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California UCC Sales and Leases

Use this book to stay current with Commercial Code issues and changes.

Use this book to stay current with Commercial Code issues and changes.

  • Sales contracts: terms, warranties, the battle of the forms
  • Seller's and buyer’s performance
  • Breakdown of the bargain
  • Assignment of rights and delegation of duties
  • Prelitigation and litigation remedies
  • Letters of credit
  • Bulk sales
  • Leasing of goods
  • Sales agreement and lease agreement checklists
  • Quick-reference summary of remedies for both buyer and seller
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Use this book to stay current with Commercial Code issues and changes.

  • Sales contracts: terms, warranties, the battle of the forms
  • Seller's and buyer’s performance
  • Breakdown of the bargain
  • Assignment of rights and delegation of duties
  • Prelitigation and litigation remedies
  • Letters of credit
  • Bulk sales
  • Leasing of goods
  • Sales agreement and lease agreement checklists
  • Quick-reference summary of remedies for both buyer and seller

1

Introduction and Key Principles

Wayne H. Thomas

  • I.  INTRODUCTION TO COMMERCIAL CODE  1.1
    • A.  Uniform Commercial Code  1.2
    • B.  Rules of Construction  1.3
  • II.  SCOPE OF DIVISION 2
    • A.  Application to Transactions in Goods  1.4
      • 1.  Definition of “Goods”  1.5
        • a.  Included Transactions  1.6
        • b.  Excluded Transactions  1.7
      • 2.  Future Goods  1.8
    • B.  Mixed Transactions
      • 1.  Transactions Involving Both Goods and Services: Predominant Feature Test  1.9
      • 2.  Transactions Involving Software  1.9A
      • 3.  Sales of Business Assets Including Goods and Non-Goods  1.10
    • C.  Particular Transactions
      • 1.  Leases  1.11
      • 2.  Franchises and Distributorships  1.12
      • 3.  Bailments  1.13
      • 4.  Installation, Service, and Repair Contracts  1.14
      • 5.  Consignment  1.14A
    • D.  Relation to Division 9  1.15
    • E.  Relation to Other Laws  1.16
      • 1.  Consumer Transactions  1.17
      • 2.  International Transactions  1.18
  • III.  KEY PRINCIPLES AND POLICIES OF DIVISION 2
    • A.  Contract Formation  1.19
    • B.  Variation by Agreement  1.20
    • C.  Good Faith  1.21
    • D.  Course of Performance, Course of Dealing, and Usage of Trade  1.22
    • E.  Passing of Title  1.23
    • F.  Merchants  1.24
  • IV.  OUTLINE OF DIVISION 2  1.25
  • V.  TABLE: TERMS USED IN DIVISION 2  1.26

2

Formation of Sales Contracts: Express Terms

Wayne H. Thomas

  • I.  SCOPE OF CHAPTER  2.1
  • II.  BASIC PRINCIPLES
    • A.  Ease of Contract Formation  2.2
    • B.  Open Terms  2.3
    • C.  Formation Issues  2.4
    • D.  Formation Problems Not Covered by Commercial Code  2.5
  • III.  THE OFFER
    • A.  What Constitutes an Offer?  2.6
      • 1.  Form: Quotation  2.7
      • 2.  Form: Noncontractual Intent  2.8
    • B.  Revocability and When “Firm”  2.9
      • 1.  Requirements of Firm Offer
        • a.  Offer Made by Merchant  2.10
        • b.  Assurance That Offer Will Be Held Open  2.11
        • c.  Signed Writing  2.12
      • 2.  Form Supplied by Offeree  2.13
      • 3.  Period of Irrevocability  2.14
      • 4.  Limited Effect of Com C §2205  2.15
      • 5.  Firm Offer to Contractor  2.16
    • C.  Drafting Considerations  2.17
      • 1.  Form: Revocable Offer  2.18
      • 2.  Form: Firm Offer for Specified Period  2.19
      • 3.  Form: Firm Offer Subject to Contingencies  2.20
      • 4.  Form: Firm Renewable Offer  2.21
      • 5.  Form: Firm Offer in Form Supplied by Offeree  2.22
      • 6.  Form: Firm Offer by Nonmerchant  2.23
  • IV.  ACCEPTANCE
    • A.  When No Means or Manner Specified  2.24
    • B.  Specifying Means or Manner of Acceptance  2.25
      • 1.  Form: Acceptance by Return of Form  2.26
      • 2.  Form: Acceptance by Performance  2.27
    • C.  Notices of Acceptance
      • 1.  Code Requirement of Reasonable Time  2.28
      • 2.  Effect of Performance Alone  2.29
      • 3.  Forms
        • a.  Form: Notice of Acceptance by Performance  2.30
        • b.  Form: Offeror’s Waiver of Notice of Acceptance  2.31
        • c.  Form: Notice That Offer Has Lapsed  2.32
    • D.  Withdrawal of Acceptance  2.33
    • E.  Failure in Transmission of Acceptance  2.34
    • F.  Form: Requirement of Notice of Acceptance by Given Date  2.35
    • G.  Prompt or Current Shipment: Acceptance by Promise or Performance
      • 1.  The Rule  2.36
      • 2.  Acceptance by Promise
        • a.  The Rule  2.37
        • b.  Form: Requirement of Acceptance by Promise to Ship  2.38
      • 3.  Acceptance by Performance
        • a.  The Rule  2.39
        • b.  Form: Requirement of Acceptance by Performance  2.40
      • 4.  What Is Prompt or Current?  2.41
    • H.  Acceptance by Shipping Nonconforming Goods
      • 1.  Meaning of “Nonconforming”  2.42
      • 2.  Shipment of Nonconforming Goods May Be Acceptance and Breach  2.43
      • 3.  Notifying Buyer That Goods Are Shipped for Accommodation  2.44
      • 4.  Buyer’s Options on Receipt of Nonconforming Goods  2.45
      • 5.  Precluding Accommodation Shipments  2.46
      • 6.  Forms
        • a.  Form: Precluding Accommodation Shipments  2.47
        • b.  Form: Requirement of Seasonable Notification of Acceptance or Accommodation  2.48
        • c.  Form: Notice of Intentional Accommodation Shipment  2.49
        • d.  Form: Notice of Unintentional Accommodation Shipment  2.50
  • V.  ELECTRONIC CONTRACTING
    • A.  ESIGN
      • 1.  Introduction  2.50A
      • 2.  Electronic Signatures  2.50B
      • 3.  Consumer Protection Features  2.50C
      • 4.  Electronic Record Retention  2.50D
    • B.  Uniform Electronic Transactions Act (UETA)
      • 1.  Overview  2.50E
      • 2.  Consent Under UETA  2.50F
    • C.  Shrink-Wrap, Click-Wrap, and Browse-Wrap License Agreements and the Commercial Code
      • 1.  Is Transaction Covered by Division 2?  2.50G
      • 2.  Enforceability If Transaction Is a Sale  2.50H
      • 3.  Commercial Code Express and Implied Warranties Applied to Software  2.50I
  • VI.  AUCTIONS
    • A.  Regulation
      • 1.  State Law  2.51
      • 2.  Bankruptcy Auction Sales  2.51A
    • B.  Separate Sales and Statute of Frauds  2.52
    • C.  Formation of Auction Contract
      • 1.  The Bid and Its Acceptance  2.53
      • 2.  Last-Minute Bid  2.54
    • D.  Auctions With and Without Reserve
      • 1.  Distinctions Between “With” and “Without” Reserve  2.55
      • 2.  Change in Nature of Auction Before Goods Are “Put Up”  2.56
      • 3.  Reasonable Time for Bid  2.57
    • E.  Bids by Seller  2.58
    • F.  Bidding Abuses  2.59
  • VII.  SALES AGREEMENT CHECKLIST  2.60

3

Warranties

Reid H. Everett

Thomas Ross

  • I.  INTRODUCTION
    • A.  Tort Law and Warranty Law  3.1
    • B.  Kinds of Warranties  3.2
    • C.  Consumer Warranty Legislation
      • 1.  Overview  3.3
      • 2.  California Law  3.4
      • 3.  Magnuson-Moss Warranty Act
        • a.  Scope  3.5
        • b.  Contents of Written Warranties  3.6
        • c.  Full and Limited Warranties  3.7
  • II.  EXPRESS WARRANTIES
    • A.  Made by Affirmation or Promise  3.8
      • 1.  Seller’s Intent to Warrant  3.9
      • 2.  Words of Warranty  3.10
      • 3.  Interpretation Issues  3.10A
      • 4.  Basis of Bargain; Buyer’s Reliance   3.11
      • 5.  Inspection of Goods  3.12
      • 6.  Distinguishing Warranty From Opinion  3.13
      • 7.  Seller Who Is Expert  3.14
      • 8.  Time of Warranting
        • a.  Warranties Made Before Sale  3.15
        • b.  Warranties Made After Sale  3.16
      • 9.  Duration of Warranty  3.17
      • 10.  Warranty by Remote Seller  3.18
    • B.  Description of Goods as Creating Express Warranty  3.19
    • C.  Sample or Model as Creating Express Warranty  3.20
  • III.  IMPLIED WARRANTIES
    • A.  Warranty of Merchantability
      • 1.  Described  3.21
      • 2.  Only Merchants Warrant Merchantability  3.22
      • 3.  Meaning of “Merchantable”
        • a.  Summary of Standard  3.23
        • b.  Pass Without Objection in the Trade and Be of Fair Average Quality  3.24
        • c.  Fit for Ordinary Purposes  3.25
        • d.  Be of Even Kind, Quantity, and Quality  3.26
        • e.  Adequately Contained, Packaged, and Labeled  3.27
        • f.  Conform to Representations on Container or Label  3.28
      • 4.  Sales of Food or Drink  3.29
      • 5.  Sales of Livestock  3.30
      • 6.  Sales of Secondhand Goods  3.31
      • 7.  Effect of Buyer’s Inspection of Goods  3.32
    • B.  Warranty of Fitness for Particular Purpose
      • 1.  Described  3.33
      • 2.  Who Warrants Fitness for Particular Purpose?  3.34
      • 3.  Elements of Warranty  3.35
        • a.  Seller’s Knowledge of Buyer’s Purpose  3.36
        • b.  Buyer’s Reliance on Seller’s Skill or Judgment  3.37
        • c.  Seller’s Knowledge of Buyer’s Reliance  3.38
        • d.  Seller’s Selecting or Furnishing of Goods  3.39
      • 4.  No “Trade Name” Limitation  3.40
    • C.  Other Implied Warranties From Course of Dealing or Usage of Trade  3.41
  • IV.  WARRANTY OF TITLE
    • A.  Accompanies Any Sale of Goods  3.42
    • B.  Breach of Warranty of Title  3.43
  • V.  WARRANTY AGAINST INFRINGEMENT
    • A.  Patent or Trademark Infringement  3.44
    • B.  Copyright Infringement  3.45
  • VI.  EXCLUSION OF WARRANTIES
    • A.  General Principles
      • 1.  Distinguished From Limiting Remedies  3.46
      • 2.  Strict Construction  3.47
      • 3.  Unconscionability  3.48
      • 4.  Postsale Disclaimers  3.49
    • B.  Disclaiming Express Warranties
      • 1.  Reconciling Warranty and Disclaimer  3.50
      • 2.  Significance of Parol Evidence Rule  3.51
      • 3.  Effect of Merger Clause  3.52
    • C.  Disclaiming Implied Warranties
      • 1.  Disclaiming Warranty of Merchantability  3.53
      • 2.  Conspicuousness Requirement  3.54
      • 3.  Disclaiming Warranty of Fitness  3.55
      • 4.  Disclaiming Implied Warranties by “As Is” and Similar Phrases  3.56
      • 5.  Excluding Warranties by Examination Before Sale  3.57
      • 6.  Excluding Warranties by Past Experience  3.58
      • 7.  Excluding Warranties by Providing Specifications  3.59
      • 8.  Excluding Implied Warranties in Sales of Consumer Goods  3.60
      • 9.  Excluding Implied Warranties in Sales of Pesticides  3.61
    • D.  Disclaimer Forms
      • 1.  Form: Merchantability and Particular Purpose Warranties Disclaimed  3.62
      • 2.  Form: Sale of Goods “As Is” and “With All Faults”  3.63
      • 3.  Form: Examination Made or Refused  3.64
    • E.  Disclaiming Warranty of Title
      • 1.  By Specific Language  3.65
      • 2.  Form: Warranty of Title Disclaimed  3.66
      • 3.  By Circumstances  3.67
    • F.  Disclaiming Warranty Against Infringement  3.68
    • G.  Form: Warranty Against Infringement Disclaimed  3.69
  • VII.  CUMULATION AND CONFLICT OF WARRANTIES
    • A.  Cumulation Favored  3.70
    • B.  Resolving Inconsistent Warranties  3.71
    • C.  Form: Description Displaces Sample  3.72
  • VIII.  NOTICES
    • A.  Notice of Breach of Warranty
      • 1.  Introduction  3.73
      • 2.  Importance of Tender of Delivery  3.74
      • 3.  Whom to Notify  3.75
      • 4.  When to Give Notice  3.76
      • 5.  Content of Notice  3.77
      • 6.  Additional Notice in Infringement Actions  3.78
      • 7.  Proof of Purchase Requirement  3.79
      • 8.  Form: Written Notice Required  3.80
      • 9.  Form: Notice of Breach of Warranty  3.81
      • 10.  Form: Notice of Infringement Suit  3.82
    • B.  Vouching In
      • 1.  Background and Rule  3.83
      • 2.  Vouching In and Notice of Breach of Warranty  3.84
      • 3.  Effect of Judgment If Manufacturer Refuses to Defend  3.85
      • 4.  Infringement Actions and Vouching In  3.86
      • 5.  Form: Notice of Litigation; Requesting Defense  3.87
      • 6.  Form: Demand for Control of Infringement Action  3.88
  • IX.  REMEDIES FOR BREACH OF WARRANTY
    • A.  Overview  3.89
    • B.  Consumer Warranty Legislation
      • 1.  Song-Beverly Consumer Warranty Act  3.90
      • 2.  Magnuson-Moss Warranty Act  3.91
    • C.  Limitation of Remedies
      • 1.  Remedy Limitation Provisions Distinguished From Disclaimers and Warranties  3.92
      • 2.  Cumulative or Exclusive Remedies  3.93
      • 3.  Repair or Replacement Provisions and Failure of Essential Purpose  3.94
      • 4.  Form: Remedy Limitation  3.95
      • 5.  Strict Construction of Limitation Provisions  3.96
      • 6.  Conspicuousness  3.97
      • 7.  Remedy Limitations and Consumer Warranty Legislation  3.98
  • X.  STATUTE OF LIMITATIONS
    • A.  Applicable Limitations Period
      • 1.  Overview  3.99
      • 2.  Exceptions to Applicability of Commercial Code Limitations Period  3.100
      • 3.  Conflict of Law; Variations in Limitation Periods  3.101
    • B.  Accrual and Tolling
      • 1.  General Rule  3.102
      • 2.  Future Performance  3.103
      • 3.  Breach of Warranty Against Infringement  3.104
  • XI.  PLEADINGS AND JURY INSTRUCTIONS
    • A.  Allegations in Complaints
      • 1.  Summary  3.105
      • 2.  Form: Allegation of Express Warranty by Affirmation  3.106
      • 3.  Form: Allegation of Express Warranty by Description  3.107
      • 4.  Form: Allegation of Express Warranty by Sample or Model  3.108
      • 5.  Form: Allegation of Implied Warranty of Merchantability  3.109
      • 6.  Form: Allegation of Implied Warranty of Fitness for Particular Purpose  3.110
      • 7.  Form: Allegation of Noncompliance With Warranty  3.111
      • 8.  Form: Allegation of Notice of Breach  3.112
      • 9.  Form: Allegation That Notice of Litigation Was Given  3.113
      • 10.  Form: Allegation of Warranty of Title  3.114
      • 11.  Form: Allegation of Lack of Title  3.115
      • 12.  Form: Allegation of Disturbance of Quiet Possession  3.116
      • 13.  Form: Allegation of Damages  3.117
      • 14.  Form: Allegation of Incidental and Consequential Damages  3.118
    • B.  Allegations in Answers; Defenses
      • 1.  Introduction  3.119
      • 2.  Form: Allegation of Exclusion or Disclaimer  3.120
      • 3.  Lack of Privity  3.121
      • 4.  Form: Allegation of Lack of Privity  3.122
      • 5.  Form: Allegation of Examination or Refusal to Examine  3.123
      • 6.  Form: Allegation of Exclusion or Modification by Past Experience  3.124
    • C.  Jury Instructions  3.125
  • XII.  SAMPLE WARRANTY FORM  3.126

