1. © 2004 West Legal Studies in Business A Division of Thomson Learning 1 Chapter 11 Sales, Leases, and E-Contracts

2. © 2004 West Legal Studies in Business A Division of Thomson Learning 2 IntroductionIntroduction Facilitates commercial transactions. Facilitates commercial transactions. UCC Article 2: Sale of Goods. UCC Article 2: Sale of Goods.  Modifies common law of contracts of some areas.  UCC 2 preempts common law.  Where UCC2 is silent, common law governs. Facilitates commercial transactions. Facilitates commercial transactions. UCC Article 2: Sale of Goods. UCC Article 2: Sale of Goods.  Modifies common law of contracts of some areas.  UCC 2 preempts common law.  Where UCC2 is silent, common law governs.

3. © 2004 West Legal Studies in Business A Division of Thomson Learning 3 §1: The Scope of UCC 2— The Sale of Goods Does not apply to real estate unless there is a “good” that can be severed by the Seller. If the good is severed by the Buyer, then UCC2 does not apply. Does not apply to real estate unless there is a “good” that can be severed by the Seller. If the good is severed by the Buyer, then UCC2 does not apply. Generally contracts for services are not governed by UCC2. Generally contracts for services are not governed by UCC2. What if Goods and Services combined? What if Goods and Services combined? Does not apply to real estate unless there is a “good” that can be severed by the Seller. If the good is severed by the Buyer, then UCC2 does not apply. Does not apply to real estate unless there is a “good” that can be severed by the Seller. If the good is severed by the Buyer, then UCC2 does not apply. Generally contracts for services are not governed by UCC2. Generally contracts for services are not governed by UCC2. What if Goods and Services combined? What if Goods and Services combined?

4. © 2004 West Legal Studies in Business A Division of Thomson Learning 4 Scope of Article 2 UCC2 applies to the “sale of goods.” UCC2 applies to the “sale of goods.”  A “sale” is the passing of title of “goods” to/from a “merchant” (seller or buyer) for a price (money, goods, services,etc).  “Goods” are tangible and movable.  A “merchant” has special business expertise and is not a casual buyer/seller. UCC2 applies to the “sale of goods.” UCC2 applies to the “sale of goods.”  A “sale” is the passing of title of “goods” to/from a “merchant” (seller or buyer) for a price (money, goods, services,etc).  “Goods” are tangible and movable.  A “merchant” has special business expertise and is not a casual buyer/seller.

5. © 2004 West Legal Studies in Business A Division of Thomson Learning 5 §2: Scope of UCC 2A-Leases Contract for lease of personal goods between a lessor and a lessee. Contract for lease of personal goods between a lessor and a lessee. Consumer Leases (total payments less than $25,000). Consumer Leases (total payments less than $25,000). Finance Leases (involves a 3rd party-supplier). Finance Leases (involves a 3rd party-supplier). Contract for lease of personal goods between a lessor and a lessee. Contract for lease of personal goods between a lessor and a lessee. Consumer Leases (total payments less than $25,000). Consumer Leases (total payments less than $25,000). Finance Leases (involves a 3rd party-supplier). Finance Leases (involves a 3rd party-supplier).

6. © 2004 West Legal Studies in Business A Division of Thomson Learning 6 § 3: Amendments to Articles 2 and 2A 2002 Amendments attempt to accommodate electronic commerce. 2002 Amendments attempt to accommodate electronic commerce. Article 2 consistent with UETA and E-SIGN. Article 2 consistent with UETA and E-SIGN. “Writing” is now “record.” “Writing” is now “record.” 2002 Amendments attempt to accommodate electronic commerce. 2002 Amendments attempt to accommodate electronic commerce. Article 2 consistent with UETA and E-SIGN. Article 2 consistent with UETA and E-SIGN. “Writing” is now “record.” “Writing” is now “record.”

7. © 2004 West Legal Studies in Business A Division of Thomson Learning 7 §4: Formation of Sales and Lease Contracts At common law once a valid offer is unequivocally accepted, a binding contract is formed. At common law once a valid offer is unequivocally accepted, a binding contract is formed. UCC is more flexible, and allows for open pricing, payment, and delivery terms. UCC is more flexible, and allows for open pricing, payment, and delivery terms. At common law once a valid offer is unequivocally accepted, a binding contract is formed. At common law once a valid offer is unequivocally accepted, a binding contract is formed. UCC is more flexible, and allows for open pricing, payment, and delivery terms. UCC is more flexible, and allows for open pricing, payment, and delivery terms.

8. © 2004 West Legal Studies in Business A Division of Thomson Learning 8 Open Terms UCC 2-204: even if terms of are undetermined, a contract may still exist. UCC 2-204: even if terms of are undetermined, a contract may still exist.  Open Terms: “Indefiniteness” is OK as long as the parties intended to make a contract and there is a reasonable basis for a court to grant a remedy. UCC 2-204: even if terms of are undetermined, a contract may still exist. UCC 2-204: even if terms of are undetermined, a contract may still exist.  Open Terms: “Indefiniteness” is OK as long as the parties intended to make a contract and there is a reasonable basis for a court to grant a remedy.

9. © 2004 West Legal Studies in Business A Division of Thomson Learning 9 Open Price Term: If parties have not agreed on pricing, court can determine “reasonable price at the time of delivery.” UCC2-305. Open Payment Term: Unless otherwise agreed, payment is due on delivery (COD). UCC2-310(a). Open Delivery Term: Unless otherwise agreed, buyer takes delivery at the Seller’s place of business. UCC2-308(a). Open Price Term: If parties have not agreed on pricing, court can determine “reasonable price at the time of delivery.” UCC2-305. Open Payment Term: Unless otherwise agreed, payment is due on delivery (COD). UCC2-310(a). Open Delivery Term: Unless otherwise agreed, buyer takes delivery at the Seller’s place of business. UCC2-308(a). Open Terms

10. © 2004 West Legal Studies in Business A Division of Thomson Learning 10 Open Terms Open Quantity: generally courts will not impose a quantity. UCC2-306. Exceptions: Open Quantity: generally courts will not impose a quantity. UCC2-306. Exceptions:  Requirements Contract: buyer agrees to purchase what the buyer needs or requires.  Output Contract: buyer agrees to buy all of seller’s production or output. Open Quantity: generally courts will not impose a quantity. UCC2-306. Exceptions: Open Quantity: generally courts will not impose a quantity. UCC2-306. Exceptions:  Requirements Contract: buyer agrees to purchase what the buyer needs or requires.  Output Contract: buyer agrees to buy all of seller’s production or output.

