Essentials of the legal environment today, 5e Roger leroy miller © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Sales, leases, and product liability Chapter 14 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning objectives How do Article 2 and Article 2A of the UCC differ? What types of transactions does each article cover? Under the UCC, if an offeree includes additional or different terms in an acceptance, will a contract result? If so, what happens to these terms? What remedies are available to a seller or lessor when the buyer or lessee breaches the contract? What remedies are available to a buyer or lessee if the seller or lessor breaches the contract? © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LEARNING OBJECTIVES (CONT’D) What are implied warranties arise under the UCC? What are the elements of a cause of action in strict product liability? © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Articles 2 and 2a Article 2—The Sale of Goods Article 2 of the UCC governs sales contracts (contracts for the sale of goods) Whenever a conflict arises between a common law contract rule and the state statutory law based on the UCC, the UCC controls. What is a sale? What are goods? © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Exhibit 14.1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Articles 2 and 2a Who is a merchant? A person who deals in good of the kind involved in the sales contract A person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction A person who employs a merchant as a broker, agent, or other intermediary © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Articles 2 and 2a Article 2A—Leases Covers leases or subleases of goods Difference from Article 2 is that it applies to leases rather than sales of goods Note: Article 2A is not concerned with leases of real property; land or buildings LO-1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Formation of sales and lease contracts Articles 2 and 2A modify common law contract rules. Offer Open terms Merchant’s firm offer © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Formation of sales and lease contracts Acceptance Communication of acceptance Additional terms UCC dispenses with the mirror image rule A contract is formed if the offeree’s response indicates a definite acceptance of the offer, even if the acceptance includes terms additional to or different from those contained in the offer. Rules when one party or both parties are nonmerchants Rules when both parties are merchants LO-2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Formation of sales and lease contracts Consideration Common law rule that a contract requires consideration also applies to sales and lease contracts The Statute of Frauds Special rules for contracts between merchants Exceptions © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Exhibit 14.2 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

performance Consists of the duties and obligations each party has under the terms of the contract Obligations of the Seller or Lessor Place of delivery The perfect tender rule Cure Substitution of carriers Commercial impracticability Destruction of identified goods © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

performance Obligations of the Buyer or Lessee Payment Right of inspection Acceptance Anticipatory Repudiation © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Remedies for breach Remedies of the Seller or Lessor The right to cancel the contract The right to withhold delivery The right to resell or dispose of the goods The right to recover the purchase price or lease payments due The right to recover damages LO-3 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Remedies for breach Remedies of the Buyer or Lessee The right to cancel the contract The right to obtain the goods on insolvency The right to obtain specific performance The right of cover The right to replevy goods The right to recover damages The right to reject the goods Revocation of acceptance The right to recover damages for accepted goods © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Remedies for breach Additional Provisions Affecting Remedies A seller and buyer can expressly provide for remedies in addition to those provided in the UCC. Can also specify remedies in lieu of those provided in the UCC, or change the measure of damages © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

warranties Articles 2 and 2A designate several types of warranties Title Warranties – can automatically arise in sales and lease contracts Express Warranties – concerns the quality, condition, description, or performance potential of the goods © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

warranties Express warranties arise when seller or lessor indicates: That the goods conform to any affirmation of fact or promise that the seller or lessor makes to the buyer or lessee about the goods That the goods conform to any description of them That the goods conform to any sample or model of the goods shown to the buyer or lessee Basis of the bargain Statements of opinion and value © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

warranties Implied Warranties Warranty Disclaimers Implied warranty of merchantability Implied warranty of fitness for a particular purpose Warranties implied from prior dealings or trade custom Warranty Disclaimers LO-4 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Product liability Based on the theories of negligence, misrepresentation, and strict liability Negligence If a manufacturer fails to exercise “due care” to make a product safe, a person who is injured may sue for negligence. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Product liability Misrepresentation When a user is injured as a result of a manufacturer’s or seller’s fraudulent misrepresentation, the basis of liability may be the tort of fraud. Misrepresentation on a label or ad is enough to show intent. Buyer must have relied on the misrepresentation. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Product liability Strict Product Liability People may be liable for the results of their acts regardless of their intentions or their exercise of reasonable care. Requirements Proving a defective condition Unreasonably dangerous products Product defects – manufacturing and design LO-5 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Product liability Defenses to Product Liability Assumption of risk Product misuse Comparative negligence Commonly known dangers © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.