§ 34.1-1-101. Short titles.

1. This act may be cited as the Uniform Commercial Code.
2. This article may be cited as Uniform Commercial Code – General Provisions.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-101.

Changes from former law:

Subsection (b) is new. It is added in order to make the structure of Article 1 parallel with that of the other articles of the Uniform Commercial Code.

1. Each other article of the Uniform Commercial Code (except Articles 10 and 11) may also be cited by its own short title. See Sections 2-101, 2A-101, 3-101, 4-101, 4A-101, 5-101, 6-101, 7-101, 8-101, and 9-101.

Cited in

Hinkle v. Rock Springs Nat'l Bank, 538 F.2d 295, 1976 U.S. App. LEXIS 8089 (10th Cir. 1976); Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980); The Corner v. Pinnacle, Inc., 907 P.2d 1281, 1995 Wyo. LEXIS 210 (Wyo. 1995).

Law reviews. —

For note, “Section 1-207 of the Uniform Commercial Code Not Intended to Apply to Doctrine of Accord and Satisfaction,” see XV Land & Water L. Rev. 737 (1980).

§ 34.1-1-102. Scope of article.

This article applies to a transaction to the extent that it is governed by another article of this act.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

New.

1. This section is intended to resolve confusion that has occasionally arisen as to the applicability of the substantive rules in this article. This section makes clear what has always been the case - the rules in Article 1 apply to transactions to the extent that those transactions are governed by one of the other articles of the Uniform Commercial Code. See also Comment 1 to Section 1-301.

“Commerce” and “commercial” distinguished. —

“Commerce” relates to buying, selling, exchanging and transporting of commodities or articles, or the transporting of business, to the exchange or buying and selling of commodities, while “commercial” is defined as pertaining to commerce, mercantile, occupied with commerce, engaged in trade. Jahn v. Burns, 593 P.2d 828, 1979 Wyo. LEXIS 403 (Wyo. 1979).

Tort claim resulting from automobile accident is not commercial transaction. Jahn v. Burns, 593 P.2d 828, 1979 Wyo. LEXIS 403 (Wyo. 1979).

Applied in

B & W Glass, Inc. v. Weather Shield Mfg., Inc., 829 P.2d 809, 1992 Wyo. LEXIS 43 (Wyo. 1992).

Stated in

United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. 1974); Aztec Gas & Oil Corp. v. Roemer Oil Co., 948 P.2d 902, 1997 Wyo. LEXIS 145 (Wyo. 1997).

Cited in

Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 1989 Wyo. LEXIS 66 (Wyo. 1989).

§ 34.1-1-103. Construction of this act to promote its purposes and policies; applicability to supplemental principles of law.

1. This act shall be liberally construed and applied to promote its underlying purposes and policies, which are:
   1. To simplify, clarify, and modernize the law governing commercial transactions;
   2. To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
   3. To make uniform the law among the various jurisdictions.
2. Unless displaced by the particular provisions of this act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-102 (1)-(2); Former Section 1-103.

Changes from former law:

This section is derived from subsections (1) and (2) of former Section 1-102 and from former Section 1-103. Subsection (a) of this section combines subsections (1) and (2) of former Section 1-102. Except for changing the form of reference to the Uniform Commercial Code and minor stylistic changes, its language is the same as subsections (1) and (2) of former Section 1-102. Except for changing the form of reference to the Uniform Commercial Code and minor stylistic changes, subsection (b) of this section is identical to former Section 1-103. The provisions have been combined in this section to reflect the interrelationship between them.

1. The Uniform Commercial Code is drawn to provide flexibility so that, since it is intended to be a semi-permanent and infrequently-amended piece of legislation, it will provide its own machinery for expansion of commercial practices. It is intended to make it possible for the law embodied in the Uniform Commercial Code to be applied by the courts in the light of unforeseen and new circumstances and practices. The proper construction of the Uniform Commercial Code requires, of course, that its interpretation and application be limited to its reason.

Even prior to the enactment of the Uniform Commercial Code, courts were careful to keep broad acts from being hampered in their effects by later acts of limited scope. See Pacific Wool Growers v. Draper & Co., 158 Or. 1, 73 P.2d 1391 (1937) , and compare Section 1-104. The courts have often recognized that the policies embodied in an act are applicable in reason to subject-matter that was not expressly included in the language of the act, Commercial Nat. Bank of New Orleans v. Canal-Louisiana Bank & Trust Co., 239 U.S. 520, 36 S. Ct. 194, 60 L. Ed. 417 (1916) (bona fide purchase policy of Uniform Warehouse Receipts Act extended to case not covered but of equivalent nature), and did the same where reason and policy so required, even where the subject-matter had been intentionally excluded from the act in general. Agar v. Orda, 264 N.Y. 248, 190 N.E. 479 (1934) (Uniform Sales Act change in seller's remedies applied to contract for sale of choses in action even though the general coverage of that Act was intentionally limited to goods "other than things in action.") They implemented a statutory policy with liberal and useful remedies not provided in the statutory text. They disregarded a statutory limitation of remedy where the reason of the limitation did not apply. Fiterman v. J. N. Johnson & Co., 156 Minn. 201, 194 N.W. 399 (1923) (requirement of return of the goods as a condition to rescission for breach of warranty; also, partial rescission allowed). Nothing in the Uniform Commercial Code stands in the way of the continuance of such action by the courts.

The Uniform Commercial Code should be construed in accordance with its underlying purposes and policies. The text of each section should be read in the light of the purpose and policy of the rule or principle in question, as also of the Uniform Commercial Code as a whole, and the application of the language should be construed narrowly or broadly, as the case may be, in conformity with the purposes and policies involved.

2. Applicability of supplemental principles of law. Subsection (b) states the basic relationship of the Uniform Commercial Code to supplemental bodies of law. The Uniform Commercial Code was drafted against the backdrop of existing bodies of law, including the common law and equity, and relies on those bodies of law to supplement it provi-sions in many important ways. At the same time, the Uniform Commercial Code is the primary source of commercial law rules in areas that it governs, and its rules represent choices made by its drafters and the enacting legislatures about the appropriate policies to be furthered in the transactions it covers. Therefore, while principles of common law and equity may supplement provisions of the Uniform Commercial Code, they may not be used to supplant its provisions, or the purposes and policies those provisions reflect, unless a specific provision of the Uniform Commercial Code provides otherwise. In the absence of such a provision, the Uniform Commercial Code preempts principles of common law and equity that are inconsistent with either its provisions or its purposes and policies.

The language of subsection (b) is intended to reflect both the concept of supplementation and the concept of preemp-tion. Some courts, however, had difficulty in applying the identical language of former Section 1-103 to determine when other law appropriately may be applied to supplement the Uniform Commercial Code, and when that law has been displaced by the Code. Some decisions applied other law in situations in which that application, while not inconsistent with the text of any particular provision of the Uniform Commercial Code, clearly was inconsistent with the underlying purposes and policies reflected in the relevant provisions of the Code. See, e.g., Sheerbonnet, Ltd. v. American Express Bank, Ltd., 951 F. Supp. 403 (S.D.N.Y. 1995) . In part, this difficulty arose from Comment 1 to former Section 1-103, which stated that "this section indicates the continued applicability to commercial contracts of all supplemental bodies of law except insofar as they are explicitly displaced by this Act." The "explicitly displaced" language of that Comment did not accurately reflect the proper scope of Uniform Commercial Code preemption, which extends to displacement of other law that is inconsistent with the purposes and policies of the Uniform Commercial Code, as well as with its text.

3. Application of subsection (b) to statutes. The primary focus of Section 1-103 is on the relationship between the Uniform Commercial Code and principles of common law and equity as developed by the courts. State law, however, increasingly is statutory. Not only are there a growing number of state statutes addressing specific issues that come within the scope of the Uniform Commercial Code, but in some States many general principles of common law and equity have been codified. When the other law relating to a matter within the scope of the Uniform Commercial Code is a statute, the principles of subsection (b) remain relevant to the court's analysis of the relationship between that statute and the Uniform Commercial Code, but other principles of statutory interpretation that specifically address the interrelationship between statutes will be relevant as well. In some situations, the principles of subsection (b) still will be determinative. For example, the mere fact that an equitable principle is stated in statutory form rather than in judicial decisions should not change the court's analysis of whether the principle can be used to supplement the Uniform Commercial Code - under subsection (b), equitable principles may supplement provisions of the Uniform Commercial Code only if they are consistent with the purposes and policies of the Uniform Commercial Code as well as its text. In other situations, however, other interpretive principles addressing the interrelationship between statutes may lead the court to conclude that the other statute is controlling, even though it conflicts with the Uniform Commercial Code. This, for example, would be the result in a situation where the other statute was specifically intended to provide additional protection to a class of individuals engaging in transactions covered by the Uniform Commercial Code.

4. Listing not exclusive. The list of sources of supplemental law in subsection (b) is intended to be merely illustrative of the other law that may supplement the Uniform Commercial Code, and is not exclusive. No listing could be exhaustive. Further, the fact that a particular section of the Uniform Commercial Code makes express reference to other law is not intended to suggest the negation of the general application of the principles of subsection (b). Note also that the word "bankruptcy" in subsection (b), continuing the use of that word from former Section 1-103, should be understood not as a specific reference to federal bankruptcy law but, rather as a reference to general principles of insolvency, whether under federal or state law.

Displacement of common law action. —

The law of replevin has not been displaced by the Uniform Commercial Code and thus the trial court correctly determined that there were no genuine issues of material fact because, in effect, the buyers had no facts available to them that disputed any of the evidentiary material brought forward by the seller with respect to his replevin action. Johnson v. Creager, 2003 WY 110, 76 P.3d 799, 2003 Wyo. LEXIS 139 (Wyo. 2003).

Waiver requires full knowledge of rights waived. —

By this section, the law of waiver comes into play. But a party cannot be held to have waived a right based upon material facts the existence of which he did not know, for an effective waiver requires full knowledge of rights being waived. Western Nat'l Bank v. Harrison, 577 P.2d 635, 1978 Wyo. LEXIS 283 (Wyo. 1978).

Promissory estoppel available to avoid statute of frauds. —

An oral promise otherwise within the statute of frauds as set forth in § 34.1-2-201 may nevertheless be enforceable on the basis of promissory estoppel. B & W Glass v. Weather Shield Mfg., 829 P.2d 809, 1992 Wyo. LEXIS 43 (Wyo. 1992).

Quoted in

Aztec Gas & Oil Corp. v. Roemer Oil Co., 948 P.2d 902, 1997 Wyo. LEXIS 145 (Wyo. 1997).

Am. Jur. 2d, ALR and C.J.S. references. —

Promissory estoppel of lending institution based on promise to lend money, 18 ALR5th 307.

§ 34.1-1-104. Construction against implied repeal.

This act being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comments

Source:

Former Section 1-104.

Changes from former law:

Except for changing the form of reference to the Uniform Commercial Code, this section is identical to former Section 1-104.

1. This section embodies the policy that an act that bears evidence of carefully considered permanent regulative intention should not lightly be regarded as impliedly repealed by subsequent legislation. The Uniform Commercial Code, carefully integrated and intended as a uniform codification of permanent character covering an entire “field” of law, is to be regarded as particularly resistant to implied repeal.

§ 34.1-1-105. Severability.

If any provision or clause of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-108.

Changes from former law.

Except for changing the form of reference to the Uniform Commercial Code, this section is identical to former Section 1-108.

1. This is the model severability section recommended by the National Conference of Commissioners on Uniform State Laws for inclusion in all acts of extensive scope.

Cross references. —

For definition of “person,” see § 34.1-1-201.

§ 34.1-1-106. Use of singular and plural; gender.

1. In this act, unless the statutory context otherwise requires:
   1. Words in the singular number include the plural, and those in the plural include the singular; and
   2. Words of any gender also refer to any other gender.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-102(5). See also 1 U.S.C. Section1.

Changes from former law:

Other than minor stylistic changes, this section is identical to former Section 1-102(5).

1. This section makes it clear that the use of singular or plural in the text of the Uniform Commercial Code is generally only a matter of drafting style - singular words may be applied in the plural, and plural words may be applied in the singular. Only when it is clear from the statutory context that the use of the singular or plural does not include the other is this rule inapplicable. See, e.g., Section 9-322.

§ 34.1-1-107. Section captions.

Section captions are part of this act.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-107.

Changes from former law:

None.

1. Section captions are a part of the text of the Uniform Commercial Code, and not mere surplusage. This is not the case, however, with respect to subsection headings appearing in Article 9. See Comment 3 to Section 9-101 (“subsection headings are not a part of the official text itself and have not been approved by the sponsors.”).

§ 34.1-1-108. Relation to electronic signatures in global and national commerce act.

This article modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., except that nothing in this article modifies, limits, or supersedes Section 7001(c) of that act or authorizes electronic delivery of any of the notices described in Section 7003(b) of that act.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

New

1. The federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq became effective in 2000. Section 102(a) of that Act provides that a State statute may modify, limit, or supersede the provisions of section 101 of that Act with respect to state law if such statute, inter alia , specifies the alternative procedures or requirements for the use or acceptance (or both) of electronic records or electronic signatures to establish the legal effect, validity, or enforceability of contracts or other records, and (i) such alternative procedures or requirements are consistent with Titles I and II of that Act, (ii) such alternative procedures or requirements do not require, or accord greater legal status or effect to, the implementation or application of a specific technology or technical specification for performing the functions of creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures; and (iii) if enacted or adopted after the date of the enactment of that Act, makes specific reference to that Act. Article 1 fulfills the first two of those three criteria; this Section fulfills the third criterion listed above.

2. As stated in this section, however, Article 1 does not modify, limit, or supersede Section 101(c) of the Electronic Signatures in Global and National Commerce Act (requiring affirmative consent from a consumer to electronic delivery of transactional disclosures that are required by state law to be in writing); nor does it authorize electronic delivery of any of the notices described in Section 103(b) of that Act.

§ 34.1-1-109. Section captions. [Repealed]

History. Laws 1961, ch. 219, § 1-109; W.S. 1957, § 34-1-109 ; W.S. 1977, § 34-21-109; Laws 2015, ch. 124, § 1.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

To make explicit in all jurisdictions that section captions are a part of the text of this Act and not mere surplusage.

§ 34.1-1-201. General definitions.

1. Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of this act that apply to particular articles or parts thereof, have the meanings stated.
2. Subject to definitions contained in other articles of this act that apply to particular articles or parts thereof:
   1. “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined;
   2. “Aggrieved party” means a party entitled to pursue a remedy;
   3. “Agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in W.S. 34.1-1-303;
   4. “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company;
   5. “Bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or endorsed in blank;
   6. “Bill of lading” means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt;
   7. “Branch” includes a separately incorporated foreign branch of a bank;
   8. “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence;
   9. “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under article 2 may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
   10. “Conspicuous,” with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following:
       1. A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
       2. Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.
   11. “Consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes;
   12. “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties” agreement as determined by this act as supplemented by any other applicable laws
   13. “Creditor” includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate;
   14. “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim;
   15. “Delivery,” with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession;
   16. “Document of title” means a record:
       1. That in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold and dispose of the record and the goods the record covers; and
       2. That purports to be issued by or addressed to a bailee and to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.
   17. “Fault” means a default, breach, or wrongful act or omission;
   18. “Fungible goods” means:
       1. Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or
       2. Goods that by agreement are treated as equivalent.
   19. “Genuine” means free of forgery or counterfeiting;
   20. “Good faith,” except as otherwise provided in article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing;
   21. “Holder” means:
       1. The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;
       2. The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or
       3. The person in control of a negotiable electronic document of title.
   22. “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved;
   23. “Insolvent” means:
       1. Having generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute;
       2. Being unable to pay debts as they become due; or
       3. Being insolvent within the meaning of federal bankruptcy law.
   24. “Money” means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two (2) or more countries;
   25. “Organization” means a person other than an individual;
   26. “Party,” as distinguished from “third party,” means a person that has engaged in a transaction or made an agreement subject to this act;
   27. “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, instrumentality, public corporation, or any other legal or commercial entity;
   28. “Present value” means the amount as of a date certain of one (1) or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into;
   29. “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property;
   30. “Purchaser” means a person that takes by purchase;
   31. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
   32. “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal;
   33. “Representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate;
   34. “Right” includes remedy;
   35. “Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. Security interest includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible or a promissory note in a transaction that is subject to article 9. Security interest does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under W.S. 34.1-2-401, but a buyer may also acquire a security interest by complying with article 9. Except as otherwise provided in W.S. 34.1-2-505, the right of a seller or lessor of goods under article 2 or 2A to retain or acquire possession of the goods is not a security interest, but a seller or lessor may also acquire a security interest by complying with article 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under W.S. 34.1-2-401 is limited in effect to a reservation of a security interest. Whether a transaction in the form of a lease creates a security interest is determined pursuant to W.S. 34.1-1-203;
   36. “Send” in connection with a writing, record, or notice means:
       1. To deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed or, if there be none, to any address reasonable under the circumstances; or
       2. In any other way to cause to be received any record or notice within the time it would have arrived if properly sent.
   37. “Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing;
   38. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States;
   39. “Surety” includes a guarantor or other secondary obligor;
   40. “Term” means a portion of an agreement that relates to a particular matter;
   41. “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery;
   42. “Warehouse receipt” means a document of title issued by a person engaged in the business of storing goods for hire;
   43. “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-201.

Changes from former law:

In order to make it clear that all definitions in the Uniform Commercial Code (not just those appearing in Article 1, as stated in former Section 1-201, but also those appearing in other Articles) do not apply if the context otherwise requires, a new subsection (a) to that effect has been added, and the definitions now appear in subsection (b). The reference in subsection (a) to the “context” is intended to refer to the context in which the defined term is used in the Uniform Commercial Code. In other words, the definition applies whenever the defined term is used unless the context in which the defined term is used in the statute indicates that the term was not used in its defined sense. Consider, for example, Sections 3-103(a)(9) (defining “promise,” in relevant part, as “a written undertaking to pay money signed by the person undertaking to pay”) and 3-303(a)(1) (indicating that an instrument is issued or transferred for value if “the instrument is issued or transferred for a promise of performance, to the extent that the promise has been performed.” It is clear from the statutory context of the use of the word “promise” in Section 3-303(a)(1) that the term was not used in the sense of its definition in Section 3-103(a)(9). Thus, the Section 3-103(a)(9) definition should not be used to give meaning to the word “promise” in Section 3-303(a).

Some definitions in former Section 1-201 have been reformulated as substantive provisions and have been moved to other sections. See Sections 1-202 (explicating concepts of notice and knowledge formerly addressed in Sections 1-201(25)-(27)), 1-204 (determining when a person gives value for rights, replacing the definition of “value” in former Section 1-201(44)), and 1-206 (addressing the meaning of presumptions, replacing the definitions of “presumption” and “presumed” in former Section 1-201(31)). Similarly, the portion of the definition of “security interest” in former Section 1-201(37) which explained the difference between a security interest and a lease has been relocated to Section 1-203. Two definitions in former Section 1-201 have been deleted. The definition of “honor” in former Section 1-201(21) has been moved to Section 2-103(1)(b), inasmuch as the definition only applies to the use of the word in Article 2. The definition of “telegram” in former Section 1-201(41) has been deleted because that word no longer appears in the definition of “conspicuous.”

Other than minor stylistic changes and renumbering, the remaining definitions in this section are as in former Article 1 except as noted below.

1. “Action” Unchanged from former Section 1-201, which was derived from similar definitions in Section 191, Uniform Negotiable Instruments Law; Section 76, Uniform Sales Act; Section 58, Uniform Warehouse Receipts Act; Section 53, Uniform Bills of Lading Act.

2. “Aggrieved party.” Unchanged from former Section 1-201.

3. “Agreement.” Derived from former Section 1-201. As used in the Uniform Commercial Code the word is intended to include full recognition of usage of trade, course of dealing, course of performance and the surrounding circumstances as effective parts thereof, and of any agreement permitted under the provisions of the Uniform Commercial Code to displace a stated rule of law. Whether an agreement has legal consequences is determined by applicable provisions of the Uniform Commercial Code and, to the extent provided in Section 1-103, by the law of contracts.

4. “Bank.” Derived from Section 4A-104.

5. "Bearer".Unchanged, except in one respect, from former section 1-201, which was derived from Section 191, Uniform Negotiable Instruments Law. The term bearer applies to negotiable documents of title and has been broadened to include a person in control of an electronic negotiable document of title. Control of an electronic document of title is defined in Article 7 (Section 7-106).

6. "Bill of Lading". Derived from former Section 1-201. The reference to, and definition of, an “airbill” has been deleted as no longer necessary. A bill of lading is one type of document of title as defined in subsection (16). This definition should be read in conjunction with the definition of carrier in Article 7 (Section 7-102).

7. “Branch.” Unchanged from former Section 1-201.

8. “Burden of establishing a fact.” Unchanged from former Section 1-201.

9. “Buyer in ordinary course of business.” Except for minor stylistic changes, identical to former Section 1-201 (as amended in conjunction with the 1999 revisions to Article 9). The major significance of the phrase lies in Section 2-403 and in the Article on Secured Transactions (Article 9).

The first sentence of paragraph (9) makes clear that a buyer from a pawnbroker cannot be a buyer in ordinary course of business. The second sentence explains what it means to buy “in the ordinary course.” The penultimate sentence prevents a buyer that does not have the right to possession as against the seller from being a buyer in ordinary course of business. Concerning when a buyer obtains possessory rights, see Sections 2-502 and 2-716. However, the penultimate sentence is not intended to affect a buyer’s status as a buyer in ordinary course of business in cases (such as a “drop shipment”) involving delivery by the seller to a person buying from the buyer or a donee from the buyer. The requirement relates to whether as against the seller the buyer or one taking through the buyer has possessory rights.

10. “Conspicuous.” Derived from former Section 1-201(10). This definition states the general standard that to be conspicuous a term ought to be noticed by a reasonable person. Whether a term is conspicuous is an issue for the court. Subparagraphs (A) and (B) set out several methods for making a term conspicuous. Requiring that a term be conspicuous blends a notice function (the term ought to be noticed) and a planning function (giving guidance to the party relying on the term regarding how that result can be achieved). Although these paragraphs indicate some of the methods for making a term attention-calling, the test is whether attention can reasonably be expected to be called to it. The statutory language should not be construed to permit a result that is inconsistent with that test.

11. “Consumer.” Derived from Section 9-102(a)(25).

12. “Contract.” Except for minor stylistic changes, identical to former Section 1-201.

13. “Creditor.” Unchanged from former Section 1-201.

14. “Defendant.” Except for minor stylistic changes, identical to former Section 1-201, which was derived from Section 76, Uniform Sales Act.

15. "Delivery". Derived from former Section 1-201. The reference to certificated securities has been deleted in light of the more specific treatment of the matter in Section 8-301. The definition has been revised to accommodate electronic documents of title. Control of an electronic document of title is defined in Article 7 (Section 7-106).

16. “Document of title.” Derived from former Section 1-201, which was derived from Section 76, Uniform Sales Act. This definition makes explicit that the obligation or designation of a third party as “bailee” is essential to a document of title and clearly rejects any such result as obtained in Hixson v. Ward, 254 Ill. App. 505 (1929). , which treated a conditional sales contract as a document of title. Also the definition is left open so that new types of documents may be included, including documents which gain commercial recognition in the international arena. See UNCITRAL Draft Instrument on the Carriage of Goods By Sea. It is unforeseeable what documents may one day serve the essential purpose now filled by warehouse receipts and bills of lading. The definition is stated in terms of the function of the documents with the intention that any document which gains commercial recognition as accomplishing the desired result shall be included within its scope. Fungible goods are adequately identified within the language of the definition by identification of the mass of which they are a part.

Dock warrants were within the Sales Act definition of document of title apparently for the purpose of recognizing a valid tender by means of such paper. In current commercial practice a dock warrant or receipt is a kind of interim certificate issued by shipping companies upon delivery of the goods at the dock, entitling a designated person to be issued a bill of lading. The receipt itself is invariably nonnegotiable in form although it may indicate that a negotiable bill is to be forthcoming. Such a document is not within the general compass of the definition, although trade usage may in some cases entitle such paper to be treated as a document of title. If the dock receipt actually represents a storage obligation undertaken by the shipping company, then it is a warehouse receipt within this section regardless of the name given to the instrument.

The goods must be “described,” but the description may be by marks or labels and may be qualified in such a way as to disclaim personal knowledge of the issuer regarding contents or condition. However, baggage and parcel checks and similar “tokens” of storage which identify stored goods only as those received in exchange for the token are not covered by this Article.

A document of title may be either tangible or electronic. Tangible documents of title should be construed to mean traditional paper documents. Electronic documents of title are documents that are stored in an electronic medium instead of in tangible form. The concept of an electronic medium should be construed liberally to include electronic, digital, magnetic, optical, electromagnetic, or any other current or similar emerging technologies. As to reissuing a document of title in an alternative medium, see Article 7, Section 7-105. Control for electronic documents of title is defined in Article 7 (Section 7-106).

The definition is broad enough to include an airway bill.

17. “Fault.” Derived from former Section 1-201. “Default” has been added to the list of events constituting fault.

18. “Fungible goods.” Derived from former Section 1-201. References to securities have been deleted because Article 8 no longer uses the term “fungible” to describe securities. Accordingly, this provision now defines the concept only in the context of goods.

19. “Genuine.” Unchanged from former Section 1-201.

20. “Good faith.” Former Section 1-201(19) defined “good faith” simply as honesty in fact; the definition contained no element of commercial reasonableness. Initially, that definition applied throughout the Code with only one exception. Former Section 2-103(1)(b) provided that “ in this Article ... 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.” This alternative definition was limited in applicability in three ways. First, it applied only to transactions within the scope of Article 2. Second, it applied only to merchants. Third, strictly construed it applied only to uses of the phrase “good faith” in Article 2 ; thus, so construed it would not define “good faith” for its most important use- the obligation of good faith imposed by former Section 1-203.

21. “Holder.” Derived from former Section 1-201. The definition has been reorganized for clarity and amended to provide for electronic negotiable documents of title.

22. “Insolvency proceedings.” Unchanged from former Section 1-201.

23. “Insolvent.” Derived from former Section 1-201. The three tests of insolvency- “generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute as to them,” “unable to pay debts as they become due,” and “insolvent within the meaning of the federal bankruptcy law”- are expressly set up as alternative tests and must be approached from a commercial standpoint.

24. “Money.” Substantively identical to former Section 1-201. The test is that of sanction of government, whether by authorization before issue or adoption afterward, which recognizes the circulating medium as a part of the official currency of that government. The narrow view that money is limited to legal tender is rejected.

25. “Organization.” The former definition of this word has been replaced with the standard definition used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

26. “Party.” Substantively identical to former Section 1-201. Mention of a party includes, of course, a person acting through an agent. However, where an agent comes into opposition or contrast to the principal, particular account is taken of that situation.

27. “Person.” The former definition of this word has been replaced with the standard definition used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

28. “Present value.” This definition was formerly contained within the definition of “security interest” in former Section 1-201(37).

29. “Purchase.” Derived from former Section 1-201. The form of definition has been changed from “includes” to “means.”

30. “Purchaser.” Unchanged from former Section 1-201.

31. “Record.” Derived from Section 9-102(a)(69).

32. “Remedy.” Unchanged from former Section 1-201. The purpose is to make it clear that both remedy and right (as defined) include those remedial rights of “self help” which are among the most important bodies of rights under the Uniform Commercial Code, remedial rights being those to which an aggrieved party may resort on its own.

33. “Representative.” Derived from former Section 1-201. Reorganized, and form changed from “includes” to “means.”

34. “Right.” Except for minor stylistic changes, identical to former Section 1-201.

35. “Security Interest.” The definition is the first paragraph of the definition of “security interest” in former Section 1-201, with minor stylistic changes. The remaining portion of that definition has been moved to Section 1-203. Note that, because of the scope of Article 9, the term includes the interest of certain outright buyers of certain kinds of property.

36. “Send.” Derived from former Section 1-201. Compare “notifies”.

37. “Signed.” Derived from former Section 1-201. Former Section 1-201 referred to “intention to authenticate”; because other articles now use the term “authenticate,” the language has been changed to “intention to adopt or accept.” The latter formulation is derived from the definition of “authenticate” in Section 9-102(a)(7). This provision refers only to writings, because the term “signed,” as used in some articles, refers only to writings. This provision also makes it clear that, as the term “signed” is used in the Uniform Commercial Code, a complete signature is not necessary. The symbol may be printed, stamped or written; it may be by initials or by thumbprint. It may be on any part of the document and in appropriate cases may be found in a billhead or letterhead. No catalog of possible situations can be complete and the court must use common sense and commercial experience in passing upon these matters. The question always is whether the symbol was executed or adopted by the party with present intention to adopt or accept the writing.

38. “State.” This is the standard definition of the term used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

39. “Surety.” This definition makes it clear that “surety” includes all secondary obligors, not just those whose obligation refers to the person obligated as a surety. As to the nature of secondary obligations generally, see Restatement (Third), Suretyship and Guaranty Section 1 (1996).

40. “Term.” Unchanged from former Section 1-201.

41. “Unauthorized signature.” Unchanged from former Section 1-201.

42. “Warehouse receipt.” Derived from former Section 1-201, which was derived from Section 76(1), Uniform Sales Act; Section 1, Uniform Warehouse Receipts Act. Receipts issued by a field warehouse are included, provided the warehouseman and the depositor of the goods are different persons. The definition makes clear that the receipt must qualify as a document of title under subsection (16).

43. “Written” or “writing.” Unchanged from former Section 1-201.

Cross references. —

As to a transferable record under the Uniform Electronic Transactions Act and the rights of a holder to such, see § 40-21-116 .

Six weeks held unreasonable. —

While a reasonable opportunity to inspect and test was available under the Uniform Commercial Code, six weeks under the circumstances in the case was an unreasonable period to wait, and rejection of leased goods was not taken seasonably under subsection (c) of this section. Rafter Seven Ranches L.P. v. C.H. Brown Co. (In re Rafter Seven Ranches L.P.), 546 F.3d 1194, 2008 U.S. App. LEXIS 23558 (10th Cir. 2008).

The test of conspicuousness is whether attention can reasonably be expected to be called to the term or provision. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Whether term “conspicuous” matter of court's discretion. —

Resolution of the issue of whether a term or clause is “conspicuous” is a matter for the district court to resolve in the exercise of its discretion, and the supreme court will not overturn that ruling absent a demonstration of the abuse of the district court's discretion resulting in prejudice. Stauffer Chem. Co. v. Curry, 778 P.2d 1083, 1989 Wyo. LEXIS 185 (Wyo. 1989), reh'g denied, 1989 Wyo. LEXIS 197 (Wyo. Aug. 25, 1989).

Provision found sufficiently conspicuous. —

Warranty disclaimer in purchase order was conspicuous, in accordance with subdivision (a)(x), where heading and disclaimers were printed all in capital letters and in boldface type, and were easily located and read. Hutton v. Deere & Co., 2000 U.S. App. LEXIS 6285 (10th Cir. Wyo. Apr. 5, 2000).

Uniform Commercial Code governs priority questions. —

The district court erred when it relied on the motor vehicle registration code rather than the Uniform Commercial Code in determining whether a purchaser's claim was subject to the bank's prior lien and security interest. The Motor Vehicle Registration Act sets out the procedure for noting a lien on a title but does not resolve priority claims; the Uniform Commercial Code governs priority questions. Franklin v. First Nat'l Bank, 848 P.2d 775, 1993 Wyo. LEXIS 46 (Wyo. 1993).

Uniform Commercial Code as adopted in Wyoming would not encompass transaction relating to real estate. Wendling v. Cundall, 568 P.2d 888, 1977 Wyo. LEXIS 281 (Wyo. 1977).

Legislature did, however, define “good faith” as that term would apply to most other commercial transactions conducted by persons owing no fiduciary or other special obligation to one another. Wendling v. Cundall, 568 P.2d 888, 1977 Wyo. LEXIS 281 (Wyo. 1977).

Exclusive dealing agreement requires good faith performance. —

As long as an exclusive dealing agreement is in force, seller is entitled to good faith performance by buyer. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Bank need not advise home purchasers that dealer not acting as general contractor. —

In a breach of contract action for defective construction of a modular home, there was no merit to the claim that the bank providing the financing did not exercise “good faith” in failing to advise the purchasers that: (1) the dealer was not qualified to act as the general contractor; and (2) the dealer did not believe he was the general contractor. The notion that the dealer was acting as the general contractor was solely that of the purchasers. Neither the dealer nor the bank told the purchasers that the dealer would be acting as a general contractor. Garner v. Hickman, 709 P.2d 407, 1985 Wyo. LEXIS 604 (Wyo. 1985).

Personal representative of estate is not “lien creditor” within the meaning of the Uniform Commercial Code. Landen v. Production Credit Ass'n, 737 P.2d 1325, 1987 Wyo. LEXIS 455 (Wyo. 1987).

Failure to state claim.—

In a mortgagor’s suit against a bank and others wherein Wyoming law applied, the district court properly dismissed the complaint for failure to state a cause of action because the bank defendants were correct that a valid assignment was not necessary for them to have obtained the note at a time when it was not in default. Spreitzer v. Deutsche Bank Nat'l Trust Co., 610 Fed. Appx. 737, 2015 U.S. App. LEXIS 6539 (10th Cir. Wyo. 2015).

“Security interest” between parent and child. —

In determining whether a security interest exists between a parent and child, a court should look to whether the purported interest truly secures a genuine obligation and is not simply a product of family allegiance designed to defeat the interests of third parties. Hess v. O'Dell Motors, 693 F.2d 113, 1982 U.S. App. LEXIS 24044 (10th Cir. Wyo. 1982).

Applied in

Lange v. Valencia, 533 P.2d 304, 1975 Wyo. LEXIS 136 (Wyo. 1975); Sturman v. First Nat'l Bank, 729 P.2d 667, 1986 Wyo. LEXIS 646 (Wyo. 1986); First Nat'l Bank v. First Interstate Bank, 774 P.2d 645, 1989 Wyo. LEXIS 135 (Wyo. 1989).

Quoted in

Cantonwine v. Fehling, 582 P.2d 592, 1978 Wyo. LEXIS 217 (Wyo. 1978); Daly v. Shrimplin, 610 P.2d 397, 1980 Wyo. LEXIS 262 (Wyo. 1980); Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987); Longtree, Ltd. v. Resource Control Int'l, Inc., 755 P.2d 195, 1988 Wyo. LEXIS 77 (Wyo. 1988).

Stated in

United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. 1974); Western Nat'l Bank v. Harrison, 577 P.2d 635, 1978 Wyo. LEXIS 283 (Wyo. 1978); First Wyo. Bank v. Cabinet Craft Distribs., Inc., 624 P.2d 227, 1981 Wyo. LEXIS 294 (Wyo. 1981).

Cited in

Cole v. First Nat'l Bank, 433 P.2d 837, 1967 Wyo. LEXIS 185 (Wyo. 1967).

Law reviews. —

For article, “Wyoming Adopts the ‘1972 Amendments’ to Uniform Commercial Code Article 9 — The Revisions and Some Continuing Problems,” see XIX Land & Water L. Rev. 581 (1984).

For comment, “Establishing the Tort of Bad Faith in Wyoming,” see XX Land & Water L. Rev. 625 (1985).

For article, “Lender Liability in Wyoming,” see XXVI Land & Water L. Rev. 707 (1991).

Am. Jur. 2d, ALR and C.J.S. references. —

Equipment leases as security interest within Uniform Commercial Code, § 1-201(37), 76 ALR3d 11.

Who is “buyer in ordinary course of business” under Uniform Commercial Code, 87 ALR3d 11.

What constitutes taking instrument in good faith, and without notice of infirmities or defenses, to support holder-in-due-course status, under UCC, § 3-302, 36 ALR4th 212.

What constitutes “money” within meaning of Uniform Commercial Code, 40 ALR4th 346.

§ 34.1-1-202. Notice; knowledge.

1. Subject to subsection (f) of this section, a person has “notice” of a fact if the person:
   1. Has actual knowledge of it;
   2. Has received a notice or notification of it; or
   3. From all the facts and circumstances known to the person at the time in question, has reason to know that it exists.
2. “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.
3. “Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know.
4. A person “notifies” or “gives” a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.
5. Subject to subsection (f) of this section, a person “receives” a notice or notification when:
   1. It comes to that person’s attention; or
   2. It is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.
6. Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual’s attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual’s regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Derived from former Section 1-201(25)-(27).

Changes from former law:

These provisions are substantive rather than purely definitional. Accordingly, they have been relocated from Section 1-201 to this section. The reference to the “forgotten notice” doctrine has been deleted.

1. Under subsection (a), a person has notice of a fact when, inter alia, the person has received a notification of the fact in question.

2. As provided in subsection (d), the word “notifies” is used when the essential fact is the proper dispatch of the notice, not its receipt. Compare “Send.” When the essential fact is the other party's receipt of the notice, that is stated. Subsection (e) states when a notification is received

3. Subsection (f) makes clear that notice, knowledge, or a notification, although “received,” for instance, by a clerk in Department A of an organization, is effective for a transaction conducted in Department B only from the time when it was or should have been communicated to the individual conducting that transaction.

§ 34.1-1-203. Lease distinguished from security interest.

1. Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
2. A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee and:
   1. The original term of the lease is equal to or greater than the remaining economic life of the goods;
   2. The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
   3. The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
   4. The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
3. A transaction in the form of a lease does not create a security interest merely because:
   1. The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
   2. The lessee assumes risk of loss of the goods;
   3. The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;
   4. The lessee has an option to renew the lease or to become the owner of the goods;
   5. The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
   6. The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
4. Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
   1. When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
   2. When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
5. The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value, or cost of performing under the lease agreement shall be determined with reference to the facts and circumstances at the time the transaction is entered into.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-201(37).

Changes from former law:

This section is substantively identical to those portions of former Section 1-201(37) that distinguished “true” leases from security interests, except that the definition of “present value” formerly embedded in Section 1-201(37) has been placed in Section 1-201(28).

1. An interest in personal property or fixtures which secures payment or performance of an obligation is a “security interest.” See Section 1-201(37). Security interests are sometimes created by transactions in the form of leases. Because it can be difficult to distinguish leases that create security interests from those that do not, this section provides rules that govern the determination of whether a transaction in the form of a lease creates a security interest.

2. One of the reasons it was decided to codify the law with respect to leases was to resolve an issue that created considerable confusion in the courts: what is a lease? The confusion existed, in part, due to the last two sentences of the definition of security interest in the 1978 Official Text of the Act, Section 1-201(37). The confusion was compounded by the rather considerable change in the federal, state and local tax laws and accounting rules as they relate to leases of goods. The answer is important because the definition of lease determines not only the rights and remedies of the parties to the lease but also those of third parties. If a transaction creates a lease and not a security interest, the lessee’s interest in the goods is limited to its leasehold estate; the residual interest in the goods belongs to the lessor. This has significant implications to the lessee’s creditors. “On common law theory, the lessor, since he has not parted with title, is entitled to full protection against the lessee’s creditors and trustee in bankruptcy....” 1 G. Gilmore, Security Interests in Personal Property Section 3.6 , at 76 (1965).

Under pre-UCC chattel security law there was generally no requirement that the lessor file the lease, a financing statement, or the like, to enforce the lease agreement against the lessee or any third party; the Article on Secured Trans-actions (Article 9) did not change the common law in that respect. Coogan, Leasing and the Uniform Commercial Code, in Equipment Leasing-Leveraged Leasing 681, 700 n.25, 729 n.80 (2d ed.1980). The Article on Leases (Article 2A) did not change the law in that respect, except for leases of fixtures. Section 2A-309. An examination of the common law will not provide an adequate answer to the question of what is a lease. The definition of security interest in Section 1-201(37) of the 1978 Official Text of the Act provided that the Article on Secured Transactions (Article 9) governs security interests disguised as leases, i.e., leases intended as security; however, the definition became vague and outmoded.

Lease is defined in Article 2A as a transfer of the right to possession and use of goods for a term, in return for consideration. Section 2A-103(1)(j). The definition continues by stating that the retention or creation of a security interest is not a lease. Thus, the task of sharpening the line between true leases and security interests disguised as leases continues to be a function of this Article.

This section begins where Section 1-201(35) leaves off. It draws a sharper line between leases and security interests disguised as leases to create greater certainty in commercial transactions.

Prior to enactment of the rules now codified in this section, the 1978 Official Text of Section 1-201(37) provided that whether a lease was intended as security (i.e., a security interest disguised as a lease) was to be determined from the facts of each case; however, (a) the inclusion of an option to purchase did not itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee would become, or had the option to become, the owner of the property for no additional consideration, or for a nominal consideration, did make the lease one intended for security.

Reference to the intent of the parties to create a lease or security interest led to unfortunate results. In discovering intent, courts relied upon factors that were thought to be more consistent with sales or loans than leases. Most of these criteria, however, were as applicable to true leases as to security interests. Examples include the typical net lease provisions, a purported lessor’s lack of storage facilities or its character as a financing party rather than a dealer in goods. Accordingly, this section contains no reference to the parties’ intent.

Subsections (a) and (b) were originally taken from Section 1(2) of the Uniform Conditional Sales Act (act withdrawn 1943), modified to reflect current leasing practice. Thus, reference to the case law prior to the incorporation of those concepts in this article will provide a useful source of precedent. Gilmore, Security Law, Formalism and Article 9, 47 Neb.L.Rev. 659, 671 (1968) . Whether a transaction creates a lease or a security interest continues to be determined by the facts of each case. Subsection (b) further provides that a transaction creates a security interest if the lessee has an obligation to continue paying consideration for the term of the lease, if the obligation is not terminable by the lessee (thus correcting early statutory gloss, e.g., In re Royer’s Bakery, Inc., 1 U.C.C. Rep.Serv. (Callaghan) 342 (Bankr.E.D.Pa.1963)) and if one of four additional tests is met. The first of these four tests, subparagraph (1), is that the original lease term is equal to or greater than the remaining economic life of the goods. The second of these tests, subparagraph (2), is that the lessee is either bound to renew the lease for the remaining economic life of the goods or to become the owner of the goods. In re Gehrke Enters., 1 Bankr. 647, 651-52 (Bankr.W.D.Wis.1979) . The third of these tests, subparagraph (3), is whether the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration, which is defined later in this section. In re Celeryvale Transp., 44 Bankr. 1007, 1014-15 (Bankr.E.D.Tenn.1984) . The fourth of these tests, subparagraph (4), is whether the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration. All of these tests focus on economics, not the intent of the parties. In re Berge, 32 Bankr. 370, 371-73 (Bankr.W.D.Wis.1983) .

The focus on economics is reinforced by subsection (c). It states that a transaction does not create a security interest merely because the transaction has certain characteristics listed therein. Subparagraph (1) has no statutory derivative; it states that a full payout lease does not per se create a security interest. Rushton v. Shea, 419 F.Supp. 1349, 1365 (D.Del.1976) . Subparagraphs (2) and (3) provide the same regarding the provisions of the typical net lease. Compare All- States Leasing Co. v. Ochs, 42 Or.App. 319, 600 P.2d 899 (Ct.App.1979), with In re Tillery, 571 F.2d 1361 (5th Cir.1978) . Subparagraph (4) restates and expands the provisions of the 1978 Official Text of Section 1-201(37) to make clear that the option can be to buy or renew. Subparagraphs (5) and (6) treat fixed price options and provide that fair market value must be determined at the time the transaction is entered into. Compare Arnold Mach. Co. v. Balls, 624 P.2d 678 (Utah 1981), with Aoki v. Shepherd Mach. Co., 665 F.2d 941 (9th Cir.1982) .

The relationship of subsection (b) to subsection (c) deserves to be explored. The fixed price purchase option provides a useful example. A fixed price purchase option in a lease does not of itself create a security interest. This is particularly true if the fixed price is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed. A security interest is created only if the option price is nominal and the conditions stated in the introduction to the second paragraph of this subsection are met. There is a set of purchase options whose fixed price is less than fair market value but greater than nominal that must be determined on the facts of each case to ascertain whether the transaction in which the option is included creates a lease or a security interest.

It was possible to provide for various other permutations and combinations with respect to options to purchase and renew. For example, this section could have stated a rule to govern the facts of In re Marhoefer Packing Co., 674 F.2d 1139 (7th Cir.1982) . This was not done because it would unnecessarily complicate the definition. Further development of this rule is left to the courts.

Subsections (d) and (e) provide definitions and rules of construction.

§ 34.1-1-204. Value.

1. Except as otherwise provided in articles 3, 4 and 5 of this title, a person gives value for rights if the person acquires them:
   1. In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;
   2. As security for, or in total or partial satisfaction of, a preexisting claim;
   3. By accepting delivery under a preexisting contract for purchase; or
   4. In return for any consideration sufficient to support a simple contract.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-201(44).

Changes from former law:

Unchanged from former Section 1-201, which was derived from Sections 25, 26, 27, 191, Uniform Negotiable Instruments Law; Section 76, Uniform Sales Act; Section 53, Uniform Bills of Lading Act; Section 58, Uniform Warehouse Receipts Act; Section 22(1), Uniform Stock Transfer Act; Section 1, Uniform Trust Receipts Act. These provisions are substantive rather than purely definitional. Accordingly, they have been relocated from former Section 1-201 to this section.

1. All the Uniform Acts in the commercial law field (except the Uniform Conditional Sales Act) have carried definitions of “value.” All those definitions provided that value was any consideration sufficient to support a simple contract, including the taking of property in satisfaction of or as security for a pre-existing claim. Subsections (1), (2), and (4) in substance continue the definitions of “value” in the earlier acts. Subsection (3) makes explicit that “value” is also given in a third situation: where a buyer by taking delivery under a pre-existing contract converts a contingent into a fixed obligation.

This definition is not applicable to Articles 3 and 4, but the express inclusion of immediately available credit as value follows the separate definitions in those Articles. See Sections 4-208, 4-209, 3-303. A bank or other financing agency which in good faith makes advances against property held as collateral becomes a bona fide purchaser of that property even though provision may be made for charge-back in case of trouble. Checking credit is “immediately available” within the meaning of this section if the bank would be subject to an action for slander of credit in case checks drawn against the credit were dishonored, and when a charge-back is not discretionary with the bank, but may only be made when difficulties in collection arise in connection with the specific transaction involved.

Law reviews. —

For article on consistency of Fed. R. Evid. 406 with the Uniform Commercial Code, see XII Land & Water L. Rev. 601 (1977).

§ 34.1-1-205. Reasonable time; seasonableness.

1. Whether a time for taking an action required by this act is reasonable depends on the nature, purpose, and circumstances of the action.
2. An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Sections 1–205, 2–208, and Section 2A–207.

Changes from former law:

This section is derived from subsections (2) and (3) of former Section 1-204. Subsection (1) of that section is now incorporated in Section 1-302(b).

1. Subsection (a) makes it clear that requirements that actions be taken within a “reasonable” time are to be applied in the transactional context of the particular action.

2. Under subsection (b), the agreement that fixes the time need not be part of the main agreement, but may occur separately. Notice also that under the definition of “agreement” (Section 1-201) the circumstances of the transaction, including course of dealing or usages of trade or course of performance may be material. On the question what is a reasonable time these matters will often be important.

§ 34.1-1-206. Presumptions.

Whenever this act creates a “presumption” with respect to a fact, or provides that a fact is “presumed,” the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-201(31).

1. Several sections of the Uniform Commercial Code state that there is a “presumption” as to a certain fact, or that the fact is “presumed.” This section, derived from the definition appearing in former Section 1-201(31), indicates the effect of those provisions on the proof process.

§ 34.1-1-207. Performance or acceptance under reservation of rights. [Repealed]

History. Laws 1961, ch. 219, § 1-207; W.S. 1957, § 34-1-207 ; W.S. 1977, § 34-21-126; Laws 1991, ch. 160, § 3; repealed by 2015 ch. 124, § 1, effective July 1, 2015.

§ 34.1-1-208. Option to accelerate at will. [Repealed]

History. Laws 1961, ch. 219, § 1-208; W.S. 1957, § 34-1-208; W.S. 1977, § 34-21-127; repealed by 2015 ch. 124, § 1, effective July 1, 2015.

§ 34.1-1-209. Subordinated obligations. [Repealed]

History. Laws 1967, ch. 84, § 2; W.S. 1957, § 34-2-209; W.S. 1977, § 34-21-128; repealed by 2015 ch. 124, § 1, effective July 1, 2015.

§ 34.1-1-210. Applicability of other sections.

Chapter 29, title 34, Wyoming statutes shall apply to this title.

History. 2019 ch. 91, § 1, effective July 1, 2019.

Effective date. —

Laws 2019, ch. 91 § 5, makes the act effective July 1, 2019.

§ 34.1-1-301. Territorial applicability; parties’ power to choose applicable law.

1. Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.
2. In the absence of an agreement effective under subsection (a) of this section, and except as provided in subsection (c) of this section, this act applies to transactions bearing an appropriate relation to this state.
3. If one (1) of the following provisions of this act specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:
   1. W.S. 34.1-2-402;
   2. W.S. 34.1-2.A-105 and 34.1-2.A-106;
   3. W.S. 34.1-4-102;
   4. W.S 34.1-4.A-507;
   5. W.S. 34.1-5-116;
   6. Reserved;
   7. W.S. 34.1-8-110;
   8. W.S. 34.1-9-301 through 34.1-9-307.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Source: Former Section 1-105.

Changes from former law: This section is substantively identical to former Section 1–105. Changes in language are stylistic only.

1. Subsection (a) states affirmatively the right of the parties to a multi-state transaction or a transaction involving foreign trade to choose their own law. That right is subject to the firm rules stated in the sections listed in subsection (c), and is limited to jurisdictions to which the transaction bears a “reasonable relation.” In general, the test of “reasonable relation” is similar to that laid down by the Supreme Court in Seeman v. Philadelphia Warehouse Co., 274 U.S. 403, 47 S. Ct. 626, 71 L. Ed. 1123 (1927) . Ordinarily the law chosen must be that of a jurisdiction where a significant enough portion of the making or performance of the contract is to occur or occurs. But an agreement as to choice of law may sometimes take effect as a shorthand expression of the intent of the parties as to matters governed by their agreement, even though the transaction has no significant contact with the jurisdiction chosen.

2. Where there is no agreement as to the governing law, the Act is applicable to any transaction having an “appropriate” relation to any state which enacts it. Of course, the Act applies to any transaction which takes place in its entirety in a state which has enacted the Act. But the mere fact that suit is brought in a state does not make it appropriate to apply the substantive law of that state. Cases where a relation to the enacting state is not “appropriate” include, for example, those where the parties have clearly contracted on the basis of some other law, as where the law of the place of contracting and the law of the place of contemplated performance are the same and are contrary to the law under the Code.

3. Where a transaction has significant contacts with a state which has enacted the Act and also with other jurisdictions, the question what relation is “appropriate” is left to judicial decision. In deciding that question, the court is not strictly bound by precedents established in other contexts. Thus a conflict-of-laws decision refusing to apply a purely local statute or rule of law to a particular multi-state transaction may not be valid precedent for refusal to apply the Code in an analogous situation. Application of the Code in such circumstances may be justified by its comprehensiveness, by the policy of uniformity, and by the fact that it is in large part a reformulation and restatement of the law merchant and of the understanding of a business community which transcends state and even national boundaries. Compare Global Commerce Corp. v. Clark-Babbitt Industries, Inc., 239 F.2d 716, 719 (2d Cir. 1956) . In particular, where a transaction is governed in large part by the Code, application of another law to some detail of performance because of an accident of geography may violate the commercial understanding of the parties.

4. Subsection (c) spells out essential limitations on the parties' right to choose the applicable law. Especially in Article 9 parties taking a security interest or asked to extend credit which may be subject to a security interest must have sure ways to find out whether and where to file and where to look for possible existing filings.

5. Sections 9-301 through 9-307 should be consulted as to the rules for perfection of security interests and agricultural liens and the effect of perfection and nonperfection and priority.

6. This section is subject to Section 1-102, which states the scope of Article 1. As that section indicates, the rules of Article 1, including this section, apply to a transaction to the extent that transaction is governed by one of the other Articles of the Uniform Commercial Code.

Wyoming law applied. —

The supreme court applied Wyoming law to determine the priority between an out-of-state supplier who has retained the vehicle title document and an in-state retail purchaser for value without notice. Cherry Creek Dodge v. Carter, 733 P.2d 1024, 1987 Wyo. LEXIS 408 (Wyo. 1987).

Because jurisdiction was based on diversity of citizenship and the contract dealt with production of Wyoming gas, the sale of which took place in Wyoming, the federal district court applied the substantive law of the forum state of Wyoming. Ball v. Renner, 54 F.3d 664, 1995 U.S. App. LEXIS 15055 (10th Cir. Wyo. 1995).

Transaction held to have had appropriate relation to state. —

See Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964); C. Bud Racicky Agency v. Wood Gundy, Inc., 767 P.2d 601, 1989 Wyo. LEXIS 10 (Wyo. 1989).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes “reasonable” or “appropriate” relation to a transaction within the meaning of Uniform Commercial Code, § 1-105(1), 63 ALR3d 341.

§ 34.1-1-302. Variation by agreement.

1. Except as otherwise provided in subsection (b) of this section or elsewhere in this act, the effect of provisions of this act may be varied by agreement.
2. The obligations of good faith, diligence, reasonableness, and care prescribed by this act may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever this act requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
3. The presence in certain provisions of this act of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source: Former Sections 1-102(3)-(4) and 1-204(1).

Changes: This section combines the rules from subsections (3) and (4) of former Section 1-102 and subsection (1) of former Section 1-204. No substantive changes are made.

1. Subsection (a) states affirmatively at the outset that freedom of contract is a principle of the Uniform Commercial Code: "the effect" of its provisions may be varied by “agreement.” The meaning of the statute itself must be found in its text, including its definitions, and in appropriate extrinsic aids; it cannot be varied by agreement. But the Uniform Commercial Code seeks to avoid the type of interference with evolutionary growth found in pre-Code cases such as Manhattan Co. v. Morgan, 242 N.Y. 38, 150 N.E. 594 (1926) . Thus, private parties cannot make an instrument negotia-ble within the meaning of Article 3 except as provided in Section 3-104; nor can they change the meaning of such terms as “bona fide purchaser,” “holder in due course,” or “due negotiation,” as used in the Uniform Commercial Code. But an agreement can change the legal consequences that would otherwise flow from the provisions of the Uniform Commercial Code. “Agreement” here includes the effect given to course of dealing, usage of trade and course of performance by Sections 1-201 and 1-303; the effect of an agreement on the rights of third parties is left to specific provisions of the Uniform Commercial Code and to supplementary principles applicable under Section 1-103. The rights of third parties under Section 9-317 when a security interest is unperfected, for example, cannot be destroyed by a clause in the security agreement.