11. © 2004 West Legal Studies in Business A Division of Thomson Learning 11 Merchant’s Firm Offer At common law, an offer could be revoked any time prior to acceptance, unless there was some consideration. At common law, an offer could be revoked any time prior to acceptance, unless there was some consideration. At UCC, offer made by merchant in a signed writing is irrevocable for reasonable period of time. No consideration necessary. At UCC, offer made by merchant in a signed writing is irrevocable for reasonable period of time. No consideration necessary. At common law, an offer could be revoked any time prior to acceptance, unless there was some consideration. At common law, an offer could be revoked any time prior to acceptance, unless there was some consideration. At UCC, offer made by merchant in a signed writing is irrevocable for reasonable period of time. No consideration necessary. At UCC, offer made by merchant in a signed writing is irrevocable for reasonable period of time. No consideration necessary.

12. © 2004 West Legal Studies in Business A Division of Thomson Learning 12 AcceptanceAcceptance Any reasonable means of acceptance under the circumstances is permissible. Any reasonable means of acceptance under the circumstances is permissible. Promise to ship or prompt shipment is acceptance. Promise to ship or prompt shipment is acceptance. Shipment of non-conforming goods is both an acceptance and a breach unless goods sent as an “accommodation” to buyer (UCC2-206). Shipment of non-conforming goods is both an acceptance and a breach unless goods sent as an “accommodation” to buyer (UCC2-206). Any reasonable means of acceptance under the circumstances is permissible. Any reasonable means of acceptance under the circumstances is permissible. Promise to ship or prompt shipment is acceptance. Promise to ship or prompt shipment is acceptance. Shipment of non-conforming goods is both an acceptance and a breach unless goods sent as an “accommodation” to buyer (UCC2-206). Shipment of non-conforming goods is both an acceptance and a breach unless goods sent as an “accommodation” to buyer (UCC2-206).

13. © 2004 West Legal Studies in Business A Division of Thomson Learning 13 Additional Terms If either party is a non-merchant, the contract is formed according to original terms of the offer. If either party is a non-merchant, the contract is formed according to original terms of the offer. If both parties are merchants, contract incorporates new terms unless: If both parties are merchants, contract incorporates new terms unless:  (1) original offer expressly limits terms, or  (2) material change, or  (3) offeror objects within reasonable time. If either party is a non-merchant, the contract is formed according to original terms of the offer. If either party is a non-merchant, the contract is formed according to original terms of the offer. If both parties are merchants, contract incorporates new terms unless: If both parties are merchants, contract incorporates new terms unless:  (1) original offer expressly limits terms, or  (2) material change, or  (3) offeror objects within reasonable time.

14. © 2004 West Legal Studies in Business A Division of Thomson Learning 14 § 5: Consideration UCC requires consideration and modifications must be made in good faith. UCC requires consideration and modifications must be made in good faith. Modification must be in writing if required by Statute of Frauds. Modification must be in writing if required by Statute of Frauds. UCC requires consideration and modifications must be made in good faith. UCC requires consideration and modifications must be made in good faith. Modification must be in writing if required by Statute of Frauds. Modification must be in writing if required by Statute of Frauds.

15. © 2004 West Legal Studies in Business A Division of Thomson Learning 15 § 6: Statute of Frauds Sale of goods over $500 must have a signed writing to be enforceable. Sale of goods over $500 must have a signed writing to be enforceable. Exceptions to this rule: Exceptions to this rule:  Specially manufactured goods.  Admissions by breaching party.  Partial performance.  Merchant doesn’t object within 10 days. Oral agreement enforceable after written confirmation between merchants. Oral agreement enforceable after written confirmation between merchants. Sale of goods over $500 must have a signed writing to be enforceable. Sale of goods over $500 must have a signed writing to be enforceable. Exceptions to this rule: Exceptions to this rule:  Specially manufactured goods.  Admissions by breaching party.  Partial performance.  Merchant doesn’t object within 10 days. Oral agreement enforceable after written confirmation between merchants. Oral agreement enforceable after written confirmation between merchants.

16. © 2004 West Legal Studies in Business A Division of Thomson Learning 16 § 7: Title, Risk and Insurable Interest Sale of goods requires different rules than real property transactions: risk should not always pass with title. Sale of goods requires different rules than real property transactions: risk should not always pass with title. UCC replaces title with identification, risk, and insurable interest. UCC replaces title with identification, risk, and insurable interest. Sale of goods requires different rules than real property transactions: risk should not always pass with title. Sale of goods requires different rules than real property transactions: risk should not always pass with title. UCC replaces title with identification, risk, and insurable interest. UCC replaces title with identification, risk, and insurable interest.

17. © 2004 West Legal Studies in Business A Division of Thomson Learning 17 IdentificationIdentification For any interest to pass to buyer, goods must be: For any interest to pass to buyer, goods must be:  In existence.  Identified as specific goods in the sales contract (by serial numbers and/or physically separated from others. Except for fungible goods which do not need separation). For any interest to pass to buyer, goods must be: For any interest to pass to buyer, goods must be:  In existence.  Identified as specific goods in the sales contract (by serial numbers and/or physically separated from others. Except for fungible goods which do not need separation).

18. © 2004 West Legal Studies in Business A Division of Thomson Learning 18 Identification [2] Gives the buyer the right: Gives the buyer the right:  To obtain insurance on the goods.  To recover from third parties who damage the good. Identification occurs: Identification occurs:  If goods are designated when contract is made. If goods are not designated when contract is made, then identified at time of designation. Gives the buyer the right: Gives the buyer the right:  To obtain insurance on the goods.  To recover from third parties who damage the good. Identification occurs: Identification occurs:  If goods are designated when contract is made. If goods are not designated when contract is made, then identified at time of designation.

19. © 2004 West Legal Studies in Business A Division of Thomson Learning 19 When Title Passes Title can pass: Title can pass:  Upon physical delivery, or  When agreed to by the parties, or  If no agreement, depends on whether contract is shipment or destination contract: »Shipment: title passes at time and place of shipment. »Destination: title passes when goods are tendered at the destination. Case 11.1: In re Stewart (2002). Case 11.1: In re Stewart (2002). Title can pass: Title can pass:  Upon physical delivery, or  When agreed to by the parties, or  If no agreement, depends on whether contract is shipment or destination contract: »Shipment: title passes at time and place of shipment. »Destination: title passes when goods are tendered at the destination. Case 11.1: In re Stewart (2002). Case 11.1: In re Stewart (2002).

