SALES

AND

LEASES CHECKLIST

SALES
I. SCOPE OF ARTICLE 2 a. 2-102 Transactions in Goods (Transactions Not Defined) i. 2-106 Salespassing of title from seller to buyer for price ii.2-105 Goodsmovable at the time of identification to the contract b. Sales-Service (Hybrid Transaction) i. Majority RulePredominate Purpose Test (Circumstances) ii.Minority RuleGravamen Test (Complaint either for Goods or Service) c. Merchants i. Comments to 2-104 1. Any merchant acting in mercantile capacity a. 2-201 Statute of Frauds and Exceptions b. 2-205 Firm Offers c. 2-207 Exchange of Forms as Acceptance 2. Merchant with respect to goods of that kind a. 2-314 Implied Warranty of Merchantability ii.Good Faith 1. Honesty in Fact (1-201(19)) AND 2. Observance of Reasonable Commercial Standards of Fair Dealing in the Trade (2-103) iii. New Merchants iv. Between Merchants (2-104) d. Non-Merchants i. Good Faith 1. Honesty in Fact (1-201(19)) CONTRACT FORMATION a. Statute of Frauds (2-201) (One Party Denies Existence of Contract) (Does not Mean A Contract Exists Only Means Aggrieved Party Gets Day in Court) i. Requirements 1. Sale of goods for total price of $500 or more 2. Writing Requiredintentional reduction to tangible form (1-201(46)) a. Sufficient to indicate existence of an agreement (objective evidence of agreement) b. Signed by party to be charged i. Any symbol with present intention to authenticate (1-201(39)) c. Listing determinable quantity ii.Exceptions 1. Merchant Exception (2-201(2)) a. Between Merchants b. Confirmatory Writing after Oral Agreement (objective guarantee that oral agreement rests on real transaction) c. Sufficient Against Sender i. Writing sufficient to indicate agreement was made, signed by sender indicating quantity d. Sent and Received W/I Reasonable Time e. Recipient Knows of its Contents (Sent to proper place) f. Objection of Recipient

II.

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c.

d.

e.

i. Written objection to the confirmatory memo ("We have no Contract") made W/I 10 days of receipt of confirmation 2. Specially Manufactured Goods Exception (Where BUYER Denies Existence of Contract) a. Specially Manufactured Goods for the Buyer b. Not Suitable for Sale to Others in Seller's Ordinary Course of Business (Circumstances) c. Seller Substantially Began Manufacture OR Arranged for Procurement of Manufacture d. Before Buyer Notifies Seller of Repudiation e. Under Circumstances Reasonably Indicating the Goods are for the Buyer 3. Admissions a. Once Party Admits Existence of Contract, SOF cannot be at issue 4. Performance Exception a. Buyer Makes Payment AND Seller Accepts b. Seller Delivers, Buyer Receives, AND Buyer Accepts and Retains Goods c. Part Paymentenforceable to the extent paid i. More than One Item: Court Apportions Goods ii.One Item: No Apportionment Formation in General (2-204) i. Contract made in any manner sufficient to show agreement including conduct whether or not moment of making is undetermined ii.If terms left open, contract is sufficiently definite so long as a reasonably certain basis to determine remedies exists Firm Offers (2-205) i. Offer to buy or sell goods ii.Offeror is any merchant under 2-104 iii. Signed Writing (If oral, must be supported by consideration) iv. Assurance that offer is held open v. Offer revocable for time specified, not exceeding three (3) months Offer and Acceptance (2-206) i. UNLESS OTHERWISE UNAMBIGUOUSLY INDICATED, Offer to make a contract is construed as inviting acceptance in any reasonable manner ii.Prompt Shipment or Promise to Ship means acceptance can be either 1. Conforming goods shipped acts as acceptance 2. Non-Conforming Goods shipped with timely and seasonable notification that the goods are accommodations IS NOT acceptance UNLESS buyer accepts the nonconforming goods iii. Beginning of Performance acts as acceptance 1. Notification of the beginning of performance must be sent to buyer Additional Terms Included in Acceptance (2-207(1)) i. Definite and Seasonable Expression of Acceptance Including Different or Additional Terms Acts as an Acceptance ii.Where Acceptance is "Expressly Made Conditional to Offeror's Assent to Different or Additional Terms," there is no Acceptance UNTIL Offeror Expressly Assents 1. MUST STATE THESE EXACT WORDS

III.

