WGU: Business Law - C713

What are types of "exclusionary practices?"

exclusive-dealing contracts and tying arrangements. exclusive-dealing contract-An agreement under which a seller forbids a buyer to purchase products from the seller's competitors. tying arrangement-An agreement between a buyer and a seller in which the buyer of a specific product or service becomes obligated to purchase additional products or services from the seller.

Define and describe "negotiation."

negotiation is the transfer of an instrument in such form that the transferee becomes a holder requires both delivery and indorsement

Define "Deceptive Advertising.

occurs if a reasonable consumer would be misled by the advertising claim.

The Marine Protection, Research, and Sanctuaries Act of 1972

(popularly known as the Ocean Dumping Act) regulates the transportation and dumping of material (pollutants) into ocean waters.

Explain how additional terms may affect acceptance of an offer.

............

Describe "Per se" violations.

A type of anticompetitive agreement—such as a horizontal price-fixing agreement—that is considered to be so injurious to the public that there is no need to determine whether it actually injures market competition; rather, it is in itself (per se) a violation of the Sherman Act. (A given)

Differentiate between Cashier's checks, Traveler's checks, and certified checks.

1. Cashiers Checks when a bank draws a check on itself, the check is called a cashier's check and is a negotiable instrument on issue Except in very limited circumstances, the issuing bank musthonor its cashier's checks when they are presented for payment. 2. Travelers Check A check that is payable on demand, drawn on or payable through a bank, and designated as a traveler's check. Traveler's checks are designed to be a safe substitute for cash when a person is on vacation or traveling and are issued for a fixed amount, such as $20, $50, or $100 3. Certified Check A check that has been accepted by the bank on which it is drawn. Essentially, the bank, by certifying (accepting) the check, promises to pay the check at the time the check is presented.

Describe the actions that can be taken by the FTC

1. Formal Complaint 2. Cease and desist order 3. Counteradvertising-correct earlier false claims that were made about a product 4. Multiple product order-requires a firm to stop false advertising for all of its products. 5. Restitution

Differentiate between horizontal and vertical mergers

1. Horizontal Mergers: A merger between two firms that are competing in the same market. Causes Significant market share. 2. Vertical Merger: The acquisition by a company at one stage of production of a company at a higher or lower stage of production (such as its supplier or retailer).

Define and describe a firm offer.

A firm offer arises when a merchant-offeror gives assurances in a signed writing that the offer will remain open. To qualify as a firm offer, the offer must be: 1. Written (or electronically recorded, such as in an e-mail). 2. Signed by the offeror.

Define and describe implied warranties.

A warranty that the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the parties. 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.The serving of food or drink to be consumed on or off the premises is also treated as a sale of goods and subject to the implied warranty of merchantability. implied warranty of fitness for a particular purpose: A warranty that goods sold or leased are fit for a particular purpose. The warranty arises when any seller or lessor knows the particular purpose for which a buyer or lessee will use the goods and knows that the buyer or lessee is relying on the skill and judgment of the seller or lessor to select suitable goods.

Replevin

An action to recover specific goods in the hands of a party who is wrongfully withholding them from the other party.

Disclaimers

Disclaimer of Merchantability-Can be given orally Disclaimer of Implied Warranty of Fitness- Must be in writing

Describe and explain the major provisions of the Sherman Antitrust Act

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal [and is a felony punishable by fine and/or imprisonment].(Applies to 2 or more persons) Deals with agreements that are restrictive Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony [and is similarly punishable].(Can apply to 1 or more people). Deals with Monopolies The underlying assumption of Section 1 of the Sherman Act is that society's welfare is harmed if rival firms are permitted to join in an agreement that consolidates their market power or otherwise restrains competition.

Exceptions to Statute of Frauds

Exceptions: An oral contract for the sale or lease of custom-made goods will be enforceable if: 1. The goods are specially manufactured for a particular buyer or specially manufactured or obtained for a particular lessee. 2. The goods are not suitable for resale or lease to others in the ordinary course of the seller's or lessor's business. 3. The seller or lessor has substantially started to manufacture the goods or has made commitments for the manufacture or procurement of the goods

Inconsistent Warranties

Express warranties displace inconsistent implied warranties, except implied warranties of fitness for a particular purpose. Samples take precedence over inconsistent general descriptions. Exact or technical specifications displace inconsistent samples or general descriptions.

Explain how "unconscionability" can affect a warranty.

Factors such as lack of bargaining position, "take-it-or-leave-it" choices, and a buyer's or lessee's failure to understand or know of a warranty disclaimer will be relevant to the issue of unconscionability.

What are the seller's and buyer's obligations under the good faith provision?

In performing a sales or lease contract, the basic obligation of the seller or lessor is to transfer and deliver conforming goods. The basic obligation of the buyer or lessee is to accept and pay for conforming goods in accordance with the contract. When the contract is unclear and disputes arise, the courts look to the UCC and impose standards of good faith and commercial reasonableness.

Describe letter of credit transactions, as they pertain to international sales contracts.

Letters of Credit: A written instrument, usually issued by a bank on behalf of a customer or other person, in which the issuer promises to honor drafts or other demands for payment by third persons in accordance with the terms of the instrument. In a simple letter-of-credit transaction, the issuer (a bank or other financial institution) agrees to issue a letter of credit and to ascertain whether the beneficiary (seller or lessor) performs certain acts. In return, the account party (buyer or lessee) promises to reimburse the issuer for the amount paid to the beneficiary. The transaction may also involve an advising bank that transmits information and a paying bank that expedites payment under the letter of credit

labeling and packaging laws: The Energy Policy and Conservation Act of 1975

Requires automakers to attach an information label to every new car. The label must include the Environmental Protection Agency's fuel economy estimate for the vehicle. In general, labels must be accurate, and they must use words that are easily understood by the ordinary consumer. In some instances, labels must specify the raw materials used in the product, such as the percentage of cotton, nylon, or other fiber used in a garment.

