1. 6. 00 Understand Sales, Consumer, Property and Cyber Laws Objective 06
6.00 Understand Sales, Consumer, Property and Cyber Laws Objective Understand Sales Law
LAW OF SALES

2. Sale of Goods What is a sale?
Goods – tangible(touchable), moveable items of personal property that can be physically weighed, measured, and moved. Goods are NOT money, intangible items (stocks, bonds, etc), patents, copyrights or trademarks. tangible (touchable) personal property
Services are not covered in this unit.
Reminder: Contracts must have all required elements.
Sale of Goods - a contract by which ownership of goods is transferred by the seller to the buyer for a form of consideration – normally a price
Ownership - the right to hold the title, possess, use, enjoy, profit from, waste, and even destroy.

3. Merchant or Casual Seller
Merchant (Vendor)
Merchant- a seller who deals regularly in a particular type of goods or who claims special knowledge in a certain type of sales transaction
Why would a merchant held to a higher standard of accountability than a casual seller?
Casual Seller- any seller who does not meet the definition of a merchant

4. Seller Comparison Merchant Casual Seller
Car dealership selling new cars
Clothing store at mall selling new clothes
Casual Seller
Individual selling used car after purchasing a new one
Person selling clothes at a garage/yard sale

5. Cash and Carry
Sale where the buyer pays for the goods and takes ownership of the goods upon payment.
Ownership transfers at the time of the transaction.
Risk of loss- the responsibility for loss or damage to goods
Risk of loss attaches upon receipt of goods.

6. Cash and Carry Most common payment and delivery method Examples:
Groceries, clothing
Usually low priced goods
Frequent purchases

7. Sale on Credit
Similar to cash and carry EXCEPT payment is made at a later date by agreement of the parties.
Examples:
Appliances, furniture, vehicles
Usually bigger ticket items   

8. Sales on Credit-Consumer
When a consumer buys goods on credit, but pays for them at a later date.
A sale that by agreement of the parties, calls for payment of the goods at a later date.
Examples:
When furniture, cars, appliances are bought on an installment credit plan
Any credit card or charge card purchase made by a consumer

9. Sales on Credit-Businesses
A business uses trade accounts to buy goods from another business with an agreement to pay for them at a later date
Examples:
One business sends an invoice to another business, with whom they regularly trade with terms for payment.
Office Depot buys printers and supplies from Hewlett Packard but does not pay before the goods are shipped to them. HP will send an invoice for the amount due and the terms of payment.

10. Sales on Credit-Businesses
Invoices - the bill for goods shipped
Terms - the statement of a due date of payment and any allowable discounts or late fees charged
Due date - the time the payment is due to the invoicing company
Discounts - a % reduction on the invoice price if the bill is paid within a specified time
Net – when 100% of an invoice is due, no discounting allowed
Late fees - a % add on to the invoice price if not paid on time

11. E-Commerce
E-commerce – conducting business using electronic means, especially the Internet
Jurisdictional issues – which state has jurisdiction in cases involving sellers & buyers in different states?
The ability to access a website in a particular state does not, by itself, give that state jurisdiction
States may gain jurisdiction over e-commerce transactions if the website allows users to purchase merchandise
Example: Amazon.com - jurisdiction lies with the state in which the buyer resides

12. E-Commerce
Tax issues – jurisdiction helps to determine which state may tax Internet sites, and how buyer may be taxed
Authentication – helps to make certain that buyers and sellers are who they say they are
Digital signature – encoded message that appears at the end of a contract created online

13. Collect on Delivery - COD
Goods are shipped to buyer
Carrier is the transportation company
Carrier collects price and transportation charges upon delivery
Carrier transmits the funds to the seller
Can you name examples of carriers?
UPS, Yellow Freight, Fedex

14. Collect on Delivery (COD)
When price is paid at delivery:
Risk transfers to new owner
Ownership transfers to new owner
Until goods are delivered and price is paid, no transfer of risk or ownership.

15. Collect on Delivery (COD)
Example:
Michelle ordered a birthday gift for her sister from a Lands End catalog. It was shipped to the office where Michelle worked. When the UPS delivery came, Michelle had to pay for the goods and the cost of shipping and handling before the package could be left. After delivery, UPS submits the money to Lands End.

