Modern Law of Sales in the United States

Modern Law of Sales in the

United States

A l i s s a Pa l u m b o
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Table of Contents

Abbreviations xi

Preface xv

Table of Cases xvii

Bibliography liii

1 An Introduction to the Modern Law of Sales in the United

States 1

2 Legal Framework of Sales Law in the United States 5

2.1 Article 2 of Uniform Commercial Code 5
2.2 Statutes and Regulations 6
2.3 The Common Law and General Principles of Law 7
2.4 Louisiana Civil Code 8
2.5 International Sales 9
2.6 Modern Consumer Protection 10
2.6.1 The History of Protecting Consumers in the United States 10
2.6.2 Regulating Standard Terms 11
2.6.3 Class Action Lawsuits 12

3 Historical Overview of Sales Law 15

3.1 The Common Law and Unification Efforts 15
3.1.1 Uniform Acts 16
3.2 The Uniform Commercial Code 16
3.2.1 Karl Llewellyn’s Influence on the U.C.C. 18
3.2.2 The 2003 Revisions 19

4 Identifying the Boundaries of a Sales Contract 21

4.1 Sale by Auction 22
4.2 Other Supply of Goods Contract 22
4.3 Mixed Contracts 23

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5 The Concept of Goods 27

5.1 General Definition of Goods 27
5.2 Questionable Goods 28
5.2.1 Biological Materials 28
5.2.2 Electricity, Gas, Water 29
5.2.3 Information and Software 30

6 General Remarks on Performance of a Sales Contract 33

6.1 Obligations 33
6.2 Terms of the Contract and Article 2 Gap-Fillers 34
6.2.1 Course of Performance, Course of Dealing and Trade Usages 34
6.3 General Obligation of Good Faith 35

7 Tender of Delivery 37
7.1 Effects of Delivery 37
7.2 Tender of Non-Conforming Goods 39
7.3 Manner of Delivery 39
7.3.1 Place of Delivery 40
7.3.2 Time of Delivery 41
7.4 Notification Duties 44

8 Documents 45
8.1 Tender of Delivery through Documents 46
8.2 Documents Evidencing Conformity 47

9 Conformity of the Goods: The Law of Warranties 49

9.1 Express Warranties 50
9.1.1 Basis of the Bargain 50
9.1.2 Creating an Express Warranty 52
9.1.2.1 Affirmations of Fact and Descriptions 52
9.1.2.2 Samples or Models 53
9.2 Obligations to Remote Purchasers 54
9.2.1 Pass-Through Warranties 55
9.2.2 Advertisements and Communications to the Public 57
9.3 Implied Warranties 58
9.3.1 Implied Warranty of Merchantability 58
9.3.1.1 Defining Merchant 59
9.3.1.2 The Ordinary Purpose of Goods 60
9.3.1.3 Implied Warranty and Strict Products Liability 61

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9.3.2 Implied Warranty of Fitness for Particular Purpose 62

9.4 Third Party Beneficiaries of Warranties 63
9.5 Affirmative Defences to Warranty Claims 65
9.6 Warranty Modifications and Disclaimers 66
9.7 Warranty of Title and Third Party Property Rights 69

10 Payment 73
10.1 Time and Place of Payment 73
10.2 Determining an Open Price Term 75
10.3 Modes of Payment 76
10.3.1 Payment with Legal Tender 77
10.3.2 Payment by Cheque or Letter of Credit 77
10.4 Alternative Means for Securing an Unpaid Seller 78
10.4.1 Purchase Money Security Interest 78
10.4.2 Right of Stoppage in Transit 78
10.4.3 Right to Retain Possession and Reclaim the Goods 80

11 Taking Delivery 81
11.1 Acceptance v. Taking Delivery 81
11.2 Acts Forming Part of Taking Delivery 82
11.3 Exceptions to the Obligation to Take Delivery 82

12 Risk of Loss 85
12.1 Allocation of Risk in Contracts Contemplating Transportation by
Carrier 86
12.1.1 Standard Trade Terms 87
12.1.1.1 F.O.B. 88
12.1.1.2 C.I.F. and C. & F. 89
12.1.1.3 Delivery Ex-Ship 90
12.2 Risk of Loss for Goods Held by a Bailee 90
12.3 Allocations of Risk When a Breach Has Occurred 90
12.4 Allocation of Risk for Undivided Bulk Transfers 91

13 Examination and Notice 93

13.1 The Buyer’s Right to Inspect the Goods 93
13.1.1 Details of the Inspection 94
13.1.2 Payment before Inspection 95
13.2 Notice of Non-Conformity 95
13.2.1 Time for Giving Notice 96

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13.2.1.1 Specific Factors in Determining a Reasonable Time 99

13.2.2 Details of the Notice 100
13.3 Notice of Breach of Warranty of Title 102

14 General Remarks on Remedies 103

14.1 Purpose of the U.C.C.’s Remedies 103
14.2 Structure of the U.C.C.’s Remedies 104
14.3 Concurrent Remedies 104

15 Suspension of Performance and Adequate Assurances 107

15.1 Reasonable Grounds for Insecurity 109
15.1.1 Causes of Insecurity 111
15.2 Adequacy of the Assurance 112
15.2.1 The Demand 113
15.3 Repudiation 114
15.3.1 Revoking Repudiation 115

16 Avoidance 117
16.1 Buyer’s Right to Reject the Goods 117
16.1.1 Acceptance 117
16.1.2 Non-Conformity 118
16.1.2.1 The Perfect Tender Rule 118
16.1.2.2 Substantial Impairment and Instalment Contracts 119
16.1.3 Procedural Requirements for Effective Rejection 121
16.1.4 Effect of Buyer’s Rejection 122
16.2 Buyer’s Right to Revoke Acceptance of the Goods 122
16.2.1 Substantial Impairment under U.C.C. § 2-608 123
16.2.2 Reasonable Assumption the Seller Would Cure 124
16.2.3 Failure to Discover the Defect 125
16.2.4 Procedural Requirements for Revocation 125
16.3 The Seller’s Right to Cure 127
16.3.1 Reasonable Belief Non-Conforming Goods Were Acceptable 128
16.3.2 Procedural Requirements for Cure 129
16.3.3 Effective Cure 130
16.3.4 Buyer Who Wrongfully Rejects or Refuses Cure 130

17 Specific Performance 131

17.1 Evaluating the Adequacy of the Damages 132
17.2 Occasions When Specific Performance Is Granted 133

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 Table of Contents

17.2.1 Action for the Price 133

17.2.1.1 Action for the Price of Accepted Goods 134
17.2.1.2 Action for the Price of Identified Goods 135
17.2.2 Unique Goods and Other Proper Circumstances 136
17.2.3 Replevin 138
17.2.4 Specific Performance Called for by the Contract 139
17.3 Louisiana’s Approach 139

18 Damages 141
18.1 Classification of Damages 142
18.2 General Non-Performance Damages 142
18.2.1 Non-Performance and Repudiation Damages upon Substitute Perfor-
mance 143
18.2.1.1 Resale 143
18.2.1.1.1 Conducting the Resale 144
18.2.1.2 Cover 144
18.2.2 Non-Performance and Repudiation Damages When No Substitute
Performance Is Made 146
18.2.2.1 Buyer’s Market Price Damages under U.C.C. § 2-713 146
18.2.2.2 Seller’s Market Price Damages under U.C.C. § 2-708(1) 147
18.2.2.3 Lost Profits Formula under U.C.C. § 2-708(2) 148
18.2.2.3.1 Lost Volume Sellers 148
18.2.2.3.2 Overcompensation Using the Market Price Formula 149
18.2.3 Damages for Accepted Goods 150
18.3 Consequential Damages 151
18.3.1 Types of Loss Recoverable as Consequential Damages 151
18.3.2 Proving Recoverability of Consequential Damages 153
18.3.2.1 Causation 153
18.3.2.2 Foreseeability 154
18.3.2.3 Certainty 155
18.4 Incidental Damages 156
18.4.1 Buyer’s Incidental Damages 156
18.4.2 Seller’s Incidental Damages 157
18.5 Nominative and Punitive Damages 157
18.6 The Doctrine of Avoidable Consequences (Mitigation) 158
18.7 Contractually Stipulated Damages 160

19 Deduction of Damages from the Price 163

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Table of Contents

20 Exemption 165
20.1 Commercial Impracticability under The Code 165
20.1.1 Contingency Making Performance Impracticable 166
20.1.1.1 Increased Costs 167
20.1.1.2 Destruction of the Goods or the Source of Supply 168
20.1.1.3 Prohibition or Prevention by Law 170
20.1.2 Basic Assumption of the Contract 170
20.1.3 Notice of Delay or Non-Delivery 171
20.1.4 Substitute Performance and Partial Impracticability 172
20.2 Frustration of Purpose 173
20.3 Assumption of the Risk 174
20.3.1 Contractual Clauses Allocating Risk 174
20.3.2 Implicit Assumption of Risk 175

21 Interest 179
21.1 Purpose of Interest 180
21.2 Prejudgment Interest v. Post-Judgment Interest 181
21.3 Contractual Stipulation for Interest 181
21.3.1 Compound Interest 181
21.4 Default Provisions 182
21.4.1 Date Interest Begins to Accrue 183
21.4.2 Statutory Rate of Interest 183

22 Concluding Remarks 185

x
Abbreviations

A.L.R. American Law Reports

ABA American Bar Association
AG Attorney General
Alb. L. Rev. Albany Law Review
ALI American Law Institute
Am. J. Comp. L. American Journal of Comparative Law
Am. J. Int’l L. American Journal of International Law
Am. Jur. 2d American Jurisprudence, Second Edition
Am. L. Prod. Liab. American Law of Products Liability
Ark. L. Rev. Arkansas Law Review
ASCE American Society of Civil Engineers
B.U. L.Rev. Boston University Law Review
B2B Business to Business
B2C Business to Consumer
Baylor L. Rev. Baylor Law Review
Berkeley Tech. L. J. Berkeley Technology Law Journal
Brook. L. Rev. Brooklyn Law Review
C. & F. Cost and Freight
C.A.F. Cost Assurance Freight
C.I.F. Cost, Insurance and Freight
C.O.D. Collect on Delivery
C2C Consumer to Consumer
CAFA Class Action Fairness Act of 2005
Cal. L. Rev. California Law Review
cert. Certiorari
CISG Convention for the International Sale of Goods
cmt. comment
Colum. L. Rev. Columbia Law Review
Com. L. J. Commercial Law Journal
Cornell L. Rev. Cornell Law Review
CPSA Consumer Product Safety Act
CPSC Consumer Product Safety Commission
Def. Couns. J. Defense Counsel Journal
Del. L. Rev. Delaware Law Review
Dick. L. Rev. Dickinson Law Review

xi
Abbreviations

Drake L. Rev. Drake Law Review

Duke L. J. Duke Law Journal
Duq. L. Rev. Duquesne Law Review
e.g. exempli gratia (for example)
ed. Edition
Emory L. J. Emory Law Journal
EPA Environmental Protection Agency
F.A.S. Free Alongside
F.O.B. Free On Board
F.O.B.S.T. Free On Board Stow and Trim
FDA Food and Drug Administration
FDCA Food Drug and Cosmetic Act
Fed. R. Civ. P. Federal Rules of Civil Procedure
Fordham L. Rev Fordham Law Review
FTC Federal Trade Commission
FTCA Federal Trade Commission Act
Ga. St. U. L. Rev. Georgia State University Law Review
Hamline L. Rev. Hamline Law Review
Harv. J. L. & Pub. Pol’y. Harvard Journal of Law & Public Policy
Harv. L. Rev. Harvard Law Review
Hastings L. J. Hastings Law Journal
i.e. id est (that is)
ICC International Chamber of Commerce
Id. Ibidem (in the same place)
Ind. L. Rev. Indiana Law Review
Int’l Law International Lawyer
J. Marshall J. Computer & Info. L. John Marshall Journal of Computer & Information
Law
J. Marshall L. Rev. John Marshall Law Review
J.L. & Com. Journal of Law and Commerce
KPCS Kimberley Process Certification Scheme
Ky. L. J. Kentucky Law Journal
La. L. Rev. Louisiana Law Review
Law & Hist. Rev. Law and History Review
LLC Limited Liability Corporation
Loy. Consumer L. Rev. Loyola Consumer Law Review
Loy. L. A. Int’l & Comp. L. J. Loyola of Los Angeles International and
Comparative Law Journal

xii
 Abbreviations

Loy. U. Chi. Int’l L. Rev. Loyola University Chicago International Law

Review
LSLI Louisiana State Law Institute
MRI Magnetic Resonance Imaging
n. note
N.C. L. Rev. North Carolina Law Review
N.D.L. Rev. North Dakota Law Review
Nat. Resources J. Natural Resources Journal
NCCUSL National Conference of Commissioners on Uniform
State Laws
NOTA National Organ Transplant Act
NW. U. L. Rev. Northwestern University Law Review
Ohio St. L. J. Ohio State Law Journal
OPLA Ohio Product Liability Act
Oxford U. Comp. L. Oxford University Comparative Law Forum
para. paragraph
PEB Permanent Editorial Board
PICC Principles of International Commercial Contracts
Prod. Liab. Product Liability
Quinnipiac Health L.J. Quinnipiac Health Law Journal
Rev. Jur. U.P.R. Revista Juridica de la Universidad de Puerto Rico
rev’d reversed
Rutgers L. Rev. Rutgers Law Review
Rutgers-Cam L. J. Rutgers Camden Law Journal
S Ill U.L.J. Southern Illinois University Law Journal
S. Tex. L. J. Southern Texas Law Journal
S.D. L. Rev. South Dakota Law Review
San Diego L. Rev. San Diego Law Review
SMU L. Rev. Southern Methodist University Law Review
Stan. L. Rev. Stanford Law Review
Tenn. L. Rev. Tennessee Law Review
Tex. Int’l L. J. Texas International Law Journal
Tex. Wesleyan L. Rev. Texas Wesleyan Law Review
Tul. L. Rev. Tulane Law Review
U. Chi. L. Rev. University of Chicago Law Review
U. Cin. L. Rev. University of Cincinnati Law Review
U. Colo. L. Rev. University of Colorado Law Review
U. Dayton L. Rev. University of Dayton Law Review
U. Fla. L. Rev. University of Florida Law Review

xiii
Abbreviations

U. Ill. L.F. University of Illinois Law Forum

U. Miami Bus. L. Rev. University of Miami Business Law Review
U. Miami L. Rev. University of Miami Law Review
U. Pa. J. Int’l Econ. L. University of Pennsylvania Journal of International
Economic Law
U. Pa. L. Rev. University of Pennsylvania Law Review
U.C.C. Uniform Commercial Code
U.C.C. Trans Gd Uniform Commercial Code Transaction Guide
U.S.C.A. United States Code Annotated
UCC L. J. Uniform Commercial Code Law Journal
UCITA Uniform Computer Information Transactions Act
UCP Uniform Customs and Practices for Documentary
Credits
USD United States Dollars
USDA United States Department of Agriculture
Va. Tax Rev. Virginia Tax Review
Vand. L. Rev. Vanderbilt Law Review
Vict. U. Wellington L. Rev. Victoria University Wellington Law Review
Wake Forest L. Rev. Wake Forest Law Review
Wash. & Lee L. Rev. Washington and Lee Law Review
Whittier L. Rev. Whittier Law Review
Wis. L. Rev. Wisconsin Law Review
Yale L. J. Yale Law Journal

xiv
Preface

This work is based on a doctoral dissertation at the Faculty of Law at the University of
Basel, Switzerland. I would like to thank Prof. Dr. Peter Jung, for presiding over the pro-
ceedings, and Dr. Pascal Hachem for providing the second expert opinion and much
valuable input. I received generous financial support from the Freiwillige Akademische
Gesellschaft Basel and the Stiftung zur Förderung der rechtlichen und wirtschaftlichen
Forschung an der Universität Basel.
In the process of researching and writing this book I was extremely fortunate to receive
much support. First, and foremost, I must thank my supervisor and mentor Prof. Dr.
Ingeborg Schwenzer, LL.M., who provided invaluable insights and encouragement. I am
extremely grateful to have had the opportunity to work as an assistant at her Chair where
I had the pleasure and privilege to learn from her expertise and grow from the engaging,
dynamic, and exciting work environment she created. I would like to thank all my colleagues
at the Chair who taught me so much and made my time there fun. I wish to thank to
Claudine Abt for her help and kindness.
For their guidance and friendship I am thankful to Dr. Christopher Kee and Linda
Maria Wayner. I am deeply indebted to Bonnie and James Blaskiewicz, Denise and Georges
Högger, and Angel Yau for their unwavering support, encouragement, and kindness.
Finally, I wish to extend my gratitude to the excellent team at Eleven International Publish-
ing.
This book is dedicated to my partner Dr. Daniel Högger, who kept me fed, sharp, and
smiling during its completion; my brother, Michael Palumbo, who always helped me find
the right words; and to my parents, Lois and Dan Palumbo, for their tremendous love and
support.

xv
Table of Cases

Parties Court Date Source

Abele v. Bayliner Mar- United States District October 31, 1997 11 F.Supp.2d 955
ine Corp. Court, N.D. Ohio,
Western Division
Adel v. Greensprings of United States District January 28, 2005 363 F.Supp.2d 692
Vermont, Inc. Court, D. Vermont
Advanced Bodycare United States Court of August 25, 2010 615 F.3d 1352
Solutions, LLC v. Appeals, Eleventh Cir-
Thione Intern., Inc. cuit
AGF, Inc. v. Great Lakes Supreme Court of Ohio June 06, 1990 51 Ohio St.3d 177
Heat Treating Co.
Agri-Sales Associates, United States District July 05, 2011 75 UCC Rep.Serv.2d 24
Inc. v. McConnell Court, M.D. Tennessee,
Nashville Division
Alimenta (U.S.A.), Inc. United States Court of December 08, 1988 861 F.2d 650
v. Cargill Inc. Appeals, Eleventh Cir-
cuit
Allen Food Products, United States District December 19, 1980 507 F.Supp. 392
Inc. v. Block Bros., Inc. Court, S.D. Ohio,
Western Division
Allied Canners & Pack- Court of Appeal, First December 18, 1984 162 Cal.App.3d 905
ers, Inc. v. Victor Pack- District, Division 2,
ing Co. California
Alloway v. General Supreme Court of New June 30, 1997 149 N.J. 620
Marine Industries, L.P. Jersey
Almetals, Inc. v. Wick- United States District October 29, 2008 2008 WL 4791377
eder Westfalenstah L, Court, E.D. Michigan
GmbH
Alter & Sons, Inc. v. United States District November 29, 1973 366 F.Supp. 959
United Engineers & Court, S.D. Illinois,
Constructors, Inc. Northern Division
Alumbaugh v. Union United States Court of March 07, 2003 322 F.3d 520
Pacific R. Co. Appeals, Eighth Circuit
Aluminum Co. of United States District April 07, 1980 499 F.Supp. 53
America v. Essex Group, Court, W. D.
Inc. Pennsylvania.
American Bronze Corp. Court of Appeals of December 16, 1982 8 Ohio App.3d 223
v. Streamway Products Ohio, Eighth District,
Cuyahoga County
American Bumper & Court of Appeals of July 26, 2002 252 Mich. App. 340
Mfg. Co. v. Transtechno- Michigan
logy Corp.

xvii
Table of Cases

Parties Court Date Source

American Canning Co. Supreme Court of February 21, 1911 68 W.Va. 698
v. Flat Top Grocery Co. Appeals of West Vir-
ginia
American Car & United States Court of April 26, 1921 275 F. 786
Foundry Co. v. East Appeals, Seventh Cir-
Jordan Furnace Co. cuit
American Carpet Mills United States Court of July 06, 1981 649 F.2d 1056
v. Gunny Corp. Appeals, Fifth Circuit
American Mfg. Co. v. Circuit Court of April 06, 1925 7 F.2d 565
U.S. Shipping Board Appeals, Second Circuit
Emergency Fleet Corpor-
ation
American Paper Recyc- United States District April 07, 2011 775 F.Supp. 2d 322
ling Corp. v. IHC Corp. Court, D. Massachu-
setts
American State Bank of Court of Appeals of June 25, 2002 646 N.W.2d 241
Olivia v. Ladwig & Minnesota
Ladwig
AMF, Inc. v. McDon- United States Court of June 22, 1976 536 F.2d 1167
ald’s Corp. Appeals, Seventh Cir-
cuit
Anderson & Nafziger v. Supreme Court of May 18, 1979 100 Idaho 175
G. T. Newcomb, Inc. Idaho
Anderson v. Bungee United States District April 07, 1999 44 F.Supp.2d 534
Intern. Mfg. Corp. Court, S.D. New York
Andrus v. Bradley Circuit Court, E.D. May 31, 1900 102 F. 54
Pennsylvania
Appeal of Mazur Bros. Veterans Administra- June 25, 1965 3 UCC Rep. Serv. 419
& Jaffe Fish Co., Inc. tion Contract Appeals
Board, L. I., New York
Aqualon Co. v. Mac United States Court of July 08, 1998 149 F.3d 262
Equipment, Inc. Appeals, Fourth Circuit
ARB (American United States Court of December 12, 1980 663 F.2d 189
Research Bureau), Inc. Appeals, District of
v. E-Systems, Inc. Columbia Circuit
Arbitron, Inc. v. Tralyn United States Court of March 04, 2005 400 F.3d 130
Broadcasting, Inc. Appeals, Second Circuit
Argo Welded Products, United States District December 16, 1981 528 F.Supp. 583
Inc. v. J. T. Ryerson Court, E. D.
Steel & Sons, Inc. Pennsylvania
Arkla Energy Resources, United States Court of November 03, 1993 9 F.3d 855
a Div. of Arkla, Inc. v. Appeals Tenth Circuit
Roye Realty and Devel-
oping, Inc.

xviii
 Table of Cases

Parties Court Date Source

Associated Metals & United States District March 31, 1983 590 F.Supp. 18
Minerals Corp. v. Court, S.D. New York
Sharon Steel Corp.
Atlantech Inc. v. Amer- United States District March 24, 2008 540 F.Supp. 2d 274
ican Panel Corp. Court, D. Massachu-
setts
Atlantic Phosphate Co. Supreme Court of the May 04, 1885 114 U.S. 492
v. Grafflin United States
Atlas Industries, Inc. v. Supreme Court of Kan- January 25, 1975 216 Kan. 213
National Cash Register sas
Co.
Atwood-Kellogg, Inc. v. Supreme Court of November 23, 1999 602 N.W.2d 749
Nickeson Farms South Dakota
Audio Visual Artistry v. Court of Appeals of December 26, 2012 79 UCC Rep.Serv.2d
Tanzer Tennessee 426
Automated Energy Sys- Court of Appeals of December 03, 1982 164 Ga.App. 772
tems, Inc. v. Fibers & Georgia
Fabrics of Georgia, Inc.
Back v. Wickes Corp. Supreme Judicial Court July 06, 1978 375 Mass. 633
of Massachusetts,
Middlesex
Bailey v. Montgomery Colorado Court of July 05, 1984 690 P.2d 1280
Ward & Co., Inc. Appeals, Div. I
Baker v. DEC Intern Supreme Court of July 21, 1998 458 Mich. 247
Michigan
Bander v. Grossman Supreme Court, New April 25, 1994 161 Misc.2d 119
York County
Bank of New York v. United States Court of August 08, 1994 35 F.3d 643
Amoco Oil Co. Appeals, Second Circuit
Banker v. Nighswander, United States Court of October 11, 1994 37 F.3d 866
Martin & Mitchell Appeals, Second Circuit
Barbarossa & Sons, Inc. Supreme Court of Min- April 21, 1978 265 N.W.2d 655
v. Iten Chevrolet, Inc. nesota
Barlow v. DeVilbiss Co. United States District February 25, 1963 214 F.Supp. 540
Court E.D. Wisconsin
Barnard v. Kellogg Supreme Court of the December Term 1870 77 U.S. (10 Wall.) 383
United States
Barnes v. Diamond Air- United States District July 25, 2007 499 F.Supp. 2d 1311
craft Industries, Inc. Court, S.D. Florida
Barry & Sewall Indus. United States Court of August 23, 1990 912 F.2d 252
Supply Co. v. Metal- Appeals, Eighth Circuit
Prep of Houston, Inc.
Bartus v. Riccardi City Court of Utica October 20, 1967 55 Misc.2d 3

xix
Table of Cases

Parties Court Date Source

Baumgold Bros., Inc. v. United States District December 20, 1973 375 F.Supp. 807
Allan M. Fox Co., East Court, N.D. Ohio, East-
ern Division
Bd. of Commrs. San- Court of Appeals of December 01, 1978 60 Ohio App.2d 415
dusky Co. Park Dist. v. Ohio, Sixth District,
Annadale Scrap Co., Sandusky County
Inc.
Beauty Mfg. Solutions United States District January 27, 2012 848 F.Supp. 2d 663
Corp. v. Ashland, Inc. Court, N.D. Texas, Dal-
las Division
Benefit Trust Life Ins. United States Court of November 15, 1985 776 F.2d 1174
Co. v. Union Nat. Bank Appeals, Third Circuit
of Pittsburgh
Bentzley v. Medtronic, United States District November 29, 2011 827 F.Supp. 2d 443
Inc. Court, E.D.
Pennsylvania
Berge Helene Ltd. v. GE United States District November 16, 2011 830 F.Supp. 2d 235
Oil & Gas, Inc. Court, S.D. Texas,
Houston Division
Bernina Distributors, United States Court of April 06, 1981 646 F.2d 434
Inc. v. Bernina Sewing Appeals, Tenth Circuit
Mach. Co., Inc.
Bituminous Const., Inc. United States Court of April 21, 1987 816 F.2d 965
v. Rucker Enterprises, Appeals, Fourth Circuit
Inc.
Black v. American Supreme Court of September 08, 1977 239 Ga. 632
Vending Co., Inc. Georgia
Blair Intn’l, Ltd. v. LaB- United States Court of March 05, 1982 675 F.2d 954
arge, Inc. Appeals, Eight Circuit
Bland v. Freightliner United States District April 15, 2002 206 F.Supp. 2d 1202
LLC Court, M.D. Florida,
Tampa Division
Blanton v. Anzalone United States Court of April 09, 1987 813 F.2d 1574
Appeals, Ninth Circuit
Blue Creek Farm, Inc. v. Supreme Court of Neb- July 14, 2000 259 Neb. 1032
Aurora Co-op. Elevator raska
Co.
Bonebrake v. Cox United States Court of July 02, 1974 499 F.2d 951
Appeals, Eighth Circuit
Bornstein v. Somerson District Court of January 26, 1977 341 So.2d 1043
Appeal of Florida,
Second District
Bowdoin v. Showell United States Court of June 02, 1987 817 F.2d 1543
Growers, Inc. Appeals, Eleventh Cir-
cuit

xx
 Table of Cases

Parties Court Date Source

Bowlin’s, Inc. v. Ramsey Court of Appeals of March 17, 1983 99 N.M. 660
Oil Co., Inc. New Mexico
Boxa v. Vaughn Supreme Court of December 30, 2003 674 N.W.2d 306
South Dakota
Brandt v. Boston Sci- Supreme Court of June 05, 2003 204 Ill.2d 640
entific Corp. Illinois
Brodsky v. Nerud Supreme Court, Appel- March 05, 1979 68 A.D.2d 876
late Division, Second
Department, New York
Brody v. Overlook Hos- Superior Court of New November 13, 1972 121 N.J. Super. 299
pital Jersey
Brookings Mun. Utilit- United States District May 26, 2000 103 F.Supp. 2d 1169
ies, Inc. v. Amoco Court, D. South
Chemical Co. Dakota, Southern Divi-
sion
Brown v. Consolidated United States District July 19, 1985 614 F.Supp. 289
Rail Corp. Court, N.D. Ohio, East-
ern Division
Bunge Corp. v. Recker United States Court of July 11, 1975 519 F.2d 449
Appeals, Eighth Circuit
Burnett v. Vance New York Supreme November 30, 1984 126 Misc.2d 402
Court, Queens County
By-Lo Oil Co., Inc. v. United States Court of May 30, 2001 11 Fed.Appx. 538
Partech, Inc. Appeals, Sixth Circuit
Cadle Co. v. Castle Court of Appeals of October 24, 1995 913 S.W.2d 627
Texas, Dallas
Camden Iron & Metal, United States District August 09, 1989 719 F.Supp. 297
Inc. v. Bomar Resources, Court, D. New Jersey
Inc.
Campbell Soup Co. v. United States Court of December 23, 1948 172 F.2d 80
Wentz Appeals, Third Circuit
Campbell v. Hostetter Superior Court of December 02, 1977 251 Pa. Super. 232
Farms, Inc. Pennsylvania
Campbell v. Mark Hotel United States District August 20, 2012 2012 WL 3577531
Sponsor, LLC Court, S.D. New York
Canavan v. City of Court of Appeals of October 22, 1920 229 N.Y. 473
Mechanicville New York
Canning v. Broan- United States District March 27, 2007 480 F.Supp. 2d 392
Nutone, LLC Court, D. Maine
Canusa Corp. v. A & R United States District November 26, 1997 986 F.Supp. 723
Lobosco, Inc. Court, E.D. New York
Carey Lith. Co. v. New York Supreme February 09, 1911 70 Misc. 541
Magazine Co. Court, Appellate Term

xxi
Table of Cases

Parties Court Date Source

Carlisle Corp. v. Uresco United States District June 10, 1993 823 F.Supp. 271
Const. Materials, Inc. Court, M.D.
Pennsylvania
Carlson v. Armstrong United States District October 22, 1987 693 F.Supp. 1073
World Industries, Inc. Court, S.D. Florida,
Miami Division
Carmichael & Carmi- Court of Appeals of July 24, 1992 1992 WL 172404
chael, Inc. v. Nichol- Tennessee, Middle Sec-
stone Companies, Inc. tion at Nashville
CBS Inc. v. Ziff-Davis Court of Appeals of April 03, 1990 75 N.Y.2d 496
Pub. Co. New York
Center Garment Co., Supreme Judicial Court January 30, 1976 369 Mass. 633
Inc. v. United Refriger- of Massachusetts, Bris-
ator Co. tol
Cesco Mfg. Corp. v. Appeals Court of Mas- June 28, 1979 7 Mass. App.Ct. 837
Norcross, Inc. sachusetts
Chadwell v. English Court of Appeals of May 11, 1982 652 P.2d 310
Oklahoma, Division
No. 2
Chamberlain v. Amer- United States District April 12, 1999 70 F.Supp.2d 788
ican Tobacco Co., Inc. Court, N.D. Ohio, East-
ern Division
Charles R. Combs Supreme Court of Ohio August 01, 1984 12 Ohio St.3d 241
Trucking, Inc. v. Interna-
tional Harvester Co.
Chemco Indus. Applicat- United States District October 15, 1973 366 F.Supp. 278
ors Co. v. E. I. du Pont Court, E.D. Missouri,
de Nemours & Co. Southeastern Division
Cherwell-Ralli, Inc. v. Supreme Court of Con- May 20, 1980 180 Conn. 714
Rytman Grain Co., Inc. necticut
Chicago Prime Packers, United States Court of May 23, 2005 408 F.3d 894
Inc. v. Northam Food Appeals, Seventh Cir-
Trading Co. cuit
Cianbro Corp. v. Cur- United States Court of March 18, 1987 814 F.2d 7
ran-Lavoie, Inc. Appeals, First Circuit
Cincinnati Fluid Power, United States Court of August 06, 1986 797 F.2d 1386
Inc. v. Rexnord, Inc. Appeals, Sixth Circuit
City of Gainesville v. United States District April 18, 1980 488 F Supp 1258
Florida Power & Light Court, S. D. Florida,
Co. Miami Division
City of Rye v. Public Court of Appeals of July 10, 1974 34 N.Y.2d 470
Service Mut. Ins. Co. New York
City Stores Co. v. United States District April 05, 1967 266 F.Supp. 766
Ammerman Court District of
Columbia

xxii
 Table of Cases

Parties Court Date Source

Clark Oil Trading Co. United States District August 04, 1993 1993 WL 300039
v. Amerada Hess Trad- Court, S.D. New York
ing Co., A Div. of
Amerada Hess Corp.
Clean Uniform Co. St. Missouri Court of December 29, 2009 300 S.W.3d 602
Louis v. Magic Touch Appeals, Eastern Dis-
Cleaning, Inc. trict, Division One
Clem Perrin Marine United States Court of April 02, 1984 730 F.2d 186
Towing, Inc. v. Panama Appeals, Fifth Circuit
Canal Co.
Clemens v. U.S. United States District September 30, 1968 295 F.Supp. 1339
Court D. Oregon
Cliffstar Corp. v. River- United States District November 15, 1990 750 F.Supp. 81
bend Products, Inc. Court, W.D. New York
Coast Laundry, Inc. v. Court of Appeals of June 15, 1972 9 Or.App. 521
Lincoln City Oregon, Department 2
Cole v. Keller Industries, United States District November 18, 1994 872 F.Supp. 1470
Inc. Court, E.D. Virginia,
Richmond Division
Cole v. Melvin United States District November 21, 1977 441 F.Supp. 193
Court, D. South Dakota
Columbia Gas Transmis- United States District March 22, 1977 443 F.Supp. 14
sion Corp. v. Larry H. Court, S.D. Ohio, East-
Wright, Inc. ern Division
Columbus Milk Produ- Supreme Court of Wis- November 03, 1970 48 Wis.2d 451
cers’ Co-op. v. Depart- consin
ment of Agriculture
ConAgra, Inc. v. Bartlett Supreme Court of Neb- December 08, 1995 248 Neb. 933
Partnership raska
Concise Oil & Gas Part- United States Court of March 18, 1993 986 F.2d 1463
nership v. Louisiana Appeals, Fifth Circuit
Intrastate Gas Corp.
Connick v. Suzuki Supreme Court of October 18, 1996 174 Ill.2d 482
Motor Co., Ltd Illinois
Connor v. Bogrett Supreme Court of June 22, 1979 596 P.2d 683
Wyoming
Continental Forest Supreme Court of Ore- September 11, 1970 256 Or. 466
Products, Inc. v. White gon, Department 2
Lumber Sales, Inc.
Conwell v. Gray Loon Supreme Court of Indi- May 19, 2009 906 N.E.2d 805
Outdoor Marketing ana
Group, Inc.
Cook Composites, Inc. Court of Appeals of January 20, 2000 15 S.W.3d 124
v. Westlake Styrene Texas, Houston (14th
Corp. Dist.)

xxiii
Table of Cases

Parties Court Date Source

Cook Specialty Co. v. United States District September 25, 1991 772 F.Supp. 1532
Schrlock Court, E.D.
Pennsylvania
Copylease Corp. of United States District February 10, 1976 408 F.Supp. 758
America v. Memorex Court, S.D. New York
Corp.
County of Monroe, United States District December 17, 2009 2009 WL 4890664
Florida v. Priceline.com, Court, S.D. Florida
Inc.
Crescent Min. Co. v. Supreme Court of the January 22, 1894 151 U.S. 317
Wasatch Min. Co. United States
Creusot-Loire Intern., United States District August 02, 1983 585 F.Supp. 45
Inc. v. Coppus Engineer- Court S.D. New York
ing Corp.
Crowder v. Aurora Co- Supreme Court of Neb- September 05, 1986 223 Neb. 704
op. Elevator Co. raska
Cumbest v. Harris Supreme Court of Mis- October 18, 1978 363 So.2d 294
sissippi
Curtis v. Innerarity Supreme Court of the January Term 1848 47 U.S. 146
United States
D.C. Leathers, Inc. v. Supreme Court, Appel- December 04, 1986 125 A.D.2d 738
Gelmart Industries, Inc. late Division, Third
Department, New York
D.R. Curtis, Co. v. Court of Appeals of November 16, 1982 103 Idaho 776
Mathews Idaho
Dakota Pork Industries Supreme Court of January 02, 2002 638 N.W.2d 884
v. City of Huron South Dakota
David Tunick, Inc. v. United States District December 08, 1993 838 F.Supp. 848
Kornfeld Court, S.D. New York
Davis v. Southern United States Court of September 19, 2002 305 F.3d 1268
Energy Homes, Inc. Appeals, Eleventh Cir-
cuit
Davis v. Vintage Enter- Court of Appeals of November 20, 1974 23 N.C.App. 581
prises, Inc. North Carolina
De Witt v. Itasca-Man- Supreme Court of Min- July 09, 1943 215 Minn. 551
trap Co-op. Elec. Ass’n nesota
Deardorff-Jackson Co. United States Depart- December 18, 1967 1967 WL 8815
v. National Produce ment of Agriculture
Distributors, Inc.
Delchi Carrier SpA v. United States Court of December 06, 1995 71 F.3d 1024
Rotorex Corp. Appeals, Second Circuit
Detroit Power Screw- Court of Appeals of July 29, 1970 25 Mich.App. 478
driver Co. v. Ladney Michigan, Division No.
2
Devore v. Bostrom Supreme Court of Utah June 23, 1981 632 P.2d 832

xxiv
 Table of Cases

Parties Court Date Source

DeWitt v. Eveready Supreme Court of June 28, 2002 565 S.E.2d 140
Battery Co., Inc. North Carolina
DiGiuseppe v. Lawler Supreme Court of October 17, 2008 269 S.W.3d 588
Texas
Dingxi Longhai Dairy, United States Court of February 17, 2011 635 F.3d 1106
Ltd. v. Becwood Techno- Appeals, Eighth Circuit
logy Group LLC
Doner v. Snapp Court of Appeals of November 18, 1994 98 Ohio App.3d 597
Ohio, Second District,
Miami County
Dorn v. Stanhope Steel, Superior Court of November 04, 1987 368 Pa. Super. 557
Inc. Pennsylvania
Doug Connor, Inc. v. District Court of May 26, 2000 761 So.2d 426
Proto-Grind, Inc. Appeal of Florida, Fifth
District
Downie v. Abex Corp United States Court of August 20, 1984 741 F.2d 1235
Appeals, Tenth Circuit
Duffy Tool & Stamping, Court of Appeals of February 01, 2000 2000 WL 122225
Inc. v. Bosch Automot- Tennessee
ive Motor Systems Corp.
Duke Galish, LLC v. Court of Appeals of March 09, 2011 308 Ga.App. 316
Manton Georgia
Dutchmen Mfg., Inc. v. Supreme Court of Indi- June 22, 2006 849 N.E.2d 516
Reynolds ana
Eades Commodities, Co. Missouri Court of February 18, 1992 825 S.W.2d 34
v. Hoeper Appeals, Western Dis-
trict
East River S.S. Corp. v. Supreme Court of the June 16, 1986 476 U.S. 858
Transamerica Delaval, United States
Inc.
Eastern Air Lines, Inc. United States Court of May 17, 1976 532 F.2d 957
v. McDonnell Douglas Appeals, Fifth Circuit
Corp.
eBay, Inc. v. Bidder’s United States District May 24, 2000 100 F.Supp. 2d 1058
Edge, Inc. Court, N.D. California
Eckstein v. Cummins Court of Appeals of April 05, 1974 41 Ohio App.2d 1
Ohio, Sixth District,
Lucas County
Ecology Services, Inc. v. United States District August 09, 2006 443 F.Supp. 2d 756
GranTurk Equipment, Court, D. Maryland
Inc.
Economy Forms Corp. United States District March 29, 1974 391 F.Supp. 944
v. Kandy, Inc. Court, N.D. Georgia,
Rome Division
Eddington v. Dick City Court, City of July 02, 1976 87 Misc.2d 793
Geneva, New York

xxv
Table of Cases

Parties Court Date Source

Eichenberger v. Wilhelm Supreme Court of June 23, 1976 244 N.W.2d 691
North Dakota
Electric Regulator Corp. United States District January 22, 1968 280 F.Supp. 550
v. Sterling Extruder Court D. Connecticut
Corp.
Emanuel Law Outlines, United States District August 31, 1995 899 F.Supp. 1081
Inc. v. Multi-State Legal Court, S.D. New York
Studies, Inc.
Emery v. Caledonia Supreme Court of New May 31, 1977 117 N.H. 441
Sand & Gravel Co. Hampshire
Environmental Ele- United States District January 21, 1980 497 F.Supp. 58
ments Corp. v. Mayer Court, D. Maryland
Pollock Steel Corp.
EOI Electronics, Inc. v. United States Court of March 06, 1986 785 F.2d 391
Xebec Appeals, Second Circuit
EPN-Delaval, S.A. v. United States District April 21, 1982 542 F.Supp. 238
Inter-Equip, Inc. Court, S. D. Texas,
Houston Division
Epstein v. Giannattasio Court of Common December 10, 1963 25 Conn.Supp. 109
Pleas of Connecticut,
Fairfield County at
Bridgeport
Erie Casein Co., Inc. v. Appellate Court of August 23, 1991 217 Ill.App.3d 602
Anric Corp. Illinois, Third District
Espin v. Allergan Phar- Superior Court of New December 14, 1973 127 N.J.Super. 496
maceutical, Inc. Jersey, Law Division
Esquire Mobile Homes, Court of Appeals of March 19, 1987 182 Ga.App. 528
Inc. v. Arrendale Georgia
Euroworld of Califor- United States District June 24, 1985 613 F.Supp. 129
nia, Inc. v. Blakey Court, S.D. Florida
Extrusion Painting, Inc. United States District February 25, 1999 37 F.Supp.2d 985
v. Awnings Unlimited, Court, E.D. Michigan,
Inc. Southern Division
Facto v. Pantagis Superior Court of New January 29, 2007 390 N.J. Super. 227
Jersey, Appellate Divi-
sion
Farmers Elevator Co. of Supreme Court of January 27, 1976 90 S.D. 86
Elk Point v. Lyle South Dakota
Farmers Livestock Supreme Court of September 02, 1986 393 N.W.2d 65
Exchange of Bismarck, North Dakota
Inc. v. Ulmer
Farmer’s Union Co-op Supreme Court of Neb- September 22, 1976 196 Neb. 699
Co. of Mead v. Flamme raska
Bros.
Federal Ins. Co. v. Vil- Appellate Court of April 27, 1995 271 Ill.App. 3d 892
lage of Westmont Illinois, Second District

xxvi
 Table of Cases

Parties Court Date Source

Fell v. Kewanee Farm Supreme Court of Iowa June 20, 1990 457 N.W.2d 911
Equipment Co., A Div.
of Allied Products
Ferragamo v. Massachu- Supreme Judicial Court August 08, 1985 395 Mass. 581
setts Bay Transp. of Massachusetts, Suf-
Authority folk
Figueroa v. Kit-San Co. Court of Appeals of July 06, 1992 123 Idaho 149
Idaho
First Coinvestors v. District Court of Suf- November 08, 1976 88 Misc.2d 495
Coppola folk County, Third Dis-
trict
Firwood Mfg. Co., Inc. United States Court of September 16, 1996 96 F.3d 163
v. General Tire, Inc. Appeals, Sixth Circuit
Fitzner Pontiac-Buick- Supreme Court of Mis- April 13, 1988 523 So.2d 324
Cadillac, Inc. v. Smith sissippi
Florida Jai Alai, Inc. v. District Court of September 24, 1980 388 So.2d 1076
Southern Catering Ser- Appeal of Florida, Fifth
vices, Inc. District
Flynn v. Holder United States Court of March 27, 2012 684 F.3d 852
Appeals, Ninth Circuit
Ford Motor Co. v. Gen- Court of Appeals of September 10, 2001 365 Md. 321
eral Acc. Ins. Co. Maryland
Foster v. Colorado United States Court of July 06, 1967 381 F.2d 222
Radio Corp. Appeals, Tenth Circuit
Fowler’s Holdings, LLLP Superior Court of Con- June 01, 2011 318 Ga.App. 73
v. CLP Family Invest- necticut, Judicial Dis-
ments, L.P. trict of Litchfield
Fox v. Young Court of Civil Appeals February 27, 1936 91 S.W.2d 857
of Texas, El Paso
Foxco Industries, Ltd. v. United States Court of May 22, 1979 595 F.2d 976
Fabric World, Inc. Appeals, Fifth Circuit
Funk v. Kaiser-Frazer Supreme Court, Appel- April 12, 1965 23 A.D.2d 771
Sales Corp. late Division, Second
Department, New York
G & H Land & Cattle Supreme Court of May 12, 1981 102 Idaho 204
Co. v. Heitzman & Nel- Idaho
son, Inc.
Gall by Gall v. Supreme Court of March 03, 1989 521 Pa. 68
Allegheny County Pennsylvania
Health Dept.
Gambino v. United United States District March 07, 1969 48 F.R.D. 28
Fruit Co. Court S. D. New York
Garcia v. Edgewater Appellate Court of March 26, 1993 244 Ill.App. 3d 894
Hosp. Illinois, First District,
Fifth Division

xxvii
Table of Cases

Parties Court Date Source

GE Packaged Power, United States District January 12, 2007 510 F.Supp. 2d 1124
Inc. v. Readiness Man- Court, N.D. Georgia,
agement Support, L.C. Atlanta Division
General Instrument United States District November 13, 1973 366 F.Supp. 139
Corp., F. W. Sickles Court, M. D.
Division v. Pennsylvania
Pennsylvania Pressed
Metals, Inc.
GenTech Const., LLC v. United States District March 31, 2011 2011 WL 1257943
Natare Corp. Court, E.D. Tennessee
Gerwin v. Southeastern Court of Appeal, January 08, 1971 14 Cal.App.3d 209
Cal. Assn. of Seventh Fourth District, Divi-
Day Adventists sion 2, California
Gheen v. Diamond Court of Civil Appeals October 23, 1975 529 S.W.2d 289
Shamrock Corp. of Texas, Waco
Giallo v. New Piper Air- District Court of October 15, 2003 855 So.2d 1273
craft, Inc. Appeal of Florida,
Fourth District
Givan v. Mack Truck, Missouri Court of May 23, 1978 569 S.W.2d 243
Inc. Appeals, St. Louis Dis-
trict, Division Four
Glasstech, Inc. v. United States District September 29, 2009 675 F.Supp.2d 752
Chicago Blower Corp. Court, N.D. Ohio,
Western Division
Globe Refining Co. v. Supreme Court of the June 01, 1903 190 U.S. 540
Landa Cotton Oil Co. United States
GNP Commodities, Inc. Appellate Court of April 24, 1981 95 Ill.App.3d 966
v. Walsh Heffernan Co. Illinois, First District,
Fifth Division
Golsen v. ONG Western, Supreme Court of March 15, 1988 756 P.2d 1209
Inc. Oklahoma
Goosic Const. Co. v. Supreme Court of Neb- May 05, 1976 196 Neb. 86
City Nat. Bank of Crete raska
Government of Republic United States District August 06, 1979 473 F.Supp. 1306
of China v. Compass Court, District of
Communications Corp. Columbia
Gragg Farms & Nursery Hamilton County June 17, 1996 81 Ohio Misc.2d 34
v. Kelly Green Landscap- Municipal Court, Ohio
ing
Grandi v. LeSage Supreme Court of New February 15, 1965 74 N.M. 799
Mexico
Graulich Caterer Inc. v. Superior Court of New May 15, 1968 101 N.J. Super. 61
Hans Holterbosch, Inc. Jersey, Appellate Divi-
sion

xxviii
 Table of Cases

Parties Court Date Source

Green Const. Co. v. First United States District April 25, 1990 735 F.Supp. 1254
Indem. of America Ins. Court, D. New Jersey
Co.
Greenberg v. Beckwith Supreme Court of Ver- June 06, 1978 136 Vt. 285
Motors, Inc. mont
Groeb Farms, Inc. v. United States District February 27, 2009 2009 WL 500816
Alfred L. Wolff, Inc. Court, E.D. Michigan
Grossman v. D’Or Appellate Court of August 28, 1968 98 Ill.App.2d 198
Illinois, First District
Grundy County v. Har- Court of Appeals of May 24, 1989 1989 WL 54906
rison Tennessee, Middle Sec-
tion at Nashville
Gulf Oil Corp. v. F. P. C. United States Court of September 07, 1977 563 F.2d 588
Appeals, Third Circuit
Gulf Trading Corp. v. District Court of the January 24, 1996 912 F.Supp. 177
National Enterprises of Virgin Islands, Division
St. Croix, Inc. of St. Croix, Appellate
Division
Gurney Industries, Inc. United States Court of September 14, 1972 467 F.2d 588
v. St. Paul Fire & Mar- Appeals, Fourth Circuit
ine Ins. Co.
H. Molsen & Co., Inc. v. Court of Civil Appeals December 31, 1975 534 S.W.2d 146
Raines of Texas, El Paso
H.C. Schmieding Pro- Supreme Court of June 24, 1988 529 So.2d 243
duce Co., Inc. v. Cagle Alabama
Hackett v. Lewis District Court of May 05, 1918 36 Cal.App. 687
Appeal, First District,
California
Haken v. Scheffler Court of Appeals of May 28, 1970 24 Mich.App. 196
Michigan, Division No.
3
Hall v. T.L. Kemp Jew- Court of Appeals of November 06, 1984 71 N.C.App. 101
elry, Inc. North Carolina
Hangzhou Silk Import United States District September 05, 2002 2002 WL 2031591
and Export Corp. v. Court, S.D. New York
P.C.B. Intern. Indus-
tries, Inc.
Hannon v. Original Supreme Judicial Court April 20, 1982 385 Mass. 813
Gunite Aquatech Pools, of Massachusetts,
Inc. Middlesex
Harlow & Jones, Inc. v. United States District November 30, 1976 424 F.Supp. 770
Advance Steel Co Court, E.D. Michigan
Hawthorne Industries, United States Court of May 28, 1982 676 F.2d 1385
Inc. v. Balfour Maclaine Appeals, Eleventh Cir-
Intern., Ltd. cuit

xxix
Table of Cases

Parties Court Date Source

Hayes v. Bering Sea Supreme Court of August 20, 1999 983 P.2d 1280
Reindeer Products Alaska
Heat Exchangers, Inc. v. Court of Special February 07, 1977 34 Md.App. 679
Map Const. Corp. Appeals of Maryland
Hedrick v. Goodwin Appellate Court of March 20, 1975 26 Ill.App.3d 327
Bros., Inc. Illinois, Fourth District
Helash v. Ballard United States Court of June 11, 1980 638 F.2d 74
Appeals, Ninth Circuit
Henley Supply Co., Inc. Court of Appeals of April 07, 1989 1989 WL 31620
v. Universal Construct- Tennessee, Middle Sec-
ors, Inc. tion at Nashville
Henningsen v. Bloom- Supreme Court of New May 09, 1960 32 N.J. 358
field Motors, Inc. Jersey
Hensley v. Ray’s Motor Court of Appeals of June 03, 2003 158 N.C.App. 261
Co. of Forest City, Inc. North Carolina
Herbert v. Mentor United States District September 28, 2007 2007 WL 2893387
Court, D. New Jersey
Hercules Machinery United States District September 09, 2002 2002 WL 31015598
Corp. v. McElwee Bros., Court, E.D. Louisiana
Inc.
HGI Associates, Inc. v. United States Court of October 04, 2005 427 F.3d 867
Wetmore Printing Co. Appeals, Eleventh Cir-
cuit
Hidden Brook Air, Inc. United States District October 31, 2002 241 F.Supp.2d 246
v. Thabet Aviation Court, S.D. New York
Intern. Inc.
Hill v. Gateway 2000, United States Court of January 06, 1997 105 F.3d 1147
Inc. Appeals, Seventh Cir-
cuit
Hochster v. De La Tour Court of Queen’s Bench June 25, 1853 118 E.R. 922
Hoder v. Sayet District Court of January 31, 1967 196 So.2d 205
Appeal of Florida,
Third District
Home Indemnity Co. v. United States Court of March 09, 1973 474 F.2d 1081
Twin City Fire Insur- Appeals, Seventh Cir-
ance cuit
Hudson v. Town and Supreme Court of Ten- February 27, 1984 666 S.W.2d 51
Country True Value nessee, at Nashville
Hardware, Inc.
Hughes v. Collegedale Supreme Court of Mis- February 01, 1978 355 So.2d 79
Distributors sissippi
Hummel v. Mid Dakota Supreme Court of January 25, 1995 526 N.W.2d 704
Clinic, P.C. North Dakota
Huron Mill Co. v. United States Court of April 28, 1958 257 F.2d 258
Hedges Appeals, Second Circuit

xxx
 Table of Cases

Parties Court Date Source

Hyosung America, Inc. United States Court of February 13, 1998 137 F.3d 75
v. Sumagh Textile Co., Appeals, Second Circuit
Ltd.
i.Lan Systems, Inc. v. United States District January 02, 2002 183 F. Supp. 2d 328
Netscout Service Level Court, D. Massachu-
Corp. setts
In re Amica, Inc. United States Bank- January 03, 1992 135 B.R. 534
ruptcy Court, N.D.
Illinois, Eastern Divi-
sion
In re Ault United States Bank- August 15, 1980 6 B.R. 58
ruptcy Court, E. D.
Tennessee
In re Bridgestone/Fire- United States District July 27, 2001 155 F.Supp. 2d 1069
stone, Inc. Tires Court, S.D. Indiana,
Products Liability Litiga- Indianapolis Division
tion
In re Brooks Shoe Mfg. United States Bank- July 13, 1982 21 B.R. 604
Co., Inc. ruptcy Court, E.D.
Pennsylvania
In re Coast Trading Co., United States Bank- October 20, 1982 26 B.R. 737
Inc. ruptcy Court, D. Ore-
gon
In re Empire Pacific United States Bank- March 13, 1987 71 B.R. 500
Industries, Inc. ruptcy Court, D. Ore-
gon
In re Erving Industries, United States Bank- April 07, 2010 432 B.R. 354
Inc. ruptcy Court, D. Mas-
sachusetts, Western
Division
In re First Hartford United States Bank- July 28, 1986 63 B.R. 479
Corp. ruptcy Court, S.D. New
York
In re G. Paoletti, Inc. United States Bank- January 09, 1997 205 B.R. 251
ruptcy Court, N.D.
California
In re Kellstrom Indus- United States Bank- August 20, 2002 282 B.R. 787
tries, Inc. ruptcy Court, D.
Delaware
In re Koreag, Controle United States Court of April 09, 1992 961 F.2d 341
et Revision S.A. Appeals, Second Circuit
In re Latex Gloves United States District March 08, 2001 134 F.Supp. 2d 415
Products Liability Litiga- Court, E.D.
tion Pennsylvania
In re McDonald’s United States District May 30, 2007 503 F.Supp. 2d 953
French Fries Litigation Court, N.D. Illinois

xxxi
Table of Cases

Parties Court Date Source

In re Narragansett United States Bank- March 16, 1992 138 B.R. 354
Clothing Co. ruptcy Court
In re Payless Cashways, United States Bank- March 01, 2004 306 B.R. 243
Inc. ruptcy Appellate Panel
of the Eighth Circuit
In re Production Steel, United States Bank- October 23, 1985 54 B.R. 417
Inc. ruptcy Court, M.D.S.
Tennessee
In re Rafter Seven United States Court of November 04, 2008 546 F.3d 1194
Ranches L.P. Appeals, Tenth Circuit
In re S.N.A. Nut Co. United States Bank- April 05, 2000 247 B.R. 7
ruptcy Court, N.D.
N.D. Illinois, Eastern
Division
In re Shelton Harrison United States Court of January 31, 2000 202 F.3d 834
Chevrolet, Inc. Appeals, Sixth Circuit
In re Sunbelt Grain United States Bank- June 18, 2009 406 B.R. 918
WKS, LLC ruptcy Court, D. Kan-
sas
In re Tennecomp Sys- United States Bank- June 25, 1981 12 B.R. 729
tems, Inc. ruptcy Court, E. D.
Tennessee.
In re Wathen’s Elevat- United States Bank- September 13, 1983 32 B.R. 912
ors, Inc. ruptcy Court, W.D.
Kentucky
Indeck Energy Services, United States District September 16, 2004 2004 WL 2095554
Inc. v. NRG Energy, Inc. Court, N.D. Illinois,
Eastern Division
Indian Trail Homeown- District Court of April 10, 1991 577 So.2d 998
ers Ass’n, Inc. v. Roberts Appeal of Florida,
Fourth District
Indiana Glass Co. v. Court of Appeals of March 11, 1998 692 N.E.2d 886
Indiana Michigan Indiana
Power Co.
Indianapolis City Mar- Court of Appeals of October 30, 2009 915 N.E.2d 1013
ket Corp. v. MAV, Inc. Indiana
Indussa Corp. v. Reli- United States District January 30, 1974 369 F.Supp. 976
able Stainless Steel Sup- Court, E.D.
ply Co. Pennsylvania
Indust-Ri-Chem Labor- Court of Civil Appeals April 23, 1980 602 S.W.2d 282
atory, Inc. v. Par-Pak of Texas, Dallas.
Co., Inc.
Insul-Mark Midwest, Supreme Court of Indi- April 20, 1993 612 N.E.2d 550
Inc. v. Modern Materi- ana
als, Inc.

xxxii
 Table of Cases

Parties Court Date Source

Inter “K” N.V. v. UPS Court of Appeals of November 18, 2011 2011 WL 5826046
Supply Chain Solutions, Arizona, Division 2,
Inc. Department A.
Interco Inc. v. Randus- Missouri Court of February 03, 1976 533 S.W.2d 257
trial Corp Appeals, St. Louis Dis-
trict, Division Three
International Minerals United States Court of August 09, 1985 770 F.2d 879
and Chemical Corp. v. Appeals, Tenth Circuit
Llano, Inc.
International Multi- Court of Appeals of November 20, 1991 202 Ga.App. 263
foods Corp. v. National Georgia
Egg Products, Div. of
Hudson Foods, Inc.
International Paper Co. Supreme Court of New March 04, 1914 161 A.D. 180
v. Rockefeller York, Appellate Divi-
sion, Third Department
International Produc- United States Court of September 02, 2009 580 F.3d 587
tion Specialists, Inc. v. Appeals, Seventh Cir-
Schwing America, Inc. cuit
International Therapeut- United States Court of December 19, 1983 721 F.2d 488
ics, Inc. v. McGraw- Appeals, Fifth Circuit
Edison Co.
Interstate Indus. Uni- Supreme Judicial Court April 16, 1976 355 A.2d 913
form Rental Service, Inc. of Maine
v. Couri Pontiac, Inc.
Intervale Steel Corp. v. United States District January 09, 1984 578 F.Supp. 1081
Borg & Beck Div., Borg- Court, E.D. Michigan,
Warner Corp. Southern Division
Irrigation Motor & Colorado Court of April 06, 1971 29 Colo.App. 343
Pump Co. v. Belcher Appeals, Div. I
J & J Farms, Inc. v. Car- United States Court of December 03, 1982 693 F.2d 830
gill, Inc. Appeals, Eighth Circuit
J. Weingarten, Inc. v. Supreme Court of September 08, 1981 404 So.2d 896
Northgate Mall, Inc. Louisiana
Jackson v. Muhlenberg Superior Court of New July 13, 1967 96 N.J. Super. 314
Hospital Jersey, Law Division
Jamestown Terminal Supreme Court of November 05, 1976 246 N.W.2d 736
Elevator, Inc. v. Hieb North Dakota
Jandreau v. Sheesley Supreme Court of September 01, 1982 324 N.W.2d 266
Plumbing & Heating South Dakota
Co., Inc.
Johnson v. Mitsubishi United States District September 24, 2008 578 F.Supp. 2d 1229
Digital Electronics Court, C.D. California,
America, Inc. Southern Division

xxxiii
Table of Cases

Parties Court Date Source

Jones & Laughlin Steel United States Court of July 09, 1980 626 F.2d 280
Corp. v. Johns-Manville Appeals, Third Circuit
Sales Corp.
Jones v. Abriani Court of Appeals of June 29, 1976 169 Ind.App. 556
Indiana, First District
Jones v. Linebaugh Court of Appeals of June 22, 1971 34 Mich.App. 305
Michigan, Division No.
2
June G. Ashton Interiors Appellate Court of March 20, 1986 142 Ill.App.3d 100
v. Stark Carpet Corp. Illinois, First District,
Fourth Division
Kaiser Trading Co. v. United States District December 14, 1970 321 F.Supp. 923
Associated Metals & Court, N.D. California
Minerals Corp.
Karen v. Cane Civil Court of the City November 18, 1991 152 Misc.2d 639
of New York, Queens
County
Kashi v. Gratsos United States Court of May 15, 1986 790 F.2d 1050
Appeals, Second Circuit
Kel Kim Corp. v. Cent- Court of Appeals of December 21, 1987 70 N.Y.2d 900
ral Markets, Inc. New York
Keller v. Inland Metals Supreme Court of August 29, 2003 139 Idaho 233
All Weather Condition- Idaho, Boise
ing, Inc.
Kennedy Ship & Repair, Court of Appeals of October 05, 2006 210 S.W.3d 11
L.P. v. Pham Texas, Houston (14th
Dist.)
Kirby v. Chrysler Corp. United States District December 20, 1982 554 F.Supp. 743
Court, D. Maryland
Kittitas Reclamation Court of Appeals of July 26, 2001 107 Wash.App. 468
Dist. v. Spider Staging Washington, Division
Corp. 3
Koellmer v. Chrysler Circuit Court of Con- November 27, 1970 276 A.2d 807
Motors Corp. necticut, Appellate
Division
Koenen v. Royal Buick Court of Appeals of November 14, 1989 162 Ariz. 376
Co. Arizona, Division 2,
Department A
Konitz v. Claver Supreme Court of February 12, 1998 287 Mont. 301
Montana
Kraft Foods North United States District August 25, 2006 446 F.Supp. 2d 551
America, Inc. v. Banner Court, E.D. Virginia,
Engineering Sales, Inc. Richmond Division
Kunian v. Development Supreme Court of Con- July 11, 1973 165 Conn. 300
Corp. of America necticut

xxxiv
 Table of Cases

Parties Court Date Source

Kunststoffwerk Alfred United States Court of May 12, 1980 323 Pa. Super.23
Huber v. R. J. Dick, Inc. Appeals, Third Circuit
Kvaerner U.S., Inc. v. United States District November 18, 1999 74 F.Supp.2d 709
Hakim Plast Co. Court, E.D. Michigan
L.S. Heath & Son, Inc. United States Court of October 12, 1993 9 F.3d 561
v. AT & T Information Appeals, Seventh Cir-
Systems, Inc. cuit
La Villa Fair v. Lewis Supreme Court of Kan- April 10, 1976 219 Kan. 395
Carpet Mills, Inc. sas
LaCasse v. Blaustein Civil Court of the City March 20, 1978 93 Misc.2d 572
of New York, New York
County
Laclede Gas Co. v. United States Court of July 10, 1975 522 F.2d 33
Amoco Oil Co. Appeals, Eighth Circuit
Lambert v. City of Supreme Court of Neb- March 12, 1993 242 Neb. 778
Columbus raska
Lamberta v. Smiling Jim United States Depart- September 30, 1966 3 UCC Rep.Serv. 981
Potato Co. ment of Agriculture
Land O’Lakes, Inc. v. United States District February 08, 2005 2005 WL 300292
Grassland Dairy Court, W.D. Wisconsin
Products, Inc.
Larsen v. Grabowski Court of Appeals of March 19, 1996 1996 WL 119509
Nebraska
Leslie v. Pennco, Inc. Superior Court of December 02, 1983 323 Pa.Super. 23
Pennsylvania
Lewis v. Mobil Oil Corp. United States Court of January 07, 1971 438 F.2d 500
Appeals, Eighth Circuit
Lewis v. Nine Mile Supreme Court of December 08, 1994 268 Mont. 336
Mines, Inc. Montana
Liberty Lincoln-Mer- United States Court of March 17, 1999 171 F.3d 818
cury, Inc. v. Ford Motor Appeals, Third Circuit
Liberty Steel Products, United States District July 22, 1999 57 F.Supp.2d 459
Inc. v. Franco Steel Corp Court, N.D. Ohio, East-
ern Division
Lickley v. Max Herbold, Supreme Court of July 21, 1999 133 Idaho 209
Inc. Idaho
Liverpool v. Baltimore Court of Appeals of June 11, 2002 369 Md. 304
Diamond Exchange, Maryland
Inc.
LNS Inv. Co., Inc. v. United States District February 23, 1990 731 F.Supp. 1484
Phillips 66 Co Court, D. Kansas
Lockheed Electronics Court of Appeal, January 06, 1981 114 Cal.App.3d 304
Co. v. Keronix, Inc. Second District, Divi-
sion 4, California

xxxv
Table of Cases

Parties Court Date Source

Logan Equipment Corp. United States District May 10, 1990 736 F.Supp. 1188
v. Simon Aerials, Inc. Court, D. Massachu-
setts
Long Island Lighting United States District May 03, 1990 1990 WL 64588
Co. v. IMO Industries, Court, S.D. New York
Inc.
Longwall-Associates, United States District January 18, 2002 46 UCC Rep. Serv.2d
Inc. v. Wolfgang Prein- Court, W.D. Virginia. 651
falk GmbH
Loper v. Lingo Superior Court of May 01, 1916 97 A. 585
Delaware, Kent County
Ludwig, Inc. v. Tobey Massachusetts Appel- February 28, 1964 5 U.C.C. 832
late Division, District
Court Department,
Northern District
Lynx, Inc. v. Ordnance Court of Appeals of November 06, 1974 327 A.2d 502
Prods. Inc. Maryland
Maas v. Scoboda Supreme Court of Neb- March 17, 1972 188 Neb. 189
raska
Macromex SRL v. United States District April 16, 2008 65 UCC Rep.Serv.2d
Globex Intern., Inc. Court, S.D. New York 1033
Madison Plaza, Inc. v. Court of Appeals of April 03, 1979 180 Ind.App. 141
Shapira Corp. Indiana, First District
Manley v. Doe United States District February 2, 2012 849 F.Supp. 2d 594
Court, E.D. North Car-
olina, Southern Divi-
sion
Marcus & Co. v. K.L.G. Court of Errors and January 13, 1939 122 N.J.L. 202
Baking Co. Appeals of New Jersey
Martin v. American United States Court of June 19, 1997 116 F.3d 102
Medical Systems, Inc. Appeals, Fourth Circuit
Martin v. Sheffer Court of Appeals of May 07, 1991 102 N.C.App. 802
North Carolina
Mason Distributors, Inc. District Court of February 18, 1986 484 So.2d 1275
v. Encapsulations, Inc. Appeal of Florida,
Third District
Masterton & Smith v. Supreme Court of New January Term, 1845 7 Hill 61
City of Brooklyn York
Matter of Kohl United States Bank- June 03, 1981 11 B.R. 470
ruptcy Court, W. D.
Wisconsin
Matthews v. Ford Motor United States Court of May 21, 1973 479 F.2d 399
Co. Appeals, Fourth Circuit
Mattoon v. City of Pitts- Appeals Court of Mas- September 27, 2002 56 Mass. App.Ct. 124
field sachusetts, Berkshire

xxxvi
 Table of Cases

Parties Court Date Source

Mayflower Farms v. Court of Appeals of August 03, 1983 64 Or.App. 121
Tech-Mark, Inc. Oregon
McGinnis v. Wentworth Supreme Court of Ore- August 16, 1983 295 Or. 494
Chevrolet Co. gon
McKelvy v. Metal Con- United States District March 06, 1989 125 F.R.D. 179
tainer Corp. Court, M.D. Florida
McLaughlin v. Den- United States District January 23, 2001 129 F.Supp. 2d 32
harco, Inc. Court, D. Maine
Mechanics Nat. Bank of Appeals Court of Mas- March 07, 1979 7 Mass.App. Ct. 143
Worcester v. Gaucher sachusetts, Worcester
Meeker v. Hamilton Appellate Court of November 22, 1982 110 Ill.App.3d 668
Grain Elevator Co. Illinois, Fourth District
Melford Olsen Honey, United States Court of July 05, 2006 452 F.3d 956
Inc. v. Adee Appeals, Eighth Circuit
Mercanti v. Persson Supreme Court of Con- March 02, 1971 160 Conn. 468
necticut
Mextel, Inc. v. Air- United States District January 31, 2005 2005 WL 226112
Shields, Inc. Court, E.D.
Pennsylvania
Michigan Sugar Co. v. Court of Appeals of January 08, 1976 66 Mich App 642
Jebavy Sorenson Orch- Michigan
ard Co.
Middleby Corp. v. United States District August 27, 1992 1992 WL 220922
Hussman Corp. Court, N.D. Illinois,
Eastern Division
Midwest Hatchery & Court of Appeals of March 10, 2010 783 N.W.2d 56
Poultry Farms, Inc. v. Iowa
Doorenbos Poultry, Inc.
Midwest Mobile Dia- United States District May 28, 1997 965 F.Supp. 1003
gnostic Imaging, LLC v. Court, W.D. Michigan
Dynamics Corp. of
America
Mieske v. Bartell Drug Supreme Court of April 19, 1979 92 Wash.2d 40
Co. Washington
Miles v. Kavanaugh District Court of September 27, 1977 350 So.2d 1090
Appeal of Florida,
Third District.
Miller v. Robertson Supreme Court of the November 17, 1924 266 U.S. 243
United States
Minikes v. Admiral District Court of the January 14, 1966 48 Misc.2d 1012, 266
Corp. County of Nassau, First
District
Miron v. Yonkers Race- United States Court of August 12, 1968 400 F.2d 112
way, Inc. Appeals, Second Circuit

xxxvii
Table of Cases

Parties Court Date Source

Mitsubishi Goshi Circuit Court of December 06, 1926 16 F.2d 185
Kaisha v. J. Aron & Co. Appeals, Second Circuit
Modern Aero Sales, Inc. Court of Civil Appeals September 28, 1972 486 S.W.2d 135
v. Winzen Research, Inc. of Texas, Dallas
Modine Mfg. Co. v. Court of Civil Appeals November 29, 1973 503 S.W.2d 833
North East Independent of Texas, Beaumont
School Dist.
Mollinger-Wilson v. United States Court of December 03, 2004 122 Fed.Appx. 917
Quizno’s Franchise Co. Appeals, Tenth Circuit
Montgomery Ward & United States Court of June 19, 1959 268 F.2d 830
Co. v. Collins Estate, Appeals Fourth Circuit
Inc.
Moody v. City of Galve- Court of Appeals of May 22, 1975 524 S.W.2d 583
ston Texas, Houston (1st
Dist.)
Moore Bros. Co. v. United States Court of March 30, 2000 207 F.3d 717
Brown & Root, Inc. Appeals, Fourth Circuit
Moore v. Pro Team Court of Appeals of August 20, 2002 152 Ohio App.3d 71
Corvette Sales, Inc. Ohio, Third District,
Henry County
Morris v. Perkins Chev- Missouri Court of January 03, 1984 663 S.W.2d 785
rolet, Inc. Appeals, Western Dis-
trict
Mott Equity Elevator v. Supreme Court of December 17, 1975 236 N.W.2d 900
Svihovec North Dakota
Moulton Cavity & Supreme Judicial Court January 26, 1979 396 A.2d 1024
Mold, Inc. v. Lyn-Flex of Maine
Industries, Inc.
Mulberry-Fairplains Court of Appeals of February 04, 1992 105 N.C.App. 258
Water Ass’n, Inc. v. North Carolina
Town of North Wilkes-
boro
Multivision Northwest, United States District July 28, 1972 356 F.Supp. 207
Inc. v. Jerrold Electron- Court, N. D. Georgia
ics Corp.
Murray v. Holiday Supreme Court of Wis- May 02, 1978 83 Wis.2d 406
Rambler, Inc. consin
Murrin v. Ford Motor Supreme Court, Appel- March 10, 2003 303 A.D.2d 475
Co. late Division, Second
Department, New York
Nassau Suffolk White Supreme Court, Appel- April 03, 1978 62 A.D.2d 982
Trucks, Inc. v. Twin late Division, Second
County Transit Mix Department, New York
Corp.

