Transcript Chapter 13: Sales Contracts

Chapter 13: Sales
Contracts
Brian Messing, Armen Tooloee, Cole Pugliano
13-1 Sales
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What is a sale?
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A contract where ownership of goods is transferred from the seller to the
buyer immediately
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Ownership is a collection of rights over a certain piece of property
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These rights include the right to hold title, possess, use, make profit from,
waste, and even destroy.
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Vendor = Seller
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Vendee = Buyer
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If the transfer of goods is going to take place in the future it is called a
contract to sell.
○
When goods or services are exchanged for other goods or services it is
considered bartering.
13-1 Sales
● What are goods?
○ UCC (Uniform Commercial Code) defines goods as tangible, movable
items that are perceptible to the touch
○ non-goods are defined as
■ money
■ legal rights
■ patents, copyrights etc.
■ real property (land and buildings)
13-1 Sales
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•
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Payment: Buyer transfers agreed-upon consideration, seller accepts it.
Delivery: Act by which the subject matter of the contract is placed in
the possession of the buyer.
Receipt of Goods: Buyer takes physical possession or control of the
goods.
Bill of Sale: Written evidence of the transfer of ownership.
•
13-1 Sales
Acceptance of Goods: When the buyer has agreed, and the goods
received are conforming, or a satisfactory accommodation.
o Conforming Goods: Goods that specifically fulfill the seller’s
obligations
o Accommodation: An arrangement if the seller is unable to provide
conforming goods, instead they provide non-conforming goods.
o Non-Conforming Goods: Goods that may suffice.
o Perfect Tender Rule: Enforced by the UCC. Requires the tender of
goods to match the buyer’s order absolutely.
Contracts that are not Sales
● If the primary purpose of a contract is a service it is not a sale
○ Goods may be included but are not the primary purpose
● An example would be hiring a contractor to fix your roof
○ If you paid for the labor and the materials were included it would
not be a sale.
What’s Your Verdict
At the Dan-Dee Discount Department Store, Jack and Jean Medina signed a
contract to buy a clothes washer and dryer set. The Dan-Dee salesperson
explained that although the set on display was not in stock, “We will
deliver and install it within two weeks.” While shopping at the store, the
Medinas left their car in the store’s automobile service department to
have the engine’s idling speed adjusted and to have squeaks in the door
eliminated. The charge for labor was $45. There was no charge for parts
or supplies. The service attendant recommended replacing the car’s tires,
and the Medinas agreed. The cost of the tires was $300, plus $25 for
balancing and installation. The Medinas also bought a new battery for $59.
It was installed free of charge.
Which of the transactions were sales?
What’s Your Verdict
● The contract for the washer was a contract to sell because it will
happen in 2 weeks
● The car repairs were not a sale because the contract was for a
service not goods.
● The purchase of tires and a battery were a sale
13-2 Special Rules for Sales Contracts
• A Merchant is someone who regularly sells products and
is held to a higher standard, ie: Car Salesman
• A Casual Seller is somebody who does not sell something
regularly but does on occasion, ie: someone selling their
car through the ‘for sale’ ads or craigslist
13-2 Special Rules for Sales Contracts
• Generally, sales contracts are enforceable whether or
not they are written, oral or implied from the conduct
of the parties
• However, the Statute of Frauds states that with
goods valued at $500 or more the contract must be
written to be enforced in court
13-2
Special Rules for Sales Contracts
• It is good
business practice
to have all
contracts written
• However, not all
contracts need to
be written
13-2 Special Rules for Sales Contracts
• Receiving goods does not execute a contract
• Both a receipt and acceptance are necessary
• If the buyer has received/accepted only some of the goods,
the contract is only good for the portion of the goods accepted
13-2 Special Rules for Sales Contracts
Example A: Tooloee vs. MATC
Armen orally agreed to supply the Messing Aerospace Technology Corporation (MATC)
with packing cases made to MATC’s specifications. The cases were to be used
overseas. After the specification was received Armen began production. After
substantial progress was made, MATC cancelled the project that would use the
cases. Armen sued MATC, but MATC raised the Statute of Frauds by saying that was
no contract. Who is right?
13-2 Special Rules for Sales Contracts
-Usually contracts that are not written and are over
$500 are not enforceable. However since this was an
agreement specifically for manufactured goods and
Armen began production of them and had an
agreement of any kind he is right.
13-2 Special Rules for Sales Contracts
-Example B: Pugliano vs. Messing
Cole entered into negotiations to buy a car. Cole gave Messing Motors a check for
$455.00 as a deposit. On the check Cole wrote “agreement to purchase and
deposit subject to inspection and vehicle financing.” On the back of the check
Cole wrote “agreement to purchase and deposit subject to vehicle inspection,
application,of all manufacturer's and dealers warranties, and ability to obtain
financing.” When Messing Motors attempted to raise the purchase price, Cole
sued to enforce the contract. Who is right?
13-2 Special Rules for Sales Contracts
-The court ruled that the writing on the check was evidence of a
contract and ruled in favor of Cole. The deposit was part performance
of the contract and is such an exception to the writing requirement of
the statute of frauds. Ordinarily part performance is only good for
part of a car, however a car is indivisible.