978-0077733735 Chapter 13 Lecture Notes

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

Chapter 13

Sales Contracts: Formation, Title, and Risk of Loss

I. Key Words

Auction with reserve (p. 321) Goods (p. 310)

Auction without reserve (p. 321) Hybrid contract (p. 311)

Bill of sale (p. 322) Identified goods (p. 323)

Blended contract (p. 311) Insurable interest (p. 327)

C.F. (p. 324) Merchant (p. 314)

C.I.F. (p. 324) Mixed contract (p. 311)

C.O.D. (p. 324) Nonconforming goods (p. 313)

Conforming goods (p. 313) Open-price terms (p. 314)

Convention of Contracts Output contract (p. 315)

for the International sale of Requirements contract (p. 315)

Goods (CISG) (p. 320) Sale on approval (p. 327)

Destination contract (p. 323) Sale or return (p. 327)

Document of title (p. 325) Shipment contract (p. 323)

F.A.S. vessel (p. 324) Tender (p. 323)

Firm offer (p. 314) Title (p. 322)

F.O.B. (p. 323) Usage of trade (p. 313)

F.O.B. the place of destination (p. 324) Valid title (p. 322)

F.O.B. the place of shipment (p. 323) Void title (p. 322)

Fungible goods (p. 324) Voidable title (p. 322)

Future goods (p. 310)

II. Learning Objectives

1. Define the term goods and explain the nature of a sale.

2. Explain how Article 2 of the UCC applies to contractual relationships.

3. Explain the UCC rules that relate to written contracts.

4. Explain the two laws related to cyber-sales contracts.

5. Contrast an auction with reserve with an auction without reserve.

6. Explain title, void title, and voidable title.

7. Determine when title of goods passes from seller to buyer.

8. Decide when the buyer or seller must bear the risk of loss.

9. Compare a sale on approval with a sale or return.

10. Define an insurable interest.

III. Major Concepts

13-1 The Sale and Lease of Goods

The Uniform Commercial Code (UCC), which contains the law of sales, has been

adopted, either in whole or in part, by every state in the United States. Article 2 of the

UCC applies whenever people buy or sell goods. It applies to transactions between

without the prior written consent of McGraw-Hill Education.

Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

private parties as well as transactions by businesspeople or merchants. Article 2A applies

to leases of goods.

13-2 Rules for Sales Contracts

The following rules that are different from general contract law apply to sales contracts:

• A sales contract may be made in any manner that shows that the parties reached an

agreement.

• Unless otherwise specified, an offeree may accept an offer in any way that is reasonable,

including a prompt shipment of the goods.

• A written promise by a merchant to hold an offer open needs no consideration to be

binding.

• A sales contract may be made even though the price is not settled.

• Output and requirements contracts are allowed in sales contracts as long as the parties deal

in good faith and according to reasonable expectations.

• A sales contract may result even when an offeree adds different or additional terms from

those offered or agreed upon.

• No consideration is necessary to modify a contract for the sale of goods.

13-3 The Form of a Sales Contracts

With four exceptions, a contract for the sale of goods for $500 or more and the lease of goods for

$1,000 or more must be in writing. The exceptions are oral contracts between merchants in

which a confirmation has been received by one party and not objected to by the other party,

specially manufactured goods, admissions in court, and executed contracts. The United Nations

Convention on Contracts for the International Sale of Goods (CISG) applies to sales between

U.S. businesses and foreign businesses.

In an auction sale, offers are made by the people in the audience. The acceptance takes place

when the auctioneer bangs the gavel.

13-4 Title, Passage of Title, and Risk of Loss

Title to goods can be either valid, void, or voidable. When a merchant sells goods without

authority, the purchaser obtains good title. With few exceptions, such as when goods are to be

picked up by the buyer, whoever has title to the goods bears the risk of loss. Once goods are

identified, title passes to the buyer when the seller does whatever is required under the contract

to deliver the goods. Title to fungible goods may pass without the need to separate goods sold

from bulk. With a document of title, title and risk of loss pass to the buyer when the document is

delivered. Title returns to the seller when the buyer refuses the goods. The risk of loss remains

with the seller when the goods do not meet the requirements.

