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Professor Robert Butkin
Selling and Leasing of Goods
Spring, 2016
Assignments for January 11 and 13
Required Texts:
Keating, Sales: A Systems Approach (5th ed. 2011) (“Casebook”)
Mann, Warren, Westbrook, 2015 Comprehensive Commercial Law: Statutory
Supplement (“Statutory Supplement”)
Butkin, Selling and Leasing of Goods Supplemental Materials (“Butkin Supplemental
Materials”). You will find these materials on the TWEN page.
Monday, January 11
Please make sure you have enrolled in the course on TWEN prior to the first day of class.
Please read the Course Description and Policy and the Course Syllabus prior to the first
day of class as well. You will find these documents on TWEN.
Introduction to Course
Please read Butkin, Selling and Leasing of Goods Supplemental Materials, pp. 1-12.
These materials are posted to Assignment folder on TWEN for January 11 and 13, and
are attached to the copies of this assignment found outside the Faculty Support Center.
Prepare the questions that you find in these materials.
Please scan the Table of Contents for the Uniform Commercial Code, which you will also
find attached to this assignment and which is also posted to the Assignment folder for
January 11 and 13.
Scope of Article 2-Sales:
1. What are “transactions in goods?”
This course will require the ability to closely analyze pertinent provisions of a
statute, the Uniform Commercial Code. Many times, the meaning of a given Code
section becomes clear only if read in connection with other sections of the Code. The
following problem is intended to provide an exercise in statutory analysis, and at the
same time assist us in determining when the UCC Article 2 applies to a given transaction.
HYPO: Buyer and Seller enter into a written contract for the purchase of a
computer that was advertised in the Seller’s catalogue. The computer is to be
manufactured by Seller. The contract calls for a delivery date three months after
the date of the contract. Two days after the contract is signed, and before Seller
has commenced manufacture of the computer, Seller notifies buyer in writing that
Seller has decided to discontinue the computer model that Buyer ordered, and that
Seller is repudiating the contract.
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QUESTION: Does this transaction fall within Article 2 of the Uniform
Commercial Code or not? If so, why? I strongly encourage you to write
out your answers. As you prepare your analysis, please consult the
following sections of the UCC, which you can find in the Mann, Warren
Westbrook, Comprehensive Commercial Law: Statutory Supplement
assigned for the course. §§ 2-102, 2-105(1), 2-106(1), 2-401(2), 2-501(1)
Pay attention to how the individual sections of Article 2 work together to
provide an answer to the problem.
Wednesday, January 13
Scope of Article 2-Sales
2. The problem of “mixed” contracts involving both sales and services
The definition of merchant in Article 2
An introduction to the law of warranties
Please read:
Casebook, pp. 11-21 (beginning with note on scope of Article 2, page 11)
Adel v. Greensprings of Vermont
Cook v Downing
Please prepare to discuss Problems 1.3 and 1.4, Casebook, pp. 22-23
Be sure to read the UCC sections referenced following each problem
Please read UCC § 2-104 (1) and Official Comments 1-3, and be prepared
to answer the following questions:
1. What is the difference between a “goods” merchant and a
“practices” merchant as defined in UCC §2-104(1)?
2. Does the implied warranty of merchantability in UCC § 2-314
apply to “goods” merchants, “practices” merchants or both?
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Selling and Leasing of Goods
Supplemental Materials
Professor Robert Butkin
University of Tulsa College of Law
Revised January 3, 2016
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Part I
Introduction
An understanding of the law of Selling and Leasing of Goods requires that
we determine the law that applies to a given case or problem. Obviously, we will
not be able to solve any problem involving this subject (or any legal problem)
unless we first can correctly identify the source of law that will provide the
applicable rules of decision.
This course is described as a “Code course” because the applicable law for
problems arising in this field is often found in the Uniform Commercial Code
(UCC), a body of laws enacted by state legislatures, or in the Convention on
Contracts for the International Sale of Goods (CISG), a treaty which binds those
countries that have ratified it and which provides the applicable law for
transactions falling within its scope. However, the course will also require
knowledge of basic principles of the common law of contracts—the principles that
we focused on in our first year Contract course.
There are two reasons for this. First, as discussed in Part II that follows,
unless the UCC has displaced the common law, the UCC itself provides that
common law principles supplement the statutory provisions of the UCC. In short,
the UCC itself does not “speak” to every issue that could arise in cases that fall
within the UCC’s scope, and in those cases, the UCC itself directs us to the
common law to find the applicable rules. Second, in many cases (for example,
UCC §2-207, the “Battle of the Forms”), the UCC dramatically differs from
common law’s treatment of the same issue. In the latter situation, we will have a
better understanding of the UCC if we understand the perceived defect in the
common law that the UCC drafters were trying to address.
