Business Law Exam

When Title Passes

- Once goods exist and are identified, title passes to the buyer at the time and place the seller performs the physical delivery of the goods - In the absence of agreement delivery arrangements can determine when title passes from the seller to the buyer.

Special Provisions in International Contracts

1. Choice of Language. 2. Choice of Forum (country). 3. Choice of Law. 4. Force Majeure Clause

Open Terms:

1. The parties intended to make a contract. 2. There is a reasonably certain basis for the court to grant an appropriate remedy.

Cashiers Check

A check drawn by a bank on itself.

Article 2A—Leases

A lease is a transfer of the right to possess and use goods for a period of time in exchange for payment. Lessor: One who transfers the right to the possession and use of goods under a lease [UCC 2A-103(1)(p)]. Lessee: One who acquires the right to the possession and use of goods under a lease [UCC 2A-103(1)(o)].

Express Warranty

A seller's or lessor's oral or written promise, ancillary to an underlying sales or lease agreement, regarding the goods' quality, description, or performance.

Subsidiaries

A wholly owned subsidiary firm is used to expand into a foreign market and the parent company remains in the United States

Statute of Limitations:

An action for breach of contract under the UCC must be commenced within four years after the cause of action accrues (occurs 6. Dealing with International Contracts a. The issuer (a bank) agrees to issue a letter of credit and to determine whether the beneficiary (seller or lessor) performs certain acts.b. In return, the account party (buyer or lessee) promises to reimburse the issuer for the amount paid to the beneficiary

Future Goods

Any goods that are not in existence at the time of contracting. The following rules apply to identification of future goods:

Statute of Frauds (UCC Article 2):

Any modification that makes a sales contract come under Article 2's writing requirement usually requires a writing to be enforceable. Sales contracts for goods priced at $500+ and lease contracts requiring total payments of $1,000+ must be in writing to be enforceable

Usage of Trade (UCC)

Any practice or method of dealing that are so regularly observed in a place, vocation, or trade.

Merchant's Firm Offer

Arises when a merchant-offeror gives assurances in a signed writing that the offer will remain open.

Requirements Contract:

Buyer agrees to purchase—and the seller agrees to sell—all or up to a stated amount of what the buyer requires

The Right to Reject Goods:

Buyer or lessee can reject all of the goods or any commercial unit of the goods (UCC 2-601, 2A-509).

Parol Evidence

Evidence outside the contract such as evidence of the parties' prior negotiations

Goods Associated with Real Estate:

Goods such as minerals, gas, or oil often do fall within the scope of Article 2(UCC 2-107) if severance is to be made by the seller.

Fungible Goods

Goods that are alike by physical nature, by agreement, or by trade usage (e.g., grains of wheat)

Rules of Construction

Guiding principles for interpreting or "constructing" the terms of a contract.

Void Title

If a buyer unknowingly purchases goods from a seller who is not the owner of the goods, the seller's title is void, and the real owner can reclaim the goods from the buyer. (Same applies if the goods are leased.)

The Right to Cancel the Contract

If the buyer or lessee breaches the contract, the seller or lessor can choose to cancel the contract 1. Seller must notify buyer. 2. Buyer is not discharged from remaining obligations.

Existing Goods

If the contract calls for the sale or lease of goods that already exist in their final form, then identification occurs at the time the contract is made.

Open Price Term

If the parties have not agreed on a price, the court will determine a"reasonable price at the time for delivery

Exclusive Remedies:

In sales and lease contracts, an agreed-on remedy is in addition to those provided in the UCC unless the parties expressly agree that it is exclusive of all others

Merchantable Goods

Must be "reasonably fit for the ordinary purposes for which such goods are used." 1. Goods are of average, fair, or medium-grade. 2. Adequately packaged and labeled. 3. Conform to promises on label

Anticipatory Repudiation

Occurs when a party communicates intention she/he will not perform when performance due

Tender of Delivery

Occurs when the seller or lessor makes conforming goods available and gives the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery

What Is a "Sale"

Passing of title from seller to a buyer for a price (payable in cash, goods, or services).

Shipment Contracts

Risk of loss in a shipment contract passes to the buyer or lessee when the goods are delivered to the carrier

Destination Contracts

Risk of loss passes to the buyer or lessee when the goods are tendered to the buyer or lessee at the specified destination

Output Contract

Seller agrees to sell—and the buyer agrees to buy—all or up to a stated amount of what the seller produces.

Course of Dealing

Sequence of actions and communications between the parties to a particular transaction that establishes a common basis for their understanding [UCC 1-303(b)].

U.S. Antitrust Laws

Subject firms in foreign nations to their provisions Protect foreign consumers and competitors from violations committed by U.S. citizens

What Are Goods?

Tangible property- such as a car, can be touched or seen. Intangible property- such as patents and copyrights, has only conceptual existence.

Course of Performance

The conduct that occurs under the terms of a particular agreement; such conduct indicates what the parties to an agreement intended it to mean.

Franchising

The franchisor licenses the franchisee to use the mark, name, or copyright, under certain conditions, in the selling of goods or services.

Voidable Title

The goods were obtained by fraud.2. The goods were paid for with a check that was later dishonored.3. The goods were purchased on credit when the seller was in solvent under federal bankruptcy law

Risk of Loss

The time that risk of loss (ROL) passes from a seller or lessor to a buyer or lessee is generally determined by the contract between the parties.

Joint Ventures

U.S. company owns only part of the operation, with the rest owned either by local owners in the foreign country or by another foreign entity.

Who Is a "Merchant

UCC Article 2 imposes special standards upon a "merchant" who has special business expertise and is not a casual buyer/seller.

Consequential Damages:

Under the UCC, parties to a contract can limit or exclude consequential damages, provided the limitation is not unconscionable.

Open Delivery Term

When no delivery terms are specified, the buyer normally takes delivery at the seller's place of business

Open Payment Term

When the parties do not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods.

Agent

a person who agrees to represent or act for another, called a principal

A warranty is

an assurance or guarantee by the seller or lessor of certain facts concerning the goods being sold or leased.

Exam question

checks, lists, drafts and CD's Checks and drafts payments on demand

Three types of relationships

creditor-debtor, agency, contractual

No Infringements

free of copyright, trademark or copyright claims

The Perfect Tender Rule

i. The seller or lessor has an obligation to ship or tender conforming goods. ii. The buyer or lessee is then obligated to accept and pay for the goods according to the contract terms iii. If goods—or tender of delivery—fail in any respect to conform to the contract, the buyer has the right to do any of the following (UCC 2-601, 2A-509):

Lemon Laws

laws that protect buyers of vehicles with serious defects

Check-

payee (paid to the order of), drawer, drawee (bank)

indirect exporting

practice by which a company sells its products to intermediaries who then resell to buyers in a target market

No Liens Warranty

protects buyers and lessees who are unaware of any encumbrances against goods at the time the contract is made

direct exporting

the company sells to a customer in another country

An implied warranty is one that

the law derives by inference from the nature of the transaction or the relative situations or circumstances of the parties

Licensing

the legal process whereby a licensor allows another firm to use its manufacturing process, trademarks, patents, trade secrets, or other proprietary knowledge

good title warranty

the property belongs to the seller