Business Law Study Set 13

Business

Quiz 27 :

Remedies for Breach of Sales Contracts

Quiz 27 :

Remedies for Breach of Sales Contracts

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Wolosin purchased a vegetable and dairy refrigerator case from Evans Manufacturing Corp. When Evans sued Wolosin for the purchase price, Wolosin claimed damages for breach of warranty. The sales contract provided that Evans would replace defective parts free of charge for one year; it also stated, "This warranty is in lieu of any and all other warranties stated or inferred, and of all other obligations on the part of the manufacturer, which neither assumes nor authorizes anyone to assume for it any other obligations or liability in connection with the sale of its products." Evans claimed that it was liable only for replacement of parts. Wolosin claimed that the quoted clause was not sufficiently specific to satisfy the limitation-of-remedies requirement of UCC § 2-719. Provide some insight on this issue for the parties by discussing damage limitation clauses under the UCC. [Evans Mfg. Corp. v Wolosin, 47 Luzerne County Leg Reg 238 (Pa)]
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Refer to the case Evans Manufacturing v Wolosin
Case Issue
The issue is whether seller had limited their liability by clause in contract.
Relevant Terms, Laws, and Cases
UCC 2-719 - allows contract to modify or limit remedy of recovery.
Limitation of liability clause - provision in contract that limits liability of seller
Opinion
The court held for the seller. The limitation clause was valid. The seller specifically stated that it would exclude itself from liability instead providing for only repair services.

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entered into contracts with Dallas Semiconductor to build six machines, referred to in its contracts as Tools A-F. The contracts were entered into in 2000 and in 2001, but Maxim Integrated acquired Dallas Semiconductor in 2001. The employees at Dallas who were in charge of the contracts continued to assure Lam that everything was on track. Lam representatives also had meetings with Maxim representatives. However, those discussions broke down and after Lam issued a demand letter for which there was no response, he filed suit for breach of contract. Lam was able to sell the machines to other customers for an equal or greater price. Lam asked for total damages in the amount of $13,860,847, representing lost profits on all six tools, plus lost profits on the extended warranties and training packages for the tools. Is Lam entitled to such recovery? [Lam Research Corp. v Dallas Semiconductor Corp. 2006 WL 1000573, 59 UCC Rep Serv 2d 716 (Cal App 2006) (Cal App)]
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Refer to the case Lam Research v Dallas Semiconductor (2006 WL 1000573).
Case Issue
The issue is whether seller can recover lost profit for a breach of contract by buyer.
Relevant Terms, Laws, and Cases
UCC-2-708 - allows seller to recover lost profit from buyer when buyer fail to accept goods.
Opinion
Court held for the seller. They are entitled to lost profit. Since, buyer failed to accept the goods the seller is entitled to the lost profit it would have made.

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Formetal Engineering submitted to Presto a sample and specifications for precut polyurethane pads to be used in making air-conditioning units. Formetal paid for the goods as soon as they were delivered but subsequently discovered that the pads did not conform to the sample and specifications in that there were incomplete cuts, color variances, and faulty adherence to the pad's paper backing. Formetal then informed Presto of the defects and notified Presto that it would reject the pads and return them to Presto, but they were not returned for 125 days. Presto argued that it was denied the right to cure because the goods were not returned until some 125 days after Formetal promised to do so. Was there a breach of the contract? Did the buyer (Formetal) do anything wrong in seeking its remedies? [Presto Mfg. Co. v Formetal Engineering Co., 360 NE2d 510 (Ill App)]
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Refer to the case Presto Manufacturing v Formetal Engineering (360 NE2d 510).
Case Issue
The issue is whether the buyer properly rejected the goods, when they returned it 125 days after the notice of rejection to seller.
Trial court granted summary judgment in favor of seller. The buyer appealed the decision.
Relevant Terms, Laws, and Cases
UCC 2-601 2-602 - 2-601 States that buyer has the right to reject nonconforming goods, however, they must do so within reasonable time after delivery of goods (2-602)
Opinion
Higher court reversed the decision. The buyer made a proper rejection.
The court contends that under UCC 2-601 the buyer can reject the nonconforming goods. In this case, they found that buyer notified the seller of rejection. Seller argued that buyer was responsible for returning the nonconforming goods because the buyer promised to return, but the court noted that the promise to return is only gratuitous; court cited UCC 2-602 buyer is not responsible to return the goods, seller must take them back.

