FINAL EXAMINATION
COMMERCIAL TRANSACTIONS
FALL, 1995
PROFESSOR KLEINBERGER
Model Answers and Common Mistakes
This memo repeats the exam questions from the fall 1995 exam,(1) provides model answers for
those questions and lists the most frequent mistakes. The model answers are aspirational. I did
not expect anyone to produce an exam that reached the level of completeness and succinctness
reflected in the model answers.
Part One
A. Last August Helen, a corporate executive, went on a fishing trip in Northern Minnesota. She
hired Jay, a local fishing guide, for a week-long trip. Helen enjoyed the trip immensely and
particularly admired the hand-made fishing poles that Jay used. Helen offered to buy one, but Jay
declined. Helen persisted, raising her offering price each time. Finally Jay said, "Look. I won't
sell any of these. They're mine. And as a rule I only make poles for myself. It just isn't seemly
for a professional guide to act like a storekeeper. But if you really want one, I'll make one for you
specially, once winter sets in and I have time on my hands. It would be ready for you by the
middle of February."
Helen agreed, and the two spent several hours over the course of the next couple of days deciding
on details. Jay kept notes of their decisions, but neither he nor Helen signed the notes. They did
agree on all the details, including a price of $750.
The trip ended, and Helen returned to her executive job in Minneapolis. By December, having
heard nothing from Jay, she decided that he must have reconsidered making the pole. She
purchased through a catalogue, paying $900.
On January 10 Helen received a handwritten letter from Jay, which described the pole being made,
restated the price, explained that Jay was "3/4 finished already," promised delivery by the end of
the month and ended with Jay's signature.
Helen's first reaction was to think, "How am I going to tell him that I don't want that pole?" She
set the letter aside, planning to come back to it. Unfortunately, the letter fell off her desk into the
trash basket. Caught up in the press of work, Helen forgot the letter.
On January 31, Helen received a phone message from Jay: "Pole finished. Should I ship it to
you, or do you want to pick it up?" Assuming the pole conforms to the agreed-upon details, is
Helen legally obligated to accept and pay for the pole?
Model Answer: Helen is obligated, unless the Statutes of Frauds provides her a defense. With a
contract price of $750, the Statute certainly applies, § 2-201(1) ("sale of goods for the price of
$500 or more"), and there is no writing that satisfies subsection 1. Jay's notes do not qualify,
because they are not signed by the party "against whom enforcement [will be] sought," i.e. Helen.
Jay's January 10 letter to Helen does not satisfy the statute under § 2-201(2), because the letter
was not "[b]etween merchants." Jay was acting in his mercantile capacity, but Helen was not.
See § 2-104, comment 2. Moreover, § 2-201(2) applies only to confirmatory memos sent "within
a reasonable time." A gap of over four months (August -- January) hardly qualifies as reasonable.
Jay may nonetheless be able to escape the Statute by invoking § 2-201(3)(a). He did specially
manufacture the pole, and, "under circumstances which reasonably indicate that the goods [were]
for [Helen]," he had made "a substantial beginning of their manufacture." Jay does not ordinarily
sell poles (or anything else) as part of his fishing guide business, so neither this pole nor any other
would be "suitable for sale to others in the ordinary course of [Jay's] business."(2)
Common Mistakes: wasting time examining the obvious -- e.g., whether a fishing pole is a
good, whether the parties had made an agreement; wasting time examining the irrelevant -- e.g.,
whether the contract involved warranties, what remedies Jay might have; missing either the § 2-201(2) issue or the § 2-201(3)(a) issue; characterizing Helen as a merchant with regard to this
transaction and missing the "fishing tackle" comment to § 2-104; characterizing Jay as not a
merchant with regard to this transaction because he does not typically sell goods; missing the
"reasonable time" issue under § 2-201(2); merely asserting that the pole is not suitable for sale to
others without explaining why; mentioning that Helen did not sign "the agreement" without
indicating the writing being referred to (i.e. the notes or the letter); merely gliding across the
relevant statutes -- i.e., mentioning them but failing to discuss the pertinent elements and facts
B. Felix, the owner of a coal mine, agrees to sell six carloads of coal to Oscar, a coal dealer.
Felix and Oscar make the agreement at a meeting in a hotel room, and at the end of the meeting
Felix jots down a note of the agreement. The note is on the hotel's letterhead and includes merely
the date of the agreement, the price and the phrase "six carloads of coal, FOB Railroad Terminal,
Oscarville. Sight draft against bill of lading. Coal to arrive no later than February 15, 1995."
