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Chapter 7

Chapter 7. Consumer Law and Contracts. Sales of Goods. Sales Law: Interstate commerce led to the need to make sales practices uniform. Sales of Goods Continued. The Uniform Commerce Code ( UCC ) is a collection of laws that governs various types of business transactions.***

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Chapter 7

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  1. Chapter 7 Consumer Law and Contracts

  2. Sales of Goods Sales Law: Interstate commerce led to the need to make sales practices uniform.

  3. Sales of Goods Continued The Uniform Commerce Code (UCC) is a collection of laws that governs various types of business transactions.*** A sale is a contract to transfer ownership of the goods.

  4. Important Terms

  5. Leasing Goods Sale of Goods applies to leased goods, rentals and are also governed by the UCC

  6. Contracts for both Goods and Services When a contract includes both goods and services the dominant elements determines the law that will apply.

  7. Special Rules for Sales Contracts Sales contracts must contain the same elements as other contracts BUTThe UCC has relaxes some of the strict rules of contract law.

  8. Methods of Dealing and Usage of Trade When you have dealt with another person before, the method you use to deal with them has special meaning. Similarly, any commonly used method of dealing in a particular area – or usage of trade - has special meaning. Unless you state otherwise, either an established method of dealing with someone or usage of trade may be used to supplement or qualify the terms of a sales contract.

  9. Good Faith Parties to a sale contract must treat each other fairly.

  10. Offer and Acceptance of a Sales Contract Sales contracts may be made in a way that shows the parties have reached an agreement. Can be written or oral.

  11. Offer and Acceptance of a Sales Contract Acceptance can be by any means and in any reasonable manner; the party making the offer may request a certain method of acceptance. Contract exists when acceptance is sent in a reasonable manner.

  12. Firm Offer Firm Offer No consideration is necessary when a merchant promises in writing to hold an offer open for the sale or lease of goods. A merchant cannot revoke a firm offer during the time stated in the offer or for a reasonable amount of time. No offer can stand for longer than 3 months!

  13. Different or Additional Terms Acceptance may add different or additional terms. Terms are treated as proposals for additions to the contract if both parties are not merchants. If both parties are merchants the changes become part of the contract unless they are major or the offeror objects.

  14. Different or Additional Terms Continued No consideration is necessary to modify – or change – a contract for the sale of goods. Modifications may be oral or in writing, unless the original agreement states that it must be modified in writing.

  15. Statute of Limitations Sales contracts: 4 years.Individual parties can reduce time period to a minimum of 1 year, but may not extend it any longer than 4 years. The time limit begins to accrue when a breach occurs, regardless if whether the parties are aware the breech has occurred.

  16. Form of Sales If the price for goods is less than $500.00, then an oral sales contract is enforceable, over $500.00, the sales contract must be in writing to be enforceable.

  17. Rules do not apply when: A written confirmation of an oral contract between two merchants is sent within a reasonable time, and no objection is made within 10 days. The contract involves specifically manufactured goods that cannot be easily resold. The buyer receives and accepts the goods and pays for them. The parties admit in court that they entered into an oral agreement.

  18. Title and Risk of Loss Title Bill of Sale

  19. Insurable Interest • Insurable interest (II) • Buyer • Seller

  20. Voidable Title Voidable Title Anyone who obtains property as a result of another’s fraud, mistake, undue influence, or duress holds only a voidable title to the goods.

  21. Voidable Title Continued Voidable title is also received when goods are bought from or sold to a minor or a person is mentally impaired. Anyone with a voidable title to goods is able to transfer valid (good) title to others.

  22. Passage of Title and Risk of Loss Risk of Loss Title passes to the buyer when the seller does what is required under the contract to deliver the goods.Cannot have title to goods that do not exist, like crops that are not grown.

  23. Shipment and Destination Contracts A shipment contract is one where the seller gives goods to a carrier for delivery to a buyer. A carrier is a transportation company. Both title and risk of loss pass to the buyer when the goods are given to the carrier.

  24. Remedies for Breach of Sales Contract: A breach of contract occurs when one party to a contract fails to perform the duties required by the contract.

