Chapter 21 Outline

Chapter 21 Outline - Definitions o Goods movable tangible...

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CHAPTER 21 –INTRODUCTION TO SALES AND LEASES Nature of Sales and Lease Definitions o Goods  – movable, tangible personal property. IE: purchase of a bicycle, CD player, or a textbook is considered a sale of goods. Also include unborn young of animals, growing crops, and if removed by seller, timber, minerals, or a building attached to real property. o Sale  – Transfer of title to goods from seller to buyer for a price which can be money, other goods, real estate, or services. o Lease  – (Governed by Article 2A, unless it is a security interest, which is governed by Article 9) “transfer of the right to possession and use of goods for a term in return for consideration, but…retention or creation of a security interest is not a lease.” o Consumer Leases  –afforded special treatments under article 2A with the following requirements: 1. The transaction has to meet the definition of a lease under article 2A (discussed above). 2. The lessor must be regularly engaged in the business of leasing or selling goods. 3. The lessee must be an individual, not an organization. 4. The lessee must take the lease interest primarily for a personal, family, or household purpose. 5. The total payment under the lease must not exceed $25,000. o Finance Leases  – a special type of lease transaction generally involving three parties instead of two. In a typical lease, lessor also supplies the goods, in a finance lease the lessor and the supplier are separate parties. Lessor provides financing; supplier provides goods pursuant to the lessee’s instructions or specifications. The lessor either buys the finished goods from the supplier and leases to the lessee, or act as the prime lessee in leasing them from the supplier and then lease to the lessee. Since the role of the lessor is limited, the finance lease is treated differently from ordinary leases.
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o Governing Law Sales Transactions  – governed by article 2 of the code, but where general law has not been specifically modified by the code; general contract law continues to apply. Lease Transactions – governed by article 2A of the code, but where general law has not been specifically modified by the code; general contract law continues to apply. Transactions outside the code – fall outside sales and leases and include: employment contracts, service contracts, insurance contracts, contracts involving real property, and contracts for the sale of intangibles. Fundamental Principles of Article 2 and Article 2A  o Purpose  – to modernize, clarify, simplify, and make uniform the law of sales. o Good faith  – all sales and lease contracts must abide by honesty in fact in the conduct or transaction concerned; for merchants, this also requires observance of reasonable commercial standards. IE: If the parties agree that the seller is to set the price, then the seller must do so in good faith.
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