Felix initials the note, and Oscar writes his name at the bottom. The parties had made a similar
agreement several months earlier, on essentially the same terms. Just before writing his name on
the note, Oscar comments, "This is the same deal we made last time." Felix responds by nodding.
Felix ships the coal in a timely manner and two days later has the First Bank of Oscarville present
a sight draft and negotiable bill of lading to Oscar. Oscar declines to pay immediately, stating
(accurately), "Last time we did this Felix let me have 48 hours to get the money together." The
First Bank contacts Felix, who insists that Oscar pay immediately. When Oscar again refuses,
Felix finds another buyer for the coal. Oscar is forced to purchase replacement coal at a higher
price.
Oscar subsequently sues Felix for damages. In response, Felix asserts that Oscar breached the
contract by refusing to make payment as agreed. Oscar attempts to prove that Felix breached the
contract by not allowing a 48-hour grace period. May Oscar introduce evidence of (1) the
arrangements in the previous coal deal? (2) Oscar's comment ("This is the same deal we made
last time.") and Felix's response to that comment?
Model Answer: Oscar's only hope is to persuade the court that the memorandum signed in the
hotel room was not "intended by the parties as a final expression of their agreement with respect
to such terms as are included therein" § 2-202. Otherwise, the parol evidence rule will prevent
Oscar from introducing either piece of evidence.
The writing certainly appears intended to be "final." It contains key terms, and the parties
expressly indicated their assent by signing or initialing. The writing therefore "may not be
contradicted by evidence of any prior agreement or of a contemporaneous oral agreement." § 2-202. Introducing Oscar's comment would do just that. The "same deal" remark could serve only
to establish an oral agreement (made with reference to the past conduct) that contradicts the
"sight draft" term. See 2-310(c) (payment due "at the time . . . the buyer is to receive the
documents").
Oscar might attempt to invoke § 2-202(a) to introduce evidence of the past arrangement,
asserting that the prior course of dealing explains the true meaning for these parties of the
concept of a sight draft. This argument should fail, however. A course of dealing is a sequence
of previous conduct," § 1-205(1) (emphasis added), and therefore a single event cannot qualify as
a course of dealing.
Common Mistakes: not considering both parts of the question (the past arrangement and the
comment); misreading the facts and viewing Oscar's comments as occurring post-formation;
concluding that the written agreement was not even final (thereby removing most of the
interesting and subtle issues from the problem); not recognizing that one past deal cannot
constitute a "sequence" sufficient to establish a course of dealing; confusing "course of
performance" with "course of dealing"; failing the see the grace period as contradictory to the
sight draft term (and often, as a result, making far more of the "final vs. final and exclusive"
distinction than was warranted); asserting that a "final" agreement can be supplemented or
explained by evidence of prior agreements and contemporaneous oral agreements;
C. HeartLung, Inc. ("HeartLung") sells respirators to be used for infants born prematurely.
HeartLung has a catalogue that describes these "infant respirators" and states an 800 number for
customers to call to place orders. Three weeks ago the purchasing agent of Unionville Hospital
("Hospital") telephoned HeartLung's order department and spoke to one of HeartLung's order
takers. In that conversation, the purchasing agent made reference to HeartLung's catalogue,
specified the particular model the Hospital wanted, confirmed the price, determined the delivery
date and shipping terms and stated, "OK. We want it on those terms. You can take this as a firm
order. We'll send you the paperwork by close of business tomorrow." HeartLung's order taker
responded, "OK. We've got your order. It's in our computer and we'll start processing it. We
send you a formal acknowledgement as soon as we get your P.O. [purchase order] in writing."
