INTRODUCTION TO SALES LAW

1
INTRODUCTION TO SALES LAW
2
LAW OF CONTRACTS

• COMMON LAW OF CONTRACTS
• UCC - UNIFORM COMMERCIAL CODE
• CISG INTERNATIONAL B2B SALE OF GOODS

3
COMMON LAW OF CONTRACTS

• Foundation of US contract law
• State court decisions
• Governs a wide array of contracts services,
  land, business agreements, employment
  consulting

4
UNIFORM COMMERCIAL CODE

• ARTICLE 2
• Governs the sale and purchase of goods
• GOODS - tangible personal property
• Includes business and consumer goods

5
Common Law and Sales Law under UCC

• Common law- No implied guarantees/warranties of
  performance under the common law
• Sales Law UCC imposes implied warranties of
  merchantability in any sale by merchant and
  warranty of fitness in some sales unless
  disclaimed in the contract

6
UCITA UNIFORM CONSUMER INFORMATION TRANSACTIONS
ACT

• Governs computer information transaction
• Defined as an agreement to create, modify,
  transfer, or license computer information or
  rights in computer information

7
SOFTWARE AS A SALE OF GOODS?

• Ilan v. Netscout
• Packaged software license considered a sale
• Multi-Tech v. Floreat
• Computer software design and development contract
  not a sale of goods

8
MIXED TRANSACTIONS

• Kietzer v. Land OLakes
• Contract for chicken feed and consulting services
  was a sale of goods
• AAF McQuay v. MJC, Inc.
• Contract for application of anti-corrosive
  coating to air conditioner coils was deemed a
  sale of goods

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ELEMENTS OF A SALES CONTRACT

• MUTUAL ASSENT
• FREE AND VOLUNTARY AGREEMENT
• CONSIDERATION
• PRICE BARGAINED FOR AND PAID FOR A PROMISE
• CAPACITY
• COMPETENT PARTIES
• LAWFUL PURPOSE
• CONTRACT OBJECTIVE CANNOT VIOLATE THE LAW OR
  PUBLIC POLICY
• FORM OF CONTRACT
• STATUTE OF FRAUDS WRITING IS REQUIRED FOR SOME
  CONTRACTS

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PARTIES TO A SALES CONTRACT

• MERCHANTS
• PERSONS WHO REGULARLY DEAL IN GOODS OF THE KIND
  IN THE CONTRACT
• NONMERCHANTS

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MUTUAL ASSENT

• THE MEETING OF THE MINDS
• THE OFFER AND ACCEPTANCE

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FIRM OFFER

• WRITTEN OFFER FOR SALE OF GOODS
• SIGNED BY A MERCHANT
• THAT STATES IT WILL BE HELD OPEN
• IRREVOCABLE FOR TIME STATED OR REASONABLE TIME
  (MAX. 3 MONTHS)

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THE ACCEPTANCE

• MANNER OF ACCEPTANCE
• Orders to ship goods
• TERMS OF THE ACCEPTANCE
• Battle of the Forms

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BATTLE OF THE FORMS

• Whose Terms Govern The Sales Contract
• Affects warranties, remedies and other rights of
  the parties under a sales contract
• Buyers purchase order form often has different
  terms than sellers invoice
• UCC has complicated rule (2-207) to resolve the
  differences

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ACCEPTANCE WITH ADDITIONAL TERMS

• CONSTITUTES AN ACCEPTANCE UNLESS
• ACCEPTANCE IS MADE EXPRESSLY CONDITIONAL UPON
  AGREEMENT TO THE TERMS (COUNTEROFFER)

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ADDITIONAL TERMS BECOME PART OF THE CONTRACT
BETWEEN MERCHANTS UNLESS

• THE OFFER LIMITS ACCEPTANCE TO ITS TERMS OR
• ADDITIONAL TERMS MATERIALLY ALTER THE CONTRACT OR
• OFFEROR OBJECTS TO THE TERMS

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RECENT CASES

• Commerce Industry v. Bayer Corp.
• Arbitration clause in buyers purchase order did
  not become part of parties contract
• Aceros Prefabricados v. Tradearbed, Inc.
• Arbitration clause in sellers confirmation form
  became part of the parties contract

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DEFENSES TO SALES CONTRACT

• FRAUD, DURESS, UNDUE INFLUENCE, INCAPACITY ETC.
• UNCONSCIONABILITY
• GROSSLY UNFAIR CONTRACT

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CONSIDERATION

• MODIFICATION OF SALES CONTRACT
• NEW CONSIDERATION IS NOT REQUIRED FOR BINDING
  MODIFICATION OF SALE OF GOODS CONTRACT
• GOOD FAITH IS REQUIRED

20
Electronic Signature/Contract Laws

• State digital signature laws
• UETA Uniform Electronic Transactions Act
• ESIGN Electronic Signatures in Global and
  National Commerce Act

