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Commercial Transactions
University of Dayton School of Law
Hallinan, Charles G.

COMMERCIAL TRANSACTIONS
PROFESSOR HALLINAN
FALL 2010
 
 
Sales
 
I.                   Scope of Article 2
a.      §2-102 :  Applies only to transactions (contracts) dealing with the sale of goods
                                                              i.      (Transactions Not Defined)
b.     §2-106 Definitions: 
                                                              i.      “Contract”
                                                            ii.       “Agreement”
                                                          iii.       “Contract for Sale”
                                                          iv.       “Sale” passing of title from seller to buyer for price (§2-401)
                                                            v.      “Present Sale”
                                                          vi.       “Conforming” to Contract
                                                        vii.       “Termination”
                                                      viii.       “Cancellation”
c.      §2-105 Definitions
                                                              i.      Transferability
                                                            ii.       Goods—all things (including specially manufactured goods) movable at the time of identification to the contract
1.      Can also include:
a.       the unborn young of animals
b.     Growing crops
c.      Other identified things under §2-107
                                                          iii.      “Future” Goods
                                                          iv.      Lot
                                                            v.      Commercial Unit
d.     Sales-Service (Hybrid Transaction)
                                                             i.      Majority Rule—Predominate Purpose Test (Circumstances)
                                                          ii.      Minority Rule—Gravamen Test (Complaint either for Goods or Service)
e.      Merchants
                                                              i.      Comments to §2-104 
1.      Any merchant acting in mercantile capacity
a.      §2-201 Statute of Frauds and Exceptions
b.     §2-205 Firm Offers
c.      §2-207 Exchange of Forms as Acceptance
2.      Merchant with respect to goods of that kind
a.      §2-314 Implied Warranty of Merchantability 
                                                            ii.      Good Faith
1.      Honesty in Fact (§1-201(20)) AND
2.     Observance of Reasonable Commercial Standards of Fair Dealing in the Trade (2-103)
                                                          iii.      New Merchants
                                                          iv.      Between Merchants (§2-104)
f.       Non-Merchants
                                                              i.      Good Faith
1.      Honesty in Fact (§1-201(20))
 
II.               Contract Formation
a.      Statute of Frauds (§2-201) (One Party Denies Existence of Contract) (Does not Mean A Contract Exists—Only Means Aggrieved Party Gets Day in Court)
                                                              i.      Requirements
1.      Sale of goods for total price of $500 or more
2.      Writing Required—intentional reduction to tangible form (§1-201(43)
a.      Sufficient to indicate existence of an agreement (objective evidence of agreement)
b.     Signed by party to be charged
                                                                                                                                      i.      Any symbol with present intention to authenticate (§1-201(37))
c.      Listing determinable quantity
                                                            ii.      Exceptions
1.      Merchant Exception (§2-201(2))
a.      Between Merchants
b.     Confirmatory Writing after Oral Agreement (objective guarantee that oral agreement rests on real transaction)
c.      Sufficient Against Sender
                                                                                                                                      i.      Writing sufficient to indicate agreement was made, signed by sender indicating quantity
d.     Sent and Received within Reasonable Time
e.      Recipient Knows of its Contents (Sent to proper place)
f.       Objection of Recipient
                                                                                                                                      i.      Written objection to the confirmatory memo (“We have no Contract”) made within 10 days of receipt of confirmation
2.      Specially Manufactured Goods Exception (Where BUYER Denies Existence of Contract)
a.      Specially Manufactured Goods for the Buyer
b.     Not Suitable for Sale to Others in Seller's Ordinary Course of Business (Circumstances)
c.      Seller Substantially Began Manufacture OR Arranged for Procurement of Manufacture
d.     Before Buyer Notifies Seller of Repudiation
e.      Under Circumstances Reasonably Indicating the Goods are for the Buyer
3.      Admissions
a.      Once Party Admits Existence of Contract, SOF cannot be at issue
4.      Performance Exception
a.      Buyer Makes Payment AND Seller Accepts
b.     Seller Delivers, Buyer Receives, AND Buyer Accepts and Retains Goods
c.      Part Payment—enforceable to the extent paid
                                                                                                                                      i.      More than One Item: Court Apportions Goods
                                                                                                                                    ii.      One Item: No Apportionment
b.     Formation in General (§2-204)
                                                              i.      Contract made in any manner sufficient to show agreement including conduct whether or not moment of making is undetermined
                                                            ii.      If terms left open, contract is sufficiently definite so long as a reasonably certain basis to determine remedies exists
c.      Firm Offers (§2-205)
                                                              i.      Offer to buy or sell goods
                                                            ii.      Offeror is any merchant under §2-104
                                                          iii.      Signed Writing (If oral, must be supported by consideration)
                                                          iv.      Assurance that offer is held open
                                                            v.      Offer revocable for time specified, not exceeding three (3) months
d.     Offer and Acceptance (§2-206)
                                                              i.      UNLESS OTHERWISE UNAMBIGUOUSLY INDICATED, Offer to make a contract is construed as inviting acceptance in any reasonable manner
                                                            ii.      Prompt Shipment or Promise to Ship means acceptance can be either
1.      Conforming goods shipped acts as acceptance
2.      Non-Conforming Goods shipped with timely and seasonable notification that the goods are accommodations IS NOT acceptance UNLESS buyer accepts the nonconforming goods
                                                          iii.      Beginning of Performance acts as acceptance
1.      Notification of the beginning of performance must be sent to buyer
e.      Additional Terms Included in Acceptance (§2-207(1))
                                                              i.      Definite and Seasonable Expression of Acceptance Including Different or Additional Terms Acts as an Acceptance
                                                            ii.      Where Acceptance is “Expressly Made Conditional to Offeror's Assent to Different or Additional Terms,” there is no Acceptance UNTIL Offeror Expressly Assents
1.      MUST STATE THESE EXACT WORDS
 
