Located in Detroit, Widget Inc. is a factory that deals with the production of widgets. Widgets Inc. has received an order from Machines Inc. to supply 2000 widgets at a price of $100 per widget. Other essential additional information such as the passing of title of goods and shipping have been neglected. The purchase may be termed as vague because essential details are missing. The areas of interest that are missing include the shipping method, the risk of loss, title and warranties transfer which are discussed in details, all which favours Machine Inc. and shall be in accordance to the good faith provisions stipulated in Uniform Commercial Code (UCC) standards.
The carrier method chosen is F.O.B (Free On Board) which is in favour of Machine Inc. The destination contract makes the buyer not to worry how the order shall be delivered to them, and the buyer does not incur the risk of loss until the product delivery is done. The destination contract requires that Widget Inc. bears all the transportation costs and is held liable in case there are losses or damage to the goods (Coleman & Lange, 2012). Under the Free On Board destination, the seller is supposed to bear the costs regarding transportation and assumes the risk associated with damage or loss in transit.
Tender of Delivery
Under the Tender of Delivery, Widgets Inc., delivers the order to Machine Inc. in not more than one shipment. However, the tendered goods should also be within a stipulated time frame which must be reasonable. Reasonable period of time possibly should be held at the buyer’s disposal for a short period.
Perfect Tender Rule
As the Uniform Commercial Code stipulates, the buyer who in this case is Machine Inc. can acknowledge the goods delivered, reject the whole shipment or even chose accept a percentage of the shipment and reject the other part in case Widget Inc. does not adhere to the contract. Nevertheless, if the goods delivered conforms to the contract, Machine Inc. will be restricted in rejecting the products delivered
Widget Inc. Obligations
The seller who is Widget Inc. will have an obligation to ensure that the purchased goods within the order are transferred and delivered. Widget Inc. shall also ensure that necessary documentation and notice is given to Machine Inc. to enable them to obtain the delivery. If the goods are defective or not in conformity to the placed order, then Widget Inc. has an obligation to replace, repair or adjust them (Cullinane, 2015). In cases where there will be non-delivery or a delay in shipment, then Widget Inc. shall be required to give prior notice to the buyer.
Risk of Loss if there is a Breach in the Contract
In circumstances where one party is found to be in breach of contract, then the breaching party bears the risk of loss. If Widget Inc. ships nonconforming goods then the buyer who is Machine Inc. does not incur the risk of loss unless the duties are cured or Machine Inc. decides to accept the goods in the conditions in which they have been delivered with defects. In case Machine Inc. accepts the goods and later on finds them to be defective, Machine Inc. can choose to revoke the acceptance and therefore the risk of loss now transfers to Widget Inc.
The documents showing the title of goods can be accepted by considering the bill of landing and a warehouse receipt can also be used. With the provision of the bill of landing, then the carrier is supposed to acknowledge through signing and return the signed document to Widget Inc., and this will be regarded as an agreement or contractual term for the products being transported. On receiving the warehouse receipt or the bill of landing, then the buyer shall have a maximum of 10 business days to ensure that the products are inspected and ensure payment without which a breach would have been made. Machine Inc. shall bear the costs of inspection. After the expiry of 10 days, then Machine Inc. must convey in writing that the delivery was made and a payment of the full invoice must be made.
The two types of warranties include implied and expressed warranty. The seller shall have the express warranty for any marketing or description of the goods that the buyer used while choosing the purchase of the product. Puffery found within the advertisement or description shall be excluded (Deakin & Michie, 2017). There shall be no disclaimer because there is no information that describes the function of the product. In implied warranty, Widget Inc. contains an implied warranty guaranteeing that the goods shall be inspected without any objection. Therefore, the goods are deemed to be of good quality and quantity.
In conclusion, the terms of purchase are essential in a trade deal without which one or either parties can suffer significant losses, or it can lead to disputes. It is the responsibility of both the buyer and the seller to ensure that all uncertainties are addressed by having a comprehensive trade contract to avoid any losses.
Cullinane, K. (2015). Shipping Economics. JAI Press.
Coleman, J. L., & Lange, J. (2012). Law and economics. New York, NY: New York University Press.
Deakin, S. F., & Michie, J. (2017). Contracts, co-operation, and competition: Studies in economics, management, and law. Oxford: Oxford University Press.