BADM 209 for Monday, March 29th

Slide 1: 

Chapter 11: Sales, Leases,and E-Contracts

Outline : 

Outline No class on Monday March 29th. Check Blackboard on Wednesday after 12:00 p.m. for class on Wednesday. I may need to do an online presentation for Wednesday If so, I will post an announcement on Blackboard Otherwise, assume we will have class in the classroom 2

Outline : 

Outline Office Hours are canceled for Monday & Wednesday If you need to meet with me send me and E-mail and I will arrange something so we can meet If my absence is causing a problem with you completing your assignments I will grant extensions 3

Outline : 

Outline Reminders: The next exam will be a take home exam. We will set the date on Wednesday. I will give everyone a week to do it. Check Blackboard for the homework for Chapter 11. If you have questions regarding this material post it on Blackboard in the message boards Thanks for the support with this! 4

§ 6: Performance of Sales and Lease Contracts : 

5 § 6: Performance of Sales and Lease Contracts Seller must transfer and deliver 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.

Good Faith Requirement : 

6 Good Faith Requirement Good Faith is the foundation of every UCC commercial contract. 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.

Obligations of the Seller or Lessor : 

7 Obligations of the Seller or Lessor Seller has a duty to “tender” delivery of “conforming goods.” Tender means “delivery” to agreed place: With reasonable notice. At a reasonable hour. In a reasonable manner. Exactly, unless otherwise agreed.

Place of Delivery : 

8 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 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.

The Perfect Tender Rule : 

9 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: Accept the goods; Reject the entire shipment; or Accept part and reject part.

Exceptions to the Perfect Tender Rule  : 

10 Exceptions to the Perfect Tender Rule  Agreement of the Parties. Cure. Substitution of Carriers. Installment contracts. Commercial Impracticability. Destruction of Identified goods. Cooperation and Assurance.

Exceptions: Agreement of the Parties : 

11 Exceptions: Agreement of the Parties Parties agree that some defective goods will be acceptable. Parties agree that defective goods can be replaced or repaired within a certain time.

Exceptions: Seller’s Cure : 

12 Exceptions: Seller’s Cure 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.

Exceptions: Substitution of Carriers : 

13 Exceptions: Substitution of Carriers If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable.

Exceptions: Commercial Impracticability : 

14 Exceptions: Commercial Impracticability Occurrence of an unforeseen contingency that makes performance impracticable. Nonoccurrence was a basic assumption on which the contract was made. If only partial impracticability, Seller must allocate what he/she has.

Exceptions: Commercial Impracticability : 

15 Exceptions: Commercial Impracticability Example: There was a contract to rent out a music hall at 100 pounds a day. The hall burned down before the concert took place. Was there a breach? Yes, the owner of the hall did not provide the hall as promised. But the owner’s performance is excused under impracticability doctrine. Performance is impossible and the court holds the owner ought not to bear the loss that the owner’s failure to perform imposes on the other party, the lost profits the promotor would have made.

Exceptions: Destruction of Identified Goods : 

16 Exceptions: Destruction of Identified Goods If no fault of either party and it occurs Before risk passes to Buyer then Both Seller and Buyer are excused from performance.

Exceptions: Cooperation : 

17 Exceptions: Cooperation 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. Buyer has the right to reject.

Obligations of the Buyer or Lessee : 

18 Obligations of the Buyer or Lessee Furnish facilities reasonably suited for receipt of 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.

Buyer’s Obligations : 

19 Buyer’s Obligations 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.

Acceptance : 

20 Acceptance 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.

Revocation of Acceptance : 

21 Revocation of Acceptance Notify Seller of breach. 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.

Anticipatory Repudiation : 

22 Anticipatory Repudiation Party communicates he will not perform by time of contract performance. Non-breaching party may suspend performance and: Treat the A.R. as material breach and pursue a remedy; or Wait a reasonable time.

§ 7: Remedies for Breach of Sales and Lease Contracts : 

23 § 7: Remedies for Breach of Sales and Lease Contracts Remedies of the Seller or Lessor: 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. Withhold delivery of all goods if Buyer is insolvent.

