Law for Accountants. 3 questions (Each answer 350-450 words)


Law for Accountants. 3 questions (Each answer 350-450 words)
100% original and no plagiarism (Each answer 350-450 words)  APA format with references (Book attached)11–4. Shipment and Destination Contracts – In 2003, Karen Pearson and Steve and Tara Carlson agreed
to buy a 2004 Dynasty recreational vehicle (RV) from DeMartini’s RV Sales in
Grass Valley, California. On September 29, Pearson, the Carlson’s, and
DeMartini’s signed a contract providing that “seller agrees to deliver the
vehicle to you on the date this contract is signed.” The buyers made a payment
of $145,000 on the total price of $356,416 the next day, when they also signed
a form acknowledging that the RV had been inspected and accepted. They agreed
to return later to have the RV transported out of state for delivery (to avoid
paying state sales tax on the purchase). On October 7, Steve Carlson returned
to DeMartini’s to ride with the seller’s driver to Nevada to consummate the
out-of-state delivery. When the RV developed problems, Pearson and the Carlson’s
fi led a suit in a federal district court against the RV’s manufacturer, Monaco
Coach Corp., alleging, in part, breach of warranty under state law. The applicable
statute is expressly limited to goods sold in California. Monaco argued that
this RV had been sold in Nevada. How does the Uniform Commercial Code (UCC)
define a sale? What does the UCC provide with respect to the passage of title?
How do these provisions apply here? Discuss. [Carlson v. Monaco Coach Corp.,
486 F.Supp.2d 1127 (E.D.Cal. 2007)]
11–5. Additional Terms – Continental Insurance Co. issued a policy to cover
shipments by Oakley Fertilizer, Inc. Oakley agreed to ship three thousand tons
of fertilizer by barge from New Orleans, Louisiana, to Ameropa North America in
Caruthersville, Missouri. Oakley sent Ameropa a contract form that set out
these terms and stated that title and risk would pass to the buyer after the
seller was paid for the goods. Ameropa e-mailed a different form that set out
the same essential terms but stated that title and risk of loss would pass to
the buyer when the goods were loaded onto the barges in New Orleans. The cargo
was loaded onto barges but had not yet been delivered when it was damaged in
Hurricane Katrina. Oakley fi led a claim for the loss with Continental but was
denied coverage. Oakley fi led a suit in a Missouri state court against the insurer.
Continental argued that title and risk passed to Ameropa before the damage as
specified in the buyer’s form under Section 2–207(3) of the Uniform Commercial
Code because the parties did not have a valid contract under UCC 2–207(1).
Apply UCC 2–207 on additional terms in an acceptance to these facts. Is
Continental correct? Explain. [Oakley Fertilizer, Inc. v. Continental
Insurance Co., 276 S.W.3d 342 (Mo. App.E.D. 2009)]
12–7. Libel and Invasion of Privacy – The Northwest Herald, a newspaper in Illinois,
regularly received e-mail reports from area police departments about criminal
arrests. The paper published the information, which is proper because the
reports are public records. One day, the Herald received an e-mail
stating that Carolene Eubanks had been charged with theft and obstruction of
justice. The paper put that information into an issue that was to be published
four days later. Several hours after the original e-mail had been received, the
police issued another e-mail, explaining that Eubanks had not been charged with
anything; the correct name was Barbara Bradshaw. Due to a long weekend, no one
at the Herald noticed the e-mail until after the paper had been published.
The following day, five days after the e-mails had been received, the paper
published a correction. Eubanks sued the Herald for libel and for
invasion of privacy. Does Eubanks have a good case for either tort? Why or why
not? [Eubanks v. Northwest Herald Newspapers, 922 N.E.2d 1196
(App.Ct.Ill. 2010)]Book:Cross, F.
B., & Miller, R. L. (2010). The Legal Environment of Business: Text and
Cases – Ethical, Regulatory, Global, and Corporate Issues, 8th Edition.
Cengage Publishing.Chapter 11   Chapter 12


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hen we turn to contracts
for the sale and lease of
goods, we move away from
common law principles and into the
area of statutory law. State statutory law
governing sales and lease transactions is
based on the Uniform Commercial Code
(UCC), which, as mentioned in Chapter 1,
has been adopted as law by all of
the states.1 The goal of the UCC is to simplify and streamline commercial transactions, allowing parties to form sales
and lease contracts without observing
the same degree of formality used in
forming other types of contracts.
This chapter opens with a look at
the broad scope of Articles 2 and 2A.
1. Louisiana has not adopted Articles 2
and 2A, however.
Article 2 of the UCC establishes the
requirements to form sales contracts,
and we describe how these laws differ
from the common law of contracts.
