UCC Rules Flashcards
Applicable Law
Contracts involving services are governed by the common law. All contracts for the sale of goods are government by Article 2 of the UCC. Goods means all things which are movable at the time of identification to the contract
Merchants
Under the UCC, special rules apply to merchants. A merchant is anyone who deals in goods of kind or otherwise by his occupation holds himself out as having “special knowledge or skill” with respect to the goods involved in the transaction
Merchant’s Firm Offer
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable during the time states, but in no even may the period of irrevocability exceed three months.
1) Signatures include initials, imprinted signatures, letterhead, and firm logos
Quantity Term
Under the UCC a contract is NOT enforceable beyond the quantity of good states in the writing. This is the one term that a court will NOT imply.
Statute of Frauds
A contract for the sale of goods of $500 or more must be in writing to be enforceable.
Acceptance
Under the UCC, an acceptance may be made in any manner and by any medium reasonable in the circumstances. A contract is formed even though the acceptance contains additional or different terms than the offer. The UCC has abandoned the common law mirror image rule.
Acceptance - Additional Terms
Additional Terms: Between merchants, additional terms may become part of the contract UNLESS 1) the offer expressly limits acceptance to its terms 2) they materially alter it OR 3) notification of objection is given within a reasonable time.
1) Material Alterations: Any new term in the acceptance that materially alters the contract is excluded from the deal. Materially altering terms are those that would result in surprise or hardship. The official Comments mention warranty disclaimers and most courts treat limited remedy provisions as material alterations.
Acceptance - Different Terms
Different Terms: When the terms of the offer and acceptance differ, the conflicting terms does NOT become part of the contract. Most courts apply the knock out rule, since each party would naturally object to the other’s terms. The terms of the contract include those on which the parties agree and the conflicting terms are replaced by the UCC gap fillers.
Conditional Acceptance - Rejection and Counteroffer
A definite and seasonable expression of acceptance which is sent within a reasonable time operates as an acceptance even though it states terms additional from those offered, UNLESS acceptance is expressly made conditional on assent to the additional terms. In other words, a conditional acceptance is construed as a rejection and counteroffer.
Contract Forms Through Conduct
Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract. In such cases, the terms of the contract consist of those terms on which the writing of the parties agree.
Anticipatory Repudiation
An anticipatory repudiation is a clear and definite statement of intent, made prior to the time that performance is due, that the repudiating party will NOT perform. The mere assertion that a party is encountering difficulties in performing, or is uncertain whether performance will be rendered when due, is insufficient to constitute a repudiation. In other words, expressions of doubt do NOT constitute a repudiation.
1) A repudiation gives rise to a claim for damages for total breach. When one party repudiates, the other party may suspend her own performance AND 1) await performance by the other party for a commercially reasonable time 2) immediately resort to any remedy for breach OR 3) simply cancel the contract.
2) In sum, the doctrine of anticipatory repudiation provides an aggrieved party with immediate remedies even though the other party’s performance is NOT yet due.
Right to Demand Adequate Assurances
When reasonable grounds for insecurity arise, a party may in writing demand adequate assurance that performance will be forthcoming, and until she receives such assurance, may suspend her own performance. After a justified demand, the failure to provide assurances within a reasonable time, not exceeding thirty days, escalates the concern into a full fledged repudiation
1) The rational behind this rules is that once a party gave given reason to believe that the other’s performance has become shaking or uncertain, it is an undue hardship to force her to continue her own performance. Thus, the aggrieved party is permitted to suspend her own performance until she receives such assurances.
2) The adequate assurance doctrine requires that a party respond to a demand for assurances only if the demand is justified. A demand is justified if the party making the demand has reasonable grounds for insecurity with respect to the other party’s potential performance. If the insecurity is NOT cleared up, the contract is materially breached.
Selection of Goods
The UCC provides certain gap fillers when the parties contract is incomplete in some aspects. As a general rule, the buyer selects the assortment of goods and the seller arranges shipment.
Implied Warranty of Merchantability
The implied warranty of merchantability warrants that the goods are “fit for the ordinary purposes” for which they are used. The goods must be capable of performing the ordinary tasks for which they were designed. Most claims involve defects in the design or manufacture of the goods.
1) The warranty of merchantability applies only when the seller is a merchant with respect to the goods that are involved in the transaction
Implied Warranty of Fitness of Particular Purpose
The implied warranty of fitness for a particular purpose arises only where the seller has reason to know of the buyer’s particular purpose for which the goods are to be used and the buyer is relying on the seller’s skill or judgment to select the goods.
