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Contracts II
University of Kansas School of Law
Ware, Stephen J.

Contract II
Professor: Ware
Type: Open book/notes
Structure: Written exam (worth 85% of final grade)
Length: 3?
Date/Time: 05.13.08 (Tuesday)/ 2:00PM
Computer: Yes

General: Scope of Article 2

I. Overview: Reputation is generally more important than law in the sales industry. Rather than sue, an aggrieved client will usually cease doing business.

A. The importance of sales law: Three ways sales law has an impact on sales system:
1. Relationships break down: It is crucial when normal business relationships break down, and parties end up litigating.
2. Informal settlements: Informal settlements in disputes will often consult the law to determine the bottom line.
3. Forms- creation and use: Sale law helps develop purchase orders, distribution agreements, etc.

B. UCC- Not the law: The UCC is not the law. Even in states where certain segments of the UCC have been adopted, there will often be amendments. And even if two states have adopted the same section of the UCC, the courts in these states may have interpreted them differently.

C. UCC- gap filler purpose superseded: There are four ways in which the UCC gap filler will be superseded:
1. Contract terms- covered by: When the contract itself specifies the terms (provided they are in good faith & commercial reasonableness).
2. Course of performance: Repeated prior performance constitutes agreement by implication.
3. Course of dealing: Prior history between parties may establish by implication certain standard terms used between parties.
4. Usage of trade: These are industry customs.
♣ a. Ragus Co. v. City of Chicago: Π entered into a contract with Δ to ship mouse traps; specifically 24 boxes with 12 per case. Π shipped the correct quantity, but the shipment was rejected (and the court upheld) that the Δ was shorted in that industry custom called for shipping these mouse traps in pairs (which they were not).

D. Mixed goods contracts: Mixed goods contracts are those that deal with both the sale of goods and services. Since the UCC only covers the sale of goods, it’s important to determine how to asses mixed goods contracts. See §2-102 Scope. There are generally two tests that courts use.
1. Test 1 (Predominance): Looks to the predominant purpose of the contract (i.e. whether the predominant purpose is to sell goods or services).
2. Test 2 (Source of Complaint): Looks to the source of the complaint (i.e. whether the complaint is for bad services or bad goods).

E. Merchants: Merchants hold a special place within the UCC. They are held to a higher standard.
1. Merchants- defined: UCC §2-104(1): “A merchant is either a person who deals in goods of the kind or a person who holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.”

F. Goods: §2-102 covers the scope of Article 2 and provides that it only covers transaction in goods. §2-105 defines what a good is and is not.
1. Movable- at time of identification: §2-105: “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale…
2. Not a good: Money, Investment securities, and things in action.
a. Things in action: A property right that has no intrinsic value, but whose value derives from the ri

ts in the supply of labor or other services.” (Art. 3(2)).

C. Sales Excluded from CISG (Art. 2):
1. Household use: Goods bought for personal, family or household use are excluded from the CISG.
a. Seller did not know: If the seller neither knew nor ought to have known then this exclusion does not apply;
2. Other goods such as by auction, and investment securities, ships, and electricity are also excluded from scope of the CISG.

D. Acceptance within CISG defined (Art. 18): A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance.
1. Silence or inactivity alone- insufficient: Silence or inactivity does not in itself amount to acceptance.

E. Distinguishing §2-207 with CISG (Art. 19):
1. Reply to an offer with material alterations 19(1): Is a rejection of the offer and constitutes a counter-offer.
2. Reply to an offer with non-material alterations 19(2): Operates as an acceptance and adds the additional terms unless the offeror “without undue delay” objects to the alterations.
3. Material alterations- defined 19(3): Alterations to the “price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.”