I. CHAPTER 1 – BASIC CONCEPTS
a. The UCC
i. Has been adopted by all the states and codified
ii. Has generally been adopted verbatim, but not in all states
iii. What aspects of a “sale” are worth having UCC provisions about?
1. Formation of the contract – Bringing the parties together
2. Terms of the contract – UCC sets default rules, set in place unless parties contract otherwise
3. Performance of the contract – i.e. delivery
4. Remedies – In the case of a breach
b. Official Comments – Are NOT the law, but they may provide persuasive authority in cases.
c. Basics of Article 1 – General provisions that apply to the entire rest of the UCC (unless there is a particular provision that goes counter) – Revised in 2001. 22 states have adopted Revised Article 1. SC has NOT adopted Revised Article 1.
i. §1-103: preserves CL equity principles unless there is a particular UCC provision dealing with the issue. Common law still lives and is not usurped by the UCC (unless obviously changed by UCC)!
ii. §1-102: Purposes (Public Policy) – to make the law uniform among jurisdictions. UCC also serves a gap-filling function, to provide implicit terms (default rules) to a contract. This:
1. Encourages commercial transactions. Contracts will not fail for indefiniteness. If parties intended to form a contract, we want that transaction to go forward
2. Freedom to contract (i.e. Autonomy): By your failure to make particular provisions, we assume that you intended that your contract contain the default terms dictated.
iii. §1-203: every K or duty w/in the UCC imposes an obligation of good faith Bin its performance or enforcement.
d. The Basics of Article 2 – Applies to “Goods”: §2-105; Tangible, movable things. Doesn’t apply to: (1) Service contracts; (2) Security interests; (3) Intangible rights (“things in action”) – even if the right is represented by a tangible object (i.e. an insurance contract).
e. Problem 1: Is it a good?
i. Insurance policy: No; this is a thing in action; an intangible right represented by a tangible object.
ii. Realty: No
iii. House apart from the realty: If it is severed by the seller, it is a good, but if it is severed by the buyer, it is not a good
1. It depends who is doing the severing (the extracting)!
2. The seller is in charge of getting the house off the land, of getting the minerals off the land, of getting the timber off of the land. It may cause some destruction to the realty. See §2-107
iv. Building materials: Yes
1. Unless you are contracting for the finished product, the house. Then it is really a service contract to build a house. See cases below.
2. Buyer contracts to pay seller $1000 for a $750 a/c unit and $250 installation and repair. Mixed (hybrid) goods/services contract. Predominant purpose test:
v. Standing timber: Yes – §2-107(2).
2 Scope of Article 2
a. “Transactions in Goods”
i. Milau Associates Inc. v. North Avenue Development Corp. (N.Y. 1977) – Faulty pipe in a sprinkler system. Was the K for goods (the pipe) or services (installation of the sprinkler system)? Services.
1. Rule: When service predominates, and the transfer of personal property is but an incidental feature of the transaction, the UCC will not apply
a. Thus, implied warranties under the UCC do not apply to the pipe as provided under this contract
b. The strict liability imposed by the UCC implied warranties should not be implied in service contracts
ii. Analysts International Corp. v. Recycled Paper Products Inc. (N.D. Ill 1987) – Issue: is the sale of custom software a “good” and governed by the UCC? Yes
1. Predominant (Dominant) purpose test: When determining whether hybrid transaction is one for “services” of for “goods” governed by the UCC, you ask what was the essence of the contract; i.e. what was really contracted for?
a. When an agreement involves both goods and services, the court must inquire whether the essence or dominant factor in the formation of the K was the provision of goods or services; this tes
nt. §2-314 – definition of merchant is a narrow one and the warranty of merchantability is applicable only to a person who, in a professional capacity, sells the particular kind of goods giving rise to the warranty (merchant seller).
2. Here, Δ was not in the business of selling saws. Making an isolated sale will not subject you to liability under implied warranties (even though you may qualify under the second part of §2-104, that is construed narrowly or just avoided).
v. HYPO: Deborah Swift Handout – DS offers to sell you a Rolls Royce for $8k; you send her a letter outlining the terms, she doesn’t reply. When you show up with the check she says she won’t sell it for less than $15k.
1. Is the contract enforceable under the statute of frauds?
2. §2-201(1) – SOF: A contract worth more than $500 must be in a writing signed by the party against whom the contract is being enforced, unless that party admits to the oral K
3. §2-201(2) – Merchant confirmation memo (exception to the SOF):
a. Are both parties “merchants” for purposes of §2-201?
· Broad definition or narrow definition under §2-104?
· Narrow definition! You are not a person who deals in the goods or holds yourself out as having knowledge or Rolls Royces.
b. Nope, can’t use this exception to make the contract enforceable
d. Problem 3: Are the following persons merchants?
i. A lady who quit her job as a teacher on Friday and opened a hat store on Monday? Yes
ii. A farmer selling produce to a wholesaler? Depends – Casual seller or habitual seller? Probably yes, if it is a modern enormo farming business, but not Uncle Remus selling from his patch