Sales and Leases of Goods in a Nutshell
Author:
Miller, Frederick H.
Edition:
4th
Copyright Date:
2003
19 chapters
have results for Sales and Leases of Goods in a Nutshell
Chapter 1. Subject Matter and Selected Important Definitions 72 results (showing 5 best matches)
- Virtually every sale and lease involves not only goods but services, such as dealer preparation on a car or the installation of a furnace, carpeting or an air conditioner. There has been considerable litigation as to whether a transaction involving a sale or lease and the rendition of services is one for the sale or lease of goods or the rendition of services. Some of the earliest cases involved blood transfusions during operations; if the transaction was for services the courts applied a negligence standard rather than the absolute liability standard of warranty when the blood produced hepatitis or a like medical condition. See, e.g., Lagalo v. Allied Corp. (1998) (jury finding of negligence but not breach of warranty not inconsistent). Today these cases often are subject to special statute. See Section 2–108(1)(c)(ii). When they are controlled by the UCC, most courts use a “predominate purpose” test to characterize the transaction, and find a sale of services. However, some courts...
- The same duality exists between a lease contract (Section 2A–103(1)(r)) and a lease agreement (Section 2A–103(1)(q)). Of course, a lease does not involve the passage of title but rather is a transfer of the right to possession and use of goods for a term in return for consideration. Section 2A–103(1)(p). Thus, in every lease the lessor retains a “residual interest.” Section 2A–103(1)(w). The concepts of sale and lease are mutually exclusive; a sale, including a sale on approval (Section 2–326(1)(a)) or a sale or return (Section 2–326(1)(b)), is not a lease. Unless the context clearly indicates otherwise, a lease includes a sublease. Section 2A–103(1)(q).
- Special problems existed under pre-UCC law regarding property that is a part of or that is attached to realty. Pre–UCC case law relating to sales commonly treated crops that are planted yearly and regularly cultivated, such as wheat, corn, tomatoes, and potatoes, as goods, although there were cases to the contrary. Some courts treated growing crops such as orchard fruit, hops, and timothy seed as goods even though they are not planted annually and may not be regularly cultivated. Under Article 2 growing crops are goods; as to Article 2A, the point is moot as growing crops are not rented. Also under pre-UCC sales law, confusion existed regarding standing wild timber and grass, unmined minerals, and buildings. It was generally agreed that these types of property were not goods so long as they remained attached to the land, but became goods as soon as they were severed or removed. The chief difficulty lay in those situations in which a ...sale was made while the property was attached...
- Another problem often characterized as involving goods versus services, but which more accurately involves goods versus computer information, and which is not dealt with explicitly in Articles 2 or 2A for the most part, involves computer software contracts, which mainly are licenses, not sales, and normally should be recognized as such and not recharacterized. Compare Adobe Systems, Inc. v. Stargate Software Inc. (2002) (agreement only conferred a license and was not a sale) with Softman Products Co., LLC v. Adobe Systems, Inc. (2001) (transaction that involved single payment giving person unlimited period of possession is a sale). However, since Article 2 and Article 2A apply to a “transaction” in goods, it must also be recognized that many cases involve information and not goods, and even when the software is embedded in a disc, the true value is in the information, much the same as in the case of a book. That goods are not involved certainly is true, for example, for information...
- Conceptually, a sale or a lease transaction may involve goods, or land, or other forms of property, such as a sale of securities or promissory notes. The scope of Article 2, however, is limited to transactions in goods, and that of Article 2A to leases of goods, including fixtures (Article 2 deals with goods related to real estate in Section 2–107). See also Fischer v. Zepa Consulting A.G. (2000) (where purchase was not just of right to sever standing timber but deeded right to all hardwood and softwood and right to enter premises to inspect, cut, and remove timber, transaction was transfer of interest in land). Money in which the price or rent is to be paid, investment securities and choses in action are not goods. Sections 2–103(1)(k) and 2A–103(1)(n).
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Chapter 9. Warranty Obligations 185 results (showing 5 best matches)
- A warranty that the goods will be merchantable is implied in a contract for their sale or lease (except a finance lease) if the seller or lessor is a merchant with respect to goods of that kind. In a sale, the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
- Note that under these provisions the warranty is implied only when the seller or a lessor other than a finance lessor is a merchant and the goods sold or leased are a part of normal stock sold or leased in the normal course of business. A sale or lease by a non-merchant does not, in the absence of an agreement to the contrary, carry with it such an implied warranty. Moreover, even if the seller or lessor is a merchant dealing in goods of the kind, there is no implied warranty against infringement where the goods are manufactured by a seller or lessor (or supplier) according to specifications furnished by the buyer or lessee. In fact, under these latter circumstances it is possible that manufacture in
- A seller’s or lessor’s liability for breach of the implied warranty of merchantability requires proof by the buyer or lessee not only that the goods were not merchantable when they left the control of the seller or lessor (see Official Comment 15 to Section 2–314), but also that (1) the seller or lessor was a “merchant” with respect to goods of that kind (thus this warranty is not made by a casual seller, such as a person selling one’s car), (2) the seller or lessor “sold or leased goods”, (3) the injury or damage proximately resulted from the defect in the goods (Official Comment 15 to Section 2–314), and (4) notice was given to the seller or lessor and supplier, if any, of the breach of warranty. On the latter, see Sections 2–607(3)(a) and 2A–516(3)(a). The meaning of “merchant” and “goods,” the problem of damages, and the notice requirement are all discussed elsewhere. Discussion here is limited to a few problems primarily involving the question of whether a transaction is one...
