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82 Cards in this Set
- Front
- Back
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What does Article 2 of the UCC cover? |
A sale of goods involves the transfer of ownership to tangible personal property in exchange for money, other goods, or the performance of services. Does not specifically apply to trade in services. |
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What does Article 2A of the UCC cover? |
Leasing large goods, such as manufacturing or agricultural equipment, is common. This article covers the lease of goods. |
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What are goods? |
Tangible Personal Property |
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What is a "hybrid" or "mixed" contract? |
A contract where a service is provided with the use of a good |
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How do you determine if a "mixed" or "hybrid" good is covered by Article 2? |
Determine whether the service element or the good element is the predominant factor to determine if it is governed by common law (services) or UCC (goods) |
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What is the Price Gap Filler?
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If price was omitted, UCC 2-305 fills the gap by providing the term: reasonable price at the time of delivery |
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What is an outputs contract? |
An agreement in which buyer purchases all produce of seller |
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What is a requirements contract? |
An agreement in which a seller must provide all requirements for buyer's production to the buyer |
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What is the gap filler for where goods are to be delivered? |
If the contract is silent about the place for delivery, the goods are to be delivered at the seller's place of business (2-308(a)). The only exception to this rule is in the case of contracts dealing with identified goods that both parties at the same time of contracting know are located someplace other than the seller's place of business. In such a case, the site of the goods is the place for delivery (2-308(b)). |
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Define Title
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Evidence of legal ownership |
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Title to goods cannot pass from seller to buyer until what? |
Goods are identified to the contract |
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When does title pass? |
Parties may agree when title passes. If no agreement, title to goods passes to buyer when seller completes obligations of delivery |
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What does passage of title determine? |
Who bears risk of loss if goods are damaged during shipment |
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What is the fundamental rule of title to goods? |
Buyer cannot receive better title to goods than the seller had. If the seller was a thief, buyer does not obtain a good title. |
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Define Voidable Title |
Gained by fraudulent means |
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What is the exception to the title of goods rule in regards to voidable title? |
A seller who has a voidable title may pass good title to a good faith purchaser for value |
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Define Good Faith |
Honesty in fact in the conduct or transaction concerned |
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What is a buyer in ordinary course? |
A person who gains good title because s/he in good faith and without knowledge that the sale to him or her is in violation of the ownership rights of a third party, and buys goods in the ordinary course of business of a person selling goods of that kind (other than a pawnbroker) |
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What is the exception to title of goods in regards to goods entrusted to a merchant? |
If goods are entrusted to a merchant who deals in goods of that kind, the merchant may transfer all rights of the entruster to a buyer in the ordinary course of business. But a merchant-seller cannot pass good title to stolen goods even if buyer is a buyer in the ordinary course of business. |
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Describe risk of loss in shipping in common law |
Common law placed risk of loss on the party who had technical title at time of loss. |
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Describe risk of loss in shipping under the UCC |
Contracting parties, subject to the rule of good faith, may specify who bears risk of loss in the agreement. If contract requires seller to ship goods by carrier but does not require delivery to specific destination, risk passes to buyer when seller delivers goods to carrier. |
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Define Shipping Contract |
Seller must place goods in possession of a carrier and contract for transportation as is reasonable for the nature of goods and other circumstances. Unless parties specify shipment method, contract is generally construed as a shipment contract. |
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Define Destination Contract |
Seller must deliver goods to specific destination bearing risk and expense of delivery |
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Define FOB point of origin |
Seller must deliver goods free of expense and at seller's risk (including loading on board) to the place designated |
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Define FAS |
Seller must deliver goods alongside the vessel at the port at seller's own risk and expense |
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Define CIF |
Price of goods includes seller's cost and risk to load, ship, and insure goods |
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Define C&F |
Same as CIF, except seller not obligated to insure |
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Define FOB destination |
FOB term plus destination for the goods puts expense and risk of delivering to that destination on the seller |
