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K. UCC sp. 2014

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Kelli Blackburn

on 9 April 2014

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Transcript of K. UCC sp. 2014

BOP: on buyer to show material loss or delay exists.
Buyer can only reject if material loss resulted.

2-602 Manner & effect rightful rejection
buyer can only reject if:
within a reasonable time of receipt of the goods.
After notifying the seller that he is rejecting.
UCC K SP. 2014
2-601 Prefect Tender
If anything fails to conform: buyer may
Applies to good/delivery
Must be reasonable & seasonable
Reject all.
Accept all.
Accept some reject some.

2-504 Improper Shipment by seller
2-508 Sellers Right Cure
Must be before due date:
Seller cures nonconformity
Must notify buyer of intentions to cure
goods don't conform but seller reasonably believes goods substituted would be acceptable (hearing aid), The seller may have further reasonable time to cure this
2-605 Waiver of Buyers objection
by failure to particularize
Buyer MUST state a particular reason for rejection.
Justifying rejection
After buyer has a reasonable time to inspect goods.
After reasonable time, right to reject waived
IE: Seller must know whats wrong in order to fix it.
Revocation - what happens after acceptance
2-606 What constitutes acceptance of goods
1. the buyer has reasonable opportunity to inspect the goods
2. the buyer does not reject or otherwise indicate he doesn't accept the goods.
Silence = acceptance if reasonable time passed and buyer hasn't found any defects
Possession doesn't = acceptance
Acceptance Occurs & too late to reject when:
2 - 607 Effect of Acceptance
The buyer must pay at the contract rate for any/all goods accepted
If Buyer accepts w/defect he waives right to reject based on the defect later
2- 608 Revocation of
Acceptance in whole or in part
Revocation by buyer allowed when nonconformity = substantially impaired goods AND buyer already accepted goods because
The buyer reasonably believed seller would cure and seller hasn't done so
The nonconformity was so difficult to discover and the buyer didn't discover until after acceptance had occur, but revocation must occur within a reasonable time after the buyer finds/should have found the conformity.
2-612 Installment Contracts; Repudiation
When the goods are delivered in separate lots & separate installments are required for each installment
Buyer can reject installment, not entire contract if defect substantially impairs the value of the installment and the seller can't cure the defect
Rejecting entire installment contract, buyer
has to prove the defect substantially
impairs the value of the entire contract.

2-610 anticipatory repudiation
"Reasonable grounds for insecurity"
If either party breaches the contract with respect to performance not yet due and the loss will substantially impair the value of the contract the victim may
1. wait for a commercially reasonable time to see it the other party performs by the due date.
2. Immediately resort to any available remedies under the UCC.
Don't over react!
2-609 Right to adequate assurance of performance
Before demanding assurance from seller you must have reasonable grounds for insecurity.
you can always call and ask for assurances, but you cannot demand assurances unless you have reasonable grounds for insecurity
Rumors are not enough!!!
Between merchants commercial standards govern reasonable grounds for insecurity
If it is typical in industry it might be reasonable grounds!
If seller doesn't give assurances when demanded by buyer. Seller is breaching party and becomes the repudiator.
Reasonable time is 30 days if none is set
2-611 Retraction of
Anticipatory Repudiation
The party can retract his repudiation before the due date unless the other party has canceled or materially changed his position. (ie: ordering from someone else, going out of business)
1-305 Remedies to be liberally Administered
Purpose: put victim in same position as if the beach had not occurred
Buyers Remedies
For breach within:
2-601. 2-608. 2-612. 2-610.
2-711 Buyers remedies in general "gatekeeper"
when seller fails to make a delivery or repudiates buyer can:
COVER: 2-712, but buyer will argue cover isn't reasonable

RECOVER: 2-713 damages for nondelivery

DO NOTHING: To keep the peace for business relationships in future.