  25. Seller Remedies

  26. Seller Remedies Continued

  27. Buyer’s Remedies

  28. Buyer’s Remedies

  29. Consumer Protection Laws Applies to transactions between consumers and businesses. Does not apply to transactions between consumers (example, purchasing a car from a dealer vs purchasing a car from an individual). Consumer: is someone who buys or leases goods, real estate or services for personal, family, or household purposes. Federal Trade Commission (FTC) is the government agency that promotes free and fair trade competition.

  30. Federal Consumer Protection Law Consumer Protection Safety Act: protects consumer from unreasonable risk of injury while using consumer products sold in interstate commerce. Manufacturers and sellers must prove the product has been tested and is safe.

  31. Consumer Leasing Act: Requires lease agreements to include certain terms of the lease, including the required number of lease payments and their dollar amounts. Leases must include the penalties for not paying on time and whether there is a lump-sum payment due at the end of the lease.

  32. State and Local Laws Federal government has no jurisdiction over intrastate commerce. States have enacted their own laws and regulations.

  33. Unfair and Deceptive Practices Most states have enacted the Uniform Deceptive Trade Practices Act to protect consumers from unfair and deceptive practices.

  34. Fraudulent Misrepresentation Any statement that deceives a buyer.Occurs when a seller misstates or fails to disclose the facts about something that is important to the consumer.

  35. Bait and Switch Advertising A store advertises a bargain that doesn’t really exists to lure customers in, in hopes that they will buy something more expensive.

  36. FTC Trade Regulation Rules: Negative Option Rule:

  37. FTC Trade RegulationRules: Sellers must legally tell you how many selections you must buy, if any, how to notify the seller when you do not want the selection, and when you can get credit for the return of a selection. They must also tell you how often you will receive announcements and forms, and how and when you can cancel your membership.

  38. The Cooling Off Rule Gives the consumer 3 days to cancel a transaction made away from a seller’s regular place of business, such as a hotel, a restaurant, a fair, or your home. Rules applies to purchases $25 or more.

  39. The Cooling Off Rule Continues Seller must inform you of your right to cancel at the time the sale takes place. Seller must give you a cancellation form and a copy of your contract or receipt. Does not apply to real estate, insurance, securities, or emergency home repairs.

  40. Telemarketing Sale Rule DO NOT CALL REGISTRY helps reduce the number of unwanted calls.It is illegal for telemarketers to call you if you have asked not to be called.Calling times are restricted between 8 am – 9 pm. And yes I have had a telemarketer call at 8:59!

  41. Telemarketing Sales Rule (Continued) Telemarketers must identify that it is a sales call and the company they are working for. Telemarketers must tell you the total cost of the products or services offered and if there are any restrictions that apply. It is illegal for telemarketers to make false statements about their goods or services.

  42. Shopping By mail Phone Fax or Internet Sellers must ship goods in the time they promise in their catalogs or advertisements, if no time is stated sellers must ship goods within 30 days after receiving the order. You have the right to cancel orders and get you money back. If time limits are not met. Buyers must be notified of the delay in shipment and given a free means of responding to the delay. Buyers may cancel their order and get their money back or agree to the new shipping date.

  43. Warranties A guarantee usually by a seller to a buyer, that a product will perform as promised.

  44. Express Warranty Is an oral or written statement, promise, or other representation about the quality of a product. There are three ways a warranty can be made Statement of Fact or Promise: a private party or merchant sells goods and makes a statement of fact or a promise about the goods to the buyer.

  45. Express Warranty Continued Warranty must be stated in precise and understandable terms.Usually found in sales brochures, circulars, and advertisements. Description or Sample of the Goods: Any description or sample of the goods that is part of a transaction, such as an advertisement or even the box the item comes in. The seller warrants that the goods will be the same as the description.

  46. Advertising Express Warranties: Advertisements stating that a product is warranted must tell you how to get a copy of the warranty before you buy the product. Magnuson-Moss Warranty Act: a warranty on goods in interstate commerce costing more than $10 must disclose whether it is full or limited.

  47. Full Warranty: is an assurance that a defective product will be repaired or replaced without charge within a reasonable time.

  48. Limited warranty: is any written warranty that does not meet the requirements of a full warranty.

  49. Implied Warranties: Is a guarantee of quality imposed by the law, automatic rather then verbally or in writing.

  50. There are three types of implied warranties:

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