Comprehensive Volume, 18th Edition
Chapter 25:
Nature and Form of Sales
Laws Governing Sales
Chapter
25
Contracts for the sale of services and
real estate are governed by the common
law.
Contracts for the sale of goods (new or
used tangible personal property) are
governed by Article 2 of the Uniform
Commercial Code (UCC).
The UCC does not apply to securities or
intellectual property.
What Is and Is Not a Sale?
A sale of goods is the transfer of title to
tangible personal property for a price.
Is NOT a Sale:
A bailment is a transfer of possession and not title
and is therefore not a sale.
A gift is not a sale because there is no price paid.
A contract for services is an ordinary contract and
is not governed by the UCC.
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A contract for both services and goods is
classified according to its dominant element.
Sales Contracts Under the UCC
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Subject matter and quantity are required
elements; other terms may be left open as
long as the intent to contract is clear.
Requirements on merchants are stricter in
some cases. (See later chapters).
A merchant’s firm offer is irrevocable for a
reasonable time period.
Acceptance must be in a reasonable manner
and time; terms may be changed or added
without voiding the offer.
Defenses to Formation
The same defenses available to
formation under common law are
incorporated in Article 2.
In addition, the UCC recognizes
unconscionability as a defense to
formation.
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Open Terms
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The UCC does not require every term to
be stated for a contract to be valid.
Article 2 provides for missing terms.
Price may be open, stating a formula for
how the price would be figured later.
Some open terms are interpreted by
past patterns in their course of dealing.
Modifications are binding if they are
voluntary.
UCC Rules for Additional Terms
in Acceptance
Nonmerchants
Nonmerchant/Merchant
Merchants
Additional Terms
Additional Terms
Material
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Contract
without
Additional
Terms
Offer Is Limited
Objection
Contract
with
Additional
Terms
Output & Requirements Contracts
In output or requirements contracts, the
quantity is not specified, but are valid
contracts if entered in good faith.
Output Contracts
A contract for the entire product produced
by a seller in a given time period.
Requirements Contracts
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A contract for the seller to sell whatever
quantity the buyer needs.
Statute of Frauds
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The UCC’s statute of frauds provides
that a sales contract for $500 or more
must be evidenced by a writing.
The UCC’s merchant’s confirmation
memorandum allows two merchants to
be bound to an otherwise oral
agreement by a memo or letter signed
by only one party that stands without
objection for ten days.
Statute of Frauds: Exceptions
Several exceptions to the UCC statute of
frauds exist:
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when the goods are specially made or procured for
the buyer and are nonresellable in the seller’s
ordinary market,
when the buyer has received and accepted the
goods,
when the buyer has made either full or partial
payment, and
when the party against whom enforcement is
sought admits in court pleadings or testimony that
a contract for sale was made.
Uniform Law for International Sales
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Uniform rules for international sales are
applicable to contracts for sales between
parties in countries that have ratified
the United Nations Convention on
Contracts for the International Sales of
Goods (CISG).
Under the CISG, a contract for the sale
of goods need not be in any particular
form and can be proven by any means.
Leases
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Article 2A of the UCC regulates
consumer leases, commercial leases,
finance leases, nonfinance leases, and
subleases of tangible movable goods.
A lease subject to Article 2A must be in
writing if the lease payments will total
$1,000 or more.
A commercial finance lease is
irrevocable.