In order for your business to be successful, at some point, you may have to engage in sales. This is how you generate revenues for your business. But once you get into the process of selling goods or services to the public, there are legal issues that come up that you should be aware of as a business owner. In this lesson, we're going to talk about two big areas of law in connection with sales. Then highlight some key terms that you want to address in your sales contracts. The first is, the Uniform Commercial Code. This is used in the U.S. Then you have the Convention on contracts for the Sale of International Goods. This is a body of law that you use internationally. Let's talk about the Uniform Commercial Code or the UCC. This is a body of law in the US that governs the sale of goods. This body of law has been adopted by almost all States in the U.S. If your company is in the business of selling goods to the public, you need to be familiar with the key terms of the Uniform Commercial Code. Now oftentimes your business maybe both selling goods as well as services, and so you have a mix of goods and services. Services are not governed by the UCC only the sale of goods. But if you are in this twilight zone where you're selling both goods and services, what a Court may do is decide which one is the primary form of business. What are you doing more of, is it more goods or is it more services? If the answer to that analysis is that it's more goods then your business is likely to be governed by the UCC. The UCC has some pretty stringent requirements largely around things like contract formation, how a contract is actually formed. They also have several key terms of a contract, which is what we call gap fillers. In the event that you and a partner you're entering into a contract with, did not address specific issues, the UCC will fill the gap there with default provisions and these default provisions are things you want to make sure that you're aware of when you're entering into contracts. There's also an issue of around battle of forms. If you as a business owner are engaging in a contract with another business owner, we'd like to use the term merchants and both of you are in the business of selling a particular type of goods. Then there may be multiple forms. The question comes up as to which one of these forms controls, which one is really the contract? Which one of these forms should the Court enforce? The often times what a Court will do is look at the term for the various forms, and if they are inconsistent, then the Court applies what we call the knockout rule. Any inconsistent terms will fall out, and then the UCC default provisions for those terms will be part of the contract. As you're engaging in business with suppliers and vendors who are in the space where you're working, you want to be sure that it's one clear form. There isn't this battle of forms, and to the extent there is, you want to make sure you understand what the gap filler provision are so you know what contract terms are you going to be held to. Then under the UCC, this is a unique thing to the UCC and this is called the perfect tender rule. What this implies is that if the contract calls for X in order to avoid breaching the contract, you must provide X. You can't have any deviation from that. It must be a perfect tender. Exactly what is called for under the contract. The contract calls for 10 widgets. You can't bring nine widgets or 11 widgets, it must be exactly 10 widgets or the contract is breached. That perfect tender rule is different in some international jurisdictions and we'll get into that now. The convention on the contracts for the international sale of goods, or CISG, that's an international body of law for sales contracts between merchants. Whereas in the U.S, the UCC governs the contracts for the sale of goods regardless of the parties. It could be between merchants, it can be between an individual and merchants. The CISG only deals with international sales contracts between merchants, and merchants are business owners who are engaged in selling a particular type of goods, goods of a particular kind. Now the CISG, if you have an international sales contract, so you're entering into an agreement for sales across the world, then those sales contracts will be governed by the CISG if there's no other choice of law provision in the contract. You can get around the CISG by agreeing in the terms of the contract for another type of law to apply. If not, the default will be the CISG. CISG does not include the familiar statute to frauds. The statute of frauds is included in the UCC, which means there's certain types of contracts must be in writing. Under the CISG, there's no requirement that those types of contracts be written. Also whereas the UCC has the perfect tender rule, CISG is a little more relaxed. They have what we call the good-faith rule. As long as you're making a good faith effort to comply with the terms of the contract, the CISG will excuse anything that's not perfect. For example, if you have a contract for ten widgets and you're able to get nine widgets under the good faith rule the CISG would accept that tender as acceptable. Now these are two very complicated and very complex bodies of law. The UCC in the US and the CISG for international sales between merchants. There are tons of very new ones contract provisions that are in there. If you are in the business of selling goods, you want to make sure that you consult with counsel on any contracts that you're entering into with third parties around the sales of goods to ensure that one, you understand what terms of the contract will be enforced, and you understand what rights and obligations you have as a party to those contracts. Now, contracts for sale of goods can take many forms, can have a long form agreement. You can have standard contracts that are standard in the industry that you ran, you can have short form contracts, you can have attachments to those contracts, a tender to those contracts, all of these forms of contracts would be acceptable. Depending on where you are, if it's in the U.S, you want to look to the UCC and if you're selling goods internationally, you were to look to the CISG to understand what requirements may be necessary for these various forums of contract. Key terms that you want to include in your contracts. This is largely designed to ensure that you and the party you're negotiating with understand the terms of the contract and you aren't relying on default provisions in the CISG, or the UCC, or these gaps doors in these bodies of law to write out the terms of the contract. Representations and warranties, want to make sure that to the extent there are new reps or guarantees that the parties want to make, that you spell that out clearly in the contract. Any conditions, the price and payment terms, when performance is to occur, what damages may be available or other remedies may be available in the event of a bridge, the duration of the contract, and whether there's any avenues for a party to renew the contract, what methods are in place for terminating the contract. Also, dispute resolution. To the extent there is a dispute about the contract, how would that dispute be resolved? In what venues? What jurisdiction will dispute being resolved? All of these are key terms that are negotiable. But as you're entering into contracts, you want to make sure that you are negotiating these, that you understand exactly the terms of these key provisions so that you are relying on gap fillers from the UCC or the CISG. In summary, sales contracts, they're very important to your business. These are the contracts that allow you to generate revenue for your business. But they're governed by a very complex bodies of law and your business offerings may be subject to these statutory rules if you in the sale of goods, if that's the business that you ran. As a business owner, you want to make sure you know the difference between the UCC in the U.S and the CISG for the International sale of goods. Consulting with an attorney is the best way to make sure you understand what rights and obligations you may have on these bodies of law.