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Define Ex-ship |
Places expense and risk on seller until good are unloaded from whatever ship is used |
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Define delivery without movement of the goods |
In the goods are in possession of a third party bailee and are to be delivered without being moved: title passes when the buyer receives a document of title or, if there is no document of title, when the buyer is informed by the bailee of the right to possess the goods. |
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How is good faith imputed into every contract for the sale of goods? |
The buyer and seller must act in good faith in the performance of a sales contract. Good faith is define to mean "honesty in fact" in performing the duties assumed in the contract or in carrying out the transaction. And, in the case of a merchant, good faiths, means honesty in fact as well as the observance of reasonable commercial standards of fair dealing in the trade |
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What happens if express terms of contract conflict with past course of dealings between parties? |
express terms prevail |
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What happens if express terms of contract do not conflict with past course of dealings between parties? |
Parole evidence allowed to show previous dealings to interpret contract |
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What happens if express terms of contract conflict with trade usage? |
Express terms prevail |
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What constitutes acceptance of goods? |
Acceptance of goods occurs when a buyer, after having a reasonable opportunity to inspect them, either indicates that he will take them or fails to reject them |
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What constitutes rejection of goods? |
The buyer must notify the seller of the rejection and specify the defect or nonconformity. |
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What is improper rejection? |
Not giving timely notice that the buyer does not want to keep it or that it is not in proper working order. Or using the item as if the buyer owns it. |
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When may a buyer revoke acceptance of nonconforming goods? |
Where nonconformity substantially impairs value. Buyer accepted goods without knowledge of non-conformity (the discovery was difficult). Buyer accepted goods because seller assured buyer it would cure defect, if repeated attempts to cure defects failed, buyer may revoke acceptance. |
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Define liquidated damages |
Parties agree on the amount of damages to be paid to the injured party |
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When is a liquidated damages clause enforceable? |
If reasonable amount and actual damages would be difficult to prove |
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When is a liquidated damages clause not enforceable? |
When an amount is a penalty or unconscionable, injured party may recover the actual damages suffered |
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Define limitation or exclusion clause |
Parties agree to limit either the remedies that the law makes available or the damages that can be covered. Limitations commonly placed on liability for consequential damages. Attempt to limit consequential damages for injury to a person by consumer goods is prima facie unconscionable. |
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Define Seller's Remedies for breach of contract when the seller has the goods |
If buyer breaches the contract and seller has goods, seller has several remedies: cancel the contract and withhold delivery of goods or resell manufactured goods and recover damages. |
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Define Seller's Remedies for breach of contract even if seller does not have the goods |
Recover purchase price of goods. Recover damages for rejection or repudiation (difference between contract price and current market price for the goods and "profit" that seller lost when buyer did not go through with the contract) |
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Define Seller's Remedies if buyer is insolvent |
Seller may recover purchase price or reclaim goods in possession of buyer. If goods are in transit, seller may stop shipment. |
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Define Buyer's Remedies |
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What is specific performance and when does it apply? |
Specific performance means that the buyer can require the seller to give the buyer the goods covered by the contract. This applies to specialty goods that the buyer cannot get elsewhere. |
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Define Real Property |
The earth's crust and all things firmly attached to it |
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Define Personal Property |
All other objects and rights that may be owned that do not include real property |
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Define Fixture |
Personal property that is attached to or used in conjunction with real property in a such a way as to be treated as part of the real property |
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What are the three requirements to make a gift valid? |
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Define Abandoned Property |
Property is considered abandoned if owner intentionally placed property out of his/her possession with intent to give up ownership |
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For what types of property may a finder claim ownership? |
Abandoned |
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Define Lost Property |
Property is lost when the owner did not intend to part with possession of the property |
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What type of property may a finder not claim ownership? |
Lost property & mislaid property |
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Define Mislaid Property |
Property is mislaid when owner voluntarily leaves the property, but forgets to retake possession |
