Law 322 Chapter 11 Notes
Law 322 Chapter 11 Notes LAW 3220
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This 5 page Class Notes was uploaded by Stephanie Notetaker on Monday March 7, 2016. The Class Notes belongs to LAW 3220 at Clemson University taught by Edward R. Claggett in Fall 2015. Since its upload, it has received 31 views. For similar materials see Legal Environment of Business in Law and Legal Studies at Clemson University.
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Date Created: 03/07/16
Law 322 Chapter 11 1. Uniform Commercial Code (UCC) Article 2 governs law of commercial sale of goods a. Federal law, every state has adopted b. Purpose i. Promote uniformity and consistency from state to state c. More flexible than common law i. Article 2 can override and supersede common law ii. Deals only with contracts for the sale of goods for merchants iii. Much more limited iv. Contract law that applies specifically if your contract deals with the sale of goods by merchants 1. Merchants-‐people who normally deal with those types of property like business to business 2. Goods-‐tangible goods v. Article two does not apply to the sale of real property, intangible property, services, employment contracts vi. Mixed contract-‐tangible personal property plus services 1. Article two only applies to mixed contract if it applies to the predominant portion of the contract, you have to look at the price vii. Article two is designed to promote business in commerce viii. Specifically written that there is a contract to support commerce ix. Generally more flexible than common law to see if the contract exists x. Article two isn’t going to say there isn’t a contract, they will try to fill in the gaps and find the information they need xi. Sale of tangible personal property-‐seller passed title to the buyer xii. You can tell who has title from the contract xiii. Whoever has title is the owner of the goods, they better have insurance on the goods xiv. A contract can be shown in any manner that shows agreement between the parties (don’t need the five elements) xv. Parties have a duty to act in good faith xvi. An offer can be withdrawn before it is accepted xvii. Acceptance has to be on the terms of the offer (like common law) xviii. If you are dealing with a firm offer, one that says the offer will remain open for a fixed period of time, you cannot withdraw the offer within that fixed period of time but you can after that xix. Contract modifications-‐contracts can be modified, but it needs to be in writing 1. You don’t need new considerations to modify xx. Has a statute of frauds d. Terms 2. Forming a Contract 3. Statute of Frauds & Parole Evidence Rule a. Different from common law b. The statute of frauds says that if it is a contract for the sale of goods for $500 or more, it has to be in writing to be enforceable, which is 99.9% of contracts c. Parole Evidence Rule i. Similar to common law, except it says you cannot introduce oral evidence or testimony if it contradicts the written contract ii. You can introduce oral evidence or testimony if something in the contract is vague or ambiguous or trying to prove fraud like common law iii. Exception: different because it says if a term is missing, you can introduce oral evidence or testimony 1. Under common law, you wouldn’t have an enforceable contract if something was missing 4. Filling in the Gaps a. Courts have come up with ways to fill in the gaps if there are things missing from the contract b. Parties have a duty to act in good faith c. Can look at previous dealings that the party has had d. Look at trade practice i. This means you can look at other retailers in the same trade as you and see under what terms they deal with like how many days they ship in, what ways they can pay, etc. e. Can leave out the price and have a contract i. Fill it in as a reasonable price, typically fair market value ii. Courts don’t like this but they have to help figure out fair market value f. You can have a contract even if you don’t specify the quantity i. Requirements Contract 1. Seller agrees to provide all the buyers needs 2. At the time the contract was entered into 3. Determined at the time the contract was signed 4. What the buyer requires ii. Output contract 1. Buyer says I’ll take every unit you can produce at the time they sign the agreement 2. If they triple in size down the road, you don’t have to take all of that g. Delivery terms i. If it’s not filled in, we will assume a reasonable time, depends on how much you ordered and how long it usually takes to produce that unit h. Payment Terms i. How soon or long after you receive the units do I have to pay for them ii. If they aren’t there, the terms are “cash on delivery” iii. You have to pay for them when they show up for delivery iv. Buyer needs to be cautious i. Can fill in the blanks and keep commerce going 5. Sellers’ and Buyers’ Basic Obligations a. Sellers primary obligations is to delivery