CH 14: Sales and Lease Contracts

Risk of loss passes to the buyer when goods are held by a bailee if

- buyer receives negotiable doc of title for the goods - bailee acknoledges buyer's rights to possess goods - receives nonnegotiable doc of title & buyer has had reasonable time to present doc to bailee & demand goods [if bailee refuses to honor doc, risk of loss remains w seller]

Acceptance may be demonstrated after a reasonable opportunity to inspect goods when buyer (lessee) indicates:

- by words/conduct to seller that goods are conforming - they will retain them in spite of their nonconformity - buyer fails to reject goods by reasonable time - in sales contracts, buyer will be deemed to have accepted the goods if they perform any act inconsistent w/ seller's ownership

when buyer obtains sustitute goods/ or covers, buyer can recover from seller

- difference between cost of cover and contract price/lease payments - incidental damages resulted from breach - consiquential damages to compenstae for indirect losses (lost profits) resulting from breach that were reasonably forseeable at time of contract formation

When two Merchants enter contract & Offeror adds terms, it automatically becomes part of contract unless

- original offer expressly limited acceptance to terms of offer - new/changed terms materially alter contract - offeror objects new/changed terms within reasonable time

Oral contract for sale of custom goods is enforceable if goods specifically manufactured for

- particular buyer - is not suitable for reale in ordinary business - seller substantially started to manufacture goods

Article 2 of UCC deals with sales of goods, not:

- real property - services - intangible products (stocks/bonds)

When court find contract to be unconscionable, they can

- refuse to enforce contract - enfore contract w/o clause - limit application of caluse to avoid unconscionable result

When seller refuses to deliver, the basic remedies available to buyer

- right to cancel/rescind contract - obtain goods that have been paid for if the seller (lessor) is insolvent - sue to obtain specific performance if goods are unique or damages are in adequate - buy other goods/obtain cover - recover damages from seller - sue to obtain identified goods held by third party/ for damages - replevy (recover) goods

Generally a buyer has insurable interest in identified goods and seller has insurable interest as long as

- seller retains title - seller has security interest in goods

Statements that create express warranties may include

- statements that the goods conform to any affirmation of fact or promise that the seller (lessor) makes to the buyer (lessee) abouyt the goods - the goods conform to any description of them - goods conform to any sample/model of the goods shown to the buyer

When buyer breaches and seller has possesion of goods, seller has right

- to cancel or rescind contract - resell the goods and sue to recover damages - sue to recover purchase price/lease payments due - sue to recover damages for buyer's nonacceptance of goods

Implied warranty of merchantabililty

- warranty that goods being sold or leased are properly packaged and labeled, and are of fair quality - warrany automatically arises in every sale made by merchant dealing w goods sold/leased

Implied warranty of fitness for a particular purpose

- warranty that goods sold/leased fit for particular purpose - arises when seller (lessor) knows particular purpose which buyer (lessee) will use goods & knows they are relying on skill & judgement of seller

If the buyer or lessee breaches the contract, the risk of loss immediately shifts to the buyer or lessee. Limitations to this rule are as follows:

1.) seller (lessor) must already identified contract goods 2.) buyer (lessee) bears risk for only a commercially reasonable time after seller (lessor) has learned of the breach 3.) buyer (lessee) is liable only to extent of any deficiency in seller's insurance coverage

When anticipatory repudiation occurs, the nonbreaching party may

1.) treat the repudiation as a final breach by purusing a remedy 2.) wait to see if the repudiating party will decide to honor the contract

Sales Contract

A contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price

Merchant

A perosn who deals in goods of the kind involved in the sales contract

Requirements Contract

An agreement in which a byer agres to purchase adn the seller agreees to sell all or up to a state damount of what the buyer requires

Subject matter of dispute is real estate/services

Common Laws applies

Lease Agreement

In regard to the lease of goods, an agreement in which on person, the lessor, agrees to transfer the right to the possession and use of the property to another person, the lessee, in exchange for rental payments

Lessee (Buyer)

One who acquires the right to the possession and use of goods under a lease

Lessor (Seller)

One who transfer rights to the possession and use of goods under a lease

Intangible property

Property that has only conceptual existence and thus does not come under Article 2

Tangible Property

Property that has physical existence, that can be touched or seen

In contracts that involve the sale of both goods and services, once a court decides that such a contract is primarily a goods contract, any dispute, even over the services portion, will be decided under the UCC.

