Class 8 Notes

U.C.C. - ARTICLE 2 - SALES
..PART 3. GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT

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§ 2-313. Express Warranties by Affirmation, Promise, Description, Sample.

(1) Express warranties by the seller are created as follows:

• (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
• (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
• (c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goodsshall conform to the sample or model.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.

Warranty Liability is an alternative theory because if someone makes a warranty and accepts the risk of the facts not being true and therefore is imposed with strict liability for the item regardless of true knowledge.


The buyer is always gonna ask for certain warranties. i.e. real estate (sales), financial (services)


Express W: The seller is articulating the quality of the goods being sold.
Implied W: The seller has not articulated but the law supplies the W. 


Daughtrey v. Ashe
Diamond Bracelet sold with statement from the seller mentioning the quality of the diamond as VVS quality and that should client not be satisfied there would a complete refund of the purchase price.


Plaintiff finds out that diamond is not of the correct quality. Daughtry wants a new diamond bracelet or the cash value difference of the VVS bracelet reflecting against what he received.


Argument is that just stating a mere opinion about a diamond not fact.


Express warranties do not arise out of a statement of value.


The issue: becomes whether the buyer must establish reliance on the statement?


The court rules that Reliance is not necessary. If the representation comes after the sale then we treat it as a contract modification.


Parol Evidence: statements that come prior to or contemporaneously with the original contract. 
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§ 2-314. Implied Warranty:  Merchantability;  Usage of Trade.
(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.  Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.


(2) Goods to be merchantable must be at least such as:
(a) pass without objection in the trade under the contract description; 
(b) in the case of fungible goods, are of fair average quality within the description; 
(c) are fit for the ordinary purposes for which goods of that description are used; 
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; 
(e) are adequately contained, packaged, and labeled as the agreement may require;  and
(f) conform to the promise or affirmations of fact made on the container or label if any.


(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.


Webster v. Blue Ship Tea Room, Inc.
If the buyer inspect the good, They wave the right to claim the implied warranty of merchantability.


Issue: Whether a fish bone lurking in a fish chowder, about the ingredients of which there is no other complaint, constitutes a breach of implied warranty under applicable provisions of the Uniform Commercial Code.


Rationale: The court found no breach of implied warranty because a restaurant customer such as plaintiff, eating fish chowder, should have anticipated having to remove some fish bones from her bowl. The mere presence of a fish bone in fish chowder containing chunks of fish and potato eaten by a New Englander at a restaurant after stirring the chowder did not constitute a breach of the implied warranty of merchantability of the chowder by the proprietor of the restaurant under § 2-314 of the Uniform Commercial Code, and did not render the proprietor liable on that ground to the customer for injuries received when the fish bone lodged in her throat.


Warranties is about signing risk. So its about who is in a better position to bear risk of unmerchantable products. The merchant is also in the best position to avoid that risk. Therefore even if merchant doesnt know of the risk then merchant would be held liable.


Look at what Plaintiff wants as remedy. 

Class 6 Notes

Threadgill V. Peabody


There is a Hierarchy in the evidence the court look to:
1. written intent
2. Evidentiary actions taken by the parties

ETC.

Should there be a methodic approach to dealing with the Intent of the parties in such cases?

Meyer v. State Farm Fire & Cas. Co.
A contract of adhesion does not mean that its terms are invalid.  There was no ambiguity in the appraisal provision.  Arbitration clauses are standard in insurance contracts therefore the adhesion contract is not unconscionable. 


This does not require that the Meyers understand this contract. They would need to go to arbitration first.


The constitutionally provided right is of knowing what is in the contract does not apply where it is up against the public policy of arbitration.
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Lauvetz v. Alaska Sales and Service d/b/a National Car Rental 


Rental car case: P rents car and buys D's Insurance, signs CDW. Damages car via drunk driving and D claims that this is not part of CDW. Trial Court concurs and P appeals.


Issue: Whether the purchaser of the damage waiver reasonably expected the waiver to be subject to any exclusions?

Holding: A consumer would not reasonably expect the damage waiver to be less than complete, REVERSED, REMANDED, for P

Rule: Customers are not bound to unknown terms which are beyond the range of reasonable expectation.

Court adopted Restatement § 211; this section establishes the general enforceability of the terms of standardized forms, without regard for whether the customer reads or understands those terms.  Reasonable expectations are those expectations a consumer would have after reading the form.  When offered the CDW, the bailee would reasonably expect this option, at the not inconsiderable rate of $ 8.95 per day, to relieve him of responsibility even if the damage were caused by his fault.  “we join the large number of courts who have refused to enforce damage waiver exclusions under a variety of circumstances.”