This principle of freedom of contract is subject to specific exceptions found elsewhere in the Uniform Commercial Code and to the general exception stated here. The specific exceptions vary in explicitness: the statute of frauds found in Section 2-201, for example, does not explicitly preclude oral waiver of the requirement of a writing, but a fair reading denies enforcement to such a waiver as part of the “contract” made unenforceable; Section 9-602, on the other hand, is a quite explicit limitation on freedom of contract. Under the exception for “the obligations of good faith, diligence, reasonableness and care prescribed by [the Uniform Commercial Code],” provisions of the Uniform Commercial Code prescribing such obligations are not to be disclaimed. However, the section also recognizes the prevailing practice of having agreements set forth standards by which due diligence is measured and explicitly provides that, in the absence of a showing that the standards manifestly are unreasonable, the agreement controls. In this connection, Section 1-303 incorporating into the agreement prior course of dealing and usages of trade is of particular importance.

Subsection (b) also recognizes that nothing is stronger evidence of a reasonable time than the fixing of such time by a fair agreement between the parties. However, provision is made for disregarding a clause which whether by inadvertence or overreaching fixes a time so unreasonable that it amounts to eliminating all remedy under the contract. The parties are not required to fix the most reasonable time but may fix any time which is not obviously unfair as judged by the time of contracting.

2. An agreement that varies the effect of provisions of the Uniform Commercial Code may do so by stating the rules that will govern in lieu of the provisions varied. Alternatively, the parties may vary the effect of such provisions by stating that their relationship will be governed by recognized bodies of rules or principles applicable to commercial transactions. Such bodies of rules or principles may include, for example, those that are promulgated by intergovernmental authorities such as UNCITRAL or Unidroit ( see, e.g ., Unidroit Principles of International Commercial Con-tracts), or non-legal codes such as trade codes.

3. Subsection (c) is intended to make it clear that, as a matter of drafting, phrases such as “unless otherwise agreed” have been used to avoid controversy as to whether the subject matter of a particular section does or does not fall within the exceptions to subsection (b), but absence of such words contains no negative implication since under subsection (b) the general and residual rule is that the effect of all provisions of the Uniform Commercial Code may be varied by agreement.

§ 34.1-1-303. Course of performance; course of dealing; usage of trade.

1. A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if:
   1. The agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
   2. The other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
2. A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
3. A “usage of trade” is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage shall be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
4. A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
5. Except as otherwise provided in subsection (f) of this section, the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade shall be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:
   1. Express terms prevail over course of performance, course of dealing, and usage of trade;
   2. Course of performance prevails over course of dealing and usage of trade; and
   3. Course of dealing prevails over usage of trade.
6. Subject to W.S. 34.1-2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
7. Evidence of a relevant usage of trade offered by one (1) party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Sections 1–205, 2–208, and Section 2A–207.

Changes from former law: This section integrates the “course of performance” concept from Articles 2 and 2A into the principles of former Section 1-205, which deals with course of dealing and usage of trade. In so doing, the section slightly modifies the articulation of the course of performance rules to fit more comfortably with the approach and structure of former Section 1-205. There are also slight modifications to be more consistent with the definition of “agreement” in former Section 1-201(3). It should be noted that a course of performance that might otherwise establish a defense to the obligation of a party to a negotiable instrument is not available as a defense against a holder in due course who took the instrument without notice of that course of performance.

1. The Uniform Commercial Code rejects both the “lay-dictionary” and the “conveyancer's” reading of a commercial agreement. Instead the meaning of the agreement of the parties is to be determined by the language used by them and by their action, read and interpreted in the light of commercial practices and other surrounding circumstances. The measure and background for interpretation are set by the commercial context, which may explain and supplement even the language of a formal or final writing.

2. “Course of dealing,” as defined in subsection (b), is restricted, literally, to a sequence of conduct between the parties previous to the agreement. A sequence of conduct after or under the agreement, however, is a “course of performance.” “Course of dealing” may enter the agreement either by explicit provisions of the agreement or by tacit recognition.

3. The Uniform Commercial Code deals with “usage of trade” as a factor in reaching the commercial meaning of the agreement that the parties have made. The language used is to be interpreted as meaning what it may fairly be expected to mean to parties involved in the particular commercial transaction in a given locality or in a given vocation or trade. By adopting in this context the term “usage of trade,” the Uniform Commercial Code expresses its intent to reject those cases which see evidence of “custom” as representing an effort to displace or negate “established rules of law.” A distinction is to be drawn between mandatory rules of law such as the Statute of Frauds provisions of Article 2 on Sales whose very office is to control and restrict the actions of the parties, and which cannot be abrogated by agreement, or by a usage of trade, and those rules of law (such as those in Part 3 of Article 2 on Sales) which fill in points which the parties have not considered and in fact agreed upon. The latter rules hold “unless otherwise agreed” but yield to the contrary agreement of the parties. Part of the agreement of the parties to which such rules yield is to be sought for in the usages of trade which furnish the background and give particular meaning to the language used, and are the framework of common understanding controlling any general rules of law which hold only when there is no such understanding.

4. A usage of trade under subsection (c) must have the “regularity of observance” specified. The ancient English tests for “custom” are abandoned in this connection. Therefore, it is not required that a usage of trade be “ancient or immemorial,” “universal,” or the like. Under the requirement of subsection (c) full recognition is thus available for new usages and for usages currently observed by the great majority of decent dealers, even though dissidents ready to cut corners do not agree. There is room also for proper recognition of usage agreed upon by merchants in trade codes.

5. The policies of the Uniform Commercial Code controlling explicit unconscionable contracts and clauses (Sections 1-304, 2-302) apply to implicit clauses that rest on usage of trade and carry forward the policy underlying the ancient requirement that a custom or usage must be “reasonable.” However, the emphasis is shifted. The very fact of commercial acceptance makes out a prima facie case that the usage is reasonable, and the burden is no longer on the usage to establish itself as being reasonable. But the anciently established policing of usage by the courts is continued to the ex-tent necessary to cope with the situation arising if an unconscionable or dishonest practice should become standard.

6. Subsection (d), giving the prescribed effect to usages of which the parties “are or should be aware,” reinforces the provision of subsection (c) requiring not universality but only the described “regularity of observance” of the practice or method. This subsection also reinforces the point of subsection (c) that such usages may be either general to trade or particular to a special branch of trade.

7. Although the definition of “agreement” in Section 1-201 includes the elements of course of performance, course of dealing, and usage of trade, the fact that express reference is made in some sections to those elements is not to be con-strued as carrying a contrary intent or implication elsewhere. Compare Section 1-302(c).

In cases of a well established line of usage varying from the general rules of the Uniform Commercial Code where the precise amount of the variation has not been worked out into a single standard, the party relying on the usage is entitled, in any event, to the minimum variation demonstrated. The whole is not to be disregarded because no particular line of detail has been established. In case a dominant pattern has been fairly evidenced, the party relying on the usage is entitled under this section to go to the trier of fact on the question of whether such dominant pattern has been incorporated into the agreement.

9. Subsection (g) is intended to insure that this Act's liberal recognition of the needs of commerce in regard to usage of trade shall not be made into an instrument of abuse.

Cross references. —

For definitions of key words, see § 34.1-1-201.

Conflict with contract terms. —

In a case where there was a contract to provide equipment, even if a supplier was correct that, based on the course of dealings between the parties, a purchaser's failure to specify certain name-brand equipment in its purchase order should have been construed as leaving that choice to the supplier, that would have been inconsistent with the express terms of some construction specifications. Fox v. Wheeler Elec., Inc., 2007 WY 171, 169 P.3d 875, 2007 Wyo. LEXIS 184 (Wyo. 2007).

Quoted in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980); Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 1989 Wyo. LEXIS 66 (Wyo. 1989).

Law reviews. —

For article on consistency of Fed. R. Evid. 406 with the Uniform Commercial Code, see XII Land & Water L. Rev. 601 (1977).

For article, “Lender Liability in Wyoming,” see XXVI Land & Water L. Rev. 707 (1991).

Am. Jur. 2d, ALR and C.J.S. references. —

Liability of bank for diversion to benefit of presenter or third party of proceeds of check drawn to bank's order by drawer not indebted to bank, 69 ALR4th 778.

§ 34.1-1-304. Obligation of good faith.

Every contract or duty within this act imposes an obligation of good faith in its performance and enforcement.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-203.

Changes from former law:

Except for changing the form of reference to the Uniform Commercial Code, this section is identical to former Section 1-203.

1. This section sets forth a basic principle running throughout the Uniform Commercial Code. The principle is that in commercial transactions good faith is required in the performance and enforcement of all agreements or duties. While this duty is explicitly stated in some provisions of the Uniform Commercial Code, the applicability of the duty is broader than merely these situations and applies generally, as stated in this section, to the performance or enforcement of every contract or duty within this Act. It is further implemented by Section 1-303 on course of dealing, course of performance, and usage of trade. This section does not support an independent cause of action for failure to perform or enforce in good faith. Rather, this section means that a failure to perform or enforce, in good faith, a specific duty or obligation under the contract, constitutes a breach of that contract or makes unavailable, under the particular circumstances, a remedial right or power. This distinction makes it clear that the doctrine of good faith merely directs a court towards interpreting contracts within the commercial context in which they are created, performed, and enforced, and does not create a separate duty of fairness and reasonableness which can be independently breached.

2. “Performance and enforcement” of contracts and duties within the Uniform Commercial Code include the exercise of rights created by the Uniform Commercial Code.

Cross references. —

For the definition of “good faith,” see §§ 34.1-1-201 and 34.1-2-103.

UCC and common law each impose duty to perform in good faith. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Exclusive dealing agreement requires good faith performance. —

As long as an exclusive dealing agreement is in force, seller is entitled to good faith performance by buyer. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Applied in

Texas W. Oil & Gas Corp. v. First Interstate Bank, 743 P.2d 857, 1987 Wyo. LEXIS 514 (Wyo. 1987).

Quoted in

Western Nat'l Bank v. Harrison, 577 P.2d 635, 1978 Wyo. LEXIS 283 (Wyo. 1978).

Stated in

Scherer Constr. LLC v. Hedquist Constr., Inc., 2001 WY 23, 2001 Wyo. LEXIS 28 , 18 P.3d 645 (Wyo. 2001).

Cited in

Coones v. FDIC, 848 P.2d 783, 1993 Wyo. LEXIS 48 (Wyo. 1993).

Law reviews. —

For article, “Wyoming Adopts the ‘1972 Amendments’ to Uniform Commercial Code Article 9 — The Revisions and Some Continuing Problems,” see XIX Land & Water L. Rev. 581 (1984).

For article, “Lender Liability in Wyoming,” see XXVI Land & Water L. Rev. 707 (1991).

§ 34.1-1-305. Remedies to be liberally administered.

1. The remedies provided by this act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in this act or by other rule of law.
2. Any right or obligation declared by this act is enforceable by action unless the provision declaring it specifies a different and limited effect.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-106.

Changes from former law: Other than changes in the form of reference to the Uniform Commercial Code, this section is identical to former Section 1-106.

1. Subsection (a) is intended to effect three propositions. The first is to negate the possibility of unduly narrow or technical interpretation of remedial provisions by providing that the remedies in the Uniform Commercial Code are to be liberally administered to the end stated in this section. The second is to make it clear that compensatory damages are limited to compensation. They do not include consequential or special damages, or penal damages; and the Uniform Commercial Code elsewhere makes it clear that damages must be minimized. Cf. Sections 1-304, 2-706(1), and 2-712(2). The third purpose of subsection (a) is to reject any doctrine that damages must be calculable with mathematical accuracy. Compensatory damages are often at best approximate: they have to be proved with whatever definiteness and accuracy the facts permit, but no more. Cf. Section 2-204(3).

2. Under subsection (b), any right or obligation described in the Uniform Commercial Code is enforceable by action, even though no remedy may be expressly provided, unless a particular provision specifies a different and limited effect. Whether specific performance or other equitable relief is available is determined not by this section but by specific provisions and by supplementary principles. Cf. Sections 1-103, 2-716.

3. “Consequential” or “special” damages and “penal” damages are not defined in the Uniform Commercial Code; rather, these terms are used in the sense in which they are used outside the Uniform Commercial Code.

Cross references. —

For definitions of key words, see § 34.1-1-201.

Consequential damages are generally nonrecoverable, but sellers may recover incidental damages. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Buyers cannot claim punitive damages on account of an alleged fraud pertaining to chattels. They can of course be made whole by recovering all of their actual or compensatory damages. Waters v. Trenckmann, 503 P.2d 1187, 1972 Wyo. LEXIS 286 (Wyo. 1972).

Applied in

The Corner v. Pinnacle, Inc., 907 P.2d 1281, 1995 Wyo. LEXIS 210 (Wyo. 1995).

Quoted in

Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. 1991); Kirby v. NMC/ Kirby v. NMC/Continue Care, 993 P.2d 951, 1999 Wyo. LEXIS 194 (Wyo. 1999).

Cited in

Cole v. First Nat'l Bank, 433 P.2d 837, 1967 Wyo. LEXIS 185 (Wyo. 1967).

§ 34.1-1-306. Waiver or renunciation of claim or right after breach.

A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source:

Former Section 1-107.

Changes from former law: This section changes former law in two respects. First, former Section 1-107, requiring the “delivery” of a “written waiver or renunciation” merges the separate concepts of the aggrieved party's agreement to forego rights and the manifestation of that agreement. This section separates those concepts, and explicitly requires agreement of the aggrieved party. Second, the revised section reflects developments in electronic commerce by providing for memorialization in an authenticated record. In this context, a party may “authenticate” a record by (i) signing a record that is a writing or (ii) attaching to or logically associating with a record that is not a writing an electronic sound, symbol or process with the present intent to adopt or accept the record. See Sections 1-201(b)(37) and 9-102(a)(7).

1. This section makes consideration unnecessary to the effective renunciation or waiver of rights or claims arising out of an alleged breach of a commercial contract where the agreement effecting such renunciation is memorialized in a record authenticated by the aggrieved party. Its provisions, however, must be read in conjunction with the section imposing an obligation of good faith. (Section 1-304).

Cross references. —

For definitions of key words, see § 34.1-1-201.

As to obligation of good faith, see § 34.1-1-304.

As to modification of signed writings, see § 34.1-2-209. See, also, § 34.1-2-719.

§ 34.1-1-307. Prima facie evidence by third-party documents.

A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher’s or inspector’s certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source: Former Section 1-202.

Changes from former law: Except for minor stylistic changes, this Section is identical to former Section 1-202.

1. This section supplies judicial recognition for documents that are relied upon as trustworthy by commercial parties.

2. This section is concerned only with documents that have been given a preferred status by the parties themselves who have required their procurement in the agreement, and for this reason the applicability of the section is limited to actions arising out of the contract that authorized or required the document. The list of documents is intended to be illustrative and not exclusive.

3. The provisions of this section go no further than establishing the documents in question as prima facie evidence and leave to the court the ultimate determination of the facts where the accuracy or authenticity of the documents is questioned. In this connection the section calls for a commercially reasonable interpretation.

4. Documents governed by this section need not be writings if records in another medium are generally relied upon in the context.

Cross references. —

For general definitions, see § 34.1-1-201.

Law reviews. —

For discussion of Fed. R. Evid. 902, which relates to self-authentication, see XII Land & Water L. Rev. 601 (1977).

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and effect of § 1-202 of the Uniform Commercial Code dealing with documents which are prima facie evidence of their own authenticity and genuineness, 72 ALR3d 1243.

§ 34.1-1-308. Performance or acceptance under reservation of rights.

1. A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as “without prejudice,” “under protest,” or the like are sufficient.
2. Subsection (a) of this section does not apply to an accord and satisfaction.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source: Former Section 1-207.

Changes from former law: This section is identical to former Section 1-207.

1. This section provides machinery for the continuation of performance along the lines contemplated by the contract despite a pending dispute, by adopting the mercantile device of going ahead with delivery, acceptance, or payment “without prejudice,” “under protest,” “under reserve,” “with reservation of all our rights,” and the like. All of these phrases completely reserve all rights within the meaning of this section. The section therefore contemplates that limited as well as general reservations and acceptance by a party may be made “subject to satisfaction of our purchaser,” “subject to acceptance by our customers,” or the like.

2. This section does not add any new requirement of language of reservation where not already required by law, but merely provides a specific measure on which a party can rely as that party makes or concurs in any interim adjustment in the course of performance. It does not affect or impair the provisions of this Act such as those under which the buyer's remedies for defect survive acceptance without being expressly claimed if notice of the defects is given within a reasonable time. Nor does it disturb the policy of those cases which restrict the effect of a waiver of a defect to reasonable limits under the circumstances, even though no such reservation is expressed.

The section is not addressed to the creation or loss of remedies in the ordinary course of performance but rather to a method of procedure where one party is claiming as of right something which the other believes to be unwarranted.

3. Subsection (b) states that this section does not apply to an accord and satisfaction. Section 3-311 governs if an accord and satisfaction is attempted by tender of a negotiable instrument as stated in that section. If Section 3-311 does not apply, the issue of whether an accord and satisfaction has been effected is determined by the law of contract. Whether or not Section 3-311 applies, this section has no application to an accord and satisfaction.

Cross references. —

For general definitions, see § 34.1-1-201.

As to effect of acceptance of goods delivered, see § 34.1-2-607.

This section is not designed to alter law of accord and satisfaction. Jahn v. Burns, 593 P.2d 828, 1979 Wyo. LEXIS 403 (Wyo. 1979) (decided prior to 1991 amendment).

Law reviews. —

For note, “Section 1-207 of the Uniform Commercial Code Not Intended to Apply to Doctrine of Accord and Satisfaction,” see XV Land & Water L. Rev. 737 (1980).

Am. Jur. 2d, ALR and C.J.S. references. —

Application of UCC, § 1-207 to avoid discharge of disputed claim upon qualified acceptance of check tendered as payment in full, 37 ALR4th 358.

Modern status of rule that acceptance of check purporting to be final settlement of disputed amount constitutes accord and satisfaction, 42 ALR4th 12.

Creditor's certification of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 ALR4th 95.

Creditor's retention without negotiation of check purporting to be final settlement of disputed amount as constituting accord and satisfaction, 42 ALR4th 117.

§ 34.1-1-309. Option to accelerate at will.

A term providing that one (1) party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source: Former Section 1-208.

Changes from former law: Except for minor stylistic changes, this section is identical to former Section 1-208.

1. The common use of acceleration clauses in many transactions governed by the Uniform Commercial Code, including sales of goods on credit, notes payable at a definite time, and secured transactions, raises an issue as to the effect to be given to a clause that seemingly grants the power to accelerate at the whim and caprice of one party. This section is intended to make clear that despite language that might be so construed and which further might be held to make the agreement void as against public policy or to make the contract illusory or too indefinite for enforcement, the option is to be exercised only in the good faith belief that the prospect of payment or performance is impaired.

Obviously this section has no application to demand instruments or obligations whose very nature permits call at any time with or without reason. This section applies only to an obligation of payment or performance which in the first instance is due at a future date.

Cross references. —

For general definitions, see § 34.1-1-201.

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes “good faith” under Uniform Commercial Code, § 1-208 dealing with “insecure” or “at will” acceleration clauses, 61 ALR3d 244.

What constitutes “good faith” under UCC § 1-208 dealing with “insecure” or “at will” acceleration clauses, 85 ALR4th 284.

Sales: what constitutes “reasonable grounds for insecurity” justifying demand for adequate assurance of performance under UCC § 2-609, 37 ALR5th 459.

§ 34.1-1-310. Subordinated obligations.

An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.

History. 2015 ch. 124, § 1, effective July 1, 2015.

Official Comment

Source: Former Section 1-209.

Changes from former law: This section is substantively identical to former Section 1-209. The language in that section stating that it “shall be construed as declaring the law as it existed prior to the enactment of this section and not as modifying it” has been deleted.

1. Billions of dollars of subordinated debt are held by the public and by institutional investors. Commonly, the subordinated debt is subordinated on issue or acquisition and is evidenced by an investment security or by a negotiable or non-negotiable note. Debt is also sometimes subordinated after it arises, either by agreement between the subordinating creditor and the debtor, by agreement between two creditors of the same debtor, or by agreement of all three parties. The subordinated creditor may be a stockholder or other “insider” interested in the common debtor; the subordinated debt may consist of accounts or other rights to payment not evidenced by any instrument. All such cases are included in the terms “subordinated obligation,” “subordination,” and “subordinated creditor.”

2. Subordination agreements are enforceable between the parties as contracts; and in the bankruptcy of the common debtor dividends otherwise payable to the subordinated creditor are turned over to the superior creditor. This “turn-over” practice has on occasion been explained in terms of “equitable lien,” “equitable assignment,” or “constructive trust,” but whatever the label the practice is essentially an equitable remedy and does not mean that there is a transaction “that creates a security interest in personal property. . . by contract” or a “sale of accounts, chattel paper, payment intangibles, or promissory notes” within the meaning of Section 9-109. On the other hand, nothing in this section prevents one creditor from assigning his rights to another creditor of the same debtor in such a way as to create a security interest within Article 9, where the parties so intend.

3. The enforcement of subordination agreements is largely left to supplementary principles under Section 1-103. If the subordinated debt is evidenced by a certificated security, Section 8-202(a) authorizes enforcement against purchasers on terms stated or referred to on the security certificate. If the fact of subordination is noted on a negotiable instrument, a holder under Sections 3-302 and 3-306 is subject to the term because notice precludes him from taking free of the subordination. Sections 3-302(3)(a), 3-306, and 8-317 severely limit the rights of levying creditors of a subordinated creditor in such cases.

Cross references. —

As to secured transactions, see article 9 of this title.

§ 34.1-2-101. Short title.

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

History. Laws 1961, ch. 219, § 2-101; W.S. 1957, § 34-2-101 ; W.S. 1977, § 34-21-201 .

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.

Cited in

Aztec Gas & Oil Corp. v. Roemer Oil Co., 948 P.2d 902, 1997 Wyo. LEXIS 145 (Wyo. 1997).

Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

Am. Jur. 2d, ALR and C.J.S. references. —

Electricity, gas or water furnished by public utility as “goods” within provisions of Uniform Commercial Code article 2 on sales, 48 ALR3d 1060.

§ 34.1-2-102. Scope; certain security and other transactions excluded from this article.

Unless the context otherwise requires, this article 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 security transaction nor does this article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

History. Laws 1961, ch. 219, § 2-102; W.S. 1957, § 34-2-102 ; W.S. 1977, § 34-21-202.

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.

Click to view

Cross references. —

As to secured transactions, see article 9 of this title.

Applicability. —

Where a retail store purchased and supplied the outer fabric for some of the garments produced by the manufacturer, the transaction was one for the sale of goods to which the U.C.C. applied, despite the fact that labor was involved in producing the goods. Jackson Hole Traders, Inc. v. Joseph, 931 P.2d 244, 1997 Wyo. LEXIS 18 (Wyo. 1997).

“Lease agreement” considered to be sales contract. —

Where testimony on behalf of the lessee established that it continued to make the lease payments after the repossession of the trailer and the extension because it wanted to preserve its right to purchase, under the terms of the lease agreement and the option, the lessor was obligated to sell for $3,000 at the end of the lease term even though there was no concomitant requirement of the lessee to buy, and, in relative terms, the purchase price at the end of the lease was less than 10% of the value of the equipment leased, the trial court was justified in considering the contract to be one for the sale of goods, at least for the purpose of applying the damage provisions of the UCC. Stillwell Welding Co. v. Colt Trucking, 741 P.2d 598, 1987 Wyo. LEXIS 500 (Wyo. 1987).

Stated in

Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Cited in

R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975); Wyo. Bd. of Land Comm'rs v. Antelope Coal Co., 2008 WY 60, 185 P.3d 666, 2008 Wyo. LEXIS 62 (June 3, 2008).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes a transaction, a contract for sale or a sale within the scope of UCC article 2, 4 ALR4th 85.

What constitutes “goods” within the scope of UCC article 2, 4 ALR4th 912.

Applicability of UCC article 2 to mixed contracts for sale of goods and services, 5 ALR4th 501.

§ 34.1-2-103. Definitions and index of definitions.

1. In this article unless the context otherwise  requires:
   1. “Buyer” means a person who buys or contracts  to buy goods;
   2. Reserved;
   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 article  or to specified parts thereof, and the sections in which they appear  are: “Acceptance”. . W.S. 34.1-2-606 “Banker's credit”. . W.S. 34.1-2-325 “Between merchants”. . W.S. 34.1-2-104 “Cancellation”. . W.S. 34.1-2-106(d) “Commercial unit”. . W.S. 34.1-2-105 “Confirmed credit”. . W.S. 34.1-2-325 “Conforming to contract”. . W.S. 34.1-2-106 “Contract for sale”. . W.S. 34.1-2-106 “Cover”. . W.S. 34.1-2-712 “Entrusting”. . W.S. 34.1-2-403 “Financing agency”. . W.S. 34.1-2-104 “Future goods”. . W.S. 34.1-2-105 “Goods”. . W.S. 34.1-2-105 “Identification”. . W.S. 34.1-2-501 “Installment contract”. . W.S. 34.1-2-612 “Letter of credit”. . W.S. 34.1-2-325 “Lot”. . W.S. 34.1-2-105 “Merchant”. . W.S. 34.1-2-104 “Overseas”. . W.S. 34.1-2-323 “Person in position of seller”. . W.S. 34.1-2-707 “Present sale”. . W.S. 34.1-2-106 “Sale”. . W.S. 34.1-2-106 “Sale on approval”. . W.S. 34.1-2-326 “Sale or return”. . W.S. 34.1-2-326 “Termination”. . W.S. 34.1-2-106 Click to view
3. “Control” as provided in W.S. 34.1-7-106 and the following definitions in other articles apply to this article: “Check”. . W.S. 34.1-3-104 “Consignee”. . W.S. 34.1-7-102 “Consignor”. . W.S. 34.1-7-102 “Consumer goods”. . W.S. 34.1-9-102 “Dishonor”. . W.S. 34.1-3-502 “Draft”. . W.S. 34.1-3-104 Click to view
4. In addition article 1 contains general  definitions and principles of construction and interpretation applicable  throughout this article.

History. Laws 1961, ch. 219, § 2-103; W.S. 1957, § 34-2-103 ; W.S. 1977, § 34-21-203; 2001, ch. 137, § 3; 2015 ch. 124, §§ 2, 5, effective July 1, 2015.

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.

The 2015 amendment, effective July 1, 2015, reserved former (a)(ii), which read: “‘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”; and in the introductory language of (c), added “‘Control’ as provided in W.S. 34.1-7-106 and’ at the beginning, and made a related change.

Word “buyer” includes, with respect to any previous seller in the distributive chain, persons within the scope of § 34.1-2-318, “any person who may reasonably be expected to use, consume, or be affected by the goods.” Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Plaintiff qualified as buyer. —

As the party who contracted to buy the wheelchair and paid for the chair with Medicaid benefits, plaintiff qualified as a buyer under this section, and as a buyer who rightfully rejected the chair, plaintiff was entitled to the remedies available in § 34.1-2-711.Kirby v. NMC/Continue Care, 993 P.2d 951, 1999 Wyo. LEXIS 194 (Wyo. 1999).

Subsection (a)(ii) requires observance of reasonable commercial standards of fair dealing and honesty in fact in the transaction; both requirements must be satisfied to meet the duty of good faith. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Reasonable commercial standards are incapable of precise definition and instead must be determined from the facts of each case. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

“Good faith” consists of an honest intention to abstain from taking any unconscientious advantage of another, even through the forms of technicalities of law, together with an absence of all information or belief of facts which could render the transaction unconscientious. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

The implied covenant of good faith enjoins each party to do nothing destructive of the other party's right to enjoy the fruits of the contract and to do everything that the contract presupposes they will do to accomplish its purpose. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Agent arranging sale makes principal “seller.” —

Whether the defendant ever held title to a defective steel plate was irrelevant if a salesman acted as the defendant's agent in arranging the sale of the plate to the plaintiff; where the salesman did act as the defendant's agent, the defendant was the seller under subsection (a)(iv). Cargill v. Mountain Cement Co., 891 P.2d 57, 1995 Wyo. LEXIS 31 (Wyo. 1995).

§ 34.1-2-104. Definitions: “Merchant”; “between merchants”; “financing agency”.

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 (section 34.1-2-707).
3. “Between merchants” means in any transaction  with respect to which both parties are chargeable with the knowledge  or skill of merchants.

History. Laws 1961, ch. 219, § 2-104; W.S. 1957, § 34-2-104 ; W.S. 1977, § 34-21-204; 2015 ch. 124, § 5, effective July 1, 2015.

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.

The special provisions as to merchants appear only in this Article and they are of three kinds. Sections 2-201(b), 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(b) for retention of possession by a merchant-seller falls in the same class; as does Section 2-403(b) on entrusting of possession to a merchant “who deals in goods of that kind”.

A third group of sections includes 2-103(a)(ii), 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(a)(iii), 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.

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.

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.

Click to view

Cross references. —

For definition of “draft”, see § 34.1-3-104.

Stated in

Ford v. Starr Fireworks, Inc., 874 P.2d 230, 1994 Wyo. LEXIS 58 (Wyo. 1994).

Am. Jur. 2d, ALR and C.J.S. references. —

Who is “merchant” under UCC, § 2-314(1), dealing with implied warranties of merchantability, 91 ALR3d 876.

Farmers as “merchants” within provisions of UCC article 2, dealing with sales, 95 ALR3d 484.

§ 34.1-2-105. 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 (article 8) 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 (section 34.1-2-107).
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. Laws 1961, ch. 219, § 2-105; W.S. 1957, § 34-2-105 ; W.S. 1977, § 34-21-205.

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 (a) on “goods”: The phraseology of the prior uniform statutory provision has been changed so that:

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(a) (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).

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 (d) 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 (e) and (f) 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.

Cross references:

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.

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Term “goods” encompasses motor vehicles. Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

Gas purchase contracts are “contracts for the sale of goods” and are governed by this article. Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. Wyo. 1991), reh'g, en banc, denied, 1991 U.S. App. LEXIS 28650 (10th Cir. Dec. 6, 1991).

Quoted in

Young v. Thomas, 785 P.2d 489, 1990 Wyo. LEXIS 1 (Wyo. 1990); Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Cited in

Meuse-Rhine-Ijssel Cattle Breeders of Can., Ltd. v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes “goods” within the scope of UCC article 2, 4 ALR4th 912.

Applicability of UCC article 2 to mixed contracts for sale of goods and services, 5 ALR4th 501.

Acceptance of some “commercial units” of goods purchased under UCC, § 2-601(C), 41 ALR4th 396.

§ 34.1-2-106. Definitions: “Contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming” to contract; “termination”; “cancellation”.

1. In this article 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 (section 34.1-2-401). 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. Laws 1961, ch. 219, § 2-106; W.S. 1957, § 34-2-106 ; W.S. 1977, § 34-21-206.

Official Comment

Prior uniform statutory provision:

Subsection (a)—Section 1 (1) and (2), Uniform Sales Act; Subsection (b)—none, but subsection generally continues policy of Sections 11, 44 and 69, Uniform Sales Act; Subsections (c) and (d)—none.

Changes:

Completely rewritten.

Purposes of changes and new matter:

1. Subsection (a): “Contract 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 (b): 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 (c) and (d): 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.

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Lease agreement considered to be sales contract. —

Where testimony on behalf of the lessee established that it continued to make the lease payments after the repossession of the trailer and the extension because it wanted to preserve its right to purchase, under the terms of the lease agreement and the option, the lessor was obligated to sell for $3,000 at the end of the lease term even though there was no concomitant requirement of the lessee to buy, and, in relative terms, the purchase price at the end of the lease was less than 10% of the value of the equipment leased, the trial court was justified in considering the contract to be one for the sale of goods, at least for the purpose of applying the damage provisions of the UCC. Stillwell Welding Co. v. Colt Trucking, 741 P.2d 598, 1987 Wyo. LEXIS 500 (Wyo. 1987).

No “sale” unless gas severed from land. —

The language of an oil and gas lease, considered in its entirety, demonstrated that the intention of the parties was that royalty payments would be due only after the gas was “sold” or used. No sale could be identified unless the gas was severed from the leased land. State v. Pennzoil Co., 752 P.2d 975, 1988 Wyo. LEXIS 40 (Wyo. 1988).

Sharecrop agreement did not constitute “sale” under statutory definition. Young v. Thomas, 785 P.2d 489, 1990 Wyo. LEXIS 1 (Wyo. 1990).

Substitute equipment not conforming. —

Breach of contract occurred in a case where a supplier was required to provide equipment , and a substitution for a name-brand did not conform under this section; substitution was not in accordance with the supplier's obligations under the contract to provide certain equipment or obtain approval to make a substitution. Fox v. Wheeler Elec., Inc., 2007 WY 171, 169 P.3d 875, 2007 Wyo. LEXIS 184 (Wyo. 2007).

Quoted in

Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes a transaction, a contract for sale or a sale within the scope of UCC article 2, 4 ALR4th 85.

§ 34.1-2-107. Goods to be severed from realty; recording.

1. A contract for the sale of timber, minerals  or the like or a structure or its materials to be removed from realty  is a contract for the sale of goods within this article 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  (a) is a contract for the sale of goods within this article 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. Laws 1961, ch. 219, § 2-107; W.S. 1957, § 34-2-107 ; W.S. 1977, § 34-21-207.

Official Comment

Prior uniform statutory provision:

See Section 76, Uniform Sales Act on prior policy; Section 7, Uniform Conditional Sales Act.

Purposes:

1. Subsection (a). 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 (b). “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.

The provision in subsection (c) 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.

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.

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.

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Cross references. —

As to conveyances of interests in land generally, see chapter 1 of title 34.

As to deeds generally, see chapter 2 of title 34.

Gas purchase contracts are “contracts for the sale of goods” and are governed by this article. Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. Wyo. 1991), reh'g, en banc, denied, 1991 U.S. App. LEXIS 28650 (10th Cir. Dec. 6, 1991).

Am. Jur. 2d, ALR and C.J.S. references. —

Conveyance of land as including mature but unharvested crops, 51 ALR4th 1263.

§ 34.1-2-201. Formal requirements; statute of frauds.

1. Except as otherwise provided in this section  a contract for the sale of goods for the price of five hundred dollars  ($500.00) 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 (a) against  such party unless written notice of objection to its contents is given  within ten (10) days after it is received.
3. A contract which does not satisfy the  requirements of subsection (a) 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  (section 34.1-2-606).

History. Laws 1961, ch. 219, § 2-201; W.S. 1957, § 34-2-201; W.S. 1977, § 34-21-208.

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.

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.

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.

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 of 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.

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.

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.

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Cross references. —

As to statute of frauds generally, see § 1-23-105 . See, also, § 34.1-1-206 as to statute of frauds.

Editor's notes. —

Cases that involved contract formalities or statute of frauds which were decided under prior law have been placed under this section.

Sharecrop agreement did not constitute “contract for the sale of goods” under this section. Young v. Thomas, 785 P.2d 489, 1990 Wyo. LEXIS 1 (Wyo. 1990).

Oral promise to repurchase stock when distinct from sale and made by one not interested in sale is within statute, and unenforceable. Pierce v. Rothwell, 38 Wyo. 267, 267 P. 86, 1928 Wyo. LEXIS 52 (Wyo. 1928).

But oral promise of seller to repurchase is part of original sale. —

Oral promise by seller of stock, who is also owner, to repurchase, is part of original contract, and payment and delivery takes agreement out of statute. Pierce v. Rothwell, 38 Wyo. 267, 267 P. 86, 1928 Wyo. LEXIS 52 (Wyo. 1928).

Where one selling stock acts as agent, but is officer of corporation, and interested in its success, his agreement to repurchase stock is not within statute. Pierce v. Rothwell, 38 Wyo. 267, 267 P. 86, 1928 Wyo. LEXIS 52 (Wyo. 1928).

Evidence held to show that purchase of bank stock and oral agreement of defendant to repurchase was one transaction, not within statute of frauds. Pierce v. Rothwell, 38 Wyo. 267, 267 P. 86, 1928 Wyo. LEXIS 52 (Wyo. 1928).

Promissory estoppel available to avoid statute of frauds. —

An oral promise otherwise within the statute of frauds may nevertheless be enforceable on the basis of promissory estoppel. B & W Glass v. Weather Shield Mfg., 829 P.2d 809, 1992 Wyo. LEXIS 43 (Wyo. 1992).

Memorandum to contain substantial terms of contract. —

Memorandum of sales contract, in order to satisfy statute of frauds, must contain the substantial terms of the contract, expressed with such certainty that they may be understood from the contract itself, or some other writing to which it refers, without resorting to parol evidence; and when reference is made to another writing, it must be so clear as to prevent possibility of one paper being substituted for another. Burley-Winter Pottery Co. v. Onken Bros. & W. Co., 26 Wyo. 287, 183 P. 747, 1919 Wyo. LEXIS 18 (Wyo. 1919).

Memorandum to be sufficient to satisfy statute of frauds for sale of personal property must contain in substantial terms the contract so that it cannot be misunderstood or confused with some other writing to which it refers, without resort to parol evidence; and such that one paper cannot be substituted for another. Noland v. Haywood, 46 Wyo. 101, 23 P.2d 845, 1933 Wyo. LEXIS 31 (Wyo. 1933).

“Usage of trade” may supplement purchase order. —

A concrete supplier, in a case in which the sale and purchase of concrete was memorialized only through a simple purchase order, was entitled to produce evidence of “usage of trade,” including the quantity terms, to supplement the terms of the agreement. Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 1989 Wyo. LEXIS 66 (Wyo. 1989).

Note or memorandum need not have been made contemporaneously with contract. Mead v. Leo Sheep Co., 32 Wyo. 313, 232 P. 511, 1925 Wyo. LEXIS 4 (Wyo. 1925).

Full-performance exception satisfied upon arranged sale. —

The full-performance exception (UCC) was satisfied and there was no violation of the statute of frauds where the defendant's agent arranged the sale and instructed the plaintiff to pay a third party, since he was acting within the scope of his authority, despite the fact that he may have violated private instructions he received from the defendant. Cargill v. Mountain Cement Co., 891 P.2d 57, 1995 Wyo. LEXIS 31 (Wyo. 1995).

Payment may be in form of credit. —

Payment made on purchase price of personalty in form of credit given to buyer on his claim against third party and applied by such third party upon debt due him from seller is sufficient payment to free contract from invalidity under statute of frauds. Saratoga Land & Inv. Co. v. Jensen, 20 Wyo. 323, 123 P. 415, 1912 Wyo. LEXIS 38 (Wyo. 1912).

Or purchase of collateral. —

Where bond was put up as collateral on note to a bank and bank thereafter orally purchased bond in satisfaction of the note and exercised acts of ownership of the bond, it was held sufficient to take transaction out of statute. Wilde v. Zimmerman, 46 Wyo. 530, 30 P.2d 148, 1934 Wyo. LEXIS 47 (Wyo. 1934).

Where bank declares ownership of collateral bonds which were retained in discharge of principal debt and delivers them to third party as collateral to its own obligation, validity of purchase of the bonds in first instance is unaffected by statute of frauds. Wilde v. Zimmerman, 46 Wyo. 530, 30 P.2d 148, 1934 Wyo. LEXIS 47 (Wyo. 1934).

Delivery to carrier insufficient to show acceptance. —

The delivery of goods purchased under an oral contract to a carrier is not a sufficient acceptance of such goods by the buyer to take the contract outside the statute of frauds, but some act is required on the part of the buyer to show an intention to receive and accept the goods. Williams-Hayward Shoe Co. v. Brooks, 9 Wyo. 424, 64 P. 342, 1901 Wyo. LEXIS 20 (Wyo. 1901).

Delivery to partner. —

To satisfy this section and § 1-23-105 , it is not necessary to show by evidence distinct from a prior oral contract of sale to a partnership that a delivery pursuant thereto to one of the partners was to him as a partner. Sneider v. Big Horn Milling Co., 28 Wyo. 40, 200 P. 1011, 1921 Wyo. LEXIS 3 (Wyo. 1921).

Acceptance of delivery shown. —

Buyer was held to have accepted delivery of hay under a written contract for sale of land including 50 tons of hay and for additional hay, where he entered into possession of land on which 12 stacks of hay were located, had the hay measured, agreed to have two stacks weighed and entered into an arbitration agreement under which he agreed to pay for the quantity of hay found by the arbitrators. Cooley v. Frank, 68 Wyo. 436, 235 P.2d 446, 1951 Wyo. LEXIS 31 (Wyo. 1951).

Defense waived by failure to plead statute or object to proof of contract. —

The defense of the statute of frauds may be waived by failure to plead the statute, or by failure to object to plaintiff's proof of the contract, in the trial court. Tregea v. Mills, 11 Wyo. 438, 72 P. 578, 1903 Wyo. LEXIS 17 (Wyo.), reh'g denied, 11 Wyo. 438, 73 P. 209, 1903 Wyo. LEXIS 18 (Wyo. 1903); Davison v. Nicholson, 37 Wyo. 412, 263 P. 605, 1928 Wyo. LEXIS 5 (Wyo. 1928).

But objection is sufficient. —

Defendant may take advantage of statute of frauds by objecting to parol evidence to prove the contract which he has by his answer denied, although he has not specifically pleaded statute. Williams-Hayward Shoe Co. v. Brooks, 9 Wyo. 424, 64 P. 342, 1901 Wyo. LEXIS 20 (Wyo. 1901).

Applied in

Giacchino v. Estate of Stalkup, 908 P.2d 983, 1995 Wyo. LEXIS 236 (Wyo. 1995).

Cited in

Metz Beverage Co. v. Wyo. Beverages, Inc., 2002 WY 21, 2002 Wyo. LEXIS 20 , 39 P.3d 1051 (Wyo. 2002); Jackman Constr., Inc. v. Rock Springs Winnelson Co., 2016 WY 118, 385 P.3d 311, 2016 Wyo. LEXIS 133 (Wyo. 2016).

Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

For note, “Failure to Include All Material Terms Under the Uniform Commercial Code — the ‘Open Terms Contract,’” see 19 Wyo. L.J. 80 (1964).

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and application of UCC, § 2-201(3)(b) rendering contract of sale enforceable notwithstanding statute of frauds, to extent it is admitted in pleading, testimony or otherwise in court, 88 ALR3d 416.

Farmers as “merchants” within provisions of UCC article 2, dealing with sales, 95 ALR3d 484.

Construction and application of UCC, § 2-201(3)(c), rendering contract of sale enforceable notwithstanding statute of frauds with respect to goods for which payment has been made and accepted or which have been received and accepted, 97 ALR3d 908.

Promissory estoppel as basis for avoidance of UCC statute of frauds (UCC, § 2-201), 29 ALR4th 1006.

Enforceability, by landowner, of subdivision developer's oral promise to construct or improve roads, 41 ALR4th 573.

“Specially manufactured goods” statute of frauds exception in UCC, § 2-201(3)(a), 45 ALR4th 1126.

Sales: construction of statute of frauds exception under UCC § 2-201(2) for confirmatory writing between merchants, 82 ALR4th 709.

Satisfaction of statute of frauds by e-mail, 110 ALR5th 277.

§ 34.1-2-202. Final written expression; parol or extrinsic evidence.

1. 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 (section 34.1-1-303); 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.
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)(i) is an original determination by the court that the language used is ambiguous.

   2. Paragraph (a)(i) 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 (a)(ii) 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.

History. Laws 1961, ch. 219, § 2-202; W.S. 1957, § 34-2-202; W.S. 1977, § 34-21-209; 2015 ch. 124, § 2, effective July 1, 2015.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. This section definitely rejects:

(a) 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;

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.

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The 2015 amendment, effective July 1, 2015, rewrote (a)(i), which formerly read: “By course of dealing or usage of trade (section 34.1-1-205) or by course of performance (section 34.1-2-208); and.”

Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Uniform Commercial Code was intended to liberalize the parol evidence rule. Zwierzycki v. Owens, 499 P.2d 996, 1972 Wyo. LEXIS 270 (Wyo. 1972); Shepard v. Top Hat Land & Cattle Co., 560 P.2d 730, 1977 Wyo. LEXIS 232 (Wyo. 1977).

And to eliminate the presumption that a written contract is a total integration. Zwierzycki v. Owens, 499 P.2d 996, 1972 Wyo. LEXIS 270 (Wyo. 1972); Shepard v. Top Hat Land & Cattle Co., 560 P.2d 730, 1977 Wyo. LEXIS 232 (Wyo. 1977).

If contract is ambiguous, parol evidence is admissible to explain its meaning. Provisions of this title provide a means to assist in resolving the issues of fact presented. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Where the language of a contract is indefinite or ambiguous, all the surrounding circumstances and the governing law must be searched in order to ascertain its true meaning. Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

Where the intent of the parties is disclosed by the language which they used, resort to evidence outside of the contract for the purpose of contradicting or explaining its terms is not necessary. Shepard v. Top Hat Land & Cattle Co., 560 P.2d 730, 1977 Wyo. LEXIS 232 (Wyo. 1977).

Parol evidence properly admitted. —

It was not error to admit parol evidence, despite clause reciting that no representations had been made unless incorporated, where the finding of the trial court that the written instrument was not intended to be the complete and exclusive statement of the terms of the agreement was supported by the evidence. Zwierzycki v. Owens, 499 P.2d 996, 1972 Wyo. LEXIS 270 (Wyo. 1972).

“Usage of trade” may supplement purchase order. —

A concrete supplier, in a case in which the sale and purchase of concrete was memorialized only through a simple purchase order, was entitled to produce evidence of “usage of trade,” including the quantity terms, to supplement the terms of the agreement. Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 1989 Wyo. LEXIS 66 (Wyo. 1989).

Applied in

Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495, 1995 U.S. Dist. LEXIS 3381 (D. Wyo. 1995).

Quoted in

Western Nat'l Bank v. Moncur, 624 P.2d 765, 1981 Wyo. LEXIS 298 (Wyo. 1981).

Am. Jur. 2d, ALR and C.J.S. references. —

Application of parol evidence rule of Uniform Commercial Code, § 2-202 where fraud or misrepresentation is claimed in sale of goods, 71 ALR3d 1059.

Affirmations or representations made after the sale is closed as basis of warranty under UCC, § 2-313(1)(a), 47 ALR4th 200.

§ 34.1-2-203. 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. Laws 1961, ch. 219, § 2-203; W.S. 1957, § 34-2-203; W.S. 1977, § 34-21-210.

Official Comment

Prior uniform statutory provision:

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 references:

Point 1: Section 2-205.

Definitional cross references:

“Contract for sale”. Section 2-106. “Goods”. Section 2-105. “Writing”. Section 1-201.

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§ 34.1-2-204. 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 (1) 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. Laws 1961, ch. 219, § 2-204; W.S. 1957, § 34-2-204; W.S. 1977, § 34-21-211.

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 (a) 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 (a) appropriate conduct by the parties may be sufficient to establish an agreement. Subsection (b) 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 (c) 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 (a): Sections 1-103, 2-201 and 2-302.

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

Subsection (c): 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.

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If contract is ambiguous, parol evidence is admissible to explain its meaning. Provisions of this title provide a means to assist in resolving the issues of fact presented. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and application of UCC, § 2-305 dealing with open price term contracts, 91 ALR3d 1237.

Output contracts under § 2-306(1) of Uniform Commercial Code, 30 ALR4th 396.

§ 34.1-2-205. 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 (3) months, but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

History. Laws 1961, ch. 219, § 2-205; W.S. 1957, § 34-2-205; W.S. 1977, § 34-21-212.

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:

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.

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Cited in

Western Nat'l Bank v. Moncur, 624 P.2d 765, 1981 Wyo. LEXIS 298 (Wyo. 1981).

§ 34.1-2-206. 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 an acceptance.

History. Laws 1961, ch. 219, § 2-206; W.S. 1957, § 34-2-206; W.S. 1977, § 34-21-213.

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 (b).

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 (a)(ii) 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.

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§ 34.1-2-207. 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 [§§ 34.1-1-101 through 34.1-10-104].

History. Laws 1961, ch. 219, § 2-207; W.S. 1957, § 34-2-207; W.S. 1977, § 34-21-214.

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:

1. This section is intended to deal with two typical situations. The one is 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 acknowledgments or memoranda embodying the terms so far as agreed upon and adding terms not discussed. The other situation is one in which a wire or letter expressed and intended as the closing or confirmation 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.

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 either in the writing intended to close the deal or in a later confirmation falls within subsection (b) 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 (b). 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 (b) 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 (b). 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 (c) 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.

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Am. Jur. 2d, ALR and C.J.S. references. —

What are additional terms materially altering contract within meaning of Uniform Commercial Code, § 2-207(2)(b), 72 ALR3d 479.

Construction and application of UCC, § 2-305, dealing with open price term contracts, 91 ALR3d 1237.

What constitutes acceptance “expressly made conditional” converting it to rejection and counteroffer under UCC, § 2-207(1), 22 ALR4th 939.

§ 34.1-2-208. Course of performance or practical construction. [Repealed]

History. Laws 1961, ch. 219, § 2-208; W.S. 1957, § 34-2-208; W.S. 1977, § 34-21-215; repealed by 2015 ch. 124, § 3, effective July 1, 2015.

§ 34.1-2-209. Modification, rescission and waiver.

1. An agreement modifying a contract within  this article 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 article (section 34.1-2-201) 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 (b) or  (c) 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. Laws 1961, ch. 219, § 2-209; W.S. 1957, § 34-2-209; W.S. 1977, § 34-21-216.

Official Comment

Prior uniform statutory provision:

Subsection (1)—Compare Section 1, Uniform Written Obligations Act; Subsections (b) to (e)—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 (a) provides that an agreement modifying a sales contract needs no consideration to be binding.

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.

3. Subsections (b) and (c) 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.

The Statute of Frauds provisions of this Article are expressly applied to modifications by subsection (c). 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 (b) 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.

4. Subsection (d) is intended, despite the provisions of subsections (b) and (c), 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 (e).

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.

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Reliance on waiver required. —

The inconsistency between this section's enforcement of no modification clauses in contracts and its allowance of waiver is resolved by requiring reliance by the breaching party on the nonbreaching party's waiver. Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495, 1995 U.S. Dist. LEXIS 3381 (D. Wyo. 1995).

Quoted in

Jim's Water Serv., Inc. v. Alinen, 608 P.2d 667, 1980 Wyo. LEXIS 252 (Wyo. 1980).

Am. Jur. 2d, ALR and C.J.S. references. —

Affirmations or representations made after the sale is closed as basis of warranty under UCC, § 2-313(1)(a), 47 ALR4th 200.

§ 34.1-2-210. 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 section 34.1-9-406, 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 (b) 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 (1)  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 (2) 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 (section 34.1-2-609).

History. Laws 1961, ch. 219, § 2-210; W.S. 1957, § 34-2-210; W.S. 1977, § 34-21-217; 2001, ch. 137, § 3.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Generally, this section recognizes both delegation of performance and assignability as normal and permissible 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 (a) where no substantial reason can be shown as to why the delegated performance will not be as satisfactory as personal performance.

3. Under subsection (b) 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 b 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 (e) 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 (e) 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 (b).

5. Subsection (d) 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.

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).

6. Subsection (e) 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.

Cross references:

Point 3: Articles 5 and 9.

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

Point 5: Article 9, Sections 9-402, 9-404 to 9-406.

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.

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§ 34.1-2-301. 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. Laws 1961, ch. 219, § 2-301; W.S. 1957, § 34-2-301; W.S. 1977, § 34-21-218.

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.

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Cited in

Western Equip. Co. v. Sheridan Iron Works, Inc., 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

For note, “Failure to Include All Material Terms Under the Uniform Commercial Code — the ‘Open Terms Contract,’” see 19 Wyo. L.J. 80 (1964).

§ 34.1-2-302. 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. Laws 1961, ch. 219, § 2-302; W.S. 1957, § 34-2-302; W.S. 1977, § 34-21-219.

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 (b) 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:

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.

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 (b) 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.

Definitional cross reference:

“Contract”. Section 1-201.

Courts have ability to pass directly on unconscionability of each individual contract or particular clause therein in light of the general commercial background and needs of each case and to limit unconscionable contract provisions so as to avoid unconscionable results. Kerr-McGee Corp. v. Northern Utils., 500 F. Supp. 624, 1980 U.S. Dist. LEXIS 9447 (D. Wyo. 1980), rev'd, 673 F.2d 323, 1982 U.S. App. LEXIS 20769 (10th Cir. Wyo. 1982).

Principle of this provision is one of prevention of oppression and unfair surprise and not of disturbance of allocation of risks because of superior bargaining power. In order to avail oneself of the section, proof must show the contract is so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. Kerr-McGee Corp. v. Northern Util., Inc., 673 F.2d 323, 1982 U.S. App. LEXIS 20769 (10th Cir. 1982).

Considerations relevant to determination of unconscionability are whether: (1) the protesting party was deprived of a meaningful choice as to whether to enter into the contract; (2) the party was compelled to accept the terms; (3) there was opportunity for meaningful negotiation; and (4) there was gross inequality of bargaining power. Kerr-McGee Corp. v. Northern Util., Inc., 673 F.2d 323, 1982 U.S. App. LEXIS 20769 (10th Cir. 1982).

Burden is on complaining party to demonstrate that clause in question was unconscionable at the time the contract was made. Kerr-McGee Corp. v. Northern Util., Inc., 673 F.2d 323, 1982 U.S. App. LEXIS 20769 (10th Cir. 1982).

Indefinite escalation clause not unconscionable where result of experienced, protracted negotiation. —

An indefinite escalation clause in an interstate gas sales contract between a producer and a public gas utility is not unconscionable where experienced negotiators for both parties entered into the agreement after several months of give-and-take. Kerr-McGee Corp. v. Northern Util., Inc., 673 F.2d 323, 1982 U.S. App. LEXIS 20769 (10th Cir. 1982).

