My Outline (UCC)

UCC Basics- Spring 2019 (Boltz) ASSIGNMENTS 13-15 (PGS 223-277) Case: North American Lighting, Inc. v. Hopkins Manufacturing Corp. (1994) Facts: Defendant seller appealed from a decision by the United States District Court for the Southern District of Illinois that found plaintiff buyer had timely revoked its acceptance of a system and was entitled to a refund of the purchase price and found that the buyer was not liable for the rental value of the system. Buyer had sued to recover the amount it had tendered a seller in partial payment for a headlight aiming system. The seller counterclaimed for the reasonable rental value of equipment that the seller had loaned to buyer. The district court found buyer had timely revoked its acceptance of the system and was entitled to refund of the partial purchase price and was not liable for the rental value of the system during the period prior to revocation. Seller appealed from the decision arguing buyer knew of the shortcomings of the system; thus, there was no non-conformity upon which the buyer could base its revocation. Held : (CUDHAY) The reviewing court stated it would have been inequitable to require the buyer to pay for the system in full because buyer reasonably delayed revocation in order to allow seller to make good on its promise that the system could be adapted. Thus, there was timely revocation of acceptance. However, the reviewing court found seller was entitled to reasonable compensation for buyer's use of the system from the time of its arrival until the time of revocation. The decision that buyer was entitled to a refund of the purchase price was affirmed. However, the case was remanded for a determination of seller's reasonable compensation for buyer's use of the system until the time of revocation. Note: The period where revocation of a purchase contract is allowable may be extended where the seller gives continuous assurances, and where the seller repeatedly fails to repair defects of which the buyer complains. Case: Sinco, Inc. v. Metro-North Commuter R. Co. (2001) Facts: Plaintiff installed a defective fall-protection system in defendant's railroad terminal. Defendant notified plaintiff of its default and plaintiff attempted to cure its breach of the parties' contract. Dissatisfied with plaintiff's attempted cure, defendant gave plaintiff a second notice. Plaintiff made other offers to cure the defects, but defendant rejected them and "covered" the contract by hiring another business to install its safety system. Plaintiff sued for breach of contract, defendant filed a counterclaim, and the parties filed cross-motions for summary judgment. The court granted summary judgment to defendant on the issue of liability and denied plaintiff's motion for summary judgment. Held : (HELLERSTEIN) Even though plaintiff's default was a material breach and undermined defendant's confidence in plaintiff, it did not eliminate plaintiff's right, under the parties’ contract and under New York common law, to cure its breach. A party's right of termination is limited by the doctrine of cure. Although a material breach justifies the injured party in exercising a right to self-help by suspending performance, it does not necessarily justify the injured party in exercising such a right by terminating the contract. Fairness ordinarily dictates that the party in breach be allowed a period of time--even if only a short one--to cure the breach if it can. If the party in breach does cure within that period, the injured party is not justified in further suspension of its performance and both parties are still bound to complete their performances. Note: In order to effectively cure a breach, a seller must make a conforming tender, and the buyer must accept the tender. Mere suggestions of solutions regarding potentially curative

performance by the seller are not enough; the seller holds the burden of performance, and cannot shift any part of that burden to the buyer. Problem Set 13  13.1- a) No; Notice is required to accept; she has inspected but has not given notice (2- 606) b) Yes; she has altered the product signifying acceptance of the good (2-606(1)(c)) c) No; she is still within the reasonable period of inspection d) Yes; 2-606(1)(c) she has acted inconsistently with the seller’s ownership post- rejection e) No; she can’t reject is seller says they will fix it (2-612(2)) f) Yes; “shaken faith doctrine” g)  13.2- Don’t sell the steel. Once you reject the shipment it is the property of the seller. She can call the seller and ask for permission to take back ownership or work out a new deal, but she forfeited right to sell once she rejected under 2-602  13.3- Sell cars with as-is warranty to put buyers on notice. Seller has no protection of disclosure if he doesn’t and is expected to reasonably believe tender is conforming, which he can’t do without proper inspection. He would not have grounds under 2-508 to remedy the or substitute with conforming tender unless he disclosed potential problems  13.4- (1) under 2-606 they could still be considered in a trial period of making sure the vehicle is in proper working order and conforms to expectations since it has only been a week and the oil issue was noticed after the first school trip, so they had not officially accepted the item and should be able to void the deal. Or, if acceptance is present, it can be revoked in a reasonable time under 2-608. (2) Under 2-711(3) the school can keep the bus and even resell it to collect their money or any expenses they were out as an aggrieved seller. (3) Under 2-602 buy can’t continue use of the vehicle once justifiable rejection has occurred (4) under 