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Contracts II
University of Kansas School of Law
Drahozal, Christopher R.

CONTRACTS II

I. Contract Formation…………………………………………………………………………………………………. 3
A. Scope of Article 2…………………………………………………………………………………………………. 3
1. §2-102 – Applies to transactions in goods………………………………………………………………………………………………. 3
a. Transactions……………………………………………………………………………………………………………………………………………. 3
b. Goods……………………………………………………………………………………………………………………………………………………… 3
c. Not anything in UCC that allows parties to contract Art. 2 into their agreement when it otherwise wouldn’t apply 3
2. §1-103: Supplementation by Common Law…………………………………………………………………………………………. 3
a. Code overrules common law, but if the Code does not answer or cover the situation, the common law applies. Used as a “back-up” gap filler. §1-103……………………………………………………………………………………………………………………….. 3
b. Role of common law in Code:………………………………………………………………………………………………………………… 3
3. UCC as a Gapfiller – When not used as a gap filler (UCC superceded)………………………………………………….. 3
a. §1-102: By agreement of the parties……………………………………………………………………………………………………… 3
b. §2-208: Course of Performance…………………………………………………………………………………………………………….. 3
c. §1-205(1): Course of Dealing………………………………………………………………………………………………………………… 3
d. §1-205(2): Usage of Trade…………………………………………………………………………………………………………………….. 3
e. §1-205(4): Hierarchy of terms and dealings………………………………………………………………………………………….. 3
4. Merchants and Consumers under UCC………………………………………………………………………………………………….. 3
a. Merchant………………………………………………………………………………………………………………………………………………… 3
5. Misc. Gap-fillers………………………………………………………………………………………………………………………………………. 3
a. §2-305: Price…………………………………………………………………………………………………………………………………………… 3
b. §2-308: Absence of Specified Place of Delivery……………………………………………………………………………………. 3
c. Quantity must be specified!……………………………………………………………………………………………………………………. 3
6. Mixed Contracts – Involving a Combination of Goods and Services……………………………………………………. 3
a. UCC Problem………………………………………………………………………………………………………………………………………….. 3
b. Courts Approach to Mixed Contracts…………………………………………………………………………………………………….. 3
7. Application of Article……………………………………………………………………………………………………………………………… 3
a. Transactions in which the UCC applies………………………………………………………………………………………………….. 3
b. Transactions in which the UCC does not apply……………………………………………………………………………………… 3
c. Transactions in which the UCC may or may not apply…………………………………………………………………………. 3
B. Sales Contract Formation…………………………………………………………………………………….. 3
1. Offer, Acceptance and Consideration…………………………………………………………………………………………………….. 3
a. UCC & Common Law……………………………………………………………………………………………………………………………. 3
b. §2-204: General Formation……………………………………………………………………………………………………………………. 3
c. §2-205: Firm Offers……………………………………………………………………………………………………………………………….. 3
d. §2-206: Offer & Acceptance…………………………………………………………………………………………………………………. 3
e. §2-207: Additional Terms in Acceptance or Confirmation…………………………………………………………………… 3
2. Battle of the Forms Examined……………………………………………………………………………………………………………….. 3
a. Hypothetical #1………………………………………………………………………………………………………………………………………. 3
b. Hypothetical #2………………………………………………………………………………………………………………………………………. 3
c. Hypothetical #3………………………………………………………………………………………………………………………………………. 3
C. Statute of Frauds………………………………………………………………………………………………….. 3
1. §2-201: Requirements for the Statute of Frauds…………………………………………………………………………………… 3
a. §2-201(1): Basic Requirements……………………………………………………………………………………………………………… 3
b. §2-201(2): Merchants Exception to Satisfy §2-201(1)………………………………………………………………………….. 3
c. §2-201(3): Writing Requirement (Complete) Exceptions Under §2-201(1)…………………………………………… 3
d. §2-201 Case Examples…………………………………………………………………………………………………………………………… 3
2. Estoppel – Common Law……………………………………………………………………………………………………………………….. 3
a. §1-103: Gap filler provision – apply common law………………………………………………………………………………… 3
3. EDI Writing Requirement Issues…………………………………………………………………………………………………………….. 3
a. Cmt. 1 to §2-201: Computer transaction a writing?………………………………………………………………………………. 3
D. Parol Evidence Rule……………………………………………………………………………………………… 3
1. Introduction to parol evidence……………………………………………………………………………………………………………….. 3
a. Definition & application of rule………………………………………………………………………………………………………………. 3
b. Merger Clauses – introduction………………………………………………………………………………………………………………… 3
2. Three Classes of Writings………………………………………………………………………………………………………………………… 3