13-5 Sales, Returns, and Insurable Interest

Goods sold on approval remain the property of the seller until the buyer approves. The seller

retains the risk of loss. In a sale or return, the buyer takes title to the goods but is given the right

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

to return the goods to the seller. The buyer must care for the goods in a reasonable manner and

suffer the risk. Buyers have an insurable interest in goods the moment a contract is made and the

goods are identified to the contract.

IV. Outline

I. The Sale and Lease of Goods (13-1)

A. Sales of Goods

1. Goods are things (other than money, stocks, and bonds) that are tangible, movable,

and valuable to someone

2. Goods that are not yet in existence or under the control of people are called future

goods.

3. A gift is not considered a sale because, though title passes, it is not given for a price.

4. A bailment (e.g., when an item is left at a store to be sold on consignment) does not

meet the definition of a sale because title does not pass between the parties.

5. Article 2 of the UCC applies whenever people buy or sell goods.

B. Leases of Goods

1. The leasing of goods is governed by Article 2A of the Uniform Commercial Code.

2. Many of the rules that relate to the sale of goods also apply to the leasing of goods

under Article 2A.

C. Goods and Services

1. When a contract includes both goods and services, it is referred to as a mixed,

blended, or hybrid contract.

2. When faced with a hybrid contract, the court determines which side dominates

through determining the ultimate goal of the parties when the contract was first made.

3. When the sale of goods is dominant, the UCC applies; and when the provision of

services is dominant, the common law of contracts applies.

II. Rules for Sales Contracts (13-2)

A. Good Faith, Course of Dealings, and Usage of Trade

1. The UCC imposes an obligation of good faith in every contract.

2. The duty of good faith requires that the parties act and deal fairly with each other.

3. Unless the parties express otherwise, a course of dealing or usage of trade may be

used to supplement or to qualify the terms of a sales contract.

B. Formation of a Sales Contract

1. A contract may be made in any manner that shows that the parties reached an

agreement.

2. An enforceable sales contract may come about even if the exact moment of its

making cannot be determined and even though some terms are not completely agreed

upon.

C. Offer and Acceptance

1. To establish a contract for the sale of goods, unless otherwise indicated by the offeror

or the circumstances, the offeree may accept the offer in any manner and by any

medium that is reasonable.

2. Unless the buyer indicates otherwise, an order or other offer to buy goods for prompt

shipment may be accepted by either a prompt shipment or a prompt promise to ship,

and goods may be conforming or nonconforming.

D. Firm Offer

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

1. The UCC holds merchants to a higher standard than nonmerchants.

2. No consideration is necessary when a merchant promises in writing to hold an offer

open for the sale or lease of goods for a time period not exceeding three months, and

this type of offer is referred to as a firm offer.

E. Open-Price Terms

1. Under the UCC, a contract may be established even though the price is not settled if

the parties intend to be bound by the contract.

2. If the parties do not agree on the price, the UCC requires that the price be the

reasonable price at the time the goods are delivered.

F. Output and Requirements Terms

1. The UCC allows output and requirements contracts to satisfy the quantity

requirement under the UCC as long as the parties deal in good faith and according to

reasonable expectations.

2. Such contracts were often not allowed under common law because of the lack of

definite terms.

G. Additional Terms in Acceptance

1. Unless acceptance is made conditional on assent to the additional terms, a contract for

the sale of goods occurs even though the acceptance states terms that are additional to

or different from those offered or agreed upon.

2. When the parties are not merchants, the additional terms are treated as proposals for

additions to the contract.

3. If both parties are merchants, the additional terms become part of the contract unless

they materially alter it, the other party objects within a reasonable time, or the offer

limits acceptance to its terms.

H. Modification

1. An agreement modifying a contract for the sale of goods needs no consideration to be

binding.

2. A modification may be oral unless the original agreement is in writing and provides

that it may not be modified except by a signed writing.

3. A modification in a form supplied by a merchant to a nonmerchant, however, must be

separately signed (such as in the margin) by the nonmerchant to be effective.

III. The Form of a Sale Contract (13-3)

A. The Written Sales Contract

1. As long as the value of the goods involved in a sales contract does not exceed $500,

the contract can be oral and still be enforceable.

2. A lease of goods must be in writing if the total payments to be made under the lease

are $1,000 or more.

