GB/IK

Sales
 Sales

Sales of Goods（商品の売買契約）

重要なTOPICは
●   Firm Offer

●   締結した契約の変更時における Consideration

●   Warranty（保証）：数種類があります。

●   書面による契約の例外事項

●   商品の所有権と損失リスクはどの時点で Buyerに移行するのか？

●   契約が守られなかった時の、Impact

土地、ビルの売買契約やサービス契約と同じで Mail - Boxルールは使用できます。

Sales契約は簡単です。問題を読み間違わなければ高得点が期待できる TOPIC
です。
Sales

CHANGES FROM CONTRACT LAW

A. No Consideration Needed

1. No additional consideration is needed when modifying an existing sales of

Goods contract.

2. In contract law, additional consideration is needed to modify a real estate

or employment contract.

B. Firm Offers

1. Must be written (not oral).

2. Must be made by a merchant.

3. Must state that offer is irrevocable.

4. Duration: If not stated in offer, then duration is a reasonable time, (not to

exceed 3 months)

5. No consideration needed

Notes:

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C. Mailbox Rule (Early Acceptance Rule)

1. Any means of communication as fast or faster than offeror’s method of

communication is valid when sent. (only applies to acceptances)

2. Exception: Offeror stipulates that acceptance must be received to be

effective

D. Terms

1. Different or additional terms in an acceptance

a. Minor changes are Okay: valid acceptance, not a counteroffer

b. Either party says no changes, then cannot change

2. Time of Delivery: Not stated, then reasonable time

3. Place of Delivery: Not stated, then seller’s place

Notes:

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STATUTE OF FRAUDS
A. Contract in Writing: Sale of goods of $500 or more
1. Must state major terms of the contract

2. Must state quantity

B. Exceptions: No writing required (even if $500 or more)

1. Specially manufactured goods or unique goods

2. Part payment for goods or part receipt and acceptance of goods (Can only
enforce part paid or part received and accepted.)

3. Admission in court

4. Merchants Confirming Letter Rule: When a confirming letter is issued

between two merchants and neither merchant objects within 10 days, both
parties are bound by the terms of the contract as if both parties had signed
the letter.

Status of Fraud Exceptions

S Specially manufactured goods

P Part payment or receipt of goods

A Admission in court

M Merchant’s confirming letter

C. Modification: No additional consideration required to modify sales contract

1. Under $500: Don’t need writing

2. Over $500: Need writing

Notes:

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WARRANTIES
A. Express Warranties

1. Seller’s statement of fact that is relied on by the buyer

• Opinions and statements of value are not warranties.

2. Need not use the word “warranty” to constitute a warranty.

3. Using the word “warranty” does not mean there is a warranty.

4. Must be part of the basis of the bargain between buyer and seller.

5. Buyer may rely on statement of fact made by seller.

6. Merchandise in sale must conform to sample or description.

Notes:

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B. Implied Warranties

1. Warranty of Merchantability: Merchant’s promise that goods are fit and safe
for normal use

2. Warranty of Fitness for a Particular Purpose

a. Buyer must rely on seller to select suitable goods.

b. If buyer does rely, goods must be fit for buyer’s purpose.

3. Exclude Warranties of Fitness & Merchantability

a. Words such as “as is,” “with all faults,” or “slightly irregular”

b. Conspicuous writing

4. Warranty of Title

a. Sellers promise good title unless specifically disclaimed

b. May not be excluded by the use of an “as is” clause

5. Infringements

a. Merchant’s promise of no patent or trademark violations

b. No such warranty on sale to buyer’s specification

6. Encumbrances: Seller’s promise of no unstated liens or attachments

Notes:

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PRODUCT LIABILITY
A. Privity: Covers who can sue whom for breach of merchantability.

1. Old Rule: Only original buyer can sue; can only sue original seller.

2. UCC Rule: Buyer, family, household members, and guests can sue merchant
who sold the goods or anyone in the chain of title for breach of warranty of
merchantability.

B. Negligence

1. Failure to exercise reasonable care

2. Negligence Elements

a Duty owed to somebody

b. Breach of that duty

c. Harm suffered by somebody

d. Causality: A direct connection between the harm and the other party’s
negligence

3. Anyone injured by negligence can sue the negligent seller.

C. Strict Liability

1. Seller is liable to ultimate user for a defective or unreasonably dangerous product.

2. Applies where seller is in business of selling such product and defective product
reaches user without substantial change.

