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BB30 Business Law 6.01Summer 2013
ES 6 UNDERSTAND SALES, CONSUMER, PROPERTY, AND CYBER LAWS
BB30 Business Law 6.01Summer 2013
6.01 Understand sales law
BB30 Business Law 6.01Summer 2013
SALES LAW & EXCHANGE OF OWNERSHIP
Sales Activity
• List 5 items you bought in the last week.• List 2 “large” purchases your family has made
in the last 2 years.
BB30 Business Law 6.01Summer 2013
SALES LAW & EXCHANGE OF OWNERSHIP
Using the list of the items in the Sales Activity:• Did ALL of those constitute a sale?– What is the definition of a sale?
• What did you do with the product? – What is the definition of ownership?
• Were they goods or services?• Did money exchange hands for these items? – If you didn’t have the money to buy the item, how
could you change ownership?
BB30 Business Law 6.01Summer 2013
SALES LAW & EXCHANGE OF OWNERSHIPE-commerce laws
• E-commerce – conducting business using electronic means, especially the Internet
• Jurisdictional issues – which state has jurisdiction in cases involving sellers & buyers in different states?– The ability to access a website in a particular state does not, by itself, give that state
jurisdiction– States may gain jurisdiction over e-commerce transactions if the website allows
users to purchase merchandise• Example: Amazon.com - jurisdiction lies with the state in which the buyer resides
• Tax issues – jurisdiction helps to determine which state may tax Internet sites, and how buyer may be taxed
• Authentication – helps to make certain that buyers and sellers are who they say they are
• Digital signature – encoded message that appears at the end of a contract created online
BB30 Business Law 6.01Summer 2013
UNIFORM COMMERCIAL CODE
• Group Activity:– Create a one page summary of the UCC.• Include:
– General Information (First published, definition, goal/purpose)– Specific Information (leasing goods, contracts for
goods/services, special rules)– Why is it important?
BB30 Business Law 6.01Summer 2013
TRANSFER OF OWNERSHIP
• Payment vs. Delivery vs. Receipt of Goods– What is the proof?
• Vendor vs. Vendee vs. Merchant vs. Casual Seller
• Unconscionable Contract vs. Statute of Frauds
BB30 Business Law 6.01Summer 2013
TRANSFER OF OWNERSHIP
Authorized Person vs.
Buyers in a Sale Induced by Fraud vs.
Holders of Negotiable Instruments vs.
Merchants with Possession of Sold Goods
BB30 Business Law 6.01Summer 2013
TRANSFER OF OWNERSHIP
Existing Goods vs.
Identified Goods vs.
Future Goods
BB30 Business Law 6.01Summer 2013
When does ownership transfer?Situation Definition Who owns item?
Tender of delivery Seller notifies buyer of item being available.
Buyer once notified.
Seller ships goods Seller is required to ship item but not deliver to buyer.
Buyer once the carrier is in possession of item.
Seller sends document of title
Seller provides the document of title to the buyer and the buyer can receive the goods at anytime.
Buyer once document of title is possessed.
Seller tenders items at place of sale
Buyer is offered item at the place of the sale.
Buyer once item is tendered.
BB30 Business Law 6.01Summer 2013
RISK OF LOSS
Situation Who is at risk?
FOB Shipping Point Buyer is at risk once the item is shipped.
FOB Destination Seller is at risk until the product is delivered to the buyer
You purchase a used car on autotrader.com from a dealer in Atlanta. While the caris being driven to North Carolina it slides off the road and is damaged. What is typedelivery terms will protect you in this transaction?
When does risk of loss transfer?
BB30 Business Law 6.01Summer 2013
Types of Sales/Transfer of Rights?Situation Definition Who is at risk?
Cash and Carry Sales Pay cash and take immediate delivery
Buyer assumes risk at receipt.
Sales on Credit Payment at a later date Buyer assumes risk at receipt.
COD Sales Collect on delivery Buyer assumes risk at receipt (when paid in full).
Sale or Return Buyer has the option to return the goods
Buyer assumes risk at receipt.
