UCC Article 9 Outline

UCC SALES OUTLINE
 
I. Scope of Article 2
·        Article 2 applies to present transactions in goods and contracts to sell goods at a future time. Courts must determine whether a transaction is governed by Article 2.
 
§2-103(j), Good Faith: means honesty in fact and the observance of reasonable commercial standards of fair dealing.
 
A. What are goods? UCC 2-103(k) – goods means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.
o       Goods must be both existing and identified before any interest in them may pass. Goods that are not both existing and identified are future goods. §2-105(1)
o       Article 2 applies to existing goods and future goods (goods that do not exist at the time the contract was made).
 
o       Identification: UCC 2-501(1) – The buyer obtains a special property and insurable interest in goods by identification. Identification occurs:
(a) when the contract is made if it is for the sale of goods already existing and identified;
(b) if the contract is for future goods other than those in (c), they will be considered identified when the goods are shipped, marked, or otherwise designated by the seller as the goods to which the contract refers. 
(c) when the crops are planted or otherwise become growing crops (see statute for full def.)
 
§         Insurable interest – an interest in property which would allow the owner to insure it. (one can’t insure someone else’s property). 
 
o       Personal Property can be divided between goods (tangibles) and intangibles (ex: licenses, trademarks). The question is what are you buying? Are you buying the good or are you buying a person’s intellectual power or ideas? The law generally tries to look past the form of a transaction and focus on the functional reality.
o       There is a middle ground called Indispensable Paper which has attributes of both tangible and intangible. It must be on paper, so it is tangible, however the rights that the paper conveys is intangible. Negotiable Instruments (negotiable documents) – ex: checks, promissory notes.
o       But we will focus on goods.
 
o       Foster v. Colorado Radio Corp.
§         Plaintiff, Colorado, sues defendant, Foster, for Foster’s alleged breach of promise to purchase certain assets of a New Mexico Radio Station.
§         The transaction involved both tangible (furniture, equipment) and intangible (license) property.
§         The Trial Court concluded that the contract did not fall within the UCC Article 2 b/c it did not deal w/ goods. It looked at the contract as a whole, used the dominant purpose test, and ruled that the dominant purpose was the sale of the intangible goods (the license). The based their ruling on Epstein.
§         The Court of Appeals reversed in part and affirmed in part. The court looked at the contract in two pieces, one for the sale of goods and one for the sale of non-goods. The real property and the intangible property parts of the contract are not w/in Article 2. However, the furniture and equipment sales are governed by Article 2.
§         The Court of Appeals ruled that Epstein is inapplicable to this case b/c in that case, the beauty service and the sale of beauty products was inseparable and the main purpose was the service. But in this case, there was no hybrid goods-service. It was only the sale of goods and non-goods, so it can be separated so that some falls under Article 2 and some doesn’t.
§         Most courts follow the dominant purpose test where the whole transaction either falls under Article 2 or none of it does. No separation.
 
B. What is a transaction?
There are many different types of transactions other than sales. Leases, bailments, theft, consignments, gifts, shipment.
UCC 2-106(1),Sale – Contract for sale includes both a present sale of goods and a contract t