1. The Sale and Lease of Goods Section 13.1

2. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 The Sale and Lease of Goods Section 13.2 Ownership and Risk of Loss in Sales or Goods Section 13.3 E-Commerce and the Law 13 Chapter Contracts for the Sale of Goods

3. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods What You’ll Learn When to apply the law of sales in your daily life (p. 268) How to describe the special rules for sales contracts (p. 270)

4. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods What You’ll Learn How to determine when sales contracts must be in writing (p. 272) How to explain the rules for auctions and bulk sales (p. 274)

5. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Why It’s Important As you learn more about the law of sales, you will be better able to protect your legal rights and your money when buying or selling a product.

6. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Legal Terms sale (p. 268) price (p. 268) goods (p. 268) Uniform Commercial Code (UCC) (p. 268) contract to sell (p. 269) merchant (p. 270)

7. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Legal Terms usage of trade (p.270) firm offer (p. 272) output contract (p. 272) requirement contract (p. 272) auction with/without reserve (p. 274) bulk transfer (p. 275)

8. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Sales The Sales Contract Contracts for Both Goods and Services Special Rules for Sales Contracts Leasing Goods Section Outline

9. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section Outline Form of Sales Contracts Other Sales Governed by UCC Rules Auction Sales Bulk Transfers

10. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Pre-Learning Question How often do you enter into sales contracts?

11. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods The law of sales governs contracts for the sale and lease of goods. Sales

12. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods A sale is a contract in which ownership of goods is transferred from the seller to the buyer for consideration. The consideration is also known as the price, or the money that is paid for goods. Sales

13. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Goods are all things that are moveable, such as your clothing, books, pens, food, car, and even the gas you put in your car. Money, stocks, and bonds are not considered goods. Sales

14. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods $ ShirtStore ShirtStore 13.1 Sales

15. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods The Uniform Commercial Code (UCC) is a collection of laws that governs various types of business transactions. When you have a contract involving goods, the UCC will apply. The UCC

16. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods A sales contract may involve either a sale or a contract to sell. The Sales Contract

17. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Every time you buy goods and take ownership of them, a sale occurs. However, if you will take ownership at some future time, the agreement is a contract to sell, not a sale. The Sales Contract

18. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods When a contract includes both goods and services, the dominant element determines the type of contract. Contracts for Both Goods and Services

19. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods If the sale of goods dominates, the laws of the UCC apply. If the performance of service dominates, the common law of contract applies. Contracts for Both Goods and Services

20. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Special Rules for Sales Contracts With some exceptions, the UCC applies to all sellers and buyers of goods.

21. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Special Rules for Sales Contracts A merchant is a business or person who deals regularly in the sale of goods or who has a specialized knowledge of goods. A nonmerchant is a casual or occasional seller.

22. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Special Rules for Sales Contracts A sales contract must contain the same elements as other contracts, but the UCC has relaxed some of the strict rules of contract law.

23. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Good Faith Parties to a sales contract must treat each other fairly.

24. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Methods of Dealing and Usage of Trade When parties have previously dealt with each other, those methods of dealing may be used to supplement or qualify the terms of their sales contract.

25. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Methods of Dealing and Usage of Trade This rule is true with any usage of trade, which is the method of dealing that is commonly used in the particular field.

26. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Formation of a Sales Contract You may make a contract in any manner that shows that the parties have reached an agreement.

27. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Acceptance of an Offer In most situations, you may accept an offer by any means and in any reasonable manner.

28. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Different or Additional Terms An acceptance may have different or additional terms added without a complete rejection of the offer.

29. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Firm Offer A firm offer is a merchant’s written promise to hold an offer open for the sale of goods. It does not require payment to be binding.

30. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Open-Price Terms A sales contract may be made without a settled price. Unless the parties agree on a price prior to delivery, a reasonable price can be settled at the time of delivery.

31. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Output and Requirement Terms Output and requirement contracts are allowed even if they are not definite.

32. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Output and Requirement Terms An agreement to buy all of the manufacturer’s goods is an output contract. A requirement contract occurs when a seller agrees to supply the needs of a buyer.

33. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Modification No consideration is necessary to change a contract for the sale of goods. The modification may be oral, unless the original agreement is in writing and states that it must be modified in writing.

34. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Leasing Goods You can apply the sale-of-goods rules to the leasing of goods, with a few modifications.

35. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Pre-Learning Question Do you think sales contracts are enforceable if they are oral and not written?

36. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Many sales contracts are oral rather than written. As long as the price is less than $500, an oral contract for the sale of goods is enforceable. Form of Sales Contracts

37. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods If the price is $500 or more, a sales contract must be in writing to be enforceable with the following exceptions: Form of Sales Contracts

38. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Written confirmation of an oral contract between two merchants is sent within a reasonable time, and no objection is made within ten days. Exceptions to the $500 rule

39. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods The contract involves specially manufactured goods that cannot be resold easily. Exceptions to the $500 rule

40. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods The buyer receives and accepts the goods or pays for them. The parties admit in court that they entered into an oral contract. Exceptions to the $500 rule

41. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Anton Carapoli makes handcrafted violins for professional musicians. His instruments are famous and sell for over $20,000.

42. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods If Carapoli and a buyer contract orally for a violin, is the contract enforceable if the buyer later refuses to pay the agreed sum?

43. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods ANSWER Yes. A Carapoli violin is a specially manufactured good.

44. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Pre-Learning Question What other types of sales might be governed by UCC rules?

45. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Other sales governed by the UCC rules include auction sales and bulk transfers. Other Sales Governed by UCC Rules

46. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Auction Sales In an auction with reserve, the auctioneer does not have to sell the goods for the highest bid if it’s lower than the reserve amount. The auctioneer may withdraw the goods at any time before a sale is completed.

47. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Auction Sales In an auction without reserve, the auctioneer must sell the goods to the highest bidder. The goods cannot be withdrawn from bidding unless no bid is made.

48. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Auction Sales An auction sale is with reserve unless it is expressly stated that it is without reserve.

49. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Bulk Transfers Sometimes a business transfers all merchandise and supplies at once, which is known as a bulk transfer.

50. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Bulk Transfers The UCC rules require that the buyer of the bulk goods notify all of the seller’s creditors at least ten days before the transfer will take place.

51. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned 1. 1.When do you use the law of sales? Section 13.1 Assessment

52. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned For the sale and lease of goods Section 13.1 Assessment Answer

53. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned 2. 2.What special rules apply to sales contracts? Section 13.1 Assessment

54. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned Must be in good faith; may be supplemented with methods of dealing and usage of trade; may result from the parties’ conduct; offer may be accepted by any reasonable means; Section 13.1 Assessment Answer

55. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned acceptance may include terms different than those in offer; consideration not required for firm offer; price need not be settled; output and requirement contracts allowed; may be modified without consideration. Section 13.1 Assessment Answer

56. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned 3. 3.When must sales contracts be in writing? What are the exceptions? Section 13.1 Assessment

57. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned For sale of goods for $500. Exceptions: oral contracts between two merchants when a confirmation is sent and no objection made; oral contracts for specially manufactured goods; admissions in court; executed oral contracts Section 13.1 Assessment Answer

58. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned 4. 4.What are some rules for auctions and bulk sales? Section 13.1 Assessment

59. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned In an auction with reserve, the auctioneer need not accept the highest bid. In an auction without reserve, the auctioneer must accept the highest bid. Section 13.1 Assessment Answer

60. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Reviewing What You Learned The UCC rules require that the buyer of bulk goods in a bulk transfer notify all of the seller’s creditors at least ten days before the transfer will take place. Section 13.1 Assessment Answer

61. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment Critical Thinking Activity Law of Sales When you contract for something that includes both goods and services, such as having wall-to-wall carpeting installed in your home, how should you determine whether to apply the law of sales?

62. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment If the sale of goods is dominant, the laws of the UCC apply. If the performance of services is dominant, the common law of contract applies. Critical Thinking Activity Answer Law of Sales

63. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment Legal Skills in Action Auctions Conduct a two-part mock auction of music CDs in front of your class.

64. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment Legal Skills in Action Auctions Have your classmates bring in CDs to be auctioned. (Be sure to mention that everything will be returned to the rightful owners after the auction.)

65. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment Legal Skills in Action Auctions Arrange for the first part of the role-play to be an auction without reserve and for the second part to be an auction with reserve.

66. Understanding Business and Personal Law The Sale and Lease of Goods Section 13.1 Contracts for the Sale of Goods Section 13.1 Assessment Legal Skills in Action Answer Auctions Mock auctions will vary, but should recognize the differences between auctions with and without reserve.

67. The Sale and Lease of Goods End of Section 13.1