Shaffer v victoria station inc

COMMERCIL LAW

1\Contract Formation

2\Warranties

Professor:

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Date:

Introduction

This paper is centered on contract formation and the sale of goods, describing the major principles of this topic. The description is made using cases covered in class as well as other problems, code and comments. The cases that will be used will are a description of the process of contract formation and the sale of goods.

1-Contract Formation

A- The Statute of Frauds:

A statute of frauds is a state law within the United States of America that generally applies for oral contracts. Under the UCC, the statute of frauds requires some contracts be in their written form. However, not all the contracts are required to be in written form, hence the need to have the statute of frauds to cover for all oral contracts. Under the UCC, there is a special provision of the statute of frauds that requires that for contracts between parties to be enforceable, they have to be in written form. However, there are limitations to the situations during which the contract must be in writing, such as when goods for sale are worth $500 or more, goods being leased are worth $1000 or more, or in the event that goods, whose security needs to be assured, are not in the hands of a creditor. (The Statute of Frauds pg53-54)

Case (1) Ellig v. Molina (2014):

In this case, the plaintiffs, Mr. And Mrs. Ellig had taken to court over a breach of contract on the side of the defendant. Mr. Molina, the defendant, had failed to meet his legal obligations as required by their oral agreement, promising to buy back goods that he had sold to the plaintiff. The defendant used the statute of frauds to deny claims of breaching the contract, claiming that the oral contract that was made between him and the plaintiff was not enforceable, based on the requirement by the statute of frauds that goods worth $500 and more should be sold after having signed a written contract. However, the court found the defendant’s claims to be utterly misleading based on the fact that he clearly proved that a contract existed between him and the plaintiffs (Ellig, pg 54). In the course of the case, the court identified the usage of the dear brother letter by Molina, and this was the basis of proving that indeed, a contract existed between them.

Case problems:

Case problem 6 describes the scenario where James Ross and Robert Scott disagreed on the existence and details of a contract signed between them. The instruments of the contract included a memo by Scott, and a letter by Ross to Scott giving details of the order placed.

Based on section 2-201(1),[footnoteRef:1] the contract needed to be in writing, since the contract exceeded the $500 limit for goods that did not require a written contract under the statute of frauds. In this case, there was a legal contract between the defendant and the plaintiff. This is mainly because the case meets the requirements of section1 2-201(1),[footnoteRef:2] that requires that for the contract to be enforceable, the plaintiff or party to be enforced against must have signed the contract in written form. Clearly, Scott did sign by scribbling his initials on the pad. As appertaining to section 201(b) (37), the contract is enforceable since the initials scribbled on the pad were an intention to adopt of accept the contract on the side of Scott. [1: U.C.C. § 2-201 (Am. Law Inst.) available at https://www.law.cornell.edu/ucc/2/2-201.] [2: U.C.C. § 1-201 (Am. Law Inst.) available at https://www.law.cornell.edu/ucc/1/1-201.]

In my personal opinion, the ruling made by the court in both the case and the problem is sufficient evidence to show how oral and written contracts must be treated. Written contracts that are made enforceable by signing need to be honored and do must the contracts that are made orally. In both cases, justice was served as necessary.

Case (2) St. Ansgar Mills, Inc. v. Streit (2000):

In this court case, St. Ansgar Mills, Inc was suing Duane Streit as well as John Streit for allegedly breaching a contract established between the two entities. Usually, Duane Streit bought grain from the plaintiff by placing a phone call to initiate the process. However, in this case, the defendant failed to do so, since the prices of grain had fell far below the agreed price after the order was laced. As a result, the plaintiff moved to court seeking a summary judgment for the defendant’s action of breaching the contract. However, the defendant claimed that the charges were not enforceable since there was a long delay between the placing of the orders, and thus, signing of the oral contact, and the confirmation of the contact through signing of the written contract. In addition, John sought to clarify that the Statute of Frauds did not apply to this case, as he was not a merchant (St. Ansgar Mills, Inc, pg63). The farmer was a merchant, hence the jury had to determine whether the manner of acknowledgment was reasonable. The degree of reasonableness was not determined by whether or not the defendant had a reason for pursuing a different conduct, rather it was determines by the fact and circumstances existing at the time.