the product that conforms to the contract and the quality is what was specified in the contract b. Buyers obligation is to pay for those units in accordance to what the contract says c. Buyers rights i. Right to inspect goods right when they receive them 1. For quantity and quality 2. If they are in accordance with the contract, they need to pay for them right then 3. If they are not in accordance with the contract, the buyer has 3 options a. Accept all the goods b. Reject all the goods c. Accept the goods that are in conformance, and reject the bad ones 4. Buyer has an obligation to the seller, the buyer must notify the seller as quickly as they can if there are defective units because article two says that the time for performance under the contract has not yet passed, the seller has the right to fix the problem within the time period, if the seller does this, there is no breach of contract 6. Sales Warranties-‐ Express & Implied a. Warranty creates a contract b. Article two says there are 6 warranties that can exist in a contract under article two i. Warranty of Title (expressed warranty) 1. Imposed upon the seller in every contract imposed under article two, you are warranting to the buyer that you have good, clear title on these goods, if this isn’t true it creates a breach of contract ii. Express Warranty 1. If the seller makes any promise or statement to the buyer regarding the goods like quality, how it performs, etc. If its not true, they can get sued 2. Through the description of the goods from seller to the buyer, creates a warranty that every unit produced will be of that description 3. If the seller gives a sample of the goods to the buyer, every other unit will be alike kind and quality iii. Implied Warranties-‐Court creates 1. Merchantability-‐must be in the contract a. Warranty that the goods you sell to the buyer are fit for the use, they are fit to be used in the business, must be of similar quality, packaging and label has to be adequate and accurate, labeling must be accurate 2. Fitness for a particular purpose-‐can be in the contract, doesn’t have to be a. Only arises if the buyer is reliant on the sellers expertise of the product, if the seller gives advice and says it will meet the buyers needs c. Breach of any of these warranties carries strict liability, if you prove one of these warranties was breached, you can move right on to talk about damages, how much does the seller owe the buyer i. Sellers like to disclaim these warranties, article two says a seller can disclaim any or all of these if they put clear and conspicuous language in the contract (written) and the buyer sells the contract ii. In the real world, a buyer will usually never sign away all 6 of these warranties iii. Buyer might agree to wave one or two of them, because they might feel the rest of them are enough protection iv. Parties can agree to a cap or limit on the amount of damages if any of the warranties are breached, standard to see in article two contracts v. Sellers are trying to put time limits on the warranties, “the warranties under article two are valid for X amount of time” 7. Warranty Disclaimers (above) 8. Remedies and Damages-‐(if there is a breach) a. Designed to put the nonbreaching party back in the same economic position had the contract not been breached b. Talking about monetary damages c. Remedies i. Nonbreaching party should always notify the breaching party that they are canceling the contract (don’t expect performance) ii. Seller can reclaim goods if it’s the buyer that breached and try to find another buyer for as reasonable price as they can get it iii. Seller can try to sell to another buyer iv. Sellers costs include costs to resell goods, transportation to bring goods back (included in damages) v. Article two does not provide attorney fees vi. If seller breaches, the buyer should cancel the contract vii. Buyer goes to find another seller for a reasonable price viii. If the buyer has made a deposit or prepayment the seller must give it back ix. Buyer can sue seller for any other damages they have, like less profits x. Article two does not provide for punitive damages to be awarded 1. If other party committed fraud, you can ask for them xi. Article two is U.S law, so it only applies to buyers and sellers in the United States 1. Contract to sell goods in the Netherlands 2. In these types of contracts, to protect yourself: a. Make sure the contract is in writing b. Easier for judge to understand terms with a written contract c. Specify in the written contract how you’re going to resolve disputes i. Avoid the uncertainty ii. You can litigate, but you must specify it in the contract iii. Saves a lot of time and money iv. Look to see if both countries can ratify under convention (international sale of goods) this is your next to last resort v. Jurisdiction over breaching party is the last resort 9. International Sales (above)
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