Section 13.1
The Sale and Lease of Goods
Contracts
for
the
Section
13.1
The
Sale
and
Lease
of Goods
Chapter 13
Sale of Goods
Section 13.1
The Sale and Lease of Goods
Section 13.2
Ownership and Risk of Loss in Sales
or Goods
Section 13.3
E-Commerce and the Law
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
What You’ll Learn
When to apply the law of sales in your
daily life (p. 268)
How to describe the special rules for
sales contracts (p. 270)
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
What You’ll Learn
How to determine when sales contracts
must be in writing (p. 272)
How to explain the rules for auctions and
bulk sales (p. 274)
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Why It’s Important
As you learn more about the law of sales,
you will be better able to protect your legal
rights and your money when buying or
selling a product.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Legal Terms
sale (p. 268)
price (p. 268)
goods (p. 268)
Uniform Commercial Code (UCC) (p. 268)
contract to sell (p. 269)
merchant (p. 270)
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Legal Terms
usage of trade (p.270)
firm offer (p. 272)
output contract (p. 272)
requirement contract (p. 272)
auction with/without reserve (p. 274)
bulk transfer (p. 275)
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section Outline
Sales
The Sales Contract
Contracts for Both Goods and Services
Special Rules for Sales Contracts
Leasing Goods
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section Outline
Form of Sales Contracts
Other Sales Governed by UCC Rules
Auction Sales
Bulk Transfers
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Pre-Learning Question
How often do you enter into sales
contracts?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Sales
The law of sales governs contracts for
the sale and lease of goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Sales
A sale is a contract in which
ownership of goods is transferred
from the seller to the buyer for
consideration.
The consideration is also known as
the price, or the money that is paid
for goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Sales
Goods are all things that are
moveable, such as your clothing,
books, pens, food, car, and even
the gas you put in your car.
Money, stocks, and bonds are not
considered goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
13.1 13.1 The Sale and Lease of Goods
Section
Sales
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Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
The UCC
The Uniform Commercial Code
(UCC) is a collection of laws that
governs various types of business
transactions.
When you have a contract involving
goods, the UCC will apply.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
The Sales Contract
A sales contract may involve either a
sale or a contract to sell.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
The Sales Contract
Every time you buy goods and take
ownership of them, a sale occurs.
However, if you will take ownership
at some future time, the agreement
is a contract to sell, not a sale.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Contracts for Both Goods
and Services
When a contract includes both goods
and services, the dominant element
determines the type of contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Contracts for Both Goods
and Services
If the sale of goods dominates, the
laws of the UCC apply.
If the performance of service
dominates, the common law of
contract applies.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Special Rules for Sales Contracts
With some exceptions, the UCC
applies to all sellers and buyers of
goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Special Rules for Sales Contracts
A merchant is a business or person
who deals regularly in the sale of
goods or who has a specialized
knowledge of goods.
A nonmerchant is a casual or
occasional seller.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Special Rules for Sales Contracts
A sales contract must contain the
same elements as other contracts, but
the UCC has relaxed some of the
strict rules of contract law.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Good Faith
Parties to a sales contract must treat
each other fairly.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Methods of Dealing
and Usage of Trade
When parties have previously dealt
with each other, those methods of
dealing may be used to supplement or
qualify the terms of their sales
contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Methods of Dealing
and Usage of Trade
This rule is true with any usage of
trade, which is the method of dealing
that is commonly used in the particular
field.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Formation of a Sales Contract
You may make a contract in any
manner that shows that the parties
have reached an agreement.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Acceptance of an Offer
In most situations, you may accept an
offer by any means and in any
reasonable manner.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Different or Additional Terms
An acceptance may have different or
additional terms added without a
complete rejection of the offer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Firm Offer
A firm offer is a merchant’s written
promise to hold an offer open for the
sale of goods.
It does not require payment to be
binding.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Open-Price Terms
A sales contract may be made without
a settled price.
Unless the parties agree on a price
prior to delivery, a reasonable price
can be settled at the time of delivery.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Output and Requirement Terms
Output and requirement contracts are
allowed even if they are not definite.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Output and Requirement Terms
An agreement to buy all of the
manufacturer’s goods is an
output contract.
