section 13.1

The Sale and Lease of Goods The Sale and Lease of Goods Section 13.1Section 13.1

Understanding Business and Personal Law

The Sale and Lease of Goods Section 13.1

Contracts for the Sale of Goods

Section 13.1The Sale and Lease of Goods

Section 13.2Ownership and Risk of Loss in Sales

or Goods

Section 13.3E-Commerce and the Law

13Chapter Contracts for the Sale of Goods




The law of sales governs contracts for the sale and lease of goods.

Sales




A sale is a contract in which ownership of goods is transferred from the seller to the buyer for consideration.The consideration is also known as the price, or the money that is paid for goods.

Sales




Goods are all things that are moveable, such as your clothing, books, pens, food, car, and even the gas you put in your car. Money, stocks, and bonds are not considered goods.

Sales




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13.1

Sales




The Uniform Commercial Code (UCC) is a collection of laws that governs various types of business transactions.When you have a contract involving goods, the UCC will apply.

The UCC

Example 1




A sales contract may involve either a sale or a contract to sell.

The Sales Contract




Every time you buy goods and take ownership of them, a sale occurs.However, if you will take ownership at some future time, the agreement is a contract to sell, not a sale.

The Sales Contract

Example 2




When a contract includes both goods and services, the dominant element determines the type of contract.

Contracts for Both Goods and Services




If the sale of goods dominates, the laws of the UCC apply.If the performance of service dominates, the common law of contract applies.

Contracts for Both Goods and Services

Furnace Ex. Page 270




Special Rules for Sales Contracts

With some exceptions, the UCC applies to all sellers and buyers of goods.





A merchant is a business or person who deals regularly in the sale of goods or who has a specialized knowledge of goods.A non-merchant is a casual or occasional seller.

Example 3





A sales contract must contain the same elements as other contracts, but the UCC has relaxed some of the strict rules of contract law.




Good Faith

Parties to a sales contract must treat each other fairly.




Methods of Dealing and Usage of Trade

When parties have previously dealt with each other, those methods of dealing may be used to supplement or qualify the terms of their sales contract.




Methods of Dealing and Usage of Trade

This rule is true with any usage of trade, which is the method of dealing that is commonly used in the particular field.




Formation of a Sales Contract

You may make a contract in any manner (oral or written) that shows that the parties have reached an agreement.




Acceptance of an Offer

In most situations, you may accept an offer by any means and in any reasonable manner.




Different or Additional Terms

An acceptance may have different or additional terms added without a complete rejection of the offer.




Firm Offer

A firm offer is a merchant’s written promise to hold an offer open for the sale of goods; however, no offer can stand for longer than three months.

It does not require payment to be binding.




Open-Price Terms

A sales contract may be made without a settled price.

Unless the parties agree on a price prior to delivery, a reasonable price can be settled at the time of delivery.




Output and Requirement Terms

Output and requirement contracts are allowed even if they are not definite.




Output and Requirement Terms

An agreement to buy all of the manufacturer’s goods is an output contract.A requirement contract occurs when a seller agrees to supply the needs of a buyer.

Backpack Ex. p. 272




Modification

No consideration is necessary to change a contract for the sale of goods. The modification may be oral, unless the original agreement is in writing and states that it must be modified in writing.




Leasing Goods

You can apply the sale-of-goods rules to the leasing of goods, with a few modifications.




Many sales contracts are oral rather than written. As long as the price is less than $500, an oral contract for the sale of goods is enforceable.

Form of Sales Contracts




If the price is $500 or more, a sales contract must be in writing to be enforceable with the following exceptions:

Form of Sales Contracts




Written confirmation of an oral contract between two merchants is sent within a reasonable time, and no objection is made within ten days.

Exceptions to the $500 rule




The contract involves specially manufactured goods that cannot be resold easily.





The buyer receives and accepts the goods or pays for them.The parties admit in court that they entered into an oral contract.





Other sales governed by the UCC rules include auction sales and bulk transfers.

Other Sales Governed by UCC Rules




Auction Sales

In an auction with reserve, the auctioneer doesn’t have to sell the goods for the highest bid if it’s lower than the reserve amount. The auctioneer may withdraw the goods at any time before a sale is completed.




Auction Sales

In an auction without reserve, the auctioneer must sell the goods to the highest bidder.

The goods cannot be withdrawn from bidding unless no bid is made.




Auction Sales

An auction sale is with reserve unless it is expressly stated that it is without reserve.




Bulk Transfers

Sometimes a business transfers all merchandise and supplies at once, known as a bulk reserve.




Bulk Transfers

The UCC rules require that the buyer of the bulk goods notify all of the seller’s creditors at least ten days before the transfer will take place.

End of Section 13.1




The right of ownership to goods is known as title.

People who own goods have title to them.

OWNERSHIP AND RISK OF LOSS IN SALES OF GOODS

Title




A bill of sale is formal evidence of ownership. You receive this document when you buy goods. It only proves that you once had title, not that you still own the goods.

Title




PriceName and address of buyer and of sellerReceiptGoods sold

Elements of a Bill of Sale




WarrantyDateSignature of seller

Elements of a Bill of Sale

Example 4




Anyone who obtains property as a result of another’s fraud, mistake, undue influence, or duress holds only voidable title to the goods.

Voidable Title




Voidable title means title that may be voided if the injured party elects to do so.

