Chapter 12: Sales and Lease Law Flashcards
Statutory Law governing ___________ and _____________ transactions / agreements are ______________ _______________ _____________.
Sales; lease; Uniform Commerical Code
Uniform Commercial Code (UCC)
- Model law proposed to become statutory law.
- Governs exchange of commercial goods.
_________________ ________________ benefits our nation.
Free commerce
What are Articles 2 and 2A of the UCC?
Article 2: governs sales contracts (obligations of each party in sales contract.)
Article 2A: governs lease contracts
Sales Contracts
Contracts for the sale of goods.
The _______________ law requirements of a _____________ contract (_____________, _____________, _____________ ___________, and ________________) are also applicable to _____________ contracts.
common; valid; agreement;consideration; contractual capacity; legality; sales
Remember, _________ eventually become state _____________ law. Because _____________ laws regulating ______________ contract arise from _________, and are also regulated by _______________ law requirements, if there’s ever a dispute between __________ and ____________ law contract requirements, _______ always takes control.
UCC; statutory; statutory; sales; UCC; common; UCC; common; UCC
REMEMBER, Article 2 deals with the sale of ____________, not ___________, or ____________. If the subject-matter of a contract regards _____________, then the _________ governs it. If it deals with anything otherwise, like real estate or ___________, then _____________ law governs the contract.
Bear in mind, these rules could vary depending on if the buyer or seller is a ______________.
GOODS; property; services; goods, UCC; services; common; merchant.
Sale
Passing of a title from buyer to seller for a price
Requisites for something to be considered a good?
For an item to be considered a “good,” it must be
- tangible
- moveable
Tangible Property
Has a real / physical existence; can be touched / seen
Intangible Property
Has a conceptual existence (i.e. copyright, patent, things usually found in contract rights)
- Therefore doesn’t recieve protection under UCC (bc UCC governs contracts regarding goods –> goods equal tangible / moveable items).
Moveable Item
can be carried from place to place
(real estate can’t be moved from place to place, and hence excluded from article 2).
Predominant-Factor Test
- employed whenever there’s a mixed contract (made for the purpose of selling goods and services)
Test employed by courts, deciding whether contract was made predominantly for the sale of goods, or the sale of services.
Regardless of what a court decides using the Predominant-Factor Test, the decision of whether a contract is mainly for the sale of ___________ or ___________ is left to the _________.
goods; services; UCC
Statute of Limitations
The only time in which a lawsuit can be filed. If the time passes (4, 6, 10 yrs) and you file the lawsuit, you will lose your chance to file the lawsuit.
Merchant
Someone in the business of buying or selling a Particular good, and uses certain expertise related to the particular good
(E.g. someone who sells tennis rackets in a sporting goods retail store.)
Why is it that the rules governing a sales contract under the UCC could vary if the buyer or seller is a merchant?
Because the merchant has an elevated level of expertise regarding the particular good.
Lease
Right to possess /use a good for a period of time in exchange for a payment.
Article 2A covers any transaction that involves the _____________ of a good, and any ________________ of a good. Article 2A does not cover the _____________ of __________ __________________ like land and buildings.
lease; subleases; lease; real property
The UCC usually comes into play when…
1) the parties to a contract fail to provide certain terms in contract (parties are allowed to make their own terms in a contract under UCC law).
2) the parties wish to change UCC’s terms in the application of the contract.
UCC Open Terms for a contract
Sales and Lease Contracts made under UCC won’t fail for “indefiniteness” if one or more terms are left open as long as
1) The parties intend to make the contract
2) There is a certain basis for which the court may provide a remedy.
Elaborate of these remedies the court may provide for indefiniteness in a sales or lease contract.
The court provides remedies for when the parties have not specified the…
1) the price of a good –> make open price terms.
2) the payment of the parties –> make open payment terms.
3) Where the goods are recieved –> make open delivery terms.
Open Price Terms
Court decides the fair price that is to be paid for a good.