- Sections 2–312(3) and 2A–211(4) allow disclaimer or modification of the title or interference warranty either by the use of “specific language”, which in the case of a lease must be conspicuous and in a record, or by circumstances which give the buyer or lessee reason to know that the person selling or leasing does not claim title, is purporting to sell or lease only such right, interest, or title as that person or a third person may have, or is transferring the goods subject to any claims of infringement or the like. “Seller does not warrant title to the goods” or “the goods are being leased subject to any claim or interest of a person other than lessor” should be language sufficiently specific as a general proposition to exclude the warranty. For what is not sufficient, see Brokke v. Williams (1989) (“as is”). If in a sale the exclusion or modification is put in a record, Section 2–312(3) does not indicate that it must meet the standard of “conspicuousness,” but that would seem a...
- Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must be in a record and be conspicuous. In a consumer lease the language must state “The lessor undertakes no responsibility for the quality of the goods except as otherwise provided in this contract,” and in any other contract the language must mention merchantability. Subject to subsection (3), to exclude or modify any implied warranty of fitness the exclusion must be in a record and be conspicuous. Language to exclude all implied warranties of fitness in a consumer lease must state “The lessor assumes no responsibility that the goods will be fit for any particular purpose for which you may be leasing these goods, except as otherwise provided in the contract,” and in any other contract the language is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.” Language that satisfies the...
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Chapter 2. Formation of the Contract 49 results (showing 5 best matches)
- Both a present sale of goods and a contract to sell goods as well as a lease of goods require mutual manifestation of assent for their formation. The seller or lessor must manifest its intent to sell or lease; the buyer or lessee must manifest its intent to buy or lease. This intent may be manifested by words, by actions, by a combination of words and actions, by the interaction of electronic agents or of an electronic agent and an individual or, where there is a duty to speak, by silence. Sections 2–204(1) and 2A–204(1). See also Sections 2–204(4) and 2A–204(4) (on electronic agents), and 2–211–2–213 and 2A–222–2A–224 (on legal recognition of electronic contracts, records and signatures, attribution, and electronic communication), the latter being supplemented by the Uniform Electronic Transactions Act, where enacted. As to “E-sign,” see Sections 2–108 and 2A–104. Ordinarily a contract is formed when one party makes an offer to buy or sell or lease goods and the other party accepts...
- Generally speaking, the formation of contracts for the sale or for the lease of goods is governed by the same rules as those governing the formation of other types of contracts. In some instances, however, Article 2 and Article 2A, in an attempt to carry out the stated purpose of modernizing the law governing commercial transactions, formulated special rules applicable only to these contracts. In short, Articles 2 and 2A modify general contract law to the extent necessary to adopt it to sales or leases of goods, but general contract law, such as the doctrine of consideration, supplements or fills in what the UCC rules do not displace. Section 1–103(b). For a further discussion of general contract law, see C. Rohwer and A. Skroki, Contracts (5th ed. West Group 2000).
- With some exceptions, an offer does not place the offeror under a contractual obligation until it is accepted, but only creates a power of acceptance in the offeree. This means that the offeror ordinarily is legally free to revoke the offer before it is accepted. Once the offer is properly accepted a contract is formed, and neither party may terminate it unilaterally without proper legal cause. In some circumstances, however, the offeror is contractually obligated not to revoke an offer. For example, S offers to sell goods to B in return for B’s promise to pay five dollars for the privilege and promises to keep the offer open for ten days. Here S’s promise is contractual as the promise to keep the offer open is supported by consideration; S is legally obligated not to revoke the offer. Also some courts have held an offer irrevocable on the basis of promissory estoppel. Sections 2–205 and 2A–205 create another means by which an offer to buy or sell or to lease goods may be made...
- Article 2A does not contain a similar provision. As discussed earlier, lease contracts tend to be formulated in more formal ways, and thus less need exists for such a provision. This is not to say that contract formation issues are absent in leases. See, e.g., Essex Crane Rental Corp. v. Weyher/Livsey Constructors, Inc. (1989). It is to say, however, that given the adverse experience under Section 2–207, it did not seem desirable to perpetuate its mistakes in a context where that approach is avoidable. For a detailed criticism of former Section 2–207, see Murray, A Proposed Revision of Section 2–207 of the Uniform Commercial Code, 6 Journal of Law and Comm. 337 (1986). For a road map to the section, see Frisch and Wladis, General Provisions, Sales, Bulk Transfers, and Documents of Title, 43 Bus. Law. 1259, 1266–67 (1988).
- Section 2–206(1)(b) expressly provides that the shipment of nonconforming goods constitutes an acceptance and normally a breach unless the seller “reasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.” If the seller takes that action, the shipment of the nonconforming goods constitutes a counter offer only, and the buyer is free to accept or reject the goods. To illustrate: Suppose B orders a certain quantity of aluminum screening from S. S ships steel screening. S has accepted the offer. There is a contract between the parties, but at the same time S’s shipment of nonconforming goods is a breach. S could have protected himself by reasonably notifying B that the shipment was made only to accommodate B. In such a case S would not have accepted the offer and would not be in breach.