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A full review of first year Contracts is not feasible within the scope of this
course. However, our studies in this course will be enhanced if we refresh our
understanding of certain common law principles, and the following materials are
intended to do that.
Part II
Choice of Applicable Law
Choice of law is the choice of legal rules under which a dispute will be
resolved. Thus, choice of law will always be the threshold step in any problem
involving contract analysis.
A.
THE COMMON LAW
The common law refers to judge-made law, governing rules that can be
distilled from analysis of court decisions. The common law is to be distinguished
from statutory law, which refers to legislation passed by a state legislature or
Congress that provides an applicable rule of decision. When a state legislature
passes a statute that diverges from or codifies the common law, that statute will
always prevail. For our purposes, common law will refer to the law that applies if
there is no legislation that would otherwise provide the rule of decision.
Many of you will remember studying the Restatements of Contracts as a
way of learning about the common law of contracts. A private organization, the
American Law Institute (ALI), consisting of judges, leading practitioners, and
leading scholars, has adopted Restatements covering a number of fields of law,
including contracts, torts, and restitution. There have been two Restatements of
Contracts. The Restatement (First) of Contracts was officially adopted by the ALI
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in 1932; the Restatement (Second) of Contracts was officially adopted by the ALI
in 1979.
The Restatement (First) tended to emphasize “black letter rules” and
predictability, while the Restatement (Second) tended to provide for more
flexibility, accommodation of the law to developing commercial practices, and
judicial innovation. Please keep in mind that the Restatements themselves are
secondary authority, and are not “the Law.” However, courts will often give them
authoritative weight, and in a number of situations appellate courts have explicitly
adopted Restatement sections as the governing rules of law in their jurisdictions.
In such cases, the Restatement provision so adopted becomes the law of that
jurisdiction (until such time as the legislature passes a statute departing from that
rule, or such time as the appellate courts in that jurisdiction depart from the
principle of stare decisis and choose to apply a new rule), while those portions of a
Restatement not adopted by a court remain secondary authority. For the purposes
of this course, unless otherwise noted, we will apply the common law rules as set
forth in the Restatement (Second) Contracts. You will find the Restatement rules in
the supplement that was used in your first year Contracts class.
B. THE UNIFORM COMMERCIAL CODE
Historically, much of the law of contracts in the Anglo-American system has
been common (judge-made) law. One significant and very notable exception to
this was the Statute of Frauds, enacted by the English Parliament in 1677. A
similar Statute of Frauds was subsequently adopted in virtually every American
state in early American history. The Statute of Frauds requires that certain types of
contracts be evidenced by a writing to be enforceable in court. But with the
exception of the Statute of Frauds, Anglo-American law traditionally consisted
largely of common law.
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In the twentieth century, this began to change. The most important change to
the traditional common law nature of contract law was the adoption of the Uniform
Commercial Code (UCC) in legislatures throughout the fifty states and the District
of Columbia.
The UCC had its origins in a recognized need to bring greater uniformity
and predictability to a commercial system that was becoming increasingly modern
and national in the twentieth century. Two private organizations, the National
Conference on Commissioners of Uniform State Laws (NCCUSL), now known as
the Uniform Law Commission (ULC), and the American Law Institute (ALI),
came together to draft a uniform act for submission to the states. (In these
materials, I will refer to NCCUSL by its current name, the Uniform Law
Commission (ULC). The ULC was founded in 1892 and was responsible for the
drafting of a number of uniform laws that were enacted by the states prior to the
UCC. The ALI, discussed above, was founded in 1923 to address the need to
provide a compilation of common law principles in certain subjects of law that
would be accessible in a single resource.
The joint ULC/ALI project to draft a UCC began in 1945.1 The ALI and
ULC completed a final text of the proposed UCC in September 1951. After it was
debated and approved by the House of Delegates of the American Bar Association,
a text was issued in November 1951. After a number of revisions, particularly in
response to the criticisms and suggestions of the State of New York Law Revision
Commission (which held hearings on the text from 1952-1955), the ALI and ULC
approved a draft that was published as the “1957 Official Edition” of the UCC.
Several years later, after further revisions, these bodies adopted the 1962 Official
I want to thank Professor Martin Frey of the College of Law faculty for the following
summary of the history of the drafting and adoption of the UCC.
