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Houston Commercial & Business Law Frequently Asked Questions - FAQs
Q: What Is The U.C.C.?
A: The U.C.C. stands for the Uniform Commercial Code. The laws concerning commercial and private transactions for the sale and leasing of goods developed out of the
Q: Does Chapter 2 Treat Merchants The Same As Non-Merchants?
A: No. Chapter 2 distinguishes between merchants and nonmerchants. In most situations, the U.C.C. holds merchants to a higher standard. Under the U.C.C., a merchant is one who regularly deals in goods of the kind. For example, if your neighbor sells his car through an advertisement in the classifieds, he or she would not be considered a merchant. However, if your neighbor sells a car every week through the classifieds, for purposes of the U.C.C., your neighbor may be a merchant because he or she regularly deals in goods of the kind. Any store that sells merchandise will generally be considered a merchant under the U.C.C. For example, the computer store on the corner, the grocery store in your neighborhood, and all major retailers would be considered a merchant under Chapter 2.
Q: Are There Fundamental Principles That Chapter 2 Always Applies?
A: Yes. Certain fundamental principles apply to the sale of all goods. Failure to adhere to the fundamental principles may take the transaction outside of the protection of the Uniform Commercial Code. One fundamental concept is that of good faith. Courts presume that all parties to a contract are acting in good faith. The U.C.C. defines good faith as honesty in fact. In order to qualify for the protections of the U.C.C., all parties to a contract for the sale of goods must deal honestly with each other as to the essential facts of the contract. Another basic concept of the U.C.C. is that all contracts for the sale of goods must be fundamentally fair. If a contract is so unfair that it may be said to shock the conscience, a Court may find that the contract is unconscionable. Courts do not recognize contracts that are determined to be unconscionable. The term is broad and there is not a strict line drawn to determine whether or not a contract is unconscionable. The determination is determined on a case-by-case analysis. If a Court finds that a contract is unconscionable, the court may (1) void the entire contract, (2) enforce the contract without including the unconscionable clause, or (3) so limit the application of the clause that it will avoid the unconscionable result. A final concept fundamental to the U.C.C. is that of a merchant. Chapter 2 distinguishes between merchants and nonmerchants. In most situations, the U.C.C. holds merchants to a higher standard.
Q: What Is An Express Warranty?
A: Any affirmation of fact or promise (or description of the goods) made by the seller to the buyer that relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. This sounds more complicated that it really is. For example, if the seller states, "this car gets 40 miles per gallon." then the statement is an express warranty. But instead, if the seller said, "this car gets excellent mileage!" then that is not an express warranty. In other words, a statement must be specific and objective to create an express warranty. A seller`s mere opinion such as this car is a beauty! does not create an express warranty. Often times, you see a model or a sample of a product and decide to buy it. But the seller does not say anything. Well, there still is an express warranty because any sample of a model, which is made part of the basis of the bargain, creates an express warranty that the product shall conform to the sample or model. In other words, the product you receive better be just like the one you saw. For example, you see safe in a showroom. The safe is called the x400. The x400 on display is made of titanium steel. Well, the seller just made an express warranty that the x400 you buy will be just like the x400 that you saw on display. If you get home and discover that the x400 that you just bought is not made of titanium, but rather aluminum, then the seller has breached the express warranty. As the buyer, you have the right to return the product for a full refund.
Q: What is an Implied Warranty of Merchantability?
A: In every sale between a merchant and a consumer, there exists an implied warranty of merchantability. This means that the goods bought will be fit for their ordinary use. For example, if you buy a golf club from a golf shop, there is an implied warranty in the sale that the golf club will perform as it was designed to. If the first time you swing the club, the head falls off, then the implied warranty of merchantability has been breached. In the case of a buying a car.... warranting that the a car will run is an example of a warranty of merchantability. This promise applies to the basic functions of a car. It does not cover everything that could go wrong. However, breakdowns and other problems after the sale don't prove the seller breached the warranty of merchantability. A breach occurs only if the buyer can prove that a defect existed at the time of sale. A problem that occurs after the sale may be the result of a defect that existed at the time of sale or not. As a result, a car dealer's liability is judged case by case.
Q: What Is The Implied Warranty Of Fitness For A Particular Purpose?
A: This is a warranty that is created when you seek and rely upon the expertise and advice of a sales associate in buying an item. To establish an implied warranty for a particular purpose, the buyer must satisfy two requirements: (1) At the time of contracting, the seller must have reason to know of any particular purpose for which the goods are required, and (2) the seller must have reason to know that the buyer is relying on the seller`s skill and judgment to select or furnish suitable goods. For example: Joe has decided to open up an Italian restaurant. Joe plans to have the restaurant open 15 hours a day, seven days a week. Joe needs to buy a stove that will not overheat if left on for 15 hours at a time. Joe goes to Bob`s Stoves to purchase his stove. Joe knows nothing about stoves. When Joe meets Bob he says, "Hi! I need your help in recommending a stove." Joe then goes on to tell Bob that any stove he buys must be able to run continually for 15 hours without overheating. Bob states, "I have just the stove for you, the ACME 412." Joe relies upon Bob`s expertise and buys the ACME 412. Four hours after the stove is turned on, the stove overheats, catches on fire and quits working. In this example, the implied warranty of fitness for a particular purpose has been breached.