2-712: "Cover"
Rule: To buy the goods from somewhere else; most likely for more money.
After a breach, the buyer can "cover" in good faith w/o unreasonable delay
Buyer is presumed in good faith
BOP on seller
The buyer can then recover from the seller the difference between the cover price and contract price & any any incidental or consequential damages.
although the buyer does not have to cover, if the buyer does cover, there is an implied duty to mitigate
Buyer can, in good faith, get the difference between the cover price and the contract price.
Purchases must be reasonable (ie: cotton v. cashmere)
There can't be unreasonable delay before buyer covers. (buyer can't wait for market prices to go up and then cover.
The buyer is held to subjective and objective test.
The buyer is held to a subjective test as to whether he does cover
Once the buyer decides to cover he must act as an objective and reasonable person would

2-713 Buyer's Damages if no cover
When the buyer cannot cover or chooses not to
If buyer doesn't cover, the buyer can recover the difference between the market price at the time the buyer learned of the breach and the contract price at the time of formation + incidental and consequential damages.
2-714 Damages for accepted goods
When buyer accepts non conforming goods
and tells seller the goods are nonconforming, buyer can get the difference in value of goods as warranted and the value of the goods as received.
2-715 Buyer incidental and consequential damages
Incidental Damages:
Rule: expenses reasonably incurred to remedy the breach.
Consequential Damages:
Rule: any loss/damages that results from the breach which the seller at the time of contracting knew could, or would occur if the K was breached and which could not be reasonably prevented by cover or otherwise.
Within Consequential Damages
1. Primary Profits: the difference between what the buyer would have earned from reselling the goods had there been no breach and what was actually earned after the breach.
Within Consequential Damages
2. Secondary Profits:
Damages lost because of a reduction in impulse purchases since less customers would be going in for gas this means less customers would be going in and out of the mini mart.
Good Will: profits lost on future sales