a. Fully integrated……………………………………………………………………………………………………………………………………….. 3
b. Partially integrated (not in the code, but an appropriate term)……………………………………………………………….. 3
c. Not integrated…………………………………………………………………………………………………………………………………………. 3
3. §2-202: Final Written Expression; Parol or Extrinsic Evidence……………………………………………………………… 3
a. §2-202: The rule may preclude admissibility of extrinsic evidence if the parties intended the writing as a final expression of their agreement with respect to the terms in the writing……………………………………………………………………………….. 3
b. §2-202(a): Usage of trade or Course of Dealing/Performance………………………………………………………………. 3
c. §2-202(b): Evidence of consistent additional terms………………………………………………………………………………. 3
4. §2-209: Modification, Rescission, Waiver…………………………………………………………………………………………….. 3
a. §2-209 – Application to parol evidence rule…………………………………………………………………………………………… 3
5. Case Examples……………………………………………………………………………………………………………………………………….. 3
a. Hypothetical #1………………………………………………………………………………………………………………………………………. 3
b. Hypothetical #2………………………………………………………………………………………………………………………………………. 3
c. Hypothetical #3………………………………………………………………………………………………………………………………………. 3
II. Contract Terms……………………………………………………………………………………………………….. 3
A. Warranties with Sales of Goods…………………………………………………………………………….. 3
1. §2-313: Express Warranties…………………………………………………………………………………………………………………… 3
a. §2-313(1): Express warranties may be created by:……………………………………………………………………………….. 3
b. §2-313(2): Seller need not use words like “guarantee” or “warranty” nor is specific intent to create a warranty. But if a seller is merely giving his opinion of the goods then such statements are considered “puffing” and do not give rise to a warranty. 3
c. Other theories/arguments………………………………………………………………………………………………………………………… 3
2. §2-314: Implied Warranty of Merchantability……………………………………………………………………………………… 3
a. §2-314(1): Unless disclaimed or modified (§2-316), warranty created by operation of law by any seller of goods who is a merchant in goods of the kind…………………………………………………………………………………………………………………….. 3
b. §2-314(2): Sets minimum standards of merchantability. Goods to be merchantable must be at least:. 3
c. §2-314(2)©: Goods must be fit for ordinary purpose……………………………………………………………………………. 3
d. §2-314(3): Other implied warranties may arise from course of dealing or usage of trade…………………….. 3
e. Actions for breach…………………………………………………………………………………………………………………………………… 3
f. Non-merchants still may have responsibilities………………………………………………………………………………………… 3
3. §2-315: Implied Warranty of Fitness for a Particular Purpose………………………………………………………………. 3
a. §2-315: Warranty is created by a seller (merchant or non-merchant) in a sales transaction which………. 3
4. §2-317: Cumulation and Conflict of Warranties Express or Implied……………………………………………………. 3
a. Principles set down………………………………………………………………………………………………………………………………….. 3
5. Steps to Establish Breach of Warranty…………………………………………………………………………………………………… 3
a. Was a warranty made? (2-313-315)………………………………………………………………………………………………………. 3
b. Was a warranty breached?……………………………………………………………………………………………………………………… 3
c. Was breach proximate cause of injury?…………………………………………………………………………………………………. 3
d. What are amount of damages?………………………………………………………………………………………………………………. 3
e. Was the warranty effectively disclaimed or modified? (2-316)……………………………………………………………… 3
f. Seller’s affirmative defenses:………………………………………………………………………………………………………………….. 3
B. Notice & Privity – Seller’s defenses to breach of warranty claims…………………………….. 3
1. §2-607: Notice of Breach………………………………………………………………………………………………………………………. 3
a. §2-607(3)(a): Notice requirement………………………………………………………………………………………………………….. 3
b. §2-607(5)(a): Who must receive notice…………………………………………………………………………………………………. 3
c. Case Example…………………………………………………………………………………………………………………………………………. 3
2. Privity……………………………………………………………………………………………………………………………………………………… 3
a. Introduction to privity problem………………………………………………………………………………………………………………. 3
b. §2-318: Third Party Beneficiaries of Warranties. Offers three different alternatives for states to adopt regarding privity. 3
C. Magnuson-Moss Consumer Warranty Provision…………………………………………………….. 3
1. Introduction……………………………………………………………………………………………………………………………………………. 3
a. Definition & Scope of Act………………………………………………………………………………………………………………………. 3
b. Overview of statute requirements…………………………………………………………………………………………………………… 3
