Select Page

Sales (see also UCC Article 9)
St. Johns University School of Law
Hennigan, John

Sales outline
Me
 
A.    Scope of UCC and UN
a.           UCC – sale of goods
b.           UN – CISG- sales btw citizens of different k’ing states/gov’s
                                                  i.      Art I – Sphere of Application
                                                ii.      Art II- not apply to goods that:   
1.      Used for personal, family, household use unless seller neither knew nor ought to have known that goods were brought for such use, or
                                              iii.      Art 10 –  If a party has more than 1 place of business, the place of business that controls is the one which has the closest relationship to the contract and its performance having regard to the circumstances known to or contemplated by the parties at the time before or at the conclusion of the contract
B.     Scope of Article 2
a.           2-102 scope provisions
                                                  i.      “applies to transactions in goods”
1.      2-105(1) defines “goods” as “all things which are movable at the time of identification”
a.       2-501(1) defines when “identification” occurs as:
                                                                                                                          i.      at contract formation for goods already existing and identified
                                                                                                                        ii.      when the goods are shipped, marked, or otherwise designated
                                                ii.      does not apply to security transactions
                                              iii.      in hybrid transactions, (i.e. goods and intangibles such as goodwill) it applies to at least the “goods” and perhaps the rest if the “primary purpose” of the transaction is the sale of goods, according to local case law.
1.      some courts divide transaction into goods and non-goods and deal with each separately.
a.         ex: in Foster, court argued that Art. 2 applied only to the furniture and other movables, even though the transaction involved the sale of a whole radio station, including real property, goodwill, FCC license, etc.
2.      other courts treat contract as a whole by determining “primary purpose” by looking at:
a.       intent of parties, or
b.      value of the goods in relation to the intangibles.
C.     How figure out what statute applies?
a.           Look at dominant purpose of k in hybrid transactions
                                                  i.      Art 2 is all or nothing
                                                ii.      So service or goods
D.    Formation
a.           UCC art 2 – Must know how the k is formed to know terms agreed
                                                  i.      2-204 –Formation
1.      contract formation in general is very flexible
2.      2-204(1) – contract “may be made in any manner sufficient to show agreement, including conduct.” 
3.      2-204(2) – even if the moment of contract formation is undetermined.
4.      2-204(3) – even if some of the terms are left open
                                                ii.      2-206 – Offer and Acceptance à Formation
1.      Definition of “offer” and “acceptance” is not found in the code because their definition is incorporated from the common law by 1-103.
2.      Acceptance is very flexible unless unambiguously indicated by language or circumstances:
a.       in any manner and by any reasonable medium
b.      by shipment (actual performance) of either conforming or non-conforming goods, unless the seller indicates that the shipment is only an accommodation.
c.       avoids unilateral contract trick of seller denying contract formation if buyer rejects goods, and insisting on contract price if buyer accepts goods.
d.      beginning performance prevents revocation for a reasonable time, but the performer must notify the offeror of acceptance within that reasonable time.
e.       promise to ship or shipment may be sufficient for acceptance
3.      Like 207(1), terms that are additional to or different from original agreement, a definite and seasonable acceptance is acceptance.
a.       I.e. supposed to send acknowledgment form after receive shipment, but still thinks she doesn’t want to be bound by the k’s arbitration (b/c they didn’t orally agree on it) she can be bound by the k w/arb because definite and seasonable acceptance (207 and 206).
4.      shipment of non-conforming goods – 2-206(1)(b) = acceptance but breach
a.       seasonably notifies buyer that goods are an accommodation than no acceptance
                                                                                                                          i.      buyer can return or accept
                                              iii.      2-207 – Battle of the Forms (the big guy from contracts)
1.      look at what terms are and when the k is formed (i.e. if terms that discuss on phone are different from terms sent with goods)
a.       2-207(2) btw merchants
b.      If agree on basics (i.e. price, date) then terms of k will be made by 207
c.       Inconsistent papers though, no k (look at sequence)
d.      Acknowledgement of accepting goods may be construed as acceptance even though different or additional terms.
                                                                                                                          i.      If terms are too different – i.e. confusion as to what the goods are à no k.
                                                                                                                        ii.      If acknowledgement is made conditional on buyer’s assent to additional terms à not a k b/c 2-207(1) unless…(i.e. not a definite and seasonable accept b/c there are conditions)
                                                                                                                      iii.      If acknowledgement says – “I accept but I disclaim the consequential damages and arbitration clauses” à k b/c not conditional.
1.      Comment 6 – but if those terms are different from seller’s confirmation don’t come in.
2.      if only buyer sent confirmation barring those remedies, Comment 3 says additional = different. If materially alterà not come in unless expressly ok’d. If not materially alterà incorporated unless notice of objections w/in reasonable time.
e.       Note- material alteration if surprise or hardship
                                                                                                                          i.      Mandatory arbitration = material
                                                                                                                        ii.      Reasonable limitations on remedies = not
1.      comment 5 – no element of unreasonable surprise
2.      make sure the confirmation is to help form the k, otherwise parties would try get out of k already formed by sending non-matching confirmation. (Would just treat as proposals)
2.      revised 2-207 –
a.      terms are what parties agreed to + default terms
E.     Lease vs. Sale
1.      Important b/c rights of TP and tax. Look to economic realities of transaxn at the time k was entered into.
2.      1-203 – depends of facts of case. Sec int if:
1.      term lease equal to economic life of goods = (no reversionary interest)
2.      not subject to termination by lessee à security interest.
3.      lessee bound to renew for remaining economic life or bound to become owner
4.      option to renew w/nominal or no consideration (b/c treated as something that will happen), or
5.       l’ee option to become owner of goods for no additional consid or nominal upon compliance w/the lease agreement (i.e. at end of lease, acquiring party is declared the owner)
a.       Diff from 3 b/c 3 has option to become owner and 4 says will become owner w/follow lease.
b.       Nominal if
                                                                                                                           i.      Comparing the consideration paid WITH
                                                                                                                          ii.      Reasonably anticipated fair market value at the time of the original agreement
                                                                                                                        iii.      Rationale—what did the parties think the goods would be worth at the end of the lease
                                                ii.      If creates a security interest in the goods àfinance lease 203(g)
1.      sale intended for security = seller sells goods on credit and retains right to foreclose on goods if buyer fails pay price.
2.      Will not create security interest merely b/c:
a.      lessee agrees to pay taxes, maintenance, etc.
b.      b/c present value is substantially equal to or more than FMV, see statute…
c.       but look to these as factors
                                              iii.      Examples:
                                              iv.      Say for example the lease is for a year, but there is something else in the agreement that commits the goods to the party for the rest of the economic life
1.      Ie. buyer has an option to buy high tech computer after 1 year lease for $.05 and computers have 1/3 of economic life remainingàsale
a.       The $.05 is considered nominal consideration
                                                v.      If lessee can terminate the deal it is a lease as a matter of law because there is a reversionary interest
1.      Howev