3. There are four exceptions to the requirement of a writing involving the following:

a. Oral contracts between merchants in which a confirmation has been received by

one party and not objected to by the other party.

b. Specially manufactured goods.

c. Admissions in court.

d. Executed contracts.

4. Sometimes contracts falling outside the UCC rule on what must be in writing fall

within other provisions of the statute of frauds.

5. Requirements of Writing

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

a. The writing that is required to satisfy the UCC must indicate that a contract for

sale has been made between the parties and mention the quantity of goods being

sold.

b. The writing must also be signed by the party against whom enforcement is sought.

c. An informal note, memorandum, or sales slip will satisfy the writing requirement.

6. Signature Requirements

a. Under the UCC, a signature includes any symbol made with the intent to

authenticate a writing.

b. An X and a typewritten name may qualify as signatures so long as they were

written with the intent to be signatures.

B. Cyber-Sales Contracts

1. The E-Sign Act

a. The statute declares that, as long as the parties to a cyber-contract have freely

decided to conduct business electronically, the cyber-contract that results will

have the same legal effect as a paper contract.

b. Parties to the contract must have some way to store and duplicate a cyber-record

of the contract; otherwise, the cyber-record will not be legally sufficient under the

act.

c. Some critical documents including court records, eviction notices, health

insurance cancellations, foreclosure notices, prenuptial contracts, and divorce

papers are not covered by the Act.

2. The Uniform Electronic Transactions Act (UETA)

a. The UETA promises the same legal parity between electronic records and paper

records that is guaranteed by the E-Sign Act.

b. The UETA applies only to transactions that involve a business, governmental, or

commercial situation.

c. Under the UETA, an electronic signature is defined as “an electronic sound,

symbol, or process attached to or logically associated with a record and executed

or adopted by a person with the intent to sign the record.”

C. International Law

1. The trend in other countries is to eliminate the requirement that a sales contract be in

writing.

2. International sales law, called the United Nations Convention on Contracts for the

International Sale of Goods (CISG), applies only to sales between businesses whose

places of business are in different countries that have adopted the law.

3. International sales law also has no writing requirements for a sales contract; instead, a

sales contract may be proved by any means.

D. Auction Sales and Cyber-Auction Fraud

1. An auction sale is “with reserve” unless the goods are expressly put up without

reserve.

2. In an auction with reserve, the auctioneer may withdraw the goods at any time before

announcing completion of the sale if the highest bid is not high enough.

3. In an auction that is without reserve, after the auctioneer calls for bids on an article or

lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable

time.

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

4. In either type of auction, the bidder may retract a bid until the auctioneer’s

announcement of completion of the sale.

5. Internet auction fraud is alarming.

IV. Title, Passage of Title, and Risk of Loss (13-4)

A. Valid Title, Void Title, and Voidable Title

1. Title, or valid title, is the right of ownership to goods.

2. With the exception of voidable title, buyers of goods acquire whatever title their

sellers had to the property.

3. If a seller has void title (no title at all), a buyer of the goods obtains no title to them.

4. Anyone who obtains property as a result of another’s fraud, misrepresentation, mutual

mistake, undue influence, or duress holds only voidable title to the goods.

5. Voidable title means title that may be voided if the injured party elects to do so.

6. When goods are entrusted to a merchant, if the merchant sells the goods in the

ordinary course of business to a third party who has no knowledge of the real owner’s

rights, the third party receives good title to them.

B. Passage of Title and Risk of Loss

1. Introduction

a. Identified goods are specific goods that have been selected as the subject matter

of the contract.

b. Once goods are identified, title passes to the buyer when the seller does whatever

is required under the contract to deliver the goods.

2. Shipment Contracts

a. In a shipment contract the seller turns the goods over to a carrier for delivery to

the buyer.

b. Both title and risk of loss pass to the buyer when the goods are given to the

carrier.

c. Shipment contracts are often designated by the terms f.o.b. the place of shipment.

3. Destination Contracts

a. In a destination contract the seller is required to deliver the goods to a destination.

b. Both title and risk of loss pass to the buyer when the seller tenders the goods at

the place of destination.

c. Destination contracts are often designated by the terms f.o.b. the place of

destination.

d. When terms of shipment do not specify shipping point or destination it is assumed

to be a shipment contract.

e. Additional terms such as c.o.d. (collect on delivery), c.i.f. (cost of goods shipped,

insurance, and freight), and f.a.s. (free alongside) vessel may be used.

