Bus 303 - Business Law II - Chapter 13

Future Goods

are goods that are not yet in existence or under the control of people

Several sales contracts usually occur for a particular item

before the item reaches the consumer and sometimes even after it reaches the consumer

A gift is not considered a sale

because it is not given for a price, even though title passes..

A bailment (item left at store to be sold on consignment) does not meet the definition of a sale

because title does not pass between the parties

The UCC applies when a contract is a contract

for the sale of goods

When a contract includes both goods and services

the dominant element of the contract determines whether it is a contract for goods or a contract for services

Sales contracts often occur

at a moment's notice with little or no preparation

Hidden terms and fine print found in purchase orders and invoices

might contain terms that contradict one another, however, they do not matter to the actual completion of the contract

A shipment of goods might have to get started

before all of the details of a deal are finalized

Under the UCC, every contract or duty

imposes an obligation of good faith; parties to a sales contract must act and deal fairly with each other

Usage of trade

any method of dealing that is commonly used in the particular field. Unless the parties express otherwise, a course of dealings or usage of trade may be used to supplement or qualify the terms of a sales contract

A contract may be made

in any manner that shows that the parties reached an agreement. It may be: oral (with some exceptions), in writing, or established by the conduct of the parties

An enforceable sales contract may come about even if

the exact moment of its making cannot be determined and even though some terms are not completely agreed upon

The offeree may accept the offer in

any manner and by any medium that is reasonable

A contract for the sale of goods comes into existence when the

acceptance is sent; as long as the method used to send it is reasonable

Unless the buyer indicates otherwise, an order or other offer to buy goods for prompt shipment

may be accepted by either a prompt shipment or a prompt promise to ship

Conforming goods are

those that are in accordance with the obligations under the contract

Nonconforming goods are

those that are not the same as those called for under the contract or that are in some way defective

A merchant is

a person who deals in goods of the kind sold in the ordinary course of business or who otherwise claims to have knowledge or skills peculiar to those. The UCC holds merchants to a higher standard than non-merchants

Firm offer

No consideration is necessary when a merchant in writing to hold an offer open for the sale or lease of goods. The writing must be signed by the merchant, and the time period for holding the offer open may not exceed 3 months

Open-price terms may occur when

the parties intend to be bound by a contract but fail to mention the price or decide to set the price later. A contract for the sale of goods may be established even though the price is not settled.

Output contracts occur when a seller agrees to sell

all the goods they manufacture to a particular buyer

Requirements contracts occur when a buyer agrees to buy

all the oil we need to heat our building or some similar requirement from a particular seller

A contract for the sale of goods occurs even though the acceptance states

terms that are additional to or different form those offered or agreed upon. If the parties are not both merchants, these new terms are treated as proposals for additions to the contract. If the parties are both merchants, the additional terms become part

An agreement modifying a contract for the sale of goods needs no

consideration to be binding. May be oral unless the original agreement is in writing and provides that it may not be modified except by a signed writing. Must be separately signed to be effective.

As long as the value of the goods involved in a sales contract do not exceed $500

the contract can be oral and still be enforceable. Once the price is $500 or more, the contact must be in writing to be enforceable.

If the total payments to be made under a lease are more than $1,000

the lease must be in writing to be enforceable

Exceptions to the writing requirement for contracts for the sale of goods for $500 or more and the lease of goods for $1,00 or more:

1. Oral contracts between merchants in which a confirmation has been received by one party and not objected by the other party
2. Specially manufactured goods
3. Admissions in court
4. Executed contracts

If either merchant receives a written confirmation of the oral agreement from the other merchant within a reasonable time

and does not object to it in writing within 10 days, the writing is sufficient even though it hasn't been signed by the other party. This applies only to merchants. Any objection to the original confirmation must be in writing.

Specially manufactured goods: if the seller has made

either a substantial beginning in manufacturing the goods or commitments to buy them, the oral agreement will be enforceable

Admissions in court: If the party against whom enforcement is sought admits in court that

an oral contract for the sale of goods was made, the contract will be enforceable, however, only up to the quantity of goods admitted.

Executed contracts (those that have been carried out)

need not be in writing. If there has been a part payment or a part delivery, the court will enforce only that portion of the agreement that has been performed

The writing that is required to satisfy the UCC: must indicate that a contract for sale has been made between the parties and mention the quantity of goods being sold.

