BSN 107

1. ESSENTIALS OF THE LEGAL
ENVIRONMENT TODAY, 5E
ROGER LEROY MILLER
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

2. CHAPTER 14
SALES, LEASES, AND
PRODUCT LIABILITY
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

3. LEARNING OBJECTIVES
1. How do Article 2 and Article 2A of the UCC differ?
What types of transactions does each article
cover?
2. Under the UCC, if an offeree includes additional
or different terms in an acceptance, will a
contract result? If so, what happens to these
terms?
3. What remedies are available to a seller or lessor
when the buyer or lessee breaches the contract?
What remedies are available to a buyer or lessee
if the seller or lessor breaches the contract?
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

4. LEARNING OBJECTIVES (CONT’D)
4. What are implied warranties arise
under the UCC?
5. What are the elements of a cause of
action in strict product liability?
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

5. ARTICLES 2 AND 2A
• Article 2—The Sale of Goods
• Article 2 of the UCC governs sales
contracts (contracts for the sale of goods)
• Whenever a conflict arises between a
common law contract rule and the state
statutory law based on the UCC, the UCC
controls.
• What is a sale?
• What are goods?
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

6. EXHIBIT 14.1
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

7. ARTICLES 2 AND 2A
• Who is a merchant?
• A person who deals in good of the kind involved in the
sales contract
• A person who, by occupation, holds himself or herself out
as having knowledge and skill unique to the practices or
goods involved in the transaction
• A person who employs a merchant as a broker, agent, or
other intermediary
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

8. ARTICLES 2 AND 2A
• Article 2A—Leases
• Covers leases or subleases of goods
• Difference from Article 2 is that it applies to
leases rather than sales of goods
• Note: Article 2A is not concerned with
leases of real property; land or buildings
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
LO-1

9. FORMATION OF SALES AND LEASE
CONTRACTS
• Articles 2 and 2A modify common law
contract rules.
• Offer
• Open terms
• Merchant’s firm offer
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

10. FORMATION OF SALES AND LEASE
CONTRACTS
• Acceptance
• Communication of acceptance
• Additional terms
• UCC dispenses with the mirror image rule
• A contract is formed if the offeree’s response indicates a
definite acceptance of the offer, even if the
acceptance includes terms additional to or different
from those contained in the offer.
• Rules when one party or both parties are nonmerchants
• Rules when both parties are merchants
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
LO-2

11. FORMATION OF SALES AND LEASE
CONTRACTS
• Consideration
• Common law rule that a contract requires
consideration also applies to sales and
lease contracts
• The Statute of Frauds
• Special rules for contracts between
merchants
• Exceptions
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

12. EXHIBIT 14.2
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

13. PERFORMANCE
• Consists of the duties and obligations
each party has under the terms of the
contract
• Obligations of the Seller or Lessor
• Place of delivery
• The perfect tender rule
• Cure
• Substitution of carriers
• Commercial impracticability
• Destruction of identified goods
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

14. PERFORMANCE
• Obligations of the Buyer or Lessee
• Payment
• Right of inspection
• Acceptance
• Anticipatory Repudiation
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

15. REMEDIES FOR BREACH
• Remedies of the Seller or Lessor
• The right to cancel the contract
• The right to withhold delivery
• The right to resell or dispose of the goods
• The right to recover the purchase price or
lease payments due
• The right to recover damages
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
LO-3

16. REMEDIES FOR BREACH
• Remedies of the Buyer or Lessee
• The right to cancel the contract
• The right to obtain the goods on insolvency
• The right to obtain specific performance
• The right of cover
• The right to replevy goods
• The right to recover damages
• The right to reject the goods
• Revocation of acceptance
• The right to recover damages for accepted
goods
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

17. REMEDIES FOR BREACH
• Additional Provisions Affecting
Remedies
• A seller and buyer can expressly provide
for remedies in addition to those provided
in the UCC.
• Can also specify remedies in lieu of those
provided in the UCC, or change the
measure of damages
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

18. WARRANTIES
• Articles 2 and 2A designate several
types of warranties
• Title Warranties – can automatically
arise in sales and lease contracts
• Express Warranties – concerns the
quality, condition, description, or
performance potential of the goods
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

19. WARRANTIES
• Express warranties arise when seller or
lessor indicates:
• That the goods conform to any affirmation of fact or
promise that the seller or lessor makes to the buyer or
lessee about the goods
• That the goods conform to any description of them
• That the goods conform to any sample or model of the
goods shown to the buyer or lessee
• Basis of the bargain
• Statements of opinion and value
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

20. WARRANTIES
• Implied Warranties
• Implied warranty of merchantability
• Implied warranty of fitness for a particular
purpose
• Warranties implied from prior dealings or
trade custom
• Warranty Disclaimers
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
LO-4

21. PRODUCT LIABILITY
• Based on the theories of negligence,
misrepresentation, and strict liability
• Negligence
• If a manufacturer fails to exercise “due
care” to make a product safe, a person
who is injured may sue for negligence.
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

22. PRODUCT LIABILITY
• Misrepresentation
• When a user is injured as a result of a
manufacturer’s or seller’s fraudulent
misrepresentation, the basis of liability may
be the tort of fraud.
• Misrepresentation on a label or ad is
enough to show intent.
• Buyer must have relied on the
misrepresentation.
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.

23. PRODUCT LIABILITY
• Strict Product Liability
• People may be liable for the results of their
acts regardless of their intentions or their
exercise of reasonable care.
• Requirements
• Proving a defective condition
• Unreasonably dangerous products
• Product defects – manufacturing and
design
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
LO-5

24. PRODUCT LIABILITY
• Defenses to Product Liability
• Assumption of risk
• Product misuse
• Comparative negligence
• Commonly known dangers
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.