4

Formation of Sales Contracts: Open or Indefinite Terms

Barbara L. Borden

  • I.  INTRODUCTION; SCOPE OF CHAPTER  4.1
  • II.  OPEN TERM PROVISIONS
    • A.  Effect of Indefiniteness on Sales Contract  4.2
    • B.  Open Price Contracts
      • 1.  Overview  4.3
      • 2.  Contracts Silent About Price  4.4
      • 3.  Contracts Leaving Price to Be Agreed
        • a.  Agreements to Agree  4.5
        • b.  Form: Agreement to Agree on Price  4.6
        • c.  Form: Agreement to Agree (Maximum and Minimum Price)  4.7
      • 4.  Independent Price-Fixing Standards
        • a.  Permissible Price  4.8
        • b.  Form: Open Price Tied to Market Price  4.9
        • c.  Form: Price Keyed to Published Index  4.10
        • d.  Form: Price Adjusted to Seller’s Competitors’ Prices  4.11
        • e.  Form: Appraiser or Arbitrator to Set Price  4.12
      • 5.  Price Set by Seller or Buyer
        • a.  Good Faith Requirement  4.13
        • b.  Form: Same Price as Given Others  4.14
        • c.  Form: Price Fixed in Bad Faith  4.15
        • d.  Price Dependent on Cost  4.16
        • e.  Form: Price Dependent on Resale  4.17
        • f.  Form: Price Set at Discretion of Contract Party  4.18
        • g.  Form: Price Increased at Discretion of Seller  4.19
      • 6.  Form: No Sale If Price Not Set  4.20
    • C.  Open Quantity
      • 1.  Introduction  4.21
      • 2.  Requirements Contracts
        • a.  Overview  4.22
        • b.  Validity of Requirements Contracts  4.23
        • c.  Changes in Requirements  4.24
          • (1)  Actual Good Faith Requirements  4.25
            • (a)  Increased Requirements  4.26
            • (b)  Decreased and Disappearing Requirements  4.27
          • (2)  “Unreasonably Disproportionate” Limitation  4.28
          • (3)  Basis of Comparison in Contracts Without Stated Estimates  4.29
          • (4)  Stated Maximum or Minimum and Other Limitations  4.30
        • d.  Breach  4.31
        • e.  Requirements Contract Provisions
          • (1)  Form: Description of Requirements  4.32
          • (2)  Form: Recital for New Business  4.33
          • (3)  Form: Stated Estimate  4.34
          • (4)  Form: Maximum Quantity  4.35
          • (5)  Form: Variable Maximum Quantity  4.36
          • (6)  Form: Variable Minimum Quantity  4.37
          • (7)  Other Provisions  4.38
      • 3.  Output Contracts
        • a.  Overview  4.39
        • b.  Validity  4.40
        • c.  Actual Good Faith Output; Decreasing and Disappearing Output  4.41
        • d.  Unreasonably Disproportionate Output  4.42
        • e.  Breach  4.43
        • f.  Output Contract Provisions
          • (1)  Overview  4.44
          • (2)  Form: Description of Output Subject to Contract  4.45
          • (3)  Form: Maximum Quantity  4.46
          • (4)  Form: Minimum Quantity  4.47
      • 4.  Exclusive Dealing
        • a.  Overview  4.48
        • b.  Validity
          • (1)  Antitrust Considerations  4.49
          • (2)  Mutuality of Obligation  4.50
        • c.  Performance: Best Efforts and Good Faith  4.51
        • d.  Contract Provisions
          • (1)  Form: Definition of “Best Efforts” (Buyer’s and Seller’s Protection)  4.52
          • (2)  Exclusive Dealing Distinguished From Requirements and Output Contracts  4.53
          • (3)  Form: Nonexclusive Supply by Seller  4.54
        • e.  Other Drafting Issues  4.55
    • D.  Open Delivery Terms
      • 1.  Number of Deliveries  4.56
      • 2.  Forms
        • a.  Form: Single Delivery  4.57
        • b.  Form: Delivery in Lots  4.58
      • 3.  Place of Delivery
        • a.  Applicable Rules  4.59
        • b.  Forms
          • (1)  Form: Place of Delivery  4.60
          • (2)  Form: Delivery of Goods in Possession of Third Party  4.61
      • 4.  Time for Delivery or Related Performance
        • a.  Applicable Rules  4.62
          • (1)  Reasonable Notification of Proposed Time Limit  4.63
          • (2)  Failure to Reply as Acquiescence  4.64
          • (3)  Tacit Extension of Time; Abandonment  4.65
          • (4)  Unreasonably Early Offer or Demand  4.66
          • (5)  Establishing Breach  4.67
        • b.  Contract Provisions
          • (1)  Form: Time for Delivery  4.68
          • (2)  Form: Notification of Proposed Time Limit  4.69
          • (3)  Form: Objection to Proposed Time Limit; Counterproposal  4.70
    • E.  Open Payment
      • 1.  Delivery Not by Documents  4.71
      • 2.  Delivery by Documents of Title  4.72
      • 3.  Shipments Under Reservation  4.73
      • 4.  Delivery in Lots  4.74
      • 5.  Agreement About Other Payment Terms  4.75
      • 6.  Payment on Credit  4.76
      • 7.  Forms
        • a.  Form: Time for Payment  4.77
        • b.  Form: Right of Inspection Reserved by Buyer  4.78
    • F.  Open Duration
      • 1.  Contract Valid for Reasonable Time  4.79
      • 2.  Form: Duration of Contract  4.80
      • 3.  Power to Terminate  4.81
      • 4.  Form: Power to Terminate  4.82
      • 5.  Notice of Termination  4.83
      • 6.  Automatic Termination on Occurrence of Agreed Event  4.84
      • 7.  Form: Automatic Termination  4.85
    • G.  Particulars of Performance Left to One Party
      • 1.  Overview  4.86
      • 2.  Quantity  4.87
      • 3.  Assortment  4.88
      • 4.  Shipping Arrangements  4.89
      • 5.  Failure to Specify Particulars or to Cooperate  4.90
        • a.  Responses to Noncooperating Party  4.91
        • b.  Exception for Commercial Impracticability  4.92
      • 6.  Form: Procedure for Specification of Particulars of Contract Provisions  4.93
  • III.  COURSE OF PERFORMANCE, COURSE OF DEALING, AND USAGE OF TRADE
    • A.  General Principles  4.94
    • B.  Course of Performance
      • 1.  Effect on Contract  4.95
      • 2.  Forms
        • a.  Form: Exclusion of Course of Performance  4.96
        • b.  Form: Sample Seller’s Notice of Objection to Buyer’s Course of Performance  4.97
    • C.  Course of Dealing
      • 1.  Effect on Contract  4.98
      • 2.  Form: Incorporation or Exclusion of Course of Dealing  4.99
    • D.  Usage of Trade
      • 1.  Effect on Contract  4.100
      • 2.  Scope of Application  4.101
      • 3.  Contract Provisions
        • a.  Form: Usages of Trade Expressly Incorporated by Reference  4.102
        • b.  Form: Usage of Trade Excluded or Limited  4.103
      • 4.  Priority of Sources for Unexpressed Terms  4.104

5

Battle of the Forms

David V. Otterson

  • I.  CHANGING TERMS IN ACCEPTANCE OR CONFIRMATION OF OFFER  5.1
  • II.  CONTRACT FORMATION WHEN OFFER AND ACCEPTANCE VARY  5.2
    • A.  Does a Contract Exist?  5.3
    • B.  Offeree Does Not Condition Acceptance on Assent to Offeree’s Terms
      • 1.  Statutory Requirements: Definite and Seasonable Expression  5.4
      • 2.  Form of Expression of Acceptance  5.5
      • 3.  Statute of Frauds Requirements  5.6
      • 4.  Specifying Acceptable Form of Expression of Acceptance  5.7
    • C.  Offeree Conditions Acceptance on Assent to Offeree’s Terms  5.8
      • 1.  Form: Acceptance Conditional on Assent to Changes  5.9
      • 2.  Offeror’s Assent to Offeree’s Terms  5.10
  • III.  TERMS OF CONTRACTS FORMED BY VARYING OFFER AND ACCEPTANCE  5.11
    • A.  Contracts Not Between Merchants  5.12
    • B.  Contracts Between Merchants  5.13
      • 1.  Limiting Acceptance to Terms of Offer
        • a.  The Rule  5.14
        • b.  Form: Acceptance Expressly Limited to Offer’s Terms  5.15
      • 2.  Material Alterations  5.16
        • a.  Terms That Materially Alter  5.17
        • b.  Terms That Do Not Materially Alter  5.18
      • 3.  Notification of Objection to Offeree’s Terms  5.19
        • a.  Previous Notification of Objection  5.20
        • b.  Notification After Learning of Offeree’s Terms  5.21
        • c.  Form: Objection to All Proposed Terms  5.22
        • d.  Form: Objection to Only Some Proposed Terms  5.23
  • IV.  TERMS OF CONTRACTS FORMED BY CONDUCT  5.24
  • V.  APPLICATION OF COMMERCIAL CODE PRINCIPLES TO NON-GOODS SITUATIONS  5.25

6

Modification, Rescission, and Waiver

David V. Otterson

  • I.  CHANGING TERMS IN CONTRACT  6.1
  • II.  MODIFICATION OF SALES CONTRACTS
    • A.  Requirements for Effective Modification  6.2
      • 1.  Good Faith  6.3
      • 2.  Application of Statute of Frauds  6.4
      • 3.  “No-Oral-Modification” Clause  6.5
    • B.  Modification Forms
      • 1.  Form: Prohibition of Oral Modification or Rescission  6.6
      • 2.  Form: Modification Increasing Contract Price  6.7
    • C.  Objections to Modification  6.8
  • III.  RESCISSION
    • A.  Definitions and Distinctions  6.9
    • B.  Requirements of Rescission  6.10
    • C.  Form: Rescission of Written Contract  6.11
  • IV.  WAIVER
    • A.  Requirements for Effective Waiver  6.12
    • B.  Contractual Clauses Limiting Waiver  6.13
      • 1.  Form: Prohibition of Oral Waiver  6.14
      • 2.  Form: Limitation on Application of Waiver  6.15
      • 3.  Form: Express Waiver  6.16
    • C.  Waiver Resulting From Ineffective Modification or Rescission  6.17
    • D.  Waiver by Conduct  6.18
    • E.  Retraction of Waiver
      • 1.  Ability to Retract Waiver  6.19
      • 2.  Reasonable Notification Received  6.20
      • 3.  Retraction Forbidden Because Unjust  6.21
      • 4.  Form: Retraction of Waiver Allowing Substitution of Goods  6.22

