Law Exam 2
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What contracts are subject to sales law
- 1. Contracts to the sale of goods
- 2. Not for sale of goods are not subject to sales law
- 3. Predominant purpose of the contract determines if sales law.
elements to form the agreement. Which necessary under sales law.
- 1. Mutual Assent - changes
- 2. Consideration - none
- 3. Capacity - does not change
- 4. Legality - does not change
- 5. Writing – changes
How is Mutual Assent different under sales
- 1. don’t need definite TERMS
- 2. don’t need to ACCEPT in the manner specified
- 3. don’t need to MIRROR.
- 4. Does not change INTENT OR COMMUNICIATION
- 5. Only need to agree on QUALITY.
How does writing change under sales
- 1. For sales $500 or more a writing needed
- 2. Any writing will do as long as you have quantity and the signature of party you are suing
Writing not required for sales
- 1. When party you are suing is a MERCHANT
- 2. When party you are suing received a written MEMO from you
- 3. When party you are suing did not object in writing within 10 DAYS of his receipt of memo
General rule of seller
cannot pass better title to goods than he has
Exceptions to General rule of seller
- 1. Person who has a VOIDABLE title
- 2. A buyer in ordinary course of retailer’s business usually takes free of any INTERESTS in the goods that the retailer has given to others
- 3. A person who buys goods in the ordinary course of a dealer’s business takes free of any claims of a person who ENTRUSTED those goods to the dealer.
Ways contract ended in regular contract law
- 1. COURT, operation of law – does not change
- 2.AGREEMENT of the parties – does not change except you don’t need consideration
- 3. BREACH – no
- 4. PERFORMANCE – no
Ways to end contract by court
- 1. COMMERCIAL impracticability
- 2. Statute of LIMITATIONS
- 3. IMPOSSIBILITY
- 4. FRUSTRATION of purpose
- 5. BANKRUPTCY
Duties of the buyer - accept
- 1. Every time buyer gets right to INSPECT even if he pays to deliver gets to inspect before accept
- 2. Inspecting for PATENT defects which are obvious on the face of it
- 3. If inspection okay then ACCEPT and pay
- 4. If not okay then REJECT
Duty of buyer - How to reject
- 1. Reject by WRITING and with a basis
- 2. Need to ALLOW cure if commercially reasonable
- 3. If merchant and goods are deteriorating then must SELL on behalf of the seller. Such as selling potatoes expired in transit to the cows.
- 4. HOLD the goods safe
- 5. If seller cures then buyer must PAY
Duty of buyer - Pay
- 1. Can get out if paid by revoking acceptance, but only when LATENT defect that could not be found on reasonable inspection
- 2. Still ALLOW to cure
- 3. Revoke same way you reject in WRITING and with a basis
Duties of seller
- 1. DELIVER the goods
- 2. CONFORMING good
Duties of the seller - deliver the goods
To the PLACE that is in the contract FOB (xxxx)
Duties of the seller - conforming goods
- 1. in general goods MUST conform, different than reasonable and material
- 2. FUNGIBLE goods like grain and potatoes then generally need to be the same, not every kernel
Sellers remedies - Buyer refuses to go ahead and SELLER HAS THE GOODS
- 1. Seller may CANCEL contract
- 2. If seller is in the process of manufacturing, he may COMPETE manufacture or
- 3. stop and sell for SCRAP, picking alternative that in his judgment at the time will minimize the seller’s loss.
- 4. Seller can RESELL goods covered by contract and recover difference between contract price and proceeds of resale.
- 5. Seller may recover purchase PRICE where resale is not possible
- 6. Seller may recover damages for breach based on differences between contract price and MARKET price, or
- 7. recover in some cases based on lost PROFITS.
Sellers remedies - Buyer refuses to go ahead BUYER HAS THE GOODS
- 1. Seller may recover purchase PRICE
- 2. Seller may RECLAIM goods in possession of insolvent buyer by making a demand within 10 days after their receipt.
- 3. If the buyer REPRESENTED solvency to the seller in writing within three months before delivery, the 10-day limitation does not apply.
Sellers remedies - Goods Are in TRANSIT
- 1. Seller may stop ANY size shipment if buyer is insolvent
- 2. seller may stop carload, truckload, planeload, or other LARGE shipment for reasons other than buyer’s insolvency.
