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Managers and The Legal Environment Strategies For Business 9Th Edition Bagley Solutions Manual Full Chapter PDF
Managers and The Legal Environment Strategies For Business 9Th Edition Bagley Solutions Manual Full Chapter PDF
(i) Sale of goods: the UCC only applies to contracts for the sale of goods. Goods is
defined as all things (including specially manufactured goods) which are
movable at the time of identification to the contract sale.”
(iii) Fixtures: not considered goods under UCC 2, because it is attached to real estate.
(iv) Merchants: person who deals in goods or the kind, or holds himself out as having
knowledge or skill peculiar to the practices or goods in the transaction.
Does Article 2 apply to software, even if is bundled with a good? A sales agreement generally
imposes no obligation other than purchase price at sale. Software license, however, generally
includes a number of ongoing obligations. By licensing, vendors can avoid the doctrine of first
sale.
Under the UCC, a contract is enforceable if parties intend to be bound, though terms are left open
for later agreement. If a dispute arises over a missing term, the court may use UCC “gap-fillers.”
8-3a Offer
The term is not defined by the UCC.
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 9TH ED—INSTRUCTOR'S MANUAL
8-3b Acceptance
The UCC does not define acceptance, but acceptance may contain terms additional to or
different from those in the offer. This is different from the mirror-image rule.
Conditional Response.
If the offeree wants to make a counteroffer, rather than an acceptance, he/she should state
clearly that the acceptance is conditioned.
CASE 8.1 Option Wireless, Ltd. v. OpenPeak, Inc., 2012 WL 6045936, S.D. Fla.
Dec. 5, 2012).
After receiving a purchase order from OpenPeak (the buyer), Option
Wireless, Ltd. (the seller) sent several shipments of the product. For the
final shipment, a new invoice listed new terms that put a limit on
contesting the quality of the product. After the delivery of the final
product, the buyer found that the product was defective and sued for
breach of contract and seeking damages. The seller moved to dismiss on
the grounds that the final invoice was the controlling document, not the
original purchase order.
HELD: For Buyer. The sales contract was formed with the purchase
order, and the invoice which contained a clause stating the seller would
not be liable for consequential damages was “knocked out” of the
contract.
(i) Shrink-wrap license: license terms on the outside of the box of software.
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CHAPTER 8 SALES, LICENSING, AND E-COMMERCE
(ii) Clip-wrap license: presents user with notice on her computer screen that
requires user to agree to terms of license before software can be used.
(iii) Browse-wrap agreement: online website that does not required the user
to take any action to express her consent to the agreement.
8-3c Consideration
An offer signed by a merchant that indicates the offer will be kept open is a firm offer and
is not revocable for lack of consideration.
Statue of frauds of the UCC provides that a contract for the sale of goods for at least $500 is
unenforceable unless it is at least partly in writing: (1) there must be some writing evidencing the
sale of goods; (2) the writing must be signed by the party against whom enforcement is sought;
and (3) the writing must specify the quantity of goods.
8-4b Signature
The writing must be signed by the party against whom enforcement is sought, unless the
sale is between merchants, and: (1) a confirmation of the contract has been received; (2)
the party receiving it has reason to know its contents; and (3) that party has not made a
written objection within ten days after the confirmation was received.
8-5 ELECTRONIC CONTRACTS: THE UNIFORM ELECTRONIC TRANSACTIONS ACT AND THE E-
SIGN ACT
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BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 9TH ED—INSTRUCTOR'S MANUAL
8-5c Exclusions
Use of electronic signatures is voluntary. Both UETA and the E-Sign Act exclude: wills,
codicils, and trusts; contracts or records relating to adoption, divorce, or other matters of
family law; and contracts governed by certain provisions of the UCC in effect in each
state.
The UCC imposes an obligation of good faith in contract performance and enforcement.
8-7 WARRANTIES
The UCC’s warranty provisions note attributes of goods under: express warranty, implied
warranty of merchantability, and implied warranty of fitness for a particular purpose.
Puffing. A seller is not making a warranty if he or she is expressing an opinion about the
quality of the goods.
Reasonable Expectations.
The key issue in determining merchantability is whether the goods do what a reasonable
person would expect of them.
CASE 8.2 MacNeil Automotive Products, Ltd. v. Cannon Automotive, Ltd., 715 F.
Supp. 2d 786 (N.D. Ill. 2010).
MacNeil subcontracted with Canon Automotive to provide floor mats on
automobiles. MacNeil claimed the mats were defective and breached the
express warranty.
HELD: Only specific representations of fact constitute express
warranties; opinions or “sales talk” are not actionable.
(i) Elements: The warranty is implied only if four elements are present: the buyer
had a particular purpose for the goods; the seller knew or had reason to know of
that purpose; the buyer relied on the seller’s expertise; and the seller knew or had
reason to know of the buyer’s reliance.
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CHAPTER 8 SALES, LICENSING, AND E-COMMERCE
Disproving Reliance.
To prove that the buyer did not rely on the seller’s expertise, the seller must show that:
the buyer’s expertise was equal to or superior to that of the seller; the buyer relied on the
skill and judgment of persons hired by the buyer; or the buyer supplied the seller with
detailed specifications or designs for the seller was to follow.
