Official Comments in Article 8.2:

Copyright by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. Reprinted with permission of the Permanent Editorial Board of the Uniform Commercial Code.

The Revision of Uniform Commercial Commentary Article 1 — General Provisions, drafted by the National Conference of Commissioners on Uniform State Laws of The American Law Institute, and approved by the American Bar Association on February 12, 2002, made conforming amendments to other articles of the UCC and the commentary thereto.

PART 1. Short Title, General Construction and Subject Matter.

§ 8.2-101. Short title.

This title shall be known and may be cited as Uniform Commercial Code — Sales.

History. 1964, c. 219.

Law Review.

For article, “ ‘Good Faith’ in General Contract Law and the Sales Provisions of the Uniform Commercial Code,” see 54 Va. L. Rev. 195 (1968).

For survey of Virginia commercial law for the year 1975-1976, see 62 Va. L. Rev. 1375 (1976).

For 1987 survey of Virginia commercial law, see 21 U. Rich. L. Rev. 693 (1987).

For an article, ‘Uniformity, Choice of Law and Software Sales,’ see 8 Geo. Mason L. Rev. 261 (1999).

For essay, “Proposed Legislation: A (Second) Modest Proposal to Protect Virginia Consumers Against Defective Products,” see 43 U. Rich. L. Rev. 211 (2008).

Research References.

Checks, Drafts and Notes (Matthew Bender). Weisblatt.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 24 Contract Actions. § 24.16 Contracts for the Sale of Goods: UCC Article 8.2. Friend.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 2, 19.

CIRCUIT COURT OPINIONS

Air conditioning unit installed in house was “good.” —

Home buyers sufficiently alleged §§ 8.2-314 and 8.2-315 claims against a builder as an air conditioning unit was a “good” under §§ 8.2-101 and 8.2-105 , even though it had been installed in a house; the Uniform Commercial Code Article 2 warranties extended down the chain of distribution under § 8.2-318 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

OFFICIAL COMMENT

This Article is a complete revision and modernization of the Uniform Sales Act which was promulgated by the National Conference of Commissioners on Uniform State Laws in 1906 and has been adopted in 34 states and Alaska, the District of Columbia and Hawaii.

The coverage of the present Article is much more extensive than that of the old Sales Act and extends to the various bodies of case law which have been developed both outside of and under the latter.

The arrangement of the present Article is in terms of contract for sale and the various steps of its performance. The legal consequences are stated as following directly from the contract and action taken under it without resorting to the idea of when property or title passed or was to pass as being the determining factor. The purpose is to avoid making practical issues between practical men turn upon the location of an intangible something, the passing of which no man can prove by evidence and to substitute for such abstractions proof of words and actions of a tangible character.

VIRGINIA COMMENT

Since Virginia never adopted the Uniform Sales Act, there is no comprehensive statutory treatment of the law of sales, which would be replaced by this title. At the most, there are about ten statutory sections and rules of court in Virginia that are related to this title.

Virginia sales law is to be found in some 214 sales cases decided by the supreme court of appeals between 1799 and the present. Title 8.2 provides systematization of this case law. The UCC makes only a few changes in sales law as it has been generally understood in Virginia.

§ 8.2-102. Scope; certain security and other transactions excluded from this title.

Unless the context otherwise requires, this title applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this title impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

History. 1964, c. 219.

Law Review.

For 1991 survey of commercial law, see 25 U. Rich. L. Rev. 681 (1991).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 2, 3.

CASE NOTES

Where contract contemplated both services and goods, since agreement was dominated by language designating a sale of goods, the agreement at issue contained the UCC implied sales warranties. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F. Supp. 187, 1997 U.S. Dist. LEXIS 17381 (W.D. Va. 1997).

CIRCUIT COURT OPINIONS

Warranty of merchantability does not extend to new home purchases. —

Provisions of § 8.2-318 do not extend the warranty of merchantability to a buyer of a new home, as a home buyer does not purchase “goods”; Title 8.2 of the Uniform Commercial Code applies only to transactions in goods, under § 8.2-102 , and only items that are movable at the time of identification to the contract are goods, under § 8.2-105 . Glass v. Trafalgar House Prop., Inc., 58 Va. Cir. 437, 2002 Va. Cir. LEXIS 160 (Loudoun County Apr. 15, 2002).

Modular home built in factory as a “good.” —

Modular home built in a factory and moved to a lot for installation is a “good” for purposes of subdivision 1 of § 8.2-105 of the Uniform Commercial Code. Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

Installation services were not “goods.” —

Home buyers did not sufficiently allege §§ 8.2-314 and 8.2-315 claims against an installer of an air conditioning unit as the buyers alleged that the installer “installed” the unit, and Uniform Commercial Code Article 2 did not apply to services under § 8.2-102 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

Contract for purchase of motor vehicle for personal use. —

Four-year statute of limitations of § 8.2-725 applied to assignee’s breach of contract claim against a borrower who purchased a motor vehicle for the purchaser’s personal use. A motor vehicle was a good under § 8.2-105 , and the assignee’s right to sue arose from contract constituting a transaction in goods under § 8.2-102 . Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 2008 Va. Cir. LEXIS 83 (Fairfax County June 20, 2008).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 75, Uniform Sales Act.

Changes: Section 75 has been rephrased.

Purposes of changes and new matter: To make it clear that:

The Article leaves substantially unaffected the law relating to purchase money security such as conditional sale or chattel mortgage though it regulates the general sales aspects of such transactions. “Security transaction” is used in the same sense as in the Article on Secured Transactions (Article 9).

Cross reference:

Article 9.

Definitional cross references:

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Present sale”. Section 2-106.

“Sale”. Section 2-106.

§ 8.2-103. Definitions and index of definitions.

  1. In this title unless the context otherwise requires:
    1. “Buyer” means a person who buys or contracts to buy goods.
    2. “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
    3. “Receipt” of goods means taking physical possession of them.
    4. “Seller” means a person who sells or contracts to sell goods.
  2. Other definitions applying to this title or to specified parts thereof, and the sections in which they appear are:“Acceptance.” § 8.2-606 .“Banker’s credit.” § 8.2-325 .“Between merchants.” § 8.2-104 .“Cancellation.” § 8.2-106 (4) .“Commercial unit.” § 8.2-105 .“Confirmed credit.” § 8.2-325 .“Conforming to contract.” § 8.2-106 .“Contract for sale.” § 8.2-106 .“Cover.” § 8.2-712 .“Entrusting.” § 8.2-403 .“Financing agency.” § 8.2-104 .“Future goods.” § 8.2-105 .“Goods.” § 8.2-105.“Identification.” § 8.2-501 .“Installment contract.” § 8.2-612 .“Letter of credit.” § 8.2-325.“Lot.” § 8.2-105.“Merchant.” § 8.2-104.“Overseas.” § 8.2-323 .“Person in position of seller.” § 8.2-707 .“Present sale.” § 8.2-106.“Sale.” § 8.2-106.“Sale on approval.” § 8.2-326 .“Sale or return.” § 8.2-326 .“Termination.” § 8.2-106.
  3. The following definitions in other titles apply to this title:“Check.” § 8.3A-104 .“Consignee.” § 8.7-102 .“Consignor.” § 8.7-102 .“Consumer goods.” § 8.9A-102 .“Control.” § 8.7-106 .“Dishonor.” § 8.3A-502 .“Draft.” § 8.3A-104 .
  4. In addition Title 8.1A contains general definitions and principles of construction and interpretation applicable throughout this title.

History. 1964, c. 219; 2000, c. 1007; 2003, c. 353; 2004, c. 200.

The 2000 amendments.

The 2000 amendment by c. 1007, effective July 1, 2001, in subdivision (3), substituted “§ 8.9A-102 ” for “8.9-109” following “Consumer goods”; and substituted “§ 8.3-502” for “8.3-507” following “Dishonor.”

The 2003 amendments.

The 2003 amendment by c. 353 substituted “8.1A” for “8.1” in subdivision 4.

The 2004 amendments.

The 2004 amendment by c. 200 inserted “‘Control.’ § 8.7-106 ” in subdivision (3).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 4, 8, 12, 15, 20 — 26, 28, 29, 32, 33.

CASE NOTES

“Buyer.” —

Article 2 of the UCC applies to the sale of goods to a buyer. A buyer is a person who buys or contracts to buy goods; a buyer may or may not be a merchant. Sprague & Henwood v. Johnson, 606 F. Supp. 1564, 1985 U.S. Dist. LEXIS 20385 (W.D. Va. 1985).

Distributor entitled to credit for supplier’s inventory as “seller.” —

A distributor of petroleum products was a “seller” where, following the termination of its distributor agreement with an oil company, the distributor had the right under the agreement to have the value of the oil company’s products in its inventory applied against any amount by which it was indebted to the oil company; the distributor had title to its inventory of the oil company products and a contractual right to exchange that inventory for valuable consideration, that is, a credit against its debt to the oil company. Although somewhat atypical, this arrangement was the very essence of a sales contract, in which no doubt existed that the distributor was the seller and the oil company the buyer. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

Hospital considered as “seller.” —

Where a patient filed breach of warranty claims against a manufacturer and a hospital, the action, which was removed based on diversity jurisdiction, was remanded to the state court because the manufacturer failed to demonstrate that there was no reasonable possibility that a state court could find that the non-diverse hospital, which sold an allegedly defective pulse generator to the patient, was liable for breach of the implied warranty of merchantability set forth in § 8.2-314 ; the merchant’s contention that the hospital was fraudulently joined was rejected because (1) a state court could find that the hospital was a seller; and (2) evidence showing that the hospital was engaged in the continued practice of selling spinal cord stimulators to patients supported the allegation that the hospital was a merchant under § 8.2-104 . Sanders v. Medtronic, Inc., No. 4:06cv57, 2006 U.S. Dist. LEXIS 45516 (E.D. Va. June 26, 2006).

The implied warranty of fitness for a particular purpose provided under § 8.2-315 applies to sales only, and not to bailments or chattel lease transactions. Leake v. Meredith, 221 Va. 14 , 267 S.E.2d 93, 1980 Va. LEXIS 209 (1980).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1): Section 76, Uniform Sales Act.

Changes:

The definitions of “buyer” and “seller” have been slightly rephrased, the reference in Section 76 of the prior Act to “any legal successor in interest of such person” being omitted. The definition of “receipt” is new.

Purposes of changes and new matter:

  1. The phrase “any legal successor in interest of such person” has been eliminated since Section 2-210 of this Article, which limits some types of delegation of performance on assignment of a sales contract, makes it clear that not every such successor can be safely included in the definition. In every ordinary case, however, such successors are as of course included.
  2. “Receipt” must be distinguished from delivery particularly in regard to the problems arising out of shipment of goods, whether or not the contract calls for making delivery by way of documents of title, since the seller may frequently fulfill his obligations to “deliver” even though the buyer may never “receive” the goods. Delivery with respect to documents of title is defined in Article 1 and requires transfer of physical delivery. Otherwise the many divergent incidents of delivery are handled incident by incident.

Cross references:

Point 1: See Section 2-210 and Comment thereon.

Point 2: Section 1-201 .

Definitional cross reference:

“Person”. Section 1-201 .

§ 8.2-104. Definitions: “Merchant”; “financing agency”; “between merchants.”

  1. “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
  2. “Financing agency” means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller’s draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. “Financing agency” includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (§ 8.2-707 ).
  3. “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 inserted “or are associated with” in the first sentence of subdivision (2).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 5.

CASE NOTES

“Merchant” includes dairy farmers. —

Dairy farm was obligated to reimburse the dairy cooperative for damages it paid as a result of the farm’s breach of implied warranty of merchantability when the farm delivered adulterated milk to a dairy processor who had to issue a recall and close its plant. Md. & Va. Milk Producers Coop. Ass'n v. Crowell Farms Inc., 102 Fed. Appx. 267, 2004 U.S. App. LEXIS 11343 (4th Cir. 2004).

Hospital considered as “merchant.” —

Where a patient filed breach of warranty claims against a manufacturer and a hospital, the action, which was removed based on diversity jurisdiction, was remanded to the state court because the manufacturer failed to demonstrate that there was no reasonable possibility that a state court could find that the non-diverse hospital, which sold an allegedly defective pulse generator to the patient, was liable for breach of the implied warranty of merchantability set forth in § 8.2-314 ; the merchant’s contention that the hospital was fraudulently joined was rejected because (1) a state court could find that the hospital was a seller as defined in § 8.2-103 ; and (2) evidence showing that the hospital was engaged in the continued practice of selling spinal cord stimulators to patients supported the allegation that the hospital was a merchant. Sanders v. Medtronic, Inc., No. 4:06cv57, 2006 U.S. Dist. LEXIS 45516 (E.D. Va. June 26, 2006).

“Buyer.” —

Article 2 of the UCC applies to the sale of goods to a buyer. A buyer is a person who buys or contracts to buy goods; a buyer may or may not be a merchant. Sprague & Henwood v. Johnson, 606 F. Supp. 1564, 1985 U.S. Dist. LEXIS 20385 (W.D. Va. 1985).

CIRCUIT COURT OPINIONS

Includes manufacturer and distributor. —

Both manufacturer of patented synthetic stucco exterior wall cladding product, and distributor to builders, were “merchants” under subsection 1. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: None. But see Sections 15 (2), (5), 16(c), 45(2) and 71, Uniform Sales Act, and Sections 35 and 37, Uniform Bills of Lading Act for examples of the policy expressly provided for in this Article.

Purposes:

  1. This Article assumes that transaction between professionals in a given field require special and clear rules which may not apply to a casual or inexperienced seller or buyer. It thus adopts a policy of expressly stating rules applicable “between merchants” and “as against a merchant” wherever they are needed instead of making them depend upon the circumstances of each case as in the statutes cited above. This section lays the foundation of this policy by defining those who are to be regarded as professionals or “merchants” and by stating when a transaction is deemed to be “between merchants”.
  2. The term “merchant” as defined here roots in the “law merchant” concept of a professional in business. The professional status under the definition may be based upon specialized knowledge as to the goods, specialized knowledge as to business practices, or specialized knowledge as to both and which kind of specialized knowledge may be sufficient to establish the merchant status is indicated by the nature of the provisions.
  3. The “or to whom such knowledge or skill may be attributed by his employment of an agent or broker . . . ” clause of the definition of merchant means that even persons such as universities, for example, can come within the definition of merchant if they have regular purchasing departments or business personnel who are familiar with business practices and who are equipped to take any action required.

The special provisions as to merchants appear only in this Article and they are of three kinds. Sections 2-201(2), 2-205, 2-207 and 2-209 dealing with the statute of frauds, firm offers, confirmatory memoranda and modification rest on normal business practices which are or ought to be typical of and familiar to any person in business. For purposes of these sections almost every person in business would, therefore, be deemed to be a “merchant” under the language “who . . . by his occupation holds himself out as having knowledge or skill peculiar to the practices . . . involved in the transaction . . .” since the practices involved in the transaction are non-specialized business practices such as answering mail. In this type of provision, banks or even universities, for example, well may be “merchants.” But even these sections only apply to a merchant in his mercantile capacity; a lawyer or bank president buying fishing tackle for his own use is not a merchant.

On the other hand, in Section 2-314 on the warranty of merchantability, such warranty is implied only “if the seller is a merchant with respect to goods of that kind.” Obviously this qualification restricts the implied warranty to a much smaller group than everyone who is engaged in business and requires a professional status as to particular kinds of goods. The exception in Section 2-402(2) for retention of possession by a merchant-seller falls in the same class; as does Section 2-403(2) on entrusting of possession to a merchant “who deals in goods of that kind”.

A third group of sections includes 2-103(1) (b), which provides that in the case of a merchant “good faith” includes observance of reasonable commercial standards of fair dealing in the trade; 2-327(1) (c), 2-603 and 2-605, dealing with responsibilities of merchant buyers to follow seller’s instructions, etc.; 2-509 on risk of loss, and 2-609 on adequate assurance of performance. This group of sections applies to persons who are merchants under either the “practices” or the “goods” aspect of the definition of merchant.

Cross references:

Point 1: See Sections 1-102 and 1-203 .

Point 2: See Sections 2-314, 2-315 and 2-320 to 2-325, of this Article, and Article 9.

Definitional cross references:

“Bank”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Document of title”. Section 1-201 .

“Draft”. Section 3-104.

“Goods”. Section 2-105.

“Person”. Section 1-201 .

“Purchase”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

By imposing different standards upon merchants than upon casual buyers or sellers in specified situations, the UCC changes the law of Virginia.

§ 8.2-105. Definitions: Transferability; “goods”; “future” goods; “lot”; “commercial unit.”

  1. “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Title 8.8A) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (§ 8.2-107 ).
  2. Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.
  3. There may be a sale of a part interest in existing identified goods.
  4. An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller’s interest in the bulk be sold to the buyer who then becomes an owner in common.
  5. “Lot” means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
  6. “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

History. 1964, c. 219.

Law Review.

For survey of developments in Virginia commercial law for the year 1973-1974, see 60 Va. L. Rev. 1475 (1974).

For a note “Let the Buyer Beware: The Seventh Circuit’s Approach to Accept-or-Return Offers,” see 55 Wash. & Lee L. Rev. 1287 (1998).

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assignments, § 9; 3C M.J. Commercial Law, § 99.

CASE NOTES

No distinction made between new and used goods. —

The Code makes absolutely no distinction between new and used goods when defining “goods” in this section. If the drafters of the Code had intended for this particular section to apply only to new goods, then it would have been simple to have so stated; however, this was not done. In the absence of express language to the contrary, in the area of implied warranties no distinction is made between new and used goods. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

A sale of land at auction is not controlled by § 8.2-328 (2) , since this title applies only to transactions relating to “goods.” Hoffman v. Horton, 212 Va. 565 , 186 S.E.2d 79, 1972 Va. LEXIS 209 (1972).

CIRCUIT COURT OPINIONS

Intended beneficiary. —

Window company’s demurrer was overruled because a property owner sufficiently carried its burden, for purposes of demurrer, of showing that it was an intended beneficiary of the contracts between the company and a subcontractor; the owner provided a limited warranty between the subcontractor and company that stated the warranty applied to the original homeowner and identified the owner. 139 Riverview, LLC v. Quaker Window Prods., 90 Va. Cir. 74, 2015 Va. Cir. LEXIS 45 (Norfolk Mar. 2, 2015).

Contract to pave a parking lot was for “goods.” —

Oral agreement whereby a paving contractor was to pave a parking lot at a moving company’s place of business was to be construed under the Uniform Commercial Code as the contract contemplated the delivery and installation of goods, paving, as in essence the moving company sought to buy paving material and the labor aspect, while not insignificant, was incidental to the process. Harrison's Moving & Storage Co. v. Princess Anne Paving Corp., 60 Va. Cir. 303, 2002 Va. Cir. LEXIS 266 (Portsmouth Nov. 4, 2002).

Air conditioning unit installed in house was “good.” —

Home buyers sufficiently alleged §§ 8.2-314 and 8.2-315 claims against a builder as an air conditioning unit was a “good” under §§ 8.2-101 and 8.2-105 , even though it had been installed in a house; the Uniform Commercial Code Article 2 warranties extended down the chain of distribution under § 8.2-318 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

Wall cladding product and application is a “good.” —

Synthetic stucco product and its application as exterior wall cladding, sold under a patent, was a subsection (1) “good,” not a mere intangible concept, and thus carried a manufacturer’s warranty applicable to its direct purchaser. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

Modular home built in factory. —

Modular home built in a factory and moved to a lot for installation is a “good” for purposes of subdivision 1 of § 8.2-105 of the Uniform Commercial Code. Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

Motor vehicles fall within the definition of goods. —

Motor vehicles fall within the Uniform Commercial Code’s definition of a good, § 8.2-105 , even if the vehicle is acquired for personal use. Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 2008 Va. Cir. LEXIS 83 (Fairfax County June 20, 2008).

Four-year statute of limitations of § 8.2-725 applied to assignee’s breach of contract claim against a borrower who purchased a motor vehicle for the borrower’s personal use. A motor vehicle was a good under § 8.2-105 , and the assignee’s right to sue arose from contract constituting a transaction in goods under § 8.2-102 . Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 2008 Va. Cir. LEXIS 83 (Fairfax County June 20, 2008).

Warranty of merchantability does not extend to new home purchases. —

Provisions of § 8.2-318 do not extend the warranty of merchantability to a buyer of a new home, as a home buyer does not purchase “goods”; Title 8.2 of the Uniform Commercial Code applies only to transactions in goods, under § 8.2-102 , and only items that are movable at the time of identification to the contract are goods, under § 8.2-105 . Glass v. Trafalgar House Prop., Inc., 58 Va. Cir. 437, 2002 Va. Cir. LEXIS 160 (Loudoun County Apr. 15, 2002).

Action barred by statute of limitation. —

Pleas in bar to implied warranty claims were sustained because the company’s suit was not filed until almost eight years after the parties entered into the contracts; neither the general contractor nor the subcontractor were merchants under the Uniform Commercial Code, and to the extent that any other warranty claim against them was made, such claims were barred by the five-year statute of limitations for written contract and the three-year statute of limitations for an unwritten contract. E. Va. Bank Shares, Inc. v. PPI Dissolution Co., 100 Va. Cir. 472, 2013 Va. Cir. LEXIS 225 (Essex County Apr. 15, 2013).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsections (1), (2), (3) and (4)—Sections 5, 6 and 76, Uniform Sales Act; Subsections (5) and (6)—none.

Changes: Rewritten.

Purposes of changes and new matter:

  1. Subsection (1) on “goods”: The phraseology of the prior uniform statutory provision has been changed so that:
  2. References to the fact that a contract for sale can extend to future or contingent goods and that ownership in common follows the sale of a part interest have been omitted here as obvious without need for expression; hence no inference to negate these principles should be drawn from their omission.
  3. Subsection (4) does not touch the question of how far an appropriation of a bulk of fungible goods may or may not satisfy the contract for sale.
  4. Subsections (5) and (6) on “lot” and “commercial unit” are introduced to aid in the phrasing of later sections.
  5. The question of when an identification of goods takes place is determined by the provisions of Section 2-501 and all that this section says is what kinds of goods may be the subject of a sale.

The definition of goods is based on the concept of movability and the term “chattels personal” is not used. It is not intended to deal with things which are not fairly identifiable as movables before the contract is performed.

Growing crops are included within the definition of goods since they are frequently intended for sale. The concept of “industrial” growing crops has been abandoned, for under modern practices fruit, perennial hay, nursery stock and the like must be brought within the scope of this Article. The young of animals are also included expressly in this definition since they, too, are frequently intended for sale and may be contracted for before birth. The period of gestation of domestic animals is such that the provisions of the section on identification can apply as in the case of crops to be planted. The reason of this definition also leads to the inclusion of a wool crop or the like as “goods” subject to identification under this Article.

The exclusion of “money in which the price is to be paid” from the definition of goods does not mean that foreign currency which is included in the definition of money may not be the subject matter of a sales transaction. Goods is intended to cover the sale of money when money is being treated as a commodity but not to include it when money is the medium of payment.

As to contracts to sell timber, minerals, or structures to be removed from the land Section 2-107(1) (Goods to be severed from realty: recording) controls.

The use of the word “fixtures” is avoided in view of the diversity of definitions of that term. This Article in including within its scope “things attached to realty” adds the further test that they must be capable of severance without material harm thereto. As between the parties any identified things which fall within that definition become “goods” upon the making of the contract for sale.

“Investment securities” are expressly excluded from the coverage of this Article. It is not intended by this exclusion, however, to prevent the application of a particular section of this Article by analogy to securities (as was done with the Original Sales Act in Agar v. Orda, 264 N.Y. 248, 190 N.E. 479, 99 A.L.R. 269 (1934)) when the reason of that section makes such application sensible and the situation involved is not covered by the Article of this Act dealing specifically with such securities (Article 8).

Point 1: Sections 2-107, 2-201, 2-501 and Article 8.

Point 5: Section 2-501.

See also Section 1-201 .

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Fungible”. Section 1-201 .

“Money”. Section 1-201 .

“Present sale”. Section 2-106.

“Sale”. Section 2-106.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Since Virginia never adopted the Uniform Sales Act, there has been little reason to decide whether a particular sale constitutes a sale of goods or a sale of something else. This decision is important under the UCC. For example, the narrow definition of goods in § 8.2-105(1) excludes actions by buyers or sellers for breach of contract to sell investment securities, Lynch v. Highfield, 146 Va. 488 , 499-500, 131 S.E. 810 (1926), choses in action, Hughes v. Burwell, 113 Va. 598 , 75 S.E. 230 (1912) or a business, Pinsky v. Kleinman, 198 Va. 360 , 94 S.E.2d 267 (1956), from the remedies provided by Title 8.2.

§ 8.2-106. Definitions: “Contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming” to contract; “termination”; “cancellation.”

  1. In this title unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (§ 8.2-401 ). A “present sale” means a sale which is accomplished by the making of the contract.
  2. Goods or conduct including any part of a performance are “conforming” or conform to the contract when they are in accordance with the obligations under the contract.
  3. “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On “termination” all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.
  4. “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

History. 1964, c. 219.

Law Review.

For 1991 survey of commercial law, see 25 U. Rich. L. Rev. 681 (1991).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 4, 8, 18, 19, 22, 26, 32.

CASE NOTES

Constructive delivery of portions of a larger mass. —

In cases where portions of a larger mass, liquid or solid, are sold, and where the portion sold must be weighed or measured (which, of necessity, includes the idea of separating them from the general mass), it may be said that the identity and individuality of the part sold must be ascertained by actual separation from its kindred residue, before the sale will be complete to pass the property; or, in other words, before there can be a constructive delivery. City of Richmond v. Petroleum Marketers, Inc., 221 Va. 372 , 269 S.E.2d 389, 1980 Va. LEXIS 255 (1980).

Continuation of security interest after authorized sale. —

An electrical contractor’s creditor’s security interest in electrical supplies to be installed in a school under construction would not continue after disposition of the goods to the school’s general contractor where, under the terms of the contract between the general contractor and the electrical contractor, there was an authorized sale as defined by this section within the contemplation of the terms of the security agreement. Graves Constr. Co. v. Rockingham Nat'l Bank, 220 Va. 844 , 263 S.E.2d 408, 1980 Va. LEXIS 175 (1980).

“Cancellation” of a plea agreement. —

In cancelling defendant’s plea agreement, the Government retained its “remedy for breach” under the agreement, pursuant to the U.C.C. [see subsections 3 and 4 of this section] the use of the statements defendant had given pursuant to the agreement. United States v. Scruggs, 356 F.3d 539, 2004 U.S. App. LEXIS 1032 (4th Cir.), cert. denied, 541 U.S. 1079, 124 S. Ct. 2429, 158 L. Ed. 2d 993, 2004 U.S. LEXIS 3952 (2004), .

Receipt of commission is not a sale of goods. —

A sale of goods under Virginia law actually required title to pass from the seller to the buyer; the fact that a distributor made a commission on goods that were sold by the deceased did not make the distributor the seller. Wachovia Bank, N.A., Adm'r of the Estate of Susan Hale Young v. Bourn, No. 7:02CV00773, 2003 U.S. Dist. LEXIS 519 (W.D. Va. Jan. 7, 2003).

Summary judgment denied. —

Where a plaintiff moved for summary judgment as to defendant’s breach of contract counterclaim, a genuine dispute of material fact precluded summary judgment; the written contract between the parties consisted of a series of terse purchase orders and invoices, and neither the defendant’s purchase orders nor the plaintiff’s invoices made any reference to contaminants in the pallets, much less mention insect infestation. Grottoes Pallet Co. v. Graham Packaging Plastic Prods., Inc., No. 5:15-cv-00017, 2016 U.S. Dist. LEXIS 1459 (W.D. Va. Jan. 6, 2016).

CIRCUIT COURT OPINIONS

Intended beneficiary. —

Window company’s demurrer was overruled because a property owner sufficiently carried its burden, for purposes of demurrer, of showing that it was an intended beneficiary of the contracts between the company and a subcontractor; the owner provided a limited warranty between the subcontractor and company that stated the warranty applied to the original homeowner and identified the owner. 139 Riverview, LLC v. Quaker Window Prods., 90 Va. Cir. 74, 2015 Va. Cir. LEXIS 45 (Norfolk Mar. 2, 2015).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1)—Section 1 (1) and (2), Uniform Sales Act; Subsection (2)—none, but subsection generally continues policy of Sections 11, 44 and 69, Uniform Sales Act; Subsections (3) and (4)—none.

Changes: Completely rewritten.

Purposes of changes and new matter:

  1. Subsection (1): “Contractual for sale” is used as a general concept throughout this Article, but the rights of the parties do not vary according to whether the transaction is a present sale or a contract to sell unless the Article expressly so provides.
  2. Subsection (2): It is in general intended to continue the policy of requiring exact performance by the seller of his obligations as a condition to his right to require acceptance. However, the seller is in part safeguarded against surprise as a result of sudden technicality on the buyer’s part by the provisions of Section 2-508 on seller’s cure of improper tender or delivery. Moreover usage of trade frequently permits commercial leeways in performance and the language of the agreement itself must be read in the light of such custom or usage and also, prior course of dealing, and in a long term contract, the course of performance.
  3. Subsections (3) and (4): These subsections are intended to make clear the distinction carried forward throughout this Article between termination and cancellation.

Cross references:

Point 2: Sections 1-203 , 1-205 , 2-208 and 2-508.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-107. Goods to be severed from realty; recording.

  1. A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this title if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
  2. A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this title whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
  3. The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer’s rights under the contract for sale.

History. 1964, c. 219; 1973, c. 509.

Law Review.

For survey of Virginia commercial law for the year 1972-1973, see 59 Va. L. Rev. 1426 (1973).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3-5, 20; 18 M.J. Trees and Timber, §§ 2, 5.

CASE NOTES

A sale of land at auction is not controlled by § 8.2-328 (2) , since this title applies only to transactions relating to “goods.” Hoffman v. Horton, 212 Va. 565 , 186 S.E.2d 79, 1972 Va. LEXIS 209 (1972).

Real estate statute of frauds applicable to sale of model home. —

Under § 8.2-107(1) , the real estate statute of frauds, § 11-2(6) , rather than the Uniform Commercial Code (UCC) statute of frauds, § 8.2-201(1) , applied to a contract for the sale of a model home because the model home was a structure and the alleged contract provided that a buyer was to remove the home from a builder’s display lot. Although the UCC statute of frauds did not apply, the buyer’s action for breach of an oral contract would have been barred under either statute of frauds because the buyer conceded that there was no writing that qualified under either statute and the buyer did not show that the builder admitted that a contract was made. Baker v. Jim Walter Homes, Inc., 438 F. Supp. 2d 649, 2006 U.S. Dist. LEXIS 49028 (W.D. Va. 2006).

OFFICIAL COMMENT

Prior uniform statutory provision: See Section 76, Uniform Sales Act on prior policy; Section 7, Uniform Conditional Sales Act.

Purposes:

  1. Subsection (1). Notice that this subsection applies only if the minerals or structures “are to be severed by the seller”. If the buyer is to sever, such transactions are considered contracts affecting land and all problems of the Statute of Frauds and of the recording of land rights apply to them. Therefore, the Statute of Frauds section of this Article does not apply to such contracts though they must conform to the Statute of Frauds affecting the transfer of interests in land.
  2. Subsection (2). “Things attached” to the realty which can be severed without material harm are goods within this Article regardless of who is to effect the severance. The word “fixtures” has been avoided because of the diverse definitions of this term, the test of “severance without material harm” being substituted.
  3. The security phases of things attached to or to become attached to realty are dealt with in the Article on Secured Transactions (Article 9) and it is to be noted that the definition of goods in that Article differs from the definition of goods in this Article.

The provision in subsection (3) for recording such contracts is within the purview of this Article since it is a means of preserving the buyer’s rights under the contract of sale.

However, both Articles treat as goods growing crops and also timber to be cut under a contract of severance.

Cross references:

Point 1: Section 2-201.

Point 2: Section 2-105.

Point 3: Articles 9 and 9-105.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Present sale”. Section 2-106.

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

Under Virginia law, when standing timber sold is to be severed within a reasonable time by either the buyer or seller the transaction is not within the statute of frauds provision relating to transfers of interests in land. Va. Code 11-2(6) , as interpreted by Hurricane Lumber Co. v. Lowe, 110 Va. 380 , 383, 66 S.E. 66 (1909). Since Virginia has no statute of frauds provision relating to the sale of goods, the transaction need not be reduced to writing. But see Stuart v. Pennis, 91 Va. 688 , 689-91, 22 S.E. 509 (1895) (buyer has right to let timber stand for 3 years). The UCC provides that if the seller is to sever at any time, a sale of standing timber is within the scope of Title 8.2 and thus subject to the statute of frauds provision relating to the sale of goods, § 8.2-201 . The net effect of this is to reduce the scope of the statute of frauds provision relating to interests in land when the seller is to sever but to increase the requirement of a writing by bringing these transactions within the scope of Title 8.2.

VIRGINIA COMMENT

In Stuart v. Pennis, 91 Va. 688 , 691, 22 S.E. 509 (1895), it was said that land includes everything “attached to it,” a statement that would include growing crops, but this broad definition seems to have been limited by Hurricane Lumber Co. v. Lowe, 110 Va. 380 , 383, 66 S.E. 66 (1909). Under § 8.2-107(2) growing crops are defined as goods. See also, Note, Crops—Personalty or Realty in Virginia, 39 Va. L. Rev. 1115 (1953).

The UCC makes no provision for legislation such as Virginia’s timber branding statute, Code 1950, §§ 59.1-103 to 59.1-116, and there appears to be no necessary conflict between the UCC and this legislation, under § 59.1-113 of which the branding of marketable timber is deemed to be a change of ownership and possession. The statute was applied in Hurley v. Hurley, 110 Va. 31 , 65 S.E. 472 (1909). Subsection 8.2-107(3) authorizes the recordation of contracts for sale under this section as though they involved transfers of interests in land, so as thereby to give third parties notice. This provision changes the result in Braxton v. Bell, 92 Va. 229 , 235, 23 S.E. 289 (1895), holding that the recordation of a contract in regard to personal property, not required by statute to be recorded, as a nullity and not notice to any person.

PART 2. Form, Formation and Readjustment of Contract.

§ 8.2-201. Formal requirements; statute of frauds.

  1. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
  2. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received.
  3. A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
    1. if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
    2. if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
    3. with respect to goods for which payment has been made and accepted or which have been received and accepted (§ 8.2-606 ).

History. 1964, c. 219.

Law Review.

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For 2000 survey of Virginia technology law, see 34 U. Rich. L. Rev. 1051. (2000).

For article, “Intent to Contract,” see 95 Va. L. Rev. 1437 (2009).

Research References.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 24 Contract Actions. § 24.15 Parol Evidence Rule. Friend.

Virginia Forms (Matthew Bender). No. 8A-101 Firm Offer Unsupported by Consideration.

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assignments, § 17; 3C M.J. Commercial Law, §§ 3, 5, 8, 11, 12, 36.

CASE NOTES

Sufficiency of writing. —

To avoid the proscription of the statute of frauds, a writing must provide a basis for believing that the offered oral evidence rests on a real transaction. The writing need not, however, conclusively establish the existence of a contract to survive the scrutiny of the statute of frauds. Barber & Ross Co. v. Lifetime Doors, Inc., 810 F.2d 1276, 1987 U.S. App. LEXIS 1480 (4th Cir.), cert. denied, 484 U.S. 823, 108 S. Ct. 86, 98 L. Ed. 2d 48, 1987 U.S. LEXIS 3504 (1987).

Language excluding warranties or remedies must be conspicuous. —

When a writing which meets the requirements of this section is intended by the parties as a final expression of their agreement, the terms thereof may not be contradicted by evidence of any prior agreement. To limit either warranties or remedies, however, the exclusionary language in the writing must be “conspicuous.” Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

A writing may satisfy subsection (1) even though it was made before the contract was formed. Wells, Waters & Gases, Inc. v. Air Prods. & Chems., Inc., 19 F.3d 157, 1994 U.S. App. LEXIS 5240 (4th Cir. 1994).

Acknowledgment became contract in 10 days when transaction between merchants. —

Where the transaction was “between merchants,” the acknowledgment sent by the seller on receipt of the buyer’s purchase order became the parties’ contract when the buyer failed to give the seller written notice of any objection within 10 days after receiving the acknowledgment. Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

Claim brought by manufacturer against bakery for purchase price of packaging material was not within the statute of frauds where the cellophane wrapping material was manufactured to the size required by bakery’s containers, was imprinted with bakery’s name and unique “artwork,” and was completely produced by the seller. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Where there was a written agreement signed by the president of the company against whom enforcement was sought, subsection (1) of this section did not apply. Wells, Waters & Gases, Inc. v. Air Prods. & Chems., Inc., 19 F.3d 157, 1994 U.S. App. LEXIS 5240 (4th Cir. 1994).

Written sales brochures given by seller to purchaser met the signature requirement of the statute of frauds, because the seller’s trademark appeared on the documents, and that was sufficient to authenticate them. Barber & Ross Co. v. Lifetime Doors, Inc., 810 F.2d 1276, 1987 U.S. App. LEXIS 1480 (4th Cir.), cert. denied, 484 U.S. 823, 108 S. Ct. 86, 98 L. Ed. 2d 48, 1987 U.S. LEXIS 3504 (1987).

Written sales brochures given by seller to purchaser stated a sufficiently definite quantity for purposes of the statute of frauds, where they referred to meeting the purchaser’s needs. Barber & Ross Co. v. Lifetime Doors, Inc., 810 F.2d 1276, 1987 U.S. App. LEXIS 1480 (4th Cir.), cert. denied, 484 U.S. 823, 108 S. Ct. 86, 98 L. Ed. 2d 48, 1987 U.S. LEXIS 3504 (1987).

Purchase order was confirmatory writing effective against sender. —

Purchase order held to be confirmatory writing effective against the sender under subsection (2). The statute of frauds defense was thus unavailable. Howard P. Foley Co. v. Phoenix Eng'g & Supply Co., 819 F.2d 60, 1987 U.S. App. LEXIS 6438 (4th Cir. 1987).

No offer and no acceptance so no breach of contract. —

There was no offer and no acceptance, therefore defendant was not liable for breach of contract; plaintiff and defendant were engaged in contract negotiations related to the potential sale of four cranes, but no offer was made by defendant. The record was devoid of any evidence that would suggest that plaintiff and defendant had a meeting of the minds or an intent to enter into a contract; had it been an offer, it was not accepted by plaintiff as the document containing the handwritten purchase order number was not signed by plaintiff, and instead, plaintiff sent a separate agreement with materially different terms and conditions. P&J Arcomet v. Perini Corp., No. 1:07cv342, 2007 U.S. Dist. LEXIS 84343 (E.D. Va. Nov. 14, 2007).

Third comment to this section undercuts the claim that an unanswered confirmation is dispositive of both the existence and terms of a contract. The confirmation is merely evidential as an admission. Howard P. Foley Co. v. Phoenix Eng'g & Supply Co., 819 F.2d 60, 1987 U.S. App. LEXIS 6438 (4th Cir. 1987).

Applicability to sale of model home removed from lot. —

Under § 8.2-107(1) , the real estate statute of frauds, § 11-2(6) , rather than the Uniform Commercial Code (UCC) statute of frauds, § 8.2-201(1) , applied to a contract for the sale of a model home because the model home was a structure and the alleged contract provided that a buyer was to remove the home from a builder’s display lot. Although the UCC statute of frauds did not apply, the buyer’s action for breach of an oral contract would have been barred under either statute of frauds because the buyer conceded that there was no writing that qualified under either statute and the buyer did not show that the builder admitted that a contract was made. Baker v. Jim Walter Homes, Inc., 438 F. Supp. 2d 649, 2006 U.S. Dist. LEXIS 49028 (W.D. Va. 2006).

No contract based upon part performance. —

Enforcement of any contract, based upon part performance under § 8.2-201(3)(c), extended only to the buyer’s entryway flooring and not to the purchase and installation of flooring in one of the buyer’s offices because payment was made by the buyer and accepted by the seller for only the entryway flooring. Delta Star, Inc. v. Michael's Carpet World, 276 Va. 524 , 666 S.E.2d 331, 2008 Va. LEXIS 90 (2008).

No confirmation of contract. —

Pursuant to § 8.2-201(2) , an enforceable contract did not exist between the seller and the buyer for the purchase and installation of flooring in one of the buyer’s offices because the seller, in submitting the seller’s proposals, sought to form a contract, rather than to confirm a contract, and the seller’s installation sketches and the buyer’s credit application similarly did not confirm a contract. Additionally, the sellers’ invoice for an entryway flooring did not serve as confirmation of a contract for the purchase and installation of flooring in an office. Delta Star, Inc. v. Michael's Carpet World, 276 Va. 524 , 666 S.E.2d 331, 2008 Va. LEXIS 90 (2008).

Material not specially manufactured. —

Buyer’s and seller’s unwritten contract for the purchase and installation of flooring materials was not enforceable under § 8.2-201(3)(a) because the flooring materials were not specifically manufactured for the buyer. Delta Star, Inc. v. Michael's Carpet World, 276 Va. 524 , 666 S.E.2d 331, 2008 Va. LEXIS 90 (2008).

CIRCUIT COURT OPINIONS

Defendants’ testimony as to existence of oral agreement provided exception to statute of frauds. —

Where landlords sued their tenants for detinue based on an oral agreement for the sale of personalty located at the leased premises, pursuant to § 8.2-201(3)(b), the tenants’ statute of frauds defense regarding contracts for the sale of goods failed in the face of their sworn testimony concerning that oral agreement. Lee v. Park, 73 Va. Cir. 219, 2007 Va. Cir. LEXIS 80 (Fairfax County Apr. 4, 2007).

Open account exception to statute of frauds. —

Seller and buyer had an “open account” under their written agreement, which was an exception to the writing requirement, so the court denied the buyer’s motion to dismiss the seller’s suit for payment and granted the seller’s motion to strike that statute of frauds affirmative defense. Quality Foods Coop., Inc. v. New River Oils, L.L.C., 66 Va. Cir. 464, 2001 Va. Cir. LEXIS 531 (Amherst County Feb. 14, 2001).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 4, Uniform Sales Act (which was based on Section 17 of the Statute of 29 Charles II).

Changes: Completely re-phrased; restricted to sale of goods. See also Sections 1-206 , 8-319 and 9-203.

Purposes of changes: The changed phraseology of this section is intended to make it clear that:

  1. The required writing need not contain all the material terms of the contract and such material terms as are stated need not be precisely stated. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction. It may be written in lead pencil on a scratch pad. It need not indicate which party is the buyer and which the seller. The only term which must appear is the quantity term which need not be accurately stated but recovery is limited to the amount stated. The price, time and place of payment or delivery, the general quality of the goods, or any particular warranties may all be omitted.
  2. “Partial performance” as a substitute for the required memorandum can validate the contract only for the goods which have been accepted or for which payment has been made and accepted.
  3. Between merchants, failure to answer a written confirmation of a contract within ten days of receipt is tantamount to a writing under subsection (2) and is sufficient against both parties under subsection (1). The only effect, however, is to take away from the party who fails to answer the defense of the Statute of Frauds; the burden of persuading the trier of fact that a contract was in fact made orally prior to the written confirmation is unaffected. Compare the effect of a failure to reply under Section 2-207.
  4. Failure to satisfy the requirements of this section does not render the contract void for all purposes, but merely prevents it from being judicially enforced in favor of a party to the contract. For example, a buyer who takes possession of goods as provided in an oral contract which the seller has not meanwhile repudiated, is not a trespasser. Nor would the Statute of Frauds provisions of this section be a defense to a third person who wrongfully induces a party to refuse to perform an oral contract, even though the injured party cannot maintain an action for damages against the party so refusing to perform.
  5. The requirement of “signing” is discussed in the comment to Section 1-201 .
  6. It is not necessary that the writing be delivered to anybody. It need not be signed or authenticated by both parties but it is, of course, not sufficient against one who has not signed it. Prior to a dispute no one can determine which party’s signing of the memorandum may be necessary but from the time of contracting each party should be aware that to him it is signing by the other which is important.
  7. If the making of a contract is admitted in court, either in a written pleading, by stipulation or by oral statement before the court, no additional writing is necessary for protection against fraud. Under this section it is no longer possible to admit the contract in court and still treat the Statute as a defense. However, the contract is not thus conclusively established. The admission so made by a party is itself evidential against him of the truth of the facts so admitted and of nothing more; as against the other party, it is not evidential at all.

Special emphasis must be placed on the permissibility of omitting the price term in view of the insistence of some courts on the express inclusion of this term even where the parties have contracted on the basis of a published price list. In many valid contracts for sale the parties do not mention the price in express terms, the buyer being bound to pay and the seller to accept a reasonable price which the trier of the fact may well be trusted to determine. Again, frequently the price is not mentioned since the parties have based their agreement on a price list or catalogue known to both of them and this list serves as an efficient safeguard against perjury. Finally, “market” prices and valuations that are current in the vicinity constitute a similar check. Thus if the price is not stated in the memorandum it can normally be supplied without danger of fraud. Of course if the “price” consists of goods rather than money the quantity of goods must be stated.

Only three definite and invariable requirements as to the memorandum are made by this subsection. First, it must evidence a contract for the sale of goods; second, it must be “signed” a word which includes any authentication which identifies the party to be charged; and third, it must specify a quantity.

Receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists. If the court can make a just apportionment therefor, the agreed price of any goods actually delivered can be recovered without a writing or, if the price has been paid, the seller can be forced to deliver an apportionable part of the goods. The overt actions or the parties make admissible evidence of the other terms of the contract necessary to a just apportionment. This is true even though the actions of the parties are not in themselves inconsistent with a different transaction such as a consignment for resale or a mere loan of money.

Part performance by the buyer requires the delivery of something by him that is accepted by the seller as such performance. Thus, part payment may be made by money or check, accepted by the seller. If the agreed price consists of goods or services, then they must also have been delivered and accepted.

Cross references:

See Sections 1-201 , 2-202, 2-207, 2-209 and 2-304.

Definitional cross references:

“Action”. Section 1-201 .

“Between merchants”. Section 2-104.

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Notice”. Section 1-201 .

“Party”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Sale”. Section 2-106.

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section provides Virginia with a statute of frauds for the sale of goods where none existed before. Virginia decisions under existing provisions of the statute of frauds have required essential terms but not the whole of contracts within the statute to be in writing. See e.g., Browder v. Mitchell, 187 Va. 781 , 785, 48 S.E.2d 221 (1948); Reynolds v. Dixon, 187 Va. 101 , 46 S.E.2d 6 (1948). The UCC requires only that there be “some writing sufficient to indicate that a contract for sale has been made.” Further, since a writing is not insufficient because it omits or incorrectly states a term agreed upon, this section will lead to greater liberality in the introduction of parol evidence in Virginia where unintegrated writings within the statute of frauds are involved. Matthews v. LaPrade, 130 Va. 408 , 420, 107 S.E. 795 (1921).

§ 8.2-202. Final written expression; parol or extrinsic evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented

  1. by course of performance, course of dealing or usage of trade (§ 8.1A-303 ); and
  2. by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

History. 1964, c. 219; 2003, c. 353.

The 2003 amendments.

The 2003 amendment by c. 353 inserted “course of performance,” and substituted “8.1A-303” for “8.1-205” in subsection (a).

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

For note, “Admissibility of Evidence of Course of Dealing and Usage of Trade Under Uniform Commercial Code § 2-202(a),” see 30 Wash. & Lee L. Rev. 117 (1973).

For 1987 survey of Virginia commercial law, see 21 U. Rich. L. Rev. 693 (1987).

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 5, 11, 12, 17; 4A M.J. Contracts, § 51; 5C M.J. Customs and Usages, § 5; 7B M.J. Evidence, § 132.

CASE NOTES

Language excluding warranties or remedies must be conspicuous. —

When a writing which meets the requirements of § 8.2-201 is intended by the parties as a final expression of their agreement, the terms thereof may not be contradicted by evidence of any prior agreement. To limit either warranties or remedies, however, the exclusionary language in the writing must be “conspicuous.” Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

This section expressly allows evidence of course of dealing or usage of trade to explain or supplement terms intended by the parties as a final expression of their agreement. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971); Brunswick Box Co. v. Coutinho, Caro & Co., 617 F.2d 355, 1980 U.S. App. LEXIS 19582 (4th Cir. 1980).

Course of conduct did not establish contract. —

Parties’ course of conduct did not establish the existence of an enforceable contract under § 8.2-202 because the parties’ course of dealing was relevant only to explain or supplement the terms of the parties’ contract. The parties’ course of dealing could not establish the existence of a contract. Delta Star, Inc. v. Michael's Carpet World, 276 Va. 524 , 666 S.E.2d 331, 2008 Va. LEXIS 90 (2008).

Peculiar meaning of contract phrases admissible. —

Evidence that contract phrases or terms have acquired, by custom in the locality, or by usage of the trade, a peculiar meaning not attached to them in their ordinary use is admissible even though the phrases or items themselves are unambiguous. Doswell Ltd. Partnership v. VEPCO, 251 Va. 215 , 468 S.E.2d 84, 1996 Va. LEXIS 27 (1996).

Test of admissibility. —

When this section is read in light of § 8.1-205 (4), it is clear that the test of admissibility of evidence of course of dealing or usage of the trade is not whether the contract appears on its face to be complete in every detail, but whether the proffered evidence of course of dealing and trade usage reasonably can be construed as consistent with the express terms of the agreement. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971); Brunswick Box Co. v. Coutinho, Caro & Co., 617 F.2d 355, 1980 U.S. App. LEXIS 19582 (4th Cir. 1980).

A finding of ambiguity in a contract is not necessary for the admission of extrinsic evidence about the usage of the trade and the parties’ course of dealing. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971); Brunswick Box Co. v. Coutinho, Caro & Co., 617 F.2d 355, 1980 U.S. App. LEXIS 19582 (4th Cir. 1980).

The parol evidence rule would not bar the introduction of extrinsic evidence as to the intentions of the parties in their use of the term “F.A.S. Norfolk, Virginia” in their written agreement under which the seller was to supply the buyer with certain stevedoring pallets. Although the term is not in and of itself ambiguous, that conclusion does not preclude the admission of extrinsic evidence, not only about the usage of the trade, but the parties’ course of dealings as well. Brunswick Box Co. v. Coutinho, Caro & Co., 617 F.2d 355, 1980 U.S. App. LEXIS 19582 (4th Cir. 1980).

Course of dealing and trade usage are not synonymous with verbal understandings, terms and conditions. This section draws a distinction between supplementing a written contract by consistent additional terms and supplementing it by course of dealing or usage of trade. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971).

Proof of fraud in procurement of contract. —

When fraud in the procurement of the written contract is pleaded, parol evidence tending to prove the fraud is admissible. George Robberecht Seafood, Inc. v. Maitland Bros. Co., 220 Va. 109 , 255 S.E.2d 682, 1979 Va. LEXIS 241 (1979).

Any express oral warranties were effectively disclaimed. —

Even if a seller made express oral warranties prior to the sale of an RV, they were effectively disclaimed under § 8.2-316(1) by a merger clause in the purchase contract pursuant to § 8.2-202 and thus, the seller’s motion to dismiss a claim for breach of express warranties was granted. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

“Basis of bargain” oral statements not admissible to contradict warranty disclaimer. —

Even if the oral representations made by defendant’s representative became the “basis of the bargain” and therefore constituted an express warranty, those oral statements would not be admissible to contradict or vary the disclaimer of express warranties clause contained in the integrated agreement between defendant and plaintiff. King Indus., Inc. v. Worlco Data Sys., 736 F. Supp. 114, 1989 U.S. Dist. LEXIS 17041 (E.D. Va. 1989), aff'd, 900 F.2d 253, 1990 U.S. App. LEXIS 4361 (4th Cir. 1990).

Complete and exclusive purchase agreement. —

Where the district court did not explicitly apply the language of subdivision (b), but its reference to a “merged contract” and to the fact that any liability would have to be discovered “within the four corners of the instrument” left no doubt that the court found asset purchase agreement to be a “complete and exclusive statement” of the agreement between buyer and seller, in light of the detailed nature of the contract, including the well-drafted merger clause, there was no error in that conclusion. It followed, therefore, that this section precluded any effort by buyer to establish, through handout distributed at a meeting between buyer’s and seller’s representatives, a warranty relating to the product’s cavitation capacity, even in the unlikely eventuality that the warranty could be construed as a consistent additional term. Hoover Universal, Inc. v. Brockway Imco, Inc., 809 F.2d 1039, 1987 U.S. App. LEXIS 1190 (4th Cir. 1987).

No violation of parol evidence rule. —

District court did not violate the parol evidence rule, where the parties’ contract assured that a software system would operate correctly and the evidence offered by the faucet manufacturer related to the ambiguous term “correctly” as well as to breach of the promise that the installation of a software system perform correctly. SER Solutions, Inc. v. Masco Corp., 103 Fed. Appx. 483, 2004 U.S. App. LEXIS 13650 (4th Cir. 2004).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section definitely rejects:
    1. Any assumption that because a writing has been worked out which is final on some matters, it is to be taken as including all the matters agreed upon;
    2. The premise that the language used has the meaning attributable to such language by rules of construction existing in the law rather than the meaning which arises out of the commercial context in which it was used; and
    3. The requirement that a condition precedent to the admissibility of the type of evidence specified in paragraph (a) is an original determination by the court that the language used is ambiguous.
  2. Paragraph (a) makes admissible evidence of course of dealing, usage of trade and course of performance to explain or supplement the terms of any writing stating the agreement of the parties in order that the true understanding of the parties as to the agreement may be reached. Such writings are to be read on the assumption that the course of prior dealings between the parties and the usages of trade were taken for granted when the document was phrased. Unless carefully negated they have become an element of the meaning of the words used. Similarly, the course of actual performance by the parties is considered the best indication of what they intended the writing to mean.
  3. Under paragraph (b) consistent additional terms, not reduced to writing, may be proved unless the court finds that the writing was intended by both parties as a complete and exclusive statement of all the terms. If the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact.

Cross references:

Point 3: Sections 1-303 , 2-207, 2-302 and 2-316.

Definitional cross references:

“Agreed” and “agreement”. Section 1-201 .

“Course of dealing”. Section 1-303 .

“Course of performance”. Section 1-303 .

“Party”. Section 1-201 .

“Term”. Section 1-201 .

“Usage of trade”. Section 1-303 .

“Written” and “writing”. Section 1-201 .

VIRGINIA COMMENT

This section reflects a more liberal approach to the introduction of parol evidence to explain or supplement written contracts for the sale of goods than has been followed in Virginia. The supreme court of appeals has said that “no rule is better settled in this State than that extrinsic evidence is not admissible to determine the sense in which language is used unless the contract is ambiguous.” Mathieson Alkali Works v. Virginia Banner Coal Corp., 147 Va. 125 , 136, 136 S.E. 673 (1927). This case held that parol evidence was inadmissible to show the “quantity” contracted for in a requirements contract. Hopkins v. LeCato, 142 Va. 769 , 779-83, 128 S.E. 55 (1925), held parol evidence inadmissible to show the time at which a deposit to guarantee performance was to be made. Sutherland & Co. v. Gibson, 117 Va. 840 , 842-44, 86 S.E. 108 (1915), held parol evidence inadmissible to show a custom of weighing livestock between daylight and nine o’clock. Scott v. Norfolk & Western Railroad Co., 90 Va. 241 , 243, 17 S.E. 882 (1893), held parol evidence inadmissible to show that a buyer was to haul a part of a purchase of railroad ties. Under this section of the UCC, it would appear that parol evidence would be admissible in these situations.

In Richlands Flint Glass Co. v. Hiltebeitel, 92 Va., 94-97, 22 S.E. 806 (1895), Virginia permitted the introduction of parol evidence to show custom and usage and a prior course of dealing where a contract for doing brick work did not contain any term stating how the quantity of brick was to be ascertained. See also Hansbrough v. Neal, Featherston and Co., 94 Va. 722 , 724-26, 27 S.E. 593 (1897). Virginia also permits the introduction of parol evidence to show that a buyer was induced by false and fraudulent representations of the seller’s agents to enter into the contract, even though the written contract purports to embody all the agreements between the parties. White Sewing Machine Co. v. Gilmore Furniture Co., 128 Va. 630 , 637-44, 105 S.E. 134 (1920). And Virginia has construed a term of a conditional sale contract providing that all conditions and agreements between the parties are stated therein as referring to that contract only and not to a prior sales contract. Transit Corp. of Norfolk v. Four Wheel Drive Auto Co., 151 Va. 865 , 873, 145 S.E. 331 (1928). A federal court, in Victor Products Corp. v. Yates-American Mach. Co., 54 F.2d 1062, 1063-64 (4th Cir. 1932), held that the parol evidence rule, as applied in Virginia, bars proof of an oral warranty that contradicts the terms of a conditional sale contract. These holdings are not changed by the UCC.

§ 8.2-203. Seals inoperative.

The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 1A M.J. Agency, §§ 13, 46, 106; 3C M.J. Commercial Law, §§ 5, 7.

OFFICIAL COMMENT

Prior uniform statutory provisions: Section 3, Uniform Sales Act.

Changes: Portion pertaining to “seals” rewritten.

Purposes of changes:

  1. This section makes it clear that every effect of the seal which relates to “sealed instruments” as such is wiped out insofar as contracts for sale are concerned. However, the substantial effects of a seal, except extension of the period of limitations, may be had by appropriate drafting as in the case of firm offers (see Section 2-205).
  2. This section leaves untouched any aspects of a seal which relate merely to signatures or to authentication of execution and the like. Thus, a statute providing that a purported signature gives prima facie evidence of its own authenticity or that a signature gives prima facie evidence of consideration is still applicable to sales transactions even though a seal may be held to be a signature within the meaning of such a statute. Similarly, the authorized affixing of a corporate seal bearing the corporate name to a contractual writing purporting to be made by the corporation may have effect as a signature without any reference to the law of sealed instruments.

Cross reference:

Point 1: Section 2-205.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Writing”. Section 1-201 .

VIRGINIA COMMENT

Although seals are still recognized in Virginia, there have been no cases involving contracts for the sale of goods, where a question involving a seal has arisen. At least in equity, the seal no longer prevents inquiry as to whether a sealed instrument is supported by consideration. Norris v. Barbour, 188 Va. 723 , 737, 51 S.E.2d 334 (1949); Cooper v. Gregory, 191 Va. 24 , 31, 60 S.E.2d 50 (1950). The principal change is in the length of the statute of limitations, for which see Virginia Comment to § 8.2-725 .

§ 8.2-204. Formation in general.

  1. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
  2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
  3. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

History. 1964, c. 219.

Law Review.

For a note “Let the Buyer Beware: The Seventh Circuit’s Approach to Accept-or-Return Offers,” see 55 Wash. & Lee L. Rev. 1287 (1998).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 6.

CASE NOTES

Parties’ words and conduct must manifest intention to be bound. —

While the UCC has greatly modified the rigors of the common-law rules governing the formation of contracts, it remains a prerequisite that the parties’ words and conduct must manifest an intention to be bound. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Although the parties may make a contract which deliberately leaves material terms open for future determination, no contract results where their words and conduct demonstrate a lack of intention to contract. Such a lack is not remedied by evidence of custom and usage in the trade, or by a written memorandum purporting to confirm oral discussions which did not in themselves amount to an agreement. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Price quotation was not an offer. —

Given that price quotations are typically nothing more than invitations to enter into negotiations and that the terms and conditions in a seller’s price quotation stated that all orders were subject to the seller’s acceptance, the seller’s quotation was not an offer. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 1 and 3, Uniform Sales Act.

Changes: Completely rewritten by this and other sections of this Article.

Purposes of changes:

Subsection (1) continues without change the basic policy of recognizing any manner of expression of agreement, oral, written or otherwise. The legal effect of such an agreement is, of course, qualified by other provisions of this Article.

Under subsection (1) appropriate conduct by the parties may be sufficient to establish an agreement. Subsection (2) is directed primarily to the situation where the interchanged correspondence does not disclose the exact point at which the deal was closed, but the actions of the parties indicate that a binding obligation has been undertaken.

Subsection (3) states the principle as to “open terms” underlying later sections of the Article. If the parties intend to enter into a binding agreement, this subsection recognizes that agreement as valid in law, despite missing terms, if there is any reasonably certain basis for granting a remedy. The test is not certainty as to what the parties were to do nor as to the exact amount of damages due the plaintiff. Nor is the fact that one or more terms are left to be agreed upon enough of itself to defeat an otherwise adequate agreement. Rather, commercial standards on the point of “indefiniteness” are intended to be applied, this Act making provision elsewhere for missing terms needed for performance, open price, remedies and the like.

The more terms the parties leave open, the less likely it is that they have intended to conclude a binding agreement, but their actions may be frequently conclusive on the matter despite the omissions.

Cross references:

Subsection (1): Sections 1-103, 2-201 and 2-302.

Subsection (2): Sections 2-205 through 2-209.

Subsection (3): See Part 3.

Definitional cross references:

“Agreement”. Section 1-201 .

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

“Term”. Section 1-201 .

VIRGINIA COMMENT

The UCC is consistent with the Virginia policy of enforcing apparently indefinite agreements whenever possible by resort to external, objective standards of reasonableness. Turpin v. Branaman, 190 Va. 818 , 828, 58 S.E.2d 63 (1950), held an agreement to be sufficiently definite where one of its terms provided the means and formula by which the quantity could be determined. Cocoa Products Co. of America, Inc. v. Duche, 156 Va. 86 , 90, 158 S.E. 719 (1931), held an agreement for the sale of three to five cars of cocoa butter to be sufficiently definite. Smokeless Fuel Co. v. Seaton & Sons, 105 Va. 170 , 172-74, 52 S.E. 829 (1906), held a contract for 1,000 to 1,500 tons of coal to be sufficiently definite. The section is consistent with Chandler v. Kelley, 149 Va. 221 , 227-32, 141 S.E. 389 (1928), holding that a contract for sale had been made, an intermediary being an agent for the buyer.

§ 8.2-205. Firm offers.

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

History. 1964, c. 219.

Law Review.

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 5-7.

OFFICIAL COMMENT

Prior uniform statutory provisions: Sections 1 and 3, Uniform Sales Act.

Changes: Completely rewritten by this and other sections of this Article.

Purposes of changes:

  1. This section is intended to modify the former rule which required that “firm offers” be sustained by consideration in order to bind, and to require instead that they must merely be characterized as such and expressed in signed writings.
  2. The primary purpose of this section is to give effect to the deliberate intention of a merchant to make a current firm offer binding. The deliberation is shown in the case of an individualized document by the merchant’s signature to the offer, and in the case of an offer included on a form supplied by the other party to the transaction by the separate signing of the particular clause which contains the offer. “Signed” here also includes authentication but the reasonableness of the authentication herein allowed must be determined in the light of the purpose of the section. The circumstances surrounding the signing may justify something less than a formal signature or initialing but typically the kind of authentication involved here would consist of a minimum of initialing of the clause involved. A handwritten memorandum on the writer’s letterhead purporting in its terms to “confirm” a firm offer already made would be enough to satisfy this section, although not subscribed, since under the circumstances it could not be considered a memorandum of mere negotiation and it would adequately show its own authenticity. Similarly, an authorized telegram will suffice, and this is true even though the original draft contained only a typewritten signature. However, despite settled courses of dealing or usages of the trade whereby firm offers are made by oral communication and relied upon without more evidence, such offers remain revocable under this Article since authentication by a writing is the essence of this section.
  3. This section is intended to apply to current “firm” offers and not to long term options, and an outside time limit of three months during which such offers remain irrevocable has been set. The three month period during which firm offers remain irrevocable under this section need not be stated by days or by date. If the offer states that it is “guaranteed” or “firm” until the happening of a contingency which will occur within the three month period, it will remain irrevocable until that event. A promise made for a longer period will operate under this section to bind the offeror only for the first three months of the period but may of course be renewed. If supported by consideration it may continue for as long as the parties specify. This section deals only with the offer which is not supported by consideration.
  4. Protection is afforded against the inadvertent signing of a firm offer when contained in a form prepared by the offeree by requiring that such a clause be separately authenticated. If the offer clause is called to the offeror’s attention and he separately authenticates it, he will be bound; Section 2-302 may operate, however, to prevent an unconscionable result which otherwise would flow from other terms appearing in the form.
  5. Safeguards are provided to offer relief in the case of material mistake by virtue of the requirement of good faith and the general law of mistake.

Cross references:

Point 1: Section 1-102.

Point 2: Section 1-102.

Point 3: Section 2-201.

Point 5: Section 2-302.

Definitional cross references:

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Signed”. Section 1-201 .

“Writing”. Section 1-201 .

VIRGINIA COMMENT

This section changes prior law by making firm offers by merchants irrevocable, even without consideration. Virginia cases, following traditional contract law, have held that such offers are revocable. Weade v. Weade, 153 Va. 540 , 545, 150 S.E. 238 (1929); Saunders v. Bank of Mecklenburg, 112 Va. 443 , 451, 71 S.E. 714 (1911).

§ 8.2-206. Offer and acceptance in formation of contract.

  1. Unless otherwise unambiguously indicated by the language or circumstances
    1. an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
    2. an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
  2. Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

History. 1964, c. 219.

Law Review.

For survey of developments in Virginia commercial law for the year 1973-1974, see 60 Va. L. Rev. 1475 (1974).

For a note “Let the Buyer Beware: The Seventh Circuit’s Approach to Accept-or-Return Offers,” see 55 Wash. & Lee L. Rev. 1287 (1998).

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 7.

CASE NOTES

This section rejects the technical rules of acceptance by its provisions in subsection (a). McAfee v. Brewer, 214 Va. 579 , 203 S.E.2d 129, 1974 Va. LEXIS 181 (1974).

Expressed intention of offeror governs. —

The determination whether an offer inviting acceptance has been made is controlled by the expressed intention of the offeror. J.B. Moore Elec. Contractor v. Westinghouse Elec. Supply Co., 221 Va. 745 , 273 S.E.2d 553, 1981 Va. LEXIS 204 (1981).

The submission of a purchase order by a prospective buyer is viewed as an offer which may then be accepted or rejected by a seller. J.B. Moore Elec. Contractor v. Westinghouse Elec. Supply Co., 221 Va. 745 , 273 S.E.2d 553, 1981 Va. LEXIS 204 (1981).

A purchase order, with a place for the signature of the buyer only, prepared by seller after review with buyer of plans and specifications for an electrical subcontract for a proposed new building constituted an offer to furnish the electrical equipment described in the plans and specifications for a fixed price that buyer could and did use as the basis for its bid for the subcontract. J.B. Moore Elec. Contractor v. Westinghouse Elec. Supply Co., 221 Va. 745 , 273 S.E.2d 553, 1981 Va. LEXIS 204 (1981).

And can ripen into a contract upon acceptance. —

A purchase order prepared and submitted by a seller, and intended to be an offer, could ripen into a contract upon acceptance by the buyer. J.B. Moore Elec. Contractor v. Westinghouse Elec. Supply Co., 221 Va. 745 , 273 S.E.2d 553, 1981 Va. LEXIS 204 (1981).

Court would not interpret broadly an offer term that made “commencement of work” a form of acceptance. —

While a purchase order was generally an offer, and such an offer could specify the method of acceptance, applying Virginia law, the court would not interpret broadly an offer term that made “commencement of work” a form of acceptance; steps a subcontractor took to investigate whether it could fulfill a manufacturer’s order did not constitute “commencement of work” and, thus, the subcontractor’s “acknowledgement” constituted a counter-offer and the terms of the purchase order did not govern the parties’ transaction. Roanoke Cement Co., L.L.C. v. Falk Corp., 413 F.3d 431, 2005 U.S. App. LEXIS 13139 (4th Cir. 2005).