Open Payment Terms
Court decides performing party is to recieve payment at TIME and PLACE at which the other party recieves the goods.
Open Delivery Terms
Court decides buyer will take delivery at the place of the seller’s business.
What happens if too many terms of a contract are left open?
The court will decide that there was no intent to form a contract anyways.
What happens if the “Quantity” term, which decides the volume of the good being exchanged for a price, is left open?
Courts won’t have basis for making a remedy.
Firm Offer
A MERCHANT-offeror gives assurance in signed writing that an irrevocable offer will remain open for a specified period of time
(can’t exceed 3 months).
UCC permits the Acceptance of an offer to buy goods by a _____________ promise or by the ______________ or __________ shipment of _____________ or _______________ goods.
prompt; prompt; current; conforming; nonconforming
Conforming goods ________ in accordance (they conform) to a _____________’s terms; Noncomforming goods __________ in accordance with a ____________’s terms.
are; contract’s; aren’t; contract’s
The prompt shipment of nonconforming goods both creates a contract, in that it follows the acceptance laws of the UCC, and simoultaneously breaches the contract because nonconforming goods shipped to the buyer without appropriate forewarning / notice, aren’t in accordance with the contract’s terms. What is an exception to this rule?
Seller seasonably (being shipped within a reasonable amount of time) notifies buyer of nonconforming goods being shipped, only as a favor to the buyer.
Under common law, when a contract is made, the offeree does not have to notify the offeror of when he/she starts performing the contract, unless offeree’s notification is literally the only way the offeror would be made aware of his/her performance. How does performance of a contract work under UCC?
The offeree’s performance IS their accpetance of the contract, so the offeree absolutely HAS to notify the offeror of their performance within a reasonable time.
Mirror Image Rule
Acceptance of terms of offer matches offer itself.
Take an example of the Common law Mirror Image Rule: I offer you a set number of Model A tablets at a certain price. You’re fine with the number of tablets and the price at which it is charged, HOWEVER, you counter and request Model E tablets. In this situation there would be no contract because, under the Mirror Image Rule, there wasn’t an unequivocal acceptance. How does the UCC’s Mirror Image Rule differ from this?
UCC’s Mirror Image Rule: offeree accepts offer WITH additional or different terms than what was proposed by the original offer.
(UCC doesn’t want one difference between the parties to entirely dissolve the contract.)
If one or both of the parties to a contract is a _________________, then ____________ is simply agreement to the _______________ terms of the contract, ______ added terms.
nonmerchant; acceptance; original; NO
Under Common law, consideration (legally sufficient or bargained-for) is required to be paid for performance (Unilateral) or promise (Bilateral). Under UCC, a _________________ to a contract does not entail a required _______________ (more ____________ essentially). However, if any _____________ are made to a sales or lease contract without ______________, it must be in ______________.
modification; consideration; money; changes; consideration; writing
Statute of Frauds
Provision in stating…
- Sales Contracts selling goods at $500 or more must be written to be enforceable.
- Lease Contracts selling goods w/ payments of $1,000 or more must be written to be enforceable.
_____________, and other _________________ records satisfy the Statute of Frauds requirements.
Email; electronic
Under the UCC’s Statute of Fraud provisions, the contract only needs to indicate the parties _______________ to form a __________________, and must be signed by the party against whom ____________________ is sought. With lease contracts, they only need to _______________ and _______________ the goods being leased, and the lease _____________.
intended; contract; enforcement; describe; identify; term
3 Exceptions to Writing Requirement of Statute of Frauds
1) Specially Manufactured Goods
2) Admissions
3) Partial Performance
1) Specially Manufactured Goods
Oral Contract is enforceable for…
- goods being manufactured is for a specific buyer (good can’t be leased or sold to anyone else).
AND
- seller has made substantial progress in manufacturing the good.
2) Admissions
The party to whom enforcement is sought (offeree) admits the oral contract is enforceable, regarding the quantity of goods (being bought and sold).