2. Scope of Magnuson-Moss………………………………………………………………………………………………………………………. 3
a. §2301(1): MM deals only with consumer products……………………………………………………………………………….. 3
b. 15 USC §2302(b)(1)(B) – No where does require mfgs or sellers to give warranties……………………………….. 3
c. §15 USC §2302(a)- M-M Warranty:………………………………………………………………………………………………………. 3
3. Cause of action available……………………………………………………………………………………………………………………….. 3
a. §2310(d)(1): Recovery allowed under Act for breach of warranty claims (Starting Point)…………………… 3
b. §2301(e): Opportunity to cure/notice…………………………………………………………………………………………………….. 3
c. §2310(a)(3): Allows parties to attempt informal dispute resolution before going to court……………………. 3
d. §2310(d)(1)(A-B): Jurisdiction provision if suit brought………………………………………………………………………… 3
e. §2310(d)(2): Costs and attorneys fees recoverable……………………………………………………………………………….. 3
4. Definitions pertaining to Act…………………………………………………………………………………………………………………… 3
a. Definitions of “players” in Act………………………………………………………………………………………………………………… 3
b. Warranty Definitions………………………………………………………………………………………………………………………………. 3
5. Reasons for wanting to bring suit under MM rather than UCC Art. 2…………………………………………………….. 3
a. Changes privity……………………………………………………………………………………………………………………………………….. 3
b. §2310(d)(1)(A): Can sue in any state or federal court as long as meet monetary requirement……………… 3
c. §2310(d)(3): Can recover attorneys fees………………………………………………………………………………………………… 3
D. Warranty Disclaimers………………………………………………………………………………………….. 3
1. Exclusion of Express Warranties (§2-313)……………………………………………………………………………………………… 3
a. §2-316(1): If there are express warranties on the one hand, and disclaimers on the other, the disclaimers are gone. 3
2. Exclusion of Implied Warranty of Merchantability (§2-314)……………………………………………………………….. 3
a. §2-316(2): To exclude or modify the IWM, language must mention merchantability, and in the case of a writing must be conspicuous…………………………………………………………………………………………………………………………………………………. 3
b. §2-316(3)(a): OR Implied Warranty of Merchantability may be excluded by expressions like “as is,” “with all faults,” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty…………………………………………………………………………………………………………………………………….. 3
c. §2-316(3)(b): If buyer examined the goods as much as desired before entering the K, or refused to examine them after the seller’s demand, there is no implied warranty on defects that the examination should have revealed to the buyer. 3
d. §2-316(3)©: Implied warranties can be disclaimed by course of dealing, course of performance, or trade usage. 3
3. Exclusion of Implied Warranty of Fitness for a Particular Purpose (§2-315)………………………………………… 3
a. §2-316(2): To exclude Implied Warranty of Fitness for a Particular Purpose, it is sufficient if general language of writing conspicuously states, for example, that “there are no warranties which extend beyond the description on the face hereof.” 3
b. §2-316(3)(a): OR IWF may be excluded by expressions like “as is,” “with all faults,” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty. 3
4. Limitation of UCC Remedies…………………………………………………………………………………………………………………. 3
a. §2-719: Contractual Modification or Limitation of Remedy……………………………………………………………….. 3
5. Magnuson-Moss Warranty Disclaimers………………………………………………………………………………………………….. 3
a. Consequences of Designation of “Full Warranty”………………………………………………………………………………….. 3
E. Commercial Impracticability………………………………………………………………………………… 3
1. Introduction……………………………………………………………………………………………………………………………………………. 3
a. Purpose of commercial impracticability…………………………………………………………………………………………………. 3
2. §2-509(3): Risk of loss…………………………………………………………………………………………………………………………… 3
a. If seller is a merchant, risk of loss passes to buyer on receipt of goods………………………………………………….. 3
b. If seller is NOT a merchant, risk of loss passes to buyer on tender of delivery……………………………………….. 3
3. §2-613: Casualty to Identified Goods…………………………………………………………………………………………………… 3
a. Requirements………………………………………………………………………………………………………………………………………….. 3
b. If Requirement are met…………………………………………………………………………………………………………………………… 3
4. §2-615: Excuse/Commercial Impracticability………………………………………………………………………………………. 3
a. Applies to sellers but may apply to buyers……………………………………………………………………………………………… 3
b. §2-615(a): Basic Requirements……………………………………………………………………………………………………………… 3
c. §2-615©: Notice Requirement………………………………………………………………………………………………………………. 3