Within Consequential Damages
2-716 Specific Performance
Buyer may sue for specific performance on delivery.
Sellers' Remedies
2-703 Seller's Remedies in General
When buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment, the seller may:
Resell goods and recover damages 2-706
Recover damages for non-acceptance 2-708(1)(2)
Recovers damages for the contract price if requirements are met 2-709
Cancel the Contract
2-704 Seller's right to finish the goods (business judgement rule)
If the goods are unfinished, aggrieved seller can complete the manufacture of the goods or stop the manufacture of goods and resell for scrap, but he must do this using reasonable commercial judgement.
The seller has the right to decide to finish manufacturing even after the breach if they think they can sell the goods to someone else.
Liberally construed in favor of deferring business decisions to the businesses because the judges or courts are not qualified to make such decisions:
seller gets the benefit of the doubt
if management makes a decision that turns out to be a mistake they cant be sued personality for it
2-706 Seller's resale
Rule: seller has the right to resale goods
2-706(1): aggregated seller MAY:
resale as long as
in good faith
in commercially reasonable manner.
Then the seller can recover the difference between the K price and the resale price + incidentals.
Sellers do not get consequential damages only incidental if they apply
Resell can be PUBLIC or PRIVATE
upon notice to buyer
If seller makes more money in resell, than he would have under the original K, the seller s not accountable to the buyer for any profit.
Buyer will argue 1-305 that the seller is getting more than he should but this argument will fail.
subjective test in deciding whether to resell
but once he decides to resell, he is held to an objective test of good faith and reasonableness. 1-304/1-202(20).
Under 2-706(3) any resale is held to both subjective and objective test
UCC code for Good Faith
2-708 seller's Damages if NO resell
2-709 Action for the K price
2-710 Sellers Incidental Damages
Includes commercially reasonable expense (storage, consulting fees etc) incurred in stopping delivery care and custody of goods in return or resale of goods resulting from the breach
Does not include consequential damages: ie lost profits.
Comparable to buyers 2-715
Comparable to buyers 2-716
Recover actual K price here, as apposed to market K price
If buyer Repudiates, Seller can recover:
The price of the goods accepted by the buyer
The price of the goods that the buyer did not accept and which the seller made reasonable efforts to resell at a reasonable price and could not resell.
Incidental damages, if applicable
Duty to Mitigate
If seller chooses to sue (2-709) for the price of the K he must first make a reasonable effort to resell, at a reasonable price, the goods which the buyer did not take.
Exception: where circumstances reasonably indicate that seller wouldn't be able to resell even if he tried, then he doesn't have to. ie: last season fabric
(comparable to buyers cover [2-712]).
If aggregated seller chooses not to resell or cannot resell he can recover from the buyer
Market Value Damages
The difference between the unpaid K price and the market value at the time and place for tender
Incidentals, if applicable
BOP on seller
market price can change from time K was formed and when K ws broken. You have to use the price at the time K was broken.
Market price for both buyer and seller no cover/no resale damages is based on the time of the breach
purpose isn't to put S in a better position than if the K had been performed.
2-708(2) Lost Profit Damages
Lost Volume Seller
If damages provided under 2-706 (resale) are not enough to put the seller in as good a position as performance would have done, then the measure of damages is the profit the seller would have made from full performance of the K + incidentals
Lost volume seller is entitled to sue the breaching buyer for the lost profits of the original sale
In order to be a Lost Volume Seller you must have a large volume or unlimited # of generic type goods.
ie: a 1000 identical tables = LVS
EX: one can assign their right to receive money to another & assume debtor has no problem w who he pays.
However the other party has to be given notice.
A person can assign the rights w/o the permission or consent of the other person in the K.
To be VALID:
Assignor must make clear that he intends to give up all his rights and assign them to someone else.
Once the obligator notice of the assignment the obligator must pay the assignee NOT the assignor.
if the obligator pays the assignor instead of paying the assignee then the obligator paid the wrong person and will have to pay twice.
What can be assigned at
common law
1. an assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the assignor's right to performance by obligor is extinguished.
obligor does not need to accept or give consent. Just needs to be notified.
2. a contractual right can be assigned UNLESS the assignment would materially change the duty of the obligor (EX assigning a performance painting house)
Red Flags
If assignment would Materially Change:
Increase burden of risk imposed on the obligor.
Impair the obligor's change of getting return performance (paid out).
Reduces the value of return performance
Restricted by law.
Step 1. Contract between the original parties
Step 2. K between the assignor & assignee (one party is original to K and new party)
Step 3. Recoverable damages
an assignment has been made, only the assignee can sue for damages. The assignor cannot sue anymore because he is out of the deal.
Obligor could sue if he needed to (but unlikely to need to).
Waiver of Defense Clause
Clause in K which says you waive your right to sue the assignee for any claims you have against the assignor.
Rule: Waiver of defense clauses are not enforceable against consumers. They are deemed unconscionable against consumers. They are only enforceable against business.
Assignor: an original to a contract who transfers their rights under the contract. Someone owes this homie money. hes assigning it to someone else.
Assignee: Party who contracts w/an assignor to take over the assignors rights.
Obligor: an original party to the contract who has not assigned his rights and therefore, still owes a duty under the contract
Rule: you cannot delegate duties w/o consent from the other party in the K (this is different from the assignments where you can assign w/o consent.
What can be delegated at common law
Delegation of performance of Duty:
a promise requires by a particular person if the obligee has a substantial interest in having that person perform acts promised.
Unless the obligee agrees to release the original obligor (novation), delegation does not discharge any duty or liability of the delegating obligor.
Translated: an obligation can be delegated unless the obligee has a substantial interest in having the original obligor perform the duty. The obligor will still be liable even after delegation UNLESS the obligee agrees to discharge the obligor of any duty and liability (this is called novation).
Waiver of Rights:
Rule: one can waive their rights to a contract for personal service if they do not immediately object to a delegation.
3rd Party Beneficiaries
2 or more parties may enter into a K to benefit 3rd party who is then entitled to enforce the contractual obligations w/o being a party to the K. ie: the 3rd party can sue the obligor for breach.
Hypo: dessent buys life ins policy names school as beneficiary. school can recover even though they didn't sign K and possibly didn't know of it or receive a formal assignment.
Two types of third
party beneficiaries
: if either - performance of the promise will satisfy an obligation of the promisee to pay the money to the beneficiary. OR Circumstances indicate that the promisor intends to give the benefit of the promised performance. can sue on the K

