Sales and secured transactions Flashcards

1
Q

What sales are covered under the Uniform Commercial Code (UCC)?

A

Only sales of goods are covered under the UCC.

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2
Q

What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?

A

Offer - You offer to sell something at a price
Acceptance - the other party accepts
Consideration - Something of value has been exchanged for the goods

Note: The UCC only covers sales of goods.

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3
Q

What are the elements of a Firm Offer?

A

You offer to sell something at a price and keep that offer open for a set period of time 3 months max

Only merchants can make firm offers

Must be in writing and signed

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4
Q

Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?

A

If value of goods sold is > $500

Contract must be in writing

Exceptions: Merchants can enter into oral contracts for > $500 items.

Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)

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5
Q

When does title and risk of loss transfer on a sale of goods?

A

If terms are:
FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck)

FOB destination: Title and risk transfers once item is delivered

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6
Q

What is a Warranty of Title?

A

The seller has the right to sell the good and no one else can stake claim to that good

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7
Q

What is Warranty of Merchantability?

A

This good will do its intended purpose

Can be disclaimed

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8
Q

What is Warranty of Fitness?

A

This good is the right choice for you based on the seller’s expert opinion

Can be disclaimed

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9
Q

What is strict liability with respect to buyer protection?

A

Manufacturers of goods cannot disclaim that their products will be safe

Can be liable if negligent

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10
Q

What are non-conforming goods with respect to buyer protection?

A

Buyer can reject some or all of the shipment if the seller didn’t perform as agreed and ship what was expected

Must give notice

Must give seller a chance to remedy the situation

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11
Q

What is the statute of limitations with respect to buyer protection?

A

Buyer must sue to recover damages within 4 years.

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12
Q

When does a security interest attach, or become legally enforceable?

A

Secured interest must be supported by consideration given.

Debtor must actually own the rights to the collateral or have possession.

Secured interest much be recorded

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13
Q

What are the characteristics of perfection of interest in a secured transaction?

A

Gets higher priority over others claiming rights to collateral after the perfection takes place

Attachment must take place BEFORE perfection

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14
Q

How does perfection occur in a secured transaction?

A

By filing a financing statement

By possessing the collateral

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15
Q

When does automatic perfection occur in a secured transaction?

A

Store sells a consumer good on credit - Store retains security interest

A bank finances the purchase of a consumer good - Bank retains security interest

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16
Q

What are the priority rules for payment in a secured transaction?

A

If two parties are perfected, then the first one to file wins

If neither party is perfected, then the first one to attach wins

17
Q

What are the advantages of a creditor holding a lien in a secured transaction?

A

Creditor holds priority over claims to collateral vs. unperfected security interests

Beats perfected security interests filed after lien attachment

Exceptions: Purchase money security interest, which has a 10 day grace period to be filed
Buyers purchasing in the ordinary course of business are immune from security interests held by merchants