Business Law II: UCC Article 2

Question 1

UCC Article 2

Answer 1

Sale of Goods

Question 2

UCC Terms of Agreement

Answer 2

Supplies terms in absence of agreement:

1. Open price term (can be decided at delivery)
2. Open payment term (due when buyer is to receive goods)
3. Open place of delivery term (seller’s business/residence)
4. Open time for contracted performance (reasonable time)

Question 3

UCC Firm Offer

Answer 3

1. Made by buyer/seller merchant
2. Offeror gives assurance that offer will not be withdrawn (3 mo. limit w/o consideration)
3. Signed writing (record)
4. Acceptance by shipment of conforming goods

Question 4

Battle of the forms (Common Law vs UCC formation)

Answer 4

1. Common Law - Mirror Image acceptance or it is a counter offer
2. UCC - definite expression of acceptance (if followed by additional terms, may/may not form a new contract)

Question 5

Consideration (Common Law vs UCC)

Answer 5

1. C. L. - Modification of existing terms is not enforceable unless supported by consideration.
2. UCC - agreement modifying contract for sale of goods needs no consideration to be binding

Question 6

UCC Statute of Frauds

Answer 6

Contracts for sale of goods > $500 must be in writing except:

1. Between merchants (merchant confirmation memo)
2. Special Orders
3. Admission of oral contract under Oath
4. Buyer’s performance (accepting/paying for goods)

Question 7

UCC Title and Risk of Loss Misconception

Answer 7

Title/Risk of Loss pass at same time… incorrect b/c:

1. parties can expressly determine when title/risk of loss pass. can differ.
2. even in absence of agreement, they can pass at same time in one situation and different times in another

Question 8

Identification

Answer 8

1. Goods must be in existence and identified before title/risk of loss can pass
2. For goods in existence at time contract entered into, identification occurs at time parties enter into contract
3. Fungible (i.e. grains). Identified when shipped, marked, or otherwise designated for buyer.
4. Future goods. Identified when shipped, marked, otherwise designated for buyer.

Question 9

Shipment: F.O.B.

Answer 9

(free on board) place of shipment (seller’s city, business, or warehouse).

Title/risk of loss pass upon DELIVERY (possession) of conforming goods to carrier

Question 10

Shipment: F.A.S.

Answer 10

(free alongside vessel) place of shipment.

Title/risk of loss pass upon seller’s delivery of conforming goods alongside vessel (port/dock)

Question 11

Shipment: C.I.F.

Answer 11

(cost, insurance, freight).

Title/Risk of loss pass when:

1. seller delivers (possession) identified conforming goods to carrier
2. obtains negotiable bill of lading
3. procures insurance policy
4. forwards to buyer all documents.

Question 12

Shipment: C & F

Answer 12

(cost and freight)

Same rules as C.I.F., but no insurance policy

Question 13

Shipment: COD

Answer 13

(cash on delivery)

Affects timing of buyer’s right to inspection.

Question 14

Passage of Title in non-delivery/non-shipment contracts

Answer 14

No Document of title - identification/passage of title happen at same time contract is made

Non-negotiable document of title - passes upon buyer’s receipt of document

Negotiable document of title - passes upon buyer’s receipt of the document

Question 15

Passage of Title in delivery/shipment contracts

Answer 15

1. FOB place of shipment = title passes when shipped/delivered to carrier
2. FOB place of destination = title passes upon tender of conforming goods at place of destination

Question 16

Tender

Answer 16

Goods have arrived, are available for buyer to pick up, and buyer has been notified

Question 17

Passage of risk of loss in non-delivery contract

Answer 17

1. If merchant seller - risk of loss does not pass until buyer actually gets possession
2. If non-merchant seller - risk of loss passes upon seller’s tender of goods to the buyer

Question 18

Passage of risk of loss in delivery/shipment contract

Answer 18

1. FOB ship point - risk of loss passes at time goods delivered to carrier
2. FOB destination - risk of loss passes at time of tender (same time as title)

Question 19

Passage of risk of loss when there is a negotiable document of title and no delivery

Answer 19

Risk of loss passes to buyer upon buyer’s receipt of document

Question 20

Passage of risk of loss when there is no delivery and a nonnegotiable document of title

Answer 20

Risk of loss passes to buyer after receipt of document and buyer has had reasonable time to present document, receive goods, or give directions to bailee

Question 21

Passage of risk of loss when goods are held by third party and no document of title

Answer 21

Risk of loss passes to buyer when bailee acknowledges buyer’s right to possession of good (basically tender by the warehouseman)

Question 22

Effects of Breach on Passage of title/risk of loss

Answer 22

1. Nonconforming, seller’s breach - risk of loss does not pass to buyer until defects cured/buyer accepts anyway
2. Accepted then revoked - risk of loss (over buyer’s insurance) back to seller
3. Buyer’s breach - risk to buyer for reasonable period after seller learns of breach (over seller’s insurance)
4. Breach does not affect title.

