Business Law Mid-Term 1

Online Acceptances

- Click-on agreements - Shrink-wrap agreements, usually an agreement between makers of hardware or software and the buyer-user, in which the terms are in a document located inside the box in which the goods are packaged. Upheld by courts unless it is learned that the buyer learned about the shrink-wrap agreement after the parties had entered into a contract.

Open Price Term

1) If the parties intended to form a contract, but did not set a price, the price will be the reasonable price at time of delivery 2) If the buyer or seller is to set the price he must do so in good faith 3) If the price is not fixed through the fault of one party, the other party may treat the contract as canceled or fix a reasonable price

Destination Contract

A contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier and tender delivery of the goods 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.

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.

Frustration of Purpose

A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract.

Revocation fo Acceptance

Acceptance of the goods precludes the buyer or lessee from exercising the right of rejection, but it does not necessarily prevent the buyer or lessee from pursuing other remedies.

Impossibility of performance

After a contract has been made, supervening events (i.e. a fire) may make performance impossible in objective sense. It may be commercially unfeasible due to unforeseen circumstances.

Alteration of the contract

An innocent party may be discharged when the other party has materially altered a written contract without consent

Goods

An item of property that is tangible and moveable (i.e. not real estate). Stocks and bonds have only conceptual existence therefore they are not governed by Article 2 of the UCC code

Temporary impossibility

An occurrence or events that makes performance temporarily impossible operates to suspend performance until the impossibility ceases.

Tender

An unconditional offer to perform by a person who is ready, willing, and able to do so

Warranties of Title

Arise automatically in sales contracts Seller can disclaim by use of specific language in the contract. (1) Good Title The seller warrants that she has good and valid title to goods sold and that transfer of title is rightful. (2) No Liens The seller warrants that there are no liens, or encumbrances, on goods sold. (3) No Infringement seller warrants that goods are free from any copyright, trademark, or patent claims of a third person. If buyer is sued for infringement, she must notify the seller, who can choose to defend lawsuit. If seller states in writing her intention to defend lawsuit, buyer must let her or will lose all rights against the seller if liability is established.

E-signature

As defined by the Uniform Electronic Transactions Act, "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record."

Discharge by Novation

Both of the parties to a contract agree to substitute a third party for one of the original parties. The requirements are as follows: 1. A previous valid obligation 2. An agreement between all parties to a new contract 3. The extinguishing of the old contract 4. A new contract that is valid.

Compensatory damages

Damages that compensate the non breaching party for the loss of the bargain. They simply replace what was lost because of the wrong or damage and, for this reason, are often said to "make the person whole". In a contract for the sale of goods the usual measure of compensatory damages is an amount equal to the difference between the contract price and the market price. In a contract for the sale of land the remedy for a seller's breach of a contract is specific performance- that is, the buyer is awarded the parcel of property for which he or she bargained. In a contract for construction the measure of damages varies depending on which party breaches and when the breach occurs.

Statements of Opinion and Value

Does not create an express warranty- only statements of fact

Right of inspection

Generally, buyer has right to inspect goods before making payment. Buyer bears the cost of inspecting the goods. C.O.D. (Collection on Delivery) Buyer must pay for goods before inspecting them Buyer can reject goods shipped C.O.D.

The right to recover damages for the buyer's nonacceptance

If a buyer or lessee repudiate a contract or wrongfully refuses to accept the goods, a seller or lessor can bring an action to recover damages sustained. Ordinarily the amount of damages equals the difference between the contract price or lease payments and the market price or lease payments at the time and place of tender of the goods, plus incidental damages.

The right to recover damages

If a seller or lessor repudiates the contract or fails to deliver the goods, the buyer or lessee can sue for damages. The measure of recovery is the difference between the contract price and the market price of the gods at the time the buyer learned of the breach.

Time for Performance

If no time for performance is stated in the contract a reasonable time is implied.

Risk of Loss

If not stated when the risk of loss is transfered in a contract, the courts must interpret the existing terms to ascertain whether the risk has passed. Risk of loss remains in the breaching parties hands.

The right to replevy goods

If the buyer has made a reasonable effort to "cover" for the goods, they may seek to recover identified goods in the hands of the party who is unlawfully holding them.

The right to cancel the contract

If the buyer or lessee breaches the contract, the seller or lessor can choose to simply cancel the contract. The seller or lessor must notify the buyer or lessee of the cancellation and at that point all remaining obligations of the seller or lessor are discharged. The seller or lessor can still pursue remedies available under the UCC for breach

The right to reject the goods

If the seller or lessor delivers non conforming goods to the contract in any respect, the buyer or lessee can reject all or any commercial unit of the goods. He or she may then obtain cover or cancel the contract, and may seek damages just as if the seller or lessor had refused to deliver the goods

The right of cover

In certain situations buyers and lessees can protect themselves by obtaining voer- that is, by buying or leasing substitute goods for those that were due under the contract. The buyer or lessee can recover the difference between the cost of cover and the contract price.

