Scope
Scope of the UCC: to provide a uniform and
consistent set of rules to deal with all phases
of commercial sales transactions.
Scope of Art. II of the UCC: to govern
contracts for the sale of goods.
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§1: The UCC
• Facilitates commercial transactions.
• UCC Article 2: Sale of Goods.
– Modifies common law of contracts of some
areas.
– UCC 2 preempts common law.
– Where UCC2 is silent, common law governs.2
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What is a ‘Sale of Goods’?
• Art. 2 governs “sale of goods”
• “Sale”: passing of title from seller to buyer for a
price.
• “Goods”: must be tangible and movable (not land,
services or intangibles).
--goods associated with land
--goods and services combined
• “Merchant”: Deals in goods of the kind sold or has
special business expertise
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Goods and Services Combined
• Courts must determine whether the contract
is one for the sale of goods (governed by
UCC-2) or for the sale of services (not
governed by UCC).
• Courts use one of two tests:
– Predominant Factor Test
– Bifurcation
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Who is a Merchant?
• In some cases, special standards apply to
merchants.
• A merchant is:
– A person who deals in goods of the kind involved in the
contract.
– A person who, by occupation, holds himself out as
having special knowledge or skill relative to the
transaction; or
– A person who employs a merchant (as defined above).
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§3: Scope of UCC 2A-Leases
• Contract for lease of personal goods
between a lessor and a lessee.
• Consumer Leases (total payments less than
$25,000).
• Finance Leases (involves a 3rd partysupplier).
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§4: Formation of
Sales and Lease Contracts
• At common law once a valid offer is
unequivocally accepted, a binding contract is
formed.
• UCC is more flexible, and allows for open
pricing, payment, and delivery terms.
• UCC modifies the common law of k’s.
Where UCC speaks, it preempts the common
law. Where it is silent, the common law
governs.
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Open Quantity Term: Failure to specify the quantity
of goods to be sold is fatal at common law. UCC
recognizes two exceptions:
1. Requirements Contract: an agreement
where buyer agrees to buy and seller
agrees to sell whatever buyer requires.
2. Output Contract: an agreement where
seller agrees to sell and buyer agrees to
buy whatever seller can produce.
Note: UCC imposes the “good faith
requirement”.
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Good Faith Requirement
• UCC imposes the good faith requirement on
requirement and output contracts, such that
the actual quantity purchased or sold cannot
be unreasonably disproportionate to normal
or comparable requirements or output.
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Merchant’s Firm Offer
• At common law, an offer could be revoked
any time prior to acceptance, unless there
was some consideration.
• At UCC, offer made by merchant in a
signed writing is irrevocable for reasonable
period of time. No consideration necessary.
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Acceptance
• See Handout
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Acceptance: Additional Terms
• If either party is a non-merchant, the
contract is formed according to original
terms of the offer.
• If both parties are merchants, contract
incorporates new terms unless:
– (1) original offer expressly limits terms, or
– (2) material change, or
– (3) offeror objects within reasonable time.
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Consideration
• UCC requires consideration—but not for
modifications—and modifications must be
made in good faith.
• Modification must be in writing if required
by Statute of Frauds.
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Statute of Frauds
• Sale of goods over $500 must have a signed
writing to be enforceable.
• Exceptions to this rule:
–
–
–
–
Specially manufactured goods.
Admissions by breaching party.
Partial performance.
Merchant doesn’t object within 10 days.
• Oral agreement enforceable after written
confirmation between merchants.
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