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Brown Machine Company, a division of Kvaerner U.S., Inc., entered into a contract to supply a machine and tools to Hakim Plast, a food container-producing company based in Cairo, Egypt, to enable Hakim to meet its growing demand for plastic containers. The plastic containers were for customers to use in the ice cream distribution industry. It was understood that the equipment would be ready for delivery before the busy summer ice cream season. Brown Machine was not able to meet the twice extended deadline. It attempted to obtain another extension, but Hakim Plast refused without additional consideration. Brown refused to provide the requested consideration. Hakim Plast declared the contract breached on September 25, 1994. Brown then sold the equipment and brought suit for breach of contract, requesting damages for the loss of the sale. Hakim Plast countersued for Brown's breach seeking out-of-pocket expenses and consequential damages for loss of business. Discuss who breached the contract and determine what possible damages might be recovered. [Kvaerner U.S., Inc. v Hakim Plast Co., 74 F Supp 2d 709 (ED Mich)]
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after Gast purchased a used auto from a Chevrolet dealer, he experienced a series of mechanical problems with the car. Gast refused to make further payments on the bank note that had financed the purchase. The bank took possession of the automobile and sold it. Gast then brought an action against the dealer, alleging that he had revoked his acceptance. Was Gast correct? Explain your answer. [Gast v Rodgers-Dingus Chevrolet, 585 So 2d 725 (Miss)]
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Kirby purchased a wheelchair from NMC/ Continue Care. The wheelchair was customized for her and her home. When the wheelchair arrived, it was too wide to fit through the doorways in her home. What options does Mrs. Kirby have? [Kirby v NMC Continue Care, 993 P2d 951 (Wyo)]
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Stephan's Machine Tool, Inc., purchased a boring mill from D H Machinery Consultants. The mill was a specialized type of equipment and was essential to the operation of Stephan's plant. The purchase price was $96,000, and Stephan's had to borrow this amount from a bank to finance the sale. The loan exhausted Stephan's borrowing capacity. The mill was unfit, and D H agreed to replace it with another one. D H did not keep its promise, and Stephan's sued it for specific performance of the contract as modified by the replacement agreement. Is specific performance an appropriate remedy? Discuss. [Stephan's Machine Tool, Inc. v D H Machinery Consultants, Inc., 417 NE2d 579 (Ohio App)]
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McNeely entered into a contract with Wagner to pay $250,000 as a lump sum for all timber present in a given area that Wagner would remove for McNeely. The contract estimated that the volume in the area would be 780,000 board feet. Wagner also had provisions in the contract that made no warranties as to the amount of lumber and that he would keep whatever timber was not harvested if McNeely ended the contract before the harvesting was complete. The $250,000 was to be paid in three advances. McNeely paid two of the three advances but withheld the third payment and ended the contract because he said there was not enough timber. Wagner filed suit for the remaining onethird of the payment. McNeely said Wagner could not have the remaining one-third of the payment as well as the transfer; he had to choose between the two remedies. Is he correct? [Wagner v McNeely, 38 UCC2d 1176 (Or)]
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Stock Solution is a "stock photo agency" that leases photographic transparencies produced by professional photographers for use in media advertising. Between October 1, 1994, and May 31, 1995, Stock Solution delivered Axiom 107 color transparencies to be used in Axiom's advertising. The contracts provided that in the event the transparencies were not returned by the specified "return date," Axiom would pay the following fees: (1) an initial "service charge" of $30, (2) "holding fee[s]" in the amount of "$5.00 per week per transparency," (3) "service fees" at a rate of "one and one-half percent per month" on unpaid balances of invoices beginning 30 days after invoice date, and (4) reimbursement for loss or damage of each "original transparency" in the amount of $1,500. Axiom failed to return 37 of the 107 transparencies in breach of the contracts. Of the 37 missing transparencies, 36 were original color transparencies and 1 was a duplicate color transparency. Stock Solution filed suit seeking damages (1) for the 36 missing original color transparencies, the agreed liquidated value of $54,000 plus sales tax of $3,294; (2) for the 1 missing duplicate color transparency, $1 plus sales tax of $0.06; (3) holding fees on the 37 missing transparencies in the amount of $23,914.83; (4) service fees and charges as provided for in the contracts; and (5) attorney fees. Discuss whether the liquidated damage clause was enforceable under the law. [Bair v Axiom Design, LLC, 20 P3d 388 (Utah)]