3) Partial Performance
Oral Contract that has been partially performed is enforceable TO THE EXTENT that it has been performed.
Unconscionability
one sided contract that is too burdensome and grossly unfair to one party, while the dominant party is the beneficiary.
Court’s options in dealing with an unconscionable contract.
1) Refuse to enforce contract.
2) Remove the unconscionable part
3) Limit the application unconscionable part to avoid unconscionable result.
Lessor
Party selling good under lease contract.
Lessee
Party buying good under lease contract.
Conforming Goods
goods that conform to the contract’s description in every way.
Tender of Delivery
Seller / Lessor offers good in a sales or lease contract to buyer / lessee, AND give buyer/lessee whatever notification is necessary to enable them to take delivery.
Tender of Delivery must take place at a _________________ _____________ in a _________________ _____________, enabling the buyer to take possession.
reasonable time; reasonable manner
Where are goods to be delivered between buyer/seller lessor/lessee?
1) Seller’s / Lessor’s place of business.
2) Seller’s residence
3) Location of goods (if both parties know where location, where goods are stored, is other than seller’s place of business)
Perfect Tender Rule
if the Seller’s / Lessor’s offer of goods / tender of delivery is not perfect, lessee and buyers are at the discretion to…
1) Accept the goods
2) Revoke the entire shipment
3) reject part & accept part.
An Exception to the Perfect Tender Rule
Cure
Cure
Right of Lessor and Seller to adjust, refine, fix defective / nonconforming goods
(in light of failing Perfect Tender Rule).
Why might the Seller / Lessor consider a “Cure”? :
1) ______________ of goods was ______________ by buyer / lessee.
2) ___________ of performance has not yet ______________.
3) Sellor or Lessor provides timely ______________ to the buyer or lessee with the intention of providing ______________.
4) The cure can be made “within contract time for performance.”
Delivery; rejected; Time; expired; notice; cure
_______________ ________________, making performance _______________ based on unforeseen events, is another __________________ to the Perfect Tender Rule.
Commercial Impracticability; impracticable; exception
If the goods shipped from the seller/ lessor are ___________________, by NO fault of the the parties invovled, “if the goods are __________________ by each party at the time the ______________ was formed,” their destruction can be used an _______________ of the Perfect Tender Rule. The lessor and sellor may be ______________ from performance, and the lessee/buyer may at this point _____________ the goods, or ______________ anything that can be recovered at a reduced price in the contract.
destroyed; identified; contract; exception; excused; reject; accept
Obligation of Buyer and Lessee under sales or lease contract:
to pay for goods tendered for delivery under contract.
What is the Right of Inspection for Buyer or Lessee
gives buyer or lessee right to inspect good being recieved, and if they’re nonconforming, or come not as ordered, the buyer/lessee have no duty to pay.
Anticipatory Repudiation (Breach of Contract)
Party vows not to perform contractual obligations at a future time, BEFORE both parties are required to perform.
How can nonbreaching party respond to anticipatory repudiation?
1) Nonbreaching party can treat breaching party’s repudiation as a final breach, and seek remedy [in court].
2) Nonbreaching party can stay in, and preform contractual obligaitons despite the other party vowing to not do theirs.
_________________ available to _________________ party of a sales or lease contract are _________________, meaning they’re not limited to just __________ remedy. However, one may not recover damages ____________ for the same harm (breach).
Remedies; nonbreaching; “cumulative”; one; twice
Remedies Available to Sellor / Lessor when there’s a breach before lessee and buyer recieve goods:
1) _____________ the contract.
2) _____________ delivery of goods (bc the buyer and seller cannot pay debts when they come due).
3) ____________ goods and _________ to recover damages.
4) _______ for ____________ ____________ of goods.
5) _______ to recover damages of buyer’s ____________ of goods.
Rescind; Withhold; Resell; sue; Sue; purchase price; Sue; nonacceptance
Remedies Available to Buyer / Lessee when Sellor / Lessor refuses to give goods, or when Buyer / Lessee reject delivery of goods:
1) _____________ the contract.
