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MS 331 Ch13
Business Law: Ch 13: The UCC Sale and Lease Contracts
| Question | Answer |
|---|---|
| The scope of the UCC and Article 2 and 2A: | Facilitates commercial transactions. |
| The UCC Article 2 governs contracts for __________ | sale of goods |
| T or F: UCC Article 2 preempts common law | True |
| Where UCC Article 2 is silent, ____________ governs | common law |
| Article 2 only applies to ____; the common law of contracts governs ____, ______, or _______ | goods; real estate, services, or intangible |
| Mixed goods-services: The ________________ test | Predominant-Factor |
| A ___ is the passing of title from seller to a buyer for a price (payable in ___, ____, or _____) | sale; cash, goods, and services |
| Goods must be ______ and ______ | tangible and movable |
| Define tangible: | has physical existence |
| Define movable: | carried from place to place |
| Goods Associated with Real Estate can fall within Article 2 if: (3 things) | 1. Contract for sale of minerals or a structure is a good IF severance is made by seller. 2.Sale of growing crops 3.Other "things" attached to real property, capable of being severed without harm to land |
| T or F: If severance by buyer, sale is governed by Article 2 | False; common law |
| "Predominant Factor" Test --- if goods, then _____ governs, if services then _____ governs the entire contract | UCC, common law |
| UCC Article 2 imposes special standards upon a “_______” who has special business expertise and is not a casual buyer/seller. | merchant |
| UCC Article 2 has 3 criteria for merchant | 1.Deals in good of the kind in sale 2.Holds themselves out as having special expertise, knowledge, or skill 3.Person who employs a merchant |
| Define a Lease Agreement: | contract for lease of personal goods between a lessor and a lessee |
| Define Lessor: | transfers right to possess and use goods under lease |
| Define Lessee: | acquires right to possess and use goods |
| Define a Consumer Lease: | lessor, lessee who leases for personal, family, or household use, and total payments less than $25,000 |
| What is unique about Finance Leases? | Involve a 3rd party-supplier |
| What is different between valid offers with UCC vs. common law? | common law- a binding contract is formed when a valid offer is unequivocally accepted WHEREAS with the UCC- more flexible and allows for open pricing, payment, and delivery terms |
| Open Terms. UCC 2-204: even if terms are undetermined | a contract may still exist. |
| [Open Terms Offer] When is indefiniteness is OK in a contract? | as long as the parties intend to make a contract and there is a reasonable basis for a court to grant a remedy |
| [Open terms offer] Define open price term | If parties have not agreed on pricing, court can determine “reasonable price at the time of delivery.” |
| [Open terms offer] Define ppen payment term | payment is due at the time and place in which buyer receives goods. |
| [Open terms offer] Define open delivery term | Unless otherwise agreed, buyer takes delivery at the Seller’s place of business. |
| [Open terms offer - delivery term] Seller has duty to make arrangements ______ | in good faith |
| [Open terms] Define open quantity | generally courts will not impose a quantity and there is no remedy, unless the contract is either a requirements or output contract |
| [Open terms] Describe exceptions to open quantity | 1.Requirements Contract 2.Output Contract 3.UCC good faith limitation |
| [Open terms - exception to open quantity] Describe requirements contract | buyer agrees to purchase what the buyer needs or requires. (generally includes exclusivity). |
| [Open terms - exception to open quantity] Describe output contract | buyer agrees to buy all of seller’s production or output |
| [Open terms - exception to open quantity] Describe good faith limitation | Amount purchased should be close to normal production year. |
| Describe: Merchant's Firm Offer | Offer made by merchant in a signed writing is irrevocable for reasonable period of time |
| Does a merchant's firm offer require consideration? | No |
| Does a merchant's firm offer need to be in writing? | Yes |
| Does a merchant's firm offer need to be signed by the offeror? | Yes |
| [Acceptance] Either by prompt shipment of _________ or ________ goods | conforming; non conforming |
| [Acceptance] Describe non-conforming goods | is both an acceptance and a breach unless goods sent as an “accommodation” to buyer, with prompt notice by buyer. |
| [Acceptance] Communication of Acceptance is _______ | required |
| [Acceptance] What are some additional terms when one party is a merchant | Contract is formed according to origingal terms of the offer |
| [Acceptance] When both parties are merchants: the contract incorporates new terms unless | 1.original offer expressly limits new terms 2.material change 3.offeror objects within reasonable time |
| UCC adopts common law rule requiring consideration. However, __________ do not need consideration | modifications |
| Modifications must be _________ | made in good faith |
| [The Statute of Frauds] Sale of goods over $______ must have a signed writing to be enforceable | $500 |
| [The Statute of Frauds] Sufficiency of writing: signed by ______________________. | party against whom enforcement is sough |
| [The Statute of Frauds] Sufficiency of writing: Is it enforceable beyond quantity of goods shown in the writing? | normally not |
| [The Statute of Frauds] What are special rules for contracts between merchants? | After oral agreement, one of the merchants sends a signed, written memorandum containing essential terms to the other merchant within a reasonable time. |
| [The Statute of Frauds] EXCEPTIONS! (3) | 1. Specially Manufactured Goods 2. Admissions by breaching party 3. Partial performance: oral contract is enforcable IF payment has been made or goods have been accepted |
| How does Parol Evidence impact formation of sales and leases? | Terms of a written agreement intended to be the final expression of parties’ intentions, cannot be contradicted by prior or contemporaneous agreements |
| What are the exceptions to Parol Evidence? | consistent terms, course of dealing and trade, course of performance. |
