Charas

Charas 

Contractual Provisions Affecting Remedies

Contractual Provisions Affecting Remedies

üLimitation of Damages.

üLimitation of Remedies.

üWaiver of Defenses.

Lemon Law

The majority of the states have enacted lemon laws in regard to automobile sales.

Seller’s limitations were too “good.”

Buyer must:

§Give notice.

§Seller gets four chances to fix.

§Arbitration: decision binding on manufacturer, not on Buyer.

Remedies for Breach of International Sales Contracts

CISG provides remedies similar to the UCC.

Article 74 provides for money damages, foreseeable consequential damages.

§Damages are difference between contract price and market price.

Article 28 provides for specific performance where a country would normally grant it in their own law.

Parties can agree to what law they will use.

Buyer-Seller Delivers Nonconforming Goods

Buyer-Seller Delivers Nonconforming Goods

If Seller does not make perfect tender Buyer has the right to reject all or part of goods.

§Buyer must timely notify Seller of rejection and reasons and follow Seller’s directions.

§Buyer is entitled to commission for selling perishable goods.

§Buyer may store the goods and retain a security interest in the goods for his costs.

If Buyer has accepted non-conforming goods, she may:

§Sue for breach of warranty.

§Sue for ordinary damages.

§Deduct damages from purchase price.

Case 22.3:  China National Metal Products v. Apex Digital (2001).

Buyer-Goods in Seller’s Possession

Buyer-Goods in Seller’s Possession

Buyer Wants Goods

§Specific performance or replevin

§Recover goods from Seller if Seller becomes insolvent within 10 days after receiving first payment.

Buyer Does Not Want Goods

§Rescind contract.

§Cover or do not cover and sue for breach of contract.     

Case 22.2: KGM Harvesting v. Fresh Network (1995).

Remedies for Breach of International Sales

Remedies for Breach of International Sales

CISG provides remedies similar to the UCC:

§Monetary damages that are foreseeable, consequential damages.

§Damages are difference between contract price and market price.

Parties can agree to what law they will use.

Seller- Goods in Seller’s Possession

Seller may withhold delivery of the goods:

§If material breach by Buyer, Seller can withhold delivery of all goods.

§If non-material breach, Seller can withhold delivery of this installment.

Seller can withhold delivery of all goods if Buyer is insolvent.

Seller may rescind the contract.

Seller may identify the goods to the contract.

Seller may sell raw materials for scrap or finish production.

Seller may resell the goods; and

§Recover damages: the difference between the contract price and the resale price + incidental damages+ damages = the market price at the time & place of tender  + incidental damages - expenses saved.

§If No Damages, Seller can sue for lost profits.

Case 22.1:  Brandeis Machinery v. Capital Crane Rental (2002).

Seller may sue Buyer for breach of contract.

§Recover Damages = the market price at the time & place of tender  + incidental damages.

•if there are no damages, Seller can sue for lost profits.

Seller-Goods in Transit

Goods are “in transit” when Seller has tendered goods to Carrier.

Goods are in transit until:

§Buyer is given negotiable document of title to goods.

§Buyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods.

§Buyer has had a reasonable time to pick up the goods.

Seller has the right to stop the goods in transit if:

§Buyer is insolvent - Seller can stop entire shipment of goods.

§Buyer is in breach - Seller may stop a whole truckload or whole container.

Seller-Goods in Buyer’s Possession

Seller may sue for the purchase price.

§Seller may also sue Buyer if goods were  “specially-made” which Seller cannot resell.

§Seller may also sue for the purchase price if the goods were destroyed and the risk had already passed to the Buyer.

Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt.

Lemon Laws

Lemon Laws

Automobile under warranty possesses significant defect that affects vehicles use or value that cannot be fixed within statutory period. Buyer’s remedies include:

§A new car;

§Replacement of defective parts;

§Or full refund. 

Contractual Provisions Affecting Remedies

Contractual Provisions Affecting Remedies

Parties to a contract can vary their rights and duties that preempt UCC provisions.

Parties can stipulate whether contractual provisions are “exclusive”.  However, provisions limiting consumer rights may be unconscionable. 

Installment Contracts

Installment Contracts

Installment Contracts can be rejected if:

§ Installment is substantially non-conforming and can’t be cured.

§ Non-conforming installment substantially impairs the entire contract.

Destruction of Goods

If no fault of either party and it occurs,

Before risk passes to Buyer then,

Both Seller and Buyer are excused from performance.

Partial Performance

Sometimes unforeseen event only partially affects Seller’s capacity to perform.

In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance.

Buyer has the right to reject.

Case 21.2: Kock Materials Co. v. Shore Slurry Seal, Inc.  (2002).

International Contracts and Letters of Credit

International Contracts and Letters of Credit

Parties.

§ Account: Buyer.

§ Issuer: Bank.

§ Beneficiary: Seller.

Issuer is bound to pay the beneficiary who has complied with the terms and conditions of the letter of credit, usually requiring a bill of lading to the issuer to prove shipment has been made.

Agreement of the Parties

Parties agree that some defective goods will be acceptable.

Parties agree that defective goods can be replaced or repaired within a certain time.

Seller’s Cure

Seller has the right to “Cure” (ship conforming goods to Buyer) if:

§ Agreed time of performance has not yet expired; or

§ If Seller had reasonable grounds to expect that Buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or Buyer has accepted non-conforming goods in the past.

Substitution of Carriers

If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable.

Commercial Impracticability

Occurrence of an unforeseen contingency that makes performance impracticable.

Nonoccurrence was a basic assumption on which the contract was made.

If only partial impracticability, Seller must allocate what he/she has.

Case 21.1: Maple Farms v. City School District of Elmira (1974).

Acceptance

Acceptance

Buyer can accept goods:

§ By words or conduct.

§ If Buyer had reasonable amount of time and failed to reject.

§ Buyer performs an act which indicates he thinks he is the owner.

Partial Acceptance.

Revocation of Acceptance

Notify Seller of breach.

Revoke only if substantial nonconformity; and

§ Buyer accepted on the reasonable assumption that the Seller would cure the non-conformity OR Buyer did not discover the nonconformity because defect was latent or hard to discover.

Anticipatory Repudiation

Party communicates he will not perform by time of contract performance.

No breaching party may suspend performance and:

§ Treat the A.R. as material breach and pursue a remedy; or

§ Wait a reasonable time.

Case 21.3:  Banco International v. Goody’s Family Clothing (1999).