7

Statute of Frauds and Parol Evidence Rule

Marcia B. Wilbur

  • I.  STATUTE OF FRAUDS
    • A.  Introduction
      • 1.  Overview; Purpose  7.1
      • 2.  Parol Evidence Rule Distinguished  7.2
      • 3.  Criticism of Statute  7.3
      • 4.  International Sales  7.4
    • B.  Transactions Within Statute
      • 1.  Contract for Sale of Goods
        • a.  Contract for Sale  7.5
        • b.  Goods  7.6
        • c.  Price of $500 or More  7.7
      • 2.  Sale or Return Transaction  7.8
      • 3.  Contract Modifications  7.9
    • C.  Requirement of Writing
      • 1.  Form of Writing  7.10
      • 2.  Contents of Writing
        • a.  Minimum Terms  7.11
        • b.  Quantity Term  7.12
        • c.  Incorrect Statement of Terms  7.13
      • 3.  Signature
        • a.  Manner  7.14
        • b.  Agent’s Signature; Equal Dignities Rule  7.15
    • D.  Effect of Compliance or Noncompliance With Statute of Frauds  7.16
    • E.  Exceptions to Statute
      • 1.  Merchant’s Failure to Object to Written Confirmation
        • a.  Requirements Applicable to Confirmation  7.17
        • b.  Notice of Objection  7.18
      • 2.  Specially Manufactured Goods  7.19
      • 3.  Goods Paid for or Received
        • a.  All Goods Received and Accepted  7.20
        • b.  Entire Price Paid and Accepted  7.21
        • c.  Limited Effect of Partial Performance  7.22
        • d.  Partial Acceptance of Commercial Unit  7.23
        • e.  Allocation of Goods to Partial Payment  7.24
        • f.  Installment and Dealership Contracts  7.25
      • 4.  Admissions in Court  7.26
      • 5.  Estoppel and Waiver  7.27
    • F.  Other Statutes of Frauds
      • 1.  Commercial Code
        • a.  Sale of Personal Property Not Goods [Deleted]  7.28
        • b.  Grant of Security Interest in Goods  7.29
        • c.  Sale of Investment Securities  7.30
      • 2.  Civil Code  7.31
  • II.  PAROL EVIDENCE RULE
    • A.  Introduction  7.32
    • B.  Applicability
      • 1.  Overview  7.33
      • 2.  Limited to Evidence Affecting Terms in Final Writing
        • a.  Terms  7.34
        • b.  Writing  7.35
        • c.  Final Expression  7.36
      • 3.  Exceptions to Parol Evidence Rule  7.37
    • C.  Inadmissibility of Evidence of Contradictory Terms
      • 1.  Overview  7.38
      • 2.  Sale or Return Contracts  7.39
      • 3.  Admissibility When Contract Is Silent  7.40
    • D.  Admissibility of Evidence to Explain Meaning of Terms
      • 1.  Overview  7.41
      • 2.  Admissibility of Course of Performance, Course of Dealing, and Usage of Trade to Explain Express Terms  7.42
      • 3.  Admissibility to Explain Terms Defined by Commercial Code  7.43
    • E.  Admissibility of Evidence to Supplement Terms of Writing
      • 1.  Overview  7.44
      • 2.  Admissibility of Consistent Terms
        • a.  Consistency  7.45
        • b.  Examples  7.46
      • 3.  Inadmissibility When Agreement Is Complete and Exclusive
        • a.  Generally  7.47
        • b.  Inapplicability to Course of Performance, Course of Dealing, and Usage of Trade  7.48
        • c.  Merger Clauses  7.49
        • d.  Special Problems With Warranty Disclaimers  7.50
    • F.  Litigation
      • 1.  Checklist for Introduction of Evidence  7.51
      • 2.  Burden of Proof  7.52
      • 3.  Failure to Object at Trial  7.53
    • G.  Form: Merger Clauses  7.54

8

Title and Identification

Hon. Whitney Rimel

  • I.  SCOPE OF CHAPTER; APPLICABILITY OF RULES  8.1
  • II.  TITLE
    • A.  Overview of Rules for Passage of Title  8.2
    • B.  Delivery Requiring Movement of Goods  8.3
      • 1.  Shipment Contracts
        • a.  Title Passage on Shipment  8.4
        • b.  Seller’s Duties Under Shipment Contract  8.5
        • c.  F.O.B. Place of Shipment  8.6
        • d.  F.O.B. Carrier  8.7
        • e.  F.A.S. Vessel  8.8
        • f.  C.I.F. and C. & F.  8.9
      • 2.  Destination Contracts
        • a.  Title Passage on Tender  8.10
        • b.  F.O.B. Destination  8.11
        • c.  Ex Ship  8.12
        • d.  No Arrival, No Sale  8.13
    • C.  Delivery Without Movement of Goods
      • 1.  General Rules  8.14
      • 2.  Delivery With Documents of Title  8.15
      • 3.  Delivery Without Documents of Title  8.16
    • D.  Auction Sale  8.17
    • E.  Rejection of Goods or Revocation of Acceptance
      • 1.  Revesting Title in Seller  8.18
      • 2.  Effect of Nonconformity on Passage of Title  8.19
    • F.  Other Code Sections Dealing With Passage of Title  8.20
    • G.  Seller’s Security Interest and Title
      • 1.  Effect of Reservation of Title  8.21
      • 2.  Form: Reservation of Title  8.22
      • 3.  Perfection of Security Interest Not Necessary  8.23
      • 4.  Purchase Money Security Interest  8.24
    • H.  Control of Title for Nonsales Purposes  8.25
  • III.  COMPARISON OF TITLE AND RISK OF LOSS
    • A.  Table: Passage of Title and Passage of Risk of Loss  8.26
    • B.  Table: Effect of Breach on Title and Risk of Loss  8.27
  • IV.  IDENTIFICATION
    • A.  Overview  8.28
    • B.  Rules Governing Identification  8.29
    • C.  Insurable Interests of Buyer and Seller  8.30
    • D.  Buyer’s “Special Property”  8.31

9

Seller’s Performance

Henry S. David

Erich P. Wise

  • I.  APPLICABLE LAW  9.1
  • II.  OBLIGATIONS OF PARTIES  9.2
  • III.  DUTY TO SHIP
    • A.  Shipment and Destination Contracts
      • 1.  Definitions and Distinctions  9.3
      • 2.  Effect of Freight or C.O.D. Term  9.4
    • B.  Seller’s Obligation Under Shipment Contract
      • 1.  Introduction  9.5
      • 2.  Proper Contract of Carriage  9.6
      • 3.  Delivery of Documents  9.7
      • 4.  Notice of Shipment  9.8
      • 5.  Effect of Failure to Ship Properly  9.9
    • C.  Shipments Under Reservation
      • 1.  Seller’s Security Interest  9.10
      • 2.  Order Bills of Lading  9.11
      • 3.  Nonnegotiable Bills of Lading and C.O.D.  9.12
      • 4.  Documentary Sales and Buyer’s Inspection  9.13
      • 5.  Unauthorized Reservation Shipments  9.14
    • D.  Mercantile Shipment Terms
      • 1.  Introduction  9.15
      • 2.  Table: Allocation of Responsibilities Under Mercantile Shipment Terms  9.16
      • 3.  F.O.B.
        • a.  Price Term and Delivery Term  9.17
        • b.  F.O.B. Place of Shipment  9.18
        • c.  F.O.B. Place of Destination  9.19
        • d.  F.O.B. Carrier  9.20
        • e.  F.O.B. Vessel
          • (1)  Duties of Seller and Buyer  9.21
          • (2)  Form and Number of Bills of Lading  9.22
        • f.  F.O.B. Intermediate Point  9.23
        • g.  Matters Not Covered by F.O.B. Term  9.24
      • 4.  F.A.S. Vessel  9.25
      • 5.  C.I.F.
        • a.  Meaning of Term  9.26
        • b.  Expense and Risk of Loss  9.27
        • c.  Obtaining Bill of Lading  9.28
        • d.  Payment or Provision for Freight  9.29
        • e.  Procurement of Insurance
          • (1)  Kind, Amount, and Beneficiary  9.30
          • (2)  Risks Required to Be Covered  9.31
          • (3)  Insuring Freight Charges  9.32
          • (4)  Consequences of Failure to Insure  9.33
        • f.  Importance of Commercial Invoice  9.34
        • g.  Procurement and Forwarding of Documents  9.35
        • h.  Payment of Various Charges  9.36
      • 6.  C.F. & I., C. & F., C.F., and C.A.F.  9.37
      • 7.  Other C.I.F. Variants  9.38
      • 8.  Ex Ship or D.E.S.  9.39
      • 9.  Ex Factory and Similar Terms  9.40
      • 10.  No Arrival, No Sale
        • a.  In General  9.41
        • b.  To Arrive  9.42
        • c.  Incompatibility With C.I.F. Term  9.43
  • IV.  TENDER OF DELIVERY
    • A.  Introduction  9.44
    • B.  Manner of Tender
      • 1.  General Rule  9.45
      • 2.  Delivery Without Movement of Goods Held by Third Party  9.46
      • 3.  Interparty Delivery Without Movement of Goods  9.47
      • 4.  Delivery Under Destination Contract  9.48
    • C.  Effect of Proper Tender  9.49
    • D.  Excuse of Tender  9.50
  • V.  “PERFECT TENDER” REQUIREMENT
    • A.  “Perfect Tender” Rule  9.51
    • B.  Exceptions to “Perfect Tender” Rule  9.52
      • 1.  Installment Contracts: Substantial Performance
        • a.  Introduction  9.53
        • b.  Definition of Installment Contract  9.54
        • c.  Buyer’s Grounds for Canceling Whole Contract  9.55
        • d.  Rejection of Installment  9.56
        • e.  Meaning of Substantial Impairment  9.57
        • f.  Reinstatement  9.58
      • 2.  Other Sales Contracts
        • a.  Contractual Limitation of Buyer’s Remedy  9.59
        • b.  Buyer’s Good Faith  9.60
        • c.  Buyer’s Right to Revoke Acceptance  9.61
        • d.  Cure by Seller  9.62
          • (1)  Cure Within Contract Period  9.63
          • (2)  Surprise and Unfair Rejection
            • (a)  Right to Cure  9.64
            • (b)  Time to Cure  9.65
            • (c)  Eliminating Right to Cure by Contract  9.66
          • (3)  Manner of Cure  9.67
        • e.  Material Loss or Delay From Shipping Arrangements  9.68
        • f.  Substitute Delivery  9.69
        • g.  Federal Exception for Perishable Agricultural Commodities  9.70
  • VI.  DOCUMENTARY TRANSACTIONS
    • A.  Tender and Delivery of Documents  9.71
    • B.  “Perfect Tender”
      • 1.  General Rule  9.72
      • 2.  Applicability of Commercial Code Exceptions
        • a.  Installment Contracts  9.73
        • b.  Right to Revoke Acceptance  9.74
        • c.  Cure  9.75
        • d.  Nonconformity in Shipping Documents  9.76
        • e.  Substitute Delivery  9.77

10

Buyer’s Performance

James F. Brown

Mark J. Coleman

  • I.  BUYER’S DUTY  10.1
  • II.  RECEIPT  10.2
  • III.  INSPECTION  10.3
    • A.  Right to Inspect  10.4
    • B.  Time to Inspect
      • 1.  When Right Arises  10.5
      • 2.  Duration of Right  10.6
      • 3.  Hour of Inspection  10.7
      • 4.  Effect of Payment, Acceptance, or Rejection on Right to Inspect  10.8
    • C.  Place and Manner of Inspection
      • 1.  Reasonable Place and Manner of Inspection  10.9
      • 2.  Exclusive Place or Manner of Inspection  10.10
      • 3.  Form: Place or Manner of Inspection  10.11
    • D.  Expenses of Inspection  10.12
    • E.  Inspection in C.O.D. and Documentary Transactions
      • 1.  General Rule  10.13
      • 2.  Exceptions Permitting Inspection Before Payment  10.14
      • 3.  Inspection Under Certain C.I.F. Contracts  10.15
    • F.  Inspection in Special Situations  10.16
      • 1.  Casualty to Identified Goods  10.17
      • 2.  Inspection to Preserve Evidence of Goods in Dispute  10.18
  • IV.  ACCEPTANCE  10.19
    • A.  Whole or Partial Acceptance  10.20
    • B.  What Constitutes Acceptance?
      • 1.  Basic Rule  10.21
        • a.  Acceptance by Affirmative Action  10.22
        • b.  Acceptance by Inaction  10.23
        • c.  Acceptance by Acts Inconsistent With Seller’s Ownership  10.24
      • 2.  Sale on Approval and Sale or Return Contracts
        • a.  Sale on Approval  10.25
          • (1)  Form: Contract Provision Requiring Notification of Return  10.26
          • (2)  Form: Notice of Election to Return Goods  10.27
        • b.  Sale or Return Contracts  10.28
      • 3.  Effect of Acceptance
        • a.  Effect of Acceptance on Payment Obligation  10.29
        • b.  Effect of Acceptance on Right to Reject Goods  10.30
        • c.  Effect of Acceptance on Right to Damages  10.31
      • 4.  Revocation of Acceptance
        • a.  Grounds for Revocation of Acceptance  10.32
        • b.  Time Limit for Revocation of Acceptance  10.33
        • c.  Effect of Revocation of Acceptance  10.34
  • V.  REJECTION
    • A.  Buyer’s Right to Reject
      • 1.  Time and Manner of Rejection  10.35
      • 2.  Form: Time and Manner of Rejection  10.36
    • B.  Eliminating Right to Reject by Contract  10.37
    • C.  Specification of Defects  10.38
      • 1.  Curable Defects  10.39
      • 2.  Seller’s Demand for Specification  10.40
      • 3.  Unstated Defects in Documentary Transactions  10.41
      • 4.  Form: Statement of Defects  10.42
      • 5.  Form: Request for Full and Final Statement of Defects  10.43
    • D.  Buyer’s Rights and Duties After Rejection
      • 1.  Introduction  10.44
      • 2.  Security Interest for Expenditures  10.45
      • 3.  Buyer’s Duty to Hold Goods  10.46
      • 4.  Disposition of Goods by Merchant Buyer  10.47
    • E.  Salvage  10.48
    • F.  Right to Use Goods After Rejection  10.49
      • 1.  Title After Rejection  10.50
      • 2.  Sale on Approval and Sale or Return Contracts  10.51
  • VI.  PAYMENT  10.52
    • A.  Tender of Payment
      • 1.  Tender of Payment as Condition to Seller’s Obligations  10.53
      • 2.  Manner of Tendering Payment  10.54
      • 3.  Agreement on Method of Payment  10.55
    • B.  Payment Before Inspection
      • 1.  When Required  10.56
      • 2.  Effect on Buyer’s Right to Inspect  10.57
      • 3.  Refusal to Pay for Obviously Nonconforming Goods  10.58
    • C.  Payment by Various Means
      • 1.  Payment by Check
        • a.  Sufficiency of Tender  10.59
        • b.  Payment by Subsequently Dishonored Check  10.60
      • 2.  Payment by Letter of Credit  10.61
      • 3.  Payment by Credit Card  10.62
      • 4.  Barter Transactions  10.63
      • 5.  Payment in Realty  10.64
      • 6.  Payment in Foreign Currency  10.65
      • 7.  Failure of Means of Payment Because of Government Regulation  10.66
    • D.  Effect of Payment and Nonpayment
      • 1.  Effect on Rights in Goods  10.67
      • 2.  Effect on Seller’s Performance  10.68
      • 3.  Effect on Buyer’s Remedies  10.69
    • E.  Payment Under Installment Contracts
      • 1.  Defaulted Payments  10.70
      • 2.  Late Payments  10.71