2) ___________ goods that have been __________ for (by Buyer/Lessee)
3) __________ to obtain ______________ ________________ if the goods are _____________.
4) Obtain a _____________, which are basically ______________ goods in place of what was originally ______________ but not delivered by Sellor / Lessor.
5) _________ to obtain _________________ goods wrongfully _____________ by third party.
6) _________ to obtain ________________.
7) ____________ of goods within a reasonable time.
Rescind; Obtain; paid; Sue; specific performance; unique; cover; substitute; promised; Sue; identified; withheld; Sue; damages; Rejection
Acceptance of goods by ____________ / _____________ precludes them from attempting ________________ of the goods. However, they can pursue other _______________, allowing them to ____________ of acceptance of the good–to stop all usage of it.
buyer; lessee; rejection; remedies; revoke
Buyer/Lessee must ____________ the Seller/Lessor of the ______________ of acceptance of the good within a ______________ time
notify; revocation; reasonable
A buyer or lessee may accept __________________ goods or goods with _____________, and still be able to recover ________________. To do this the buyer/lessee must ___________ Seller / Lessor of acceptance within a ______________ time after the _______________ was / should’ve been found. Failure to ____________ Seller/ Lessor within _______________ time bars buyer/lessee from seeking any ________________.
nonconforming; defects; damages; notify; reasonable; defect; notify; reasonable; remedies
A _____________ is a documented ____________ of a product’s _____________ by the Seller / Lessor. Breach of warranty could very well result in the buyer/lessee _________ to recover ______________.
warranty; guarantee; quality; suing; damages
3 Types of Warranties
Title Warranties
Implied Warranties
Express Warranties
3 Types of Title Warranties in Sales and Lease Contracts
1) Good Title
2) No Liens
3) No Infringement
Good Title Warranties (Title)
Sellers warrant that they have good and valid titles, and transferral of the title is rightful.
No Liens Warranties (Title)
Meant to protect buyers / lessees from unknown obstacles in contract, called “liens.”
No Infringement Warranties (Title)
Merchant seller warrants / promises that good given to buyer or lessee is free of copyright, patent, trademark (infringement) claims.
Express Waranty (3)
Sellor / lessor creates a representation of the quality, condition, performance potential of a good.
1) good conforms to affirmation (declearation) of fact / promise made by seller [about good].
2) good conforms to description of them.
3) good conforms to samples / models of them shown to buyer.
Basis of a bargain: to create an express warranty, the sellor doesn’t have to use words like “____________” or “___________.” The idea is that (competent) buyer / lessee would rely on the ________________ of the good (from _________ or ___________) as the basis for buying it.
“warrant”; “guarantee”; representation; sample; model
Only statements of ___________ constitute an ____________ warranty.
fact; express
Implied Warranty
A warranty the law derives by inference of a contractual transaction, or relative circumstances.
Implied Warranty of Merchantability: this implicit warranty of [the quality of] a good arises when a good being is sold by a ________________, who deals specifically with the __________ being sold or leased. For something to be “__________________,” the goods must be reasonably ____ for the ______________ purposes of which such __________ are used.
merchant; good; “merchantable”; fit; ordinary; goods
Implied Warranty of Fitness for a Particular Purpose: this warranty of a good arises when Seller or Lessor ___________ what the Buyer / Lessee want, and knows the _____________ _____________ for which the buyer / lessee plan to use the good for, and hence it’s the responsibility of the Seller or Lessor to provide ______________ goods based on their __________ and judgement call.
knows; particular purpose; suitable; skills
Warranties Implied from Prior Dealings or Trade Custom: when the parties to a contract have had ____________ dealings, and when both parties have knoweldge of a well-recognized _____________ ________________, the courts will infer that the parties intended to implement that ____________ _____________ in the contract.
prior; trade custom; trade custom.
