UCC Article 2 Flashcards
1
Q
What is the Uniform Commercial Code (UCC) supplied term (i.e., assumed term) if a contract term has an open time for contracted performance?
A
In absence of agreement, it is a reasonable time.
2
Q
What happens to additional terms in acceptance-merchants?
A
Additional terms become part of the contract unless they are material, the offer is limited, or the party objects.
3
Q
What is the result of a shipment of a nonconforming goods delivery?
A
- Acceptance and automatic breach; 2. Not an acceptance if shipper notifies that shipment is only an accommodation.
4
Q
The ___ ___ ___ is the passage of title of goods from a seller to a buyer for a price.
A
sale of goods
5
Q
A ____ is a person who deals in goods of the kind being sold, or a person who by occupation holds himself or herself out as having knowledge or skill.
A
merchant
6
Q
In what special circumstances will an offeree’s additional terms not be valid when both parties in the transaction are merchants?
A
- The offeror limits acceptance to his or her terms; 2. The additional terms materially alter the contract; 3. The offeror specifically with notice objects to the additional terms.
7
Q
What is the Uniform Commercial Code (UCC) supplied term (i.e., assumed term) if a contract term has an open price term?
A
A reasonable or market price at the time of delivery will apply or if price is to be fixed by either party good faith is required in doing so.
8
Q
List the requirements for a sale of goods contract.
A
Intent; Object; Quantity.
9
Q
What happens to additional terms in acceptance-non-merchants?
A
Additional terms do not become part of the contract - original offer terms control.
10
Q
Is consideration required for the modification of a contract?
A
No consideration required; good faith is required.
11
Q
What law governs the sale of goods?
A
Uniform Commercial Code - Article 2.
12
Q
Describe the concept of a merchant’s battle of the forms.
A
Formation situation in which boiler plate language in merchant’s individual forms adds terms to the original offer.
13
Q
What is the Uniform Commercial Code (UCC) supplied term (i.e., assumed term) if a contract term has an open payment term?
A
Payment is due at time and place buyer is to receive the goods.
14
Q
Describe the elements of a merchant’s firm offer.
A
- Offer by a merchant; 2. States that it will be kept open (max of 3 months); 3. Signed or authenticated by merchant. Irrevocable for time stated or max of 3 months.
15
Q
What is the Uniform Commercial Code (UCC) supplied term (i.e., assumed term) if a contract term has an open place of payment term?
A
Seller’s place of business or if none residence.
16
Q
List the three methods by which a seller can accept a buyer’s shipment order.
A
- Delivery of conforming goods to carrier; 2. A prompt promise to ship; or 3. Shipment of nonconforming goods delivery without notice of accommodation.
17
Q
All movable and tangible personal property other than money, investments, securities and things in action are defined as ____.
A
goods
18
Q
When studying Article 2, use the ____ formula.
A
AFTPDT
19
Q
Explain/Discuss the meaning of the AFTPDT formula, for studying UCC Article 2.
A
Application - when do I apply the UCC Article 2 to a contract? This question often controls the answer to questions you will have on the exam. Understanding when to apply the UCC determines whether you will get your answer correct! Formation - when is a contract formed under the UCC Article 2? Terms - what are the terms of a UCC Article 2 contract? Performance - what is required for performance under a UCC Article 2 contract? Damages - what damages are available to buyers and sellers under the UCC Article 2? Title and Risk of Loss - what are the issues of title and risk of loss under the UCC Article 2?
20
Q
When the contract involves both service and the sale of goods - use the ___ ____ ____; was the primary purpose of the transaction the sale of goods or the provision of a service?
A
predominant purpose test
21
Q
When a contract involves both realty and the sale of goods, use which law(s)?
A
the UCC (UCC 2-107) and common law on fixtures (real property).
22
Q
“Things” attached but not deemed fixtures, which can be severed without material harm to realty, are ___.
A
goods.
23
Q
The sales of minerals, oil, gas, or structures on earth to be moved are considered ___ if they are to be severed by the seller; if severed by the buyer, ___ ___ law governs.
A
goods; real estate (common law)
24
Q
Sales of growing crops or timber are sale of ___ regardless who severs.