11

Assignment of Rights and Delegation of Duties

David V. Otterson

  • I.  DEFINITIONS AND DISTINCTIONS
    • A.  Assignment and Delegation  11.1
    • B.  Financing Assignments Governed by Division 9  11.2
    • C.  Novation  11.3
    • D.  Limited Scope of Com C §2210  11.4
  • II.  ASSIGNMENT OF RIGHTS
    • A.  Principles of Assignment  11.5
    • B.  Scope of Assignment  11.6
      • 1.  Form: Assignment of Rights Excluding Delegation of Duties  11.7
      • 2.  Form: Consent to Assignment of Rights  11.8
    • C.  Effect of Assignment on Parties  11.9
    • D.  Assignment Prohibited by Parties’ Mutual Agreement
      • 1.  Narrow Construction of Contractual Prohibition  11.10
      • 2.  Limitation on Power to Restrict Assignment  11.11
      • 3.  Form: Prohibition of Assignment of Rights  11.12
      • 4.  Form: Assignment Expressly Permitted  11.13
    • E.  Assignment Prohibited Due to Adverse Effect on Nonassigning Party  11.14
    • F.  Waiver of Prohibition on Assignment  11.15
  • III.  DELEGATION OF DUTIES
    • A.  Principles of Delegation  11.16
    • B.  Delegation Implied by Assignment  11.17
    • C.  Form: Express Delegation of Performance  11.18
    • D.  Effect of Delegation  11.19
      • 1.  Between Nondelegating Party and Assignee  11.20
      • 2.  Between Nondelegating Party and Assignor  11.21
      • 3.  Between Assignor and Assignee  11.22
    • E.  Delegation Prohibited by Parties’ Mutual Agreement  11.23
      • 1.  Form: Prohibition of Delegation of Duties  11.24
      • 2.  Form: Delegation Expressly Permitted  11.25
    • F.  Delegation Prohibited by Commercial Code  11.26
    • G.  Waiver of Prohibition Against Delegation  11.27

12

Rights of Third Parties

Helen Milowe

  • I.  SCOPE OF CHAPTER  12.1
  • II.  BUYERS AND THIRD PARTIES
    • A.  Rules Concerning Buyers’ Rights  12.2
      • 1.  When Good Title Is Obtained From Seller  12.3
        • a.  Void Title for Stolen Goods  12.4
        • b.  Good Title Requires Voluntary Transfer by Owner  12.5
      • 2.  Seller With Voidable Title  12.6
        • a.  Seller Deceived About Transferee’s Identity  12.7
        • b.  Delivery in Exchange for Dishonored Check  12.8
        • c.  Cash Sale  12.9
        • d.  Delivery Procured by Fraud  12.10
      • 3.  Goods Entrusted to Merchant  12.11
        • a.  Definition of Entrusting  12.12
        • b.  Entrusting Must Be for Sale Purposes  12.13
        • c.  Party to Whom Goods Are Entrusted Must Be Merchant  12.14
      • 4.  Seller With Apparent Ownership or Authority to Sell  12.15
    • B.  Good Faith Purchaser for Value  12.16
      • 1.  Good Faith  12.17
      • 2.  Purchaser  12.18
      • 3.  For Value  12.19
    • C.  Buyer in Ordinary Course of Business  12.20
      • 1.  Definition of “Buyer in Ordinary Course”  12.21
        • a.  Good Faith Buyer  12.22
        • b.  Sale in Ordinary Course of Business  12.23
        • c.  Merchant Seller  12.24
        • d.  New Value Given  12.25
      • 2.  When “Buyer in Ordinary Course” Status Attaches  12.26
      • 3.  Transactions Under PACA  12.26A
    • D.  Rights of Buyers in Bulk Transfers  12.27
  • III.  RIGHTS OF SELLER’S CREDITORS
    • A.  Creditors’ Rights Against Buyers  12.28
    • B.  Retention of Possession by Seller  12.29
      • 1.  Fraudulent Retention Rule/Conveyance Without Delivery  12.30
        • a.  Immediate Delivery  12.31
        • b.  Actual and Continued Change of Possession  12.32
      • 2.  Exceptions to Fraudulent Retention Rule
        • a.  Retention by Merchant in Current Course of Trade  12.33
        • b.  Filing and Publication  12.34
        • c.  Sale-Leaseback by Seller  12.35
        • d.  Other Exceptions to Fraudulent Retention Rule  12.36
    • C.  Voidable Transfers of Goods  12.37
      • 1.  Definition of Voidable Transfer  12.38
      • 2.  Remedies of Creditors  12.39
        • a.  Attachment  12.40
        • b.  Execution  12.41
        • c.  Assignment  12.42
      • 3.  Rights of Transferees  12.43
        • a.  Good Faith Transferees  12.44
        • b.  Amount of Judgment Limited  12.45
        • c.  Other Rights Retained by Good Faith Transferees  12.46
      • 4.  Statute of Limitations  12.46A
    • D.  Insolvent Seller  12.47
      • 1.  Secured Creditors  12.48
      • 2.  Trustee in Bankruptcy  12.49
        • a.  Avoidable Preferences  12.50
        • b.  Nonpreferential Transfers  12.51
  • IV.  RIGHTS OF BUYER’S CREDITORS
    • A.  Creditors’ Rights Against Sellers  12.52
    • B.  Sale on Approval and Sale or Return Contracts  12.53
      • 1.  Sale on Approval  12.54
      • 2.  Sale or Return  12.55
    • C.  Consignment Contracts  12.56
      • 1.  Definition of Consignment  12.57
        • a.  Goods Must Be Delivered for Sale  12.58
        • b.  Delivery of Goods Not Consignment If Merchant Not Generally Known to Sell Goods of Others  12.59
        • c.  Consumer Goods Excluded  12.60
      • 2.  Protecting Consignor’s Interest in Consigned Goods By Filing and Sending Notification  12.61
        • a.  Effect of Financing Statement  12.62
        • b.  Requirements for Authenticated Notification  12.63
      • 3.  Consignor’s Rights in Consignee’s Bankruptcy  12.64
        • a.  Effect of Automatic Stay  12.65
        • b.  Avoidance of Consignor’s Interest  12.66
    • D.  Seller’s Right to Reclaim Goods From Insolvent Buyer  12.67
  • V.  RIGHTS OF FINANCING AGENCY OR PERSON IN POSITION OF SELLER
    • A.  Financing Agency  12.68
      • 1.  Definition of “Financing Agency”  12.69
      • 2.  Rights With Respect to Goods  12.70
      • 3.  Contractual Rights  12.71
    • B.  Person in Position of Seller  12.72

13

Letters of Credit

Neil B. Martin

  • I.  USES OF LETTERS OF CREDIT GENERALLY
    • A.  Introduction  13.1
    • B.  General Characteristics and Requirements  13.2
    • C.  Terminology  13.3
  • II.  APPLICABLE LAW
    • A.  Uniform Customs  13.4
    • B.  Commercial Code
      • 1.  Scope  13.5
      • 2.  Role of Custom and Practice  13.6
      • 3.  Variance by Agreement   13.7
      • 4.  Key Definitions  13.8
    • C.  Other Sources of Law  13.9
  • III.  CREATION OF LETTER OF CREDIT
    • A.  Parties to Letter of Credit Transaction  13.10
    • B.  Application for Letter of Credit  13.11
    • C.  Consideration and Issuance  13.12
    • D.  Advice of Credit and Confirmation  13.13
    • E.  Duration of Credit  13.14
    • F.  Modification and Revocation of Credit  13.15
    • G.  Form: Sample Letter of Credit  13.16
  • IV.  OPERATION OF LETTER OF CREDIT
    • A.  Issuing Bank’s Obligations
      • 1.  Duty to Honor Presentation Independent of Transaction  13.17
      • 2.  Remedies for Wrongful Dishonor  13.18
      • 3.  Choice of Law  13.19
    • B.  Issuer’s Rights and Duties in Honoring Drafts  13.20
    • C.  Beneficiary’s Rights and Obligations: Warranties on Transfer or Presentment  13.21
    • D.  Jurisdiction
      • 1.  Jurisdiction Over Foreign Issuer  13.21A
      • 2.  Jurisdiction Over Foreign Beneficiary  13.22
    • E.  Duties of Advising Bank  13.23
    • F.  Standard Practices Followed  13.24
    • G.  Transfer and Assignment of Credit; Security Interests in the Credit  13.25
    • H.  Remedies of Beneficiary or Other Claimant  13.26
  • V.  EXPANSION OF LETTER OF CREDIT DEVICE  13.27

14

Bulk Sales

Bryan D. Hull

  • I.  CALIFORNIA BULK SALES LEGISLATION  14.1
  • II.  TRANSACTIONS SUBJECT TO LAW  14.2
    • A.  Location of Seller  14.3
    • B.  Type of Business  14.4
    • C.  Type and Amount of Transfer  14.5
    • D.  Type of Property  14.6
  • III.  EXEMPTED SALES
    • A.  Value of Assets Test  14.7
    • B.  Creation of Security Interests  14.8
    • C.  Assignment for Benefit of Creditors  14.9
    • D.  Settlement of Lien or Security Interest  14.10
    • E.  Sale of Encumbered Asset  14.11
    • F.  Sale by Court-Appointed and Public Officers  14.12
    • G.  Sales in Corporate Dissolution and Reorganization Proceedings  14.13
    • H.  Transfers of Goods in Warehouse  14.14
    • I.  Sale and Leaseback  14.15
    • J.  Transfer of Alcoholic Beverage License  14.16
    • K.  Sale of Business in Which Buyer Agrees to Pay Seller’s Debts  14.17
      • 1.  Buyer Assumes Debts to Known Claimants
        • a.  Requirements  14.18
        • b.  Form: Notice for Exemption When Buyer Assumes Debts to Known Claimants  14.19
      • 2.  Buyer Assumes All Debts
        • a.  Requirements  14.20
        • b.  Form: Notice for Exemption When Buyer Assumes All Debts  14.21
      • 3.  Sale to Newly Formed Organization That Will Continue Business  14.22
    • L.  Sales Pursuant to Statute  14.23
  • IV.  MANNER OF COMPLIANCE
    • A.  Buyer’s Obligations  14.24
    • B.  Transfers Not by Auction Sale
      • 1.  Notice Requirements
        • a.  Recordation and Publication of Notice  14.25
        • b.  Contents of Notice  14.26
        • c.  Form: Notice for Transfers Not by Auction or Liquidation Sale  14.27
      • 2.  Payment of Transferor’s Creditors’ Claims  14.28
      • 3.  Disputed Claims Procedure  14.29
      • 4.  Insufficient Funds to Pay All Claims Filed With Escrow Agent  14.30
      • 5.  Order of Priorities for Distribution of Consideration  14.31
    • C.  Auction Sales and Sales by Liquidator
      • 1.  Notice Requirements  14.32
      • 2.  Form: Notice of Intended Bulk Sale by Public Auction  14.33
      • 3.  Form: Notice of Intended Bulk Transfer by Liquidator on Seller’s Behalf  14.34
    • D.  Rights of Creditors in Event of Compliance  14.35
    • E.  Effect of Noncompliance
      • 1.  Liability for Failure to Comply  14.36
      • 2.  Buyer’s Good Faith Defense  14.37
      • 3.  Limitation on Cumulative Liability  14.38
      • 4.  Remedies Available to Trustee in Bankruptcy  14.39
      • 5.  Statute of Limitations and Levies  14.40
    • F.  Compliance With Other Laws Not Excused  14.41
  • V.  SOME ASPECTS OF CALIFORNIA LAW COMPARED WITH 1988 UCC OFFICIAL TEXT  14.42
    • A.  Scope of Coverage  14.43
    • B.  Exemptions  14.44
    • C.  Schedule of Distribution  14.45
    • D.  Notice to Claimants  14.46
    • E.  Good Faith Belief  14.47

