Transcript Warm Up
Warm Up • What is the difference between a merchant and a casual seller? • Download 9.01 Notes Part B Sales and Consumer Issues Objective 09.01 Part B Interpret sales contracts and warranties within the rights and law of consumers. LAW OF SALES Discounts • If terms are 2/10, n30 – Purchaser may take a 2% discount on the cost of invoice if paid within 10 days, – Purchaser will pay net (full 100% of invoice), if paying after 10 days but before 30 days – Example: Invoice billed on July 1st for $1,000 with terms 2/10, n30. If paid by July 10, buyer can take discount of $20 (2% x 1000), and pay $980. If bill is paid July 11 - July 31 amount will be net or $1000. Late Fees • Also called Past Due Fees • Frequently vendors state a separate amount of interest due on accounts that are past due. • Example: “1.5 % per month on all unpaid past due accounts” Consignment Sale • Goods are sent by a manufacturer to a retailer, but ownership and risk remain with the manufacturer until goods are sold. • Retailer generally does not make payment for the goods unless goods are sold to consumer. • If goods do not sell, retailer has right to return unsold goods to manufacturer. Consignment Sales Example: Jean owns a retail clothing store. A supplier, Awesome Duds, offers Jean a new line of accessories saying, “If you’ll display this new product line, I will make you a deal. You’ll take no risk. I will not invoice you. If they don’t sell, return them all to me. When they sell, send me the wholesale price quoted.” Sale or Return • A completed sale in which the merchant-buyer has the option of returning the goods. • The merchant-buyer gains ownership and risk of loss upon delivery. • If goods are returned within the agreed upon time, or a reasonable time, ownership and risk return to seller. • Returned goods must be in essentially their original condition. Sale on Approval • A sale in which goods are delivered to the buyer in an “on trial” or “on satisfaction” basis. • Ownership and risk of loss do not attach until prospective buyer approves goods. Auction • A public sale to the highest bidder. • Auctioneer offers goods for sale and accepts offers called bids. • Auctioneer accepts the bid on behalf of the owner of the goods. • An Auction sale with reserve means the auctioneer does not have to sell to the highest bidder. For example, if all bids are very low, the bid can be rejected and sale stopped. • Ownership passes when auctioneer closes bidding and accepts the highest bid. “SOLD!” • Risk of loss passes when auctioneer gives buyer right to possess (usually after payment). Bulk Transfer • A transfer, generally by sale, of all or a major part of the goods of a business in one unit at one time. • To protect creditors, the UCC requires merchants to give creditors written notice of bulk transfers so the merchant cannot sell all inventory and leave without payment to creditors. Transfer of Ownership • People who own goods have title to the goods. Title is the right of ownership of goods. • True owners or titleholders may transfer goods. – If the seller of goods is a thief, the seller’s title is void. • Authorized persons or agents of the owner may transfer goods. (Examples: Merchant in a consignment sale or an auctioneer) What are title documents? • A document of title is a written document giving the person who possesses it the right to receive the goods named in the document. – Bill of lading is a receipt for shipment of goods given by a transportation company to a shipper when the carrier accepts the goods for shipment – Warehouse receipt is given by a warehouse to a customer whose goods are stored in the warehouse. – Bill of sale is given to a buyer as evidence of ownership. (Property tax collectors may require a bill of sale to remove a sold vehicle from your tax bill. License tag offices may require bill of sale to transfer a vehicle title and issue a tag.) Can a voidable title be transferred? • Voidable Title-when goods can be returned and the money paid for them is refunded. – Minors have voidable titles. – Victims of fraud who purchase goods have voidable titles. • Under UCC law, someone with a voidable title can transfer good title to someone who buys in good faith for something of value. When does ownership pass and risk of loss attach? • Identified goods -goods that have been specifically designated as the subject matter of a particular sales contract • Once goods are identified, title passes to buyer when seller meets contract requirements. • IN CONTRAST: goods that are not both existing and identified are called future goods and neither ownership or risk of loss pass at time of agreement. These goods can be the subject matter of a contract to sell in the future, but not a sale. No one has title to future goods because they do not exist. Example: crops or goods to be manufactured in future. When does ownership pass and risk of loss attach? • In a shipment contract– Seller transfers goods to a carrier for delivery to buyer. – Title and risk of loss pass to buyer when seller turns over goods to carrier. – Seller has no responsibility once goods reach carrier. – Invoice designation is f.o.b. (free on board) shipping point. This means the buyer is responsible for freight cost (and risk) once seller delivers goods to carrier or to the shipping point. When does ownership pass and risk of loss attach? • In a destination contract– Contract requires seller to deliver goods to a specific destination. – Title and risk of loss retained by seller until delivered to the destination point. – Invoice designation is f.o.b. (free on board) destination. This means the seller is responsible for goods until they have been delivered.