Where the language of a distributor agreement unambiguously indicated that it was subject to acceptance at the supplier’s general office, under subdivision (1)(b) of this section, the supplier could not accept the agreement by performance. Wells, Waters & Gases, Inc. v. Air Prods. & Chems., Inc., 19 F.3d 157, 1994 U.S. App. LEXIS 5240 (4th Cir. 1994).

Buyer’s offer accepted by delivery of goods. —

Where a buyer’s purchase order directed that a seller could accept its offer either by express acceptance of the purchase order or by shipment of the goods pursuant to the purchase order and that all shipments should be made F.O.B. destination, the seller accepted the contract when it delivered the goods, whether conforming or nonconforming, to the buyer’s plant in Virginia; thus, the parties’ contract was made in Virginia. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

Controlling provision. —

Plaintiff’s contention that defendant’s forum selection clause was not part of the contract failed because terms and conditions of defendant’s purchase order established the parameters of the contract, and as such, defendant’s choice of venue provision was the controlling provision in the contract; plaintiff’s argument attempting to incorporate its terms and conditions from its supplemental proposal failed. Power Paragon, Inc. v. Precision Tech. USA, Inc., 605 F. Supp. 2d 722, 2008 U.S. Dist. LEXIS 108324 (E.D. Va. 2008).

Requirements for summary judgment. —

Buyer offered no evidence of a requirements contract with the seller, aside from the buyer’s own unsubstantiated affidavit stating that the seller verbally agreed to fulfill all of the buyer’s needs for the contract; however, more than this blanket assertion was required to prevail on a motion for summary judgment. E. I. DuPont de Nemours & Co. v. Park, 42 Fed. Appx. 605, 2002 U.S. App. LEXIS 15433 (4th Cir. 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 1 and 3, Uniform Sales Act.

Changes: Completely rewritten in this and other sections of this Article.

Purposes of changes: To make it clear that:

  1. Any reasonable manner of acceptance is intended to be regarded as available unless the offeror has made quite clear that it will not be acceptable. Former technical rules as to acceptance, such as requiring that telegraphic offers be accepted by telegraphed acceptance, etc., are rejected and a criterion that the acceptance be “in any manner and by any medium reasonable under the circumstances,” is substituted. This section is intended to remain flexible and its applicability to be enlarged as new media of communication develop or as the more time-saving present day media come into general use.
  2. Either shipment or a prompt promise to ship is made a proper means of acceptance of an offer looking to current shipment. In accordance with ordinary commercial understanding the section interprets an order looking to current shipment as allowing acceptance either by actual shipment or by a prompt promise to ship and rejects the artificial theory that only a single mode of acceptance is normally envisaged by an offer. This is true even though the language of the offer happens to be “ship at once” or the like. “Shipment” is here used in the same sense as in Section 2-504; it does not include the beginning of delivery by the seller’s own truck or by messenger. But loading on the seller’s own truck might be a beginning of performance under subsection (2).
  3. The beginning of performance by an offeree can be effective as acceptance so as to bind the offeror only if followed within a reasonable time by notice to the offeror. Such a beginning of performance must unambiguously express the offeree’s intention to engage himself. For the protection of both parties it is essential that notice follow in due course to constitute acceptance. Nothing in this section however bars the possibility that under the common law performance begun may have an intermediate effect of temporarily barring revocation of the offer, or at the offeror’s option, final effect in constituting acceptance.
  4. Subsection (1) (b) deals with the situation where a shipment made following an order is shown by a notification of shipment to be referable to that order but has a defect. Such a non-conforming shipment is normally to be understood as intended to close the bargain even though it proves to have been at the same time a breach. However, the seller by stating that the shipment is non-conforming and is offered only as an accommodation to the buyer keeps the shipment or notification from operating as an acceptance.

Definitional cross references:

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Notifies”. Section 1-201 .

“Reasonable time”. Section 1-204 .

VIRGINIA COMMENT

The supreme court of appeals has said that the acid test of the formation of a contract for the sale of goods is “A meeting of the minds of the parties.” Palmer v. Charles E. Frosst & Cos., 139 Va. 239 , 244, 123 S.E. 357 (1924). See also Rownd v. Bell, 156 Va. 811 , 813-14, 158 S.E. 890 (1931); Old Dominion Coal Corp. v. Snipes, 142 Va. 331 , 339-40, 128 S.E. 518 (1925); Insurance Company of North America v. Gamble & Co., 94 Va. 622 , 625, 27 S.E. 463 (1897). The UCC generally follows this approach, with perhaps, some relaxation of what constitutes a meeting of the minds. Without expressly so providing, the UCC continues the general proposition of contract law that an offer can be revoked at any time before it is accepted. J. B. Colt Co. v. Elam, 138 Va. 124 , 127, 120 S.E. 857 (1924); Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 257-58, 124 S.E. 283 (1924).

The UCC rejects technical rules of acceptance, providing that an offer shall be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances, thus relaxing the requirement of Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 258, 124 S.E. 283 (1924), that an offer made by mail must generally be accepted by an answer sent by return mail.

Under this section an order or other offer for prompt or current shipment can be accepted either by prompt shipment or a “prompt promise to ship.” In Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 258, 124 S.E. 283 (1924), the buyer asked the seller to “ship at once.” The court said that under the principles of law governing the acceptance of an offer, the seller, “in order to effectuate a binding contract, had to notify the defendant of his acceptance of its order and ship promptly.” However, since the seller neither shipped to nor notified the buyer before the offer was revoked, the case is doubtful precedent for the view that Virginia permits an offer for an “unilateral” contract to be accepted by a promise to perform. Both the UCC and prior Virginia law appear to agree that if an offer is properly accepted by starting or completing a bargained for performance, the offeree, as a condition to the creation of a contract, must notify the offeror within a reasonable time.

An offer for a shipment “at once” under Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 257, 124 S.E. 283 (1924), means a “prompt and an immediate shipment” although, of course, not a shipment made simultaneously with the receipt of the order. The UCC leaves this construction of the term unchanged.

The UCC does not expressly cover fraud in the factum as a defense to an alleged sale of goods. Consequently, the holding in Amos v. Franklin, 159 Va. 19 , 22-23, 165 S.E. 510 (1932), that this is a good defense remains unchanged. In this case the buyer thought he was signing a permit for a demonstration of a truck, whereas he actually was signing a contract to buy the truck.

The section is consistent with Lynch v. Commonwealth, 131 Va. 769 , 772, 109 S.E. 418 (1921), which distinguishes between a sale and an offer to sell. It is also consistent with Montague Manufacturing Co. v. Aycock-Holly Lumber Co., 139 Va. 742 , 747, 124 S.E. 208 (1924), in which it was found that no contract had arisen between the parties.

§ 8.2-207. Additional terms in acceptance or confirmation.

  1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
  2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
    1. the offer expressly limits acceptance to the terms of the offer;
    2. they materially alter it; or
    3. notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
  3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act.

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

For survey of developments in Virginia commercial law for the year 1973-1974, see 60 Va. L. Rev. 1475 (1974).

For article, “Rules, Standards, and the Battle of the Forms: A Reassessment of § 2-207,” see 68 Va. L. Rev. 1217 (1982).

For a note “Let the Buyer Beware: The Seventh Circuit’s Approach to Accept-or-Return Offers,” see 55 Wash. & Lee L. Rev. 1287 (1998).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 4, 6, 7, 11.

CASE NOTES

This section applies only to the formation of contracts. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971); J.B. Moore Elec. Contractor v. Westinghouse Elec. Supply Co., 221 Va. 745 , 273 S.E.2d 553, 1981 Va. LEXIS 204 (1981).

Acceptance of offer by letter held reasonable. —

While the buyers did not sign and return one copy of the contract in the manner requested by the seller, their acceptance of offer by letter was reasonable under the circumstances because they had misplaced the contract and the copy thereof. McAfee v. Brewer, 214 Va. 579 , 203 S.E.2d 129, 1974 Va. LEXIS 181 (1974).

Buyers’ letters constituted a definite and seasonable acceptance or written confirmation sent within five weeks, a reasonable time for amount specified by the seller due upon acceptance of the contract, and the request to include another item on the contract manifested the buyers’ assent or confirmation of the specific items enumerated in the seller’s letter. McAfee v. Brewer, 214 Va. 579 , 203 S.E.2d 129, 1974 Va. LEXIS 181 (1974).

Under a “reservation of privilege,” which operated to preserve the electrical fixture supplier’s right to install cheaper fixtures if the owner/architect ultimately approved them, the electrical contractor would go along with an attempt to secure permission from the owner and architect to make the substitution, but once the owner and architect for the project decided that cheaper fixtures were unacceptable, the supplier’s “privilege” was lost. The supplier was then bound by the terms of the agreement plus any additional terms contained in the confirmation letter which did not materially alter the terms of the original agreement and to which it did not seasonably object. None of the possible alterations that the confirmatory letter might have introduced would negate the supplier’s liability on the contract. Howard P. Foley Co. v. Phoenix Eng'g & Supply Co., 819 F.2d 60, 1987 U.S. App. LEXIS 6438 (4th Cir. 1987).

Conditional nature of purchase order made it a counteroffer. —

Even if a seller intended its price quotation to be an offer, a purchase order submitted by the buyer was not an acceptance because the purchase order made it clear that the buyer was unwilling to proceed in the absence of the seller’s assent to the terms and conditions in the purchase order; thus, under subsection (1) of § 8.2-207 , the conditional nature of the buyer’s purchase order made it a counteroffer rejecting the terms of the seller’s offer. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

Invoice not an acceptance. —

Invoice does not operate as an acceptance under the Uniform Commercial Code when it is subject to and expressly conditioned upon assent to the terms and conditions provided for in the invoice. P&J Arcomet v. Perini Corp., No. 1:07cv342, 2007 U.S. Dist. LEXIS 84343 (E.D. Va. Nov. 14, 2007).

Controlling provision. —

Plaintiff’s contention that defendant’s forum selection clause was not part of the contract failed because terms and conditions of defendant’s purchase order established the parameters of the contract, and as such, defendant’s choice of venue provision was the controlling provision in the contract; plaintiff’s argument attempting to incorporate its terms and conditions from its supplemental proposal failed. Power Paragon, Inc. v. Precision Tech. USA, Inc., 605 F. Supp. 2d 722, 2008 U.S. Dist. LEXIS 108324 (E.D. Va. 2008).

CIRCUIT COURT OPINIONS

Acceptance of new proposals. —

To the extent that an order confirmation included additional terms not part of the existing agreement between the parties, those additional terms were construed as proposals for addition to the contract, which proposal a buyer accepted by signing and returning the order confirmation. Colonna's Shipyard, Inc. v. Alpha Pipe Co., 2012 Va. Cir. LEXIS 210 (Norfolk Aug. 27, 2012).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 1 and 3, Uniform Sales Act.

Changes: Completely rewritten by this and other sections of this Article.

  1. This section is intended to deal with two typical situations. The one is the written confirmation, where an agreement has been reached either orally or by informal correspondence between the parties and is followed by one or both of the parties sending formal memoranda embodying the terms so far as agreed upon and adding terms not discussed. The other situation is offer and acceptance, in which a wire or letter expressed and intended as an acceptance or the closing of an agreement adds further minor suggestions or proposals such as “ship by Tuesday,” “rush,” “ship draft against bill of lading inspection allowed,” or the like. A frequent example of the second situation is the exchange of printed purchase order and acceptance (sometimes called “acknowledgment”) forms. Because the forms are oriented to the thinking of the respective drafting parties, the terms contained in them often do not correspond. Often the seller’s form contains terms different from or additional to those set forth in the buyer’s form. Nevertheless, the parties proceed with the transaction.
  2. Under this Article a proposed deal which in commercial understanding has in fact been closed is recognized as a contract. Therefore, any additional matter contained in the confirmation or in the acceptance falls within subsection (2) and must be regarded as a proposal for an added term unless the acceptance is made conditional on the acceptance of the additional or different terms.
  3. Whether or not additional or different terms will become part of the agreement depends upon the provisions of subsection (2). If they are such as materially to alter the original bargain, they will not be included unless expressly agreed to by the other party. If, however, they are terms which would not so change the bargain they will be incorporated unless notice of objection to them has already been given or is given within a reasonable time.
  4. Examples of typical clauses which would normally “materially alter” the contract and so result in surprise or hardship if incorporated without express awareness by the other party are: a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer’s failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable.
  5. Examples of clauses which involve no element of unreasonable surprise and which therefore are to be incorporated in the contract unless notice of objection is seasonably given are: a clause setting forth and perhaps enlarging slightly upon the seller’s exemption due to supervening causes beyond his control, similar to those covered by the provision of this Article on merchant’s excuse by failure of presupposed conditions or a clause fixing in advance any reasonable formula of proration under such circumstances; a clause fixing a reasonable time for complaints within customary limits, or in the case of a purchase for sub-sale, providing for inspection by the sub-purchaser; a clause providing for interest on overdue invoices or fixing the seller’s standard credit terms where they are within the range of trade practice and do not limit any credit bargained for; a clause limiting the right of rejection for defects which fall within the customary trade tolerances for acceptance “with adjustment” or otherwise limiting remedy in a reasonable manner (see Sections 2-718 and 2-719).
  6. If no answer is received within a reasonable time after additional terms are proposed, it is both fair and commercially sound to assume that their inclusion has been assented to. Where clauses on confirming forms sent by both parties conflict each party must be assumed to object to a clause of the other conflicting with one on the confirmation sent by himself. As a result the requirement that there be notice of objection which is found in subsection (2) is satisfied and the conflicting terms do not become a part of the contract. The contract then consists of the terms originally expressly agreed to, terms on which the confirmations agree, and terms supplied by this Act, including subsection (2). The written confirmation is also subject to Section 2-201. Under that section a failure to respond permits enforcement of a prior oral agreement; under this section a failure to respond permits additional terms to become part of the agreement.
  7. In many cases, as where goods are shipped, accepted and paid for before any dispute arises, there is no question whether a contract has been made. In such cases, where the writings of the parties do not establish a contract, it is not necessary to determine which act or document constituted the offer and which the acceptance. See Section 2-204. The only question is what terms are included in the contract, and subsection (3) furnishes the governing rule.

Cross references:

See generally Section 2-302.

Point 5: Sections 2-513, 2-602, 2-607, 2-609, 2-612, 2-614, 2-615, 2-616, 2-718 and 2-719.

Point 6: Sections 1-102 and 2-104.

Definitional cross references:

“Between merchants”. Section 2-104.

“Contract”. Section 1-201 .

“Notification”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Seasonably”. Section 1-204 .

“Send”. Section 1-201 .

“Term”. Section 1-201 .

“Written”. Section 1-201 .

VIRGINIA COMMENT

Virginia law has been that an expression of an acceptance to be effectual must be identical with the offer. Since the UCC provides that additional terms are to be construed as proposals for additions to the contract, this section changes Virginia law. In W. S. Hoge & Bro. v. Prince William Co-operative Exchange, Inc., 141 Va. 676 , 682-84, 126 S.E. 687 (1925), it was held that there was no contract where the offer provided for goods to be shipped when ordered and the acceptance called for shipment before October 1, and the acceptance also varied the offer by providing for nonliability for failure to deliver when due because of causes beyond the control of the seller. See also Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 257-58, 124 S.E. 283 (1924); Gibney & Co. v. Arlington Brewing Co., 112 Va. 117 , 120-21, 70 S.E. 487 (1917) (no contract where acceptance contained three material alterations in the terms of the offer); Lynchburg Hosiery Mills v. Chesterfield Manufacturing Co., 107 Va. 73 , 77-78, 57 S.E. 606 (1907) (acceptance varied grades of yarn to be supplied and time of delivery).

The UCC provides that between merchants under specified conditions a failure to respond to proposed additional, nonmaterial terms results in their incorporation into the contract. By thus specifying additional circumstances from which an acceptance by silence may reasonably be implied, the UCC changes Virginia law. See Boone v. Standard Acc. Ins. Co. of Detroit, 192 Va. 672 , 66 S.E.2d 530 (1951) (insurance case).

§ 8.2-208. Repealed by Acts 2003, c. 353.

§ 8.2-209. Modification, rescission and waiver.

  1. An agreement modifying a contract within this title needs no consideration to be binding.
  2. A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
  3. The requirements of the statute of frauds section of this title (§ 8.2-201 ) must be satisfied if the contract as modified is within its provisions.
  4. Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
  5. A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

For article, “Cardozo and Posner: A Study in Contracts,” see 36 Wm. & Mary L. Rev. 1379 (1995).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 5, 6, 8, 11, 14, 25, 28.

CASE NOTES

Section supports adjusting terms of agreements. —

The change from the common law of contracts found in subsection (1) supports the common business practice of adjusting the terms of agreements as conditions change. United States ex rel. Crane Co. v. Progressive Enters., Inc., 418 F. Supp. 662, 1976 U.S. Dist. LEXIS 13542 (E.D. Va. 1976).

A modification of a prior agreement needs no consideration to be binding. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Limited by good faith. —

The ability to modify a sales agreement is limited by the general Uniform Commercial Code requirement of good faith. United States ex rel. Crane Co. v. Progressive Enters., Inc., 418 F. Supp. 662, 1976 U.S. Dist. LEXIS 13542 (E.D. Va. 1976).

Modification of sales price. —

In the context of a lengthy, ongoing business relationship, seeking modification of a sales price is not uncommon and, given increased costs, is a fair method of doing business in order to preserve the desirability of the relationship for both parties. In such a situation, the parties must be able to rely on objective, unequivocal manifestations of assent. United States ex rel. Crane Co. v. Progressive Enters., Inc., 418 F. Supp. 662, 1976 U.S. Dist. LEXIS 13542 (E.D. Va. 1976).

The buyer must display some protest against the higher price in order to put the seller on notice that the modification is not freely entered into. United States ex rel. Crane Co. v. Progressive Enters., Inc., 418 F. Supp. 662, 1976 U.S. Dist. LEXIS 13542 (E.D. Va. 1976).

CIRCUIT COURT OPINIONS

Modification of a prior agreement. —

To the extent that an order confirmation included additional terms not part of the existing agreement between the parties, those additional terms were construed as proposals for addition to the contract, which proposal a buyer accepted by signing and returning the order confirmation. Colonna's Shipyard, Inc. v. Alpha Pipe Co., 2012 Va. Cir. LEXIS 210 (Norfolk Aug. 27, 2012).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1)—Compare Section 1, Uniform Written Obligations Act; Subsections (2) to (5)—none.

Purposes of changes and new matter:

  1. This section seeks to protect and make effective all necessary and desirable modifications of sales contracts without regard to the technicalities which at present hamper such adjustments.
  2. Subsection (1) provides that an agreement modifying a sales contract needs no consideration to be binding.
  3. Subsections (2) and (3) are intended to protect against false allegations of oral modifications. “Modification or rescission” includes abandonment or other change by mutual consent, contrary to the decision in Green v. Doniger, 300 N.Y. 238, 90 N.E.2d 56 (1949); it does not include unilateral “termination” or “cancellation” as defined in Section 2-106.
  4. Subsection (4) is intended, despite the provisions of subsections (2) and (3), to prevent contractual provisions excluding modification except by a signed writing from limiting in other respects the legal effect of the parties’ actual later conduct. The effect of such conduct as a waiver is further regulated in subsection (5).

However, modifications made thereunder must meet the test of good faith imposed by this Act. The effective use of bad faith to escape performance on the original contract terms is barred, and the extortion of a “modification” without legitimate commercial reason is ineffective as a violation of the duty of good faith. Nor can a mere technical consideration support a modification made in bad faith.

The test of “good faith” between merchants or as against merchants includes “observance of reasonable commercial standards of fair dealing in the trade” (Section 2-103), and may in some situations require an objectively demonstrable reason for seeking a modification. But such matters as a market shift which makes a performance come to involve a loss may provide such a reason even though there is no such unforeseen difficulty as would make out a legal excuse from performance under Sections 2-615 and 2-616.

The Statute of Frauds provisions of this Article are expressly applied to modifications by subsection (3). Under those provisions the “delivery and acceptance” test is limited to the goods which have been accepted, that is, to the past. “Modification” for the future cannot therefore be conjured up by oral testimony if the price involved is $500.00 or more since such modification must be shown at least by an authenticated memo. And since a memo is limited in its effect to the quantity of goods set forth in it there is safeguard against oral evidence.

Subsection (2) permits the parties in effect to make their own Statute of Frauds as regards any future modification of the contract by giving effect to a clause in a signed agreement which expressly requires any modification to be by signed writing. But note that if a consumer is to be held to such a clause on a form supplied by a merchant it must be separately signed.

Cross references:

Point 1: Section 1-203 .

Point 2: Sections 1-201 , 1-203 , 2-615 and 2-616.

Point 3: Sections 2-106, 2-201 and 2-202.

Point 4: Sections 2-202 and 2-208.

Definitional cross references:

“Agreement”. Section 1-201 .

“Between merchants”. Section 2-104.

“Contract”. Section 1-201 .

“Notification”. Section 1-201 .

“Signed”. Section 1-201 .

“Term”. Section 1-201 .

“Writing”. Section 1-201 .

VIRGINIA COMMENT

Subsection 8.2-209(1) , providing that an agreement modifying a contract within this title is binding without consideration, probably changes Virginia law as stated in Georgetown v. Reynolds, 161 Va. 164 , 173, 170 S.E. 741 (1933), citing Richmond Leather Manufacturing Co. v. Fawcett, 130 Va. 484 , 107 S.E. 800 (1921), for the proposition that a purchaser, who told the seller that if he continued to ship there would be no lawsuit, was held not to be bound by his promise not to sue.

Virginia law has recognized that a stipulation in a written contract that it can only be modified by a writing can be rescinded by an oral agreement. Zurich General Accident and Liability Insurance Co., Ltd. v. Baum, 159 Va. 404 , 409, 165 S.E. 518 (1932). Subsection 8.2-209(2) modifies this rule.

Prior Virginia law is in accord with subsection 8.2-209(5) in recognizing that the waiver of an executory portion of a contract may be retracted by giving reasonable notification that strict performance is to be required. Cocoa Products Co. of America, Inc. v. Duche, 156 Va. 86 , 97, 158 S.E. 719 (1931); Richmond Leather Manufacturing Co. v. Fawcett, 130 Va. 484 , 506, 107 S.E. 800 (1921).

The UCC does not say whether causes of action for breaches survive termination of contracts by mutual agreement. Under prior Virginia law such causes of action do not survive, unless expressly reserved. Plant Lipford, Inc. v. E. W. Gates & Son Co., 141 Va. 325 , 335, 127 S.E. 183 (1925); Juniper Lumber Co. v. John M. Nelson, Jr., Inc., 133 Va. 146 , 156-57, 112 S.E. 564 , 24 A.L.R. 247 (1922).

§ 8.2-210. Delegation of performance; assignment of rights.

  1. A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.
  2. Except as otherwise provided in § 8.9A-406 , unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor’s due performance of his entire obligation can be assigned despite agreement otherwise.
  3. The creation, attachment, perfection, or enforcement of a security interest in the seller’s interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer’s chance of obtaining return performance within the purview of subsection (2) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but (i) the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.
  4. Unless the circumstances indicate the contrary a prohibition of assignment of “the contract” is to be construed as barring only the delegation to the assignee of the assignor’s performance.
  5. An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.
  6. The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (§ 8.2-609 ).

History. 1964, c. 219; 2000, c. 1007.

The 2000 amendments.

The 2000 amendment by c. 1007, effective July 1, 2001, added “Except as otherwise provided in § 8.9A-406 ” at the beginning of subdivision (2); added present subdivision (3); and redesignated former subdivisions (3), (4), and (5) as present subdivisions (4), (5), and (6), respectively.

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 2. Potential Jurisdiction. § 2.02 Subject Matter Jurisdiction. Bryson.

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assignments, §§ 7, 13; 3C M.J. Commercial Law, § 9.

CASE NOTES

Offer and acceptance of assignment. —

Subsection (4) indicates that there must be an offer of assignment and an acceptance of the assignment. Virginia Block Co. v. Virginia Wilbert Vault Co., 8 Bankr. 616, 1981 Bankr. LEXIS 5014 (Bankr. W.D. Va. 1981).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Generally, this section recognizes both delegation of performance and assignability as normal impermissible incidents of a contract for the sale of goods.
  2. Delegation of performance, either in conjunction with an assignment or otherwise, is provided for by subsection (1) where no substantial reason can be shown as to why the delegated performance will not be as satisfactory as personal performance.
  3. Under subsection (2) rights which are no longer executory such as a right to damages for breach may be assigned although the agreement prohibits assignment. In such cases no question of delegation of any performance is involved. Subsection (2) is subject to Section 9-406, which makes rights to payment for goods sold (“accounts”), whether or not earned, freely alienable notwithstanding a contrary agreement or rule of law.
  4. The nature of the contract or the circumstances of the case, however, may bar assignment of the contract even where delegation of performance is not involved. This Article and this section are intended to clarify this problem, particularly in cases dealing with output requirement and exclusive dealing contracts. In the first place the section on requirements and exclusive dealing removes from the construction of the original contract most of the “personal discretion” element by substituting the reasonably objective standard of good faith operation of the plant or business to be supplied. Secondly, the section on insecurity and assurances, which is specifically referred to in subsection (5) of this section, frees the other party from the doubts and uncertainty which may afflict him under an assignment of the character in question by permitting him to demand adequate assurance of due performance without which he may suspend his own performance. Subsection (5) is not in any way intended to limit the effect of the section on insecurity and assurances and the word “performance” includes the giving of orders under a requirements contract. Of course, in any case where a material personal discretion is sought to be transferred, effective assignment is barred by subsection (2).
  5. Subsection (4) lays down a general rule of construction distinguishing between a normal commercial assignment, which substitutes the assignee for the assignor both as to rights and duties, and a financing assignment in which only the assignor’s rights are transferred.
  6. Subsection (5) recognizes that the non-assigning original party has a stake in the reliability of the person with whom he has closed the original contract, and is, therefore, entitled to due assurance that any delegated performance will be properly forthcoming.
  7. This section is not intended as a complete statement of the law of delegation and assignment but is limited to clarifying a few points doubtful under the case law. Particularly, neither this section nor this Article touches directly on such questions as the need or effect of notice of the assignment, the rights of successive assignees, or any question of the form of an assignment, either as between the parties or as against any third parties. Some of these questions are dealt with in Article 9.

This Article takes no position on the possibility of extending some recognition or power to the original parties to work out normal commercial readjustments of the contract in the case of financing assignments even after the original obligor has been notified of the assignment. This question is dealt with in the Article on Secured Transactions (Article 9).

Cross references:

Point 3: Article 5 and 9.

Point 4: Sections 2-306 and 2-609.

Point 5: Article 9, Sections 9-317 and 9-318.

Point 7: Article 9.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Party”. Section 1-201 .

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

“Term”. Section 1-201 .

VIRGINIA COMMENT

This section takes a more liberal view as to the assignment of a sales contract than was expressed in J. Maury Dove Co. v. New River Coal Co., 150 Va. 796 , 827, 143 S.E. 317 (1928), which held that a contract for the purchase of coal, subject to cancellation if the seller found that the buyer’s credit had been impaired, could not be assigned without the consent of the seller. See also Eastern Coal and Export Corp. v. Beasley & Blandford, 121 Va. 4 , 10-11, 92 S.E. 824 (1917).

PART 3. General Obligation and Construction of Contract.

§ 8.2-301. General obligations of parties.

The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 21-23.

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 11 and 41, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes:

This section uses the term “obligation” in contrast to the term “duty” in order to provide for the “condition” aspects of delivery and payment insofar as they are not modified by other sections of this Article such as those on cure of tender. It thus replaces not only the general provisions of the Uniform Sales Act on the parties’ duties, but also the general provisions of that Act on the effect of conditions. In order to determine what is “in accordance with the contract” under this Article usage of trade, course of dealing and performance, and the general background of circumstances must be given due consideration in conjunction with the lay meaning of the words used to define the scope of the conditions and duties.

Cross references:

Section 1-106. See also Sections 1-205 , 2-208, 2-209, 2-508 and 2-612.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Party”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-302. Unconscionable contract or clause.

  1. If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
  2. When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

History. 1964, c. 219.

Law Review.

For note, “Commercial Decency and The Code — The Doctrine of Unconscionability Vindicated,” see 9 Wm. & Mary L. Rev. 1143 (1968).

For note discussing pre-judgment attachment in the context of consumer due process, see 14 Wm. & Mary L. Rev. 337 (1972).

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For article, “Revamping Consumer-Credit Contract Law,” see 68 Va. L. Rev. 1333 (1982).

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 6. Pleading. § 6.03 Defendant’s Pleadings. Bryson.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 24 Contract Actions. § 24.04 Specific Performance. Friend.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 2, 4, 11, 28, 31.

CASE NOTES

Unconscionability is a matter of law for decision by the court. —

See Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

The essence of unconscionability in the context of a disclaimer of liability for consequential damages is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Contract held unconscionable. —

Where debtors moved from West Virginia to Virginia where the husband had taken an executive position with a new employer, and where complete furniture delivery and installation had been made to their new home before their arrival and without their knowledge, and the debtors had no freedom to retract, reject or repudiate the furniture transaction, whether it be for cash or credit, since the husband was for all intents and purposes at the time in question beholden to the furniture company because of its relationship with his new employer, it would have been unconscionable for the court to require total compliance with the agreement which was made upon such unequal terms that the harshness thereof would contravene the intent of the drafters of this section. Costner's Furn., Inc. v. Cawthorn, 1 Bankr. 267, 1979 Bankr. LEXIS 803 (Bankr. W.D. Va. 1979).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section is intended to make it possible for the courts to police explicitly against the contracts or clauses which they find to be unconscionable. In the past such policing has been accomplished by adverse construction of language, by manipulation of the rules of offer and acceptance or by determinations that the clause is contrary to public policy or to the dominant purpose of the contract. This section is intended to allow the court to pass directly on the unconscionability of the contract or particular clause therein and to make a conclusion of law as to its unconscionability. The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. Subsection (2) makes it clear that it is proper for the court to hear evidence upon these questions. The principle is one of the prevention of oppression and unfair surprise (Cf. Campbell Soup Co. v. Wentz, 172 F.2d 80, 3d Cir. 1948) and not of disturbance of allocation of risks because of superior bargaining power. The underlying basis of this section is illustrated by the results in cases such as the following:
  2. Under this section the court, in its discretion, may refuse to enforce the contract as a whole if it is permeated by the unconscionability, or it may strike any single clause or group of clauses which are so tainted or which are contrary to the essential purpose of the agreement, or it may simply limit unconscionable clauses so as to avoid unconscionable results.
  3. The present section is addressed to the court, and the decision is to be made by it. The commercial evidence referred to in subsection (2) is for the court’s consideration, not the jury’s. Only the agreement which results from the court’s action on these matters is to be submitted to the general triers of the facts.

Kansas City Wholesale Grocery Co. v. Weber Packing Corporation, 93 Utah 414, 73 P.2d 1272 (1937), where a clause limiting time for complaints was held inapplicable to latent defects in a shipment of catsup which could be discovered only by microscopic analysis; Hardy v. General Motors Acceptance Corporation, 38 Ga. App. 463, 144 S.E. 327 (1928), holding that a disclaimer of warranty clause applied only to express warranties, thus letting in a fair implied warranty; Andrews Bros. v. Singer & Co. (1934 CA) 1 K.B. 17, holding that where a car with substantial mileage was delivered instead of a “new” car, a disclaimer of warranties, including those “implied,” left unaffected an “express obligation” on the description, even though the Sale of Goods Act called such an implied warranty; New Prague Flouring Mill Co. v. G. A. Spears, 194 Iowa 417, 189 N.W. 815 (1922), holding that a clause permitting the seller, upon the buyer’s failure to supply shipping instructions, to cancel, ship, or allow delivery date to be indefinitely postponed 30 days at a time by the inaction, does not indefinitely postpone the date of measuring damages for the buyer’s breach, to the seller’s advantage; and Kansas Flour Mills Co. v. Dirks, 100 Kan. 376, 164 P. 273 (1917), where under a similar clause in a rising market the court permitted the buyer to measure his damages for non-delivery at the end of only one 30 day postponement; Green v. Arcos, Ltd. (1931 Ca) 47 T.L.R. 336, where a blanket clause prohibiting rejection of shipments by the buyer was restricted to apply to shipments where discrepancies represented merely mercantile variations; Meyer v. Packard Cleveland Motor Co., 106 Ohio St. 328, 140 N.E. 118 (1922), in which the court held that a “waiver” of all agreements not specified did not preclude implied warranty of fitness of a rebuilt dump truck for ordinary use as a dump truck; Austin Co. v. J. H. Tillman Co., 104 Or. 541, 209 P. 131 (1922), where a clause limiting the buyer’s remedy to return was held to be applicable only if the seller had delivered a machine needed for a construction job which reasonably met the contract description; Bekkevold v. Potts, 173 Minn. 87, 216 N.W. 790, 59 A.L.R. 1164 (1927), refusing to allow warranty of fitness for purpose imposed by law to be negated by clause excluding all warranties “made” by the seller; Robert A. Munroe & Co. v. Meyer (1930) 2 K.B. 312, holding that the warranty of description overrides a clause reading “with all faults and defects” where adulterated meat not up to the contract description was delivered.

Definitional cross reference:

“Contract”. Section 1-201 .

§ 8.2-303. Allocation or division of risks.

Where this title allocates a risk or a burden as between the parties “unless otherwise agreed,” the agreement may not only shift the allocation but may also divide the risk or burden.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 19.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section is intended to make it clear that the parties may modify or allocate “unless otherwise agreed” risks or burdens imposed by this Article as they desire, always subject, of course, to the provisions on unconscionability.
  2. The risk or burden may be divided by the express terms of the agreement or by the attending circumstances, since under the definition of “agreement” in this Act the circumstances surrounding the transaction as well as the express language used by the parties enter into the meaning and substance of the agreement.

Compare Section 1-102(4).

Cross references:

Point 1: Sections 1-102, 2-302.

Point 2: Section 1-201 .

Definitional cross references:

“Party”. Section 1-201 .

“Agreement”. Section 1-201 .

§ 8.2-304. Price payable in money, goods, realty, or otherwise.

  1. The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
  2. Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller’s obligations with reference to them are subject to this title, but not the transfer of the interest in realty or the transferor’s obligations in connection therewith.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 23.

OFFICIAL COMMENT

Prior uniform statutory provisions: Subsections (2) and (3) of Section 9, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes:

  1. This section corrects the phrasing of the Uniform Sales Act so as to avoid misconstruction and produce greater accuracy in commercial result. While it continues the essential intent and purpose of the Uniform Sales Act it rejects any purely verbalistic construction in disregard of the underlying reason of the provisions.
  2. Under subsection (1) the provisions of this Article are applicable to transactions where the “price” of goods is payable in something other than money. This does not mean, however, that this whole Article applies automatically and in its entirety simply because an agreed transfer of title to goods is not a gift. The basic purposes and reasons of the Article must always be considered in determining the applicability of any of its provisions.
  3. Subsection (2) lays down the general principle that when goods are to be exchanged for realty, the provisions of this Article apply only to those aspects of the transaction which concern the transfer of title to goods but do not affect the transfer of the realty since the detailed regulation of various particular contracts which fall outside the scope of this Article is left to the courts and other legislation. However, the complexities of these situations may be such that each must be analyzed in the light of the underlying reasons in order to determine the applicable principles. Local statutes dealing with realty are not to be lightly disregarded or altered by language of this Article. In contrast, this Article declares definite policies in regard to certain matters legitimately within its scope though concerned with real property situations, and in those instances the provisions of this Article control.

Cross references:

Point 1: Section 1-102.

Point 3: Sections 1-102, 1-103, 1-104 and 2-107.

Definitional cross references:

“Goods”. Section 2-105.

“Money”. Section 1-201 .

“Party”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

The possibility of treating an exchange of chattels as involving two sales was not discussed in Philip Greenberg, Inc. v. Dunville, 166 Va. 398 , 185 S.E. 892 (1936).

§ 8.2-305. Open price term.

  1. The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if
    1. nothing is said as to price; or
    2. the price is left to be agreed by the parties and they fail to agree; or
    3. the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
  2. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
  3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
  4. Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

History. 1964, c. 219.

Law Review.

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 12, 23, 32.

CASE NOTES

This section authorizes the court to fill in a gap which the parties have intentionally left open with respect to sale price, but by its own terms it applies only where the parties intended to conclude a contract. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Parties’ words and conduct must manifest intention to be bound. —

While the UCC has greatly modified the rigors of the common-law rules governing the formation of contracts, it remains a prerequisite that the parties’ words and conduct must manifest an intention to be bound. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Although the parties may make a contract which deliberately leaves material terms open for future determination, no contract results where their words and conduct demonstrate a lack of intention to contract. Such a lack is not remedied by evidence of custom and usage in the trade, or by a written memorandum purporting to confirm oral discussions which did not in themselves amount to an agreement. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 9 and 10, Uniform Sales Act.

Changes: Completely rewritten.

Purposes of changes:

  1. This section applies when the price term is left open on the making of an agreement which is nevertheless intended by the parties to be a binding agreement. This Article rejects in these instances the formula that “an agreement to agree is unenforceable” if the case falls within subsection (1) of this section, and rejects also defeating such agreements on the ground of “indefiniteness”. Instead this Article recognizes the dominant intention of the parties to have the deal continue to be binding upon both. As to future performance, since this Article recognizes remedies such as cover (Section 2-712), resale (Section 2-706) and specific performance (Section 2-716) which go beyond any mere arithmetic as between contract price and market price, there is usually a “reasonably certain basis for granting an appropriate remedy for breach” so that the contract need not fail for indefiniteness.
  2. Under some circumstances the postponement of agreement on price will mean that no deal has really been concluded, and this is made express in the preamble of subsection (1) (“The parties if they so intend”) and in subsection (4). Whether or not this is so is, in most cases, a question to be determined by the trier of fact.
  3. Subsection (2), dealing with the situation where the price is to be fixed by one party rejects the uncommercial idea that an agreement that the seller may fix the price means that he may fix any price he may wish by the express qualification that the price so fixed must be fixed in good faith. Good faith includes observance of reasonable commercial standards of fair dealing in the trade if the party is a merchant. (Section 2-103). But in the normal case a “posted price” or a future seller’s or buyer’s “given price,” “price in effect,” “market price,” or the like satisfies the good faith requirement.
  4. The section recognizes that there may be cases in which a particular person’s judgment is not chosen merely as a barometer or index of a fair price but is an essential condition to the parties’ intent to make any contract at all. For example, the case where a known and trusted expert is to “value” a particular painting for which there is no market standard differs sharply from the situation where a named expert is to determine the grade of cotton, and the difference would support a finding that in the one the parties did not intend to make a binding agreement if that expert were unavailable whereas in the other they did so intend. Other circumstances would of course affect the validity of such a finding.
  5. Under subsection (3), wrongful interference by one party with any agreed machinery for price fixing in the contract may be treated by the other party as a repudiation justifying cancellation, or merely as a failure to take cooperative action thus shifting to the aggrieved party the reasonable leeway in fixing the price.
  6. Throughout the entire section, the purpose is to give effect to the agreement which has been made. That effect, however, is always conditioned by the requirement of good faith action which is made an inherent part of all contracts within this Act. (Section 1-203 ).

Cross references:

Point 1: Sections 2-204(3), 2-706, 2-712 and 2-716.

Point 3: Section 2-103.

Point 5: Sections 2-311 and 2-610.

Point 6: Section 1-203 .

Definitional cross references:

“Agreement”. Section 1-201 .

“Burden of establishing”. Section 1-201 .

“Buyer”. Section 2-103.

“Cancellation”. Section 2-106.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Fault”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Receipt of goods”. Section 2-103.

“Seller”. Section 2-103.

“Term”. Section 1-201 .

VIRGINIA COMMENT

C. G. Blake Co., Inc. v. W. R. Smith and Son, Ltd., 147 Va. 960 , 973-81, 133 S.E. 685 (1926), discusses the interpretation of a clause providing that the “price inserted is based upon the government fixed price and subject to any revision.”

§ 8.2-306. Output, requirements and exclusive dealings.

  1. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
  2. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

History. 1964, c. 219.

Law Review.

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 12.

CASE NOTES

Written sales brochures given by seller to purchaser stated a sufficiently definite quantity for purposes of the statute of frauds, where they referred to meeting the purchaser’s needs. Barber & Ross Co. v. Lifetime Doors, Inc., 810 F.2d 1276, 1987 U.S. App. LEXIS 1480 (4th Cir.), cert. denied, 484 U.S. 823, 108 S. Ct. 86, 98 L. Ed. 2d 48, 1987 U.S. LEXIS 3504 (1987).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Subsection (1) of this section in regard to output and requirements, applies to this specific problem the general approach of this Act which requires the reading of commercial background and intent into the language of any agreement and demands good faith in the performance of that agreement. It applies to such contracts of nonproducing establishments such as dealers or distributors as well as to manufacturing concerns.
  2. Under this Article, a contract for output or requirements is not too indefinite since it is held to mean the actual good faith output or requirements of the particular party. Nor does such a contract lack mutuality of obligation since, under this section, the party who will determine quantity is required to operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure. Reasonable elasticity in the requirements is expressly envisaged by this section and good faith variations from prior requirements are permitted even when the variation may be such as to result in discontinuance. A shut-down by a requirements buyer for lack of orders might be permissible when a shut-down merely to curtail losses would not. The essential test is whether the party is acting in good faith. Similarly, a sudden expansion of the plant by which requirements are to be measured would not be included within the scope of the contract as made but normal expansion undertaken in good faith would be within the scope of this section. One of the factors in an expansion situation would be whether the market price had risen greatly in a case in which the requirements contract contained a fixed price. Reasonable variation of an extreme sort is exemplified in Southwest Natural Gas Co. v. Oklahoma Portland Cement Co., 102 F.2d 630 (C.C.A. 10, 1939). This Article takes no position as to whether a requirements contract is a provable claim in bankruptcy.
  3. If an estimate of output or requirements is included in the agreement, no quantity unreasonably disproportionate to it may be tendered or demanded. Any minimum or maximum set by the agreement shows a clear limit on the intended elasticity. In similar fashion, the agreed estimate is to be regarded as a center around which the parties intend the variation to occur.
  4. When an enterprise is sold, the question may arise whether the buyer is bound by an existing output or requirements contract. That question is outside the scope of this Article, and is to be determined on other principles of law. Assuming that the contract continues, the output or requirements in the hands of the new owner continue to be measured by the actual good faith output or requirements under the normal operation of the enterprise prior to sale. The sale itself is not grounds for sudden expansion or decrease.
  5. Subsection (2), on exclusive dealing, makes explicit the commercial rule embodied in this Act under which the parties to such contracts are held to have impliedly, even when not expressly, bound themselves to use reasonable diligence as well as good faith in their performance of the contract. Under such contracts the exclusive agent is required, although no express commitment has been made, to use reasonable effort and due diligence in the expansion of the market or the promotion of the product, as the case may be. The principal is expected under such a contract to refrain from supplying any other dealer or agent within the exclusive territory. An exclusive dealing agreement brings into play all of the good faith aspects of the output and requirement problems of subsection (1). It also raises questions of insecurity and right to adequate assurance under this Article.

Cross references:

Point 4: Section 2-210.

Point 5: Sections 1-203 and 2-609.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Good faith”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Term”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Prior Virginia law has recognized that “requirements” contracts are sufficiently definite so as to be enforceable. C. G. Blake, Inc. v. W. R. Smith and Son, Ltd., 147 Va. 960 , 973, 133 S.E. 685 (1926); Mathieson Alkali Works v. Virginia Banner Coal Corp., 147 Va. 125 , 135-36, 143-49, 136 S.E. 673 (1927); New Idea Spreader Co. v. R. M. Rogers & Sons, 122 Va. 54 , 64-65, 94 S.E. 351 (1917); Smokeless Fuel Co. v. W. E. Seaton & Sons, 105 Va. 170 , 174, 52 S.E. 829 (1906). A requirements contract is not one for such quantity as the purchaser may see fit to order, but a contract for a reasonable quantity by a good faith buyer, and a buyer whose requirements do not equal a stated estimate is not required to take the estimated figure. Mathieson Alkali Works v. Virginia Banner Coal Corp., 147 Va. 125 , 141-50, 136 S.E. 673 (1927). See Standard Ice Co. v. Lynchburg Diamond Ice Factory, 129 Va. 521 , 527-32, 106 S.E. 390 (1921), for construction of “the full making capacity of the plant.” See also Potts v. Mathieson Alkali Works, 165 Va. 196 , 215-18, 181 S.E. 521 (1935).

The Official Comment, point 4, indicates that the UCC does not cover the situation presented in Wiseman v. Dennis, 156 Va. 431 , 435, 157 S.E. 716 (1931), in which it was held that a buyer could not avoid a requirements contract by selling his business.

§ 8.2-307. Delivery in single lot or several lots.

Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 12, 22, 23.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 45(1), Uniform Sales Act.

Changes: Rewritten and expanded.

Purposes of changes:

  1. This section applies where the parties have not specifically agreed whether delivery and payment are to be by lots and generally continues the essential intent of original Act, Section 45(1) by assuming that the parties intended delivery to be in a single lot.
  2. Where the actual agreement or the circumstances do not indicate otherwise, delivery in lots is not permitted under this section and the buyer is properly entitled to reject for a deficiency in the tender, subject to any privilege in the seller to cure the tender.
  3. The “but” clause of this section goes to the case in which it is not commercially feasible to deliver or to receive the goods in a single lot as for example, where a contract calls for the shipment of ten carloads of coal and only three cars are available at a given time. Similarly, in a contract involving brick necessary to build a building the buyer’s storage space may be limited so that it would be impossible to receive the entire amount of brick at once, or it may be necessary to assemble the goods as in the case of cattle on the range, or to mine them.
  4. Where the circumstances indicate that a party has a right to delivery in lots, the price may be demanded for each lot if it is apportionable.

In such cases, a partial delivery is not subject to rejection for the defect in quantity alone, if the circumstances do not indicate a repudiation or default by the seller as to the expected balance or do not give the buyer ground for suspending his performance because of insecurity under the provisions of Section 2-609. However, in such cases the undelivered balance of goods under the contract must be forthcoming within a reasonable time and in a reasonable manner according to the policy of Section 2-503 on manner of tender of delivery. This is reinforced by the express provisions of Section 2-608 that if a lot has been accepted on the reasonable assumption that its nonconformity will be cured, the acceptance may be revoked if the cure does not seasonably occur. The section rejects the rule of Kelly Construction Co. v. Hackensack Brick Co., 91 N.J.L. 585, 103 A. 417, 2 A.L.R. 685 (1918) and approves the result in Lynn M. Ranger, Inc. v. Gildersleeve, 106 Conn. 372, 138 A. 142 (1927) in which a contract was made for six carloads of coal then rolling from the mines and consigned to the seller but the seller agreed to divert the carloads to the buyer as soon as the car numbers became known to him. He arranged a diversion of two cars and then notified the buyer who then repudiated the contract. The seller was held to be entitled to his full remedy for the two cars diverted because simultaneous delivery of all of the cars was not contemplated by either party.

Cross references:

Point 1: Section 1-201 .

Point 2: Sections 2-508 and 2-601.

Point 3: Sections 2-503, 2-608 and 2-609.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Lot”. Section 2-105.

“Party”. Section 1-201 .

“Rights”. Section 1-201 .

§ 8.2-308. Absence of specified place for delivery.

Unless otherwise agreed

  1. the place for delivery of goods is the seller’s place of business or if he has none his residence; but
  2. in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
  3. documents of title may be delivered through customary banking channels.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 22.

OFFICIAL COMMENT

Prior uniform statutory provision: Paragraphs (a) and (b)—Section 43(1), Uniform Sales Act; Paragraph (c)—none.

Changes: Slight modification in language.

Purposes of changes and new matter:

  1. Paragraphs (a) and (b) provide for those noncommercial sales and for those occasional commercial sales where no place or means of delivery has been agreed upon by the parties. Where delivery by carrier is “required or authorized by the agreement”, the seller’s duties as to delivery of the goods are governed not by this section but by Section 2-504.
  2. Under paragraph (b) when the identified goods contracted for are known to both parties to be in some location other than the seller’s place of business or residence, the parties are presumed to have intended that place to be the place of delivery. This paragraph also applies (unless, as would be normal, the circumstances show that delivery by way of documents is intended) to a bulk of goods in the possession of a bailee. In such a case, however, the seller has the additional obligation to procure the acknowledgment by the bailee of the buyer’s right to possession.
  3. Where “customary banking channels” call only for due notification by the banker that the documents are on hand, leaving the buyer himself to see to the physical receipt of the goods, tender at the buyer’s address is not required under paragraph (c). But that paragraph merely eliminates the possibility of a default by the seller if “customary banking channels” have been properly used in giving notice to the buyer. Where the bank has purchased a draft accompanied by documents or has undertaken its collection on behalf of the seller, Part 5 of Article 4 spells out its duties and relations to its customer. Where the documents move forward under a letter of credit the Article on Letters of Credit spells out the duties and relations between the bank, the seller and the buyer.
  4. The rules of this section apply only “unless otherwise agreed.” The surrounding circumstances, usage of trade, course of dealing and course of performance, as well as the express language of the parties may constitute an “otherwise agreement”.

Cross references:

Point 1: Sections 2-504 and 2-505.

Point 2: Section 2-503.

Point 3: Section 2-512, Articles 4, Part 5, and 5.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Delivery”. Section 1-201 .

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Virginia has also indicated, in accord with this section, that the place of delivery, unless otherwise agreed, is at the seller’s place of business, or if he has none, at his residence. Geoghegan Sons & Co. v. Arbuckle Bros., 139 Va. 92 , 105, 123 S.E. 387 , 36 A.L.R. 399 (1924); Blenner v. Vim Motor Truck Co., 136 Va. 189 , 204-05, 117 S.E. 834 (1923).

§ 8.2-309. Absence of specific time provisions; notice of termination.

  1. The time for shipment or delivery or any other action under a contract if not provided in this title or agreed upon shall be a reasonable time.
  2. Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
  3. Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 8, 12, 22, 23.

CASE NOTES

Effect of antitrust laws. —

A termination that is otherwise valid under this section may still be unreasonable under the antitrust laws. Barber & Ross Co. v. Lifetime Doors, Inc., 810 F.2d 1276, 1987 U.S. App. LEXIS 1480 (4th Cir.), cert. denied, 484 U.S. 823, 108 S. Ct. 86, 98 L. Ed. 2d 48, 1987 U.S. LEXIS 3504 (1987).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1)—see Sections 43(2), 45(2), 47(1) and 48, Uniform Sales Act, for policy continued under this Article, Subsection (2)—none; Subsection (3)—none.

Changes: Completely different in scope.

Purposes of changes and new matter:

  1. Subsection (1) requires that all actions taken under a sales contract must be taken within a reasonable time where no time has been agreed upon. The reasonable time under this provision turns on the criteria as to “reasonable time” and on good faith and commercial standards set forth in Sections 1-203 , 1-204 and 2-103. It thus depends upon what constitutes acceptable commercial conduct in view of the nature, purpose and circumstances of the action to be taken. Agreement as to a definite time, however, may be found in a term implied from the contractual circumstances, usage of trade or course of dealing or performance as well as in an express term. Such cases fall outside of this subsection since in them the time for action is “agreed” by usage.
  2. The time for payment, where not agreed upon, is related to the time for delivery; the particular problems which arise in connection with determining the appropriate time of payment and the time for any inspection before payment which is both allowed by law and demanded by the buyer are covered in Section 2-513.
  3. The facts in regard to shipment and delivery differ so widely as to make detailed provision for them in the text of this Article impracticable. The applicable principles, however, make it clear that surprise is to be avoided, good faith judgment is to be protected, and notice or negotiation to reduce the uncertainty to certainty is to be favored.
  4. When the time for delivery is left open, unreasonably early offers of or demands for delivery are intended to be read under this Article as expressions of desire or intention, requesting the assent or acquiescence of the other party, not as final positions which may amount without more to breach or to create breach by the other side. See Sections 2-207 and 2-609.
  5. The obligation of good faith under this Act requires reasonable notification before a contract may be treated as breached because a reasonable time for delivery or demand has expired. This operates both in the case of a contract originally indefinite as to time and of one subsequently made indefinite by waiver.
  6. Parties to a contract are not required in giving reasonable notification to fix, at peril of breach, a time which is in fact reasonable in the unforeseeable judgment of a later trier of fact. Effective communication of a proposed time limit calls for a response, so that failure to reply will make out acquiescence. Where objection is made, however, or if the demand is merely for information as to when goods will be delivered or will be ordered out, demand for assurances on the ground of insecurity may be made under this Article pending further negotiations. Only when a party insists on undue delay or on rejection of the other party’s reasonable proposal is there a question of flat breach under the present section.
  7. Subsection (2) applies a commercially reasonable view to resolve the conflict which has arisen in the cases as to contracts of indefinite duration. The “reasonable time” of duration appropriate to a given arrangement is limited by the circumstances. When the arrangement has been carried on by the parties over the years, the “reasonable time” can continue indefinitely and the contract will not terminate until notice.
  8. Subsection (3) recognizes that the application of principles of good faith and sound commercial practice normally call for such notification of the termination of a going contract relationship as will give the other party reasonable time to seek a substitute arrangement. An agreement dispensing with notification or limiting the time for the seeking of a substitute arrangement is, of course, valid under this subsection unless the results of putting it into operation would be the creation of an unconscionable state of affairs.
  9. Justifiable cancellation for breach is a remedy for breach and is not the kind of termination covered by the present subsection.
  10. The requirement of notification is dispensed with where the contract provides for termination on the happening of an “agreed event.” “Event” is a term chosen here to contrast with “option” or the like.

When both parties let an originally reasonable time go by in silence, the course of conduct under the contract may be viewed as enlarging the reasonable time for tender or demand of performance. The contract may be terminated by abandonment.

Cross references:

Point 1: Sections 1-203 , 1-204 and 2-103.

Point 2: Sections 2-320, 2-321, 2-504, and 2-511 through 2-514.

Point 5: Section 1-203 .

Point 6: Section 2-609.

Point 7: Section 2-204.

Point 9: Sections 2-106, 2-318, 2-610 and 2-703.

Definitional cross references:

“Agreement”. Section 1-201 .

“Contract”. Section 1-201 .

“Notification”. Section 1-201 .

“Party”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Termination”. Section 2-106.

VIRGINIA COMMENT

This section is in accord with prior Virginia law, under which action must be taken within a reasonable time, when there is no specific provision relating to time. Norfolk & Western Railway Co. v. Duke & Rudacille, 107 Va. 764 , 768, 60 S.E. 96 (1908); Duke v. Norfolk & Western Railway Co., 106 Va. 152 , 155, 55 S.E. 548 (1906); Carpenter Co. v. Virginia-Carolina Chemical Co., 98 Va. 177 , 181-82, 35 S.E. 358 (1900). See also Fulton v. Henrico Lumber Co., 152 Va. 666 , 676, 148 S.E. 576 (1929), involving conflicting evidence as to the contractual provision relating to the time of delivery. By implication the section recognizes that a failure to make delivery at an agreed time constitutes a breach of a sales contract, a result that is in accord with W. S. Forbes & Co. v. Southern Cotton Oil Co., 130 Va. 245 , 252, 108 S.E. 15 (1921).

§ 8.2-310. Open time for payment or running of credit; authority to ship under reservation.

Unless otherwise agreed:

  1. payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
  2. if the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (§ 8.2-513 ); and
  3. if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due regardless of where the goods are to be received (i) at the time and place at which the buyer is to receive delivery of the tangible documents  or (ii) at the time the buyer is to receive delivery of the electronic documents and at the seller’s place of business or if none, the seller’s residence; and
  4. where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 rewrote subdivision (c), which formerly read: “if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received; and.”

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 12.

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 42 and 47(2), Uniform Sales Act.

Changes: Completely rewritten in this and other sections.

Purposes of changes: This section is drawn to reflect modern business methods of dealing at a distance rather than face to face. Thus:

  1. Paragraph (a) provides that payment is due at the time and place “the buyer is to receive the goods” rather than at the point of delivery except in documentary shipment cases (paragraph(c) ). This grants an opportunity for the exercise by the buyer of his preliminary right to inspection before paying even though under the delivery term the risk of loss may have previously passed to him or the running of the credit period has already started.
  2. Paragraph (b) while providing for inspection by the buyer before he pays, protects the seller. He is not required to give up possession of the goods until he has received payment, where no credit has been contemplated by the parties. The seller may collect through a bank by a sight draft against an order bill of lading “hold until arrival; inspection allowed.” The obligations of the bank under such a provision are set forth in Part 5 of Article 4. In the absence of a credit term, the seller is permitted to ship under reservation and if he does payment is then due where and when the buyer is to receive the documents.
  3. Unless otherwise agreed the place for the receipt of the documents and payment is the buyer’s city but the time for payment is only after arrival of the goods, since under paragraph (b), and Section 2-512 and 2-513 the buyer is under no duty to pay prior to inspection.
  4. Where the mode of shipment is such that goods must be unloaded immediately upon arrival, too rapidly to permit adequate inspection before receipt, the seller must be guided by the provisions of this Article on inspection which provide that if the seller wishes to demand payment before inspection, he must put an appropriate term into the contract. Even requiring payment against documents will not of itself have this desired result if the documents are to be held until the arrival of the goods. But under (b) and (c) if the terms are C.I.F., C.O.D., or cash against documents payment may be due before inspection.
  5. Paragraph (d) states the common commercial understanding that an agreed credit period runs from the time of shipment or from that dating of the invoice which is commonly recognized as a representation of the time of shipment. The provision concerning any delay in sending forth the invoice is included because such conduct results in depriving the buyer of his full notice and warning as to when he must be prepared to pay.

Cross references:

Generally: Part 5.

Point 1: Section 2-509.

Point 2: Sections 2-505, 2-511, 2-512, 2-513 and Article 4.

Point 3: Sections 2-308(b), 2-512 and 2-513.

Point 4: Section 2-513(3) (b).

Definitional cross references:

“Buyer”. Section 2-103.

“Delivery”. Section 1-201 .

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Receipt of goods”. Section 2-103.

“Seller”. Section 2-103.

“Send”. Section 1-201 .

“Term”. Section 1-201 .

§ 8.2-311. Options and cooperation respecting performance.

  1. An agreement for sale which is otherwise sufficiently definite (subsection (3) of § 8.2-204 ) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.
  2. Unless otherwise agreed specifications relating to assortment of the goods are at the buyer’s option and except as otherwise provided in subsections (1) (c) and (3) of § 8.2-319 specifications or arrangements relating to shipment are at the seller’s option.
  3. Where such specification would materially affect the other party’s performance but is not seasonably made or where one party’s cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies
    1. is excused for any resulting delay in his own performance; and
    2. may also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 12, 21, 22, 25.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Subsection (1) permits the parties to leave certain detailed particulars of performance to be filled in by either of them without running the risk of having the contract invalidated for indefiniteness. The party to whom the agreement gives power to specify the missing details is required to exercise good faith and to act in accordance with commercial standards so that there is no surprise and the range of permissible variation is limited by what is commercially reasonable. The “agreement” which permits one party so to specify may be found as well in a course of dealing, usage of trade, or implication from circumstances as in explicit language used by the parties.
  2. Options as to assortment of goods or shipping arrangements are specifically reserved to the buyer and seller respectively under subsection (2) where no other arrangement has been made. This section rejects the test which mechanically and without regard to usage or the purpose of the option gave the option to the party “first under a duty to move” and applies instead a standard commercial interpretation to these circumstances. The “unless otherwise agreed” provision of this subsection covers not only express terms but the background and circumstances which enter into the agreement.
  3. Subsection (3) applies when the exercise of an option or cooperation by one party is necessary to or materially affects the other party’s performance, but it is not seasonably forthcoming; the subsection relieves the other party from the necessity for performance or excuses his delay in performance as the case may be. The contract-keeping party may at his option under this subsection proceed to perform in any commercially reasonable manner rather than wait. In addition to the special remedies provided, this subsection also reserves “all other remedies”. The remedy of particular importance in this connection is that provided for insecurity. Request may also be made pursuant to the obligation of good faith for a reasonable indication of the time and manner of performance for which a party is to hold himself ready.
  4. The remedy provided in subsection (3) is one which does not operate in the situation which falls within the scope of Section 2-614 on substituted performance. Where the failure to cooperate results from circumstances set forth in that section, the other party is under a duty to proffer or demand (as the case may be) substitute performance as a condition to claiming rights against the non-cooperating party.

Cross references:

Point 1: Sections 1-201 , 2-204 and 1-203 .

Point 3: Sections 1-203 and 2-609.

Point 4: Section 2-614.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Virginia has reached the same result as provided for in subsection 8.2-311(3) , excusing a party who fails to receive seasonable cooperation from the other party for any resulting delay in his own performance. James River Lumber Co., Inc. v. Smith Bros., 135 Va. 406 , 416-18, 116 S.E. 241 (1923); Lewis v. Weldon, 24 Va. (3 Rand.) 71, 79-80 (1824).

Virginia is in accord with subsection 8.2-311(3) , having given similar effect to an express contractual clause providing that “failure to give prompt shipping instruction may, at seller’s option, be deemed refusal to take nitrate.” Wessel, Duval & Co. v. Crozet Cooperage Co., 143 Va. 469 , 473-76, 130 S.E. 393 (1925).

§ 8.2-312. Warranty of title and against infringement; buyer’s obligation against infringement.

  1. Subject to subsection (2) there is in a contract for sale a warranty by the seller that
    1. the title conveyed shall be good, and its transfer rightful; and
    2. the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
  2. A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
  3. Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

History. 1964, c. 219.

Research References.

Enforcement of Judgments and Liens in Virginia (Matthew Bender). 3. The Writ Firea Facies: Execution. § 3.6 Satisfaction of the Judgment; Sale of Tangible Property. Rendleman.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 16, 28, 32, 33; 5A M.J. Costs, § 7.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 13, Uniform Sales Act.

Changes: Completely rewritten, the provisions concerning infringement being new.

Purposes of changes:

  1. Subsection (1) makes provision for a buyer’s basic needs in respect to a title which he in good faith expects to acquire by his purchase, namely, that he receive a good, clean title transferred to him also in a rightful manner so that he will not be exposed to a lawsuit in order to protect it.
  2. The provisions of this Article requiring notification to the seller within a reasonable time after the buyer’s discovery of a breach apply to notice of a breach of the warranty of title, where the seller’s breach was innocent. However, if the seller’s breach was in bad faith he cannot be permitted to claim that he has been misled or prejudiced by the delay in giving notice. In such case the “reasonable” time for notice should receive a very liberal interpretation. Whether the breach by the seller is in good or bad faith Section 2-725 provides that the cause of action accrues when the breach occurs. Under the provisions of that section the breach of the warranty of good title occurs when tender of delivery is made since the warranty is not one which extends to “future performance of the goods.”
  3. When the goods are part of the seller’s normal stock and are sold in his normal course of business, it is his duty to see that no claim of infringement of a patent or trademark by a third party will mar the buyer’s title. A sale by a person other than a dealer, however, raises no implication in its circumstances of such a warranty. Nor is there such an implication when the buyer orders goods to be assembled, prepared or manufactured on his own specifications. If, in such a case, the resulting product infringes a patent or trademark, the liability will run from buyer to seller. There is, under such circumstances, a tacit representation on the part of the buyer that the seller will be safe in manufacturing according to the specifications, and the buyer is under an obligation in good faith to indemnify him for any loss suffered.
  4. This section rejects the cases which recognize the principle that infringements violate the warranty of title but deny the buyer a remedy unless he has been expressly prevented from using the goods. Under this Article “eviction” is not a necessary condition to the buyer’s remedy since the buyer’s remedy arises immediately upon receipt of notice of infringement; it is merely one way of establishing the fact of breach.
  5. Subsection (2) recognizes that sales by sheriffs, executors, foreclosing lienors and persons similarly situated may be so out of the ordinary commercial course that their peculiar character is immediately apparent to the buyer and therefore no personal obligation is imposed upon the seller who is purporting to sell only an unknown or limited right. This subsection does not touch upon and leaves open all questions of restitution arising in such cases, when a unique article so sold is reclaimed by a third party as the rightful owner.
  6. The warranty of subsection (1) is not designated as an “implied” warranty, and hence is not subject to Section 2-316 (3). Disclaimer of the warranty of title is governed instead by subsection (2), which requires either specific language or the described circumstances.

The warranty extends to a buyer whether or not the seller was in possession of the goods at the time the sale or contract to sell was made.

The warranty of quiet possession is abolished. Disturbance of quiet possession, although not mentioned specifically, is one way, among many, in which the breach of the warranty of title may be established.

The “knowledge” referred to in subsection 1(b) is actual knowledge as distinct from notice.

Foreclosure sales under Article 9 are another matter. Section 9-610 provides that a disposition of collateral under that section includes warranties such as those imposed by this section on a voluntary disposition of property of the kind involved. Consequently, unless properly excluded under subsection (2) or under the special provisions for exclusion in Section 9-610, a disposition under Section 9-610 of collateral consisting of goods includes the warranties imposed by subsection (1) and, if applicable, subsection (3).

Cross references:

Point 1: Section 2-403.

Point 2: Sections 2-607 and 2-725.

Point 3: Section 1-203 .

Point 4: Sections 2-609 and 2-725.

Point 6: Section 2-316.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Person”. Section 1-201 .

“Right”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

An express warranty of clear title in the sale of an automobile was involved in Silvey v. Johnston, 193 Va. 677 , 679, 70 S.E.2d 280 (1952), but Virginia has not had a case involving an implied warranty of title.

§ 8.2-313. Express warranties by affirmation, promise, description, sample.

  1. Express warranties by the seller are created as follows:
    1. Any affirmation of fact or promise made 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.
    2. 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.
    3. 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. It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

History. 1964, c. 219.

Law Review.

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For survey of Virginia commercial law for the year 1977-1978, see 64 Va. L. Rev. 1383 (1978).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For essay, “Proposed Legislation: A (Second) Modest Proposal to Protect Virginia Consumers Against Defective Products,” see 43 U. Rich. L. Rev. 19 (2008).

Michie’s Jurisprudence.

For related discussion, see 2B M.J. Automobiles, § 129; 3C M.J. Commercial Law, §§ 14, 17, 31.

CASE NOTES

The drafters of the Uniform Commercial Code intended to modify the traditional requirement of buyer reliance on express warranties. Daughtrey v. Ashe, 243 Va. 73 , 413 S.E.2d 336, 8 Va. Law Rep. 1762, 1992 Va. LEXIS 152 (1992).

The “part of the basis of the bargain” language of subsection (1)(b) of this section does not establish a buyer’s reliance requirement; instead, this language makes a seller’s description of the goods that is not his mere opinion a representation that defines his obligation. Daughtrey v. Ashe, 243 Va. 73 , 413 S.E.2d 336, 8 Va. Law Rep. 1762, 1992 Va. LEXIS 152 (1992).

A plaintiff is not required to show that he relied upon the affirmation in order to recover under an express warranty claim. Yates v. Pitman Mfg., Inc., 257 Va. 601 , 514 S.E.2d 605, 1999 Va. LEXIS 58 (1999).

Removal of presumption of affirmation. —

An affirmation of fact is presumed to be a part of the bargain, and any fact that would remove such affirmation out of the agreement requires clear affirmative proof. Yates v. Pitman Mfg., Inc., 257 Va. 601 , 514 S.E.2d 605, 1999 Va. LEXIS 58 (1999).

If one who has superior knowledge makes a statement about the goods sold and does not qualify the statement as his opinion, the statement will be treated as a statement of fact. Daughtrey v. Ashe, 243 Va. 73 , 413 S.E.2d 336, 8 Va. Law Rep. 1762, 1992 Va. LEXIS 152 (1992).

