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REG > Sales Law > Flashcards

Sales Law Flashcards

2
Q

What sales are covered under the Uniform Commercial Code (UCC)?

A

Only sales of goods are covered under the UCC.

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3
Q

What are the elements of a Firm Offer?

A

You offer to sell something at a price and keep that offer open for a set period of time

3 months max

Only merchants can make firm offers

Must be in writing and signed

Becker: Assurances must be made to keep offer open, but no longer than 3 months! Must be in writing! There is no need for consideration under a merchant firm offer.

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4
Q

What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?

A

Offer - You offer to sell something at a price

Acceptance - the other party accepts

Consideration - Something of value has been exchanged for the goods

Note: The UCC only covers sales of goods.

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5
Q

Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?

A

If value of goods sold is >$500; sales contract must be in writing

Exceptions: Merchants can enter into oral contracts for > $500 items.

Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)

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6
Q

What is Warranty of Merchantibility?

A

This good will do its intended purpose, ordinary purpose

Only warranty that requires a merchant seller (note that the buyer does not need to be a merchant)

Can be disclaimed (if mentioning “merchantability” or by conspicuous written disclaimer)

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7
Q

What is a Warranty of Title?

A

The seller has the right to sell the good and no one else can stake claim to that good

All items sold must have Warranty of Title

Can NOT be disclaimed

Becker: Can be disclaimed by specific language or circumstances showing seller does not claim title. A general disclaimer is not effective.

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8
Q

When does title and risk of loss transfer on a sale of goods?

A

If terms are:

FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck)

FOB destination: Title and risk transfers once item is delivered

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9
Q

What is Warranty of Fitness?

A

This good is the right choice for you based on the seller’s expert opinion.

Can be disclaimed

Becker: Buyer must rely and the seller must know of the particular “fitness”. Note: you do not need to be a merchant to imply this warranty.

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10
Q

What is strict liability with respect to buyer protection?

A

Manufacturers of goods cannot disclaim that their products will be safe

Can be liable if negligent

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11
Q

What is the statute of limitations with respect to buyer protection?

A

Buyer must sue to recover damages within 4 years.

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12
Q

What are non-conforming goods with respect to buyer protection?

A

Buyer can reject some or all of the shipment if the seller didn’t perform as agreed and ship what was expected

Must give notice

Must give seller a chance to remedy the situation

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13
Q

How can goods be described?

A

All things moveable, includes most tangible personal property.

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14
Q

What is excluded from UCC law (thus included in contract law)?

A

RISE - real estate (including things attached to land), insurance, services, and employment

Intangible personal property (i.e. stock, patent rights)

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15
Q

What are merchants?

A

They are dealers, they deal in goods of the kind sold or have special knowledge regarding the goods being sold. Dealers are held to commercial standards (a higher standard) than non-dealers.

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16
Q

Is the UCC limited to merchants?

A

No - they apply to ALL contracts for sale of goods, including personal and garage sales.

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17
Q

Is good faith required on both parties to a sales contract under UCC?

A

Yes - both parties.

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18
Q

How do you create a contract under UCC?

A

Same rules as contract law - offer and acceptance, consideration, and lack of defenses.

Most offers are revocable, with the exception of a consideration made for an option and, under UCC, merchant firm offers (no consideration necessary).

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19
Q

What is the statutory time limit for Merchant Firm Offers under UCC?

A

3 months max, or earlier if specifically stated.

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20
Q

How will a merchant keep an offer open for more than 3 months?

A

Make an option, no statutory time limit on options.

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21
Q

Does the mirror-image rule apply under UCC?

A

No. The mirror-image rule only applies to acceptance in common law contracts, not acceptance in UCC contracts.

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22
Q

If prompt shipment of goods is a valid acceptance, what happens if the seller ships goods that do not conform to the contract?

A

A shipment of nonconforming goods is both an acceptance and a breach.

