Sales Outline (Chomsky, Spring 2012)
Scope of Article 2
1. Sales
a. 2-102 Scope: “unless context otherwise requires…”
b. 2-104 Merchant “someone who by occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.”
c. 2-106 Sale “passing of title from the seller to the buyer for a price”
2. Goods
a. 2-105 Goods “All things which are movable at the time of identification to the contract for sale”
i. 2-501 Identification occurs when goods have been designated to the contract.
3. Hybrid Transactions
a. Predominate Purpose test (majority)
i. Court will apply Art. 2 if the goods aspect of the transaction predominates and other law if the non-goods aspects predominate. Not bifurcated, entire transaction covered by one source of law.
ii. Factors (goods or services?):
1. contract language
2. nature of the supplier’s business
3. relative cost of the different aspects
4. purpose of B in entering transaction
b. Gravamen-of-the-action test
i. Bifurcates the transactions, applies different laws to different aspects of the contract.
ii. Difficult to bifurcate the issues in the contract as a whole, i.e. formation, S/L, etc.
4. Supplementation by principles of law and equity
a. 1-103(b) continued viability of general principles of law and equity.
i. Code provision > law & equity, but still remain relevant
Contract Formation
1. 2-204 Formation
a. Manner of formation: Contract for sale of goods may be made in any manner sufficient to show agreement, including conduct of both parties which recognizes the existence of the contract.
i. An agreement sufficient to be a contract for sale may be found even through the moment of its making is undetermined.
b. 2-204(3) even if terms are left open, still contract if (a) the parties intended it to be contract (objective manifestations of intent to be bound) & (b) there is a reasonably certain basis for giving an appropriate remedy.
c. 1-201Agreement v. contract
i. Agreement = bargain of the parties in fact.
1. Terms expressly agreed and inferred from facts
2. U/T, C/D, and C/P
ii. Contract = total legal obligation that results from the parties’ agreement as determined by the UCC and other laws.
1. Includes terms for the agreement, express and implied, & gap-fillers.
2. 2-206 Acceptance
a. 2-206(1)(a) Offeror may imposed exclusive manner of acceptance
i. Unless otherwise, can accept:
1. In any manner (even if offeror doesn’t know conduct has occurred)
2. By any medium reasonable in circumstances
b. 2-206(2) if offeree accepts through performance, must notify offeror in reasonable time otherwise it can be assumed the offer lapsed.
3. 2-205 Firm Offers
a. Offer by merchant in signed writing with terms gives assurance it will be held open. If made, not revocable (for 3 months). Not effective unless separately signed
i. If doesn’t establish a definite period, help open for reasonable time, but not longer than 3 months.
4. 2-207 Battle of the Forms
a. Definite and seasonable expression of acceptance = acceptance even though contains additional or different terms from offer.
i. Seasonable = acceptance must occur before an offer lapses.
ii. Definite expression of acceptance = expresses an unequivocal commitment to go forward in deal with negotiated/dickered terms.
1. If dickered terms in response are different, may be a counter-offer
b. Written confirmation
i. Presupposes that a contract has already been formed and the issue is whether the terms can be modified by those in confirmation.
1. The written confirmation can only be sent after contract formation, meaning nothing more can impact the fact that the offer has already been accepted.
2. Best to understand it as an attempt to modify an existing contract and the only relevant is then what happens to the additional and different terms if the recipient doesn’t assent to them.
a. Additional terms treated as terms in a definite expression of acceptance.
b. Different terms cancel each other out if each party sends confirmations with conflicting terms
c. Additional or different terms
i. 2-207(2) Additional terms: If the written confirmation includes terms that didn’t appear prior, then they are additional.
1. BETWEEN MERCHANTS, these terms become part of the contract automatically; for NON-MERCHANTS, they are proposals to become part of the contract, and can be accepted by affirmation or conduct.
2. UNLESS
a. The offer expressly limits acceptance to the terms of the offer
i. An acknowledgement that says “subject to” doesn’t expressly limit.
ii. Having a term that says only these terms control is insufficient.
iii. If there is an expressly conditional acceptance can, but not mandated by the section, cause a counteroffer.
b. New terms materially alter the contract
i. Material if it results in surprise or hardship if incorporated without express awareness by the other party. Materiality examples:
1. Disclaimer of warranty of merchantability or fitness;
2. Requiring guarantee or increased Q.
3. Right to cancel if B fails to pay; &
4. Shortening time period for complaints to be made.
ii. Surpris
n 2-201(2)
a. If B and S conduct business orally, one should send the other a confirmation asap. If the other party disagrees, should respond with concerns. But that initial confirmation can be used against the other party as they “signed” it. Hence, this exception to prevent that abuse.
i. If between MERCHANTS, Receiving party only has 10 days to dispute the terms, otherwise they are deemed to have been accepted.
ii. After those 10 days, the writing though only “signed” by one party is now chargeable against either.
iii. CUATION: easy to become a merchant and lose S/F defense within 10 days.
b. No mailbox rule, only when received and must be received in reasonable amount of time.
c. The effectiveness of the written confirmation doesn’t mean the other party is bound, it just satisfies the S/F.
5. Other Statutory Exceptions 2-201(3)
a. Alternatives to satisfy S/F defense, regardless of whether or not Merchant:
i. 2-201(3)(b) Admissions (affirmative statement of contract) in Judicial Proceedings, even if involuntary.
1. Admission to facts that support contract formation
ii. 2-201(3)(c) goods accepted or payment made.
1. In some cases, receipt of goods can simply be bailment, subject to 3 factors:
a. Whether the goods were out of the Seller’s control
b. Whether the Buyer exercised complete control, and
c. Whether the particular goods could be returned to Seller.
iii. 2-201(3)(a) specially manufactured goods, not suitable for sale to others in ordinary course of business and S already made substantial beginning of manufacture or commitments for procurement.
1. Also allows S to have lost-profit remedy or contract price, depending on timing of breach.
6. Non-Statutory Exceptions: Equitable and Promissory Estoppel
a. Equitable estoppel: Misrepresentation or concealment of existing facts
i. P must show D made an affirmative misrep:
1. That S/F satisfied
2. D would prepare a signed writing in the future, or
3. That the S/F would not be used as a defense
b. Promissory estoppel: requires a promise regarding future facts
c. Both require reasonable reliance
