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Ch. 7: Consumer Law and Contracts (3/3/10)
Section 7.1 Sales Contracts
A special area of contract law is the law of sales contracts.
A sales contract is any contract in which ownership of goods is passed from a buyer to a seller for a price.
Goods are tangible items, such as clothing, books, food, cell phones, and computers.
Sales contracts are covered by the Uniform Commercial Code (UCC), a set of laws that governs certain types of business transactions.
The UCC also covers the lease of goods.
You lease goods whenever you rent an item such as a car, a DVD, or a computer.
Service contracts are covered by general contract law and not the UCC.
A service is a task performed by someone, such as dental work, auto repair, and haircutting.
The right of ownership of goods is known as title.
Title passes from the buyer to the seller when the seller fulfills the contract.
If the price for goods is under $500, an oral contract for the sale is enforceable.
If the price is $500 or more, the contract must be in writing to be enforceable.
The seller or the buyer may breach a sales contract by delivering damaged goods or refusing to pay for goods.
When a contract is breached, there are things both the seller and buyer can do.
The seller may:
cancel the contract
withhold or stop the delivery of goods
resell goods that have been withheld
bring a claim against the buyer for the cost of the goods delivered
The buyer may:
cancel the contract
refuse to accept the goods
return the goods
bring a claim against the seller for the cost of the goods
Section 7.2 Consumer Protection
The federal and state governments have laws to protect consumers from unsafe products and unfair business practices.
The federal government passes laws that regulate interstate commerce, or business that crosses state lines.
The federal agency that regulates business is the Federal Trade Commission (FTC).
Each state government passes laws that regulate intrastate commerce, or business that occurs within the state.
Most states have their own Department of Consumer Affairs to regulate business.
Both federal and state laws protect consumers from various forms of sales fraud, such as bait and switch.
Bait and switch is when a business lures you into a store with a great bargain that doesn’t really exist, and then tries to sell you something else more expensive.
An important form of protection consumers have in a sales contract is a warranty.
A warranty is a guarantee by a seller to the buyer that a product will perform as promised.
There are two basic types of warranties
express
An express warranty is a statement, promise, or representation made by the seller about the quality of a product.
implied
An implied warranty is a guarantee required by law.
A written warranty may be either
a full warranty
A full warranty is a guarantee that a defective product will be repaired or replaced without charge within a reasonable period of time.
a limited warranty
A limited warranty is a warranty that has certain limitations and does not provide the coverage of a full warranty.
A limited warranty might cover only parts and not labor.