Two days later Hospital's purchase order arrived. On the front it restated precisely the details
agreed upon in the phone conversation. On the back the purchase order included 15 "Terms and
Conditions of this Order," including a paragraph that purported to require "Seller" to indemnify
"Buyer" against any and all claims "made against Buyer that in any way arise from or relate to
Buyer's use of the goods sold under this Purchase Order."
Within a day of receiving the written purchase order, HeartLung sent Hospital a form entitled
"Order Acknowledgement." The front of that form also restated precisely the details agreed upon
in the phone conversation and included the statement "We are processing your order." The back
of the Order Acknowledgement included 12 "Terms of Sale" and stated in large print "This sale is
subject to and governed by the following Terms." One of those terms purported to limit buyer's
remedies to "at Seller's option, repair or replacement of any defective equipment, or return of the
purchase price." Another term purported to exclude consequential damages.
In due course, HeartLung delivered the respirator and Hospital accepted and paid for it. Which, if
any, of the following are part of the contract between the parties:
1. the indemnification provision;
2. the remedy limitation;
3. the exclusion of consequential damages.
Model Answer: The crux of this problem is the initial phone conversation. That conversation
formed a contract. The buyer's representative mentioned a "firm order" and specified all sufficient
information to establish "a reasonably certain basis for giving an appropriate remedy." § 2-204(3).
In response, the seller's representative accepted the order: "Ok. We've got your order. It's in our
computer and we'll start processing it." See § 2-206(1).(3)
The subsequent paperwork is therefore mere confirmation of an existing "agreement [which] has
been reached . . . orally." § 2-207, comment 1. All three of the disputed terms will therefore rise
or fall according to § 2-207(2). Both parties are clearly merchants for § 2-207 purposes. See 2-104, comment 2, 2nd paragraph (for purposes of § 2-207 "almost every person in business . . .
deemed to be a `merchant'"). Each of the terms would materially alter the statutory default rules,
since each term significantly shifts the allocation of risk between the parties.(4) Therefore, § 2-207(2) causes each one to drop out.(5)
Common Mistakes: ignoring the telephone conversation; ignoring the telephone conversation
and then failing to identify which of the forms constituted the offer and which the seasonable
acceptance;(6) treating both forms as confirmations without explaining what the forms are
confirming; being so distracted by § 2-719 as to ignore § 2-207; doing a § 2-207(3) analysis
without first demonstrating how § 2-207(1) fails to establish a contract; spending too much time
establishing the obvious -- i.e., that both parties are merchants; stating or implying that § 2-207(2)
requires that the parties be merchants with regards to the goods; doing a "fails of its essential
purpose" analysis;(7) characterizing the respirator as a consumer good and the remedy limitation as
per se unconscionable; treating the remedy limitation issue as a warranty disclaimer issue
D. Minnesota's Home Solicitation Sales Act ("Act") allows certain parties a 3-day cancellation
period, during which the parties may cancel a contract without having to state or have any
particular cause, reason or justification. The Act establishes the scope of its protection by
defining relevant terms. Those definitions appear in Minn.Stat. § 325G.06 and are attached to
this examination as Appendix A. In essence, the Act applies to any "home solicitation sale."
Last summer Irv visited a booth at the State Fair at which Sno-Go, Inc. ("Sno-Go") displayed and
sold its line of expensive snow-blowers. Sno-Go has a regular store in Blaine, but each summer
operates a booth at the Fair.
Irv spent about an hour discussing matters with a Sno-Go representative and almost agreed to
purchase a snow-blower. Eventually, however, Irv said, "I gotta think this one over a bit. Why
don't you give me a call after the Fair is over, and we'll talk about it." The Sno-Go representative
agreed to do so, and Irv gave the representative both Irv's home and office phone numbers.