BREACH OF THE CONTRACT a. First, Define the Contract Terms i. Parole Evidence Rule (2-202) (Parties Agree That There is A Contract BUT One Party Tries to Introduce or Rely on Term OUTSIDE the Writing) 1. A non-integrated writing can be modified by parole evidence

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2. One Writing Signed By Both Parties a. Fully Integrated Writing (Under All Circumstances, writing is absolutely complete) i. Parole evidence is inadmissible. UOT COP COD can be used for limited purpose, namely, to explain or supplement the writing; it CANNOT contradict the writing b. Partially Integrated Writing (Under All Circumstances terms in writing are agreed to, but the contract is not complete) i. Agreed-to terms CANNOT be contradicted by the parole evidence ii.However, consistent, additional evidence is admissible 1. Where the contract is silent OR 2. Parties have not yet agreed to that term iii. UOT COP COD can also be used to explain or supplement the writing UNLESS Contradictory to the agreed-upon terms 3. Confirmatory Memos Sent By Each Party a. Terms to Which Both Writings Agree CANNOT be contradicted by parole evidence b. Where One Writing is Silent OR Where the Writings do NOT Agree i. Consistent, additional evidence is admissible Party Relying on Terms Included in their Form (2-207(2) or (3)) 1. Oral Agreement Followed by Confirmatory Memorandum, terms determined by subsection (2) a. Between Merchants AND Additional Term i. Additional Term is part of the Contract UNLESS 1. Material alteration (also, where offer limits acceptance to offeror's terms or offeror objects to any additional terms) a. Objective and subjective surprise OR b. Substantial Economic Hardship i. Disclaimer of warranties ii.Knowingly and unilaterally imposing hardship on buyer b. Not Between Merchants and Additional Term i. Additional term is a proposal to the contract c. Different Terms i. Knockout Rule ii.Master of Offer OR iii. Reasonable 2. Where the Exchange of Forms = Offer and Acceptance a. Definite and seasonable expression of acceptance = acceptance, Terms determined by subsection (2) i. Between Merchants AND Additional Term 1. Additional Term is part of the Contract UNLESS a. Material alteration i. Objective and subjective surprise OR ii.Substantial Economic Hardship iii. Disclaimer of warranties iv. Knowingly and unilaterally imposing hardship on buyer ii.Not Between Merchants and Additional Term 1. Additional term is a proposal to the contract iii. Different Terms (Three Approaches) 1. Knockout Rule 2. Master of Offer OR

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3. Reasonable b. Acceptance Made Expressly Conditional to Buyer's Assent to Different or Additional Terms i. NO ACCEPTANCE UNLESS OFFEROR EXPRESSLY ASSENTS 1. If offeror assents to additional terms, there is no issue ii.IF NO ASSENT, Writings do not establish the contract c. Where writings do not establish the existence of a contract, but Subsequent Performance Indicates Agreement (2-207(3)) i. Terms consists of those terms to which the parties agreed AND ii.Gap fillers in the code Gap Fillers 1. 2-305 Open Price Term a. Reasonable Price @ time of delivery IF price not included, left to be agreed upon and fail to agree, or parties let market decide the price 2. 2-311 Allocation of Quantity a. Specifics left to one party i. Specifications must be done in good faith within commercial reasonableness b. Where party refuses to set specifications i. Other party may treat the refusal as a breach and be excused from performance OR ii.May proceed to set specifications himself in a reasonable manner 3. Other presumptions: Unless otherwise agreed a. Entire K is to be delivered at one time. UCC 2-307 b. Tender of delivery is at seller's place of business. UCC 2-308 c. Time for Delivery is a reasonable time. 2-309(1) d. Payment is due at the time and place of delivery upon receipt of goods 2-310(a) Warranties 1. Warranty of Title (2-312) a. Created in the sale of goods b. Extent i. Good Title Conveyed (2-403) 1. Void Titleinvoluntarily giving up goods 2. Voidable Titlevoluntarily giving up goods a. GFPVgood faith standards; voluntary transfer of interests, for value (sale) ii.Transfer Rightful 1. GFPV has power to transfer good title, but not the right (True owner has the right to transfer) iii. No security interests or liens to which buyer does NOT actually know i. If BUYER furnishes specifications to seller, buyer must hold seller harmless from any claim arising from the specifications c. Breach i. Good Title not conveyed ii.Transfer is not rightful iii. Seller fails to disclose security interest iv. If BUYER requires specifications and specifications give rise to claim against seller, the buyer has breached the warranty of title d. Proximate Causation e. Buyer's Damages (2-714 and 2-715)