Case problems:

In this problem, a contract signed by the administration of the City of Thebes to the Tanks of America organization was nullified by a new administration, as the company was in its final stages of painting the finished tank. In this case the check was a confirmation of the existence of the oral contact, and it satisfies section 2-201(1)[footnoteRef:3] where goods worth more than $500 must be made in writing, as it was signed by the comptroller of the defendant. Since the quantity of goods is stated as one, the section 2-201 may not be applied to this case. However, the defendant has a right to claim for the contract to be enforced, since the goods were specifically made for the use of the city and could not be resold to other buyers. In addition, according to section 2-201(3)(c), payment had already been made by the city, and received by the manufacturer hence the contract was enforceable. The city, using 1-103(b)[footnoteRef:4] can easily circumvent this contract by using estoppel as an avenue as it is allowed in this section (Tanks of America, pg 68). [3: U.C.C. § 2-201 (Am. Law Inst.) available at https://www.law.cornell.edu/ucc/2/2-201] [4: U.C.C. § 1-103 (Am. Law Inst.) available at https://www.law.cornell.edu/ucc/1/1-103]

In my personal opinion, I think that the code is enforceable for the case problem, since the contract was made valid based on section 1-103 as payment had already been made. In a similar manner, in the St. Ansgar Mills, Inc. v. Streit case, the defendant was not liable for the contract since the time taken between the contracts was a factor of concern. However it was evident based on the case details that John was indeed a merchant.

B-Offer and Acceptance

General Rules:

Due to the complexity of the situations as well as language under which businesses create contracts, these contracts are only meant to be, ‘determined by the language used by them and by their action, read and interpreted in the light of commercial practices and other surrounding circumstances.’ In the Mastervoice case (Mastervoice v. General Electroc Company case pg87), the point at which the contract was formed was when the defendant shipped the fuses. In this case, the defendant showed an intention to comply with the contract details. General Electric has no excuse to claim there did not exist a contract, since section 2-204 states that any action towards the contract details signifies compliance to the contract. In addition, section 2-206(1)(b) states that the very act of shipping the goods shows existence of acceptance of the contract. (pg. 89)

The Battle of the Forms:

Case (1) Dependable Component Supply, Inc. v. Pace Electronics Inc (2000):
In this case, the seller seemed to have added some new terms to a contract signed between seller and buyer stating that, “both parties agree that any and all proceedings relating to the sale of the products to buyer or these terms and conditions shall be brought in the state courts of general jurisdiction in Orange County in the State of Florida, which ․ shall have exclusive jurisdiction for such purpose, and Buyer hereby irrevocably consents to such jurisdiction ’The court ruled that by failing to object to the changes, the buyer had seemingly accepted the changes, and this the choice of venue for the seller was enforceable (Dependable Component Supply, Inc. , p g 88).

Case problems:

This problem involved Alibaba, the seller, and Magic Carpet, the buyer. The buyer sued the seller for supplying nonconforming carpets. The seller had earlier on expressly notified the buyer, within reasonable time before supplying the carpets that there would be no warranties for the goods supplied. As a result, according to section 2-207(1),[footnoteRef:5] a disputed contract with Alibaba was claimed to have had expressly notified the buyer in reasonable time of its terms existed. The fact that there was no express limiting of the contract before removal was misleading, and therefore, faulty. The disclaimer was also part of the contact as it was not a material alteration of the contract, did not expressly limit acceptance to the offer, neither did it give room for objection. [5: U.C.C. § 2-207 (Am. Law Inst.) available at https://www.law.cornell.edu/ucc/2/2-207 ]