A
goods
25
The transfer of personal property but not title is termed a \_\_\_\_.
bailment
26
Does Article 2 apply to bailments?
no
27
\_\_\_ ___ is the obligation of both parties to an Article 2 contract to act with forthrightness and fairness in the formation, performance, and modification of their contracts.
Good faith
28
The UCC's goal is to produce ____ \_\_\_\_ and minimize ___ \_\_\_\_ in performing contracts and handling ___ to \_\_\_. Both parties have an obligation to act in good faith.
smooth transactions ; unnecessary expenses; failures to perform
29
A reasonable or market price at the time of delivery will apply, or if price is to be fixed by either party, good faith is required in doing so -UCC 2-305- is called the ___ \_\_\_ \_\_\_.
Open price term
30
A contract for sale of goods under UCC is formed as long as the ___ \_\_\_ and ___ \_\_\_ ___ are agreed upon
subject matter ; quantity of goods (if there is more than one)
31
What is an "escalation clause"?
the UCC specifically allows prices to be determined at time of shipment (sometimes referred to as an "escalation clause")
32
Under UCC, allows for prices to be determined at the time of \_\_\_\_. The price can be what is a reasonable or a market price at time of either \_\_\_\_, \_\_\_, \_\_\_\_, or \_\_\_.
shipment; contract, shipment, delivery, or payment.
33
\_\_\_ ___ \_\_\_ permits a record of a contract to be pieced together from various memos, documents, and correspondence if the writings/records show that a contract was formed and the necessary terms are included.
UCC Article 2
34
For goods in existence at the time the contract is entered into, identification occurs at the time the parties ?
enter into the contract.
35
Before any interest in goods (title or risk of loss) can pass from a seller to a buyer, the goods must be in ____ and ____ to the contract - (UCC 2-105(2)).
existence; identified
36
\_\_\_ is -- A Prerequisite to Passage of Title and Risk of Loss
identification
37
\_\_\_ ___ are those goods that either cannot be distinguished because of homogenous qualities or that are so mixed together that they cannot be distinguished by individual units, e.g., grains, fruit, cases of canned goods
Fungible goods
38
For fungible and manufactured goods, Identification occurs when the goods are ?
shipped, marked, or otherwise designated for the buyer, i.e., set aside in the warehouse.
39
How and when risk of loss and title pass depend upon the \_\_\_/\_\_\_ ___ in a contract.
shipping/delivery terms
40
\_\_\_\_ - (\_\_\_ ___ \_\_\_) delivery terms -- Title and risk of loss pass upon delivery (possession) of conforming goods to the carrier
F.O.B. -- (free on board)
41
\_\_\_\_ - (\_\_\_ ___ \_\_\_) delivery terms -- Title and risk of loss pass upon seller's delivery of conforming goods alongside the vessel in the manner usual in that port, or on a dock designated and provided by the buyer
F.A.S -- (free alongside vessel)
42
This term requires the buyer to pay cash upon tender of the goods.
COD -- (cash on delivery)
43
This shipping term follows the same rule as in C.I.F., except procurement of an insurance policy is not required on seller's part.
C&F -- (cost and freight)
44
\_\_\_\_ - (\_\_\_ ___ \_\_\_) delivery terms -- Title and risk of loss pass from seller to buyer when the seller delivers (possession) identified conforming goods to the carrier, obtains a negotiable bill(s) of lading covering transportation to a named destination, procures an insurance policy, and forwards to buyer all documents
C.I.F. -- (cost, insurance, freight)
45
When title passes is important for purposes of determining the ???
When title passes is important for purposes of determining the rights of third parties with respect to the buyer and seller.
46
If goods are shipped COD, then the timing of the buyer's ___ \_\_\_ ___ is affected
right to inspection
47
Passage of title occurs at different times depending on whether the contract is ___ \_\_\_ or \_\_\_\_.
non-delivery or delivery.
48
You must be sure that ____ has occurred regardless of whether the contract is delivery or non-delivery.
identification
49
Without ____ , title cannot pass.
identification
50
\_\_\_\_ means the goods have arrived, they are available for the buyer to pick up, and the buyer has been notified that the goods are there and available for pick-up. The seller's holding out to the buyer the goods in a reasonable manner, for a reasonable time, to allow the buyer to take possession of the goods.
