Sales and Leasing Outline

I.       When Article II Governs?
A.     Using Article II
·        Article 2 of the UCC applies only to transactions (Ks) dealing with the Sales of Gods
·        Thus, in order to use the rules of Article 2, one must first determine whether we are dealing with goods purchased in a sale transaction.
·        It is therefore imperative to ask 3 questions before attempting to apply Article 2 to a particular set of circumstances (all criteria must be met):
a.      Is there a transaction of sale? 2-106
b.      Does the sale involve goods? 2-105
c.       Is there a valid K?
1.      2-105: Definition of “Goods”
·        According to UCC 2-105 “good” are all things which are movable at the time of identification to the K for the sale, specifically including:
1.      Specially manufactured goods
2.      Unborn Young of animals
3.      Growing Crops
 
And under §2-107(2):
 
4.      Crops and fixtures which can be removed without material harm to the land, and timber (re movable by seller or buyer); &
5.      Minerals and structures to be removed from land by the seller, not the Buyer.
 
Under 2-105(1): Goods do not include
1.      money in which the price is to be paid.
2.      investment securities (covered by Article 8); and
3.      Things in action (2-105(1)) (Comment 1)
 
Note: Identification of Goods § 2-501
 
(1)(c) Manner of Identification:
1.      Agreed Mode of Identification: Identification can be made at any time an in any manner explicitly agreed to by the parties.
2.      No Specified Mode of Identification: If the parties did not explicitly agree how the goods are to be identified, identification shall occur as follows:
(a)    Sales of Already Identified Existing Goods: Present Sale of Goods
Identification shall occur when the K is made if the K is for the sale of goods which are already existing and identified. 
 
(b)   Sale of Future Goods: 
Identification shall occur when the seller designates specific goods as goods for the K (ex: when they are shipped, marked or set aside for the Buyer) if the K if for the sale of future goods (which are not crops or goods falling under (c).
(c)    Sale of Crops and Animals
1.      Crops: Identification shall occur when the crops are planted or become growing crops (if the K is for the sale of crops to be harvested within the longer of 12 months or after the harvest season after the K is made).
2.      Unborn Animals: Identification shall occur when the young are conceived (if the K if for the sale of unborn young to be born within 12 months after the K is made).
 
2.      Sales Transaction: The transaction involved be a “Sale.” à2-106
 
2-106(1) K for Sale
a.       Limitation to Present and Future Sale of Goods: 
In this article (unless the context otherwise requires) the terms K and agreement are limited to those relating to the present or future sale of goods.
b.      K for sale – Includes both:
1.      A Present Sale of Goods and
2.      A K to sell goods at future time.
c.       Sale: A sale consists of the passing of title from the Seller to the Buyer for a price (as per 2-401)
d.      Present Sale: A sale which is accomplished by the making of the K.
 
3. Existence of a K: Discussed in next section.
 
Hybrid Sales
Tests: To Determine Whether Article II Applies in Hybrid Transactions (Goods and Services)
1.      Predominate Purpose Test:
·        Looks at the transaction as a whole to determine whether its predominate purpose was the sale of goods or the provision of service.
·        Look at the following factors to determine whether the predominate purpose of the transaction is a service or good [none are dispositive]:
2.      Language of K between parties in light of the circumstances of the parties and the surrounding circumstances.
3.      Nature of business of the supplier of goods ands services
4.      Reason of the parties entering into K; purpose of K; or what each party sought to get out of K
5.      Respective amounts charged under the K for mixed sale of goods and services (if K has more $ with goods, the increased likelihood Article II should apply.)
 
2.      Divisibility Test: (In re Trailer and Plumbing Supplies)
·        Whether the K was divisible.
·        If the parties give a single assent to the whole transaction, the K is indivisible, while it is divisible if they assented separately to several things
 
3.      Hybrid/Mixture Transaction or Gravamen Test
·        Looks to that portion of the transaction upon which the complaining is based, to determine if it involved goods or services are present; thereby determining whether Article should govern.
·        If complaint is based on goods = Article II applies.
 
B.     Statute of Frauds 2-104
II.    Statute of Frauds
 
Effect of Code Provisions: 
A sale K that does comply with the Statue is unenforceable. However, if the parties choose to perform, enforceable rights may be created.
 
2-201(1) SOF
·         A K for Sale of Goods for greater than or equal to $500 must be in writing to be enforceable by way of action or defense (except as otherwise provide dint his section.)
·         The Writing Requirement:
(1)    Terms that must be contained in written memorandum: The writing is sufficient if it indicates that a K for sale has been made and specifies the quantity term. Note that a quantity in terms of output (e.g. “all the steel you produce”) is sufficient. The writing need only indicate that a K for sale ahs been made between the party.
(2)    The writing must be signed by the party against whom enforcement is sought (or his authorized agent or broker (ex: if seller is suing buyer, buyer’s signature must be on writing).
(3)    A writing is not insufficient if it omits or incorrectly states an agreed upon term.
 
Notes
·         The K will not be enforceable under 2-201(1) beyond the quantity of goods shown in such writing.
·         Form of Memorandum: No particular form is necessary as long as it contains the required terms. A buyer’s check with a notation as to subject matter and quantity suffices to bind the buyer; a seller’s endorsement when cashing the check will also bind the seller.
 
2-201(2) K Between Merchants
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Definition of Merchant: 2-104
A person considered a “Merchant” if he is either:
a) Dealer: A person who deals with goods of the kind or
b) Expert: A person who either:
1) Holds himself out has 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.
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(a) Merchant’s Confirmation:  A merchant can satisfy requirements of a writing (2-201(1)) by sending the other Merchant party a confirmation of the K.
 
(b) Notice of Objection: The confirmation will be effective writing unless the party receiving the confirmation gives the sender a written notice of objection within 10 Days after it received the confirmation.
 
(c) If the party receiving the confirmation does not properly object to it, it will be effective if:
1.      The writing is in confirmation of the K and
2.      It is also sufficient to hold the sender responsible and
3.      It is sent within a reasonable time after the K was created and
4.      The party receiving the confirmation has reason to known its contents.
 
Notes: Non-Merchants
If one of the parties is not a Merchants (as per 2-104) a written memorandum from a party will qualify as a writing if (2-201(2):
(1)   It indicates that K was created and
(2)