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Section 13.1. Contracts for the Sale of Goods. Chapter. 13. Section 13.1 The Sale and Lease of Goods Section 13.2 Ownership and Risk of Loss in Sales or Goods Section 13.3 E-Commerce and the Law. Sales. The law of sales governs contracts for the sale and lease of goods. Sales.
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Contracts for the Sale of Goods Chapter 13 Section 13.1 The Sale and Lease of Goods Section 13.2 Ownership and Risk of Loss in Sales or Goods Section 13.3 E-Commerce and the Law
Sales The law of sales governs contracts for the sale and lease of goods.
Sales • A sale is a contract in which ownership of goods is transferred from the seller to the buyer for consideration. • The consideration is also known as the price, or the money that is paid for goods.
Sales • Goods are all things that are moveable, such as your clothing, books, pens, food, car, and even the gas you put in your car. • Money, stocks, and bonds are not considered goods.
13.1 Sales Shirt Store $ Shirt Store
The UCC • The Uniform Commercial Code (UCC) is a collection of laws that governs various types of business transactions. • When you have a contract involving goods, the UCC will apply. Example 1
The Sales Contract A sales contract may involve either a sale or a contract to sell.
The Sales Contract • Every time you buy goods and take ownership of them, a sale occurs. • However, if you will take ownership at some future time, the agreement is a contract to sell, not a sale. Example 2
Contracts for Both Goods and Services When a contract includes both goods and services, the dominant element determines the type of contract.
Contracts for Both Goods and Services • If the sale of goods dominates, the laws of the UCC apply. • If the performance of service dominates, the common law of contract applies. Furnace Ex. Page 270
Special Rules for Sales Contracts With some exceptions, the UCC applies to all sellers and buyers of goods.
Special Rules for Sales Contracts • A merchant is a business or person who deals regularly in the sale of goods or who has a specialized knowledge of goods. • A non-merchant is a casual or occasional seller. Example 3
Special Rules for Sales Contracts A sales contract must contain the same elements as other contracts, but the UCC has relaxed some of the strict rules of contract law.
Good Faith Parties to a sales contract must treat each other fairly.
Methods of Dealing and Usage of Trade When parties have previously dealt with each other, those methods of dealing may be used to supplement or qualify the terms of their sales contract.
Methods of Dealing and Usage of Trade This rule is true with any usage of trade, which is the method of dealing that is commonly used in the particular field.
Formation of a Sales Contract You may make a contract in any manner (oral or written) that shows that the parties have reached an agreement.
Acceptance of an Offer In most situations, you may accept an offer by any means and in any reasonable manner.
Different or Additional Terms An acceptance may have different or additional terms added without a complete rejection of the offer.
Firm Offer A firm offer is a merchant’s written promise to hold an offer open for the sale of goods; however, no offer can stand for longer than three months. It does not require payment to be binding.
Open-Price Terms A sales contract may be made without a settled price. Unless the parties agree on a price prior to delivery, a reasonable price can be settled at the time of delivery.
Output and Requirement Terms Output and requirement contracts are allowed even if they are not definite.
Output and Requirement Terms • An agreement to buy all of the manufacturer’s goods is an • output contract. • A requirement contract occurs when a seller agrees to supply the needs of a buyer. Backpack Ex. p. 272
Modification No consideration is necessary to change a contract for the sale of goods. The modification may be oral, unless the original agreement is in writing and states that it must be modified in writing.
Leasing Goods You can apply the sale-of-goods rules to the leasing of goods, with a few modifications.
Form of Sales Contracts Many sales contracts are oral rather than written. As long as the price is less than $500, an oral contract for the sale of goods is enforceable.
Form of Sales Contracts If the price is $500 or more, a sales contract must be in writing to be enforceable with the following exceptions:
Exceptions to the $500 rule • Written confirmation of an oral contract between two merchants is sent within a reasonable time, and no objection is made within ten days.
Exceptions to the $500 rule • The contract involves specially manufactured goods that cannot be resold easily.
Exceptions to the $500 rule • The buyer receives and accepts the goods or pays for them. • The parties admit in court that they entered into an oral contract.
Other Sales Governed by UCC Rules Other sales governed by the UCC rules include auction sales and bulk transfers.
Auction Sales In an auction with reserve, the auctioneer doesn’t have to sell the goods for the highest bid if it’s lower than the reserve amount. The auctioneer may withdraw the goods at any time before a sale is completed.
Auction Sales In an auction without reserve, the auctioneer must sell the goods to the highest bidder. The goods cannot be withdrawn from bidding unless no bid is made.
Auction Sales An auction sale is with reserve unless it is expressly stated that it is without reserve.
Bulk Transfers Sometimes a business transfers all merchandise and supplies at once, known as a bulk reserve.
Bulk Transfers The UCC rules require that the buyer of the bulk goods notify all of the seller’s creditors at least ten days before the transfer will take place. End of Section 13.1
OWNERSHIP AND RISK OF LOSS IN SALES OF GOODS Title The right of ownership to goods is known as title. People who own goods have title to them.
Title • A bill of sale is formal evidence of ownership. • You receive this document when you buy goods. • It only proves that you once had title, not that you still own the goods.
Elements of a Bill of Sale • Price • Name and address of buyer and of seller • Receipt • Goods sold
Elements of a Bill of Sale • Warranty • Date • Signature of seller Example 4
Voidable Title Anyone who obtains property as a result of another’s fraud, mistake, undue influence, or duress holds only voidable title to the goods.
Voidable Title Voidable title means title that may be voided if the injured party elects to do so. Example 5
Buying from a Merchant The UCC has a special rule that allows merchants who have no title to goods to pass on good title to their consumers.
Buying from a Merchant This occurs when you entrust your own goods to a merchant who sells them in the ordinary course of business.
Buying from a Merchant • This gives consumers confidence that they will receive good title when buying from a merchant. • This rule does not apply to stolen goods. Only the rightful owner has title to stolen property. Example 6
Passage of Title and Risk of Loss Sometimes it is necessary to determine who has title to goods—the seller or the buyer.
Passage of Title and Risk of Loss Similarly, it is sometimes necessary to determine who must bear the risk of loss, or the responsibility for loss or damage to goods.
Passage of Title and Risk of Loss This is because goods may be stolen, damaged, or destroyed after the sales contract has been entered but before the transaction is completed.
Passage of Title and Risk of Loss • Title to goods cannot be transferred under a sales contract until the goods have been identified. • Identified goods are goods that presently exist and that have been set aside for a contract.
