BLAW Exam 2

Chapters 4-6

sales law

• body of law which governs contracts for the present and future sale of goods

• subcategory of contract and commercial law

warranty definition

promise bw buyer and seller

firm offer

irrevocable promise by a merchant to keep an offer open for a set time without needing payment

______ under CISG are valid without writing and may be irrevocable if offeree reasonably relies on and acts upon the offer

firm offers

foundation of modern sales law

law merchant

merchant definition

those who deal in specific goods, hold themselves out as having specialized occupational knowledge, or employ intermediaries with such expertise

contract

legal mechanism for conducting trade in goods, embodying the agreement bw buyers and sellers

a contract sets out…

the rights and liabilities that can extend into the future

a well-drafted contracts serves a roadmap that…

guides parties’ performance and behavior

in case of disputes, a contract determines parties’…

rights and obligations, with courts and arbitrations referring to the governing law of sales for interpretation and enforcement

American approach to negotiations

• aggressive

• adversarial

• win-lose perspective

US lawyers are accustomed to…

• press for every legal advantage

• draft contracts w calculated, technical, and detailed language

American contracts typically…

• set forth exact performance expectations

• outline legal rights in case the deal falls apart

most contracts fall under…

common law

what does the law of sales NOT apply to?

1. contracts for the sale of real estate

2. intangibles (stocks, bonds, copyrights, patents, trademarks)

3. contracts of employment

4. contracts of insurance

5. contracts of the provision of services

sale

transfer of ownership and possession of tangible goods

lex mercatoria

set of customs for exchanging goods for money + an unwritten code that protected their words, gave them the benefit of the bargains, + fostered commerce and trade

• enforced by merchants

US Uniform Commercial Code

• primary body of COMMERCIAL law for DOMESTIC transactions in the US (except Louisiana)

• covers areas of COMMERCIAL law (including bank deposits, negotiable instruments, and the sale of goods)

• must include a merchant

international contracts for sale of goods may be subjected to…

foreign laws

________ law controls contracts not governed by the UCC

Common

Contracts not governed by the UCC include:

1. contracts for employment

2. contracts for insurance

3. contracts for services

4. contracts for the sale of real property

5. contracts for the transfer of IP

unification of the law

process of making national laws for uniform

Convention on Contracts for the International Sale of Goods

forms the basis for a widely accepted body of intl sales law

• merchant to merchant transaction

• implemented in more than 90 nations

Intoxicating, Inc. v. Maritim Hotelgesellsschaft mbH Background

Intoxicating (Pennsylvania) sued MH (Germany) for an unpaid balance on beauty products ordered through Maritim’s employee. Maritim filed a motion to dismiss, claiming the parties had never created a binding contract

Intoxicating, Inc. v. Maritim Hotelgesellsschaft mbH Issue + Decision

Issue: ability of parties to “opt out” of the CISG by using a choice of law clause + effect of CISG on intl contracts

Decision: court denied MH’s motion to dismiss, ruling that CISG was applicable and absense of a written contract was insufficient to dismiss the plaintiff’s claims. Parties should have said that CISG does not apply.

Examples of countries that have adopted the CISG

The US, Canada, Mexico, China, Japan, and most of Europe

Examples of countries that have NOT adopted the CISG

India, the UK, some countries in Africa, some countries in Asia, some countries in the Middle East, and some countries in Central America

CISG applies only if THESE conditions are met:

1. Contract is for the commercial sale of Goods

2. Place of business of parties is in different countries

3. Each party’s place of business is in a country that has ratified the CISG

4. Rules of private intl law (like choice of law rules) lead to the application of the law of a contracting State

T/F: The CISG does not define the term “goods”

True

Assume a dispute arises over a contract between a buyer whose business in the US and a seller whose business is in France. Regardless of who initiates the lawsuit or whether its brought in the US or France, if no choice of law clause exists, their rights will be determined by…

The CISG, because the CISG automatically applies when:

1) both parties' places of business are in different states AND both countries are signatories of the CISG

and because the CISG supersedes the U.S.’s UCC and France’s Civil code

The CISG does NOT automatically apply when:

1. Countries opt out (Parties can contractually exclude the CISG's application, in whole or in part, and choose a different governing law instead)

2. Subject matter exclusions

3. Not a sale of “goods” transaction

4. both parties aren’t in contracting states

place of business requirement

country that has the closest relation to the contract and where it will be performed

Rules to opt out of CISG

1. express language (stated in clear and unequivocal language)

2. specify domestic law governing jurisdiction

3. state that the chosen domestic law applies without regard to its conflict-of-law rules

Valid contract under Common Law

Agreement that has and meets all the requirements of a binding contract, including:

