Chapter 15: The Formation of Sales and Lease Contracts Flashcards
What contracts does the UCC cover?
Sales and Lease contracts
The UCC attempts to provide a ____________________________ of rules to deal with all phases ordinarily arising in a commercial sales or lease transaction
Consistent, integrated framework
A contract for the sale of goods
Sales contract
Article 2 of the UCC
Sales
Article 3 of UCC
Negotiable Instruments
Article 4 of UCC
Bank Deposits-Collections
Article 9 of UCC
Secured Transactions
Article 2A of UCC
Lease Contracts
The passing of a title to property from the seller to the buyer for a price
Sale
The item of property must be
Tangible and moveable
Property that has physical existence and can be distinguished by the senses of touch and sight
Tangible Property
Property that cannot be seen or touched but exists only conceptually, such as corporate stocks (not covered by article 2)
Intangible Property
A test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services
Predominant Factor Test
If a contract is primarily for goods,
UCC applies to all disputes
Goods associated with real estate can fall under the UCC. How?
If they can be severed by the seller
A merchant is a person who
Deals in goods of the kind involved in the sales contract
By occupation, holds him/herself out as having special knowledge and skill related to the practices or goods involved in the transaction
Employs a merchant as a broker, agent, or other intermediary
A transfer of the right to possess and use goods for a period of time in exchange for payment
Lease
An agreement in which one person agrees to transfer the right to the possession and use of property to another person in exchange for rental payments
Lease Agreements
A person who transfers the right to the possession and use of goods to another in exchange for rental payments
Lessor
A person who acquires the right to the possession and use of another’s goods in exchange for rental payments
Lessee
What are the 3 elements to consumer Leases?
A lessor who regularly engages in the business of leasing or selling
A lessee who leases the goods primarily for a personal, family, or household purposes
Total lease payments that are less than $25,000
UCC comes into play only when the parties have failed to provide for
Contingency that later gives rise to a dispute
The moment a definite offer is met by an unqualified acceptance, what is formed?
A Binding Contract
The UCC states that a sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as
Parties intended to make a contract
Reasonably certain basis of the court to grant an appropriate remedy
This must be expressly stated in the contract
Quantity of goods
If parties have not agreed on a price, the court will determine a reasonable price when?
At the time of delivery
Honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade
Good Faith
Unless otherwise agree, payment is due when?
On delivery
The buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer needs or requires
Requirements Contracts
Implicit Consideration in a requirements contract because?
The buyer gives up the right to buy goods from any other seller, and this forfeited right creates a legal detriment
Seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces
Output Contracts
UCC imposes this on requirements and outputs contracts
Good Faith Limitation
AN offer by a merchant that is irrevocable without the necessity of consideration for a stated period of time, or, if no definite period is stated, for a reasonable time, neither period to exceed three months
Firm Offer
Occurs when a merchant-offeror gives assurances in a signed writing that the offer will remain open
Firm Offer
A merchant’s firm offer is irrevocable without this
Necessity of consideration
Generally made in any reasonable manner and by any reasonable means
Acceptance
UCC permits acceptance of an offer to buy goods with or by a prompt promise to ship or by the prompt or current shipment of
Conforming or Nonconforming goods
Accord with the contract’s terms
Conforming Goods
Do not accord with the contract’s terms
Nonconforming Goods
Prompt shipment of nonconforming goods constitutes what?
An acceptance and a breach of that contract
Within a specified time period or, if no period is specified, within a reasonable time
Seasonably
If the offeror is not notified within a reasonable time that the offeree has accepted the contract by beginning the performance, then the offeror can treat the offer as having
Lapsed Before having acceptance
The UCC __________ the mirror image rule
Dispenses
When one party or both are nonmerchants, a contract is formed according to the terms of whom?
The original offer submitted by the original offeror
When both parties are merchants, additional terms automatically become part of the contract unless
Original offer expressly limits acceptance to its terms
New or changed terms materially alter the contract
Offeror objects to the new or changed terms within a reasonable period of time
The UCC does not require a contract modification to be supported by this
New consideration
The statute of frauds applies to sales contracts priced at _____ or more
$500
The statute of frauds applies to lease contracts requiring payments of _____ or more
$1000
The writing of consideration will be sufficient as long as it indicates that the parties intended to form a contract and it is signed by the party against whom
enforcement is sought
What are the three exceptions to the statute of frauds of consideration
Specially Manufactured Goods
Admissions
Partial Performance
Testimony or other evidence of the parties’ prior negotiations, prior agreements, or contemporaneous oral agreements
Parol Evidence
The terms of a fully integrated contract cannot be contradicted by evidence of any prior agreements or contemporaneous oral agreements
Parol Evidence Rule
A sequence of previous actions and communications between the parties to a particular transaction that establishes a common basis for their understanding
Course of Dealing
Course of dealing is restricted to that previous sequence of
Actions and communications
Course of dealing is relevant in ascertaining what?
The meaning of the parties’ agreement
Course of dealing may give particular meaning to
specific terms of the agreement
Course of dealing may supplement or qualify
terms of the agreement
Any practice or method of dealing that is so regularly observed in a place, vocation, or trade that the parties justifiably expect or should expect to be observed in their transaction
Usage of Trade
The conduct that occurs under the terms of a particular agreement
Course of Performance
Indicates what the parties to that agreement intended it to mean
Course of Performance
When construction is unreasonable, this order of priority controls
Express Terms
Course of Performance
Course of Dealing
Usage of Trade
One that is so unfair and one sided that it would be unreasonable to enforce it
Unconscionable contract
When the contract is unconscionable, the court can
Refuse to enforce the contract
Enforce the remainder of the contract without the unconscionable clause
Limit the application of any unconscionable clauses to avoid and unconscionable result
The right to ownership
Title
In a sale of goods, the express designation of the goods provided for in the contract
Identification
Takes place when specific goods are designated as the subject matter of a sales or lease contract
Identification
Identification of existing goods takes place when?
At the time the contract is made
Identification of future goods takes place when?
When the goods are shipped, marked, or otherwise designated by the seller or lessor as the goods to which the contract refers
Goods that are part of a larger mass are identified when?
When the goods are marked, shipped, or somehow designated by the seller or lessor
Goods that are alike by physical nature, agreement, or trade usage
Fungible Goods
In a passage of title, this statement must appear
“Unless otherwise explicitly agreed”
Without an explicit agreement to the contrary, title passes to the buyer when and where?
At the time and place the seller performs by delivering the goods
A contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier
Shipment Contract
With a shipment contract, the seller assumes liability for any losses or damage to the goods until when?
They are delivered to the carrier
A contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier and tender delivery of the goods at a particular destination
Destination Contract
With a destination contract, the seller assumes liability for any losses or damage to the goods until when?
They are tendered at the destination specified in the contract
Title passes in a shipment contract when
Goods are shipped
Title passes in a destination contract when
Goods are tendered at that destination
A paper exchange in the regular course of business that evidences the right to possession of goods
Document of Title
When a document of title is required, title passes to the buyer when?
When and where the document is delivered
When no documents of title are required and delivery is made without moving the goods, title passes when?
When and where the sales contract is made
If the goods have not been identified, title does not pass until when?
Identification occurs
If the seller is a thief, the seller’s title is
Void
If the seller is a thief, the real owner can do what?
Reclaim the goods from the buyer
Titles are voidable if the goods that he or she is selling were obtained by
Fraud
Dishonored check
From a minor
On credit when the seller was insolvent
A condition in which a person cannot pay his or her debts as they become due or ceases to pay debts in the ordinary course of business
Insolvent
