BLRB19 - Business Law and the Regulation of Business...

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Unformatted text preview: Business Law and the Regulation of Business Regulation Chapter 19: Introduction to Sales and Leases Chapter By Richard A. Mann & Barry S. Roberts Topics Covered in this Chapter Topics I. Nature of Sales and Leases A. Definitions B. Fundamental Principles of Article 2 B. and 2A II. Formation of a Sales and Lease Formation Contracts Contracts A. B. C. Manifestation of Mutual Assent Consideration Form of the Contract Nature of Sales and Leases Nature s s s Goods – movable personal property movable Sale – transfer of title to goods from seller to buyer for a price buyer Lease – a transfer of right to possession and use of goods in return for consideration use – Consumer Leases – leases by a merchant to an individual who leases for personal, family, or household purposes for no more than $25,000 household – Finance Leases – special type of lease transaction generally involving three parties: the lessor, the supplier, and the lessee lessor, Transactions in Goods Transactions Transfer of Title Sale Gift Bailment Lease Security Interest Yes Yes No No No Transfer of Possession Usually, but not necessarily Yes Yes Yes No Governing law Article 2 Common Law Common Law and Article 7 Common Law or Article 2A Article 9 Governing Law Governing s s s Sales Transactions – governed by Article 2 of the Code, but where general contract law has not been specifically modified by the Code, general contract law continues to apply. law Lease Transactions – governed by Article 2A of the Code, but where general contract law has not been specifically modified by the Code, general contract law continues to apply. contract Transactions outside the Code – service contracts, employment contracts, insurance mployment contracts, contracts involving real property, and contracts for the sale of intangibles. contracts Law of Sales Law LAW OF PROPERTY LAW OF CONTRACTS Real Property LAW OF SALES Personal Property Fundamental Principles of Article 2 and Article 2A Article Purpose – to modernize, clarify, simplify, and make uniform the law of sales and leases. sales s Good Faith – the Code requires all sales and lease contracts to be performed in good faith, which means honesty in fact in the conduct or transaction concerned; in the case of a merchant, it also includes the observance of reasonable commercial standards. standards. s Unconscionability Unconscionability s Unconscionability – a court may refuse to enforce an unconscionable contract or any part of a contract found to be unconscionable. to – Procedural Unconscionability – Procedural unfairness of the bargaining process. unfairness – Substantive Unconscionability – Substantive oppressive or grossly unfair contractual provisions. provisions. Expansion of Commercial Practices Expansion Course of Dealing – a sequence of previous conduct between the parties establishing a common basis for interpreting their agreement. interpreting s Usage of Trade – a practice or method of dealing regularly observed and followed in a place, vocation, or trade. followed s Sales by and between Merchants Sales s The Code establishes separate rules The that apply to transactions between merchants or involving a merchant (a dealer in goods or a person who by his occupation holds himself out as having knowledge or skill peculiar to the goods or practice involved, or who employs an agent or broker whom he holds out as having such knowledge or skill). having Selected UCC Rules Applicable to Merchants Applicable Section of UCC 2-103(1)(b) 2-201 2-205 2-207(2) 2-312(3) 2-314(1) 2-327(1)(c) 2-402(2) 2-403(2) 2-509(3) 2-603(1) Merchant Rule Good faith Confirmation of oral contracts Firm offers Battle of the forms Warranty of title Warranty of merchantability Sales on approval Retention of possession of goods by seller Entrusting of Goods Risk of loss Duties after rightful rejection Chapter in Text Where Discussed 12 9, 12 7, 12 7, 12 14 14 13 13 13 13 13 Battle of the Forms Battle Is acceptance identical to offer? Yes Contact formed based on offeror’s terms No Is acceptance expressly conditional upon assent to additional or different terms? Yes No contract formed Contract formed No Does acceptance include different terms? Yes Then, No No Does acceptance include additional terms? (1) different terms cancel each other out, or (2) offeror’s terms control, or (3) additional term test applied Contract formed based on offeror’s terms without additional terms Yes Battle of the Forms (cont.) Battle Are both parties merchants? No Contract formed based on offeror’s terms without additional terms Yes Does offer limit acceptance to its terms? Yes No Has offeror assented to the additional terms? No Do additional terms materially Yes alter the offer? No Has the offeror objected to the Yes additional terms? Yes Contract formed with additional terms No Liberal Administration of Remedies Liberal Freedom of Contract – most provisions of the Code may be varied by agreement. by s Validation and Preservation of Sales Validation Contract – the Code reduces formal Contract requisites to the bare minimum and attempts to preserve agreements whenever the parties manifest an intention to enter into a contract. intention s Formation Formation s Manifestation of Mutual Assent Manifestation Definiteness of an Offer – the Code Definiteness provides that a sales or lease contract does not fail for indefiniteness even though one or more terms may have been omitted; the Code provides standards by which missing essential terms may be supplied for sales of goods. goods. Irrevocable Offers Irrevocable s s s s Option – a contract to hold open an offer. contract Firm Offer – a signed writing by a merchant to hold open an offer for the purchase or sale of goods for a maximum of three months. of Variant Acceptances – the inclusion of different or additional terms in an acceptance is addressed by focusing on the intent of the parties. parties. Manner of Acceptance – an acceptance can be made in any reasonable manner and is effective upon dispatch. is Consideration Contractual Modifications – the Code provides that a contract for the sale or lease of goods may be modified without new consideration if the modification is made in good faith. made s Firm Offers – are not revocable for lack of consideration. of s Form of the Contract s Statute of Frauds – sale of goods costing $500 or more (or lease of goods for $1,000 or more) must be evidenced by a signed writing to be enforceable. writing – Written Compliance – the Code requires writing to indicate that a contract has been made between the parties, signed by the party against whom enforcement is sought or by her authorized agent, including a term specifying the quantity of goods. quantity – Alternative Methods of Compliance – written confirmation between merchants, admission, specially manufactured goods, and delivery or payment and acceptance. payment Parol Evidence Parol s Contractual terms that are set forth in a Contractual writing intended by the parties as a final expression of their agreement may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement, but such terms may be explained or supplemented by course of dealing, usage of trade, course of performance, or consistent additional evidence. evidence. Contract Law Compared with Law of Sales Law Contract Definiteness Contract must include all material terms. Acceptance must be a mirror image of offer. Counteroffer and conditional acceptance are rejections. Consideration is required. Options. Law of Sales Open terms permitted if parties intend to make a contract Battle of Forms. Counteroffers Modification of Contract Irrevocable Offers Consideration is not required. Options. Firm offers up to three months’ duration binding without consideration. Writing must include quantity term. Specially manufactured goods. Confirmation by merchants. Delivery or payment and acceptance. Admissions. Statute of Frauds Writing must include all material terms. ...
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This note was uploaded on 10/25/2009 for the course LAW 100 taught by Professor Liu during the Spring '09 term at Zhejiang University.

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