In my personal opinion, the Dependable Component Supply, Inc. v. Pace Electronics Inc. case, the seller had every right to have the ruling in their favor, since subsection 2-207(1) affirms that the additional terms were legitimate. This is because the seller did not require the buyer to sign the acceptance of the additional changes. In addition, according to subsection 2-207(3), the buyer’s action of continuing to buy in spite of seeing the invoice can be counted as their acceptance of the additional changes. (pg88)

Case (2) Klocek v. Gateway Inc (2007):

In this case the court dismissed a claim by the plaintiff to sue a seller for changing the terms of a contract and supplying products under false advertisement of technical support. The court finds that one of the defendants, Gateway was unable to prove that the plaintiffs agreed to the arbitration, and thus the motion to dismiss was overruled. (Pg110)

Case problems:

In this problem, Grand Sailing was asked to repair a yacht owned by Phyllis Prost, but in the process, the repair company decided to sell the yacht to Alex Stewart. According to Lindholm v. Brant et al., and as quoted in Section 42a-2-403(2),[footnoteRef:6] any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entrusted to a buyer in ordinary course of business’ (Lindholm., pg 127). [6: U.C.C. § 2-403 (Am. Law Inst.) available at https://law.justia.com/codes/connecticut/2013/title-42a/article-2/section-42a-2-403]

In my personal opinion, I think that it is unfair for the company to be able to transfer ownership to the buyer without even consulting the owner of the yacht. The repair company should have confirmed with the owner when the company found a new buyer. All the same, the company had the right to do so, since the law states that if a person leaves an item to another, in this case Phyllis Prost leaving her yatch to Grand Sailing, the latter had every right to sell the yatch. In as much as it was unfair, morally, it was lawful.

2-Warrantiies

A-Warranties of Quality

-Implied Warrantiies

Case (1) In Re Toshiba America HD DVD Marketing and Sales Practices Litigation (2009):

In Re Toshiba America HD DVD Marketing and Sales Practices Litigation, the plaintiffs sued Toshiba for selling to them a DVD which was seemingly faulty based on the fact that Toshiba had stopped producing it due to loss of supremacy battles, even though Toshiba was still advertising the DVD. This deception was sued to sue Toshiba for breach of express warranty. Based on an affirmation by the Court of Appeal by the Seventh Circuit using the New Jersey law, the plaintiff held that, ‘ a statement can amount to a warranty, even if unintended to be such by the seller, if it could be fairly understood to a certain quality or capacity relating to future performance’ (Re Toshiba America HD DVD Marketing and Sales Practices Litigation, pg 136). However, Toshiba’s statement that its HD DVDs were for ‘Today, Tomorrow and Beyond,’ was found not to have breached the contract as the DVDs performed the intended task. The case was, therefore, dismissed.

Case problems:

In this problem, the salesman at Paper and Paste Inc seemed to breach express warranties by giving misleading information to the clients, Mr. And Mrs. Consumer. The salesman assured the clients that the product they were about to buy was ‘the finest, goes up easily, can be put on with any paste and dries immediately.’ All these statements seemed to act in contradiction of the express warranties. Section 2-313 of the UCC states that express warranties are, ‘any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. ( Pg 24)

https://www.law.cornell.edu/ucc/2A/2A-210.

In my personal opinion, I think that based on the fact that this information was misleading to the client, there was a clear breach of contract, and this forms the basis of holding the claim of express warranty. I feel that there was a huge breach of the contract, in that the defendant gave misleading information to the client to influence the sale.

Implied warranties

Case (2) Shaffer v. Victoria, Station, Inc(1978):

On March 26, 1974, Shaffer ordered a glass of wine at the Victoria Station restaurant, and as he was drinking, the wine broke in his glass. This accident caused a permanent injury. The plaintiff placed an action before the court based on negligence, breach of the UCC and strict liability under the theory of Restatement (Second) of Torts 402(A) of 1965. However, there was no ground to prove negligence, and based on this, the case was dismissed after the plaintiff sought voluntary nonsuit. However, the Supreme Court reversed the ruling made by the Court of Appeal, affirming the existence of negligence as well as breach of the UCC. The Supreme Court found that there was, in fact, proof that the restaurant was a merchant in that based on section 2-316 of the UCC, merchants are responsible for the sale of goods, and the accompanying packaging. The court found that the glass was pertinent to the service that the restaurant gave to the plaintiff, and so, in this case, the restaurant acted as a merchant (Shaffer, pg 140).

