Sales Uniform Commercial Code

Contract formation 2-204

A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract [such as a writing, or other indicia of intent] 1. An agreement : an intent to be bound 2. Enough information to permit the court to fashion a remedy. a. parties and subject matter and quantity

Firm Offer

A merchant of any type may make a firm offer to hold the offer open for no longer than 3 months when a merchant makes an offer to buy or sell goods in a signed writing by the offeror which expressly states in its terms assurance that the offer will be held open without consideration. However, when such a firm offer is made on a form supplied by the offeree, a term of assurance must be separately signed by the offeror so as to make sure the offeror really assents to making a firm offer. Despite any courses of dealing or usages of trade, a purported firm offer made orally without a signature remains revocable.

Merchant

A person who deals in goods of the kind (DEALERS) it is their business to deal with those kinds of goods or A person who by his occupation hold himself out having knowledge or skill (PROFESSIONALS) a) Of the goods of the k b) They know about general business transactions/practices [a professional]

Warranty

A warranty is an obligation or guarantee from one party to the other party that good will conform to the promise.

A warranty of title

A warranty of title guarantees a buyer that the seller has the right to transfer good title to the goods and the goods are free from any security interest which the buyer did not have knowledge of at the time of the contract which arises automatically when there is a contract for sale. If the title is void, then title cannot be transferred. However, voidable title means that the title may be voided at the option of the original seller. Voidable title may be transferred and transformed into good tile when a good faith purchaser gives value to the seller.

Implied warranty disclaimer

All implied warranties may be disclaimed by a blanket express such as goods sold "as is" or "with all faults" or with language that call's to the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty or by CoD, CoP, UoT or if buyer fails to inspect.

SoL: 2-725

An action for the breach of contract for sale must be filed within 4 years after the cause of action has accrued. However, the parties may contract for a shorter period, but in any event no shorter than one year from the accruing of the cause of action. A cause of action accrues when the breach occurs regardless of knowledge. This is true except when a warranty explicitly extends to future performance of the goods and discovery of breach awaits the expiration of the time of such performance.

Express Warranty

An express warranty is created by conduct of the seller such as an affirmative action. However, the seller need not have the specific intention to create a warranty. An express warranty is created by an affirmation of fact or promise which relates to the good made part of the basis of the bargain, by a description of the goods made part of the basis of the bargain or by a sample or model made part of the basis of the bargain.

Scope

Article 2 applies to transaction in goods. Goods are things movable at the time of identification to the K for sale. Movable means that the thing has to travel from place to place, and is not fixed in one location b) when the goods are shipped, marked, or otherwise designated by the seller as goods to which the K refers, if it is for the sale of future goods (does not exist at the time of contracting) other than crops and animals.

CL Defenses:

Because the CL applies only when displaced by the code, the CL defense of unconscionability is available. If the court finds a clause unconscionable, then court may exercise discretion to strike the clause or refuse to enforce the entire k. In order to be deemed unconscionable, the term must be, in light of general commercial background and commercial needs of a particular trade or industry, so one sided under the circumstances existing at the time of making of the contract. This prevents oppression and unfair surprise. In order to find uncon, there must be both procedural and substantive uncon. Procedural uncon is when there is an absence of meaningful choice during the bargaining process. Substantive uncon looks to the inherent unfairness of the terms of the contract.

Contract Terms

Contract terms include the expressly agreed to terms as well as any implied terms including Course of Performance, Course of Dealing or Usage of Trade. CoP is the sequence of conduct between parties to a particular transaction that involves repeat performance. CoD is a sequence of conduct in previous transactions between the same parties which shows a common basis of understanding. UoT terms are practices with such regularity in the industry as to justify an expectation that they will be included in the k without an express agreement. Contract Terms include both express and implied warranties.

Express Warranty Disclaimer

Express warranties may be disclaimed. However, words or conduct relevant to the creation of an express warranty and words of conduct tending to negate or limit the express warranty shall be construed whenever reasonable as consistent with each other. If no consistent interpretation can be found, then the express warranty remains.

2209:

If no "no oral mod" clause is contained in the k, then a modification must comply with the statute of frauds. However, a SoF exception may allow the modification to be enforced.

Essential Purpose

However, if an exclusive remedy fails of its essential purpose, then any remedy may be had as provided in article 2. The essential purpose of a remedy is to give the buyer what he bargained for or some meaningful relief if the good is non-conforming. The good fails of that purpose when the remedy limitation does not bring the good into conformance with the contract. However, this may only be determined after some performance by the parties. When the remedy limit fails of its essential purpose, the issue is whether the limitation on consequential damages is also stricken. A majority of courts use the independent approach and require that the limit on cons damages be deemed unconscionable prior to a court's striking of the clause. The minority of courts applies the dependent approach in which a failure of the remedy's essential purpose will also cause the cons damages limit to fail.

2207(2) Non Merchants

If a contract is found to be formed, but the terms are different or additional, then 2207(2) determines which terms are included in the contract and which terms are stricken. If the parties are not both merchants of any type, then the additional terms are construed as proposals for the contract and the conflicting terms are deemed to be objected to by both parties.

