During a promotional sale, Alice bought a car from Bill for $10,000. Bill warran

Question

During a promotional sale, Alice bought a car from Bill for $10,000. Bill warranted that the car had no defects. The car would have been worth $11,000 had it complied with Bill's warranty. In fact, the car's transmission was defective; a breach of warranty. As a result, the actual value of the car was only $9,000. Alice paid $200 for a rental car when the transmission failed and she needed transportation. Alice has accepted the car, and intends to keep it.

Under the theories of obligation and performance, and given that Allison wants to keep the car, what can she do? What standard must she prove? What are her responsibilities as the buyer?Is Alice required to give Bill notice of the breach?
What can Bill do if Alice gives him notice?
How much in damages can Alice recover?
What other remedies might Allison have?

Answer using IRAC format: Issue, Rule, Analysis, and Conclusion

Explanation / Answer

1.            Under the theories of obligation and performance, and given that Allison wants to keep the car, what can she do?

The applicable law is governed by the UCC under express warranty. “An express warranty is a statement of fact or promise of performance relating to the goods that becomes a basis of the buy’s bargain” . Since Alice wants to keep the car, Bill has an obligation of good faith under the UCC concerning the performance of the contract. Under these circumstances Bill has committed a breach of an expressed warranty because the “basis for the bargain” was that the car was free of defect. She can also return the car to Bill and revoke the acceptance of the car since it does not conform to the contract and the defects substantially reduce the value of the car.

2.            What standard must she prove?

                Alice has to prove that the car did not conform to the contract and that devaluation of the car was substantial. It did not conform to the contract because it was not “free of defect”. If the car was worth $11,000 as warranted, the fact that it is now only worth $9,000 supposes that the loss is almost 20% of the cars value. That is substantial.

3.            What are her responsibilities as the buyer?

                Alice’s responsibilities include notification to the seller of revocation of acceptance. “The notice of revocation must be given within a reasonable time after the buyer discovered the problems with the goods”. Under buyer’s responsibilities, Alice must also “hold the goods and await instructions from the seller” .

4.            Is Alice required to give Bill notice of the breach?

                “Notice of Breach. If the buyer has accepted goods that do not conform to the contract or there has been a breach of any warranties given, the buyer must notify the seller of the breach within a reasonable time after the breach is discovered or should have been discovered”. In this instance, Alice must notify Bill of a breach of warranty an await instructions from Bill on his course of action.

5.            What can Bill do if Alice gives him notice?

                Upon notification of the breach, Bill has a “right to cure”. “The seller has a right to cure if the seller is able to make the cure within the time remaining on the contract”. Also, “Since the buyer is virtually required to permit the seller to attempt to repair the 'defects, he must await the time necessary for the seller to effect such a cure”. Bill has an obligation to either restore the car to its warranted condition or offer an alternative choice.

6.            How much in damages can Alice recover?

                Alice can recover incidental damages which are defined as “reasonable expenses incurred by one party to a contract as a result of the other party’s breach of the contract” (legaldictionary.net). Alice spent $200 incidental to the breach of warranty on a rental car therefore, Bill is liable for those expenses. If Bill refuses to fix the transmission Alice can sue for breach of contract, incidental damages and damages for non-delivery, market value. “If the seller fails to deliver the goods as required by contract or repudiates the contract, they buyer is entitled to collect damages for breach of contract”. Under revised Article 2 and previous Article 2 methods of determining value, in this case, market price and measured damages would be the same. Alice could receive a total of $2,200 (Difference in value from current condition $9,000 and warranted value, $11,000 plus the $200 for incidental damages, cost of the rental car).

7.            What other remedies might Allison have?

                Another remedy for Alice would be buyer’s action for damages for non-delivery, cover price. “A buyer may choose, as a remedy for the seller’s non-delivery of goods that conform to the contract, to purchase substitute goods or cover”. Alice has the option to select another car from the lot instead of having the original car fixed. The damages for the seller would be the difference in price of the original contract and the price of the new vehicle selected. The two cars do not have to be identical.

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