Define the terms "sale" and "goods."

Sale-The passing of title (evidence of ownership rights) from the seller to the buyer for a price Goods- To be characterized as a good, an item of property must be tangible, and it must be movable

Explain the purpose of Section 2 of the Sherman Antitrust Act.

Section 2: monopolization and attempts to monopolize. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony [and is similarly punishable].(Can apply to 1 or more people). Deals with Monopolies

Define and describe methods of acceptance, including the "mailbox" rule.

The UCC permits acceptance of an offer to buy goods "either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods" [UCC 2-206(1) (b)]. Conforming goods accord with the contract's terms, whereas nonconforming goods do not. The prompt shipment of nonconforming goods constitutes both an acceptance, which creates a contract, and a breach of that contract. This rule does not apply if the seller seasonably (within a reasonable amount of time) notifies the buyer that the nonconforming shipment is offered only as an accommodation, or as a favor Mirror image rule-A common law rule that requires, for a valid contractual agreement, that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer.

What is the purpose of the Environmental Regulatory agency?

The primary federal agency regulating environmental law is the Environmental Protection Agency (EPA), which was created in 1970 to coordinate federal environmental responsibilities Most federal environmental laws provide that citizens can sue to enforce environmental regulations if government agencies fail to do so—or to limit enforcement actions if agencies go too far in their actions. All federal agencies must take environmental factors into consideration when making significant decisions

Describe the "Shelter Principle."

The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC. Anyone, no matter how far removed from an HDC, who can ultimately trace her or his title back to an HDC comes within the shelter principle. The idea is based on the legal theory that the transferee of an instrument receives at least the rights that the transferor had. Limitations if fraud is involved.

Describe the regulations designed to protect air and water:Rivers and Harbors Appropriations Act of 1899

These regulations prohibited ships and manufacturers from discharging or depositing refuse in navigable waterways without a permit.

Explain the term "merchantability" as it pertains to implied warranties.

To be merchantable, goods must be "reasonably fit" for the ordinary purposes for which such goods are used.

What is a warranty?

Under the UCC, three types of title warranties—good title, no liens, and no infringements Good Title: sellers warrant that they have good and valid title to the goods sold and that the transfer of the title is rightful [UCC 2-312(1)(a)]. If the buyer subsequently learns that the seller did not have valid title to the goods that were purchased, the buyer can sue the seller for breach of this warranty. No Liens: This warranty protects buyers who, for instance, unknowingly purchase goods that are subject to a creditor's security interest. (A security interest in this context is an interest in the goods that secures payment or performance of an obligation.) If a creditor legally repossesses the goods from a buyer who had no actual knowledge of the security interest, the buyer can recover from the seller for breach of warranty. (In contrast, a buyer who has actual knowledge of a security interest has no recourse against a seller.) No Infringements: A third type of warranty of title arises automatically when the seller or lessor is a merchant. A merchant-seller or lessor warrants that the buyer or lessee takes the goods free of infringements from any copyright, trademark, or patent claims of a third person

Define Nuisance

Under the common law doctrine of nuisance, persons may be held liable if they use their property in a manner that unreasonably interferes with others' rights to use or enjoy their own property.

UCC Remedies

Unlike remedies under the common law, remedies under the UCC are cumulative

Define and describe "risk of loss" and how it applies to shipment and destination contracts.

When risk of loss passes from a seller or lessor to a buyer or lessee is generally determined by the contract between the parties. In a destination contract, the risk of loss passes to the buyer or lessee when the goods are tendered to the buyer or lessee at the specified destination The risk of loss in a shipment contract passes to the buyer or lessee when the goods are delivered to the carrier

Describe the remedies a buyer has when the seller breaches.

When seller refuses to deliver goods: Buyer/Lessee can: -Cancel (rescind) the contract. -Obtain goods that have been paid for if the seller or lessor is insolvent. -Sue to obtain specific performance if the goods are unique or if damages are an inadequate remedy. -Buy other goods (obtain cover) and recover damages from the seller. -Sue to obtain identified goods held by a third party (replevy goods). -Sue to obtain damages. When Seller/Lessor delivers nonconforming goods -right to reject goods -permitted to revoke his or her acceptance of the goods -Right to recover damages for accepted goods

When does title pass between seller and buyer?

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

What are the two methods of negotiation?

order instrument or a bearer instrument. Order Instrument contains the name of a payee capable of indorsing, as in "Pay to the order of Jamie Fowler. Bearer Instrument negotiated by delivery—that is, by transfer into another person's possession. Indorsement is not necessary

The Toxic Substances Control Act

regulates chemicals and chemical compounds that are known to be toxic—such as asbestos and polychlorinated biphenyls, popularly known as PCBs. The act also controls the introduction of new chemical compounds by requiring investigation of any possible harmful effects from these substances. -For new chemicals first determine their effects on human health and the environment. The EPA may require special labeling, limit the use of a substance, set production quotas, or prohibit the use of a substance altogether.

The Safe Drinking Water Act

requires the EPA to set maximum levels for pollutants in public water systems.

Describe how the UCC applies to a merchant.

the UCC presumes that special business standards ought to be imposed because of merchants' relatively high degree of commercial expertise. Such standards do not apply to the casual or inexperienced seller or buyer (consumer) A merchant is a person who deals in goods of the kind involved in the sales contract. Thus, a retailer, a wholesaler, or a manufacturer is a merchant of the goods sold in his or her business

Describe "monopolization."