2-508 a chance to remedy would be possible only if seller can assuredly say that he reasonably thought the issue was not present. If he can not give assurances that the issue was not present or show that the vehicle was sold as-is thereby putting the buyers on notice, then he loses the option to remedy the issue and save the transaction  13.5- They may return them under 2-601 for failure to conform to the contract as the contract stated they would include installation. They would also be allowed under 2- 606(1)(a) because the buyer has not officially accepted the goods without being afforded a reasonable opportunity to inspect them for conformity. It is impossible to inspect the computers if the are inly delivers and not installed and set up. -2-608- revokes acceptance (revocation) Case: In re Rafter Seven Ranches, L.P. (2008) Facts: Appellant, a debtor/lessee, appealed from the U.S. Bankruptcy Appellate Panel for the Tenth Circuit a decision upholding a bankruptcy court's rejection of appellant's objection to the claim of appellee, a creditor/lessor-lender, that the debtor was liable to the creditor for equipment leases because the debtor accepted goods and failed to reject them seasonably as provided by the Uniform Commercial Code (UCC), Wyo. Stat. Ann. § 34.1-1-109 et seq. The creditor provided financing for the lease/purchase of used sprinkler systems by the debtor. The first sprinkler

Held : (WINTER) The court found that because of defendant's breach, plaintiff had to shut down its manufacturing operation, and the date on which plaintiff's produce was available for sale was substantially delayed. The court also found that plaintiff was entitled to various consequential and incidental damages because plaintiff's expenses for shipping, customs, and related matters for the two returned shipments of compressors were clearly foreseeable and recoverable incidental expenses. Therefore, the court reversed in part the denial of damages and remanded for further proceedings. The district court's decision that found that defendant seller breached its contract with plaintiff buyer and awarded plaintiff lost profits and other damages was reversed in part and remanded. Plaintiff was also entitled to various consequential and incidental damages because plaintiff's losses were clearly foreseeable and recoverable incidental expenses. Note: If a breach is fundamental, the buyer may either require delivery of substitute goods or declare the contract void under the CISG. A breach is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. Case: Gray v. First NH Banks (1994) Facts: Plaintiff buyers appealed from the Superior Court, Belknap County (New Hampshire), that dismissed their suit for rescission of a real estate purchase. They asserted error in finding defendant bank's violation of N.H. Rev. Stat. Ann. § 485-A:39 (1992) did not provide a cause of action, in failing to rule the lack of signatures on the site assessment study constituted per se liability, and in finding defendant realtor was acting as an intermediary. After learning that N.H. Rev. Stat. Ann. § 485-A:39 (1992) required the preparation of a site assessment study evaluating the sewage system of developed waterfront property before it could be offered for sale, the buyers filed suit, contending that the bank's failure to procure a site assessment until the day before the closing entitled them to rescission of the contract and that negligent or fraudulent misrepresentations entitled them to money damages. Realtor and bank's motion to dismiss at the close of the buyers' case in the jury-waived trial was granted. On appeal, the buyers contended that the failure to comply created per se liability, entitling them to rescission of the purchase. Held : (BATCHELDER) The court found that the buyers knew of the problems yet chose to utilize them as a bargaining chip in negotiations for the purchase of the property. Further, the trial court found the buyers were aware of the problems with the sewer system early on in the negotiations, thus negating any argument that they relied on the bank's or realtor's statements. Finally, there was no evidence that the value of the property was substantially less than that bargained for. The judgment of the trial court dismissing the buyers' action for rescission of a real estate purchase was affirmed. Note: Although lack of strict compliance with the statutory mandate may give rise to the remedy of rescission, plaintiffs must first prove that the failure to comply caused their injuries.  Inspection is necessary for acceptance Problem Set 14  14.1- a) No, she can not revoke; “Hell or High water clause”; recourse-check for warranties in the contract; express or implied b) Yes, no clause in place

c) No; she is a consumer since it is for personal use rather than a finance lease; 2A- 407, comment 2 d) e) Argue that bank’s attempt to alter her reasonable opportunity to inspect the bus is against the rules and signing the lease can not change the point of acceptance  14.2- a) Yes (Art. 25); Can cure (Art. 48) b) No (did not create a substantial detriment under Art. 25); Art. 46 allows ability to request repairs; Art. 39 allows up to 2 years c) Under Art. 37 suits can be replaced with better quality suits if they can do so within the 3 weeks time period since they delivered early  14.3- mutual mistake (common law claim) allows for equitable rescission of the contract Case: Stampede Presentation Products, Inc. v. Productive Transportation, Inc. (2013) Facts: Stampede Presentation Products, Inc. (Stampede) (plaintiff) purchased 960 flat-screen televisions from 1 SaleADay (defendant). The purchase invoice for this transaction