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We know that a contract consists of offer, acceptance, and legal consideration. However, are each of those steps enforceable? If so, what happens if a party breaches a contract? In addition, can offers and acceptance be withdrawn? How? If those elements are not withdrawn, and the contract becomes enforceable, what are the available remedies for the non-breaching party? What is the maximum recovery amount in a legal remedy? Please discuss.

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Collen Von
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20 Jun 2018

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Learning Activity 1

This assignment focuses on UCC contracts.

Scenario: Landmark Company is a US-based business that sells iron tables to retailers in the US. The tables are purchased from individual metalsmiths, from US wholesale suppliers, and suppliers in Mexico.

Landmark ordered by telephone 300 iron tables to be shipped by April 1 from Metal Elements, Inc., another US company. No other sales terms were discussed. Landmark followed up the telephone call with an email to Metal Elements confirming the number of tables in the order and the delivery date, but did not discuss price. Metal Elements did not respond but shipped the tables as ordered to Landmark by April 1 at a price of $700 each, totaling $210,000.

Landmark’s new Director of Purchasing, Payton Mann, is concerned about whether Landmark is bound to accept the tables from Metal Elements since Landmark had no formal acceptance or written correspondence Metal Elements. Payton is also concerned about the price of the tables which is higher than she had expected to pay. She emails you, one of the Landmark owners, to explain the situation with Metal Elements and to seek your advice about the sales.

Respond to Payton via email including:

A. An analysis and explanation of whether this is a valid contract between Landmark and Metal Elements, and why or why not; suggest to Payton how this situation should be handled;

B. For Payton’s future information, include in the email a hypothetical situation in which the same facts apply as in the Landmark – Metal Elements order except that, upon inspection, fifty of the tables delivered from Metal Elements were damaged; provide an analysis of Landmark’s options and suggestions for resolving this situation with Metal Elements.

Sources: Saylor: Advanced Business Law and the Legal Environment

Chapter 8: Formation of Sales and Lease Contracts, Uniform Commercial Code, Contracts for Sale of International Goods (CISG)

Chapter 9: Title, Risk and Insurable Interest

Chapter 10: Performance, Breach of Sales Contracts and Remedies

Chapter 11: Sections 11.1-11.7 (Warranties and Product Liability)

Week 5 Overview

SALES AND LEASE CONTRACTS

Formation of Sales and Lease Contracts, Uniform Commercial Code, Contracts for Sale of International Goods (CISG)

Introduction: Contracts for the sale and lease of goods are based primarily on the Uniform Commercial Code (UCC), rather than common law contract principles. UCC Article 2 and Article 2A govern contract formation for the sale and lease of goods. The goal of the UCC is to provide a relatively simple, straightforward guide to commercial transactions without the formality and inflexibility required to validly form other types of contracts. The UCC has been adopted in all states; Louisiana has not adopted Articles 2 and 2A. Because globalization has increased the scope and number of international sales transactions, the United Nations Convention on Contracts for the International Sale of Goods (CISG) is a model uniform law that applies for those nations that have adopted it.

Title, Risk, and Insurable Interest

Introduction: The UCC addresses and clarifies the concepts of identification of specific goods to a contract, when risk of loss for goods passes from a seller to a buyer, and which party to a sales contract holds an insurable interest in goods. Under the UCC, typically title and risk of loss for the goods in a specific transaction pass from a seller or lessor to a buyer or lessee according to specific terms in the contract between the parties. Parties to sales and lease agreements often have insurance to protect against damage, loss, or destruction of goods.

Performance, Breach of Sales Contracts, Remedies

Introduction: Under a sales or lease contract subject to the UCC, the seller or lessor has the basic duty to transfer and deliver the goods according to the contract terms, and the buyer or lessee has the basic duty to accept and pay for the goods. Parties may also be bound to implied terms based on customs within an industry, or based on prior contracts and dealings between the parties. When a contract is breached, the non-breaching party has available remedies under the law, such as retaining the goods or requiring the breaching party to perform under the contract. As with common law contract principles, remedies are designed to put the non-breaching party in essentially the same position as if the contract had not been breached.

Warranties and Product Liability

Introduction: A warranty is a promise, or guarantee, by a seller or lessor that certain facts are true of the goods being sold or leased. Types of warranties include (1) warranties of title guaranteeing that the goods have clear and valid title, (2) express warranties promising specific facts about the goods, and (3) implied warranties of merchantability, or fitness for a particular purpose. A warranty creates a legal duty for the seller or lessor; a non-breaching party can recover damages for breach of warranty(ies). Because warranties are associated with the sale or lease of products, breach of warranty claims are a part of product liability claims and manufacturers and sellers of goods can be held liable for breach of warranty for defective products. Warranties are subject to regulation under the UCC, product liability tort law, contract law, and the Magnuson-Moss Warranty Act.

