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
offer is still enforceable, but only up to 3 months
o §2-206 – Acceptance
§ Unless otherwise unambiguously indicated by the offeror, acceptance can be manifested under Article 2 under any manner reasonable under the circumstances
§ The offeror is the “master of his offer” in stipulation in the offer precisely how assent is to be manifested
· Can use express words in the offer
· Or use the triplets
§ Otherwise, UCC repudiates the mirror image rule (ex. – if it came through the phone, acceptance has to be done via phone
§ Now, acceptance is through any medium reasonable under the circumstances
· Use context and the triplets to tell you if time is of the essence
§ §2-206(1)(b) – an offer to buy for prompt or current shipment
· “Please ship promptly,” “please ship within 12 hours,”
· Assent will occur in those cases by prompt or current shipment/promise to ship, instead of delaying by formal assent
§ The deal is locked in on the offeror’s terms, whether the offeree ships conforming goods or not
· If non-conforming goods are shipped, the offeree has made a deal and breached it simultaneously
o It is not considered a counter-offer, since the terms of the acceptance don’t have to mirror the offer
o The offeror can take the goods and still sue for breach of contract
· For a good faith player, the shipper of the non-conforming goods has to reasonably notify the offeror that the shipment is only an accommodation
o Once that notification is sent, it is considered a counter-offer which the original offeror can accept or reject without liability
o Notification can be by phone, enclosed with the packing slip, etc.
· §2-207 – the battle of the forms
o Where the terms of a seeming assent depart from the terms of the offer (at common law, that was a counteroffer)
o Assent that contains a variant term or terms is still an assent and not a counteroffer, unless the assent indicates that it is expressly made conditional on the offeror’s adherence to its terms
o §§2 –
§ If at least one party is a non-merchant, the variant terms drop out, unless specifically assented to
§ if at least one party is a non-merchant, apply the “automatic inclusion rule” unless:
· (a) The offer limits assent to the offer’s terms, or
· (b) The variant term materially alters the contract, or
o Comment 4 – if it’s inclusion would provide unfair surprise or hardship
· (c) The offeror gives notice of objection to the variant term/s