said that the televisions were to be shipped to Stampede’s customer in Illinois. Stampede hired Productive Transportation, Inc. (Productive) (defendant) to transport the televisions from 1 SaleADay’s warehouse in California to Stampede’s customer in Illinois. The agreement between Stampede and Productive was set out in a bill of lading that said the goods were to be shipped “FOB Origin,” which is trade shorthand meaning the seller’s responsibility ends once the carrier picks up the goods for transportation. Additionally, the bill of lading identified Stampede as the shipper. Productive then subcontracted with MML Transport to transport the televisions. MML Transport picked up the televisions, but the televisions were either lost or stolen in transit. Stampede sued Productive and 1 SaleADay, alleging, among other things, breach of contract. 1 SaleADay moved to dismiss Stampede’s claims. 1 SaleADay argued that it had a shipment contract with Stampede that placed the risk of loss on Stampede once the televisions were transferred to MML Transport. Held : (SCHROEDER) Under Uniform Commercial Code (UCC) § 2-509(1)(a), the risk of loss under a shipment contract shifts from the seller to the buyer once the goods are delivered to a carrier. The UCC categorizes a contract’s delivery terms into two types: shipment or destination. In a shipment contract, the buyer is responsible for the logistics and expenses of transporting the merchandise. Under UCC § 2-504, the seller only needs to get the goods to the carrier for shipment. In addition, for shipment contracts, UCC § 2-509 specifically transfers the risk of loss to the buyer once the seller responsible transfers possession of the merchandise to the carrier. In contrast, a destination contract makes the seller responsible for the expenses of transporting merchandise to the buyer. For a destination contract, UCC § 2-509(1)(b) says the risk of loss remains with the seller until the carrier delivers the goods to the buyer. Finally, the term F.O.B. Origin is one way to clearly identify a shipment contract. However, if there is any doubt, under the UCC, the default presumption is that a contract is a shipment contract. Here, Stampede and 1 SaleADay had a shipment contract, not a destination contract. The purchase invoice does not expressly make 1 SaleADay responsible for delivering the goods to a destination. Plus, the Productive bill of lading says FOB Origin, and it identifies Stampede as the shipper rather than 1 SaleADay. These facts weigh in favor of a shipment contract. If there is any doubt, that doubt should be resolved in favor of finding a shipment contract anyway. Because this was a shipment contract, UCC § 2-509(1)(a) shifted the risk of loss from Stampede to 1 SaleADay once MML

Case: In re Jawad (2006) Facts: Samey Jawad (debtor) entered a finance lease with Michael R. White and Associates (White) (creditor) to lease a modular office. Under the finance lease, White would purchase the office from a third-party vendor in two installments: $17,000 once the lease was signed, and $19,805 once the vendor delivered the modular office to Jawad. Jawad would then make monthly payments to White over a 60-month period, totaling nearly $79,000. The lease stated that Jawad would assume the risk of loss upon delivery. However, the lease had an addendum that deemed the office accepted upon execution of the lease, rather than upon delivery. The lease was signed, and White paid the initial $17,000 to the vendor. However, the vendor never delivered the modular office to Jawad. Through a series of events, Jawad recovered some money for White, paid some money to White, and ended up filing for bankruptcy twice. By the second bankruptcy proceeding, White had already received almost $24,000. Still, White made a claim against Jawad for the remaining unpaid lease money, interest, and attorneys’ fees. If White received the entire amount of its latest claim, White would receive a total of nearly $49,000 for its initial advance of $17,000. Jawad objected to White’s claim, arguing that enforcement of the lease would be unconscionable. White argued that the risk of loss for non-delivery fell on Jawad, not on White. The bankruptcy court disallowed White’s claim, finding that it was unconscionable. White appealed. Held : (RUSSELL) Pursuant to Uniform Commercial Code (UCC) § 2A-219(1), under a finance lease, the risk of loss passes to the lessee upon the lessee’s acceptance of the leased goods. For a lease other than a finance lease, the lessor retains the risk of loss for the entire term of the lease. However, in general, lessees under finance leases are offered very few protections because the lessors are not the manufacturers or sellers of the goods being leased. Thus, for a finance lease, the UCC says that the lessor only has the risk of loss until the lessee accepts the goods. The lessee must both receive and have an opportunity to inspect the goods before a lessee can accept the goods. However, after delivery and acceptance, a lessee in a finance lease is bound by the terms of the lease no matter the condition of the leased goods or what happens to the leased goods. Finally, although lease parties may contract around the UCC’s risk-of-loss provisions, they cannot use unreasonable terms to do so. Here, the main lease between White and Jawad mirrored UCC § 2A-219(1), placing the risk of loss under the finance lease with the lessor until delivery. However, the lease addendum attempted to shift the risk of loss before delivery to Jawad by deeming the leased equipment accepted upon signing of the lease, rather than after delivery and inspection. This addendum clause