| What makes a contract unconscionable? | Contract is one that is so unfair and one-sided it is unreasonable to enforce it. Court can: set it aside, refuse to enforce the unconscionable provision, limit the contract. |
| Does risk always pass with title? | Nope |
| UCC replaces title with ______, _____, and ______ | identification, risk of loss, and insurable interest |
| Describe Identification: | For any interest to pass to buyer, goods must be (1) in existence and (2) identified as specific goods in sales contract. |
| Identification takes place when ________________________ | specific goods are designated as the subject matter of the contract. |
| Identification: Gives buyer the right to_______ (2 things) | 1.To obtain insurance on the goods. 2.To recover from third parties who damage the good. |
| [Identification: Existing Goods] if contract calls for ascertainable goods in existence, identification takes place ___________________________ | at the time contract is made. |
| [Identification: Future Goods] Animals - takes place when | Animals born within 12 months of contract, identification takes place at conception |
| [Identification: Future Goods] Crops - takes place when | For crops harvested within 12 months of contracting, identification takes place at time of planting (or when crops begin to grow). |
| [Identification: Future Goods] Everything but animals and crops takes place when | when goods shipped, or marked or designated by seller |
| [Identification: Goods Part of a Larger Mass] takes place when | marked, shipped, or designated by seller |
| [Identification: Goods Part of a Larger Mass] Exception | fungible goods which are naturally alike (grades of wheat, oil, wine). –undivided interest. |
| Describe Passage of Title | Contract between seller and buyer usually determines when title passes. |
| [Passage of Title] Title can pass _____________ or _________- | Upon physical delivery, or when agreed to by the parties |
| [Passage of Title] Title passes ______ | If not otherwise agreed in contract, title passes based on whether contract is shipment or destination contract |
| [Passage of Title] - Shipment contracts | title passes at time and place of shipment. |
| [Passage of Title] - Destination contracts | title passes when goods are tendered at the destination. |
| [Passage of Title] - Without movement of goods and With document of title (bill of lading) | title passes when and where document delivered. |
| [Passage of Title] - Without movement of goods and without document of title | title passes when sales contract is made, if goods have been identified, or when identification occurs if they have not been identified. |
| [Passage of Title - Sales or Leases by Nonowners] Void Title | true owner gets goods back; Person selling goods obtained by stealing |
| [Passage of Title - Sales or Leases by Nonowners] Voidable title (3 things) | 1. Person selling goods obtained by fraud, paid with bounced check, minor, or purchased on credit when seller was insolvent 2.Good faith purchaser keeps goods 3. leases - good faith lessee retains possession |
| [Passage of Title - Sales or Leases by Nonowners] Describe the entrustment rule | Merchant must deal in goods of that kind. ---- Gives power to transfer valid title to good faith purchaser in ordinary course of business. |
| [Risk of Loss] T or F: ROL passes with title | False: ROL does not necessarily pass with title |
| [Risk of Loss] Unless otherwise agreed, ROL passes to buyer _________________ | depending on whether delivery is with or without movement of the goods. |
| [Risk of Loss- with movement of goods] Shipment Contracts; ROL passes to buyer ______________- | when goods tendered to Carrier. If goods damaged in transit, Buyer’s bears risk of loss |
| [Risk of Loss- with movement of goods] Destination Contracts, ROL passes to buyer ______________ | when goods tendered at contractually specified destination. |
| [Risk of Loss- without movement of goods] Often goods are held by a _______ on behalf of the seller in a bailment arrangement | bailee |
| [Risk of Loss- without movement of goods] ____________ give bailee possession of goods and/or contracts to deliver them | Documents of title |
| [Risk of Loss- without movement of goods] What are some examples? | Warehouse, trucking company |
| [Risk of Loss- without movement of goods] Held by Seller (Mechant) ROL passes to buyer ________ | takes physical possession of goods. (ROL remains with seller until buyer takes physical possession.) |
| [Risk of Loss- without movement of goods] Held by seller (not merchant) ROL passes to buyer _________ | on Tender of Delivery (goods available for pickup) |
| Define Baillee | a party who by document of title acknowledges possession of goods or contract to deliver them. |
| [Risk of Loss- without movement of goods] Held by bailee, ROL passes to buyer _______________ | Buyer receives document of title; bailee acknowledges Buyer’s right to goods and buyer receives title and has reasonable time to pick up |
| [Risk of Loss- breached contract by sellor or lessor] | Rejection - risk stays with seller.; Revocation of acceptance - risk passes back to seller to the extent that buyer’s insurance does not cover the loss. |
| [Risk of Loss- breached contract by buyer or lessee] | Goods are identified, risk passes to buyer for a commercially reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss. |
| Generally, when a contract is breaches, the _______bears ROL | breaching party |
| [Insurable interest] _______ has an insurable interest in goods that have been identified. | buyer |
| [Insurable interest] _______has an insurable interest in goods as long as they retain title or a security interest. | seller |
| Both ______ and ______ can have an insurable interest at the same time | buyer and seller |
| CISG: Applies to __________ and not _______ or ________ | merchant sales; consumer sales; services |
| [CISG] T or F: contain Mirror image rule | True |
| [CISG] What is different about irrevocable offers? | offer can become irrevocable w/o signed writing |
| [CISG] - Statute of Frauds | Contract may not need to be in writing to be enforceable |
| [CISG] - Necessity of a Price Term | Or contract might not exist. |
| [CISG] Time of contract formation | When offeror received acceptance. --- UCC requires notice to other party if acceptance is by performance. |
Created by:
savelae
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