15

Documents of Title

Neil B. Martin

  • I.  INTRODUCTION
    • A.  Commercial Use of Documents of Title  15.1
    • B.  Organization and Terminology of Division 7
      • 1.  Organization  15.2
      • 2.  Terminology  15.3
    • C.  Subordination of Division 7 to Federal and State Laws and Regulations  15.4
  • II.  CREATION OF DOCUMENTS OF TITLE
    • A.  Issuer  15.5
    • B.  Terms of Document  15.6
      • 1.  Required Terms  15.7
      • 2.  Permitted Terms  15.8
      • 3.  Void Terms; Conversion by Bailee  15.9
      • 4.  Provisions on Description of Goods  15.10
      • 5.  Negotiability  15.11
      • 6.  Electronic Documents of Title  15.11A
      • 7.  Substitution of Tangible and Electronic Documents of Title  15.11B
    • C.  Multiple Documents
      • 1.  In General  15.12
      • 2.  Duplication of Documents  15.13
      • 3.  Bills in a Set  15.14
      • 4.  Overissue of Documents for Fungible Goods  15.15
      • 5.  Lost, Stolen, or Destroyed Documents  15.16
    • D.  Alteration of Documents  15.17
    • E.  Reducing Risk to Clients  15.18
    • F.  Checklist of Possible Problems on Issuance of Document of Title  15.19
  • III.  FORMS OF DOCUMENTS OF TITLE; TRANSFER AND NEGOTIATION
    • A.  Types and Forms  15.20
    • B.  Transfer of Interest in Goods Subject to Negotiable Document of Title
      • 1.  Due Negotiation  15.21
      • 2.  Rights of Transferee in Duly Negotiated Document  15.22
      • 3.  Limitation on Transferee of Duly Negotiated Document  15.23
    • C.  Transfer of Document Not Qualifying as Due Negotiation  15.24
    • D.  Transfer of Interest in Goods Subject to Nonnegotiable Document of Title  15.25
    • E.  Warranties of Transferor, Intermediary, and Indorser
      • 1.  Transferor’s Warranties  15.26
      • 2.  Intermediary’s Warranties  15.27
      • 3.  Indorser’s Warranties  15.28
  • IV.  DOCUMENTS USED AS SECURITY DEVICES  15.29
    • A.  Security Interest Created to Borrow Money  15.30
    • B.  Seller Retains a Secured Interest  15.31
      • 1.  Bill of Lading to Seller’s Order  15.32
      • 2.  Bill of Lading to Financing Agency’s Order  15.33
      • 3.  Bill of Lading to Buyer’s Order  15.34
      • 4.  Bill of Lading to Seller (Straight Bill)  15.35
      • 5.  Straight Bill of Lading to Seller’s Nominee  15.36
      • 6.  Bill of Lading to Buyer  15.37
  • V.  RIGHTS OF BAILEE
    • A.  Collection of Charges; Bailee’s Lien  15.38
      • 1.  Extent of Bailee’s Lien; Warehouse’s Lien  15.39
      • 2.  Carrier’s Lien  15.39A
      • 3.  Operation of Lien  15.40
      • 4.  Loss of Lien  15.41
      • 5.  Enforcement of Lien  15.42
        • a.  Sale of Goods Stored by Merchant  15.43
        • b.  Sale of Other Goods
          • (1)  Notification Requirements  15.44
          • (2)  Advertising Requirements  15.45
          • (3)  Sale Requirements  15.46
        • c.  Provisions Common to Both Enforcement Procedures  15.47
      • 6.  Other Remedies Against Bailor  15.48
      • 7.  Remedies Against Consignee-Consignor or Beneficial Owner of Goods  15.49
    • B.  Termination of Storage at Warehouse’s Option
      • 1.  General Right of Termination  15.50
      • 2.  Summary Termination: Value Deteriorated to Less Than Lien  15.51
      • 3.  Summary Termination: Hazard to Other Goods Stored  15.52
      • 4.  Form: Notice to Merchant of Private Sale  15.53
      • 5.  Form: Suggested Notice of Intent to Sell Goods at Public Auction  15.54
  • VI.  REMEDIES ON LOSS, DAMAGE, MISDELIVERY, OR DELAY OF GOODS
    • A.  Introduction  15.55
    • B.  Bailee’s Duty of Care  15.56
    • C.  Bailee’s Duty to Deliver  15.57
      • 1.  Delivery to Rightful Person  15.58
      • 2.  Destruction by Fire  15.59
      • 3.  Routing Problems  15.60
    • D.  Value Limitations  15.61
    • E.  Time Limitations on Claims  15.62
    • F.  Checklist: Considering Claims Against Bailee  15.63
    • G.  Aids for Reducing Issues and Settling Dispute  15.64
      • 1.  Independent Appraisal of Goods  15.65
      • 2.  Stipulations  15.66
    • H.  Suggested Pleadings  15.67
      • 1.  Form: Pleading Allegations as to Breach of Duty by Carrier Resulting in Loss or Damage to Goods  15.68
      • 2.  Form: Pleading Allegations as to Complaint Against Warehouse for Failure to Follow Lien-Enforcement Procedures  15.69
      • 3.  Form: Allegations: Answer Raising Defense of Agreed Value  15.70
      • 4.  Form: Allegations: Defense of Late Filing of Claim  15.71
      • 5.  Form: Allegations: Answer Raising Defense of Exclusion From Liability  15.72
      • 6.  Form: Allegation: Defense of Valid Enforcement of Lien  15.73
    • I.  Suggested Aids in Settlement
      • 1.  In General  15.74
      • 2.  Form: Authorization to Sell  15.75
      • 3.  Protective Measures by Bailor  15.76
  • VII.  INTERVENING RIGHTS OF THIRD PARTIES  15.77
    • A.  Personal Disputes  15.78
    • B.  Attaching or Executing Creditor  15.79
    • C.  Commercial Code Treatment of Bailee’s Stakeholder Role  15.80
    • D.  Settlement Aids
      • 1.  Stakeholder Agreement  15.81
      • 2.  Agreement to Sell and Deposit Proceeds  15.82
      • 3.  Compound Sales and Stakeholder Agreement  15.83
      • 4.  Indemnity, Hold Harmless, and Surety Agreement  15.84
    • E.  Form: Complaint in Interpleader  15.85
    • F.  Checklist for Reviewing Third Party Claims  15.86
  • VIII.  DEATH OF PERSON HOLDING UNDER DOCUMENT OF TITLE
    • A.  In General  15.87
    • B.  Form: Declaration Under Probate Code to Collect or Transfer Personal Property  15.88

16

Breakdown of the Bargain

Michael K. Slattery

  • I.  SCOPE OF CHAPTER  16.1
  • II.  RIGHT TO ASSURANCE OF PERFORMANCE
    • A.  Background  16.2
    • B.  Requirements for Demanding Assurance of Performance
      • 1.  Written Demand  16.3
      • 2.  Reasonable Grounds for Insecurity  16.4
      • 3.  Reasonable Grounds in Installment Contracts  16.5
      • 4.  Contractual Definitions of Grounds for Insecurity  16.6
      • 5.  Form: Certain Events Are Not Grounds for Demanding Assurance of Performance  16.7
      • 6.  Form: Certain Events Are Grounds for Demanding Assurance of Performance  16.8
    • C.  Demand for Adequate Assurance
      • 1.  In General  16.9
      • 2.  Form: Demand for Adequate Assurance  16.10
      • 3.  Form: Form or Timing of Demand Specified  16.11
    • D.  Adequacy and Timeliness of Assurance
      • 1.  Adequacy  16.12
      • 2.  Form: Type of Assurance to Be Furnished  16.13
      • 3.  When Assurance Must Be Given  16.14
      • 4.  Fixing Time for Assurance  16.15
    • E.  Permissible Action While Waiting for Assurance  16.16
    • F.  Effect of Failure to Furnish Adequate Assurance  16.17
    • G.  Acceptance of Improper Performance Is Not Waiver  16.18
    • H.  Related Remedies
      • 1.  Insolvent Buyer  16.19
      • 2.  Insolvent Seller  16.20
  • III.  ANTICIPATORY REPUDIATION AND ITS RETRACTION
    • A.  Introduction  16.21
    • B.  Manifestation of Repudiation
      • 1.  Generally  16.22
      • 2.  Bankruptcy Issues
        • a.  Automatic Stay  16.23
        • b.  Assumption and Rejection of Contracts  16.24
    • C.  Form: Acts Constituting Repudiation  16.25
    • D.  Substantial Impairment of Value of Contract  16.26
    • E.  Aggrieved Party’s Choices
      • 1.  Introduction  16.27
      • 2.  Await Performance  16.28
      • 3.  Resort to Remedy for Breach  16.29
      • 4.  Suspend Performance or Identify or Salvage Goods  16.30
        • a.  Identify Completed Goods  16.31
        • b.  Salvage or Complete Manufacture of Unfinished Goods  16.32
    • F.  Damages After Anticipatory Repudiation
      • 1.  Seller’s Damages  16.33
      • 2.  Buyer’s Damages  16.34
    • G.  Retraction of Anticipatory Repudiation
      • 1.  Introduction  16.35
      • 2.  Time for Retraction  16.36
      • 3.  Method and Consequences of Retraction  16.37
      • 4.  Form: Retraction of Repudiation  16.38
      • 5.  Form: Cancellation of Contract Because of Repudiation  16.39
  • IV.  RISK OF LOSS
    • A.  Introduction  16.40
    • B.  Basic Rules
      • 1.  Introduction  16.41
      • 2.  Shipment Contracts  16.42
      • 3.  Table: Shift of Risk of Loss  16.43
      • 4.  Contracts for Goods Held by Bailee  16.44
      • 5.  Other Situations  16.45
      • 6.  Contrary Agreement  16.46
    • C.  Effect of Breach on Risk of Loss
      • 1.  Preliminary Note  16.47
      • 2.  Seller’s Breach
        • a.  Defect Entitles Buyer to Reject Tender  16.48
        • b.  Buyer Revokes Acceptance  16.49
      • 3.  Buyer’s Breach  16.50
  • V.  LOSS OF OR DAMAGE TO IDENTIFIED GOODS
    • A.  Summary of Rule  16.51
    • B.  Goods Affected  16.52
    • C.  Risk of Loss  16.53
    • D.  Casualty Without Fault  16.54
    • E.  Total Loss  16.55
    • F.  Partial Loss  16.56
    • G.  Casualty in “No Arrival, No Sale” Contracts  16.57
    • H.  Form: Identified Goods Required or Not Required for Performance  16.58
    • I.  Form: Consequences of Casualty If Risk of Loss Divided  16.59
  • VI.  EXCUSE BECAUSE OF IMPRACTICABILITY
    • A.  Summary of Rule  16.60
    • B.  Factors in Claiming Excused Performance
      • 1.  Occurrence Contrary to Basic Assumptions  16.61
      • 2.  Compliance With Government Regulations  16.62
      • 3.  Assumption of Risk That May Interfere With Performance  16.63
    • C.  Allocation of Production and Deliveries  16.64
    • D.  Notice of Allocation  16.65
    • E.  Power to Shift Risks by Agreement
      • 1.  Introduction  16.66
      • 2.  Form: Performance Is Conditional  16.67
      • 3.  Form: Modification of Allocation  16.68
      • 4.  Form: Notification of Delay and Quota  16.69
    • F.  Buyer’s Excuse  16.70
    • G.  Effect of Seller’s Excused Performance on Third Persons  16.71
    • H.  Procedure on Seller’s Notice Claiming Excuse
      • 1.  Buyer’s Choice of Responses  16.72
      • 2.  Termination and Discharge  16.73
      • 3.  Form: Termination for Delay or Allocation of Production and Deliveries  16.74
      • 4.  Modification of Contract  16.75
      • 5.  Form: Buyer’s Agreement to Modify  16.76
      • 6.  Installment Contracts  16.77
      • 7.  Validity of Claim of Excuse  16.78
  • VII.  INSPECTION FOR RESOLUTION OF DISPUTES
    • A.  Inspection Is Not Acceptance  16.79
    • B.  Notification and Access to Goods  16.80
    • C.  Third Party Inspection
      • 1.  Summary  16.81
      • 2.  Relationship to Arbitration  16.82
      • 3.  Form: Conditions of Third Party Inspection  16.83
  • VIII.  SUMMARY OF AVAILABLE OPTIONS AND REMEDIES  16.84

17

Prelitigation Remedies

Loyd P. Derby

Richard J. Maire, Jr.

Melissa N. Sanchez

  • I.  SCOPE OF CHAPTER  17.1
  • II.  STRATEGIC PLANNING  17.2
  • III.  CONSIDERATIONS APPLICABLE TO BOTH BUYER AND SELLER
    • A.  Cumulation of Remedies  17.3
      • 1.  Supplementary Principles of Law Applicable  17.4
      • 2.  Preserving Evidence of Goods in Dispute  17.5
    • B.  Installment Contracts  17.6
  • IV.  SELLER’S REMEDIES
    • A.  Summary of Remedies  17.7
    • B.  Who Can Assert Seller’s Remedies?  17.8
    • C.  Choosing Appropriate Remedies  17.9
    • D.  Remedies Available
      • 1.  Withholding Delivery
        • a.  Grounds  17.10
        • b.  Effect  17.11
      • 2.  Refusing Delivery Except for Cash
        • a.  Grounds: Buyer’s Insolvency  17.12
        • b.  Effect  17.13
      • 3.  Stopping Delivery
        • a.  Grounds  17.14
        • b.  Effect  17.15
        • c.  Limits on Right to Stop Delivery  17.16
        • d.  Shipments Under Negotiable Documents  17.17
        • e.  Who May Stop Delivery of Goods?  17.18
        • f.  Procedure for Stopping Delivery  17.19
        • g.  Rights of Carrier or Bailee  17.20
        • h.  Effect of Buyer’s Bankruptcy  17.21
        • i.  Relationship to Division 9  17.22
      • 4.  Buyer’s Forfeiture of Its Deposit  17.23
      • 5.  Reclaiming Goods
        • a.  Reclamation Under California UCC  17.24
        • b.  Reclamation Following Commencement of Bankruptcy Case  17.25
        • c.  Other Remedies Excluded  17.26
        • d.  10-Day Limitation and Exception Under Commercial Code  17.27
        • e.  Form: Buyer’s Representation of Solvency  17.28
        • f.  Other Limitations  17.29
        • g.  Rights of Third Parties  17.30
        • h.  Form: Seller’s Demand for Reclaiming Goods  17.31
      • 6.  Identifying Goods to the Contract
        • a.  Effect of Identification  17.32
        • b.  What Constitutes Identification?  17.33
        • c.  Grounds  17.34
        • d.  Unfinished Goods  17.35
        • e.  Goods Being Procured  17.36
        • f.  Seller’s Security Interest  17.37
      • 7.  Reselling Goods
        • a.  Grounds and Purpose  17.38
        • b.  Public or Private Resale?  17.39
        • c.  Form: Contract Language Governing Resale  17.40
        • d.  Private Sale Procedure  17.41
        • e.  Form: Notice to Buyer of Private Resale of Goods  17.42
        • f.  Public Sale Procedure  17.43
        • g.  Form: Notice to Buyer of Public Resale of Goods  17.44
        • h.  Form: Announcement of Public Sale of Goods  17.45
        • i.  Sales to Affiliates  17.46
        • j.  Leasing  17.47
      • 8.  Canceling the Contract
        • a.  Grounds and Effect  17.48
        • b.  Limitations on Right to Cancel  17.49
        • c.  Form: Notice of Cancellation of Contract  17.50
  • V.  BUYER’S REMEDIES
    • A.  Selection of Responses  17.51
    • B.  Summary of Buyer’s Remedies  17.52
    • C.  Remedies Available
      • 1.  Rejecting Goods  17.53
        • a.  Perfect Tender Rule  17.54
        • b.  Limitations  17.55
        • c.  Effect  17.56
        • d.  Partial Acceptance  17.57
        • e.  Time and Manner of Rejection  17.58
        • f.  Form: Notice of Rejection  17.59
        • g.  Duties of Buyer With Respect to Rejected Goods  17.60
      • 2.  Revoking Acceptance
        • a.  What Constitutes Acceptance?  17.61
        • b.  Effect of Revocation of Acceptance  17.62
        • c.  Circumstances in Which Acceptance May Be Revoked  17.63
        • d.  Time and Manner of Revocation  17.64
        • e.  Form: Notice of Revocation  17.65
        • f.  Form: Limitation on Revocation  17.66
      • 3.  Covering
        • a.  Purpose and Consequences  17.67
        • b.  Time and Manner  17.68
        • c.  Effect of Inability or Failure to Cover  17.69
      • 4.  Repairing or Replacing Nonconforming Goods  17.70
      • 5.  Enforcing Buyer’s Security Interest
        • a.  Purpose of Security Interest  17.71
        • b.  Extent of Security Interest  17.72
        • c.  Relation to Division 9  17.73
        • d.  Procedure for Sale  17.74
      • 6.  Claiming Goods From Seller
        • a.  Grounds
          • (1)  Goods Purchased for Personal or Household Use  17.75
          • (2)  Seller’s Insolvency  17.76
        • b.  Effect  17.77
        • c.  Insolvency  17.78
        • d.  Payment  17.79
      • 7.  Offsetting Buyer’s Damages Against Price
        • a.  Grounds  17.80
        • b.  Effect  17.81
        • c.  Form: Notice of Intention to Deduct Damages  17.82
        • d.  Impact of Accord and Satisfaction Principles  17.83
      • 8.  Canceling the Contract
        • a.  Grounds  17.84
        • b.  Effect  17.85
        • c.  Notification of Cancellation  17.86
        • d.  Contract Reinstatement  17.87
  • VI.  CHECKLIST: MATTERS REQUIRING NOTICE BEFORE ACTION BY SELLER OR BUYER  17.88

18

Litigation Remedies

Loyd P. Derby

Ivan L. Kallick

Richard J. Maire, Jr.