contradicts the statutory rules and is unreasonably one-sided. Consequently, the lease, not the addendum, governs the risk of loss here. The risk of loss never shifted to Jawad because the modular office was never delivered to Jawad. The bankruptcy court’s judgment is affirmed. Dissent (Montali, J.): The deemed acceptance clause of the addendum was part of the consideration that Jawad paid for White’s financing. The parties are free to make a bad bargain if the law permits it. Case: Citgo Petroleum Corp.v. Odfjell Seachem (2013) Facts: YPF (defendant), a company with a place of business in Argentina, sold cyclohexane to Tricon. YPF agreed to ship the cyclohexane aboard the shipping vessel the BOW FIGHTER (defendant) to Houston, Texas by March 15, 2005. YPF’s contract with Tricon specified that YPF was to ship the cyclohexane “CFR,” a standard code for the International Commercial Term

(Incoterm) “Cost and Freight.” Shipping CFR means the seller arranges the shipping transportation and pays for delivering the goods to the shipping vessel. Once the goods are on board the vessel, the risk of loss shifts to the buyer. In turn, Tricon sold the cyclohexane to Citgo (plaintiff). Tricon agreed to deliver the cyclohexane aboard the BOW FIGHTER to Citgo in Freeport, Texas by April 20, 2005. The BOW FIGHTER arrived late to Argentina, and then suffered engine problems as it sailed to Texas. The ship arrived nearly two months late to Houston and then to Freeport. During the two-month delay, the price of cyclohexane dropped significantly, causing Tricon to lose $450,000. Citgo sued both on behalf of Tricon, as Tricon’s subrogee, and on its own behalf. Among other claims, Citgo alleged that YPF had breached its duty under Article 32 of the United Nations Convention for the International Sale of Goods (CISG) to arrange for appropriate transport of the cyclohexane. YPF moved for summary judgment, arguing that the contract only required YPF to deliver the cyclohexane to the BOW FIGHTER, and, after that, the risk of loss for any transport issues fell on the buyer. Held : (MILLER) In an international sales contract, the incorporation of a non-contradictory Incoterm for shipping does not supersede the CISG’s default rules. The CISG contains default rules governing when the risk of loss passes in an international sales contract. One CISG default rule is the rule in Article 32 that if a seller is arranging for the transportation of the goods, then the seller has a duty to select appropriate transportation. The CISG also lets parties’ contract around these default rules if they want. An Incoterm is a standard code that parties can use to define their shipping responsibilities in international sales contracts. An Incoterm may contradict and replace a default CISG term. However, if an Incoterm is not contrary to the CISG’s default terms, then the Incoterm and the CISG default terms can be read together. Here, the CISG governs the YPF-Triton contract. The parties agreed to ship the cyclohexane CFR. However, the CFR term does not contradict the CISG’s default rules. The CFR term made YPF generally responsible for arranging transportation. CISG’s default rules in Article 32 only refined this responsibility by requiring YPF to arrange for appropriate transportation. The CFR term also shifted the risk of loss to Citgo once YPF loaded the cyclohexane, but this is not incompatible with holding YPF responsible for its choice of shipping vessels before that point. Thus, reading the non-contradictory terms together, YPF had a duty to arrange for appropriate transportation of the cyclohexane. Whether YPF’s selection of the BOW FIGHTER constituted appropriate transportation is a question of fact. Accordingly, YPF’s motion for summary judgment is denied. Case: Chicago Prime Packers, Inc. v. Northam Food Trading Co. (2005) Facts: Chicago Prime Packers, Inc. (Chicago Prime) (plaintiff), a Colorado company, contracted to sell 1,350 boxes of pork ribs to Northam Food Trading Company (Northam) (defendant), a Canadian corporation. Chicago Prime bought the ribs from meat processor Brookfield Farms (Brookfield). Brookfield’s logs indicated that the ribs were kept at a proper temperature. Northam engaged Brown Brother’s Trucking Company (Brown) to pick up the ribs from Brookfield’s storage facility. Thereafter, Brown delivered the ribs to Beacon Premium Meats (Beacon), Northam’s customer. When processing the shipment, Beacon noticed issues with the ribs’ condition. A United States Department of Agriculture supervisor, Dr. John Maltby, examined the product and concluded that the ribs were spoiled and had arrived to Beacon in that condition. Northam told Chicago Prime about the assessment and refused to pay. Chicago Prime brought suit against Northam for payment. Northam contended that its obligations under the contract were excused because the ribs were already spoiled when Brown picked up the ribs from Brookfield. The district court found that the burden of proving nonconformity at the time of

