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Business Law Ch 13
Summary of slides for Chapter 13 of Fundamentals of Business Law
| Question | Answer |
|---|---|
| What is the UCC? | Uniform Commercial Commission (???) |
| What does the UCC Article 2 govern? | the contracts for sale of goods |
| Does UCC Article 2 preempt common law? | Yes |
| If UCC Article 2 is silent, what law governs? | Common Law |
| What does Articles 2 sales apply to? | Only to goods |
| What governs the contracts of real estate, services, or intangible property? | Common Law |
| What is the test for Mixed Goods-Services? | The Predominant Factor Test (whichever is predominant is how it shall be treated) |
| What types of contracts does general contract control? | nonsales contracts (primarily contracts for services and real estate) |
| What types of contracts do common law and statutory law control? | contracts for the sale and lease of goods |
| What is a sale? | the passing of title from seller to a buyer for a price |
| What can a price be paid? | cash, goods, or services |
| What are goods? | Tangible and moveable; physical and can be carried from place to place |
| What types of goods associated with real estate can fall within article 2? | minerals or a structure if severance is made by seller; sale of growing crops; other "things" attached to real property that are capable of being severed w/o harm to the land |
| What is a merchant? | someone who has special business expertise and is not a casual buyer/seller |
| How does UCC article 2 define a merchant? | someone who deals in goods of the kind in the sale, holds themselves out as having special expertise, knowledge, or skill, or person who employs a merchant |
| What is the definition of a lease agreement under UCC article 2A? | contract for lease of personal goods between a lessor and a lessee |
| Lessor | transfers right to possess and use goods under lease |
| Lessee | acquires right to possess and use goods |
| What is a consumer lease under UCC article 2A? | lessor, lessee who leases for personal, family, or household use and total payments are less than $25,000 |
| What do finance leases involve? | A 3rd party supplier |
| In common law, once a valid offer is unequivocally accepted, what happens? | A contract is formed |
| Under the UCC, is a contract formed once a valid offer is unequivocally accepted? | Not quite; more flexible. Allows for open pricing, payment, and delivery terms |
| What are Open Terms under the UCC (2-204)? | undetermined terms inside an existing contract |
| When is indefiniteness for a contract ok? | when the parties intend to make a contract and there is a reasonable basis for a court to grant a remedy |
| What is an Open Price term? | if parties have not agreed on pricing, court can determine "reasonable price at the time of delivery" |
| What is an Open Payment term? | payment is due at the time and place in which buyer receives goods |
| What is Open Delivery Term? | unless otherwise agreed, buyer takes delivery at the seller's place of business; seller has duty to make arrangements in good faith |
| What is an Open Quantity Term? | generally courts will not impose a quantity and there is no remedy unless the contract is a requirements or output contract |
| What is a Requirements Contract? | buyer agrees to purchase what the buyer needs or requires (includes exclusivity) |
| What is an Output Contract? | buyer agrees to buy all of the seller's production or output |
| What limitations does the UCC place on Requirements and Output Contracts? | they must be done in good faith; amount purchased should be close to normal production year |
| What is a Merchant's Firm Offer? | the offer made by a merchant in a signed writing is irrevocable for a reasonable period of time w/o need for consideration |
| What are the requirements of a merchant's firm offer? | the offer must be in writing and signed by the offeror |
| When is acceptance under the UCC? | by prompt shipment of conforming goods or nonconforming goods |
| What are non-conforming goods? | similar but not exactly what had been ordered |
| If you ordered bananas but received over-ripened bananas, what type of good is this? | Non-conforming |
| When are non-conforming goods both an acceptance and a breach? | When the goods are sent as an "accommodation" to buyer with prompt notice by the buyer |
| Under the UCC, what is considered acceptance? | Communication of Acceptance |
| Under common law, what is acceptance? | Performance or communication |
| Can merchants add additional terms after a contract is formed? | No |
| When both parties are merchants, can the contract incorporate new terms? | Yes |
| When can a contract between merchants not incorporate new terms? | original offer expressly limits terms; material change; or offeror objects within reasonable time |
| What is consideration under the UCC? | the same as common law, except modifications do not need consideration |
| Sales of goods over $500 must have what to be enforceable under UCC? | A signed writing |
| What is Sufficiency of the Writing? | signed by party against whom enforcement is sought |
| Is sufficiency of the writing enforceable beyond quantity of goods shown in the writing? | Normally not |
| What's a special rule under the statute of frauds for contracts between merchants? | after an oral agreement, one of the merchants can send a signed, written memorandum containing essential terms to the other merchant within a reasonable time |
| What are exceptions to the statute of frauds under the UCC? | specially manufactured goods; admissions by breaching party; partial performance |
| When is an oral contract enforceable under the UCC? | if payment has been made or goods have been accepted |
| Parol Evidence | terms of a written agreement intended to be the final expression of parties' intentions; cannot be contradicted by prior or contemporaneous agreements |
| What are exceptions to parol evidence? | consistent terms, course of dealing and trade, and course of performance |
| Course of Dealing | previous communications between parties showily the common basis for their understanding in a transaction |
| Unconscionable | the contract is so unfair and one-sided that it is unreasonable to enforce it |