A requirement contract occurs
when a seller agrees to supply the
needs of a buyer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Modification
No consideration is necessary to
change a contract for the sale of
goods. The modification may be oral,
unless the original agreement is in
writing and states that it must be
modified in writing.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Leasing Goods
You can apply the sale-of-goods rules
to the leasing of goods, with a few
modifications.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Pre-Learning Question
Do you think sales contracts are
enforceable if they are oral and not
written?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Form of Sales Contracts
Many sales contracts are oral rather
than written. As long as the price is
less than $500, an oral contract for the
sale of goods is enforceable.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Form of Sales Contracts
If the price is $500 or more, a sales
contract must be in writing to be
enforceable with the following
exceptions:
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Exceptions to the $500 rule
Written confirmation of an oral
contract between two merchants is
sent within a reasonable time, and
no objection is made within ten
days.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Exceptions to the $500 rule
The contract involves specially
manufactured goods that cannot be
resold easily.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Exceptions to the $500 rule
The buyer receives and accepts the
goods or pays for them.
The parties admit in court that they
entered into an oral contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Anton Carapoli makes handcrafted
violins for professional musicians. His
instruments are famous and sell for
over $20,000.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
If Carapoli and a buyer contract orally
for a violin, is the contract enforceable
if the buyer later refuses to pay the
agreed sum?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
ANSWER
Yes. A Carapoli violin is a specially
manufactured good.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Pre-Learning Question
What other types of sales might be
governed by UCC rules?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Other Sales Governed
by UCC Rules
Other sales governed by the UCC
rules include auction sales and bulk
transfers.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Auction Sales
In an auction with reserve, the
auctioneer does not have to sell the
goods for the highest bid if it’s lower
than the reserve amount. The
auctioneer may withdraw the goods
at any time before a sale is
completed.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Auction Sales
In an auction without reserve, the
auctioneer must sell the goods to the
highest bidder. The goods cannot be
withdrawn from bidding unless no bid
is made.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Auction Sales
An auction sale is with reserve unless
it is expressly stated that it is without
reserve.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Bulk Transfers
Sometimes a business transfers all
merchandise and supplies at once,
which is known as a bulk transfer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Bulk Transfers
The UCC rules require that the buyer
of the bulk goods notify all of the
seller’s creditors at least ten days
before the transfer will take place.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
1. When do you use the law of sales?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
For the sale and lease of goods
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
2. What special rules apply to sales
contracts?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
Must be in good faith; may be
supplemented with methods of dealing and
usage of trade; may result from the parties’
conduct; offer may be accepted by any
reasonable means;
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
acceptance may include terms different
than those in offer; consideration not
required for firm offer; price need not be
settled; output and requirement contracts
allowed; may be modified without
consideration.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
3. When must sales contracts be in
writing? What are the exceptions?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
For sale of goods for $500. Exceptions:
oral contracts between two merchants
when a confirmation is sent and no
objection made; oral contracts for specially
manufactured goods; admissions in court;
executed oral contracts
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
4. What are some rules for auctions
and bulk sales?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
In an auction with reserve, the auctioneer
need not accept the highest bid. In an
auction without reserve, the auctioneer
must accept the highest bid.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
The UCC rules require that the buyer of
bulk goods in a bulk transfer notify all of the
seller’s creditors at least ten days before
the transfer will take place.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Critical Thinking Activity
Law of Sales
When you contract for something that
includes both goods and services, such as
having wall-to-wall carpeting installed in
your home, how should you determine
whether to apply the law of sales?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Critical Thinking Activity Answer
Law of Sales
If the sale of goods is dominant, the laws of
the UCC apply. If the performance of
services is dominant, the common law of
contract applies.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Legal Skills in Action
Auctions
Conduct a two-part mock auction of music
CDs in front of your class.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Legal Skills in Action
Auctions
Have your classmates bring in CDs to be
auctioned. (Be sure to mention that
everything will be returned to the rightful
owners after the auction.)
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Legal Skills in Action
Auctions
Arrange for the first part of the role-play to
be an auction without reserve and for the
second part to be an auction with reserve.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.1 The Sale and Lease of Goods
Section 13.1 Assessment
Legal Skills in Action Answer
Auctions
Mock auctions will vary, but should
recognize the differences between auctions
with and without reserve.
Understanding Business and Personal Law
Contracts for the Sale of Goods
End of Section 13.1
The Sale and Lease of Goods