Commercial Law- Hefferan (Spring 2014)
The UCC
– Purposes and Policies of the UCC
o To simplify, clarify, and modernize the law governing commercial transactions
o To permit continued expansion of commercial practice through custom, usage, etc.
o To make uniform the law among various jurisdictions
§ Unless displaced by the UCC- the common law of contracts governs
– UCC Variation by agreement
o Effect of UCC can be varied by agreement
§ Will be applied if the parties contract does not address the issue
§ Obligations of good faith, diligence, reasonableness and care set forth in the UCC cannot be disclaimed by agreement
– Business Relationships Outside of the UCC
o Commercial real estate
o Construction ks
o Agreements for professional services between firms
o Data and info transactions
§ ** applies to individual consumer and business transactions
ARTICLE 2
– Applies to the sale of goods (regardless of whether it involves merchants)
o “Sale” defined:
§ 2-106(1): A sale is a contract in which title to goods passes from the seller to the buyer for a price
o “Goods” defined:
§ All things movable at the time they are identified as goods to be sold under the k.
· Does not apply to sale of real estate, services, or intangibles
§ Goods include:
· Unborn young of animals, growing crops, other identified things in 2-107
o Goods or Real property (2-107):
§ Goods if severed by the SELLER:
· Minerals, oil, gas, structure to be removed from realty
§ Goods no matter who severs:
· Growing crops, timber, other things not covered above, but capable of severance without material harm to the land
§ “Commercial Unit” defined:
· 2-105(6): A unit of goods that by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or market value
o May be a single article (machine), set of articles (suite of furniture), or any other unit treated in market as a relevant whole, or quantity
§ “Future goods” defined”
· Goods must be existing and identified before an interest in them can pass
· A present sale of future goods operates as a k to sell
o Mixed Contracts:
§ Goods or Services?
· 2 tests:
o Predominant purpose test
§ Majority test
§ Applies article 2 where the predominant purpose of the transaction is a sale for goods
§ Look at what predominates
o Gravamen test
§ Minority test
§ Look at the portion of the k that is in dispute
§ What did the loss or personal injury come from—the goods or the service?
FORMATION OF THE CONTRACT
– General Rule (2-204): A contract may be made in any manner sufficient to show agreement
o Does not matter if terms are left open- so long as there is an intent to k and a basis for granting remedy
– Offers
o Firm Offers (2-205):
§ Permits a MERCHANT, by means of a SIGNED WRITING,
§ To make an offer irrevocable,
§ Without consideration,
§ For a period of up to three months (can be for longer but requires consideration)
– Acceptance:
o 2-206: Unless otherwise indicated by language or circumstances, an offer is construed as inviting acceptance in any manner reasonable and by any medium reasonable under the circumstances
§ Bilateral k: promise for a promise
§ Unilateral k: promise for promise or promise for performance
o Shipment or Promise to Ship
§ An offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or current or prompt shipment of conforming or non-conforming goods
· Shipment of non-conforming goods still constitutes an acceptance
o But NOT if the seller seasonably notifies the buyer that the shipment is only being offered as an accommodation
· Can have acceptance and breach at the same time
– Battle of the Forms
o 2-207: Additional Terms in Acceptance or Confirmation
o Addresses two situations
§ Written confirmation
§ Offer and acceptance
o (1): A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon
§ UNLESS the offeree’s acceptance is expressly made conditional on assent to the additional or different terms
o (2): The additional terms are to be construed as PROPOSALS for addition to the k.
§ Between merchants:
· The terms become part of the contract, UNLESS:
o The offeror’s offer expressly limits acceptance to the terms of the offer;
o They materially alter it; or
o Notification of objection to them has already been given or is given within a reasonable time after notice of them is received
o OR
o (3): C
nts
§ Within a reasonable time after an oral agreement has been made
§ Sends to the other party a written confirmation of the understanding
§ It will bind the recipient if
· They have reason to know of the confirmations contents and
· Do not object to the writing within ten days of receipt
o Specially manufactured goods
o Admission in pleading/testimony in court
o Goods for which payment has been made and accepted or received and accepted (partial performance)
PROPERTY INTERESTS
– Property interests in goods include:
o Title
o Special property
o Insurable interests
o Security interest
o Risk of Loss
– Title (2-401):
o Article 2 applies irrespective of who has title to the goods- unless a provision specifically refers to title
o Title to goods does not pass prior to their identification to the k
§ IDENTIFICATION:
· 2-501(1): The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers
o Identification can be made at any time and in any manner explicitly agreed to by the parties
o If the parties do not agree upon the manner of identification, identification occurs as follows:
§ Identification occurs when the contract is made if it is for the sale of goods already existing and identified
§ If the contract is for the sale of future goods (other than crops to be planted or the unborn young of animals), identification occurs when goods are shipped, marked or otherwise designation by the seller as goods to which the contract refers
o Unless otherwise agreed, goods remain at the sellers risk until the property therein is transferred to the B, but when the property therein is transferred to the buyer the goods are at the buyers risk
o Any retention or reservation of title by the seller in goods shipped or delivered to the buyer is limited to reservation of a security interest
