Breach Outline

1. BREACH? (Have the parties done what they agreed to do?)

   1. Warranties (See: DEFENSES TO FORMATION)

Warranties are strict liability provisions on a contract. They may be express or implied. To become a warranty, a representation or promise must be made part of the contract.

• UCC § 2-313: Express Warranties by Affirmation, Promise, Description, or Sample

  • (1) Express warranties by the seller are created as follows:

    • (a) Any affirmation of fact or promise 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.

    • (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

    • (c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

  • (2) The seller need not use the words “warrant” or “guarantee” or have a specific intention to make a warranty. However, a seller’s mere opinion or commendation of the goods does not create a warranty.

• UCC § 2-314: Implied Warranty of Merchantability; Usage of Trade

  • (1) Unless otherwise excluded (§ 2-316), a warranty that the goods shall be merchantable is implied in a contract of sale if the seller is a merchant (§ 2-104) dealing in goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

  • (2) Goods to be merchantable must be at least such as

    • (a) pass without objection in the trade under the contract description; and

    • (b) in the case of fungible goods, are of fair average quality and within the description; and

    • (c) are fit for the ordinary purposes for which such goods are used; and…

  • (3) Unless excluded or otherwise modified (§ 2-316) other implied warranties may arise from the course of dealing or usage of trade.

• UCC § 2-315: Implied Warranty of Fitness for a Particular Purpose

  • (1) Where the seller at the time of contracting has reason to know the particular purpose for which the buyer requires the goods and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there unless excluded or modified (§ 2-316) an implied warranty that the goods shall be fit for such purpose.

• UCC § 2-316: Exclusion or Modification of Warranties

  • (1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent to each other, but subject to provisions of this Article on parol or extrinsic evidence (§ 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

  • (2) Subject to (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, “There are no warranties which extend beyond the description on the face hereof.”

  • (3) Notwithstanding (2):

    • (a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all the faults”, or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and

    • (b) when the buyer before entering into the contract has examined the goods or the sample or model as full as he desired or has refused to examine the goods there is no implied warranty with regard to defects which examination ought in the circumstances to have revealed to him; and

    • (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

  • (4) Remedies for breach of warranty can be limited in accordance with the provisions of the Article on liquidation or limitation of damages and on contractual modification of remedy (§§ 2-718 and 2-719).

• UCC § 2-719(3): Limitation of Remedy

  • (3): Consequential damages may be limited or excluded unless unconscionable. Limitation of damages for personal injuries in the case of goods is prima facie unconscionable, but the limitation of damages where the loss is commercial is not.

• Warranties and Real Estate: An “implied warranty of habitability” may attach to a real estate contract where the deed restricts use of the property and it is found not to be suitable for the permitted uses. (Hinson v. Jefferson)

• Opinion: Where the seller merely gives an opinion about the thing being bought, he does not give rise to a warranty.(Tribe v. Peterson: bucking horse).

  1. Defenses to Breach

Contract performance may be excused in three circumstances, all stemming from unforeseeable events that happened after the contract was formed: Impossibility, Impracticability, and Frustration of Purpose. Where the court excuses performance in these circumstances, remedies mays still be due.

• “Unwinding”: The court will try to unwind the contract and return the parties to the status quo ante.

• “Freezing”: The court may decide to “freeze” the parties at the status quo, but terminate all future obligations to one another. This can naturally have unjust results, especially where one party has substantially performed while the other has not.

• Restitution: The parties may have to return consideration given one another.

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