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Text with Comments, and this became the draft enacted by the legislatures of the
50 states and the District of Columbia. 2
During the last 48 years, a number of articles were amended and several
additional articles were added. They are as follows:
Article 1-General Provisions. Revised by ULC and ALI in 2001. As of the date
of the preparation of these materials, 49 states, including Oklahoma, as well as the
District of Columbia have enacted into law revised Article 1. The Revised Article
1 is the version that you will find in our Statutory Supplement used for this course.
Article 2-Sales. Revised by ULC and ALI in 2003. To date, no state has enacted
revised article 2. In May, 2011, the ULC and the ALI officially withdrew their
support of Revised Article 2. Most statutory supplements, including the one we
use in our course, now omit the 2003 revisions of Article 2.
Article 2A-Leases. In 1987, ULC and ALI adopted a proposed Article 2A,
entitled Leases. The 1987 version of Article 2A was subsequently amended in
1990. To date, 47 states, including Oklahoma, and the District of Columbia have
enacted the 1990 Article 2A. In 2003, ULC and ALI adopted a revised Article 2A.
To date, no state has enacted revised (2003) Article 2A, and in May, 2011, the
ULC and the ALI officially withdrew their support of Revised Article 2A.
Article 3-Negotiable Instruments. Revised by ULC and ALI in 1990. Revised
Article 3 has been adopted in 48 states and the District of Columbia.
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The State of Louisiana has not adopted Article 2.
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Article 4-Bank Deposits and Collections. Amended to conform to revised Article
3 in 1990. 48 states and the District of Columbia have enacted amended Article 4.
Article 4A-Funds Transfers. This new article was adopted by ULC/ALI in 1989.
It has been enacted in all 50 states and the District of Columbia.
Article 5- Letters of Credit. Revised in 1995. 50 states and the District of
Columbia have enacted Revised Article 5.
Article 6-Bulk Transfers. Revised in 1988. The revised Article 6, “Bulk
Transfers” has been enacted in 4 states, including Oklahoma. The original Article 6
has been repealed in 46 states.
Article 7-Documents of Title. Revised in 2003. As of this date, 36 states have
adopted Revised Article 7.
Article 8-Investment Securities-Revised in 1994. All 50 states have enacted
revised Article 8.
Article 9-Secured Transactions. Revised in 1998. All 50 states have approved
Revised Article 9. In 2010, the ULC and the ALI adopted amendments to Article
9, the most important of which involved changes to way the debtor’s name is
required to be identified in UCC-1 financing statements that are used to perfect a
security interest. As of the date of the preparation of these materials, all fifty
states, and the District of Columbia, have adopted the 2010 amendments. The
text of Article 9 that is included in our Statutory Supplement includes the 2010
amendments.
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Please keep the following in mind when considering cases that may fall
within the scope of the UCC:
1) The Code is “uniform” only at the time that the Uniform Law
Commission (ULC) and the ALI approved it (or a revision) for submission to the
states. States have often made non-uniform amendments to Articles of the UCC
that have been adopted in those states. Thus, it will always be necessary to consult
the law of your jurisdiction for the statutory text of the UCC in effect in that
jurisdiction. For the purposes of this course, we will assume that the “Official
Texts” as approved by ULC and ALI provide the applicable rules of statutory
decision for cases falling within the scope of the UCC.
2) As we noted above, over the last half century, a number of UCC Articles
have been amended or revised by the ULC and the ALI, and several new Articles
have been adopted that were not part of the original UCC, e.g. Article 2A-Leases.
Please make sure you monitor legislative developments in the jurisdiction in which
you are practicing to keep abreast of legislative adoptions of future revisions or
amendments to existing Articles. We noted earlier, for example, that Revised
Article 1(2001) has been adopted by the legislatures of 47 states; thus it will be
important to you to consult your local statutes to see which version of Article 1 is
in effect in your jurisdiction. The Uniform Law Commission (ULC) website,
www.uniformlaws.com also provides a resource for researching new revisions or
articles that are being considered for adoption and presentation to the states. For
purposes of this course, we will assume that Revised Article 1 is in effect unless
you are advised otherwise. This is the version of Article 1 that you will find in our
Statutory Supplement.
PROBLEM II.1
(a) Go to the website for the Uniform Law Commission,
www.uniformlaws.org. From that website, find the link for either the
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2001 revision to Article 1 of the UCC or the link to the 2010
amendments to Article 9 of the UCC. What information is provided to
you in each of those links?
