Goals of UCC & Article 2 –
1) UCC §1-102
2) Goals: §1-103(a)
a) (3) to make uniform the law among the various jurisdictions - Want to have
uniformity among states; should save money as businesses conduct
transactions across state lines
- Whole purpose of article 2 and 2a is to facilitate commerce.
3) UCC § 2-403
i) §2-403 – no one can transfer what one does not have
(1) thief has nothing – nemo dot qual something – latin
(a) person who buys computer from a thief has no claim to title
ii) Problem 2: Baker purchased a notebook from Abel in Bloomington
tendering a worthless check which Baker knew to be to be worthless
(1) §2-403 – someone with voidable title has power to transfer a good
title to a good faith purchaser for value
(a) result: even though Baker no better of person than in problem 1,
the result is that Abel can’t get computer back
Definitions and Scope:
4) What law applies? What law governs?
a) Which jurisdiction’s law applies?
b) Which code or set of statutes or body of common law within that jurisdiction
applies?
5) §2-102 – SCOPE - “transaction in goods”
a) What is a “sale”? 2-106. Passage of title from a seller to a buyer.
b) What is a “good”? 2-105-1. All things moveable at the time the goods are
identified
i) DOES NOT include:
(1) “things in action”
(a) What is a “thing in action?
1. Insurance policy – don’t get fooled b/c carried in box
ii) Sales of Real Property NOT covered
(1) Software???
(a) software is not a good and therefore CL should apply BUT
most courts have now decided software is a good and that
Article 2 applies to the sale of software. The only exception
appears to be where go to company and ask company to
design something unique or special—under that case we still
are not sure.
(b) In that situation revert back to the predominate purpose test.
(c) But there we are really at adrift. Have one thing that is not a
good and another that is not and trying to see if good was a
predominate purchase.
6) Hybrid Contract:
a) **Predominate Purpose test (majority view): The court must inquire
whether the “essence or dominant factor” in the formation of the K was
the provision of goods [or provision of a service”
i) Milau – K to install sprinkler contract (made of pipes)
o Court decides that it was predominantly a service and not a good,
thus Art. 2 doesn’t apply: “The goods were merely incidental”
ii) Groveman Test – if the accident occurred b/c of poor service then no UCC;
and if b/c of poor goods then UCC
(1) Problem – often problem due to both service and good; thus, it’s
Minority view: Anthony Pools
iii) Can we have two contracts, one for service and one for the good? No, the
court will use Re-characterization. They will put them together.
7) Sale of goods v. Lease of goods:
a) Whether the lesser (seller) retains a significant, residual interest in the
goods
i) does the leaser have a reasonable expectation that she will get back the
goods with some economic value
(1) Seller never gets the goods back
Scope of Article 2A and True Lease v. Security Lease
8) 2A-103—a parting of possession/ a transfer of the right to possession and use
for goods for a term in return for consideration, but a sale, including a sale on
approval or a sale or return, or retention or creation of a security interest is not a
lease.
a) Test for whether true lease vs. security interest:
i) According § 1-203(b) – if the lessee can terminate the contract at will,
then it will be a lease; if no, then look to see if it fulfills one of the
following:
(1) is there economic life left at end of term?
(a) Yes = sale / security interest
(b) No, then go to next one
(2) is the lessee is bound to renew or to purchase at end of lease?
(a) Yes = sale / security interest
(b) No, next one
(3) Option to renew for 0 or a nominal amount
(a) Yes = sale / security interest
(b) No, next one
(4) Option to buy for 0 or a nominal amount
(a) Yes = sale / security interest
(b) No, next one
ii) What if All are NO  then, we have to look to jurisdiction – but this
process seems to take care of 95 – 99% of transactions
b) the Fair Market Value at end is good; nominal value not good
(1) ***real test of nominality: the only “a fool test” – only a fool would not
renew or only a fool would buy the product
(2) If the amount to renew or buy at the end of lease is included in the
contract, then Fair Market Value doesn’t matter
Choice of Law:
9) Choice-of-Laws Provision
a) *Has no initial impact on how the court considering a dispute on that
transaction will choose the law that is applied to the case.
i) Before the court will do anything, it will first apply the Choice-of-Laws
rule for the court’s state
(1) Choice of Law rules from the state are IMPORTANT
10)UCC §1-301 - choice-of-law rule – whether or not the UCC rule is the one that will
apply to your case; in addition to be applicable to many transactions in Indiana,
it is the choice-of-law rule
a) BUT can choose own law: §1-302 – Variation by Agreement.
i) *one of the most dramatic departures of UCC from Common Law.
(1) provisions may be varied
(2) From comments, you don’t have to have explicit language. You can
vary the effect of any term in the UCC unless it’s explicitly prohibited
by the UCC or it’s just nonsense (e.g., making the SofF not apply with a
verbal agreement)
11)Where is the choice-of-law rule in the CISG?
a) Article 1:
i) Section 2 – if parties have their places of business in different nations and
both nations are contracting parties, then the law of the case is the CISG
b) under Article 6 of the CISG, you can opt out of the CISG.
i) BUT if the parties attempted to opt out by saying “this transaction will be
governed by the law of the state of NY,” The CISG would still apply
(1) Have to say explicitly that the CISG does not apply and that the UCC of
NY and the common law of NY applies.
(2) HAVE to explicitly say no CISG – have to effectively disclaim it.
12)For step-by-step process for choice of laws, see attached.
Statute of Frauds and Parol Evidence Rule
13)Common Law – all its terms and conditions had to be in writing or K not
enforceable
14)UCC §2-201 – a K can be enforced even if a main term is omitted or misstated
a) Under §2-201(1) only necessary term is quantity
i) Other exceptions:
(1) Merchant confirmation letters,
(2) Special manufacture
(3) Part performance
(4) Admission in legal proceedings
15)
16)Contract Formation
a) Battle of the Forms (2-3 classes)
17)Warranties (7 classes)
a) Magnuson-Moss Warranty Act
b) Warranties in Article 2A
c) Warranties in CISG
18)Terms of the Contract
19)Identification
20)Risk of Loss – No Breach (2 classes)
21)Installment Sales / Perfect Tender Rule
22)Acceptance & Rejection (2 classes)
23)Revocation of Acceptance (2 classes)
24)Risk of Loss – Breach/Impossibility (2 classes)
25)Special Remedies
26)Seller’s Remedies (2 classes)
27)Buyer’s Remedies (2 classes)
28)Anticipatory Repudiation and Statute of Limitions