1. Essentials Of Business Law Chapter 15 Sales McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

2. Essentials of Business LawChapter 15-2 Contract For Sale An agreement to sell existing goods  Transfers title to personal property in return for consideration Existing goods  Goods that physically exist and are owned by the seller at the time of sale The Uniform Commercial Code definition:  “The passing of title from the seller to the buyer for a price”  “Payment for goods can be in the form of money, or goods, or in the performance of services”

3. Essentials of Business LawChapter 15-3 Contract To Sell An agreement to sell future goods Future goods  Goods that do not exist at the time of the sales transaction Examples include growing crops and timber, unborn livestock, goods not yet manufactured A person cannot sell goods to which he or she does not hold title

4. Essentials of Business LawChapter 15-4 Contract For Labor And Materials A sales contract for goods of special design, construction, or manufacture Need not always be in writing to be enforceable, even if contract exceeds $500 Uniform Commercial Code’s requirements:  “…if the goods are to be specially manufactured for the buyer and are not suitable for sale to others…”  If the seller has begun manufacture or commitment, the contract can not be canceled

5. Essentials of Business LawChapter 15-5 Contract For Sale With Right Of Return Contracts for sale with right of return  Goods sold on a trial basis  Gives the buyer both title to the goods and the opportunity to return them to the seller

6. Essentials of Business LawChapter 15-6 Sale On Approval Contract provides for the sale of goods subject to the buyer’s approval The goods remain the property of the seller Title and risk of loss remain with the seller The buyer may indicate approval:  Orally  In writing  By retaining the goods beyond a reasonable period

7. Essentials of Business LawChapter 15-7 Sale Or Return An agreement whereby the seller will accept the return of goods at the request of the buyer  Purpose is to maintain goodwill  Seller does not have any legally obligation to accept the returned goods The purchaser takes title to the goods  The purchaser has the right to return them within a specified or reasonable time The purchaser assumes all the obligations of ownership while in possession of the goods

8. Essentials of Business LawChapter 15-8 Auction Sales The buyer makes the offer The seller owns the goods The auctioneer gathers bids from interested parties intending to selling to the highest bidder The offer is accepted when the auctioneer lets the hammer fall and at the same time says:  “Going once, twice, three times, sold!” A bidder may retract a bid at any time before the hammer falls  The retraction does not revive previous bids

9. Essentials of Business LawChapter 15-9 Auction Sales Auction without reserve  Goods must be sold to the highest bidder An auction with reserve  If reasonable bids are not made, the auctioneer has the right to withdraw the goods at any time before completion of the sale Auction sales are with reserve unless otherwise specified Notations made in the auctioneer’s sales book satisfy the requirement that contracts over $500 be in writing Online auctions are conducted on the internet  Bidders rely on the reputation of the seller and photographs that display the goods  Items offered for sale can be offered with a reserve

10. Essentials of Business LawChapter 15-10 Delivery Goods shipped by private carrier or delivered by the seller  Title passes at the time of delivery to the buyer If the buyer arranges for delivery  Title passes when the buyer, or his or her agent, picks up the goods Goods shipped by common carrier  FOB shipping point Title to the goods passes from the seller to the buyer when the carrier receives the shipment The buyer pays the transportation charges  FOB destination Title passes when the goods are delivered to the buyer The seller pays the transportation charges

11. Essentials of Business LawChapter 15-11 Remedies For Breach Of Sales Statute of limitations  A time limit after which the usual legal remedies are no longer available  Remedies for a breach of sales contract must be started within four years

12. Essentials of Business LawChapter 15-12 Seller’s Remedies If buyer refuses to accept goods, seller may:  Store the goods and sue to recover the sales price if the goods are not readily resalable  Resell the goods immediately if they are perishable or if their market value might depreciate rapidly  Retain the goods and sue the buyer for the difference between the contract price and the market price If the buyer refuses to pay the purchase price, seller may:  Resell goods if he or she still has possession of the goods, and sue for damages  Sue for the purchase price if the merchandise has already been delivered to the buyer

13. Essentials of Business LawChapter 15-13 Seller’s Remedies When buyer is insolvent  Seller has the right of stoppage in transit The right of an unpaid seller to stop goods in transit and order the carrier to hold them This right to the buyer exists for both f.o.b. shipping point sales and f.o.b. destination sales

14. Essentials of Business LawChapter 15-14 Buyer’s Remedies When the wrong quantity is delivered  If a smaller quantity of goods is delivered The buyer may reject delivery and sue for damages The buyer may accept the quantity delivered and sue for damages  If a larger quantity of goods is delivered than was ordered The buyer may reject the entire shipment Accept only what was ordered and reject the rest Accept the entire shipment and pay for the additional items at the contract price

15. Essentials of Business LawChapter 15-15 Buyer’s Remedies When the goods are not as ordered  The buyer may revoke the contract and return the goods that are substantially different  The buyer may demand a refund, if the goods have already been paid for  The buyer may keep the goods and sue for damages

16. Essentials of Business LawChapter 15-16 Buyer’s Remedies When the seller fails to deliver the goods  When title has passed to the buyer for goods the seller has failed to deliver, the buyer may: Sue for damages by bringing a tort action charging conversion Seek a court order of specific performance if the goods are unique Sue to obtain the goods by bringing an action of replevin Cover for those goods not delivered by the seller by purchasing substitute goods