Comm. Trans. Outline
SALES SYSTEMS/ TRANSACTIONS IN PERSONAL PROPERTY
2-301 General Obligations of Parties
The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the K.
I. FORMATION
a. The Role and Scope of Codes in Sales Systems
i. Fundamental Aspects of Sales
1. Four functions of sales systems
a. Formation- they bring buyers and sellers together
b. Terms- provide a set of standard terms
c. Performance-provide the possessory, legal and symbolic transfer from seller to buyer/ delivery
d. Remedies- provides the buyer and seller with various remedies
ii. Functions of a Code in Sales Systems
1. warranty of merchantability- a promise that items are “fit for their ordinary purpose”
2. provides gap- fillers
3. provides predictability more so than the common law
4. common law still provides three roles
a. can help define terms that the UCC has left undefined
b. provides related common law doctrines referred to in the UCC- offer guidance
c. CL doctrines not mentioned the UCC that work side-by-side with the UCC
iii. Scope of Article 2
1. Intro:
a. Applicable transactions
i. 2-102- Art. 2 applies to transactions in good- specifically the sale of goods
1. goods- “all things that are movable at the time of K for sale” (tangible items)
b. Although there are many gap-fillers, the 2 that cause parties to fight over the application of the UCC the most are: the warranty gap-filler and the SOL gap-filler
i. A prima facie- warranty case is fairly easy to prove in comparison to a party’s available action in tort/ negligence
ii. SOL under the UCC is 4 years from the time the cause of action accrued, even if the party has not discovered it
c. There are 4 ways that UCC gap- fillers are superseded
i. Contract specifically addresses the matter
ii. Parties’ repeated occasions for performance within that K may establish an agreement by implication (course of dealing) 2-208
1. may show waiver or modification
iii. Parties’ past dealings may establish an agreement by implication (course of dealing) 2-208
1. may show waiver or modification
iv. Custom in a particular industry (usage of trade)
d. Express terms trump course of dealing and usage of trade
e. Course of dealings trumps usage of trade
f. Mixed-Ks (use in determining if K is for goods or services- also applicable to merchants)
i. Predominant purpose test
1. whether the predominant purpose was to sell goods or services
2. used frequently in medical health field
ii. Gravamen of the action test
1. whether the source of the complaint is within the goods or the services portion of the transaction
2. used frequently in transactions with commercial entities (plumbers)
iii. States that have addressed the question in the state supreme court’s will not clearly state which test they use overall b/c they may switch between tests depending on the facts of the case
1. TF, it is tough to know what jurisdiction one is in
g. In the instance of services Ksà liability
i. Breach of K- implied warranty of “workmanlike performance”
ii. Negligence
h. More is expected of merchants than non- merchants
i. Implied warranty of merchantability
ii. SOF required for merchants
iii. General duties of good faith and fair dealing
2. Dakota Pork Indus. V. City of Huron
a. Dispute around whether the item sold (water) was a “good” and thus Article 2 applies, specifically the breach of express warranty and breach of implied warranty of fitness for a particular purpose
b. 2 viewpoints on whether the City’s providing water to ∏ constituted a “good”
i. NY- pre- UCC case held that the sale of water in a like situation is the sale of “goods”
ii. Oregon- held that water is not a “good”- it is not fairly identifiable as movable before the K is performed
iii. UCC definition- all things “which are movable at the time of identification to the K for sale” “must be both existing and identified before any interest in them can pa
rty- taken to satisfy a debt (before adoption of article 9- security interest there were many types of security devices- article 9 consolidated these devises- screws those in bankruptcy- b/c all things that are not leases are sales and thus, are taken from bankruptcy debtor)
1. Whether a transaction creates a lease or security interest is determined by the facts of each case; however, a transaction creates a security interest if the KSN the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee, and
a. The original term of the lease is equal to or greater than the remaining economic life of the goods,
b. The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods,
c. The lessee has an option to renew the lease for the remaining economic life of the goods for no additional KSN or nominal additional KSN upon compliance with the lease agreement, or
i. Nominal KSNà it is so low that the lessee will certainly exercise it- only a fool wouldn’t
d. The lease has an option to become the owner of the goods for no additional KSN or nominal additional consideration upon compliance with the lease agreement
2. Not security interest merely because:
a. Present value of KSN lessee is obligated to pay for right to possession and use of the goods is substantially equal to or is greater than the FMV at the time the lease is entered into
b. Lessee assumes risk of loss, pays taxes, insurance, maintenance, etc.
c. Option to renew or become the owner
