Commercial Law Outline

Commercial Law

– SALES/LEASES

– Difference between a sale and a lease:
o Sale – ownership or title is transferred to the new owner
o Lease – ownership and title remains with the lessor

– §1-203 ** important provision – always look at the facts of each case to determine if it’s a sale or a lease; look at the lease – determined by the economic factors of each case

– nominal consideration – used to determine if the item was in fact leased or sold. If the item can be purchased at FMV for an appropriate price and the item still has a usable life, the item will be considered a lease. If the item can be purchased for a nominal fee and the life of the product is over, it will be considered a sale for all intents and purposes.

– Factors to look at to determine if it’s a sale or a lease:
o If its going to be returned, then it’s a lease

– in a lease, the lessor contains conditional title

– §2-105 – all things movable at the time the contract is made; seller has taken the goods out of the general inventory to make them available to be sold to complete the K; includes unborn young of animals and growing crops

– GOODS V SERVICES (Anthony Pools)
o Predominant purpose test – (test most often used) if the service aspect predominates then you don’t use the UCC if the goods aspect predominates then the UCC applies
o Gravamen test – focus whether the gravamen of the action involves goods or services; gravamen = faulty diving board and the slipperiness of the edge
o Policy oriented test – emphasizes loss shifting, risk distribution, consumer reliance, and difficulties in the proof of negligence (strict liability in tort); looks to who can bear the costs best
o Predominant factor test – look at 1) the language of the K; 2) the business of the supplier and 3) the intrinsic worth of the goods involved (Duxbury)
o determine if the defect leading to injury is caused by the service or good itself
o look at the relative cost of the good v. service
o professional services do NOT come under art 2

– distinction between merchants and non-merchants
o §2-104 – merchants – persons who deal in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill
o You can be a merchant and not have the warranty of merchantability applied to you if you don’t sell goods of that kind

– TITLE AND RISK OF LOSS

– Notes – title to the goods cant pass any earlier than identification of the goods by the seller and set aside for the purposes of transfer to the buyer; goods must be movable at the time of ID in the K, before interest can pass, goods must be existing and identifiable

– Title usually passes:
o 1) delivery of the goods
o 2) any other time specified in the K

– risk of loss normally passes with delivery of CONFORMING goods; if the seller delivers non-conforming goods, the risk stays with the seller until they cure the non-conformity; if the buyer refuses to accept CONFORMING goods, then the risk stays with the buyer

– §2-401, 2-509, 2-510 ****
o Risk of loss and title can pass separately from each other, in the past they ran together
o Title cannot pass before goods are identified in the K
o Title passes once performance is complete
o “Unless otherwise agreed”
o Risk of loss normally passes when performance is complete
o Risk of loss can pass earlier than performance/delivery when a buyer refuses to accept conforming goods
o Risk of loss can pass later when a seller tenders non conforming goods

– §2-501(1) – an insurable interest passes before title
o Passage of title occurs when 1) performance is complete (delivery), 2) identification of the goods (marking them off from the general inventory)

– §2-509 – if conforming goods are delivered, the risk of loss shifts to the buyer, if non conforming goods are delivered, the