Contracts for the Sale of Goods & Warranties

Law A

The Sale and Lease of Goods

Law of sales applies when ownership of goods is transferred from seller to buyer for consideration

When a contract includes both goods and services, the dominant element of the contract determines whether it is a contract for goods or a contract for services

The Sale and Lease of Goods

Special rules for sales include:

1. Contracts may result from the parties’ conduct

2. An offer may be accepted by any reasonable means

3. An acceptance may include terms that differ from those in the offer

4. The price need not be settled

5. Output and requirements contracts are allowed

6. Contracts may be modified without consideration

7. Firm offer – is a merchants written promise to hold an offer open for the sale of goods. If a time frame is not specified, there is a time limit of three months

The Sale and Lease of Goods

Contracts for the sale of goods of $500 must be in writing

Exceptions: Oral contracts between merchants

Oral contracts for specially manufactured goods

Admissions in court

Ownership and Risk of Loss

Title is passed from a seller to a buyer after the goods have been identified

The risk of loss is created when the contract is created

Usually, title and risk pass at the same time

Ownership and Risk of Loss

When a BUYER breaches a sales contract Cancel contract

Withhold delivery

Stop delivery

Resell goods and bring a claim for any difference in cost

When a SELLER breaches a sales contract Cancel contract

Bring a claim for the return of money

Cover the sale

Revoke the acceptance

E-Commerce and the Law

When shopping on the Internet Shop with companies you know

Keep password private

Pay by credit or use accounts such as PayPal

Keep a record

The federal law permits using E-sign on a contract if the parties agree

Know your rights and protect your information

Express and Implied Warranties

Warranty is another name for guarantee

Oral or written statement about the quality, ability, or performance of a product

Given by manufacturers or sellers

Merchants must label warranties as either full or limited

Full warranty promises to fix or replace a defective product at no extra cost to the consumer

Limited warranty is any written warranty that does cover all that would be covered in a full warranty

Implied Warranties

Guarantee of quality imposed by law

Warranty of fitness for a particular purpose – is created when the seller knows the purpose for which the goods are needed

Warranty of merchantability – the merchant warrants that the goods being sold are merchantable

Usage of trade – providing documentation when involved in trading items of value

Warranty of Title – seller warrants that the title being conveyed is good and legal

Consumer Protection

Consumer is someone who buys or leases goods and services

Unfair and deceptive Practice - is an act that misleads consumers

Fraudulent Misrepresentation – any statement the deceives the buyer Convinced to purchase by persuasion

Seller misstates the facts about something that is important to the consumer

False Advertising

Bait and Switch Advertising Store advertises bargains that do not really exist

Used to get customers in the door

This practice is illegal

Example: Irma was looking for a new Blue-ray player and saw one advertised on sale for $70. When Irma went to buy one, the clerk discouraged her by pointing out the player’s faults. Instead, he tried to sell her the player that cost $150.

Product Liability

Product liability law states that someone who is injured from a product’s unsafe or defective condition may recover damages

Strict liability – makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous

EXAMPLE: Jackson leased a truck from Ryder Truck Rental. When he stopped at a traffic light, the brakes failed and Jackson hit the car in front of him. Meantime, the driver of the other car, was injured. The Delaware Supreme Court ruled that Ryder could be held liable, even without proof that the company was negligent.

POP QUIZ!

Edwin Jones is a professional musician and is interested in buying a Carapoli violin. Carapoli offers in writing to make a violin for $22,000. When Jones wants to enforce the terms four months later, Carapoli refuses. Can Jones enforce Carapoli’s original offer?

No. Although the offer is in writing, it exceeds the three-month time limit set by law.

POP QUIZ!!

What is the difference between an express warranty and an implied warranty?

Express: provided by the seller

Implied: imposed by law