C241- Chapter 16

UCC - Define the terms "sale"

The UCC defines a sale as "the passing of title [evidence of ownership rights] from the seller to the buyer for a price" The price may be payable in cash or in other goods or services.

Goods and Services Combined: What law governs?

"Predominant Factor" Test - if goods, then UCC governs, if services then common law governs entire contract.

Parole evidence under the UCC.

-No agreements are completely integrated (§2-202, comment 1a) -Parole evidence CANNOT be used to directly contradict a contract, but -you CAN ALWAYS use course of performance, course of dealings, usage of trade or additional terms to explain or supplement the contract. -If the judge decides that they are relevant to the explaining of the contract, the jury then decides if they were actually promises that were made.

UCC - Define the term "goods."

1. A "good" must be tangible and movable. Tangible: has physical existence. Movable: carried from place to place. 2. Goods Associated With Real Estate. (a) Contract for sale of minerals or a structure is a good IF severance is made by seller. If severance by buyer, sale is governed by common law. (a) Sale of growing crops.

CISG vs UCC

1. First, the CISG does not include a statute of frauds. Under section 2-201 of the UCC, contracts for the sale of goods of $500 or more are not enforceable unless there is a writing sufficient to indicate a contract has been made between the parties and signed by the party against whom enforcement is sought. Conversely, article 11 of the CISG provides that a contract of sale need not be evidence by writing and may be proved by any means, including witnesses. 2. Second, the CISG does not contain a parol evidence rule. Under section 2-202 of the UCC, the agreed upon terms of the contract may not be contradicted by evidence of any prior agreements, but may only be explained or supplemented by course of performance, course of dealing, or usage of trade. Evidence of consistent additional terms is permitted unless the parties intended the written contract to be a complete statement of their agreement. Conversely, article 8 of the CISG permits the court to consider the parties' negotiations, course of dealing, and subsequent conduct to determine the parties' intent when interpreting the contract. 3. Third, the CISG more closely follows the mirror image rule, where the UCC permits an acceptance to be effective even though it offers additional terms. Section 2-207 of the UCC provides that an acceptance is effective even though it states terms additional to or different than the terms in the offer. Conversely, under article 19 of the CISG, a reply to an offer that contains additional terms or limitations is a rejection of the offer and constitutes a counter-offer.

Uniform Commercial code (UCC).

1. Governs contracts for sale of "goods." 2. UCC 2 preempts common law in sale of goods and modifies common law of contracts in some areas. But where UCC 2 is silent, common law governs.

Requirements for a Firm Offer.

1. Written (or electronically recorded, such as in an e-mail). 2. Signed by the offeror.

What is an offer in a contract using contract law?

1. an offer is a promise in exchange for performance by another party. 2. An offer can be revoked or terminated under certain conditions. 3. There are also times when an offer can be negotiated to create a counter-offer.

Requirements under the Statute of Frauds - Formation of Sales and Lease Contracts

1.All contracts for the sale of goods priced at $500 or more must be in writing. A writing is sufficient as long as it indicates a contract between the parties and is signed by the party against whom enforcement is sought. A contract is not enforceable beyond the quantity shown in the writing. 2.When written confirmation of an oral contract between merchants is not objected to in writing by the receiver within ten days, the oral contract is enforceable.

if court deems contract "unconscionability." do the following:

1.Refuse to enforce the contract. 2.Enforce the remainder of the contract without the unconscionable part. 3.Limit the application of the unconscionable term to avoid an unconscionable result.

Parol Evidence Rule.

1.The terms of a clearly and completely worded written contract cannot be contradicted by evidence of prior agreements or contemporaneous oral agreements. 2.Evidence is admissible to clarify the terms of a writing in the following situations: a. If the contract terms are ambiguous. b. If evidence of course of dealing, usage of trade, or course of performance is necessary to learn or to clarify the intentions of the parties to the contract.