  • I.  SCOPE OF CHAPTER  18.1
  • II.  SELLER’S REMEDIES
    • A.  Damages  18.2
      • 1.  Damages Measured by Market Price
        • a.  The Rule  18.3
        • b.  Form: Allegation of Damages Measured by Market Price  18.4
      • 2.  Damages Measured by Resale
        • a.  The Rule  18.5
        • b.  Forms
          • (1)  Form: Allegation of Damages Measured by Resale (Private Sale)  18.6
          • (2)  Form: Allegation of Damages Measured by Resale (Public Sale)  18.7
      • 3.  Incidental and Consequential Damages
        • a.  The Rule  18.8
        • b.  Form: Allegation of Incidental Damages  18.9
      • 4.  Lost Profits  18.10
        • a.  Lost Volume Seller  18.11
        • b.  Component Seller  18.12
        • c.  Jobber or Middleman  18.13
        • d.  Form: Allegation of Damages Measured by Lost Profits  18.14
      • 5.  Punitive or Exemplary Damages  18.15
      • 6.  Attorney Fees and Costs  18.16
    • B.  Contract Price Recovery
      • 1.  When Available  18.17
      • 2.  Procedural Aspects  18.18
      • 3.  Form: Allegations for Recovery of Price  18.19
  • III.  BUYER’S REMEDIES
    • A.  Damages  18.20
      • 1.  Damages Measured by Market Price
        • a.  The Rule  18.21
        • b.  Form: Allegation of Damages Measured by Market Price  18.22
      • 2.  Damages Measured by Cover
        • a.  The Rule  18.23
        • b.  Form: Allegation of Damages Measured by Cover  18.24
      • 3.  Damages After Acceptance: Nonconformity and Breach of Warranty  18.25
        • a.  Determining Value of Goods as Accepted
          • (1)  Expert Opinion of Fair Market Value  18.26
          • (2)  Resale Price  18.27
        • b.  Determining Value of Goods as Warranted
          • (1)  Purchase Price  18.28
          • (2)  Repair Costs  18.29
          • (3)  Replacement Price  18.30
          • (4)  Choosing Appropriate Measures of Damages  18.31
        • c.  Special Circumstances  18.32
        • d.  Injury to Person or Property  18.33
        • e.  Notice of Breach  18.34
      • 4.  Incidental Damages  18.35
      • 5.  Consequential Damages  18.36
        • a.  Lost Profits  18.37
        • b.  Loss of Goodwill  18.38
        • c.  Proof  18.39
        • d.  Excluding Consequential Damages
          • (1)  The Rule  18.40
          • (2)  Form: Recovery of Consequential Damages Excluded  18.41
        • e.  Mitigation of Damages  18.42
      • 6.  Attorney Fees  18.43
      • 7.  Punitive or Exemplary Damages  18.44
      • 8.  Deduction of Damages From Price  18.45
    • B.  Replevin  18.46
    • C.  Specific Performance  18.47
    • D.  Restitution of Payments
      • 1.  After Breach by Seller  18.48
      • 2.  After Breach by Buyer  18.49
    • E.  Indemnification  18.50
  • IV.  RESTRICTION, QUALIFICATION, AND ENLARGEMENT OF REMEDIES
    • A.  Liquidated Damages
      • 1.  Analysis  18.51
      • 2.  Form: Contract Clause Fixing Liquidated Damages  18.52
    • B.  Contractual Modification of Remedies
      • 1.  Power to Modify  18.53
      • 2.  Limitations
        • a.  Overview  18.54
        • b.  Types of Clauses  18.55
        • c.  Repair Time  18.56
        • d.  Consumer Goods  18.57
    • C.  Cumulation and Election of Remedies  18.58
  • V.  SPECIAL LITIGATION PROBLEMS
    • A.  Applicable Law  18.59
    • B.  Choice of Forum  18.60
    • C.  Evidence of Market Price  18.61
    • D.  Burden of Proof  18.62
    • E.  Notice of Breach
      • 1.  Summary  18.63
      • 2.  Time of Notice  18.64
      • 3.  Particularity of Notice  18.65
      • 4.  Notice of Breach by Delayed Delivery or Knowledge of Defects  18.66
      • 5.  Form: Notice of Breach  18.67
    • F.  Statutes of Limitations  18.68
    • G.  Litigating Unconscionability Claim
      • 1.  Background  18.69
      • 2.  Meaning of “Unconscionable”  18.70
      • 3.  Remedies and Proof  18.71
      • 4.  Unconscionability and Arbitration Provisions  18.71A
    • H.  Litigating Claim Under Consumers Legal Remedies Act and Unfair Competition Law  18.72
    • I.  Persons Answerable  18.73
    • J.  Right to Sue Third Parties  18.74
    • K.  Unfair Competition Law
      • 1.  Generally  18.75
      • 2.  Available Remedies  18.76
      • 3.  Statute of Limitations  18.77

19

Leasing of Goods

William B. Piels

  • I.  INTRODUCTION
    • A.  Overview of Division 10  19.1
    • B.  Scope of Division 10  19.2
    • C.  Relationship of Division 10 to Divisions 2 and 9  19.3
    • D.  Transition From Prior Law to Division 10  19.4
  • II.  LEASE VERSUS SECURITY INTEREST
    • A.  Reason for Distinction Between Lease and Security Interest
      • 1.  Overview  19.5
      • 2.  Importance of Distinction  19.6
      • 3.  Taxation and Accounting Issues in General  19.7
      • 4.  Distinctions Between Operating and Capital Leases  19.8
      • 5.  Synthetic Lease or Off Balance Sheet Loan  19.9
    • B.  Revised Definition of Security Interest  19.10
    • C.  Two-Part Test for “Security Interest”
      • 1.  Lessee’s Right to Terminate  19.11
      • 2.  Lessor’s Residual Interest  19.12
    • D.  Consideration of Other Factors  19.13
    • E.  Application of Revised Definition of Security Interest
      • 1.  Lease to End of Economic Life
        • a.  Original Lease Term  19.14
        • b.  Options to Renew  19.15
        • c.  Options to Purchase  19.16
      • 2.  Option Consideration  19.17
      • 3.  Risk of Depreciation: Terminal Rental Adjustment Clause (TRAC)  19.18
  • III.  CONTRACT FORMALITIES
    • A.  Offer and Acceptance  19.19
    • B.  Modification and Waiver  19.20
    • C.  Statute of Frauds  19.21
    • D.  Parol Evidence Rule  19.22
  • IV.  CHOICE OF LAW AND FORUM SELECTION
    • A.  Choice of Governing Law  19.23
    • B.  Forum Selection Clause  19.24
    • C.  Variations in Commercial Code Provisions and Other Laws  19.25
    • D.  Special Rules for Consumer Leases  19.26
    • E.  Special Rules for Goods Covered by Certificate of Title  19.27
  • V.  TYPES OF LEASES
    • A.  Introduction  19.28
    • B.  Finance Leases
      • 1.  Overview  19.29
      • 2.  Definition of Finance Lease  19.30
      • 3.  Lessor Who Is Affiliate of Manufacturer or Supplier  19.31
      • 4.  Lessor’s Warranties  19.32
      • 5.  Pass-Through of Supplier Warranties  19.33
      • 6.  Lessee’s Obligations Irrevocable  19.34
      • 7.  Form: Hell or High Water Covenant  19.35
      • 8.  Liability in Tort  19.35A
      • 9.  Revocation of Acceptance of Goods  19.36
      • 10.  Risk of Loss  19.37
    • C.  Consumer Leases
      • 1.  Definition  19.38
      • 2.  Protections Given to Consumer Lessees  19.39
      • 3.  Consumer Finance Leases  19.40
    • D.  Installment Leases
      • 1.  Definition  19.41
      • 2.  Breach  19.42
      • 3.  Master Lease  19.43
  • VI.  RISK OF LOSS; INSURANCE
    • A.  Rules for Determining Risk of Loss  19.44
    • B.  Insurable Interest in Goods  19.45
    • C.  Form: Insurance Covenant  19.46
    • D.  Form: Risk of Loss Covenant  19.47
  • VII.  DUTY TO MAINTAIN LEASED PROPERTY
    • A.  Duty to Maintain  19.48
    • B.  Form: Maintenance Covenant  19.49
  • VIII.  ACCEPTANCE AND REJECTION
    • A.  Acceptance of Goods by Lessee  19.50
    • B.  Form: Acceptance Covenant and Certificate  19.51
    • C.  Revocation of Acceptance  19.52
    • D.  Rejection of Goods by Lessee
      • 1.  Perfect Tender Rule  19.53
      • 2.  Lessee’s Security Interest in Rejected Goods  19.54
      • 3.  Lessee’s Duties as to Rightfully Rejected Goods
        • a.  Duties in General  19.55
        • b.  Additional Duties of Merchant Lessee  19.56
      • 4.  Lessor’s Right to Cure  19.57
    • E.  Lessee’s Waiver of Objections to Nonconforming Delivery  19.58
  • IX.  WARRANTY PROVISIONS
    • A.  Background  19.59
    • B.  Express Warranties  19.60
    • C.  Implied Warranties
      • 1.  Overview  19.61
      • 2.  Quiet Enjoyment  19.62
      • 3.  Form: Quiet Enjoyment Covenant  19.63
      • 4.  Against Infringement  19.64
      • 5.  Merchantability  19.65
      • 6.  Fitness for Lessee’s Particular Purposes  19.66
      • 7.  Form: Disclaimer of Implied Warranties  19.67
  • X.  ALIENATION, DELEGATION, ASSIGNMENT, AND SUBLEASE
    • A.  Restrictions on Alienation as Disfavored  19.68
    • B.  Subleases  19.69
    • C.  Assignment and Delegation  19.70
    • D.  Form: Restrictions on Transfer  19.71
    • E.  Grant of Security Interest  19.72
    • F.  Form: Quiet Enjoyment Letter  19.73
    • G.  Foreclosure of Security Interest  19.74
    • H.  Transfer of Rights to Payments or Damages  19.75
    • I.  Priorities Among Conflicting Claimants
      • 1.  Overview  19.76
      • 2.  When Lessor Sells Goods  19.77
      • 3.  When Lessor Subsequently Leases Goods  19.78
      • 4.  When Lessee Subleases Goods  19.79
      • 5.  When Lessee Sells Goods  19.80
      • 6.  When Goods Are Entrusted  19.81
    • J.  Rights of Possessory Lienholder  19.82
    • K.  Form: Covenant to Keep Free of Liens  19.83
    • L.  Rights of Lessee’s Creditors  19.84
    • M.  Rights of Lessor’s Creditors
      • 1.  As Subject to Lease; Exceptions  19.85
      • 2.  Pledge of Lease as Collateral  19.86
  • XI.  Fixtures and Accessions
    • A.  Conflicting Interests in Fixtures
      • 1.  Overview; Definitions  19.87
      • 2.  Priority Rules  19.88
      • 3.  Requirements for Fixture Filings  19.89
    • B.  Form: Landlord’s Waiver  19.90
    • C.  Conflicting Interests in Accessions  19.91
    • D.  Filing Financing Statement  19.92
  • XII.  LIABILITY TO THIRD PARTIES AND INDEMNIFICATION
    • A.  Indemnification  19.93
    • B.  Form: Indemnification Covenant  19.94
  • XIII.  PERFORMANCE AND REPUDIATION
    • A.  Adequate Assurances of Performance  19.95
    • B.  Repudiation  19.96
    • C.  Substituted Performance  19.97
    • D.  Excused Performance  19.98
  • XIV.  DEFAULT AND REMEDIES
    • A.  Default by Lessor; Lessee’s Remedies
      • 1.  Overview  19.99
      • 2.  General Provisions  19.100
      • 3.  Measure of Damages Following Cover  19.101
      • 4.  Measure of Damages Without Cover or Nonqualifying Cover  19.102
      • 5.  Incidental and Consequential Damages  19.103
      • 6.  Form: Waiver of Consequential Damages  19.104
      • 7.  Specific Performance and Other Remedies  19.105
    • B.  Default by Lessee; Lessor’s Remedies
      • 1.  General Provisions  19.106
      • 2.  Form: Remedies Clause  19.107
      • 3.  Retention or Repossession of Goods  19.108
      • 4.  Disposition of Goods Under Substantially Similar Lease  19.109
      • 5.  Measure of Damages in Absence of Qualifying Disposition  19.110
      • 6.  Recovery of Rent for Balance of Lease Term  19.111
      • 7.  Incidental Damages  19.112
      • 8.  Consequential Damages  19.112A
    • C.  Other Remedies
      • 1.  Liquidated Damages  19.113
      • 2.  Restitution  19.114
      • 3.  Cancellation and Termination  19.115
    • D.  Standing to Sue Third Parties for Damage to Leased Goods  19.116
    • E.  Statute of Limitations  19.117
  • XV.  FRAUDULENT CONVEYANCE ISSUES  19.118
  • XVI.  BANKRUPTCY ISSUES
    • A.  Introduction  19.119
    • B.  Applicability of Bankruptcy Law
      • 1.  Terminated Versus Unexpired Leases  19.120
      • 2.  Unenforceability of Bankruptcy Clauses in Leases  19.121
      • 3.  Lessors of Aircraft, Vessels, and Rolling Stock  19.122
    • C.  Effect of Automatic Stay  19.123
    • D.  Use, Sale, or Lease of Property of Estate  19.124
    • E.  Assumption or Rejection of Lease
      • 1.  Rule Permitting Assumption or Rejection of Unexpired Term  19.125
      • 2.  Time Limits for Assumption or Rejection  19.126
      • 3.  Procedure for Assumption or Rejection  19.127
      • 4.  Assumption When Defaults Exist  19.128
      • 5.  Assumption of Entire Lease  19.129
      • 6.  Rejection as Breach of Lease  19.130
    • F.  Lessor’s Claims in Bankruptcy Proceedings
      • 1.  Prepetition Claims  19.131
      • 2.  Postpetition Claims  19.132
    • G.  Assignment of Leases After Bankruptcy  19.133
    • H.  Preferential Transfer Questions  19.134