3. User need not show negligence by seller or manufacturer.

4. Seller cannot use defenses of “no notice of breach,” “disclaimer,” or “lack of

privity.”

5. Bystanders may sue under strict liability provided that the product was defective
and the seller was in the business of selling the product.

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TITLE & RISK OF LOSS

A. Contracts Requiring Transportation

1. Shipment Contract: Title and risk of loss (ROL) pass when goods are delivered
to carrier (shipping point).

2. Destination Contract: Title and ROL pass when goods reach their destination.

3. If unclear which type of contract, courts construe as a shipment contract.

B. Documents of Title

1. Include bills of lading, dock warrants, warehouse receipts, etc.

2. Title and ROL pass when buyer receives documents.

C. Goods Held by Seller: No transportation or no documents of title

1. Title passes when contract is made and seller completes performance agreed
upon.

2. Merchant Sellers: ROL passes when buyer receives goods.

3. Non-merchant Sellers: ROL passes upon tender of delivery.

D. Nonconforming Goods

1. ROL is always on seller.

2. Title passes when buyer receives correct goods.

Notes:

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SHIPPING TERMS
A. F.O.B. (Free on Board)

1. Seller has expense and ROL in getting goods to the FOB point.

2. FOB Shipping Point: Seller’s expense of getting goods to the point of shipping.
ROL and title pass at shipping point.

3. FOB Destination: Seller’s expense of getting goods to the destination. Title and
ROL pass when goods reach destination.

B. F.A.S. (Free Along Side)

1. Title and ROL pass once the goods are delivered to the carrier.

2. Basically the same as FOB Shipping Point.

C. C.O.D. (Cash On Delivery)

1. Buyer must pay for the goods before having the right to inspect or receive the
goods.

2. Buyer can return non-conforming goods.

D. Ex-Ship

1. Title and ROL pass when goods are safely unloaded at the destination.

2. Basically, the same as FOB Destination.

E. C.I.F. (Cost, Insurance & Freight)

1. Total price includes the cost of the goods, insurance in the buyer’s name, and
freight charges to a named destination.

2. Title and ROL pass at shipping point. (Basically like the FOB Shipping Point
contract. )

Notes:

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F. Sale On Approval

1. Title and ROL pass when buyer approves goods

2. At end of trial period, approval is deemed to have taken place unless the buyer
has returned the goods

G. Sale Or Return

1. Title and ROL pass to buyer upon delivery.

2. Buyer has the right to return the goods.

Notes:

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POWER TO TRANSFER TITLE

A. Buyer can acquire no better title than seller.

• Thief cannot pass good title.

B. Exceptions

1. Title acquired by Fraud (such as impersonation or bad check): Good title passes
to an innocent buyer.

2. Entrustment: Rightful owner leaves goods with merchant. A good faith purchaser
receives good title.

3. Goods Remaining in Seller’s Possession After Sale: Seller can resell goods to
a good faith purchaser who receives good title.

Notes:

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BUYERS’/SELLERS’ RIGHTS & REMEDIES

A. Non-Conforming Goods

1. Buyer has choices.

a. Accept the goods

b. Reject the goods

c. Revoke acceptance of goods.

2. Seller has the right to cure.

a. Seller may deliver conforming goods within original time frame of the
contract.

b. If delivered, the buyer must accept the goods.

B. Breach by Seller

1. Buyer has right to cover: Make a substitute purchase of goods elsewhere.

2. Buyer may obtain damages from seller.

3. In the case of unique goods, buyer may assert specific performance against
the seller.

4. If the goods are not unique, but the buyer cannot acquire them elsewhere, the
buyer may assert specific performance against the seller.