Three weeks later, Sno-Go's representative telephoned Irv at work and renewed the discussions.
Irv agreed to meet the representative for lunch at a restaurant the next day. At that luncheon
meeting, Irv agreed to rent a snow-blower for two years for use at Irv's home at a yearly rental of
$300 per year, with an option to purchase at the end of the second year.
Does the Home Solicitation Sales Act apply to this transaction?
Model Answer: The Act probably does apply. The transaction comes within the general
definition stated in Minn.Stat. § 325G.06, subd. 2, and no exceptions apply. At first glance the
transaction seems to fit the exception stated in paragraph (a), but a key element is missing.
All the elements of the general definition are met. Because subdivision 3 defines sale to include a
lease, this transaction constituted a sale under the statute. The seller "regularly [engaged] in
transactions of the same kind," subd. 2, and Irv acquired the snow blower for use at home -- i.e.,
for "personal, family or household purposes." Id. There was personal solicitation, both at the Fair
and the restaurant, and "the buyer's agreement . . . to purchase [was] made at a place other than
the place of business of the seller." Id. At a lease rate of $300/year for two years, the lease price
far exceeded $25. (If the statute is to apply to leases as well as actual sales, the lease price must
satisfy subdivision 2's reference to "purchase price.").
Almost all of the elements of the paragraph (a) exception are met. This transaction was "a sale
made pursuant to prior negotiations in the course of a visit by the buyer to a retail business
establishment." Subd. 2(a). The deal had its origins in Irv's first to the seller's Fair booth.
However, even assuming that the seller has the same booth year after year -- i.e., that the retail
business establishment has "a fixed permanent location" -- the Fair is not open year round.
Therefore, the booth is not a location "where the goods are exhibited . . . on a continuing basis."
Id. (emphasis added).(8) The exception therefore does not apply, and the statute does.
Common Mistakes: merely assuming that the facts satisfied the main definition in subdivision 2
and leaping straight to the exceptions; merely asserting without supporting analysis that
subdivision 2(a) does not apply; missing the lease = sale provision; asserting that Irv solicited the
sale without discussing the phone call from the Sno-Go representative; resorting to a policy
analysis in disregard of the elements specifically stated in the statute; applying the caption of the
statute in derogation of the statute's specific provisions (e.g., stating that the Act does not apply
to a deal made in a restaurant); using Article 2 concepts instead of the definitions provided in the
Home Solicitation Sales Act;(9)
E. The following statement of facts comes from a recent decision of the Minnesota Court of
Appeals.
Robert, David, and Hazel Schluter [later referred to as "the farmers"] are grain farmers in Starbuck, Minnesota. The elevator is a public grain elevator in Murdock, Minnesota. For several years prior to the events of this case, the independent trucker had engaged in the practice of buying grain from various farmers, hauling it to the elevator, and selling it. Both the farmers and the elevator had done business with the trucker in this manner prior to the transaction at issue.
In May, June and July of 1988, the trucker delivered 114,877 bushels of corn and 3,454 bushels of soybeans to the elevator. This included 29,056 bushels of the farmers' corn. On the scale tickets issued by the elevator, the trucker's name is listed as the owner of the grain . . . . At his deposition, the trucker admitted he represented to the elevator that he was the owner of the grain. The elevator checked for liens against the grain, and found none.
Between May 20 and July 13, the elevator issued checks to the trucker totalling $288,000. . . . No warehouse receipts were issued either to the trucker or to anyone else by the elevator. On June 5, 1989, the elevator sold the grain in question for $302,638.33 . . . .
The farmers never received payment for their grain from the trucker.
The farmers subsequently sued the elevator for conversion. The elevator argued that it owned the
grain and therefore could not be liable for conversion. Who was right?
Model Answer: The elevator. Under the entrusting provisions of § 2-403 they had good title
and so could not be liable for conversion.
