Description
Cases to BriefGrace Label, Inc. v. Kliff (2005)Pages 21-3 – 21-4Pittman v. Henry Mocure Motors (2015)Pages 21-10 – 21-11Please complete the briefs in an IRAC format and a sample is provided.
Fall 2021
CALIFORNIA STATE UNIVERSITY, NORTHRIDGE
DAVID NAZARIAN COLLEGE OF BUSINESS & ECONOMICS
DEPARTMENT OF BUSINESS LAW
COMMERCIAL TRANSACTIONS LAW
BLAW 480
PROFESSOR:
OFFICE:
OFFICE HOURS:
TIME & PLACE:
EMAIL:
OFFICE PHONE:
Farshad Ghodoosi, J.S.D., PhD.
BB3240
Virtually via Zoom on Tuesdays: 12:30pm-1:30PM. Office hours can also be
scheduled by appointment. Contact the Professor to Schedule a Zoom
Meeting.
Fully Online and Asynchronous (FOA). No on campus meetings. Please
follow the course’s Canvas page for introductory materials, week-by-week
recorded lectures and assignments among others.
farshad.ghodoosi@csun.edu
N/A
Course Description
Study of those areas of law related to commercial business transactions, including commercial paper, negotiable
instruments, secured transactions, bankruptcy, and the law of sales.
Prerequisites
BLAW 280, BLAW 308; BUS 302/L for Business majors; Upper Division Writing Proficiency Exam (UDWPE)
score of 8 or higher.
Course Materials
Required Textbook: BUSINESS LAW: THE ETHICAL,
GLOBAL, AND DIGITAL ENVIRONMENT (18th Edition
By Jamie Darin Prenkert and A. James Barnes and
Joshua Perry and Todd Haugh and Abbey Stemler.
Additional materials and cases may be assigned as
needed.
•
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•
•
Course Objectives
To develop strong analytical and writing skills.
To evaluate and analyze how decisions are made in the business environment within the constraints of state
and federal laws and regulations.
To describe how law serves as a tool for generating policy and for making decisions, including business
decisions.
To explore and evaluate the impact ethical considerations play in defining appropriate business behavior and
conduct.
1
•
•
•
•
•
•
•
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To expand the student’s analytical and evaluative capacity of substantive and procedural rules of law, and how
these concepts influence decision making in the work environment.
To inquire into the nature of technological developments and advancements and how laws and regulations
are applied in the protection of rights.
To evaluate current research and keep abreast of legal developments/legislations that impact business.
To actively participate and present on legal issues and case law pertinent to this class.
Learning Outcomes
The course objective will be met through a combination of activities as described on the Canvas page. The
emphasis here is on interactive learning. For this purpose, classes are taught using, in part, the Socratic method,
with its goal of participatory learning and the development of reasoning skills.
Through various readings, activities and assignments in this class, students will develop analytical skills and
some basic knowledge of the relevant area of the law.
Students must complete all readings and other assignments prior to class meetings in order to benefit from
class time.
Students are reminded that learning is an exploratory process of continuous intellectual enhancement and
development. For this reason, the fear of being wrong should not inhibit students’ participation. Instead,
students should come well prepared to each class, particularly for the case discussions, and be ready to answer
questions/discuss your analysis.
Each assignment preparation, analytical thinking, meaningful participation, deep understanding of the
materials, research skills, writing skills, speaking silks, and respectful interactions with others are among the
most important factors in determining the grades.
Course Topics
Below are the main topics of the course. Other topics will be likely discussed.
I.
THE LAW OF SALES
II.
SECURED TRANSACTIONS
III.
BANKRUPTCY
IV.
COMMERCIAL PAPER
Course Requirements
Type
Mid-Term (1)
Mid-Term (2)
Final
Case Briefs
Participation
Format
Multiple-choice and essay questions
Multiple-choice and essay questions
Multiple-choice and essay questions
One-page brief of cases using IRAC
Active engagement with course materials
including recorded lectures, quizzes
discussion boards etc.
Percentage
20%
20%
25%
15%
20%
Mid-terms and final examination
•
•
Exams are comprised of (a) essay questions, and (b) multiple-choice questions.
