Partial delivery- the contract is not enforceable beyond amount of goods admitted. 2-201(3)(b); if seller only admits to part, that is all that is enforceable
Paid/Received. 2-201(3)(c)- if you’ve paid/accepted or received/accepted the goods, can’t assert SOF as a defense
Electronic transactions can substitute a signed writing; i.e. clicking ‘buy’ online
Is promissory estoppel an exception to the SOF?
Non-UCC states Rest. 139, Monarco
Majority- yes, promissory estoppel may be used to overcome a lack of writing when a signed writing is required by the SOF
UCC states
Majority- yes; most states have agreed promissory estoppel may be an exception to the SOF
Decatur (p. 8); 1-103
Minority- no
Union Oil v. Lige Dickson- Lige does paving contracting, buys asphalt from Union; Union promised not to raise prices for existing contracts Lige had, broke that promise and alleged they’d not made it; Held- promissory estoppel claim fails, 2-201(3) states all exceptions, need uniformity, don’t want an increase in litigation
Pattern of Argumentation
Π’s Claim: Δ made a promise and didn’t keep it.
Δ’s Defense: SOF
Π’s Reply: promissory estoppel
Supplemental General Principles
Rule- Unless displaced by particular provisions of the UCC, otherwise applicable principles of law and equity supplement the UCC’s provisions. UCC sits on top of the common law and other statutes, leaving them intact and applicable.
Pattern of Argumentation
Supplemental Claims
Π’s Claim: In performing our contract for the sale of goods, Δ’s conduct gave me a claim under a state statute applicable as a supplemental general principle of law.
Zapatha v. Dairy Mart- see p. 7
Supplemental Defenses
Π’s Claim: Δ promised to buy or sell goods and did not do it.
Δ’s Defense: Promise is not enforceable b/c it was induced by a statement constituting a misrepresentation under common law rules applicable as supplemental general principles.
Option Contract = promise to keep offer open (exception to requirement of consideration)
common law- basis for enforcement req’d; enforceable promise not to revoke a promise for a certain period requires consideration
Dickinson v. Dodds-; Dick found out informally the property was being sold to another; Held- no obligation to keep offer open b/c no consid.; before complete acceptance by Dick, Dodds could contract w/another
Art. 2- exception for firm offers by merchants (if requirements met). § 2-205.
An option contract by a merchant is not revocable during the time stated if the following requirements are met: 1. offeror is a merchant and; 2. merchant promises in writing to keep the offer open.
If req’s met, offer must be kept open for the stated period but for no more than 3 mos.
If not in writing, requires consideration
Friedman v. Sommer- Sommer, owner of NY apt. building decides to sell apt.s as co-ops; Sommer offers: purchase at current price for 30 days; Sommer then revokes, and Friedman attempts to accept; Held- Sommer may revoke the offer b/c the terms are non-exclusive; saying it’ll lapse after 30 days different from saying it will be open for 30 days
Revocation
prevented from revoking if:
binding option contract (promise to keep offer open)
exception for firm offers by merchants applies. § 2-205
party makes offer, other party relies on the offer, and no promise to keep the offer open
Drennan v. Star Paving- Π, general contractor, relied on Δ Star Paving’s offer in submitting a large bid; Held- enforceable on promissory estoppel; Π’s reliance makes Δ’s offer irrevocable
E.A. Coronis case- Gordon Construction, contractor, solicited bids for a bldg project; E.A. promised to sell Gordon steel structural gods and then revoked; Held- reliance could make an offer revocable, but Π must prove elements of promissory estoppel
UCC sits on top of the common law, and if it’s not precluded by the UCC, UCC may be supplemented w/the common law
Response may argue something is precluded by the UCC (as in Lige Dickson, where promissory estoppel couldn’t overcome SOF b/c couldn’t creat add’l exceptions to those already listed in UCC)
Form of Acceptance § 2-206(1)(a)
Offeror is master of the bargain
If offeror does not specify how to accept, any reasonable manner of acceptance is ok
You can make a promise by beginning performance but doesn’t count as acceptance unless you provide notice
Means of Acceptance:
promise to ship
shipment
policy- prevent unilateral trick; trickster may argue no acceptance b/c no complete performance; UCC- if you ship the goods, whether conforming or non-conforming, you are accepting the contract; if defective- you’ve breached