d. §2-615(b): Allocation of Remaining Goods…………………………………………………………………………………………… 3
e. §2-616(1): If Breached:…………………………………………………………………………………………………………………………. 3
F. Unconscionability…………………………………………………………………………………………………. 3
1. Introduction – Generally………………………………………………………………………………………………………………………….. 3
a. Like doctrine of impossibility, unconscionability is a basis by which a party to an otherwise enforceable sales agreement may avoid the K………………………………………………………………………………………………………………………………………………….. 3
b. Unconscionability excuse tends to be used by the consumer buyer……………………………………………………….. 3
c. Types………………………………………………………………………………………………………………………………………………………. 3
d. Definition………………………………………………………………………………………………………………………………………………… 3
2. §2-302 – How to determine unconscionability………………………………………………………………………………………. 3
a. §2-302(1) – Operation of unconscionability…………………………………………………………………………………………… 3
G. Title with Sale of Goods………………………………………………………………………………………… 3
1. §2-401: Passing of Title…………………………………………………………………………………………………………………………. 3
a. When passing of title, title doesn’t usually matter………………………………………………………………………………….. 3
b. Below are the exceptions………………………………………………………………………………………………………………………… 3
2. §2-403: Power to Transfer Title……………………………………………………………………………………………………………… 3
a. §2-403(1): Generally; Voidable Title……………………………………………………………………………………………………… 3
b. §2-403(2): Entrusting a Merchant…………………………………………………………………………………………………………. 3
3. §2-312: Warranty of Title……………………………………………………………………………………………………………………… 3
a. §2-312(1): Warranty of Title…………………………………………………………………………………………………………………. 3
b. §2-312(2): Disclaimer of Warranty of Title…………………………………………………………………………………………… 3
4. Case Problems………………………………………………………………………………………………………………………………………… 3
a. Hypo #1………………………………………………………………………………………………………………………………………………….. 3
b. Hypothetical #2………………………………………………………………………………………………………………………………………. 3
c. Hypothetical #3………………………………………………………………………………………………………………………………………. 3
d. Hypothetical #4………………………………………………………………………………………………………………………………………. 3
III. Performance: Closing the Sale of Goods…………………………………………………………………… 3
A. Introduction………………………………………………………………………………………………………… 3
1. Process of Sale Closing……………………………………………………………………………………………………………………………. 3
a. Buyer physically receives the goods..

(unconsionability in leases).3
2. Two types of unconscionable terms:………………………………………………………………………………………………………. 3
a. Procedural unconscionability………………………………………………………………………………………………………………….. 3
b. Substantive unconscionability………………………………………………………………………………………………………………… 3
VII. Performance: Closing Under Article 2A………………………………………………………………… 3
A. Closing Under Article 2A……………………………………………………………………………………… 3
1. Introduction……………………………………………………………………………………………………………………………………………. 3
a. Differences to Art. 2………………………………………………………………………………………………………………………………… 3
2. §2A-407: No Revocation of Acceptance with Finance Leases……………………………………………………………… 3
a. §2A-407(1): In case of a finance lease that is not a consumer lease, lessee’s promises under the lease contract after acceptance becomes irrevocable “come hell or high water.”………………………………………………………………………. 3
3. §2A-517: Revocation of Acceptance of Goods…………………………………………………………………………………….. 3
a. §2A-517(1): Lessee may revoke acceptance if:……………………………………………………………………………………. 3
VIII. Remedies Under Article 2A…………………………………………………………………………………… 3
A. Lessor’s Remedies Under Article 2A……………………………………………………………………… 3
1. Introduction……………………………………………………………………………………………………………………………………………. 3
a. Comparison to Article 2 remedies…………………………………………………………………………………………………………… 3
2. §2A-529: Lessor’s Action for the Rent………………………………………………………………………………………………….. 3
a. §2A-529(1): The lessor may recover rent as damages:………………………………………………………………………….. 3
3. §2A-527: Lessor’s Rights to Dispose of Goods (Analogous to K resale damages)……………………………….. 3
a. 2A-527(2) Requirements to qualify under 2A-527(2):…………………………………………………………………………… 3
b. Formula: UR + (PVOL – PVNL) + ID – ES…………………………………………………………………………………………….. 3
4. §2A-530: Lessor’s Incidental Damages…………………………………………………………………………………………………. 3
a. Incidental damages include:…………………………………………………………………………………………………………………… 3
5. §2A-528: Lessor’s Damages for Non-Acceptance (Analogous to contract-market measure)……………… 3
a. Formula: UR + (PVOL – PVML) + ID – ES……………………………………………………………………………………………. 3
b. §2A-528(2): Lost profits alternative/Lost Volume Lessor…………………………………………………………………….. 3
