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Contracts II
University of Dayton School of Law
Hallinan, Charles G.

CONTRACTS II OUTLINE

Professor Hallinan ~ Spring 2018

I. Warranties

Caveat Emptor= “buyer beware” old principle where a seller bore no responsibility at all for the quality of product he was selling unless he expressly guaranteed it. Courts gradually reversed this doctrine.

Three Types of warranties under the UCC:

Express Warranty

Under UCC 2-313, a seller may provide the basis for an express warranty in several ways:

Making a representation about the goods (affirmation of fact about the goods);
Giving a description; OR
Displaying a sample or model

BUT a statement purporting to be merely a seller’s opinion or commendation of the goods does NOT create a warranty

A description of the goods creates an express warranty! For example, a light bulb manufacturer prints the words “lasts 15,000 hours” on its packaging. The words “guaranteed” or “warranty” do not appear, but this claim nevertheless is an express warranty.

No longer required for Π/buyer to show reliance on a representation about the quality of goods to establish that an express warranty had been created.

Implied Warranty of Merchantability

Merchant: (UCC 2-104) a party who regularly deals in goods of the kind or holds itself out as having particular knowledge about the kind of goods.

If seller is a merchant, they impliedly warrant to the buyer that the goods are of good quality and are fit for the purpose. (UCC 2-314)

To be merchantable goods must=

Pass without objection in the trade; AND
Be fit for the ordinary purposes for which such goods are used.

Implied Warranty of Fitness for a Particular Purpose

(UCC 2-315) created only when buyer relies on seller’s skill or judgment to select goods and seller has reason to know of this reliance.

Liability under this warranty is NOT limited to merchant sellers

Breach of this warranty does NOT require showing that goods are defective in any way

Disclaiming warranties (UCC 2-316):

Express= disclaimer is inoperable if the disclaimer cannot be construed as consistent with the terms of the contract that would create an express warranty

Implied= language must mention merchantability and in the case of writing, must be conspicuous. Can also be disclaimed by including an “as is” disclaimer.

Implied Warranty of Workmanlike Construction

Common law version of a warranty

Judicially created doctrine intended to protect innocent home buyer by holding the experienced builder accountable for the quality of construction

Kirk Elements of Workmanlike Construction, buyer must show:

House was constructed to be occupied by the buyer as a home
House was purchased from a builder-vendor, who had constructed it for the purpose of sale;
When sold, house wasn’t reasonably fit for its intended purpose or had not been constructed in a good and workmanlike manner;
At time of purchase, buyer was unaware of the defect and had no reasonable means of discovering it; AND
By reason of the defective condition, the buyer suffered damages.

Majority of jurisdictions, but not all, recognize this warranty

Some jurisdictions allow subsequent purchasers to recover for breach of implied warranty of workmanlike construction against a builder-vendor. (See Speight v. Walters Development)

II. Avoiding Enforcement

The following are grounds for avoiding the enforcement of a contract:

Incapacity

Minority
Mental
Intoxication

Duress
Undue influence
Misrepresentation
Non-disclosure
Unconscionability
Public policy

INCAPACITY:

Individuals in certain protected classes are legally incapable of incurring binding contractual obligations. Timely assertion of this defense by a promisor makes the contract voidable at his election.

Minority Incapacity=

Infancy doctrine is meant to protect minors from their lack of judgment and from “squandering their wealth” through bad contracts with crafty adults who would take advantage of them.

Traditional Rule= minors “sort of” lack capacity…A contract entered into between an infant and an adult is voidable by the infant but binding on the adult

Two main exceptions:

Necessities

Minor is liable for the reasonable value of necessities

Necessities a

lements of Economic Duress=

Wrongful or improper threat;
Lack of reasonable alternative; AND
Actual inducement of the contract by the threat (threat must substantially contribute to the manifestation of assent)

Contracts under economic duress are deemed voidable NOT void; such contracts will be binding unless disaffirmed!

Threat need not be illegal in order to give rise to a claim of duress.

Mere threat to refuse to enter a contract, or to agree only to disproportionately favorable terms, is not duress because there is no general duty to enter into a contract.

Some courts require showing that Δ caused or contributed to the Π’s hardship.

UNDUE INFLUENCE:

Undue influence is persuasion that is coercive in nature, characterized by high pressure that works on mental, moral, or emotional weakness.

critical element of undue influence is a lessened capacity of one party to make a free contract. It involves an unfair advantage attributable to a mismatch between the parties.

Factors of Undue Influence=

Discussion of the transaction at an unusual or inappropriate time
Consummation of the transaction in an unusual place
Insistent demand that the deal be done at once
Extreme emphasis on serious consequences of delay;
Use of multiple persuaders by the dominant side against a single servient party;
Absence of third-party advisors to the servient party; and
Statements that there is no time to consult advisors.

The more of these factors that are present, the more likely the persuasion may be characterized as excessive.

8th unofficial factor is that the Δ know of the Π’s weakness

Undue Influence usually involves a lack of full vigor due to

Age
Physical condition
Emotional anguish