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The Selling of Goods: The Uniform Commercial Code and Warranties
Transcript of The Selling of Goods: The Uniform Commercial Code and Warranties
the uniform commercial code and warranties
The Uniform Commercial Code
The Uniform Commercial Code (UCC) is a set of common law regulations regarding the buying and selling of goods
The UCC is concerned with the sale of goods and the transfer of titles for goods
It does not cover sales of services, real estate, or intangible property
The price one pays to another party for fulfilling a contract. Consideration is usually monetary payment by cash, check, or credit.
Between designer and supplier, consideration is primarily a deposit that is paid when the agreement that says the client will pay the full value at a later time is signed.
Price increases are relevant to consideration. If the supplier can prove that price increases are due to the availability of materials to manufacture the finished goods, causing an increase then the designer is responsible for the increase in price.
Suppliers and manufacturers generally set their terms of sales
through catalogs and price lists. For custom goods, the terms of sale are prepared in a proposal that outlines the terms of the custom goods sale. As a designer, you have to make sure to set the time limit involved in the process of custom goods. When a designer orders from a manufacturer or supplier, if acceptance is not made in the manner specified by the seller, the acceptance can be rejected or considered a counteroffer. The law considers an acceptance to be valid if it is received within the time limit set, even if it is by a different method o acceptance. Usually sellers want an oral acceptance that is followed by a signed acceptance of the sales proposal. Designers should place orders with suppliers only after a written purchase order is provided. Any discrepancies in an order should be addressed with prompt written notification.
In this situation, the client who is not sure about a product takes it to his or her home or business location to see if it is appropriate. If the client subsequently keeps the product, he or she pays for it; otherwise, he or she is obligated to return the product. If the buyer damages the product, it’s on them. If the product is damaged in transit, it’s on the seller.
sales on approval
• They place a burden on the seller to ensure that the goods he or she sells meet certain standards
• According to contract law, a promise that something in furtherance of the contract is guaranteed by on of the contractors, especially the seller’s promise that the thing being sold is as promised or represented
Goods: any items that are tangible, have existence, and can be moved
Sale: occurs when the seller transfers title or ownership of the goods to a buyer and the buyer provides some consideration to the seller
Seller: anyone who sells goods or contracts to sell goods
Merchant: anyone who is involved with the buying and/or selling of kinds of goods with which he or she is dealing.
Buyer: when he or she contracts to purchase or purchases some good
Price: can be any kind of payment from a buyer to a seller, including money, goods, services or real property.
In legal terms, ownership of goods is called title.
When goods are bought and sold, ownership of those goods changes from the sellers hands to the buyers. For a sale to take place, goods must exist and must be identified in the contract.
Under a shipment contract, title to the goods passes to the buyer when the manufacturer places the merchandise into the hands of the shipper.
FOB aka free on board means that the title is transferred when the goods are placed in the hands of a shipper by the supplier.
When a seller uses a destination contract, the manufacturer retains title to the goods until they arrive at the buyers delivery address.
Cash on delivery COD, require that the buyer pays cash or another approved payment at the time the merchandise is delivered to the buyer’s location.
Some buyers do not require shipping or delivery and take the merchandise right from the studio or showroom.
In the early 1800s, the National Conference of Commissioners on Uniform State Laws (NCCUSL) was founded
The NCCUSL was intended to create uniform statues related to business activities
In 1945 the NCCUSL was revised, and the UCC was developed
In 1957 the Uniform Commercial Code was finished and passed into law
The UCC has 9 articles. Article 2 is the most pertinent for interior designers, as it regards the buying and selling of goods.
how will financial records be maintained?
what is the marketing plan?
will design contracts or letters of agreement be used?
It is the designer’s legal and ethical responsibility to understand buyers rights
The sales agreement must be written in sufficient detail to avoid future problems
The buyer has a right to inspect goods before paying for them. If the delivered foods are as described by the sales agreement they are called conforming goods. If they are not as described, they are called nonconforming goods.
The buyer has the right to reject nonconforming goods, and must alert the seller of the rejection
The buyer is obligated to make payment for the delivered conforming goods
statute of frauds
If the location for the delivery has not been provided, deliveries are usually made to the seller’s business location. Not specifying that the goods should be delivered to the designer’s warehouse could mean that the delivery could be made to the designer’s home office. The designer should put any other conditions into wording.
quantity is KEY! it is difficult for a court to know what to do if a quantity is not specified
PO's should include a price. if the price is missing, the other party can cancel the order.
a payment term specifies the way an order or invoice will be paid: cash or check, for example
You must address who is liable for the risk of loss during shipping of the goods.
IF the seller is a merchant, risk passes when the buyer receives the goods.
If the seller is not a merchant, then risk passes when the seller gives the merchandise to the buyer.
In destination contracts, the risk for loss is transferred to the buyer when the goods reach the buyers destination. If the goods have been damaged in transit, it is the seller’s responsibility to recover the damages from the carrier.
warranty of title
• Indicates that the seller has title or legal ownership to the goods and can legally sell them to others
• Only the legal owner can sell the goods
• This type of warranty protects the buyer from loss if he or she unknowingly buys something with a lien attached
the sales contract
certain types of contracts must be in writing to be enforceable. this statute clarifies requirements and conditions of when contracts for the sale of goods actually exist and their terms.
the base condition of the statute is that the contract for the sale of goods over $500 must be in writing to be enforceable.
Implied Warranty of Merchantability
• Promises, claims, descriptions, or affirmations made about a product’s performance, quality, or condition that form the “basis of bargain”
• Basis of bargain means that the information provided is what primarily influences the buyer’s decision
• Goods sold by merchants must be of fair to average quality and must be comparable in quality to other similar goods
• The law states that when a merchant sells goods, it is implied tat the seller understands the characteristics of the goods he or she is selling and can thus specify them for proper use
Implied Warranty of Fitness for a Particular Purpose
When a seller knows the intended purpose for the goods and the buyer must rely on the seller’s knowledge to select or recommend goods for the purpose, an implied warranty of fitness for a particular purpose exists
As consumers, there is an expectation that products will meet certain minimal standards of materials, workmanship, and design for their interned use. If the product fails, certain express or implied warranties may have been breached. Manufacturers and sellers of products may be liable to end users, bystanders, and other merchants if individuals are physically harmed or if property damage occurs
A seller is liable for any and all defective or hazardous products, which unduly threaten a consumer’s personal safety.
• When a buyer breaches the sales contract, the seller is allowed to withhold delivery of goods
• Partial delivery billing is feasible only if permitted by the terms and conditions of the sales contract
Be sure to find out if electronically transmitted contracts for design services are in the jurisdiction of where your job is.
Always consult with a law expert before issuing an online contract for design services.
In electronic agreements: include description of what is to be ordered, quantities, pricing, and convey the sellers intent to sell and buyers intent to buy.
If you are going to use electronic agreements, consult with an attorney.
Electronic Agreements & Signatures