Law reviews. —

For article on time element as test of unconscionability, see I Land & Water L. Rev. 309 (1966).

For case note, “Indefinite Price Escalation Clause in Natural Gas Sales Contract; Unconscionable and Contrary to Public Policy. Kerr-McGee Corp. v. Northern Util., Inc., 500 F. Supp. 624, 1980 U.S. Dist. LEXIS 9447 (D. Wyo. 1980),” see XVII Land & Water L. Rev. 257 (1982).

Am. Jur. 2d, ALR and C.J.S. references. —

“Unconscionability” as ground for refusing enforcement of contract for sale of goods or agreement collateral thereto, 18 ALR3d 1305.

Unconscionability, under UCC, § 2-302 or § 2-719(3), of disclaimer of warranties or limitation or exclusion of damages in contract subject to UCC article 2 (sales), 38 ALR4th 25.

“Unconscionability,” under UCC § 2-302, of bank's letter of credit or other financing arrangements, 15 ALR5th 365.

§ 34.1-2-303. Allocation or division of risks.

Where this article 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. Laws 1961, ch. 219, § 2-303; W.S. 1957, § 34-2-303; W.S. 1977, § 34-21-220.

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.

Compare Section 1-102(d).

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.

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.

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§ 34.1-2-304. 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 article,  but not the transfer of the interest in realty or the transferor’s  obligations in connection therewith.

History. Laws 1961, ch. 219, § 2-304; W.S. 1957, § 34-2-304; W.S. 1977, § 34-21-221.

Official Comment

Prior uniform statutory provisions:

Subsections (b) and (c) 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 (a) 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 (b) 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.

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§ 34.1-2-305. 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 (1) 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. Laws 1961, ch. 219, § 2-305; W.S. 1957, § 34-2-305; W.S. 1977, § 34-21-222.

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 (a) 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 (a) (“The parties if they so intend”) and in subsection (d). Whether or not this is so is, in most cases, a question to be determined by the trier of fact.

3. Subsection (b), 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 (c), 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(c), 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.

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Cited in

Moncrief v. Williston Basin Interstate Pipeline Co., 174 F.3d 1150, 1999 U.S. App. LEXIS 7617 (10th Cir. 1999).

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and application of UCC, § 2-305, dealing with open price term contracts, 91 ALR3d 1237.

§ 34.1-2-306. 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. Laws 1961, ch. 219, § 2-306; W.S. 1957, § 34-2-306; W.S. 1977, § 34-21-223.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Subsection (a) 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 (b), 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.

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Inherent question of fact created by section. —

In a contract dispute over performance, this section creates an inherent question of fact which plaintiff could rightfully present to the trier of fact. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Exclusive dealing agreement requires good faith performance. —

As long as an exclusive dealing agreement is in force, seller is entitled to good faith performance by buyer. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Quoted in

Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 1989 Wyo. LEXIS 66 (Wyo. 1989).

Am. Jur. 2d, ALR and C.J.S. references. —

Output contracts under § 2-306(1) of Uniform Commercial Code, 30 ALR4th 396.

Establishment and construction of requirements contracts under § 2-306(1) of Uniform Commercial Code, 94 ALR5th 247.

§ 34.1-2-307. 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. Laws 1961, ch. 219, § 2-307; W.S. 1957, § 34-2-307; W.S. 1977, § 34-21-224.

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.

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.

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.

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.

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§ 34.1-2-308. Absence of specified place for delivery.

1. 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. Laws 1961, ch. 219, § 2-308; W.S. 1957, § 34-2-308; W.S. 1977, § 34-21-225.

Official Comment

Prior uniform statutory provision:

Paragraphs (a)(i) and (ii)—Section 43(1), Uniform Sales Act; Paragraph (a)(iii)—none.

Changes:

Slight modification in language.

Purposes of changes and new matter:

1. Paragraphs (a)(i) and (ii) 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 (a)(ii) 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 available, leaving the buyer himself to see to the physical receipt of the goods, tender at the buyer's address is not required under paragraph (a)(iii). 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 or associated with 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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-309. 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 article or agreed  upon shall be a reasonable time.
2. Where the contract provides for successive  performance 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 (1) 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. Laws 1961, ch. 219, § 2-309; W.S. 1957, § 34-2-309; W.S. 1977, § 34-21-226.

Official Comment

Prior uniform statutory provision:

Subsection (a)—see Sections 43(2), 45(2), 47(1) and 48, Uniform Sales Act, for policy continued under this Article, Subsection (b)—none; Subsection (c)—none.

Changes:

Completely different in scope.

Purposes of changes and new matter:

1. Subsection (a) 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.

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.

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 (b) 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 (c) 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.

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.

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The statute of frauds inapplicable. —

The statute of frauds did not apply where there was an oral agreement spanning over 30 years which included substantial part performance. Metz Bev. Co. v. Wyo. Bevs. Inc., 2002 WY 21, 39 P.3d 1051, 2002 Wyo. LEXIS 20 (Wyo. 2002).

Applied in

McGreal v. Jackie Fine Arts, Inc., 654 P.2d 149, 1982 Wyo. LEXIS 412 (Wyo. 1982).

§ 34.1-2-310. Open time for payment or running of credit; authority to ship under reservation.

1. 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 (section 34.1-2-513); and
   3. If delivery is authorized and made by way of documents of title otherwise than by subdivision (ii) then payment is due regardless of where the goods are to be received:
      1. At the time and place at which the buyer is to receive delivery of the tangible documents; or
      2. 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. Laws 1961, ch. 219, § 2-310; W.S. 1957, § 34-2-310; W.S. 1977, § 34-21-227; 2015 ch. 124, § 5, effective July 1, 2015.

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(a)(iii)). 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 (a)(ii) 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. Under subsection (c), 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 delivery of the tangible documents of title. In the case of an electronic document of title, payment is due when the buyer is to receive delivery of the electronic document and at the seller’s place of business, or if none, the seller’s residence. Delivery as to documents of title is stated in Article 1, Section 1-201.

3. Unless otherwise agreed, the place for the delivery 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 Sections 2-512 and 2-513 the buyer is under no duty to pay prior to inspection. Tender of a document of title requires that the seller be ready, willing and able to transfer possession of a tangible document of title or control of an electronic document of title to the buyer.

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 (a)(ii) and (iii) if the terms are C.I.F., C.O.D., or cash against documents payment may be due before inspection.

5. Paragraph (a)(iv) 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(c)(ii).

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-311. Options and cooperation respecting performance.

1. An agreement for sale which is otherwise  sufficiently definite (section 34.1-2-204(c)) to be a contract is not made invalid by the fact that  it leaves particulars of performance to be specified by one (1) 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 section 34.1-2-319(a)(iii) and (c) 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. Laws 1961, ch. 219, § 2-311; W.S. 1957, § 34-2-311; W.S. 1977, § 34-21-228.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Subsection (a) 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 (b) 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 (c) 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 (c) 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.

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§ 34.1-2-312. Warranty of title and against infringement; buyer's obligation against infringement.

1. Subject to subsection (b) 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 (a) 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. Laws 1961, ch. 219, § 2-312; W.S. 1957, § 34-2-312; W.S. 1977, § 34-21-229.

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 (a) 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.

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 (a)(ii) is actual knowledge as distinct from notice.

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 (b) recognizes that sales by sheriffs, executors, certain 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.

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 (b) 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 (a) and, if applicable, subsection (c).

6. The warranty of subsection (a) is not designated as an “implied” warranty, and hence is not subject to Section 2-316 (c). Disclaimer of the warranty of title is governed instead by subsection (b), which requires either specific language or the described circumstances.

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.

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Cited in

Western Equip. Co. v. Sheridan Iron Works, Inc., 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Law reviews. —

For note, “Sales Warranties Under Wyoming Law and the Uniform Commercial Code,” see 14 Wyo. L.J. 246 (1960).

Am. Jur. 2d, ALR and C.J.S. references. —

Elements and measure of damages for breach of warranty in sale of horse, 91 ALR3d 419.

§ 34.1-2-313. 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. Laws 1961, ch. 219, § 2-313; W.S. 1957, § 34-2-313; W.S. 1977, § 34-21-230.

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.

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

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.

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.

5. Paragraph (a)(ii) makes specific some of the principles set forth above when a description of the goods is given by the seller.

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.

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.

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.

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 (b), 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 (b) 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.

Cross references:

Point 1: Section 2-316.

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

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

Point 4: Section 2-316.

Point 5: Sections 1-205(d) 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.

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Affirmative act, by conduct or words, is essential to creation of express warranty. Stauffer Chem. Co. v. Curry, 778 P.2d 1083, 1989 Wyo. LEXIS 185 (Wyo. 1989), reh'g denied, 1989 Wyo. LEXIS 197 (Wyo. Aug. 25, 1989).

Well digger's statement as to production not a guarantee. —

Well digger's statement, made when he reached the well's total depth, that it would produce 400 gallons of water per hour continuously, was not a guarantee which he could be held to, since it was not a part of the basis of the bargain, neither did it induce a bargain, the parties having had their bargain and contract before the well was started. Terry v. Moore, 448 P.2d 601, 1968 Wyo. LEXIS 218 (Wyo. 1968).

Tire manufacturer's representations that its tires were good and had been used successfully on prior occasions did not create an express warranty. McLaughlin v. Michelin Tire Corp., 778 P.2d 59, 1989 Wyo. LEXIS 174 (Wyo. 1989).

Contract warranty forecloses evidence of oral agreement. —

Evidence of oral agreement that inclosed cab would be furnished with truck was inadmissible, where contract contained warranty and excluded any other warranty. International Harvester Co. v. Leifer, 42 Wyo. 283, 293 P. 381, 1930 Wyo. LEXIS 52 (Wyo. 1930) (decided under prior law).

Privity is not required in action by remote purchaser against a manufacturer based upon an express warranty. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Express warranty is not circumscribed nor eliminated by examination of goods. Shepard v. Top Hat Land & Cattle Co., 560 P.2d 730, 1977 Wyo. LEXIS 232 (Wyo. 1977).

All warranties of future performance of goods should be explicit. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Discovery of breach of warranty of future performance must await the failure to successfully perform in the future, and appropriate remedies for the breach may be claimed at that time. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Express warranty of continued ability relates to future condition. —

Where there is an alleged express warranty of the continued physical ability of a retriever for purposes of field trial competition, such a warranty, if it existed, would be one relating to the future condition of the retriever. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Effect of failure to correct defect within reasonable time. —

At some point in time after the purchase of a new automobile, it must be put in good running condition and the seller does not have an unlimited time for performance of its warranty obligation, so that a failure to correct the defect within a reasonable time, as promised, renders the warrantor liable for a breach of warranty. Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978).

And where dealer deemed agent of manufacturer on warranty. —

Since each dealer, by specific written agreement with the manufacturer, was authorized by written agreement to perform warranty work at the expense of the manufacturer, as far as the buyer was concerned, the manufacturer held out every dealer as its representative and agent to perform warranty work. Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978).

Burden of proving defect. —

Plaintiffs in order to prevail must show first that there was a defective product, second how it was defective, and third, that the defendant was responsible for the defect under Wyoming law. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972); Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978).

Proof by circumstantial evidence permissible. —

There is no requirement that the allegedly defective product must be presented in evidence and be shown by analysis to be ipso facto defective. Such proof is permissible by circumstantial evidence. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Election between warranty and tort recovery in products liability. —

See Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Common-law principles governing express warranty in sales of land. —

See Garriffa v. Taylor, 675 P.2d 1284, 1984 Wyo. LEXIS 256 (Wyo. 1984).

Applicability to hired animals. —

Sections 34.1-2-313 through 34.1-2-315 did not apply to the provision of a mule by an outfitter hired for a hunting trip because no “sale of goods” was involved, so no warranties were created under these sections to support liability for injuries plaintiff suffered when thrown by the mule. Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Sale of a horse. —

The UCC creates and limits express and implied warranties applicable to the sale of goods, including livestock, and therefore, applies to the sale of a horse. Keller v. Merrick, 955 P.2d 876, 1998 Wyo. LEXIS 31 (Wyo. 1998).

Jury was presented with sufficient evidence to support conclusion that no express warranty was made to purchaser of horse that horse would not buck, under any circumstances, in the future. Tribe v. Peterson, 964 P.2d 1238, 1998 Wyo. LEXIS 129 (Wyo. 1998).

Applied in

Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

Quoted in

Agar v. Kysar, 628 P.2d 1350, 1981 Wyo. LEXIS 345 (Wyo. 1981); Schneider Nat'l, Inc. v. Holland Hitch Co., 843 P.2d 561, 1992 Wyo. LEXIS 191 (Wyo. 1992).

Cited in

Centric Corp. v. Drake Bldg. Corp., 726 P.2d 1047, 1986 Wyo. LEXIS 628 (Wyo. 1986).

Law reviews. —

For article, “Warranty as a Lawyer's Tool in Motor Vehicle Cases,” see 18 Wyo. L.J. 259 (1964).

Am. Jur. 2d, ALR and C.J.S. references. —

What amounts to a “sale by sample” as regards warranties, 12 ALR2d 524.

Construction and effect of contract for sale of commodity or goods wherein quantity is described as “about” or “more or less” than an amount specified; warranty of amount, 58 ALR2d 377.

Whether oral statements amount of express warranty as question of law or fact, 67 ALR2d 619.

Warranty that article sold is new where seller fails to disclose that article has been used or is secondhand, 36 ALR3d 125, 36 ALR3d 237.

Sales: liability for warranty or representation that article, other than motor vehicle, is new, 36 ALR3d 237.

Liability of manufacturer or seller for personal injury or property damage caused by television set, 89 ALR3d 210.

Elements and measure of damages for breach of warranty in sale of horse, 91 ALR3d 419.

Products liability: stoves, 93 ALR3d 99.

Products liability: air guns and BB guns, 94 ALR3d 291.

What constitutes “affirmation of fact” giving rise to express warranty under UCC, § 2-313(1)(a), 94 ALR3d 729.

Construction and effect of new motor vehicle warranty limiting manufacturer's liability to repair or replacement of defective parts, 2 ALR4th 576.

Products liability: industrial presses, 8 ALR4th 70.

Products liability: fertilizers, insecticides, pesticides, fungicides, weedkillers and the like, or articles used in application thereof, 12 ALR4th 462.

Allowance of punitive damages in products liability case, 13 ALR4th 52.

Products liability: cranes and other lifting apparatuses, 13 ALR4th 476.

Preemption of strict liability in tort by provisions of UCC article 2, 15 ALR4th 791.

Products liability: firearms, ammunition, and chemical weapons, 15 ALR4th 909.

Products liability: cement and concrete, 15 ALR4th 1186.

Products liability: tire rims and wheels, 16 ALR4th 137.

Liability of builder or real estate developer who sells new dwelling for failure to provide potable water, 16 ALR4th 1246.

Products liability: blasting materials and supplies, 18 ALR4th 206.

Products liability: firefighting equipment, 19 ALR4th 326.

“Concert of activity,” “alternative liability,” “enterprise liability,” or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer of precise unit or batch causing injury, 22 ALR4th 183.

Products liability: mechanical or chain saw or components thereof, 22 ALR4th 206.

Liability of blood supplier or donor for injury or death resulting from blood transfusion, 24 ALR4th 508.

Products liability: admissibility of expert or opinion evidence as to adequacy of warning provided to user of product, 26 ALR4th 377.

Successor products liability: form of business organization of successor or predecessor as affecting successor liability, 32 ALR4th 196.

Validity and construction of “sistership” clause of products liability insurance policy excepting from coverage cost of product recall or withdrawal of product from market, 32 ALR4th 630.

Products liability: stud guns, staple guns, or parts thereof, 33 ALR4th 1189.

Products liability: household appliances relating to cleaning, washing, personal care, and water supply, quality and disposal, 34 ALR4th 95.

Products liability: medical machinery used in plaintiff's treatment, 34 ALR4th 532.

Products liability: household equipment relating to storage, preparation, cooking and disposal of food, 35 ALR4th 663.

Products liability: equipment and devices directly relating to passengers' standing or seating safety in land carriers, 35 ALR4th 1050.

Products liability: home and office furnishings, 36 ALR4th 170.

Products liability: modern cases on explosion or breakage of beverage bottles, 36 ALR4th 419.

Computer sales and leases: breach of warranty, misrepresentation or failure of consideration as defense or ground for affirmative relief, 37 ALR4th 110.

Products liability: duty of manufacturer or seller of component part incorporated in another product to warn of dangers, 39 ALR4th 6.

Products liability: inhalation of asbestos, 39 ALR4th 399.

Products liability: automobile manufacturer's liability for injuries caused by repairs made under manufacturer's warranty, 40 ALR4th 1218.

Products liability: inconsistency of verdicts on separate theories of negligence, breach of warranty or strict liability, 41 ALR4th 9.

Products liability: construction materials or insulation containing formaldehyde, 45 ALR4th 751.

Affirmations or representations made after the sale is closed as basis of warranty under UCC, § 2-313(1)(a), 47 ALR4th 200.

Burden of proving feasibility of alternative safe design in products liability action based on defective design, 78 ALR4th 154.

Products liability: lubricating products and systems, 80 ALR4th 972.

Products liability: Roofs and roofing materials, 3 ALR5th 851.

Products liability: Application of strict liability doctrine to seller of used product, 9 ALR5th 1.

Products liability: Lighters and lighter fluid, 14 ALR5th 47.

Products liability: failure to provide product warning or instruction in foreign language or to use universally accepted pictographs or symbols, 27 ALR5th 697.

Products liability: cigarettes and other tobacco products, 36 ALR5th 541.

Presumption or inference, in products liability action based on failure to warn, that user of product would have heeded an adequate warning had one been given, 38 ALR5th 683.

Products liability: theatrical equipment and props, 42 ALR5th 699.

Products liability: Manufacturer's postsale obligation to modify, repair, or recall product, 47 ALR5th 395.

Breach of warranty in sale, installation, repair, design or inspection of septic or sewage disposal systems, 50 ALR5th 417.

Products liability: Cement and concrete, 60 ALR5th 413.

Liability for donee's contraction of Acquired Immune Deficiency Syndrome (AIDS) from blood transfusion, 64 ALR5th 333.

Products liability: swimming pools and accessories, 65 ALR5th 105.

Consumer product warranty suits in federal court under Magnuson-Moss Warranty — Federal Trade Commission Improvement Act (15 USC § 2301 et seq.), 59 ALR Fed 461.

Federal pre-emption of state common-law products liability claims pertaining to motor vehicles, 97 ALR Fed 853.

Federal pre-emption of state common-law products liability claims pertaining to tobacco products, 97 ALR Fed 890.

§ 34.1-2-314. Implied warranty; merchantability; usage of trade.

1. Unless excluded or modified (section 34.1-2-316), 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 (section 34.1-2-316) other implied warranties may arise from course of dealing  or usage of trade.

History. Laws 1961, ch. 219, § 2-314; W.S. 1957, § 34-2-314; W.S. 1977, § 34-21-231.

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 (b) 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 (a) 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 (a) and (b)(iii) of this section.

6. Subsection (b) 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 (i) and (ii) of subsection (b) 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 (b)(iii). 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 (b)(iv) 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 (b)(v) applies only where the nature of the goods and of the transaction requires a certain type of container, package or label. Paragraph (b)(vi) 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 (d) 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 (c) 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.

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The term “goods” is broad enough to include cattle under an implied warranty. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

An implied warranty is applicable to latent diseases in livestock. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Seller may imply warranty of merchantability. —

Under Wyoming law, a seller may, in particular circumstances, imply certain warranties, including those of merchantability and fitness for purpose. Schwenn v. Pamida, 392 F. Supp. 69, 1975 U.S. Dist. LEXIS 12696 (D. Wyo. 1975).

Warranties implied where lease likely to end in purchase. —

There was no reason why warranties should not be implied as a matter of law, whether the contract were deemed a lease or bailment agreement, especially as the mercantile probabilities were that the lease would end in a purchase by the defendant. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Warranty not implied where inspection made. —

Where the lessee of a chattel inspects it before accepting it, there is no implied warranty of fitness for the use he intends to make of it. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Complaints by restaurant-franchisees and customer-witnesses that meat was below quality establishes breach of warranty. —

Complaints received by a supplier-franchisor from various restaurant-franchisees that various meat items were of poor quality, poor consistency, odorous, spoiled and rodent-damaged was probative on the issue of whether the franchisor had breached his implied warranty of merchantability and, together with testimony from customer-witnesses that the meat products were below the quality normally expected, provided sufficient evidence to establish a breach of warranty claim. Ponderosa System, Inc. v. Brandt, 767 F.2d 668, 1985 U.S. App. LEXIS 20228 (10th Cir. Wyo. 1985).

Warranty by itself does not create jurisdiction. —

To hold that a product warranty standing alone would create jurisdiction would pass the bounds of due process by ignoring the usual elements of minimal contact. Cozzens v. Piper Aircraft Corp., 514 P.2d 1375, 1973 Wyo. LEXIS 185 (Wyo. 1973).

Burden of proving defect. —

Plaintiffs in order to prevail must show first that there was a defective product, second how it was defective, and third, that the defendant was responsible for the defect under Wyoming law. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

In seeking to recover upon an implied warranty the burden is upon the plaintiff to prove that sheep were suffering from vibriosis at the time the risk of loss had passed to him. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Proof by circumstantial evidence permissible. —

There is no requirement that the allegedly defective product must be presented in evidence and be shown by analysis to be ipso facto defective. Such proof is permissible by circumstantial evidence. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Reliance is not an element of the warranty of merchantability. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Privity not required in suit by remote purchaser. —

No privity of contract is required in an action based upon theories of breach of implied warranties of fitness for a particular purpose and merchantability in which a remote purchaser seeks to recover from a manufacturer an economic loss which the purchaser sustained. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Evidence showing amount of damages essential to entitle buyer to recover. —

Where the record discloses no evidence demonstrating the amount of the damage which buyers claim to have suffered by reason of either negligence or breach of warranty of seller, and any amount which could be set either by the trial court or on appeal would be wholly speculative, buyers were not entitled to recovery from the seller. Opheim v. United Mobile Homes, 511 P.2d 1289, 1973 Wyo. LEXIS 172 (Wyo. 1973).

Verdict supported by substantial evidence. —

Jury could have found that manufacturer of agricultural farm tractors had not delivered tractor to buyer that was merchantable or fit for ordinary purpose for which such goods were used. See Massey Ferguson, Inc. v. Stowe, 686 P.2d 604, 1984 Wyo. LEXIS 332 (Wyo. 1984).

Applicability to hired animals. —

Sections 34.1-2-313 through 34.1-2-315 did not apply to the provision of a mule by an outfitter hired for a hunting trip because no “sale of goods” was involved, so no warranties were created under these sections to support liability for injuries plaintiff suffered when thrown by the mule. Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Wrongful exercise of ownership. —

Buyer of fireworks who returned part of the fireworks received from seller wrongfully exercised ownership of rejected fireworks by selling some of them and holding others at retail outlets for an unreasonably long period of time. Ford v. Starr Fireworks, 874 P.2d 230, 1994 Wyo. LEXIS 58 (Wyo. 1994).

Applied in

R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Quoted in

Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978); McLaughlin v. Michelin Tire Corp., 778 P.2d 59, 1989 Wyo. LEXIS 174 (Wyo. 1989); Schneider Nat'l, Inc. v. Holland Hitch Co., 843 P.2d 561, 1992 Wyo. LEXIS 191 (Wyo. 1992).

Cited in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980); Cargill, Inc. v. Mountain Cement Co., 891 P.2d 57, 1995 Wyo. LEXIS 31 (Wyo. 1995); Hutton v. Deere & Co., 2000 U.S. App. LEXIS 6285 (10th Cir. Apr. 5, 2000).

Law reviews. —

For note, “Manufacturer's Liability for Breach of an Implied Warranty,” see 14 Wyo. L.J. 55 (1959).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes a contract for sale under Uniform Commercial Code, § 2-314, 78 ALR3d 696.

Uniform Commercial Code: implied warranty of fitness for particular purpose as including fitness for ordinary use, 83 ALR3d 656.

What are “merchantable” goods within meaning of UCC, § 2-314 dealing with implied warranty of merchantability, 83 ALR3d 694.

Liability of manufacturer, seller, or installer for personal injury caused by door glass, 84 ALR3d 877.

Liability of manufacturer or seller for personal injury or property damage caused by television set, 89 ALR3d 210.

Who is “merchant” under UCC, § 2-314(1), dealing with implied warranties of merchantability, 91 ALR3d 876.

Products liability: stoves, 93 ALR3d 99.

Products liability: air guns and BB guns, 94 ALR3d 291.

Liability of manufacturer or seller for injury or death allegedly caused by failure to warn regarding danger in use of vaccine, 94 ALR3d 748.

Products liability: industrial presses, 8 ALR4th 70.

Products liability: fertilizers, insecticides, pesticides, fungicides, weedkillers and the like, or articles used in application thereof, 12 ALR4th 462.

Allowance of punitive damages in products liability case, 13 ALR4th 52.

Products liability: cranes and other lifting apparatuses, 13 ALR4th 476.

Preemption of strict liability in tort by provisions of UCC article 2, 15 ALR4th 791.

Products liability: firearms, ammunition, and chemical weapons, 15 ALR4th 909.

Products liability: cement and concrete, 15 ALR4th 1186.

Products liability: tire rims and wheels, 16 ALR4th 137.

Liability of builder or real estate developer who sells new dwelling for failure to provide potable water, 16 ALR4th 1246.

Products liability: blasting materials and supplies, 18 ALR4th 206.

Products liability: firefighting equipment, 19 ALR4th 326.

What statute of limitations applies to actions for personal injuries based on breach of implied warranty under UCC provisions governing sales (UCC, § 2-725(1)), 20 ALR4th 915.

“Concert of activity,” “alternative liability,” “enterprise liability” or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer of precise unit or batch causing injury, 22 ALR4th 183.

Products liability: mechanical or chain saw or components thereof, 22 ALR4th 206.

Liability of blood supplier or donor for injury or death resulting from blood transfusion, 24 ALR4th 508.

Strict products liability: liability for failure to warn as dependent on defendant's knowledge of danger, 33 ALR4th 368.

Products liability: stud guns, staple guns or parts thereof, 33 ALR4th 1189.

Products liability: household appliances relating to cleaning, washing, personal care and water supply, quality and disposal, 34 ALR4th 95.

Products liability: medical machinery used in plaintiff's treatment, 34 ALR4th 532.

Products liability: household equipment relating to storage, preparation, cooking and disposal of food, 35 ALR4th 663.

Products liability: equipment and devices directly relating to passengers' standing or seating safety in land carriers, 35 ALR4th 1050.

Products liability: home and office furnishings, 36 ALR4th 170.

Products liability: modern cases on explosion or breakage of beverage bottles, 36 ALR4th 419.

Computer sales and leases: breach of warranty, misrepresentation or failure of consideration as defense or ground for affirmative relief, 37 ALR4th 110.

Products liability: admissibility of evidence of post-injury warning measures undertaken by defendant, 38 ALR4th 583.

Products liability: duty of manufacturer or seller of component part incorporated in another product to warn of dangers, 39 ALR4th 6.

Products liability: inhalation of asbestos, 39 ALR4th 399.

Products liability: alcoholic beverages, 42 ALR4th 253.

Auction sales under UCC, § 2-328, 44 ALR4th 110.

Handgun manufacturer's or seller's liability for injuries caused to another by use of gun in committing crime, 44 ALR4th 595.

Products liability: construction materials or insulation containing formaldehyde, 45 ALR4th 751.

Products liability: admissibility of defendant's evidence of industry custom or practice in strict liability action, 47 ALR4th 621.

Products liability: sufficiency of evidence to support product misuse defense in actions concerning athletic, exercise or recreational equipment, 50 ALR4th 1226.

Products liability: toxic shock syndrome, 59 ALR4th 50.

Products liability: sufficiency of evidence to support product misuse defense in action concerning agricultural implements and equipment, 60 ALR4th 678.

Products liability: electricity, 60 ALR4th 732.

Liability for injury incurred in operation of power golf cart, 66 ALR4th 622.

Products liability: general recreational equipment, 77 ALR4th 1121.

Burden of proving feasibility of alternative safe design in products liability action based on defective design, 78 ALR4th 154.

Products liability: seller's right to indemnity from manufacturer, 79 ALR4th 278.

Consequential loss of profits from injury to property as element of damages in products liability, 89 ALR4th 11.

Liability for injury or death allegedly caused by foreign substance in beverage, 90 ALR4th 12.

Liability for injury or death allegedly caused by foreign object in food or food product, 1 ALR5th 1.

Products liability of endorser, trade association, certifier or similar party who expresses approval of product, 1 ALR5th 431.

Products liability: Roofs and roofing materials, 3 ALR5th 851.

Products liability: Prefabricated buildings, 4 ALR5th 667.

Products liability: Application of strict liability doctrine to seller of used product, 9 ALR5th 1.

Presumption or inference, in products liability action based on failure to warn, that user of product would have heeded an adequate warning had one been given, 38 ALR5th 683.

Products liability: theatrical equipment and props, 42 ALR5th 699.

Products liability: Manufacturer's postsale obligation to modify, repair, or recall product, 47 ALR5th 395.

Liability on implied warranties in sale of used motor vehicle, 47 ALR5th 677.

Liability under state law for injuries resulting from defective automobile seatbelt, shoulder harness, or restraint system, 48 ALR5th 1.

Breach of warranty in sale, installation, repair, design or inspection of septic or sewage disposal systems, 50 ALR5th 417.

Products liability; liability for injury or death allegedly caused by defect in mobile home or trailer, 61 ALR5th 473.

“Concert of activity,” “alternate liability,” “enterprise liability,” or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer of precise unit or batch causing injury, 63 ALR5th 195.

Products liability: admissibility of evidence of subsequent repairs or other remedial measures by third party other than defendant, 64 ALR5th 119.

Products liability: paints, stains, and similar products, 69 ALR5th 137.

Products liability: Helicopters, 72 ALR5th 299.

Products liability: consumer expectations test, 73 ALR5th 75.

Products liability: Ladders, 81 ALR5th 245.

Consumer product warranty suits in federal court under Magnuson-Moss Warranty — Federal Trade Commission Improvement Act (15 USC § 2301 et seq.), 59 ALR Fed 461.

Applicability of maritime law rule of comparative negligence to strict products liability cases brought in admiralty, 74 ALR Fed 316.

§ 34.1-2-315. 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 an implied warranty that the goods shall be fit for such purpose.

History. Laws 1961, ch. 219, § 2-315; W.S. 1957, § 34-2-315; W.S. 1977, § 34-21-232.

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.

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.

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.

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.

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Seller may imply warranty of fitness for purpose. —

Under Wyoming law, a seller may, in particular circumstances, imply certain warranties, including those of merchantability and fitness for purpose. Schwenn v. Pamida, 392 F. Supp. 69, 1975 U.S. Dist. LEXIS 12696 (D. Wyo. 1975).

Warranty by itself does not create jurisdiction. —

To hold that a product warranty standing alone would create jurisdiction would pass the bounds of due process by ignoring the usual elements of minimal contact. Cozzens v. Piper Aircraft Corp., 514 P.2d 1375, 1973 Wyo. LEXIS 185 (Wyo. 1973).

Knowledge of purpose for purchasing goods required. —

No implied warranty exists as to quality or fitness of goods supplied under contract unless seller was informed expressly or by implication of purpose for which goods were purchased and purchaser relied on seller's skill or judgment. Salt Lake Hardware Co. v. Connell, 47 Wyo. 145, 34 P.2d 23, 1933 Wyo. LEXIS 1 (Wyo. 1933) (decided under prior law).

Use of insecticide for specific purpose creates warranty. —

The use of an insecticide to filter down through the surface “trash” created by the minimum till method of preparing the soil was specific enough to justify claims of an implied warranty of fitness for a particular purpose. Stauffer Chem. Co. v. Curry, 778 P.2d 1083, 1989 Wyo. LEXIS 185 (Wyo. 1989), reh'g denied, 1989 Wyo. LEXIS 197 (Wyo. Aug. 25, 1989).

Reliance is an element of the warranty of fitness for a particular purpose. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Without evidence to suggest that a buyer was relying on seller's skill and judgment, the breakdown of a compressor after 98 days of operation did not breach any implied warranty of fitness for a particular purpose. Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

Issue as to product's use precludes judgment. —

Genuine issues of material fact, precluding summary judgment, existed in regard to claim for breach of implied warranty of fitness for particular purpose, in case of heavy-equipment radial tires sold for use on scrapers that had been using bias-ply tires. See McLaughlin v. Michelin Tire Corp., 778 P.2d 59, 1989 Wyo. LEXIS 174 (Wyo. 1989).

Privity not required in suit by remote purchaser. —

No privity of contract is required in an action based upon theories of breach of implied warranties of fitness for a particular purpose and merchantability in which a remote purchaser seeks to recover from a manufacturer an economic loss which the purchaser sustained. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Evidence showing amount of damages essential to entitle buyer to recover. —

Where the record discloses no evidence demonstrating the amount of the damage which buyers claim to have suffered by reason of either negligence or breach of warranty of seller, and any amount which could be set either by the trial court or on appeal would be wholly speculative, buyers were not entitled to recovery from the seller. Opheim v. United Mobile Homes, 511 P.2d 1289, 1973 Wyo. LEXIS 172 (Wyo. 1973).

Inapplicable to professional services. —

This section is applicable to contracts for the sale of goods, not for professional services, and an oral agreement between an architect and an engineer calling for a system design held the professional responsible against a standard of negligence only. Kemper Architects, P.C. v. McFall, Konkel & Kimball Consulting Eng'rs, 843 P.2d 1178, 1992 Wyo. LEXIS 193 (Wyo. 1992).

Applicability to hired animals. —

Sections 34.1-2-313 through 34.1-2-315 did not apply to the provision of a mule by an outfitter hired for a hunting trip because no “sale of goods” was involved, so no warranties were created under these sections to support liability for injuries plaintiff suffered when thrown by the mule. Walters v. Grand Teton Crest Outfitters, Inc., 804 F. Supp. 1442, 1992 U.S. Dist. LEXIS 15892 (D. Wyo. 1992).

Implied warranty for particular purpose did not apply to video sale. —

See Osborn v. Emporium Videos, 870 P.2d 382, 1994 Wyo. LEXIS 36 (Wyo. 1994).

Applied in

R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975); Agar v. Kysar, 628 P.2d 1350, 1981 Wyo. LEXIS 345 (Wyo. 1981).

Law reviews. —

For article, “Comparative Negligence and Strict Tort Liability — A Marriage of Necessity,” see XVIII Land & Water L. Rev. 643 (1983).

Am. Jur. 2d, ALR and C.J.S. references. —

Implied warranty of fitness by one serving food, 7 ALR2d 1027.

Implied warranty of fitness on sale of livestock, 53 ALR2d 892.

Uniform Commercial Code: implied warranty of fitness for particular purpose as including fitness for ordinary use, 83 ALR3d 656.

What constitutes “particular purpose” within meaning of UCC, § 2-315 dealing with implied warranty of fitness, 83 ALR3d 669.

Liability of hotel or motel operator for injury or death resulting to guest from defects in furniture in room or suite, 91 ALR3d 483.

Products liability: stoves, 93 ALR3d 99.

Products liability: air guns and BB guns, 94 ALR3d 291.

Products liability: industrial presses, 8 ALR4th 70.

Products liability: fertilizers, insecticides, pesticides, fungicides, weedkillers and the like, or articles used in application thereof, 12 ALR4th 462.

Allowance of punitive damages in products liability case, 13 ALR4th 52.

Products liability: cranes and other lifting apparatuses, 13 ALR4th 476.

Preemption of strict liability in tort by provisions of UCC article 2, 15 ALR4th 791.

Products liability: firearms, ammunition, and chemical weapons, 15 ALR4th 909.

Products liability: cement and concrete, 15 ALR4th 1186.

Products liability: tire rims and wheels, 16 ALR4th 137.

Products liability: blasting materials and supplies, 18 ALR4th 206.

Products liability: firefighting equipment, 19 ALR4th 326.

What statute of limitations applies to actions for personal injuries based on breach of implied warranty under UCC provisions governing sales (UCC, § 2-725(1)), 20 ALR4th 915.

“Concert of activity,” “alternative liability,” “enterprise liability” or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer of precise unit or batch causing injury, 22 ALR4th 183.

Products liability: mechanical or chain saw or components thereof, 22 ALR4th 206.

Products liability: stud guns, staple guns or parts thereof, 33 ALR4th 1189.

Products liability: household appliances relating to cleaning, washing, personal care and water supply, quality and disposal, 34 ALR4th 95.

Products liability: medical machinery used in plaintiff's treatment, 34 ALR4th 532.

Products liability: household equipment relating to storage, preparation, cooking and disposal of food, 35 ALR4th 663.

Products liability: equipment and devices directly relating to passengers' standing or seating safety in land carriers, 35 ALR4th 1050.

Products liability: home and office furnishings, 36 ALR4th 170.

Products liability: modern cases on explosion or breakage of beverage bottles, 36 ALR4th 419.

Computer sales and leases: breach of warranty, misrepresentation or failure of consideration as defense or ground for affirmative relief, 37 ALR4th 110.

Products liability: duty of manufacturer or seller of component part incorporated in another product to warn of dangers, 39 ALR4th 6.

Products liability: inhalation of asbestos, 39 ALR4th 399.

Products liability: construction materials or insulation containing formaldehyde, 45 ALR4th 751.

Products liability: perfumes, colognes or deodorants, 46 ALR4th 1197.

Applicability of warranty of fitness under UCC, § 2-315 to supplies or equipment used in performance of service contract, 47 ALR4th 238.

Products liability: toxic shock syndrome, 59 ALR4th 50.

Products liability: Application of strict liability doctrine to seller of used product, 9 ALR5th 1.

Presumption or inference, in products liability action based on failure to warn, that user of product would have heeded an adequate warning had one been given, 38 ALR5th 683.

Products liability: theatrical equipment and props, 42 ALR5th 699.

Liability on implied warranties in sale of used motor vehicle, 47 ALR5th 677.

Liability under state law for injuries resulting from defective automobile seatbelt, shoulder harness, or restraint system, 48 ALR5th 1.

Breach of warranty in sale, installation, repair, design or inspection of septic or sewage disposal systems, 50 ALR5th 417.

“Concert of activity,” “alternate liability,” “enterprise liability,” or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer of precise unit or batch causing injury, 63 ALR5th 195.

Products liability: paints, stains, and similar products, 69 ALR5th 137.

Products liability: Helicopters, 72 ALR5th 299.

Products liability: consumer expectations test, 73 ALR5th 75.

Products liability: Ladders, 81 ALR5th 245.

Consumer product warranty suits in federal court under Magnuson-Moss Warranty — Federal Trade Commission Improvement Act (15 USC § 2301 et seq.), 59 ALR Fed 461.

§ 34.1-2-316. Exclusion or modification of warranties.

1. Words or conduct relevant to the creation  of an express warranty and words or conduct tending to negate or limit  warranty shall be construed wherever reasonable as consistent with  each other; but subject to the provisions of this article on parol  or extrinsic evidence (section 34.1-2-202) negation or limitation is inoperative to the extent  that such construction is unreasonable.
2. Subject to subsection (c), 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 (b) of this  section:
   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; and
   4. The implied warranties of merchantability  and fitness shall not be applicable to a contract for the sale of  human blood, blood plasma or other human tissue or organs from an  individual or a blood bank or reservoir of such other tissues or organs.  Such blood, blood plasma or tissue or organs shall not for the purpose  of this article be considered commodities subject to sale or barter,  but shall be considered as medical services;
   5. With respect to the sale of cattle, hogs,  sheep and horses, there shall be no implied warranty that the cattle,  hogs, sheep and horses are free from disease.
4. Remedies for breach of warranty can be  limited in accordance with the provisions of this article on liquidation  or limitation of damages and on contractual modification of remedy  (sections 34.1-2-718 and 34.1-2-719).

History. Laws 1961, ch. 219, § 2-316; W.S. 1957, § 34-2-316; Laws 1969, ch. 79, § 1; W.S. 1977, § 34-21-233; Laws 1981, ch. 140, § 1.

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 (d) 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 (b), 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 (b) 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 (i), (ii), and (iii) of subsection (c) 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 (i) of subsection (c) 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 (i) are in fact merely a particularization of paragraph (iii) which provides for exclusion or modification of implied warranties by usage of trade.

8. Under paragraph (ii) of subsection (c) 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.

In order to bring the transaction within the scope of “refused to examine” in paragraph (ii), 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 (a) 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.

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 (iii) 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.

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.

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The primary objective of this section is to avoid the fine print waiver of rights by the buyer (lessee). Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Disclaimers of warranties are not favored and thus are strictly interpreted. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

The test of conspicuousness is whether attention can reasonably be expected to be called to the term or provision. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Disclaimer on sacks of insecticide was not sufficiently conspicuous, where it was located toward the bottom of each sack and was printed in type approximately one-half the size of the type used to provide other information. Stauffer Chem. Co. v. Curry, 778 P.2d 1083, 1989 Wyo. LEXIS 185 (Wyo. 1989), reh'g denied, 1989 Wyo. LEXIS 197 (Wyo. Aug. 25, 1989).

Lawful disclaimers apply to remote purchaser. —

A remote purchaser cannot deprive a manufacturer of any lawful exclusion, modification or limitation of warranties it may have structured in its contract of sale with the original purchaser. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Express warranty is not circumscribed nor eliminated by examination of goods. Shepard v. Top Hat Land & Cattle Co., 560 P.2d 730, 1977 Wyo. LEXIS 232 (Wyo. 1977).

Implied warranty of merchantability not negated by restaurant-franchisee's inspection of meat samples. —

A restaurant-franchisee's inspection of meat samples could not have revealed that the meat shipped later by the supplier-franchisor would not conform to the sample. Thus, the inspection did not negate the implied warranty of merchantability with respect to the sale of meat products. Ponderosa System, Inc. v. Brandt, 767 F.2d 668, 1985 U.S. App. LEXIS 20228 (10th Cir. Wyo. 1985).

Warranty not implied where inspection made. —

Where the lessee of a chattel inspects it before accepting it, there is no implied warranty of fitness for the use he intends to make of it. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Or when property sold “as is.” —

Buyers waived all implied warranties in purchasing new home, where unambiguous language in initial and final purchase agreements clearly identified transfer of the property “as is,” and questionable condition of floor joists would have been discovered if buyers had availed themselves of opportunity to conduct a visual inspection. Greeves v. Rosenbaum, 965 P.2d 669, 1998 Wyo. LEXIS 144 (Wyo. 1998).

The test of conspicuousness.—

In a case arising from a one-vehicle accident on a private dirt track in which defendant moved for summary judgment, arguing that plaintiff’s breach of warranty claims had been disclaimed, the warranty disclaimer on the parts receipt was not sufficiently conspicuous under the provisions of Wyo. Stat. Ann. § 34.1-1-201(a)(x), to meet the requirements of Wyo. Stat. Ann. § 34.1-2-316(b); inter alia, the language of the body of the disclaimer is not set off from the other text in any manner. Kretzschmar v. Big Horn Power Sports, LLC, 2014 U.S. Dist. LEXIS 187282 (D. Wyo. Feb. 26, 2014).

Disclaimers upheld when unconscionability absent. —

Although disclaimers of warranties are not viewed favorably, they will be upheld under the proper circumstances, all elements of unconscionability being absent. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Applied in

Schepps v. Howe, 665 P.2d 504, 1983 Wyo. LEXIS 338 (Wyo. 1983).

Quoted in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980)Johnson v. Creager, 2003 WY 110, 76 P.3d 799, 2003 Wyo. LEXIS 139 (Wyo. 2003).

Cited in

Schneider Nat'l, Inc. v. Holland Hitch Co., 843 P.2d 561, 1992 Wyo. LEXIS 191 (Wyo. 1992).

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and effect of affirmative provision in contract of sale by which purchaser agrees to take article “as is,” in the condition in which it is or equivalent term, 24 ALR3d 465.

Construction and effect of Uniform Commercial Code, § 2-316(2), providing that implied warranty disclaimer must be “conspicuous,” 73 ALR3d 248.

Prospective buyer's release of prospective seller from liability for injuries resulting from trial use or inspection of product for sale, 93 ALR3d 1296.

Construction and effect of new motor vehicle warranty limiting manufacturer's liability to repair or replacement of defective parts, 2 ALR4th 576.

Products liability: modern status of rule that there is no liability for patent or obvious dangers, 35 ALR4th 861.

Unconscionability, under UCC, § 2-302 or § 2-719(3), of disclaimer of warranties or limitation or exclusion of damages in contract subject to UCC article 2 (sales), 38 ALR4th 25.

Validity and construction of products liability statute precluding or limiting recovery where product has been altered or modified after leaving hands of manufacturer or seller, 41 ALR4th 47.

Products liability: liability of manufacturer or seller as affected by failure of subsequent party in distribution chain to remedy or warn against defect of which he knew, 45 ALR4th 777.

Products liability: pertussis vaccine manufacturers, 57 ALR4th 911.

Commercial renter's negligence liability for customer's personal injuries, 57 ALR4th 1186.

Construction and effect of provision in contract for sale of realty by which purchaser agrees to take property “as is” or in its existing condition, 8 ALR5th 312.

§ 34.1-2-317. Cumulation and conflict of warranties express or implied.

1. 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. Laws 1961, ch. 219, § 2-317; W.S. 1957, § 34-2-317; W.S. 1977, § 34-21-234.

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.

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.

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 paragraphs (a)(i), (ii) and (iii) 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.

Cross references:

Point 1: Section 2-315.

Definitional cross reference:

“Party”. Section 1-201.

Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Quoted in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

§ 34.1-2-318. Third party beneficiaries of warranties express or implied.

A seller’s warranty whether express or implied extends to any person who may reasonably be expected to use, consume, or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section.

History. Laws 1961, ch. 219, § 2-318; W.S. 1957, § 34-2-318; W.S. 1977, § 34-21-235.

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.

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Section becomes implied provision in any sale. —

The provision found in this section becomes an implied provision in any contract for the sale of goods. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Inclusions within “buyer.” —

The word “buyer” as it appears in § 34.1-2-103 includes, with respect to any previous seller in the distributive chain, “any person who may reasonably be expected to use, consume, or be affected by the goods.” Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Seller not liable for injuries caused by unforeseeable product alterations. —

Even if a product is defective, unmerchantable or negligently manufactured, the seller may not be liable for a plaintiff's injuries which are caused by unforeseeable alterations in the product rather than the original defects. Material alterations, like other issues of proximate cause, are ordinarily left to the jury for its factual determination. Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986).

Notice required for suit by buyer. —

Because privity is not required in an action upon expressed or implied warranties, furnishing notice under § 34.1-2-607 is an obligation imposed upon one who asserts a right to relief as a buyer. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Lawful disclaimers apply to remote purchaser. —

A remote purchaser cannot deprive a manufacturer of any lawful exclusion, modification, or limitation of warranties it may have structured in its contract of sale with the original purchaser. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Action by remote purchaser for economic loss permitted. —

Because this section extends “to any person who may reasonably be expected to use, consume or be affected by the goods” and contains no limitation on the style of injury to be suffered by that person, this section is sufficiently broad to cover an action by a remote purchaser for an economic loss. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

And privity is not required. —

A remote purchaser is not foreclosed from bringing an action to recover an economic loss from a manufacturer because of lack of privity. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Warranty by itself does not create jurisdiction. —

To hold that a product warranty standing alone would create jurisdiction would pass the bounds of due process by ignoring the usual elements of minimal contact. Cozzens v. Piper Aircraft Corp., 514 P.2d 1375, 1973 Wyo. LEXIS 185 (Wyo. 1973).

Burden of proving defect. —

Plaintiffs in order to prevail must show first that there was a defective product, second how it was defective, and third, that the defendant was responsible for the defect under Wyoming law. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Proof by circumstantial evidence permissible. —

There is no requirement that the allegedly defective product must be presented in evidence and be shown by analysis to be ipso facto defective. Such proof is permissible by circumstantial evidence. Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Election between warranty and tort recovery in products liability. —

See Colorado Serum Co. v. Arp, 504 P.2d 801, 1972 Wyo. LEXIS 292 (Wyo. 1972).

Law reviews. —

For article, “Warranty as a Lawyer's Tool in Motor Vehicles Cases,” see 18 Wyo. L.J. 259 (1964).

For note on application of implied warranty to leased vehicle, see I Land & Water L. Rev. 322 (1966).

Am. Jur. 2d, ALR and C.J.S. references. —

Third-party beneficiaries of warranties under UCC, § 2-318, 100 ALR3d 743.

Third-party beneficiaries of warranties under UCC § 2-318, 50 ALR5th 327.

Admiralty products liability: recovery against remote manufacturer or distributor for economic or commercial loss caused by defect in product, 81 ALR Fed 181.

§ 34.1-2-319. 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 article (section 34.1-2-504) 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 article (section 34.1-2-503);
   3. When under either subdivision (i) or (ii)  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  article on the form of bill of lading (section 34.1-2-323).
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 (a)(i) or (iii) or subsection (b) 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 article (section 34.1-2-311). 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. Laws 1961, ch. 219, § 2-319; W.S. 1957, § 34-2-319; W.S. 1977, § 34-21-236.

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 (a) 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(b) (seller's option re arrangements relating to shipment) and Sections 2-614 and 615 (substituted performance and seller's excuse).

2. Subsection (a)(iii) 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 (a)(iii) and subsection (c) are, as shown in the text, obligations of cooperation. The last sentence of subsection (c) 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(c), 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.

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Term “FOB destination” clearly destination agreement. —

Where purchase documents provided for “FOB destination” or “Free on Board jobsite,” it was clearly a destination agreement, whereby freight charges remained with the seller. Buenger v. Pruden, 713 P.2d 771, 1986 Wyo. LEXIS 465 (Wyo. 1986).

§ 34.1-2-320. C.I.F. and C. & F. terms.

1. The term C.I.F. means that the price includes  in a lump sum the costs of 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 indorsement 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. Laws 1961, ch. 219, § 2-320; W.S. 1957, § 34-2-320; W.S. 1977, § 34-21-237.

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.

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.

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.

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

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.

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 against 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.

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.

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.

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 (b) 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 (d) 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.

Cross references:

Point 4: Section 2-323.

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

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

Point 12: Sections 2-321(c), 2-512 and 2-513(c) 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.

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§ 34.1-2-321. C.I.F. or C. & F.; “net landed weights”; “payment on arrival”; warranty of condition on arrival.

1. 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 subdivision  (a)(i) 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. Laws 1961, ch. 219, § 2-321; W.S. 1957, § 34-2-321; W.S. 1977, § 34-21-238.

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. Paragraphs (a)(i) and (ii), 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. Paragraph (a)(iii) 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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-322. 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 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. Laws 1961, ch. 219, § 2-322; W.S. 1957, § 34-2-322; W.S. 1977, § 34-21-239.

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.

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§ 34.1-2-323. 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 (a) 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 (1) 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 article on cure of improper delivery  (section 34.1-2-508(a)); 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. Laws 1961, ch. 219, § 2-323; W.S. 1957, § 34-2-323; W.S. 1977, § 34-21-240; 2015 ch. 124, § 5, effective July 1, 2015.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Subsection (a) 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 (b) 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 codifies 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(b), 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.

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The 2015 amendment, effective July 1, 2015, in the introductory language of (b), substituted “a tangible bill of lading” for “a bill of lading.”

§ 34.1-2-324. “No arrival, no sale” term.

1. 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 nonarrival; 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 (section 34.1-2-613).

History. Laws 1961, ch. 219, § 2-324; W.S. 1957, § 34-2-324; W.S. 1977, § 34-21-241.

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.

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.

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 (a)(ii) 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.

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-325. “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. Laws 1961, ch. 219, § 2-325; W.S. 1957, § 34-2-325; W.S. 1977, § 34-21-242.

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 (b) 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 (c) 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 5-114(b).

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(c) and 3-802 [repealed] 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.

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§ 34.1-2-326. Sale on approval and sale or return; consignment sales and 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. Repealed by Laws 2001, ch. 137, § 4.
4. 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 article (section 34.1-2-201) and as contradicting the sale aspect of the contract  within the provisions of this article on parol or extrinsic evidence  (section 34.1-2-202).

History. Laws 1961, ch. 219, § 2-326; W.S. 1957, § 34-2-326; W.S. 1977, § 34-21-243; Laws 2001, ch. 137, §§ 3, 4.

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. A “sale on approval” or “sale or return” is distinct from other types of transactions with which they have frequently been confused. The type of “sale on approval,” “on trial” or “on satisfaction” dealt with involves a contract under which the seller undertakes a particular business risk to satisfy his prospective buyer with the appearance or performance of the goods in question. 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. The type of “sale or return” involved herein 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. 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.”

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 and the following section. The present 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 presupposes that a contract for sale is contemplated by the parties although that contract may be of the peculiar character here described.

Where the 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” where an industrial machine is involved, this Article takes no position.

2. Pursuant to the general policies of this Act which require good faith not only between the parties to the sales contract, but as against interested third parties, subsection (3) resolves all reasonable doubts as to the nature of the transaction in favor of the general creditors of the buyer. As against such creditors words such as “on consignment” or “on memorandum”, with or without words of reservation of title in the seller, are disregarded when the buyer has a place of business at which he deals in goods of the kind involved. A necessary exception is made where the buyer is known to be engaged primarily in selling the goods of others or is selling under a relevant sign law, or the seller complies with the filing provisions of Article 9 as if his interest were a security interest. However, there is no intent in this Section to narrow the protection afforded to third parties in any jurisdiction which has a selling Factors Act. The purpose of the exception is merely to limit the effect of the present subsection itself, in the absence of any such Factors Act, to cases in which creditors of the buyer may reasonably be deemed to have been misled by the secret reservation.

3. Subsection (d) 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.

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.

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Law reviews. —

For article, “Wyoming Adopts the ‘1972 Amendments’ to Uniform Commercial Code Article 9 — The Revisions and Some Continuing Problems,” see XIX Land & Water L. Rev. 581 (1984).

Am. Jur. 2d, ALR and C.J.S. references. —

Consignment transactions under the Uniform Commercial Code, 40 ALR3d 1078.

§ 34.1-2-327. 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. Laws 1961, ch. 219, § 2-327; W.S. 1957, § 34-2-327; W.S. 1977, § 34-21-244.

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:

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”.

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.

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.