CALIFORNIA UCC SALES AND LEASES

(1st Edition)

December 2018

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH02

Chapter 2

Formation of Sales Contracts: Express Terms

02-007

§2.7

Quotation

02-008

§2.8

Noncontractual Intent

02-018

§2.18

Revocable Offer

02-019

§2.19

Firm Offer for Specified Period

02-020

§2.20

Firm Offer Subject to Contingencies

02-021

§2.21

Firm Renewable Offer

02-022

§2.22

Firm Offer in Form Supplied by Offeree

02-023

§2.23

Firm Offer by Nonmerchant

02-026

§2.26

Acceptance by Return of Form

02-027

§2.27

Acceptance by Performance

02-030

§2.30

Notice of Acceptance by Performance

02-031

§2.31

Offeror’s Waiver of Notice of Acceptance

02-032

§2.32

Notice That Offer Has Lapsed

02-035

§2.35

Requirement of Notice of Acceptance by Given Date

02-038

§2.38

Requirement of Acceptance by Promise to Ship

02-040

§2.40

Requirement of Acceptance by Performance

02-047

§2.47

Precluding Accommodation Shipments

02-048

§2.48

Requirement of Seasonable Notification of Acceptance or Accommodation

02-049

§2.49

Notice of Intentional Accommodation Shipment

02-050

§2.50

Notice of Unintentional Accommodation Shipment

02-060

§2.60

Sales Agreement Checklist

CH03

Chapter 3

Warranties

03-062

§3.62

Merchantability and Particular Purpose Warranties Disclaimed

03-063

§3.63

Sale of Goods “As Is” and “With All Faults”

03-064

§3.64

Examination Made or Refused

03-066

§3.66

Warranty of Title Disclaimed

03-069

§3.69

Warranty Against Infringement Disclaimed

03-072

§3.72

Description Displaces Sample

03-080

§3.80

Written Notice Required

03-081

§3.81

Notice of Breach of Warranty

03-082

§3.82

Notice of Infringement Suit

03-087

§3.87

Notice of Litigation; Requesting Defense

03-088

§3.88

Demand for Control of Infringement Action

03-095

§3.95

Remedy Limitation

03-106

§3.106

Allegation of Express Warranty by Affirmation

03-107

§3.107

Allegation of Express Warranty by Description

03-108

§3.108

Allegation of Express Warranty by Sample or Model

03-109

§3.109

Allegation of Implied Warranty of Merchantability

03-110

§3.110

Allegation of Implied Warranty of Fitness for Particular Purpose

03-111

§3.111

Allegation of Noncompliance With Warranty

03-112

§3.112

Allegation of Notice of Breach

03-113

§3.113

Allegation That Notice of Litigation Was Given

03-114

§3.114

Allegation of Warranty of Title

03-115

§3.115

Allegation of Lack of Title

03-116

§3.116

Allegation of Disturbance of Quiet Possession

03-117

§3.117

Allegation of Damages

03-118

§3.118

Allegation of Incidental and Consequential Damages

03-120

§3.120

Allegation of Exclusion or Disclaimer

03-122

§3.122

Allegation of Lack of Privity

03-123

§3.123

Allegation of Examination or Refusal to Examine

03-124

§3.124

Allegation of Exclusion or Modification by Past Experience

03-126

§3.126

Sample Warranty Form

CH04

Chapter 4

Formation of Sales Contracts: Open or Indefinite Terms

04-006

§4.6

Agreement to Agree on Price

04-007

§4.7

Agreement to Agree (Maximum and Minimum Price)

04-009

§4.9

Open Price Tied to Market Price

04-010

§4.10

Price Keyed to Published Index

04-011

§4.11

Price Adjusted to Seller’s Competitors’ Prices

04-012

§4.12

Appraiser or Arbitrator to Set Price

04-014

§4.14

Same Price as Given Others

04-015

§4.15

Price Fixed in Bad Faith

04-017

§4.17

Price Dependent on Resale

04-018

§4.18

Price Set at Discretion of Contract Party

04-019

§4.19

Price Increased at Discretion of Seller

04-020

§4.20

No Sale If Price Not Set

04-032

§4.32

Description of Requirements

04-033

§4.33

Recital for New Business

04-034

§4.34

Stated Estimate

04-035

§4.35

Maximum Quantity

04-036

§4.36

Variable Maximum Quantity

04-037

§4.37

Variable Minimum Quantity

04-045

§4.45

Description of Output Subject to Contract

04-046

§4.46

Maximum Quantity

04-047

§4.47

Minimum Quantity

04-052

§4.52

Definition of “Best Efforts” (Buyer’s and Seller’s Protection)

04-054

§4.54

Nonexclusive Supply by Seller

04-057

§4.57

Single Delivery

04-058

§4.58

Delivery in Lots

04-060

§4.60

Place of Delivery

04-061

§4.61

Delivery of Goods in Possession of Third Party

04-068

§4.68

Time for Delivery

04-069

§4.69

Notification of Proposed Time Limit

04-070

§4.70

Objection to Proposed Time Limit; Counterproposal

04-077

§4.77

Time for Payment

04-078

§4.78

Right of Inspection Reserved by Buyer

04-080

§4.80

Duration of Contract

04-082

§4.82

Power to Terminate

04-085

§4.85

Automatic Termination

04-093

§4.93

Procedure for Specification of Particulars of Contract Provisions

04-096

§4.96

Exclusion of Course of Performance

04-097

§4.97

Sample Seller’s Notice of Objection to Buyer’s Course of Performance

04-099

§4.99

Incorporation or Exclusion of Course of Dealing

04-102

§4.102

Usages of Trade Expressly Incorporated by Reference

04-103

§4.103

Usage of Trade Excluded or Limited

CH05

Chapter 5

Battle of the Forms

05-009

§5.9

Acceptance Conditional on Assent to Changes

05-015

§5.15

Acceptance Expressly Limited to Offer’s Terms

05-022

§5.22

Objection to All Proposed Terms

05-023

§5.23

Objection to Only Some Proposed Terms

CH06

Chapter 6

Modification, Rescission, and Waiver

06-006

§6.6

Prohibition of Oral Modification or Rescission

06-007

§6.7

Modification Increasing Contract Price

06-011

§6.11

Rescission of Written Contract

06-014

§6.14

Prohibition of Oral Waiver

06-015

§6.15

Limitation on Application of Waiver

06-016

§6.16

Express Waiver

06-022

§6.22

Retraction of Waiver Allowing Substitution of Goods

CH07

Chapter 7

Statute of Frauds and Parol Evidence Rule

07-051

§7.51

Checklist for Introduction of Evidence

07-054

§7.54

Merger Clauses

CH08

Chapter 8

Title and Identification

08-022

§8.22

Reservation of Title

CH10

Chapter 10

Buyer’s Performance

10-011

§10.11

Place or Manner of Inspection

10-026

§10.26

Contract Provision Requiring Notification of Return

10-027

§10.27

Notice of Election to Return Goods

10-036

§10.36

Time and Manner of Rejection

10-042

§10.42

Statement of Defects

10-043

§10.43

Request for Full and Final Statement of Defects

CH11

Chapter 11

Assignment of Rights and Delegation of Duties

11-007

§11.7

Assignment of Rights Excluding Delegation of Duties

11-008

§11.8

Consent to Assignment of Rights

11-012

§11.12

Prohibition of Assignment of Rights

11-013

§11.13

Assignment Expressly Permitted

11-018

§11.18

Express Delegation of Performance

11-024

§11.24

Prohibition of Delegation of Duties

11-025

§11.25

Delegation Expressly Permitted

CH13

Chapter 13

Letters of Credit

13-016

§13.16

Sample Letter of Credit

CH14

Chapter 14

Bulk Sales

14-019

§14.19

Notice for Exemption When Buyer Assumes Debts to Known Claimants

14-021

§14.21

Notice for Exemption When Buyer Assumes All Debts

14-027

§14.27

Notice for Transfers Not by Auction or Liquidation Sale

14-033

§14.33

Notice of Intended Bulk Sale by Public Auction

14-034

§14.34

Notice of Intended Bulk Transfer by Liquidator on Seller’s Behalf

CH15

Chapter 15

Documents of Title

15-019

§15.19

Checklist of Possible Problems on Issuance of Document of Title

15-053

§15.53

Notice to Merchant of Private Sale

15-054

§15.54

Suggested Notice of Intent to Sell Goods at Public Auction

15-056

§15.56

Bailee’s Duty of Care

15-062

§15.62

Time Limitations on Claims

15-063

§15.63

Checklist: Considering Claims Against Bailee

15-068

§15.68

Pleading Allegations as to Breach of Duty by Carrier Resulting in Loss or Damage to Goods

15-069

§15.69

Pleading Allegations as to Complaint Against Warehouse for Failure to Follow Lien-Enforcement Procedures

15-070

§15.70

Allegations: Answer Raising Defense of Agreed Value

15-071

§15.71

Allegations: Defense of Late Filing of Claim

15-072

§15.72

Allegations: Answer Raising Defense of Exclusion From Liability

15-073

§15.73

Allegation: Defense of Valid Enforcement of Lien

15-075

§15.75

Authorization to Sell

15-085

§15.85

Complaint in Interpleader

15-086

§15.86

Checklist for Reviewing Third Party Claims

15-088

§15.88

Declaration Under Probate Code to Collect or Transfer Personal Property

CH16

Chapter 16

Breakdown of the Bargain

16-007

§16.7

Certain Events Are Not Grounds for Demanding Assurance of Performance

16-008

§16.8

Certain Events Are Grounds for Demanding Assurance of Performance

16-010

§16.10

Demand for Adequate Assurance

16-011

§16.11

Form or Timing of Demand Specified

16-013

§16.13

Type of Assurance to Be Furnished

16-025

§16.25

Acts Constituting Repudiation

16-038

§16.38

Retraction of Repudiation

16-039

§16.39

Cancellation of Contract Because of Repudiation

16-058

§16.58

Identified Goods Required or Not Required for Performance

16-059

§16.59

Consequences of Casualty If Risk of Loss Divided

16-067

§16.67

Performance Is Conditional

16-068

§16.68

Modification of Allocation

16-069

§16.69

Notification of Delay and Quota

16-074

§16.74

Termination for Delay or Allocation of Production and Deliveries

16-076

§16.76

Buyer’s Agreement to Modify

16-083

§16.83

Conditions of Third Party Inspection

CH17

Chapter 17

Prelitigation Remedies

17-028

§17.28

Buyer’s Representation of Solvency

17-031

§17.31

Seller’s Demand for Reclaiming Goods

17-040

§17.40

Contract Language Governing Resale

17-042

§17.42

Notice to Buyer of Private Resale of Goods

17-044

§17.44

Notice to Buyer of Public Resale of Goods

17-045

§17.45

Announcement of Public Sale of Goods

17-050

§17.50

Notice of Cancellation of Contract

17-059

§17.59

Notice of Rejection

17-065

§17.65

Notice of Revocation

17-066

§17.66

Limitation on Revocation

17-082

§17.82

Notice of Intention to Deduct Damages

17-088

§17.88

Checklist: Matters Requiring Notice Before Action by Seller or Buyer

CH18

Chapter 18

Litigation Remedies

18-004

§18.4

Allegation of Damages Measured by Market Price

18-006

§18.6

Allegation of Damages Measured by Resale (Private Sale)

18-007

§18.7

Allegation of Damages Measured by Resale (Public Sale)

18-009

§18.9

Allegation of Incidental Damages

18-014

§18.14

Allegation of Damages Measured by Lost Profits

18-019

§18.19

Allegations for Recovery of Price

18-022

§18.22

Allegation of Damages Measured by Market Price

18-024

§18.24

Allegation of Damages Measured by Cover

18-041

§18.41

Recovery of Consequential Damages Excluded

18-052

§18.52

Contract Clause Fixing Liquidated Damages

18-067

§18.67

Notice of Breach

CH19

Chapter 19

Leasing of Goods

19-035

§19.35

Hell or High Water Covenant

19-046

§19.46

Insurance Covenant

19-047

§19.47

Risk of Loss Covenant

19-049

§19.49

Maintenance Covenant

19-051

§19.51

Acceptance Covenant and Certificate

19-063

§19.63

Quiet Enjoyment Covenant

19-067

§19.67

Disclaimer of Implied Warranties

19-071

§19.71

Restrictions on Transfer

19-073

§19.73

Quiet Enjoyment Letter

19-083

§19.83

Covenant to Keep Free of Liens

19-090

§19.90

Landlord’s Waiver

19-094

§19.94

Indemnification Covenant

19-104

§19.104

Waiver of Consequential Damages

19-107

§19.107

Remedies Clause

 

Selected Developments

December 2018 Update

As of September 15, 2018, 89 states have adopted the United Nations Convention on Contracts for the International Sale of Goods (CISG). See §1.18.

In James v Global Tel*Link Corp. (3d Cir 2017) 852 F3d 262, 267, users of a telephone service for prison inmates could sign up either online or over the telephone. Those signing up over the telephone were told that the terms of use for the service were available on the company’s website. However, they were not required to visit the website or demonstrate acceptance of the terms of use through any affirmative act. Nor were they told that their use of the phone service would itself constitute assent to the terms of use, which included an agreement to arbitrate disputes and a class-action waiver. The court held that such users “had neither the knowledge nor intent necessary to provide ‘unqualified acceptance,’” and were therefore not bound by the terms of use. See §2.50H.

