UCC Model Essay Law School Problem
Roger buys raw red bell peppers, processes them and sells them to retailers. Roger had existing contracts with Oregon retailers to provide 1,000,000 pounds of processed peppers. Fred the Farmer agreed to sell Roger 1,000,000 pounds of unprocessed peppers at $.30 per pound, with delivery from September through November 2005. Fred and Roger signed a written contract outlining the above.
To fulfill his contract with Roger, Fred purchased pepper seeds through the seed store, Peppers Plus. he spoke with a Peppers Plus employee and explained that he needed to grow 1,000,000 pounds of peppers for an Oregon pepper processor. Ultimately, Fred purchased the "Sweet Pepper Patty" variety because, in the words of the Peppers Plus employee who assisted him, "it is the sweetest pepper you have ever eaten--hands down." One week after Fred planted the seeds, Peppers Plus sent an invoice that contained a disclaimer of "all warranties, including any implied warranties." The disclaimer was in small writing in the far lower left-hand corner of the invoice.
Fred began timely delivery of the peppers. In October, Roger asked Fred to stop delivering peppers because of a scheduling problem on the processing line. Roger explained that such delays were standard in the industry. Fred, a farmer for 20 years had never heard of this standard. Roger told Fred he did not know how long the delay would last and he should do whatever he needed to get rid of his peppers. Fred did not pick any peppers during the delay and the undelivered peppers remained in storage bins and began to rot.
Ten days later, Roger told Fred that he could start delivering peppers again. Roger asked Fred if he was going to be able to fulfill the contract, and Fred said yes. At the end of November, Fred had only delivered 700,000 pounds of peppers to Roger. The retailers that received the 700,000 pounds of peppers returned them to Roger because they smelled and were sour.
To meet his contractual obligations to these retailers, Roger purchased replacement peppers on the open market at a price much higher than $.30 per pound. However, because of the changed market conditions,Roger was able to negotiate a significantly higher price from the retailers for the replacement peppers.
Applying the Uniform Commercial Code, discuss the following:
45% UCC Essay Bar Exam 1. What are Roger's claims against Fred and Fred's defenses, if any?
20% UCC Essay Bar Exam 2. If Roger prevails, what are his damages?
35% UCC Essay Bar Exam 3. What are Fred's claims against Peppers Plus and Peppers Plus's defenses, if any?
I. Approaching the UCC Essay Bar Exam Question
Helpful for me is a diagram about the the nature of the relationships in the question and a list of the miscellaneous "non-remedy" legal issues which arise out of statements in the first few paragraphs.
A. We have: Peppers Plus--Fred--Roger--Retailers
We have: k between F and R for 1,000,000 pounds at $.30 per pound, delivery from 9 to 11/05. We also have a k between PP and F, though the terms are not given.
B. Legally Significant Pre-Breach/Pre-Remedy Facts
1. Written contract (therefore no SoF issue). 2-201 2. We have retailers (therefore probably merchants, though farmers are not merchants in all jurisdictions under UCC). 2-104 3. We have PP's employee knowing F's needs, and that may bring in a 2-315 warranty. 4. We have PP's employee telling F that the peppers are the sweetest ever tasted, which implicates express warranty or "puffery" under 2-313. 5. We have a contract with a disclaimer, which is discussed in 2-316. 6. We may have a conspicuousness problem with the placement or language of the disclaimer. 7. We know that every contract for new goods comes with an implied warranty, 2-314, which touches six areas. 8. When the case talks about a "standard" in par. 3, this sounds like a usage of trade, which is spoken of in revised 1-303.
II. Answering the UCC Essay Bar Exam Question
I combine the legally significant facts, with my outline of important questions with the questions posed at the bottom of the exam question, and proceed as follows:
1. What are Roger's claims against Fred and Fred's defenses, if any?
R's Claims. Always think "breach of contract" and "breach of warranty," and then "backfill" with legal and factual principles. Here Roger has a claim against Fred for breach of contract, because Fred didn't deliver 1,000,000 pounds of peppers on time. You have to go through the whole list of questions then on breach of contract. (1) Is this an Article 2 transaction? Yes. Why? Goods--2-102, 2-105. (2) Was there a contract? Yes. Why? Look at 2-204(1) ("any manner sufficient to show agreement") and 2-206(1) ("inviting acceptance in any manner"). Though the Code relaxes the CL requirements for quantity at times, delivery and even price, it still requires mutual assent. That is here. We have no statute of frauds problem.