Limitation on action for personal injury based on breach of warranty. —

Where a cause of action to recover for personal injury is predicated upon a breach of warranty under the Uniform Commercial Code, § 8.01-243 is the proper statute of limitations to be applied. Tyler v. R.R. St. & Co., 322 F. Supp. 541, 1971 U.S. Dist. LEXIS 14571 (E.D. Va. 1971).

Common-law warranties must also be considered before ruling on motion to dismiss. —

Official Comment 2 to this section notes that “the warranty sections of [Article 2] are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined . . . to sales contracts.” Thus, even if plaintiff’s allegations do not state a claim upon which relief can be granted under §§ 8.2-314 and 8.2-315 , a court must also consider whether plaintiff’s allegations are sufficient to state a common-law implied warranty claim under Virginia law before ruling on defendant’s Fed. R. Civ. P. 12(b)(6) motion. Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

Comment 2 to this section does not suggest that the Uniform Commercial Code is applicable to nonsales transactions or that a common-law warranty concerning leases parallels the provisions of the Code. Leake v. Meredith, 221 Va. 14 , 267 S.E.2d 93, 1980 Va. LEXIS 209 (1980).

“Basis of bargain” oral statements not admissible to contradict warranty disclaimer. —

Even if the oral representations made by defendant’s representative became the “basis of the bargain” and therefore constituted an express warranty, those oral statements would not be admissible to contradict or vary the disclaimer of express warranties clause contained in the integrated agreement between defendant and plaintiff. King Indus., Inc. v. Worlco Data Sys., 736 F. Supp. 114, 1989 U.S. Dist. LEXIS 17041 (E.D. Va. 1989), aff'd, 900 F.2d 253, 1990 U.S. App. LEXIS 4361 (4th Cir. 1990).

Seller’s description was an express warranty. —

Jeweler’s description was an express warranty where the jeweler did more than give a mere opinion of the value of the goods; he specifically described them as diamonds of “H color and v.v.s. quality.” Daughtrey v. Ashe, 243 Va. 73 , 413 S.E.2d 336, 8 Va. Law Rep. 1762, 1992 Va. LEXIS 152 (1992).

Where a cut sheet, which was included in a seller’s price quotation for an impedance pipe heating system, contained a notation regarding maximum torque, the torque specification was an affirmation, for purposes of § 8.2-313 , that bolts in insulated pipe joints could be torqued to 60 foot-pounds, and the torque specification was a description of the goods; thus, the seller expressly warranted that the bolts in the insulated pipe joints could be safely torqued to 60 foot-pounds. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

Seller’s description not express warranty. —

Where statement made by boat dealer in its sales brochure was merely a commendation of the boat’s performance and did not describe a specific characteristic or feature of the boat, the statement expressed the manufacturer’s opinion concerning the quality of the boat’s performance and did not create an express warranty that the boat was capable of attaining a certain speed. Bayliner Marine Corp. v. Crow, 257 Va. 121 , 509 S.E.2d 499, 1999 Va. LEXIS 12 (1999).

Manufacturer of sprinkler heads, which allegedly failed to operate properly during a fire, was entitled to the protection of the statute of limitations under § 8.2-725 on insurers’ breach of warranty claims because there was not an express warranty of future performance regarding the sprinkler heads under § 8.2-313 . Royal Indem. Co. v. Tyco Fire Prods., LP, 281 Va. 157 , 704 S.E.2d 91, 2011 Va. LEXIS 24 (2011).

Summary judgment. —

In a suit alleging that defendants negligently failed to provide adequate instructions for manually programming the drug concentration into a patient-controlled analgesia pump, summary judgment was inappropriate as to a breach of express warranty claim because whether the statements in a news release and a brochure were part of the basis of the bargain creating an express warranty was a question for the jury. Jain v. Abbott Labs., Inc., No. 7:13cv00551, 2014 U.S. Dist. LEXIS 175242 (W.D. Va. Dec. 19, 2014).

Failure to state claim for breach of express warranty. —

Homebuilder failed to state a claim against a stucco manufacturer for breach of an express warranty where the homebuilder’s allegations amounted to no more than a legal conclusion, as the allegations did not identify any affirmations of fact, promises, descriptions, and/or use of samples and/or models purportedly made by the manufacturer; a mere legal conclusion was not sufficient. Pulte Home Corp. v. Parex, Inc., 265 Va. 518 , 579 S.E.2d 188, 2003 Va. LEXIS 51 (2003).

In an action in which a patient alleged that she suffered injuries as a result of the failure of batteries in a surgically implanted pulse generator and that a hospital gave the patient documentation indicating that her doctor could provide a battery life estimate, the patient failed to state a claim against the hospital for breach of express warranty because the documentation did not contain an express warranty and the patient’s doctor, who was not a party to the case and was not an employee of the hospital, gave the patient a battery life estimate. Sanders v. Medtronic, Inc., No. 4:06cv57, 2006 U.S. Dist. LEXIS 45516 (E.D. Va. June 26, 2006).

In a case in which a truck buyer asserted a claim for breach of express warranty under § 8.2-313 in a last-ditch effort to defeat summary judgment, he did not satisfy his evidentiary burden on summary judgment. He had not offered a shred of evidence demonstrating the terms of any express warranty. Eversole v. Ford Motor Co., No. 3:11cv428-DJN, 2012 U.S. Dist. LEXIS 49166 (E.D. Va. Apr. 6, 2012).

CIRCUIT COURT OPINIONS

Claim for breach of express warranty sufficiently stated. —

Co-executors of decedent’s estate, who alleged manufacturers’ agents represented that a medical device was suitable for insertion into their decedent’s artery, stated sufficient facts to survive a demurrer in their breach of express warranty claim; privity was not required because it was a products liability claim, the co-executors had alleged that the decedent’s doctors were induced by the representations, and there was no need to show that the representations were made directly to the decedent. Hamlett v. Va. Vascular Assocs., 61 Va. Cir. 468, 2003 Va. Cir. LEXIS 138 (Norfolk Apr. 21, 2003).

Defendant contractor’s demurrer to an express warranty claim asserted by plaintiff, a general contractor, was denied in the general contractor’s suit for indemnity and contribution for liability arising from water damage in a condominium project, where the part of the contract that stated that the contractor’s services would be performed in a workmanlike and professional manner were sufficient statements for the general contractor to proceed on a breach of express warranty claim for the work specified in the contract. RML Corp. v. Lincoln Window Prods., 67 Va. Cir. 545, 2004 Va. Cir. LEXIS 363 (Norfolk Dec. 3, 2004).

Defendant contractor’s demurrer to an express warranty claim asserted by plaintiff, a general contractor, was sustained in the general contractor’s suit for indemnity and contribution for liability arising from water damage in a condominium project, where the asserted representations made by the contractor that its windows were suitable for use on the condominium buildings and were much better than other windows were found to have been puffery, or seller’s talk, that were insufficient to qualify as an express warranty. RML Corp. v. Lincoln Window Prods., 67 Va. Cir. 545, 2004 Va. Cir. LEXIS 363 (Norfolk Dec. 3, 2004).

Warranty not applicable to home construction contract. —

Because a buyer did not contest the contractor’s demurrer to the implied warranty under § 55-70.1, and because express warranty did not apply to a home construction contract, the contrator’s demurrers were sustained thereto. Sturmfels v. Mays, 68 Va. Cir. 142, 2005 Va. Cir. LEXIS 101 (Amherst County June 13, 2005).

Failure to state claim for express breach of express warranty. —

Homeowners failed to properly allege a claim for breach of express warranty where they alleged that a power company systematically developed a plan for the disposal of its coal ash byproduct and, in doing so, contracted with a combustion products management company and a technology company to remove the coal ash from the power company’s site, mix the byproduct with binding agent, transport it to a nearby golf course property, and utilize the coal ash in the construction of the golf course. The homeowners were not in the class of those who used, consumed, or were affected by the goods. They unsuccessfully attempted to frame what was essentially a case of nuisance or negligence into a cause of action for product liability. Fentress Families Trust v. Va. Elec. & Power Co., 81 Va. Cir. 67, 2010 Va. Cir. LEXIS 293 (Chesapeake July 29, 2010).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 12, 14 and 16, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To consolidate and systematize basic principles with the result that:

  1. “Express” warranties rest on “dickered” aspects of the individual bargain, and go so clearly to the essence of that bargain that words of disclaimer in a form are repugnant to the basic dickered terms. “Implied” warranties rest so clearly on a common factual situation or set of conditions that no particular language or action is necessary to evidence them and they will arise in such a situation unless unmistakably negated.
  2. Although this section is limited in its scope and direct purpose to warranties made by the seller to the buyer as part of a contract for sale, the warranty sections of this Article are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined either to sales contracts or to the direct parties to such a contract. They may arise in other appropriate circumstances such as in the case of bailments for hire, whether such bailment is itself the main contract or is merely a supplying of containers under a contract for the sale of their contents. The provisions of Section 2-318 on third party beneficiaries expressly recognize this case law development within one particular area. Beyond that, the matter is left to the case law with the intention that the policies of this Act may offer useful guidance in dealing with further cases as they arise.
  3. The present section deals with affirmations of fact by the seller, descriptions of the goods or exhibitions of samples, exactly as any other part of a negotiation which ends in a contract is dealt with. No specific intention to make a warranty is necessary if any of these factors is made part of the basis of the bargain. In actual practice affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods; hence no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement. Rather, any fact which is to take such affirmations, once made, out of the agreement requires clear affirmative proof. The issue normally is one of fact.
  4. In view of the principle that the whole purpose of the law of warranty is to determine what it is that the seller has in essence agreed to sell, the policy is adopted of those cases which refuse except in unusual circumstances to recognize a material deletion of the seller’s obligation. Thus, a contract is normally a contract for a sale of something describable and described. A clause generally disclaiming “all warranties, express or implied” cannot reduce the seller’s obligation with respect to such description and therefore cannot be given literal effect under Section 2-316.
  5. Paragraph (1) (b) makes specific some of the principles set forth above when a description of the goods is given by the seller.
  6. The basic situation as to statements affecting the true essence of the bargain is no different when a sample or model is involved in the transaction. This section includes both a “sample” actually drawn from the bulk of goods which is the subject matter of the sale, and a “model” which is offered for inspection when the subject matter is not at hand and which has not been drawn from the bulk of the goods.
  7. The precise time when words of description or affirmation are made or samples are shown is not material. The sole question is whether the language or samples or models are fairly to be regarded as part of the contract. If language is used after the closing of the deal (as when the buyer when taking delivery asks and receives an additional assurance), the warranty becomes a modification, and need not be supported by consideration if it is otherwise reasonable and in order (Section 2-209).
  8. Concerning affirmations of value or a seller’s opinion or commendation under subsection (2), the basic question remains the same: What statements of the seller have in the circumstances and in objective judgment become part of the basis of the bargain? As indicated above, all of the statements of the seller do so unless good reason is shown to the contrary. The provisions of subsection (2) are included, however, since common experience discloses that some statements or predictions cannot fairly be viewed as entering into the bargain. Even as to false statements of value, however, the possibility is left open that a remedy may be provided by the law relating to fraud or misrepresentation.

This section reverts to the older case law insofar as the warranties of description and sample are designated “express” rather than “implied”.

This is not intended to mean that the parties, if they consciously desire, cannot make their own bargain as they wish. But in determining what they have agreed upon good faith is a factor and consideration should be given to the fact that the probability is small that a real price is intended to be exchanged for a pseudo-obligation.

A description need not be by words. Technical specifications, blueprints and the like can afford more exact description than mere language and if made part of the basis of the bargain goods must conform with them. Past deliveries may set the description of quality, either expressly or impliedly by course of dealing. Of course, all descriptions by merchants must be read against the applicable trade usages with the general rules as to merchantability resolving any doubts.

Although the underlying principles are unchanged, the facts are often ambiguous when something is shown as illustrative, rather than as a straight sample. In general, the presumption is that any sample or model just as any affirmation of fact is intended to become a basis of the bargain. But there is no escape from the question of fact. When the seller exhibits a sample purporting to be drawn from an existing bulk, good faith of course requires that the sample be fairly drawn. But in mercantile experience the mere exhibition of a “sample” does not of itself show whether it is merely intended to “suggest” or to “be” the character of the subject matter of the contract. The question is whether the seller has so acted with reference to the sample as to make him responsible that the whole shall have at least the values shown by it. The circumstances aid in answering this question. If the sample has been drawn from an existing bulk, it must be regarded as describing values of the goods contracted for unless it is accompanied by an unmistakable denial of such responsibility. If, on the other hand, a model of merchandise not on hand is offered, the mercantile presumption that it has become a literal description of the subject matter is not so strong, and particularly so if modification on the buyer’s initiative impairs any feature of the model.

Cross references:

Point 1: Section 2-316.

Point 2: Sections 1-102(3) and 2-318.

Point 3: Section 2-316(2) (b).

Point 4: Section 2-316.

Point 5: Sections 1-205(4) and 2-314.

Point 6: Section 2-316.

Point 7: Section 2-209.

Point 8: Section 1-103.

Definitional cross references:

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Prior Virginia law relating to express warranties is generally in accord with this section. C. E. Wright & Co., Inc. v. Shackleford, 152 Va. 635 , 648, 148 S.E. 807 (1929) (ninety day warranty of new car); Newbern v. Joseph Baker & Co., Inc., 147 Va. 996 , 998, 133 S.E. 500 (1926) (cabbage warranted to be in good merchantable condition); Ford Motor Co. v. Switzer, 140 Va. 383 , 393-94, 125 S.E. 209 (1924) (new car warranted for ninety days to be free from defects in material and workmanship); Monroe & Monroe, Inc. v. Cowne, 133 Va. 181 , 203, 112 S.E. 848 (1922) (warranty of a machine); Ney v. Wrenn, 117 Va. 85 , 93, 84 S.E. 1 (1915) (machine warranted to be strictly up-to-date in every respect and in first-class working condition); Reese & Co. v. Bates, 94 Va. 321 , 324, 26 S.E. 865 (1897) (fertilizer warranted to be as good for potatoes as any other in the market); Milburn Wagon Co. v. Nisewarner, 90 Va. 714 , 715, 19 S.E. 846 (1894) (seller expressly warranted in catalogue that wagons were well made of good, thoroughly seasoned material, and of sufficient strength to carry the weights mentioned); Herron & Holland v. Dibrell Bros., 87 Va. 289 , 292, 12 S.E. 674 (1891) (tobacco warranted to be sound); Eastern Ice Co. v. King, 86 Va. 97 , 98, 9 S.E. 506 (1889) (warranted best quality ice); Trice v. Cockran, 49 Va. (8 Gratt.) 442, 450 (1852) (slave warranted sound). The only apparent discrepancy between the UCC and prior Virginia law is that under subsection 8.2-313(2) it is not necessary for the seller to have any specific intention to make a warranty, while the supreme court of appeals in Mason v. Chappell, 56 Va. (15 Gratt.) 572, 583 (1860), said that “no affirmation, however strong, will constitute a warranty, unless it is so intended.” See also Herron & Holland v. Dibrell Bros., 87 Va. 289 , 296, 12 S.E. 674 (1891).

Since under the UCC both a warranty by affirmation and one by description are express warranties, it is unnecessary to determine which the warranty is. See Latham v. Powell, 127 Va. 382 , 398-400, 103 S.E. 638 (1920). Depending somewhat on the view taken of the facts, subsection 8.2-313(1)(b) might change the result in Gillette v. Kelling Nut Co., 185 F.2d 294, 297-98 (4th Cir. 1950), in which there was a sale by description, but the buyer relied on his own inspection rather than the seller’s description. If the description was “made part of the basis of the bargain” there would be an express warranty under the UCC, but not otherwise.

Virginia law is in accord with subsection 8.2-313(1)(c) that a sample made a part of the bargain creates an express warranty. Van Duyn v. Matthews, 181 Va. 256 , 259-61, 24 S.E.2d 442 (1943); Jacot v. Grossman Seed and Supply Co., Inc., 115 Va. 90 , 105, 78 S.E. 646 (1913); Note, 1 Va. L. Rev. 151 (1913). Although a sample is exhibited, it is not necessarily a part of the bargain. Proctor v. Spratley, 78 Va. 254 , 265-66 (1884).

§ 8.2-314. Implied warranty: Merchantability; usage of trade.

  1. Unless excluded or modified (§ 8.2-316 ), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to 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
    1. pass without objection in the trade under the contract description; and
    2. in the case of fungible goods, are of fair average quality within the description; and
    3. are fit for the ordinary purposes for which such goods are used; and
    4. run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
    5. are adequately contained, packaged, and labeled as the agreement may require; and
    6. conform to the promises or affirmations of fact made on the container or label if any.
  3. Unless excluded or modified (§ 8.2-316 ) other implied warranties may arise from course of dealing or usage of trade.

History. 1964, c. 219.

Law Review.

For article on products liability, see 4 U. Rich. L. Rev. 155 (1970).

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For comment, “A Guide to Federal Warranty Legislation — The Magnuson-Moss Act,” see 11 U. Rich. L. Rev. 163 (1976).

For comment, “Toward a Uniform State Product Liability Law — Virginia and the Uniform Product Liability Act,” see 36 Wash. & Lee L. Rev. 1145 (1979).

For note, “Virginia Should Adopt Strict Tort Recovery in Products Liability Suits Involving Personal Injury,” see 14 U. Rich. L. Rev. 391 (1980).

For article, “Products Liability and the Virginia Statute of Limitations — A Call for the Legislative Rescue Squad,” see 16 U. Rich. L. Rev. 323 (1982).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For 1987 survey of Virginia commercial law, see 21 U. Rich. L. Rev. 693 (1987).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 15, 17, 36; 8B M.J. Food, § 8.

CASE NOTES

Contingent and consequential damages are not generally associated with the law of negligence. They are terms applicable to and used in relation to the law of warranty and the U.C.C. In particular, they apply to the law of sales. Wellmore Coal Co. v. Powell Constr. Co., 600 F. Supp. 1042, 1984 U.S. Dist. LEXIS 21519 (D. Va. 1984).

Implied warranty of merchantability arises by operation of law, and not by agreement of the parties. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

Warranty implied unless properly excluded. —

Warranty of merchantability is implied in every sale made by a merchant seller unless excluded in a manner which is effective under the Code. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

Implied warranties in a contract for sale of an RV were not effectively disclaimed under § 8.2-316(2) , as they were not conspicuous as defined in § 8.1A-201(b)(10) where the disclaimer clause was located in the middle of the back page of the buyer’s order; the language referring the buyer to the back page — the merger clause — was located in the middle of the front page in an extremely small font size; the signatures of the buyer and dealer were on the bottom of the first page, and no signatures or initials appeared on the back of the page; font and print colors sizes were the same; and the disclaimer clause was not set off from the other paragraphs on the back side of the order in any distinctive way. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Limitation on implied warranty. —

While this section recognizes that an implied warranty can arise from a course of dealing between merchants, it further provides that no implied warranty arises where it has been expressly disclaimed. Fisher v. Monsanto Co., 863 F. Supp. 285, 1994 U.S. Dist. LEXIS 14032 (W.D. Va. 1994).

Implied warranty of merchantability is distinctly different from implied contract of indemnity. —

The implied warranty of merchantability that generally arises upon the sale (or delivery) of goods and the implied contract of indemnity that flows from the warranty are distinctly different and are governed by different statutes of limitation. Wingo v. Norfolk & W. Ry., 638 F. Supp. 107, 1986 U.S. Dist. LEXIS 25214 (W.D. Va. 1986).

Implied contract for indemnity upon breach. —

Where there has been a breach of an implied warranty of merchantability an implied contract for indemnity will lie. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

No distinction made between new and used goods. —

The Code makes absolutely no distinction between new and used goods when defining “goods” in § 8.2-105 . If the drafters of the Code had intended for this particular section to apply only to new goods, then it would have been simple to have so stated; however, this was not done. In the absence of express language to the contrary, in the area of implied warranties no distinction is made between new and used goods. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

Official Comments support this conclusion. —

Official Comment 3 for this section supports even further the conclusion that the drafters intended not to make a distinction between new and used goods. Had the implied warranty been intended to apply only to new goods, this comment would be meaningless. This statement by the drafters refers to the scope of the warranty and not the existence of such. It merely indicates that when you buy a used product you cannot expect it to be as good as a new one. In short, the warranty which attaches to a used good obviously takes into account normal wear and tear. Whittle v. Timesavers, Inc., 614 F. Supp. 115, 1985 U.S. Dist. LEXIS 19748 (W.D. Va. 1985).

When warranty arises. —

An implied warranty of merchantability arises, if at all, at the time the product is sold to the purchaser. Goodbar v. Whitehead Bros., 591 F. Supp. 552, 1984 U.S. Dist. LEXIS 24746 (W.D. Va. 1984), aff'd, 769 F.2d 213, 1985 U.S. App. LEXIS 21195 (4th Cir. 1985).

Distributor could not be held liable to deceased’s estate after the deceased was allegedly fatally wounded by ingestion of the manufacturer’s product because the distributor did not actually sell the product at issue to the deceased. Wachovia Bank, N.A., Adm'r of the Estate of Susan Hale Young v. Bourn, No. 7:02CV00773, 2003 U.S. Dist. LEXIS 519 (W.D. Va. Jan. 7, 2003).

Warranty runs from seller to purchaser and then through purchaser to ultimate user. —

With one notable exception (limitation of damages in personal injury cases is prima facie unconscionable), the user can rise no higher than purchaser through which he obtained the implied warranty. Goodbar v. Whitehead Bros., 591 F. Supp. 552, 1984 U.S. Dist. LEXIS 24746 (W.D. Va. 1984), aff'd, 769 F.2d 213, 1985 U.S. App. LEXIS 21195 (4th Cir. 1985).

Employees of skilled purchaser received no warranty derivatively through employer. —

When a skilled purchaser such as a foundry knows or reasonably should be expected to know of the dangerous propensities or characteristics of a product, no implied warranty of merchantability arises. Where plaintiffs (employees of purchaser) claimed derivatively through the foundry on their implied warranty claim against suppliers of silica to the foundry, and where the foundry received no implied warranty as to the particular harmful propensities and characteristics of free silica because of their extensive knowledge in this area, plaintiffs’ claim on this theory failed. Goodbar v. Whitehead Bros., 591 F. Supp. 552, 1984 U.S. Dist. LEXIS 24746 (W.D. Va. 1984), aff'd, 769 F.2d 213, 1985 U.S. App. LEXIS 21195 (4th Cir. 1985).

In order to prove that product is not merchantable, the complaining party must first establish the standard of merchantability in the trade. Bayliner Marine Corp. v. Crow, 257 Va. 121 , 509 S.E.2d 499, 1999 Va. LEXIS 12 (1999).

A personal injury or wrongful death claimant may recover for breach of warrant by establishing (1) that the goods were unreasonably dangerous either for the use to which they would ordinarily be put or for some other reasonably foreseeable purpose, and (2) that the unreasonably dangerous condition existed when the goods left the defendant’s hands. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Obligation to reimburse due to breach of implied warranty of merchantability. —

Dairy farm was obligated to reimburse the dairy cooperative for damages it paid as a result of the farm’s breach of implied warranty of merchantability when the farm delivered adulterated milk to a dairy processor who had to issue a recall and close its plant; therefore, the appellate court affirmed the award of summary judgment in favor of the cooperative in its action for reimbursement of damages. Md. & Va. Milk Producers Coop. Ass'n v. Crowell Farms Inc., 102 Fed. Appx. 267, 2004 U.S. App. LEXIS 11343 (4th Cir. 2004).

A product can be unreasonably dangerous if defective in assembly or manufacture, if imprudently designed, or if not accompanied by adequate warnings about its hazardous properties. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

If a product is not rendered unreasonably dangerous by the absence of warnings when it leaves the manufacturer’s control, it cannot at some later date “become” unreasonably dangerous due to the lack of warnings. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Where the evidence suggested that waist-high guards on lift trucks reflected prevailing industry views on the appropriate level of operator protection at the time the lift truck was manufactured and sold, coupled with expert testimony opining that the truck was, in this sense, defective in design, a jury could certainly conclude that a lesser standard of protection was “unreasonable” and a breach of the warranty of merchantability that proximately caused the death of plaintiff’s decedent. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Misuse not abrogation of manufacturer’s responsibility. —

While a manufacturer cannot be held to foresee an unanticipated or unpredictable misuse when it has specified a particular use, the decision establishing this rule involved the much narrower, more specific and more precise warranty of fitness, it did not abrogate the manufacturer’s responsibility to produce a merchantable article. Beard Plumbing & Heating v. Thompson Plastics, 152 F.3d 313, 1998 U.S. App. LEXIS 18363 (4th Cir. 1998).

Manufacturer may breach implied warranty of merchantability by failing to warn or instruct concerning dangerous propensities or characteristics of a product even if that product is flawless in design and manufacture. In essence, the product is rendered “unreasonably dangerous” by the absence of proper warnings or instructions. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

A manufacturer or seller that fails to warn of the dangers of its products can be held liable, in appropriate circumstances, either on a theory of negligence, or on a theory of implied warranty, or strict liability in tort. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Duty to warn under theory of implied warranty in tort is similar to manufacturer’s duty to warn under negligence theory, but it differs in critical aspects. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Doctrine of crashworthiness rejected. —

The Virginia Supreme Court rejects the doctrine of crashworthiness which concerns the dangers posed by the vehicle occupants’ collision with the interior of the vehicle upon collision, or the intrusion of moving or standing objects, upon collision, into the passenger area. Slone v. GMC, 249 Va. 520 , 457 S.E.2d 51, 1995 Va. LEXIS 50 (1995).

“Habitability” of mobile home. —

With respect to a mobile home, “habitability” is an element of merchantability, but the fact that people may be able to live safely in a mobile home does not mean that it satisfies the warranty of merchantability. Twin Lakes Mfg. Co. v. Coffey, 222 Va. 467 , 281 S.E.2d 864, 1981 Va. LEXIS 330 (1981).

Explicit contract terms blocked implied warranty action against successor corporation. —

Where “assumed liability” provision in corporation’s sale contract was expressly limited to contractual liabilities, the provision could not be read to imply that purchasing corporation assumed selling corporation’s liabilities for a breach of implied warranties action under this section. Harris v. T.I., Inc., 243 Va. 63 , 413 S.E.2d 605, 8 Va. Law Rep. 1751, 1992 Va. LEXIS 149 (1992).

Implied warranty held not to arise. —

Under this section and § 8.2-315 , no implied warranty would arise from a shipyard, which purchased asbestos products, to the manufacturers which used such products that it would exercise due care in the handling and use of the products and would use the products in the manner contemplated and intended by the manufacturer, nor would any duty of care on the part of the shipyard arise from the vendor-vendee relationship itself. Oman v. Johns-Manville Corp., 482 F. Supp. 1060, 1980 U.S. Dist. LEXIS 8968 (E.D. Va. 1980), aff'd, 662 F.2d 243, 1981 U.S. App. LEXIS 17097 (4th Cir. 1981).

Adequate pleading of implied warranty. —

Trial court erred in granting an equipment supplier’s demurrer to a gas station owner’s motion for judgment in an action arising from the sale of fuel pumps which allegedly failed to correctly measure the fuel dispensed, as the owner adequately stated a claim for breach of implied warranty of merchantability, as reason and common sense dictated that a pump manufactured to dispense fuel would be required to accurately register the amount of fuel dispensed. Hubbard v. Dresser, Inc., 271 Va. 117 , 624 S.E.2d 1, 2006 Va. LEXIS 4 (2006).

Inadequate pleading of implied warranty. —

In a case in which a truck buyer asserted a claim for breach of an implied warranty of merchantability under § 8.2-314 in a last-ditch effort to defeat summary judgment, he did not show that the truck was not fit for the ordinary purposes for which it was used. Eversole v. Ford Motor Co., No. 3:11cv428-DJN, 2012 U.S. Dist. LEXIS 49166 (E.D. Va. Apr. 6, 2012).

Summary judgment. —

Where plaintiff moved for summary judgment as to defendant’s counterclaim for breach of the implied warranty of merchantability, that counterclaim required resolution by a jury. Grottoes Pallet Co. v. Graham Packaging Plastic Prods., Inc., No. 5:15-cv-00017, 2016 U.S. Dist. LEXIS 1459 (W.D. Va. Jan. 6, 2016).

Sale of goods prerequisite to warranty. —

An implied warranty of merchantability or a warranty of fitness for a particular purpose is made only when a sale of goods occurs. Moore v. Allied Chem. Corp., 480 F. Supp. 364, 1979 U.S. Dist. LEXIS 10976 (E.D. Va. 1979).

An allegation in a complaint that the defendant corporation breached a warranty that a toxic chemical used in the manufacture of pesticides (kepone) was unlikely to cause contamination of the environment and humans failed to state a claim for breach of warranty of merchantability or for breach of warranty of fitness for a particular purpose, since there was involved neither a passing of title nor a transfer of goods. Moore v. Allied Chem. Corp., 480 F. Supp. 364, 1979 U.S. Dist. LEXIS 10976 (E.D. Va. 1979).

Where a patient filed breach of warranty claims against a manufacturer and a hospital, the action, which was removed based on diversity jurisdiction, was remanded to the state court because the manufacturer failed to demonstrate that there was no reasonable possibility that a state court could find that the non-diverse hospital, which sold an allegedly defective pulse generator to the patient, was liable for breach of the implied warranty of merchantability; the merchant’s contention that the hospital was fraudulently joined was rejected because (1) a state court could find that the hospital was a seller as defined in § 8.2-103 ; and (2) evidence showing that the hospital was engaged in the continued practice of selling spinal cord stimulators to patients supported the allegation that the hospital was a merchant. Sanders v. Medtronic, Inc., No. 4:06cv57, 2006 U.S. Dist. LEXIS 45516 (E.D. Va. June 26, 2006).

Where contract contemplated both services and goods, since agreement was dominated by language designating a sale of goods, the agreement at issue contained the UCC implied sales warranties. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F. Supp. 187, 1997 U.S. Dist. LEXIS 17381 (W.D. Va. 1997).

Common-law warranties must also be considered before ruling on motion to dismiss. Official Comment 2 to § 8.2-313 notes that “the warranty sections of [Article 2] are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined . . . to sales contracts.” Thus, even if plaintiff’s allegations do not state a claim upon which relief can be granted under this section and § 8.2-315 , a court must also consider whether plaintiff’s allegations are sufficient to state a common-law implied warranty claim under Virginia law before ruling on defendant’s Fed. R. Civ. P. 12(b)(6) motion. Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

Common-law implied warranties from soft drink manufacturers to consumers. —

See Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

Limitation on action for personal injury based on breach of warranty. —

Where a cause of action to recover for personal injury is predicated upon a breach of warranty under the Uniform Commercial Code, § 8.01-243 is the proper statute of limitations to be applied. Tyler v. R.R. St. & Co., 322 F. Supp. 541, 1971 U.S. Dist. LEXIS 14571 (E.D. Va. 1971) (commented on in 6 U. Rich. L. Rev. 167 (1971)).

Admission of evidence. —

In a products liability action, the trial court did not err in admitting evidence presented by defendant of the numbers of atmospheric heaters sold, their safety record, and the absence of prior injuries associated with the atmospheric heaters. The number of atmospheric heaters sold was directly related to the issue of whether the atmospheric heater would pass without objection in the trade as demonstrated by evidence as to whether a significant segment of the buying public would object to buying the product. Dorman v. State Indus., 292 Va. 111 , 787 S.E.2d 132, 2016 Va. LEXIS 77 (2016).

CIRCUIT COURT OPINIONS

Owners could assert breach of warranty claim against modular home manufacturer. —

As a modular home was a “good” under subdivision 1 of § 8.2-105 of the Uniform Commercial Code, and as the manufacturer might reasonably have expected the owners to use this “good,” the antiprivity statute, § 8.2-318 , applied. Therefore, the manufacturer could be liable to the owners for breach of the implied warranties of fitness and merchantability under §§ 8.2-314 and 8.2-315 . Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

Product neither “passed without objection” nor was “fit.” —

Synthetic stucco exterior wall cladding and its application were a merchantable good that neither “passed without objection,” nor was “fit for the ordinary purposes” under subdivisions (2)(a) and (c), in that it had many vehement opponents in the architectural, design, and building communities which constituted a large part of the advising and purchasing public for such building materials, and failed to divert or drain water that intruded unlike brick, molded vinyl, or hard-plank. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

Installation services were not “goods.” —

Home buyers did not sufficiently allege §§ 8.2-314 and 8.2-315 claims against an installer of an air conditioning unit as the buyers alleged that the installer “installed” the unit, and Uniform Commercial Code Article 2 did not apply to services under § 8.2-102 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

Sale of goods. —

The Uniform Commercial Code remedy of breach of the implied warranty of merchantability was not available against builders who sold completed homes that allegedly incorporated defective Chinese drywall, because those transactions did not involve “goods.” However, the remedy was available against the suppliers of the allegedly defective drywall. In re Chinese Drywall Cases, 80 Va. Cir. 69, 2010 Va. Cir. LEXIS 43 (Norfolk Mar. 29, 2010).

Claim for breach of implied warranties sufficiently alleged. —

Home buyers sufficiently alleged §§ 8.2-314 and 8.2-315 claims against a builder as an air conditioning unit was a “good” under §§ 8.2-101 and 8.2-105 , even though it had been installed in a house; the Uniform Commercial Code Article 2 warranties extended down the chain of distribution under § 8.2-318 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 15(2), Uniform Sales Act.

Changes: Completely rewritten.

Purposes of changes: This section, drawn in view of the steadily developing case law on the subject, is intended to make it clear that:

  1. The seller’s obligation applies to present sales as well as to contracts to sell subject to the effects of any examination of specific goods. (Subsection (2) of Section 2-316). Also, the warranty of merchantability applies to sales for use as well as to sales for resale.
  2. The question when the warranty is imposed turns basically on the meaning of the terms of the agreement as recognized in the trade. Goods delivered under an agreement made by a merchant in a given line of trade must be of a quality comparable to that generally acceptable in that line of trade under the description or other designation of the goods used in the agreement. The responsibility imposed rests on any merchant-seller, and the absence of the words “grower or manufacturer or not” which appeared in Section 15(2) of the Uniform Sales Act does not restrict the applicability of this section.
  3. A specific designation of goods by the buyer does not exclude the seller’s obligation that they be fit for the general purposes appropriate to such goods. A contract for the sale of second-hand goods, however, involves only such obligation as is appropriate to such goods for that is their contract description. A person making an isolated sale of goods is not a “merchant” within the meaning of the full scope of this section and, thus, no warranty of merchantability would apply. His knowledge of any defects not apparent on inspection would, however, without need for express agreement and in keeping with the underlying reason of the present section and the provisions on good faith, impose an obligation that known material but hidden defects be fully disclosed.
  4. Although a seller may not be a “merchant” as to the goods in question, if he states generally that they are “guaranteed” the provisions of this section may furnish a guide to the content of the resulting express warranty. This has particular significance in the case of second-hand sales, and has further significance in limiting the effect of fine-print disclaimer clauses where their effect would be inconsistent with large-print assertions of “guarantee”.
  5. The second sentence of subsection (1) covers the warranty with respect to food and drink. Serving food or drink for value is a sale, whether to be consumed on the premises or elsewhere. Cases to the contrary are rejected. The principal warranty is that stated in subsections (1) and (2) (c) of this section.
  6. Subsection (2) does not purport to exhaust the meaning of “merchantable” nor to negate any of its attributes not specifically mentioned in the text of the statute, but arising by usage of trade or through case law. The language used is “must be at least such as . . .” and the intention is to leave open other possible attributes of merchantability.
  7. Paragraphs (a) and (b) of subsection (2) are to be read together. Both refer, as indicated above, to the standards of that line of the trade which fits the transaction and the seller’s business. “Fair average” is a term directly appropriate to agricultural bulk products and means goods centering around the middle belt of quality, not the least or the worst that can be understood in the particular trade by the designation, but such as can pass “without objection.” Of course a fair percentage of the least is permissible but the goods are not “fair average” if they are all of the least or worst quality possible under the description. In cases of doubt as to what quality is intended, the price at which a merchant closes a contract is an excellent index of the nature and scope of his obligation under the present section.
  8. Fitness for the ordinary purposes for which goods of the type are used is a fundamental concept of the present section and is covered in paragraph (c). As stated above, merchantability is also a part of the obligation owing to the purchaser for use. Correspondingly, protection, under this aspect of the warranty, of the person buying for resale to the ultimate consumer is equally necessary, and merchantable goods must therefore be “honestly” resalable in the normal course of business because they are what they purport to be.
  9. Paragraph (d) on evenness of kind, quality and quantity follows case law. But precautionary language has been added as a reminder of the frequent usages of trade which permit substantial variations both with and without an allowance or an obligation to replace the varying units.
  10. Paragraph (e) applies only where the nature of the goods and of the transaction requires a certain type of container, package or label. Paragraph (f) applies, on the other hand, wherever there is a label or container on which representations are made, even though the original contract, either by express terms or usage of trade, may not have required either the labelling or the representation. This follows from the general obligation of good faith which requires that a buyer should not be placed in the position of reselling or using goods delivered under false representations appearing on the package or container. No problem of extra consideration arises in this connection since, under this Article, an obligation is imposed by the original contract not to deliver mislabeled articles, and the obligation is imposed where mercantile good faith so requires and without reference to the doctrine of consideration.
  11. Exclusion or modification of the warranty of merchantability, or of any part of it, is dealt with in the section to which the text of the present section makes explicit precautionary references. That section must be read with particular reference to its subsection (4) on limitation of remedies. The warranty of merchantability, wherever it is normal, is so commonly taken for granted that its exclusion from the contract is a matter threatening surprise and therefore requiring special precaution.
  12. Subsection (3) is to make explicit that usage of trade and course of dealing can create warranties and that they are implied rather than express warranties and thus subject to exclusion or modification under Section 2-316. A typical instance would be the obligation to provide pedigree papers to evidence conformity of the animal to the contract in the case of a pedigreed dog or blooded bull.
  13. In an action based on breach of warranty, it is of course necessary to show not only the existence of the warranty but the fact that the warranty was broken and that the breach of the warranty was the proximate cause of the loss sustained. In such an action an affirmative showing by the seller that the loss resulted from some action or event following his own delivery of the goods can operate as a defense. Equally, evidence indicating that the seller exercised care in the manufacture, processing or selection of the goods is relevant to the issue of whether the warranty was in fact broken. Action by the buyer following an examination of the goods which ought to have indicated the defect complained of can be shown as matter bearing on whether the breach itself was the cause of the injury.

Cross references:

Point 1: Section 2-316.

Point 3: Sections 1-203 and 2-104.

Point 5: Section 2-315.

Point 11: Section 2-316.

Point 12: Sections 1-201 , 1-205 and 2-316.

Definitional cross references:

“Agreement”. Section 1-201 .

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with the Virginia decision in Smith v. Hensley, 202 Va. 700 , 703-04, 119 S.E.2d 332 (1961), in recognizing an implied warranty of merchantability in the sale of all kinds of goods. This case involved the sale of a roof coating by its trade name and the court said that “there was an implied warranty of merchantability or fitness of the product for the ordinary or general purposes for which it was sold.” The case is commented upon in Comment, The Implied Warranty of Merchantability—Smith v. Hensley, 48 Va. L. Rev. 152 (1962). The general subject is also discussed in Note, The Implied Warranty of Fitness in Virginia, 43 Va. L. Rev. 273 (1957).

Virginia had previously recognized something akin to this warranty insofar as sales of food and drink not in sealed packages was involved. In such sales the Virginia court has recognized that there is a warranty that the food is sound and fit for human consumption. Kroger Grocery and Baking Co. v. Dunn, 181 Va. 390 , 393-94, 25 S.E.2d 254 (1943) (sale by seller to buyer-plaintiff of ham from which plaintiff got ptomaine poisoning); Colonna v. Rosedale Dairy Co., 166 Va. 314 , 317-22, 186 S.E. 94 (1936) (sale of unwholesome milk). Virginia has never decided whether the implied warranty also arises in sales of food and beverages in the original sealed containers, which bear the label of reputable manufacturers. See Blythe v. Camp Manufacturing Co., 183 Va. 432 , 442, 32 S.E.2d 659 (1954). The federal district court has extended the warranty to cosmetics sold in sealed containers. Higbee v. Giant Food Shopping Center, Inc., 106 F. Supp. 586, 587-88 (E.D. Va. 1952), Note, 38 Va. L. Rev. 1109 (1952).

In some other cases Virginia has recognized what seems in substance to have been a warranty of merchantability, although not called by this name. H. M. Gleason and Co., Inc. v. International Harvester Co., 197 Va. 255 , 257-63, 88 S.E.2d 904 (1955) (implied warranty of tractor-trailer fifth wheel); Swersky v. Higgins, 194 Va. 983 , 985-88, 76 S.E.2d 200 (1953) (implied warranty that roofing materials were reasonably fit for the purposes for which they were applied); McNeir v. Greer-Hale Chinchilla Ranch, 194 Va. 623 , 627-28, 74 S.E.2d 165 (1953) (implied warranty as to the breeding qualities of chinchillas); Wood v. Quillin, 167 Va. 255 , 261, 188 S.E. 216 (1936) (implied warranty that seeds of kind and name for which sold); Charles Syer & Co. v. Lester, 116 Va. 541 , 545, 82 S.E. 122 (1914) (implied warranty of the quantity and quality of lemons).

This section does not purport to cover tort actions for negligence. See Standard Paint Co. v. E. K. Vietor & Co., 120 Va. 595 , 91 S.E. 752 (1917), and Virginia Comment to § 8.2-318 . By authorizing an action for breach of warranty, the UCC probably changes the result in Belcher v. Goff Bros., 145 Va. 448 , 454-58, 134 S.E. 588 (1926). That decision involved an unsuccessful tort action by an injured purchaser of kerosene containing gasoline against a seller who was not the manufacturer. While the court also denied recovery on a warranty theory this result would clearly be changed by the UCC; the seller was a merchant and kerosene containing gasoline cannot be considered of merchantable quality.

Virginia, in a case involving an express warranty of merchantability, has recognized the importance of the trade in which the goods are bought and sold in determining whether goods are merchantable. Ripeness in vegetables, which would not constitute a breach of warranty of merchantability in a sale to a retailer, may, nevertheless, be a breach in a sale to a wholesaler. Newbern v. Joseph Baker & Co., Inc., 147 Va. 996 , 1005-06, 133 S.E. 500 (1926). This approach is consistent with subsection 8.2-314(2)(a).

§ 8.2-315. Implied warranty: Fitness for particular purpose.

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section [§ 8.2-316 ] an implied warranty that the goods shall be fit for such purpose.

History. 1964, c. 219.

Law Review.

For article on products liability, see 4 U. Rich. L. Rev. 155 (1970).

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For survey of developments in Virginia commercial law for the year 1973-1974, see 60 Va. L. Rev. 1475 (1974).

For comment, “A Guide to Federal Warranty Legislation — The Magnuson-Moss Act,” see 11 U. Rich. L. Rev. 163 (1976).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

Research References.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 29 Consumer Actions and Products Liability. § 29.02 Products Liability. Friend.

Michie’s Jurisprudence.

For related discussion, see 2B M.J. Automobiles, § 129; 3C M.J. Commercial Law, §§ 14, 17, 31.

CASE NOTES

In order to recover under this section, a buyer must prove that (1) the seller had reason to know the particular purpose for which the buyer required the goods, (2) the seller had reason to know the buyer was relying on the seller’s skill or judgment to furnish appropriate goods, and (3) the buyer in fact relied upon the seller’s skill or judgment. Medcom, Inc. v. C. Arthur Weaver Co., 232 Va. 80 , 348 S.E.2d 243, 3 Va. Law Rep. 534, 1986 Va. LEXIS 231 (1986).

Contingent and consequential damages are not generally associated with the law of negligence. They are terms applicable to and used in relation to the law of warranty and the U.C.C. In particular, they apply to the law of sales. Wellmore Coal Co. v. Powell Constr. Co., 600 F. Supp. 1042, 1984 U.S. Dist. LEXIS 21519 (D. Va. 1984).

Breach of warranty and negligence compared. —

In negligence, a supplier of sand to a foundry will be liable for failure to warn the foundry’s employees of the risks of silicosis if its conduct is unreasonable, whereas the duty to warn under a theory of implied warranty focuses upon whether the lack of warning renders the product unreasonably dangerous and thereby breaches an implied warranty arising under this section. Goodbar v. Whitehead Bros., 591 F. Supp. 552, 1984 U.S. Dist. LEXIS 24746 (W.D. Va. 1984), aff'd, 769 F.2d 213, 1985 U.S. App. LEXIS 21195 (4th Cir. 1985).

Sale of goods prerequisite to warranty. —

An implied warranty of merchantability or a warranty of fitness for a particular purpose is made only when a sale of goods occurs. Moore v. Allied Chem. Corp., 480 F. Supp. 364, 1979 U.S. Dist. LEXIS 10976 (E.D. Va. 1979).

An allegation in a complaint that the defendant corporation breached a warranty that a toxic chemical used in the manufacture of pesticides (kepone) was unlikely to cause contamination of the environment and humans failed to state a claim for breach of warranty of merchantability or for breach of warranty of fitness for a particular purpose, since there was involved neither a passing of title nor a transfer of goods. Moore v. Allied Chem. Corp., 480 F. Supp. 364, 1979 U.S. Dist. LEXIS 10976 (E.D. Va. 1979).

Where contract contemplated both services and goods, since agreement was dominated by language designating a sale of goods, the agreement at issue contained the UCC implied sales warranties. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F. Supp. 187, 1997 U.S. Dist. LEXIS 17381 (W.D. Va. 1997).

The rules of implied warranty apply only when an article is being operated or used in the manner intended for it. Layne-Atlantic Co. v. Koppers Co., 214 Va. 467 , 201 S.E.2d 609, 1974 Va. LEXIS 162 (1974).

A manufacturer cannot be held to foresee an unanticipated or unpredictable misuse of the article it manufactures or sells. Layne-Atlantic Co. v. Koppers Co., 214 Va. 467 , 201 S.E.2d 609, 1974 Va. LEXIS 162 (1974).

Where there is an absence of defect in the product and the seller’s goods were being installed in a manner not contemplated when they were sold, there is no implied warranty giving liability to the seller for product’s failure in installation. Layne-Atlantic Co. v. Koppers Co., 214 Va. 467 , 201 S.E.2d 609, 1974 Va. LEXIS 162 (1974).

Doctrine of crashworthiness rejected. —

The Virginia Supreme Court rejects the doctrine of crashworthiness which concerns the dangers posed by the vehicle occupants’ collision with the interior of the vehicle upon collision, or the intrusion of moving or standing objects, upon collision, into the passenger area. Slone v. GMC, 249 Va. 520 , 457 S.E.2d 51, 1995 Va. LEXIS 50 (1995).

Warranted goods with no value except for particular purpose. —

Where a seller breaches an implied warranty of fitness for a particular purpose, and the warranted goods have no value except for that purpose, the purchaser may assert the breach as a complete defense to the seller’s action for the purchase price. Medcom, Inc. v. C. Arthur Weaver Co., 232 Va. 80 , 348 S.E.2d 243, 3 Va. Law Rep. 534, 1986 Va. LEXIS 231 (1986).

Where the “particular purpose” is the purpose described in the contract, that purpose cannot be considered in isolation or divorced from the specifications of the contract. Layne-Atlantic Co. v. Koppers Co., 214 Va. 467 , 201 S.E.2d 609, 1974 Va. LEXIS 162 (1974).

Seller had no reason to know of a particular purpose. —

In an action in which a patient alleged that she suffered injuries as a result of the failure of batteries in a surgically implanted pulse generator, the patient failed to state a claim against the hospital for breach of the implied warranty of fitness for a particular purpose because the patient’s intended use for the pulse generator device was the ordinary use for such devices; thus, the patient was not able to show that the hospital had reason to know any particular purpose for which the pulse generator devices were intended. Sanders v. Medtronic, Inc., No. 4:06cv57, 2006 U.S. Dist. LEXIS 45516 (E.D. Va. June 26, 2006).

Generally, express warranties and disclaimers do not run with personal property. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

And do not absolve from liability imposed by implied warranty. —

The exclusions contained in a manufacturer’s express warranty do not absolve an independent dealer from liability imposed by an implied warranty. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

No effective disclaimer. —

Implied warranties in a contract for sale of an RV were not effectively disclaimed under § 8.2-316(2) , as they were not conspicuous as defined in § 8.1A-201(b)(10) where the disclaimer clause was located in the middle of the back page of the buyer’s order; the language referring the buyer to the back page — the merger clause — was located in the middle of the front page in an extremely small font size; the signatures of the buyer and dealer were on the bottom of the first page, and no signatures or initials appeared on the back of the page; font and print colors sizes were the same; and the disclaimer clause was not set off from the other paragraphs on the back side of the order in any distinctive way. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Common-law warranties must also be considered before ruling on motion to dismiss. —

Official Comment 2 to § 8.2-313 notes that “the warranty sections of [Article 2] are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined . . . to sales contracts.” Thus, even if plaintiff’s allegations do not state a claim upon which relief can be granted under § 8.2-314 and this section, a court must also consider whether plaintiff’s allegations are sufficient to state a common-law implied warranty claim under Virginia law before ruling on defendant’s Fed. R. Civ. P. 12(b)(6) motion. Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

Limitation on action for personal injury based on breach of warranty. —

Where a cause of action to recover for personal injury is predicated upon a breach of warranty under the Uniform Commercial Code, § 8.01-243 is the proper statute of limitations to be applied. Tyler v. R.R. St. & Co., 322 F. Supp. 541, 1971 U.S. Dist. LEXIS 14571 (E.D. Va. 1971) (commented on in 6 U. Rich. L. Rev. 167 (1971)).

The resolution of conflicting evidence is a function of the jury. —

Where the evidence relating to an implied warranty and breach thereof was conflicting, it should have been submitted to the jury to resolve the conflicts. Medcom, Inc. v. C. Arthur Weaver Co., 232 Va. 80 , 348 S.E.2d 243, 3 Va. Law Rep. 534, 1986 Va. LEXIS 231 (1986).

Question whether there was implied warranty of fitness for a particular purpose in a sale of goods is ordinarily a question of fact based on the circumstances surrounding the transaction. Bayliner Marine Corp. v. Crow, 257 Va. 121 , 509 S.E.2d 499, 1999 Va. LEXIS 12 (1999).

Jury verdict on issue of breach of implied warranty held unassailable. —

Where evidence of an automobile’s defects was sufficient to establish breach of implied warranty, the jury’s verdict on this issue is unassailable. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

Buyer did not rely on skill or judgment of seller to select or furnish suitable goods. —

See Layne-Atlantic Co. v. Koppers Co., 214 Va. 467 , 201 S.E.2d 609, 1974 Va. LEXIS 162 (1974).

Buyer did not rely on skill or judgment of manufacturer to furnish suitable goods. —

A remote purchaser did not rely upon the skill or judgment of the manufacturers of allegedly defective plumbing fittings where the purchaser alleged that the suppliers of the resin used by the manufacturers of the fittings published catalogues containing warranties of fitness for certain purposes; because there was no communication between the purchaser and the manufacturers of the fittings, there could be no dispute that the purchaser did not, in fact, rely on their skill or judgment in furnishing goods suitable for a particular purpose. Beard Plumbing & Heating v. Thompson Plastics, 152 F.3d 313, 1998 U.S. App. LEXIS 18363 (4th Cir. 1998).

Section not applicable to bailments or chattel leases. —

The implied warranty of fitness for a particular purpose provided under this section applies to sales only, and not to bailments or chattel lease transactions. Leake v. Meredith, 221 Va. 14 , 267 S.E.2d 93, 1980 Va. LEXIS 209 (1980).

Implied warranty held not to arise. —

Under § 8.2-314 and this section, no implied warranty would arise from a shipyard, which purchased asbestos products, to the manufacturers which used such products that it would exercise due care in the handling and use of the products and would use the products in the manner contemplated and intended by the manufacturer, nor would any duty of care on the part of the shipyard arise from the vendor-vendee relationship itself. Oman v. Johns-Manville Corp., 482 F. Supp. 1060, 1980 U.S. Dist. LEXIS 8968 (E.D. Va. 1980), aff'd, 662 F.2d 243, 1981 U.S. App. LEXIS 17097 (4th Cir. 1981).

Where insecticide was applied to plaintiff’s home, and insecticide was commonly applied to residences by exterminators, there was nothing about the application of insecticide to plaintiff’s house to indicate that the application was anything but the ordinary use of insecticide as an insecticide. Accordingly, no implied warranty of fitness for a particular purpose was created in this case. Lescs v. Dow Chem. Co., 976 F. Supp. 393, 1997 U.S. Dist. LEXIS 12733 (W.D. Va. 1997), aff'd sub nom. Lescs v. William R. Hughes, Inc., 168 F.3d 482, 1999 U.S. App. LEXIS 6580 (4th Cir. 1999).

Summary judgment on implied warranty claim. —

Where plaintiff moved for summary judgment as to defendant’s counterclaim for breach of the implied warranty of fitness for a particular purpose, there was no evidence that the long-standing business relationship between the parties gave plaintiff reason to know that defendant had a particular purpose for its pallets; there was no evidence that business relationship between the parties by itself, gave rise to an implied warranty of fitness for a particular purpose. Grottoes Pallet Co. v. Graham Packaging Plastic Prods., Inc., No. 5:15-cv-00017, 2016 U.S. Dist. LEXIS 1459 (W.D. Va. Jan. 6, 2016).

Common-law implied warranties from soft drink manufacturers to consumers. —

See Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

CIRCUIT COURT OPINIONS

Promotion of cladding foresaw particular purpose of use in coastal area. —

Where manufacturer and distributor put synthetic stucco exterior cladding product into distribution cycle and promoted it for application on wood-framed residential construction in coastal areas, and builder-buyer selected the product because it was so distributed and promoted, the manufacturer intended it be used for the builder’s particular purpose. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

Installation services were not “goods.” —

Home buyers did not sufficiently allege §§ 8.2-314 and 8.2-315 claims against an installer of an air conditioning unit as the buyers alleged that the installer “installed” the unit, and Uniform Commercial Code Article 2 did not apply to services under § 8.2-102 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

Contractor liable for breach of warranty. —

Paving contractor that contracted to pave a parking lot was liable for violating the warranty of fitness for a particular purpose when damage occurred to the parking lot as the parking lot owner relied upon the contractor’s knowledge and the evidence showed that the contractor was aware that heavy forklifts were being used on the parking lot, which the contractor claimed to not know about, nor did the evidence show that the heavy trucks that were being used on the parking lot, which the contractor did know about, did not cause the damage. Harrison's Moving & Storage Co. v. Princess Anne Paving Corp., 60 Va. Cir. 303, 2002 Va. Cir. LEXIS 266 (Portsmouth Nov. 4, 2002).

Owners could assert breach of warranty claim against modular home manufacturer. —

As a modular home was a “good” under subdivision 1 of § 8.2-105 of the Uniform Commercial Code, and as the manufacturer might reasonably have expected the owners to use this “good,” the antiprivity statute, § 8.2-318 , applied. Therefore, the manufacturer could be liable to the owners for breach of the implied warranties of fitness and merchantability under §§ 8.2-314 and 8.2-315 . Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

Claim for breach of implied warranties sufficiently alleged. —

Home buyers sufficiently alleged §§ 8.2-314 and 8.2-315 claims against a builder as an air conditioning unit was a “good” under §§ 8.2-101 and 8.2-105 , even though it had been installed in a house; the Uniform Commercial Code Article 2 warranties extended down the chain of distribution under § 8.2-318 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 15 (1), (4), (5), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes:

  1. Whether or not this warranty arises in any individual case is basically a question of fact to be determined by the circumstances of the contracting. Under this section the buyer need not bring home to the seller actual knowledge of the particular purpose for which the goods are intended or of his reliance on the seller’s skill and judgment, if the circumstances are such that the seller has reason to realize the purpose intended or that the reliance exists. The buyer, of course, must actually be relying on the seller.
  2. A “particular purpose” differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question. For example, shoes are generally used for the purpose of walking upon ordinary ground, but a seller may know that a particular pair was selected to be used for climbing mountains.
  3. In connection with the warranty of fitness for a particular purpose the provisions of this Article on the allocation or division of risks are particularly applicable in any transaction in which the purpose for which the goods are to be used combines requirements both as to the quality of the goods themselves and compliance with certain laws or regulations. How the risks are divided is a question of fact to be determined, where not expressly contained in the agreement, from the circumstances of contracting, usage of trade, course of performance and the like, matters which may constitute the “otherwise agreement” of the parties by which they may divide the risk or burden.
  4. The absence from this section of the language used in the Uniform Sales Act in referring to the seller, “whether he be the grower or manufacturer or not,” is not intended to impose any requirement that the seller be a grower or manufacturer. Although normally the warranty will arise only where the seller is a merchant with the appropriate “skill or judgment,” it can arise as to non-merchants where this is justified by the particular circumstances.
  5. The elimination of the “patent or other trade name” exception constitutes the major extension of the warranty of fitness which has been made by the cases and continued in this Article. Under the present section the existence of a patent or other trade name and the designation of the article by that name, or indeed in any other definite manner, is only one of the facts to be considered on the question of whether the buyer actually relied on the seller, but it is not of itself decisive of the issue. If the buyer himself is insisting on a particular brand he is not relying on the seller’s skill and judgment and so no warranty results. But the mere fact that the article purchased has a particular patent or trade name is not sufficient to indicate nonreliance if the article has been recommended by the seller as adequate for the buyer’s purposes.
  6. The specific reference forward in the present section to the following section on exclusion or modification of warranties is to call attention to the possibility of eliminating the warranty in any given case. However, it must be noted that under the following section the warranty of fitness for a particular purpose must be excluded or modified by a conspicuous writing.

A contract may of course include both a warranty of merchantability and one of fitness for a particular purpose.

The provisions of this Article on the cumulation and conflict of express and implied warranties must be considered on the question of inconsistency between or among warranties. In such a case any question of fact as to which warranty was intended by the parties to apply must be resolved in favor of the warranty of fitness for particular purpose as against all other warranties except where the buyer has taken upon himself the responsibility of furnishing the technical specifications.

Cross references:

Point 2: Sections 2-314 and 2-317.

Point 3: Section 2-303.

Point 6: Section 2-316.

Definitional cross references:

“Buyer”. Section 2-103.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Virginia has recognized this warranty of fitness for a particular purpose. The prior Virginia law is discussed in Note, The Implied Warranty of Fitness in Virginia, 43 Va. L. Rev. 273 (1957).In E. I. duPont de Nemours & Co. v. Universal Moulded Products Corp., 191 Va. 525 , 566, 62 S.E.2d 233 (1950), the court said, “When one contracts to supply an article in which he deals, to be applied to a particular purpose, so that the buyer necessarily trusts to the judgment or skill of the vendor, there is an implied warranty that it shall be reasonably fit for the purpose to which it is to be applied; and the better doctrine is that this rule applies to dealers as well as to manufacturers and not to manufacturers alone.” See also H. M. Gleason and Co., Inc. v. International Harvester Co., 197 Va. 255 , 257-63, 88 S.E.2d 904 (1955); Greenland Development Corp. v. Allied Heating Products Co., Inc., 184 Va. 588 , 597-98, 35 S.E.2d 801, 164 A.L.R. 1312 (1945), Note, 32 Va. L. Rev. 679 (1946); Universal Motor Co. v. Snow, 149 Va. 690 , 695-700, 140 S.E. 653 , 59 A.L.R. 1174 (1927); Standard Paint Co. v. E. K. Vietor & Co., 120 Va. 595 , 608-09, 91 S.E. 752 (1917); Gerst v. Jones & Co., 73 Va. (32 Gratt.) 518, 521-24 (1879).

§ 8.2-316. 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 title on parol or extrinsic evidence (§ 8.2-202 ) negation or limitation is inoperative to the extent that such construction is unreasonable.
  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)
    1. 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; and
    2. 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; and
    3. 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 this title on liquidation or limitation of damages and on contractual modification of remedy (§§ 8.2-718 and 8.2-719 ).

History. 1964, c. 219.

Law Review.

For comment on impact of Uniform Commercial Code upon implied warranties in leases, see 26 Wash. & Lee L. Rev. 374 (1969).

For note, “UCC Warranty Solutions to Art Fraud and Forgery,” see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For survey of developments in Virginia commercial law for the year 1973-1974, see 60 Va. L. Rev. 1475 (1974).

For comment, “A Guide to Federal Warranty Legislation — The Magnuson-Moss Act,” see 11 U. Rich. L. Rev. 163 (1976).

For note, “Legal Control on Warranty Liability Limitation Under the Uniform Commercial Code,” see 63 Va. L. Rev. 791 (1977).

For comment, “Toward a Uniform State Product Liability Law — Virginia and the Uniform Product Liability Act,” see 36 Wash. & Lee L. Rev. 1145 (1979).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For essay, “Proposed Legislation: A (Second) Modest Proposal to Protect Virginia Consumers Against Defective Products,” see 43 U. Rich. L. Rev. 19 (2008).

Michie’s Jurisprudence.

For related discussion, see 2B M.J. Automobiles, § 129; 3C M.J. Commercial Law, §§ 14, 17, 31.

CASE NOTES

Limitation of consequential damages permitted. —

A seller may by contract limit the remedies for breach of warranty and, in particular, may exclude consequential damages unless the exclusion is unconscionable. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Limitation on warranty or remedy must be conspicuous. —

When a writing which meets the requirements of § 8.2-201 is intended by the parties as a final expression of their agreement, the terms thereof may not be contradicted by evidence of any prior agreement. To limit either warranties or remedies, however, the exclusionary language in the writing must be “conspicuous.” Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

A writing excluding the implied warranty of fitness must be “conspicuous.” A clause buried in small type among eighteen other numbered paragraphs on the back of the purchase order fails to satisfy the definition of this essential adjective. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

Although defendants conspicuously disclaimed all warranties, plaintiff argued that defendants’ fraud precluded them from enforcing those disclaimers; however, plaintiff failed to prove fraud, and defendants’ disclaimers were effective. Waytec Elecs. Corp. v. Rohm & Haas Elec. Materials, LLC, 459 F. Supp. 2d 480, 2006 U.S. Dist. LEXIS 77673 (W.D. Va. 2006), aff'd, 255 Fed. Appx. 754, 2007 U.S. App. LEXIS 28113 (4th Cir. 2007).

Tailoring of warranty. —

Manufacturer can tailor warranty with regard to breach of warranty remedies; liability and remedies in such action are thus limited in comparison with tort remedies. Redman v. John D. Brush & Co., 111 F.3d 1174, 1997 U.S. App. LEXIS 8812 (4th Cir. 1997).

The essential purpose of the requirement of conspicuousness is to protect the buyer from surprise. Lacks v. Bottled Gas Corp., 215 Va. 94 , 205 S.E.2d 671, 1974 Va. LEXIS 237 (1974).

Whether a provision is conspicuous is a question of law for a court. Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

Where excluding language in the contract is in larger type, it is conspicuous as a matter of law. Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

Subsection (2) controls in case of conflict with § 11-4 . —

Section 11-4 , which specifies sizes of type in printed contracts, was inconsistent with subsection (2), which requires that a limiting term or clause need only be conspicuous, and therefore, did not apply to a transaction to which subsection (2) was applicable. Armco, Inc. v. New Horizon Dev. Co., 229 Va. 561 , 331 S.E.2d 456, 1985 Va. LEXIS 232 (1985).

Language in disclaimer was not conspicuous. —

Language of a disclaimer in print of the same size, style, and color as that used in most of the other provisions, immersed in the body of the contract failed of its purpose and was not “conspicuous” within the meaning of this section and was ineffective. Lacks v. Bottled Gas Corp., 215 Va. 94 , 205 S.E.2d 671, 1974 Va. LEXIS 237 (1974).

Implied warranties in a contract for sale of an RV were not effectively disclaimed under § 8.2-316(2) , as they were not conspicuous as defined in § 8.1A-201(b)(10) where the disclaimer clause was located in the middle of the back page of the buyer’s order; the language referring the buyer to the back page — the merger clause — was located in the middle of the front page in an extremely small font size; the signatures of the buyer and dealer were on the bottom of the first page, and no signatures or initials appeared on the back of the page; font and print colors sizes were the same; and the disclaimer clause was not set off from the other paragraphs on the back side of the order in any distinctive way. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

“Basis of bargain” oral statements not admissible to contradict warranty disclaimer. —

Even if the oral representations made by defendant’s representative became the “basis of the bargain” and therefore constituted an express warranty, those oral statements would not be admissible to contradict or vary the disclaimer of express warranties clause contained in the integrated agreement between defendant and plaintiff. King Indus., Inc. v. Worlco Data Sys., 736 F. Supp. 114, 1989 U.S. Dist. LEXIS 17041 (E.D. Va. 1989), aff'd, 900 F.2d 253, 1990 U.S. App. LEXIS 4361 (4th Cir. 1990).

Disclaimer effective as to remote user. —

Where a components manufacturer effectively disclaimed implied warranties as to the product manufacturer under §§ 8.2-316(2) and 8.1A-201(b)(10) , then they were also disclaimed as to the buyer of the product (the remote user). Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Any express oral warranties were effectively disclaimed. —

Even if a seller made express oral warranties prior to the sale of an RV, they were effectively disclaimed under § 8.2-316(1) by a merger clause in the purchase contract pursuant to § 8.2-202 and thus, the seller’s motion to dismiss a claim for breach of express warranties was granted. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Examination precludes implied warranty for defects which should have been revealed. —

When a buyer before entering into a contract has examined the goods or the sample or model as fully as he desires 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. Virginia Transformer Corp. v. P.D. George Co., 932 F. Supp. 156, 1996 U.S. Dist. LEXIS 10255 (W.D. Va. 1996).

No public policy reasons sufficient to prohibit exclusion of implied warranties. —

What is crucially important about the adoption of the Uniform Commercial Code is that if the legislature did not in 1964, when it adopted the Code, recognize the existence of public policy reasons sufficient to require it to say that there shall be no exclusion of implied warranties of fitness in the sale of personal property, then certainly this court cannot say that such reasons existed in 1962, when a controversy as to whether a “new car warranty” excluded implied warranties had its beginning. Marshall v. Murray Oldsmobile Co., 207 Va. 972 , 154 S.E.2d 140, 1967 Va. LEXIS 165 (1967).

Seller’s fraud may be shown notwithstanding sale “as is”. —

A buyer can show that a contract of sale was induced by the seller’s fraud, notwithstanding the fact the sale was made “as is.” This is true even though the written contract contains covenants waiving warranties or disclaiming or limiting liabilities. George Robberecht Seafood, Inc. v. Maitland Bros. Co., 220 Va. 109 , 255 S.E.2d 682, 1979 Va. LEXIS 241 (1979).

Lack of privity of contract is no longer a defense in Virginia to a claim of breach of warranty. Williams v. Gradall, 990 F. Supp. 442, 1998 U.S. Dist. LEXIS 59 (E.D. Va. 1998).

Contributory negligence in Virginia is a defense to tort liability but not to breach of warranty. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

It is not settled that disclaimers pursuant to subsection (3) of this section must be conspicuous. Leake v. Meredith, 221 Va. 14 , 267 S.E.2d 93, 1980 Va. LEXIS 209 (1980).

Imputation of component’s disclaimer to manufacturer of product. —

Even if manufacturers of allegedly defective plumbing fittings could rely on the express disclaimer of warranties in the installation guides provided by the supplier of the resin used to produce the fittings, the manufacturer of the resin could only disclaim a merchantability warranty with respect to its product, the resin, and not to the manufactured fittings themselves; since the remote purchaser did not assert a merchantability problem with the resin, but rather with the manufacturers’ finished products, the manufacturers’ reliance on the resin producer’s disclaimer was unavailing. Beard Plumbing & Heating v. Thompson Plastics, 152 F.3d 313, 1998 U.S. App. LEXIS 18363 (4th Cir. 1998).

