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Contracts
Wayne State University Law School
Findlater, Janet

CONTRACTS A

PART 1 UCC

Use UCC for transactions in goods (movable things) 2-102.

If specific provision is lacking in UCC, use CL 1-103.

Every K or duty w/in UCC imposes obligation of good faith in performance or enforcement 1-203.

I. CONTRACT FORMATION

2-204 Formation in General

1. K may be made in any manner sufficient to show agreement, incl. conduct by both parties which recognizes the existence of such a K.

2. An agreement sufficient to constitute K may be found even if it’s underdetermined when the K was made.

3. K does not fail for indefiniteness (one or more terms left open) if parties intended to make a K andthere’s reasonably certain basis for giving appropriate remedy.

II. OFFER

2-206 – O & A in Formation of K

1. Unless language or circumstances clearly say otherwise

a) O shall be construed as inviting A in any manner & by any reasonable medium 2-206(1).

b) order or O to buy goods for prompt or current shipment shall be construed as inviting A either by

prompt promise to ship or
prompt or current shipment of conforming/non-con goods.

Shipment of non-conf. goods is not A if seller seasonably notifies buyer that shipment is only to accommodate buyer 2-206(1b) Applied in Corinthian v Lederle.

2-205 – Firm Offer

An O is not Revocable for (lack of consideration) if:

1. O is by merchant to buy/sell goods &
2. O is in signed writing &
3. O by its terms must assure that it’ll be held open.

· Period of irrevocability is time stated or a reasonable time if none stated, but it may never exceed 3 months.

· If O is made on a form supplied by O’ee, any such terms of assurance must be separately signed by O’or 2-205.

Note: O says 4 months irrevocability & $100 consideration => 4 months, coz 205 applies only if there’s no consideration.

Merchant is someone who (2-104):
· Deals in goods of kind or
· By his occupation holds himself to have special knowledge of goods involved in transaction or
· By his occupation knows about general business practices.
· (=> any businessman)

III. ACCEPTANCE

If beginning performance is a reasonable mode of A, O’or who is not notified of A w/in reasonable time may txt O as having lapsed before A 2-206(2).

A. International Filter: P’s telegram, “We propose to furnish filters …will become K when you A it & approved by office in Chicago”, is not an offer because there is no power being given to conclude agreement. D’s telegram, “accepted” is an offer. P’s Chicago office wrote “OK” on it, w/out informing D. Court held that “OK” amounted to an A w/in the meaning of the initial proposal & a subsequent thank you letter that asked for a water sample sufficiently communicated notice.

B. Allied Steel v Ford Motor: Ford’s offer to buy machinery said, “PO is not binding until accepted. A should be executed on acknowledgement copy which should be returned to buyer.” Court held that this was a permitted/suggested method of A & did not preclude A by other methods. That Allied began installing machinery is unambiguous conduct constituting A.

If O requests a return promise, return promise may be expressed or implied in unambiguous conduct.

Acceptance of a K may be implied from acts of the parties – e.g. shipment of goods & other party accepting them Allied Steel.

2-207 Additional Terms in A or Confirmation

1) A definite & seasonable expression of A or written confirmation which is sent w/in reasonable time operates as an A even if it states terms additional to or different from those offered or agreed upon, unless A is expressly made conditional on assent to the additional or different terms.

2) The additional terms are to be construed as proposals for addition to the K. Between merchants such terms become part of K unless:

a) O expressly limits A to terms of O;
b) They materially alter it (test=unreasonable surprise/hardship) or
c) Notice of objection is given w/in reasonable time after notice of additional terms is received.

3) Conduct by both parties which recognizes existence of K is sufficient to establish K even if writings of parties do not otherwise establish K. Terms of K will be those on which parties writings agree, supplemented by provisions of UCC (gap fillers).

For consumers, extra terms are in K only if they agree w/ it expressly or implied.

· Only a piece of paper can trigger 2-207.
· Definite = agrees w/ O wrt essential terms, bargainable terms e.g. subject, price.
· Seasonable = timely.
· In (1) A is expressly conditional if it says no deal unless add/diff terms are included, some courts say ‘subject to’ is enough, Dorton court says you need more. Best option: use code language.
· In (2) buyer is accepting goods as part of K, not necessarily assenting to new clause.
· What counts as material & which party has B/P may differ state to state
· A change in wrty length is a material alteration, at least in the absence of industry custom setting a limit on wrt’s that don’t specify length

***What looks like an additional term may be a different one if it is implied in the offer. (can’t imply terms in A to create a 2-207 problem).

Solutions for Different Terms:

Knockout Doctrine: This is the majori

for diff terms.
KO: Reasonable time for wrty, DO: O’ors’ 90 d wrty, when treated as an add’l term, wrty materially alters it so the term in A does not become part of K & 90 days wins.

ProCD v Z: Consumer purchases software w/ license inside (not on box) stating it’s for non-commercial use only.

Under 2-204: A vendor, as master of the offer, may invite acceptance by conduct & may propose limitations on the kind of conduct that constitutes A. ProCD proposed a K that a buyer would accept by using the software after having an opportunity to read the license at leisure. A buyer accepts goods under 2-606(1)b when after an opportunity to inspect, he fails to make an effective rejection under 2-602(1). Z tried out the software, learned of the license & did not reject the goods; hence he accepted the limited license.

Under 2-207: K under (1). Under (2) limited license is to be construed as a proposal, unless expressly assented by the consumer.

Hill/Klocek: Same case, 2 different results. Consumers ordered Gateway computer by phone. They shipped it w/ notice in box, w/ arbitration clause + accept by not returning computer in 30/5 days. Hill: 204: Buyer didn’t return so terms are in, you’ve done what O’or asked. O’or is master. Klocek: 207: Terms are out b/c consumer did not expressly assent.

Ways to Decide: K Law, 2B or UCITA Statute and Federal Copyright Law

IV. NOTICE

· Notice is NOT a part of K formation.

· Notice w/in a reasonable time is an implied condition of O’or’s duty to perform under the K formed by the A.

Carbolic Smoke Balls:

V. GAP FILLERS (tend to favor buyers)

2-305: Price is a ‘reasonable price at the time of delivery’. (4) if parties intend not to be bound unless price is agreed, there is no K. Buyer must return goods rc’d or pay their reasonable value.
2-308: The place for delivery of goods is the seller’s place of business or if he has none his residence but if they’re identified goods at a place known to parties, that’s the place of delivery.
2-309: Unspecified time for shipment, delivery or any other action under a K (incl. warranty) shall be a reasonable time.
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