Sale of Goods Contracts: An Overview of Florida’s UCCA contract for the sale of “goods” is governed by Florida’s Uniform Commercial Code, Chapter 672. Technically, this governing chapter is known as the “Uniform Commercial Code: Sales”. Since that name is sort of a mouthful, it is usually just referred to as the UCC. Notably, a contract which is not related to the sale of goods, for instance, service contracts, is not governed by the UCC, but is governed by the common law of contracts.

This article will focus on sale contracts for goods. Accordingly, this discussion will provide an overview of Florida’s UCC governing the sale of goods contracts.

What is a “good”?

The UCC applies to all transactions in “goods”. A “good” is generally defined in 672.105 as any movable item other than money, investment securities and things in action. A good has to be identified and existing. It has to be a tangible thing, such as cell phones, watches, clothes, cattle, fruit and other physical items or personal property.

Writing Requirement/Statute of Frauds

A contract for the sale of goods, generally speaking, has to be put in writing. The UCC, section 672.201, states that a contract for the sale of goods for a price of $500 or more will not be enforceable unless it is under a written agreement. The contract must also be signed by the party against whom enforcement is sought. However, there are some exceptions to the writing requirement. One exception, for instance, is that if the goods have been paid for and accepted, and/or have been received and accepted, then the writing requirement is not applicable.

Acceptance of Goods, Rejection, Revocation of Acceptance

The UCC has specific rules on how goods are deemed accepted by the buyer. Pursuant to 672.606, the basic rule is that a buyer is considered to have accepted goods sold by a seller when, after having a reasonable opportunity to inspect the goods, the buyer signifies to the seller that the goods are conforming, or that the buyer will take the goods anyway in spite of their nonconformity. Once the goods are accepted, the buyer must pay the contract rate for any goods accepted.

Upon delivery, if the buyer is faced with nonconforming goods, he would have two options available to him. He could either reject the goods (before they are accepted) or, after he has already accepted the goods, the buyer can return the goods by way of revocation of acceptance. In order for the buyer to “reject” the goods he must do so within a reasonable time after the goods have been delivered or tendered. Also, the buyer must seasonably notify the seller of his rejection of the goods. If the buyer fails to properly reject the goods, he is deemed to have accepted them under the UCC, subject, however, to his revocation of acceptance.

Once the buyer has “accepted” the goods he could still revoke his acceptance of the goods. The buyer may revoke his acceptance of the goods if the nonconformity in the goods substantially impairs their value. However, the buyer’s revocation of acceptance of the goods must occur within a reasonable time after the buyer discovers, or should have discovered, the grounds for it. Finally, the buyer must notify the seller of his revocation of acceptance. Otherwise the revocation of acceptance will not be legally effective. 672.608.

In B.P. Development and Management Corp. v. P. Lafer Enterprises, Inc., 538 So.2d 1379, the buyer purchased a Christmas decorations package from the seller. The decorations were delivered prior to the Thanksgiving holiday and were to be used by the buyer during the Christmas season. The buyer refused to pay the full price of the decorations package, contending that the decorations were of poor quality. The buyer then sought to rescind the contract some 6 months after the holiday season ended. Since the buyer kept the goods and used them throughout the entire Christmas season, however, the Court ruled that the buyer had “accepted” the decorations package pursuant to the UCC. In other words, the buyer did not properly “reject” the goods. The Court also ruled that the buyer did not “revoke its acceptance” of the goods because its notification to the seller was untimely.

Risk of Loss: Shipment vs. Destination Contracts

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The two (2) types of sales contracts under the UCC wherein a carrier is used to transport goods sold are a shipment contract and destination contract. A “shipment contract” is considered the default contract used by sellers and buyers. In a shipment contract, the seller is required under the contract to send the goods by carrier to the buyer, but the seller is not required to guarantee delivery of the goods to a particular destination. Once the seller has put the goods sold in the possession of the carrier, and satisfies other certain requirements, the risk of loss will then pass to the buyer when the goods sold are duly delivered to the carrier for shipment.