Pittard (Π) v. Unique- Pittard helped Unique sell their lathe w/understanding Unique would buy a lathe from Pittard, they didn’t; Unique- contract too indefinite to enforce (2-204(3)) b/c not agreed upon and course of dealing shows no formation (1-205); Held- 2-305- price can be settled later, just must be reasonable; & 1 prior contract does not equate to a course of dealing
Notice of Acceptance § 2-206(2)
If you’re merely promising to perform, notice of acceptance is required (unless waived, as in Corlies & Tift)
Characterization of Orders § 2-206(1)(b)
ORDERS ARE OFFERS
important b/c at common-law, it was important to look carefully at the communication to determine whether it was an offer or just preliminary communications
Conduct Showing Agreement § 2-204(1)
courts do not need to determine precisely what was the offer and what was the acceptance; so long as the parties can be shown to make an agreement, it is enough (even w/o specific characterization of 1 offer and 1 acceptance)
Definiteness § 2-204(3)
promise is sufficiently definite to enforce so long as it can be shown the parties intended to enter an agreement and there is a reasonable basis for providing an appropriate basis
open term (e.g. price), 2-303(1); even if there are open terms, enforceable if clear there was intent to form a contract; price must just be reasonable
Patterns of Argumentation
No Offer
Π’s Claim: Breach of contract.
Δ’s Defense: There was no offer.
Π’s 1st Reply: An order for goods may be characterized as an offer under § 2-206(1)(b).
Π’s 2nd Reply: No distinct offer is necessary if the conduct of the parties shows the existence of a contract. § 2-204(1).
Offer Revoked Before Acceptance
Π’s Claim: Breach of contract.
Δ’s Defense: The offer was revoked before acceptance.
Π’s Reply: Δ promised to keep the offer open.
Δ’s Response: There was no consideration for the promise to keep the offer open.
Π’s Reply: No consideration is needed under § 2-205 (option contract in writing by merchant must be kept open).
No Acceptance
Π’s Claim: Breach of contract.
Δ’s Defense: There was no proper acceptance
Π’s Reply: The attempted acceptance was made in manner and medium reasonable under the circumstances. § 2-206(1)(a).
Δ’s Response: There was no consideration for the promise to keep the offer open.
Π’s 2nd Reply: The acceptance was made by a promise to ship or a prompt or current shipment of conforming or nonconforming goods. § 2-206(1)(b).
Π’s 3rd Reply: No distinct acceptance is necessary if the conduct of the parties shows the existence of a contract. § 2-204(1).
No Notice of Acceptance
Π’s claim: breach of contract.
Δ’s defense: There is no contract b/c you did not provide notice of your acceptance of my offer before it lapsed. Notice was required b/c you attempted to accept by beginning performance. § 2-206(2).
Agreement Too Indefinite to Enforce
Π’s claim: Breach of contract.
Δ’s defense: The agreement is too indefinite to enforce b/c obligations of parties are unclear.
Π’s reply: The contract is sufficiently definite b/c the facts show the parties intended to make a contract, and there is a reasonably certain basis for giving an appropriate remedy, in particular ______. § 2-204(3).
The Battle of the Forms
Is there a contract?
Rules
mirror image rule Rest. § 59, 1-103
common law rule- a purported acceptance which contains different or add’l terms to the offer is not really an acceptance but a counteroffer, no contract
Columbus Rolling Mill- Π, Rwy., rejected by making new offer; Held- a proposal to accept on terms different from those offered = rejection of offer, ending the negotiation, unless other party accepts
exception to mirror image rule § 2-207(1)’s 1st Clause
may form a contract even if there are different/ add’l terms in the purported acceptance, unless the offer says the offeree has to agree to the stated terms (proviso)
proviso (exception to exception) § 2-207(1)’s 2nd Clause
exception subject to proviso- may form a contract even if add’l/different terms UNLESS acceptance is made expressly conditional on assent to the add’l terms
i.e. if purported acceptance contains add’l terms and if the acceptance requires assent to those terms to form a contract, there is no contract (mirror image rule applies)
contract by conduct § 2-207(3)
conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract (even if the writings don’t acknowledge a contract)
i.e. buyer sends “want 200 cds”; acceptance- “will ship Tues. but only if you agree to this price”; buyer doesn’t agree to price but takes cds and sells them binding contract
What are the terms of a contract formed by conduct but not by forms? 2-207(3)
terms on which the writings agree § 2-207(3)’s 2nd sent.;
the terms will consist only of those terms that are common to both forms; add’l terms cut out
AND any “gap fillers” supplied by UCC e.g., § 2-309(1)
must be reasonable
Pattern of Argumentation
Π’s Claim: Δ broke a promise to do X.
