COMMERCIAL LAW
Fall ‘15
Caraballo
How to deal with the U.C.C. generally:
In every situation, what is the initial problem?
Which section within the U.C.C. solves or at least on some level addresses this problem?
Both Article II and IX have gaps that must be addressed.
In such a situation look to §1-103 for the answers. Simply put, §1-103 addresses these gaps by stating that all other areas of law (and there respective rules) continue to remain good law. Of course, if those rules are displaced or modified in the U.C.C., the U.C.C. is the controlling law.
For example:There is no mention of consideration found within the U.C.C., but because §1-103 exists, consideration is still mandated as K law requires consideration for the formal creation of a contract.
: All Law is Alive under the U.C.C., so the freedom to contract is alive. (basic premise, you can make a complete fool of yourself, you just can not be taken advantage of.)
Article I applies to all the articles in the U.C.C.
1-102: Purposes, rules of construction, variation of agreement
Act shall be liberally construed and applied.
Purposes and policies
Simplify, clarify and modernize the law governing commercial transactions.
Permit the continued expansion of commercial practices through custom, usage and agreement
To make uniform laws among the jursidictions.
The effect of the act may be varied by agreement.Except the obligations of good faith. Can not agree to be unreasonable, negligent …etc.However the parties can define the parameters (i.e. good faith) so long as the definition is not unreasonable.
ARTICLE 2 and Its Scope:
2-102 – Transactions in Goods
Applies to transactions in goods.Although not specifically defined here, it seems that all sales, leases and other modes of give and takes of goods will be covered.
2-105 – Definition of Goods.
Goods means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action (insurance policies).Also include, unborn animals and growing crops and other identified things attached to realty.
Goods must be existing and identified before any interest in them can pass.Otherwise, they are future goods.A purported present sale of future goods or of any interest therein operates as a contract to sell.
Can have sale in part interest in existing identified goods.
Problem 1
Insurance policies are not covered under Article II.They are things in action.
Real property — §2-107, if not severed (house) not covered, but if severed, counts as goods under §2-107.
Building materials – is it:
Predominant purpose test – What was the predominant factor in this transaction? or
Gravaman test – Did the problem arise from a defect in the product or from the installation of the product?
Spinal plate installed—sale, service or goods?
Standing timber – under §2-107(2) treated the same as crops. So it is a good.
Computer programs – Considered goods under Article II, however, under Article IX they are treated as general intangibles (not goods).
Health Spa service – not a good, treated as service.
Entire assets of a clothing store – As a bulk sale…YES.
Electricity (and other utilities) – treated as goods, however, there is confusion as to exact reasons why.In fact, many theorists (Caraballo included) see this as a failure in the code.
Problem 2
3rd Year student sold his car to a fellow student.
Does this fall under Art II?
Yes – Article II applies to “all transactions is goods.” There is a common misconception that Article II requires merchants. However, remember that there are some warranties (§2-314 – implied warranty, merchantability and usage of trade.) that will not be triggered, unless there is a merchant involved in the initial transaction. (as the seller)
2-104: Definition of a Merchant
does the person deals in goods of that kind or
holds himself out as having knowledge or
through his employment holds himself out.
If the answer is yes to any of the above, the individual will be treated as a merchant under the U.C.C.
Practices v. Goods.
if business procedures (liberal view of who is a merchant).For example, mailing letters.
Narrowly – an individual may be a merchant for one specific transaction.
Problem 3
§2-314 – under cmt., the U.C.C. attempts to protect farmers. Specifically, the court must look at all facts surrounding a specific farmers actions in determining whether they are a merchant. Look to see if the farmer in question is casual or inexperienced.
Problem 4
U.C.C. has stretched the term sale to include many types of transactions that are commonly known as leases. Also known as disguised sales – therefore, many so-called leases will be treated as a sale under Art. 2A.
For example, leases equipment for $225/month for 5 years. Equipment costs $10,000.
Under §1-201 (37) – Is this a true lease or disguised sale?
Clause that allows for permanent termination – amounts to true lease….not a sale.
1-201(37) – this is a disguised sale. The goods are completely paid for by the end of the terms of lease.
International Sales (CISG) – UN Convention on Contracts for the International sale of goods.
Problem 5
Yes, parties are both business in different states.
Yes, parties can choose which law they would like to have apply.
No, likely that a clothing company would not use toys except for p
Problem 7
§2-201(1) – SOF has a requirement for the quantity to be contained within the writing.If the word is ambiguous there is a strong argument that either there is or isn’t quantity defined satisfactorily for the SOF.(i.e. Tank, car, cat).
Most courts will allow singular words to satisfy the quantity (of one) requirement for the SOF.Policy behind this dictates that the SOF should not be used as a bar for all legitimate claims simply because of a small grammatical error.
§2-201(3)(a) – there is a K if the goods (1) were manufactured for one party and (2) not suitable for sale to others.
§2-201(3) – If there is an indivisible unit, must pay for the entire thing, otherwise the party is entitled to the amount already paid for.
Can a city use promissory estoppel?
Under §2-201, now, however courts have consistently utilized the common law doctrine, despite the codes rejection of C.L. principles, of equitable estoppel.
But remember, this is a very questionable area of law.Courts have gone both ways on this issue.
RELIANCE – must show a change in your circumstances (required under promissory estoppel.
With sale of goods, the U.C.C. covers the sale of goods (§2-201(3)(c)), payment for goods(§2-201(3)(c)), and the manufacturing of goods(§2-201(3)(a)).
Equitable estoppel – consistently used in land improvement cases.
Problem 8
To normally satisfy the SOF:
some signature for the party of which you are seeking enforcement
Good faith is the lynch pin of almost every U.C.C. claim.
By requiring all parties to act in good faith, there is a limitation on their freedom to act.Thus, this will always satisfy the consideration requirement of general K law.
– today requirements Ks are not barred under the U.C.C., despite their being absolutely no showing of quantity in the K. This essentially circumvents the original problem that §2-201 attempted to remedy. (requiring quantity). However, there is a general requirement that all Ks point to something, or at least the parties along with the K point to something.
The major problem with this concept, is that if there is NO exclusivity in dealing, the parties can not look to §2-306 as a remedy.Must be a formal requirements K.