16. Terms/Discounts If terms are 2/10, n30
Purchaser may take a 2% discount on the cost of invoice if paid within 10 days
Purchaser will pay net (full 100% of invoice), if paying after 10 days but before 30 days
Example: Invoice billed on July 1st for $1,000 with terms 2/10, n30. If paid by July 10, buyer can take discount of $20 (2% x 1000), and pay $980. If bill is paid July 11 - July 31 amount will be net or $1000.

17. Late Fees Also called Past Due Fees
Frequently vendors state a separate amount of interest due on accounts that are past due.
Example: “1.5 % per month on all unpaid past due accounts”

18. Consignment Sale
Goods are sent by a manufacturer to a retailer, but ownership and risk remain with the manufacturer until goods are sold.
Retailer generally does not make payment for the goods unless goods are sold to consumer.
If goods do not sell, retailer has right to return unsold goods to manufacturer.

19. Consignment Sale Example:
Jean owns a retail clothing store. A supplier, Awesome Duds, offers Jean a new line of accessories saying, “If you’ll display this new product line, I will make you a deal. You’ll take no risk. I will not invoice you. If they don’t sell, return them all to me. When they sell, send me the wholesale price quoted.”

20. Sale on Approval
A sale in which goods are delivered to the buyer in an “on trial” or “on satisfaction” basis.
Ownership and risk of loss do not attach until prospective buyer approves goods.

21. Sale / Returns
A completed sale in which the merchant-buyer has the option of returning the goods.
The merchant-buyer gains ownership and risk of loss upon delivery.
If goods are returned within the agreed upon time, or a reasonable time, ownership and risk return to seller.
Returned goods must be in essentially their original condition.

22. Auctions A public sale to the highest bidder.
Auctioneer offers goods for sale and accepts offers called bids.
Auctioneer accepts the bid on behalf of the owner of the goods.
An Auction sale with reserve means the auctioneer does not have to sell to the highest bidder. For example, if all bids are very low, the bid can be rejected and sale stopped.
Ownership passes when auctioneer closes bidding and accepts the highest bid. “SOLD!”
Risk of loss passes when auctioneer gives buyer right to possess (usually after payment).

23. Bulk Transfer
A transfer, generally by sale, of all or a major part of the goods of a business in one unit at one time.
To protect creditors, the UCC requires merchants to give creditors written notice of bulk transfers so the merchant cannot sell all inventory and leave without payment to creditors.

24. Uniform Commercial Code
Published 1952
Definition: Body of laws governing commercial transactions in the United States.
Goal/Purpose: Form unity among all 50 states from businesses that complete transactions over state line.
How difficult would it be to know the laws in different states?
Who has purchased something online in a different state?
Imagine if there were 50 different laws on how sales are transacted.

25. Transfer of Ownership
People who own goods have title to the goods. Title is the right of ownership of goods.
True owners or titleholders may transfer goods. A warranty of title guarantees that goods are free from financial obligation.
If the seller of goods is a thief, the seller’s title is void.
Authorized persons or agents of the owner may transfer goods. (Examples: Merchant in a consignment sale or an auctioneer)

26. Transfer of Ownership - Terms
Barter - an exchange of goods.
Buyer - the purchaser or vendee
Casual Seller – does not regularly deal with item
Delivery – buyer possess of has control of item
Merchant – regularly deals with item
Payment – buyer pays for the item
What is the proof? Bill of Sale
Price - the consideration for a sale
Money , Services, Other goods (barter), Real estate

27. Transfer of Ownership - Terms
Receipt of Goods - buyer takes physical possession
Seller - the vendor or merchant
Statute of Frauds – requires certain contracts to be in writing
Applies to the sale of goods valued over $500.00
In writing requirements: Date, Place, parties, Subject Matter, Price, Signatures
Unconscionable Contract – so grossly unfair that the courts will refuse to enforce it.
Vendor = Seller
Vendee = Buyer

28. Transfer of Ownership Authorized Person
A third party may sell someone else’s product with their permission. Realtor sells a home on behalf of the owner. Consignment shops are examples.
Buyers in a Sale Induced by Fraud
If a person sells an item due to fraud they can void the transaction and receive the item back. However, if the other party has already sold the item to a good faith purchaser then the third party now has a good title. However, if the third party bought stolen goods (not sale induced by fraud), then they must return the item.
Holders of Negotiable Instruments
Ownership may transfer while the items are in transit or storage (define warehouse receipt, bill of lading, common carrier during this discussion).
Merchants with Possession of Sold Goods
After purchasing an item, you may asked the merchant to hold it until you can pick it up. For example, you purchase a couch but do not return until the next day with a friend’s truck to pick it up.