Latent defects not contemplated by subdivision (3) (b). —

Latent defects such as those in the construction of the superstructure of a mobile home, which did not become apparent, even to experienced workmen, until pressure was applied to join the two sections of the home and level the unit on its foundation, are not those defects contemplated by subdivision (3) (b) of this section. Twin Lakes Mfg. Co. v. Coffey, 222 Va. 467 , 281 S.E.2d 864, 1981 Va. LEXIS 330 (1981).

CIRCUIT COURT OPINIONS

Express warranty disclaimed all other warranties. —

In plaintiff’s suit alleging defendants’ rototiller breached the implied warranty of merchantability and implied warranty of fitness for a particular purpose, the district court sustained defendants’ demurrers because the express warranty disclaimed all other warranties, express or implied, and Va. Code Ann. § 8.2-316 specifically permitted such disclaimers. Va. Code Ann. § 8.2-719 was inapplicable, because the implied warranty had been effectively disclaimed. Santana v. Deere & Co., 108 Va. Cir. 537, 2021 Va. Cir. LEXIS 207 (Madison County Oct. 26, 2021).

Language in disclaimer was not conspicuous. —

In a breach of warranty suit, a vehicle dealer was not entitled to a demurrer based on a written disclaimer of all warranties, as some of the words used in the disclaimer were in small letters and some were in capitals, and the print was not conspicuous, as contemplated by this section and as required to disclaim a warranty. Morris v. Winnebago Indus., 71 Va. Cir. 292, 2006 Va. Cir. LEXIS 239 (Roanoke County July 18, 2006).

Unsigned disclaimer of warranties invalid. —

Under subdivision 2 of § 8.2-316 , a totally blank and unsigned form showing no connection whatsoever to the buyers was insufficient to show that a manufacturer disclaimed all implied warranties that accompanied the sale of its goods. Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

OFFICIAL COMMENT

Prior uniform statutory provision: None. See Sections 15 and 71, Uniform Sales Act.

Purposes:

  1. This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude “all warranties, express or implied.” It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.
  2. The seller is protected under this Article against false allegations of oral warranties by its provisions on parol and extrinsic evidence and against unauthorized representations by the customary “lack of authority” clauses. This Article treats the limitation or avoidance of consequential damages as a matter of limiting remedies for breach, separate from the matter of creation of liability under a warranty. If no warranty exists, there is of course no problem of limiting remedies for breach of warranty. Under subsection (4) the question of limitation of remedy is governed by the sections referred to rather than by this section.
  3. Disclaimer of the implied warranty of merchantability is permitted under subsection (2), but with the safeguard that such disclaimers must mention merchantability and in case of a writing must be conspicuous.
  4. Unlike the implied warranty of merchantability, implied warranties of fitness for a particular purpose may be excluded by general language, but only if it is in writing and conspicuous.
  5. Subsection (2) presupposes that the implied warranty in question exists unless excluded or modified. Whether or not language of disclaimer satisfies the requirements of this section, such language may be relevant under other sections to the question whether the warranty was ever in fact created. Thus, unless the provisions of this Article on parol and extrinsic evidence prevent, oral language of disclaimer may raise issues of fact as to whether reliance by the buyer occurred and whether the seller had “reason to know” under the section on implied warranty of fitness for a particular purpose.
  6. The exceptions to the general rule set forth in paragraphs (a), (b), and (c) of subsection (3) are common factual situations in which the circumstances surrounding the transaction are in themselves sufficient to call the buyer’s attention to the fact that no implied warranties are made or that a certain implied warranty is being excluded.
  7. Paragraph (a) of subsection (3) deals with general terms such as “as is,” “as they stand,” “with all faults,” and the like. Such terms in ordinary commercial usage are understood to mean that the buyer takes the entire risk as to the quality of the goods involved. The terms covered by paragraph (a) are in fact merely a particularization of paragraph (c) which provides for exclusion or modification of implied warranties by usage of trade.
  8. Under paragraph (b) of subsection (3) warranties may be excluded or modified by the circumstances where the buyer examines the goods or a sample or model of them before entering into the contract. “Examination” as used in this paragraph is not synonymous with inspection before acceptance or at any other time after the contract has been made. It goes rather to the nature of the responsibility assumed by the seller at the time of the making of the contract. Of course if the buyer discovers the defect and uses the goods anyway, or if he unreasonably fails to examine the goods before he uses them, resulting injuries may be found to result from his own action rather than proximately from a breach of warranty. See Sections 2-314 and 2-715 and comments thereto.
  9. The situation in which the buyer gives precise and complete specifications to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded. The warranty of fitness for a particular purpose would not normally arise since in such a situation there is usually no reliance on the seller by the buyer. The warranty of merchantability in such a transaction, however, must be considered in connection with the next section on the cumulation and conflict of warranties. Under paragraph (c) of that section in case of such an inconsistency the implied warranty of merchantability is displaced by the express warranty that the goods will comply with the specifications. Thus, where the buyer gives detailed specifications as to the goods, neither of the implied warranties as to quality will normally apply to the transaction unless consistent with the specifications.

In order to bring the transaction within the scope of “refused to examine” in paragraph (b), it is not sufficient that the goods are available for inspection. There must in addition be a demand by the seller that the buyer examine the goods fully. The seller by the demand puts the buyer on notice that he is assuming the risk of defects which the examination ought to reveal. The language “refused to examine” in this paragraph is intended to make clear the necessity for such demand.

Application of the doctrine of “caveat emptor” in all cases where the buyer examines the goods regardless of statements made by the seller is, however, rejected by this Article. Thus, if the offer of examination is accompanied by words as to their merchantability or specific attributes and the buyer indicates clearly that he is relying on those words rather than on his examination, they give rise to an “express” warranty. In such cases the question is one of fact as to whether a warranty of merchantability has been expressly incorporated in the agreement. Disclaimer of such an express warranty is governed by subsection (1) of the present section.

The particular buyer’s skill and the normal method of examining goods in the circumstances determine what defects are excluded by the examination. A failure to notice defects which are obvious cannot excuse the buyer. However, an examination under circumstances which do not permit chemical or other testing of the goods would not exclude defects which could be ascertained only by such testing. Nor can latent defects be excluded by a simple examination. A professional buyer examining a product in his field will be held to have assumed the risk as to all defects which a professional in the field ought to observe, while a nonprofessional buyer will be held to have assumed the risk only for such defects as a layman might be expected to observe.

Cross references:

Point 2: Sections 2-202, 2-718 and 2-719.

Point 7: Sections 1-205 and 2-208.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Course of dealing”. Section 1-205 .

“Goods”. Section 2-105.

“Remedy”. Section 1-201 .

“Seller”. Section 2-103.

“Usage of trade”. Section 1-205 .

VIRGINIA COMMENT

The holding in Packard Norfolk, Inc. v. Miller, 198 Va. 557 , 564-65, 95 S.E.2d 207 (1956), that there may be a rescission of a sales contract for fraud, even though the contract provides that all other express and implied warranties are excluded is consistent with subsection 8.2-316(1) . This case is discussed in Note, A Seller’s Liability for Innocent Misrepresentation in Virginia, 43 Va. L. Rev. 765 (1957). Similarly, the UCC is consistent with Wood v. Quillin, 167 Va. 255 , 260, 188 S.E. 216 (1936), holding that a contract warranty of purity of seed did not exclude an implied warranty that the seed were of the kind and name under which they were sold.

Subsection 8.2-316(2) and § 8.2-202 relating to parol evidence are consistent with the holding in Bolling v. General Motors Acceptance Corp., 204 Va. 4 , 9-10, 129 S.E.2d 54 (1963), that the parol evidence rule bars evidence of an express oral warranty that is in conflict with a written contractual warranty.

The prior Virginia cases are consistent with subsection 8.2-316(3)(b) as regards the effect of an inspection by the buyer on the exclusion of warranties. In Gerst v. Jones & Co., 73 Va. (32 Gratt.) 518, 524-25 (1879), the court said: “In cases like the present, the question is not whether the purchaser has an opportunity of examining the article, but whether he has, in fact, examined it for himself, and whether the defect be one readily discoverable upon inspection. He is not bound to examine, for he has the right to rely upon the judgment of the seller, and to take it for granted the latter has furnished an article answering the terms of the contract.” Johnson v. Hoffman, 130 Va. 335 , 341, 107 S.E. 645 (1921), held that there was no express or implied warranty of quality, where the buyer had satisfied himself as to the quality of cattle by an inspection.

§ 8.2-317. Cumulation and conflict of warranties express or implied.

Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:

  1. Exact or technical specifications displace an inconsistent sample or model or general language of description.
  2. A sample from an existing bulk displaces inconsistent general language of description.
  3. Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

History. 1964, c. 219.

Law Review.

For comment, “A Guide to Federal Warranty Legislation — The Magnuson-Moss Act,” see 11 U. Rich. L. Rev. 163 (1976).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 13.

OFFICIAL COMMENT

Prior uniform statutory provision: On cumulation of warranties, see Sections 14, 15, and 16, Uniform Sales Act.

Changes: Completely rewritten into one section.

Purposes of changes:

  1. The present section rests on the basic policy of this Article that no warranty is created except by some conduct (either affirmative action or failure to disclose) on the part of the seller. Therefore, all warranties are made cumulative unless this construction of the contract is impossible or unreasonable.
  2. The rules of this section are designed to aid in determining the intention of the parties as to which of inconsistent warranties which have arisen from the circumstances of their transaction shall prevail. These rules of intention are to be applied only where factors making for an equitable estoppel of the seller do not exist and where he has in perfect good faith made warranties which later turn out to be inconsistent. To the extent that the seller has led the buyer to believe that all of the warranties can be performed, he is estopped from setting up any essential inconsistency as a defense.
  3. The rules in subsections (a), (b) and (c) are designed to ascertain the intention of the parties by reference to the factor which probably claimed the attention of the parties in the first instance. These rules are not absolute but may be changed by evidence showing that the conditions which existed at the time of contracting make the construction called for by the section inconsistent or unreasonable.

This Article thus follows the general policy of the Uniform Sales Act except that in case of the sale of an article by its patent or trade name the elimination of the warranty of fitness depends solely on whether the buyer has relied on the seller’s skill and judgment; the use of the patent or trade name is but one factor in making this determination.

Cross references:

Point 1: Section 2-315.

Definitional cross reference:

“Party”. Section 1-201 .

VIRGINIA COMMENT

Virginia, in accordance with this section, has recognized that warranties, when consistent, are cumulative. In Greenland Development Corp. v. Allied Heating Products Co., 184 Va. 588 , 597, 35 S.E.2d 801 (1945), 164 A.L.R. 1312 (1946), Note, 32 Va. L. Rev. 679 (1946), the court, saying that the precise question was one of first impression, said: “Since the express warranty . . . is in no wise inconsistent with the implied warranty of fitness . . . both were binding on the seller.” See also E. I. duPont de Nemours & Co. v. Universal Moulded Products Corp., 191 Va. 525 , 566, 62 S.E.2d 233 (1955).

The provision in subsection 8.2-317(c) that an implied warranty of fitness for a particular purpose prevails over an inconsistent express warranty changes the dictum in Greenland Development Corp. v. Allied Heating Products Co., 184 Va. 588 , 596-97, 35 S.E.2d 801 (1945), 164 A.L.R. 1312 (1946), Note, 32 Va. L. Rev. 679 (1946), to the effect that an express warranty prevails over an inconsistent implied warranty.

§ 8.2-317.1. Use of warranty registration cards.

  1. As used in this section, “warranty registration card” means a card or similar device that is provided to the purchaser of personal, family, or household goods with a statement that the purchaser’s return of the warranty registration card shortly after purchase of the goods is a condition precedent to warranty coverage and performance.
  2. Unless any requirement that the purchaser of personal, family, or household goods return a warranty registration card as a condition precedent to warranty coverage and performance is conspicuously disclosed in any advertising and marketing materials that reference the goods’ warranty, a seller may not condition the coverage or performance of a warranty upon the return by the purchaser of a warranty registration card, or provide that the duration of a warranty is dependent upon the return by the purchaser of a warranty registration card.
  3. This section does not prohibit the use of warranty registration cards where a seller suggests use of the card as one possible means of proof of the date the goods were purchased. Any such suggestion to the purchaser shall include notice that failure to return the card will not affect rights under the warranty, if the purchaser can establish with reasonable certainty the date the goods were purchased.
  4. A violation of this section constitutes a prohibited practice under the Virginia Consumer Protection Act (§ 59.1-196 et seq.).

History. 2010, c. 713.

§ 8.2-318. When lack of privity no defense in action against manufacturer or seller of goods.

Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer or seller of goods to recover damages for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the goods from the defendant, if the plaintiff was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods; however, this section shall not be construed to affect any litigation pending on June 29, 1962.

History. Code 1950, § 8-654.3; 1962, c. 476; 1964, c. 219.

Editor’s note.

Section 8-654.3, Code 1950, was substituted for the first alternative version of this section appearing in the official text of the Uniform Commercial Code, which read as follows:

“§ 2-318. Third Party Beneficiaries of Warranties Express or Implied. A seller’s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.”

Section 8-654.3, referred to in the Virginia Comment, was repealed by Acts 1977, c. 617.

Law Review.

For article on products liability under the Uniform Commercial Code, see 51 Va. L. Rev. 804 (1965).

For comment on tort action for strict liability in products liability cases, see 26 Wash. & Lee L. Rev. 143 (1969).

For article on products liability, see 4 U. Rich. L. Rev. 155 (1970).

For note discussing Virginia’s disavowal of privity of contract in commercial transactions as a basis for extended liability, see 14 Wm. & Mary L. Rev. 409 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For comment, “Toward a Uniform State Product Liability Law — Virginia and the Uniform Product Liability Act,” see 36 Wash. & Lee L. Rev. 1145 (1979).

For note, “Virginia Should Adopt Strict Tort Recovery in Products Liability Suits Involving Personal Injury,” see 14 U. Rich. L. Rev. 391 (1980).

For article, “Products Liability and the Virginia Statute of Limitations — A Call for the Legislative Rescue Squad,” see 16 U. Rich. L. Rev. 323 (1982).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For note on enforcing waivers in products liability, see 69 Va. L. Rev. 1111 (1983).

For 1987 survey of Virginia commercial law, see 21 U. Rich. L. Rev. 693 (1987).

For survey on commercial law in Virginia for 1989, see 23 U. Rich. L. Rev. 523 (1989).

For survey on construction law in Virginia for 1989, see 23 U. Rich. L. Rev. 541 (1989).

For article reviewing case law and changes in legislation affecting Virginia construction law, see 40 U. Rich. L. Rev. 143 (2005).

For casenote and comment, “The Fourth Circuit Sinks Admiral Dur’s Boat and Virginia’s Economic Loss Rule Insulates a Negligent Subcontractor from Tort Liability,” see 16 Geo. Mason L. Rev. 747 (2009).

Research References.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 29 Consumer Actions and Products Liability. § 29.02 Products Liability. Friend.

Michie’s Jurisprudence.

For related discussion, see 2B M.J. Automobiles, § 132; 3C M.J. Commercial Law, §§ 13, 99; 4A M.J. Contracts, § 80; 5C M.J. Death by Wrongful Act, § 10; 8B M.J. Food, §§ 6-9; 13B M.J. Negligence, § 14.

CASE NOTES

Section 8.01-223 is a companion statute to this section. Bryant Elec. Co. v. City of Fredericksburg, 762 F.2d 1192, 1985 U.S. App. LEXIS 31288 (4th Cir. 1985).

The legislature intended § 8.01-223 and this section to apply prospectively only from the dates of their enactments. Farish v. Courion Indus., Inc., 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

This section, abolishing the privity requirement, would not apply retroactively to an injury incurred after the enactment of the statute but caused by a product manufactured and transferred prior to the statute’s enactment. Farish v. Courion Indus., Inc., 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

The legislature intended that this section apply only from the date of its enactment. Farish v. Courion Indus., Inc., 722 F.2d 74, 1983 U.S. App. LEXIS 14855 (4th Cir. 1983).

It does not operate retroactively. Cook v. G.M. Diehl Mach. Works, 563 F. Supp. 281, 1983 U.S. Dist. LEXIS 16892 (W.D. Va. 1983).

Section not to be extended beyond express terms. —

This section is in derogation of the common-law privity requirement; under Virginia’s rules of statutory construction, it is not to be extended beyond its express terms. Farish v. Courion Indus., Inc., 722 F.2d 74, 1983 U.S. App. LEXIS 14855 (4th Cir. 1983).

Privity still necessary for economic loss recovery. —

This section eliminates the privity requirement in an action for damages for physical injury to person or property, but not in an action to recover purely economic loss damages. Richmond, F. & P.R.R. v. Davis Indus., Inc., 787 F. Supp. 572, 1992 U.S. Dist. LEXIS 3771 (E.D. Va. 1992).

This section is to be read the same way as the more general statute abolishing the requirement of privity in actions for injury to person or property to the extent it applies to economic loss in negligence actions. In other words, this section does not abrogate the privity requirement in such circumstances. Beard Plumbing & Heating v. Thompson Plastics, 152 F.3d 313, 1998 U.S. App. LEXIS 18363 (4th Cir. 1998).

Privity is required to recover economic loss under § 8.2-715(2) due to the breach of the implied warranty of merchantability, notwithstanding the language of this section. Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 254 Va. 240 , 491 S.E.2d 731, 1997 Va. LEXIS 79 (1997).

Homebuilder failed to state a claim against a stucco manufacturer for breach of an implied warranty, as the damages to the builder were consequential, and privity was required to recover economic loss, under § 8.2-715(2) , due to an alleged breach of the implied warranty of merchantability; because § 8.2-715 2 a addressed in a specific way the subject of the ability to raise the common law requirement of privity as a defense and § 8.2-318 addressed the subject in a general way, § 8.2-715(2) a prevailed. Pulte Home Corp. v. Parex, Inc., 265 Va. 518 , 579 S.E.2d 188, 2003 Va. LEXIS 51 (2003).

Plaintiff’s breach of warranty claim against defendant rip-saw manufacturer was dismissed due to lack of privity between plaintiff’s decedent and defendant because plaintiff could not show the product was manufactured or sold before Virginia’s first anti-privity statute was enacted in 1962, and unlike for negligence claims, the inherently dangerous product exception to the privity requirement does not apply to warranty claims. Powell v. Diehl Woodworking Mach., Inc., 198 F. Supp. 3d 628, 2016 U.S. Dist. LEXIS 103434 (E.D. Va. 2016).

The limited contract requirement of Section 8.2-715(2) prevails over the general provisions relating to common law privity in this section. Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 254 Va. 240 , 491 S.E.2d 731, 1997 Va. LEXIS 79 (1997).

This section does not create for the benefit of nonpurchasing users an independent warranty of merchantability but rather simply preserves for remote users the warranties already enjoyed by an immediate purchaser. Buettner v. R.W. Martin & Sons, 47 F.3d 116, 1995 U.S. App. LEXIS 2801 (4th Cir. 1995).

Virginia’s version of the Uniform Commercial Code strips a defendant of the defense of lack of privity. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

Virginia has expressly abolished any vertical privity requirement in actions for breach of warranty. Bly v. Otis Elevator Co., 713 F.2d 1040, 1983 U.S. App. LEXIS 25185 (4th Cir. 1983), different results reached on reh'g, 754 F.2d 1111, 1985 U.S. App. LEXIS 28168 (4th Cir. 1985).

Manufacturer may not assert the defense of vertical privity against a consumer. Harris v. Aluminum Co. of Am., 550 F. Supp. 1024, 1982 U.S. Dist. LEXIS 15806 (W.D. Va. 1982).

Seller’s disclaimer of warranty against third parties. —

Absent an express statement from Virginia courts to the effect that seller’s express disclaimers of warranty were not effective against third party users, the district court would not unilaterally establish the principle that seller’s disclaimer’s of implied warranties do not run to third parties. Buettner v. Super Laundry Mach., 857 F. Supp. 471, 1994 U.S. Dist. LEXIS 14469 (E.D. Va. 1994), aff'd sub nom. Buettner v. R. W. Martin & Sons, 47 F.3d 116, 1995 U.S. App. LEXIS 2801 (4th Cir. 1995).

Where plaintiff was a third party, not a party to the contract, the district court refused to hold that any exclusion of implied warranty is per se unconscionable with respect to third parties because they by definition were not a party to the contract. Buettner v. Super Laundry Mach., 857 F. Supp. 471, 1994 U.S. Dist. LEXIS 14469 (E.D. Va. 1994), aff'd sub nom. Buettner v. R. W. Martin & Sons, 47 F.3d 116, 1995 U.S. App. LEXIS 2801 (4th Cir. 1995). But see Reibold v. Simon Aerials, Inc., 859 F. Supp. 193, 1994 U.S. Dist. LEXIS 10615 (E.D. Va. 1994).

Privity in warranty actions against architects. —

Neither § 8.01-223 nor this section alters the rule demanding privity of contract in warranty actions against architects. Gravely v. Providence Partnership, 549 F.2d 958, 1977 U.S. App. LEXIS 14606 (4th Cir. 1977).

Privity not required of foreseeable user. This section allows foreseeable users of goods a remedy against the seller without regard to privity of contract. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Privity not issue in penile implant defense. —

Lack of privity was not a defense as to manufacturer in action brought by penile implant user for infection although limited warranty restricted coverage to direct purchasers, where implant was expressly warrantied as sterile. Martin v. American Medical Sys., 116 F.3d 102, 1997 U.S. App. LEXIS 14787 (4th Cir. 1997).

Parol evidence. —

The parol evidence rule would not bar the introduction of extrinsic evidence as to the intentions of the parties in their use of the term “F.A.S. Norfolk, Virginia” in their written agreement under which the seller was to supply the buyer with certain stevedoring pallets. Although the term is not in and of itself ambiguous, that conclusion does not preclude the admission of extrinsic evidence, not only about the usage of the trade, but the parties’ course of dealings as well. Brunswick Box Co. v. Coutinho, Caro & Co., 617 F.2d 355, 1980 U.S. App. LEXIS 19582 (4th Cir. 1980).

In suit brought against franchisor by hotel patron for injuries sustained on the premises of motel operated by franchisee, where plaintiff contended that franchisor impliedly and expressly warranted to her, through national advertising, that the hotel was safe for its intended use and made other implied and express warranties, all of which were breached, franchisor was not entitled to summary judgment on the ground that it had no agency agreement which would subject it to vicarious liability. Hayward v. Holiday Inns, Inc., 459 F. Supp. 634, 1978 U.S. Dist. LEXIS 15165 (E.D. Va. 1978).

Revocation of acceptance does not lie against remote manufacturer. —

Limiting the remedy of revocation so that it does not lie against a remote manufacturer does not revive archaic doctrine of privity. A remote manufacturer is liable to a buyer for damages arising from negligence or from breach of warranty, and the defense of lack of privity has been abolished as to such cases. But the remedy of revocation of acceptance under § 8.2-608 is conceptually inapplicable to any persons other than the parties to the contract of sale sought to be rescinded. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Whether a machine, weighing several thousand pounds and bolted to floor, is a fixture is a question of fact; a reasonable jury could find, applying Virginia’s three-part test, that the machine was personalty and, accordingly, defendant was not entitled to judgment on this issue as a matter of law. Wilkes v. F.L. Smithe Mach. Co., 704 F. Supp. 680, 1989 U.S. Dist. LEXIS 1147 (W.D. Va. 1989).

Unconscionability of contract with respect to third party. —

Where plaintiff who suffered a traumatic amputation of her right arm below the elbow in an ironer was a supervisor for the flatwork ironer department who oversaw the use of five such machines and was at least partially responsible for their safe operation, and who, as supervisor, bore some responsibility not only for her own safety, but also for the safety of the employees working in her department, and where, in the laundry business it was common practice to purchase used equipment, the court would not say that contract of sale of ironer between plaintiff’s employer and defendant was unconscionable with respect to plaintiff. Buettner v. Super Laundry Mach., 857 F. Supp. 471, 1994 U.S. Dist. LEXIS 14469 (E.D. Va. 1994), aff'd sub nom. Buettner v. R. W. Martin & Sons, 47 F.3d 116, 1995 U.S. App. LEXIS 2801 (4th Cir. 1995). But see Reibold v. Simon Aerials, Inc., 859 F. Supp. 193, 1994 U.S. Dist. LEXIS 10615 (E.D. Va. 1994).

CIRCUIT COURT OPINIONS

Class of those who used, consumed, or were affected by the goods. —

Homeowners failed to properly allege a claim for breach of express warranty where they alleged that a power company systematically developed a plan for the disposal of its coal ash byproduct and, in doing so, contracted with a combustion products management company and a technology company to remove the coal ash from the power company’s site, mix the byproduct with binding agent, transport it to a nearby golf course property, and utilize the coal ash in the construction of the golf course. The homeowners were not in the class of those who used, consumed, or were affected by the goods. They unsuccessfully attempted to frame what was essentially a case of nuisance or negligence into a cause of action for product liability. Fentress Families Trust v. Va. Elec. & Power Co., 81 Va. Cir. 67, 2010 Va. Cir. LEXIS 293 (Chesapeake July 29, 2010).

Once building materials were incorporated into real property they ceased to be “goods”; therefore, the anti-privity statute did not afford buyers of real estate the right to sue the manufacturer of the materials for breach of the implied warranties afforded under the Uniform Commercial Code. Bay Point Condo. Ass'n v. RML Corp., 54 Va. Cir. 422, 2001 Va. Cir. LEXIS 197 (Norfolk Jan. 30, 2001).

Privity not required between manufacturers of medical device and deceased patient. —

Co-executors of decedent’s estate, who alleged manufacturers’ agents represented that a medical device was suitable for insertion into their decedent’s artery, stated sufficient facts to survive a demurrer in their breach of express warranty claim; privity was not required because it was a products liability claim, the co-executors had alleged that the decedent’s doctors were induced by the representations, and there was no need to show that the representations were made directly to the decedent. Hamlett v. Va. Vascular Assocs., 61 Va. Cir. 468, 2003 Va. Cir. LEXIS 138 (Norfolk Apr. 21, 2003).

Privity required to recover economic loss. —

Subdivision 2 of § 8.2-715 requires privity of contract for the recovery of consequential economic loss damages and the application of that statute is limited to cases where a plaintiff is claiming consequential economic loss damages due to a breach of warranty. RML Corp. v. Lincoln Window Prods., 67 Va. Cir. 545, 2004 Va. Cir. LEXIS 363 (Norfolk Dec. 3, 2004).

Window company’s demurrer was sustained with respect to privity and damages because a property owner did not contract directly with the company and thus, lacked privity; therefore, the owner was barred from recovering purely economic consequential damages in its warranty action. 139 Riverview, LLC v. Quaker Window Prods., 90 Va. Cir. 74, 2015 Va. Cir. LEXIS 45 (Norfolk Mar. 2, 2015).

Homes are not considered goods. —

Provisions of § 8.2-318 do not extend the warranty of merchantability to a buyer of a new home, as a home buyer does not purchase “goods,” but rather acquires real property improved with a home, as only items that are movable at the time of identification to the contract are considered goods, under § 8.2-105 . Glass v. Trafalgar House Prop., Inc., 58 Va. Cir. 437, 2002 Va. Cir. LEXIS 160 (Loudoun County Apr. 15, 2002).

Modular home owners could assert breach of warranty claims. —

As a modular home was a “good” under subdivision 1 of § 8.2-105 of the Uniform Commercial Code, and as the manufacturer might reasonably have expected the owners to use this “good,” the antiprivity statute, § 8.2-318 , applied. Therefore, the manufacturer could be liable to the owners for breach of the implied warranties of fitness and merchantability under §§ 8.2-314 and 8.2-315 . Cash v. GWVA Corp., 74 Va. Cir. 243, 2007 Va. Cir. LEXIS 169 (Fairfax County Oct. 4, 2007).

Home buyers sufficiently alleged §§ 8.2-314 and 8.2-315 claims against a builder as an air conditioning unit was a “good” under §§ 8.2-101 and 8.2-105 , even though it had been installed in a house; the Uniform Commercial Code Article 2 warranties extended down the chain of distribution under § 8.2-318 . French v. York Int'l Corp., 72 Va. Cir. 538, 2007 Va. Cir. LEXIS 142 (Greene County Feb. 27, 2007).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. The last sentence of this section does not mean that a seller is precluded from excluding or disclaiming a warranty which might otherwise arise in connection with the sale provided such exclusion or modification is permitted by Section 2-316. Nor does that sentence preclude the seller from limiting the remedies of his own buyer and of any beneficiaries, in any manner provided in Sections 2-718 or 2-719. To the extent that the contract of sale contains provisions under which warranties are excluded or modified, or remedies for breach are limited, such provisions are equally operative against beneficiaries of warranties under this section. What this last sentence forbids is exclusion of liability by the seller to the persons to whom the warranties which he has made to his buyer would extend under this section.
  2. The purpose of this section is to give certain beneficiaries the benefit of the same warranty which the buyer received in the contract of sale, thereby freeing any such beneficiaries from any technical rules as to “privity.” It seeks to accomplish this purpose without any derogation of any right or remedy resting on negligence. It rests primarily upon the merchant-seller’s warranty under this Article that the goods sold are merchantable and fit for the ordinary purposes for which such goods are used rather than the warranty of fitness for a particular purpose. Implicit in the section is that any beneficiary of a warranty may bring a direct action for breach of warranty against the seller whose warranty extends to him.
  3. The first alternative expressly includes as beneficiaries within its provisions the family, household, and guests of the purchaser. Beyond this, the section in this form is neutral and is not intended to enlarge or restrict the developing case law on whether the seller’s warranties, given to his buyer who resells, extend to other persons in the distributive chain.

The second alternative is designed for states where the case law has already developed further and for those that desire to expand the class of beneficiaries. The third alternative goes further, following the trend of modern decisions as indicated by Restatement of Torts 2d § 402A (Tentative Draft No. 10, 1965) in extending the rule beyond injuries to the person.

Cross references:

Point 1: Sections 2-316, 2-718 and 2-719.

Point 2: Section 2-314.

Definitional cross references:

“Buyer”. Section 2-103.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

VIRGINIA COMMENT

The 1962 Official Text of § 2-318 of the UCC effects a limited abolition of the privity defense in actions for breach of warranty by specified users of goods against remote manufacturers or sellers. Only those “natural persons” who were in the family or household of the buyer or were guests in his home were protected. Recent Virginia legislation has virtually abolished the privity defense in breach of warranty and negligence suits. Code § 8-654.3 (Supp. 1962). This statute reflects the increasing tendency of modern decisions and has been substituted for the section provided in the 1962 Official Text.

For a comment on the Virginia statute and the earlier law in the state, see Emroch, Statutory Elimination of Privity Requirement in Products Liability Cases, 48 Va. L. Rev. 982 (1962).

§ 8.2-319. F.O.B. and F.A.S. terms.

  1. Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which
    1. when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this title (§ 8.2-504 ) and bear the expense and risk of putting them into the possession of the carrier; or
    2. when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this title (§ 8.2-503 ):
    3. when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this title on the form of bill of lading (§ 8.2-323 ).
  2. Unless otherwise agreed the term F.A.S. vessel (which means “free alongside”) at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must
    1. at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and
    2. obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.
  3. Unless otherwise agreed in any case falling within subsection (1) (a) or (c) or subsection (2) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this title (§ 8.2-311 ). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.
  4. Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 21, 23.

CASE NOTES

Jurisdiction not established. —

Fact that the risk of loss of goods shipped F.O.B. Danville passed from seller to out-of-state buyer when the goods were placed in the possession of the common carrier at Danville, pursuant to § 8.2-319(1)(a), and that technical acceptance of the order may have occurred in Virginia by seller’s delivery of the panels to the carrier, was insufficient to establish that buyer had the necessary “minimum contracts” with Virginia to satisfy due process and give Virginia courts jurisdiction. Danville Plywood Corp. v. Plain & Fancy Kitchens, Inc., 218 Va. 533 , 238 S.E.2d 800, 1977 Va. LEXIS 286 (1977).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section is intended to negate the uncommercial line of decision which treats an “F.O.B.” term as “merely a price term.” The distinctions taken in subsection (1) handle most of the issues which have on occasion led to the unfortunate judicial language just referred to. Other matters which have led to sound results being based on unhappy language in regard to F.O.B. clauses are dealt with in this Act by Section 2-311(2) (seller’s option re arrangements relating to shipment) and Sections 2-614 and 615 (substituted performance and seller’s excuse).
  2. Subsection (1) (c) not only specifies the duties of a seller who engages to deliver “F.O.B. vessel,” or the like, but ought to make clear that no agreement is soundly drawn when it looks to reshipment from San Francisco or New York, but speaks merely of “F.O.B.” the place.
  3. The buyer’s obligations stated in subsection (1) (c) and subsection (3) are, as shown in the text, obligations of cooperation. The last sentence of subsection (3) expressly, though perhaps unnecessarily, authorizes the seller, pending instructions, to go ahead with such preparatory moves as shipment from the interior to the named point of delivery. The sentence presupposes the usual case in which instructions “fail”; a prior repudiation by the buyer, giving notice that breach was intended, would remove the reason for the sentence, and would normally bring into play, instead, the second sentence of Section 2-704, which duly calls for lessening damages.
  4. The treatment of “F.O.B. vessel” in conjunction with F.A.S. fits, in regard to the need for payment against documents, with standard practice and case law; but “F.O.B. vessel” is a term which by its very language makes express the need for an “on board” document. In this respect, that term is stricter than the ordinary overseas “shipment” contract (C.I.F., etc., Section 2-320).

Cross references:

Sections 2-311(3), 2-323, 2-503 and 2-504.

Definitional cross references:

“Agreed”. Section 1-201 .

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Goods”. Section 2-105.

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

“Term”. Section 1-201 .

VIRGINIA COMMENT

F.O.B. at a named place is a delivery term, even though only used in connection with a statement of the price. In Bott v. Snellenburg & Co., Inc., 177 Va. 331 , 338, 14 S.E.2d 372 (1941), on a construction of the contract as a whole, the term F.O.B. was found to be a delivery term, but the court quoted a definition in which it was said that F.O.B. used in connection with the price of goods is a price term and not a delivery term. A contrary agreement was also found in Rountree v. Graham, 144 Va. 145 , 148-50, 131 S.E. 193 (1926). The UCC rejects this approach as uncommercial. See also Geoghegan Sons & Co. v. Arbuckle Bros., 139 Va. 92 , 101-04, 123 S.E. 387 , 36 A.L.R. 399 (1924); Lawson v. Hobbs, 120 Va. 690 , 693-95, 91 S.E. 750 (1917); Aspegren & Co. v. Wallerstein Produce Co., 111 Va. 570 , 572-73, 69 S.E. 597 (1911).

The UCC is in accord with Lawson v. Hobbs, 120 Va. 690 , 692-93, 91 S.E. 750 (1917), in which the court approved this statement: “a sale f.o.b. cars means that the subject of the sale is to be placed on the cars for shipment without any expense or act on the part of the buyer,” although this case involved an “f.o.b. Suffolk” rather than an “f.o.b. cars” term. See also Birdsong and Co., Inc. v. American Peanut Corp., 149 Va. 755 , 766-67, 141 S.E. 759 (1928).

Virginia has recognized that the buyer must give any necessary shipping instructions. James River Lumber Co. v. Smith Bros., 135 Va. 406 , 413-14, 116 S.E. 241 (1923).

A seller has not complied with an F.O.B. contract if he instructs the carrier to hold the goods until the seller hears that his draft has been paid. Fulton v. W. R. Grace Co., 143 Va. 12 , 23-24, 129 S.E. 374 (1925).

§ 8.2-320. C.I.F. and C. & F. terms.

  1. The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. & F. or C.F. means that the price so includes cost and freight to the named destination.
  2. Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to
    1. put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and
    2. load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for; and
    3. obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance; and
    4. prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and
    5. forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer’s rights.
  3. Unless otherwise agreed the term C. & F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.
  4. Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 12.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To make it clear that:

  1. The C.I.F. contract is not a destination but a shipment contract with risk of subsequent loss or damage to the goods passing to the buyer upon shipment if the seller has properly performed all his obligations with respect to the goods. Delivery to the carrier is delivery to the buyer for purposes of risk and “title”. Delivery of possession of the goods is accomplished by delivery of the bill of lading, and upon tender of the required documents the buyer must pay the agreed price without awaiting the arrival of the goods and if they have been lost or damaged after proper shipment he must seek his remedy against the carrier or insurer. The buyer has no right of inspection prior to payment or acceptance of the documents.
  2. The seller’s obligations remain the same even though the C.I.F. term is “used only in connection with the stated price and destination”.
  3. The insurance stipulated by the C.I.F. term is for the buyer’s benefit, to protect him against the risk of loss or damage to the goods in transit. A clause in a C.I.F. contract “insurance—for the account of sellers” should be viewed in its ordinary mercantile meaning that the sellers must pay for the insurance and not that it is intended to run to the seller’s benefit.
  4. A bill of lading covering the entire transportation from the port of shipment is explicitly required but the provision on this point must be read in the light of its reason to assure the buyer of as full protection as the conditions of shipment reasonably permit, remembering always that this type of contract is designed to move the goods in the channels commercially available. To enable the buyer to deal with the goods while they are afloat the bill of lading must be one that covers only the quantity of goods called for by the contract. The buyer is not required to accept his part of the goods without a bill of lading because the latter covers a larger quantity, nor is he required to accept a bill of lading for the whole quantity under a stipulation to hold the excess for the owner. Although the buyer is not compelled to accept either goods or documents under such circumstances he may of course claim his rights in any goods which have been identified to his contract.
  5. The seller is given the option of paying or providing for the payment of freight. He has no option to ship “freight collect” unless the agreement so provides. The rule of the common law that the buyer need not pay the freight if the goods do not arrive is preserved.
  6. The requirement that unless otherwise agreed the seller must procure insurance “of a kind and on terms then current at the port for shipment in the usual amount, in the currency of the contract, sufficiently shown to cover the same goods covered by the bill of lading”, applies to both marine and war risk insurance. As applied to marine insurance, it means such insurance as is usual or customary at the port for shipment with reference to the particular kind of goods involved, the character and equipment of the vessel, the route of the voyage, the port of destination and any other considerations that affect the risk. It is the substantial equivalent of the ordinary insurance in the particular trade and on the particular voyage and is subject to agreed specifications of type or extent of coverage. The language does not mean that the insurance must be adequate to cover all risks to which the goods may be subject in transit. There are some types of loss or damage that are not covered by the usual marine insurance and are excepted in bills of lading or in applicable statutes from the causes of loss or damage for which the carrier or the vessel is liable. Such risks must be borne by the buyer under this Article.
  7. An additional obligation is imposed upon the seller in requiring him to procure customary war risk insurance at the buyer’s expense. This changes the common law on the point. The seller is not required to assume the risk of including in the C.I.F. price the cost of such insurance, since it often fluctuates rapidly, but is required to treat it simply as a necessary for the buyer’s account. What war risk insurance is “current” or usual turns on the standard forms of policy or rider in common use.
  8. The C.I.F. contract calls for insurance covering the value of the goods at the time and place of shipment and does not include any increase in market value during transit or any anticipated profit to the buyer on a sale by him.
  9. Insurance “for the account of whom it may concern” is usual and sufficient. However, for a valid tender the policy of insurance must be one which can be disposed of together with the bill of lading and so must be “sufficiently shown to cover the same goods covered by the bill of lading.” It must cover separately the quantity of goods called for by the buyer’s contract and not merely insure his goods as part of a larger quantity in which others are interested, a case provided for in American mercantile practice by the use of negotiable certificates of insurance which are expressly authorized by this section. By usage these certificates are treated as the equivalent of separate policies and are good tender under C.I.F. contracts. The term “certificate of insurance”, however, does not of itself include certificates or “cover notes” issued by the insurance broker and stating that the goods are covered by a policy. Their sufficiency as substitutes for policies will depend upon proof of an established usage or course of dealing. The present section rejects the English rule that not only brokers’ certificates and “cover notes” but also certain forms of American insurance certificates are not the equivalent of policies and are not good tender under a C.I.F. contract.
  10. The seller’s invoice of the goods shipped under a C.I.F. contract is regarded as a usual and necessary document upon which reliance may properly be placed. It is the document which evidences points of description, quality and the like which do not readily appear in other documents. This Article rejects those statements to the effect that the invoice is a usual but not a necessary document under a C.I.F. term.
  11. The buyer needs all of the documents required under a C.I.F. contract, in due form and with necessary endorsements, so that before the goods arrive he may deal with them by negotiating the documents or may obtain prompt possession of the goods after their arrival. If the goods are lost or damaged in transit the documents are necessary to enable him promptly to assert his remedy against the carrier or insurer. The seller is therefore obligated to do what is mercantilely reasonable in the circumstances and should make every reasonable exertion to send forward the documents as soon as possible after the shipment. The requirement that the documents be forwarded with “commercial promptness” expresses a more urgent need for action than that suggested by the phrase “reasonable time”.
  12. Under a C.I.F. contract the buyer, as under the common law, must pay the price upon tender of the required documents without first inspecting the goods, but his payment in these circumstances does not constitute an acceptance of the goods nor does it impair his right of subsequent inspection or his options and remedies in the case of improper delivery. All remedies and rights for the seller’s breach are reserved to him. The buyer must pay before inspection and assert his remedy against the seller afterward unless the nonconformity of the goods amounts to a real failure of consideration, since the purpose of choosing this form of contract is to give the seller protection against the buyer’s unjustifiable rejection of the goods at a distant port of destination which would necessitate taking possession of the goods and suing the buyer there.
  13. A valid C.I.F. contract may be made which requires part of the transportation to be made on land and part on the sea, as where the goods are to be brought by rail from an inland point to a seaport and thence transported by vessel to the named destination under a “through” or combination bill of lading issued by the railroad company. In such a case shipment by rail from the inland point within the contract period is a timely shipment notwithstanding that the loading of the goods on the vessel is delayed by causes beyond the seller’s control.
  14. Although subsection (2) stating the legal effects of the C.I.F. term is an “unless otherwise agreed” provision, the express language used in an agreement is frequently a precautionary, fuller statement of the normal C.I.F. terms and hence not intended as a departure or variation from them. Moreover, the dominant outlines of the C.I.F. term are so well understood commercially that any variation should, whenever reasonably possible, be read as falling within those dominant outlines rather than as destroying the whole meaning of a term which essentially indicates a contract for proper shipment rather than one for delivery at destination. Particularly careful consideration is necessary before a printed form or clause is construed to mean agreement otherwise and where a C.I.F. contract is prepared on a printed form designed for some other type of contract, the C.I.F. terms must prevail over printed clauses repugnant to them.
  15. Under subsection (4) the fact that the seller knows at the time of the tender of the documents that the goods have been lost in transit does not affect his rights if he has performed his contractual obligations. Similarly, the seller cannot perform under a C.I.F. term by purchasing and tendering landed goods.
  16. Under the C. & F. term, as under the C.I.F. term, title and risk of loss are intended to pass to the buyer on shipment. A stipulation in a C. & F. contract that the seller shall effect insurance on the goods and charge the buyer with the premium (in effect that he shall act as the buyer’s agent for that purpose) is entirely in keeping with the pattern. On the other hand, it often happens that the buyer is in a more advantageous position than the seller to effect insurance on the goods or that he has in force an “open” or “floating” policy covering all shipments made by him or to him, in either of which events the C. & F. term is adequate without mention of insurance.
  17. It is to be remembered that in a French contract the term “C.A.F.” does not mean “Cost and Freight” but has exactly the same meaning as the term “C.I.F.” since it is merely the French equivalent of that term. The “A” does not stand for “and” but for “assurance” which means insurance.

Unless the shipment has been sent “freight collect” the buyer is entitled to receive documentary evidence that he is not obligated to pay the freight; the seller is therefore required to obtain a receipt “showing that the freight has been paid or provided for.” The usual notation in the appropriate space on the bill of lading that the freight has been prepaid is a sufficient receipt, as at common law. The phrase “provided for” is intended to cover the frequent situation in which the carrier extends credit to a shipper for the freight on successive shipments and receives periodical payments of the accrued freight charges from him.

Insurance secured in compliance with a C.I.F. term must cover the entire transportation of the goods to the named destination.

The contract contemplates that before the goods arrive at their destination they may be sold again and again on C.I.F. terms and that the original policy of insurance and bill of lading will run with the interest in the goods by being transferred to each successive buyer. A buyer who becomes the seller in such an intermediate contract for sale does not thereby, if his sub-buyer knows the circumstances, undertake to insure the goods again at an increased price fixed in the new contract or to cover the increase in price by additional insurance, and his buyer may not reject the documents on the ground that the original policy does not cover such higher price. If such a sub-buyer desires additional insurance he must procure it for himself.

Where the seller exercises an option to ship “freight collect” and to credit the buyer with the freight against the C.I.F. price, the insurance need not cover the freight since the freight is not at the buyer’s risk. On the other hand, where the seller prepays the freight upon shipping under a bill of lading requiring prepayment and providing that the freight shall be deemed earned and shall be retained by the carrier “ship and/or cargo lost or not lost,” or using words of similar import, he must procure insurance that will cover the freight, because notwithstanding that the goods are lost in transit the buyer is bound to pay the freight as part of the C.I.F. price and will be unable to recover it back from the carrier.

The seller’s failure to tender a proper insurance document is waived if the buyer refuses to make payment on other and untenable grounds at a time when proper insurance could have been obtained and tendered by the seller if timely objection had been made. Even a failure to insure on shipment may be cured by seasonable tender of a policy retroactive in effect; e. g., one insuring the goods “lost or not lost.” The provisions of this Article on cure of improper tender and on waiver of buyer’s objections by silence are applicable to insurance tenders under a C.I.F. term. Where there is no waiver by the buyer as described above, however, the fact that the goods arrive safely does not cure the seller’s breach of his obligations to insure them and tender to the buyer a proper insurance document.

Cross references:

Point 4: Section 2-323.

Point 6: Section 2-509(1) (a).

Point 9: Sections 2-508 and 2-605(1) (a).

Point 12: Sections 2-321(3), 2-512 and 2-513(3) and Article 5.

Definitional cross references:

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-321. C.I.F. or C. & F.: “Net landed weights”; “payment on arrival”; warranty of condition on arrival.

Under a contract containing a term C.I.F. or C. & F.

  1. Where the price is based on or is to be adjusted according to “net landed weights,” “delivered weights,” “out turn” quantity or quality or the like, unless otherwise agreed the seller must reasonably estimate the price. The payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness.
  2. An agreement described in subsection (1) or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the place or time of identification to the contract for sale or delivery or on the passing of the risk of loss.
  3. Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost delivery of the documents and payment are due when the goods should have arrived.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 12.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

This section deals with two variations of the C.I.F. contract which have evolved in mercantile practice but are entirely consistent with the basic C.I.F. pattern. Subsections (1) and (2), which provide for a shift to the seller of the risk of quality and weight deterioration during shipment, are designed to conform the law to the best mercantile practice and usage without changing the legal consequences of the C.I.F. or C. & F. term as to the passing of marine risks to the buyer at the point of shipment. Subsection (3) provides that where under the contract documents are to be presented for payment after arrival of the goods, this amounts merely to a postponement of the payment under the C.I.F. contract and is not to be confused with the “no arrival, no sale” contract. If the goods are lost, delivery of the documents and payment against them are due when the goods should have arrived. The clause for payment on or after arrival is not to be construed as such a condition precedent to payment that if the goods are lost in transit the buyer need never pay and the seller must bear the loss.

Cross reference:

Section 2-324.

Definitional cross references:

“Agreement”. Section 1-201 .

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Goods”. Section 2-105.

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-322. Delivery “ex-ship.”

  1. Unless otherwise agreed a term for delivery of goods “ex-ship” (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are are usually discharged.
  2. Under such a term unless otherwise agreed
    1. the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and
    2. the risk of loss does not pass to the buyer until the goods leave the ship’s tackle or are otherwise properly unloaded.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 19.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. The delivery term, “ex ship” as between seller and buyer, is the reverse of the f.a.s. term covered.
  2. Delivery need not be made from any particular vessel under a clause calling for delivery “ex ship”, even though a vessel on which shipment is to be made originally is named in the contract, unless the agreement by appropriate language, restricts the clause to delivery from a named vessel.
  3. The appropriate place and manner of unloading at the port of destination depend upon the nature of the goods and the facilities and usages of the port.
  4. A contract fixing a price “ex ship” with payment “cash against documents” calls only for such documents as are appropriate to the contract. Tender of a delivery order and of a receipt for the freight after the arrival of the carrying vessel is adequate. The seller is not required to tender a bill of lading as a document of title nor is he required to insure the goods for the buyer’s benefit, as the goods are not at the buyer’s risk during the voyage.

Cross reference:

Point 1: Section 2-319(2).

Definitional cross references:

“Buyer”. Section 2-103.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-323. Form of bill of lading required in overseas shipment; “Overseas.”

  1. Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.
  2. Where in a case within subsection (1) a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set:
    1. due tender of a single part is acceptable within the provisions of this title on cure of improper delivery (subsection (1) of § 8.2-508 ); and
    2. even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.
  3. A shipment by water or by air or a contract contemplating such shipment is “overseas” insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 inserted “tangible” in the first sentence of subsection (2).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 22.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Subsection (1) follows the “American” rule that a regular bill of lading indicating delivery of the goods at the dock for shipment is sufficient, except under a term “F.O.B. vessel.” See Section 2-319 and comment thereto.
  2. Subsection (2) deals with the problem of bills of lading covering deep water shipments, issued not as a single bill of lading but in a set of parts, each part referring to the other parts and the entire set constituting in commercial practice and at law a single bill of lading. Commercial practice in international commerce is to accept and pay against presentation of the first part of a set if the part is sent from overseas even though the contract of the buyer requires presentation of a full set of bills of lading provided adequate indemnity for the missing parts is forthcoming.

This subsection codified that practice as between buyer and seller. Article 5 (Section 5-113) authorizes banks presenting drafts under letters of credit to give indemnities against the missing parts, and this subsection means that the buyer must accept and act on such indemnities if he in good faith deems them adequate. But neither this subsection nor Article 5 decides whether a bank which has issued a letter of credit is similarly bound. The issuing bank’s obligation under a letter of credit is independent and depends on its own terms. See Article 5.

Cross references:

Sections 2-508(2), 5-113.

Definitional cross references:

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Financing agency”. Section 2-104.

“Person”. Section 1-201 .

“Seller”. Section 2-103.

“Send”. Section 1-201 .

“Term”. Section 1-201 .

§ 8.2-324. “No arrival, no sale” term.

Under a term “no arrival, no sale” or terms of like meaning, unless otherwise agreed,

  1. the seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but he assumes no obligation that the goods will arrive unless he has caused the non-arrival; and
  2. where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (§ 8.2-613 ).

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 19, 30.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. The “no arrival, no sale” term in a “destination” overseas contract leaves risk of loss on the seller but gives him an exemption from liability for non-delivery. Both the nature of the case and the duty of good faith require that the seller must not interfere with the arrival of the goods in any way. If the circumstances impose upon him the responsibility for making or arranging the shipment, he must have a shipment made despite the exemption clause. Further, the shipment made must be a conforming one, for the exemption under a “no arrival, no sale” term applies only to the hazards of transportation and the goods must be proper in all other respects.
  2. The provisions of this Article on identification must be read together with the present section in order to bring the exemption into application. Until there is some designation of the goods in a particular shipment or on a particular ship as being those to which the contract refers there can be no application of an exemption for their non-arrival.
  3. The seller’s duty to tender the agreed or declared goods if they do arrive is not impaired because of their delay in arrival or by their arrival after transshipment.
  4. The phrase “to arrive” is often employed in the same sense as “no arrival, no sale” and may then be given the same effect. But a “to arrive” term, added to a C.I.F. or C. & F. contract, does not have the full meaning given by this section to “no arrival, no sale”. Such a “to arrive” term is usually intended to operate only to the extent that the risks are not covered by the agreed insurance and the loss or casualty is due to such uncovered hazards. In some instances the “to arrive” term may be regarded as a time of payment term, or, in the case of the reselling seller discussed in point 1 above, as negating responsibility for conformity of the goods, if they arrive, to any description which was based on his good faith belief of the quality. Whether this is the intention of the parties is a question of fact based on all the circumstances surrounding the resale and in case of ambiguity the rules of Sections 2-316 and 2-317 apply to preclude dishonor.
  5. Paragraph (b) applies where goods arrive impaired by damage or partial loss during transportation and makes the policy of this Article on casualty to identified goods applicable to such a situation. For the term cannot be regarded as intending to give the seller an unforeseen profit through casualty; it is intended only to protect him from loss due to causes beyond his control.

The reason of this section is that where the seller is reselling goods bought by him as shipped by another and this fact is known to the buyer, so that the seller is not under any obligation to make the shipment himself, the seller is entitled under the “no arrival, no sale” clause to exemption from payment of damages for non-delivery if the goods do not arrive or if the goods which actually arrive are non-conforming. This does not extend to sellers who arrange shipment by their own agents, in which case the clause is limited to casualty due to marine hazards. But sellers who make known that they are contracting only with respect to what will be delivered to them by parties over whom they assume no control are entitled to the full quantum of the exemption.

Cross references:

Point 1: Section 1-203 .

Point 2: Section 2-501(a) and (c).

Point 5: Section 2-613.

Definitional cross references:

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Fault”. Section 1-201 .

“Goods”. Section 2-105.

“Sale”. Section 2-106.

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-325. “Letter of credit” term; “confirmed credit.”

  1. Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.
  2. The delivery to seller of a proper letter of credit suspends the buyer’s obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him.
  3. Unless otherwise agreed the term “letter of credit” or “banker’s credit” in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term “confirmed credit” means that the credit must also carry the direct obligation of such an agency which does business in the seller’s financial market.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 12.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To express the established commercial and banking understanding as to the meaning and effects of terms calling for “letters of credit” or “confirmed credit”:

  1. Subsection (2) follows the general policy of this Article and Article 3 (Section 3-802) on conditional payment under which payment by check or other short-term instrument is not ordinarily final as between the parties if the recipient duly presents the instrument and honor is refused. Thus the furnishing of a letter of credit does not substitute the financing agency’s obligation for the buyer’s, but the seller must first give the buyer reasonable notice of his intention to demand direct payment from him.
  2. Subsection (3) requires that the credit be irrevocable and be a prime credit as determined by the standing of the issuer. It is not necessary, unless otherwise agreed, that the credit be a negotiation credit; the seller can finance himself by an assignment of the proceeds under Section 5-116(2).
  3. The definition of “confirmed credit” is drawn on the supposition that the credit is issued by a bank which is not doing direct business in the seller’s financial market; there is no intention to require the obligation of two banks both local to the seller.

Cross references:

Sections 2-403, 2-511(3) and 3-802 and Article 5.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Draft”. Section 3-104.

“Financing agency”. Section 2-104.

“Notifies”. Section 1-201 .

“Overseas”. Section 2-323.

“Purchaser”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-326. Sale on approval and sale or return; rights of creditors.

  1. Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is
    1. a “sale on approval” if the goods are delivered primarily for use; and
    2. a “sale or return” if the goods are delivered primarily for resale.
  2. Goods held on approval are not subject to the claims of the buyer’s creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer’s possession.
  3. Any “or return” term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this title (§ 8.2-201 ) and as contradicting the sale aspect of the contract within the provisions of this title on parol or extrinsic evidence (§ 8.2-202 ).

History. 1964, c. 219; 2000, c. 1007.

Editor’s note.

Section 55-152, referred to in the Virginia Comment, was repealed by Acts 1973, c. 509.

The 2000 amendments.

The 2000 amendment by c. 1007, effective July 1, 2001, deleted “consignment sales and” from catchline, and deleted “Except as provided in subsection (3),” at the beginning of subsection (2); deleted former subsection (3), explaining the status of “sale or return”, and redesignated former subsection (4) as present subsection (3).

Michie’s Jurisprudence.

For related discussion, see 1A M.J. Agency, § 89; 2B M.J. Bankruptcy, § 60; 3C M.J. Commercial Law, §§ 12, 18, 20.

CASE NOTES

Not a “sale or return” transaction. —

Evidence did not support “a sale or return” transaction, as there was no evidence of an obligation to pay for the goods; there was no evidence of an invoice being prepared, sent or paid. No terms of a “sale or return” were established, such as the time period within which the goods could be returned; further, there was a limited time period for the consignment, but the goods were never returned even though the time had expired. In re Niblett, 441 Bankr. 490, 2009 Bankr. LEXIS 3752 (Bankr. E.D. Va. 2009).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 19(3), Uniform Sales Act.

Changes: Completely rewritten in this and the succeeding section.

Purposes of changes: To make it clear that:

  1. Both a “sale on approval” and “sale or return” should be distinguished from other types of transactions with which they frequently have been confused. A “sale on approval,” sometimes also called a sale “on trial” or “on satisfaction,” deals with a contract under which the seller undertakes a risk in order to satisfy its prospective buyer with the appearance or performance of the goods that are sold. The goods are delivered to the proposed purchaser but they remain the property of the seller until the buyer accepts them. The price has already been agreed. The buyer’s willingness to receive and test the goods is the consideration for the seller’s engagement to deliver and sell. A “sale or return,” on the other hand, typically is a sale to a merchant whose unwillingness to buy is overcome only by the seller’s engagement to take back the goods (or any commercial unit of goods) in lieu of payment if they fail to be resold. A sale or return is a present sale of goods which may be undone at the buyer’s option. Accordingly, subsection (2) provides that goods delivered on approval are not subject to the prospective buyer’s creditors until acceptance, and goods delivered in a sale or return are subject to the buyer’s creditors while in the buyer’s possession.
  2. The right to return the goods for failure to conform to the contract does not make the transaction a “sale on approval” or “sale or return” and has nothing to do with this section or section 2-327. This section is not concerned with remedies for breach of contract. It deals instead with a power given by the contract to turn back the goods even though they are wholly as warranted. This section nevertheless pre-supposes that a contract for sale is contemplated by the parties although that contract may be of the peculiar character that this section addresses (i.e., a sale on approval or a sale or return).
  3. Subsection (3) resolves a conflict in the pre-UCC case law by recognizing that an “or return” provision is so definitely at odds with any ordinary contract for sale of goods that if a written agreement is involved the “or return” term must be contained in a written memorandum. The “or return” aspect of a sales contract must be treated as a separate contract under the Statute of Frauds section and as contradicting the sale insofar as questions of parole or extrinsic evidence are concerned.
  4. Certain true consignment transactions were dealt with in former Sections 2-326(3) and 9-114. These provisions have been deleted and have been replaced by new provisions in Article 9. See, e.g., Sections 9-109(a)(4); 9-103(d); 9-319.

These two transactions are so strongly delineated in practice and in general understanding that every presumption runs against a delivery to a consumer being a “sale or return” and against a delivery to a merchant for resale being a “sale on approval.”

If a buyer’s obligation as a buyer is conditioned not on his personal approval but on the article’s passing a described objective test, the risk of loss by casualty pending the test is properly the seller’s and proper return is at his expense. On the point of “satisfaction” as meaning “reasonable satisfaction” when an industrial machine is involved, this Article takes no position.

Cross references:

Point 2: Article 9.

Point 3: Sections 2-201 and 2-202.

Definitional cross references:

“Between merchants”. Section 2-104.

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract for sale”. Section 2-106.

“Creditor”. Section 1-201 .

“Goods”. Section 2-105.

“Sale”. Section 2-106.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Under prior Virginia law, compliance with the Trader’s Act, Code 1950, § 55-152, was the exclusive method for persons who consigned goods for sale to obtain protection from the creditors of the consignee. Under the UCC, the consignor has two additional methods of protection, perfection of a security interest under Title 8.9 or establishing that the consignee is generally known by his creditors to be substantially engaged in selling the goods of others.

§ 8.2-327. Special incidents of sale on approval and sale or return.

  1. Under a sale on approval unless otherwise agreed
    1. although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and
    2. use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole; and
    3. after due notification of election to return, the return is at the seller’s risk and expense but a merchant buyer must follow any reasonable instructions.
  2. Under a sale or return unless otherwise agreed
    1. the option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably; and
    2. the return is at the buyer’s risk and expense.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 18, 19, 26.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 19(3), Uniform Sales Act.

Changes: Completely rewritten in preceding and this section.

Purposes of changes: To make it clear that:

  1. In the case of a sale on approval:
  2. In the case of a sale or return, the return of any unsold unit merely because it is unsold is the normal intent of the “sale or return” provision, and therefore the right to return for this reason alone is independent of any other action under the contract which would turn on wholly different considerations. On the other hand, where the return of goods is for breach, including return of items resold by the buyer and returned by the ultimate purchasers because of defects, the return procedure is governed not by the present section but by the provisions on the effects and revocation of acceptance.
  3. In the case of a sale on approval the risk rests on the seller until acceptance of the goods by the buyer, while in a sale or return the risk remains throughout on the buyer.
  4. Notice of election to return given by the buyer in a sale on approval is sufficient to relieve him of any further liability. Actual return by the buyer to the seller is required in the case of a sale or return contract. What constitutes due “giving” of notice, as required in “on approval” sales, is governed by the provisions on good faith and notice. “Seasonable” is used here as defined in Section 1-204 . Nevertheless, the provisions of both this Article and of the contract on this point must be read with commercial reason and with full attention to good faith.

If all of the goods involved conform to the contract, the buyer’s acceptance of part of the goods constitutes acceptance of the whole. Acceptance of part falls outside the normal intent of the parties in the “on approval” situation and the policy of this Article allowing partial acceptance of a defective delivery has no application here. A case where a buyer takes home two dresses to select one commonly involves two distinct contracts; if not, it is covered by the words “unless otherwise agreed”.

Cross references:

Point 1: Sections 2-501, 2-601 and 2-603.

Point 2: Sections 2-607 and 2-608.

Point 4: Sections 1-201 and 1-204 .

Definitional cross references:

“Agreed”. Section 1-201 .

“Buyer”. Section 2-103.

“Commercial unit”. Section 2-105.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Notifies”. Section 1-201 .

“Notification”. Section 1-201 .

“Sale on approval”. Section 2-326.

“Sale or return”. Section 2-326.

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Subsection 8.2-327(1)(b) is in accord with prior Virginia law, although the Virginia court put the rule in affirmative language—a retention beyond a reasonable time constitutes an acceptance. Dimos v. Stowe, 193 Va. 831 , 836-37, 71 S.E.2d 186 (1952); Brown v. Austin-Western Co., 111 Va. 209 , 212, 68 S.E. 184 (1910).

The UCC does not expressly state whether the buyer’s nonapproval is conclusive regardless of his good or bad faith, where he is to keep the goods if they are satisfactory. Under prior Virginia law the buyer must act in good faith. Virginia-Carolina Chemical Co. v. Carpenter & Co., 99 Va. 292 , 293-97, 38 S.E. 143 (1901); Carpenter & Co. v. Virginia-Carolina Chemical Co., 98 Va. 177 , 182-85, 35 S.E. 358 (1900). A similar rule of good faith may be continued under the general obligation of good faith required by § 8.1-203.

See Virginia Comment to § 8.2-607 for comment on actions for breach of warranty after acceptance in a sale on approval.

§ 8.2-328. Sale by auction.

  1. In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.
  2. A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
  3. Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid.
  4. If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Auctions and Auctioneers, §§ 2, 3, 6, 7.

CASE NOTES

There is no rigidly prescribed prerequisite for the conclusion of an auction sale of real property. —

The literal “fall of the hammer,” although commonly employed in practice and frequently alluded to in the decided cases, has never been regarded as essential to a valid sale. All that is necessary is that the auctioneer, after receiving the apparent last and highest bid, give clear notice of his or her intention to accept it if no higher bids are forthcoming, giving those present a fair opportunity to submit higher bids and then, if none is forthcoming, announce in some clear and unequivocal manner that the highest bid is accepted and the sale completed. Yaffe v. Heritage Sav. & Loan Ass'n, 235 Va. 577 , 369 S.E.2d 404, 4 Va. Law Rep. 3093, 1988 Va. LEXIS 74 (1988).

A sale of land at auction is not controlled by subsection (2) of this section, since this title applies only to transactions relating to “goods.” Hoffman v. Horton, 212 Va. 565 , 186 S.E.2d 79, 1972 Va. LEXIS 209 (1972).

However, to vest the auctioneer crying a sale of land with the same discretion to reopen bidding that he has in the sale of goods is to achieve uniformity and, of more importance, to recognize a rule which is both necessary and fair. Hoffman v. Horton, 212 Va. 565 , 186 S.E.2d 79, 1972 Va. LEXIS 209 (1972).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 21, Uniform Sales Act.

Changes: Completely rewritten.

Purposes of changes: To make it clear that:

  1. The auctioneer may in his discretion either reopen the bidding or close the sale on the bid on which the hammer was falling when a bid is made at that moment. The recognition of a bid of this kind by the auctioneer in his discretion does not mean closing in favor of such a bidder, but only that the bid has been accepted as a continuation of the bidding. If recognized, such a bid discharges the bid on which the hammer was falling when it was made.
  2. An auction “with reserve” is the normal procedure. The crucial point, however, for determining the nature of an auction is the “putting up” of the goods. This Article accepts the view that the goods may be withdrawn before they are actually “put up,” regardless of whether the auction is advertised as one without reserve, without liability on the part of the auction announcer to persons who are present. This is subject to any peculiar facts which might bring the case within the “firm offer” principle of this Article, but an offer to persons generally would require unmistakable language in order to fall within that section. The prior announcement of the nature of the auction either as with reserve or without reserve will, however, enter as an “explicit term” in the “putting up” of the goods and conduct thereafter must be governed accordingly. The present section continued the prior rule permitting withdrawal of bids in auctions both with and without reserve; and the rule is made explicit that the retraction of a bid does not revive a prior bid.

Cross reference:

Point 2: Section 2-205.

Definitional cross references:

“Buyer”. Section 2-103.

“Good faith”. Section 1-201 .

“Goods”. Section 2-105.

“Lot”. Section 2-105.

“Notice”. Section 1-201 .

“Sale”. Section 2-106.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Subsection 8.2-328(4) is in accord with prior Virginia law in undertaking to protect buyers at auction sales from having the price bid up by the seller who has not given notice of reserving liberty to make such bids. Edmunds v. Gwynn, 157 Va. 528 , 541-44, 159 S.E. 205 , 161 S.E. 892 (1931), like the UCC, allows the buyer to rescind the purchase where there has been illegal puffing on the seller’s behalf. See also Hinde v. Pendleton, Wythe 354, 355-57 (1799).

The UCC does not cover unlawful combinations between the auctioneer and the purchaser, Brock v. Rice, 68 Va. (27 Gratt.) 812, 816-20 (1876), or unlawful combinations among purchasers, Underwood v. McVeigh, 64 Va. (23 Gratt.) 409, 428-29 (1873).

PART 4. Title, Creditors and Good Faith Purchasers.

§ 8.2-401. Passing of title; reservation for security; limited application of this section.

Each provision of this title with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this title and matters concerning title become material the following rules apply:

  1. Title to goods cannot pass under a contract for sale prior to their identification to the contract (§ 8.2-501 ), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this act. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the title on secured transactions (Title 8.9A), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.
  2. Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:
    1. if the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but
    2. if the contract requires delivery at destination, title passes on tender there.
  3. Unless other explicitly agreed where delivery is to be made without moving the goods,
    1. if the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents  and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
    2. if the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.
  4. A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance, revests title to the goods in the seller. Such revesting occurs by operation of law and is not a “sale.”