xxxviii
 Table of Cases

Parties Court Date Source

National Farmers United States Court of September 06, 1977 560 F.2d 1350
Organization v. Bartlett Appeals, Eighth Circuit
& Co., Grain
National Farmers United States District December 01, 1977 488 F.Supp. 944
Organization v. Coast Court, D. Oregon
Trading Co., Inc.
National Heater Co., United States Court of August 15, 1973 482 F.2d 87
Inc. v. Corrigan Co. Appeals, Eighth Circuit
Mechanical Contract-
ors, Inc.
National Plumbing Justice Court Town of February 24, 1983 118 Misc.2d 150
Supply Corp. v. Castel- Ossining, Westchester
lano County
National Ropes, Inc. v. United States Court of May 16, 1975 513 F.2d 53
National Diving Service, Appeals, Fifth Circuit
Inc.
Neal-Cooper Grain Co. United States Court of December 17, 1974 508 F.2d 283
v. Texas Gulf Sulphur Appeals, Seventh Cir-
Co. cuit
Necho Coal Co. v. Den- Supreme Court of January 07, 1957 387 Pa. 567
ise Coal Co. Pennsylvania
Neibarger v. Universal Supreme Court of May 20, 1992 439 Mich. 512
Cooperatives, Inc. Michigan
New Texas Auto Auc- Supreme Court of March 28, 2008 249 S.W.3d 400
tion Services, L.P. v. Texas
Gomez De Hernandez
Nick’s Auto Sales, Inc. Court of Appeals of December 14, 1979 591 S.W.2d 709
v. Radcliff Auto Sales, Kentucky
Inc.
Nigro v. Lee Supreme Court, Appel- June 25, 2009 63 A.D.3d 1490
late Division, Third
Department, New York
Ninth St. East, Limited Circuit Court of Con- December 23, 1968 5 Conn.Cir. Ct. 597
v. Harrison necticut, First Circuit
Nobs Chemical, USA, United States Court of May 02, 1980 616 F.2d 212
Inc. v. Koppers Co., Inc. Appeals, Fifth Circuit
Nora Springs Co-op. Co. Supreme Court of Iowa December 15, 1976 247 N.W.2d 744
v. Brandau
Norcold, Inc. v. Gate- Court of Appeals of August 11, 2003 154 Ohio App.3d 594
way Supply Co. Ohio, Third District,
Shelby County.
Nordberg, Inc. v. Court of Appeals of February 10, 1995 101 Ohio App.3d 89
Sylvester Material Co. Ohio
North Dakota Public Supreme Court of March 27, 1985 365 N.W.2d 528
Service Com’n v. Valley North Dakota
Farmers Bean Ass’n

xxxix
Table of Cases

Parties Court Date Source

Northern States Power United States Court of November 14, 1985 777 F.2d 405
Co. v. ITT Meyer Indus- Appeals, Eighth Circuit
tries, Div. of ITT Grin-
nell Corp.
Northwest Lumber Supreme Court of Ore- April 04, 1972 261 Or. 480
Sales, Inc. v. Contin- gon
ental Forest Products,
Inc.
Nygaard v. Continental Supreme Court of August 25, 1999 598 N.W.2d 851
Resources, Inc. North Dakota
Oberg v. Phillips Court of Appeals of July 15, 1980 615 P.2d 1022
Oklahoma, Division
No. 1
Ohio Metal Servs., LLC Court of Appeals of May 01, 2013 2013 WL 1850786
v. TrueForge Mach. Ohio, Ninth District,
Corp. Summit County
Olcott Intern. & Co., Court of Appeals of August 19, 2003 793 N.E.2d 1063
Inc. v. Micro Data Base Indiana
Systems, Inc.
Oloffson v. Coomer Appellate Court of May 21, 1973 11 Ill.App.3d 918
Illinois, Third District
Olson v. Molacek Bros. Supreme Court of December 15, 1983 341 N.W.2d 375
of Calloway, Minn. North Dakota
One Step Up, Ltd. v. Superior Court of New May 04, 2011 419 N.J.Super. 500
Sam Logistic, Inc. Jersey, Appellate Divi-
sion
Ontario Hydro v. Zallea United States District August 03, 1983 569 F.Supp. 1261
Systems, Inc. Court, D. Delaware
Otis Spunkmeyer, Inc. Court of Appeals of November 01, 2000 30 S.W.3d 678
v. Blakely Texas, Dallas
Palmgreen v. Palmer’s Supreme Court of November 14, 1955 383 Pa. 105
Garage, Inc. Pennsylvania
Panda Capital Corp. v. Supreme Court, Appel- September 29, 1997 242 A.D.2d 690
Kopo Intern., Inc. late Division, Second
Department, New York
Parker Tractor & Supreme Court of Mis- January 10, 2002 819 So.2d 1234
Implement Co. v. John- sissippi
son
Parrillo v. Giroux Co., Supreme Court of March 11, 1981 426 A.2d 1313
Inc. Rhode Island
Pass v. Shelby Aviation, Court of Appeals of April 13, 2000 2000 WL 388775
Inc. Tennessee
Paul T. Freund Corp. v. United States District September 15, 2004 2004 WL 2075427
Commonwealth Packing Court, W.D. New York
Co.

xl
 Table of Cases

Parties Court Date Source

Pay Tel Systems, Inc. v. United States District April 26, 1994 850 F.Supp. 276
Seiscor Technologies, Court, S.D. New York
Inc.
Pearl Investments, LLC United States District April 23, 2003 257 F.Supp.2d 326
v. Standard I/O, Inc. Court, D. Maine
Penberthy Electromelt Court of Appeals of August 13, 1984 38 Wash.App. 514
Intern. Inc. v. U.S. Washington, Division
Gypsum Co. 2
Peoria Harbor Marina Appellate Court of March 25, 1982 105 Ill.App.3d 723
v. McGlasson Illinois, Third District
Perceptron, Inc. v. United States Court of July 24, 2000 221 F.3d 913
Sensor Adaptive Appeals, Sixth Circuit
Machines, Inc.
Perlmutter v. Beth Court of Appeals of December 31, 1954 308 N.Y. 100
David Hospital New York
Pestana v. Karinol District Court of February 27, 1979 367 So.2d 1096
Corp. Appeal of Florida,
Third District
Phillips v. Cricket Light- Supreme Court of September 28, 2005 584 Pa. 179
ers Pennsylvania
Piedmont Plastics, Inc. Court of Appeals of July 06, 1982 58 N.C.App. 135
v. Mize Co., Inc. North Carolina
Pieper, Inc. v. Land United States Court of December 09, 2004 390 F.3d 1062
O’Lakes Farmland Feed, Appeals, Eighth Circuit
LLC
Pioneer Fuels, Inc. v. Supreme Court of August 16, 1991 474 N.W.2d 706
Montana-Dakota Utilit- North Dakota
ies Co., a Div. of MDU
Resources Group, Inc.
Pioneer Peat, Inc. v. Court of Appeals of November 26, 2002 653 N.W.2d 469
Quality Grassing & Ser- Minnesota
vices, Inc.
Pittsburgh-Des Moines United States Court of March 02, 1976 532 F.2d 572
Steel Co. v. Brookhaven Appeals, Seventh Cir-
Manor Water Co. cuit
Pittsley v. Houser Court of Appeals of June 01, 1994 125 Idaho 820
Idaho
Plas-Tex, Inc. v. U.S. Supreme Court of April 19, 1989 772 S.W.2d 442
Steel Corp. Texas
Portal Gallaries, Inc. v. Supreme Court, Mon- August 04, 1969 60 Misc.2d 523
Tomar Products, Inc. roe County
Potts v. Offutt Court of Appeals of August 15, 1985 481 N.E.2d 429
Indiana, Third District
PPG Industries, Inc. v. United States Court of November 06, 1990 919 F.2d 17
Shell Oil Co. Appeals, Fifth Circuit

xli
Table of Cases

Parties Court Date Source

Pratt v. Winnebago United States District January 12, 1979 463 F.Supp. 709
Industries, Inc. Court, W. D.
Pennsylvania
Price Bros. Co. v. Phil- United States Court of May 15, 1981 649 F.2d 416
adelphia Gear Corp. Appeals, Sixth Circuit
Printing Industries United States District January 27, 1984 584 F.Supp. 990
Ass’n of Northern Ohio, Court, N.D. Ohio, East-
Inc. v. International ern Division
Printing and Graphic
Communications Union
Local 56
ProCD, Inc. v. Zeiden- United States Court of June 20, 1996 86 F.3d 1447
berg Appeals, Seventh Cir-
cuit
Process Supply Co., Inc. United States Depart- April 25, 1979 1979 WL 30091
v. Sunstar Foods, Inc. ment of Agriculture
Pronti v. DML of Supreme Court, Appel- July 12, 1984 103 A.D.2d 916
Elmira, Inc. late Division, Third
Department, New York
Prusky v. ReliaStar Life United States Court of July 10, 2008 532 F.3d 252
Ins. Co. Appeals, Third Circuit
Pulprint, Inc. v. Louisi- New York Supreme February 15, 1984 124 Misc.2d 728
ana-Pacific Corp. Court, Oneida County
Purina Mills, LLC v. United States District December 22, 2003 295 F.Supp. 2d 1017
Less Court, N.D. Iowa,
Western Division
Putensen v. Clay California Court of November 20, 1970 8 UCC Rep.Serv. 449
Adams, Inc. Appeal, First District,
Division 1
Quadrini v. Sikorsky United States District January 23, 1981 505 F.Supp. 1049
Aircraft Division Court, D. Connecticut
R. I. Lampus Co. v. Supreme Court of October 07, 1977 474 Pa. 199
Neville Cement Pennsylvania
Products Corp.
Rad Source Technolo- District Court of November 02, 2005 914 So.2d 1006
gies, Inc. v. Colony Nat. Appeal of Florida,
Ins. Co. Fourth District
Ralston Purina Co. v. United States District August 19, 1974 381 F.Supp. 181
McNabb Court, W.D. Tennessee,
Western Division.
Ralston Purina Co. v. Supreme Court of Mis- May 25, 1977 346 So.2d 901
Rooker sissippi
Ram Head Outfitters, United States District April 14, 2011 2011 WL 1429623
Ltd. v. Mecham Court, D. Arizona
Ramirez v. Autosport Supreme Court of New February 04, 1982 88 N.J. 277
Jersey

xlii
 Table of Cases

Parties Court Date Source

Randy Knitwear, Inc. v. Court of Appeals of February 22, 1962 N.Y.S.2d 363
American Cyanamid New York
Co.
Reade v. Stoneybrook Supreme Court, Appel- June 04, 2009 63 A.D.3d 433
Realty, LLC late Division, First
Department, New York
Red River Commodities, Supreme Court of August 01, 1990 459 N.W.2d 805
Inc. v. Eidsness North Dakota
Red Sage Ltd. Partner- United States Court of July 13, 2001 254 F.3d 1120
ship v. DESPA Deutsche Appeals, District of
Sparkassen Immobilien- Columbia Circuit
Anlage-Gasellschaft
mbH
Reed v. City of Chicago United States District March 05, 2003 263 F.Supp. 2d 1123
Court, N.D. Illinois,
Eastern Division
Rester v. Morrow Supreme Court of Mis- June 04, 1986 491 So.2d 204
sissippi
Rheem Mfg. Co. v. Supreme Court of Indi- May 09, 2001 746 N.E.2d 941
Phelps Heating & Air ana
Conditioning, Inc.
Rheinberg-Kellerei Court of Appeals of September 01, 1981 53 N.C.App. 560
GMBH v. Vineyard North Carolina
Wine Co., Inc.
Rhodes v. R.G. Indus- Court of Appeals of November 26, 1984 173 Ga.App. 51
tries, Inc. Georgia
RIJ Pharmaceutical United States District June 14, 2004 322 F.Supp. 2d 406
Corp. v. Ivax Pharma- Court, S.D. New York
ceuticals, Inc.
Rinaldi v. Iomega Corp. Superior Court of September 03, 1999 41 UCC Rep. Serv.2d
Delaware 1143
Risk v. Thompson Supreme Court of Indi- January 27, 1958 237 Ind. 642
ana
Robins v. Zwirner United States District May 20, 2010 713 F.Supp.2d 367
Court, S.D. New York
Rockland Indus., Inc. v. United States District January 15, 1998 991 F.Supp. 468
E+E (US) Inc. Court, D. Maryland
Roehm v. Horst Supreme Court of the May 14, 1900 178 U.S. 1
United States
Rogath v. Siebenmann United States Court of November 10, 1997 129 F.3d 261
Appeals, Second Circuit
Ron Mead T.V. & Court of Appeals of November 17, 1987 746 P.2d 1163
Appliance v. Legendary Oklahoma, Division
Homes, Inc. No. 3
Roth Steel Products v. United States Court of April 08, 1983 705 F.2d 134
Sharon Steel Corp. Appeals, Sixth Circuit

xliii
Table of Cases

Parties Court Date Source

Rourke v. Fred H. Supreme Court, Appel- June 15, 1995 216 A.D.2d 717
Thomas Associates late Division, Third
Department, New York
Roy v. Stephen Pontiac- Appellate Court of July 05, 1988 15 Conn. App. 101
Cadillac, Inc. Connecticut
Royal Business United States Court of October 07, 1980 633 F.2d 34
Machines, Inc. v. Lor- Appeals, Seventh Cir-
raine Corp. cuit
Royal Oldsmobile Co., Court of Appeal of May 16, 2013 2013 WL 2120525
Inc. v. Heisler Proper- Louisiana, Fifth Circuit
ties, LLC
Rozeboom v. Northwest- Supreme Court of November 14, 1984 358 N.W.2d 241
ern Bell Telephone Co. South Dakota
Ruddock v. First Nat. Appellate Court of May 30, 1990 201 Ill.App. 3d 907
Bank of Lake Forest Illinois, Second District
Ruffin v. Shaw Indus- United States Court of July 16, 1998 149 F.3d 294
tries, Inc. Appeals, Fourth Circuit
Rule v. Fort Dodge United States District March 11, 2009 604 F.Supp. 2d 288
Animal Hosp., Inc. Court, D. Massachu-
setts
Ryder Truck Lines, Inc. United States District December 20, 1983 576 F.Supp. 1348
v. Goren Equipment Court, N.D. Georgia,
Co., Inc. Atlanta Division
S & S, Inc. v. Meyer Court of Appeals of October 29, 1991 478 N.W.2d 857
Iowa
Sabine Corp. v. ONG United States District August 09, 1989 725 F.Supp. 1157
Western, Inc. Court, W.D. Oklahoma
Sae Biang Optical v. United States Court of June 21, 2012 489 Fed. Appx. 826
Kentucky Kenmark Appeals, Sixth Circuit
Optical, Inc.
Saffire Corp. v. United States District October 07, 2003 286 F.Supp. 2d 302
Newkidco, LLC Court, S.D. New York
San Antonio v. War- Supreme Court of December 20, 1968 104 R.I. 700
wick Club Ginger Ale Rhode Island
Co.
Santor v. A and M Supreme Court of New February 17, 1965 44 N.J. 52
Karagheusian, Inc. Jersey
Sarsfield v. Citimort- United States District April 20, 2010 707 F.Supp.2d 546
gage, Inc. Court, M.D.
Pennsylvania
SAVA gumarska in Court of Appeals of January 30, 2004 128 S.W.3d 304
kemijska industria d.d. Texas, Dallas
v. Advanced Polymer
Sciences, Inc.
Schafer v. AT&T Wire- United States District April 01, 2005 2005 WL 850459
less Servs., Inc. Court, S.D. Illinois

xliv
 Table of Cases

Parties Court Date Source

Schmaltz v. Nissen Supreme Court of November 09, 1988 431 N.W.2d 657
South Dakota
Scott v. Crown Colorado Court of October 20, 1988 765 P.2d 1043
Appeals, Div. II
Seely v. White Motor Supreme Court of Cali- June 23, 1965 63 Cal.2d 9
fornia
Seixas v. Woods Supreme Court of New May Term, 1804 2 Cai. R. 48
York
Selland Pontiac-GMC, Court of Appeals of March 25, 1986 384 N.W.2d 490
Inc. v. King Minnesota
Semple v. State Farm United States District March 18, 1963 215 F.Supp. 645
Mut. Auto. Ins. Co. Court E.D.
Pennsylvania
Shaffer v. Victoria Sta- Supreme Court of December 28, 1978. 91 Wash.2d 295
tion, Inc. Washington, En Banc.
Shell Oil Co. v. HRN, Supreme Court of August 27, 2004 144 S.W.3d 429
Inc. Texas
Sherwin Alumina L.P. United States District March 19, 2007 512 F.Supp. 2d 957
v. AluChem, Inc. Court, S.D. Texas
Shooshanian v. Wagner Supreme Court of October 28, 1983 672 P.2d 455
Alaska
Siemens Energy & United States District April 23, 1999 46 F.Supp.2d 217
Automation, Inc. v. Court, E.D. New York
Coleman Elec. Supply
Co., Inc.
Sig M. Glukstad, Inc. v. United States Court of June 19, 1980 619 F.2d 457
Lineas Aereas Appeals, Fifth Circuit
Paraguayas
Silver v. Sloop Silver United States District August 23, 1966 259 F.Supp. 187
Cloud Court S.D. New York
Slemmons v. Ciba-Geigy Court of Appeals of March 10, 1978 57 Ohio App.2d 43
Corp. Ohio, Third District,
Logan County
Smart Online, Inc. v. Superior Court of June 17, 2003 51 UCC Rep.Serv.2d 47
Opensite Technologies, North Carolina, Wake
Inc. County, Business Court
Smith v. Marquross Court of Appeals of May 28, 2008 276 S.W.3d 926
Tennessee, Eastern Sec-
tion, at Knoxville
Smith v. Paoli Popcorn Supreme Court of Neb- January 08, 1999 255 Neb. 910
Co. raska
Smith, Fitzmaurice Co. Supreme Judicial Court August 03, 1927 138 A. 389
v. Harris of Maine

xlv
Table of Cases

Parties Court Date Source

Solar Kinetics Corp. v. United States District April 17, 1980 488 F.Supp. 1237
Joseph T. Ryerson & Court, D. Connecticut
Son, Inc.
Solarz v. Daimler- Pennsylvania Court of March 13, 2002 2002 WL 452218
Chrysler Corp. Common Pleas
Southern Illinois Stone United States Court of February 12, 1979 592 F.2d 446
Co. v. Universal Engin- Appeals, Eighth Circuit
eering Corp.
Southwestern Elec. Supreme Court of March 28, 2002 73 S.W.3d 211
Power Co. v. Grant Texas
Spalding v. Mason Supreme Court of the March 02, 1896 161 U.S. 375
United States
Spikes v. Bauer Court of Appeals of April 17, 1981 6 Kan.App. 2d 45
Kansas
Spring Motors Distribut- Supreme Court of New March 28, 1985 98 N.J. 555
ors, Inc. v. Ford Motor Jersey
Co.
SPS Industries, Inc. v. Court of Appeals of February 26, 1988 186 Ga.App. 94
Atlantic Steel Co. Georgia
St. Anne-Nackawic Pulp United States District March 09, 1992 788 F.Supp. 729
Co., Ltd. v. Research- Court, S.D. New York
Cottrell, Inc.
Stampede Presentation United States District May 21, 2013 2013 WL 2245064
Products, Inc. v. Product- Court, W.D. New York
ive Transp., Inc.
Standard Alliance United States Court of October 20, 1978 587 F.2d 813
Industries, Inc. v. Black Appeals, Sixth Circuit
Clawson Co.
Standard Structural United States District August 29, 1980 515 F.Supp. 803
Steel Co. v. Debron Court, D. Connecticut
Corp.
Stanton v. New York & Supreme Court of July 10, 1890 22 A. 300
E. Ry. Co. Errors of Connecticut
Star-Shadow Produc- Supreme Court of June 18, 1999 730 A.2d 1081
tions, Inc. v. Super 8 Rhode Island
Sync Sound System
State v. Alexander Court of Appeals of March 06, 2003 64 P.3d 1148
Oregon
Stephan’s Mach. & Court of Appeals of August 03, 1979 65 Ohio App.2d 197
Tool, Inc. v. D & H Ohio, Sixth District,
Machinery Consultants, Lucas County
Inc.
Step-Saver Data Sys- United States Court of July 29, 1991 939 F.2d 91
tems, Inc. v. Wyse Tech- Appeals, Third Circuit
nology

xlvi
 Table of Cases

Parties Court Date Source

Sternberg v. New York Supreme Court, Appel- November 27, 1989 155 A.D.2d 658
Water Service Corp. late Division, Second
Department, New York
Steuber Co., Inc. v. Her- United States Court of June 05, 1981 646 F.2d 1093
cules, Inc. Appeals, Fifth Circuit
Stinnes Interoil, Inc. v. United States District March 08, 1985 604 F.Supp. 978
Apex Oil Co. Court, S.D. New York
Stridiron v. I.C., Inc. District Court of the January 05, 1984 578 F.Supp. 997
Virgin Islands, Division
of St. Croix
Studio No. 54 Disco, Supreme Court, Appel- May 26, 1981 81 A.D.2d 911
Inc. v. Pee Dee Jay late Division, Second
Amusement Corp. Department, New York
Sturges v. Green Supreme Court of Kan- January Term 1882 27 Kan. 235
sas
Sunseri v. RKO-Stanley Superior Court of June 29, 1977 248 Pa. Super. 111
Warner Theatres, Inc. Pennsylvania
Superior Boiler Works, Supreme Court of April 29, 1998 711 A.2d 628
Inc. v. R.J. Sanders, Inc. Rhode Island
Sylvia Coal Co. v. Mer- Supreme Court of July 11, 1967 151 W.Va. 818
cury Coal & Coke Co. Appeals of West Vir-
ginia
T. J. Stevenson & Co., United States Court of October 27, 1980 629 F.2d 338
Inc. v. 81,193 Bags of Appeals, Fifth Circuit
Flour
T.W. Oil, Inc. v. Consol- Court of Appeals of December 15, 1982 57 N.Y.2d 574
idated Edison Co. of New York
New York, Inc.
Tatum v. Cordis Corp. United States District February 14, 1991 758 F.Supp. 457
Court, M.D. Tennessee,
Nashville Division
Taylor v. Caldwell Queen’s Bench 1863 122 Eng. Rep. 309
TCP Industries, Inc. v. United States Court of September 29, 1981 661 F.2d 542
Uniroyal, Inc. Appeals, Sixth Circuit
Teco Coal Corp. v. United States District September 17, 2010 2010 WL 8750622
Orlando Utilities Com’n Court, E.D. Kentucky
Tenavision, Inc. v. Neu- Court of Appeals of July 11, 1978 45 N.Y.2d 145
man New York
Tennessee Carolina Supreme Court of June 01, 1973 283 N.C. 423
Transp., Inc. v. Strick North Carolina
Corp.
Tennessee Valley United States Court of January 23, 1985 753 F.2d 493
Authority v. Exxon Appeals, Sixth Circuit
Nuclear Co., Inc

xlvii
Table of Cases

Parties Court Date Source

Terex Trailer Corp. v. District Court of April 29, 1991 579 So.2d 237
McIlwain Appeal of Florida, First
District
Terwilliger v. Terwilli- United States Court of March 14, 2000 206 F.3d 240
ger Appeals, Second Circuit
Thorman v. Polytemp, New York County May 11, 1965 2 UCC Rep. Serv. 772
Inc. Court, Westchester
County
Toltec Fabrics, Inc. v. United States Court of July 08, 1994 29 F.3d 778
August Inc. Appeals, Second Circuit
Top of Iowa Co-op. v. Supreme Court of Iowa March 22, 2000 608 N.W.2d 454
Sime Farms, Inc.
Toppert v. Bunge Corp. Appellate Court of June 02, 1978 60 Ill.App.3d 607
Illinois, Third District
Total Foods Corp. v. United States District November 01, 1996 945 F.Supp. 100
Wilfran Agr. Industries, Court, E.D.
Inc. Pennsylvania
Trans World Metals, United States Court of August 05, 1985 769 F.2d 902
Inc. v. Southwire Com- Appeals, Second Circuit
pany
Transatlantic Financing United States Court of May 27, 1966 363 F.2d 312
Corp. v. U.S. Appeals District of
Columbia Circuit
Travelers Property Cas. United States District January 31, 2007 474 F.Supp. 2d 1075
Co. of America v. Saint- Court, D. Minnesota
Gobain Technical Fab-
rics Canada Ltd.
Travenol Laboratories, Supreme Judicial Court February 20, 1985 394 Mass. 95
Inc. v. Zotal, Ltd. of Massachusetts,
Middlesex
Traynor v. Walters United States District May 15, 1972 342 F.Supp. 455
Court, M. D.
Pennsylvania
Tremco, Inc. v. Valley Court of Appeals of May 13, 1992 38 Ark. App. 143
Aluminum Products Arkansas, Division II
Corp.
Triangle Underwriters, United States Court of July 17, 1979 604 F.2d 737
Inc. v. Honeywell, Inc. Appeals, Second Circuit
Triple E, Inc. v. Hendrix Court of Appeals of January 16, 2001 344 S.C. 186
and Dail, Inc. South Carolina
Turntables, Inc. v. Supreme Court, Appel- May 06, 1976 52 A.D.2d 776
Gestetner late Division, First
Department, New York
U.S. for Use and Ben. of United States Court of September 06, 1984 741 F.2d 326
Sunbeam Equipment Appeals, Eleventh Cir-
cuit

xlviii
 Table of Cases

Parties Court Date Source

Corp. v. Commercial
Const. Corp.
U.S. Nemrod, Inc. v. Civil Court, City of July 25, 1983 465 N.Y.S.2d 674
Wheel House Dive New York, Kings
Shop, Inc. County
U.S. v. Employers Mut. United States Court of November 02, 1955 226 F.2d 895
Cas. Co. Appeals, Eighth Circuit
U.S. v. Southern Con- United States District September 01, 1994 862 F.Supp. 107
tracting of Charleston, Court, D. South Caro-
Inc. lina, Charleston Divi-
sion
U.S. v. Wegematic Corp. United States Court of May 05, 1966 360 F.2d 674
Appeals, Second Circuit
Uchitel v. Tripler & Co. Supreme Court, Appel- October 21, 1980 107 Misc.2d 310
late Term, First Depart-
ment
UMIC Government United States Court of May 16, 1983 707 F.2d 251
Securities, Inc. v. Pion- Appeals, Sixth Circuit
eer Mortg. Co.
Union Carbide Corp. v. United States District June 11, 1986 636 F.Supp. 1498
Consumers Power Co. Court, E.D. Michigan,
Southern Division
Universal Builders Appellate Court of May 06, 1986 7 Conn.App. 318
Corp. v. United Method- Connecticut
ist Convalescent Homes
of Connecticut, Inc.
Universal Resources United States Court of March 31, 1987 813 F.2d 77
Corp. v. Panhandle Appeals, Fifth Circuit
Eastern Pipe Line Co.
Unlaub Co., Inc. v. Sex- United States Court of December 21, 1977 568 F.2d 72
ton Appeals, Eighth Circuit
Valero Marketing & Court of Appeals of May 03, 2001 51 S.W.3d 345
Supply Co. v. Kalama Texas, Houston (1st
Intern. Dist.)
Venezia v. Miller Brew- United States Court of July 18, 1980 626 F.2d 188
ing Co. Appeals, First Circuit
Vezina v. Nautilus Appellate Court of June 16, 1992 27 Conn. App. 810
Pools, Inc. Connecticut
Vigortone Ag Products, United States District March 12, 2001 217 F.Supp.2d 858
Inc. v. PM Ag Products, Court, N.D. Illinois,
Inc. Eastern Division
Village Mobile Homes, Court of Appeals of June 25, 1986 716 S.W.2d 543
Inc. v. Porter Texas, Austin
Village of Chatham v. Supreme Court, Appel- November 04, 1982 90 A.D.2d 860
Board of Fire Com’rs of late Division, Third
Delmar Fire Dist. Department, New York

xlix
Table of Cases

Parties Court Date Source

Voigt v. Fabricut, Inc. United States District April 06, 2012 2012 WL 1161429
Court, N.D. Oklahoma
Volkswagen of America, District Court of March 10, 1997 690 So.2d 1328
Inc. v. Smith Appeal of Florida, First
District
Waddy v. Riggleman Supreme Court of October 22, 2004 216 W.Va. 250
Appeals of West Vir-
ginia
Waldinger Corp. v. CRS United States Court of October 14, 1985 775 F.2d 781
Group Engineers, Inc., Appeals, Seventh Cir-
Clark Dietz Div. cuit
Walter Balfour & Co., New York Supreme June 10, 1969 1969 WL 11070
Inc. v. Lizza & Sons, Court, Kings County,
Inc. Trial Term
Walton General Con- United States Court of April 22, 1997 111 F.3d 1376
tractors, Incorpor- Appeals, Eighth Circuit
ated/Malco Steel, Inc. v.
Chicago Forming, Inc.
Washington Freight- Court of Appeals of September 08, 1998 351 Md. 616
liner, Inc. v. Shantytown Maryland
Pier, Inc.
Webster v. Blue Ship Supreme Judicial Court May 04, 1964 347 Mass. 421
Tea Room, Inc. of Massachusetts, Suf-
folk
Webster v. Edward D. United States Court of October 08, 1999 197 F.3d 815
Jones & Co., L.P. Appeals, Sixth Circuit
Weil v. Murray United States District April 09, 2001 161 F.Supp.2d 250
Court, S.D. New York
Well v. Schoeneweis Appellate Court of October 29, 1981 101 Ill.App. 3d 254
Illinois, Fourth District
Western Pacific Fisher- United States Court of April 11, 1984 730 F.2d 1280
ies, Inc. v. SS President Appeals, Ninth Circuit
Grant
Westlake Petrochemic- United States Court of July 24, 2012 688 F.3d 232
als, LLC v. United Poly- Appeals, Fifth Circuit
chem, Inc.
Whitaker v. Lian Feng Appellate Court of May 27, 1987 156 Ill.App. 3d 316
Mach. Co. Illinois, First District,
Third Division
White Star Refining Co. Supreme Court of June 27, 1930 251 Mich. 224
v. Hansen Michigan
Whitehead v. Allen Supreme Court of New July 02, 1957 63 N.M. 63
Mexico
Whitehouse v. Lange Court of Appeals of January 30, 1996 128 Idaho 129
Idaho

l
 Table of Cases

Parties Court Date Source

Wilk Paving, Inc. v. Supreme Court of Ver- September 16, 1994 162 Vt. 552
Southworth-Milton, Inc. mont
Wilke v. Woodhouse Supreme Court of Neb- November 06, 2009 278 Neb. 800
Ford, Inc. raska
William F. Wilke, Inc. Court of Appeals of March 10, 1969 252 Md. 611
v. Cummins Diesel Maryland
Engines, Inc.
Williams v. O’Charley’s, Court of Appeals of June 19, 2012 105 N.C.App. 258
Inc. North Carolina
Wilson v. Brawn of Court of Appeal, First September 02, 2005 132 Cal.App.4th 549
California, Inc. District, Division 1,
California
Wilson v. Scampoli District of Columbia May 02, 1967 228 A.2d 848
Court of Appeals
Windows, Inc. v. Jordan United States Court of April 21, 1999 177 F.3d 114
Panel Systems Corp. Appeals, Second Circuit
Woodbury Chemical United States Court of March 22, 1971 439 F.2d 1052
Co. v. Holgerson Appeals, Tenth Circuit
Wright v. Vickaryous Supreme Court of May 02, 1980 611 P.2d 20
Alaska
Y & N Furniture, Inc. v. Civil Court, City of October 12, 2001 190 Misc.2d 402
Nwabuoku New York, Kings
County
Yorgo Foods, Inc. v. United States District September 29, 2011 2011 WL 4549392
Orics Industries, Inc. Court, D. New Hamp-
shire
Zabriskie Chevrolet, Inc. Superior Court of New February 29, 1968 99 N.J.Super. 441
v. Smith Jersey, Law Division
Zepp v. Mayor & Coun- Court of Appeals of July 16, 1986 180 Ga.App. 72
cil of Athens Georgia
Zhong Ya Chemical United States District November 21, 2001 2001 WL 1491378
(USA) Ltd. v. Industrial Court, S.D. New York
Chemical Trading, Inc.

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Perillo, Joseph M. Calamari and Perillo on Contracts. 6th ed. St. Paul, MN: Thomson Reuters
(2009).
Peters, Ellen A. Remedies for Breach of Contracts Relating to the Sale of Goods under the
Uniform Commercial Code: A Roadmap for Article Two, 73 Yale L. J. 199
(1963).
Phalan, Reed T. The Obligations of Parties to Sales of Goods under the Uniform Commer-
cial Code, 62 Dick. L. Rev. 235 (1957-1958).
Robertson, R. J. The Right to Demand Adequate Assurance of Due Performance: Uniform
Commercial Code Section 2-609 and Restatement (Second) of Contracts
Section 251 38 Drake L. Rev. 305 (1988-1989).
Robertson, R. J. Rights and Obligations of Buyers With Respect to Goods in Their Posses-
sion After Rightful Rejection or Justifiable Revocation of Acceptance, 60
Ind. L. J. 663 (1985).
Rothschild, Anthony Prejudgment Interest: Survey and Suggestion, 77 NW. U. L. Rev. 192
E. (1982).
Rowley, Keith A. A Brief History of Anticipatory Repudiation in American Contract Law,
69 U. Cin. L.Rev. 565 (2001).
Rusch, Linda J. Is the Saga of the Uniform Commercial Code Article 2 Revisions Over?
A Brief Look at What NCCUSL Finally Approved, 6 Del. L. Rev. 41 (2003).
Russ, Lee R. What Constitutes “Substantial Impairment” Entitling Buyer to Revoke
His Acceptance of Goods under UCC § 2-608(1), Annotation, 38 A.L.R.5th
191 (1996).
Russ, Lee R. Impracticability of Performance of sales Contract under UCC § 2-615,
Annotation, 55 A.L.R.5th 1 (1998).
Rustad, Michael L. Making UCITA More Consumer-Friendly, 18 J. Marshall J. Computer &
Info. L. 547 (1999).
Sachse, Harry R. Report to the Louisiana Law Institute on Article Nine of the Uniform
Commercial Code, 41 Tul. L. Rev. 505 (1966-1967).
Sargis, Marc W. The Uniform Commercial Code Section 2-609: A Return to Certainty, 14
J. Marshall L. Rev. 113 (1980-1981).

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Scalise Jr., Ronald J. Why No “Efficient Breach” In The Civil Law?: A Comparative Assessment
of The Doctrine Of Efficient Breach Of Contract, 55 Am. J. Comp. L. 721
(2007).
Schauer, Frederick Rules and the Rule of Law. Symposium on Law and Philosophy, 14 Harv.
J. L. & Pub. Pol’y. 645 (1991).
Schwartz, Alan The Case for Specific Performance, 89 Yale L. J. 271 (1979).
Schwenzer, Ingeborg Force Majeure and Hardship in International Sales Contracts, 39 Vict. U.
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Schwenzer, Ingeborg, Towards Uniformity. The 2nd Annual MAA Schlechtriem CISG Conference,
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Schwenzer, Ingeborg, Global Sales and Contract Law, New York: Oxford University Press (2012).
Pascal Hachem, and
Christopher Kee
Scott, Robert E. The Rise and Fall of Article 2, 62 La. L. Rev. 1009 (2002).
Sherman, Edward F. Decline & Fall, 93 ABAJournal 51 (2007).
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Smith, Ralph D. Commercial Law-Uniform Commercial Code- Section 2-609: Right to
Adequate Assurance of Performance, 7 Nat. Resources J. 397 (1967).
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Scope of UCC Article 2, Annotation, 4 A.L.R.4th 85 (1981).
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Taylor Jr., E. H. Uniformity of Commercial Law and State by State Enactment: A Conflu-
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Travalio, Gregory M. The UCC’s Three “‘R’s’”: Rejection, Revocation and (the Seller’s) Right
to Cure, 53 U. Cin. L. Rev. 931 (1984).
Travers, Timothy E. Construction and Application of UCC § 2-305 Dealing with Open Price
Term Contracts, Annotation, 91 A.L.R.3d 1237 (1979).
University of Manufacturers’ Liability to Remote Purchasers for “Economic Loss”
Pennsylvania Law Damages, Tort or Contract?, 114 U. Pa. L. Rev. 539 (1966).
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Weintraub, Russell J. Disclaimer of Warranties and Limitation of Damages for Breach of War-
ranty Under the UCC, 53 Tex. L. Rev. 60 (1974).
White, G. E. The American Law Institute And The Triumph Of Modernist Jurispru-
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White, James J. Freeing The Tortious Soul Of Express Warranty Law, 72 Tul. L. Rev. 2089
(1998).
White, James J. Warranties in the Box, 46 San Diego L. Rev. 733 (2009).
White, James J., and Uniform Commercial Code, 6th ed. St. Paul, MN: West, (2010).
Robert S. Summers
Whitman, James Commercial Law and the American Volk: A Note on Llewellyn’s German
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Williams, Stephen L. Risk of Loss Under the Uniform Commercial Code, 7 Ind. L. Rev. 711
(1974).
Williston, Samuel Repudiation Of Contracts, 14 Harv. L. Rev. 421 (1901).
Yale Law Journal Damages—“Duty” to Mitigate—Recovery of Expenses of Denial in Action
for Libel, Casenote, 28 Yale L. J. 897 (1919).
York, Stephen G. Re: The Impracticability Doctrine of the UCC, 29 Duq. L. Rev. 221 (1991).
Zitter, Jay M. Liability of Hospital, Physician, or Other Individual Medical Practitioner
for Injury or Death Resulting from Blood Transfusion, Annotation, 20
A.L.R.4th 136 (1983).

lix
1 An Introduction to the Modern Law of
Sales in the United States

The story of modern America can be told through sales that defined it. In a way the
founding of the United States was predicated on the selling of an idea – settlers from
England sold the idea to move to a new continent and a new world in order to live free of
religious persecution. After a hard-fought revolution, America gained its independence,
only to grow rich on one of the most shameful and vile acts known to man – the sale of
human beings into slavery. It was the practice of selling people as slaves that divided the
nation so deeply and threw it into a bloody civil war. Eventually the practice was abolished,
and the Union preserved, but the scars of this chapter of history remain and still run deep,
and it set in motion the events that created the nation as it exists today – including the
westward expansion and the civil rights movement, which continues to evolve.
The twentieth century in America could be defined by the explosion of commerce –
the rise of mass production, the proliferation of the personal automobile, the creation of
an interstate highway system and the ability to become a magnate of industry on a scale
previously unimaginable. While these changes brought success for many, it also brought
injustice as an old system of laws struggled to keep up with new realities. Well-oiled industry
created widgets and goods, and with the same mechanical efficiency created litigation, as
if commercial disputes were just one more product on the assembly line. Through these
dramatic changes, the laws of commerce have had to try and keep up.
Moving towards the present day, this trend persists. Today one may make a plausible
argument that if America did have a national religion it would be consumerism. This is
an activity that cuts across the nation’s deep ideological, political, and socio-economic
divides. Evidence of this can be seen in the fact that stores in the country remain open
seven days a week, for longer and longer hours to accommodate the attitude many
Americans have that everything should be available for purchase at all times. Online
shopping realizes this demand to the extreme. Indeed the economic health of the nation
is often measured by weekly and quarterly consumer reports; so long as people are buying,
the nation is healthy. Again, today, the laws must evolve to keep up. This is not a critique,
but rather an attempt to paint an accurate picture of the role buying and selling goods
plays in modern America – a prominent one.
With this in mind, this book sets out to portray an accurate account of the modern law
governing these sales in the United States today. Specifically and exclusively covered are
the sales of goods in business-to-business (B2B), business-to-consumer (B2C), and con-
sumer-to-consumer (C2C) transactions. There is no minimum or maximum amount for

1
Modern Law of Sales in the United States

the transactions discussed, so case examples range from multimillion-dollar contracts for
the sale of oil, to the sale of a single puppy to a family from a breeder.
Despite being such an important topic, American sales law as a whole is an under-
represented field in legal literature. This is evidenced by the vocabulary employed by
American lawyers and professors; the term ‘sales law’ as such is not one routinely employed
by American law students or jurists. Instead, the term ‘commercial law’ is most frequently
used. Even this term, though frequently used, lacks a clear universal meaning. What is
certain is that ‘commercial law’ indicates a scope much broader than sales law, covering
leases, negotiable instruments, bank deposits, fund transfers, investment securities and
secured transactions. Additionally, books and treatises that cover commercial law often
include detailed guides on general contract law principles such as contract formation,
interpretation and validity. The articles, books and comments available today fall on one
or the other extreme – focusing either on commercial law as a whole, therefore encom-
passing all the above-mentioned ‘commercial law’ topics, including general contract
principles, or on the other end of the spectrum, narrowing in on one very particular aspect
of a transaction or particular law. Both of these types of writings are valuable resources,
but create a vacuum for a practical work that focuses solely on sale of goods transactions.
The overarching and very general question that this book addresses is, how does a sale
work in the United States – what are the rules that create the boundaries of a sale, what
are the obligations necessary for the seller and buyer to achieve performance and what are
all the possibilities for redress if any of these obligations fails to be met. To answer this big
question, a series of smaller questions must be answered, and they are divided into three
main sections. The first section addresses the questions of what is included in the scope
of sales law and how the American legal system is structured to deal with sales. The second
section addresses the questions that relate to the performance of the parties – put very
broadly, what each party must do to satisfy their obligations, what rights do they have as
contractual partners and who bears the risks that are inherent in the sale of goods. Finally,
the third section addresses the questions of what remedies are available to the parties when
one or both of them have breached or intend to breach their obligations.
Of course, principles of contract law are integral to understanding the law of sales.
Fortunately, there is a wealth of valuable literature on American contract law. The most
prominent of these is Farnsworth on Contracts, now in its third edition, authored by the
leading expert on American contract law Professor E. Allan Farnsworth. Because much
has been written about the general principles of contract, the topics of contract formation,
interpretation and supplementation, validity and limitation periods have been excluded
from this work, placing the focus rather on what the parties are obliged to do once they
enter a valid agreement and what relief they are entitled to when something goes awry.
When necessary, relevant contract law is addressed, but it is not the subject of this book.

2
 1 An Introduction to the Modern Law of Sales in the United States

This book undertakes a careful study of the text of Article 2 of the Uniform Commercial
Code (hereinafter ‘U.C.C.’ or ‘Code’), including the official commentary of the Permanent
Editorial Board. The U.C.C. has a clear preference for standards over bright-line rules.
One of the most recurring words in Article 2 of the U.C.C. is reasonable – the U.C.C. often
calls for the parties to act in a commercially reasonable manner in a given situation or
requires that a particular action be taken within a reasonable time instead of prescribing
a fixed time limit. Some examples of this are when the contract leaves a price term open,
the price to be set is a reasonable one (U.C.C. § 2-305), or if the parties did not contract
for a particular time for shipment or delivery it is to be a reasonable time (U.C.C. § 2-309).
The parties are free to define their own terms of the agreement; such terms are subject to
the limits of commercial reasonableness, unconscionability and good faith.
The intention of using these standards in the U.C.C. was to give parties control over
their contracts, so that those closest to the transaction would be the masters of the agree-
ment. From a legal perspective this means that in the event of a dispute, absent an express
term in the contract, courts are called upon to examine the facts and circumstances of each
case and determine what falls within the meaning of a particular provision.
Court decisions give the life and meaning to the provisions of the U.C.C. – it is through
the cases that the parameters of what is ‘reasonable’ is defined. Here, the cases were searched
and collected by the most common issues that arise in connection with a particular provision
or topic. The search was conducted on the basis of which cases were the most frequently
cited as well as to gain a sampling from different jurisdictions and levels of review. By
selecting and reviewing many cases from many jurisdictions, a systematic comparison of
cases was possible. Cases were analysed for their reasoning and holdings on a particular
topic, and also to determine the emergence of jurisprudential trends on particular open
questions. In addition to the case law, great guidance was provided by the definitive
treatise on the U.C.C., written by Professors James J. White and Robert S. Summers. Now
in its sixth edition, White and Summers have become a citation staple and guiding star
for courts deciding U.C.C. litigation since its first edition in 1972.

3
2 Legal Framework of Sales Law in the
United States

The following sections provide an outline of the laws, rules and regulations relevant to
sales contracts. While Article 2 of the U.C.C. is the primary source for the following dis-
cussion of sales, it is not the only source.

2.1 Article 2 of Uniform Commercial Code

Contracts for the sale of goods in the United States are governed by Article 2 of the U.C.C.
as adopted by each state. The U.C.C. does not have the force of law by itself, rather it is a
model law that has been adopted by each state individually and enacted through the state’s
legislature to gain the force of law. There is no federal commercial code, but rather a sep-
arate version in each state as well as the District of Columbia, Puerto Rico and the Virgin
Islands. These versions largely and for the most part mirror one another with some
amendments made by the individual states and territories. The U.C.C. was not drafted by
an elected legislative body, but rather was the product of two sponsoring institutions, the
National Conference of Commissioners on Uniform State Laws (hereinafter ‘NCCUSL’)
and the American Law Institute (hereinafter ‘ALI’), made up of lawyers and scholars. The
drafting process is discussed in greater detail below.1
The U.C.C. is comprised of eleven separate articles, each addressing a different aspect
of commercial law. Article 1 contains the general provisions and definitions used
throughout the U.C.C., and each subsequent article covers a different topic of commercial
law – sales (Art. 2), leases (Art. 2A), negotiable instruments (Art. 3), bank deposits (Art.
4), funds transfers (Art. 4A), letters of credit (Art. 5), bulk transfers and bulk sales (Art.
6), warehouse receipts, bills of lading and other documents of title (Art. 7), investment
securities (Art. 8), and secured transaction (Art. 9). Article 2 is applicable to all transactions
in goods. This straightforward and broad scope has a few exceptions that are discussed
below, but it places no limit on the parties to the transactions that it governs. Therefore,
whether the transaction is a B2B, B2C or C2C sale, the applicable law will be Article 2 as
adopted by the state whose law applies. Each rule is accompanied by official comments
written by the drafting committee. The comments do not have the force of law after the

1 See below para. under Section 3.2. et seq.

5
Modern Law of Sales in the United States

Article is adopted by a state; however, frequently courts look to the comments as persuasive
authority.2
The underlying purposes and policies of the U.C.C. are to create uniformity among
the jurisdictions, to continue the expansion of commercial practices and to create a simple,
clear and modern law that governs commerce.3 U.C.C. § 1-103 instructs that the U.C.C.
is to “be liberally construed and applied to promote its underlying purposes and policies”.
Such an instruction is meant to create a “semi-permanent and infrequently-amended piece
of legislation” with “its own machinery for expansion of commercial practices… intended
to make it possible for the law embodied in the Uniform Commercial Code to be applied
by the courts in the light of unforeseen and new circumstances and practices”.4 A testament
to the success of these goals is the fact that in over sixty years since Article 2’s implemen-
tation by the states it has not undergone any extensive revisions or repeals.5

2.2 Statutes and Regulations

Article 2 is supplemented by state and federal statutes, and it is inapplicable if its application
would displace a statute regulating sales to consumers, farmers or other specified classes
of buyers.6 When a conflict arises between Article 2 and a statute, it is typically resolved
in favour of the statute.7 However, if it is possible to supplement a regulatory statute without
conflicting with or weakening the statute, then a court may apply both the statute and
Article 2.8 An example of Article 2 being displaced in favour of a specific statutory regulation
can be found in Southwestern Elec. Power Co. v. Grant, in which the U.C.C. was displaced
by a statutory scheme regulating the provision of electricity to Texas consumers.9 The
court found that it was not possible to apply Article 2, as doing so would “impair the stat-
utory scheme regulating the sale of electricity to Texas consumers”. The court found that
the U.C.C. would displace a system already in place to regulate the distribution of electri-
city.10 Many states have enacted specific legislation to protect consumers; for example in

2 Gregory Klass, Contract Law in the U.S.A. 245 (2010); Karl N. Llewellyn, Why We Need The Uniform Com-
mercial Code, 10 U. Fla. L. Rev. 367, 375 (1957).
3 U.C.C. § 1-103(a); See Llewellyn, supra note 2 at 368-369.
4 U.C.C. § 1-103 cmt. 1.
5 See below para. under Section 3.2.2. for a discussion of the 2003 revisions that never gained acceptance in
the individual states.
6 U.C.C. § 2-102.
7 Southwestern Elec. Power Co. v. Grant 73 S.W.3d 211, 218 (Tex. 2002); Olson v. Molacek Bros., 341 N.W.2d
375, 378 (N.D. 1983); Hughes v. Collegedale Distributors, 355 So.2d 79, 81 (Miss. 1978); James J. White &
Robert S. Summers, Uniform Commercial Code § 2–1 at 25 (6th ed. 2010).
8 Farmers Livestock Exchange of Bismarck, Inc. v. Ulmer 393 N.W.2d 65, 69 (N.D. 1986).
9 Southwestern Elec. Power Co. v. Grant 73 S.W.3d 211, 218 (Tex. 2002).
10 Id.

6
 2 Legal Framework of Sales Law in the United States

Ohio, the Ohio Product Liability Act (OPLA), which offers protections superseding those
in the U.C.C.11

2.3 The Common Law and General Principles of Law

The U.C.C. does not displace the body of common law that existed at the time it was
drafted; rather it leaves intact “principles of law and equity, including the law merchant
and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepres-
entation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause
supplement its provisions.”12 The common law of contracts governs questions that are
excluded from the U.C.C. Pre-Code cases dealing with sales or other topics expressly
covered by the U.C.C. are not ‘bad law’, and many still provide a helpful basis for deciding
cases today. It was the intention of the drafters for the U.C.C. to “settle into and be supple-
mented by the common law background”.13 The common law is particularly valuable and
important because, as mentioned above, Article 2 deals largely with standards rather than
rules; for example the U.C.C. favours giving parties a ‘reasonable time’ for aspects of per-
formance rather than prescribing fixed time limits. Therefore while the provisions of
Article 2 provide the backbone for sales law, it is the case law that provides the lifeblood
to animate these provisions.
The Restatements of Law are a valuable source in navigating the common law. These
treatises are comprised of black-letter rules distilled from the common law, and while not
binding, are extremely helpful and often cited by judges, lawyers and experts. The
Restatements are a product of the ALI. In 1923 the ALI was founded by legal scholars and
practitioners to correct two perceived defects in American law – namely, the uncertainty
that resulted from a lack of consensus regarding fundamental principles of common law
and the complexity that resulted from variations among the different jurisdictions in the
United States.14 The ALI’s solution was to create the Restatements of the Law, which they
developed between 1923 and 1944 in the fields of Agency, Conflict of Laws, Contracts,
Property and Torts among others. These Restatements presented the general principles of
laws and included case examples. The ALI has continued to expand and update the

11 Ohio R.C. § 2307.71 et seq; Chamberlain v. American Tobacco Co., Inc. 70 F.Supp.2d 788, 801 (N.D. Ohio
1999).
12 U.C.C. § 1-103(b).
13 Homer Kripke, The Principles Underlying the Drafting of the Uniform Commercial Code, 1962 U. Ill. L.F.
321, 330 (1962); Gregory E. Maggs, Karl Llewellyn’s Fading Imprint on the Jurisprudence of the Uniform
Commercial Code, 71 U. Colo. L. Rev. 541, 572 (2000).
14 G. Edward White, The American Law Institute and the Triumph of Modernist Jurisprudence, 15 Law & Hist.
Rev. 1, 2 (1997).

7
Modern Law of Sales in the United States

Restatements, the second series was published between 1957 and 1981, and the third in
1986 to the present.
Harvard law professor and editorial coordinator of the U.C.C., Robert Braucher, was
appointed as Reporter for the Restatement (Second) Contracts by the ALI in 1960.15 It is
notable that certain sections he is credited with drafting resemble almost verbatim the
corresponding provision in the U.C.C.16 In drafting the Principles of European Contract
Law (PECL) the Commission of European Contract Law noted that the U.S. Restatements
served as a model for the undertaking.17 Today they continue to influence judicial opinions
and U.C.C. cases.

2.4 Louisiana Civil Code

The southern state of Louisiana joined the Union in 1812 as a former French colony, thus
it never shared the common law heritage of the other states. Accordingly, it enacted its
own civil code influenced by the French and Spanish civil codes.18 In the 1970s, after con-
sideration, the Louisiana State Law Institute (LSLI)19 recommended that the state adopt
U.C.C. Articles 1 through 8, excluding Articles 2, 6, and 9. The LSLI declined to recommend
the adoption of these articles because they were of the opinion that they would have “an
undesirable impact upon important areas of Louisiana civil heritage”.20 The legislature
heeded this recommendation and adopted the U.C.C. with the exception of Articles 2, 6,
and 9, until 1988 when the legislature adopted Article 9.21 In 1993 new civil code provisions
governing the law of sales were enacted by the legislature. Many of the new provisions
were inspired by Article 2.22 In practice today, this distinction has not created a great divide
between Louisiana sales contracts and those in the rest of the United States.

15 W. David Slawson, Binding Promises: The Late 20th Century Reformation of Contract Law 134 (1996).
16 Slawson, supra note 15, at 134. See e.g. Restatement (Second) of Contracts § 208 (1981) and U.C.C. § 2-302.
17 Ineborg Schwenzer, Pascal Hachem & Christopher Kee, Global Sales and Contract Law para. 2.24 (2012).
18 See Kenneth M. Murchison, The Judicial Revival of Louisiana’s Civilian Tradition: A Surprising Triumph for
the American Influence, 49 La. L. Rev. 1 (1988); Christopher Osakwe, Cogitations on the Civil Law Tradition
in Louisiana: Civil Code Revision and Beyond, 52 Rev. Jur. U.P.R. 179 (1983); Harry R. Sachse, Report to the
Louisiana Law Institute on Article Nine of the Uniform Commercial Code, 41 Tul. L. Rev. 505 (1966-1967).
19 Osakwe, supra note 18, at 195 (“It was intended by the legislature that the Institute would serve as the nerve
center for the coordination of all efforts directed at the systematization, coordination, reform and revision
of the law of Louisiana.”).
20 Christian Paul Callins, Louisiana Civil Law and The Uniform Commercial Code: Interpreting the New
Louisiana U.C.C.-Inspired Sales Articles on Price, 69 Tul. L. Rev. 1649, 1650 (1995). See Jerry L. Mashaw,
Consequences for Louisiana adoption of Article 2 of the Code, 42 Tul. L. Rev. 740 (1968).
21 See La. Rev. Stat. Ann. §§ 10:9-101 to 10:9-605.
22 See Callins, supra note 20, at n. 9 for a legislative table containing revised Louisiana Civil Code provision
with corresponding U.C.C. provisions.

8
 2 Legal Framework of Sales Law in the United States

2.5 International Sales

In 1988 the United States became a signatory to the United Nations Convention on the
Sale of International Goods (hereinafter ‘CISG’ or ‘Convention’). As of the time of this
writing the United States is one of eighty-one Contracting States for which the CISG governs
international sales contracts that fall under its scope.23 Thus, transactions between a party
from the United States and another Contracting State are subject to the CISG, which dis-
places Article 2, pursuant to the Supremacy Clause of the United States Constitution.
Pursuant to Article 6 of the Convention, parties are permitted to “exclude the application
of this Convention or, subject to Article 12, derogate from or vary the effect of any of its
provisions”.24
Despite having been in effect in the United States for a quarter of a century by now,
U.S. courts seem to have developed a bad habit of looking to the U.C.C. for interpreting
CISG provisions instead of the plethora of readily available CISG case law that now exists
both outside and within the United States.25 This approach of continuing to treat the CISG
as “the international analogue to Article 2 of the Uniform Commercial Code”26 endangers
one of the CISG’s underlying goals – to bring uniformity to international trade.27
It should be noted that this book deals primarily with domestic sales contracts, but
mindful that the law of sales in the United States includes the CISG, an attempt is made
to provide relevant comparisons and analysis when appropriate.

23 For a full list of Contracting States see UNCITRAL Texts & Status <www.uncitral.org/uncitral/en/uncitral
_texts/sale_goods/1980CISG_status.html> (last visited 1 September 2014).
24 The United States has not made an Article 12 declaration. For an empirical analysis of the rate at which
parties use and exclude the CISG see Inegborg Schwenzer & Christoper Kee, Global Sales Law – Theory and
Practice, in Towards Uniformity: The Second Annual Schlechtriem CISG Conference 155 (2011); Schwenzer,
Hachem & Kee, supra note 17, paras. 5.17-5.20.
25 Dingxi Longhai Dairy, Ltd. v. Becwood Technology Group L.L.C. 635 F.3d 1106, 1107-1108 (8th Cir. 2011);
Chicago Prime Packers, Inc. v. Northam Food Trading Co. 408 F.3d 894 (7th Cir. 2005); Delchi Carrier SpA
v. Rotorex Corp. 71 F.3d 1024, 1027-1028 (2d Cir. 1995) (“Because there is virtually no caselaw under the
Convention, we look to its language and to “the general principles” upon which it is based…Caselaw inter-
preting analogous provisions of Article 2…may also inform a court where the language of the relevant CISG
provisions tracks that of the UCC.”); Macromex SRL v. Globex Intern., Inc. 65 UCC Rep.Serv.2d 1033 (S.D.N.Y.
2008). See also Francesco G. Mazzotta, Why Do Some American Courts Fail to Get it Right?, 3 Loy. U. Chi.
Int’l L. Rev. 85 (2005).
26 Dingxi Longhai Dairy, Ltd. v. Becwood Technology Group L.L.C. 635 F.3d 1106, 1107 -1108 (8th Cir. 2011);
Chicago Prime Packers, Inc. v. Northam Food Trading Co. 408 F.3d 894, 898 (7th Cir. 2005).
27 CISG Article 7(2) provides that “Questions concerning matters governed by this Convention which are not
expressly settled in it are to be settled in conformity with the general principles on which it is based or, in
the absence of such principles, in conformity with the law applicable by virtue of the rules of private interna-
tional law.” This should not be read by U.S. judges as a mandate to turn to Article 2 on any issue without
first consulting the body of CISG case law and literature.

9
Modern Law of Sales in the United States

2.6 Modern Consumer Protection

Sales law as discussed here includes consumer contracts. These are very often concluded
between parties with vastly unequal bargaining power. Therefore, it is important to briefly
consider what rules and mechanisms are in place to protect consumers in these sales. The
United States has what has been described as a ‘patchwork’ of state and federal law that is
meant to provide protections to consumers.28 This approach is far from ideal and certainly
has its drawbacks and pitfalls, or, in the words of one American professor, currently con-
sumer protection law is “a mess”.29 Because the law is so scattered, the average consumer
has great difficulty identifying its rights as a consumer, and knowing how and where these
rights may be enforced.30 The following describes a rough sketch of the rules and bodies
meant to protect and assist consumers in sales transactions.

2.6.1 The History of Protecting Consumers in the United States

Interest in regulating the activity surrounding consumer practice gained momentum

around the turn of the twentieth century, and it was around this time that Congress began
passing legislation targeting consumer products and unfair and deceptive business prac-
tices.31 Two game-changing acts were passed around this time – the Federal Trade Com-
mission Act (FTCA) and the Food, Drug, and Cosmetic Act (FDCA). The FTCA is enforced
by the Federal Trade Commission (FTC), founded in 1914 and headed by five commission-
ers. It has broad regulatory powers to prevent unfair and deceptive business practices,
including the authority to regulate the way in which products are sold.32 The Food and
Drug Administration (FDA), founded in 1906, implements and enforces the FDCA. Like
the FTC, the FDA has broad regulatory powers that extend to all food and drug activities,
with the exception of non-game meat and poultry.33 More than half a century later, the
Consumer Product Safety Act (CPSA) was passed. Product safety standards, bans on
dangerous consumer products, and the issuances of recalls are some of the actions that

28 Edward M. Crane, Nicholas J. Eichenseer & Emma S. Glazer, U.S. Consumer Protection Law: A Federal
Patchwork, 78 Def. Couns. J. 305 (2011).
29 Mark E. Budnitzt, The Federalization and Privatization of Public Consumer Protection Law in the United
States: Their Effect on Litigation and Enforcement, 24 Ga. St. U. L. Rev. 663, 663 (2008) (“public law of con-
sumer protection in the United States is a mess. As a result, the effectiveness of litigation and other methods
to enforce those laws is in jeopardy”).
30 Budnitzt, supra note 29, at 670.
31 Crane et al., supra note 28, at 306; Lawrence M. Friedman, American Law in the Twentieth Century 59-62
(2002).
32 15 U.S.C.A. §§ 41 et seq; About the Federal Trade Commission, <www.ftc.gov/ftc/about.shtm> (last visited
13 August 2013).
33 21 U.S.C.A. §§ 301 et seq.; FDA Fundamentals, <www.fda.gov/AboutFDA/Transparency/Basics/ucm192695.
htm> (last visited 13 August 2013).

10
 2 Legal Framework of Sales Law in the United States

the Consumer Products Safety Commission (CPSC) is authorized by the CPSA of 1972 to
undertake.34
In the 1960s state governments began feeling pressure to enact their own consumer
protection measures, based on the perception that the federal rules provided inadequate
protection.35 By the early 1980s, each state had enacted some law, largely based on the
FTCA, that regulated deceptive and unfair trade practices.36 Collectively, these state Acts
are referred to as UDPTAs.37 State Attorney Generals (AG’s) act as enforcers of these
UDPTAs, and the acts give them broad powers to investigate and subpoena.38 State AG’s
work with the FTC and AG’s from other states to coordinate, investigate and enforce. AG’s
can generally bring administrative, civil and sometimes criminal enforcement proceedings.
Together these agencies stand on the front line between consumers and unfair or
dangerous practices. Until recently, protecting consumers from dangerous products and
unfair business practices was almost universally accepted as a good thing and a worthy
effort of the federal and state governments.

2.6.2 Regulating Standard Terms

Two areas that deserve special attention in consumer sales are contracts that contain
standard terms and warranty protections – often these two areas overlap as frequently
warranties and warranty disclaimers are contained within the standard terms of a contract.
The doctrine of unconscionability, found both in the common law and now in the U.C.C.,
has developed to allow courts to provide relief to consumer plaintiffs in the event that
standard terms are found to be manifestly unconscionable.39
Two years prior to New Jersey’s enactment of the U.C.C., the seminal case of Henningsen
v. Bloomfield Motors, Inc was decided.40 Finding for the plaintiff car buyers, the New Jersey
Supreme Court recognized that the grossly unequal bargaining power between the auto
industry and the consumer is obvious, and the extreme limitation found in the express
warranty at issue required “great care for courts to avoid injustice through application of

34 15 U.S.C.A. §§ 2053 et seq.; 63B Am. Jur. 2d Products Liability § 1890 (2013).
35 Crane et al., supra note 28, at 306; William A. Lovett, State Deceptive Trade Practice Legislation, 46 Tul. L.
Rev. 724 (1971-1972); Mary D. Pridgen, Consumer Protection and the Law § 2:10 (2012).
36 Anthony Paul Dunbar, Consumer Protection: The Practical Effectiveness of State Deceptive Trade Practices
Legislation, 59 Tul. L. Rev. 427 (1984); Pridgen, supra note 35.
37 This acronym comes from the fact that almost every state’s consumer protection is titled ‘Unfair Trade
Practices Act’ or ‘Deceptive Trade Practices Act’.
38 Dunbar, supra note 36, at 430.
39 U.C.C. § 2-302; Restatement (Second) of Contracts § 281 (1981); Joseph M. Perillo, Calamari and Perillo on
Contracts § 9.37 (6th ed. 2009). See Rozeboom v. Northwestern Bell Telephone Co. 358 N.W.2d 241 (S.D.
1984).
40 Henningsen v. Bloomfield Motors, Inc. 32 N.J. 358 (N.J. 1960).

11
Modern Law of Sales in the United States

strict common law principles of freedom of contract”.41 Thus the court held that the dis-
claimer of the warranty was void on grounds of public policy. A decade after Henningsen,
in Matthews v. Ford Motor Co., the Fourth Circuit ruled that attempting to limit damages
by restricting the warranty to repair and replacement failed under the U.C.C. as enacted
by Virginia, because under the U.C.C. an attempt to limit damages for personal injury
resulting from a consumer product is prima facie unconscionable. The defendant failed
to rebut this statutory presumption, and thus the injured plaintiff was entitled to damages
for its injuries.42
In addition to U.C.C. § 2-302, which prohibits unconscionability, there have been other
attempts to control unfair clauses through both uniform model laws as well as specific
state statutes. In 1970 the Uniform Consumer Practices Act was released, but not widely
adopted, and in 1974 the Uniform Consumer Credit Code was released.43 Some states have
enacted specific statutes that require a certain size of font type in consumer contracts.44
New York has a statute requiring that consumer contracts up to 50,000 USD must be
written in a clear and cohesive manner with words with common and everyday meanings.45
These efforts to regulate standard terms are steps in the right direction to help protect
consumers.

2.6.3 Class Action Lawsuits

One of the most influential and unique aspects of consumer protection law in the United
States is the class action lawsuit. A class action is a special method of civil litigation that
allows one or more individual consumers to sue on behalf of a class of consumers who
suffered the same or similar injury. Class actions can be maintained in state or federal
courts. Class actions allow redress when the injury to an individual consumer is relatively
small, but the group of injured consumers is vastly larger.46
The use of class action lawsuits, as well as personal injury lawsuits has been a hotly
debated issue in the United States for almost two decades now. Consumer advocates argue
that class actions allow plaintiffs redress and are an effective deterrent for businesses from
inflicting even small injuries.47 The other side argues that such suits allow for frivolous

41 Id. at 391.
42 Matthews v. Ford Motor Co. 479 F.2d 399, 402 (4th Cir. 1973); See U.C.C. § 2-719(3).
43 17 Am. Jur. 2d Consumer Protection §§ 257, 289 (2013).
44 See e.g. N.Y.C.P.L.R. § 4544; Wis. Stat. Ann. § 422.303(2).
45 N.Y. Gen. Oblig. L. 5-702.
46 Fed. R. Civ. P. 3. See William B. Rubenstein & Alba Conte, Annotation, Class Action as a Procedural Device
for Representative Litigation, 1 Newberg on Class Actions § 1:1 (2013). For a detailed examination of the
mechanics of a class action lawsuit, see Brian Anderson & Andrew Trask, The Class Action Playbook (2nd
ed. 2012).
47 See Crane et al. supra note 28, at 229-330; Edward F. Sherman, Decline & Fall, 93-Jun A.B.A. J. 51 (2007).

12
 2 Legal Framework of Sales Law in the United States

actions that clog up the already overburdened court system. There has been a concentrated
effort to reduce the possibility for consumers to bring civil actions against corporations
and businesses.48 These efforts resulted in the passing of the Class Action Fairness Act
(CAFA) in 2005.49 Essentially, CAFA expands federal jurisdiction over class action lawsuits
with the intention of reducing forum shopping for states and jurisdictions that are sym-
pathetic to class action plaintiffs.50 Opponents of CAFA saw it as a concession to large
corporations and an attempt to reduce consumers’ access to courts through class action
litigation.51 While certainly there is merit to the need for efficiency in the judicial process,
it should not come at the price of the consumer’s right to redress. The idea of ‘jackpot
justice’ seekers that was propagated in the 1990s is largely unfounded and based on sensa-
tionalized stories.52

48 See Sherman, supra note 47.

49 Pub. L. No. 109-2, 119 Stat. 4 (2005); 28 U.S.C. §§ 1332(d), 1453, 1711-1715.
50 32B Am. Jur. 2d Federal Courts § 1560 (2013).
51 William Branigin, Congress Changes Class Action Rules, Washington Post, February 17, 2005 (On the CAFA
former Democratic Speaker of the House from California, Nancy Pelosi, was quoted saying, “When Amer-
icans are injured or even killed by Vioxx or Celebrex or discriminated against by Wal-Mart, they may never
get their day in court” and Representative Ed Markey called the Act “the final payback to the tobacco industry,
to the asbestos industry, to the oil industry, to the chemical industry at the expense of ordinary families who
need to be able go to court to protect their loved ones when their health has been compromised.”). See
Amanda Griscom Little, Erin Brockovich, drop dead, Salon.com, February 12, 2005 available at
<www.salon.com/2005/02/12/class_action/> (last visited 14 August 2013).
52 For treatment of the subject of ‘crackpot lawsuits’ as urban legends rather than legal realities see Friedman,
supra note 31, at 538-540.

13
3 Historical Overview of Sales Law

The following provides an overview of how the law of sales in the United States originated,
and the people and processes that led to its current state. While this work is largely meant
as a practical guide, a brief look at the history of the law of sales may be useful in providing
context for the current rules and practices.

3.1 The Common Law and Unification Efforts

Like all areas of law in the United States, sales law began as an extension of the English
common law at the time the country was founded. After gaining independence from
England, the thirteen newly independent states retained the English common law as the
law of the land as opposed to drafting civil codes as in continental Europe.1 At this time
commercial transactions were governed by the common law of contracts and the law
merchant, which had been incorporated into the English common law. By the early nine-
teenth century, it became apparent that the law merchant as it was received by the states
was insufficient to deal with the emerging face of commerce in the young country. New
customs and practices emerged that outgrew the English law merchant.2 As early as the
mid-nineteenth century, famed Supreme Court Justice Joseph Story, among others, began
calling for reform of the commercial law and championed the codification of American
commercial law.3
In addition to the changing face of commerce, major differences arose between the
states in the field of commercial law. The states differed in how they received the common
law, perceived its content and interpreted its meaning.4 As a result each state developed
its own body of common law and statutes. These substantial differences in the laws of the
states gave rise to calls for enactment of a federal commercial code that would govern
interstate commerce.5 The desire for such a federal code was not a universal sentiment,
and some challenged such a code as being beyond the scope of Congress’ authority.6

1 Charles A. Bane, From Holt and Mansfield to Story to Llewellyn and Mentschikoff: The Progressive Development
of Commercial Law, 37 U. Miami L. Rev. 351, 362 (1983); Klass, supra note 2, at 22. See Ford W. Hall, The
Common Law: An Account of Its Reception in the United States 4 V. L. Rev. 791 (1950-1951).
2 Bane, supra note 1.
3 Bane, supra note 1, at 364; Friedman, supra Ch. 2, note 31, at 45-47.
4 Hall, supra note 1; E. Hunter Taylor, Jr., Uniformity of Commercial Law and State-by-State Enactment: A
Confluence of Contradictions, 30 Hastings L. J. 337 (1978).
5 Taylor, supra note 5.
6 Uniform Law Commission, </www.uniformlaws.org/Narrative.aspx?title=About%20the%20ULC> (last
visited 12 June 2014); Taylor, supra note 5, at 339.

15
Modern Law of Sales in the United States

In 1892, with the climate such that there was a desire for uniformity of the laws but an
opposition to giving more power to the federal government, NCCUSL was founded. Still
active today, NCCUSL is a non-government entity made up of representatives from each
state as well as the District of Columbia, Puerto Rico and the Virgin Islands.7 NCCUSL’s
mission is to “determine what areas of private state law might benefit from uniformity
among the states, to prepare statutes or “uniform acts” to carry that object forward, and
to have those statutes enacted in each American jurisdiction.”8

3.1.1 Uniform Acts

In the first half of the twentieth century, NCCUSL passed a string of uniform acts aimed
at unifying the law and avoiding federal control of commercial practice areas. Their first
major project was the 1896 Uniform Negotiable Instruments Law followed by the Uniform
Sales Act of 1906.9 Samuel Williston drafted the Uniform Sales Act of 1906, and has been
described by Karl Llewellyn as “the maker and builder of [the US] law on Sales”.10 The Act
was adopted in more than thirty states; however, it failed to cover several issues arising
out of contracts for the sale of goods, and thus these issues remained largely governed by
common law. To further complicate commercial law, additional acts were passed shortly
after the Uniform Sales Act, including the Uniform Warehouse Receipts Act (1906), the
Uniform Bills of Lading Act (1909), the Uniform Conditional Sales Act (1918) and the
Uniform Trust Receipts Act (1933).11 These acts failed to achieve NCCUSL’s goal of unifying
the law of commerce. The states did not unanimously adopt these acts; additionally they
were subject to local amendments and conflicting judicial interpretations, thus ensuring
diversity of the law among the states.12

3.2 The Uniform Commercial Code

The true beginning of modern sales law in the United States came when ALI and NCCUSL
joined forces under the leadership of Karl Llewellyn as Chief Reporter and Soia Mentschikoff
as Associate Chief Reporter to draft a comprehensive Uniform Commercial Code,
expanding on the Uniform Sales Act. In 1945, when NCCUSL was joined by ALI, the

7 Henry D. Gabriel, The Revisions of the Uniform Commercial Code-Process and Politics, 19 J.L. & Com. 125
at 127 (1999).
8 Id.
9 Klass, supra Ch. 2, note 2, at 244; Taylor, supra note 5, at 339.
10 Mark L. Movsesian, Rediscovering Williston, 62 Wash. & Lee L. Rev. 207, 208 (2005).
11 Robert Braucher, The Legislative History of the Uniform Commercial Code, 58 Colum. L. Rev. 798 (1958);
Taylor, supra note 5, at 339.
12 Klass, supra Ch. 2, note 2, at 244; Taylor, supra note 5, at 339.

