Question

1. Describe the respective obligations of the parties under a contract for the sale or lease of

goods?

2. Explain the perfect tender rule and the exceptions to this rule that apply to sales and lease

contracts.

3. Explain the options that are available to the nonbreachingparty when the other party to a sales

or lease contract repudiates the contract prior to the time for performanc.

4. Describe the remedies that are available to a seller or lessorwhen the buyer or lessee breaches

the contract.

5. Explain the implied warranties that arise under the UCC.

Answer 1

1. Contract of the sale is an agreement between the buyer and the seller intending to exchange property. Section 4(1) defines the contract of the sale as – a contract of the sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to a buyer for a price.

There must be 2 distinct parties i.e. a buyer and a seller, to effect a contract of the sale and they must be competent to contract. ‘Buyer’ means a person who buys or agrees to buy goods. ‘Seller’ which states that a person who sells or agrees to sell goods.

There must be some goods, the property which is or is to be transferred from the seller to the buyer. The subject-matter as to the goods under the Contract of Sale must be movable property.

The most important essential for the enforceability of the Contract of Sale of goods is the price. The price can be termed equivalent to the consideration. In the absence of such price or consideration, the transfer cannot be termed as a sale.

There are two types of property on the basis of its nature, i.e., general property and special property. The subject-matter of the contract of Sale of Goods deals with the special property. For the enforceability of such a contract, there must be a transfer of special property from the seller to the buyer.

The obligations of the buyer must be specified in the contract of the sale of goods as to the payment, mode of payment, and provisions as to when goods are received. The provisions as to the mode of payment can be:

• The buyer can pay in full upon receipt.
• The buyer can pay in instalments.
• The buyer can pay half upon receipt and the rest within 30 days of receiving the goods.

Sometimes disputes may arise related to the receiving of the goods. The contract of the sale of goods must specify that what qualifies as the ‘receipt’ of the delivery of goods.

All essential elements of a valid contract must be present in the contract of the sale, i.e.,

• An offer,
• An acceptance,
• An intention to create a legal relationship, and
• A consideration

2.•Seller has duty to ship or tender conforming goods.

•If goods fail to conform to the agreement in any way, the Buyer has the right to:

–Accept the entire shipment.

–Reject the entire shipment.

–Accept or reject part of the shipment.

One of the exceptions to the perfect tender rule is if all parties involved agree to the change. Another exception to the perfect tender rule is that the UCC allows for the seller to repair, replace or adjust any goods that are defective. The timing of the cure must be notified within the contract time of performance. Also, the buyer must disclose the nature of the defect. Another exception is when the method of delivery agreed upon is unavailable through no fault of either party. In the case of installment contracts, the buyer can reject the installment if the value cannot be cured. Sometimes there are unforeseen circumstances that prevent an order from being fulfilled, either partially or completely. Another possibility is an event that destroys the good through no fault of either party.

3. If before the time for contract performance, one party clearly communicates to the other the intention not to perform, there is a breach of contract by anticipatory repudiation. The nonbreaching party then has two choices—he or she can treat the repudiation as a final breach by pursuing a remedy; or he or she can wait, hoping that the repudiating party will decide to honor the obligations required by the contract despite the avowed intention to renege. In either situation, the nonbreaching party may suspend performance

4. •When Goods are in Buyer’s Possession, Seller has the right to:

–Recover the Purchase Price or Payments Due.

–Right to Reclaim Goods.

•If seller refuses to deliver the goods, the buyer has the right to:

–Cancel the contract.

–Obtain goods that have been paid for.

Sue for specific performance

–Right of “Cover”: buyer must act in good faith and without unreasonable delay.

•If seller refuses to deliver the goods, the buyer has the right to:

–Reply Goods (action to recover specific goods).

–Recover damages (difference between the contract price and market price).

•If seller delivers non-conforming goods, buyer has the right to:

–Reject Goods: can obtain cover, cancel contract or sue for damages.

–Revoke Acceptance.

•Acceptance based on nonconformity would be cured.

•If discovery happened after possession.

5. One of the primary sources of product liability law is the Uniform Commercial Code. The UCC came about as a way to harmonize laws governing commercial transactions from state to state. Each state legislature has adopted at least part of the UCC — California has adopted the entire UCC — and may have adapted at least one or two provisions to reflect conditions in their state.

Among the most frequently cited provisions of the U.C.C. are express and implied warranties. According to the Cornell University’s Legal Information Institute, if these warranties are not satisfied they can form the basis of a product liability lawsuit.

The situations in which an implied warranty exists are laid out in UCC sect. 2-314 and 2-315. Warranties of merchantability are implied in any sale as long as the seller is in the business of selling the types of goods in question. In order to be considered merchantable, goods must meet certain requirements. They must, for example, be fit for the usual uses for those goods, be packaged and labeled as required by the sale agreement and conform to the promises made by their labels.

It is important to note that sellers may be able to mount defenses to warranty claims under the provisions of UCC sect. 2-316. For example, a seller may be able to use a written disclaimer such as “sold as-is” to show that no implied warranty exists for that product.

These warranties are much more complicated than we can get into here. Suffice it to say, the law is an important starting point in product liability cases involving a breach of warranty claim.