LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 15 Slide 1 Sales Contracts 15-1 15-1Sales 15-2 15-2Ownership 15-3 15-3Special Rules

LAW FOR BUSINESS AND PERSONAL USE LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING© SOUTH-WESTERN PUBLISHING

Chapter 15Chapter 15 Slide Slide 11

Sales Contracts

15-115-1 Sales

15-215-2 Ownership

15-315-3 Special Rules for Sales Contracts

CHAPTER 15

Lessons



Sales

Define sale and explain how the UCC governs the sale of goods

Identify unconscionable contracts and contracts of adhesion

Distinguish between payment, delivery, and transfer of title of goods

LESSON 15-1

GOALS



DEBATE

Amanda & Bob – started redecorating a home purchased in New Orleans

Contracted with several artisansAnton, owner of a custom cabinet shop was

hired to develop a pattern for the cabinets in the period of the house

Anton began making the cabinets to fit the unique dimensions and style of the home.



As the work was nearing completion, Amanda and Bob decided to divorce.

They notified Anton to stop work and told him he would not be paid as he had not completed the job.

Anton sued

Should Anton be able to recover?Why or why not?



Yes, the UCC allows recovery for unique goods in situations such as these

What would happen if the law did not allow Anton to recover?



WHAT IS A SALE?A sale is a contract in which ownership of (title to)

goods transfers immediately from the seller to the buyer for a price.

Ownership entails a collection of rights that allow the use an enjoyment of property.

If the transfer of ownership is to take place in the future, the transaction is a contract to sell rather than a sale.



Price is the consideration for a sale or contract to sell goods.

When parties exchange goods for goods, the sale is a barter.



SALES OF GOODSUNDER THE UCC

The Uniform Commercial Code (UCC) governs sales of goods and contracts to sell goods in the future.

Goods are tangible movable personal property such as airplanes, books, clothing, and dogs.



Under UCC

Goods do not include the following:

1) Money (except rare currency or rare coins which are collectible items with value that may exceed their face amounts.)

2) Intangible (not touchable) personal property such as legal rights to performance under a contract transferred by assignment rather than sale.



Under UCC

3) Patents and Copyrights – exclusive rights given by the federal government to inventors or writers.

4) Land and other forms of real property, which are transferred by conveyance and are subject to special rules



Contracts for Property



CONTRACTS FOR PERSONAL SERVICES

In many situations, the contract is primarily for personal services.

Such contracts are not sales because any goods supplied are merely incidental.



You sign a contract to buy a dishwasher – to be delivered in two weeks

Is this a sale?

No – a contract in which ownership of the dishwasher will transfer in a sale in the future



You take your car to the dealer for an oil change and they recommend new tires – you agree.

Is this a sale?

No – a contract for services

Any goods supplied such as oil, filter were incidental

Tires -- Transfer of the title to the new tires is a sale of goods

Services contracts do not fall under the UCC rules and requirements.



Sales of Goods & Contracts to Sell

Vendor – seller

Vendee – purchaser

Payment occurs when the buyer transfers the agreed-upon consideration and the seller accepts it.




Delivery is the act by which the subject matter of the contract is placed within the possession or control of the buyer

Receipt of goods means that the buyer takes physical possession or control of the goods usually involves actual delivery




Delivery may be constructive:No actual transfer of possession of the

goods, but recipient has the power to control themi.e. buyer gets the keys to a carreceives a warehouse receipt for stored goods



MUST DELIVERY AND PAYMENT BE MADE AT THE SAME TIME?

In the basic sales transaction, payment, delivery, and transfer of title take place simultaneously at the seller’s place of business.

If payment, delivery, etc. take place later, title still passes when the buyer selects and agrees to buy existing goods in the seller’s store.



Bill of Sale

A bill of sale is a receipt that serves as written evidence of the transfer of ownership of goods.

Sometimes required

by Statute Auto salesProvides evidence

of ownership



Signed Writing

Statute of Frauds - signed writing is required for items over $500 in most states



OTHER METHODS OF SALES CONTRACTING UNDER THE UCC

Sales contracts may be made through a traditional exchange of offer and acceptance.

UCC also recognizes alternative methods.Proposal for additionPurchase order formSales order form



UNCONSCIONABLE SALES CONTRACTS

The UCC provides that a court may find that a contract or a clause of a contract is unconscionable, that is, grossly unfair and oppressive.



Ivan, an immigrant, bought a refrigerator from a rent-to-own store

Advertised “no established credit necessary”Ivan spoke Russian, very little EnglishNegotiations tooks place in RussianContract written in EnglishStore paid manufacturer $348 for the

appliance



Under the agreement, the total cost for three years amounted to $2,567.