1. Mutual assent from words or conduct

2. Supported by consideration, with each side of the contract providing something of value

3. Legal capacity

4. Contract must not be for illegal purposes or contrary to public policy

Valid contract under Civil Law and CISG

1. Mutual assent from words or conduct

2. Legal capacity

3. Contract must not be for illegal purposes or contrary to public policy

The CISG does not provide rules for determining whether:

• a contract is valid

• a party to a contract is legally competent

• a party is guilty of fraud or misrepresentation

Who decides anything other than the formation of a contract and the rights/obligations of the sellers and buyers?

individual states and national laws

the CISG is ONLY responsible for:

governing the formation of a contract and the rights/obligations of the buyers and sellers

Under the UCC, American law (does/does not) require that contracts for the sale of goods of $500 or more to be in writing

Does

Under the CISG, a contract for the international sale of goods…

“need not be concluded in or evidence by writing”

In which countries must foreign sales contracts governed by the CISG be in writing?

Argentina, Chile, Hungary, Russia

Which country’s provision in contract law prevails over the CISG, permitting foreign sales contracts to be either written or oral

China

Which countries have enacted laws recognizing the validity of electronic or digital signatures on contracts and legal documents?

The US, china, japan, and members of the EU

integrated contract

written documents that evidence the final agreement of the parties

parol evidence rule

• common law

• states that a court may not consider written or oral statements made prior to or at the time of concluding a fully integrated written contract if they contradict, vary, or add to the terms of the written contract

  • prevents extrinsic evidence from reaching the ears of a jury, lessens chance of unreliable testimony

    • applicable to ALL contracts

T/F: CISG incorporates the parol evidence rule, allowing courts to consider ALL relevant circumstances, including negotiations and subsequent conduct of the parties, including oral/written agreements pertaining to contracts outside of the written contract

True

Trade usages

rules derived from widespread customs of an industry and past practices of merchants, used to fill gaps or interpret specific contract provisions in many jurisdictions

the CISG recognizes trade usages that…

the parties have agreed to, as well as those widely known and observed in the industry/trade involved

Mutual assent

agreement by all parties to the terms of a contract, often called a "meeting of the minds"

• Offer and acceptance

Offer

a proposal for concluding a contract with definite intention to be bound

what makes an offer sufficiently definite?

if it indicates:

1. goods

2. quantity

3. price

(may require addtl terms)

T/F open price term contracts are possible under CISG

T

what additional information does the pro forma invoice set out?

• additional charges payable to buyer’s account (cost of packing and crating, freight forwarder’s fees, etc.)

• mode of shipment

• method of payment

• lenght of t for which quoted terms will be valid

• any other terms required by seller as condition of sale

Invitations to deal

preliminary expression of willingness to negotiate, rather than a binding legal offer

pro forma invoice

common method of offering goods for sale internationally, typically meeting offer requirements with specific terms and conditions

commercial invoice

final bill accompanying payment request

mailbox rule under Common Law

idea that a contract is formed when the acceptance is sent (NOT when the offeror receives it)

mirror image rule

• requires acceptance to match offer terms exactly

• found in common law, civil law, and CISG

• acceptance with different terms = counteroffer

purchase orders

legal offer to buy

order confirmation

• seller's formal acknowledgment of a purchase order

• often serves as the legal acceptance that finalizes a binding sales agreement

terms and conditions

legally binding rules and provisions that define the rights, responsibilities, and expectations of parties entering into a contract or using a service

battle of the forms

• occurs when terms in purchase orders and order confirmations differ

How do Common Law and Civil Law deal with Battle of the Forms?

No contract exists if the terms differ. Last form sent is used if parties perform

How does the UCC deal with Battle of the Forms?

Tries to uphold intentions by keeping contract in existence for minor differences

How does CISG deal with Battle of the Forms?

falls bw UCC and Common law; the new terms not materially altering the offer become part of the contract unless promptly objected to

New Excelsior, Inc v. Amut Dolci Bielloni SRL Background

New Excelsior, Inc. (North Carolina) and Amut Dolci Bielloni SRL (Italy) entered into a sales agreement for a packaging label printing machine, with a dispute arising over a forum selection clause specifying litigation in Milan, Italy.

New Excelsior, Inc v. Amut Dolci Bielloni SRL Issue + Decision

Issue: battle of the forms, forum selection clause

Decision: The forum selection clause was not part of the contract and was not enforceable, as the plaintiff's confirmation of March 21 was a counteroffer to do business without the clause, which the defendant accepted

fundamental breach

serious breaches of contract

• one that substantially deprives the other party of what they expect under the contract (unless unforeseen by breaching party/reasonable person in a similar circumstance)

examples of fundamental breaches

• shipment of less than the full amt

• shipment of defective goods that can’t be replaced/repaired on time

• seller’s failure or refusal to ship

• buyer’s refusal or inability to take delivery and pay for the good

*late shipments can sometimes be fundamental breaches depending on circumstances and the impact on the buyer

primary responsibility of the buyer…

pay the price for the goods and take delivery as promised

• buyer must fulfill obligations @ time and in the manner specified in the contract

