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image of God in the exercise of their creative dominion over the resources of the earth and goods produced by other people through enforcement of terms to which they have agreed (expressly or tacitly), or payment of damages in lieu thereof I. Assignment 1: The Role and Scope of Codes in Sales Systems A. Sales systems: all the people, institutions, laws and practices that are involved in transfers of ownership for a price B. Sales Systems perform 4 functions: formation, terms, performance & remedies 1. Brings buyers and sellers together and enables them to create legally enforceable transfers of ownership 2. Provides a set of standard terms that govern the transfer of ownership a. The buyer and seller can choose to modify the standard terms b. This gap-filling function may be performed by a code (UCC), common law, or standard form contracts 3. Provides set of delivery institutions that facilitate the possessory, legal and symbolic transfer from seller to buyer 4. Enforce agreements to transfer ownership by giving aggrieved buyer or seller various remedies for breach by the other C. Three ways sales law has impact on sales systems 1. Law of sales crucial in those instances where the normal business relationship breaks down and the parties end up in the litigation world 2. When parties to sales agreement negotiate informal settlements to disputes, they will probably do so in the “shadow of the law” 3. Legal rules help dictate the terms of the various forms that business people use in conducting transactions within a given sales system a. Forms are important because they could be binding in litigation and also b/c business people often act as if the forms are binding and sometimes change their behavior to conform to what the forms say D. The UCC plays the role of gap-filing in the sales system of goods 1. The common law is a gap-filler where the code is silent 2. §1-103 The provisions of the code override common law that is contrary to it but the common law shall continue to supplement the provisions of the code E. Common law continues to play at least 3 roles in law-related sales system
. goods or services to be 2 . the unborn young of animals and growing crops 2. If there is a custom in a particular industry concerning a performance term. Four ways in which UCC gap-filler will be superseded 1. the money in which the price is paid. Two different tests to determine if “mixed” contract is for goods or services 1. Mitigation of damages. parties’ repeated occasion of performance w/in that contract may establish an agreement by implication w/in that contract a.and things in action b. §2-107 Good also includes things severed from Realty a. that custom will prevail over the UCC gap-filler whenever the two are inconsistent a. UCC will not apply if the contact itself specifies what the term should be a. Where parties’ past dealings with one another have established a particular way that the parties have done business with one another. and even such related tort theories as intentional interference w/ contract F. §1-302(a): Code drafter desired first and foremost to give effect to private agreements. that history may establish by implication certain standard terms btwn the parties a. structures or materials if they are severed by the seller b. all things which are moveable at the time of identification to the contract for sale other than. §1-303(a): Course of performance 3. §1-303(c): Usage of trade G. frustration of purpose for buyer. Growing crops or other things attached to realty and capable of severance w/out material harm to the land c. Some UCC provisions are not intended to affect certain related common law doctrine. investment securities…. the common law can help define terms that the UCC has left undefined 2. §2-105: Goods are defined as: a. Some common law doctrines that operate side-by-side with UCC a. Timber to be cut whether severed by buyer or seller H. Minerals.1. Article 2 applies to the sale of goods 1. at least to extent that agreements are w/in limits of good faith and commercial reasonableness 2. Even where parties to contract are silent on a particular matter. therefore parties must looks to common law to define parameters of that related doctrine 3. Where Article 2 is merely codifying existing law. §1-303(b): Course of dealings 4. Predominant Purpose test: look to the contract and see what it is “predominantly” about.
Problem Set 1 A. BUT 3 . Merchant is defined as §2-104: 1. Person who deals in the goods of the kind OR 2. Implied warranty of merchantability c. The warranty promises the buyer that the good will be fit for their ordinary purpose b. The seller must be a merchant with respect to goods of that kind J. §2-104 Comment 2: 3 categories of Consequences to Being a Merchant: a. Place of delivery in contract for goods §2-308 1. §2-314 Implied Warranty of Merchantability 1. Gravaman of the Action test: look at the dispute (lawsuit) and see if it is concerning the good or the service I. etc. Merchants follow rules surrounding general business practices such as answering the mail. To whom such knowledge or skill may be attributed by his employment of an agent or broker or intermediary who by his occupation holds himself out as having such knowledge or skill 4. (a) Unless otherwise agreed place for delivery is seller’s place of business or if he has none his residence. it satisfies the writing requirement of goods of $500 or more. b. If merchant then implied warranty of habitability applies to the goods they are selling b. General duties of good faith & standards of fair dealing in trade including special duty of merchant-buyer to follow seller’s reasonable instructions regarding goods in the buyer’s possession following rejection & heightened duty of merchant to give adequate assurance of future performance IA. at least where the merchant deals in goods of the kind that are sold a. Otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction OR 3. unless written notice of objection to its contents is given w/in 10 days after its received 5. Matters if person is merchant or not: Implied warranty of merchantability and statute of fraud exception a.2. §2-201(2) Statute of frauds exception: Btwn merchants if w/in a reasonable time a writing in confirmation of contract and sufficient against sender is received and party receiving it has reason to know what it is. The warranty that all merchants create when they sell goods under Article 2. giving firm offers.
