Commercial Law Outline

COMMERCIAL LAW SURVEY

PROFESSOR PAULA FRANCEZE

Spring 2013

ARTICLE 1

· Article 1 is a form of introduction to article 2

o It is the relevant mission statement for the UCC

o §1-102

§ Article 1 applies to transactions to the extent that those transactions are governed by one of the other articles of the UCC

o §1-103

§ The UCC must be liberally construed to promote the underlying purposes of the UCC which are:

· 1) to simplify, clarify, and modernize the law governing commercial transactions

o The “law merchant” was how it was done before; UCC codified the most sensible of the practices

· 2) to never separate interpretation from practicality

o never divorce a deal from its commercial settings

o look at custom, usage and the agreement of the parties

· 3) uniformity among the jurisdictions

§ The UCC is not to render it the last word. Principles of law and equity must be allowed to supplement code application

o §1-301 – the power to choose applicable state law

§ States’ courts differ in the treatment of corporations

§ in a multi-state transaction (MST):

· first, go to the contract to see if there is a choice of law clause

· second, should it apply

· if the choice of law is stipulated, the chosen forum will be upheld so long as it bears a reasonable relation to the transaction

o comment 1 – must be that of a jurisdiction where a significant enough portion of the making or performance of a contract I to occur or occurs

· if not stipulated, state may apply its’ laws as long as it bears an “appropriate relation to the transaction

o is it fair to apply this state’s laws

o §1-303 – TRIPLETS

§ course of performance, course of dealing, and usage of trade

§ history:

· Karl Liewellyn – founder of Art. 2

o founder of political realism movement

o the guidepost for statutory interpretation: ask HOW WOULD SIMILARLY SITUATED PARTIES HAVE RESOLVED THE ISSUE HAD THEY EXPLICITLY BARGAINED OVER IT?

§ replicate existing reasonable business practices

§ allows predictable outcomes, allows for planning

§ minimizes inefficiencies

§ prevents unfair surprises

§ Course of performance – the most important

· repeated occasions

o a sequence of conduct demonstrated by parties, within the scope of this particular deal

o example – multiple shipments, multi-year contracts

§ Course of dealing

· from previous transactions

§ Use of trade

· industry customs

ARTICLE 2

· 5 stages of article 2 analysis

o 1) formation – how do parties form a binding article 2 contract for the sale of goods (§2-200s)

o 2) content – what are the terms included in this deal (§2-300s)

o 3) performance – how do the parties satisfy their obligations (§2-500s)

o 4) breach – what circumstances qualify as a breach (§2-600s)

o 5) remedies – if a party is in a breach, how will the breach be remediated (§2-700s)

· Article 2 deals with the law of sales

o How to get from an agreement to a contract

o A2 applies only to contracts for the sale of goods

· Guidepost for policy analysis of article 2

o Merchants are held to higher standards (§2-204)

o Abuses during formation are governed by the doctrine of unconscionability, regulated by §2-302

o Abuses during performance are regulated by good faith (§1-201)

o The Code de-emphasises formalities and honors substance

· How to get from agreement to contract

o Agreement

§ The bargain of the parties in fact

· This is a subjective standard – what the parties thought

· Not all bargains in fact are enforceable (Frigaliment)

§ A bargain in fact that is legally enforceable is called a contract

o Contract

§ A total legal obligation that results from the parties’ agreement

§ Must comport with all of the ingredients that form a contract

o Frigalement (chicken case)

§ In order to get from an agreement to a contract, look at:

· The words used

· Conduct of the parties

· Triplets (§1-103)

§ Unless explicitly negated, the triplets always form the backdrop against which the deal is struck

· Presuming the triplets promotes efficiency

· The triplets don’t have to be included, but they have to be carefully and specifically displaced with precision

§ Holmes: “The making of a contract depends not on the agreement of 2 minds in one intention, but on the agreement of 2 sets of external signs… not on the parties’ having meant the same thing but on their having said the same thing.”

§ Government regulations and expert testimony can be used to glean custom

· §2-105 – Goods –

o “goods” means all things which are movable at the time of identification to the contract for sale

o Goods must be:

§ Movable

§ Tangible and mobile

o Example of non-goods

§ Real estate – not movable,

§ Service contracts

· However, if the services include movable parts as part of the contract, it is a hybrid contract, so you have the provisions of both goods and services

o If the provisions of goods are the predominant factors in the transaction, then A2 applies

o This is the “Predominant factor test”

· If the provisions of goods is secondary, then it is not an A2 contract

o Look at the costs to see if the good was a predominant factor

§ If the cost of the goods was a minor part of the total price, it is a services contract, and not subject to A2

§ Intellectual property

§ Leases

· §2-106 – Sale

o A sale consists in the passing of title from the seller to the buyer for a price

§ “title” = ownership

§ This excludes leases

§ Excludes consignments – no money has been exchanged, and ownership has not passed

§ Excludes gifts

· In short, the scope of Article 2 is: Contracts where, in exchange for a price, title passes from seller to buyer of something possessing tangible movability

· Merchants

o §2-104 – Merchants defined as one of 2 ways:

§ One who holds himself our as having particular skill or expertise with respect to goods in question

· Either through vocation, training, o