Business Law

Business

Quiz 22 :

Performance and Breach of Sales and Lease Contracts

Quiz 22 :

Performance and Breach of Sales and Lease Contracts

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Implied Warranties Moon, a farmer, needs to install a two-thousand-pound piece of equipment in his barn. This will require lifting the equipment thirty feet up into a hayloft. Moon goes to Davidson Hardware and tells Davidson that he needs some heavy-duty rope to be used on his farm. Davidson recommends a one-inch-thick nylon rope, and Moon purchases two hundred feet of it. Moon ties the rope around the piece of equipment; puts the rope through a pulley; and, with a tractor, lifts the equipment off the ground. Suddenly, the rope breaks. The equipment crashes to the ground and is severely damaged. Moon files a suit against Davidson for breach of the implied warranty of fitness for a particular purpose. Discuss how successful Moon will be in his suit.
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M was a farmer who wanted to install a piece of equipment in his farm that weighed two-thousand-pound. The equipment requited to be lifted and kept in a hayloft that was thirty feet high. M goes to DH to purchase a rope so as to lift the equipment. M asks DH for a heavy-duty rope that can be used in the farm. On the recommendation DH, M purchases two hundred feet of a one-inch thick nylon rope but the rope breaks while lifting the equipment, leaving the equipment damaged. M sued DH for the breach of implied warranty of fitness of a particular product.
Under UCC Article 2 section 315, implied warranty of Fitness for a Particular Purpose arises when the seller is aware about the following two things, they are:
1. The particular purpose for which the good will be used by the buyer.
2. The buyer relies on the skill and judgment of the seller for selection of the suitable good (UCC 2-315, 2A-213).
In the given case M asked DH to provide a heavy-duty rope to be used on his farm but did not mention the particular purpose for which the rope was supposed to be used. DH was unaware that the particular purpose for which the rope was supposed to be used was to lift a two-thousand-pound equipment up to the height of 30ft. with the help of a tractor and a pulley. The rope was not generally used in the farm, it was used for a significantly different purpose that could not have been known by DH.
As it can be seen that DH did not know about the particular purpose for which the rope was supposed to be used , then it cannot be said that DH gave incorrect recommendation. The rope that was recommended by DH was on the basis of the statement that the rope was required for farm use. Had M specifically mentioned that he wanted the rope to lift a two-thousand-pound equipment, then DH would have suggested a rope taking this fact into consideration.
Similarly, it cannot be stated that M, the buyer, fully relied on DH's judgment because M himself determined the length that he thought would be sufficient to lift the equipment. Also, if M would have actually trusted the judgment of DH then he would have specifically mentioned the purpose of rope so that DH could recommend the rope and its length accordingly.
Thus, M would not successful in his suit.

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QUESTION WITH SAMPLE ANSWER: Product Liability. Jason Clark, an experienced hunter, bought a paintball gun. Clark practiced with the gun and knew how to screw in the carbon dioxide cartridge, pump the gun, and use its safety and trigger. Although Clark was aware that he could purchase protective eyewear, he chose not to buy it. Clark had taken gun safety courses and understood that it was "common sense" not to shoot anyone in the face. Clark's friend, Chris Wright, also owned a paintball gun and was similarly familiar with the gun's use and its risks. Clark, Wright, and their friends played a game that involved shooting paint-balls at cars whose occupants also had the guns. One night, while Clark and Wright were cruising with their guns, Wright shot at Clark's car, but hit Clark in the eye. Clark filed a product liability lawsuit against the manufacturer of Wright's paintball gun to recover for the injury. Clark claimed that the gun was defectively designed. During the trial, Wright testified that his gun "never malfunctioned." In whose favor should the court rule? Why?
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Most likely the court will rule in favor of the manufacturer since the gun performed as C and W expected. Furthermore, both C and W were aware of the possible danger and rejected the opportunity to wear protective eyewear.
In addition, there was no proof to indicate the gun did actually malfunction. W also knew that it was dangerous to shoot someone in the eye with the gun and his testimony explaining that the gun did not malfunction especially favors the manufacturer.

