Bus-115 (Business Law): Chapter 14 Guide
Sales contracts: Rights, duties, title and risk of loss and the nature of negotiable instruments
Learning Objectives
After reading this chapter, students should be able to accomplish the following objectives:
- Describe what is meant by tender of performance.
- Outline the rights and duties of sellers and buyers in a sales contract.
- Explain the doctrine of anticipatory breach.
- Discuss the seller’s and the buyer’s remedies in case of a breach.
- Define the term statute of limitations.
- Describe the three ways in which an express warranty may be created.
- State the requirements of the Magnuson-Moss Warranty Act.
- Differentiate among the implied warranties of fitness for a particular purpose, merchantability, and usage of trade.
- Explain the meaning of a warranty of title.
- Recognize the ways in which warranties may be excluded.
Major Concepts
14-1. Rights and Duties of the Parties
Sellers and buyers must follow the terms of their contract and act in good faith. Tender of performance is necessary to test the other party’s ability and willingness to perform. Tender of delivery requires the seller to make conforming goods available to the buyer at a reasonable hour of the day.
Tender of payment may be made by any means that is commonly used in the ordinary course of business. Except when goods are shipped c.o.d. or when the contract provides for payment against a document of title, the buyer has the right to inspect goods before accepting or paying for them. When improper goods are delivered, the buyer may elect to reject all of them, accept all of them, or accept any commercial unit or units and reject the rest. Sellers may cure defects or nonconformities that caused the goods to be rejected by the buyer.
14-2. Breach of Contract
When a buyer breaches a sales contract, the seller may withhold delivery of any goods not yet delivered, stop goods that are in transit, resell the goods or the undelivered balance of them, retain the goods and bring suit for damages, bring suit for the price of any goods that the buyer has accepted, or cancel the contract. When a seller breaches a sales contract, the buyer may cancel the contract and recover any money paid out, buy similar goods from someone else and sue the seller for the difference in price, sue the seller for damages for nondelivery, keep the goods and deduct the cost of damages from any price still due, or sue for specific performance if the goods are rare or unique.
14-3. Warranty Protection
Express warranties arise by a statement of fact or promise, by a description of the goods, and by a sample or model. Other warranties may arise from the ways in which parties have dealt in the past. When goods are sold, either by a merchant or a private party, the seller warrants that the title is good and that there are no liens on the goods.
Except when express warranties are made, sellers may exclude the warranties of merchantability and fitness for a particular purpose. Such an exclusion must be in writing and conspicuous. The words as is and with all faults serve to disclaim implied warranties but not the warranty of title. Warranties extend to people who would normally be expected to use the goods as well as to those who actually buy them.
