LGS 200 Chapter 11 lecture notes
LGS 200 Chapter 11 lecture notes LGS 200 - 008
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LGS 200 - 008
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This 4 page Class Notes was uploaded by Conner Jones on Tuesday March 1, 2016. The Class Notes belongs to LGS 200 - 008 at University of Alabama - Tuscaloosa taught by Charlye S. Adams in Summer 2015. Since its upload, it has received 76 views. For similar materials see Legal Environment of Business in Law and Legal Studies at University of Alabama - Tuscaloosa.
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Date Created: 03/01/16
Chapter 11 – Sales and Lease Contracts The scope of article 2 What is a sale? – passage of title from seller to buyer for a price What are goods? – must be tangible and movable (does not include real estate) Goods and services combined: mixed sale law o “predominant factor” test – if goods, then UCC (uniform commercial code) governs, if service, then common law governs contract who is a merchant? – a person who has special business expertise (not casual buyer/seller) o deals in same goods as the sale o businesses that holds themselves out as having special expertise, knowledge, or skill o a person who employs a merchant as a broker, agent, or other intermediary lease agreement – contract for lease of personal goods between lessor and lessee o lessor transfers rights to possess and use goods formation of sales and lease contracts offer – once a valid offer is accepted a binding contract is formed UCC 2-204 o Open terms – “indefiniteness” is OK as if parties intend to make contract o Open price term – if parties have not agreed on pricing, count can determine “reasonable price at time of delivery” o Open payment term – unless otherwise agreed, payment is due upon delivery o Open delivery term – unless otherwise agreed, buyer takes delivery at seller’s place of business o Open quantity – generally courts will not impose a quantity and there is no remedy unless contract requires it Exceptions: Requirements contract: buyer agrees to purchase all of what he needs or requires from seller Output contract: buyer agrees to buy all of seller’s production or output Merchant firm offer – offer made by merchant in a signed writing is irrevocable for reasonable period of time Methods of acceptance: o Offeror can specify a means of acceptance o “Mailbox rule” – any reasonable means of acceptance under circumstances is permissible o a promise to ship/prompt shipment counts as acceptance o shipment of non-conforming goods is both acceptance and breach, items are not what you ordered additional terms: o only one party is merchant: terms of contract cannot be changed o both parties are merchants: terms of contract can be changed consideration statute of frauds o sale of goods over $500 must be in writing to be enforced o “merchant communication rule” – after oral agreement, merchant sends a signed written note containing essential terms to other merchant within reasonable time (10 days) o “partial performance”- an oral contract is enforceable if payment has been made or goods have been accepted o test question: supplier and restaurant have oral contract $12k for $12k of goods, supplier sends goods in intervals $4k at a time, doesn’t pay invoice because contract is oral. Restaurant owner has to pay for $4k of goods title and risk of loss for goods to pass to buyer: o in existence o identified as specific goods in sales contract identification – specific goods are designated as subject matter of contract o existing goods – identification takes place at time contract is made o future goods – animals born within 12 months of contract, identification takes place at conception; crops harvested within 12 months of contracting identification takes place at time of harvesting; identified when goods are shipped or marked/designated by seller when title passes – generally ownership/title passes upon physical delivery or when agreed upon by parties o if no agreement shipment contract (default) – title passes at time and place of shipment destination contract – title passes when goods are tendered at the destination risk of loss – ROL passes to buyer under shipment contract; under destination contract seller has ROL during transit ROL when sales contract is breached o When seller breaches Rejection – ROL stays with seller Revocation of acceptance – risk passes to seller to extent that buyers insurance doesn’t cover loss o When buyer breaches ROL passes to buyer for reasonable amount of time after seller learns of breach to extent that sellers insurance doesn’t cover loss Insurable interest o Buyer has insurable interest in goods that have been identified o Seller has insurable interest in goods as long as they retain title or security interest o Both can have insurable interest at same time Performance of sales and lease contracts Good faith and contract performance o Merchants held to higher standard of care o Buyer obligation to pay for good Obligations of seller o Tender of delivery: occurs when seller makes conforming goods available to buyer o Place of delivery: buyer picks up at seller’s place of business or seller’s residence o Shipment contract: seller has duty to put goods into hands of independent carrier o Destination contract: seller has duty to tender goods at a reasonable hour for buyer o Cure: seller has right to repair or replace defective goods within time of contract performance (dog collar example) o Substitution of carrier: if agreed upon method is impractical, a commercially reasonable sub will be sufficient (seller will cover cost) o Commercial impracticability: something happens that makes it impractical to deliver on time (mad cow example) Obligations of buyer o Payment: usually payment is made when goods received o Buyer has absolute right to inspection before payment, must be conforming to payment Anticipatory repudiation o Occurs when party communicates intention he will not perform when due Warranty (assurance, guarantee) Expressed warranty – affirmation, promise, statement of fact about the quality, condition, or performance of a good (has to be basis of bargain, why you bought the car) Implied warranty of o Merchantability – only applies to merchants, automatically arises, good can be used for the ordinary purpose for which it was made Fitness for a particular purpose – applies to everyone, Home Depot needs wood to build deck, they sell you plywood, you can sue for damages if you fall through
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