Offer

In general contract law, the moment a definite offer is met by an unqualified acceptance, a binding contract is formed. In commercial sales transactions, the verbal exchanges, correspondance, and actions of the parties may not reveal exactly when a binding contractual obligation arises. The UCC states that an agreement sufficient to constitute a contract can exist even if the moment of its making is undetermined.

The right to withhold delivery

In general, sellers or lessors can withhold delivery or discontinue performance of their obligations under sales or lease contracts when the buyers or lessees are in breach. They can also refuse to deliver goods to a client that is insolvent unless the buyer or lessee pays in cash.

Merchant

Individuals with a high level of expertiser in a certain subject matter. 1. Someone who deals in goods of the kind involved in the sales contract. 2. a person who, by occupation, holds himself out as having knowledge and skill unique to the practices or goods involved in the transaction 3. A person who employs a merchant as a broker, agent, or other intermediary.

Statute of Limitations

Lawsuits for breach of contract for the sale fo goods must generally be brought within four years after the cause of actions has accrued.

International Sales Contracts

May be governed by the 1980 United Nations Convention on Contracts for the international sale of goods (CISG).

Acceptance

Once the buyer or lessee has had a reasonable opportunity to inspect the goods, the buyer or lessee can demonstrate acceptance of the delivered goods by words or conduct.

Commercial impracticability

Performance may be commercially unfeasible due to unforeseen circumstances.

Discharge by Rescission

Rescission is the process by which a contract is cancelled or terminated and the parties are returned to the positions they occupied before forming it. For mutual rescission to take place the parties must make another agreement that also satisfies the legal requirements for a contract (i.e. there must be an offer, an acceptance, and consideration) Agreements to rescind the sale of Goods must be in writing.

Equitable remedies

Rescission- Essentially undoing the contract and returning the parties to the positions they occupied before the transaction. Generally both parties must make "Restitution", and return goods, property or funds previously conveyed to each other. Specific Performance- calls for the performance of the act promised in the contract. A court may grant specific performance to a buyer in an action for a breach of contract involving the sale of land. Courts will generally refuse to grant specific performance for contracts for personal services as it would appear to make a part perform personal services against his or her will, which would be like involuntary servitude

Identification

Takes place when specific goods are designated as the subject matter of a sales or leas contract Existing goods- Identification takes place at the time the contract is made. Future Goods- Identification takes place when cultivation begins.

Open Terms

The fact that one or more terms (including price) are left open does not prevent the formation of a contract if the parties intended such and there is a reasonable basis for giving a remedy. The court can supply reasonable terms for those that are missing.

Material Breach of Contract

The nonperformance of a contractual duty. The breach is material when the performance is not at least substantial. The non breaching party is excused of contractual duties and can sue for damages resulting from the breach.

Sale

The passing of title (evidence of ownership) from the seller to the buyer for a price

Communication of acceptance

UCC requires notification- if the offeror is not notified within a reasonable time that the offeree has accepted the contract by beginning performance, then the offeror can treat the offer as having lapsed before acceptance.

The right to recover the purchase price or lease payments due

Under the UCC an unpaid seller or lessor can bring an action to recover the purchase price or the payements due under the lease contract, plus incidental damages.

Requirement Contract

Under which 1 party agree to purchase its entire requirement of specific goods or services exclusively from another party for a specific period of time.

Mitigation of damages

When a breach occurs, the innocent party is held to a duty to mitigate, or reduce, the damages that he or she suffers. (i.e. A landlord with a tenant who moves out during their lease)

Election of Remedies

When a nonbreaching party is requird to choose one remedy to purse.

Complete Performance

When a party performs exactly as agreed. When a party's performance is perfect, it is said to be complete. Complete Performance is required to avoid material breach.

Nominal Damages

When no actual damage or financial loss results from a breach of contract and only a technical injury is involved, the court may award nominal damages.

Payment

With the absence of any specific agreement the buyer or lessee must make payment at the time and place the goods are received.

Perfect Tender Rule

performance for Sale of goods- the standard by which a seller's performance is measured. Under the perfect tender rule, a seller must deliver perfect goods in the right place at the right time. If not, the buyer has the right to reject the non-conforming goods.

Insurable interest

potential to sustain loss if the insured property is damaged or destroyed

Output Contract

a contract in which you promise to deliver your entire output to the other party who promises to accept it

Damages

A breach of contract entitles the non breaching part to sue for monetary damages. Innocent parties are to be plances in the position that they would have occupied had the contract been fully performed.