The SoF has various exceptions.

If both parties are merchants, then the contract will be found to satisfy the statute of frauds if, within a reasonable time, a written confirmation of the contract sufficiently binds the sender, either by authentication or signature, is received by the other party and the other party has reason to know of its contents and the receiving party does not object within 10 days after the written confirmation is received. However, a failure to respond only takes away the SoF defense to contract formation but the other burdens of proof are unaffected. The K is enforceable despite noncompliance with the SoF if the goods are specially manufactured by for the buyer and are not suitable for sale to others and the seller has made a substantial beginning for their manufacture or commitments for their procurement. The K is enforceable despite noncompliance with the SoF if the party against whom enforcement is sought admits to the exsiting of a contract in the pleadings or in court. The K is enforceable despite noncompliance with the SoF if the actions of the parties demonstrate a partial performance of the contract. This is either shown by payments made to the Seller by the buyer or goods accepted by the buyer form the seller. However, the contract will only be enforced up to the payment amount or the number of goods received. Some partial performance acts as an overt admission that a contract exists.

"No oral Mod Clause"

If the contract contains a "no oral mod clause" then the modification must be in the form of a signed writing. A no oral mod clause must be signed separately by the non merchant when the merchant supplies the form. However, if the agreement is between merchants of any type, then no additional signature is required to validate the "no oral mod clause." In either case, the party against whom enforcement is sought may waive the compliance requirement through the modification. Such a waiver may be retracted at any time prior to the other parties material change in position in reliance upon the waiver and modification.

SoF:

If the contract is for goods over $500 (or if the total of the contract as modified is over $500) then the contract must comply with the statute of frauds. The SoF requires some writing sufficient to indicate a contract for sale has been made between the parties signed/authenticated by the party against whom enforcement is sought.

Unconscionable

If the court finds a clause unconscionable, then court may exercise discretion to strike the clause or refuse to enforce the entire k. In order to be deemed unconscionable, the term must be, in light of general commercial background and commercial needs of a particular trade or industry, so one sided under the circumstances existing at the time of making of the contract. This prevents oppression and unfair surprise. In order to find uncon, there must be both procedural and substantive uncon. Procedural uncon is when there is an absence of meaningful choice during the bargaining process. Substantive uncon looks to the inherent unfairness of the terms of the contract.

2207 (2) Merchants

If the parties are both merchants of any type, the additional terms become part of the contract unless the offer expressly limits acceptance to the terms of the offer, the additional terms materially alter the contract, or notification of objection has been given within a reasonable time. In any event, the contract is still formed. To materially alter, the terms must cause hardship or surprise if the term was incorporated without the express awareness of the other party.

2-607: Notice of Breach

In any event, notice of the breach of the warranty must be made within a reasonable time after the buyer discovers or should have discovered the breach and given to the seller. Otherwise the buyer is barred from any remedy for which notice was not given. The notice msut be sufficient to let the seller know the transaction is troublesome and must be watched. Notice is not sufficient through the filing of a lawsuit.

2206

More specifically, a contract may be formed under 2206 where an offer to make a contract invites acceptance in any manner and by any medium reasonable in the circumstances. Because the code does not define an offer, the CL definition supplements the code. Offer: An offer is a manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it. Here, the offer was made by ____ because ____. Acceptance: Acceptance is the manifested willingness to enter into the same bargain. Since 2206 invites acceptance in any manner and by any medium reasonable in the circumstances, here the ____ accepted because ______. More specifically, if the offer is to buy goods for prompt or current shipment, such an offer will be deemed to invite acceptance either by a promise to ship or the prompt/current shipment of any goods, conforming or non conforming unless the shipment or promise to ship is accompanied by language which expressly notes the shipment is non conforming and only an accommodation to the offeror. The accommodation is then treated as a counter offer which the offeror may then accept or reject

[2513]

Once the seller tenders, the buyer has the right, but not the obligation, to inspect the goods. The inspection of the goods means that the buyer determines whether the goods are conforming or non conforming. Conforming goods is defined under 2106 as in accordance with the obligations of the k.

Gap fillers

The code provides gap fillers which indicate that a reasonable price, reasonable time of shipment, delivery in single lot causing payment to be due only on such tender, the default place of delivery as seller's place of business (or if goods id'd and at another place, that place), time for shipment is a reasonable time, payment due when buyer is to receive the goods.

The implied warranty of fitness

The implied warranty of fitness for a particular purpose arises when the seller, at the time of contracting, has reason to know by some action of the buyer that the buyer has a particular purpose for which the goods are acquired and the buyer is relying upon the seller's skill or judgment to select suitable goods. There is no requirement that the seller be a merchant. A particular purpose means some special function of the good, as contrasted with ordinary purpose meaning the normal function of the good. If the buyer asks for a specific brand or model number or brings a knowledgeable person with them to get the item, there is no reliance on the seller's skill and hence no warranty of fitness for a particular purpose is created.

