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Chapter 21 - Chapter 21 Chapter Introduction to Sales and...

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Unformatted text preview: Chapter 21: Chapter Introduction to Sales and Leases Introduction BUL 3350 - Chapter 21 1 Topics Covered in this Chapter I. Nature of Sales and Leases A. Definitions B. Fundamental Principles of Article 2 B. (Sale of goods) and 2A (Lease of goods) II. Formation of a Sales and Lease Formation Contracts Contracts A. Manifestation of Mutual Assent B. Consideration C. Form of the Contract BUL 3350 - Chapter 21 2 Nature of Sales and Leases Goods – movable personal property movable Sale – transfer of title to goods from seller to Sale buyer for a price buyer Lease – a transfer of right to possession and Lease use of goods in return for consideration use • Consumer Leases – leases by a merchant to an Consumer 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 supplier, BUL 3350 - Chapter 21 3 Governing Law Sales Transactions – governed by Article 2 of Sales the Code, but where general contract law has not been specifically modified by the Code, general contract law continues to apply. contract Lease Transactions – governed by Article 2A Lease of the Code, but where general contract law has not been specifically modified by the Code, general contract law continues to apply. general Transactions outside the Code – service Transactions contracts, employment contracts, insurance mployment contracts, contracts involving real property, and contracts for the sale of intangibles. contracts BUL 3350 - Chapter 21 4 Law of Sales LAW OF PROPERTY LAW OF CONTRACTS Real Property LAW OF SALES Personal Property BUL 3350 - Chapter 21 5 Fundamental Principles of Fundamental Article 2 and Article 2A Article Purpose – to modernize, clarify, simplify, and make uniform the law of sales and leases. leases. Good Faith – the Code requires all sales Good 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. commercial BUL 3350 - Chapter 21 6 Unconscionability Unconscionability – a court may refuse Unconscionability to enforce an unconscionable contract or any part of a contract found to be unconscionable. unconscionable. • Procedural Unconscionability – unfairness Procedural of the bargaining process. of • Substantive Unconscionability – Substantive oppressive or grossly unfair contractual provisions. provisions. BUL 3350 - Chapter 21 7 Expansion of Commercial Practices Course of Dealing – a sequence of Course previous conduct between the parties establishing a common basis for interpreting their agreement. interpreting Usage of Trade – a practice or method Usage of dealing regularly observed and followed in a place, vocation, or trade. followed BUL 3350 - Chapter 21 8 Sales by and between Merchants The Code establishes separate rules that The 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). such BUL 3350 - Chapter 21 9 Liberal Administration of Remedies Freedom of Contract – most provisions Freedom of the Code may be varied by agreement. agreement. Validation and Preservation of Sales Validation Contract – the Code reduces formal requisites to the bare minimum and attempts to preserve agreements whenever the parties manifest an intention to enter into a contract. intention BUL 3350 - Chapter 21 10 Formation 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. BUL 3350 - Chapter 21 11 Irrevocable Offers Option – a contract to hold open an offer. Option contract Firm Offer – a signed writing by a merchant to Firm hold open an offer for the purchase or sale of goods for a maximum of three months. goods Variant Acceptances – the inclusion of Variant different or additional terms in an acceptance is addressed by focusing on the intent of the parties. parties. Manner of Acceptance – an acceptance can Manner be made in any reasonable manner and is effective upon dispatch. effective BUL 3350 - Chapter 21 12 Battle of the Forms 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 Continues-on next21 BUL 3350 Chapter slide… 13 Battle of the Forms (cont.) 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 alter the offer? Yes No Has the offeror objected to the Yes additional terms? Yes Contract formed with additional terms 14 No BUL 3350 - Chapter 21 Consideration 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 Firm Offers – are not revocable for lack Firm of consideration. of BUL 3350 - Chapter 21 15 Form of the Contract Form 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. to • Written Compliance – the Code requires writing to Written 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. including • Alternative Methods of Compliance – written Alternative confirmation between merchants, admission, specially manufactured goods, and delivery or payment and acceptance. payment BUL 3350 - Chapter 21 16 Parol Evidence 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. BUL 3350 - Chapter 21 17 Contract Law Compared with Law of Sales 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. 18 Statute of Frauds Writing must include all material terms. BUL 3350 - Chapter 21 ...
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