1. The possession of monopoly power in the relevant market. 2. "The willful acquisition or maintenance of the power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."

What are the three requirements for holder in due course (HDC)?

1. for value 2. in good faith 3. without notice that it is defective (such as when the instrument is overdue, dishonored, irregular, or incomplete)

Describe some of the common endorsement problems.

1. Misspelled Names 2. Instruments can be payable to Entities 3. Alternative or Joint Payees-requires endorsement of only one of the payees

What is the Fair Packaging and Labeling Act?

1. Requires that labels identify: a. The product b. The net quantity of the contents(#of servings & size of serving) c. The manufacturer d. The packager or distributor

Differentiate between shipment contracts and destination contracts.

1. Shipment Contract A contract in which the seller is required to ship the goods by carrier. The buyer assumes liability for any losses or damage to the goods after they are delivered to the carrier. Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract 2. 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.

Describe the Truth-in-Lending Act and the Fair and Accurate Credit Transactions Act.

1. name commonly given to Title I of the Consumer Credit Protection Act, as amended. 2. The TILA is basically a disclosure law. It is administered by the Federal Reserve Board and requires sellers and lenders to disclose credit terms or loan terms so that individuals can shop around for the best financing arrangements. 3. law protects only debtors who are natural persons (as opposed to the artificial "person" of a corporation). It does not extend to other legal entities. The disclosure requirements are contained in Regulation Z, issued by the Federal Reserve Board of Governors.

Define and describe a "bailee."

A bailment is a temporary delivery of personal property, without passage of title, into the care of another, called a bailee. Under the UCC, a bailee is a party who—by a bill of lading, warehouse receipt, or other document of title—acknowledges possession of goods and/or contracts to deliver them. For instance, a warehousing company or a trucking company may be a bailee.

Describe the bank's duty to accept deposits.

A bank has a duty to its customer to accept the customer's deposits of cash and checks. When checks are deposited, the bank must make the funds represented by those checks available within certain time frames. A bank also has a duty to collect payment on any checks payable or indorsed to its customer and deposited by the customer into his or her account

Differentiate between blank, special, qualified, and restrictive endorsements.

A blank endorsement does not specify a particular indorsee and can consist of a mere signature. An order instrument indorsed in blank becomes a bearer instrument and can be negotiated by delivery alone A special endorsement contains the signature of the endorser and identifies the person to whom the indorser intends to make the instrument payable—that is, it names the endorsee. An order instrument unqualified endorsements. In other words, the endorser is guaranteeing payment of the instrument in addition to transferring title to it. An indorser who does not wish to be liable on an instrument can use a qualified indorsement to disclaim this liability [UCC 3-415(b)]. The notation "without recourse" is commonly used to create a qualified indorsement. A restrictive indorsement requires the indorsee to comply with certain instructions regarding the funds involved but does not prohibit further negotiation of the instrument

Describe the "Perfect Tender" rule, including possible exceptions to the rule.

A common law rule under which a seller was required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the sales contract. A tender of nonconforming goods would automatically constitute a breach of contract. Under the Uniform Commercial Code, the rule has been greatly modified. The UCC preserves the perfect tender doctrine. It states that if goods or tender of delivery fails in any respect to conform to the contract, the buyer or lessee may accept the goods, reject the entire shipment, or accept part and reject part The corollary to this rule is that if the goods conform in every respect, the buyer or lessee does not have a right to reject the goods Exceptions to rule: -. With an installment contract, a buyer or lessee can reject an installment only if the nonconformity substantially impairs the value of the installment and cannot be cured.If the buyer or lessee fails to notify the seller or lessor of the rejection, however, and subsequently accepts a nonconforming installment, the contract is reinstated. Unless the contract provides otherwise, the entire installment contract is breached only when one or more nonconforming installments substantially impair the value of the whole contract. -A discounted price can serve as the "reasonable grounds" to believe that the buyer or lessee will accept the nonconforming tender. -that defective goods or parts will not be rejected if the seller or lessor is able to repair or replace them within a reasonable period of time, the perfect tender rule does not apply or cure. -The seller or lessor has a right to attempt to "cure" a defect when the following are true: A delivery is rejected because the goods were nonconforming. The time for performance has not yet expired. The seller or lessor provides timely notice to the buyer or lessee of the intention to cure. The cure can be made within the contract time for performance. Once the time for performance under the contract has expired, the seller or lessor no longer has a right to cure -Commercial Impracticability Unless the contract provides otherwise, the entire installment contract is breached only when one or more nonconforming installments substantially impair the value of the whole contract. Partial Performance -the unforeseen event only partially affects the capacity of the seller or lessor to perform. Sellor/Lessor required to deliver goods it can...Buyer/Lessee can accept or reject it. Destruction of Identified Goods -Unexpected event(fire) if the goods were identified at the time the contract was formed, the parties are excused from performance. If the goods are only partially destroyed, however, the buyer or lessee can inspect them and either treat the contract as void or accept the damaged goods with a reduction in the contract price. Right of Assurance reasonable grounds" to believe that the other party will not perform, the first party may in writing "demand adequate assurance of due performance" from the other party. Until such assurance is received, the first party may "suspend" further performance without liability. Duty of Cooperation The UCC provides that when cooperation is not forthcoming, the other party can suspend performance without liability and hold the uncooperative party in breach or proceed to perform the contract in any reasonable manner

Define Negligence and Strict Liability.

