Contracts – MEE

Question 1

COMMON LAW VS ARTICLE 2 SALE OF GOODS

Answer 1

COMMON LAW VS ARTICLE 2 SALE OF GOODS

Generally, the common law governs contracts. However, for contracts involving the sale of goods, Article 2 of the Uniform Commercial Code (“UCC”) applies. Article 2 has adopted much of the common law of contracts, but when the common law and Article 2 differ, Article 2 governs in a contract for the sale of goods.

“Goods” Defined

“Goods” are all things movable at the time they are identified as the items to be sold under the contract. Thus, Article 2 applies to sales of most tangible things (including cars, horses, hamburgers), but doesn’t apply to the sale of real estate, services (such as a health club membership or employment), or intangibles (such as a patent), or to construction contracts.

Merchants

A number of the rules in Article 2 depend on whether the seller and/or buyer are merchants. For merchant rules to apply, a merchant must be acting in a way that relates to their business. So, the rules don’t apply to sales that are solely personal, such as sales related to a collecting hobby—even if the buyer or seller would be a merchant in other circumstances.

“Merchant” Defined

Article 2 generally defines “merchant” as one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved. For Article 2 provisions dealing with general business practices (for example, Statute of Frauds, confirmatory memos, firm offers, modification), almost anyone in business can be deemed a merchant.

Special Definition for Certain Transactions

Some Article 2 provisions (for example, the implied warranty of merchantability) are narrower and require a person to be a merchant with respect to goods of the kind involved in the transaction.

Contracts Involving Goods and Nongoods

If a sale involves both goods and services, you will determine which aspect is dominant and apply the law governing that aspect to the whole contract. However, if the contract divides payment between goods and services, then Article 2 will apply to the sale portion and the common law will apply to the services portion.

Good Faith and Fair Dealing

Every contract within the UCC imposes an obligation of good faith in its performance and enforcement. “Good faith” is honesty in fact and the observance of reasonable commercial standards. The common law also imposes a duty of good faith and fair dealing. A breach of this duty usually involves exercising discretion in a way that deprives the other party of the fruits of the contract.

Answer 2

MUTUAL ASSENT—OFFER AND ACCEPTANCE

For an agreement to be enforced as a contract, there must be mutual assent, meaning both parties agree. This usually is accomplished with an offer and an acceptance.

THE OFFER

An offer creates a power of acceptance in the offeree and a reasonable expectation that the offeror is willing and has intent to enter into a contract on definite and certain terms that are capable of being enforced.

Advertisements, Etc

Advertisements and the like containing price quotations are usually construed as mere invitations for offers. Although price quotations generally are not offers, they can be if given in response to an inquiry that contains a quantity term.