The facts do not indicate that the trucker stole the grain from the farmers. So there was
apparently "delivery and . . . acquiescence in [the farmer's] retention of possession." § 2-403(3)
(defining "entrusting"). The trucker had a practice of buying and selling grain, and so the farmers
were entrusting "to a merchant who deals in good of that kind." § 2-403(2). See also § 2-104(1)
(defining as "merchant" one who deals in goods of the kind).
This entrusting gave the trucker the power to transfer to a buyer in the ordinary course "all rights
of the entruster." § 2-403(2). The elevator was such a buyer. § 1-201(9). It was a "person who
buys or contracts to buy goods," § 2-103(1)(a) (defining "buyer"), and nothing in the facts
indicates that the elevator lacked good faith (even under the "reasonable commercial standards"
rule of § 2-103(1)(b)) or had reason to know that the trucker was violating the farmers' rights.
To the contrary, the elevator even did a lien check. The elevator's purchase was also "in ordinary
course from a person in the business of selling goods of that kind." § 1-201(9). For several
years the trucker had bought and sold grain in the same manner as involved here.
The farmers' rights to the grain therefore transferred to the elevator when the elevator took
possession of the grain, if not earlier. § 2-401(2) (absent contrary agreement title transfers when
"the seller completes his [sic] performance with reference to the physical delivery of the goods").
Common Mistakes: doing a voidable title analysis under § 2-403(1) without explaining how the
trucker acquired voidable title; asserting that mere failure to pay for goods renders the buyer's title
voidable; assuming that the trucker stole the grain; characterizing the trucker as having good title
and then treating the concept of "good faith purchaser for value" as relevant; applying the "buyer
in the ordinary course" concept to a § 2-403(1) analysis; asserting that the trucker misrepresented
him/herself to the elevator as the owner of the grain and that this misrepresentation somehow
relates back to the trucker--farmers transaction and renders the trucker's title voidable: asserting
that the trucker took good title under the first sentence of § 2-403(1) without discussing the
sentence reading "This included 29,056 bushels of the farmers' corn." (emphasis added); failing to
use the lien check as evidence of the elevator's good faith
Part Two
Consider the following to be Findings of Fact made by a judge in a non-jury trial. Based on these
Facts and the law covered by this course, decide the case and write a memo explaining the
decision.
1. Plaintiff is in the business of selling and installing heating and air conditioning equipment in
residences and business facilities.
2. Defendants are married and reside at [address omitted] in St. Paul.
3. Approximately two years ago defendants contacted plaintiff and discussed the purchase of a
new furnace for defendants' home. Plaintiff recommended a particular brand and model of
furnace, stating that the furnace was "90%" efficient and would "run quiet." Plaintiff gave to
defendants brochures and other promotional materials from the manufacturer, which described the
furnace in greater detail.
4. Approximately two years ago plaintiff and defendants entered into a written agreement under
which plaintiff agreed to sell to defendants and install in their home a specified make and model of
furnace, 90% efficient. The agreement listed the price of the furnace as $1400 and the price of
installation as $350. The furnace manufacturer was not a party to the agreement and is not a
party in this case.
5. The St. Paul building code, like many other building codes, requires that 90% efficient
furnaces be vented through the side of the building in which the furnace is installed. Plaintiff
followed code in installing the specified furnace at defendants' home.
6. Plaintiff never mentioned the side-venting requirement when recommending the furnace to
defendants or when negotiating the agreement with defendants. The manufacturer's information
shown to the defendants also omits any mention of the requirements. Defendants' old furnace
vented exhaust through the home's fireplace chimney, so there was no visible exhaust tubing.
7. Defendants were, in their words, "shocked" when they returned home on the day of installation
and found a heavy metal exhaust tube, four inches in diameter, protruding from the side of their
home.
8. In response to defendants' consternation, plaintiff painted the venting tubing to match the trim
of the house. Defendants continue to maintain that the side-venting is unsightly, but they have
presented no evidence as to any diminution in value of the house resulting from what they term "a
eyesore."
