Law of Commercial Transactions Exam #1

UCC's Purpose
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Terms in this set (42)
UCC's Purpose
-to simplify, clarify, and modernize the law governing commercial transactions
-to make uniform the law among various jurisdictions.
Article 2
Sale of goods
-NOT real property, services, or intangible property.
Article 2A
lease of goods
sale
the passing of title from the seller to the buyer for a price.
goods
An item that is tangible and moveable
What if goods and services are combined in a contract?
Predominant factor test: determine whether the K is primarily for goods or services. (if goods then UCC governs the whole K)
merchant
-A person who deals in goods of the kind
-A person who, by occupation, holds himself out as having expert knowledge or skill.
Open terms under the UCC
unlike common law a contract will not fail for indefiniteness, UCC permits open terms as long as:
1) Both parties intended to make a K
2) there is a reasonably certain basis for the court to grant an appropriate remedy.
Open Price Term
if the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery"
Open Payment Term
When the parties do not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods.
Open Delivery TermWhen no delivery terms are specified, the buyer normally takes delivery at the seller's place of business. (residence if no place of business)Open Quantity Termif the parties do not specify a quantity, a court will have no basis for determining a remedy -NO Contract formed 2 Exceptions:Requirements K (exception to open Q)UCC K agreement to buy or sell everything that one party will need -"my needs change from month to month, so just sell me everything I need"Output K (exception to open Q)A seller promises to sell to a certain buyer all of the goods the seller produces, and the buyer agrees to buy that amount from the sellerMerchant Firm OfferTypically, the offeror has the ability to revoke their offer at any time -Merchant firm offer: the merchant offeror gives assurance in SIGNED writing that the offer will remain open for a stated period of time (no more than 3 months)Acceptanceeither by prompt shipment/promise to ship conforming or nonconforming goods.Communication of acceptanceUCC states that acceptance needs to be communicated. -if offeror is not notified within a reasonable amount of time that offeree has accepted the K, then the offeror can treat the offer as lapsed.Nonconforming goods and acceptanceThe prompt shipment of nonconforming goods serves as both an acceptance and a breach of the K. -This does not apply if the seller SEASONABLY notifies the buyer that the nonconforming goods are offered as an accommodation. -notice of accommodation must clearly indicate to buyer that shipment does not constitute and acceptance and no K has been formed.If one party or both is a nonmerchant - Additional termsthe K is formed according to the terms of the original offer. additional terms are only proposals.Both Parties Merchants - additional termsadditional terms automatically become part of the K unless: 1) original offer expressly limited acceptance to its terms. 2) new or changed terms materially alter the K 3) offeror objects to the new or changed terms within a reasonable period of time.Consideration for K modificationThe UCC does not require K modification to be supported by new consideration.Statute of Frauds-Sales K $500 or more. -Lease K $1,000 or more in total payments. *must be in writing and signed by party whom enforcement is sought.Statute of frauds for K between merchants-Merchants can satisfy statute of frauds if after an oral agreement, one of the merchants sends a signed written confirmation to the other in a reasonable time.Parole Evidence RuleIf K is fully integrated (no terms or conditions left out), then it cant be contradicted by outside evidence.2 types of parole evidence-course of dealings: past interactions of the parties. -usage of trade: industry practices and norms.identificationtakes place when specific goods are designated as the subject matter of a sales or lease contractIdentification for existing goodsidentification takes place at the time the K is made.identification for future goodsidentification takes place when the seller ships, marks, or otherwise designates the goods as those to which the K refers to.Goods part of a larger massGoods are identified when marked, shipped, or designated by seller (Get fridge from BestBuy; fridge is identified when they select the exact fridge they are going to sell you from the warehouse)Passage of titleDefault rule: without an explicit agreement to the contrary, title passes to the buyer at the time and place delivery occurs (delivery as stated in K)Title passing with the Movement of goods:- shipping K: seller only required to get into the hands of the carrier (this is when title passes) -Destination K: seller required to get the goods to the location of buyer (title passes when buyer gets goods)void titleNo title exists so title cannot passGood titlelegitimate title, can pass to othersvoidable titleTitle is voidable if: 1) goods were obtained by fraud 2) goods were paid for with a check that later bounced 3) goods purchased on credit when seller is insolvent. \ **Voidable title can be passed to a good faith purchaser** -original owner cant get the good back from the good faith purchaser but can sue the original buyer that later sold to the good faith purchaser.Entrustment Ruleentrusting goods to a merchant who deals in goods of that kind gives that merchant the power to transfer those goods and all rights to them to a buyer in the ordinary course of business.Risk of loss For movement of goods-shipping K: seller only required to get the good to the carrier and this is when risk of loss transfers. -Destination K: seller must get the goods to the destination stated in the K and risk of loss passes when goods are delivered to buyer at the specified destination.shipping termsFOB: Can be either a shipping or destination K FAS: shipping K Ex ship: DestinationRisk of loss for nonmovement of goodsGoods held by seller: -Seller = Merchant: risk of loss passes when buyer takes physical possession. -Seller = nonmerchant: Risk of loss passes when make goods available for pickup. Goods Held by a Bailee: ??Conditional sales-Sales on approval: risk of loss passes when buyer accepts offer expressly or performs an inconsistent act -sale or return: risk of loss stays with buyer until they return.Risk of loss with breach - seller/lessorwhen the seller/lessor breaches by providing goods that are so nonconforming that the buyer has the right to reject them. Risk of loss does not pass to buyer until: 1) the defects are cured 2) buyer accepts the goods in spite of their defectsRisk of loss with breach - buyer/lesseewhen the buyer breaches the K, risk of loss immediately shifts to the buyer. *3 limitations: 1) seller must have already identified the goods in the K 2) buyer bears the risk of loss for only a commercially reasonable time after the seller has learned of the breach. 3) buyer only liable to the extent of any deficiency in the sellers insurance coverage.Insurable Interest-Buyer: insurable interest in identifiable goods - seller: insurable interest in goods as long as they retain the title.