4. No Delivery Required

a. When the contract calls for the buyer to pick up the goods, title passes to the

buyer when the contract is made.

b. If the seller is a merchant, the risk of loss passes when the buyer receives the

goods.

c. If the seller is not a merchant, the risk of loss passes to the buyer when the seller

tenders the goods to the buyer.

5. Fungible Goods

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

a. Fungible goods are “goods of which any unit is, by nature or usage of trade, the

equivalent of any like unit.”

b. Title to fungible goods may pass without the necessity of separating goods sold

from the bulk.

6. Documents of Title

a. A document of title is a paper giving the person who possesses it the right to

receive the goods named in the document.

b. When a document of title is used in a sales transaction, both title and risk of loss

pass to the buyer when the document is delivered to the buyer.

7. Agreement of the Parties

a. The parties may enter into an agreement setting forth the time that title and risk of

loss pass from the seller to the buyer.

b. An exception is that if the agreement allows the seller to retain title after the

goods are shipped, title will pass to the buyer at the time of shipment regardless of

the agreement; and the seller will have a security interest in the goods.

8. Revesting of Title in Seller

a. Title to goods returns to the seller when buyers, after entering into a sales

contract, refuse to accept the goods that are delivered to them.

b. Title to goods returns to the seller when the buyer accepts the goods and then for a

justifiable reason decides to revoke the acceptance.

c. When the seller sends goods to the buyer that do not meet the contract

requirements, risk of loss remains with the seller.

d. When the buyer accepts goods but later discovers some defect and rightfully

revokes acceptance, passage of risk of loss depends upon whether the buyer is

insured.

e. When the buyer breaches the contract with regard to goods that have been

identified to the contract, the seller may, to the extent of having no insurance

coverage, treat risk of loss as resting with the buyer.

9. International Sales

a. Rules governing international sales are given in the United Nations Convention

on Contracts for the International Sale of Goods (CISG).

b. The CISG does not address questions dealing with the passage of title because the

laws of each country vary.

c. Rules governing the passage of risk of loss are addressed in the international law

and are similar to those found in the UCC.

d. The CISG has several exceptions in the contracts it covers.

V. Sales, Returns, and Insurable Interest (13-5)

A. Sale on Approval

1. A sale that allows goods to be returned, even though they conform to the contract is

called a sale on approval when the goods are primarily for the buyer’s use.

2. Goods on approval remain the property of the seller until the buyer’s approval has

been expressed.

B. Sale or Return

1. A sale that allows goods to be returned even though they conform to the contract is

called a sale or return when the goods are delivered primarily for resale.

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

2. The buyer takes title to the goods with the right to revest title in the seller after a

specified period or reasonable time.

C. Insurable Interest

1. People must have an insurable interest in property in order to place insurance on it.

2. An insurable interest is the financial interest that an insured party has in the insured

property.

3. Buyers may place insurance on goods the moment a contract is made and the goods

are identified to the contract.

4. Sellers retain an insurable interest in goods as long as they still have title to the goods.

V. Background Information

A. Cross-Cultural Notes

1. In England, post office rules prevent the sender of a letter from retaking possession of

it once it has been mailed. The practice of forming contracts from the date when they

are mailed (a law common to both England and the United States) seems to have

evolved from this peculiarity of the English postal system.

2. The United Kingdom has not adopted the CISG.

3. The U.S. Consulate in Mexico recommends caution before purchasing real estate there

noting that Mexican real estate law differs significantly from U.S. law. More

information is available at http://merida.usconsulate.gov/consumerissues2.html.

B. Historical Notes

1. Auctions have been a part of human culture for as long as there has been recorded

history. Modern auctions closely resemble those of Roman times. In fact, some

practices, such as holding up fingers for a bid, come from the Roman model. The story

of an aristocrat, who acquired the emperor Caligula’s gladiators by nodding off during

an auction, started the myth that a simple nod or other inadvertent gesture might

commit the auction attendee to a purchase.

