1. Sales Law December 7, 2009 Winn

2. Sales Law December 8 Tuesday 12/8 – Teaching Evaluations (please bring laptops if possible) – Unofficial Survey on Teaching Materials? – Problems 5-2 to 5-5; plus 5-6 – Problems 6-1 and 6-3 – Problems 7-4 and 7-7 – Magnusson-Moss lecture plus Problem 8-5 – Omit Chapter 9

3. Warranties & Disclaimers 2-313 Express Warranty very difficult to disclaim 2-316(1) – If a description is part of the “basis of the bargain” then blanket disclaimers clearly insufficient 2-314, 2-314 Implied Warranties can generally be disclaimed provided that: – (2) meaning of disclaimer is clear and, if in writing, conspicuous – (3) but certain formulaic disclaimers permitted “AS IS” “With all faults” – (3) or defects discernable and buyer examines or refuses [upon demand of seller?] to examine – (3) course of dealing or usage of trade 2-312(2) and Warranty of Title is ESPECIALLY difficult to disclaim….

4. Conspicuous Disclaimers for Services (B) CNN INTERACTIVE IS PROVIDED ON AN "AS IS" BASIS WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF TITLE OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OTHER THAN THOSE WARRANTIES WHICH ARE IMPLIED BY AND INCAPABLE OF EXCLUSION, RESTRICTION OR MODIFICATION UNDER THE LAWS APPLICABLE TO THIS AGREEMENT. http://edition.cnn.com/interactive_legal.html

5. Chapter 5 Damages Problem 5-6 UCC 2-718 – Parties estimate of amount of damages from breach turns out to be 10x too high Reasonable at time of contract formation? Reasonable after breach?

6. Problems 6-1, 6-3 Assign Right Buyer Seller Delegate Duty Buyer Seller No Contractual Provision Permitted unless material change to other party Yes unless original party is special, but original party also remains bound Contractual Prohibition NO YES (for right to Receive payment) NO Problem 6-3 Seller learns Buyer is experiencing financial difficulties. What options? 2-702 Does Seller really know that Buyer is “insolvent”? Probably not 2-609 Demand “adequate assurances” but if demands are too high and Buyer does not meet them, then Seller is in breach, not Buyer

7. Chapter 7 Problems Problem 7-4 Scope of “Cover” – Buyer paid $1,000 deposit for $40,000 car Seller never delivered; Seller must replay deposit – Buyer buys closest model with some extra features for $2,000 more If Seller pays Buyer $2,000 then Buyer gets a windfall But Buyer not required to find exact substitute for cover as a result of Seller’s breach Problem 7-7 Market price: when & where? – Where: Place of performance = Bar Harbor, Maine – When: When Buyer treated repudiation as breach by covering June 15

8. Magnuson Moss: Big Picture Merchants gave consumers “Warranties” that actually disclaimed all implied warranties Merchants who provide written warranties on consumer products must specify either “full” or “limited” warranty, use plain language & provide a copy prior to purchase – Full warranty too broad, never used – Even limited warranty cannot include disclaimer of implied warranties of merchantability or fitness for a purpose If you want to disclaim implied warranties, then don’t provide anything in writing called “Warranty” FTC Businessperson’s Guide to Federal Warranty Law – www.ftc.gov/bcp/edu/pubs/business/adv/bus01.shtm

9. Problem 8-5 Rstmt 2 nd 402A – Sale of product in defective condition that reaches consumer is liable for harm provided Seller is in the business of selling, and Product reached consumer in condition that seller sold it – Even though seller exercised all possible care and no privity of contract between seller and consumer Review: p. 355 Rstmt (3 rd ) Torts Product Defect – Manufacturing defect – Design defect – Failure to warn Product 8-5 – Breach of warranty of merchantability possible even though no strict products liability – Can strict product liability exist even though no breach of warranty of merchantability? Kerosene/propane space heaters? Cigarettes?