- 1. Buyer refuses to go ahead and SELLER HAS THE GOODS
- 2. Buyer refuses to go ahead BUYER HAS THE GOODS
- 3. Goods Are in Transit
Buyer’s remedies - seller fails or delivers nonconforming that buyer REJECTS
- 1. Buyer may CANCEL the contract and recover damages
- 2. Buyer may "cover" by obtaining SUBSTITUTE goods and recover difference between contract price and cost of cover
- 3. Buyer may recover damages for breach based on difference between contract price and MARKET price
Buyer’s remedies - Seller delivers nonconforming goods that are ACCEPTED
Buyer may recover damages based on difference between value of goods received and the value of goods if they had been as warranted.
Buyer’s remedies - seller has the goods but REFUSES to deliver
- 1. Buyer may seek SPECIFIC performance if goods are unique and cannot be obtained elsewhere
- 2. Buyer may REPLEVY (obtain from the seller) goods identified to contract if buyer cannot obtain cover.
- 1. seller fails or delivers nonconforming that buyer REJECTS
- 2. Seller delivers nonconforming goods that are ACCEPTED
- 3. seller has the goods but REFUSES to deliver
Sales statute of limitations
1. 1-4 years with 4 years the default.
Firm offer under sales
- 1. Written by a merchant that it will be held open is IRREVOCABLE for a period of up to 3 MONTHS.
- 2. Firm offer in regular contract law did not have any way to hold offer out unless paid to do it because merchant could revoke as
- soon as they made it.
- 1. If any time during contract DOUBT other side will perform can ask other side for reasonable assurance.
- 2. If you ask they must VERIFY in writing they will perform. If they do not you can call breach at that point.
- 3. Important because you can call a breach SOONER.
- 4. If goods are in buyer’s possession. May RECLAIM goods in possession of insolvent buyer by making a demand within 10 days after their receipt.
- 5. If Buyer represented solvency within 3 MONTHS before delivery the 10 DAY limitation does not apply.
- 6. If they were insolvent they will sell goods off and you have a hard time getting them back.
Risk of loss concept
- 1. Does not pass to anyone else if goods are not conforming.
- 2. Only time get risk of loss is when deliver conforming good
Risk of loss - who suffers when damaged
- 1. If merchant to consumer risk on MERCHANT until consumer gets possession
- 2. If merchant to merchant or consumer to consumer then on TENDER of delivery (you tender the delivery at the place you are supposed to)
- 3. By AGREEMENT of the parties you can change this: By FOB – (xxx) xxx = shipping, destination-designates where risk of loss changes.
How Sales Contract put together
- 1. Contract formed by QUANTITY
- 2. By all the AGREED upon terms
- 3. If not agree on terms then the ACCEPTORS terms, except
- a. The offer says CAN'T change them
- b. If they materially ALTER the offer
- c. If they are REJECT within a reasonable time
Former contracts of the parties (how the
contract put together)
- 1. Industry standards
- 2. Whatever the judge thinks necessary
Example: I want to buy 200 widgets from you for $90, you send back conforming memorandum stating I will sell you 200 widgets but I want $100, at that point we have a contract for 200. Judge will say agreed on everything but the price so will be the acceptor’s terms (guy that offered $100) unless.
- 1. The offer says can’t change them
- 2. If they materially alter the offer (Is $10 a material alter of $90)
- 3. If they are rejected within a reasonable time
Areas of Product Liability can sue you for
- 1. warranty
- 2. negligence
- 3. strict liability
Types of warranty
- 1. Express warranty
- 2. Implied Warranty
Ways to create an express warranty
- 1. DESCRIBE the product
- 2. Give a SAMPLE of product
- 3. REPRESENT what the product will do
Types of implied warranty
- 1. Implied Warranty of MERCHANTABILITY
- 2. Implied warranty of FITNESS for a particular purpose
- 3. Implied Warranty of TITLE
to be merchantable goods under warranty of Merchantability goods must
- 1. Adequately package and LABELED
- 2. EVEN kind and quality
- 3. Fair AVERAGE quality in the case of fungible goods
- 4. FIT for ordinary purpose for which such goods are sold
- 5. Pass without OBJECTION in the trade
- 6. CONFORM to any promises or statements on the label
Where implied warranty of fitness for a particular purpose arises
- 1. the seller has reason to know a particular PURPOSE for which the buyer requires the goods
- 2. the seller has reason to know that the buyer is RELYING on the seller’s skill or judgment for the selection of suitable
- 3. the buyer ACTUALLY relies on the seller’s skill or judgment in purchasing the goods.
Defenses to warranty suit
Defenses to warranty suit - privity
- 1. The only reason you can sue someone is that you are the contracting party.
- 2. Liberal Judges can say no Privity and allow wife sue when husband bought the iron.
