Contracts and Risk of Loss in Sales Law

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Questions and Answers

Which of the following is NOT a way an agency contract can terminate by acts of the parties?

Death of the principal (correct)

Revocation of authority

Lapse of time

Mutual agreement by parties

In which situation can a principal be held liable for an agent's tortious act?

When the principal provides appropriate instructions

When the agent commits a wrongful act at their own discretion

When the principal directs the agent to commit a wrongful act (correct)

When the agent acts outside their authority

What is an example of termination of agency by operation of law?

Revocation of authority by the principal

Completion of the project

Bankruptcy of the principal (correct)

Mutual agreement to terminate

Which of the following constitutes a tort in the context of agency?

An agent providing incorrect information to a third party Signup and view all the answers

What is the principle of respondeat superior in agency law?

The principal may be liable for the agent's acts during the scope of employment. Signup and view all the answers

Which of the following actions by an agent would likely result in the principal being liable for tortious acts?

All of the above Signup and view all the answers

When is a principal NOT liable for the actions of an agent acting outside the scope of their authority?

If the agent was acting in bad faith Signup and view all the answers

What triggers the termination of agency due to 'impossibility of performance'?

Events make performance of duties unfeasible Signup and view all the answers

In an origin shipment contract, when does the title transfer to the buyer?

When the goods are shipped by the seller Signup and view all the answers

What is the responsibility of the seller regarding risk of loss in a destination shipment contract?

Seller bears risk until the goods are delivered to the buyer Signup and view all the answers

What remedy is preferred for a non-breaching seller when the buyer is in breach?

Resell the goods Signup and view all the answers

At what point does a buyer acquire insurable interest in goods during a simple delivery transaction?

When the title transfers at the time of sale Signup and view all the answers

What rights does a seller have when the buyer breaches the contract prior to delivery?

Cancel the contract and stop delivery Signup and view all the answers

How can contracts for the sale of goods be formed between merchants?

Any manner that shows agreement is sufficient Signup and view all the answers

What happens to the risk of loss when a buyer leaves the seller's presence after a purchase?

Risk of loss transfers to the buyer immediately Signup and view all the answers

What does the perfect tender rule require from sellers in contract execution?

Deliver conforming goods as promised in the contract Signup and view all the answers

What is required for a contract to be valid at the time the agreement is made?

Mutual consideration Signup and view all the answers

In which situation would a seller be able to defend against breach due to commercial impracticability?

A sudden law prohibits the sale of goods Signup and view all the answers

What defines a 'good title' in a sale of goods?

Complete possession and control to the exclusion of all others Signup and view all the answers

Which scenario would result in a buyer acquiring a voidable title?

The buyer is a minor Signup and view all the answers

What is a characteristic of a void title?

Rights to the goods are permanently lost Signup and view all the answers

What remedy is available to a buyer prior to delivery of goods?

Cancel the contract Signup and view all the answers

How can a buyer acquire a good title from someone with a voidable title?

By making a good-faith purchase for value Signup and view all the answers

Which of the following represents a buyer's right after the delivery of goods?

Recovering the goods if they are defective Signup and view all the answers

What does the Family and Medical Leave Act (FMLA) require from covered employers?

To offer up to 12 weeks of unpaid leave during any 12-month period Signup and view all the answers

Which statement is true regarding primary and secondary boycotts?

Primary boycotts involve targeting a specific company, while secondary boycotts target associated businesses. Signup and view all the answers

What is the primary focus of the ECPA regarding electronic communications?

It prohibits the interception and unauthorized disclosure of electronic communications. Signup and view all the answers

Under the principle of entrustment, what right does a merchant have?

The authority to transfer all rights in the goods to a buyer in the ordinary course of business. Signup and view all the answers

What determines the applicable law for mixed contracts under UCC?

The predominant part of the contract. Signup and view all the answers

What is one requirement for employees to qualify for FMLA leave?

They must have worked at least 1,250 hours in the previous 12 months. Signup and view all the answers

Which of the following is a requirement for an employee's right to privacy concerning their electronic communications?

Employers must not disclose employees' information to other employees. Signup and view all the answers

Which of the following describes a delivery contract involving common carriers?

Includes rules and conditions that guide how goods are delivered. Signup and view all the answers

What is the perfect tender rule?

It allows buyers to reject all goods if any part of the delivery is nonconforming. Signup and view all the answers

Which of the following describes a void title?

A title that is invalid and provides no legal rights. Signup and view all the answers

Under what conditions can a seller be excused from performance according to UCC?

If the identified goods were destroyed through no fault of the parties. Signup and view all the answers

What is the obligation of buyers concerning conforming goods?

Buyers must accept and pay for conforming goods in accordance with the contract. Signup and view all the answers

What does the statute of frauds require for contracts concerning the sale of goods?

Sales of goods valued at $500 or more must be in writing. Signup and view all the answers

What is one condition under which a liquidated damages clause may be enforced?

It must be reasonable and not punitive. Signup and view all the answers

Which of the following is NOT a required term for the formation of an agreement under UCC?

Duration of contract. Signup and view all the answers

What actions can a buyer take if goods are nonconforming under the perfect tender rule?