9. The St. Paul building code allows 80% efficient furnaces to be vented vertically (e.g. through
an existing chimney). Had defendants known about the St. Paul building code venting
requirements, defendants would have chosen to purchase an 80% efficient furnace.
10. After plaintiff had completed the installation, defendants noticed several problems with the
installation. Rather than allowing plaintiff to repair the problems, defendants hired another party
who did the repair at a cost of $150. This cost was reasonable.
11. As part of the installation, plaintiff had to work near the defendants' chimney. After the
installation, the chimney cap dislodged and did $250 of damage to defendants' roof. It is
undisputed that the loose cap caused the damage. Defendants contend that plaintiff loosened the
cap through incompetent work. Plaintiff states that the cap was loose already, that plaintiff
noticed the loose cap and "did not think it any of my business to report this" to defendants.
12. Defendants contend that the new furnace does not "run quiet." They present no independent
evidence of this problem, beyond their own perceptions. Plaintiff acknowledges that more
efficient furnaces turn off and on more often then less efficient furnaces. Plaintiff never mentioned
this fact when recommending the furnace to defendants or when negotiating the agreement with
defendants. The manufacturer's information shown to the defendants also omitted this fact.
13. Defendants have paid plaintiff $1000 but have withheld any further payments. They assert
that they have set-offs at least equalling the remaining amount due on account of the side-venting,
the costs of remedying the installation defects, the failure of the furnace to run quietly and the
damage to the roof.
14. Plaintiff seeks the remainder of the contract price, denying all of defendants' assertions and in
particular arguing that defendants had no right to hire another party to remedy installation defects
without first giving plaintiff an opportunity to "make things right."
Model Answer: Although the contract involved both goods (the furnace) and services (the
installation), I find the contract's predominant purpose to have been the sale and purchase of the
goods. The buyer's main interest was obtaining a furnace -- i.e., a good -- and the price allocated
to the goods dwarfs the price allocated to the service. Accordingly, Article 2 of the Uniform
Commercial Code governs.
In response to seller's claim for the remainder of the contract price, the buyers asserted set-offs
based on these allegations: (1) the seller did not inform them that a 90% efficient furnace would
require side-of-the-house exhaust and intake; (2) the new furnace is not as "quiet" as promised;
(3) the furnace installation work was faulty and required correction; and (4) the seller's
carelessness in dealing with the chimney resulted in damage to the buyers' roof.
Each of these contentions are essentially breach of warranty claims. As to the side-of-the-house
problem, I sympathize with the buyers' surprise but cannot allow a set-off. There is no breach of
the implied warranty of merchantability; the seller's uncontradicted testimony was that side-of-the-house exhaust and intake is required by code. See §.2-314(2)(c) ("fit for the ordinary purposes
for which such goods are used"). Even assuming some express warranty, buyers have accepted
the furnace. They have paid part of the purchase price and are not seeking the return of that
money. They have therefore indicated that they will retain the goods in spite of the alleged
nonconformities. §2-606(1)(a). Moreover, buyer's had a third party repair the installed furnace,
which is an act "inconsistent with the seller's ownership." § 2-606(1)(c). Buyers are therefore
limited to claiming damages under §.2-714(2) (damages for accepted goods equals "the difference
at the time and place of acceptance between the value of the goods accepted and the value they
would have had if they had been as warranted "). Buyers presented no evidence as to any
diminution in value resulting from the side-of-the-house arrangement.
The claim about "quiet" is also ineffective for buyers. Even assuming that seller assured buyers
that the furnace would run "quiet," that vague and general statement may well be "puffing" and,
according to § 2-313(2) incapable of creating a warranty. In any event, buyers did not present
any objective, specific evidence regarding the alleged noisiness of the furnace.
