Contracts B
Wellman
1-11-10
Koken v. Black & Veatch Construction (Implied warranty of merchantability)
A fire occurred and a fire blanked had been used to protect a certain area but did not work so caused $9 million in damages. Suing b/c the blanket was unfit for its ordinary purpose and breach of warranty claim. To be “merchantable” must establish “fit for the ordinary purposes for which such goods are used.”
Holding: Summary Judgment granted on breach of warranty b/c an ordinary user reasonably expected a fire blanket to prevent the type of melting.
Lewis v. Mobil Oil Corp (Implied warranty of fitness)
P bought new machinery and continued to order oil from the D due to prior history. P provided D with information needed about with oil the machinery would take and D insisted a certain oil which led to numerous breakdowns and losses to his business. Evidence establishes an implied warranty of fitness b/c once they changed the oil, the machine started to work perfectly. P relied on D to supply him with the proper oil and if any further information was needed, D should have got it before making the recommendation. The seller should not supply a product which is not so suited.
Implied warranty of fitness:
– A) Seller have “reason to know” of the use for which the goods are purchased
– B) The buyer relies on the seller’s expertise in supplying the proper product.
South Carolina Electric & Gas v. Combustion Engineer (Excluding Implied Warranty)
Suing to recover damages as a result of a fire that occurred by the D’s steam boiler. Under 2-316, the disclaimer of “1 yr warranty and there are no other warranty’s whether expressed or implied” nowhere mentions “merchantability”, as it must do under (2) to exclude an implied warranty of merchantability. Further the language of the disclaimer was “conspicuous” under (2) b/c a reasonable person ought have noticed it and here it was on page 17 out of 21.
Henningsen v. Bloomfield Motors, Inc. (Excluding Implied Warranty)
P purchased a new car from D and his wife was injured due to steering failure ten days after delivery. Sued for breach of implied warranty of merchantability and D’s claims warranty was disclaimed on the purchase contract. Even though it was noticeable and in proper print, the disclaimer limits the bargaining power of the consumers, either you buy the car with the disclaimer or you don’t. This case led to more freedom of contracts and competitors advertising their warranties.
Contracts with Mandatory GOOD FAITH Terms
UCC 1-304 provides that every contract or duty imposes an obligation of good faith in its performance and enforcement.
– Legal Rules Allocate Entitlements
o Supported by Consideration/ Promissory Estoppel
§ Bargain for theory (promise for exchange for promise or performance)
· Consideration makes the Promisor liable
§ Benefit detriment theory (
o Capacity/Fraud/Unjust enrichment
§ Minors
· Get to rescind the transaction
· Get a co-signer/adult so cannot rescind
§ Misrepresentation (minor lies about age)
– Group assignment
o Warranty
§ Gives Buyers entitle to recover damages, replaced
§ 2-714(2) Breach of Warranty
· (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
§ Sellers think about ways of avoiding warranties
· 2-719 Limit of Remedies
o Who pays, who much, to what circumstances
o (1) as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts;
§ 2-313 Express Warranties by Affirmation, Promise, Description, Sample
o Arise by explicit conduct by the seller.
o How is the warranty created?
o What is the content of the warranty?
o How can the warranty be modified or limited or disclaimed?
§ 2-316 Modification of Warranties
· 3(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him;
§ 2-314 Implied Warranty; Merchantability: Usage of Trade
· 2-104: sets out criteria’s of who is a merchant.
o Merchant of the goods in that kind.
· Seller is a merchant with goods of that kind
· Based on status, warranty still arises of don’t say or do anything.
· MUST BE IN WRITING
· (2) Goods to be merchantable must be at least such as
o (a) pass without objection in the trade under the contract description; and
o (b) in the case of fungible goods, are of fair average quality within the description; and
o (c) are fit for the ordinary purposes for which such goods are used;
§ 2-315 Implied Warranty: Fitness for Particular Purpose
· Where the sell
silent about intent (gap) b/c read in as a matter of law (law fills silence – rule of law, default rule – rule that will govern unless the parties express a contrary intent).
Dissent: Contradictory. Look at K and see if there is a gap and fill w/ term. You contradict silence by 1) Read into deed what the parties intended; or 2) read in as a matter of law
Class: Evidence of oral collateral agreements should be excluded ONLY when the fact finder is likely to be misled. When determining that a collateral agreement is such that it might naturally be made as a separate agreement, the ct must look to the actual experience and dealings.
Bollinger v. Central Penn. Quarry Stripping and Construction Co. (Parol Evidence)
This is a suit in EQUITY- P asking ct to make an exception to the rules based on justice.
B signed a written agreement with a construction company working on the PA turnpike that permitted the company to deposit refuse on the Bs property near their home. The writing failed to state the parties’ understanding that the company would first remove the topsoil and then use it to cover the refuse so as to “make a sandwich of its refuse between the bare earth and the topsoil.” Both parties mistakenly assumed that the writing contained such a provision and acted like provision was in writing. They discovered later that it had been omitted and P had writing reformed to include the provision.
“Ct. can reform a contract if the mistake is mutual to the parties, however, if one of the parties denies that a mistake was made does not prevent a finding of mutual mistake.”
Holding: Ct. Granted relief even though they had signed the written agreement w/o reading it b/c they assumed that the provision had been incorporated into the writing. Not a PER problem b/c B asked to modify writing not the K. It is unlike Gianni where P did not claim that either party believed that the writing contained the term. Reformation is unavailable.
UAW GM Human Resources v. KSL Recreation (Merger clause)