16
 3 Historical Overview of Sales Law

addition of their financial resources to the project was able to expand it from a revision of
the Uniform Sales Act to a fully realized commercial code.13 In setting out to achieve certain
goals, Llewellyn and the drafting committee believed the best way to achieve those goals
was through the use of a code.14 The new body of sales law was meant to reduce the conflicts
between the rules in different jurisdictions, clarify the law and make it more accessible,
and modernize the law so that it would be in harmony with commercial development. In
an article written prior to the legislatures’ consideration of the U.C.C., Llewellyn introduced
it thus:

What is this animal, why is it, and how did it come to be? …The Code is an
effort to breakup those [Uniform] Acts, to modernize them, to put them into
a coherent and accessible form, to add to them a large body of material that
should have been put into them before but has not, and to clarify the frequent
case law disputes that have arisen.15

In 1952 an official draft was approved by both the NCCUSL and ALI, and this version was
enacted by Pennsylvania. From 1953 to 1955 the New York Law Revision Commission
studied the draft, and ultimately recommended not to enact it. In 1958 an amended version
of the 1952 draft was published, heavily influenced by the remarks of the New York Law
Revision Committee. In 1961 thirteen states, including Pennsylvania, enacted the 1958
version as law. This version of the U.C.C. was not uniformly adopted as the New York
legislature made a number of amendments to the 1958 version. Several other states also
made various amendments before adopting it. In order to prevent the breakdown of uni-
formity a Permanent Editorial Board (PEB) was established in 1961, which passed upon
the actual or proposed amendments of the states. The amendments that were approved
were incorporated into the 1962 Official Text. Today the U.C.C. has been adopted by all
the states as well as the District of Columbia, Puerto Rico and the Virgin Islands.16 Thus,
while sales contracts are still governed by state as opposed to federal law, Llewellyn and
his drafting committee went to great lengths to provide predictability and uniformity
throughout the jurisdictions of the United States.

13 Id.
14 See Llewellyn, supra Ch. 2, note 2.
15 Karl N. Llewellyn, Why a Code?, 22 Tenn. L. Rev. 779, 779 (1953). See also Maggs, supra Ch. 2, note 13, at
546.
16 E. Allan Farnsworth & William F. Young, Selections For Contracts 1-5 (2004); Robert E. Scott, The Rise and
Fall of Article 2, 62 La. L. Rev. 1009, 1030 (2002); Taylor, supra Ch. 2, note 5, at 341.

17
Modern Law of Sales in the United States

3.2.1
. Karl Llewellyn’s Influence on the U.C.C.

Karl Nickerson Llewellyn was the principal drafter of the U.C.C. Llewellyn is a famous
figure in American legal history for both his work on the U.C.C. and as a vanguard in the
legal realist movement that took foot in the United States between the world wars.17 Several
characteristics can be identified throughout the U.C.C. as the imprint of Llewellyn’s
influence and his attempts to create a flexible semi-durable piece of legislation.
The first characteristic is the U.C.C.’s preference for open-ended standards over firm
rules.18 The use of standards allows the law to be durable, just as Llewellyn desired. It allows
flexibility in the face of changing commerce and new situations that could not have been
imaginable in the 1940s. The difference between standards and rules has been described
thus – whereas standards require a court to determine what has happened and what the
law should and should not permit on the basis of a fixed standard, rules prescribe precisely
the conduct that is permitted so that courts only need decide what it was that happened.19
The second prominent feature is the avoidance of formalities.20 An example of this
feature is highlighted in U.C.C. § 2-204, which eliminates the formal requirements of offer
and acceptance. Another example is the departure from rigid adherence to the concept of
title that afflicted former sales law. By avoiding the formalities that Llewellyn believed
plagued the former law, it was his desire to avoid the injustices caused by formalities,
allowing the U.C.C. to reflect the business practices of the time so that business people
would not have to be burdened by overly technical laws or take burdensome measures to
conform to those laws, and finally allow judges to do what was necessary to resolve cases
justly regardless of formalities.21 Llewellyn referred to the style of judging that disregarded
an existing rule if rigid adherence to it would contravene the underlying purpose for which
the rule was created as the “grand style”.22 It was his mission to create a body of commercial
law that allowed judges to use this grand style – without having to twist the laws already
in place in order to reach a fair and commercially reasonable result.23

17 For greater insight into the life and work of Karl Llewellyn, see Michael Ansaldi, The German Llewellyn, 58
Brook. L. Rev. 705 (1992); Allen R. Kamp, Between-the-Wars Social Thought: Karl Llewellyn, Legal Realism,
and the Uniform Commercial Code in Context, 59 Alb. L. Rev. 325 (1995).
18 Slawson, supra Ch. 2, note 15, at 135-138. See also Kripke, supra Ch. 2, note 13, at 330; Maggs, supra Ch. 2,
note 13, at 553.
19 Louis Kaplow, Rules versus Standards: An Economic Analysis, 42 Duke L.J. 557, 559-560 (1992); Frederick
Schauer, Rules and the Rule of Law, 14 Harv. J.L. & Pub. Pol’y 645 (1991).
20 Klass, supra Ch. 2, note 2, at 245; Maggs, supra Ch. 2, note 13, at 559.
21 Id.
22 Kevin M. Teeven, A History of the Anglo-American Common Law of Contract 188 (1990); Slawson, supra
Ch. 2, note 15, at 135.
23 Allen R. Kamp, Stories of the Code, 12 Tex. Wesleyan L. Rev. 377, 379 (2005); Kamp, supra note 17; Slawson,
supra Ch. 2, note 15, at 134.

18
 3 Historical Overview of Sales Law

3.2.2 The 2003 Revisions

In 2003 NCCUSL and ALI approved revisions to Articles 1 and 2 of the U.C.C. The revisions
were the result of a long drafting process that commenced after a 1988 study was undertaken
by the PEB.24 The most significant changes to Article 2 were the deletion of U.C.C. §§ 2-
319 through 2-324, which addressed the U.C.C.’s standard trade terms, and the addition
of two new sections, U.C.C. §§ 2-313A and 2-313B addressing warranty beneficiaries.25
To date, no state has adopted the 2003 Article 2 revisions, while by and large the revised
Article 1 was universally adopted. Thus all references below to Article 2 of the U.C.C. refer
to the official current version that is current through the 2012 annual meetings of the
NCCUSL and ALI. When reference is made to one of the revised provisions of Article 2
it is noted as such.

24 Fred H. Miller & William H. Henning, Problems and Solutions Under UCC Article 2, 37, No. 1, UCCLJ
Article 1 (2004).
25 For greater detail on the content and process of the 2003 revisions see Gabriel, supra note 7, at 127; Miller
& Henning, supra note 24; Linda J. Rusch, Is the Saga of the Uniform Commercial Code Article 2 Revisions
Over? A Brief Look at What NCCUSL Finally Approved, 6 Del. L. Rev. 41 (2003).

19
4 Identifying the Boundaries of a Sales
Contract

Before exploring the substantive rules and practices guiding sales transactions, it is
important to identify what transactions are identified as sales of goods. The question must
be answered in two parts – first, what transactions qualify as a sale as defined by Article 2
of the U.C.C., and second, what things qualify as goods as contemplated by Article 2.
U.C.C. § 2-106(1) defines a sale as a transfer of title to goods from a seller to a buyer for a
price. This section further distinguishes between a contract for sale and a present sale. A
contract for sale contemplates both a present sale, a sale accomplished by the making of
the contract, and a contract to sell goods at a future time. The rights of the parties are the
same under both a contract for sale and a present sale, unless expressly provided otherwise
in Article 2.1 A sale may also be thought of with regard to the characteristic obligations of
the parties. Pursuant to U.C.C. § 2-301, a seller must tender delivery of conforming goods,
and a buyer must accept and pay for these goods. In some cases, as will be discussed below,
a court must determine whether Article 2 is applicable to a particular case, and these basic
concepts will be foundational in this inquiry.
Although the topic of contract formation is beyond the scope of this book, it is
important to note that the U.C.C. recognizes that a contract for sale can be made in any
manner sufficient to show an agreement, which includes through the parties’ conduct, and
holds true even when the exact moment of contract formation cannot be determined.2
Additionally, so long as the parties intended to make a contract and there is a reasonably
certain basis for giving a remedy, a contract for sale will not fail for indefiniteness even if
one or more terms are left open.3 The U.C.C. recognizes contracts with missing terms, and
contains gap-filling provisions to plug holes in the contract and allow the transaction to
be carried out as intended by the parties. The U.C.C. also recognizes contracts containing
terms that measure the quantity by the output of the seller, output contracts, or by the
requirements of the buyer, requirements contracts.4

1 U.C.C. § 2-106 cmt. 1.

2 U.C.C. §§ 2-204(1), 2-204(2). This general rule is subject to the U.C.C.’s statute of frauds contained in U.C.C.
§ 2-201.
3 U.C.C. § 2-204(3).
4 See U.C.C. § 2-606(1).

21
Modern Law of Sales in the United States

4.1 Sale by Auction

In contrast to the CISG, which explicitly excludes sales by auction, sales by auction are
covered by U.C.C. § 2-328.5 Auctions are public sales effected through competitive bidding,
where the goods are sold to the highest bidder.6 The contract is formed as a result of an
offer from the bidder and acceptance carried out by the action of the auctioneer, the action
traditionally being the fall of the hammer.7 U.C.C. § 2-328 has been applied to auctions
for real estate by analogy, even though real estate is excluded from the scope of Article 2.8
Today online auctions are a common method for selling goods by auction, and just as with
in-person auctions, Article 2 applies to sales made via online auctions.9

4.2 Other Supply of Goods Contract

U.C.C. § 2-102 provides that Article 2 applies to ‘transactions in goods’. This is a notably
broader term than ‘sale of good’ as used in U.C.C. §§ 2-105 and 2-106. This difference in
phraseology has been interpreted to mean that Article 2 has a broader application than to
the contract of sale as defined in U.C.C. § 2-106.10 Examples of these other types of contracts
that supply goods include barter transactions, leases and hire purchase agreements. U.C.C.
§ 2-304 does not use the term barter; however, it authorizes the purchase price to be made
payable in money or “otherwise” and continues that “if the price is paid totally or partially
in goods then each party is a seller of the goods that the party is to transfer”.11 The logical
continuation of this rule is that the party receiving the goods is the buyer to that transaction,
and therefore has the possibility to exercise the rights of a buyer – including the right to
inspection and the right to reject non-conforming goods.12
Article 2A of the U.C.C. covers any transaction that creates a lease. The main distinction
between a sale and a lease is time – a lease is for a finite period of time, although that period

5 CISG Article 2(b).

6 Restatement (Second) of Contracts § 28 (1981); David Carl Minneman, Annotation, Auction Sales Under
UCC § 2-328, 44 A.L.R. 4th 110 (1986).
7 U.C.C. § 2-328; Clemens v. U.S. 295 F.Supp. 1339, 1340-1341 (D.C.Or. 1968); Minneman, supra note 6.
8 Well v. Schoeneweis 101 Ill.App.3d 254 (Ill.App. 1981).
9 See Nigro v. Lee 63 A.D.3d 1490, 1491-1492 (N.Y.A.D. 2009)(applying New York’s version of the U.C.C. to
a sale of a vehicle on e-bay regarding warranty issues); Smith v. Marquross 276 S.W.3d 926, 929 -930
(Tenn.Ct.App. 2008) (sale of an aircraft through online auction governed by U.C.C.).
10 Mieske v. Bartell Drug Co. 92 Wash.2d 40, 46-47 (Wash. 1979); Pittsburgh-Des Moines Steel Co. v. Brookhaven
Manor Water Co., 532 F.2d 572, 580 (7th Cir. 1976); Louis F. Del Duca, Evolving Concepts of the Contract
for Sale of Goods: Sale of Goods Under the Uniform Commercial Code, 38, No. 2 UCCLJ Article 2 (2005).
11 U.C.C. § 2-304(1); Home Indemnity Co. v. Twin City Fire Insurance Co. 474 F.2d 1081, 1084 (7th Cir. 1973);
Potts v. Offutt 481 N.E.2d 429, 432 (Ind.App. 1985).
12 Potts v. Offutt 481 N.E.2d 429, 432 (Ind.App. 1985) (finding that the recipient of a trade-in mobile home
was a buyer and therefore had the rights given to a buyer by the U.C.C., but failed to exercise these rights).

22
 4 Identifying the Boundaries of a Sales Contract

may be long and continuous, while a sale contemplates a final transaction. The U.C.C.
defines a lease as “a transfer of the right to possession and use of goods for a term in return
for consideration, but a sale, including a sale on approval or a sale or return, or retention
or creation of a security interest is not a lease.”13

4.3 Mixed Contracts

Often contracts are not solely for the sale of goods, but also include requirements for
manufacture, production, supply or other services. In dealing with such contracts, courts
must determine whether they are subject to Article 2 or fall outside of its scope. There are
a number of ways this issue may be analysed, the most popular and commonplace being
the predominant purpose test. Two other tests that have not gained much traction are the
blended contract approach and the gravamen of the action test.
The blended contract, or bifurcation, approach was used by the Tenth Circuit in Foster
v. Colorado Radio Corp. in 1967.14 In the case regarding the sale of a radio station, the court
ruled the most appropriate course was to divide the contract up and apply the U.C.C. to
the portions dealing with goods. The court rejected the predominant factor test,15 reasoning
that the issue in Foster was not whether the contract was one for goods or services, but
rather whether the contract was for goods or non-goods.16 This approach has received
more criticism than followers.17
The other approach that has been largely rejected in favour of the predominant purpose
test is the gravamen of the action test.18 This approach permits the application of Article
2 in disputes relating to goods, even if the predominant purpose is not the sale of goods.
Conversely, this approach permits the application of law other than Article 2 to be applied
even when the sale of goods is the predominant purpose of the transaction, if Article 2’s
application would give an inappropriate result.19
The predominant purpose test views the contract as a whole, and if the predominant
purpose is the sale of goods, then the U.C.C. applies; whereas if the predominant purpose

13 U.C.C. § 2A-103(j).
14 Foster v. Colorado Radio Corp. 381 F.2d 222, 224 (10th Cir. 1967).
15 Epstein v. Giannattasio 25 Conn.Supp.109 (Conn. Com. Pl. 1963).
16 Foster, supra note 14.
17 Pittsley v. Houser 125 Idaho 820 (Idaho App. 1994)(“Severing contracts into various parts, attempting to
label each as goods or nongoods and applying different law to each separate part clearly contravenes the
UCC’s declared purpose “to simplify, clarify and modernize the law governing commercial transactions.”);
Hudson v. Town and Country True Value Hardware, Inc. 666 S.W.2d 51, 53 (Tenn. 1984). See Insul-Mark
Midwest, Inc. v. Modern Materials, Inc. 612 N.E.2d 550, 554 (Ind. 1993).
18 Garcia v. Edgewater Hosp. 244 Ill.App.3d 894 (Ill.App. 1993) overruled Brandt v. Boston Scientific Corp. 204
Ill.2d 640 (Ill. 2003).
19 Miller & Henning, supra Ch. 3, note 24.

23
Modern Law of Sales in the United States

is for services or non-goods, then the U.C.C. has no application.20 The party seeking the
application of the U.C.C. bears the burden of proving that the predominant thrust of the
contract was the sale of goods.21
There are several measurements that can be used to determine the predominant purpose
of the transaction.22 One straightforward measurement is to compare the price paid for
the goods with the price paid for the service. In GenTech Const., LLC v. Natare Corp, a
District Court in Tennessee had to determine whether the U.C.C.’s warranty disclaimer
rules applied in a case involving the installation of a swimming pool. Applying the predom-
inant factor test, the court found that the transaction was predominately for goods noting
the cost of the materials was 27,840 USD, while the cost of the installation was only 18,965
USD.23 In another dispute involving an installation contract, another Tennessee court
concluded, without much discussion, that it was obvious the predominant factor was the
material to be used for the roof to be installed, and therefore the contract was governed
by Article 2.24
A better and more balanced approach to determining whether the contract is predom-
inately for goods or services is to consider several interrelated factors and weigh each
according to its importance in the particular case. Under this analysis the starting point
would be to look at language of the contract between the parties.25 The relevant language
that courts look to, if it exists, is “the terms describing the performance required of the
parties, and the words used to describe the relationship between the parties”.26 The language
must be considered in light of the parties’ respective situations and the surrounding cir-
cumstances of the transaction and their relationship.27 Some key phrases a court may look
for that would evidence a sale contract include whether the parties are referred to by the
terms ‘buyer’, ‘seller’, or ‘purchaser’, or whether the contract itself is referred to as a ‘pur-
chase order’ or contains terms addressing warranties or detailed description of the product.28

20 Bonebrake v. Cox 499 F.2d 951 (8th Cir. 1974); Agri-Sales Associates, Inc. v. McConnell 2011 WL 2632648,
*3 (M.D.Tenn. 2011); Hudson v. Town and Country True Value Hardware, Inc. 666 S.W.2d 51, 53 (Tenn.
1984); White & Summers § 2-1.
21 Pass v. Shelby Aviation, Inc. 2000 WL 388775, *4 (Tenn.Ct.App. 2000); Insul-Mark Midwest, Inc. v. Modern
Materials, Inc. 612 N.E.2d 550, 555 (Ind. 1993).
22 Agri-Sales Associates, Inc. v. McConnell 2011 WL 2632648, *3 (M.D.Tenn. 2011). See Sonja A. Soehnel,
Annotation, What Constitutes a Transaction, a Contract for Sale, or a Sale within the Scope of UCC Article
2, 4 A.L.R. 4th 85 (1981).
23 GenTech Const., LLC v. Natare Corp. L 1257943, *20 -21 (E.D.Tenn. 2011); Pittsley v. Houser 125 Idaho 820,
823 (Idaho App.1994).
24 Grundy County v. Harrison 1989 WL 54906, *3 (Tenn.App. 1989).
25 Insul-Mark Midwest, Inc. v. Modern Materials, Inc. 612 N.E.2d 550, 555 (Ind.1993).
26 Insul-Mark Midwest, Inc. v. Modern Materials, Inc. 612 N.E.2d 550, 555 (Ind. 1993); Standard Structural
Steel Co. v. Debron Corp. 515 F.Supp. 803, 808 -809 (D.C.Conn. 1980).
27 Audio Visual Artistry v. Tanzer 2012 WL 6697600, *9 (Tenn.Ct.App. 2012).
28 Audio Visual Artistry v. Tanzer 79 UCC Rep.Serv.2d 426 (Tenn.Ct.App. 2012); Hensley v. Ray’s Motor Co.
of Forest City, Inc. 158 N.C.App. 261, 266 (N.C.App. 2003)(finding contract for sale when “the language of
the contract deals primarily with the terms of sale, including the price, warranties, description and model

24
 4 Identifying the Boundaries of a Sales Contract

Related to this factor is the reason that the parties entered into the contract. A party arguing
for the applicability of the U.C.C. must demonstrate that the motivation for entering into
the contract was to acquire a product, rather than to receive a service.29 This circumvents
one of the criticisms of the blended contract approach taken in Foster, namely that it fails
to consider the parties’ intentions as a factor.30
Another relevant factor to consider is the nature of the supplier’s business. Here the
relevant inquiry is whether the supplier is routinely in the business of manufacturing and
producing a particular product, or rather whether its business consists mainly of services
such as design and installation where the goods used are only ancillary to the service being
provided.31
A final factor in this consideration is the respective amounts paid in the contract. Courts
may divide the price as described above by how much was paid for the materials compared
with how much was paid for a service, such as installation.32 Another relevant inquiry may
be the calculation method used for determining a price. For example, in Insul-Mark Mid-
west, Inc. v. Modern Materials, Inc. the plaintiff sued defendant for rust defects it alleged
were caused by defendant’s deficient screw coating application.33 In determining whether
the predominant thrust of the contract was the sale of the coating or the service of coating
the screws, the court considered that the pricing scheme was based on the poundage of
screws coated rather than how many gallons of coating were used, thus indicating that the
most important feature of the contract was the service performed.34
The multi-factored approach is the best way to determine the predominant purpose
of the contract, and determining the predominant purpose of the contract is the best way
to evaluate the applicability of Article 2. It best honours the parties’ intentions and provides
more predictability.

of the mobile home, and options and accessories.”); Bailey v. Montgomery Ward & Co., Inc. 690 P.2d 1280,
1282 (Colo.App. 1984); Meeker v. Hamilton Grain Elevator Co. 110 Ill.App.3d 668, 671 (Ill.App. 1982).
29 Audio Visual Artistry v. Tanzer 79 UCC Rep.Serv.2d 426 (Tenn.Ct.App. 2012); Neibarger v. Universal
Cooperatives, Inc. 439 Mich. 512, 536-537 (Mich.1992).
30 See Foster v. Colorado Radio Corp. 381 F.2d 222, 224 (10th Cir. 1967); Insul-Mark Midwest, Inc. v. Modern
Materials, Inc. 612 N.E.2d 550, 554 (Ind. 1993)(stating that the bifurcation approach disregards the intention
of the parties to make a unified contract).
31 Audio Visual Artistry v. Tanzer L 6697600, *12 -13 (Tenn.Ct.App. 2012); Hensley v. Ray’s Motor Co. of Forest
City, Inc. 158 N.C.App. 261, 266 (N.C.App. 2003).
32 Pass v. Shelby Aviation, Inc. 2000 WL 388775, *5 (Tenn.Ct.App. 2000).
33 Insul-Mark Midwest, Inc. v. Modern Materials, Inc. 612 N.E.2d 550, 553 (Ind.1993).
34 Id.

25
5 The Concept of Goods

U.C.C. § 2-102 limits the application of Article 2 to transactions in goods. It is therefore

important to determine whether a transaction is one for goods or something else. It is a
closely related question to the one just discussed, but here the focus slightly shifts to whether
the thing contracted for is a good. Such a distinction will determine whether the transaction
is governed by Article 2 or by another body of law – making the discussion of what are
goods an important one in practice, not just in theory.

5.1 General Definition of Goods

U.C.C. § 2-105 defines goods as “all things (including specially manufactured goods) which
are movable at the time of identification to the contract for sale” with three exceptions –
the money with which the purchase price is to be paid, investment securities that are
covered by Article 8, and things in action. The definition in U.C.C. § 2-105 also specifically
“includes the unborn young of animals and growing crops and other identified things
attached to realty as described in the section on goods to be severed from realty”.
Money may be considered a good when it is treated as a commodity rather than the
method of payment.1 This includes foreign currency, which may be the subject of a sales
contract. Other items that are specifically included in the definition of goods under the
U.C.C., which may be problematic in other legal systems,2 include undivided shares of
bulk,3 livestock, food, emblements, growing crops, the unborn young of animals4 and
plants and minerals.5
The focus of the U.C.C.’s definition is on the movability of the goods, specifically
whether the thing is moveable at the time of identification to contract as defined by U.C.C.
§ 2-501. This focus marks a shift that has occurred over the last one hundred and fifty
years from a time when the focus was on whether the thing in question was tangible.6
Today the distinction between whether the things in question are tangible or intangible is
not determinative. Goods that are not both existing and identified at the time of contracting

1 U.C.C. § 2-105 cmt. 1; In re Koreag, Controle et Revision S.A. 961 F.2d 341, 355 (2d Cir. 1992).
2 For a comparison of treatment of these items in other legal systems see Schwenzer, Hachem & Kee, Supra
Ch. 2, note 17, paras. 7.12-7.17.
3 U.C.C. § 2-105(4).
4 U.C.C. §§ 2-105(1), 2-107.
5 U.C.C. § 2-107.
6 Bonna Lynn Horovitz, Computer Software as a Good under the Uniform Commercial Code: Taking a Byte
Out of the Intangibility Myth, 65 B.U. L.Rev. 129, 138 (1985).

27
Modern Law of Sales in the United States

are future goods, and no interest may pass in future goods, but they may be the subject of
a contract to sell.7

5.2 Questionable Goods

Some items fall into a grey area where it is unclear whether they fall into U.C.C. § 2-105’s
broad definition of goods. Below is a brief outline of how these questionable goods have
been dealt with.

5.2.1 Biological Materials

As medical and reproductive technology rapidly advances there is an ever-increasing

demand for human biological materials, for example, stem cells or reproductive cells.8 The
classification of parts or natural products of the body as ‘goods’ or commercial products
has many ramifications, including potential liability of the ‘seller’ or applicable tax rules
to the transactions, not to mention the heady ethical and moral questions raised.
The outright sale of human organs is expressly banned by the National Organ Transplant
Act (NOTA), which prohibits “any person to knowingly acquire, receive, or otherwise
transfer any human organ for valuable consideration for use in human transplantation if
the transfer affects interstate commerce”.9 Excluded from NOTA’s sale prohibition are
replenishable tissues, such as blood, plasma, gametes, breast milk, placenta, stem cells and
cord blood. However, while their transfer and acquisition is not illegal, it is not clear
whether they are goods subject to the rules of Article 2. For the purposes of sales law, where
this classification becomes important besides the legality of the contract is in determining
whether the warranty provisions of Article 2 apply. In the past where patients have received
tainted or otherwise dangerous blood, a few courts have held that the transfer of blood
constituted a sale and therefore the transaction was subject to the U.C.C.’s warranty law.10

7 U.C.C. § 2-501(1). See generally Dale Joseph Gilsinger, Annotation, What Constitutes “Future Goods” Within
Scope of U.C.C. Article 2, 48 A.L.R.6th 475 (2009).
8 For an up-to-date overview of the scope and scale of biological materials in the stream of commerce see
Bridget J. Crawford, Our Bodies, Our (Tax) Selves, 31 Va. Tax Rev. 695 (2012).
9 42 U.S.C.A. § 274e (2007). Under the Act, human organ includes “human (including fetal) kidney, liver,
heart, lung, pancreas, bone marrow, cornea, eye, bone, and skin or any subpart thereof and any other human
organ (or any subpart thereof, including that derived from a fetus) specified by the Secretary of Health and
Human Services by regulation.” Violation of this ban by transferring or acquiring organs can result in a
maximum of five years in prison and a 50,000 USD fine. See Flynn v. Holder 684 F.3d 852, 859-861 (9th Cir.
2012).
10 Hoder v. Sayet, 196 So. 2d 205 (Fla. Dist. Ct. App. 1967); Brody v. Overlook Hospital 121 N.J.Super. 299
(N.J.Super.L. 1972); Jackson v. Muhlenberg Hospital 96 N.J.Super. 314, 324 (N.J.Super.L. 1967), judgment
rev’d, 53 N.J. 138 (1969).

28
 5 The Concept of Goods

However, today the majority view held by courts addressing this issue is that the transfusion
of blood constitutes a contract for a service rather than a sale of goods.11
As a result of lobbying efforts by the healthcare industry to curtail imposition of liability,
48 states have now passed ‘blood shield statutes’ that provide immunity to hospitals and
blood-suppliers unless negligence is found.12 The blood shield statutes specifically designate
blood-related transactions as a rendering of services not a sale of goods, and further exempt
hospitals and suppliers from liability in the absence of a showing of negligence on their
part.13 Outside these defining characteristics, the blood shield laws vary from state to state
regarding their language, and thus scope of protection and extent of protection from
liability.14

5.2.2 Electricity, Gas, Water

Jurisdictions are not in accord with whether utilities such as electricity, gas and water
constitute goods or services. Several authors have attempted to provide an overview of the
somewhat confusing way jurisdictions view varying utilities.15 Unlike the CISG, which
clearly excludes the sale of electricity from its scope, Article 2 leaves this question open to
the interpretation of courts.16
Illustrative of the debate between the differing positions is the manner in which courts
justify their classification of tap water. While they are split on the issue of whether
providing water constitutes a sale of goods or the rendering of services, a majority follow
the former approach.17 A common scenario in which this distinction is important is when

11 Perlmutter v. Beth David Hospital 308 N.Y. 100, 106-107 (N.Y. 1954); For additional cases see Jay M. Zitter,
Annotation, Liability of Hospital, Physician, or Other Individual Medical Practitioner for Injury or Death
Resulting from Blood Transfusion, 20 A.L.R.4th 136 (1983).
12 Florence Shu-Acquaye & Leanne Innet, Human Blood and Its Transfusion: The Twists and Turns of Legal
Thinking, 9 Quinnipiac Health L.J. 33, 65-66 (2005); See e.g. Ala. Code § 7-2-314(4); Colo. Rev. Stat. § 13-
22-104; Fla. Stat. Ann. § 672.316(5); N.Y. Pub. Health Law § 580(4) (McKinney 2003); 42 Pa. Cons. Stat.
Ann. § 8333(a).
13 Daniel L. Russo, Jr., Blood Bank Liability to Recipients of HIV Contaminated Blood, 18 U. Dayton L. Rev. 87,
93 (1992).
14 Shu-Acquaye & Leanne Innet, supra note 12, at 65-66 (2005).
15 See Koby Bailey. Energy “Goods”: Should Article 2 of the Uniform Commercial Code Apply to Energy Sales in
a Deregulated Environment?, 37 J. Marshall L. Rev. 281 (2003); Jason B. Myers, The Sale of Electricity in a
Deregulated Industry: Should Article 2 of the Uniform Commercial Code Govern?, 54 SMU L. Rev. 1051 (2001);
67 Am. Jur. 2d Sales § 53 (2013).
16 CISG Article 2(f).
17 Holding that tap water is a good: Vermont Adel v. Greensprings of Vermont, Inc. 363 F.Supp.2d 692, 699
(D.Vt. 2005); North Carolina Mulberry-Fairplains Water Ass’n, Inc. v. Town of North Wilkesboro 105
N.C.App. 258 (N.C.App. 1992); Georgia Zepp v. Mayor & Council of Athens 180 Ga.App. 72, 77 (Ga.App.
1986); Texas Moody v. City of Galveston 524 S.W.2d 583 (Tex.Civ.App. 1975). Holding that tap water is not
classified as goods for the purpose of applying the U.C.C.: Mattoon v. City of Pittsfield 56 Mass. App. Ct.

29
Modern Law of Sales in the United States

the water provided by either a municipality or a private company contains a contaminant

that leads to illness and those affected base their recovery on claims of breach of implied
warranty found in the U.C.C. In a 1989 case, the Pennsylvania Supreme Court had no
trouble determining water was a good as it is a thing, existing and moveable.18 In Massachu-
setts, plaintiffs who contracted giardiasis from tap water were barred from bringing breach
of warranty claims on the basis of Article 2 because the sale of water by the municipality
was deemed a service, not a good. The court reasoned that the city did not create or man-
ufacture the water, but rather captured it from nature, stored, treated and distributed it to
citizens, and the cost it charged for the water reflected the cost of storage, treatment and
distribution, rather than the water itself.19 This approach has been criticized as ignoring
the definition of goods provided in the U.C.C., as nowhere does it require that the goods
be manufactured or created, and explicitly provides that natural products, such as minerals
or oil, meet the definition of goods.20 However, the result is not necessarily wrong, but the
appropriate analysis would have employed the predominant purpose test rather than a
goods v. non-goods analysis. A third approach exists, but has been rightly criticized and
seldom adopted – that is, the classification of water as a good with the stipulation that it
is not subject to the U.C.C.’s warranty requirements.21 Such an exception finds no support
in the U.C.C.

5.2.3 Information and Software

Although the U.C.C. has already passed its diamond jubilee, its flexible standards and
driving principles have allowed it to remain relevant and appropriate for modern commerce.
One area, however, that is developing more rapidly than almost any area of law – commer-
cial, criminal or constitutional – is able to keep up with is information technology. Thus
the issue arises as to what information, software or digital data, if any, are subject to the
provisions of Article 2.
The 2003 proposed revisions to Article 2 would have expressly excluded information
from the definition of goods. This proposed amendment met the same unlucky fate as the
other Article 2 revisions of 2003 and was not adopted in any state.22 Even though this
proposal did not win adoption, it is the majority view in practice that information itself is

124, 141-142 (Mass.App.Ct. 2002); Coast Laundry, Inc. v. Lincoln City 9 Or. App. 521, 527-528 (Or.App.
1972).
18 Gall by Gall v. Allegheny County Health Department 521 Pa. 68, 74-75 (Pa. 1989).
19 Mattoon v. City of Pittsfield 56 Mass. App. Ct. 124, 141-142 (Mass. App. Ct. 2002).
20 U.C.C. § 2-107(1); Adel v. Greensprings of Vermont, Inc. 363 F.Supp.2d 692, 699 (D.Vt. 2005).
21 Dakota Pork Industries v. City of Huron 638 N.W.2d 884, 887 (S.D. 2002); Sternberg v. New York Water
Service Corp. 155 A.D.2d 658, 659 (N.Y.A.D. 2 Dept. 1989); Canavan v. City of Mechanicville 229 N.Y. 473,
476-477 (N.Y. 1920).
22 U.C.C. (2003) § 2-103(k); Schwenzer, Hachem & Kee, Supra Ch. 2, note 17, para. 6.24.

30
 5 The Concept of Goods

not a good, and therefore the exchange of it does not fall under Article 2 of the U.C.C. In
2005 Oklahoma amended its version of Article 2 to become the only state to explicitly
exclude information from its definition of goods.23 While other states do not address the
classification of information in their versions of the U.C.C., a body of case law as well as
commentary from experts has developed to reach this result.
Another failed attempt by the ALI and NCCUSL at regulating computer information
was their proposed Uniform Computer Information Transactions Act (UCITA). During
the drafting process, ALI dropped out from the project; nonetheless the UCITA was
approved by NCCUSL in 1999, but was wildly unpopular among consumer advocates and
technology experts.24 Most of the criticism of UCITA centred on its dense language as well
as perceived advantages to software companies at the expense of consumers.25 As a result
it was only adopted by two states – Maryland and Virginia.26
Software transactions have long been troubling courts with how to classify them.27
Leading commercial law experts Professors White and Summers have developed a series
of criteria that courts consider when determining the applicability of Article 2 in a software
transaction.28 These criteria include the following questions – first, whether the transaction
involved a mass market software sale,29 and second, whether the software was made from
scratch.30 Considering a claim for breach of warranty under the U.C.C., the District Court
of Maine held that a contract in dispute was one for service rather than a sale of goods,
relying on the fact that the software was to be created from scratch and the plaintiff
developer was to be paid on a time and material basis, thus distinguishing the case from
those where pre-existing software was sold and the court determined a sale of goods had
occurred.31 However, the Supreme Court of Indiana has cautioned against using this dis-

23 12A Okl.St.Ann. § 2-105. 137.

24 Brian D. McDonald, Contract Enforceability: The Uniform Computer Information Transactions Act, 16
Berkeley Tech. L.J. 461 (2001); Michael L. Rustad, Making UCITA More Consumer-Friendly, 18 J. Marshall
J. Computer & Info. L. 547 (1999); 2B or not 2B; Future of UCITA now Depends on States, 12 Loy. Consumer
L. Rev. 101 (1999).
25 On 9 July 1999 a letter was prepared and signed jointly by the staff of the Bureaus of Consumer Protection
and Competition and of the Policy Planning Office of the Federal Trade Commission to NCCUSL,
expressing consumer protection concerns raised by UCITA. The letter is available on the FTC website at
<www.ftc.gov/be/v990010.shtm>. For further criticism of UCITA see James D. Hornbuckle, The Uniform
Computer Information Transaction Act: State Should Take a Critical Look Before Clicking Away Consumer
Protections, 23 Whittier L. Rev. 839 (2002).
26 Md. Code Ann., Commercial Law § 22-103(a) (West 2012); Va. Code Ann. § 59.1-501.3(a) (West 2012).
27 See Arbitron, Inc. v. Tralyn Broadcasting, Inc. 400 F.3d 130, 138 n.2 (2d Cir. 2005) (providing a chronology
of cases from different jurisdictions addressing this question).
28 White & Summers, supra Ch. 2, note 7, § 2-1.
29 See ProCD, Inc. v. Zeidenberg 86 F.3d 1447, 1450 -1451 (7th Cir. 1996); Smart Online, Inc. v. Opensite Tech-
nologies, Inc. 51 UCC Rep. Serv.2d 47 (Superior Ct NC 2003).
30 See Olcott Intern. & Co., Inc. v. Micro Data Base Systems, Inc. 793 N.E.2d 1063, 1071 -1072 (Ind.App. 2003).
31 Pearl Investments, LLC v. Standard I/O, Inc. 257 F.Supp.2d 326, 353 (D.Me. 2003).

31
Modern Law of Sales in the United States

tinction as the only factor in determining whether the transfer of software is a good or a
service and referred to it as an attempt to “pour new wine into old legal bottles”.32
In software transactions, the manner of payment may provide insight into whether a
sale of goods is present. A single payment often indicates a sale, while multiple payments
over time tend to evidence a leasing agreement.33 In Lan Sys. v. Netscout Serv. Level Corp.,
the court applied Article 2 to software licensing agreement even though “[a]rticle 2 tech-
nically does not, and certainly will not in the future, govern software licenses”. However,
it best fulfilled the parties’ expectations.34
The law on this front continues to develop, but always two steps behind the technology.

32 Conwell v. Gray Loon Outdoor Marketing Group, Inc. 906 N.E.2d 805, 812 (Ind. 2009).
33 White & Summers, supra Ch. 2, note 7, § 2-1.
34 Lan Sys. v. Netscout Serv. Level Corp. 183 F. Supp. 2d 328, 332 (D. Mass. 2002).

32
6 General Remarks on Performance of a
Sales Contract

The following sections outline the elements of performance of a sales contract, including
the parties’ rights, obligations and risks.

6.1 Obligations

Pursuant to U.C.C. § 2-301, “the obligation of the seller is to transfer and deliver and that
of the buyer is to accept and pay in accordance with the contract.” The drafters of the
U.C.C. specifically refer to the parties’ obligations rather than duties to emphasise the
conditional nature of the performance, meaning that each party’s performance is condi-
tioned on the compliance by its contracting partner.1
The obligation of the seller is to transfer and deliver the goods in accordance with the
contract.2 Very broadly, the seller can be said to have two integral obligations, and all other
obligations flow from those – those being the obligation to tender delivery and for the
goods to conform to the contractual and legal requirements of the agreement. Under the
U.C.C., the notion of conformity extends beyond the physical qualities of the goods to
cover the title being transferred and the manner of the seller’s tender of delivery.3 The
following chapters will expand on these obligations and explore the aspects that make up
the broad category of ‘conforming tender’.
The main obligations of the buyer are to accept and pay in accordance with the terms
of the contract. The buyer’s duty to accept is a condition of the seller’s duty to tender
delivery. Tendering delivery entitles the seller to acceptance and payment in accordance
with the contract. While the seller’s rights to acceptance and payment are conditional upon
its performance, likewise the buyer’s right to retain or dispose of the goods is conditional
upon its payment in accordance with the contract.

1 U.C.C. § 2-301 cmt. 1.

2 U.C.C. § 2-301.
3 Irrigation Motor & Pump Co. v. Belcher 29 Colo.App. 343, 347 (Colo.App. 1971); Esquire Mobile Homes,
Inc. v. Arrendale 356 S.E.2d 250 (Ga.App. 1987) cert.denied.

33
Modern Law of Sales in the United States

6.2 Terms of the Contract and Article 2 Gap-Fillers

Generally, parties are the masters of their own agreement – they are free to create their
own terms for contracts for the sale of goods. U.C.C. § 1-302 sets out the principle of
freedom of contract, stating that unless specifically prohibited by a particular provision
“the effect of provisions of [the Uniform Commercial Code] may be varied by agreement”.
Recall from above that the U.C.C. defines agreement broadly, and therefore in order to
derogate from the default provisions of the U.C.C. parties need not include an express
term to that effect in their sales contract – rather they may vary from the U.C.C. provisions
through course of performance, course of dealing, usage of trade or their particular circum-
stance.4

6.2.1 Course of Performance, Course of Dealing and Trade Usages

The U.C.C. gives much weight to the course of performance, course of dealing and trade
usages, and if proven they may add to the express terms of the contract, give particular
meaning to terms of the agreement, or supplement or qualify the terms of the agreement.5
Course of performance, course of dealing and trade usages are defined in U.C.C. § 1-303.
A trade usage is “any practice or method of dealing having such regularity of observance
in a place, vocation, or trade as to justify an expectation that it will be observed with respect
to the transaction in question”.6 It is not necessary that both parties have knowledge of a
particular trade usage for it to be applicable.7 A course of dealing can be thought of as a
sequence of conduct between the parties before entering into a contract, while a course of
performance rather refers to a sequence of conduct that arises after the parties enter into
a contract.8
Additionally, the U.C.C. provides a hierarchy for weighing these concepts. In interpret-
ing the agreement express terms supersede course of performance, course of dealing, and
usage of trade; the course of performance supersedes the course of dealing and usage of
trade; and the course of dealing supersedes usage of trade.9 A party seeking to rely on a
custom as it relates to intent has the burden of proving the custom, and its own statements
about a certain custom are insufficient evidence to establish the custom.10

4 U.C.C. § 1-201(b)(3) defines agreement as “the bargain of the parties in fact, as found in their language or
inferred from other circumstances, including course of performance, course of dealing, or usage of trade”.
5 U.C.C. § 1-303(d).
6 U.C.C. § 1-303(c).
7 White & Summers, Supra Ch. 2, note 7, § 4-3 at 13.
8 U.C.C. §§ 1-303(a), 1-303(b); Step-Saver Data Systems, Inc. v. Wyse Technology 939 F.2d 91, 104 (3d Cir.
1991); Kunststoffwerk Alfred Huber v. R. J. Dick, Inc. 621 F.2d 560, 564 (3d Cir. 1980).
9 U.C.C. § 1-303(e).
10 Leslie v. Pennco, Inc. 323 Pa.Super. 23, 29 (Pa.Super. 1983).

34
 6 General Remarks on Performance of a Sales Contract

6.3 General Obligation of Good Faith

While freedom of contract is the general rule, parties are not limitless in defining their
own agreements. U.C.C. § 1-302(b) provides that under no circumstances may the parties
through their agreement disclaim the obligations of good faith, diligence, reasonableness
and care prescribed by the U.C.C. The general obligation of good faith is found in U.C.C.
§ 1-304, which sets forth the principle that in all “commercial transactions good faith is
required in the performance and enforcement of all agreements or duties”.11 This rule
finds a place in the common law of contracts and is contained in the Restatement Second
of Contracts as well.12 The U.C.C.’s obligation of good faith does not provide parties with
an independent cause of action for breach of a duty of good faith; rather, U.C.C. § 2-304
sets out that “a failure to perform or enforce, in good faith, a specific duty or obligation
under the contract, constitutes a breach of that contract or makes unavailable, under the
particular circumstances, a remedial right or power.”13 Of the general obligation of good
faith, Professor Summers has said, “there is no obligation in all of the U.C.C. and in general
contract law of more overall importance than the general obligation of good faith.”14 Its
importance and presence will be discussed throughout the following sections of this work
as it touches on nearly all aspects of commercial performance.15
The CISG does not contain an analogous provision requiring a general duty of good
faith in all contracts. Article 7(1) requires the “observance of good faith in international
trade” in the interpretation and application of the Convention. This, however, should not
be confused with a general duty of good faith as the one found in the U.C.C.

11 U.C.C. § 1-304 cmt. 1. U.C.C. § 1-201(20) defines good faith as “honesty in fact and the observance of reas-
onable commercial standards of fair dealing”.
12 Restatement (Second) of Contracts § 205 1981 states, “[e]very contract imposes upon each party a duty of
good faith and fair dealing in its performance and its enforcement”.
13 U.C.C. § 1-304 cmt. 1.
14 Robert S. Summers, Good Faith Revisited: Some Brief Remarks Dedicated to the Late Richard E. Speidel--
Friend, Co-Author, and U.C.C. Specialist, 46 San Diego L. Rev. 723, 726 (2009).
15 For a detailed analysis of the obligation of good faith in the U.C.C. see E. Allan Farnsworth, Good Faith
Performance and Commercial Reasonableness under the Uniform Commercial Code, 30 U. Chi. L. Rev. 666
(1962-1963).

35
7 Tender of Delivery

Delivery is an obligation so fundamental to a sales contract that indeed it is what helps

characterize a contract as a sales contract. Under the U.C.C. a seller is obligated to tender
delivery – which requires that it “put and hold conforming goods at the buyer’s disposition
and give the buyer any notice reasonably necessary to enable him to take delivery”.1 This
obligation is fulfilled when a seller does “everything necessary to put the goods completely
and unconditionally at the buyer’s disposal”.2 Courts have defined delivery simply as “the
voluntary transfer of possession” or “as an act by which a seller parts with possession, and
a buyer acquires possession […]”.3
Tender “contemplates an offer coupled with a present ability to fulfil all the conditions
resting on the tendering party and must be followed by actual performance if the other
party shows himself ready to proceed”.4 Thus, so long as the seller fulfils its tendering
requirement, the buyer is in default should it fail to proceed accordingly. The traditional
notion of delivery was born from a market where buyers and sellers dealt with each other
face-to-face in an actual physical marketplace. Today this traditional notion is incomplete
and inadequate to encompass all the different types of delivery. Therefore, the modern
concept of delivery does not place such an emphasis on physical possession of the goods,
but rather is defined in terms of the seller doing what is necessary for the buyer to be able
to complete its obligations, namely to accept and pay for the goods.5 This modernised
concept accounts for sales where the parties are located in different cities or different
countries, or are dealing at arm’s length and have never had occasion to meet in person.

7.1 Effects of Delivery

Delivery is such an important topic with regard to the law of sales because the act of
delivery has many effects in the sale. These effects can be divided into two broad categories
– internal and external. Internal effects affect the relationship and obligations between the

1 U.C.C. §§ 2-503, 2-301, 2-507.

2 Crowder v. Aurora Co-op. Elevator Co. 223 Neb. 704, 710 (Neb. 1986). Goosic Const. Co. v. City Nat. Bank
of Crete 196 Neb. 86, 87-88 (Neb. 1976); Fox v. Young 91 S.W.2d 857, 859 (Tex.Civ.App. 1936).
3 American State Bank of Olivia v. Ladwig & Ladwig, Inc. 646 N.W.2d 241, 246 (Minn.App. 2002); Crowder
v. Aurora Co-op. Elevator Co. 223 Neb. 704, 710 (Neb. 1986); Goosic Const. Co. v. City Nat. Bank of Crete
196 Neb. 86, 87-88 (Neb. 1976).
4 U.C.C. § 2-503 cmt. 1; 2 Hawkland, Uniform Commercial Code Series § 2-503:02 (2013)(“the seller does
not tender delivery for purposes of section 2-503 until he is in a position to actually perform….”).
5 Crowder v. Aurora Co-op. Elevator Co. 223 Neb. 704, 711 (Neb. 1986); Goosic Const. Co. v. City Nat. Bank
of Crete 196 Neb. 86, 88 (Neb. 1976).

37
Modern Law of Sales in the United States

parties to the sales contract themselves, while the external effects are those that affect the
parties’ positions outside of the sales contract.6
One of the most important consequences frequently tied to the act of delivery is the
passing of the risk from the seller to the buyer. The passing of risk is discussed in greater
detail below,7 but here it is important to note that the time that the risk passes is often,
whether by the parties’ agreement or under the default rules of the U.C.C., tied to the time
of delivery.8 This is reflected in the trade symbols, such as F.O.B., which provide that risk
passes upon performance of delivery.9 The default time for risk to pass for non-merchant
sellers not using a carrier is upon tender of delivery pursuant to U.C.C. § 2-503(3).
In addition to the passage of risk, delivery is often the critical time for the passing of
title. Unless the parties agree otherwise, title to the goods passes from the seller to the buyer
at the time of delivery.10 This means that failure to fulfil one’s delivery obligations will
result in the title and the risk of loss remaining with the seller as was the case in National
Plumbing Supply Corp. v. Castellano, where the court found that title to the goods did not
pass to the buyer, because the seller failed to fulfil its delivery obligations.11 This default
rule applies regardless of whether or not any reservation of a security interest exists, or if
a document of title is to be delivered at a different time or place.12
The time of delivery also impacts several areas relating to conformity. Importantly, the
time at which the goods are delivered is the time that the statute of limitations begins to
run in a breach of warranty case.13 While these topics are covered below, for now it is suf-
ficient to mention that the time at which delivery occurs directly affects the time a seller
has to cure,14 the time period for a buyer to inspect the goods, and subsequently give notice
of rejection or any non-conformity.15 In cases of breach of contract, delivery plays an
important role in determining the market price of the goods.16 If a seller fails to deliver or
repudiates the contract, the buyer is entitled to damages amounting to the difference

6 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, paras. 29.12, 29.16.
7 See below introductory para. of Chapter 12 et seq.
8 U.C.C. § 2-503(3) for non-merchant sellers not required to ship the goods through a carrier the risk of loss
passes to the buyer upon tender of delivery.
9 U.C.C. § 2-319; Rad Source Technologies, Inc. v. Colony Nat. Ins. Co. 914 So.2d 1006, 1008 (Fla.App. 4 Dist.
2005).
10 U.C.C. § 2-401(2); Helash v. Ballard 638 F.2d 74, 76 (9th Cir. 1980); Semple v. State Farm Mut. Auto. Ins.
Co. 215 F.Supp. 645, 647 (D.C.Pa. 1963)(leaving a vehicle at the buyer’s place of business and turning over
the key to the buyer constituted delivery, and thus title passed under U.C.C. § 2-401(2) regardless of the fact
that the formalities of Pennsylvania’s certificate of title requirements had not yet been met).
11 National Plumbing Supply Corp. v. Castellano 118 Misc.2d 150, 153 (N.Y.Just.Ct. 1983).
12 U.C.C. § 2-401(2); In re Shelton Harrison Chevrolet, Inc. 202 F.3d 834, 837 (6th Cir. 2000).
13 U.C.C. § 2-725(2).
14 U.C.C. § 2-508. See below paras. under Section 16.3. et seq. for further discussion of the seller’s right to cure.
15 U.C.C. §§ 2-513, 2-602(1), 2-607(3)(a). See below paras. of Chapter 13 et seq. for further discussion inspection
rights and notice.
16 U.C.C. § 2-713.

38
 7 Tender of Delivery

between market price when the buyer learned of the breach and the contract price together
with any incidental and consequential damages.17

7.2 Tender of Non-Conforming Goods

In order to tender delivery the seller must “put and hold conforming goods at the buyer’s
disposition”.18 The wording of U.C.C. § 2-503(1) raises the question of whether a tender
of non-conforming goods can ever constitute a tender of delivery as defined by the U.C.C.
This is an important issue because the time of tender begins the clock for the statute of
limitations in an action for a breach of contract due to non-conformity.19 In order to prevent
the result that the statute of limitations runs indefinitely, courts have found that tender of
non-conforming goods can indeed begin the clock on the statute of limitations, or else
due tender would never occur until the defect was corrected.20 These courts have relied
on the official comments to U.C.C. § 2-503, which provide two possible definitions for the
term ‘tender’ as it is used in Article 2. The applicable definition in the case of a latent defect
provides that due tender may be an offer of goods under a contract as if in fulfilment of
its conditions even if there is a defect when measured against the contract obligations.21
Under the other definition of tender, due tender “contemplates an offer coupled with
a present ability to fulfil all conditions resting on the tendering party and must be followed
by actual performance if the other party shows himself willing to proceed”. This is the
usual and typical way that tender is defined, and this definition applies “unless the context
unmistakably indicates otherwise”.22 This is the definition applicable in cases where the
buyer does not accept.23 The two-definition approach is an effective, albeit slightly clumsy,
way to handle this necessary distinction.

7.3 Manner of Delivery

Part of the seller’s obligation under a sales contract is to tender delivery in accordance with
the contract – at the agreed upon time and place using the agreed upon method. If the

17 U.C.C. § 2-715.
18 U.C.C. § 2-503(1).
19 U.C.C. § 2-725(2).
20 Kittitas Reclamation Dist. v. Spider Staging Corp. 107 Wash.App. 468, 473-474 (Wash.App. 2001); Baker v.
DEC Intern 458 Mich. 247, 254-255 (Mich. 1998); Ontario Hydro v. Zallea Systems, Inc. 569 F.Supp. 1261,
1272 (D.C.Del. 1983).
21 U.C.C. §§ 2-503 cmt. 1, 2-725(2); Alliance Ind v. Black Clawson Co. 587 F.2d 819 (6th Cir. 1978).
22 U.C.C. § 2-503 cmt. 1.
23 See Baker v. DEC Intern 458 Mich. 247, 253-254 (Mich. 1998).

39
Modern Law of Sales in the United States

parties have not contracted for these details of delivery then the U.C.C.’s gap-filling provi-
sions will supply them.

7.3.1 Place of Delivery

Of course the seller’s duty to deliver the goods requires that it delivers at the appropriate
place. It is first and foremost up to the parties to designate a place for delivery, and in the
majority of commercial contracts the parties agree on a place and means for delivery.24
Additionally, an agreement by the parties may be found in the circumstances surrounding
the contract, trade usage and the course of dealing and performance.25 One of the most
frequent ways in which parties agree on a place for delivery, along with all other manners
relating to performance, is through the use of standardized trade terms, which are discussed
below in connection with risk allocation.26
Two types of contracts must be distinguished here – destination and shipment contracts.
Under a shipment contract in which a seller is required or authorized to hand over the
goods to a carrier, but not required to deliver them to a particular location, the seller is
required to put the goods in possession of the carrier, and delivery occurs at the place the
seller’s carrier is located.27 Shipment contracts often contain the trade terms ‘F.O.B. seller’s
plant’ or ‘F.O.B. seller’s city.’28 In a shipment contract, unless otherwise clearly agreed by
the parties,29 the risk of loss passes to the buyer at the time of shipment, which is also the
time of delivery.30 The U.C.C. does not specify that the tender of the goods must be to the
‘first carrier’, but this is implied.31
On the other hand, destination contracts, which do name a specified place for delivery,
provide that the risk passes to the buyer upon the seller’s tender at the destination.32 When
the contract does not state whether a shipment or destination contract is at hand, there is
a presumption in favour of a shipment contract.33 To overcome this presumption, the

24 U.C.C. §§ 2-308, 2-503(1), 2-308 cmt. 1.

25 U.C.C. § 2-308 cmt. 4; Mechanics Nat. Bank of Worcester v. Gaucher 7 Mass.App.Ct. 143, 148, (Mass. App.
1979).
26 2 Hawkland, Uniform Commercial Code Series § 2-308:01 (2013); Philip T. Lacy & Ralph C. Anzivino, 1
U.C.C. Trans Gd § 7:8 (2013). See below paras. 12.1.1. et seq.
27 U.C.C. § 2-504(a); White & Summers, supra Ch. 2, note 9, § 4-5.
28 White & Summers, supra Ch. 2, note 9, § 4-5.
29 U.C.C. § 2-509(4).
30 U.C.C. § 2-509(1)(a).
31 Henry D. Gabriel, Contracts for the Sale of Goods: A Comparison of U.S. and International Law 130 (2d ed.
2009).
32 U.C.C. § 2-509(1)(b).
33 U.C.C. § 2-503 cmt. 5(“under this Article the ‘shipment’ contract is regarded as the normal one and the
‘destination’ contract as the variant type”); Windows, Inc. v. Jordan Panel Systems Corp. 177 F.3d 114 (2d
Cir. 1999); Baumgold Bros., Inc. v. Allan M. Fox Co., East 375 F.Supp. 807 (N.D. Ohio 1973).

40
 7 Tender of Delivery

parties must explicitly agree to effect delivery at a particular destination.34 However, case
law is not consistent in applying a standard of explicitness to overcome the presumption
of a shipment contract.35
In instances where the parties do not expressly or impliedly agree on a place or manner
of delivery, a much more common omission in non-commercial sales, U.C.C. § 2-308
supplies default terms. Absent an agreement by the parties, the place of delivery is the
seller’s place of business, or, if it has none, at its residence.36 In cases where the goods that
are the subject of the contract have been identified to the contract, and to both parties’
knowledge are at a location other than at the seller’s place of business, then the location
of the goods is the place of delivery.37 The requirement that both parties know that the
location of the goods is elsewhere than the seller’s place of business or residence creates a
presumption that the parties intended this to be the location of the delivery.38

7.3.2 Time of Delivery

For delivery to be effective it must occur at the correct time as well as the correct place.
Failure of a seller to deliver on time can result in the buyer rejecting the goods or potential
liability for damages. As with designating a place for delivery, it is up to the parties to agree
on a delivery time and schedule, and their contract is the starting point for determining
the time for delivery.39 Should the parties fail to include such a timetable, a fact finder may
nonetheless find an agreement on a time for delivery based on trade usages or prior dealings
between the parties.40
It is certainly advisable for parties to set their own delivery schedule and date to ensure
that the expectations and needs of each party are made clear at the outset. By their agree-
ment, parties may make time ‘of the essence’, but they must use clear language, and simply

34 Windows, Inc. v. Jordan Panel Systems Corp. 177 F.3d 114, 117 (2d Cir. 1999); Stampede Presentation Products,
Inc. v. Productive Transp., Inc. 2013 WL 2245064, *4 (W.D.N.Y. 2013).
35 Windows, Inc. v. Jordan Panel Systems Corp. 177 F.3d 114, 117 (2d Cir. 1999)(holding contract term reading
that goods are “to be shipped properly crated/packaged/boxed suitable for cross country motor freight transit
and delivered to New York City” did not overcome presumption of shipment contract) but cf. National
Heater Co., Inc. v. Corrigan Co. Mechanical Contractors, Inc. 482 F.2d 87, 89 (8th Cir. 1973)(contract term
stating “$275,640.00 Total Delivered to Rail Siding” created a destination contract). See White & Summers,
supra Ch. 2, note 17, § 4-5 at n22.
36 U.C.C. § 2-308(a).
37 U.C.C. § 2-308(b). See Haken v. Scheffler 24 Mich.App. 196, 199 (Mich.App. 1970).
38 U.C.C. § 2-308 cmt. 2.
39 U.C.C. § 2-309(1), 2-503(1), 1-301.
40 U.C.C. §§ 2-309 cmt. 1, 1-303; Harlow & Jones, Inc. v. Advance Steel Co. 424 F.Supp. 770, 776 (D.C.Mich.
1976)(expert testimony that it is a recognized trade usage that a shipment term of September-October implies
an October-November delivery for steel); Jamestown Terminal Elevator, Inc. v. Hieb 246 N.W.2d 736 (N.D.
1976).

41
Modern Law of Sales in the United States

including a date is not enough to make time of the essence.41 Absent an express term, it
may be found that time was of the essence if the “nature or purpose of the contract and
the circumstances surrounding it making it apparent that the parties intended that time
be of the essence”.42 By making time of the essence the parties effectively agree that timely
delivery is an express condition precedent to the promisee’s duty to counter-perform.43
Thus, in the case of a sale the counter-performance refers to the buyer’s obligation to pay.
Failure to deliver on time in such a contract entitles the buyer to withdraw from the
agreement upon the late delivery.44 The concept of time being of the essence is more likely
to impact installment contracts than one-shot contracts, where the buyer is already entitled
to reject for failure of the tender to conform in any manner.45
It is possible for parties to renegotiate their contractually agreed time for delivery. The
modification must follow the general rules of modifying a concluded contract.46 Such
modifications are binding and do not require consideration.47 The prevailing test under
the U.C.C. to determine whether or not the modification is valid is good faith; this test
may require demonstration of objective reasons justifying the modification.48 If a buyer
accepts a modified delivery date, it may not then reject the goods upon their delivery
claiming late delivery.49 This may seem like an obvious proposition, but in some cases
buyers dispute that they ever agreed to a modification, and then it becomes an issue of fact
for the court to decide.
Sometimes the issue is not at what time delivery was due, but rather when delivery
occurred. A contract may call for a lengthy installation or testing period, and in such a
case courts vary on the issue of the time at which delivery occurs.50 In these cases the
intention of the parties is of great importance. The parties may agree that delivery does
not occur until after testing, but this must explicitly be part of the contract.51 Courts are

41 Arkla Energy Resources, a Div. of Arkla, Inc. v. Roye Realty and Developing, Inc. 9 F.3d 855, 863 (10th Cir.
1993)(finding that setting “a specific date for performance does not necessarily mean that performance by
that date is of the essence of the contract.”) Kennedy Ship & Repair, L.P. v. Pham 210 S.W.3d 11, 19 (Tex.App.
2006); Waddy v. Riggleman 216 W.Va. 250, 264 (W.Va. 2004); Cadle Co. v. Castle, 913 S.W.2d 627, 637
(Tex.App. 1995) writ denied.
42 Kennedy Ship & Repair, L.P. v. Pham 210 S.W.3d 11, 19 (Tex.App. 2006).
43 Waddy v. Riggleman 216 W.Va. 250, 264 (W.Va. 2004); 15 Williston on Contracts (4th ed.) § 46:3 (2013).
44 Porterco, Inc. v. Igloo Products Corp. 955 F.2d 1164, 1171 (8th Cir. 1992).
45 U.C.C. § 2-601(a). See below paras. under Section 16.1.2.1. et. seq. for discussion of perfect tender.
46 In re First Hartford Corp. 63 B.R. 479, 489 (Bkrtcy.S.D.N.Y. 1986)(no modification to the delivery schedule
by a letter which merely informed the expected arrival date of a ship).
47 U.C.C. § 2–609; Kvaerner U.S., Inc. v. Hakim Plast Co. 74 F.Supp.2d 709, 718 (E.D.Mich. 1999); In re Brooks
Shoe Mfg. Co., Inc. 21 B.R. 604, 607 (Bkrtcy.Pa. 1982).
48 Kvaerner U.S., Inc. v. Hakim Plast Co. 74 F.Supp.2d 709, 718 (E.D.Mich. 1999).
49 In re Brooks Shoe Mfg. Co., Inc. 21 B.R. 604, 607 (Bkrtcy.Pa. 1982).
50 St. Anne-Nackawic Pulp Co., Ltd. v. Research-Cottrell, Inc. 788 F.Supp. 729 (S.D.N.Y.1992).
51 Baker v. DEC Intern. 458 Mich. 247 (Mich. 1998).

42
 7 Tender of Delivery

split on the issue of whether tender occurs when goods are physically brought to the site,
or, rather, when installation is complete when the contract calls for installation.52
If an agreement cannot be found on the basis of the express contract terms or the means
described above, the gap-filling default rule in the U.C.C. requires the seller to tender
delivery within a reasonable time.53 The reasonable time required by U.C.C. § 2-309 is
judged by the requirement of good faith and commercial reasonableness.54 Thus, failure
to specify a delivery date in the contract does not, as a matter of law, constitute a failure
to form a contract.55 However, the failure to specify a delivery date may give the seller a
defence against a claim for non-delivery by the buyer. The nature, purpose and circum-
stances, which include the usage of trade and course of dealing, are to be consulted in
determining whether an open delivery date was met within a reasonable time.56 Other
relevant factors include the seller’s knowledge of the buyer’s intentions, transportation
conditions, the present conditions of the market and the nature of the goods.57 Because
these considerations are necessarily dependent on the facts and circumstances of each case,
the issue of whether the delivery was within a reasonable time is a question of fact.58
Additionally with regard to time, the tender must be made at a reasonable hour, and
if the tender is of goods, as opposed to documents, they have to be kept available for a
reasonable time that enables the buyer to take possession of them.59 The issue of whether
delivery was made at a reasonable hour is one that is rarely raised in U.C.C. litigation. Any
open terms regarding the shipment are at the seller’s option, and subject to the requirements
of good faith and commercial reasonability.60

52 Jandreau v. Sheesley Plumbing & Heating Co., Inc. 324 N.W.2d 266 (S.D. 1982)(holding that delivery did
not occur until after installation); Atlas Industries, Inc. v. National Cash Register Co. 216 Kan. 213, 221 (Kan.
1975) (holding the delivery for the purpose of determining the start of the clock for a breach of warranty
claim did not begin to run until after a lengthy 6-month installation period) cf. Washington Freightliner, Inc.
v. Shantytown Pier, Inc. 351 Md. 616, 631 (Md. 1998) (holding that the statute of limitations began to run
from the date of delivery, not after installation as the contract did not require installation).
53 U.C.C. § 2-309(1).
54 U.C.C. § 2-309 cmt. 1 states that reasonable time “depends upon what constitutes acceptable commercial
conduct in view of the nature, purpose and circumstances of the action to be taken.” See U.C.C. §§ 1-203,
1-204, 2-103.
55 Anderson & Nafziger v. G. T. Newcomb, Inc. 100 Idaho 175, 181 (Idaho 1979); Jamestown Terminal Elevator,
Inc. v. Hieb, 246 N.W.2d 736 (N.D.1976).
56 U.C.C. §§ 1-204(a), 1-205.
57 Superior Boiler Works, Inc. v. R.J. Sanders, Inc. 711 A.2d 628, 636 (R.I. 1998); Anderson & Nafziger v. G. T.
Newcomb, Inc. 100 Idaho 175, 181 (Idaho, 1979).
58 International Production Specialists, Inc. v. Schwing America, Inc. 580 F.3d 587, 597 (7th Cir. 2009).
59 U.C.C. § 2-503(1)(a); Eades Commodities, Co. v. Hoeper 825 S.W.2d 34, 37 (Mo.App. 1992); Ron Mead T.V.
& Appliance v. Legendary Homes, Inc. 746 P.2d 1163, 1165(Okl.App. 1987).
60 U.C.C. §§ 2-311(2), 2-311 cmt. 1.

43
Modern Law of Sales in the United States

7.4 Notification Duties

Part of the seller’s duty to achieve effective tender is to give the buyer any notice necessary
to enable it to take delivery.61 The seller’s invoice to the buyer can satisfy the notice
requirement of U.C.C. § 2-503.62 Failure to meet the notice requirement gives rise to a
claim of breach by the buyer and entitles the buyer to reject the tender. In shipment con-
tracts where the risk of loss passes to the buyer upon the seller’s delivery to a designated
carrier the seller has the obligation to promptly notify the buyer of the shipment.63 However,
unlike notification failure under U.C.C. § 2-503, failure to give notice under U.C.C. § 2-
504 permits the buyer to reject the tender only if the failure results in material loss or
delay.64

61 U.C.C. § 2-503(1); First Coinvestors, Inc. v. Coppola 88 Misc.2d 495, 497 (N.Y.Dist.Ct. 1976).
62 U.C.C. § 2-504 cmt. 5; White & Summers, supra Ch. 2, note 17, § 4-5 at 150.
63 U.C.C. § 2-504(c).
64 U.C.C. § 2-504 cmt. 5; Harlow & Jones, Inc. v. Advance Steel Co. 424 F.Supp. 770, 776 (D.C.Mich. 1976);
White & Summers, supra Ch. 2, note 7, § 4-5 at 150.

44
8 Documents

In addition to the primary characteristic obligations for the seller to deliver conforming
goods and the buyer to accept and pay for the goods, there exist other obligations that are
often necessary to facilitate transactions that relate to documents and ancillary costs besides
the purchase price. For example, to transport goods from one location to the other it may
be necessary to obtain an importing or exporting licence, or there may be certain costs
and expenses incurred from the transportation including transportation insurance or the
weighing and measuring of goods in transit. These additional obligations are largely created
and regulated by the parties and laid out in their sales agreement.
In many sales transactions documents play a critical role, not just in those sales described
as documentary sales, but also where the performance of one or both of the parties is
dependent on the rendering of documents. It is impossible here to describe all the relevant
documents and the situations they pertain to, as parties are free under the U.C.C. to design
the manner of their obligations, but there are some identifiable categories of documents,
in which some general insights may be provided.
One particularly common and document-heavy method for payment is through a letter
of credit. Because this method is so common for payment of the purchase price, an entire
Article of the U.C.C., Article 5, is devoted to letters of credit; additionally a set of standard-
ized rules, the Uniform Customs and Practices for Documentary Credits (UCP), have been
adopted by bankers of the International Chamber of Commerce (ICC) detailing the
requirements the documents must meet and the inspection duties of the banks.1
Documents of title allow the seller to comply with its obligations to tender delivery
and transfer title.2 Documents of title entitle the holder of the document to control over
the goods or to claim physical possession of the goods.3 Under shipment contracts, the
seller must obtain and deliver or tender in due form any documents necessary to allow the
buyer to obtain possession of the goods.4 Failure to deliver the necessary documents results
in improper tender even if the seller already made delivery at the point of shipment.5
Destination contracts may also require the seller to tender documents covering the goods.6
Under either a destination or a shipment contract, the buyer cannot be in breach for failure

1 See U.C.C. Article 5; UCP 600 (2006) available at <www.iccwbo.org> (last visited 18 August 2013).
2 U.C.C. Article 7 is dedicated to Warehouse Receipts, Bills of Lading and Other Documents of Title.
3 U.C.C. § 1-201(16); Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 30.8.
4 U.C.C. § 2-504(b); White & Summers, supra Ch. 2, note 7, § 4-5 at 153; 2 Hawkland, Uniform Commercial
Code Series § 7-101:2 (2013).
5 U.C.C. §§ 2-503(1), 2-503(2), 2-503(3), 2-504; White and Summers, supra Ch. 2, note 7, § 4-5 at 153.
6 U.C.C. §§ 2-503(3). See e.g. In re Production Steel, Inc. 54 B.R. 417, 422 (Bkrtcy.M.D.Tenn. 1985); White &
Summers, supra Ch. 2, note 7, § 4-5 at 153-154.

45
Modern Law of Sales in the United States

to accept or pay until the seller has offered to relinquish any control it retains over the
goods through documents of title.7
Documents of title are also important for sellers as evidence of tender of delivery. The
U.C.C. provides that documents of title include bills of lading,8 dock warrants, dock receipts,
warehouse receipts,9 orders for delivery as well as any other document that in ordinary
course of business or financing adequately evidences that the person in possession of it is
entitled to receive, hold and dispose of the goods it covers.10 In Inter “K” N.V. v. UPS
Supply Chain Solutions, the court held that a standardized customs form qualified as a
document of title in the ‘other documents’ category.11
Documents of title are especially important in string transactions where there are
multiple buyers and sellers and the only ones to ever have physical possession of the goods
are the first seller and the final buyer.12 With so many intermediaries, the documents allow
each of the parties to fulfil their obligations, and serve as evidence that the goods went
through the proper chain of possession.13

8.1 Tender of Delivery through Documents

While rare in domestic contracts, sometimes a contract for the sale of goods will require
the tender of delivery through the tender of documents covering the goods.14 It is never
required by the default rules of the U.C.C. that delivery be through the tender of documents;
rather, this obligation arises from the explicit agreement of the parties or the particular
circumstances of the case or a usage of trade.15 The tender of delivery effected through the
tender of documents usually includes a documentary sale, by which the buyer agrees to
pay cash upon the seller’s agent presenting a sight draft and a bill of lading covering the
goods.16 Unless the parties have agreed otherwise such a tender through the tender of
documents requires the seller to deliver the documents to the buyer’s city17 at a reasonable

7 U.C.C. § 2-504(b); White & Summers, supra Ch. 2, note 7, § 4-5 at 154.
8 U.C.C. § 1-201(6).
9 U.C.C. § 1-201(42).
10 U.C.C. § 1-201(16); See Bank of New York v. Amoco Oil Co., 35 F.3d 643 (2d Cir. 1994); One Step Up, Ltd.
v. Sam Logistic, Inc. 419 N.J.Super. 500, 508-509 (N.J.Super.A.D. 2011).
11 Inter “K” N.V. v. UPS Supply Chain Solutions, Inc. 2011 WL 5826046, *3 (Ariz.App. Div. 2 2011).
12 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 30.8; 2 Hawkland, Uniform Commercial Code Series
§ 7-101:2 (2013).
13 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 30.8.
14 White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
15 U.C.C. § 2-503 cmt. 7; White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
16 White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
17 U.C.C. §§ 2-310(a), 2-310 cmt. 3, 2-308(c), 2-308 cmt. 3; White & Summers, supra Ch. 2, note 7, § 4-5 at
153.

