer the difference between resale price and contract price + incidental damages. Resale must be reasonably identified with the broken contract , but the goods themselves do not have to be identified to the contract before the breach (i.e.—buyer repudiates in anticipation of goods not yet made). If a private sale, seller must notify the buyer of intent to resell. If a public sale, only identified goods can be sold except where there is a market for sale of futures of those goods. Seller must be allowed to buy at a public sale (must be notified of place of sale). Buyer has no right to the profits made by seller on resale. Damages = difference between market price at time of tender and the unpaid contract price plus incidental damages less expenses saved due to breach. If damages above do not restore expectancy, damages = profit (including reasonable overhead) that would have been made plus incidental damages. ** Eliminates unfair/wasteful results from applying old law to goods that no longer have fixed prices. If no market price exists at time of tender, can offer proof of substitute market .
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2-703 (Seller Remedies: General)
2-704 (Seller Right to Identify/Salvage)
2-705 (Seller Stoppage of Delivery)
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2-706 (Seller Resale)
2-708 (Seller Remedy: Loss Volume Seller)
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2-709 (Seller Remedy: Action for Price/Spec. Performance)
When buyer fails to pay contract price, seller may recover incidental damages plus price of goods lost or damaged after risk of loss passes to buyer plus price of identified goods only for those goods that are not re-sellable after reasonable effort to do so by buyer or showing that efforts will be unsuccessful (comment 2). When suing for price, seller must hold goods for buyer unless it becomes possible to resell the goods, at which point the resale proceeds should be credited to the buyer. If buyer is in default of an advance (not payment for goods accepted), seller cannot recover price under this section but can recover the collateral (comment 4). Include charges in transportation and care of goods after the buyer’s breach or in connection with the resale.
2-710 (Seller Incidental Damages) 2-711 (Buyer Remedies: General)
Upon rightful rejection or justified revocation of acceptance, buyer may: Cover (see §2-712) and have damages as to all goods affected Recover damages for non-delivery under §2-713 Hold and resell goods, to be reimbursed for costs by seller Upon repudiation or failure to deliver, buyer may: Cover (see §2-712) and have damages as to all goods affected Recover damages for non-delivery under §2-713 Recover identified goods Obtain specific performance as allowed under §2-716 ► Equivalent of seller’s RIGHT OF RESALE!!! Upon seller’s breach, buyer may cover by making good faith purchase of substitute goods within reasonable amount of time. Cover sale can be a single sale or a series of sales (comment 2) Substitute goods do not have to be identical but commercially reasonably similar (comment 2). Buyer may recover difference between cover price and contract price plus incidental and consequential damages less expenses saved. Failure to cover does not bar buyer from other remedy (i.e.— damages for non-delivery). ** However, does limit consequential damages where they cannot be recovered where buyer fails to cover (comment 3). In case of non-delivery or repudiation, damages = difference between market price at time buyer learned of breach and contract price plus incidental and consequential damages less expenses saved. Uses the market in which buyer would have covered as the baseline for damages. (comment 1) Where market price is difficult to determine, spot purchase prices are proper measure (comment 2). Where goods are too scarce to determine market price, specific performance is a good alternative (comment 2). Applies only to the extent that the buyer has not covered . May recover loss for non-conformity of accepted goods resulting from seller’s breach after time for revocation of acceptance has passed (i.e.—breach of warranty, failure of seller to perform later duties under the contract). Allowed even where buyer still owes a portion of the purchase price. Damages = difference between value of the goods when accepted and value they would have had if they had been conforming plus incidental and consequential damages. Incidental = expenses of inspection, receipt, transportation, care of goods rightfully rejected. Expenses of effecting cover. Consequential = loss from general or particular needs that the buyer had at time of contract that the seller had reason to know of and could not be provided for by cover. Injury to person or property as a result of breach of warranty.
2-712 (Buyer Cover)
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2-713 (Buyer Remedy:Repudiation)
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2-714 (Buyer Remedy: Breach with Accepted Goods)
2-715 (Buyer Incidental/Conseq. Damages)
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2-716 (Buyer Right to Specific Performance) 2-717 (Buyer Remedy: Deduction of Damages from Price) 2-718 (Liquidation or Limitation of Damages)
May be decreed where goods are unique or in other circumstances Right to replevin if buyer is unable to recover or if goods have been shipped under a satisfied security interest.
Buyer may deduct damages for seller’s breach from unpaid price due upon notifying seller . Breach must involve the same contract as the one which involves the unpaid price balance. Damages may be liquidated by agreement only in an amount reasonable to the actual harm caused by the breach and difficulty of proof of loss . Unreasonably large amounts = penalty (void) Unreasonably small amounts = unconscionable Where seller withholds goods, buyer entitled to restitution of amount that his payment/deposit exceeds (1) liquidated damage amount or (2) 20% of total value for which buyer is liable (exception for small amounts). Offset by amount that seller can recover as damages under the contract and value of benefits received by buyer. Resale prior to notice of breach should be treated as payment/deposit made by buyer (comment 2). Agreement may provide for other remedies in addition or substitution of those in UCC. Remedies (e.g. repair and replacement) are optional unless one is expressly agreed to be exclusive. Consequential damages may not be limited if such limitation is unconscionable. Limitation of consequential damages in consumer goods is prima facie unconscionable.
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2-719 (Modification & Limitation of Remedy)
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Secured Transactions (Art. 9) 9-403 (Agreement Not to Assert Defenses Against Assignee) 9-404 (Rights & Liabilities of Assignee of Account Debtor)
Account debtor may agree with assignor not to assert defenses against the assignee that he would otherwise be permitted where assignment is in good faith. Exception: Defenses asserted against holder in due course not waivable. Rights of assignee subject to all terms of original agreement and any defense or claim of the debtor against assignor that accrues before debtor receives notification of the assignment . Account debtor’s setoff is capped by the value of the account against the assignee (no affirmative recovery from assignee) Debtor may waive right to assert defenses against the assignee Debtor may discharge debt by paying assignor until he receives notification of assignment. Notification is ineffective where (1) it does not identify rights assigned,
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9-406 (Discharge of Debtor; Notification of Assignment)
(2) (3)
debtor may not pay anyone but the assignor , or if the notification states a payment that is less than what is under the agreement. Assignee must furnish proof of assignment at request of debtor . However, may not suspend payment if it becomes due while waiting for proof of assignment (comment 4). Assignment may not be restricted even by agreement of the parties. Exception: sale of payment intangible or promissory note •
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