ES 6 UNDERSTAND SALES, CONSUMER, PROPERTY, AND CYBER LAWS BB30 Business Law 6.01 Summer 2013

6.01 Understand sales law BB30 Business Law 6.01 Summer 2013

SALES LAW & EXCHANGE OF OWNERSHIP Sales Activity List 5 items you bought in the last week. List 2 “large” purchases your family has made in the last 2 years. BB30 Business Law 6.01 Summer 2013

SALES LAW & EXCHANGE OF OWNERSHIP Using the list of the items in the Sales Activity: Did ALL of those constitute a sale? What is the definition of a sale? What did you do with the product? What is the definition of ownership? Were they goods or services? Did money exchange hands for these items? If you didn’t have the money to buy the item, how could you change ownership? Talking Points: Sale is a contract in which ownership transfers. Ownership is the right to hold the title, possess, use, enjoy, profit from, waste, and even destroy. Goods are tangible, moveable items of personal property. Goods are NOT money, intangible items (stocks, bonds, etc), patents, copyrights, and trademarks (remind students of intellectual property unit), and real property (to be covered later this unit). Price is the consideration for a sale (remind students of the contract law unit) Barter is a exchange of goods. BB30 Business Law 6.01 Summer 2013

SALES LAW & EXCHANGE OF OWNERSHIP E-commerce laws E-commerce – conducting business using electronic means, especially the Internet Jurisdictional issues – which state has jurisdiction in cases involving sellers & buyers in different states? The ability to access a website in a particular state does not, by itself, give that state jurisdiction States may gain jurisdiction over e-commerce transactions if the website allows users to purchase merchandise Example: Amazon.com - jurisdiction lies with the state in which the buyer resides Tax issues – jurisdiction helps to determine which state may tax Internet sites, and how buyer may be taxed Authentication – helps to make certain that buyers and sellers are who they say they are Digital signature – encoded message that appears at the end of a contract created online BB30 Business Law 6.01 Summer 2013

UNIFORM COMMERCIAL CODE Group Activity: Create a one page summary of the UCC. Include: General Information (First published, definition, goal/purpose) Specific Information (leasing goods, contracts for goods/services, special rules) Why is it important? Key: Published 1952 Definition: Body of laws governing commercial transactions in the United States. Goal/Purpose: Form unity among all 50 states from businesses that complete transactions over state line. Important: Student should state how difficult it would be to know the laws in different states. If necessary, prompt the students with asking who has purchased something online in a different state. Imagine if there were 50 different laws on how sales are transacted. BB30 Business Law 6.01 Summer 2013

Requires: Contract be in writing and meet all requirements of writing TRANSFER OF OWNERSHIP Payment vs. Delivery vs. Receipt of Goods What is the proof? Vendor vs. Vendee vs. Merchant vs. Casual Seller Unconscionable Contract vs. Statute of Frauds Payment – buyer pays for the item Delivery – buyer possess or has control of item Receipt of Goods – buyer takes physical possession. What is the proof? Bill of Sale Vendor = Seller (Types: Merchant regularly deals with item OR casual seller who does not) Vendee = Buyer Unconscionable contract is so grossly unfair that the courts will refuse to enforce it. Statute of Frauds (recall contract law unit) requires certain contracts to be in writing. Applies to : Sale of goods valued over $500 Requires: Contract be in writing and meet all requirements of writing Requirements of Writing Include: Date, Place, Parties, Subject matter, Price, Signatures BB30 Business Law 6.01 Summer 2013

TRANSFER OF OWNERSHIP Authorized Person vs. Buyers in a Sale Induced by Fraud Holders of Negotiable Instruments Merchants with Possession of Sold Goods Discuss each point with the students individually: Authorized person – A third party may sell someone else’s product with their permission. Realtor sells a home on behalf of the owner. Consignment shops are examples. Buyers in a Sale Induced by Fraud – If a person sells an item due to fraud they can void the transaction and receive the item back. However, if the other party has already sold the item to a good faith purchaser then the third party now has a good title. However, if the third party bought stolen goods (not sale induced by fraud), then they must return the item. (Role Play: Bring three students to the front of the room and role play. Ask each person the ethics behind what has happened what their legal rights are in the transaction). Holders of Negotiable Instruments – Ownership may transfer while the items are in transit or storage (define warehouse receipt, bill of lading, common carrier during this discussion). Merchants with Possession of Stolen Goods – After purchasing an item, you may asked the merchant to hold it until you can pick it up. For example, you purchase a couch but do not return until the next day with a friend’s truck to pick it up. BB30 Business Law 6.01 Summer 2013

Existing Goods vs. Identified Goods vs. Future Goods TRANSFER OF OWNERSHIP Existing Goods vs. Identified Goods vs. Future Goods Existing Goods – physically exist and owned by the seller. Identified Goods – designated for a sale (Discussion: Ask students if they have ever seen a sign of a product that says, “Hold for Miller” or if they have received a box from the back of the store that has marker written on it with their name. Future Goods – this is a contract and not a sale because under UCC you cannot own future goods. (Discussion: What if they are never produced? How can you own something that does not exist?) BB30 Business Law 6.01 Summer 2013

When does ownership transfer? Situation Definition Who owns item? Tender of delivery Seller notifies buyer of item being available. Buyer once notified. Seller ships goods Seller is required to ship item but not deliver to buyer. Buyer once the carrier is in possession of item. Seller sends document of title Seller provides the document of title to the buyer and the buyer can receive the goods at anytime. Buyer once document of title is possessed. Seller tenders items at place of sale Buyer is offered item at the place of the sale. Buyer once item is tendered. Discuss each situation on box at a time. BB30 Business Law 6.01 Summer 2013

When does risk of loss transfer? Situation Who is at risk? FOB Shipping Point Buyer is at risk once the item is shipped. FOB Destination Seller is at risk until the product is delivered to the buyer You purchase a used car on autotrader.com from a dealer in Atlanta. While the car is being driven to North Carolina it slides off the road and is damaged. What is type delivery terms will protect you in this transaction? FOB means “free on board.” Discuss the example with the class. They should state that the best terms would be FOB (name of the town you are located in). Discuss with students the importance of checking this when purchasing on the Internet. How can they protect themselves with FOB Shipping Point? Prompt the students to discuss purchasing insurance from the carrier when shipping FOB Destination. BB30 Business Law 6.01 Summer 2013

Types of Sales/Transfer of Rights? RISK OF LOSS Types of Sales/Transfer of Rights? Situation Definition Who is at risk? Cash and Carry Sales Pay cash and take immediate delivery Buyer assumes risk at receipt. Sales on Credit Payment at a later date COD Sales Collect on delivery Buyer assumes risk at receipt (when paid in full). Sale or Return Buyer has the option to return the goods Sale on Approval Buyer has goods on a trial basis Buyer assumes risk at time of approval. Sale of an Undivided Interest Buyer owns a portion of the item Each owner has a partial risk. Auction Buyer bids on item. Ownership transfers when the gavel falls (unless reserve is not met). Bulk Transfer All or a major part of a business is sold. Buyer must notify creditors of ownership transfer. BB30 Business Law 6.01 Summer 2013