46
 8 Documents

time.18 The seller can send the documents through customary banking channels, and the
seller must tender all the correct documents in the correct form.19 Sellers should be careful
to follow all requirements, as there is a tradition of strictness regarding documentary
transfers.20
If the seller satisfactorily meets all the above requirements then it is entitled to payment
at the time and place at which the buyer gets the documents, regardless of where the goods
are to be received.21 Furthermore, unless the buyer explicitly reserves the right to do so, it
has no right to inspection of the goods before accepting the documents and paying the
price.22

8.2 Documents Evidencing Conformity

There is another type of documents that can be grouped together on the basis of what they
do not do – they do not pass title in the goods. This category contains mainly documents
that pertain to the conformity of the goods.
Certificates of origin may be required by the contract, or if not required may become
important in several situations.23 First, if there are trade restrictions on goods from a certain
country, then a certificate of origin may be necessary to allow the goods into the United
States at all, or so that later the seller may prove that the goods conformed to the restric-
tions.24 Additionally, a certificate of origin may be important to the buyer because of its
resale market. For example, the seller of coffee beans to a ‘fair trade’ coffee shop may
require certification from Fair Trade USA or another certifying body that signifies their
product comes from growers who work in a safe environment and are paid fair wages.25
Another prominent example is conflict diamonds from Angola, Sierra Leone, and the
Democratic Republic of the Congo. Because of the danger and bloodshed that was caused
by the diamond industry in these countries, the Kimberley Process Certification Scheme
(KPCS) was developed, which created a mandatory certification system for all diamonds
originating in these countries.26

18 U.C.C. § 2-309(1).
19 U.C.C. §§ 2-503(5)(a), 2-503(5)(b).
20 White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
21 U.C.C. § 2-310(c); White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
22 U.C.C. §§ 2-310(c), 2-513(3)(b); White & Summers, supra Ch. 2, note 7, § 4-5 at 153.
23 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 30.15.
24 See e.g. Groeb Farms, Inc. v. Alfred L. Wolff, Inc. 68 UCC Rep.Serv.2d 539 (E.D.Mich. 2009)(the buyer con-
tracted for Korean honey; when the seller delivered Chinese honey it was subject to anti-dumping duties
and tariffs).
25 See i.e. Fair Trade USA <fairtradeusa.org/> (last visited 5 June 2014)(a non-profit organization, the leading
third-party certifier of Fair Trade products in the United States).
26 See generally The Kimberly Process <kimberleyprocess.com/en> (last visited 5 June 2014). For a description
of the KPCS see Daniel L. Feldman, Conflict Diamonds, International Trade Regulation, and the Nature of

47
Modern Law of Sales in the United States

Sometime documents will be required by law and are necessary to demonstrate com-
pliance with certain instructions or industry standards. For example, the USDA requires
inspections to be conducted on any meat that is to be exported for human consumption
prior to its export, and additionally requires that the inspectors issue certificates evidencing
the results of the inspection.27 Failure to obtain such a certificate prevents a vessel from
being cleared to leave any port in the United States until the owner or shipper receives
such a certificate from a qualified inspector that the meat on board intended for export to
a foreign country is “sound and wholesome”.28

Law, 24 U. Pa. J. Int’l Econ. L. 835 (2003); Julie L. Fishman, Is Diamond Smuggling Forever? The Kimberley
Process Certification Scheme: The First Step Down the Long Road to Solving the Blood Diamond Trade Problem,
13 U. Miami Bus. L. Rev. 217 (2005).
27 21 U.S.C.A. § 615 (2005); 21 U.S.C.A. § 616 (2005).
28 21 U.S.C.A. § 617 (2005).

48
9 Conformity of the Goods: The Law of
Warranties

Of course, the delivery obligations described above are extremely important; however, the
when and where aspect of delivery can be rendered worthless if what the seller delivers is
not what was contracted for. In a nutshell, the essential purpose of a sales contract is for
the buyer to end up with the goods that it wants and is willing to exchange for value. The
U.C.C. sets out a framework for the obligations of the seller regarding the quality of the
goods using the basic common law terminology of ‘warranties’.1 The seller’s warranty
obligations can be divided into three categories – those that are created by the contract,
express warranties, covered by U.C.C. § 2-313, and those that exist as a matter of law,
implied warranties found in U.C.C. § 2-315. The third category is the seller’s warranty that
it is transferring good title, found in U.C.C. § 2-312. While this warranty arises as a matter
of law, not express terms, the requirements for disclaiming it more closely resemble the
disclaimer of an express warranty; therefore it does not fit neatly into either category.
If a warranty is effectively expressly created or exists as a matter of law and has not
been effectively disclaimed, then the seller is bound to deliver goods conforming in every
way to the warranty. Failure to tender conforming goods entitles the buyer to reject the
goods or revoke acceptance.2 If non-conforming goods are accepted, the seller is liable to
the buyer for damages equalling the difference between the goods warranted and the goods
delivered, including any consequential or incidental losses that resulted from the non-
conforming tender.3
As so often accompanies warranties, a disclaimer is necessary for the following section.
The law of warranties in the United States is an immense topic that has promulgated
incredible amounts of litigation in the last century. As warranty litigation often straddles
the line between contract and tort, covering it in detail exceeds the scope of this work.
Therefore, the following chapter is meant to serve as an outline of the important rules and
concepts of warranties as they apply to sales contracts under Article 2.4

1 Gabriel, supra Ch. 7, note 31, at 140.

2 U.C.C. §§ 2-602, 2-608.
3 U.C.C. §§ 2-714, 2-715.
4 For more in depth discussion of the law of warranties see Debra L. Goetz et al., Special Project: Article Two
Warranties in Commercial Transactions: An Update, 72 Cornell L. Rev. 1159 (1987) (a special project by the
Cornell Law Review devoted to the exploration and analysis of U.C.C. warranty law).

49
Modern Law of Sales in the United States

9.1 Express Warranties

Express warranties represent the contractually agreed upon qualities of the goods. Pursuant
to U.C.C. § 2-313, an express warranty is created when the seller makes promises or
affirmations of fact, describes the goods or shows a sample or model that becomes part of
a basis of the bargain. Professors White and Summers have compared examining express
warranty litigation to “seeing the same play enacted again and again with different props”.5
The elements and issues remain the same, and only the type of goods changes. Much of
the U.C.C. litigation in the United States is based on warranty claims. Two of the most
frequently litigated issues are discussed below – first, whether the statements or actions of
the seller formed the basis of the bargain as required by U.C.C. § 2-313. This issue is par-
ticularly problematic as courts, even within the same jurisdictions, do not agree on what
is meant by the basis of the bargain. The second issue is whether the seller’s actions,
statements or representations created an express warranty. Cases involving express war-
ranties are very fact specific and require consideration of the particular statements and
circumstances of each case; therefore, whether a warranty was created and complied with
is an issue of fact.6

9.1.1 Basis of the Bargain

U.C.C. § 2-313(2) requires that the seller’s representations form part of the basis of the
bargain in order for an express warranty to be found. Prior to the enactment of the U.C.C.,
a buyer was required to prove reliance on the seller’s representations in order to prove
that there was an enforceable express warranty.7 The U.C.C. replaced the express reliance
requirement with the ambiguous standard that the statements alleged to have created an
express warranty must form the basis of the bargain. Authorities are divided on the extent
to which U.C.C. § 2-313 dilutes or even eliminates the traditional reliance requirement as
an element of an express warranty claim.8 The minority view suggests that Article 2’s
silence on the issue reflects an intention to leave the pre-Code rule in effect,9 whereas the
U.C.C.’s commentary suggests that the burden of demonstrating reliance is no longer on

5 White & Summers, supra Ch. 2, note 7, § 10-3 at 453-454.

6 U.C.C. § 2-313 cmt. 3.
7 Uniform Sales Act (1906) §§ 12, 14, 16; Hackett v. Lewis 36 Cal.App. 687 (Cal.App. 1918); Loper v. Lingo 97
A. 585, 586 (Del.Super. 1916); Gabriel, supra Ch. 7, note 31, at 141; George Gleason Bogert, Express Warranties
in Sales of Goods, 33 Yale L. J. 14, 27-28 (1923); White & Summers, supra Ch. 2, note 7, § 10-3 at 453.
8 Gabriel, supra Ch. 7, note 31, at 141; James J. White, Freeing the Tortious Soul of Express Warranty Law, 72
Tul. L. Rev. 2089 (1998).
9 See Vigortone Ag Products, Inc. v. PM Ag Products, Inc. 217 F.Supp.2d 858, 866 (N.D.Ill. 2001); Middleby
Corp. v. Hussman Corp. 1992 WL 220922, *6 (N.D.Ill. 1992)(finding that plaintiff must prove reliance to
prevail on breach of express warranty claim).

50
 9 Conformity of the Goods: The Law of Warranties

the buyer as a prerequisite to prove an express warranty exists.10 This position holds that
Article 2 creates a rebuttable presumption of reliance that the seller is required to disprove.11
The CISG suggests the same presumption, evidenced by the elimination of the seller’s
obligations under Article 35 when the buyer is aware of the lack of conformity of the
goods.12
Courts do not offer a clear consensus as most still find the buyer’s reliance to be of
some significance, but vary on which party has the burden to prove the existence or lack
of reliance.13 To illustrate the far ends of the spectrum consider a Fourth Circuit case citing
a Virginia court in finding that “[u]nder Virginia law, any description of goods, other than
seller’s mere opinion about product, constitutes part of the basis of bargain and is therefore
express warranty. It is unnecessary that buyer actually rely upon it”.14 While a New York
court has held that a “necessary element in the creation of an express warranty is the buyer’s
reliance upon the seller’s affirmations or promises”.15 In another case, Price Bros. Co. v.
Philadelphia Gear Corp., the Sixth Circuit looked at the respective knowledge and positions
of each party and found that because both parties were merchants on equal footing, and
the plaintiff buyer had at least as much knowledge of the product as the defendant, the
U.C.C.’s requirement of good faith prevented the plaintiff from “remaining silent in the
face of known overstatements of performance … and then asserting that those falsehoods
were a basis of the bargain”.16 Accordingly, no express warranty was created by the seller’s
statements. Examples of courts varying takes on what is meant by the basis of the bargain
are infinite.17 This is unfortunate, as these diverse interpretations certainly do nothing to
further the goal of a uniform sales law among the jurisdictions.

10 U.C.C. § 2-313 cmt. 3 states “[…] affirmations of fact made by the seller about the goods during a bargain
are regarded as part of the description of those goods; hence no particular reliance on such statements need
be shown in order to weave them into the fabric of the agreement. Rather, any fact which is to take such
affirmations, once made, out of the agreement requires clear affirmative proof. The issue normally is one of
fact.”
11 See Liberty Lincoln-Mercury, Inc. v. Ford Motor Co. 171 F.3d 818, 825 (3d Cir. 1999); Herbert v. Mentor 2007
WL 2893387 *6 (D.N.J. 2007); Gabriel, supra Ch. 7, note 31, at 142 n. 694.
12 Gabriel, supra Ch. 7, note 31, at 142 n. 694.
13 Compare Alumbaugh v. Union Pacific R. Co. 322 F.3d 520, 524 (8th Cir. 2003)(plaintiff buyer failed to provide
any evidence that it relied on defendant’s statements of product’s ‘longevity or durability’ when purchasing
equipment); Middleby Corp. v. Hussman Corp. 1992 WL 220922, *6 (N.D.Ill. 1992)(plaintiff buyer must
prove reliance to prevail on breach of express warranty claim); CBS Inc. v. Ziff-Davis Pub. Co. 75 N.Y.2d
496, 503 (N.Y. 1990)(finding that reliance means “requiring no more than reliance on the express warranty
as being a part of the bargain between the parties”).
14 Kraft Foods North America, Inc. v. Banner Engineering Sales, Inc. 446 F.Supp.2d 551, 570 -571 (E.D.Va. 2006)
citing Martin v. American Medical Systems, Inc., 116 F.3d 102, 105 (4th Cir.1997).
15 Scaringe v. Holstein 103 A.D.2d 880, 880 (N.Y.A.D. 3 Dept. 1984).
16 Price Bros. Co. v. Philadelphia Gear Corp. 649 F.2d 416, 423 (6th Cir. 1981).
17 For an extensive survey of cases with varying definitions of basis of the bargain see White, supra note 8, at
n. 31.

51
Modern Law of Sales in the United States

9.1.2 Creating an Express Warranty

Because express warranties exist as a matter of contract, one must be validly created for a
buyer to be able to rely on it. A perpetual issue in breach of warranty litigation is whether
the seller’s statement or affirmation of fact rose to the level of creating a warranty or rather
was merely puffing or sales talk in order to sell a product. The following outlines the ways
in which an express warranty may be created.

9.1.2.1 Affirmations of Fact and Descriptions

Affirmations of fact or promises made by the seller to the buyer, relating to the goods, are
one way to create express warranties.18 It is not necessary that the seller have the subjective
intention to create a warranty, and there are no formal terms of guarantee or ‘magic words’
that must be used to create an express warranty.19 Statements of future capacity or perfor-
mance can constitute an express warranty.20 However, sellers’ statements of opinion or
commendation do not create a warranty.
There are several factors that courts consistently look to in determining whether the
statement made was an opinion or an affirmation of fact creating a warranty.21 These
factors include the specificity of the statement22 and the context in which it was made,23
the nature of the defect, the parties’ relative knowledge and sophistication,24 the actual
language employed by the seller and the form of the statement – i.e. whether the statement
was written or oral.25
Not all statements made by the seller rise to the level of an express warranty. Some
instead are mere puffery or opinions by the seller. Some statements such as ‘high quality’
and ‘top notch performance’ are deemed so general as to be worthless.26 Statements from
a manufacturer that a television would “‘take full advantage’ of new technology and provide
‘unsurpassed picture quality’” were deemed mere sales puffery as they did not express

18 U.C.C. § 2-313(1)(a).
19 U.C.C. § 2-313 cmt. 3; L.S. Heath & Son, Inc. v. AT & T Information Systems, Inc. 9 F.3d 561, 570 (7th Cir.
1993)(“A statement can amount to a warranty, even if unintended to be such by the seller…”).
20 Royal Business Machines, Inc. v. Lorraine Corp. 633 F.2d 34, 41-42 (7th Cir. 1980); Hercules Machinery Corp.
v. McElwee Bros., Inc. 49 UCC Rep.Serv.2d 72 (E.D.La. 2002); White & Summers, supra Ch. 2, note 7, § 10-
7 at 471-472.
21 White & Summers, supra Ch. 2, note 7, § 10-7 at 471-472; 18 Williston on Contracts (4th ed.) § 52:49 (2013).
22 Downie v. Abex Corp. 741 F.2d 1235, 1239-1240 (10th Cir. 1984)(the more specific a statement is the more
likely that it created an express warranty); Vezina v. Nautilus Pools, Inc. 27 Conn.App. 810, 816 (Conn.App.
1992).
23 Berge Helene Ltd. v. GE Oil & Gas, Inc. 830 F.Supp.2d 235, 258 (S.D.Tex. 2011).
24 Rogath v. Siebenmann 129 F.3d 261, 265 (2d Cir. 1997); Doug Connor, Inc. v. Proto-Grind, Inc. 761 So.2d
426, 429 (Fla.App. 2000).
25 Vezina v. Nautilus Pools, Inc. 27 Conn.App. 810, 816, 610 A.2d 1312, 1316 (Conn.App. 1992).
26 Tatum v. Cordis Corp. 758 F.Supp. 457, 463 (M.D.Tenn.1991); Ruffin v. Shaw Industries, Inc. 149 F.3d 294,
302 (4th Cir. 1998); Hall v. T.L. Kemp Jewelry, Inc. 71 N.C.App. 101, 104-105 (N.C.App. 1984).

52
 9 Conformity of the Goods: The Law of Warranties

facts, but rather the manufacturer’s opinion of its product’s superiority.27 In Anderson v.
Bungee Intern. Mfg. Corp. the court held that a package of bungee cords labelled as ‘Premium
Quality’ and ‘Made in the USA’, was merely puffery and created no express warranty as
these statements did not describe particularly held characteristics of the goods.28 These
bald statements are characteristic of those that courts often deem too broad to create a
warranty.
A description of the goods by the seller may also create an express warranty.29 Often a
description of the goods may not appear distinguishable from an affirmation of fact, and
in practice this distinction may not be critical. However, they are distinct ways to create
express warranties. They differ in that descriptions may be broader, to the extent that
descriptive terms may include symbols that have special meaning for a particular transac-
tion.30 A description constituting an express warranty may be created by conduct as well
as statements, for example the showing of a blueprint.31 An express warranty by description
can be implied from past deliveries or the parties’ course of dealing.32 However, typically
in cases where the buyer has selected the goods, there will be no sale by description.33

9.1.2.2 Samples or Models

In addition to statements of facts and descriptions, samples or models used by sellers
during the course of bargaining can also create an express warranty.34 Samples and models
are two separate methods for creating an express warranty – a sample is actually drawn
from the bulk of goods which is the subject matter of the contract, while a model is offered
for inspection when the subject matter is not at hand and is not drawn from the bulk of
the goods.35 However, in practice, as with the distinction between an affirmation of fact
and a description, the decisive issue is whether or not the sample or model formed part of
the agreement between the parties.
The U.C.C. maintains the pre-Code rule regarding samples that merely showing a
sample does not create a sale by sample, and that some evidence must be present to show

27 Johnson v. Mitsubishi Digital Electronics America, Inc. 578 F.Supp.2d 1229, 1238 -1239 (C.D.Cal. 2008).
28 Anderson v. Bungee Intern. Mfg. Corp. 44 F.Supp.2d 534, 541 (S.D.N.Y. 1999).
29 U.C.C. §§ 2-313(1)(b), 2-313 cmt. 5.
30 Gabriel, supra Ch. 7, note 31, at 141.
31 U.C.C. § 2-313 cmt. 5; Northern States Power Co. v. ITT Meyer Industries, Div. of ITT Grinnell Corp. 777
F.2d 405, 411-412 (8th Cir. 1985)(providing technical specifications can create an express warranty); Hayes
v. Bering Sea Reindeer Products 983 P.2d 1280, 1285 (Alaska 1999); Miles v. Kavanaugh 350 So.2d 1090, 1093
(Fla.App. 1977).
32 U.C.C. §§ 2-313(1)(b), 2-313 cmt. 5.
33 Sylvia Coal Co. v. Mercury Coal & Coke Co. 151 W.Va. 818, 827 (W.Va. 1967).
34 U.C.C. § 2-313(1)(c).
35 U.C.C. (2003) § 2-313 cmt. 8; U.C.C. § 2-313 cmt. 6; White & Summers, supra Ch. 2, note 7, § 10-7.

53
Modern Law of Sales in the United States

an intention to contract by sample.36 However, the official comments to U.C.C. § 2-313

suggest a presumption that anything the seller holds out is meant to be a sample or model
and the seller therefore has the burden to show that the considered goods did not constitute
a sample or model that created an express warranty.37
While the issue of whether an express warranty was created by a sample is one of fact
to be determined upon consideration of the facts and circumstances of each case, there
are some guiding factors to consider. Courts look particularly at the facts that would
evidence that the parties contracted solely in reference to the sample or model held out
and whether there was a mutual understanding that they were dealing with a sample and
that the bulk would be like it.38 In addition to the parties’ conduct, a finder of fact may
consider trade usage and custom in ascertaining whether a sample or model created an
express warranty.39
The buyer’s knowledge is relevant in this analysis. A buyer will be precluded from
relying on an express warranty claim based on a sample if it knows that there will be signi-
ficant physical differences between the goods it is shown and the goods it has ordered.40
In Logan Equipment Corp. v. Simon Aerials, Inc., a Massachusetts court rejected the buyer’s
claim that the demonstration of a boomlift created an express warranty by sample, in part
because the viewer of the demonstration was aware of significant differences in capabilities
and characteristics between the equipment being demonstrated and that which was to be
ordered.41 If it is determined that a sample or model did indeed create an express warranty,
then for a buyer to prevail in a breach of warranty claim it must prove that the goods did
not conform to the standard set by the sample or model.

9.2 Obligations to Remote Purchasers

One area where Article 2 has not aged so gracefully is regarding warranties created for
remote purchasers. Remote purchasers are buyers that are further down the line in the
chain of a sale; the most typical example is an end consumer who purchased from a retailer

36 U.C.C. §§ 2-313(1)(c), 2-313 cmt. 6; American Canning Co. v. Flat Top Grocery Co. 70 S.E. 756 (W.Va.
1911)(containing the pre-Code rule that the “mere fact that a sample is exhibited does not necessarily make
the transaction a sale by sample. The contract must evince an intention to contract by sample.”); Pioneer
Peat, Inc. v. Quality Grassing & Services, Inc. 653 N.W.2d 469, 472 (Minn.App. 2002); Logan Equipment
Corp. v. Simon Aerials, Inc. 736 F.Supp. 1188, 1197 -1198 (D.Mass. 1990); Beech Aircraft Corp. v. Flexible
Tubing Corp. 270 F.Supp. 548, 562 (D.C.Conn. 1967); Sylvia Coal Co. v. Mercury Coal & Coke Co. 151 W.Va.
818, 819 (W.Va.1967); White & Summers, supra Ch. 2, note 7, § 10-7.
37 U.C.C. § 2-313 cmt. 6; White & Summers, supra Ch. 2, note 7, § 10-7.
38 Pioneer Peat, Inc. v. Quality Grassing & Services, Inc. 653 N.W.2d 469, 472 (Minn.App. 2002).
39 Gabriel, supra Ch. 7, note 31, at 141.
40 Logan Equipment Corp. v. Simon Aerials, Inc. 736 F.Supp. 1188, 1198 (D.Mass. 1990).
41 Id. at 1197-1198.

54
 9 Conformity of the Goods: The Law of Warranties

who obtained its goods from a manufacturer. Under the U.C.C., warranty provisions cover
the transaction between sellers and buyers, but in the case described above, the seller would
be the retailer, not the manufacturer. Two situations where remote purchasers rely on
warranties are when warranties come packaged with the goods, ‘in the box warranties’,
and when statements are made in advertisements that may be construed as a warranty. It
is easy to see how it would have been difficult for the drafters of the U.C.C. in the 1950s
to imagine situations where smartphones and laptops ordered over the internet would
come packaged with warranties inside the box, or the extent to which advertising pervades
American life and society today. Two issues initially created roadblocks for remote pur-
chasers to recover based on a claim of breach of warranty – the issue of privity, and the
language in U.C.C. § 2-313 that an express warranty must form the basis of the bargain.
Despite these technical roadblocks, judges have developed workarounds to come to fair
results.

9.2.1 Pass-Through Warranties

Nowadays it has become standard practice that when a consumer buys certain types of
goods – personal electronics, large appliances and new cars, to name a few, these goods
come packaged with a warranty inside the box, typically contained inside the user’s manual.
These descriptions are frequently labelled ‘Manufacturer’s Warranty’, but even without
such a label it is clear the statement is from the manufacturer, evidenced by the fact that
it is contained in the box or packaging that remained sealed from the time it left the factory
until it reached the consumer’s home. Traditionally, only buyers in privity with the man-
ufacturer could recover under a contract-based claim for breach of warranty – as the
manufacturer only owed a duty to those with whom it was in contractual privity.42 Addi-
tionally, U.C.C. § 2-313 requires that such warranties must form the basis of the bargain
in order to be effective. This raises the question of whether it is possible for a warranty
that is only read after the goods have been purchased and taken home to create the basis
of the bargain.
The drafters addressed this concern in comment 7 to U.C.C. § 2-313 by stating that
the “precise time when words of description or affirmation are made or samples are shown
is not material” and may nonetheless create an express warranty. Thus the relevant question
for the drafters was not when the statement was made, or a sample shown, but rather
whether it can be regarded as part of the contract. The drafters instruct that statements

42 Harry M. Flechtner, Enforcing Manufacturers’ Warranties, ‘Pass Through’ Warranties and the Like: Can the
Buyer Get a Refund ?, 50 Rutgers L. Rev. 397, 401-404 (1998); Goetz et al., supra note 4, at 1310-1317. See
Gary L. Monserud, Blending the Law of Sales with the Common Law of Third Party Beneficiaries, 39 Duq. L.
Rev. 111 (2000).

55
Modern Law of Sales in the United States

made after the closing of the deal, for example, upon delivery of the goods, is treated as a
modification that does not need consideration, so long as it meets the modification
requirements laid out in U.C.C. § 2-209, and constitutes a valid warranty. While this may
address the basis of the bargain issue, it leaves open the question of the missing privity
between the manufacturer and the remote purchaser.
The 2003 Revisions to Article 2 would have created a new section that in effect would
have been the equivalent of an express warranty for purchasers who are not the direct
purchasers from the seller, but rather lie further down the distribution chain, remote
purchasers.43 U.C.C. (2003) § 2-313A would have addressed the obligations created towards
remote purchasers in the case of ‘pass-through warranties’, records that are contained
within the packaging of the goods in the situations described above. This section defined
a remote purchaser as “a person that buys or leases goods from an immediate buyer or
other person in the normal chain of distribution”.44 In titling this section ‘Obligation to
Remote Purchasers’ the revisionists, headed in this section by Professor Dick Speidel,
hoped to overcome, or at least sidestep, the roadblocks of privity and the basis of the bargain
requirement.45 The commentary clarifies that obligations, unlike true warranties, are not
direct between a buyer and a seller in a contractual relationship and they are limited to
new goods sold or leased in the normal chain of distribution.46 Further, the use of ‘obliga-
tion’ eliminates the basis of the bargain requirement that is necessary for demonstrating
the existence of an express warranty.47
This new section would have be a codification of a large body of case law that deals
with ‘pass-through’ warranties.48 However, as with the other proposed revisions, this section
has been rejected. Despite this failure of action on the part of state legislatures, courts have
very seldom refused to give effect to warranties in the box.49 Professor White has offered
a simple and effective solution to the U.C.C.’s lack of clarity in lieu of U.C.C. (2003) § 2-
313A. First, regarding the privity requirement, he suggests that because the purpose of the
requirement in claims against remote sellers is to protect them from a barrage of litigation
from plaintiffs coming out of the woodwork, this justification is not needed in pass-through
warranty cases as the end-consumer is a targeted recipient of the warranty. Second, he
suggests, in certain areas at least, such as personal electronics, computers and large appli-
ances, it has become an expected business practice to include a warranty with the goods.

43 U.C.C. (2003) § 2-313A; Gabriel, supra Ch. 7, note 31, at 142.

44 U.C.C. (2003) § 2-313A (1)(b).
45 James J. White, Warranties in the Box, 46 San Diego L. Rev. 733, 735 (2009).
46 U.C.C. (2003) § 2-313A cmt. 1; Gabriel, supra Ch. 7, note 31, at 142.
47 U.C.C. (2003) § 2-313A cmt. 1.
48 White & Summers, supra Ch. 2, note 7, § 10-9 at 478.
49 See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1452 (7th Cir. 1996) (finding that acceptance did not occur until
after buyer read the terms); White, supra note 45, at 735. See also Hill v. Gateway 2000, Inc. 105 F.3d 1147,
1149 (7th Cir. 1997); Schafer v. AT&T Wireless Servs., Inc. 2005 WL 850459 (S.D. Ill. 2005).

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Consumers’ knowledge and expectation of such warranties elevates the warranty to become
a basis of the bargain.50

9.2.2 Advertisements and Communications to the Public

Of course, advertisements existed at the time that the U.C.C. was being drafted. However,
they were mainly in the form of home mailers or newspaper announcements. It is safe to
say that Professor Llwellyn and his contemporaries would have had difficulty imagining
the pervasiveness and ubiquity of advertisements in America today. One would have to
go to great lengths to avoid advertisements – besides appearing on television, radio and
in newspapers, adverts often pop up to greet users as they enter a website, they decorate
the sides of public transportation and highways, and in recent times some companies have
even paid people to become permanent walking advertisements by tattooing their company
logos on their skin. Certainly, advertisements sometimes entice consumers to buy products
lest there would cease to be such a robust advertising industry in the United States. This
raises the question of how advertisements fit into the discussion of the law of warranties.
Does each billboard on the side of the road or every flyer in a mailbox create an express
warranty?
Generally, yes, advertisements can create an express warranty. This general rule is, of
course, subject to exceptions, depending on the facts and circumstances of each case. In
Funk v. Kaiser-Frazer Sales Corp a New York Appellate court held that while generally
advertisements can create an express warranty, in this case the plaintiff buyer failed to
allege that he “understood the Ford advertisements” or even that he was aware of these
advertisements before his purchase.51 Advertisements, brochures and catalogues can be
express warranties, but they must have been at least read to be held to form the basis of a
bargain.52 Thus, a buyer who wishes to rely on an advertisement as having created an
express warranty has the burden to demonstrate that the particular advertisement was the
basis of the bargain, which at a minimum means having seen the advertisement in question.
Under proposed U.C.C. (2003) § 2-313B, for the first time, a body of case law would
have been codified that extends the seller’s obligations created by advertisement or similar
communication to the public for new goods to remote purchasers.53 According to the
drafters of U.C.C. (2003) § 2-313B, the obligation to remote purchasers would arise “when

50 White, supra note 45, at 747-748.

51 Funk v. Kaiser-Frazer Sales Corp. 23 A.D.2d 771, 771 (N.Y.A.D.1965). See also Eddington v. Dick 87 Misc.2d
793, 795 (N.Y.City Ct. 1976).
52 Murrin v. Ford Motor Co. 303 A.D.2d 475, 476-477 (N.Y.A.D. 2003); Interco Inc. v. Randustrial Corp. 533
S.W.2d 257, 261-262 (Mo.App. 1976).
53 U.C.C. (2003) § 2-313B; Nazmi Orkun Akseli, Advertising and “Pass-Through” Warranties Under Revised
Article 2, 106 Com. L. J. 65, 65 (2001). See White & Summers, supra Ch. 2, note 7, § 10-10 at 479.

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a manufacturer engages in an advertising campaign directed towards all or part of the

market for its product and will make statements that if made to an immediate buyer would
amount to an express warranty or remedial promise under U.C.C. § 2-313”.54 However,
as with the rest of the revisions, including U.C.C. § 2-313A, U.C.C. § 2-313B has not been
adopted and is not likely to ever see the inside of a state’s Code.

9.3 Implied Warranties

Unlike the express warranties just addressed, implied warranties need not be created
through any particular statements or actions by the seller. Rather, they exist as a matter of
law. Thus the plaintiff buyer does not have the burden of establishing that the implied
warranty was created, but rather it is upon the seller to prove that such a warranty was
effectively disclaimed or excluded, or that the sale fell outside the scope of the warranty
provisions described in the following. The U.C.C. recognizes two types of implied warranties
– an implied warranty of merchantability that provides that goods sold by merchants will
be fit for their ordinary purpose, and an implied warranty of fitness for a particular purpose
– assuring that a buyer may rely on a seller’s skill and judgment to furnish appropriate
goods to be used for a particular purpose when the seller has knowledge of the reliance
and the buyer’s particular purpose.

9.3.1 Implied Warranty of Merchantability

Under the implied warranty of merchantability in U.C.C. § 2-314, merchant sellers are
obligated to deliver goods that are fit for the ordinary purpose for which the goods are to
be used. Unless modified or properly disclaimed under U.C.C. § 2-316, this warranty exists
as a matter of law, and is based on unstated, reasonable expectations about the quality of
the type of goods sold.55 U.C.C. § 2-314 is not revolutionary, it is a modernization of section
15(2) of the Uniform Sales Act,56 which did mark a shift from the prior common law rule
of caveat emptor.57 As more consumers became market participants they could not rely

54 U.C.C. (2003) § 2-313B cmt. 1 citing the approach followed by Randy Knitwear, Inc. v. American Cyanamid
Co., 11 N.Y.2d 5 (Ct. App. 1962).
55 U.C.C. § 2-314; Gabriel, supra Ch. 7, note 31, at 144.
56 See Uniform Sales Act (1906) § 15(2); White & Summers, supra Ch. 2, note 7, § 10-11 at 480.
57 Seixas v. Woods, 2 Cai. R. 48 (N.Y. Sup. Ct. 1804); Barnard v. Kellogg, 77 U.S. (10 Wall.) 383 (1870). Gabriel,
supra Ch. 7, note 31, at 144. For a discussion on the history of caveat emptor see Walton H. Hamilton, The
Ancient Maxim Caveat Emptor, 40 Yale L. J. 1133 (1931); 1 Madden & Owen on Prod. Liab. (3d ed.) § 1:4
(2013).

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on their own expertise, as is the case with two experienced merchants in a sales contract,
but rather were dependent on the integrity of the seller.58
Essentially, U.C.C. § 2-314 is a promise made simply by putting the goods on the
market that they meet a minimum standard of merchantability. There are some guidelines
as to what this standard of merchantability means. A merchantable product is one within
the quality range normally associated by the trade with ‘goods of its type’. A product of
‘fair average quality’ does not have to be the best available of its type, but it should be better
than the worst available.59 Further, the goods must be acceptable when compared with
generally accepted goods of the same kind, with the exception of new or experimental
goods that exist alone without comparable goods on the market, for example experimental
machines or new technology.60 The standard for merchantable does not require that the
product be perfect.61 Merchantable goods have to be fit for the ordinary purpose for which
goods of that kind are used, adequately packaged and labelled, and able to pass in the trade
without objection.62 The definition provided by U.C.C. § 2-314 is not exhaustive.63 In the
case of used goods, merchantability is essentially the operative essentials of the product.64

9.3.1.1 Defining Merchant

Only sellers who are merchants are subject to the implied warranty of merchantability.
U.C.C. § 2-104 defines a merchant as one who “regularly deals in goods of the kind involved
or otherwise has a professional status with regard to the goods involved such that [it] could
be expected to have specialized knowledge or skill peculiar to those goods”.65 Whether or
not a seller is a merchant is an issue frequently brought before courts, and the fact finders
are called on to determine whether a seller is so experienced and knowledgeable under the
circumstances that it should be charged with the more substantial burden placed on the
merchant.66 Thus, in determining whether a seller can be held liable under U.C.C. § 2-314

58 Teeven, supra Ch. 3, note 22, at 220.

59 U.C.C. § 2-314(2); Gabriel, supra Ch. 7, note 31, at 144.
60 U.C.C. § 2-314 cmt. 2; Price Bros. Co. v. Philadelphia Gear Corp. 649 F.2d 416, 424 (6th Cir. 1981); Norcold,
Inc. v. Gateway Supply Co. 154 Ohio App.3d 594, 603 (Ohio App. 2003).
61 Pronti v. DML of Elmira, Inc. 103 A.D.2d 916, 917 (N.Y.A.D. 1984); Nassau Suffolk White Trucks, Inc. v.
Twin County Transit Mix Corp. 62 A.D.2d 982, 983-984 (N.Y.A.D. 1978).
62 U.C.C. § 2-314(2); Bentzley v. Medtronic, Inc. 827 F.Supp.2d 443, 454 (E.D.Pa. 2011); Shaffer v. Victoria
Station, Inc. 91 Wash.2d 295, 297 (Wash. 1978)(requirement that goods be adequately packaged included
wine glass used to serve plaintiff wine, which broke in his hand).
63 U.C.C. § 2-314 cmt. 6.
64 C. Clifford Allen, Annotation, What are “merchantable” Goods Within Meaning of UCC § 2-314 Dealing
with Implied Warranty of Merchantability, 83 A. L. R. (3rd) 694 (1978) (comparing cases deciding the issue
of merchantability).
65 U.C.C. § 2-104.
66 For an extensive list of litigation addressing the issue of who is a merchant under U.C.C. § 2-314 see David
B. Harrison, Annotation, Who is “merchant” under UCC § 2-314(1) Dealing with Implied Warranties of
Merchantability, 91 A. L. R. (3rd) 876 (1979). See e.g. Ferragamo v. Massachusetts Bay Transp. Authority 395
Mass. 581(Mass.1985)(finding that the Massachusetts Bay Transportation Authority was a merchant of used

59
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more emphasis should be placed on the respective knowledge of the parties, rather than
the frequency of sales made by the seller. This approach can clearly be seen by some courts
that have allowed plaintiffs to proceed with a claim based on U.C.C. § 2-314, even when
the defendants are not merchants, if it can be demonstrated that the defendants “knew of
any defects, not apparent on inspection, and failed to disclose them”.67

9.3.1.2 The Ordinary Purpose of Goods

A merchant’s implied warranty covers goods only for their ordinary use. The concept of
the ordinary purpose of the goods is central to determining the scope of the implied war-
ranty by the merchant. The ordinary purposes that the implied warranty covers include
the uses that the manufacturer intended as well as those that are reasonably foreseeable.68
Thus, ordinary use contemplates not only the intended use of the goods, but also the
foreseeable or likely additional or alternative uses, including foreseeable slight misuse in
the course of the intended use. However, a breach of implied warranty will not be found
in cases of deliberate misuse unrelated to the ordinary use of the goods. In Venezia v. Miller
Brewing the plaintiff, an eight-year old child, brought an action against the Miller Brewing
Company for negligence and breach of implied warranty when after throwing a beer bottle
against a pole it shattered and pieces of glass entered his eye, causing severe injury. The
First Circuit dismissed the claim, and found that the intentional misuse of throwing a glass
bottle against a hard surface, with consequences known to the plaintiff – the bottle would
shatter – cannot fall under U.C.C. § 2-314’s definition of ordinary use.69
In the tragic case of Rhodes v. R.G. Industries, Inc., a Georgia Appellate Court upheld
the dismissal of plaintiff’s claim of breach of implied warranty, which she based on the
argument that a .22-caliber double-action revolver was not fit for its ordinary purpose,
self-protection, when the gun was used by a 3-year old girl to shoot and kill the plaintiff’s
10-year-old daughter.70 The court explained that “the fact that the revolver in this case
fired when the hammer was cocked and the trigger was pulled was evidence that the weapon
was fit for the use intended”.71 Thus, fitness for ordinary purpose does not contemplate
that the product will necessarily be safe, if it is an inherently dangerous product, and courts

train coaches for the purposes of U.C.C. § 2-314); Eichenberger v. Wilhelm 244 N.W.2d 691, 697 (N.D.
1976)(crop sprayer whose spray caused damage to a farmer’s wheat crop was a merchant under U.C.C. § 2-
314).
67 Village of Chatham v. Board of Fire Com’rs of Delmar Fire Dist. 90 A.D.2d 860, 861 (N.Y.A.D.,1982); Goetz
et al., supra note 4, at 1193-1194.
68 U.C.C. §§ 2-314(2)(c), 2-314 cmt. 8; Back v. Wickes Corp. 375 Mass. 633, 640 (Mass.1978)(“‘ordinary purposes’
contemplated by this section include both those uses which the manufacturer intended and those which are
reasonably foreseeable.”).
69 Venezia v. Miller Brewing Co. 626 F.2d 188, 191 (1st Cir. 1980).
70 Rhodes v. R.G. Industries, Inc. 173 Ga.App. 51, 52-53, (Ga.App. 1984).
71 Id.

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will not extend the warranty of merchantability to cover all injuries or damages caused by
mishandled goods.

9.3.1.3 Implied Warranty and Strict Products Liability

The implied warranty of merchantability has been called the ‘first cousin’ of strict tort
liability.72 The law of products liability has developed along two parallel paths that at times
intersect – the one being the law of contract embedded in the U.C.C.’s warranty provisions
and the other being the law of tort, particularly in the areas of negligence and strict products
liability.73 The doctrine of strict products liability permits recovery by an injured consumer
against the manufacturer so long as the consumer can prove that the manufacturer distrib-
uted into commerce a product that contained a dangerous defect.74 Such a cause of action
is similar to the U.C.C. implied warranty of merchantability, and frequently plaintiffs raise
both simultaneously.75
Defective products can essentially cause three types of injury – personal injury, property
damage, and economic loss, which occurs when the defective product causes damages only
to itself. Economic loss has been defined as “the diminution in the value of the product
because it is inferior in quality and does not work for the general purpose for which it was
manufactured and sold”.76 In the majority of jurisdictions, courts employ a type of injury
test to determine the appropriate theory of recovery.77 The general rule is that tort recovery
is allowed for both personal injury and property damage, and sometimes for economic
loss, but only if it is accompanied by personal injury or property damage.78 For purely
economic loss, tort recovery is not permitted, and a plaintiff is restricted to rely on contract
damages.79 This limitation on recovery is known as the economic loss rule, and is followed
by the majority of jurisdictions.80 The policy rationale underlying the economic loss rule

72 White & Summers, supra Ch. 2, note 7, § 10-11 at 480.

73 Elizabeth A. Heiner, Note, Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc.: What Recovery for
Economic Loss--Tort or Contract?, 1990 Wis. L. Rev. 1337, 1337 (1990).
74 Restatement (Second) of Torts § 402A (1965); 63 Am. Jur. 2d Products Liability § 506 (2013).
75 See e.g. Back v. Wickes Corp. 375 Mass. 633, 639 (Mass.1978)(“Amendments to the Massachusetts version
of the Uniform Commercial Code make it clear that the Legislature has transformed warranty liability into
a remedy intended to be fully as comprehensive as the strict liability theory of recovery that has been adopted
by a great many other jurisdictions.”); White & Summers, supra Ch. 2, note 7, § 10-11 at 481.
76 Comment, Manufacturers’ Liability to Remote Purchasers for “Economic Loss” Damages--Tort or Contract?,
114 U. Pa. L. Rev. 539, 541 (1966); Heiner, supra note 73, at 1337.
77 Heiner, supra note 73, at 1337; MacKenzie Mayes Walter, The Solution to the Economic Loss Doctrine Con-
fusion: The Disappointed Expectations Test, 95 Ky. L. J. 943 (2006–2007).
78 Alloway v. General Marine Industries, L.P. 149 N.J. 620, 625 (N.J.1997); Restatement (Third) of Torts: Prod.
Liab. § 21 (1998). See generally Jay M. Zitter, Annotation, Strict Products Liability: Recovery for Damage to
Product Alone, 72 A. L. R. (4th) 12 (1989).
79 Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp. 626 F.2d 280, 285 (3d Cir. 1980); Sarsfield v.
Citimortgage, Inc. 707 F.Supp.2d 546, 553 (M.D.Pa. 2010).
80 See East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (U.S. 1986); 63B Am. Jur. 2d Products
Liability § 1794 (2013).

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is based on the different interests that are protected by contract and tort remedies. On the
one hand contract remedies protect the interest society has in the performance of promise,
while tort remedies protect society’s interest in being free from harm.81

9.3.2 Implied Warranty of Fitness for Particular Purpose

Similar to the distinction made in the CISG, the U.C.C. recognizes the creation of an
implied warranty when a buyer can prove that the seller had reason to know that it relied
on the seller’s skill and judgment when buying goods for a particular purpose.82 This
implied warranty that the goods will be fit for a particular purpose arises from the seller’s
implicit responsibility to furnish appropriate goods when it has reason to know the buyer’s
particular needs and that the buyer is relying on it.83 In order to prevail on a claim for
breach of implied warranty of fitness for a particular purpose the buyer must prove that
the seller had reason to know that the buyer was purchasing the goods for a particular
purpose, the seller had reason to know that the buyer was relying on its skill and judgment
to select or furnish appropriate goods, and that there was actual reliance on the seller’s
skill and judgment.84
The implied warranty of fitness for a particular purpose differs from the implied war-
ranty of merchantability in three major ways – first, U.C.C. § 2-315’s application is not
limited to merchants; second, U.C.C. § 2-315’s requirement that a buyer prove the seller
had reason to know of the use for which the goods were purchased and that the buyer was
relying on its skill and judgment does not exist in U.C.C. § 2-314; and, finally, U.C.C. § 2-
314 does not contain any requirement that the buyer prove actual reliance on the seller.85
As discussed above, a warranty exists under U.C.C. § 2-314 by simply placing goods on
the market, and no special purpose of the buyer need be present. Despite these distinctions,
some courts and lawyers still conflate the two, and use the terms interchangeably.86 Because

81 Spring Motors Distributors, Inc. v. Ford Motor Co. 98 N.J. 555, 579 (N.J. 1985)(“The demarcation of duties
arising in tort and those arising in contract is often indistinct, but one difference appears in the interest
protected under each set of principles.”). See John J. Laubmeier, Comment, Demystifying Wisconsin’s Economic
Loss Doctrine, 2005 Wis. L. Rev. 225 (2005).
82 U.C.C. § 2-315; CISG Article 35(2)(c); Gabriel, supra Ch. 7, note 31, at 144-45.
83 Glasstech, Inc. v. Chicago Blower Corp. 675 F.Supp.2d 752, 759-760 (N.D. Ohio 2009); Gabriel, supra Ch. 7,
note 31, at 145; Goetz et al., supra note 4, at 1213-1214.
84 Glasstech, Inc. v. Chicago Blower Corp. 675 F.Supp.2d 752, 759-760 (N.D. Ohio 2009). See Canning v. Broan-
Nutone, LLC 480 F.Supp.2d 392, 412 (D.Me. 2007); In re McDonald’s French Fries Litigation 503 F.Supp.2d
953, 957 (N.D.Ill.,2007); Travelers Property Cas. Co. of America v. Saint-Gobain Technical Fabrics Canada
Ltd. 474 F.Supp.2d 1075, 1084 (D.Minn. 2007).
85 U.C.C. § 2-315 cmt. 1(the buyer need not explicitly tell the seller the purpose so long as the seller had reason
to realize the purpose); Gabriel, supra Ch. 7, note 31, at 145.
86 See In re McDonald’s French Fries Litigation 503 F.Supp.2d 953, 957 (N.D.Ill. 2007); White & Summers,
supra Ch. 2, note 7, § 10-14 at 495.

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the implied warranty of fitness for a particular purpose deals with the parties’ respective
knowledge and reliance, the individual facts and circumstances of each case are ultimately
decisive.87
Whether the seller had reason to know that the buyer was relying on its skill and
judgment and whether the buyer did in fact rely on the seller are critical issues under
U.C.C. § 2-315. In cases where a buyer insists on a particular product, it is not relying on
the seller’s skill and judgment, so even then if the seller knows that the buyer is going to
use the goods for a particular purpose, no warranty of fitness for a particular purpose is
created.88 Similarly, if the seller can prove that the buyer is more knowledgeable, the buyer
may not be able to prevail on proving reliance.89
However, in some situations the fact that the buyer picked out the goods is not an
absolute defence for the seller. In Whitehouse v. Lange, a mare that was selected by the
buyers and purchased for breeding turned out to be infertile.90 The sellers defended the
case for breach of implied warranty on the grounds that by selecting the horse, the buyers
could not have relied on their skill and judgment.91 The court held that even though the
buyers picked out the specific mare, they still relied on the seller to furnish a mare that
was suitable for the particular purpose, namely breeding. The court further elaborated that
to meet the reliance requirement of U.C.C. § 2-315 the seller must know both (1) the par-
ticular purpose and (2) that the buyer is relying on its skill or judgment to select or furnish
suitable goods. Therefore, the fact that a buyer selects the goods is not an absolute defence
to the reliance requirement, as it may still rely that the seller is more knowledgeable and
will furnish goods conforming to its needs.92

9.4 Third Party Beneficiaries of Warranties

In the words of the Pennsylvania Supreme Court, U.C.C. § 2-318 ensures “that the ancient
concepts of privity would not bar a modern breach of warranty claim. In essence, § 2318
was adopted to broaden the class of people who could recover when a product is found to
be unmerchantable”.93 The proposed U.C.C. (2003) §§ 2-313A and 2-313B discussed above

87 U.C.C. § 2-315 cmt. 1.

88 Glasstech, Inc. v. Chicago Blower Corp. 675 F.Supp.2d 752, 759-760 (N.D. Ohio 2009)(the seller should have
been aware of the buyer’s particular purpose and the buyer did actually rely on the seller so there was an
implied warranty of fitness for a particular purpose); Longwall-Associates, Inc. v. Wolfgang Preinfalk GmbH
46 UCC Rep.Serv.2d 651 (W.D.Va. 2002).
89 See Sylvia Coal Co. v. Mercury Coal & Coke Co. 151 W.Va. 818, 828 (W.Va.1967).
90 Whitehouse v. Lange 128 Idaho 129 (Idaho App. 1996).
91 Id.
92 See U.C.C. § 2-315 cmt. 5; Ram Head Outfitters, Ltd. v. Mecham 2011 WL 1429623, *5 (D.Ariz. 2011);
Whitehouse v. Lange 128 Idaho 129 (Idaho App. 1996).
93 Phillips v. Cricket Lighters 584 Pa. 179, 187 (Pa. 2005).

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addressed the obligations sellers had to remote purchasers, while U.C.C. § 2-318 addresses
the beneficiaries of warranties that are not the immediate purchaser.
The U.C.C. provides three alternative versions of U.C.C. § 2-318 – Alternatives A, B
and C, to deal with third party beneficiaries of express and implied warranties. Additionally,
several states have created their own version of U.C.C. § 2-318 that provide broader pro-
tections to third parties in warranty cases.94 An example of one of these broader statutes
is found in Massachusetts, where the distinction between contract and tort has been virtually
abolished and there exists no possibility for defendants in a breach of warranty claim to
defend based on lack of privity.95
The majority of states have adopted Alternative A, the most restrictive of the three that
extends the seller’s express and implied warranties to members of the buyer’s family,
household or guests in the buyer’s home.96 While Alternatives B and C do provide a more
liberal approach – extending the warranty to any persons reasonably expected to use,
consume or be affected by the goods, Alternative A has been interpreted by courts to
provide greater protections than the language of the statute.97 In Reed v. City of Chicago,
a U.S. District Court ruled that a detainee at the city’s police station was a beneficiary of
the warranties made by the designer and manufacturer of an isolation gown the detainee

94 See (MA) Mass. Gen. Laws Ann. ch. 106, § 2-318; (ME) 11 Me. Rev. Stat. Ann. tit.11, § 2-318; (NH) N.H.
Rev. Stat. Ann. § 382-A:2-318 (RI) R.I. Gen. Laws § 6A-2-318.
95 Mass. Gen. Laws Ann. ch. 106, § 2-318 reads: “Lack of privity between plaintiff and defendant shall be no
defense in any action brought against the manufacturer, seller, lessor or supplier of goods to recover damages
for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the
goods from the defendant if the plaintiff was a person whom the manufacturer, seller, lessor or supplier
might reasonably have expected to use, consume or be affected by the goods. The manufacturer, seller, lessor
or supplier may not exclude or limit the operation of this section. Failure to give notice shall not bar recovery
under this section unless the defendant proves that he was prejudiced thereby. All actions under this section
shall be commenced within three years next after the date the injury and damage occurs.”
96 Alternative A has been adopted by the following jurisdictions: (AK) Alaska Stat. § 45.02.318; (AR) Ark. Code
Ann. § 4-2-318; (CT) Conn. Gen. Stat. § 42a-2-318;(FL) Fla. Stat. Ann. § 672.318; (ID) Idaho Code § 28-2-
318; (IN) Ind. Code Ann. § 26-1-2-318; (KY) Ky. Rev. Stat. Ann. § 355.2-318; (MD) Md. Code Ann., Com.
Law § 2-318; (MI) Mich. Comp. Laws Ann. § 440.2318; (MS) Miss. Code Ann. § 75-2-318; (MO) Mo. Ann.
Stat. § 400.2-318; (MT) Mont. Code Ann. § 30-2-318; (NV) Nev. Rev. Stat. Ann. § 104.2318; (NJ) N.J. Stat.
Ann. § 12A:2-318; (NM) N.M. Stat. Ann. § 55-2-318; (NC) N.C. Gen. Stat. § 25-2-318; (OH) Ohio Rev. Code
Ann. § 1302.31; (OK) Okla. Stat. Ann. § 2-318(1); (OR) Or. Rev. Stat. Ann. § 72.3180; (TN) Tenn. Code
Ann. § 47-2-318; (WA) Wash. Rev. Code Ann. § 62A.2-318; (WV) W. Va. Code § 46-2-318; (WI) Wis. Stat.
Ann. § 402.318; (DC) D.C. Code § 28:2-318. Alternative B has been adopted by the following jurisdictions:
(AL) Ala. Code § 7-2-318; (CO) Colo. Rev. Stat. § 4-2-318; (KS) Kan. Stat. Ann. § 84-2-318; (SC) S.C. Code
Ann. § 36-2-318; (SD) S.D. Codified Laws § 57A-2-318; (VT) 9A Vt. Stat. Ann. § 2-318. Alternative C has
been adopted by the following jurisdictions: (HI) Haw. Rev. Stat. § 490:2-318; (MN) Minn. Stat. Ann. §
336.2-318; (ND) N.D. Cent. Code § 41-02-35.
97 See Whitaker v. Lian Feng Mach. Co. 156 Ill.App.3d 316, 320 (Ill.App. 1 Dist. 1987); Carlson v. Armstrong
World Industries, Inc. 693 F.Supp. 1073, 1077 -1078 (S.D.Fla. 1987)(Florida contains an amended version
of Alternative A that expressly includes employees); Quadrini v. Sikorsky Aircraft Division 505 F.Supp. 1049,
1052 (D.C.Conn. 1981)(“This Court is not persuaded that the adoption of Alternative A in Connecticut
evinces a clear legislative intent to preclude all other persons but those in the family, household, or a guest
from seeking warranty coverage.”).

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used to hang himself.98 The court was applying Illinois law, which has adopted the more
restrictive Alternative A, and in so ruling the court noted that other Illinois courts have
interpreted U.C.C. § 2-318 Alternative A to cover employees, thus expanding on the stat-
utory language of Alternative A.99
While this section expands upon the class of plaintiffs that may recover in a breach of
warranty case, it does not “expand upon or in any fashion provide further elucidation of
what constitutes a breach of warranty”.100 Thus, the Supreme Court of Pennsylvania
rejected a claim that a Cricket lighter was unmerchantable under U.C.C. § 2-314 because
a 2-year-old was able to obtain the lighter and set fire to some linens, resulting in a house
fire that caused the death of himself, his mother and one other minor child. The adminis-
tratrix plaintiff argued that as the 2-year-old who started the fire was a family member of
the purchaser of the lighter (his mother) it was reasonable for the defendants to anticipate
that a small child would use the lighter. The court rejected this line of argumentation,
stating that the ordinary purpose of a lighter is to allow an adult to make a flame, and its
ordinary purpose is certainly not to be a small child’s toy. Therefore the lighter was fit for
its ordinary purpose and merchantable; accordingly U.C.C. § 2-318 did not provide a basis
for a claim.101 Of course, the outcome of the case would have been different if the lighter
malfunctioned while an adult member of the household was using it.

9.5 Affirmative Defences to Warranty Claims

Even if a plaintiff buyer can make a case that the above elements were met with respect to
the breach of either an express or an implied warranty, the seller has several affirmative
defences in addition to the possibility to disclaim or modify the warranty. A common
affirmative defence against a breach of warranty claim is that the plaintiff failed to bring
the action within the statute of limitations.102 Under the U.C.C. a plaintiff must bring an
action within whichever is the latest date – four years after the right of action has accrued
or one year after discovery of the breach occurred or should have occurred, but no longer
than five years after the right of action accrues.103

98 Reed v. City of Chicago 263 F.Supp.2d 1123 (N.D.Ill. 2003).

99 Id., 1123, 1125 (N.D.Ill. 2003) citing Thomas v. Bombardier–Rotax Motorenfabrik 869 F.Supp. 551
(N.D.Ill.1994); Maldonado v. Creative Woodworking Concepts, Inc. 296 Ill.App.3d 935 (Ill.App. 1998);
Whitaker v. Lian Feng Mach. Co. 156 Ill.App.3d 316 (Ill.App. 1987).
100 Phillips v. Cricket Lighters 584 Pa. 179, 187 (Pa. 2005).
101 Id.
102 See e.g. Fell v. Kewanee Farm Equipment Co., A Div. of Allied Products 457 N.W.2d 911, 919 (Iowa 1990);
Ruddock v. First Nat. Bank of Lake Forest 201 Ill.App.3d 907, 918 (Ill.App. 1990); 67A Am. Jur. 2d Sales §
873 (2013).
103 U.C.C. § 2-725(1).

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A buyer loses its rights under the U.C.C. if it fails to give the seller notice of the non-
conformity within a reasonable period of time after the breach was or should have been
discovered.104 The requirements and details of giving notice are discussed in greater detail
in the sections of this text specifically covering notice requirements.105 Here it is relevant
to note that the failure to give notice is an affirmative defence available to a defendant
seller. When lack of notice is raised as an affirmative defence the seller must prove that
notice was not made, was not timely or was otherwise insufficient.

9.6 Warranty Modifications and Disclaimers

Under U.C.C. § 2-316 it is possible for parties to modify or disclaim warranties, thus
reducing or eliminating their liability for non-conforming goods. It should be no secret
or surprise that courts do not favour express warranty disclaimers.106 Indeed at first thought
the notion of an express warranty disclaimer may seem like an oxymoron. After all, express
warranties are born out of the dickered terms of a contract; these are affirmative statements,
symbols or acts made by the seller that form the basis of the bargain between the parties.
Why would the law allow such statements to be used to entice a buyer in one breath and
then disclaimed in the next? The U.C.C.’s provision on express warranty disclaimer and
the consensus of courts throughout Article 2 jurisdictions make it clear that such a dis-
claimer is allowed only in narrow circumstances.
U.C.C. § 2-316(1) requires that any “words or conduct tending to negate or limit” an
express warranty must be construed whenever possible as consistent with the words or
conduct that are relevant to the creation of the express warranty. However, subject to
U.C.C. § 2-202’s parol and extrinsic evidence rules, when such a consistent interpretation
is not possible, the limitation or negation is inoperative to the extent that it is not reason-
able.107 Bell Sports, Inc. v. Yarusso involved a breach of warranty claim against a helmet
manufacturer after a motorcycle accident caused the plaintiff to suffer from paraplegia.
The court held that a warranty contained in the helmet’s owner’s manual was not effectively
disclaimed within the same manual and the helmet manufacturer was liable for breach of
express warranty, because the representations about the safety features of the helmet in

104 U.C.C. § 2-607(3)(a).

105 See below paras. under Section 13.2. et seq. for detailed treatment of the time and form for giving notice of
a breach of warranty. See generally George Frank Hammond, Notification of Breach Under Uniform Com-
mercial Code Section 2-607(3)(a): A Conflict, a Resolution, 70 Cornell L. Rev. 525 (1985).
106 White & Summers, supra Ch. 2, note 7, § 13-2; Goetz et al., supra note 4, at 1258-1259.
107 U.C.C. § 2-316(1). See Goetz et al., supra note 4, at 1258-1259; Russell J. Weintraub, Disclaimer of Warranties
and Limitation of Damages for Breach of Warranty Under the UCC, 53 Tex. L. Rev. 60, 74-75 (1974).

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 9 Conformity of the Goods: The Law of Warranties

the user’s manual were essential elements of a valid express warranty that could not be
disclaimed as a matter of law by the use of the phrase ‘Five Year Limited Warranty’.108
As implied warranties arise as a matter of law rather than as a result of the agreement
of the parties, their disclaimer or modification is somewhat easier relative to disclaiming
express warranties. The standard for disclaiming an implied warranty of merchantability
is slightly less strict than that for a warranty of fitness for a particular purpose. According
to U.C.C. § 2-316(2), a seller can exclude or modify an implied warranty of merchantability
using language that mentions merchantability, and if it is in writing, it must be conspicu-
ous.109 Common language recognized and used to disclaim implied warranties of merchant-
ability includes ‘as is’ or ‘with all faults.’110 While disclaimers or modifications of implied
warranties of merchantability can be modified orally if done so conspicuously and men-
tioning merchantability, warranties for a particular purpose may only be modified or dis-
claimed using general language if it is done in writing.111
An issue that often arises in disclaimer cases is whether the language of the disclaimer
satisfies the requirements of U.C.C. § 2-316(2). On this question, Professors White and
Summers have written that “[i]t is comparatively easy to draft a disclaimer that complies
with 2-316(2); to draft a disclaimer that a court will enforce is something else.”112 The
reason for this is that even though a disclaimer may use words that comport with the
requirements of U.C.C. § 2-316(2), the disclaimer is still subject to attack on the grounds
that the words are not conspicuous, or that the disclaimer itself is unconscionable.113 An
example of an effective warranty disclaimer can be found in Thorman v. Polytemp, Inc.,
where the court concluded that under the facts of the case the evidence supported a finding
that an implied warranty of fitness for a particular purpose arose and had been breached;
however, the disclaimer effectively excluded such a warranty.114 The disclaimer read as
follows: “The warranties and guarantees herein set forth are made by us and accepted by
you in lieu of all statutory or implied warranties or guaranties, other than title…This
contract contains all agreements between the parties and there is no agreement, verbal or

108 Bell Sports, Inc. v. Yarusso 759 A.2d 582, 593 (Del.Supr. 2000).
109 See Pay Tel Systems, Inc. v. Seiscor Technologies, Inc. 850 F.Supp. 276, 281 (S.D.N.Y. 1994); 18 Williston on
Contracts (4th ed.) § 52:81 (2013).
110 U.C.C. §§ 2-316(3)(a), 2-316 cmt. 7. See e.g. Wilke v. Woodhouse Ford, Inc. 278 Neb. 800, 810 (Neb. 2009)(“the
use of an ‘as is’ clause to exclude the implied warranty of merchantability cannot be against the public policy
of this state when it mirrors the statutory requirements specifically allowing for such exclusion”); New Texas
Auto Auction Services, L.P. v. Gomez De Hernandez 249 S.W.3d 400, 407 (Tex. 2008); Dutchmen Mfg., Inc.
v. Reynolds 849 N.E.2d 516, 523 -524 (Ind. 2006).
111 U.C.C. § 2-316(2).
112 White & Summers, supra Ch. 2, note 7, § 13-5 at 578.
113 Star-Shadow Productions, Inc. v. Super 8 Sync Sound System 730 A.2d 1081, 1084 (R.I. 1999) (language
“except for * * * replacement this product is sold without warranty or liability” effectively disclaimed implied
warranty); Schmaltz v. Nissen 431 N.W.2d 657, 661-662 (S.D. 1988)(disclaimer and limitation of damages
were unconscionable as a matter of law). See White & Summers, supra Ch. 2, note 7, § 13-5.
114 Thorman v. Polytemp, Inc. 2 U.C.C. Rep.Serv. 772 (N.Y.Co.Ct. 1965).

67
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otherwise, which is not set down herein.”115 The second sentence effectively precluded the
plaintiff’s admission of any parol evidence to attempt to undermine the warranty disclaimer.
During the drafting of the U.C.C., drafters had concerns about producing rules that
would protect consumers as well as seasoned merchants, particularly with regard to fine
print in standard form contracts “being written by the big fellow to the prejudice of the
little fellow”.116 Working under the presumption that the sellers are most often the ‘big
fellows’, the requirement that implied warranty disclaimers must be conspicuous was one
of the mechanisms used to protect a party in a weaker bargaining position from an unfair
deal.117 Whether a disclaimer is conspicuous is an issue of fact,118 and hence it depends on
the facts and circumstances of each case and contract. U.C.C. § 1-201(10) provides a non-
exhaustive list of what is meant by conspicuous; the test in determining what is conspicuous
is “whether attention could reasonably be drawn to it”.119 This definition of conspicuous
applies equally to electronic contracts.120
Often in commercial contracts, a disclaimer arrives with the goods at the time of
delivery, in an operator’s manual, an invoice, or printed on the label. In these cases, U.C.C.
§ 2-316 requires that any attempt to exclude or modify the implied warranty of merchant-
ability or fitness in a consumer contract must be conspicuous and in writing. In Bowdoin
v. Showell Growers, Inc., the Eleventh Circuit denied effect of a warranty disclaimer con-
tained inside the instruction manual of a high-pressure spray rig, delivered after the con-
clusion of the contract, holding that pursuant to U.C.C. § 2-316, the disclaimer must form
part of the basis bargain.121 However, courts also recognize the modern reality of commercial
transactions and have held that the location of a warranty inside the package of a hard
drive122 and the location of an arbitration agreement inside the packaging of a computer123
were effective as in both cases the buyer had the ability to revoke its acceptance if it disagreed
with the terms after purchasing and taking the products home. These latter cases reach
the correct conclusion. As described above, the time at which a warranty is made is not
material in determining whether it forms the basis of the bargain between the parties;

115 Id.
116 Kripke, supra Ch. 2, note 13.
117 Id.
118 U.C.C. § 1-201 cmt. 10.
119 See L.S. Heath & Son, Inc. v. AT & T Information Systems, Inc. 9 F.3d 561, 571 (7th Cir. 1993)(disclaimer in
capital letters with bold capital heading clearly identifying it as a disclaimer and specifically mentioning
merchantable and fitness for particular purpose effective disclaimer); Nordberg, Inc. v. Sylvester Material
Co. 101 Ohio App.3d 89, 96-97 (Ohio App. 1995)(warranty was effectively disclaimed by statement in all
capital letters expressly mentioning merchantability and particular purpose); Minikes v. Admiral Corp. 48
Misc.2d 1012, 1013, 266 N.Y.S.2d 461, 462 (Dist.Ct. 1966)(disclaimer in smaller text than the rest of the
purchase order was not conspicuous).
120 White & Summers, supra Ch. 2, note 7, § 13-5 at 582.
121 Bowdoin v. Showell Growers, Inc. 817 F.2d 1543, 1545 (11th Cir. 1987).
122 Rinaldi v. Iomega Corp. 41 U.C.C. Rep.Serv.2d 1143 (Del.Super. 1999).
123 Hill v. Gateway 2000, Inc. 105 F.3d 1147 (7th Cir. 1997).

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 9 Conformity of the Goods: The Law of Warranties

therefore it should be possible for a disclaimer made after the purchase to be effective if it
is made simultaneously with the warranty, given of course that it meets the other require-
ments of an effective disclaimer.
In an effort to strength the protection of consumers, Congress enacted the Magnuson-
Moss Warranty Act in 1975.124 This federal warranty legislation aims to ensure that war-
ranties used in consumer sales are understandable and enforceable and to provide con-
sumers with a level of protection from deceptive warranty practices.125 Magnuson-Moss
does not require that a warranty be given in consumer product sales; however, when a
warranty is given it must comply with the standards set out in the statute. Written warranties
issued with consumer products must fully and conspicuously disclose the terms and con-
ditions in readily understandable language. For consumer products costing more than 25
USD, the FTC has promulgated regulations that govern the requirements of written war-
ranties accompanying such goods.126
The 2003 revisions to the U.C.C. added language to several provisions that provide for
a different standard when dealing with consumer contracts.127 While none of these revisions
were adopted, several states have amended their version of U.C.C. § 2-316 to include
prohibitions on limiting implied warranties in consumer contracts.128 Massachusetts, a
state with a reputation for strong consumer protection laws, flatly prohibits merchants
from disclaiming implied warranties of merchantability for consumer goods.129 Several
other states have done the same, or severely limited the ability of merchants to interfere
with consumer warranties.130

9.7 Warranty of Title and Third Party Property Rights

In addition to the warranties discussed above that address the promises made regarding
the physical qualities of the goods, the seller also warrants that the goods sold are free from
rights of third parties. This is an obligation that is recognized in all legal systems,131 and
codified in the United States in U.C.C. § 2-312. Pursuant to the warranty of title, the seller
warrants that the title conveyed is good, that the transfer is rightful, and the goods will be
delivered free from any security interest, lien, or encumbrance that the buyer has no

124 15 U.S.C. § 2301 et seq. See H.R.Rep. No. 93–1107 (1974).

125 15 U.S.C. § 2302(a) (1994); Davis v. Southern Energy Homes, Inc. 305 F.3d 1268, 1272 (11th Cir. 2002).
126 16 C.F.R. Part 700.
127 See White & Summers, supra Ch. 2, note 7, § 13-5d at 593.
128 Franklin E. Crawford, Note, Fit for Its Ordinary Purpose? Tobacco, Fast Food, and the Implied Warranty of
Merchantability, 63 Ohio St. L. J. 1165, 1224 (2002).
129 Mass. Gen. Laws Ann. ch. 106 § 2-316A (2012).
130 See e.g. Ala. Code § 7-2-316(5) (2013); Kan. Stat. Ann. § 50-639(a) (2000); Vt. Stat. Ann. tit. 9A § 2-316(5)
(2001).
131 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, paras. 30.01-30.02.

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knowledge of at the time of contracting.132 The knowledge of the seller is irrelevant, and a
seller may be found to have breached the warranty of title even if it acted in good faith,
had no knowledge of any security interests or even if it took steps to discover any defects
with the title.133
Buyers are entitled to this warranty regardless of whether the seller is in possession of
the goods at the time the sale or contract to sell is made.134 The purpose of this warranty
of title is to protect the buyer in its basic expectation that upon purchase of the goods it
will get a “good, clean titled transferred” in a rightful manner so that it is protected from
exposure to lawsuits.135
The time for determining whether there has been a breach of warranty of title is at the
time of delivery.136 Thus, if the parties conclude a contract and agree that delivery will take
place one month later, and several days after the conclusion of the contract the buyer learns
that there is a perfected third party security interest in the goods, no breach of the warranty
of title will have occurred so long as the interest is extinguished by the time of delivery.137
In spite of this, courts have allowed the buyer to refuse to take delivery if there is a substan-
tial cloud on the title, or because of a buyer’s reasonable belief that it may have to defend
the title in court to protect its rights.138
The U.C.C. does not designate the warranty of title as an implied warranty, but some
courts refer to it as such.139 However, because the warranty of title is not designated as an
implied warranty in Article 2, disclaimer of this warranty is governed by U.C.C. § 2-312(2),
which requires specific language or circumstances that give the buyer reason to know that
the seller itself does not claim title to the goods or that it is agreeing to sell only such right
or title as it or a third person may have.140 As with the language necessary to disclaim an
express warranty, courts have interpreted U.C.C. § 2-312(2) narrowly when determining
whether the language of a disclaimer is sufficiently specific.141 A disclaimer stating that
“[a]ll warranties pursuant to O.R.C. 1302.25 (U.C.C.2–312) (warranty of title and against
infringement) are hereby excluded from this transaction” was deemed insufficient to dis-

132 U.C.C. § 2-312(1). See 18 Williston on Contracts (4th ed.) § 52:61 (2013).
133 Richard A. Lord, Some Thoughts about Warranty Law in North Dakota Part One: The Warranty of Title, 53
N.D. L. Rev. 537, 539 (1976-1977).
134 U.C.C. § 2-312 cmt. 1.
135 Id.
136 U.C.C. §§ 2-312(1)(b), 2-312 cmt. 1.
137 Lord, supra note 133, at 539.
138 Wright v. Vickaryous 611 P.2d 20, 22 (Alaska 1980).
139 U.C.C. § 2-312 cmt. 6. See e.g. Matter of Kohl, 11 B.R. 470 (Bankr. W.D. Wis. 1981).
140 U.C.C. §§ 2-312(2), 2-312 cmt. 6.
141 Moore v. Pro Team Corvette Sales, Inc. 152 Ohio App.3d 71 (Ohio App. 2002); Sunseri v. RKO-Stanley Warner
Theatres, Inc. 248 Pa.Super. 111, 114-116 (Pa.Super. 1977); Jones v. Linebaugh 34 Mich.App. 305, 309-310
(Mich.App. 1971).

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 9 Conformity of the Goods: The Law of Warranties

claim the warranty of title under U.C.C. § 2-312.142 In so finding, the court found that the
wording expressed a limitation of liability for the seller, rather than a statement alerting
the buyer what it would not be receiving.143 With a limited amount of case law on the issue,
the court looked at the respective purposes served by the warranty and the disclaimer.

142 Moore v. Pro Team Corvette Sales, Inc. 152 Ohio App.3d 71, 75 (Ohio App. 3 Dist. 2002).
143 Id.

71
10 Payment

Turning now to the buyer’s obligations under the sales contract, the buyer’s most basic
obligation is to pay for the goods. Without this obligation, the transaction would rather
be a gift than a sale. The buyer’s duty to pay is conditional upon the seller’s duty to tender
and complete any delivery.1 Of course, it is for the parties to agree on a price in their sales
contract; indeed the price of the goods is one of the primary points of negotiations between
parties.
Parties may enter into a sales contract without having settled on a price at the time of
the contract’s conclusion. In such a case the default price becomes a reasonable price at
the time of delivery.2 The inclusion of a default provision saves a sales contract from failing
on the grounds of indefiniteness, and protects the parties’ underlying intention to have a
deal that is binding on both parties.3

10.1 Time and Place of Payment

When the parties have not made an agreement as to the place for payment, the buyer is
obligated to pay where it receives the goods even though the place of shipment is the place
of delivery.4 Likewise, the default time for payment is at the time when the goods are
received.5 The place of receipt of the goods is where the buyer takes physical possession
of the goods, which is not necessarily when the title passes.6 The default rules for the time
and place of payment are meant to preserve the buyer’s preliminary right to inspect the
goods before paying for them, even in situations where under the contract the risk of loss
has already passed from the seller.7 Thus, even under a shipment contract, where title and
risk of loss pass at the seller’s destination, a buyer would not be forced to travel to the
seller’s city or place of business to exercise its right of inspection before having to make
payment.
The payment by the buyer and relinquishment of control by the seller are concurrent
conditions; however, it is possible for the seller to retain full possession and control of the
goods even though they may be at a great physical distance at the buyer’s place of business.

1 U.C.C. § 2-301.
2 U.C.C. § 2-305.
3 U.C.C. § 2-305 cmt. 1.
4 U.C.C. § 2-310(a).
5 Id.
6 U.C.C. § 2-503(1)(a).
7 U.C.C. § 2-310 cmt. 1.

