Sales OVERALL COURSE OUTLINE: Scope does transaction fall w/in scope of Art 2 (2-102) Contract formed?

ed? (2-201 S/F and 2-204, 2-206, 2-207) If so, what are terms? (2-207) Performance o Properly performed? o What was required? o What was actually performed? o Was there material difference Remedies (if breach) Basic Principles of the UCC Good Faith the UCC imposes an unwaivable obligation of good faith in the performance of enforcement of contracts or duties within its scope; good faith is generally considered a condition precedent to UCC protection 1-304 o Honesty in fact and fair dealing Good faith is defined subjectively as honesty in fact; i.e. not the reasonable person test PLUS an objective component of observance of reasonable commercial standards of fair dealing. 1-201(20) Reasonableness standard in transactions Heirarchy of Construction terms: Express terms (unless waived) > Course of Performance > Course of Dealing > Usage of Trade > Code o Course of Performance 1-303(a)= what the parties do when performing this particular contract o Course of Dealing 1-303(b) = the parties past contacts with each other o Usage of Trade 1-303(c) = the custom within the industry and bind all who should know about it, sometimes even consumers. Scope of Article 2 2-102: Unless the text otherwise requires, this article applies to transactions on goods. IF: transaction in goods 2-101 official comments, paragraph 3: Contracts for sale o this implies that it is not for bailments, gifts, etc. THEN: Article 2 applies UNLESS: Context otherwise requires. Goods means all things (including specially manufactured goods) which are moveable at the time of identification to the contract for sale other than money in which the price is to be paid, investment securities, and things in action. 2-105(1) contract for sale: 2-106(1): includes both a present sale of goods and a contract to sell goods at a future time. identification: 2-501: identification occurs o (a) when the contract is made if it is for the sale of goods already existing and identified; o (b) if the contract is for the sale of future goods other than those described in paragraph (c), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers; o (c) when the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within twelve months after contracting or

for the sale of crops to be harvested within twelve months or the next normal harvest reason after contracting whichever is longer. money: 1-201: a medium of exchange currently authorized or adopted by a domestic or foreign government o Bridging statute 2-103(4): in addition article 1 contains general definitions and principles of construction and interpretation applicable throughout this article. investment securities: 8-102(a)(15) thing in action: intangible property right

Goods also includes the unborn young of animals and growing crops and indentified things attached to the realty.to be served from realty. 2-107 Hybrid of services and goods Predominant factor test (majority rule): is the contract predominantly for goods or for services? If it is predominantly for goods, Article 2 applies to the entire contract. If it is a service contract, then Article 2 does not apply. Determining predomination: 1. Language: Look to the terms describing the performance of the parties and the words used to describe the relationship between the parties of the contracts a. Builder agrees to design and install (services contract) vs seller agrees to deliver 1000 units of X (goods contract) 2. Purpose: Look to the circumstances of the parties, and the primary reason they entered into the contract. One also considers the final product the purchaser bargained to receive, and whether it may be described as a good or a service. 3. Cost: Consider the cost of the goods and services. If the cost of the goods is but a small portion of the overall contract price, such fact would increase the likelihood that the services portion predominates. Anthony Pools v Sheehan The court here applied the gravamen test (minority rule): o Where, as part of a commercial transaction, consumer goods are sold which retain their characteristics as consumer goods after completion of the performance promised to the consumer, and where monetary loss or personal injury is claimed to have resulted from a defect in the consumer goods, the provisions of the U.C.C. dealing with implied warranties apply to the consumer goods, even if the transaction is predominantly one for providing services. This exception was carved out to protect consumers. Usually there is some sort of physical injury involved. The consumer is usually in an unequal bargaining position bc they are unsophisticated and the lawyers for companies can easily construct a contract that makes it a services contract and then exculpate the company from liability for product faults. This is limited to warranty issues. Software Advent Systems v Unisys Corp That a computer program may be copyrightable as intellectual property does not alter the fact that once in the form of a floppy disc or other medium, the program is tangible, moveable, and available in the marketplace. It is thus a good and governed by Article 2. Chapter 2 - Formation of the Sales Contract There is a substantial amount of common law that still applies to formation. We will be looking at the places where the UCC has changed that law to reflect commercial reality.

 There are many different methods of communication. There is a national economy that moves more quickly than in the past. Old methods of law proved to
be too costly. Offer + Acceptance + Consideration = Contract Offer and acceptance are judged by an objective standard o Offer The offer must be sufficiently definite such that a reasonable person would believe there was an offer. Specific price Goods and services Duration of performance Time at which performance is to be tendered Quantity of goods to be shipped Quality of goods to be shipped Unless the offer was supported by consideration or reliance, it could be revoked at anytime before being accepted. The offeror could select the method of making the offer o Acceptance Telegraph Rule: the method of acceptance has to be that which was specified by the offeror, or if not specified, has to be the same method used by the offeror. Mirror image Rule: acceptance has to mirror exactly the terms of the offer. A modification of the contract requires consideration. The UCC has changed some of these rules. You can have an enforceable contract without following these common law rules. 2-204(1): A contract for sale of goods may be made in any manner sufficient to show agreement, including offer and acceptance, conduct by both parties which recognizes the existence of a contract. Agreement the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade. o 1-303(b) A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. Contract the total legal obligation that results form the parties agreement as determined by the UCC as supplemented by any other applicable law. 2-204(2): An agreement sufficient to constitute a contract for sale may be found even if the moment of its making is undetermined. There doesnt need to be something as formal as an offer and acceptance 2-204(3): Even though one or more terms are left open in a contract for sale, the contract does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. All of the terms do not need to be spelled out for the contract to be legally enforceable. We can infer the contract from the surrounding circumstances. (reasonable person standard) o Look to language that the parties used. ship cds soon..will do we can look to the surrounding circumstances what is the industry norm? if this is normal, this must be intended to be a bargain o Look to the past course of dealing between the parties and to the market norms Unique Design v Pittard Machinery Unique argues that because certain essential terms of the agreement were in dispute purchase price, the amount of the down payment and the financing arrangements the contract was unenforceable.