| What can a court do when it concludes a contract is unconscionable? | it can set it aside, refuse to the enforce the unconscionable provision, or limit the contract |
| What does the UCC replace title with? | Identification, risk of loss, and insurable interest |
| Does the sale of goods require different rules than real property transactions? | Yes |
| Does risk always pass with title? | No; it should NOT always pass with title |
| What are the 2 requirements of identification under the UCC? | goods must (1) be in existence and (2) identified as specific goods in a sales contract |
| When does identification occur? | when specific goods are designated as the subject matter of the contract |
| What rights does identification give the buyer? | the right to obtain insurance on the goods and the right to recover from third parties who damage the good |
| When does identification occur for existing goods? | If called for ascertainable goods in existence, then identification takes place at the time the contract is made |
| When does identification occur for animals born within 12 months of the contract? | At conception |
| When does identification occur for crops harvested within 12 months of the contract? | At the time of the planting (or when crops begin to grow) |
| When does identification occur for future goods (outside animals and crops)? | when the goods are shipped, marked, or designated by the seller |
| When does identification occur for goods part of a larger mass? | when marked, shipped, or designated by the seller |
| When are goods part of a larger mass not identified? | when they are fungible goods that are naturally alike, since there's an undivided interest (wtf does this mean???) |
| When does title pass between seller and buyer? | Usually determined by the contract |
| When can title pass? | Upon physical delivery or when agreed to by the parties |
| Shipment contract | title passes at time and place of shipment |
| When is it determined if a contract is a shipment or destination contract? | when it is not otherwise agree in a contract when title passes |
| Destination contract | title passes when goods are tendered at the destination |
| When does title pass with a document of title (bill of lading)? | title passes when and where the document is delivered |
| When does title pass without a document of title (bill of lading)? | titles passes when sales contract is made, if goods have been identified, or when identification occurs if they have not been identified |
| When a person sells an item with void title, can the original owner get the item back? | Yes |
| Void title | True owner gets the goods back |
| Voidable title and leases | good faith lessee retains possession |
| When a person sells an item with voidable title, can the original owner get the item back? | Not if a good faith buyer purchases the goods |
| BIOCOB | buyer in the ordinary course of business |
| Entrustment Rule | merchant deals in goods of a kind; gives the power to transfer valid title to good faith buyer in ordinary course of business |
| Does risk of loss pass with title? | Not necessarily |
| Why is risk of loss important? | Because of insurance concerns |
| Unless otherwise agreed, when does risk of loss pass to the buyer? | It depends on whether delivery is with or without movement of the goods |
| If delivery with movements of the goods occurs, when does risk of loss pass under shipment contracts? | risk of loss passes to buyer when goods tendered to carrier; if goods are damaged in transit, buyer's bears risk of loss |
| If delivery with movements of the goods occurs, when does risk of loss pass under destination contracts? | risk of loss passes to buyer when goods tendered at contractually specified destination |
| Bailee | party who, by document of title, acknowledges possession of goods or contract to deliver them |
| What is an example of a bailee? | warehouse, trucking company |
| In a bailment agreement, who holds goods? | The bailee, on behalf of the seller |
| When the goods are held by the seller without movement of goods, are documents of title used? | Generally not |
| If seller is a merchant, when does risk of loss pass to the buyer? | when the buyer takes physical possession of the goods |
| If seller is not a merchant and there is delivery without movement of the goods, when does risk of loss pass to the buyer? | On tender of delivery (goods are available for pickup) |
| If goods are held by a bailee, when does risk of loss pass to the buyer? | buyer receives document of title; bailee acknowledges buyer's right to goods and buyer receives title and has reasonable time to pick up |
| When a contract is breached, which party bears the risk of loss generally? | The breaching party |
| When a seller/lessor rejects a contract, who has the risk of loss? | The seller |
| When a seller/lessor revokes acceptance, who has the risk of loss? | the risk passes back to the seller to the extent that buyer's insurance does not cover the loss |
| What a buyer/lessee breaches, what happens? | goods are identified, risk passes to buyer for a commercially reasonable amount of time after seller learns of breach to the extent that seller's insurance does not cover loss |
| What does a buyer have insurable interest in? | in goods that have been identified |
| What does a seller have insurable interest in? | in goods as long as they retain title or a security interest |
| Can both buyers and sellers have an insurable interest at the same time? | Yes |
| What does Contracts for International Sale of Goods apply to? | Merchant sales; not consumer sales or services |
| CISG contains | mirror image rule, irrevocable offers, statute of frauds, necessity of a price term, and time of contract formation |
| Can irrevocable offers be formed w/o signed writing under the CISG? | yes |
| How is the statute of frauds different under the CISG? | the contract may not need to be in writing to be enforceable |
| If a necessity of a price term doesn't exist under the CISG, can a contract exist? | Depends (but probably not) |
| When is a contract formed under CISG? | when offeror receives acceptance |
Created by:
fredrickss
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