Legal Concepts Review for Exam

Overview of Test Preparation

• Importance of attending class for success in exams.
• Review of definitions and applications essential to understand for the test.

Key Definitions

• Merchant:

  • A merchant is someone who regularly sells or deals in goods or holds themselves out as having knowledge or skill related to the goods.
  • Example: Selling computers as a part of a business qualifies as being a merchant.

• Quantity Terms:

  • The court can fill in missing terms in contracts for goods if they are left out.

• Merchant's Promise in Writing:

  • If a merchant makes a promise in writing, they cannot revoke the offer for a period of three months.
  • Note: Important not to confuse with other contract scenarios.

Non-Merchant Contracts

• Between Non-Merchants:
  • If one party makes an additional term, it is treated as a separate offer rather than a rejection of the original offer.

Statute of Frauds

• Written Confirmation:
  • If one merchant sends written confirmation of an oral agreement, the other merchant must reject it within 10 days to avoid upholding the agreement.

Risk of Loss in Contracts

• FOB Seller's Address:
  • Risk of loss passes to the buyer when goods leave the seller (shipping contract).
• FOB Destination:
  • Risk of loss passes to the buyer only when goods reach their destination.
• If Non-Merchant:
  • Risk passes when the buyer can pick them up.

Void vs. Voidable Title

• Void Title:
  • Stolen goods have no title; the original owner can reclaim them.
• Voidable Title:
  • Goods obtained through fraud can be voidable, meaning the true owner may or may not reclaim them based on circumstances.

Consignment

• Definition:
  • Goods loaned to another individual or a business for sale; the consignee has title to those goods while they’re in their possession.
  • Implication for Creditors: Creditors can claim those goods from consignee as they hold title.

Buyer’s Rights

• Reject Nonconforming Goods:

  • A buyer can reject goods that do not conform to the agreement if the defect is large or small, but within 30 days of acceptance.
  • Merchants must make efforts to address rejected goods, such as arranging return shipments.

• Material Defects After 30 Days:

  • A buyer can still seek recourse for refunds if the defect is either material or minor even after 30 days if they have legitimate grounds.

Seller’s Rights

• Cure a Problem:
  • A seller can fix issues with goods only before the contract expires. Attempting to fix after the expiration is not permitted.

Commercial Impracticability

• Definition: A seller can avoid contractual obligations if unforeseen circumstances render performance impractical to predict.

Article II Considerations

• Merchantability:
  • Only applies to merchants. Goods must be fit for ordinary purposes and and significant defects must be identified (i.e., a major defect like a broken item).

Liability and Suing

• Negligence Law:
  • Traditionally allowed for buyers only to sue sellers. Now, anyone can sue for negligence concerning faulty goods.
• McPherson v. Buick Motor Co.:
  • Landmark negligence case allowing broader rights to sue in product liability contexts.

Product Liability Theories

• Theories for Suing:
  • 1. Merchantability: Breach if goods aren't suitable for ordinary use.
  • 2. Negligence: Supplier's carelessness leading to harm.
  • 3. Strict Liability: Applies to anyone affected by defective products regardless of negligence care.

Exam Tips

• Study specific definitions and examples emphasized during the review sessions.
• Focus on distinguishing between void and voidable titles, terms of risk in various shipping terms, and buyer and seller responsibilities related to defects.
• Ensure understanding of rules and timings related to contracts and merchant dealings to excel in the exam.