Question

17

(TCO H) What does the uniform commercial code (UCC) state regarding price and warranty? What if a price is not specified in an agreement? What if a price is specified in an agreement? Does the UCC modify the price? What about a warranty? What rights does the buyer have for a guarantee under the UCC? What protection is granted to the seller?

18

You are the project manager on a social media project. The buyer wants to get an idea of how much they will pay for cost overruns. With the following data, calculate the point of total assumption:

Expected Cost == $250,000

Expected Profit == $50,000

Buyer / Seller Ratio == 50% / 50%

Ceiling Price == $310,000

Maximum Overrun == 140%

Answer 1

Question 17.

Uniform Commercial Code (UCC) is a type of law in the United States and it regulates and covers most of the transactions or commercial activities that are being carried out by the business persons or organizations by entering into contracts (these contracts are between buyers and seller). Warranty normally refers to express warranty under UCC if not specifically mentioned which warranty. Express warranty refers to that type of warranty which specifically mentions or agrees that goods that are being sold pertain to good quality and good features. Sometimes or at most of the times Express warranties include more of these affirmative statements. Apart from the express warranty we also have another kind of warranty under UCC, i.e. implied warranty. Implied means that the contract itself has required justifications whether or not mentioned in particular. In the Implied warranty the goods that are being bought by the buyer implies the buyer to be sure that goods pertain to good quality and features. In law terms we can say that it possesses the rule of Caveat Emptor which means let the buyer be beware.

Regarding the price, at the formation of contract UCC allows the contract to be formed with an amount of consideration as defined by it in the Article 2. Which says us that the consideration must be the amount at which the buyer and seller agrees to perform the contract. It also allows the buyer and seller form a contract without stating the price. But at the time of delivery the price shall be reasonably fixed (by the court) which shall be in the good faith of both the buyer and seller. UCC allows the parties of the contract to modify the terms of the contract (including the price) in the good faith of both the parties. UCC doesn’t involve in changing or modifying the terms of the contract, it only allows the parties to do so. UCC only changes the contract rules as a whole, but doesn’t change terms of a contract even with the warranty the same is the case.

UCC provides the buyer with the right to inspect the goods before taking delivery, right to expect that the goods which are being bought should contain certain fitness rules, he has a right to reject the goods without intimating the seller if they are not pertaining to such standards as they should. These are some of the rights that buyer has against the guarantee.

Seller has a right to cease the contract if he believes that buyer is not following the contract, he also has a right to expect good faith from the other party regarding the contract, he also has a right to inspect the goods if they are of bad quality and replace such goods within the specified time or given time even before the buyer rises an issue or a suit. He also has a right to make the goods which are sold returned to him if he finds that the buyer cannot honour the contract or cannot pay the stipulated price in the contract terms. He can also refuse the point that he should make delivery unless and until the buyer wishes to pay only in terms of cash before the delivery. These are some of the rights that a seller has.

Question 18.

Concept - The point of total assumption lets us understand the amount of money above which that the seller suffers the losses of the additional cost overrun. The formula for calculating PTA (point of total assumption) is ((Ceiling Price - Total Price)/buyer's Share Ratio) + Total Cost

Answer - Find the total cost first, Total Cost = Expected cost + profit = $250,000 + $50,000 = $300,000

Substitute the given values in the above formula;

((310,000 - 250,000)/0.5) + $300,000 = $420,000 is the point of assumption