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ESSENTIALS OF THE LEGAL ENVIRONMENT TODAY, 5E

ROGER LEROY MILLER

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

CHAPTER 14

SALES, LEASES, AND PRODUCT LIABILITY


LEARNING OBJECTIVES

1. How do Article 2 and Article 2A of the UCC differ? What types of transactions does each article cover?

2. Under the UCC, if an offeree includes additional or different terms in an acceptance, will a contract result? If so, what happens to these terms?

3. What remedies are available to a seller or lessor when the buyer or lessee breaches the contract? What remedies are available to a buyer or lessee if the seller or lessor breaches the contract?


LEARNING OBJECTIVES (CONT’D)

4. What are implied warranties arise under the UCC?

5. What are the elements of a cause of action in strict product liability?


ARTICLES 2 AND 2A

• Article 2—The Sale of Goods• Article 2 of the UCC governs sales

contracts (contracts for the sale of goods)• Whenever a conflict arises between a

common law contract rule and the state statutory law based on the UCC, the UCC controls.• What is a sale?• What are goods?


EXHIBIT 14.1


ARTICLES 2 AND 2A

• Who is a merchant?• A person who deals in good of the kind involved in the

sales contract• A person who, by occupation, holds himself or herself

out as having knowledge and skill unique to the practices or goods involved in the transaction

• A person who employs a merchant as a broker, agent, or other intermediary


ARTICLES 2 AND 2A

• Article 2A—Leases• Covers leases or subleases of goods• Difference from Article 2 is that it applies

to leases rather than sales of goods• Note: Article 2A is not concerned with

leases of real property; land or buildings


LO-1

FORMATION OF SALES AND LEASE CONTRACTS

• Articles 2 and 2A modify common law contract rules.•Offer• Open terms• Merchant’s firm offer



• Acceptance• Communication of acceptance• Additional terms• UCC dispenses with the mirror image rule• A contract is formed if the offeree’s response indicates

a definite acceptance of the offer, even if the acceptance includes terms additional to or different from those contained in the offer.

• Rules when one party or both parties are nonmerchants• Rules when both parties are merchants


LO-2


• Consideration• Common law rule that a contract

requires consideration also applies to sales and lease contracts

• The Statute of Frauds• Special rules for contracts between

merchants• Exceptions


EXHIBIT 14.2


PERFORMANCE

• Consists of the duties and obligations each party has under the terms of the contract•Obligations of the Seller or Lessor• Place of delivery• The perfect tender rule• Cure• Substitution of carriers• Commercial impracticability• Destruction of identified goods


PERFORMANCE

•Obligations of the Buyer or Lessee• Payment• Right of inspection• Acceptance• Anticipatory Repudiation


REMEDIES FOR BREACH

• Remedies of the Seller or Lessor• The right to cancel the contract• The right to withhold delivery• The right to resell or dispose of the

goods• The right to recover the purchase price

or lease payments due• The right to recover damages


LO-3

REMEDIES FOR BREACH• Remedies of the Buyer or Lessee• The right to cancel the contract• The right to obtain the goods on insolvency• The right to obtain specific performance• The right of cover• The right to replevy goods• The right to recover damages• The right to reject the goods• Revocation of acceptance• The right to recover damages for accepted goods


REMEDIES FOR BREACH

• Additional Provisions Affecting Remedies• A seller and buyer can expressly provide

for remedies in addition to those provided in the UCC.• Can also specify remedies in lieu of those

provided in the UCC, or change the measure of damages


WARRANTIES

• Articles 2 and 2A designate several types of warranties• Title Warranties – can automatically arise in sales and lease contracts• Express Warranties – concerns the quality, condition, description, or performance potential of the goods


WARRANTIES

• Express warranties arise when seller or lessor indicates:• That the goods conform to any affirmation of fact or

promise that the seller or lessor makes to the buyer or lessee about the goods

• That the goods conform to any description of them• That the goods conform to any sample or model of the

goods shown to the buyer or lessee• Basis of the bargain• Statements of opinion and value


WARRANTIES

• Implied Warranties• Implied warranty of merchantability• Implied warranty of fitness for a

particular purpose• Warranties implied from prior dealings or

trade custom•Warranty Disclaimers


LO-4

PRODUCT LIABILITY

• Based on the theories of negligence, misrepresentation, and strict liability•Negligence• If a manufacturer fails to exercise “due

care” to make a product safe, a person who is injured may sue for negligence.


PRODUCT LIABILITY

•Misrepresentation• When a user is injured as a result of a

manufacturer’s or seller’s fraudulent misrepresentation, the basis of liability may be the tort of fraud.• Misrepresentation on a label or ad is

enough to show intent.• Buyer must have relied on the

misrepresentation.© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

PRODUCT LIABILITY

• Strict Product Liability• People may be liable for the results of

their acts regardless of their intentions or their exercise of reasonable care.• Requirements• Proving a defective condition• Unreasonably dangerous products

• Product defects – manufacturing and design


LO-5

PRODUCT LIABILITY

•Defenses to Product Liability• Assumption of risk• Product misuse• Comparative negligence• Commonly known dangers


Business

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