Sale on Approval Buyer has goods on a trial basis
Buyer assumes risk at time of approval.
Sale of an Undivided Interest Buyer owns a portion of the item
Each owner has a partial risk.
Auction Buyer bids on item. Ownership transfers when the gavel falls (unless reserve is not met).
Bulk Transfer All or a major part of a business is sold.
Buyer must notify creditors of ownership transfer.
RISK OF LOSS
BB30 Business Law 6.01Summer 2013
WARRANTIES
• Express• Implied• Warranty of Title• Exclusions
BB30 Business Law 6.01Summer 2013
Express Warranty
Express warranty is also called a guarantee • The promise or assurance of the quality or life
of a product– “Guaranteed satisfaction or your money back”– “Lifetime guarantee”
BB30 Business Law 6.01Summer 2013
Express Warranty
• Can be oral or written• Written form recommended• Parol evidence rule applies: evidence of oral
statements made before signing a written contract cannot be presented in court to change or add to the terms of that written agreement
• Magnuson-Moss Act – requires that written warranties be labeled as full or limited
BB30 Business Law 6.01Summer 2013
Express Warranty
• Puffery by salesman is not a warranty, but an opinion of the salesperson.
• Express warranties are created by:– Statement of fact or promise by seller– Description of goods– Use of same item or model
BB30 Business Law 6.01Summer 2013
Implied Warranty
A guarantee of quality imposed by law but not in writing • Implied warranty deals with sale of goods• Regulated by UCC• Given by all sellers
BB30 Business Law 6.01Summer 2013
Implied Warranties
• Warranty of fitness for a particular purpose
– Seller knows the purpose for which goods are needed– Seller advises buyer in making purchase– Buyer relies on seller’s advice to make decision– Seller infers that the goods are fit for a particular purpose– A warranty exists
BB30 Business Law 6.01Summer 2013
Implied Warranties
• Warranty of Merchantability– Given by a merchant only– Merchant infers that goods pass in the trade
without objection– Goods are fit for the ordinary purpose such goods
are used for– Conform to any promises or statements made on
the container or label
BB30 Business Law 6.01Summer 2013
Implied Warranties
Usage of TradeAn implied warranty that is a well established custom or practice among people in specific trades or businesses• Example: When a person sells a thoroughbred horse
there is an implied warranty that papers are provided to prove the animal’s pedigree as a thoroughbred. It is expected in the horse trading business
BB30 Business Law 6.01Summer 2013
Warranty of TitleSeller warrants that the title is good and transfer is rightful
Seller warrants that goods will be delivered free of any financial obligations about which the buyer had no knowledge
BB30 Business Law 6.01Summer 2013
Warranty of Title
• Sale of Stolen Goods– If stolen goods are sold to an innocent purchaser,
the true owner is entitled to return of the goods
– The buyer can pursue remedy against the seller for breach of warranty of title
BB30 Business Law 6.01Summer 2013
Full Warranty
A full warranty requires that the defective product be repaired or replaced for free within a reasonable length of time after complaint is made. • If the product cannot be fixed, the consumer has the
option to get their money refunded.• Have you ever tried to return merchandise that you
thought was under warranty but was not?
BB30 Business Law 6.01Summer 2013
Limited Warranty
A limited warranty provides a restricted guarantee. • Must state “Limited” Warranty• Be sure to read and understand the limits of
the warranty before purchasing…caveat emptor!
BB30 Business Law 6.01Summer 2013
Limited Warranty
Caveat Emptor - Latin for “Buyer Beware”– It is the duty of the consumer to make informed
decisions. – Be sure to read labels and research products
before buying. Comparison shop.– It is the duty of the seller to provide appropriate
information for the consumer.
BB30 Business Law 6.01Summer 2013
Limited Warranty
Caveat Venditor - Latin for “Seller Beware”– It is the duty of the seller to make informed
decisions. – Example: Banks, credit card companies and
businesses who extend credit to customers check credit histories and applications before extending credit.
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