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Am. Jur. 2d, ALR and C.J.S. references. —

Risk of loss in regard to goods in “sale or return” transaction under Uniform Commercial Code, § 2-327, 66 ALR3d 190.

§ 34.1-2-328. 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. Laws 1961, ch. 219, § 2-328; W.S. 1957, § 34-2-328; W.S. 1977, § 34-21-245.

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 continues 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.

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Quoted in

Pitchfork Ranch Co. v. Bar TL, 615 P.2d 541, 1980 Wyo. LEXIS 295 (Wyo. 1980).

Am. Jur. 2d, ALR and C.J.S. references. —

Auctioneer's action for commissions against seller, 38 ALR4th 170.

Auction sales under UCC, § 2-328, 44 ALR4th 110.

§ 34.1-2-401. Passing of title; reservation for security; limited application of this section.

1. Each provision of this article 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 article  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 (section 34.1-2-501), and unless otherwise explicitly agreed the buyer acquires  by their identification a special property as limited by this act  [§§ 34.1-1-101 through 34.1-10-104]. 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 article on secured transactions (article  9), 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 otherwise 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. Laws 1961, ch. 219, § 2-401; W.S. 1957, § 34-2-401; W.S. 1977, § 34-21-246; 2015 ch. 124, § 5, effective July 1, 2015.

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 (a)(ii) and (iii) 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 (a)(iii) 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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

The rights of parties under the Uniform Commercial Code do not depend upon title. Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

“Explicit” defined. —

The term “explicit,” used throughout this section, means that which is so clearly stated or distinctly set forth that there is no doubt as to its meaning. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Possession. —

Taxpayer's sales were subject to Wyoming sales tax because the buyers took possession in Wyoming, Wyo. Stat. Ann. § 39-15-103(a)(i)(A), and title passed to the buyer when the vehicle was delivered to the buyer or an agent, Wyo. Stat. Ann. § 34.1-2-401. Maverick Motorsports Group, LLC v. Dep't of Revenue, 2011 WY 76, 253 P.3d 125, 2011 Wyo. LEXIS 78 (Wyo. 2011).

Applied in

United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. 1974); Brown v. Green, 618 P.2d 140, 1980 Wyo. LEXIS 313 (Wyo. 1980).

Law reviews. —

For note, “The Passage of Title,” see 14 Wyo. L.J. 25 (1959).

§ 34.1-2-402. Rights of seller's creditors against sold goods.

1. Except as provided in subsections (b)  and (c), 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 article (sections 34.1-2-502 and 34.1-2-716).
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 article shall be deemed  to impair the rights of creditors of the seller:
   1. Under the provisions of the article on  secured transactions (article 9); 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 article  constitute the transaction a fraudulent transfer or voidable preference.

History. Laws 1961, ch. 219, § 2-402; W.S. 1957, § 34-2-402; W.S. 1977, § 34-21-247.

Official Comment

Prior uniform statutory provision:

Subsection (b)—Section 26, Uniform Sales Act; Subsections (a) and (c)—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.

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Cited in

Western Equip. Co. v. Sheridan Iron Works, Inc., 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

§ 34.1-2-403. Power to transfer; good faith purchase of goods; “entrusting”.

1. A purchaser of goods acquires all title  which his transferor has 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 of 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 articles on secured transactions  (article 9) and documents of title (article 7).

History. Laws 1961, ch. 219, § 2-403; W.S. 1957, § 34-2-403; W.S. 1977, § 34-21-248; Laws 1991, ch. 177, § 1.

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 (a). 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 (a) 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.

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.

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 (b) – (d) 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.

The principle is extended in subsection (c) to fit with the abolition of the old law of “cash sale” by subsection (a)(iii). 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 (b) is limited by the more specific provisions of Section 9-320, which deny protection to a person buying farm products from a person engaged in farming operations.

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(a)(ix) 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 (a), the rights of purchasers other than buyers in ordinary course are left to the Articles on Secured Transactions, Documents of Title, and Bulk Sales.

Cross references:

Point 1: Sections 1-103 and 1-201.

Point 2: Sections 1-201, 2-402, 7-205 and 9-320.

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.

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Transfer of title. —

Voidable title under this section can only arise from a voluntary transfer or delivery of the goods by the owner; if the goods are stolen or otherwise obtained against the will of the owner, only void title can result, and the good faith of the purchaser is not a defense. Kenyon v. Abel, 2001 WY 135, 36 P.3d 1161, 2001 Wyo. LEXIS 161 (Wyo. 2001).

Retail buyers possess priority over dealer's supplier. —

Retail buyers who in good faith paid the purchase price for a vehicle had priority over the supplier, who was unpaid when the dealer's payment draft was dishonored, even though the supplier issued no vehicle title when retaining the manufacturer's statement of origin received from the dealer, since by entrusting possession of the vehicle to the dealer, the supplier gave the dealer power to transfer all of the supplier's rights to a buyer in the ordinary course of business. Cherry Creek Dodge v. Carter, 733 P.2d 1024, 1987 Wyo. LEXIS 408 (Wyo. 1987).

Applied in

United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. 1974).

Am. Jur. 2d, ALR and C.J.S. references. —

Sales: what is “entrusting” goods to merchant dealer under UCC, § 2-403, 59 ALR4th 567.

§ 34.1-2-501. 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 subdivision (iii), 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 (12) months  after contracting or for the sale of crops to be harvested within  twelve (12) 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. Laws 1961, ch. 219, § 2-501; W.S. 1957, § 34-2-501; W.S. 1977, § 34-21-249.

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)(i), (ii) and (iii) 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)(i), (ii) and (iii) 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)(i) 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 (a)(iii) 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 (a)(iii) 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(a), 2-107(a) 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.

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Cited in

Western Equip. Co. v. Sheridan Iron Works, Inc., 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

§ 34.1-2-502. Buyer's right to goods on seller's repudiation, failure to deliver or insolvency.

1. Subject to subsections (b) and (c) 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 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 (10) days after receipt of the first installment on their  price.
2. The buyer’s right to recover the goods  under paragraph (a)(i) 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. Laws 1961, ch. 219, § 2-502; W.S. 1957, § 34-2-502; W.S. 1977, § 34-21-250; Laws 2001, ch. 137, § 3.

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 the goods on the seller’s insolvency occurring within 10 days after he receives the first installment on their price.

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. Subsection (b) is included to preclude the possibility of unjust enrichment which exists 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.

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§ 34.1-2-503. 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 article, 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  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  (a) and also in any appropriate case tender documents as described  in subsections (d) and (e) 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 article 9 of this title 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 article with respect to bills of lading  in a set (section 34.1-2-323(b)); 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. Laws 1961, ch. 219, § 2-503; W.S. 1957, § 34-2-503; W.S. 1977, § 34-21-251; 2015 ch. 124, § 5, effective July 1, 2015.

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 (c) changes the rule of prior section 19(5) as to what constitutes a “destination” contract and subsection (d) 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 (a) 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.”

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 (a) by tendering documents which give the buyer complete control of the goods under the provisions of Article 7 on due negotiation.

3. Under paragraph (i) of subsection (a) 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 (a), paragraph (ii). This obligation of the buyer is no part of the seller's tender.

5. For the purposes of subsections (b) and (c) 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 (i) of subsection (d) continues the rule of the prior uniform legislation as to acknowledgement by the bailee. Paragraph (ii) of subsection (d) 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 (e) 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.

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(a).

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(c), 2-504, 2-507(b), 2-511(a), 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.

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Cross references. —

For definition of “draft,” see § 34.1-3-104.

For definition of “dishonor,” see § 34.1-3-502.

§ 34.1-2-504. Shipment by seller.

1. 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.
2. Failure to notify the buyer under subdivision  (a)(iii) or to make a proper contract under subdivision (a)(i) is  a ground for rejection only if material delay or loss ensues.

History. Laws 1961, ch. 219, § 2-504; W.S. 1957, 34-2-504; W.S. 1977, § 34-21-252.

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 case 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)(i) 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 co-operation 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 (i) 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 (i) 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 (a)(ii) 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 (i).

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 (a)(ii) unless the contract requires some other form of document.

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.

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 (a)(ii) 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 (a)(iii) 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.

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.

Cross references:

Point 1: Sections 2-319, 2-320 and 2-503(b).

Point 2: Sections 1-203, 2-323(b), 2-601 and 2-614(a).

Point 3: Section 2-311(b).

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.

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Word “require” means that there is an explicit written understanding to that effect. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

§ 34.1-2-505. 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 (section 34.1-2-507(b)) 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 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. Laws 1961, ch. 219, § 2-505; W.S. 1957, § 34-2-505; W.S. 1977, § 34-21-253; 2015 ch. 124, § 5, effective July 1, 2015.

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 (a) 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 (a) 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.

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.

2. Every shipment of identified goods under a negotiable bill of lading reserves a security interest in the seller under subsection (a) paragraph (i).

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).

3. A non-negotiable bill of lading taken to a party other than the buyer under subsection (a) paragraph (ii) 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 (a) 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 (b) 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 (a) does not protect his holding of the document or the goods for the purpose of exacting more than is due him under the contract.

Cross references:

Point 1: Section 1-201.

Point 2: Article 7.

Point 3: Sections 2-501(b) and 2-504.

Point 4: Sections 2-403, 2-507(b) and 2-705.

Point 5: Sections 2-310, 2-319(d), 2-320(d), 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.

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Cross references. —

For definition of “consignee,” see § 34.1-7-102.

§ 34.1-2-506. 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. Laws 1961, ch. 219, § 2-506; W.S. 1957, § 34-2-506; W.S. 1977, § 34-21-254; 2015 ch. 124, § 5, effective July 1, 2015.

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 (a) 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 (a) 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 (a) 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 (a) 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(b) and Article 4.

Point 2: Part 5 of Article 4, and Article 5.

Point 4: Sections 2-501 and 2-502(a) 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.

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Cross references. —

For definition of “draft,” see § 34.1-3-104.

§ 34.1-2-507. Effect of seller's tender; delivery on condition.

1. Tender of delivery is a condition to the  buyer’s duty to accept the goods, 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. Laws 1961, ch. 219, § 2-507; W.S. 1957, § 34-2-507; W.S. 1977, § 34-21-255.

Official Comment

Prior uniform statutory provision:

See Section 11, 41, 42 and 69, Uniform Sales Act.

Purposes:

1. Subsection (a) 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 (a) 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 (b) 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 limitation 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. There is no specific time limit for a cash seller to exercise the right of reclamation. However, the right will be defeated by delay causing prejudice to the buyer, waiver, estoppel, or ratification of the buyer's right to retain possession. Common law rules and precedents governing such principles are applicable (Section 1-103). If third parties are involved, Section 2-403(1) protects good faith purchasers.

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(a)(ii).

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.

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Cited in

United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. 1974).

§ 34.1-2-508. 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. Laws 1961, ch. 219, § 2-508; W.S. 1957, § 34-2-508; W.S. 1977, § 34-21-256.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Subsection (a) 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.

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.

2. Subsection (b) 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.

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.

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Law reviews. —

For note, “Failure to Include All Material Terms Under the Uniform Commercial Code — The ‘Open Terms Contract,’” see 19 Wyo. L.J. 80 (1964).

Am. Jur. 2d, ALR and C.J.S. references. —

Seller's cure of improper tender or delivery under UCC, § 2-508, 36 ALR4th 544.

§ 34.1-2-509. 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 (section 34.1-2-505); 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 acknowledgment 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 section 34.1-2-503(d)(ii).
3. In any case not within subsection (a)  or (b), 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  article on sale on approval (section 34.1-2-327) and on effect of breach on risk of loss (section 34.1-2-510).

History. Laws 1961, ch. 219, § 2-509; W.S. 1957, § 34-2-509; W.S. 1977, § 34-21-257; 2015 ch. 124, § 5, effective July 1, 2015.

Official Comment

Prior uniform statutory provision:

Section 22. Uniform Sales Act.

Changes:

Rewritten, subsection (c) of this section modifying prior law.

Purposes of changes:

To make it clear that:

1. The 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 (a) 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 (i) 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.

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.

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 (d) 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.

Cross references:

Point 1: Section 2-510(a).

Point 2: Sections 2-503 and 2-504.

Point 3: Sections 2-104, 2-503 and 2-510.

Point 4: Section 2-503(d).

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.

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Intent of section is to shift the risk of loss to the purchaser when the seller has done all which is required of him under the contract. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Risk of loss is no longer determined by which party has title to the goods at the time of the loss, but is determined, instead, by rules in the UCC covering specific fact situations independent of title. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Parties can validly agree who shall bear the risk of loss but must do so in clear and unequivocal language. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

The word “require” means that there is an explicit written understanding to that effect. S--Creek Ranch v. Monier & Co., 509 P.2d 777, 1973 Wyo. LEXIS 156 (Wyo. 1973).

Am. Jur. 2d, ALR and C.J.S. references. —

Who bears risk of loss of goods under UCC, §§ 2-509, 2-510, 66 ALR3d 145.

§ 34.1-2-510. 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. Laws 1961, ch. 219, § 2-510; W.S. 1957, § 34-2-510; W.S. 1977, § 34-21-258.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

To make clear that:

1. Under subsection (a) 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 (a) 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.

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.

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 (b) and (c) 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.

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.

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§ 34.1-2-511. 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, payment by check  is conditional and is defeated as between the parties by dishonor  of the check on due presentment.

History. Laws 1961, ch. 219, § 2-511; W.S. 1957, § 34-2-511; W.S. 1977, § 34-21-259; Laws 2004, ch. 130, § 1.

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 (a) 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 (a) 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.

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.

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 (b) 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 (c) 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.

The phrase “by check” includes not only the buyer's own but any check which does not effect a discharge under Article 3. Similarly the reason of this subsection should apply and the same result should be reached where the buyer “pays” by sight draft on a commercial firm which is financing him.

5. Under subsection (c) payment by check is defeated if it is not honored upon due presentment. This corresponds to the provisions of the Article on Commercial Paper. 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.

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. Section 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.

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Cross references. —

For definition of “check,” see § 34.1-3-104.

For definition of “dishonor,” see § 34.1-3-502.

The 2004 amendment, in (c), deleted “(section 34.1-3-802)” following “payment by check is conditional.”

Laws 2004, ch. 130, § 4, makes the act effective immediately upon completion of all acts necessary for a bill to become law as provided by art. 4, § 8, Wyo. Const. Approved March 19, 2004.

Conflicting legislation. —

Laws 2004, ch. 130, § 3, provides: “Any other act adopted by the Wyoming legislature during the same session in which this act is adopted shall be given precedence and shall prevail over the amendments in this act to the extent that such acts are in conflict with this act.”

Payment by check does not discharge a debt unless and until the check is honored; once honored, the time of payment relates back to the time the check is delivered. Aztec Gas & Oil Corp. v. Roemer Oil Co., 948 P.2d 902, 1997 Wyo. LEXIS 145 (Wyo. 1997).

§ 34.1-2-512. 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 this  act (section 34.1-5-109(b)).
2. Payment pursuant to subsection (a) does  not constitute an acceptance of goods or impair the buyer’s right  to inspect or any of his remedies.

History. Laws 1961, ch. 219, § 2-512; W.S. 1957, § 34-2-512; W.S. 1977, § 34-21-260; 1997, ch. 89, § 2.

Official Comment

Prior uniform statutory provision:

None, but see Sections 47 and 49, Uniform Sales Act.

Purposes:

1. Subsection (a) 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 (i) 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 (ii) 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 [5-109].

5. Subsection (b) 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.

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.

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.

Cross references:

Point 4: Article 5.

Point 5: Section 1-207.

Point 6: Section 2-513(c).

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.

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§ 34.1-2-513. Buyer's right to inspection of goods.

1. Unless otherwise agreed and subject to  subsection (c), 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 article on C.I.F. contracts (section 34.1-2-321(a)(iii)), 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 filed  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. Laws 1961, ch. 219, § 2-513; W.S. 1957, § 34-2-513; W.S. 1977, § 34-21-261.

Official Comment

Prior uniform statutory provision:

Section 47(2), (3), Uniform Sales Act.

Changes:

Rewritten, subsections (b) and (c) 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 (a) 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 (c) and (d) 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 (d) 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.

The last sentence of subsection (a) makes it clear that the place of arrival of shipped goods is a reasonable place for their inspection.

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 (c) 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.

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 (c)(ii). This result is reinforced by the buyer's right under subsection (a) to inspect goods which have been appropriated with notice to him.

6. Under subsection (d) 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.

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.”

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 (d) 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.

Cross references:

Generally: Sections 2-310(b), 2-321(c) and 2-606(a)(ii).

Point 1: Section 2-607.

Point 2: Sections 2-501 and 2-502.

Point 4: Section 2-715.

Point 5: Section 2-321(c).

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(b)(ii).

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.

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Cited in

Producers Livestock Marketing Ass'n v. Parker, 509 P.2d 345, 1973 Wyo. LEXIS 155 (Wyo. 1973).

Am. Jur. 2d, ALR and C.J.S. references. —

Time, place and manner of buyer's inspection of goods under UCC, § 2-513, 36 ALR4th 726.

§ 34.1-2-514. 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 (3) days after presentment; otherwise, only on payment.

History. Laws 1961, ch. 219, § 2-514; W.S. 1957, § 34-2-514; W.S. 1977, § 34-21-262.

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(b), 2-507(b), 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.

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Cross references. —

For definition of “draft,” see § 34.1-3-104.

§ 34.1-2-515. Preserving evidence of goods in dispute.

1. 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. Laws 1961, ch. 219, § 2-515; W.S. 1957, § 34-2-515; W.S. 1977, § 34-21-263.

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)(i), 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.

Paragraph (a)(i) 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)(i) 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)(i).

3. Under paragraph (a)(ii), 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.

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 (a)(ii) 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 (a)(ii) 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(c), 2-706 and 2-711(b) 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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-601. Buyer's rights on improper delivery.

1. Subject to the provisions of this article  on breach in installment contracts (section 34.1-2-612) and unless otherwise agreed under the sections on contractual  limitations of remedy (sections 34.1-2-718 and 34.1-2-719) 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. Laws 1961, ch. 219, § 2-601; W.S. 1957, § 34-2-601; W.S. 1977, § 34-21-264.

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 (a)(iii). 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(b)(i), 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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Perfect tender rule.—

Buyer did not breach a contract to sell a mobile home because the contract required the seller to tender title, and the seller’s insistence that the buyer accept a manufacturer’s certificate of origin, which required the buyer to pay sales tax, did not comply with the seller’s obligation. Larson v. Burton Constr., Inc., 2018 WY 74, 421 P.3d 538, 2018 Wyo. LEXIS 80 (Wyo. 2018).

Cited in

Western Equip. Co. v. Sheridan Iron Works, Inc., 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

For comment, “Buyers Remedies in Sales Cases Under the Uniform Commercial Code,” see II Land & Water L. Rev. 419 (1967).

Am. Jur. 2d, ALR and C.J.S. references. —

Buyer's incidental and consequential damages from seller's breach and UCC, § 2-715, 96 ALR3d 299.

Seller's cure of improper tender or delivery under UCC, § 2-508, 36 ALR4th 544.

Acceptance of some “commercial units” of goods purchased under UCC, § 2-601(C), 41 ALR4th 396.

§ 34.1-2-602. 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 (2)  following sections on rejected goods (sections 34.1-2-603 and 34.1-2-604):
   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 article (section 34.1-2-711(c)), 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 obligation with  regard to goods rightfully rejected.
3. The seller’s rights with respect to goods  wrongfully rejected are governed by the provisions of this article  on seller’s remedies in general (section 34.1-2-703).

History. Laws 1961, ch. 219, § 2-602; W.S. 1957, § 34-2-602; W.S. 1977, § 34-21-265.

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 (a), 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 (b) 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 (c) 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(a) and (c), 2-512(b), 2-513(a) and 2-606(a)(ii).

Point 2: Section 2-603(a).

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.

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Wrongful exercise of ownership. —

Buyer of fireworks who returned part of the fireworks received from seller wrongfully exercised ownership of rejected fireworks by selling some of them and holding others at retail outlets for an unreasonably long period of time. Ford v. Starr Fireworks, 874 P.2d 230, 1994 Wyo. LEXIS 58 (Wyo. 1994).

Applied in

Jackson Hole Traders, Inc. v. Joseph, 931 P.2d 244, 1997 Wyo. LEXIS 18 (Wyo. 1997).

Am. Jur. 2d, ALR and C.J.S. references. —

Time, place and manner of buyer's inspection of goods under UCC, § 2-513, 36 ALR4th 726.

§ 34.1-2-603. Merchant buyer's duties as to rightfully rejected goods.

1. Subject to any security interest in the  buyer (section 34.1-2-711(c)), 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  (a), 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 percent (10%) 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. Laws 1961, ch. 219, § 2-603; W.S. 1957, § 34-2-603; W.S. 1977, § 34-21-266.

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 (a) 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 (a) 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 (b) are applicable and necessary only where he is not acting under instructions from the seller. As provided in subsection (a) 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 (c) 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.

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Duty to return goods in a reasonable manner. —

Once buyer gratuitously offered to return the fireworks to seller, buyer was under a duty to return the fireworks in a reasonable manner; leaving the fireworks unattended outside a business on a busy street was unreasonable. Ford v. Starr Fireworks, 874 P.2d 230, 1994 Wyo. LEXIS 58 (Wyo. 1994).

§ 34.1-2-604. Buyer's options as to salvage of rightfully rejected goods.

Subject to the provisions of the immediately preceding section [§ 34.1-2-603] 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. Laws 1961, ch. 219, § 2-604; W.S. 1957, § 34-2-604; W.S. 1977, § 34-21-267.

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 buyer 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(a), 2-603(a) and 2-706.

Definitional cross references:

“Buyer”. Section 2-103. “Notification”. Section 1-201. “Reasonable time”. Section 1-204. “Seller”. Section 2-103.

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§ 34.1-2-605. 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. Laws 1961, ch. 219, § 2-605; W.S. 1957, § 34-2-605; W.S. 1977, § 34-21-268; 2015 ch. 124, § 5, effective July 1, 2015.

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 (a)(i), 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 (a)(ii) 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 (a)(ii) will be sufficient in the case of a merchant-buyer.

4. Subsection (b) 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 non-objection 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(b), 2-606(a)(ii) and 2-607(b).

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.

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The 2015 amendment, effective July 1, 2015, in (b), substituted “in the documents” for “on the face of the documents.”

§ 34.1-2-606. 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 (section 34.1-2-602(a)), 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. Laws 1961, ch. 219, § 2-606; W.S. 1957, § 34-2-606; W.S. 1977, § 34-21-269.

Official Comment

Prior uniform statutory provision:

Section 48, Uniform Sales Act.

Changes:

Rewritten, the qualification in paragraph (a)(iii) and subsection (b) 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)(i), 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 (a)(iii), 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 (a)(iii) 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 (a)(iii) 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.

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 (a)(iii), he can obligate himself by a communication of acceptance despite a prior rejection under paragraph (a)(i). 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)(i) 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.

5. Subsection (b) 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.

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.

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Acceptance of delivery shown. —

Buyer was held to have accepted delivery of hay under written contract for sale of land including 50 tons of hay and for additional hay, where he entered into possession of land on which 12 stacks of hay were located, had the hay measured, agreed to have two stacks weighed and entered into an arbitration agreement under which he agreed to pay for the quantity of hay found by the arbitrators. Cooley v. Frank, 68 Wyo. 436, 235 P.2d 446, 1951 Wyo. LEXIS 31 (Wyo. 1951) (decided under prior law).

Installing hoist and dump bed on vehicle held acceptance. —

The buyers accepted the goods (a vehicle) under this section when they began installing a hoist and dump bed on the vehicle. Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

Acceptance in sale of dog. —

Appellant accepted a dog, within the context of this section, where he treated the dog as his own in every respect, including, particularly, using his own training methods, entering the dog in field trial competitions and offering its services for breeding purposes. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Defendant was held, under former § 34-213, not to have accepted plaintiff's machine, even though possession was retained for five years, where the plaintiff had been notified of rejection and it remained on defendant's premises through plaintiff's own fault. Morgan v. Union Pac. R.R., 346 P.2d 1071, 1959 Wyo. LEXIS 49 (Wyo. 1959).

Presumption as to place of return upon disapproval. —

Under former § 34-213 it was held that in a case where the contract is indefinite as to the place to which the article is to be returned if it is not approved as satisfactory by the buyer, it will be presumed that the place where the seller delivered the article to the buyer is the place for return. Morgan v. Union Pac. R.R., 346 P.2d 1071, 1959 Wyo. LEXIS 49 (Wyo. 1959).

Applied in

Jackson Hole Traders, Inc. v. Joseph, 931 P.2d 244, 1997 Wyo. LEXIS 18 (Wyo. 1997).

Cited in

Murphy v. Petrolane-Wyoming Gas Serv., 468 P.2d 969, 1970 Wyo. LEXIS 168 (Wyo. 1970).

Am. Jur. 2d, ALR and C.J.S. references. —

Use of goods by buyer as constituting acceptance under Uniform Commercial Code, § 2-606(1)(c), 67 ALR3d 363.

Time, place and manner of buyer's inspection of goods under UCC, § 2-513, 36 ALR4th 726.

§ 34.1-2-607. 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 article  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 (section 34.1-2-312(c)) 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 (2) 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 (section 34.1-2-312(c)) 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 (c), (d)  and (e) apply to any obligation of a buyer to hold the seller harmless  against infringement or the like (section 34.1-2-312(c)).

History. Laws 1961, ch. 219, § 2-607; W.S. 1957, § 34-2-607; W.S. 1977, § 34-21-270.

Official Comment

Prior uniform statutory provision:

Subsection (a)—Section 41, Uniform Sales Act; Subsections (b) and (c)—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 (a), 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 (b) 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 (b). 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 his 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.

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.

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 extend 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 (d) 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 (c). For subsection (b) 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 of recoupment in diminution or extinction of the price.

7. Subsections (c)(ii) and (e)(ii) give a warrantor against infringement an opportunity to defend or compromise third-party claims or be relieved of his liability. Subsection (e)(i) 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.

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Right of seller to recover balance of purchase price is readily traceable through the provisions of this chapter. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Buyers obligated to pay upon acceptance. —

When the buyers began installing a hoist and dump bed on a vehicle, they accepted the goods under § 34.1-2-606 and thereby became obligated to pay the contract price under this section. Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

Notice required for suit by buyer. —

Because privity is not required in an action upon expressed or implied warranties, furnishing notice under this section is an obligation imposed upon one who asserts a right to relief as a buyer. Western Equip. Co. v. Sheridan Iron Works, 605 P.2d 806, 1980 Wyo. LEXIS 230 (Wyo. 1980).

Notification sufficient if seller informed that transaction is troublesome and that transaction involves breach. —

A jury instruction which conditioned the liability of the seller for breach of warranty on the buyer informing the seller that he looks to the seller for damages was clearly erroneous, as notification is sufficient if the seller is informed that the transaction is still troublesome and that the transaction is claimed to involve a breach; the instruction was also prejudicial, as it effectively precluded recovery by taking away a jury question. Petro-Chem, Inc. v. A.E. Staley Mfg. Co., 686 P.2d 589, 1984 Wyo. LEXIS 329 (Wyo. 1984).

Where contract provides for adjustment of price under particular situation, contract not “breached.” —

In the sale of a business, the parties agreed in the contract that the purchase price should be reduced if the wholesale value of the inventory was less than the specific figure agreed to, or if the inventory was sold and not replaced. That was what happened and, therefore, the purchase price should have been reduced accordingly. The issue of whether the buyer discovered the breach within a “reasonable time” and notified the seller was not reached. Garlach v. Tuttle, 705 P.2d 828, 1985 Wyo. LEXIS 541 (Wyo. 1985).

Applied in

Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986).

Stated in

Althoff, Inc. v. IFG Leasing Co., 704 P.2d 1302, 1985 Wyo. LEXIS 532 (Wyo. 1985).

Cited in

Murphy v. Petrolane-Wyoming Gas Serv., 468 P.2d 969, 1970 Wyo. LEXIS 168 (Wyo. 1970); Centric Corp. v. Drake Bldg. Corp., 726 P.2d 1047, 1986 Wyo. LEXIS 628 (Wyo. 1986).

Am. Jur. 2d, ALR and C.J.S. references. —

Buyer's incidental and consequential damages from seller's breach and UCC, § 2-715, 96 ALR3d 299.

Necessity that buyer of goods give notice of breach of warranty to manufacturer under UCC, § 2-607, requiring notice to seller of breach, 24 ALR4th 277.

Sufficiency and timeliness of buyer's notice under UCC § 2-607(3)(a) of seller's breach of warranty, 89 ALR5th 319.

§ 34.1-2-608. Revocation of acceptance in whole or in part.

1. The buyer may revoke his acceptance of  a lot or commercial unit whose nonconformity 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. Laws 1961, ch. 219, § 2-608; W.S. 1957, § 34-2-608; W.S. 1977, § 34-21-271.

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 (ii) of subsection (a) 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 (ii). 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 (b) 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 adjustment 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 (b) 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 (b) 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.

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Quoted in

Agar v. Kysar, 628 P.2d 1350, 1981 Wyo. LEXIS 345 (Wyo. 1981).

Law reviews. —

For note, “Failure to Include All Material Terms under the Uniform Commercial Code — The ‘Open Terms Contract,’” see 19 Wyo. L.J. 80 (1964).

Am. Jur. 2d, ALR and C.J.S. references. —

Time for revocation of acceptance of goods under UCC, § 2-608(2), 65 ALR3d 354.

Measure and elements of buyer's recovery upon revocation of acceptance of goods under UCC, § 2-608(1), 65 ALR3d 388.

What constitutes “substantial impairment” entitling buyer to revoke his acceptance of goods under UCC § 2-608(1), 38 ALR5th 191.

§ 34.1-2-609. 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 further performance.
4. After receipt of a justified demand failure  to provide within a reasonable time not exceeding thirty (30) days  such assurance of due performance as is adequate under the circumstances  of the particular case is a repudiation of the contract.

History. Laws 1961, ch. 219, § 2-609; W.S. 1957, § 34-2-609; W.S. 1977, § 34-21-272.

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).)

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.

3. Subsection (b) of the present section requires that “reasonable” grounds and “adequate” assurance as used in subsection (a) 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.

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.

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 corner-cutter 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.

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 that 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.

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 (d). 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.

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.

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.

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.

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Am. Jur. 2d, ALR and C.J.S. references. —

Sales: what constitutes “reasonable grounds for insecurity” justifying demand for adequate assurance of performance under UCC § 2-609, 37 ALR5th 459.

§ 34.1-2-610. Anticipatory repudiation.

1. 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 (section 34.1-2-703 or section 34.1-2-711), 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 article on the  seller’s right to identify goods to the contract notwithstanding breach  or to salvage unfinished goods (section 34.1-2-704).

History. Laws 1961, ch. 219, § 2-610; W.S. 1957, § 34-2-610; W.S. 1977, § 34-21-273.

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.

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.

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 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.

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:

“Aggrieved party”. Section 1-201. “Contract”. Section 1-201. “Party”. Section 1-201. “Remedy”. Section 1-201.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Forms of repudiation. —

Repudiation may result from any one of the following: (1) an overt communication of intention not to continue with performance; (2) an action that demonstrates a clear determination not to continue with performance; (3) an action that reasonably indicates a rejection of the continuing obligation; or (4) a demand for more than the contract calls for that, under a fair reading, amounts to a statement of intention not to perform except on conditions that go beyond the contract. Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d 1205, 1997 U.S. App. LEXIS 201 (10th Cir. Wyo. 1997).

Partial repudiation. —

The test for partial repudiation is whether the aggrieved party suffered substantial impairment of the value of the contract. Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d 1205, 1997 U.S. App. LEXIS 201 (10th Cir. Wyo. 1997).

Incidental damages for unjustified return of dog. —

Where buyer unjustifiably returns a dog to seller's possession and seller sues for maintenance, care and training of the dog, such items fall within the incidental damages described in § 34.1-2-710.Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Cited in

Thunder Basin Coal Co. v. Tuco, Inc., 156 F.R.D. 665, 1994 U.S. Dist. LEXIS 11210 (D. Wyo. 1994).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes “anticipatory repudiation” of sales contract under UCC, § 2-610, 1 ALR4th 527.

§ 34.1-2-611. 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 article (section 34.1-2-609).
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. Laws 1961, ch. 219, § 2-611; W.S. 1957, § 34-2-611; W.S. 1977, § 34-21-274.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

To make it 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 (b) 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.

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Quoted in

Thunder Basin Coal Co. v. Southwestern Public Service Co., 104 F.3d 1205, 1997 U.S. App. LEXIS 201 (10th Cir. 1997).

§ 34.1-2-612. “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 (c) and the seller gives adequate assurance  of its cure the buyer must accept that installment.
3. Whenever nonconformity or default with  respect to one (1) 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. Laws 1961, ch. 219, § 2-612; W.S. 1957, § 34-2-612; W.S. 1977, § 34-21-275.

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 (b) 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.

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.

5. Under subsection (b) 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 (b) is measured by the same standards as under the section on right to adequate assurance of performance.

6. Subsection (c) 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 (c), 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.

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.

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Am. Jur. 2d, ALR and C.J.S. references. —

Sales: construction and application of UCC § 2-612(2), dealing with rejection of goods under installment contracts, 61 ALR5th 611.

§ 34.1-2-613. Casualty to identified goods.

1. 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 (section 34.1-2-324) then:
   1. If the loss is total the contract is voided;  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. Laws 1961, ch. 219, § 2-613; W.S. 1957, § 34-2-613; W.S. 1977, § 34-21-276.

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Am. Jur. 2d, ALR and C.J.S. references. —

Construction and effect of UCC, § 2-613 governing casualty to goods identified to a contract, without fault of buyer or seller, 51 ALR4th 537.

§ 34.1-2-614. 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. Laws 1961, ch. 219, § 2-614; W.S. 1957, § 34-2-614; W.S. 1977, § 34-21-277.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Subsection (a) 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.

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.

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, especially Sections 5-102, 5-103, 5-109, 5-110 and 5-114.

3. Under subsection (b) 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.”

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.

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§ 34.1-2-615. Excuse by failure of presupposed conditions.

1. Except so far as a seller may have assumed  a greater obligation and subject to the preceding section [§ 34.1-2-614] on substituted performance:
   1. Delay in delivery or nondelivery in whole  or in part by a seller who complies with subdivisions (ii) and (iii)  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 subdivision  (i) 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 subdivision (ii), of the estimated quota thus made available  for the buyer.

History. Laws 1961, ch. 219, § 2-615; W.S. 1957, § 34-2-615; W.S. 1977, § 34-21-278.

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).)

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.

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.

Agreement can also be made in regard to the consequences of exemption as laid down in paragraphs (a)(ii) and (a)(iii) and the next section on procedure on notice claiming excuse.

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.

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.

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)(i) and (a)(ii), 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.

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Applicability of doctrine of commercial frustration. —

A court should apply the doctrine of commercial frustration to relieve a party to a contract from further performance thereunder only if: (1) the contract is at least partially executory; (2) a supervening event occurred after the contract was made; (3) the nonoccurrence of such event was a basic assumption on which the contract was made; (4) such occurrence frustrated the party's principal purpose for the contract; (5) the frustration was substantial; and (6) the party has not agreed, expressly or impliedly, to perform in spite of the occurrence of the event. Downing v. Stiles, 635 P.2d 808, 1981 Wyo. LEXIS 385 (Wyo. 1981).

Temporary impossibility only suspends performance obligation. —

Temporary impossibility is not grounds for cancellation of a contract. The obligation to perform is revived when performance subsequently is possible. Colorado Coal Furnace Distributors, Inc. v. Prill Mfg. Co., 605 F.2d 499, 1979 U.S. App. LEXIS 12669 (10th Cir. Wyo. 1979).

Trier of fact determines issue of impossibility. —

The issue of impossibility of performance is a question normally most suitable for determination by the trier of fact. Meuse-Rhine-Ijssel Cattle Breeders v. Y-Tex Corp., 590 P.2d 1306, 1979 Wyo. LEXIS 361 (Wyo. 1979).

Am. Jur. 2d, ALR and C.J.S. references. —

Labor disputes as excusing, under UCC, 2-615, failure to deliver goods sold, 70 ALR3d 1266.

Impracticability of performance of sales contract as defense under UCC, § 2-615, 93 ALR3d 584.

Gas and oil lease force majeure provisions: construction and effect, 46 ALR4th 976.

Impracticability of performance of sales contract under UCC § 2-615, 55 ALR5th 1.

§ 34.1-2-616. Procedure on notice claiming excuse.

1. Where the buyer receives notification  of a material or indefinite delay of an allocation justified under  the preceding section [§ 34.1-2-615] he may by written notification to the seller as to any  delivery concerned, and where the prospective deficiency substantially  impairs breach of installment contracts (section 34.1-2-612), 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 (30) days the contract lapses  with respect to any deliveries affected.
3. The provisions of this section may not  be negated by agreement except insofar as the seller has assumed a  greater obligation under the preceding section.

History. Laws 1961, ch. 219, § 2-616; W.S. 1957, § 34-2-616; W.S. 1977, § 34-21-279.

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 (b) his silence after receiving the seller's claim of excuse operates as such a termination. Subsection (c) 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.

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§ 34.1-2-701. 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 article.

History. Laws 1961, ch. 219, § 2-701; W.S. 1957, § 34-2-701; W.S. 1977, § 34-21-280.

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.

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Law reviews. —

For article, “The Uniform Commercial Code — Sales, Bulk Sales, and Documents of Title,” see 15 Wyo. L.J. 1.

For note, “Failure to Include All Material Terms under the Uniform Commercial Code — the ‘Open Terms Contract,’” see 19 Wyo. L.J. 80 (1964).

For comment, “Seller's Remedies in Sales Cases Under the Uniform Commercial Code,” see II Land & Water L. Rev. 199 (1967).

§ 34.1-2-702. 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 article (section 34.1-2-705).
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 (10) days after the receipt, but if misrepresentation  of solvency has been made to the particular seller in writing within  three (3) months before delivery the ten (10) 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  (b) is subject to the rights of a buyer in ordinary course or other  good faith purchaser under this article (section 34.1-2-403). Successful reclamation of goods excludes all other  remedies with respect to them.

History. Laws 1961, ch. 219, § 2-702; W.S. 1957, § 34-2-702; Laws 1967, ch. 84, § 3; W.S. 1977, § 34-21-281.

Official Comment

Prior uniform statutory provision:

Subsection (a)—Sections 53(1)(b), 54(1)(c) and 57, Uniform Sales Act; Subsection (b)—none; Subsection (c)—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 (a) 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 (b) 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.

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.

3. Because the right of the seller to reclaim goods under this section constitutes preferential treatment as against the buyer's other creditors, subsection (c) provides that such reclamation bars all his other remedies as to the goods involved.

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.

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Failure to make demand for reclamation within time period. —

A defrauded seller's rights are not superior to those of a secured creditor of the purchaser when the seller fails to make demand for reclamation within the 10-day period provided. United States v. Wyoming Nat'l Bank, 505 F.2d 1064, 1974 U.S. App. LEXIS 6244 (10th Cir. Wyo. 1974).

§ 34.1-2-703. Seller's remedies in general.

1. 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 (section 34.1-2-612), 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 (section 34.1-2-705);
   3. Proceed under the next section [§ 34.1-2-704] respecting goods still unidentified to the contract;
   4. Resell and recover damages as hereafter  provided (section 34.1-2-706);
   5. Recover damages for nonacceptance (section 34.1-2-708) or in a proper case the price (section 34.1-2-709);
   6. Cancel.

History. Laws 1961, ch. 219, § 2-703; W.S. 1957, § 34-2-703; W.S. 1977, § 34-21-282.

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

Resale and recovery of damages. —

In order to resell goods in accordance with this section and § 34.1-2-706(b) and recover damages thereunder, the seller must first identify the goods to the contract pursuant to § 34.1-2-704(a)(i). Producers Livestock Mktg. Ass'n v. Parker, 509 P.2d 345, 1973 Wyo. LEXIS 155 (Wyo. 1973).

Applied in

Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987).

§ 34.1-2-704. Seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.

1. An aggrieved seller under the preceding  section [§ 34.1-2-703] 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  purpose 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. Laws 1961, ch. 219, § 2-704; W.S. 1957, § 34-2-704; W.S. 1977, § 34-21-283.

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.

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In order to resell goods in accordance with §§ 34.1-2-703 and 34.1-2-706(b) and recover damages thereunder, the seller must first identify the goods to the contract pursuant to subsection (a)(i). Producers Livestock Mktg. Ass'n v. Parker, 509 P.2d 345, 1973 Wyo. LEXIS 155 (Wyo. 1973).

Am. Jur. 2d, ALR and C.J.S. references. —

Measure of recovery where buyer repudiates contract for goods to be manufactured to special order, before completion of manufacture, 42 ALR3d 182.

§ 34.1-2-705. 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 (section 34.1-2-702) 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.
3. 1. To stop delivery the seller must so notify  as to enable the bailee by reasonable diligence to prevent delivery  of the goods; (c) (i) To stop delivery the seller must so notify  as to enable the bailee by reasonable diligence to prevent delivery  of the goods;

(ii) 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;

(iii) 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;

(iv) 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. Laws 1961, ch. 219, § 2-705; W.S. 1957, § 34-2-705; W.S. 1977, § 34-21-284; 2015 ch. 124, § 5, effective July 1, 2015.

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 (a) applies the stoppage principle to other bailees as well as carriers.

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 (c)(ii) therefore gives him a right of indemnity as against the seller in such a case.

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.

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 (c)(iii) and (iv), 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 (c)(ii) to pay the carrier any ensuing damages or charges.

3. A diversion of a shipment is not a “reshipment” under subsection (b)(iii) 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.

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.

4. Subsection (c)(iii) 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.

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.

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§ 34.1-2-706. Seller's resale including contract for resale.

1. Under the conditions stated in section 34.1-2-703 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 article (section 34.1-2-710), but less expenses saved in consequence of the buyer’s  breach.
2. Except as otherwise provided in subsection  (c) or unless otherwise agreed resale may be at public or private  sale including sale by way of one (1) 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 (1) 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  (section 34.1-2-707) 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 (section 34.1-2-711(c)).

History. Laws 1961, ch. 219, § 2-706; W.S. 1957, § 34-2-706; W.S. 1977, § 34-21-285.

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 (a) 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 (b) 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 (a) 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.

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.

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 (a). 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.

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.

4. Subsection (b) 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 (b) 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.

On the question of the place for resale, subsection (b) 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.

6. The purpose of subsection (b) 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 (b) 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 (b) 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 (c) 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.

Subsection (d)(ii) 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.”

9. Since there would be no reasonable prospect of competitive bidding elsewhere, subsection (d) 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 (a). 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.

Paragraph (i) of subsection (d) qualifies the last sentence of subsection (b) 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 (iii) of subsection (d) are intended to permit intelligent bidding.

The provision of paragraph (iv) of subsection (d) 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.

10. This Article departs in subsection (e) 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 (f), 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 (f).

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(c).

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.

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In order to resell goods in accordance with subsection (b) of this section and § 34.1-2-703 and recover damages thereunder, the seller must first identify the goods to the contract pursuant to § 34.1-2-704(a)(i). Producers Livestock Mktg. Ass'n v. Parker, 509 P.2d 345, 1973 Wyo. LEXIS 155 (Wyo. 1973).

Am. Jur. 2d, ALR and C.J.S. references. —

Resale of goods under UCC § 2-706, 101 ALR5th 563.

§ 34.1-2-707. “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 article withhold or stop delivery (section 34.1-2-705) and resell (section 34.1-2-706) and recover incidental damages (section 34.1-2-710).

History. Laws 1961, ch. 219, § 2-707; W.S. 1957, § 34-2-707; W.S. 1977, § 34-21-286.

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.

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Cross references. —

As to consignee and consignor, see § 34.1-7-102.

§ 34.1-2-708. Seller's damages for nonacceptance or repudiation.

1. Subject to subsection (b) and to the provisions  of this article with respect to proof of market price (section 34.1-2-723), 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 article (section 34.1-2-710), but less expenses saved in consequence of the buyer’s  breach.
2. If the measure of damages provided in  subsection (a) 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 article (section 34.1-2-710), due allowance for costs reasonably incurred and due  credit for payments or proceeds of resale.

History. Laws 1961, ch. 219, § 2-708; W.S. 1957, § 34-2-708; W.S. 1977, § 34-21-287.

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.

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.

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.

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.

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Construction of section. —

Absent a market for the goods, subsection (a) is an inadequate measure of damages, and where the plaintiff can be made whole only be receiving its lost profits under the agreement, it is entitled to recover future fixed costs pursuant to subsection (b). Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Proof of market value. —

Proof of market value on the day succeeding the date for acceptance was a sufficient basis for estimating damages to the seller. Western Alfalfa Milling Co. v. Worthington, 31 Wyo. 82, 223 P. 218, 1924 Wyo. LEXIS 8 (Wyo. 1924) (decided under prior law).

Applied in

Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. 1991).

§ 34.1-2-709. 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 [§ 34.1-2-710], 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 revokes acceptance of the goods or has failed to make a payment  due or has repudiated (section 34.1-2-610), a seller who is held not entitled to the price under  this section shall nevertheless be awarded damages for nonacceptance  under the preceding section [§ 34.1-2-708].

History. Laws 1961, ch. 219, § 2-709; W.S. 1957, § 34-2-709; W.S. 1977, § 34-21-288.

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 (a)(ii) 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 (a)(i) 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 (a)(ii) 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 (c) 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.

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Right of seller to recover balance of purchase price is readily traceable through the provisions of this chapter. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Cited in

Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. 1991).

Am. Jur. 2d, ALR and C.J.S. references. —

Seller's recovery of price of goods from buyer under UCC, § 2-709, 90 ALR3d 1141.

§ 34.1-2-710. 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. Laws 1961, ch. 219, § 2-710; W.S. 1957, § 34-2-710; W.S. 1977, § 34-21-289.

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.

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Damages for unjustified return of dog. —

Where buyer unjustifiably returns a dog to seller's possession and seller sues for maintenance, care and training of the dog, such items fall within the incidental damages described in this section. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Minimum bill payments for gas that the seller is unable to take because of a shut-in by the buyer can be viewed as commercially reasonable charges incurred in stopping delivery as a result of the buyer's breach. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

§ 34.1-2-711. 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 (section 34.1-2-612), 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 [§ 34.1-2-712] 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 article (section 34.1-2-713).
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 article (section 34.1-2-502); or
   2. In a proper case obtain specific performance  or replevy the goods as provided in this article (section 34.1-2-716).
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 (section 34.1-2-706).

History. Laws 1961, ch. 219, § 2-711; W.S. 1957, § 34-2-711; W.S. 1977, § 34-21-290.

Official Comment

Prior uniform statutory provision:

No comparable index section; Subsection (c)—Section 69(5), Uniform Sales Act.

Changes:

The prior uniform statutory provision is generally continued and expanded in Subsection (c).

Purposes of changes and new matter:

1. To index in this section the buyer's remedies, subsection (a) covering those remedies permitting the recovery of money damages, and subsection (b) 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.

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.

2. To make it clear in subsection (c) 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 (c), 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).

Cross references:

Point 1: Sections 2-508, 2-601(a)(iii), 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.

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Damages for repudiation not limited to loss of profit. —

The language of this section is clear that when a seller has repudiated, which a seller did by repossessing a lowboy trailer and extension, the buyer may recover so much of the price as has been paid and, in addition, under § 34.1-2-715 may recover as damages “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 article,” and the buyer certainly is not limited to recovery of only the loss of profit essentially described in § 34.1-2-713(a). Stillwell Welding Co. v. Colt Trucking, 741 P.2d 598, 1987 Wyo. LEXIS 500 (Wyo. 1987).

Applied in

Kirby v. NMC/ Continue Care, 993 P.2d 951, 1999 Wyo. LEXIS 194 (Wyo. 1999).

Cited in

Cole v. First Nat'l Bank, 433 P.2d 837, 1967 Wyo. LEXIS 185 (Wyo. 1967).

Law reviews. —

See comment, “Buyer's Remedies in Sales Cases Under the Uniform Commercial Code,” II Land & Water L. Rev. 419 (1967).

§ 34.1-2-712. “Cover”; buyer's procurement of substitute goods.

1. After a breach within the preceding section  [§ 34.1-2-711] 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 (section 34.1-2-715), 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. Laws 1961, ch. 219, § 2-712; W.S. 1957, § 34-2-712; W.S. 1977, § 34-21-291.

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 (a) 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.

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.

3. Subsection (c) 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.

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.

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.

Cross references:

Point 1: Section 2-706.

Point 2: Section 1-204.

Point 3: Sections 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.

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Cover applied. —

In a case where a supplier allegedly breached a contract by failing to provide name-brand equipment, there was no error shown where the trial court applied this section in finding that a purchaser was able to cover; there was nothing to show any rulings that were inconsistent with the Uniform Commercial Code. Fox v. Wheeler Elec., 2007 WY 171, 169 P.3d 875, 2007 Wyo. LEXIS 184 (Oct. 31, 2007).

Am. Jur. 2d, ALR and C.J.S. references. —

What constitutes “cover” upon breach by seller under UCC, § 2-712(1), 79 ALR4th 844.

§ 34.1-2-713. Buyer's damages for nondelivery or repudiation.

1. Subject to the provisions of this article  with respect to proof of market price (section 34.1-2-723), 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 article  (section 34.1-2-715), 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. Laws 1961, ch. 219, § 2-713; W.S. 1957, § 34-2-713; W.S. 1977, § 34-21-292.

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 remedies, opinion evidence as to the value 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.

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Damages for repudiation not limited to loss of profit. —

The language of § 34.1-2-711 is clear that when a seller has repudiated, which a seller did by repossessing a lowboy trailer and extension, the buyer may recover so much of the price as has been paid and, in addition, under § 34.1-2-715 may recover as damages “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 article,” and the buyer certainly is not limited to recovery of only the loss of profit essentially described in subsection (a) of this section. Stillwell Welding Co. v. Colt Trucking, 741 P.2d 598, 1987 Wyo. LEXIS 500 (Wyo. 1987).

Am. Jur. 2d, ALR and C.J.S. references. —

Buyer's incidental and consequential damages from seller's breach and UCC, § 2-715, 96 ALR3d 299.

§ 34.1-2-714. Buyer's damages for breach in regard to accepted goods.

1. Where the buyer has accepted goods and  given notification (section 34.1-2-607) 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 [§ 34.1-2-715] may also be recovered.

History. Laws 1961, ch. 219, § 2-714; W.S. 1957, § 34-2-714; W.S. 1977, § 34-21-293.

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.

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.

2. The “non-conformity” referred to in subsection (a) 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 (b) 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 (c), which will usually accompany an action brought under this section, are discussed in detail in the comment on the next 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.

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Full purchase price not recoverable when buyer never pays balance due. —

There was no evidence to support or justify the recovery by a buyer of the full purchase price of a tractor for which there was a breach of warranty, when the buyer made a down payment but never paid the balance due because the tractor broke, was never repaired, and was eventually repossessed. Massey Ferguson, Inc. v. Stowe, 686 P.2d 604, 1984 Wyo. LEXIS 332 (Wyo. 1984).

Effect of “growing crop” theory of damages. —

Under the “growing crop” theory of damages, a plaintiff can recover damages up to the amount of the value of the crop as it stood in the ground at the time it was destroyed, and for any loss in the diminution of the value of the land. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

Lost profits can be recovered where sufficiently proven. R. E. B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. Wyo. 1975).

Lost profits are generally a proper element of damages which can be recovered for breach of warranty under the Uniform Commercial Code; however, such a loss must be proved with a reasonable degree of certainty through the use of the best evidence available. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

But record of past profits required for recovery. —

To recover for lost profits, courts generally require some record of past profits which allows a reasonable inference to be drawn that a profit would have been experienced but for the breach by the seller. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

Recovery for loss of good will and business reputation can be proper. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Problem of double damage award from submission without limitation of both loss of profits and diminution of property value. — See R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Reasonable steps to minimize damages required. —

The Uniform Commercial Code recognizes the principle that a party must take reasonable steps to minimize the damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

If goods are lost, steps ought to be taken to purchase substitute goods. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

When small amounts of money and few risks involved. —

Courts ordinarily require mitigation where the amounts are small and the risks involved are not great. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

But not when hazards and substantial sums involved. —

It is not required that the injured party incur hazards, and so if the expenditures would be substantial, the injured party is excused from making a new investment. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

A lack of sufficient funds can excuse absence of effort to lessen damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Exercise of reasonable care as question of fact. —

Whether reasonable care has been exercised is generally a question of fact and a product of the surrounding circumstances. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

An injured party cannot continue using rejected equipment indefinitely, thereby building up consequential damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Economic Loss Doctrine. —

Under the theories of product liability and negligence, plaintiffs, a jet buyer and its insurer, could not recover for damages to a jet that skidded off of a runway against defendants, a jet seller, a parts supplier, and others, because the economic loss doctrine barred plaintiff's action when their remedy for damages to the jet was provided by a breach of warranty action pursuant to art. 2 of the Uniform Commercial Code-Sales, Wyo. Stat. Ann. §§ 34-21-201 through 34-21-299.5, now Wyo. Stat. Ann. § 34.1-2-101 et seq. The language of the purchase agreement preserved the buyer's right to pursue claims that would otherwise exist under state law; it did not create a right to pursue a claim that would not otherwise exist and would be barred by the economic loss doctrine. United States Aviation Underwriters, Inc. v. Dassault Aviation, 505 F. Supp. 2d 1252, 2007 U.S. Dist. LEXIS 35028 (D. Wyo. 2007).

Stated in

Agar v. Kysar, 628 P.2d 1350, 1981 Wyo. LEXIS 345 (Wyo. 1981); Althoff, Inc. v. IFG Leasing Co., 704 P.2d 1302, 1985 Wyo. LEXIS 532 (Wyo. 1985); Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986).

Cited in

Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978); Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980); Centric Corp. v. Drake Bldg. Corp., 726 P.2d 1047, 1986 Wyo. LEXIS 628 (Wyo. 1986).

Am. Jur. 2d, ALR and C.J.S. references. —

Elements and measure of damages for breach of warranty in sale of horse, 91 ALR3d 419.

Measure of damages in action for breach of warranty of title to personal property under UCC, § 2-714, 94 ALR3d 583.

Buyer's incidental and consequential damages from seller's breach and UCC, § 2-715, 96 ALR3d 299.