c) d)  16.2-  16.3- a) b) Rescission option goes away (no clean hands); if core desire is to purchase home you can make it work SELLER’S REMEDIES Why do legal remedies matter?  Providing the stick to incentivize cooperation between buyers and sellers  Bad faith either a buyer and a seller  No other contractual alternative available What are Seller’s Remedies?  Basic principle: o Place the aggrieved party in the position the seller would have been as if the performance had been rendered o No consequential damages o Sellers are eligible for incidental damages: 2-710 Description of Buyer’s breach  Wrongful rejection  Wrongful revocation of acceptance  Non-payment by buyer when payment is due  Anticipatory repudiation -unequivocal refusal to perform prior to performance being due 2-610 Remedies Available 2-703  Withhold delivery *potential article 9 problem  Stop delivery by bailee  Identify goods to the contract in the case of anticipatory repudiation  Resell and recover, 2-706  Recover damages: contract price- market price + ID -expense saved, 2-708 (Non- acceptance or repudiation by buyer)  Sue for the price (action for the price) 2-709)  Cancel the contract, 2-708 Action for the Price  Action for the price is akin to seeking specific performance, but limited to three circumstances o Buyer has accepted the goods o Conforming goods lost or damaged AFTER risk of loss has passed to buyer o Seller identified goods to the contract and to reasonable prospect reselling to third parties

Resale Damages, 2-706  Seller gives buyer notice of resale  Seller resells the goods of either a public or private sale  Damages formula o Contract price (KP) – Resale price (RP) + Incidental damages (ID) -ES  Need not account for profits made on resale  Can resell over a period of time o Consider the following questions o Was the resale COMMERCIAL REASONABLE o Will seller receive compensation for the time value of money last due to delay in the resale What constitutes REASONABLE RESALE of goods 2-708  2-708 seller’s damages for non-acceptance or repudiation  Difference between the market price (at the time and place for tender) and the unpaid contract price, together with incidental damages, but less expenses saved in consequence of buyer’s breach o Time for tender determined by time stated in the contract o Place of tender determined by the delivery term (FOB) Lost Profits  2-708(2)  In the context of a LOST VOLUME seller/lost profits seller as being one that, had the buyer not breached, would have made additional profit o Neither contract-resale or contract-market damages truly place seller in the same position seller would have been in if buyer not breached Case: Sack v. Lawton (2003) Facts: Kenneth Lawton (defendant) agreed to purchase a drawing by Rafael known as the Modello from Shirley Sack and Shirley D. Sack, Ltd. (plaintiffs) for $12,000,000. Sack’s agent, together with Lawton, executed a bill of sale for the drawing. Lawton never paid for the Modello drawing, and the drawing remained with Sack. Eventually, Sack tried to sell the drawing to another buyer, but she could not find a buyer willing to pay a comparable price. Sack was also concerned that the unfulfilled bill of sale would make it impossible to convey clear title to a new buyer. Sack and Shirley D. Sack, Ltd. sued Lawton for breach of contract, seeking $12,000,000 in damages for the purchase price of the drawing, plus interest and consequential damages. Lawton did not respond to the complaint, and the plaintiffs obtained a default judgment against Lawton. The only remaining issue was for the court to determine the appropriate amount of damages. Lawton did respond on this issue and contested the plaintiffs’ claim for damages. Held : (FOX) Under the Uniform Commercial Code (UCC), if a buyer has breached a contract for the sale of goods, the seller may recover the price of the entire contract if the seller has no reasonable prospect of reselling the goods for a reasonable price. UCC § 2-709 sets out the situations in which a seller may try to recover the full price of a breached contract. Specifically, UCC § 2-709(1) identifies three possible situations in which a seller may seek to recover the full contract price: (1) the buyer has accepted the goods, (2) conforming goods were lost or damaged after risk of loss had passed to the buyer, or (3) the seller is unable to resell the goods for a

 17.4 a) b) c) d) e)  17.5 Case: C.I.C. Corp. v. Ragtime, Inc. (1999) Facts: C.I.C. Corporation (CIC) (plaintiff), a vending-machine company, placed four vending machines on the premises of Ragtime, Inc. (Ragtime) (defendant), a bar owned by Donald Tabatneck (defendant). The parties agreed to a five-year lease of the machines, during which revenue would be shared between CIC and Tabatneck. After a payment dispute, CIC removed the vending machines from Ragtime’s premises. CIC then brought suit against Ragtime and Tabatneck, seeking to recover $41,000, constituting the total loss of CIC’s revenue for the four vending machines during the 59-month period that remained on the lease when Ragtime breached. Ragtime contended that CIC had failed to mitigate damages and thus was not entitled to the damages. CIC argued that it had no mitigation duty under the circumstances. The trial judge’s jury instructions directed the jury that in determining an appropriate damages award, the jury could consider what CIC should have done to mitigate damages. The jury awarded $1 in damages. CIC moved for a new trial on damages. The trial court denied the motion, and CIC appealed both the jury award and the denial of the motion for a new trial. Held : (PRESSLER) The mere fact that an injured party can make arrangements for the disposition of the goods or services that he was to supply under a contract does not necessarily mean that by doing so he will avoid loss. If he would have entered into both transactions but for the breach, he has “lost volume” as a result of the breach. In that case the second transaction is not a “substitute” for the original one. Then the remedies are based on the net profit that he has lost as a result of the broken contract. Here, a jury could have reasonably concluded that CIC owned many vending machines and could have entered into just as many lease agreements for those machines. Therefore, even