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200, in paragraph (3)(a), inserted “tangible”; and “and if the seller . . . delivers the document”; and inserted “of title” in paragraph (3)(b).

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assignments, § 9; 3C M.J. Commercial Law, § 99.

Research References.

Virginia Forms (Matthew Bender). No. 8A-401 Provision — Specific Warranty of Quality.

CASE NOTES

When title passes in a retail sales transaction. —

In a retail sales transaction involving goods such as a camcorder, title passes upon the seller’s delivery of the goods. Davies v. Commonwealth, 15 Va. App. 350, 423 S.E.2d 839, 9 Va. Law Rep. 586, 1992 Va. App. LEXIS 285 (1992).

Initial bona fide sale occurred at time of shipping. —

Coal mine operator was not shipping coal to its customers for the purpose of cleaning but for the purpose of selling the coal to the customers and thus, it was at that moment that the “initial bona fide sale” occurred. The fact that the coal mine operator was paid on some basis other than the tons of actual “raw coal” shipped does not change this conclusion; the customer owned all the coal including the impurities. United States v. Rapoca Energy Co., 751 F. Supp. 565, 1990 U.S. Dist. LEXIS 16122 (W.D. Va. 1990).

Payment arrangement did not affect passage of title. —

The arrangement that coal mine operator and its customers had for determining the amount owed to coal mine operator was only the method of payment and did not alter the fact that when coal mine operator loaded its coal on trucks or other means of transportation the coal was identified to the contract and title passed because coal mine operator had completed physical delivery of the goods. United States v. Rapoca Energy Co., 751 F. Supp. 565, 1990 U.S. Dist. LEXIS 16122 (W.D. Va. 1990).

Title passed at time of sale. —

Trustee’s right to proceeds of sale of collateral of debtor was superior to that of other creditors holding a lien created by reason of a judgment and a related garnishment because an “account” within the meaning of § 8.9A-102(a)(2) came into existence at the moment that debtor accepted third party purchase orders for the collateral, at which time title passed to the third party buyers by operation of § 8.2-401(3)(b), and the trustee’s security interest attached thereto by operation of § 8.9A-203 . The resulting right to payment and the funds used as payment were “proceeds” within the meaning of § 8.9A-102 (64) in which the trustee had an interest superior to that of the competing creditors, and § 8.9A-317 did not require a different result given these facts. Swanson v. Applied Process Tech. Int'l, LLC, 475 Bankr. 495, 2012 Bankr. LEXIS 3091 (Bankr. E.D. Va. 2012).

Where portions of a larger mass, liquid or solid, are sold, and where the portion sold must be weighed or measured (which, of necessity, includes the idea of separating them from the general mass), it may be said that the identity and individuality of the part sold must be ascertained by actual separation from its kindred residue, before the sale will be complete to pass the property; or, in other words, before there can be a constructive delivery. City of Richmond v. Petroleum Marketers, Inc., 221 Va. 372 , 269 S.E.2d 389, 1980 Va. LEXIS 255 (1980).

Continuation of security interest after authorized sale. —

An electrical contractor’s creditor’s security interest in electrical supplies to be installed in a school under construction would not continue after disposition of the goods to the school’s general contractor where, under the terms of the contract between the general contractor and the electrical contractor, there was an authorized sale as defined by § 8.2-106 (1) within the contemplation of the terms of the security agreement. Graves Constr. Co. v. Rockingham Nat'l Bank, 220 Va. 844 , 263 S.E.2d 408, 1980 Va. LEXIS 175 (1980).

Error in jury instructions in prosecution for grand larceny by false pretenses. —

In prosecution for grand larceny by false pretenses, the trial court erred in refusing to instruct the jury that it must find that defendant obtained title to the property; although the trial court erred in instructing the jury regarding the elements of the offense, the error was harmless. Davies v. Commonwealth, 15 Va. App. 350, 423 S.E.2d 839, 9 Va. Law Rep. 586, 1992 Va. App. LEXIS 285 (1992).

OFFICIAL COMMENT

Prior uniform statutory provision: See generally, Sections 17, 18, 19 and 20, Uniform Sales Act.

Purposes: To make it clear that:

  1. This Article deals with the issues between seller and buyer in terms of step by step performance or non-performance under the contract for sale and not in terms of whether or not “title” to the goods has passed. That the rules of this section in no way alter the rights of either the buyer, seller or third parties declared elsewhere in the Article is made clear by the preamble of this section. This section, however, in no way intends to indicate which line of interpretation should be followed in cases where the applicability of “public” regulation depends upon a “sale” or upon location of “title” without further definition. The basic policy of this Article that known purpose and reason should govern interpretation cannot extend beyond the scope of its own provisions. It is therefore necessary to state what a “sale” is and when title passes under this Article in case the courts deem any public regulation to incorporate the defined term of the “private” law.
  2. “Future” goods cannot be the subject of a present sale. Before title can pass the goods must be identified in the manner set forth in Section 2-501. The parties, however, have full liberty to arrange by specific terms for the passing of title to goods which are existing.
  3. The “special property” of the buyer in goods identified to the contract is excluded from the definition of “security interest”; its incidents are defined in provisions of this Article such as those on the rights of the seller’s creditors, on good faith purchase, on the buyer’s right to goods on the seller’s insolvency, and on the buyer’s right to specific performance or replevin.
  4. The factual situations in subsections (2) and (3) upon which passage of title turn actually base the test upon the time when the seller has finally committed himself in regard to specific goods. Thus in a “shipment” contract he commits himself by the act of making the shipment. If shipment is not contemplated subsection (3) turns on the seller’s final commitment, i. e. the delivery of documents or the making of the contract.

Cross references:

Point 2: Sections 2-102, 2-501 and 2-502.

Point 3: Sections 1-201 , 2-402, 2-403, 2-502 and 2-716.

Definitional cross references:

“Agreement”. Section 1-201 .

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Delivery”. Section 1-201 .

“Document of title”. Section 1-201 .

“Good faith”. Section 2-103.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Purchaser”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Remedy”. Section 1-201 .

“Rights”. Section 1-201 .

“Sale”. Section 2-106.

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

“Send”. Section 1-201 .

VIRGINIA COMMENT

The UCC rules as set forth in this section are generally in accord with the earlier Virginia decisions. Under earlier Virginia law when title passes is governed by the intention of the parties. Birdsong & Co. v. American Peanut Co., 149 Va. 755 , 766, 141 S.E. 759 (1928). Under both the UCC and prior Virginia law title cannot pass from a seller to a buyer until there has been an identification of specific goods to the contract. Ellis & Meyers Lumber Co. v. Hubbard, 123 Va. 481 , 493-99, 96 S.E. 754 (1918); Broad Street Bank v. Baker Motor Vehicle Co., 119 Va. 26 , 31, 89 S.E. 110 (1916). Subject to this proviso, title passes in any manner and on any conditions expressly agreed upon by the parties. Ellis & Meyers Lumber Co. v. Hubbard, 123 Va. 481 , 494, 96 S.E. 754 (1918). In the absence of express agreement, under the UCC, the rules of this section are immediately resorted to in order to determine whether title has passed. Under earlier Virginia law, it is said, title passage is wholly a question of the intention of the parties. In Triplett Lumber Co., Inc. v. Purcell, 185 F.2d 843, 845-46 (4th Cir. 1950), it was held that no title had passed because the parties had not agreed upon a price. The facts and circumstances are examined under Virginia law in order to ascertain the intentions of the parties, and if these show no manifestation of intention, then resort is had to presumptions of law to find these intentions. Faulkner v. Town of South Boston, 141 Va. 517 , 520, 127 S.E. 380 (1925).

Under both the UCC and prior Virginia law an appropriation of specific goods to the contract can be made only with the assent of both seller and buyer. Broad Street Bank v. Baker Motor Vehicle Co., 119 Va. 26 , 31, 89 S.E. 110 (1916); American Hide & Leather Co. v. Chalkley & Co., 101 Va. 458 , 464, 44 S.E. 705 (1903). Title may pass although the goods are still in the possession of the seller and something remains to be done, as weighing to determine the price. Drewry, Treasurer v. Baugh and Sons, Inc., 150 Va. 394 , 403-05, 143 S.E. 713 (1928). Under Virginia law, title may pass while the goods are in the hands of a third person, and it is still necessary to separate the buyer’s goods from a larger fungible mass. Geoghegan Sons & Co., Inc. v. Arbuckle Bros., 139 Va. 92 , 106, 123 S.E. 387 , 36 A.L.R. 399 (1924); Pleasants v. Pendleton, 27 Va. (6 Rand.) 473, 488-95, 499-502, 503-06 (1828). The UCC is not explicit on this point. Trigg Co. v. Bucyrus Co., 104 Va. 79 , 83-86, 51 S.E. 174 (1905), recognized that title had passed to the buyer so that the seller could not reclaim the goods upon the buyer’s insolvency.

Unless otherwise expressly agreed, title under both the UCC and prior Virginia law passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods. Faulkner v. Town of South Boston, 141 Va. 517 , 520-21, 127 S.E. 380 (1925); Jacobs v. Warthen, 115 Va. 571 , 573, 80 S.E. 113 (1913). Under both the UCC and prior Virginia law, title passes to the buyer at the time and place of shipment, under an F.O.B. place of shipment contract. Geoghegan Sons & Co. v. Arbuckle Bros., 139 Va. 92 , 123 S.E. 387 , 36 A.L.R. 399 (1924); J. B. Colt Co. v. Elam, 138 Va. 124 , 127, 120 S.E. 857 (1924); Lawson v. Hobbs, 120 Va. 690 , 693, 91 S.E. 750 (1917). If the seller is required to deliver the goods at destination, title passes under the UCC “on tender” at destination, while Virginia has spoken of title passing “on delivery” at destination. Montauk Ice Cream Co. v. Daigger, 141 Va. 686 , 698, 126 S.E. 681 (1925).

The UCC changes the result in Rountree v. Graham, 144 Va. 145 , 148-50, 131 S.E. 193 (1926). In this case, under an F.O.B. place of shipment term, the goods were delivered by the seller to the carrier. The seller took an order bill of lading, granting the buyer a right of inspection, and with draft attached, forwarded the documents for collection. On inspection the buyer found the goods to be defective and refused to accept them. The Virginia court, saying that passage of title is a question of the intention of the parties, found from the correspondence between the parties that title was not intended to pass at the place of shipment. The UCC is clear that the reservation of a security interest in a bill of lading does not affect the passing of title, the time and place of title passage being controlled by the UCC in the absence of an explicit agreement. Since there was no explicit agreement in this case, title would have passed at the place of shipment, contrary to the holding in the case.

Under both the UCC and prior Virginia law where delivery is to be made, without moving the goods, by the delivery of a document, title passes at the time and place the document is delivered. Pleasants v. Pendleton, 27 Va. (6 Rand.) 473, 483-84 (1828). Where delivery of identified goods is to be made without moving the goods or delivery of documents, title passes at the time and place of contracting.

The UCC changes the result in F. D. Cummer and Son Co. v. R. M. Hudson Co., 141 Va. 271 , 283-84, 127 S.E. 171 (1925) (goods already in possession of the buyer.)

§ 8.2-402. Rights of seller’s creditors against sold goods.

  1. Except as provided in subsections (2) and (3), rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer’s rights to recover the goods under this title (§§ 8.2-502 and 8.2-716 ).
  2. A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.
  3. Nothing in this title shall be deemed to impair the rights of creditors of the seller
    1. under the provisions of the title on secured transactions (Title 8.9A); or
    2. where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this title constitute the transaction a fraudulent transfer or voidable preference.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 20.

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (2)—Section 26, Uniform Sales Act; Subsections (1) and (3)—none.

Changes: Rephrased.

Purposes of changes and new matter: To avoid confusion on ordinary issues between current sellers and buyers and issues in the field of preference and hindrance by making it clear that:

  1. Local law on questions of hindrance of creditors by the seller’s retention of possession of the goods are outside the scope of this Article, but retention of possession in the current course of trade is legitimate. Transactions which fall within the law’s policy against improper preferences are reserved from the protection of this Article.
  2. The retention of possession of the goods by a merchant seller for a commercially reasonable time after a sale or identification in current course is exempted from attack as fraudulent. Similarly, the provisions of subsection (3) have no application to identification or delivery made in the current course of trade, as measured against general commercial understanding of what a “current” transaction is.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Creditor”. Section 1-201 .

“Good faith”. Section 2-103.

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Money”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Rights”. Section 1-201 .

“Sale”. Section 2-106.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Section 8.2-402(2) provides an exception to the blanket statutory rule that a retention of possession by a seller of goods sold is void against creditors unless a written bill of sale exists and has been properly recorded. Va. Code 1950, §§ 11-1 , 55-95, 55-96.

The UCC does not cover the situation presented in Drewry, Treasurer v. Baugh and Sons, Inc., 150 Va. 394 , 403-05, 143 S.E. 713 (1928), in which the buyer, to whom title had passed, although the goods were in the possession of the seller for weighing to ascertain the price, took free of a tax lien levied against the seller. See also M’Kinley v. Ensell, 43 Va. (2 Gratt.) 333 (1845), involving a bulk sale in which the seller was thereafter employed as an agent of the buyer.

§ 8.2-403. Power to transfer; good faith purchase of goods; “entrusting.”

  1. A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though
    1. the transferor was deceived as to the identity of the purchaser, or
    2. the delivery was in exchange for a check which is later dishonored, or
    3. it was agreed that the transaction was to be a “cash sale,” or
    4. the delivery was procured through fraud punishable as larcenous under the criminal law.
  2. Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
  3. “Entrusting” includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.
  4. The rights of other purchasers of goods and of lien creditors are governed by the titles on secured transactions (Title 8.9A) and documents of title (Title 8.7).

History. Code 1950, § 6-558; 1964, c. 219; 1997, c. 121; 2011, c. 369.

The 2011 amendments.

The 2011 amendment by c. 369 deleted “bulk sales (Title 8.6A)” following “(Title 8.9A)” in subdivision (4).

CASE NOTES

Transfer of title. —

The statute deals with the power of an owner with void or voidable title to pass good title to a bona fide purchaser for value, and not with the rights of lien creditors. Thus, this section did not apply where a lien was omitted from a duplicate certificate of title by the owner’s fraud, and the lienholder attempted to enforce its security interest against a subsequent bona fide purchaser; the owner had good title which was not made “void” or “voidable” by a security interest, and she passed a good title to the purchaser. Toyota Motor Credit Corp. v. C.L. Hyman Auto Whsle., Inc., 256 Va. 243 , 506 S.E.2d 14, 1998 Va. LEXIS 116 (1998).

Purchaser of a limited interest. —

Purchaser of goods acquires all title which his transferor had or had power to transfer, except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased; therefore, where plaintiff attempted to sell assets encumbered by a lien to defendants through an asset purchase agreement, plaintiff did not have the power to transfer the assets and thus could not convey clear title to defendants. Bizmark, Inc. v. Air Prods. Inc., 427 F. Supp. 2d 680, 2006 U.S. Dist. LEXIS 42974 (W.D. Va. 2006), aff'd, No. 06-1486, 2006 U.S. App. LEXIS 32076 (4th Cir. Dec. 29, 2006).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 20(4), 23, 24, 25, Uniform Sales Act; Section 9, especially 9(2), Uniform Trust Receipts Act; Section 9, Uniform Conditional Sales Act.

Changes: Consolidated and rewritten.

Purposes of changes: To gather together a series of prior uniform statutory provisions and the case law thereunder and to state a unified and simplified policy on good faith purchase of goods.

  1. The basic policy of our law allowing transfer of such title as the transferor has is generally continued and expanded under subsection (1). In this respect the provisions of the section are applicable to a person taking by any form of “purchase” as defined by this Act. Moreover the policy of this Act expressly providing for the application of supplementary general principles of law to sales transactions wherever appropriate joins with the present section to continue unimpaired all rights acquired under the law of agency or of apparent agency or ownership or other estoppel, whether based on statutory provisions or on case law principles. The section also leaves unimpaired the powers given to selling factors under the earlier Factors Acts. In addition subsection (1) provides specifically for the protection of the good faith purchaser for value in a number of specific situations which have been troublesome under prior law.
  2. The many particular situations in which a buyer in ordinary course of business from a dealer has been protected against reservation of property or other hidden interest are gathered by subsections (2)-(4) into a single principle protecting persons who buy in ordinary course out of inventory. Consignors have no reason to complain, nor have lenders who hold a security interest in the inventory, since the very purpose of goods in inventory is to be turned into cash by sale.
  3. The definition of “buyer in ordinary course of business” (Section 1-201 ) is effective here and preserves the essence of the healthy limitations engrafted by the case law on the older statutes. The older loose concept of good faith and wide definition of value combined to create apparent good faith purchasers in many situations in which the result outraged common sense; the court’s solution was to protect the original title especially by use of “cash sale” or of over-technical construction of the enabling clauses of the statutes. But such rulings then turned into limitations on the proper protection of buyers in the ordinary market. Section 1-201 (9) cuts down the category of buyer in ordinary course in such fashion as to take care of the results of the cases, but with no price either in confusion or in injustice to proper dealings in the normal market.
  4. Except as provided in subsection (1), the rights of purchasers other than buyers in ordinary course are left to the Articles on Secured Transactions, Documents of Title, and Bulk Sales.

On the other hand, the contract of purchase is of course limited by its own terms as in a case of pledge for a limited amount or of sale of a fractional interest in goods.

The principle is extended in subsection (3) to fit with the abolition of the old law of “cash sale” by subsection (1) (c). It is also freed from any technicalities depending on the extended law of larceny; such extension of the concept of theft to include trick, particular types of fraud, and the like is for the purpose of helping conviction of the offender; it has no proper application to the long-standing policy of civil protection of buyers from persons guilty of such trick or fraud. Finally, the policy is extended, in the interest of simplicity and sense, to any entrusting by a bailor; this is in consonance with the explicit provisions of Section 7-205 on the powers of a warehouseman who is also in the business of buying and selling fungible goods of the kind he warehouses. As to entrusting by a secured party, subsection (2) is limited by the more specific provisions of Section 9-307(1), which deny protection to a person buying farm products from a person engaged in farming operations.

Cross references:

Point 1: Sections 1-103 and 1-201 .

Point 2: Sections 1-201 , 2-402, 7-205 and 9-307(1).

Points 3 and 4: Sections 1-102, 1-201 , 2-104, 2-707 and Articles 6, 7 and 9.

Definitional cross references:

“Buyer in ordinary course of business”. Section 1-201 .

“Good faith”. Sections 1-201 and 2-103.

“Goods”. Section 2-105.

“Person”. Section 1-201 .

“Purchaser”. Section 1-201 .

“Signed”. Section 1-201 .

“Term”. Section 1-201 .

“Value”. Section 1-201 .

VIRGINIA COMMENT

By implication the UCC recognizes, as has prior Virginia law, that a person without title cannot transfer title, even though the buyer has paid value in good faith without notice of the lack of title. First National Bank of Waynesboro v. Johnson, 183 Va. 227 , 236, 31 S.E.2d 581 (1944). The rights of purchasers under prior Virginia law has been determined on the basis of where “title” to the goods has been located. In Old Dom. Steamship Co. v. Burckhordt, 72 Va. (31 Gratt.) 664, 668-69 (1879), the Supreme Court of Appeals said: “If the transaction was a sale which transferred both title and possession, although such title and possession was obtained by false and fraudulent representations . . . the goods cannot be recovered from . . . the bona fide purchaser, who paid value for them without notice of such fraud . . . . If, on the other hand, there was no sale which, upon delivery, passed the title, but it was intended to pass the bare possession only, then the sale . . . could pass no title . . . , and [the seller] not having parted with the title, could claim the goods in the hands of whomsoever they might be found.” Oberdorfer v. Meyer, 88 Va. 384 , 386, 13 S.E. 756 (1891), is to the same effect.

Under subsection 8.2-403(2) the entrusting of goods to a merchant gives him power to transfer all rights of the entruster to a buyer in ordinary course of business, but the situation when the person entrusted with the goods is not a merchant does not seem to be covered by the UCC. See Williams v. Given, 47 Va. (6 Gratt.) 268, 270-77 (1849).

The UCC leaves unchanged the result in Peshine v. Shepperson, 58 Va. (17 Gratt.) 472, 482 (1867), in which the buyer was denied good title where he had surreptitiously, at night, bought goods from a clerk and carried them away in satisfaction of debts owed to the buyer by the insolvent owner of the goods. Such a transaction would not be in good faith under the UCC. See Virginia Comment to § 8.1-201.

This section apparently leaves unchanged the result in Philip Greenberg, Inc. v. Dunville, 166 Va. 398 , 185 S.E. 892 (1936). In this case, Greenberg, through Dunville, as salesman for the Allied Company, bought some fixtures on a conditional sale contract, trading in his old fixtures. Under the contract, Greenberg was to ship the old fixtures as soon as the new fixtures were delivered. On delivery of the new fixtures, Greenberg claimed that they were defective and refused to ship the old fixtures until an adjustment was made in his complaint. Dunville, thereupon, brought an action of detinue against Greenberg for the old fixtures, claiming that he had purchased them from the Allied Company. This purchase resulted from the custom of the Allied Company of requiring their salesmen to accept as part payment for their services the traded-in equipment at the price allowed to the customer. The Virginia court allowed Dunville to recover the old equipment from Greenberg, taking the view that title passed to the Allied Company on its delivery of the new fixtures to Greenberg, and thereafter Allied Company could sell the equipment, even though it was in the possession of a third person and the bona fide character of the transaction had not been disproved.

The question might be raised under the UCC as to whether the transaction between the Allied Company and its salesman was a “sale,” or for that matter whether it fits into any of the categories included under the UCC definition of a “purchase.” See § 8.1-201(32).

PART 5. Performance.

§ 8.2-501. Insurable interest in goods; manner of identification of goods.

  1. The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs
    1. when the contract is made if it is for the sale of goods already existing and identified;
    2. if the contract is for the sale of future goods other than those described in paragraph (c), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers;
    3. when the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within twelve months after contracting or for the sale of crops to be harvested within twelve months or the next normal harvest season after contracting whichever is longer.
  2. The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.
  3. Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

History. 1964, c. 219.

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 6. Pleading. § 6.03 Defendant’s Pleadings. Bryson.

Virginia Forms (Matthew Bender). No. 8A-301 Provision — Identification of Goods.

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assignments, § 9; 3C M.J. Commercial Law, § 99.

CASE NOTES

Initial bona fide sale occurred at time of shipping. —

Coal mine operator was not shipping coal to its customers for the purpose of cleaning but for the purpose of selling the coal to the customers and thus, it was at that moment that the “initial bona fide sale” occurred. The fact that the coal mine operator was paid on some basis other than the tons of actual “raw coal” shipped does not change this conclusion; the customer owned all the coal including the impurities. United States v. Rapoca Energy Co., 751 F. Supp. 565, 1990 U.S. Dist. LEXIS 16122 (W.D. Va. 1990).

Payment arrangement did not affect passage of title. —

The arrangement that coal mine operator and its customers had for determining the amount owed to coal mine operator was only the method of payment and did not alter the fact that when coal mine operator loaded its coal on trucks or other means of transportation the coal was identified to the contract and title passed because coal mine operator had completed physical delivery of the goods. United States v. Rapoca Energy Co., 751 F. Supp. 565, 1990 U.S. Dist. LEXIS 16122 (W.D. Va. 1990).

CIRCUIT COURT OPINIONS

Manner of identification of goods. —

As a corporation’s specifically manufactured goods were identified prior to the time that a store claimed the corporation breached a contract, the corporation was entitled to recover the price of the materials and any incidental damages. Metwood, Inc. v. True Value Home Ctr., 61 Va. Cir. 664, 2002 Va. Cir. LEXIS 321 (Roanoke Sept. 30, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: See Sections 17 and 19, Uniform Sales Act.

Purposes:

  1. The present section deals with the manner of identifying goods to the contract so that an insurable interest in the buyer and the rights set forth in the next section will accrue. Generally speaking, identification may be made in any manner “explicitly agreed to” by the parties. The rules of paragraphs (a), (b) and (c) apply only in the absence of such “explicit agreement”.
  2. In the ordinary case identification of particular existing goods as goods to which the contract refers is unambiguous and may occur in one of many ways. It is possible, however, for the identification to be tentative or contingent. In view of the limited effect given to identification by this Article the general policy is to resolve all doubts in favor of identification.
  3. The provision of this section as to “explicit agreement” clarifies the present confusion in the law of sales which has arisen from the fact that under prior uniform legislation all rules of presumption with reference to the passing of title or to appropriation (which in turn depended upon identification) were regarded as subject to the contrary intention of the parties or of the party appropriating. Such uncertainty is reduced to a minimum under this section by requiring “explicit agreement” of the parties before the rules of paragraphs (a), (b) and (c) are displaced—as they would be by a term giving the buyer power to select the goods. An “explicit” agreement, however, need not necessarily be found in the terms used in the particular transaction. Thus, where a usage of the trade has previously been made explicit by reduction to a standard set of “rules and regulations” currently incorporated by reference into the contracts of the parties, a relevant provision of those “rules and regulations” is “explicit” within the meaning of this section.
  4. In view of the limited function of identification there is no requirement in this section that the goods be in deliverable state or that all of the seller’s duties with respect to the processing of the goods be completed in order that identification occur. For example, despite identification the risk of loss remains on the seller under the risk of loss provisions until completion of his duties as to the goods and all of his remedies remain dependent upon his not defaulting under the contract.
  5. Undivided shares in an identified fungible bulk, such as grain in an elevator or oil in a storage tank can be sold. The mere making of the contract with reference to an undivided share in an identified fungible bulk is enough under subsection (a) to effect an identification if there is no explicit agreement otherwise. The seller’s duty, however, to segregate and deliver according to the contract is not affected by such an identification but is controlled by other provisions of this Article.
  6. Identification of crops under paragraph (c) is made upon planting only if they are to be harvested within the year or within the next normal harvest season. The phrase “next normal harvest season” fairly includes nursery stock raised for normally quick “harvest,” but plainly excludes a “timber” crop to which the concept of a harvest “season” is inapplicable.

Paragraph (c) is also applicable to a crop of wool or the young of animals to be born within twelve months after contracting. The product of a lumbering, mining or fishing operation, though seasonal, is not within the concept of “growing”. Identification under a contract for all or part of the output of such an operation can be effected early in the operation.

Cross references:

Point 1: Section 2-502.

Point 4: Sections 2-509, 2-510 and 2-703.

Point 5: Sections 2-105, 2-308, 2-503 and 2-509.

Point 6: Sections 2-105(1), 2-107(1) and 2-402.

Definitional cross references:

“Agreement”. Section 1-201 .

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Future goods”. Section 2-105.

“Goods”. Section 2-105.

“Notification”. Section 1-201 .

“Party”. Section 1-201 .

“Sale”. Section 2-106.

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Both the UCC and prior Virginia law provide that identification, or appropriation as it is called in the Virginia cases, of existing goods to a contract may be made at any time and in any manner expressly agreed upon by the parties. American Hide & Leather Co. v. Chalkley & Co., 101 Va. 458 , 464, 44 S.E. 705 (1903). The UCC, in the absence of express agreement, provides rules to be followed in determining whether goods have been identified to a contract. While the Virginia cases speak in terms of the passage of title, the UCC states results without reference to the location of title.

The UCC is in accord with Ellis & Meyers Lumber Co. v. Hubbard, 123 Va. 481 , 494-96, 96 S.E. 754 (1918), in which it was held that delivery of lumber to the place agreed upon by the seller and buyer constituted an identification, although the buyer was still to inspect the lumber—testing, measuring, recounting, and accepting—and the seller was still to deliver the lumber to the shipping point. Similarly, Drewry, Treasurer v. Baugh and Sons, Inc., 150 Va. 394 , 403-05, 143 S.E. 713 (1928), held that there had been an identification of the goods to the contract and title had passed, although the goods were still in possession of the seller, being ready for loading. See also Trigg Co. v. Bucyrus Co., 104 Va. 79 , 83-84, 51 S.E. 174 (1905), holding that there had been an appropriation of specific goods to a contract so that ownership passed to the vendee.

In accord with this section, Broad Street Bank v. Baker Motor Vehicle Co., 119 Va. 26 , 31, 89 S.E. 110 (1916), recognized that the property in goods not ascertained by the contract does not pass until there has been an appropriation of specific goods to the contract. In this case a second buyer, who obtained a car, prevailed over a first buyer, who had ordered the car.

Subsection 8.2-501(2) is consistent with Trigg Co. v. Bucyrus Co., 104 Va. 79 , 85, 51 S.E. 174 (1905), in recognizing that a seller may have an insurable interest in a chattel, even though title or ownership has passed to the buyer.

§ 8.2-502. Buyer’s right to goods on seller’s repudiation, failure to deliver, or insolvency.

  1. Subject to subsections (2) and (3) and even though the goods have not been shipped a buyer who has paid a part or all of the price of goods in which he has a special property under the provisions of the immediately preceding section (§ 8.2-501 ) may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
    1. in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; or
    2. in all cases, the seller becomes insolvent within ten days after receipt of the first installment on their price.
  2. The buyer’s right to recover the goods under subsection (1) (a) vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
  3. If the identification creating his special property has been made by the buyer he acquires the right to recover the goods only if they conform to the contract for sale.

History. 1964, c. 219; 2000, c. 1007.

The 2000 amendments.

The 2000 amendment by c. 1007, effective July 1, 2001, inserted “and (3)” following “(2)” in subdivision (1); added subdivision (1) (a); redesignated “the seller becomes insolvent within ten days after receipt of the first installment on their price” at the end of subdivision (1) as subdivision (1) (b); added “in all cases” at the beginning of subdivision (1) (b); added present subdivision (2); and redesignated former subdivision (2) as present subdivision (3).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 18-20, 33, 36.

OFFICIAL COMMENT

Prior uniform statutory provision: Compare Sections 17, 18 and 19, Uniform Sales Act.

Purposes:

  1. This section gives an additional right to the buyer as a result of identification of the goods to the contract in the manner provided in Section 2-501. The buyer is given a right to recover the goods conditioned upon making and keeping good a tender of any unpaid portion of the price, in two limited circumstances. First, the buyer may recover goods bought for personal, family, or household purposes if the seller repudiates the contract or fails to deliver the goods. Second, in any case, the buyer may recover the goods if the seller becomes insolvent within 10 days after the seller receives the first installment on their price. The buyer’s right to recover the goods under this section is an exception to the usual rule, under which the disappointed buyer must resort to an action to recover damages.
  2. The question of whether the buyer also acquires a security interest in identified goods and has rights to the goods when insolvency takes place after the ten-day period provided in this section depends upon compliance with the provisions of the Article on Secured Transactions (Article 9).
  3. Under subsection (2), the buyer’s right to recover consumer goods under subsection (1)(a) vests upon acquisition of a special property, which occurs upon identification of the goods to the contract. See Section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral that its debtor had or had power to convey, see Section 2-403(1) (first sentence), a buyer who acquires a right to recover under this section will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.
  4. Subsection (3) is included to preclude the possibility of unjust enrichment, which would exist if the buyer were permitted to recover goods even though they were greatly superior in quality or quantity to that called for by the contract for sale.

Cross references:

Point 1: Sections 1-201 and 2-702.

Point 2: Article 9.

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Insolvent”. Section 1-201 .

“Right”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-503. Manner of seller’s tender of delivery.

  1. Tender of delivery requires that the seller put and hold conforming goods at the buyer’s disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this title, and in particular:
    1. tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
    2. unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.
  2. Where the case is within the next section [§ 8.2-504 ] respecting shipment tender requires that the seller comply with its provisions.
  3. Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section.
  4. Where goods are in the possession of a bailee and are to be delivered without being moved:
    1. tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer’s right to possession of the goods; but
    2. tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and,  except as otherwise provided in Title 8.9A, receipt by the bailee of notification of the buyer’s rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
  5. Where the contract requires the seller to deliver documents:
    1. he must tender all such documents in correct form, except as provided in this title with respect to bills of lading in a set (subsection (2) of § 8.2-323 ); and
    2. tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200, in subdivision (4)(b), substituted “record directing” for “written direction to” and inserted “except as otherwise provided in Title 8.9A”; and inserted “or associated with” in subdivision (5)(b).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 18, 22, 25.

OFFICIAL COMMENT

Prior uniform statutory provision: See Sections 11, 19, 20, 43 (3) and (4), 46 and 51, Uniform Sales Act.

Changes: The general policy of the above sections is continued and supplemented but subsection (3) changes the rule of prior section 19(5) as to what constitutes a “destination” contract and subsection (4) incorporates a minor correction as to tender of delivery of goods in the possession of a bailee.

Purposes of changes:

  1. The major general rules governing the manner of proper or due tender of delivery are gathered in this section. The term “tender” is used in this Article in two different senses. In one sense it refers to “due tender” which contemplates an offer coupled with a present ability to fulfill all the conditions resting on the tendering party and must be followed by actual performance if the other party shows himself ready to proceed. Unless the context unmistakably indicates otherwise this is the meaning of “tender” in this Article and the occasional addition of the word “due” is only for clarity and emphasis. At other times it is used to refer to an offer of goods or documents under a contract as if in fulfillment of its conditions even though there is a defect when measured against the contract obligation. Used in either sense, however, “tender” connotes such performance by the tendering party as puts the other party in default if he fails to proceed in some manner.
  2. The seller’s general duty to tender and deliver is laid down in Section 2-301 and more particularly in Section 2-507. The seller’s right to a receipt if he demands one and receipts are customary is governed by Section 1-205 . Subsection (1) of the present section proceeds to set forth two primary requirements of tender: first, that the seller “put and hold conforming goods at the buyer’s disposition” and, second, that he “give the buyer any notice reasonably necessary to enable him to take delivery.”
  3. Under paragraph (a) of subsection (1) usage of the trade and the circumstances of the particular case determine what is a reasonable hour for tender and what constitutes a reasonable period of holding the goods available.
  4. The buyer must furnish reasonable facilities for the receipt of the goods tendered by the seller under subsection (1), paragraph (b). This obligation of the buyer is no part of the seller’s tender.
  5. For the purposes of subsections (2) and (3) there is omitted from this Article the rule under prior uniform legislation that a term requiring the seller to pay the freight or cost of transportation to the buyer is equivalent to an agreement by the seller to deliver to the buyer or at an agreed destination. This omission is with the specific intention of negating the rule, for under this Article the “shipment” contract is regarded as the normal one and the “destination” contract as the variant type. The seller is not obligated to deliver at a named destination and bear the concurrent risk of loss until arrival, unless he has specifically agreed so to deliver or the commercial understanding of the terms used by the parties contemplates such delivery.
  6. Paragraph (a) of subsection (4) continues the rule of the prior uniform legislation as to acknowledgment by the bailee. Paragraph (b) of subsection (4) adopts the rule that between the buyer and the seller the risk of loss remains on the seller during a period reasonable for securing acknowledgment of the transfer from the bailee, while as against all other parties the buyer’s rights are fixed as of the time the bailee receives notice of the transfer.
  7. Under subsection (5) documents are never “required” except where there is an express contract term or it is plainly implicit in the peculiar circumstances of the case or in a usage of trade. Documents may, of course, be “authorized” although not required, but such cases are not within the scope of this subsection. When documents are required, there are three main requirements of this subsection: (1) “All”: each required document is essential to a proper tender; (2) “Such”: the documents must be the ones actually required by the contract in terms of source and substance; (3) “Correct form”: All documents must be in correct form.

In cases in which payment is due and demanded upon delivery the “buyer’s disposition” is qualified by the seller’s right to retain control of the goods until payment by the provision of this Article on delivery on condition. However, where the seller is demanding payment on delivery he must first allow the buyer to inspect the goods in order to avoid impairing his tender unless the contract for sale is on C.I.F., C.O.D., cash against documents or similar terms negating the privilege of inspection before payment.

In the case of contracts involving documents the seller can “put and hold conforming goods at the buyer’s disposition” under subsection (1) by tendering documents which give the buyer complete control of the goods under the provisions of Article 7 on due negotiation.

When a prescribed document cannot be procured, a question of fact arises under the provision of this Article on substituted performance as to whether the agreed manner of delivery is actually commercially impracticable and whether the substitute is commercially reasonable.

Cross references:

Point 2: Sections 1-205 , 2-301, 2-310, 2-507 and 2-513 and Article 7.

Point 5: Sections 2-308, 2-310 and 2-509.

Point 7: Section 2-614(1).

Specific matters involving tender are covered in many additional sections of this Article. See Sections 1-205 , 2-301, 2-306 to 2-319, 2-321(3), 2-504, 2-507(2), 2-511(1), 2-513, 2-612 and 2-614.

Definitional cross references:

“Agreement”. Section 1-201 .

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Dishonor”. Section 3-508.

“Document of title”. Section 1-201 .

“Draft”. Section 3-104.

“Goods”. Section 2-105.

“Notification”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Receipt” of goods. Section 2-103.

“Rights”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

“Written”. Section 1-201 .

VIRGINIA COMMENT

For a discussion of Philip Greenberg, Inc. v. Dunville, 166 Va. 398 , 185 S.E. 892 (1936), see Virginia Comment to § 8.2-403 . For comment with reference to subsection 8.2-503(2) see Virginia Comment to § 8.2-504 .

Subsection 8.2-503(5)(a) is in accord with Sauls v. Thomas Andrews and Co., 163 Va. 407 , 415, 175 S.E. 760 (1934), which pointed out that in order to complete the sale of an automobile it is essential for the seller to give the buyer a proper assignment of title, and until this is done the contract is executory.

§ 8.2-504. Shipment by seller.

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must

  1. put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
  2. obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
  3. promptly notify the buyer of the shipment.Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 12, 22.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 46, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To continue the general policy of the prior uniform statutory provision while incorporating certain modifications with respect to the requirement that the contract with the carrier be made expressly on behalf of the buyer and as to the necessity of giving notice of the shipment to the buyer, so that:

  1. The section is limited to “shipment” contracts as contrasted with “destination” contracts or contracts for delivery at the place where the goods are located. The general principles embodied in this section cover the special cases of F.O.B. point of shipment contracts and C.I.F. and C. & F. contracts. Under the preceding section on manner of tender of delivery, due tender by the seller requires that he comply with the requirements of this section in appropriate cases.
  2. The contract to be made with the carrier under paragraph (a) must conform to all express terms of the agreement, subject to any substitution necessary because of failure of agreed facilities as provided in the later provision on substituted performance. However, under the policies of this Article on good faith and commercial standards and on buyer’s rights on improper delivery, the requirements of explicit provisions must be read in terms of their commercial and not their literal meaning. This policy is made express with respect to bills of lading in a set in the provision of this Article on form of bills of lading required in overseas shipment.
  3. In the absence of agreement, the provision of this Article on options and cooperation respecting performance gives the seller the choice of any reasonable carrier, routing and other arrangements. Whether or not the shipment is at the buyer’s expense the seller must see to any arrangements, reasonable in the circumstances, such as refrigeration, watering of livestock, protection against cold, the sending along of any necessary help, selection of specialized cars and the like for paragraph (a) is intended to cover all necessary arrangements whether made by contract with the carrier or otherwise. There is, however, a proper relaxation of such requirements if the buyer is himself in a position to make the appropriate arrangements and the seller gives him reasonable notice of the need to do so. It is an improper contract under paragraph (a) for the seller to agree with the carrier to a limited valuation below the true value and thus cut off the buyer’s opportunity to recover from the carrier in the event of loss, when the risk of shipment is placed on the buyer by his contract with the seller.
  4. Both the language of paragraph (b) and the nature of the situation it concerns indicate that the requirement that the seller must obtain and deliver promptly to the buyer in due form any document necessary to enable him to obtain possession of the goods is intended to cumulate with the other duties of the seller such as those covered in paragraph (a).
  5. This Article, unlike the prior uniform statutory provision, makes it the seller’s duty to notify the buyer of shipment in all cases. The consequences of his failure to do so, however, are limited in that the buyer may reject on this ground only where material delay or loss ensues.
  6. Generally, under the final sentence of the section, rejection by the buyer is justified only when the seller’s dereliction as to any of the requirements of this section in fact is followed by material delay or damage. It rests on the seller, so far as concerns matters not within the peculiar knowledge of the buyer, to establish that his error has not been followed by events which justify rejection.

In this connection, in the case of pool car shipments a delivery order furnished by the seller on the pool car consignee, or on the carrier for delivery out of a larger quantity, satisfies the requirements of paragraph (b) unless the contract requires some other form of document.

A standard and acceptable manner of notification in open credit shipments is the sending of an invoice and in the case of documentary contracts is the prompt forwarding of the documents as under paragraph (b) of this section. It is also usual to send on a straight bill of lading but this is not necessary to the required notification. However, should such a document prove necessary or convenient to the buyer, as in the case of loss and claim against the carrier, good faith would require the seller to send it on request.

Frequently the agreement expressly requires prompt notification as by wire or cable. Such a term may be of the essence and the final clause of paragraph (c) does not prevent the parties from making this a particular ground for rejection. To have this vital and irreparable effect upon the seller’s duties, such a term should be part of the “dickered” terms written in any “form,” or should otherwise be called seasonably and sharply to the seller’s attention.

Cross references:

Point 1: Sections 2-319, 2-320 and 2-503(2).

Point 2: Sections 1-203 , 2-323(2), 2-601 and 2-614(1).

Point 3: Section 2-311(2).

Point 5: Section 1-203 .

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Goods”. Section 2-105.

“Notifies”. Section 1-201 .

“Seller”. Section 2-103.

“Send”. Section 1-201 .

“Usage of trade”. Section 1-205 .

VIRGINIA COMMENT

This section is in accord with Aspegren & Co. v. Wallerstein Produce Co., 111 Va. 570 , 69 S.E. 957 (1911), in which it was held to be improper for the seller to enter into a private agreement with the carrier under which goods were not to go forward until the seller had heard that his draft had been paid. Since the last sentence of this section of the UCC provides that the failure to make a proper contract with the carrier is not a ground for rejection unless material delay or loss ensues, it is not entirely clear whether the UCC changes the result in the Aspegren case. The contract in this case called for December delivery. A bill of lading was taken from the carrier on December 26, but there is no evidence to indicate whether the delay occasioned in the shipment by the private agreement made by the seller with the carrier was material or not.

§ 8.2-505. Seller’s shipment under reservation.

  1. Where the seller has identified goods to the contract by or before shipment:
    1. his procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller’s expectation of transferring that interest to the person named.
    2. a nonnegotiable bill of lading to himself or his nominee reserves possession of the goods as security but except in a case of conditional delivery (subsection (2) of § 8.2-507 ) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.
  2. When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section [§ 8.2-504 ] but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller’s powers as a holder of a negotiable document of title.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 inserted “or control” in subdivision (1)(b); and added “of title” at the end of subsection (2).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 20(2), (3), (4), Uniform Sales Act.

Changes: Completely rephrased, the “powers” of the parties in cases of reservation being emphasized primarily rather than the “rightfulness” of reservation.

Purposes of changes: To continue in general the policy of the prior uniform statutory provision with certain modifications of emphasis and language, so that:

  1. The security interest reserved to the seller under subsection (1) is restricted to securing payment or performance by the buyer and the seller is strictly limited in his disposition and control of the goods as against the buyer and third parties. Under this Article, the provision as to the passing of interest expressly applies “despite any reservation of security title” and also provides that the “rights, obligations and remedies” of the parties are not altered by the incidence of title generally. The security interest, therefore, must be regarded as a means given to the seller to enforce his rights against the buyer which is unaffected by and in turn does not affect the location of title generally. The rules set forth in subsection (1) are not to be altered by any apparent “contrary intent” of the parties as to passing of title, since the rights and remedies of the parties to the contract of sale, as defined in this Article, rest on the contract and its performance or breach and not on stereotyped presumptions as to the location of title.
  2. Every shipment of identified goods under a negotiable bill of lading reserves a security interest in the seller under subsection (1) paragraph (a).
  3. A non-negotiable bill of lading taken to a party other than the buyer under subsection (1) paragraph (b) reserves possession of the goods as security in the seller but if he seeks to withhold the goods improperly the buyer can tender payment and recover them.
  4. In the case of a shipment by non-negotiable bill of lading taken to a buyer, the seller, under subsection (1) retains no security interest or possession as against the buyer and by the shipment he de facto loses control as against the carrier except where he rightfully and effectively stops delivery in transit. In cases in which the contract gives the seller the right to payment against delivery, the seller, by making an immediate demand for payment, can show that his delivery is conditional, but this does not prevent the buyer’s power to transfer full title to a sub-buyer in ordinary course or other purchaser under Section 2-403.
  5. Under subsection (2) an improper reservation by the seller which would constitute a breach in no way impairs such of the buyer’s rights as result from identification of the goods. The security title reserved by the seller under subsection (1) does not protect his holding of the document or the goods for the purpose of exacting more than is due him under the contract.

This Article does not attempt to regulate local procedure in regard to the effective maintenance of the seller’s security interest when the action is in replevin by the buyer against the carrier.

It is frequently convenient for the seller to make the bill of lading to the order of a nominee such as his agent at destination, the financing agency to which he expects to negotiate the document or the bank issuing a credit to him. In many instances, also, the buyer is made the order party. This Article does not deal directly with the question as to whether a bill of lading made out by the seller to the order of a nominee gives the carrier notice of any rights which the nominee may have so as to limit its freedom or obligation to honor the bill of lading in the hands of the seller as the original shipper if the expected negotiation fails. This is dealt with in the Article on Documents of Title (Article 7).

Cross references:

Point 1: Section 1-201 .

Point 2: Article 7.

Point 3: Sections 2-501(2) and 2-504.

Point 4: Sections 2-403, 2-507(2) and 2-705.

Point 5: Sections 2-310, 2-319(4), 2-320(4), 2-501 and 2-502 and Article 7.

Definitional cross references:

“Bill of lading”. Section 1-201 .

“Buyer”. Section 2-103.

“Consignee”. Section 7-102.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Delivery”. Section 1-201 .

“Financing agency”. Section 2-104.

“Goods”. Section 2-105.

“Holder”. Section 1-201 .

“Person”. Section 1-201 .

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

In accord with this section, Virginia has recognized in Birdsong and Co., Inc. v. American Peanut Corp., 149 Va. 755 , 767, 141 S.E. 759 (1928), that the seller’s taking a bill of lading to his own order is not determinative of who has title to the goods, although Virginia has indicated that this is strong evidence that the seller did not intend for title to pass to the buyer. For a discussion of Rountree v. Graham, 144 Va. 145 , 148-50, 131 S.E. 193 (1926), see Virginia Comment to § 8.2-401 .

§ 8.2-506. Rights of financing agency.

  1. A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper’s right to have the draft honored by the buyer.
  2. The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 deleted “on its face” at the end of subsection (2).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. “Financing agency” is broadly defined in this Article to cover every normal instance in which a party aids or intervenes in the financing of a sales transaction. The term as used in subsection (1) is not in any sense intended as a limitation and covers any other appropriate situation which may arise outside the scope of the definition.
  2. “Paying” as used in subsection (1) is typified by the letter of credit, or “authority to pay” situation in which a banker, by arrangement with the buyer or other consignee, pays on his behalf a draft for the price of the goods. It is immaterial whether the draft is formally drawn on the party paying or his principal, whether it is a sight draft paid in cash or a time draft “paid” in the first instance by acceptance, or whether the payment is viewed as absolute or conditional. All of these cases constitute “payment” under this subsection. Similarly, “purchasing for value” is used to indicate the whole area of financing by the seller’s banker, and the principle of subsection (1) is applicable without any niceties of distinction between “purchase,” “discount,” “advance against collection” or the like. But it is important to notice that the only right to have the draft honored that is acquired is that against the buyer; if any right against any one else is claimed it will have to be under some separate obligation of that other person. A letter of credit does not necessarily protect purchasers of drafts. See Article 5. And for the relations of the parties to documentary drafts see Part 5 of Article 4.
  3. Subsection (1) is made applicable to payments or advances against a draft which “relates to” a shipment of goods and this has been chosen as a term of maximum breadth. In particular the term is intended to cover the case of a draft against an invoice or against a delivery order. Further, it is unnecessary that there be an explicit assignment of the invoice attached to the draft to bring the transaction within the reason of this subsection.
  4. After shipment, “the rights of the shipper in the goods” are merely security rights and are subject to the buyer’s right to force delivery upon tender of the price. The rights acquired by the financing agency are similarly limited and, moreover, if the agency fails to procure any outstanding negotiable document of title, it may find its exercise of these rights hampered or even defeated by the seller’s disposition of the document to a third party. This section does not attempt to create any new rights in the financing agency against the carrier which would force the latter to honor a stop order from the agency, a stranger to the shipment, or any new rights against a holder to whom a document of title has been duly negotiated under Article 7.

Cross references:

Point 1: Section 2-104(2) and Article 4.

Point 2: Part 5 of Article 4, and Article 5.

Point 4: Sections 2-501 and 2-502(1) and Article 7.

Definitional cross references:

“Buyer”. Section 2-103.

“Document of title”. Section 1-201 .

“Draft”. Section 3-104.

“Financing agency” Section 2-104.

“Good faith”. Section 2-103.

“Goods”. Section 2-105.

“Honor”. Section 1-201 .

“Purchase”. Section 1-201 .

“Rights”. Section 1-201 .

“Value”. Section 1-201 .

§ 8.2-507. Effect of seller’s tender; delivery on condition.

  1. Tender of delivery is a condition to the buyer’s duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.
  2. Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 22, 23, 32.

CASE NOTES

Right of seller to reclaim goods. —

This section gives the seller a right to reclaim his goods where a check, subsequently dishonored, has been accepted for payment in a cash transaction. However, the right to reclaim is limited. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

This section and § 8.2-511 give the seller a right to reclaim his goods from the buyer where a cash transaction has occurred, and a check, taken in payment by the seller, was dishonored. However, the right to reclaim is limited to a ten day period from the delivery of the goods as provided by this section by virtue of its cross reference to § 8.2-702 . If the right to reclaim has not been exercised within that specified time period, the right is waived. The seller’s remedy is then on the instrument as well as for breach of contract. This reduces the seller’s rights to those of a general creditor. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

The seller in a cash transaction, who accepts a check which the bank refuses to pay because of the intervening of bankruptcy proceedings, has the right to reclaim the goods sold and nothing in the Bankruptcy Act changes this. If the seller has a right to reclaim the goods, he stands in a position superior to any creditor. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

Check as proper method of payment. —

The Uniform Commercial Code recognizes payment by check as a commercially normal and proper method of payment. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

The acceptance of a check does not change a cash sale into a credit transaction. —

If the intention of the parties was to accomplish a cash transaction, which is the custom of the trade, then an acceptance of a check in place of actual cash does not change the transaction. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

Factors determinative of cash transaction. —

The customs and habits, plus the intention of the parties, are governing factors in determining whether there has been a cash transaction. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

CIRCUIT COURT OPINIONS

Right of seller to reclaim goods. —

Since the unsecured creditor had an adequate remedy at law by a right to reclaim the amounts owed on certain dishonored checks of an insolvent company, the secured creditor was entitled to payment of the insolvent company’s debts from the company’s remaining assets. Signet Bank v. Bradley, Inc., 56 Va. Cir. 207, 2001 Va. Cir. LEXIS 451 (Richmond June 1, 2001).

OFFICIAL COMMENT

Prior uniform statutory provision: See Section 11, 41, 42 and 69, Uniform Sales Act.

Purposes:

  1. Subsection (1) continues the policies of the prior uniform statutory provisions with respect to tender and delivery by the seller. Under this Article the same rules in these matters are applied to present sales and to contracts for sale. But the provisions of this subsection must be read within the framework of the other sections of this Article which bear upon the question of delivery and payment.
  2. The “unless otherwise agreed” provision of subsection (1) is directed primarily to cases in which payment in advance has been promised or a letter of credit term has been included. Payment “according to the contract” contemplates immediate payment, payment at the end of an agreed credit term, payment by a time acceptance or the like. Under this Act, “contract” means the total obligation in law which results from the parties’ agreement including the effect of this Article. In this context, therefore, there must be considered the effect in law of such provisions as those on means and manner of payment and on failure of agreed means and manner of payment.
  3. Subsection (2) deals with the effect of a conditional delivery by the seller and in such a situation makes the buyer’s “right as against the seller” conditional upon payment. These words are used as words of limitations to conform with the policy set forth in the bona fide purchase sections of this Article. Should the seller after making such a conditional delivery fail to follow up his rights, the condition is waived. The provision of this Article for a ten day limit within which the seller may reclaim goods delivered on credit to an insolvent buyer is also applicable here.

Cross references:

Point 1: Sections 2-310, 2-503, 2-511, 2-601 and 2-711 to 2-713.

Point 2: Sections 1-201 , 2-511 and 2-614.

Point 3: Sections 2-401, 2-403 and 2-702(1) (b).

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

As to which party must make the first act of tender see Virginia Comment to § 8.2-511 . For discussion of Greenberg, Inc. v. Dunville, 166 Va. 398 , 185 S.E. 892 (1936), see Virginia Comment to § 8.2-403 .

§ 8.2-508. Cure by seller of improper tender or delivery; replacement.

  1. Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.
  2. Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 22, 25, 33.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Subsection (1) permits a seller who has made a non-conforming tender in any case to make a conforming delivery within the contract time upon seasonable notification to the buyer. It applies even where the seller has taken back the non-conforming goods and refunded the purchase price. He may still make a good tender within the contract period. The closer, however, it is to the contract date, the greater is the necessity for extreme promptness on the seller’s part in notifying of his intention to cure, if such notification is to be “seasonable” under this subsection.
  2. Subsection (2) seeks to avoid injustice to the seller by reason of a surprise rejection by the buyer. However, the seller is not protected unless he had “reasonable grounds to believe” that the tender would be acceptable. Such reasonable grounds can lie in prior course of dealing, course of performance or usage of trade as well as in the particular circumstances surrounding the making of the contract. The seller is charged with commercial knowledge of any factors in a particular sales situation which require him to comply strictly with his obligations under the contract as, for example, strict conformity of documents in an overseas shipment or the sale of precision parts or chemicals for use in manufacture. Further, if the buyer gives notice either implicitly, as by a prior course of dealing involving rigorous inspections, or expressly, as by the deliberate inclusion of a “no replacement” clause in the contract, the seller is to be held to rigid compliance. If the clause appears in a “form” contract evidence that it is out of line with trade usage or the prior course of dealing and was not called to the seller’s attention may be sufficient to show that the seller had reasonable grounds to believe that the tender would be acceptable.
  3. The words “a further reasonable time to substitute a conforming tender” are intended as words of limitation to protect the buyer. What is a “reasonable time” depends upon the attending circumstances. Compare Section 2-511 on the comparable case of a seller’s surprise demand for legal tender.
  4. Existing trade usages permitting variations without rejection but with price allowance enter into the agreement itself as contractual limitations of remedy and are not covered by this section.

The rule of this subsection, moreover, is qualified by its underlying reasons. Thus if, after contracting for June delivery a buyer later makes known to the seller his need for shipment early in the month and the seller ships accordingly, the “contract time” has been cut down by the supervening modification and the time for cure of tender must be referred to this modified time term.

Cross references:

Point 2: Section 2-302.

Point 3: Section 2-511.

Point 4: Sections 1-205 and 2-721.

Definitional cross references:

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Money”. Section 1-201 .

“Notifies”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Under prior Virginia law the seller would not ordinarily be permitted to cure an improper tender, but Fielding v. Robertson, 141 Va. 123 , 131-32, 126 S.E. 231 (1925), recognized an exception when the seller has shipped the right quantity, but there has been a diminishment during transit. Then the buyer must notify the seller of the deficiency and give him a reasonable opportunity to make it good, at least if the time of delivery has not passed, and the buyer has no right to refuse flatly to accept a shipment because of a deficiency so caused.

§ 8.2-509. Risk of loss in the absence of breach.

  1. Where the contract requires or authorizes the seller to ship the goods by carrier:
    1. if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (§ 8.2-505 ); but
    2. if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.
  2. Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:
    1. on his receipt of possession or control of a negotiable document of title covering the goods; or
    2. on acknowledgement by the bailee of the buyer’s right to possession of the goods; or
    3. after his receipt of possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in subsection (4) (b) of § 8.2-503 .
  3. In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.
  4. The provisions of this section are subject to contrary agreement of the parties and to the provisions of this title on sale on approval (§ 8.2-327 ) and on effect of breach on risk of loss (§ 8.2-510 ).

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 inserted “possession or control of” in subdivisions (2)(a) and (2)(c); and in subdivision (2)(c), deleted “written” preceding “direction” and inserted “in a record.”

OFFICIAL COMMENT

Prior uniform statutory provision: Section 22. Uniform Sales Act.

Changes: Rewritten, subsection (3) of this section modifying prior law.

Purposes of changes: To make it clear that:

  1. That underlying theory of these sections on risk of loss is the adoption of the contractual approach rather than an arbitrary shifting of the risk with the “property” in the goods. The scope of the present section, therefore, is limited strictly to those cases where there has been no breach by the seller. Where for any reason his delivery or tender fails to conform to the contract, the present section does not apply and the situation is governed by the provisions on effect of breach on risk of loss.
  2. The provisions of subsection (1) apply where the contract “requires or authorizes” shipment of the goods. This language is intended to be construed parallel to comparable language in the section on shipment by seller. In order that the goods be “duly delivered to the carrier” under paragraph (a) a contract must be entered into with the carrier which will satisfy the requirements of the section on shipment by the seller and the delivery must be made under circumstances which will enable the seller to take any further steps necessary to a due tender. The underlying reason of this subsection does not require that the shipment be made after contracting, but where, for example, the seller buys the goods afloat and later diverts the shipment to the buyer, he must identify the goods to the contract before the risk of loss can pass. To transfer the risk it is enough that a proper shipment and a proper identification come to apply to the same goods although, aside from special agreement, the risk will not pass retroactively to the time of shipment in such a case.
  3. Whether the contract involves delivery at the seller’s place of business or at the situs of the goods, a merchant seller cannot transfer risk of loss and it remains upon him until actual receipt by the buyer, even though full payment has been made and the buyer has been notified that the goods are at his disposal. Protection is afforded him, in the event of breach by the buyer, under the next section.
  4. Where the agreement provides for delivery of the goods as between the buyer and seller without removal from the physical possession of a bailee, the provisions on manner of tender of delivery apply on the point of transfer of risk. Due delivery of a negotiable document of title covering the goods or acknowledgment by the bailee that he holds for the buyer completes the “delivery” and passes the risk.
  5. The provisions of this section are made subject by subsection (4) to the “contrary agreement” of the parties. This language is intended as the equivalent of the phrase “unless otherwise agreed” used more frequently throughout this Act. “Contrary” is in no way used as a word of limitation and the buyer and seller are left free to readjust their rights and risks as declared by this section in any manner agreeable to them. Contrary agreement can also be found in the circumstances of the case, a trade usage or practice, or a course of dealing or performance.

The underlying theory of this rule is that a merchant who is to make physical delivery at his own place continues meanwhile to control the goods and can be expected to insure his interest in them. The buyer, on the other hand, has no control of the goods and it is extremely unlikely that he will carry insurance on goods not yet in his possession.

Cross references:

Point 1: Section 2-510(1).

Point 2: Sections 2-503 and 2-504.

Point 3: Sections 2-104, 2-503 and 2-510.

Point 4: Section 2-503(4).

Point 5: Section 1-201 .

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Delivery”. Section 1-201 .

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Party”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Sale on approval”. Section 2-326.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Under the UCC risk of loss has been divorced from the passage of title whereas under prior Virginia law the risk of loss follows title. These different approaches, though, usually lead to the same results. Under both the UCC and prior Virginia law, where the seller is to ship the goods to the buyer F.O.B. the place of shipment, the risk of loss passes to the buyer when the goods are delivered to the carrier. F. A. Rausch & Co. v. Graham Manufacturing Corp., 139 Va. 502 , 506, 124 S.E. 427 , 126 S.E. 2 (1924); L. J. Upton & Co. v. Reeve, 123 Va. 241 , 248, 96 S.E. 2 77 (1918); Haxall, Brothers & Co. v. Willis, 56 Va. (15 Gratt.) 434, 440-54 (1859).

Under both the UCC and prior Virginia law the risk of loss remains with the seller while he still has possession of the goods, with something to do in order to put the goods in a deliverable state, or to ascertain the price, as by enumeration, measurement, or weighing. Thus in Dixon v. Meyers & Co., 48 Va. (7 Gratt.) 240, 243-45 (1851), the risk of loss from fire was on the seller where tobacco stems in hogsheads had been put aside for the buyer, but they had not yet been marked or weighed.

The decision in Haxall, Brothers & Co. v. Barbour, unreported but noted 56 Va. (15 Gratt.) 454, 455 (1851), is in accord with § 8.2-509(2) in holding that risk of loss has passed to the buyer where goods are in the possession of a bailee and the seller has given the buyer a delivery order, which the bailee has acknowledged. Similarly the UCC is in accord with Pleasants v. Pendleton, 27 Va. (6 Rand.) 473, 483, 502 (1828), holding that risk of loss had passed to the buyer, the seller having given the buyer a delivery order on the bailee in possession. While the UCC does not expressly cover the point, it would seem that the fact that the bailee, a warehouseman, in this case had to separate 119 barrels out of 123 barrels of flour would not prevent the risk of loss from passing.

§ 8.2-510. Effect of breach on risk of loss.

  1. Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
  2. Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.
  3. Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To make clear that:

  1. Under subsection (1) the seller by his individual action cannot shift the risk of loss to the buyer unless his action conforms with all the conditions resting on him under the contract.
  2. The “cure” of defective tenders contemplated by subsection (1) applies only to those situations in which the seller makes changes in goods already tendered, such as repair, partial substitution, sorting out from an improper mixture and the like since “cure” by repossession and new tender has no effect on the risk of loss of the goods originally tendered. The seller’s privilege of cure does not shift the risk, however, until the cure is completed.
  3. In cases where there has been a breach of the contract, if the one in control of the goods is the aggrieved party, whatever loss or damage may prove to be uncovered by his insurance falls upon the contract breaker under subsections (2) and (3) rather than upon him. The word “effective” as applied to insurance coverage in those subsections is used to meet the case of supervening insolvency of the insurer. The “deficiency” referred to in the text means such deficiency in the insurance coverage as exists without subrogation. This section merely distributes the risk of loss as stated and is not intended to be disturbed by any subrogation of an insurer.

Where defective documents are involved a cure of the defect by the seller or a waiver of the defects by the buyer will operate to shift the risk under this section. However, if the goods have been destroyed prior to the cure or the buyer is unaware of their destruction at the time he waives the defect in the documents, the risk of the loss must still be borne by the seller, for the risk shifts only at the time of cure, waiver of documentary defects or acceptance of the goods.

Cross reference:

Section 2-509.

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

§ 8.2-511. Tender of payment by buyer; payment by check.

  1. Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.
  2. Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.
  3. Subject to the provisions of this act on the effect of an instrument on an obligation (§ 8.3A-310 ), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

History. 1964, c. 219; 1992, c. 693.

CASE NOTES

Right of seller to reclaim goods. —

This section and § 8.2-507 give the seller a right to reclaim his goods from the buyer where a cash transaction has occurred, and a check, taken in payment by the seller, was dishonored. However, the right to reclaim is limited to a ten day period from the delivery of the goods as provided by § 8.2-507 by virtue of its cross reference to § 8.2-702 . If the right to reclaim has not been exercised within that specified time period, the right is waived. The seller’s remedy is then on the instrument as well as for breach of contract. This reduces the seller’s rights to those of a general creditor. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

Check as proper method of payment. —

The Uniform Commercial Code recognizes payment by check as a commercially normal and proper method of payment. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

The acceptance of a check does not change a cash sale into a credit transaction. —

If the intention of the parties was to accomplish a cash transaction, which is the custom of the trade, then an acceptance of a check in place of actual cash does not change the transaction. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

Factors determinative of cash transaction. —

The customs and habits, plus the intention of the parties, are governing factors in determining whether there has been a cash transaction. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

CIRCUIT COURT OPINIONS

Right of seller to reclaim goods. —

Since the unsecured creditor had an adequate remedy at law by a right to reclaim the amounts owed on certain dishonored checks of an insolvent company, the secured creditor was entitled to payment of the insolvent company’s debts from the company’s remaining assets. Signet Bank v. Bradley, Inc., 56 Va. Cir. 207, 2001 Va. Cir. LEXIS 451 (Richmond June 1, 2001).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 42, Uniform Sales Act.

Changes: Rewritten by this section and Section 2-507.

Purposes of changes:

  1. The requirement of payment against delivery in subsection (1) is applicable to noncommercial sales generally and to ordinary sales at retail although it has no application to the great body of commercial contracts which carry credit terms. Subsection (1) applies also to documentary contracts in general and to contracts which look to shipment by the seller but contain no term on time and manner of payment, in which situations the payment may, in proper case, be demanded against delivery of appropriate documents.
  2. Unless there is agreement otherwise the concurrence of the conditions as to tender of payment and tender of delivery requires their performance at a single place or time. This Article determines that place and time by determining in various other sections the place and time for tender of delivery under various circumstances and in particular types of transactions. The sections dealing with time and place of delivery together with the section on right to inspection of goods answer the subsidiary question as to when payment may be demanded before inspection by the buyer.
  3. The essence of the principle involved in subsection (2) is avoidance of commercial surprise at the time of performance. The section on substituted performance covers the peculiar case in which legal tender is not available to the commercial community.
  4. Subsection (3) is concerned with the rights and obligations as between the parties to a sales transaction when payment is made by check. This Article recognizes that the taking of a seemingly solvent party’s check is commercially normal and proper and, if due diligence is exercised in collection, is not to be penalized in any way. The conditional character of the payment under this section refers only to the effect of the transaction “as between the parties” thereto and does not purport to cut into the law of “absolute” and “conditional” payment as applied to such other problems as the discharge of sureties or the responsibilities of a drawee bank which is at the same time an agent for collection.
  5. Under subsection (3) payment by check is defeated if it is not honored upon due presentment. This corresponds to the provisions of the Article on Commercial Paper. (Section 3-802). But if the seller procures certification of the check instead of cashing it, the buyer is discharged. (Section 3-411).
  6. Where the instrument offered by the buyer is not a payment but a credit instrument such as a note or a check postdated by even one day, the seller’s acceptance of the instrument insofar as third parties are concerned, amounts to a delivery on credit and his remedies are set forth in the section on buyer’s insolvency. As between the buyer and the seller, however, the matter turns on the present subsection and the section on conditional delivery and subsequent dishonor of the instrument gives the seller rights on it as well as for breach of the contract for sale.

In the case of specific transactions such as C.O.D. sales or agreements providing for payment against documents, the provisions of this subsection must be considered in conjunction with the special sections of the Article dealing with such terms. The provision that tender of payment is a condition to the seller’s duty to tender and complete “any delivery” integrates this section with the language and policy of the section on delivery in several lots which call for separate payment. Finally, attention should be directed to the provision on right to adequate assurance of performance which recognizes, even before the time for tender, an obligation on the buyer not to impair the seller’s expectation of receiving payment in due course.

The phrase “by check” includes not only the buyer’s own but any check which does not effect a discharge under Article 3 (Section 3-802). Similarly the reason of this subsection should apply and the same result should be reached where the buyer “pays” by sign draft on a commercial firm which is financing him.

Cross references:

Point 1: Sections 2-307, 2-310, 2-320, 2-325, 2-503, 2-513 and 2-609.

Point 2: Sections 2-307, 2-310, 2-319, 2-322, 2-503, 2-504 and 2-513.

Point 3: Section 2-614.

Point 5: Article 3, esp. Sections 3-802 and 3-411.

Point 6: Sections 2-507, 2-702, and Article 3.

Definitional cross references:

“Buyer”. Section 2-103.

