Law 2

  1. Contract Formation
    Need 5 things

    • 1. Offer
    • 2. Acceptance
    • 3. Agreement - supported by consideration
    • 4. Capacity
    • 5. Legality
  2. UCC - Uniform Commercial Code
    Applies to the SALE OF GOODS

    Any time goods change hands it goes under the UCC doesn't matter if the the buyer or seller is a merchant or not
  3. Sale
    Any transaction however paid for, in which title transfers from seller to buyer for a price
  4. Title
    • Legal ownership
    • not a document, but a legal concept of ownership
  5. goods
    • Tangible Movable items of personal property
    • not money or stocks
  6. Mixed sale
    Involves the sale of both goods and services

    Predominant-purpose test - UCC applies if transaction is "predominantly" a sale of goods
  7. Merchant
    • Someone who either
    • Deals in the goods of the kinds involved in the transaction OR
    • Holds themselves out as an expert, by their occupation, in the goods involved in the transaction
  8. Major Differences
    UCC v. Common Law
    • UCC has Firm Offer Rule
    • UCC relaxes definiteness requirement
    • UCC Eliminates Mirror Image Rule
    • UCC eliminates the preexisting obligation rule
  9. UCC has firm offer rule
    If the offerer promises to keep an offer open until a certian time, the offer must remain open

    Under common law, such an offer must only remain open if the offeree pays for the option, otherwise, offerer can revoke at any time
  10. UCC relaxes definiteness requirement
    • Only Quantity is required for a valid contract
    • price, payment, delivery, duration, etc can be reasonably filled in if not stated in the contract
    • lack of these does not void the contract
  11. UCC Eliminates Mirror image rule
    • 1. If either paty is a non-merchant:
    • additional terms are considered proposed additions to the contract
    • if additional proposed items are NOT explicitly accepted, a contract is formed on the basis of the original offer without the additional terms

    • 2. If both parties are merchants, additional terms automatically become part of the contract UNLESS
    • the offer expressly limits acceptance to the terms of the offer OR
    • additional terms materially alter the contract OR
    • the offeree objects within a reasonable time
  12. UCC eliminates the preexisting obligation rule
    • Agreed-to modifications to an existing contract do not need to be supported by consideration nder the UCC
    • as long as they are made in good faith
  13. Statute of Frauds
    Certain contracts must be in writting to be enforceable

    • Land
    • Debts of Others
    • Anything over a year
    • Goods >= $500
  14. Statute of Frauds
    Specially manufactured goods

    Even if these are over 500 they need not be in writting

    • As long goods are not suitable for sale to others in seller's ordinary course of business
    • Seller has made a substantial begining of their manufacture or procurement
  15. Parol Evidence Rule
    Parties to a complete and final written contract cannot introduce oral evidence in court that changes the intended meaning of the written terms

    • Parties can submit evidence to interpret terms
    • course of performance (during this contract)
    • course of dealing (during other contracts)
    • trade usage (between others in the same industry)
  16. Remedies for breach of Contract
    UCC and Common law rules have the sale goal - to put the non breaching party in the position he would have been in had the contract been fully performed

    The non breaching party can usually choose from a number of remedies

    Contract law does NOT punish the breaching party
  17. Seller's Remedies
    • the seller's remedies ususally focus on:
    • getting goods back from a breaching buyer
    • allowing the seller to find another buyer
    • awarding damages
  18. Seller's remedies after breach
    Right to withold delivery
    can also demand cash is a buyer becomes insolvent prior to delivery, despite the original payment terms
  19. Seller's remedies after breach
    Right to stop delivery of goods in transit
    • In possession of common carriers
    • buyer insolvency - seller can stop entire shipment regardless of size
    • buyer repudiation of failure to make payment - seller can stop delivery if discrete unit (carload, truckload, planeload)
  20. Seller's remedies after breach
    right to reclaim goods
    Seller can reclaim goods within 10 days of delivery if seller discovers that the buyer was insolvent when the goods were received

    the 10 day limit does not apply if the buyer misrepresented his solvency or buyer paid with a dishonored check
  21. sellers remedies after breach
    Unfinished goods
    • if contract is breached, while goods are in the process of being made, seller can either:
    • cease production and resell for scrap or salvage
    • complete production and sell to another buyer
  22. Seller's remedies after breach
    right to recover the purchase price
    If the goods are either not in possession of the seller or unable to be sold to anyone other than the original buyer

    • This is called "action for the price"
    • Buyer accepted but failed to pay
    • seller cannot sell item to another buyer or otherwise dispose of them
    • goods are damaged or lost after ROL has passed to buyer
  23. Seller's remedies after breach
    Right to damages
    • compensatory
    • - to place Seller in position he would have been in if the buyer had not breched
    • - can include incidental damges - transaction costs in selling to another buyer, attorney fees
    • - seller has a duty to mitigate

    • Consequential
    • - additional losses foreseeable to buyer and caused by buyers breach
  24. Buyer's remedies
    Recover goods from insolvent seller
    If buyer has made partial or full payment prior to receving goods, and seller becomes insolvent within 10 days after receiving the first payment, then buyer can capture the goods as long as it pays any remaining amount due
  25. buyer's remedies
    Specific Performance
    Buyer can order seller to deliver unique goods if other remedies such as damages would be inadequate

    art, coins, antiques
  26. buyers remedies
    buyer may purchasr goods from another seller in a commercially reasonable manner, and recover any amount paid in excess of the contract price
  27. buyers remedies
    right of replevin
    buyer may institute legal action to recover goods that are wrongfully in the possession of another - used when goods are scarce and attempts at cover are unsuccessfull
  28. buyers remedies
    right to cancel
    seller's repudiation of the contract or failure to deliver goods gives buyer the right to cancel, ending buyers obligations
  29. Title obtained by theft
    is VOID

    • owner had not voluntarily transferred title
    • good faith purchaser obtains viod title
  30. Title obtained by fraud
    is Voidable

    • Owner voluntarilly transferred title
    • good faith purchaser obtains good title
  31. Entrustment Rule
    • Owner who entrusts goods to a merchant relies on merchant
    • Merchant can pass Good title to good faith purchaser even through merchant never had title
  32. Non- Carrier - simple delivery
    If seller is merchant - risk of loss passes to buyer upon delivery

    If seller is a non-merchant - the risk of loss passes when seller "tenders" goods to buyer, makes the goods available and notifies buyer
  33. Common Carrier
    • Carrier is primarily liable for loss or damage
    • over and above carrier's ability to pay
    • - Shipment contract (default) - seller agrees to deliver goods to carrier, buyer assumes ROL during transit
    • - Destination Contract - seller agrees to deliver goods to buyer - ROL remains with seller during transit
  34. Goods in Bailment (storage)
    • Negotiable document of title - "to the order of" when endorsed by buyer
    • Non-Negotiable document of title - when the bailee is notified
    • No document of title - when bailee is notified and acknowledges transfer of title
  35. Conditional Sale
    Sale on Approval - seller alloes buyer to take possession before buyer decides whether to complete the contract - ROL stays with seller untill acceptance

    Sale or Return - Seller and buyer agree that buyer may return goods at a later time - ROL shifts to buyer based on pervious rules
  36. ROL
    party in breach of contract
    Seller: Sent nonconforming goods - ROL remains with seller untill cured or accepted

    • Buyer: nonpayment, repudiation of contract, refusal to take delivery
    • - for desination contracts - ROL remains with seller to extent of seller's to insurance
    • - buyer liable for any deficit
    • - to encourage sellers to use shipment contracts
Card Set
Law 2