Put in other terms, once the goods are effectively delivered to the carrier by the seller, the buyer “owns” the goods and will therefore be responsible for their loss. In a destination contract, however, the seller will specifically agree to deliver the goods sold to the buyer at a particular destination. Accordingly, in a destination contract, the seller will bear the risk of loss for the goods until tender of delivery of the goods at the designated place of destination. The risk of loss will only pass to the buyer when the goods sold are duly tendered to the buyer at the place of destination. A destination contract could be signified by such a delivery term as “F.O.B. Miami”. Pursuant to the UCC, the parties must expressly agree to a destination contract. Otherwise, the contract will be deemed a shipment contract.

In Pestana v. Karinol Corporation, 367 So.2d 1096, a Mexican resident, the buyer, agreed to purchase electronic watches from an exporting company, Karinol, the seller. The contract for sale stipulated that the watches were to be delivered by air transport from Miami to Mexico. But there was no provision in the contract which allocated the risk of loss on the goods sold while in transit with the carrier. There were also no special delivery terms in the contract as recognized under the UCC.

Karinol, the seller, delivered the watches to its freight carrier in Miami. The watches were then transported by air to be delivered ultimately to the buyer in Mexico. However, during the course of the transport, the watches went missing and were not successfully delivered to the buyer at his location in Mexico. A lawsuit was then filed by the buyer’s representative against the seller due to the lost shipment of goods. Since there was no provision in the contract defining the allocation of the risk of loss, the Florida Appellate Court ruled that the contract in question was a shipment contract. And since the seller, Karinol, had effectively delivered the goods to the carrier for shipment, the risk of loss had then passed to the buyer. Accordingly, the seller was not held liable to the buyer for the loss of the watches while they were in transit.

Warranty and Breach of Warranty

There are three types of warranties that are recognized under the UCC. They are (1) express warranty, (2) implied warranty of merchantability, and (3) implied warranty of fitness for a particular purpose. All of these warranties provide certain protections to a buyer who purchases goods from a seller or merchant.

An express warranty can be created by the seller in three ways: (1) the seller makes an affirmation of fact or promise to the buyer relating to the goods that the goods will conform to the seller’s affirmation or promise; (2) the seller furnishes a description of the goods that is made a part of the basis of the bargain that the goods will conform to that description; or (3) the seller uses a sample or model which is made part of the basis of the bargain that the goods will conform to the sample or model. In these three specific circumstances an express warranty may arise under the sales contract, and the seller will potentially be liable for violation of the warranty if breached. Notably, the reason it is referred to as an “express warranty” is because, for the warranty to arise under the contract, the seller must perform some affirmative act to give rise to the express warranty. Otherwise, there is no express warranty under the sale of goods contract.

The implied warranty of merchantability is an implied warranty which arises under the contract of sale where the seller is a merchant with respect to the goods sold. In short, this implied warranty requires the merchant to sell merchantable goods. In order for the goods to be merchantable, the goods must be fit for the ordinary purposes for which the goods are used, as well as other requirements as laid out by statute. R.A. Jones & Sons v. Holman, 470 So.2d 60. The implied warranty of fitness for a particular purpose is an implied warranty which is more limited in scope. It only arises where the seller has reason to know a particular purpose for which the goods are required and the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods. Royal Typewriter Co. v. Xerographic Supplies Corp., 719 F.2d 1092.

Under these circumstances, an implied warranty arises that the goods sold are fit for such particular purpose. When a buyer sues a seller or merchant for breach of an express or implied warranty under the UCC, the buyer must generally plead and prove the following elements: (1) the buyer must allege facts relating to the sale of goods; (2) the buyer must identify the type of warranty and allege those facts establishing its creation; (3) the buyer must allege facts relating to the breach of the warranty; (4) the buyer must give notice to the seller of the breach; and (5) the buyer must allege the injuries sustained as a result of the breach of the warranty. Dunham-Bush, Inc. v. Thermo-Air Serv., Inc., 351 So.2d 351.

If you are a buyer or seller of goods in Florida, and you are in need of legal assistance please feel free to call our office for a consultation.

Filed under: Florida Business

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