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3.

i. Difference between value of goods as promised and goods as transferred (FMV) 1. Actual costs of litigation if buyer must defend cloud on title ii.Incidental and consequential damages f. Vouching In under 2-607 g. Disclaimer (2-312) i. Specific language OR ii.Circumstances Express Warranties (2-313) a. Created i. Affirmation of Fact, Promise, Description, Sample, Model b. Extent (TEST) i. Representations 1. Made by seller to buyer 2. Relating to the goods 3. Form the basis of the bargain a. No reliance required BUT b. Seller rebuts by showing buyer did not rely c. Breach i. Goods do NOT conform to representations made by seller d. Proximate Causation e. Damages (2-714 and 2-715) i. Difference between the value of the goods as promised and the value of the goods as transferred ii.Incidental or consequential damages f. Disclaimer (2-316) i. Where Language of the contract both creates express warranties AND limits express warranties, court construes as consistent ii.If inconsistent, the disclaimer of express warranties drops out iii. Attempt to Disclaim 1. Seller must assure that the writing is fully integrated or integrated with respect to disclaimer of warranty term 2. Seller should add a "lack of authority" clause if salespersons are used 3. Seller should have buyer sign the disclaimer separately to prevent unbargained-for disclaimer and surprise Implied Warranty of Merchantability (2-314) a. Created i. Sale of goods ii.Seller is a merchant with respect to goods of that kind 1. "Goods of that kind" interpreted broadly or narrowly depending on type of contract (Consumer = broad interpretation) b. Extent i. Goods Fit for its ORDINARY purpose ii.Food warranties 1. Reasonable anticipation test iii. Allergic reaction 1. Seller has reason to know the reaction was possible in some "appreciable" class of consumers (Circumstances) c. Breach

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i. Goods not fit for ordinary purpose d. Proximate Causation e. Damages (2-714 and 2-715) i. Difference between the value of the goods as promised and the value of the goods as transferred AND ii.Incidental or consequential damages f. Disclaimers (2-316) i. General Rule 1. Must contain the word "merchantability" AND 2. Must be conspicuous (reasonable person ought to have noticed it) a. Some courts allow "actual" knowledge to supplant conspicuousness although it is not in the code ii.Exceptions: Alternatives 1. Conspicuous "As is" or "with all faults" language 2. Seller demands inspection by buyer and buyer should have found the defect 3. UOT COP COD Implied Warranty of Fitness for Particular Purpose (2-315) a. Created i. Seller knows or has reason to know of the buyer's needs ii.Seller knows or has reason to know the buyer is relying on seller to select or furnish suitable goods iii. Seller actually selects or furnishes goods iv. Buyer actually relies on seller's skill or judgment to select or furnish the goods v. ALL at time of contracting b. Extent i. Goods are fit for buyer's particular purpose c. Breach i. Goods are not fit for buyer's particular purpose d. Proximate Causation e. Damages (2-714 and 2-715) i. Difference between the value of the goods as promised and the value of the goods as transferred ii.Incidental or consequential damages f. Disclaimer (2-316) i. General Rule 1. Must be in writing AND 2. Conspicuous 3. Need not be specific language (no implied warranties in this sale) ii.Exceptions: Alternatives 1. Conspicuous "As is" or "with all faults" language 2. Seller demands inspection by buyer and buyer should have found the defect 3. UOT COP COD Beneficiaries of Warranties 2-318 a. Alternative A (Narrow) (PA) i. Natural persons 1. In family or household OR 2. Guests in home

b.