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Modern Law of Sales in the United States

Thus while the right to inspect protects the interest of the buyer, it is possible for the seller
to take protective measures as well. The seller can achieve this by procuring a document
of title in the proper form, for example a negotiable bill of lading to the seller’s own order,
or a non-negotiable bill of lading naming the seller as consignee.8
The general rule is that the buyer may withhold payment until it has had an opportunity
to inspect the goods.9 However, there are some situations in which the buyer is required
to pay prior to inspection. If the terms of the contract require delivery C.O.D, or a similar
term requiring payment against documents of title, then the buyer is required to pay before
it receives physical possession of the goods, and thus has an opportunity to inspect.10 Under
these contractual terms, a buyer is not permitted to withhold payment until it has full
possession and control over the goods.
While it is possible for a buyer to waive its right to inspect the goods,11 payment before
inspection does not constitute such a waiver. It does not impair the buyer’s right to inspect
or any of its remedies, including rejection, revocation of acceptance, and damages.12 A
North Carolina court has pointed out that an agreement to pay as a condition for receiving
the goods does not constitute a waiver of the right to inspect, but rather highlights the
commercial practice that delivery and payment are concurrent conditions.13 This means
that the buyer is entitled to full possession and control only when it concurrently tenders
payment.14 Conversely, the seller has the right to reclaim goods from an insolvent buyer
who has taken possession but fails to tender the payment as required.15
In contracts that require payment before inspection, non-conformity does not relieve
the buyer of its duty to perform unless the non-conformity is apparent without inspection.16
Even if the non-conformity is apparent, the buyer may only pay a reduced purchase price
if the seller agrees to a reduction. If the seller disputes the existence or extent of the alleged
non-conformity, the U.C.C. does not require it to accept a reduced purchase price.17

8 U.C.C. § 2-310(b). See e.g. In re Ault 6 B.R. 58 (Bkrtcy.Tenn. 1980); White & Summers, supra Ch. 2, note 7,
§ 4-7 at 163.
9 U.C.C. § 2-310(b). See below para. of Chapter 13 et. seq.
10 U.C.C. §§ 2-513(3)(a), 2-513(3)(b).
11 U.C.C. § 2-315(1).
12 U.C.C. § 2-512; Davis v. Vintage Enterprises, Inc. 23 N.C.App. 581, 587 (N.C.App. 1974).
13 Liverpool v. Baltimore Diamond Exchange, Inc. 369 Md. 304, 331 (Md. 2002).
14 U.C.C. § 2-310 cmt. 2; See In re Koreag, Controle et Revision S.A. 961 F.2d 341, 356 (2d Cir. 1992); Spikes
v. Bauer 6 Kan.App.2d 45 (Kan.App. 1981).
15 See In re Koreag, Controle et Revision S.A. 961 F.2d 341, 356 (2d Cir. 1992); State v. Alexander 64 P.3d 1148
(Or.App. 2003); In re Wathen’s Elevators, Inc. 32 B.R. 912, 917 -918 (Bkrtcy.Ky. 1983).
16 U.C.C. § 2-512(1)(a).
17 White & Summers, supra Ch. 2, note 7, § 4-7 at 162.

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 10 Payment

10.2 Determining an Open Price Term

If it is the clear intention of the parties to conclude a contract for sale, then they may do
so even if the price term is left open.18 It is highly advisable for the parties to include an
agreed upon purchase price; however, there are several practical considerations that may
cause them to leave this important element of the bargain open. One possibility is that the
buyer or the seller may believe that it can get a more favourable price in the future, or
perhaps the parties wished to contract with each other but the negotiations reached an
impasse on the issue of price. In this event, the U.C.C. calls for the purchase price to be a
reasonable price. Of course a ‘reasonable price’ requires a discussion of its own, but before
courts can ever get to the sometimes Herculean task of sorting out a reasonable price they
must first determine whether the parties intended to contract, as the first part of U.C.C.
§ 2-305 requires, and, second, whether a gap regarding the price even exists in the contract.19
Regarding the first question, courts look to the rules on contract formation found in U.C.C.
§ 2-204 so that the central question to be addressed is whether the parties intended to be
bound.20
The U.C.C. contemplates two types of open price terms – first, those that leave a
complete gap as to price in the contract,21 and second, those leaving only a partial gap in
the contract.22 With the second type the parties contemplated a method for calculating the
price, but in practice this method somehow failed.23 In determining the appropriate price
in such cases, the reasonable price called for by the U.C.C. must be distinguished from the
fair market price because while sometimes these two measures may be the same, this is
not necessarily always true. The reasonable price may be higher or lower than the fair
market value, for example in cases where the court looks to past course of dealings between
the parties to determine the reasonable price.24

18 U.C.C. § 2-305(1). See generally, Timothy E. Travers, Annotation, Construction and application of UCC §
2-305 dealing with open price term contracts, 91 A. L. R. (3rd) 1237 (1979).
19 See Koenen v. Royal Buick Co. 162 Ariz. 376, 380 (Ariz.App.1989); H.C. Schmieding Produce Co., Inc. v. Cagle
529 So.2d 243, 247 (Ala. 1988); Lamberta v. Smiling Jim Potato Co. 3 UCC Rep.Serv. 981 (Dept.Agric. 1966).
20 See Lickley v. Max Herbold, Inc. 133 Idaho 209, 212 (Idaho 1999); D.R. Curtis, Co. v. Mathews 103 Idaho
776, 778 (Idaho App. 1982); H. Molsen & Co., Inc. v. Raines 534 S.W.2d 146, 149 -150 (Tex.Civ.App. 1975).
21 U.C.C. § 2-305(1)(a).
22 U.C.C. §§ 2-305(1)(b), 2-305(1)(c), 2-305(2), 2-305(3).
23 White & Summers, supra Ch. 2, note 7, § 4-8 at 168.
24 TCP Industries, Inc. v. Uniroyal, Inc. 661 F.2d 542, 548 -549 (6th Cir. 1981) (“Note that the section says ‘a
reasonable price’ and not ‘fair market value of the goods.’ In many instances these two would not be
identical.”); Shell Oil Co. v. HRN, Inc. 144 S.W.3d 429, 437 (Tex. 2004); White & Summers, supra Ch. 2, note
7, § 4-8 at 168. But see New York, where it is established that the fair market price is equivalent to the reas-
onable price called for by U.C.C. § 2-305, see e.g. Pulprint, Inc. v. Louisiana-Pacific Corp. 124 Misc.2d 728,
730 (N.Y.Sup.1984) citing Huron Mill Co. v. Hedges, 257 F.2d 258 (N.Y.1958); Carey Lith. Co. v. Magazine
Co. 70 Misc. 541 (N.Y. Sup. Ct. 1911).

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In the event of a complete gap, courts typically first look to course of dealing between
the parties, the course of performance and trade usage to determine the reasonable price.
Ultimately, most courts end up finding the fair market price at the time of delivery.25 Unlike
a complete price gap, where courts are totally on their own to determine a reasonable price,
with a partial gap courts find some guidance in the form of the calculation method that
the parties had agreed upon. There are several price formulas parties can agree to in leaving
a partial price gap. The most straightforward is agreeing to simply set a price at a later
date.26 The parties may agree that one of the parties will be responsible for fixing a price
at a later date, and should the agreed party fail to set a price or set one in bad faith, then
the court may substitute a reasonable price.27 Other methods include fixing the price by
reference to the costs of one of the parties,28 by agreement that the price will be the prevail-
ing fair market value at a given time and place,29 based on quotations in a trade journal,30
based on prevailing industry standards,31 or based on the manufacturer’s suggested retail
price.32

10.3 Modes of Payment

Pursuant to U.C.C. § 2-304, the parties can agree on any mode of payment, including by
money, goods or real property. If goods are used as payment, each party is considered a
seller of the goods that it is transferring.33 When an interest in realty is used to pay any
portion of the price, the transfer of the interest and any resulting obligations are not subject
to the provisions of the U.C.C.34 The tender of payment is sufficient when made by any
means or any manner current in the ordinary course of business.35 Courts have interpreted

25 Columbus Milk Producers’ Co-op. v. Department of Agriculture 48 Wis.2d 451 (Wis. 1970); White & Summers,
supra Ch. 2, note 7, § 4-8 at 168.
26 White & Summers, supra Ch. 2, note 7, § 4-8 at 169.
27 Shell Oil Co. v. HRN, Inc. 144 S.W.3d 429, 437 (Tex. 2004)(noting that a relatively high yet commercially
reasonable price is not evidence of bad faith).
28 Bernina Distributors, Inc. v. Bernina Sewing Mach. Co., Inc. 646 F.2d 434, 439 (10th Cir. 1981).
29 Columbus Milk Producers’ Co-op. v. Department of Agriculture 48 Wis.2d 451, 460 (Wis. 1970).
30 American Car & Foundry Co. v. East Jordan Furnace Co. 275 F. 786 (7th Cir. 1921); Bd. of Commrs. Sandusky
Co. Park Dist. v. Annadale Scrap Co., Inc. 398 N.E.2d 810, 811 (Ohio App. 1978).
31 Bornstein v. Somerson 341 So.2d 1043, 1047-1048 (Fla.App. 1977).
32 Morris v. Perkins Chevrolet, Inc. 663 S.W.2d 785, 787 (Mo.App. W.D. 1984).
33 U.C.C. §2-304(1); Home Indem. Co. v. Twin City Fire Ins. Co. 474 F.2d 1081, 1084 (7th Cir. 1973).
34 U.C.C. § 2-304(2).
35 U.C.C. § 2-511(2).

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the ‘ordinary course of business’ language broadly.36 The purpose of this provision of the
U.C.C. is to avoid commercial surprise at the time of performance.37

10.3.1 Payment with Legal Tender

The buyer is obligated to make payment with legal tender if so demanded by the seller,
and the seller gives an extension of time reasonably necessary to procure it.38 This means
that by default, sales are cash sales, unless, as is the normal procedure in commercial sales,
credit terms are agreed upon. Legal tender is defined as U.S. coins and currency, including
Federal Reserve notes and circulating notes of Federal Reserve banks and national banks.39
Excluded from the statutory definition of legal tender is foreign gold and silver. A seller
may refuse payment by cheque so long as the buyer is given reasonable time to procure
legal tender.40 When the seller rejects payment because it is not legal tender, it must inform
the buyer that this is the reason the payment is rejected. This is because money claims are
so often paid in a manner other than legal tender.41

10.3.2 Payment by Cheque or Letter of Credit

Payment by cheque is subject to the rules that govern an instrument of obligation, and is
conditional on the cheque being honoured.42 If the buyer issues a cheque for payment, the
seller must present the cheque for payment before suing the buyer on the underlying
obligation. If the cheque is dishonoured the seller may proceed against the buyer on either
the cheque or the sales contract.43 Once payment is made on the cheque the buyer’s obli-
gation to pay is discharged.44 If the cheque bounces, the seller can reassert dominion over
the goods.45 Payment by letter of credit is treated in the same manner as payment by cheque.
The buyer’s delivery to the seller of a proper letter of credit suspends the obligation to

36 Modern Aero Sales, Inc. v. Winzen Research, Inc. 486 S.W.2d 0135, 138 (Tex.Civ.App. 1972)(holding that
‘ordinary course of business’ is not restricted to the business between the parties to the litigation, nor is it
limited to “a common-law ‘custom,’ which is binding only on parties who contract with knowledge of it.”).
37 U.C.C. §§ 2-511(2), 2-511 cmt. 3.
38 U.C.C. § 2-511(2).
39 31 U.S.C.A. § 5103.
40 Gheen v. Diamond Shamrock Corp. 529 S.W.2d 289, 293 (Tex.Civ.App. 1975); Silver v. Sloop Silver Cloud
259 F.Supp. 187, 192 (D.C.N.Y. 1966).
41 Restatement (Second) of Contracts § 249 cmt. a (1981); Nygaard v. Continental Resources, Inc. 598 N.W.2d
851, 855 (N.D. 1999); 2 Hawkland, Uniform Commercial Code Series § 2-511:1 (2013).
42 U.C.C. §§ 2-511(3), 3-310.
43 U.C.C. §§ 2-511(3), 3-802 cmt. 3; Burnett v. Vance 126 Misc.2d 402, 404 (N.Y.Sup.1984); 18 Williston on
Contracts (4th ed.) § 52:3 (2013).
44 U.C.C. § 2-511(3); 18 Williston on Contracts (4th ed.) § 52:3 (2013).
45 U.C.C. §§ 2-507(2), 2-511(2), 2-511(3); White & Summers, supra Ch. 2, note 7, § 4-7.

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pay.46 Conversely, the buyer’s failure to seasonably furnish the agreed letter of credit con-
stitutes a breach of the sales contract.47

10.4 Alternative Means for Securing an Unpaid Seller

10.4.1 Purchase Money Security Interest

Under the U.C.C. a security interest may arise when goods are identified to the contract
by or before shipment.48 If the seller ships goods under a straight bill of lading to itself,
then it reserves possession as security for the buyer’s performance.49 When the goods are
shipped under a straight bill of lading to the buyer, the seller only has a security interest
in the goods if they are conditionally delivered.50 The security interest retained by the seller
in this case is restricted to payment or some other performance from the buyer. The seller’s
disposition and control of the goods is limited as against the buyer or third parties.51
Whereas Article 2 of the U.C.C. governs security interests that arise under authorization
of law, Article 9 of the U.C.C. governs secured interests that result from an agreement.
Security agreements governed by Article 9 must be in writing, unless pledged.52 The com-
prehensive and complex scheme for regulating security interests found in Article 9 exceeds
the scope of this book.53 Here it is enough to note that a secured interest may arise under
Article 2 or be created by the rules found in Article 9.

10.4.2 Right of Stoppage in Transit

If a seller finds out a buyer is insolvent, and thus unable to pay, it can stop the delivery of
goods that are in possession of a carrier.54 If the buyer fails to make a payment that is due
before delivery, then the seller can withhold or reclaim the goods.55 In order for the seller
to be able to avail itself of these options there cannot have been receipt of the goods by the
buyer. The U.C.C. distinguishes the delivery and transfer of title from receipt, so while the

46 U.C.C. § 2-325(2). For a detailed examination of letters of credit see White & Summers, supra Ch. 2, note 7,
§ 21-1 at 1065 et seq.
47 U.C.C. § 2-325(1).
48 U.C.C. § 2-505(1).
49 U.C.C. § 2-505(1)(b); In re Ault 6 B.R. 58, 63 (Bkrtcy.Tenn. 1980).
50 U.C.C. §§ 2-505(1)(b), 2-507; In re Ault 6 B.R. 58, 63 (Bkrtcy.Tenn. 1980).
51 U.C.C. § 2-505 cmt. 1.
52 U.C.C. § 9-203(1).
53 See generally, 68A Am. Jur. 2d Secured Transactions § 1 et seq.; White & Summers, supra Ch. 2, note 7, § 22-1
at 1148 et seq.
54 U.C.C. § 2-705(1).
55 Id.

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 10 Payment

goods may be delivered and title may have passed pursuant to the contract, receipt may
not yet have been effected.56 Receipt of the goods requires actual physical possession by
the buyer.57
The U.C.C. permits a seller to stop the delivery of goods while they are in the process
of being transported in certain situations.58 Under U.C.C. § 2-705, insolvency is always
grounds for stoppage; additionally, the seller is permitted to stop delivery of a carload,
truckload, planeload or larger shipments of express or freight when the buyer repudiates
or fails to make a payment due before delivery or if for any other reason the seller has a
right to withhold or reclaim the goods. Because the stoppage can place a large burden on
the carrier, the U.C.C. limits when a seller may exercise this right to large shipments.59 In
order to avoid finding oneself in this situation, sellers contracting with buyers of unsure
credit are advised to include a C.O.D. shipment term in the contract.60
U.C.C. § 2-705 does not address whether the seller is required to notify a buyer that it
is exercising its right to stop delivery in transit. While it is possible to read this silence as
meaning there is no notice requirement, at least one court has found that reasonable
commercial standards of fair dealing require a seller to give notice that it is stopping
delivery of the goods in transit.61 In Indussa Corp. v. Reliable Stainless Steel Supply Co. the
court listed the following three factors in supporting its holding – first, the ease and minimal
effort of the seller to give such notice; second, the benefit to the buyer of receiving such
notice; and third, the absence of reason for not giving notice by the plaintiff seller.62 The
seller’s failure to give notice did not render its U.C.C. § 2-705 stoppage ineffective, putting
it in breach for failure to deliver, but rather entitled the buyer to damages defined as the
harm suffered from the delay in learning that goods would not be delivered. However, in
Indussa, the buyer proved no such damages, and so the finding of a notice requirement
did not change the outcome of the case on appeal.
If the seller improperly stops the delivery of the goods, then the seller is in breach for
non-delivery. If, on the other hand, the stoppage is proper under U.C.C. § 2-705, then the
seller retains the same rights in the goods as if it never made delivery.

56 U.C.C. §§ 2–103 cmt. 2, 2-703 cmt. 1.

57 In re Kellstrom Industries, Inc. 282 B.R. 787, 791 (Bkrtcy.D.Del. 2002).
58 U.C.C. §§ 2-702, 2-705.
59 U.C.C. § 2-705 cmt. 1.
60 Id.
61 Indussa Corp. v. Reliable Stainless Steel Supply Co. 369 F.Supp. 976 (D.C.Pa., 1974).
62 Id.

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10.4.3 Right to Retain Possession and Reclaim the Goods

An unpaid seller is permitted to retain possession of the goods regardless of whether title
has passed to the buyer pursuant to U.C.C. § 2-703. If the seller finds out after delivery
that a buyer was insolvent at the time of receipt of the goods, then the seller is entitled to
reclaim the goods under U.C.C. § 2-702(2).

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11 Taking Delivery

11.1 Acceptance v. Taking Delivery

Pursuant to U.C.C. § 2-301, the buyer’s obligations are to accept and pay for the goods.
Acceptance is a legal concept that is described below in connection with rejection and
revocation of acceptance. The act of acceptance carries many consequences regarding the
rights and remedies of the parties. Taking delivery, while not expressly laid out in the
U.C.C. as an affirmative obligation, is clearly one of the buyer’s obligations as failure to
do so will result in the imposition of liability. While acceptance connotes transfer of
ownership, taking delivery should be thought of as taking control over and being
responsible for the goods.1
Taking delivery should not be equated with or confused for the legal concept of
acceptance. Rather, taking delivery is an element of the buyer’s acceptance obligation.
Merely taking possession of the goods does not in itself fulfil the requirements set out for
acceptance. Thus, it is possible to take delivery of the goods without having accepted them
pursuant to one of the three possible methods. There are three methods for an effective
acceptance. First, the buyer can make an affirmative communication to the seller, after a
reasonable opportunity to accept the goods, that either the goods are conforming or it will
accept them even though there is a non-conformity.2 Second, the buyer can fail to make
an effective rejection3 after a reasonable opportunity for inspection has passed.4 Third, the
buyer accepts the goods when its conduct is inconsistent with the seller’s ownership. If
such an act is wrongful against the seller, the acceptance is effective only if the seller ratifies
it.5 Acts that are inconsistent with the seller’s ownership can include, but are not limited
to, “retaining and using the goods for a long period of time, or resale of the goods.”6

1 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 37.01.
2 U.C.C. § 2-606(1)(a).
3 See U.C.C. § 2-602(1) for the requirements of an effective rejection.
4 U.C.C. § 2-606(1)(b).
5 U.C.C. § 2-606(1)(c).
6 GE Packaged Power, Inc. v. Readiness Management Support, L.C. 510 F.Supp.2d 1124, 1131 (N.D.Ga. 2007)
citing Sears, Roebuck & Co. v. Galloway 195 A.D.2d at 826 (N.Y.A.D. 3 Dept. 1993); Gem Source Int’l. v. Gem
Works, N.S., L.L.C., 258 A.D.2d 373 (N.Y.App.Div.1999).

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11.2 Acts Forming Part of Taking Delivery

Implicit in the buyer’s obligation to take delivery is to make it possible for the seller to
make delivery, in so far as it is required to by the U.C.C. or the contract. Of course, the
parties are permitted to set out in the terms of their agreement specific steps the buyer
must take to enable the seller to make delivery. Absent such an agreement, the U.C.C.
requires the buyer to furnish facilities reasonably suited to receive the goods.7
In Camden Iron & Metal, Inc. v. Bomar Resources, Inc. the buyer was found to have
breached its duty under U.C.C. § 2-503 to provide facilities reasonably suited to receive
the goods.8 The District Court of New Jersey found that the vessel provided by the buyer
of scrap metal under an F.O.B.S.T.9 contract term was unreasonable because its structure
and physical condition increased both the risks plaintiff could have reasonably expected
and the costs because of a slower method of loading. The vessel, not being in accord with
the usage of trade, failed to satisfy the buyer’s obligation under U.C.C. § 2-503(1)(b).10
Typically the issues surrounding acts that allow the seller to make delivery arise in
connection with a buyer’s refusal to accept the goods. In Mott Equity Elevator v. Svihovec
the Supreme Court of North Dakota found a buyer of grain was in breach under U.C.C.
§ 2-703 when it refused to take delivery of bushels of grain, claiming it had insufficient
space in its boxcars to transport the grain.11 The court elaborated that the buyer had a duty
to exercise a reasonable amount of care and effort to provide a space for the seller to deliver
the goods. This duty would be suspended only if the lack of space was beyond the power
of the buyer to prevent. As the evidence contradicted the buyer’s boxcar excuse, the court
found the buyer in breach.12

11.3 Exceptions to the Obligation to Take Delivery

The obligation to take delivery is important, but not absolute. Exceptions can be identified
in which the buyer is not obligated to take delivery of the goods. These scenarios allow the
buyer to reject the goods without taking delivery. First, when the seller delivers an excess
quantity, the buyer is not obligated to take delivery of the excess. Rather, it is obligated to
take delivery only of the quantity ordered.13 This exception is supported by the perfect

7 U.C.C. § 2-503(1)(b).
8 Camden Iron & Metal, Inc. v. Bomar Resources, Inc. 719 F.Supp. 297, 300 (D.N.J. 1989).
9 F.O.B.S.T. is a maritime variation on the common F.O.B. term that means Free On Board Stow and Trim.
10 Camden Iron & Metal, Inc. v. Bomar Resources, Inc. 719 F.Supp. 297, 309 -310 (D.N.J. 1989).
11 Mott Equity Elevator v. Svihovec 236 N.W.2d 900, 906 (N.D. 1975).
12 Id.
13 See In re Empire Pacific Industries, Inc. 71 B.R. 500, 504 (Bkrtcy.D.Or. 1987); 14 Williston on Contracts
(4th ed.) § 40:7 (2013).

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 11 Taking Delivery

tender rule which requires that the seller’s tender conform perfectly to the contract. Also,
in cases where the buyer would otherwise be entitled to avoid the contract, it is not required
to take delivery of the goods.

83
12 Risk of Loss

Allocation of risk in a sales contract determines which party will have to bear the costs
and expenses for the loss of or damage to the goods. Allocating the risk between the parties
is an incredibly important aspect of the sales contract as it can have a tremendous economic
impact on the parties.
The United States is a vast and mobile country with 140,000 miles of rail tracks as of
20081 and almost four million miles of paved roadways that accommodate the nation’s
nearly nine million commercial trucks.2 Given the sheer distances covered and the amount
of traffic to compete with, selling goods in one part of the country to be delivered and
accepted in another part of the country is an inherently risky business. Added to this is
the fact that the American Society of Civil Engineers (ASCE) has consistently graded
America’s infrastructure with a ‘D’ average since 1998, currently estimating that a 3.6-
trillion USD investment would be needed by 2020 to correct the nation’s failing infrastruc-
ture.3 This is only even considering domestic contracts between two American parties, the
transactions become even riskier when one considers international sales – transportation
across even greater distances often by sea or air with added risks of governmental unrest,
armed conflicts and embargos, to name just a few.
The U.C.C. did away with earlier laws that held that the risk of loss passes with the title
of the goods.4 This rule was the cause of much consternation for lawyers and courts, as
well as the drafters of the U.C.C.5 Both the location of title and determining at what point
it passed from seller to buyer proved an extremely elusive task. Thus the drafters sought
to create a more certain and reliable set of rules for the passing of risk.6 Today the U.C.C.,

1 Rail Track Mileage and Number of Class I Rail Carriers, United States, 1830-2008 available at
<http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/usrail18402003.html> (last visited 26 April 2014).
2 Transportation Security Administration – Highway Motor Carrier Branch available at <www.tsa.gov/stake
holders/highway-motor-carrier-branch> (last visited 8 June 2014).
3 American Society of Civil Engineers, 2013 Report Card for America’s Infrastructure, available at
<www.infrastructurereportcard.org/> (last visited 8 June 2014)(“Once every four years, America’s civil
engineers provide a comprehensive assessment of the nation’s major infrastructure categories…[u]sing a
simple A to F school report card format…assigns the grades according to the following eight criteria: capacity,
condition, funding, future need, operation and maintenance, public safety, resilience, and innovation. Since
1998, the grades have been near failing, averaging only Ds, due to delayed maintenance and underinvestment
across most categories.”).
4 Uniform Sales Act (1906) §§ 18, 19, 22; Klass, supra Ch. 2, note 2, at 245.
5 White & Summers, supra Ch. 2, note 7, § 6-1(b) at 247. See Gerald G. Glaser & William C. Kelsch, Title
Theory and the Uniform Commercial Code, 30 N. D. L. Rev. 211 (1954).
6 White & Summers, supra Ch. 2, note 7, § 6-1(b) at 247.

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like the CISG, supports a scheme in which the risk of loss should be allocated to the party
in the better position to care for the goods and cover the risk of insurance.7
The primary rules for allocation of risk are set out in U.C.C. §§ 2-509 and 2-510. The
starting point for discussion must be U.C.C. § 2-509(4), which provides that all the rules
of risk are subsidiary to an agreement by the parties. The first three sub-sections of U.C.C.
§ 2-509 lay out three types of contracts and provide the rules for each – first, when the
parties enlist a carrier to transport the goods; second, when the goods are in possession of
a bailee and delivery occurs without moving them; and the third category addresses all
other scenarios. In those cases, absent a breach, where the contract does not require or
authorize the goods to be transferred via a carrier nor are the goods to be held by a bailee,
the passage of risk is dependent on whether or not the seller is a merchant. If the seller is
a merchant, the risk of loss passes to the buyer on receipt of the goods. If the seller is not
a merchant, the risk of loss passes on tender of delivery.8

12.1 Allocation of Risk in Contracts Contemplating Transportation

by Carrier

If the seller transfers the goods via a carrier, and there is no specified destination in the
contract, then the risk passes to the buyer when the goods are duly delivered to the buyer
whether or not the goods are shipped under reservation.9 A contract contemplates trans-
portation by a carrier when goods are transported via railroad, commercial air carrier, the
U.S. mail, and trucks, so long as it is not one of the seller’s own trucks.10
When the goods are shipped via a carrier and the contract specifies a destination, and
the goods are duly tendered there while in possession of the carrier, the risk passes to the
buyer when the goods are duly tendered as to enable the buyer to take delivery.11 In cases
involving a carrier, distinguishing between a shipment contract and a destination contract
is important, because it changes the time at which the risk passes. Not designating a par-

7 Shivbir S. Grewal, Risk of Loss in Goods Sold During Transit: A Comparative Study of the U.N. Convention
on Contracts for the International Sale of Goods, The U.C.C. and The British Sale of Goods Act, 14 Loy. L.A.
Int’l & Comp. L. J. 93, 107 (1991); John Honnold, The New Uniform Law for International Sales and the
UCC: A Comparison, 18 Int’l L. 21, 27 (1984); CISG Articles 66-70.
8 U.C.C. § 2-509(3); Mercanti v. Persson 160 Conn. 468, 472-473 (Conn. 1971) (boatbuilder who agreed to
build and deliver mast for plaintiff’s yacht was a merchant for the purposes of U.C.C. § 2-509(3). ‘Merchant’
is defined in U.C.C. § 2-104(1) as “a person that deals in goods of the kind or otherwise holds itself out by
occupation as having knowledge or skill peculiar to the practices or goods involved in the transaction or to
which the knowledge or skill may be attributed by the person’s employment of an agent or broker or other
intermediary that holds itself out by occupation as having the knowledge or skill.”
9 U.C.C. § 2-509(1)(a).
10 49 U.S.C.A. § 10102(4); La Casse v. Blaustein 93 Misc.2d 572, 574-575 (N.Y.City Civ.Ct.1978); White &
Summers, supra Ch. 2, note 7, § 6-2 at 253.
11 U.C.C. § 2-509(1)(b).

86
 12 Risk of Loss

ticular destination creates a shipment contract. In the case of doubt, a shipment contract
is presumed.12 Under a shipment contract the seller must or can initiate shipment of the
goods to a particular place.13 If the contract is a shipment contract, the seller must deliver
the goods to a carrier and make a reasonable contract for their transportation, deliver or
tender any document necessary for the buyer to take possession, and notify the buyer that
the goods have been shipped.14 In a destination contract, the seller must initiate the
transportation of the goods to a particular place and is responsible for the arrival of the
goods at that place.15 The seller must tender or deliver any document of title that is necessary
for the buyer to take possession.16
Under U.C.C. § 2-504, the buyer may argue that the risk of loss has not yet passed
because the seller failed to deliver conforming and properly packaged goods to the carrier,
failed to deliver documents needed to obtain possession to the buyer, or failed to promptly
notify the buyer of a shipment.17
U.C.C. § 2-509 contemplates that it is possible that shipment is made prior to contract-
ing; in those cases when goods are sold while in transit, and there is no breach, the risk of
loss passes to the buyer when the goods are identified to the contract.18 Subject to party
agreement otherwise, identification occurs when the contract is made for goods that can
be clearly identified. If the identification is uncertain or inconclusive, doubts are to be
resolved in favour of identification.19

12.1.1 Standard Trade Terms

In contracts where a carrier is used, the most common method for parties to allocate the
risk in the contract is through the use of standard trade terms ( i.e. F.O.B., F.A.S., and
C.I.F.). Originally these standard trade terms were developed by merchants so that they
could distinguish between shipment and destination contracts.20 While the U.C.C. currently
provides definitions of standard trade terms in U.C.C. §§ 2-319 through 2-24, the 2003

12 U.C.C. § 2-503 cmt. 3; Windows, Inc. v. Jordan Panel Systems Corp. 177 F.3d 114, 117 (2d Cir. 1999); Wilson
v. Brawn of California, Inc. 132 Cal.App. (4th) 549, 555, (Cal.App. 1 Dist. 2005); Electric Regulator Corp. v.
Sterling Extruder Corp. 280 F.Supp. 550, 557 -558 (D.C.Conn. 1968); Stephen L. Williams, Risk of Loss Under
the Uniform Commercial Code, 7 Ind. L. Rev. 711, 719 (1974).
13 Reed T. Phalan, The Obligations of Parties to Sales of Goods under the Uniform Commercial Code, 62 Dick.
L. Rev. 235, 237 (1957-1958).
14 U.C.C. § 2-504.
15 Phalan, supra note 13, at 237.
16 U.C.C. § 2-503.
17 U.C.C. § 2-504. See Rheinberg-Kellerei GMBH v. Vineyard Wine Co., Inc. 53 N.C.App. 560, 564-565 (N.C.App.
1981).
18 U.C.C. § 2-509 cmt. 2.
19 U.C.C. §§ 2-501, 2-501 cmt. 2.
20 Williams, supra note 12, at 715.

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revisions removed these definitions, explaining that they are no longer consistent with
and conforming to modern commercial practice.21 The official comment to U.C.C. (2003)
§ 2-319 provides instructions that due to the repeal of the trade term definitions, absent
an agreement by the parties as to the meaning of a trade term in the contract, it is to be
interpreted “in light of any applicable usage of trade and any course of performance or
course of dealing between the parties”.22
One of the ways in which the U.C.C. definitions of standard trade terms have diverged
from modern commercial practice is that they differ from the ICC’s widely used
INCOTERMS.23 As an example, under the current version of the U.C.C. the term ‘F.O.B.
place of shipment’ means that the risk of loss passes when the seller places the goods in
the possession of a common inland carrier.24 The same term as defined by the INCOTERMS
2010 means that the risk of loss passes when the exporter places the goods aboard a ship
at a designated port of shipment. Below is an outline of frequently used terms as they are
defined in Article 2.

12.1.1.1 F.O.B.
An F.O.B. (“free on board”) contract term designates a location, and the designated location
establishes that point at which the risk of loss passes to the buyer.25 An F.O.B. place of
shipment term creates a shipment contract so that the seller must tender delivery at the
place of shipment.26 If the seller makes a proper tender, the buyer bears the risk of loss
while the goods are in transit.27 The buyer is obligated to give any necessary delivery
instructions.28 Unless otherwise agreed, the seller under a F.O.B. place of shipment term
is empowered to make shipping specifications and arrangements.29 When a contract con-
tains an F.O.B. place of destination term it is a destination contract. The F.O.B. term pre-
ceding the place of destination is important in overcoming the U.C.C.’s presumption of a
shipment contract.30 Under an F.O.B. place of destination term, the seller must transport
goods to a named destination at its own risk and expense.31 A seller wishing to limit
assumption of the risk of loss under this term may include a ‘no arrival no sale’ term. A

21 Legislative Note to U.C.C. (2003) § 2-319 reads: “Sections 2-319 through 2-324 have been eliminated because
they are inconsistent with modern commercial practices.”
22 U.C.C. (2003) § 2-319 Official Comment.
23 Gabriel, supra Ch. 7, note 31, at 204-205.
24 U.C.C. § 2-319.
25 Id.
26 U.C.C. § 2-319(1)(a). See Travenol Laboratories, Inc. v. Zotal, Ltd. 394 Mass. 95, 99-100 (Mass. 1985);
Restatement (Second) of Conflict of Laws § 191 cmt. d (1981).
27 U.C.C. § 2-319(1)(a); Cook Specialty Co. v. Schrlock 772 F.Supp. 1532, 1533- 1534 (E.D.Pa. 1991).
28 U.C.C. § 2-319(3).
29 U.C.C. § 2-311(2).
30 Pestana v. Karinol Corp. 367 So.2d 1096, 1099 (Fla.App. 3 Dist.1979).
31 U.C.C. § 2-319(1)(b); Pestana v. Karinol Corp. 367 So.2d 1096, 1099 (Fla.App. 3 Dist. 1979).

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 12 Risk of Loss

‘no arrival no sale’ term in a destination overseas contract does not remove the risk of loss
from the seller, but rather provides an exemption from liability for non-delivery under
certain circumstances.32

12.1.1.2 C.I.F. and C. & F.

Even though a destination is named under a C.I.F. (‘Cost, Insurance and Freight’) term,
it creates a shipment contract; thus the buyer bears the risk of loss while the goods are in
transit. The seller bears the risk of loss until the goods are put in possession of the carrier
and loaded, and the risk passes to the buyer when the goods are loaded onto the carrier.33
As its name implies, a C.I.F. term indicates that the contract price includes a lump sum of
the cost of the goods and marine insurance covering the goods and freight to the named
destination.34 Both the U.C.C. and the INCOTERMS C.I.F. term require the seller to insure
the goods while the goods are in transit.35 The seller must obtain war insurance.36 Addition-
ally, the seller must obtain a policy or certificate of insurance so that the buyer may resell
the goods once they are afloat.37 The INCOTERM’s insurance requirement varies slightly,
as the seller is not required to obtain war insurance unless the buyer expressly requests.38
A C.I.F. term creates a documentary sale; therefore the buyer must make payment against
proper tender of documents and has no right to inspect the goods before making payment.39
Under a C.I.F. term it is possible for the buyer to resell the goods while they are still afloat;
therefore the documents supplied by the seller must be sufficient to enable such a transac-
tion.40
The term C.F. or C. & F. (‘cost and freight’) carries the same rights and obligations as
a C.I.F. term. The term differs because under a C.F. term the seller has no obligation to
insure the goods.41 In an international contract parties should be mindful not to write
C.A.F. when they intend a C. & F. contract because in an international contract C.A.F.
refers to ‘cost, assurance and freight’ rather than ‘cost and freight’.42

32 U.C.C. § 2-324 cmt.1.

33 U.C.C. §§ 2-320(a), 2-320(b), 2-320 cmt. 1; Sig M. Glukstad, Inc. v. Lineas Aereas Paraguayas 619 F.2d 457,
458-459 (5th Cir. 1980); Harlow & Jones, Inc. v. Advance Steel Co. 424 F.Supp. 770, 775 (D.C.Mich. 1976).
34 U.C.C. § 2-320(1).
35 U.C.C. § 2-320(2)(c).
36 U.C.C. §§ 2-320(2), 2-320 cmt. 7.
37 U.C.C. § 2-320(2)(c).
38 Lacy & Anzivino, supra Ch. 7, note 26, § 7:33.
39 U.C.C. § 2-320(4); Steuber Co., Inc. v. Hercules, Inc. 646 F.2d 1093, 1096 -1097 (5th Cir. 1981).
40 U.C.C. § 2-320 cmt. 4; Lacy & Anzivino, supra Ch. 7, note 26, § 7:34.
41 U.C.C. § 2-320(3).
42 U.C.C. §§ 2-320(4), 2-320 cmt. 16.

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12.1.1.3 Delivery Ex-Ship

Under an ex-ship term, as defined in U.C.C. § 2-322, the seller’s main obligation is to
deliver goods to the named port of destination. The seller bears the expense and risk of
transporting the goods, and the risk passes to the buyer only once the goods have been
properly unloaded from the ship.43 The time at which the risk passes under an ex-ship
term differs under the INCOTERMS. With the INCOTERMS the buyer bears the risk and
expense of unloading the goods, and the risk passes from the seller only once it has put
the goods at the buyer’s disposal.44 Under the U.C.C. definitions, an ex-ship term does not
create a documentary sale, and the buyer has a right to inspect the goods on arrival prior
to making payment.45

12.2 Risk of Loss for Goods Held by a Bailee

The risk of loss passes to the buyer in one of three ways when the contract calls for a bailee
to hold the goods and they are to be delivered without being moved. Essentially, the risk
passes when the buyer receives notice in one of the following ways – on receipt of negotiable
document of title covering the goods, or on the bailee’s acknowledgment of the buyer’s
right of possession of the goods, or after the receipt of non-negotiable document of title
or other written direction to deliver.46

12.3 Allocations of Risk When a Breach Has Occurred

In the event of a breach the allocation of risk can change. If the seller fails to deliver con-
forming goods, the risk of loss remains on the seller until cure or acceptance.47 Once a
buyer has properly revoked acceptance of the non-conforming goods, it may treat the risk
of loss as having remained with the seller from the beginning, to the extent of the deficiency
in the effective insurance coverage. On the other hand, if it is the buyer who has breached
before the risk of loss has passed, then the seller may, to the extent of any deficiency in its
insurance, treat the risk of loss as resting on the buyer for a commercially reasonable time.48

43 U.C.C. §§ 2-322(2)(a), 2-322(b).

44 Lacy & Anzivino, supra Ch. 7, note 26, § 7:34.
45 U.C.C. §§ 2-513(1), 2-322 cmt. 4.
46 U.C.C. § 2-509(2).
47 U.C.C. § 2-510(1); T. J. Stevenson & Co., Inc. v. 81,193 Bags of Flour 629 F.2d 338, 356 (5th Cir. 1980); William
F. Wilke, Inc. v. Cummins Diesel Engines, Inc. 252 Md. 611, 618 (Md. 1969).
48 U.C.C. §§ 2-510(2), 2-510(3), 2-510 cmt. 3. See Portal Gallaries, Inc. v. Tomar Products, Inc. 60 Misc.2d 523,
525-526 (N.Y.Sup. 1969) (seller who abandoned contract was not entitled to recover deficiency in insurance).

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 12 Risk of Loss

12.4 Allocation of Risk for Undivided Bulk Transfers

No provisions in the U.C.C. directly address the issue of allocation of risk for undivided
fungible bulk, but the comments give ample guidance. Goods are effectively identified
when a contract is made with reference to an undivided share in an identified fungible
bulk. This identification does not affect the seller’s duty to segregate and deliver according
to the contract.49 Sales can be made for a part interest in existing identified goods.50 Under
these circumstances the buyer becomes an owner in common.51 Because the buyers are
owners in common of these shares, it appears that the risk is shared equally.52

49 U.C.C. § 2-501 cmt. 5.

50 U.C.C. § 2-105(3).
51 U.C.C. § 2-105(4).
52 Grewal, supra note 7, at 110.

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13 Examination and Notice

In some countries, the buyer has an affirmative obligation to examine the goods and is
subject to liability for failure to do so.1 This is not the case in the United States, where
inspection is treated as a right of the buyer, which the seller cannot refuse unless expressly
waived by the buyer.2 U.C.C. § 2-513(1) grants the buyer a right to a reasonable opportunity
to inspect the goods, and U.C.C. § 2-606(1) conditions the effective acceptance of the goods
upon the buyer’s right to inspect. The buyer’s reasonable opportunity to inspect under
U.C.C. § 2-513 is not to be confused with an examination of the goods, a sample, or a
model of them at the time of contracting, which may affect the contract’s warranties. Rather
the inspection under U.C.C. § 2-513 refers to a “check-up on whether the seller’s perfor-
mance is in accordance with the contract previously made”.3
Under the scheme laid out in the U.C.C., in line with its underlying goals of encouraging
the parties to work out problems between themselves and promoting judicial and economic
efficiency, the buyer must be given a reasonable opportunity to inspect goods upon their
tender and is then given essentially two opportunities to notify the seller of a non-conform-
ity. Under U.C.C. §§ 2-606(1)(b) and 2-602(1), the buyer is deemed to have accepted the
goods if it fails to timely notify the seller about the non-conformity. In many cases this
rejection will trigger the seller’s right to cure under U.C.C. § 2-508. If no notice of rejection
is given and the goods are deemed accepted, the second notice requirement is triggered.
Under U.C.C. § 2-607(3)(a), once acceptance takes place, failure to notify the seller of any
non-conformity within a reasonable time results in the loss of all other remedies, including
damages. These provisions are meant to encourage a dialogue between the buyer and the
seller by demanding good faith efforts to communicate problematic aspects with one
another. The buyer’s right to inspect the goods and its obligation to give the seller notice
within a reasonable time is thus a paramount prerequisite for access to remedies.4

13.1 The Buyer’s Right to Inspect the Goods

Inspection of the goods is a right granted to the buyer by U.C.C. § 2-513(1). Unless the
parties have made an agreement to the contrary, a buyer is not required to pay for or accept

1 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 34.32.
2 U.C.C. § 2-513(1); id.
3 U.C.C. § 2-513 cmt. 9.
4 Miron v. Yonkers Raceway, Inc., 400 F.2d 112 (2d Cir. 1968); G & H Land & Cattle Co. v. Heitzman & Nelson,
Inc. 102 Idaho 204, 207 (Idaho 1981); Brodsky v. Nerud, 68 A.D.2d 876 (N.Y.A.D.1979); Economy Forms
Corp. v. Kandy, Inc. 391 F.Supp. 944 (D.C.Ga. 1974), aff’d without op. 511 F.2d 1400 (5th Cir. 1975).

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Modern Law of Sales in the United States

the goods prior to exercising this right. A buyer’s failure to properly exercise this right
does not itself affect the buyer’s access to remedies, but rather it is the failure to give notice
that results in the loss of remedies. Therefore, results of the buyer’s inspection merely
provide the basis for notification of the non-conformity.5 Whether the buyer had a reason-
able opportunity to inspect may be a basis for a response to a seller’s defence of lack of
notice. Additionally, the adequacy of an inspection may come into play when a plaintiff
buyer must prove that it gave timely notice of a non-conformity under U.C.C. § 2-607(3)(a),
which requires that notice must be given to the seller when the breach was or should have
been discovered. Here, a defendant seller may argue that a proper inspection should have
revealed the non-conformity earlier.6

13.1.1 Details of the Inspection

The first place to look for the details of the inspection, including the time, place and
manner for the inspection, is the parties’ sales contract. If the parties fix a method and
manner for inspection, this agreement is presumed to be exclusive.7 In G & H Land &
Cattle Co. v. Heitzman & Nelson, Inc. the Supreme Court of Idaho held that inspection of
potatoes one month after delivery by the seller, when the buyer removed the potatoes from
storage, was within a reasonable time as the contract was clear that the potatoes were to
be inspected for size by government inspectors at delivery, and the contract was clear that
delivery would occur when the buyer took the potatoes out of storage.8G & H Land &
Cattle Co. demonstrates the primacy given to the parties’ contractual terms.
Absent an express term in the contract outlining the inspection procedure, the gap-
filling rule under the U.C.C. allows the buyer to inspect the goods at any reasonable time
and place.9 The reasonableness of the time, place and manner are to be determined by
“trade usages, past practices between the parties and the other circumstances of the case”.10
In La Villa Fair v. Lewis Carpet Mills, Inc., the defendant carpet manufacturer argued that
the plaintiff’s inspection was untimely and thus resulted in an acceptance of the defective
carpet. The Supreme Court of Kansas determined that as a matter of law, the plaintiff’s
inspection was timely as it was in line with industry practice that rolls of carpet would only
be inspected when they are ready to be used, and the defendant was aware of this industry
practice. Thus even though the inspection took place nine months after delivery, it was

5 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 34.32.
6 See below paras. under Section 13.2. et. seq. for a discussion of timely notice under U.C.C. § 2-607(3)(a).
7 U.C.C. § 2-513(4); G & H Land & Cattle Co. v. Heitzman & Nelson, Inc. 102 Idaho 204, 208 (Idaho 1981).
8 G & H Land & Cattle Co. v. Heitzman & Nelson, Inc. 102 Idaho 204 (Idaho 1981).
9 U.C.C. § 2-513(1).
10 U.C.C. 2-513 cmt. 3. See D.C. Leathers, Inc. v. Gelmart Industries, Inc. 125 A.D.2d 738, 739-740 (N.Y.A.D.
1986); GNP Commodities, Inc. v. Walsh Heffernan Co. 95 Ill.App.3d 966, 972 (Ill.App. 1981).

94
 13 Examination and Notice

still within a reasonable time and did not cause the plaintiff to make an untimely rejection
of the goods.11
An additional aspect of the manner of the inspection involves the costs incurred con-
ducting the inspection. The default rule in the U.C.C. is that the buyer is responsible for
the expenses of the inspection.12 However, if the goods do not conform to the contract and
are rejected, the buyer may recover the costs from the seller as incidental damages.13

13.1.2 Payment before Inspection

The general rule under U.C.C. § 2-513(1) is that a buyer is entitled to inspect the goods
before having to make payment.14 There is an exception to this rule when the parties agree
otherwise by including in the contract a C.O.D. or a similar term or require payment
against documents of title.15 If the contract requires payment before inspection the buyer
is only excused from making such payment due to non-conformity if the non-conformity
is apparent without inspection.16 Payment before inspection does not mean that the buyer
has accepted, nor does it impair the buyer’s ability to make an inspection before accepting;
additionally, all the buyer’s remedies remain open.17

13.2 Notice of Non-Conformity

The importance of giving notice of non-conformity cannot be overstressed. Whether the

buyer wishes to reject goods that do not conform or avail itself of any of the remedies
available for non-conformity after acceptance has occurred, notice must be given. There
are two critical junctures in the life of the sales transaction under the U.C.C. in which the
buyer must give notice. First, after tender has been made and reasonable time for inspection
was given, the buyer must notify the seller of rejection under U.C.C. § 2-602(1) or be
deemed to have accepted the goods under U.C.C. § 2-606(1)(b). Second, after acceptance
has occurred upon discovery of a breach, the buyer must notify the seller of the breach

11 La Villa Fair v. Lewis Carpet Mills, Inc. 219 Kan. 395 (Kan. 1976).
12 U.C.C. § 2-513(2).
13 U.C.C. §§ 2-513(2), 2-715(1), 2-513 cmt. 4; U.S. Nemrod, Inc. v. Wheel House Dive Shop, Inc. 465 N.Y.S.2d
674, 677 (N.Y.City Civ.Ct. 1983).
14 See above para. under Section 10.1. for treatment of payment.
15 U.C.C. § 2-513(3); Liverpool v. Baltimore Diamond Exchange, Inc. 369 Md. 304, 331 (Md. 2002); Gragg Farms
& Nursery v. Kelly Green Landscaping 81 Ohio Misc.2d 34, 36 (Ohio Mun.1996).
16 U.C.C. § 2-512(1).
17 U.C.C. § 2-512(2); Davis v. Vintage Enterprises, Inc. 23 N.C.App. 581, 587 (N.C.App. 1974) (“plaintiff’s cash
payment would not impair his right to inspect following delivery”).

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Modern Law of Sales in the United States

under U.C.C. § 2-607(3)(a) or lose access to all remedies. Thus, all the buyer’s remedies
effectively hinge on the fulfilment of providing proper notice.18
In the frequently cited case, Standard Alliance Ind. v. Black Clawson Co., the Sixth
Circuit described the policy of the notice requirement as serving a twofold purpose.19 First,
the notice allows for the parties to settle through negotiation, and, second, the notice gives
the seller “ample opportunity to cure the defect, inspect the goods, investigate the claim,
or do whatever may be necessary to properly defend himself or minimize his damages
while the facts are fresh in the minds of the parties”.20 Additionally, courts have recognized
that the notice requirement serves to provide the seller with an opportunity to inspect the
claims and prepare for litigation if necessary, and to protect the seller from ‘stale claims’,
thus providing certainty that once it has fulfilled its obligations the contract is complete.21
Given these policy reasons behind the notice requirement, it is logical that the notice
requirements apply not just to the purchaser of the goods, but to all the beneficiaries of
an implied or express warranty.22

13.2.1 Time for Giving Notice

As stated above, all of a buyer’s recourse in cases of non-conforming tender hinge on sea-
sonable notification to the seller. Thus it is critical to examine what constitutes ‘seasonable’
or timely notification. With both the notice of rejection and, later on, the notice of breach,
there are two critical times that require attention. The first is the period of time in which
the buyer must give notice in order for it to be considered to have fulfilled the requirements
of Article 2 in order to preserve its rights. The second time that merits consideration is
the point in time at which the clock begins to run. The buyer bears the burden of proving
that the notification was timely, regardless of the seller’s fault.23 First consideration will be
given to the question of when the period begins and then to the length of the period.

18 Aqualon Co. v. Mac Equipment, Inc. 149 F.3d 262, 268 -271 (4th Cir. 1998) (plaintiff’s contract and breach
of warranty claims dismissed for failure to give defendant proper and timely notice); St. Clair v. Kroger Co.
581 F.Supp.2d 896, 902 (N.D. Ohio 2008) (plaintiff’s breach of warranty claim dismissed for failure to provide
defendant with notice); American Bumper & Mfg. Co. v. Transtechnology Corp. 252 Mich.App. 340 (Mich.App.
2002) (plaintiff was barred from any remedy for failing to give adequate notice of breach); Carmichael &
Carmichael, Inc. v. Nicholstone Companies, Inc. 1992 WL 172404, *5 (Tenn.App. 1992) (plaintiff’s failure to
give timely notice barred claims for damages based on breach of warranty).
19 Standard Alliance Ind. v. Black Clawson Co. 587 F.2d 813 (6th Cir.1978).
20 Standard Alliance Ind. v. Black Clawson Co. 587 F.2d 813 (6th Cir.1978) quoted in Liberty Steel Products Inc
v. Franco Steel Corporation 57 F. Supp 459 (N.D. Ohio 1999).
21 Aqualon Co. v. Mac Equipment, Inc. 149 F.3d 262, 269 (4th Cir. 1998); Cole v. Keller Indus., 872 F.Supp.
1470, 1474 (E.D.Va.1994), vacated on other grounds, 132 F.3d 1044, 1047-48 (4th Cir.1998).
22 U.C.C. § 2-607(3)(a); Maldonado v. Creative Woodworking Concepts, Inc. 296 Ill.App.3d 935, 940 (Ill.App.
3 Dist. 1998).
23 U.C.C. § 2-607(4); Liberty Steel Products, Inc. v. Franco Steel Corp. 57 F.Supp.2d 459, 466-467 (N.D. Ohio
1999).

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 13 Examination and Notice

Notice of rejection under U.C.C. § 2-602(1) and notice of breach under U.C.C. § 2-
607(3)(a) must be made within a reasonable time. According to U.C.C. § 1-205, a reasonable
time for action depends on the nature, purpose and circumstances of the action; thus
whether or not notice was given within a reasonable time is a question of fact.24 However,
if the facts are undisputed and can only reasonably lead to one conclusion, the court may
determine the reasonability of the time for notice as a matter of law.25
Of course, the start of the period for when notice must be given depends on whether
the notice is of rejection or breach. Under U.C.C. § 2-602(1) the time for giving notice of
rejection begins to run from tender or delivery, while the time for giving notice of a breach
under U.C.C. § 2-607(3)(a) starts to run from the time the breach is discovered or should
have been discovered.26 In cases of rejection the most common issue to arise is when
delivery or tender occurred. Most frequently this question arises in sales where a lengthy
installation period is required. This issue is addressed above in the chapter covering
delivery.27
In cases where the buyer is notifying the seller of a breach after acceptance, the most
commonly litigated issue is at what point the buyer should have discovered the breach.
The issue of when a buyer should have discovered the non-conformity is an issue of fact
as it must be determined in light of the particular circumstances of each case.28 If the buyer
should have, under all the facts and circumstances, discovered the non-conformity earlier
than it did, then notice will be deemed to be untimely, and the buyer will be barred from
a remedy.29 In Slemmons v. CIBA-GEIGY Corporation, the plaintiff corn-grower relied on
the defendant seller to provide it with an herbicide that would prevent the growth of grass
and weeds in its cornfields. The Ohio Appellate Court held that the plaintiff’s notice met
the requirements of U.C.C. § 2-607(3)(a) when it was given only after weeds and grass
began growing. In so finding, the court distinguished the phrase ‘should have discovered’
from ‘could have discovered’, as it “does not necessarily carry with it a duty to seek out
the condition to which the discovery pertains, but it connotes, instead, that if the condition

24 Pioneer Peat, Inc. v. Quality Grassing & Services, Inc. 653 N.W.2d 469, 473 (Minn.App. 2002); De Witt v.
Itasca-Mantrap Co-op. Elec. Ass’n 215 Minn. 551, 559-560 (Minn. 1943).
25 Parrillo v. Giroux Co., Inc. 426 A.2d 1313, 1317 (R.I. 1981); San Antonio v. Warwick Club Ginger Ale Co.
104 R.I. 700, 708 (R.I. 1968); Barlow v. DeVilbiss Co. 214 F.Supp. 540, 544 (D.C.Wis. 1963); Necho Coal Co.
v. Denise Coal Co. 387 Pa. 567, 570 (Pa. 1957).
26 See Voigt v. Fabricut, Inc. 2012 WL 1161429 (N.D.Okla. 2012); EPN-Delaval, S.A. v. Inter-Equip, Inc. 542
F.Supp. 238 (S.D.Tex. 1982).
27 See above para. under Section 7.2.2.
28 U.C.C. § 1-205. See e.g. Land O’Lakes, Inc. v. Grassland Dairy Products, Inc. 2005 WL 300292, *6 (W.D.Wis.
2005) (summary judgment denied on the issue of timeliness of the notice of breach as factual dispute still
existed at the time of the motion).
29 Beauty Mfg. Solutions Corp. v. Ashland, Inc. 848 F.Supp.2d 663, 670 (N.D.Tex. 2012) (operable question in
determining whether notice was timely is whether buyer should have discovered non-conformity earlier,
not whether it could have).

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Modern Law of Sales in the United States

is so obvious as to be apparent in the normal exercise of the perceptory senses then that
condition may not be considered overlooked or not observed.”30 There the defect could
not have been discovered until the weeds sprang up unless the plaintiff had conducted
extensive chemical tests on the prepared mixture of herbicides, and this is beyond the
contemplation of ‘should have been discovered’. Thus, the standard for when a defect
should have been discovered is based on reasonable care and diligence, but not excessive
or extraordinary efforts.
Parties are free to agree on a period of time for giving notice so long as it is not mani-
festly unreasonable.31 The fixing of time by the parties’ agreement is the strongest evidence
for a reasonable time, and indeed if such a period is agreed upon then it is controlling.32
The parties’ agreement is subject to the limits of fairness, and the parties are not permitted
to either intentionally or inadvertently set a time “so unreasonable that it amounts to
eliminating all remedy under the contract”.33 In Bowlin’s, Inc. v. Ramsey Oil Co., Inc., the
court examined whether a two-day inspection and notification period after the delivery
of gasoline to a gasoline retail outlet was unconscionable. The court found that under the
circumstances of the case the period was lawful, reasonable and not unconscionable. In
reaching its conclusion the court noted that both parties were sophisticated and that the
two-day notice term was a specific term in the contract known and agreed to by the buyer.34
In addition to the express terms of the contract, courts may determine that a notice was
timely given based on trade usage.35
Courts also look to the parties’ conduct during the period after delivery and prior to
the notice of the rejection. In Smith v. Paoli Popcorn Co, the Supreme Court of Nebraska
reversed summary judgment in favour of the seller, finding that a six-to-seven-month
delay in rejecting popcorn was not, as a matter of law, an unseasonable notification because
during those several months there was ongoing communication between the parties about
the non-conformity and the seller was aware of the problem.36 This line of inquiry by the
courts is consistent with the U.C.C.’s goal of facilitating negotiations and cooperation
between the parties.

30 Slemmons v. Ciba-Geigy Corp. 57 Ohio App.2d 43, 51 (Ohio App. 1978). See also Allen Food Products, Inc.
v. Block Bros., Inc. 507 F.Supp. 392, 394 -395 (D.C.Ohio 1980).
31 U.C.C. § 2-104(1).
32 U.C.C. § 2-104 cmt. 1; Saffire Corp. v. Newkidco, LLC 286 F.Supp.2d 302, 307 (S.D.N.Y. 2003) (plaintiff failed
to give a timely notice of rejection when it let the contractual period of seventeen days for a rejection lapse);
In re First Hartford Corp. 63 B.R. 479, 488 (Bkrtcy.S.D.N.Y. 1986); Maas v. Scoboda 188 Neb. 189, 193-194
(Neb. 1972).
33 U.C.C. § 2-104 cmt. 1.
34 Bowlin’s, Inc. v. Ramsey Oil Co., Inc. 662 P.2d 661 (N.M.App.1983) certiorari denied 662 P.2d 645, 99 N.M.
644.
35 D.C. Leathers, Inc. v. Gelmart Industries, Inc. 125 A.D.2d 738, 740 (N.Y.A.D. 1986); GNP Commodities, Inc.
v. Walsh Heffernan Co. 95 Ill.App.3d 966, 972-973 (Ill.App. 1981).
36 Smith v. Paoli Popcorn Co. 255 Neb. 910, 917-918 (Neb. 1998).

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 13 Examination and Notice

13.2.1.1 Specific Factors in Determining a Reasonable Time

The reasonableness of the time it takes a buyer to give notice of non-conformity is directly
related to the relative ease or difficulty of discovering the defect.37 Of course, a shorter
period for giving notice is reasonable when a buyer orders all red shirts and upon delivery
sees that they are all green, than for a buyer who orders a complex chemical mixture of
pesticide to determine that the wrong ratio of chemicals was used. Factors that contribute
to the analysis of the difficulty of discovering the defect include the complexity of the goods
and the latent or hidden nature of the defect, as well as the respective sophistication and
knowledge of the parties.38
It is logical and sound that the more complex the goods are, the more time is afforded
for giving notice. Complex goods such as machinery or chemical compounds take longer
to inspect than simple goods. Additionally, even after inspection it is more likely that non-
conformity may be discovered only after use or the passage of time.39 On the basis of the
same logic, a longer period of time is reasonable for giving notice of hidden rather than
apparent defects.40
The relative position of the parties, their respective sophistication and knowledge may
also be taken into consideration in this analysis. In Figueroa v. Kit-San Co., the court found
that two-hundred days for rejection of bentonite was not unreasonable as a matter of law,
partly because the seller had knowledge of the industry, the EPA testing requirements, and
knowledge about the project the bentonite was to be used for, and therefore, it could be
assumed that the seller was aware that a two-hundred-day permeability test was required.41
The U.C.C. distinguishes between consumers and merchant buyers in this area, allowing
the timeliness of a consumer’s notice to be judged by a more lenient standard.42 As the
purpose of the notice requirement is to “defeat commercial bad faith, not to deprive a good
faith consumer of his remedy”.43

37 White & Summers, supra Ch. 2, note 7, § 9-3. See Figueroa v. Kit-San Co. 123 Idaho 149, 158 (Idaho App.
1992).
38 In re Rafter Seven Ranches L.P. 546 F.3d 1194, 1202 (10th Cir. 2008) (non-conformity was discoverable
immediately upon delivery so that six weeks to give notice of rejection was unreasonable); Carmichael &
Carmichael, Inc. v. Nicholstone Companies, Inc. L 172404, *4-5 (Tenn.App.1992); Henley Supply Co., Inc. v.
Universal Constructors, Inc. L 31620, *7-8 (Tenn.App. 1989); White & Summers, supra Ch. 2, note 7, § 9-3
at 421.
39 Slemmons v. CIBA-GEIGY Corporation, 57 Ohio App.2d 43 (Logan Cty. 1978) (herbicide mixture prepared
by experts on whom the buyer relied was only reasonably discovered to be defective upon the growth of
grass and weeds).
40 Beauty Mfg. Solutions Corp. v. Ashland, Inc. 2012 WL 253880 (N.D.Tex. 2012); Environmental Elements
Corp. v. Mayer Pollock Steel Corp. 497 F.Supp. 58, 62 (D.C.Md. 1980).
41 Figueroa v. Kit-San Co. 123 Idaho 149 (Idaho App.1992) review denied.
42 U.C.C. § 2-607 cmt. 4 states: “‘A reasonable time’ for notification from a retail consumer is to be judged by
different standards so that in his case it will be extended, for the rule of requiring notification is designed to
defeat commercial bad faith, not to deprive a good faith consumer of his remedy.”
43 U.C.C. § 2-607 cmt. 4.

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Buyers wishing to recover damages for non-conforming perishable goods had best act
fast to give notice.44 Just how fast, though, is again a matter determined by the specific
circumstances of each case and the relative perishability of the goods at issue. In some
cases it is clear whether goods can be classified as perishable – for example machines, textiles
or glass certainly do not have a shelf life in the way that fruits, vegetables or meats do,
whereas other cases such as frozen foods or canned foods present a tougher question.
In determining the reasonableness of the period courts look at the relative perishability
of the goods, that is, how long it took the buyer to give notice relative to how long the
goods can last. In Allen Food Products, Inc. v. Block Bros., Inc., the court held that a three-
month delay in giving notice of breach was not unreasonable as a matter of law.45 The
goods at issue were non-conforming walnuts, and the defendants argued that given their
perishable nature, three months was not reasonable. The court considered the plaintiff’s
assertions that it had cold storage facilities that would have allowed the walnuts not to
perish, past practice of the parties made three months not too long, and industry custom
and usage did not require consumption inspection. Ultimately, the court said perishability
is a relative term and if the plaintiff’s submissions were accurate, then the walnuts could
have been stored indefinitely.46

13.2.2 Details of the Notice

In addition to making a timely notice, the buyer must be sure to give a notice containing
the proper information in the proper form in order for the notification to be effective.
U.C.C. § 1-202 provides some insight by way of a definition as to what suffices as proper
notice. Under U.C.C. § 1-202(d) a party notifies another by taking “such steps as may be
reasonably required to inform the other person in ordinary course, whether or not the
other person actually comes to know of it.” Additionally, a party is deemed to have notice
of a fact when it has actual knowledge of the fact, has received notice of it or has reason to
know the fact exists on the basis of all the facts and circumstances known to it at the time
in question.47 Under this definition if a seller has actual knowledge of a fact it may not
claim lack of notice as a defence.48 Courts have been strict in interpreting this principle,
however, as not to allow buyers to bypass their notification duties with too much ease. It

44 International Multifoods Corp. v. National Egg Products, Div. of Hudson Foods, Inc. 202 Ga.App. 263, 266
(Ga.App.1991) (notice to defendant seller that egg yolks contained salmonella was not within a reasonable
time); Appeal of Mazur Bros. & Jaffe Fish Co. Inc. 3 U.C.C. Rep. Serv. 419 (V.A.B.C.A. 1965) (five days for
giving notice of rejection of shrimp was not seasonable, to have been effective notice must have been given
on the same day); Am. L. Prod. Liab. 3d § 23:17 (2013); White & Summers, supra Ch. 2, note 7, § 9-3.
45 Allen Food Products, Inc. v. Block Bros., Inc. 507 F.Supp. 392, 395 (D.C. Ohio 1980).
46 Id.
47 U.C.C. § 1-202(1).
48 Red River Commodities, Inc. v. Eidsness 459 N.W.2d 805, 809 (N.D. 1990).

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has been held that while actual knowledge may in some cases replace the need for the buyer
to give notice, the actual knowledge must be of trouble with the particular product by a
particular buyer.49 Thus, knowledge that a particular make or model has been giving some
customers problems is not sufficient to impute knowledge to the seller in a manner that
would make the buyer’s notice unnecessary.
Notice of rejection need not be in writing; so long as it is prompt, absolute and
unequivocal it may be effective.50 However, it is highly advisable to give written and
unequivocal notice. Furthermore, failure to particularize defects that could have been
discovered through reasonable inspection bar the buyer from relying on those defects to
justify the rejection or establish a breach when a seller could have cured the defects had
such a particularized notice been provided.51 This requirement prevents a remorseful buyer
from being able to shoot first and ask questions later; in other words, the buyer may not
reject the goods and then, as the seller is scrambling to respond, look for defects.
Regarding the notice of a breach required by U.C.C. § 2-607(3)(a), generally, the plaintiff
must contact the seller directly and inform it of a problem with a particular product pur-
chased. The notice only needs to let the seller know that the transaction continues to be
troublesome and needs to be watched. There is no such requirement, as for rejection, that
the defects be particularized, nor does the notice need to be a claim for damages or a threat
of litigation.52 Again, courts have interpreted this provision strictly, requiring not just that
the buyer informs the seller that the transaction is troublesome, as required by the language
of U.C.C. § 2-607’s comments, but also that it considers the seller to be in breach.53 This
standard is more lenient than that for rejection as all of the buyer’s remedies ride on its
effectiveness.
Courts remain split on the issue of whether the notice requirement of U.C.C. § 2-
607(3)(a) may be satisfied by filing a legal complaint, or whether the statute requires that
pre-litigation notice be given.54 However, there appears to be consensus that in cases where

49 Connick v. Suzuki Motor Co., Ltd. 174 Ill.2d 482, 494 (Ill. 1996) quoting Judge Learned Hand in American
Manufacturing Co. v. United States Shipping Board Emergency Fleet Corp. 7 F.2d 565, 566 (2d Cir.1925)
(“The notice ‘of the breach’ required is not of the facts, which the seller presumably knows quite as well as,
if not better than, the buyer, but of buyer’s claim that they constitute a breach.”).
50 G & H Land & Cattle Co. v. Heitzman & Nelson, Inc. 102 Idaho 204, 209 (Idaho 1981).
51 U.C.C. § 2-605; Lockheed Electronics Co. v. Keronix, Inc. 114 Cal.App.3d 304, 314-315 (Cal.App. 2 Dist.
1981); Uchitel v. F. R. Tripler & Co. 107 Misc.2d 310, 317 (N.Y. App. Term 1980).
52 U.C.C. § 2-607 cmt. 4.
53 Roth Steel Products v. Sharon Steel Corp. 705 F.2d 134, 153 (6th Cir. 1983); Southern Illinois Stone Co. v.
Universal Engineering Corp. 592 F.2d 446, 451-452 (6th Cir. 1979); Eckstein v. Cummins 41 Ohio App.2d 1,
6 (Ohio App. 1974).
54 For courts that have allowed the filing of a legal complaint to satisfy the notice requirement of U.C.C. § 2-
607(3)(a) see In re Bridgestone/Firestone, Inc. Tires Products Liability Litigation 155 F.Supp.2d 1069, 1110
(S.D.Ind. 2001); In re Latex Gloves Products Liability Litigation 134 F.Supp.2d 415, 422-423 (E.D.Pa. 2001);
Panda Capital Corp. v. Kopo Intern., Inc. 242 A.D.2d 690, 692 (N.Y.A.D. 1997); Shooshanian v. Wagner, 672
P.2d 455, 463 (Alaska 1983); Solarz v. DaimlerChrysler Corp. 2002 WL 452218, *12 (Pa.Com.Pl. 2002). For

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the plaintiff is a consumer and has suffered personal injuries, U.C.C. § 2-607(3)(a)’s notice
requirement can be satisfied by the filing of a complaint.55 This consensus reflects courts’
general practice of focusing their analysis on whether the purpose that notice is meant to
achieve was met, rather than fixating on the form that the notice took. Thus the U.C.C.
may have been able to provide some degree of procedural certainty by enumerating
acceptable forms of notice; this was willingly sacrificed by the drafters in favour of a flexible
standard that allows courts to do exactly what they have been doing for the past sixty years
– consider the result that fairness and commercial reasonableness dictate under the par-
ticular circumstances of the case.

13.3 Notice of Breach of Warranty of Title

The buyer must notify the seller of the discovery of a breach of warranty of title within a
reasonable time, but only in cases where the seller’s breach is innocent.56 If the seller
breaches the warranty of title in bad faith, then it cannot claim that the buyer gave it
untimely notice, as a means of avoiding liability. As with the buyer’s other notification
duties, the notice of the breach need not be in writing and only must be sufficient to inform
the seller that the transaction is troublesome. The seller’s actual knowledge of facts sur-
rounding the sale does not replace the need for the buyer to notify. The seller’s knowledge
of these facts is not equivalent to the seller knowing that the buyer is claiming a breach of
warranty.57

courts holding that pre-litigation notice was necessary see Brookings Mun. Utilities, Inc. v. Amoco Chemical
Co. 103 F.Supp.2d 1169, 1176-1177 (D.S.D. 2000); Connick v. Suzuki Motor Co., Ltd. 174 Ill.2d 482 (Ill. 1996);
Lynx, Inc. v. Ordnance Prods., Inc. 327 A.2d 502, 513–14 (Md.1974).
55 St. Clair v. Kroger Co. 581 F.Supp.2d 896, 902 (N.D. Ohio 2008); In re Bridgestone/Firestone, Inc. Tires
Products Liability Litigation 155 F.Supp.2d 1069, 1110-1111 (S.D.Ind. 2001); Connick v. Suzuki Motor Co.,
Ltd. 174 Ill.2d 482 (Ill. 1996).
56 U.C.C. § 2-312 cmt. 2.
57 U.C.C. § 2-312 cmt. 2; 18 Williston on Contracts (4th ed.) § 52:61 (2013).

102
14 General Remarks on Remedies

In an ideal world the discussion of sales law up to this point would be sufficient to cover
all relevant topics. In our very imperfect world, however, the performance of sales contracts
does not always go as planned or agreed to. Situations may arise, circumstances may change
or a party may get a better offer – all of which would lead to a breach of the contract. When
a breach occurs, Part 7 of Article 2 provides a series of remedies to compensate the aggrieved
party. For the parties to a contract, the defendant’s performance is a primary right, while
the law of remedies addresses a set of secondary rights.1 These remedies are outlined in
the chapters below.

14.1 Purpose of the U.C.C.’s Remedies

Writing about remedies for breach of contract, Professor Farnsworth has said that the
American system of remedies is “not directed at compulsion of promisors to prevent breach;
rather, it is aimed at relief to promisees to redress breach…. this at least adds to the celebrated
freedom to make contracts, a considerable freedom to break them as well”.2 Thus, the
primary purpose of remedies found in the U.C.C. is to compensate an aggrieved party,
not to force the promisor to perform. This legal philosophy shaped the U.C.C.’s underlying
purposes and policies of its remedial scheme.3 The two primary discernible goals of the
U.C.C.’s remedies are, first, to provide full compensation for the loss suffered by a party
as a result of a breach. U.C.C. § 1-305 instructs that remedies must be liberally administered
to put the aggrieved party in as good a position as if the other party had fully performed.
This goal is furthered by flexible rules on measuring damages and broad discretion given
to judges based on the circumstances of each case. The second goal of the U.C.C.’s remedies
is to afford parties the opportunity to work out problems among themselves without having
to resort to judicial intervention. Efforts to achieve this end can be seen in the provisions
allowing for insecure parties to demand assurance or in the codification of the seller’s right
to cure.
The remedies in the U.C.C. are not exclusive, but cumulative – so a party may resort
to more than one remedy if it is necessary for full compensation.