Tender
51
If delivery is FOB \_\_\_\_, then title passes at the time the goods are delivered to the carrier.
FOB SHIPPING --- FOB place of shipment or FOB seller's place of business, warehouse, or residence
52
If delivery is FOB \_\_\_\_, then title passes upon the seller's tender of conforming goods at place specified in contract.
FOB DESTINATION -- FOB place of destination or FOB buyer's city, business, warehouse, or residence,
53
\_\_\_\_ ___ \_\_\_ delivery terms --Title and risk of loss does not pass until the ship arrives at a port of destination and not until the goods leave the ship's "tackle" or are otherwise properly unloaded.
Delivery "Ex-ship"
54
This is the converse of a delivery F.A.S. ??
Delivery "Ex-ship"
55
\_\_\_\_ delivery terms --- If contract merely calls for the seller to deliver at the buyer's destination and there are no other delivery terms, title passes from the seller to the buyer upon tender of conforming goods at buyer's destination
Deliver
56
the goods must be ___ or risk of loss cannot pass.
identified
57
Unless the parties provide for \_\_\_/\_\_\_, there is no delivery provided under Article 2.
shipment/delivery
58
If seller is a \_\_\_\_, risk of loss does not pass until buyer actually gets possession.
merchant
59
If seller is a \_\_\_\_, risk of loss passes upon seller's tender of the goods to the buyer
nonmerchant
60
In most cases the determination of risk of loss is important because???
it controls which of the parties' insurers will be responsible for reimbursement for the loss.
61
What effect does a breach of a contract have on the passage of risk of loss?
Risk of loss does not pass until goods are conforming; if they never conform, risk of loss does not pass and return is at seller's risk.
62
What does the acronym FAS mean?
A shipping term - Free alongside vessel (ship).
63
At what point does title/risk of loss pass when the terms are Free on Board the buyer's place (city, warehouse, or residence)?
Upon the seller's tender of conforming goods at place of contract destination.
64
When does title/risk of loss occur for a sale or return?
Title and risk of loss pass as with an ordinary complete sale of goods.
65
When does title/risk of loss pass when delivery is required by a seller with no physical movement and the goods are not represented by a document title?
1. Title passes when the contract is made; 2. If seller is a merchant, risk of loss does not pass until buyer gets possession; 3. If seller is a nonmerchant, risk of loss passes upon seller's tender of goods to the buyer.
66
When does title/risk of loss pass when the shipping terms of cost, insurance, and freight are used?
When the seller: delivers identified conforming goods to the carrier; obtains a negotiable bill(s) of lading covering transportation to named destination; procures an insurance policy; and forwards to buyer all documents.
67
Describe the free-on-board place of destination term.
Risk of loss and title pass from seller to buyer when goods have been tendered to the buyer at the destination.
68
Define "void title."
A thief in the chain of title.
69
Define "voidable title."
Title to goods that has come through a voidable contract, as when a minor purchases a car and then sells it to a third party.
70
When does title/risk of loss pass in free alongside shipping terms?
Title and risk of loss pass upon seller's delivery of conforming goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer.
71
Describe the differences between the timing of risk of loss and the title in shipment contracts and non-shipment contracts.
In shipment contracts, risk of loss and title pass at the same time. In non-shipment contracts, risk of loss and title do not pass at the same time and depends on whether there is a document of title and whether there is a merchant or non-merchant seller for risk of loss.
72
When does the risk of loss pass in a non-delivery contract?
If seller is a merchant, risk of loss passes when buyer has actual receipt. If seller is a non-merchant, risk of loss passes when goods are tendered to buyer.
73
Describe determination of "place of delivery."
Unless the contract provides for shipment, delivery is the seller's place of business or residence. There are no delivery terms under Uniform Commercial Cod Article 2 unless provided for in the contract.
74
When does title/risk of loss pass for a sale on approval?
Neither title nor risk of loss pass until acceptance by the buyer.