Voidable Title

Example 5




The UCC has a special rule that allows merchants who have no title to goods to pass on good title to their consumers.

Buying from a Merchant




This occurs when you entrust your own goods to a merchant who sells them in the ordinary course of business.





This gives consumers confidence that they will receive good title when buying from a merchant.This rule does not apply to stolen goods. Only the rightful owner has title to stolen property.


Example 6




Sometimes it is necessary to determine who has title to goods—the seller or the buyer.

Passage of Title and Risk of Loss




Similarly, it is sometimes necessary to determine who must bear the risk of loss, or the responsibility for loss or damage to goods.





This is because goods may be stolen, damaged, or destroyed after the sales contract has been entered but before the transaction is completed.





Title to goods cannot be transferred under a sales contract until the goods have been identified.Identified goods are goods that presently exist and that have been set aside for a contract.





Goods that are not both existing and selected are known as future goods, such as crops not yet grown or items not yet manufactured. No one can have title to future goods.





A shipment contract is one in which the seller turns the goods over to a carrier for delivery to a buyer.

A carrier is a transportation company.

Shipment Contract




Both title and risk of loss pass to the buyer when the goods are given to the carrier.

Shipment Contract




The term f.o.b., or free on board, means that goods will be delivered free to the designated place.

The buyer must pay the freight charges from the shipping point to the destination.

Shipment Contract

Example 7




When a contract requires the seller to deliver the goods to a destination, it is a destination contract.

Destination Contract




Both title and risk of loss pass to the buyer when the seller leaves the goods at the place of destination.

Destination Contract

Example 8




When no delivery is required and the contract calls for the buyer to pick up the goods, title passes to the buyer when the contract is made.

No Delivery

Example 9




When goods are not to be shipped by carrier, the passage of risk of loss depends on whether the seller is a merchant or not.

No Carrier




If the seller is a not a merchant, the risk of loss passes to the buyer when the seller delivers the product, or the seller offers to turn the goods over to the buyer.

No Carrier

Example 10




If the seller is a merchant, the risk of loss is transferred from the seller to the buyer when the buyer receives the goods.

No Carrier




Sometimes when you buy goods you receive a document of title, rather than the actual goods.

Documents of Title




A bill of lading is a receipt for shipment of goods given by a transportation company, or carrier, to a shipper when the carrier accepts goods for shipment.

Documents of Title




A warehouse receipt is a document given to a customer by the warehouse that is storing his or her goods.

Documents of Title

Example 11




The UCC prescribes specific remedies for both the buyer and the seller when there is a breach of a sales contract.

Remedies for Breach of Sales Contract




1. Cancel the contract.2. Withhold delivery of goods.

Seller’s Remedies




3. Stop delivery of any goods that are still in the possession of the carrier.

4. Resell any goods that have been rightfully withheld.

Seller’s Remedies




5. Bring a claim against the buyer for the difference between the agreed price and the market price or for the price of any goods that were accepted by the buyer.

Seller’s Remedies




1. Cancel the contract.2. Bring a claim against the seller for

the return of any money that has been paid or for the difference between the agreed price and the market price.

Buyer’s Remedies




3. Refuse to accept the goods if they do not conform to the contract.

4. Cover the sale.

Buyer’s Remedies




5. Give notice to the seller that the goods have been accepted but that they do not conform to the contract.

6. Revoke the acceptance and return the goods.

Buyer’s Remedies

End of Section 13.2




Electronic commerce, also called e-commerce, is the buying and selling of goods and services, or the transfer of money, over the Internet.

Electronic Commerce




Shopping online offers many benefits. You can shop when you want, you can find almost anything you want, and prices may be very good.

However, there can be some dangers to shopping on the Internet.

Shopping Safely on the Internet




To avoid these dangers, here are some tips:

Shopping Safely on the Internet

Shop with companies you know.Keep your password private.Pay by credit or charge card.Keep a record.




Internet auctions offer good buys, but they can be risky. Do your homework before buying online.

Internet Auctions

1. Know the seller.2. Know the product.3. Know the auction site.4. Know how to bid.




Online shopping has opened up a world of available goods.

Answer these questions to determine whether a Web site is safe for international online shopping.

Worldwide Shopping




Are the prices listed in U.S dollars or another currency?Does the company ship internationally?How long will delivery take?

Worldwide Shopping




Will unexpected taxes or duties be added to the price?Who can help you resolve any problems?

Worldwide Shopping




E-Sign is a federal law that permits the use of electronic signatures and records.An electronic signature is a method of signing an electronic message.

Electronic Signatures




It identifies a particular person as the source of the message. It indicates that person’s approval of the information in the message.





Under E-Sign, an electronic signature can be used on a contract if the parties agree.The Uniform Electronic Transactions Act (UETA), adopted by numerous states, is a similar law.





Online privacy is a part of your more general right to privacy.

It concerns your identity, movement, and personal commercial activities on the Internet.

Online Privacy




Many laws protect your rights to online privacy.Children (under thirteen) are protected with special statutes, such as the Children’s Online Privacy Protection Act.

Online Privacy




Many state legislatures are adopting laws regulating Internet privacy, which can create confusion among consumers. There is a movement for the U.S. Congress to set national standards that override state legislation.

Online Privacy




The Federal Trade Commission (FTC) would investigate violations of the FTC Act, which states that, “unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful.”

Online Privacy

End of Section 13.3

section 13.1

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