20. © 2004 West Legal Studies in Business A Division of Thomson Learning 20 Delivery Without Movement of Goods Title passes when agreed by the parties, or Title passes when agreed by the parties, or With document of title: when and where document delivered. With document of title: when and where document delivered. Without document: when sales contract is made, if goods have been identified or when identification occurs if they have not been identified. Without document: when sales contract is made, if goods have been identified or when identification occurs if they have not been identified. Title passes when agreed by the parties, or Title passes when agreed by the parties, or With document of title: when and where document delivered. With document of title: when and where document delivered. Without document: when sales contract is made, if goods have been identified or when identification occurs if they have not been identified. Without document: when sales contract is made, if goods have been identified or when identification occurs if they have not been identified.

21. © 2004 West Legal Studies in Business A Division of Thomson Learning 21 Risk of Loss ROL is important because of insurance concerns. ROL is important because of insurance concerns. ROL does not necessarily pass with title. ROL does not necessarily pass with title. Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods. Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods. ROL is important because of insurance concerns. ROL is important because of insurance concerns. ROL does not necessarily pass with title. ROL does not necessarily pass with title. Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods. Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods.

22. © 2004 West Legal Studies in Business A Division of Thomson Learning 22 ROL: Delivery With Movement Shipment Contracts. Shipment Contracts.  ROL passes to Buyer when tendered to Carrier. If goods damaged in transit, Buyer’s loss. Destination Contracts. Destination Contracts.  ROL passes to Buyer when goods tendered at particular Destination. Shipment Contracts. Shipment Contracts.  ROL passes to Buyer when tendered to Carrier. If goods damaged in transit, Buyer’s loss. Destination Contracts. Destination Contracts.  ROL passes to Buyer when goods tendered at particular Destination.

23. © 2004 West Legal Studies in Business A Division of Thomson Learning 23 ROL: Delivery Without Movement of Goods Goods Held by Seller: Goods Held by Seller:  Document of Title is generally not used.  If Seller is a merchant, ROL passes when buyer takes physical possession of goods. Goods Held by Bailee (Warehouse). ROL passes when: Goods Held by Bailee (Warehouse). ROL passes when:  Buyer receives document of title; bailee acknowledges Buyer’s right to goods and buyer receives title and has reasonable time to pick up. Goods Held by Seller: Goods Held by Seller:  Document of Title is generally not used.  If Seller is a merchant, ROL passes when buyer takes physical possession of goods. Goods Held by Bailee (Warehouse). ROL passes when: Goods Held by Bailee (Warehouse). ROL passes when:  Buyer receives document of title; bailee acknowledges Buyer’s right to goods and buyer receives title and has reasonable time to pick up.

24. © 2004 West Legal Studies in Business A Division of Thomson Learning 24 ROL: Shipping Terms TermDefinition F.O.B. Free on Board. Sales price includes shipping to specific place in contract. Example: FOB Chicago. F.A.S. Free Along Side. Requires seller to deliver goods alongside the ship before ROL passes to buyer. C.I.F. Cost, Insurance and Freight. Seller puts the goods in possession of a carrier. Delivery Ex- Ship Deliver from Carrying shipping vessel. ROL passes to buyer when goods leave the ship or unloaded.

25. © 2004 West Legal Studies in Business A Division of Thomson Learning 25 ROL: Conditional Sales Sale on Approval. Sale on Approval.  ROL passes when buyer approves expressly or implicitly. Sale or Return. (Consignment is sale or return unless it complies with Art. 9.) Sale or Return. (Consignment is sale or return unless it complies with Art. 9.)  ROL passes to buyer with possession. Sale on Approval. Sale on Approval.  ROL passes when buyer approves expressly or implicitly. Sale or Return. (Consignment is sale or return unless it complies with Art. 9.) Sale or Return. (Consignment is sale or return unless it complies with Art. 9.)  ROL passes to buyer with possession.

26. © 2004 West Legal Studies in Business A Division of Thomson Learning 26 ROL in Breach of Contract Generally breaching party bears ROL. Generally breaching party bears ROL. Seller’s Breach. Seller’s Breach.  Rejection - risk stays with seller.  Revocation of acceptance - risk passes back to seller to the extent that buyer’s insurance does not cover the loss. Buyer’s Breach. Goods are identified, risk passes to buyer for a reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss. Buyer’s Breach. Goods are identified, risk passes to buyer for a reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss. Generally breaching party bears ROL. Generally breaching party bears ROL. Seller’s Breach. Seller’s Breach.  Rejection - risk stays with seller.  Revocation of acceptance - risk passes back to seller to the extent that buyer’s insurance does not cover the loss. Buyer’s Breach. Goods are identified, risk passes to buyer for a reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss. Buyer’s Breach. Goods are identified, risk passes to buyer for a reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss.

27. © 2004 West Legal Studies in Business A Division of Thomson Learning 27 Insurable Interest Buyer has an insurable interest in goods that have been identified. Buyer has an insurable interest in goods that have been identified. Seller has an insurable interest in goods as long as they retain title or a security interest. Seller has an insurable interest in goods as long as they retain title or a security interest. Both buyers and sellers can have an insurable interest at the same time. Both buyers and sellers can have an insurable interest at the same time. Buyer has an insurable interest in goods that have been identified. Buyer has an insurable interest in goods that have been identified. Seller has an insurable interest in goods as long as they retain title or a security interest. Seller has an insurable interest in goods as long as they retain title or a security interest. Both buyers and sellers can have an insurable interest at the same time. Both buyers and sellers can have an insurable interest at the same time.

28. © 2004 West Legal Studies in Business A Division of Thomson Learning 28 § 8: Performance of Sales and Lease Contracts Seller must transfer and deliver conforming goods. Seller must transfer and deliver conforming goods. Buyer must accept and pay for conforming goods. Buyer must accept and pay for conforming goods. In the absence of an agreement between Seller and Buyer UCC Article 2 controls as set out below. In the absence of an agreement between Seller and Buyer UCC Article 2 controls as set out below. Seller must transfer and deliver conforming goods. Seller must transfer and deliver conforming goods. Buyer must accept and pay for conforming goods. Buyer must accept and pay for conforming goods. In the absence of an agreement between Seller and Buyer UCC Article 2 controls as set out below. In the absence of an agreement between Seller and Buyer UCC Article 2 controls as set out below.

