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Contracts II
University of Kansas School of Law
Peck, John C.

U.C.C. ARTICLE 2______________________________________________________________________________ 5
Hybrid Transactions__________________________________________________________________________ 5
Supplementing Provisions of the U.C.C. (1-103)______________________________________________________ 5
CONTRACT FORMATION_______________________________________________________________________ 5
I.      Contract Formation in General [2-204]________________________________________________________ 5
A.         Offer______________________________________________________________________________ 5
2-204 Formation in General__________________________________________________________________ 5
B.         Acceptance [2-206]__________________________________________________________________ 6
1.      Generally__________________________________________________________________________ 6
2-206 Offer and Acceptance in Formation of Contract_____________________________________________ 6
2.      Countering the Unilateral Contract Trick___________________________________________________ 6
C.         Firm Offers [2-205]___________________________________________________________________ 6
3.      The Battle of the Forms [2-207]_________________________________________________________ 6
a.     Definite Expressions of Assent________________________________________________________ 7
b.     Written Confirmations______________________________________________________________ 7
c.      “Between Merchants”_______________________________________________________________ 8
i.       Materiality_____________________________________________________________________ 8
ii.      “Additional” and “Different” Terms__________________________________________________ 8
Consequences of an Expressly Conditional Acceptance_____________________________________________ 8
THE REQUIREMENT OF A WRITING______________________________________________________________ 9
I.      Specific Statute of Frauds Provisions [2-201]___________________________________________________ 9
A.         Requirements:______________________________________________________________________ 9
1.      The Writing Requirement______________________________________________________________ 9
2.      The Signature Requirement_____________________________________________________________ 9
3.      Sufficient to Show a Contract___________________________________________________________ 9
4.      The Quantity Term___________________________________________________________________ 9
B.         Statutory Exceptions: The Written Confirmation Rule [2-201(2)]________________________________ 9
C.         Statutory Exceptions: Exceptions Based on Equitable Principles [2-201(3)]_______________________ 10
1.      Specially Manufactured Goods [2-201(3)(a)]______________________________________________ 10
2.      Admissions in Judicial Proceedings [2-201(3)(b)]____________________________________________ 10
3.      Goods Accepted or Payments Made [2-201(3)(c)]___________________________________________ 10
SOURCES OF CONTRACT TERMS_______________________________________________________________ 11
I.      Sources of contract terms:________________________________________________________________ 11
A.         The Parol Evidence Rule______________________________________________________________ 11
1.      The Code’s Formulation of the Rule [2-202]_______________________________________________ 11
2.      Finality___________________________________________________________________________ 11
3.      Completeness______________________________________________________________________ 11
4.      Contradiction and Consistency_________________________________________________________ 11
5.      The Effect of a Merger Clause_________________________________________________________ 11
6.      Terms That Can Be Proved Notwithstanding a Complete Writing_______________________________ 12
a.     Supplementation Through Usage of Trade, Course Dealing, and Course of Performance___________ 12
b.     Invalidating Causes_______________________________________________________________ 12
c.      Conditions Precedent______________________________________________________________ 12
d.     Interpretation and Reformation______________________________________________________ 12
B.         Implied-In-Fact Terms: The Special Roles of Trade Usage, Course of Dealing, and Course of Performance [1-205, 2-208]             13
1.      Hierarchy of Terms__________________________________________________________________ 13
a.     Course of Performance Defined [2-208]________________________________________________ 13
b.     Course of Dealing Defined [1-205(1)]__________________________________________________ 13
c.      Usage of Trade Defined [1-205(2)]____________________________________________________ 13
C.         Impled-In-Law Terms [Gap-Fillers]______________________________________________________ 13
D.         Supereminent Principles______________________________________________________________ 14
1.      Unconscionability [2-302]_____________________________________________________________ 14
a.     Procedural and Substantive Unconscionability___________________________________________ 14
Procedural Unconscionability________________________________________________________________ 14
Substantive Unconscionability_______________________________________________________________ 15
WARRANTIES________________________________________________________________________________ 16
A.         Types of Warranties_________________________________________________________________ 16
1.      Express Warranties [2-313]____________________________________________________________ 16
a.     The Affirmation of Fact/Opinion Dichotomy____________________________________________ 16
b.     Description______________________________________________________________________ 16
c.      Sample or Model__________________________________________________________________ 16
d.     Basis of the Bargain_______________________________________________________________ 16
B.         The Implied Warranty of Merchantability [2-314]__________________________________________ 17
§ 2-314: Implied Warranty: Merchantability; Usage of Trade._______________________________________ 17
1.      “Merchant with Respect to Goods of That Kind”___________________________________________ 17
2.      The Standard of Merchantability_______________________________________________________ 17
C.         The Implied Warranty of Fitness for a Particular Purpose [2-315]_______________________________ 17
1.      “Reason to Know”__________________________________________________________________ 18
2.      Particular Purpose___________________________________________________________________ 18
3.      Reliance by the Buyer________________________________________________________________ 18
D.         Warranty Disclaimers [2-316]__________________________________________________________ 18
1.      Disclaiming Express Warranties________________________________________________________ 18
2.      Disclaiming the Implied Warranties of Merchantability and Fitness_____________________________ 18
a.     Disclaimers Using “Safe-Harbor” Language_____________________________________________ 19
b.     Disclaimers Using Other Language____________________________________________________ 19
c.      Inspection of the Goods____________________________________________________________ 19
E.          Modification or Impairment of Rights and Remedies [2-719]__________________________________ 19
1.      Substituted Remedy Clauses___________________________________________________________ 19
a.     “Expressly Agreed to Be Exclusive”___________________________________________________ 19
b.     “Failure of Essential Purpose”________________________________________________________ 20
2.      Clauses Limiting or Excluding Consequential Damages______________________________________ 20
3.      Substituted Remedy Clauses and Clauses Limiting Consequential Damages in Combination__________ 20
F.          Privity [2-318]______________________________________________________________________ 20
1.      Note on Strict Liability in Tort__________________________________________________________ 20
2.      Horizontal Privity___________________________________________________________________ 20
a.     Alternative A_____________________________________________________________________ 20
b.     Alternative B_____________________________________________________________________ 21
c.      Alternative C_____________________________________________________________________ 21
3.      Vertical Privity_____________________________________________________________________ 21
4.      Express Warranties__________________________________________________________________ 21
5.      Cumulation and Conflict of Warranties [2-317]____________________________________________ 21
RISK OF LOSS________________________________________________________________________________ 22
A.         In the Absence of Breach [2-509]_______________________________________________________ 22
1.      Express Agreement_________________________