1 Perillo, supra Ch. 2, note 39, at § 14.1.

2 E. Allan Farnsworth, Remedies for Breach of Contract, 70 Colum. L. Rev. 1145, 1147 (1970).
3 See U.C.C. § 1-103(a).

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14.2 Structure of the U.C.C.’s Remedies

If one were to create a map of the remedies in the U.C.C. there would be two divergent
paths. Down the one road would be the remedies available when the exchange contracted
for is carried out in spite of a breach so that the buyer ends up with the goods and the seller
with the price, the defective performance would be compensated with damages. Down the
other path the exchange is not completed, performance is cancelled and the buyer does
not get the goods and the seller does not get the price. If the exchange would have benefited
the non-breaching party this loss may be compensated through damages. Acceptance is
the crossroads that determines which path a party will go down to reach recovery.4 If the
buyer accepts the goods its remedy will be found in U.C.C. § 2-714 for breach of warranty;
however, if the buyer accepts the goods and does not pay, the seller’s remedy will be an
action for the price under U.C.C. § 2-709. Before acceptance occurs, the buyer may reject
non-conforming goods and effectively avoid the contract, in which case the seller would
be liable for the resulting loss; likewise in the case of repudiation by the buyer, the seller
may avoid the contract and recover the loss suffered.

14.3 Concurrent Remedies

Situations may occur that give rise to a cause of action in both contract and tort. A party
having claims in both tort and contract may generally elect which remedy to pursue. The
plaintiff in Enhance-It, L.L.C. v. American Access Technologies, Inc. brought a claim in tort
based on fraud and a breach of contract claim both arising out of the same facts. The District
Court in South Carolina stated that “fraud and breach of contract claims are based upon
the same facts. Plaintiff, therefore, may not recover under both causes of action, but is not
required to make an election of remedies at this time. Should this matter proceed to trial,
Plaintiff may plead and prove both fraud and breach of contract causes of action although
Plaintiff will ultimately be limited to one recovery.”5 Thus, in such cases plaintiffs are
entitled to full recovery, but not double recovery. Other typical scenarios giving rise to
concurrent remedies are in cases of mistake and misrepresentation, and especially in cases
of products liability where the line between contract and tort is sometimes blurred to the
point of non-existence.
The economic loss rule, discussed above in connection with implied warranties, is used
to demarcate the boundary between remedies for contract and tort.6 Recall that under the

4 Harry M. Flechtner, Remedies under the New International Sales Conventions: The Perspective from Article
2 of the U.C.C., 8 J. L. & Com. 53 (1988).
5 Enhance-It, L.L.C. v. American Access Technologies, Inc. 413 F.Supp.2d 626, 632 (D.S.C. 2006).
6 Sacramento Regional Transit Dist. v. Grumman Flxible 158 Cal.App.3d 289, 294 (Cal.App. 1984).

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 14 General Remarks on Remedies

economic loss doctrine, if a plaintiff has been economically injured but suffered no physical
or property damage, a tort claim against the manufacturer of a defective product will not
stand. In Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp. the Third Circuit,
applying Illinois law, conducted a lengthy discussion in ascertaining whether the Illinois
Supreme Court would adopt the economic loss rule. Ultimately, the court found that the
economic loss rule prevails and a claim of strict liability would not be extended to cover
economic losses.7 Decisive for the court was the large body of case law that had developed
since the mid-1960s adopting this rule following two high-profile cases on the issue,8 as
well as the sound policy reasons for the doctrine.9

7 Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp. 626 F.2d 280 (3d Cir. 1980).
8 Santor v. A and M Karagheusian, Inc. 44 N.J. 52 (N.J. 1965) (New Jersey Supreme Court allowed a plaintiff
buyer of a carpet that became discoloured after time to recover under the theory of strict product liability);
Seely v. White Motor Co. 63 Cal.2d 9 (Cal. 1965) (California Supreme Court allowed plaintiff buyer of a truck
that bounced violently and overturned, but the incident resulted in no injuries, to recover from the defendant
on the basis of breach of warranty but not in tort for the purely economic loss).
9 See above para. under Section 9.3.1.3.

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15 Suspension of Performance and Adequate
Assurances

The first remedial action examined is one that is available before a breach necessarily takes
place – the right to demand adequate assurance of performance or suspend performance.
One of the central foundations of commercial contracts is recognition that parties
contract for actual performance; they do not “bargain merely for a promise, or for a
promise plus the right to win a lawsuit”.1 In reality, parties to a sales contract can find
themselves in the unenviable position of doubting their contracting partner’s willingness
or ability to perform. In such cases the performing party is faced with the decision of going
forward with its own performance at a potentially great loss, or ceasing to perform and
facing the consequences of potentially being in breach. If the doubtful party goes forward
with performance the seller risks production and delivery costs and the buyer assumes the
risk of not getting the delivery but turning down other offers.
Prior to the U.C.C., such situations of uncertainty were governed by the common law
doctrine of repudiation.2 Under the doctrine of anticipatory repudiation, once a party
made it clear that it was no longer willing or able to perform under the contract, the other
party may treat the contract as if it is repudiated. Anything short of a clear and unequivocal
declaration from the repudiating party that it indeed was no longer going to perform its
obligations left the other party still stuck in the mire of uncertainty as to whether it should
treat the contract as repudiated.3
The U.C.C. offers an innovative, yet imperfect solution to the uncertainty problem of
whether a party has or intends to repudiate. U.C.C. § 2-609 offers a combination of three
measures – (1) the right to suspend one’s performance including the preparations necessary
for the performance, (2) the right to require adequate assurances of performance, and
finally, (3) the ability to treat the contract as broken if the demands are not met.4 Thus,
U.C.C. § 2-609 gives a party in doubt the ability to put a choice to its contracting partner

1 U.C.C. § 2-609 cmt. 1.

2 Roehm v. Horst 178 U.S. 1, 13 (U.S. 1900); Masterton & Smith v. City of Brooklyn 7 Hill 61 (N.Y.Sup. 1845);
Hochster v. De la Tour, 118 Eng. Rep. 922 (Q.B. 1853); Keith A. Rowley, A Brief History of Anticipatory
Repudiation in American Contract Law, 69 U. Cin. L. Rev. 565, 565-639 (2001) (chronicling pre-Code
repudiation cases); Samuel Williston, Repudiation of Contracts (Part II), 14 Harv. L. Rev. 421 (1901); White
& Summers, supra Ch. 2, note 7, § 7-2.
3 Restatement (First) of Contracts § 318 (1932); Perillo, supra Ch. 2, note 39, at § 12.2(a).
4 U.C.C. §§ 2-609, 2-609 cmt. 2.

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– either give an adequate assurance that you will perform or be deemed to have repudiated
the contract.5
The official comments to U.C.C. § 2-610, which covers anticipatory repudiation,
optimistically begin by declaring that “the problem of insecurity” over performance is
“taken care of by the preceding Section”.6 The aim of U.C.C. § 2-609 is certainly to alleviate
insecurity; however, it raises several of its own thorny issues. These issues are explored in
this chapter. In order to be entitled to suspend performance there must be reasonable
grounds for insecurity regarding the other party’s performance, and the insecure party
must demand in writing adequate assurance of future performance.7 The issue of whether
a party has reasonable grounds for insecurity has promulgated a number of cases, which
are surveyed below. While the issue of whether reasonable grounds for insecurity exists is
the most frequently litigated under U.C.C. § 2-609, there are additional uncertainties
inherent in the text. A party is permitted to suspend performance only if the suspension
is ‘commercially reasonable’. Typically, courts have held that such a suspension is commer-
cially reasonable so long as there was a reasonable ground for the insecurity, and thus
generally do not analyse the question of commercial reasonability separately.8
Another issue that has caused some debate among academics, but rarely comes up in
court practice is the issue of what is meant by ‘due performance’ when a party demands
adequate assurance of due performance. A minority view has put forward the position
that due performance is not total performance, but rather performance that does not
substantially impair the value of the contract, borrowing this standard from the language
used in the following U.C.C. section on anticipatory repudiation.9 However, given the
emphasis in the commentary to U.C.C. § 2-609 on the importance of receiving the promised
performance, the majority, and more reasonable approach, is that due performance con-
templates total performance by the party that has been requested to give assurances.10

5 Atwood-Kellogg, Inc. v. Nickeson Farms 602 N.W.2d 749, 753 (S.D. 1999); Cole v. Melvin 441 F.Supp. 193
(D.C.S.D. 1977); R.J. Robertson, The Right to Demand Adequate Assurance of Due Performance: Uniform
Commercial Code Section 2-609 and Restatement (Second) of Contracts Section 251, 38 Drake L. Rev. 305,
324 (1988-1989).
6 U.C.C. § 2-610 cmt. 1.
7 U.C.C. § 2-609.
8 SAVA gumarska in kemijska industria d.d. v. Advanced Polymer Sciences, Inc. 128 S.W.3d 304, 315 (Tex.App.
2004); Turntables, Inc. v. Gestetner 382 N.Y.S.2d 798, 799 (N.Y.A.D. 1976); ARB (American Research Bureau),
Inc. v. E-Systems, Inc. 663 F.2d 189, 196 (C.A.D.C. 1980); See Robertson, supra note 5, at 339.
9 Marc W. Sargis, The Uniform Commercial Code Section 2-609: A Return to Certainty, 14 J. Marshall L. Rev.
113, 122-23 (1980-1981); Ralph D. Smith, Commercial Law - Uniform Commercial Code- Section 2-609: Right
to Adequate Assurance of Performance, 7 Nat. Resources J. 397, 400-402 (1967).
10 Arthur Anderson, Repudiation of a Contract under the Uniform Commercial Code, 14 DePaul L. Rev. 1, 7-8
(1964-1965); Robertson, supra note 5, at 331-332.

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 15 Suspension of Performance and Adequate Assurances

The following sections examine when a party is entitled to demand adequate assurances
and what circumstances justify the suspension of performance so that the suspending party
is not in breach of its obligations.

15.1 Reasonable Grounds for Insecurity

Suspension of performance based on insufficient grounds for insecurity puts the suspending
party in breach of its obligations. Therefore, determination of what grounds are sufficient
to justify insecurity is very important; however, it is not always clear. What constitutes
reasonable grounds for insecurity is an issue of fact.11
While the reasonableness of the insecurity is decided on a case-by-case basis, there are
several general rules that can be discerned. The U.C.C. calls for an objective commercial
standard to evaluate whether a party had reasonable grounds for insecurity. Courts conduct
an examination of whether there exists an objective factual basis or rather whether a party
is merely conjecturing based on nerves or subjective fears.12 Often one of the factors in
this analysis is consideration of the past dealings between the parties, as well as their
respective experiences and sophistication. In Universal Resources Corp., the Fifth Circuit
did not recognize as reasonable an insecurity that “arose from purely subjective evaluations
and projections and was not based on any objective, identifiable conduct”. In that case an
experienced buyer based its insecurity on an independent field study of one of the seller’s
reservoirs.13
However, this objective standard contains a subjective element. If a promisee has special
knowledge about the promisor’s ability to perform, then it is not entitled to demand
assurance even though the average promisee without such knowledge would be justified
in doing so.14 Even if the information on which the insecurity is based turns out to be false,
it can still be the cause for the reasonable insecurity.15 The insecurity need not arise from

11 AMF, Inc. v. McDonald’s Corp. 536 F.2d 1167, 1170 (7th Cir.1976); SPS Industries, Inc. v. Atlantic Steel Co.
186 Ga.App. 94, 97 (Ga.App. 1988).
12 Top of Iowa Co-op. v. Sime Farms, Inc. 608 N.W.2d 454, 466 (Iowa 2000); Campbell v. Mark Hotel Sponsor,
LLC 2012 WL 3577531, *14 (S.D.N.Y. 2012) (plaintiff failed “to explain how the existence of contractually
contemplated circumstances justifies her demand for financial assurances” and is therefore not justified in
demanding adequate assurances); Cherwell-Ralli, Inc. v. Rytman Grain Co., Inc. 180 Conn. 714, 719-720
(Conn. 1980); Cole v. Melvin 441 F.Supp. 193, 203 (D.C.S.D. 1977) (plaintiff’s insecurity “was prompted by
purely subjective concerns which were not rooted in any objective facts”; therefore insecurity was not reas-
onable and defendant had no obligation to supply adequate assurances); Robertson, supra note 5, at 322.
13 Universal Resources Corp. v. Panhandle Eastern Pipe Line Co. 813 F.2d 77, 79 (5th Cir. 1987); SPS Industries,
Inc. v. Atlantic Steel Co. 186 Ga.App. 94, 97 (Ga.App. 1988).
14 Robertson, supra note 5, at 307.
15 U.C.C. § 2-609 cmt. 4; Clem Perrin Marine Towing, Inc. v. Panama Canal Co. 730 F.2d 186, 191 (5th Cir.
1984).

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Modern Law of Sales in the United States

the contract in question or from circumstances surrounding the parties themselves, but
the insecurity must be about the contract at hand.16
Also relevant in the determination of whether the insecurity is reasonable is the time
that facts on which the insecurity is based arose or came to light. An insecure party may
only rely on facts that come to light after the conclusion of the contract as its basis for
reasonable insecurity.17 Such a rule ensures that parties cannot misuse the protection of
U.C.C. § 2-609 in order to renegotiate the contract.18
Another issue of timing relevant to the reasonableness of insecurity is at what point
between the conclusion of the contract and the point when performance is due is it reas-
onable to become insecure that the performance will not be tendered. All contracts come
with certain risks, but the purpose of U.C.C. § 2-609 is not to pacify all nervous parties.
While it is not necessary for a party to wait until after performance becomes due to demand
an assurance, the reasonableness of the demand is connected to when it is made. If a
demand is made much in advance, a court will examine whether the time for a weary party
to make alternative arrangements is running out as well as whether the time for the
necessary cure or adjustments is close to the amount of time between the demand and the
deadline for performance. In By-Lo Oil Co., Inc. v. Partech, Inc., the Sixth Circuit held that
a demand for assurance issued in January 1998 over concern about the Y2K millennium
bug19 in a sale of software was not based on a reasonable insecurity, especially in light of
the fact that the contracting partner has proved reliable in the past.20
If the facts that the demanding party uses as the grounds for its insecurity should have
been known prior to the conclusion of the contract, but only come to light after, it has
been held that reasonable grounds for insecurity can exist. In Creusot-Loire Intern., Inc.
the court held that a buyer who discovered after the conclusion of the contract that the

16 Top of Iowa Co-op. v. Sime Farms, Inc. 608 N.W.2d 454, 467 (Iowa 2000)(finding that there was sufficient
evidence to generate a jury question whether there were reasonable grounds for insecurity based upon “the
market conditions existing in June 1996, combined with the widely-publicized statements that HTA contracts
were illegal and unenforceable”); Green Const. Co. v. First Indem. of America Ins. Co. 735 F.Supp. 1254, 1263
(D.N.J. 1990); Toppert v. Bunge Corp. 60 Ill.App.3d 607 (Ill.App. 1978); Northwest Lumber Sales, Inc. v.
Continental Forest Products, Inc. 261 Or. 480, 492 (Or. 1972).
17 U.C.C. § 2-609 cmt. 3; By-Lo Oil Co., Inc. v. Partech, Inc. 11 Fed.Appx. 538, 544 (6th Cir. 2001); Universal
Resources Corp. v. Panhandle Eastern Pipe Line Co. 813 F.2d 77, 79 (5th Cir. 1987); Matthew C. Brenneman,
Annotation, Sales: What Constitutes “Reasonable Grounds For Insecurity” Justifying Demand For Adequate
Assurance Of Performance Under UCC § 2-609, 37 A.L.R.5th 459 (1996).
18 Robertson, supra note 5, at 307.
19 “The ‘Y2K Bug’, also called Year 2000 Bug or Millennium Bug, a problem in the coding of computerized
systems that was projected to create havoc in computers and computer networks around the world at the
beginning of the year 2000…After more than a year of international alarm, feverish preparations, and pro-
gramming corrections, few major failures occurred in the transition from December 31, 1999, to January 1,
2000.” From Encyclopedia Britannica Online, available at <www.britannica.com/EBchecked/topic/382740/
Y2K-bug> (last visited 26 April 2014).
20 By-Lo Oil Co., Inc. v. Partech, Inc. 11 Fed.Appx. 538, 544 (6th Cir. 2001).

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 15 Suspension of Performance and Adequate Assurances

seller had delivered non-conforming goods in the past prior to the conclusion of the contract
has reasonable grounds for insecurity.21
Finally, consideration is given to the reliability of the source from which the information
came. For example, information regarding a change in the financial position of one of the
parties from a third party that would have intimate details of the contract and relationship
between the parties has been found to be a source from which reasonable grounds for
insecurity can be based.22 On the other hand, in Cherwell-Ralli, Inc. v. Rytman Grain Co.,
Inc, a buyer was not excused from performance after a truck driver informed him that a
present shipment would be his last load, especially when the presidents of both parties
assured each other of continued performance.23

15.1.1 Causes of Insecurity

For the uncertain seller the greatest cause of insecurity is the buyer’s ability, or rather
inability, to pay for the goods. Therefore, sellers most frequently employ U.C.C. § 2-609
in credit sales and installment contracts.24 A clear-cut case of grounds for reasonable
uncertainty is in the case of a buyer falling behind on payments for goods already delivered
under the contract at issue.25 If the buyer refuses to pay for conforming deliveries, the seller
is justified in suspending deliveries, even if the deliveries are under separate contracts.26
However, the situation is different if the seller has breached the contract and the buyer has
justifiably withheld payment, as stopping performance then while awaiting adequate
assurance would constitute anticipatory repudiation.27
While the seller’s insecurity is typically confined to the issue of payment, a buyer may
be insecure as to whether a seller will deliver goods at all, deliver the goods on time or
whether the seller will deliver non-conforming goods.28 If the cause of the buyer’s insecurity
relates to the availability or adequacy of the seller’s source of supply, courts distinguish

21 U.C.C. § 2-609 cmt. 3; Creusot-Loire Intern., Inc. v. Coppus Engineering Corp. 585 F.Supp. 45, 49 (D.C.N.Y.
1983).
22 U.C.C. § 2-609 cmt. 3; Clem Perrin Marine Towing, Inc. v. Panama Canal Co. 730 F.2d 186, 191 (5th Cir.
1984).
23 Cherwell-Ralli, Inc. v. Rytman Grain Co., Inc. 180 Conn. 714 (Conn. 1980).
24 Robertson, supra note 5, at 326-327.
25 International Therapeutics, Inc. v. McGraw-Edison Co. 721 F.2d 488, 492 (5th Cir. 1983); In re Amica, Inc.
135 B.R. 534, 550 (Bkrtcy.N.D.Ill. 1992); Kunian v. Development Corp. of America 165 Conn. 300, 312-313
(Conn. 1973).
26 U.C.C. § 2-609 cmt. 3; National Farmers Organization v. Bartlett & Co., Grain 560 F.2d 1350, 1355 (8th Cir.
1977).
27 UMIC Government Securities, Inc. v. Pioneer Mortg. Co. 707 F.2d 251, 254 (6th Cir. 1983); National Farmers
Organization v. Coast Trading Co., Inc. 488 F.Supp. 944, 951 (D.C.Or. 1977).
28 LNS Inv. Co., Inc. v. Phillips 66 Co. 731 F.Supp. 1484, 1487 (D.Kan. 1990) (seller’s delivery of non-conforming
goods routinely leads to findings that the buyer has reasonable ground for insecurity).

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between cases in which the parties contemplate a specific source and those in which no
such source was agreed upon. In cases where both the buyer and the seller understand that
the goods are to come from a specific source, and the buyer has reliable information that
that source is unavailable or insufficient, assuming that the buyer has not assumed such
risk at the time the contract was concluded, then there are reasonable grounds for insecur-
ity.29 On the other hand when no specific source is contemplated by the parties, the infor-
mation that one of several potential sources is unavailable or inadequate does not constitute
reasonable grounds for uncertainty.30
Another source of consternation for a buyer may be the fact that goods are subject to
a third party security interest. The court in Clem Perrin Marine Towing, Inc. v. Panama
Canal Co. held that the buyer had justifiable grounds for insecurity when goods were
identified to the contract and the seller failed to pay a debt to a third party that was secured
by those same goods.31

15.2 Adequacy of the Assurance

Once it is established that there are reasonable grounds for insecurity, the question arises
as to what assurance is adequate to satisfy the requirements of U.C.C. § 2-609 and prevent
the demanding party from being able to treat the contract as repudiated. Whether an
assurance is adequate is a question of fact.32 Evaluation of the assurance begins by consulting
the source of the insecurity. If the insecurity stems from reliable information from a third
party, simply proving that information is false suffices as an adequate assurance. If, however,
one party is insecure as a result of its contracting partner’s past failure to render perfor-
mance, the only adequate assurance can be in the form of a prompt promise to cure or
actual cure itself.33
Of course, the U.C.C. does not provide a specific definition of adequate assurance,
stating instead that when both parties to a contract are merchants the standard for what
counts as an ‘adequate assurance’ for the purpose of U.C.C. § 2-609 is that of a commercial
standard.34 Courts are directed to use the same test of the factual conditions to determine
whether an assurance is adequate as is used to determine whether insecurity is reasonable.35

29 Robertson, supra note 5, at 322.

30 In re Coast Trading Co., Inc. 26 B.R. 737, 740 (Bkrtcy.D.Or.1982).
31 Clem Perrin Marine Towing, Inc. v. Panama Canal Co. 730 F.2d 186 (5th Cir. 1984).
32 S & S, Inc. v. Meyer 478 N.W.2d 857, 863 (Iowa App. 1991); American Bronze Corp. v. Streamway Products
8 Ohio App.3d 223, 230 (Ohio App. 1982).
33 U.C.C. § 2-609 cmt. 4; American Bronze Corp. v. Streamway Products 8 Ohio App.3d 223, 231 (Ohio App.
1982); Robertson, supra note 5, at 345.
34 U.C.C. § 2-609(2).
35 U.C.C. § 2-609 cmt. 4; LNS Inv. Co., Inc. v. Phillips 66 Co. 731 F.Supp. 1484, 1487-1488 (D.Kan. 1990);
American Bronze Corp. v. Streamway Products 8 Ohio App.3d 223, 230 (Ohio App. 1982).

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 15 Suspension of Performance and Adequate Assurances

Thus courts look at the conduct of the party that was requested to provide assurances in
light of the source of the requesting party’s insecurity.
In some cases an insecure party may demand excessive assurance of performance,
asking the other party to go above and beyond to demonstrate its ability to perform.
However, an insecure party is only entitled to assurances of the originally contracted for
performance.36 In an often-cited case, Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor
Water Co., the Seventh Circuit has said of U.C.C. § 2-609 that it is a “protective device
when reasonable grounds for insecurity arise; it is not a pen for rewriting a contract in the
absence of those reasonable grounds….”37 If the demanding party withholds performance
awaiting the excessive performance, they will be found to have repudiated the contract.38

15.2.1 The Demand

Not every statement made by an insecure party constitutes a demand for assurance. For
example, by just requesting a meeting39 or information about a defective product40 the
insecure party did not make a demand for the purpose of securing an adequate assurance.
Other examples of communication that was found insufficient to constitute a demand for
assurance were an email inquiring whether there was a ‘production issue’41 as well as a
request that a party sign financial documents.42 It is safe to say that at a minimum the
demand for adequate assurance must indicate that one party is insecure about the perfor-
mance of the other and that the demanding party requires some showing that the promise
will be performed.43 Whether a demand for adequate assurance of performance was issued
is a question of fact.44
The U.C.C. requires that the demand must be in writing, but if it is not in writing courts
typically will not consider this fatal to the demand. Some courts have found that the failure
to put the demand in writing was fatal to the promisee invoking U.C.C. § 2-609.45 However,
more often, courts do not focus on the formal aspect of the demand, but rather whether

36 Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co. 532 F.2d 572 (7th Cir. 1976); Scott v. Crown
765 P.2d 1043, 1047 (Colo.App. 1988).
37 Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co. 532 F.2d 572, 582 (7th Cir. 1976).
38 Id.
39 Penberthy Electromelt Intern. Inc. v. U.S. Gypsum Co. 38 Wash.App. 514, 518-519 (Wash.App. 1984); Scott
v. Crown 765 P.2d 1043, 1046-1047 (Colo.App. 1988).
40 SPS Industries, Inc. v. Atlantic Steel Co. 366 S.E.2d 410, 414 (Ga.App. 1988).
41 Advanced Bodycare Solutions, LLC v. Thione Intern., Inc. 615 F.3d 1352 (11th Cir. 2010).
42 Automated Energy Systems, Inc. v. Fibers & Fabrics of Georgia, Inc. 164 Ga.App. 772 (Ga.App. 1982).
43 Robertson, supra note 5, at 333.
44 Atwood-Kellogg, Inc. v. Nickeson Farms 602 N.W.2d 749, 753 (S.D. 1999).
45 For courts finding a demand not in writing to be insufficient under section 2-609 see National Farmers
Organization v. Bartlett & Co., Grain 560 F.2d 1350, 1355 (8th Cir. 1977); National Ropes, Inc. v. National
Diving Service, Inc. 513 F.2d 53, 61 (5th Cir. 1975).

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the communication “provides a clear understanding of the insecure party’s intent to suspend
performance until receipt of adequate assurances from the other party.”46 The requirement
of writing marks a distinction between U.C.C. § 2-609 and the Second Restatement of
Contracts § 251, which is based on U.C.C. § 2-609. Unlike the U.C.C., the Second
Restatement does not require writing for the demand to be effective.

15.3 Repudiation

While U.C.C. § 2-609 provides a mechanism for parties to ascertain whether their contract-
ing partners have repudiated, failure to receive adequate assurances is not the only method
for determining whether repudiation has occurred. The U.C.C. provides the non-repudi-
ating party with three options – it may await the repudiating party’s performance for a
commercially reasonable time, resort to any of the appropriate remedies found in U.C.C.
§§ 2-703 through 2-711, or it may suspend its own performance. U.C.C. § 2-610 primarily
retains the common law rule and definition of repudiation, with its official commentary
emphasizing that repudiation “centers upon an overt communication of intention or an
action which renders performance impossible or demonstrates a clear determination not
to continue with performance”.47
In line with the U.C.C.’s preference for and common law tradition of preserving the
contract, courts tend to favour an interpretation of facts that preserve the contract, but
under certain circumstances it will be held that one party made an unequivocal repudi-
ation.48 Under both the U.C.C. and the Second Restatement, a party can repudiate verbally
or through actions.49 A verbal repudiation must be positive and unequivocal.50 The most
easily identifiable case of repudiation occurs when a party makes its own performance
irretrievably impossible.51 It is possible for a situation to arise when a willing party is forced
to repudiate because it finds itself unable to perform. Courts tend to be more generous to

46 AMF, Inc. v. McDonald’s Corp. 536 F.2d 1167, 1170-1171 (7th Cir. 1976); Atwood-Kellogg, Inc. v. Nickeson
Farms 602 N.W.2d 749, 753 (S.D. 1999); Scott v. Crown 765 P.2d 1043, 1046 (Colo. App. 1988); Kunian v.
Development Corp. of America 165 Conn. 300, 312-313 (Conn. 1973).
47 U.C.C. § 2-610 cmt. 1). See also Restatement (Second) of Contracts § 250 (1981); Black’s Law Dictionary
‘repudiation’ (9th ed. 2009) “A person’s refusal to accept a benefice. 2) A contracting party’s words or actions
that indicate an intention not to perform the contract in the future; a threatened breach of contract.”; Gov-
ernment of Republic of China v. Compass Communications Corp. 473 F.Supp. 1306, 1309 (D.C.D.C. 1979).
48 U.C.C. § 2-601 cmt. 1; White & Summers, supra Ch. 2, note 7, § 7-2 at 290. See Tenavision, Inc. v. Neuman
45 N.Y.2d 145, 150 (N.Y. 1978) (ample evidence to support clear and unequivocal communication of repu-
diation when defendant told plaintiff it would not accept delivery).
49 U.C.C. §§ 2-610 cmt. 1, 2-610 cmt. 2; Restatement (Second) of Contracts § 250 (1981).
50 U.C.C. § 2-610 cmt. 1.
51 Bonebrake v. Cox 499 F.2d 951, 961-962 (8th Cir. 1974); White & Summers, supra Ch. 2, note 7, § 7-2 at 279.

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the unwilling repudiator than to the willful breacher.52 This approach, while sympathetic
to the remorseful repudiator, raises questions of fairness towards the non-repudiating
party for whom the result of the breach is the same whether the repudiation was willful or
not.
Under U.C.C. § 2-609(4), if a party was justified in its insecurity and sent an appropriate
demand for assurance of performance and no such assurance was received within thirty
days, then the contract is de facto repudiated. The Second Restatement has added a provi-
sion similar to U.C.C. § 2-609, with the main difference that it allows the obligee to treat
the contract as repudiated if no assurance is made within a reasonable time under the cir-
cumstances, and does not set the thirty-day time limit found in the U.C.C.53
Cancellation of the contract by a party after the other party has materially breached
does not constitute repudiation,54 as once the breaching party has materially breached, the
non-breaching party is relieved of further performance obligations. This is a distinct situ-
ation, not to be confused with repudiation.

15.3.1 Revoking Repudiation

Depending on the actions already taken by the non-repudiating party, a repudiating party
may revoke its repudiation for performance not yet due. This is only possible if the non-
repudiating party has not yet cancelled the contract, materially changed its position or
otherwise indicated that it considers the repudiation final.55 The repudiator can retract by
any method that clearly indicates it intends to perform – this includes a straightforward
verbal indication ‘I will perform’ or communication of the facts that put it back in the
position to be able to perform.56 Retraction of a repudiation that occurred automatically
due to a failure to provide adequate assurance under U.C.C. § 2–609 must be accompanied
by the demanded assurance.57

52 White & Summers, supra Ch. 2, note 7, § 7-2 at 282. See Blue Creek Farm, Inc. v. Aurora Co-op. Elevator Co.
259 Neb. 1032, 1036 (Neb. 2000) (finding no evidence of repudiation as a matter of law from letter indicating
promisor intended to perform but performance had to be delayed by thirty days).
53 Restatement (Second) of Contracts § 251 (1981).
54 Mayflower Farms v. Tech-Mark, Inc. 64 Or.App. 121, 125-126 (Or.App. 1983); White & Summers, supra Ch.
2, note 7, § 7-2 at 282.
55 U.C.C. § 2-611(1).
56 U.C.C. § 2- 611(2).
57 Id.

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16 Avoidance

The term avoidance here is used to indicate the situation in which the parties to the contract
free themselves from the obligations and benefits due under the agreement. The U.C.C.’s
most comparable actions to avoiding the contract under the CISG are the buyer’s rights
to rejection and revocation of acceptance under certain circumstances. Important to this
conversation as well are the concept of the seller’s right to cure defects in tender and con-
formity, and the legal concept of acceptance. Generally, these self-help remedies allow the
buyer to return the goods and free itself from the obligation to pay the price, or entitle it
to recover any portion of the price already paid.

16.1 Buyer’s Right to Reject the Goods

Buyers are not required to keep or pay for goods or performance that fails to conform to
the performance that was agreed upon. While rejection is not explicitly defined in the
U.C.C., it can be understood as a combination of the buyer’s refusal to keep the delivered
goods plus notification to the seller that the buyer will not keep the goods.1 Partial rejection
is permitted when the non-conformity affects only part of the goods.2 A proper rejection
frees the buyer from paying the price. The right to reject the goods encompasses four
requirements – (1) there is no acceptance, (2) the goods or the tender do not conform, (3)
there is no rightful and effective cure by the seller, and (4) there is no term in the contract
prohibiting rejection.3

16.1.1 Acceptance

The first requirement, that there is no acceptance, is a pivotal one.4 Acceptance is the
default. It is presumed that the buyer has accepted the tender of the goods unless it takes
‘affirmative action’ to reject.5 This is true even if the goods are wholly non-conforming.
Acceptance and rejection are different sides of the same coin. Konitz v. Claver offers an
illustration of how the concepts of acceptance and rejection work together.6 The buyer’s
inspection, processing and continued use of the goods constituted statutory acceptance

1 See above paras. under Section 13.2. et seq.; White & Summers, supra Ch. 2, note 7, § 9-1.
2 U.C.C. § 2-601(c).
3 U.C.C. §§ 2-601, 2-602, 2-508, 2-612.
4 For the methods of acceptance see above para. under Section 11.1.
5 U.C.C. § 2-602 cmt. 1.
6 Konitz v. Claver 287 Mont. 301 (Mont. 1998).

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Modern Law of Sales in the United States

of them under U.C.C. § 2-606(1), and his mere statements at trial that he gave notice of
rejection were not enough to overcome his actions. Thus, the Supreme Court of Montana
found that the defendant buyer had accepted the goods as a matter of law, even if the
timber at issue was non-conforming, and consequently he was responsible for the purchase
price.7 Acceptance occurs when the buyer affirmatively accepts through its words, or it
can passively accept through conduct inconsistent with the seller’s ownership, as was the
case in Konitz.

16.1.2 Non-Conformity

A buyer has the right to reject when either the goods or the tender does not conform to
the contract.8 Just as a buyer is not required to accept goods of the wrong quality or
quantity, it also need not accept goods delivered late or in a manner incompatible with
the contemplated performance. The standard for determining whether the goods do not
conform to the extent that right to reject becomes available depends on the type of contract
between the parties. The standard of perfect tender applies to one-shot contracts. Under
U.C.C. § 2-601 a buyer may reject the goods if they fail to conform in any respect to the
contract; the non-conformity may be with the goods or with the tender. The second
standard is that for instalment contracts, found in U.C.C. § 2-612, wherein the buyer may
reject the goods only if they are ‘substantially’ non-conforming.

16.1.2.1 The Perfect Tender Rule

The U.C.C. retains the common law rule of perfect tender in U.C.C. § 2-601.9 However,
from the internal U.C.C. limitations, such as the seller’s right to cure, as well as the devel-
opment of case law, it is clear that the harsh perfect tender rule of old has been largely
declawed. Indeed such a harsh rule in the first place, which would allow any immaterial
or minor discrepancy to serve as a basis for rejection, seems to betray the cornerstone
principles of the U.C.C., particularly the requirement of good faith.10 Far from a blank
cheque to reject goods for the slightest deviation from the agreement, the perfect tender
rule is subject to several discernible limitations.

7 Konitz v. Claver 287 Mont. 301, 308 (Mont. 1998). See U.C.C. § 2-606; Midwest Hatchery & Poultry Farms,
Inc. v. Doorenbos Poultry, Inc. 783 N.W.2d 56, 61 (Iowa App. 2010) (egg farm accepted hens that were
younger than called for by contract when they kept the hens and eventually used their eggs).
8 U.C.C. § 2-601.
9 Mitsubishi Goshi Kaisha v. J. Aron & Co. 16 F.2d 185, 186 (2d Cir. 1926) (“There is no room in commercial
contracts for the doctrine of substantial performance.”). See also Moulton Cavity & Mold, Inc. v. Lyn-Flex
Industries, Inc. 396 A.2d 1024, 1027 (Me. 1979); Smith, Fitzmaurice Co. v. Harris 138 A. 389, 391 (Me. 1927).
10 GE Packaged Power, Inc. v. Readiness Management Support, L.C. 510 F.Supp.2d 1124, 1133 (N.D.Ga. 2007)
(rejection of non-conforming goods must be made in good faith); Y & N Furniture, Inc. v. Nwabuoku 190
Misc.2d 402, 404 (N.Y.City Civ.Ct. 2001).

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 16 Avoidance

First, as mentioned, the standard of failure to conform in any respect only applies to
one-shot contracts.11 Therefore, in any transaction where more than one delivery is con-
templated, the more generous substantial impairment standard applies. Furthermore,
pursuant to U.C.C. § 2-504 rejection for failure to notify the buyer of shipment or failure
to make a proper shipment contract is permitted only when such failures result in material
losses or delays.12 The perfect tender rule is further limited by the seller’s right to cure.13
Pursuant to U.C.C. § 2-508, the seller has the right in several circumstances to correct
deficiencies in its performance so that the contract may be upheld.
Given these limitations, as well as the clear judicial trend, removal of the perfect tender
rule from U.C.C. § 2-601 would have little impact on modern commercial practice.14 A
replacement by the substantial impairment standard would be a practical and contemporary
solution. It would also be in line with international practice, which has abandoned the
perfect tender rule as well.15

16.1.2.2 Substantial Impairment and Instalment Contracts

U.C.C. § 2-612 provides that a buyer may reject goods that are the subject of an instalment
contract only when there is an incurable non-conformity that substantially impairs the
value of the goods to the buyer. An instalment contract “requires or authorizes the delivery
of goods in separate lots to be separately accepted, even though the contract contains a
clause ‘each delivery is a separate contract’ or its equivalent”.16 The question of whether a
contract is an instalment contract is a question of fact, and its determination can have a
great impact for the parties.17 A buyer may argue that a contract was not an instalment
contract and is thus entitled to perfect tender, while the seller would defend and argue that
it was just exercising its right to deliver in several lots under the appropriate circumstances
as permitted by U.C.C. § 2-307. Siding with the buyer would mean that the seller would
be liable for even a minor delay resulting in no loss or prejudice to the buyer.18
While the U.C.C. does not expressly define substantial impairment, its meaning is
comparable to the common law doctrine of material breach found in the Second Restate-

11 U.C.C. § 2-601 begins, “Subject to the provisions of this Article on breach in installment contracts…”
12 U.C.C. § 2-505(2).
13 For the seller’s right to cure see below paras. under Section 16.3. et seq.
14 White & Summers, supra Ch. 2, note 7, § 9-3.
15 CISG Article 25 requires a fundamental breach, and UNIDROIT PICC (2010) Article 7.3.1 requires funda-
mental non-performance.
16 U.C.C. § 2-612(1).
17 Stinnes Interoil, Inc. v. Apex Oil Co. 604 F.Supp. 978, 980-981 (D.C.N.Y. 1985).
18 Stinnes Interoil, Inc. v. Apex Oil Co. 604 F.Supp. 978, 980-981 (D.C.N.Y.1985) (whether delivery in several
lots constituted an instalment contract was a question of fact to be proved by the plaintiff claiming perfect
tender applied).

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ment of Contracts.19 The Second Restatement uses the language of a material failure of a
party’s performance20 and lists the relevant factors to consider in determining whether
there has been a material failure, including the extent to which the injured party will be
deprived of the benefit that it reasonably expected; the extent to which the injured party
can be compensated for the benefit of which he will be deprived; the extent of forfeiture
the breaching party will suffer; the likelihood that the breaching party will cure; and whether
the breaching party’s behavior comports with standards of good faith and fair dealing.21
This standard of material breach is comparable to the CISG’s concept of fundamental
breach found in Article 25. Under Article 25 of the CISG, a party has committed a funda-
mental breach if its actions substantially deprive the other party of what it is entitled to
expect under the contract, subject to the limitation of foreseeability.
The buyer’s rejection can occur in two ways under U.C.C. § 2-612. The buyer can reject
either a particular instalment that substantially fails to conform and is incurable (U.C.C.
§ 2-612(2)) or all subsequent instalments, effectively cancelling the entire contract if the
non-conformity substantially impairs the value of the whole contract (U.C.C. § 2-612(3)).
Under the first situation – rejection of a single instalment under U.C.C. § 2-612(2) – only
a few cases arise. In these cases, the requirement that the defect be non-curable by the seller
often proves fatal as the buyer is required to accept if the seller gives adequate assurances
of cure.22
By and large the more problematic section is U.C.C. § 2-612(3), which allows the buyer
to reject subsequent instalments and cancel executory portions of the contract when “one
or more of the installments substantially impairs the value of the whole”. What constitutes
‘substantial impairment of the whole’ leaves much more room for different interpretations
and litigation.
Midwest Mobile Diagnostic Imaging, L.L.C. v. Dynamics Corp. of America analyses both
rejection under U.C.C. § 2-612(2) and cancellation of the whole contract under U.C.C. §

19 Restatement (Second) of Contracts §§ 237, 241 (1981); International Production Specialists, Inc. v. Schwing
America, Inc. 580 F.3d 587, 595 (7th Cir. 2009) (describing a material breach as a breach that “destroys the
essential object of the agreement or deprives the non-breaching party of a benefit that the party reasonably
expected” and releases the non-breaching party from its obligations under the contract); Midwest Mobile
Diagnostic Imaging, L.L.C. v. Dynamics Corp. of America 965 F.Supp. 1003, 1013 (W.D.Mich. 1997) (“whether
non-conformity rises to the level of substantial impairment may be judged by reference to the concept of
material breach under traditional contract law”).
20 Restatement (Second) of Contracts § 237 (1981).
21 Restatement (Second) of Contracts § 241 (1981).
22 See e.g. Extrusion Painting, Inc. v. Awnings Unlimited, Inc. 37 F.Supp.2d 985 (E.D.Mich.1999) (factual issue
exists as to whether there was a non-conformity and whether it substantially impaired the value of the whole
or of a single instalment).

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 16 Avoidance

2-612(3).23 In this frequently cited case,24 the plaintiff buyer contracted to buy four custom-
built mobile MRI trailers. Two days before delivery was due, upon inspection of the first
trailer, it was clear that the trailer would not conform to the sales agreement. As required
by the U.C.C., the buyer allowed the seller a reasonable time to cure. However, after the
period for cure passed, the trailer still did not meet the buyer’s needs or specifications, and
the court found that the defects substantially impaired the value of the trailer and that the
buyer was within its rights to reject under U.C.C. § 2-612(2). The court emphasized that
at that time the seller made no adequate assurance of additional cure, and even denied the
existence of the defect and explicitly stated it would take no more steps towards cure. The
buyer rejected the first instalment and cancelled the entire contract, which the court found
to be proper because one of the primary purposes of the contract was to meet the buyer’s
growing demand for services and timely completion was essential, and thus the significant
delay and breach would have had an adverse effect on the entire contract. In determining
whether the breach substantially impairs the value of the whole contract the question must
be of “present breach which focuses on the importance of the non-conforming installment
relative to the contract as a whole”, rather than “the intent or likelihood that future deliv-
eries will also be defective”.25 If non-conformity makes the buyer insecure but does not
impair the value of the entire contract, the buyer has the right to demand adequate assurance
of performance but not to cancel the entire contract.26
It is possible to reinstate the contract under U.C.C. § 2-612(3) when a party invokes
the section but has accepted non-conforming performance or brings an action only for
past instalments or demands any future performance regarding further deliveries, in spite
of any potential breach that may have affected the entire contract.27

16.1.3 Procedural Requirements for Effective Rejection

Complying with the procedural requirements of U.C.C. § 2-602 is critical for the rejecting
buyer, as failure to do so can result in an ineffective rejection that would leave the buyer
with the goods and responsible for the purchase price, even if the goods are non-conform-

23 Midwest Mobile Diagnostic Imaging, L.L.C. v. Dynamics Corp. of America 965 F.Supp. 1003, 1016 (W.D.Mich.
1997).
24 See Arthur Glick Truck Sales, Inc. v. Stuphen East Corp. 2013 WL 4028184 (S.D.N.Y. 2013); Majic Window
Co. v. Milgard Windows 63 UCC Rep.Serv.2d 679 (E.D.Mich. 2007); Bayer Corp. v. DX Terminals, Ltd. 214
S.W.3d 586 (Tex.App. 2006); Extrusion Painting, Inc. v. Awnings Unlimited, Inc. 37 F.Supp.2d 985 (E.D.Mich.
1999).
25 Midwest Mobile Diagnostic Imaging, L.L.C. v. Dynamics Corp. of America 965 F.Supp. 1003, 1016 (W.D.Mich.
1997).
26 Id. See the preceeding chapter for discussion of adequate assurances.
27 Mextel, Inc. v. Air-Shields, Inc. 2005 WL 226112, *25 (E.D.Pa. 2005); Traynor v. Walters 342 F.Supp. 455,
461 (D.C.Pa. 1972).

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ing.28 There are two procedural requirements for an effective rejection – the rejection must
be timely, and the buyer must seasonably notify the seller of the rejection. The notice
requirement is meant to give the seller an opportunity to cure and minimize any losses,
as well as for the buyer to be able to return the goods quickly before any depreciation takes
place.29
Of course, the U.C.C. points to the particulars of each case in determining whether a
rejection is timely, instructing one to consider the “nature, purpose and circumstances of
the action”.30 Professors White and Summers have identified four factors that courts cite
as the most relevant in determining whether a rejection was timely – first, the difficulty
identifying the defect; second, the terms of the contract; third, the perishability of the
goods; and finally, the course of performance after the sale but before the rejection.31

16.1.4 Effect of Buyer’s Rejection

If the buyer’s rejection of the goods is both justified and effective pursuant to the procedural
requirements described above, the buyer no longer has any right to exercise ownership
over the goods and no further obligations with regard to them. It is only necessary for the
buyer to hold the goods with reasonable care at the seller’s disposition for a time sufficient
to permit the seller to remove them.32

16.2 Buyer’s Right to Revoke Acceptance of the Goods

Even after a buyer has accepted goods, and the time for rejection has passed, the U.C.C.
permits revocation of acceptance in certain circumstances. The effect of a proper revocation
of acceptance is the same as an effective rejection – the buyer is no longer responsible for
the goods, and the seller is entitled to return of the purchase price. Pursuant to U.C.C. §
2-608, a buyer may revoke its acceptance of a “lot or commercial unit whose non conformity
substantially impairs the value to him…”33 if either it accepted on the reasonable assumption

28 See Gulf Trading Corp. v. National Enterprises of St. Croix, Inc. 912 F.Supp. 177, 181 (D.Virgin Islands 1996);
White & Summers, supra Ch. 2, note 7, § 9-3(e).
29 White & Summers, supra Ch. 2, note 7, § 9-3(e).
30 U.C.C. § 1-205(a).
31 White & Summers, supra Ch. 2, note 7, § 9-3(e). For cases citing White and Summer’s four factors in their
analysis of timely rejection see Figueroa v. Kit-San Co., 123 Idaho 149, 158 (Idaho App. 1992); Henley Supply
Co., Inc. v. Universal Constructors, Inc. 1989 WL 31620, *7 (Tenn.App. 1989); Bowlin’s, Inc. v. Ramsey Oil
Co., Inc. 662 P.2d 661, 670-671 (N.M.App. 1983); EPN-Delaval, S.A. v. Inter-Equip, Inc. 542 F.Supp. 238,
247 (S.D.Tex. 1982).
32 U.C.C. § 2-602(2).
33 U.C.C. § 2-608(1).

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that the goods would be cured and were not seasonably cured34 or the acceptance was
reasonably induced by either the difficulty of discovery of the defect or the seller’s assur-
ances.35 Revocation must be within a reasonable time upon discovery of a defect or when
it should have been discovered, and the buyer must provide the seller with reasonable
notice.36
Revoking acceptance is not a measure to be taken lightly. It exists to protect the buyer
from becoming stuck with substantially non-conforming performance. However, this
protection must be weighed against the seller’s interest in certainty that once it tenders its
performance its obligations under the contract are released. When determining whether
it has the right to revoke, a buyer must consider whether it accepted before or after discov-
ering the defect. Acceptance after the defect was discovered, and not upon the reasonable
assumption that the seller would cure, precludes revocation of acceptance and requires
the buyer to turn to U.C.C. § 2-714’s remedies for breach of warranty. If the acceptance
was made prior to the discovery of the defect, the buyer must next consider whether the
defect was not discovered because of the difficulty in finding it, the assurances of the seller,
or the reasonable assumption of cure.37 A buyer who wrongfully or ineffectively revokes
acceptance breaches the contract and is liable for the purchase price to the seller.

16.2.1 Substantial Impairment under U.C.C. § 2-608

Because revocation is a more extreme measure than rejection, a buyer must demonstrate
a higher standard of showing non-conformity. The first place to look in determining
whether the non-conformity of the goods substantially impairs their value to the buyer is
of course the terms of the sales contract. Courts have looked to the same standard of
interpretation for the meaning of substantial impairment used in instalment contracts
under U.C.C. § 2-612 to analyse the magnitude of impairment necessary to justify revoking
acceptance.38
If the defects are relatively easy to repair, and the seller does indeed repair them, then
there is no substantial impairment under U.C.C. § 2-608, and the buyer is not entitled to
revoke.39 However, if the necessary repair requires major integral parts of the whole, the

34 U.C.C. § 2-608(1)(a).
35 U.C.C. § 2-608(1)(b).
36 U.C.C. § 2-608(2).
37 White & Summers, supra Ch. 2, note 7, § 9-4 at 428. See generally New Pacific Overseas Group (USA) Inc. v.
Excal Intern. Development Corp. 43 UCC Rep.Serv.2d 1149 (S.D.N.Y. 2001).
38 EOI Electronics, Inc. v. Xebec 785 F.2d 391 (2d Cir. 1986). See generally Lee R. Russ, Annotation, What
Constitutes “Substantial Impairment” Entitling Buyer To Revoke His Acceptance Of Goods Under UCC § 2-
608(1), 38 A.L.R. (5th) 191 (1996).
39 See Abele v. Bayliner Marine Corp. 11 F.Supp.2d 955, 961 (N.D. Ohio 1997); Pratt v. Winnebago Industries,
Inc. 463 F.Supp. 709, 714-715 (W.D.Penn. 1979).

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seller cannot bar revocation.40 Likewise, under the ‘enough is enough’ standard, too many
repairs can allow for proper revocation when the defect is in theory curable but cure
requires multiple attempts at repair.41 In evaluating the facts of such a case, the Mississippi
Supreme Court summarized the rule of ‘enough is enough’ thusly in Rester v. Morrow,
stating that “our law does not allow a seller to postpone revocation in perpetuity by fixing
everything that goes wrong with the automobile. There comes a time when enough is
enough – when an automobile purchaser, after having to take his car into the shop for
repairs an inordinate number of times and experiencing all of the attendant inconvenience,
is entitled to say, ‘That’s all’, and revoke, notwithstanding the seller’s repeated good faith
efforts to fix the car”.42
The U.C.C. requires not only substantial impairment to the value; it must be impairment
of the value to the buyer. The drafters somewhat cryptically added this ‘to him’ language,
which introduces a subjective element to what should be an objective test of evaluating
the severity of the non-conformity. Professors White and Summers call this hybrid
objective-subjective test “goofy” as it undermines what should be a purely objective evalu-
ation.43

16.2.2 Reasonable Assumption the Seller Would Cure

The buyer has the right to revoke if it reasonably assumes that the non-conformity will be
cured, thus begging the question of when it is reasonable to believe the non-conformity
will be cured.44 Probably the clearest answer is in cases when the seller says it will cure, but
cases are not always so clear-cut. If the goods are sold ‘as is’, the buyer will be precluded
from arguing that it reasonably assumed that the seller would cure.45 Triers of fact may
also look to past dealings between the parties or usage of trade. The nature of the goods

40 Zabriskie Chevrolet, Inc. v. Smith 99 N.J.Super. 441, 457 (N.J.Super.L. 1968) (establishing the ‘shaken faith
principle’ stating in dicta: “For a majority of people the purchase of a new car is a major investment,
rationalized by the peace of mind that flows from its dependability and safety. Once their faith is shaken,
the vehicle loses not only its real value in their eyes, but becomes an instrument whose integrity is substantially
impaired and whose operation is fraught with apprehension.”).
41 Bland v. Freightliner LLC 206 F.Supp.2d 1202 (M.D.Fla. 2002) (defects of a vehicle taken separately would
not be enough to permit a revocation of acceptance; however, plaintiffs’ evidence of 21 attempts to cure the
various defects “sufficiently demonstrated the substance of the impairment”); Wilk Paving, Inc. v. Southworth-
Milton, Inc. 162 Vt. 552, 556 (Vt. 1994); Oberg v. Phillips 615 P.2d 1022, 1025 (Okl.App. 1980); White &
Summers, supra Ch. 2, note 7, § 9-4 at 429.
42 Rester v. Morrow 491 So.2d 204, 210 (Miss.1986).
43 White & Summers, supra Ch. 2, note 7, § 9-4 at 430.
44 U.C.C. § 2-608(a). See GE Packaged Power, Inc. v. Readiness Management Support, L.C. 510 F.Supp.2d 1124,
1132-1133 (N.D.Ga. 2007).
45 Giallo v. New Piper Aircraft, Inc. 855 So.2d 1273, 1275-1276 (Fla.App. 2003).

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may also shed some light on this issue; for example, do the goods require post-delivery
adjustment or assembly.46

16.2.3 Failure to Discover the Defect

The second possibility to fulfil U.C.C. § 2-608’s requirements to revoke acceptance is if

the buyer fails to discover the defect before acceptance owing to either the difficulty of
discovery or the seller’s assurances.47 Obviously, if the defect was not discovered through
the buyer’s own failure to properly inspect, then the right to subsequently revoke is not
available. In J.F. Daley Intern., Ltd. v. Midwest Container and Indus. Supply Co. the Missouri
Appellate Court had to consider whether a buyer’s revocation of acceptance of plastic
bottles was proper in the light of the difficulty of discovering pin-sized holes in the bottles.48
In affirming the judgment for the buyer, the court considered three factors in reaching the
conclusion that the difficulty of discovering the defect justified the revocation. First, the
past practices between the parties never resulted in any such problem – the buyer had
ordered the same product from the seller in the past, and never experienced any such
problem. Second, the tests that would have been necessary to discover the defect were not
customary trade usage in the industry. Third, the tests that would have ultimately revealed
the extent of the defect would have required “hundreds of man hours”, and the expense
relative to the entire cost of the contract would have been prohibitive.49 Taken together,
these factors allowed the buyer to revoke its acceptance under U.C.C. § 2-608(1)(b). This
case is illustrative of the combination of factors that courts look to when determining
whether revocation was proper in the light of the difficulty of discovering a particular
defect.

16.2.4 Procedural Requirements for Revocation

The above section described the situations that would justify the revocation of acceptance
under U.C.C. § 2-608. In order for the revocation to free the buyer of its obligations under
the contract, it must not only be justified, but also effective pursuant to the following
procedural requirements. Of course, the time when revocation occurs is critical, and in
order to be effective must be made within a reasonable time after the non-conformity was
or should have been discovered, and effective notice must be given to the buyer.50 The

46 White & Summers, supra Ch. 2, note 7, § 9-4 at 430.

47 U.C.C. §§ 2-608(1)(b), 2-608 cmt. 3.
48 J.F. Daley Intern., Ltd. v. Midwest Container and Indus. Supply Co. 849 S.W.2d 260 (Mo.App. E.D. 1993).
49 Id at 264 – 265.
50 U.C.C. § 2-608(2).

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analysis for what constitutes a reasonable time under U.C.C. § 2-608(2) follows similar
policies and guidelines as that for timely rejection under U.C.C. § 2-607. The factors con-
sidered in determining the reasonableness of the time of discovery mirror those employed
in evaluating the reasonableness of the time for rejection – the difficulty of discovery, the
terms of the contract, the perishability of the goods, past dealings between the parties, and
the course of performance after the sale but before the revocation.51 According to comment
4 to U.C.C. § 2-608, “the reasonable time period should extend in most cases beyond the
time in which notification of breach must be given, beyond the time for discovery of non-
conformity after acceptance and beyond the time for rejection after tender.” The parties
may also limit the period by agreement, but an unreasonable time limit will be stricken as
unconscionable.52
Revocation is not effective until notice is given.53 The mere notification of a breach as
under U.C.C. § 2-607(3) is not enough. The minimum standard for proper U.C.C. § 2-
608(2) notice, between merchants, is that it must set forth the non-conformity in the goods
that substantially impairs the value to the buyer, and additionally, it must indicate that the
buyer does not want to keep the goods. The notice must be unequivocal but not necessarily
formal, and while it has been permitted in some cases that oral notice would suffice, it is
highly advisable to provide written unequivocal notice.54
Buyers are cautioned that it is possible, through their conduct, to reaccept the goods,
even after notice of revocation has been issued. This occurs if the buyer takes actions that
are inconsistent with the seller’s ownership, such as reselling the goods after it has claimed
revocation.55
A buyer will be barred from revoking acceptance if the goods undergo substantial
change in their condition, not due to their own defect.56 The substantial change must

51 See Ford Motor Credit Co. v. Harper 671 F.2d 1117, 1124-1125 (8th Cir. 1982); Koch Supplies, Inc. v. Farm
Fresh Meats, Inc. 630 F.2d 282, 285-286 (5th Cir. 1980); White & Summers, supra Ch. 2, note 7, § 9-4 at 431.
See generally Gary D. Spivey, Annotation, Time for Revocation Of Acceptance Of Goods under UCC § 2-
608(2), 65 A.L.R.3d 354 (1975).
52 Koch Supplies, Inc. v. Farm Fresh Meats, Inc. 630 F.2d 282, 285-286 (5th Cir. 1980) (48-hour period for
revocation set forth in the contract was stricken as installation of the smokehouse took two to three weeks,
the buyer’s revocation five months after discovery of the defect was reasonable based on past dealings and
cooperation with seller’s efforts to cure).
53 U.C.C. § 2-608 cmt. 5; Solar Kinetics Corp. v. Joseph T. Ryerson & Son, Inc. 488 F.Supp. 1237, 1249-1250
(D.C.Conn. 1980) (failure to give effective notice precluded finding of revocation of acceptance). See 67A
Am. Jur. 2d Sales § 1068 (2013).
54 Grossman v. D’Or 98 Ill.App.2d 198, 202-203 (Ill.App. 1968); White & Summers, supra Ch. 2, note 7, § 9-4
at 433.
55 Delhomme Industries, Inc. v. Houston Beechcraft, Inc. 735 F.2d 177, 181 (5th Cir. 1984); Hays Merchandise,
Inc. v. Dewey 78 Wash.2d 343, 349 (Wash 1970) (finding that the buyer had not revoked in part because its
“acts of pricing, displaying, advertising and selling were for his own account and were not in keeping with
his duty to use reasonable care in holding the goods at the seller’s disposition for a reasonable time”).
56 U.C.C. § 2-608(2).

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encompass a material deterioration.57 Important in the analysis is the permanence of the

change; for example, when a buyer of steel processed the steel into parts he was barred
from revocation for substantially changing the goods.58 On the other hand, a buyer who
tinted the windows of a defective car and installed a stereo system did not make substantial
changes.59 Reasonable changes may be made to the goods that are made in good faith to
make them usable, increases their value, or that the buyer fully repairs.60
If all of the above procedural and substantive requirements are satisfied, the buyer has
properly and effectively revoked, and all it is then required to do is hold the goods for the
seller.61 After the revocation the buyer is treated the same as if it had rejected, and therefore
need not return the goods or tender to the seller, nor must it tender any sum for rental or
beneficial use of the goods to the seller.62 The buyer may even retain the goods to secure
the goods to protect a security interest.63 As with rejection, after revocation, the seller is
entitled to return of the full purchase price.

16.3 The Seller’s Right to Cure

The seller’s right to cure, found in U.C.C. § 2-508, is not an innovation of the U.C.C., but
rather it gives legal recognition to a long-standing practice of business people.64 U.C.C. §
2-508 acts as a limit to a buyer’s ability to reject by giving the seller the right to offer sub-
stitute tender first, thus empowering the parties to settle disputes and problems between
themselves and minimizing economic waste.65 Once it is determined that the seller has the
right to cure, the buyer loses the right to reject, but may still sue for any non-conformities
under U.C.C. § 2-714. A buyer who refuses to allow the seller to attempt to cure will be
found in breach.
While it is clear that U.C.C. § 2-508 limits the right of rejection found in U.C.C. § 2-
602, it is murky whether this limitation extends to revocation cases under U.C.C. § 2-608.66
In the past it was clear that courts were unwilling to extend the seller’s right to cure to
cases of revocation; however, more recently there has been an increased willingness to

57 U.C.C. § 2-608 cmt. 6; White & Summers, supra Ch. 2, note 7, § 9-4 at 432.
58 Intervale Steel Corp. v. Borg & Beck Div., Borg-Warner Corp. 578 F.Supp. 1081, 1088 (D.C.Mich. 1984).
59 Stridiron v. I.C., Inc. 578 F.Supp. 997, 1002 (D.C.Virgin Islands 1983).
60 Village Mobile Homes, Inc. v. Porter 716 S.W.2d 543, 552 (Tex.App. 1986) (revocation permissible after buyer
painted mobile home, thus increasing its value).
61 U.C.C. § 2-608(3).
62 Id.
63 Id.; White & Summers, supra Ch. 2, note 7, § 9-4 at 435.
64 Farnsworth, Farnsworth on Contracts, § 8.17 (3d ed. 2004).
65 White & Summers, supra note 7, § 9-5 at 437.
66 Farnsworth, supra note 64, at § 8.17; Howard Foss, The Seller’s Right to Cure When the Buyer Revokes
Acceptance: Erase the Line in the Sand, 16 S Ill U.L.J. 1 (1991); Gregory M. Travalio, The UCC ’s Three “‘R’s’”:
Rejection, Revocation and (the Seller’s) Right to Cure, 53 U. Cin. L. Rev. 931, 976-978 (1984).

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consider the application of U.C.C. § 2-508 in revocation cases.67 The Southern District
Court of New York, in deciding Clark Oil Trading Co. v. Amerada Hess Trading Co., held
that a seller’s right to cure extends to cases of revocation based on the U.C.C.’s general
language and underlying policy guarding against economic waste.68 This trend was
recognized by the 2003 revisions to U.C.C. (2003) § 2-508, which would have expanded
its applicability to cases of revocation.69 Today, however, a clear rule has not emerged on
the issue.

16.3.1 Reasonable Belief Non-Conforming Goods Were Acceptable

U.C.C. § 2-508(2) permits the seller to substitute conforming tender upon seasonable
notice to the buyer when the buyer has rejected a non-conforming tender that the seller
had reasonable grounds to believe would be acceptable. In determining when a seller may
have reasonable grounds to believe that non-conforming goods would be acceptable, courts
may look to prior dealings between the parties, trade usage or the circumstances surround-
ing the formation of the contract.70 It has also been held that when a seller delivers a newer
or better model than the one contracted for, the seller is reasonable in believing such tender
would be accepted.71 Goods that are not the exact brand contracted for but are the functional
equivalent so that they would fulfil the buyer’s needs can give the seller reasonable belief
of acceptance.72
The fact that the seller was not aware of any defect does not automatically put it over
the first hurdle of having the right to cure – in other words just because the seller did not
know something was wrong, it does not get a free pass on the ‘reasonable grounds to

67 See Clark Oil Trading Co. v. Amerada Hess Trading Co., L 300039, *13-14 (S.D.N.Y. 1993) (“Though the
express language of Section 75-2-508 does not apply here, cure is not excluded by Section 75-2-608. By
analogy to Section 75-2-508 and in furtherance of the policy justification undergirding that statute and our
common law doctrine of cure in contracts generally, we recognize that, before Smith was entitled to get his
money back, Fitzner had a right to a reasonable opportunity to cure the vehicle’s deficiencies.”); Fitzner
Pontiac-Buick-Cadillac, Inc. v. Smith 523 So.2d 324, 327-328 (Miss.1988); Travalio, supra note 66, at 976-
978; White & Summers, supra Ch. 2, note 7, § 9-5 at 437; 18 Williston on Contracts (4th ed.) § 52:25 (2013).
68 New York’s willingness to extend section 2-508’s application dovetails with its adherence to the perfect
tender rule. See Y & N Furniture, Inc. v. Nwabuoku 190 Misc.2d 402, 404 (N.Y.City Civ.Ct. 2001) (stating
that “[a]lthough criticized, and modified by case law in some states, the perfect tender rule is still very much
the law of New York.”).
69 U.C.C. (2003) § 2-508 states that “[i]f the buyer rejects goods or a tender of delivery under Section 2-601 or
2-612 or, except in a consumer contract, justifiably revokes acceptance under Section 2-608(1)(b) and the
agreed time for performance has not expired, a seller that has performed in good faith, upon seasonable
notice to the buyer and at the seller’s own expense, may cure the breach of contract by making a conforming
tender of delivery within the agreed time.”
70 U.C.C. § 2-508 cmt. 2.
71 Bodine Sewer, Inc. v. Eastern Illinois Precast, Inc. 143 Ill.App.3d 920, 930 (Ill.App. 1986) (finding that
delivery of a newer model of pipe was reasonably believed to be acceptable).
72 Bartus v. Riccardi 55 Misc.2d 3, 6 (N.Y.City.Ct. 1967).

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believe’ test. The focus in such cases is not on what the seller actually knew, but rather on
what a reasonable prudent seller should have known. Therefore, even if the seller did not
know of the defect, it would only qualify as eligible to cure if it would have reasonably
believed the tender would be accepted even if it knew of the defect and that this belief is
based on a reasonable ground as discussed above, such as past dealing between the parties
or trade practice.73

16.3.2 Procedural Requirements for Cure

A seller cannot rely on its right to cure indefinitely. The protection of the seller afforded
by U.C.C. § 2-508 must be balanced with the right of the buyer to have possession and use
of conforming goods.74 U.C.C. § 2-508(1) gives the seller the right to cure “within the
contract time”. Once the time for performance has passed, the seller is entitled to cure
only if the seller reasonably assumed that the non-conforming tender would be acceptable,
seasonably notified the buyer of an intention to cure, and actually cures within a further
reasonable time.75
With regard to the question of what constitutes a further reasonable time in which the
seller may substitute conforming tender, the case law is sparse and not extremely illumin-
ating. Of course, what additional time is reasonable is a question of fact and must be
determined on a case-by-case basis. Relevant to the consideration of a reasonable time for
the cure are the surrounding circumstances, including the change in position and the
amount of inconvenience to the buyer, the length of time needed by the seller to correct
the conformity and its ability to salvage the goods for resale.76
U.C.C. § 2-508(2) requires that the seller seasonably notify the buyer of its intent to
cure clearly and unequivocally. Sufficiency of the notice to cure is a question of fact
dependent on the circumstances of each case; therefore the limited cases discussing this
issue are largely anecdotal.77 When time is of the essence in a contract, a stricter standard
will apply for determining seasonable notice.78

73 T.W. Oil, Inc. v. Consolidated Edison Co. of New York, Inc. 443 N.E.2d 932, 939 (N.Y.1982); White & Summers,
supra Ch. 2, note 7, § 9-5 at 440.
74 U.C.C. § 2-508 cmt. 3 instructs that “further reasonable time” under U.C.C. § 2-508 is to be compared with
the standard for a seller’s surprise demand for legal tender in U.C.C. § 2-511.
75 U.C.C. § 2-508(2).
76 Ramirez v. Autosport 88 N.J. 277, 285-286 (N.J. 1982); White & Summers, supra Ch. 2, note 7, § 9-5 at 442.
77 See Andrea G. Nadel, Annotation, Seller’s Cure Of Improper Tender or Delivery Under UCC § 2-508, 36
A.L.R.4th 544 § 5 (1996).
78 June G. Ashton Interiors v. Stark Carpet Corp. 142 Ill.App.3d 100, 107 (Ill.App. 1986); Wilson v. Scampoli
228 A.2d 848, 850 (D.C.App. 1967).

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16.3.3 Effective Cure

The simple definition of cure under U.C.C. § 2-508 is the substitute of non-conforming
goods with conforming goods. Generally, courts have interpreted this definition more
broadly to permit more than actual replacement of one set of goods for another. The repair
of defective goods instead of an entirely new tender has been held as effective cure.79 Other
courts have held that in addition to substitute tender, cure is effective only when the seller
reimburses the buyer the costs that arose as a result of the need to cure.80
It is arguable that other methods of cure, mainly price adjustments, could conform to
the drafters’ intent and the purpose of U.C.C. § 2-508. This is the most common form of
cure by business people and certainly serves the purpose of eliminating economic waste
and allowing the parties to work it out for themselves. However, comment 4 to U.C.C. §
2-508 specifically rejects price allowance as a method for cure. In Continental Forest
Products, Inc. v. White Lumber Sales, Inc, the contract specifically allowed for price
adjustment as a method of cure, so the court did not have to decide whether it would have
been acceptable under the U.C.C. absent a contract term.81 Thus, specifically including a
term that allows for price adjustments as a form of cure allows the parties to circumvent
comment 4’s restriction.

16.3.4 Buyer Who Wrongfully Rejects or Refuses Cure

A buyer who wrongfully refuses to allow or accept a seller’s rightful cure will find itself
regretting such a move, for doing so nullifies the seller’s breach and deprives the buyer of
all remedies that would be available for such a breach. Additionally, the buyer may become
liable for the price under U.C.C. § 2-709 or damages under the contract market formula
of U.C.C. § 2-708(1) or the resale contract formula of U.C.C. § 2-706.82 The serious con-
sequences for rejecting rightful cure emphasize the importance of the ability to preserve
the contract through cure.

79 See e.g. Wilson v. Scampoli 228 A.2d 848, 850 (D.C.App.1967); White & Summers, supra Ch. 2, note 7, § 9-
5 at 442.
80 Moulden & Sons, Inc. v. Osaka Landscaping & Nursery, Inc. 21 Wash.App. 194, 199 (Wash.App. 1978)
(holding that effective cure required that, in addition to substitute delivery, the seller was required to have
delivered the cost to the buyer of regrading the replacement cinders).
81 Continental Forest Products, Inc. v. White Lumber Sales, Inc. 256 Or. 466 (Or. 1970). See Superior Derrick
Services, Inc. v. Anderson 831 S.W.2d 868, 871 (Tex.App. 1992) (citing U.C.C. § 2-612 cmt. 5 to allow price
adjustment as a cure in an instalment contract); White & Summers, supra Ch. 2, note 7, § 9-5 at 443.
82 White & Summers, supra Ch. 2, note 7, § 9-6 at 444.

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17 Specific Performance

In the United States, like other common law legal systems, the primary remedy for a breach
of contract is damages.1 In some instances when damages prove to be inadequate to make
the plaintiff whole, certain equitable remedies may be available. The equitable remedy of
specific performance is available to parties when damages fail to adequately compensate
their loss.2 The U.C.C. recognizes the right to this equitable form of relief in U.C.C. § 2-
716. Specific performance is a “decree or order that the defaulting obligor performs”.3 The
decree is specific to the situation and based on the facts and circumstances of each case.
An order for specific performance may take the form of an injunction against breaching
the contract. This has been referred to as ‘negative specific performance’ and follows the
same rules and requirements as specific performance.4
In more severe cases specific performance can require the supervision of the court to
ensure that the defaulting obligor is indeed performing. When determining whether specific
performance is an appropriate remedy, courts must balance the benefit conferred upon
the obligee with the burden placed on the court due to its supervision.5 In Florida Jai Alai,
Inc. v. Southern Catering Services, Inc. the court declined to award equitable relief in the
form of a permanent injunction as it would require permanent supervision by the court.6
The Second Restatement recognizes this limitation on specifically enforcing promises
when the burden of supervision placed on the courts would be disproportionate to the
advantages gained from the enforcement.7 Other factors that may be considered in evalu-
ating the adequacy of the damages are the difficulty in ascertaining them and the difficulty
of collecting them, for example in the case of an insolvent party.8

1 See Farnsworth, supra Ch. 14, note 2, at 1151, 1154; Schwenzer, Hachem & Kee, supra Ch. 2, note 17, paras.
43.24-43.27.
2 U.C.C. § 2-716; Restatement (Second) of Contracts § 359 (1981).
3 Perillo, supra Ch. 2, note 39, at § 16.1.
4 Florida Jai Alai, Inc. v. Southern Catering Services, Inc. 388 So.2d 1076, 1078 (Fla.App. 1980).
5 City Stores Co. v. Ammerman 266 F.Supp. 766, 776 (D.C.D.C. 1967); Madison Plaza, Inc. v. Shapira Corp.
180 Ind.App. 141, 146 (Ind.App. 1979); Risk v. Thompson 237 Ind. 642, 651 (Ind. 1958); Will Hendrick,
Comment, Pay or Play?: On Specific Performance and Sports Franchise Leases, 87 N.C. L. Rev. 504, 508 (2009).
6 Florida Jai Alai, Inc. v. Southern Catering Services, Inc. 388 So.2d 1076, 1078 (Fla.App. 1980). See also County
of Monroe, Florida v. Priceline.com, Inc. 2009 WL 4890664, *6 (S.D.Fla. 2009); Indian Trail Homeowners
Ass’n, Inc. v. Roberts 577 So.2d 998, 999 (Fla.App. 1991).
7 Restatement (Second) of Contracts § 366 (1981).
8 White Star Refining Co. v. Hansen 251 Mich. 224, 227 (Mi. 1930); Farnsworth, supra Ch. 14, note 2, at 1155.