Δ’s Defense: Our contract was formed by conduct and X is not a term on which the writings agree.
Π’s Reply: The term X becomes part of the contract as a “gap filler” supplied by the UCC.
Pattern of Argumentation
Π’s Claim: Breach of contract.
Δ’s Defense: No contract was formed b/c the purported acceptance was not a mirror image of the offer. Rest. § 59.
Π’s 1st Reply: A contract may be formed even if the acceptance contains add’l or different terms under the exception in § 2-207(1)’s 1st clause.
Δ’s Response: The exception does not apply b/c the acceptance in this case expressly required the offeror assent to the different or add’l terms. § 2-207(1)’s 2nd clause.
Π’s 2nd Reply: A contract was formed by our conduct even if the forms do not create a contract. § 2-207(2).
What are the terms of the contract formed by the exception to the mirror image rule?
Rules
Additional Terms
General Rule- A contract has been formed, but it doesn’t contain the add’l terms, which are just proposals for modifying the terms. § 2-207(2)’s 1st sent.
Merchant Rule- If btw merchants, the terms become part of the contract unless the offeror objects to them (in advance, or after seeing them, w/in reasonable time) or unless they materially alter the contract (where merchant rule won’t apply).
usually doesn’t apply, would just use general rule
Different Terms; 3 different ways to deal w/them:
same as additional (minority)- treat them as proposals for modifying the contract; different terms become part of the contract if the two parties are merchants unless they would materially alter or buyer objects. § 2-207 cmt. 3
“knock out” (majority)- if different terms btw offer and acceptance, knock-out the different terms, change the terms to what is reasonable (i.e. gap-filler). § 2-207 cmt. 6; Prof. White
offer controls- b/c 2-207 doesn’t say you must do anything, just ignore them and say the terms of the offer control (Prof. Summers)
“Gap Fillers”- i.e. default- reasonable price. e.g. § 2-305(1)
gap fillers specify a rule if the contract does not; i.e. if no specification of when it is to be performed, must be w/in a reasonable time
Pattern of Argumentation
Π’s Claim: Δ broke a promise to do X.
Δ’s Defense: I did not promise to do X in my offer.
Π’s 1st Reply: The term X was included in my acceptance and became part of the contract under the merchant rule in § 2-207(2)’s 2nd sent.
Δ’s Response: The merchant rule in § 2-207(2)’s 2nd sent. does not apply b/c its elements are not satisfied. At most the term is a proposal for modifying the contract, which I did not accept. § 2-207(2)’s 1st sent.
Π’s 2nd Reply: The term X is part of the contract as a gap filler supplied by the UCC b/c either our agreement does not address the issue or b/c the offer and acceptance have different terms on the issues; a court should apply the “knock-out” approach.
Δ’s Response: The court should not apply the knock-out approach.