Exception: A seller may avoid breach if the buyer is reasonably notified that the nonconforming goods are an “accommodation”. The shipment is no longer an acceptance, but rather a counter offer. THIS ONLY APPLIES TO PROMPT SHIPMENT (unilateral acceptance), not a promise to ship (bilateral acceptance).

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23
Q

How do changes in a UCC offer effect its acceptance?

A

New or different terms are ignored, unless the contract is between merchants. If between merchants, and changes are immaterial, there is acceptance; if changes are material, there is no acceptance.

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24
Q

What special rules apply to auctions under UCC?

A

Generally, the bid is the offer, fall of the hammer the acceptance.

Unless otherwise stated, all auctions are with a reserve.

25
Q

What is the general rule of consideration under UCC?

A

Quantity is the only essential term, except in Output and Requirements Contracts.

Modifications are enforceable without consideration (unlike common law or RISE contracts). Everyone must agree in good faith.

You can pay by cash or check unless specifically stated.

26
Q

What is an Output and Requirements Contract?

A

Output contract - buyer agrees to buy the entire output over a period of time.

Requirements contract - seller agrees to supply a buyer with all requirements over a period of time.

Although exact quantities are unknown in output and requirements contracts, they are enforceable if reasonable.

27
Q

What are the exceptions to the Statute of Frauds under UCC?

A

Remember that the Statute of Frauds (MYLEGS) must evidence a contract in writing and be signed by the defendant to be enforceable

The exception under UCC is S.W.A.P.

  • Specially manufactured goods (“custom” or “tailored” goods)
  • Written merchant’s confirmatory memo, if not objected within 10 days
  • Admitted to in court
  • Performance (order is fulfilled, payment is made, etc.)
28
Q

What is the seller’s duty on delivery?

A

Generally, there is no duty to deliver, only a notice that that the goods are ready.

29
Q

What is risk of loss?

A

The party which bears the loss if the goods are destroyed. Risk of loss generally depends on the time delivery is made.

30
Q

For risk of loss to pass, goods must first be……

A

Identified (marked, segregated, or separated for the buyer).

31
Q

How do you determine risk of loss?

A

Step 1: See if the parties agreed under contract terms.

If not, Step 2: Is it a non-carrier case or a carrier case?

If non-carrier (i.e. no delivery involved) - If seller is non merchant, risk passes on tender of delivery (i.e. when seller says, “this stuff is yours”). If seller is merchant, risk passes on actual delivery.

If carrier case (i.e. delivery involved) - if Shipment Contract, seller’s risk until delivered to the carrier (i.e. “inside the truck” standard). If Destination Contract, seller’s risk until goods have arrived at destination.

Remember that a breach of nonconforming goods never shifts risk to the buyer unless the buyer accepts the defective goods.

32
Q

What are some common shipment contract terms?

A

F.A.S. - Free along side; for boats, only have to put on loading dock vs. truck, must be inside.

C.I.F. - Cost of goods, insurance and freight.

Buyer assumes risk of loss once seller delivers to carrier

33
Q

What does Free on Board (FOB) mean?

A

This is the most common delivery term.

If FOB names seller’s place of business, it is a shipment contract (i.e. buyer’s risk of loss upon delivery to carrier).

If FOB names buyer’s place of business, it is a destination contract (i.e. seller’s risk of loss until goods arrive at destination).

34
Q

Under the UCC, all sales are…..

A

Final, unless otherwise agreed.

Two types of nonfinal sales: Sale on Approval and Sale or Return

35
Q

What is the nonfinal Sale on Approval?

A

The sale is not final until the buyer “approves” (i.e. a sale with a trial period). Title and risk of loss remain with seller until approval.

36
Q

What is the nonfinal Sale or Return?

A

The sale is completed, but the buyer has the right to return (sale on consignment). Risk of loss passes to the buyer until goods are returned.

37
Q

When can you insure goods as a buyer?

A

As soon as the seller identifies the goods (i.e. don’t need possession, don’t need to make payment). Goods can be insured simultaneously by both parties.

