Commercial Law
Fall 2015
Marcantel
Article 1
1-304: Obligation of Good Faith
Every K or duty w/in the UCC imposes an obligation of good faith in its performance and enforcement
1-201(24): Money
Any medium of exchange authorized by a sovereign
Article 2
** If code doesn’t govern, what does it mean? The common law applies; doesn’t mean it is unenforceable – means it is unenforceable under Article 2 of UCC
Transaction in Goods
2-102: Scope
Article 2 applies to transactions in goods, unless the context provides otherwise
2-105(1): Goods
All things moveable at the time of the identification of the K for sale, including specially manufactured goods [**majority of courts have ruled that sale of software is the sale of specially manufactured goods]
: if severance will cause material harm to the property, it must be severed by the seller or it will NOT be covered by article 2. If it will not cause material harm to the property, it does not matter if the buyer or seller severs from reality
Not moveable: RP
Material Harm à must be severed by seller
Minerals and oil
2-107(1): Goods to be severed from realty
A K for the sale of minerals (oil and gas) to be removed from realty is covered by Article 2 if they are severed if by the seller [otherwise not a good under UCC]
No Material Harm à can be severed by buyer or seller
Timber and crops
2-107(2): Goods to be severed from realty
capable of severance w/o material harm or of timber even though it forms part of the RP at the time of K and the parties effect a sale prior to severance
Q to ask: at the moment of ID of the K, we’re the goods moveable? [Looking at temporal moment K is entered into]
Can become more complicated when goods become fungible (interchangeable/ easily replaced by another)
Ex. buying 100 BMWs v. buying 100 BMWs w/ these vin numbers
Goods do include:
Unborn young of animals
Growing crops
Other identified things attached to realty as described in the section on goods to be severed from realty [2-107]
Goods do NOT include:
Money in which the price is to be paid
Money when it is used solely as a medium for exchange – ex. exchanging currencies
Using $20 American dollars for euros. $20 is the medium of exchange and NOT a good. The euros received for the $20 are goods
Investment securities
Things in action or choses in action – something that derives its value solely from the ability to enforce it in court
Insurance policy, IP rights, licenses, cellular K, health club memberships, gun memberships, mining gold on your property
2-106(1): Definitions: “Contract”; “Agreement”; “Contract for sale”; “Sale”; “Present sale”; etc.
[synonymous with the word transaction]: Consists in the passing of title from the seller to the buyer for a price
Present sale: sale that is accomplish by the making of the K
and agreement are limited to those relating to the present or future sale of goods
Contract for sale includes both a present sale of goods and a K to sells goods at a future time
2-304(1): Price
Payable in money or otherwise
If payable in whole or in part in goods, each party is a seller of the goods he is transferring
Hybrid Transactions – does the UCC or CL govern?
Two types of hybrid transactions: (1) K for goods and services; (2) goods attached to RP under 2-107
Predominate purpose test
Court supposed to review three factors:
(1) Allocation of cost/value between the goods and services
If parties have delineated costs between the goods and services of the K, which is more? If even, factor becomes irrelevant
(2) Language of the K
Objective perspective – what did the parties think the K was predominantly for? Look at text – does the K say “K for services” and continue to use “K for services”; look at full K, not just initial heading of K; look at names of lined items; language may prove nothing and be irrelevant in determining what the K is predominantly for
(3) Nature of the supplier
Look at whether the supplying party normally deals in predominantly goods or services; can be ambiguous and therefore less relevant
Service station (nature is services, even tho you can order parts for your car) v. Auto parts store (nature is sale of goods even tho may provide some services)
Rule & Reason: dominant purpose test is used to determine whether a K is one for goods rather than services and is therefore governed by Article 2 – whether the in the formation of the K was the provision of goods.
Any supplier of a specially designed item m
aud in formation of K]
2-201(1): 2 part test à 1st part: related to $$ – if K is for more than $500 //// 2nd part: writing indicating that a K for sale has been made & signed against party whom enforcement is sought
(1): A K for the sale of goods over $500 is unenforceable unless there is:
A writing indicating a K for sale [1-201(43): Writing à any intentional reduction to tangible form; a check may be sufficient]
Signed by the party against whom enforcement is sought (or his agent), and
Must indicate a K for sale of goods
Omitted Terms: A K can be enforced even if a main term is omitted or misstated
Required terms: only required term is quantity (why? There is no gap-filler for quantity)
A writing is not insufficient b/c it omits or incorrectly states a term agreed upon, but the K is unenforceable beyond the quantity of goods shown in such writing
**To comply w/ part 2 of 2-201(1): must have writing, quantity, parties, subject matter (aka sale of goods), /s/ by party whom seeking enforcement (aka must be signed by party denying the existence of the K)
1-201(39): Signature à Any mark or representation to indicate
Ex. A & B agree on a K for 500 widgets for $7 – this invokes the SOF. The secretary types up and puts 400 widgets for $6, K still invokes SOF. Caveat: b/c quantity term is misstated – K is only enforceable up until the quantity stated [caveat to caveat – this is only if you are stuck in subpart 1 and can’t move to subpart 2 or 3. If can move to 2 or 3 and can satisfy you can fully recover]
2-201(2): Safe Harbor Rule [Safe harbor for enforcement that would otherwise be unenforceable under subpart 1]
** If you don’t object to a K you have never seen, then you are essentially acquiescing
(2): Merchant Confirmation exception (for subpart 2 to be invoked): [P can use subpart 2 against the D]
