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Contracts II
University of Kansas School of Law
Drahozal, Christopher R.

Drahozal – Contracts 2 Outline – spring 2006
I.                   Article 2: Sales of Goods
a.       Contract Formation
                                                              i.      Scope
1.      rev. §1-103b = gapfiller is common law
2.      §1-303 = course of performance/dealing/usage of trade
a.       (1-303(e)) hierarchy = terms of k à performance à dealing à trade
3.      UCC applies to transactions in goods
a.       Transactions = ( ) more than just sales
b.      Goods = (2-105) all things specially manufactured which are moveable at time of ID to K for sale
                                                                                                                                      i.      Things are still goods even if you special order them
                                                                                                                                    ii.      Examples of goods= gas, glasses, contacts, sale of cd in music store, Majority says IP sold in retail store is analogous to good
                                                                                                                                  iii.      Examples of mixed= orig recording on cd sold to producer (good & IP), buy a book from Target
c.       Not goods = services, things in action (rights for future monies), security transactions
                                                                                                                                      i.      Examples = expensive specially fitted contacts, publishing co’s contract with author for future book (IP & services)
d.      Mixed transactions
                                                                                                                                      i.      Predominant purpose test (KS & Majority)
1.      whether pp is to sell goods or svcs
a.       if goods à art 2 applies to everything
b.      if svcs à art 2 doesn’t apply at all
2.      goods are predominant
a.       carpet & installation, computer w/ installed software, new computer controlled car
3.      services are predominant
a.       painting & paint, contract to write book, disk w/ master recording
                                                                                                                                    ii.      Gravamen of the action test
1.      if source of the complaint lies with goods, art 2 applies even if predominant purpose is svc
2.      if source lies with svcs, art 2 doesn’t apply even if pp = good
4.      Art 2 applies whether seller is merchant or not b/c 2-102 doesn’t mention it
                                                            ii.      Sales contract formation
1.      formation in general (2-204)
a.       (1) any manner sufficient to show agreement, including conduct
b.      (2) contract may be found even if moment of making is undetermined
c.       (3) leaving 1+ terms open does not automatically make contract fail for indefiniteness
2.      Firm Offers
a.       3 ways to argue an offer is irrevocable
                                                                                                                                      i.      consideration
1.      bargained-for exchange – option contract = irrevocable offer
                                                                                                                                    ii.      reliance
1.      à irrevocable offer b/c reliance becomes consideration
                                                                                                                                  iii.      2-205
1.      see below
3.      Offer & Acceptance in contract formation (2-206)
a.       An offer may be accepted “in any manner & by any medium reasonable under the circumstances”
                                                                                                                                      i.      When buyer offers to purchase goods for immediate shipment, seller may accept by
1.      shipping the goods OR
2.      promising to ship goods
                                                                                                                                    ii.      even a shipment of nonconforming goods will count as acceptance UNLESS seller specifically indicates that non-conforming shipment is offered merely as an accommodation to buyer (=counteroffer)
·         see [17]  
b.      Firm offers (2-205)
                                                                                                                                      i.      F.o. are binding (unlike CL) even w/o consideration IF offeror is merchant AND offer is in writing BUT only open for reasonable time (unless stated otherwise) and NEVER >3 months
4.      Add’l terms in acceptance or confirmation (2-207) [20] a.       How seller can ensure exclusion of consequential damages [23]                                                           iii.      Statute of frauds 2-201 (rationale [24])
1.      to be valid, writing must :
a.       be signed (by party against whom enforcement is sought)
                                                                                                                                      i.      rev 1-201(37)
1.      printed, stamped or written
a.       for emails, see [30] 2.      may be initials or thumbprint
3.      may be billhead or letterhead
b.      list qty
c.       sufficient to evidence existence of contract
                                                                                                                                      i.      “we had a deal, but you are wrong on term x so no deal” = fulfills 2-201(1) = no SoF defense
d.      might only be good against one party
2.      between merchants exception 2-201(2)
a.       see [26 & 27] = implies signature UNLESS written notice of objection
b.      an objection can serve as a writing
3.      specially manufactured good exception (2-201(3)(a) [30] 4.      admits in pleading exception 2-201(3)(b)
5.      part performance exception 2-201(3)(c) [28] a.       if 2-201(1) not met, contract is still enforceable for goods for which payment made and accepted OR goods received and accepted
                                                                                                                                      i.      20k downpayment for deskprice 12k/ea = at least one, probably 2 desks purchased
1.      seller argues that contract was for 6, SoL limits to 2 at most
·         reliance vs SoL [29] PAROL EVIDENCE RULE
1st: ID type of writing & type of terms
 
2-202: Final Written Expression:
–          Must have a writing (more than oral K), intended as final expression of agreement
–          Cannot be contradicted by prior or contemporaneous agreement, but may be explained/supplemented by…
 
(a)     Course of Performance, Course of Dealing, or Usage of Trade (1-303)
(b)     Evidence of consistent additional terms unless the court finds the writing to be a completely integrated writing
 
Non-Integrated Writing:
–          Not a final expression of terms set forth in writing (i.e., purchase order, draft K)
–          Can supplement & contradict
P

r of breach within a reasonable time after he discovers or should have discovered breach or be barred from remedy
 
2-607: Comment 4:
–          “Reasonable time” for a retail buyer is more lenient
–          Notice need not include all objections of the buyer
 
2-607: Comment 5: 3rd Party Beneficiaries
–          Even though beneficiaries are not covered by this section, they must still give notice to seller
 
Purposes of Notice:
–          Preserve Seller’s right to cure
–          Facilitate settlement (2-607: Cmmt. 4)
–          Permit seller to prepare for litigation
–          Maintain seller’s right to repose
PRIVITY
Summary of 2-318
Alternative A
Alternative B
Alternative C
Natural Person
Natural Person
Person
Family/Household/Guest


Reasonably Expected
Reasonably Expected
Reasonable Expected
Injured in Person
Injured in Person
Injured
May Not Limit
May Not Limit
May Not Limit as to Injury to Person
 
2-318: Alternative A
 
Express or Implied warranty extends to:
–          Any natural person (no corps.)
–          Who is in the family or household of his buyer or guest in his home
–          If it is reasonable to expect that such person may use, consume, or be affected by goods
–          And who is injured in person by breach
o        Majority: Can only recover personal injury damages
o        Minority: Once personal injury, can recover all damages
–          Seller cannot exclude or limit operation of this section
 
Horizontal Privity: Removed for family members and household guests
 
2-318: Alternative B
 
Express or Implied warranty extends to:
–          Any natural person (no corps.)
–          Who may reasonably be expected to use, consume or be affected by the goods
–          Who is injured in person by breach
–          Seller may not exclude or limit operation of this section.
 
Disclaimers: (Applies to all 3)
–    Buyer cannot disclaim warranty to 3rd party alone
–    Buyer may disclaim all warranties (both own and 3rd parties)
–    2-318 Cmmt. 1: Cannot give away 3rd party’s rights unless you give away your own as well.
 
Horizontal Privity: Removed for an even larger class of people
 
2-318: Alternative C
 
Express or Implied warranty extends to:
–          Any person (includes corps.)
–          Who may reasonably be expected to use, consume, or be affected by the goods
–          Who is injured by breach
–          Seller may not exclude or limit operation of this section with respect to injury to the person of an individual to whom the warranty extends.
Argument:
–          If seller disclaims all warranties and person suffers personal injuries, could void entire disclaimer
 
 
Horizontal Privity: Allows the greatest opportunity for people to recover