29. Transfer of Ownership
Existing Goods - physically exist and owned by the seller.
Identified Goods - designated for a sale
Ever seen a sign of a product that says, “Hold for Miller”?
Ever received a box from the back of the store that has marker written on it with their name.
Future Goods - this is a contract and not a sale because under UCC you cannot own future goods.
What if they are never produced?
How can you own something that does not exist?

30. TITLE Documents
Document of title - a written document giving the person who possesses it the right to receive the goods named in the document.
Bill of lading - a receipt for shipment of goods given by a transportation company to a shipper when the carrier accepts the goods for shipment
Warehouse receipt - document given by a warehouse to a customer whose goods are stored in the warehouse.
Bill of sale – document given to a buyer as evidence of ownership. (Property tax collectors may require a bill of sale to remove a sold vehicle from your tax bill. License tag offices may require bill of sale to transfer a vehicle title and issue a tag.)

31. Voidable Title
Voidable Title - when goods can be returned and the money paid for them is refunded.
Minors have voidable titles.
Victims of fraud who purchase goods have voidable titles.
Under UCC law, someone with a voidable title can transfer good title to someone who buys in good faith for something of value.

32. Ownership passes & risk of loss
Identified goods -goods that have been specifically designated as the subject matter of a particular sales contract
Once goods are identified, title passes to buyer when seller meets contract requirements.
IN CONTRAST: goods that are not both existing and identified are called future goods and neither ownership or risk of loss pass at time of agreement. These goods can be the subject matter of a contract to sell in the future, but not a sale. No one has title to future goods because they do not exist. Example: crops or goods to be manufactured in future.

33. Ownership passes & risk of loss
In a shipment contract-
Seller transfers goods to a carrier for delivery to buyer.
Title and risk of loss pass to buyer when seller turns over goods to carrier.
Seller has no responsibility once goods reach carrier.
Invoice designation is f.o.b. (free on board) shipping point. This means the buyer is responsible for freight cost (and risk) once seller delivers goods to carrier or to the shipping point.

34. Ownership passes & risk of loss
In a destination contract-
Contract requires seller to deliver goods to a specific destination.
Title and risk of loss retained by seller until delivered to the destination point.
Invoice designation is f.o.b. (free on board) destination. This means the seller is responsible for goods until they have been delivered.
WORKSHEET:
I’ll Take That

35. When does risk of loss transfer?
Situation
Who is at risk?
FOB Shipping Point
Buyer is at risk once the item is shipped.
FOB Destination
Seller is at risk until the product is delivered to the buyer
You purchase a used car on autotrader.com from a dealer in Atlanta. While the car is being driven to North Carolina it slides off the road and is damaged. What is type delivery terms will protect you in this transaction?

36. When does ownership transfer?
Situation
Definition
Who owns item?
Tender of delivery
Seller notifies buyer of item being available.
Buyer once notified.
Seller ships goods
Seller is required to ship item but not deliver to buyer.
Buyer once the carrier is in possession of item.
Seller sends document of title
Seller provides the document of title to the buyer and the buyer can receive the goods at anytime.
Buyer once document of title is possessed.
Seller tenders items at place of sale
Buyer is offered item at the place of the sale.
Buyer once item is tendered.

37. Risk of Loss Types of Sales/Transfer of Rights?
WORKSHEET:
Sales Law
Story
Situation
Definition
Who is at risk?
Cash and Carry Sales
Pay cash and take immediate delivery
Buyer assumes risk at receipt.
Sales on Credit
Payment at a later date
COD Sales
Collect on delivery
Buyer assumes risk at receipt (when paid in full).
Sale or Return
Buyer has the option to return the goods
Sale on Approval
Buyer has goods on a trial basis
Buyer assumes risk at time of approval.
Sale of an Undivided Interest
Buyer owns a portion of the item
Each owner has a partial risk.
Auction
Buyer bids on item.
Ownership transfers when the gavel falls (unless reserve is not met).
Bulk Transfer
All or a major part of a business is sold.
Buyer must notify creditors of ownership transfer.