29. © 2004 West Legal Studies in Business A Division of Thomson Learning 29 Good Faith Requirement Good Faith is the foundation of every UCC commercial contract. Good Faith is the foundation of every UCC commercial contract. Good faith means honesty in fact. Good faith means honesty in fact. For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non- merchants. For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non- merchants. Good Faith is the foundation of every UCC commercial contract. Good Faith is the foundation of every UCC commercial contract. Good faith means honesty in fact. Good faith means honesty in fact. For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non- merchants. For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non- merchants.

30. © 2004 West Legal Studies in Business A Division of Thomson Learning 30 Obligations of the Seller or Lessor Seller has a duty to “tender” delivery of “conforming goods.” Seller has a duty to “tender” delivery of “conforming goods.” Tender means “delivery” to agreed place: Tender means “delivery” to agreed place:  With reasonable notice.  At a reasonable hour.  In a reasonable manner.  Exactly, unless otherwise agreed. Seller has a duty to “tender” delivery of “conforming goods.” Seller has a duty to “tender” delivery of “conforming goods.” Tender means “delivery” to agreed place: Tender means “delivery” to agreed place:  With reasonable notice.  At a reasonable hour.  In a reasonable manner.  Exactly, unless otherwise agreed.

31. © 2004 West Legal Studies in Business A Division of Thomson Learning 31 Place of Delivery If no place designated, Buyer picks up at Seller’s place of business or, if Seller has no place of business, then Seller’s residence. If no place designated, Buyer picks up at Seller’s place of business or, if Seller has no place of business, then Seller’s residence. If contract involves identified goods, and the goods are located somewhere else (e.g., a warehouse), then the location of the goods is the place of delivery. If contract involves identified goods, and the goods are located somewhere else (e.g., a warehouse), then the location of the goods is the place of delivery. If no place designated, Buyer picks up at Seller’s place of business or, if Seller has no place of business, then Seller’s residence. If no place designated, Buyer picks up at Seller’s place of business or, if Seller has no place of business, then Seller’s residence. If contract involves identified goods, and the goods are located somewhere else (e.g., a warehouse), then the location of the goods is the place of delivery. If contract involves identified goods, and the goods are located somewhere else (e.g., a warehouse), then the location of the goods is the place of delivery.

32. © 2004 West Legal Studies in Business A Division of Thomson Learning 32 The Perfect Tender Rule If goods, or tender of delivery, fail in any respect to conform to the contract, the Buyer has the right to: If goods, or tender of delivery, fail in any respect to conform to the contract, the Buyer has the right to:  Accept the goods;  Reject the entire shipment; or  Accept part and reject part. If goods, or tender of delivery, fail in any respect to conform to the contract, the Buyer has the right to: If goods, or tender of delivery, fail in any respect to conform to the contract, the Buyer has the right to:  Accept the goods;  Reject the entire shipment; or  Accept part and reject part.

33. © 2004 West Legal Studies in Business A Division of Thomson Learning 33 Exceptions to the Perfect Tender Rule Agreement of the Parties. Agreement of the Parties. Cure. Cure. Substitution of Carriers. Substitution of Carriers. Installment contracts. Installment contracts. Commercial Impracticability. Commercial Impracticability. Destruction of Identified goods. Destruction of Identified goods. Cooperation and Assurance. Cooperation and Assurance. Agreement of the Parties. Agreement of the Parties. Cure. Cure. Substitution of Carriers. Substitution of Carriers. Installment contracts. Installment contracts. Commercial Impracticability. Commercial Impracticability. Destruction of Identified goods. Destruction of Identified goods. Cooperation and Assurance. Cooperation and Assurance.

34. © 2004 West Legal Studies in Business A Division of Thomson Learning 34 Exceptions : Agreement of the Parties Parties agree that some defective goods will be acceptable. Parties agree that some defective goods will be acceptable. Parties agree that defective goods can be replaced or repaired within a certain time. Parties agree that defective goods can be replaced or repaired within a certain time. Parties agree that some defective goods will be acceptable. Parties agree that some defective goods will be acceptable. Parties agree that defective goods can be replaced or repaired within a certain time. Parties agree that defective goods can be replaced or repaired within a certain time.

35. © 2004 West Legal Studies in Business A Division of Thomson Learning 35 Exceptions: Seller’s Cure Seller has the right to “Cure” (ship conforming goods to Buyer) if: Seller has the right to “Cure” (ship conforming goods to Buyer) if:  Agreed time of performance has not yet expired; or  If Seller had reasonable grounds to expect that Buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or Buyer has accepted non-conforming goods in the past. Seller has the right to “Cure” (ship conforming goods to Buyer) if: Seller has the right to “Cure” (ship conforming goods to Buyer) if:  Agreed time of performance has not yet expired; or  If Seller had reasonable grounds to expect that Buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or Buyer has accepted non-conforming goods in the past.

36. © 2004 West Legal Studies in Business A Division of Thomson Learning 36 Exceptions: Substitution of Carriers If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable.

37. © 2004 West Legal Studies in Business A Division of Thomson Learning 37 Exceptions: Commercial Impracticability Occurrence of an unforeseen contingency that makes performance impracticable. Occurrence of an unforeseen contingency that makes performance impracticable. Nonoccurrence was a basic assumption on which the contract was made. Nonoccurrence was a basic assumption on which the contract was made. If only partial impracticability, Seller must allocate what he/she has. If only partial impracticability, Seller must allocate what he/she has. Occurrence of an unforeseen contingency that makes performance impracticable. Occurrence of an unforeseen contingency that makes performance impracticable. Nonoccurrence was a basic assumption on which the contract was made. Nonoccurrence was a basic assumption on which the contract was made. If only partial impracticability, Seller must allocate what he/she has. If only partial impracticability, Seller must allocate what he/she has.

38. © 2004 West Legal Studies in Business A Division of Thomson Learning 38 Exceptions: Installment Contracts Installment Contracts can be rejected if: Installment Contracts can be rejected if:  installment is substantially non-conforming and can’t be cured.  non-conforming installment substantially impairs the entire contract. Installment Contracts can be rejected if: Installment Contracts can be rejected if:  installment is substantially non-conforming and can’t be cured.  non-conforming installment substantially impairs the entire contract.

39. © 2004 West Legal Studies in Business A Division of Thomson Learning 39 Exceptions: Destruction of Goods If no fault of either party and it occurs If no fault of either party and it occurs Before risk passes to Buyer then Before risk passes to Buyer then Both Seller and Buyer are excused from performance. Both Seller and Buyer are excused from performance. If no fault of either party and it occurs If no fault of either party and it occurs Before risk passes to Buyer then Before risk passes to Buyer then Both Seller and Buyer are excused from performance. Both Seller and Buyer are excused from performance.

