Chapter 9

Contracts for theSale of Goods

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9-2

UCC Coverage

• The UCC applies only to sales contracts that are agreements for the sale of goods.

• The UCC defines goods as:(1) tangible (i.e., has a physical existence, such as a laptop computer)

(2) moveable from place to place.

9-3

Offers with Open Terms

• Quantity

• Delivery

• Price

• Payment

9-4

Firm Offers by Merchants

A firm offer is created when a merchant offers to sell goods, in a writing that promises the offer will be held open for a certain time period.

9-5

Consideration

• UCC allows contracts to be modified without any additional consideration.

• The UCC recognizes market conditions are not static and the parties may have good faith reasons for modifying a contract but want it to remain enforceable.

9-6

Statute of Frauds

Any sales contract for goods with a total value of $500 or more must be in writing.

9-7

Title

A party holds title to a good when:

(1) the goods are actually in existence in tangible form, and

(2) when the goods are identified to the contract.

9-8

Risk of Loss – Shipment Contract

• The risk of loss is on the seller only until the seller has delivered the goods to the carrier.

• If the goods are destroyed at any point after that, such as during shipping, the loss is borne by the buyer.

9-9

Risk of Loss – Destination Contract

• Requires the seller to deliver the goods to a specified destination, typically the buyer’s place of business or home.

• Any loss will be borne by seller until the goods are delivered to buyer.

9-10

Goods Picked Up by the Buyer

• If the seller is a merchant, the risk of loss to goods held by the seller passes to the buyer only when the buyer takes physical possession of the goods.

• If the seller is not a merchant, the risk of loss to goods held by the seller passes to the buyer on tender of the goods.

9-11

Seller’s Obligations and Rights

• The seller’s primary obligation is to transfer or deliver conforming goods to the buyer.

• Perfect tender rule

• If the seller has delivered goods and the buyer rejects them under the perfect tender rule, the seller has the right to repair or replace (cure) the rejected goods so long as the time period for performance has not expired.

9-12

Buyer’s Rights and Obligations

• Buyer’s Right of Inspection: Acceptance or Rejection

• After seller tenders delivery and buyer has accepted the goods, buyer must pay for them in accordance with the contract.

9-13

Seller’s Remedies

• The choice of remedies depends on when the breach occurs relative to whether the goods have been delivered:– Goods in Hands of Seller– Goods in Hands of Buyer

• Usually involves lawsuit for monetary damages under either scenario

9-14

Remedies Available to the Buyer

• Rejection of Goods – Seasonable notification

• Cover– Substitute goods

• Lawsuit for Money Damages

• Specific Performance– Unique

9-15

Remedies Following Acceptance of Nonconforming Goods

• Revocation of Acceptance

• Lawsuit for Money Damages