Buyers other claims are valid, however. Seller was a "merchant" with regard to the furnace, § 2-104(1), and as a result this contract included a warranty of merchantability. § 2-314(1). The
furnace as installed would not "pass without objection in the trade." § 2-314(2)(a). Seller
suggested that he could have performed the necessary corrections for far less money than buyer
paid. However, having accepted the goods, buyers were not obligated to allow seller to fix any
breaches. See § 2-508 (seller's right to cure triggered only if buyer rejects the goods). Under § 2-714(2) buyers are entitled to damages equal to "the difference at the time and place of acceptance
between the value of the goods accepted and the value they would have had if they had been as
warranted." The cost of repairs is a good surrogate for that difference.
As to the roofing problem, seller and buyers disputed whether the chimney piece was still attached
by cement when seller was working on the chimney. It is not necessary for me to resolve that
factual dispute. Under § 2-314(3) a court may look to "usage of trade" (i.e., common and
accepted industry practices) to help define the warranty of merchantability. Accordingly, I find
that seller had an implied obligation not only to avoid damaging buyer's chimney but also to report
to buyers any unsafe condition seller observed while working on the chimney. Regardless of
whether seller caused or merely observed the cement problem, seller had an obligation to notify
buyers. If seller had notified buyer, a timely repair would have been made and would have
prevented the damage to the roof. Under § 2-715(2)(b) buyers are entitled to the cost of roof
repairs as consequential damages.
The seller has a valid action for price, because the goods, although nonconforming, have been
accepted. However, the amount awarded to seller as plaintiff is reduced in light of buyers' set-offs. § 2-717.
Common Mistakes: missing the mixed transaction/predominant purpose issue; applying a right to
cure when the buyer has accepted the goods; spending time on the "90% efficient" warranty even
though there was no claim of breach; asserting a breach of the warranty for a particular purpose
without specifying the particular purpose; identifying warranties and breaches but neglecting to
consider that buyers failed to present evidence of damages; asserting a "runs quiet" warranty
existed but contending that buyers uncorroborated statements about noisiness could not establish
breach;(10) addressing revocation even though there are no facts suggesting that buyers revoked;
asserting baldly -- i.e., without supporting analysis -- that seller had a duty to inform buyers of the
side-venting requirement; asserting that seller's failure to disclose the side-venting requirement
breached the seller's duty of good faith;(11) using the economic loss doctrine for the roof damage;
asserting that the roof damage gave buyers a consequential damages remedy under § 2-715
without explaining how in this connection seller breached the contract; asserting that the roof
damage gave buyers a tort remedy without addressing (much less resolving) the factual dispute
about what caused the damage; analyzing the warranties in sequence rather than the buyer's claims
in sequence(12)
Appendix A -- Minn.Stat. § 325G.06
325G.06. Definitions
Subdivision 1. As used in sections 325G.06 to 325G.11, the terms defined in this section have the meanings given them.
Subd. 2. "Home solicitation sale" means a sale of goods or services, by a seller who regularly engages in transactions of the same kind, purchased primarily for personal, family or household purposes, and not for agricultural purposes, with a purchase price of more than $25, in which the seller or a person acting for him personally solicits the sale, and when the buyer's agreement or offer to purchase is made at a place other than the place of business of the seller, except as otherwise provided in this subdivision. It does not include:
(a) a sale made pursuant to prior negotiations in the course of a visit by the buyer to a retail business establishment having a fixed permanent location where the goods are exhibited or the services are offered for sale on a continuing basis; or
(b) a sale in which the buyer has initiated the contact and the goods or services are needed to meet a bona fide immediate personal emergency of the buyer and the buyer furnishes the seller with a separate dated and signed statement not furnished by the seller describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the sale. This exclusion shall only apply where (i) the seller in good faith makes a substantial beginning of performance of the contract before the buyer gives notice of cancellation, and, (ii) in the case of goods, the goods cannot be returned to the seller in substantially as good condition as when received by the buyer; or
(c) a sale in which the buyer has initiated the contact and specifically requested the seller to visit the buyer's home for the purpose of repairing or performing maintenance upon the buyer's property. If in the course of such a visit, the seller sells the buyer the right to receive additional services or goods other than replacement parts necessarily used in performing the maintenance or in making the repairs, the sale of those additional goods or services would not fall within this exclusion; or
(d) a sale in which the buyer has initiated the contact either by oral, telephone, or written request (other than on a form provided by the seller), and requested the seller to visit the buyer's home for the purpose of negotiating the purchase of the specific good or service requested. This exclusion shall only apply where the buyer furnishes the seller with a separate dated and signed statement in the buyer's handwriting expressly acknowledging and waiving the right to cancel the sale; or
(e) a sale of insurance, securities, or real property; or a sale by public auction; or
(f) a sale of a motor vehicle, as defined in section 168.011, subdivision 4, when the buyer's agreement or offer to purchase is made at a place other than the buyer's place of residence.