- 3. Currently it is “is it reasonable to think a person applicable to the warranty”
Defenses to warranty suit - disclaimer
- 1. OBVIOUS
- 2. In Merchantability must say “MERCHANTABILITY”
- 3. Good idea to just state ALL the implied warranties
- 4. Also rid of implied with “AS IS”
- 5. Can rid EXPRESS with statement
- as well can fall into unconscionability Because it normally is unreasonable for a seller to EXCLUDE WITH ONE HAND what he has freely and OPENLY PROMISED WITH THE OTHER it is quite difficult to disclaim an express warranty.
Types of negligence claims
- 1. negligent failure to provide adequate WARNINGS
- 2. negligent INSPECTION
- 3. negligent MANUFACTURE of the goods-including improper materials and packaging
- 4. negligent DESIGN
Plaintiff must prove in negligence cases
- 1. BREACH of duty
- 2. CONNECTION
- 3. there IS damage
- 4. PROXIMATE cause of damage
Defenses to negligence
- 1. COMPARATIVE negligence compare negligence of plaintiff to the defendant and if the plaintiff more negligent than the defendant then they can’t win
- 2. CONTRIBUTORY negligence the guy suing you also negligent (easier in southern states)
- 3. ASSUMPTION of risk buyer assumes the risk, only when very dangerous products like
- 4. SUPERVENING intervening cause. I was negligent but something else caused your injury. Like causing the car crash but the doctor operated on the wrong leg.
Strict Liability history
Plaintiff lawyers came up with new way to sue business people
Strict Liability - What need to prove
- 1. It was unreasonably DANGEROUS
- 2. This was a DEFECT in the product
- 3. It did physical INJURY to you or property
- 4. Get an EXPERT to testify like the McDonalds case
- 5. Prove person selling was the SELLER (mfg,retailer, wholesaler)
Strict Liability - Defenses
- 1. COMPARATIVE fault-If plaintiff more at fault than defendant then plaintiff can’t win
- 2. They CHANGED the product
- 3. I didn’t HANDLE the product (wholesaler’s defense)
- 4. ASSUMPTION of the risk
- 5. They used it WRONG
when Magnason-moss act applies
Used for personal family or household purposes and costs more than $10
Magnason-moss act - What it does
- 1. If a seller gives a written warranty for such a product to a consumer, the warranty must be DESIGNATED as full or limited.
- 2. A seller who gives a FULL warranty promises to
- a. REMEDY any defects in the product
- b. REPLACE the product or refund its purchase price if, after a reasonable number of attempts, it cannot be repaired
- 3. A seller who gives a LIMITED warranty is bound to whatever promises it actually makes
- 4. NEITHER warranty applies if the seller simply declines to give a written warranty
Misrepresentation is tort just like negligence
- 1. Involves FRAUDULENT, INNOCENT, or NEGLIGENT of a material fact about the product
- 2. Only applies in Idaho to ACCOUNTANTS-only ones who can be sue for misrepresentation in Idaho
Ways to end a contract-Agreement of the parties
- 1. Waiver
- 2. Accord and satisfaction
- 3. Alteration
- 4. Mutual Agreement
Types of illegal contracts
- 1. Agreements to commit a CRIME
- 2. against public POLICY - set by precedent of courts
- 3. LEGISLATURE declares illegal
When in writing in Idaho
- 1. REAL property except less than one year
- 2. Agreements lasting MORE than one year
- 3. MARRIAGE agreements such as prenuptuals
- 4. LOANS over $50K
Types of equitable damages
- 1. SPECIFIC performance - order to perform duty
- 2. INJUNCTION - order to do or refrain from something
- 3. RESTITUTION -consideration or amount defendant enriched returned
- 4. RESTORATION - restore the contract to how actually performed
- 5. QUASI-contract - create contract where none existed to prevent unjust enrichment
Types of legal damages
- 1. PUNITIVE - above compensatory
- 2. LIQUIDATED - specified sum in the contract
- 3. COMPENSATORY - compensate for losses and lost gains
- 4. CONSEQUENTIAL - compensate for losses that occurred due to the breach
- 5. NOMINAL - very small
Ways contract ended by public policy
- 1. restrictions on restraint of TRADE
- 2. EXCULPATORY
- 3. contracts of ADHESION
- 4. UNCONSCIONABLE
Exceptions to capacity to contract
Exceptions to minors rights to disaffirm
- 1. PUBLIC transportation
- 2. LIFE and medical insurance
- 3. agreements to support CHILDREN
- 4. MARRIAGE contracts
- 5. EDUCATION loans
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