§ 34.1-2-715. 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. Laws 1961, ch. 219, § 2-715; W.S. 1957, § 34-2-715; W.S. 1977, § 34-21-294.

Official Comment

Prior uniform statutory provisions:

Subsection (b)(ii)—Sections 69(7) and 70, Uniform Sales Act.

Changes:

Rewritten.

Purposes of changes and new matter:

1. Subsection (a) 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 (b) 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 (b) 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.

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.

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 (b)(ii) 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 (b)(i).

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.

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Damages in case of rejection. —

Where plaintiff rejected delivery of the wheelchair, neither a breach of warranty cause of action nor a request for personal injury damages was appropriate absent her acceptance and use of the chair. Kirby v. NMC/Continue Care, 993 P.2d 951, 1999 Wyo. LEXIS 194 (Wyo. 1999).

Damages for repudiation not limited to loss of profit. —

The language of § 34.1-2-711 is clear that when a seller has repudiated, which a seller did by repossessing a lowboy trailer and extension, the buyer may recover so much of the price as has been paid and, in addition, may recover as damages “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 article,” and the buyer certainly is not limited to recovery of only the loss of profit essentially described in § 34.1-2-713(a). Stillwell Welding Co. v. Colt Trucking, 741 P.2d 598, 1987 Wyo. LEXIS 500 (Wyo. 1987).

Consequential damages need not naturally flow from breach of warranty. —

The Uniform Commercial Code does not express any such limitation as that items of consequential damage must flow naturally from breach of warranty as defined by the Uniform Commercial Code. R. E. B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. Wyo. 1975).

One year of consequential damages for breach of warranty on tractor was reasonable, as, although the buyer claimed he did not purchase a new tractor or attempt to redeem the old one because of financial inability, damages caused by a warranty breach cannot continue indefinitely. Massey Ferguson, Inc. v. Stowe, 686 P.2d 604, 1984 Wyo. LEXIS 332 (Wyo. 1984).

Effect of “growing crop” theory of damages. —

Under the “growing crop” theory of damages, a plaintiff can recover damages up to the amount of the value of the crop as it stood in the ground at the time it was destroyed, and for any loss in the diminution of the value of the land. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

Lost profits can be recovered where sufficiently proven. R. E. B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. Wyo. 1975).

Lost profits are generally a proper element of damages which can be recovered for breach of warranty under the Uniform Commercial Code; however, such a loss must be proved with a reasonable degree of certainty through the use of the best evidence available. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

But record of past profits required for recovery. —

To recover for lost profits, courts generally require some record of past profits which allows a reasonable inference to be drawn that a profit would have been experienced but for the breach by the seller. Farella v. Rumney, 649 P.2d 185, 1982 Wyo. LEXIS 364 (Wyo. 1982).

Recovery for loss of good will and business reputation can be proper. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Reasonable steps to minimize damages required. —

The Uniform Commercial Code recognizes the principle that a party must take reasonable steps to minimize the damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

If goods are lost, steps ought to be taken to purchase substitute goods. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

When small amounts of money and few risks involved. —

Courts ordinarily require mitigation where the amounts are small and the risks involved are not great. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

But not when hazards and substantial sums involved. —

It is not required that the injured party incur hazards, and so if the expenditures would be substantial, the injured party is excused from making a new investment. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

A lack of sufficient funds can excuse absence of effort to lessen damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Exercise of reasonable care as question of fact. —

Whether reasonable care has been exercised is generally a question of fact and a product of the surrounding circumstances. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

An injured party cannot continue using rejected equipment indefinitely, thereby building up consequential damages. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 1975 U.S. App. LEXIS 12294 (10th Cir. 1975).

Quoted in

Agar v. Kysar, 628 P.2d 1350, 1981 Wyo. LEXIS 345 (Wyo. 1981).

Cited in

Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978).

Am. Jur. 2d, ALR and C.J.S. references. —

Elements and measure of damages for breach of warranty in sale of horse, 91 ALR3d 419.

Buyer's incidental and consequential damages from seller's breach and UCC, § 2-715, 96 ALR3d 299.

Bystander recovery for emotional distress at witnessing another's injury under strict products liability or breach of warranty, 31 ALR4th 162.

Recovery of punitive damages for breach of building or construction contract, 40 ALR4th 110.

§ 34.1-2-716. Buyer's right to specific performance or replevin.

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 replevin 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 replevin  vests upon acquisition of a special property, even if the seller had  not then repudiated or failed to deliver.

History. Laws 1961, ch. 219, § 2-716; W.S. 1957, § 34-2-716; W.S. 1977, § 34-21-295; 2001, ch. 137, § 3.

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 to 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 (c) 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.

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Plaintiff must show equities entitling him to specific performance, and discretion of court should not, particularly in case involving sale of dismantled steel storage tanks for export to Japan, which had become illegal, be exercised unless case is clear. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 1942 Wyo. LEXIS 25 (Wyo. 1942) (decided under prior law).

Unless petition for specific performance discloses petitioner has been or might be damaged, his bargain has been or might be of benefit to him, or, property has some peculiar or special value to him no cause of action has been stated. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 1942 Wyo. LEXIS 25 (Wyo. 1942) (decided under prior law).

Specific performance for delivery of personal property is the exception, not the rule. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 1942 Wyo. LEXIS 25 (Wyo. 1942) (decided under prior law).

And rests in sound discretion of court. —

Remedy by specific performance is not a remedy of right, but rests in sound discretion of court. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 1942 Wyo. LEXIS 25 (Wyo. 1942) (decided under prior law).

Discretion held not abused. —

Refusal to grant buyer specific performance of contract for sale of steel storage tanks was not abuse of discretion, especially where buyer-exporter had already sold to purchasers in Japan, in view of war between United States and Japan. Takahashi v. Pepper Tank & Contracting Co., 58 Wyo. 330, 131 P.2d 339, 1942 Wyo. LEXIS 25 (Wyo. 1942).

Am. Jur. 2d, ALR and C.J.S. references. —

Specific performance of sale of goods under UCC, § 2-716, 26 ALR4th 294.

§ 34.1-2-717. 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. Laws 1961, ch. 219, § 2-717; W.S. 1957, § 34-2-717; W.S. 1977, § 34-21-296.

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 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.

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§ 34.1-2-718. 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 payment exceeds:
   1. The amount to which the seller is entitled  by virtue of terms liquidating the seller’s damages in accordance  with subsection (a); or
   2. In the absence of such terms, twenty percent  (20%) of the value of the total performance for which the buyer is  obligated under the contract or five hundred dollars ($500.00), whichever  is smaller.
3. The buyer’s right to restitution under  subsection (b) is subject to offset to the extent that the seller  establishes:
   1. A right to recover damages under the provisions  of this article other than subsection (a); 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 (b); 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 article on resale by an aggrieved seller (section 34.1-2-706).

History. Laws 1961, ch. 219, § 2-718; W.S. 1957, § 34-2-718; W.S. 1977, § 34-21-297.

Official Comment

Prior uniform statutory provision:

None.

Purposes:

1. Under subsection (a) 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 (b) refuses to recognize a forfeiture unless the amount of the payment so forfeited represents a reasonable liquidation of damages as determined under subsection (a). A special exception is made in the case of small amounts (20% of the price or $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 (b) 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.

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Parties should be left within framework of their agreement. —

Enforceability of a liquidated damage provision is determinable as a question of law; the general principle to be applied is that, in the absence of overreaching or unconscionability, the parties should be left within the framework of the terms of the agreement that they negotiate. McMurry Oil Co. v. Deucalion Research, 842 P.2d 584, 1992 Wyo. LEXIS 178 (Wyo. 1992).

Quoted in

Marcam Mtg. Corp. v. Black, 686 P.2d 575, 1984 Wyo. LEXIS 311 (Wyo. 1984).

Cited in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

Am. Jur. 2d, ALR and C.J.S. references. —

Contractual liquidated damages provisions under UCC article 2, 98 ALR3d 586.

§ 34.1-2-719. Contractual modification or limitations of remedy.

1. Subject to the provisions of subsections  (b) and (c) of this section and of the preceding section [§ 34.1-2-718] on liquidation and limitation of damages:
   1. The agreement may provide for remedies  in addition to or in substitution for those provided in this article  and may limit or alter the measure of damages recoverable under this  article, 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 [§§ 34.1-1-101 through 34.1-10-104].
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. Laws 1961, ch. 219, § 2-719; W.S. 1957, § 34-2-719; W.S. 1977, § 34-21-298.

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.

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 (b), 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.

2. Subsection (a)(ii) 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 (c) 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.

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.

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Subsection (a)(ii) creates presumption that clauses prescribing remedies are cumulative rather than exclusive; parties who intend a contractual provision to constitute a sole remedy must clearly express that intention. Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 661 F. Supp. 1448, 1987 U.S. Dist. LEXIS 4714 (D. Wyo. 1987), aff'd in part and rev'd in part, 885 F.2d 683, 1989 U.S. App. LEXIS 13559 (10th Cir. Wyo. 1989).

Limitation of liability statement to be conspicuous. —

A limitation of liability statement, like a disclaimer of an implied warranty, must be conspicuous in order to become a basis for the bargain. Whether the limitation of liability is sufficiently conspicuous is a factual determination falling within the discretion of the district court. Stauffer Chem. Co. v. Curry, 778 P.2d 1083, 1989 Wyo. LEXIS 185 (Wyo. 1989), reh'g denied, 1989 Wyo. LEXIS 197 (Wyo. Aug. 25, 1989).

Applied in

Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986); Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 1991 U.S. App. LEXIS 21476 (10th Cir. 1991).

Cited in

Kure v. Chevrolet Motor Div., 581 P.2d 603, 1978 Wyo. LEXIS 203 (Wyo. 1978); Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

Am. Jur. 2d, ALR and C.J.S. references. —

Bystander recovery for emotional distress at witnessing another's injury under strict products liability or breach of warranty, 31 ALR4th 162.

Unconscionability, under UCC, § 2-302 or § 2-719(3), of disclaimer of warranties or limitation or exclusion of damages in contract subject to UCC article 2 (sales), 38 ALR4th 25.

§ 34.1-2-720. 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. Laws 1961, ch. 219, § 2-720; W.S. 1957, § 34-2-720; W.S. 1977, § 34-21-299.

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.

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§ 34.1-2-721. Remedies for fraud.

Remedies for material misrepresentation or fraud include all remedies available under this article 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. Laws 1961, ch. 219, § 2-721; W.S. 1957, § 34-2-721; W.S. 1977, § 34-21-299.1.

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.

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§ 34.1-2-722. Who can sue third parties for injury to goods.

1. 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. Laws 1961, ch. 219, § 2-722; W.S. 1957, § 34-2-722; W.S. 1977, § 34-21-299.2.

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.

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2-723. 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 (section 34.1-2-708 or section 34.1-2-713) 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 article 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 article offered  by one (1) 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. Laws 1961, ch. 219, § 2-723; W.S. 1957, § 34-2-723; W.S. 1977, § 34-21-299.3.

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.

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§ 34.1-2-724. Admissibility of market quotations.

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. Laws 1961, ch. 219, § 2-724; W.S. 1957, § 34-2-724; W.S. 1977, § 34-21-299.4.

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.

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§ 34.1-2-725. Statute of limitations in contracts for sale.

1. An action for breach of any contract for  sale must be commenced within four (4) 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 (1) 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 (a) 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  (6) 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. Laws 1961, ch. 219, § 2-725; W.S. 1957, § 34-2-725; W.S. 1977, § 34-21-299.5.

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 (a) 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 (b), providing that the cause of action accrues when the breach occurs, states an exception where the warranty extends to future performance.

Subsection (c) 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 (d) 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.

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Editor's notes. —

As to the effective date of this act, see § 34.1-10-101.

“Explicitly” defined. —

The term “explicitly,” referred to in the second sentence in subsection (b), means that which is so clearly stated or distinctly set forth that there is no doubt as to its meaning. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

All warranties of future performance of goods should be explicit. Connor v. Bogrett, 596 P.2d 683, 1979 Wyo. LEXIS 421 (Wyo. 1979).

Breach of warranty. —

Statute of limitations for breach of warranty ran from date of delivery of vehicle, as opposed to date of discovery of alleged breach. Painter v. GMC, 974 P.2d 924, 1999 Wyo. LEXIS 21 (Wyo. 1999).

Plaintiff bringing breach of warranty action for personal injury must file suit within four years of the date on which the warranted goods are tendered. The UCC's breach of warranty action is a statutory cause of action which has both tort and contract aspects and which applies by its own terms when either economic or personal damages are suffered. Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986).

Identity of parties required between subsequent actions. —

In determining whether the savings clause of subsection (c) is applicable, there must be a substantial identity of parties between the original action and the subsequent action, and the time-honored maxim that a corporation is a separate entity from its stockholders cannot be disregarded. MGTC, Inc. v. Northern Utils., 733 P.2d 607, 1987 Wyo. LEXIS 407 (Wyo. 1987).

Anticipatory breach not found. —

Defendants' entering into continuing contract to purchase natural gas did not anticipatorily breach the contract because defendants' letters to the seller were merely offers to modify the contract's terms, not clear and unequivocal refusals to perform; and the price actually paid to the seller might plausibly be considered overpayment of the actual contract price. Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495, 1995 U.S. Dist. LEXIS 3381 (D. Wyo. 1995).

Stated in

Mountain Fuel Supply Co. v. Central Eng'r & Equip. Co., 611 P.2d 863, 1980 Wyo. LEXIS 277 (Wyo. 1980).

Cited in

NuHome Invs., LLC v. Weller, 2003 WY 171, 81 P.3d 940, 2003 Wyo. LEXIS 207 (Wyo. 2003).

Law reviews. —

For case note, “Torts — Wyoming Finds an Appropriate Case to Adopt Strict Products Liability. Ogle v. Caterpillar Tractor Co., 716 P.2d 334, 1986 Wyo. LEXIS 511 (Wyo. 1986),” see XXII Land & Water L. Rev. 223 (1987).

Am. Jur. 2d, ALR and C.J.S. references. —

What statute of limitations governs actions based on strict liability in tort, 91 ALR3d 455.

Application, to security aspects of sales contract, of UCC, § 2-725 limiting time for bringing actions for breach of sales contract, 16 ALR4th 1335.

What statute of limitations applies to actions for personal injuries based on breach of implied warranty under UCC provisions governing sales (UCC, § 2-725(1)), 20 ALR4th 915.

Bank's liability for breach of implied contract of good faith and fair dealing, 55 ALR4th 1026.

Computer sales and leases: time when cause of action for failure of performance accrues, 90 ALR4th 298.

Causes of action governed by limitations period in UCC § 2-725, 49 ALR5th 1.

What constitutes warranty explicitly extending to “future performance” for purposes of UCC § 2-725(2), 81 ALR5th 483.

§ 34.1-2.A-101. Short title.

This article shall be known and may be cited as the Uniform Commercial Code — Leases.

History. Laws 1991, ch. 14, § 1.

Official Comment

Rationale for Codification:

There are several reasons for codifying the law with respect to leases of goods. An analysis of the case law as it applies to leases of goods suggests at least three significant issues to be resolved by codification. First, what is a lease? It is necessary to define lease to determine whether a transaction creates a lease or a security interest disguised as a lease. If the transaction creates a security interest disguised as a lease, the lessor will be required to file a financing statement or take other action to perfect its interest in the goods against third parties. There is no such requirement with respect to leases. Yet the distinction between a lease and a security interest disguised as a lease is not clear. Second, will the lessor be deemed to have made warranties to the lessee? If the transaction is a sale the express and implied warranties of Article 2 of the Uniform Commercial Code apply. However, the warranty law with respect to leases is uncertain. Third, what remedies are available to the lessor upon the lessee's default? If the transaction is a security interest disguised as a lease, the answer is stated in Part 5 of the Article on Secured Transactions (Article 9). There is no clear answer with respect to leases.

There are reasons to codify the law with respect to leases of goods in addition to those suggested by a review of the reported cases. The answer to this important question should not be limited to the issues raised in these cases. Is it not also proper to determine the remedies available to the lessee upon the lessor's default? It is, but that issue is not reached through a review of the reported cases. This is only one of the many issues presented in structuring, negotiating and documenting a lease of goods.

Statutory Analogue:

After it was decided to proceed with the codification project, the drafting committee of the National Conference of Commissioners on Uniform State Laws looked for a statutory analogue, gradually narrowing the focus to the Article on Sales (Article 2) and the Article on Secured Transactions (Article 9). A review of the literature with respect to the sale of goods reveals that Article 2 is predicated upon certain assumptions: Parties to the sales transaction frequently are without counsel; the agreement of the parties often is oral or evidenced by scant writings; obligations between the parties are bilateral; applicable law is influenced by the need to preserve freedom of contract. A review of the literature with respect to personal property security law reveals that Article 9 is predicated upon very different assumptions: Parties to a secured transaction regularly are represented by counsel; the agreement of the parties frequently is reduced to a writing, extensive in scope; the obligations between the parties are essentially unilateral; and applicable law seriously limits freedom of contract.

The lease is closer in spirit and form to the sale of goods than to the creation of a security interest. While parties to a lease are sometimes represented by counsel and their agreement is often reduced to a writing, the obligations of the parties are bilateral and the common law of leasing is dominated by the need to preserve freedom of contract. Thus the drafting committee concluded that Article 2 was the appropriate statutory analogue.

Issues:

The drafting committee then identified and resolved several issues critical to codification:

Scope:

The scope of the Article was limited to leases (Section 2A-102). There was no need to include leases intended as security, i.e., security interests disguised as leases, as they are adequately treated in Article 9. Further, even if leases intended as security were included, the need to preserve the distinction would remain, as policy suggests treatment significantly different from that accorded leases.

Definition of Lease:

Lease was defined to exclude leases intended as security (Section 2A-103(a)(x)). Given the litigation to date a revised definition of security interest was suggested for inclusion in the Act. (Section 1-201(a)(xxxvii)). This revision sharpens the distinction between leases and security interests disguised as leases.

Filing:

The lessor was not required to file a financing statement against the lessee or take any other action to protect the lessor's interest in the goods (Section 2A-301). The refined definition of security interest will more clearly signal the need to file to potential lessors of goods. Those lessors who are concerned will file a protective financing statement (Section 9-408).

Warranties:

All of the express and implied warranties of the Article on Sales (Article 2) were included (Sections 2A-210 through 2A-216), revised to reflect differences in lease transactions. The lease of goods is sufficiently similar to the sale of goods to justify this decision. Further, many courts have reached the same decision.

Certificate of Title Laws:

Many leasing transactions involve goods subject to certificate of title statutes. To avoid conflict with those statutes, this Article is subject to them (Section 2A-104(a)(i)).

Consumer Leases:

Many leasing transactions involve parties subject to consumer protection statutes or decisions. To avoid conflict with those laws this Article is subject to them to the extent provided in (Section 2A-104(a)(iii) and (ii)). Further, certain consumer protections have been incorporated in the Article.

Finance Leases:

Certain leasing transactions substitute the supplier of the goods for the lessor as the party responsible to the lessee with respect to warranties and the like. The definition of finance lease (Section 2A-103(a)(vii)) was developed to describe these transactions. Various sections of the Article implement the substitution of the supplier for the lessor, including Sections 2A-209 and 2A-407. No attempt was made to fashion a special rule where the finance lessor is an affiliate of the supplier of goods; this is to be developed by the courts, case by case.

Sale and Leaseback:

Sale and leaseback transactions are becoming increasingly common. A number of state statutes treat transactions where possession is retained by the seller as fraudulent per se or prima facie fraudulent. That position is not in accord with modern practice and thus is changed by the Article “if the buyer bought for value and in good faith” (Section 2A-308(c)).

Remedies:

The Article has not only provided for lessor's remedies upon default by the lessee (Sections 2A-523 through 2A-531), but also for lessee's remedies upon default by the lessor (Sections 2A-508 through 2A-522). This is a significant departure from Article 9, which provides remedies only for the secured party upon default by the debtor. This difference is compelled by the bilateral nature of the obligations between the parties to a lease.

Damages:

Many leasing transactions are predicated on the parties' ability to stipulate an appropriate measure of damages in the event of default. The rule with respect to sale of goods (Section 2-718) is not sufficiently flexible to accommodate this practice. Consistent with the common law emphasis upon freedom to contract, the Article has created a revised rule that allows greater flexibility with respect to leases of goods (Section 2A-504(1)).

History:

This Article is a revision of the Uniform Personal Property Leasing Act, which was approved by the National Conference of Commissioners on Uniform State Laws in August, 1985. However, it was believed that the subject matter of the Uniform Personal Property Leasing Act would be better treated as an article of this Act. Thus, although the Conference promulgated the Uniform Personal Property Leasing Act as a Uniform Law, activity was held in abeyance to allow time to restate the Uniform Personal Property Leasing Act as Article 2A.

In August, 1986 the Conference approved and recommended this Article (including conforming amendments to Article 1 and Article 9) for promulgation as an amendment to this Act. In December, 1986 the Council of the American Law Institute approved and recommended this Article (including conforming amendments to Article 1 and Article 9), with official comments, for promulgation as an amendment to this Act. In March, 1987 the Permanent Editorial Board for the Uniform Commercial Code approved and recommended this Article (including conforming amendments to Article 1 and Article 9), with official comments, for promulgation as an amendment to this Act. In May, 1987 the American Law Institute approved and recommended this Article (including conforming amendments to Article 1 and Article 9), with official comments, for promulgation as an amendment to this Act. In August, 1987 the Conference confirmed its approval of the final text of this Article.

Upon its initial promulgation, Article 2A was rapidly enacted in several states, was introduced in a number of other states, and underwent bar association, law revision commission and legislative study in still further states. In that process debate emerged, principally sparked by the study of Article 2A by the California Bar Association, California's non-uniform amendments to Article 2A, and articles appearing in a symposium on Article 2A published after its promulgation in the Alabama Law Review. The debate chiefly centered on whether Article 2A had struck the proper balance or was clear enough concerning the ability of a lessor to grant a security interest in its leasehold interest and in the residual, priority between a secured party and the lessee, and the lessor's remedy structure under Article 2A.

This debate over issues on which reasonable minds could and did differ began to affect the enactment effort for Article 2A in a deleterious manner. Consequently, the Standby Committee for Article 2A, composed predominantly of the former members of the drafting committee, reviewed the legislative actions and studies in the various states, and opened a dialogue with the principal proponents of the non-uniform amendments. Negotiations were conducted in conjunction with, and were facilitated by, a study of the uniform Article and the non-uniform Amendments by the New York Law Revision Commission. Ultimately, a consensus was reached, which has been approved by the membership of the Conference, the Permanent Editorial Board, and the Council of the Institute. Rapid and uniform enactment of Article 2A is expected as a result of the completed amendments. The Article 2A experience reaffirms the essential viability of the procedures of the Conference and the Institute for creating and updating uniform state law in the commercial law area.

Relationship of Article 2A to Other Articles:

The Article on Sales provided a useful point of reference for codifying the law of leases. Many of the provisions of that Article were carried over, changed to reflect differences in style, leasing terminology or leasing practices. Thus, the official comments to those sections of Article 2 whose provisions were carried over are incorporated by reference in Article 2A, as well; further, any case law interpreting those provisions should be viewed as persuasive but not binding on a court when deciding a similar issue with respect to leases. Any change in the sequence that has been made when carrying over a provision from Article 2 should be viewed as a matter of style, not substance. This is not to suggest that in other instances Article 2A did not also incorporate substantially revised provisions of Article 2, Article 9 or otherwise where the revision was driven by a concern over the substance; but for the lack of a mandate, the drafting committee might well have made the same or a similar change in the statutory analogue. Those sections in Article 2A include Sections 2A-104, 2A-105, 2A-106, 2A-108(b) and (d), 2A-109(b), 2A-208, 2A-214(b) and (c)(i), 2A-216, 2A-303, 2A-306, 2A-503, 2A-504(c)(ii), 2A-506(b), and 2A-515. For lack of relevance or significance not all of the provisions of Article 2 were incorporated in Article 2A.

This codification was greatly influenced by the fundamental tenet of the common law as it has developed with respect to leases of goods: freedom of the parties to contract. Note that, like all other Articles of this Act, the principles of construction and interpretation contained in Article 1 are applicable throughout Article 2A (Section 2A-103(d)). These principles include the ability of the parties to vary the effect of the provisions of Article 2A, subject to certain limitations including those that relate to the obligations of good faith, diligence, reasonableness and care (Section 1-102(c)). Consistent with those principles no negative inference is to be drawn by the episodic use of the phrase “unless otherwise agreed” in certain provisions of Article 2A. Section 1-102(d). Indeed, the contrary is true, as the general rule in the Act, including this Article, is that the effect of the Act's provisions may be varied by agreement. Section 1-102(c). This conclusion follows even where the statutory analogue contains the phrase and the correlative provision in Article 2A does not.

Cited in

The Corner v. Pinnacle, Inc., 907 P.2d 1281, 1995 Wyo. LEXIS 210 (Wyo. 1995).

§ 34.1-2.A-102. Scope.

This article applies to any transaction, regardless of form, that creates a lease.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-102(a). Throughout this Article, unless otherwise stated, references to “Section” are to other sections of this Act.

Changes:

Substantially revised.

Purposes:

This Article governs transactions as diverse as the lease of a hand tool to an individual for a few hours and the leveraged lease of a complex line of industrial equipment to a multi-national organization for a number of years.

To achieve that end it was necessary to provide that this Article applies to any transaction, regardless of form, that creates a lease. Since lease is defined as a transfer of an interest in goods (Section 2A-103(a)(x)) and goods is defined to include fixtures (Section 2A-103(a)(viii)), application is limited to the extent the transaction relates to goods, including fixtures. Further, since the definition of lease does not include a sale (Section 2-106(a)) or retention or creation of a security interest (Section 1-201(a)(xxxvii)), application is further limited; sales and security interests are governed by other Articles of this Act.

Finally, in recognition of the diversity of the transactions to be governed, the sophistication of many of the parties to these transactions, and the common law tradition as it applies to the bailment for hire or lease, freedom of contract has been preserved. DeKoven, Proceedings After Default by the Lessee Under a True Lease of Equipment, in 1C P. Coogan, W. Hogan, D. Vagts, Secured Transactions Under the Uniform Commercial Code, § 29B.02[2] (1986). Thus, despite the extensive regulatory scheme established by this Article, the parties to a lease will be able to create private rules to govern their transaction. Sections 2A-103(d) and 1-102(c). However, there are special rules in this Article governing consumer leases, as well as other state and federal statutes, that may further limit freedom of contract with respect to consumer leases.

A court may apply this Article by analogy to any transaction, regardless of form, that creates a lease of personal property other than goods, taking into account the expressed intentions of the parties to the transaction and any differences between a lease of goods and a lease of other property. Such application has precedent as the provisions of the Article on Sales (Article 2) have been applied by analogy to leases of goods. E.g., Hawkland, The Impact of the Uniform Commercial Code on Equipment Leasing , 1972 Ill. L.F. 446; Murray, Under the Spreading Analogy of Article 2 of the Uniform Commercial Code , 39 Fordham L. Rev. 447 (1971). Whether such application would be appropriate for other bailments of personal property, gratuitous or for hire, should be determined by the facts of each case. See Mieske v. Bartell Drug Co. , 92 Wash.2d 40, 46-48, 593 P.2d 1308, 1312 (1979).

Further, parties to a transaction creating a lease of personal property other than goods, or a bailment of personal property may provide by agreement that this Article applies. Upholding the parties' choice is consistent with the spirit of this Article.

Cross References:

Sections 1-102(c), 1-201(a)(xxxvii), Article 2, esp. Section 2-106(a), and Sections 2A-103(a)(viii), 2A-103(a)(x) and 2A-103(d).

Definitional Cross References:

“Lease”. Section 2A-103(a)(x).

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§ 34.1-2.A-103. Definitions and index of definitions.

1. In this article unless the context otherwise  requires:
   1. “Buyer in ordinary course of business” means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. “Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
   2. “Cancellation” occurs when either party  puts an end to the lease contract for default by the other party;
   3. “Commercial unit” means such a unit of  goods as by commercial usage is a single whole for purposes of lease  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 a line  of machinery, or a quantity, as a gross or carload, or any other unit  treated in use or in the relevant market as a single whole;
   4. “Conforming” goods or performance under  a lease contract means goods or performance that are in accordance  with the obligations under the lease contract;
   5. “Consumer lease” means a lease that a  lessor regularly engaged in the business of leasing or selling makes  to a lessee who is an individual and who takes under the lease primarily  for a personal, family, or household purpose, if the total payments  to be made under the lease contract, excluding payments for options  to renew or buy, do not exceed twenty-five thousand dollars ($25,000.00);
   6. “Fault” means wrongful act, omission,  breach, or default;
   7. “Finance lease” means a lease with respect  to which:
      1. The lessor does not select, manufacture,  or supply the goods;
      2. The lessor acquires the goods or the right  to possession and use of the goods in connection with the lease; and
      3. One of the following occurs:
         1. The lessee receives a copy of the contract  by which the lessor acquired the goods or the right to possession  and use of the goods before signing the lease contract;
         2. The lessee’s approval of the contract  by which the lessor acquired the goods or the right to possession  and use of the goods is a condition to effectiveness of the lease  contract;
         3. The lessee, before signing the lease contract,  receives an accurate and complete statement designating the promises  and warranties, and any disclaimers of warranties, limitations or  modifications of remedies, or liquidated damages, including those  of a third party, such as the manufacturer of the goods, provided  to the lessor by the person supplying the goods in connection with  or as part of the contract by which the lessor acquired the goods  or the right to possession and use of the goods; or
         4. If the lease is not a consumer lease,  the lessor, before the lessee signs the lease contract, informs the  lessee in writing (1) of the identity of the person supplying the  goods to the lessor, unless the lessee has selected that person and  directed the lessor to acquire the goods or the right to possession  and use of the goods from that person, (2) that the lessee is entitled  under this article to the promises and warranties, including those  of any third party, provided to the lessor by the person supplying  the goods in connection with or as part of the contract by which the  lessor acquired the goods or the right to possession and use of the  goods, and (3) that the lessee may communicate with the person supplying  the goods to the lessor and receive an accurate and complete statement  of those promises and warranties, including any disclaimers and limitations  of them or of remedies.
   8. “Goods” means all things that are movable  at the time of identification to the lease contract, or are fixtures  (section 34.1-2.A-309), but the term does not include money, documents,  instruments, accounts, chattel paper, general intangibles, or minerals  or the like, including oil and gas, before extraction. The term also  includes the unborn young of animals;
   9. “Installment lease contract” means a lease  contract that authorizes or requires the delivery of goods in separate  lots to be separately accepted, even though the lease contract contains  a clause “each delivery is a separate lease” or its equivalent;
   10. “Lease” means a transfer of the right  to possession and use of goods for a term in return for consideration,  but a sale, including a sale on approval or a sale or return, or retention  or creation of a security interest is not a lease. Unless the context  clearly indicates otherwise, the term includes a sublease;
   11. “Lease agreement” means the bargain, with  respect to the lease, of the lessor and the lessee in fact as found  in their language or by implication from other circumstances including  course of dealing or usage of trade or course of performance as provided  in this article. Unless the context clearly indicates otherwise, the  term includes a sublease agreement;
   12. “Lease contract” means the total legal  obligation that results from the lease agreement as affected by this  article and any other applicable rules of law. Unless the context  clearly indicates otherwise, the term includes a sublease contract;
   13. “Leasehold interest” means the interest  of the lessor or the lessee under a lease contract;
   14. “Lessee” means a person who acquires the  right to possession and use of goods under a lease. Unless the context  clearly indicates otherwise, the term includes a sublessee;
   15. “Lessee in the ordinary course of business” means a person who in good faith and without knowledge that the lease to him is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. “Leasing” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a pre-existing lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt;
   16. “Lessor” means a person who transfers  the right to possession and use of goods under a lease. Unless the  context clearly indicates otherwise, the term includes a sublessor;
   17. “Lessor’s residual interest” means the  lessor’s interest in the goods after expiration, termination, or cancellation  of the lease contract;
   18. “Lien” means a charge against or interest  in goods to secure payment of a debt or performance of an obligation,  but the term does not include a security interest;
   19. “Lot” means a parcel or a single article  that is the subject matter of a separate lease or delivery, whether  or not it is sufficient to perform the lease contract;
   20. “Merchant lessee” means a lessee that  is a merchant with respect to goods of the kind subject to the lease;
   21. “Present value” means the amount as of  a date certain of one (1) or more sums payable in the future, discounted  to the date certain. The discount is determined by the interest rate  specified by the parties if the rate was not manifestly unreasonable  at the time the transaction was entered into; otherwise, the discount  is determined by a commercially reasonable rate that takes into account  the facts and circumstances of each case at the time the transaction  was entered into;
   22. “Purchase” includes taking by sale, lease,  mortgage, security interest, pledge, gift, or any other voluntary  transaction creating an interest in goods;
   23. “Sublease” means a lease of goods the  right to possession and use of which was acquired by the lessor as  a lessee under an existing lease;
   24. “Supplier” means a person from whom a  lessor buys or leases goods to be leased under a finance lease;
   25. “Supply contract” means a contract under  which a lessor buys or leases goods to be leased;
   26. “Termination” occurs when either party  pursuant to a power created by agreement or law puts an end to the  lease contract otherwise than for default.
2. Other definitions applying to this article  and the sections in which they appear are:

   “Accessions”. Section 34.1-2.A-310(a). “Construction mortgage”. Section 34.1-2.A-309(a)(iv). “Encumbrance”. Section 34.1-2.A-309(a)(v). “Fixtures”. Section 34.1-2.A-309(a)(i). “Fixture filing”. Section 34.1-2.A-309(a)(ii). “Purchase money lease”. Section 34.1-2.A-309(a)(iii).

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3. The following definitions in other articles apply to this article:

   “Account”. Section 34.1-9-102(a)(ii) “Between merchants”. Section 34.1-2-104(c) “Buyer”. Section 34.1-2-103(a)(i) “Chattel paper”. Section 34.1-9-102(a)(xi) “Consumer goods”. Section 34.1-9-102(a)(xxiii) “Document”. Section 34.1-9-102(a)(xxx) “Entrusting”. Section 34.1-2-403(c) “General intangible”. Section 34.1-9-102(a)(xlii) “Instrument”. Section 34.1-9-102(a)(xlvii) “Merchant”. Section 34.1-2-104(a) “Mortgage”. Section 34.1-9-102(a)(lv) “Pursuant to commitment”. Section 34.1-9-102(a)(lxxi) “Receipt”. Section 34.1-2-106(a) “Sale”. Section 34.1-2-326. “Sale on approval”. Section 34.1-2-104(a) “Sale or return”. Section 34.1-2-326. “Seller”. Section 34.1-2-103(a)(iv)

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4. In addition, article 1 contains general  definitions and principles of construction and interpretation applicable  throughout this article.
5. “Consumer lease”. New. This Article includes a subset of rules that applies only to consumer leases. Sections 2A-106, 2A-108(b), 2A-108(d), 2A-109(b), 2A-221, 2A-309, 2A-406, 2A-407, 2A-504(c)(ii), and 2A-516(c)(ii).

   For a transaction to qualify as a consumer lease it must first qualify as a lease. Section 2A-103(a)(x). Note that this Article regulates the transactional elements of a lease, including a consumer lease; consumer protection statutes, present and future, and existing consumer protection decisions are unaffected by this Article. Section 2A-104(a)(iii) and (b). Of course, Article 2A as state law also is subject to federal consumer protection law.

   This definition is modeled after the definition of consumer lease in the Consumer Leasing Act, 15 U.S.C. § 1667 (1982), and in the Unif. Consumer Credit Code § 1.301(14), 7A U.L.A. 43 (1974). However, this definition of consumer lease differs from its models in several respects: the lessor can be a person regularly engaged either in the business of leasing or of selling goods, the lease need not be for a term exceeding four months, a lease primarily for an agricultural purpose is not covered, and whether there should be a limitation by dollar amount and its amount is left up to the individual states.

   This definition focuses on the parties as well as the transaction. If a lease is within this definition, the lessor must be regularly engaged in the business of leasing or selling, and the lessee must be an individual not an organization; note that a lease to two or more individuals having a common interest through marriage or the like is not excluded as a lease to an organization under Section 1-201(a)(xxviii). The lessee must take the interest primarily for a personal, family or household purpose. If required by the enacting state, total payments under the lease contract, excluding payments for options to renew or buy, cannot exceed the figure designated.

6. “Fault”. Section 1-201(a)(xvi).
7. “Finance Lease”. New. This Article includes a subset of rules that applies only to finance leases. Sections 2A-209, 2A-211(b), 2A-212(a), 2A-213, 2A-219(a), 2A-220(a)(i), 2A-221, 2A-405(a)(iii), 2A-407, 2A-516(b) and 2A-517(a)(i) and (b).

   For a transaction to qualify as a finance lease it must first qualify as a lease. Section 2A-103(a)(x). Unless the lessor is comfortable that the transaction will qualify as a finance lease, the lease agreement should include provisions giving the lessor the benefits created by the subset of rules applicable to the transaction that qualifies as a finance lease under this Article.

   A finance lease is the product of a three-party transaction. The supplier manufactures or supplies the goods pursuant to the lessee's specification, perhaps even pursuant to a purchase order, sales agreement or lease agreement between the supplier and the lessee. After the prospective finance lease is negotiated, a purchase order, sales agreement, or lease agreement is entered into by the lessor (as buyer or prime lessee) or an existing order, agreement or lease is assigned by the lessee to the lessor, and the lessor and the lessee then enter into a lease or sublease of the goods. Due to the limited function usually performed by the lessor, the lessee looks almost entirely to the supplier for representations, covenants and warranties. If a manufacturer's warranty carries through, the lessee may also look to that. Yet, this definition does not restrict the lessor's function solely to the supply of funds; if the lessor undertakes or performs other functions, express warranties, covenants and the common law will protect the lessee.

   This definition focuses on the transaction, not the status of the parties; to avoid confusion it is important to note that in other contexts, e.g., tax and accounting, the term finance lease has been used to connote different types of lease transactions, including leases that are disguised secured transactions. M. Rice, Equipment Financing, 62-71 (1981). A lessor who is a merchant with respect to goods of the kind subject to the lease may be a lessor under a finance lease. Many leases that are leases back to the seller of goods (Section 2A-308(c)) will be finance leases. This conclusion is easily demonstrated by a hypothetical. Assume that B had bought goods from C pursuant to a sales contract. After delivery to and acceptance of the goods by B, B negotiates to sell the goods to A and simultaneously to lease the goods back from A, on terms and conditions that, we assume, will qualify the transaction as a lease. Section 2A-103(a)(x). In documenting the sale and lease back, B assigns the original sales contract between B, as buyer, and C, as seller, to A. A review of these facts leads to the conclusion that the lease from A to B qualifies as a finance lease, as all three conditions of the definition are satisfied. Subparagraph (a)(vii)(A) is satisfied as A, the lessor, had nothing to do with the selection, manufacture, or supply of the equipment. Subparagraph (a)(vii)(B) is satisfied as A, the lessor, bought the equipment at the same time that A leased the equipment to B, which certainly is in connection with the lease. Finally, subparagraph (a)(vii)(A) is satisfied as A entered into the sales contract with B at the same time that A leased the equipment back to B. B, the lessee, will have received a copy of the sales contract in a timely fashion.

   Subsection (a)(vii)(A) requires the lessor to remain outside the selection, manufacture and supply of the goods; that is the rationale for releasing the lessor from most of its traditional liability. The lessor is not prohibited from possession, maintenance or operation of the goods, as policy does not require such prohibition. To insure the lessee's reliance on the supplier, and not on the lessor, subsection (a)(vii)(B) requires that the goods (where the lessor is the buyer of the goods) or that the right to possession and use of the goods (where the lessor is the prime lessee and the sublessor of the goods) be acquired in connection with the lease (or sublease) to qualify as a finance lease. The scope of the phrase “in connection with” is to be developed by the courts, case by case. Finally, as the lessee generally relies almost entirely upon the supplier for representations and covenants, and upon the supplier or a manufacturer, or both, for warranties with respect to the goods, subsection (a)(vii)(C) requires that one of the following occur: (I) the lessee receive a copy of the supply contract before signing the lease contract; (II) the lessee's approval of the supply contract is a condition to the effectiveness of the lease contract; (III) the lessee receive a statement describing the promises and warranties and any limitations relevant to the lessee before signing the lease contract; or (IV) before signing the lease contract and except in a consumer lease, the lessee receive a writing identifying the supplier (unless the supplier was selected and required by the lessee) and the rights of the lessee under Section 2A-209, and advising the lessee a statement of promises and warranties is available from the supplier. Thus, even where oral supply orders or computer placed supply orders are compelled by custom and usage the transaction may still qualify as a finance lease if the lessee approves the supply contract before the lease contract is effective and such approval was a condition to the effectiveness of the lease contract. Moreover, where the lessor does not want the lessee to see the entire supply contract, including price information, the lessee may be provided with a separate statement of the terms of the supply contract relevant to the lessee; promises between the supplier and the lessor that do not affect the lessee need not be included. The statement can be a restatement of those terms or a copy of portions of the supply contract with the relevant terms clearly designated. Any implied warranties need not be designated, but a disclaimer or modification of remedy must be designated. A copy of any manufacturer's warranty is sufficient if that is the warranty provided. However, a copy of any Regulation M disclosure given pursuant to 12 C.F.R. § 213.4(g) concerning warranties in itself is not sufficient since those disclosures need only briefly identify express warranties and need not include any disclaimer of warranty.

   If a transaction does not qualify as a finance lease, the parties may achieve the same result by agreement; no negative implications are to be drawn if the transaction does not qualify. Further, absent the application of special rules (fraud, duress, and the like), a lease that qualifies as a finance lease and is assigned by the lessor or the lessee to a third party does not lose its status as a finance lease under this Article. Finally, this Article creates no special rule where the lessor is an affiliate of the supplier; whether the transaction qualifies as a finance lease will be determined by the facts of each case.

8. “Goods”. Section 9-105(a)(viii). See Section 2A-103(c) for reference to the definition of “Account”, “Chattel paper”, “Document”, “General intangibles” and “Instrument”. See Section 2A-217 for determination of the time and manner of identification.
   1. “Installment lease contract”. Section 2-612(a).
9. “Lease”. New. There are several reasons to codify the law with respect to leases of goods. An analysis of the case law as it applies to leases of goods suggests at least several significant issues to be resolved by codification. First and foremost is the definition of a lease. It is necessary to define lease to determine whether a transaction creates a lease or a security interest disguised as a lease. If the transaction creates a security interest disguised as a lease, the transaction will be governed by the Article on Secured Transactions (Article 9) and the lessor will be required to file a financing statement or take other action to perfect its interest in the goods against third parties. There is no such requirement with respect to leases under the common law and, except with respect to leases of fixtures (Section 2A-309), this Article imposes no such requirement. Yet the distinction between a lease and a security interest disguised as a lease is not clear from the case law at the time of the promulgation of this Article. DeKoven, Leases of Equipment: Puritan Leasing Company v. August, A Dangerous Decision, 12 U.S.F. L.Rev. 257 (1978).

   At common law a lease of personal property is a bailment for hire. While there are several definitions of bailment for hire, all require a thing to be let and a price for the letting. Thus, in modern terms and as provided in this definition, a lease is created when the lessee agrees to furnish consideration for the right to the possession and use of goods over a specified period of time. Mooney, Personal Property Leasing: A Challenge , 36 Bus.Law. 1605, 1607 (1981). Further, a lease is neither a sale (Section 2-106(a)) nor a retention or creation of a security interest (Section 1-201(a)(xxxvii)). Due to extensive litigation to distinguish true leases from security interests, an amendment to Section 1-201(a)(xxxvii) has been promulgated with this Article to create a sharper distinction.

   This section as well as Section 1-201(a)(xxxvii) must be examined to determine whether the transaction in question creates a lease or a security interest. The following hypotheticals indicate the perimeters of the issue. Assume that A has purchased a number of copying machines, new, for $1,000 each; the machines have an estimated useful economic life of three years. A advertises that the machines are available to rent for a minimum of one month and that the monthly rental is $100.00. A intends to enter into leases where A provides all maintenance, without charge to the lessee. Further, the lessee will rent the machine, month to month, with no obligation to renew. At the end of the lease term the lessee will be obligated to return the machine to A's place of business. This transaction qualifies as a lease under the first half of the definition, for the transaction includes a transfer by A to a prospective lessee of possession and use of the machine for a stated term, month to month. The machines are goods (Section 2A-103(a)(viii)). The lessee is obligated to pay consideration in return, $100.00 for each month of the term.

   However, the second half of the definition provides that a sale or a security interest is not a lease. Since there is no passing of title, there is no sale. Sections 2A-103(c) and 2-106(a). Under pre-Act security law this transaction would have created a bailment for hire or a true lease and not a conditional sale. Da Rocha v. Macomber , 330 Mass. 611, 614-15, 116 N.E.2d 139, 142 (1953). Under Section 1-201(a)(xxxvii), as amended with the promulgation of this Article, the same result would follow. While the lessee is obligated to pay rent for the one-month term of the lease, one of the other four conditions of the second paragraph of Section 1-201(a)(xxxvii) must be met and none is. The term of the lease is one month and the economic life of the machine is 36 months; thus, subparagraph (A) of Section 1-201(a)(xxxvii) is not now satisfied. Considering the amount of the monthly rent, absent economic duress or coercion, the lessee is not bound either to renew the lease for the remaining economic life of the goods or to become the owner. If the lessee did lease the machine for 36 months, the lessee would have paid the lessor $3,600 for a machine that could have been purchased for $1,000; thus, subparagraph (B) of Section 1-201(a)(xxxvii) is not satisfied. Finally, there are no options; thus, subparagraphs (C) and (D) of Section 1-201(a)(xxxvii) are not satisfied. This transaction creates a lease, not a security interest. However, with each renewal of the lease the facts and circumstances at the time of each renewal must be examined to determine if that conclusion remains accurate, as it is possible that a transaction that first creates a lease, later creates a security interest.

   Assume that the facts are changed and that A requires each lessee to lease the goods for 36 months, with no right to terminate. Under pre-Act security law this transaction would have created a conditional sale, and not a bailment for hire or true lease. Hervey v. Rhode Island Locomotive Works , 93 U.S. 664, 672-73 (1876). Under this subsection, and Section 1-201(a)(xxxvii), as amended with the inclusion of this Article in the Act, the same result would follow. The lessee's obligation for the term is not subject to termination by the lessee and the term is equal to the economic life of the machine.

   Between these extremes there are many transactions that can be created. Some of the transactions have not been properly categorized by the courts in applying the 1978 and earlier Official Texts of Section 1-201(a)(xxxvii). This subsection, together with Section 1-201(a)(xxxvii), as amended with the promulgation of this Article, draws a brighter line, which should create a clearer signal to the professional lessor and lessee.

10. “Lease agreement”. This definition is derived from the first sentence of Section 1-201(c). Because the definition of lease is broad enough to cover future transfers, lease agreement includes an agreement contemplating a current or subsequent transfer. Thus it was not necessary to make an express reference to an agreement for the future lease of goods (Section 2-106(a)). This concept is also incorporated in the definition of lease contract. Note that the definition of lease does not include transactions in ordinary building materials that are incorporated into an improvement on land. Section 2A-309(b).

    The provisions of this Article, if applicable, determine whether a lease agreement has legal consequences; otherwise the law of bailments and other applicable law determine the same. Sections 2A-103(d) and 1-103.

11. “Leasehold interest”. New.
12. “Lessee”. New.
13. “Lessee in ordinary course of business”. Section 1-201(a)(ix).
14. “Lessor”. New.
15. “Lessor's residual interest”. New.
16. “Lien”. New. This term is used in Section 2A-307 (Priority of Liens Arising by Attachment or Levy on, Security Interests in, and Other Claims to Goods).
17. “Lot”. Section 2-105(e).
18. “Merchant lessee”. New. This term is used in Section 2A-511 (Merchant Lessee's Duties as to Rightfully Rejected Goods). A person may satisfy the requirement of dealing in goods of the kind subject to the lease as lessor, lessee, seller, or buyer.
19. “Present value”. New. Authorities agree that present value should be used to determine fairly the damages payable by the lessor or the lessee on default. E.g., Taylor v. Commercial Credit Equip. Corp., 170 Ga.App. 322, 316 S.E.2d 788 (Ct. App. 1984). Present value is defined to mean an amount that represents the discounted value as of a date certain of one or more sums payable in the future. This is a function of the economic principle that a dollar today is more valuable to the holder than a dollar payable in two years. While there is no question as to the principle, reasonable people would differ as to the rate of discount to apply in determining the value of that future dollar today. To minimize litigation, this Article allows the parties to specify the discount or interest rate, if the rate was not manifestly unreasonable at the time the transaction was entered into. In all other cases, the interest rate will be a commercially reasonable rate that takes into account the facts and circumstances of each case, as of the time the transaction was entered into.
20. “Sublease”. New.
21. “Supply contract”. New.
22. “Termination”. Section 2-106(c). The effect of a termination is provided in Section 2A-505(b).

History. Laws 1991, ch. 14, § 1; 2001, ch. 137, § 3; 2015 ch. 131, § 1, effective March 4, 2015; 2015 ch. 124, §§ 2, 5, effective July 1, 2015.

Official Comment

(a) “Buyer in ordinary course of business”. Section 1-201(a)(ix).

(b) “Cancellation”. Section 2-106(d). The effect of a cancellation is provided in Section 2A-505(a).

(c) “Commercial unit”. Section 2-105(f).

(d) “Conforming”. Section 2-106(b).

(l) “Lease contract”. This definition is derived from the definition of contract in Section 1-201(a)(xi). Note that a lease contract may be for the future lease of goods, since this notion is included in the definition of lease.

(v) “Purchase”. Section 1-201(a)(xxxii). This definition omits the reference to lien contained in the definition of purchase in Article 1 (Section 1-201(a)(xxxii)). This should not be construed to exclude consensual liens from the definition of purchase in this Article; the exclusion was mandated by the scope of the definition of lien in Section 2A-103(a)(xviii). Further, the definition of purchaser in this Article adds a reference to lease; as purchase is defined in Section 1-201(a)(xxxii) to include any other voluntary transaction creating an interest in property, this addition is not substantive.

(x) “Supplier”. New.

§ 34.1-2.A-104. Leases subject to other law.

1. A lease, although subject to this article,  is also subject to any applicable:
   1. Certificate of title statute of this state;
   2. Certificate of title statute of another  jurisdiction (section 34.1-2.A-105); or
   3. Consumer protection statute of this state,  or final consumer protection decision of a court of this state existing  on the effective date of this article.
2. In case of conflict between this article,  other than sections 34.1-2.A-105, 34.1-2.A-304(c), and 34.1-2.A-305(c),  and a statute or decision referred to in subsection (a), the statute  or decision controls.
3. Failure to comply with an applicable law  has only the effect specified therein.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 9-203(d) and 9-302(c)(ii) and (iii).

Changes:

Substantially revised.

Purposes:

1. This Article creates a comprehensive scheme for the regulation of transactions that create leases. Section 2A-102. Thus, the Article supersedes all prior legislation dealing with leases, except to the extent set forth in this Section.

2. Subsection (a) states the general rule that a lease, although governed by the scheme of this Article, also may be governed by certain other applicable laws. This may occur in the case of a consumer lease. Section 2A-103(a)(v). Those laws may be state statutes existing prior to enactment of Article 2A or passed afterward. In this case, it is desirable for this Article to specify which statute controls. Or the law may be a pre-existing consumer protection decision. This Article preserves such decisions. Or the law may be a statute of the United States. Such a law controls without any statement in this Article under applicable principles of preemption.

An illustration of a statute of the United States that governs consumer leases is the Consumer Leasing Act, 15 U.S.C. §§ 1667-1667(e) (1982) and its implementing regulation, Regulation M, 12 C.F.R. § 213 (1986); the statute mandates disclosures of certain lease terms, delimits the liability of a lessee in leasing personal property, and regulates the advertising of lease terms. An illustration of a state statute that governs consumer leases and which if adopted in the enacting state prevails over this Article is the Unif. Consumer Credit Code, which includes many provisions similar to those of the Consumer Leasing Act, e.g. Unif. Consumer Credit Code §§ 3.202, 3.209, 3.401, 7A U.L.A. 108-09, 115, 125 (1974), as well as provisions in addition to those of the Consumer Leasing Act, e.g., Unif. Consumer Credit Code §§ 5.109-.111, 7A U.L.A. 171-76 (1974) (the right to cure a default). Such statutes may define consumer lease so as to govern transactions within and without the definition of consumer lease under this Article.

3. Under subsection (b), subject to certain limited exclusions, in case of conflict a statute or a decision described in subsection (1) prevails over this Article. For example, a provision like Unif. Consumer Credit Code § 5.112, 7A U.L.A. 176 (1974), limiting self-help repossession, prevails over Section 2A-525(c). A consumer protection decision rendered after the effective date of this Article may supplement its provisions. For example, in relation to Article 9 a court might conclude that an acceleration clause may not be enforced against an individual debtor after late payments have been accepted unless a prior notice of default is given. To the extent the decision establishes a general principle applicable to transactions other than secured transactions, it may supplement Section 2A-502.

4. Consumer protection in lease transactions is primarily left to other law. However, several provisions of this Article do contain special rules that may not be varied by agreement in the case of a consumer lease. E.g., Sections 2A-106, 2A-108, and 2A-109(b). Were that not so, the ability of the parties to govern their relationship by agreement together with the position of the lessor in a consumer lease too often could result in a one-sided lease agreement.

5. In construing this provision the reference to statute should be deemed to include applicable regulations. A consumer protection decision is “final” on the effective date of this Article if it is not subject to appeal on that date or, if subject to appeal, is not later reversed on appeal. Of course, such a decision can be overruled by a later decision or superseded by a later statute.

Cross References:

Sections 2A-103(a)(v), 2A-106, 2A-108, 2A-109(b) and 2A-525(c).

Definitional Cross Reference:

“Lease”. Section 2A-103(a)(x).

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Am. Jur. 2d, ALR and C.J.S. references. —

Who is a “consumer” entitled to protection of state deceptive trade practice and consumer protection acts, 63 ALR5th 1.

§ 34.1-2.A-105. Territorial application of article to goods covered by certificate of title.