A negligence action is based on a business's alleged failure to use reasonable care toward a party whose injury was foreseeable and was caused by the lack of reasonable care In a strict liability action, the injured party does not have to prove that the business failed to exercise reasonable caree. Ex is a business that engages in ultrahazardous activies like transportation of radioactive materials

Define and describe express warranties.

A seller or lessor can create an express warranty by making representations concerning the quality, condition, description, or performance potential of the goods ex: D. J. Vladick, a salesperson at Home Depot, tells a customer, "These drill bits will easily penetrate stainless steel—and without dulling." Vladick's statement is an express warranty. -That the goods conform to any affirmation -That the goods conform to any description of them. -That the goods conform to any sample or model of the goods shown to the buyer or lessee.

Define and describe Parol Evidence.

A term that originally meant "oral evidence," but that has come to refer to any negotiations or agreements made prior to a contract or any contemporaneous oral agreements made by the parties

Explain the concept of "anticipatory repudiation."

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

Define and describe "insurable interest."

An interest either in a person's life or well-being or in property that is sufficiently substantial that insuring against injury to (or the death of) the person or against damage to the property does not amount to a mere wagering (betting) contract. A buyer or lessee has an insurable interest in identified goods. The moment the contract goods are identified by the seller or lessor, the buyer or lessee has a property interest in them. That interest allows the buyer or lessee to obtain the necessary insurance coverage for those goods even before the risk of loss has passed [UCC 2-501(1), 2A-218(1)]. Identification can be made at any time and in any manner agreed to by the parties. A seller has an insurable interest in goods as long as he or she retains title to the goods. Even after title passes to a buyer, a seller who has a security interest (a right to secure payment) in the goods still has an insurable interest and can insure the goods

Explain the term "unconscionability."

An unconscionable contract is one that is so unfair and one sided that it would be unreasonable to enforce it. The UCC allows a court to evaluate a contract or any clause in a contract, and if the court deems it to have been unconscionable at the time it was made, the court can do any of the following [UCC 2-302, 2A-108]: 1. Refuse to enforce the contract. 2. Enforce the remainder of the contract without the unconscionable part. 3. Limit the application of the unconscionable term to avoid an unconscionable result.

Describe the scope and purpose of Articles 2 and 2A of the UCC.

Article 2 of the UCC sets forth the requirements for sales contracts, as well as the duties and obligations of the parties involved in the sales contract Article 2 of the UCC (as adopted by state statutes) governs sales contracts, or contracts for the sale of goods. To facilitate commercial transactions, Article 2 modifies some of the common law contract requirements Article 2 deals with the sale of goods. It does not deal with real property (real estate), services, or intangible property such as stocks and bonds. Thus, if the subject matter of a dispute is goods, the UCC governs. If it is real estate or services, the common law applies Article 2A covers similar issues for lease contracts. Leases of personal property (goods such as automobiles and industrial equipment) have become increasingly common. In this context, a lease is a transfer of the right to possess and use goods for a period of time in exchange for payment. Article 2A of the UCC was created to fill the need for uniform guidelines in this area.

Describe how title to goods will pass to a buyer.

Before any interest in specific goods can pass from the seller or lessor to the buyer or lessee, the goods must be 1. in existence and 2. identified as the specific goods designated in the contract [UCC 2-105(2)]

Describe the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994.

Directed to FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers

Differentiate between the shipping terms FOB, FAS, and CIF (or CC&F).

FOB-Free on Board Indicates that the selling price of goods includes transportation costs to the specificF.O.B. place named in the contract. The seller pays the expenses and carries the risk of loss to the F.O.B. place named FAS-Free alongside Requires that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer [UCC 2-319(2)]. An F.A.S. contract is essentially an F.O.B. contract for ships. C.I.F. or C.&F. (cost, insurance, and freight or just cost and freight)—Requires, among other things, that the seller "put the goods in possession of a carrier" before risk passes to the buyer [UCC 2-320(2)]. (These are basically pricing terms, and the contracts remain shipment contracts, not destination contracts.) Delivery ex-ship (delivery from the carrying vessel)—Means that risk of loss does not pass to the buyer until the goods are properly unloaded from the ship or other carrier [UCC 2-322].

Describe the regulations designed to protect air and water: the Clean Air Act

Federal involvement with air pollution goes back to the 1950s and 1960s, when Congress authorized funds for air-pollution research and enacted the Clean Air Act The Clean Air Act, as amended, provides the basis for issuing regulations to control multistate air pollution. It covers both mobile sources (such as automobiles and other vehicles) and stationary sources (such as electric utilities and industrial plants) of pollution. (Reduce emissions and greenhouse gases)(Lists hazardous air pollutants,maximize use of pollution control equipment-Maximum achievable control technology) -for violations under Clean Air Act up to fees of $25K a day

Describe the UCC's "Good Faith" provision.

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

Types of Trade Restraints:

Horizontal and Vertical In contrast to horizontal relationships, which occur at the same level of operation, vertical relationships encompass the entire chain of production.

When do warranties arise in sales transactions?

If the buyer is subsequently sued by a third party holding copyright, trademark, or patent rights in the goods, then this warranty is breached. The buyer must notify the seller of the litigation within a reasonable time to enable the seller to decide whether to defend the lawsuit. The seller then decides whether to defend the buyer and bear all expenses in the action.

How is risk of loss affected when the seller breaches? When the buyer breaches?