75
How is the title/risk of loss affected by the passage of goods in a sale or return?
Passes upon possession of Buyer - returns to Seller if Buyer returns properly the goods.
76
List the ways in which a buyer can accept title of goods?
Due notification of acceptance; Failure to reject within trial period; Does any act inconsistent with seller's ownership.
77
At what point does title/risk of loss pass when the terms are Free on Board the seller's place (city, business, warehouse, or ship point)?
Delivery of conforming goods to carrier.
78
When does the risk of loss pass in a warehouse (third party) delivery?
Risk of loss and title pass to buyer when the buyer has all necessary documents and the goods are available for pick-up.
79
When does the passage of title occur in a non-delivery contract?
If there is a document of title, title passes when buyer has the document. If there are other documents, title passes when buyer has those documents. If there are no documents, title passes at the time of contracting.
80
When does title/risk of loss pass when delivery is required by a seller with no physical movement and the goods are represented by a negotiable document of title?
Title and risk of loss pass upon buyer's receipt of document.
81
When does the title/risk of loss pass for sales on approval?
Title and risk of loss remain with seller until buyer accepts.
82
Define "future goods."
For contracts under which goods are to be manufactured, identification occurs when the goods are in existence and either shipped, marked, or otherwise designated for buyer.
83
Describe the general rule regarding passage of title and risk of loss.
In absence of agreement, the time title and risk of loss to identified goods passes from the seller to the buyer is dependent upon the contract's delivery terms.
84
When does title/risk of loss pass when delivery is required by the seller without physical movement and the goods are represented by a nonnegotiable document of title?
Title passes to buyer upon receipt of document; Risk of loss passes after buyer receives document and has a reasonable time to present document to receive the goods.
85
Describe the free-on-board place of shipment term.
Risk of loss and title pass from seller to buyer when the goods are delivered to the carrier.
86
When do title and risk of loss for conforming goods pass to the buyer under a shipment contract covered by the Sales Article of the UCC?
When the goods are given to a common carrier.
87
When there is a ___ \_\_\_\_, the obligation of the seller is to place the goods in the hands of a carrier to be delivered to the seller. The risk of loss passes (FOB place of shipment) when the goods are delivered to the carrier.
shipment contract
88
List three types of express warranties.
Affirmations of fact or promises; Sales by description; Sales by sample or model.
89
List the requirements for establishing strict tort liability.
Product is in a defective condition that is unreasonably dangerous by design, production, or lack of warning. Seller is in the business of manufacturing, distributing, or selling the product. The product reaches the buyer in the same condition as when it left the seller's possession (i.e., it has not been altered).
90
When does an implied warranty that arises from a course of dealing or trade usage apply?
When both parties have a knowledge of a well-recognized usage of trade, or by numerous past performances, infer a warranty course of action intended to be performed.
91
List the four types of warranties that are given under Article 2 sales contracts.
Express Warranties; Implied Warranty of Title; Implied Warranty of Merchantability; Implied Warranty of Fitness for a Particular Purpose.
92
List the requirements for establishing negligent product liability.
Product is in a defective condition that is unreasonably dangerous by design, production, or lack of warning. Seller is in the business of manufacturing, distributing, or selling the product. The product reaches the buyer in the same condition as when it left the seller's possession (i.e., it has not been altered) Seller had knowledge that the product was defective and did not take steps to fix the problem.
93
What is the difference between recovery under strict tort liability and recovery under negligence?
Punitive damages are available for negligence.
94
What are the requirements for a disclaimer of oral express warranties?
Specific; Unambiguous; Clearly and conspicuously drawn to attention of buyer.
95
Describe the elements of a disclaimer of an implied warranty of merchantability.
If written, must be conspicuous. Must use terms such as "No warranty of merchantability" or general disclaimer of "As is," "With all faults," or "As they stand."
96
List the justifications that a party in a transaction can use as a warranty defense.
Lack of Privity; Statute of Limitations; Failure of Notice of Breach.
97
List the protections given by the implied warranty of title.
Seller has a good title and transfer is rightful; There are no outstanding liens, encumbrances or security interests; If seller is a merchant, goods shall be delivered free from third party infringement claims.