6. §2A-532: Lessor’s Rights to Residual Interest……………………………………………………………………………………….. 3
a. Purpose/requirement of remedy allows lessor to recover an amount that will fully compensate for any loss or damage to lessor’s residual interest……………………………………………………………………………………………………………………………….. 3
B. Lessee’s Remedies Under Article 2A……………………………………………………………………… 3
1. Buyers Remedies Lessee’s remedies- Present Value……………………………………………………………………………… 3
2. §2A-518: Cover; Substitute Goods………………………………………………………………………………………………………… 3
a. Two differences exist between Article 2 (§2-712) and Article 2A cover:………………………………………………… 3
b. §2A-518(1): Lessee may cover after lessor defaults……………………………………………………………………………… 3
c. §2A-518(2): To recover damages under this section the cover lease must be:……………………………………… 3
IX. Contract Formation Under CISG……………………………………………………………………………… 3
A. Scope of CISG……………………………………………………………………………………………………… 3
1. Art. 1: CISG Scope…………………………………………………………………………………………………………………………………. 3
a. Requirements………………………………………………………………………………………………………………………………………….. 3
b. Definitions/explanations…………………………………………………………………………………………………………………………. 3
c. Where CISG does not apply……………………………………………………………………………………………………………………. 3
d. Art. 6: CISG is a gap-filler, and parties may contract away application of CISG or any of its provisions.3
e. Art. 11: NO Statute of Frauds/Writing requirement………………………………………………………………………………… 3
f. Art. 12 (in combination w/ Art. 96): Allows countries to keep SOF & adopt CISG, but the U.S. has NOT done this. 3
B. CISG Contract Formation……………………………………………………………………………………. 3
1. General Formation………………………………………………………………………………………………………………………………….. 3
a. 18(1): Statement or other conduct of offeree indicating assent is an acceptance…………………………………. 3
b. 15(1): Offer is effective on receipt…………………………………………………………………………………………………………. 3
c. 18(3): Acceptance is effective on receipt………………………………………………………………………………………………. 3
2. Offer and Acceptance with Different Terms…………………………………………………………………………………………… 3
a. 19(1): Acceptance that contains additional or different terms act as counteroffers. (Essentially common-law mirror image rule)……………………………………………………………………………………………………………………………………………………………… 3
b. 19(2): Exception to 19(1)………………………………………………………………………………………………………………………. 3
c. 19(3): Material alteration can include, but are not limited to:……………………………………………………………….. 3
d. If term is not listed, you can look to common practice in industry, past dealings, etc……………………………. 3
e. Art. 18(1): Performance = Acceptance, and the additional terms are accepted by performance (common-law “last shot” doctrine)- the last transaction terms become part of the deal……………………………………………………………………… 3
X. Remedies Under CISG…………………………………………………………………………………………….. 3
A. Breach Under CISG……………………………………………………………………………………………… 3
1. Art. 64(1)(a): Seller can “avoid” K if it’s a fundamental breach……………………………………………………………. 3
a. Art. 25- a fundamental breach is:…………………………………………………………………………………………………………… 3
b. If breach is fundamental, you can use all the remedies available………………………………………………………….. 3
c. If breach is not fundamental, you cannot use resale or market damages……………………………………………… 3
d. Basic remedies available under UCC are available in the CISG…………………………………………………………….. 3
2. Art. 62: Can require specific performance if breached by buyer……………………………………………………………. 3
a. BUT, Art. 28: court is not bound to enter a judgment for specific performance unless rules of court would otherwise (in US, look to UCC)……………………………………………………………………………………………………………………………………………….. 3
B. Damages Under CISG………………………………………………………………………………………….. 3
1. Art. 74: Incidental and Consequential damages…………………………………………………………………………………….. 3
a. Allows sellers and buyers to receive incidental and consequential damages………………………………………….. 3
2. Art. 75: Resale………………………………………………………………………………………………………………………………………… 3
a. If you rely on Art. 75, you’re precluded from using Art. 76……………………………………………………………………. 3
b. Recover for difference in KP and RP……………………………………………………………………………………………………… 3
3. Art. 76: Market Damages……………………………………………………………………………………………………………………….. 3
a. recover for difference in KP and MP………………………………………………………………………………………………………. 3
4. Art. 77: Duty to Mitigate…………………………………………………………………………………………………………………………. 3
a. Overarching principle that applies to all damage provisions…………………………………………………………………… 3
5. Art. 62: Seller cannot recover for price if you’ve resold the goods…………………………………………………………. 3