This class deals with the business law topics that appear on the CPA exam: Agency, Contracts, Debtor-Creditor Relationships, Government Regulation of Business, and Business Organizations. Students will gain an understanding of how these areas of the law affect businesses and their operations, with an eye on preparation for the business law portions of the REG section of the CPA exam. By the end of the class, students will be able to identify the legal principles that govern various business situations and apply those principles to an issue to determine the outcome when the law is applied to the facts of a scenario.
Contract Performance: Sale of Goods
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来自 University of Illinois at Urbana-Champaign 的课程
Corporate & Commercial Law I: Contracts & Employment Law
4 个评分
University of Illinois at Urbana-Champaign
4 个评分
从本节课中
Module 3: Enforcing Agreements
In this module, we continue our discussion of contract law by focusing on the enforcement of agreements. We begin by examining who can enforce contracts, then discuss when contracts can be enforced in court, and end by looking into what types of awards courts will grant when a party has been the victim of a breach of a contract. Throughout this module, we will call special attention to different rules that apply to contracts for the sale of goods.
与讲师见面
Professor Michael R FrickeTeaching Assistant Professor
Department of Business Administration
This is the second of our two part series on contract performance.
Here we're going to talk about performing contracts dealing with the sale of goods.
What are the rules that are specific to a
buyer's and seller's obligations with respect to
their duties under a sale of goods contract?
Now in part one we talked about common law contract performance, in this part,
we're going to talk about contract performance under
UCC article two which you remember deals with the sale of goods.
So UCC article two imposes some specific duties of
performance on sellers and buyers of goods.
Now, the common law performance rules still usually apply,
but article two sort of supplements those rules with
some specific rules targeted at sellers and buyers of goods.
So let's take sellers first.
If you're seller, what are your performance obligations?
Now your main duty,
as a seller of goods is to,
what we call make tender of delivery.
What this means is as a seller your job is to complete your delivery obligations.
Whatever those are, it might be handing
the goods over to a common carrier like the post office,
or UPS, or whatever.
It might be actually physically delivering the goods to the buyer.
It might be just holding them for the buyer to come and pick up.
Whatever your delivery obligations are,
tender of delivery means your job is
to fulfill those obligations as called for in the contract.
Now the UCC article two imposes what's called the perfect tender rule.
The perfect tender rule means as a seller of goods,
your job is to deliver the exact goods called for by the contract.
So, for instance, suppose you have a contract
with a bicycle manufacturer to purchase 100 blue bikes,
you own a little bike shop you want to sell blue bikes your bike shop,
you contact the manufacturer say,
"I want to buy 100 blue bikes."
The perfect tender rule requires the manufacturer to ship you 100 blue bikes.
Not 99 blue bikes,
not 50 blue bikes or 50 red bikes,
but 100 blue bikes.
That's the perfect tender rule.
If they give you anything else,
that's a breach of contract.
Now say they give you 50 blue bags and 50 ride bikes.
Those red bikes are what we call nonconforming goods.
They violate the perfect tender rule,
they're not what you ordered, they are nonconforming.
Now if a seller provides nonconforming goods,
they actually have the opportunity to cure.
So, maybe it was an accident,
maybe they sent you 99 blue bikes and one red bike and you call up and say,
''Hey, you sent me nonconforming goods.
This one red bike.'' They might say, ''Oops!
We just put the wrong thing in the package.
We'll send you a new blue bike and will come pick up the red bike.''
Sellers have the opportunity to cure when they sell you nonconforming goods.
Now, as the buyer,
if the seller sends nonconforming goods,
you actually have three options.
Option number one is to reject the entire shipment,
option number two is to accept the entire shipment.
So maybe you order 100 blue bikes,
you get the 100 red bikes and you think, ''Gee whiz!
These are great bikes.
I'm just going to keep the 100 red bikes.'' You can do that.
Option number three is you can actually accept
part of the shipment and reject part of it.
So say you have a bike shop and you have
customers that are jumping at the beat for your bikes and you say,
''I got these red bikes but I got to have some bikes to sell.
So I'll keep 20 of
these red bikes because I need to be able to sell them to my customers,
but I'll reject the other 80 red bikes
because I really wanted blue bikes.'' You can do that.
Okay, the perfect to rule actually has a few exceptions.
So exception number one;
if goods are damaged or destroyed through no fault of the seller
so the bike company ships you
the bikes and while they're in the hands of the shipping company,
they're swept away by a tornado,
it's not the seller's fault.
In that case, the contract is actually voided.
So all parties are relieved from their obligations.
Second exception; in the case of installment contracts,
each installment is treated separately with regards to the perfect tender rule.
So for instance, say you have a contract to ship
a customer a thousand widgets a month for the next year.
Every single widget shipment is
its own separate entity for purposes of the perfect tender rule.
So, say shipment number six has the wrong type of widgets in it.
The customer can't terminate the entire contract because one shipment was incorrect.
They can reject that shipments if it has nonconforming goods.
But if shipments one through five were correct,
they can't just say, "We'll terminate
this whole contract because shipment six was incorrect."
And then the third exception to the perfect tender rule is that,
if your industry has some sort of industry norm that allows a degree of variance,
or a degree of nonconformity in the goods,
then that's an exception to the perfect tender rule.
So going back our the example of the bikes.
Say in the bicycle manufacturing industry,
it's just commonly known that if you order blue bikes,
and they ship you blue bikes,
or seafoam colored bikes, or teal bikes,
or whatever other colors that are so close to blue,
that's generally accepted in the industry.
Well, that's an exception to the perfect rule.
Okay. Let's talk about buyer performance obligations.
Buyer really has three obligations.
First; inspect the goods,
and then accept or reject the goods,
and pay for the goods.
So acceptance or rejection should be done within a reasonable time.
You can't call up the seller of goods a year later say,
"Oh, by the way you sent me nonconforming goods.''
Got to inspect the goods and accept or reject them in a reasonable time,
and then your duty to pay actually doesn't arise until you verify,
''Yes, these are conforming goods.''
Because until you have conforming goods,
you don't have any duty to pay.
Now this actually gives rise to
sort of an interesting twist in the sale of good scenarios.
Sometimes your duty to pay will not
arise until before or after the actual payment has been made.
So let's consider this example.
You have a contract for the sale of goods that calls
for payment to be made at the time you placed the order.
This is pretty common, right?
You ever bought anything online?
Payment is always made at the time you placed the order.
So your contract calls for payment to be made at the time of the order.
But, you actual duty to pay has not arisen at that time.
Remember your duty to pay,
doesn't arise until you confirm that you've got conforming goods.
So the shipper ships you the goods,
you inspect them, you say,
''These are conforming,'' then your duty to pay arises.
But if you get the goods they're nonconforming,
your duty to pay has never arisen.
So even though you may have already actually made the payment,
your duty to pay hasn't arisen so the seller could be forced to
refund you the payment for nonconforming goods because your duty to pay never arises.
To sort of an interesting quirk.
So next time you make an online order,
know that even though you may have made payment,
you might not have had the duty to pay just yet.