Notes:

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C. Adequate Assurance of Performance

1. Right of either party to a contract to receive assurance from the other party that
it will fulfill the terms of the contract

2. Asserted if reasonable grounds for insecurity arise concerning the performance

of a party to the contract

D. Identified Goods

1. Goods identified as agreed to by the parties under the contract

2. Buyer acquires insurable interest in the goods.

3. Buyer can recover goods from insolvent seller or seller’s creditors.

E. Statute of Limitations: Four (4) years

1. Can be reduced to not less than one year by agreement

2. Cannot be extended

3. Runs from the date of the breach

Notes:

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MULTIPLE CHOICE QUESTIONS

1. Under the Sales Article of the UCC, a 3. Under the Sales Article of the UCC,
firm offer will be created only if the the warranty of title
a. Offer states the time period during a. Provides that the seller cannot
which it will remain open. disclaim the warranty if the sale is
b. Offer is made by a merchant in a made to a bona fide purchaser for
signed writing. value.
c. Offeree gives some form of consid- b. Provides that the seller deliver the
eration. goods free from any lien of which the
d. Offeree is a merchant. (5910) buyer lacked knowledge when the
contract was made.
2. Under the Sales Article of the UCC, c. Applies only if it is in writing and
when a written offer has been made without signed by the seller.
specifying a means of acceptance but d. Applies only if the seller is a
providing that the offer will only remain open merchant. (5912)
for ten days, which of the following
statements represent(s) a valid acceptance 4. To establish a cause of action based
of the offer? on strict liability in tort for personal injuries
that result from the use of a defective
I. An acceptance sent by regular mail product, one of the elements the injured
the day before the ten-day period party must prove is that the seller
expires that reaches the offeror on a. Was aware of the defect in the
the eleventh day. product.
II. An acceptance faxed the day before b. Sold the product to the injured party.
the ten-day period expires that Failed to exercise due care.
reaches the offeror on the eleventh c. Sold the product in a defective
day, due to a malfunction of the d. condition.   (5913)
offeror’s printer.
5. Under the Sales Article of the UCC,
a. I only which of the following factors is most
b. II only important in determining who bears the risk
c. Both I and II of loss in a sale of goods contract?
d. Neither I nor II (5911) a. The method of shipping the goods.
b. The contract’s shipping terms.
c. Title to the goods.
d. How the goods were lost. (5914)

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6. Under the Sales Article of the UCC,
in an F.O.B. place of shipment contract, the
risk of loss passes to the buyer when the
goods
a. Are identified to the contract.
b. Are placed on the seller’s loading
dock.
c. Are delivered to the carrier.
d. Reach the buyer’s loading dock.
(5915)
7. Under the Sales Article of the UCC,
and unless otherwise agreed to, the seller’s
obligation to the buyer is to
a. Deliver the goods to the buyer’s place
of business.
b. Hold conforming goods and give the
buyer whatever notification is
reasonably necessary to enable the
buyer to take delivery.
c. Deliver all goods called for in the
contract to a common carrier.
d. Set aside conforming goods for
inspection by the buyer before
delivery.
8. Under the Sales Article of the UCC,
which of the following statements is correct?
a. The obligations of the parties to the
contract must be performed in good
faith.
b. Merchants and nonmerchants are
treated alike.
c. The contract must involve the sale of
goods for a price of more than $500.
d. None of the provisions of the UCC
may be disclaimed by agreement.
(5227)
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Sales
9. Under the Sales Article of the UCC,
which of the following statements is correct
regarding the warranty of merchantability
arising when there has been a sale of goods
by a merchant seller?
a. The warranty must be in writing.
b. The warranty arises when the buyer
relies on the seller’s skill in selecting
the goods purchased.
c. The warranty cannot be disclaimed.
d. The warranty arises as a matter of
law when the seller ordinarily sells
the goods purchased. (5228)
10. High sues the manufacturer, whole-
saler, and retailer for bodily injuries caused
by a power saw High purchased. Which of
the following statements is correct under
strict liability theory?
a. Contributory negligence on High’s
part will always be a bar to recovery.
b. The manufacturer will avoid liability if
it can show it followed the custom of
the industry.
c. Privity will be a bar to recovery
insofar as the wholesaler is con-
cerned if the wholesaler did not have
a reasonable opportunity to inspect.
d. High may recover even if he cannot
show any negligence was involved.
  (5230)
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11. Under the Sales Article of the UCC, 14. Vick bought a used boat from Ocean
which of the following events will result in the Marina that disclaimed “any and all
risk of loss passing from a merchant seller to warranties” in connection with the sale.
a buyer? Ocean was unaware the boat had been
stolen from Kidd. Vick surrendered it to Kidd
Tender of the
  goods Use of the seller’s
at the seller’s
  truck to deliver
when confronted with proof of the theft. Vick
place of business
  the goods sued Ocean. Who is likely to prevail and
a. Yes Yes why?
b. Yes No a. Vick, because the implied warranty of
c. No Yes title has been breached.
d. No No b. Vick, because a merchant cannot
(5231)
disclaim implied warranties.
12. Rowe Corp. purchased goods from c. Ocean, because of the disclaimer of
Stair Co. that were shipped C.O.D. Under the warranties.
Sales Article of the UCC, which of the d. Ocean, because Vick surrendered the
following rights does Rowe have? boat to Kidd. (4798)
a. The right to inspect the goods before
paying. 15. Larch Corp. manufactured and sold
b. The right to possession of the goods Oak a stove. The sale documents included
before paying. a disclaimer of warranty for personal injury.
c. The right to reject nonconforming The stove was defec-tive. It exploded
goods. causing serious injuries to Oak’s spouse.
d. The right to delay payment for a Larch was notified one week after the
reasonable period of time. (5233) explosion. Under the UCC Sales Article,
which of the following statements
13. Under the UCC Sales Article, which of concerning Larch’s liability for personal
the following statements is correct injury to Oak’s spouse would be correct?
concerning a contract involving a merchant a. Larch cannot be liable because of a
seller and a non-merchant buyer? lack of privity with Oak’s spouse.
a. Whether the UCC Sales Article is b. Larch will not be liable because of a
applicable does not depend on the failure to give proper notice.
price of the goods involved. c. Larch will be liable because the
b. Only the seller is obligated to perform disclaimer was not a disclaimer of all
the contract in good faith. liability.
c. The contract will be either a sale or d. Larch will be liable because liability for
return or sale on approval contract. personal injury cannot be disclaimed.
d. The contract may not involve the sale (4799)
of personal property with a price of
more than $500. (4797)

