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Flashcards in Sales Law Deck (18):
2

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

Only sales of goods are covered under the UCC.

3

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

If value of goods sold is >$500; sales 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)

In addition, under UCC, an oral modification of an existing contract for the sale of goods for a price less than $500 is considered binding

Also, the following are exceptions to the Statute Of Frauds - (no writing required, even if $500 or more):

a. Specially manufactured goods for the buyer

b. Payment of goods OR receipt of goods

c. Admissions in court

d. Merchants confirming letter - if no objection in 10 days, both merchants are bound

4

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

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.

5

What is a Warranty of Title?

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

All items sold must have Warranty of Title

Included in warranty of title are the following:

a. encumbrances - all sellers promise no unstated liens or attachments

b infringements - merchant sellers promise no patent or trademark violations

Can NOT be disclaimed - however, disclaiming title requires very specific language (seller must specifically tell the buyer that they DO NOT guarantee title); general language is ineffective

For example, if a seller sells goods "as is" or "without all faults", this DOES NOT disclaim warranty of title because the language is too vague

6

What is Warranty of Merchantability?

(Implied warranty of merchantability)

This good will do its intended purpose

Can be disclaimed - either orally or in writing by the seller. However, the statement must contain some form of the word "merchantability" to be effective. Goods sold "as is" or "with all faults" are an exception to the rule

Note: This is always implied if the seller is a merchant with respect to the type of goods being sold

7

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

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

8

What is strict liability with respect to buyer protection?

Manufacturers of goods cannot disclaim that their products will be safe

Can be liable if negligent

9

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

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

10

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

Buyer must sue to recover damages within 4 years.

11

What is an example of an express warranty under the Sales Article of the UCC?

In the Sales Article of the UCC, express warranties include warranties that the goods will conform to any description used or any sample or model shown

12

Under the Sales Article of the UCC, what rights are available to a seller when a buyer materially breaches a sales contract?

Under the Sales Article of the UCC, the seller has the following remedies against the buyer upon breach:

1. Withhold delivery of the goods

2. Stop delivery of the carrier of the goods

3. Resell the goods

4. Recover compensatory and incidental damages

5. Recover the goods from the buyer upon the buyer's insolvency

6. Cancel the contract

13

What is Strict Liability in Tort?

With regards to a sales contract, a person can sue based on strict liability in tort which is liability without fault by sellers of defective products. However, the person must show the following:

1. Must show a Defective product

2. Must show the defect Caused injury

3. Must show the defect was Unreasonably dangerous to users and consumers

4. Must show seller was engaged in that Business

5. Must show it reached the user without substantial Changes

A way to remember these elements is that "Defective products cause unreasonably dangerous business changes"

14

In a situation where there is no common carrier, either no transportation or seller uses their own truck, when does title pass to buyer?

Title passes to buyer as soon as the contract is made with identified goods

15

In a situation where there is no common carrier, either no transportation or seller uses their own truck, when does risk of loss pass to buyer?

Risk of loss with merchant sellers ONLY passes when the buyer takes possession

Risk of loss with Non-merchants passes on tender of delivery

(the buyer bears risk of loss - can't expect non-merchants to protect goods)

16

In a situation where a seller ships something to a buyer based on APPROVAL, when does title and risk of loss pass to the buyer?

With a sale on approval, neither risk of loss nor title passes until the buyer APPROVES

For example, if a buyer (like a non-merchant) purchases a computer for their own use for 20 days and then returns it. During the wait period, buyer DOES NOT have risk of loss or Title. The seller has ROL and title

17

In a situation where a seller ships something to a buyer with Sale or Return shipping terms, when does title and risk of loss pass to the buyer?

With a Sale or Return, BUYER gets risk of loss and title on delivery, buy may return the goods

Buyer obtains risk of loss and title according to shipping terms in contract

However, for a merchant seller, during the wait period, the seller has title and risk of loss (like a merchant buyer)

18

In a situation where a seller ships Non-conforming goods to a buyer, when does risk of loss and title transfer to the buyer?

With nonconforming goods, risk of loss IS always on the seller

Title passes when the seller completes delivery requirements:

FOB shipping - title passes when shipped to buyer; however ROL remains with seller during the entire shipping process until it is complete

19

Can a seller disclaim fitness for a particular purpose when they sell something to a buyer based on their recommendation?

A seller can disclaim fitness for a particular purpose, but a writing is required