Chapter 20 - Article 2

Question 1

When does UCC apply?

Answer 1

If the contract is for the sale of goods

Question 2

Is real estate covered by the UCC?

Answer 2

No, purchase of real estate is not a UCC transaction

Question 3

What does Article 2 cover?

Answer 3

Sale of goods, not real estate, services, or intangible property (stocks & bonds)

Question 4

Definition of good

Answer 4

Item that is Tangible and Movable

Question 5

When does the sale of minerals, oil, crops, timber fall under Article 2 of the UCC?

Answer 5

Minerals/oil: If they are to be extracted from the land by the seller
Crops/Timber: Always falls under UCC, regardless of who severs them from the land.
If it can be extracted without harming the land, falls under UCC.

Question 6

When does the sale of a structure fall under UCC?

Answer 6

If severance is to be made by the seller

Question 7

Predominant-factor test

Answer 7

If a contract combines goods and services, court uses predominant factor test to determine whether contract is mainly for goods or services
If mainly for goods, any dispute (even services) falls under UCC.

Question 8

Requirements to be a Merchant

Answer 8

1) Commonly deals in goods related to the sale
2) Holds herself out as having special expertise or knowledge to the goods involved in the transaction
3) Also includes anyone who hires a merchant to act as their agent.

Question 9

Article 2A covers:

Answer 9

Lease contracts

Question 10

Lessor vs Lesee

Answer 10

Lessor: One who transfers (gives) the right to possession and use of goods under the lease
Lesee: One who gains the right to possession and use of goods under the lease

Question 11

Requirements of a Consumer Lease

Answer 11

1) Lessor who regularly engages in the business of leasing/selling
2) Lesee who leases goods for a personal, family, or household purpose
3) Total lease payments that are less than $25,000

Question 12

Finance Lease

Answer 12

Lessor buys or leases goods from a supplier, then subleases them to the lesee.
Lesee can only sue the original seller/leaser, not the intermediary

Question 13

Under UCC, a sales contract with open terms will be considered enforceable and definite if:

Answer 13

1) The parties intended to make a contract
2) There is a reasonable basis for the court to grant a remedy
3) Quantity of goods was stated (except in requirements & output contracts)

Question 14

Court remedy surrounding “open prices” in sale of goods contracts

Answer 14

1) If the buyer or seller gets to determine the price, they must act in good faith
2) If the price is not set through the fault of one of the parties, the other party can treat the contract as canceled, or pick a price

Question 15

UCC rules if payment terms are not specified

Answer 15

Payment is due at the time and place at which the buyer is to receive the goods
1) Buyer can pay by any normal means (check/credit card)
2) If the seller demands cash, the buyer must be given a reasonable time to obtain it

Question 16

UCC rules if delivery terms are not specified

Answer 16

1) Buyer normally picks up goods at seller’s business/residence
2) If goods are elsewhere and both parties know this, the goods are delivered there
3) If no time or date is specified, court will impose a reasonable time

Question 17

Merchant’s Firm Offer

Answer 17

1) Merchant must give assurances in a signed writing
2) Offer cannot be revoked for the stated period (or reasonable period of time); basically an option contract but merchant gets no consideration

Question 18

Requirements for an offer to not be revocable by offeror under UCC

Answer 18

1) If UCC article applies
2) If the offeror is a merchant
3) If the merchant gives a “firm offer” in a signed writing, offer will remain open (can’t exceed 3 months)
4) Merchant doesn’t require additional consideration

Question 19

Rules of Acceptance of Unilateral contracts of sale of goods

Answer 19

Offers to buy goods are accepted when the seller:
1) Promises to ship the specified (conforming) goods; or
2) Seller actually ships the conforming goods in a reasonable time.
Can accept through words or actions

Question 20

The seller shipping nonconforming goods is considered

Answer 20

1) An acceptance to the contract; and
2) A breach of contract for not delivering the correct goods
3) If the seller notifies the buyer that the nonconforming shipment is a favor to the buyer, the shipment is a counteroffer, not an acceptance.

Question 21

Notification of Performance in UCC Unilateral Contracts

Answer 21

Offeror must be notified in a reasonable time that the offeree has accepted by starting performance

Question 22

Mirror image rule under UCC

Answer 22

A contract is still formed even if the offeree adds new terms to the contract

Question 23

Conditions to determine whether new/additional terms are added to a UCC contract

Answer 23

1) If either party is a non-merchant, the contract is formed to its original terms, does not include the additional terms
2) If both parties are merchants, additional terms are automatically added to the contract unless:
-The original offer expressly limited acceptance to the original terms
-New or changed terms materially alter the contract
-Offeror objects to the new/changed terms within a reasonable period of time

Question 24

Prior Dealings Between Merchants

Answer 24

If the offeree adds additional terms and it is conditioned on the offeror’s assent to those new terms, it is not acceptance, but a counteroffer. Even if they are both merchants

Question 25

Additional consideration upon modification of UCC sale of goods contract

Answer 25

No additional consideration is required when modifying an existing contract for the sale of goods

Question 26

Statute of Frauds requirement for Lease Contracts

Answer 26

Writing is required if total lease payments are $1000 or more

Question 27

Modification of contracts and statute of frauds

Answer 27

If the modification of a contract brings the matter into the statute of frauds, the modification must be in writing

Question 28

Statute of Frauds requirement for sale of goods

Answer 28

Goods priced at $500 or more and must be signed by the party against whom it is sought to be enforced

Question 29

Statute of Frauds requirement between merchants

Answer 29

1) Statute of Frauds is satisfied if after an oral agreement is made, one of the merchants sends a signed, written memorandum containing the essential terms of the contract within a reasonable time
2) Merchant receiving the confirmation must have reason to know of the contents and does not object in writing within 10 days after reception

Question 30

UCC Exceptions to Statute of Frauds requirement

Answer 30

1) Oral contract for goods to be specially made for a buyer, and the goods cannot be resold, and the seller has begun production
2) Admissions under oath by the breaching party
3) Payment has already been made and accepted or goods have been received and accepted

Question 31

Parole Evidence Rule

Answer 31

A fully integrated contract cannot be contradicted by;
1) Any prior oral agreements
2) Other new oral agreements

Question 32

If contract isn’t fully complete; it can be supplemented by

Answer 32

1) Course of dealing
2) Usage of trade
3) Course of performance
4) Consistent additional terms

Question 33

Course of dealing

Answer 33

using past contracts to supplement new

Question 34

course of performance

Answer 34

conduct that occurs under current contract

Question 35

Rules of construction

Answer 35

Express terms, course of performance, course of dealing, and usage of trade must be construed to be consistent with each other whenever reasonable

Question 36

order of priority for unreasonable construction of incomplete contracts

Answer 36

1) express terms
2) course of performance
3) course of dealing
4) usage of trade

Question 37

Unconscionability

Answer 37

UCC allows a court to evaluate any contract deemed unconscionable at the time it was made

Question 38

Court remedies to unconscionability

Answer 38

1) refuse to enforce the contract
2) enforce everything but the unconscionable part
3) limit application of the unconscionable term

Question 39

Usage of Trade

Answer 39

Practices that are regularly used in a certain trade