ii.Reasonably expected to use, consume, or be affected by the goods iii. May recover for personal injury resulting from breach of warranty b. Alternative B (Moderate) i. Natural Persons ii.Reasonably expected to use, consume, or be affected by the goods iii. May recover for personal injury resulting from breach of warranty c. Alternative C (Broad) i. Any person, including corporations ii.Reasonably expected to use, consume, or be affected by the goods iii. May recover for ANY injury (personal and property) for breach of warranty 6. Seller's Defense to Breach of Warranty Claim 2-607 a. Buyer MUST NOTIFY seller of the breach of warranty under all circumstances b. Within a reasonable time c. To ensure negotiations, give seller opportunity to cure and allow seller to inspect before curing d. Content of notice need not be specific but must inform the seller that the transaction is "troublesome and needs to be watched" 7. Limitation of Warranties (2-719) a. Remedy Limited to Repair or Replace i. IF Parties expressly agreed that the repair or replace remedy would be exclusive (code presumes that it is in addition to other warranties, so parties must expressly agree that it is exclusive) AND ii.Limitation fails of its essential purpose (what is the purpose) iii. Limitation drops out and code remedies apply b. Limitation of Consequential Damages i. Limitation permitted unless unconscionable 1. Limitation of damages for personal injury in consumer contract is prima facie unconscionable 2. Limitation of damages for economic injury is not prima facie unconscionable c. Limitation of consequential damages where exclusive remedy is repair or replace (and remedy fails of its essential purpose) i. In consumer contracts, they both drop out and the code remedies come in ii.In commercial contracts, the repair or replace clause ALONE drops out (limitation of consequential damages stays in) 8. Unconscionability (2-302) a. Substantive (terms etc) AND Procedural (unfair process) unconscionability must be found by the court in order to refuse to enforce the contract or a clause thereof Next, Determine Performance Obligations i. General Obligations (2-301) 1. Seller must tender conforming goods 2. Buyer must accept conforming goods and tender payment a. General RulePayment is sufficient when made by any means or in any manner generally accepted in the business b. ExceptionWhen seller demands payment in cash, seller must give buyer a reasonable time to procure cash, and buyer must act with due diligence 3. Code contemplates a contemporaneous transfer, but 2-507 and 2-511 provide that seller's tender of conforming goods is conditioned upon buyer's payment, and vice versa, in the event of non-contemporaneous transfer

ii.Overview 1. When buyer receives goods, buyer has reasonable time to inspect so as to assure the goods are conforming a. Buyer MUST accept OR reject based on whether the goods conform or not b. Whether goods conform depends on the contract terms i. "In accordance with the obligations under the contract" (2-106(2)) c. IF the goods conform, buyer MUST accept d. IF the goods do NOT conform, buyer has right to reject i. Perfect tender rule in a single delivery contract OR ii.Rejection in accordance with provisions for installment contracts iii. Rejection 1. Single Delivery Contracts (2-601) a. Buyer has Right to Reject IF i. Tender fails to conform in any respect with the TERMS OF THE CONTRACT (Perfect Tender Rule) 1. Reject the whole 2. Accept the whole 3. Accept commercial unit(s) and reject the rest b. Procedure for Rejection (2-602) AFTER REASONABLE OPPORTUNITY TO INSPECT i. Buyer must seasonably notify the seller of rejection ii.Buyer must refrain from exercising ownership of goods AND iii. Hold goods for reasonable time and in a reasonable manner so seller can remove them c. Additional Obligations i. Merchant Buyers are under additional obligations under 2-603 1. Buyer must reship goods (at seller's cost) IF a. Seller requests AND b. Seller has no place of business in the market 2. If Goods are perishable a. Buyer must make reasonable attempts to resell without seller's demand, but buyer is entitled to commission ii.Buyer must also state defects that could have been found upon reasonable inspection under 2-605 IF 1. Seller could cure (2-508) a. Seller has absolute right to cure IF time for Seller's performance has not expired b. IF seller has reasonable grounds to believe that the goods or tender are acceptable, seller has right to cure within a reasonable time after rejection (not forever) i. Reasonable grounds determined by all circumstances including UOT COD COP 2. Seller demands statement 3. Where statement is required and not given, buyer CANNOT rely on those defects to show breach 2. Installment Contracts (separate lots, separately accepted) (2-612) a. Buyer has Right to Reject IF AFTER REASONABLE OPPORTUNITY TO INSPECT i. Goods are non-conforming ii.Non-conformity substantially impairs the value of the installment to the buyer 8