(i) Avoiding responsibility: The seller can avoid responsibility for the quality of the
goods under any of these warranties by: not making any express warranties; by
disclaiming any warranties of quality making the buyer aware of disclaimers
such as “AS IS”; and by refraining from professing expertise with respect to the
goods and leaving the selection to the buyer.
(ii) To recover for breach of warranty: To recover for breach of warranty, a buyer
must prove that: the seller made an express or implied warranty; that the goods
were defective at the time of the sale; the loss or injury was caused by the defect
rather than the buyer’s negligent or inappropriate use of the goods; and the seller
has no affirmative defenses.
(i) Full warranty: gives the consumer the right to free repair of a defective product
or replacement if multiple repair attempts have failed.
(ii) Limited warranty: might restrict the availability of free repair or replacement.
Generally, title to goods cannot pass from seller to buyer until the goods are identified to the
contract. Unless otherwise agreed, title passes when seller tenders the goods.
In the absence of an agreement, the UCC places the risk of loss on the party controlling the goods
at the time loss occurs.
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BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 9TH ED—INSTRUCTOR'S MANUAL
does not require delivery at a particular destination; or (2) at the time the carrier tenders
the goods to the buyer at the specified destination.
• If the seller is a merchant, the risk of loss passes to the buyer only when the
buyer receives physical possession of the goods.
• If the seller is not a merchant, the risk passes to the buyer when tender of
delivery is made.
A buyer has the right to reject nonconforming goods. The rejection must be made within a reasonable
time after the goods are delivered.
8-12 UNCONSCIONABILITY
If a contract is so unfair as to “shock the conscience” of the court, a judge may negate the
offending terms or the entire contract. Under common law, unconscionability can be either
procedural or substantive.
Under the UCC a failure to perform is not a breach if performance is made impractical by an
event unforeseen by the contract. A party seeking discharge must show three things:
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CHAPTER 8 SALES, LICENSING, AND E-COMMERCE
The party must prove that the performance was impracticable due to a marked increase in
costs of the transaction – over 100%.
8-14 REMEDIES
The UCC tries to put the non-breaching party in the same position it would have been in if the
contract had been performed. This is usually done through award of monetary damages.
(i) Buyer breach: The measure of damages is the difference between the market
price at the time and place for delivery and the unpaid contract price, minus any
expenses saved because of the buyer’s breach.
(i) Seller breach: If a seller breaches, the buyer may cancel the contract and recover
as much of the price as has been paid and then either: cover or recover damages
for non-delivery.
(ii) Buyer’s remedies: If buyer elects to cover it must do so in good faith and in a
reasonable time period. If buyer elects damages, the measure of damages is the
difference between the market price at the time the buyer learned of the breach
and the contract price. The buyer may also recover consequential damages.
GLOBAL VIEW:
The Convention on Contracts for the International Sale of Goods (CISG)
The international sale of goods is outside of the scope of UCC Article 2. Today, the signatories to the
CISG account for nearly two-thirds of the world’s imports and exports.
A. Scope of Convention. CISG applies to oral and written sales contracts between parties within
signatory countries. CISG does not apply to goods for personal use, stocks, negotiable
instruments, money, or ships and other marine vessels.
B. Offer and Acceptance. Under the CISG an offer is effective when it reaches the offeree, but may
be withdrawn if the withdrawal reaches the offeree first. A contract is concluded at the moment
acceptance becomes effective. Custom and course of dealing between the parties is also
considered.
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BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 9TH ED—INSTRUCTOR'S MANUAL
C. Battle of the Forms. Under CISG, a reply that contains additional terms or other modifications is
a rejection of the offer and constitutes a counteroffer.
D. Good Faith. CISG promotes “the observance of good faith in international trade.”
E. Implied Warranties. CISG holds sellers liable for implied warranties of merchantability and
fitness for particular use and for any express warranties they make.
G. Exclusion of CISG from Agreements. U.S. lawyers tend to opt out of any CISG provisions.
IN BRIEF
Comparison of UCC, Common Law, UCITA, and CISG
Scope Battle of the Forms Warranties Statute of Frauds
UCC Sale of goods If both parties are 1. Implied warranties of Sales of $500 or
merchants, additional merchantability and more
terms are generally fitness for a particular
incorporated; if not, purpose
mirror image rule
2. Any express warranties
applies. For different
made
terms, “knockout” rule
applies
Common 1. Provision Mirror image rule Any express warranties 1. Transfer of real
Law of services made estate
2. Contracts 2. Contract cannot
for sale of be performed
land or within one year
securities
3. Prenuptial
3. Loan agreement
agreements
4. Agreement to
pay debt of
another
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CHAPTER 8 SALES, LICENSING, AND E-COMMERCE
*****
1. Will e-mail, Facebook Messenger, and other forms of social media make the Statute of Frauds
obsolete?
2. Should the protection of unconscionability be eliminated and replaced with caveat emptor (the
principle that the buyer alone is responsible for checking the quality and suitability of goods before a
purchase is made)?
3. Why would United States’ companies tend to like the CISG more than most or all other countries’
companies?
4. Is it ethical for managers to encourage salespeople to “push the envelope” in making representations
to potential customers?
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