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17.1 Evaluating the Adequacy of the Damages

Prior to the enactment of the U.C.C., the leading case on specific performance, Campbell
Soup Co. v. Wentz, suggested a liberal access to the remedy, with the court stating there
was “no reason why a court should be reluctant to grant specific relief when it can be given
without supervision of the court or other time-consuming processes against one who has
deliberately broken his agreement”.9 Today two questions arise in evaluating the availability
of specific performance – first, is it necessary that damages are inadequate for specific
performance to be on the table as a remedy, and, second, if inadequacy of the damages is
a necessary prerequisite, how is the adequacy of damages to be measured.
The U.C.C., like its predecessor the Uniform Sales Act, contains no express mandate
that legal remedies must be inadequate for courts to be permitted to grant equitable rem-
edies. While courts differ on whether and to what extent legal remedies must be inadequate
to grant specific performance,10 the slightly prevailing opinion is that damages must fail
to make the requesting party whole for specific performance to be available.
On the one end of the spectrum in this debate is the position that damages are adequate
in all but extraordinary circumstances. These courts deny specific performance if it is
possible for a legal remedy to make the plaintiff whole.11 Still one of the most frequently
cited cases following this approach is Klein v. Pepsi, in which the court stated that Virginia’s
adoption of the U.C.C. did not “abrogate the maxim that specific performance is inappro-
priate where damages are recoverable and adequate”.12 In Klein the Fourth Circuit reversed
the District Court’s order for specific performance because the good at issue, a GII jet, was
not unique in the sense meant by U.C.C. § 2-716, and thus damages would have adequately
compensated the plaintiff buyer. Furthermore, it was held that an increase in the price of
the goods on the market was no reason to order specific performance.13 On the other hand,

9 Campbell Soup Co. v. Wentz 172 F.2d 80, 82 (3d Cir. 1949).
10 King Aircraft Sales, Inc. v. Lane 68 Wash.App. 706, 713 (Wash.App. 1993) (recognizing that “there is a split
of authority among those jurisdictions which have considered whether a buyer’s remedy at law must be
inadequate before specific performance can be granted). Compare Klein v. PepsiCo, Inc., 845 F.2d 76 (4th
Cir.1988); Beckman v. Vassall–Dillworth Lincoln–Mercury, Inc., 321 Pa.Super. 428 (Pa.Super 1983) (requiring
inadequacy of remedy at law) with Sedmak v. Charlie’s Chevrolet, Inc., 622 S.W.2d 694 (Mo.App. 1981)
(allowing specific performance even though no absence of legal remedy); Dexter Bishop & Co. v. B. Redmond
& Son, Inc. 58 A.D.2d 755 (N.Y.A.D. 1977) (specific performance does not preclude a claim for damages).
11 Ingram v. Kasey’s Associates 340 S.C. 98, 105 (S.C. 2000) (requested specific performance was for a specific
option to purchase property); Yates v. Hill 761 A.2d 677, 679 (R.I. 2000); Gleason v. Gleason 64 Ohio App.3d
667, 672 (Ohio App. 1991) (specific performance requested was for the transfer of interest in a farm); Pingley
v. Brunson, 252 S.E.2d 560, 561 (S.C. 1979).
12 Klein v. PepsiCo, Inc. 845 F.2d 76, 80 (4th Cir. 1988).
13 Klein v. PepsiCo, Inc. 845 F.2d 76, 80 (4th Cir. 1988). See also Barnes v. Diamond Aircraft Industries, Inc. 499
F.Supp.2d 1311, 1319 (S.D.Fla. 2007) (also denying specific performance for the sale of a jet as such a jet was
deemed a ‘commonly available manufactured good’).

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there are courts that grant specific performance regardless of the ability of damages to fully
compensate the injured party.14
The second question to be addressed is how the adequacy of damages is to be measured.15
One suggested approach to evaluate the adequacy of the damages is to consider whether
it is possible to measure them. If it is impossible, they are presumed impracticable.16 In
these cases specific performance may be available because the damages are impossible to
calculate. However, just because it is possible to calculate the damages, this does not
necessarily lead to the result that they are adequate.17 The discussion of whether damages
are adequate necessarily relates to the question of whether the goods are unique as the
term is envisioned by the U.C.C. It follows that damages will not be adequate if the goods
are deemed to be unique or ‘other proper circumstances’ are found to be present.

17.2 Occasions When Specific Performance Is Granted

17.2.1 Action for the Price

Presently, U.C.C. § 2-716 addresses only buyers as entitled to specific performance; however,
revised U.C.C. (2003) § 2-716 would have removed the word ‘buyer’ from the title. The
comments make it clear that this change is meant to ensure that specific performance is
available to both parties.18 Without this amendment, however, one may still find the seller’s
equivalent of specific performance in U.C.C. § 2-709’s action for the price.19 Under U.C.C.
§ 2-709 a seller may claim the purchase price where the buyer has accepted the goods or
within a commercially reasonable time after the risk has passed to the buyer in the case of
non-conforming goods that were lost or damaged. Similar to the rationale for granting

14 Taylor v. Hoffman Ford, Inc. 2005 WL 2503722, *6 (Conn.Super. 2005); King Aircraft Sales, Inc. v. Lane 68
Wash.App. 706, 713 (Wash.App. 1993); Sedmak v. Charlie’s Chevrolet, Inc., 622 S.W.2d 694 (Mo.App. 1981);
Eastern Air Lines, Inc. v. Gulf Oil Corp. 415 F.Supp. 429, 442-443 (D.C.Fla. 1975). See U.C.C. § 2-716 cmt.
1.
15 See Atlantech Inc. v. American Panel Corp. 540 F.Supp.2d 274, 286 (D.Mass. 2008).
16 Hendrick, supra note 5, at 511; Alan Schwartz, The Case for Specific Performance, 89 Yale L. J. 271, 272-273
(1979).
17 Ruddock v. First Nat. Bank of Lake Forest 201 Ill.App.3d 907, 916 (Ill.App. 1990) (“The fact that a value can
be assigned to an item of personality does not necessarily make damages an adequate remedy. The Code’s
principal requirement for an order of specific performance is that the goods be unique.”).
18 U.C.C. (2003) § 2-716 cmt. 3. However, an aggrieved seller may not obtain specific performance if the only
obligation the buyer is in breach of is paying. Whether or not the buyer is required to make payment of the
purchase price is still to be determined by U.C.C. § 2-709.
19 Purina Mills, L.L.C. v. Less 295 F.Supp.2d 1017 (N.D.Iowa 2003) (stating that “[a]n action for price under
section 2-709 is tantamount to an action for specific performance”); Karen v. Cane 152 Misc.2d 639, 641,
(N.Y.City Civ.Ct. 1991) (“An action for the sale price is essentially one for specific performance of the contract
of sale”); 24 Williston on Contracts (4th ed.) § 66:21 (2013).

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buyers specific performance, a seller may also be entitled to the price for unique goods
that cannot be reasonably resold elsewhere.

17.2.1.1 Action for the Price of Accepted Goods

U.C.C. § 2-709 is primarily aimed at redressing sellers in the event that the goods have
been accepted but not paid for. If the goods are accepted, the seller is entitled to recovery
of the purchase price under U.C.C. § 2-709(1)(a). Recovery of the price under U.C.C. § 2-
709(1)(a) is based on three elements – (1) that the parties had a contract, (2) that the buyer
failed to pay the purchase price, and that (3) the buyer accepted the goods under U.C.C.
§ 2-606.20 It is the third element, whether the buyer accepted the goods, that provides the
most trouble for sellers seeking to prove their right to purchase price under U.C.C. § 2-
709.21 In Weil v. Murray the court found that the buyer accepted a painting as a matter of
law for two reasons – the buyer not only had a reasonable opportunity to inspect the goods,
but actually inspected the goods, and made no indication it found any problem with the
art, and, second, the buyer took steps inconsistent with the seller’s ownership, mainly
taking the painting to an expert for restoration.22 Therefore, the buyer was on the hook
for paying the purchase price, even though the seller had repossessed the Edgar Degas oil
painting at issue. Thus in a case of clear-cut acceptance, the seller should have no trouble
convincing the court of its right to the price.
Proper and effective revocation or rejection, as discussed above, necessarily bars the
seller from recovering the purchase price under U.C.C. § 2-709(1)(a), as in such a case
there would be no acceptance.23 Where problems may arise is in cases where the rejection
or revocation fails for lack of procedural correctness, or timely and effective notice is given,
but the rejection or revocation is not justified. Pursuant to U.C.C. § 2-606(1)(b), if the
rejection or revocation would be justified but the buyer fails to make it timely or give
proper notice, then acceptance occurs and the seller may retrieve the purchase price under
U.C.C. § 2-709(1)(a).24 Of course, this does not mean that the seller gets off scot-free if the
goods are non-conforming and their rejection would have been justified. In that case the
award of the purchase price is subject to the set-off for damages under U.C.C. § 2-714
owing to the non-conformity.25

20 Purina Mills, L.L.C. v. Less 295 F.Supp.2d 1017 (N.D.Iowa 2003); Weil v. Murray 161 F.Supp.2d 250 (S.D.N.Y.
2001). See Carlisle Corp. v. Uresco Const. Materials, Inc. 823 F.Supp. 271, 273 (M.D.Pa. 1993); 67A Am. Jur.
2d Sales § 1016 (2013). See above para under Section 16.1.1. for treatment of acceptance.
21 White & Summers, supra Ch. 2, note 7, § 8-3 at 346. See Hidden Brook Air, Inc. v. Thabet Aviation Intern.
Inc. 241 F.Supp.2d 246, 272 (S.D.N.Y. 2002).
22 Weil v. Murray 161 F.Supp.2d 250 (S.D.N.Y. 2001).
23 U.C.C. § 2-709 cmt. 5; White & Summers, supra Ch. 2, note 7, § 8-3 at 346-347.
24 Euroworld of California, Inc. v. Blakey 613 F.Supp. 129, 133-134 (D.C.Fla. 1985).
25 White & Summers, supra Ch. 2, note 7, § 8-3 at 347; 4A Anderson on the Uniform Commercial Code (3d.
ed.) § 2-709:10 (2013).

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On the other hand, a buyer may make a procedurally perfect rejection, but it may be
totally baseless and unjustified. Even though the rejection is wrongful it will still preclude
acceptance, and thus the seller’s right to claim the purchase price.26 Instead the seller would
be forced to turn to damages for wrongful rejection under U.C.C. § 2-708. Revocation of
acceptance is a more extreme measure than rejection, as it comes further down in the chain
of control of the goods; a revocation that is effective but improper should be judged more
harshly than such a rejection. The U.C.C. seems to espouse the position that an unjustified
revocation does not undo acceptance, the key component for recovery under U.C.C. § 2-
709(1)(a).
U.C.C. § 2-709(1)(a) grants the seller the purchase price if the goods are conforming,
but have been lost or damaged within a commercially reasonable time after the risk of
their loss has passed to the buyer. Determining whether the risk of loss has passed to the
buyer is typically not a problematic issue in cases of lost or damaged goods. The passing
of risk is discussed at length above.27 Rather, whether a commercially reasonable time has
passed proves to be a much more problematic issue.28

17.2.1.2 Action for the Price of Identified Goods

Under U.C.C. § 2-709(1)(b), the seller may recover the purchase price for goods identified
to the contract, if it is unable to resell them with reasonable effort at a reasonable price or
the circumstances reasonably indicate that such an effort will be unavailing. The first hurdle
for recovery under U.C.C. § 2-709(1)(b) is simple enough. U.C.C. § 2-501 defines when
goods are identified to the contract, and generally goods that have been shipped to the
buyer, labelled for the buyer or in any other way designated for the buyer are considered
identified goods.29
Rather, it is the latter part of the U.C.C. § 2-709(1)(b) that presents some thorny issues.
Professors White and Summers lament the use of not one, but three “reasonables” in the
subsection.30 Unfortunately, courts have been scattered in their interpretation of the pro-
vision and to date have failed to fashion a consistent set of objective standards for
determining whether a seller is reasonably unable to resell goods at a reasonable price with
reasonable efforts. These inconsistencies leave lawyers with only anecdotal cases in
determining whether their client can successfully recover under U.C.C. § 2-709(1)(b). One

26 See Zhong Ya Chemical (USA) Ltd. v. Industrial Chemical Trading, Inc. 2001 WL 1491378, *1 (S.D.N.Y.
2001).
27 See above introductory para. of Chapter 12 et. seq.
28 See Ninth St. East, Limited v. Harrison 5 Conn.Cir.Ct. 597 (Conn.Cir. 1968).
29 U.C.C. § 2-501; White & Summers, supra Ch. 2, note 7, § 8-5 at 351; 67 Am. Jur. 2d Sales § 370 (2013).
30 White & Summers, supra Ch. 2, note 7, § 8-5 at 351.

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factor that can consistently be identified as making goods unreasonably difficult for resale
is whether the goods are custom-made and cannot reasonably be used by any other buyer.31
One can imagine a difficult situation in which the buyer repudiates before the identified
goods are complete. In at least one case, the seller had completed under U.C.C. § 2-704
and recovered the purchase price U.C.C. § 2-709(1)(b).32 In such a case there has to be a
change in the conditions that make the completion of the goods seem reasonable at the
time of the repudiation, and then become unreasonable at the time of resale. Thus, only
a very narrow set of circumstances would give rise to recovery in such a case.

17.2.2 Unique Goods and Other Proper Circumstances

The specific performance provision for buyers, U.C.C. § 2-716, focuses on the commercial
feasibility of replacement and introduces a new concept – that of unique goods.33 The most
determinative factor in deciding whether specific performance is an appropriate remedy
is the classification of goods as unique. This classification, however, does not necessitate
that specific performance be granted.34 Whether goods are unique is a question of fact,
and an important and frequently litigated one. While the facts and circumstances of each
case certainly play the largest role in this determination, there are some broad categories
that are deemed unique by their very nature. These include goods of special beauty or

31 Emanuel Law Outlines, Inc. v. Multi-State Legal Studies, Inc. 899 F.Supp. 1081, 1089 (S.D.N.Y. 1995) (publisher
of law school review materials entitled to recover price when “evidence clearly demonstrates that the outlines
prepared to Multi-State’s specifications have no value to other buyers”); In re Narragansett Clothing Co.
138 B.R. 354, 356 (Bkrtcy.D.R.I. 1992) (recovery under section 2-709(1)(b) was precluded even though fixtures
were custom made, because no evidence was presented that an attempt to resell was made or would have
been unavailing); Walter Balfour & Co., Inc. v. Lizza & Sons, Inc. 1969 WL 11070 (N.Y.Sup 1969) (finding
that plaintiff “made a reasonable effort to resell the doors at a reasonable price, without success” but “evidence
clearly shows that there is no market or market value for the doors-but only scrap value”; therefore plaintiff
was entitled to the price under section 2-709(1)(b)); Ludwig, Inc. v. Tobey 5 U.C.C. 832, 836 (Mass.App.Div.
1964) (finding that attempts to resell custom-tailored coat would be unavailing).
32 See Foxco Industries, Ltd. v. Fabric World, Inc. 595 F.2d 976, 983-984 (5th Cir. 1979).
33 U.C.C. § 2-716 cmt. 2.
34 See e.g. Bander v. Grossman 161 Misc.2d 119, 125 (N.Y.Sup. 1994) (even though jury determined that the
1965 DB5 Aston-Martin convertible, of which only twenty existed in the world, was unique, the court declined
to award specific performance).

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rarity,35 works of art,36 goods with a special personal history of sentimental value37 or
machines of special design.38
The inclusion of the phrase “other proper circumstances” in U.C.C. § 2-716 allows
courts to look beyond whether the goods are unique in the traditional sense of being one
of a kind and consider availability or scarcity of a particular source and commercial realities,
such as the inability to cover.39 The inability to cover is very strong evidence of “other
proper circumstances”.40 In some situations it is possible for generic goods to be classified
as unique; for example, general goods in a tight market may be classified as unique.41 Thus
the concept of uniqueness is not limited to the one-of-a-kindness of a Picasso painting,
but can be thought of rather in terms of the level of difficulty in procuring a substitute.42
Today output and requirements contracts that involve a particular or singularly available
source or market represent the usual specific performance situation,43 as opposed to the
older cases that focused on the “sale of heirlooms or priceless works of art”.44 A requirements
contract is one in which the seller agrees to supply as many goods as are required by the
buyer, and an output contract is one in which the buyer agrees to purchase from the seller
the entire production independent of the actual amount produced.45 Pursuant to U.C.C.

35 E.g. Ruddock v. First Nat. Bank of Lake Forest 201 Ill.App.3d 907, 914, (Ill.App. 1990) (finding that an
astronomical clock with historical significance, which may be the only one like it in existence, was unique).
36 E.g. Robins v. Zwirner 713 F.Supp.2d 367, 374 (S.D.N.Y.2010) (“Original works of art are within the small
category of intrinsically unique goods for which a specific performance remedy is appropriate.”); David
Tunick, Inc. v. Kornfeld 838 F.Supp. 848, 852 (S.D.N.Y.1993) (“The real fact to be considered is that the
purchaser chose a given print because he viewed it as uniquely beautiful, interesting, or well suited to his
collection or gallery. Nothing else will satisfy that collector but that which he bought”).
37 E.g. Cumbest v. Harris 363 So.2d 294, 297 (Miss.1978) (finding that a stereo system that was custom built
over a fifteen-year period was unique).
38 E.g. Stephan’s Mach. & Tool, Inc. v. D & H Machinery Consultants, Inc. 65 Ohio App.2d 197, 201 (Ohio App.
1979).
39 In re Tennecomp Systems, Inc. 12 B.R. 729, 735 (Bkrtcy.E.D.Tenn.1981) (“The test of uniqueness under this
section would be made in terms of the total situation which characterizes the contract.”); Gerwin v. South-
eastern Cal. Assn. of Seventh Day Adventists 14 Cal.App.3d 209, 220 (Cal.App. 1971); Farnsworth, supra Ch.
14, note 2, at 1155.
40 U.C.C. § 2-716 cmt. 2.
41 Almetals, Inc. v. Wickeder Westfalenstah L, GmbH 2008 WL 4791377, *8 (E.D.Mich. 2008) Sherwin Alumina
L.P. v. AluChem, Inc. 512 F.Supp.2d 957, 970-971 (S.D.Tex. 2007).
42 Chadwell v. English 652 P.2d 310 (Okl.App. 1982) (even though the stock at issue was not unique given “its
scarcity and its lack of access” since all shares were held by three to four owners, circumstances were proper
for specific performance); Anthony T. Kronman, Specific Performance, 45 U. Chi. L. Rev. 351, 359 (1977-
1978).
43 E.g. Laclede Gas Co. v. Amoco Oil Co. 522 F.2d 33, 38 -39 (8th Cir. 1975); Eastern Air Lines, Inc. v. Gulf Oil
Corp. 415 F.Supp. 429, 442-443 (D.C.Fla. 1975).
44 U.C.C. § 2-716 cmt. 2; Andrea G. Nadel, Annotation, Specific Performance Of Sale Of Goods under UCC §
2–716, 26 A.L.R.4th 294 § 5 (1983).
45 U.C.C. § 2-306; Schwenzer, Hachem & Kee, supra Ch. 2, note 7, para. 43.44.

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§ 2-306, a “requirements contract under the U.C.C. may speak of ‘requirements’ alone, or
it may include estimates, or it may contain maximums and minimums.”46
For buyers seeking specific performance of an output or requirements contract, courts
look to whether the buyer can replace the goods on the open market. If the answer is neg-
ative, courts are inclined to grant the equitable relief.47 In some cases, courts have awarded
specific performance when the contract itself was irreplaceable in the sense that the buyer
would not be able to obtain a similar contract with like terms with another seller.48

17.2.3 Replevin

Under a very narrow set of circumstances given in U.C.C. §§ 2-716(3) and 2-502, a buyer
will have the right to identified goods in the seller’s possession. However, these provisions
contain such limitations on their applicability that in reality they hardly ever result in
putting the goods in the buyer’s hands. Under U.C.C. § 2-716(3) the buyer can replevy
identified goods when cover reasonably appears unavailable.49 Of U.C.C. § 2-716(3), the
more lenient of the two provisions, Professors White and Summers have remarked that
the “judicial silence bespeaks the unimportance of 2-716(3)”.50 The judicial silence the
professors speak of is the lack of case law regarding U.C.C. § 2-716(3).
U.C.C. § 2-502 entitles the buyer to a grant of replevin if the goods are identified to
the contract and partly paid for if the seller becomes insolvent within ten days after the
receipt of the first instalment on their price. The requirement that the buyer have a special
property interest in the goods under U.C.C. § 2-501(1) and the ten-day time limitation
already considerably narrow the circumstances in which U.C.C. § 2-502 will result in
replevin. Further weakening the buyer’s claim to the goods under this provision is the fact
that it will often be pre-empted by the claims of secured creditors in bankruptcy court.51
It has been held that U.C.C. § 2-502 rights are unenforceable in bankruptcy proceedings
as inconsistent with section 365 of the Bankruptcy Code.52 Subject to similar attacks in
bankruptcy proceedings are buyer’s claims under U.C.C. § 2-716(3).

46 U.C.C. §§ 2-306 cmt. 2, 2-306 cmt. 3; Eastern Air Lines, Inc. v. Gulf Oil Corp. 415 F.Supp. 429, 435 (D.C.Fla.
1975).
47 See Copylease Corp. of America v. Memorex Corp. 408 F.Supp. 758, 759-760 (D.C.N.Y. 1976); Kaiser Trading
Co. v. Associated Metals & Minerals Corp. 321 F.Supp. 923 (D.C.Cal. 1970).
48 Nadel, supra note 44.
49 McLaughlin v. Denharco, Inc. 129 F.Supp.2d 32, 40 (D.Me. 2001).
50 White & Summers, supra Ch. 2, note 7, § 7-6(d) at 323.
51 Id.
52 See In re G. Paoletti, Inc. 205 B.R. 251, 260 (Bkrtcy.N.D.Cal. 1997); White & Summers, supra Ch. 2, note 7,
§ 7-6(d) at 322.

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17.2.4 Specific Performance Called for by the Contract

Clauses within the contracts that provide for specific performance, while rare, are typically
not enforced.53 However, at least one court has upheld a contract provision that called for
specific performance, evaluating the clause using the criteria of unconscionability and
public policy.54 The Court of Appeals of North Carolina found in Martin v. Sheffer that
the clause violated neither as the parties did not lack meaningful choice when they entered
the contract, and thus the provision was upheld.55 The 2003 revisions to U.C.C. (2003) §
2-716 would have permitted specific performance by agreement.56 This would have brought
U.S. law in line with the civil law and CISG approach.

17.3 Louisiana’s Approach

The civil law jurisdiction of Louisiana takes a different approach to granting specific per-
formance than that found in Article 2. In line with its civil law heritage, specific performance
is the preferred remedy for breach of contract in Louisiana.57 In sale of goods contracts
specific performance is explicitly established as the buyer’s remedy for non-delivery.58
Louisiana buyers need no special justification or special need for requesting and receiving
specific performance.59
Generally, in Louisiana specific performance is an available remedy unless it proves
impracticable.60 In J. Weingarten, Inc. v. Northgate Mall, Inc. the Louisiana Supreme Court
had to determine whether specific performance should be upheld to enforce a lease provi-
sion that would require the destruction of a large section of a four-million-dollar building
that the defendant built on an area of land reserved for the plaintiff to be used for customer
parking. The court recognized that Louisiana holds specific performance as the preferred
remedy for breach of contract except “when specific relief is impossible, when the incon-

53 DiGiuseppe v. Lawler 269 S.W.3d 588, 597-598 (Tex. 2008); Terex Trailer Corp. v. McIlwain 579 So.2d 237,
242 (Fla.App. 1991) (clause called for specific performance in an employment contract); Black v. American
Vending Co., Inc. 239 Ga. 632 (Ga. 1977); Perillo, supra Ch. 2, note 39, at § 16.1.
54 Martin v. Sheffer 102 N.C.App. 802, 805 (N.C.App. 1991).
55 Id.
56 U.C.C. (2003) § 2-716(1) cmt. 3.
57 Royal Oldsmobile Co., Inc. v. Heisler Properties, L.L.C. 2013 WL 2120525, *6 (5th Cir. 2013) (“Specific per-
formance is the preferred remedy in Louisiana”); Concise Oil & Gas Partnership v. Louisiana Intrastate Gas
Corp. 986 F.2d 1463, 1471 (5th Cir. 1993); J. Weingarten, Inc. v. Northgate Mall, Inc. 404 So.2d 896, 900 (La.
1981).
58 La. Civ Code Ann. Article 2485(1).
59 J. Weingarten, Inc. v. Northgate Mall, Inc. 404 So.2d 896, 900 (La. 1981).
60 La. Civ Code Ann. Article 1986(1)(1985) cf. Groeb Farms, Inc. v. Alfred L. Wolff, Inc. 2009 WL 500816, *7
(E.D.Mich. 2009) (holding the converse, that specific performance is available only when damages are
impracticable).

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venience or cost of performance is greatly disproportionate to the damages caused, when

the obligee has no real interest in receiving performance, or when the latter would have a
substantial negative effect on the interests of third parties”.61 Ultimately, the appellate grant
of specific performance was reversed due to “great disparity between the cost of specific
relief and the damages caused by the contractual breach, the magnitude of the economic
and energy waste that would result from the building’s destruction, the substantial hardship
which would be imposed on individuals who are not parties to the contract or to this liti-
gation, and the potential negative effect upon the community”.62

61 J. Weingarten, Inc. v. Northgate Mall, Inc. 404 So.2d 896, 900 (La. 1981); Concise Oil & Gas Partnership v.
Louisiana Intrastate Gas Corp. 986 F.2d 1463, 1471 (5th Cir.1993).
62 J. Weingarten, Inc. v. Northgate Mall, Inc. 404 So.2d 896, 897 (La. 1981).

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18 Damages

All the remedies discussed thus far have required special factual triggers for an aggrieved
party to be entitled to them. The right to claim damages, however, requires only a breach
by the other party. As discussed above, damages are the primary means of compensating
an aggrieved party under American contract law. The nature of the breach determines the
calculation applied to the recovery.
In considering the law of damages it is helpful to bear in mind the three interests that
the law seeks to protect by awarding damages – the expectation interest, the reliance interest
and the restitution interest.1 The expectation interest is the primary interest the damage
rules in the U.C.C. seek to compensate.2 It is the interest that parties have in completed
performance. Thus in a sales contract, the buyer’s expectancy interest is to receive goods,
and the seller’s expectancy interest is to receive the purchase price. The typical formula
for compensating the expectancy interest that was lost through a breach or default is to
provide the non-defaulting party with the gain it expected to receive had the contract been
performed as agreed.
Recall that the remedies in the U.C.C. operate on the basic principle of full compensa-
tion, meant to place an aggrieved party in the same position as if the contract had been
performed. While this principle is the bedrock of the law of damages for breach of contract,
it is more easily appreciated in theory than implemented in actual practice. The question
of what amounts to full compensation so that a party is made whole while avoiding the
undesired effect of overcompensation can become very difficult in some cases.3 Damages
should not reward a plaintiff party by placing it in a better position than it would have
been in if the breach had not occurred.4 Examples where achieving this balance may become
problematic often involve cases where the calculation of a market-price-based recovery
would lead to a windfall or in determining the appropriate amount of incidental or con-
sequential loss a party has suffered.5

1 Restatement (Second) of Contracts § 344 (1981); Farnsworth, supra Ch. 14, note 2, at 1147–1149.
2 Farnsworth, supra Ch. 16, note 64, § 12.8 at 190; Roy Ryden Anderson, Annotation, Contract Remedies: In
General—Restitution, Reliance, Or Expectation, 1 Damages Under UCC § 1:3 (2013).
3 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 44.19-44.21.
4 Cincinnati Fluid Power, Inc. v. Rexnord, Inc. 797 F.2d 1386, 1393 (6th Cir. 1986) (damage award is unreas-
onable as a matter of law if “it places a party in a better position than that party would have enjoyed had the
culpable party fully performed its obligations”.); Nobs Chem., U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 215
(5th Cir.1980); Purina Mills, L.L.C. v. Less 295 F.Supp.2d 1017, 1046 (N.D.Iowa 2003) (“A non-breaching
party is entitled to be placed in the same position it would have enjoyed had the defendant abided by the
contract, but is not entitled to more than the benefit of his bargain.”).
5 U.C.C. § 2-708(2) states that the lost profit calculation is applicable only when the market formula of U.C.C.
§ 2-708(1) is inadequate to achieve full compensation. For a discussion on cases that have considered whether

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18.1 Classification of Damages

The U.C.C. provides for three types of damages – general, consequential, and incidental.
Additionally, as discussed briefly below, it may be possible to recover nominal damages
or punitive damages under certain limited circumstances.6 In order for the party to receive
the full amount of damages due, the selection of the basis for recovery is very important.
What follows below is a road map for aggrieved buyers and sellers in selecting the basis
for damage recovery in the event of a breach.

18.2 General Non-Performance Damages

General damages, sometimes called direct damages, are the damages that relate directly
to the value of the goods themselves.7 For the buyer the most obvious loss in the case of
non-delivery or non-conformity is the value of the goods, and for the seller it is the purchase
price of the goods.8 The damage remedies in the U.C.C. are divided up between those
applicable to the buyer and those for the seller and organized according to the type of
breach. Just as with available remedies in general, the damages in the U.C.C. can be divided
into two schemes. In the first system are the damages available when the transaction goes
through as contemplated by the parties in that the buyer ultimately ends up with the goods.
In these cases once again the vital question is whether there has been acceptance, either
through affirmative actions or unsuccessful revocation or rejection. When the goods have
been accepted, but do not conform to the contract, the buyer’s measure for general damages
is found in U.C.C. § 2-714 for breach of warranty. If, on the other hand, acceptance has
not occurred, Article 2 contemplates that the aggrieved party will attempt to make a good
faith commercially reasonable substitute, cover for the buyer under U.C.C. § 2-712, and
resale for the seller under U.C.C. § 2-706 – parties are then permitted to recover any dif-
ference between the substitute and the contract. If performance is not completed and the
parties make no substitute transaction, then the general measure of damages is the difference
between the market price at the time of the breach and the contract price.

the ‘inadequate’ may refer to a party’s overcompensation, as well as under-compensation, see below paras.
under Section 18.2.2.3.2. et. seq.
6 U.C.C. § 1-305(a) states that “neither consequential or special damages nor penal damages may be had except
as specifically provided in [the Uniform Commercial Code] or by other rule of law.”
7 Gabriel, supra Ch. 7, note 31, at 226.
8 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 44.159.

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18.2.1 Non-Performance and Repudiation Damages upon Substitute

Performance

The seller’s remedy of resale and the buyer’s remedy of cover are effectively two sides of
the same coin. Resale and cover damages are the appropriate measure of damages when
the buyer has not accepted, and the goods are still in the seller’s control at the time of the
breach. In the cases of both resale and cover the aggrieved party has attempted to make a
substitute transaction to realize the benefit of its contract. Damages are awarded in both
cases when the substitute transaction has failed to put the party in the same position it
would have been in had the originally contemplated transaction occurred.

18.2.1.1 Resale
Turning first to the seller’s resale damages under U.C.C. § 2-706, if the buyer breaches the
contract by repudiation, wrongful rejection or revocation of acceptance, then a seller may
resell the goods and claim damages equal to the contract price minus the resale price plus
any incidental expenses incurred, but less any expenses saved as a result of the buyer’s
breach.
The only predicate to trigger this remedy is that the buyer breached the contract by
failing to accept conforming tender; thus it is not necessary for the goods to be in existence
at the time of the breach.9 U.C.C. § 2-704 expressly permits a seller to identify the goods
to the contract and resell them. If the goods are unfinished at the time of the breach, the
seller may exercise reasonable commercial judgment in determining whether to complete
the manufacture. U.C.C. § 2-704(2) allows for a party to minimize its losses if completing
the manufacture would achieve this end.10 In making this decision the U.C.C. invites sellers
to exercise “reasonable commercial judgment for the purposes of avoiding loss”. While
here the U.C.C. uses the polite and soft ‘may’, as in may use reasonable commercial judg-
ment, the principle of mitigation discussed below suggests that the seller must do so in
order to recover the resulting losses.11 At this time, it is unclear, and untested in the courts,
whether stopping production that would have been commercially reasonable to complete
deprives the seller of recovery under the doctrine of avoidable losses.12 However, the dearth
of case law on this particular issue most likely reflects the commercial reality that a seller
who has suffered a breach will in most cases take the measures that are in the best interest
of its business.

9 U.C.C. §§ 2-706(2), 2-706 cmt. 1.

10 Restatement (Second) of Contracts § 350 (1981) corresponds with the underlying policy of U.C.C. § 2-704.
11 See below paras. under Section 18.6. et. seq.
12 White & Summers, supra Ch. 2, note 7, § 8-15 at 390(supporting the position that failure to complete a
commercially reasonable production under section 2-704(2) amounts to a failure to mitigate losses).

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18.2.1.1.1 Conducting the Resale

The seller may conduct a private or public resale, and in determining which is more
appropriate should take into account the character of the goods, and must observe relevant
trade practices and usages.13 A private sale, which can be achieved by “solicitation or
negotiation…either directly or through a broker” simply requires that the buyer identify
the resale contract to the broken contract, give the buyer reasonable notification of the
intention to sell, and resell in good faith and a commercially reasonable manner.14 While
the U.C.C. does not define what is meant by a public sale, it does say that an auction is a
public sale; however, it is unclear what non-auction sales are considered public.15 Conduct-
ing a public sale requires additional steps. First, again, the seller must identify the resale
contract to the broken contract and only resell those identified goods (unless there is a
recognized market for goods of the kind in question); then, if a usual place for the public
sale exists, it must conduct the sale there giving the buyer reasonable notice of the time
and place of the sale, and display the goods at the time of the resale or at least provide for
the inspection of the goods by potential buyers at the place where the goods are located;
and finally, the seller must resell the goods in good faith and in a commercially reasonable
manner.16 If the goods are perishable or rapidly declining in value, then the requirement
to give the buyer notice of the resale is removed.17 Failure to comply with these requirements
strips the seller of the right to recover under U.C.C. § 2-706, but leaves open the possibility
to recover damages based on the market price.18
While the seller is not liable to the buyer for any profit made on the resale, it is unclear
from the text of Article 2 what is to be done about any partial payment made by the buyer;
however, fairness and reasonableness suggest that any such payment should be credited
to the buyer.19

18.2.1.2 Cover
Prior to the U.C.C., the buyer’s sole measure for damages in the event of the seller’s non-
performance was the difference between the market price and the contract price of the

13 U.C.C. § 2-706 cmt. 4.

14 U.C.C. §§ 2-706(1), 2-706 cmt. 4. See Cook Composites, Inc. v. Westlake Styrene Corp. 15 S.W.3d 124 (Tex.App.
2000) petition for review dismissed; White & Summers, supra Ch. 2, note 7, § 8-6 at 355.
15 U.C.C. § 2-706 cmt. 4.
16 U.C.C. § 2-706(4); White & Summers, supra Ch. 2, note 7, § 8-6 at 355. See generally Carolyn Kelly
MacWilliam, Annotation, Resale of Goods Under UCC § 2–706, 101 A.L.R.5th 563 (2002); 24 Williston on
Contracts § (4th ed.) § 66:32 (2013).
17 U.C.C. § 2-706 cmt. 8; White & Summers, supra Ch. 2, note 7, § 8-6 at 355.
18 Foxco Industries, Ltd. v. Fabric World, Inc. 595 F.2d 976, 983 (5th Cir. 1979) (failure to give buyer notice of
private resale precluded the seller from basing recovery on U.C.C. § 2-706); R.J. Robertson, Rights and
Obligations of Buyers With Respect to Goods in Their Possession After Rightful Rejection or Justifiable Revoc-
ation of Acceptance, 60 Ind.L.J. 663, 707 (1985).
19 U.C.C. § 2-706(6). See Perillo, supra Ch. 2, note 39, at § 14.25.

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goods.20 While retaining this measure, U.C.C. § 2-713, one of its best innovations, provides
an alternative remedy that allows a buyer to make a good faith purchase or contract to
purchase substitute goods within a reasonable time and then recover the difference between
the cover price and the contract price along with any incidental or consequential damages.
The cover purchase must be made in good faith, without unreasonable delay, and must
be a reasonable substitute for the contracted for goods.21 The test for assessing whether
cover was proper is reasonability at the time of cover, not whether in hindsight the eventual
cover was the most effective or cheapest.22
The issue of whether the cover was made in good faith is one that is sparsely and
uneventfully litigated,23 while the latter two requirements, that the cover be made without
unreasonable delay and that it is a reasonable substitute, make up the meat and potatoes
of the cover purchase litigation. The U.C.C.’s official comments provide some guidance
on evaluating the reasonableness of these restrictions. Regarding unreasonable delay, the
comments stipulate that this restriction is not meant to deprive the buyer of the time
necessary to make an informed and sound cover, but rather reiterates the general rule
regarding time periods – the cover must be in a reasonable time, and the action must be
seasonable in light of the facts and circumstances of the particular case.24
Whether the cover was made without unreasonable delay is a question of fact.25 Relevant
factors in determining whether an unreasonable time passed between the breach and the
cover include whether the goods are readily and easily available on the market, the buyer’s
knowledge of alternative suppliers, and the market conditions at the time of the breach.26
In Farmers Elevator Co. of Elk Point v. Lyle, the court acknowledged a lack of evidence as
to whether it would have been possible to make a cover purchase of grain sooner than
thirteen days,27 but noted that since there was no demonstrable evidence as to how the

20 Uniform Sales Act (1906) § 67(3).

21 U.C.C. § 2-712.
22 U.C.C. § 2-712 cmt. 2.
23 See e.g. American Carpet Mills v. Gunny Corp. 649 F.2d 1056, 1059-1060 (5th Cir. 1981); Universal Builders
Corp. v. United Methodist Convalescent Homes of Connecticut, Inc. 7 Conn.App. 318, 323-324 (Conn.App.
1986); Farmer’s Union Co-op Co. of Mead v. Flamme Bros. 196 Neb. 699, 706-707 (Neb. 1976).
24 U.C.C. § 2-712 cmt. 2.
25 See Mason Distributors, Inc. v. Encapsulations, Inc. 484 So.2d 1275 (Fla.App. 1986); Farmers Elevator Co. of
Elk Point v. Lyle 90 S.D. 86, 96 (S.D. 1976).
26 Erie Casein Co., Inc. v. Anric Corp. 217 Ill.App.3d 602, 606 (Ill.App. 1991) (four months was a reasonable
time to procure cover of casein during a market shortage); Mason Distributors, Inc. v. Encapsulations, Inc.
484 So.2d 1275 (Fla.App. 1986) (42 days was a reasonable time to make a cover purchase of substitute vitamins
in a volatile market).
27 Generally, in cases for the sale of grain, a reasonable time for cover is ‘immediately’, given that grain is always
readily available in an organized market. See Farmers Elevator Co. of Elk Point v. Lyle 90 S.D. 86, 96 (S.D.
1976); Oloffson v. Coomer 11 Ill.App.3d 918, 922 (Ill.App. 1973).

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delay prejudiced the defendant seller, it would affirm the finding that there was no
unreasonable delay in effecting cover.28
Effecting a cover transaction is entirely at the buyer’s discretion, and it is never under
an obligation to do so. However, failure to cover when it would have been reasonable could
result in a finding that the buyer failed to mitigate, and thus preclude recovery of any
consequential damages that could have been avoided by covering.29

18.2.2 Non-Performance and Repudiation Damages When No Substitute

Performance Is Made

In the event of a repudiation or non-acceptance on the part of the buyer, or non-delivery

on the part of the seller, the basic formula the U.C.C. provides allows the injured party
damages amounting to the difference between the contract price and the market price.
Given the U.C.C.’s recognition of cover and resale, some have questioned the necessity of
its retention of the pre-Code market price formula.30 Indeed U.C.C. § 2-713 (the buyer’s
market price damages) has been described as “a statutory liquidated damage clause, a
breach inhibitor the payout of which need bear no close relation to plaintiff’s actual loss.”31
In any case, these provisions remain part of the U.C.C., and their application as well as
their short-comings are discussed below.

18.2.2.1 Buyer’s Market Price Damages under U.C.C. § 2-713

Pursuant to U.C.C. § 2-713, if the buyer does not make a cover purchase or contract to
purchase, then the measure for damages is the difference between the market price at the
time it learned of the breach and the contract price plus any incidental and consequential
damages minus any expenses saved by the seller’s breach.32 The market price is to be
determined as that at the place of tender, unless the buyer rejects the goods after arrival
or revokes acceptance; then the market price is determined according to the place of

28 Farmers Elevator Co. of Elk Point v. Lyle 90 S.D. 86, 96 (S.D. 1976).
29 U.C.C. §§ 2-712 cmt. 3, 2-715(2); Lewis v. Nine Mile Mines, Inc. 268 Mont. 336 (Mont. 1994).
30 Allied Canners & Packers, Inc. v. Victor Packing Co. 162 Cal.App.3d 905, 912-913 (Cal.App.1984) (declining
to apply the market price formula for damages when doing so would result in a windfall for the plaintiff);
Ellen A. Peters, Remedies for Breach of Contracts Relating to the Sale of Goods under the Uniform Commercial
Code: A Roadmap for Article Two, 73 Yale L.J. 199, 259-261 (1963). See John D. Clark, Comment, The Proposed
Revisions to Contract-Market Damages of Article Two of the Uniform Commercial Code: A Disaster Not a
Remedy, 46 Emory L. J. 807 (1997).
31 Allied Canners & Packers, Inc. v. Victor Packing Co. 162 Cal.App.3d 905, 912 -913 (Cal.App. 1984) quoting
White & Summers, Uniform Commercial Code (2nd ed. 1980) § 6-4 at 225.
32 The buyer’s attempt to cover is not a prerequisite to claim damages based on the market price formula, but
failure to cover in cases when it would have saved consequential damages bar recovery of those losses;
however, such a failure does not affect the buyer’s ability to seek damages under U.C.C. § 2-713. See Kashi
v. Gratsos 790 F.2d 1050, 1056 (2d Cir.1986).

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arrival.33 The price for measuring the market price is that of the goods that are of the same
kind and in the same branch of trade.34
To recover the market contract price differential the buyer must show that the market
price is greater than the contract price.35 If the market price does not exceed the contract
price, the buyer is limited to recovery of incidental and consequential damages.36 In some
cases determining this issue may be problematic. In Keller v. Inland Metals All Weather
Conditioning, Inc., the Supreme Court of Idaho affirmed the district court’s finding that
the defendant seller of a seven-and-a-half-ton dehumidifier breached its express warranty
created by a letter to the plaintiff, an indoor pool owner, stating that the dehumidifier
would remedy the moisture and odour problems in the pool area. When the humidifier
failed to achieve these promised results, the district court held that the buyer rightfully
rejected the humidifier and was entitled to damages under U.C.C. § 2-713. The Supreme
Court rejected the district court’s finding that the plaintiff should be awarded the difference
between the market price of a ten-ton humidifier, the size offered by a competing bid
plaintiff rejected, and the contract price of the seven-and-a-half-ton humidifier. It reduced
plaintiff’s damages recovery to only incidental and consequential damages, as there was
no evidence that the market price of a seven-and-a-half-ton humidifier was greater than
the contract price. The dissent in Keller points out the contradiction in finding that the
correct measure for the market price was a seven-and-a-half-ton humidifier, as the one
that plaintiff received was not defective as such, but rather failed to meet the particular
purpose for which it was purchased. Keller and other cases where the contract is not for a
specific good, but rather a good that meets a certain purpose raise the following question:
when goods are rejected as non-conforming because what was delivered was the wrong
thing, should the market price be measured as the market price of the wrong thing (in
Keller, a seven-and-a-half-ton humidifier) or what would be necessary to fulfil the particular
purpose (a ten-ton humidifier). The Idaho Supreme Court supports the former calculation.
Keller illustrates one of the challenges that may accompany calculation of the buyer’s
market damages.

18.2.2.2 Seller’s Market Price Damages under U.C.C. § 2-708(1)

The seller’s traditional measure for damages is found in U.C.C. § 2-708(1), which provides
that upon repudiation or non-acceptance by the buyer, the seller is entitled to damages in
the amount of the difference between the contract price and the market price at the time

33 U.C.C. § 2-713(2).
34 U.C.C. § 2-713 cmt. 2.
35 Keller v. Inland Metals All Weather Conditioning, Inc. 139 Idaho 233, 240 (Idaho 2003); Greenberg v. Beckwith
Motors, Inc. 136 Vt. 285, 286 (Vt. 1978).
36 Keller v. Inland Metals All Weather Conditioning, Inc. 139 Idaho 233, 240 (Idaho 2003).

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and place for tender as well as any incidental damages caused by the breach, but less any
expenses saved as a result of the breach.

18.2.2.3 Lost Profits Formula under U.C.C. § 2-708(2)

If the market price formula detailed above is not adequate to meet the seller’s expectancy
interest, the damages may be measured under U.C.C. § 2-708(2) as the profit (including
reasonable overhead) that the seller would have made from the buyer’s full performance
plus any recoverable incidental damages, with due allowance for costs reasonably incurred
and due credit for payments or proceeds of the resale. U.C.C. § 2-708(2) is prefaced with
the condition that it applies only “ [i]f the measure of damages provided in subsection (1)
is inadequate to put the seller in as good a position as performance would have done…”
Over time, courts and commentators have identified three situations in which the plaintiff
seller will be inadequately compensated by an award of market damages. These will be
discussed below, as well as a more recent body of cases that have also applied the lost profit
formula – those cases in which an award of market damages would provide a windfall for
the plaintiff seller.
The first category of cases in which U.C.C. § 2-708(1) would routinely fail to compensate
the seller is when the goods that are the subject of the breached or repudiated contract are
specially manufactured and have no readily accessible market.37 The appropriateness of
damages based on the lost profit in these cases is evident, as no market exists that would
allow a meaningful calculation of the appropriate market price. Prior to the enactment of
the U.C.C., the absence of an available market was the only circumstance that would permit
recovery based on a calculation other than the contract market differential.38 The second
category of seller recognized as being inadequately compensated by U.C.C. § 2-708(1) is
the so-called jobber, a middleman seller. Courts have identified jobbers as sellers meeting
two conditions – first, they never acquire the contract goods, and, second, their decision
not to acquire the contract goods after the breach is commercially reasonable.39

18.2.2.3.1 Lost Volume Sellers

Perhaps the most populous group of sellers inadequately compensated by U.C.C. § 2-708(1)
and requiring the lost profit measure of damages to be made whole, are the lost volume
sellers. A seller qualifies as a lost volume seller if it can prove that “even though [it] resold

37 In re S.N.A. Nut Co. 247 B.R. 7, 19-20 (Bkrtcy.N.D.Ill. 2000); Alter & Sons, Inc. v. United Engineers & Con-
structors, Inc. 366 F.Supp. 959 (D.C.Ill. 1973); Detroit Power Screwdriver Co. v. Ladney 25 Mich.App. 478,
486-487 (Mich.App. 1970). See also Purina Mills, L.L.C. v. Less, 295 F.Supp.2d 1017, 1035 (N.D.Iowa 2003).
38 Uniform Sales Act (1906) § 64(3); Charles J. Goetz & Robert E. Scott, Measuring Sellers’ Damages: The Lost
Profits Puzzle, 31 Stan L. Rev. 323, 323-324 (1979).
39 Blair Intn’l, Ltd. v. LaBarge, Inc. 675 F.2d 954, 960 (8th Cir.1982); Nobs Chemical, U.S.A., Inc. v. Koppers
Co., Inc. 616 F.2d 212, 215 (5th Cir. 1980). See Purina Mills, L.L.C. v. Less 295 F.Supp.2d 1017, 1036 (N.D.Iowa
2003); White & Summers, supra Ch. 2, note 7, § 8-13.

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the contract goods, that sale to the third party would have been made regardless of the
buyer’s breach[, ] using the inventory on hand at the time”.40 A lost volume seller must
prove that but for the buyer’s breach it would have realized two sales and two profits; thus
the decisive question is whether the seller would have been in a position to sell to the buyer
and the resale purchaser if not for the breach.41

18.2.2.3.2 Overcompensation Using the Market Price Formula

In certain cases it is clear that the market formula of U.C.C. § 2-708(1) will adequately
compensate the aggrieved seller; sometimes, however, often on account of a great increase
in the market price of the relevant goods, the seller is poised to experience a windfall should
such a calculation be made. In these cases the seller will argue that the market formula is
the correct measure to use as it adequately compensates the loss, while the buyer will argue
that such a windfall violates the underlying principles of the U.C.C. that aim to put the
plaintiff in the same, not a better, position than if performance had been carried out
properly. A court must then determine whether it can force the seller to accept lost profit
damages even when the damages under U.C.C. § 2-708(1) would be greater.
There have been a string of cases that forced the lost profit calculation on plaintiff
sellers in order to prevent a windfall. Common characteristics that these cases considered
were, first, whether it was evident that the market contract calculation would overcom-
pensate; second, whether the seller had insulated itself from market fluctuations by entering
a contract with its supplier to fix its market price; third, whether the seller’s expectation
interest is more accurately met by an award of its lost profit; and fourth, whether or not
the seller is in possession of the remaining goods to be delivered.42 Some courts have said
that the inadequacy of damages required to trigger the lost profit formula means not only
that the compensation under U.C.C. § 2-708(1) would be too small, but that the damages
would also be inadequate if they overcompensate.43 Thus, they would be inadequate in the

40 Vanderwerff Implement, Inc. v. McCance 561 N.W.2d 24, 26 (S.D. 1997); Unique Designs, Inc. v. Pittard
Machinery Co. 200 Ga.App. 647, 649-650 (Ga.App. 1991); Great Western Sugar Co. v. Mrs. Allison’s Cookie
Co. 563 F.Supp. 430, 433 (D.C.Mo. 1983). See generally 67A Am. Jur. 2d Sales § 1004 (2013).
41 Ragen Corp. v. Kearney & Trecker Corp. 912 F.2d 619, 626-627 (3d Cir. 1990); Unique Designs, Inc. v. Pittard
Machinery Co. 200 Ga.App. 647, 649-650 (Ga.App. 1991).
42 Westlake Petrochemicals, L.L.C. v. United Polychem, Inc. 688 F.3d 232, 243-244 (5th Cir, 2012); Nobs
Chemical, USA, Inc. v. Koppers Co., Inc., 616 F.2d 212 (5th Cir.1980); Purina Mills, L.L.C. v. Less, 295 F.Supp.2d
1017 (N.D.Iowa 2003); Union Carbide Corp. v. Consumers Power Co. 636 F.Supp. 1498, 1501 (E.D.Mich.
1986).
43 Nobs Chemical, USA, Inc. v. Koppers Co., Inc. 616 F.2d 212, 215-216 (5th Cir.1980) (“Had the transaction
been completed, their “benefit of the bargain” would not have been affected by the fall in market price, and
they would not have experienced the windfall they otherwise would receive if the market price-contract
price rule contained in s 2.708(a) is followed. Thus, the premise contained in s 1.106 and Texas case law is
a strong factor weighing against application of s 2.708(a).”); Union Carbide Corp. v. Consumers Power Co.
636 F.Supp. 1498, 1501 (E.D.Mich. 1986) (“inadequate should be interpreted to mean incapable or inadequate

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sense that the purpose of remedies in the U.C.C., full, but not overcompensation, would
not be fulfilled.
Forcing lost profit damages on a windfall seller is not a unanimous course of action.
At least one court, the Second Circuit, applying New York law, refused to read the ‘inad-
equate’ of U.C.C. § 2-708(2) in the manner described above. In Trans World Metals, Inc.
v. Southwire Company the court refused to read U.C.C. § 2-708 as to force lost profit
damages on a seller.44 In a nutshell, the facts of that case were such that it was not crystal
clear whether U.C.C. § 2-708(1) would overcompensate, the plaintiff seller did not take
steps to insulate itself from market fluctuations, and the state of New York, where the
Federal court was sitting, had not interpreted U.C.C. § 2-708 to allow for the imposition
of lost profits when the seller had proven the necessary elements for the market contract
damages.
The results of each case were reasonable in light of the respective facts. While it is clear
the U.C.C. drafters had in mind under-compensation, when they drafted U.C.C. § 2-708(2),
it is possible for the lost profit calculation to greatly overcompensate an aggrieved seller.
In those cases, particularly when dealing with a middleman, a so-called jobber, who has a
fixed price contract and would thus never see the harms or benefits of severe fluctuations
in the market, the market price formula of U.C.C. § 2-708(1) should be used to calculate
the damages.

18.2.3 Damages for Accepted Goods

Once the buyer has accepted the goods, its damage options shift from the non-acceptance
remedies discussed above. For a seller, the primary measure of recovery after acceptance
is an action for the price under U.C.C. § 2-709, discussed above in connection with specific
performance, and for the buyer the available damages are found in U.C.C. § 2-714 for
breach of warranty.
The U.C.C. provides buyers with many opportunities before acceptance (i.e. rejection,
revocation) to avoid getting stuck with non-conforming goods. Should these safeguards
fail, the buyer must turn to the U.C.C.’s damage provisions for breach of warranties. Upon
a breach of the seller’s warranty, the buyer is entitled to the difference between the value
of the goods at the time and place of acceptance and the value of the goods as warranted.45

to accomplish the stated purpose of the UCC remedies of compensating the aggrieved person but not over-
compensating that person or specially punishing the other person”).
44 Trans World Metals, Inc. v. Southwire Company, 769 F.2d 902 (2d Cir.1985). See Roy Ryden Anderson,
Annotation, When Market Formula Provides Windfall, 1 Damages Under UCC § 5:8 (2012).
45 U.C.C. § 2-714(2).

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These damages may be measured by the cost to repair the defects under U.C.C. § 2-714(2).46
Pursuant to U.C.C. § 2-714(1), damages for non-conformity are not limited to quality, but
also extend to defects with the tender.

18.3 Consequential Damages

In addition to general damages, a buyer may seek consequential damages. Consequential

damages are compensation for the loss resulting from general or particular requirements,
the needs of which the seller had reason to know at the time of contracting and that could
not reasonably be prevented by cover or otherwise, and injury to personal property prox-
imately resulting from any breach of warranty.47 U.C.C. § 2-715 is essentially a codification
of the rule of Hadley v. Baxendale48 – namely, that a party who breaches a contract is liable
for the consequences naturally flowing from the breach, or which were within the contem-
plation of the parties as foreseeable consequences because of circumstances known to both
parties at the time of contracting.49 Professors White and Summers eloquently drive home
just how important consequential damages are by describing them as the difference between
a fifty-cent or a million-dollar damages award.50 In their example, the breakage of a fifty-
cent screw may cause the death of dozens of children riding a school bus or breakdown
of a generator needed to power a factory. Recovery limited to general damages and
excluding consequential damages would limit buyers to the recovery of the cost of screw.

18.3.1 Types of Loss Recoverable as Consequential Damages

Consequential damages for the buyer can include, but are not limited to, lost profits, loss
of goodwill, lost interest, loss from the interruption of the production process, physical
injury to person or property, and the cost of unsuccessful attempts to repair defective
goods.51 Lost profits are the most commonly sought after and litigated type of consequential

46 See Rheem Mfg. Co. v. Phelps Heating & Air Conditioning, Inc. 746 N.E.2d 941, 955-956 (Ind. 2001); Jones
v. Abriani 169 Ind.App. 556, 572-573 (Ind.App. 1976).
47 U.C.C. § 2-715. See generally John S. Herbrand, Annotation, Buyer’s Incidental and Consequential Damages
from Seller’s Breach Under UCC § 2-715, 96 A.L.R.3d 299 (1979).
48 Hadley v. Baxendale 9 Exch 341 (Exchequer Court 1854).
49 Id. See Gerwin v. Southeastern Cal. Assn. of Seventh Day Adventists 14 Cal.App.3d 209, 220 (Cal.App. 1971);
White & Summers, supra Ch. 2, note 7, § 11-4 at 522.
50 White & Summers, supra Ch. 2, note 7, § 11-4(h) at 537.
51 Federal Ins. Co. v. Village of Westmont 271 Ill.App.3d 892, 896, (Ill.App. 1995); White & Summers, supra
Ch. 2, note 7, § 7-5, at 310; White & Summers, supra Ch. 2, note 7, § 11-4(d) at 532. See generally Roy R.
Anderson, Incidental and Consequential Damages 7 J. L. & Com. 327, 399 et. seq. (1987).

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damages claimed.52 If a seller knows that the buyer is in the business of reselling the goods,
lost profits are almost certainly recoverable as damages.53 Likewise, if a seller is aware that
the goods are to be used in a manufacturing process, it will generally be charged with
knowledge that defective goods will disrupt production and lost profits would be a natural
consequence of such a disruption.54 In Lewis v. Mobil Oil Corp. the defendant seller was
liable for consequential damages after it sold oil it knew to be defective such that it would
cause a slowdown in the production of the plaintiff’s mill.55 In addition to the lost profits,
the increased costs of production are recoverable when the defective goods cause a slow-
down in the production process.56
The loss of goodwill, which can include loss of future profits, loss of customers or
damage to reputation, is recoverable as an item of consequential damages.57 The fact that
it is recoverable, however, does not mean that it is often recovered. In the majority of cases
that address loss of goodwill, courts recognize that it may be recovered, but refuse to grant
recovery to the plaintiff for failure to carry the burden of proving the necessary certainty.58
A buyer may recover legal fees incurred as a result of liability to third parties stemming
from the seller’s breach.59 The buyer may also recover the liability to third persons as the
result of the use or resale.60 However, Professor Anderson has written that “[o]ne of the
great ironies of the law of damages in this country is that the most common consequential
loss suffered by an aggrieved party seeking legal recourse is generally not a recoverable
item of damage.”61 The professor is referring of course to attorney’s fees. Under the pre-
vailing American Rule, courts have consistently held that the buyer’s own attorney’s fees
for the action against the breaching seller are not recoverable as consequential damages

52 See e.g. Givan v. Mack Truck, Inc. 569 S.W.2d 243, 248 (Mo.App. 1978); Charles R. Combs Trucking, Inc. v.
International Harvester Co. 12 Ohio St.3d 241, 244 (Ohio 1984); White & Summers, supra Ch. 2, note 7, §
7-5 at 312; 24 Williston on Contracts (4th ed.) § 66:74 (2013).
53 U.C.C. § 2-715 cmt. 6; Canusa Corp. v. A & R Lobosco, Inc. 986 F.Supp. 723, 732 (E.D.N.Y. 1997).
54 Lewis v. Mobil Oil Corp. 438 F.2d 500, 510 -511 (8th Cir. 1971); White & Summers, supra Ch. 2, note 7, §
11-4(d) at 531.
55 Lewis v. Mobil Oil Corp. 438 F.2d 500, 510 (8th Cir. 1971).
56 Hawthorne Industries, Inc. v. Balfour Maclaine Intern., Ltd. 676 F.2d 1385, 1387 (11th Cir. 1982) (“Increased
production costs are unquestionably proper items of recovery as consequential damages when adequately
attributed to a breach.”).
57 Toltec Fabrics, Inc. v. August Inc. 29 F.3d 778, 780 (2d Cir. 1994). See John B. Greer, Consequential Damages:
The Loss of Goodwill, 23 Baylor L. Rev. 108 (1971-1972).
58 Toltec Fabrics, Inc. v. August Inc. 29 F.3d 778, 780 (2d Cir. 1994); Hangzhou Silk Import and Export Corp.
v. P.C.B. Intern. Industries, Inc. 2002 WL 2031591 (S.D.N.Y. 2002); White & Summers, supra Ch. 2, note 7,
§ 7-5 at 312. But see Argo Welded Products, Inc. v. J. T. Ryerson Steel & Sons, Inc. 528 F.Supp. 583, 588 (E.D.Pa.
1981) (stating that Pennsylvania categorically rejects recovery for loss of goodwill).
59 Chemco Indus. Applicators Co. v. E. I. du Pont de Nemours & Co. 366 F.Supp. 278, 286 (D.C.Mo. 1973).
60 Woodbury Chemical Co. v. Holgerson 439 F.2d 1052, 1055 (10th Cir. 1971); Gambino v. United Fruit Co. 48
F.R.D. 28, 29 (S.D.N.Y. 1969).
61 Anderson, supra note 51, at 439.

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under U.C.C. § 2-715(2)(a)’s broad language.62 Only if expressly provided by the terms of
the agreement or by a specific statute may the prevailing party recover attorney’s fees.

18.3.2 Proving Recoverability of Consequential Damages

An injured party seeking consequential damages has the burden of proving the loss it
suffered was caused by the defendant’s breach, that the loss was a reasonably foreseeable
consequence of the breach, that the loss can be calculated with reasonable certainty, and
that the damages are not barred by its failure to mitigate the loss.63

18.3.2.1 Causation
The buyer must show a causal link between the seller’s breach and each claimed item of
damages.64 It has been held that proximate cause is lacking when a buyer fails to discover
an obvious defect or takes other actions that break the chain of causality.65 In Michigan
Sugar Co. v. Jebavy Sorenson Orchard Co. upon inspection, the food-processor buyer dis-
covered a defect in sugar that he knew might make it unacceptable to his resale customers,
but used it anyway, and ultimately it was rejected by his customer. The court held that the
buyer’s use of the sugar he knew to have a contaminant constituted a sufficient intervening
act to relieve the seller of liability for consequential damages.66 Thus, a seller can defend
against claim for consequential damages by providing evidence that there was a break in
the chain of causation from a supervening event between its alleged breach and the loss.
A court may apply the rules of comparative fault to apportion loss; these rules are especially
used in personal injury and property damage cases.67

62 Yorgo Foods, Inc. v. Orics Industries, Inc. 2011 WL 4549392, *13-15 (D.N.H. 2011); Indiana Glass Co. v.
Indiana Michigan Power Co. 692 N.E.2d 886 (Ind.App. 1998); Devore v. Bostrom 632 P.2d 832, 835-836
(Utah 1981); Nick’s Auto Sales, Inc. v. Radcliff Auto Sales, Inc. 591 S.W.2d 709 (Ky.App. 1979); Murray v.
Holiday Rambler, Inc. 83 Wis.2d 406, 435-436 (Wis. 1978); Modine Mfg. Co. v. North East Independent School
Dist. 503 S.W.2d 833, 844 (Tex.Civ.App. 1974).
63 U.C.C. § 2-715; RIJ Pharmaceutical Corp. v. Ivax Pharmaceuticals, Inc. 322 F.Supp.2d 406, 415 (S.D.N.Y.
2004); Herbrand, supra note 47. See below para. under Section 18.6.
64 J & J Farms, Inc. v. Cargill, Inc. 693 F.2d 830 (8th Cir. 1982) (the loss did not arise out of the contract at issue
but out of a secondary enterprise); White & Summers, supra Ch. 2, note 7, § 7-5 at 311.
65 Long Island Lighting Co. v. IMO Industries, Inc. L 64588, *3-4 (S.D.N.Y. 1990) (“LILCO’s mismanagement
and its own negligence negate any causation on the part of Imo”); General Instrument Corp., F. W. Sickles
Division v. Pennsylvania Pressed Metals, Inc. 366 F.Supp. 139, 149-150 (D.C.Pa. 1973) (failure to discover
obvious defect was cause of the loss).
66 Michigan Sugar Co. v. Jebavy Sorenson Orchard Co. 66 Mich App 642 (Mich.App. 1976).
67 Indust-Ri-Chem Laboratory, Inc. v. Par-Pak Co., Inc. 602 S.W.2d 282 (Tex.Civ.App. 1980).

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18.3.2.2 Foreseeability
For consequential damages to be recoverable, the injury must have been foreseeable by
the seller. The issue of what is foreseeable is a heavily litigated one, as of course it is
dependent on the facts and circumstances surrounding each particular claim. Unlike
general damages, consequential damages are caused by a particular situation the buyer is
in – so the relevant question becomes, how much notice of the buyer’s circumstances must
the breaching seller have to be liable for the loss?
For some time the prevailing test for assessing the foreseeability in claims for consequen-
tial damages was known as the ‘tacit agreement test’. Justice Holmes laid out this test in
Globe Refining Co. v. Landa Cotton Oil Co.68 According to Holmes, a breaching party’s
liability “should be worked out on terms which it fairly may be presumed he would have
assented to if they had been presented to his mind.”69 This is a strict standard for the buyer,
which basically requires the plaintiff to prove that the parties specifically contemplated
that the consequential damages would result and that the defendant assumed the risk for
them.70
The U.C.C. explicitly rejects the tacit agreement test, in favour of a more lenient reading
of the foreseeability rule found in Hadley.71 U.C.C. § 2-715(2)(a) requires the reasonable
foreseeability of probable consequences, and uses the standard of whether the seller knew
of the buyer’s circumstances at the time of contracting or had reason to know.72 The ‘reason
to know’ standard is an objective one wherein the person in the place of the seller could
have reasonably foreseen. It is not necessary that the seller could have foreseen the specific
injury or amount, but rather that a reasonable person could have anticipated the harm
flowing from the breach in the usual course of events.73
U.C.C. § 2-715(2)(b) contains a different rule for cases of injury to person or property.
For a plaintiff claiming consequential damages for personal injury or property damages
there is no foreseeability requirement.

68 Globe Refining Co. v. Landa Cotton Oil Co. 190 U.S. 540 (U.S. 1903).
69 Id., 543-544. See also Marcus & Co. v. K.L.G. Baking Co. 122 N.J.L. 202, 209 (N.J.Err. & App. 1939); Perillo,
supra Ch. 2, note 39, at § 14.22.
70 White & Summers, supra Ch. 2, note 7, § 11-4 at 528.
71 U.C.C. § 2-715 cmt. 2 states that the “tacit agreement test for the recovery of consequential damages is
rejected.”
72 U.C.C. § 2-715(2)(a); Gerwin v. Southeastern Cal. Assn. of Seventh Day Adventists 14 Cal.App.3d 209, 220
(Cal.App. 1971).
73 See R. I. Lampus Co. v. Neville Cement Products Corp. 474 Pa. 199, 204-205 (Pa. 1977); Gurney Industries,
Inc. v. St. Paul Fire & Marine Ins. Co. 467 F.2d 588, 598 -599 (4th Cir. 1972) (permitting consequential
damages when defendants were familiar with plaintiff’s industry and therefore had reason to know the
“probable result of an ill-equipped mill would be a decrease in production, shoddy yarn, and an increase in
operating expenses”); 24 Williston on Contracts (4th ed.) § 66:58 (2013).

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18.3.2.3 Certainty
Consequential damages are limited to losses that can be proven with reasonable certainty.74
The buyer has the burden of proving the extent of loss incurred; however, the level of
certainty required to show the amount of loss is less than the amount of certainty that is
required to establish the fact or cause of loss.75 Once the buyer provides evidence establishing
the certainty of the loss, the burden shifts to the seller to negate the evidence and show the
loss is too speculative to be recoverable.76
There are some categories of buyers who will almost never run into problems establish-
ing the reasonable certainty of their losses. Buyers who deal in commodities or frequently
in resale can demonstrate their loss by turning to the current market value of the goods
they would resell at the time they wished to resell. On the other hand, when a buyer wishes
to recover damages based on a claim for loss of goodwill or a new business for loss of
profits, the issue of certainty can be problematic. To establish loss of profits with reasonable
certainty, new businesses can introduce evidence of expert testimony, economic and fin-
ancial data, market surveys and analyses, or business records of similar enterprises.77 In a
case involving the sale of three ostriches, Doner v. Snapp, the plaintiff buyer, Mr. Doner,
a first-time ostrich buyer hoping to earn some cash for retirement by beginning an ostrich
enterprise, provided some very ill-advised testimony in which he confirmed that his method
for calculating future lost profits on account of being sold a male instead of a female ostrich
was based on pure speculation; additionally, he failed to provide any of the above-mentioned
evidence.78 As a result he was denied recovery of consequential damages for lack of certainty.

74 RIJ Pharmaceutical Corp. v. Ivax Pharmaceuticals, Inc. 322 F.Supp.2d 406 (S.D.N.Y.2004); Givan v. Mack
Truck, Inc. 569 S.W.2d 243, 248 (Mo.App. 1978) (plaintiff failed to provide sufficient evidence of lost profits);
Multivision Northwest, Inc. v. Jerrold Electronics Corp. 356 F.Supp. 207, 217 (D.C.Ga. 1972); White & Summers,
supra Ch. 2, note 7, § 7-5 at 311.
75 U.C.C. § 2-715 cmt. 4; Indianapolis City Market Corp. v. MAV, Inc. 915 N.E.2d 1013, 1025 (Ind.App. 2009)
(“We also note that lost profits need not be proved with mathematical certainty. Farm Bureau Mut. Ins. Co.,
450 N.E.2d at 541. Lost profits are not uncertain where there is testimony that, while not sufficient to put
the amount beyond doubt, is sufficient to enable the factfinder to make a fair and reasonable finding as to
the proper damages. Jerry Alderman Ford Sales, Inc. v. Bailey, 154 Ind.App. 632, 652, 291 N.E.2d 92, 106
(1972). Finally, a proper award of lost profits must be confined to the loss of net profits. Berkel, 814 N.E.2d
at 659.”); Parker Tractor & Implement Co. v. Johnson 819 So.2d 1234, 1239 (Miss. 2002) (“damages are
speculative only when the cause is uncertain, not when the amount is uncertain”); White & Summers, supra
Ch. 2, note 7, § 7-5 at 312.
76 Parker Tractor & Implement Co. v. Johnson 819 So.2d 1234, 1239 (Miss. 2002).
77 AGF, Inc. v. Great Lakes Heat Treating Co. 51 Ohio St.3d 177, 182-183 (Ohio 1990). See Restatement (Second)
of Contracts § 352 cmt. b (1981).
78 Doner v. Snapp 98 Ohio App.3d 597, 598 (Ohio App. 1994).

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18.4 Incidental Damages

18.4.1 Buyer’s Incidental Damages

In addition to general and consequential damages, upon a breach buyers are entitled to
recover incidental damages that arise from handling the goods when they have rightfully
rejected, rightfully revoked acceptance of goods, or have effected cover of non-conforming
or non-delivered goods.79 U.C.C. § 2-715(1) does not define a buyer’s incidental damages,
but rather provides a non-exclusive list that includes the “expenses reasonably incurred
in inspection, receipt, transportation and care and custody of goods rightfully rejected,
any commercially reasonable charges, expenses or commissions in connection with
effecting cover and any other reasonable expense incident to the delay or other breach.”
While the list is non-exclusive, it has been construed narrowly.80
In order to recover incidental damages, the buyer must prove that the expenses were
incurred incident to the breach and that they were reasonable.81 Like consequential damages,
incidental damages are special damages, damages that do not necessarily result from the
breach, and as such they must be specifically pleaded in addition to the general damages
in order to be recoverable.82
Generally, the classification of an item of damages as either consequential or incidental
will not affect the buyer’s recovery. However, in some cases, such as McGinnis v. Wentworth
Chevrolet Co., where the seller included a clause in the contract excluding consequential
damages, the classification becomes very relevant.83 In McGinnis the Supreme Court of
Oregon determined that the rental costs incurred from the purchase of a defective car were
not incidental damages, but rather consequential damages as they relate to the “particular
circumstances of Plaintiff relative to the goods, rather than being necessarily incident to
a breach of this contract”.84 Thus the buyer could not recover the rental costs. Unlike
consequential damages, the issue of foreseeability does not arise regarding incidental
damages, and therefore it is not a barrier to their recovery. Rather, it is only important
that the incidental damages are commercially reasonable.85

79 U.C.C. § 2-715(1). Buyers are entitled to recover incidental damages under U.C.C. § 2-715(1) no matter
whether they have recovered under U.C.C. §§ 2-712, 2-713 or 2-714.
80 24 Williston on Contracts (4th ed.) § 66:56 (2013). See McGinnis v. Wentworth Chevrolet Co. 295 Or.494,
503 (Or. 1983).
81 Duffy Tool & Stamping, Inc. v. Bosch Automotive Motor Systems Corp. 2000 WL 122225, *11 (Tenn.Ct.App.
2000).
82 Piedmont Plastics, Inc. v. Mize Co., Inc. 58 N.C.App. 135, 140 (N.C.App. 1982).
83 McGinnis v. Wentworth Chevrolet Co. 295 Or. 494, 503 (Or.1983).
84 Id.
85 Firwood Mfg. Co., Inc. v. General Tire, Inc. 96 F.3d 163, 170 (6th Cir. 1996); 24 Williston on Contracts (4th
ed.) § 66:56 (2013).

