Download FIN 240 - Class 1

Sale of Goods Contracts
GOODS:
Often referred to as personal property or movables
Can be tangible or intangible
TRANSFER OF TITLE:
Need sales K (verbal/written) + delivery of goods to buyer
DIFFERENT FROM GIFT or BARTER:
Because buyer is required to pay a price/money
Parties are generally free to determine price
REQUIRED FORMALITIES:
Generally no (except vehicles, stocks, IP, installment)
UN Convention on Ks for the Int’l
Sale of Goods (CISG)
INTRO:
A) Sponsored by United Nations
Almost 80 countries (Turkey in 2009)
B) Incorporates rules from all major legal systems
C) Divided into Four Parts: (we’ll focus on 1st 3)
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Part I – Scope and Coverage of CISG
Part II – K Formation
Part III – Rights & Duties of Buyers/Sellers
Part IV – Final Provisions
SCOPE & COVERAGE OF CISG
A) Covers International “Sale-of-Goods” Ks
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Int’l = B’s and S’s business are in different nations
Sale = title to a good passes for a price
Goods = movable, tangible objects
B) Parties may “Opt In” or “Opt Out”
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Choice of Law Clause – must clearly opt out
C) The CISG Does NOT Cover:
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Legality of sales Ks; Incompetency issues; 3rd party
claims; Seller liability for injuries
INTERPRETING SALES Ks
A) Subjective Intent
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Actual intent (understanding at the time of making K)
Examine negotiations, party practices, conduct
Common Law “parole evidence rule” doesn’t apply
B) Objective Intent
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Look at statements and conduct of parties
What would “reasonable person” have understood?
C) Party Practices & Trade Usage
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Prior behavior of parties; customary practices of
those in the same trade
FORMATION OF K
A) Need not be in writing
B) Offer – see “Pro Forma Invoice” example
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Definite - ID goods, quantity, price
Revoke? - Yes- up to acceptance (No - if firm offer)
Firm Offer - Verbal/written statement or Option K
C) Acceptance - see “Purchase Order” example
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Methods - Any method OK (silence doesn’t count)
Timing - When is it effective? Can be withdrawn?
Effect of different terms - Are the different terms
“material” terms?
PERFORMANCE OF SALES K
A) Generally - Parties entitled to what they expect in K
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Failure to deliver = fundamental breach
B) Seller’s Duties
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Deliver conforming goods
Delivery - at K place (or w/carrier), at K time (or reas. time)
Conforming - quantity, quality, description, packaging
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Hand over relevant documentation (check K)
C) Buyer’s Duties
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Inspect goods for defects (& give notice if defective)
Pay the price (seller need not make formal demand)
Take delivery (failure to cooperate = responsible for
resulting costs; assume risk of damage/loss)
REMEDIES FOR BREACH OF K
A) For Buyer (when seller breaches)
1) Specific performance (S must fix or substitute goods);
2) Avoid K (after S’s fund. breach - B must give notice);
3) Reduce the price;
4) Refuse early delivery;
5) Refuse excess quantity
B) For Seller (when buyer breaches)
1) Specific performance;
2) Avoid K (after B’s fund. breach - S must give notice)
C) Both
1) Damages (foreseeable ones like lost profits, extra costs;
but have a duty to mitigate!);
2) Suspend performance
NON-PERFORMANCE EXCUSES
A) Force Majeure – Something happens beyond the control
of the parties (like natural disaster, act
of God, war, embargo)
B) “Dirty Hands” – You can’t complain about other party’s
breach if your own action or inaction
caused the other party to breach
UNIFORM COMMERCIAL CODE
(UCC)
A) GOVERNS SALE-OF-GOODS Ks IN USA
1) Art. 2 governs sales
2) Title to goods is exchanged for $ (same as CISG “sale”)
B) MERCHANTS - deal regularly in a particular good
Firm offers (may not revoke - for up to 90 days)
C) WRITING REQUIREMENT
Sale of goods priced ≥ $500 (compare this with CISG)
D) ACCEPTANCE – any reasonable method
1) Mailbox rule = effective on dispatch (compare CISG)
2) Additional/Different Terms - not a problem (compare CISG)
E) CERTAIN “OPEN” TERMS ARE OK
1) Price, payment, & delivery terms can be determined later
(compare CISG)
2) Exception – Quantity must generally be specified
F) PERFORMANCE DUTIES
1) Seller – “Perfect Tender Rule”
2) Buyer – Accept goods and pay for them
3) Both – Good faith, commercial reasonableness