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Define Estray Statutes |
Allow finders of property to clear their title to the property through court action after giving public notice |
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Define bailments for benefit of bailor and the bailee's duty of care |
A bailment for the sole benefit of the bailor is one in which the bailee renders some services but does not receive a benefit in return. Only minimal, or slight, degree of care is required. |
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Define bailments for benefit of bailee and the bailee's duty of care |
A bailment for the sole benefit of the bailee is one in which the owner of the goods allows someone else to use them free of charge. High degree of care. |
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Define bailments for mutual benefits and the bailee's duty of care |
If both the bailee and the bailor receive benefits from the bailment, it is a bailment for mutual benefit. Ordinary or reasonable care is required. |
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Define Promissory Note |
A two-party instrument in which one person (known as the maker) makes an unconditional promise in writing to pay another person (the payee), a person specified by that person, or the bearer of the instrument, a fixed amount of money, with or without interest, either on demand or at a specified, future time |
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Define Certificates of Deposit |
An instrument containing (1) an acknowledgement by a bank that it has received a deposit of money and (2) a promise by the bank to repay the sum of money. |
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Define Draft |
A form of commercial paper that involves an order to pay money rather than a promise to pay money. The most common example of a draft is a check. A draft has three parties to it: one person (known as the drawer) orders a second person (the drawee) to pay a certain sum of money to a third person (the payee), to a person specified by that person, or to bearer |
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Define Check |
A draft payable on demand and drawn on a bank (i.e., a bank is the drawee or person to whom the order to pay is addressed). |
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Define Cashier's Check |
A draft on which drawer and drawee are the same bank (or branches of same bank) |
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Define Teller's Check |
Draft drawn by a bank (as drawer) on another bank or payable at or through a bank |
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What is the purpose of negotiability? |
To decrease risk of transfer (assignment of commercial paper contract) so the instrument will be accepted as a substitute for money |
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What are the requirements for negotiability? |
For an instrument to be negotiable, it must be in writing, signed by the maker, containing an unconditional promise or order to pay a fixed amount of money, payable to order or to bearer, payable on demand at a definite time, lack of any other instruction by the maker |
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Define Bearer Paper |
A negotiable instrument (e.g. a bond) which is payable to whoever has possession (is the bearer). |
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Define Order Paper |
Only payable to the person named on the instrument |
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If terms conflict or ambiguous term exists, what general rules of interpretation apply? |
Typewritten terms prevail over printed terms; handwritten terms prevail over printed and typewritten terms, and where words and numbers conflict, words control the numbers. |
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Define Indorsement |
A signature that, alone or with other words, is made on an instrument for a specific purpose. Signature may not be that of the maker, drawer, or acceptor. The form or lack of indorsement may affect future attempts to negotiate instrument |
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Define indorsement in blank |
An instrument is indorsed in blank if the indorser signs without specifying to whom the item is payable |
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Define Special Indorsement |
The indorser's signature plus words indicating to whom, or to whose order, the instrument is payable |
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Define Restrictive Indorsement |
Specifies purpose of the indorsement or how the instrument must be used |
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Define Qualified Indorsement |
One where the indorser disclaims her liability to make the instrument good if the maker or drawer defaults on it
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Define Holder in Due Course |
Takes a negotiable instrument free of all personal defenses, claims to the instrument, and claims in recoupment of the obligor or a third party |
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Define Real Defenses |
Real defenses attack the instrument's validity and may be used as reasons against payment of a negotiable instrument to any holder, including a holder in due course
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What are the advantages of being a holder in due course? |
Only real defenses are defenses of payment against the HDC, not personal defenses |
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Who is primarily liable for an instrument? |
A person may be primarily liable if s/he agreed to pay the negotiable instrument. The maker of a promissory note is primarily liable for paying the debt. |
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Who is secondarily liable for an instrument? |
A person who is secondarily liable is a contract guarantor and, under UCC Article 3, must pay the instrument only if the person who is primarily liable defaults on the obligation |
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Define Accommodation Party |
A person who signs a negotiable instrument for the purpose of lending her credit to another party to the instrument but is not a direct beneficiary of the value given for the instrument |