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Chapter 11. Seller’s and Lessor’s Remedies 142 results (showing 5 best matches)
- In the case of a resale, when the goods are identified the resale may be either by public or private sale, unless the parties have agreed otherwise. Section 2–706(2). Official Comment 5 to Section 2–706 explains that a “public sale” usually means a sale by auction. If the goods are not identified, the resale must be at a private sale “unless there is a recognized market for a public sale of futures in goods of the kind” (such as cotton). Section 2–706(4)(a). This restriction on the public sale of unidentified goods is not as encompassing as it seems in light of Section 2–704. That section allows the seller to (1) identify to the contract conforming goods in the seller’s possession or control at the time the seller learned of the breach, (2) resell unfinished goods “which have been demonstrably intended for the particular contract,” and (3) complete the manufacture of goods which were unfinished at the time of
- Suppose S contracts to sell or lease a stated quantity of goods to B. The goods are not identified at the time the contract is made. A short time later B notifies S that B is going out of business and will not need the goods. At that time, while S still has not identified the goods to the contract, S has in S’s warehouse a large quantity of goods meeting the description in the contract.
- The market price or rent is that prevailing at the relevant time and at the place for tender or, in a lease, where the goods are located. Thus, if the agreement calls for the buyer or lessee to pick up the goods at the seller’s or lessor’s place of business in Philadelphia, the market price or rent is that prevailing in Philadelphia when the goods were to have been picked up. A sale agreement calling for delivery at destination would require determining the market price at time of tender at the destination point. For example, if S contracts to sell B 100 bushels of a certain grade of wheat at $2 per bushel to be delivered by S to B’s warehouse in Pittsburgh on June 1, 2003, B wrongfully refuses delivery and the market price of that grade of wheat in Pittsburgh on June 1, 2003 is $1.50 a bushel, S’s damage using the market standard would be $.50 per bushel or a total of $50.
- In some instances the goods which the seller or lessor has contracted to sell or lease may not be in the possession of the seller or lessor but in the hands of a bailee. The two most usual examples are when the goods are in the hands of a carrier for delivery to the buyer or lessee, or when they are in the hands of a warehouseman and the seller or lessor intends to deliver without moving them, usually by delivery of a warehouse receipt to the buyer or lessee.
- In order for a resale to be valid it must conform to certain standards. In general it must be made in good faith and in a commercially reasonable manner. In determining the “commercial reasonableness” of a resale, time and place of sale are of prime importance. The sale must be made within a reasonable time after the buyer’s breach. What is a reasonable time in doubtful cases is a question of fact. The nature of the goods and the condition of the market are important facts to be considered. Resale one week after breach if the goods were shoes might be perfectly reasonable, whereas it would probably be unreasonable if the goods were tomatoes already identified to the contract at the time of breach. In a rapidly falling market, one week might be too long even if the goods were shoes. Resale in a wholesale market may be unreasonable if the original sale was at retail. See Official Comments 5 and 8 to Section 2–703 and California Airmotive Corp. v. Jones (1969).
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Chapter 6. Performance 84 results (showing 5 best matches)
- Once the parties have concluded a contract, there is an obligation in a contract for sale on the seller “to transfer and deliver” the goods and an obligation on the buyer “to accept and pay” the price. Section 2–301. No exactly similar provision appears in Article 2A, but from the definition of “lease” in Section 2A–103(1)(p) it can be deduced that in an enforceable lease contract the basic obligation of the lessor is to transfer possession of the goods for the lease term and that of the lessee is to pay the agreed rent in money or other value. Of course, by agreement, the parties to either a sale or a lease can
- If, however, the parties have not otherwise agreed, various provisions of Article 2 describe the obligations of the parties in the absence of agreement. These provisions are designed to reflect the presumed intent of the parties on the topic; that is, what they would have provided had they focused on the matter. Article 2A contains few such provisions. This is because in some instances the topic is not relevant to leases, as opposed to sales, and in other instances because lease agreements customarily are formulated through a structured process that normally leaves less to be filled in by statute as there is more likely to be agreement. Nonetheless, to the extent the lease contract does not cover a topic, the proper answer usually can be inferred from the nature of a lease. Moreover, the answer presumably will accord with any express statutory resolution of the matter supplied in Article 2 for sales, to the extent the matter is relevant to both sales and leases, because, as noted,...of
- The same principle extended in time can be implied in a lease, unless otherwise agreed and except as qualified in a finance lease (Section 2A–103(1)( )) that is not a consumer lease (Section 2A–103(1)(f)), where the statutory “hell or high water” clause of Section 2A–407(1) makes the lessee’s promises under the lease contract irrevocable and independent (of the lessor’s performance) upon the lessee’s acceptance of the goods.
- The right to inspect the goods before payment in a non-credit sale is very important from the buyer’s standpoint. Usually inspection will reveal whether the goods are conforming. If they are non-conforming the seller has not made a proper tender and there is no obligation to pay the price. The buyer is at a serious disadvantage if payment is required before inspection. While payment could be recovered if later inspection showed the goods to be non-conforming, this might require bringing a legal action against the seller. Furthermore, there is always the chance that the seller is insolvent, making a judgment of little value. While these same considerations may exist for a credit buyer or lessee, the amount initially payable is less than the price or full rent. For this reason and because lease transactions often occur in a way that minimizes this issue, no explicit provision on inspection exists in Article 2A.
- Special problems in overseas sales.