Subject to the provisions of sections 34.1-2.A-304(c) and 34.1-2.A-305(c), with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until the earlier of (1) surrender of the certificate, or (2) four months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-103(b)(i) and (ii).

Changes:

Substantially revised. The provisions of the last sentence of Section 9-103(b)(ii) have not been incorporated as it is superfluous in this context. The provisions of Section 9-103(b)(iv) have not been incorporated because the problems dealt with are adequately addressed by this section and Sections 2A-304(c) and 305(c).

Purposes:

The new certificate referred to in (b) must be permanent, not temporary. Generally, the lessor or creditor whose interest is indicated on the most recently issued certificate of title will prevail over interests indicated on certificates issued previously by other jurisdictions. This provision reflects a policy that it is reasonable to require holders of interests in goods covered by a certificate of title to police the goods or risk losing their interests when a new certificate of title is issued by another jurisdiction.

Cross References:

Sections 2A-304(c), 2A-305(c), 9-103(b)(ii) and 9-103(b)(iv).

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii).

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§ 34.1-2.A-106. Limitation on power of parties to consumer lease to choose applicable law and judicial forum.

1. If the law chosen by the parties to a  consumer lease is that of a jurisdiction other than a jurisdiction  in which the lessee resides at the time the lease agreement becomes  enforceable or within thirty (30) days thereafter or in which the  goods are to be used, the choice is not enforceable.
2. If the judicial forum chosen by the parties  to a consumer lease is a forum that would not otherwise have jurisdiction  over the lessee, the choice is not enforceable.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Unif. Consumer Credit Code § 1.201(8), 7A U.L.A. 36 (1974).

Changes:

Substantially revised.

Purposes:

There is a real danger that a lessor may induce a consumer lessee to agree that the applicable law will be a jurisdiction that has little effective consumer protection, or to agree that the applicable forum will be a forum that is inconvenient for the lessee in the event of litigation. As a result, this section invalidates these choice of law or forum clauses, except where the law chosen is that of the state of the consumer's residence or where the goods will be kept, or the forum chosen is one that otherwise would have jurisdiction over the lessee.

Subsection (a) limits potentially abusive choice of law clauses in consumer leases. The 30-day rule in subsection (a) was suggested by Section 9-103(a)(iii). This section has no effect on choice of law clauses in leases that are not consumer leases. Such clauses would be governed by other law.

Subsection (b) prevents enforcement of potentially abusive jurisdictional consent clauses in consumer leases. By using the term judicial forum, this section does not limit selection of a nonjudicial forum, such as arbitration. This section has no effect on choice of forum clauses in leases that are not consumer leases; such clauses are, as a matter of current law, “prima facie valid”. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). Such clauses would be governed by other law, including the Model Choice of Forum Act (1968).

Cross Reference:

Section 9-103(a)(iii).

Definitional Cross Reference:

“Consumer lease”. Section 2A-103(a)(v). “Lease agreement”. Section 2A-103(a)(xi). “Lessee”. Section 2A-103(a)(xiv). “Goods”. Section 2A-103(a)(viii). “Party”. Section 1-201(a)(xxix).

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§ 34.1-2.A-107. Waiver or renunciation of claim or right after default.

Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 1-107.

Changes:

Revised to reflect leasing practices and terminology. This clause is used throughout the official comments to this Article to indicate the scope of change in the provisions of the Uniform Statutory Source included in the section; these changes range from one extreme, e.g., a significant difference in practice (a warranty as to merchantability is not implied in a finance lease (Section 2A-212)) to the other extreme, e.g., a modest difference in style or terminology (the transaction governed is a lease not a sale (Section 2A-203)).

Cross References:

Sections 2A-103 and 2A-212.

Definitional Cross References:

“Aggrieved party”. Section 1-201(a)(ii). “Delivery”. Section 1-201(a)(xiv). “Rights”. Section 1-201(a)(xxxvi). “Signed”. Section 1-201(a)(xxxix). “Written”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-108. Unconscionability.

1. If the court as a matter of law finds  a lease contract or any clause of a lease contract to have been unconscionable  at the time it was made the court may refuse to enforce the lease  contract, or it may enforce the remainder of the lease contract without  the unconscionable clause, or it may so limit the application of any  unconscionable clause as to avoid any unconscionable result.
2. With respect to a consumer lease, if the  court as a matter of law finds that a lease contract or any clause  of a lease contract has been induced by unconscionable conduct or  that unconscionable conduct has occurred in the collection of a claim  arising from a lease contract, the court may grant appropriate relief.
3. Before making a finding of unconscionability  under subsection (a) or (b), the court, on its own motion or that  of a party, shall afford the parties a reasonable opportunity to present  evidence as to the setting, purpose, and effect of the lease contract  or clause thereof, or of the conduct.
4. In an action in which the lessee claims  unconscionability with respect to a consumer lease:
   1. If the court finds unconscionability under  subsection (a) or (b), the court shall award reasonable attorney’s  fees to the lessee;
   2. If the court does not find unconscionability  and the lessee claiming unconscionability has brought or maintained  an action he knew to be groundless, the court shall award reasonable  attorney’s fees to the party against whom the claim is made;
   3. In determining attorney’s fees, the amount  of the recovery on behalf of the claimant under subsections (a) and  (b) is not controlling.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-302 and Unif. Consumer Credit Code § 5.108, 7A U.L.A. 167-69 (1974).

Changes:

Subsection (a) is taken almost verbatim from the provisions of Section 2-302(a). Subsection (b) is suggested by the provisions of Unif. Consumer Credit Code § 5.108(1), (2), 7A U.L.A. 167 (1974). Subsection (c), taken from the provisions of Section 2-302(b), has been expanded to cover unconscionable conduct. Unif. Consumer Credit Code § 5.108(3), 7A U.L.A. 167 (1974). The provision for the award of attorney's fees to consumers, subsection (d), covers unconscionability under subsection (a) as well as (b). Subsection (d) is modeled on the provisions of Unif. Consumer Credit Code § 5.108(6), 7A U.L.A. 169 (1974).

Purposes:

Subsections (a) and (c) of this section apply the concept of unconscionability reflected in the provisions of Section 2-302 to leases. See Dillman & Assocs. v. Capitol Leasing Co., 110 Ill.App.3d 335, 342, 442 N.E.2d 311, 316 (App.Ct. 1982). Subsection (c) omits the adjective “commercial” found in subsection 2-302(b) because subsection (c) is concerned with all leases and the relevant standard of conduct is determined by the context.

The balance of the section is modeled on the provisions of Unif. Consumer Credit Code § 5.108, 7A U.L.A. 167-69 (1974). Thus subsection (b) recognizes that a consumer lease or a clause in a consumer lease may not itself be unconscionable but that the agreement would never have been entered into if unconscionable means had not been employed to induce the consumer to agree. To make a statement to induce the consumer to lease the goods, in the expectation of invoking an integration clause in the lease to exclude the statement's admissibility in a subsequent dispute, may be unconscionable. Subsection (b) also provides a consumer remedy for unconscionable conduct, such as using or threatening to use force or violence, in the collection of a claim arising from a lease contract. These provisions are not exclusive. The remedies of this section are in addition to remedies otherwise available for the same conduct under other law, for example, an action in tort for abusive debt collection or under another statute of this State for such conduct. The reference to appropriate relief in subsection (b) is intended to foster liberal administration of this remedy. Sections 2A-103(d) and 1-106(a).

Subsection (d) authorizes an award of reasonable attorney's fees if the court finds unconscionability with respect to a consumer lease under subsections (a) or (b). Provision is also made for recovery by the party against whom the claim was made if the court does not find unconscionability and does find that the consumer knew the action to be groundless. Further, subsection (d)(ii) is independent of, and thus will not override, a term in the lease agreement that provides for the payment of attorney's fees.

Cross References:

Sections 1-106(1), 2-302 and 2A-103(d).

Definitional Cross Reference:

“Action”. Section 1-201(a). “Consumer lease”. Section 2A-103(a)(v). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Party”. Section 1-201(a)(xxix).

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§ 34.1-2.A-109. Option to accelerate at will.

1. A term providing that one party or his  successor in interest may accelerate payment or performance or require  collateral or additional collateral “at will” or “when he deems himself  insecure” or in words of similar import must be construed to mean  that he has power to do so only if he in good faith believes that  the prospect of payment or performance is impaired.
2. With respect to a consumer lease, the  burden of establishing good faith under subsection (a) is on the party  who exercised the power; otherwise the burden of establishing lack  of good faith is on the party against whom the power has been exercised.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 1-208 and Unif. Consumer Credit Code § 5.109(2), 7A U.L.A. 171 (1974).

Purposes:

Subsection (a) reflects modest changes in style to the provisions of the first sentence of Section 1-208.

Subsection (b), however, reflects a significant change in the provisions of the second sentence of Section 1-208 by creating a new rule with respect to a consumer lease. A lease provision allowing acceleration at the will of the lessor or when the lessor deems itself insecure is of critical importance to the lessee. In a consumer lease it is a provision that is not usually agreed to by the parties but is usually mandated by the lessor. Therefore, where its invocation depends not on specific criteria but on the discretion of the lessor, its use should be regulated to prevent abuse. Subsection (a) imposes a duty of good faith upon its exercises. Subsection (b) shifts the burden of establishing good faith to the lessor in the case of a consumer lease, but not otherwise.

Cross Reference:

Section 1-208.

Definitional Cross Reference:

“Burden of establishing”. Section 1-201(a)(viii). “Consumer lease”. Section 2A-103(a)(v). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Party”. Section 1-201(a)(xxix). “Term”. Section 1-201(a)(xlii)

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§ 34.1-2.A-201. Statute of frauds.

1. A lease contract is not enforceable by  way of action or defense unless:
   1. The total payments to be made under the  lease contract, excluding payments for options to renew or buy, are  less than one thousand dollars ($1,000.00); or
   2. There is a writing, signed by the party  against whom enforcement is sought or by that party’s authorized agent,  sufficient to indicate that a lease contract has been made between  the parties and to describe the goods leased and the lease term.
2. Any description of leased goods or of  the lease term is sufficient and satisfies subsection (a)(ii), whether  or not it is specific, if it reasonably identifies what is described.
3. A writing is not insufficient because  it omits or incorrectly states a term agreed upon, but the lease contract  is not enforceable under subsection (a)(ii) beyond the lease term  and the quantity of goods shown in the writing.
4. A lease contract that does not satisfy  the requirements of subsection (a), but which is valid in other respects,  is enforceable:
   1. If the goods are to be specially manufactured  or obtained for the lessee and are not suitable for lease or sale  to others in the ordinary course of the lessor’s business, and the  lessor, before notice of repudiation is received and under circumstances  that reasonably indicate that the goods are for the lessee, has made  either a substantial beginning of their manufacture or commitments  for their procurement;
   2. If the party against whom enforcement  is sought admits in that party’s pleading, testimony or otherwise  in court that a lease contract was made, but the lease contract is  not enforceable under this provision beyond the quantity of goods  admitted; or
   3. With respect to goods that have been received  and accepted by the lessee.
5. The lease term under a lease contract  referred to in subsection (d) is:
   1. If there is a writing signed by the party  against whom enforcement is sought or by that party’s authorized agent  specifying the lease term, the term so specified;
   2. If the party against whom enforcement  is sought admits in that party’s pleading, testimony, or otherwise  in court a lease term, the term so admitted; or
   3. A reasonable lease term.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-201, 9-203(a) and 9-110.

Changes:

This section is modeled on Section 2-201, with changes to reflect the differences between a lease contract and a contract for the sale of goods. In particular, subsection (a)(ii) adds a requirement that the writing “describe the goods leased and the lease term”, borrowing that concept, with revisions, from the provisions of Section 9-203(a)(i). Subsection (b), relying on the statutory analogue in Section 9-110, sets forth the minimum criterion for satisfying that requirement.

Purposes:

The changes in this section conform the provisions of Section 2-201 to custom and usage in lease transactions. Section 2-201(b), stating a special rule between merchants, was not included in this section as the number of such transactions involving leases, as opposed to sales, was thought to be modest. Subsection (d) creates no exception for transactions where payment has been made and accepted. This represents a departure from the analogue, Section 2-201(c)(iii). The rationale for the departure is grounded in the distinction between sales and leases. Unlike a buyer in a sales transaction, the lessee does not tender payment in full for goods delivered, but only payment of rent for one or more months. It was decided that, as a matter of policy, this act of payment is not a sufficient substitute for the required memorandum. Subsection (e) was needed to establish the criteria for supplying the lease term if it is omitted, as the lease contract may still be enforceable under subsection (d).

Cross References:

Sections 2-201, 9-110 and 9-203(a)(i).

Definitional Cross References:

“Action”. Section 1-201(a). “Agreed”. Section 1-201(c). “Buying”. Section 2A-103(a)(i). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notice”. Section 1-201(a)(xxv) “Party”. Section 1-201(a)(xxix). “Sale”. Section 2-106(a). “Signed”. Section 1-201(a)(xxxix). “Term”. Section 1-201(a)(xlii). “Writing”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-202. Final written expression: parol or extrinsic evidence.

1. 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 dealing or usage of trade  or by course of performance; 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. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-202.

Definitional Cross References:

“Agreement”. Section 1-201(a)(iii). “Course of dealing”. Section 1-205. “Party”. Section 1-201(a)(xxix). “Term”. Section 1-201(a)(xlii). “Usage of trade”. Section 1-205. “Writing”. Section 1-201(a)(xlvi).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-203. Seals inoperative.

The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-203.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Lease contract”. Section 2A-103(a)(xii). “Writing”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-204. Formation in general.

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

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-204.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Agreement”. Section 1-201(a)(iii). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Remedy”. Section 1-201(a)(xxxiv). “Term”. Section 1-201(a)(lxii).

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§ 34.1-2.A-205. Firm offers.

An offer by a merchant to lease goods to or from another person in a signed writing that by its terms gives assurance 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 the period of irrevocability exceed three (3) months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-205.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Merchant”. Section 2-104(a) “Person”. Section 1-201(a)(xxx). “Reasonable time”. Section 1-204(a) and (b). “Signed”. Section 1-201(a)(xxxix). “Term”. Section 1-201(a)(lxii). “Writing”. Section 1-201(a)(lxvi).

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§ 34.1-2.A-206. Offer and acceptance in formation of lease contract.

1. Unless otherwise unambiguously indicated  by the language or circumstances, an offer to make a lease contract  must be construed as inviting acceptance in any manner and by any  medium reasonable in the circumstances.
2. If 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. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-206(a)(i) and (ii).

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Lease contract”. Section 2A-103(a)(xii). “Notifies”. Section 1-201(a)(xxvi). “Reasonable time”. Section 1-204(a) and (b).

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§ 34.1-2.A-207. Course of performance or practical construction. [Repealed]

History. Laws 1991, ch. 14, § 1; repealed by 2015 ch. 124, § 3, effective July 1, 2015.

§ 34.1-2.A-208. Modification, rescission and waiver.

1. An agreement modifying a lease contract  needs no consideration to be binding.
2. A signed lease agreement that excludes  modification or rescission except by a signed writing may not be otherwise  modified or rescinded, but, except as between merchants, such a requirement  on a form supplied by a merchant must be separately signed by the  other party.
3. Although an attempt at modification or  rescission does not satisfy the requirements of subsection (b), it  may operate as a waiver.
4. A party who has made a waiver affecting  an executory portion of a lease 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. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-209.

Changes:

Revised to reflect leasing practices and terminology, except that the provisions of subsection 2-209(c) were omitted.

Purposes:

Section 2-209(c) provides that “the requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions.” This provision was not incorporated as it is unfair to allow an oral modification to make the entire lease contract unenforceable, e.g., if the modification takes it a few dollars over the dollar limit. At the same time, the problem could not be solved by providing that the lease contract would still be enforceable in its pre-modification state (if it then satisfied the statute of frauds) since in some cases that might be worse than no enforcement at all. Resolution of the issue is left to the courts based on the facts of each case.

Cross References:

Sections 2-201 and 2-209.

Definitional Cross References:

“Agreement”. Section 1-201(a)(iii). “Between merchants”. Section 2-104(c). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Merchant”. Section 2-104(a). “Notification”. Section 1-201(a)(xxvi). “Party”. Section 1-201(a)(xxix). “Signed”. Section 1-201(a)(xxxix). “Term”. Section 1-201(a)(xlii). “Writing”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-209. Lessee under finance lease as beneficiary of supply contract.

1. The benefit of a supplier’s promises to  the lessor under the supply contract and of all warranties, whether  express or implied, including those of any third party provided in  connection with or as part of the supply contract, extends to the  lessee to the extent of the lessee’s leasehold interest under a finance  lease related to the supply contract, but is subject to the terms  of the warranty and of the supply contract and all defenses or claims  arising therefrom.
2. The extension of the benefit of a supplier’s  promises and of warranties to the lessee (section 34.1-2.A-209(a))  does not: (1) modify the rights and obligations of the parties to  the supply contract, whether arising therefrom or otherwise; or (2)  impose any duty or liability under the supply contract on the lessee.
3. Any modification or rescission of the  supply contract by the supplier and the lessor is effective between  the supplier and the lessee unless, before the modification or rescission,  the supplier has received notice that the lessee has entered into  a finance lease related to the supply contract. If the modification  or rescission is effective between the supplier and the lessee, the  lessor is deemed to have assumed, in addition to the obligations of  the lessor to the lessee under the lease contract, promises of the  supplier to the lessor and warranties that were so modified or rescinded  as they existed and were available to the lessee before modification  or rescission.
4. In addition to the extension of the benefit  of the supplier’s promises and of warranties to the lessee under subsection  (a), the lessee retains all rights that the lessee may have against  the supplier which arise from an agreement between the lessee and  the supplier or under other law.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

None.

Changes:

This section is modeled on Section 9-318, the Restatement (Second) of Contracts §§ 302-315 (1981), and leasing practices. See Earman Oil Co. v. Burroughs Corp., 625 F.2d 1291, 1296-97 (5th Cir. 1980).

Purposes:

1. The function performed by the lessor in a finance lease is extremely limited. Section 2A-103(a)(ix). The lessee looks to the supplier of the goods for warranties and the like or, in some cases as to warranties, to the manufacturer if a warranty made by that person is passed on. That expectation is reflected in subsection (a), which is self-executing. As a matter of policy, the operation of this provision may not be excluded, modified or limited; however, an exclusion, modification, or limitation of any term of the supply contract or warranty, including any with respect to rights and remedies, and any defense or claim such as a statute of limitations, effective against the lessor as the acquiring party under the supply contract, is also effective against the lessee as the beneficiary designated under this provision. For example, the supplier is not precluded from excluding or modifying an express or implied warranty under a supply contract. Sections 2-312(b) and 2-316, or Section 2A-214. Further, the supplier is not precluded from limiting the rights and remedies of the lessor and from liquidating damages. Sections 2-718 and 2-719 or Sections 2A-503 and 2A-504. If the supply contract excludes or modifies warranties, limits remedies, or liquidates damages with respect to the lessor, such provisions are enforceable against the lessee as beneficiary. Thus, only selective discrimination against the beneficiaries designated under this section is precluded, i.e., exclusion of the supplier's liability to the lessee with respect to warranties made to the lessor. This section does not affect the development of other law with respect to products liability.

2. Enforcement of this benefit is by action. Sections 2A-103(d) and 1-106(b).

3. The benefit extended by these provisions is not without a price, as this Article also provides in the case of a finance lease that is not a consumer lease that the lessee's promises to the lessor under the lease contract become irrevocable and independent upon the lessee's acceptance of the goods. Section 2A-407.

4. Subsection (b) limits the effect of subsection (a) on the supplier and the lessor by preserving, notwithstanding the transfer of the benefits of the supply contract to the lessee, all of the supplier's and the lessor's rights and obligations with respect to each other and others; it further absolves the lessee of any duties with respect to the supply contract that might have been inferred from the extension of the benefits thereof.

5. Subsections (b) and (c) also deal with difficult issues related to modification or rescission of the supply contract. Subsection (b) states a rule that determines the impact of the statutory extension of benefit contained in subsection (a) upon the relationship of the parties to the supply contract and, in a limited respect, upon the lessee. This statutory extension of benefit, like that contained in Sections 2A-216 and 2-318, is not a modification of the supply contract by the parties. Thus, subsection (c) states the rules that apply to a modification or rescission of the supply contract by the parties. Subsection (c) provides that a modification or rescission is not effective between the supplier and the lessee if, before the modification or rescission occurs, the supplier received notice that the lessee has entered into the finance lease. On the other hand, if the modification or rescission is effective, then to the extent of the modification or rescission of the benefit or warranty, the lessor by statutory dictate assumes an obligation to provide to the lessee that which the lessee would otherwise lose. For example, assume a reduction in an express warranty from four years to one year. No prejudice to the lessee may occur if the goods perform as agreed. If, however, there is a breach of the express warranty after one year and before four years pass, the lessor is liable. A remedy for any prejudice to the lessee because of the bifurcation of the lessee's recourse resulting from the action of the supplier and the lessor is left to resolution by the courts based on the facts of each case.

6. Subsection (d) makes it clear that the rights granted to the lessee by this section do not displace any rights the lessee otherwise may have against the supplier.

Cross References:

Sections 2A-103(a)(vii), 2A-407 and 9-318.

Definitional Cross References:

“Action”. Section 1-201(a)(i). “Finance lease”. Section 2A-103(a)(vii). “Leasehold interest”. Section 2A-103(a)(xiii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notice”. Section 1-201(a)(xxv). “Party”. Section 1-201(a)(xxix). “Rights”. Section 1-201(a)(xxxvi). “Supplier”. Section 2A-103(a)(xxiv). “Supply contract”. Section 2A-103(a)(xxv). “Term”. Section 1-201(a)(lxii).

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§ 34.1-2.A-210. Express warranties.

1. Express warranties by the lessor are created  as follows:
   1. Any affirmation of fact or promise made  by the lessor to the lessee which relates to the goods and becomes  part of the basis of the bargain creates an express warranty that  the goods will 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 will conform to the description;
   3. Any sample or model that is made part  of the basis of the bargain creates an express warranty that the whole  of the goods will conform to the sample or model.
2. It is not necessary to the creation of  an express warranty that the lessor use formal words, such as “warrant”  or “guarantee,” or that the lessor 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 lessor’s opinion or commendation  of the goods does not create a warranty.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-313.

Changes:

Revised to reflect leasing practices and terminology.

Purposes:

All of the express and implied warranties of the Article on Sales (Article 2) are included in this Article, revised to reflect the differences between a sale of goods and a lease of goods. Sections 2A-210 through 2A-216. The lease of goods is sufficiently similar to the sale of goods to justify this decision. Hawkland, The Impact of the Uniform Commercial Code on Equipment Leasing, 1972 Ill.L.F. 446, 459-60. Many state and federal courts have reached the same conclusion.

Value of the goods, as used in subsection (2), includes rental value.

Cross References:

Article 2, esp. Section 2-313, and Sections 2A-210 through 2A-216.

Definitional Cross References:

“Conforming”. Section 2A-103(a)(iv). “Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-211. Warranties against interference and against infringement; lessee's obligation against infringement.

1. There is in a lease contract a warranty  that for the lease term no person holds a claim to or interest in  the goods that arose from an act or omission of the lessor, other  than a claim by way of infringement or the like, which will interfere  with the lessee’s enjoyment of its leasehold interest.
2. Except in a finance lease there is in  a lease contract by a lessor who is a merchant regularly dealing in  goods of the kind a warranty that the goods are delivered free of  the rightful claim of any person by way of infringement or the like.
3. A lessee who furnishes specifications  to a lessor or a supplier shall hold the lessor and the supplier harmless  against any claim by way of infringement or the like that arises out  of compliance with the specifications.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-312.

Changes:

This section is modeled on the provisions of Section 2-312, with modifications to reflect the limited interest transferred by a lease contract and the total interest transferred by a sale. Section 2-312(b), which is omitted here, is incorporated in Section 2A-214. The warranty of quiet possession was abolished with respect to sales of goods. Section 2-312 official comment 1. Section 2A-211(a) reinstates the warranty of quiet possession with respect to leases. Inherent in the nature of the limited interest transferred by the lease — the right to possession and use of the goods — is the need of the lessee for protection greater than that afforded to the buyer. Since the scope of the protection is limited to claims or interests that arose from acts or omissions of the lessor, the lessor will be in position to evaluate the potential cost, certainly a far better position than that enjoyed by the lessee. Further, to the extent the market will allow, the lessor can attempt to pass on the anticipated additional cost to the lessee in the guise of higher rent.

Purposes:

General language was chosen for subsection (a) that expresses the essence of the lessee's expectation: with an exception for infringement and the like, no person holding a claim or interest that arose from an act or omission of the lessor will be able to interfere with the lessee's use and enjoyment of the goods for the lease term. Subsection (b), like other similar provisions in later sections, excludes the finance lessor from extending this warranty; with few exceptions (Sections 2A-210 and 2A-211(a)), the lessee under a finance lease is to look to the supplier for warranties and the like or, in some cases as to warranties, to the manufacturer if a warranty made by that person is passed on. Subsections (b) and (c) are derived from Section 2-312(c). These subsections, as well as the analogue, should be construed so that applicable principles of law and equity supplement their provisions. Sections 2A-103(d) and 1-103.

Cross References:

Sections 2-312, 2-312(a), 2-312(b), 2-312 official comment 1, 2A-210, 2A-211(a) and 2A-214.

Definitional Cross References:

“Delivery”. Section 1-201(a)(xiv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Leasehold interest”. Section 2A-103(a)(xiii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Merchant”. Section 2-104(a). “Person”. Section 1-201(a)(xxx). “Supplier”. Section 2A-103(a)(xxiv).

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§ 34.1-2.A-212. Implied warranty of merchantability.

1. Except in a finance lease, a warranty  that the goods will be merchantable is implied in a lease contract  if the lessor is a merchant with respect to goods of that kind.
2. Goods to be merchantable must be at least  such as:
   1. Pass without objection in the trade under  the description in the lease agreement;
   2. In the case of fungible goods, are of  fair average quality within the description;
   3. Are fit for the ordinary purposes for  which goods of that type are used;
   4. Run, within the variation permitted by  the lease agreement, of even kind, quality and quantity within each  unit and among all units involved;
   5. Are adequately contained, packaged and  labeled as the lease agreement may require; and
   6. Conform to any promises or affirmations  of fact made on the container or label.
3. Other implied warranties may arise from  course of dealing or usage of trade.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-314.

Changes:

Revised to reflect leasing practices and terminology. E.g., Glenn Dick Equip. Co. v. Galey Constr., Inc., 97 Idaho 216, 225, 541 P.2d 1184, 1193 (1975) (implied warranty of merchantability (Article 2) extends to lease transactions).

Definitional Cross References:

“Conforming”. Section 2A-103(a)(iv). “Course of dealing”. Section 1-205. “Finance lease”. Section 2A-103(a)(vii). “Fungible”. Section 1-201(a)(xvii). “Goods”. Section 2A-103(a)(viii). “Lease Agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessor”. Section 2A-103(a)(xvi). “Merchant”. Section 2-104(a). “Usage of trade”. Section 1-205.

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§ 34.1-2.A-213. Implied warranty of fitness for particular purpose.

Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-315.

Changes:

Revised to reflect leasing practices and terminology. E.g., All-States Leasing Co. v. Bass, 96 Idaho 873, 879, 538 P.2d 1177, 1183 (1975) (implied warranty of fitness for a particular purpose (Article 2) extends to lease transactions).

Definitional Cross References:

“Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Knows”. Section 1-201(a)(xxv). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi).

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§ 34.1-2.A-214. 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  a warranty must be construed wherever reasonable as consistent with  each other; but, subject to the provisions of section 34.1-2.A-202  on parol or extrinsic evidence, negation or limitation is inoperative  to the extent that the construction is unreasonable.
2. Subject to subsection (c), to exclude  or modify the implied warranty of merchantability or any part of it  the language must mention “merchantability,” be by a writing, and  be conspicuous. Subject to subsection (c), to exclude or modify any  implied warranty of fitness the exclusion must be by a writing and  be conspicuous. Language to exclude all implied warranties of fitness  is sufficient if it is in writing, is conspicuous and states, for  example, “There is no warranty that the goods will be fit for a particular  purpose.”
3. Notwithstanding subsection (b), but subject  to subsection (d):
   1. Unless the circumstances indicate otherwise,  all implied warranties are excluded by expressions like “as is,” or  “with all faults,” or by other language that in common understanding  calls the lessee’s attention to the exclusion of warranties and makes  plain that there is no implied warranty, if in writing and conspicuous;
   2. If the lessee before entering into the  lease contract has examined the goods or the sample or model as fully  as desired or has refused to examine the goods, there is no implied  warranty with regard to defects that an examination ought in the circumstances  to have revealed; and
   3. An implied warranty may also be excluded  or modified by course of dealing, course of performance, or usage  of trade.
4. To exclude or modify a warranty against  interference or against infringement (section 34.1-2.A-211) or any  part of it, the language must be specific, be by a writing, and be  conspicuous, unless the circumstances, including course of performance,  course of dealing, or usage of trade, give the lessee reason to know  that the goods are being leased subject to a claim or interest of  any person.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-316 and 2-312(2).

Changes:

Subsection (b) requires that a disclaimer of the warranty of merchantability be conspicuous and in writing as is the case for a disclaimer of the warranty of fitness; this is contrary to the rule stated in Section 2-316(b) with respect to the disclaimer of the warranty of merchantability. This section also provides that to exclude or modify the implied warranty of merchantability, fitness or against interference or infringement the language must be in writing and conspicuous. There are, however, exceptions to the rule. E.g., course of dealing, course of performance, or usage of trade may exclude or modify an implied warranty. Section 2A-214(c)(iii). The analogue of Section 2-312(b) has been moved to subsection (d) of this section for a more unified treatment of disclaimers; there is no policy with respect to leases of goods that would justify continuing certain distinctions found in the Article on Sales (Article 2) regarding the treatment of the disclaimer of various warranties. Compare Sections 2-312(b) and 2-316(b). Finally, the example of a disclaimer of the implied warranty of fitness stated in subsection (b) differs from the analogue stated in Section 2-316(b); this example should promote a better understanding of the effect of the disclaimer.

Purposes:

These changes were made to reflect leasing practices. E.g., FMC Finance Corp. v. Murphree, 632 F.2d 413, 418 (5th Cir.1980) (disclaimer of implied warranty under lease transactions must be conspicuous and in writing). The omission of the provisions of Section 2-316(d) was not substantive. Sections 2A-503 and 2A-504.

Cross References:

Article 2, esp. Sections 2-312(b) and 2-316, and Sections 2A-503 and 2A-504.

Definitional Cross References:

“Conspicuous”. Section 1-201(a)(x). “Course of dealing”. Section 1-205. “Fault”. Section 2A-103(a)(vi). “Goods”. Section 2A-103(a)(viii). “Knows”. Section 1-201(a)(xxv). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Person”. Section 1-201(a)(xxx). “Usage of trade”. Section 1-205. “Writing”. Section 1-201(a)(lxvi).

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§ 34.1-2.A-215. Cumulation and conflict of warranties express or implied.

1. Warranties, whether express or implied,  must be construed as consistent with each other and as cumulative,  but if that construction is unreasonable, the intention of the parties  determines 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. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-317.

Definitional Cross Reference:

“Party”. Section 1-201(a)(xxix).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-216. Third-party beneficiaries of express and implied warranties.

A warranty to or for the benefit of a lessee under this article, whether express or implied, extends to any person who may reasonably be expected to use, consume, or be affected by the goods and who is injured by breach of the warranty. The operation of this section may not be excluded, modified, or limited with respect to injury to the person of an individual to whom the warranty extends, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the lessee is also effective against the beneficiary designated under this section.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-318.

Changes:

The provisions of Section 2-318 have been included in this section, modified in two respects: first, to reflect leasing practice, including the special practices of the lessor under a finance lease; second, to reflect and thus codify elements of the official comment to Section 2-318 with respect to the effect of disclaimers and limitations of remedies against third parties.

Purposes:

Alternative A is based on the 1962 version of Section 2-318 and is least favorable to the injured person as the doctrine of privity imposed by other law is abrogated to only a limited extent. Alternatives B and C are based on later additions to Section 2-318 and are more favorable to the injured person. In determining which alternative to select, the state legislature should consider making its choice parallel to the choice it made with respect to Section 2-318, as interpreted by the courts.

The last sentence of each of Alternatives A, B and C does not preclude the lessor from excluding or modifying an express or implied warranty under a lease. Section 2A-214. Further, that sentence does not preclude the lessor from limiting the rights and remedies of the lessee and from liquidating damages. Sections 2A-503 and 2A-504. If the lease excludes or modifies warranties, limits remedies for breach, or liquidates damages with respect to the lessee, such provisions are enforceable against the beneficiaries designated under this section. However, this last sentence forbids selective discrimination against the beneficiaries designated under this section, i.e., exclusion of the lessor's liability to the beneficiaries with respect to warranties made by the lessor to the lessee.

Other law, including the Article on Sales (Article 2), may apply in determining the extent to which a warranty to or for the benefit of the lessor extends to the lessee and third parties. This is in part a function of whether the lessor has bought or leased the goods.

This Article does not purport to change the development of the relationship of the common law, with respect to products liability, including strict liability in tort (as restated in Restatement (Second) of Torts, § 402A (1965)), to the provisions of this Act. Compare Cline v. Prowler Indus. of Maryland, 418 A.2d 968 (Del.1980) and Hawkins Constr. Co. v. Matthews Co., 190 Neb. 546, 209 N.W.2d 643 (1973) with Dippel v. Sciano, 37 Wis.2d 443, 155 N.W.2d 55 (1967).

Cross References:

Article 2, esp. Section 2-318, and Sections 2A-214, 2A-503 and 2A-504.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Person”. Section 1-201(a)(xxx). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi).

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§ 34.1-2.A-217. Identification.

1. Identification of goods as goods to which  a lease contract refers may 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 lease contract is made if the  lease contract is for a lease of goods that are existing and identified;
   2. When the goods are shipped, marked, or  otherwise designated by the lessor as goods to which the lease contract  refers, if the lease contract is for a lease of goods that are not  existing and identified; or
   3. When the young are conceived, if the lease  contract is for a lease of unborn young of animals.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-501.

Changes:

This section, together with Section 2A-218, is derived from the provisions of Section 2-501, with changes to reflect lease terminology; however, this section omits as irrelevant to leasing practice the treatment of special property.

Purposes:

With respect to subsection (a)(ii) there is a certain amount of ambiguity in the reference to when goods are designated, e.g., when the lessor is both selling and leasing goods to the same lessee/buyer and has marked goods for delivery but has not distinguished between those related to the lease contract and those related to the sales contract. As in Section 2-501(a)(ii), this issue has been left to be resolved by the courts, case by case.

Cross References:

Sections 2-501 and 2A-218.

Definitional Cross References:

“Agreement”. Section 1-201(a)(iii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessor”. Section 2A-103(a)(xvi). “Party”. Section 1-201(a)(xxix).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-218. Insurance and proceeds.

1. A lessee obtains an insurable interest  when existing goods are identified to the lease contract even though  the goods identified are nonconforming and the lessee has an option  to reject them.
2. If a lessee has an insurable interest  only by reason of the lessor’s identification of the goods, the lessor,  until default or insolvency or notification to the lessee that identification  is final, may substitute other goods for those identified.
3. Notwithstanding a lessee’s insurable interest  under subsections (a) and (b), the lessor retains an insurable interest  until an option to buy has been exercised by the lessee and risk of  loss has passed to the lessee.
4. Nothing in this section impairs any insurable  interest recognized under any other statute or rule of law.
5. The parties by agreement may determine  that one (1) or more parties have an obligation to obtain and pay  for insurance covering the goods and by agreement may determine the  beneficiary of the proceeds of the insurance.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-501.

Changes:

This section, together with Section 2A-217, is derived from the provisions of Section 2-501, with changes and additions to reflect leasing practices and terminology.

Purposes:

Subsection (b) states a rule allowing substitution of goods by the lessor under certain circumstances, until default or insolvency of the lessor, or until notification to the lessee that identification is final. Subsection (c) states a rule regarding the lessor's insurable interest that, by virtue of the difference between a sale and a lease, necessarily is different from the rule stated in Section 2-501(b) regarding the seller's insurable interest. For this purpose the option to buy shall be deemed to have been exercised by the lessee when the resulting sale is closed, not when the lessee gives notice to the lessor. Further, subsection (e) is new and reflects the common practice of shifting the responsibility and cost of insuring the goods between the parties to the lease transaction.

Cross References:

Sections 2-501, 2-501(2) and 2A-217.

Definitional Cross References:

“Agreement”. Section 1-102(a)(iii). “Buying”. Section 2A-103(a)(i). “Conforming”. Section 2A-103(a)(iv). “Goods”. Section 2A-103(a)(viii). “Insolvent”. Section 1-201(a)(xxiii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notification”. Section 1-201(a)(xxvi). “Party”. Section 1-201(a)(xxix).

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§ 34.1-2.A-219. Risk of loss.

1. Except in the case of a finance lease,  risk of loss is retained by the lessor and does not pass to the lessee.  In the case of a finance lease, risk of loss passes to the lessee.
2. Subject to the provisions of this article  on the effect of default on risk of loss (section 34.1-2.A-220), if  risk of loss is to pass to the lessee and the time of passage is not  stated, the following rules apply:
   1. If the lease contract requires or authorizes  the goods to be shipped by carrier:
      1. And it does not require delivery at a  particular destination, the risk of loss passes to the lessee when  the goods are duly delivered to the carrier; but
      2. If it does require delivery 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 lessee when the goods  are there duly so tendered as to enable the lessee to take delivery.
   2. If the goods are held by a bailee to be  delivered without being moved, the risk of loss passes to the lessee  on acknowledgment by the bailee of the lessee’s right to possession  of the goods;
   3. In any case not within paragraph (i) or  (ii), the risk of loss passes to the lessee on the lessee’s receipt  of the goods if the lessor, or, in the case of a finance lease, the  supplier, is a merchant; otherwise the risk passes to the lessee on  tender of delivery.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-509(a) through (c).

Changes:

Subsection (a) is new. The introduction to subsection (b) is new, but subparagraph (A) incorporates the provisions of Section 2-509(a); subparagraph (B) incorporates the provisions of Section 2-509(b) only in part, reflecting current practice in lease transactions.

Purposes:

Subsection (a) states rules related to retention or passage of risk of loss consistent with current practice in lease transactions. The provisions of subsection (d) of Section 2-509 are not incorporated as they are not necessary. This section does not deal with responsibility for loss caused by the wrongful act of either the lesser or the lessee.

Cross References:

Sections 2-509(a), 2-509(b) and 2-509(d).

Definitional Cross References:

“Delivery”. Section 1-201(a)(xiv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xvi). “Lessor”. Section 2A-103(a)(xviii). “Merchant”. Section 2-104(a) “Receipt”. Section 2-103(a)(iii). “Rights”. Section 1-201(a)(xxxvi). “Supplier”. Section 2A-103(a)(x).

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§ 34.1-2.A-220. Effect of default on risk of loss.

1. Where risk of loss is to pass to the lessee  and the time of passage is not stated:
   1. If a tender or delivery of goods so fails  to conform to the lease contract as to give a right of rejection,  the risk of their loss remains with the lessor, or, in the case of  a finance lease, the supplier, until cure or acceptance;
   2. If the lessee rightfully revokes acceptance,  he, to the extent of any deficiency in his effective insurance coverage,  may treat the risk of loss as having remained with the lessor from  the beginning.
2. Whether or not risk of loss is to pass  to the lessee, if the lessee as to conforming goods already identified  to a lease contract repudiates or is otherwise in default under the  lease contract, the lessor, or, in the case of a finance lease, the  supplier, to the extent of any deficiency in his effective insurance  coverage may treat the risk of loss as resting on the lessee for a  commercially reasonable time.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-510.

Changes:

Revised to reflect leasing practices and terminology. The rule in Section (a)(ii) does not allow the lessee under a finance lease to treat the risk of loss as having remained with the supplier from the beginning. This is appropriate given the limited circumstances under which the lessee under a finance lease is allowed to revoke acceptance. Section 2A-517 and Section 2A-516 official comment.

Definitional Cross References:

“Conforming”. Section 2A-103(a)(i). “Delivery”. Section 1-201(a)(xiv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Reasonable time”. Section 1-204(a) and (b). “Rights”. Section 1-201(x)(xxxvi). “Supplier”. Section 2A-103(a)(xxiv).

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§ 34.1-2.A-221. Casualty to identified goods.

1. If a lease contract requires goods identified  when the lease contract is made, and the goods suffer casualty without  fault of the lessee, the lessor or the supplier before delivery, or  the goods suffer casualty before risk of loss passes to the lessee  pursuant to the lease agreement or section 34.1-2.A-219, then:
   1. If the loss is total, the lease contract  is avoided; and
   2. If the loss is partial or the goods have  so deteriorated as to no longer conform to the lease contract, the  lessee may nevertheless demand inspection and at his option either  treat the lease contract as avoided or, except in a finance lease  that is not a consumer lease, accept the goods with due allowance  from the rent payable for the balance of the lease term for the deterioration  or the deficiency in quantity but without further right against the  lessor.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-613.

Changes:

Revised to reflect leasing practices and terminology.

Purpose:

Due to the vagaries of determining the amount of due allowance (Section 2-613(a)(ii)), no attempt was made in subsection (a)(ii) to treat a problem unique to lease contracts and installment sales contracts: determining how to recapture the allowance, e.g., application to the first or last rent payments or allocation, pro rata, to all rent payments.

Cross References:

Section 2-613.

Definitional Cross References:

“Conforming”. Section 2A-103(a)(iv). “Consumer lease”. Section 2A-103(a)(v). “Delivery”. Section 1-201(a)(xiv). “Fault”. Section 2A-103(a)(vi). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-193(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Rights”. Section 1-201(a)(xxxvi). “Supplier”. Section 2A-103(a)(xxiv).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-301. Enforceability of lease contract.

Except as otherwise provided in this article, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods and against creditors of the parties.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-201.

Changes:

The first sentence of Section 9-201 was incorporated, modified to reflect leasing terminology. The second sentence of Section 9-201 was eliminated as not relevant to leasing practices.

Purposes:

1. This section establishes a general rule regarding the validity and enforceability of a lease contract. The lease contract is effective and enforceable between the parties and against third parties. Exceptions to this general rule arise where there is a specific rule to the contrary in this Article. Enforceability is, thus, dependent upon the lease contract meeting the requirements of the Statute of Frauds provisions of Section 2A-201. Enforceability is also a function of the lease contract conforming to the principles of construction and interpretation contained in the Article on General Provisions (Article 1). Section 2A-103(d).

2. The effectiveness or enforceability of the lease contract is not dependent upon the lease contract or any financing statement or the like being filed or recorded; however, the priority of the interest of a lessor of fixtures with respect to the interests of certain third parties in such fixtures is subject to the provisions of the Article on Secured Transactions (Article 9). Section 2A-309. Prior to the adoption of this Article filing or recording was not required with respect to leases, only leases intended as security. The definition of security interest, as amended concurrently with the adoption of this Article, more clearly delineates leases and leases intended as security and thus signals the need to file. Section 1-201(a)(xxxvii). Those lessors who are concerned about whether the transaction creates a lease or a security interest will continue to file a protective financing statement. Section 9-408. Coogan, Leasing and the Uniform Commercial Code, in Equipment Leasing-Leveraged Leasing 681, 744-46 (2d ed. 1980).

3. Hypothetical:

1. In construing this section it is important to recognize its relationship to other sections in this Article. This is best demonstrated by reference to a hypothetical. Assume that on February 1 A, a manufacturer of combines and other farm equipment, leased a fleet of six combines to B, a corporation engaged in the business of farming, for a 12 month term. Under the lease agreement between A and B, A agreed to defer B's payment of the first two months' rent to April 1. On March 1 B recognized that it would need only four combines and thus subleased two combines to C for an 11 month term.
2. This hypothetical raises a number of issues that are answered by the sections contained in this part. Since lease is defined to include sublease (Section 2A-103(a)(x) and (xxiii)), this section provides that the prime lease between A and B and the sublease between B and C are enforceable in accordance with their terms, except as otherwise provided in this Article; that exception, in this case, is one of considerable scope.
3. The separation of ownership, which is in A, and possession, which is in B with respect to four combines and which is in C with respect to two combines, is not relevant. Section 2A-302. A's interest in the six combines cannot be challenged simply because A parted with possession to B, who in turn parted with possession of some of the combines to C. Yet it is important to note that by the terms of Section 2A-302 this conclusion is subject to change if otherwise provided in this Article.
4. B's entering the sublease with C raises an issue that is treated by this part. In a dispute over the leased combines A may challenge B's right to sublease. The rule is permissive as to transfers of interests under a lease contract, including subleases. Section 2A-303(b). However, the rule has two significant qualifications. If the prime lease contract between A and B prohibits B from subleasing the combines, or makes such a sublease an event of default, Section 2A-303(b) applies; thus, while B's interest under the prime lease may not be transferred under the sublease to C, A may have a remedy pursuant to Section 2A-303(e). Absent a prohibition or default provision in the prime lease contract A might be able to argue that the sublease to C materially increases A's risk; thus, while B's interest under the prime lease may be transferred under the sublease to C, A may have a remedy pursuant to Section 2A-303(e).
5. Resolution of this issue is also a function of the section dealing with the sublease of goods by a prime lessee (Section 2A-305). Subsection (a) of Section 2A-305, which is subject to the rules of Section 2A-303 stated above, provides that C takes subject to the interest of A under the prime lease between A and B. However, there are two exceptions. First, if B is a merchant (Sections 2A-103(c) and 2-104(a)) dealing in goods of that kind and C is a sublessee in the ordinary course of business (Sections 2A-103(a)(xv) and 2A-103(a)(xiv)), C takes free of the prime lease between A and B. Second, if B has rejected the six combines under the prime lease with A, and B disposes of the goods by sublease to C, C takes free of the prime lease if C can establish good faith. Section 2A-511(d).
6. If the facts of this hypothetical are expanded and we assume that the prime lease obligated B to maintain the combines, an additional issue may be presented. Prior to entering the sublease, B, in satisfaction of its maintenance covenant, brought the two combines that it desired to sublease to a local independent dealer of A's. The dealer did the requested work for B. C inspected the combines on the dealer's lot after the work was completed. C signed the sublease with B two days later. C, however, was prevented from taking delivery of the two combines as B refused to pay the dealer's invoice for the repairs. The dealer furnished the repair service to B in the ordinary course of the dealer's business. If under applicable law the dealer has a lien on repaired goods in the dealer's possession, the dealer's lien will take priority over B's and C's interests, and also should take priority over A's interest, depending upon the terms of the lease contract and the applicable law. Section 2A-306.
7. Now assume that C is in financial straits and one of C's creditors obtains a judgment against C. If the creditor levies on C's subleasehold interest in the two combines, who will prevail? Unless the levying creditor also holds a lien covered by Section 2A-306, discussed above, the judgment creditor will take its interest subject to B's rights under the sublease and A's rights under the prime lease. Section 2A-307(a). The hypothetical becomes more complicated if we assume that B is in financial straits and B's creditor holds the judgment. Here the judgment creditor takes subject to the sublease unless the lien attached to the two combines before the sublease contract became enforceable. Section 2A-307(b)(i). However, B's judgment creditor cannot prime A's interest in the goods because, with respect to A, the judgment creditor is a creditor of B in its capacity as lessee under the prime lease between A and B. Thus, here the judgment creditor's interest is subject to the lease between A and B. Section 2A-307(a).
8. Finally, assume that on April 1 B is unable to pay A the deferred rent then due under the prime lease, but that C is current in its payments under the sublease from B. What effect will B's default under the prime lease between A and B have on C's rights under the sublease between B and C? Section 2A-301 provides that a lease contract is effective against the creditors of either party. Since a lease contract includes a sublease contract (Section 2A-103(a)(xii)), the sublease contract between B and C arguably could be enforceable against A, a prime lessor who has extended unsecured credit to B the prime lessee/sublessor, if the sublease contract meets the requirements of Section 2A-201. However, the rule stated in Section 2A-301 is subject to other provisions in this Article. Under Section 2A-305, C, as sublessee, would take subject to the prime lease contract in most cases. Thus, B's default under the prime lease will in most cases lead to A's recovery of the goods from C. Section 2A-523. A and C could provide otherwise by agreement. Section 2A-311. C's recourse will be to assert a claim for damages against B. Sections 2A-211(a) and 2A-508.

   4. Relationship Between Sections:

9. As the analysis of the hypothetical demonstrates, Part 3 of the Article focuses on issues that relate to the enforceability of the lease contract (Sections 2A-301, 2A-302 and 2A-303) and to the priority of various claims to the goods subject to the lease contract (Sections 2A-304, 2A-305, 2A-306, 2A-307, 2A-308, 2A-309, 2A-310, and 2A-311).
10. This section states a general rule of enforceability, which is subject to specific rules to the contrary stated elsewhere in the Article. Section 2A-302 negates any notion that the separation of title and possession is fraudulent as a rule of law. Finally, Section 2A-303 states rules with respect to the transfer of the lessor's interest (as well as the residual interest in the goods) or the lessee's interest under the lease contract. Qualifications are imposed as a function of various issues, including whether the transfer is the creation or enforcement of a security interest or one that is material to the other party to the lease contract. In addition, a system of rules is created to deal with the rights and duties among assignor, assignee and the other party to the lease contract.
11. Sections 2A-304 and 2A-305 are twins that deal with good faith transferees of goods subject to the lease contract. Section 2A-304 creates a set of rules with respect to transfers by the lessor of goods subject to a lease contract; the transferee considered is a subsequent lessee of the goods. The priority dispute covered here is between the subsequent lessee and the original lessee of the goods (or persons claiming through the original lessee). Section 2A-305 creates a set of rules with respect to transfers by the lessee of goods subject to a lease contract; the transferees considered are buyers of the goods or sublessees of the goods. The priority dispute covered here is between the transferee and the lessor of the goods (or persons claiming through the lessor).
12. Section 2A-306 creates a rule with respect to priority disputes between holders of liens for services or materials furnished with respect to goods subject to a lease contract and the lessor or the lessee under that contract. Section 2A-307 creates a rule with respect to priority disputes between the lessee and creditors of the lessor and priority disputes between the lessor and creditors of the lessee.
13. Section 2A-308 creates a series of rules relating to allegedly fraudulent transfers and preferences. The most significant rule is that set forth in subsection (c) which validates sale-leaseback transactions if the buyer-lessor can establish that he or she bought for value and in good faith.
14. Sections 2A-309 and 2A-310 create a series of rules with respect to priority disputes between various third parties and a lessor of fixtures or accessions, respectively, with respect thereto.
15. Finally, Section 2A-311 allows parties to alter the statutory priorities by agreement.

    Cross References:

    Article 1, especially Section 1-201(a)(xxxvii), and Sections 2-104(a), 2A-103(a)(x), 2A-103(a)(xii), 2A-103(a)(xiv), 2A-103(a)(xv) and 2A-103(a)(xxiii), 2A-103(c), 2A-103(d), 2A-201, 2A-301 through 2A-303, 2A-303(b), 2A-303(e), 2A-304 through 2A-307, 2A-307(a), 2A-307(b)(i), 2A-308 through 2A-311, 2A-508, 2A-511(d), 2A-523, Article 9, especially Sections 9-201 and 9-408.

    Definitional Cross References:

    “Creditor”. Section 1-201(a)(xii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Purchaser”. Section 1-201(a)(xxxiii). “Term”. Section 1-201(a)(xlii).

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    Am. Jur. 2d, ALR and C.J.S. references. —

    Measure and elements of damages for lessee's breach of covenant as to repairs, 45 ALR5th 251.

§ 34.1-2.A-302. Title to and possession of goods.

Except as otherwise provided in this article, each provision of this article applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding any statute or rule of law that possession or the absence of possession is fraudulent.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-202.

Changes:

Section 9-202 was modified to reflect leasing terminology and to clarify the law of leases with respect to fraudulent conveyances or transfers.

Purposes:

The separation of ownership and possession of goods between the lessor and the lessee (or a third party) has created problems under certain fraudulent conveyance statutes. See, e.g., In re Ludlum Enters., 510 F.2d 996 (5th Cir. 1975); Suburbia Fed. Sav. & Loan Ass'n v. Bel-Air Conditioning Co., 385 So.2d 1151 (Fla.Dist.Ct.App.1980). This section provides, among other things, that separation of ownership and possession per se does not affect the enforceability of the lease contract. Sections 2A-301 and 2A-308.

Cross References:

Sections 2A-301, 2A-308 and 9-202.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi).

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§ 34.1-2.A-303. Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights.

1. As used in this section, “creation of  a security interest” includes the sale of a lease contract that is  subject to article 9, secured transactions, by reason of section 34.1-9-109(a)(iii).
2. Except as provided in subsection (d) and section 34.1-9-407, a provision in a lease agreement which (1) prohibits  the voluntary or involuntary transfer, including a transfer by sale,  sublease, creation or enforcement of a security interest, or attachment,  levy, or other judicial process, of an interest of a party under the  lease contract or of the lessor’s residual interest in the goods,  or (2) makes such a transfer an event of default, gives rise to the  rights and remedies provided in subsection (e), but a transfer that  is prohibited or is an event of default under the lease agreement  is otherwise effective.
3. A provision in a lease agreement which  (1) prohibits a transfer of a right to damages for default with respect  to the whole lease contract or of a right to payment arising out of  the transferor’s due performance of the transferor’s entire obligation,  or (2) makes such a transfer an event of default, is not enforceable,  and such a transfer is not a transfer that materially impairs the  prospect of obtaining return performance by, materially changes the  duty of, or materially increases the burden or risk imposed on, the  other party to the lease contract within the purview of subsection  (d).
4. Subject to subsection (e) and section 34.1-9-407:
   1. If a transfer is made which is made an  event of default under a lease agreement, the party to the lease contract  not making the transfer, unless that party waives the default or otherwise  agrees, has the rights and remedies described in section 34.1-2.A-501(b);
   2. If paragraph (i) is not applicable and  if a transfer is made that (1) is prohibited under a lease agreement  or (2) materially impairs the prospect of obtaining return performance  by, materially changes the duty of, or materially increases the burden  or risk imposed on, the other party to the lease contract, unless  the party not making the transfer agrees at any time to the transfer  in the lease contract or otherwise, then, except as limited by contract,  (1) the transferor is liable to the party not making the transfer  for damages caused by the transfer to the extent that the damages  could not reasonably be prevented by the party not making the transfer  and (2) a court having jurisdiction may grant other appropriate relief,  including cancellation of the lease contract or an injunction against  the transfer.
5. A transfer of “the lease” or of “all my  rights under the lease,” or a transfer in similar general terms, is  a transfer of rights and, unless the language or the circumstances,  as in a transfer for security, indicate the contrary, the transfer  is a delegation of duties by the transferor to the transferee. Acceptance  by the transferee constitutes a promise by the transferee to perform  those duties. The promise is enforceable by either the transferor  or the other party to the lease contract.
6. Unless otherwise agreed by the lessor  and the lessee, a delegation of performance does not relieve the transferor  as against the other party of any duty to perform or of any liability  for default.
7. In a consumer lease, to prohibit the transfer  of an interest of a party under the lease contract or to make a transfer  an event of default, the language must be specific, by a writing,  and conspicuous.

