Sales and Leases - A Problem-based Approach, 2016a

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Problem 17-7. An 18-year old high school student wants to earn some extra money, so she buys a lawn mower for $300 and does lawn work for her neighbors after school. The lawn mower comes with a one-year warranty, but limits any damages (including consequential damages) for breach of the warranty to the retail list price of the lawn mower. As a result of a defective blade, the blade shatters while the student is using it and she suffers serious personal injuries, as well as other losses, such as the lost opportunity to earn money. Is the limitation of damages, including consequential damages, prima facie unconscionable? Why or why not? Problem 17-8. George owns and stores a valuable gun collection in his house, and he purchases an alarm system to install in his home for the protection of this collection. The alarm system was sold with the sole and exclusive remedy of “repair or replacement of parts or the system.” When a burglar arrived, the siren did not go off, nor did the system alert the monitoring agency as promised, all because of a defective battery. The manufacturer of the alarm system replaced the defective battery. 1. Is the “repair or replacement of parts or the system” a minimum adequate remedy? 2. Did the remedy fail of its essential purpose? 3. Is George entitled to recover the value of his stolen gun collection? 17.3.6. Often, a purchase agreement will contain a single clause which contains (i) a limited warranty, (ii) a limitation of remedy (such as repair or replacement), and (iii) a limitation of damages. The following language, which is typical of that found in purchase agreements, is based on the contractual provisions at issue in the case of Cooley v. Big Horn Harvestore Systems, Inc., 813 P.2d 736 (Colo. 1991): If within one year from the date of sale, any product sold under this purchase order, or any part thereof, shall prove to be defective in material or workmanship upon examination by the Manufacturer, the Manufacturer will supply an identical or substantially similar replacement part f.o.b. the Manufacturer's factory, or the Manufacturer, at its option, will repair or allow credit for such part. NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED AND INCLUDING A WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE HAS BEEN OR WILL BE MADE BY OR ON BEHALF OF THE MANUFACTURER OR THE SELLER OR BY OPERATION OF LAW WITH RESPECT TO THE EQUIPMENT AND ACCESSORIES OR THEIR INSTALLATION, USE, OPERATION, REPLACEMENT OR REPAIR. NEITHER THE MANUFACTURER NOR THE SELLER SHALL BE LIABLE BY VIRTUE OF THIS WARRANTY, OR OTHERWISE, FOR ANY SPECIAL OR CONSEQUENTIAL LOSS OR DAMAGE RESULTING FROM THE USE 249
OR LOSS OF THE USE OF EQUIPMENT AND ACCESSORIES. THE BUYER RECOGNIZES THAT THE EXPRESS WARRANTY SET FORTH ABOVE IS THE EXCLUSIVE REMEDY TO WHICH HE IS ENTITLED AND HE WAIVES ALL OTHER REMEDIES, STATUTORY OR OTHERWISE. The question which has been presented to several courts is the following: If the manufacturer is unable to repair or replace the defective goods, and thus the limited remedy has failed of its essential purpose, does the separate limitation on consequential damages fail with it? Or should the limitation on damages be enforced unless it fails on its own merits; i.e., if it is found to be unconscionable? 17.3.6.1. The majority of jurisdictions have concluded that a limitation of remedy clause is distinct from a limitation of damages clause, even if they are commingled in a single contract provision (as above). The limitation of remedy clause must be analyzed under § 2-719(2), and if it “fails of its essential purpose,” the buyer may then pursue any other available remedy. However, when the buyer pursues other available remedies, the second clause limiting consequential damages will be enforced, unless it fails the unconscionability test of § 2-719(3). See, for example, Rheem Manufacturing Co. v. Phelps Heating & Air Conditioning, 746 N.E. 2d 941 (Ind. 2001). 17.3.6.2. A minority of jurisdictions have ruled that if a limited remedy fails of its essential purpose, all other limitations stated in connection with it (such as a limitation of damages) also fail. For example, in Cooley v. Big Horn Harvestore Systems, Inc., 813 P.2d 736 (Colo. 1991), from which the above language is adapted, the manufacturer could not repair the equipment as promised, and thus the remedy failed of its essential purpose. The court found that the limitation on damages was written in the context of the limitation of remedy, that they were dependent upon each other, and because the limitation of remedy failed, the limitation on consequential damages also failed. 17.3.6.3. A subminority of jurisdictions that strike the limited remedy also strike the limitation on damages if it is in the same paragraph, but not if it is in a separate paragraph. Research Assignment 17-1. What is the rule in your jurisdiction? When a court strikes a limitation of remedy clause, does it also strike the limitation on consequential damages? Problem 17-9. Chapter 17 Review Problem. The following facts are taken from Schlenz, v. John Deere Co., 511 F. Supp. 224 (D. Mont. 1981). What issues arise and how would you analyze them? 250
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SALES AND LEASES: A Problem-based A
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About CALI eLangdell Press The Cent
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Table of Contents About the Authors
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5.1. Statute of Frauds - the Genera
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8.3.4. Remote Sellers under UCC §
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12.3. Qualifications to the Perfect
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16.4. Buyer’s Remedy of “Cover.
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Chapter 1. Introduction to the Unif
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asserted in the Code itself (see [
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(4) The requirement in § 2-511 tha
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unfair that a court refuses enforce
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(1) What factors should the consume
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Problem 1-8. Number from 1 through