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Purpose of the goods, time, quantity, assortment, resale, damage iii. Non-conformity cannot be cured by the seller 1. Seller has absolute right to cure in installment contracts 2. If seller cures, buyer MUST accept b. ANY PARTY has the right to reject the ENTIRE INSTALLMENT CONTRACT IF i. Seller's Nonconformity OR Buyer's Default ii.Substantially impairs the value of the whole contract 1. Cumulative effect of the nonconformity based on all the circumstances a. Purpose, price, good will, harm to other customers, reputation etc. iii. Substantial impairment acts as a breach of the whole contract c. *PRESUMPTION IN COURT is that nonconformities do not substantially impair value to the partiesencourage performance of contracts d. Procedure i. Buyer MUST seasonable notify seller and give seller opportunity to cure Acceptance 1. Generally a. Buyer must pay for accepted goods (2-607) b. Acceptance precludes rejection (2-607) c. Buyer bears the burden of proving any breach with respect to goods accepted (2607) 2. Acceptance (2-606) a. After reasonable opportunity to inspect i. Buyer makes an overt indication of acceptance to the seller b. Fails to make an effective rejection under 2-602 i. Failure to seasonably notify seller of rejection within a reasonable time ii.Exercise of ownership iii. Fail to reasonably hold goods in reasonable manner so seller can retrieve the goods OR c. Does any act inconsistent with the seller's ownership d. Acceptance of any part of a commercial unit is acceptance of the entire unit Revocation of Acceptance (2-608) 1. Right to Revoke Acceptance (2-608(1)) a. Nonconformity BASED ON THE CONTRACT TERMS i. Regardless if seller knows of buyer's circumstances b. Nonconformity substantially impairs the value of goods to the buyer i. Subjective determination of THIS buyer's needs AND ii.Objective determination of the value to a reasonable person with THIS buyer's needs c. AND BUYER i. Knowingly accepts goods with the nonconformity based on a reasonable assumption that the seller would cure OR ii.Buyer was induced to accept because the defect was difficult to discover 2. Procedure (2-608(2)) a. Notification of revocation of acceptance must occur within a reasonable time after buyer discovers OR should have discovered the defect AND b. Before any substantial change in condition of goods not caused by the defect c. Once buyer rightfully revokes acceptance, buyer has the same rights and obligations as if he rejected the goods

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i. Cannot exercise of ownership ii.Hold goods for reasonable time and with reasonable care so seller can retrieve them iii. Merchant buyers may also have additional obligations (2-603) Other Matters 1. Identification 2-501 a. Generally i. Determines the exact goods seller will give to buyer ii.Buyer obtains limited property interest and insurable interest at time of ID iii. Comments suggest that all doubts should be resolved in favor of ID b. ABSENT EXPLICIT AGREEMENT i. Existing goods are identified at the time of contracting ii.Identification of an undivided share in identified fungible bulk occurs at the time of contract 1. Undivided share means ownership 2. Identified fungible bulk means container of goods 3. Fungible means identical equivalent iii. Future goods are identified when 1. Goods are shipped 2. Marked OR 3. Otherwise designated by the seller as goods to which the contract refers 4. NEED NOT BE DELIVERABLE iv. Crops or unborn young 1. Identification occurs when crops are planted IF a. Harvested within the year OR b. At the end of the next normal harvesting season i. Whichever is longer 2. Risk of Loss: NO BREACH AND NO AGREEMENT (2-509) (After Identification) a. 2-509(1): IN Shipment Contracts ROL shifts when goods are duly delivered to the carrier i. F.A.S. (2-319) is always a shipment contract 1. Requires seller to deliver goods on the dock of the vessel 2. Obtain negotiable bill of lading 3. 2-504 also requires seller to a. Form a reasonable contract to ship with the carrier b. Obtain all necessary documents for shipment AND c. Promptly notify buyer of shipment ii.C.I.F. (2-320) is always a shipment contract 1. Requires seller to obtain a negotiable bill of lading 2. Load the goods and obtain the receipt 3. Obtain insurance for the goods 4. 2-504 also requires seller to a. Form a reasonable contract to ship with the carrier b. Obtain all necessary documents for shipment AND c. Promptly notify buyer of shipment iii. C & F (2-320) is always a shipment contract 1. Same as C.I.F. except no insurance requirement (buyer has a blanket insurance policy for all goods)