If the goods are so nonconforming that the buyer has the right to reject them, the risk of loss does not pass to the buyer. With nonconforming goods, the risk of loss does not pass to the buyer until either: 1. The defects are cured—that is, the goods are repaired, replaced, or discounted in price by the seller—see Chapter 18. 2. The buyer accepts the goods in spite of their defects (thus waiving the right to reject). The general rule is that when a buyer or lessee breaches a contract, the risk of loss immediately shifts to the buyer or lessee. This rule has three important limitations [UCC 2-510(3), 2A-220(2)]: 3. The seller or lessor must have already identified the contract goods. 4. The buyer or lessee bears the risk for only a commercially reasonable time after the seller or lessor has learned of the breach. 5. The buyer or lessee is liable only to the extent of any deficiency in the seller's or lessor's insurance coverage.

Describe how prior dealings or customs can affect implied warranties.

Implied warranties can also arise (or be excluded or modified) as a result of course of dealing or usage of trade. Without evidence to the contrary, when both parties to a sales or lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that custom to apply to their contract. Ex:Industry-wide custom is to lubricate a new car before it is delivered. If a dealer fails to lubricate a car, the dealer can be held liable to a buyer for damages resulting from the breach of an implied warranty. (This, of course, would also be negligence on the part of the dealer.)

What is the purpose of the Clayton Act of 1914?

In 1914, Congress enacted the Clayton Act. The act was aimed at specific anticompetitive or monopolistic practices that the Sherman Act did not cover.

Describe the regulations designed to protect air and water: Federal Water Pollution Control Act (FWPCA) AKA Clean Water Act

In 1948, Congress passed the Federal Water Pollution Control Act (FWPCA), but its regulatory system and enforcement powers proved to be inadequate In 1972, amendments to the FWPCA—known as the Clean Water Act (CWA)—established the following goals: 1. make waters safe for swimming, 2. protect fish and wildlife, and 3. eliminate the discharge of pollutants into the water.

Describe the Consumer Product Safety Act.

In 1972, the Consumer Product Safety Act created the first comprehensive scheme of regulation over matters of consumer safety. The act also established the Consumer Product Safety Commission (CPSC), which has far-reaching authority over consumer safety. The CPSC conducts research on the safety of individual consumer products and maintains a clearinghouse on the risks associated with various products. 1. Set Safety standards for consumer products 2. Ban the manufacture and sale of any product that the commission believes poses an "unreasonable risk" to consumers. 3. Remove from the market any products it believes to be imminently hazardous. 4. Require manufacturers to report on any products already sold or intended for sale if products are hazardous 5. Administer other product-safety legislation, including the Child Protection and Toy Safety Act of 1969 and the Federal Hazardous Substances Act of 1960.

Define the Superfund - CERCLA

In 1980, Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund. The basic purpose of Superfund is to regulate the clean-up of disposal sites in which hazardous waste is leaking into the environment 1. It established an information-gathering and analysis system that enables the government to identify chemical dump sites and determine the appropriate action. 2. It authorized the EPA to respond to hazardous substance emergencies and to arrange for the clean-up of a leaking site directly if the persons responsible for the problem fail to clean up the site. 3. It created a Hazardous Substance Response Trust Fund (also called Superfund) to pay for the clean-up of hazardous sites using funds obtained through taxes on certain businesses. 4. It allowed the government to recover the cost of clean-up from the persons who were (even remotely) responsible for hazardous substance releases.

What is the purpose of the Federal Food, Drug, and Cosmetic Act?

The most important federal legislation regulating food and drugs is the Federal Food, Drug, and Cosmetic Act (FDCA). The act protects consumers against adulterated (contaminated) and misbranded foods and drugs. Establish food standards,specifies safe levels of potentially hazardous food additives, and provides classifications of foods and food advertising.Similar to FDA.

Explain how Identification takes place with both existing and future goods, and goods that are part of a larger mass.

In a sale of goods, the express designation of the specific goods provided for in the contract. Existing Goods- If the contract calls for the sale or lease of specific and ascertained goods that are already in existence, identification takes place at the time the contract is made. Future Goods- Any goods that are not in existence at the time of contracting are known as future goods. If a sale or lease involves unborn animals to be born within twelve months after contracting, identification takes place when the animals are conceived Goods that are part of a larger mass- Goods that are part of a larger mass are identified when the goods are marked, shipped, or somehow designated by the seller or lessor as the particular goods to pass under the contract.

Define and describe an offer, including "open" terms.

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, correspondence, 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 [UCC 2-204(2), 2A-204(2)]. the UCC states that a sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as both of the following are true: 1. The parties intended to make a contract. 2. There is a reasonably certain basis for the court to grant an appropriate remedy [UCC 2-204(3), 2A-204(3)].

Define a lease agreement and consumer leases.

Lease Agreement-In regard to the lease of goods, an agreement in which one person (the lessor) agrees to transfer the right to the possession and use of property to another person (the lessee) in exchange for rental payments. A consumer lease involves three elements: 1. A lessor who regularly engages in the business of leasing or selling. 2. A lessee (except an organization) who leases the goods "primarily for a personal, family, or household purpose." 3. Total lease payments that are less than $25,000 [UCC 2A-103(1)(e)].

How do statements of opinion or value affect express warranties?

Only statements of fact create express warranties. A seller or lessor who makes a statement that merely relates to the value or worth of the goods, or states an opinion about or recommends the goods, does not create an express warranty Ordinarily, statements of opinion do not create warranties. If the seller or lessor is an expert, however, and gives an opinion as an expert to a layperson, then a warranty may be created.

