Sales and Consumer Issues Objective 09.01 Interpret sales contracts and warranties within the rights and law of consumers. LAW OF SALES
What is a Sale? Sale- a contract by which ownership of goods is transferred by the seller to the buyer for a consideration called price –*Sales Contract must have all required elements. Goods- tangible (touchable) personal property that can be physically weighed, measured, and moved Buyer- the purchaser or vendee Services are not covered in law of sales
Is the seller a merchant or casual seller? Seller (Vendor) –Merchant- a seller who deals regularly in a particular type of goods or who claims special knowledge in a certain type of sales transaction Why is a merchant held to a higher standard of accountability than a casual seller? –Casual Seller- any seller who does not meet the definition of a merchant
Seller Comparison Merchant vs. –Car dealership selling new cars –Clothing store at mall selling new clothes Casual Seller –Individual selling used car after purchasing a new one –Person selling clothes at a garage/yard sale
Student Response: Can you think of other… MERCHANTS? CASUAL SELLERS?
Price Consideration in sales contract. Items used for consideration include: –Money –Services –Other goods (barter) –Real estate
Cash and Carry Sale where the buyer pays for the goods and takes ownership of the goods upon payment. Ownership transfers at the time of the transaction. Risk of loss attaches upon receipt of goods. Risk of loss- the responsibility for loss or damage to goods
Cash and Carry Most common payment and delivery method –Examples: Groceries, clothing Usually low priced goods Frequent purchases –Can you name other examples of cash and carry?
Sale on Credit Similar to cash and carry EXCEPT payment is made at a later date by agreement of the parties. Examples: –Appliances, furniture, vehicles –Usually bigger ticket items
COD - Collect on Delivery Goods are shipped to buyer Carrier collects price and transportation charges upon delivery Carrier is the transportation company Carrier transmits the funds to the seller Can you name examples of carriers? – UPS, Yellow Freight, Fedex
Collect on Delivery (COD) When price is paid at delivery: –Risk transfers to new owner –Ownership transfers to new owner Until goods are delivered and price is paid, no transfer of risk or ownership.
Collect on Delivery (COD) Example: Michelle ordered a birthday gift for her sister from a Lands End catalog. It was shipped to the office where Michelle worked. When the UPS delivery came, Michelle had to pay for the goods and the cost of shipping and handling before the package could be left. After delivery, UPS submits the money to Lands End.
Sales on Credit-Consumer A sale that by agreement of the parties, calls for payment of the goods at a later date. When a consumer buys goods on credit, but pays for them at a later date. –Examples: When furniture, cars, appliances are bought on an installment credit plan Any credit card or charge card purchase made by a consumer
Sales on Credit-Businesses A business uses trade accounts to buy goods from another business with an agreement to pay for them at a later date –Example: One business sends an invoice to another business, with whom they regularly trade with terms for payment. Office Depot buys printers and supplies from Hewlitt Packard but does not pay before the goods are shipped to them. HP will send an invoice for the amount due and the terms of payment.
Sales on Credit-Businesses Invoices- the bill for goods shipped Terms- the statement of a due date of payment and any allowable discounts or late fees charged Due date- the time the payment is due to the invoicing company Discounts- a % reduction on the invoice price if the bill is paid within a specified time Net – when 100% of an invoice is due, no discounting allowed Late fees- a % add on to the invoice price if not paid on time
Discounts If terms are 2/10, n30 –Purchaser may take a 2% discount on the cost of invoice if paid within 10 days, –Purchaser will pay net (full 100% of invoice), if paying after 10 days but before 30 days –Example: Invoice billed on July 1 st for $1,000 with terms 2/10, n30. If paid by July 10, buyer can take discount of $20 (2% x 1000), and pay $980. If bill is paid July 11 - July 31 amount will be net or $1000.