if CIC re-let the four vending machines taken from Ragtime to another customer, CIC still would have experienced a loss of profits under Ragtime’s contract because CIC could and would have made two separate lease deals. The second deal would not have constituted a substitute for the first deal. By instructing the jury on the duty of mitigation instead of the doctrine of lost volume, the trial judge misled the jury in its damages calculation and infringed upon CIC’s right to proper damage instructions. Accordingly, CIC’s motion for a new trial on damages should have been granted, and the trial court’s denial of CIC’s motion is reversed and remanded. Case: Williams v. Ubaldo (1996) Facts: John Ubaldo (defendant) contracted to buy a house from Roger and Cynthia Williams (plaintiffs) for $450,000. The agreement provided that Ubaldo would furnish a down payment of $10,000 and pay the balance at closing. Additionally, the contract conditioned Ubaldo’s obligation to pay upon his ability to acquire sufficient financing. If Ubaldo breached the contract, the Williamses were entitled to keep the deposit. Before closing, the Williamses agreed to offer Ubaldo extra time to secure financing. At closing, the money was not paid to the Williamses. Eventually, the Williamses brought suit against Ubaldo, seeking specific performance of the

contract and release of the deposit from escrow. Ubaldo filed his own complaint to recoup the deposit. The Williamses were able to sell the house to a different buyer for $430,000 prior to trial. No appraiser testified at trial, and the trial court concluded that Ubaldo had breached the contract. The trial court awarded three kinds of damages to the Williamses: (1) $20,000 in compensatory damages, calculated by finding the difference between the contract price and the subsequent sale price; (2) $3,500 for real-estate taxes that the Williamses paid between the time of breach and sale; and (3) $500 in special damages for snow-removal expenses, because the Williamses had sold their snow-removal equipment in anticipation of their move from the home. The trial court entered judgment in the Williamses’ favor for $14,000, constituting the total damages offset by the $10,000 deposit that Ubaldo had already paid. Ubaldo appealed. Held : (WATHEN) In an action for breach of contract for the sale of real property, the claimant is entitled to the “benefit of the bargain” which equals the difference between the contract price and the fair market value at the time of breach. A claimant is entitled to special damages resulting from the unique needs and characteristics of the parties, if the parties were reasonably aware of those circumstances at the time of contracting. Fair market value for the purpose of determining compensatory damages for a breach of contract may be evidenced by the price obtained at a sale after the breach. Compensatory damages are meant to give the injured party the benefit of the bargain and are calculated by taking the difference between the contract price and the fair market value of the property at the time the breach occurred. The fair market value may be determined by a professional appraiser’s report, as well as the price at which the property was sold after the breach. Additionally, an injured party may be able to recoup special damages related to unique or extraordinary circumstances of which the parties were reasonably aware when the contract was executed. Here, the trial court awarded the Williamses $20,000 in compensatory damages. Because no appraiser testified at trial, the trial court properly calculated the compensatory damages using the subsequent reasonable sale price of $430,000 as the fair market value. However, the trial court improperly granted the Williamses $3,500 in damages for property taxes. During the period of time between the breach and the sale, the Williamses owned and occupied the home. The Williamses were therefore liable for those taxes and were not entitled to recoup the taxes as part of the benefit of the bargain. Finally, the trial court also erred in granting $500 in special damages for snow removal. None of the evidence produced at trial established that Ubaldo had reason to know that the Williamses sold their snow-removal equipment before the impending move. Accordingly, the trial court’s judgment is affirmed but modified to $10,000, a total that includes only $20,000 in compensatory damages and is reduced by the $10,000 deposit that Ubaldo already paid. Notes: Leases: Fundamental Differences with Sales  Residual interest in leased goods by the lessor  Terms of default defined in the lease contract Present Value, 2A-103(u)  The amount as of a date certain of one or more sums payable in the future discounted to the date certain  The discount is determined by the interest rate specified by the parties if the rate nor manifestly unreasonable at the time the transaction was entered into otherwise, the discount is determined by a commercially reasonable rate that takes into account…

