SALES AND LEASES OUTLINE HAVARD SPRING 2011
OFFER AND ACCEPTANCE
Generally
1. UCC applies
a. Minerals, including oil and gas
b. Structures or its materials (house), if severed by the seller
c. Crops or an asset attached to land that is not a structure – either party may severe
1. Transactions
a. Sales—passing of title from seller to buyer for a price UCC § 2-106(1)
i. Seller: One who sells or contracts to sell UCC § 2-103(1)(d)
ii. Buyer: One who buys or contracts to buy UCC § 2-103(1)(a)
b. Exchanges
2. Goods
a. Things which are movable at the time of identification of the contract for sale UCC § 2-105(1)
i. Minerals removed from realty UCC § 2-107(1)
1. Removed by the seller
ii. Growing crops, building materials inside of building UCC § 2-107(2)
1. Attached to realty
2. Severed without material
3. Removed by buyer or seller
b. Manufactured goods UCC § 2-105
i. Specially manufactured goods
1. appear to request service of mfg. the good BUT
2. the mfg of goods is covered under Article 2 (see below: hybrid transactions)
2. UCC does not apply
a. K’s predominantly for services
b. Real property that isn’t moveable (such as real estate)
c. Personal property that is intangible
i. K and intellectual property rights
ii. Money as a medium of exchange
iii. Negotiable instruments
iv. Negotiable documents
Predominant Aspect Test
o was the intent of the parties to contract for goods or for services
o test is whether their purpose is a rendition of service with goods incidentally involve or a transaction of sale with labor incidentally involves
o Consider
§ Language of K
§ Nature of business and supplies
§ Value of materials
o If predominant purpose, selects a single set of rules to govern all aspects of a mixed sales transaction
o If the primary purpose for entering into the contract was for the goods, Article 2 applies
o If the primary purpose for entering into the contract was for the service, Article 2 does not apply: common law will apply
o Doctors—under this test, doctors are presumed to provide services; thus, Article 2 will not apply to doctors
o
Gravamen Test
– Test focuses on the nature of the complaint
– Consider
o Is the B complaining about the S’s labor or a defect in the goods
o The portion of the transaction upon which the complain is based
o Scope of the injury and seriousness of resulting damage
§ If Gravamen, selects law issue by issue
o If the point of complaint is towards the good, Article 2 (and common law) applies
o If the point of complaint is towards the service, Article 2 will not apply: common law will apply
o Benefits
§ Draft the complaint under the UCC (because UCC and Common law can apply)
§ Broadens the scope of the UCC
§ Fairness
· Focus on the substance of the transaction rather than the form
o Applies primarily in Consumer transactions, not between businesses
– hybrid test, Intent + consideration
– court looks at what is important
– decide to apply Article 2 to entire K or part that caused the problem
– Under the test each component of the sale is isolated and individually determined to be either a good or a service.
MERCHANT/NONMERCHANT
1. Merchants UCC § 2-104
a. Dealer of particular goods OR
b. One with knowledge or skill peculiar to goods or practices OR
c. One whom acquires knowledge or skill by hiring an agent with such knowledge or skill
2. What kind of merchant
a. Any person in business acting in mercantile capacity (lawyer or banker buying fishing tackle for own use not a merchant)
i. Statute of frauds UCC § 2-201(2)
ii. Firm Offers UCC § 2-205
iii. Confirmatory Memoranda UCC § 2-201(2)/2-207
iv. Modifications of Contracts UCC § 2-209
b. Merchant with respect to goods of that kind
i. Implied Warranty of merchantability UCC § 2-314
a. Specific and professional sellers
b. Not isolated sales
c. Good Faith UCC § 2-103(1)(b)
ii. Any person in the business acting in mercantile capacity
a. Good Faith Standard for merchants UCC § 2-103(1)(b)
i. Honesty in fact UCC § 1-201(19) AND
ii. Observance of reasonable commercial standards of fair dealing in the trade
d. New Merchants
iii. Comparable to other new merchants
e. ALL MERCHANTS MUST FOLLOW GOOD FAITH STANDARD FOR MERCHANTS
f. “Between Merchants” UCC § 2-104(3)
iv. Both buyer and seller must be merchants
Formation
1. UCC 2-204
a. Makes it clear that parties don’t have to spell everything out in the K
2. UCC 2-205 – Firm Offer
a. Merchants don’t need to exchange consideration if irrevocability is a term of the offer
1. IF Offer to buy or sell goods
2. Offeror is a merchant
a. Knowledge of business practices AND
b. Acting in mercantile capacity
3. Must be a signed writing
a. If oral, must be supported by consideration AND
4. Assurance that the offer is held open
5. THEN offer is irrevocable even without consideration
a. Offer is valid for three month maximum
i. If offer is open for only twenty days, it is irrevocable for twenty days
ii. Code provides the maximum time—parties can contract for less ti
o settlement of disputes
STATEUTE OF FRAUDS
a. 2-201
Statute of Frauds UCC § 2-201(1) *apply when one party denies existence of contract*
i. IF sale of goods AND
ii. $500 or more (total price of the contract) THEN
iii. writing is required
1. Intentional writing into tangible form
a. Printing, typewriting, e-records or other tangibles UCC § 1-202(46)
2. Need not be mailed, delivered, or seen by the P in order to qualify
iv. sufficient to indicate the existence of an agreement
1. some objective evidence to believe an agreement was made
v. signed by the party to be charged (person who claims there is no contract)
1. any symbol WITH
2. present intent to authenticate UCC § 1-201(39) AND
vi. listing the quantity (code cannot fill in the quantity term, so you must have it)
1. not exact quantity
2. can be determined by good faith or reasonableness
Exceptions to the statute of frauds
i. UCC § 2-201(2) Merchant Exception
1. IF between merchants
a. both parties must be merchants
b. Any person in the business acting in mercantile capacity (2-104(3) comments)
2. writing that confirms the contract
a. probably after oral agreement; this is pretty much a given, but my darling girlfriend wanted it included in the outline, and because I lover her, I will so include said element.
b. Oral agreement followed by confirmatory memo: Bazak
i. Some objective guarantee that the oral agreement rests on a real transaction
3. Sufficient against the sender (would bind the sender: requirements of 2-201(1))
a. writing
b. sufficient to indicate agreement was made
c. signed by sender AND
d. indicating quantity
4. Sent and received within a reasonable time
a. fairness to the receiver of the memo
b. To determine reasonable, look to goods
i. Perishable
ii. Depreciation
iii. Reasonable industry standards
5. Recipient has reason to know of the memo’s contents
a. reason to know means the sender sent the memo to the appropriate place
i. recipients are expected to read mail