40. © 2004 West Legal Studies in Business A Division of Thomson Learning 40 Exceptions: Cooperation Sometimes unforeseen event only partially affects Seller’s capacity to perform. Sometimes unforeseen event only partially affects Seller’s capacity to perform. In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance. In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance. Buyer has the right to reject. Buyer has the right to reject. Case 11.2: Koch Materials Co. v. Shore Slurry Seal, Inc. (2002). Case 11.2: Koch Materials Co. v. Shore Slurry Seal, Inc. (2002). Sometimes unforeseen event only partially affects Seller’s capacity to perform. Sometimes unforeseen event only partially affects Seller’s capacity to perform. In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance. In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance. Buyer has the right to reject. Buyer has the right to reject. Case 11.2: Koch Materials Co. v. Shore Slurry Seal, Inc. (2002). Case 11.2: Koch Materials Co. v. Shore Slurry Seal, Inc. (2002).

41. © 2004 West Legal Studies in Business A Division of Thomson Learning 41 Obligations of the Buyer or Lessee Furnish facilities reasonably suited for receipt of the goods. Furnish facilities reasonably suited for receipt of the goods. Make payment at the time and place the Buyer receives the goods. Make payment at the time and place the Buyer receives the goods.  Credit has to be prearranged. »Credit period begins on the date of shipment.  Pay with cash, credit card, check. » But if Seller asks for cash, Seller has to give Buyer time to get cash. Furnish facilities reasonably suited for receipt of the goods. Furnish facilities reasonably suited for receipt of the goods. Make payment at the time and place the Buyer receives the goods. Make payment at the time and place the Buyer receives the goods.  Credit has to be prearranged. »Credit period begins on the date of shipment.  Pay with cash, credit card, check. » But if Seller asks for cash, Seller has to give Buyer time to get cash.

42. © 2004 West Legal Studies in Business A Division of Thomson Learning 42 Buyer’s Obligations Buyer has right to inspection before paying: Buyer has right to inspection before paying:  Costs of inspection borne by Buyer.  However, C.O.D., C.I.F. and C&F give Buyer no right to inspect. Buyer has right to inspection before paying: Buyer has right to inspection before paying:  Costs of inspection borne by Buyer.  However, C.O.D., C.I.F. and C&F give Buyer no right to inspect.

43. © 2004 West Legal Studies in Business A Division of Thomson Learning 43 AcceptanceAcceptance Buyer can accept goods: Buyer can accept goods:  By words or conduct.  If Buyer had reasonable amount of time and failed to reject.  Buyer performs an act which indicates he thinks he is the owner. Partial Acceptance. Partial Acceptance. Buyer can accept goods: Buyer can accept goods:  By words or conduct.  If Buyer had reasonable amount of time and failed to reject.  Buyer performs an act which indicates he thinks he is the owner. Partial Acceptance. Partial Acceptance.

44. © 2004 West Legal Studies in Business A Division of Thomson Learning 44 Revocation of Acceptance Notify Seller of breach. Notify Seller of breach. Revoke only if substantial nonconformity; and Revoke only if substantial nonconformity; and  Buyer accepted on the reasonable assumption that the Seller would cure the non-conformity OR Buyer did not discover the nonconformity because defect was latent or hard to discover. Notify Seller of breach. Notify Seller of breach. Revoke only if substantial nonconformity; and Revoke only if substantial nonconformity; and  Buyer accepted on the reasonable assumption that the Seller would cure the non-conformity OR Buyer did not discover the nonconformity because defect was latent or hard to discover.

45. © 2004 West Legal Studies in Business A Division of Thomson Learning 45 Anticipatory Repudiation Party communicates he will not perform by time of contract performance. Party communicates he will not perform by time of contract performance. Non-breaching party may suspend performance and: Non-breaching party may suspend performance and:  Treat the A.R. as material breach and pursue a remedy; or  Wait a reasonable time. Party communicates he will not perform by time of contract performance. Party communicates he will not perform by time of contract performance. Non-breaching party may suspend performance and: Non-breaching party may suspend performance and:  Treat the A.R. as material breach and pursue a remedy; or  Wait a reasonable time.

46. © 2004 West Legal Studies in Business A Division of Thomson Learning 46 § 9: Remedies for Breach Buyer Seller Proceed to § 10: Warranties Proceed to § 10: Warranties Goods in Buyer’s Possession Goods in Buyer’s Possession Seller delivers non- conforming goods Seller delivers non- conforming goods Goods are in Transit Goods are in Transit Goods in Seller’s Possession Goods in Seller’s Possession Goods in Seller’s Possession Goods in Seller’s Possession Click on the Links Below

47. © 2004 West Legal Studies in Business A Division of Thomson Learning 47 Next Seller- Goods in Seller’s Possession Seller may withhold delivery of the goods: Seller may withhold delivery of the goods:  If material breach by Buyer, Seller can withhold delivery of all goods.  If non-material breach, Seller can withhold delivery of this installment. Seller can withhold delivery of all goods if Buyer is insolvent. Seller can withhold delivery of all goods if Buyer is insolvent. Seller may withhold delivery of the goods: Seller may withhold delivery of the goods:  If material breach by Buyer, Seller can withhold delivery of all goods.  If non-material breach, Seller can withhold delivery of this installment. Seller can withhold delivery of all goods if Buyer is insolvent. Seller can withhold delivery of all goods if Buyer is insolvent.

48. © 2004 West Legal Studies in Business A Division of Thomson Learning 48 Seller- Goods in Seller’s Possession Seller may rescind the contract. Seller may rescind the contract. Seller may identify the goods to the contract. Seller may identify the goods to the contract. Seller may sell raw materials for scrap or finish production. Seller may sell raw materials for scrap or finish production. Seller may rescind the contract. Seller may rescind the contract. Seller may identify the goods to the contract. Seller may identify the goods to the contract. Seller may sell raw materials for scrap or finish production. Seller may sell raw materials for scrap or finish production. Next

49. © 2004 West Legal Studies in Business A Division of Thomson Learning 49 Seller-Goods in Seller’s Possession Seller may resell the goods; and Seller may resell the goods; and  Recover damages: the difference between the contract price and the resale price + incidental damages+ damages = the market price at the time & place of tender + incidental damages - expenses saved.  If No Damages, Seller can sue for lost profits. Case 11.3: Brandeis Machinery v. Capital Crane Rental (2002). Case 11.3: Brandeis Machinery v. Capital Crane Rental (2002). Seller may resell the goods; and Seller may resell the goods; and  Recover damages: the difference between the contract price and the resale price + incidental damages+ damages = the market price at the time & place of tender + incidental damages - expenses saved.  If No Damages, Seller can sue for lost profits. Case 11.3: Brandeis Machinery v. Capital Crane Rental (2002). Case 11.3: Brandeis Machinery v. Capital Crane Rental (2002). Next

50. © 2004 West Legal Studies in Business A Division of Thomson Learning 50 Return Seller-Goods in Seller’s Possession Seller may sue Buyer for breach of contract. Seller may sue Buyer for breach of contract.  Recover Damages = the market price at the time & place of tender + incidental damages. »if there are no damages, Seller can sue for lost profits. Seller may sue Buyer for breach of contract. Seller may sue Buyer for breach of contract.  Recover Damages = the market price at the time & place of tender + incidental damages. »if there are no damages, Seller can sue for lost profits.