C. Itoh & Co., Inc. v. Jordan Int’l Co.- Itoh sent purchase order for steel coils; Seller, Jordan, sent acknowledgement that contained add’l terms- express condition required arbitration if dispute arose; Held- falls under proviso; there is a contract b/c parties acted like there was, knock out add’l terms (arbitration clause)
Hypo- what if no express condition? there would be a contract, under 2-207(1), but the arbitration clause would just be a proposal; merchant rule would apply- unless objected to, it would be part of the agreement; C. Itoh could argue it materially alters the agreement
Hypo- Prob. 3, p. 77- offer for goods – ship Oct. 15, purported acceptance- ship Dec. 15; majority- “knock out” 2 dates and just requires shipment w/in reasonable time
Terms in the Box
Is a buyer bound by terms in the box? Is the contract formed before or after the buyer saw the terms in the box? 2 Views:
View #1: Hill v. Gateway- Hill orders/ pays for Gateway comp.; arrival- Hill finds terms in the box- if you keep the comp. past 30 days, agree disputes will be arbitrated; Hill - clause inconspicuous (rejected by court), and only bound by terms they knew about when contract made; Held- seller is master of the bargain and may specify how acceptance is formed
View #2: Klocek v. Gateway- buyer orders goods, seller accepts by shipping; Held- terms in box are at most a proposal to modify/ amend the contract, 2-207; terms of the contract are whatever was agreed to when the computer was bought
What Courts May Consider in Determining the Meaning of an Agreement
§ 1-205(4) Hierarchy: Express Terms Course of Performance Course of Dealing Usage of Trade
Express terms- first in the hierarchy
Course of performance, 2-208(1)- a course of performance acquiesced to is evidence of the terms of the agreement
Course of dealing, 1-205(1)- past transactions (previous contracts) have established a common basis of understanding for interpretation of the parties’ dealings
Usage of trade, 1-205(2)- any practice/ method of dealing done regularly in a place/ trade as to justify an expectation that it will be observed w/respect to the transaction in question
Nanakuli v. Shell- Shell promised to ‘protect’ price of asphalt for Nanakuli, asphalt paver, and breached; Held- upheld protection b/c price protection is regularly practiced for existing contracts in the asphaltic paving trade, 2 instances enough to establish course of perf., exception to express terms (paying posted terms at delivery), not a negation
For Lige Dickson case, (holding oral agreement to protect price unenforceable b/c of SOF), could have used usage of trade arg. instead of relying on the oral agreement
Art. 2 Receipt, Inspection, and Warranties
Receipt and Inspection
Rules
Buyer’s Rights and Duties
Duty to pay. § 2-301
if goods tendered. § 2-507(1)
after inspection. § 2-513(1), (2)
if defective, seller has to pay cost of inspection (otherwise, they are buyer’s cost)
Right to reject § 2-601(a)
perfect tender required- if they fail to conform to contract, buyer has right to reject
good faith § 1-203; buyer has general duty of good faith, must act honestly and abide by reasonable standards of commercial dealing in the trade (i.e. trade might not permit rejection if only slight defect)
Methods of acceptance. § 2-606(1)
signifying acceptance, 2-606(1)(a)
failing to reject, 2-606(1)(b)
acting inconsistently, 2-606(1)(c): i.e. buyer rejects but continues to use, sells, or leases the good
Right to revoke acceptance. § 2-608(1) & (3); i.e. if buyer discovers after acceptance the goods have a defect, which substantially impairs the value of the goods to the buyer, and buyer was unable to discover defects prior to paying (b/c latent b/c or seller had assured no defect), then buyer may revoke
“early tender”. § 2-508(1); seller may try again to deliver perfect goods
“surprise reject”. § 2-508(2); i.e. if seller thought the goods would be acceptable to the buyer; may cure by making conforming tender w/in reasonable time (and will get purchase price; however, seller must still pay damages, since they weren’t conforming, i.e. if late)
Effect of cure
seller gets price. § 2-607(1)
seller pays damages. § 2-714(1)
Pattern of Argumentation
Seller’s Claim and Buyer’s Defenses
S’s Claim: B did not pay for the goods. § 2-301
B’s 1st Defense: S did not tender the goods. § 2-507(1).
B’s 2nd Defense: S did not let me inspect the goods. § 2-513(1).
B’s 3rd Defense: I rejected the goods b/c they were not perfect. § 2-601(1).
S’s 1st Reply: You in fact accepted the goods b/c you did an act consistent w/my ownership of them, etc. § 2-606(1)(c).
S’s 2nd Reply: Although you rejected, I subsequently cured the defect. I had a right to cure b/c I tendered early or b/c I had reasonable grounds for thinking the goods would be accepted. § 2-508(1) & (2).
(If seller cures, buyer must accept and pay for goods, but may have a claim for damages caused by the non-conformity)
B’s 4th Defense: I revoked acceptance. I had a right to revoke acceptance b/c (1) the goods were non-conforming; (2) the non-conformity substantially impaired their value to me; and 3(a) I reasonably assumed the non-conformity would be cured or (3)(b) I did not discover the non-conformity during inspection b/c of the difficulty of discovery or b/c of your assurances. § 2-608(1) & (3).