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Shalene Kolchek bought a Great Lakes Spa from Val Porter, a dealer who was selling spas at the state fair. Porter told Kolchek that Great Lakes spas were "top of the line" and "the Cadillac of spas" and indicated that the spa she was buying was "fully warranted for three years." Kolchek signed an installment contract; then Porter handed her the manufacturer's paperwork and arranged for the spa to be delivered and installed for her. Three months later, Kolchek noticed that one corner of the spa was leaking onto her new deck and causing damage. She complained to Porter, but he did nothing about the problem. Kolchek's family continued to use the spa. Using the information presented in the chapter, answer the following questions. One night, Kolchek's six-year-old daughter, Litisha, was in the spa with her mother. Litisha's hair became entangled in the spa's drain, and she was sucked down and held underwater for a prolonged period, causing her to suffer brain damage. Under which theory or theories of product liability can Kolchek sue Porter to recover for Litisha's injuries? DEBATE THIS: No express warranties should be created by the oral statements made by salespersons about a product.
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As per UCC 2-314, 2A-212, every lease or sale of goods made by a merchant automatically creates an implied warranty of merchantability. Goods must be "rationally fit for the usual purposes for which such goods are used" to be merchantable.
Therefore, P owed an implied warranty of merchantability of spa being in good condition to be rationally fit for the usual purposes for which spa is used. And as per law, even if P did not know about the defect in spa, such warranty of merchantability is considered to be breached. Therefore, K can legally sue P for breach of the implied warranty of merchantability.