For essay questions:
o They require full and clear answers which consist of identifying the issues, analyzing the facts and
applying law to the facts. Mere conclusions are not enough and may receive no credit.
o Answers must be in IRAC format.
2
•
o Discuss the issues involved, the applicable legal rules, an application of the law to the facts.
o Discuss all issues. Some essay questions have more than one issue.
o An overall structure of answers to essay questions is as follows:
Discuss the issue(s)
Define and discuss any principles of law, legal theories, etc., relevant to the question.
Fully apply the given facts to the legal principles on which you rely. Do not ignore any facts,
even if they do not support your conclusions. Do not assume that I know that you know
something – tell me in your exam what you know, defining every legal term used.
The actual conclusions you reach could be the least important part of your answer – but you
must base your conclusions on complete and intelligent applications of the facts to the legal
principles involved.
Failure to take an exam at the scheduled time will result in F on that exam unless arrangements have been
made with the professor.
Case Briefs:
•
•
Briefs are one-page long per case or problem (single space, Times New Roman Font size 12). Students are
required to submit the briefs on or before the class in which the relevant materials are taught. Canvas modules
include the deadline for submission of briefs.
To brief cases, case problems and questions, use the following “IRAC” format:
o Issue: What question must be answered in order to reach a conclusion in the case? This should be a
legal question which, when answered, gives a result in the particular case. Make it specific (e.g. “Has
there been a false imprisonment if the plaintiff was asleep at the time of ‘confinement’?”) rather than
general. Most cases present one issue. If there is more than one issue, list all, and give rules for all
issues raised.
o Rule: The rule is the law which applies to the issue. It should be stated as a general principal, (e.g. A
duty of care is owed whenever the defendant should anticipate that her conduct could create a risk of
harm to the plaintiff.) not a conclusion to the particular case being briefed, (e.g. “The plaintiff was
negligent.”)
o Application: The application is a discussion of how the rule applies to the facts of a particular case.
While the issue and rule are normally only one sentence each, the application is normally paragraphs
long. It should be written debate – not simply a statement of the conclusion. Whenever possible,
present both sides of any issue. Do not begin with your conclusion. The application shows how you
are able to reason on paper and is the most difficult (and, on exams, the most important) skill you will
learn.
o Conclusion: What was the result of the case? With cases, the text gives you a background of the facts
along with the judge’s reasoning and conclusion. When you brief cases, you are basically summarizing
the judge’s opinion. With case problems, the editors have given you a summary of the facts of an
actual case, but have not given you the judge’s opinion. Your job is to act as the judge in reasoning
your way to a ruling, again using the IRAC format.
Participation:
•
•
Participation grade is assessed based on student’s engagement with Canvas’ materials. Each week students are
required to complete quizzes (in-video or otherwise) and/or discussion boards. Each of the activities include
certain points (e.g., syllabus quiz may be 15 points). Participation grade is students’ overall grade from these
activities.
It is important that students complete all weekly Canvas assignments by their due date.
3
Policies
Academic and Personal Integrity
• Violations of honor codes and other integrity problems are unacceptable. In doing projects/assignments, you
should cite all external sources of information (including Internet sources), fully and completely. To maintain
fairness to all other students, violators of academic integrity will be penalized by receiving failing grades and
will be reported to the appropriate university authorities.
• Please be advised that your papers will be submitted to a plagiarism detector software through the Canvas
system, which will generate an originality report on your paper.
• Any material cited verbatim from its original source should be in quotes and contain a reference to a full
citation for that source using a standard format (e.g., MLA, APA, Bluebook). Remember anytime you use a
source (e.g. website, article, book) you need to properly cite. Paraphrased work should also contain a reference
to the source citation. Papers and assignments with long quotes are not acceptable and will be subject to lower
grades.
• Substantial similarity of written assignments with other sources will result in the zero grade for that assignment
and can result in a failing grade for the course.
• It is your responsibility to read and understand the University’s policy on academic dishonesty as described in
the University catalog.
• Works that do not include proper citation will receive a failing grade for the assignment and possible for the
course. The instructor may inform relevant university authorities including Vice President of Student Affairs.
Assignment Submission Policy
• Assignments must be turned in on the due date/time electronically via Canvas. Any technological issues are
students’ responsibility and the instructor will not excuse submission or late submission unless the student
receives the instructor’s approval in exceptional circumstance. Late or not, however, you must complete all
required assignments to pass this course.
