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Chapter 22 -23 1. Seller’s (lessor’s) remedies when buyer (lessee) breaches Seller and buyer went into a contract, buyer anticipatory breach contract. Buyer notified the seller for an advance breach. Or maybe the goods arrived and the buyer wrongfully rejects the conforming goods. a. Withhold or stop delivery i. What if the buyer is suppose to send an advanced payment, the seller is supposed to receive 35% of the purchase price before the day the seller puts the goods on the truck. The money doesn’t come, the buyer has breached and that will give the seller the right to withhold or stop the delivery. OR if the goods are already on the truck, seller tells carrier to drop goods at nearby warehouse because the buyer’s breach is a material breach. b. Resale i. Seller goes out and tries to find another buyer for the goods. So, the seller finds another buyer but what if the seller’s resale contract price is less than the original contract price Seller can sue for the difference. c. Ordinary measure of damages i. Measure the difference original contract price and fair market price. Damages are measured differently, difference contract price and market price of goods at the time and place of tender of the goods. ii. Example: 1. K price- 20,000 2. Resale k – 15,00 3. Advertise- 1,000 4. Saving of shipment cost (freight cost) – 1,000 5. Total not recovery from the buyer – 5,000 iii. Example: 1. K price – 20,00 (shipment k) 2. Seller – is located in Tyler, Texas 17,000 (market price) 3. Buyer – located in El Paso ,Texas 15,000 (market price) 4. 15-20 of May 5. The time and place goes to the seller because it is a shipment d. In case of buyer’s insolvency i. The contract called for the seller to sell a quantity of computers. Goods are being moved. Buyer is to pay 30 day after receiving goods. Seller gets told that the buyer is not paying debt. Seller entitled to withhold delivery except for cash. Change (change of remedy without a breach) the contract to a credit deal to a cash upfront deal. e. Specific performance (recovery of purchase price or lease payments) i. If the remedy of resale is not reasonably available. f. Incidental and/or consequential damages i. Seller suing the difference between original contract and resale contract price (incidental and/or consequential) in addition to the resale contract price and the original contract price. I. Product Liability a. Sealing with article 2 of UCC. Talking about litigation, which involves a defect in a product. May leads to contract damages. i. Breach of warranty ii. Tort theories Chapter 23 – Warranties and Product Liability 1. Warranty of title 2. Warranty of quality – defective product dispute a. Express i. Warranty by modeling the product or by fiving a free sample 1. Seller presents a model or sample regarding the product and then the seller presents an integrated contract. If the buyer has a problem with that contract it would then be followed by the parole evidence rule. So if the integrated contract is inconsistent with what the customer was told and now the buyer would say it’s a breach of warranty, there will be a parole evidence rule problem there. That evidence might not be admissible, unless the customer can prove fraud. b. Implied i. Merchantability 1. What is the implied warranty of merchantability If the seller is a merchant, dealing in goods of that kind, the implied warranty of merchantability automatically applies unless the warranty is disclaimed. 2. What if its not disclaimed A merchantable product is a product of fair average quality for goods of that kind. ii. Fitness for a particular purpose 1. The first distinction between merchantability and fitness is that its never automatic, instead there are certain elements that have to be present and this warrant may be made by a merchant or a non-merchant. a. The implied warranty of fitness is present and there are six elements. Xyz Corporation has an infrastructure of buildings; one of which is the record building, and this records building sticks out like a sore thumb because it is sadly in need of a paint job. But xyz is looking for is a paint that they can apply, only cheap, that is without having to do a standard of reapplication preparation. Which ordinarily involve scrapping off and sanding down the original surface. The want a paint that can paint over the existing surface and stay there for another year. A representative of warner paints calls on the purchasing manager for xyz corp. The purchasing manager takes the factory route to the records building and show him and tells the factory route what exactly what he want worked on the building. (1) So the factory route gets on his cell phone and calls the factory and explains to them what the costumer is looking for and asks him if they have a paint that will do that. (2) The guy at the factory says yes. Purchasing manager from xyz asks the factory route is that what he would recommend, and he says yes. (3,4,5) Based on that recommendation, xyz purchases the efficient quantity of the paint. They applied the recommended painting to the building and wait after 6 months to dry. (6) It did not work, there’s a breach of implied warranty of fitness. i. Elements that applies: 1. The buyer has a specific purpose 2. Buyer communicating to the seller 3. Buyer is relying on the sellers expertise 4. The seller is aware that the buyer is relying on the sellers expertise 5. The seller makes a recommendation 6. The seller relies on the buying product 3. Tort theories (breach of warranties) a. Negligence – plaintiff has a burden i. There’s not a warranty cause of action, there’s just a blanket disclaimer. So the plaintiff’s attorney sues for negligence. Is the disclaimer of warranty going to be a good defense in tort cause of action No, because disclaimers is a contract defense in a contract cause of action. Breach of warranty is a contract cause of action and this is a tort defense. ii. Negligence – defective product case. 1. Early on, the courts had a requirement of what’s called privity case. A lot times in a defective product case, you have three defective parties, the manufacturer (defendant), the dealer (defendant), and the costumer (plaintiff). The plaintiff in a defective product case can make out a cause of action against the defendant. That the plaintiff has to be in privity with that defendant, now privity is a contact concept, meaning direct contractual relationship. In this case, the plaintiff’s privity would be the dealer. The privity is not required if the plaintiff can meet the tracing burden, the plaintiff does not see negligence in the dealer but see it in the manufacturer. The plaintiff has to prove that the product left the manufacturing in the same conditions in which it was expected to and ultimately did reach the consumer without intervening change in the condition in which it was sold. b. Elements to the Res Ipsa Loquitar – the thing speaks for itself. It’s way for the plaintiff’s attorney to make out a case, even though the plaintiff cannot prove a specific act of negligence. i. Injuring causing of instrumentality ii. Under the exclusive control of the defendant iii. The injury can only be explained by negligence iv. Case: coca cola vs. S cola, S cola bought a coca cola and before opening the bottled, the bottle exploded in his hand causing him severe personal injuries. S cola attorney filed suit against the bottling company with whom S cola was not in privity. Plaintiff’s attorney raised the theory of ‘res ipsa loquitar.” The question was why did the bottle explode They didn’t know, for some reason the pressure inside the bottle was greater than the outside. Secondly, exclusive control of the defendant. If the plaintiff can prove that the product left the manufacturer in the same condition, the plaintiff met the tracing burden. Thirdly, what happened would not have happened after the pursuit of negligence. And so, the negligence started at the bottling company. c. Strict liability – liability in regardless of fault, it a non-fault theory. i. Another tort theory, its distinguishable from negligence because negligence is a fault paradigm. There are two types of paradigm: fault paradigm and reciprocal risk paradigm.