Chapter 16Chapter 16

Sale and Lease of GoodsSale and Lease of Goods

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Learning Objectives

1. Determine when to apply the law of sales under the UCC.

2. Describe the special rules for sales contracts.

3. Explain the four exceptions to the rule requiring that contracts for the sale of goods costing $500 or more must be in writing.

4. Judge, in a given situation, whether a writing satisfies the requirements of the UCC.

5. Contrast an auction with reserve with an auction without reserve.

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Question?

_________ are all things (other than money, stocks, and bonds) that are movable.

A. Needs

B. Wants

C. Goods

D. Mercantiles

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The Sale and Lease of Goods

• Goods – all things (other than money, stocks, and bonds)

that are movable.

• Future goods– Goods that are not yet in existence or under the

control of people

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Question?

What is a contract that transfers ownership of goods by the seller to the buyer for a price?

A. Purchase

B. Merchandise contract

C. Sale

D. Auction

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The Sale and Lease of Goods

• Sale – a contract that transfers ownership of goods by

the seller to the buyer for a price

• Contract for sale – includes both a present sale of goods and a

contract to sell goods at a future time

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Different Laws Apply to Different Transactions

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Contracts for Both Goods and Services

• When a contract includes both goods and services, the dominant element of the contract determines whether it is a contract for goods or a contract for services.

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Special Rules for Sales Contracts

• Good Faith • Course of Dealings and Usage of Trade • Formation of a Sales Contract • Offer and Acceptance • Firm Offer • Open-Price Terms • Output and Requirements Terms • Additional Terms in Acceptance • Modification

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Course of Dealings and Usage of Trade

• When the parties have dealt with each other before, their prior dealings give special meaning to sales contracts.

• Usage of trade

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Formation of a Sales Contract

• An enforceable sales contract may come about even if the exact moment of its making cannot be determined and even though some terms are not completely agreed upon

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Question?

_________ goods are those that are in accordance with the obligations under the contract.

A. Conventional

B. Matched

C. Non-conforming

D. Conforming

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Offer and Acceptance

• Conforming goods – those that are in accordance with the obligations

under the contract

• Nonconforming goods – those that are not the same as those called for

under the contract or that are in some way defective

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Question?

What is a person who deals in goods of the kind sold in the ordinary course of business?

A. Proprietor

B. Administrator

C. Owner

D. Merchant

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Firm Offer

• The UCC holds merchants to a higher standard than non-merchants.

• Merchant – a person who deals in goods of the kind sold in

the ordinary course of business or who otherwise claims to have knowledge or skills peculiar to those goods

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Question?

With a _______offer the writing must be signed by the merchant, and the time period for holding the offer open may not exceed three months.

A. Firm

B. Strong

C. Solid

D. Concrete

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Firm Offer

• Firm offer– writing must be signed by the merchant, and the

time period for holding the offer open may not exceed three months

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Open-Price Terms

• Open-price terms– occur when the parties intend to be bound by a

contract but fail to mention the price or decide to set the price later.

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Output and Requirements Terms

• Output contract

• Requirements contract

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Additional Terms in Acceptance

• A contract for the sale of goods occurs even though the acceptance states terms that are additional to or different from those offered or agreed upon (unless acceptance is made conditional on assent to the additional terms).

• The additional terms are treated as proposals for additions to the contract if the parties are not both merchants.

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Form of Sales Contracts

• As long as the price is under $500, an oral contract for the sale of goods is enforceable

• If the price is $500 or more, a sales contract must be in writing to be enforceable.

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Exceptions to the General Rule

1. Oral contracts between merchants

2. Specially manufactured goods

3. Admissions in court

4. Executed contracts

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Requirements of Writing

• The writing that is required to satisfy the UCC must indicate that a contract for sale has been made between the parties and mention the quantity of goods being sold.

• It must also be signed by the party against whom enforcement is sought (the defendant).

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Signature Requirements

• Under the UCC, a signature includes any symbol made with the intent to authenticate a writing.

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International Law

• United Nations Convention on Contracts for the International Sale of Goods (CISG) – applies only to sales bet0ween businesses whose

places of business are in different countries that have adopted the law.

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Question?

With an _________ the auctioneer may withdraw the goods at any time before announcing completion of the sale if the highest bid is not high enough.

A. Auction with reserve

B. Auction without reserve

C. Contract with reserve

D. Contract without reserve

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Auction Sales

• Auction with reserve– the auctioneer may withdraw the goods at any

time before announcing completion of the sale if the highest bid is not high enough

• Auction without reserve, – After the auctioneer calls for bids on an article or

lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time