Chapter 20 - The Uniform Commercial Code: Scope, Contract Formation, and Performance and Breach

Question 1

Uniform Commercial Code (UCC)

Answer 1

• Contains 9 articles
• A state isn’t forced to adopt all the laws dealing with the UCC.
• If UCC is silent on an issue, the common law controls.
• If UCC and common law are in conflict, the UCC controls.

Question 2

Article 2

Answer 2

• Sale of Goods

Question 3

Good

Answer 3

• Tangible
• Personal Property
• Movable
• If bothe goods and services are provided, the UCC applies if the sale of goods is the “predominant factor.”

Question 4

Merchants

Answer 4

-Held to a different standard in some cases because of their knowledge.

Question 5

Firm offer by a Merchant (Offer)

Answer 5

• Not revokable by the merchant
• Irrevokable for the time stated, or up to a max of three months.
• Firm offer = offer in writing by a merchant stating the offer will remain open.

Question 6

Battle of the Forms by Merchant (Acceptance)

Answer 6

• If forms are a little different for acceptance, it doesn’t violate the mirror image rule, it is ok.
• If the form changes a material item (price, quantity), or expressly limits acceptance to the terms of offer, it won’t be held as an acceptance.
• Can also manifest acceptance by a prompt promise to ship or by promptly shipping goods to the buyer.

Question 7

Consideration

Answer 7

• No consideration is necessary for a merchant to make a firm offer.
• Merchant can make offer without any consideration involved.
• No consideration necessary when parties modify a contract for the sale of goods.

Question 8

Statute of Frauds

Answer 8

• Requires some contracts to be in writing.
• REAL PROPERTY
• SALE OF GOODS FOR $500 OR MORE
• IF CAN’T BE PERFORMED IN A YEAR
• PROMISES TO PAY DEBT OF ANOTHER.
• Exception is if goods are specially manufactured

Question 9

Missing Terms

Answer 9

• PRICE missing: still have a contract under UCC, to determine price it must be REASONABLE.
• PAYMENT TERMS missing: general rule is that buyer must pay upon receipt of goods.
• DELIVERY TERM missing: If goods are available at sellers place of business, it constitutes delivery.
• UNCERTAIN QUANTITY: general rule=NO CONTRACT.

Question 10

Output Contract

Answer 10

• OK not to have quantity.

- Whatever the merchant produces, you’ll buy.

Question 11

Requirements Contract

Answer 11

• OK to not have a quantity.

- The merchant will sell you all the product that you require.

Question 12

Delivery (Performance)

Answer 12

-General Rule: delivery occurs at the sellers place of business. Buyer is under obligation if no other terms are made to pick it up.

Question 13

Shipment Contract

Answer 13

-Seller has to get product to the shipper. Once the good is in the shipper’s hands, the seller no longer has an obligation.

Question 14

Destination Contract

Answer 14

• The seller has the responsibility to make sure that the goods get to their destination.
• Must tender delivery at a reasonable hour and at a reasonable time.
• If goods are at a warehouse, the general rule is that the buyer needs to go pick them up, unless agreed upon a destination contract.

Question 15

Title to the Goods

Answer 15

• Follows the shipping/delivery rules.
• Seller has title until seller tenders delivery to the shipper in a shipment contract or to the destination in a destination contract.

Question 16

Ordinary Course of Business

Answer 16

If a product is purchased in the “ordinary course of business,” the bank can’t recover the product.

Question 17

Entrustment Rule

Answer 17

• Protects customers who in good faith purchase goods from merchants.
• Protects “good faith” buyer.
• Ex. take ring to jeweler, they sell it to someone else. I can’t get my ring back, but can sue the company.

Question 18

Risk of Loss

Answer 18

• Shipment Contract: the buyer bears risk of loss once the seller has successfully mad the delivery to the shipper.
• If seller is a MERCHANT, the merchant has the risk of loss until the buyer receives the goods.
• Destination Contract: the seller bears risk of loss until delivery is made to the buyer.

Question 19

Insurable Interest

Answer 19

• Parties (buyer or seller) can purchase insurance to protect against risk of loss.
• A party has this in the goods once the goods to which the contract refers are identified.

Question 20

Capshaw v. Hickman

Answer 20

• One was selling a car to the other and entered into a contract.
• Capshaw is the buyer, Hickman is the seller.
• The car was sold, but sat in Hickman’s driveway until Capshaw’s check cleared.
• Before it cleared, there was a hail storm that damaged the car.
• The seller is held responsible because delivery didn’t occur.
• Judge originally ruled for capshaw, but appellate court needed more info.
• Risk of Loss Case

Question 21

Perfect Tender Rule - Breach

Answer 21

• A seller is required to meet the requirements of the contract by delivering conforming goods.
• If not correct, I can send back all of the product because the order didn’t come perfect.

Question 22

Conforming vs. Nonconforming Goods

Answer 22

A seller is required to meet the requirements of the contract by delivering conforming goods. - perfect tender rule.
- If delivers nonconforming goods, the seller is in breach of contract unless they can cure the delivery.

Question 23

Seller’s right to cure

Answer 23

The seller has the right to cure ntil the due date of delivery.and return the conforming goods to the buyer.

Question 24

Reasonable Time

Answer 24

Buyer has a reasonable time to inscpect the goods and find any nonconforming goods.
- If the goods are nonconforming, the buyer must inform the seller within a reasonable time.

Question 25

Nonconforming goods

Answer 25

BUyer can accept, reject, or partially accept and reject nonconforming goods.

Question 26

Fitl v. Strek

Answer 26

• Fitl bought baseball cards.
• He had it analyzed 2 years after he bought it.
• Appraiser said it was a fake card and worthless.
• Sued Strek and Strek’s defense was that he had waited way too long under the UCC.
• Court ruled that 2 years was a reasonable time under circumstances.

Question 27

Perfect Tender Rule Exceptions

Answer 27

1. Commercial Impracticability - must be extremely difficult to perform (court will probably le me extend the due date.)

Question 28

If seller refuses to delive and is in breach of contract, the buyer can:

Answer 28

1. Sue the seller for monetary damages
2. Cancel the contract
3. Cover the contract (sue for difference)
4. Sue for specific performance if goods are unique.

Question 29

If BUYER refuses to pay and is in breach, the seller…

Answer 29

1. Can sue for the purchase price
2. Sell to another person
3. Cancel the contract
4. Withhold delivery