History. Laws 1991, ch. 14, § 1; 2001, ch. 137, §§ 3, 4.

Official Comment

Uniform Statutory Source:

Sections 2-210 and 9-311.

Changes:

The provisions of Sections 2-210 and 9-311 were incorporated in this section, with substantial modifications to reflect leasing terminology and practice and to harmonize the principles of the respective provisions, i.e., limitations on delegation of performance on the one hand and alienability of rights on the other. In addition, unlike Section 2-210 which deals only with voluntary transfers, this section deals with involuntary as well as voluntary transfers. Moreover, the principle of Section 9-318(d) denying effectiveness to contractual terms prohibiting assignments of receivables due and to become due also is implemented.

Purposes:

1. Subsection (b) states a rule, consistent with Section 9-401(b), that voluntary and involuntary transfers of an interest of a party under the lease contract or of the lessor's residual interest, including by way of the creation or enforcement of a security interest, are effective, notwithstanding a provision in the lease agreement prohibiting the transfer or making the transfer an event of default. Although the transfers are effective, the provision in the lease agreement is nevertheless enforceable, but only as provided in subsection (d). Under subsection (d) the prejudiced party is limited to the remedies on “default under the lease contract” in this Article and, except as limited by this Article, as provided in the lease agreement, if the transfer has been made an event of default. Section 2A-501(b). Usually, there will be a specific provision to this effect or a general provision making a breach of a covenant an event of default. In those cases where the transfer is prohibited, but not made an event of default, the prejudiced party may recover damages; or, if the damage remedy would be ineffective adequately to protect that party, the court can order cancellation of the lease contract or enjoin the transfer. This rule that such provisions generally are enforceable is subject to subsections (c) and Section 9-407, which make such provisions unenforceable in certain instances.

2. Under Section 9-407, a provision in a lease agreement which prohibits the creation or enforcement of a security interest, including sales of lease contracts subject to Article 9 (Section 9-109(a)(iii)), or makes it an event of default is generally not enforceable, reflecting the policy of Section 9-406 and former Section 9-318(d).

3. Subsection (c) is based upon Section 2-210(b) and Section 9-406. It makes unenforceable a prohibition against transfers of certain rights to payment or a provision making the transfer an event of default. It also provides that such transfers do not materially impair the prospect of obtaining return performance by, materially change the duty of, or materially increase the burden or risk imposed on, the other party to the lease contract so as to give rise to the rights and remedies stated in subsection (d). Accordingly, a transfer of a right to payment cannot be prohibited or made an event of default, or be one that materially impairs performance, changes duties or increases risk, if the right is already due or will become due without further performance being required by the party to receive payment. Thus, a lessor can transfer the right to future payments under the lease contract, including by way of a grant of a security interest, and the transfer will not give rise to the rights and remedies stated in subsection (d) if the lessor has no remaining performance under the lease contract. The mere fact that the lessor is obligated to allow the lessee to remain in possession and to use the goods as long as the lessee is not in default does not mean that there is remaining performance on the part of the lessor. Likewise, the fact that the lessor has potential liability under a “non-operating” lease contract for breaches of warranty does not mean that there is remaining performance. In contrast, the lessor would have remaining performance under a lease contract requiring the lessor to regularly maintain and service the goods or to provide “upgrades” of the equipment on a periodic basis in order to avoid obsolescence. The basic distinction is between a mere potential duty to respond which is not remaining performance, and an affirmative duty to render stipulated performance. Although the distinction may be difficult to draw in some cases, it is instructive to focus on the difference between “operating” and “non-operating” leases as generally understood in the marketplace. Even if there is remaining performance under a lease contract, a transfer for security of a right to payment that is made an event of default or that is in violation of a prohibition against transfer does not give rise to the rights and remedies under subsection (d) if it does not constitute an actual delegation of a material performance under Section 9-407.

4. The application of either the rule of Section 9-407 or the rule of subsection (c) to the grant by the lessor of a security interest in the lessor's right to future payment under the lease contract may produce the same result. Both provisions generally protect security transfers by the lessor in particular because the creation by the lessor of a security interest or the enforcement of that interest generally will not prejudice the lessee's rights if it does not result in a delegation of the lessor's duties. To the contrary, the receipt of loan proceeds or relief from the enforcement of an antecedent debt normally should enhance the lessor's ability to perform its duties under the lease contract. Nevertheless, there are circumstances where relief might be justified. For example, if ownership of the goods is transferred pursuant to enforcement of a security interest to a party whose ownership would prevent the lessee from continuing to possess the goods, relief might be warranted. See 49 U.S.C. § 1401(a) and (b) which places limitations on the operation of aircraft in the United States based on the citizenship or corporate qualification of the registrant.

5. Relief on the ground of material prejudice when the lease agreement does not prohibit the transfer or make it an event of default should be afforded only in extreme circumstances, considering the fact that the party asserting material prejudice did not insist upon a provision in the lease agreement that would protect against such a transfer.

6. Subsection (d) implements the rule of subsection (b). Subsection (b) provides that, even though a transfer is effective, a provision in the lease agreement prohibiting it or making it an event of default may be enforceable as provided in subsection (d). See Brummond v. First National Bank of Clovis, 656 P.2d 884, 35 U.C.C. Rep. Serv. (Callaghan) 1311 (N. Mex. 1983), stating the analogous rule for Section 9-311. If the transfer prohibited by the lease agreement is made an event of default, then, under subsection (d)(i), unless the default is waived or there is an agreement otherwise, the aggrieved party has the rights and remedies referred to in Section 2A-501(b), viz. those in this Article and, except as limited in the Article, those provided in the lease agreement. In the unlikely circumstance that the lease agreement prohibits the transfer without making a violation of the prohibition an event of default or, even if there is no prohibition against the transfer, and the transfer is one that materially impairs performance, changes duties, or increases risk (for example, a sublease or assignment to a party using the goods improperly or for an illegal purpose), then subsection (d)(ii) is applicable. In that circumstance, unless the party aggrieved by the transfer has otherwise agreed in the lease contract, such as by assenting to a particular transfer or to transfers in general, or agrees in some other manner, the aggrieved party has the right to recover damages from the transferor and a court may, in appropriate circumstances, grant other relief, such as cancellation of the lease contract or an injunction against the transfer.

7. If a transfer gives rise to the rights and remedies provided in subsection (d), the transferee as an alternative may propose, and the other party may accept, adequate cure or compensation for past defaults and adequate assurance of future due performance under the lease contract. Subsection (d) does not preclude any other relief that may be available to a party to the lease contract aggrieved by a transfer subject to an enforceable prohibition, such as an action for interference with contractual relations.

8. Subsection (g) requires that a provision in a consumer lease prohibiting a transfer, or making it an event of default, must be specific, written and conspicuous. See Section 1-201(a)(x). This assists in protecting a consumer lessee against surprise assertions of default.

9. Subsection (e) is taken almost verbatim from the provisions of Section 2-210(e). The subsection states a rule of construction that distinguishes a commercial assignment, which substitutes the assignee for the assignor as to rights and duties, and an assignment for security or financing assignment, which substitutes the assignee for the assignor only as to rights. Note that the assignment for security or financing assignment is a subset of all security interests. Security interest is defined to include “any interest of a buyer of … chattel paper”. Section 1-201(a)(xxxvii). Chattel paper is defined to include a lease. Section 9-102. Thus, a buyer of leases is the holder of a security interest in the leases. That conclusion should not influence this issue, as the policy is quite different. Whether a buyer of leases is the holder of a commercial assignment, or an assignment for security or financing assignment should be determined by the language of the assignment or the circumstances of the assignment.

Cross References:

Sections 1-201(a)(xi), 1-201(a)(xxxvii), 2-210, 2A-401, 9-102(a)(ii), 9-104(f), 9-105(a)(i), 9-206, and 9-318.

Definitional Cross References:

“Agreed” and “Agreement”. Section 1-201(c). “Conspicuous”. Section 1-201(a)(x). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103 (a)(xvi). “Lessor's residual interest”. Section 2A-103(a)(xvii). “Notice”. Section 1-201(a)(xxv) “Party”. Section 1-201(a)(xxix). “Person”. Section 1-201(a)(xxx). “Reasonable time”. Section 1-204(a) and (b). “Rights”. Section 1-201(a)(xxxvi). “Term”. Section 1-201(a)(xlii). “Writing”. Section 1-201(a)(xlvi).

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Editor's notes. —

Laws 2001, ch. 137, § 4, repealed former subsection (c), and ch. 137, § 3, redesignated former subsections (d) and (e) as (c) and (d), but failed to redesignate former subsections (f) through (h). Those latter subsections were redesignated as (e) through (g) at the direction of the legislative service office.

§ 34.1-2.A-304. Subsequent lease of goods by lessor.

1. Subject to section 34.1-2.A-303, a subsequent  lessee from a lessor of goods under an existing lease contract obtains,  to the extent of the leasehold interest transferred, the leasehold  interest in the goods that the lessor had or had power to transfer,  and except as provided in subsection (b) and section 34.1-2.A-527(d),  takes subject to the existing lease contract. A lessor with voidable  title has power to transfer a good leasehold interest to a good faith  subsequent lessee for value, but only to the extent set forth in the  preceding sentence. If goods have been delivered under a transaction  of purchase, the lessor has that power even though:
   1. The lessor’s transferor was deceived as  to the identity of the lessor;
   2. The delivery was in exchange for a check  which is later dishonored;
   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. A subsequent lessee in the ordinary course  of business from a lessor who is a merchant dealing in goods of that  kind to whom the goods were entrusted by the existing lessee of that  lessor before the interest of the subsequent lessee became enforceable  against that lessor obtains, to the extent of the leasehold interest  transferred, all of that lessor’s and the existing lessee’s rights  to the goods, and takes free of the existing lease contract.
3. A subsequent lessee from the lessor of  goods that are subject to an existing lease contract and are covered  by a certificate of title issued under a statute of this state or  of another jurisdiction takes no greater rights than those provided  both by this section and by the certificate of title statute.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-403.

Changes:

While Section 2-403 was used as a model for this section, the provisions of Section 2-403 were significantly revised to reflect leasing practices and to integrate this Article with certificate of title statutes.

Purposes:

1. This section must be read in conjunction with, as it is subject to, the provisions of Section 2A-303, which govern voluntary and involuntary transfers of rights and duties under a lease contract, including the lessor's residual interest in the goods.

2. This section must also be read in conjunction with Section 2-403. This section and Section 2A-305 are derived from Section 2-403, which states a unified policy on good faith purchases of goods. Given the scope of the definition of purchaser (Section 1-201(a)(xxxiii)), a person who bought goods to lease as well as a person who bought goods subject to an existing lease from a lessor will take pursuant to Section 2-403. Further, a person who leases such goods from the person who bought them should also be protected under Section 2-403, first because the lessee's rights are derivative and second because the definition of purchaser should be interpreted to include one who takes by lease; no negative implication should be drawn from the inclusion of lease in the definition of purchase in this Article. Section 2A-103(a)(xxii).

3. There are hypotheticals that relate to an entrustee's unauthorized lease of entrusted goods to a third party that are outside the provisions of Sections 2-403, 2A-304 and 2A-305. Consider a sale of goods by M, a merchant, to B, a buyer. After paying for the goods B allows M to retain possession of the goods as B is short of storage. Before B calls for the goods M leases the goods to L, a lessee. This transaction is not governed by Section 2-403(b) as L is not a buyer in the ordinary course of business. Section 1-201(a)(ix). Further, this transaction is not governed by Section 2A-304(b) as B is not an existing lessee. Finally, this transaction is not governed by Section 2A-305(b) as B is not M's lessor. Section 2A-307(b) resolves the potential dispute between B, M and L. By virtue of B's entrustment of the goods to M and M's lease of the goods to L, B has a cause of action against M under the common law. Sections 2A-103(d) and 1-103. See, e.g., Restatement (Second) of Torts §§ 222A-243. Thus, B is a creditor of M. Sections 2A-103(d) and 1-201(a)(xii). Section 2A-307(b) provides that B, as M's creditor, takes subject to M's lease to L. Thus, if L does not default under the lease, L's enjoyment and possession of the goods should be undisturbed. However, B is not without recourse. B's action should result in a judgment against M providing, among other things, a turnover of all proceeds arising from M's lease to L, as well as a transfer of all of M's right, title and interest as lessor under M's lease to L, including M's residual interest in the goods. Section 2A-103(a)(xvii).

4. Subsection (a) states a rule with respect to the leasehold interest obtained by a subsequent lessee from a lessor of goods under an existing lease contract. The interest will include such leasehold interest as the lessor has in the goods as well as the leasehold interest that the lessor had the power to transfer. Thus, the subsequent lessee obtains unimpaired all rights acquired under the law of agency, apparent agency, ownership or other estoppel, whether based upon statutory provisions or upon case law principles. Sections 2A-103(d) and 1-103. In general, the subsequent lessee takes subject to the existing lease contract, including the existing lessee's rights thereunder. Furthermore, the subsequent lease contract is, of course, limited by its own terms, and the subsequent lessee takes only to the extent of the leasehold interest transferred thereunder.

5. Subsection (a) further provides that a lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value. In addition, subsections (a)(i) through (iv) provide specifically for the protection of the good faith subsequent lessee for value in a number of specific situations which have been troublesome under prior law.

6. The position of an existing lessee who entrusts leased goods to its lessor is not distinguishable from the position of other entrusters. Thus, subsection (b) provides that the subsequent lessee in the ordinary course of business takes free of the existing lease contract between the lessor entrustee and the lessee entruster, if the lessor is a merchant dealing in goods of that kind. Further, the subsequent lessee obtains all of the lessor entrustee's and the lessee entruster's rights to the goods, but only to the extent of the leasehold interest transferred by the lessor entrustee. Thus, the lessor entrustee retains the residual interest in the goods. Section 2A-103(a)(xvii). However, entrustment by the existing lessee must have occurred before the interest of the subsequent lessee became enforceable against the lessor. Entrusting is defined in Section 2-403(c) and that definition applies here. Section 2A-103(c).

7. Subsection (c) states a rule with respect to a transfer of goods from a lessor to a subsequent lessee where the goods are subject to an existing lease and covered by a certificate of title. The subsequent lessee's rights are no greater than those provided by this section and the applicable certificate of title statute, including any applicable case law construing such statute. Where the relationship between the certificate of title statute and Section 2-403, the statutory analogue to this section, has been construed by a court, that construction is incorporated here. Sections 2A-103(d) and 1-102(a) and (b). The better rule is that the certificate of title statutes are in harmony with Section 2-403 and thus would be in harmony with this section. E.g., Atwood Chevrolet-Olds v. Aberdeen Mun. School Dist., 431 So.2d 926, 928, (Miss.1983); Godfrey v. Gilsdorf, 476 P.2d 3, 6, 86 Nev. 714, 718 (1970); Martin v. Nager, 192 N.J.Super. 189, 197-98, 469 A.2d 519, 523 (Super. Ct. Ch. Div. 1983). Where the certificate of title statute is silent on this issue of transfer, this section will control.

Cross References:

Sections 1-102, 1-103, 1-201(a)(xxxiii), 2-403, 2A-103(a)(xxii), 2A-103(c), 2A-103(d), 2A-303 and 2A-305.

Definitional Cross References:

“Agreed”. Section 1-201(c). “Delivery”. Section 1-201(a)(xiv). “Entrusting”. Section 2-403(c). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Leasehold interest”. Section 2A-103(a)(xiii). “Lessee”. Section 2A-103(a)(xiv). “Lessee in the ordinary course of business”. Section 2A-103(a)(xv). “Lessor”. Section 2A-103(a)(xvi). “Merchant”. Section 2-104(a). “Purchase”. Section 2A-103(a)(xxii). “Rights”. Section 1-201(a)(xxxvi). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-305. Sale or sublease of goods by lessee.

1. Subject to the provisions of section 34.1-2.A-303,  a buyer or sublessee from the lessee of goods under an existing lease  contract obtains, to the extent of the interest transferred, the leasehold  interest in the goods that the lessee had or had power to transfer,  and except as provided in subsection (b) and section 34.1-2.A-511(d),  takes subject to the existing lease contract. A lessee with a voidable  leasehold interest has power to transfer a good leasehold interest  to a good faith buyer for value or a good faith sublessee for value,  but only to the extent set forth in the preceding sentence. When goods  have been delivered under a transaction of lease the lessee has that  power even though:
   1. The lessor was deceived as to the identity  of the lessee;
   2. The delivery was in exchange for a check  which is later dishonored; or
   3. The delivery was procured through fraud  punishable as larcenous under the criminal law.
2. A buyer in the ordinary course of business  or a sublessee in the ordinary course of business from a lessee who  is a merchant dealing in goods of that kind to whom the goods were  entrusted by the lessor obtains, to the extent of the interest transferred,  all of the lessor’s and lessee’s rights to the goods, and takes free  of the existing lease contract.
3. A buyer or sublessee from the lessee of  goods that are subject to an existing lease contract and are covered  by a certificate of title issued under a statute of this state or  of another jurisdiction takes no greater rights than those provided  both by this section and by the certificate of title statute.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-403.

Changes:

While Section 2-403 was used as a model for this section, the provisions of Section 2-403 were significantly revised to reflect leasing practice and to integrate this Article with certificate of title statutes.

Purposes:

This section, a companion to Section 2A-304, states the rule with respect to the leasehold interest obtained by a buyer or sublessee from a lessee of goods under an existing lease contract. Cf. Section 2A-304 official comment. Note that this provision is consistent with existing case law, which prohibits the bailee's transfer of title to a good faith purchaser for value under Section 2-403(a). Rohweder v. Aberdeen Product. Credit Ass'n, 765 F.2d 109 (8th Cir.1985).

Subsection (b) is also consistent with existing case law. American Standard Credit, Inc. v. National Cement Co., 643 F.2d 248, 269-70 (5th Cir.1981); but cf. Exxon Co., U.S.A. v. TLW Computer Indus., 37 U.C.C. Rep. Serv. (Callaghan) 1052, 1057-58 (D.Mass.1983). Unlike Section 2A-304(b), this subsection does not contain any requirement with respect to the time that the goods were entrusted to the merchant. In Section 2A-304(b) the competition is between two customers of the merchant lessor; the time of entrusting was added as a criterion to create additional protection to the customer who was first in time: the existing lessee. In subsection (b) the equities between the competing interests were viewed as balanced.

There appears to be some overlap between Section 2-403(b) and Section 2A-305(b) with respect to a buyer in the ordinary course of business. However, an examination of this Article's definition of buyer in the ordinary course of business (Section 2A-103(a)(i)) makes clear that this reference was necessary to treat entrusting in the context of a lease.

Subsection (c) states a rule of construction with respect to a transfer of goods from a lessee to a buyer or sublessee, where the goods are subject to an existing lease and covered by a certificate of title. Cf. Section 2A-304 official comment.

Cross References:

Sections 2-403, 2A-103(1)(a), 2A-304 and 2A-305(2).

Definitional Cross References:

“Buyer”. Section 2-103(a)(i). “Buyer in the ordinary course of business”. Section 2A-103(a)(i). “Delivery”. Section 1-201(a)(xiv). “Entrusting”. Section 2-403(c). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Leasehold interest”. Section 2A-103(a)(xiii). “Lessee”. Section 2A-103(a)(xiv). “Lessee in the ordinary course of business”. Section 2A-103(a)(xv). “Lessor”. Section 2A-103(a)(xvi). “Merchant”. Section 2-104(a). “Rights”. Section 1-201(a)(xxxvi). “Sale”. Section 2-106(a). “Sublease”. Section 2A-103(a)(xxiii). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-306. Priority of certain liens arising by operation of law.

If a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this article unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-310.

Changes:

The approach reflected in the provisions of Section 9-310 was included, but revised to conform to leasing terminology and to expand the exception to the special priority granted to protected liens to cover liens created by rule of law as well as those created by statute.

Purposes:

This section should be interpreted to allow a qualified lessor or a qualified lessee to be the competing lienholder if the statute or rule of law so provides. The reference to statute includes applicable regulations and cases; these sources must be reviewed in resolving a priority dispute under this section.

Cross Reference:

Section 9-310.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Lien”. Section 2A-103(a)(xviii). “Person”. Section 1-201(a)(xxx).

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§ 34.1-2.A-307. Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.

1. Except as otherwise provided in section  34.1-2.A-306, a creditor of a lessee takes subject to the lease contract.
2. Except as otherwise provided in subsection  (e) and in sections 34.1-2.A-306 and 34.1-2.A-308, a creditor of a  lessor takes subject to the lease contract unless:
   1. The creditor holds a lien that attached  to the goods before the lease contract became enforceable;
   2. and (iii) Repealed by Laws 2001, ch. 137, § 4.
3. and (d) Repealed by Laws 2001, ch. 137, § 4.
4. Except as otherwise provided in sections 34.1-9-717, 34.1-9-321 and 34.1-9-323, a lessee takes a leasehold interest subject to a security  interest held by a creditor of the lessor.

History. Laws 1991, ch. 14, § 1; 2001, ch. 137, §§ 3, 4; 2004, ch. 130, § 1.

Official Comment

Uniform Statutory Source:

None for subsection (a). Subsection (b) is derived from Section 9-301, and subsections (c) and (d) are derived from Section 9-307(a) and (c), respectively.

Changes:

The provisions of Sections 9-301 and 9-307(a) and (c) were incorporated, and modified to reflect leasing terminology and the basic concepts reflected in this Article.

Purposes:

1. Subsection (a) states a general rule of priority that a creditor of the lessee takes subject to the lease contract. The term lessee (Section 2A-103(a)(xiv)) includes sublessee. Therefore, this subsection not only covers disputes between the prime lessor and a creditor of the prime lessee but also disputes between the prime lessor, or the sublessor, and a creditor of the sublessee. Section 2A-301 official comment 3(g). Further, by using the term creditor (Section 1-201(a)(xii)), this subsection will cover disputes with a general creditor, a secured creditor, a lien creditor and any representative of creditors. Section 2A-103(d).

2. Subsection (b) states a general rule of priority that a creditor of a lessor takes subject to the lease contract. Note the discussion above with regard to the scope of these rules. Section 2A-301 official comment 3(g). Thus, the section will not only cover disputes between the prime lessee and a creditor of the prime lessor but also disputes between the prime lessee, or the sublessee, and a creditor of the sublessor.

3. To take priority over the lease contract, and the interests derived therefrom, the creditor must come within the exception stated in subsection (b) or within one of the provisions of Article 9 mentioned in subsection (c). Subsection (b) provides that where the creditor holds a lien (Section 2A-103(a)(xviii)) that attached before the lease contract became enforceable (Section 2A-301), the creditor does not take subject to the lease. Subsection (c) provides that a lessee takes its leasehold interest subject to a security interest except as otherwise provided in Sections 9-317, 9-321, or 9-323.

4. The rules of this section operate in favor of whichever party to the lease contract may enforce it, even if one party perhaps may not, e.g., under Section 2A-201(a)(ii).

Cross References:

Sections 1-201(a)(xii), 1-201(a)(xxv), 1-201(a)(xxxvii), 1-201(a)(xliv), 2A-103(a)(xiv), 2A-103(a)(xv), 2A-103(a)(xviii), 2A-103(d), 2A-201(a)(ii), 2A-301 official comment 3(g), Article 9, especially Sections 9-301, 9-307(a) and 9-307(c).

Definitional Cross References:

“Creditor”. Section 1-201(a)(xii). “Goods”. Section 2A-103(a)(viii). “Knowledge” and “Knows”. Section 1-201(a)(xxv). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Leasehold interest”. Section 2A-103(a)(xiii). “Lessee”. Section 2A-103(a)(xiv). “Lessee in the ordinary course of business”. Section 2A-103(a)(xv). “Lessor”. Section 2A-103(a)(xvi). “Lien”. Section 2A-103(a)(xviii). “Party”. Section 1-201(a)(xxix). “Pursuant to commitment”. Section 2A-103(c). “Security interest”. Section 1-201(a)(xxxvii).

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The 2004 amendment, in (b), substituted “subsection (e)” for “subsection (d).”

Laws 2004, ch. 130, § 4, makes the act effective immediately upon completion of all acts necessary for a bill to become law as provided by art. 4, § 8, Wyo. Const. Approved March 19, 2004.

Conflicting legislation. —

Laws 2004, ch. 130, § 3, provides: “Any other act adopted by the Wyoming legislature during the same session in which this act is adopted shall be given precedence and shall prevail over the amendments in this act to the extent that such acts are in conflict with this act.”

§ 34.1-2.A-308. Special rights of creditors.

1. A creditor of a lessor in possession of  goods subject to a lease contract may treat the lease contract as  void if as against the creditor retention of possession by the lessor  is fraudulent under any statute or rule of law, but retention of possession  in good faith and current course of trade by the lessor for a commercially  reasonable time after the lease contract becomes enforceable is not  fraudulent.
2. Nothing in this article impairs the rights  of creditors of a lessor if the lease contract (1) becomes enforceable,  not in current course of trade but in satisfaction of or as security  for a pre-existing claim for money, security, or the like, and (2)  is made under circumstances which under any statute or rule of law  apart from this article would constitute the transaction a fraudulent  transfer or voidable preference.
3. A creditor of a seller may treat a sale  or an identification of goods to a contract for sale as void if as  against the creditor retention of possession by the seller is fraudulent  under any statute or rule of law, but retention of possession of the  goods pursuant to a lease contract entered into by the seller as lessee  and the buyer as lessor in connection with the sale or identification  of the goods is not fraudulent if the buyer bought for value and in  good faith.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-402(b) and (c)(ii).

Changes:

Rephrased and new material added to conform to leasing terminology and practice.

Purposes:

Subsection (a) states a general rule of avoidance where the lessor has retained possession of goods if such retention is fraudulent under any statute or rule of law. However, the subsection creates an exception under certain circumstances for retention of possession of goods for a commercially reasonable time after the lease contract becomes enforceable.

Subsection (b) also preserves the possibility of an attack on the lease by creditors of the lessor if the lease was made in satisfaction of or as security for a pre-existing claim, and would constitute a fraudulent transfer or voidable preference under other law.

Finally, subsection (c) states a new rule with respect to sale-leaseback transactions, i.e., transactions where the seller sells goods to a buyer but possession of the goods is retained by the seller pursuant to a lease contract between the buyer as lessor and the seller as lessee. Notwithstanding any statute or rule of law that would treat such retention as fraud, whether per se, prima facie, or otherwise, the retention is not fraudulent if the buyer bought for value (Section 1-201(a)(xliv)) and in good faith (Sections 1-201(a)(xix)) and 2-103(a)(ii)). Section 2A-103(c) and (d). This provision overrides Section 2-402(b) to the extent it would otherwise apply to a sale-leaseback transaction.

Cross References:

Sections 1-201(a)(xix), 1-201(a)(xliv), 2-402(b) and 2A-103(d).

Definitional Cross References:

“Buyer”. Section 2-103(a)(i). “Contract”. Section 1-201(a)(xi). “Creditor”. Section 1-201(a)(xii). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Money”. Section 1-201(a)(xxiv). “Reasonable time”. Section 1-204(a) and (b). “Rights”. Section 1-201(a)(xxxvi). “Sale”. Section 2-106(a). “Seller”. Section 2-103(a)(iv). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-309. Lessor's and lessee's rights when goods become fixtures.

1. In this section:
   1. Goods are “fixtures” when they become  so related to particular real estate that an interest in them arises  under real estate law;
   2. A “fixture filing” is the filing, in the  office where a record of a mortgage on the real estate would be filed  or recorded, of a financing statement covering goods that are or are  to become fixtures and conforming to the requirements of section 34.1-9-502(a) and (b);
   3. A lease is a “purchase money lease” unless  the lessee has possession or use of the goods or the right to possession  or use of the goods before the lease agreement is enforceable;
   4. A mortgage is a “construction mortgage”  to the extent it secures an obligation incurred for the construction  of an improvement on land including the acquisition cost of the land,  if the recorded writing so indicates; and
   5. “Encumbrance” includes real estate mortgages  and other liens on real estate and all other rights in real estate  that are not ownership interests.
2. Under this article a lease may be of goods  that are fixtures or may continue in goods that become fixtures, but  no lease exists under this article of ordinary building materials  incorporated into an improvement on land.
3. This article does not prevent creation  of a lease of fixtures pursuant to real estate law.
4. The perfected interest of a lessor of  fixtures has priority over a conflicting interest of an encumbrancer  or owner of the real estate if:
   1. The lease is a purchase money lease, the  conflicting interest of the encumbrancer or owner arises before the  goods become fixtures, the interest of the lessor is perfected by  a fixture filing before the goods become fixtures or within ten (10)  days thereafter, and the lessee has an interest of record in the real  estate or is in possession of the real estate; or
   2. The interest of the lessor is perfected  by a fixture filing before the interest of the encumbrancer or owner  is of record, the lessor’s interest has priority over any conflicting  interest of a predecessor in title of the encumbrancer or owner, and  the lessee has an interest of record in the real estate or is in possession  of the real estate.
5. The interest of a lessor of fixtures,  whether or not perfected, has priority over the conflicting interest  of an encumbrancer or owner of the real estate if:
   1. The fixtures are readily removable factory  or office machines, readily removable equipment that is not primarily  used or leased for use in the operation of the real estate, or readily  removable replacements of domestic appliances that are goods subject  to a consumer lease, and before the goods become fixtures the lease  contract is enforceable;
   2. The conflicting interest is a lien on  the real estate obtained by legal or equitable proceedings after the  lease contract is enforceable;
   3. The encumbrancer or owner has consented  in writing to the lease or has disclaimed an interest in the goods  as fixtures; or
   4. The lessee has a right to remove the goods  as against the encumbrancer or owner. If the lessee’s right to remove  terminates, the priority of the interest of the lessor continues for  a reasonable time.
6. Notwithstanding paragraph (d)(i) but otherwise  subject to subsections (d) and (e), the interest of a lessor of fixtures,  including the lessor’s residual interest, is subordinate to the conflicting  interest of an encumbrancer of the real estate under a construction  mortgage recorded before the goods become fixtures if the goods become  fixtures before the completion of the construction. To the extent  given to refinance a construction mortgage, the conflicting interest  of an encumbrancer of the real estate under a mortgage has this priority  to the same extent as the encumbrancer of the real estate under the  construction mortgage.
7. In cases not within the preceding subsections,  priority between the interest of a lessor of fixtures, including the  lessor’s residual interest, and the conflicting interest of an encumbrancer  or owner of the real estate who is not the lessee is determined by  the priority rules governing conflicting interests in real estate.
8. If the interest of a lessor of fixtures,  including the lessor’s residual interest, has priority over all conflicting  interests of all owners and encumbrancers of the real estate, the  lessor or the lessee may (1) on default, expiration, termination,  or cancellation of the lease agreement but subject to the lease agreement  and this article, or (2) if necessary to enforce other rights and  remedies of the lessor or lessee under this article, remove the goods  from the real estate, free and clear of all conflicting interests  of all owners and encumbrancers of the real estate, but the lessor  or lessee must reimburse any encumbrancer or owner of the real estate  who is not the lessee and who has not otherwise agreed for the cost  of repair of any physical injury, but not for any diminution in value  of the real estate caused by the absence of the goods removed or by  any necessity of replacing them. A person entitled to reimbursement  may refuse permission to remove until the party seeking removal gives  adequate security for the performance of this obligation.
9. Even though the lease agreement does not  create a security interest, the interest of a lessor of fixtures,  including the lessor’s residual interest, is perfected by filing a  financing statement as a fixture filing for leased goods that are  or are to become fixtures in accordance with the relevant provisions  of the article on secured transactions (article 9).

History. Laws 1991, ch. 14, § 1; 2001, ch. 137, § 3.

Official Comment

Uniform Statutory Source:

Section 9-313.

Changes:

Revised to reflect leasing terminology and to add new material.

Purposes:

1. While Section 9-313 provided a model for this section, certain provisions were substantially revised.

2. Section 2A-309(a)(iii), which is new, defines purchase money lease to exclude leases where the lessee had possession or use of the goods or the right thereof before the lease agreement became enforceable. This term is used in subsection (d)(i) as one of the conditions that must be satisfied to obtain priority over the conflicting interest of an encumbrancer or owner of the real estate.

3. Section 2A-309(d), which states one of several priority rules found in this section, deletes reference to office machines and the like (Section 9-313(d)(iii)) as well as certain liens (Section 9-313(d)(iv)). However, these items are included in subsection (e), another priority rule that is more permissive than the rule found in subsection (d) as it applies whether or not the interest of the lessor is perfected. In addition, subsection (e)(i) expands the scope of the provisions of Section 9-313(d)(iii) to include readily removable equipment not primarily used or leased for use in the operation of real estate; the qualifier is intended to exclude from the expanded rule equipment integral to the operation of real estate, e.g., heating and air conditioning equipment.

4. The rule stated in subsection (g) is more liberal than the rule stated in Section 9-313(g) in that issues of priority not otherwise resolved in this subsection are left for resolution by the priority rules governing conflicting interests in real estate, as opposed to the Section 9-313(g) automatic subordination of the security interest in fixtures. Note that, for the purpose of this section, where the interest of an encumbrancer or owner of the real estate is paramount to the intent of the lessor, the latter term includes the residual interest of the lessor.

5. The rule stated in subsection (h) is more liberal than the rule stated in Section 9-313(h) in that the right of removal is extended to both the lessor and the lessee and the occasion for removal includes expiration, termination or cancellation of the lease agreement, and enforcement of rights and remedies under this Article, as well as default. The new language also provides that upon removal the goods are free and clear of conflicting interests of owners and encumbrancers of the real estate.

6. Finally, subsection (i) provides a mechanism for the lessor of fixtures to perfect its interest by filing a financing statement under the provisions of the Article on Secured Transactions (Article 9), even though the lease agreement does not create a security interest. Section 1-201(a)(xxxvii). The relevant provisions of Article 9 must be interpreted permissively to give effect to this mechanism as it implicitly expands the scope of Article 9 so that its filing provisions apply to transactions that create a lease of fixtures, even though the lease agreement does not create a security interest. This mechanism is similar to that provided in Section 2-326(c)(iii) for the seller of goods on consignment, even though the consignment is not “intended as security”. Section 1-201(a)(xxxvii). Given the lack of litigation with respect to the mechanism created for consignment sales, this new mechanism should prove effective.

Cross References:

Sections 1-201(a)(xxxvii), 2A-309(a)(iii), 2A-309(d), Article 9, especially Sections 9-313, 9-313(d)(iii), 9-313(d)(iv), 9-313(g), 9-313(h) and 9-408.

Definitional Cross References:

“Agreed”. Section 1-201(a)(iii). “Cancellation”. Section 2A-103(a)(ii). “Conforming”. Section 2A-103(a)(iv). “Consumer lease”. Section 2A-103(a)(v). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Lien”. Section 2A-103(a)(xviii). “Mortgage”. Section 9-105(a)(x). “Party”. Section 1-201(a)(xxix). “Person”. Section 1-201(a)(xxx). “Reasonable time”. Section 1-204(a) and (b). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Security interest”. Section 1-201(a)(xxxvii). “Termination”. Section 2A-103(a)(xxvi). “Value”. Section 1-201(a)(xliv). “Writing”. Section 1-201(a)(xlvi).

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Editor's notes. —

There is no subsection (i) in this section as it appears in the printed acts.

References in these Comments to sections in Article 9 are presumably to sections in former Article 9. See principally § 9-334.

§ 34.1-2.A-310. Lessor's and lessee's rights when goods become accessions.

1. Goods are “accessions” when they are installed  in or affixed to other goods.
2. The interest of a lessor or a lessee under  a lease contract entered into before the goods became accessions is  superior to all interests in the whole except as stated in subsection  (d).
3. The interest of a lessor or a lessee under  a lease contract entered into at the time or after the goods became  accessions is superior to all subsequently acquired interests in the  whole except as stated in subsection (d) but is subordinate to interests  in the whole existing at the time the lease contract was made unless  the holders of such interests in the whole have in writing consented  to the lease or disclaimed an interest in the goods as part of the  whole.
4. The interest of a lessor or a lessee under  a lease contract described in subsection (b) or (c) is subordinate  to the interest of:
   1. A buyer in the ordinary course of business  or a lessee in the ordinary course of business of any interest in  the whole acquired after the goods became accessions; or
   2. A creditor with a security interest in  the whole perfected before the lease contract was made to the extent  that the creditor makes subsequent advances without knowledge of the  lease contract.
5. When under subsections (b) or (c) and  (d) a lessor or a lessee of accessions holds an interest that is superior  to all interests in the whole, the lessor or the lessee may (1) on  default, expiration, termination, or cancellation of the lease contract  by the other party but subject to the provisions of the lease contract  and this article, or (2) if necessary to enforce his other rights  and remedies under this article, remove the goods from the whole,  free and clear of all interests in the whole, but he must reimburse  any holder of an interest in the whole who is not the lessee and who  has not otherwise agreed for the cost of repair of any physical injury  but not for any diminution in value of the whole caused by the absence  of the goods removed or by any necessity for replacing them. A person  entitled to reimbursement may refuse permission to remove until the  party seeking removal gives adequate security for the performance  of this obligation.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-314.

Changes:

Revised to reflect leasing terminology and to add new material.

Purposes:

Subsections (a) and (b) restate the provisions of subsection (a) of Section 9-314 to clarify the definition of accession and to add leasing terminology to the priority rule that applies when the lease is entered into before the goods become accessions. Subsection (c) restates the provisions of subsection (b) of Section 9-314 to add leasing terminology to the priority rule that applies when the lease is entered into on or after the goods become accessions. Unlike the rule with respect to security interests, the lease is merely subordinate, not invalid.

Subsection (d) creates two exceptions to the priority rules stated in subsections (b) and (c). Subsection (d) deletes the special priority rule found in the provisions of Section 9-314(c)(ii) as the interests of the lessor and lessee are entitled to greater protection.

Finally, subsection (e) is modeled on the provisions of Section 9-314(d) with respect to removal of accessions, restated to reflect the parallel changes in Section 2A-309(g).

Neither this section nor Section 9-314 governs where the accession to the goods is not subject to the interest of a lessor or a lessee under a lease contract and is not subject to the interest of a secured party under a security agreement. This issue is to be resolved by the courts, case by case.

Cross References:

Sections 2A-309(g), 9-314(a), 9-314(b), 9-314(c)(ii), 9-314(d).

Definitional Cross References:

“Agreed”. Section 1-201(c). “Buyer in the ordinary course of business”. Section 2A-103(a)(i). “Cancellation”. Section 2A-103(a)(ii). “Creditor”. Section 1-201(a)(xii). “Goods”. Section 2A-103(a)(viii). “Holder”. Section 1-201(a)(xx). “Knowledge”. Section 1-201(a)(xxv). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessee in the ordinary course of business”. Section 2A-103(a)(xv). “Lessor”. Section 2A-103(a)(xvi). “Party”. Section 1-201(a)(xxix). “Person”. Section 1-201(a)(xxx). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Security interest”. Section 1-201(a)(xxxvii). “Termination”. Section 2A-103(a)(xxvi). “Value”. Section 1-201(a)(xliv). “Writing”. Section 1-201(a)(xlvi).

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Editor's notes. —

References in these Comments to sections in Article 9 are presumably to sections in former Article 9. See principally § 9-335.

§ 34.1-2.A-311. Priority subject to subordination.

Nothing in this article prevents subordination by agreement by any person entitled to priority.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 9-316.

Purposes:

The several preceding sections deal with questions of priority. This section is inserted to make it entirely clear that a person entitled to priority may effectively agree to subordinate the claim. Only the person entitled to priority may make such an agreement: the rights of such a person cannot be adversely affected by an agreement to which that person is not a party.

Cross References:

Sections 1-102 and 2A-304 through 2A-310.

Definitional Cross References:

“Agreement”. Section 1-201(3). “Person”. Section 1-201(30).

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§ 34.1-2.A-401. Insecurity: adequate assurance of performance.

1. A lease contract imposes an obligation  on each party that the other’s expectation of receiving due performance  will not be impaired.
2. If reasonable grounds for insecurity arise  with respect to the performance of either party, the insecure party  may demand in writing adequate assurance of due performance. Until  the insecure party receives that assurance, if commercially reasonable  the insecure party may suspend any performance for which he has not  already received the agreed return.
3. A repudiation of the lease contract occurs  if assurance of due performance adequate under the circumstances of  the particular case is not provided to the insecure party within a  reasonable time, not to exceed thirty (30) days after receipt of a  demand by the other party.
4. Between merchants, the reasonableness  of grounds for insecurity and the adequacy of any assurance offered  must be determined according to commercial standards.
5. Acceptance of any nonconforming delivery  or payment does not prejudice the aggrieved party’s right to demand  adequate assurance of future performance.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-609.

Changes:

Revised to reflect leasing practices and terminology. Note that in the analogue to subsection (3) (Section 2-609(4)), the adjective “justified” modifies demand. The adjective was deleted here as unnecessary, implying no substantive change.

Definitional Cross References:

“Aggrieved party”. Section 1-201(a)(ii). “Agreed”. Section 1-201(a)(iii). “Between merchants”. Section 2-104(c). “Conforming”. Section 2A-103(a)(iv). “Delivery”. Section 1-201(a)(xiv). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Reasonable time”. Section 1-204(a) and (b). “Receipt”. Section 2-103(a)(iii). “Rights”. Section 1-201(a)(xxxvi). “Writing”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-402. Anticipatory repudiation.

1. If either party repudiates a lease contract  with respect to a performance not yet due under the lease contract,  the loss of which performance will substantially impair the value  of the lease contract to the other, the aggrieved party may:
   1. For a commercially reasonable time, await  retraction of repudiation and performance by the repudiating party;
   2. Make demand pursuant to section 34.1-2.A-401  and await assurance of future performance adequate under the circumstances  of the particular case; or
   3. Resort to any right or remedy upon default  under the lease contract or this article, even though the aggrieved  party has notified the repudiating party that the aggrieved party  would await the repudiating party’s performance and assurance and  has urged retraction. In addition, whether or not the aggrieved party  is pursuing one of the foregoing remedies, the aggrieved party may  suspend performance or, if the aggrieved party is the lessor, proceed  in accordance with the provisions of this article on the lessor’s  right to identify goods to the lease contract notwithstanding default  or to salvage unfinished goods (section 34.1-2.A-524).

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-610.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Aggrieved party”. Section 1-201(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessor”. Section 2A-103(a)(xvi). “Notifies”. Section 1-201(a)(xxvi). “Party”. Section 1-201(a)(xxix). “Reasonable time”. Section 1-204(a) and (b). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Value”. Section 1-201(a)(xliv).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-403. Retraction of anticipatory repudiation.

1. Until the repudiating party’s next performance  is due, the repudiating party can retract the repudiation unless,  since the repudiation, the aggrieved party has cancelled the lease  contract or materially changed the aggrieved party’s position or otherwise  indicated that the aggrieved party considers the repudiation final.
2. Retraction may be by any method that clearly  indicates to the aggrieved party that the repudiating party intends  to perform under the lease contract and includes any assurance demanded  under section 34.1-2.A-401.
3. Retraction reinstates a repudiating party’s  rights under a lease contract with due excuse and allowance to the  aggrieved party for any delay occasioned by the repudiation.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-611.

Changes:

Revised to reflect leasing practices and terminology. Note that in the analogue to subsection (b) (Section 2-611(b)) the adjective “justifiably” modifies demanded. The adjective was deleted here (as it was in Section 2A-401) as unnecessary, implying no substantive change.

Definitional Cross References:

“Aggrieved party”. Section 1-201(a)(ii). “Cancellation”. Section 2A-103(a)(ii). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Rights”. Section 1-201(a)(xxxvi).

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§ 34.1-2.A-404. Substituted performance.

1. If without fault of the lessee, the lessor  and the supplier, the agreed berthing, loading, or unloading facilities  fail or the agreed type of carrier becomes unavailable or the agreed  manner of delivery otherwise becomes commercially impracticable, but  a commercially reasonable substitute is available, the substitute  performance must be tendered and accepted.
2. If the agreed means or manner of payment  fails because of domestic or foreign governmental regulation:
   1. The lessor may withhold or stop delivery  or cause the supplier to withhold or stop delivery unless the lessee  provides a means or manner of payment that is commercially a substantial  equivalent; and
   2. If delivery has already been taken, payment  by the means or in the manner provided by the regulation discharges  the lessee’s obligation unless the regulation is discriminatory, oppressive,  or predatory.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-614.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Agreed”. Section 1-201(a)(iii). “Delivery”. Section 1-201(a)(xiv). “Fault”. Section 2A-103(a)(vi). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Supplier”. Section 2A-103(a)(xxiv).

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§ 34.1-2.A-405. Excused performance.

1. Subject to section 34.1-2.A-404 on substituted  performance, the following rules apply:
   1. Delay in delivery or nondelivery in whole  or in part by a lessor or a supplier who complies with paragraphs  (ii) and (iii) is not a default under the lease contract 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 lease  contract was made or by compliance in good faith with any applicable  foreign or domestic governmental regulation or order, whether or not  the regulation or order later proves to be invalid;
   2. If the causes mentioned in paragraph (i)  affect only part of the lessor’s or the supplier’s capacity to perform,  he shall allocate production and deliveries among his customers but  at his option may include regular customers not then under contract  for sale or lease as well as his own requirements for further manufacture.  He may so allocate in any manner that is fair and reasonable;
   3. The lessor seasonably shall notify the  lessee and in the case of a finance lease the supplier seasonably  shall notify the lessor and the lessee, if known, that there will  be delay or nondelivery and, if allocation is required under paragraph  (ii), of the estimated quota thus made available for the lessee.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-615.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Agreed”. Section 1-201(a)(iii). “Contract”. Section 1-201(a)(xi). “Delivery”. Section 1-201(a)(xiv). “Finance lease”. Section 2A-103(a)(vii). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Knows”. Section 1-201(a)(xxv). “Lease”. Section 2A-103(a)(x). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notifies”. Section 1-201(a)(xxvi). “Sale”. Section 2-106(a). “Seasonably”. Section 1-204(c). “Supplier”. Section 2A-103(a)(xxiv).

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Editor's notes. —

There is no subsection (b) in this section as it appears in the printed acts.

§ 34.1-2.A-406. Procedure on excused performance.

1. If the lessee receives notification of  a material or indefinite delay or an allocation justified under section  34.1-2.A-405, the lessee may by written notification to the lessor  as to any goods involved, and with respect to all of the goods if  under an installment lease contract the value of the whole lease contract  is substantially impaired (section 34.1-2.A-510):
   1. Terminate the lease contract (section  34.1-2.A-505(b)); or
   2. Except in a finance lease that is not  a consumer lease, modify the lease contract by accepting the available  quota in substitution, with due allowance from the rent payable for  the balance of the lease term for the deficiency but without further  right against the lessor.
2. If, after receipt of a notification from  the lessor under section 34.1-2.A-405, the lessee fails so to modify  the lease agreement within a reasonable time not exceeding thirty  (30) days, the lease contract lapses with respect to any deliveries  affected.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-616(a) and (b).

Changes:

Revised to reflect leasing practices and terminology. Note that subsection (a)(i) allows the lessee under a lease, including a finance lease, the right to terminate the lease for excused performance (Sections 2A-404 and 2A-405). However, subsection (a)(ii), which allows the lessee the right to modify the lease for excused performance, excludes a finance lease that is not a consumer lease. This exclusion is compelled by the same policy that led to codification of provisions with respect to irrevocable promises. Section 2A-407.

Definitional Cross References:

“Consumer lease”. Section 2A-103(a)(v). “Delivery”. Section 1-201(a)(xiv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Installment lease contract”. Section 2A-103(a)(ix). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notice”. Section 1-201(a)(xxv). “Reasonable time”. Section 1-204(a) and (b). “Receipt”. Section 2-103(a)(iii). “Rights”. Section 1-201(a)(xxxvi). “Termination”. Section 2A-103(a)(xxvi). “Value”. Section 1-201(a)(xliv). “Written”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-407. Irrevocable promises: finance leases.

1. In the case of a finance lease that is  not a consumer lease the lessee’s promises under the lease contract  become irrevocable and independent upon the lessee’s acceptance of  the goods.
2. A promise that has become irrevocable  and independent under subsection (a):
   1. Is effective and enforceable between the  parties, and by or against third parties including assignees of the  parties; and
   2. Is not subject to cancellation, termination,  modification, repudiation, excuse, or substitution without the consent  of the party to whom the promise runs.
3. This section does not affect the validity  under any other law of a covenant in any lease contract making the  lessee’s promises irrevocable and independent upon the lessee’s acceptance  of the goods.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

None.

Purposes:

1. This section extends the benefits of the classic “hell or high water” clause to a finance lease that is not a consumer lease. This section is self-executing; no special provision need be added to the contract. This section makes covenants in a finance lease irrevocable and independent due to the function of the finance lessor in a three party relationship: the lessee is looking to the supplier to perform the essential covenants and warranties. Section 2A-209. Thus, upon the lessee's acceptance of the goods the lessee's promises to the lessor under the lease contract become irrevocable and independent. The provisions of this section remain subject to the obligation of good faith (Sections 2A-103(d) and 1-203), and the lessee's revocation of acceptance (Section 2A-517).

2. The section requires the lessee to perform even if the lessor's performance after the lessee's acceptance is not in accordance with the lease contract; the lessee may, however, have and pursue a cause of action against the lessor, e.g., breach of certain limited warranties (Sections 2A-210 and 2A-211(a)). This is appropriate because the benefit of the supplier's promises and warranties to the lessor under the supply contract and, in some cases, the warranty of a manufacturer who is not the supplier, is extended to the lessee under the finance lease. Section 2A-209. Despite this balance, this section excludes a finance lease that is a consumer lease. That a consumer be obligated to pay notwithstanding defective goods or the like is a principle that is not tenable under case law (Unico v. Owen, 50 N.J. 101, 232 A.2d 405 (1967)), state statute (Unif. Consumer Credit Code §§ 3.403-.405, 7A U.L.A. 126-31 (1974), or federal statute (15 U.S.C. § 1666i (1982)).

3. The relationship of the three parties to a transaction that qualifies as a finance lease is best demonstrated by a hypothetical. A, the potential lessor, has been contracted by B, the potential lessee, to discuss the lease of an expensive line of equipment that B has recently placed an order for with C, the manufacturer of such goods. The negotiation is completed and A, as lessor, and B, as lessee, sign a lease of the line of equipment for a 60-month term. B, as buyer, assigns the purchase order with C to A. If this transaction creates a lease (Section 2A-103(a)(x)), this transaction should qualify as a finance lease. Section 2A-103(a)(vii).

4. The line of equipment is delivered by C to B's place of business. After installation by C and testing by B, B accepts the goods by signing a certificate of delivery and acceptance, a copy of which is sent by B to A and C. One year later the line of equipment malfunctions and B falls behind in its manufacturing schedule.

5. Under this Article, because the lease is a finance lease, no warranty of fitness or merchantability is extended by A to B. Sections 2A-212(a) and 2A-213. Absent an express provision in the lease agreement, application of Section 2A-210 or Section 2A-211(a), or application of the principles of law and equity, including the law with respect to fraud, duress, or the like (Sections 2A-103(d) and 1-103), B has no claim against A. B's obligation to pay rent to A continues as the obligation became irrevocable and independent when B accepted the line of equipment (Section 2A-407(a)). B has no right to set-off with respect to any part of the rent still due under the lease. Section 2A-508(f). However, B may have another remedy. Despite the lack of privity between B and C (the purchase order with C having been assigned by B to A), B may have a claim against C. Section 2A-209(a).

6. This section does not address whether a “hell or high water” clause, i.e., a clause that is to the effect of this section, is enforceable if included in a finance lease that is a consumer lease or a lease that is not a finance lease. That issue will continue to be determined by the facts of each case and other law which this section does not affect. Sections 2A-104, 2A-103(d), 9-206 and 9-318. However, with respect to finance leases that are not consumer leases courts have enforced “hell or high water” clauses. In re O.P.M. Leasing Servs., 21 Bankr. 993, 1006 (Bankr. S.D.N.Y. 1982).

7. Subsection (b) further provides that a promise that has become irrevocable and independent under subsection (a) is enforceable not only between the parties but also against third parties. Thus, the finance lease can be transferred or assigned without disturbing enforceability. Further, subsection (b) also provides that the promise cannot, among other things, be cancelled or terminated without the consent of the lessor.

Cross References:

Sections 1-103, 1-203, 2A-103(a)(vii), 2A-103(a)(xii), 2A-103(d), 2A-104, 2A-209, 2A-209(a), 2A-210, 2A-211(a), 2A-212(a), 2A-213, 2A-517(a)(ii), 9-206 and 9-318.

Definitional Cross References:

“Cancellation”. Section 2A-103(a)(ii). “Consumer lease”. Section 2A-103(a)(v). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Party”. Section 1-201(a)(xxix). “Termination”. Section 2A-103(a)(xxvi).

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§ 34.1-2.A-501. Default: procedure.

