2 Learning ObjectivesDetermine when to apply the law of sales under the UCC.Describe the special rules for sales contracts.Explain the four exceptions to the rule requiring that contracts for the sale of goods costing $500 or more must be in writing.Judge, in a given situation, whether a writing satisfies the requirements of the UCC.Contrast an auction with reserve with an auction without reserve.
3 Question?_________ are all things (other than money, stocks, and bonds) that are movable.NeedsWantsGoodsMercantilesThe correct answer is “C” – goods. See next slide.
4 The Sale and Lease of Goods all things (other than money, stocks, and bonds) that are movable.Future goodsGoods that are not yet in existence or under the control of peopleTeaching Tip Ask students to name some goods they see around the classroom.Stress that a contract for any of these items would be governed by the UCC. Be alert for itemsthat might be classified as fixtures rather than goods and explain the differenceto the class. Fixtures are discussed in Chapter 23.
5 Question?What is a contract that transfers ownership of goods by the seller to the buyer for a price?PurchaseMerchandise contractSaleAuctionThe correct answer is “C” – sale. See next slide.
6 The Sale and Lease of Goods a contract that transfers ownership of goods by the seller to the buyer for a priceContract for saleincludes both a present sale of goods and a contract to sell goods at a future timeTeaching Tip Because many students own their own cars, point out that a car is a good and that acontract for the purchase or sale of a car would be governed by the UCC, whether the seller is a merchantor a private party.
8 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.Getting Students InvolvedLet students discover the intricacies of leasing firsthand by contacting a local automobile dealer and comparing the legalitiesand costs of leasing with buying. Students should find out who holds title to the car, who is liable for bothunavoidable damages and those caused by the lessee, and who holds the warranty on the car. They should factorin taxes, additional dealer costs, and maintenance estimates.This activity will be more interesting if you assign specific autos in a wide price range so that there willbe a variety of results to share in class.
9 Special Rules for Sales Contracts Good FaithCourse of Dealings and Usage of TradeFormation of a Sales ContractOffer and AcceptanceFirm OfferOpen-Price TermsOutput and Requirements TermsAdditional Terms in AcceptanceModificationThe fundamental rules of contract law, discussed in the previous nine chapters, serve as abase in the UCC, but the UCC is often more flexible. Some special rules for sales contractsfollow.Good FaithUnder the UCC, every contract or duty imposes an obligation of good faith. In other words,the parties to a sales contract must act and deal fairly with each other.
10 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 tradeWhen the parties have dealt with each other before, their prior dealings give specialmeaning to sales contracts. Similarly, usage of trade, that is, any method of dealingthat is commonly used in the particular field, is given special meaning. Unless theparties express otherwise, a course of dealings or usage of trade may be used to supplementor qualify the terms of a sales contract.
11 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 uponTeaching Tips Ask students to bring to class copies of sales contracts either they or their family orfriends have. Reproduce the small print on some of the contracts and distribute these to the students.Discuss clauses that should be crossed out by the buyer before signing the contract.
12 Question?_________ goods are those that are in accordance with the obligations under the contract.ConventionalMatchedNon-conformingConformingThe correct answer is “D” –Conforming . See next slide.
13 Offer and Acceptance Conforming goods Nonconforming goods those that are in accordance with the obligations under the contractNonconforming goodsthose that are not the same as those called for under the contract or that are in some way defectiveTo establish a contract for the sale of goods, unless otherwise indicated by the offeror orthe circumstances, the offeree may accept the offer in any manner and by any medium thatis reasonable. A contract for the sale of goods comes into existence when the acceptance issent, as long as the method used to send it is reasonable.
14 Question?What is a person who deals in goods of the kind sold in the ordinary course of business?ProprietorAdministratorOwnerMerchantThe correct answer is “D” – merchant. See next slide.
15 Firm OfferThe UCC holds merchants to a higher standard than non-merchants.Merchanta 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 goodsThe UCC holds merchants to a higher standard than non-merchants. A merchant is a personwho deals in goods of the kind sold in the ordinary course of business or who otherwiseclaims to have knowledge or skills peculiar to those goods. Although most rules underthe UCC apply to both merchants and non-merchants alike, some rules apply only to merchants.One such rule involves a firm offer.
16 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.FirmStrongSolidConcreteThe correct answer is “A” – firm. See next slide.
