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