Sales Flashcards
To what transaction does the UCC Article 2 apply?
Sales of goods
What is a good?
Moveable at the time they are identified
What is a merchant?
One who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the particular goods involved
Test for mixed services and goods?
Predominant purpose test:
Was the predominant purpose of the transaction the provision of goods or services? Factors:
1. The contract language
2. The nature of the suppliers business
3. The value of the materials and services provided
under the contract.
Contract formation?
Anything sufficient to show agreement; intent + reasonably certain basis for remedy
Firm offer:
Made by a merchant, in writing, with signature, gives assurance it will be held open, for a period of time. No need for consideration; or reasonable time; but can’t exceed 3 months.
Acceptance of an offer: 3 ways
- In any reasonable manner of reasonable medium;
- Prompt shipment or promise to ship of conforming
or nonconforming goods; - Part performance
Invitation vs Offer:
Things like lacking essential, material terms, and not directed at anyone in particular
Additional terms upon acceptance (non-merchant):
The additional terms are to be construed as proposals for addition to the contract
Additional terms upon acceptance (between merchants):
Additional terms become part of the contract unless:
the offer expressly limits acceptance to the terms of the offer;
they materially alter it; or
objection to them
writing is insufficient to show agreement, but there is conduct? additional terms context
Terms consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under UCC.
Different terms in the agreement:
If there are different terms in the acceptance, then they knock each other out and UCC gap filler rules fill the gaps.
Expressly conditional acceptance:
If acceptance is made expressly conditional on agreement to new terms, it is simply a counter offer instead.
What is a material alteration (additional term):
Change the risk
Change the remedy
In other words, hardship or unreasonable surprise
Examples of material alteration:
Choice of forum, arbitration clause. Probably not choice of law.
Statute of frauds:
$500 plus needs to be in signed writing
Open terms:
A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing
5 exceptions to writing requirement (statute of frauds):
Merchant’s confirmatory memorandum (between merchants)
Specifically manufactured goods
Admissions in pleadings
Part Performance (goods accepted and paid or accepted and rec’d)
Promissory estoppel
Unconscionibility:
Substantive: deals with the substantive terms of the K (price, warranties, limitations of remedies)
Procedural: deals with bargaining process (lack of meaningful choice, deception, small print, language barriers).
Effect of unconscionable clause:
Refuse to enforce the K;
Enforce the remainder of the K without the unconscionable clause; or
Limit the application of the clause so as to avoid an unconscionable result.
But hard for commercial parties to assert
Course of Performance:
Post contracting sequence of conduct by the parties and arises when the contract calls for the same act to be repeated multiple times.
Often arises in an installment contract
Can modify the contract; and can result in a party implicitly waiving rights under the K
Course of Dealing:
Precontracting conduct of the parties
It arises from the parties prior dealings or transactions with one another.
Usage of Trade:
How members of the relevant industry or trade behave and informs the meaning they ascribe to particular terms. It is a set of standard practices and their lexicon for communicating with one another. Used so much that, unless expressly disclaimed, can fairly be said to be based on the expectation that such practices and meanings are apart of the agreement.
Hierarchy in 1-303 (e) controls when there are inconsistencies:
Express terms prevail;
Assuming no express terms, Course of performance prevails;
If no 1 and 2, then Course of dealing prevails
If not 1, 2, or 3, then Usage of trade prevails.
Good faith
Every contract or duty within the UCC imposes an obligation of good faith in its performance and enforcement.
Does not apply to negotiation phases; only kicks in when there is a binding agreement between the parties.
Implied in all agreements under UCC
Definition of good faith:
Good faith means honesty in fact and observance of reasonable commercial standards of fair dealing (in the trade if you are a merchant).
Contract modification:
Must be made in good faith
Are binding without consideration.
Must meet SOF requirement if the K as modified falls within the SOF
No modification clause:
A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
Modification made for higher quantity:
If mod made for more than quantity in original, must be in writing; however, can be enforced for less than the quantity in original if modified, without SOF.
