Sales. A Context and Practice Casebook. Edith R. Warkentine. Carolina Academic Press. Durham, North Carolina WESTERN STATE UNIVERSITY COLLEGE OF LAW

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1 Sales A Context and Practice Casebook Edith R. Warkentine WESTERN STATE UNIVERSITY COLLEGE OF LAW Carolina Academic Press Durham, North Carolina

2 Contents Table of Principal Cases Series Editor's Preface Preface Book Organization and Coverage How To Use This Book Acknowledgments xiii xv xvii xvii xviii xxi Chapter 1 The Uniform Commercial Code ("U.C.C.") 3 1. Uniform Commercial Code Overview 3 2. Article 1 5 Exercise 1-1: Course of Performance, Course of Dealing, Usage of Trade 6 3. The Official Comments 6 Exercise 1-2: The Official Comments 6 4. U.C.C. Amendments 7 5. Relationship of U.C.C. to Other Laws 7 6. Article 2 Overview 8 Exercise 1-3: Article 2 Overview 9 Chapter 2 Statutory Analysis The Anatomy of a Modern Statute 11 Exercise 2-1: Identifying the Parts of a Statute 12 Exercise 2-2: Identifying the Parts of a Statute Statutory Language: Rules v. Standards Taxonomy of Statutory Disputes Statutory Analysis, Generally Statutory Analysis Under the U.C.C Types of Disputes Code Methodology Conclusion: Statutory Analysis and the U.C.C. 20 Exercise 2-3: "Think-Aloud" Statutory Analysis 20 Additional Resources 21 Chapter 3 The Scope of Article 2 23 Chapter Problem The Importance of Analyzing Scope The Basic Scope Rule Goods 25 Exercise 3-1: "Moveable at the time of identification" Transactions Mixed Transactions: Predominant Purpose Test Mixed Transactions: Gravamen Test 28

3 viii 2.5 Other Scope Analyses 28 Exercise 3-2: True-North Composites v. Trinity Industries 29 True North Composites, LLC v. Trinity Industries, Inc Other Bodies of Law Applicable to Sales Problems 34 Exercise 3-3: Are Crops "Goods"? 35 Exercise 3-4: Applying Section Exercise Exercise Additional Resources 37 Chapter 4 Contract Formation 39 Chapter Problem Introduction Contract Formation in General 41 Exercise 4-1: Corono-Oro, Inc. v. Harry Thompson 42 Corono-Oro, Inc. v. Harry Thompson The Role of Merchants in Contract Formation and Throughout Article Who Are Merchants? Special Article 2 Rules that Apply Only to Merchants 48 Exercise 4-2: Who Is a Merchant? 48 Exercise 4-3: Merchants Throughout the Code Contract Formation; Specific Rules Contract Formed by Merchant's Firm Offer Followed by Acceptance 49 Exercise 4-4: Applying Section Contract Formed by Shipment of Conforming or Non-conforming Goods in Response to Offer 52 Exercise 4-5: Corinthian Pharmaceutical Systems, Inc. v. Lederele Laboratories 52 Corinthian Pharmaceutical Systems, Inc. v. Lederele Laboratories 53 Exercise 4-6: Shipment as Acceptance: Non-conforming goods 58 Exercise 4-7: Shipment as Acceptance: Conforming goods 58 Exercise 4-8: Shipment as Acceptance: Non-Conforming Goods 58 Exercise 4-9: Shipment as Acceptance: Accommodation Shipment Contract Formed by "Deviant" Acceptance of Offer Section 2-207(1) 59 Exercise 4-10: Understanding Section Section 2-207(2): Additional Terms Section 2-207(2): Different Terms Section 2-207(3) 62 Exercise 4-11: Applying Section 2-207: Representative Fact Patterns 65 Exercise 4-12: Applying Section 2-207: Is there "a definite and seasonable expression of acceptance?" 66 Exercise 4-13: Applying Section 2-207: Is Acceptance "expressly made conditional" on assent to additional or different terms? 67 Exercise 4-14: Applying Section 2-207: Merchants and Non-Merchants; Material Alterations ^ 4.4 Contract Modifications Third Parties, Assignment and Delegation Basic Terminology 69

4 ix Basic Rules 70 Additional Resources 70 Chapter 5 Defenses 73 Chapter Problem The Statute of Frauds 74 Exercise 5-1: Deconstructing Sections 2-201(2) and 2-201(3) 76 Exercise 5-2: Contract Modifications and the Statute of Frauds Unconscionability 77 Exercise 5-3: Applying Section Additional Resources 79 Chapter 6 Contract Terms: Warranties, Warranty Disclaimers, and Remedy Limitations 81 Chapter Problem Introduction to the Study of Contract Terms Introduction to Warranties 82 Exercise 6-1: Creating a Structure for the Study of Warranties Creation of Warranties Warranty of Title 84 Exercise 6-2: The Warranty of Title and Good Faith Purchasers 86 Exercise 6-3: The Warranty of Title and Entrustment Express Warranties 86 Exercise 6-4: Puffing v. Affirmations of Fact Implied Warranty of Merchantability 89 Exercise 6-5: The Implied Warranty of Merchantability Implied Warranty of Fitness for a Particular Purpose 90 Exercise 6-6: The Implied Warranty of Fitness for a Particular Purpose Warranty Disclaimers Warranty of Title Disclaimers Express Warranty Disclaimers 91 Exercise 6-7: Killion v. Buran Equipment Co. 93 Killion v. Buran Equipment Co Implied Warranty Disclaimers Remedy Limitations 95 Razor v. Hyundai Motor America Warranty Litigation; Defenses in Warranty Actions Cause of Action for Breach of Warranty Notice Privity The Statute of Limitations 102 Exercise 6-8: Poli v. DaimlerChrysler Corp. 102 Poli v. DaimlerChrysler Corp Federal Magnuson Moss Consumer Warranty Act 107 Exercise 6-9: Exploring the Magnuson-Moss Act 107 Exercise 6-10: Applying the Magnuson-Moss Act Non-U.C.C. Warranty Litigation 109 Exercise 6-11: Virgil v. Kash N' Karry Service Corp. 109 Virgil v. "Kash N' Karry" Service Corp. 109 Exercise