98
Can an express warranty be withdrawn?
It is not possible to make an express warranty and then withdraw it when it has been a basis of the bargain.
99
List the criteria required for an implied warranty of fitness for a particular purpose.
The seller must expressly or impliedly know the purpose or buyer's use; The buyer must rely on seller in making selection.
100
Describe the elements of a disclaimer of a warranty of title.
Must be in writing and conspicuous or be obvious from the nature of the goods or the transaction that there is no warranty of title.
101
Explain when the implied warranty of merchantability is given.
Seller is a merchant; and Goods are warranted to be fit for ordinary use, of proper kind, properly packaged, and conform to the label.
102
What are the necessary requirements for a party in a transaction to disclaim an implied warranty of fitness for a particular purpose?
Must be in writing; Conspicuous.
103
Describe the elements of a disclaimer of an implied warranty of fitness for a particular purpose.
Must be written; must be conspicuous; General disclaimer of "As is," "With all faults," or "As they stand" disclaims this and warranty of merchantability.
104
What are the necessary requirements for a party in a transaction to disclaim an implied warrant of merchantability?
Must mention word merchantability; Can be in writing or oral; If in writing, must be conspicuous.
105
Give examples of language that effectively disclaims implied warranties of merchantability and fitness for a particular purpose.
"As is" sale; "Sold with all faults;" Any other language brought to Buyer's attention plainly making a disclaimer.
106
What are the seller's remedies if the buyer is insolvent or in breach when the goods are in transit?
1. If buyer insolvent, can stop any quantity shipped;
2. If not, and Buyer is in breach, can only stop if shipment is a carload, truckload, planeload, or larger shipment.
107
What types of limitations may be put in place on remedies of a breach?
1. Liquidated damage agreements;
2. Contract limitations - such as limited to repair or replacement;
3. Statute of Limitation time runs out.
108
Describe the concept of replevin.
If seller refuses to tender delivery of identified goods to the buyer, and the buyer cannot cover, the buyer can file a suit in equity requiring the seller to deliver the goods to the buyer.
109
What are the buyer's remedies when the seller tenders nonconforming goods or refused to deliver conforming goods?
1. Cancel and with notice Rescind;
2. Cover;
3. Sue for breach of contract;
4. Specific performance;
5. Replevin;
6. Buyer can recover prepayment if Seller becomes insolvent within 10 days of receipt or pay balance and get the goods.
110
When can a buyer recover consequential damages?
When the buyer has to pay penalties or damages for being late on performance owed to third parties.
111
When is a seller entitled to the full contract price when the buyer breaches?
When the goods cannot be resold, such as in specially manufactured goods.
112
When can a buyer have specific performance as a remedy?
When the goods are rare or unique.
113
When is a seller entitled to lost profits?
In situations in which no other remedy provides compensation, such as when specially manufactured goods are ordered but the buyer breaches prior to production beginning. Lost profits compensate for the downtime in the seller's production facilities.
114
What is the statute of limitations used to file actions against a party that breached a contract?
1. Four years from cause of action - by agreement can be shortened to not less than one year but not extended;
2. For breach of warranty action - cause of action starts with tender of delivery - not discovery of breach.
115
Upon a buyer's breach, what remedies does the seller have when the seller retains possession of the goods?
1. Withhold delivery;
2. Identify Goods to Contract and proceed with other remedies;
3. Cancel and/or rescind contract;
4. Resell the goods;
5. Sue for breach of contract.
116
What are the buyer's remedies when the buyer accepts nonconforming goods with notice?
1. Sue for ordinary damages;
2. Sue for breach of warranty;
3. Deduct damages from purchase price.
117
What are the seller's remedies if the buyer is insolvent or in breach when the buyer has possession of the goods?
1. Can reclaim the goods within 10 days if buyer received the goods on credit while insolvent;
2. Can sue for purchase price.
118
Once a buyer notifies the seller that it intends to breach the contract, an ___ \_\_\_ takes place.
anticipatory breach
119
Under the Negotiable Instruments Article of the UCC, an instrument will be precluded from being negotiable if the instrument is ?
made subject to another agreement.
120
