Chapter 20 - Article 2 Flashcards
When does UCC apply?
If the contract is for the sale of goods
Is real estate covered by the UCC?
No, purchase of real estate is not a UCC transaction
What does Article 2 cover?
Sale of goods, not real estate, services, or intangible property (stocks & bonds)
Definition of good
Item that is Tangible and Movable
When does the sale of minerals, oil, crops, timber fall under Article 2 of the UCC?
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.
When does the sale of a structure fall under UCC?
If severance is to be made by the seller
Predominant-factor test
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.
Requirements to be a Merchant
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.
Article 2A covers:
Lease contracts
Lessor vs Lesee
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
Requirements of a Consumer Lease
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
Finance Lease
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
Under UCC, a sales contract with open terms will be considered enforceable and definite if:
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)
Court remedy surrounding “open prices” in sale of goods contracts
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
UCC rules if payment terms are not specified
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
UCC rules if delivery terms are not specified
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
Merchant’s Firm Offer
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
Requirements for an offer to not be revocable by offeror under UCC
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
Rules of Acceptance of Unilateral contracts of sale of goods
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
The seller shipping nonconforming goods is considered
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.
Notification of Performance in UCC Unilateral Contracts
Offeror must be notified in a reasonable time that the offeree has accepted by starting performance
Mirror image rule under UCC
A contract is still formed even if the offeree adds new terms to the contract
Conditions to determine whether new/additional terms are added to a UCC contract
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
Prior Dealings Between Merchants
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
Additional consideration upon modification of UCC sale of goods contract
No additional consideration is required when modifying an existing contract for the sale of goods
Statute of Frauds requirement for Lease Contracts
Writing is required if total lease payments are $1000 or more
Modification of contracts and statute of frauds
If the modification of a contract brings the matter into the statute of frauds, the modification must be in writing
Statute of Frauds requirement for sale of goods
Goods priced at $500 or more and must be signed by the party against whom it is sought to be enforced
Statute of Frauds requirement between merchants
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
UCC Exceptions to Statute of Frauds requirement
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
Parole Evidence Rule
A fully integrated contract cannot be contradicted by;
1) Any prior oral agreements
2) Other new oral agreements
If contract isn’t fully complete; it can be supplemented by
1) Course of dealing
2) Usage of trade
3) Course of performance
4) Consistent additional terms
Course of dealing
using past contracts to supplement new
course of performance
conduct that occurs under current contract
Rules of construction
Express terms, course of performance, course of dealing, and usage of trade must be construed to be consistent with each other whenever reasonable
order of priority for unreasonable construction of incomplete contracts
1) express terms
2) course of performance
3) course of dealing
4) usage of trade
Unconscionability
UCC allows a court to evaluate any contract deemed unconscionable at the time it was made
Court remedies to unconscionability
1) refuse to enforce the contract
2) enforce everything but the unconscionable part
3) limit application of the unconscionable term
Usage of Trade
Practices that are regularly used in a certain trade