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Preface 9 results (showing 5 best matches)
- This is a revised edition of the Sales and Leases of Goods Nutshell, which was published in 1992. This edition updates the law on sales of goods under Uniform Commercial Code (UCC) Article 2, as amended, and on leases under Article 2A of the UCC, as amended. In addition, it briefly discusses software contracts and licenses of information under the Uniform Computer Information Transactions Act (UCITA) and other law (which may include UCC Article 2). It also incorporates the current text of UCC Articles 1, 5, 7, 8 and 9 in the discussion as relevant, but omits any discussion of Article 6, as it has been repealed in most states. There also is brief mention of the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., as well as relevant other law, such as the Bankruptcy Code, 11 U.S.C. § 101 et seq., the Convention on Contracts for the International Sale of Goods (CISG), essentially applicable in the...
- As in earlier editions, many of the provisions of Articles 2 and 2A that are discussed are in substance set forth in the body of the text. This was done with some hesitation because of space limitations. However, inclusion of the text allows the reader to evaluate the discussion and analysis without the need to have a copy of the UCC constantly at hand.
- Ultimately, any errors are those of the author alone. The discussion distinguishes between the previous and amended or revised version of a UCC Article by preceding the citation to the Article or a section of an Article by the description “old” or “former” or “prior” or “revised,” as appropriate; e.g., old § 1–103; revised § 1–103. If there is no particular difference, the citation will be merely to the Article or, in the case of a section, to the old section, which may be followed by a citation to the revised section in parentheses, as § 1–101 (1–101).
- Some provisions discussed include a modest amount of historical background. While this is done at the sacrifice of a more complete coverage of other sections, in some cases historical background is desirable to a thorough understanding of the concepts and rules discussed.
- Debts to others are numerous. The others include, in particular, John M. Stockton, the original author of this work, who generously allowed me to work with him and then bequeathed his and our joint work so I could carry it on in future editions, and research assistants, support persons who prepared the manuscript, the American Law Institute and the ALI and the National Conference of Commissioners on Uniform State Laws (NCCUSL) to quote from the official comments and the Code.
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Chapter 3. Statute of Frauds, Parol Evidence, and Modification 97 results (showing 5 best matches)
- Suppose S contracts to sell or lease goods which are not in existence at the time the contract is made, but which are to be manufactured by S for B. The contract envisages not only the transfer of ownership or possession and use of goods from S to B but the performance of services by S. Absent a more specific rule, if the contract is primarily for services, regardless of the value of the goods the goods provision of the statute of frauds would not apply. See the discussion in Chapter 1 on goods versus services issues generally. Section 2–201(3)(a) and Section 2A–201(4)(a) adopt a more specific rule. If the seller or lessor has made either a substantial beginning of the manufacture of the goods or commitments for their procurement, and the goods are to be specially manufactured for the buyer or lessee are not suitable for sale or lease to others in the ordinary course of the seller’s or lessor’s business, the special rule is applicable; that is, an oral contract is enforceable...
- Section 2–201 is applicable only to contracts for sale of goods for the price of $5000 or more and Section 2A–201 is applicable only where the total payments to be made under the lease, excluding payments for options to renew or buy, are $1000 or more. Unless the thing being bought and sold or leased is a “good” as defined in the UCC, these sections are not applicable. Suppose, for example, S contracts to sell B a small building located on, and attached to, S’s land and to be severed and removed by B. The contract is not one for the sale of goods under Section 2–107; therefore, Section 2–201 does not apply. Of course, another statute of frauds outside the UCC may apply to the real estate sale, and another provision of the UCC, for example Section 9–203, may apply where the sale is of certain other kinds of personal property. See also Bridgewater Washed Sand & Stone Co. v. Bridgewater Materials, Inc. (1972), where S agreed to sell a sand and gravel plant to B and agreed orally to...
- Prior to Article 2A, a lease transaction might involve goods but not a contract for their “sale”, and thus escape the UCC. In George F. Mueller and Sons, Inc. v. Northern Illinois Gas Co. (1973), the court held that a rental agreement providing for installation, servicing, and maintenance of vending machines was not a contract of “sale” within Section 2–201. If such a contract now is covered by Article 2A as a lease, Section 2A–201 could be applicable.
- Section 2A–201 is the same, except the cut-off figure is $1000 rather than $5000, and Section 2A–201 in addition requires the record to describe the goods leased and the lease term, adjusts the payment exception due to the difference between a sale and a lease, and omits the merchant exception which was viewed as having a very limited role to play in lease transactions according to Official Comment 1 to Section 2A–201.
- Generally speaking, a record (information inscribed on a tangible medium, as in a writing, or stored in an electronic or other medium, and that is in perceivable form–see Section 2–103(1) (m)) is not necessary to make a promise legally enforceable unless required by statute. Such a statute which is applicable to sales contracts or leases is called the statute of frauds. An original statute of frauds was enacted in England in 1677 in part in an attempt to prevent false assertions that a contract existed when one in fact was never concluded by the parties. This original statute contained twenty-five sections, of which eight imposed a general requirement of a writing to make the types of promises involved in those sections legally enforceable. One of the those sections applied to the sale of goods.
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Chapter 10. Repudiation, Breach and Excuse 187 results (showing 5 best matches)
- Whether S chooses to await B’s performance or chooses to treat B’s repudiation as a breach, S may suspend its own performance. For example, if S is in the process of manufacturing goods to be delivered to B pursuant to a contract for sale or lease between the two and B anticipatorily repudiates, S in the exercise of reasonable commercial judgment may complete manufacture and identify the goods to the contract for the purpose of providing a remedy, but also may cease manufacture immediately and sell or lease the unfinished goods for scrap or salvage. Sections 2–704 and 2A–524.