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Express Warranties Videotape is recorded magnetically. The magnetic particles that constitute the recorded image are bound to the tape's polyester base. The binder that holds the particles to the base breaks down over time. This breakdown, which is called sticky shed syndrome, causes the image to deteriorate. The Walt Disney Co. made many of its movies available on tape. Buena Vista Home Entertainment, Inc., sold the tapes, which it described as part of a "Gold Collection" or "Masterpiece Collection." The advertising included such statements as "Give Your Children the Memories of a Lifetime- Collect Each Timeless Masterpiece!" and "Available for a Limited Time Only!" Charmaine Schreib and others who bought the tapes filed a suit in an Illinois state court against Disney and Buena Vista, alleging, among other things, breach of warranty. The plaintiffs claimed that the defendants' marketing promised the tapes would last for generations. In reality, the tapes were as subject to sticky shed syndrome as other tapes. Did the ads create an express warranty? In whose favor should the court rule on this issue? Explain. [ Schreib v. The Walt Disney Co., __ N.E.2d __ (Ill.App. 1 Dist. 2006)]
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Implied Warranties Peter and Tanya Rothing operated Diamond R Stables near Belgrade, Montana, where they bred, trained, and sold horses. Arnold Kallestad owned a ranch in Gallatin County, Montana, where he grew hay and grain, and raised Red Angus cattle. For more than twenty years, Kallestad had sold between three hundred and one thousand tons of hay annually, sometimes advertising it for sale in the Bozeman Daily Chronicle. In 2001, the Rothings bought hay from Kallestad for $90 a ton. They received delivery on April 23. In less than two weeks, at least nine of the Rothings' horses exhibited symptoms of poisoning that was diagnosed as botulism. Before the outbreak was over, nineteen animals had died. Robert Whitlock, associate professor of medicine and the director of the Botulism Laboratory at the University of Pennsylvania, concluded that Kallestad's hay was the source. The Rothings filed a suit in a Montana state court against Kallestad, claiming, in part, breach of the implied warranty of merchantability. Kallestad asked the court to dismiss this claim on the ground that, if botulism had been present, it had been in no way foreseeable. Should the court grant this request? Why or why not? [ Rothing v. Kallestad, 337 Mont. 193, 159 P.3d 222 (2007)]
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Shalene Kolchek bought a Great Lakes Spa from Val Porter, a dealer who was selling spas at the state fair. Porter told Kolchek that Great Lakes spas were "top of the line" and "the Cadillac of spas" and indicated that the spa she was buying was "fully warranted for three years." Kolchek signed an installment contract; then Porter handed her the manufacturer's paperwork and arranged for the spa to be delivered and installed for her. Three months later, Kolchek noticed that one corner of the spa was leaking onto her new deck and causing damage. She complained to Porter, but he did nothing about the problem. Kolchek's family continued to use the spa. Using the information presented in the chapter, answer the following questions. Did Porter's statement that the spa was "top of the line" and "the Cadillac of spas" create any type of warranty? Why or why not? DEBATE THIS: No express warranties should be created by the oral statements made by salespersons about a product.
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To watch this chapter's video, Matilda, go to www. cengagebrain.com and register your access code that came with your new book or log in to your existing account. Select the link for the "Business Law Digital Video Library Online Access" or "Business Law CourseMate." Click on "Complete Video List," view Video 71, and then answer the following questions: (a) What warranties of title arise in the sales of used cars by dealers? (b) In the video, a father (Danny DeVito) uses a tool to turn back the numbers on a vehicle's odometer. When he sells this car, if he tells the buyer the mileage is only 60,000 knowing that it is really 120,000, has he breached an express warranty? If the seller did not make any oral statements about the car's mileage, could the buyer claim an express warranty existed? Explain. (c) What would a person who buys the car in the video have to show to prove that the seller breached the implied warranty of merchantability?
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Defenses to Product Liability Terry Kunkle and VanBuren High hosted a Christmas party in Berkeley County, South Carolina. Guests had drinks and hors d'oeuvres at a residence and adjourned to dinner in a barn across a public road. Brandon Stroud ferried the guests to the bam in a golf car made by Textron, Inc. The golf car was not equipped with lights, and Textron did not warn against its use on public roads at night. South Carolina does not require golf cars to be equipped with lights, but does ban their operation on public roads at night. As Stroud attempted to cross the road at 8:30 p.m., his golf car was struck by a vehicle driven by Joseph Thornley. Stroud was killed. His estate filed a suit in a South Carolina state court against Textron, alleging strict product liability and product liability based on negligence. The estate claimed that the golf car was defective and unreasonably dangerous. What might Textron assert in its defense? Explain. [ Moore v. Barony House Restaurant, LLC, 382 S.C. 35, 674 S.E.2d 500 (S.C.App. 2009)]