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Was the court correct to distinguis
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Chapter 2. Introduction to UCC Arti
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the sale of goods, such as the stat
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714 (Mich. App. 1981) (court held t
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Advent filed a complaint in the dis
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That a computer program may be copy
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and available in the marketplace.
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having knowledge or skill peculiar
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2.4.5.2. Section 2-207(2) regarding
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Chapter 3. Formation of a Contract
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3.2.4.2. Quantity. Section § 2-204
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common law). The provision probably
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3.3.5.3. Section 2-206(1)(b) provid
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Commercial Code. Whether there are
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Case Notes: 1. Although UCC § 2-20
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a website and a little box pops up
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4.2.1. Section 2-207(1) requires a
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4.3. Second Step: Look for Language
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(2) the additional term materially
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522 U.S. 808 (1997) (arbitration pr
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eached orally . . . and is followed
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Terms. Accord Brown Machine, 770 S.
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Section 2-207(2) is silent on the t
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the approach. On the contrary, at l
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offered terms. And if there is nego
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Problem 5-1. Would the following co
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noted a 10 per cent discount on the
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All that is required is that the wr
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We do not mean to [imply] that term
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Problem 5-3. On July 10, 2014, Jack
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A more difficult question is whethe
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Chapter 6. Warranties Implied by La
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6.3.1 If a buyer provides specifica
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particular model of toaster would b
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etween the chowder and crackers whi
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unwholesomeness of the food itself,
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extent beyond that which would be c
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One of the purchasers asks for Joan
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Chapter 7. Express Warranties and W
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5. A picture of a watch with a face
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sorghum seed, but it didn’t grow.
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gets home. When the DVR breaks ten
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7.3.1.5.1. In any event, Home Appli
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merchantability is extended to thos
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court's reason for abolishing the p
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(e) in sales of any seed for planti
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the surrounding text of the same si
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does not claim title in himself (su
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(b) the purchase by a celebrity of
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Problem 8-9. Read § 108. What, if
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8.3.3. Alternatives. After receivin
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8.3.3.1. Under Alternative A, famil
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Problem 8-14. Jump High Inc. manufa
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of a consistent additional term to
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BUTZNER, Circuit Judge …. Columbi
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whether the buyer has in fact defau
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Problem 9-3. Betty owns a building
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Id. at 644. defendant for the lira,
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clauses such as this one are strong
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(1) Can the parties agree on a deli
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(2) Does your answer to the precedi
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Chapter 10. Delivery Terms and Titl
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10.1.2.3.2. So where do we go for g
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10.1.4. Common Carrier Contracts. W
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Rheinberg-Kellerei GMBH v. Vineyard
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Ted asks Outdoor Sporting Goods to
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10.2.2. Transferor’s Title. Secti
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levied on the car on behalf of Butl
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Id. at 266. contends its ownership
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Hollis v. Chamberlin, 419 S.W.2d 11
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Chapter 11. Impracticability (Excus
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11.3. Failure of Basic Assumption.
