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Chapter 3: The formation of contract for sale of goods A legal agreement between two or more parties with the intention of creating a legal relationship enforceable by law. The elements of a valid K: 1- Real Agreement : Agreement= offer + Acceptance Real:made by freewill (no mistake, duress, fraud) 2- Capacity : the legal power or ability to make a K. COT
LAW 3-Legality: the subject matter of K must be legal and not against to public policy. 4-Formality : the valid K must be in the forms required by law ( be in writing) - Art 4 of D #38: K over 5000R - In U.S.A: K over $500 5-Consideration : a new legal detriment to the parties to the contract. • Legal detrimentmeans that the party does or promises to do something that he was not required to do before. COT
Two elements to determine consideration - Must have legal value. - Must be bargained for exchange. ☻ How the special rules governing the K for sale of goods affect the formation of the sale K ☺ These areas of special concern are: Interpretation of the terms of the K, Missing terms, Acceptance, Need for writing formality requirement. COT
I- Interpretation of the terms of the K The special rules are created to allow for Ks to be validly formed even though some of its terms may not be clear. ☻ Why? - Hastily drafted. - Individuals without training or skill ☺The special rules provide three main ways to determine the parties’ intent: - The parties’ course of performance - The parties’ course of dealings - Usage of trade COT
a- Course of performance The conduct of parties under the K which indicates what the parties intend the K to mean. (a previous conduct of the parties under the current K .) - What did they do? - How did the parties perform under K ♣- Condition: - There is K - Some parts of the K have applied by the parties. - The K has not still finished. ☻- Study Question # 5 ( p:22 ) COT
Thanna (S) K Chuon (B) • - Jan Apr, Thanna delivered beer at Chuon’s rest.. • May Thanna refuse to deliver beer at Chuon’s rest and want Chuon to pick up beer at Thanna’s office. • ♠- How to solve this problem? • ☺- Art 32 of D#38 : if no place of delivery of the goods is specified in the K, then delivery shall be at the residence of the debtor. • ☺- Art 30 of D#38 : Debtor is the person • that regarding the obligation to be executed. • ☻- Who is the debtor? • Chuon or Thanna? COT
☺ Although Thanna is correct about the K terms & D#38 a court could find that delivery to the restaurant was the parties’ intention. because Thanna delivered beer to the Chuon’s restaurant is the course of performance of the K. b- Course of dealing The conduct of the parties in previous K & dealings which indicates what they intent the current K to mean. ( conduct of the parties under the previous K ). ♣- Condition: - There are previous K - Those Ks have finished. ☻- Study Question # 6 ( p:23 ) COT
Jan, 2005 K1 Thanna delivers beer to Chuon’s restaurant. Jan, 2006 K2 Thanna delivers beer to Chuon’s restaurant. Jan, 2007, K3Thanna refuses to delivery beer to restaurant ♠- How do you solve this problem? ☺- Although Thanna is correct about the K terms & D#38 a court will look at K1 & K2 could find that delivery to the restaurant was the parties’ intention. because Thanna delivered beer to Chuon’s restaurant is the course of their past dealing of the K. ☻- What is matter? if the K1 & K2 are different. ☻- What’s matter? if K3 from Apr, 2004 Thanna refuses to delivery beer to Chuon’s restaurant. COT
☺- If the K2 is different from K1 ( K2 has changed ) so, the court only look K2 to resolve dispute term in K3. Because K2 is the new acceptance. ☺The court will only look to K3 as course of performance. c- Usage of trade The customs or practices in the business, industry, or place which provide a basis for determining the parties’ intentions under the K. ♣- Art 23 of D#38, provide that if the K is not clear in meaning that K shall be interpreted according to common practice or custom of the place where the K has been made, but the interpretation shall not conflict with the provisions of this law. COT
♣- Condition - Common practices - The parties have known or couldn’t have been unaware. ☻- Study Question # 7 (p:23) In the wholesale beverage industry in Cambodia, it is common practice or custom to deliver beer, water, soda directly to the store, markets, restaurants which sale the beverage to the public. Again, Thanna decides to stop delivering beer & wants Chuon to pick it up at Thanna’s residence. How can you solve this problem? ☺ Although Thanna is correct about the K terms & D#38 a court could find that delivery to the restaurant was the parties’ intention. because it is common practice in the industry to deliver beer to the restaurants. COT