act Price Differential [2-713]___________________________________________ 33
Recovery = Market Price – KP + ID + CD – ES___________________________________________________ 33
1.      Election__________________________________________________________________________ 33
2.      Selecting the Market_________________________________________________________________ 33
a.     Place___________________________________________________________________________ 33
b.     Time___________________________________________________________________________ 33
D.         Damages When the Buyer Accepts the Goods [2-714]_______________________________________ 33
1.      Recovery of Ordinary Loss____________________________________________________________ 33
E.          Incidental and Consequential Damages [2-715]____________________________________________ 33
1.      Incidental Damages [2-715(1)]_________________________________________________________ 34
2.      Consequential Damages [2-715(2)]______________________________________________________ 34
II.         Non-Monetary Damages_______________________________________________________________ 35
A.         Cancellation [2-711(1)]_______________________________________________________________ 35
B.         Specific Performance [2-716]__________________________________________________________ 35
REMEDIES OF SELLERS_______________________________________________________________________ 36
I.      Monetary Remedies_____________________________________________________________________ 36
A.         Resale [2-706]_____________________________________________________________________ 36
Other requirements of sale:__________________________________________________________________ 36
Identification of Goods:____________________________________________________________________ 36
B.         Contract Price / Market Price Differential [2-708(1)]_________________________________________ 36
Determining the Market:___________________________________________________________________ 36
C.         Action for Price [2-709]_______________________________________________________________ 37
1.      Limited Applicability________________________________________________________________ 37
a.     Accepted Goods__________________________________________________________________ 37
b.     Goods Lost or Damaged____________________________________________________________ 37
c.      Goods Not Readily Resalable________________________________________________________ 37
D.         Incidental Damages [2-710]___________________________________________________________ 37
E.          Consequential Damages______________________________________________________________ 37
F.          Lost Profits [2-708(2)]________________________________________________________________ 37
1.      “Lost Volume Seller”________________________________________________________________ 38
2.      Component Part Manufacturer_________________________________________________________ 38
Recovery = KP – DC(incurred) – DC(would have incurred to complete) – Credit for Scrap__________________ 38
II.         Non-Monetary Remedies_______________________________________________________________ 38
 
CONTRACTS II: Spring 2002
 
U.C.C. ARTICLE 2
 
Article 2 applies to the sale of goods. Section 2-106(1) states that “[i]n this Article unless the context otherwise requires ‘contract’ and ‘agreement’ are limited to those relating to the present or future sale of goods.”
 
Goods. Goods are defined as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.” Goods are any form of tangible, personal prop