“Check”. Section 3-104.

“Dishonor”. Section 3-508.

“Party”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with Blenner v. Vim Motor Truck Co., 136 Va. 189 , 203-04, 117 S.E. 834 (1923), in which it was held that the seller was in default when he refused to deliver a bill of lading against tender of payment. When §§ 8.2-507 and 8.2-511 are considered together, it would appear that the UCC requires the buyer to do the first act, that is, tender payment. Virginia has indicated that contracts for sale are mutual contracts and it is “uncertain which party is to do the first act.” Ragland & Co. v. Butler, 59 Va. (18 Gratt.) 323, 334 (1868).

§ 8.2-512. Payment by buyer before inspection.

  1. Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless
    1. the nonconformity appears without inspection; or
    2. despite tender of the required documents the circumstances would justify injunction against honor under § 8.5A-109 (b).
  2. Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer’s right to inspect or any of his remedies.

History. 1964, c. 219; 1997, c. 343.

OFFICIAL COMMENT

Prior uniform statutory provision: None, but see Sections 47 and 49, Uniform Sales Act.

Purposes:

  1. Subsection (1) of the present section recognizes that the essence of a contract providing for payment before inspection is the intention of the parties to shift to the buyer the risks which would usually rest upon the seller. The basic nature of the transaction is thus preserved and the buyer is in most cases required to pay first and litigate as to any defects later.
  2. “Inspection” under this section is an inspection in a manner reasonable for detecting defects in goods whose surface appearance is satisfactory.
  3. Clause (a) of this subsection states an exception to the general rule based on common sense and normal commercial practice. The apparent non-conformity referred to is one which is evident in the mere process of taking delivery.
  4. Clause (b) is concerned with contracts for payment against documents and incorporates the general clarification and modification of the case law contained in the section on excuse of a financing agency. Section 5-114.
  5. Subsection (2) makes explicit the general policy of the Uniform Sales Act that the payment required before inspection in no way impairs the buyer’s remedies or rights in the event of a default by the seller. The remedies reserved to the buyer are all of his remedies which include as a matter of reason the remedy for total non-delivery after payment in advance.
  6. This section applies to cases in which the contract requires payment before inspection either by the express agreement of the parties or by reason of the effect in law of that contract. The present section must therefore be considered in conjunction with the provision on right to inspection of goods which sets forth the instances in which the buyer is not entitled to inspection before payment.

The provision on performance or acceptance under reservation of rights does not apply to the situations contemplated here in which payment is made in due course under the contract and the buyer need not pay “under protest” or the like in order to preserve his rights as to defects discovered upon inspection.

Cross references:

Point 4: Article 5.

Point 5: Section 1-207 .

Point 6: Section 2-513(3).

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Financing agency”. Section 2-104.

“Goods”. Section 2-105.

“Remedy”. Section 1-201 .

“Rights”. Section 1-201 .

§ 8.2-513. Buyer’s right to inspection of goods.

  1. Unless otherwise agreed and subject to subsection (3), where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner. When the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.
  2. Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.
  3. Unless otherwise agreed and subject to the provisions of this title on C.I.F. contracts (subsection (3) of § 8.2-321 ), the buyer is not entitled to inspect the goods before payment of the price when the contract provides
    1. for delivery “C.O.D.” or on other like terms; or
    2. for payment against documents of title, except where such payment is due only after the goods are to become available for inspection.
  4. A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly agreed it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection shall be as provided in this section unless the place or method fixed was clearly intended as an indispensable condition failure of which avoids the contract.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 47(2), (3), Uniform Sales Act.

Changes: Rewritten, subsections (2) and (3) being new.

Purposes of changes and new matter: To correspond in substance with the prior uniform statutory provision and to incorporate in addition some of the results of the better case law so that:

  1. The buyer is entitled to inspect goods as provided in subsection (1) unless it has been otherwise agreed by the parties. The phrase “unless otherwise agreed” is intended principally to cover such situations as those outlined in subsections (3) and (4) and those in which the agreement of the parties negates inspection before tender of delivery. However, no agreement by the parties can displace the entire right of inspection except where the contract is simply for the sale of “this thing.” Even in a sale of boxed goods “as is” inspection is a right to the buyer, since if the boxes prove to contain some other merchandise altogether the price can be recovered back; nor do the limitations of the provision on effect of acceptance apply in such a case.
  2. The buyer’s right of inspection is available to him upon tender, delivery or appropriation of the goods with notice to him. Since inspection is available to him on tender, where payment is due against delivery he may, unless otherwise agreed, make his inspection before payment of the price. It is also available to him after receipt of the goods and so may be postponed after receipt for a reasonable time. Failure to inspect before payment does not impair the right to inspect after receipt of the goods unless the case falls within subsection (4) on agreed and exclusive inspection provisions. The right to inspect goods which have been appropriated with notice to the buyer holds whether or not the sale was by sample.
  3. The buyer may exercise his right of inspection at any reasonable time or place and in any reasonable manner. It is not necessary that he select the most appropriate time, place or manner to inspect or that his selection be the customary one in the trade or locality. Any reasonable time, place or manner is available to him and the reasonableness will be determined by trade usages, past practices between the parties and the other circumstances of the case.
  4. Expenses of an inspection made to satisfy the buyer of the seller’s performance must be assumed by the buyer in the first instance. Since the rule provides merely for an allocation of expense there is no policy to prevent the parties from providing otherwise in the agreement. Where the buyer would normally bear the expenses of the inspection but the goods are rightly rejected because of what the inspection reveals, demonstrable and reasonable costs of the inspection are part of his incidental damage caused by the seller’s breach.
  5. In the case of payment against documents, subsection (3) requires payment before inspection, since shipping documents against which payment is to be made will commonly arrive and be tendered while the goods are still in transit.
  6. Under subsection (4) an agreed place or method of inspection is generally held to be intended as exclusive. However, where compliance with such an agreed inspection term becomes impossible, the question is basically one of intention. If the parties clearly intend that the method of inspection named is to be a necessary condition without which the entire deal is to fail, the contract is at an end if that method becomes impossible. On the other hand, if the parties merely seek to indicate a convenient and reliable method but do not intend to give up the deal in the event of its failure, any reasonable method of inspection may be substituted under this Article.
  7. Clauses on time of inspection are commonly clauses which limit the time in which the buyer must inspect and give notice of defects. Such clauses are therefore governed by the section of this Article which requires that such a time limitation must be reasonable.
  8. Inspection under this Article is not to be regarded as a “condition precedent to the passing of title” so that risk until inspection remains on the seller. Under subsection (4) such an approach cannot be sustained. Issues between the buyer and seller are settled in this Article almost wholly by special provisions and not by the technical determination of the locus of the title. Thus “inspection as a condition to the passing of title” becomes a concept almost without meaning. However, in peculiar circumstances inspection may still have some of the consequences hitherto sought and obtained under that concept.
  9. “Inspection” under this section has to do with the buyer’s check-up on whether the seller’s performance is in accordance with a contract previously made and is not to be confused with the “examination” of the goods or of a sample or model of them at the time of contracting which may affect the warranties involved in the contract.

The last sentence of subsection (1) makes it clear that the place of arrival of shipped goods is a reasonable place for their inspection.

This Article recognizes no exception in any peculiar case in which the goods happen to arrive before the documents. However, where by the agreement payment is to await the arrival of the goods, inspection before payment becomes proper since the goods are then “available for inspection.”

Where by the agreement the documents are to be held until arrival the buyer is entitled to inspect before payment since the goods are then “available for inspection”. Proof of usage is not necessary to establish this right, but if inspection before payment is disputed the contrary must be established by usage or by an explicit contract term to that effect.

For the same reason, that the goods are available for inspection, a term calling for payment against storage documents or a delivery order does not normally bar the buyer’s right to inspection before payment under subsection (3) (b). This result is reinforced by the buyer’s right under subsection (1) to inspect goods which have been appropriated with notice to him.

Since the purpose of an agreed place of inspection is only to make sure at that point whether or not the goods will be thrown back, the “exclusive” feature of the named place is satisfied under this Article if the buyer’s failure to inspect there is held to be an acceptance with the knowledge of such defects as inspection would have revealed within the section on waiver of buyer’s objections by failure to particularize. Revocation of the acceptance is limited to the situations stated in the section pertaining to that subject. The reasonable time within which to give notice of defects within the section on notice of breach begins to run from the point of the “acceptance.”

Cross references:

Generally: Sections 2-310 (b), 2-321(3) and 2-606(1) (b).

Point 1: Section 2-607.

Point 2: Sections 2-501 and 2-502.

Point 4: Section 2-715.

Point 5: Section 2-221(3).

Point 6: Sections 2-606 to 2-608.

Point 7: Section 1-204 .

Point 8: Comment to Section 2-401.

Point 9: Section 2-316(2) (b).

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Presumed”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

“Send”. Section 1-201 .

“Term”. Section 1-201 .

VIRGINIA COMMENT

This section is in accord with Rosenbaum Hardware Co. v. Paxton Lumber Co., 124 Va. 346 , 353-55, 97 S.E. 784 (1919), in giving the buyer a right of inspection after arrival of goods which the seller is required or authorized to send to the buyer.

§ 8.2-514. When documents deliverable on acceptance; when on payment.

Unless otherwise agreed documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 41, Uniform Bills of Lading Act.

Changes: Rewritten.

Purposes of changes: To make the provision one of general application so that:

  1. It covers any document against which a draft may be drawn, whatever may be the form of the document, and applies to interpret the action of a seller or consignor insofar as it may affect the rights and duties of any buyer, consignee or financing agency concerned with the paper. Supplementary or corresponding provisions are found in Sections 4-503 and 5-112.
  2. An “arrival” draft is a sight draft within the purpose of this section.

Cross references:

Point 1: See Sections 2-502, 2-505(z), 2-507(2), 2-512, 2-513, 2-607 concerning protection of rights of buyer and seller, and 4-503 and 5-112 on delivery of documents.

Definitional cross references:

“Delivery”. Section 1-201 .

“Draft”. Section 3-104.

§ 8.2-515. Preserving evidence of goods in dispute.

In furtherance of the adjustment of any claim or dispute

  1. either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test and sample the goods including such of them as may be in the possession or control of the other; and
  2. the parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provisions: None.

Purposes:

  1. To meet certain serious problems which arise when there is a dispute as to the quality of the goods and thereby perhaps to aid the parties in reaching a settlement, and to further the use of devices which will promote certainty as to the condition of the goods, or at least aid in preserving evidence of their condition.
  2. Under paragraph (a), to afford either party an opportunity for preserving evidence, whether or not agreement has been reached, and thereby to reduce uncertainty in any litigation and, in turn perhaps, to promote agreement.
  3. Under paragraph (b), to provide for third party inspection upon the agreement of the parties, thereby opening the door to amicable adjustments based upon the findings of such third parties.

Paragraph (a) does not conflict with the provisions on the seller’s right to resell rejected goods or the buyer’s similar right. Apparent conflict between these provisions which will be suggested in certain circumstances is to be resolved by requiring prompt action by the parties. Nor does paragraph (a) impair the effect of a term for payment before inspection. Short of such defects as amount to fraud or substantial failure of consideration, nonconformity is neither an excuse nor a defense to an action for non-acceptance of documents. Normally, therefore, until the buyer has made payment, inspected and rejected the goods, there is no occasion or use for the rights under paragraph (a).

The use of the phrase “conformity or condition” makes it clear that the parties’ agreement may range from a complete settlement of all aspects of the dispute by a third party to the use of a third party merely to determine and record the condition of the goods so that they can be resold or used to reduce the stake in controversy. “Conformity”, at one end of the scale of possible issues, includes the whole question of interpretation of the agreement and its legal effect, the state of the goods in regard to quality and condition, whether any defects are due to factors which operate at the risk of the buyer, and the degree of non-conformity where that may be material. “Condition”, at the other end of the scale, includes nothing but the degree of damage or deterioration which the goods show. Paragraph (b) is intended to reach any point in the gamut which the parties may agree upon.

The principle of the section on reservation of rights reinforces this paragraph in simplifying such adjustments as the parties wish to make in partial settlement while reserving their rights as to any further points. Paragraph (b) also suggests the use of arbitration, where desired, of any points left open, but nothing in this section is intended to repeal or amend any statute governing arbitration. Where any question arises as to the extent of the parties’ agreement under the paragraph, the presumption should be that it was meant to extend only to the relation between the contract description and the goods as delivered, since that is what a craftsman in the trade would normally be expected to report upon. Finally, a written and authenticated report of inspection or tests by a third party, whether or not sampling has been practicable, is entitled to be admitted as evidence under this Act, for it is a third party document.

Cross references:

Point 2: Sections 2-513(3), 2-706 and 2-711(2) and Article 5.

Point 3: Sections 1-202 and 1-207 .

Definitional cross references:

“Conform”. Section 2-106.

“Goods”. Section 2-105.

“Notification”. Section 1-201 .

“Party”. Section 1-201 .

PART 6. Breach, Repudiation and Excuse.

§ 8.2-601. Buyer’s rights on improper delivery.

Subject to the provisions of this title on breach in installment contracts (§ 8.2-612 ) and unless otherwise agreed under the sections on contractual limitations of remedy (§§ 8.2-718 and 8.2-719 ), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may

  1. reject the whole; or
  2. accept the whole; or
  3. accept any commercial unit or units and reject the rest.

History. 1964, c. 219.

Research References.

Virginia Forms (Matthew Bender). No. 8A-501 Provision — Risk of Loss on Seller of Goods.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 23, 26.

OFFICIAL COMMENT

Prior uniform statutory provision: No one general equivalent provision but numerous provisions, dealing with situations of non-conformity where buyer may accept or reject, including Sections 11, 44 and 69(1), Uniform Sales Act.

Changes: Partial acceptance in good faith is recognized and the buyer’s remedies on the contract for breach of warranty and the like, where the buyer has returned the goods after transfer of title, are no longer barred.

Purposes of changes: To make it clear that:

  1. A buyer accepting a non-conforming tender is not penalized by the loss of any remedy otherwise open to him. This policy extends to cover and regulate the acceptance of a part of any lot improperly tendered in any case where the price can be reasonably be apportioned. Partial acceptance is permitted whether the part of the goods accepted conforms or not. The only limitation on partial acceptance is that good faith and commercial reasonableness must be used to avoid undue impairment of the value of the remaining portion of the goods. This is the reason for the insistence on the “commercial unit” in paragraph (c). In this respect, the test is not only what unit has been the basis of contract, but whether the partial acceptance produces so materially adverse an effect on the remainder as to constitute bad faith.
  2. Acceptance made with the knowledge of the other party is final. An original refusal to accept may be withdrawn by a later acceptance if the seller has indicated that he is holding the tender open. However, if the buyer attempts to accept, either in whole or in part, after his original rejection has caused the seller to arrange for other disposition of the goods, the buyer must answer for any ensuing damage since the next section provides that any exercise of ownership after rejection is wrongful as against the seller. Further, he is liable even though the seller may choose to treat his action as acceptance rather than conversion, since the damage flows from the misleading notice. Such arrangements for resale or other disposition of the goods by the seller must be viewed as within the normal contemplation of a buyer who has given notice of rejection. However, the buyer’s attempts in good faith to dispose of defective goods where the seller has failed to give instructions within a reasonable time are not to be regarded as an acceptance.

Cross references:

Sections 2-602(2) (a), 2-612, 2-718 and 2-719.

Definitional cross references:

“Buyer”. Section 2-103.

“Commercial unit”. Section 2-105.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Installment contract”. Section 2-612.

“Rights”. Section 1-201 .

VIRGINIA COMMENT

To the extent that this section permits a buyer to accept any commercial unit of nonconforming goods and to reject the rest, the UCC is contrary to prior Virginia law as broadly laid down in Charles Syer & Co. v. Lester, 116 Va. 541 , 545-46, 82 S.E. 122 (1914). In this case the court said that if the buyer knows of the nonconformity of the goods he must either reject the whole or accept the whole under protest and bring an action for damages, and that he has no right to accept part and to reject the remainder. Furthermore, the court said that an acceptance of a part of a shipment implies an agreement to accept the whole. In this case the buyer had actually taken possession of all the goods, sold part of them, and then endeavored to return those remaining on the ground that they were nonconforming. Later Virginia cases, however, have seemed to limit the rule. It was held inapplicable where the buyer accepted part of the nonconforming goods in the belief that the nonconformity arose from the buyer’s own failure to make a timely inspection and acceptance. Rennolds v. Avery, 132 Va. 335 , 340-41, 111 S.E. 123 (1922). The rule is also inapplicable where the seller agrees to take back nonconforming goods. Lamborn & Co. v. Bristol Grocery Co., 140 Va. 77 , 81-82, 124 S.E. 184 (1924). The rule was also held not applicable where the buyer had accepted a part in order to avoid litigation. Gibney & Co. v. Arlington Brewing Co., 112 Va. 117 , 121-22, 70 S.E. 487 (1917). Pettibone Wood Manufacturing Co. v. Pioneer Construction Co., 203 Va. 152 , 159-60, 122 S.E.2d 885 (1961), held that in a sale on approval, an acceptance of nonconforming goods is final—the buyer must either accept or reject the goods.

§ 8.2-602. Manner and effect of rightful rejection.

  1. Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.
  2. Subject to the provisions of the two following sections on rejected goods (§§ 8.2-603 and 8.2-604 ),
    1. after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and
    2. if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this title (subsection (3) of § 8.2-711 ), he is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them; but
    3. the buyer has no further obligations with regard to goods rightfully rejected.
  3. The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this title on seller’s remedies in general (§ 8.2-703 ).

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 23, 26; 16 M.J. Rescission, Cancellation and Reformation, § 7.

CASE NOTES

In order to be effective, notice of rejection must be given to the seller within a reasonable time. —

If notice of rejection is given unreasonably late, the rejection is not effective, acceptance is implied by § 8.2-606(1)(b), and the burden of proof is on the buyer, pursuant to § 8.2-607(4) , to establish any unconformity of the goods to the contract. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Issue of reasonable rejection one for jury. —

The issue whether notice of rejection was given within a reasonable time under the circumstances is ordinarily one of fact for the jury. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

If the goods in fact conform to the contract, the buyer has a positive duty to accept them, and his failure to do so constitutes a wrongful rejection which gives the seller immediate remedies for breach. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 50, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To make it clear that:

  1. A tender or delivery of goods made pursuant to a contract of sale, even though wholly non-conforming, requires affirmative action by the buyer to avoid acceptance. Under subsection (1), therefore, the buyer is given a reasonable time to notify the seller of his rejection, but without such seasonable notification his rejection is ineffective. The sections of this Article dealing with inspection of goods must be read in connection with the buyer’s reasonable time for action under this subsection. Contract provisions limiting the time for rejection fall within the rule of the section on “Time” and are effective if the time set gives the buyer a reasonable time for discovery of defects. What constitutes a due “notifying” of rejection by the buyer to the seller is defined in Section 1-201 .
  2. Subsection (2) lays down the normal duties of the buyer upon rejection, which flow from the relationship of the parties. Beyond his duty to hold the goods with reasonable care for the buyer’s disposition, this section continues the policy of prior uniform legislation in generally relieving the buyer from any duties with respect to them, except when the circumstances impose the limited obligation of salvage upon him under the next section.
  3. The present section applies only to rightful rejection by the buyer. If the seller has made a tender which in all respects conforms to the contract, the buyer has a positive duty to accept and his failure to do so constitutes a “wrongful rejection” which gives the seller immediate remedies for breach. Subsection (3) is included here to emphasize the sharp distinction between the rejection of an improper tender and the non-acceptance which is a breach by the buyer.
  4. The provisions of this section are to be appropriately limited or modified when a negotiation is in process.

Cross references:

Point 1: Sections 1-201 , 1-204(1) and (3), 2-512(2), 2-513(1) and 2-606(1) (b).

Point 2: Section 2-603(1).

Point 3: Section 2-703.

Definitional cross references:

“Buyer”. Section 2-103.

“Commercial unit”. Section 2-105.

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Notifies”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Remedy”. Section 1-201 .

“Rights”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-603. Merchant buyer’s duties as to rightfully rejected goods.

  1. Subject to any security interest in the buyer (subsection (3) of § 8.2-711 ), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller’s account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
  2. When the buyer sells goods under subsection (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten per cent on the gross proceeds.
  3. In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section recognizes the duty imposed upon the merchant buyer by good faith and commercial practice to follow any reasonable instructions of the seller as to reshipping, storing, delivery to a third party reselling or the like. Subsection (1) goes further and extends the duty to include the making of reasonable efforts to effect a salvage sale where the value of the goods is threatened and the seller’s instructions do not arrive in time to prevent serious loss.
  2. The limitations on the buyer’s duty to resell under subsection (1) are to be liberally construed. The buyer’s duty to resell under this section arises from commercial necessity and thus is present only when the seller has “no agent or place of business at the market of rejection”. A financing agency which is acting in behalf of the seller in handling the documents rejected by the buyer is sufficiently the seller’s agent to lift the burden of salvage resale from the buyer. (See provisions of Sections 4-503 and 5-112 on bank’s duties with respect to rejected documents.) The buyer’s duty to resell is extended only to goods in his “possession or control”, but these are intended as words of wide, rather than narrow, import. In effect, the measure of the buyer’s “control” is whether he can practically effect control without undue commercial burden.
  3. The explicit provisions for reimbursement and compensation to the buyer in subsection (2) are applicable and necessary only where he is not acting under instructions from the seller. As provided in subsection (1) the seller’s instructions to be “reasonable” must on demand of the buyer include indemnity for expenses.
  4. Since this section makes the resale of perishable goods an affirmative duty in contrast to a mere right to sell as under the case law, subsection (3) makes it clear that the buyer is liable only for the exercise of good faith in determining whether the value of the goods is sufficiently threatened to justify a quick resale or whether he has waited a sufficient length of time for instructions, or what a reasonable means and place of resale is.
  5. A buyer who fails to make a salvage sale when his duty to do so under this section has arisen is subject to damages pursuant to the section on liberal administration of remedies.

Cross references:

Point 2: Sections 4-503 and 5-112.

Point 5: Section 1-106. Compare generally Section 2-706.

Definitional cross references:

“Buyer”. Section 2-103.

“Good faith”. Section 1-201 .

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-604. Buyer’s options as to salvage of rightfully rejected goods.

Subject to the provisions of the immediately preceding section [§ 8.2-603 ] on perishables if the seller gives no instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller’s account or reship them to him or resell them for the seller’s account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.

History. 1964, c. 219.

CASE NOTES

Removal of goods not allowed. —

Assuming that buyer rightfully rejected the seller’s nonconforming cabinets, buyer was not permitted to remove and discard the units, let alone recover damages for the expenses it incurred in so doing. United States ex rel. Whitaker's, Inc. v. C.B.C. Enters., Inc., 820 F. Supp. 242, 1993 U.S. Dist. LEXIS 6207 (E.D. Va. 1993).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

The basic purpose of this section is twofold: on the one hand it aims at reducing the stake in dispute and on the other at avoiding the pinning of a technical “acceptance” on a buyer who has taken steps towards realization on or preservation of the goods in good faith. This section is essentially a salvage section and the buyer’s right to act under it is conditioned upon (1) non-conformity of the goods, (2) due notification of rejection to the seller under the section on manner of rejection, and (3) the absence of any instructions from the seller which the merchant-buyer has a duty to follow under the preceding section.

This section is designed to accord all reasonable leeway to a rightfully rejecting buying acting in good faith. The listing of what the buyer may do in the absence of instructions from the seller is intended to be not exhaustive but merely illustrative. This is not a “merchant’s” section and the options are pure options given to merchant and nonmerchant buyers alike. The merchant-buyer, however, may in some instances be under a duty rather than an option to resell under the provisions of the preceding section.

Cross references:

Sections 2-602(1), 2-603(1) and 2-706.

Definitional cross references:

“Buyer”. Section 2-103.

“Notification”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Seller”. Section 2-103.

§ 8.2-605. Waiver of buyer’s objections by failure to particularize.

  1. The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach:
    1. where the seller could have cured it if stated seasonably; or
    2. between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.
  2. Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 substituted “in” for “on the face of” in subsection (2).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 25, 26.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. The present section rests upon a policy of permitting the buyer to give a quick and informal notice of defects in a tender without penalizing him for omissions in his statement, while at the same time protecting a seller who is reasonably misled by the buyer’s failure to state curable defects.
  2. Where the defect in a tender is one which could have been cured by the seller, a buyer who merely rejects the delivery without stating his objections to it is probably acting in commercial bad faith and seeking to get out of a deal which has become unprofitable. Subsection (1) (a), following the general policy of this Article which looks to preserving the deal wherever possible, therefore insists that the seller’s right to correct his tender in such circumstances be protected.
  3. When the time for cure is past, subsection (1) (b) makes it plain that a seller is entitled upon request to a final statement of objections upon which he can rely. What is needed is that he make clear to the buyer exactly what is being sought. A formal demand under paragraph (b) will be sufficient in the case of a merchant-buyer.
  4. Subsection (2) applies to the particular case of documents the same principle which the section on effects of acceptance applies to the case of goods. The matter is dealt with in this section in terms of “waiver” of objections rather than of right to revoke acceptance, partly to avoid any confusion with the problems of acceptance of goods and partly because defects in documents which are not taken as grounds for rejection are generally minor ones. The only defects concerned in the present subsection are defects in the documents which are apparent on their face. Where payment is required against the documents they must be inspected before payment, and the payment then constitutes acceptance of the documents. Under the section dealing with this problem, such acceptance of the documents does not constitute an acceptance of the goods or impair any options or remedies of the buyer for their improper delivery. Where the documents are delivered without requiring such contemporary action as payment from the buyer, the reason of the next section on what constitutes acceptance of goods, applies. Their acceptance by nonobjection is therefore postponed until after a reasonable time for their inspection. In either situation, however, the buyer “waives” only what is apparent on the face of the documents.

Cross references:

Point 2: Section 2-508.

Point 4: Sections 2-512(2), 2-606(1) (b) and 2-607(2).

Definitional cross references:

“Between merchants” Section 2-104.

“Buyer”. Section 2-103.

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

“Writing” and “written”. Section 1-201 .

VIRGINIA COMMENT

The doctrine of waiver formerly was given a somewhat wider application in Virginia than has been provided for in this section. Fielding v. Robertson, 141 Va. 123 , 132-33, 126 S.E. 231 (1925), indicated that the statement of one ground of objection is a waiver of the tender on all other grounds that could have been given, but were not. The case actually held that a refusal of tender on the ground of delay in delivery was not a waiver of a deficiency in the quantity since this deficiency could not have been known at the time of the tender.

§ 8.2-606. What constitutes acceptance of goods.

  1. Acceptance of goods occurs when the buyer
    1. after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or
    2. fails to make an effective rejection (subsection (1) of § 8.2-602 ), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
    3. does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.
  2. Acceptance of a part of any commercial unit is acceptance of that entire unit.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 7, 23, 26.

CASE NOTES

Acceptance found. —

By taking possession of the cabinets, cutting them to fit over pipes and installing the units, buyer accepted the cabinets within the meaning of this section. United States ex rel. Whitaker's, Inc. v. C.B.C. Enters., Inc., 820 F. Supp. 242, 1993 U.S. Dist. LEXIS 6207 (E.D. Va. 1993).

Acceptance implied where rejection unreasonably late. —

If notice of rejection is given unreasonably late, the rejection is not effective, acceptance is implied by subdivision (1)(b), and the burden of proof is on the buyer, pursuant to § 8.2-607(4) , to establish any unconformity of the goods to the contract. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

CIRCUIT COURT OPINIONS

Acceptance found. —

Buyer owed the seller the contract price for the goods, because the buyer clearly accepted the goods by failing to reject them not only after an opportunity to inspect them, but after its inspector inspected the goods and recommended that the buyer reject them, and the buyer accepted the goods by repacking them and reselling them in spite of their nonconformance. Natucultura, S.A. v. Bloomaker United States, Inc., 96 Va. Cir. 7, 2017 Va. Cir. LEXIS 299 (Waynesboro Jan. 26, 2017).

Acceptance not found. —

Judgment was granted in favor of a pharmacy in a drug company’s action to recover for drugs allegedly delivered to the pharmacy because, without proof of delivery, § 8.2-606 never came into play, and the drug company failed to carry its burden of proof that delivery of the goods had occurred. Harvard Drug Group v. Health Spectrum, Inc., 60 Va. Cir. 301, 2002 Va. Cir. LEXIS 396 (Roanoke County Oct. 30, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision. Section 48, Uniform Sales. Act.

Changes: Rewritten, the qualification in paragraph (c) and subsection (2) being new; otherwise the general policy of the prior legislation is continued.

Purposes of changes and new matter: To make it clear that:

  1. Under this Article “acceptance” as applied to goods means that the buyer, pursuant to the contract, takes particular goods which have been appropriated to the contract as his own, whether or not he is obligated to do so, and whether he does so by words, action, or silence when it is time to speak. If the goods conform to the contract, acceptance amounts only to the performance by the buyer of one part of his legal obligation.
  2. Under this Article acceptance of goods is always acceptance of identified goods which have been appropriated to the contract or are appropriated by the contract. There is no provision for “acceptance of title” apart from acceptance in general, since acceptance of title is not material under this Article to the detailed rights and duties of the parties. (See Section 2-401). The refinements of the older law between acceptance of goods and of title become unnecessary in view of the provisions of the sections on effect and revocation of acceptance, on effects of identification and on risk of loss, and those sections which free the seller’s and buyer’s remedies from the complications and confusions caused by the question of whether title has or has not passed to the buyer before breach.
  3. Under paragraph (a), payment made after tender is always one circumstance tending to signify acceptance of the goods but in itself it can never be more than one circumstance and is not conclusive. Also, a conditional communication of acceptance always remains subject to its expressed conditions.
  4. Under paragraph (c), any action taken by the buyer, which is inconsistent with his claim that he has rejected the goods, constitutes an acceptance. However, the provisions of paragraph (c) are subject to the sections dealing with rejection by the buyer which permit the buyer to take certain actions with respect to the goods pursuant to his options and duties imposed by those sections, without effecting an acceptance of the goods. The second clause of paragraph (c) modifies some of the prior case law and makes it clear that “acceptance” in law based on the wrongful act of the acceptor is acceptance only as against the wrongdoer and then only at the option of the party wronged.
  5. Subsection (2) supplements the policy of the section on buyer’s rights on improper delivery, recognizing the validity of a partial acceptance but insisting that the buyer exercise this right only as to whole commercial units.

In the same manner in which a buyer can bind himself, despite his insistence that he is rejecting or has rejected the goods, by an act inconsistent with the seller’s ownership under paragraph (c), he can obligate himself by a communication of acceptance despite a prior rejection under paragraph (a). However the sections on buyer’s rights on improper delivery and on the effect of rightful rejection, make it clear that after he once rejects a tender, paragraph (a) does not operate in favor of the buyer unless the seller has re-tendered the goods or has taken affirmative action indicating that he is holding the tender open. See also Comment 2 to Section 2-601.

Cross references:

Point 2: Section 2-401, 2-509, 2-510, 2-607, 2-608 and Part 7.

Point 4: Sections 2-601 through 2-604.

Point 5: Section 2-601.

Definitional cross references:

“Buyer”. Section 2-103.

“Commercial unit”. Section 2-105.

“Goods”. Section 2-105.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Subsection 8.2-606(1)(a) is in accord with Rosenbaum Hardware Co. v. Paxton Lumber Co., 124 Va. 346 , 353-55, 97 S.E. 784 (1919), in holding that a buyer does not accept goods until he has had a reasonable opportunity to inspect the goods.

§ 8.2-607. Effect of acceptance; notice of breach; burden of establishing breach after acceptance; notice of claim or litigation to person answerable over.

  1. The buyer must pay at the contract rate for any goods accepted.
  2. Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this title for nonconformity.
  3. Where a tender has been accepted
    1. the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and
    2. if the claim is one for infringement or the like (subsection (3) of § 8.2-312 ) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.
  4. The burden is on the buyer to establish any breach with respect to the goods accepted.
  5. Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over
    1. he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.
    2. if the claim is one for infringement or the like (subsection (3) of § 8.2-312 ) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.
  6. The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection (3) of § 8.2-312 ).

History. 1964, c. 219.

Law Review.

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For comment, “Toward a Uniform State Product Liability Law — Virginia and the Uniform Product Liability Act,” see 36 Wash. & Lee L. Rev. 1145 (1979).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For 1995 survey of civil practice and procedure, see 29 U. Rich. L. Rev. 897 (1995).

For essay, “Proposed Legislation: A (Second) Modest Proposal to Protect Virginia Consumers Against Defective Products,” see 43 U. Rich. L. Rev. 19 (2008).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 7, 17, 23, 25, 27, 28, 32, 33, 36; 4A M.J. Contracts, § 56; 5A M.J. Costs, § 7.

CASE NOTES

Subdivisions (3) (a) and (5) (a) operate together, rather than being mutually exclusive: the intermediate seller is required to give notice of a breach of warranty to his seller under subsection (3) (a) in order to reserve his rights, but he may also give him notice of litigation regarding the breach if he wishes to bind him to adjudication of common questions of fact arising out of suit by the subpurchaser. Begley v. Jeep Corp., 491 F. Supp. 63, 1980 U.S. Dist. LEXIS 13334 (W.D. Va. 1980).

The term “retail consumer” in Official Comment 4 contemplates that the purchaser buys the item for his own use rather than for resale in the course of his business. Smith-Moore Body Co. v. Heil Co., 603 F. Supp. 354, 1985 U.S. Dist. LEXIS 22301 (E.D. Va. 1985).

Buyer’s status held to be retail consumer. —

Buyer of air compressor’s status was that of retail consumer for purposes of Va. Code § 8.2-607 since the buyer was not in the business of selling air compressors and purchased equipment for its own use. Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1988 U.S. App. LEXIS 16367 (4th Cir. 1988).

The burden of proof is on the plaintiff to show that notice was given within a reasonable time. —

Begley v. Jeep Corp., 491 F. Supp. 63, 1980 U.S. Dist. LEXIS 13334 (W.D. Va. 1980).

And a merchant buyer is held to a commercial standard to determine adequacy of notice. —

Begley v. Jeep Corp., 491 F. Supp. 63, 1980 U.S. Dist. LEXIS 13334 (W.D. Va. 1980).

The term “buyer.” —

Even though the requirement of reasonable notice may be more strictly applied to merchant buyers than to retail consumers, the term “buyer” as used in subdivision (3)(a) clearly applies to both merchant buyers and retail consumers. Hebron v. American Isuzu Motors, Inc., 60 F.3d 1095, 1995 U.S. App. LEXIS 20001 (4th Cir. 1995).

Notice not condition precedent to suit. —

A non-purchaser is not required to give notice to the manufacturer as a condition precedent to suing on a warranty under the Virginia law for personal injuries. Cole v. Keller Indus., Inc., 132 F.3d 1044, 1998 U.S. App. LEXIS 34 (4th Cir. 1998).

Who must give notice. —

Only buyers, that is, those who buy or contract to buy goods from a seller, must give notice of breach of warranty to the seller as a prerequisite to recovery. Yates v. Pitman Mfg., Inc., 257 Va. 601 , 514 S.E.2d 605, 1999 Va. LEXIS 58 (1999).

Court may rule as to adequacy of notice. —

Whether plaintiffs gave defendants reasonable notice of breach of warranty is ordinarily a question of fact reserved for the jury, however, if the evidence is clear, the court can rule as a matter of law that a party failed to give proper notice. Begley v. Jeep Corp., 491 F. Supp. 63, 1980 U.S. Dist. LEXIS 13334 (W.D. Va. 1980).

Acceptance implied where rejection unreasonably late. —

If notice of rejection is given unreasonably late, the rejection is not effective, acceptance is implied by § 8.2-606(1) (b), and the burden of proof is on the buyer, pursuant to subsection (4), to establish any unconformity of the goods to the contract. Flowers Baking Co. v. R-P Packaging, Inc., 229 Va. 370 , 329 S.E.2d 462, 1985 Va. LEXIS 215 (1985).

Acceptance of partial shipment. —

Having installed and accepted the fifteen (15) units, buyer was bound to pay for all nineteen (19) units contained in the first shipment. United States ex rel. Whitaker's, Inc. v. C.B.C. Enters., Inc., 820 F. Supp. 242, 1993 U.S. Dist. LEXIS 6207 (E.D. Va. 1993).

Delay of two years in giving notice. —

Plaintiffs violated the letter and spirit of subsection (3) (a) of this section by waiting over two years to give defendants notice and, therefore, its sanction of dismissal should operate against them. Begley v. Jeep Corp., 491 F. Supp. 63, 1980 U.S. Dist. LEXIS 13334 (W.D. Va. 1980).

In the circumstances of the instant case, a two-year delay in giving notice under subsection (3) was unreasonable as a matter of law where no explanation for the delay was provided and actual prejudice was sustained. Hebron v. American Isuzu Motors, Inc., 60 F.3d 1095, 1995 U.S. App. LEXIS 20001 (4th Cir. 1995).

Sufficient notice. —

Factors constituted sufficient notice where a buyer of an air compressor communicated its dissatisfaction with compressor to seller and shipped it back to seller pursuant to seller’s instructions and seller discovered evidence that compressor was overheating, and where buyer informed seller that compressor was continuing to overheat. Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1988 U.S. App. LEXIS 16367 (4th Cir. 1988).

A determination of what constitutes reasonable notice is a question of fact for the jury. Virginia Transformer Corp. v. P.D. George Co., 932 F. Supp. 156, 1996 U.S. Dist. LEXIS 10255 (W.D. Va. 1996).

Motion to dismiss was not the proper method of determining notice. —

Sellers’ Fed. R. Civ. P. 12(b)(6) motion to dismiss a breach of warranty action was denied because the motion was not the proper method of raising the fact questions of whether the co-administrators or the deceased buyer were required to give the sellers reasonable notice of the product defect and could not prove such notice. Campbell v. Ethex Corp., 413 F. Supp. 2d 738, 2006 U.S. Dist. LEXIS 4603 (W.D. Va. 2006).

Motion to dismiss was a premature stage in which to address the factual issue of whether a chassis supplier was given the required notice of an RV’s defects under §§ 8.2-607(3)(a) (the Virginia Uniform Commercial Code) and 59.1-207.13 (the Lemon law). Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

CIRCUIT COURT OPINIONS

Notice must be pled. —

Manufacturer’s demurrer to builder’s amended cross-claim count seeking direct damages for breach of implied warranty was sustained where the builder failed to plead that it notified the manufacturer of a defect with its synthetic stucco material; the trial court held that because failure to give notice under subsection (3) was a bar to recovery, notice must be pled in order to properly state a cause of action for direct damages on a breach of implied warranty claim. Bindra v. Michael Bowman and Assoc., Inc., 58 Va. Cir. 47, 2002 Va. Cir. LEXIS 28 (Fairfax County Feb. 11, 2002).

Motion for judgment served as breach of warranty claim notification. —

Builder’s instituting a cross-claim and third-party motion for judgment within three months of acquiring a breach of warranty claim served as reasonable notification under subdivision (3)(a) to exterior wall cladding manufacturer and distributor of the breach of warranty claim. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

Acceptance found. —

Buyer owed the seller the contract price for the goods, because the buyer clearly accepted the goods by failing to reject them not only after an opportunity to inspect them, but after its inspector inspected the goods and recommended that the buyer reject them, and the buyer accepted the goods by repacking them and reselling them in spite of their nonconformance. Natucultura, S.A. v. Bloomaker United States, Inc., 96 Va. Cir. 7, 2017 Va. Cir. LEXIS 299 (Waynesboro Jan. 26, 2017).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1)—Section 41, Uniform Sales Act; Subsections (2) and (3)—Sections 49 and 69, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To continue the prior basic policies with respect to acceptance of goods while making a number of minor though material changes in the interest of simplicity and commercial convenience so that:

  1. Under subsection (1), once the buyer accepts a tender the seller acquires a right to its price on the contract terms. In cases of partial acceptance, the price of any part accepted is, if possible, to be reasonably apportioned, using the type of apportionment familiar to the courts in quantum valebat cases, to be determined in terms of “the contract rate,” which is the rate determined from the bargain in fact (the agreement) after the rules and policies of this Article have been brought to bear.
  2. Under subsection (2) acceptance of goods precludes their subsequent rejection. Any return of the goods thereafter must be by way of revocation of acceptance under the next section. Revocation is unavailable for a non-conformity known to the buyer at the time of acceptance, except where the buyer has accepted on the reasonable assumption that the non-conformity would be seasonably cured.
  3. All other remedies of the buyer remain unimpaired under subsection (2). This is intended to include the buyer’s full rights with respect to future installments despite his acceptance of any earlier non-conforming installment.
  4. The time of notification is to be determined by applying commercial standards to a merchant buyer. “A reasonable time” for notification from a retail consumer is to be judged by different standards so that in case it will be extended, for the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy.
  5. Under this Article various beneficiaries are given rights for injuries sustained by them because of the seller’s breach of warranty. Such a beneficiary does not fall within the reason of the present section in regard to discovery of defects and the giving of notice within a reasonable time after acceptance, since he has nothing to do with acceptance. However, the reason of this section does extent to requiring the beneficiary to notify the seller that an injury has occurred. What is said above, with regard to the extended time for reasonable notification from the lay consumer after the injury is also applicable here; but even a beneficiary can be properly held to the use of good faith in notifying, once he has had time to become aware of the legal situation.
  6. Subsection (4) unambiguously places the burden of proof to establish breach on the buyer after acceptance. However, this rule becomes one purely of procedure when the tender accepted was non-conforming and the buyer has given the seller notice of breach under subsection (3). For subsection (2) makes it clear that acceptance leaves unimpaired the buyer’s right to be made whole, and that right can be exercised by the buyer not only by way of cross-claim for damages, but also by way or recoupment in diminution or extinction of the price.

The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched. There is no reason to require that the notification which saves the buyer’s rights under this section must include a clear statement of all the objections that will be relied on by the buyer, as under the section covering statements of defects upon rejection (Section 2-605). Nor is there reason for requiring the notification to be a claim for damages or of any threatened litigation or other resort to a remedy. The notification which saves the buyer’s rights under this Article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.

Subsections (3) (b) and (5) (b) give a warrantor against infringement an opportunity to defend or compromise third-party claims or be relieved of his liability. Subsection (5) (a) codifies for all warranties the practice of voucher to defend. Compare Section 3-803. Subsection (6) makes these provisions applicable to the buyer’s liability for infringement under Section 2-312.

8. All of the provisions of the present section are subject to any explicit reservation of rights.

Cross references:

Point 1: Section 1-201 .

Point 2: Section 2-608.

Point 4: Sections 1-204 and 2-605.

Point 5: Section 2-318.

Point 6: Section 2-717.

Point 7: Sections 2-312 and 3-803.

Point 8: Section 1-207 .

Definitional cross references:

“Burden of establishing”. Section 1-201 .

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Notifies”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Remedy”. Section 1-201 .

“Seasonably”. Section 1-204 .

VIRGINIA COMMENT

Subsection 5(a) establishes rules for vouching in closely analogous to the provisions of Code 1950, § 49-29 , under which a principal who knows of the pendency of suit against his surety and fails to offer to defend such suit is precluded from later making any defense to the claim of the surety which he might have made against the creditor. Though akin to it, the procedure thus established does not constitute third party practice, because the person vouched in does not become a party to the action and no judgment can be rendered against him. It is not therefore a legislative exception to Rule of Court 3:9.1.

§ 8.2-608. Revocation of acceptance in whole or in part.

  1. The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it
    1. on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
    2. without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.
  2. Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
  3. A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

History. 1964, c. 219.

Law Review.

For comment, “Virginia’s Lemon Law: The Best Treatment for Car Owner’s Canker,” see 19 U. Rich. L. Rev. 405 (1985).

For 1985 survey of Virginia commercial law, see 19 U. Rich. L. Rev. 717 (1985).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 23, 26, 33; 4A M.J. Contracts, § 56.

CASE NOTES

Analysis

I.General Consideration.

The UCC has substituted a standard of commercial reasonableness for the stricter standards which formerly prevailed, but the guiding principles are clear. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Buyer must offer objective evidence showing: (1) that the goods fail to conform to the terms of the contract of sale, and (2) that the nonconformity substantially impairs the value of the goods to the buyer. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Issues for trier of fact. —

Whether substantial impairment of value to the particular buyer exists is an issue to be determined by the trier of fact. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

In deciding whether the remedy of revocation of acceptance is applicable, the fact finder must resolve additional issues: whether the buyer unreasonably delayed giving notice of revocation, whether the condition of the goods had substantially changed, and whether the buyer had made unjustified use of the goods after giving notice of revocation. As to all these issues, the buyer has the burden of proving by a preponderance of the evidence that his conduct was reasonable. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Revocation does not lie against remote manufacturer. —

Limiting the remedy of revocation so that it does not lie against a remote manufacturer does not revive archaic doctrine of privity. A remote manufacturer is liable to a buyer for damages arising from negligence or from breach of warranty, and the defense of lack of privity has been abolished as to such cases. But the remedy of revocation of acceptance under this section is conceptually inapplicable to any persons other than the parties to the contract of sale sought to be rescinded. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

The remedy of revocation of acceptance lies only against a seller of goods, not against a remote manufacturer. This is so because the remedy, where successful, cancels a contract of sale, restores both title to and possession of the goods to the seller, restores the purchase price to the buyer, and as fairly as possible, returns the contracting parties to the status quo ante. The remote manufacturer, having no part in the sale transaction, has no role to play in such a restoration of former positions. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Action properly filed. —

Purchaser of a car, who revoked her acceptance of the car and sought monetary damages as permitted by § 8.2-608 , properly filed her motion for judgement on the law side of the court, as §§ 8.2-608 and 8.2-711 permit a buyer, such as the plaintiff, to recover monetary damages upon revocation of acceptance, which may include the purchase price. Hence, the circuit court erred in setting aside the jury verdict that awarded damages to her. Love v. Kenneth Hammersley Motors, Inc., 263 Va. 45 , 556 S.E.2d 764, 2002 Va. LEXIS 19 (2002).

II.Impairment of Value.

Value of goods must be substantially impaired. —

A buyer’s right to revoke acceptance does not arise from every breach of warranty, notwithstanding the availability of damages for the breach; it arises only where the value of the goods to the buyer is substantially impaired. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Test of impairment of value is not a diminution in value of the goods on the open market, or to the average buyer, but rather a substantial impairment of value to the particular buyer involved. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Buyer must carry the burden of proof on the issue of impairment of value by a preponderance of the evidence. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Standard of “driveability” as test of whether a car’s value to the buyer was substantially impaired, while not of universal application, was not erroneous where the buyers failed to prove any need for the car beyond ordinary transportation. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Submitting claim to jury was proper. —

Trial court did not err in submitting the car buyers’ § 8.2-608 revocation claim against an automobile dealer to the jury where the evidence demonstrated that the buyers intended to buy a new vehicle and that the decrease in value caused by the dealer repainting the nonconforming condition was a substantial impairment. Manassas Autocars, Inc. v. Couch, 274 Va. 82 , 645 S.E.2d 443, 2007 Va. LEXIS 88 (2007).

III.Reasonable Time.

Revocation of acceptance must be made promptly, or within a reasonable time after acceptance. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Reasonableness depends upon facts and circumstances. —

What constitutes a reasonable time depends upon the facts and circumstances of each case. The time for revocation will ordinarily extend beyond the time for giving notice of breach. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Delay caused by giving seller opportunity to repair is not unreasonable. —

Where the delay in notification of revocation is brought about because the buyer gave the seller repeated opportunities to correct the defects and the seller procrastinated in accomplishing repairs, the delay is not unreasonable. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

IV.Buyer’s Use of Goods.

Buyer’s use of goods before revocation. —

The buyer may not use the goods to a material degree and then attempt to revoke. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

Buyer’s use of goods after giving notice of revocation. —

After giving notice of revocation, the buyer holds the goods as bailee for the seller. The buyer cannot continue to use them as his own and still have the benefit of rescission; his continued use becomes wrongful against the seller, unless induced by the seller’s instructions or promises. Gasque v. Mooers Motor Car Co., 227 Va. 154 , 313 S.E.2d 384, 1984 Va. LEXIS 276 (1984).

CIRCUIT COURT OPINIONS

Consequential damages awarded when buyers revoked acceptance of damaged mobile home. —

After buyers properly revoked acceptance of a structurally damaged mobile home, since they notified the sellers of their nonacceptance of the home due to its extensive damages immediately after receiving delivery of the home even though the buyers did not pick up the home until after the buyers had moved from it about 11 months later during which time the buyers were awaiting the sellers promised repairs. The substantial impairment of value was proven by building inspectors notifications to the seller of noncompliance with structural building codes. Oakwood Acceptance Corp. v. Pippin, 66 Va. Cir. 474, 2002 Va. Cir. LEXIS 462 (Nelson County Mar. 27, 2002).

Test of impairment of value. —

In her action against a vehicle dealer, a consumer was entitled to a revocation of acceptance because she experienced problems within a month after she purchased the vehicle; in less than one year, the vehicle was taken to the dealer seven times for repair. Excessive use of oil, continuous smoke from the exhaust of the vehicle, and loss of power all constituted a breach of implied warranty that substantially impaired the value of the vehicle. Love v. Kenneth Hammersley Motors, Inc., 66 Va. Cir. 447, 2000 Va. Cir. LEXIS 647 (Lynchburg Oct. 30, 2000).

Attorney fee award. —

Auto buyers were not entitled to an attorney fee award on the claim that they properly revoked acceptance of the vehicle that they bought from the auto sellers. An award of money damages was contemplated pursuant to the relevant statutes, §§ 8.2-608 and 8.2-711 , but those statutes did not provide for an attorney fee award and the auto buyers did not show any other basis for awarding attorney fees to them despite their success on the claim for revocation of acceptance. Couch v. Manassas Autocars, Inc., 77 Va. Cir. 30, 2008 Va. Cir. LEXIS 130 (Prince William County July 17, 2008).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 69(1) (d), (3), (4) and (5), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To make it clear that:

  1. Although the prior basic policy is continued, the buyer is no longer required to elect between revocation of acceptance and recovery of damages for breach. Both are now available to him. The non-alternative character of the two remedies is stressed by the terms used in the present section. The section no longer speaks of “rescission,” a term capable of ambiguous application either to transfer of title to the goods or to the contract of sale and susceptible also of confusion with cancellation for cause of an executed or executory portion of the contract. The remedy under this section is instead referred to simply as “revocation of acceptance” of goods tendered under a contract for sale and involves no suggestion of “election” of any sort.
  2. Revocation of acceptance is possible only where the non-conformity substantially impairs the value of the goods to the buyer. For this purpose the test is not what the seller had reason to know at the time of contracting; the question is whether the non-conformity is such as will in fact cause a substantial impairment of value to the buyer though the seller had no advance knowledge as to the buyer’s particular circumstances.
  3. “Assurances” by the seller under paragraph (b) of subsection (1) can rest as well in the circumstances or in the contract as in explicit language used at the time of delivery. The reason for recognizing such assurances is that they induce the buyer to delay discovery. These are the only assurances involved in paragraph (b). Explicit assurances may be made either in good faith or bad faith. In either case any remedy accorded by this Article is available to the buyer under the section on remedies for fraud.
  4. Subsection (2) requires notification of revocation of acceptance within a reasonable time after discovery of the grounds for such revocation. Since this remedy will be generally resorted to only after attempts at judgment have failed the reasonable time period should extend in most cases beyond the time in which notification of breach must be given, beyond the time for discovery of non-conformity after acceptance and beyond the time for rejection after tender. The parties may by their agreement limit the time for notification under this section, but the same sanctions and considerations apply to such agreements as are discussed in the comment on manner and effect of rightful rejection.
  5. The content of the notice under subsection (2) is to be determined in this case as in others by considerations of good faith, prevention of surprise, and reasonable adjustment. More will generally be necessary than the mere notification of breach required under the preceding section. On the other hand the requirements of the section on waiver of buyer’s objections do not apply here. The fact that quick notification of trouble is desirable affords good ground for being slow to bind a buyer by his first statement. Following the general policy of this Article, the requirements of the content of notification are less stringent in the case of a non-merchant buyer.
  6. Under subsection (2) the prior policy is continued of seeking substantial justice in regard to the condition of goods restored to the seller. Thus the buyer may not revoke his acceptance if the goods have materially deteriorated except by reason of their own defects. Worthless goods, however, need not be offered back and minor defects in the articles reoffered are to be disregarded.
  7. The policy of the section allowing partial acceptance is carried over into the present section and the buyer may revoke his acceptance, in appropriate cases, as to the entire lot or any commercial unit thereof.

Cross references:

Point 3: Section 2-721.

Point 4: Sections 1-204 , 2-602 and 2-607.

Point 5: Sections 2-605 and 2-607.

Point 7: Section 2-601.

Definitional cross references:

“Buyer”. Section 2-103.

“Commercial unit”. Section 2-105.

“Conform”. Section 2-106.

“Goods”. Section 2-105.

“Lot”. Section 2-105.

“Notifies”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Rights”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with Ney v. Wrenn, 117 Va. 85 , 95, 84 S.E. 1 (1915), in which a buyer was held not liable for the purchase price after rightfully revoking acceptance of goods, because of a breach of warranty.

§ 8.2-609. Right to adequate assurance of performance.

  1. A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
  2. Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.
  3. Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.
  4. After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

History. 1964, c. 219.

Law Review.

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 3, 9, 24, 29, 32, 33.

OFFICIAL COMMENT

Prior uniform statutory provision: See Sections 53, 54(1) (b), 55 and 63(2), Uniform Sales Act.

Purposes:

  1. The section rests on the recognition of the fact that the essential purpose of a contract between commercial men is actual performance and they do not bargain merely for a promise, or for a promise plus the right to win a lawsuit and that a continuing sense of reliance and security that the promised performance will be forthcoming when due, is an important feature of the bargain. If either the willingness or the ability of a party to perform declines materially between the time of contracting and the time for performance, the other party is threatened with the loss of a substantial part of what he has bargained for. A seller needs protection not merely against having to deliver on credit to a shaky buyer, but also against having to procure and manufacture the goods, perhaps turning down other customers. Once he has been given reason to believe that the buyer’s performance has become uncertain, it is an undue hardship to force him to continue his own performance. Similarly, a buyer who believes that the seller’s deliveries have become uncertain cannot safely wait for the due date of performance when he has been buying to assure himself of materials for his current manufacturing or to replenish his stock of merchandise.
  2. Three measures have been adopted to meet the needs of commercial men in such situations. First, the aggrieved party is permitted to suspend his own performance and any preparation therefor, with excuse for any resulting necessary delay, until the situation has been clarified. “Suspend performance” under this section means to hold up performance pending the outcome of the demand and includes also the holding up of any preparatory action. This is the same principle which governs the ancient law of stoppage and seller’s lien, and also of excuse of a buyer from prepayment if the seller’s actions manifest that he cannot or will not perform. (Original Act, Section 63 (2).)
  3. Subsection (2) of the present section requires that “reasonable” grounds and “adequate” assurance as used in subsection (1) be defined by commercial rather than legal standards. The express reference to commercial standards carries no connotation that the obligation of good faith is not equally applicable here.
  4. What constitutes “adequate” assurance of due performance is subject to the same test of factual conditions. For example, where the buyer can make use of a defective delivery, a mere promise by a seller of good repute that he is giving the matter his attention and that the defect will not be repeated, is normally sufficient. Under the same circumstances, however, a similar statement by a known cornercutter might well be considered insufficient without the posting of a guaranty or, if so demanded by the buyer, a speedy replacement of the delivery involved. By the same token where a delivery has defects, even though easily curable, which interfere with easy use by the buyer, no verbal assurance can be deemed adequate which is not accompanied by replacement, repair, money-allowance, or other commercially reasonable cure.
  5. A failure to provide adequate assurance of performance and thereby to reestablish the security of expectation, results in a breach only “by repudiation” under subsection (4). Therefore, the possibility is continued of retraction of the repudiation under the section dealing with that problem, unless the aggrieved party has acted on the breach in some manner.
  6. Clauses seeking to give the protected party exceedingly wide powers to cancel or readjust the contract when ground for insecurity arises must be read against the fact that good faith is a part of the obligation of the contract and not subject to modification by agreement and includes, in the case of a merchant, the reasonable observance of commercial standards of fair dealing in the trade. Such clauses can thus be effective to enlarge the protection given by the present section to a certain extent, to fix the reasonable time within which requested assurance must be given, or to define adequacy of the assurance in any commercially reasonable fashion. But any clause seeking to set up arbitrary standards for action is ineffective under this Article. Acceleration clauses are treated similarly in the Articles on Commercial Paper and Secured Transactions.

Secondly, the aggrieved party is given the right to require adequate assurance that the other party’s performance will be duly forthcoming. This principle is reflected in the familiar clauses permitting the seller to curtail deliveries if the buyer’s credit becomes impaired, which when held within the limits of reasonableness and good faith actually express no more than the fair business meaning of any commercial contract.

Third, and finally, this section provides the means by which the aggrieved party may treat the contract as broken if his reasonable grounds for insecurity are not cleared up within a reasonable time. This is the principle underlying the law of anticipatory breach, whether by way of defective part performance or by repudiation. The present section merges these three principles of law and commercial practice into a single theory of general application to all sales agreements looking to future performance.

Under commercial standards and in accord with commercial practice, a ground for insecurity need not arise from or be directly related to the contract in question. The law as to “dependence” or “independence” of promises within a single contract does not control the application of the present section.

Thus a buyer who falls behind in “his account” with the seller, even though the items involved have to do with separate and legally distinct contracts, impairs the seller’s expectation of due performance. Again, under the same test, a buyer who requires precision parts which he intends to use immediately upon delivery, may have reasonable grounds for insecurity if he discovers that his seller is making defective deliveries of such parts to other buyers with similar needs. Thus, too, in a situation such as arose in Jay Dreher Corporation v. Delco Appliance Corporation, 93, F.2d 275 (C.C.A.2, 1937), where a manufacturer gave a dealer an exclusive franchise for the sale of his product but on two or three occasions breached the exclusive dealing clause, although there was no default in orders, deliveries or payments under the separate sales contract between the parties, the aggrieved dealer would be entitled to suspend his performance of the contract for sale under the present section and to demand assurance that the exclusive dealing contract would be lived up to. There is no need for an explicit clause tying the exclusive franchise into the contract for the sale of goods since the situation itself ties the agreements together.

The nature of the sales contract enters also into the question of reasonableness. For example, a report from an apparently trustworthy source that the seller had shipped defective goods or was planning to ship them would normally give the buyer reasonable grounds for insecurity. But when the buyer has assumed the risk of payment before inspection of the goods, as in a sales contract on C.I.F. or similar cash against documents terms, that risk is not to be evaded by a demand for assurance. Therefore no ground for insecurity would exist under this section unless the report went to a ground which would excuse payment by the buyer.

A fact situation such as arose in Corn Products Refining Co. v. Fasola, 94 N.J.L. 181, 109 A. 505 (1920) offers illustration both of reasonable grounds for insecurity and “adequate” assurance. In that case a contract for the sale of oils on 30 days’ credit, 2% off for payment within 10 days, provided that credit was to be extended to the buyer only if his financial responsibility was satisfactory to the seller. The buyer had been in the habit of taking advantage of the discount but at the same time he failed to make his customary 10 day payment, the seller heard rumors, in fact false, that the buyer’s financial condition was shaky. Thereupon, the seller demanded cash before shipment or security satisfactory to him. The buyer sent a good credit report from his banker, expressed willingness to make payments when due on the 30 day terms and insisted on further deliveries under the contract. Under this Article the rumors, although false, were enough to make the buyer’s financial condition “unsatisfactory” to the seller under the contract clause. Moreover, the buyer’s practice of taking the cash discounts is enough, apart from the contract clause, to lay a commercial foundation for suspicion when the practice is suddenly stopped. These matters, however, go only to the justification of the seller’s demand for security, or his “reasonable grounds for insecurity”.

The adequacy of the assurance given is not measured as in the type of “satisfaction” situation affected with intangibles, such as in personal service cases, cases involving a third party’s judgment as final, or cases in which the whole contract is dependent on one party’s satisfaction, as in a sale on approval. Here, the seller must exercise good faith and observe commercial standards. This Article thus approves the statement of the court in James B. Berry’s Sons Co. of Illinois v. Monark Gasoline & Oil Co., Inc. 32 F.2d 74 (C.C.A.8, 1929), that the seller’s satisfaction under such a clause must be based upon reason and must not be arbitrary or capricious; and rejects the purely personal “good faith” test of the Corn Products Refining Co. case, which held that in the seller’s sole judgment, if for any reason he was dissatisfied, he was entitled to revoke the credit. In the absence of the buyer’s failure to take the 2% discount as was his custom, the banker’s report given in that case would have been “adequate” assurance under this Act, regardless of the language of the “satisfaction” clause. However, the seller is reasonably entitled to feel insecure at a sudden expansion of the buyer’s use of a credit term, and should be entitled either to security or to a satisfactory explanation.

The entire foregoing discussion as to adequacy of assurance by way of explanation is subject to qualification when repeated occasions for the application of this section arise. This Act recognizes that repeated delinquencies must be viewed as cumulative. On the other hand, commercial sense also requires that if repeated claims for assurance are made under this section, the basis for these claims must be increasingly obvious.

The thirty day limit on the time to provide assurance is laid down to free the question of reasonable time from uncertainty in later litigation.

Cross references:

Point 3: Section 1-203 .

Point 5: Section 2-611.

Point 6: Sections 1-203 and 2-208 and Articles 3 and 9.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Between merchants”. Section 2-104.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Party”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Rights”. Section 1-201 .

“Writing”. Section 1-201 .

VIRGINIA COMMENT

Virginia law previously had not recognized this right to demand adequate assurance of performance, although the point was not squarely decided. In Smokeless Fuel Co. v. W. E. Seaton & Sons, 105 Va. 170 , 176, 52 S.E. 829 (1906), it was said that a seller’s demand for an indemnifying bond to induce the seller to complete the contract was “wholly unwarranted,” but there was no evidence that the seller had reasonable grounds for insecurity. Virginia has recognized and given effect to similar contractual provisions: J. Maury Dove Co., Inc. v. New River Coal Co., 150 Va. 796 , 823, 143 S.E. 317 (1928). It was held in Sun Co. v. Burruss, 139 Va. 279 , 287-90, 123 S.E. 347 (1924), that a contractual provisions. J. Maury Dove Co., Inc. v. New River Coal Co., 150 Va. 796 , 823, 143 S.E. 317 (1928). It was held in Sun Co. v. Burruss, 139 Va. 279 , 287-90, 123 S.E. 347 (1924), that a contractual clause that the buyer’s financial responsibility must at all times be satisfactory to the seller or shipments might be suspended could only be invoked if there was a “good faith” dissatisfaction.

§ 8.2-610. Anticipatory repudiation.

When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may

  1. for a commercially reasonable time await performance by the repudiating party; or
  2. resort to any remedy for breach (§ 8.2-703 or § 8.2-711 ), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and
  3. in either case suspend his own performance or proceed in accordance with the provisions of this title on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (§ 8.2-704 ).

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 29, 32.

OFFICIAL COMMENT

Prior uniform statutory provision: See Sections 63(2) and 65, Uniform Sales Act.

Purposes: To make it clear that:

  1. With the problem of insecurity taken care of by the preceding section and with provision being made in this Article as to the effect of a defective delivery under an installment contract, anticipatory repudiation centers upon an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance.
  2. It is not necessary for repudiation that performance be made literally and utterly impossible. Repudiation can result from action which reasonably indicates a rejection of the continuing obligation. And, a repudiation automatically results under the preceding section on insecurity when a party fails to provide adequate assurance of due future performance within thirty days after a justifiable demand therefor has been made. Under the language of this section, a demand by one or both parties for more than the contract calls for in the way of counter-performance is not in itself a repudiation nor does it invalidate a plain expression of desire for future performance. However, when under a fair reading it amounts to a statement of intention not to perform except on conditions which go beyond the contract, it becomes a repudiation.
  3. The test chosen to justify an aggrieved party’s action under this section is the same as that in the section is the same as that in the section on breach in installment contracts—namely the substantial value of the contract. The most useful test of substantial value is to determine whether material inconvenience or injustice will result if the aggrieved party is forced to wait and receive an ultimate tender minus the part or aspect repudiated.
  4. After repudiation, the aggrieved party may immediately resort to any remedy he chooses provided he moves in good faith (see Section 1-203 ). Inaction and silence by the aggrieved party may leave the matter open but it cannot be regarded as misleading the repudiating party. Therefore the aggrieved party is left free to proceed at any time with his options under this section, unless he has taken some positive action which in good faith requires notification to the other party before the remedy is pursued.

Under the present section when such a repudiation substantially impairs the value of the contract, the aggrieved party may at any time resort to his remedies for breach, or he may suspend his own performance while he negotiates with, or awaits performance by, the other party. But if he awaits performance beyond a commercially reasonable time he cannot recover resulting damages which he should have avoided.

Cross references:

Point 1: Sections 2-609 and 2-612.

Point 2: Section 2-609.

Point 3: Section 2-612.

Point 4: Section 1-203 .

Definitional cross references:

“Aggrieves party”. Section 1-201 .

“Contract”. Section 1-201 .

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

VIRGINIA COMMENT

Only one Virginia sales case has discussed the effect of an anticipatory breach. In Virginia Hardwood Lumber Co. v. Hughes, 140 Va. 249 , 259, 124 S.E. 283 (1924), the court said that upon the seller being notified of the breach it is the seller’s duty “to accept the situation and terminate all relations and sue for the breach and prove his damages.” The seller was, therefore, denied the price of the goods, and because he had failed to prove any damages, the seller was denied as well. In Baker-Matthews Lumber Co., Inc. v. Lincoln Furniture Co., Inc., 153 Va. 14 , 149 S.E. 517 (1929), it was found that the seller was unreasonable in thinking that the buyer had made an anticipatory repudiation of the contract. For other cases on anticipatory repudiation of the contract. For other cases on anticipatory breach see Mutual Reserve Fund Life Ass’n v. Taylor, 99 Va. 208 , 37 S.E. 854 (1901) (life insurance); Lee v. Mutual Reserve Fund Life Ass’n, 97 Va. 160 , 33 S.E. 556 (1899) (life insurance); James v. Kibler’s Adm’r, 94 Va. 165 , 26 S.E. 417 (1896) (lease).

§ 8.2-611. Retraction of anticipatory repudiation.

  1. Until the repudiating party’s next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final.
  2. Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this title (§ 8.2-609 ).
  3. Retraction reinstates the repudiating party’s rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 24, 29.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To make clear that:

  1. The repudiating party’s right to reinstate the contract is entirely dependent upon the action taken by the aggrieved party. If the latter has cancelled the contract or materially changed his position at any time after the repudiation, there can be no retraction under this section.
  2. Under subsection (2) an effective retraction must be accompanied by any assurances demanded under the section dealing with right to adequate assurance. A repudiation is of course sufficient to give reasonable ground for insecurity and to warrant a request for assurance as an essential condition of the retraction. However, after a timely and unambiguous expression of retraction, a reasonable time for the assurance to be worked out should be allowed by the aggrieved party before cancellation.

Cross reference:

Point 2: Section 2-609.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Cancellation”. Section 2-106.

“Contract”. Section 1-201 .

“Party”. Section 1-201 .

“Rights”. Section 1-201 .

VIRGINIA COMMENT

This section is in accord with Norfolk Hosiery and Underwear Mills v. Aetna Hosiery Co., 124 Va. 221 , 243-44, 98 S.E. 43 (1919), in recognizing that a repudiating party may retract his repudiation before performance is due unless the other party has cancelled or otherwise materially changed his position.

§ 8.2-612. “Installment contract”; breach.