51. © 2004 West Legal Studies in Business A Division of Thomson Learning 51 Seller-Goods in Transit Goods are “in transit” when Seller has tendered goods to Carrier. Goods are “in transit” when Seller has tendered goods to Carrier. Goods are in transit until: Goods are in transit until:  Buyer is given negotiable document of title to goods.  Buyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods.  Buyer has had a reasonable time to pick up the goods. Goods are “in transit” when Seller has tendered goods to Carrier. Goods are “in transit” when Seller has tendered goods to Carrier. Goods are in transit until: Goods are in transit until:  Buyer is given negotiable document of title to goods.  Buyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods.  Buyer has had a reasonable time to pick up the goods. Next

52. © 2004 West Legal Studies in Business A Division of Thomson Learning 52 Seller-Goods in Transit Seller has the right to stop the goods in transit if: Seller has the right to stop the goods in transit if:  Buyer is insolvent - Seller can stop entire shipment of goods.  Buyer is in breach - Seller may stop a whole truckload or whole container. Seller has the right to stop the goods in transit if: Seller has the right to stop the goods in transit if:  Buyer is insolvent - Seller can stop entire shipment of goods.  Buyer is in breach - Seller may stop a whole truckload or whole container. Return

53. © 2004 West Legal Studies in Business A Division of Thomson Learning 53 Seller-Goods in Buyer’s Possession Seller may sue for the purchase price. Seller may sue for the purchase price.  Seller may also sue Buyer if goods were “specially-made” which Seller cannot resell.  Seller may also sue for the purchase price if the goods were destroyed and the risk had already passed to the Buyer. Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt. Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt. Seller may sue for the purchase price. Seller may sue for the purchase price.  Seller may also sue Buyer if goods were “specially-made” which Seller cannot resell.  Seller may also sue for the purchase price if the goods were destroyed and the risk had already passed to the Buyer. Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt. Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt. Return

54. © 2004 West Legal Studies in Business A Division of Thomson Learning 54 Buyer-Goods in Seller’s Possession Buyer Wants Goods Buyer Wants Goods  Specific performance or replevin  Recover goods from Seller if Seller becomes insolvent within 10 days after receiving first payment. Buyer Does Not Want Goods Buyer Does Not Want Goods  Rescind contract.  Cover or do not cover and sue for breach of contract. Case 22.2: KGM Harvesting v. Fresh Network (1995). Buyer Wants Goods Buyer Wants Goods  Specific performance or replevin  Recover goods from Seller if Seller becomes insolvent within 10 days after receiving first payment. Buyer Does Not Want Goods Buyer Does Not Want Goods  Rescind contract.  Cover or do not cover and sue for breach of contract. Case 22.2: KGM Harvesting v. Fresh Network (1995). Return

55. © 2004 West Legal Studies in Business A Division of Thomson Learning 55 Buyer-Seller Delivers Nonconforming Goods If Seller does not make perfect tender Buyer has the right to reject all or part of goods. If Seller does not make perfect tender Buyer has the right to reject all or part of goods.  Buyer must timely notify Seller of rejection and reasons and follow Seller’s directions.  Buyer is entitled to commission for selling perishable goods.  Buyer may store the goods and retain a security interest in the goods for his costs. If Seller does not make perfect tender Buyer has the right to reject all or part of goods. If Seller does not make perfect tender Buyer has the right to reject all or part of goods.  Buyer must timely notify Seller of rejection and reasons and follow Seller’s directions.  Buyer is entitled to commission for selling perishable goods.  Buyer may store the goods and retain a security interest in the goods for his costs. Next

56. © 2004 West Legal Studies in Business A Division of Thomson Learning 56 If Buyer has accepted non-conforming goods, she may: If Buyer has accepted non-conforming goods, she may:  Sue for breach of warranty.  Sue for ordinary damages.  Deduct damages from purchase price. If Buyer has accepted non-conforming goods, she may: If Buyer has accepted non-conforming goods, she may:  Sue for breach of warranty.  Sue for ordinary damages.  Deduct damages from purchase price. Buyer-Seller Delivers Nonconforming Goods Return

57. © 2004 West Legal Studies in Business A Division of Thomson Learning 57 Contractual Provisions Affecting Remedies Limitation of Damages. Limitation of Damages. Limitation of Remedies. Limitation of Remedies. Waiver of Defenses. Waiver of Defenses. Limitation of Damages. Limitation of Damages. Limitation of Remedies. Limitation of Remedies. Waiver of Defenses. Waiver of Defenses.

58. © 2004 West Legal Studies in Business A Division of Thomson Learning 58 § 10: Sales and Lease Warranties A warranty is an assurance of fact upon which a party may rely. A warranty is an assurance of fact upon which a party may rely.  Warranty of Title.  Express Warranty.  Implied Warranty of Merchantability.  Implied Warranty of Fitness for a Particular Purpose.  Implied warranty arising from the course of dealing or trade usage. A warranty is an assurance of fact upon which a party may rely. A warranty is an assurance of fact upon which a party may rely.  Warranty of Title.  Express Warranty.  Implied Warranty of Merchantability.  Implied Warranty of Fitness for a Particular Purpose.  Implied warranty arising from the course of dealing or trade usage.

59. © 2004 West Legal Studies in Business A Division of Thomson Learning 59 Warranty of Title Automatically arises in most commercial sales transactions. Automatically arises in most commercial sales transactions. UCC-312 creates 3 warranties: UCC-312 creates 3 warranties:  Good Title.  No Liens.  No Infringements. Automatically arises in most commercial sales transactions. Automatically arises in most commercial sales transactions. UCC-312 creates 3 warranties: UCC-312 creates 3 warranties:  Good Title.  No Liens.  No Infringements.

