California Civil Jury Instructions (CACI)

3331. Affirmative Defense to Locality Discrimination, Below Cost Sales, and Loss Leader Sales Claims - Closed-out, Discontinued, Damaged, or Perishable Items

[Name of defendant] claims that any [locality discrimination/below cost sales/loss leader sales] proven by [name of plaintiff] [is/are] within the law because the [product] was being sold as [a close-out/seasonal goods/damaged goods/perishable goods]. To succeed, [name of defendant] must prove both of the following:

1. That [his/her/its] sales were [insert one or more of the following:]

[in the course of closing out, in good faith, all or any part of [his/her/its] supply of [product], in order to stop trade in [product];] [or]

[of seasonal goods to prevent loss by depreciation;] [or]

[of perishable goods to prevent loss by spoilage or depreciation;] [or]

[of goods that were damaged or deteriorated in quality;] and

2. That [name of defendant] gave sufficient notice of the sale to the public.

Notice is sufficient only if:

1. The sale goods are kept separate from other goods;

2. The sale goods are clearly marked with the reason[s] for the sales; and

3. Any advertisement of such goods sets forth the reason[s] for the sale and indicates the number of items to be sold.

Directions for Use

This defense applies to locality discrimination, below cost sales, and loss leader sales only.

Sources and Authority

Business and Professions Code section 17050 provides, in part:

The prohibitions of this chapter against locality discriminations, sales below cost, and loss leaders do not apply to any sale made:

(a) In closing out in good faith the owner's stock or any part thereof for the purpose of discontinuing his trade in any such article or product and in the case of the sale of seasonal goods or to the bona fide sale of perishable goods to prevent loss to the vendor by spoilage or depreciation; provided, notice is given to the public thereof.

(b) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof.

. . .

The notice required to be given under this section shall not be sufficient unless the subject of such sales is kept separate from other stocks and clearly and legibly marked with the reason for such sales, and any advertisement of such goods must indicate the same facts and the number of items to be sold.

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 591- 596, pp. 534-539

1 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 1997), § 1.03B

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.153 (Matthew Bender)

49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition (Matthew Bender)

23 California Points and Authorities, Ch. 235, Unfair Competition (Matthew Bender)

(New September 2003)