Chile and shipped the pipe to Philadelphia. When the pipe was delivered, Dempsey found that much of it was bent. Rather than rejecting the delivery, Dempsey straightened the pipe and resold it for $922 per short ton. Had the pipe been delivered to Dempsey in the condition warranted by T.Co, the resale price would have been $1000 per short ton. When T.Co invoiced Dempsey for the pipe, Dempsey did not pay T.Co in full. T.Co initiated an arbitration against Dempsey for the rest of the contract money. Dempsey counterclaimed T.Co for damages Dempsey had suffered due to the diminished or reduced value of the damaged pipe. Following Uniform Commercial Code (UCC) § 2-714(2), the arbitrator awarded Dempsey diminution-in- value damages of $420,357. T.Co petitioned the district court to have the arbitration award set aside. The district court denied T.Co’s petition. T.Co appealed, arguing that the contracts between the parties barred consequential damages. In response, Dempsey argued that consequential damages do not include the diminution-in-value damages in UCC § 2-714(2). Held : (LIVINGSTON) Under the UCC, a buyer may recover damages for diminution in value under a contract that bars consequential damages. UCC § 2-714(2) allows buyers to recover damages for the difference in value between: (1) the good warranted by the seller under a contract and (2) the good actually delivered by the seller. This type of loss is referred to a diminution-in-value loss, and it reflects the reduction in good’s value caused by defects. Consequential damages are typically interpreted to include damages for lost profits, like lost business opportunities and lost sales. These lost-profit damages are distinguishable from diminution-in-value damages. Consequently, courts have held that contractual provisions barring consequential damages do not bar diminution-in-value damages. Here, T.Co delivered defective pipe to Dempsey that Dempsey had to straighten to resell. Even after Dempsey went through the work of straightening the pipe, the defective pipe was still worth less than non-defective pipe would have been worth. UCC § 2-714(2) allows Dempsey to recover damages from T.Co for the reduced or diminished value of the pipe. Because damages for diminution in value are not equivalent to damages for lost profits, the contractual prohibition on consequential damages does not preclude Dempsey from recovering lost value under UCC § 2-714(2). The district court was correct to deny T.Co’s petition to vacate the arbitrator’s award of diminution-in-value damages to Dempsey. Notes: Buyer’s remedies 2-711  When the seller (1) o Fails t make delivery o Repudiates o Buyer rightfully rejects o Justifiably revokes acceptance  THEN o With respect to the whole, IF the breach goes to he whole contract Problem Set 19  19.1-  19.2-  19.3-  19.4 a)

b) c)  19.5 a) b)  19.6 a) b) c)  19.7 a) b)  19.8 a) b) c) d) e) f) g) ASSIGNMENT 20 (PGS 344-353 & 359-365) Case: Jue v. Smiser (1994) Facts: A purchaser of real property who learns of potential material misrepresentations about the property after execution of a purchase agreement – but before consummation of the sale – close escrow and sue for damages. When touring respondent sellers' home, appellant buyers were given a brochure indicating that the home was an authenticated design by a celebrated architect. Appellant entered into a purchase agreement for the sale of respondent's home. Before the closing, appellant learned that the design could not have been confirmed as being one by the celebrated architect and signed off on a contract addendum. The closing was held and title passed to appellant. Appellant brought suit for damages, claiming that respondent misrepresented the home as being designed by the celebrated architect. The trial court granted respondent's motion for summary judgment. On appeal, the court reversed, holding that appellant, who learned of potential material misrepresentation about the property after execution of the purchase agreement, but before consummation of the sale, could have closed escrow and sued for damages. Held : (ANDERSON) When a party learns that he has been defrauded, he may, instead of rescinding, elect to stand on the contract an sue for damages, and, in such case his continued performance of the agreement does not constitute a waiver of his action for damages. The court found that appellant's reliance must have been established at the time the initial contract was struck and appellant's continued performance in the consummation of the sale had not constituted a waiver of an action for damages. The court reversed the summary judgment in favor of respondent sellers, in appellant buyers' action for misrepresentation by respondents that a celebrated architect designed their home. The court held that appellant, who learned of potential

to dismiss. Further, they pled all the requisite elements to support a claim for promissory estoppel and negligent misrepresentation. The court denied the motion. Case: Citibank (South Dakota), N.A. v. Mincks (2004) Facts: Plaintiff credit card company appealed from a judgment of the Circuit Court of Barton County (Missouri) that was entered for defendant cardholder in the company's breach of contract action filed after the cardholder refused to make payments on her account due to the merchant's non-delivery. The company claimed the judgment was based on insufficient evidence and an erroneous application of the Truth-in-Lending Act (TILA), 15 U.S.C.S. § 1601 et seq. The credit card company filed suit as the merchant's assignee to recover the purchase price. The company argued that the cardholder was not entitled to assert the merchant's non-delivery as a defense because the purchase consisted of postcards to be used in a business, which was not within the scope of Regulation Z, 12 C.F.R. § 226.1 et seq., and that even if Regulation Z did apply, non- delivery constituted a "billing error" within the meaning of 15 U.S.C.S. § 1666 and 12 C.F.R. § 226.13. The cardholder also failed to give notice of the error within 60 days as required by 15 U.S.C.S. § 1666(a). Held : (BATES) The court held that the TILA "claims and defenses rule" under 15 U.S.C.S. § 1666i and 12 C.F.R. § 226.12(c) authorized the cardholder to assert the non-delivery defense because her credit card account was