5 x Exercise 6-13 Exercise 6-14 Exercise 6-15 Exercise 6-16 Additional Resources H Chapter 7 Contract Terms: Express Terms, Interpretation and the Parol Evidence Rule 11 7 Chapter Problem Express Contract Terms H9 2. Limitations on Voluntary Agreements The Parol Evidence Rule 120 Peter B. Sundlun v. Bruce G. Shoemaker 122 Exercise 7-1: The Parol Evidence Rule and Implied Terms 125 Exercise 7-2: The Parol Evidence Rule and Express Terms Not Contained in a Written Agreement 125 Exercise 7-3: The Parol Evidence Rule: Consistent Additional Terms 125 Exercise 7-4: Applicability of the Parol Evidence Rule 125 Exercise 7-5: The Parol Evidence Rule and Course of Performance, Course of Performance and Usage of Trade l 2^ Exercise 7-6: Applying Section I Delivery Terms l 2^ Exercise 7-8: Delivery Terms I Contract Interpretation 129 Exercise 7-8: Frigaliment Importing Co. v. B.N.S. International Sales Corp. 130 Frigaliment Importing Co. v. B.N.S. International Sales Corp. 131 Additional Resources 135 Chapter 8 Contract Terms: Gap Fillers 137 Chapter Problem Introduction Course of Performance, Course of Dealing, Usage of Trade I Price Details of Delivery Options and Cooperation Regarding Performance Identification Insurable Interest 140 Exercise 8-1: Identification 14 1 Exercise 8-2: Applying Section I Risk of Loss in General Risk of Loss No Breach (Section 2-509) Risk of Loss Breach (Section 2-510) I 43 Exercise 8-3: Applying Sections and I 43 Additional Resources 145 Chapter 9 Contract Performance I 47 Chapter Problem I The Obligations of the Parties I Contract Performance I Tender Inspection 150

6 xi 2.3 Acceptance Rejection Rejection in an Installment Contract Rejection in a Single Lot Delivery Contract 153 Exercise 9-1: Kaspersetz v. Clarks Landing Marina, Inc. 153 Kaspersetz v. Clarks Landing Marina, Inc. 156 Exercise 9-2: Buyer's Right to Inspect Goods Revocation of Acceptance Cure 160 Exercise 9-3: Analyzing Performance 160 Exercise 9-4: Linking Up Performance Code Sections 161 Exercise 9-5: Analyzing Performance 161 Exercise 9-6: Analyzing Performance 162 Exercise 9-7: Revocation 162 Exercise 9-8: Rejection 162 Additional Resources 163 Chapter 10 Excuses for Non-Performance 165 Chapter Problem Contract Provisions: Force Majeure Clauses Contract Modifications to Accommodate Unforeseen Circumstances Code Provisions Excuse by Reason of Improper Performance by Other Party Excuse Due to Impossibility Excuse of Substituted Performance Due to Changed Circumstances Excuse Due to Commercial Impracticability 169 Exercise 10-i: Specialty Tires of America, Inc. v. The CIT Group/ Equipment Financing, Inc. 171 Specialty Tires of America, Inc., v. The CIT Group/Equipment Financing, Inc. 171 Exercise 10-2: Applying Sections and Common Law Grounds for Excuse 178 Additional Resources 178 Chapter 11 Breach of Contract 181 Chapter Problem Breach of Contract Present Breach Breach by Anticipatory Repudiation Demand for Adequate Assurances of Due Performance 184 AMF, Incorporated, Plaintiff-Appellant, v. McDonald's Corporation, Defendant-Appellee 18 5 Exercise 11-1: Reasonable Grounds for Insecurity 188 Exercise 11-2: Breach by Anticipatory Repudiation 188 Additional Resources 189 Chapter 12 Remedies 191 Chapter Problem The Goal of Remedies Under Article Buyer's Remedies for Unaccepted Goods 193

7 xii 2.1 In General Cover Exercise 12-1: Corono-Oro, Inc. v. Harry Thompson 193 Corono-Oro, Inc. v. Harry Thompson I Damages Based on the Market Price 1% 2.4 Specific Performance and Replevin I Buyers' Remedies for Accepted Goods I Breach of Warranty I Additional Damages Recoverable I Right of Offset I Seller's Remedies I In General I Action for the Price (Accepted Goods) Resale (Unaccepted Goods) Damages Based on the Market Price 1" 5. Other Remedies Liquidated Damages 202 Exercise 12-2: Deconstructing Section Contractual Remedies 202 Exercise 12-3: Buyer's Remedies 2 06 Exercise 12-4: Buyer's Remedies 2 0 Additional Resources 2^7 Chapter 13 Advanced Issues: Clickwrap, Shrinkwrap, and Electronic Contracting 2^9 Chapter Problem 209 Exercise 13-1: Rolling Contracts 2 1 Pro CDIncv Zeidenberg 210 Hill v. Gateway Exercise 3-2: Step-Saver Data Systems, Inc. v. Wyse Technology and Klocek v. Gateway 218 Step Saver Data Systems Inc. v. Wyse Technology 2i8 Klocek v. Gateway 229 Additional Resources 234 Chapter 14 Sales Problems 235 Problem Problem Problem Problem Problem Problem Problem 14-7 Practice Problem: Drafting a Reply to a Motion for Summary Judgment 245 Index 261