Sales Law Flashcards
What sales are covered under the Uniform Commercial Code (UCC) Article 2?
Only sales of goods are covered under the UCC Article 2. Goods are defined as all things moveable. Includes most tangible personal property (e.g., cars, cows, and groceries).
What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?
- Offer and Acceptance
* *Acceptance: effective even if it states new or different terms. Those new/different terms will be ignored unless both parties are merchants, in which the terms of the acceptance now control unless offeror objects or changes are material. - Consideration
* *Output and requirements contracts are enforceable if the actual amounts are reasonable.
* *Modifications are enforceable even without consideration (unlike contract law) - Defenses
What are the elements of a Firm Offer?
Firm offers are offers by merchants that are irrevocable without consideration.
- The seller must be a merchant; and
- The offer must be in writing and signed by the merchant; and
- The offer must be kept open for a certain time (if no time is stated no longer than 3 months/90 days)
Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?
Sale of goods for $500 or more must be evidenced by writing signed by the party being sued.
Exceptions: (“SWAP”)
- Specially manufactured goods
- Merchant’s confirmatory memo rule - written confirmation with no objection within 10 days is binding
- Admission in court
- Contracts that have been performed to the extent that the performance has been accepted
What are the common shipping terms?
- FAS - “Free Along Side”: risk of loss passes to the buyer when the seller gets the goods along side of the vessel
- CIF - “Cost, Insurance and Freight”: risk of loss is on buyer during shipment
- FOB - “Free on Board”: FOB seller’s place is a shipment contract and the seller must get the goods to the carrier in order for the risk of loss to pass. FOB destination is a destination contract. Seller must get goods to the destination and tender delivery for risk of loss to pass.
What is Implied Warranty of Title?
The seller has good title and the right to transfer that title. Also impliedly warrants that there are no unstated encumbrances. If seller is a merchant, confirms that the goods do not infringe on any patent or trademark.
Cannot be disclaimed by a general disclaimer such as “as is” or “with all faults.” Only disclaimed specifically (e.g., I do not warrant title”) or by circumstance.
What is Implied Warranty of Merchantability?
Goods are fit for ordinary purposes. Only merchant sellers can make the implied warranty of merchantability. Can be disclaimed by using statements like “as is” or “with all faults.”
What is Implied Warranty of Fitness?
When the buyer relies on the seller to select goods suitable for the buyer’s particular purpose. Can be a merchant or nonmerchant. Can be disclaimed by selling the goods “as is” or “with all faults.”
What is strict liability with respect to buyer protection?
Manufacturers of goods cannot disclaim that their products will be safe
Can be liable if negligent
What are non-conforming goods with respect to buyer protection?
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
What is the statute of limitations with respect to buyer protection?
Buyer must sue to recover damages within 4 years of breach.
Who is a merchant?
One who deals in goods of the kind sold or who has special knowledge regarding the goods being sold.
Can acceptance by promise to ship or a prompt shipment be valid?
Yes, acceptance can occur by either a promise to ship or by prompt shipment unless the offer indicates otherwise.
A shipment of nonconforming goods is both an acceptance and a breach of contract.
Notices of accomodations are not acceptances but counteroffers.
What are the defenses for contracts under the UCC Article 2?
- Fraud (“MAIDS”) - may rescind AND sue for money damages
- Statute of Limitations - 4 years from breach
- Statute of Frauds - sale of goods for $500 or more must be evidenced in writing signed by the party being sued
* *See exceptions - Impossibility and impracticality
What are the steps in determining when Risk of Loss and Title passes between parties?
- Goods must be identified
- Designation as to when and where delivery will occur or risk of loss will pass in the agreement/contract
- If step 2 is not in the contract, then falls either in noncarrier cases or carrier cases
- Title can pass as the parties agree, but the goods must be identified in the contract
If the seller sells nonconforming goods, the risk of loss remains on the seller regardless of the shipping terms, unless buyer accepts defective goods.
