Objective 09.01 Interpret sales contracts and warranties within the rights and law of consumers.

LAW OF SALES

Student Response

1. What types of products are not covered by the law of sales?

2. Why is a merchant held to a higher standard of accountability than a casual seller?

3. Define cash and carry and give examples not listed on the slides.

4. What are the 5 types of sales?5. What must be included on a Sales on

Credit-Businesses purchase?6. Label the following discount showing the

expected payment requirements. 3/5, n60

What is a Sale?

Sale- contract by which ownership of goods is transferred by the seller to the buyer for a consideration called “price”

Goods- tangible (touchable) personal property that can be physically weighed, measured, and moved

Buyer- the purchaser or vendee

Services (Intangible) are not covered in law of sales

Merchant vs. Casual Seller

Seller (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

Casual Seller- any seller who does not meet the definition of a merchant

Seller Comparison Merchant

vs.

▫Car dealership selling new cars

▫Clothing store at a mall selling new clothes

Casual Seller

▫Individual selling a used car after purchasing a new one

▫Person selling clothes at a garage/yard sale

Price

Consideration▫Money ▫Services▫Other goods (barter)▫Real estate

Cash and Carry

Sale where the buyer pays for the goods and takes ownership of the goods upon payment.

Risk of Loss (responsibility for loss) attaches upon receipt of goods

Most common payment / delivery methodEx:

Groceries, clothing Usually low priced goods Frequent purchases

COD - Collect on DeliveryGoods are shipped to buyerCarrier collects price and transportation charges upon deliveryPrice paid by purchaser at delivery:

Risk / Ownership transferred when paid to new owner

Carrier transmits the funds to the seller

Ex: UPS, DHL , & FedEx

Collect on Delivery (COD)

(supplemental)Ex: 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.

Sales on Credit - Consumer

Sale by agreement calls for payment of the goods at a later date.

Ex: •Furniture, cars, and appliances bought on an installment credit plan•Credit card or charge card purchase

Sales on Credit - BusinessesA business uses trade accounts to buy goods from another business in agreement to pay for them at a later date.

•One business sends an invoice to another business, with whom they regularly trade with terms for payment

Sales on Credit - BusinessesMust have:

▫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 % is added on to the invoice price if it’s not paid on time

Discounts

If terms are 2/10, n30

Ex: Invoice billed on July 1st for $1,000 with terms 2/10, n30. -If paid by July 10, buyer can take a discount of $20 (2% x 1000), and pay $980. -If bill is paid July 11 - July 31 amount will be net or $1000.

Due within 30 days

2% Discount

If paid in 10 days from billing

Net or 100%

Late Fees (Past Due Fees)

•Separate amount of interest due on accounts that are past due

Ex: “1.5 % per month on all unpaid, past due accounts”

Video!

Consignment Sale

Goods are sent by a manufacturer to a retailer, but ownership and risk remain with the manufacturer until the goods are sold.

•Retailer does not make payment unless goods are sold to consumer•If goods do not sell, retailer has right to return unsold goods to manufacturer

Sale or Return

Completed sale in which the merchant-buyer has the option of returning the goods.

Sale on ApprovalSale in which goods are delivered to the

buyer in an “on trial” or “on satisfaction” basis.

Auction

A public sale to the highest bidder.•Auction Sale With Reserve- auctioneer does not have to sell to the highest bidder

•Auctioneer accepts offers called bids

•Ownership passes when auctioneer accepts highest bid

•Risk of loss passes usually after payment

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

Student Response

1. What types of products are not covered by the law of sales?

2. Why is a merchant held to a higher standard of accountability than a casual seller?

3. Define cash and carry and give examples not listed on the slides.

4. What are the 5 types of sales?5. What must be included on a Sales on

Credit-Businesses purchase?6. Label the following discount showing the

expected payment requirements. 3/5, n60