a beneficiary who is not intended to be a beneficiary by the parties who created the original K.
Over View of Assignments/Delegations/3rd Party Beneficiaries
Assignments = 2 steps
1. Original K creating rights and duties between obligee (assignor) and obligor.
2. Obligee (assignor) assigns his rights under the 1st K to a 3rd party (assignee) either for consideration or by gift and gives up the right to sue the obligor (this does not require consent).
Delegations: of ones duties requires consent from the other party in the K and does not release the delegator of liability.
Unless there is a novation from the other party in the original K
3rd party beneficiaries
1. Both the original parties to a K must intend to benefit a 3rd party at the time of formation of the K.
2. 3rd party beneficiary is not assigned any part of the original K between the assignor and the obligor.
CANNOT sue on the K
Statute of Frauds
SOF exists in every state. (applies to UCC and common law)
2-201 Formal Requirements SOF (UCC)
With no proof of fraud or admission that there was a K, then a K for the sale of goods for $500 ($5000 in CA) or more is not enforcable unless it is in writing and signed by the party against whom enforcement is sought.
The writing can still be enforced even if its
missing terms agreed upon.
Must be in writing:
1. K for $500+ or ($5000 in CA)
2. Real Estate Transaction
3. Prenuptial/antenuptial agreements
4. Arbitration
5. A K which by its terms cannot be performed within 1 yr from the making thereof.
6. A K that by its terms is not performed during the lifetime of the promisor.
A K that falls under SOF is enforceable only if:
1. it's writing (even if on cocktail napkin)
2. It is signed by the D (person you are trying to enforce against)
3. Writing reasonably identifies the subject matter of the K
4. Writing is sufficient to show an agreement between parties
5. Writing states (w/reasonable certainty) the essential terms of the K
Exceptions to The Statute of Frauds
Don't have to have it in writing for it to be enforceable if....
1. an admission: both sides admit there was a K.
2. Electronic: Statute doesn't apply because electronic K's have authentications (instead of signature) and they provide a record (instead of writing).
3. Part, substantial, or full performance: substantial portion of the K performed - not same as substantial performance earlier. (if your behavior indicates that you were behaving as if there was a K then you dont need writing to show there was. the court will believe you. This will apply only if the performance is solely and unequivicaly referable to the specific agreement. Performance alone is not enough, the performance must be exactly for the promise or agreement that was claimed to have been made.
Promissory estoppel: if you can show your client satisfied all elements to PE.
Fraud: if you can prove that there was fraud then you dont need written K
Parol Evidence Rule
PEOPLE FUCKING LIE (about specific terms) DEAL WITH IT
Applies to UCC and common law
Basic Rule:
If the term is not in writing in the K then the court will not treat the term like it's in the K
Parol Evi only deals with things related to the K either prior to or contemporaneously to the signing of the agreement.
2-202 Final Written Expression: Parol or Extrinsic Evidence
a writing intended to be the final expression of an agreement cannot be contradicted by evidence of prior agreements or contemporaneous oral agreements
Final Expression can always be explained/supplemented by
Course of dealings
Usage in trade
Coarse if performance
Note UCC has a code # to define each of these
Difference between SOF and Parol Evi.
SOF exists to avoid perjury about whether the contract exists at all
Parol Evi exists to avoid perjury about specific term of the K
Two Parts to the Parol Evi Rule:
The 4 "Corners"
To avoid perjury about whether terms are missing.
Rule: if the court concludes the parties intended that their written agreement was filly integrated (complete) then the court excludes extrinsic (outside) evidence (written or oral) of prior or current negotiations.
If the court looks at the K and says its full, meaning no major terms are missing then no other evidence can be brought in.
Objective standard: evaluation of the credibility of extrinsic evidence is determined by the jury.
The writing must be the entire K between the parties if parol evidence is to be excluded.
Plain Meaning:
To avoid perjury about what a K term means.
Bars evidence of meaning of finalized terms that the court concludes aren't ambiguous.
You cannot bring in evidence to help show your interpretation of a term you put in the K.
You cannot bring in evidence showing you meant something else by a certain word or term that what is normally meant.
You cannot bring in evidence of what you subjectively thought the words meant.
You can bring in evidence of custom in the industry/trade usage
Based on objective standard- An entire trade isn't going to lie about what a certain word means.
Custom can supersede the plain meaning of a term.
Test Under The UCC
Whether the writing is the final expression of the parties agreement
Objective Test: looking at the K, would a reasonable person think this is the final agreement.
If nothing seems to be missing, the the court is not going to hear evidence showing there is supposes to be other terms. ie: barred by the parol evidence rule.
UCC allows a broader admissibility of terms that common law.
What is not barred by the Parol Evi Rule
Ie things you can introduce into evidence
1. K's made in jest; you can introduce evidence it was a joke.
2. Subsequent promises
when you sign the K and then later you make an agreement adding to the K (related to subject matter of the K, Relates to K after 1st signed.
3. Collateral Promise
agreements that are separate from the original agreement and are a completely different subject matter than the original K (some other business they are doing together
ie: murder for hirer.
4. Custom in the trade or local custom:
Courts take the K as if it is non-ambiguous unless there is custom that shows there could be other meanings.
5. Prior dealings or course of dealings
Exceptions to Parol Evidence
1. Illegalities
2. Fraud
3. Duress
4. Mistake
5. Lack of Consideration
Affirmative Defenses to Rule
Forcemajor clause - if unforeseeable occurance then contract void according to pre drafted clause.
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