TRUE

What is NOT one of the requirements for a merchant's firm offer?

The offer must state the date for all future shipments

Sale

The passing of title, or evidence of ownership rights, fron the seller to the buyer for a price

Unlike the UCC, the CISG does not apply to consumer sales.

True

Subject matter of dispute is goods

UCC governs

Sales contracts between parties residing in the United States and foreign countries typically are governed by the:

United Nations Convention on Contracts for the International Sale of Goods (CISG)

Perdominant-factor test

When contracts invovle a combination of goods and services, courts use this test to determine whether a contract is primarily for the sale of goods or for the sale of services

Under the UCC, a bill of lading is:

a reciept of goods signed by a carrier and a contract for transportation of the goods

The basic obligation of a buyer in performing a sales or lease contract is to:

accept and pay for conforming goods in accordance with contract

The CISG provides that a contract may be formed even though an acceptance contains additional terms, unless

additional terms materially alter the contract

Output contract

an agreement in which a seller agreees to sell adn a buyer agrees to buy all or up to a stated amount of what the seller produces

When one party sends an acceptance to an offer that adds terms to the offer, and one or both parties are nonmerchants, the additional terms:

are not a part of the contract

The general rule regarding the warranty of good title in most sales contracts is that the warranty:

arises automatically in most sales contracts

Identification takes place for existing goods if the parties do not otherwise agree:

at the time the contract is made

For an express warranty to exist, a reasonable buyer would need to consider the promise or representation as a part of the:

basis of the bargain

In commercial transactions, when both parties are merchants and are using form contracts, there is a risk of conflicting terms. This is known as

battle of the forms

If contract fails to specify delivery

delivery is at the seller's place of business

When a contract fails to specify a price, either because the parties have not agreed or the price is to be set by one of the parties later in good faith, then a court will:

determine a reasonable pirce at time for delivery

The seller is required to deliver the goods to a particular destination in a destination contract, usually

directly to specified destination

The UCC's provisions relating to passage of title " " apply to lease of goods

do not

In the absence of any specific agreements, the buyer must make payment at the time and place the contract is signed.

false

The UCC generally does not prevent warranties to be disclaimed or limited.

false

A party to a contract with a sufficient interest in the property subject to the contract may have:

insurable interest

What is used to determine if a party has sufficient interest in the insured item to obtain a valid policy?

insurance laws

What is the one requirement that is NOT necessary for a writing or electronic record to be sufficient to satisfy the UCC's statute of frauds?

notary public's signature

if seller is a merchant, risk of loss to goods held by the seller passes

only on a buyer's taking possession

If contract fails to specify payment

payment is due at the time and place at which the buyer will receive the goods

fungible

product that can be replaced by another item

If the seller or lessor breaches by tendering nonconforming goods that the buyer or lessee has a right to reject

risk of loss does not pass to the buyer or lessee until the defects are cured or the buyer accepts the goods, thus waiving the right to reject.

The Convention on Contracts for the International Sale of Goods (CISG) provides remedies that are:

similar to those in the UCC

A person who employs a merchant as a broker, agent, or other intermediary has the " " of a merchant in that transaction.

status

bailment

temporary delivery of personal property, without passage of title, into the care of another who is obligated to return the bailed property to the bailor or dispose of it as directed.

When one party has a reasonable belief that the other party will not perform

the first party may request an assurance of performance

Goods can be merchantable, but at the same time unfit for a particular purpose.

true

In sales law, a warranty is an assurance or guarantee by the seller about the quality and features of the goods being sold.

true

Without an explicit agreement to the contrary, title passes to the buyer at the time and the place the seller performs by delivering the goods.

true

Implied warranty

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

Tender of delivery is

when the seller places or holds conforming goods at the buyer's disposal

The CISG provides that any additional terms related to payment, quality, quantity, price, or time/place of delivery

will not be included in the contract