I. Scope of Article 2
A. 2-102 scope provisions
1. “applies to transactions in goods”
a) 2-105(1) defines “goods” as “all things which are movable at the time of identification”
(1) 2-501(1) defines when “identification” occurs as:
(a) at contract formation for goods already existing and identified
(b) when the goods are shipped, marked, or otherwise designated
(c) crops planted
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]:
1. Language of K between parties in light of the circumstances of the parties and the surrounding circumstances.
2. Nature of business of the supplier of goods ands services
3. Reason of the parties entering into K; purpose of K; or what each party sought to get out of K
· 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. Hybrid/Mixture Transaction or Gravamen Test
· Looks to that portion of the transaction upon which the complaint is based. If complaint is based on goods = Article II applies.
B. 2-106(1) – “contract” and “agreement” in Article 2 are limited to “present or future sale of goods”.
1. “present sale” is a sale which is accomplished by contract formation
2. “sale” is “passing of title from the seller to the buyer for a price.”
C. 2-103(1) defines “buyer” and “seller” as:
1. buyer is person who contracts to buy “goods”
2. seller is person who contracts to sell “goods”
D. 2-104(1) defines “merchant” as “person who deals in goods of the kind”
E. 2-107 – Goods to Be Severed From Realty
1. sale of things fixed to realty such as buildings, minerals, oil, gas, etc., is a sale of “goods” only if they are to be severed by the seller
2. sale of crops, timber, or things removable without material harm is a “sale of goods”, regardless of who is to sever, and even though it still forms part of the realty at the time of contracting.
F. 1-103 provides continuing applicability of common law unless displaced by a particular provision.
II. Contract Formation
A. 2-204 Contract formation in general is very flexible
1. 2-204(1) – contract “may be made in any manner sufficient to show agreement, including conduct.”
2. 2-204(2) – even if the moment of contract formation is undetermined.
3. 2-204(3) – even if some of the terms are left open
B. 2-206 Offer and Acceptance
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.
(1) avoids unilateral contract trick of seller denying contract formation if buyer rejects goods, and insisting on contract price if buyer accepts goods.
c) beginning performance prevents revocation for a reasonable time, but the performer must notify the offeror of acceptance within that reasonable time.
3. 2-205 Firm Offers are irrevocable during their stated term (or for a reasonable time) not to exceed three months if:
a) made by a “merchant” under 2-104(1) definition.
b) made in a “signed writing” signed by the offeror
c) give assurances that it will be held open.
(1) ex: an offer having an express term of 6 months may be revoked after 3 months, but the offeror must take affirmative action to do so because the common law “dispatch rule” is incorporated by 1-103.
C. 2-209 Modification and Waiver
1. An agreement modifying an contract needs no consideration to be binding.
2. private statute of frauds – parties can expressly require that any modification may be in writing.
3. the statute of frauds of 2-201 must be satisfied for a modification to be effective – for the same reason as contract formation
4. even if the modification attempt does not satisfy the statute of frauds, it may still operate as a waiver if relied upon by the other party.
5. waivers are retractable by
t signed writing with a quantity term, or otherwise by conduct
2. Second step: argue that a contract did exist, based on all the evidence, including oral evidence.
IV. Terms of the Contract
A. Contract and Agreement distinguished
1. 1-201(3) an “agreement” is “the bargain of the parties in fact as found in their language or by implication”
a) consists of express understandings plus trade usage, course of dealing and course of performance
2. 1-201(11) a “contract” is the “total legal obligation which results from the parties’ agreement” as affected by the code and common law.
a) may contain more terms than the agreement, as in the case of omitted terms which are supplied by gap-filler provisions
b) may contain fewer terms than the agreement due to unenforceability of terms due to parol evidence rule, fraud or mistake (for example).
B. 2-202 Parol Evidence Rule
1. terms intended to be a “final expression” of the parties’ agreement may not be contradicted by other parol evidence, but may be explained or supplemented:
a) by course of dealing or usage of trade or course of performance whether or not the document is “complete”;
(1) these implied-in-fact terms are incorporated unless carefully negated by express language.
(2) ex: in Royster, the court allowed evidence of usage of trade and course of dealing even though the contract was unambiguous on its face.
b) evidence of additional consistent terms unless the writing was also intended to be complete and exclusive.
(1) “complete” means that evidence of omitted terms that would “certainly” have been included in the document is excluded.
(2) a “merger clause” expressly stating that the document is complete and final, might not be enforced against an unsophisticated party.
c) “final” terms are terms that agree, or terms that both parties have otherwise assented to.