EXCEPTIONS - Requirements under the Statute of Frauds - Formation of Sales and Lease Contracts

3. Exceptions to the requirement of a writing exist in the following situations: a. When the oral contract is for specially manufactured or obtained goods not suitable for resale or lease to others and the seller or lessor has made commitments for the manufacture or procurement of the goods. b. If the defendant admits in pleadings, testimony, or other court proceedings that an oral contract for the sale or lease of goods was made, then the contract will be enforceable to the extent of the quantity of goods admitted. c. The oral agreement will be enforceable to the extent that payment has been received and accepted or to the extent that goods have been received and accepted.

Consumer Leases.

A consumer lease involves three elements: 1. A lessor who regularly engages in the business of leasing or selling. 2. A lessee (except an organization) who leases the goods "primarily for a personal, family, or household purpose." 3. Total lease payments that are less than $25,000 [UCC 2A-103(1)(e)].

Consideration.

A modification of a contract for the sale of goods does not require consideration.

UCC - Offer acceptance.

Acceptance of an offer to buy, sell, or lease goods generally may be made in any reasonable manner and by any reasonable means. 1. offer to buy goods "either by a prompt promise to ship 2. or by the prompt or current shipment of conforming or nonconforming goods" [UCC 2-206(1) (b)]. 3. Conforming goods accord with the contract's terms, whereas nonconforming goods do not. The prompt shipment of nonconforming goods constitutes both an acceptance, which creates a contract, and a breach of that contract. This rule does not apply if the seller seasonably (within a reasonable amount of time) notifies the buyer that the nonconforming shipment is offered only as an accommodation, or as a favor. The notice of accommodation must clearly indicate to the buyer that the shipment does not constitute an acceptance and that, therefore, no contract has been formed.

Statute of Frauds, including how it pertains exceptions to the rule.

Exceptions: d. Oral contracts for specially manufactured goods will be enforced. e. Oral contract is enforceable if there are admissions by breaching party. Exceptions: f. Partial Performance: an oral contract is enforceable IF payment has been made or goods have been accepted.

UCC - Offer acceptance. EXAMPLE.

McFarren Pharmacy orders five cases of Johnson & Johnson 3-by-5-inch gauze pads from H.T. Medical Supply, Inc. If H.T. ships five cases of Xeroform 3-by-5-inch gauze pads instead, the shipment acts as both an acceptance of McFarren's offer and a breach of the resulting contract. McFarren may sue H.T. for any appropriate damages. If, however, H.T. notifies McFarren that the Xeroform gauze pads are being shipped as an accommodation—because H.T. has only Xeroform pads in stock—the shipment will constitute a counteroffer, not an acceptance. A contract will be formed only if McFarren accepts the Xeroform gauze pads.

OPEN Price Term Price Fails- EXAMPLE

Perez and Merrick enter into a contract for the sale of goods and agree that Perez will determine the price. Perez refuses to specify the price. Merrick can either treat the contract as canceled or set a reasonable price.

Statute of Frauds, including how it pertains to merchants.

Sale of goods over $500 must have a signed writing to be enforceable. Sufficiency of the Writing. a. Signed by party against whom enforcement is sought. b. Normally not enforceable beyond quantity of goods shown in the writing. Special Rules for Merchants. c. After oral agreement, one of the merchants sends a signed, written memorandum containing essential terms to the other merchant within a reasonable time.

Uniform Commercial code (UCC). Article 2A: Lease Contracts.

Similar issues for lease contracts that the parties to sales or lease contracts are free to agree to terms different from those stated in the UCC.

Open Price Term. Price Fails.

Sometimes, the price fails to be set through the fault of one of the parties. In that situation, the other party can treat the contract as canceled or determine a reasonable price.

OFFER.

The UCC states that an agreement sufficient to constitute a contract can exist even if the moment of its making is undetermined [UCC 2-204(2), 2A-204(2)]. 1. In general contract law, the moment a definite offer is met by an unqualified acceptance, a binding contract is formed. 2. In commercial sales transactions, the verbal exchanges, correspondence, and actions of the parties may not reveal exactly when a binding contractual obligation arises.