- It is quite common for sales contracts to call for the delivery of goods in installments. A lease also may involve this situation. Section 2–612(1) defines an installment sale contract as one “which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause ‘each delivery is a separate contract’ or its equivalent.” Section 2A–103(1)(o) is essentially the same for a lease. Difficult problems arise in the performance of these contracts when one of the parties defaults in the performance of one or more installments. It is clear that any default of this sort gives the aggrieved party a cause of action for damages; however, the chief problems lie in determining whether (1) a buyer or lessee to whom the tender of a nonconforming installment is
- A sales contract imposes legal obligations on both parties as does a lease. The seller or a lessor is obligated to deliver the goods according to the terms of the contract while the buyer or lessee is obligated to accept and pay for the goods according to the terms of the contract. Section 2–301 and (by implication) Section 2A–103(1)(p). A failure by either party, without legal justification, to perform any of these obligations when due constitutes a breach of contract (in a lease, a “default”) entitling the “aggrieved” party to one or more of the remedies discussed in the next two chapters. Sections 2–703, 2–711, 2A–508 and 2A–523. In addition, if the contract imposes other obligations and so provides, a breach or default as to those obligations may furnish a remedy to an aggrieved party. “An aggrieved party means a party entitled to resort to a remedy.” Section 1–201(b)(2).
- The right of the seller, lessor, or supplier in a finance lease, to cure an improper tender is not restricted to installment contracts, but is a right which the seller, lessor or supplier may have in the performance of every sale or lease contract. The cure provisions of the Code are found in Sections 2–508 and 2A–513 which provide:
- Even though a nonconforming tender is such as to give the buyer or lessee a right to reject all the goods, Sections 2–601 and 2A–509 provide that the buyer or lessee may instead accept all the goods or accept any commercial unit or units and reject the rest. As to what is a “commercial unit,” see Sections 2–105(5) and 2A–103(1)(b) and Casazza v. Kiser (2002) (the commercial unit provision protects against return of less than a commercial unit having a severely reduced value). All these rights, however, may be subject to contrary agreement between the parties as provided in Sections 2–718 and 2–719 for sales and 2A–503 and 2A–504 for leases. Quite often such agreements are made; they are discussed in Chapter 12. Rejection and acceptance are discussed below.
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Chapter 7. Title and Rights of Third Parties 160 results (showing 5 best matches)
- In some instances, however, a seller or lessor will deliver goods to a buyer or lessee pursuant to contract but for a reason such as fraud the buyer or lessee will obtain only a “voidable” interest. Legal title or a leasehold interest is voidable when the title or interest is subject to a right in the seller or lessor to avoid the sale or lease and revest full title in the seller or lessor. It is commonly said that “voidable” means “valid until avoided.” Suppose, for example, that B, who intentionally misrepresents B’s financial condition, induces S to sell goods on credit. Delivery of the goods to B gives B “voidable” title only, and S, upon discovering the fraud, may rescind the sale and recover the goods. If that occurs before a good faith purchaser purchases from B, then title is in S and B has nothing to convey, but, if S has not recovered the goods, S has entrusted them and the purchaser may prevail under that analysis if a buyer in ordinary course of business. For a...
- Among the various contractual agreements used in the marketing of goods are the “sale on approval” and the “sale or return.” The type of arrangement that has been adopted in a given situation may be legally significant in determining who holds title to the goods and thus the rights of creditors. Both arrangements are transactions in which goods are delivered by the seller to the buyer with the understanding that they may be returned even though they conform to the contract. Section 2–326(1). If the transaction is a sale on approval, the goods must be delivered primarily for use and there is no “sale” until the buyer accepts the goods; that is, title does not pass to the buyer until the buyer indicates approval by accepting the goods. Section 2–326(1)(a) and (2). As to when acceptance of goods occurs, see Section 2–606 discussed in Chapter 10. Until acceptance by the buyer, the “sale on approval” is only a bailment with an option to purchase. On the other hand, if the arrangement is...
- The same principle exists in Article 2A. Suppose instead (1) B leases the goods to P, or (2) itself leased the goods from S and then subleases them to P? In the first case, under Section 2A–304(1), a lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, and, in the second case, under Section 2A–305(1) a lessee with a voidable leasehold interest has power to transfer a good leasehold interest to either a good faith buyer for value or a good faith sublessee for value. There is some overlap between Sections 2–403(1) and 2A–304(1) and 2A–305(1) due to the definitions of “purchase” in Sections 1–201(2)(cc) and 2A–103(1)(bb) and “purchaser” in Section 1–201(b)(30), which include both a sale and a lease. See Official Comment 2 to Section 2A–304.
- When the contract is for future goods, identification normally occurs only when the goods are in some way designated or particularized by the seller or the lessor as the goods to which the contract refers. This particularization may be made by shipment, marking, or any other action sufficient to show that these are the goods to which the contract refers. Sections 2–501(1)(b) and 2A–217(2). To illustrate, if the parties contract for the sale or lease of goods of a certain description and S has a warehouse filled with goods answering that description, until identification the contract is a contract for future goods. Identification does not occur until S in some way particularizes a quantity of the goods as the goods to which the contract refers. Moreover, until identification takes place, title cannot pass to B in the case of a sale. An explicit agreement could give the buyer or the lessee the power to select the goods. Official Comment 3 to Section 2–501.