                                i.      Offer by a merchant to lease goods to or from another person in a signed writing that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or if not time is stated, for a reasonable time, but in no event may the period of irrevocability exceed 3 months. Assurance must be separately signed by offeror.
1.      leaves room to get around w/CL equity (i.e. prom estoppel)
b.           2A-201 SOF Leases
                                                  i.      apply when one party denies existence of contract*
                                                ii.      Lease k not enforceable unless
1.      total payments to be made under lease k excluding payments for option to renew or buy are less than $1,000 (revised $5g) or
2.      writing…signed by party against whom enforcement…describe goods leased and lease term.
3.      delivered goods and accepted payment
4.      no merchant exception
                                              iii.      Comment 1– no exception for payment (unlike buyer in sales, lessee doesn’t tender payment in full for goods delivered, but only rent for 1 or more months. As mater of policy this act of payment is no sufficient substitute for required memorandum.
1.      So, in 2A can possibly get around writing if lessee pays in big single payment.
2.      not supplement w/CL
3.      unsure about part performance!
H.    CISG Formation
a.           Article 19 – like 2-207
                                                  i.      (1) reply to an offer which purports to be acceptance but contains additions, limitations, or other modifications is a rejection of offer and constitutes a counteroffer.
                                                ii.      (2) however…which do not materially alter terms of offer constitutes an acceptance, unless offeror, w/out delay, objects orally…
                                              iii.      (3) price, payment, quality or quantity, place/time delivery, extent of one party’s liability = material.
                                              iv.      Like CL mirror image rule but only for material alterations.
b.           Article 18 – Acceptance
                                                  i.      Statement or conduct indicating assent = acceptance
1.      i.e. accepting and paying for goods
2.      precludes acknowledgement from operating as acceptance to purchase order; treated as accepting other k. “Last shot doctrine” (use the latter writing as basis for k)
a.       UCC 202 – and revised 207 differ from this.
                                                ii.      Silence itself not equal acceptance.
c.           No SOF (Art 11- no writing requirement) and no PER (Art 8(3) look at evidence to show intent, such evid not barred)
Generally according to Henny
§         2-207 – writing as acceptance is such even if terms are different unless it says acceptance is conditioned on our terms
§         CISG –different terms are not treated as k formed unless the different terms are immaterial.
Formalization -what kind of paper work in effect do you have to do
§         PER- 2-202 –written k, then info about course dealing/peform/trade use and assurance made during sales pitch are not admissible if contradict writing as final expression of agreement.
§         SOF2-201 – basic rule is if no writing, no enforceable k- w/exceptions.
§         CISG no SOF or PER
 
I.       Warranties
a.           Art 2 – Implied Warranties arise as default terms
                                                  i.      Seller merchant – Merchantability
                                                ii.      Special circumstances – fitness for particular purpose
                                              iii.      CL can supplement (Estoppel)
b.           2-313 Amended