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iv. F.O.B. (2-319) CAN be a shipment contract if the named place is the seller's location 1. Requires seller to put the goods in possession of the carrier 2. 2-504 also requires seller to a. Form a reasonable contract to ship with the carrier b. Obtain all necessary documents for shipment AND c. Promptly notify buyer of shipment b. 2-509(1): IN Destination Contracts, ROL shifts when carrier tenders delivery at the particular destination i. Ex-Ship is always a destination contract 1. Goods must be unloaded ii.F.O.B. CAN be a destination contract if the named place is the BUYER'S location 1. 2-503 requires seller 2. Put and hold conforming goods at buyer's disposition AND give buyer notice reasonably necessary for buyer to take delivery 3. Tender must be at a reasonable hour 4. Goods must be kept available for a reasonable period of time 5. Seller must also furnish facilities reasonably suited for receipt of goods (exrefrigeration) c. 2-509(2): Goods in Possession of Bailee to be delivered without movement i. Documents of Title 1. Negotiable a. ROL shifts upon buyer's receipt of the negotiable document of title (actual physical possession) 2. Non-Negotiable a. ROL shifts upon buyer's receipt of the non-negotiable document of title AND buyer has a reasonable time to i. Present the document of title to the bailee OR ii.Have bailee acknowledge buyer's right to the goods ii.Bailee Acknowledgement 1. Absent any document of title exchange, ROL will shift to the buyer when bailee acknowledges buyer's rights to possession of the goods a. Must come from the bailee and must be give to the buyer d. 2-509(3): Other Transactions i. Merchant sellerROL shifts upon buyer's receipt (actual physical possession) of the goods ii.Non-Merchant SellerROL shifts to buyer upon seller's tender of delivery Under 2-503 1. Put and hold conforming goods at buyer's disposition 2. Put and hold conforming goods at buyer's disposition AND give buyer notice reasonably necessary for buyer to take delivery 3. Tender must be at a reasonable hour 4. Goods must be kept available for a reasonable period of time 5. Seller must also furnish facilities reasonably suited for receipt of goods (exrefrigeration) 3. Risk of Loss: BREACH (2-510) a. Seller in breach 2-510(1) and (2) i. IF goods are nonconforming AND ii.Buyer has the right to reject 11

1. Single delivery contract = perfect tender rule 2. Installment contract = substantially impairs rule iii. THEN risk of loss is on seller UNTIL 1. Cure under 2-508 a. If seller cures, seller MUST retender the goods or risk of loss won't shift OR 2. Acceptance by the buyer under 2-606 b. IF 2-510(1) does NOT apply, BUYER has the risk of lossBuyer can SHIFT the risk of loss back to the seller under 2-510(2) i. IF Buyer rightfully revoked acceptance 1. Three part test under 2-608 AND ii.Deficiency in insurance coverage 1. Buyer does NOT have adequate insurance to cover loss iii. THEN buyer can treat the risk of loss as if it never shifted to buyer 1. Risk of loss is on the seller to the extent the insurance will not cover the buyer's loss 2. Risk of loss is on the buyer for the remainder c. IF the BUYER repudiates or breaches, 2-510(3) applies i. IF goods conform ii.Goods identified to the contract before the loss under 2-501 AND iii. Deficiency in seller's insurance 1. Loss occurs within a commercially reasonable time after the breach/repudiation iv. THEN risk of loss is on the buyer for a commercially reasonable time 4. Impossibility a. Casualty to Identified Goods 2-613 i. IF contract requires specific or unique goods for performance ii.Goods have been identified at the time of contracting iii. Casualty WITHOUT fault of either party AND iv. Risk of loss has not shifted to buyer v. THEN 1. IF total loss a. Contract can be avoided 2. IF partial loss a. Buyer has the right to inspect goods i. Buyer can accept goods at a reduced price reflecting the loss OR ii.Treat contract as avoided b. Substituted Performance 2-614 i. No fault ii.Either 1. Berthing, loading, or unlading facilities fail 2. Agreed type of carrier becomes unavailable OR 3. Agreed manner of delivery is commercially impracticable iii. Commercially reasonable substitute is available iv. THEN substitute must be tendered and accepted c. Excuse by Failure of Presupposed Conditions 2-615 i. Threshold requirements 1. Contingency or event occurs 2. Seller's performance has become commercially impracticable 12

