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Sales of Goods (see also UCC article 9)
University of Kansas School of Law
Ware, Stephen J.

23 January, 2006

Sale of goods

Sale: a transaction

Buyer obtains right and ownership to possess an item

Goods: movables (land = immovable)

Land and goods are tangible
Intangible property (copyrights)

UCC Article 2

Law that governs sale of goods

Common law of contracts

Law that governs K other than K for sale of goods

Why is there separate law for goods?

More goods K
Different issues with goods
Fungibility of goods
Historically

Goods K were the first ones to spread across states and countries

24 January 2006

Sales Systems

All of the people, institiutions, laws, and practices that are involved in transfers of ownership for a price.
Generally there are four functions that facilitate the transfer of ownership from seller to buyer

Sale systems bring buyers and sellers together and enable them to create legally enforceable transfers of ownership.

The system not only provides legal rules to define when formation occurs but also provides people and institutions that help enable formation to happen at all. (car salesman)

sale systems provide a set of standard terms that govern the transfer of ownership unless the buyer and seller choose to modify the standard terms

often performed by a code most notably the UCC
codes are merely one cog in the bigger machine
the residential real estate sales system has no code comparable to the UCC but there are nevertheless institutions in practice within that system.

Sale system provides a set of delivery institutions that facilitate the possessory, legal and symbolic transfer from seller to buyer.

i.e. insurance cost, delivery charges, and passage of the risk of loss from seller from seller to buyer

Sale systems enforce agreements to transfer ownership by giving the aggrieved buyer or seller various remedies for breach by the other.

Sales Law

There are at least three ways in which sales law has an impact on sales systems.

1. the law of sales will be crucial in those instances where the normal business relationship breaks down and the parties end up in the litigation world.
2. when parties to a sales agreement negotiate informal settlements to a dispute they will probably do so in the shadow of the law
3. legal rules are important in sales systems because they help dictate the terms of the various forms that business people use in conducting transactions within a given sales system.
a. Lawyers’ draft: purchase orders, distribution agreements, and the like and business people use them.

25 January 2006

Predominant purpose test pg 12

Services or goods
Quantification approach

Placing dollar amount on the goods and services, whichever cost more determines whether it is a good or service

Gravamen of the action test pg 13

Court determines if the source of the complaint is with the goods or services

For article 2 to apply to contracts does the contract have to apply to goods?

UCC §2-105 definition of goods

Problem 1.4

Problem 1.5

24 January 2006

What is a sale?

Ownership changing hands

Possession may or may not be necessary

CB 7

Law should reflect merchant customs

UCC created by ALI & NCCUSL

Each of the 50 state governors appoints members to NCCUSL

Article 1 of UCC

Law in 14 states (revised)

Not in KS and MO

Gap fillers

· What is the gap

o Unspecified terms in a K

o Some questions can be answered by the express terms of the K

o UCC fills in the gap for questions that can not be answered

· Gap filler = default rules

· Versus mandatory rules enacted by law that have to be abided by

o Parties can specify to the contrary that default rules govern

o Mandatory rules govern even if the parties specify otherwise.

Summary of Contents

Formation
Terms
Performance
Remedies
How does a plaintiff prove a breach of K

Have to prove K was 1) formed that K was 2) performed or breached and if it w

fferent terms in K

3.4(b)

?

3.4(c)

The term of consequential damages is part of K
The confirmation is a proposal to modify

3.5
Get one document’

7 February 2006

CISG

· International trade agreement

o Only with governments that have ratified CISG (Japan has not)

· Governs international sale of goods
o Although UCC also governs sales of goods its meaning is different

· Does not govern personal items

What can be done to remedy contract disputes between Kansas and Japan (who has not ratified CISG).

Arbitration clause may be in contract
file suit in federal district court, establish personal jurisdiction

win on the merits
What law would govern?

i. KS Law/Japanese Law
ii. Choice of law clause in contract
iii. Choice of Forum clause in contract, may also be the arbitration clause because that is the choice of forum.

CB 38

CISG governs unless the choice of law clause says otherwise

Scope of CISG
Scope of article 2
Mixed goods etc…

Formation

CB 42

Problem 2.5

Does CISG govern?

If purely US transaction UCC would govern, because sale of goods.

Article 1 Place of business may not make CISG applicable

Article 10

Article 2 sales of goods bought for personal, family, or household use.

Scope different than UCC

Most places in the world believe that UCC article 2 isn’t really a commercial article because it governs personal goods.

Article 3 in CISG is it goods or services.

CB 85

Problem 4.2

Mirror image rule Article 19 in CISG