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(4) the promisor seasonably notifie
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[The court also rejected Bobby Murr
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performance has become commercially
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Transatlantic Financing Corp. v. Un
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4. See Lee Russ, Annotation, Imprac
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The facts are that the parties ente
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Watson Labs., Inc. v. Rhone-Poulenc
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preclude performance under the cont
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2. RPR's express obligation under P
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12.3.1. Section 2-602 sets out rule
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delivery or tender. It is ineffecti
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easonable time for rejection, U.C.C
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nor refused the offer. No mention w
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uyer can reject the entire contract
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12.7.2. Under § 2-602(2)(b), if th
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Chapter 13. Acceptance; Revocation
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13.2.4. After acceptance, the burde
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13.3.2.2. Another important factor
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attempted repairs sufficient to kee
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miles after revocation was found to
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Problem 13-4. Whoopie Cereals purch
Page 214 and 215: Problem 14-3. Sally has agreed to p
Page 216 and 217: constitute reasonable grounds which
Page 218 and 219: On May 1, 1969, AMF met with McDona
Page 220 and 221: Case Notes: 1. When did someone fir
Page 222 and 223: 14.6.2. An effective retraction rei
Page 224 and 225: Chapter 15. Common Law Remedy Princ
Page 226 and 227: end that the aggrieved party may be
Page 228 and 229: 15.1.4.4. The terms “general dama
Page 230 and 231: in certain circumstances, the right
Page 232 and 233: Problem 15-11. Dollar Store decides
Page 234 and 235: everse. Kenco buys mobile homes fro
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Page 238 and 239: Chapter 16. Buyer Remedies under th
Page 240 and 241: Schroeder v. Barth, Inc. 969 F.2d 4
Page 242 and 243: e.g., Indiana Ins. Co. v. Plummer P
Page 244 and 245: a condition precedent to any recove
Page 246 and 247: the manufacturer under the particul
Page 248 and 249: ottles of wine instead of 12 bottle
Page 250 and 251: "We first turn our attention to the
Page 252 and 253: severe loss. Therefore, the actual
Page 254 and 255: At first blush, the result reached
Page 256 and 257: Chapter 17. Limitation of Remedies
Page 258 and 259: April and October, while almost not
Page 260 and 261: Pa. Super. 470, 473, 168 A.2d 750,
Page 262 and 263: California Civil Code § 1671. Vali
Page 266 and 267: In May, 1976, plaintiff LeVon Schle
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Page 270 and 271: 18.4. Suits against Manufacturers a
Page 272 and 273: Spanierman prepared an invoice that
Page 274 and 275: exception, the warranty explicitly
Page 276 and 277: state a specific time period, such
Page 278 and 279: opinions from other jurisdictions a
Page 280 and 281: and the tailor says, “I’m kind
Page 282 and 283: Section 9-406.” The problem is th
Page 284 and 285: elevant to this appeal. First, each
Page 286 and 287: its intellectual property and trade
Page 288 and 289: “[t]o reveal the intent necessary
Page 290 and 291: University of Michigan. At the same
Page 292 and 293: 20.3. Lease or Security Interest? S
Page 294 and 295: 2. You cannot cancel the lease duri
Page 296 and 297: lessee acquires ownership, and that
Page 298: Note that incidental damages under
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