38
Q

Is risk of loss determined by who has title?

A

No, its determined by the contract terms. If there are no terms, then UCC provides risk of loss rules under carrier vs. non-carrier cases.

39
Q

Title can generally pass when….

A

the parties agree or, if they do not agree, upon delivery (shipment or destination). If the buyer rejects the goods, title revests with seller.

40
Q

Name the 4 warranties to fulfill perfect tender.

A

1) Express Warranties - oral or written
2) Implied warranty of title
3) Implied warranty of merchantability
4) Implied warranty of fitness

41
Q

What does it mean when a seller must make “perfect tender”?

A

The goods and delivery must conform exactly to the contract without any defects AND to all warranties, express and implied.

42
Q

True or False: Express warranties are statements of fact and/or opinion.

A

False, express warranties are statements of fact. They are part of the basis of the bargain (i.e. induced the buyer’s decision to buy)

43
Q

True or False: Express warranties must be made in writing.

A

False, they can be oral or in writing.

44
Q

Can any seller make an express warranty?

A

Yes (merchants and nonmerchants), and they are very difficult to disclaim

45
Q

What is an implied warranty of title?

A

Implied in every sales contract is the warranty that the seller has good title and the right to transfer that title (i.e. no encumbrances, no infringements)

46
Q

What happens when an implied warranty of title is specifically disclaimed?

A

This indicates the seller is not guaranteeing title - be careful, these may be stolen goods.

Note: a general disclaimer never disclaims title.

47
Q

What warranties survive general disclaimers, “as is” “with all faults”?

A

Express warranties and title warranties.

48
Q

What warranties can never be disclaimed?

A

Express warranties.

49
Q

Name 3 types of tort liability.

A

Fraud, Negligence and Strict Product Liability

50
Q

What is Negligence?

A

Focuses on conduct. A plaintiff must prove:

  • Duty of care
  • Failed to use due care
  • Suffered damages
  • damages caused by the negligence
51
Q

What is Strict Products Liability?

A

Focuses on product. A plaintiff must prove:
Elements:
-Defective product
-Caused injury
-Unreasonably dangerous
-Seller in the business of selling the goods
-No substantial changes

Privity is not required. Negligence (conduct) is not required.

52
Q

What remedies are available under UCC to the seller?

A

If for breach:

  • Cancel and sue for damages
  • Withhold delivery/Stop goods in transit

If buyer is insolvent:

  • Stop goods in transit unless paid in cash (“guaranteed COD”)
  • Reclaim goods within 10 day of receipt

A seller has the right to resell and sue for damages.

UCC also affords a liquidated damages, either in contract or not. Any down payments could be used for this (lesser of $500 or 20% of price)

53
Q

What remedies are available under UCC to the buyer?

A

Buyer has most options:

  • May reject all, some, or accept if not perfect tender. Note: must be made in reasonable time, state reasons for objection, seller has right to cure, and buyer has right to inspect (unless COD).
  • Cancel or rescind for any defect
  • Sue for damages (for accepted nonconforming the value difference, for rejected/undelivered the value difference of comparable goods “cover”)
  • Specific performance if goods are unique
  • If goods identified, recovering the goods in insolvency.
54
Q

What is voidable title?

A

If you are defrauded into selling into giving title, and the goods have since been sold to a bona fide purchaser for value, the purchaser gets good title. The defrauded owner can no longer recover the goods.

55
Q

What is Entrusting?

A

If goods are: (1) entrusted to a merchant and (2) sold in the ordinary course of business, the purchaser gets good title. For example, a ring given to a jeweler for cleaning which accidentally gets sold.

56
Q

In a shipment contract involving nonconforming goods, what happens to title? What happens to risk of loss?

A

Title is always transferred at delivery, unless specified in the agreement.

Risk of loss, however, is never transferred from seller if nonconforming goods are delivered.

REG (18 decks)

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