Business Law - Chapter 7: Consumer Law and Contracts
Bill of Sale
formal evidence of ownership (but doesn't prove that you STILL have ownership)
Warranty of title
seller warrants that the title being given to the buyer is good and that the transfer is lawful. Cannot be excluded.
full warranty
promise to fix or replace a defective product at no extra charge within a reasonable time
methods of dealing / usage of trade
special meaning for an established method of dealing with someone or method of dealing in a particular area that may be used to supplement or qualify the terms of a contract.
Consumer Product Safety Act
protects consumer from unreasonable risk of injury while using consumer products sold in interstate commerce. Sellers must prove that the product has been tested and is safe (quality and reliability) before shipping.
Magnuson-Moss Warranty Act
states that a written warranty on goods costing more than $10 must disclose whether it is full or limited.
Telemarketing sales rule
protects consumers from abusive telemarketers through tools like Do Not Call registry. They are required not to make false statements and must disclose the total cost of the products/services offered.
Consumer Leasing Act
requires lease agreements to include certain terms: # of lease payments, $ amounts, penalties for nonpayment, and the amount of a lump sum if required.
risk of loss
responsibility for loss or damage to goods. Title passes to the buyer when the seller does what is required under the contract to deliver the goods.
Bureau of Consumer Protection
safeguards consumers against unfair and deceptive practices.
Exceptions to the form of sales contracts
1) written confirmation of oral contract is sent within a reasonable time and there is no objection made within 10 days 2) the contract involved specially manufactured goods that cannot be resold easily 3) The buyer receives and accepts the goods and pays for them, and 4) the parties admit in course that they entered into an oral contract.
statute of limitations for sales contracts
4 years and begins when the breach occurred.
firm offer
a merchant's written promise to hold an offer open for the sale or lease of goods. Merchant cannot revoke a firm offer during the time stated (or reasonable time if no time specified) and no offer can stand for longer than 3 mos.
bait and switch advertising
a store advertises bargains that don't really exist to lure customers in hopes that they will buy something more expensive. Can't try to sell a different product than the one advertised.
Goods
all things other than money, stocks, and bonds that are movable
fraudulent misrepresentation
any statement that deceives a buyer or failure to disclose important facts
Uniform Commercial Code (UCC)
collection of laws that governs various types of business transactions including the sale, lease, or rental of goods.
Sale
contract in which ownership of goods is transferred from the seller to the buyer for a price
Dominant element
determines the law that will apply (either UCC or contract law) if a contract includes both goods and services.
modifications
different or additional terms of a contract given with the contract's acceptance. Treated as proposals if both parties are not merchants. If both parties are merchants, they become part of the contract unless they are major or the offeror objects. No consideration is required for modifications and may be oral unless the original agreement states changes must be in writing.
Consumer Product Safety Commission
establishes safety standards for consumer products. Has the power to recall unsafe products and to impose fines on violators.
Cooling-off rule
gives a buyer 3 days to cancel a transaction made away from a seller's regular place of business and applies to purchases $25 or more. Seller must inform the buyer of the right to cancel. Refunds must be returned within 10 days. Rule does not apply to real estate, insurance, securities, or emergency home repair contracts.
Federal Trade Commission (FTC)
government agency that promotes free trade and fair competition. Establishes trade regulations for interstate commerce.
Sales law
governs the sale of goods (excludes sales of real property [houses/land] or services [work performed by somebody else]}
Implied warranty
guaranty of quality imposed by law
Warranty
guaranty, usually by a seller to a buyer, that a product will perform as promised.
seller's remedies for breach of sales contract
if the buyer refuses to accept goods or refuses payment, the seller may: cancel the contract, withhold delivery, stop delivery, resell the goods and bring a claim against the buyer for the difference in price, if they cannot be resold the seller can bring a claim for the difference in price between the agreed price and market value, or the seller can bring a claim against the buyer for the price of any goods that the buyer accepted.
buyer's remedies for seller's breach
if the seller fails to deliver goods or sends incorrect, damaged or defective goods, the buyer may cancel the contract, bring a claim for the return of any money paid, bring a claim for the difference between the agreed price and market price, refuse to accept the goods (notify seller and give reasonable time to correct the problem), buy similar goods elsewhere and bring a claim for the difference between the agreed price and the cost of the purchase, give notice that the goods were accepted but that there's a problem - if no adjustment is made, bring a claim against the seller for breach, or revoke the acceptance and return the goods.
Warranty of merchantability
implied warranty that goods are fit for the ordinary purpose for which the goods are sold. Can be excluded if the word "merchantability" is mentioned specifically.
Warranty of fitness for a particular purpose
implied warranty that goods will be fit for a specific use (i.e. truck to haul heavy equipment).
Uniform Deceptive Trade Practices Act
law enacted to protect consumers against false, misleading, and deceptive business and insurance practices and breach of warranty.
insurable interest
legal interest in the protection of property from injury, loss, or destruction. This is retained by a seller when the seller still has title to the goods or has a security interest in the goods.
limited warranty
limited promise to cover specific costs such as parts but not labor
offer and acceptance of a sales contract
may be oral or written so long it is in a reasonable manner, but the party making the offer can dictate how acceptance is to be sent. It becomes a contract upon acceptance.
shipment contract
one in which the seller gives goods to a carrier (transportation company) for delivery to a buyer. Title and risk of loss pass to the buyer when the goods are given to the carrier.
Form of sales contracts
oral contracts for goods < $500 are enforceable; written contracts are required for goods > $500.
Express warranty
oral or written statement, promise, or other representation about the quality of a product made by a statement of fact or promise by the seller, by a description of the goods, or by the use of a sample or model.
good faith
parties to a sales contract must treat each other fairly.
Better Business Bureau
private agency that hears consumer complaints at the local and state levels. Mission is to promote highly ethical relationships between businesses and the public through voluntary self-regulation, consumer and business education, and service excellence. No power of enforcement.
Negative option rule
subscriber must tell the seller NOT to send the selection. Sellers must disclose how many selections you must buy, how to notify when you don't want the selection, when you can get credit for the return of a selection, how often you will receive announcements/forms, and how/when to cancel.
Title
the right of ownership to goods
voidable title
title that may be voided (cancelled) if the injured party chooses to do so. This may happen if someone obtains property as a result of another's fraud, mistake, undue influence, or duress. Or, if goods are bought/sold from/to a minor or mentally impaired person.