In Patricia A. Murray Dental Corp. v Dentsply Int’l, Inc. (2018) 19 CA5th 258, plaintiffs were a class of dentists who had purchased a device called the Cavitron ultrasonic scaler, for use during oral surgical procedures. Plaintiffs sued the device’s manufacturer, Dentsply International, Inc., for breach of express warranty under Com C §2313(1)(a) and (b), alleging that the directions for use of the device falsely indicated that it could be used in “periodontal debridement for all types of periodontal diseases,” which by implication included oral surgery, when in fact the device could not be used for oral surgery because it accumulated biofilm in its waterlines and thus was incapable of delivering sterile water during surgical procedures. After trial, the court found in favor of Dentsply on all claims, noting that the plaintiffs, as licensed California dentists, were well aware that biofilm forms in all dental waterlines and that the Cavitron thus could not produce sterile water. Plaintiffs thus already knew the facts that they claimed ought to have been disclosed in the product’s directions. The evidence accordingly failed to establish that they were likely to be misled. The court of appeal affirmed. Notably, the targeted consumers for this product were not members of the general public, but licensed dental professionals. As such, they could be expected to be familiar with the issue of biofilm formation and thus not be misled by the product directions, even if those directions were not a model of clarity. See §§3.10, 18.75.

In R.W.L. Enters. v Oldcastle, Inc. (2017) 17 CA5th 1019, the court of appeal held that it was error for the trial court to award attorney fees to the defendant based on two unrelated agreements. The parties entered into a dealer agreement in 2001, and then in 2010, the plaintiff dealer filled out a credit application with the defendant-manufacturer. The dealer agreement did not have an attorney fees provision, but the credit application did. The lawsuit was based on the alleged breach of the dealer agreement. The court of appeal found that the 2001 and 2010 instruments did not show a “clear and unequivocal” intention to incorporate each other, so an award of attorney fees was improper. See §4.94.

A written agreement obtained or executed through mistake, fraud, duress, or undue influence is not protected by the parol evidence rule. See IIG Wireless, Inc. v Yi (2018) 22 CA5th 630, in which the court of appeal held that evidence of what the defendant, a founding shareholder of a cell phone business, told the other founding shareholders about the treasury shares at issue was admissible to prove fraud, because it showed the other shareholders had entirely different understandings about the meaning of certain shareholder agreements based on those allegedly fraudulent misrepresentations. See §7.37.

The Airline Deregulation Act of 1978 (49 USC §41713) does not preempt a passenger’s breach of contract claim based on the airline’s failure to timely deliver luggage as promised. Hickcox-Huffman v US Airways, Inc. (9th Cir 2017) 855 F3d 1057. See §9.6.

A new §12.26A has been added, dealing with transactions under the Perishable Agricultural Commodities Act (PACA) (7 USC §§499a–499s).

In S & H Packing & Sales Co. v Tanimura Distrib., Inc. (9th Cir 2018) 883 F3d 797, 808, the Ninth Circuit adopted a threshold “true sale” test to determine whether assets transferred in transactions that are labeled “sales” remain assets of a PACA trust. The en banc panel held that a court must conduct a two-step inquiry when determining whether the questioned transaction is a sale or creates a security interest (i.e., a loan). First, a court must apply a threshold “true sale” test, of which the transfer of risk is a key, but not the sole, factor. If a court concludes that there was a true sale, it must then determine if the transaction was commercially reasonable. See §12.26A.

In PGA W. Residential Ass’n, Inc. v Hulven Int’l, Inc. (2017) 14 CA5th 156, the court held that the 7-year limitations period for actions under the predecessor statute to the Uniform Voidable Transactions Act is not simply a procedural statute of limitations that bars a remedy and is forfeited if not properly raised by a defendant; rather, it is a substantive statute of repose that completely extinguishes a right or obligation and is not subject to forfeiture. See §12.46A.

An evaluation of unconscionability is highly dependent on context. Farrar v Direct Commerce, Inc. (2017) 9 CA5th 1257, 1270. See §18.70.

In Saheli v White Mem. Med. Ctr. (2018) 21 CA5th 308, the court held that the Bane Act’s and Ralph Act’s special requirements for arbitration agreements were preempted by the Federal Arbitration Act (FAA) (9 USC §§1–16). Both Acts depart from the preexisting doctrine of unconscionability, and treat arbitration agreements differently from other types of contracts; such discriminatory treatment is not permitted under the FAA. See §18.71A.

In Gutierrez v Carmax Auto Superstores Cal. (2018) 19 CA5th 1234, the court held that a car buyer’s allegations adequately stated a claim for deceptive practices under the Consumers Legal Remedies Act (CLRA) (CC §§1750–1784). The allegations included: (1) the seller represented that the vehicle had passed a 125-point quality inspection, but failed to disclose the recall of a critical safety-related component; (2) the buyer would not have purchased the vehicle if she had known its true condition, including the recall history; and (3) there was a duty to disclose in that the seller had actual knowledge of the recall before the sale, but had made misleading partial representations that excluded the existence of the recall, a material fact. See §18.72.

In Rubenstein v The Gap, Inc. (2017) 14 CA5th 870, 878, the court held that the allegation that a retailer sold lesser-quality clothing items at its factory stores that were never sold at its traditional stores did not state a claim under the False Advertising Law because, as a matter of law, a retailer’s use of its own brand name labels on clothing that it manufactures and sells at its stores is not deceptive, regardless of the quality. Further, there was no claim under the Unfair Competition Law (UCL) (Bus & P C §§17200–17210), because the retailer’s use of its own brand names on factory store clothing labels was not likely to deceive a reasonable consumer; a purchaser was still getting that retailer’s item. Finally, there was no claim under the CLRA, because the consumer alleged no advertising or representation of any kind that the retailer made about the characteristics or quality of its factory store merchandise. See §18.75.

In People v Overstock.com, Inc. (2017) 12 CA5th 1064, the court of appeal upheld the trial court’s imposition of civil penalties of $6,828,000 for defendant’s willful, numerous, and persistent violations of the UCL and False Advertising Law. See §18.76.

In Quanta Computer Inc. v Japan Communications Inc. (2018) 21 CA5th 438, 446, the court of appeal held that the trial court could decline to exercise jurisdiction, and did not abuse its discretion in dismissing a case without prejudice, when the forum selection clause in the parties’ contract was the only link to California. California had no public interest in providing a forum for the resolution of a dispute between a Taiwanese and Japanese company with no connections to the state, involving a contract formed and executed in their respective countries, when there were suitable alternatives. See §19.24.

About the Authors

ANNE M. BONGI received her undergraduate degree from Northwestern University and her J.D. from Boston College Law School. She is Senior Counsel for SVB Financial Group in Santa Clara.

BARBARA L. BORDEN received her B.A. degree in 1981 from the University of Virginia and her J.D. degree in 1984 from Arizona State University. Ms. Borden, of the firm of Sheppard, Mullin, Richter & Hampton, practices law in San Diego.

JAMES F. BROWN received his B.S. degree in 1985 from Weber State University and his J.D. degree in 1988 from Brigham Young University. He was formerly of the firm of Pillsbury, Madison & Sutro, practicing commercial law in San Francisco.

MARK J. COLEMAN received his B.A. degree in 1980 from Pomona College and his J.D. degree in 1983 from the University of California, Berkeley, School of Law. He was formerly with the firm of Pillsbury, Madison & Sutro, practicing commercial law in San Francisco. Mr. Coleman served on the UCC Committee of the Business Law Section of the California State Bar.

HENRY S. DAVID received his B.S. degree in 1976 from the California Institute of Technology and his J.D. degree in 1979 from New York University. Mr. David, of the firm of Squire, Sanders & Dempsey L.L.P., practices law in Los Angeles.

LOYD P. DERBY received his A.B. degree in 1963 from the University of California, Berkeley, and his J.D. degree in 1966 from the University of California, Berkeley, School of Law. Mr. Derby, formerly of the firm of Morgan, Lewis & Bockius LLP, practiced law in Los Angeles.

REID H. EVERETT received his B.A. degree in 1978 from Brigham Young University and his J.D. degree in 1981, also from Brigham Young University. He is a member of the firm of Perkins, Mann & Everett, APC in Fresno.

JEROME GROSSMAN received his B.A. degree in 1974 from the University of California, San Diego, and his J.D. degree from the University of California, Berkeley, School of Law, where he was a member of the Order of the Coif. Mr. Grossman’s practice focuses on Uniform Commercial Code secured transactions, real estate secured transactions, and other financing transactions (including securitized financings) and third-party legal opinions. Mr. Grossman is Chair of the Opinions Committee of the Business Law Section of the California State Bar and serves on the Board of Governors of the Financial Lawyers Conference. He is a partner in the firm of Luce, Forward, Hamilton & Scripps LLP, practicing in San Diego.

BRYAN D. HULL received his B.A. degree in 1979 and his J.D. degree in 1982 from the University of California, Los Angeles. Mr. Hull is Professor of Law at Loyola Law School in Los Angeles. Before joining the faculty at Loyola, he practiced with Latham & Watkins and served as Bank Operations Counsel at Crocker National Bank. He is a Member of the Executive Committee of the Los Angeles County Bar Commercial Law and Bankruptcy Section. Mr. Hull has served on the UCC Committee of the Business Law Section of the California State Bar and was Chair of the Subcommittee that studied changes to Division 6. He worked with the California Commission on Uniform State Laws in drafting new Division 6.

IVAN L. KALLICK received his B.S. degree in 1977 from the University of California, Los Angeles, and his J.D. degree in 1980 from the University of San Francisco. Mr. Kallick, of the firm of Manatt, Phelps & Phillips LLP, practices law in Los Angeles.

JEFFREY M. KAYES received his B.S. degree from the University of Michigan in 1997 and his J.D. degree in 2000, also from the University of Michigan. Mr. Kayes is a member of the UCC Committee of the Business Law Section of the California State Bar. He practices with the firm of Latham & Watkins LLP in San Francisco.

JANICE E. KOSEL received her undergraduate degree from the University of California, Berkeley, and her J.D. degree from the University of California, Berkeley, School of Law, where she was a member of the Order of the Coif. She is a former member of the UCC Committee of the Business Law Section of the California State Bar, and is currently a professor of law in the subjects of sales, contracts, and commercial finance at Golden Gate University School of Law in San Francisco. Before joining the faculty at Golden Gate, she practiced with the firm of Orrick, Herrington, Rowley & Sutcliffe in San Francisco.

RICHARD J. MAIRE, JR., received his B.A. degree in 1980 from the University of California, Los Angeles, and his J.D. degree in 1983 from the University of Southern California. Mr. Maire, of the firm of Manatt, Phelps & Phillips LLP, practices law in Los Angeles.

NEIL B. MARTIN received his A.B. degree and his J.D. degree from the University of Southern California. Mr. Martin is vice president and senior counsel in the legal department of City National Bank in Beverly Hills.

HELEN MILOWE received her A.B. degree in 1984 from the University of California, Berkeley, and her J.D. degree in 1988 from the University of California, Hastings College of the Law. Ms. Milowe practices law in San Rafael.

DAVID V. OTTERSON received his B.A. degree in 1977 from California State University, Chico, and his J.D. degree in 1980 from the University of California, Hastings College of the Law. Mr. Otterson, formerly of the firm of Crosby, Heafy, Roach & May, in Oakland, now practices law as a member of Helms Mulliss & Wicker, PLLC, in Raleigh, North Carolina.

WILLIAM B. PIELS received his B.A. degree in 1977 from Macalester College and his J.D. degree in 1980 from the University of Oregon. Mr. Piels, of the firm of Holland & Knight LLP, in San Francisco, practices in all areas of asset-based financing and has extensive experience representing lessors, lessees, and lenders in a broad variety of equipment financing transactions.

HON. WHITNEY RIMEL received her B.A. degree in 1969 from Oberlin College, her M.A. degree in 1972 from the University of Chicago, and her J.D. degree in 1982 from the University of California, Davis, School of Law. Judge Rimel, formerly a partner in the law firm of Diepenbrock, Wulff, Plant & Hannegan in Sacramento, is a judge of the United States Bankruptcy Court for the Eastern District of California, in Fresno. Judge Rimel has served on the UCC Committee of the Business Law Section of the California State Bar and has been an adjunct professor at McGeorge School of Law.

THOMAS ROSS received his B.S. degree in 1957 from the United States Naval Academy and his J.D. degree in 1980 from the University of California, Davis, School of Law. Mr. Ross was formerly of counsel to the law firm of Downey, Brand, Seymour & Rohwer in Sacramento.

MELISSA N. SANCHEZ received her B.A. degree from the University of California, Davis, where she was the recipient of a Regents Scholarship, and her J.D. degree from Columbia University School of Law, where she was a Robert L. Lieff Scholar. She practices with the firm of Manatt, Phelps & Phillips LLP in Los Angeles.

MICHAEL K. SLATTERY received his B.A. degree in 1978 from Princeton University and his J.D. degree in 1982 from the University of Southern California. Mr. Slattery formerly practiced bankruptcy and commercial law with the firm of Rutan & Tucker in Costa Mesa, and now serves in the office of the County Counsel in Fresno. He is the author of FIRREA Receivership and Conservatorship Law (Clark Boardman Callaghan 1992). He has taught courses at Western State University College of Law on UCC sales, bankruptcy, and contracts.

WAYNE H. THOMAS received a B.S. degree from Oklahoma State University in 1962, an M.B.A. degree from the University of North Dakota in 1974, and a J.D. degree from the University of California, Davis, School of Law in 1978. He has been a Certified Specialist in Business Bankruptcy Law through the American Bankruptcy Board of Certification and a Certified Specialist in Personal and Small Business Bankruptcy Law through the State Bar of California Board of Legal Specialization. Mr. Thomas is Special Counsel to Thoits, Love, Hershberger & McLean in Palo Alto.

MARCIA B. WILBUR received her B.A. degree from California State University, Fresno, and her J.D. degree from Pepperdine University. Ms. Wilbur is Dean Emeritus at Western State University College of Law in Fullerton and an instructor in commercial law.

ERICH P. WISE received his A.B. degree in 1970 from Harvard University and his J.D. degree in 1974 from the University of Chicago. Mr. Wise, of the firm of Flynn, Delich & Wise, practices law in Long Beach.

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