Sales Paper 4

(d) The UCC places risk of loss on the breaching party. Since Cey shipped nonconforming goods, it breached the contract and would have risk of loss until the nonconforming goods were accepted by the buyer or until the goods were cured by Cey. Since Deck rejected the goods and Cey did not cure the goods, risk of loss remained with Cey. Shipping terms have no bearing on risk of loss in this situation because the goods did not conform to the contract. Answer (a) is incorrect because Deck would only bear risk of loss if the goods conformed to the contract. An872 swer (b) is incorrect because the risk of loss was never transferred to Deck since the goods were nonconforming. Answer (c) is incorrect because if the goods were conforming, risk of loss would pass to Deck at Cey’s warehouse based on the shipping terms “FOB Cey’s warehouse.”

(b) The parties to the contract may agree as to which party bears risk of loss. In the absence of this, under the UCC, the shipping terms determine who bears risk of loss.

(a) In this situation, since Wool is not a merchant seller, the risk of loss passed to Bond on Wool’s tender of delivery. If Wool had been a merchant seller, then the risk of loss would not have passed until the buyer received the goods. Answers (c) and (d) are incorrect because the risk of loss passed when the nonmerchant seller (Wool) tendered delivery of the painting. Answer (b) is incorrect because the risk of loss would not pass at the time the contract was formed since the seller still had possession of the painting and had not attempted to deliver it to the buyer.

(b) Common carriers are not liable for losses due to causes deemed acts of God. Although a common carrier may limit its damages to a dollar amount specified in the contract, it is not liable at all in this case. Funston, not the customer, had the risk of loss due to the FOB terms.

(b) Statement I is incorrect because a liquidated damages provision is enforced if it is not punitive but amounts to a reasonable estimate of what the loss will be in the event of a breach of contract. If a reasonable estimate of the loss from a breach of contract cannot be estimated with a reasonable degree of certainty, the parties can agree on an amount, but still the amount cannot be punitive. Statement II is correct because damages that are excessive are viewed as punitive.

(b) The seller generally discharges his obligation to the buyer by placing conforming goods at the buyer’s disposition and giving the buyer reasonable notice to enable the buyer to take delivery.

(b) A seller has the right to resell goods to another if the buyer refuses to accept the goods upon delivery. Answer (a) is incorrect because specific performance is not a remedy available to the seller. Baker cannot force Lazur to accept the word processor. Answer (c) is incorrect because Baker has a couple of additional remedies available. Baker can recover the full contract price plus incidental damages if he is unable to resell the identified goods. Alternatively, if the difference between the market value and contract price is inadequate to place Baker in as good a position as performance would have, then Baker can sue for lost profits plus incidental damages. Answer (d) is incorrect because Baker could sue for consequential damages that Lazur had reason to know Baker would incur as a result of Lazur’s breach.

(a) By advising Mazur on June 1 that it would not accept or pay for the wheat, Good has engaged in anticipatory repudiation. Anticipatory repudiation occurs when a party renounces the duty to perform the contract before the party’s obligation to perform arises. Anticipatory repudiation discharges the nonrepudiating party (Mazur) from the contract and allows this party to sue for breach immediately. In this situation, Mazur could successfully sue Good for the difference between the resale price and the contract price on June 2. Answer (b) is incorrect because Mazur was discharged from the contract on June 1 and would not have to wait until after June 23 to resell the wheat. Answer (c) is incorrect because Good would only be allowed to retract its anticipatory breach if Mazur had ignored this breach and awaited performance at the appointed date. Answer (d) is incorrect because specific performance is only allowed for unique goods or for other situations in which monetary damages are not appropriate.

(c) Pickens has committed an anticipatory breach of contract. Thus, Crocket, as the aggrieved party, has different options. Crocket may treat it as a present breach of contract with the remedies available for breach of contract. One of these remedies is that the aggrieved party (Crocket) may cancel the contract. Another option is that Crocket may wait for a reasonable time to see if Pickens will change his/her mind and still deliver.

(d) UCC Section 2-719(3) states that a limitation of damages for personal injury in the case of consumer goods is considered to be unconscionable and thus not allowed. Although limitations of damages for personal injury in the case of nonconsumer goods can be allowed, answer (d) is correct since one limits “personal injury” to the stove which was apparently being used for consumer use in this fact pattern. Answer (a) is incorrect because under the UCC, the spouse, being a member of the household expecting to use the stove, may recover for damages. Answer (b) is incorrect because Larch was notified shortly after the explosion. This notice, however, was not required. Answer (c) is incorrect because even though the disclaimer did not disclaim all liability, it did attempt to disclaim personal injury. This disclaimer for personal injuries, however, is not allowed for the reasons mentioned above. Answer (d) is chosen as being more specific than answer (c).