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contract expressly warranted that the manufacturer would replace or repair all defective parts within one year of the date the authority took delivery of the car. In a lawsuit between the authority and the manufacturer, the issue arose whether and to what extent the implied warranty of merchantability applied, considering the express warranty. On similar facts, the Third Circuit held that the implied warranty of merchantability applied, but only for the one- year period of the express warranty. Otherwise, the implied warranty of merchantability would be inconsistent with the express warranty. After all, there is no time limitation on the implied warranty of merchantability (apart from the applicable statute of limitations). Thus, the implied warranty could effectively extend many of the protections of the express warranty well beyond the one-year period. [ Adapted from N.J. Transit Corp. v. Harsco Corp. , 497 F.3d 323 (3d. Cir. 2007). But see Bell Sports, Inc. v. Yarusso , 759 A.2d 582 (Del. 2000).] VIII. Remedies Part 7 of Article 2 sets forth most of the seller’s and buyer’s remedies, though some remedial provisions appear elsewhere in Article 2. Normally, a breach of contract activates these remedies, which thus operate in the nonbreaching party’s favor. Some remedies apply in other situations, as when one party learns that the other is insolvent.
Special Remedies for Particular Contexts
Some of Article 2’s remedial provisions apply in special situations, such as (1) the buyer’s insolvency, (2) liquidated damages, and (3) restitution.
1. Seller’s Remedies on the Buyer’s Insolvency Section 2-702 affords the seller various remedies upon discovering that the buyer is insolvent. Namely, the seller may (1) refuse delivery unless the buyer pays in cash, including payment for any goods previously delivered under the same contract, and (2) stop delivery under § 2-705. Also, if the seller learns that the buyer has received goods on credit while insolvent, the seller may reclaim the goods. For these remedies to apply, the seller must discover the buyer’s insolvency sometime after the contract is made. [U.C.C. § 2-702(1)-(2) (1951); 2 Hawkland UCC Series § 2-702:1, Westlaw (database updated June 2021); Seller’s Right to Stop Delivery of Goods in a Bailee's Possession, infra .] a. Insolvency In the UCC, a party is insolvent if the party (1) has generally ceased paying debts in the ordinary course of business, except due to a bona fide dispute; (2) cannot pay debts as they mature; or (3) is insolvent within the meaning of federal bankruptcy law. In federal bankruptcy law, a party is generally insolvent if her total liabilities exceed the total value of her assets (with some exceptions). Insolvency may be implied if the buyer seeks financial
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