Ch 6: Sales Flashcards Preview

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Flashcards in Ch 6: Sales Deck (25):

What does the UCC Sales Article cover and not cover?

  • the sale of goods, which is all things moveable
  • however, the following are excluded:
    • contracts for personal services and real estate
    • contracts for intangible property, such as stock or patent rights
    • contracts for fixtures - things attached to the land


What is a merchant's firm offer?

A written and signed offer by a merchant assuring that the offer will be held open for a period of time. 

  1. the seller must be a merchant
  2. the offer must be in writing and signed by the merchant, and
  3. the offer must give assurances it will be kept open for a certain time

Such offers must be kept open for the time stated or, if not time is stated, for a reasonable time but, in any event, no longer than 3 months.


Under the sales article, the terms of the acceptance must match the terms of the offer or no contract is formed (i.e. the mirror image rule). True or False?

False. The sales article does not follow the common law mirror image rule.

If the terms of the acceptance do not match the terms of the offer, the terms of the offer control, except in a contract between merchants, i.e. new or different terms are ignored unless the contract is between merchants.

In a contract between merchants, the terms of the acceptance usually control unless the offeror objects or the changes are material.


Describe what happens when there is a shipment of nonconforming goods.

  • both an acceptance and a breach of contract
  • exception: notice of accomodation - if the seller reasonably notifies the buyer that nonconforming goods are shipped only as an accomodation to the buyer, the shipment is not an acceptance. It is a counteroffer.


State the accommodation shipment rule.

Shipment of nonconforming goods will not operate as an acceptance, but rather will operate as a counteroffer, if the seller notifies the buyer that the shipment is intended as an accomodation.


Output and requirement contracts do not state an exact quantity of goods. When are such contracts enforcable?

Although the extact quantity is unknown, output and requirement contracts are enforcable if the amounts are reasonable with respect to normally expected amounts.


What are the defenses for fraud under common law and fraud under the UCC?

  • common law: may either sue for monetary damages or seek rescission
  • UCC: may seek rescission and sue for monetary damages


How long is the statute of limitations in UCC Sales and when does the statute begin to run?

The UCC statute of limitations is four years from the the cause of action accrued (from the date of breach).

The limitations period begins to run when the breach occurs.


Under the Sales Article, what are the exceptions to the Statute of Frauds?

Contracts for the sale of goods for $500 or more must be evidenced by writing signed by the party being sued. There are 4 exceptions.


  • Specially manufactured goods (ex. monogram)
  • Written confirmatory memo between merchants (if merchant does not object within 10 days, then it is binding, even though it was not signed)
  • Admission in court (contracts that the parties have admitted in court)
  • Performance to the extent accepted (goods are delivered and accepted)


If the contract does not specify where goods should be delivered, what is the usual place for delivery?

The seller's place of business or, if there is no place of business, the seller's home.


Noncarrier cases: If there is no agreement between the parties, when does risk of loss pass to the buyer:

If the seller is a merchant?

If the seller is not a merchant?

If the seller is a merchant:

  • in a noncarrier contract, when the buyer takes physical possession of the goods (i.e. actual delivery occurs), or
  • in a shipment contract, when the seller turns over the goods to a carrier
  • in a destination contract, when the goods reach the desination specified

If the seller is not a merchant:

  • upon tender of goods to buyer
    • when seller offers to deliver or offers for seller to pick up
      • ex: if you bought goods and said you would pick them up later, and the goods get destroyed by fire before you picked them up, then you, the buyer, bears the risk of loss


Under the UCC, state the rules governing passage of title.

  • title generally can pass as parties agree
  • if parties do not agree, title passes upon delivery
  • if buyer rejects good, title revests with seller


Under the Sales Article, identify 4 types of warranties

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


How does the implied warranty of title arise?

May it be disclaimed by a general disclaimer?

The warranty of title arises automatically in every sale of goods.

It may only be

  1. disclaimed specifically (i.e. "I am giving no warranty of title")
  2. or by circumstances (e.g. a judicial sale),
  • but may not be disclaimed through a general disclaimer, such as "as is" or "with all faults."


Who makes the implied warranty of merchantability?

Essentially, what does the warranty guarantee?

Only merchants who regularly sell goods of the kind sold and other experts in the goods make the warranty, which is that the goods are fit for the ordinary purpose for which such goods are used.

  • Buyer does not need to be a merchant, only the seller must be a merchant.
  • Disclaimed by "as is" or "with all faults" sale or by stating no merchantability.


Who makes the implied warranty of fitness for a particular purpose?


What does is guarantee?

Any seller (not just merchants) who knows that the buyer is relying on the seller to choose goods suitable for a purpose specified by the buyer makes the warranty.

The seller's guarantee is that the goods are fit for the purpose for which the seller has reason to know the buyer will use them.

  • May be disclaimed by selling the goods "as is" or "with all faults"
  • if not disclaimed by "As is" sale, fitness must be disclaimed by a conspicuous (clearly visble) disclaimer
    • the writing does not need to mention fitness 
    • ex: "I make no warranties beyond the face of this contract."


Those injured by goods can sue seller for negligence (i.e. failure to use reasonable care). Those injured must prove what?

  1. the seller owed them a duty of care
  2. the seller breached the duty by failing to use due care (i.e. selling unsafe goods)
  3. damages - the plaintiff suffered damages, and
  4. causation - the damages were caused by the seller's negligence


What must be shown in order to prove a cause of action for strict products liability?

  1. the seller was in the business of selling goods
  2. the product was defective when it left the seller's hands
  3. the product was unreasonably dangerous
  4. the defect caused the plaintiff's injuries or damages, and
  5. the product was expected to and did reach the consumer without substantial change in condition
  • The focus is on the product and not the seller's conduct.
  • Privity is not required because it is a tort action, not a contract action.
  • Plaintiff does not need to be a buyer. 
  • The plaintiff does not need to prove negligence. Thus, it is not a defense that the defendant was not at fault or that the defendant followed industry custom.


What is anticipatory repudiation and what can the nonbreaching party do?

Anticipatory repudiation occurs when either the buyer or the seller indicates in advance of performance that he will not perform. 

The nonbreaching party may:

  1. sue immediately
  2. cancel the contract
  3. *demand assurances, or
  4. wait until the time for performance and sue then if the other party fails to perform

*Demand assurances: Under UCC, if one party has reasonable grounds to believe the other party will not perform when required, she may make a written demand for an assurance of performance from the other. Failure to give this assurance within a reasonable time is an anticipartory repudiation.


If a seller sells goods to a buyer on credit and then learns that the buyer is insolvent, what are the seller's remedies?

  • withhold goods still in seller's possession
  • stop goods in transit and demand cash
  • demand return of goods already received - 10 day limitation


What are the buyer's option when goods are tendered that do not conform to the contract?

  • keep the goods and sue for damages
  • reject all of the goods and cancel the contract
  • reject all or some of the goods and sue for damages


If the buyer breaches, under what circumstances can a seller recover the full contract price?

When the buyer has the goods, the seller can collect the full contract price plus incidental damages if the goods cannot be resold for any price or the goods are destroyed after risk of loss has passed to the buyer


Define buyer's right to specific performance.

Define replevin.

  • specific performance may be used in a sales contract if the goods are unique or if the buyer cannot reasonably recover
  • replevin is the right to recover goods wrongfully in the hands of the seller. it may be used if the goods are identified an the buyer cannot reasonably recover


What 3 attributes must be shown in order to obtain a patent for an invention?

The invention is:

  1. novel
  2. useful
  3. not obvious to someone working in the field


What is the basic requirement to obtain a copyright in an original work?

It must be a tangible medium of expression.