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Advanced Sales & Leases
Wayne State University Law School
Wellman, Vincent A.

Sales and Lease Outline
1.      Does Article 2 apply?
2.      Is there a K? (O & A)
a.       Destination; shipment; warehouse
3.      Is there a SOF issue?
4.      Is there a BOF issue?
5.      Is there a vague or ambiguous term that parties need clear def for? (Extrinsic evidence analysis)
6.      Is there a party wanting to add supplementary/contradictory terms? (PER)
7.      Does a party want to mod the K at all, or limit mods?
8.      Are there any warranties on the goods?
9.      Did the Seller tender? (ID; deliver; ship; docs/title)
10.  Is it a carrier or a warehouse K? (ROL)
11.  Did the buyer tender? (Accept; Reject; Revoke)
12.  Was there a breach of K or warranty?
13.  What are the remedies? (Sellers vs. buyers)
14.  Any random defenses? (Unconscionability; Impossibility)
Intro: Scope of Article 2, intro 2A and Merchanthood
1.      Article 1: definitions and such
a.       security interest v. lease (see below)
b.      Good faith standards
                                                               i.      MERCHANTS = must meet OBJECTIVE (reas comm stdrs) and SUBJECTIVE (honesty in fact)
                                                             ii.      non-merchants must meet must meet OBJECTIVE (reas comm stdrs) and SUBJECTIVE (honesty in fact) 
                                                           iii.      **MI: has NOT adopted R1 so GF for non-merchants is just subjective meaning that non-merchants do not need to meet reasonable commercial standards
2.      Scope of Article 2
a.       Q1 will always be what body of law governs (CL, or 2)
b.      2-102: for transactions of goods
                                                               i.      2-725 SOL =
1.      4 yrs for breach of K
2.      can be K’d around but not lessened below 1 yr mark
3.      clock starts running:
a.       at time of breach for K claims
b.      at time of delivery for breach warranty
                                                             ii.      NOT Covered:
1.      Gifts
2.      Lending/bailments
3.      Leases
4.      Computer software (i.e. a license)
5.      Secured transactions: the sales part does
c.       2-105: what are goods = moveable goods in transaction not inc the $
                                                               i.      3 factors
1.      must be ID’able at time of K
2.      buying
                                                             ii.      future goods
                                                           iii.      foreign currency
                                                           iv.      minerals that are sold AFTER REMOVAL
                                                             v.      Gifts
                                                           vi.      ending/bailments
                                                         vii.      Leases Computer software (i.e. a license) Secured transactions: the sales part does
1.      Once hardware is soft with software in it it is more likely to be covered under article 2
2.      THUS:
a.       Shrink wrap = sales
b.      Invent software = NOT sales
c.       Updates/modifications = middle-ground
                                                                                                                                       i.      This one Depends on whether programmer was paid like a seller
                                                       viii.      NOT things in actions—e.g. copyright
                                                           ix.      NOT investment securities
                                                             x.      NOT things where the goods are incidental (i.e. predom factor test)
1.      E.g. getting dentures from dentist, they suck, cant sue Dentist under article 2 BUT you can sue the manufacturer of the dentures under 2
2.      PREDOM FACTOR TEST: whether goods are incidental to the K or whether the service is incidental to the K
a.       Repair Ks are not usually goods
3.      Alt Tests:
a.       MI Sine quan non test: were goods essential to the K (maybe?)
                                                                                                                                       i.      *ask Wellman
b.      Gravamen: what is the subject of the dispute?
                                                                                                                                       i.      Cm circumstantial test
d.      2-106 Termination vs. Cancellation of a K
                                                               i.      Termination = one party stops the K at their own will
                                                             ii.      Cancellation = one party legit ends the K in response to other’s breach
                                                           iii.      Default does NOT equal breach
3.      Leases—Article 2A
a.       2A-103(1)(J): lease = possession and use in exchange for consideration
                                                               i.      True Lease: cannot just have the effect of a lease but also must have the econ operation of a lease
1.      This prevents the use of disguised leases (security means it’s a sale and not 2A) see below
2.      Lease must state that the goods will be returned at the end of the K
                                                             ii.      does NOT include when it is a sale on approval
                                                           iii.      does NOT include subleases 
b.      1-203: Lease v. a security interest = have a lease term and not be subject to termination by the lessee
                                                               i.      key is a reversionary interest = leasor will get the chattel back and it will have some economic life left
1.      e.g. 20 yr car lease is a sale
2.      auto renew lease for remaining life or required to buy at end is sale
3.      renewal of lease for nominal consideration is a sale
a.       nominal consideration = less than lessee’s reasonable prediction of cost of performing if lease option not exercised
b.      NOT nominal if renewal price is to be determined at time of renewal
                                                             ii.      NOT auto security interest just bc
1.      Lease price is Full market value
2.      Lease assumes no ROL
3.      Leasee agree to pay maintenance
4.      Option to renew/own later
5.      Option to renew at a greater price than full market value
4.      Merchanthood
a.       ANALYSIS: do not ever fucking mention this in the beginning of the analysis or VW will kill
                                                               i.       What section of the Code are we referencing? See below
                                                             ii.      What standard are using?
                                                           iii.      Does the party in QUESTION apply to the standard?
b.      2-104 3 Standards
                                                               i.      Merchant in GOODS (2-300s WARRANTIES) = meaning the party is an expert in the those goods in particular
                                                             ii.      Merchant in PRACTICE (2-200s SOF, BOF, Firm OFFERS, MOD/RESCISSION): essentially everyone is qualify as a merchant unless acting in a private capacity
1.      E.g. farmer and grain elevator—farmers do
                                                           iii.      MIDDLE_GROUND/SLIDING SCALE: applies to either standard (???)
1.      2-103 GF
2.      2-603: buyers rights in rightfully rejected goods
3.      2-605: waiver of buyer’s objections for a particular issue
4.      2-509: ROL in absence of ROL
Formation, Enforceability and Basic Terms
1.      Offer and Acceptance: not really defined in the Code so defaults to CL
a.       2-205: Firm Offer

                                                                                                                                       i.      Is the K btwn merchants (easy practice standard i.e. most will fall into this category)?
1.      NO = no add terms
2.      YES  =
a.       Did the offer limit the acceptance to the offer’s terms?
                                                                                                                                                                                                               i.      YES = no add terms
                                                                                                                                                                                                             ii.      NO = go to b
b.      Do the add terms materially alter the K i.e. undue hardship or surprise?
                                                                                                                                                                                                               i.      YES = no add terms
                                                                                                                                                                                                             ii.      NO = go to c
                                                                                                                                                                                                           iii.      *MATERIAL (cmt 4): limit warranties; higher delivery guarantee than normal course of dealing; consequential damages
                                                                                                                                                                                                           iv.      *NOT MATERIAL (cmt 5): slight enlarging seller’s protection for superseding causes beyond seller’s control—choice of venue; arbitration depends by court
c.       Was objection to the add terms given before, or reasonably after?
                                                                                                                                                                                                               i.      YES = no add terms
                                                                                                                                                                                                             ii.      NO = add terms in
b.      DIFFERENT: knock-out doctrine (no diff terms allowed)
                                                                                                                                       i.      Then use gap-fillers to finish
1.      Warranties will depend on what kind
2.      Buyer will get consequential damages
                                                           iii.      SOLUTION: seller should sell up click terms website with their terms that reads so that the buyer is made to look like they are accepting the offer from seller i.e. the buyer is accepting their own terms
                                                           iv.      LEASES: no BOF, use mirror image rule