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McInnis purchased a tractor and scraper as new equipment of the current model year from Western Tractor Equipment Co. The written contract stated that the seller disclaimed all warranties and that no warranties existed except those stated in the contract. Actually, the equipment was not the current model but that of the prior year. The equipment was not new but had been used for 68 hours as a demonstrator model, after which the hour meter had been reset to zero. The buyer sued the seller for damages. The seller's defense was based on the ground that all liability for warranties had been disclaimed. Was this defense valid? [McInnis v Western Tractor Equipment Co., 388 P2d 562 (Wash)]
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Joseph Perna purchased a 1981 Oldsmobile at a traffic auction conducted by Locascio. The car had been seized pursuant to action taken by the New York City Parking Violation Bureau against Jose Cruz. Perna purchased the car for $1,800 plus tax and towing fees "subject to the terms and conditions of any and all chattel mortgages, rental agreements, liens, conditional bills of sale, and encumbrances that may be on the motor vehicle of the above judgment debtor." The Olds had 58,103 miles on it at the time of Perna's purchase. On May 7, 1993, Perna sold the car to Elio Marino, a coworker, for $1,200. The vehicle had about 65,000 miles on it at the time of this sale. During his period of ownership, Marino replaced the radiator ($270), repaired the power steering and valve cover gasket ($117), and replaced a door lock ($97.45). He registered and insured the vehicle. In February 1994, Marino's son was stopped by the police and arrested for driving a stolen vehicle. The son was kept in jail until his arraignment, but the charges were eventually dropped. The Oldsmobile was never returned to Marino, who filed suit for breach of contract because he had been given a car with a defective title. He asked for damages that included the costs of getting his son out of jail and having the theft charges dropped. Is he entitled to those damages? [Marino v Perna, 629 NYS2d 669 (NY Cir)]
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Ramtreat Metal Technology provided for a "double your money back" remedy in its contracts for the sale of its metal drilling assemblies. A buyer filed suit seeking consequential damages and cost of replacement. Ramtreat said that its clause was a limitation of remedies. Could Ramtreat limit its remedies to "double your money back"? [Adcock v Ramtreat Metal Technology, Inc., 44 UCC Rep Serv 2d 1026 (Wash App)]
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Elmore purchased a car from Doenges Brothers Ford. The car had been placed with the dealership by a dealership employee as part of a consignment arrangement. Elmore was unable to obtain title to the car because the Environmental Protection Agency had issues with the car's compliance with emissions equipment requirements. Elmore was unable to drive the car. He brought suit because he was forced to sell the car for $10,300 less than he paid because of the title defect, and the fact that only a salvage dealer would purchase it. Because he lost his transportation, he was out of work for eight months and experienced a $20,000 decline in income. What damages could Elmore recover under the UCC? [Elmore v Doenges Bros. Ford, Inc., 21 P3d 65 (Okla App)]
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Sonya Kaminski purchased from Billy Cain's Cornelia dealership a truck that was represented to her to be a 1989 Chevrolet Silverado pickup. However, subsequent incidents involving repair of the truck and its parts, as well as a title history, revealed that the truck was a GMC rather than a Chevrolet. Sales agents at the Cornelia dealership misrepresented the truck's character and sold the truck to Kaminski as a Chevrolet. Kaminski filed suit for intentional fraud and deceit under the Georgia Fair Business Practices Act (FBPA) and for breach of express warranty. The jury awarded Kaminski $2,823.70 for breach of express warranty and $50,000 punitive (exemplary) damages. The judge added damages under the FBPA of $10,913.29 in actual damages and $9,295 in attorney fees and court costs. The dealership appealed. Must the dealership pay the damages? Why or why not? [ Billy Cain Ford Lincoln Mercury, Inc. v. Kaminski , 496 SE2d 521 (Ga App)]
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Firwood Manufacturing Co. had a contract to sell General Tire 55 model 1225 postcure inflators (PCIs). PCIs are $30,000 machines used by General Tire in its manufacturing process. The contract was entered into in 1989, and by April 1990 General Tire had purchased 22 PCIs from Firwood. However, General Tire then closed its Barrie, Michigan, plant. Firwood reminded General Tire that it still had the obligation to purchase the 33 remaining PCIs. General Tire communicated to Firwood that it would not be purchasing the remaining ones. Firwood then was able, over a period of three years, to sell the remaining PCIs. Some of the PCIs were sold as units, and others were broken down and sold to buyers who needed parts. Firwood's sales of the remaining 33 units brought in $187,513 less than the General Tire contract provided, and Firwood filed suit to collect the resale price difference plus interest. Can Firwood recover? Why or why not? [Firwood Manufacturing Co., Inc. v General Tire, Inc., 96 F3d 163 (6th Cir)]
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