Late Fees Also called Past Due Fees Frequently vendors state a separate amount of interest due on accounts that are past due. Example: 1.5 % per month on all unpaid past due accounts
Consignment Sale Goods are sent by a manufacturer to a retailer, but ownership and risk remain with the manufacturer until goods are sold. Retailer generally does not make payment for the goods unless goods are sold to consumer. If goods do not sell, retailer has right to return unsold goods to manufacturer.
Consignment Sales Example: Jean owns a retail clothing store. A supplier, Awesome Duds, offers Jean a new line of accessories saying, If youll display this new product line, I will make you a deal. Youll take no risk. I will not invoice you. If they dont sell, return them all to me. When they sell, send me the wholesale price quoted.
Sale or Return A completed sale in which the merchant-buyer has the option of returning the goods. The merchant-buyer gains ownership and risk of loss upon delivery. If goods are returned within the agreed upon time, or a reasonable time, ownership and risk return to seller. Returned goods must be in essentially their original condition.
Sale on Approval A sale in which goods are delivered to the buyer in an on trial or on satisfaction basis. Ownership and risk of loss do not attach until prospective buyer approves goods.
Auction A public sale to the highest bidder. Auctioneer offers goods for sale and accepts offers called bids. Auctioneer accepts the bid on behalf of the owner of the goods. An Auction sale with reserve means the auctioneer does not have to sell to the highest bidder. For example, if all bids are very low, the bid can be rejected and sale stopped. Ownership passes when auctioneer closes bidding and accepts the highest bid. SOLD! Risk of loss passes when auctioneer gives buyer right to possess (usually after payment).
Bulk Transfer A transfer, generally by sale, of all or a major part of the goods of a business in one unit at one time. To protect creditors, the UCC requires merchants to give creditors written notice of bulk transfers so the merchant cannot sell all inventory and leave without payment to creditors.
Transfer of Ownership People who own goods have title to the goods. Title is the right of ownership of goods. True owners or titleholders may transfer goods. –If the seller of goods is a thief, the sellers title is void. Authorized persons or agents of the owner may transfer goods. (Examples: Merchant in a consignment sale or an auctioneer)
What are title documents? A document of title is a written document giving the person who possesses it the right to receive the goods named in the document. –Bill of lading is a receipt for shipment of goods given by a transportation company to a shipper when the carrier accepts the goods for shipment –Warehouse receipt is given by a warehouse to a customer whose goods are stored in the warehouse. –Bill of sale is given to a buyer as evidence of ownership. (Property tax collectors may require a bill of sale to remove a sold vehicle from your tax bill. License tag offices may require bill of sale to transfer a vehicle title and issue a tag.)
Can a voidable title be transferred? Voidable Title-when goods can be returned and the money paid for them is refunded. –Minors have voidable titles. –Victims of fraud who purchase goods have voidable titles. Under UCC law, someone with a voidable title can transfer good title to someone who buys in good faith for something of value.
When does ownership pass and risk of loss attach? Identified goods -goods that have been specifically designated as the subject matter of a particular sales contract Once goods are identified, title passes to buyer when seller meets contract requirements. IN CONTRAST: goods that are not both existing and identified are called future goods and neither ownership or risk of loss pass at time of agreement. These goods can be the subject matter of a contract to sell in the future, but not a sale. No one has title to future goods because they do not exist. Example: crops or goods to be manufactured in future.
When does ownership pass and risk of loss attach? In a shipment contract- –Seller transfers goods to a carrier for delivery to buyer. –Title and risk of loss pass to buyer when seller turns over goods to carrier. –Seller has no responsibility once goods reach carrier. –Invoice designation is f.o.b. (free on board) shipping point. This means the buyer is responsible for freight cost (and risk) once seller delivers goods to carrier or to the shipping point.
When does ownership pass and risk of loss attach? In a destination contract- –Contract requires seller to deliver goods to a specific destination. –Title and risk of loss retained by seller until delivered to the destination point. –Invoice designation is f.o.b. (free on board) destination. This means the seller is responsible for goods until they have been delivered.