Remedies of the Seller or Lessor : 

24 Remedies of the Seller or Lessor 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.

Remedies of the Seller or Lessor : 

25 Remedies of the Seller or Lessor 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.

Remedies of the Seller or Lessor : 

26 Remedies of the Seller or Lessor 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.

Remedies of the Buyer : 

27 Remedies of the Buyer Right to Obtain Specific Performance. Right to Recover Damages. Right to Reject Non-Conforming Goods. Right to Recover Damages for Accepted Goods. Revocation of Acceptance. Case 11.3 Fitl v. Strek (2005).

Contractual Provisions Affecting Remedies : 

28 Contractual Provisions Affecting Remedies Limitation of Damages. Limitation of Remedies. Waiver of Defenses.

§ 8: Sales and Lease Warranties : 

29 § 8: Sales and Lease Warranties 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.

Warranty of Title : 

30 Warranty of Title Automatically arises in most commercial sales transactions. UCC-312 creates 3 warranties: Good Title. No Liens. No Infringements.

Disclaimer of Title Warranty : 

31 Disclaimer of Title Warranty 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.

Express Warranties : 

32 Express Warranties 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.

Express Warranties : 

33 Express Warranties 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.

Express Warranties : 

34 Express Warranties Statements of Opinion and Value. Generally excludes “puffing” – “Best car in town”, not an express warranty. However, expert opinion is not puffery.

Implied Warranties : 

35 Implied Warranties 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.

Implied Warranty of Merchantability : 

36 Implied Warranty of Merchantability Automatically arises from merchants. Goods are of average, fair, or medium-grade. Adequately packaged and labeled. Conform to promises on label. Have a consistent quality and quantity among the commercial units. Case 11.4 Webster v. Blue Ship Tea Room, Inc. (1964).

Implied Warranty of Fitness for a Particular Purpose : 

37 Implied Warranty of Fitness for a Particular Purpose 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.

Implied Warranty Arising from Course of Dealing or Trade Usage : 

38 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.

Warranty Disclaimers : 

39 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). Warranty Disclaimers

Warranty Disclaimers : 

40 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. Warranty Disclaimers

§ 9: E-Contracts : 

41 § 9: E-Contracts Most courts find E-Contracts involve basic principles of contract law, applied in the online context. 

Online Offers : 

42 Online Offers Displaying the Offer (via hyperlink). Case 11.5 Feldman v. Google, Inc. (2007). Online Offers should include: Remedies for Buyer. Statute of Limitations. What constitutes Buyer’s acceptance. Method of Payment. Seller’s Refund and Return Policies. 

Online Offers : 

43 Online Offers Online Offers should include …. Disclaimers of Liability. How Seller will Use Buyer’s Information (Privacy). Dispute Settlement Provisions. Choice of Law. Choice of Forum. E-Bay uses online dispute resolution. How Offer Will Be Accepted. Amazon.com--Checkout./ “I Accept” Button.

Online Acceptances : 

44 Online Acceptances Click-on 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). Additional Terms.

Online Acceptances : 

45 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. Browse-Wrap Terms.

E-Signatures : 

46 E-Signatures E-Signature Technologies. Asymmetric Cryptosystem. Cyber Notary. State Law Governing E-Signatures. Uniform Electronic Transactions Act (1999). Federal Law. E-SIGN (2000) gives e-signatures and e-documents legal force.

Uniform Electronic Transactions Act : 

47 Uniform Electronic Transactions Act 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.” UETA applies only to e-records and e-signatures relating to a transaction.

UETA and E-SIGN : 

48 UETA and E-SIGN E-SIGN explicitly refers to UETA. Provides that E-SIGN is pre-empted by state passing of UETA. But state law must conform to minimum E-SIGN procedures.

Highlights of UETA : 

49 Highlights of UETA 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. Electronic Errors. “E-Mailbox” Rules. Dispatched when leaves control of sender. Received when enters recipient’s processing system.