a. Ex: orders CANNOT be filled AND 3. Party's assumed that the event would NOT occur a. That is, neither party assumed the risk of this event ii.Non-delivery in Part 1. Seller must allocate among current customers in a fair and reasonable manner a. Comments suggests pro rata 2. Seller can consider his own needs for manufacturing 3. Seller can also consider regular customers not party to this particular contract iii. Notification 1. Seller must seasonably notify the buyer of the non-delivery or partial delivery d. Buyer's Procedure when Notified Under 2-616 i. Buyer receives notice of delay or partial allocation ii.Allocation would substantially impair the value of the contract to the buyer iii. Buyer can 1. Terminate the contract OR 2. Modify (basically, agree to the delay or allocation) iv. Buyer must notify seller in writing within a reasonable time not exceeding 30 days 1. IF no notification by the buyer, contract is terminated e. "Commercially Impracticable" as used in these sections i. Comment 4 states that generally, an increase in cost is NOT an excuse making performance "commercially impracticable" 1. IF rise in price is excuse, increase in seller's cost MUST a. Result in a loss on the contract AND b. Loss must be severe and unreasonable 5. Adequate Assurance 2-609) a. Contract for the sale of goods b. Reasonable grounds of insecurity about the other party's performance i. Between merchants ii.Reasonable commercial standards of insecurity 1. Objective financial indications a. Bankruptcy b. Reduced bond ratings c. Insecure party must demand, in writing, assurance of performance by other party i. Adequate assurance ii.Request a promise to perform as required by the contract d. Party can suspend performance UNLESS party has received the agreed upon return e. Responding party has a reasonable time, not exceeding 30 days, to give adequate assurance i. Reasonable time might be short if goods are perishable f. If party does not respond within such time, insecure party can treat the failure to respond as an anticipatory repudiation under 2-610 6. Anticipatory Repudiation (2-610) a. Test: Comments provide threshold showing: i. Overt communication of intention ii.Action rendering performance impossible OR 13

iii. Demonstration of clear determination not to continue with performance b. AND if repudiation substantially impairs the value of the contract, aggrieved party can i. Wait for performance ii.Resort to remedies sections iii. Suspend its own performance c. Doubts as to performance? i. Make a 2-609 demand of adequate assurance II. DAMAGES a. Seller's Remedies i. Buyer's Insolvency 2-702 1. Goods not yet shipped 2-702(1) a. Seller learns of buyer's insolvency b. Seller may refuse to ship except for cash 2. Goods in possession of Buyer 2-702(2) a. Seller has right to reclaim b. Must make demand within 10 days of buyer's receipt of the goods c. Goods must have been shipped and received on credit d. Buyer must be insolvent when buyer received the goods e. Remedy limited to BUYER only, not to third parties (exBuyer received goods and sold to third party, seller cannot reclaim from third party) 3. Goods in Transit 2-705 a. Seller has the right to stop delivery b. Limitations: seller can stop until i. Buyer receives goods ii.Bailee acknowledges the buyer's rights to goods iii. Buyer receives negotiable documents of title ii. Buyer's Breach 2-703 1. General Remedies: 2-703Seller Can a. Withhold delivery b. Stop delivery (stoppage) (2-705) i. Limited to larger shipments (truckloads, plane loads, ships, etc.) c. ID goods to the contract after a breach (2-704) i. Seller can ID goods to the contract if they are in his possession or control ii.If goods are manufactured, seller has the choice of finishing the goods and reselling OR stopping manufacture and sell for scrap d. Resell the goods (2-706) i. Must be done in good faith ii.Sale must be held in a commercially reasonable manner 1. Two Types a. Public (Auction) b. Private (contracting with another party) 2. Seller cannot participate in the private resale (cannot contract with himself) but can participate in the auction iii. Seller must notify the buyer of the resale iv. Calculation of damages is the difference between the contract price and the resale price plus any incidental damages e. Recover Damages (general calculation under 2-708)

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i. 2-708(1) Generally, where buyer fails to pay ii. Calculation of damages is the difference between the market price and the contract price 1. Market price is determined at the time and place for tender iii. 2-708(2) "Lost Volume Seller" 1. Where seller has unlimited supply of goods AND 2. Market price is inadequate to make the seller whole THEN 3. Measure of damages is a. The lost "profit" i. Definedcontract price minus variable costs (not fixed costs) AND b. Reasonable overhead i. Fixed costs associated with the sale of THIS good (anyone who worked on selling this good) Bring an Action for Price (Seller's specific performance under 2-709) i. Limited to 1. Accepted Goods OR 2. Conforming goods a. Must be lost or damaged within a commercially reasonable time AND b. After Risk of Loss has passed to the buyer OR 3. Goods Identified to the contract a. Seller must be unable to resell OR b. Circumstances make resale futile ii.Seller DOES NOT get to keep the goods Recover Incidental Damages (2-710) i. Definitionout of pocket expenses from dealing with the goods in connection with resale or otherwise from the buyer's breach