Comparison of Common Law vs. UCC Contracts

Introduction: Common law contract principles are stringent, specific, relatively rigid and rules-laden, and require clarity in the formation and performance of agreements. Common law contract rules focus on protecting the rights and interests of parties to an agreement. UCC contract principles are more flexible, looser, permit implied terms in agreements, focus on “keeping the deal together”, and expediting business transactions. The UCC rules rely on prior dealings between the parties, customs within an industry, and reasonableness to complete contracts that may have omitted or implied terms. Both common law and UCC principles are based on fairness for the parties, and provide remedies, such as compensatory damages or specific performance, for contract breach. The goal of remedies for breach under both common law and the UCC contracts is to restore the non-breaching party to essentially the same position as if there had been no breach.

With the content of the videos/readings in mind, review the following messages about the company “Holiday Party.”….It is now December 18th and Noel Cringle, the VP of Marketing, was not copied on any of these messages. She found out today that Patty Lewis is in the hospital and was surprised. She has asked you to draft a 100 + word memo - be sure to limit your response to only what you find in the e-mails below. This memo should be addressed to all employees and cc'd to Noel Cringle. This memo should promote a positive and unbiased workplace compliant with Human Resource policies. You should not assume anything beyond what is listed in those e-mails. TO: All Employees DATE: December 1 RE: Christmas Party I’m happy to inform you that the company Christmas Party will be held on December 23rd starting at noon at The Grill House. There will be a cash bar and plenty of drinks! A small band will play traditional carols…feel free to sing-along. And don’t be surprised if our CEO shows up dressed as Santa Claus to light the Christmas tree. Exchanging gifts among employees can be done at this time. Please remember to keep gifts to the agreed $10 limit. The gathering is only for employees. Merry Christmas to you and yours, FROM: Patty Lewis, Human Resources Director ——————————————————————— After multiple incoming e-mails Patty responds: TO: All Employees DATE: December 4 RE: Christmas Party In no way was yesterday’s memo intended to exclude our Jewish employees. We recognize that Hanukkah is an important holiday which often coincides with Christmas. However, from now on we’re calling this party our “Holiday Party”. The same policy also applies to employees who are celebrating Kwanzaa at this time. There will be no tree or Christmas carols sung. Happy holidays to you and yours. FROM: Patty Lewis, Human Resources Director ——————————————————————— After multiple incoming e-mails Patty responds: TO: All Employees DATE: December 8 RE: Christmas Party Regarding the anonymous note I received from a member of Alcoholics Anonymous requesting a non-drinking table, I’m happy to accommodate your request but please remember that if I put a sign on the table that reads “AA Only” you won’t be anonymous any more. Forget about the gift exchange because union members feel that $10 is too much money and the executives believe $10 is a little cheap. NO GIFT EXCHANGE WILL BE ALLOWED. FROM: Patty Lewis, Human Resources Director ——————————————————————— After multiple incoming e-mails Patty responds: TO: All Employees DATE: December 10 RE: Christmas Party What a diverse group we are! I had no idea that December 20 begins the Muslim holy month of Ramadan, which forbids eating and drinking during daylight hours. Perhaps the Grill House can hold off on serving your meal until the end of the party…. Meanwhile, I have arranged for members of Over-eaters Anonymous to sit farthest away from the dessert table and for pregnant members to sit closest to the restrooms. Low fat food will be available for those on a diet. We cannot control the salt used in the food. We urge those with high blood pressure to taste first. There will be fresh fruits as dessert for diabetics. Did I miss anything? FROM: Patty Lewis, Human Resources Director ———————————————————————– After multiple incoming e-mails Patty responds: TO: All Employees DATE: December 13 RE: Christmas Party People! People! Nothing sinister was intended by wanting our CEO to play Santa Claus. Even if “Santa” can be arranged to be “Satan” there is no evil connection to our own little “man in a red suit.” FROM: Patty Lewis, Human Resources Director ——————————————————————— After multiple incoming e-mails Patty responds: TO: All #%&$ing Employees DATE: December 16 RE: The #%&$! Christmas Party Vegetarians!!!! I’ve had it with you people!! We’re going to keep this party at the Grill House whether you like it or not. You can just sit at the table farthest from the “Grill of Death” as you so quaintly put it, and you’ll get your %$#&*$ salad bar only including organic tomatoes. But, tomatoes have feelings too, you know. They scream when you slice them. I can hear them now! I hope you have a rotten holiday. Drive drunk and die, you hear me???!! FROM: AHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!! ——————————————————————— TO: All Employees DATE: December 17 RE: Christmas Party I’m sure I speak for all of us in wishing Patty Lewis a speedy recovery. I’ll continue to forward your cards to her at the hospital. In the meantime management has decided to cancel the Holiday Party and give everyone the afternoon of the 23rd off with full pay. FROM: Terri Bishop, Acting Human Resources Director

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