Describe the buyer's obligations, as it pertains to payment, inspection, and acceptance

Payment: the buyer or lessee must make payment at the time and place the goods are received When a sale is made on credit, the buyer is obligated to pay according to the specified credit terms (for example, 60, 90, or 120 days), not when the goods are received. The credit period usually begins on the date of shipment If the seller demands cash, the seller must permit the buyer reasonable time to obtain it. Inspection: The buyer or lessee has an absolute right to inspect the goods before making payment. If the goods are not as ordered, the buyer or lessee has no duty to pay. An opportunity for inspection is therefore a condition precedent to the right of the seller or lessor to enforce payment.The buyer bears the costs of inspecting the goods but can recover the costs from the seller if the goods do not conform and are rejected. Acceptance if: -The buyer or lessee indicates (by words or conduct) to the seller or lessor that the goods are conforming or that he or she will retain them in spite of their nonconformity [UCC 2-606(1)(a), 2A-515(1)(a)]. -The buyer or lessee fails to reject the goods within a reasonable period of time [UCC 2-602(1), 2-606(1)(b), 2A-515(1)(b)]. -In sales contracts, the buyer will be deemed to have accepted the goods if he or she performs any act inconsistent with the seller's ownership. For instance, any use or resale of the goods—except for the limited purpose of testing or inspecting the goods—generally constitutes an acceptance

Describe "price discrimination."

Setting prices in such a way that two competing buyers pay two different prices for an identical product or service.

Describe what happens when there are "overlapping" warranties.

Sometimes, two or more warranties are made in a single transaction. An implied warranty of merchantability, an implied warranty of fitness for a particular purpose, or both can exist in addition to an express warranty. If warranties consistent then cumulative. If inconsistent pick warranty that is more dominant: -Express warranties displace inconsistent implied warranties, except implied warranties of fitness for a particular purpose. -Samples take precedence over inconsistent general descriptions. -Exact or technical specifications displace inconsistent samples or general descriptions.

Define and describe the different types of delivery.

Tender of Delivery: Under the Uniform Commercial Code, a seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and giving the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery. Reasonable hour and time. Place of Delivery: Will be at one of the following if not indicated in contract: -The seller's place of business. -The seller's residence, if the seller has no business location [UCC 2-308(a)]. -The location of the goods, if both parties know at the time of contracting that the goods are located somewhere other than the seller's business Delivery via Carrier Delivery is clear in contract In carrier contracts, the seller fulfills the obligation to deliver the goods through either a shipment contract or a destination contract. Seller must: -Place the goods into the hands of the carrier. -Make a contract for their transportation that is reasonable according to the nature of the goods and their value. (For example, certain types of goods need refrigeration in transit.) -Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain possession of the goods from the carrier. -Promptly notify the buyer that shipment has been made. If the seller does not make a reasonable contract for transportation or notify the buyer of the shipment, the buyer can reject the goods, but only if a material loss or a significant delay results. Destination Contracts: In a destination contract, the seller agrees to deliver conforming goods to the buyer at a particular destination The goods must be tendered at a reasonable hour and held at the buyer's disposal for a reasonable length of time. The seller must also give the buyer appropriate notice and any necessary documents to enable the buyer to obtain delivery from the carrier

Describe how the CISG applies to the international sale of goods

The CISG governs international contracts only if the countries of the parties to the contract have ratified the CISG and if the parties have not agreed that some other law will govern their contract. CISG is the uniform international sales law of countries that account for more than two-thirds of all global trade Essentially, the CISG is to international sales contracts what Article 2 of the UCC is to domestic sales contracts. the UCC applies when the parties to a contract for a sale of goods have failed to specify in writing some important term, such as the price or delivery. Similarly, whenever the parties to international transactions have failed to specify in writing the precise terms of a contract, the CISG will be applied. Unlike the UCC, the CISG does not apply to consumer sales. Neither the UCC nor the CISG applies to contracts for services.

Clean Water Act

The CWA also set specific schedules, which were extended by amendment in 1977 and by the Water Quality Act of 1987. Under these schedules, the EPA limits the discharge of various types of pollutants based on the technology available for controlling them. The CWA established a permit system, called the National Pollutant Discharge Elimination System (NPDES), for regulating discharges from "point sources" of pollution, which include industrial, municipal (such as pipes and sewage treatment plants), and agricultural facilities.

What is the availability schedule for deposited checks?

The Expedited Funds Availability Act (EFAA) and Regulation CC 1. Any local check (drawn on a bank in the same area) deposited must be available for withdrawal by check or as cash within one business day from the date of deposit. 2. For nonlocal checks, the funds must be available for withdrawal within not more than five business days. 3. Under the Check Clearing in the 21st Century Act (Check 21, which will be discussed shortly), a bank must credit a customer's account as soon as the bank receives the funds. 4. For cash deposits, wire transfers, and government checks, funds must be available on the next business day. 5. The first $100 of any deposit must be available for cash withdrawal on the opening of the next business day after deposit.

Explain how online deceptive advertising is monitored.

The FTC actively monitors online advertising and has identified hundreds of Web sites that have made false or deceptive claims for products. The FTC has issued guidelines to help online businesses comply with existing laws prohibiting deceptive advertising

Explain the Magnuson-Moss Warranty Act.

The Magnuson-Moss Warranty Act of 1975 was designed to prevent deception in warranties by making them easier to understand.Applies to consumer transactions only. Under the Magnuson-Moss Act, no seller is required to give a written warranty for consumer goods sold. If a seller chooses to make an express written warranty, however, and the cost of the consumer goods is more than $25, the warranty must be labeled as either "full" or "limited." A full warranty requires free repair or replacement of any defective part. A limited warranty is one in which the buyer's recourse is limited in some fashion, such as to replacement of an item. The fact that only a limited warranty is being given must be conspicuously stated. The Magnuson-Moss Act further requires the warrantor to make certain disclosures fully and conspicuously in a single document in "readily understood language." The seller must disclose the name and address of the warrantor, specifically what is warranted, and the procedures for enforcing the warranty. The seller must also clarify that the buyer has legal rights and explain limitations on warranty relief.