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18.4.2 Seller’s Incidental Damages

Like buyers, sellers are entitled to incidental damages in addition to general damages when
such damages would be necessary to fulfil their expectation interest.86 According to U.C.C.
§ 2-710, a seller’s incidental damages “include any commercially reasonable charges,
expenses or commissions incurred in stopping delivery, in the transportation, care and
custody of goods after the buyer’s breach, in connection with return or resale of the goods
or otherwise resulting from the breach.”87 As with the buyer’s consequential damages,
attorney’s fees and litigation cost are not included as incidental damages, and thus are only
recoverable if permitted by a statutory exception to U.C.C. § 1-305.88 No provision exists
in the U.C.C. entitling a seller to consequential damages; thus the recovery of incidental
damages is all the more important, and unlike in the case of plaintiff buyers, the classifi-
cation of damages as consequential or incidental is critical.

18.5 Nominative and Punitive Damages

As discussed earlier, the remedial purpose of contract damages in general is to put the
aggrieved party in the same position it would be in had the breach not occurred.89 While
compensation is the primary and fundamental purpose of awarding damages, it is not the
sole purpose. Two categories of damages – nominal and punitive – do not necessarily
compensate for a loss sustained, but rather achieve a preventative purpose. Deterrence is
not to be confused with punishment. The criminal courts are the only courts vested with
the power to punish. The use of private law damages to achieve a preventative purpose
does not require a violation of a state’s laws, but rather only a breach of contract, and thus
it does not cross the line into criminal law territory.90 There are two ways to achieve a
preventative rather than compensatory purpose – through the use of nominal and punitive
damages.
The ability of courts to award nominal damages is recognized as an independent pre-
ventative purpose of damages.91 Nominal damages are available in all breach of contract

86 U.C.C. §§ 2-706, 2-708, 2-709.

87 U.C.C. § 2-710. See Indeck Energy Services, Inc. v. NRG Energy, Inc. 2004 WL 2095554 *12-14 (N.D.Ill. 2004);
Peoria Harbor Marina v. McGlasson 105 Ill.App.3d 723, 730-731 (Ill.App. 1982); Cesco Mfg. Corp. v. Norcross,
Inc. 7 Mass.App.Ct. 837, 844, (Mass.App. 1979); Connor v. Bogrett 596 P.2d 683, 68-689 (Wyo. 1979) (cost
and care of ailing dog returned to seller constituted recoverable incidental damages).
88 White & Summers, supra Ch. 2, note 7, § 8-16(a) at 393.
89 Melvin A.Eisenberg, Actual and Virtual Specific Performance: The Theory of Efficient Breach and the Indif-
ference Principle in Contract Law, 93 Cal. L. Rev. 975, 979 (2005); Schwenzer, Hachem & Kee, supra Ch. 2,
note 7, para. 44.4.
90 Schwenzer, Hachem & Kee, supra Ch. 2, note 7, para. 44.11.
91 Id., para. 44.8. See Perillo, supra Ch. 2, note 39, at § 14.2.

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cases,92 including breaches of contracts for the sale of goods.93 A court may award nominal
damages when the plaintiff has proven the elements of the breach, but has suffered no
compensable damages. The usual amount for a nominal damages award is six cents or one
dollar; however, some jurisdictions have fixed an amount that must be awarded for nominal
damages, typically one dollar or any amount not exceeding one dollar.94 Georgia takes a
different approach and provides that a party may recover nominal damages “sufficient to
cover the costs of bringing the action”.95
Nominal damages have been referred to as a symbol of vindication for the wrong done
as well as the “peg to hang costs on”,96 as at the court’s discretion the nominal damage
award may carry with it an award of court costs. Because the awards are so trivial, failure
to award nominal damages when they are merited is not a reversible error on the part of
the court, unless a significant right or question of costs is involved.97
U.C.C. § 1-106 provides that penal damages may not be had “except as specifically
provided in this Act or by other rule of law”. Traditionally, punitive damages were available
only in tort actions.98 However, today it is possible for punitive damages to be awarded in
a breach of contract case, when the breach of contract constitutes an independent tort for
which punitive damages would be available.99

18.6 The Doctrine of Avoidable Consequences (Mitigation)

An aggrieved party may not recover any damages that it could have reasonably avoided.
This simple and sensible principle is the doctrine of avoidability, or avoidable consequences,
and is often mislabelled as the ‘duty’ to mitigate.100 A party is under no obligation to mit-

92 Restatement (Second) of Contracts § 346 (1981). See e.g. Duke Galish, LLC v. Manton 308 Ga.App. 316, 322
(Ga.App. 2011) (quoting Ga. Code Ann. § 13-6-6 - “In every case of breach of contract the injured party has
a right to damages, but if there has been no actual damage, the injured party may recover nominal damages
sufficient to cover the costs of bringing the action.”).
93 See e.g. Ohio Metal Servs., L.L.C. v. TrueForge Mach. Corp. 2013 WL 1850786, *2 (Ohio App. 2013).
94 See e.g. Mollinger-Wilson v. Quizno’s Franchise Co. 122 Fed.Appx. 917, 923 (10th Cir. 2004) (nominal damages
in Colorado must be exactly one dollar); Hummel v. Mid Dakota Clinic, P.C. 526 N.W.2d 704, 709 (N.D.
1995) (in North Dakota nominal damages are not to exceed one dollar).
95 Ga. Code Ann. § 13-6-6.
96 Stanton v. New York & E. Ry. Co. 22 A. 300, 303 (Conn. 1890). See Fowler’s Holdings, LLLP v. CLP Family
Investments, L.P. 318 Ga.App. 73, 74 (Ga.App. 2012); Perillo, supra Ch. 2, note 39, at § 14.2.
97 Hummel v. Mid Dakota Clinic, P.C. 526 N.W.2d 704, 709 (N.D. 1995); Restatement (Second) of Contracts
§ 346 cmt. b (1981).
98 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 44.13.
99 Whitehead v. Allen 63 N.M. 63, 65-66 (N.M. 1957); Restatement (Second) of Contracts § 355 (1981);
Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 44.13. See Grandi v. LeSage 74 N.M. 799, 806-807
(N.M. 1965).
100 Casenote, Damages—“Duty” to Mitigate—Recovery of Expenses of Denial in Action for Libel, 28 Yale L. J. 827
(1919); Perillo, supra Ch. 2, note 39, at § 14.5.

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igate its damages; rather, it may not receive compensation for losses it could have reasonably
avoided. This doctrine is embodied in the Second Restatement of Contracts § 350, which
provides that “damages are not recoverable for loss that the injured party could have
avoided without undue risk, burden or humiliation”. Furthermore the Second Restatement
provides that the efforts must be reasonable, but need not be successful. The doctrine of
avoidable consequences is applicable to all areas of contracting, including sales contracts.101
A buyer’s consequential damages under U.C.C. § 2-715(2)(a) are limited to losses that
“could not reasonably be prevented by cover or otherwise”. This rule is applicable in the
consumer context as well as in B2B sales.102
It is a question of fact whether the aggrieved party took reasonable measures to mitigate
its damages. The breaching party bears the burden of proving that the aggrieved party
failed to mitigate its losses, and is therefore barred from recovery of such losses that could
have been prevented.103 Specifically, to prove failure to mitigate, the party asserting the
defence must show what reasonable measures the plaintiff should have taken, that those
actions would have reduced the damages, and the amount by which the damages would
have been reduced.104
While it is not necessary that the measures taken to mitigate damages be successful,
they must be reasonable steps. Pursuant to the Second Restatement, an aggrieved party is
not required to take steps that subject a party to undue risk, burden or humiliation.105
Furthermore, a party need not incur unreasonable expenses or commit a wrong – for
example, breach another contract, nor does a party have to jeopardize its credit rating.106
Losses will not be recoverable when reasonable efforts could have prevented them but the
aggrieved party sat on its hands.107 Reasonableness and not success is the appropriate
measure in determining whether a party could have taken steps to avoid loss, as anything
else would discourage parties from making good faith efforts at mitigating their losses for
fear of failure.

101 U.C.C. § 2-715 cmt. 2; Perillo, supra Ch. 2, note 39, at § 14.5. See e.g. HGI Associates, Inc. v. Wetmore Printing
Co. 427 F.3d 867, 880 (11th Cir. 2005).
102 White & Summers, supra Ch. 2, note 7, § 11-4f at 535.
103 Prusky v. ReliaStar Life Ins. Co. 532 F.3d 252, 258-259 (3d Cir. 2008); Webster v. Edward D. Jones & Co., L.P.
197 F.3d 815, 820 (6th Cir.1999); Boxa v. Vaughn 674 N.W.2d 306, 312 (S.D. 2003); Webster v. Edward D.
Jones & Co., L.P. 197 F.3d 815, 820 (6th Cir.1999).
104 Prusky v. ReliaStar Life Ins. Co. 532 F.3d 252, 258 -259 (3d Cir. 2008).
105 Banker v. Nighswander, Martin & Mitchell 37 F.3d 866, 873 (2d Cir. 1994) (“it is unreasonable to require a
plaintiff to expend funds to pay an hourly rate to an attorney to take an appeal that the plaintiff believes to
be without merit. That option cannot be described as an effort free of ‘undue risk, expense, or humiliation’”);
Siemens Energy & Automation, Inc. v. Coleman Elec. Supply Co., Inc. 46 F.Supp.2d 217 (E.D.N.Y 1999)
(opening oneself up to additional litigation constitutes an undue risk); Emery v. Caledonia Sand & Gravel
Co., Inc. 117 N.H. 441, 448 (N.H. 1977); Perillo, supra Ch. 2, note 39, at § 14.5.
106 Perillo, supra Ch. 2, note 39, at § 14.5.
107 Barry & Sewall Indus. Supply Co. v. Metal-Prep of Houston, Inc. 912 F.2d 252, 259-260 (8th Cir.1990).

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The mitigation principle is not applicable to a seller’s action for the price under U.C.C.
§ 2-709(1)(a). Unless the buyer justifiably revokes acceptance or effectively rejects the
goods, the seller has no obligation to retrieve the goods and make a resale attempt in order
to limit damages.108 This rule is supported by the policy of U.C.C. § 2-709, namely that the
buyer bears the burden of reselling the goods once it has accepted control over them.109

18.7 Contractually Stipulated Damages

While it has been established above that freedom of contract is a principle set forth in the
U.C.C., with parties generally free to define and shape their own agreements, this freedom
is more limited regarding the ability to shape the available remedies in the case of a breach.
If one thinks of the parties’ agreement as to obligations as the general rule, with the
exception being in regard to default U.C.C. provisions, the converse may be true for rem-
edies. However, there are some possibilities for parties to shape their own remedies – by
limiting remedies available upon breach, providing for liquidated damages or alternative
performance.
There are several reasons why parties may include a liquidated damage clause in their
sales contract. Both parties may find it advantageous to fix damages in order to facilitate
risk calculation as well as reduce the cost necessary to prove actual damages; additionally,
it may serve to protect any secrecy interests the parties may have.110 For the breaching
party it may limit the sum of damages it must pay, and for the aggrieved party it may
provide a chance for recovery that would otherwise be made impossible due to constraints
of evidence and proof.111 A proper and valid liquidated damage clause may ultimately save
court resources, including the time of the judge, jury and witnesses, thus cutting the cost
of litigation for the parties.112
U.C.C. § 2-718(1) permits parties to liquidate damages at any amount that is reasonable
in light of the actual or anticipated harm caused by the breach, the difficulty of proof of
loss, and the inconvenience or infeasibility of otherwise obtaining an adequate remedy.113

108 Unlaub Co., Inc. v. Sexton 568 F.2d 72, 76 (8th Cir. 1977); Siemens Energy & Automation, Inc. v. Coleman
Elec. Supply Co., Inc. 46 F.Supp.2d 217 (E.D.N.Y 1999).
109 White & Summers, supra Ch. 2, note 7, § 8-3 at 344.
110 Farnsworth, supra Ch. 16, note 64, § 12.18 at 301; Omri Ben-Shahar & Lisa Bernstein, The Secrecy Interest
in Contract Law, 109 Yale L. J. 1885, 1902-1904 (2000).
111 Farnsworth, supra Ch. 16, note 64, § 12.18 at 301; Pascal Hachem, Agreed Sums Payable Upon Breach of an
Obligation 49-50 (2011).
112 Farnsworth, supra Ch. 16, note 64, § 12.18 at 301.
113 See also Restatement (Second) of Contracts § 356 (1981) using the same language as U.C.C. § 2-718. For a
comprehensive and comparative analysis of agreed sums payable see Hachem, supra note 111.

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Liquidated damages that are unreasonably large are considered a penalty and are void.114
Conversely, an unreasonably small amount may be stricken as being unconscionable under
U.C.C. § 2-302.115 If the provision is upheld, both parties are bound by it, and it displaces
the default conventional damage remedies regardless of whether the fixed sum is greater
or less than the actual damages incurred.116 If, on the other hand, the damage clause is
stricken as a penalty, then it is unenforceable and the injured party is entitled to the con-
ventional damage remedy.117
Determining whether the liquidated amount is reasonable, as required by U.C.C. § 2-
718(1), is the most frequently litigated issue in dealing with liquidated damages. Typically,
the factors considered in making this determination are laid out in the subsection itself.118
Traditionally, the time for determining the reasonability of the sum is at the time for
contracting, not at the time of the breach.119
The aversion to penalties is rooted in traditional common law, but today with the
development of the doctrine of unconscionability, such a distinction between liquidated
damages and penalties becomes hard to justify.120 California has recognized the modern
tendency of favouring freedom of contract and has amended its version of Article 2 so that
all liquidated damage provisions are valid unless the party seeking to invalidate the provision
can prove that the clause was unreasonable under the circumstances at the time the contract
was made.121 The relevant circumstances include the respective bargaining power of the
parties, whether or not they were represented by counsel, and whether or not the clause
was contained in a standard form contract.122
One way that parties may achieve the desired result of a liquidated damages clause
without including one is by providing for alternative performance. A frequent example in
contracts for the supply of gas or oil is take-or-pay clauses. Under such a clause, buyers of
the natural commodity, such as pipeline companies, pay for a minimum quantity of the

114 Red Sage Ltd. Partnership v. DESPA Deutsche Sparkassen Immobilien-Anlage-Gasellschaft mbH 254 F.3d
1120, 1127 (D.C. Cir. 2001) (holding that if “it appears that the stipulation is designed to make the default
of the party against whom it runs more profitable to the other party than performance would be, it will be
void as a penalty”); Ryder Truck Lines, Inc. v. Goren Equipment Co., Inc. 576 F.Supp. 1348, 1354 (D.C.Ga.
1983). See Interstate Indus. Uniform Rental Service, Inc. v. Couri Pontiac, Inc. 355 A.2d 913, 921-922 (Me.
1976).
115 U.C.C. § 2-718 cmt. 1.
116 Farnsworth, supra Ch. 16, note 64, § 12.18 at 304.
117 City of Rye v. Public Service Mut. Ins. Co. 34 N.Y.2d 470, 472-473 (N.Y. 1974).
118 U.C.C. § 2-718(1) provides that the liquidated amount must be reasonable “in the light of the anticipated
or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility
of otherwise obtaining an adequate remedy”.
119 Farnsworth, supra Ch. 16, note 64, § 12.18 at 303; 24 Williston on Contracts (4th ed.) § 65:17 (2013).
120 For the development of agreed sums in the common law and the U.S. see Hachem, supra note 111, at 34-37.
121 Cal. Com. Code § 2718 (West’s Ann. 2002).
122 Cal. Com. Code § 2718 (West’s Ann. 2002); Farnsworth, supra Ch. 16, note 64, § 12.18 at 303.

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gas or oil, whether or not they take delivery of the total amount.123 Courts have upheld
take-or-pay clauses, finding that the take-or-pay provisions constitute an alternative per-
formance rather than a penalty.124

123 Hachem, supra note 111, at 147; 61 Am. Jur. 2d Pipelines § 6 (2013). See Michael J. Medina et al., Take or
Litigate: Enforcing the Plain Meaning of the Take-or-Pay Clause in Natural Gas Contracts, 40 Ark. L. Rev.
185 (1987).
124 Farnsworth, supra Ch. 16, note 64, § 12.18 at 314; Perillo, supra Ch. 2, note 39, at § 14.34.

162
19 Deduction of Damages from the Price

The U.C.C. contains a set-off provision that allows a buyer to deduct all or part of the
damages arising from a breach of contract from any part of the price still due under the
same contract. U.C.C. § 2-717 is not a general set-off provision that allows a buyer to adjust
continuing contractual obligations according to the buyer’s perceived equities.1 Rather,
the buyer is limited to deduction of damages arising out of the same contract for which
the price is due. U.C.C. § 2-717 displaces the common law of set-off in sales contracts.2
The buyer must give notice to the seller of its intention to deduct the damages from
the price. Failure to provide the seller with notice of the intention to withhold payment
will result in a default. However, there is no formal requirement as to what the notice must
look like, and any language that is reasonably indicative of the buyer’s reason for withhold-
ing payment suffices to meet the notice requirement.3 In U.S. v. Southern Contracting of
Charleston, Inc. the court found that notice was sufficient to inform the seller of the buyer’s
intention to deduct damages from the purchase price based on a fax between the parties
acknowledging defects and authorizing additional work. The buyer submitted an invoice
instead of payment, listing damages including the extended overhead, liquidated damages,
and labour and material costs incurred.4
Because U.C.C. § 2-717 does not require the determination by a third party or a judge
that a deduction is an appropriate action, it is possible that the parties may resolve any
breach and settle any resulting damages entirely through self-help without the intervention
of an adjudicator.5 In such a case the buyer would assess the breach and necessary amount
to deduct from the contract price, and the seller would admit to the breach and agree the
deduction offsets the damage. If, however, there is not such a harmony among the parties
and the seller denies the existence of a breach or the reasonableness of the deduction, then
the buyer should proceed with caution when invoking U.C.C. § 2-717.
As mentioned, the buyer is entitled to deduct the damages without any outside approval;
therefore the buyer is acting upon a perceived breach and must make several determinations,
the miscalculation of which put it at risk for liability of damages if the seller prevails.6 First,

1 Total Foods Corp. v. Wilfran Agr. Industries, Inc. 945 F.Supp. 100, 102 (E.D.Pa. 1996). See Columbia Gas
Transmission Corp. v. Larry H. Wright, Inc. 443 F.Supp. 14, 20 (D.C.Ohio 1977).
2 Total Foods Corp. v. Wilfran Agr. Industries, Inc. 945 F.Supp. 100, 102 (E.D.Pa. 1996); Cliffstar Corp. v.
Riverbend Products, Inc. 750 F.Supp. 81, 89 (W.D.N.Y. 1990).
3 U.C.C. § 2-717 cmt. 2.
4 U.S. v. Southern Contracting of Charleston, Inc. 862 F.Supp. 107, 110 (D.S.C. 1994).
5 Celia R. Taylor, Self-Help in Contract Law: An Exploration and Proposal, 33 Wake Forest L. Rev. 839, 870
(1998).
6 Total Foods Corp. v. Wilfran Agr. Industries, Inc. 945 F.Supp. 100, 102 (E.D.Pa. 1996).

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the buyer must determine whether a breach occurred at all and whether it is serious enough
to invoke U.C.C. § 2-717. Second, the buyer must determine whether the deduction is
from the same contract under which the breach arose.7 Finally, the buyer must determine
the appropriate amount to withhold.8

7 Id.
8 Taylor, supra note 5, at 870.

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20 Exemption

The following section provides an overview of situations when performance becomes so

commercially impracticable or the purpose of the contract becomes so frustrated that the
law exempts the parties from their obligations and liability under the contract.

20.1 Commercial Impracticability under The Code

U.C.C. § 2-615 provides a defence for parties who claim that due to the occurrence of a
contingency, the absence of which was a basic assumption of the parties’ agreement, per-
formance has become commercially impracticable. A party that succeeds in proving the
elements of the defence is excused from performance. The party is also excused from further
performance, and must return any benefit conferred. Excuse from performance means
failure to perform does not constitute a breach of contract, and there is no liability for
damages. The drafters of the U.C.C. purposefully chose to require that performance become
“commercially impracticable,” as opposed to impossible, in order to emphasize the
“commercial character of the criterion” contained in Article 2.1 The traditional standard
to excuse performance was objective impossibility, meaning that the performance must
have been objectively physically impossible.2 Today both the U.C.C. and the Second
Restatement recognize the less stringent and more flexible standard of commercial
impracticability.3
The seminal case of Transatlantic Financing Corp. v. U.S., dealing with a ship forced
into a long detour owing to the closure of the Suez Canal,4 laid out the modern doctrine

1 U.C.C. § 2-615 cmt. 3.

2 Taylor v. Caldwell 122 Eng. Rep. 309 (Q.B. 1863) (establishing the common law doctrine of impossibility,
Justice Blackburn held that the burning down, through no fault of either party, of a concert hall where a
series of performances was to be held excused defendant from performance and liability). See Sheldon W.
Halpern, Application of the Doctrine of Commercial Impracticability: Searching for “the Wisdom of Solomon,”
135 U. Pa. L. Rev. 1123, 1131 (1987).
3 Melford Olsen Honey, Inc. v. Adee 452 F.3d 956, 963 -964 (8th Cir. 2006); Neal-Cooper Grain Co. v. Texas
Gulf Sulphur Co. 508 F.2d 283, 293 (7th Cir. 1974); Barbarossa & Sons, Inc. v. Iten Chevrolet, Inc. 265 N.W.2d
655, 658 (Minn.1978) (stating that the U.C.C. “provision governing excuse of performance has replaced the
common-law requirement of impossibility of performance by a less stringent standard of commercial
impracticability”); Restatement (Second) of Contracts § 261 (1981).
4 A body of case law addressing impracticability has sprung up around the 1956 closure of the Suez Canal by
Eygpt due to conflict in the region; out of these cases, Transatlantic Financing Corp. v. U.S. is the most widely
discussed as it set forth the modern interpretation of the doctrine of commercial impracticability. For further
insight into the Suez Canal cases see Harold J. Berman, Excuse for Nonperformance in Light of Contract
Practices in International Trade, 63 Colum. L. Rev. 1413, 1420 et seq. (1963); Robert L. Birmingham, A Second

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of impracticability. The D.C. Court of Appeals explained that “something is impossible in

legal contemplation when it is not practical, it is not practical when it can only be done at
excessive and unreasonable cost.”5 Applying this doctrine, however, the court found that
performance of a contract to transport wheat from a U.S. gulf port to a safe port in Iran
was not excused owing to commercial impracticability when the closing of the Suez Canal
forced the ship to re-route around the Cape of Good Hope in Africa.
To be excused under U.C.C. § 2-615, three conditions must be met. The party seeking
exemption must show a (1) contingency has occurred (2) that has made performance
impracticable, and (3) the non-occurrence of that contingency was a basic assumption on
which the parties contracted.6 Furthermore, two requirements must be met – it must be
shown that the party seeking exemption has not assumed a greater obligation and that it
has seasonably notified the buyer that there will be a delay or non-delivery.
A party may be exempt by a supervening impracticability if the contingency giving rise
to the excuse occurs after the conclusion of the contract, as well as an existing impractic-
ability, a contingency that exists at the time of the contract formation.7 If the party seeking
exemption is doing so on the basis of an existing impracticability, it has the additional
burden of proving that it did not know of the facts giving rise to the excuse at the time of
the contract conclusion, nor did it have reason to know of such facts.8

20.1.1 Contingency Making Performance Impracticable

The first element of proving exemption under U.C.C. § 2-615 is demonstrating that a
contingency occurred that made performance impracticable. Both the U.C.C. and Second
Restatement refrain from making an exhaustive list of contingencies that would render
the performance impracticable in order to allow for a factual assessment of each case based
on the principles laid out in the respective provisions.9 Rather, they provide guidance by
offering some broad categories that most often give rise to excused performance, as well
as criteria for determining whether a contingency has occurred that makes performance
impracticable.

Look at the Suez Canal Cases: Excuse for Nonperformance of Contractual Obligations in the Light of Economic
Theory, 20 Hastings L. J. 1393, 1400 et seq. (1968-1969).
5 Transatlantic Financing Corp. v. U.S. 363 F.2d 312, 315 (C.A.D.C. 1966) citing Mineral Park land Co. v.
Howard, 172 Cal. 289, 293 (Cal. 1916); Restatment (First) of Contracts § 454 (1932).
6 See Melford Olsen Honey, Inc. v. Adee 452 F.3d 956, 964 (8th Cir. 2006); Lambert v. City of Columbus 242
Neb. 778, 781 (Neb. 1993); Neal-Cooper Grain Co. v. Texas Gulf Sulphur Co. 508 F.2d 283, 293 (C.A.Ill.
1974).
7 Roy v. Stephen Pontiac-Cadillac, Inc. 15 Conn.App. 101, 106 (Conn.App.1988); Restatement (Second) of
Contracts §§ 266(1), 266 cmt. a (1981).
8 Id.
9 U.C.C. § 2-615 cmt. 2; Restatement (Second) of Contracts § 261 cmt. a (1981).

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Typically for an event to be one that qualifies a party for exemption, it must be a so-
called act of God or acts of third parties. If the act causing the contingency is caused by
the obligee, this would most likely amount to a breach of contract, and thus would be
governed by the sections addressing breach.10 Likewise, if the contingency can somehow
be attributed to the obligor, that party is not entitled to the protection offered by U.C.C.
§ 2-615, as the contingency relied upon would have been within the seller’s control.11 For
example, the seller in Roth Steel Products v. Sharon Steel Corp. was not excused from per-
formance due to a market shortage of the raw materials for steel when the Sixth Circuit
determined that its inability to perform was not due to the market shortage, but rather
due to the defendant’s policy of accepting more purchase orders than it knew it was capable
of fulfilling.12 Below are described several broad categories of contingencies that form the
lion’s share of cases that arise under U.C.C. § 2-615.

20.1.1.1 Increased Costs

The U.C.C. and subsequent case law make it clear that increased costs alone will not excuse
a party from its obligation to perform; however, if the increased cost is due to an “unforeseen
contingency which alters the essential nature of the performance”, excused performance
may be possible.13 Normal fluctuations in the markets do not justify excusing performance,
as the rise and fall of markets is a business risk contemplated by the parties by setting fixed
prices in their contracts.
While normal ups and downs in the market will not excuse performance, “a severe
shortage of raw materials or of supplies due to a contingency such as war, embargo, local
crop failure, unforeseen shutdown of major sources of supply or the like, which either
causes a marked increase in cost or altogether prevents the seller from securing supplies
necessary to his performance” may give rise to an exemption.14 The events listed by the
commentary are the classic act of God examples required by the doctrine of impossibility.
Sellers today, however, may be excused not only because a war, for example, makes perfor-
mance physically impossible, but also because the war makes the cost of performance
commercially impracticable. A court will excuse performance as commercially impracticable
only if “the cost of performance has in fact become so excessive and unreasonable that the
failure to excuse performance would result in grave injustice”.15 This standard thus requires

10 Restatement (Second) of Contracts § 261 cmt. d (1981).

11 Roth Steel Products v. Sharon Steel Corp. 705 F.2d 134, 150 (6th Cir. 1983); Deardorff-Jackson Co. v. National
Produce Distributors, Inc. 1967 WL 8815 (Dept.Agric. 1967); Restatement (Second) of Contracts § 261 cmt.
d (1981); White & Summers, supra Ch. 2, note 7. § 4-10 at 182.
12 Roth Steel Products v. Sharon Steel Corp. 705 F.2d 134, 150 (6th Cir.1983).
13 U.C.C. § 2-615 cmt. 1.
14 U.C.C. § 2-615 cmt. 4.
15 Gulf Oil Corp. v. F. P. C. 563 F.2d 588, 599 (3d Cir. 1977); Dorn v. Stanhope Steel, Inc. 368 Pa.Super. 557,
586-587 (Pa.Super. 1987); Nora Springs Co-op. Co. v. Brandau 247 N.W.2d 744, 748 (Iowa 1976).

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Modern Law of Sales in the United States

more than evidence that performance would be more expensive than anticipated, or would
result in a loss, but rather it requires showing that performance can be completed only at
a loss, and such a loss would be severe, unreasonable and extreme.16
Given this high standard, it is extremely rare for a party to be excused based on increased
cost. Because this result is so rare, there is one case that is consistently cited by parties
seeking exemption on the basis of increased cost: Aluminum Co. of America v. Essex Group,
Inc., or the ALCOA case.17 Here, the court deemed ALCOA’s performance under a long-
term contract to convert alumina into molten aluminium commercially impracticable
when due to a sharp increase in non-labour cost, ALCOA stood to lose sixty million USD
out of pocket. The court noted that the evidence in the case indicated that the parties took
specific measures in their contract to avoid abnormal risks. Despite its popularity among
defendant sellers, the case is rarely found to be on all fours with parties requesting excuse
for increased costs, and has received heavy criticism.18 Despite the ruling in ALCOA, gen-
erally courts do not recognize increased costs as an excuse for performance, save the most
extreme circumstances.

20.1.1.2 Destruction of the Goods or the Source of Supply

A large group of cases addressing commercial impracticability involve contracts for the
sale of agricultural commodities. Most often these cases arise after droughts, floods, fires,
freezes and other acts of nature destroy farmers’ fields or crop yields. In such a situation
it is possible for a farmer to be excused if the land affected has been designated by the
agreement and the failure is of a specific crop. The exemption may be based either on
destruction of identified goods or on a failure of a basic assumption of the contract.19
Destruction of goods identified to the contract is covered by U.C.C. § 2-613. If identified
goods are destroyed through no fault of the seller before the risk has passed to the buyer,
the contract may be deemed avoided.20 If the goods have not yet been identified to the
contract when they are destroyed, then U.C.C. § 2-615 is the appropriate provision for a
seller to turn to. Farmer sellers whose crops have been destroyed often seek relief under

16 Gulf Oil Corp. v. F. P. C. 563 F.2d 588, 600 (3d Cir. 1977); Sabine Corp. v. ONG Western, Inc. 725 F.Supp.
1157, 1175 (W.D.Okl. 1989); Eastern Air Lines, Inc. v. Gulf Oil Corp. 415 F.Supp. 429, 440 -441 (D.C.Fla.
1975).
17 Aluminum Co. of America v. Essex Group, Inc. 499 F.Supp. 53 (D.C.Pa. 1980). See Lee Russ, Annotation,
Impracticability of Performance of sales Contract under UCC § 2-615, 55 A.L.R.5th 1 (1998).
18 See e.g. Teco Coal Corp. v. Orlando Utilities Com’n 2010 WL 8750622, *3 (E.D.Ky. 2010); Golsen v. ONG
Western, Inc. 756 P.2d 1209, 1222 (Okl. 1988); Printing Industries Ass’n of Northern Ohio, Inc. v. International
Printing and Graphic Communications Union Local 56 584 F.Supp. 990, 998 (D.C.Ohio1984).
19 U.C.C. §§ 2-615 cmt. 9, 2-613.
20 A similar rule is found in Restatement (Second) of Contracts § 263 (1981), which states: “[i]f the existence
of a specific thing is necessary for the performance of a duty, its failure to come into existence, destruction,
or such deterioration as makes performance impracticable is an event the non-occurrence of which was a
basic assumption on which the contract was made.”

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 20 Exemption

both U.C.C. §§ 2-613 and 2-615; however, courts have routinely determined that contracts
for the sale of crops lacking a term identifying the place they are to be grown and harvested
renders the destroyed crops unidentified, and thus U.C.C. § 2-613 not applicable.21
The critical inquiry in these cases is whether the goods have been identified to the
contract and whether the parties contemplated that they would come from a particular
source. A typical case involving the destruction of crops is ConAgra, Inc. v. Bartlett Part-
nership.22 Here the defendant farmer was unsuccessful in raising the defence of causality
and excuse of presupposed condition due to a hailstorm severely damaging his crop. In
ruling that these U.C.C. defences were unavailable, the court explained that the contract
in question did not contemplate that the corn to be delivered must be grown on the
defendant’s land. The corn was only identified by type and amount, and the contract merely
required that it be grown ‘in the Continental United States’. Therefore, the corn was fungible
and not identified to the contract, rendering U.C.C. §§ 2-613 and 2-615 inapplicable.23
The underlying reasoning for such decisions is that if a specific source is not contemplated
from which the crops should come, then it was in the contemplation of the parties that
the seller could fulfil its contractual obligations with crops from any place or source as
long as they conform to the contract.24
A similar rationale applies in cases where there is a failure of a mutually contemplated
source of supply. Performance is excused when a mutually contemplated source of supply
becomes unavailable for causes beyond the seller’s control.25 The parties must have
mutually contemplated the failed source as the sole source for supply.26 As with other
alleged contingencies, if the failure of the source could have been foreseen at the time of
contracting, the requesting party will not be excused, and generally failure of a source of

21 For a discussion of the application of U.C.C. § 2-613 in forward grain contracts cases see David C. Bugg,
Crop Destruction and Forward Grain Contracts: Why Don’t Sections 2-613 and 2-615 of the U.C.C. Provide
More Relief?, 12 Hamline L. Rev. 669 (1989).
22 ConAgra, Inc. v. Bartlett Partnership 248 Neb. 933 (Neb. 1995).
23 Id., 939. See also Bunge Corp. v. Recker 519 F.2d 449, 450-451 (8th Cir. 1975); Ralston Purina Co. v. McNabb
381 F.Supp. 181, 182 (D.C.Tenn. 1974).
24 Larsen v. Grabowski 1996 WL 119509, *3 (Neb.App. 1996); ConAgra, Inc. v. Bartlett Partnership 248 Neb.
933, 939 (Neb. 1995).
25 U.C.C. § 2-615 cmt. 5; Ecology Services, Inc. v. GranTurk Equipment, Inc. 443 F.Supp.2d 756, 768 (D.Md.
2006); Rockland Indus., Inc. v. E+E (US) Inc., 991 F.Supp. 468 (D.Md.1998); International Paper Co. v.
Rockefeller 161 A.D. 180, 185 (N.Y.A.D. 3 Dept.1914) (performance was excuse when delivery of spruce was
mutually contemplated to come from a particular tract of land that was destroyed by a fire).
26 Center Garment Co., Inc. v. United Refrigerator Co. 369 Mass. 633, 635-636 (Mass. 1976); White & Summers,
supra Ch. 2, note 7, § 4-10(c) at 191. See also InterPetrol Bermuda Ltd. v. Kaiser Aluminum Intern. Corp. 719
F.2d 992, 999 (9th Cir.1983).

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supply is considered a foreseeable contingency.27 Finally, the party seeking to be excused

must have attempted “all due measures” to ensure that the source would not fail.28

20.1.1.3 Prohibition or Prevention by Law

A party may seek to be excused from performance when a contract is legal at the time it
is concluded and then through a government regulation, law, action or court injunction
becomes illegal or prohibited.29 According to the Second Restatement, in such a case,
performance may be excused by supervening prohibition of performance by law or regu-
lation as long as the other requirements of the doctrine are met.30 Injunctions as well as
judicial temporary restraining orders, so long as they are not issued as a result of actions
by the party seeking to be excused, may be deemed such a supervening prohibition.31 This
rule applies to all government orders unless the requesting party had a part in causing
them, for example, lobbying for a set of regulations and then claiming they make perfor-
mance of contractual obligations impossible.32 The legality of the government action is
not determinative for excusing the seller’s performance; rather, the appropriate standard
is the seller’s good faith belief in the validity.33 In Process Supply Co., Inc. v. Sunstar Foods,
Inc., a seller was excused for a delayed delivery of chipping potatoes when its truck driver
was forced off the road by state police due to bad weather. Good faith compliance with
the police excused the seller for the delay under U.C.C. § 2-615.34 For the purpose of this
excuse, U.C.C. § 2-615(a) specifically equates foreign law with domestic law.

20.1.2 Basic Assumption of the Contract

Exemption under U.C.C. § 2-615 requires that the non-occurrence of the contingency was
a basic assumption of the parties on which the contract was made. Whether a party assumed
a greater obligation is closely related to the inquiry of whether the non-occurrence of the
contingency was a basic assumption of the parties. The central element of both questions
is what the parties have agreed upon.

27 Paul T. Freund Corp. v. Commonwealth Packing Co. 2004 WL 2075427, *5 (W.D.N.Y. 2004); Heat Exchangers,
Inc. v. Map Const. Corp. 34 Md.App. 679, 689-690 (Md.App. 1977); White & Summers, supra Ch. 2, note 7,
§ 4-10(c) at 191.
28 Ecology Services, Inc. v. GranTurk Equipment, Inc. 443 F.Supp.2d 756, 770 (D.Md. 2006); Rockland Indus.,
Inc. v. E+E (US) Inc., 991 F.Supp. 468 (D.Md. 1998); White & Summers, supra Ch. 2, note 7, § 4-10(c) at 191.
29 U.C.C. §§ 2-615(a), 2-615 cmt. 10; International Minerals and Chemical Corp. v. Llano, Inc. 770 F.2d 879,
887 (10th Cir. 1985).
30 Restatement (Second) of Contracts § 264 (1981); Perillo, supra Ch. 2, note 39, at § 13.5.
31 Reade v. Stoneybrook Realty, LLC 63 A.D.3d 433, 434, (N.Y. App. Div. 2009); Studio No. 54 Disco, Inc. v. Pee
Dee Jay Amusement Corp. 81 A.D.2d 911, 912 (N.Y.A.D.1981); Perillo, supra Ch. 2, note 39, at § 13.5.
32 U.C.C. § 2-615 cmt. 10; White & Summers, supra Ch. 2, note 7, § 4-10(e) at 193.
33 U.C.C. § 2-615 cmt. 10.
34 Process Supply Co., Inc. v. Sunstar Foods, Inc. 1979 WL 30091 (Dept.Agric 1979).

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In cases where a party is excused from performance three dominant types of basic
assumptions are found – first, there is ordinarily a basic assumption that the government
will not intervene and prevent the performance of a party’s obligations; second, there is
ordinarily a basic assumption that a person or party necessary to performance will not die
or become incapacitated before performance is due; and third, there is ordinarily a basic
assumption that a thing necessary for performance will remain in existence, and in such
a condition that it can be used for performance.35
In determining the parties’ assumptions, courts should look at all the relevant circum-
stances surrounding the agreement, including the terms of the contract.36 This approach
would allow courts to look at evidence beyond the integrated agreement for the limited
purpose of determining what assumptions the parties based their agreement on.37 Even
though this approach lends itself to the fairest results, some courts have held that the parol
evidence rule bars any extrinsic evidence for determining the parties’ assumptions, when
there is fully integrated written agreement.38

20.1.3 Notice of Delay or Non-Delivery

In order for a seller to prevail with an exemption defence, U.C.C. § 2-615(c) requires that
it seasonably notify the buyer of a delay in delivery or non-delivery. Whether the require-
ment of notice has been met is an issue of fact. However, it has been held as a matter of
law that a letter merely detailing the fact that there are deviations from the original contract
but without reference to the possibility of delay or non-delivery does not constitute season-
able notice.39 To alleviate any ambiguity, the parties may agree upon the method for
notification in the contract. In Red River Commodities, Inc. v. Eidsness the parties agreed
that notice of an excuse must be in the form of certified mail. The trial court found that
the failure to give notice as agreed upon precluded the seller of sunflowers from being
exempted under U.C.C. § 2-615. On appeal the Supreme Court of North Dakota reversed
this decision, finding that it was immaterial whether notice was sent by certified mail as

35 Restatement (Second) of Contracts §§ 261-64 (1981); Farnsworth, supra Ch. 16, note 64, § 9.6 at 641; P.J.M.
Declercq, Modern Analysis of the Legal Effect of Force Majeure Clauses in Situations of Commercial Imprac-
ticability, 15 J. L. & Com. 213, 219 (1995).
36 Roy v. Stephen Pontiac-Cadillac, Inc. 15 Conn.App. 101, 105 (Conn.App. 1988); Farnsworth. supra Ch. 16,
note 64, § 9.6 at 641.
37 Farnsworth, supra Ch. 16, note 64, § 9.6 at 641. See Campbell v. Hostetter Farms, Inc. 251 Pa.Super. 232, 239-
240 (Pa.Super. 1977).
38 Bunge Corp. v. Recker 519 F.2d 449, 450-451 (8th Cir. 1975); Ralston Purina Co. v. Rooker 346 So.2d 901,
903 (Miss. 1977); Farnsworth, supra Ch. 16, note 64, § 9.6 at 641.
39 Lambert v. City of Columbus 242 Neb. 778, 782 (Neb. 1993); See Russ, supra note 17.

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called for by the contract, as the evidence showed that the buyer had actual knowledge of
the seller’s situation.40
Regarding the content of the notice, a seller who is unsure whether it is facing delayed
delivery or non-delivery may be justifiably concerned as to what it is required to tell the
buyer. In such a case the seller will be protected so long as it gives seasonable notice of
delay and indicates in good faith uncertainty as to whether the delay will become non-
delivery and that it will keep the buyer informed as events unfold – but as soon as the seller
knows the non-delivery will occur it must notify the buyer of this fact.41 U.C.C. § 2-616
provides the options available to a buyer upon receiving notice that the seller’s performance
will be delayed or will not occur. If the notice indicates that delay will be material or
indefinite, then buyer can terminate the contract.

20.1.4 Substitute Performance and Partial Impracticability

The purpose of U.C.C. §§ 2-614 and 2-615(b) is to allow for the preservation of the contract
when performance is still partially possible. A party will not be excused from performance
or liability if the possibility for substitute performance as provided in U.C.C. § 2-614 exists.
The Second Restatement echoes this rule that parties are expected to exert reasonable
efforts to overcome obstacles to performance, “and performance is only impracticable in
spite of such efforts”.42
U.C.C. § 2-614 provides that if the contemplated facilities (type of carrier, berthing,
loading, or unloading facilities) become unavailable or commercially impracticable, then
any available reasonable substitute must be tendered and accepted. The change in the
manner or place of delivery must be without the fault of either party.43 In determining
whether U.C.C. §§ 2-614 or 2-615 is applicable the operative question is whether the
impossibility or failure of performance is incidental (U.C.C. § 2-614) or “goes to the very
heart of the agreement” (U.C.C. § 2-615).44
Similarly, if a contingency does not render the entire performance commercially
impractical, but rather only affects part of the ability to perform, a seller will be expected
to take action. Pursuant to U.C.C. § 2-615(b), if the contingency affects only part of the
seller’s capacity to perform, the seller is required to allocate the remaining goods in a fair
and reasonable manner. The allocation must be in a fair and reasonable manner while

40 Red River Commodities, Inc. v. Eidsness 459 N.W.2d 805 (N.D. 1990).
41 Selland Pontiac-GMC, Inc. v. King 384 N.W.2d 490 (Minn.App. 1986).
42 Restatement (Second) of Contracts § 261 cmt. d (1981).
43 U.C.C. § 2-614(1); S & S, Inc. v. Meyer 478 N.W.2d 857, 861-862 (Iowa App. 1991).
44 U.C.C. § 2-614 cmt. 1.

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taking into consideration the needs of regular customers, as well as the manufacturing
needs of particular customers that are already under contract with the seller.45
Proration of the goods is specifically authorized. U.C.C. § 2-615(c) requires sellers to
notify the buyers of any plans for allocation. An example of a proper allocation can be
found in Alimenta (U.S.A.), Inc. v. Cargill Inc., wherein a drought reduced the defendant’s
peanut crop. The defendant grower notified the plaintiff it would proceed under U.C.C.
§ 2-615 and allocate the remaining peanuts, thus giving the plaintiff 65% of the peanuts it
contracted for. The plaintiff accepted the nuts and later sued for breach of contract. The
trial court found for the defendant and the appellate court affirmed the finding. The court
found that the question of allocation was properly sent to the jury, and affirmed the jury’s
verdict that given the circumstances of this particular drought it was sufficiently unfore-
seeable as to qualify as impracticable, thus allowing the defendant to allocate under U.C.C.
§ 2-615(b).46 On the other hand, in Roth Steel Products v. Sharon Steel Corp., the court
found that the seller failed to demonstrate that it had made a reasonable allocation of steel
by failing to prove that the party it allocated to was a party currently under contract or a
regular customer.47

20.2 Frustration of Purpose

While U.C.C. § 2-615 addresses sellers, buyers are not explicitly prohibited from raising
the defence in appropriate circumstances.48 Mississippi has become the only state to
explicitly include buyers within its adoptation of U.C.C. § 2-615.49 More often, however,
the appropriate defence for a buyer is under the doctrine of frustration, which has been
applied in a number of sales of goods cases. The defence of frustration of purpose is very
similar to commercial impracticability with regard to the required elements of proof.
However, the two differ in regard to the circumstances that give rise to the defence.50 When
a party claims excuse from performance and subsequent liability based on commercial
impracticability, it is claiming that the performance required by the contract is no longer
practical and some objective roadblock prevents the performance. Whereas a party
claiming the defence of frustration claims that something has happened that totally frus-
trates the purpose of the contract and would make performance totally unreasonable and
worthless.

45 U.C.C. § 2-615 cmt. 11.

46 Alimenta (U.S.A.), Inc. v. Cargill Inc. 861 F.2d 650 (11th Cir. 1988).
47 Roth Steel Products v. Sharon Steel Corp. 705 F.2d 134, 151 (6th Cir. 1983).
48 See U.C.C. § 2-615 cmt. 9.
49 Miss. Code Ann. § 75-2-615(d).
50 Restatement (Second) of Contracts § 265 (1981).

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The elements of the defence of frustration of purpose mirror almost exactly those for
impracticality, with the exception of the first element – first, the party’s principle purpose
in making the contract must be frustrated, without the fault of the party claiming frustration,
by the occurrence of an event, the non-occurrence of which was a basic assumption upon
which the contract was made.51 In determining the principal purpose of the agreement,
extrinsic evidence is admissible.52

20.3 Assumption of the Risk

Frequently, parties to sale of goods contracts include clauses in their contract that allocate
the risk if performance becomes impossible or impracticable, or the purpose of the contract
becomes frustrated. These clauses are commonly referred to as force majeure clauses, and
it is certainly advisable to include such terms to enhance predictability and certainty for
the parties when the circumstances under which the agreement was made change.
If the parties have assumed the risk for the type of contingency that occurred, the
analysis comes to a halt, and it is clear the defences of commercial impracticability and
frustration of purpose are not available. Determining whether a greater risk was assumed
can be done by examining both the express terms of the contract as well as the surrounding
circumstances and trade usages.53 The commentary to the U.C.C. reveals that if “the con-
tingency in question is sufficiently foreshadowed at the time of contracting to be included
among the business risks which are fairly to be regarded as part of the dickered terms,
either consciously or as a matter of reasonable, commercial interpretation from the circum-
stances,” the exemptions of U.C.C. § 2-615 are not available.54

20.3.1 Contractual Clauses Allocating Risk

Courts may first look to the explicit wording in the contract to determine whether a clause
is present that clearly allocates the risk. Of course, these cases tend to be much clearer
regarding the parties’ allocation of risk than those where risk allocation must be determined
from circumstances and trade usage. Contractual provisions that address the effect of
contingencies and changed circumstances in general are most frequently referred to gen-
erically as force majeure clauses. Professor Farnsworth notes, however, that for parties
intending to expand the excuses available such a clause may more accurately be described

51 Restatement (Second) of Contracts § 265 (1981); Pieper, Inc. v. Land O’Lakes Farmland Feed, LLC 390 F.3d
1062, 1065 (8th Cir. 2004); Bland v. Freightliner LLC 206 F.Supp.2d 1202, 1207-1208 (M.D.Fla. 2002).
52 Pieper, Inc. v. Land O’Lakes Farmland Feed, LLC 390 F.3d 1062, 1065 (8th Cir. 2004).
53 U.C.C. § 2-615 cmt. 8.
54 Id.

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as an exemption clause, failure of presupposed condition clause or changed circumstance

clause, as ‘force majeure’ derives from the much stricter French doctrine.55 There are several
examples of typical exemption clauses, and many contracting parties often include them
as a standard term.56 Mississippi has added a statutory force majeure clause to its version
of the U.C.C.57
Parties are free to expand or limit the protections of U.C.C. § 2-615 by their contract
terms. Parties that seek broader protection under the impracticability doctrine through
the use of exemption clauses must describe the excusing contingencies with particularities,
not general language.58 A contingency that is specifically provided for in the clause will
excuse a party, even if it cannot be determined that such a contingency was beyond the
party’s reasonable control.59 Inevitably, clauses will differ according to the size and nature
of the transaction involved and the types of risks involved.
Another type of clause addressing a change of circumstances is the gross inequity
clause, or hardship clause.60 Unlike other exemption clauses discussed above, a gross
inequity clause or hardship clause does not alleviate the parties from having to perform,
but rather attempts to continue the contractual relationship by allowing and encouraging
adjustments to the original terms to account for the changed circumstances.61 These clauses
aim to protect both parties in the event of changed circumstances by giving each party the
right to demand negotiations about modification of the original terms should there be a
significant change in circumstances. As these clauses facilitate renegotiations and ongoing
relationships, they are typically used only in long-term contracts.62

20.3.2 Implicit Assumption of Risk

Additionally to the terms of the contract, courts may look to whether there was an implicit
assumption of a party taking on a greater obligation exposing itself to more risk.63 The

55 Farnsworth, supra Ch. 16, note 64, § 9.9a at 673. For a description of the French approach see Schwenzer,
Hachem & Kee, supra Ch. 2, note 17, paras. 45.32-45.33.
56 See e.g. ICC Model Force Majeure Clause (2003) for a model force majeure clause.
57 Miss. Code Ann. § 75-2-617.
58 Perlman v. Pioneer Ltd. Partnership 918 F.2d 1244, 1248 (5th Cir. 1990); Facto v. Pantagis 390 N.J.Super.
227, 231-232 (N.J.Super.A.D. 2007); Kel Kim Corp. v. Central Markets, Inc. 70 N.Y.2d 900, 902-903 (N.Y.1987).
59 PPG Industries, Inc. v. Shell Oil Co. 919 F.2d 17, 18 (5th Cir. 1990); Eastern Air Lines, Inc. v. McDonnell
Douglas Corp. 532 F.2d 957, 991 -992 (5th Cir. 1976).
60 Farnsworth, supra Ch. 16, note 64, § 9.9a. For international context see UNIDROIT PICC (2010) Article
6.2.2 for a definition of hardship and Article 6.2.3. for the effects of hardship in international contracts. See
ICC Model Hardship Clause (2003) for a model hardship clause. See Ingeborg Schwenzer, Force Majeure
and Hardship in International Sales Contracts, 39 Vict. U. Wellington L. Rev. 709 (2009) (comparative analysis
of force majeure and hardship in international practice).
61 See e.g. Tennessee Valley Authority v. Exxon Nuclear Co., Inc. 753 F.2d 493, 495 (6th Cir. 1985).
62 Farnsworth, supra Ch. 16, note 64, § 9.9a.
63 U.C.C. § 2-615 cmt. 8.

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factors that are consulted to determine whether a greater obligation was assumed include
whether the supervening event was foreseeable at the time of contracting, the extent to
which the contract was standardized and the parties had the opportunity to reach an
agreement on such a term, as well as other surrounding circumstances and trade usages.64
The issue of whether or not a party assumed a greater risk is largely dependent on the
foreseeability of the contingency. The relationship between the seller’s assumption of risk
and the foreseeability of a contingency has been described thus – the “seller’s failure to
provide a contractual excuse against the occurrence of a foreseeable contingency may be
deemed to be an assumption of an unconditional obligation to perform” as the risk of a
foreseeable contingency will be tacitly assigned to the seller.65 The comments to U.C.C. §
2-615 state that a contingency does not qualify to excuse a party if the contingency was
“sufficiently foreshadowed at the time of contracting to be included among the business
risks which are fairly to be regarded as part of the dickered terms, either consciously or as
a matter of reasonable, commercial interpretation from the circumstances.”66
While some courts and commentators believe that foreseeability is a factor to be con-
sidered in determining whether a party assumed a risk, others have used it as dispositive.
The rationale for courts that stop their analysis of impracticality, impossibility and frustra-
tion cases after determining that a particular event was foreseeable is that if the contingency
now relied on to excuse performance was foreseeable at the time of contracting, then the
obligor should have addressed it in the contract, and in not doing so assumed such a risk.67
Critics of this approach point to the language of U.C.C. § 2-615, which does not use
the term ‘foreseeability’, but rather talks about the need for the contingency to be unfore-
seen.68 Some have cautioned against focusing on foreseeability when the question is truly
one of risk allocation. The analysis then should not begin by asking whether the contingency
was foreseeable, but instead whether the risk, either foreseen or not, was assumed by the
promisor, and if not then whether it was the kind of risk that the promisor could have or
should have foreseen.69 Judge Friendly once referred to the assumption of greater obligation
test set out in U.C.C. § 2-615 as “a somewhat complicated way of putting Professor Corbin’s

64 U.C.C. § 2-615 cmt. 8; Restatement (Second) of Contracts § 261 cmt. c (1981). See U.S. v. Wegematic Corp.
360 F.2d 674, 676 (2d Cir. 1966).
65 Waldinger Corp. v. CRS Group Engineers, Inc., 775 F.2d 781, 786 (7th Cir. 1985); Roy v. Stephen Pontiac-
Cadillac, Inc. 15 Conn.App. 101, 105-106 (Conn.App. 1988).
66 U.C.C. § 2-615 cmt. 8.
67 See e.g. Teco Coal Corp. v. Orlando Utilities Com’n 2010 WL 8750622, *5 (E.D.Ky. 2010); Clean Uniform Co.
St. Louis v. Magic Touch Cleaning, Inc. 300 S.W.3d 602, 609 (Mo.App. E.D. 2009).
68 U.C.C. § 2-615 cmt. 1; Stephen G. York, Re: The Impracticability Doctrine of the UCC, 29 Duq. L. Rev. 221
(1991).
69 Opera Co. of Boston, Inc. v. Wolf Trap Foundation for Performing Arts 817 F.2d 1094, 1101-1102 (4th Cir.
1987); Mary A. Bloomfield, The Role of Foreseeability in Allocation of Risk under UCC 2-615, Excuse by
Failure of Presupposed Conditions, 21 S. Tex L. J. 441, 444 et. seq. (1980-1981).

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question of how much risk the promisor assumed”.70 Professor Farnsworth agrees with
this approach – arguing that foreseeability should be a factor in determining whether a
party assumed a greater obligation, but not conclusive.71

70 U.S. v. Wegematic Corp. 360 F.2d 674, 676 (2d Cir. 1966) referencing A. Corbin, Recent Developments in the
Law of Contracts, 50 Harv. L. Rev. 449, 465-66 (1937).
71 Farnsworth, supra Ch. 16, note 64, § 9.6 at 644.

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21 Interest

Article 2 does not address the recovery of interest directly; however, interest plays a critical
role in carrying out the U.C.C.’s remedial goal of putting an injured party in the same
position that it would have been in if the breaching party fully performed. A situation that
clearly illustrates this is the case of a breaching buyer who fails to pay the purchase price.
For each day the buyer retains the money due to the seller, the buyer is able to make use
of the money, while the seller is deprived of the opportunity to make any investments with
this money. A damage award that did not include any interest on the amount would thus
fail to compensate the seller for lost time with its money. Thus an award of interest is
necessary to achieve full indemnity for loss.1
In the field of sales law the issue of interest typically arises in three contexts. The first
is upon late payment of the purchase price, as described in the example above; the second
is in calculating damages, when interest may be added to the amount due as damages; and
the third is in the event of revocation of acceptance or otherwise return of the goods when
the contract price must be repaid by the seller.2
Historically, the payment and collection of interest was forbidden, frowned upon or
severely restricted. This position was held in ancient Israel and Greece and continued
through medieval Europe to the Church and Courts of England.3 This attitude derived
largely from religious traditions,4 which viewed interest as immoral, as the recipients of
loans were largely the poor of the society, while the lenders were the upper class. The
loaning of money and charging of interest was therefore seen as usurious. Over time the
law developed, and now in most legal systems the obligation to pay interest is increasingly
seen as an accepted part of the law of damages.5 The United States, despite its common
law heritage, never experienced such an aversion to granting interest on money due.6 It is

1 Restatement (Second) of Contracts § 354 cmt. a (1981); Miller v. Robertson 266 U.S. 243 (U.S. 1924).
2 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para 46.1.
3 Martin Oyos, Prejudgment Interest in South Dakota, 33 S.D. L. Rev. 484, 486 (1987-1988) (providing a history
of the development of attitudes towards and rules of interest); For a comparative analysis of interest rules
from around the world see Schwenzer, Hachem & Kee, supra Ch. 2, note 17, paras. 46.01 et. Seq.
4 Exodus 22:25 “If you lend money to any of my people with you who is poor, you shall not be to him as a
creditor, and shall not exact interest from him”; Leviticus 25:36-37 “Do not take interest or profit from him,
but you must fear your God and your brother must live with you. You must not lend him your money at
interest and you must not sell him food for profit.”
5 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 46.6. This is evidenced by CISG Article 78 as well as
the rules in the PICC.
6 Spalding v. Mason 161 U.S. 375, 395 (U.S. 1896) (“Interest is allowed both at law and equity upon money
due”); Crescent Min. Co. v. Wasatch Min. Co. 151 U.S. 317, 323 (U.S. 1894).

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generally considered a legal right that arises upon breach of contract.7 Already in 1848 the
U.S. Supreme Court stated in its ruling in Curtis v. Innerarity:

It is a dictate of natural justice, and the law of every civilized country, that a
man is bound in equity, not only to perform his engagements, but also to repair
all the damages that accrue naturally from their breach. Hence, every nation,
whether governed by the civil or common law, has established a certain common
measure of reparation for the detention of money not paid according to contract,
which is usually calculated at a certain and legal rate of interest. Every one who
contracts to pay money on a certain day knows, that, if he fails to fulfil his
contract, he must pay the established rate of interest as damages for his non-
performance. Hence it may correctly be said, that such is the implied contract
of the parties.8

21.1 Purpose of Interest

The purpose of interest may be debated – whether it is primarily to compensate the obligee
for the time spent without the benefit of its bargain, or rather it primarily serves the purpose
of disgorging the obligor of any profits it received from withholding money that rightfully
belonged to the obligee.9 A third interest may be identified as encouraging settlement
between the parties in litigation or arbitration and discouraging any dilatory tactics in
prolonging the judicial proceedings.10
Certainly all three of these purposes are valid, and it is possible for an award of interest
to satisfy all three. However, which of these objectives a court focuses on may become
important as it can affect both the outcome of the case and the rate applied to the interest.
If the primary purpose is compensating the obligee for the time it has lost with its money,
then the applicable rate will be its place of business as presumably that is where it would
have invested it; if it is to disgorge the obligor then the rate would be the place of the obligor
as presumably that is where it was profiting from it.11 Courts that place higher emphasis
on the pro-settlement rationale of interest may do so at the expense of fully compensating
the plaintiff. This appears to be the case in Espin v. Allergan Pharmaceutical, Inc. where a

7 Benefit Trust Life Ins. Co. v. Union Nat. Bank of Pittsburgh 776 F.2d 1174, 1178 (3d Cir. 1985); Palmgreen
v. Palmer’s Garage, Inc. 383 Pa. 105, 108, (Pa. 1955) (“In all cases of contract interest is allowable at the legal
rate from the time payment is withheld after it has become the duty of the debtor to make such payment;
allowance of such interest does not depend upon discretion but is a legal right”).
8 Curtis v. Innerarity 47 U.S. 146, 154 (U.S. 1848).
9 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 46.9. See Benefit Trust Life Ins. Co. v. Union Nat. Bank
of Pittsburgh 776 F.2d 1174, 1178 (3d Cir. 1985).
10 John Y. Gotanda, Awarding Interest in International Arbitration, 90 Am J. Intl. L. 40 (1996).
11 Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 46.12.

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New Jersey Court placed the case on an ‘inactive list’ when it appeared that the plaintiff
was unwilling and uncooperative to proceed to trial. Interest was not to accrue while the
case was on the inactive list.12

21.2 Prejudgment Interest v. Post-Judgment Interest

There is a distinction to be made between prejudgment interest and post-judgment interest.

Prejudgment interest is interest that forms part of an award of damages, while post-judg-
ment interest is interest on the award itself. In the majority of states the issue of prejudgment
interest is viewed as a substantive issue, while post-judgment interest is a procedural issue.13
The interest discussed in this chapter is generally prejudgment interest unless specifically
stated otherwise. There is no federal law covering prejudgment interest. Therefore, each
state is free to determine its own rules regarding the time and rate of interest.

21.3 Contractual Stipulation for Interest

Parties in a contract may provide for the award of interest and stipulate the rate of interest
through the terms of their agreement. When interest is reserved by the parties this is
referred to as contractual, or conventional, interest.14 Interest agreed to by the parties is
enforceable as any other contract duty rather than as damages.15 The rate agreed upon by
the parties is subject to the applicable state law restriction on the interest rate.16

21.3.1 Compound Interest

Compound interest is interest for a certain period that is added to the principal sum; the
new amount is the new principal sum on which interest can be calculated for the next
period of time.17 Given the underpinnings of the interest discussion in the nineteenth

12 Espin v. Allergan Pharmaceutical, Inc. 127 N.J.Super. 496, 497 (N.J.Super.L. 1973). See also Volkswagen of
America, Inc. v. Smith 690 So.2d 1328, 1332 (Fla.App. 1997) (“We do not suggest that prejudgment interest
should be suspended merely as a result of a delay attributable to the claimant. Some delays will occur in
every case. The decision in this case, however, turns on the fact that Volkswagen was dismissed and then
joined again in the case”).
13 Perceptron, Inc. v. Sensor Adaptive Machines, Inc. 221 F.3d 913, 922 (6th Cir. 2000); Restatement (Second)
of Conflicts of Law § 207 cmt. e (1981).
14 Restatement (Second) of Contracts § 354 (1981); 25 Williston on Contracts (4th ed.) § 66:109 (2013).
15 Restatement (Second) of Contracts § 354 cmt. 2 (1981).
16 Id.
17 44B Am. Jur. 2d Interest and Usury § 54 (2013); C. L. Feinstock, Annotation, What Is “Compound Interest”
Within Meaning Of Statutes Prohibiting The Charging Of Such Interest, 10 A. L. R.3d 421 (1966); Schwenzer,
Hachem & Kee, supra Ch. 2, note 17, para. 46.111.

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century U.S. Supreme Court cases discussed above (i.e. Curtis v. Innerarity), that interest
is based on an implied contract between the parties, it is generally accepted that compound
interest may be provided for in the contract.18 The state statutes restricting simple interest
also serve as boundaries for any interest award including compound interest.19 Usually
compound interest rates are not calculable by default – only if agreed to by the parties –
there are exceptions to this general rule, but those exceptions cover situations outside the
area of contract law – where the other party’s conduct requires financial redress.20 Louisiana
takes its own approach to the issue: interest can be added to interest only if agreed by the
parties in a new agreement after the interest has accrued.21

21.4 Default Provisions

While parties are free to provide for interest in their contract, it is not necessary in order
to recover an award of interest. It is available as a matter of right.22 As already mentioned,
there is no federal law addressing compensation through interest. Federal courts faced
with issues of interest have turned to the relevant 52-week U.S. Treasury bill rate,23 the
most relevant or applicable state statute, or principles of reasonableness and fairness.24
Thus the rules governing interest – when is interest available, when does it begin to accrue
and how much? – are governed by state statutes and the common law of each state.
Regarding the first issue, when interest becomes available, generally interest is awarded
as a matter of right on liquidated claims.25 In cases of liquidated claims subject to set-off
or an un-liquidated counterclaim the interest is calculated based on the balance that the
obligee is due, as this is the amount it was deprived of, regardless of set-off or counter-
claims.26 The traditional rule is that the amount on which interest is due must be ascertain-

18 Curtis v. Innerarity 47 U.S. 146, 154 (U.S. 1848); Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para.
46.46.
19 John Y. Gotanda, Compound Interest in International Disputes, 2004 Oxford U. Comp. L., sub D.4 (2004);
Schwenzer, Hachem & Kee, supra Ch. 2, note 17, para. 46.115.
20 Rourke v. Fred H. Thomas Associates 216 A.D.2d 717, 717-718 (N.Y.A.D. 1995); Gotanda, supra note 19.
21 LSA-C.C. Article 2001.
22 See Terwilliger v. Terwilliger 206 F.3d 240, 249 (2d Cir. 2000); Palmgreen v. Palmer’s Garage, Inc. 383 Pa.
105, 108, (Pa. 1955); 25 Williston on Contracts (4th ed.) § 66:109 (2013).
23 Blanton v. Anzalone 813 F.2d 1574, 1576 (9th Cir. 1987) (“substantial evidence must support the district
court’s decision to depart from the Treasury bill rate”); Western Pacific Fisheries, Inc. v. SS President Grant
730 F.2d 1280, 1289 (9th Cir. 1984); Gotanda, supra note 10, at 45.
24 McKelvy v. Metal Container Corp., 125 F.R.D. 179 ((M.D.Fla. 1989); Brown v. Consolidated Rail Corp., 614
F.Supp. 289 (D. Ohio 1985); Gotanda, supra note 10, at 45.
25 Terwilliger v. Terwilliger 206 F.3d 240, 249 (2d Cir. 2000).
26 Walton General Contractors, Incorporated/Malco Steel, Inc. v. Chicago Forming, Inc. 111 F.3d 1376, 1383-
1384 (8th Cir. 1997); U.S. for Use and Ben. of Sunbeam Equipment Corp. v. Commercial Const. Corp. 741
F.2d 326, 329 (11th Cir. 1984).

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 21 Interest

able to the obligor, and no interest would be awarded on un-liquidated claims.27 While
the traditional rule still has traction, it is not absolute, and courts are willing to permit
recovery of interest on un-liquidated claims if it is necessary to achieve full compensation
of the aggrieved party.28 This approach finds support in the Second Restatement.29 Under
this approach interest may be awarded when the sum due is uncertain, but not when the
facts upon which the claim is based are uncertain.30

21.4.1 Date Interest Begins to Accrue

Generally, interest begins to run on the date that the right to recover accrued.31 In the case
of a breach of contract, this means interest begins accruing on the date of the breach.32 In
contracts that require payment to be made on demand, the breach, and thus the interest,
accrues on the date the demand was made.33 The delivery date marks the start of the period
for the running of interest when goods are sold for cash or when goods are delivered
without an agreement as to the terms of credit.34

21.4.2 Statutory Rate of Interest

The rate of interest to be paid upon the default of a sum due is fixed by statute in each
state. Generally, the statutory interest rates vary between 6 and 12%. Therefore the law
applicable to calculating a party’s recovery is critical for the party that is to receive the
interest and the party who must pay the interest. For example, if a buyer breaches a sales
contract by failing to pay the purchase price and the applicable law is that of the District
of Columbia, the plaintiff seller will be awarded interest at a rate of 6%,35 whereas the same

27 Walton General Contractors, Incorporated/Malco Steel, Inc. v. Chicago Forming, Inc. 111 F.3d 1376, 1383 -
1384 (8th Cir. 1997); 25 Williston on Contracts (4th ed.) § 66:111 (2013).
28 Miller v. Robertson 266 U.S. 243, 258 (U.S. 1924); U.S. v. Employers Mut. Cas. Co. 226 F.2d 895, 900 (8th Cir.
1955); 25 Williston on Contracts (4th ed.) § 66:111 (2013).
29 Restatement (Second) of Contracts § 354(2) (1981) (providing same standard for assessing certainty in
consequential damage claim); Anthony E. Rothschild, Comment, Prejudgment Interest: Survey and Suggestion,
77 Nw. U. L. Rev. 192, 212 (1982).
30 See Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 727 (4th Cir. 2000).
31 Hyosung America, Inc. v. Sumagh Textile Co., Ltd. 137 F.3d 75, 81 (2d Cir. 1998); Bituminous Const., Inc. v.
Rucker Enterprises, Inc. 816 F.2d 965, 969 (4th Cir. 1987); Montgomery Ward & Co. v. Collins Estate, Inc.
268 F.2d 830, 838 (4th Cir. 1959); Restatement (Second) of Contracts § 354(1) (1981). See also 25 Williston
on Contracts (4th ed.) § 66:112 (2013) (interest accrues when payment was due for breach of a sales contract).
32 Miller v. Robertson 266 U.S. 243, 258 (U.S. 1924).
33 U.C.C. § 3-122(4) (interest on demand note runs from the date of demand); Andrus v. Bradley 102 F. 54
(C.C.Pa. 1900).
34 Atlantic Phosphate Co. v. Grafflin 114 U.S. 492 (U.S. 1885); Sturges v. Green 1882 WL 879, *2 (Kan. 1882).
35 DC ST § 28-3302 (2001) (6% interest per annum).

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Modern Law of Sales in the United States

transaction subject to Massachusetts law would entitle the seller to 12% interest.36 This
may be a point of consideration when selecting an applicable law.

36 M.G.L.A. 231 § 6C (2010) (12% interest).

184
22 Concluding Remarks

As stated in the introduction, the purpose of this book is to provide an overview of sales
law in the United States – with a particular focus on Article 2 of the U.C.C. In considering
the most important takeaway lessons from this study one should remember that the parties
are the masters of their own agreements. Therefore, parties should make their intentions
and expectations as clear as possible when entering into a contract for sale. The more
specific they make their contract, the less room they leave for interpretation that may result
in unanticipated or unwanted consequences. This is not always possible – either because
some element of the performance remains unknown or because a standard term or con-
sumer contract limits the amount of control or input afforded to a party. In contracts
where a term is left open, the U.C.C. provides a set of default rules meant to fill in any
gaps. In addition to the gap-filling function of the U.C.C., it contains provisions that limit
parties’ absolute freedom of contract and assure a minimum amount of fairness. The most
notable of these provisions are those policing unconscionability and implied warranties.
The remedial structure of the U.C.C. encourages cooperation between the parties and
the preservation of the contract. This goal is especially seen in the provision that allows
an insecure party to demand assurance of performance and in the codification of the right
to cure. Should preservation of the contract not be possible, the U.C.C. provides for full
compensation so that an aggrieved party is put in the same position as if the contract had
been carried out.

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International Commerce and Arbitration (Series editor: Ingeborg Schwenzer)

Volume 1: Mariel Dimsey, The Resolution of International Investment Disputes: Challenges

and Practical Solutions, ISBN 978-90-77596-52-4
Volume 2: Sarah E. Hilmer, Mediation in the People’s Republic of China and Hong Kong
(SAR), ISBN 978-90-77596-74-6
Volume 3: Christina Knahr, Christian Koller, Walter Rechberger and August Reinisch
(eds.), Investment and Commercial Arbitration – Similarities and Divergences, ISBN 978-
90-77596-81-4
Volume 4: Markus Jäger, Reimbursement for Attorney’s Fees, ISBN 978-90-77596-98-2
Volume 5: Olivier Luc Mosimann, Anti-Suit Injunctions in International Commercial
Arbitration, ISBN 978-90-77596-99-9
Volume 6: Edgardo Munoz, Modern Law of Contracts and Sales in Latin America, Spain
and Portugal, ISBN 978-94-90947-03-3
Volume 7: Pascal Hachem, Agreed Sums Payable upon Breach of an Obligation, ISBN
978-94-90947-04-0
Volume 8: Ingeborg Schwenzer and Lisa Spagnolo (eds.), Towards Uniformity, ISBN 978-
94-90947-10-1
Volume 9: Natia Lapiashvili, Modern Law of Contracts and Sales in Eastern Europe and
Central Asia, ISBN 978-94-90947-20-0
Volume 10: Lara Pair, Consolidation in International Commercial Arbitration – The ICC
and Swiss Rules, ISBN 978-94-90947-27-9
Volume 11: Ingeborg Schwenzer and Lisa Spagnolo (eds.), State of Play, ISBN 978-94-
90947-46-0
Volume 12: Ingeborg Schwenzer and Lisa Spagnolo (eds.), Globalization versus Regional-
ization, ISBN 978-94-6236-020-4
Volume 13: Marie-Camille Pitton, Le rôle du jugement étranger dans l’interprétation du
droit conventionnel uniforme, ISBN 978-94-90947-81-1
Volume 14: Andreas F. Müller, Protecting the Integrity of a Written Agreement, ISBN
978-94-6236-073-0
Volume 15: Ingeborg Schwenzer, Yeşim M. Atamer and Petra Butler (eds.), Current Issues
in the CISG and Arbitration, ISBN 978-94-6236-097-6
Volume 16: Alain Hosang, Obstructionist Behavior in International Commercial Arbitra-
tion: Legal Analysis and Measures Available to the Arbitral Tribunal, ISBN 978-94-6236-
100-3

187