Article 2 also stipulates the duties and
obligations of parties to sales contracts,
although parties normally can agree to
different terms than what is stated in
the UCC. Article 2A covers similar issues
for lease contracts. Because of its importance in commercial transactions, we
have included Article 2 in Appendix C
of this text.
After an examination of the formation of sales and lease contracts, we
consider how Article 2 addresses when
title (ownership) passes and who bears
the risk of loss, and who can obtain
insurance, on goods in the process of
Article 2 of the UCC (as adopted by state statutes)
governs sales contracts, or contracts for the sale
of goods. To facilitate commercial transactions,
Article 2 modi?es some of the common law contract
requirements that were discussed in the previous
chapters. To the extent that it has not been modi?ed
by the UCC, however, the common law of contracts
also applies to sales contracts. For example, the common law requirements for a valid contract—agreement, consideration, capacity, and legality, which
were discussed in Chapters 9 and 10—are also applicable to sales contracts. Thus, you should reexamine
being sold. We then look at the performance required in sales and lease
contracts and the remedies available if
a contract is breached. Also examined
are the warranties, both express and
implied, that can arise in contracts to
sell or lease goods.
The ?nal pages of this chapter
cover how traditional laws are being
applied to contracts formed online, or
e-contracts, which often involve sales
or leases. Because international sales
transactions are increasingly commonplace, we conclude the chapter
with an examination of the United
Nations Convention on Contracts for
the International Sale of Goods, which
governs international sales contracts.
these common law principles when studying the
law of sales.
In general, the rule is that whenever a con?ict
arises between a common law contract rule and
the state statutory law based on the UCC, the UCC
controls. In other words, when a UCC provision
addresses a certain issue, the UCC rule governs;
when the UCC is silent, the common law governs.
The relationship between general contract law and
the law governing sales of goods is illustrated in
Exhibit 11–1 on the following page.
In regard to Article 2, keep two points in mind.
First, Article 2 deals with the sale of goods. It does
not deal with real property (real estate), services,
or intangible property such as stocks and bonds.
Thus, if the subject matter of a dispute is goods,
the UCC governs. If it is real estate or services, the
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
E X H I B I T 11–1 • The Law Governing Contracts
This exhibit graphically illustrates the relationship between general contract law and statutory law (UCC
Articles 2 and 2A) governing contracts for the sale and lease of goods. Sales contracts are not governed
exclusively by Article 2 of the UCC but are also governed by general contract law whenever it is relevant and
has not been modi?ed by the UCC.
General Contract Law
Relevant Common Law
Not Modified by the UCC
Nonsales Contracts
(contracts outside the UCC, primarily
contracts for services and for real estate)
Contracts for the
Sale and Lease of Goods
Statutory Law
(UCC Articles 2 and 2A)
common law applies. Second, in some situations, the
rules may vary quite a bit, depending on whether
the buyer or the seller is a merchant. We look now
at how the UCC de?nes a sale, goods, and merchant
What Is a Sale?
The UCC de?nes a sale as “the passing of title [evidence of ownership rights] from the seller to the
buyer for a price” [UCC 2–106(1)]. The price may be
payable in cash or in other goods or services.
What Are Goods?
To be characterized as a good, an item of property
must be tangible, and it must be movable. Tangible
property has physical existence—it can be touched
or seen. Intangible property—such as corporate
stocks and bonds, patents and copyrights, and ordinary contract rights—has only conceptual existence
and thus does not come under Article 2. A movable
item can be carried from place to place. Hence, real
estate is excluded from Article 2.
Goods associated with real estate can fall within
the scope of Article 2, however [UCC 2–107]. For
example, a contract for the sale of minerals, oil, or
gas is a contract for the sale of goods if severance,
or separation, is to be made by the seller. Similarly, a
contract for the sale of growing crops or timber to
be cut is a contract for the sale of goods regardless of
who severs them.
In cases involving contracts in which goods and
services are combined, the courts generally use the
predominant-factor test to determine whether
a contract is primarily for the sale of goods or for
the sale of services. If a court decides that a mixed
contract is primarily a goods contract, any dispute,
even a dispute over the services portion, will be
decided under the UCC. For example, an accounting ?rm contracts to purchase customized software
from Micro Systems. The contract states that half of
the purchase price is for Micro’s professional services
and the other half is for the goods (the software). If a
court determines that the contract is predominantly
for the software, rather than the services to customize the software, the court will hold that the transaction falls under Article 2. Conversely, if the court
?nds that the services are predominant, it will hold
that the transaction is not governed by the UCC.
Who Is a Merchant?