Describe the Statute of Frauds, including how it pertains to merchants and exceptions to the rule.

The UCC contains Statute of Frauds provisions covering sales and lease contracts. Under these provisions, sales contracts for goods priced at $500 or more and lease contracts requiring total payments of $1,000 or more must be in writing to be enforceable A writing, e-mail, or other electronic record will be sufficient to satisfy the UCC's Statute of Fraud as long as it: 4. Indicates that the parties intended to form a contract. 5. Is signed by the party (or agent of the party) against whom enforcement is sought. (Note that a typed name can qualify as a signature on an electronic record.) The UCC provides a special rule for merchants in sales transactions (there is no corresponding rule that applies to leases under Article 2A). Merchants can satisfy the Statute of Frauds if, after the parties have agreed orally, one of the merchants sends a signed written (or electronic) confirmation to the other merchant within a reasonable time.

Describe the disclaimers that can be made on express and implied warranties.

The UCC generally permits warranties to be disclaimed or limited by specific and unambiguous language, provided that this is done in a manner that protects the buyer or lessee from surprise. Express: A seller or lessor can disclaim all oral express warranties by including in the contract a written (or an electronically recorded) disclaimer. The disclaimer must be in language that is clear and conspicuous, and called to a buyer's or lessee's attention.This allows the seller or lessor to avoid false allegations that oral warranties were made, and it ensures that only representations made by properly authorized individuals are included in the bargain.Note, however, that a buyer or lessee must be made aware of any warranty disclaimers or modifications at the time the contract is formed. Implied: Generally, unless circumstances indicate otherwise, the implied warranties of merchantability and fitness are disclaimed by an expression such as "as is" or "with all faults." Both parties must be able to clearly understand from the language used that there are no implied warranties To specifically disclaim an implied warranty of merchantability, a seller or lessor must mention the word merchantability. The disclaimer need not be written, but if it is, the writing (or record) must be conspicuous.Conspicuous terms include words set in capital letters, in a larger font size, or in a different color so as to be set off from the surrounding text. To disclaim an implied warranty of fitness for a particular purpose, the disclaimer must be in a writing (or record) and must be conspicuous. The writing does not have to mention the word fitness. It is sufficient if, for instance, the disclaimer states, "There are no warranties that extend beyond the description on the face hereof.

Describe the different types of conditional sales.

The UCC states that (unless otherwise agreed) if the goods are for the buyer to use, the transaction is a sale on approval. If the goods are for the buyer to resell, the transaction is a sale or return. 1. Sale on approval- A type of conditional sale in which the buyer may take the goods on a trial basis. The sale becomes absolute only when the buyer approves of (or is satisfied with) the goods being sold. 2. Sale or return- A type of conditional sale in which title and possession pass from the seller to the buyer; however, the buyer retains the option to return the goods during a specified period even though the goods conform to the contract.

Describe remedies for breach of international sales contracts.

The United Nations Convention on Contracts for the International Sale of Goods (CISG) provides international sellers and buyers with remedies very similar to those available under the UCC Article 74 of the CISG provides for money damages, including foreseeable consequential damages, on a contract's breach. As under the UCC, the measure of damages normally is the difference between the contract price and the market price of the goods. Under Article 49, the buyer is permitted to avoid obligations under the contract if the seller breaches the contract or fails to deliver the goods during the time specified in the contract or later agreed on by the parties. Similarly, under Article 64, the seller can avoid obligations under the contract if the buyer breaches the contract, fails to accept delivery of the goods, or fails to pay for the goods under Article 28, which provides that "one party is entitled to require performance of any obligation by the other party." Nevertheless, a court may grant specific performance under Article 28 only if it would do so "under its own [national] law."

Describe the bank-customer relationship.

The bank-customer relationship begins when the customer opens a checking account and deposits funds that the bank will use to pay for checks written by the customer.

What is a bank's liability for altered checks?

The customer's instruction to the bank is to pay the exact amount on the face of the check to the holder. The bank has an implicit duty to examine checks before making final payments. If it fails to detect an alteration, it is liable to its customer for the loss because it did not pay as the customer ordered

Describe the traditional check collection process.

The first bank to receive a check for payment is the depositary bank. For instance, when a person deposits a tax-refund check from the Internal Revenue Service into a personal checking account at the local bank, that bank is the depositary bank. The bank on which a check is drawn (the drawee bank) is called the payor bank. Any bank except the payor bank that handles a check during some phase of the collection process is a collecting bank. Any bank except the payor bank or the depositary bank to which an item is transferred in the course of this collection process is called an intermediary bank.

Explain the "entrustment" rule.

The transfer of goods to a merchant who deals in goods of that kind and who may transfer those goods and all rights to them to a buyer in the ordinary course of business [UCC 2-403(2)]. Entrusting includes both turning over the goods to the merchant and leaving purchased goods with the merchant for later delivery or pickup

What is the bank's duty to accept deposits for interest bearing accounts?

Under the Truth-in-Savings Act (TISA) and Regulation DD the act's implementing regulation, banks must pay interest based on the full balance of a customer's interest-bearing account each day Before opening a deposit account, new customers must be provided certain information, including the following: 1. The minimum balance required to open an account and to be paid interest. 2. The interest, stated in terms of the annual percentage yield on the account. 3. How interest is calculated. 4. Any fees, charges, and penalties and how they are calculated. Also, under the TISA and Regulation DD, a customer's monthly statement must disclose the interest earned on the account, any fees that were charged, how the fees were calculated, and the number of days that the statement covers.