The implied warranty of merchantability disclaimer

The implied warranty of merchantability may be specifically disclaimed if the word "merchantability" is used. While no requirement exists that the merchantability disclaimer be in writing, if the disclaimer is in writing, the then the disclaimer must also be conspicuous. Conspicuous means that a reasonable person would have noticed the disclaimer.

[2301]

The performance obligations by the parties are determined by 2301 which states the seller's obligation is to transfer and deliver the goods and the buyers obligation is to accept and pay in accordance with the contract. The buyer's obligation is not triggered until the seller tenders.

The risk of loss

The risk of loss passes when neither party is in breach under shipment when seller loads onto carrier or under destination when goods are delivered at the destination. By default however, if seller is a merchant, risk of lass passes upon buyer's actual receipt of goods. If seller is not a merchant, risk of loss passes to the buyer when seller tender's delivery. If seller is in breach, the risk of loss remains on the seller until cure or acceptance by the buyer. When the buyer rightfully revokes the acceptance after an acceptance, risk of loss is on the seller but is limited ot he amount not covered by buyer's insurance. If buyer is in breach, the risk of loss is borne by the buyer but is limited to the amount not covered by seller's insurance.

Remedy Limitations:

The seller may limit the buyer's remedy or limit consequential damages under the code for breach. Under 2719, the seller has the power to limit remedies the seller wants to offer and the consequential damages for breach. However, the buyer's obligation to resort to this offered remedy is optional, unless the remedy limitation is expressly agreed to be exclusive. Expressly agreed to be exclusive is evidenced by language such as "sole" or "only" remedy. However, language such as "shall be limited to" may or may not make the remedy exclusive.

[2503/2504]

The seller's tender is the seller's outward manifestation of willingness to deliver the goods to the buyer and must comply with either making the goods available to buyer to take them away if transfer occurs face to face, or if a destination k, to ensure the delivery the goods, or if a shipment k, to put the goods into the possession of the carrier per the contact in a reasonable manner including notice to the buyer of shipment.

[2507]

The tender of goods by the seller is a condition to the buyer's duty to accept and pay for the goods, unless otherwise agreed. Tender entitles the seller to acceptance of the goods and to payment according to the k, subject to inspection.

Warranty of Title Disclaimer

The warranty of title may be disclaimed only by specific language or circumstances which gives the buyer reason to know no warranty of title exists.

delivery terms:

There is a presumption that a contract is a shipping contract which means that the risk of loss passes to the buyer once the seller has placed the goods into the possession of the carrier. Therefore, the buyer has the risk of loss while the goods are on route. Shipment contracts include: FOB point of shipment, FOB vessel point of shipment, CIF and CF. A destination contract means that the seller has the risk of loss while the goods are en route to the destination and risk of loss passes to the buyer when the tender of goods in possession of the carrier occurs at the destination. Destination contracts include FOB destination, FOB vessel destination and Ex Ship contracts.

2-207(3)

Under 2-207(3), when the writings exchanged by the parties or the oral negotiations between the parties do not form a contract, but the parties act as if a contract as been formed, the terms of the contract are all the terms on which the writings of the parties agree including gap fillers. There is no need to determine which writings constituted an offer and which an acceptance.

The implied warranty of merchantability

automatically arises when the goods are sold by a merchant with respect to the goods of the kind. A good is merchantable if fit for the ordinary purpose for which goods of the type are used (pass w/o objection in the trade under the k description; if fungible, then average quality; run with permissible variations; adequately packaged; conform to promise of affirmation of fact made on the label/container).

Consequential Damages

consequential damages may be limited or excluded unless such a provision is unconscionable. A limitation of consequential damages for injury to the person regarding consumer goods is presumptive evidence of uncon. However, limitation of conseuqntial damages for injury to the person regarding commercial goods is not presumptively uncon.

A description of the goods

create an express warranty that the goods will conform the description. Descriptions include blueprints, plans, pictures, specs and need not be words. Further, past deliveries as a course of dealing may set the conforming standard of quality. Here, the goods was describe as _____ and therefore the seller warrants that the good will conform to _______.

A sample or model

creates an express warranty that the whole of the goods shall conform to the sample or model. A sample is a good pulled form an existing bulk. A model is a representation of the good which may contain certain variations that may or may not be present in the final, actual good. Here, the buyer was shown a sample/model by the seller and therefore the seller warrants that the to be delivered good will conform to the ________ (description of the model/sample).

Basis of the bargain

means that the seller's affirmative act played a party in the buyer's decision to buy or might have reasonably have influenced the buyer. Here, the seller's affirmative actions _____ may have influenced the buyer to purchase because ________. Therefore, seller's actions formed the basis of the bargain the buyer entered into.

An affirmation of fact or promise

relating to the good that the good will conform to the promise or affirmation means that the seller has made a plain and unambiguous statement that is specific and detailed. This is contrast with mere puffery by the seller such as an unverifiable opinion about the product. Here, seller's statement/brochure states "". This is an affirmation of fact because ____. Therefore, unless properly disclaimed, the seller warrants that the goods will _______.