• In exceptional circumstances and depending on the type of assignment, late submissions may be accepted but
with a penalty determined by the instructor.
• The instructor may make some of the grading based in part on students’ peer review and evaluation.
Etiquette & Netiquette
• At all times, students must remain respectful and polite in all interactions and communications including
online communication, email communications, in-person discussions. Students need to observe all rules of
etiquette including 15 rules which can be found here. If a student fails to observe the rules, the instructor
retains the right to decide on the issues related to etiquette & netiquette and deduct points from the
participation and/or overall grade in the course.
Technology
• This is an online course. All activities, assignments and exams in this course will be completed via Canvas.
Students need to have a proper device to be able to check their emails, Canvas, and other e-learning tools
regularly and complete all the assignments on time. You also need reliable internet and access to certain
software to be able to complete assignments. If you ever have any technical difficulties accessing the Canvas
site materials you are welcome to email me or you can contact the CSUN IT department that can be reached
at (818) 677-1400. Their hours are Monday-Friday from 8am-5pm.
Disability Resources & Educational Services
• If you have a disability and need accommodations, please register with the Disability Resources and
Educational Services (DRES) office or the National Center on Deafness (NCOD)
The DRES office is located in Bayramian Hall, room 110 and can be reached
4
at 818/677- 2684. NCOD is located on Bertrand Street in Jeanne Chisholm Hall and can be reached at
818/677-2611. If you would like to discuss your need for accommodations with me, please contact me to set
up an appointment. Reasonable and effective accommodations and services will be provided to students if
the requests are made in a timely manner and with appropriate documentation in accordance with federal,
state, and university guidelines.
Legal Advice
• Faculty members may not provide legal advice or legal services to students.
Syllabus
• The instructor reserves the right to modify and adjust the syllabus, assignments, and policies throughout the
semester based on class needs and class progress. All modifications and changes will be communicated to
students in writing.
Evaluation
Letter
Grade Points
Description
Grade
THE BASIS FOR GRADING
(2) MIDTERM EXAMINATION
FINAL EXAMINATION
CLASS PARTICIPATION
CASE BRIEFS
40
25
20
15
TOTAL
100
A
AB+
B
BC+
C
CD+
D
94-100
90-93
87-89
83-86
80-82
77-79
73-76
70-72
67-69
63-66
DF
60-62
0-59
Outstanding
Very Good
Average
Barely
Passing
Failure
** the instructor reserves the right to apply appropriate curving to ensure fairness and just distribution of grades.
** please note that often the total grades calculated by Canvas and shown to students are inaccurate and can be
starkly different from the actual total grade. Students should calculate the grades based on the basis for grading
provided here. For any questions in this regard, please reach out to the professor.
Rubrics
*** NOTE that grading is generally holistic. Rubrics, however, are the main criteria that the professor will take into
consideration. Please check the course Canvas page for the applicable rubrics.
•
Tentative Schedule
Please note each week, students are required to
o (1) Read the materials;
o (2) Complete the Canvas assignments for that week by their due date; and
o (3) Submit briefs for the cases listed below on Canvas.
Topic
Introduction
Week 1 (Aug. 30th)
Readings
Introduction to the American Legal System (LINK)
5
Syllabus
IRAC
Read the syllabus and complete syllabus quiz on Canvas
Lawrence Trautman et al, IRAC! IRAC! IRAC!: How to Brief Any Legal Issue, 29
SOUTHERN LAW JOURNAL (2019) (LINK)
Berkeley Law IRAC Handout (LINK)
Week 2 (Sept. 6th)
Topic
Sales (Formation)
Cases to Brief
Reading
Chapter 19
Janke v. Brooks (2012)
Noble Roman’s v. Pizza Boxes (2005)
Pages 19-5 – 19-6
Pages 19-9 – 19-10
Week 3 (Sept. 13th)
Topic
Sales (Terms)
Cases to Brief
Reading
Chapter 19
American’s Shrine to Music v. Johnson (2018)
Zaretsky v. William Goldberg Diamond Corp. (2016)
Topic
Sales (Performance)
Cases to Brief
Pages 19-12 – 19-13
Pages 19-14 – 19-16
Week 4 (Sept. 20th)
Reading
Chapter 21
Grace Label, Inc. v. Kliff (2005)
Pages 21-3 – 21-4
Pittman v. Henry Mocure Motors (2015)
Pages 21-10 – 21-11
Week 5 (Sept. 27th)
Topic
Sales (Remedies)
Cases to Brief
Reading
Chapter 22
Green Wood Industrial Company v. Forceman Int’l Dev. Group
(2007).