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16. Quick Corp. agreed to purchase 200
typewriters from Union Suppliers, Inc. Union
is a wholesaler of appliances and Quick is an
appliance retailer. The contract required
Union to ship the typewriters to Quick by
common carrier, “F.O.B. Union Suppliers, Inc.
Loading Dock.” Which of the parties bears
the risk of loss during shipment?
a. Union, because the risk of loss
passes only when Quick receives the
typewriters.
b. Union, because both parties are
merchants.
c. Quick, because title to the type-writers
passed to Quick at the time of
shipment.
d. Quick, because the risk of loss
passes when the typewriters are
delivered to the carrier. (4800)
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17. Webstar Corp. orally agreed to sell
Northco, Inc. a computer for $20,000.
Northco sent a signed purchase order to
Webstar confirming the agreement. Webstar
received the purchase order and did not
respond. Webstar refused to deliver the
computer to Northco, claiming that the
purchase order did not satisfy the UCC
Statute of Frauds because it was not signed
by Webstar. Northco sells computers to the
general public and Webstar is a computer
wholesaler. Under the UCC Sales Article,
Webstar’s position is
a. Incorrect, because it failed to object to
Nothco’s purchase order.
b. Incorrect, because only the buyer in a
sale-of-goods transaction must sign
the contract.
c. Correct, because it was the party
against whom enforcement of the
contract is being sought.
d. Correct, because the purchase price
of the computer exceeded $500.
(4801)
18. Which of the following statements
applies to a sale on approval under the UCC
Sales Article?
a. Both the buyer and seller must be
merchants.
b. The buyer must be purchasing the
goods for resale.
c. Risk of loss for the goods passes to
the buyer when the goods are
accepted after the trial period.
d. Title to the goods passes to the buyer
on delivery of the goods to the buyer.
(4346)
Sales
19. Which of the following statements
would not apply to a written contract
governed by the provisions of the UCC Sales
Article?
a. The contract may involve the sale of
personal property.
b. The obligations of a nonmerchant
may be different from those of a
merchant.
c. The obligations of the parties must be
performed in good faith.
d. The contract must involve the sale of
goods for a price of $500 or more.
(4347)
20. To establish a cause of action based
on strict liability in tort for personal injuries
resulting from using a defective product, one
of the elements the plaintiff must prove is
that the seller (defendant)
a. Failed to exercise due care.
b. Was in privity of contract with the
plaintiff.
c. Defectively designed the product.
d. Was engaged in the business of
selling the product. (4351)
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21. Bond purchased a painting from Wool,
who is not in the business of selling art.
Wool tendered delivery of the painting after
receiving payment in full from Bond. Bond
informed Wool that Bond would be unable
to take possession of the painting until later
that day. Thieves stole the painting before
Bond returned. The risk of loss
a. Passed to Bond at Wool’s tender of
delivery.
b. Passed to Bond at the time the
contract was formed and payment
was made.
c. Remained with Wool, because the
parties agreed on a later time of
delivery.
d. Remained with Wool, because Bond
had not yet received the painting.
(4352)
22. Smith contracted in writing to sell
Peters a used personal computer for $600.
The contract did not specifically address the
time for payment, place of delivery, or
Peters’ right to inspect the computer. Which
of the following statements is correct?
a. Smith is obligated to deliver the
computer to Peters’ home.
b. Peters is entitled to inspect the
computer before paying for it.
c. Peters may not pay for the computer
using a personal check unless Smith
agrees.
d. Smith is not entitled to payment until
30 days after Peters receives the
computer. (4353)