C. State Variations

1. Louisiana has adopted parts of the UCC but not Article 2. The state’s laws regarding

sale of goods are patterned after the French legal system as opposed to the British

system, part of Louisiana’s legacy as a former French territory.

2. By statute, Massachusetts and California have declared that the procurement,

processing, distribution, or use of whole blood for the purpose of transfusion is a

service by each participant and is not a sale of such blood for any purpose.

3. Louisiana law is an exception to the rule that sales contracts over $500 need to be in

writing.

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

4. Under the Illinois Motor Vehicle Leasing Act, a lease of a motor vehicle must be in

writing and printed in at least 8 point type, and some portions must be in at least

10-point bold capitalized type.

5. Maine, like many states, has adopted UCC 2-403, which provides that a person who

entrusts goods to a merchant who deals in goods of that kind gives the merchant power

to transfer all rights of the entrustor to a buyer in the ordinary course of business.

6. If a lessee in Minnesota, and in other states adopting UCC 2A-304(2), entrusts leased

goods to a lessor who is a merchant dealing in goods of that kind, a subsequent lessee

of those goods under a lease entered into after the entrustment and in the ordinary

course of business takes those goods free of the existing lease contract.

VI. Terms

1. The word auction comes from the Latin phrase auctio sub hasta or “under the spear.”

After a battle, Roman soldiers would group behind a spear thrust into the ground and

bid for the spoils of war.

2. The root word fungi refers to function, which relates to the broader definition of

fungible as interchangeable. One unit of something fungible can function the same as

any other unit.

3. A bill of sale is not actually a bill. It is simply a receipt indicating that title has

transferred from seller to buyer. A bill of sale prevents the seller from denying that the

sale took place.

VII. Related Cases

1. A scrap metal salvaging company entered into an output contract with a metal

manufacturer. The contract stipulated that the manufacturer would ship all of its scrap

metal to the salvager. When the manufacturer stopped shipping the scrap metal, the

salvager sued. The manufacturer claimed that the contract should be ruled invalid

because it did not name the amount to be shipped. The court ruled against the

manufacturer, stating the agreement to purchase all of the manufacturer’s scrap metal

was not too indefinite to be enforced. This was a valid output contract. Cohen v.

Wood Bros. Steel Stamping, 529 N.E.2d 1068 (Ill. Spp. Ct. 1988).

2. A software purchaser sued a software manufacturer after discovering problems with

the product. On the software box was a sales agreement and a warranty disclaimer.

The manufacturer argued that the combination of these two items shielded it. The

court disagreed, holding that the warranty disclaimer was an additional term to the

contract because it materially altered the contract. Step-Saver Data Systems, Inc. v.

Wyse Technology, 939 F.2d 91 (3d Cir. 1991).

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

3. Flowers Banking Co. entered an oral contract with R-P Packaging for specialized

cellophane wrapping material imprinted with the Flowers Banking name and unique

artwork. When Flowers refused the goods, R-P sued. The court ruled that because

these were specially manufactured goods, the oral contract fell outside the statute of

frauds. Flowers Banking Co. of Lynchburg, Inc., v. R-P Packaging, Inc., 329 S.E.2d

462 (Va. 1985).

4. In Mahler v. Allied Marine, 513 So.2d 677 (Fla. Dist. Ct. App. 1987), Mahler had a

one-week period within which to accept or reject a yacht under a sale-on-approval

agreement or otherwise lose a deposit. When the time limit was not met, the court

found in favor of Allied, stating that the buyer must respond within the specified time

which had been specifically negotiated by the parties.

VIII. Teaching Tips and Additional Resources

1. Information on monthly and annual retail trade, including e-commerce information, is

available at http://www.census.gov/retail/.

2. The Federal Reserve Board has a consumer guide to vehicle leasing at

http://www.federalreserve.gov/pubs/leasing/.

3. The web site for the National Auctioneers Association, at http://www.auctioneers.org/,

has extensive information regarding auctions and auctioneers.

4. The Federal Bureau of Investigation has an article providing tips on avoiding fraud on

the Internet, including Internet auction fraud, at

http://www.fbi.gov/scams-safety/fraud/internet_fraud/internet_fraud.

5. The U.S. Department of Justice has a site devoted to mass-marketing fraud at

http://www.justice.gov/criminal/fraud/internet/.