- Suppose, in the same fact situation, that S does not resell the goods to P but rather that C, S’s creditor, attempts to levy on the goods so as to subject them to the payment of C’s claim against S. B then intervenes, claiming the goods by virtue of the sale. C then argues that since S has possession of the goods any alleged prior sale is fraudulent and void. If C can prove as a fact that the transaction between S and B is merely a scheme to defraud, that is, an attempt to place the goods beyond the reach of S’s creditors while still allowing their full use to S, the sale will be void as to C and C’s rights in the goods are superior to those of B. On the other hand, if C cannot prove that the sale by S to B was in fact an attempt to defraud, opinion regarding the legal rights of the parties is widely divided. In some states the courts have held that S’s retention of possession makes the sale, as to C, fraudulent as a matter of law except in a few narrow exceptions, such as the goods...
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Chapter 4. Terms of the Contract 92 results (showing 5 best matches)
- Because of the way contracts for the sale of goods often are formed through the exchange of forms as previously discussed, matters that would normally be covered in an agreement may inadvertently be overlooked and be left uncovered. This may also occur in a lease, although it is less likely because lease transactions seldom are formed through an exchange of forms. Where an important term is left open, the contract may fail for indefiniteness, unless some method to supply the missing term exists. The UCC seeks to avoid this result in both the sale and lease context by providing in Sections 2–204(3) and 2A–204(3) that although one or more terms are left open, a contract will not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. Article 2 also attempts to avoid
- Section 2A–108 is the same, except that for consumer leases, as defined in Section 2A–103(1)(f) (a lease by a person regularly engaged in the business of leasing or selling makes to an individual who leases or contracts to lease goods primarily for a personal, family or household purpose), unconscionable inducement and enforcement also are covered, and a successful litigant may recover attorney’s fees as well as be awarded appropriate relief sought. The Official Comment to Section 2A–108 illustrates a possible application of these additional provisions: inducement by a statement with the intent to invoke an integration clause should the lessee assert reliance upon the statement, and enforcement by using or threatening to use force or violence.
- In sales cases, a number of courts have refused to enforce contracts or terms on the basis of Section 2–302, almost exclusively in consumer transactions. In some of these cases courts have found an excessive price as the basis for unconscionability. In American Home Improvement, Inc. v. MacIver (1964), the plaintiff agreed to make certain home improvements for the defendant for a contract price of $1,759. The court found that $959 was the value of the goods and services and the balance of $800 was a sales commission paid by the plaintiff to the salesman. However, the defendant signed a document obligating him to pay a total of $2,568.60. The balance of $809.60 consisted of interest and carrying charges. After a negligible amount of work had been performed, the defendant told the plaintiff to cease work and the latter complied. The plaintiff sued for damages, but the court held that the contract was unenforceable. First, the court found that the plaintiff had failed to comply with a...
- Few successful cases have arisen to date under Section 2A–108. Thus in Siemens Credit Corp. v. American Transit Ins. Co. (2001), a term in a finance lease that obligated a company to make all payments regardless of the condition or performance of the lease equipment was upheld. But see First Federal Financial Service, Inc. v. Derrington’s Chevron, Inc. (1999) (forum selection clause under circumstances in case was unconscionable). And, even before Article 2A, the results were similar. In Dillman & Associates, Inc. v. Capitol Leasing Co. (1982), the court applied Section 2–302 by analogy to a lease of equipment, a process no longer necessary upon enactment of Article 2A, but refused under the circumstances to declare a lease between businessmen of equal sophistication for a copier selected by the lessee and which lease disclaimed warranties in conspicuous language to be unconscionable. See also John Deere Leasing Co. v. Blubaugh (1986), applying Article 2 by analogy to an excessive...
- The price term perhaps is the most material part of any sales contract. Hence, if the parties do not intend to be bound unless they agree on a price, they have not contracted; or, as it is commonly stated in the cases, “the agreement is void for indefiniteness.” Section 2–305(4). This does not mean, however, that the parties must expressly agree on a price. Often the price term is supplied by implication. For example, suppose B, a retail grocer, calls S, a wholesaler, and says “Send me one hundred bushels of No. 1 Idaho potatoes today,” and S replies “O.K.” and immediately sends a truck to B’s store with the potatoes. There is no doubt that the parties intend a contract to buy and sell the potatoes even though nothing has been said about the price. The price is supplied by implication; the price is a reasonable price at the time for delivery. Section 2–305(1). While no explicit provision like Section 2–305(1) appears in Article 2A, under similar circumstances and in accordance with...a
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Chapter 12. Buyer’s or Lessee’s Remedies 141 results (showing 5 best matches)
- Equity recognizes the right of the buyer or lessee to specific performance if the goods are unique. In the vast majority of sales cases, the goods have been identified, usually at the time of contracting, but title has not passed to the buyer. At common law and under the Sales Act, if title had passed, the buyer, generally, was allowed to obtain possession of the goods by one of the legal possessory actions mentioned above. If title had not passed, the buyer’s only hope of obtaining the goods was by getting specific performance in equity. Of course, title does not pass to the lessee in a lease. The equitable remedy, however, is only available if the buyer’s or lessee’s remedy at law is not adequate, which usually means that the buyer or lessee has to show that the goods are “unique.” Some pre-Code courts were unwilling to treat any goods as unique except original works of art, rare manuscripts, family heirlooms, and the like. Others displayed a more liberal attitude by decreeing...