Course of dealing is next (how they have performed in past contracts) 4. Economic realities test rejects looking at the parties’ intention 4 . with gap-fillers provided as back-ups but with very few limits on freedom of contract C. (b) in contract for sale of identified goods. that is place for their delivery 3. Economic realities test: simply considers the likelihood. Course of performance is next (how they have already performed in contract in question) 3. unlike a seller. Like Article 2 it also allows the parties to make their sale or lease contracts more or less as they wish. Agreement as distinguished from contract §1-201(3) 1. Article 2A deals with lease transactions it: 1. a. If unlikely that there lessor would get back considering the economics then it is considered a disguised sale intended for security c. (c) documents of title delivered through customary banking channels B. If dispute arises over what was agreed to: 1. CISG. Scope Issues with Leases. Bargain of the parties as found in their language or inferred from other circumstances like course of performance. at the time the transaction is entered into. that the lessor will receive the goods back at a time when the goods still have a meaningful economic life. Borrows heavily from the language & concepts of Article 2 2. and Real Estate A. Express terms prevail over all 2. the lessor. has a reasonable expectation of receiving the goods back at a time when the goods still have meaningful economic life B. course of dealing or usage of trade C. Usage of trade is last (how others in the industry perform) D. Courts struggle to distinguish btwn “true lease” & “disguised sale” 1. which to the knowledge of the parties at time of contracting goods are in another place. Statute of Frauds §2-201 1.the 2. If there is a reasonable likelihood lessor will retain some residual interest in the goods then this test would deem it to be a true lease b. In order to be enforceable contract for the sale of goods for $500 or more must be in writing 2. Btwn merchants if w/in a reasonable time a confirmation writing is sent and received and receiving party has reason to know of its contents it will meet the writing requirement and is enforceable unless receiving party gives written objection to its contents w/in 10 days II. In a lease.
the lessee has the option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal consideration upon compliance with the lease. that they have places of business in different Contracting States 2. service/maintenance costs. CISG defines a party’s place of business as the place “which has the closest relationship to the contract and its performance” 3. CISG applies if the parties have reason to know. unless the seller neither knew nor should have known that the goods were being purchased for a consumer purpose 4. Transaction in form of a lease creates instead a security interest if the lessee is obligated to pay the lessor for the right of possession and use of the good during the term of the lease AND this obligation is not subject to termination by the lessee AND: a. OR b.D. The present value of consideration the lessee has to pay for use & possession of goods substantially = to or greater than the fair market value of the goods at the time the lease is entered into. OR d.). Lessee agrees to pay associated cost of goods (i. by the time of contract formation. §1-203 (c): Transaction in form of a lease does not create a security erest merely b/c: a. OR e. There is no body of common law the CISG can draw upon when silent 5 . insurance. CISG does not apply to the liability of the seller for death or personal injury caused by the goods sold 5. registration fees. the lessee is either bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods. the original term of the lease is equal to or greater than the remaining economic life of the goods. the lessee has the option to become the owner of the goods for no additional consideration or for nominal consideration upon compliance with the lease 2. OR b. etc. OR c. CISG does not cover the sale of consumer goods. CISG: Convention of Contracts for International Sales of Goods 1. OR d. §1-203: Four times when the transaction must be considered a disguised sale 1. Lessee has option to renew lease for fixed rent that is = to or greater than the reasonable fair market rent for term of renewal at the time the option is to be performed f. Lessee assumes risk of loss of goods. Lessee has option to purchase option at fair market value E. OR c.e taxes. Lessee has an option to renew the lease or become the owner of the goods.
The first question is “Is there a contract?” 1.III. The Process of Sales Contract Formation A. §2-204: Formation in General 6 .
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