Business Law II Quiz 2

At common law, the risk of loss or damage, to goods identified under a contract of sale, falls on whom?

fall upon the party who had title or ownership of the goods at the time of the loss or damage.

Requirement of Good Faith

general presumption that the parties to a contract will deal with each other honestly, fairly, and in good faith, so as to not destroy the right of the other party or parties to receive the benefits of the contract.

What are fungible goods?

goods that are generally sold by weight or measure like wheat, sugar, flour, gasoline, & oil.

One who buys stolen goods acquires what type of title?

void title

voidable title

the good faith purchaser acquires good title

Shipment Contract

A contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier. The seller assumes liability for any losses or damage to the goods until they are delivered to the carrier.

Destination Contract

A contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination. The seller assumes liability for any losses or damage to the goods until they are tendered at the destination specified in the contract.

good faith purchaser

A purchaser who buys without notice of any circumstance that would cause a person of ordinary prudence to inquire as to whether the seller has valid title to the goods being sold.

Comparative Negligence

A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all parties who were negligent (including the injured party), on the basis of each person's proportionate negligence.

Implied Warranty of Merchantability

A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased.

Security Interest

An interest in personal property or fixtures that secures payment or performance of an obligation

Security Interests are governed by which article of the UCC?

Article 9

Which warranties exist by "operation of law"?

Implied

When does a Warranty of Title arise?

In a sale or lease contract

In a lease, when does title to the goods pass from the lessor to the lessee?

It doesn't. No title transfer.

What effect does modification have on a warranty?

Modification eliminates warranty

If you buy a good marked "as is", can you later sue for breach of implied warranty of fitness?

No, buyer is buying good accepting all faults

Does the Code label warranty of title as an implied warranty?

No, expressed.

Does an opinion given by one rise to the level of being an expressed warranty?

No. Opinion or exaggerated statements are not an expressed warranty.

Who can identify goods as those being part of a sale?

The buyer or the seller

If one who is not a thief, finder or an unauthorized person leaves a good with a merchant, and a buyer in the ordinary course of business purchases the good from the merchant, who is the rightful owner of the good?

The good faith purchaser

In the case of a breach, the code places the risk of loss on which party?

The party responsible for the breach

What is required for there to be a valid tender under the code?

The seller must: 1. Put and hold conforming goods at the buyer's disposition 2. Give notice to the buyer that goods are available 3. Give notice at a reasonable time and keep the goods available for a reasonable period of time

Defenses available to a defendant based on a 402A claim

Voluntary assumption of the risk, substantial change (misuse or abuse)

What effect does inspection by the buyer, before entering into a contract, have on any implied warranty?

Waives implied warranty protections

Can both design and manufacturing defects subject a manufacturer or seller to product liability?

Yes

Does an implied warranty exist by operation of law?

Yes

If the seller of a good is an expert, and they give an opinion with respect to the goods, can they be held liable for breach of warranty?

Yes

Can a buyer and seller simultaneously hold an insurable interest in goods?

Yes. Buyer has an insurable interest in goods that have been identified while seller has an insurable interest in goods as long as they retain title or a security interest.

Can future goods be the subject of a present sale?

Yes. Contract for sale.

What are the requirements to become a buyer in the ordinary course of business?

a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course of business from a person, other than a pawnbroker, in the business of selling goods of that kind

Statute of Repose

a statute that limits the seller's liability to a certain number of years from the date when the product was first sold

Implied Warranty

an unwritten guarantee that the good or service is fit for the purpose for which it was sold

Horizontal Privity

doctrine determining who benefits from a warranty and who therefore may bring a cause of action; the Code provides three alternatives

Vertical Privity

doctrine determining who in the chain of distribution is liable for a breach of warranty; the Code has not adopted a position on this

Expressed Warranty

either written or verbalized agreements about the performance of a product and can cover all attributes of the merchandise or only one attribute

void title

no title can be transferred

When does product liability exist?

when the product was not modified (same purchase condition)

When does 402A liability apply?

when there is imposition of liability on a party without a finding of fault (such as negligence or tortious intent); product liability claim