6. Pace Law School has a site providing the contents of the Convention on Contracts for

the International Sale of Goods at

http://www.cisg.law.pace.edu/cisg/text/cisg-toc.html. Pace provides a table of

contracting states at http://www.cisg.law.pace.edu/cisg/countries/cntries.html.

7. The U.S. General Services Administration shows items available for auction at

http://gsaauctions.gov/gsaauctions/aucindx/.

8. An article from Consumer Reports titled “ID Protection Services Help Reduce Fraud

Losses: Study” is available at

http://news.consumerreports.org/money/2011/09/identity-theft-protection-javelin-ban

ks-credit-bureaus.html.

9. The New York Law Journal has an article at

http://www2.gtlaw.com/pub/articles/2006/iselinh06a.pdf titled “Life Insurance

Purchase Invalid: Owner Had No Insurable Interest.”

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

10. The Internet site for the United Nations Commission on International Trade Law

which works with modernization and harmonization of rules on international business

can be found at

http://www.uncitral.org/uncitral/en/about_us.html.

11. Ask students to attend an auction during the term and report their observations.

12. Ask the students to name some goods they see around the classroom. Stress that a

contract for any of these items would be governed by the UCC. Be alert for items that

would be classified as fixtures rather than goods and explain the difference to the

class.

13. Since many students will own their own cars, point out that a car is a good and that a

contract for the purchase or sale of a car would be governed by the UCC, whether the

seller is a merchant or a private party.

14. One point that may confuse students is the domain of the UCC. When teaching this

chapter, be sure that students differentiate between the sale of goods and that of

services. Remind them, in brief, that goods are moveable property and are governed

by the UCC. Services fall under the common law of contracts.

15. Let students discover the intricacies of leasing firsthand by contacting a local

automobile dealer and comparing the legalities and costs of leasing with buying.

Students should find out who holds title to the car, who’s liable for both unavoidable

damages and those caused by the lessee, and who holds the warranty on the car. They

should factor in taxes, additional dealer costs, and maintenance estimates. This

activity will be more interesting if you assign specific autos in a wide price range so

that there will be a variety of results to share in class.

16. Review the special rules for sales contracts. Discuss who benefits from each special

rule.

17. Clarify for students the difference between void and voidable title. A void title is no

title. If Marco buys a car from Corinne, who has void title, Marco has no title to the

car, even though he paid for it, because Corinne had no title to give. A voidable title is

a title that can be voided. If Tran buys a mountain bike from Jaleel, who has a

voidable title to the bike, Tran acquires good title to the bike because, at the moment

of sale, Jaleel’s title to the bike was voidable but not void.

18. In discussing who retains title of stolen goods, it is worth pointing out the low

statistics of recovered merchandise. The best way to deal with theft is to prevent it

whenever possible and to insure goods for their full worth.

19. Emphasize the rule that allows a merchant to give good title to someone who buys

goods that have been entrusted to the merchant. Give the example of leaving a watch

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Chapter 13 – Sales Contracts: Formation, Title, and Risk of Loss

with a jeweler for repairs and later discovering that the jeweler has sold it by mistake.

20. Help students remember the meanings of c.f., c.i.f., c.o.d., f.a.s. vessel, f.o.b. the place

of destination, and f.o.b. the place of shipment. Have students work in pairs to come

up with ways to communicate the meaning of one term to the other students. The

pairs might, for example, draw cartoons illustrating the meaning of a term, act out the

meaning of a term, or come up with a play on words for a term’s abbreviation to help

classmates remember what the term means.

21. Use Table 13-3 as a guide for conducting a class discussion on the difference between

passage of title and risk of loss. Stress that the terms are the same except when no

delivery is required; the difference then depends on whether the seller is a merchant.

Ask the class for examples of the latter situation.

22. The CISG has several notable exceptions in the contracts that it covers. It does not

apply to goods bought for personal, household, or family use or to contracts that

mainly supply services. Nor does it cover liability of the seller for death or injury

caused by the goods sold.

23. Ask students if they ever returned merchandise that they ordered from a catalog. Have

any students who had this experience explain what the seller required him or her to do

to return the merchandise. Next ask students what would have happened if the

merchandise had been lost in the mail on its way back to the seller.

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