Chapter 1: The role and scope of Codes in Sales Systems
A. Fundamental aspects of sales
What is the function of a sales system?
To see how the code fits into the BIG picture, as to:
B. The Real world of Sales
– Reality. More common not to sue, in reality the party would just stop doing business with the other.
– So when is sales law crucial?
o Litigation. When the normal business relationship breaks and the parties end up in litigation.
o “shadow of the law” When parties negotiate in informal settlements to disputes they do so knowing what will happen if it goes to litigation.
o Terms of forms. Law dictates the terms of forms. (purchase orders, distribution agreements…). Cam change the default rules by the form.
C. Functions of a code in a Sales System.
Gap filler. Parties to sales can’t think of everything so Article 2 sets the defaults.
Before gapfiller. Before you go to a gap filler go to:
(1) Express terms of the K
(2) course of performance (2-208)
(3) course of dealing – (1-205(1))
(4) trade usage – 1-205
Common law. UCC trumps CL. But CL can supplement the UCC. 1-103
Variations. UCC varies from state to state.
D. Scope of Article 2.
Scope: Are you in the code or out?
Why would you want the code to apply?
(1) plaintiff – the implied warranty of merchantability (for one)
(2) defendant – statute of limitations is shorter
2-725(1) – P has 4 yrs to commence suit from when the COA accrued (compare to state statutes where the SOL starts when the P discovers the breach).
UCC applies to transactions of goods.
2-102 – Article 2 applies to “transactions in goods.” Does not apply to “security transactions.”
2-105(1) – goods – all things (including specially manufactured goods) which are moveable at the time of identification to the K for sale.
2-105(2) – Goods which are not both in existence and identified to the contract are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.
Hybrid cases. Mixture of service and good. Courts have 2 approaches:
(1) Predominant purpose test. (majority)
If the main purpose is to purchase or supply goods, then the UCC applies to the entire transaction.
(2) Gravaman of the action test. (minority)
Looks at the problem. Is the problem with the good or the service? If it is with the good then the UCC applies.
Cook v. Downing – Is a dentist who puts in dentures a merchant and are dentures a good? Court here said no, the UCC does not apply.
à The dissent, who said that a dentist is a merchant and that the UCC does apply, is the majority rule.
1.2(a) – An example of a default rule. Here, the K did not specify a place of
The existence and scope of such usage are to be proved as facts.
If it is established that such a usage is embodied in a written code or similar writing, the interpretation of the writing is for the court.
1.3 – call from Aunt. She took in 7 reels of home movies so they could transfer them to tapes. Camera shop messes up the transfer. The home movies are destroyed!!!!!
Does the UCC apply, and thus aunt can use one of the warranties?
2-313 – “express warranty by the seller”
2-314 – Implied warranty of merchantability
2-315 – Implied warranty, fitness for a particular purpose
Is this a sale of good? It is a mix of goods and services. So how is that dealt with.
2-102 – “this article only applies to transactions in goods.”
The predominant purpose of the transaction was the service of the transfer not the tape itself. Thus it is not a SOG
The gravaman test looks to where the problem arose. The problem was not the VHS tape (not defective), the problem was with the service. Thus the problem is a service problem not a SOG problem.
So it doesn’t matter which jurisdiction, the contract was not for the SOG.