Differentiate between void and voidable title.

Void-If the seller is a thief, the seller's title is void—legally, no title exists. Thus, the buyer acquires no title, and the real owner can reclaim the goods from the buyer. If the goods were leased instead, the same result would occur because the lessor would have no leasehold interest to transfer A seller has a voidable title to goods obtained by fraud, paid for with a check that was later dishonored, purchased from a minor, or purchased on credit when the seller was insolvent.

What is the general rule for forged drawer's signatures?

When a bank pays a check on which the drawer's signature is forged, generally the bank suffers the loss A forged signature on a check has no legal effect as the signature of a drawer [UCC 3-403(a)]. For this reason, banks require a signature card from each customer who opens a checking account. Signature cards allow a bank to verify whether the signatures on its customers' checks are genuine. The general rule is that the bank must recredit the customer's account when it pays on a forged signature.

Describe the bank's duties to honor checks, as it pertains to overdrafts, postdated checks, stale checks, stop-payment orders, and incompetence or death of the customer.

When a banking institution provides checking services, it agrees to honor the checks written by its customers, with the usual stipulation that sufficient funds must be available in the account to pay each check. When a drawee bank wrongfully fails to honor a check, it is liable to its customer for damages resulting from its refusal to pay Overdrafts: Bank can either dishonor the item, or it can pay the item and charge the customer's account, thus creating an overdraft A bank can expressly agree with a customer to accept overdrafts through what is sometimes called an "overdraft protection agreement." If such an agreement is formed, any failure of the bank to honor a check because it would create an overdraft breaches this agreement and is treated as a wrongful dishonor Postdated checks: A bank may charge a postdated check against a customer's account unless the customer notifies the bank, in a timely manner, not to pay the check until the stated date. (Indeed, banks typically ignore the dates on checks and treat them as demand instruments unless a customer has notified the bank that a check was postdated If the bank fails to act on the customer's notice and charges the customer's account before the date on the postdated check, the bank may be liable for any damages incurred by the customer. Stale Checks: A check, other than a certified check, that is presented for payment more than six months after its date. When receiving a stale check for payment, the bank has the option of paying or not paying the check. If a bank pays a stale check in good faith without consulting the customer, the bank has the right to charge the customer's account for the amount of the check. Stop Payment Orders: An order by a bank customer to his or her bank not to pay or certify a certain check. Only a customer or a "person authorized to draw on the account" can order the bank not to pay the check when it is presented for payment [UCC 4-403(a)]. A customer has no right to stop payment on a check that has already been certified (or accepted) by a bank, however. Incompetence or Death of a customer: at the time a check is issued or its collection is undertaken, a bank does not know that the customer who wrote the check has been declared incompetent or died, the bank can pay without incurring liability Even when a bank knows of the death of its customer, for ten days after the date of death it can pay or certify checks drawn on or before the date of death. An exception to the rule is made if a person claiming an interest in the account of the deceased customer, such as an heir or an executor of the estate (see Chapter 31), orders the bank to stop payment

Differentiate between a holder and a holder in due course (HDC).

When an instrument is transferred, an ordinary holder obtains only those rights that the transferor had in the instrument. holder in due course (HDC) takes an instrument free of most of the defenses and claims that could be asserted against the transferor.

Explain what law applies when a transaction combines both goods and services.

When contracts involve a combination of goods and services, courts generally use the predominant-factor test to determine whether a contract is primarily for the sale of goods or the sale of services

Describe the remedies a seller has when the buyer breaches.

When goods are in possession of the seller or lessor: Seller can: -Cancel (rescind) the contract. Can reject delivery -Resell the goods and sue to recover damages. -Sue to recover the purchase price or lease payments due. -Sue to recover damages for the buyer's nonacceptance of goods. When the goods are unfinished: Seller can: cease manufacturing complete manufacture and resell or dispose of the goods. -Hold lessee/buyer liable for deficiency. In sales transactions, the seller can recover any deficiency between the resale price and the contract price. The seller can also recover incidental damages, defined as the costs to the seller resulting from the breach While goods are in transit: If the seller or lessor learns that the buyer or lessee is insolvent, the seller or lessor can stop the delivery of the goods still in transit, regardless of the quantity of goods shipped.

What is the Statute of Limitations for a breach of warranty?

a cause of action for breach of contract under the UCC must be commenced within four years after the breach occurs. An action for breach of warranty accrues when the seller or lessor tenders delivery, even if the buyer or lessee is unaware of the breach at that time.the nonbreaching party usually must notify the breaching party within a reasonable time after discovering the breach or be barred from pursuing any remedy

What as an "endorsement?"

a signature with or without additional words or statements. Most often written on the back. If there is no room on the instrument, the endorsement can be written on a separate piece of paper (called an allonge) A person who transfers a note or a draft by signing (endorsing) it and delivering it to another person is an endorser. The person to whom the check is endorsed and delivered is the endorsee.

Define "interlocking directorates."

the practice of having individuals serve as directors on the boards of two or more competing companies simultaneously. Specifically, no person may be a director for two or more competing corporations at the same time if either of the corporations has capital, surplus, or undivided profits aggregating more than $28,883,000 or competitive sales of $2,888,300 or more. The Federal Trade Commission adjusts these threshold amounts each year.

Explain the Postal Reorganization Act of 1970.

under the Postal Reorganization Act, a consumer who receives unsolicited merchandise sent by U.S. mail can keep it, throw it away, or dispose of it in any manner that she or he sees fit. The recipient will not be obligated to the sender