Introduction To Sales Flashcards
Uniform Commercial Code (UCC)
§1-102(2) Purpose: to simplify, clarify and modernize the law governing commercial transactions; to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and to make uniform the law among the various jurisdictions
The code emphasizes getting the right results rather than following rigid rules of contract law
UCC §2-102
Applies to the sale of goods
Regulates sales, which means that one party transfers title to the other in exchange for money
Does not apply to the leasing of goods
A sale involves a permanent change in ownership
Mixed Contracts
In a mixed contract, the UCC will govern if the predominant purpose is the sale of goods; the common law will control if the predominant purpose is providing services
The type of agreement that parties made needs to be known in order to determine whether UCC or common law applies
Merchants
Someone who routinely deals in the particular goods involved or who appears to have special knowledge or skill in those goods or who uses agents with special knowledge or skill in those goods
The UCC frequently holds a merchant to a higher standard of conduct
May be held to an oral contract if she/he received written confirmation of it, even though the merchant may never have signed it
Good Faith
UCC imposes a duty of good faith in the performance of all contracts
For a non-merchant, good faith means honesty in fact
For a merchant, good faith means honesty in fact plus the exercise of reasonable commercial standards of fair dealing
Focuses on a party’s behavior as it performs an agreement
Unconscionability
UCC employs a principle to encourage fair play and just results: the doctrine of unconscionability
A contract may be unconscionable if it is shockingly one-sided and fundamentally unfair
Courts seldom find a contract unconscionable if the two parties are businesses, but quicker to apply the doctrine when one party is a consumer
Looks primarily at the contract itself, asking whether any terms are so grossly unfair that a court should reform or ignore them
Formation Basics
UCC §2-204
3 rules that enable parties to make a contract quickly and informally
- Any manner that shows agreement; the parties may make a contract in any manner sufficient to show that they reached an agreement - they may show the agreement with words, writings, or even their conduct
- Moment of making is not critical; the UCC will enforce a deal even though it is difficult, in common law terms, to say exactly when it was formed
- One or more terms may be left open; the common law insisted that the parties clearly agree on all important terms - if they did not, there was no meeting of the minds and no enforceable deal
**under the UCC, a court may enforce a bargain even though one or more terms were left open
Additional Terms
UCC §2-207 governs an acceptance that does not “mirror” the offer; usually become part of the contract
Different Terms
Contradicts a term in the offer
When this happens, most courts will reject both parties’ proposals and rely on gap-filler terms
Formation
UCC §2-204 permits the parties to form a contract in any manner that shows agreement
Writing
UCC §2-201 requires some writing that indicates an agreement for the sale of goods of $500 or more
Statute of Frauds in Common Law
When a contract is for the sale of land, it is governed by the common law of contracts
The common law Statute of Frauds requires any agreement for the sale of land to be in writing and signed by the party to be charged the amount the land is being sold for
Writing Sufficient to Indicate a Contract
The UCC only requires a writing sufficient to indicate that the parties made a contract - the writing need not be a contract - a simple memo, letter, email, or text mentioning that the two sides reached an agreement is enough
In general, the writing must be signed by the defendant, that is, whichever party is claiming there was no deal
Incorrect or Omitted Terms
If the writing demonstrates the two sides reached an agreement, it satisfies the Code even if it omits important terms or states them incorrectly
If an email shows that two parties made a deal, the court will enforce it, relying on oral testimony to determine the correct price
Enforceable Only to the Quantity Stated
Since the writing only has to indicate that the parties agreed, it need not state every term of their deal, but one thing is essential: quantity
The Code will enforce the contract only up to the quantity of goods stated in the writing
Exceptions - When the UCC Statute of Frauds Does Not Apply
Merchants: When two merchants make an oral contract, and one sends a confirming memo to the other within a reasonable time, and the memo is sufficiently definite that it could be enforced against the sender themselves, then the memo is also valid against the merchant who receives it, unless he objects within ten days
Specially Made Goods: If a buyer orders goods that are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business, then a verbal agreement is enforceable, even if it exceeds $500
Judicial Admission: If a defendant admits in the pleading, testimony, or otherwise in court that a contract for sale was made, then the contract he admitted to is enforceable against them
Added Terms: UCC §2-207
An acceptance that adds or alters the terms will often create a contract
The Code has made this change in response to battles of the form
The law must cope with real practices
UCC §2-207 - Intention
The parties must still intend to create a contract
If the differing forms indicate that the parties never reached an agreement, there is no contract
Three Circumstances When Additional Terms Don’t Bind Parties
- If the original offer insisted on its own terms
- If the additional terms materially alter the offer
- If the offeror promptly objects to the new terms
Open Terms
Under UCC §2-305, the parties may conclude a contract even though they have not settled the price
If the parties have not stated one, the price is a reasonable price at the time of delivery
A court will use market value and other comparable sales to determine what a reasonable price would have been
Output and Requirements Contracts
UCC §2-306
Output Contract: obligates the seller to sell all of his output to the buyer, who agrees to accept it
Requirements Contract: the reverse of an output contract; obligates the buyer to purchase all of the needed goods from the seller
Output and requirements contracts are valid under the Code
The UCC requires that the parties in an output or requirements contract to make their demands in good faith
Modification
Under UCC §2-209, the UCC does away with the consideration requirement for changes to contracts, so long as both sides agree to the modification
Parties make a contract attempting to control their futures - but one party’s certainty can be undercut by the ease with which the other party may obtain a modification
Section 2-209 acknowledges this tension by enabling the parties to limit
The UCC allows the parties to modify some contracts orally, but they may agree to prohibit oral modifications and insist that all modifications be in writing and signed
Between merchants, such a clause is valid
**But if weather party is not a merchant, such a clause is valid only if the non-merchant separately signs it
Merchant Exception
When two merchants make an oral contract, and one sends a confirming memo to the other within a reasonable time, and the memo is sufficiently definite that it could be enforced against the sender themselves, then the merchant
Three Exceptions to Common Law Transfer of Title
- A person with a voidable title can pass a good title to a bona fide purchaser
- One who in good faith buys goods from a retailer even though the retailer has transferred a prior interest to others
