First question:-
Before beginning this interactive, read the case on p. 533 in your text. Note that when a seller breaches a contract, depending on the circumstances, the buyer can cancel the contract, obtain cover, sue to recover damages, recover the goods, obtain specific performance, or reject nonconforming goods. In this scenario, you will observe the actions taken by a customer of the fictional J.B. Used Cars after the car dealer breaches its contract.
CONCEPT REVIEW:
As with sellers and lessors, buyers and lessees also have a number of contract remedies under the Uniform Commercial Code (UCC). Like the remedies of sellers, the remedies used by buyers and lessees depend on the circumstances surrounding the breach of contract.
Read the case below and answer the questions that follow.
Imagine that Mark contracts with the fictional J.B. Used Cars to purchase a used 2009 red, automatic Toyota Camry for $14,988 through a special two-day sale. Mark pays in full for the car and is told that the car lot will deliver the Camry to Mark's house free of charge as soon as the transfer of title is cleared. However, the seller begins making excuses and fails to ever deliver the car. Thus, the seller is in breach of contract because Mark already paid for the Camry and never received his vehicle. Mark needs a new car soon, so he decides to obtain cover instead of cancelling the contract with the seller. He searches at other local car dealers and, two days after finding J.B. Used Cars in breach of contract, he finds another Camry that he is satisfied with. It is a 2009 silver Camry that costs $17,982; it is an automatic, and it has roughly the same number of miles as the Camry from J.B. Used Cars. This price is comparable to the standard Blue Book price for a 2009 Camry.
- What does it mean to obtain cover after a seller breaches a contract? Why does the buyer in this situation obtain cover?
- What are the four criteria that a buyer must meet to obtain cover? In this case, do Mark's actions appear to meet those criteria?
- What is the formula used to determine damages in cover cases? How much in damages would Mark be awarded by the courts
- in this situation?
Second Question:-
Before beginning this interactive, read LO5 and LO6. Pay attention to the special situations in which third parties are beneficiaries to warranties, and when warranties can be disclaimed. This interactive will help explain who third-party beneficiaries of warranties are and how they benefit.
CONCEPT REVIEW:
The idea of a seller's being in breach of an implied warranty raises an entirely new issue: Is the seller liable to anyone other than the buyer? This question may initially sound peculiar. After all, the seller and the buyer are bound together by contract, and if either breaches, then the breaching party is liable to the nonbreaching party. But in many scenarios, often it is not the buyer, but rather a third party that uses the product or is injured by the product. So questions arise as to when those third parties are beneficiaries to warranties.
Read the hypothetical case and answer the questions that follow.
Suppose that Howie buys a garbage disposal from a kitchen appliance outlet. He has it professionally installed by professionals from the kitchen appliance outlet, and he has a full and written warranty on the product. Howie's 16-year-old daughter, Joanna, was cleaning up after dinner one evening when the garbage disposal began to malfunction. Parts flew out of the hole in the sink, hitting Joanna in the face and causing serious injuries. She had reconstructive surgery on her face and no longer has full vision in her right eye.
For each question, select the correct answer AND provide a short explanation as to why it is the correct answer.
1. Does a "contractual relationship" exist between Joanna (the third party) and the kitchen appliance seller?
a. No, Joanna did not enter into a contract with the merchant.
b. No, Joanna cannot bring a breach of warranty suit against the seller.
c. Yes, as long as Joanna paid for at least a portion of the garbage disposal.
d. Yes, Joanna and the seller entered into an official contract.
e. Yes, the Uniform Commercial Code (UCC) recognizes that third parties automatically enter into contracts with sellers.
2. Which of the following is not a choice the states are given (under the UCC) regarding third-party beneficiaries of warranties, such as Joanna?
a. Seller's warranties extend to only the person who purchased the good and has the receipt.
b. Seller's warranties extend to the buyer's household members and guests.
c. Seller's warranties extend to any reasonable and foreseeable user.
d. Seller's warranties extend to anyone injured by the good.
e. None of the above.
3. Most states have adopted which option regarding people like Joanna, who are third-party beneficiaries of warranties?
a. Seller's warranties extend to any reasonable and foreseeable user.
b. Seller's warranties extend only to the person who purchased the good and has the receipt.
c. Seller's warranties extend to the buyer's household members and guests.
d. Most states do not acknowledge any third-party beneficiaries of warranties.
e. Seller's warranties extend to anyone injured by the good.
4. Let's suppose that Howie and Joanna live in a state that has adopted the most common guideline regarding third-party beneficiaries to warranties. Who might be covered by the warranty for the garbage disposal?
a. Only Howie's immediate family, including Joanna.
b. Only people who were stipulated as "foreseeable" users on the written contract.
c. Only those injured by the good, including Joanna.
d. No one other than the purchaser (Howie).
e. Any foreseeable user, including Howie and Joanna.
5. Suppose that Joanna was injured by the garbage disposal in 2008, but her family does not choose to bring a lawsuit against the kitchen appliance company until 2015. Can they bring a lawsuit for breach of contract in 2015?
a. No, Joanna is not a foreseeable user of the product.
b. Yes, they can bring a lawsuit whenever they want.
c. No, under the UCC they must sue within four years of the breach.
d. Yes, the lawsuit would be within the statute of limitations.
e. No Howie waived his warranty when he failed to inspect the good.