Cahaba Disaster Recovery v. Rogers (2012)
Pages 22-13 – 22-15
Pages 22-15 – 22-16
Week 6 (Oct. 4th)
Review & First Mid-Term (Tentatively Scheduled for Tuesday Oct. 5th)
Week 7 (Oct. 11th)
Topic
Credit
Reading
Chapter 28
Cases to Brief
Columbia Realty Ventures v. Dang (2011)
Allstate Lien & Recovery Corporation v. Stanbury (2014)
Pages 28-6 – 28-8
Pages 28-11 – 28-12
Week 8 (Oct. 18th)
Topic
Secured Transactions
Reading
Chapter 28
Cases to Brief
In re Foreclosure Cases (2007)
Trump Endeavor v. Fernich (2017)
Pages 28-15 – 28-16
Pages 28-19 – 28-21
Week 9 (Oct. 25th)
Topic
Bankruptcy (1)
Reading
Chapter 30
Cases to Brief
In re Rogers (Wallace v. Rogers) (2008)
Pages 30-7 – 30-8
6
Rosenberg v. N.Y. State Higher Education (2020)
Pages 30-16 – 30-18
Week 10 (Nov. 1st)
Topic
Bankruptcy (2)
Reading
Chapter 30
Cases to Brief
In re Siegenberg (2007)
In re Burt (2007)
Pages 30-19 – 30-22
Pages 30-30 – 30-31
Week 11 (Nov. 8th)
Review & Second Mid-Term (Tentatively Scheduled for Tuesday, Nov. 9th)
Week 12 (Nov. 15th)
Topic
Negotiable Instruments
Reading
Chapter 31
Cases to Brief
Heritage Bank v. Bruha (2012)
Pelican Nat’l Park v. Provident Bank of Maryland (2004)
Pages 31-12 – 31-13
Pages 31-14 – 31-15
Week 13 (Nov. 22nd)
Topic
Negotiation & Holder in
Due Course
Cases to Brief
Reading
Chapter 32
Town of Freeport v. Ring (1999)
RR Maloan Investment v. New HGE (2014)
Pages 32-3 – 32-4
Pages 32-11 – 32-12
Week 14 (Nov. 29th)
Topic
Liability of Parties
Reading
Chapter 33
Cases to Brief
National College Loan Trust v. Irizarry (2015)
Victory Clothing v. Wachovia Bank (2006)
Pages 33-4 – 33-5
Pages 33-16 – 33-19
Week 15 (Dec. 6th)
Topic
Checks & Electronic
Transfers
Cases to Brief
Reading
Chapter 34
Forcht Bank v. Gribbins (2015)
Aliaga Medical Center v. Harris Bank (2014)
Pages 34-4 – 34-5
Pages 34-6 – 34-7
Week 16 (Dec. 13th)
Review & Final Exam (Tentatively Scheduled for Tuesday Dec. 13th, 2021)
7
To briefcases, case problems and questions, use the following “IRAC” format:
Issue: What question must be answered in order to reach a conclusion in the case? This should be a legal
question which, when answered, gives a result in the particular case. Make it specific (e.g. “Has there
been a false imprisonment if the plaintiff was asleep at the time of ‘confinement’?”) rather than general.
Most cases present one issue. If there is more than one issue, list all, and give rules for all issues raised.
Rule: The rule is the law which applies to the issue. It should be stated as a general principal, (e.g. A duty
of care is owed whenever the defendant should anticipate that her conduct could create a risk of harm
to the plaintiff.) not a conclusion to the particular case being briefed, (e.g. “The plaintiff was negligent.”)
Application: The application is a discussion of how the rule applies to the facts of a particular case. While
the issue and rule are normally only one sentence each, the application is normally paragraphs long. It
should be written debate -not simply a statement of the conclusion. Whenever possible, present both
sides of any issue. Do not begin with your conclusion. The application shows how you are able to reason
on paper and is the most difficult (and, on exams, the most important) skill you will learn.
