2. 3/16/2006Class 291 Class 29, Thursday, March 16 Announcements Friday526-53—make sure you develop elements tests for duress, undue influence, and misrepresentation Today’s agenda Disclaimers of warranties Recap Dodson v. Shrader Hauer v. Union State Bank of Wautoma

3. 3/16/2006Class 292 Today

4. 3/16/2006Class 293 § 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 with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.2-202 (2) Subject to subsection (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 the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof." (3) Notwithstanding subsection (2) (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all 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; andbuyer's (b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; andbuyercontract goods (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

5. 3/16/2006Class 294 2-316 (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 with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2- 202) negation or limitation is inoperative to the extent that such construction is unreasonable.2- 202

6. 3/16/2006Class 295 2-316 (2) Subject to subsection (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 the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

7. 3/16/2006Class 296 2-316 (3) Notwithstanding subsection (2) (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all 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; andbuyer's (b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; andbuyercontractgoods (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

8. 3/16/2006Class 297 Notes 4 & 5—disclaimers of express and implied warranties 2-316(1)—what if there is a representation made during negotiations that would be treated as an express warranty, but the parties later execute a writing that disclaims any representations or warranties?

9. 3/16/2006Class 298 Recap

10. 3/16/2006Class 299 Dodson v. Shrader Supreme Court of Tennessee 824 S.W.2d545 (1992)

11. 3/16/2006Class 2910 Who is suing whom? For what kind of damages? What is the subject matter of the transaction? What is the legal basis for the claim? What is the duty that P is claiming that D breached?

12. 3/16/2006Class 2911 What is the factual basis for the claim? Arguments/defenses? Who won at the trial court level? This appeal?

13. 3/16/2006Class 2912 Issue? Authorities/Rule? Application to facts in case? What policies does it further/ignore?

14. 3/16/2006Class 2913 Wheaton v. East, p.510, top: if K is prejudicial to infant, K is void; if K is beneficial to infant, K is good; if K is uncertain, K is voidable at election of infant. What is the difference between void and voidable? What gives an infant the greatest protection?

15. 3/16/2006Class 2914 What's the current approach? Any K entered into by a minor is voidable at their election. When may this election be exercised?

16. 3/16/2006Class 2915 Before 18. At 18. Within a reasonable period after 18. Or else it will be considered ratified. Also, actions taken after 18 may ratify the contract, such as making payments after 18. Upon disaffirmance, what happens?

17. 3/16/2006Class 2916 Traditional rule: restoration -------  minor--------------------------------------adult  -------full restitution Minor not liable for anything they have used or for any depreciation in value. Exceptions?

18. 3/16/2006Class 2917 Exceptions 1. Misrepresentation of age by minor. Majority approach--minor may disaffirm but is liable for anything that cannot be restored; minority approach--K can't be disaffirmed 2. Necessaries--Majority approach--minor may disaffirm K but is liable in restitution for the reasonable value of what has been "consumed" and cannot be restored. Some courts say that a contract for necessaries cannot be disaffirmed (BUT...) 3. Minor as plaintiff (cash v. credit)

19. 3/16/2006Class 2918 On remand, court must determine 1. Was there any overreaching by the adult? 2. What was the fair market value of the truck (at various points) ? 3. Did minor contribute to the depreciation of the truck by driving it after mechanic warned of problem? 4. What was the extent of the damage from the hit and run accident? What was fair market value when minor first tried to return truck?

20. 3/16/2006Class 2919 Problem 7-1 on p. 509 I am Mr. Jones. I own Jones's Used Auto Sales. I call you on the phone. I have a problem with a young man to whom I sold a car. Now he wants to cancel the deal because he's underage. What questions do you ask me?

21. 3/16/2006Class 2920 A non-exhaustive list 1. Do you know what use the vehicle was for? 2. Did you ask his age at time of contract formation? Is there something on your form? 3. Damage to the vehicle? Depreciation? 4. Young man's age now. Age at time of contract formation. 5. How did the young man pay for the vehicle? Cash? Credit? Both?

22. 3/16/2006Class 2921 What advice would you give to Mr. Jones re: future transactions?

23. 3/16/2006Class 2922 Problem Set 5 X is a minor when he enters into a contract with Y, an adult car dealer, for the purchase of a car for $4900. After contract formation, X takes possession of the car. One week later, a hit and run driver hits the car, causing $1000 of damage. X seeks to disaffirm the contract. Assuming that the disaffirmance is timely, the issue is going to be whether X is liable for anything beyond returning the car in its present damaged state to Y. Unless otherwise stated, the facts are specific to each problem and do not carry over.

24. 3/16/2006Class 2923 1.Assume this was a pure credit transaction. a.What would the result be under the traditional rule? b.What would the result be in a jurisdiction that follows the so-called New Hampshire rule set forth on p. 511? The Tennessee court calls this the “Benefit Rule.” Is there any real difference between the Benefit Rule and the “use” rule set forth on p. 511? c.What would the result be under the approach set forth by the Tennessee Supreme Court in Dodson?

25. 3/16/2006Class 2924 2.Assume this was a pure cash transaction. a.What would the result be under the traditional rule? b.What would the result be under the New Hampshire rule? c.What would the result be based on Dodson?

26. 3/16/2006Class 2925 3.Assume that a downpayment of $500 has been paid. a.What would the result be under the traditional rule? b.What would the result be under the New Hampshire rule? c.What would the result be based on Dodson?

27. 3/16/2006Class 2926 4.Assume that the court finds the car to be a necessary. A few courts hold that a contract for necessaries is enforceable. The majority allows disaffirmance but holds the minor responsible for the reasonable value of what has been consumed/used (that which cannot be restored to the other party). What are the policy rationales behind both? Which rule makes more sense?

28. 3/16/2006Class 2927 5.Assume that X misrepresented his age and Y reasonably relied on this misrepresentation. The issue then is the extent of X’s liability? a.Under the majority approach, is X liable? For what? b.Under the minority approach, is X liable? For what? c.What are the policy rationales behind the two approaches?

29. 3/16/2006Class 2928 6.Do your answers to 4 and 5 depend at all on whether it was a pure credit transaction, pure cash transaction, or mixed credit/cash?

30. 3/16/2006Class 2929 Hauer v. Union State Bank of Wautoma Court of Appeals of Wisconsin 912 Wis. 2d 576, 532 N.W.2d 456 (1995)

31. 3/16/2006Class 2930 Who is suing whom? For what kind of damages? What is the subject matter of the transaction? What is the legal basis for the claim? What is the duty that P is claiming that D breached?

32. 3/16/2006Class 2931 What is the factual basis for the claim? Arguments/defenses? Who won at the trial court level? This appeal?

33. 3/16/2006Class 2932 Issue? Authorities/Rule? Application to facts in case? What policies does it further/ignore?

34. 3/16/2006Class 2933 Is mental incapacity just a defense to enforcement of a contract?

35. 3/16/2006Class 2934 Aside from the status that is protected (age versus mental capacity), what is the major difference between the two doctrines? What justifies this difference?

36. 3/16/2006Class 2935 Restatement 15 (1)(a) cognitive (1)(b) volitional what are the key differences between the requirements to establish mental incapacity under (1)(a) versus (1)(b)?

37. 3/16/2006Class 2936 End of Class Friday526-53—make sure you develop elements tests for duress, undue influence, and misrepresentation The Essay Midterm and a model answer are posted on our course web page. It does not include the point breakdown. I will provide this information later.