(b) From the Uniform Law Commission website, find a list of the
revisions and amendments to the UCC that are to be considered in 2016
in the state in which you plan to practice.
3) The role of the courts in deciding cases that fall within the scope of the
UCC is narrower than their role in deciding cases that do not fall within the scope
of a statute. The task of a court in deciding a case that falls within the scope of a
statute is one of statutory interpretation: it may not substitute a common law rule in
cases where the legislature has enacted a statute that speaks to the issue under
consideration.
4) While one of the statutory goals of the UCC is to promote uniformity in
commercial law among the different states (see UCC § 1-103 (a) (3)) each state’s
judiciary has flexibility in how it interprets UCC provisions that have been enacted
in that state. The UCC is state law. There is no “UCC Supreme Court” with final
authority to resolve differences among the states when states have interpreted UCC
provisions differently. Courts in each state may decide how much deference, if
any, to accord to court decisions in other states that have addressed the same or
similar issues.
5) The Uniform Commercial Code, despite its name, does not cover, within
the scope of any of its articles, the full range of transactions that we would think of
as “commercial.” Thus, sales and leases of real property, and contracts for
personal services, are not included within its scope. Conversely, many transactions
that one would not think of primarily as “commercial” fall within the scope of the
UCC. A sale of 50 Boeing 787 jets would fall within the scope of Article 2- Sales,
as would the sale, at a garage sale, of a used Barbie Doll.
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The Relationship between the UCC and the Common
Law
Article 1-General Provisions, applies to all other Articles in the UCC. UCC
§ 1-103(b) states:
Unless displaced by the particular provisions of [the UCC], the principles of
law and equity, including the law merchant and the law relative to capacity
to contract, principal and agent, estoppel, fraud, misrepresentation, duress,
coercion, mistake, bankruptcy, and other validating or invalidating cause
supplement its provisions.
This Section, and the Official Comments thereto, make clear that principles
of the common law and equity apply to disputes falling within the scope of the
UCC unless those principles have been displaced by the UCC’s language or by its
underlying purposes and policies. See Official Comments 2, 3, and 4. What
happens if state legislatures have codified specific common law rules, as is the
situation in a number of states including Oklahoma and California? In such
situations, the fact that a principle of common law or equity has been stated in
statutory form would not alter a court’s analysis of whether that principle should be
used to supplement the UCC in a given case. Official Comment 3.
Under what circumstances will courts draw on principles of law and equity
to supplement the UCC? While this is not an exhaustive list, one might consider
three circumstances where common law would supplement the UCC. One
situation arises when the UCC does not provide any definition of terms used within
the UCC when those terms had their origin within the common law. For example,
the terms “offer” and “acceptance,” which describe traditional requirements of
common law contract formation, are used within the UCC but given no precise
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definition within the UCC itself. See, e.g. §§ 2-205, 2-206, and 2-207. The courts,
on the other hand, in the development of the common law, have developed wellaccepted definitions of these terms as well as robust case law applying those terms
to specific cases involving issues of contract formation. Similarly, the UCC does
not contain a provision addressing issues such as revocation, rejection, and
counteroffer. Section 1-103 would direct us to the common law for the applicable
rule in those cases. The common law mailbox rule, under which an acceptance of
an offer by mail is effective at the moment of dispatch, rather than receipt, is
another example of a common law rule which is incorporated into the UCC
through UCC § 1-103 (b).
A second situation arises where the UCC is silent on available defenses to
the enforcement of contracts that are available under the common law. These
would include:
1. Common law rules making contracts voidable due to status (e.g. when the
party seeking to void a contractual duty was younger than 18 years old at the
time of the making of the contract);
2. Common law rules making contracts voidable due to lack of capacity (e.g.
when a person is unable to understand the nature of his contractual
obligation due to mental illness or defect, or intoxication);
3. Common law rules making contracts unenforceable due to duress, mistake,
fraud, misrepresentation, or grounds of public policy.
A third situation arises where both the UCC and the common law contain
identical rules, but neither the UCC nor the common law has precisely defined
those rules, nor may be capable of precisely prescribing how those rules will be
applied in a given case. One example of this may be the discretion that the UCC
provides courts to refuse to enforce contracts, or portions of contracts, that courts
find “unconscionable.” UCC §2-302. Courts applying the common law have also
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applied the doctrine of unconscionability to hold unenforceable contracts or
portions thereof. Such determinations are made on a case-by-case basis; the law of
unconscionability is evolving. Courts considering whether contracts within the
scope of the UCC are unconscionable may wish to draw on analyses made by
common law courts, and vice versa.