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Business Law Ch 13

Summary of slides for Chapter 13 of Fundamentals of Business Law

QuestionAnswer
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