1. ES 6 UNDERSTAND SALES, CONSUMER, PROPERTY, AND CYBER LAWS BB30 Business Law 6.01Summer 2013

2. 6.01 Understand sales law and consumer law BB30 Business Law 6.01Summer 2013

3. SALES LAW & EXCHANGE OF OWNERSHIP Sale is a contract in which ownership transfers. Ownership is the right to hold the title, possess, use, enjoy, profit from, waste, and even destroy. Goods are tangible, moveable items of personal property. Goods are NOT money, intangible items (stocks, bonds, etc), patents, copyrights, and trademarks and real property Price is the consideration for a sale Barter is a exchange of goods. BB30 Business Law 6.01Summer 2013

4. SALES LAW & EXCHANGE OF OWNERSHIP E-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

5. UNIFORM COMMERCIAL CODE (UCC) Published 1952 Definition: Body of laws governing commercial transactions in the United States. Goal/Purpose: Form unity among all 50 states from businesses that complete transactions over state line. BB30 Business Law 6.01Summer 2013

6. TRANSFER OF OWNERSHIP Payment – buyer pays for the item Delivery – buyer possess or has control of item Receipt of Goods – buyer takes physical possession. What is the proof? Bill of Sale Vendor = Seller (Types: Merchant regularly deals with item OR casual seller who does not) Vendee = Buyer BB30 Business Law 6.01Summer 2013

7. 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

8. Authorized person – A third party may sell someone else’s product with their permission. Realtor sells a home on behalf of the owner. Consignment shops are examples. Buyers in a Sale Induced by Fraud – If a person sells an item due to fraud they can void the transaction and receive the item back. However, if the other party has already sold the item to a good faith purchaser then the third party now has a good title. However, if the third party bought stolen goods (not sale induced by fraud), then they must return the item. BB30 Business Law 6.01Summer 2013

9. Holders of Negotiable Instruments – Ownership may transfer while the items are in transit or storage. Merchants with Possession of Stolen Goods – After purchasing an item, you may asked the merchant to hold it until you can pick it up. For example, you purchase a couch but do not return until the next day with a friend’s truck to pick it up. BB30 Business Law 6.01Summer 2013

10. TRANSFER OF OWNERSHIP Existing Goods vs. Identified Goods vs. Future Goods BB30 Business Law 6.01Summer 2013

11. Existing Goods – physically exist and owned by the seller. Identified Goods – designated for a sale Future Goods – this is a contract and not a sale because under UCC you cannot own future goods. BB30 Business Law 6.01Summer 2013

12. When does ownership transfer? SituationDefinitionWho owns item? Tender of deliverySeller notifies buyer of item being available. Buyer once notified. Seller ships goodsSeller 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

13. RISK OF LOSS SituationWho is at risk? FOB Shipping PointBuyer is at risk once the item is shipped. FOB DestinationSeller 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 car is being driven to North Carolina it slides off the road and is damaged. What type of delivery terms will protect you in this transaction? FOB-Free on Board Destination When does risk of loss transfer? BB30 Business Law 6.01Summer 2013

14. Types of Sales/Transfer of Rights? SituationDefinitionWho is at risk? Cash and Carry SalesPay cash and take immediate delivery Buyer assumes risk at receipt. Sales on CreditPayment at a later dateBuyer assumes risk at receipt. COD SalesCollect on deliveryBuyer assumes risk at receipt (when paid in full). Sale or ReturnBuyer has the option to return the goods Buyer assumes risk at receipt. Sale on ApprovalBuyer has goods on a trial basis Buyer assumes risk at time of approval. Sale of an Undivided InterestBuyer owns a portion of the item Each owner has a partial risk. AuctionBuyer bids on item.Ownership transfers when the gavel falls (unless reserve is not met). Bulk TransferAll 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

15. WARRANTIES Express Implied Warranty of Title Exclusions BB30 Business Law 6.01Summer 2013

16. 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

17. Express Warranty Can be oral or written Written form recommended Parole 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

18. 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

19. 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

20. 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

21. 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

22. Implied Warranties Usage of Trade An 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

23. Warranty of Title Seller 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

24. 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

25. 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

26. 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

27. 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

28. 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. BB30 Business Law 6.01Summer 2013