an open-end consumer credit plan, and it was used to make the disputed purchase. The claims and defenses rule operated independently of the billing error rule. The court noted that even without the TILA, Missouri law gave the cardholder a common law and statutory right to assert any defense against the company that she could have asserted against its assignor, the merchant. The court affirmed the judgment that was entered in favor of the credit cardholder. Problem Set 21  21.1-  21.2-  21.3-  21.4-  21.5 Case: Belmont v. Associates National Bank (Delaware) (2000) Facts: In 1987, Peter Belmont (plaintiff) co-signed for a credit-card account with his son. The account was later purchased by Associates National Bank (Associates) (defendant). In 1992, Belmont sent a letter attempting to revoke his co-signership. Associates denied that it had received the letter, and continued to list Belmont on the account statements. After Belmont’s son declared bankruptcy, Associates identified Belmont as the primary cardholder on the account. Associates sent Belmont an account statement that indicated a balance owed of $1,895.49. On May 15, Belmont sent Associates a letter in which he explained his belief that the $1,895.49 bill was in error, and requested documentation evidencing his obligation to pay. Associates received the letter on May 19 and replied to Belmont on July 20, explaining his son’s delinquency. After Belmont sent letters reiterating his belief of error, national credit-reporting agency Trans Union issued a credit report for Belmont, which included the Associates account delinquency. Belmont brought suit against Associates under the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq.

Associates moved for dismissal or summary judgment. Belmont also moved for summary judgment. Held : (TRAGER) Under TILA, a creditor must pay penalties for violations of notice-of-billing response requirements, regardless of whether actual damages resulted. The purpose of TILA is to protect consumers and allow consumers to more safely resolve disputes with creditors. To this end, TILA includes provisions relating to billing errors, specifically requiring creditors to respond to billing-error notices in compliance with TILA § 161. According to § 161(b), a billing error may include an incorrect statement of credit. When a creditor receives a notice of billing error from a customer, the creditor must respond within 30 days by either fixing the error or sending copies of any requested documents. In addition, under § 162(a), creditors are prohibited from making an unfavorable credit report while a notice of error is pending. If a creditor is found to have violated TILA §§ 161 or 162, the creditor will be assessed a penalty equal to twice the amount of any finance charges, up to $1,000. Here, there was a billing error under TILA § 161(b) when Belmont was improperly held liable for the account balance. Belmont’s numerous letters indicated the reasons that Belmont believed there was an error. The letters also requested documentary evidence to support Associates’ claims. As a result, Belmont’s letters to Associates constituted valid notices of billing error under § 161. Although Associates received Belmont’s notice on May 19, Associates did not respond until July 20, well outside of the 30-day time period prescribed by § 161(a). Associates’ letter also failed to include the requested documents. While the notices of billing error were still pending, Associates notified Trans Union, which issued an adverse credit report for Belmont in violation of § 161. Because Associates violated §§ 161 and 162, Belmont is entitled to recover an amount equal to twice the finance charges related to the transaction, not to exceed $1,000. The finance charges on the Associates account exceeded $1,000 total, and Belmont is therefore entitled to recover the maximum penalty. Accordingly, Associates’ motions for dismissal or summary judgment are denied, and Belmont’s motion for summary judgment is granted. Case: Roundtree v. Chase Bank USA, N.A. (2014) Facts: This case involves contested charges to Plaintiff's Chase Bank credit card, which was used for travel and entertainment. Following Defendant's partially successful motion for summary judgment, Plaintiff's remaining claims concern the Fair Credit Banking Act. In October 2013, Plaintiff notified this Court of the scheduled deposition of Defendant's deponent, appointed under FRCP 30(b)(6) (“corporate deponent”). Two such depositions occurred. In February 2014, Defendant informed Plaintiff of the corporate deponent's illness and related unavailability for trial. The corporate deponent is now well enough to work but asked to be released from further involvement with this matter. Plaintiff makes two requests. First, he asks this Court to apply a combination of FRCP 30(b)(6), 43, and 45 to compel Defendant's unwilling corporate deponent to testify at trial via live video link. Second, Plaintiff cites FRCP 32(a)(4)(C) and asks this Court to require Defendant to produce evidence substantiating the corporate deponent's unavailability. As explained below, Plaintiff's motions are not supported by the plain language of these rules. Held : (PECHMAN) Plaintiff asserts that the duties of Defendant's corporate deponent extend beyond discovery. This is incorrect. FRCP 30(b)(6) is a discovery rule applicable when a party wishes to depose an organization. Under the rule, the deposing party describes the subject matter of the proposed deposition and the organization produces the person(s) competent to testify on the described subject; i.e., the corporate deponent. Here, Plaintiff conducted two depositions of