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Shalene Kolchek bought a Great Lakes Spa from Val Porter, a dealer who was selling spas at the state fair. Porter told Kolchek that Great Lakes spas were "top of the line" and "the Cadillac of spas" and indicated that the spa she was buying was "fully warranted for three years." Kolchek signed an installment contract; then Porter handed her the manufacturer's paperwork and arranged for the spa to be delivered and installed for her. Three months later, Kolchek noticed that one corner of the spa was leaking onto her new deck and causing damage. She complained to Porter, but he did nothing about the problem. Kolchek's family continued to use the spa. Using the information presented in the chapter, answer the following questions. If the paperwork provided to Kolchek after her purchase indicated that the spa had no warranty, would this be an effective disclaimer under the Uniform Commercial Code? Explain. DEBATE THIS: No express warranties should be created by the oral statements made by salespersons about a product.
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A QUESTION OF ETHICS: Dangerous Products. Susan Calles lived with her four daughters, Amanda, age eleven, Victoria, age five, and Jenna and Jillian, age three. In March 1998, Calles bought an Aim N Flame utility lighter, which she stored on the top shelf of her kitchen cabinet. A trigger can ignite the Aim N Flame after an "ON/OFF" switch is slid to the "on" position. On the night of March 31, Calles and Victoria left to get videos. Jenna and Jillian were in bed, and Amanda was watching television. Calles returned to find fire trucks and emergency vehicles around her home. Robert. Finn, a fire investigator determined that Jenna had started a fire using the lighter. Jillian suffered smoke inhalation, was hospitalized, and dial on April 21. Calles filed a suit in an Illinois state court against Scripto-Tokai Corp., which distributed the Aim N Flame, and others. In her suit, which was grounded, in part, in strict liability claims, Calles alleged that the lighter was an "unreasonably dangerous product." Scripto filed a motion for summary judgment. [ Calles v. Scripto-Tokai Corp., 224 Ill.2d 247 864 N.E.2d 249, 309 Ill.Dec. 383 (2007)] (a) A product is unreasonably dangerous when it is dangerous beyond the expectation of the ordinary consumer. Whose expectation-Calles's or Jenna's-applies? Does the lighter pass this test? Explain. (b) Calles presented evidence as to the likelihood and seriousness of injury from lighters that do not have child-safety devices. Scripto argued that the Aim N Flame is an alternative source of fire and is safer than a match. Calles admitted that she knew the dangers presented by fighters in the hands of children. Scripto admitted that it had been a defendant in several suits for injuries under similar circumstances. How should the court rule? Why?
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Shalene Kolchek bought a Great Lakes Spa from Val Porter, a dealer who was selling spas at the state fair. Porter told Kolchek that Great Lakes spas were "top of the line" and "the Cadillac of spas" and indicated that the spa she was buying was "fully warranted for three years." Kolchek signed an installment contract; then Porter handed her the manufacturer's paperwork and arranged for the spa to be delivered and installed for her. Three months later, Kolchek noticed that one corner of the spa was leaking onto her new deck and causing damage. She complained to Porter, but he did nothing about the problem. Kolchek's family continued to use the spa. Using the information presented in the chapter, answer the following questions. If Kolchek had negligently left Litisha alone in the spa prior to the incident described in the previous question, what defense to liability might Porter assert? DEBATE THIS: No express warranties should be created by the oral statements made by salespersons about a product.
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Defenses to Product Liability Baxter manufactures electric hair dryers. Julie purchases a Baxter dryer from her local Ace Drugstore. Cox, a friend and guest in Julie's home, has taken a shower and wants to dry her hair. Julie tells Cox to use the new Baxter hair dryer that she has just purchased. As Cox plugs in the dryer, sparks fly out from the motor, and sparks continue to fly as she operates it. Despite this, Cox begins drying her hair. Suddenly, the entire dryer ignites into flames, severely burning Cox's scalp. Cox sues Baxter on the basis of negligence and strict liability in tort. Baxter admits that the dryer was defective but denies liability, particularly because Cox was not the person who purchased the dryer. In other words, Cox had no contractual relationship with Baxter. Discuss the validity of Baxter's defense. Are there any other defenses that Baxter might assert to avoid liability? Discuss fully.
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Theory of Recovery David Dobrovolny bought a Ford F-350 pickup truck from Ainsworth Motors in Ainsworth, Nebraska. Fourteen months later, the truck spontaneously caught fi re in his driveway. No one was injured, and no property other than the truck was damaged, but the truck was completely destroyed. Dobrovolny fi led a suit in a Nebraska state court against Ford Motor Co. on a theory of strict product liability, alleging that the truck's electrical system and other potential ignition sources had not been properly insulated from the combustible materials in the engine. Dobrovolny sought to recover the cost of the truck. Nebraska recognizes strict product liability, but the state's courts limit its application to situations involving personal injuries rather than property damage. How is the court likely to rule on Dobrovolny's claim? Why? Is there another basis for liability discussed in this chapter on which Dobrovolny might recover? [Dobrovolny v. Ford Motor Co., 281 Neb. 86, 793 N.W.2d 445 (2011)]
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