• notify the seller of any defect/nonconfirmity within a reasonable time after discovery/when it SHOULD have been discovered

primary responsibility of the seller…

deliver conforming goods as specified in the contract

• seller must deliver goods within the time frame called for in the contract + in the manner specified

remedies for breach of contract are only available if…

if the failure of performance constitutes a fundamental breach

6 remedies available for breach of contract

1. avoidance

2. right to remedy/cure

3. setting addtl time for performance

4. price reduction

5. money damages

6. specific performance

Nachfrist

grants extra time beyond contract date for parties to perform/cure problems

• adopted from CIVIL law systems

Shenzen Synergy Digital Company, Limited v. Mingtel, Inc. Background

Mingtel, a Texas electronics importer, contracted with Shenzen Synergy, a Chinese producer, for computer tablets. Mingtel had Order 59 and 60, both for 10k tablets and made partial deposits on both. Its Chinese inspectors approved the batch for shipment, but later Mingtel said that the tablets were slow and had flawed screens. After issues with Order 60, Mingtel refused Order 59 and refused to settle the balance, so Shenzen sued for breach of contract. Court ruled in favor of Shenzen, Mingtel appealed.

Shenzen Synergy Digital Company, Limited v. Mingtel, Inc. Issue + Decision

Issue: fundamental breach, contract avoidance, implied warranties, inspection + notification requirements

Decision: judgment for Shenzen affirmed. Court rules that Mingtel failed to meet its burden of proving nonconformity and did not timely inspect or notify of issues

buyers can avoid contracts for __________; sellers can avoid contracts if__________

fundamental breaches; if buyers fail to take delivery, pay, or commit a fundamental breach

Who makes contract avoidance more difficult than many national sales laws?

the CISG

price reduction

solution for buyers when sellers ship defective/nonconforming goods

• buyers are able to keep the goods and adjust the amount they paid by keeping part of the purchase price to offset the reduced value

T/F: Price reduction cannot be used if the seller’s breach is fundamental

FALSE

• price reduction can be used whether or not the seller’s breach is fundamental, allowing buyers flexibility in addressing nonconformity issues

If goods have already been paid for, under the price reduction rule, buyers can…

request a partial refund from the seller

compensatory damages

• if buyer bought substitute goods → buyer clais damages if sub goods $ > contract price

• if buyer hasn’t bought sub goods, damages = difference between contract price and current market price/price of reasonable substitute

consequential damages

recoverable for reasonable foreseeable special or indirect damages arising from the breach

• lost profits

what type of money damages does the CISG address?

consequential

liquidated damages

indirectly recognized through principles of freedom of contract and pacta sunt servanda

T/F: Liquidated damages are directly addressed in CISG

False

T/F: CISG does not allow specific performance

False, it allows it under certain conditions, namely:

1. buyer hasn’t sought another remedy

2. seller failed to deliver or there’s a fundamental breach

3. buyer gave timely notice of nonconformity

4. buyer made timely request that the seller provides substitute goods

Krape S.A., v. Like Supply Corp Background

Background: KRAPE, S.A., a Spanish distributor, sued LIK SUPPLY, CORP., a New York supplier, for breach of contract regarding unfulfilled orders of medical exam gloves in 2020, seeking reimbursement, lost profits, and interest.

Krape S.A., v. Like Supply Corp Issue + Decision

Issue: calculation of damages in a default judgement action

Decision: plaintiff had established damages and lsot profits to a “reasonable certainty.” Recommended for a total award of $919,252.10 in damages + prejudgment interest was adopted by the presiding U.S. District Court Judge, granting KRAPE's motion for default judgment in part.

specific performance

• requires a party to fulfill their contractual obligations

• used in Civil law countries

T/F: CISG requires that Common Law countries follow its rules on specific performance

F: CISG does not limit the impact on common law countries and doesn’t allow courts to follow their own laws regarding specific performance

anticipatory breach

when one party clearly sees that the other party won’t perform a substantial part of its obligations/commit a fundamental breach

suspend performance

temporarily stopping fulfilling one's contractual obligations without canceling or terminating the entire agreement.

T/F: Either party can suspend suspend performance if the other party won’t fulfill a “substantial part” of its obligations

True

When does the right to suspend end?

when adequate assurance of performance is provided

right to avoid performance for anticipatory breach

when it becomes clear the other party will commit a fundamental breach in the future

avoidance of installment contracts

party may avoid the remainder of the contract if strong grounds for future breaches exist

Excuses for nonperformance

1. objective impossibility

2. frustration of purpose

3. commercial impracticability

T/F: There is a defined method for excusal based on non-performance

False

• excusal for non-performance depends on court’s interpretation of intervening events beyond the party’s control

objective impossibility

legal defense where performance has become physically/legally impossible