- Where the nonconformity constitutes a breach of warranty, the measure of damage is stated more specifically. Essentially it is the difference in values. Suppose a new automobile is sold or leased with a defective steering mechanism, and the buyer or lessee retains the automobile. The measure of damages in the sale is the difference between the value of the defective automobile and the value it would have had without the defect. Usually this amounts to the cost of repairing or replacing the defective mechanism. See Nelson v. Logan Motor Sales, Inc. (1988) (testimony of buyer that he did not drive the car due to its condition and that it was worthless rejected as a basis for damages; contract price less repair costs of $455.04 may be actual value of the goods accepted). But see Hartzell v. Justus Co. (1982), where the goods could only be partly repaired and the balance of loss of value was awarded.
- In a lease, the measure is the present value of the difference in the use values of the goods for the lease term. Cost of repair in a short term lease then may not be a proper measure.
- The buyer or lessee may accept a nonconforming tender of goods and assert a claim for damages against the seller or lessor for various reasons. Suppose, for example, pursuant to a sales contract S tenders goods which are slightly defective. B notices the defect. But having immediate need for the goods and realizing that the defect can be quickly corrected, B may nevertheless accept the goods and give immediate notice of the defect to the seller. Now, assuming the price is $200, the sale was on open account, and the cost of having the defect corrected is $15, how may B best proceed in order to claim the $15 damages? Should B wait to be sued for the price and then counter-claim for the damages? Should B pay and then sue in small claims court for $15? Clearly neither of these routes make sense. The Code takes the position that the seller’s claim for the price may be diminished by the amount of the damages. Section 2–717 provides:
- In either case, whether the goods have been rejected, or accepted and the acceptance subsequently revoked, so long as the nonconforming goods remain in the buyer’s or lessee’s possession or control, the buyer or lessee has a security interest in them for any amounts paid and any expenses reasonably incurred in the inspection, receipt, transportation, care, and custody of them. Sections 2–711(3) and 2A–508(4). In order to enforce this security interest, the buyer or lessee may dispose of the goods in accordance with the redisposition provisions of Sections 2–706 or 2A–527. The buyer’s or lessee’s security interest in this situation, however, does not extend beyond the items mentioned. Official Comment 2 to Section 2–711. Thus the buyer or lessee may not, for example, if the goods are sold, retain from the proceeds of the sale funds to cover anticipated damages for breach of the contract; any amount in excess of that necessary to cover the items mentioned above must be paid to the...
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Chapter 8. Risk of Loss 60 results (showing 5 best matches)
- Much sales litigation involves situations where the goods which form the subject matter of the contract are damaged, lost, or destroyed after the contract is made but before it has been fully performed. The question involved in these cases is, who bears the risk of loss, the seller or the buyer? As mentioned in an earlier chapter, at common law and under the Uniform Sales Act, risk of loss normally followed title. Risk of loss was recognized as one of the incidents of ownership, although this could be changed by the agreement of the parties, but in many instances an agreement will be silent because the parties do not focus on the issue. In leases, there is a much greater chance the agreement will address the issue because most leases involve a record signed by both parties.
- Of course who has title in the lease context is not an issue as the lessor retains title. Section 2A–219(1) then, in essence, treats risk of loss as one of the incidents of ownership and, absent agreement, risk of damage or destruction from other than acts of the lessee is retained by the lessor, except in the case of a finance lease (Section 2A–103(1)( )). In a finance lease, the fact and substance of ownership diverge because, as discussed in Chapter 1, a finance lease is an alternative for a security interest in financing the acquisition of the use of goods, and the lessee is substantively treated as the owner for the purpose of risk of loss. Thus in a lease risk of loss passes to the lessee at the agreed time or otherwise in a finance lease in accordance with Section 2A–219. Section 2A–219 also controls the time of passage when risk of loss passes by agreement but the time is not agreed upon. As previously
- A seller or a lessor might argue in some cases that if they remain in possession of the goods after selling or leasing them, at that point they become a bailee and risk of loss may pass even though the seller or lessor is a merchant and has not yet delivered the goods. The leading pre-UCC case is Courtin v. Sharp (1960). In a case under the UCC, Caudle v. Sherrard Motor Co. (1975), S, a dealer, agreed to sell a house trailer to B. The trailer was not ready for delivery at the time of contracting. B had to leave the city for a few days on business and agreed to pick the trailer up on his return. Approximately three days after the purchase and before B returned, the trailer was stolen from S’s place of business. S argued, among other things, that after the sale to B, he held the trailer as B’s bailee. Therefore, under former Section 2–509(2)(b), risk of loss had passed to B. The court rejected this argument and held that former Section 2–509(3), discussed below, governed the risk of...
- To illustrate, suppose B agrees to buy 300 bales of cotton goods from S for shipment to B on July 15. On July 13, S prepares 300 bales for shipment to B. On July 14, just as S is preparing to haul the goods to the carrier, B calls and repudiates the contract. On the night of July 15, while the cotton goods are still stored in S’s warehouse, a fire destroys the goods. Risk of loss is on B to the extent the loss is not covered by insurance. Assuming this was a shipment contract, risk of loss would not have passed to B, if it was to pass, until the goods were tendered to the carrier. Sections 2–510(3) and 2A–220(2) in the case of a lease, are applicable to this fact situation because the goods were (1) conforming, (2) identified before the breach or default and loss occurred and (3) destroyed when risk of loss had not passed. Had the goods been non-conforming, these provisions literally would not apply and the entire loss, regardless of insurance coverage, would remain on seller or...
