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Law 322 Chapter 11 Notes

by: Stephanie Notetaker

Law 322 Chapter 11 Notes LAW 3220

Stephanie Notetaker
GPA 3.7

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These notes cover material on Exam 3.
Legal Environment of Business
Edward R. Claggett
Class Notes
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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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