Conclusion: What was the result of the case? With cases, the text gives you a background of the facts
along with the judge’s reasoning and conclusion. When you brief cases, you are basically summarizing
the judge’s opinion. With case problems, the editors have given you a summary of the facts of an actual
case, but have not given you the judge’s opinion. Your job is to act as the judge in reasoning your way to
a ruling, again using the IRAC format.
Brief (3)
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5 Q 21-3
+ –
An example of usage of trade comes from the build-
ing supply business where one common lumber item is
referred to as a “two-by-four and might be assumed to
measure two inches by four inches by someone not familiar
with trade practice. If you were to buy two-by-fours of vary
ing lengths from your local lumberyard or building supply
store, you would find that they in fact measure 13 inches
by 3 inches.
Grace Label, Inc. v. Kliff
355 F. Supp. 2d 965 (S.D. lowa 2005)
Stere sa citim of California, is a sole proprietore the business of brokering printing projects. On May 24 2002. Barrel S.A. de
C. Barcel), a Mexican company by purchase order contracted within
for at least 47,250,000 fal trading cards bearing the likeness
of Britney Spears Barcel is a large, multinational corporation that sells ariety of food products. It indicated that the cand would be
placed in smack food packaging and would come in direct contact with the food contents
On May 30, of by purchase order contracted with Grace Label to produce the Spears cards Grace is a low carport engaged
in the business of manufacturing pressure sensitive labels and flexible packaging. The purchase order described the product as a Foil
Trading Card (Direct Food Contact Compatible). I also specified the printing process was to we FDA Varnish, which Grace Label
understood it was to use to accomplish the food contact compatibility requirement. Gruce Label did not have any direct communication
wille Marcel because we want it to be in with his customer
The Spears job was the third or furth Barcel job Grace Lalel had worked on wide in about a year’s time. The of www
arranged while Kliff was employed by Chromium Graphics, Together, they mohed 5&000000 scrutch off game piece cards, where
customers nibhed off a coating to determine if they had won ape. In February 2002. Kur arranged for Grace Label to do the “Pile
Sobre Ruedas Job,” which med printing about 2,000,000 peel apart game piece cans whereby consumers peeled off a top laver
to see if they had won a prize. The Spears card was simply a trading cand with Snachof” or “peel apart” nature. The Spars cand
was varnished on both sides, the others were wrished on one side. The direct food compatible”descriptine appeared only in the Spears
can purchase order. All of the candy manufactured by Grace Lalel for the rows Barcel projects were inserted is packages of Barcel’s
snack-food products. On several occasions, if advised Grace Label that he wanted the same materials used for the Spears cards as
had won the prior
The adhesive used on the Chromium Graphics canais was Red-Cure 12PSFLV, as specified by Chromium Graphics. This particular
adhesives wasted on the Madure white as ring among Rod Carex Food & Drug Administration) grade adhesht
Grace Label was aware of this. Other than ondering the FDA approved vamisk, Grace Label did nothing to determine if the other me
terials and to produce the Spears cants were compatible for direct contact with food items. Before its work for Barcel Gruce Label had
no produced a product intended to be in direct contact with food and it assumed that the materials al was told to use had been approved
by Chromium Graphics or local
Grace Label produced prototype candis, single malenials from the par Barcel jobs (except for the fil, which has no odor), and
submitted to Barcel, through for awal. Gue Label Understand that Barcel was interested in the size and weight of the cons
to make sure they would fit in the Barrel dispersing wis Kis was on the Grace Label premises during the first week of production and
had a buses of cards brought to him for inton Herised no es concerning the caves
On June 28, 2002. Grace Label shipped 17,138,000 production cards directly to Barcel. An additional 2.500,000 cards were
shipped to Barcelon July , 2002. After receipt of the production cards, Barcel complained to that the cards comitted a foul
odor and were not fit for use in the potato chip bugs for which they were intended. Grace Label suggested they be aired out to
eliminate the dor Barcel templed do this but the odor persisted despite Grue Label’s content that the Spears production
cands smelled the same as the cards for the other Barcel jobs that Grace Label had printed and that had been accepted by Kayf and
Bannel
Barcel rejected the candy wner is contract with KW before the final production of cards was shipped from Grace Label Kn
there per cancelled the remaining order with Grace Label Beyond a $90,000 down payment Kit did not pay Grace Label the
contract amount for the cards. Grace Label then brought suit against Ky for breach of contact. By contended that the cards
smelled bad and that the smell was caused by a chemical (beta-phenoxyethyl acrylate (BPAin the adhesive, which was not direct
food compatible Kuts expert stated that the Bus undetectable in the prototype cands but that in the production cards, the