If there are terms that are beyond the reasonable expectations of the consumer, they are non-the-less bound by the contract based on Restatement § 211.
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Class 5 Notes

Trident V. Conn. Gen. Life Ins.
Judge Rules this case as not ambiguous. The interpretation of the clause by trident is not reasonable as the terms of the document give CG and not trident the rights of taking that 10% and because the documents clarify the ambiguity with very string language saying Trident does not have the right to repay for 12 years. - contextual approach -

The very purpose of the Parol Evidence Rule is to prevent reopening agreements.


Threadgill V. Peabody Coal Co.
There was no writeen agreement in this case and therefore PER doesn't come into play unless you have a writing.

For trade usage to be binding on the parties is that it was actual and constructive knowledge, so widely known and accepted that there is no other trade usage interpretation.

Evidence:
1. Testimony of trade usage.
2. Reasoning used: The risk is born by the party in control

Distinction made by court:
The court distinguishes between substantive rule of law and intent of the parties. The court rules the trade usage as mere evidence to the parties intent but not substantive law and therefore cannot agree to trade usage term without additional reasoning.

Trade Usage is a DEFAULT RULE: a gap filler, "what the parties will bargain around"

So if the parties have not discussed who will bare the risk, the trade usage will determine the optimal bargaining point/term.

Appellate court: says the trade usage here doesnt make the negligence by treadgill irrelevant. Parties according to state law cannot contract there way out of liability. If it violates public policy the court cannot enforce the Trade usage.

This Idea of trade usage can apply whether parties have a written agreement or not.

UCC - Ny has not yet adoopted the revised version of the law. Article 1-205

U.C.C. - ARTICLE 1- GENERAL PROVISIONS
§ 1-205. Course of Dealing and Usage of Trade.

(1) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(2) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court.

(3) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.

(4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.

(5) An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.

(6) Evidence of a relevant usage of trade offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter.

§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade.

(a) A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

Hierarchy of Proof:
1. Express Language
2. Course of performance
3. Course of dealing
4. Trade usage

§ 2-202. Final Written Expression: Parol or Extrinsic Evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented

    * (a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and
    * (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement . 
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Class 4 Notes

If there is more than one reasonable meaning to a word so how should the court decide what the word means?
The court looks to the intent of the parties, trade usage and post or prior conduct if the parties in the matter to decide what it means.

whether the court can square one of the parties subjective understandings with the objective? If the court cannot, contract formation would be defeated.

Random House V. Rosetta Books
Random House had sued Rosetta Books, claiming that the defendant violated its right in publishing the digital editions of certain books. Authors William Styron, Kurt Vonnegut and Robert B. Parker had granted Random House exclusive licenses to publish their works "in book form." They then granted Rosetta Books the right to publish digital editions of their books (commonly called “eBooks”). The trial court had refused Random House’s request for a preliminary injunction and Random House appealed. 


Issue:
"determining whether the licenses here in issue extend to eBooks?

Is this case ambiguous (exception to Parol Evidence Rule?

depends on fact-finding regarding . . . the 'evolving' technical processes and
uses of an eBook, and the reasonable expectations of the contracting parties 'cognizant of the customs, practices, usages and terminology as generally understood in the . . .trade or business' at the time of contracting?

Copyright infringement case for getting ready to publish ebooks.

Random House wants injunction and in order to this they would have to prove they would likely in the case against Rosetta and that this is in fact copyright infringement.

In a per curiam decision, the Court affirmed the denial of Random House's motion for a preliminary injunction. The Court acknowledged that "there is some appeal to [Random House's] argument that an 'eBook' . . . is simply a 'form' of a book, and therefore within the coverage of [those] licenses." But, the court added, "the law of New York, which determines the scope of Random House's contracts, has arguably adopted a restrictive view of the kinds of 'new uses' to which an exclusive license may apply when the contracting parties do not expressly provide for coverage of such future forms."

Moreover, "determining whether the licenses here in issue extend to eBooks depends on fact-finding regarding . . . the 'evolving' technical processes and uses of an eBook, and the reasonable expectations of the contracting parties 'cognizant of the customs, practices, usages and terminology as generally understood in the . . .trade or business' at the time of contracting." For these reasons, " . . . we cannot say the district court abused its discretion in the preliminary way it resolved these mixed questions of law and fact."

In addition, ". . . the balance of hardships tips . . . in [Rosetta Books'] favor. For while Random House expresses fears about harm to its goodwill if Rosetta is allowed to proceed with its sale of eBooks, Rosetta, whose entire business is based on the sale of eBooks, raises a reasonable concern that the proposed preliminary injunction will put it out of business or at least eliminate its business as to all authors who have executed similar contracts. As the district court found, such legitimate concerns outweigh any potential hardships to Random House, which, if it ultimately prevails on the merits, can recover money damages for any lost sales."

When the court looks a contract and "New-Use" Arises, the court looks to:
1. The scope of how loanguage grants rights
Therefore in this case because the terms where narrowly contemplated, The court rules that the grants do not include E-books
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Trident Center V.
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