  1. An “installment contract” is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.
  2. The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
  3. Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 25, 26, 30; 4A M.J. Contracts, § 56.

OFFICIAL COMMENT

Prior uniform statutory provision: Section 45(2), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To continue prior law but to make explicit the more mercantile interpretation of many of the rules involved, so that:

  1. The definition of an installment contract is phrased more broadly in this Article so as to cover installment deliveries tacitly authorized by the circumstances or by the option of either party.
  2. In regard to the apportionment of the price for separate payment this Article applies the more liberal test of what can be apportioned rather than the test of what is clearly apportioned by the agreement. This Article also recognizes approximate calculation or apportionment of price subject to subsequent adjustment. A provision for separate payment for each lot delivered ordinarily means that the price is at least roughly calculable by units of quantity, but such a provision is not essential to an “installment contract.” If separate acceptance of separate deliveries is contemplated, no generalized contrast between wholly “entire” and wholly “divisible” contracts has any standing under this Article.
  3. This Article rejects any approach which gives clauses such as “each delivery is a separate contract” their legalistically literal effect. Such contracts nonetheless call for installment deliveries. Even where a clause speaks of “a separate contract for all purposes”, a commercial reading of the language under the section on good faith and commercial standards requires that the singleness of the document and the negotiation, together with the sense of the situation, prevail over any uncommercial and legalistic interpretation.
  4. One of the requirements for rejection under subsection (2) is non-conformity substantially impairing the value of the installment in question. However, an installment agreement may require accurate conformity in quality as a condition to the right to acceptance if the need for such conformity is made clear either by express provision or by the circumstances. In such a case the effect of the agreement is to define explicitly what amounts to substantial impairment of value impossible to cure. A clause requiring accurate compliance as a condition to the right to acceptance must, however, have some basis in reason, must avoid imposing hardship by surprise and is subject to waiver or to displacement by practical construction.
  5. Under subsection (2) an installment delivery must be accepted if the non-conformity is curable and the seller gives adequate assurance of cure. Cure of non-conformity of an installment in the first instance can usually be afforded by an allowance against the price, or in the case of reasonable discrepancies in quantity either by a further delivery or a partial rejection. This Article requires reasonable action by a buyer in regard to discrepant delivery and good faith requires that the buyer make any reasonable minor outlay of time or money necessary to cure an overshipment by severing out an acceptable percentage thereof. The seller must take over a cure which involves any material burden; the buyer’s obligation reaches only to cooperation. Adequate assurance for purposes of subsection (2) is measured by the same standards as under the section on right to adequate assurance of performance.
  6. Subsection (3) is designed to further the continuance of the contract in the absence of an overt cancellation. The question arising when an action is brought as to a single installment only is resolved by making such action waive the right of cancellation. This involves merely a defect in one or more installments, as contrasted with the situation where there is a true repudiation within the section on anticipatory repudiation. Whether the non-conformity in any given installment justifies cancellation as to the future depends, not on whether such non-conformity indicates an intent or likelihood that the future deliveries will also be defective, but whether the non-conformity substantially impairs the value of the whole contract. If only the seller’s security in regard to future installments is impaired, he has the right to demand adequate assurances of proper future performance but has not an immediate right to cancel the entire contract. It is clear under this Article, however, that defects in prior installments are cumulative in effect, so that acceptance does not wash out the defect “waived.” Prior policy is continued, putting the rule as to buyer’s default on the same footing as that in regard to seller’s default.
  7. Under the requirement of seasonable notification of cancellation under subsection (3), a buyer who accepts a non-conforming installment which substantially impairs the value of the entire contract should properly be permitted to withhold his decision as to whether or not to cancel pending a response from the seller as to his claim for cure or adjustment. Similarly, a seller may withhold a delivery pending payment for prior ones, at the same time delaying his decision as to cancellation. A reasonable time for notifying of cancellation, judged by commercial standards under the section on good faith, extends of course to include the time covered by any reasonable negotiation in good faith. However, during this period the defaulting party is entitled, on request to know whether the contract is still in effect, before he can be required to perform further.

Substantial impairment of the value of an installment can turn not only on the quality of the goods but also on such factors as time, quantity, assortment, and the like. It must be judged in terms of the normal or specifically known purposes of the contract. The defect in required documents refers to such matters as the absence of insurance documents under a C.I.F. contract, falsity of a bill of lading, or one failing to show shipment within the contract period or to the contract destination. Even in such cases, however, the provisions on cure of tender apply if appropriate documents are readily procurable.

Cross references:

Point 2: Sections 2-307 and 2-607.

Point 3: Section 1-203 .

Point 5: Sections 2-208 and 2-609.

Point 6: Section 2-610.

Definitional cross references:

“Action”. Section 1-201 .

“Aggrieved party”. Section 1-201 .

“Buyer”. Section 2-103.

“Cancellation”. Section 2-106.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Lot”. Section 2-105.

“Notifies”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Subsection 8.2-612(3) , which provides that an aggrieved party reinstates the contract by accepting a nonconforming installment without seasonably notifying the other party of cancellation, is in accord with prior Virginia law, at least where the nonconformity is a delay in delivery. The Virginia cases hold that a buyer who has the right to rescind the contract of sale upon the failure of the seller to deliver the subject matter at the time specified waives his right to rescind and the contract is kept alive against the buyer as well as against the seller, so that neither can maintain an action against the other, except for a breach thereafter occurring. Goldstein v. Old Dominion Peanut Corp., 177 Va. 716 , 722-26, 15 S.E.2d 103 (1941); Tidewater Plumbing Supply Co., Inc., v. Emory Foundry Co., 141 Va. 363 , 367, 127 S.E. 87 (1925); Richmond Leather Manufacturing Co. v. Fawcett, 130 Va. 484 , 508, 107 S.E. 800 (1921) and Fawcett v. Richmond Leather Manufacturing Co., 155 Va. 518 , 524, 155 S.E. 714 (1930); Eichelbaum v. Klaff, 125 Va. 98 , 99-101, 99 S.E. 721 (1919); Norfolk Hosiery and Underwear Mills v. Aetna Hosiery Co., 124 Va. 221 , 236-38, 98 S.E. 43 (1919).

It is not entirely clear under prior Virginia law whether the buyer could, without giving notice, reject delayed deliveries after he accepted late deliveries while pressing for greater promptness. In Richmond Leather Manufacturing Co. v. Fawcett, 130 Va. 484 , 508, 107 S.E. 800 (1921), it was said that the buyer “was required to give notice . . . that thereafter he stood upon his legal rights, and the contracts must be discharged strictly according to their terms.” See also Smith v. Snyder, 77 Va. 432 , 440-43 (1883), 82 Va. 614 (1886). However, W. S. Forbes & Co. v. Southern Cotton Oil Co., 130 Va. 245 , 251-52, 108 S.E. 15 (1921), held that accepting late delivery on one contract did not constitute a waiver of the requirement of delivery on time as to another contract.

By accepting delayed payments, under prior Virginia law, the seller waived his right to insist on payment for future installments in strict accordance with the terms of the contract. If the seller intended to require strict punctuality of payment in the future he had to give the buyer notice of that fact. Cocoa Products Co. of America, Inc. v. Duche, 156 Va. 86 , 96-98, 158 S.E. 719 (1931). Nevertheless, payments by the buyer at greater than the contract rate did not preclude the buyer from later insisting on the seller making deliveries at the contract rate. C. G. Blake Co., Inc. v. W. R. Smith and Son, Ltd., 147 Va. 960 , 980-81, 133 S.E. 685 (1926).

§ 8.2-613. Casualty to identified goods.

Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a “no arrival, no sale” term (§ 8.2-324 ) then

  1. if the loss is total the contract is avoided; and
  2. if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 19, 30.

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 7 and 8, Uniform Sales Act.

Changes: Rewritten, the basic policy being continued but the test of a “divisible” or “indivisible” sale or contract being abandoned in favor of adjustment in business terms.

Purposes of changes:

  1. Where goods whose continued existence is presupposed by the agreement are destroyed without fault of either party, the buyer is relieved from his obligation but may at his option take the surviving goods at a fair adjustment. “Fault” is intended to include negligence and not merely wilful wrong. The buyer is expressly given the right to inspect the goods in order to determine whether he wishes to avoid the contract entirely or to take the goods with a price adjustment.
  2. The section applies whether the goods were already destroyed at the time of contracting without the knowledge of either party or whether they are destroyed subsequently but before the risk of loss passes to the buyer. Where under the agreement, including of course usage of trade, the risk has passed to the buyer before the casualty, the section has no application. Beyond this, the essential question in determining whether the rules of this section are to be applied is whether the seller has or has not undertaken the responsibility for the continued existence of the goods in proper condition through the time of agreed or expected delivery.
  3. The section on the term “no arrival, no sale” makes clear that delay in arrival, quite as much as physical change in the goods, gives the buyer the options set forth in this section.

Cross reference:

Point 3: Section 2-324.

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Contract”. Section 1-201 .

“Fault”. Section 1-201 .

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-614. Substituted performance.

  1. Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.
  2. If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer’s obligation unless the regulation is discriminatory, oppressive or predatory.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 22, 23, 25, 30.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Subsection (1) requires the tender of a commercially reasonable substituted performance where agreed to facilities have failed or become commercially impracticable. Under this Article, in the absence of specific agreement, the normal or usual facilities enter into the agreement either through the circumstances, usage of trade or prior course of dealing.
  2. The substitution provided in this section as between buyer and seller does not carry over into the obligation of a financing agency under a letter of credit since such an agency is entitled to performance which is plainly adequate on its face and without need to look into commercial evidence outside of the documents. See Article 5-109, 5-110 and 5-114.
  3. Under subsection (2) where the contract is still executory on both sides, the seller is permitted to withdraw unless the buyer can provide him with a commercially equivalent return despite the governmental regulation. Where, however, only the debt for the price remains, a larger leeway is permitted. The buyer may pay in the manner provided by the regulation even though this may not be commercially equivalent provided that the regulation is not “discriminatory, oppressive or predatory.”

This section appears between Section 2-613 on casualty to identified goods and the next section on excuse by failure of presupposed conditions, both of which deal with excuse and complete avoidance of the contract where the occurrence or non-occurrence of a contingency which was a basic assumption of the contract makes the expected performance impossible. The distinction between the present section and those sections lies in whether the failure or impossibility of performance arises in connection with an incidental matter or goes to the very heart of the agreement. The differing lines of solution are contrasted in a comparison of International Paper Co. v. Rockefeller, 161 App. Div. 180, 146 N.Y.S. 371 (1914) and Meyer v. Sullivan, 40 Cal. App. 723, 181 P. 847 (1919). In the former case a contract for the sale of spruce to be cut from a particular tract of land was involved. When a fire destroyed the trees growing on that tract the seller was held excused since performance was impossible. In the latter case the contract called for delivery of wheat “f.o.b. Kosmos Steamer at Seattle.” The war led to cancellation of that line’s sailing schedule after space had been duly engaged and the buyer was held entitled to demand substituted delivery at the warehouse on the line’s loading dock. Under this Article, of course, the seller would also be entitled, had the market gone the other way, to make a substituted tender in that manner.

There must, however, be a true commercial impracticability to excuse the agreed to performance and justify a substituted performance. When this is the case a reasonable substituted performance tendered by either party should excuse him from strict compliance with contract terms which do not go to the essence of the agreement.

Cross reference:

Point 2: Article 5.

Definitional cross references:

“Buyer”. Section 2-103.

“Fault”. Section 1-201 .

“Party”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-615. Excuse by failure of presupposed conditions.

Except so far as a seller may have assumed a greater obligation and subject to the preceding section [§ 8.2-614 ] on substituted performance:

  1. Delay in delivery or nondelivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
  2. Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
  3. The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 22, 30.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section excuses a seller from timely delivery of goods contracted for, where his performance has become commercially impracticable because of unforeseen supervening circumstances not within the contemplation of the parties at the time of contracting. The destruction of specific goods and the problem of the use of substituted performance on points other than delay or quantity, treated elsewhere in this Article, must be distinguished from the matter covered by this section.
  2. The present section deliberately refrains from any effort at an exhaustive expression of contingencies and is to be interpreted in all cases sought to be brought within its scope in terms of its underlying reason and purpose.
  3. The first test for excuse under this Article in terms of basic assumption is a familiar one. The additional test of commercial impracticability (as contrasted with “impossibility,” “frustration of performance” or “frustration of the venture”) has been adopted in order to call attention to the commercial character of the criterion chosen by this Article.
  4. Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. Neither is a rise or a collapse in the market in itself a justification, for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance, is within the contemplation of this section. (See Ford & Sons, Ltd. v. Henry Leetham & Sons, Ltd., 21 Com. Cas. 55 (1915, K.B.D.).)
  5. Where a particular source of supply is exclusive under the agreement and fails through casualty, the present section applies rather than the provision on destruction or deterioration of specific goods. The same holds true where a particular source of supply is shown by the circumstances to have been contemplated or assumed by the parties at the time of contracting. (See Davis Co. v. Hoffmann-LaRoche Chemical Works, 178 App. Div. 855, 166 N.Y.S. 179 (1917) and International Paper Co. v. Rockefeller, 161 App. Div. 180, 146 N.Y.S. 371 (1914).) There is no excuse under this section, however, unless the seller has employed all due measures to assure himself that his source will not fail. (See Canadian Industrial Alcohol Co., Ltd. v. Dunbar Molasses Co., 258 N.Y. 194, 179 N.E. 383, 80 A.L.R. 1173 (1932) and Washington Mfg. Co. v. Midland Lumber Co., 113 Wash. 593, 194 P. 777 (1921).)
  6. In situations in which neither sense nor justice is served by either answer when the issue is posed in flat terms of “excuse” or “no excuse,” adjustment under the various provisions of this Article is necessary, especially the sections on good faith, on insecurity and assurance and on the reading of all provisions in the light of their purposes and the general policy of this Act to use equitable principles in furtherance of commercial standards and good faith.
  7. The failure of conditions which go to convenience or collateral values rather than to the commercial practicability of the main performance does not amount to a complete excuse. However, good faith and the reason of the present section and of the preceding one may properly be held to justify and even to require any needed delay involved in a good faith inquiry seeking a readjustment of the contract terms to meet the new conditions.
  8. The provisions of this section are made subject to assumption of greater liability by agreement and such agreement is to be found not only in the expressed terms of the contract but in the circumstances surrounding the contracting, in trade usage and the like. Thus the exemptions of this section do not apply when the contingency in question is sufficiently foreshadowed at the time of contracting to be included among the business risks which are fairly to be regarded as part of the dickered terms, either consciously or as a matter of reasonable, commercial interpretation from the circumstances. (See Madeirense Do Brasil, S. A. v. Stulman-Emrick Lumber Co., 147 F.2d 399 (C.C.A., 2 Cir., 1945).) The exemption otherwise present through usage of trade under the present section may also be expressly negated by the language of the agreement. Generally, express agreements as to exemptions designed to enlarge upon or supplant the provisions of this section are to be read in the light of mercantile sense and reason, for this section itself sets up the commercial standard for normal and reasonable interpretation and provides a minimum beyond which agreement may not go.
  9. The case of a farmer who has contracted to sell crops to be grown on designated land may be regarded as falling either within the section on casualty to identified goods or this section, and he may be excused, when there is a failure of the specific crop, either on the basis of the destruction of identified goods or because of the failure of a basic assumption of the contract.
  10. Following its basic policy of using commercial practicability as a test for excuse, this section recognizes as of equal significance either a foreign or domestic regulation and disregards any technical distinctions between “law,” “regulation,” “order” and the like. Nor does it make the present action of the seller depend upon the eventual judicial determination of the legality of the particular governmental action. The seller’s good faith belief in the validity of the regulation is the test under this Article and the best evidence of his good faith is the general commercial acceptance of the regulation. However, governmental interference cannot excuse unless it truly “supervenes” in such a manner as to be beyond the seller’s assumption of risk. And any action by the party claiming excuse which causes or colludes in inducing the governmental action preventing his performance would be in breach of good faith and would destroy his exemption.
  11. An excused seller must fulfill his contract to the extent which the supervening contingency permits, and if the situation is such that his customers are generally affected he must take account of all in supplying one. Subsections (a) and (b), therefore, explicitly permit in any proration a fair and reasonable attention to the needs of regular customers who are probably relying on spot orders for supplies. Customers at different stages of the manufacturing process may be fairly treated by including the seller’s manufacturing requirements. A fortiori, the seller may also take account of contracts later in date than the one in question. The fact that such spot orders may be closed at an advanced price causes no difficulty, since any allocation which exceeds normal past requirements will not be reasonable. However, good faith requires, when prices have advanced, that the seller exercise real care in making his allocations, and in case of doubt his contract customers should be favored and supplies prorated evenly among them regardless of price. Save for the extra care thus required by changes in the market, this section seeks to leave every reasonable business leeway to the seller.

In the case of failure of production by an agreed source for causes beyond the seller’s control, the seller should, if possible, be excused since production by an agreed source is without more a basic assumption of the contract. Such excuse should not result in relieving the defaulting supplier from liability nor in dropping into the seller’s lap an unearned bonus of damages over. The flexible adjustment machinery of this Article provides the solution under the provision on the obligation of good faith. A condition to his making good the claim of excuse is the turning over to the buyer of his rights against the defaulting source of supply to the extent of the buyer’s contract in relation to which excuse is being claimed.

Agreement can also be made in regard to the consequences of exemption as laid down in paragraphs (b) and (c) and the next section on procedure on notice claiming excuse.

Exemption of the buyer in the case of a “requirements” contract is covered by the “Output and Requirements” section both as to assumption and allocation of the relevant risks. But when a contract by a manufacturer to buy fuel or raw material makes no specific reference to a particular venture and no such reference may be drawn from the circumstances, commercial understanding views it as a general deal in the general market and not conditioned on any assumption of the continuing operation of the buyer’s plant. Even when notice is given by the buyer that the supplies are needed to fill a specific contract of a normal commercial kind, commercial understanding does not see such a supply contract as conditioned on the continuance of the buyer’s further contract for outlet. On the other hand, where the buyer’s contract is in reasonable commercial understanding conditioned on a definite and specific venture or assumption as, for instance, a war procurement sub-contract known to be based on a prime contract which is subject to termination, or a supply contract for a particular construction venture, the reason of the present section may well apply and entitle the buyer to the exemption.

Cross references:

Point 1: Sections 2-613 and 2-614.

Point 2: Section 1-102.

Point 5: Sections 1-203 and 2-613.

Point 6: Sections 1-102, 1-203 and 2-609.

Point 7: Section 2-614.

Point 8: Sections 1-201 , 2-302 and 2-616.

Point 9: Sections 1-102, 2-306 and 2-613.

Definitional cross references:

“Between merchants”. Section 2-104.

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Good faith”. Section 1-201 .

“Merchant”. Section 2-104.

“Notifies”. Section 1-201 .

“Seasonably”. Section 1-204 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

In Goldstein v. Old Dominion Peanut Corp., 177 Va. 716 , 726-28, 15 S.E.2d 103 (1941), the supreme court of appeals refused to recognize inconvenience or cost, though they might make compliance a hardship, as excuses for nonperformance on the ground that they constitute supervening causes, not within the contemplation of the parties. Virginia has required reasonable diligence to comply with a contract even though the contract does not expressly provide for liability in case of nonperformance. Richmond Ice Co. v. Crystal Ice Co., 99 Va. 285 , 289-90, 38 S.E. 141 (1901); James River and Kanawha Co. v. Adams, 58 Va. (17 Gratt.) 427, 437-38 (1867). In Bardach Iron and Steel Co., Inc. v. Tenenbaum, 136 Va. 163 , 174-76, 118 S.E. 502 (1923), as a matter of interpretation of the contract, the seller was held not responsible for contingencies beyond his control.

§ 8.2-616. Procedure on notice claiming excuse.

  1. Where the buyer receives notification of a material or indefinite delay or an allocation justified under the preceding section [§ 8.2-615 ] he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this title relating to breach of installment contracts (§ 8.2-612 ), then also as to the whole,
    1. terminate and thereby discharge any unexecuted portion of the contract; or
    2. modify the contract by agreeing to take his available quota in substitution.
  2. If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding thirty days the contract lapses with respect to any deliveries affected.
  3. The provisions of this section may not be negated by agreement except in so far as the seller has assumed a greater obligation under the preceding section [§ 8.2-615 ].

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 30.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

This section seeks to establish simple and workable machinery for providing certainty as to when a supervening and excusing contingency “excuses” the delay, “discharges” the contract, or may result in a waiver of the delay by the buyer. When the seller notifies, in accordance with the preceding section, claiming excuse, the buyer may acquiesce, in which case the contract is so modified. No consideration is necessary in a case of this kind to support such a modification. If the buyer does not elect so to modify the contract, he may terminate it and under subsection (2) his silence after receiving the seller’s claim of excuse operates as such a termination. Subsection (3) denies effect to any contract clause made in advance of trouble which would require the buyer to stand ready to take delivery whenever the seller is excused from delivery by unforeseen circumstances.

Cross references:

Point 1: Sections 2-209 and 2-615.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Installment contract”. Section 2-612.

“Notification”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Seller”. Section 2-103.

“Termination”. Section 2-106.

“Written”. Section 1-201 .

PART 7. Remedies.

§ 8.2-701. Remedies for breach of collateral contracts not impaired.

Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this title.

History. 1964, c. 219.

Law Review.

For comment on cumulative remedies under article 9 of the U.C.C., see 14 Wm. & Mary L. Rev. 213 (1972).

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 6. Pleading. § 6.03 Defendant’s Pleadings. Bryson.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 23 Damages. § 23.10 Damages under the Uniform Commercial Code. Friend.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 31, 32.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

Whether a claim for breach of an obligation collateral to the contract for sale requires separate trial to avoid confusion of issues is beyond the scope of this Article; but contractual arrangements which as a business matter enter vitally into the contract should be considered a part thereof insofar as cross-claims or defenses are concerned.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Remedy”. Section 1-201 .

§ 8.2-702. Seller’s remedies on discovery of buyer’s insolvency.

  1. Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this title (§ 8.2-705 ).
  2. Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent misrepresentation of solvency or of intent to pay.
  3. The seller’s right to reclaim under subsection (2) is subject to the rights of a buyer in ordinary course or other good faith purchaser or lien creditor under this title (§ 8.2-403 ). Successful reclamation of goods excludes all other remedies with respect to them.

History. 1964, c. 219.

Law Review.

For note, “Inventory Lender As a Good Faith Purchaser for Value: Priority Problems in U.C.C. 2-702,” see 43 Wash. & Lee L. Rev. 1351 (1986).

Michie’s Jurisprudence.

For related discussion, see 2B M.J. Bankruptcy, § 60; 3C M.J. Commercial Law, §§ 18, 24, 32.

CASE NOTES

Right of seller to reclaim goods. —

Sections 8.2-507 and 8.2-511 give the seller a right to reclaim his goods from the buyer where a cash transaction has occurred, and a check, taken in payment by the seller, was dishonored. However, the right to reclaim is limited to a 10-day period from the delivery of the goods as provided by § 8.2-507 by virtue of its cross reference to this section. If the right to reclaim has not been exercised within that specified time period, the right is waived. The seller’s remedy is then on the instrument as well as for breach of contract. This reduces the seller’s rights to those of a general creditor. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

The seller in a cash transaction, who accepts a check which the bank refuses to pay because of the intervening of bankruptcy proceedings, has the right to reclaim the goods sold, and nothing in the Bankruptcy Act changes this. If the seller has a right to reclaim the goods, he stands in a position superior to any creditor. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

Conditions of right to reclaim goods. —

Discovery of the buyer’s insolvency and demand within a 10-day period of receipt are conditions of the right to reclaim the goods. In re Helms Veneer Corp., 287 F. Supp. 840, 1968 U.S. Dist. LEXIS 8424 (W.D. Va. 1968).

CIRCUIT COURT OPINIONS

Right of seller to reclaim goods. —

Since the unsecured creditor had an adequate remedy at law by a right to reclaim the amounts owed on certain dishonored checks of an insolvent company, the secured creditor was entitled to payment of the insolvent company’s debts from the company’s remaining assets. Signet Bank v. Bradley, Inc., 56 Va. Cir. 207, 2001 Va. Cir. LEXIS 451 (Richmond June 1, 2001).

OFFICIAL COMMENT

Prior uniform statutory provision: Subsection (1)—Sections 53(1) (b), 54(1) (c) and 57, Uniform Sales Act; Subsection (2)—none; Subsection (3)—Section 76(3), Uniform Sales Act.

Changes: Rewritten, the protection given to a seller who has sold on credit and has delivered goods to the buyer immediately preceding his insolvency being extended.

Purposes of changes and new matter: To make it clear that:

  1. The seller’s right to withhold the goods or to stop delivery except for cash when he discovers the buyer’s insolvency is made explicit in subsection (1) regardless of the passage of title, and the concept of stoppage has been extended to include goods in the possession of any bailee who has not yet attorned to the buyer.
  2. Subsection (2) takes as its base line the proposition that any receipt of goods on credit by an insolvent buyer amounts to a tacit business misrepresentation of solvency and therefore is fraudulent as against the particular seller. This Article makes discovery of the buyer’s insolvency and demand within a ten day period a condition of the right to reclaim goods on this ground. The ten day limitation period operates from the time of receipt of the goods.
  3. Because the right of the seller to reclaim goods under this section constitutes preferential treatment as against the buyer’s other creditors, subsection (3) provides that such reclamation bars all his other remedies as to the goods involved.

An exception to this time limitation is made when a written misrepresentation of solvency has been made to the particular seller within three months prior to the delivery. To fall within the exception the statement of solvency must be in writing, addressed to the particular seller and dated within three months of the delivery.

Cross references:

Point 1: Sections 2-401 and 2-705.

Compare Section 2-502.

Definitional cross references:

“Buyer”. Section 2-103.

“Buyer in ordinary course of business”. Section 1-201 .

“Contract”. Section 1-201 .

“Good faith”. Section 1-201 .

“Goods”. Section 2-105.

“Insolvent”. Section 1-201 .

“Person”. Section 1-201 .

“Purchaser”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Remedy”. Section 1-201 .

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

“Writing”. Section 1-201 .

VIRGINIA COMMENT

The right given by subsection 8.2-702(2) to the seller to reclaim goods, when he discovers that the buyer is insolvent and makes demand for their return within ten days after delivery, changes Virginia law. In James v. Bird’s Adm’r, 35 Va. (8 Leigh) 510, 513 (1837), the court said that the seller of personal property has no implied or equitable lien for the purchase money and that he must look solely to the personal responsibility of the buyer. In Trigg v. Bucyrus Co., 104 Va. 79 , 81-88, 51 S.E. 174 (1905), the seller was not permitted to recover a chattel from an insolvent buyer, ownership having passed to the buyer, but since the insolvency apparently occurred much more than ten days after the delivery of the chattel, the result would be the same under the UCC.

Subsection 8.2-702(3) is in accord with Oberdorfer v. Meyer, 88 Va. 384 , 386, 13 S.E. 756 (1891), which indicated that a seller could reclaim goods from a buyer who had fraudulently misrepresented his solvency, but denied reclamation because the goods had passed into the hands of a party who had taken them in good faith without notice of the seller’s rights.

§ 8.2-703. Seller’s remedies in general.

Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (§ 8.2-612 ), then also with respect to the whole undelivered balance, the aggrieved seller may

  1. withhold delivery of such goods;
  2. stop delivery by any bailee as hereafter provided (§ 8.2-705 );
  3. proceed under the next section [§ 8.2-704 ] respecting goods still unidentified to the contract;
  4. resell and recover damages as hereafter provided (§ 8.2-706 );
  5. recover damages for nonacceptance (§ 8.2-708 ) or in a proper case the price (§ 8.2-709 );
  6. cancel.

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 18, 32, 33; 5C M.J. Damages, § 18.

CASE NOTES

Seller may resell goods and recover damages. —

When a buyer wrongfully rejects or revokes acceptance of goods, an aggrieved seller is entitled to pursue certain remedies, including reselling the goods to a third party and recovering damages from the buyer. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

OFFICIAL COMMENT

Prior uniform statutory provision: No comparable index section. See Section 53, Uniform Sales Act.

Purposes:

  1. This section is an index section which gathers together in one convenient place all of the various remedies open to a seller for any breach by the buyer. This Article rejects any doctrine of election of remedy as a fundamental policy and thus the remedies are essentially cumulative in nature and include all of the available remedies for breach. Whether the pursuit of one remedy bars another depends entirely on the facts of the individual case.
  2. The buyer’s breach which occasions the use of the remedies under this section may involve only one lot or delivery of goods, or may involve all of the goods which are the subject matter of the particular contract. The right of the seller to pursue a remedy as to all the goods when the breach is as to only one or more lots is covered by the section on breach in installment contracts. The present section deals only with the remedies available after the goods involved in the breach have been determined by that section.
  3. In addition to the typical case of refusal to pay or default in payment, the language in the preamble, “fails to make a payment due,” is intended to cover the dishonor of a check on due presentment, or the non-acceptance of a draft, and the failure to furnish an agreed letter of credit.
  4. It should also be noted that this Act requires its remedies to be liberally administered and provides that any right or obligation which it declares is enforceable by action unless a different effect is specifically prescribed (Section 1-106).

Cross references:

Point 2: Section 2-612.

Point 3: Section 2-325.

Point 4: Section 1-106.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Buyer”. Section 2-103.

“Cancellation”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Remedy”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

For a comment on the seller’s remedies under the UCC as compared with the remedies under prior Virginia law, see Rowe, Seller’s Remedies and Article 2, 20 Wash. & Lee L. Rev. (Fall 1963).

The different seller’s remedies under prior Virginia law were summarized in Rosenbaums v. Weeden, Johnson & Co., 59 Va. (18 Gratt.) 785, 790 (1868) as follows: “If a vendee of goods refuse to accept them when tendered according to the contract of sale, the vendor may elect to rescind the contract and keep or dispose of the goods for his own use, or to let it remain in full force and hold the vendee liable for the price of the goods and all damages arising from his breach of the contract. If he elects to let the contract remain in full force, he may either bring his action for the price of the goods when it is due and payable, or he may sell the goods, apply the net proceeds of sale to the credit of the vendee on account of the money due by him, and bring an action against him to recover the balance.” Although the Rosenbaums case referred to the remedy of cancellation, there appears to be no Virginia case involving the situation. For purposes of venue, Big Seam Coal Corp. v. Atlantic Coast Line Railroad Co., 196 Va. 590 , 594-95, 85 S.E.2d 239 (1955), held that a contract for coal F.O.B. mine was breached at the mine where the buyer refused to accept shipments. The UCC does not cover the point.

§ 8.2-704. Seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.

  1. An aggrieved seller under the preceding section [§ 8.2-703 ] may
    1. identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control;
    2. treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.
  2. Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.

History. 1964, c. 219.

Law Review.

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 63(3) and 64(4). Uniform Sales Act.

Changes: Rewritten, the seller’s rights being broadened.

Purpose of changes:

  1. This section gives an aggrieved seller the right at the time of breach to identify to the contract any conforming finished goods, regardless of their resalability, and to use reasonable judgment as to completing unfinished goods. It thus makes the goods available for resale under the resale section, the seller’s primary remedy, and in the special case in which resale is not practicable, allows the action for the price which would then be necessary to give the seller the value of his contract.
  2. Under this Article the seller is given express power to complete manufacture or procurement of goods for the contract unless the exercise of reasonable commercial judgment as to the facts as they appear at the time he learns of the breach makes it clear that such action will result in a material increase in damages. The burden is on the buyer to show the commercially unreasonable nature of the seller’s action in completing manufacture.

Cross references:

Sections 2-703 and 2-706.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-705. Seller’s stoppage of delivery in transit or otherwise.

  1. The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (§ 8.2-702 ) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
  2. As against such buyer the seller may stop delivery until:
    1. receipt of the goods by the buyer; or
    2. acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
    3. such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; or
    4. negotiation to the buyer of any negotiable document of title covering the goods.
    1. To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
    2. After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
    3. If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.
    4. A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.

History. 1964, c. 219; 2004, c. 200.

The 2004 amendments.

The 2004 amendment by c. 200 substituted “a warehouse” for “warehouseman” in subdivision (2)(c); and inserted “of possession or control” in subdivision (3)(c).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 18, 32.

OFFICIAL COMMENT

Prior uniform statutory provision: Sections 57-59 , Uniform Sales Act; see also Sections 12, 14 and 42, Uniform Bills of Lading Act and Sections 9, 11 and 49, Uniform Warehouse Receipts Act.

Changes: This section continues and develops the above sections of the Uniform Sales Act in the light of the other uniform statutory provisions noted.

Purposes: To make it clear that:

  1. Subsection (1) applies the stoppage principle to other bailees as well as carriers.
  2. “Receipt by the buyer” includes receipt by the buyer’s designated representative, the sub-purchaser, when shipment is made direct to him and the buyer himself never receives the goods. It is entirely proper under this Article that the seller, by making such direct shipment to the sub-purchaser, be regarded as acquiescing in the latter’s purchase and as thus barred from stoppage of the goods as against him.
  3. A diversion of a shipment is not a “reshipment” under subsection (2) (c) when it is merely an incident to the original contract of transportation. Nor is the procurement of “exchange bills” of lading which change only the name of the consignee to that of the buyer’s local agent but do not alter the destination of a reshipment.
  4. Subsection (3) (c) makes the bailee’s obedience of a notification to stop conditional upon the surrender of any outstanding negotiable document.
  5. Any charges or losses incurred by the carrier in following the seller’s orders, whether or not he was obligated to do so, fall to the seller’s charge.
  6. After an effective stoppage under this section the seller’s rights in the goods are the same as if he had never made a delivery.

It also expands the remedy to cover the situations, in addition to buyer’s insolvency, specified in the subsection. But since stoppage is a burden in any case to carriers, and might be a very heavy burden to them if it covered all small shipments in all these situations, the right to stop for reasons other than insolvency is limited to carload, truckload, planeload or larger shipments. The seller shipping to a buyer of doubtful credit can protect himself by shipping C.O.D.

Where stoppage occurs for insecurity it is merely a suspension of performance, and if assurances are duly forthcoming from the buyer the seller is not entitled to resell or divert.

Improper stoppage is a breach by the seller if it effectively interferes with the buyer’s right to due tender under the section on manner of tender of delivery. However, if the bailee obeys an unjustified order to stop he may also be liable to the buyer. The measure of his obligation is dependent on the provisions of the Documents of Title Article (Section 7-303). Subsection 3(b) therefore gives him a right of indemnity as against the seller in such a case.

As between the buyer and the seller, the latter’s right to stop the goods at any time until they reach the place of final delivery is recognized by this section.

Under subsection (3) (c) and (d), the carrier is under no duty to recognize the stop order of a person who is a stranger to the carrier’s contract. But the seller’s right as against the buyer to stop delivery remains, whether or not the carrier is obligated to recognize the stop order. If the carrier does obey it, the buyer cannot complain merely because of that circumstance; and the seller becomes obligated under subsection (3) (b) to pay the carrier any ensuing damages or charges.

Acknowledgment by the carrier as a “warehouseman” within the meaning of this Article requires a contract of a truly different character from the original shipment, a contract not in extension of transit but as a warehouseman.

Cross references:

Sections 2-702 and 2-703.

Point 1: Sections 2-503 and 2-609, and Article 7.

Point 2: Section 2-103 and Article 7.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Document of title”. Section 1-201 .

“Goods”. Section 2-105.

“Insolvent”. Section 1-201 .

“Notification”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Rights”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Virginia has recognized the doctrine of stoppage in transit. In Howatt & Co. v. Davis & Chalmers, 19 Va. (5 Munf.) 34, 37-39 (1816), a seller was allowed a right of stoppage when the buyer became insolvent while the goods were still in the hands of the seller’s agent, the court speaking of the goods as being “in legal phrase, in transitu.” The doctrine was discussed in Pleasants v. Pendleton, 27 Va. (6 Rand.) 473, 484-85 (1828).

§ 8.2-706. Seller’s resale including contract for resale.

  1. Under the conditions stated in § 8.2-703 on seller’s remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this title (§ 8.2-710 ), but less expenses saved in consequence of the buyer’s breach.
  2. Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.
  3. Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
  4. Where the resale is at public sale
    1. only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
    2. it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
    3. if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
    4. the seller may buy.
  5. A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.
  6. The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (§ 8.2-707 ) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined (subsection (3) of § 8.2-711 ).

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

For comment on cumulative remedies under article 9 of the U.C.C., see 14 Wm. & Mary L. Rev. 213 (1972).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 18, 32, 33, 36.

CASE NOTES

Buyer entitled to notice before private resale. —

Following a buyer’s breach, the buyer was entitled to reasonable notice of the seller’s intention to make a private sale so that it could protect itself when the seller attempted to sell the goods at a steep discount and then sue for the difference between the sale price and the contract price; the failure of the seller to give such notice barred it from asserting a claim for the difference between the sale price under its agreement with the buyer and the actual price at which it sold the goods to third parties. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

Seller’s duty to give notice of private sale. —

The breaching buyer’s mere failure to accept the goods does not place the buyer on notice that the seller will choose to make a private sale and seek cover as its remedy; even if the circumstances are such that the seller clearly has no remedy except resale, reasonable notification is necessary where the seller resorts to a private, rather than a public, sale. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

Public sale and private sale distinguished. —

A public sale is an auction; a private sale occurs through direct solicitation and negotiation or through use of a broker. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

Instruction to jury. —

It is important in making a judgment under this section for a jury to be fully informed about a seller’s obligation to dispose of the goods in a commercially reasonable manner. Therefore, an instruction explaining this section should mention the seller’s duty to realize as high a price as possible under all the circumstances. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 60, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To simplify the prior statutory provision and to make it clear that:

  1. The only condition precedent to the seller’s right of resale under subsection (1) is a breach by the buyer within the section on the seller’s remedies in general or insolvency. Other meticulous conditions and restrictions of the prior uniform statutory provision are disapproved by this Article and are replaced by standards of commercial reasonableness. Under this section the seller may resell the goods after any breach by the buyer. Thus, an anticipatory repudiation by the buyer gives rise to any of the seller’s remedies for breach, and to the right of resale. This principle is supplemented by subsection (2) which authorizes a resale of goods which are not in existence or were not identified to the contract before the breach.
  2. In order to recover the damages prescribed in subsection (1) the seller must act “in good faith and in a commercially reasonable manner” in making the resale. This standard is intended to be more comprehensive than that of “reasonable care and judgment” established by the prior uniform statutory provision. Failure to act properly under this section deprives the seller of the measure of damages here provided and relegates him to that provided in Section 2-708.
  3. If the seller complies with the prescribed standard of duty in making the resale, he may recover from the buyer the damages provided for in subsection (1). Evidence of market or current prices at any particular time or place is relevant only on the question of whether the seller acted in a commercially reasonable manner in making the resale.
  4. Subsection (2) frees the remedy of resale from legalistic restrictions and enables the seller to resell in accordance with reasonable commercial practices so as to realize as high a price as possible in the circumstances. By “public” sale is meant a sale by auction. A “private” sale may be effected by solicitation and negotiation conducted either directly or through a broker. In choosing between a public and private sale the character of the goods must be considered and relevant trade practices and usages must be observed.
  5. Subsection (2) merely clarifies the common law rule that the time for resale is a reasonable time after the buyer’s breach, by using the language “commercially reasonable.” What is such a reasonable time depends upon the nature of the goods, the condition of the market and the other circumstances of the case; its length cannot be measured by any legal yardstick or divided into degrees. Where a seller contemplating resale receives a demand from the buyer for inspection under the section of preserving evidence of goods in dispute, the time for resale may be appropriately lengthened.
  6. The purpose of subsection (2) being to enable the seller to dispose of the goods to the best advantage, he is permitted in making the resale to depart from the terms and conditions of the original contract for sale to any extent “commercially reasonable” in the circumstances.
  7. The provision of subsection (2) that the goods need not be in existence to be resold applies when the buyer is guilty of anticipatory repudiation of a contract for future goods, before the goods or some of them have come into existence. In such a case the seller may exercise the right of resale and fix his damages by “one or more contracts to sell” the quantity of conforming future goods affected by the repudiation. The companion provision of subsection (2) that resale may be made although the goods were not identified to the contract prior to the buyer’s breach, likewise contemplates an anticipatory repudiation by the buyer but occurring after the goods are in existence. If the goods so identified conform to the contract, their resale will fix the seller’s damages quite as satisfactorily as if they had been identified before the breach.
  8. Where the resale is to be by private sale, subsection (3) requires that reasonable notification of the seller’s intention to resell must be given to the buyer. The length of notification or a private sale depends upon the urgency of the matter. Notification of the time and place of this type of sale is not required.
  9. Since there would be no reasonable prospect of competitive bidding elsewhere, subsection (4) requires that a public resale “must be made at a usual place or market for public sale if one is reasonably available;” i.e., a place or market which prospective bidders may reasonably be expected to attend. Such a market may still be “reasonably available” under this subsection, though at a considerable distance from the place where the goods are located. In such a case the expense of transporting the goods for resale is recoverable from the buyer as part of the seller’s incidental damages under subsection (1). However, the question of availability is one of commercial reasonableness in the circumstances and if such “usual” place or market is not reasonably available, a duly advertised public resale may be held at another place if it is one which prospective bidders may reasonably be expected to attend, as distinguished from a place where there is no demand whatsoever for goods of the kind.
  10. This Article departs in subsection (5) from the prior uniform statutory provision in permitting a good faith purchaser at resale to take a good title as against the buyer even though the seller fails to comply with the requirements of this section.
  11. Under subsection (6), the seller retains profit, if any, without distinction based on whether or not he had a lien since this Article divorces the question of passage of title to the buyer from the seller’s right of resale or the consequences of its exercise. On the other hand, where “a person in the position of a seller” or a buyer acting under the section on buyer’s remedies, exercises his right of resale under the present section he does so only for the limited purpose of obtaining cash for his “security interest” in the goods. Once that purpose has been accomplished any excess in the resale price belongs to the seller to whom an accounting must be made as provided in the last sentence of subsection (6).

Under this Article the seller resells by authority of law, in his own behalf, for his own benefit and for the purpose of fixing his damages. The theory of a seller’s agency is thus rejected.

The distinction drawn by some courts between cases where the title had not passed to the buyer and the seller had resold as owner, and cases where the title had passed and the seller had resold by virtue of his lien on the goods, is rejected.

On the question of the place for resale, subsection (2) goes to the ultimate test, the commercial reasonableness of the seller’s choice as to the place for an advantageous resale. This Article rejects the theory that the seller is required to resell at the agreed place for delivery and that a resale elsewhere can be permitted only in exceptional cases.

Subsection (4) (b) requires that the seller give the buyer reasonable notice of the time and place of a public resale so that he may have an opportunity to bid or to secure the attendance of other bidders. An exception is made in the case of goods “which are perishable or threaten to decline speedily in value.”

Paragraph (a) of subsection (4) qualifies the last sentence of subsection (2) with respect to resales of unidentified and future goods at public sale. If conforming goods are in existence the seller may identify them to the contract after the buyer’s breach and then resell them at public sale. If the goods have not been identified, however, he may resell them at public sale only as “future” goods and only where there is a recognized market for public sale of futures in goods of the kind.

The provisions of paragraph (c) of subsection 4 are intended to permit intelligent bidding.

The provision of paragraph (d) of subsection (4) permitting the seller to bid and, of course, to become the purchaser, benefits the original buyer by tending to increase the resale price and thus decreasing the damages he will have to pay.

Cross references:

Point 1: Sections 2-610, 2-702 and 2-703.

Point 2: Section 1-201 .

Point 3: Sections 2-708 and 2-710.

Point 4: Section 2-328.

Point 8: Section 2-104.

Point 9: Section 2-710.

Point 11: Sections 2-401, 2-707 and 2-711(3).

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Good faith”. Section 2-103.

“Goods”. Section 2-105.

“Merchant”. Section 2-104.

“Notification”. Section 1-201 .

“Person in position of seller”. Section 2-707.

“Purchase”. Section 1-201 .

“Rights”. Section 1-201 .

“Sale”. Section 2-106.

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with prior Virginia law in allowing the seller to resell goods that the buyer has refused to accept and to collect damages from the buyer. John H. Maclin Peanut Co., Inc., v. Pretlow and Co., 176 Va. 400 , 11 S.E.2d 607 (1940); Rosenbaums v. Weeden, Johnson & Co., 49 Va. (18 Gratt.) 785, 790 (1868). Such a resale must be made in good faith, which according to Baker-Matthews Lumber Co. v. Lincoln Furniture Manufacturing Co., Inc., 148 Va. 413 , 423, 139 S.E. 254 (1927), is because the seller is acting as an agent of the buyer in making the resale. See also, Rosenbaums v. Weeden, Johnson & Co., 49 Va. (18 Gratt.) 785, 793 (1868). This rationale is rejected by the UCC in the Official Comment, point 2.

If the resale is made in a commercially reasonable manner the seller could recover under both the UCC and prior Virginia law the difference between the resale price and the contract price, plus incidental damages, but less expenses saved in consequence of the breach. Mayflower Mills v. Hardy, 138 Va. 134 , 147-48, 120 S.E. 861 (1924).

According to the Official Comment, point 5, the requirement that the resale be commercially reasonable includes a requirement that the resale be within a reasonable time after the buyer’s breach. Mayflower Mills v. Hardy, 138 Va. 138 , 147, 120 S.E. 861 (1924), treated resale within a reasonable time as a separate and distinct requirement.

Both the UCC and earlier Virginia cases require the seller to give notice to the buyer that he is going to make a resale. In Rosenbaums v. Weeden, Johnson & Co., 49 Va. (18 Gratt.) 785, 793 (1868), the court said, “If the vendor elects to sell the goods and hold the vendee liable for the loss, he ought, of course, to notify the vendee that such is his election, in order that the vendee may know what the consequences of his continued default may be, and may, if he can and chooses to do so, avert it by performing his contract and receiving the goods; or at least may endeavor to mitigate his loss by paying some attention to the resale of the goods.” The notice, under both the UCC and the prior Virginia cases, is of an intention to resell and bind the buyer as to the price obtained, and not notice of the sale itself. Walker v. Gateway Milling Co., 121 Va. 217 , 228, 92 S.E. 826 (1917); American Hide & Leather Co. v. Chalkley & Co., 101 Va. 458 , 463, 44 S.E. 705 (1903).

§ 8.2-707. “Person in the position of a seller.”

  1. A “person in the position of a seller” includes as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.
  2. A person in the position of a seller may as provided in this title withhold or stop delivery (§ 8.2-705 ) and resell (§ 8.2-706 ) and recover incidental damages (§ 8.2-710 ).

History. 1964, c. 219.

CASE NOTES

Seller entitled to remedies under § 8.2-706 . —

A person in the position of a seller has a seller’s remedies, including the remedies provided under § 8.2-706 ; but, like a seller, must also give the notice required by that section before a private resale. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 52(2), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To make it clear that:

In addition to following in general the prior uniform statutory provision, the case of a financing agency which has acquired documents by honoring a letter of credit for the buyer or by discounting a draft for the seller has been included in the term “a person in the position of a seller.”

Cross reference:

Article 5, Section 2-506.

Definitional cross references:

“Consignee”. Section 7-102.

“Consignor”. Section 7-102.

“Goods”. Section 2-105.

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

§ 8.2-708. Seller’s damages for nonacceptance or repudiation.

  1. Subject to subsection (2) and to the provisions of this title with respect to proof of market price (§ 8.2-723 ), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this title (§ 8.2-710 ), but less expenses saved in consequence of the buyer’s breach.
  2. If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this title (§ 8.2-710 ), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

History. 1964, c. 219.

Law Review.

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

CASE NOTES

Limits to seller’s recovery. —

A seller that cannot recover under § 8.2-706 is limited to the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages. Mobil Oil Corp. v. Earhart Petroleum, Inc., No. 99-2093, 2000 U.S. App. LEXIS 8674 (4th Cir. May 3, 2000).

Lost profit measure of damages applies to “lost volume” situation. —

The lost profits measure of damages outlined in subsection (2) of this section was meant to apply to the “lost volume” situation. Famous Knitwear Corp. v. Drug Fair, Inc., 493 F.2d 251, 1974 U.S. App. LEXIS 9668 (4th Cir. 1974).

Or subsection (2) would have meaning only for seller-manufacturers. —

If the lost profits measure of damages outlined in subsection (2) did not apply to the “lost volume” situation, then the measure of damages for lost volume sales would be substantially the same as the contract-market differential of subsection (1), and subsection (2) would have meaning only for seller-manufacturers and not for other sellers of “standard priced goods.” Famous Knitwear Corp. v. Drug Fair, Inc., 493 F.2d 251, 1974 U.S. App. LEXIS 9668 (4th Cir. 1974).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 64, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To make it clear that:

  1. The prior uniform statutory provision is followed generally in setting the current market price at the time and place for tender as the standard by which damages for non-acceptance are to be determined. The time and place of tender is determined by reference to the section on manner of tender of delivery, and to the sections on the effect of such terms as FOB, FAS, CIF, C & F. Ex Ship and No Arrival, No Sale.
  2. The provision of this section permitting recovery of expected profit including reasonable overhead where the standard measure of damages is inadequate, together with the new requirement that price actions may be sustained only where resale is impractical, are designed to eliminate the unfair and economically wasteful results arising under the older law when fixed price articles were involved. This section permits the recovery of lost profits in all appropriate cases, which would include all standard priced goods. The normal measure there would be list price less cost to the dealer or list price less manufacturing cost to the manufacturer. It is not necessary to a recovery of “profit” to show a history of earnings, especially if a new venture is involved.
  3. In all cases the seller may recover incidental damages.

In the event that there is no evidence available of the current market price at the time and place of tender, proof of a substitute market may be made under the section on determination and proof of market price. Furthermore, the section on the admissibility of market quotations is intended to ease materially the problem of providing competent evidence.

Cross references:

Point 1: Sections 2-319 through 2-324, 2-503, 2-723 and 2-724.

Point 2: Section 2-709.

Point 3: Section 2-710.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Prior Virginia cases are in accord with subsection 8.2-708(1) in allowing the seller to retain the goods and maintain an action for damages, measured by the difference between the contract price and the market price, at the time and place of tender, plus incidental damages incurred, and less any expenses the seller is saved by the breach. Sanitary Grocery Co. v. Wright, 158 Va. 312 , 321-23, 163 S.E. 86 (1932); Frank v. East Carolina Lumber Co., 153 Va. 649 , 151 S.E. 135 (1930) (no breach found); Wessel, Duval & Co. v. Crozet Cooperage Co., 143 Va. 469 , 477, 130 S.E. 393 (1925); J. B. Colt Co. v. Elam, 138 Va. 124 , 131, 120 S.E. 857 (1924) (seller failed to prove any damages); James River Lumber Co., Inc. v. Smith Bros., 135 Va. 406 , 415-16, 116 S.E. 421 (1923); McCormick & C. v. Hamilton Wood & Co., 64 Va. (23 Gratt.) 561, 577-78 (1873); Rosenbaums v. Weeden, Johnson & Co., 59 Va. (18 Gratt.) 785, 790 (1868); Note, 8 Va. L. Rev. 393 (1922); Yellow Poplar Lumber Co. v. Chapman, 74 Fed. 444, 454-56 (4th Cir. 1896). Virginia has not specifically made an award of incidental damages as expressly authorized by the UCC.

If this measure of damages, that is, the contract price less the market price is inadequate, then subsection 8.2-708(2) provides that the measure of damages shall be the profit lost. Virginia has also recognized that when the goods have not yet been manufactured, the measure of damages is either the profit lost or the contract price less the cost of manufacturing and delivery. A “profit lost” rule was applied in A.I.M. Percolating Corp. v. Ferrodine Chemical Corp., 139 Va. 366 , 378-79, 124 S.E. 442 (1924). A “contract price less cost of manufacturing and delivery” rule was applied in the following cases: Tidewater Plumbing Supply Co., Inc. v. Emory Foundry Co., 141 Va. 363 , 368-69, 127 S.E. 87 (1925); Norfolk Hosiery and Underwear Mills v. Aetna Hosiery Co., 124 Va. 221 , 239-41, 98 S.E. 43 (1919); Duke v. Norfolk and Western Railway Co., 106 Va. 152 , 156-59, 55 S.E. 548 (1906); Worrell & Williams v. Kinnear Manufacturing Co., 103 Va. 719 , 722, 49 S.E. 988 (1905); Alleghany Iron Co. v. Teaford, 96 Va. 372 , 377-80, 31 S.E. 525 (1898).

§ 8.2-709. Action for the price.

  1. When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section [§ 8.2-710 ], the price
    1. of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
    2. of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
  2. Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
  3. After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (§ 8.2-610 ), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under the preceding section [§ 8.2-708 ].

History. 1964, c. 219.

CIRCUIT COURT OPINIONS

Action for the price of materials. —

As a corporation’s specifically manufactured goods were identified prior to the time that a store claimed the corporation breached a contract, the corporation was entitled to recover the price of the materials and any incidental damages. Metwood, Inc. v. True Value Home Ctr., 61 Va. Cir. 664, 2002 Va. Cir. LEXIS 321 (Roanoke Sept. 30, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 63, Uniform Sales Act.

Changes: Rewritten, important commercially needed changes being incorporated.

Purposes of changes: To make it clear that:

  1. Neither the passing of title to the goods nor the appointment of a day certain for payment is now material to a price action.
  2. The action for the price is now generally limited to those cases where resale of the goods is impracticable except where the buyer has accepted the goods or where they have been destroyed after risk of loss has passed to the buyer.
  3. This section substitutes an objective test by action for the former “not readily resalable” standard. An action for the price under subsection (1) (b) can be sustained only after a “reasonable effort to resell” the goods “at reasonable price” has actually been made or where the circumstances “reasonably indicate” that such an effort will be unavailing.
  4. If a buyer is in default not with respect to the price, but on an obligation to make an advance, the seller should recover not under this section for the price as such, but for the default in the collateral (though coincident) obligation to finance the seller. If the agreement between the parties contemplates that the buyer will acquire, on making the advance, a security interest in the goods, the buyer on making the advance has such an interest as soon as the seller has rights in the agreed collateral. See Section 9-204.
  5. “Goods accepted” by the buyer under subsection (1) (a) include only goods as to which there has been no justified revocation of acceptance, for such a revocation means that there has been a default by the seller which bars his rights under this section. “Goods lost or damaged” are covered by the section on risk of loss. “Goods identified to the contract” under subsection (1) (b) are covered by the section on identification and the section on identification notwithstanding breach.
  6. This section is intended to be exhaustive in its enumeration of cases where an action for the price lies.
  7. If the action for the price fails, the seller may nonetheless have proved a case entitling him to damages for non-acceptance. In such a situation, subsection (3) permits a recovery of those damages in the same action.

Cross references:

Point 4: Section 1-106.

Point 5: Section 2-501, 2-509, 2-510 and 2-704.

Point 7: Section 2-708.

Definitional cross references:

“Action”. Section 1-201 .

“Buyer“. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Under prior Virginia law the location of the title has been determinative of the remedy available, so that an action for the price could only be maintained where title had passed to the buyer. Montauk Ice Cream Co. v. Daigger Co., 141 Va. 686 , 695-705, 126 S.E. 681 (1925); J. B. Colt Co. v. Elam, 138 Va. 124 , 131, 120 S.E. 857 (1924). The Montauk case distinguished earlier cases in which there had been some indications that an action for the price could be maintained even though title had not passed at the time of the buyer’s breach. See James River Lumber Co., Inc. v. Smith Bros., 135 Va. 406 , 416, 116 S.E. 241 (1923); Rosenbaums v. Weeden, Johnson & Co., 59 Va. (18 Gratt.) 785, 790 (1868).

Where the buyer has accepted the goods, under prior Virginia law title has passed and the seller may maintain an action for the price. Morton Marks and Sons, Inc. v. Hill-Chase Steel Co. of Maryland, 196 Va. 268 , 272-74, 83 S.E.2d 356 (1954); Birdsong & Co. v. American Peanut Co., 149 Va. 755 , 767-68, 141 S.E. 759 (1928); Travers v. Teese, 148 Va. 378 , 138 S.E. 494 (1927) (nothing due from buyer to seller); Geoghegan Sons & Co., Inc. v. Arbuckle Bros., 139 Va. 92 , 112-13, 123 S.E. 387 , 36 A.L.R. 399 (1924); Pleasants v. Pendleton, 27 Va. (6 Rand.) 473, 502, 506 (1828).

§ 8.2-710. Seller’s incidental damages.

Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer’s breach, in connection with return or resale of the goods or otherwise resulting from the breach.

History. 1964, c. 219.

Law Review.

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

CIRCUIT COURT OPINIONS

Seller’s incidental damages. —

As a corporation’s specifically manufactured goods were identified prior to the time that a store claimed the corporation breached a contract, the corporation was entitled to recover the price of the materials and any incidental damages. Metwood, Inc. v. True Value Home Ctr., 61 Va. Cir. 664, 2002 Va. Cir. LEXIS 321 (Roanoke Sept. 30, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: See Sections 64 and 70, Uniform Sales Act.

Purposes: To authorize reimbursement of the seller for expenses reasonably incurred by him as a result of the buyer’s breach. The section sets forth the principal normal and necessary additional elements of damage flowing from the breach but intends to allow all commercially reasonable expenditures made by the seller.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Buyer”. Section 2-103.

“Goods“. Section 2-105.

“Seller”. Section 2-103.

§ 8.2-711. Buyer’s remedies in general; buyer’s security interest in rejected goods.

  1. Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (§ 8.2-612 ), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid
    1. “cover” and have damages under the next section [§ 8.2-712 ] as to all the goods affected whether or not they have been identified to the contract; or
    2. recover damages for nondelivery as provided in this title (§ 8.2-713 ).
  2. Where the seller fails to deliver or repudiates the buyer may also
    1. if the goods have been identified recover them as provided in this title (§ 8.2-502 ); or
    2. in a proper case obtain specific performance or replevy the goods as provided in this title (§ 8.2-716 ).
  3. On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (§ 8.2-706 ).

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 26, 33; 19 M.J. Trover and Conversion, § 6.

CASE NOTES

Action properly filed. —

Purchaser of a car, who revoked her acceptance of the car and sought monetary damages as permitted by § 8.2-608 , properly filed her motion for judgement on the law side of the court, as §§ 8.2-608 and 8.2-711 permit a buyer, such as the plaintiff, to recover monetary damages upon revocation of acceptance, which may include the purchase price. Hence, the circuit court erred in setting aside the jury verdict that awarded damages to her. Love v. Kenneth Hammersley Motors, Inc., 263 Va. 45 , 556 S.E.2d 764, 2002 Va. LEXIS 19 (2002).

CIRCUIT COURT OPINIONS

Attorney fee award. —

Auto buyers were not entitled to an attorney fee award on the claim that they properly revoked acceptance of the vehicle that they bought from the auto sellers. An award of money damages was contemplated pursuant to the relevant statutes, §§ 8.2-608 and 8.2-711 , but those statutes did not provide for an attorney fee award and the auto buyers did not show any other basis for awarding attorney fees to them despite their success on the claim for revocation of acceptance. Couch v. Manassas Autocars, Inc., 77 Va. Cir. 30, 2008 Va. Cir. LEXIS 130 (Prince William County July 17, 2008).

OFFICIAL COMMENT

Prior uniform statutory provision: No comparable index section; Subsection (3)—Section 69(5), Uniform Sales Act.

Changes: The prior uniform statutory provision is generally continued and expanded in Subsection (3).

Purposes of changes and new matter:

  1. To index in this section the buyer’s remedies, subsection (1) covering those remedies permitting the recovery of money damages, and subsection (2) covering those which permit reaching the goods themselves. The remedies listed here are those available to a buyer who has not accepted the goods or who has justifiably revoked his acceptance. The remedies available to a buyer with regard to goods finally accepted appear in the section dealing with breach in regard to accepted goods. The buyer’s right to proceed as to all goods when the breach is as to only some of the goods is determined by the section on breach in installment contracts and by the section on partial acceptance.
  2. To make it clear in subsection (3) that the buyer may hold and resell rejected goods if he has paid a part of the price or incurred expenses of the type specified. “Paid” as used here includes acceptance of a draft or other time negotiable instrument or the signing of a negotiable note. His freedom of resale is coextensive with that of a seller under this Article except that the buyer may not keep any profit resulting from the resale and is limited to retaining only the amount of the price paid and the costs involved in the inspection and handling of the goods. The buyer’s security interest in the goods is intended to be limited to the items listed in subsection (3), and the buyer is not permitted to retain such funds as he might believe adequate for his damages. The buyer’s right to cover or to have damages for non-delivery, is not impaired by his exercise of his right of resale.
  3. It should also be noted that this Act requires its remedies to be liberally administered and provides that any right or obligation which it declares is enforceable by action unless a different effect is specifically prescribed (Section 1-106).

Despite the seller’s breach, proper retender of delivery under the section on cure of improper tender or replacement can effectively preclude the buyer’s remedies under this section, except for any delay involved.

Cross references:

Point 1: Sections 2-508, 2-601(c), 2-608, 2-612 and 2-714.

Point 2: Section 2-706.

Point 3: Section 1-106.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Buyer”. Section 2-103.

“Cancellation”. Section 2-106.

“Contract”. Section 1-201 .

“Cover”. Section 2-712.

“Goods”. Section 2-105.

“Notifies”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Remedy”. Section 1-201 .

“Security interest”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

For a comment on the buyer’s remedies under the UCC as compared with the remedies under prior Virginia law, see Sharp, Buyer’s Remedies and Article 2, 20 Wash. & Lee L. Rev. (Fall 1963).

The right of the buyer to rescind for breach of warranty was recognized in Jacobs v. Warthen, 115 Va. 571 , 574-75, 80 S.E. 113 (1913). The UCC does not have any provision covering the situation in Berlin v. McCall Co., 161 Va. 967 , 172 S.E. 153 (1934), in which the buyer contended that the seller agreed to pay the buyer for goods returned.

§ 8.2-712. “Cover”; buyer’s procurement of substitute goods.

  1. After a breach within the preceding section [§ 8.2-711 ] the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
  2. The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (§ 8.2-715 ), but less expenses saved in consequence of the seller’s breach.
  3. Failure of the buyer to effect cover within this section does not bar him from any other remedy.

History. 1964, c. 219.

Law Review.

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 33.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. This section provides the buyer with a remedy aimed at enabling him to obtain the goods he needs thus meeting his essential need. This remedy is the buyer’s equivalent of the seller’s right to resell.
  2. The definition of “cover” under subsection (1) envisages a series of contracts or sales, as well as a single contract or sale; goods not identical with those involved but commercially usable as reasonable substitutes under the circumstances of the particular case; and contracts on credit or delivery terms differing from the contract in breach, but again reasonable under the circumstances. The test of proper cover is whether at the time and place the buyer acted in good faith and in a reasonable manner, and it is immaterial that hindsight may later prove that the method of cover used was not the cheapest or most effective.
  3. Subsection (3) expresses the policy that cover is not a mandatory remedy for the buyer. The buyer is always free to choose between cover and damages for non-delivery under the next section.
  4. This section does not limit cover to merchants, in the first instance. It is the vital and important remedy for the consumer buyer as well. Both are free to use cover; the domestic or non-merchant consumer is required only to act in normal good faith while the merchant buyer must also observe all reasonable commercial standards of fair dealing in the trade, since this falls within the definition of good faith on his part.

The requirement that the buyer must cover “without unreasonable delay” is not intended to limit the time necessary for him to look around and decide as to how he may best effect cover. The test here is similar to that generally used in this Article as to reasonable time and seasonable action.

However, this subsection must be read in conjunction with the section which limits the recovery of consequential damages to such as could not have been obviated by cover. Moreover, the operation of the section on specific performance of contracts for “unique” goods must be considered in this connection for availability of the goods to the particular buyer for his particular needs is the test for that remedy and inability to cover is made an express condition to the right of the buyer to replevy the goods.

Cross references:

Point 1: Section 2-706.

Point 2: Section 1-204 .

Point 3: Section 2-713, 2-715 and 2-716.

Point 4: Section 1-203 .

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Good faith”. Section 2-103.

“Goods”. Section 2-105.

“Purchase”. Section 1-201 .

“Remedy”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with prior Virginia law in authorizing a buyer, upon learning of a seller’s default in delivery, to use reasonable diligence to cover by the purchase of substitute goods, measuring his damages by the difference between the contract price and the cost of the substitute goods, plus incidental damages and less any expenses saved. Goldstein v. Old Dominion Peanut Corp., 177 Va. 716 , 725, 15 S.E.2d 103 (1941); C. G. Blake Co., Inc. v. W. R. Smith and Son, Ltd., 147 Va. 960 , 982-84, 133 S.E. 685 (1926); Hopkins v. LeCato, 142 Va. 769 , 783-84, 123 S.E. 347 (1925); Manor v. Hindman, 123 Va. 767 , 775, 97 S.E. 332 , 334 (1918); Richardson Construction Co. v. Whiting Lumber Co., 116 Va. 490 , 491-92, 82 S.E. 87 (1914); Long Pole Lumber Co. v. Saxon Lime and Lumber Co., 108 Va. 497 , 499-500, 62 S.E. 349 (1908); O. H. Perry Tie & Lumber Co. v. Reynolds & Bros., 100 Va. 264 , 269-74, 40 S.E. 919 (1902). Under both the UCC and prior Virginia law, as long as the buyer acts reasonably and in good faith, proof that his method of obtaining cover was not the cheapest or best will not defeat his action for damages. In Triplett v. Nichols, 139 Va. 321 , 329-30, 123 S.E. 339 (1924), it was recognized that a buyer acted reasonably when he bought steel articles costing $1,509, plus $76 freight, as cover for timber, having a contract price of $467, which was unavailable.

§ 8.2-713. Buyer’s damages for nondelivery or repudiation.

  1. Subject to the provisions of this title with respect to proof of market price (§ 8.2-723 ), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this title (§ 8.2-715 ), but less expenses saved in consequence of the seller’s breach.
  2. Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

History. 1964, c. 219.

Law Review.

For note, “U.C.C. § 2-713: Anticipatory Repudiation and the Measurement of an Aggrieved Buyer’s Damages,” see 19 Wm. & Mary L. Rev. 253 (1977).

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

For article, “The Option Elements in Contracting,” see 90 Va. L. Rev. 2187 (2004).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 33; 5C M.J. Damages, § 23; 19 M.J. Trover and Conversion, § 6.

CASE NOTES

An aggrieved buyer’s damages against a repudiating seller are based on the market price on the date of performance. —

Section 8.2-713 required that an aggrieved buyer’s damages against a repudiating seller be based on the market price on the date of performance, i.e., the date of delivery; the jury’s apparent finding that the NYMEX price supplied the proper market price was supported by testimony indicating that that price represented the applicable price for natural gas that the purchaser would have expected to pay in purchasing undelivered natural gas on the scheduled date of delivery, and the evidence as to the difference between the price the purchaser contractually agreed to pay and the market price of the undelivered natural gas on the date of delivery was provided to prove the purchaser’s actual damages. Hess Energy, Inc. v. Lightning Oil Co., 338 F.3d 357, 2003 U.S. App. LEXIS 15284 (4th Cir. 2003).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 67(3), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes: To clarify the former rule so that:

  1. The general baseline adopted in this section uses as a yardstick the market in which the buyer would have obtained cover had he sought that relief. So the place for measuring damages is the place of tender (or the place of arrival if the goods are rejected or their acceptance is revoked after reaching their destination) and the crucial time is the time at which the buyer learns of the breach.
  2. The market or current price to be used in comparison with the contract price under this section is the price for goods of the same kind and in the same branch of trade.
  3. When the current market price under this section is difficult to prove the section on determination and proof of market price is available to permit a showing of a comparable market price or, where no market price is available, evidence of spot sale prices is proper. Where the unavailability of a market price is caused by a scarcity of goods of the type involved, a good case is normally made for specific performance under this Article. Such scarcity conditions, moreover, indicate that the price has risen and under the section providing for liberal administration of the goods would be admissible in the absence of a market price and a liberal construction of allowable consequential damages should also result.
  4. This section carries forward the standard rule that the buyer must deduct from his damages any expenses saved as a result of the breach.
  5. The present section provides a remedy which is completely alternative to cover under the preceding section and applies only when and to the extent that the buyer has not covered.

