Term
| Merchants vs. Nonmerchants |
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Definition
| merchants and nonmerchants: several rules under Art. 2 differentiate between merchants and nonmerchants. A merchant is generally defined as one who deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skill as to the practices of the goods involved. Note: some Art. 2 provisions are narrower and require a person to be a merchant “with respect to goods of the kind involved in the transaction.” (e.g. implied warranty of merchant.) |
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Term
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Definition
| good faith requirement: Art. 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.) |
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Term
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Definition
| Firm offer: a written offer signed by a merchant giving assurances it will be held open will be irrevocable (even without consideration) for the stated time period or for a reasonable time if no period is expressly stated. Note: can’t exceed 3 months for either stated time or reasonable inference. |
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Term
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Definition
| Methods of acceptance: an offer is construed as inviting acceptance in any reasonable manner and by any reasonable medium. Generally, an offer to buy goods for current shipment is construed as inviting acceptance either by a promise to ship or by prompt shipment of conforming or nonconforming goods. |
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Definition
Mirror Image rule abandoned—Battle of the Forms: no need for the common law rule of mirror image on acceptance. Whether terms in the acceptance that are different from the offer will be included depends on the parties’ status: a. nonmerchant: if one of the parties to the K is not a merchant, the contract will include only the terms of the offer; b. merchants: if both parties are merchants, additional terms automatically become part of the contract, unless: i. they materially alter the contract; ii. the offer expressly limits acceptance to the offer’s terms; or iii. the offeror objects within a reasonable time |
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Term
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Definition
| Statute of Frauds: contracts for the sale of goods for $500 or more are not enforceable unless there is some writing signed by the party to be charged. A writing is sufficient if it omits certain terms, but quantity is required. |
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Term
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Definition
| confirmatory memo rule: in contracts between merchants, if one party, within a reasonable time after an oral understanding has been reached, sends a written confirmation thereof to the other party that binds the sender, it will satisfy the SOF requirement against the recipient as well if he has reason to know of the confirmation’s contents, unless he objects to its contents in writing within 10 days after it is received. |
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Term
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Definition
| writing not required: in these exceptions, a writing is not required: (1) if the goods are specially made for the buyer, and not suitable for sale to others; (2) if the party admits in his pleading or court testimony that a contract was made; or (3) if the contract is performed |
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Term
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Definition
| Unconscionability: this doctrine can be used as a defense the same as in common law of contracts |
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Term
| Modification by Party's Agreement |
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Definition
| by parties’ agreement: contract modifications sought in good faith are binding without consideration (consideration is required in common law contracts for modification) |
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Term
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Definition
| by law: 1. destruction or injury to goods: if contract requires particular goods to be identified when K is made, and before risk passes to the buyer, the goods are destroyed or damaged without the fault of either party, the K is avoided. 2. method of transportation: if the agreed-upon delivery facilities become unavailable or commercially impractical, any commercially reasonable transportation must be tendered and must be accepted. |
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Term
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Definition
| Parol Evidence Rule—the terms of a contract set forth in the confirmatory memoranda of the parties or in a writing intended as a final expression of the parties’ agreement cannot be contradicted by evidence of any prior agreement or contemporaneous oral agreement. Such terms, however, may be explained or supplemented by: (1) consistent additional terms; (2) course of dealing (previous conduct between the parties to establish a common basis of understanding); (3) usage of trade or business; or (4) course of performance (prior occasions where the party has not objected to similar nonconforming terms). |
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Term
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Definition
| noncarrier contracts: if parties did not intend the goods be moved by carrier, seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession. In the absence of agreement, place of delivery is seller’s place of business (or if he has none, his residence) Note: risk of loss—if seller is a merchant, risk of loss passes to the buyer only upon buyer’s taking physical possession; if seller is not a merchant, risk of loss passes to the buyer on tender of delivery (e.g. when the seller has goods ready for buyer to pick up at the time and place specified). |
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Term
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Definition
carrier contracts: a. shipment contract: seller need not see the goods reach the buyer, only that they reach the hands of the carrier. Note: risk of loss passes to the buyer when the goods are duly delivered to the carrier. b. destination contract: seller is required to see goods reach buyer, and 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. Note: risk of loss passes to the buyer when the goods are tendered to the buyer at the destination. Also, if goods are so defective that buyer has a right to reject, risk of loss does not pass until defects are cured or accepted despite defects. c. FOB contracts: (free on board) the FOB point is the delivery point, which may be seller’s place of shipment or the goods’ final destination. Seller must tender delivery in the manner described in either a. or b. above d. FAS contracts: (free alongside) seller must deliver the goods alongside the vessel in the manner usual in the port of delivery or on a dock designated by the buyer, and obtain and tender a receipt of the goods |
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Term
