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Understanding Sales Contracts: Key Concepts and Legal Protections

Learn about sales contracts, UCC regulations, unconscionable contracts, and Statute of Frauds. Protect yourself as a buyer or seller with knowledge on important legal aspects of sales transactions.

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Understanding Sales Contracts: Key Concepts and Legal Protections

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  1. CHAPTER 13Sales Contracts 13-1 Sales 13-2 Special Rules for Sales Contracts Teacher Version

  2. 13-1 Sales • GOALS • Define sale and explain how the UCC governs the sale of goods • Explain how the UCC treats unconscionable contracts and contracts of adhesion The Law of Sales Chapter 13

  3. WHAT IS A SALE? A contract in which ownership of goods transfers immediately from to seller to buyer for a price. • Sales are governed by the UCC Chapter 13

  4. Contracts that are NOT Sales: • When primary purpose of contract is a service • Installation of good is dominant part of contract • Goods supplied are merely incidental • Payment and delivery: transfer/possession • Bill of sale: written evidence; makes resale easier (automobile) • Use of credit: buyer gets title & possession at same time • Acceptance of goods: buyer agrees goods conform • Other ways to contract: just ship goods Chapter 13

  5. Indicate acceptance in the following sales: Purchase of a car Purchase of a meal in a restaurant Purchase of a meal from a drive-thru Signing contract Consuming food in the restaurant Payment at drive-thru window Chapter 13

  6. UNCONSCIONABLE SALES CONTRACTS • Offends an honest person’s conscience and sense of justice Chapter 13

  7. UNCONSCIONABLE SALES CONTRACTS Chapter 13 • Contracts of adhesion • One party dictates terms • Leaves weaker party with take-it or leave-it option • What’s Your Verdict? Page 238 • Section 13-1 Assessment page 239 1-8

  8. Who is Correct?John Leonard vs PepsiCo Pepsi Points – DRINK PEPSI-GET STUFF PepsiCo Ad Chapter 13

  9. 13-2 Special Rules for Sales Contracts • GOALS • Compare the status of a casual seller with a merchant • Explain how the Statute of Frauds is applied to sales Chapter 13

  10. SPECIAL RULES FOR MERCHANTS • What’s Your Verdict? Page 240 • What is a merchant? • Proposals for additions to sales offers • Not a counteroffer • New terms are proposals • New term (offeree) becomes part of contract unless offeror fails to object Chapter 13

  11. HOW DOES THE STATUTE OF FRAUDS APPLY TO SALES? • Exceptions to the Statute of Frauds for sales contracts • Goods received and accepted by the buyer • Buyer pays for goods and seller accepts payment • Goods specially made not suitable for sale to others • Party against whom enforcement sought admits oral contract made Chapter 13

  12. PREVENTLEGALDIFFICULTIES • In sales, be aware that . . . • During your lifetime, you will probably enter into more sales contracts than any other type of contract—as both buyer and seller. Knowledge of the law of sales will help you to make successful transactions. • Your best protection against poor quality merchandise is knowledge of goods and their value, followed by careful comparison shopping. Continued on the next slide Chapter 13

  13. PREVENTLEGALDIFFICULTIES • Your best protection against sales fraud is the integrity of the seller (as reflected in the seller’s established reputation) coupled with your caution. • When you make a major purchase, make sure your insurance is adequate. It should provide for coverage against possible loss of valuable purchased property beginning at the time of purchase. If appropriate (as in automobile purchases), it also should provide protection against possible liability for injury to others. Continued on the next slide Chapter 13

  14. PREVENTLEGALDIFFICULTIES • It is a good idea to put a sales agreement in writing even if it is for goods worth less than $500. Although this is not required by the Statute of Frauds, doing so can avoid misunderstandings and prevent costly litigation. If the goods are worth $500 or more, insist on compliance with the Statute of Frauds. • To have an enforceable writing be sure the other party signs the contract or memorandum and gives you a copy. The other party may properly require that you do likewise. Continued on the next slide Chapter 13

  15. PREVENTLEGALDIFFICULTIES • You are bound by oral contracts for goods priced at $500 or more if you have received them and accepted delivery. You may be bound in full or in part if you have made some payment. You usually are bound when you order custom-made goods. • For expensive items, you should get a bill of sale marked “paid in full” when you pay the full price. Chapter 13

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