"mailbox rule"

The mailbox rule, which is the default rule under contract law for determining the time at which an offer is accepted, states that an offer is considered accepted at the time that the acceptance is mailed. Under the UCC, "mailbox rule" is modified so that any reasonable means of acceptance under the circumstances is permissible

Contracts for the International Sale of Goods CISG - applies to the international sale of goods.

The provisions of the CISG, although similar for the most part to those of the UCC, differ from them in some respects. If the CISG and the UCC conflict, the CISG applies (because it is a treaty of the U.S. national government and therefore is supreme—see the definition of the supremacy clause

OPEN TERMS - UCC

a sales or lease contract will not fail for indefiniteness even if one or more terms are left open as long as both of the following are true: 1. The parties intended to make a contract. 2. There is a reasonably certain basis for the court to grant an appropriate remedy [UCC 2-204(3), 2A-204(3)].

additional terms may affect acceptance of an offer.

a. If One Party is a Merchant: contract is formed according to original terms of the offer. b. If Both Parties are Merchants, the contract incorporates new terms unless: c. (1) original offer expressly limits terms, or (2) material change, or d. If Both Parties are Merchants, the contract incorporates new terms unless: e. (3) offeror objects within a reasonable time. Conditioned on Offeror's Assent. f. If offeree's assent contains additional or different terms, and it is conditioned on offeror's assent, it is not an acceptance.

Offer—

a. Not all terms have to be included for a contract to be formed. b.The price does not have to be included for a contract to be formed. c.Particulars of performance can be left open. d.An offer by a merchant in a signed writing with assurances that the offer will not be withdrawn is irrevocable without consideration (for up to three months).

Acceptance—

a. may be made by any reasonable means of communication. It is effective when dispatched. b. of a unilateral offer can be made by a promise to ship or by the shipment of conforming or nonconforming goods. c. by performance requires notice within a reasonable time. Otherwise, the offer can be treated as lapsed. d.A definite expression of acceptance creates a contract even if the terms of the acceptance modify the terms of the offer.

Lease Agreement.

an agreement in which one person (lessor) agrees to transfer the right to the possession and use of property to another person (lessee) in exchange for rental payments.

firm offer.

arises when a merchant-offeror gives assurances in a signed writing that the offer will remain open.

UCC applies to a merchant.

sets forth three ways in which merchant status can arise: A merchant is a person who deals in goods of the kind involved in the sales contract. Thus, a retailer, a wholesaler, or a manufacturer is a merchant of the goods sold in his or her business. A merchant for one type of goods is not necessarily a merchant for another type. For instance, a sporting goods retailer is a merchant when selling tennis rackets but not when selling a used computer. A merchant is a person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction. This broad definition may include banks or universities as merchants. A person who employs a merchant as a broker, agent, or other intermediary has the status of merchant in that transaction. Hence, if an art collector hires a broker to purchase or sell art for her, the collector is considered a merchant in the transaction. In summary, a person is a merchant when she or he, acting in amercantile capacity, possesses or uses an expertise specifically related to the goods being sold. This basic distinction is not always clear-cut. For instance, state courts appear to be split on whether farmers should be considered merchants.

Open Price Term.

If the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery" [UCC 2-305(1)].

In regard to Article 2, keep two points in mind.

In regard to Article 2, keep two points in mind. 1. Article 2 deals with the sale of goods. It does not deal with real property (real estate), services, or intangible property such asstocks and bonds. Thus, if the subject matter of a dispute is goods, the UCC governs. If it is real estate or services, the common law applies. 2. In some situations, the rules can vary depending on whether the buyer or the seller is a merchant.

Uniform Commercial code (UCC). Article 2: Sales Contracts.

1-Sets Forth requirements for sales contracts. 2-duties and obligations of the parties involved in the sales contract.

Parol Evidence Defined.

consists of evidence outside the contract, such as evidence of the parties' prior negotiations, prior agreements, or contemporaneous (simultaneous) oral agreements.

"Predominant Factor" Test.

if goods, then UCC governs, if services then common law governs entire contract. If a court decides that amixed contract is primarily a goods contract, any dispute, even adispute over the services portion, will be decided under the UCC.

"unconscionability."

is one that is so unfair and one sided that it would be unreasonable to enforce it.