Cross references:

Point 3: Sections 1-106, 2-716 and 2-723.

Point 5: Section 2-712.

Definitional cross references:

“Buyer”. Section 2-103.

“Contract”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

The prior Virginia cases are in accord with subsection 8.2-713(1) . Sun Co. v. Burruss, 139 Va. 279 , 286-87, 123 S.E. 347 (1924); Richmond Leather Manufacturing Co. v. Fawcett, 130 Va. 484 , 490-91, 107 S.E. 800 (1921); Nottingham Coal & Ice Co. v. Preas, 102 Va. 820 , 822-23, 47 S.E. 823 (1904); Trigg v. Clay, 88 Va. 330 , 332-36, 13 S.E. 434 (1891).

Under subsection 8.2-713(2) it is not clear where “the place for tender” is when a seller is required to ship the goods to the buyer, but not required to deliver them at destination. See §§ 8.2-503 , 8.2-504 . Under Sun Co. v. Burruss, 139 Va. 279 , 286-87, 123 S.E. 347 (1924), the market price is determined at the place of destination, even though the “delivery point” is the place of shipment. See also Virginia Comment to § 8.2-723 for comment on Nottingham Coal & Ice Co. v. Preas, 120 Va. 820 , 823, 47 S.E. 823 (1904).

§ 8.2-714. Buyer’s damages for breach in regard to accepted goods.

  1. Where the buyer has accepted goods and given notification (subsection (3) of § 8.2-607 ) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the seller’s breach as determined in any manner which is reasonable.
  2. The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
  3. In a proper case any incidental and consequential damages under the next section [§ 8.2-715 ] may also be recovered.

History. 1964, c. 219.

Law Review.

For comment, “Virginia’s Lemon Law: The Best Treatment for Car Owner’s Canker,” see 19 U. Rich. L. Rev. 405 (1985).

For a note, “The Supreme Court’s Backwards Proportionality Jurisprudence: Comparing Judicial Review of Excessive Criminal Punishments and Excessive Punitive Damages Awards,” see 86 Va. L. Rev. 1249 (2000).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 23, 33.

CASE NOTES

Effect upon valuation of use of defective goods. —

There are cases where a buyer’s use of defective goods does not necessarily endow them with value for purposes of subsection (2) of this section. Twin Lakes Mfg. Co. v. Coffey, 222 Va. 467 , 281 S.E.2d 864, 1981 Va. LEXIS 330 (1981).

Proof of damages for breach of warranty of goods bought and sold on open market. —

In proving damages for breach of warranty of goods that can be bought and sold on the open market, a party must present evidence of the fair market value at the time and place of acceptance of the goods accepted and of what they would have had if they had been as warranted. The difference in these two valuations is the measure of damages. Wharton, Aldhizer & Weaver v. Savin Corp., 232 Va. 375 , 350 S.E.2d 635, 3 Va. Law Rep. 1353, 1986 Va. LEXIS 268 (1986).

Failure to mitigate barred consequential damages. —

Where a buyer of air compressor presented little evidence to the court as to why buyer did not attempt to mitigate its losses, buyer’s failure to minimize its losses in market barred buyer from receiving consequential damages. Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1988 U.S. App. LEXIS 16367 (4th Cir. 1988).

Consequential damages awarded for seller’s breach of express warranty. —

Where a seller of an impedance pipe heating system breached an express warranty that bolts in pipe joints could be safely torqued to 60 foot-pounds and gaskets deteriorated inside pipes that transported low trans oil to various parts of a buyer’s bakery resulting in too much compressive force, the buyer was entitled to consequential damages for the loss of cookies that were destroyed because the potential damage to the buyer’s food products was within the contemplation of the parties and the buyer could not sell the cookies to the public in light of the danger of foreign substance contamination and choking hazards. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

Statement that copier had no value to firm did not prove that it had no value. —

Statements by two of a law firm’s partners that a copier that malfunctioned frequently had no value to them or their firm did not establish the fact that it had no value. Where no probative evidence of the defective copier’s value was introduced, the firm, as a matter of law, failed to prove any damages for breach of warranty as required by subsection (2). Wharton, Aldhizer & Weaver v. Savin Corp., 232 Va. 375 , 350 S.E.2d 635, 3 Va. Law Rep. 1353, 1986 Va. LEXIS 268 (1986).

Punitive damages given only if tort established. —

Where buyer of an air compressor damages stemmed from seller’s contractual breach of warranty, and not from alleged tort of fraud, no punitive damages were awarded since punitive damages award must be based upon finding of actual damages in tort. Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1988 U.S. App. LEXIS 16367 (4th Cir. 1988).

Cover price of procuring substitute goods. —

Where after accepting nonconforming goods that seller refused to cure or replace, buyer was forced to obtain substitute units, the proper measure of buyer’s damages under subsection (1) was the cover price of procuring substitute goods. United States ex rel. Whitaker's, Inc. v. C.B.C. Enters., Inc., 820 F. Supp. 242, 1993 U.S. Dist. LEXIS 6207 (E.D. Va. 1993).

Capping damages at contract price. —

Where defendant claimed that plaintiff was seeking excessive damages and asked the court to limit plaintiff’s damages to no more than the contract price of the furnace, there was no reason to cap plaintiff’s possible damages at the contract price, and defendant’s request was denied. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F. Supp. 187, 1997 U.S. Dist. LEXIS 17381 (W.D. Va. 1997).

Cross-claimant’s claim for direct damages for breach of warranty, under § 8.2-714 (2) , did not survive demurrer, as the allegations of the cross-claim leading up to the request for damages disclosed the true nature of the cross-claimant’s damages as consequential, and the cross-claimant’s simply stating that the damages were direct did not make them direct; to recover for consequential damages, there had to be privity between the parties, which was not shown. Pulte Home Corp. v. Parex, Inc., 265 Va. 518 , 579 S.E.2d 188, 2003 Va. LEXIS 51 (2003).

Relevance of refusal to accept repair of defective part upon damages. —

In consumers’ action against a manufacturer for alleged violations of the Virginia Motor Vehicle Warranty Enforcement Act (Act), § 59.1-207.9 et seq., and the Virginia Uniform Commercial Code (UCC), arising from an allegedly defective valve in a motor home, the court would not reconsider its discovery order that directed the manufacturer to remove and replace the valve for testing purposes. Although it might be true that the consumers could not be forced to have the valve replaced after the expiration of the 18-month period for such repairs established by the Act, the refusal to allow the replacement could be relevant to the consumers’ UCC breach of warranty claim because, if the motor home worked after the valve was replaced, its replacement was relevant to the level of damages to which the consumers would be entitled and mitigation under the UCC. Parks v. Newmar Corp., No. 6:04-CV-00013, 2005 U.S. Dist. LEXIS 18373 (W.D. Va. Aug. 26, 2005).

Reasonable notice question of fact for jury. —

A determination of what constitutes reasonable notice is a question of fact for the jury. Virginia Transformer Corp. v. P.D. George Co., 932 F. Supp. 156, 1996 U.S. Dist. LEXIS 10255 (W.D. Va. 1996).

Damages under jurisdictional amount. —

Regardless of the section used to calculate damages, plaintiff’s claims fell short of the jurisdictional amount; the total Magnuson-Moss Warranty Act claim could not reach the required $50,000 jurisdictional requirement on the contract price alone. Therefore, the court did not have subject-matter jurisdiction over the action. Burtt v. Ford Motor Co., No. 4:07CV00038, 2008 U.S. Dist. LEXIS 9657 (W.D. Va. Feb. 11, 2008).

CIRCUIT COURT OPINIONS

Direct damages. —

Homebuilder was not entitled to collect direct damages from finish manufacturer based on cross-claim it filed against finish manufacturer after homeowners sued homebuilder and alleged the finish was inherently defective and improperly installed as the homebuilder was not in privity with the finish manufacturer since it obtained the finish from a third party who had acquired it from the finish manufacturer. Bindra v. Michael Bowman & Assocs., 58 Va. Cir. 47, 2001 Va. Cir. LEXIS 373 (Fairfax County Sept. 19, 2001).

Nonconformity of goods permitted builder to recover cost-of-repair damages. —

The “nonconformity” referred to in subsection (1) includes that which arises from the breach of a warranty and allowed a builder-buyer to recover for the cost of repairs to condominiums clad with exterior cladding which violated the manufacturer’s and distributor’s implied warranty of merchantability. Bay Point Condo. Ass'n v. RML Corp., 57 Va. Cir. 295, 2002 Va. Cir. LEXIS 10 (Norfolk Jan. 28, 2002).

Consequential damages awarded when buyers revoked acceptance of damaged mobile home. —

After buyers properly revoked acceptance of a structurally damaged mobile home under § 8.2-608 , the court (1) allowed consequential damages to the buyers for a $500 down payment, $3,300 “inventory fee,” $100 to a welder to fix damaged I-beams, $730 for an undisclosed fee, and two mobile home house payments of $833, for a total of $6,297, (2) did not allow the buyers’ expenses that were incurred but were not the sellers’ responsibility, at least some of which may have been incurred after the revocation, or arose to fix damage to the mobile home, which included foundation, carpet repair and other supplies, heat hookup, loan attorney fees, and site grading, and (3) allowed the sellers fair market rent to off set the damages awarded to the buyers. Oakwood Acceptance Corp. v. Pippin, 66 Va. Cir. 474, 2002 Va. Cir. LEXIS 462 (Nelson County Mar. 27, 2002).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 69(6) and (7), Uniform Sales Act.

Changes: Rewritten.

Purposes of changes:

  1. This section deals with the remedies available to the buyer after the goods have been accepted and the time for revocation of acceptance has gone by. In general this section adopts the rule of the prior uniform statutory provision for measuring damages where there has been a breach of warranty as to goods accepted, but goes further to lay down an explicit provision as to the time and place for determining the loss.
  2. The “non-conformity” referred to in subsection (1) includes not only breaches of warranties but also any failure of the seller to perform according to his obligations under the contract. In the case of such non-conformity, the buyer is permitted to recover for his loss “in any manner which is reasonable.”
  3. Subsection (2) describes the usual, standard and reasonable method of ascertaining damages in the case of breach of warranty but it is not intended as an exclusive measure. It departs from the measure of damages for non-delivery in utilizing the place of acceptance rather than the place of tender. In some cases the two may coincide as where the buyer signifies his acceptance upon the tender. If however, the non-conformity is such as would justify revocation of acceptance, the time and place of acceptance under this section is determined as of the buyer’s decision not to revoke.
  4. The incidental and consequential damages referred to in subsection (3), which will usually accompany an action brought under this section are discussed in detail in the comment on the next section.

The section on deduction of damages from price provides an additional remedy for a buyer who still owes part of the purchase price, and frequently the two remedies will be available concurrently. The buyer’s failure to notify of his claim under the section on effects of acceptance, however, operates to bar his remedies under either that section or the present section.

Cross references:

Point 1: Compare Section 2-711; Sections 2-607 and 2-717.

Point 2: Section 2-106.

Point 3: Sections 2-608 and 2-713.

Point 4: Section 2-715.

Definitional cross references:

“Buyer”. Section 2-103.

“Conform”. Section 2-106.

“Goods”. Section 1-201 .

“Notification”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

This section is in accord with prior Virginia law. Smith v. Hensley, 202 Va. 700 , 705, 119 S.E.2d 332 (1961); E. I. duPont de Nemours & Co. v. Universal Moulded Products Corp., 191 Va. 525 , 569-81, 62 S.E.2d 233 (1950); Greenland Development Corp. v. Allied Heating Products Co., Inc., 184 Va. 588 , 600-01, 35 S.E.2d 801, 164 A.L.R. 1312 (1945), Note, 32 Va. L. Rev. 679 (1946); Newbern v. Joseph Baker & Co., Inc., 147 Va. 996 , 1001-02, 133 S.E. 500 (1926); Southern Tire Sales Corp. v. A. M. Dudley & Co., 138 Va. 582 , 587-89, 121 S.E. 885 (1924); Jacobs v. Warthen, 115 Va. 571 , 575, 80 S.E. 113 (1913); Thornton v. Thompson, 45 Va. (4 Gratt.) 121 (1847).

§ 8.2-715. Buyer’s incidental and consequential damages.

  1. Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
  2. Consequential damages resulting from the seller’s breach include
    1. any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
    2. injury to person or property proximately resulting from any breach of warranty.

History. 1964, c. 219.

Law Review.

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

For comment, “Virginia’s Lemon Law: The Best Treatment for Car Owner’s Canker,” see 19 U. Rich. L. Rev. 405 (1985).

For article reviewing case law and changes in legislation affecting Virginia construction law, see 40 U. Rich. L. Rev. 143 (2005).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 33, 34.

CASE NOTES

Privity is required to recover economic loss under subsection (2) due to the breach of the implied warranty of merchantability, notwithstanding the language of Section 8.2-318 . Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 254 Va. 240 , 491 S.E.2d 731, 1997 Va. LEXIS 79 (1997).

Homebuilder failed to state a claim against a stucco manufacturer for breach of an implied warranty, as the damages to the builder were consequential, and privity was required to recover economic loss, under § 8.2-715 (2) , due to an alleged breach of the implied warranty of merchantability; there was no contract between the parties, as the stucco was applied by a subcontractor that obtained the stucco from a supplier, and consequential damages were not recoverable. Pulte Home Corp. v. Parex, Inc., 265 Va. 518 , 579 S.E.2d 188, 2003 Va. LEXIS 51 (2003).

Subsection (2) prevails over privity provisions in § 8.2-318 . —

The limited contract requirement of subsection (2) prevails over the general provisions relating to common law privity in Section 8.2-318 . Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 254 Va. 240 , 491 S.E.2d 731, 1997 Va. LEXIS 79 (1997).

Subdivision (2)(a) requires a contract between the parties for the recovery of consequential economic loss damages incurred as a result of a breach of warranty by the seller. Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 254 Va. 240 , 491 S.E.2d 731, 1997 Va. LEXIS 79 (1997).

Personal injuries are a type of consequential damages. —

See Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Recovery for emotional disturbance. —

In determining whether, at the pleading stage, allegations of mere mental suffering and emotional distress without bodily injury are sufficient to state a claim for consequential damages under this section and the Magnuson-Moss Warranty Act, the rule is that recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach was of such a kind that serious emotional disturbance was a particularly likely result. Wise v. GMC, 588 F. Supp. 1207, 1984 U.S. Dist. LEXIS 15275 (W.D. Va. 1984).

Failure to mitigate barred consequential damages. —

Where a buyer of an air compressor presented little evidence to the court as to why buyer did not attempt to mitigate its losses buyer’s failure to minimize its losses in market barred buyer from receiving consequential damages. Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1988 U.S. App. LEXIS 16367 (4th Cir. 1988).

Capping damages at contract price. —

Where defendant claimed that plaintiff was seeking excessive damages and asked the court to limit plaintiff’s damages to no more than the contract price of the furnace, there was no reason to cap plaintiff’s possible damages at the contract price, and defendant’s request was denied. Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 980 F. Supp. 187, 1997 U.S. Dist. LEXIS 17381 (W.D. Va. 1997).

Consequential damages awarded for seller’s breach of express warranty. —

Where a seller of an impedance pipe heating system breached an express warranty that bolts in pipe joints could be safely torqued to 60 foot-pounds and gaskets deteriorated inside pipes that transported low trans oil to various parts of a buyer’s bakery resulting in too much compressive force, the buyer was entitled to consequential damages for the loss of cookies that were destroyed because the potential damage to the buyer’s food products was within the contemplation of the parties and the buyer could not sell the cookies to the public in light of the danger of foreign substance contamination and choking hazards. Kraft Foods N. Am., Inc. v. Banner Eng'g & Sales, Inc., 446 F. Supp. 2d 551, 2006 U.S. Dist. LEXIS 61702 (E.D. Va. 2006).

CIRCUIT COURT OPINIONS

Contract for recovery. —

Subsection (2) of this section requires a contract between parties for recovery of consequential economic loss damages in a claim for breach of a Uniform Commercial Code warranty. MacConkey v. F.J. Matter Design, Inc., 54 Va. Cir. 1, 2000 Va. Cir. LEXIS 390 (Virginia Beach Feb. 8, 2000).

Consequential damages awarded when buyers revoked acceptance of damaged mobile home. —

After buyers properly revoked acceptance of a structurally damaged mobile home under § 8.2-608 , the court (1) allowed consequential damages to the buyers for a $500 down payment, $3,300 “inventory fee,” $100 to a welder to fix damaged I-beams, $730 for an undisclosed fee, and two mobile home house payments of $833, for a total of $6,297, (2) did not allow the buyers’ expenses that were incurred that were not the sellers’ responsibility, at least some of which may have been incurred after the revocation to fix damage to the mobile home, which included foundation, carpet repair and other supplies, heat hookup, loan attorney fees, and site grading, and (3) allowed the sellers fair market rent to off set the damages awarded to the buyers. Oakwood Acceptance Corp. v. Pippin, 66 Va. Cir. 474, 2002 Va. Cir. LEXIS 462 (Nelson County Mar. 27, 2002).

Privity is required. —

Homebuilder was not entitled to obtain consequential damages from finish manufacturer after the homebuilder was sued by the homeowners for allegedly using defective finish and improperly installing it as privity was required before the homebuilder could recover consequential damages from the finish manufacturer and privity did not exist because the homebuilder obtained the finish from a third party who had acquired it from the finish manufacturer. Bindra v. Michael Bowman & Assocs., 58 Va. Cir. 47, 2001 Va. Cir. LEXIS 373 (Fairfax County Sept. 19, 2001).

This section requires privity of contract for the recovery of consequential economic loss damages and the application of that statute is limited to cases where a plaintiff is claiming consequential economic loss damages due to a breach of warranty. RML Corp. v. Lincoln Window Prods., 67 Va. Cir. 545, 2004 Va. Cir. LEXIS 363 (Norfolk Dec. 3, 2004).

Window company’s demurrer was sustained with respect to privity and damages because a property owner did not contract directly with the company and thus, lacked privity; therefore, the owner was barred from recovering purely economic consequential damages in its warranty action. 139 Riverview, LLC v. Quaker Window Prods., 90 Va. Cir. 74, 2015 Va. Cir. LEXIS 45 (Norfolk Mar. 2, 2015).

Proper measure of damages. —

Where a paving contractor that put asphalt paving on a parking lot violated the warranty of fitness for a particular purpose, the proper measure of damages was the repair cost of the parking lot as opposed to total replacement cost of the entire parking lot. Harrison's Moving & Storage Co. v. Princess Anne Paving Corp., 60 Va. Cir. 303, 2002 Va. Cir. LEXIS 266 (Portsmouth Nov. 4, 2002).

Vehicle warranty and extended “service contract.” —

Consumer was entitled to incidental and consequential damages against a vehicle dealer in her action for revocation of acceptance because of the three-month/3,000 mile warranty and the extended service contract. Dealer warranty did not exclude incidental or consequential damages. Love v. Kenneth Hammersley Motors, Inc., 66 Va. Cir. 447, 2000 Va. Cir. LEXIS 647 (Lynchburg Oct. 30, 2000).

OFFICIAL COMMENT

Prior uniform statutory provisions: Subsection (2) (b)—Sections 69(7) and 70, Uniform Sales Act.

Changes: Rewritten.

Purposes of changes and new matter:

  1. Subsection (1) is intended to provide reimbursement for the buyer who incurs reasonable expenses in connection with the handling of rightfully rejected goods or goods whose acceptance may be justifiably revoked, or in connection with effecting cover where the breach of the contract lies in non-conformity or non-delivery of the goods. The incidental damages listed are not intended to be exhaustive but are merely illustrative of the typical kinds of incidental damage.
  2. Subsection (2) operates to allow the buyer, in an appropriate case, any consequential damages which are the result of the seller’s breach. The “tacit agreement” test for the recovery of consequential damages is rejected. Although the older rule at common law which made the seller liable for all consequential damages of which he had “reason to know” in advance is followed, the liberality of that rule is modified by refusing to permit recovery unless the buyer could not reasonably have prevented the loss by cover or otherwise. Subparagraph (2) carries forward the provisions of the prior uniform statutory provision as to consequential damages resulting from breach of warranty, but modifies the rule by requiring first that the buyer attempt to minimize his damages in good faith, either by cover or otherwise.
  3. In the absence of excuse under the section on merchant’s excuse by failure of presupposed conditions, the seller is liable for consequential damages in all cases where he had reason to know of the buyer’s general or particular requirements at the time of contracting. It is not necessary that there be a conscious acceptance of an insurer’s liability on the seller’s part, nor is his obligation for consequential damages limited to cases in which he fails to use due effort in good faith.
  4. The burden of proving the extent of loss incurred by way of consequential damage is on the buyer, but the section on liberal administration of remedies rejects any doctrine of certainty which requires almost mathematical precision in the proof of loss. Loss may be determined in any manner which is reasonable under the circumstances.
  5. Subsection (2) (b) states the usual rule as to breach of warranty, allowing recovery for injuries “proximately” resulting from the breach. Where the injury involved follows the use of goods without discovery of the defect causing the damage, the question of “proximate” cause turns on whether it was reasonable for the buyer to use the goods without such inspection as would have revealed the defects. If it was not reasonable for him to do so, or if he did in fact discover the defect prior to his use, the injury would not proximately result from the breach of warranty.
  6. In the case of sales of wares to one in the business of reselling them, resale is one of the requirements of which the seller has reason to know within the meaning of subsection (2) (a).

Particular needs of the buyer must generally be made known to the seller while general needs must rarely be made known to charge the seller with knowledge.

Any seller who does not wish to take the risk of consequential damages has available the section on contractual limitation of remedy.

Cross references:

Point 1: Section 2-608.

Point 3: Sections 1-203 , 2-615 and 2-719.

Point 4: Section 1-106.

Definitional cross references:

“Cover”. Section 2-712.

“Goods”. Section 1-201 .

“Person”. Section 1-201 .

“Receipt” of goods. Section 2-103.

“Seller”. Section 2-103.

VIRGINIA COMMENT

Prior Virginia law is in accord with this section in recognizing the buyer’s right to incidental and consequential damages. In O. H. Perry Tie & Lumber Co. v. Reynolds & Bros., 100 Va. 264 , 268-74, 40 S.E. 919 (1902), the seller had delayed in making delivery and the buyer was allowed damages for demurrage, for damages paid to a subvendee, and for profits. Bristol Belt Line Railway Co. v. Bullock Electric Manufacturing Co., 101 Va. 652 , 656-57, 44 S.E. 892 (1903), allowed the recovery of profits in the contemplation of the parties that were the natural result of the seller’s breach in making delayed delivery of goods, and which could be proved with reasonable certainty. A recovery of profits was also allowed in the following cases: Shenandoah Milling Co., Inc. v. Phosphate Products Corp., 161 Va. 642 , 649-50, 171 S.E. 681 (1933); Newbern v. Baker, 147 Va. 996 , 1001-02, 133 S.E. 500 (1926); Arkla Lumber and Manufacturing Co. v. West Virginia Timber Co., 146 Va. 641 , 652, 132 S.E. 840 (1926); New Idea Spreader Co. v. R. M. Rogers & Sons, 122 Va. 54 , 66-68, 94 S.E. 351 (1917); Consumers Ice Co. v. Jennings, 100 Va. 719 , 725, 42 S.E. 879 (1902); Trigg v. Clay, 88 Va. 330 , 333-36, 13 S.E. 434 (1891).

While the general rule of damages for breach of warranty of tires is the difference between the actual value of the tires when delivered and the value which they would have had, if as warranted, Southern Tire Sales Corp. v. A. M. Dudley & Co., 138 Va. 582 , 587-89, 121 S.E. 885 (1924), allowed the buyer to recover for loss of time in use of a truck and for labor expended on account of defective tires. In Gerst v. Jones & Co., 73 Va. (32 Gratt.) 518, 526-27 (1879), a buyer recovered special damages for tobacco damaged because of a breach of warranty as to boxes supplied by the seller. The same results would be reached under the UCC which allows damages on account of injuries proximately resulting from a breach of warranty. However, consequential damages are not recoverable for items that are uncertain, exaggerated, and fantastic. Mount Rogers Furniture Co. v. Virginia Mirror Co., 155 Va. 201 , 204-09, 154 S.E. 600 (1930). And consequential damages are not recoverable for a loss that could easily be avoided, as for the value of a potato crop that was not raised, the buyer having planted half-rotten potatoes, warranted to be first class. Moon v. Washington-Beaufort Land Co., 147 Va. 912 , 917-18, 133 S.E. 498 (1926).

In accord with the UCC, Virginia assumed in Cody v. Norton Coal Co., 110 Va. 363 , 366, 66 S.E. 33 (1909), that consequential damages were recoverable for an injury to the person proximately resulting from a breach of warranty, but only if the article purchased was used in a reasonably careful and proper manner, and the damages sustained might not have been reasonably anticipated.

See also Washington and Old Dominion Railway v. Westinghouse Electric and Manufacturing Co., 120 Va. 620 , 627-36, 89 S.E. 131 (1916), for a discussion of consequential damages.

§ 8.2-716. Buyer’s right to specific performance or detinue.

  1. Specific performance may be decreed where the goods are unique or in other proper circumstances.
  2. The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
  3. The buyer has a right of detinue for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer’s right of detinue vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.

History. 1964, c. 219; 1966, c. 392; 2000, c. 1007.

Editor’s note.

This section conforms to section 2-716 in the uniform code, except that this section uses the term “detinue” where the uniform code uses the term “replevin.”

The 2000 amendments.

The 2000 amendment by c. 1007, effective July 1, 2001, added the last sentence in subdivision (3).

Law Review.

For article on mitigation of damages, see 69 Va. L. Rev. 967 (1983).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 20, 33, 36.

CASE NOTES

Specific performance inappropriate where damages are recoverable and adequate. —

Virginia’s adoption of the U.C.C. does not abrogate the maxim that specific performance is inappropriate where damages are recoverable and adequate. Klein v. PepsiCo, Inc., 845 F.2d 76, 1988 U.S. App. LEXIS 5268 (4th Cir. 1988).

Specific performance inappropriate where replacement would require increased cost. —

Where plaintiff wanted aircraft for resale for profit and replacement aircraft would require increased cost, there was no room here for the equitable remedy of specific performance. Klein v. PepsiCo, Inc., 845 F.2d 76, 1988 U.S. App. LEXIS 5268 (4th Cir. 1988).

OFFICIAL COMMENT

Prior uniform statutory provision: Section 68, Uniform Sales Act.

Changes: Rephrased.

Purposes of changes: To make it clear that:

  1. The present section continues in general prior policy as to specific performance and injunction against breach. However, without intending to impair in any way the exercise of the court’s sound discretion in the matter, this Article seeks to further a more liberal attitude than some courts have shown in connection with the specific performance of contracts of sale.
  2. In view of this Article’s emphasis on the commercial feasibility of replacement, a new concept of what are “unique” goods is introduced under this section. Specific performance is no longer limited to goods which are already specific or ascertained at the time of contracting. The test of uniqueness under this section must be made in terms of the total situation which characterizes the contract. Output and requirements contracts involving a particular or peculiarly available source or market present today the typical commercial specific performance situation, as contrasted with contracts for the sale of heirlooms or priceless works of art which were usually involved in the older cases. However, uniqueness is not the sole basis of the remedy under this section for the relief may also be granted “in other proper circumstances” and inability to cover is strong evidence of “other proper circumstances”.
  3. The legal remedy of replevin is given the buyer in cases in which cover is reasonably unavailable and goods have been identified to the contract. This is in addition to the buyer’s right to recover identified goods under Section 2-502. For consumer goods, the buyer’s right to replevin vests upon the buyer’s acquisition of a special property, which occurs upon identification of the goods to the contract. See Section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral that its debtor had or had power to convey, see Section 2-403(1) (first sentence), a buyer who acquires a right of replevin under subsection (3) will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.
  4. This section is intended to give the buyer rights to the goods comparable to the seller’s rights to the price.
  5. If a negotiable document of title is outstanding, the buyer’s right of replevin relates of course to the document not directly to the goods. See Article 7, especially Section 7-602.

Cross references:

Point 3: Section 2-502.

Point 4: Section 2-709.

Point 5: Article 7.

Definitional cross references:

“Buyer”. Section 2-103.

“Goods”. Section 1-201 .

“Rights”. Section 1-201 .

VIRGINIA COMMENT

Virginia has recognized in dictum that a buyer who has tendered the purchase money for goods and made a demand is entitled to maintain detinue or trover if he is refused. Chapman v. Campbell, 54 Va. (13 Gratt.) 105, 110 (1856). On refusal to deliver, the seller having made a subsequent sale to a second buyer, the first buyer may maintain an action for damages against the seller. Sweeney v. Foster, 112 Va. 499 , 503, 71 S.E. 548 (1911).

While the UCC does not refer to the rights of marketing cooperatives with reference to crops grown by their members, the section would seem to be in accord with Layne v. Tobacco Growers Cooperative Association, 147 Va. 878 , 881-82, 133 S.E. 358 (1926), which recognized that an injunction might issue in a proper case to restrain a grower from disposing of tobacco in violation of a contract.

This section recognizes the acts of replevin, a form of action abolished in Virginia by Code 1950, § 8.01-218 .

§ 8.2-717. Deduction of damages from the price.

The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.

History. 1964, c. 219.

Editor’s note.

Section 8-239, referred to in the Virginia Comment, was repealed by Acts 1977, c. 619.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 33.

OFFICIAL COMMENT

Prior uniform statutory provision: See Section 69(1) (a), Uniform Sales Act.

Purposes:

  1. This section permits the buyer to deduct from the price damages resulting from any breach by the seller and does not limit the relief to cases of breach of warranty as did the prior uniform statutory provision. To bring this provision into application the breach involved must be of the same contract number under which the price in question is claimed to have been earned.
  2. The buyer, however, must give notice of his intention to withhold all or part of the price if he wishes to avoid a default within the meaning of the section on insecurity and right to assurances. In conformity with the general policies of this Article, no formality of notice is required and any language which reasonably indicates the buyer’s reason for holding up his payment is sufficient.

Cross reference:

Point 2: Section 2-609.

Definitional cross references:

“Buyer”. Section 2-103.

“Notifies”. Section 1-201 .

VIRGINIA COMMENT

The UCC is in accord with prior Virginia law in allowing the buyer to deduct damages for a breach from any part of the price still due to the seller. Dexter-Portland Cement Co. v. Acme Supply Co., 147 Va. 758 , 770-74, 133 S.E. 788 (1926); Jeffries and Co., Inc. v. Kramer Brothers Co., 135 Va. 419 , 116 S.E. 232 (1926); New Idea Spreader Co. v. R. M. Rogers & Sons, 122 Va. 54 , 65-66, 94 S.E. 351 (1917).

This section does not affect the Virginia rules of set-off, as set forth in Code 1950, §§ 8-239, 16.1-88.01, and 16.1-88.02, and Rule 3:8. These statutes and the rule of court change the law applied in earlier cases under which the buyer’s claims for unliquidated changes could not be set-off against the price claimed by the seller. See Dexter-Portland Cement Co. v. Acme Supply Co., Inc., 147 Va. 758 , 768, 133 S.E. 788 (1926); Joseph H. Baker & Co., Inc. v. Hartman, 139 Va. 612 , 613-14, 124 S.E. 425 (1924). The earlier rule was avoided in Richardson Construction Co. v. Whiting Lumber Co., 116 Va. 490 , 491-94, 82 S.E. 87 (1914), in which the buyer’s damages calculated on the basis of “cover” were found to be liquidated. See also F. A. Rausch & Co. v. Graham Manufacturing Corp., 139 Va. 502 , 505-06, 124 S.E. 427 (1924); 145 Va. 681 , 134 S.E. 692 (1926), for a case involving set-off.

§ 8.2-718. Liquidation or limitation of damages; deposits.

  1. Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
  2. Where the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds
    1. the amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subsection (1), or
    2. in the absence of such terms, twenty per cent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.
  3. The buyer’s right to restitution under subsection (2) is subject to offset to the extent that the seller establishes
    1. a right to recover damages under the provisions of this title other than subsection (1), and
    2. the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.
  4. Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer’s breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this title on resale by an aggrieved seller (§ 8.2-706 ).

History. 1964, c. 219.

Law Review.

For note on lost profits for unestablished businesses and on whether or not Virginia should retain the new business rule, see 67 Va. L. Rev. 431 (1981).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 17, 26, 31.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Under subsection (1) liquidated damage clauses are allowed where the amount involved is reasonable in the light of the circumstances of the case. The subsection sets forth explicitly the elements to be considered in determining the reasonableness of a liquidated damage clause. A term fixing unreasonably large liquidated damages is expressly made void as a penalty. An unreasonably small amount would be subject to similar criticism and might be stricken under the section on unconscionable contracts or clauses.
  2. Subsection (2) refuses to recognize a forfeiture unless the amount of the payment so forfeited represents a reasonable liquidation of damages as determined under subsection (1). A special exception is made in the case of small amounts (20% of the price of $500, whichever is smaller) deposited as security. No distinction is made between cases in which the payment is to be applied on the price and those in which it is intended as security for performance. Subsection (2) is applicable to any deposit or down or part payment. In the case of a deposit or turn in of goods resold before the breach, the amount actually received on the resale is to be viewed as the deposit rather than the amount allowed the buyer for the trade in. However, if the seller knows of the breach prior to the resale of the goods turned in, he must make reasonable efforts to realize their true value, and this is assured by requiring him to comply with the conditions laid down in the section on resale by an aggrieved seller.

Cross references:

Point 1: Section 2-302.

Point 2: Section 2-706.

Definitional cross references:

“Aggrieved party”. Section 1-201 .

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Goods”. Section 2-105.

“Notice”. Section 1-201 .

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

“Seller”. Section 2-103.

“Term”. Section 1-201 .

§ 8.2-719. Contractual modification or limitation of remedy.

  1. Subject to the provisions of subsections (2) and (3) of this section and of the preceding section [§ 8.2-718 ] on liquidation and limitation of damages,
    1. the agreement may provide for remedies in addition to or in substitution for those provided in this title and may limit or alter the measure of damages recoverable under this title, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and
    2. resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
  2. Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act.
  3. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

History. 1964, c. 219.

Law Review.

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For note, “Legal Control on Warranty Liability Limitation Under the Uniform Commercial Code,” see 63 Va. L. Rev. 791 (1977).

For note on liability and warranties in consumer protection under the UCC, see 39 Wash. & Lee L. Rev. 1347 (1982).

For survey on commercial law in Virginia for 1989, see 23 U. Rich. L. Rev. 523 (1989).

For essay, “Proposed Legislation: A (Second) Modest Proposal to Protect Virginia Consumers Against Defective Products,” see 43 U. Rich. L. Rev. 19 (2008).

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, §§ 4, 17, 26, 31.

CASE NOTES

Limitations of liability. —

This section provides that contractual agreements may include limitations of liability. This section only prohibits such limitations of liability in the sale of consumer goods. Fisher v. Monsanto Co., 863 F. Supp. 285, 1994 U.S. Dist. LEXIS 14032 (W.D. Va. 1994).

Limitation of consequential damages permitted. —

A seller may by contract limit the remedies for breach of warranty and, in particular, may exclude consequential damages unless the exclusion is unconscionable. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Virginia law prohibits the exclusion of consequential damages where such exclusion is unconscionable. Martin v. American Medical Sys., 116 F.3d 102, 1997 U.S. App. LEXIS 14787 (4th Cir. 1997).

The essence of unconscionability in the context of a disclaimer of liability for consequential damages is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Burden of proof as to commercial goods on plaintiff. —

Where the piece of equipment that caused the plaintiff’s injuries was purchased and used in a commercial enterprise and thus was not consumer goods, an exclusion of liability for consequential damages was not prima facie unconscionable and the plaintiff bore the burden of proving that the exclusion was unconscionable. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Plaintiff essentially argued that defendants’ fraud precluded them from enforcing the exclusion of consequential damages; however, plaintiff failed to prove fraud. Accordingly, in addition to not proving causation, and because there was nothing unconscionable in the agreement between the sophisticated industrial parties, defendants effectively excluded consequential and incidental damages. Waytec Elecs. Corp. v. Rohm & Haas Elec. Materials, LLC, 459 F. Supp. 2d 480, 2006 U.S. Dist. LEXIS 77673 (W.D. Va. 2006), aff'd, 255 Fed. Appx. 754, 2007 U.S. App. LEXIS 28113 (4th Cir. 2007).

Conspicuous language is not required in a writing to create a valid limitation of remedy. Flintkote Co. v. W.W. Wilkinson, Inc., 220 Va. 564 , 260 S.E.2d 229, 1979 Va. LEXIS 298 (1979).

Unlike § 8.2-316 (2) which requires conspicuous language to exclude or modify the implied warrantlessness of merchantability or of fitness for a particular purpose, this section, which expressly recognizes that the contracting parties may bargain for a limitation of remedy, contains no such requirement. Flintkote Co. v. W.W. Wilkinson, Inc., 220 Va. 564 , 260 S.E.2d 229, 1979 Va. LEXIS 298 (1979).

There is no requirement that a contract provision imposing a limitation of remedy for breach of warranty be “conspicuous” in order to be effective. Flintkote Co. v. W.W. Wilkinson, Inc., 220 Va. 564 , 260 S.E.2d 229, 1979 Va. LEXIS 298 (1979).

False misrepresentation and fraud in inducement may be shown despite limitation of liabilities. —

While contracting parties may waive their contractual rights and disclaim or limit certain liabilities, a false representation of a material fact, constituting an inducement to the contract, on which the purchaser had a right to rely, is always ground for rescission of the contract by a court of equity, and fraud in the inducement of a contract is also ground for an action for damages in a court of law. George Robberecht Seafood, Inc. v. Maitland Bros. Co., 220 Va. 109 , 255 S.E.2d 682, 1979 Va. LEXIS 241 (1979).

Exclusion may be valid even as to personal injuries. —

While this section itself indicates that personal injuries are a factor to be considered in determining whether an exclusion for consequential damages is unconscionable, nevertheless, even considering the nature of a plaintiff’s injury-that it is a personal injury rather than a commercial loss-such an exclusion may not be found unconscionable. Blevins v. New Holland N. Am., Inc., 97 F. Supp. 2d 7471, 2000 U.S. Dist. LEXIS 3759 (W.D. Va. 2000).

Limitation of damages in personal injury cases is prima facie unconscionable. Goodbar v. Whitehead Bros., 591 F. Supp. 552, 1984 U.S. Dist. LEXIS 24746 (W.D. Va. 1984), aff'd, 769 F.2d 213, 1985 U.S. App. LEXIS 21195 (4th Cir. 1985).

This section denounces as prima facie unconscionable the limitation of damages for personal injuries that are caused by consumer goods. Where defendant does not rebut this presumption, plaintiff is entitled to recover damages for his injuries. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

If the disclaimer in the manufacturer’s warranty is deemed to exclude the dealer’s implied warranty, the undertaking assumed by the dealer to fulfill the manufacturer’s warranty must also be considered. Its liability, therefore, is coextensive with manufacturer’s, and the attempt to limit its responsibility for damages to the repair or replacement of defective parts is also prima facie unconscionable under this section. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

It has been suggested that total disclaimer of warranties would be unconscionable with respect to personal injuries. Matthews v. Ford Motor Co., 479 F.2d 399, 1973 U.S. App. LEXIS 9835 (4th Cir. 1973).

Unconscionability and failure of essential purpose compared. —

Unconscionability deals primarily with a grossly unequal bargaining power at the time the contract is formed, while failure of essential purpose relates to circumstances arising during performance of the agreement. From a practical standpoint, where, as here, experienced parties agree to allocate unknown or undeterminable risks, they should be held to their bargain; courts, or juries, should not be permitted to rewrite the agreement. Envirotech Corp. v. Halco Eng'g, Inc., 234 Va. 583 , 364 S.E.2d 215, 4 Va. Law Rep. 1545, 1988 Va. LEXIS 6 (1988).

Failure of essential purpose of limited remedy does not automatically result in abrogation of the consequential damages disclaimer. Envirotech Corp. v. Halco Eng'g, Inc., 234 Va. 583 , 364 S.E.2d 215, 4 Va. Law Rep. 1545, 1988 Va. LEXIS 6 (1988).

A number of logical, sound reasons mandate why, without more, the failure of a limited remedy of repair should not invalidate a wholly distinct clause of the contract excluding recovery for consequential damages. Envirotech Corp. v. Halco Eng'g, Inc., 234 Va. 583 , 364 S.E.2d 215, 4 Va. Law Rep. 1545, 1988 Va. LEXIS 6 (1988).

CIRCUIT COURT OPINIONS

Section inapplicable where the implied warranty has been disclaimed. —

In plaintiff’s suit alleging defendants’ rototiller breached the implied warranty of merchantability and implied warranty of fitness for a particular purpose, the district court sustained defendants’ demurrers because the express warranty disclaimed all other warranties, express or implied, and Va. Code Ann. § 8.2-316 specifically permitted such disclaimers. Va. Code Ann. § 8.2-719 was inapplicable, because the implied warranty had been effectively disclaimed. Santana v. Deere & Co., 108 Va. Cir. 537, 2021 Va. Cir. LEXIS 207 (Madison County Oct. 26, 2021).

Limitation of consequential damages permitted. —

Disclaimer provisions in a home inspection contract that excluded liability for consequential damages would not have violated subdivision 3 of § 8.2-719 (had it been applicable to this personal services contract) because the disclaimer was in large, conspicuous, bold typeface and did not exclude liability for personal injuries. Howie v. Atl. Home Inspection, Inc., 62 Va. Cir. 164, 2003 Va. Cir. LEXIS 298 (Norfolk June 17, 2003).

Warranties. —

Facts, combined with the course of dealings between a buyer and seller, were effective to limit the seller’s liability to the cost of replacement concrete because although the seller did not deliver concrete that met the required specifications, the language limiting the seller’s warranty was conspicuous and was not unconscionable; the prior dealings between the parties established a course of conduct under which it was clear to the buyer that the seller made a practice of disclaiming implied warranties. Hammond-Mitchell, Inc. v. Constr. Materials Co., 77 Va. Cir. 5, 2008 Va. Cir. LEXIS 126 (Alleghany County Apr. 28, 2008).

Lack of privity barred recovery. —

Window company’s demurrer was sustained with respect to privity and damages because a property owner did not contract directly with the company and thus, lacked privity; therefore, the owner was barred from recovering purely economic consequential damages in its warranty action. 139 Riverview, LLC v. Quaker Window Prods., 90 Va. Cir. 74, 2015 Va. Cir. LEXIS 45 (Norfolk Mar. 2, 2015).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes:

  1. Under this section parties are left free to shape their remedies to their particular requirements and reasonable agreements limiting or modifying remedies are to be given effect.
  2. Subsection (1) (b) creates a presumption that clauses prescribing remedies are cumulative rather than exclusive. If the parties intend the term to describe the sole remedy under the contract, this must be clearly expressed.
  3. Subsection (3) recognizes the validity of clauses limiting or excluding consequential damages but makes it clear that they may not operate in an unconscionable manner. Actually such terms are merely an allocation of unknown or undeterminable risks. The seller in all cases is free to disclaim warranties in the manner provided in Section 2-316.

However, it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Thus any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. Similarly, under subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.

Cross references:

Point 1: Section 2-302.

Point 3: Section 2-316.

Definitional cross references:

“Agreement”. Section 1-201 .

“Buyer”. Section 2-103.

“Conforming”. Section 2-106.

“Contract”. Section 1-201 .

“Goods”. Section 2-105.

“Remedy”. Section 1-201 .

“Seller”. Section 2-103.

VIRGINIA COMMENT

Virginia earlier recognized that the remedies of parties to a sales contract may be limited by contract. The buyer’s remedy may be limited to a return of the goods and repayment of the purchase price, and additional contractual requirements may be made as to the giving of notice of nonconformity of the goods and regarding the exercise of an option to return the goods. Monroe & Monroe, Inc. v. Cowne, 133 Va. 181 , 198-204, 112 S.E. 848 (1922). Such contractual requirements may be waived by the seller, as by endeavoring to repair a machine and make it work. Monroe & Monroe, Inc. v. Cowne, 133 Va. 181 , 198-204, 112 S.E. 848 (1922); Economic Water Heating Corp. v. Dillon Supply Co., 156 Va. 597 , 607-08, 159 S.E. 78 (1831). The Economic case also held that if, with the knowledge of the seller, the goods are purchased for resale, the buyer is required to return only those goods that have not been resold.

The parties could by contract limit the seller’s liability to the repair and replacement of nonconforming goods or parts. With reference to such a limitation, the supreme court of appeals in Wright & Co., Inc. v. Shackleford, 152 Va. 635 , 648, 148 S.E. 807 (1929), quoted the following passage from 35 Cyc. 428: “Unless there is a definite condition to that effect, the buyer is not obligated, as a condition precedent to recovery on the warranty, to allow the seller to remedy defects. If, however, the contract so stipulates, no liability for a breach of warranty attaches until the seller has had an opportunity to remedy defects, but on such opportunity being afforded by proper notice, the failure or refusal of the seller to act fixes his liability. So too an unsuccessful effort to remedy the defects render the seller liable on his warranty, and the buyer is not bound to allow him a second opportunity. On the other hand, an offer on the part of the seller to remedy defects not accepted by the buyer releases the seller from liability on the warranty, provided the offer or effort to repair is made within a reasonable time.”

In one instance Virginia in effect rendered ineffective a contractual limitation on liability by finding the seller had not delivered the particular goods purchased, instead of finding that the goods had been delivered but a warranty had been breached. International Harvester Co. v. Smith, 105 Va. 683 , 688, 54 S.E. 859 (1906) (new machine ordered; old machine delivered).

§ 8.2-720. Effect of “cancellation” or “rescission” on claims for antecedent breach.

Unless the contrary intention clearly appears, expressions of “cancellation” or “rescission” of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.

History. 1964, c. 219.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purpose:

This section is designed to safeguard a person holding a right of action from any unintentional loss of rights by the ill-advised use of such terms as “cancellation”, “rescission”, or the like. Once a party’s rights have accrued they are not to be lightly impaired by concessions made in business decency and without intention to forego them. Therefore, unless the cancellation of a contract expressly declares that it is “without reservation of rights”, or the like, it cannot be considered to be a renunciation under this section.

Cross reference:

Section 1-107.

Definitional cross references:

“Cancellation”. Section 2-106.

“Contract”. Section 1-201 .

§ 8.2-721. Remedies for fraud.

Remedies for material misrepresentation or fraud include all remedies available under this title for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 34; 5C M.J. Damages, § 18.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To correct the situation by which remedies for fraud have been more circumscribed than the more modern and mercantile remedies for breach of warranty. Thus the remedies for fraud are extended by this section to coincide in scope with those for non-fraudulent breach. This section thus makes it clear that neither rescission of the contract for fraud nor rejection of the goods bars other remedies unless the circumstances of the case make the remedies incompatible.

Definitional cross references:

“Contract for sale”. Section 2-106.

“Goods”. Section 1-201 .

“Remedy”. Section 1-201 .

VIRGINIA COMMENT

See Note, A Seller’s Liability for Innocent Misrepresentations in Virginia, 43 Va. L. Rev. 765 (1957).Packard Norfolk, Inc. v. Miller, 198 Va. 557 , 564-66, 95 S.E.2d 207 (1956), allowed a buyer to rescind a purchase contract for a new car on account of an innocent material misrepresentation made by the seller.

§ 8.2-722. Who can sue third parties for injury to goods.

Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract

  1. a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other;
  2. if at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract;
  3. either party may with the consent of the other sue for the benefit of whom it may concern.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 35.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To adopt and extend somewhat the principle of the statutes which provide for suit by the real party in interest. The provisions of this section apply only after identification of the goods. Prior to that time only the seller has a right of action. During the period between identification and final acceptance (except in the case of revocation of acceptance) it is possible for both parties to have the right of action. Even after final acceptance both parties may have the right of action if the seller retains possession or otherwise retains an interest.

Definitional cross references:

“Action”. Section 1-201 .

“Buyer”. Section 2-103.

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Rights”. Section 1-201 .

“Security interest”. Section 1-201 .

§ 8.2-723. Proof of market price; time and place.

  1. If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (§ 8.2-708 or § 8.2-713 ) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
  2. If evidence of a price prevailing at the times or places described in this title is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.
  3. Evidence of a relevant price prevailing at a time or place other than the one described in this title offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.

History. 1964, c. 219.

Michie’s Jurisprudence.

For related discussion, see 5C M.J. Damages, § 23.

CASE NOTES

Buyer’s damages against a repudiating seller. —

To give meaning to § 8.2-723 (1) , the United States Court of Appeals for the Fourth Circuit concluded that, when the case does not come to trial before the performance date, damages are not measured when the aggrieved party learned of the repudiation. Hess Energy, Inc. v. Lightning Oil Co., 338 F.3d 357, 2003 U.S. App. LEXIS 15284 (4th Cir. 2003).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To eliminate the most obvious difficulties arising in connection with the determination of market price, when that is stipulated as a measure of damages by some provision of this Article. Where the appropriate market price is not readily available the court is here granted reasonable leeway in receiving evidence of prices current in other comparable markets or at other times comparable to the one in question. In accordance with the general principle of this Article against surprise, however, a party intending to offer evidence of such a substitute price must give suitable notice to the other party.

This section is not intended to exclude the use of any other reasonable method of determining market price or of measuring damages if the circumstances of the case make this necessary.

Definitional cross references:

“Action”. Section 1-201 .

“Aggrieved party”. Section 1-201 .

“Goods”. Section 2-105.

“Notifies”. Section 1-201 .

“Party”. Section 1-201 .

“Reasonable time”. Section 1-204 .

“Usage of trade”. Section 1-205 .

VIRGINIA COMMENT

Virginia earlier recognized that if evidence of a prevailing price at the time and place to measure damages is not readily available, the price at a different place may be used. In Cocoa Products Co. of America, Inc. v. Duche, 156 Va. 86 , 99-101, 158 S.E. 719 (1931), there was no market price for cocoa butter at Norfolk, and so damages were ascertained by reference to market prices at Philadelphia, New York, and Chicago, plus freight to Norfolk. Other cases to the same effect are: Nottingham Coal & Ice Co. v. Preas, 102 Va. 820 , 823, 47 S.E. 823 (1904); McCormick & Co. v. Hamilton, Wood & Co., 64 Va. (23 Gratt.) 561 (1873).

§ 8.2-724. Admissibility of market quotations (subdivision (17) of Supreme Court Rule 2:803 derived from this section).

Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.

History. 1964, c. 219.

Editor’s note.

At the direction of the Virginia Code Commission, the notation to the Virginia Rules of Evidence was added to the catchline of this section. Acts 2012, cc. 688 and 708, cl. 6 provides: “That pursuant to the authority set forth in §§ 30-146 and 30-147 of the Code of Virginia, the Virginia Code Commission shall direct any party with whom the Virginia Code Commission contracts to publish the Code of Virginia to include in the catchline of every section of the Code of Virginia from which any rule contained in the Rules of Evidence has been derived a notation specifying such rule.”

Michie’s Jurisprudence.

For related discussion, see 3C M.J. Commercial Law, § 36.

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To make market quotations admissible in evidence while providing for a challenge of the material by showing the circumstances of its preparation.

No explicit provision as to the weight to be given to market quotations is contained in this section, but such quotations, in the absence of compelling challenge, offer an adequate basis for a verdict.

Market quotations are made admissible when the price or value of goods traded “in any established market” is in issue. The reason of the section does not require that the market be closely organized in the manner of a produce exchange. It is sufficient if transactions in the commodity are frequent and open enough to make a market established by usage in which one price can be expected to affect another and in which an informed report of the range and trend of prices can be assumed to be reasonably accurate.

This section does not in any way intend to limit or negate the application of similar rules of admissibility to other material, whether by action of the courts or by statute. The purpose of the present section is to assure a minimum of mercantile administration in this important situation and not to limit any liberalizing trend in modern law.

Definitional cross reference:

“Goods”. Section 2-105.

§ 8.2-725. Statute of limitations in contracts for sale.

  1. An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.
  2. A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
  3. Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.
  4. This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this act becomes effective.

History. 1964, c. 219.

Cross references.

As to effective date of act, see § 8.10-101 .

Law Review.

For survey of Virginia law on torts for the year 1970-1971, see 57 Va. L. Rev. 1501 (1971).

For survey of Virginia commercial law for the year 1971-1972, see 58 Va. L. Rev. 1183 (1972).

For note, “Reforming the Law of Consumer Recovery and Enterprise Liability Through the Uniform Commercial Code,” see 60 Va. L. Rev. 1013 (1974).

For survey of Virginia practice and pleading for the year 1977-1978, see 64 Va. L. Rev. 1501 (1978).

For article discussing statutes of limitation and repose in toxic substances litigation, see 16 U. Rich. L. Rev. 247 (1982).

For article, “Products Liability and the Virginia Statute of Limitations — A Call for the Legislative Rescue Squad,” see 16 U. Rich. L. Rev. 323 (1982).

For 1987 survey of Virginia commercial law, see 21 U. Rich. L. Rev. 693 (1987).

Michie’s Jurisprudence.

For related discussion, see 2A M.J. Assumpsit, § 33; 3C M.J. Commercial Law, §§ 5, 14, 36; 8A M.J. Executors and Administrators, § 311; 8B M.J. Food, § 10; 12A M.J. Limitation of Actions, §§ 19, 23, 43.

CASE NOTES

Section 8.01-246 expressly provides that where this section is applicable, it shall be controlling. —

Sprague & Henwood v. Johnson, 606 F. Supp. 1564, 1985 U.S. Dist. LEXIS 20385 (W.D. Va. 1985).

Section 8.01-246 did not apply to products liability action arising before October 1, 1977. —

Where plaintiffs’ home was damaged by fire on July 20, 1977, allegedly due to a defect in a portable refrigerator delivered to their residence on February 8, 1975, the limitation period for the warranty claims was four years and the time began to run from February 8, 1975, when the refrigerator was delivered, pursuant to this section. Plaintiff’s contention that their causes of action for breach of warranty accrued on July 20, 1977, when the fire occurred and that the limitation period of five years was misplaced, since § 8.01-246 was not effective until October 1, 1977. Stone v. Ethan Allen, Inc., 232 Va. 365 , 350 S.E.2d 629, 3 Va. Law Rep. 1342, 1986 Va. LEXIS 266 (1986).

Action for injury to goods or to subject of sale. —

When a transaction is governed by the Uniform Commercial Code, an action for injury to the goods, or to the subject of the sale by a party to the contract, is to be governed by this section whether the suit is in tort or in contract. APCO v. GE Co., 508 F. Supp. 530, 1980 U.S. Dist. LEXIS 16628 (W.D. Va. 1980), aff'd, 665 F.2d 1038 (4th Cir. 1981).

Where buyer filed an action against seller of a power transformer for negligently loading and shipping the transformer, the action sounded in tort, but the genesis of the action was actually in contract because if not for the contract there would have been no duty by the seller to the buyer, and, therefore, the four-year statute of limitations governing sales contracts ruled in the action. APCO v. GE Co., 508 F. Supp. 530, 1980 U.S. Dist. LEXIS 16628 (W.D. Va. 1980), aff'd, 665 F.2d 1038 (4th Cir. 1981).

Buyer’s breach of contract claim against a seller’s parent company was not barred by the four-year statute of limitations; the claims were brought against the seller within four years from the date that the faulty goods were rebuilt by the seller, and any breach of contract claim against the parent company would have related back to the date of the buyer’s complaint if the buyer had been granted leave to file a second amended complaint that included the parent company as a party defendant. Rapoca Energy Co., LLP v. J.L. Mining Co., 368 F. Supp. 2d 541, 2005 U.S. Dist. LEXIS 8155 (W.D. Va. 2005).

Limitation on action for personal injury based on breach of warranty. —

Where a cause of action to recover for personal injury is predicated upon a breach of warranty under the Uniform Commercial Code, § 8.01-243 is the proper statute of limitations to be applied. Tyler v. R.R. St. & Co., 322 F. Supp. 541, 1971 U.S. Dist. LEXIS 14571 (E.D. Va. 1971) (commented on in 6 U. Rich. L. Rev. 167 (1971)).

Attempt to reduce limitations period ineffective. —

Manufacturer’s purported attempt in an express warranty to reduce the limitations period for enforcing limited or implied warranties to 90 days was ineffective under § 8.2-725(1) where the parties did not specifically agree to the period of limitation, not just the warranty in general. There was no indication that the buyer was even aware of the limitation period, let alone any indication of agreement by the manufacturer and the buyer on the issue. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Where the parties did not agree to reduce the limitations period by the original agreement, § 8.2-725 (1), the default Virginia Uniform Commercial Code statute of limitations applied, § 8.2-725 (20), which was four years after the breach occurred. Even accepting the component manufacturer’s contention that its delivery of the components to the RV manufacturer was the pertinent tender of delivery for limitations purposes, it failed to argue that delivery occurred four years before the buyer filed his claim. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Future performance exception inapplicable to implied warranties. —

A buyer of a crane could not avail himself of the “future performance” exception to the rule that a cause of action for breach of warranty accrues when the breach occurs, since the buyer’s claims rested entirely on implied warranties. E.T. Gresham Co. v. Koehring Crane & Excavator Group, 479 F. Supp. 132, 1979 U.S. Dist. LEXIS 10157 (E.D. Va. 1979).

Future performance. —

Manufacturer of sprinkler heads, which allegedly failed to operate properly during a fire, was entitled to the protection of the statute of limitations under § 8.2-725 on insurers’ breach of warranty claims because there was not an express warranty of future performance regarding the sprinkler heads under § 8.2-313 . Royal Indem. Co. v. Tyco Fire Prods., LP, 281 Va. 157 , 704 S.E.2d 91, 2011 Va. LEXIS 24 (2011).

Implied warranty of merchantability distinctly different from implied contract of indemnity. —

The implied warranty of merchantability that generally arises upon the sale (or delivery) of goods and the implied contract of indemnity that flows from the warranty are distinctly different and are governed by different statutes of limitation. Wingo v. Norfolk & W. Ry., 638 F. Supp. 107, 1986 U.S. Dist. LEXIS 25214 (W.D. Va. 1986).

This section did not govern action for indemnity brought by employer railway, found liable for asbestos-related injuries, against manufacturers. Wingo v. Norfolk & W. Ry., 638 F. Supp. 107, 1986 U.S. Dist. LEXIS 25214 (W.D. Va. 1986).

Applicability to claims against guarantor who was not a party to promissory note. —

Where a guarantor, who was equally liable for duties owed by a buyer to a seller under an asset purchase agreement, did not sign a nonnegotiated promissory note for the deferred purchase price for the assets, the guarantor was not a party to the note; thus, the four-year limitations period of § 8.2-725 applied to claims against him. Bizmark, Inc. v. Indus. Gas & Supply Co., 358 F. Supp. 2d 518, 2005 U.S. Dist. LEXIS 3112 (W.D. Va. 2005), dismissed in part, No. 2:04cv00109, 2005 U.S. Dist. LEXIS 26707 (W.D. Va. Nov. 4, 2005).

Seller’s disclaimer of warranty against third parties. —

Where a components manufacturer offered an express warranty to the original buyer (the RV manufacturer), that warranty did not extend to foreseeable users of the product (the purchaser of the RV) pursuant to § 8.2-318 because the components manufacturer specifically disclaimed warranties as to foreseeable users. Hoffman v. Daimler Trucks N. Am., LLC, 940 F. Supp. 2d 347, 2013 U.S. Dist. LEXIS 53118 (W.D. Va. 2013).

Applicability to breach of contract for sale of goods. —

Virginia has a five-year period of limitations for written contracts generally, but if the action is for breach of a contract for the sale of goods, the shorter Uniform Commercial Code period set forth in § 8.2-725 applies by operation of § 8.01-246 . Bizmark, Inc. v. Indus. Gas & Supply Co., 358 F. Supp. 2d 518, 2005 U.S. Dist. LEXIS 3112 (W.D. Va. 2005), dismissed in part, No. 2:04cv00109, 2005 U.S. Dist. LEXIS 26707 (W.D. Va. Nov. 4, 2005).

Inapplicable to cause of action accruing prior to UCC. —

The limitation period set forth in this section relating to warranties for future performance does not apply to causes of action which accrued before the Uniform Commercial Code became effective. Smithfield Packing Co. v. Dunham-Bush, Inc., 416 F. Supp. 1156, 1976 U.S. Dist. LEXIS 13951 (E.D. Va. 1976).

Doctrine of equitable estoppel held to preclude summary judgment for defendant based upon defense of expiration of the period of limitation in an action for breach of contract and warranties of merchantability and fitness. See City of Bedford v. James Leffel & Co., 558 F.2d 216, 1977 U.S. App. LEXIS 12627 (4th Cir. 1977).

The district court was not clearly erroneous in finding that there was no evidence to support a claim of equitable estoppel against defendant company’s raising of the running of the statute of limitations from defendant’s attempted repairs of trailers which it had sold to plaintiff and letter from defendant’s general manager indicating defendant’s assurance of standing behind its product. Roy Stone Transf. Corp. v. Budd Co., 796 F.2d 720, 1986 U.S. App. LEXIS 27625 (4th Cir. 1986).

CIRCUIT COURT OPINIONS

Economic loss rule. —

Where a school board was not attempting to vindicate any interest outside of a contractual bargain, the loss of a bus was properly categorized as an economic loss, which did not bring the loss within the statute of limitations for contract or property damage. Sch. Bd. v. Int'l Truck & Engine Corp., 62 Va. Cir. 466, 2003 Va. Cir. LEXIS 302 (Norfolk Sept. 3, 2003).

Divisible installment contract governed by statute of limitations. —

Because a contract for the purchase of a motor vehicle was a divisible installment contract, a cause of action arose each time a payment was missed. Causes of action that arose more than four years after the last payment was missed were barred by the four-year statute of limitations of § 8.2-725 . Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 2008 Va. Cir. LEXIS 83 (Fairfax County June 20, 2008).

Four-year statute of limitations applicable. —

Four-year statute of limitations of § 8.2-725 applied to assignee’s breach of contract claim against a borrower who purchased a motor vehicle for the borrower’s personal use. A motor vehicle was a good under § 8.2-105 , and the assignee’s right to sue arose from a contract constituting a transaction in goods under § 8.2-102 . Credit Acceptance Corp. v. Coates, 75 Va. Cir. 267, 2008 Va. Cir. LEXIS 83 (Fairfax County June 20, 2008).

Under the Virginia Commercial Code, the buyers’ breach of contract claims accrued at the time the vehicles were delivered and thus, the statute of limitations tolled four years later such that all the buyers’ breach of contract claims brought more than four years after delivery were time-barred. In re Volkswagen "Clean Diesel" Litig., 94 Va. Cir. 189, 2016 Va. Cir. LEXIS 138 (Fairfax County Aug. 30, 2016).

Action barred by statute of limitation. —

Pleas in bar to implied warranty claims were sustained because the company’s suit was not filed until almost eight years after the parties entered into the contracts; neither the general contractor nor the subcontractor were merchants under the Uniform Commercial Code, and to the extent that any other warranty claim against them was made, such claims were barred by the five-year statute of limitations for written contract and the three-year statute of limitations for an unwritten contract. E. Va. Bank Shares, Inc. v. PPI Dissolution Co., 100 Va. Cir. 472, 2013 Va. Cir. LEXIS 225 (Essex County Apr. 15, 2013).

Action not barred by statute of limitation.—

Breach of contract claim was not time-barred, as the initial suit in 2018 was initiated less than four years after defendants’ breach and the action was refiled a little over two months after the 2018 suit was dismissed in 2019 for lack of standing. Signal Hill Supply, LLC v. Signal Hill Supply & Servs., 2022 Va. Cir. LEXIS 99 (Fairfax County July 25, 2022).

OFFICIAL COMMENT

Prior uniform statutory provision: None.

Purposes: To introduce a uniform statute of limitations for sales contracts, thus eliminating the jurisdictional variations and providing needed relief for concerns doing business on a nationwide scale whose contracts have heretofore been governed by several different periods of limitation depending upon the state in which the transaction occurred. This Article takes sales contracts out of the general laws limiting the time for commencing contractual actions and selects a four year period as the most appropriate to modern business practice. This is within the normal commercial record keeping period.

Subsection (1) permits the parties to reduce the period of limitation. The minimum period is set at one year. The parties may not, however, extend the statutory period.

Subsection (2), providing that the cause of action accrues when the breach occurs, states an exception where the warranty extends to future performance.

Subsection (3) states the saving provision included in many state statutes and permits an additional short period for bringing new actions, where suits begun within the four year period have been terminated so as to leave a remedy still available for the same breach.

Subsection (4) makes it clear that this Article does not purport to alter or modify in any respect the law on tolling of the Statute of Limitations as it now prevails in the various jurisdictions.

Definitional cross references:

“Action”. Section 1-201 .

“Aggrieved party”. Section 1-201 .

“Agreement”. Section 1-201 .

“Contract for sale”. Section 2-106.

“Goods”. Section 2-105.

“Party”. Section 1-201 .

“Remedy”. Section 1-201 .

“Term”. Section 1-201 .

“Termination”. Section 2-106.

VIRGINIA COMMENT

This section, which provides a uniform four-year statute of limitations on contracts for sale, subject to reduction to one year by agreement between the parties, changes the Virginia limitation periods. Code 1950, § 8.01-246 , provides a ten-year limitation period on written contracts under seal, five-year period on other written contracts, and three years on other express or implied contracts. The statute also provides for a five-year period after cessation of dealings “upon accounts concerning the trade of merchandise between merchant and merchant, their factors, or servants.” This statutory provision is discussed in Ellison v. Weintrob, 139 Va. 29 , 123 S.E. 512 (1924).

This section expressly provides that it does not affect tolling statutes, but its effect on “saving provisions” is not clear. Subsection 8.2-725(3) is similar in some respects to Code 1950, § 8.01-229 , but the Virginia statute is broader. See Jones v. Morris Plan Bank of Portsmouth, 170 Va. 88 , 195 S.E. 525 (1938). It is not entirely clear whether statutes such as Code 1950, § 8.01-229 , which provides a saving provision as to persons under disability, are considered tolling statutes, so as to remain in effect under subsection (4), or saving provisions that have been superseded by subsection (3).

The UCC provides that in the original agreement, the parties may reduce the period of limitations to one year. This provision appears to be in conflict with the policy underlying Code 1950, § 8.01-232 , under which a promisor who has made a promise not to plead the statute of limitations is estopped to plead such statute if to do so would operate as a fraud on the promisee. Otherwise, unwritten promises not to plead the statute are void and written promises not to plead the statute have the same effect as promises to pay the debt, which is to start the statute running anew, Code 1950, § 8.01-229 . (But see Code 1950, § 8.01-232 relating to personal representatives and joint contractors. See also Sobel v. Herman, 175 Va. 489 , 9 S.E.2d 459 (1940), for a construction of these statutes.) The UCC would seem to change prior Virginia law in that it allows the parties to contract for shorter periods of limitation. The UCC is not clear as to whether it is intended to affect a statute such as Code 1950, § 8.01-229 , under which a new promise in writing starts this statute running anew. Literally, the text of the UCC does not affect this statute, but the Official Comment indicates that the draftsmen intended to preclude parties from extending the statutory limitation periods.