It must also be signed by the party whom enforcement is sought (the defendant). A writing is acceptable even though it omits or incorrectly states an agreed-upon term. A contract will not be enforceable beyond the quantity of goods shown in such writing.

Title or valid title is

the right of ownership of goods. People who own goods have title to them

A bill of sale is

a written statement that provides evidence of the transfer or personal property from one person to another. It does not prove, however, that the seller had perfect title to the goods

If a seller has void title (no title at all)

buyers of of the goods obtain no title to them. The continued sales of stolen property through several innocent buyers would not in any way defeat the real owner's right to the property.

Innocent purchasers may

bring suit against the person from whom the stolen goods were purchased for breach of warranty of title

With the exception of voidable title

buyers of goods acquire whatever title their sellers had to the property

Voidable title means

that the title may be voided if the injured party elects to do so. This kind of title is also received when good are purchased fro ma minor or a person who is mentally impaired. Anyone with voidable title is able to transfer good title to others, known as

When goods are entrusted to a merchant and the merchant sells the goods

in the ordinary course of business to one who has no knowledge of the real owner's rights, that individual receives good title to them. The original owner loses title altogether but may bring an action against the merchant for money damages caused by the

When goods are to be picked up by the buyer

and in few other cases, whoever has title to the goods bears the risk of loss. Goods must be identified in the contract before the title can be transferred to the buyer. Once goods are identified, title passes to the buyer when the seller does whatever is

A shipment contract is

one in which the seller turns the goods over to a carrier for delivery to the buyer. Both title and risk of loss pass to the buyer when the goods are given to the carrier.

When goods are sent F.O.B the place of shipment they will be delivered free to the place of shipment.

- buyer pays all shipping charges;
- title and risk of loss pass at the point of origin;
- buyer accepts full responsibility during transit;
- delivery to the carrier by the seller and acceptance by the carrier complete the transfer of title and risk of l

A destination contract is

a contract that requires the seller to deliver the goods to a destination. Both title and risk of loss pass to the buyer when the seller tenders the goods at the place of destination

When goods are sent F.O.B the place of destination they belong to

the seller until they have been delivered to the destination shown on the contract. The risk of loss remains with the seller until the goods are tendered at destination

When terms of shipment do not specify shipping point or destination it is

assumed to be a shipment contract

When the contract calls for the buyer to pick up the goods title passes to the buyer when

the contract is made. If the seller is a merchant, the risk of loss passes when the buyer receives the goods. If the seller is not a merchant, the risk of loss passes to the buyer when the seller tenders the goods to the buyer

Fungible goods have

no important characteristics that identify them as coming from a particular supplier, and they are usually sold by weight or measure. TItle may pass without the necessity of separating the goods sold from the bulk.

A document of title is

a paper giving the person who possesses it the right to receive the goods named in the document. Both title and risk of loss pass to the buyer when the document is delivered to the buyer

Title of the goods return to the seller when:

- the buyer refuses to accept the goods
- the buyer accepts the goods and then for a justifiable reason revokes acceptance

When the seller send goods to the buyer that do not meet the contract requirements

the risk of loss remains with the seller. If the buyer has insurance and has justifiably rejected the goods, the insurance will cover the loss. If the buyer has no insurance the risk of loss remains with the seller as before

When the buyer breaches the contract, the seller may

treat the risk of loss as resting with the buyer, that is, only if the seller has no insurance

In international sales, the risk of loss passes to the buyer when

goods are handed over to the first carrier for transmission to the buyer, unless the seller agrees to hand them over at a particular place. In that case, the risk of loss passes the buyer at that time

International sales: When goods are sold while in transit, the risk of loss passes to the buyer

when the contract is made. In all other situations, the risk of loss, generally, a passes when the buyer takes over the goods. This does not apply to goods bought for personal, household, or family use, or to service. Liability of the seller is not covere

Sales on approval allows goods to be returned even though

they conform to the contract and are primarily for the buyers use. These goods remain the property of the seller until the buyer's approval has been expressed in either written or oral form or by action

Sales or return allows goods to be returned even though

they conform to the contract and are delivered primarily for resale. The buyer takes title to the goods with the right to reinstate title in the seller after a specified period or reasonable time. Buyer must accept all obligations of ownership while in po

People must have an insurable interest in property to be able to

place insurance on it. An insurable interest is the financial interest that an insured party has in the insured property. Buyers may place insurance on goods the moment a contract is made and the goods are identified in the contract.