concentration of BPA far exceeded that in cured or cured Rad-Cure. Grace Label’s response was that specified and approved
of the material components of the cards and it relied out and Barcel to select appropriate material as it had no expertise in the
arer. This argument would require the court to consider the course of dealing between the parties. Klabjected to the introduction
of the end
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21-4
Part Four Sales
= Q 21-4
+ –
Walters, Chief United States Magistrate Judge
The parol evidence rule does not bar the course of dealing between
the parties. The UCC codifies a commercial version of the rule
Terms with respect to which the confirmatory memoranda of
the parties agree or which are otherwise set forth in a writing
intended as a final expression of their agreement with respect
to such terms as are included therein and may not be contra-
dicted by evidence of any prior agreement or of a contempor
aneous oral agreement but may be explained or supplemented
(a) by a course of dealing of age of trade… or by course
of performance
12-202a)], “Course of dealing’ is a defined term meaning “a so
quence of previous conduct between the parties to a particular
transaction which is fairty to be regarded as establishing a com-
mon basis for interpreting their expressions and other conduct.”
11-205(3)). A course of dealing “gives particular meaning to and
supplements or qualifies terms of an agreement.” [1-205(3)]
“Whenever reasonable express terms and the course of dealing
are to be construed consistent with each other. The rule incorpo
rated in the UCC reflects the commonsense assumption that the
course of prior dealings between the parties and usages of trade
were taken for granted when the contract document was phrased.
Author’s note: The court then held that the written contract
could be explained or supplemented by course of dealing between
the parties such evidence would be intended not to change or vary
the contract terms, but rather to explain what the parties meant by
them. At the same time, the court concluded that there were genuine
issues of material fact that precluded giving summary jadgment at this
time. These included (1) whether the parties intended on the basis
of successful use of adhesive and other material on prior jobs, that
the trading cards made with the same materials would be direct food
compatible within the meaning of the contract and (2) whether the
odor on the cards was worse than what had been accepted before
Motion for summary judgment dented
example, a contract calls for a fish wholesaler to deliver
fish to a supermarket every Thursday and for the super
market to pay on delivery. If the fish wholesaler regularly
delivers the fish on Friday and the supermarket does not
object, the supermarket will be unable to cancel the con
tract for that reason. Similarly, if the supermarket does not
pay cash but sends a check the following week, then unless
the fish wholesaler objects, it will not be able to assert the
late payments as grounds for later canceling the contract.
A party that has waived rights to a portion of the contract
not yet performed may retract the waiver by giving reason
able notice to the other party that strict performance will
be required. The retraction of the waiver is effective unless
it would be unjust because of a material change of position
by the other party in reliance on the waiver [2-209(5)
Waiver in a contract that entails a number of instances
of partial performance (such as deliveries or payments) by
one party, the other party must be careful to object to any
late deliveries or payments. If the other party does not ob
ject, it may waive its rights to cancel the contract if other
deliveries or payments are late 12-208(3). 2.209(4)]. For
CYBERLAW IN ACTION
The Internet and E-Commerce Facilitate particulars of the performance contracted for, an event that Article 2
Contract Modifications
calls a “modification they may change their contract. Modifications
are quite common in deals between two merchants and are not
Buyers and sellers sometimes change parts of their
uncommon in sales in which one lay buyer and one merchant
contracts after formation For example, the buyer participate
may need the goods slightly sooner or somewhat
Let’s assume that the buyer decides that her customers like the
later than originally planned. Or the seller may be able to supply first shipment of goods under a contract so much that she should
only yellow ife jackets instead of the buyer’s preferred blue and order more. To change the quantity in her office, she can do several
red mix of life jackets. So long as the parties agree to change the
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= Q 21-10
21-10
Part Four Sales
+ –
grounds that the nonconformity substantially impairs the
value of the car, that she took delivery of the car without
knowledge of the nonconformity, and that her acceptance
was based on Dealer’s assurances that he would fix the
car. Similarly, revocation of acceptance might be involved
where a serious problem with the car not discoverable by
inspection shows up in the first month’s use
Revocation must occur prior to any substantial change
in the goods, however, such as serious damage in an acci
dent or wear and tear from using them for a period of time.