1. Whether the lessor or the lessee is in  default under a lease contract is determined by the lease agreement  and this article.
2. If the lessor or the lessee is in default  under the lease contract, the party seeking enforcement has rights  and remedies as provided in this article and, except as limited by  this article, as provided in the lease agreement.
3. If the lessor or the lessee is in default  under the lease contract, the party seeking enforcement may reduce  the party’s claim to judgment, or otherwise enforce the lease contract  by self-help or any available judicial procedure or nonjudicial procedure,  including administrative proceeding, arbitration, or the like, in  accordance with this article.
4. Except as otherwise provided in section 34.1-1-305(a) or this article or the lease agreement, the rights and remedies referred to in subsections (b) and (c) are cumulative.
5. If the lease agreement covers both real  property and goods, the party seeking enforcement may proceed under  this part as to the goods, or under other applicable law as to both  the real property and the goods in accordance with that party’s rights  and remedies in respect of the real property, in which case this part  does not apply.

History. Laws 1991, ch. 14, § 1; 2015 ch. 124, § 2, effective July 1, 2015.

Official Comment

Uniform Statutory Source:

Former Section 9-501 (now codified as Section 9-601).

Changes:

Substantially revised.

Purposes:

1. Subsection (a) is new and represents a departure from the Article on Secured Transactions (Article 9) as the subsection makes clear that whether a party to the lease agreement is in default is determined by this Article as well as the agreement. Sections 2A-508 and 2A-523. It further departs from Article 9 in recognizing the potential default of either party, a function of the bilateral nature of the obligations between the parties to the lease contract.

2. Subsection (2) is a version of the first sentence of Section 9-601(a), revised to reflect leasing terminology.

3. Subsection (3), an expansive version of the second sentence of Section 9-601(a), lists the procedures that may be followed by the party seeking enforcement; in effect, the scope of the procedures listed in subsection (3) is consistent with the scope of the procedures available to the foreclosing secured party.

4. Subsection (4) establishes that the parties' rights and remedies are cumulative. DeKoven, Leases of Equipment: Puritan Leasing Company v. August, A Dangerous Decision, 12 U.S.F.L.Rev. 257, 276-80 (1978). Cumulation, and largely unrestricted selection, of remedies is allowed in furtherance of the general policy of the Commercial Code, stated in Section 1-305, that remedies be liberally administered to put the aggrieved party in as good a position as if the other party had fully performed. Therefore, cumulation of, or selection among, remedies is available to the extent necessary to put the aggrieved party in as good a position as it would have been in had there been full performance. However, cumulation of, or selection among, remedies is not available to the extent that the cumulation or selection would put the aggrieved party in a better position than it would have been in had there been full performance by the other party.

5. Section 9-602, which, among other things, states that certain rules, to the extent they give rights to the debtor and impose duties on the secured party, may not be waived or varied, is not incorporated in this Article. Given the significance of freedom of contract in the development of the common law as it applies to bailments for hire and the lessee's lack of an equity of redemption, there is no reason to impose that restraint.

Cross References:

Sections 1-305, 2A-508, 2A-523, Article 9, especially Sections 9-601 and 9-602.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Party”. Section 1-201(b)(26). “Remedy”. Section 1-201(b)(32). “Right”. Section 1-201(b)(34).

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§ 34.1-2.A-502. Notice after default.

Except as otherwise provided in this article or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

None.

Purposes:

This section makes clear that absent agreement to the contrary or provision in this Article to the contrary, e.g., Section 2A-516(c)(i), the party in default is not entitled to notice of default or enforcement. While a review of Part 6 of Article 9 leads to the same conclusion with respect to giving notice of default to the debtor, it is never stated. Although Article 9 requires notice of disposition and strict foreclosure, the different scheme of lessors' and lessees' rights and remedies developed under the common law, and codified by this Article, generally does not require notice of enforcement; furthermore, such notice is not mandated by due process requirements. However, certain sections of this Article do require notice. E.g., Section 2A-517(b).

Cross References:

Sections 2A-516(c)(i), 2A-517(b), and Article 9, esp. Part 6.

Definitional Cross References:

“Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notice”. Section 1-201(a)(xxv). “Party”. Section 1-201(a)(xxix).

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§ 34.1-2.A-503. Modification or impairment of rights and remedies.

1. Except as otherwise provided in this article,  the lease agreement may include rights and remedies for default in  addition to or in substitution for those provided in this article  and may limit or alter the measure of damages recoverable under this  article.
2. Resort to a remedy provided under this  article or in the lease agreement is optional unless the remedy is  expressly agreed to be exclusive. If circumstances cause an exclusive  or limited remedy to fail of its essential purpose, or provision for  an exclusive remedy is unconscionable, remedy may be had as provided  in this article.
3. Consequential damages may be liquidated  under section 34.1-2.A-504, or may otherwise be limited, altered,  or excluded unless the limitation, alteration, or exclusion is unconscionable.  Limitation, alteration, or exclusion of consequential damages for  injury to the person in the case of consumer goods is prima facie  unconscionable but limitation, alteration, or exclusion of damages  where the loss is commercial is not prima facie unconscionable.
4. Rights and remedies on default by the  lessor or the lessee with respect to any obligation or promise collateral  or ancillary to the lease contract are not impaired by this article.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-719 and 2-701.

Changes:

Rewritten to reflect lease terminology and to clarify the relationship between this section and Section 2A-504.

Purposes:

1. A significant purpose of this Part is to provide rights and remedies for those parties to a lease who fail to provide them by agreement or whose rights and remedies fail of their essential purpose or are unenforceable. However, it is important to note that this implies no restriction on freedom to contract. Sections 2A-103(d) and 1-102(c). Thus, subsection (a), a revised version of the provisions of Section 2-719(a), allows the parties to the lease agreement freedom to provide for rights and remedies in addition to or in substitution for those provided in this Article and to alter or limit the measure of damages recoverable under this Article. Except to the extent otherwise provided in this Article (e.g., Sections 2A-105, 106 and 108(a) and (b)), this Part shall be construed neither to restrict the parties' ability to provide for rights and remedies or to limit or alter the measure of damages by agreement, nor to imply disapproval of rights and remedy schemes other than those set forth in this Part.

2. Subsection (b) makes explicit with respect to this Article what is implicit in Section 2-719 with respect to the Article on Sales (Article 2): if an exclusive remedy is held to be unconscionable, remedies under this Article are available. Section 2-719 official comment 1.

3. Subsection (c), a revision of Section 2-719(c), makes clear that consequential damages may also be liquidated. Section 2A-504(1).

4. Subsection (d) is a revision of the provisions of Section 2-701. This subsection leaves the treatment of default with respect to obligations or promises collateral or ancillary to the lease contract to other law. Sections 2A-103(d) and 1-103. An example of such an obligation would be that of the lessor to the secured creditor which has provided the funds to leverage the lessor's lease transaction; an example of such a promise would be that of the lessee, as seller, to the lessor, as buyer, in a sale-leaseback transaction.

Cross References:

Sections 1-102(c), 1-103, Article 2, especially Sections 2-701, 2-719, 2-719(a), 2-719(c), 2-719 official comment 1, and Sections 2A-103(d), 2A-105, 2A-106, 2A-108(a), 2A-108(b), and 2A-504.

Definitional Cross References:

“Agreed”. Section 1-201(a)(iii). “Consumer goods”. Section 9-109(a)(iii)[9-102]. “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Person”. Section 1-201(a)(xxx). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi).

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§ 34.1-2.A-504. Liquidation of damages.

1. Damages payable by either party for default,  or any other act or omission, including indemnity for loss or diminution  of anticipated tax benefits or loss or damage to lessor’s residual  interest, may be liquidated in the lease agreement but only at an  amount or by a formula that is reasonable in light of the then anticipated  harm caused by the default or other act or omission.
2. If the lease agreement provides for liquidation  of damages, and such provision does not comply with subsection (a),  or such provision is an exclusive or limited remedy that circumstances  cause to fail of its essential purpose, remedy may be had as provided  in this article.
3. If the lessor justifiably withholds or  stops delivery of goods because of the lessee’s default or insolvency  (section 34.1-2.A-525 or 34.1-2.A-526), the lessee is entitled to  restitution of any amount by which the sum of his payments exceeds:
   1. The amount to which the lessor is entitled  by virtue of terms liquidating the lessor’s damages in accordance  with subsection (a); or
   2. In the absence of those terms, twenty  percent (20%) of the then present value of the total rent the lessee  was obligated to pay for the balance of the lease term, or, in the  case of a consumer lease, the lesser of such amount or five hundred  dollars ($500.00).
4. A lessee’s right to restitution under  subsection (c) is subject to offset to the extent the lessor establishes:
   1. A right to recover damages under the provisions  of this article other than subsection (a); and
   2. The amount or value of any benefits received  by the lessee directly or indirectly by reason of the lease contract.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-718(a), (b), (c) and 2-719(b).

Changes:

Substantially rewritten.

Purposes:

Many leasing transactions are predicated on the parties' ability to agree to an appropriate amount of damages or formula for damages in the event of default or other act or omission. The rule with respect to sales of goods (Section 2-718) may not be sufficiently flexible to accommodate this practice. Thus, consistent with the common law emphasis upon freedom to contract with respect to bailments for hire, this section has created a revised rule that allows greater flexibility with respect to leases of goods.

Subsection (a), a significantly modified version of the provisions of Section 2-718(a), provides for liquidation of damages in the lease agreement at an amount or by a formula. Section 2-718(a) does not by its express terms include liquidation by a formula; this change was compelled by modern leasing practice. Subsection (a), in a further expansion of Section 2-718(a), provides for liquidation of damages for default as well as any other act or omission.

A liquidated damages formula that is common in leasing practice provides that the sum of lease payments past due, accelerated future lease payments, and the lessor's estimated residual interest, less the net proceeds of disposition (whether by sale or re-lease) of the leased goods is the lessor's damages. Tax indemnities, costs, interest and attorney's fees are also added to determine the lessor's damages. Another common liquidated damages formula utilizes a periodic depreciation allocation as a credit to the aforesaid amount in mitigation of a lessor's damages. A third formula provides for a fixed number of periodic payments as a means of liquidating damages. Stipulated loss or stipulated damage schedules are also common. Whether these formulae are enforceable will be determined in the context of each case by applying a standard of reasonableness in light of the harm anticipated when the formula was agreed to. Whether the inclusion of these formulae will affect the classification of the transaction as a lease or a security interest is to be determined by the facts of each case. Section 1-201(a)(xxxvii). E.g., In re Noack, 44 Bankr. 172, 174-75 (Bankr. E.D.Wis.1984).

This section does not incorporate two other tests that under sales law determine enforceability of liquidated damages, i.e., difficulties of proof of loss and inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. The ability to liquidate damages is critical to modern leasing practice; given the parties' freedom to contract at common law, the policy behind retaining these two additional requirements here was thought to be outweighed. Further, given the expansion of subsection (a) to enable the parties to liquidate the amount payable with respect to an indemnity for loss or diminution of anticipated tax benefits resulted in another change: the last sentence of Section 2-718(a), providing that a term fixing unreasonably large liquidated damages is void as a penalty, was also not incorporated. The impact of local, state and federal tax laws on a leasing transaction can result in an amount payable with respect to the tax indemnity many times greater than the original purchase price of the goods. By deleting the reference to unreasonably large liquidated damages the parties are free to negotiate a formula, restrained by the rule of reasonableness in this section. These changes should invite the parties to liquidate damages. Peters, Remedies for Breach of Contracts Relating to the Sale of Goods Under the Uniform Commercial Code: A Roadmap for Article Two, 73 Yale L.J. 199, 278 (1963).

Subsection (b), a revised version of Section 2-719(b), provides that if the liquidated damages provision is not enforceable or fails of its essential purpose, remedy may be had as provided in this Article.

Subsection (c)(ii) of this section differs from subsection (b)(ii) of Section 2-718; in the absence of a valid liquidated damages amount or formula the lessor is permitted to retain 20 percent of the present value of the total rent payable under the lease. The alternative limitation of $500 contained in Section 2-718 is deleted as unrealistically low with respect to a lease other than a consumer lease.

Cross References:

Sections 1-201(a)(xxxvii), 2-718, 2-718(a), 2-718(b)(ii) and 2-719(b).

Definitional Cross References:

“Consumer lease”. Section 2A-103(a)(v). “Delivery”. Section 1-201(a)(xiv). “Goods”. Section 2A-103(a)(viii). “Insolvent”. Section 1-201(a)(xxiii). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Lessor's residual interest”. Section 2A-103(a)(xvii). “Party”. Section 1-201(a)(xxix). “Present value”. Section 2A-103(a)(xxi). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Term”. Section 1-201(a)(xlii). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-505. Cancellation and termination and effect of cancellation, termination, rescission, or fraud on rights and remedies.

1. On cancellation of the lease contract,  all obligations that are still executory on both sides are discharged,  but any right based on prior default or performance survives, and  the cancelling party also retains any remedy for default of the whole  lease contract or any unperformed balance.
2. On termination of the lease contract,  all obligations that are still executory on both sides are discharged  but any right based on prior default or performance survives.
3. Unless the contrary intention clearly  appears, expressions of “cancellation,” “rescission,” or the like  of the lease contract may not be construed as a renunciation or discharge  of any claim in damages for an antecedent default.
4. Rights and remedies for material misrepresentation  or fraud include all rights and remedies available under this article  for default.
5. Neither rescission nor a claim for rescission  of the lease contract nor rejection or return of the goods may bar  or be deemed inconsistent with a claim for damages or other right  or remedy.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-106(c) and (d), 2-720 and 2-721.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Cancellation”. Section 2A-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Termination”. Section 2A-103(a)(xxvi).

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§ 34.1-2.A-506. Statute of limitations.

1. An action for default under a lease contract,  including breach of warranty or indemnity, must be commenced within  four (4) years after the cause of action accrued. By the original  lease contract the parties may reduce the period of limitation to  not less than one (1) year.
2. A cause of action for default accrues  when the act or omission on which the default or breach of warranty  is based is or should have been discovered by the aggrieved party,  or when the default occurs, whichever is later. A cause of action  for indemnity accrues when the act or omission on which the claim  for indemnity is based is or should have been discovered by the indemnified  party, whichever is later.
3. If an action commenced within the time  limited by subsection (a) is so terminated as to leave available a  remedy by another action for the same default or breach of warranty  or indemnity, the other action may be commenced after the expiration  of the time limited and within six (6) 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 that have accrued before this article becomes effective.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-725.

Changes:

Substantially rewritten.

Purposes:

Subsection (a) does not incorporate the limitation found in Section 2-725(a) prohibiting the parties from extending the period of limitation. Breach of warranty and indemnity claims often arise in a lease transaction; with the passage of time such claims often diminish or are eliminated. To encourage the parties to commence litigation under these circumstances makes little sense.

Subsection (b) states two rules for determining when a cause of action accrues. With respect to default, the rule of Section 2-725(b) is not incorporated in favor of a more liberal rule of the later of the date when the default occurs or when the act or omission on which it is based is or should have been discovered. With respect to indemnity, a similarly liberal rule is adopted.

Cross References:

Sections 2-725(a) and 2-725(b).

Definitional Cross References:

“Action”. Section 1-201(a)(i). “Aggrieved party”. Section 1-201(a)(ii). “Lease contract”. Section 2A-103(a)(xii). “Party”. Section 1-201(a)(xxix). “Remedy”. Section 1-201(a)(xxxiv). “Termination”. Section 2A-103(a)(xxvi).

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§ 34.1-2.A-507. Proof of market rent: time and place.

1. Damages based on market rent (section  34.1-2.A-519 or 34.1-2.A-528) are determined according to the rent  for the use of the goods concerned for a lease term identical to the  remaining lease term of the original lease agreement and prevailing  at the time of the default.
2. If evidence of rent for the use of the  goods concerned for a lease term identical to the remaining lease  term of the original lease agreement and prevailing at the times or  places described in this article is not readily available, the rent  prevailing within any reasonable time before or after the time described  or at any other place or for a different lease term 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 difference, including the cost of transporting the goods to or  from the other place.
3. Evidence of a relevant rent prevailing  at a time or place or for a lease term other than the one described  in this article offered by one party is not admissible unless and  until he has given the other party notice the court finds sufficient  to prevent unfair surprise.
4. If the prevailing rent or value of any  goods regularly leased in any established market is in issue, reports  in official publications or trade journals or in newspapers or periodicals  of general circulation published as the reports of that market are  admissible in evidence. The circumstances of the preparation of the  report may be shown to affect its weight but not its admissibility.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-723 and 2-724.

Changes:

Revised to reflect leasing practices and terminology. Sections 2A-519 and 2A-528 specify the times as of which market rent is to be determined.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lease agreement”. Section 2A-103(a)(xi). “Notice”. Section 1-201(a)(xxv). “Party”. Section 1-201(a)(xxix). “Reasonable time”. Section 1-204(a) and (b). “Usage of trade”. Section 1-205. “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-508. Lessee's remedies.

1. If a lessor fails to deliver the goods  in conformity to the lease contract (section 34.1-2.A-509) or repudiates  the lease contract (section 34.1-2.A-402), or a lessee rightfully  rejects the goods (section 34.1-2.A-509) or justifiably revokes acceptance  of the goods (section 34.1-2.A-517), then with respect to any goods  involved, and with respect to all of the goods if under an installment  lease contract the value of the whole lease contract is substantially  impaired (section 34.1-2.A-510), the lessor is in default under the  lease contract and the lessee may:
   1. Cancel the lease contract (section 34.1-2.A-505(a));
   2. Recover so much of the rent and security  as has been paid and is just under the circumstances;
   3. Cover and recover damages as to all goods  affected whether or not they have been identified to the lease contract  (sections 34.1-2.A-518 and 34.1-2.A-520), or recover damages for nondelivery  (sections 34.1-2.A-519 and 34.1-2.A-520);
   4. Exercise any other rights or pursue any  other remedies provided in the lease contract.
2. If a lessor fails to deliver the goods  in conformity to the lease contract or repudiates the lease contract,  the lessee may also:
   1. If the goods have been identified, recover  them (section 34.1-2.A-522); or
   2. In a proper case, obtain specific performance  or replevy the goods (section 34.1-2.A-521).
3. If a lessor is otherwise in default under  a lease contract, the lessee may exercise the rights and pursue the  remedies provided in the lease contract, which may include a right  to cancel the lease, and in section 34.1-2.A-519(c).
4. If a lessor has breached a warranty, whether  express or implied, the lessee may recover damages (section 34.1-2.A-519(d)).
5. On rightful rejection or justifiable revocation  of acceptance, a lessee has a security interest in goods in the lessee’s  possession or control for any rent and security that has been paid  and any expenses reasonably incurred in their inspection, receipt,  transportation, and care and custody and may hold those goods and  dispose of them in good faith and in a commercially reasonable manner,  subject to section 34.1-2.A-527(e).
6. Subject to the provisions of section 34.1-2.A-407,  a lessee, on notifying the lessor of the lessee’s intention to do  so, may deduct all or any part of the damages resulting from any default  under the lease contract from any part of the rent still due under  the same lease contract.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-711 and 2-717.

Changes:

Substantially rewritten.

Purposes:

1. This section is an index to Sections 2A-509 through 522 which set out the lessee's rights and remedies after the lessor's default. The lessor and the lessee can agree to modify the rights and remedies available under this Article; they can, among other things, provide that for defaults other than those specified in subsection (a) the lessee can exercise the rights and remedies referred to in subsection (a); and they can create a new scheme of rights and remedies triggered by the occurrence of the default. Sections 2A-103(d) and 1-102(c).

2. Subsection (a), a substantially rewritten version of the provisions of Section 2-711(a), lists three cumulative remedies of the lessee where the lessor has failed to deliver conforming goods or has repudiated the contract, or the lessee has rightfully rejected or justifiably revoked. Sections 2A-501(b) and (d). Subsection (a) also allows the lessee to exercise any contractual remedy. This Article rejects any general doctrine of election of remedy. To determine if one remedy bars another in a particular case is a function of whether the lessee has been put in as good a position as if the lessor had fully performed the lease agreement. Use of multiple remedies is barred only if the effect is to put the lessee in a better position than it would have been in had the lessor fully performed under the lease. Sections 2A-103(d), 2A-501(d), and 1-106(a). Subsection (a)(ii), in recognition that no bright line can be created that would operate fairly in all installment lease cases and in recognition of the fact that a lessee may be able to cancel the lease (revoke acceptance of the goods) after the goods have been in use for some period of time, does not require that all lease payments made by the lessee under the lease be returned upon cancellation. Rather, only such portion as is just of the rent and security payments made may be recovered. If a defect in the goods is discovered immediately upon tender to the lessee and the goods are rejected immediately, then the lessee should recover all payments made. If, however, for example, a 36-month equipment lease is terminated in the 12th month because the lessor has materially breached the contract by failing to perform its maintenance obligations, it may be just to return only a small part or none of the rental payments already made.

3. Subsection (b), a version of the provisions of Section 2-711(b) revised to reflect leasing terminology, lists two alternative remedies for the recovery of the goods by the lessee; however, each of these remedies is cumulative with respect to those listed in subsection (a).

4. Subsection (c) is new. It covers defaults which do not deprive the lessee of the goods and which are not so serious as to justify rejection or revocation of acceptance under subsection (a). It also covers defaults for which the lessee could have rejected or revoked acceptance of the goods but elects not to do so and retains the goods. In either case, a lessee which retains the goods is entitled to recover damages as stated in Section 2A-519(c). That measure of damages is “the loss resulting in the ordinary course of events from the lessor's default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor's breach.”

5. Subsection (a)(iv) and subsection (c) recognize that the lease agreement may provide rights and remedies in addition to or different from those which Article 2A provides. In particular, subsection (c) provides that the lease agreement may give the remedy of cancellation of the lease for defaults by the lessor that would not otherwise be material defaults which would justify cancellation under subsection (a). If there is a right to cancel, there is, of course, a right to reject or revoke acceptance of the goods.

6. Subsection (d) is new and merely adds to the completeness of the index by including a reference to the lessee's recovery of damages upon the lessor's breach of warranty; such breach may not rise to the level of a default by the lessor justifying revocation of acceptance. If the lessee properly rejects or revokes acceptance of the goods because of a breach of warranty, the rights and remedies are those provided in subsection (a) rather than those in Section 2A-519(d).

7. Subsection (e), a revised version of the provisions of Section 2-711(c), recognizes, on rightful rejection or justifiable revocation, the lessee's security interest in goods in its possession and control. Section 9-113[9-110], which recognized security interests arising under the Article on Sales (Article 2), was amended with the adoption of this Article to reflect the security interests arising under this Article. Pursuant to Section 2A-511(d), a purchaser who purchases goods from the lessee in good faith takes free of any rights of the lessor, or in the case of a finance lease the supplier. Such goods, however, must have been rightfully rejected and disposed of pursuant to Section 2A-511 or 2A-512. However, Section 2A-517(e) provides that the lessee will have the same rights and duties with respect to goods where acceptance has been revoked as with respect to goods rejected. Thus, Section 2A-511(d) will apply to the lessee's disposition of such goods.

8. Pursuant to Section 2A-527(e), the lessee must account to the lessor for the excess proceeds of such disposition, after satisfaction of the claim secured by the lessee's security interest.

9. Subsection (f), a slightly revised version of the provisions of Section 2-717, sanctions a right of set-off by the lessee, subject to the rule of Section 2A-407 with respect to irrevocable promises in a finance lease that is not a consumer lease, and further subject to an enforceable “hell or high water” clause in the lease agreement. Section 2A-407 official comment. No attempt is made to state how the set-off should occur; this is to be determined by the facts of each case.

10. There is no special treatment of the finance lease in this section. Absent supplemental principles of law and equity to the contrary, in the case of most finance leases, following the lessee's acceptance of the goods the lessee will have no rights or remedies against the lessor, because the lessor's obligations to the lessee are minimal. Sections 2A-210 and 2A-211(a). Since the lessee will look to the supplier for performance, this is appropriate. Section 2A-209.

Cross References:

Sections 1-102(c), 1-103, 1-106(a), Article 2, especially Sections 2-711, 2-717 and Sections 2A-103(d), 2A-209, 2A-210, 2A-211(a), 2A-407, 2A-501(2), 2A-501(d), 2A-509 through 2A-522, 2A-511(c), 2A-517(e), 2A-527(e) and Section 9-113[9-110].

Definitional Cross References:

“Conforming”. Section 2A-103(a)(iv). “Delivery”. Section 1-201(a)(xiv). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Installment lease contract”. Section 2A-103(a)(ix). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notifies”. Section 1-201(a)(xxvi). “Receipt”. Section 2-103(a)(iii) “Remedy”. Section 1-201(a)(xxxiv). “Rights”. Section 1-201(a)(xxxvi). “Security interest”. Section 1-201(a)(xxxvii). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-509. Lessee's rights on improper delivery; rightful rejection.

1. Subject to the provisions of section 34.1-2.A-510  on default in installment lease contracts, if the goods or the tender  or delivery fail in any respect to conform to the lease contract,  the lessee may reject or accept the goods or accept any commercial  unit or units and reject the rest of the goods.
2. Rejection of goods is ineffective unless  it is within a reasonable time after tender or delivery of the goods  and the lessee seasonably notifies the lessor.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-601 and 2-602(a).

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Commercial unit”. Section 2A-103(a)(iii). “Conforming”. Section 2A-103(a)(iv). “Delivery”. Section 1-201(a)(xiv). “Goods”. Section 2A-103(a)(viii). “Installment lease contract”. Section 2A-103(a)(ix). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notifies”. Section 1-201(a)(xxvi). “Reasonable time”. Section 1-204(a) and (b). “Rights”. Section 1-201(a)(xxxvi). “Seasonably”. Section 1-204(c).

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Delayed rejection of nonconforming goods. —

Lessee knew that sprinklers systems were nonconforming when they were delivered yet failed seasonably to reject them, as six weeks later was insufficient under subsection (b) of this section; thus, lessee was liable to lessor-lender for lease payments despite defects in the systems. Rafter Seven Ranches L.P. v. C.H. Brown Co. (In re Rafter Seven Ranches L.P.), 546 F.3d 1194, 2008 U.S. App. LEXIS 23558 (10th Cir. 2008).

§ 34.1-2.A-510. Installment lease contracts: rejection and default.

1. Under an installment lease contract a  lessee may reject any delivery that is nonconforming if the nonconformity  substantially impairs the value of that delivery and cannot be cured  or the nonconformity is a defect in the required documents; but if  the nonconformity does not fall within subsection (b) and the lessor  or the supplier gives adequate assurance of its cure, the lessee must  accept that delivery.
2. Whenever nonconformity or default with  respect to one or more deliveries substantially impairs the value  of the installment lease contract as a whole there is a default with  respect to the whole. But, the aggrieved party reinstates the installment  lease contract as a whole if the aggrieved party accepts a nonconforming  delivery without seasonably notifying of cancellation or brings an  action with respect only to past deliveries or demands performance  as to future deliveries.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-612.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Action”. Section 1-201(a)(i). “Aggrieved party”. Section 1-201(a)(ii). “Cancellation”. Section 2A-103(a)(ii). “Conforming”. Section 2A-103(a)(iv). “Delivery”. Section 1-201(a)(xiv). “Installment lease contract”. Section 2A-103(a)(ix). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notifies”. Section 1-201(a)(xxvi). “Seasonably”'. Section 1-204(c). “Supplier”. Section 2A-103(a)(xxiv). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-511. Merchant lessee's duties as to rightfully rejected goods.

1. Subject to any security interest of a  lessee (section 34.1-2.A-508(e)), if a lessor or a supplier has no  agent or place of business at the market of rejection, a merchant  lessee, after rejection of goods in his possession or control, shall  follow any reasonable instructions received from the lessor or the  supplier with respect to the goods. In the absence of those instructions,  a merchant lessee shall make reasonable efforts to sell, lease, or  otherwise dispose of the goods for the lessor’s account if they threaten  to decline in value speedily. Instructions are not reasonable if on  demand indemnity for expenses is not forthcoming.
2. If a merchant lessee (subsection (a))  or any other lessee (section 34.1-2.A-512) disposes of goods, he is  entitled to reimbursement either from the lessor or the supplier or  out of the proceeds for reasonable expenses of caring for and disposing  of the goods and, if the expenses include no disposition commission,  to such commission as is usual in the trade, or if there is none,  to a reasonable sum not exceeding ten percent (10%) of the gross proceeds.
3. In complying with this section or section  34.1-2.A-512, the lessee is held only to good faith. Good faith conduct  hereunder is neither acceptance or conversion nor the basis of an  action for damages.
4. A purchaser who purchases in good faith  from a lessee pursuant to this section or section 34.1-2.A-512 takes  the goods free of any rights of the lessor and the supplier even though  the lessee fails to comply with one (1) or more of the requirements  of this article.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-603 and 2-706(e).

Changes:

Revised to reflect leasing practices and terminology. This section, by its terms, applies to merchants as well as others. Thus, in construing the section it is important to note that under this Act the term good faith is defined differently for merchants (Section 2-103(a)(ii)) than for others (Section 1-201(a)(xix)). Section 2A-103(c) and (d).

Definitional Cross References:

“Action”. Sections 1-201(a)(i). “Good faith”. Sections 1-201(a)(xix) and 2-103(a)(ii). “Goods”. Section 2A-103(a)(viii). “Lease”. Section 2A-103(a)(x). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Merchant lessee”. Section 2A-103(a)(xx). “Purchaser”. Section 1-201(a)(xxxiii). “Rights”. Section 1-201(a)(xxxvi). “Security interest”. Section 1-201(a)(xxxvii). “Supplier”. Section 2A-103(a)(xxiv). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-512. Lessee's duties as to rightfully rejected goods.

1. Except as otherwise provided with respect  to goods that threaten to decline in value speedily (section 34.1-2.A-511)  and subject to any security interest of a lessee (section 34.1-2.A-508(e)):
   1. The lessee, after rejection of goods in  the lessee’s possession, shall hold them with reasonable care at the  lessor’s or the supplier’s disposition for a reasonable time after  the lessee’s seasonable notification of rejection;
   2. If the lessor or the supplier gives no  instructions within a reasonable time after notification of rejection,  the lessee may store the rejected goods for the lessor’s or the supplier’s  account or ship them to the lessor or the supplier or dispose of them  for the lessor’s or the supplier’s account with reimbursement in the  manner provided in section 34.1-2.A-511; but
   3. The lessee has no further obligations  with regard to goods rightfully rejected.
2. Action by the lessee pursuant to subsection  (a) is not acceptance or conversion.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Sections 2-602(2)(b) and (c) and 2-604.

Changes:

Substantially rewritten.

Purposes:

The introduction to subsection (a) references goods that threaten to decline in value speedily and not perishables, the reference in Section 2-604, the statutory analogue. This is a change in style, not substance, as the first phrase includes the second. Subparagraphs (a)(i) and (iii) are revised versions of the provisions of Section 2-602(b)(ii) and (iii). Subparagraph (a)(i) states the rule with respect to the lessee's treatment of goods in its possession following rejection; subparagraph (a)(ii) states the rule regarding such goods if the lessor or supplier then fails to give instructions to the lessee. If the lessee performs in a fashion consistent with subparagraphs (a)(i) and (a)(ii), subparagraph (a)(iii) exonerates the lessee.

Cross References:

Sections 2-602(b)(ii), 2-602(b)(iii) and 2-604.

Definitional Cross References:

“Action”. Section 1-201(a)(i). “Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notification”. Section 1-201(a)(xxvi). “Reasonable time”. Section 1-204(a) and (b). “Seasonably”. Section 1-204(c). “Security interest”. Section 1-201(a)(xxxvii). “Supplier”. Section 2A-103(a)(xxiv). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-513. Cure by lessor of improper tender or delivery; replacement.

1. If any tender or delivery by the lessor  or the supplier is rejected because nonconforming and the time for  performance has not yet expired, the lessor or the supplier may seasonably  notify the lessee of the lessor’s or the supplier’s intention to cure  and may then make a conforming delivery within the time provided in  the lease contract.
2. If the lessee rejects a nonconforming  tender that the lessor or the supplier had reasonable grounds to believe  would be acceptable with or without money allowance, the lessor or  the supplier may have a further reasonable time to substitute a conforming  tender if he seasonably notifies the lessee.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-508.

Changes:

Revised to reflect leasing practices and terminology.

Definitional Cross References:

“Conforming”. Section 2A-103(a)(iv). “Delivery”. Section 1-201(a)(xiv). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Money”. Section 1-201(a)(xxiv). “Notifies”. Section 1-201(a)(xxvi). “Reasonable time”. Section 1-204(a) and (b). “Seasonably”. Section 1-204(c). “Supplier”. Section 2A-103(a)(xxiv).

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§ 34.1-2.A-514. Waiver of lessee's objections.

1. In rejecting goods, a lessee’s failure  to state a particular defect that is ascertainable by reasonable inspection  precludes the lessee from relying on the defect to justify rejection  or to establish default:
   1. If, stated seasonably, the lessor or the  supplier could have cured it (section 34.1-2.A-513); or
   2. Between merchants if the lessor or the  supplier after rejection has made a request in writing for a full  and final written statement of all defects on which the lessee proposes  to rely.
2. A lessee’s failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.

History. Laws 1991, ch. 14, § 1; 2015 ch. 124, § 5, effective July 1, 2015.

Official Comment

Uniform Statutory Source:

Section 2-605.

Changes:

Revised to reflect leasing practices and terminology.

Purposes:

The principles applicable to the commercial practice of payment against documents (subsection b) are explained in official comment 4 to Section 2-605, the statutory analogue to this section.

Cross Reference:

Section 2-605 official comment 4.

Definitional Cross References:

“Between merchants”. Section 2-104(c). “Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Rights”. Section 1-201(a)(xxxvi). “Seasonably”. Section 1-204(c). “Supplier”. Section 2A-103(a)(xxiv). “Writing”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-515. Acceptance of goods.

1. Acceptance of goods occurs after the lessee  has had a reasonable opportunity to inspect the goods and:
   1. The lessee signifies or acts with respect  to the goods in a manner that signifies to the lessor or the supplier  that the goods are conforming or that the lessee will take or retain  them in spite of their nonconformity; or
   2. The lessee fails to make an effective  rejection of the goods (section 34.1-2.A-509(b)).
2. Acceptance of a part of any commercial  unit is acceptance of that entire unit.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-606.

Changes:

The provisions of Section 2-606(a)(i) were substantially rewritten to provide that the lessee's conduct may signify acceptance. Further, the provisions of Section 2-606(a)(iii) were not incorporated as irrelevant given the lessee's possession and use of the leased goods.

Cross References:

Sections 2-606(a)(i) and 2-606(a)(iii).

Definitional Cross References:

“Commercial unit”. Section 2A-103(a)(iii). “Conforming”. Section 2A-103(a)(iv). “Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Supplier”. Section 2A-103(a)(xxiv).

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Delayed rejection of nonconforming goods. —

Lessee knew that sprinklers systems were nonconforming when they were delivered yet failed seasonably to reject them, as six weeks later was insufficient under Wyo. Stat. Ann. § 34.1-2.A-509(b); thus, lessee was liable to lessor-lender for lease payments despite defects in the systems. Rafter Seven Ranches L.P. v. C.H. Brown Co. (In re Rafter Seven Ranches L.P.), 546 F.3d 1194, 2008 U.S. App. LEXIS 23558 (10th Cir. 2008).

§ 34.1-2.A-516. Effect of acceptance of goods; notice of default; burden of establishing default after acceptance; notice of claim or litigation to person answerable over.

1. A lessee must pay rent for any goods accepted  in accordance with the lease contract, with due allowance for goods  rightfully rejected or not delivered.
2. A lessee’s acceptance of goods precludes  rejection of the goods accepted. In the case of a finance lease, if  made with knowledge of a nonconformity, acceptance cannot be revoked  because of it. In any other case, if made with knowledge of a nonconformity,  acceptance cannot be revoked because of it unless the acceptance was  on the reasonable assumption that the nonconformity would be seasonably  cured. Acceptance does not of itself impair any other remedy provided  by this article or the lease agreement for nonconformity.
3. If a tender has been accepted:
   1. Within a reasonable time after the lessee  discovers or should have discovered any default, the lessee shall  notify the lessor and the supplier, if any, or be barred from any  remedy against the party not notified;
   2. Except in the case of a consumer lease,  within a reasonable time after the lessee receives notice of litigation  for infringement or the like (section 34.1-2.A-211) the lessee shall  notify the lessor or be barred from any remedy over for liability  established by the litigation; and
   3. The burden is on the lessee to establish  any default.
4. If a lessee is sued for breach of a warranty  or other obligation for which a lessor or a supplier is answerable  over the following apply:
   1. The lessee may give the lessor or the  supplier, or both, written notice of the litigation. If the notice  states that the person notified may come in and defend and that if  the person notified does not do so that person will be bound in any  action against that person by the lessee by any determination of fact  common to the two (2) litigations, then unless the person notified  after seasonable receipt of the notice does come in and defend that  person is so bound;
   2. The lessor or the supplier may demand  in writing that the lessee turn over control of the litigation including  settlement if the claim is one for infringement or the like (section  34.1-2.A-211) or else be barred from any remedy over. If the demand  states that the lessor or the supplier agrees to bear all expense  and to satisfy any adverse judgment, then unless the lessee after  seasonable receipt of the demand does turn over control the lessee  is so barred.
5. Subsections (c) and (d) apply to any obligation  of a lessee to hold the lessor or the supplier harmless against infringement  or the like (section 34.1-2.A-211).

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-607.

Changes:

Substantially revised.

Purposes:

1. Subsection (b) creates a special rule for finance leases, precluding revocation if acceptance is made with knowledge of nonconformity with respect to the lease agreement, as opposed to the supply agreement; this is not inequitable as the lessee has a direct claim against the supplier. Section 2A-209(a). Revocation of acceptance of a finance lease is permitted if the lessee's acceptance was without discovery of the nonconformity (with respect to the lease agreement, not the supply agreement) and was reasonably induced by the lessor's assurances. Section 2A-517(a)(ii). Absent exclusion or modification, the lessor under a finance lease makes certain warranties to the lessee. Sections 2A-210 and 2A-211(a). Revocation of acceptance is not prohibited even after the lessee's promise has become irrevocable and independent. Section 2A-407 official comment. Where the finance lease creates a security interest, the rule may be to the contrary. General Elec. Credit Corp. of Tennessee v. Ger-Beck Mach. Co., 806 F.2d 1207 (3rd Cir. 1986).

2. Subsection (c)(i) requires the lessee to give notice of default, within a reasonable time after the lessee discovered or should have discovered the default. In a finance lease, notice may be given either to the supplier, the lessor, or both, but remedy is barred against the party not notified. In a finance lease, the lessor is usually not liable for defects in the goods and the essential notice is to the supplier. While notice to the finance lessor will often not give any additional rights to the lessee, it would be good practice to give the notice since the finance lessor has an interest in the goods. Subsection (c)(i) does not use the term finance lease, but the definition of supplier is a person from whom a lessor buys or leases goods to be leased under a finance lease. Section 2A-103(a)(xxiv). Therefore, there can be a “supplier” only in a finance lease. Subsection (d) applies similar notice rules as to lessors and suppliers if a lessee is sued for a breach of warranty or other obligation for which a lessor or supplier is answerable over.

3. Subsection (c)(ii) requires the lessee to give the lessor notice of litigation for infringement or the like. There is an exception created in the case of a consumer lease. While such an exception was considered for a finance lease, it was not created because it was not necessary — the lessor in a finance lease does not give a warranty against infringement. Section 2A-211(b). Even though not required under subsection (c)(ii), the lessee who takes under a finance lease should consider giving notice of litigation for infringement or the like to the supplier, because the lessee obtains the benefit of the suppliers' promises subject to the suppliers' defenses or claims. Sections 2A-209(a) and 2-607(c)(ii).

Cross References:

Sections 2-607(c)(ii), 2A-103(a)(xxiv), 2A-209(a), 2A-210, 2A-211(a), 2A-211(b), 2A-407 official comment and 2A-517(a)(ii).

Definitional Cross References:

“Action”. Section 1-201(a)(i). “Agreement”. Section 1-201(a)(iii). “Burden of establishing”. Section 1-201(a)(viii). “Conforming”. Section 2A-103(a)(iv). “Consumer lease”. Section 2A-103(a)(v). “Delivery”. Section 1-201(a)(xiv). “Discover”. Section 1-201(a)(xxv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Knowledge”. Section 1-201(a)(xxv). “Lease agreement”. Section 2A-103(a)(xi). “Lease contract”. Section 2A-103(a)(xii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Notice”. Section 1-201(a)(xxv). “Notifies”. Section 1-201(a)(xxvi). “Person”. Section 1-201(a)(xxx). “Reasonable time”. Section 1-204(a) and (b). “Receipt”. Section 2-103(a)(iii). “Remedy”. Section 1-201(a)(xxxiv). “Seasonably”. Section 1-204(c). “Supplier”. Section 2A-103(a)(xxiv). “Written”. Section 1-201(a)(xlvi).

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§ 34.1-2.A-517. Revocation of acceptance of goods.

1. A lessee may revoke acceptance of a lot  or commercial unit whose nonconformity substantially impairs its value  to the lessee if the lessee has accepted it:
   1. Except in the case of a finance lease,  on the reasonable assumption that its nonconformity would be cured  and it has not been seasonably cured; or
   2. Without discovery of the nonconformity  if the lessee’s acceptance was reasonably induced either by the lessor’s  assurances or, except in the case of a finance lease, by the difficulty  of discovery before acceptance.
2. Except in the case of a finance lease  that is not a consumer lease, a lessee may revoke acceptance of a  lot or commercial unit if the lessor defaults under the lease contract  and the default substantially impairs the value of that lot or commercial  unit to the lessee.
3. If the lease agreement so provides, the  lessee may revoke acceptance of a lot or commercial unit because of  other defaults by the lessor.
4. Revocation of acceptance must occur within  a reasonable time after the lessee discovers or should have discovered  the ground for it and before any substantial change in condition of  the goods which is not caused by the nonconformity. Revocation is  not effective until the lessee notifies the lessor.
5. A lessee who so revokes has the same rights  and duties with regard to the goods involved as if the lessee had  rejected them.

History. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-608.

Changes:

Revised to reflect leasing practices and terminology. Note that in the case of a finance lease the lessee retains a limited right to revoke acceptance. Sections 2A-517(a)(ii) and 2A-516 official comment. New subsections (b) and (c) added.

Purposes:

1. The section states the situations under which the lessee may return the goods to the lessor and cancel the lease. Subsection (b) recognizes that the lessor may have continuing obligations under the lease and that a default as to those obligations may be sufficiently material to justify revocation of acceptance of the leased items and cancellation of the lease by the lessee. For example, a failure by the lessor to fulfill its obligation to maintain leased equipment or to supply other goods which are necessary for the operation of the leased equipment may justify revocation of acceptance and cancellation of the lease.

2. Subsection (c) specifically provides that the lease agreement may provide that the lessee can revoke acceptance for defaults by the lessor which in the absence of such an agreement might not be considered sufficiently serious to justify revocation. That is, the parties are free to contract on the question of what defaults are so material that the lessee can cancel the lease.

Cross References:

Section 2A-516 official comment.

Definitional Cross References:

“Commercial unit”. Section 2A103 (a)(iii). “Conforming”. Section 2A-103(a)(iv). “Discover”. Section 1-201(a)(xxv). “Finance lease”. Section 2A-103(a)(vii). “Goods”. Section 2A-103(a)(viii). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Lot”. Section 2A-103(a)(xix). “Notifies”. Section 1-201(a)(xxvi). “Reasonable time”. Section 1-204(a) and (b). “Rights”. Section 1-201(a)(xxxvi). “Seasonably”. Section 1-204(c). “Value”. Section 1-201(a)(xliv).

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§ 34.1-2.A-518. Cover; substitute goods.

1. After a default by a lessor under the  lease contract of the type described in section 34.1-2.A-508(a), or,  if agreed, after other default by the lessor, the lessee may cover  by making any purchase or lease of or contract to purchase or lease  goods in substitution for those due from the lessor.
2. Except as otherwise provided with respect to damages liquidated in the lease agreement (section 34.1-2.A-504) or otherwise determined pursuant to agreement of the parties (sections 34.1-1-302 and 34.1-2.A-503), if a lessee’s cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (1) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and (2) any incidental or consequential damages, less expenses saved in consequence of the lessor’s default.
3. If a lessee’s cover is by lease agreement  that for any reason does not qualify for treatment under subsection  (b), or is by purchase or otherwise, the lessee may recover from the  lessor as if the lessee had elected not to cover and section 34.1-2.A-519  governs.

History. Laws 1991, ch. 14, § 1; 2015 ch. 124, § 2, effective July 1, 2015.

Official Comment

Uniform Statutory Source:

Section 2-712.

Changes:

Substantially revised.

Purposes:

1. Subsection (a) allows the lessee to take action to fix its damages after default by the lessor. Such action may consist of the lease of goods. The decision to cover is a function of commercial judgment, not a statutory mandate replete with sanctions for failure to comply. Cf. Section 9-625.

2. Subsection (b states a rule for determining the amount of lessee's damages provided that there is no agreement to the contrary. The lessee's damages will be established using the new lease agreement as a measure if the following three criteria are met: (i) the lessee's cover is by lease agreement, (ii) the lease agreement is substantially similar to the original lease agreement, and (iii) such cover was effected in good faith, and in a commercially reasonable manner. Thus, the lessee will be entitled to recover from the lessor the present value, as of the date of commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period which is comparable to the then remaining term of the original lease agreement less the present value of the rent reserved for the remaining term under the original lease, together with incidental or consequential damages less expenses saved in consequence of the lessor's default. Consequential damages may include loss suffered by the lessee because of deprivation of the use of the goods during the period between the default and the acquisition of the goods under the new lease agreement. If the lessee's cover does not satisfy the criteria of subsection (b), Section 2A-519 governs.

3. Two of the three criteria to be met by the lessee are familiar, but the concept of the new lease agreement being substantially similar to the original lease agreement is not. Given the many variables facing a party who intends to lease goods and the rapidity of change in the market place, the policy decision was made not to draft with specificity. It was thought unwise to seek to establish certainty at the cost of fairness. Thus, the decision of whether the new lease agreement is substantially similar to the original will be determined case by case.

4. While the section does not draw a bright line, it is possible to describe some of the factors that should be considered in finding that a new lease agreement is substantially similar to the original. First, the goods subject to the new lease agreement should be examined. For example, in a lease of computer equipment the new lease might be for more modern equipment. However, it may be that at the time of the lessor's breach it was not possible to obtain the same type of goods in the market place. Because the lessee's remedy under Section 2A-519 is intended to place the lessee in essentially the same position as if he had covered, if goods similar to those to have been delivered under the original lease are not available, then the computer equipment in this hypothetical should qualify as a commercially reasonable substitute. See Section 2-712(a).

5. Second, the various elements of the new lease agreement should also be examined. Those elements include the presence or absence of options to purchase or release; the lessor's representations, warranties and covenants to the lessee, as well as those to be provided by the lessee to the lessor; and the services, if any, to be provided by the lessor or by the lessee. All of these factors allocate cost and risk between the lessor and the lessee and thus affect the amount of rent to be paid. If the differences between the original lease and the new lease can be easily valued, it would be appropriate for a court to adjust the difference in rental to take account of the difference between the two leases, find that the new lease is substantially similar to the old lease, and award cover damages under this section. If, for example, the new lease requires the lessor to insure the goods in the hands of the lessee, while the original lease required the lessee to insure, the usual cost of such insurance could be deducted from the rent due under the new lease before determining the difference in rental between the two leases.

6. Having examined the goods and the agreement, the test to be applied is whether, in light of these comparisons, the new lease agreement is substantially similar to the original lease agreement. These findings should not be made with scientific precision, as they are a function of economics, nor should they be made independently with respect to the goods and each element of the agreement, as it is important that a sense of commercial judgment pervade the finding. To establish the new lease as a proper measure of damage under subsection (b), these factors, taken as a whole, must result in a finding that the new lease agreement is substantially similar to the original.

7. A new lease can be substantially similar to the original lease even though its term extends beyond the remaining term of the original lease, so long as both (a) the lease terms are commercially comparable (e.g., it is highly unlikely that a one-month rental and a five-year lease would reflect similar commercial realities), and (b) the court can fairly apportion a part of the rental payments under the new lease to that part of the term of the new lease which is comparable to the remaining lease term under the original lease. Also, the lease term of the new lease may be comparable to the term of the original lease even though the beginning and ending dates of the two leases are not the same. For example, a two-month lease of agricultural equipment for the months of August and September may be comparable to a two-month lease running from the 15th of August to the 15th of October if in the particular location two-month leases beginning on August 15th are basically interchangeable with two-month leases beginning August 1st. Similarly, the term of a one-year truck lease beginning on the 15th of January may be comparable to the term of a one-year truck lease beginning January 2d. If the lease terms are found to be comparable, the court may base cover damages on the entire difference between the costs under the two leases.

Cross References:

Sections 2-712(1), 2A-519 and 9-625.

Definitional Cross References:

“Agreement”. Section 1-201(b)(3). “Contract”. Section 1-201(b)(12). “Good faith”. Sections 1-201(b)(20). “Goods”. Section 2A-103(1)(h). “Lease”. Section 2A-103(1)(j). “Lease agreement”. Section 2A-103(1)(k). “Lease contract”. Section 2A-103(1)(l). “Lessee”. Section 2A-103(1)(n). “Lessor”. Section 2A-103(1)(p). “Party”. Section 1-201(b)(26). “Present value”. Section 2A-103(b)(28). “Purchase”. Section 2A-103(1)(v).

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§ 34.1-2.A-519. Lessee's damages for non-delivery, repudiation, default, and breach of warranty in regard to accepted goods.

1. Except as otherwise provided with respect to damages liquidated in the lease agreement (section 34.1-2.A-504) or otherwise determined pursuant to agreement of the parties (sections 34.1-1-302 and 34.1-2.A-503), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under section 34.1-2.A-518(b), or is by purchase or otherwise, the measure of damages for non-delivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.
2. Market rent 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.
3. Except as otherwise agreed, if the lessee  has accepted goods and given notification (section 34.1-2.A-516(c)),  the measure of damages for non-conforming tender or delivery or other  default by a lessor is the loss resulting in the ordinary course of  events from the lessor’s default as determined in any manner that  is reasonable together with incidental and consequential damages,  less expenses saved in consequence of the lessor’s default.
4. Except as otherwise agreed, the measure  of damages for breach of warranty is the present value at the time  and place of acceptance of the difference between the value of the  use of the goods accepted and the value if they had been as warranted  for the lease term, unless special circumstances show proximate damages  of a different amount, together with incidental and consequential  damages, less expenses saved in consequence of the lessor’s default  or breach of warranty.

History. Laws 1991, ch. 14, § 1; 2015 ch. 124, § 2, effective July 1, 2015.

Official Comment

Uniform Statutory Source:

Sections 2-713 and 2-714.

Changes:

Substantially revised.

Purposes:

1. Subsection (a), a revised version of the provisions of Section 2-713(a), states the basic rule governing the measure of lessee's damages for non-delivery or repudiation by the lessor or for rightful rejection or revocation of acceptance by the lessee. This measure will apply, absent agreement to the contrary, if the lessee does not cover or if the cover does not qualify under Section 2A-518. There is no sanction for cover that does not qualify.

2. The measure of damage is the present value, as of the date of default, of the market rent for the remaining term of the lease less the present value of the original rent for the remaining term of the lease, plus incidental and consequential damages less expenses saved in consequence of the default. Note that the reference in Section 2A-519(a) is to the date of default not to the date of an event of default. An event of default under a lease agreement becomes a default under a lease agreement only after the expiration of any relevant period of grace and compliance with any notice requirements under this Article and the lease agreement. American Bar Foundation, Commentaries on Indentures, § 5-1, at 216-217 (1971). Section 2A-501(a). This conclusion is also a function of whether, as a matter of fact or law, the event of default has been waived, suspended or cured. Sections 2A-103(d) and 1-103.

3. Subsection (b), a revised version of the provisions of Section 2-713(b), states the rule with respect to determining market rent.

4. Subsection (c), a revised version of the provisions of Section 2-714(a) and (c), states the measure of damages where goods have been accepted and acceptance is not revoked. The subsection applies both to defaults which occur at the inception of the lease and to defaults which occur subsequently, such as failure to comply with an obligation to maintain the leased goods. The measure in essence is the loss, in the ordinary course of events, flowing from the default.

5. Subsection (d), a revised version of the provisions of Section 2-714(b), states the measure of damages for breach of warranty. The measure in essence is the present value of the difference between the value of the goods accepted and of the goods if they had been as warranted.

6. Subsections (a), (c) and (d) specifically state that the parties may by contract vary the damages rules stated in those subsections.

Cross References:

Sections 2-713(a), 2-713(b), 2-714 and Section 2A-518.

Definitional Cross References:

“Conforming”. Section 2A-103(1)(d). “Delivery”. Section 1-201(b)(15). “Goods”. Section 2A-103(1)(h). “Lease”. Section 2A-103(1)(j). “Lease agreement”. Section 2A-103(1)(k). “Lessee”. Section 2A-103(1)(n). “Lessor”. Section 2A-103(1)(p). “Notification”. Section 1-202. “Present value”. Section 1-201(b)(28). “Value”. Section 1-204.

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§ 34.1-2.A-520. Lessee's incidental and consequential damages.

1. Incidental damages resulting from a lessor’s  default include expenses reasonably incurred in inspection, receipt,  transportation, and care and custody of goods rightfully rejected  or goods the acceptance of which is justifiably revoked, any commercially  reasonable charges, expenses or commissions in connection with effecting  cover, and any other reasonable expense incident to the default.
2. Consequential damages resulting from a  lessor’s default include:
   1. Any loss resulting from general or particular  requirements and needs of which the lessor 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. Laws 1991, ch. 14, § 1.

Official Comment

Uniform Statutory Source:

Section 2-715.

Changes:

Revised to reflect leasing terminology and practices.

Purposes:

Subsection (a), a revised version of the provisions of Section 2-715(a), lists some examples of incidental damages resulting from a lessor's default; the list is not exhaustive. Subsection (a) makes clear that it applies not only to rightful rejection, but also to justifiable revocation.

Subsection (b), a revised version of the provisions of Section 2-715(b), lists some examples of consequential damages resulting from a lessor's default; the list is not exhaustive.

Cross References:

Section 2-715.

Definitional Cross References:

“Goods”. Section 2A-103(a)(viii). “Knows”. Section 1-201(a)(xxv). “Lessee”. Section 2A-103(a)(xiv). “Lessor”. Section 2A-103(a)(xvi). “Person”. Section 1-201(a)(xxx). “Receipt”. Section 2-103(a)(iii).

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