To affirm the premises of this case, the court cited the Geddling v. Marsh case in which case the defendant served the plaintiff with mineral water in a bottle that exploded, causing harm to the plaintiff. In this case, the court found the defendant to be culpable, since the packaging of the water was part of the sale, as the mineral water could not have been served without the bottle.

Court also recognized the application of the strict liability theory of Restatement (Second) of Torts (402) based on fact that the container cannot be separate from the contents when the two are sold as one unit.

Case problems:

In order to treat menopausal symptoms, the plaintiff took medicines that had combined progestin and oestogen and had been manufactured by the defendant. The end result was that the plaintiff developed breast cancer. The plaintiff claimed breach of warranty of merchantability because the defendant did not warn her of this possibility. In this case, the defendant was truly culpable, since the Restatement of torts 402A[footnoteRef:7] requires that sellers notify buyers of potential harm to products. (Pg 26) [7: U.C.C. § 402A (Am. Law Inst.) available at https://avemarialaw.libguides.com/c.php?g=265710&p=1777316. ]

In my personal opinion, I think that the ruling by the court here was fair, in that the defendant ought to have been open and truthful to the plaintiff, in telling the latter that the medicines had some harm. Failure to warn the plaintiff of harm was unfair and against the UCC principles.

B-Warranty disclaimer and limitations

Disclaiming implied warranties

Case (3) Bowdoin v. Showell Growers, Inc (1987):

In this case, the plaintiff placed an appeal for a ruling regarding a disclaiming of implied warranties of fitness and merchantability in respect to a high pressure spray rig that harmed them. The Court of Appeal differed with the district court ruling that the fact that a warranty had been delivered alongside the sale made the disclaimer effective, based on the fact that the warranty was supplied later than the actual sale. Such a post-sale disclaimer was considered as not being effective as it was not part of the sale bargain between the parties (Bowdoin., pg 176).

The UCC requires that for the disclaimer of warranties to be considered recognizable, it must have been part of the original bargain, be made in writing and be conspicuous. A disclaimer that is presented as part of the sale, that is, at or before the sale forms part of the sale and is thus effective. However, if presented after sale, it is not effective (Bowdoin, pg 177). Based on this fact, the Court of Appeal reversed the ruling made by the district court and ordered the defendant to reinstate the plaintiff for the damages caused by the lack of proper disclaiming.

Rinaldi v. Lomega Corp.

This was a case that involved a suit against Lomega Corporation for producing defective Zip drives. The plaintiff presented four counts, first being that the defendant breached the implied warranty of merchantability by manufacturing a product that was not fit for the ordinary purpose for which such products are used and that defendants disclaimer of the implied warranty of merchantability contained in the packaging of the product was ineffective because it was not sufficiently conspicuous. The plaintiff also argued that he defendant was negligent in manufacturing, that the defendant practiced consumer fraud and that the defendant was negligent in failing to warn the public about the risks of its product.

The plaintiff felt that the defendant was unfair in that they had a very inconspicuous disclaimer as well as warranty, clearly violating the UCC section 2-316 (2) as well as 6 Del. C, section 2-316(2). However, the court held the opinion that the defendant had not breached the contract of mechantability, and that the plaintiff was still in position to read the disclaimer and reject the contract terms. Based on this, the court dismissed the allegations against the defendant. The code can be found at https://www.law.cornell.edu/ucc/2/2-316.

I feel that the ruling made by the court was unfair, being that sometimes, the defendants can misuse this leeway to provide very inconspicuous disclaimers, as well as warranties. This would serve as a disadvantage to unsuspecting buyers who would suffer loss due to failure to see the disclaimer.