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Sales (see also UCC Article 9)
University of Dayton School of Law
Meadows, Robyn

Sales and Leases
Spring 2002
Professor Robyn Meadows

I. Scope
a. Article 2: Sales
b. Applies only to transactions in goods UCC § 2-102
i. Transactions
1. Sales—passing of title from seller to buyer for a price UCC § 2-106(1)
a. Seller: One who sells or contracts to sell UCC § 2-103(1)(d
b. Buyer: One who buys or contracts to buy UCC § 2-103(1)(a)
2. Exchanges
ii. Goods
1. Things which are movable at the time of identification of the contract for sale (basically only deals with tangible chattels) UCC § 2-105(1)
a. Minerals removed from realty UCC § 2-107(1)
i. Removed by the seller
b. Growing crops, building materials inside of building UCC § 2-107(2)
i. Attached to realty
ii. Severed without material
iii. Removed by buyer or seller
2. Manufactured goods UCC § 2-105
a. Specially manufactured goods
i. appear to request service of mfg. the good BUT
ii. the mfg of goods is covered under Article 2 (see below: hybrid transactions)
iii. Not covered by UCC Art.2
1. Sale of
a. Real estate
b. Choses in action
i. The ability to sue for breach of contract other than those involving goods
c. Investment securities
i. Stocks, bonds, promissory notes
d. Secured transactions
i. Art. 2 only deals with unsecured transactions. Secured transactions are where a seller or lender claims a secured interest in the good. (e.g. a chattel mortgage or conditional sales contract.) Art. 9 of the UCC covers Secured transactions
c. Hybrid Transactions
i. Predominate Purpose Test (all or nothing: either Article 2 applies or it does not)
1. If the primary purpose for entering into the contract was for the goods, Article 2 applies
2. If the primary purpose for entering into the contract was for the service, Article 2 does not apply: common law will apply
3. Doctors—under this test, doctors are presumed to provide services; thus, Article 2 will not apply to doctors
ii. Gravamen Test (Modern Law) (Both Article 2 and the common law can apply)
1. If the point of complaint is towards the good, Article 2 (and common law) applies
2. If the point of complaint is towards the service, Article 2 will not apply: common law will apply
3. Benefits
a. Draft the complaint under the UCC (because UCC and Common law can apply)
b. Broadens the scope of the UCC
c. Fairness
i. Focus on the substance of the transaction rather than the form
4. Applies primarily in Consumer transactions, not between businesses

iii. Examples
1. P goes to eye doctor for glasses. On one contract, P pays 100 for exam, 175 for glasses. They break and injure P. Under predominate purpose test, P has no Article 2 relief because healthcare is predominately a service. Under the gravamen test, P may have a cause of action under Article 2 because the point of complaint was the good—here, the glasses.
2. P goes to doctor for exam. Doctor gives exam, bills P, and refers him to D for glasses. P buys glasses from D, gets billed by D, and is injured by glasses. Again, the predominate purpose test would not allow recovery against the doctor under Article 2 because the doctor provided a service. P could recover against the D because D mfg. the eye glasses.
d. Article 2 applies to merchants and nonmerchants
i. Merchants UCC § 2-104
1. Dealer of particular goods OR
2. One with knowledge or skill peculiar to goods or practices OR
3. One whom acquires knowledge or skill by hiring an agent with such knowledge or skill
ii. What kind of merchant
1. Any person in business acting in mercantile capacity (lawyer or banker buying fishing tackle for own use not a merchant)
a. Statute of frauds UCC § 2-201(2)
b. Firm Offers UCC § 2-205
c. Confirmatory Memoranda UCC § 2-201(2)/2-207
d. Modifications of Contracts UCC § 2-209
2. Merchant with respect to goods of that kind
a. Implied Warranty of merchantability UCC § 2-314
i. Specific and professional sellers
ii. Not isolated sales
1. Siemen v. Alden—D was a lumber dealer and sold a saw. Held: not a merchant under 2-314 because he was not a merchant with respect to saws, but a merchant with respect to lumber.
3. Good Faith UCC § 2-103(1)(b)
a. Every contract or duty within the scope of the UCC imposes an obligation of good faith in its performance or enforcement –UCC §1-203
b. This obligation cannot be waived by the parties § 1-102(3)
c. Many court precedents hold that good faith is an absolute condition precedent to any protection by other UCC provisions, so if a person’s actions are clearly in bad faith, that person cannot claim the benefits of the UCC RULES.
d. Good Faith Standard for merchants UCC § 2-103(1)(b)
i. Honesty in fact UCC § 1-201(19) AND
1. this is not a reasonable person test but a test of subjective honesty, whether or not reasonable
ii. Observance of reasonable commercial standards of fair dealing in the trade (merchant’s standard) UCC § 2-103(1)(b)

4. New Merchants
a. Comparable to other new merchants
5. ALL MERCHANTS MUST FOLLOW GOOD FAITH STANDARD FOR MERCHANTS
6. “Between Merchants” UCC § 2-104(3)
a. Both buyer and seller must be merchants
e. Article 2A: Leases Applies to any transaction that creates a lease UCC § 2A-102
i. Definition of a Lease UCC § 2A-103(j)
1. Transfer of the right to possess and use
2. Goods
3. For a term
a.

igned 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
6. THEN no statute of frauds UNLESS
a. written
i. no phone calls
b. objection made to confirmatory memorandum
i. must object to the contract completely “we have no contract”
1. cannot be used to get out of a deal you actually made
c. Made within 10 days of receipt of the confirmation
7. The exception only eliminates the statute of fraud defense for the D
8. Only gives P her day in court
a. burden of proof remains with the P to establish the contract and terms
9. D can always dispute the terms of the agreement
10. Example of Merchant exception: Bazak—oral agreement between P (buyer) and D (seller) followed by purchase order sent by P (usually used by P as a seller, but here he was a buyer). Court held that there was objective evidence of the oral agreement and the purchase orders, although normally mere offers, were sufficient against P (sender) because they were specific, sent from seller, 4 orders were very detailed and the final order was a summary of the agreement and date of alleged oral agreement.
ii. Specially Manufactured Goods exception
1. specially manufactured goods for the BUYER
a. seller mfg’s for buyer
b. items not usually in stock
c. unique specifications
2. not suitable for sale to others in the ordinary course of seller’s business
a. cannot by advertising or buyer list sell the goods
b. efforts made
c. uniqueness of goods
d. scarcity of use for good
e. how many potential buyers
f. more expensive to build specific goods
g. mere fact that seller takes a loss is not enough to satisfy the element
h. there must be detriment to the seller
3. Seller has made a substantial beginning to manufacture OR made commitments for the procurement