17 Firm OfferFirm offerwriting must be signed by the merchant, and the time period for holding the offer open may not exceed three monthsNo consideration is necessary when a merchant promises in writing to hold an offeropen for the sale or lease of goods. Known as a firm offer, the writing must be signed bythe merchant, and the time period for holding the offer open may not exceed three months.This rule differs from the general rule of contract law (discussed in Chapter 7), which requiresconsideration in an option contract.
18 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.Another change that the UCC has made is that a contract for the sale of goods may be establishedeven though the price is not settled. Such open-price terms may occur when theparties intend to be bound by a contract but fail to mention the price or decide to set theprice later. Under non-UCC law, no contract would come about because the terms are notdefinite. The UCC allows such a contract to come into existence. If the parties cannot agreeon the price at the later date, the UCC requires that the price will be reasonable at the timethe goods are delivered.
19 Output and Requirements Terms Output contractRequirements contractSometimes, a seller will agree to sell “all the goods we manufacture” or “all the crops we produce”to a particular buyer. This agreement is known as an output contract. At other times, abuyer will agree to buy “all the oil we need to heat our building” (or some similar requirement)from a particular seller. This agreement is called a requirements contract. Such contractsoften were not allowed under common law because the quantity of the goods to be bought orsold was not definite. The UCC allows output and requirements contracts for the sale of goods,as long as the parties deal in good faith and according to reasonable expectations.
20 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.This rule is intended to deal with two typical situations. The first is when an agreementhas been reached either orally or by informal correspondence between the parties and isfollowed by one or both of the parties sending formal acknowledgments or memos thatcontain additional terms not discussed earlier.
21 Form of Sales Contracts As long as the price is under $500, an oral contract for the sale of goods is enforceableIf the price is $500 or more, a sales contract must be in writing to be enforceable.State Variations Louisiana law is an exception to the rule that sales contracts over $500 need tobe in writing. In general, Louisiana does not require such written contracts except in the case of certaintransactions, such as securities.
22 Exceptions to the General Rule Oral contracts between merchantsSpecially manufactured goodsAdmissions in courtExecuted contractsOral Contracts Between Merchants An exception to the general rule occurswhen there is an oral contract between two merchants. If either merchant receives a writtenconfirmation of the oral contract from the other merchant within a reasonable time anddoes not object to it in writing within 10 days, the oral contract is enforceable.Specially Manufactured Goods Another exception occurs when goods are to bespecially manufactured for the buyer and are not suitable for sale to others in the ordinarycourse of the seller’s business. If the seller has made either a substantial beginning in manufacturingthe goods or commitments to buy them, the oral agreement will be enforceable.Admissions in Court If the party against whom enforcement is sought admits incourt that an oral contract for the sale of goods was made, the contract will be enforceable.The contract is not enforceable under this exception, however, beyond the quantity ofgoods admitted.Executed Contracts When the parties carry out their agreement in a satisfactorymanner, the law will not render the transaction unenforceable for want of an agreement inwriting. Executed contracts (those that have been carried out) need not be in writing; thewriting requirements apply only to contracts that are executory, that is, not yet performed.
23 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).A writing is acceptable even though it omits or incorrectly states an agreed-upon term. However, a contractwill not be enforceable beyond the quantity of goods shown in such writing. For thatreason, it is necessary to put the quantity of goods to be bought and sold in the writtenagreement.
24 Signature Requirements Under the UCC, a signature includes any symbol made with the intent to authenticate a writing.Thus, in addition to a handwritten signature, the courts have held various kinds of marks, including an X and atypewritten name, qualify as a signature as long as they were written with the intent to be signatures.
25 International LawUnited 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.Interestingly, the trend in other countries is to eliminate the requirement that a sales contractbe in writing. Great Britain, for example, after having such a requirement for 277years, did away with it in International sales law also has no writing requirements fora sales contract; instead, a sales contract may be proved by any means.
26 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.Auction with reserveAuction without reserveContract with reserveContract without reserveThe correct answer is “A” – Auction with reserve. See next slide.
27 Auction Sales Auction with reserve Auction without reserve, the auctioneer may withdraw the goods at any time before announcing completion of the sale if the highest bid is not high enoughAuction 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 timeBackground InformationAuctions have been a part of human culture for as long as there has been recorded history. Modernauctions closely resemble those of Roman times. In fact, some practices, such as holding up fingers for abid, come from the Roman model. The story of Apponius, who acquired the emperor Caligula’s goodsby nodding off during an auction, started the myth that a simple nod or other inadvertent gesture mightcommit the auction goer to a purchase.