When Ivan defaulted after one year, the store sued for the $1,805 left to be paid.

This is a contract of adhesion one party dictates all the important terms



Ivan has paid double the cost to the store already. Courts would probably order the store to turn over the title to Ivan without further payments due.



A court that decides that a contract or any clause of a contract is unconscionable may do any of the following:

(1) refuse to enforce the contract;

(2) enforce the contract without the unconscionable clause; or

(3) limit the clause’s application so that the contract is no longer unfair.



Ownership

Discuss the benefits and burdens of ownership of property

Compare the various methods of acquiring property

Explain the unique role of merchants and why and how they are treated specially by the law

LESSON 15-2

GOALS



Sale v. Contract to Sell

Benefits and Burdens of Ownership

When goods are sold, the Seller transfers ownership—

(legal right to use, control and dispose of goods)



BENEFITS OF OWNERSHIP

Any rise in value belongs to the owner- land value increases, securities increase, etc.

Goods may be enjoyed or used as the owner pleases

Goods may be squandered or destroyed



What’s your verdict?

Leister won $2 M in a state lotteryReceived first 20 payments, he went on a

spending spree bought and wrecked car bought clothes and never wore bought a casual friend a mink coat hosted an extravagant New Years Eve party for 50

new friends – trashed everything




Leister’s family filed an action in court to try to stop him from using the money and goods so wastefully.

Will they succeed?

No – only if they can prove incompetence (which is difficult)



BURDENS OF OWNERSHIP

Owners may be taxed (i.e. property tax)

Freedom to use one’s property may be limited by government regulation (i.e. speeding, zoning)

Owner suffers loss when goods deteriorate because of the passage of time (i.e. maintenance required)

If property is not properly maintained, injured parties can hold owner liable under Tort Law

Owner suffers loss when goods are lost, stolen, destroyed or damaged unless covered by insurance



Sometimes the responsibility of the owner is extended by letting others use the owner’s property with permission

i.e. Owner of an auto may be held responsible for injuries caused by another person operating the car with the owner’s permission



Ownership

Unless you insure goods, they can be:Lost

Stolen

Destroyed by fire

Obsolescence (out of date & little or no value)

Depreciation (wear & tear)



The four situations in which the Statute of Frauds would not apply are:

(1) When goods are received and accepted by the buyer;

(2) When the buyer pays for the goods and the seller accepts the payment;

(3) When the goods are specially made and not suitable for resale to others, and; (4) When the party against whom enforcement is sought admits to the contract.



UCC

Treats all sellers/buyers the sameCasual sellers – those who do not

qualify as merchants (i.e. selling your private vehicle)

Merchants are not treated the same as casual sellers



UCC

Merchant – seller who deals regularly in a particular kind of goods or otherwise claims to have special knowledge or skill in a certain type of sales transaction

may be required to be licensed subject to special taxation subject to government regulation




Adonis would buy property at auctions during the week

Resell the property on weekends at his garage sale

33 consecutive garages salesCity claimed he was a merchant and

had to pay sales taxWhat do you think?



Yes – must pay sales tax



TRANSFERS OF OWNERSHIP AND POSSESSION

Gift – transfer of ownership without consideration

Conveyance – transfer of an estate from a grantor to a grantee by a deed

Lease – one party receives temporary possession of another’s real property

Sale – ownership of goods transfers from seller to buyer for a price

Contract to sell – transaction in which transfer of ownership is to take place in the future



Barter – exchange of goods for goods

Negotiation – proper transfer of a negotiable instrument so that the person receiving the instrument has the power to collect on it by overcoming defenses of the person who must pay it off

Assignment – transaction by which a party transfers contractual rights to another

Bailment - transfer of possession of personal property without transfer of ownership



Special Rulesfor Sales Contracts

Explain the need for the statute of fraudsDiscuss the instances in which the statute of

frauds will be applied

LESSON 15-3

GOALS



STATUTE OF FRAUDS

Sales contracts are generally valid and enforceable in court whether they are oral, written, or implied from the conduct of the parties.

Under the statute of frauds, sales of goods for $500 or more must be evidenced by a writing to be enforceable in court.



WHEN IS A SIGNED WRITING NOT REQUIRED UNDER THE STATUTE?

Goods received and accepted by the buyer

Buyer pays for goods and seller accepts payment

Goods specially made not suitable for sales to others

Party against whom enforcement sought admits oral contract made

Documents

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 15 Slide 1 Sales Contracts 15-1 15-1Sales 15-2 15-2Ownership 15-3 15-3Special Rules