 Indeed, under common law rules, there would be no formation of contract, HOWEVER.. UCC 2-204(3): Even though one or more terms are left open in a contract for sale, the

contract does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

If there is active disagreement going on, the intent to contract may not be established. Bacou Dalloz USA v Continental Polymers The agreement letter stated that Bacou would purchase the material of Continental if the price and quality were equivalent to that which is then used by HLI and available from third parties. The trial courts main concern was that the parties made illusory promises resulting in a lack of mutuality of obligation, but this is not the case. o The letter set forth reciprocal promises in the form of the supply agreements material terms and established a mutuality of obligation. The trial court alternatively held that the agreement letter was unenforceable bc it lacked sufficiently definite material terms of price and quality. o Because the letter gave the price term as the price then available from others, it was discoverable by getting price quotes from other sellers. The price was not too vague. o Likewise, the quality term is not indefinite or illusory. The agreement letter specifies that the quality must be as good as the prepolymer then used by HLI and available form third parties. They need only to compare the products quality with that of other vendors. Reasonably certain remedy: Past course of dealing Prevailing market standards Gap filling provisions. UCC 2-206 Offer and Acceptance in Formation of Contract (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances: (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but the shipment of nonconforming goods is not an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. Statute of Frauds Statute of Frauds 2-201 contract for sale of goods => $500 is unenforceable unless there is a sufficient writing Sales contract that does not comply w/ Statute of Frauds is unenforceable. However, if the parties choose to perform, enforceable rights may be created. What constitutes Sufficient Written Memorandum must be a writing signed by party to be charged (i.e. the party refusing to perform o Terms that must be contained in written memorandum writing is sufficient if it indicates that a contract for sale has been made and specifies the quantity term. Quantity in terms of output (e.g. all the steel you can produce) or requirements is sufficient o Form of memorandum no particular form is necessary as long as it contains the required terms. A buyers check with a notation as to subject matter and quantity suffices to bind buyer; sellers indorsement when cashing the check will also bind seller o Signature any mark with the intent to authenticate the writing is a signature. Printed letterhead may satisfy the S/F in some Jx, as does an agents signature. o Written confirmation from other party where both parties are merchants, a written confirmation not signed by the party to be charged sufficiently satisfies the S/F unless the

receiver objects in writing within 10 days after receipt. Although such confirmation satisfies S/F, it does not necessarily show that a contract exists. Exceptions to S/F o Partial acceptance, but only to the extent of the goods received and accepted o Partial payment, enforceable as to goods for which payment has been made; and o Where a substantial beginning on the manufacture of, or commitments for, the procurement of specially manufactured goods has been made.

The statute of frauds not only (1) prevents fraud (claiming a contract exists when it does not), it also (2) provides an evidentiary history (lets the parties know exactly what is required from them under the contract). Also, (3) the signature requirement promotes a more reflective stance, so that parties take heed of the nature of their obligations. 2-201 (1): A contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some record sufficient to indicate that a contract for sale has been made between the parties and signed by the party against which enforcement is sought or by the party's authorized agent or broker. A record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subsection beyond the quantity of goods shown in the record. This statute generally requires a signed writing for contracts for more than $500 IF there is o (1) contract for sale of goods and o (2) the price is $500 or more and o (3) there is a writing that is sufficient to indicate that a contract for sale has been formed between the parties o (4) which is signed by the party against whom enforcement is sought or an authorized agent/broker. THEN: the contract is enforceable. UNLESS: otherwise provided by this section All that is required is that the writing afford a basis for believing that the offered oral evidence rest on a real transaction. Southwest Engineering v Martin Tractor

The UCC provides a framework to fill in the missing terms that are left open. The contract will not fail for indefiniteness if the parties intended to enter into a contract and there is a
reasonably certain basis for giving an appropriate remedy. A may be determined implying good faith and reasonableness into the contract.

2-204(3): even though one or more terms are left open the contract for sale will not fail for indefiniteness if the parties intended to enter into a contract and there is a reasonably certain basis for giving an appropriate remedy. The reasonable basis for providing a remedy can come from gap filing under 2-310 Exceptions to Statute of Frauds 2-201 (2): (merchants exception) Between merchants if within a reasonable time a record in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against the recipient unless notice of objection to its contents is given in a record within 10 days after it is received. IF: o between merchants (2-104(3) and 2-104(1)) o writing (1-201(b)(43)) o confirming contract (1-201(b)(12))

 THEN o satisfies the statute of frauds and the contract will be enforceable UNLESS o receiving party gives written notice within 10 days of receipt
Decatur Cooperative v Urban Between Merchants (farmer selling wheat) Rule: 2-104(1)Merchant: A merchant is (1) a person who deals in the goods of the kind involved, or (2) one who by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction, even though he may not actually have such knowledge, or (3) a principle who employs an agent, broker or other intermediary who by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction. Common Law Estoppel instead of SoF Promissory Estoppel: A promise which the promisor should reasonably expect to induce action or forbearance of a definite & substantial character on the part of the promisee & which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Promissory estoppel is a CL principle and therefore is allowed in the UCC under 1-103 as long as it does not displace the UCC.

o o o

sufficient against sender received (1-202(e) & (f)) within a reasonable time (1-205) the party receiving has reason to know of its contents (1-202(a))