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UETA UNIFORM ELECTRONIC TRANSACTIONS ACT

• Governs enforceability of electronic signatures
  and electronic contracts
• Makes electronic signatures and contracts on a
  legal par with paper contracts and traditional
  signatures

22
ESIGN ELECTRONIC SIGNATURES IN GLOBAL AND
NATIONAL COMMERCE ACT

• Federal Law (2000)
• A signature, contract or other record cannot be
  denied legal effect, validity or enforceability
  solely because it is in electronic form

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CONTRACTS THAT FALL WITHIN THE STATUTE OF FRAUDS

• A CONTRACT FOR THE SALE OF GOODS WHERE THE PRICE
  IS 500 OR GREATER
• 500 RULE APPLIES ONLY TO TRANSACTIONS IN GOODS
  TANGIBLE, PERSONAL PROPERTY
• 1,000 RULE FOR PERSONAL PROPERTY LEASES

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UCC REQUIREMENTS FOR THE WRITING

• CONTENT REQUIREMENT
• MUST INDICATE THERE IS A CONTRACT BETWEEN THE
  PARTIES AND
• CONTAIN QUANTITY OF GOODS (NEED NOT CONTAIN
  PRICE)
• SIGNATURE REQUIREMENT
• MUST BE SIGNED BY THE PARTY TO BE CHARGED UNLESS
  THERE IS A BINDING CONFIRMATORY LETTER

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UCC REQUIREMENTS FOR THE WRITING

• CONTENT REQUIREMENT
• MUST INDICATE THERE IS A CONTRACT BETWEEN THE
  PARTIES AND
• CONTAIN QUANTITY OF GOODS (NEED NOT CONTAIN
  PRICE)
• SIGNATURE REQUIREMENT
• MUST BE SIGNED BY THE PARTY TO BE CHARGED UNLESS
  THERE IS A BINDING CONFIRMATORY LETTER

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CONFIRMATORY LETTER RULE

• APPLIES ONLY TO A SALE OF GOODS
• PARTIES MUST BE MERCHANTS
• MUST BE CONFIRMATORY LETTER SENT BY ONE PARTY AND
  RECEIVED BY ANOTHER THAT IS NOT REPUDIATED IN
  WRITING IN TEN DAYS

27
STATUTE OF FRAUDS EXCEPTIONS

• Full payment or acceptance of goods
• Part payment/partial acceptance
• Divisible/indivisible goods
• Specially manufactured goods
• Judicial admissions

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INTERPRETATION OF CONTRACT

• COURSE OF PERFORMANCE
• Manner in which the parties have performed the
  existing contract
• COURSE OF DEALING
• Manner in which the parties have performed
  several contracts
• USAGE OF TRADE
• Custom within industry, trade or profession

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GOOD FAITH

• PARTIES OBLIGATED TO PERFORM IN GOOD FAITH
• Merchants honesty plus reasonable commercial
  standards of fair dealing in the trade
• Nonmerchants honesty in fact

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ELECTRONIC CONTRACTS

• CLICK AND ACCEPT AGREEMENTS
• Online user must affirmatively agree to the
  terms of use prior to transaction
• BROWSE WRAP AGREEMENTS
• Online user is advised of terms of use on home
  page

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Ilan v. Netscout (2002)

• Parties had Value Added Reseller (VAR) agreement
  under which Ilan resold Netscouts software
• Ilan sent Netscout a purchase order for software
  with upgrade and support terms
• Netscouts software had a clickwrap license
  agreement with different terms
• Ilan sued Netscout for breach of obligation to
  provide upgrades of software

32
Ilan v. Netscout (2002)

• Legal issue Does the clickwrap agreement
  override the purchase order terms?
• Court holds that clickwrap and the terms of the
  VAR agreement governed the sale of the software
  to Ilan

33
Ticketmaster v. Tickets.com (2000)

• Ticketmaster sells event tickets online
• Tickets.com deeplinks to event pages on
  Ticketmasters site
• Tickets.com sued for breach of Ticketmasters
  browse wrap agreement governing its websites
  terms of use

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Ticketmaster v. Tickets.com (2000)

• Court finds no binding contract because user of
  site was not required to explicitly agree to the
  terms of use, the link to which was at the
  bottom of Ticketmasters home page
• Unless Tickets.com knew of limitations on deep
  linking under terms of use, it had not agreed to
  them

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Format Briefing Cases

• Facts
• Relevant Factual Circumstances Procedural
  History
• Issue - Legal Question in Case
• Decision
• Decision of Appellate Court (not lower
  court/jury)
• Reasons
• Rationale for Courts Decision
• Managerial Implications
• Significance of Law/Case to Business

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Format Case Problems

• Facts
• Issue
• What is the issue of law presented by case?
• Law
• What legal rules apply to the issue?
• Application
• How should the rules apply to facts of case?
• Conclusion
• What is the outcome of your analysis? Who wins?
  Who loses? Why?