Article 2 governs the sale of goods in general. It
applies to sales transactions between all buyers and
sellers. In a limited number of instances, though, the
UCC presumes that special business standards ought
to be imposed because of merchants’ relatively high
degree of commercial expertise.2 Such standards
2. The provisions that apply only to merchants deal principally
with the Statute of Frauds, ?rm offers, con?rmatory memoranda, warranties, and contract modi?cation. These special
rules re?ect expedient business practices commonly known to
merchants in the commercial setting. They will be discussed
later in this chapter.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
C H A P T E R 11
Sales, Leases, and E-Contracts
do not apply to the casual or inexperienced seller
or buyer (consumer). Section 2–104 sets forth three
ways in which merchant status can arise:
1. A merchant is a person who deals in goods of
the kind involved in the sales contract. Thus, a
retailer, a wholesaler, or a manufacturer is a merchant of the goods sold in his or her business. A
merchant for one type of goods is not necessarily a merchant for another type. For example, a
sporting goods retailer is a merchant when selling tennis rackets but not when selling a used
2. A merchant is 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. This broad de?nition may
include banks or universities as merchants.
3. A person who employs a merchant as a broker, agent,
or other intermediary has the status of merchant in
that transaction. Hence, if an art collector hires a
broker to purchase or sell art for her, the collector
is considered a merchant in the transaction.
In summary, a person is a merchant when she
or he, acting in a mercantile capacity, possesses or
uses an expertise speci?cally related to the goods
being sold. This basic distinction is not always clearcut. For example, state courts appear to be split on
whether farmers should be considered merchants.
In the past few decades, leases of personal property (goods) have become increasingly common.
Consumers and business ?rms lease automobiles,
industrial equipment, items for use in the home
(such as ?oor polishers), and many other types of
goods. Article 2A of the UCC was created to ?ll the
need for uniform guidelines in this area.
Article 2A covers any transaction that creates a
lease of goods or a sublease of goods [UCC 2A–102,
2A–103(1)(k)]. Article 2A is essentially a repetition
of Article 2, except that it applies to leases of goods
rather than sales of goods and thus varies to re?ect
differences between sales and lease transactions.
(Note that Article 2A is not concerned with leases of
real property, such as land or buildings.)
Article 2A de?nes a lease agreement as a lessor and lessee’s bargain with respect to the lease of
goods, as found in their language and as implied by
other circumstances [UCC 2A–103(1)(k)]. A lessor is
one who transfers the right to the possession and use
of goods under a lease [UCC 2A–103(1)(p)]. A lessee
is one who acquires the right to the possession and
use of goods under a lease [UCC 2A–103(1)(o)]. In
other words, the lessee is the party who is leasing
the goods from the lessor. Article 2A applies to all
types of leases of goods. Special rules apply to certain types of leases, however, including consumer
leases and ?nance leases.
In regard to the formation of sales and lease contracts, the UCC modi?es the common law in several
ways, as discussed in the subsections that follow.
Remember, though, that parties to sales contracts
are basically free to establish whatever terms they
wish. The UCC comes into play when the parties
either fail to provide certain terms in their contract
or wish to change the effect of the UCC’s terms in
the contract’s application. The UCC makes this very
clear time and again by its use of such phrases as
“unless the parties otherwise agree” and “absent a
contrary agreement by the parties.”
In general contract law, the moment a de?nite offer
is met by an unquali?ed acceptance, a binding contract is formed. In commercial sales transactions,
the verbal exchanges, correspondence, and actions
of the parties may not reveal exactly when a binding
contractual obligation arises. The UCC states that
an agreement suf?cient to constitute a contract can
exist even if the moment of its making is undetermined [UCC 2–204(2), 2A–204(2)].
OPEN TERMS According to general contract law, an
offer must be de?nite enough for the parties (and
the courts) to ascertain its essential terms when it
is accepted. In contrast, the UCC states that a sales
or lease contract will not fail for inde?niteness even
if one or more terms are left open as long as (1) the
parties intended to make a contract and (2) there is
a reasonably certain basis for the court to grant an
appropriate remedy [UCC 2–204(3), 2A–204(3)].
Relative to the common law of contracts, the
UCC has radically lessened the requirement of de?niteness of terms. Keep in mind, though, that if too
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
many terms are left open, a court may ?nd that the
parties did not intend to form a contract.
Open Price Term. If the parties have not agreed on
a price, the court will determine a “reasonable price
at the time for delivery” [UCC 2–305(1)]. If either
the buyer or the seller is to determine the price, the
price is to be ?xed in good faith [UCC 2–305(2)].
Under the UCC, good faith means honesty in fact and
the observance of reasonable commercial standards
of fair dealing in the trade [UCC 2–103(1)(b)]. The
concepts of good faith and commercial reasonableness
permeate the UCC. For a discussion of how sellers
might charge slightly higher prices for goods in the
interest of promoting “fair trade,” see this chapter’s
Shifting Legal Priorities for Business feature on the facing page.