Subd. 3. "Sale" includes a lease or rental.
Subd. 4. "Seller" includes a lessor or anyone offering goods for rent, or an assignee of the seller.
Subd. 5. "Buyer" includes a lessee or anyone who gives a consideration for the privilege of using goods or services.
Subd. 6. [omitted]
1. The Appendix from the exam is attached at the end of this memo.
2. It is certainly possible to argue for a broader meaning to the word "suitable" -- e.g., of appropriate character and quality to enable the seller to re-sell the goods without having to make undo special efforts. The comments shed no light on this question. I gave credit to any plausible approach to this point.
3. Answers which interpreted this conversation differently and consequently viewed the purchase order as the initial offer and the Order Acknowledgment as a seasonable acceptance were not downgraded. Answers that failed to take note of the conversation and merely assumed that the purchase order was an initial offer and the Order Acknowledgment was a seasonable acceptance were downgraded for having missed a key issue. If the purchase order is the offer, then the indemnification provision is part of the contract. It is not a different term subject to § 2-207(2). It is an original term.
4. It is possible to make plausible contrary arguments on the materiality point, and I gave full credit to such arguments. See e.g. 2-207, comment 5, last clause (noting that a reasonable limitation of remedies does not cause unreasonable surprise).
5. It is possible to argue in addition that the remedy limitation falls because the stated remedy was
never "expressly agreed to be exclusive." § 2-719(1)(b). Even assuming the remedy limitation
survives § 2-207(2)(b), the limitation stands to gain entry into the contract by operation of law.
The seller never agreed to it -- expressly or otherwise. The problem with this argument is that it
may prove to much: § 2-207 could never function to limit remedies. What then of comment 5 to
§ 2-207?
In any event, § 2-719(3)'s limitations on consequential damage does not apply here. As between these parties, the respirator is not a consumer good.
6. As indicated above, it was a mistake to ignore the telephone conversation. But assuming the conversation were irrelevant and no agreement had been made prior to the exchange of form, a § 2-207 analysis must determine which form came first. Buyer's order did, and it contained an indemnification provision. If the seller's form constituted a seasonable acceptance, then the indemnification provision was part of the contract. Section 2-207(2) cannot deny inclusion to provisions contained in the original offer. If follows under this approach that the remedy limitation materially altered the offer, because the remedy limitation would eliminate the buyer's right of indemnity.
7. The question asks whether the specified provisions are in the contract. Section 2-719(2) does not function to determine whether a contract includes a particular provision, but rather to determine whether a contractual provision will be enforced. Moreover, there are no facts to support a § 2-719(2) analysis.
8. Reasonable minds could certainly disagree on this interpretation. Cogent expressions of a contrary view received credit equal to cogent expressions of this interpretation.
9. Courts sometimes do borrow UCC concepts to interpret other statutes, but not in place of terms expressly defined in those other statutes.
10. If that warranty existed, buyers perceptions were competent evidence as to breach. What buyers did not do was present evidence of damages.
11. That duty applies only in the "performance or enforcement" of a contract, not in the contract's formation.
12. I made no deduction for this approach, but the approach did seem to make it difficult for writers to identify, remember and address all the important issues.