60. © 2004 West Legal Studies in Business A Division of Thomson Learning 60 Warranty Title Disclaimer Title warranty can generally be disclaimed only with specific language in contract. Title warranty can generally be disclaimed only with specific language in contract. Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale. Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale. Title warranty can generally be disclaimed only with specific language in contract. Title warranty can generally be disclaimed only with specific language in contract. Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale. Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale.

61. © 2004 West Legal Studies in Business A Division of Thomson Learning 61 Express Warranties Can be oral or written-- don’t have to use the words “warrant” or “guarantee.” Can be oral or written-- don’t have to use the words “warrant” or “guarantee.”  Any Affirmation or Promise.  Any Description.  Any Sample or Model. Can be oral or written-- don’t have to use the words “warrant” or “guarantee.” Can be oral or written-- don’t have to use the words “warrant” or “guarantee.”  Any Affirmation or Promise.  Any Description.  Any Sample or Model.

62. © 2004 West Legal Studies in Business A Division of Thomson Learning 62 Express Warranties To create an express warranty, the affirmation of fact must become the “basis of the bargain.” To create an express warranty, the affirmation of fact must become the “basis of the bargain.” And Buyer must rely on warranty when he enters into contract. And Buyer must rely on warranty when he enters into contract. To create an express warranty, the affirmation of fact must become the “basis of the bargain.” To create an express warranty, the affirmation of fact must become the “basis of the bargain.” And Buyer must rely on warranty when he enters into contract. And Buyer must rely on warranty when he enters into contract.

63. © 2004 West Legal Studies in Business A Division of Thomson Learning 63 Express Warranties Statements of Opinion and Value. Statements of Opinion and Value.  Generally excludes “puffing” – “Best car in town”, not an express warranty.  However, expert opinion is not puffery. Statements of Opinion and Value. Statements of Opinion and Value.  Generally excludes “puffing” – “Best car in town”, not an express warranty.  However, expert opinion is not puffery.

64. © 2004 West Legal Studies in Business A Division of Thomson Learning 64 Implied Warranties Warranty inferred at law based on the circumstances or nature of the transaction. Warranty inferred at law based on the circumstances or nature of the transaction. Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold. Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold. Warranty inferred at law based on the circumstances or nature of the transaction. Warranty inferred at law based on the circumstances or nature of the transaction. Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold. Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold.

65. © 2004 West Legal Studies in Business A Division of Thomson Learning 65 Implied Warranty of Merchantability Automatically arises from merchants. Automatically arises from merchants. Goods are of average, fair, or medium-grade. Goods are of average, fair, or medium-grade. Adequately packaged and labeled. Adequately packaged and labeled. Conform to promises on label. Conform to promises on label. Have a consistent quality and quantity among the commercial units. Have a consistent quality and quantity among the commercial units. Automatically arises from merchants. Automatically arises from merchants. Goods are of average, fair, or medium-grade. Goods are of average, fair, or medium-grade. Adequately packaged and labeled. Adequately packaged and labeled. Conform to promises on label. Conform to promises on label. Have a consistent quality and quantity among the commercial units. Have a consistent quality and quantity among the commercial units.

66. © 2004 West Legal Studies in Business A Division of Thomson Learning 66 Implied Warranty of Fitness for a Particular Purpose Arises by any Seller who: Arises by any Seller who:  Knows the particular purpose for which the goods are being bought; and  Knows the buyer is relying on seller’s skill and judgment to select suitable goods. Arises by any Seller who: Arises by any Seller who:  Knows the particular purpose for which the goods are being bought; and  Knows the buyer is relying on seller’s skill and judgment to select suitable goods.

67. © 2004 West Legal Studies in Business A Division of Thomson Learning 67 Implied Warranty Arising from Course of Dealing or Trade Usage Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction. Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.

68. © 2004 West Legal Studies in Business A Division of Thomson Learning 68 Warranty Disclaimers Express Warranties can be disclaimed: Express Warranties can be disclaimed:  If they were never made (evidentiary matter).  If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED). Express Warranties can be disclaimed: Express Warranties can be disclaimed:  If they were never made (evidentiary matter).  If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).

69. © 2004 West Legal Studies in Business A Division of Thomson Learning 69 Warranty Disclaimers Implied Warranties: Implied Warranties:  Merchantability: “As Is,” “With All Faults.”  Fitness for a Particular Purpose: must be in writing and conspicuous.  If Buyer has the right to fully inspect and either: does so or refuses to do so, warranties are disclaimed as to defects that could reasonably be found. Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002). Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002). Implied Warranties: Implied Warranties:  Merchantability: “As Is,” “With All Faults.”  Fitness for a Particular Purpose: must be in writing and conspicuous.  If Buyer has the right to fully inspect and either: does so or refuses to do so, warranties are disclaimed as to defects that could reasonably be found. Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002). Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002).

70. © 2004 West Legal Studies in Business A Division of Thomson Learning 70 § 11- E-Contracts Most courts find E-Contracts involve basic principles of contract law, applied in the online context. Most courts find E-Contracts involve basic principles of contract law, applied in the online context.

71. © 2004 West Legal Studies in Business A Division of Thomson Learning 71 Online Contract Formation Online Offers should include: Online Offers should include:  Remedies for Buyer.  Statute of Limitations.  What constitutes Buyer’s acceptance.  Method of Payment.  Seller’s Refund and Return Policies.  Disclaimers of Liability.  How Seller will Use Buyer’s Information (Privacy). Online Offers should include: Online Offers should include:  Remedies for Buyer.  Statute of Limitations.  What constitutes Buyer’s acceptance.  Method of Payment.  Seller’s Refund and Return Policies.  Disclaimers of Liability.  How Seller will Use Buyer’s Information (Privacy).

72. © 2004 West Legal Studies in Business A Division of Thomson Learning 72 Online Contract Formation Dispute Settlement Provisions. Dispute Settlement Provisions.  Choice of Law.  Choice of Forum.  E-Bay uses online dispute resolution. Displaying the Offer (via hyperlink). Displaying the Offer (via hyperlink). How Offer Will Be Accepted. How Offer Will Be Accepted.  Amazon.com--Checkout.  “I Accept” Button to Click. Dispute Settlement Provisions. Dispute Settlement Provisions.  Choice of Law.  Choice of Forum.  E-Bay uses online dispute resolution. Displaying the Offer (via hyperlink). Displaying the Offer (via hyperlink). How Offer Will Be Accepted. How Offer Will Be Accepted.  Amazon.com--Checkout.  “I Accept” Button to Click.

