Biz Law - Sales Contracts

Question 1

Good

Answer 1

Tangible personal property that is movable at the time of identification to sales contract

Question 2

Real versus personal property

Answer 2

If contract calls for severing of property, law of ICC applies if seller is person who will sever property from land. If buyer severs the property, law of real property will apply to contract

Question 3

Tangible versus intangible property

Answer 3

Tangible property has physical existence. Intangible property has value but no physical existence.

Question 4

Future goods

Answer 4

Good not in existence or not identified to sales contract. Neither title nor risk of loss can pass from seller to buyer. It would be contract to sell rather than contract of sale.

Question 5

Fungible goods

Answer 5

Goods where any unit is equivalent to any other unit. These are exceptions requirement that portion that buyer is purchasing must be separated from the mass and identified to contract. Instead buyer gets fractional interest in the undivided whole.

Question 6

Merchant

Answer 6

Deals in goods, hold himself as merchant, and employs agent or broker who is merchant in goods.
UCC places higher standards on merchants than nonmerchants:
- For merchant good faith means honesty in fact an observation commercial standards
- for non-merchant good faith means honesty in fact

Question 7

Irrevocable offers

Answer 7

A written offer signed by merchant is irrevocable:
– For stated time in offer or reasonable time, but can’t exceed three months
- Does not require consideration. Called firm offers.

Question 8

Statute of frauds

and Doctrine of Past Performance

Answer 8

Contract for sale of goods for $500 or more must be in writing and signed.

Doctrine of Past Performance:
Oral agreement between merchants is enforceable if:
- One party send confirmation of oral agreement to other party and recipient does not object within 10 days after receipt.
- If involves specially manufactured goods and seller made goods/made substantial commitments to make before seller tries to revoke contract
- Party admits in court that contract was made
- Goods were accepted and paid by buyer
- Goods were received and accepted by buyer

Question 9

Passage of title from seller to buyer

Answer 9

Title passes when there’s a sale of goods.

Title passes only if good exist and are identified in contract. No future goods.

Question 10

Risk of loss

Answer 10

Attributes of ownership that makes person liable for Gammage or distraction of goods. Can only be with seller or buyer.
– Often passed along with legal title.
– Insurance owned by buyer or seller has no effect on risk of loss

Question 11

Insurable interest

Answer 11

A requirement of insurance that insured have insurable interest in property which is subject of policy. This is to prevent a person from obtaining insurance as a “gambling” transaction.

Question 12

Contract acceptance contain different terms from offer

Answer 12

Contract is formed unless acceptance is made conditional on assent by offeror to added or different terms.
If both parties are merchants, aded terms become part of contract unless:
– Offer states added or different terms are not permitted
– They materially alter the offer. Price and quantity are always material
– Receiving merchant objects to terms within reasonable time.

Question 13

Bailments

Answer 13

Delivery of possession of personal property from one person (bailor) to another (bailee) under an agreement where bailee is obligated to return property to Bailor or to a third-party designated by Bailor

Question 14

Bailee’s rights under bailment:

Answer 14

– Right to possess property
– May include right to use property
– May include right to compensation

Question 15

Bailor’s rights under a bailment

Answer 15

– Right to have property return
– Right to have property protected by use of due care by bailee
– May include right to be compensated

Question 16

Warranty

Answer 16

Assurance or guarantee the good will conform to certain standards

Question 17

Warranty of title

Answer 17

In a sales contract the seller warrants that the following are true:
– Title is good
– Transfer is rightful
– Goods are delivered free of any security interest or lein

Question 18

Express warranty

Answer 18

A warranty in oral or written words created by any of the following:
– Affirmation
– Promise
– Description
– Sample
– Model

Question 19

Implied warranties

Answer 19

Warranties imposed on goods by operation of law. Contracting parties need not even be aware of existence of implied warranties.

Question 20

Remedies for seller if buyer wrongfully rejects good or revokes acceptance of goods

Answer 20

– Withhold delivery of additional goods
– Stop delivery of goods in hands of common carrier or warehouse
– Identify goods to remainder of contract to determine damages
- Resell goods and recover damages
- Recover damages for nonacceptance of conforming goods
– Recover damages for the price
- Cancel the contract

Question 21

Anticipatory repudiation

Answer 21

Situation where one party indicates will not perform before the time performances due.
Wronged party may:
– Await performance
– Suspend own performance
– Sue immediately
Retraction: party that anticipatorily repudiates may retract unless wrongdd party: cancel contract, materially change position, indicates repudiation is considered final.

Question 22

Liquidated damages

Answer 22

Damages that are agreed-upon by parties at time of contracting and are contained in contract.
Used instead of proving compensatory damages after breach occurred.
Enforceable if reasonable when agreed-upon.

Question 23

Sale by auction

Answer 23

• Auction with reserve – auctioneer reserves the right to take goods off the block and not sell them. This is ordinary type. Goods taken off when bid price is lower than that set by owner as minimum sales price.
  – Auction without reserve: once auctioneer calls for bids on item, must be sold to the highest bidder.
• Bid is contractual offer. Can be withdrawn before acceptance. Accepted by auctioneer’s fall of the hammer. If withdrawn, prior bid not revived and auctioneer must restart by calling for new bids

Question 24

Statute of limitations on contract breach

Answer 24

After breach of contract, it is time period within which wrong party must start legal action, starting at time breach occurred.
For sale of goods contract = 4 years unless parties agree otherwise in contract.
Tolling: suspension of time period of statute of limitations, happens when wrongdoer is out of state’s jurisdiction

Question 25

Inspection of goods

Answer 25

Unless otherwise agreed, buyer has rights to inspect goods before being obligated to pay.
Inspection can be made after goods identified and before payment.
Cost is paid by buyer but buyer can recover cost if goods are nonconforming and are rejected by buyer.

Question 26

Casualty to identified goods

Answer 26

If goods are totally destroyed without fault of either party, both parties are excused from their performance obligations

Question 27

Strict liability

Answer 27

A tort liability involving sale of a defective or dangerous product. Seller can be held liable to user or consumer regardless of whose fault, or if following customs of industry. Only for sellers of manufactured products (retailers and manufacturers but not wholesalers)