Chapter 13: Sales
Contracts
Brian Messing, Armen Tooloee, Cole Pugliano
13-1 Sales
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What is a sale?
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A contract where ownership of goods is transferred from the seller to the
buyer immediately
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Ownership is a collection of rights over a certain piece of property
○
These rights include the right to hold title, possess, use, make profit from,
waste, and even destroy.
○
Vendor = Seller
○
Vendee = Buyer
○
If the transfer of goods is going to take place in the future it is called a
contract to sell.
○
When goods or services are exchanged for other goods or services it is
considered bartering.
13-1 Sales
● What are goods?
○ UCC (uniform commercial code) defines them as tangible, movable
items that are perceptible to the touch
○ Defines non-goods as the following
■ money
■ legal rights
■ patents, copyrights etc.
■ real property (land and buildings)
13-1 Sales
•
•
•
•
Payment: Buyer transfers agreed-upon consideration, seller accepts it.
Delivery: Act by which the subject matter of the contract is placed in the
possession of the buyer.
Receipt of Goods: Buyer takes physical possession or control of the
goods.
Bill of Sale: Written evidence of the transfer of ownership.
13-1 Sales
•
Acceptance of Goods: When the buyer has agreed, and the goods
received are conforming, or a satisfactory accommodation.
o Conforming Goods: Goods that specifically fulfil the seller’s
obligations
o Accommodation: An arrangement if the seller is unable to provide
conforming goods, instead they provide non-conforming goods.
o Non-Conforming Goods: Goods that may suffice.
o Perfect Tender Rule: Enforced by the UCC. Requires the tender of
goods to match the buyer’s order absolutely.
Contracts that aren’t Sales
● If the primary purpose of a contract is a service it is not a sale
○ Goods may be included but are not the primary purpose
● An example would be hiring a contractor to fix your roof
○ If you paid for the labor and the materials were included it would
not be a sale.
What’s Your Verdict
At the Dan-Dee Discount Department Store, Jack and Jean Medina signed a
contract to buy a clothes washer and dryer set. The Dan-Dee salesperson
explained that although the set on display was not in stock, “We will
deliver and install it within two weeks.” While shopping at the store, the
Medinas left their car in the store’s automobile service department to
have the engine’s idling speed adjusted and to have squeaks in the door
eliminated. The charge for labor was $45. There was no charge for parts
or supplies. The service attendant recommended replacing the car’s tires,
and the Medinas agreed. The cost of the tires was $300, plus $25 for
balancing and installation. The Medinas also bought a new battery for $59.
It was installed free of charge.
Which of the transactions were sales?
What’s Your Verdict
● The contract for the washer was a
contract to sell because it will
happen in 2 weeks
● The car repairs were not a sale
because the contract was for a service
not goods.
● The purchase of tires and a battery
were a sale
Jack and Jean Medina
13-2 Special Rules for Sales Contracts
-A Merchant is someone who
regularly sells products and
is held to a higher standard
-A Casual Seller is somebody
who does not sell something
regularly but does on
occasion
-A Merchant is a Car
Salesman
-A Casual Seller is a guy
selling his own car
Too bad we also can’t hold them to a
higher standard of dress!
13-2 Special Rules for Sales Contracts
-Generally sales contracts are enforceable whether or
not they are written, oral or implied from the conduct
of the parties
-However the Statute of Frauds states that with goods
valued at $500 or more the contract must be written to
be enforced in court
13-2
Special Rules for Sales Contracts
-It is good business
practice to have all
contracts written
-However not all
contracts need to
be written
13-2 Special Rules for Sales Contracts
-Receiving goods does not
execute a contract
-Both a receipt and
acceptance are necessary
-If the buyer has
received/accepted only
some of the goods, the
contract is only good for
the portion of the goods
accepted
13-2 Special Rules for Sales
Contracts
Example A: Tooloee vs. MATC
Armen orally agreed to supply the
Messing Aerospace Technology
Corporation (MATC) with packing
cases made to MATC’s specifications.
The cases were to be used overseas.
After the specification was received
Armen began production. After
substantial progress was made, MATC
cancelled the project that would use
the cases. Armen sued MATC, but
MATC raised the Statute of Frauds by
saying that was no contract. Who is
right?
Thanks, Armen!
13-2 Special Rules for Sales
Contracts
-Usually contracts that are
not written and are over
$500 are not enforceable.
However since this was an
agreement specifically for
manufactured goods and
Armen began production
of them and had an
agreement of any kind he
is right.
Judge Lou “the Loser” Lewiston
13-2 Special Rules for Sales Contracts
-Example B: Pugliano vs. Messing
Cole entered into negotiations to buy
a car. Cole gave Messing Motors a
check for $455.00 as a deposit. On
the check Cole wrote “agreement to
purchase and deposit subject to
inspection and vehicle financing.”
On the back of the check Cole wrote
“agreement to purchase and deposit
subject to vehicle inspection,
application,of all manufacturer's and
dealers warranties, and ability to
obtain financing.” When Messing
Motors attempted to raise the
purchase price, Cole sued to enforce
the contract. Who is right?
Brian Messing in Twenty Years
13-2 Special Rules for Sales Contracts
-The court ruled that the writing on
the check was evidence of a
contract and ruled in favor of
Cole. The deposit was part
performance of the contract and is
such an exception to the writing
requirement of the statute of
frauds. Ordinarily part
performance is only good for part
of a car, however a car is
indivisible.
Brian Messing in Twenty-One Years
13-2 Special Rules for Sales Contracts
Define these terms!
-Statute of Frauds
-Merchants
-Resell
-Suing
-non-resalable