Q: Disclaimer Or Limitation Of Implied Warranties
A: Sellers of consumer products who make service contracts on their products are prohibited under the Act from disclaiming or limiting implied warranties. (Remember also that sellers who extend written warranties on consumer products cannot disclaim implied warranties, regardless of whether they make service contracts on their products.) However, sellers of consumer products that merely sell service contracts as agents of service contract companies and do not themselves extend written warranties can disclaim implied warranties on the products they sell.
Q: Disclaimer Or Modification Of Implied Warranties
A: The Act prohibits anyone who offers a written warranty from disclaiming or modifying implied warranties. This means that no matter how broad or narrow your written
Q: Do Used Cars Come With A Warranty?
A: In general, yes. State laws hold dealers responsible if cars they sell don`t meet reasonable quality standards. These obligations are called implied warranties unspoken, unwritten promises from the seller to the buyer. However, dealers in most states can use the words as is or with all faults in a written notice to buyers to eliminate implied warranties. There is no specified time period for implied warranties.
Q: What Should I Do If The Product I Bought Has A Warranty, And Does Not Work?
A: You should first go back to the retailer and ask for an exchange of goods or for your money back. If the retailer refuses to do either, and there is no disclaimer of warranties, then you may want to seek the advice of an attorney who specializes in lemon law or consumer protection.
Q. What About Service Contracts?
A. A service contract is an optional agreement for product service that customers sometimes buy. It provides additional protection beyond what the warranty offers on the product. Service contracts are similar to warranties in that both concerns service for a product. However, there are differences between warranties and service contracts. Warranties come with a product and are included in the purchase price. In the language of the Act, warranties are part of the basis of the bargain Service contracts, on the other hand, are agreements that are separate from the contract or sale of the product. They are separate either because they are made some time after the sale of the product, or because they cost the customer a fee beyond the purchase price of the product. The Act includes very broad provisions governing service contracts that are explained in the following sections.
Q. What Is A Sales Contract?
A. This is an important consideration for purposes of Chapter 2. In order to determine whether Chapter 2 applies to a transaction, you must first determine whether a contract exists. Under the U.C.C., a contract need not be formed with any special formality. A contract may be formed in any manner sufficient to show agreement between the parties. This includes the conduct of the parties. A contract usually begins by one person making an offer to another. The other person accepting the offer completes the contract. If the contract is supported by consideration, a contract is formed. Consideration, in the context of a contract usually means, money paid, or a promise to do something. For example, If Jack asks Jill if she would like to buy his car for one hundred dollars, an offer has been made. If Jill agrees to the deal, then Jill has accepted the offer. The one hundred dollars serves as the consideration. The transaction would create a legally enforceable contract under the Uniform Commercial Code. Since the contract involved a transaction involving the sale of a good (the automobile), the transaction is governed by Chapter 2.
Q. Does A Contract Have To Be In Writing In Order To Be Enforceable?
A. No, a written contract is not required to create all contracts. The U.C.C. implements something called The Statute of Frauds (S.O.F.). The S.O.F. requires that certain contracts be recorded in writing in order to be enforced. The S.O.F. has been implemented to reduce and prevent fraud in contracts. The S.O.F. requires that all contracts for the sale of goods over five hundred dollars be in writing to be enforceable. For example, if you orally agree to buy your neighbor`s car for six hundred dollars then later decide that you no longer want to buy the car, you can do so. To be enforceable, the contract must be in writing because the sale is for six hundred dollars, an amount above the S.O.F.`s five hundred dollar writing requirement. On the other hand, if you orally agree to buy your neighbor`s car for three hundred dollars and later decide to back out, you may be liable to your neighbor under the contract.
Q. What Is A Distributorship?
A distributorship is an arrangement where the manufacturer makes its money on the sale of the actual goods that are distributed rather than for the right to distribute the goods. Thus, a distributor normally doesn't have to pay fees for the right to distribute a manufacturer's products and/or services, unlike a franchise business arrangement. Distributorships fall under distributorship laws, as well as contract and other business laws. Distributorship laws vary from state to state, and they are very complex, which is why you should consult with an attorney before entering into a distributorship agreement.
Q. What Are Some Considerations When Buying A Franchise?
A. Many people dream of being an entrepreneur. By purchasing a franchise, you often can sell goods and services that have instant name recognition and can obtain training and ongoing support to help you succeed. But be cautious. Like any investment, purchasing a franchise is not a guarantee of success.
Q. Where Are Franchise Opportunities in the Houston - Harris County Area?
A. The Houston commercial lawyers listed on this page can help you. You can, however, begin your search for a franchise opportunity at the:
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Houston Business Journal |
Houston Area Chambers of Commerce 1200 Smith Street, Suite 700 Houston, Texas 77002 (713) 844-3600 www.houston-texas-online.com/htochambers.html |
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Small Business Administration 8701 S. Gessner Drive, STE 120 Houston, TX 77074 713-773-6500 www.sbdc.uh.edu |
Small Business Development Center |
Houston Commercial & Business Lawyers serve Harris County and surrounding communities.
Serving clients throughout Southeastern Texas, including Aldine, Baytown, Bellaire, Beaumont, Channelview, Cloverleaf, Conroe, Deer Park, Friendswood, Galena Park, Galveston, Hedwig Village, Highlands, Hilshire Village, Humble, Jacinto City, Katy, League City, Magnolia, Mission Bend, Missouri City, Pasadena, Pearland, Porter, Sealy, South Houston, Spring Valley, Stafford, The Meadows, The Woodlands, Waller, West University, and other communities in Fort Bend County, Harris County, and Montgomery County.