What constitutes a substantial impairment in value and
when there has been a “substantial change in the goods”
are questions that courts frequently have to decide when
an attempted revocation of acceptance results in a lawsuit
Pittman v. Henry Moncure Motors
87 UCC Rep. 2d 619 (N.C. Ct. App. 2015)
On January 30, 2003. Ashley Keith me and Denna Puma entered into a contract with Manicure Motory for the sale, delivery
and setup of a manufactured home for a total price of $92.135. That price included $15,000 in ptional equipment.” 59.500 of which
was for a brick foundation. The Pittmansded it to be the primary residence
At Moncaure’s request, Ashley Pittman contracted with a masone to build a foundation for the home and with a contructor de perform
the rest of the setup of the home. This willed fling the walls and the roof including puting bures on the afters, aluching wood
to the roof and waiting extra singles
The home was manufactured by Crestline Homes, a company that sunt filed for bankruptcy. It was delivered to the man
lor in bus sections wrapped in plastic wrap seal in May 2003. In transit, wind and rain nipped the plastie of one of the sections all the
www down its side, causing water to enter into it. After both sections were delivered more in fell and entered into the exposed section
Prior to the setup. Ashley Pitman and Pati Moncure, the president and general manager of Mancare Motors, together saw that one of
the sets had suffered water damage from the leakage
After the foundation was built and the he was lifted and he foundation by crane, the contractor erected the roof. However, he
impropery imalled the roof
Although Ashley Pitman told Moncure that this is not what I paid for and to make the home back.” Moncune assured him
that he would address the problems with the home part of the home was gutted, cleaned of mold, and rebuilt. In September 2003,
the Portmas moved into the house when they experienced severe water leakage throwgh the roof as well as a number of
other problems with the interior and exterior of the home. Momewe msnccessfully attempted to address these problems over the
next year and in September 2004, Me Pamans, through their attorney demanded a replacement home from Moncure Motors and
Cresti
Following the September 2004 better, the parties agreed that Crestine would I ghow a further opportunity to cure the defects in
the home, and Moncure Motors would be financially responsible for the repairs covered by warranty. While over the next two years
the roof wil siding and electrical circuit breakers were replaced many defects, including problems with the electrical system,
persisted
The marthen brought swita Manicure Motors and Crestine alleging bach of warranty and seeking a refund of the full
purchase price as buyers who had justifiably revoked their acceptance of the purchase price. The trial court awarded the Pismans dam
ages for bach of warranty in the amount of592,135 wo interest at the legal rate from September 2004, the date the trial court forum
that the Pamans had made it unequivocally dear they had rescinded the contract. The trial court further specified that spoe Moncure
Motorsment of the damage, it would be entitled to rower the manufactured home from the primary property spor no les han
six months’ notice. Moncure and Creatine Homes appealed
Geer, Judge
The UCC’s warranty or implied merchantability guarantees,
among other things, that goods are it for the ordinary purposes
for which such goods are used. Implicit to a home’s fitness for
use as a dwelling is that it be free of major defects. The evidence
presented at trial overwhelmingly supports the conclusion that
the home was not fit for use as a dwelling unit.
We next address the trial court’s determination that the Pitt
mas elected to rescind the purchase of the manufactured home
by their words and conduct.” Although rescision is not a remedy
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5 Q 21-1:
Chapter Twenty-One Performance of Sales Contracts
+ –
available under the UCC, section 2608 provides for the similare instructions concerning return of the rejected goods upon notice
edy revocation of acceptance. After accepting goods from a ser of the revocation: (2) business needs or personal circumstances
1. The buyer may revoke this acceptance of a lot or commer
compelled the buyer’s continued use: (3) the seller continued to
offer assurances that the nonconformities would be cured or that
cial unit whose nonconformity substantially impairs its
the buyer would be recompensed for dissatisfaction and inconve
value to him if he accepted it
nience during the period of continued use (4) the seller acted in
(a) On the reasonable assumption that is nonconformity
would be cured and it has not been seasonably cured, or
good faith; and (5) the seller suffered undue prejudice as a result
of the continued use Citation omitted.
