Words of the Parties and PER
Parol Evidence Rule (PER) = keeps out evidence of a PRIOR or CONTEMPORANEOUS agreement (either oral or written) that CONTRADICTS a LATER writing
Exceptions to PER (evidence gets in):
- Correcting a clerical error
- Establishing a defense against formation
- Interpreting a vague or ambiguous term (but keep in mind Plain Meaning Rule)
- Adding to a PARTIALLY INTEGRATED writing (a final statement of the terms is included, but not a complete statement of all terms agreed to; but watch out for merger clause “This K is limited to the terms herein”)
The Parties’ Conducts
(Most to least important)
Course of Performance = how parties preformed under THIS K is best evidence of what parties intended
Course of Dealing = what parties did under PRIOR Ks with each other
Usage of Trade = what others in the trade do in SIMILAR Ks
Seller’s Warranties of Quality in a Sale of Goods (Art. 2)
Express Warranty = any statement of fact about or description of the goods
- Seller’s use of sample or model still counts
- mere expression of seller’s opinion or fluff does NOT count
Implied Warranties
(1) Implied Warranty of Merchantability (IWM) = goods are fit for their ordinary purpose/use
- ONLY when seller is a MERCHANT who DEALS IN GOODS OF THE KIND (has special knowledge about the particular goods being sold)
Implied Warranty of Fitness for a Particular Purpose = goods are fit for buyer’s particular purpose
- Seller knows buyer has special purpose and is relying on seller to select suitable goods
- Seller does NOT have to be a merchant of any kind!
Disclaimers
A seller can disclaim implied, but NOT express warranties
“As is” or “with all faults” = OK to disclaim implied warranties
Seller limiting buyer’s remedies:
- General rule = seller can limit buyer’s remedies for breach of any warranty (express or implied) if the limit is not unconscionable at the time of K
- Exception = limiting buyer’s remedies for personal injury in the case of consumer goods is PRESUMED unconscionable
Risk of Loss (ROL) in Sale of Goods (Art. 2)
- If seller bears ROL = seller must provide new goods to buyer for no additional cost, or be liable for breach of K
- If buyer bears ROL = buyer must still pay the K price
- Terms of the agreement control
- Breaching party bears ROL, even if loss is UNRELATED to breach
ROL: Delivery by Common Carrier
Delivery by Common Carriers = ROL shifts to buyer when seller completes its delivery obligations
- Shipment K = seller must get the goods to a common carrier, make delivery arrangements, and notify buyer (DEFAULT unless K clearly states otherwise!) and then price is due
- Destination K = seller must get the goods all the way to a specific destination (usually, where buyer is located) and then price is due
“Free on Board” (FOB) + city/place
- if where seller is located = shipment K
- if another city = destination K
ROL: Non-Carrier Cases
i.e., buyer picking up or seller delivering
Merchant seller = seller bears ROL until buyer takes physical possession of the goods
Non-merchant seller = buyer bears ROL once seller “tends” the goods (makes them available to buyer)