Sometimes, the price fails to be ?xed (speci?ed)
through the fault of one of the parties. In that situation, the other party can treat the contract as canceled or specify a reasonable price. For example,
Perez and Merrick enter into a contract for the sale
of goods and agree that Perez will determine the
price. Perez refuses to specify the price. Merrick can
either treat the contract as canceled or set a reasonable price [UCC 2–305(3)].
Open Payment Term. When the parties do not
specify payment terms, payment is due at the
time and place at which the buyer is to receive the
goods [UCC 2–310(a)]. The buyer can tender payment using any commercially normal or acceptable means, such as a check or credit card. If the
seller demands payment in cash, however, the
buyer must be given a reasonable time to obtain it
[UCC 2–511(2)]. This is especially important when
the contract states a de?nite and ?nal time for
Open Delivery Term. When no delivery terms
are speci?ed, the buyer normally takes delivery at
the seller’s place of business [UCC 2–308(a)]. If the
seller has no place of business, the seller’s residence
is used. When goods are located in some other place
and both parties know it, delivery is made there.
If the time for shipment or delivery is not clearly
speci?ed in the sales contract, then the court will
infer a “reasonable” time for performance [UCC
Open Quantity Term. Normally, if the parties do
not specify a quantity, a court will have no basis
for determining a remedy. This is because there is
almost no way to determine objectively what is a
reasonable quantity of goods for someone to purchase (whereas a court can objectively determine
a reasonable price for particular goods by looking
at the market). The UCC recognizes two exceptions in requirements and output contracts [UCC
In a requirements contract, the buyer agrees
to purchase and the seller agrees to sell all or up to
a stated amount of what the buyer needs or requires.
There is implicit consideration in a requirements
contract because the buyer gives up the right to buy
from any other seller, and this forfeited right creates a legal detriment. Requirements contracts are
common in the business world and normally are
enforceable. If, however, the buyer promises to purchase only if he or she wishes to do so, or if the buyer
reserves the right to buy the goods from someone
other than the seller, the promise lacks consideration and is unenforceable by either party.3
In an output contract, the seller agrees to sell
and the buyer agrees to buy all or up to a stated
amount of what the seller produces. Again, because
the seller essentially forfeits the right to sell goods to
another buyer, there is implicit consideration in an
output contract.
The UCC imposes a good faith limitation on
requirements and output contracts. The quantity
under such contracts is the amount of requirements
or the amount of output that occurs during a normal
production period. The actual quantity purchased
or sold cannot be unreasonably disproportionate to
normal or comparable prior requirements or output
[UCC 2–306].
MERCHANT’S FIRM OFFER Under regular contract
principles, an offer can be revoked at any time before
acceptance. The major common law exception is an
option contract (discussed in Chapter 9 on page 196),
in which the offeree pays consideration for the offeror’s irrevocable promise to keep the offer open for
a stated period. The UCC creates a second exception,
which applies only to ?rm offers for the sale or lease
of goods made by a merchant (regardless of whether
or not the offeree is a merchant).
A ?rm offer arises when a merchant-offeror
gives assurances in a signed writing that the offer
will remain open. The merchant’s ?rm offer is irrevocable without the necessity of consideration4 for
3. See, for example, In re Anchor Glass Container Corp., 345 Bankr.
765 (M.D.Fla. 2006).
4. If the offeree pays consideration, then an option contract (not a
merchant’s ?rm offer) is formed.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Sales contracts, whether domestic or international, involve the transfer of a quantity of
goods at a price. But sales contracts can do more than
that. Thanks to the Fair Trade movement, they can also
bene?t poor farmers in developing countries and promote environmentally sustainable farming practices.
What Is the Fair Trade Movement?
The origins of the Fair Trade movement can be traced
to an effort in Europe almost ?fty years ago to provide
relief to refugees and other poor communities by selling their handicrafts. But the movement only began
to expand in the 1980s when the “Fair Trade” label
was developed in the Netherlands to identify coffee
produced under certain conditions. Today, Fairtrade
Labeling Organizations International determines
minimum “fair” prices that ensure that small producers can earn a living wage. Products obtained at these
prices can bear the Fair Trade label. Retailers can still
charge any price they wish, but because they pay more
for products with the Fair Trade label, they usually pass
these costs on to consumers in the form of slightly
higher prices.
TransFair U.S.A. founder Paul Rice describes the
Fair Trade movement this way: “Fair Trade creates the
opportunity for businesses to increase their pro?ts
through socially responsible business practices, for
consumers to vote with every purchase for a more
equitable world, and for farmers to view themselves
not as an anonymous cog in the world mark …
Purchase answer to see full

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