73. © 2004 West Legal Studies in Business A Division of Thomson Learning 73 Online Acceptances Click-on Agreements. Click-on Agreements. Shrink-Wrap Agreements. Shrink-Wrap Agreements.  Contract terms are inside the box.  Party opening box agrees to terms by keeping merchandise. Enforceable Contract Terms. (UCC 2-204). Enforceable Contract Terms. (UCC 2-204). Additional Terms. Additional Terms. Click-on Agreements. Click-on Agreements. Shrink-Wrap Agreements. Shrink-Wrap Agreements.  Contract terms are inside the box.  Party opening box agrees to terms by keeping merchandise. Enforceable Contract Terms. (UCC 2-204). Enforceable Contract Terms. (UCC 2-204). Additional Terms. Additional Terms.

74. © 2004 West Legal Studies in Business A Division of Thomson Learning 74 Online Acceptances Click-On Agreements occur when Buyer “checks out” or clicks on “I Accept” button on Seller’s website or when software is installed. Click-On Agreements occur when Buyer “checks out” or clicks on “I Accept” button on Seller’s website or when software is installed. Browse-Wrap Terms. Browse-Wrap Terms. Case 11.5: Specht v. Netscape Communi- cations (2002). Case 11.5: Specht v. Netscape Communi- cations (2002). Click-On Agreements occur when Buyer “checks out” or clicks on “I Accept” button on Seller’s website or when software is installed. Click-On Agreements occur when Buyer “checks out” or clicks on “I Accept” button on Seller’s website or when software is installed. Browse-Wrap Terms. Browse-Wrap Terms. Case 11.5: Specht v. Netscape Communi- cations (2002). Case 11.5: Specht v. Netscape Communi- cations (2002).

75. © 2004 West Legal Studies in Business A Division of Thomson Learning 75 E-SignaturesE-Signatures E-Signature Technologies. E-Signature Technologies.  Asymmetric Cryptosystem.  Cyber Notary. State Law Governing E-Signatures. State Law Governing E-Signatures.  Uniform Electronic Transactions Act (1999). Federal Law. Federal Law.  E-SIGN (2000) gives e-signatures and e-documents legal force. E-Signature Technologies. E-Signature Technologies.  Asymmetric Cryptosystem.  Cyber Notary. State Law Governing E-Signatures. State Law Governing E-Signatures.  Uniform Electronic Transactions Act (1999). Federal Law. Federal Law.  E-SIGN (2000) gives e-signatures and e-documents legal force.

76. © 2004 West Legal Studies in Business A Division of Thomson Learning 76 UETAUETA Purpose is to remove barriers to forming electronic commerce. Purpose is to remove barriers to forming electronic commerce. E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” UETA applies only to e-records and e- signatures relating to a transaction. UETA applies only to e-records and e- signatures relating to a transaction. Purpose is to remove barriers to forming electronic commerce. Purpose is to remove barriers to forming electronic commerce. E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” UETA applies only to e-records and e- signatures relating to a transaction. UETA applies only to e-records and e- signatures relating to a transaction.

77. © 2004 West Legal Studies in Business A Division of Thomson Learning 77 UETA and E-SIGN E-SIGN explicitly refers to UETA. E-SIGN explicitly refers to UETA. Provides that E-SIGN is pre-empted by state passing of UETA. Provides that E-SIGN is pre-empted by state passing of UETA. But state law must conform to minimum E- SIGN procedures. But state law must conform to minimum E- SIGN procedures. E-SIGN explicitly refers to UETA. E-SIGN explicitly refers to UETA. Provides that E-SIGN is pre-empted by state passing of UETA. Provides that E-SIGN is pre-empted by state passing of UETA. But state law must conform to minimum E- SIGN procedures. But state law must conform to minimum E- SIGN procedures.

78. © 2004 West Legal Studies in Business A Division of Thomson Learning 78 Highlights of UETA Parties must agree to Conduct Transactions Electronically. Parties must agree to Conduct Transactions Electronically.  A party can “opt out” of UETA terms. Attribution—process to ensure person sending an electronic record is in fact the real person. Attribution—process to ensure person sending an electronic record is in fact the real person. Electronic Errors. Electronic Errors. “E-Mailbox” Rules. “E-Mailbox” Rules.  Dispatched when leaves control of sender.  Received when enters recipient’s processing system. Parties must agree to Conduct Transactions Electronically. Parties must agree to Conduct Transactions Electronically.  A party can “opt out” of UETA terms. Attribution—process to ensure person sending an electronic record is in fact the real person. Attribution—process to ensure person sending an electronic record is in fact the real person. Electronic Errors. Electronic Errors. “E-Mailbox” Rules. “E-Mailbox” Rules.  Dispatched when leaves control of sender.  Received when enters recipient’s processing system.

79. © 2004 West Legal Studies in Business A Division of Thomson Learning 79 UCITAUCITA Applies to computer information. Applies to computer information. Software is not a “good” but intellectual property. Software is not a “good” but intellectual property. Software is licensed, not sold; Software is licensed, not sold; License contract gives Buyer (Licensee) only specific rights. License contract gives Buyer (Licensee) only specific rights. Attribution and Authentication. Attribution and Authentication. Mass Market Licenses. Mass Market Licenses. Applies to computer information. Applies to computer information. Software is not a “good” but intellectual property. Software is not a “good” but intellectual property. Software is licensed, not sold; Software is licensed, not sold; License contract gives Buyer (Licensee) only specific rights. License contract gives Buyer (Licensee) only specific rights. Attribution and Authentication. Attribution and Authentication. Mass Market Licenses. Mass Market Licenses.

80. © 2004 West Legal Studies in Business A Division of Thomson Learning 80 Law on the Web National Conference of Commissioners. National Conference of Commissioners. National Conference of Commissioners National Conference of Commissioners U. Penn Final Draft of Uniform Laws. U. Penn Final Draft of Uniform Laws. U. Penn Final Draft of Uniform Laws U. Penn Final Draft of Uniform Laws UCC at Cornell U. UCC at Cornell U. UCC at Cornell U. UCC at Cornell U. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. National Conference of Commissioners. National Conference of Commissioners. National Conference of Commissioners National Conference of Commissioners U. Penn Final Draft of Uniform Laws. U. Penn Final Draft of Uniform Laws. U. Penn Final Draft of Uniform Laws U. Penn Final Draft of Uniform Laws UCC at Cornell U. UCC at Cornell U. UCC at Cornell U. UCC at Cornell U. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Commercial Law at Hale-Dorr. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web.