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33 Cards in this Set

  • Front
  • Back
To whom does UCC article 2 apply?
Article 2 applies to any contract for the sale of goods, be it between merchants or laymen.
What are "goods"?
All things which are movable at the time of indentification to the contract for sale, and include identifiable

1. New or used products.
2. Food whether consumed on or off the premises.
3. Living or unborn animals.
4. Growing crops or timber, regardless of whether the buyer ir the seller removes them from the land.
5. Minerals: gravel, coal, or sand, or even a structure, but only if it is to be removed from the land by the seller. If the buyer is to do the severing, then that contract is governed by the law of real property, and not UCC article 2)
How do you determine whether a contract involving both goods and services is governed by UCC article 2?
Under the predominant factor test, when a contract involved both goods and services, article two applies to the entire contract IF the contract is predominantly for the sale of goods, and the services are merely incidental to the contract.
Prodominant Factor Tests E.G.
If you buy a new TV with installation included and it falls off the wall a week after having been installed, the service of installation is incidental to the contract for the sale of goods. The value of the good was far more than the value of the services.
What is the significant of being a "merchant" with regard to UCC article 2?
The code frequently imposes higher standards upon buyers and sellers of goods whoa are merchants, and defines them as
1 - persons who regularly deal in goods of that kind,or
2. Persons who, by their occupations, hold themselves out as possessing knowledge or skill concerning the goods involved in the transaction. Almost every person in business is deemed to be a merchant,
however the implied warranty of merchantability is only given by merchants who regularly deal in goods of that kind.
What is "Good Faith" under article 2 of UCC)
THe code also imposes an obligation of good faith on contracting parties, and defines good faith as honesty in fact. For a merchant it is also observing commercial standards of fair dealing in the trade.)
Tender of Delivery
The seller's act of placing and holding conforming goods and then giving the buyer any necessary notification of the seller's readiness to perform under the contract terms to enable the buyer to take delivery.

The time, place and manner of tender are determined by the parties contract, and the provisions of article 2.
Perfect Tender Rule
PT rule permits the buyer to reject goods and sue for breach of contract if the sellers goods or tender fail to confirm to the contract in any respect.

(quantitiy, quality, or timeliness of the seller's delivery)
Perfect Tender Pneumonic

PT does not alloy to ICOP
I - Installment contracts.
What are Installment contracts?
Installmnet contract is one in which seperate lots are to be delivered and separatley paid for and accepted. SImiliary, a non-sale of goods contract is a divisible contrat if performance by one party is divided into multiple parts, and the other party's performances are agreed exchanges for the corresponding performances of teh first party
When can a buyer reject an installment?
A buyer can reject an installment only if the non-conformity "substantially impairs the value of that installment, and the non-conformity cannot be cured. A buyer cannot reject an installment for trivial defects. Courts use the restatement's HEIL factors to determine if a breach was a subtatial impairment.
What is the buyer's remedy if an installment is non-conforming and a substantial impaiment?
A buyer can sue the seller to recover damages due to the non-conformity of one installment.
When will failure of installments be considerd a breach of the whole contract?
If a non-conformity in one or more installments substantially impairs the value of the whole contract, then the entire contract will be considered breached.
When can a buyer reject an installment?
A buyer can reject an installment only if the non-conformity "substantially impairs the value of that installment, and the non-conformity cannot be cured. A buyer cannot reject an installment for trivial defects. Courts use the restatement's HEIL factors to determine if a breach was a substantial impairment.
What is the buyer's remedy if an installment is non-conforming and a substantial impairment?
A buyer can sue the seller to recover damages due to the non-conformity of one installment.
When will failure of installments be considered a breach of the whole contract?
If a non-conformity in one or more installments substantially impairs the value of the whole contract, then the entire contract will be considered breached.
What is "Good Faith" under article 2 of UCC)
THe code also imposes an obligation of good faith on contracting parties, and defines good faith as honesty in fact. For a merchant it is also observing commercial standards of fair dealing in the trade.)
Tender of Delivery
The seller's act of placing and holding conforming goods and then giving the buyer any necessary notification of the seller's readiness to perform under the contract terms to enable the buyer to take delivery.

The time, place and manner of tender are determined by the parties contract, and the provisions of article 2.
Perfect Tender Rule
PT rule permits the buyer to reject goods and sue for breach of contract if the sellers goods or tender fail to confirm to the contract in any respect.

(quantitiy, quality, or timeliness of the seller's delivery)
Perfect Tender Pneumonic: PT does not alloy to ITOP.

The I
I - Installment contracts.

T- Timely deleivery made impracticable by unforeseen event
What are Installment contracts?
Installmnet contract is one in which seperate lots are to be delivered and separatley paid for and accepted. Similiary, a non-sale of goods contract is a divisible contrat if performance by one party is divided into multiple parts, and the other party's performances are agreed exchanges for the corresponding performances of teh first party
T in ITOP
Timely delivery made commercially impractible by an event not considered by the parties when the contract was executed. (floods, snowstorms, or civil unrest.)
The O in ITOP
O- If the seller in good faith 1. Send non-conforming goods OBJECTIVELY and reasonably believing that such goods would be acceptable to the buyer, and 2. WHen notified of the non-conformity, the seller indicates to the buyer its intention to cure the breach, then 3. THe buyer give the seller additional reasonable time to cure, even beyond the date fixed in the contract for performance. If the buyer does not give the seller this additional resaonable time to cure, but instead invokes perfect tender rule (PTR) and repudiates the contract basd on the seller's breach, then it is the buyer who has wrongfully breached the contract.
Pin ITOP
If the buyer rejects non-confirming goods prior to the date of PERFORMANCE. that is fixed in the contract, then the seller will not be in breach of contract if the seller cures the tender before the performance date expires
Sale or Return Contracts-
c
Sale or Return - Protection
In a sale or return contract, a seller avoid the claim of the buyers creditors by expresely reserving title until payment, or by using terms such as “
consignment.”

In order for a seller to protect itself from the buyers creditors, the seller should comply with UCC article 9 by filing a financing statement
Sale on Approval contract - Definition
Sale on approval contract, used when goods are delivered primarily for use and not for resale. Risk of loss and title do not pass to the buyer until the buyer accepts title to the goods, either in writing, or by the buyer failing to timely return the goods under the contract term.
Sale on approval example
If you get offered a copier, guy says you don't have to pay unless you like it, you use it and you tell him you like him and you pay, or you like it and dont return it by the date he gives you to decide, title vests. Until then risk Goods held by a buyer under a sale on approval contract are not subject to the claims of the buyers creditors.
SOLEV
c
Classification of sales contracts based on shipping
A contract requiring a seller to ship goods to a buyer can be classified as 1. or 2.

1. A shipment contract under which the seller's risk of loss transfers to the buyer when the seller puts the goods into the carrier's possession

2. A destination contract, under which the seller's risk of loss only transfers to t he buyer when the goods are tendered to the buyer at a particular destination.
FOB
The most common of these contracts are abbreviated FOB:Free on Board

FOB Seller's City or Seller's place of business (meaning risk of loss shifts to buyer once delivered to the carrier, shipment contract).

FOB Buyers City or Buyers place of business - Destination contract, risk of loss on seller until delivered in a way that would allow the buyer to take title.
FAS
If the goods are to be shipped by vessel (FAS) Free alongside.

MEans risk shifts to buyer once deleiverd WHERE?
CIF
Cost Insurance and Freight

Imposes more responsibilities on the seller, requiring the seller to deliver conforming goods to a carrier, and to pay for the cost of freight and adequate insurance on the goods.