III.            Breach of the Contract
a.      First, Define the Contract Terms
                                                              i.      Parole E

                 ii.      Not Between Merchants and Additional Term
1.      Additional term is a proposal to the contract
                                                                                                                                  iii.      Different Terms (Three Approaches)
1.      Knockout Rule
2.      Master of Offer OR
3.      Reasonable
b.     Acceptance Made Expressly Conditional to Buyer's Assent to Different or Additional Terms
                                                                                                                                      i.      NO ACCEPTANCE UNLESS OFFEROR EXPRESSLY ASSENTS
1.      If offeror assents to additional terms, there is no issue
                                                                                                                                    ii.      IF NO ASSENT, Writings do not establish the contract
c.      Where writings do not establish the existence of a contract, but Subsequent Performance Indicates Agreement (§2-207(3))
                                                                                                                                      i.      Terms consists of those terms to which the parties agreed AND
                                                                                                                                    ii.      Gap fillers in the code
                                                          iii.      Gap Fillers
1.      §2-305 Open Price Term
a.      Reasonable Price @ time of delivery IF price not included, left to be agreed upon and fail to agree, or parties let market decide the price
2.      §2-311 Allocation of Quantity
a.      Specifics left to one party
                                                                                                                                      i.      Specifications must be done in good faith within commercial reasonableness
b.     Where party refuses to set specifications
                                                                                                                                      i.      Other party may treat the refusal as a breach and be excused from performance OR
                                                                                                                                    ii.      May proceed to set specifications himself in a reasonable manner
3.      Other presumptions: Unless otherwise agreed
a.      Entire K is to be delivered at one time.  UCC §2-307
b.     Tender of delivery is at seller's place of business.  UCC §2-308
c.      Time for Delivery is a reasonable time.  §2-309(1)
d.     Payment is due at the time and place of delivery upon receipt of goods §2-310(a)
                                                          iv.      Warranties
1.      Warranty of Title (§2-312)
a.      Created in the sale of goods
b.     Extent
                                                                                                                                      i.      Good Title Conveyed (§2-403)
1.      Void Title—involuntarily giving up goods
2.      Voidable Title—voluntarily giving up goods
a.      GFPV—good faith standards; voluntary transfer of interests, for value (sale)