| Buyer's Rights and Obligations |
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Definition
| Buyer’s rights and obligations 1. right of inspection: unless contract provides otherwise, buyer has a right to inspect goods before paying 2. obligation to buy: in noncarrier cases, unless contract provides otherwise, a sale is for cash and the price is due concurrently with the tender of delivery. However, unless otherwise agreed, when goods are shipped by carrier, the price is due only at the time and place at which the buyer receives the goods. |
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Term
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Definition
1. Title 2. Merchantability 3. Fitness for a particular purpose 4. Express |
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Term
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Definition
| warranty of title: any seller of goods impliedly warrants 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. |
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Term
| Implied Warranty of Merchantability |
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Definition
| implied warranty for merchantability: requires sale of goods by a merchant to be fit for the ordinary purposes for which the goods are used. “Merchant” in this context means a person who regularly sells the goods that were sold (goods of that kind). A “merchant” for implied warranty of merchantability is more than a mere person in business. |
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Term
| Implied Warranty of Fitness for a Particular Purpose |
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Definition
| implied warranty for fitness for a particular purpose: arises whenever any seller, (merchant or not) has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods. |
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Term
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Definition
| express warranty: any statement 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. Note: opinion and puffery have no legal significance. |
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Term
| Warranties and Third Parties |
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Definition
| warranties and 3rd parties: in Idaho, 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 the home if it is reasonable to expect the person to use, consume, or benefit from the goods and that person suffers personal injury because of a breach of the warranty. In the commercial context, it includes employees who would reasonably be expected to use the product. |
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Term
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Definition
| 3rd party rights: entrustment—entrusting goods to a merchant who deals in goods of that kind gives him the power to transfer all rights of the entruster to a buyer in the ordinary course of business. (E.g. Bob leaves his watch at a jeweler’s shop for repair. Jeweler sells the watch to Ed. Ed gets title to the watch, and Bob’s only recourse is to recover damages from the jeweler.) Note: the requirements for entrustment are very specific. The merchant must be one who ordinarily deals in goods of that kind, and the sale must be in the ordinary course of business. |
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Term
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Definition
| acceptance: occurs when buyer, after reasonable opportunity to inspect, either (1) indicates to seller that the goods conform or he will keep them despite their nonconformance; (2) fails to reject them within a reasonable time after tender or delivery, or fails to seasonably notify seller of rejection; or (3) does nothing inconsistent with seller’s ownership |
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Term
| Rejection Prior to Acceptance |
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Definition
rejection prior to acceptance: when goods that do not conform are tendered to a buyer, the buyer may either keep them (and sue for damages) or reject the goods and either cancel the contract or sue.
a. requirements for rejection: (1) must be made within a reasonable time after tender or delivery; and (2) must seasonably notify the seller
b. buyer’s responsibility for goods after rejection: after rejection of goods in his physical possession, buyer has an obligation to hold them with reasonable care at the seller’s disposition for sufficient time for seller to remove them
c. seller’s right to cure: where a buyer has rejected the goods because of defects, seller may within the time originally provided for by 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
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Term
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Definition
| revocation of acceptance: buyer may revoke acceptance if defect substantially impairs the value to him and (1) he accepted them on reasonable belief that the defect would be cured and it hasn’t; or (2) he accepted them because of the difficulty of discovering defects or because of the seller’s assurance that the goods conformed |
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Term
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Definition
1. withhold goods: if buyer fails to make a payment due on or before delivery, seller may withhold delivery of the goods 2. recover goods: after discovering the buyer is insolvent, seller can recover either from buyer or bailee— a. from insolvent buyer: when seller learns that a buyer has received delivery of goods on credit while insolvent, seller may reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods b. from bailee: seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer is insolvent. The seller may stop delivery of carload, truckload, or larger shipments of goods when the buyer breaches the contract or when the seller has a right to withhold performance pending receipt of assurances |
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Term
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Definition
| demand assurances: if reasonable grounds for insecurity arise with respect to the performance of either party, the other may in writing demand adequate assurance of due performance. Until adequate assurances are received, he may suspend his own performance. If no assurances are given before 30 days, the party seeking assurance can treat K as repudiated. |
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Term
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Definition
| anticipatory repudiation: where the other party’s words, actions, or circumstances make it clear that he is unwilling or unable to perform, the aggrieved party may: (1) for a commercially reasonable time, await performance by the other party; (2) resort to any remedy for breach even though he has also urged the other party to perform; or (3) suspend his own performance |
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Term
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Definition
| Statute of Limitations: the statute of limitations for actions for breach of a sales contract is 4 years from the time of breach. |
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