- The “sale on approval” and the “sale or return” have been discussed in Chapter 6 in relation to passage of title. In a number of cases involving these transactions, the goods have been lost, damaged, or destroyed either while in the buyer’s possession or while being returned to the seller. The court was then faced with the problem of determining who bore the risk of loss.
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Chapter 5. Documents of Title and Letters of Credit 22 results (showing 5 best matches)
- Goods often are shipped in a documentary transaction that involves a bill of lading or stored and perhaps sold utilizing a warehouse receipt. This chapter is directed to a brief discussion of those kinds of documents of title, which to the extent state law applies are covered in Article 7 of the UCC. At times payment for goods sold is accomplished through a letter of credit, which are covered in Article 5. See definition of document of title in Section 1–201(b)(16) and of letter of credit in Section 5–102(a)(10). The most common documents of title in a sale are bills of lading (Section 1–201(b)(6)), and warehouse receipts (Section 1–201(b)(42)). These documents represent or purport to represent goods which have been deposited with a bailee for transportation or for storage. They
- Warehouse receipts are helpful in sales transactions in allowing a seller to make delivery of the goods without the need for physical delivery of the goods. Rather, delivery is made by transferring the warehouse receipt to the buyer. Section 2–503(5). For example, S stores 5000 bushels of wheat with W and receives a warehouse receipt calling for delivery “to the order of S.” S contracts to sell the wheat to B and makes delivery by indorsing the receipt in blank or to the order of B and delivering it to B. A “sale” has been consummated without moving the wheat.
- As mentioned, use of a bill of lading is especially helpful in sales transactions where goods are shipped and the seller lacks faith in the buyer’s credit or has bargained otherwise for payment when the goods are delivered. Suppose, for example, S in Philadelphia contracts to sell goods to B in Chicago. S does not want to extend credit to B. S ships the goods to Chicago and has the carrier issue either a negotiable bill of lading calling for delivery to the order of S, the order of B, or bearer, or a straight bill of lading calling for delivery to S. S then sends the bill to S’s agent in Chicago. The agent tenders the document to B and requests the purchase price. When B pays the price to the agent the latter negotiates the bill to B if a negotiable document is being used, or if a straight bill is being used the agent transfers the document to B and gives the carrier written instructions to deliver the goods to B. Or S can achieve the same result by having a sight draft drawn on the...
- A negotiable bill enables the holder to control possession of the goods. This is because the carrier’s obligation is to deliver the goods to the “holder” of the document, which means it cannot safely deliver the goods without obtaining possession or control of the bill of lading. Sections 7–403(a) and (c) and 7–502(a). For example, suppose S ships goods to B under a bill of lading calling for delivery to the order of B and sends the bill to B. Before the goods arrive B sells the goods to P by indorsing the bill of lading in blank, that is, signing B’s name, without more, on the back and delivering it to P. The bill now has been “negotiated” and P becomes the “holder.” The carrier’s obligation under the bill of lading is to deliver the goods to P. Should it deliver them to B instead it would be liable to P for conversion of the goods. Sections 7–403 and 7–404.
- Accordingly, if a seller ships goods under a straight bill the seller can retain a security interest under the document and control the goods only by naming seller as consignee. Otherwise the seller loses control of the goods as against the carrier unless the seller has a right to stop the goods in transit under Section 2–705. The carrier has a right (in fact may be obligated) to deliver the goods to the named consignee even though the seller retains possession or control of the bill of lading.
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Outline 118 results (showing 5 best matches)
- 3. Goods Defined; Mixed Sales and Leases of Goods and Services; Computer Information Transactions
- 2. Contract for Sale and Sale Defined; Lease Agreement, Lease Contract and Lease Defined
- 7. Consumer Lease and Finance Lease Defined; Relation of UCC to Other Law
- Goods in Possession of Bailee
- 6. Sale on Approval and Sale or Return
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Title Page 4 results
- SALES AND LEASES OF GOODS
- IN A NUTSHELL
- Member of the Oklahoma Bar Kenneth McAfee Chair in Lawand Centennial Professorand George Lynn Cross Research Professor University of Oklahoma
- (with brief discussion of letters of credit, documents of title, and the Uniform Computer Information Transactions Act)
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Half Title 3 results
Copyright Page 4 results
- Nutshell Series, In a Nutshell,
- West, a Thomson business, has created this publication to provide you with accurate and authoritative information concerning the subject matter covered. However, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. West is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
- COPYRIGHT © 2003 By West, a Thomson business
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Index 255 results (showing 5 best matches)
Advisory Board 8 results (showing 5 best matches)
- Chancellor, Dean and Distinguished Professor of Law, University of California, Hastings College of the Law
- Professor of Law, University of Michigan Professor of Law, University of San Diego
- Professor of Law, University of California, Berkeley
- Professor of Law, University of Chicago
- Professor of Law, University of Illinois
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- Publication Date: August 25th, 2003
- ISBN: 9780314232144
- Subject: Commercial Law
- Series: Nutshells
- Type: Overviews
- Description: Expert authors present a primer on the law of sales and leases under Articles 2 and 2A of the UCC. This text also focuses on related subjects governed by Articles 5 and 7 of the UCC (letters of credit and documents of title). Introduces the formation of the contract and examines the statute of frauds, parol evidence, and modification. Covers terms of the contract, as well as performance; third-party title and rights; risk of loss; warranty obligations; repudiation, breach, and excuse; and remedies.
