Sales A Context and Practice Casebook Edith R. Warkentine WESTERN STATE UNIVERSITY COLLEGE OF LAW Carolina Academic Press Durham, North Carolina
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 11 1. 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 13 2. Statutory Language: Rules v. Standards 13 3. Taxonomy of Statutory Disputes 14 4. Statutory Analysis, Generally 15 5. Statutory Analysis Under the U.C.C. 16 5.1 Types of Disputes 16 5.2 Code Methodology 16 6. 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 23 1. The Importance of Analyzing Scope 24 2. The Basic Scope Rule 25 2.1 Goods 25 Exercise 3-1: "Moveable at the time of identification" 26 2.2 Transactions 26 2.3 Mixed Transactions: Predominant Purpose Test 27 2.4 Mixed Transactions: Gravamen Test 28
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. 29 3. Other Bodies of Law Applicable to Sales Problems 34 Exercise 3-3: Are Crops "Goods"? 35 Exercise 3-4: Applying Section 2-102 35 Exercise 3-5 36 Exercise 3-6 36 Additional Resources 37 Chapter 4 Contract Formation 39 Chapter Problem 39 1. Introduction 40 2. Contract Formation in General 41 Exercise 4-1: Corono-Oro, Inc. v. Harry Thompson 42 Corono-Oro, Inc. v. Harry Thompson 42 3. The Role of Merchants in Contract Formation and Throughout Article 2 47 3.1 Who Are Merchants? 47 3.2 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 49 4. Contract Formation; Specific Rules 49 4.1 Contract Formed by Merchant's Firm Offer Followed by Acceptance 49 Exercise 4-4: Applying Section 2-205 51 4.2 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 58 4.3 Contract Formed by "Deviant" Acceptance of Offer 59 4.3.1 Section 2-207(1) 59 Exercise 4-10: Understanding Section 2-207 61 4.3.2 Section 2-207(2): Additional Terms 61 4.3.3 Section 2-207(2): Different Terms 62 4.3.4 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 68 4.5 Third Parties, Assignment and Delegation 69 4.5.1 Basic Terminology 69
ix 4.5.2 Basic Rules 70 Additional Resources 70 Chapter 5 Defenses 73 Chapter Problem 73 1. 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 76 2. Unconscionability 77 Exercise 5-3: Applying Section 2-302 78 Additional Resources 79 Chapter 6 Contract Terms: Warranties, Warranty Disclaimers, and Remedy Limitations 81 Chapter Problem 81 1. Introduction to the Study of Contract Terms 82 2. Introduction to Warranties 82 Exercise 6-1: Creating a Structure for the Study of Warranties 83 3. Creation of Warranties 84 3.1 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 86 3.2 Express Warranties 86 Exercise 6-4: Puffing v. Affirmations of Fact 87 3.3 Implied Warranty of Merchantability 89 Exercise 6-5: The Implied Warranty of Merchantability 89 3.4 Implied Warranty of Fitness for a Particular Purpose 90 Exercise 6-6: The Implied Warranty of Fitness for a Particular Purpose 90 4. Warranty Disclaimers 91 4.1 Warranty of Title Disclaimers 91 4.2 Express Warranty Disclaimers 91 Exercise 6-7: Killion v. Buran Equipment Co. 93 Killion v. Buran Equipment Co. 93 4.3 Implied Warranty Disclaimers 95 5. Remedy Limitations 95 Razor v. Hyundai Motor America 96 6. Warranty Litigation; Defenses in Warranty Actions 100 6.1 Cause of Action for Breach of Warranty 100 6.2 Notice 101 6.3 Privity 101 6.4 The Statute of Limitations 102 Exercise 6-8: Poli v. DaimlerChrysler Corp. 102 Poli v. DaimlerChrysler Corp. 103 6.5 Federal Magnuson Moss Consumer Warranty Act 107 Exercise 6-9: Exploring the Magnuson-Moss Act 107 Exercise 6-10: Applying the Magnuson-Moss Act 108 6.6 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 6-12 111
x Exercise 6-13 Exercise 6-14 Exercise 6-15 Exercise 6-16 Additional Resources 112 112 H2 112 113 Chapter 7 Contract Terms: Express Terms, Interpretation and the Parol Evidence Rule 11 7 Chapter Problem 117 1. Express Contract Terms H9 2. Limitations on Voluntary Agreements 119 3. 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 2-202 I 27 4. Delivery Terms l 2^ Exercise 7-8: Delivery Terms I 29 5. 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 137 1. Introduction 138 2. Course of Performance, Course of Dealing, Usage of Trade I 39 3. Price 140 4. Details of Delivery 140 5. Options and Cooperation Regarding Performance 14 6. Identification Insurable Interest 140 Exercise 8-1: Identification 14 1 Exercise 8-2: Applying Section 2-501 I 41 7. Risk of Loss in General 142 8. Risk of Loss No Breach (Section 2-509) 143 9. Risk of Loss Breach (Section 2-510) I 43 Exercise 8-3: Applying Sections 2-509 and 2-510 I 43 Additional Resources 145 Chapter 9 Contract Performance I 47 Chapter Problem I 47 1. The Obligations of the Parties I 49 2. Contract Performance I 49 2.1 Tender 149 2.2 Inspection 150
xi 2.3 Acceptance 150 2.4 Rejection 151 2.4.1 Rejection in an Installment Contract 151 2.4.2 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 159 2.5 Revocation of Acceptance 159 2.6 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 165 1. Contract Provisions: Force Majeure Clauses 166 2. Contract Modifications to Accommodate Unforeseen Circumstances 167 3. Code Provisions 168 3.1 Excuse by Reason of Improper Performance by Other Party 168 3.2 Excuse Due to Impossibility 168 3.3 Excuse of Substituted Performance Due to Changed Circumstances 169 3.4 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 2-613 and 2-615 177 4. Common Law Grounds for Excuse 178 Additional Resources 178 Chapter 11 Breach of Contract 181 Chapter Problem 181 1. Breach of Contract 182 1.1 Present Breach 183 1.2 Breach by Anticipatory Repudiation 183 1.3 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 191 1. The Goal of Remedies Under Article 2 192 2. Buyer's Remedies for Unaccepted Goods 193
xii 2.1 In General 193 2.2 Cover 1 9 3 Exercise 12-1: Corono-Oro, Inc. v. Harry Thompson 193 Corono-Oro, Inc. v. Harry Thompson I 94 2.3 Damages Based on the Market Price 1% 2.4 Specific Performance and Replevin I 97 3. Buyers' Remedies for Accepted Goods I 97 3.1 Breach of Warranty I 97 3.2 Additional Damages Recoverable I 97 3.3 Right of Offset I 98 4. Seller's Remedies I 98 4.1 In General I 98 4.2 Action for the Price (Accepted Goods) 198 4.3 Resale (Unaccepted Goods) 198 4.4 Damages Based on the Market Price 1" 5. Other Remedies 201 5.1 Liquidated Damages 202 Exercise 12-2: Deconstructing Section 2-718 202 5.2 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 2000 215 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 14-1 235 Problem 14-2 237 Problem 14-3 238 Problem 14-4 240 Problem 14-5 241 Problem 14-6 243 Problem 14-7 Practice Problem: Drafting a Reply to a Motion for Summary Judgment 245 Index 261