b. Buyer's Remedies i. Insolvency 2-502 1. Buyer has right to replevin ii. Rejection under 2-601 and 2-612 are remedies for buyer iii. Revocation of Acceptance under 2-608 is a remedy for buyer iv. Seller's Breach 1. General Remedies 2-711: Buyer can a. Cover (2-712) i. Cover ii.Reasonable substitute for goods iii. Made in good faith iv. Calculation of damages is the difference between cost of cover and contract price plus consequential and incidental damages under 2-715 1. Incidentalout of pocket costs from dealing with the goods (2-715) 2. Consequentialinclude damages which seller has reason to know and personal or property injury (2-715) b. Recover Market Damages (2-713) i. Calculation of damages is the difference between the market price and the contract price plus incidental or consequential damages

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c.

Market price determined at the time when buyer learned of seller's breach ii.Where calculation of market damages GREATLY EXCEEDS buyer's actual damages 1. Under 1-106, the general policy is to put the aggrieved party in the same position as if the contract were performed HOWEVER 2. Market damages calculation still applies a. 1-106 is a general statute, and the specific section for market damages trumps the general statute b. Code seeks to encourage performance of contractsseller's would always breach if they knew they only had to pay actual damages, which are generally less than the market damages c. Majority of jurisdictions follow this approach c. Specific Performance (2-716) i. Where goods are unique OR ii.Other proper circumstances 1. Where buyer CANNOT cover iii. Buyer can demand that the seller deliver goods d. Recover Damages for Goods Accepted (usually warranty claims) (2-714) i. Calculation of damages is measured by the goods as warranted and actual worth of the goods Liquidated Damages i. Reasonable prediction of damages ii.Determined by anticipated OR actual damages iii. Generally permissible unless they are a penalty

1.

LEASES
I. SCOPE OF ARTICLE 2A a. Definition of a Lease (2A-103(j) i. Transfer of the right to possess and use ii.Goods iii. For a finite term with right of return to lessor iv. In exchange for consideration b. Disguised Sale (1-201(37)) i. No Termination Clause AND EITHER 1. Term and Economic life are equal 2. Lessee is bound to buy 3. Renewal for Nominal Consideration a. Nominal consideration calculated by comparing the price paid with the reasonably anticipated fair market value at the time of contracting OR 4. Buyout at the end of the term for nominal consideration c. Finance Lease (Warranties under 2A-212) i. Test 1. Must be a true lease under 2A-103(37) 2. Lessee selects the goods 3. Goods bought solely to release AND 4. Lessee must know about the original sale

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d.

e.

f.

g.

ii.Lessee is the beneficiary of the implied warranties given in original sale (from seller to buyer (lessor)) 1. Implied warranty does NOT apply to the actual finance lease (from lessor (original buyer) to lessee) Statute of Frauds (2A-201) i. Lease price totaling at least $1000 requires a writing 1. Signed by party to be charged 2. Describing the goods 3. Reasonably identifiable lease term ii.There is no merchant exception iii. Specially manufactured goods exception mirrors Article 2 iv. Admissions Exception mirrors Article 2 v. Part performance exception applies with respect to goods that have been received and accepted by the lessee Unconscionability (2A-108) i. Consumer Leases 1. Where lessor is a merchant and lessee is individual 2. Lessee leases goods for personal, family, or household purposes AND 3. There is an optional dolor amount for states ii.Protects Consumers from unconscionable conduct 1. Collection tactics AND 2. Contract creation iii. Remedies 1. Court construct appropriate remedies INCLUDING a. Reasonable attorney's fees BUT i. If the court does not find unconscionability AND ii. knew the claim was groundless iii. THEN gets reasonable attorney's fees from Warranty Against Interference (2A-211) (Distinguished from Warranty of Title in Article 2) i. Warranty of quiet possession 1. Lessor warrants that no one will interfere with the leasehold by any act or omission of the lessor a. Fault of lessor is relevant Revocation of Acceptance in Finance Lease (2A-407) i. Revocation of acceptance in a finance lease is prohibited 1. Come "Hell or High Water" ii.Other types of leases 1. Rejection and revocation of acceptance mirror Article 2

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