R will also claim that F breached the implied warranty of merchantability. 2-314. Here, Fred doesn't make express warranties to Roger, so we have to look to 2-314 for R's cause of action. There are six characteristics which merchantable goods MUST have. Key to these six are two or three phrases: (a) "fair average quality," and (b) "fit for ordinary purpose", and (3) "run...of even kind, quality and quantity. Cmt. 9 is crucial in defining "fair average quality," as "centering around the middle belt of quality." R will claim two things: that the quality of the goods (smelly, sour) violates 2-314 and that F didn't disclaim that warranty.
F's Defenses. F can claim in defense that R repudiated the k. The concept of repudiation is discussed in 2-610. Repudiation is defined at 2-610(2). Emphasize that it is language a reasonable person would understand to suggest the other party will not perform. Emphasize that it must substantially impair the value of the k (Cmt. 3). Emphasize facts here relating to R's action. Emphasize no u/t--language below
R's Response. Note that the question doesn't ask you for this, but the facts of the case are so rich in it that you need to be ready to give a few things here. R will say that it is a u/t that he could ask for delay. A u/t is something with a "regularity of observance in a place, vocation, or trade." R will also say that even if he anticipatorily repudiated (2-610), he retracted the repudiation (2-611). Indeed, F never asked for adequate assurances (2-609), so he cannot rely on R's action as a repudiation. Note what 2-611 requires. F can respond yet further to R, that he did materially change position once he received R's repudiation. You should probably stop here.
2. If Roger prevails, what are his damages?
You should have something about the theory of damages in Article 2 and then move to the specific code provisions that apply.
On the theory of damages..they are compensatory, not punitive, meant to place the non-breaching party in the position it would have been in without breach. Thus, these are contract-type damages. These damages must be proved with reasonable certainly and must be caused by the breach.
On the particular damages, R will seek what is called "cover" damages. That is, he was required as a result of F's breach, on his theory, to go out and buy more peppers. Cover is discussed in 2-712. The measure of damages is what you would expect--cover price minus contract price, less expenses saved as a result of the breach. Here the facts are tricky, because R passed the increased cost off to customers. Let me state for you the issue by using some simple numbers:
R contracted for peppers at $.30 per pound. Let us presume he sells them for $.60 per pound. But now, let us assume that he had to pay $.50 per pound for them, but got $.90 in resale. Under the original contract he would have "made" $.30 per pound. Under the "new" contract he would make $.40 per pound. If we did simple calculations based on the literal language of the code, R ought to make $.20 per pound (difference between cover charges and original contract price). But he made an additional $.10 per pound by covering. Should he be entitled to that extra amount? Commentators and courts differ. Some say that he ought to be able to make whatever the market will bear. Some say that he should subtract the increased profit as "expenses saved incidental to seller's breach." He also gets incidental/consequential damages under 2-715.
3. What are Fred's claims against Peppers Plus and Peppers Plus' defenses, if any?
F's claims relate exclusively to the breach of warranty because PP apparently delivered the seeds to F in a timely manner (i.e., there is nothing in the fact pattern to posit breach of contract), while PP's defenses have to do with whether they properly disclaimed warranties.
I think it best for F just to march through the three warranties and claim that they all were breached. With respect to an express warranty, F would claim that PP's words "sweetest peppers ever eaten" created an express warranty by affirmation. Note the important language of "basis of the bargain" which replaces the "reliance" language of the Uniform Sales Act of 1906. Obviously, they weren't so sweet.
F would claim also that there was an implied warranty of merchantability in the sale. He would also claim a warranty of fitness for a particular purpose (2-315) because he precisely informed the PP representative precisely what he needed, and the peppers ended up smelling and being sour. He would march through the requirements of 2-314 to argue that the goods violated the implied warranty of merchantability (see treatment above).
In addition F will argue that the disclaimer sent by PP wouldn't be effective to disclaim the warranties. It came one week after the contract. Even though there is no statutory language requiring a disclaimer to go to the basis of the bargain, courts have implied it, and such a late disclaimer wouldn't pass muster. Second, such a disclaimer must be conspicuous. Check out the definition of conspicuous in revised 1-201.
PP will argue in turn that the statement regarding quality was mere puffery. Check out 2-313 and Cmt. 10, second paragraph. It will argue, second, that the disclaimers sufficed.
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