Buyer’s Claim and Seller’s Defenses
B’s Claim: S failed to deliver the goods. § 2-301.
S’s Defense: B failed to tender payment for the goods. § 2-511(1).
Warranties
Rules
Types of Warranties
ExpressWarranty § 2-313(1)(a) & cmt. 3; any assertion of fact seller might make about the good; doesn’t necessarily have to be case that buyer relies on the statement
Common arguments by sellers in express warranty cases:
no intent to make warranty
always invalid- intent unnecessary; goods must be described in some way; if seller makes an affirmation about product, it creates an express warranty
no reliance by buyer
always invalid; there is no requirement of reliance; if description is made, that warranty is enforceable b/c it’s part of the bargain
seller disclaimed warranty (contract says there is no express warranty)
always invalid; may not disclaim express warranties; will look at disclaimer and description to try to make them consistent
buyer waived warranty violation (by not objecting though buyer knew the description was false)
sometimes valid; q: whether buyer waived or not
mutual mistake
Rest. § 152, 154(1); sometimes valid; 154(1)- usually seller should bear the risk that they are mistaken when making a warranty (b/c they are the expert)
just puffing/ opinion
2-313(2), Tyson; sometimes valid
Doug Connor, Inc. v. Proto-Grind, Inc.- Doug buys wood-grinding machine from P-G, who said it would grind up Palmettos; it didn’t; Doug asserts breach of express warranty; P-G: oral affirmations were puffing/ opinion and buyer didn’t rely (b/c he knew a competitor who the machine didn’t work for); Held: finder of fact could reas. conclude the promise were more than just puffing
Implied Warranties
F.F.P.P., § 2-315
Fitness For a Particular Purpose- the goods will be useful for whatever you bought them for (i.e. seller recommends a particular item for a certain use)
opinions may create it, merchantability doesn’t matter, seller doesn’t have to be a merchant, not typically disclaimed
Tyson v. Ciba-Geigy Corp.- farmer, Tyson, planting no-till soybeans needed pesticide; seller recommended Dual 8E, but it didn’t kill Tyson’s crabgrass; Held- no express warranty (just puffing) but there was breach of FFPP
Merchantability § 2-314(1) & (2)
if the seller is a merchant, unless there is a disclaimer, there is an implied warranty that the goods will be merchantable: fit for their ordinary use (ordinary purposes for which such goods are used) [2-314(2)(c)] and properly packaged and labeled
Ambassador Steel Co. v. Ewald Steel Co.- Ambassador sold Ewald steel, which Ewald sold to another co.; steel cracked when used on RR tracks, co. didn’t pay Ewald, who wouldn’t pay total $ to Ambassador; Held- the steel wasn’t merchantable, not fit for ordinary purposes b/c it wasn’t w/in the commercial range
Morrow v. New Moon Homes- Marrows buy a mobile home from Golden Heart (immediate retailer), manufactured by New Moon Homes; many defects; Held- Πs may recover from GH under FFPP and warrant of merchantability for difference btw what home is worth and would have been worth if warranted, as well as for consequential damages (i.e. to property);
tho § 2-318 doesn’t address vertical privity: Held: Morrows may also recover from NMH; Rule: consumer may bring a warranty action against the manufacturer even tho consumer has no privity w/manufacturer
policy reasons: consumer inability to protect himself; manufacturer more able to handle risk, has more info; promotes circularity of litigation
Title § 2-312(1); seller warrants that seller has good title when selling the goods
Other § 2-314(3) -that arise from facts of the cases (new, when you buy from store)
Warranty Issues
3rd-Party Beneficiaries § 2-319, esp. alt. C
Alternative C (Majority)- the warranty extends to anyone who could be reasonably be expected to use or be affected by the goods
Damages
loss in value of the product itself § 2-714(2) –i.e. you get the difference in value btw what you were promised and what you got (difference btw value of goods as they are and what value they would have had if as warranted)
consequential damages § 2-714(3), § 2-715(2)(a)
economic loss- recoverable, provided it was foreseeable
personal injury § 2-715(2)(b); foreseeability not required; so long as injury was proximately caused by breach of warranty, buyer/ injured party may recover
may recover for property if damages were foreseeable