(b) Without discovery of such nonconformity in his accep
tance was reasonably induced either by the difficulty of
Here, pursuant to Crestline’s promise to make further re
pairs following the September 2004 letter, numerous attempts
discovery before acceptance or by the seller’s assurances
were made to address continued defects in the home, including,
A buyer who revokes has the same rights and duties with respect among other things replacing the roor, Vinyl Siding, and electric
to the goods as if he had rejected them. Section 2608(3). For circuit breakers. Yet, despite these attempted repairs, the record
mal notice that acceptance is being revoked is not necessary, any and transcript are replete with references to problems that had
conduct by the buyer manifesting to the seller that he is seriously not been repaired at the time of trial. Further, Mr. Pittman testi
dissatisfied with the goods and expects redress or satisfaction is fied that he has been continuously dissatisfied with the home:
suficient
“It is steady stuff wrong. It has never been right… And. I feel
Although the trial court referred to the remedy of rescission, like when I paid that money-I can understand a few things being
our appellate courts have concluded that references to the remedy wrong, but I think it went awerboard.” Mt. Pittman testified that
of rescission should be treated as revocations of acceptance. Ac The would have returned the home to Moncure Motors, but Mon-
cordingly, we must determine whether the trial court’s findings cure Motors would not allow that. He also testined that he and
are sufficient to support the conclusion that the Pittmans revoked This family would have walked away from the home if they were
their acceptance
not indebted on it and the home were not on their family’s land.
After making findings regarding the substantial defects in the Nothing in the record suggests that the Pittmans ever indicated
manufactured home, the trial court determined that the Pittmans to the defendants that they were even remotely satisfied with the
by “words and conduct” elected to rescind the purchase of the home.
dwelling. The court found that a reasonable person in the same Contrary to defendants’ contention that the Pittmans ulti-
or similar circumstances would consider the breach a substan- mately accepted the egregiously defective home, the evidence
tial deprivation of the material benefit of the purchase of the shows that if the Pittmans at all waived revocation or accep
dwelling
tance after giving notice via the September 2004 letter, such
After the Pittmans gave Moncure Motors notice of the breach, waiver was made on the condition that the repairs would be
Moncure Moorstempled to repair and correct the water dame made to the Pittman’s satisfaction. The evidence was uncon
and the workmanlike setup of the dwelling in a reasonable and timely tradicted that the Pittmans would have walked away from the
manner, but failed to be successful in doing so.” Based on these find home but for the facts that Moncure Motors refused tender of
ings, the trial court concluded that the Pittmans “justifiably rescinded the home; the home was placed on the Pittman’s family land
the sale/purchase of the manufactured mobile home.” We hold that the Pittmans were indebted on it after giving notice of revo
the record contains ample evidence to support the findings regard cation of acceptance, the Pittmans agreed to allow Moncure
ing the defects, notice of those defects to Moncure Motors, the Pill Motors and Crestline more time to attempt repairs, and the sub-
mans’s attempts to reject acceptance of the manufactured home by sequent numerous attempts to address the defects in the home
demanding replacement of the home, and Monicure Motosintality were unsuccessful
to repair and correct the defects. The evidence is sufficient to support Based on that evidence, the conditions necessary for the Pitt
a determination that the Pittmans initially revoked acceptance of the mans to waive their revocation of acceptance failed to material
purchase of their home
ize. We also note that there is no evidence that the defendants
Nonetheless, the defendants contend that the Pittman’s un were prejudiced by the continued use: Mt. Moncure testifled that
interrupted residence in the home for at least 11 years, should it cost less to attempt repairs than to replace the home, and Mon-
ultimately be read as the Pittmans’s acceptance of the home and cure Motors acquiesced in Crestine’s decision to attempt further
its nonconformities
repairs
The reasonableness of continued use of defective goods after
revocation may depend on whether “1) the seller tendered Judgment for the Pittmans affirmed
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