SALES OUTLINE – Prof. Kwestel
*An installment contract is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent
* Negotiable Bill of Lading: A document that indicates the receipt of goods for shipment by carrier, and that is issued by a person engaged in the business of transporting or forwarding goods
*Requirements Contract: Buyer’s promise to purchase all requirements from seller
*Output Contract: Seller’s promise to sell entire output to Buyer
à Buyer or Seller involved in output or requirements contract is required to use good faith and limit quantity demanded or tendered; Seller is obligated to use best efforts to supply goods
I. ARTICLE 2 – POLICIES
· Commercial Reasonableness & Fairness
1) Every contract or duty imposes an obligation of good faith in its performance or enforcement
2) Non-merchant standard is subjective honesty test as to whether it is reasonable
3) A merchant is held to “the observance of reasonable commercial standards of fair dealing in the trade”
· Application: **Refer to each rule to determine applicability to merchants and/or non-merchants
· Good Faith: Honesty in fact, and the observance of reasonable commercial standards of fair dealing; General standard both buyer and seller are held to
· Article 2 DOES NOT apply to sale of services, only present and future sales of goods
II. DEFINITIONS
* Applies ONLY to tangible personal property, not real property
· Goods: All things which are moveable at the time of identification to the contract for sale, other than the money to be paid and things in action;
o Must be both existing and identified before any interest in them can pass, otherwise they are identified as “future goods” and only subject to Article 2 when actually manufactured or in existence
o Goods also include the unborn young of animals and growing crops
o Anything attached to the land which can be removed without material harm thereto is “goods”
· Sale of Goods: A contract under which title to goods passes from Seller to Buyer for consideration called a “price”
o A “present sale” is a sale which is accomplished by the making of the contract
o à Determine whether Article 2 will apply (contract involves goods AND services):
a) Predominance: UCC applies when the sale of goods is the PREDOMINANT PURPOSE of the contract
b) Hybrid: UCC applies to the portion of contract involving the sale of goods if SEVERABLE
o à Determine whether Article 2 will apply (contract involves goods AND information):
a) UCC applies to aspects involving standards of performance of goods OR rights in goods
b) UCC applies to a sale of a computer program NOT specifically developed for the transaction
· Merchant: One who REGULARLY engages in sale [Merchant Seller] and/or purchase [Merchant Buyer] of a particular type of goods and has SPECIAL KNOWLEDGE of goods involved in the transaction
o An “Expert” is considered a merchant; An expert is a person who either:
1) Holds himself out as having knowledge or skill peculiar to the type of goods involved in the transaction, OR
2) Employs an Agent, Broker, or other Intermediary who holds himself out as having such knowledge or skill
o A “Dealer” (person who deals with goods of the kind) is also considered a merchant
o Almost every person in business will be considered a merchant; i.e. even banks and universities
o “Between Merchants” means any transaction with respect to which both parties are CHARGEABLE with the KNOWLEDGE OR SKILL of merchants
III. FORMATION OF CONTRACT
· Formation in general:
o A contract for sale of goods may be made in any manner sufficient to show AGREEMENT (written, oral, or otherwise – subject to Statute of Frauds), including conduct by both parties which recognizes the existence of such contract
o Even if the exact moment of its creation is UNDETERMINED, an agreement sufficient to constitute a contract for sale may still be found
o Even if one or more terms are left OPEN, a contract for sale does not fail for indefiniteness so long as the parties have INTENDED to make a contract AND there is a reasonably certain basis for giving an appropriate remedy
A. Offer
· An offer must be sufficiently definite to invite acceptance
· An offer requires intent to contract AND a reasonable basis for remedy à A term for quantity is sufficient to satisfy these requirements
· Merchant’s Firm Offer Rule:
o A written offer by a merchant which by its terms gives assurance that it will be held open is irrevocable for the time stated or for a reasonable time if no time is stated, but no longer than 3 months without consideration
o If the statement that the offer will be held open is on a FORM SUPPLIED BY OFFEREE, or “boiler plate” language is used, the merchant offeror must sign such form separately
B. Acceptance and Terms of the Contract
· Unless unambiguously indicated by an offer, acceptance of the offer may be made in ANY manner, or by ANY medium reasonable under
N WRITING, and MUST
o Indicate that a contract for sale has been made between parties
o Be signed by the party against whom enforcement is sought
o Specify a quantity, à contract will not be enforceable beyond the quantity stated
· Terms which may be omitted without invalidating the writing: price, time and place of payment or delivery, the general quality of the goods, or any particular warranties
· A merchant may satisfy the requirements of writing by sending the other merchant a confirmation of the contract
o The confirmation will be an effective writing UNLESS the party receiving the confirmation gives the sender a written notice of objection within 10 days after receiving the confirmation
o If the receiving party does not properly object to the confirmation, it WILL BE EFFECTIVE if:
1) The writing is in confirmation of the contract AND
2) It is also sufficient to hold the sender responsible, AND
3) It is sent within reasonable time after the contract was created, AND
4) The party receiving the confirmation has reason to know its contents
· A contract which DOES NOT satisfy the writing requirements will STILL be ENFORCEABLE if:
1) The goods are:
i. Specifically manufactured for buyer, AND
ii. Not suitable for sale to others in the Ordinary Course of Seller’s Business, AND
iii. The seller seller has EITHER substantially begun the manufacture of the goods OR made commitments to obtain the goods:
à BEFORE any notice of repudiation was received AND
à Under circumstances which REASONABLY INDICATE that the goods are FOR THE BUYER;
2) The party against whom the enforcement is sought admits that a contract for sale was made;
3) Either payment has been made & accepted, OR goods have beenreceived and accepted