Question 23

4 Types of Warranties

Answer 23

1. Express Warranty
2. Implied warranty of title
3. Implied warranty of merchantability
4. Implied warranty of fitness for particular purpose

Question 24

Express Warranty

Answer 24

1. Affirmation of fact/promise of performance (not huffing/puffing)
2. Description of goods under Article 2 contract
3. Samples/Models
4. Any of the above must have been important in buyer’s decision to buy.

Question 25

Nature of express warranties. Can be:

Answer 25

1. oral/written 2. in brochures, advertisements, etc of seller 3. created w/o words like warranty/guaranty 4. given by merchants and nonmerchants alike *Impossible to disclaim

Question 26

Implied warranty of title

Answer 26

1. given in every sale of goods by merchants/nonmerchants unless disclaimed 2. seller has good title/ transfer is rightful and free from third party infringement 3. can be disclaimed

Question 27

Implied warranty of merchantability

Answer 27

1. can only be made by a merchant 2. warranted to be fit for use, conform to label 3. "restaurant food warranty" 4. can be specifically disclaimed if conspicuous and mention word merchantability

Question 28

Implied warranty of fitness for particular purpose

Answer 28

"salesperson's warranty" 1. seller must know purpose/buyer's use of goods 2. buyer must rely on seller recommendation in making purchase 3. disclaimer must be conspicuous ("sold as is")

Question 29

Strict Tort Liability/Negligence

Answer 29

1. Product defective in design, manufacture, lack of warnings) to a point of dangerous 2. Seller in business of selling/manufacturing the defective product 3. Product has not been tampered with in transit 4. Negligence (seller knowing of defect) allows for punitive damages

Question 30

Performance: Right of assurance

Answer 30

If party has "reasonable grounds" to believe other party will not perform, may demand in writing that other party give adequate assurance of due performance. If not received within 30 days, may be treated as anticipatory breach.

Question 31

Anticipatory repudiation/breach in advance of contract performance

Answer 31

Non-breaching party can: 1. await performance for commercially reasonable period 2. treat breach as final/resort to remedies 3. suspend performance w/o liability for breach

Question 32

Acceptance

Answer 32

1. after opportunity to inspect, buyer either notifies seller goods are performing or that they will accept even if nonconforming 2. buyer fails to reject after reasonable opportunity to do so 3. buyer uses the nonconforming goods

Question 33

Revoke Acceptance

Answer 33

1. Buyer given reasonable assurance seller would cure, and cure has not happened 2. Seller assures goods are conforming, but later find out they are not 3. Nonconformity was difficult to detect

Question 34

Seller's Remedies: In possession of goods

Answer 34

1. Identify goods to the contract (set aside) 2. Withhold delivery 3. Cancel/Rescind 4. Resell Goods 5. Sue for breach of contract 6. Retain buyer's deposit

Question 35

Seller's Remedies: Goods in Transit

Answer 35

1. If buyer insolvent, seller can stop quantity shipped / recover goods from buyer w/in 10 days after delivery 2. If buyer repudiation other than insolvent, seller can only stop if quantity shipped is carload/truckload etc 3. Seller can stop shipment any time until buyer takes possession, buyer receives negotiable doc of title or 3rd party notifies goods are ready for pickup

Question 36

Seller's Remedies: Buyer has possession

Answer 36

1. If buyer insolvend, seller may reclaim goods w/in 10 days | 2. Seller can seek to recover damages of contract price plus damages b/c of buyers failure to pay

Question 37

Buyer's Remedies: Seller fails to deliver goods

Answer 37

1. Cancel and rescind with notice 2. Cover (substitute purchase) 3. Sue for breach of contract 4. Specific performance (when goods unique) 5. Replevin (can require delivery from seller when cover is not possible)

Question 38

Buyer's Remedies: Accepting Nonconforming goods

Answer 38

1. Recovery ordinary damages 2. Recover for breach of warranty (difference of value) 3. Deduction of damages from purchase price 4. Liquidated damages (predetermined amount of damages in case of breach) 5. Buyer can seek recovery of payment