Only accept part of the shipment and reject the rest. Signup and view all the answers

Study Notes

Origin and Destination Contracts

Origin Contracts: Title transfers to the buyer when goods are given to a common carrier; buyer bears risk of loss during transit.
Destination Contracts: Title transfers to the buyer upon receipt; seller bears risk of loss until goods reach destination.
Risk of loss, insurable interest, and title transfer at different points depending on contract type (origin, destination, common carrier). UPS is considered a common carrier.

Seller's Rights for Buyer's Breach

Sellers must deliver conforming goods (perfect tender rule).
Remedies before delivery: Cancel contract, stop delivery, resell goods.
Remedies after delivery: Sue for the price, sue to reclaim goods.
Resale is a preferred remedy for non-breaching sellers; seller can sell goods to another buyer and hold the original buyer responsible for any losses.

Transfer of Title, Insurable Interest, Risk of Loss

Simple Delivery: Title transfers upon contract execution; buyer has insurable interest upon title receipt; risk of loss transfers when the buyer takes possession (e.g., buying milk at a store).

Offer and Acceptance

Contracts for the sale of goods can be formed in various ways showing agreement; open terms are permissible.
The mirror-image rule doesn't apply.
Mutual consideration is required when the agreement is made; modification of contracts between merchants doesn't require new consideration ("if/when" contracts).

Seller Defenses Against Breach

Commercial Impracticability: Delay or non-delivery isn't a breach if performance became impossible due to unforeseen circumstances not contemplated in the agreement.

Types of Title

Good Title: Full ownership rights. Acquired from someone with good title or from someone with voidable title if the third-party purchaser is a good-faith purchaser for value (e.g., entrustment).
Voidable Title: Ownership rights exist except against the person from whom the title was received. Arises from voidable contracts (e.g., fraud, misrepresentation, buyer being a minor), failure to perform (e.g., bad check), or mutual agreement to delay title transfer.
Void Title: No ownership rights. Arises from theft or acquisition from someone with void title.

Buyer's Rights and Remedies

Buyers have the right to inspect goods.
Remedies before delivery: Cancel contract, sue for damages, recover goods, obtain specific performance.
Remedies after delivery: Accept non-conforming goods and seek damages; reject non-conforming goods; revoke acceptance of non-conforming goods.

Agency: Termination of Agency

Termination by acts of parties: Lapse of time, fulfillment of purpose, occurrence of a specific event, mutual agreement, revocation of authority, renunciation by the agent.
Termination by operation of law: Death, insanity, bankruptcy, change in circumstances, change in law, impossibility of performance, agent disloyalty, war.

Agency: Agent and Principal Liability for Torts and Crimes

The agent is always liable for their wrongful acts.
The principal is liable if they directed the tortious act, failed to provide proper tools/instructions, or if respondeat superior applies (negligent hiring or agent injuring a third party while acting within the scope of their employment). The principal may also be liable for agent misrepresentation.

Principal Contract Liability for Agent Acting Outside Scope of Authority

Liability depends on whether the third party reasonably believed the agent had authority to enter the contract.

Employee Privacy Rights and Electronic Communications

Employees have privacy rights extending to electronic communication; ECPA protects against unauthorized interception and disclosure of electronic communications. Personal emails are generally protected.

Family and Medical Leave Act (FMLA)

Covered employers: 50 or more employees for at least 20 workweeks.
Covered employees: Receive up to 12 weeks of unpaid, job-protected leave within a 12-month period for: birth/adoption of a child, foster care, caring for a family member with a serious health condition, employee's serious health condition, or qualifying exigency related to a family member's military service.
Employers must maintain health benefits during leave but are not required to pay wages. Employees must be allowed to return to the same or a similar position.

Primary vs. Secondary Boycotts

Primary boycott: Directly targeting the employer (e.g., striking). Legal.
Secondary boycott: Targeting a third party associated with the employer (e.g., boycotting a company that does business with the struck company). Illegal.

UCC: Enforceable Laws for Goods, Services, and Mixed Contracts

The predominant part of the contract determines which law applies in mixed goods and services contracts.

Entrustment

An owner with good title who entrusts goods to a merchant dealing in those goods allows the merchant to transfer all rights to a buyer in the ordinary course of business.

Delivery Contracts (Origin, Destination, Common Carrier)

Common carrier delivery contracts have options for the buyer to reject non-conforming goods, revoke acceptance, or accept the goods and seek damages.

Good, Voidable, and Void Title (Summary)

Good title: Best possible title.
Voidable title: Best title if no one has good title.
Void title: No title at all.

Perfect Tender Rule

Non-conforming goods constitute a breach. Buyers can accept, reject the whole shipment, or accept part and reject part. Exceptions include industry norms, past dealings, seller's right to cure, goods destruction through no fault of the parties, and substantial impairment (related to revocation of acceptance and installment contracts).

Statute of Frauds

Applies to contracts for the sale of goods valued at $500 or more (following MYLEGS rules).

Buyer's Obligations

Accept and pay for conforming goods per the contract terms.

Liquidated Damages Clauses

Enforceable if reasonable and not punitive; UCC Section 2-718 allows non-breaching sellers to claim against breaching buyers (20% of purchase price or $500, whichever is less).

Default Rules for Contract Formation (UCC)

Required terms: Parties, quantity, subject matter. Other terms may be implied.

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Description

This quiz covers the key concepts related to origin and destination contracts, including the transfer of title and risk of loss in sales transactions. It also examines sellers' rights in the event of a buyer's breach and the remedies available. Test your knowledge on these essential aspects of contract law.