Express warranties:
Affirmation of fact or promise
Description of goods
sample of goods
that becomes BASIS OF BARGAIN
Basis of bargain
Reliance (some courts have presumption of reliance)
Reasonable expectation that statement is true
When does the warranty of merch apply?
In every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantable.
Merchantable:
Merchantable: to be merchantable, goods must be:
pass without objection in the trade under the contract description; and
in the case of fungible goods, are of fair average quality within the description; and
are fit for the ordinary purposes for which such goods are used; and
run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
are adequately contained, packaged, and labeled as the agreement may require; and
conform to the promise or affirmations of fact made on the container or label if any.
When is merchantability determined?
at the time of the sale, not the future condition.
Warranty of merch for used goods?
applies to used goods, but in a limited sense.
Only applies when appropriate
Implied warranty of fitness for particular purpose:
- Buyer must have a particular purpose for the goods; and
- Seller (does not need the be a merchant) must have reason to know two things:
- The particular purpose for which the goods are to be used; and
- That the buyer is relying on the seller’s skill set and judgment to select suitable goods
- Buyer must in fact rely on Seller’s skill or judgment (must be reasonable reliance); and
- Goods are not fit for a particular purpose
Warranty of title:
Any seller of goods (not have to be merchant) warrants the title transferred is good, the transfer is rightful, and there are no liens, security interests, or encumbrances against the title of which the buyer is unaware at the time of contracting.
This warranty will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.
effect of void vs voidable contract:
Good-faith purchasers who buy goods from a party to a void contract have no title and must return the goods to the rightful owner upon demand. By contrast, good-faith purchasers who buy goods from a party to a voidable contract will receive good title to those goods
Two situations when a contract can be open as to quantity:
Requirements and output contracts.
Must be made in good faith
Reasonably proportionate to estimates agreed upon, or normal/comparable to prior requirements.
No price set:
The parties, if they so intend, can make a contract even though the price is not settled. In such a case, the price is a reasonable price at the time for delivery if:
nothing is said as to price; or
the price is left to be agreed by the parties and they fail to agree; or
the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
(2) The price is to be set by one of the parties (GOOD FAITH required).
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as canceled or himself fix a reasonable price.
Delivery and payment:
In absence of agreement otherwise, parties are to tender (of goods and payment, respectively) simultaneously.
Right to inspection
where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner.
Result of acceptance:
Buyer is precluded from rejecting the goods
Buyer becomes obligated to pay the contract price
If there is a problem with the goods, the buyer will have the burden of proving that the goods will fail to conform to the contract in order to be entitled to any remedy
Rejection:
If the buyer rejects the goods, he may not exercise ownership over them, and if he has possession of them, must take reasonable care for the goods and hold them for the seller.
Result of nonconforming goods:
If the goods fail in any way to conform to the contract requirements, the seller will have breached the contract. Buyer can either accept or reject the goods. If rejected in timely matter, then buyer can recover damages. If accepted, Buyer must pay but can recover damages for caused by the nonconforming goods.
Place of delivery:
Unless K states otherwise, the place of delivery is the Seller’s place of business, or if he has none, his residence. However, if at the time of contracting the identified goods are, to the knowledge of both parties, at some other place, that place is the place of delivery.
Time of delivery:
If left not agreed, it is a reasonable time
Delivery in single lot:
typically, goods must be tendered in one lot; except where it makes sense to have them in lots
Risk of Loss for Non-Carrier K’s:
If seller is a merchant, the risk of loss passes to the buyer upon physical possession; If seller is a non-Merchant: the risk passes to the buyer on Tender of Delivery.
Perfect Tender for Non-Carrier Contracts
- The seller puts and holds the conforming goods at the buyers disposition for a time sufficient for the buyer to take possession; AND
- The seller gives the buyer notice reasonably necessary to enable the buyer to take possession of the goods; AND
- The tender is at a reasonable hour; AND
- Unless the contract says otherwise, Buyer furnishes facilities to receive the goods.