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CPA UCC2 - U.C.C 2 CONTRACT FOR GOODS I GENERAL COMMENTS...

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U.C.C. 2 CONTRACT FOR GOODS I. GENERAL COMMENTS UCC 2 is written to be read in conjunction with the common law (CL) rules of K. Article 2 carves some exceptions out of the CL rules & adds some new rules of its own, especially in the areas of title/risk of loss and product liability. Article 2 applies ONLY to Ks for GOODS . For non-goods Ks: (1) real property; (2) services; (3) intangibles (patents, copyrights, goodwill, stocks, bonds, etc.) the CL rules continue to apply. Furthermore, even in Ks for goods, if the K doesn’t fit the article 2 rules it is tossed back into the CL rules. Important to recall that article 2 in most instances relaxes the CL rules. II. DEFINITIONS 1. GOOD: a tangible, movable. Excludes real property, services, intangibles. 2. MERCHANT: A person who regularly deals with the type of goods being contracted for. Although UCC 2 applies to sales of goods between consumers as well as merchants, merchants are frequently subject to special rules. 3. SALE: transfer of title from Seller (S) to Buyer (B). III. DISTINCTIONS (Itemized on separate chart) IV. TITLE & RISK OF LOSS Although TITLE and RISK OF LOSS are independent of one another, the rules regarding transfer of each/both are similar. Distinctions are noted. A. SHIPPING TERMS 1. Generally determines when BOTH title & R of L pass. 2. FOB (free on board) shipping point (S’s location) results in T and R of L passing from S to B when S places goods in shipment/transit (Seller’s loading dock). 3. FOB destination point (B’s location) results in T and R of L passing from S to B when goods arrive at named destination . 4. C.I.F. (Cost, Insurance, & Freight) requires B to pay S the cost of the goods + the cost of insuring the goods + the cost of shipping the goods, ALL prior to shipment. (note: credit sales are precluded). S is req’d to insure goods AND place in transit . If S complies, T and R of L will pass when goods are placed in shipment . (Look for scenario where S fails to insure or underinsures). ** Always beware of scenarios w/non-conforming goods. 5. C.O.D. (Care on delivery) requires B to pay for goods upon delivery , which is when T and R of L will pass. NOTE: B does not lose right to inspect merely because payment must take place before inspection can occur.
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