 23.  On May 2, Lace Corp., an appliance
wholesaler, offered to sell appliances worth
$3,000 to Parco, Inc., a household
appliances retailer. The offer was signed by
Lace’s president, and provided that it would
not be withdrawn before June 1. It also
included the shipping terms: “FOB –Parco’s
warehouse.” On May 29, Parco mailed an
acceptance of Lace’s offer. Lace received the
acceptance June 2. Which of the following
statements is correct if Lace sent Parco a
telegram revoking its offer, and Parco
received the telegram on May 25?
a. A contract was formed on May 2.
b. Lace’s revocation effectively termi-
nated its offer on May 25.
c. Lace’s revocation was ineffective
because the offer could not be
revoked before June 1.
d. No contract was formed because
Lace received Parco’s acceptance
after June 1. (2864)
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Sales
24. On May 2, Mason orally contracted
with Acme Appliances to buy for $480 a
washer and dryer for household use. Mason
and the Acme salesperson agreed that
delivery would be made on July 2. On May 5,
Mason telephoned Acme and requested that
the delivery date be moved to June 2. The
Acme salesperson agreed with this request.
On June 2, Acme failed to deliver the washer
and dryer to Mason because of an inventory
shortage. Acme advised Mason that it would
deliver the appliances on July 2 as originally
agreed. Mason believes that Acme has
breached its agreement with Mason. Acme
contends that its agreement to deliver on
June 2 was not binding. Acme’s contention is
a. Correct, because Mason is not a
merchant and was buying the
appliances for household use.
b. Correct, because the agreement to
change the delivery date was not in
writing.
c. Incorrect, because the agreement to
change the delivery date was binding.
Incorrect, because Acme’s agree-
d. ment to change the delivery date is a
firm offer that cannot be withdrawn by
Acme. (2867)
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25. Which of the following conditions must 27. Which of the following factors
be met for an implied warranty of fitness for result(s) in an express warranty with
a particular purpose to arise in connection respect to a sale of goods?
with a sale of goods?
I. The seller’s description of the goods
I. The warranty must be in writing. as part of the basis of the bargain.
II. The seller must know that the buyer II. The seller selects goods knowing
was relying on the seller in selecting the buyer’s intended use.
the goods.
a. I only
a. I only b. II only
b. II only c. Both I and II
c. Both I and II d. Neither I nor II (2873)
d. Neither I nor II (2868)
28. Under the UCC Sales Article, the
26. Under the UCC Sales Article, an implied warranty of merchantability
action for breach of the implied warranty of a. May be disclaimed by a seller’s oral
merchantability by a party who sustains statement that mentions mer-
personal injuries may be successful against chantability.
the seller of the product only when b. Arises only in contracts involving a
a. The seller is a merchant of the merchant seller and a merchant
product involved. buyer.
b. An action based on negligence can c. Is breached if the goods are not fit for
also be successfully maintained. all purposes for which the buyer
c. The injured party is in privity of intends to use the goods.
contract with the seller. d. Must be part of the basis of the
d. An action based on strict liability in bargain to be binding on the seller.
tort can also be successfully (0501)
maintained. (2870)

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