Contracts II
Professor Ware
Spring 2004
Contract Formation
I. The Role and Scope of Codes in Sales Systems
a. Introduction
i. Four Subsystems for Sales System
1. Formation
2. Terms
3. Performance
4. Remedies
ii. Scope of Article II – applies to sales of goods
1. Gap-filling function
a. Hierarchy (what governs contracts) §1-205(4)
i. Express terms of the agreement
ii. Course of performance
iii. Course of dealing – §1-205(1)
iv. Usage of trade – §1-205(2)
v. UCC definitions and provisions
vi. Common law of contracts
iii. Two approaches to mixed goods/services contracts – varies by jurisdiction
1. Primary Purpose Test (possible majority) –
a. What is the primary purpose for the contract, the “goods” or the “services”? If goods, then the UCC Article II would govern the entire contract.
2. Gravamen of the Action Test (still common) –
a. What is the dispute about? The goods themselves or the services rendered?
b. Statutory Provisions
i. §2-102 – Scope of UCC
1. Applies to transactions in “goods” only.
ii. §2-105(1) – Definitions
1. Goods – all things movable at the time of identification to the contract for sale other than the money in which the price is to be made, investment securities, and things in action.
a. Includes specially manufactured goods.
2. Thing in Action – right to recover money in a legal action. Right to recover a debt, money or thing. (See the dictionary). Often pieces of paper that embodies rights.
3. Merchant (from §2-104(1)) – person who deals in goods of the kind or holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.
c. Interpretations/Problems
i. 1.3 – agreement to transfer reel home movies to DVD – example of mixed goods/services
1. Specially manufactured goods ARE NO DIFFERENT under the UCC than mass produced goods
2. Goods or Services?
a. Does she want the transfer or the product? Goods v. services
b. Predominant purpose test
c. Gravamen of action test
o the different or additional terms
4. Quick Reference – is there a deal?
a. What? – definite and seasonable expression of acceptance
b. When? – within a reasonable time
c. Result? – acts as acceptance
d. Key Point? – even though it contains different or additional terms
e. Exception? – expressly conditional on acceptance of new terms
ii. (2) – If so, then what are the terms?
1. Add’l terms are proposals for addition to contract. (Comment 3 says treat “different” the same way – BUT not all courts follow the comments), try and work with differences but it usually gets you to the same place anyways.
a. Non-merchants must accept the new terms for them to become part of the agreement.
2. Between merchants, they become part of contract UNLESS
a. Offer expressly limits acceptance to terms of the offer OR
b. They materially alter it OR
i. **Warranty disclaimer, waiver of damages, or dispute resolution ARE material**
c. Initial offeror has already objected (i.e. offer contained different terms) or objects within reasonable time
Knockout Rule (judicially created solution)
