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MS 331 Ch13

Business Law: Ch 13: The UCC Sale and Lease Contracts

QuestionAnswer
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