The right to recover damages for accepted goods

A buyer or lessee who has accepted non conforming goods may also keep the goods and recover for any loss "resulting in the ordinary course of events...as determined in any manner which is reasonable".

Discharge by settlement agreement

A compromise that arises out of a genuine dispute over obligations that is then settled by the two parties forming a new contract. Different than Novation in that there is no third-party

Substantial Performance

A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party un the doctrine of substantial performance. Courts determine whether performance was substantial on a case-by-case basis. Because substantial performance is not perfect the other party is entitled to damages to compensate for the failure to comply with the contract

Condition

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract

Predominant factor test

A test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services.

Implied Warranties

A warranty imposed by law, arising automatically because the sale has been made.

Liquidated damages

Amount predetermined by parties to contract as total compensation due injured party should the other party breach the contract

Discharge by Accord and Satisfaction

An accord is a contract to perform some act to satisfy an existing contractual duty that is not yet discharged. A satisfaction is the performance of the Accord duty. The parties must agree to accept performance that is different from the performance originally promised.

Consideration

An agreement modifying a contract for the sale or lease of goods needs no consideration to be binding according to the UCC

Reformation

An equitable remedy used when the parties have imperfectly expressed their agreement in writing. It allows the courts to rewrite the contract to reflect the parties true intentions.

Anticipatory Repudiation

Before either party to a contract has a duty to perform, one of the parties may refuse to carry out his or her contractual obligations. When this occurs, it is treated as a material breach of the contract, and the non breaching party can sue for damages immediately, even though the scheduled time for the contract is in the future. Until the non breaching part treats an early repudiation as a breach, however, the repudiating party can retract her or his anticipatory repudiation by proper notice and restore the parties to their obligations.

Additional Terms

Can be added (not held to the mirror image rule) after an offer has been made. Both parties need to be merchants.

Performance to the satisfaction of another

Contract often state that completed work must personally satisfy one of the parties or a third person. When the Contract is personal the contract must be performed to the satisfaction of the part that is stated in the contract

Article 2A of the UCC Code

Defines the rules that govern lease agreements. A lease agreement is defined as a lessor and lessee's bargain with respect to the lease of goods, as found in their language and as implied by other circumstances.

UCC's Good Faith Provision

For a merchant it means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. In other words, merchants are held to a higher standard of performance or duty than are non merchants.

Punitive Damages

Generally not recoverable in contract law, even for intentional breach of contract. They are designed to punish wrongdoers and set an example to deter similar conduct in the future, they have no legitimate place in contract law.

Article 2 of the UCC code

Governs sales contracts, or contracts for the sale of goods.

Reasonable Person Standard

Most Contracts need only be performed to the satisfaction of a reasonable person.

E-contracts

Must meet the same basic requirements as paper contracts. Disputes tend to center on contract terms and whether the parties voluntarily agreed to those terms.

Consequential Damages

Special damages that compensate for a loss that does not directly or immediately result from the breach (for example, lost profits). For the plaintiff to collect consequential damages, they must have been reasonably foreseeable at the time the breach or injury occurred.

Anticipatory Repudiation

The UCC permits the breaching party to retract his or her repudiation. This can be done by any method that clearly indicaties the party's intent to perform.

The right to resell or dispose of the goods

When a buyer or lessee breaches or repudiates the contract while the seller or lessor is in possession of the goods, the seller or lessor can resell or dispose of the foods. The seller can retain any profits made as a result of the sale and can hold the buyer or lessee liable for any loss. The seller must give the original buyer notice of the resale, unless the goods are perishable.

Firm offer

a signed written promise by a merchant to keep an offer open.

Merchantable food

food that is fit to eat based on consumer expectations (ie. Pit in cherry pie expected, not finger in the chilli)

Merchantable goods

good must be reasobnle fit for the ordinary person for which goods are used

Open Quantity Term

if the parties do not specify a quantity, a court will have no basis for determining a remedy

Basis of the Bargain

part of the buyers assumption underlying the sale.

Express Warranties

seller's promise as to quality, safety, performance, or durability of goods. Circumstances where an express warranty can be created (1) sample or model of the good provided, (2) description of goods attributes give, (3) seller makes specific written or oral statements about the good

Document of Title

transfer the ownership of the freight based on the handling over of the document. Owner of THIS is the owner of the freight

Waiver of Breach

when a nonbreaching party is willing to accept defective performance of the contract. the contract will continue as the breach never happened and the party relinqueshes all rights to future action.

Open Payment Term

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

Discharge in Bankruptcy

will ordinarily bar enforcement of most of the debtor's contracts by the creditors.