Chapter 19
Formation of Sales
and Lease Contracts
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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.
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§2: The Scope of UCC 2
Does not apply to real estate unless there is a
“good” that can be severed by the Seller. If the
good is severed by the Buyer, then UCC2 does
not apply.
Generally contracts for services are not governed
by UCC2.
What if Goods and Services combined?
Case 19.1: Micro Data Base v. Dharma Systems
(1998).
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Scope of UCC2 [2]
UCC2 applies to the “sale of goods.”
 A “sale” is the passing of title of “goods” to/from a
“merchant” (seller or buyer) for a price (money,
goods, services,etc).
 “Goods” are tangible and movable.
 A “merchant” has special business expertise and is
not a casual buyer/seller.
 Case 19.2: Ready Trucking Inc v. BP Exploration &
Oil Co. (2001).
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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 party-supplier).
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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.
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Offer-Open Terms [1]
UCC 2-204: even if terms of are undetermined, a
contract may still exist.
 Open Terms: “Indefiniteness” is OK as long as the
parties intended to make a contract and there is a
reasonable basis for a court to grant a remedy.
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Offer-Open Terms [2]
Open Price Term: If parties have not agreed
on pricing, court can determine “reasonable
price at the time of delivery.” UCC2-305.
Open Payment Term: Unless otherwise
agreed, payment is due on delivery (COD).
UCC2-310(a).
Open Delivery Term: Unless otherwise
agreed, buyer takes delivery at the Seller’s
place of business. UCC2-308(a).
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Offer-Open Terms [3]
Open Quantity: generally courts will not impose
a quantity. UCC2-306. Exceptions:
 Requirements Contract: buyer agrees to
purchase what the buyer needs or requires.
 Output Contract: buyer agrees to buy all of
seller’s production 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
Any reasonable means of acceptance under the
circumstances is permissible.
Promise to ship or prompt shipment is
acceptance.
 Shipment of non-conforming goods is both an
acceptance and a breach unless goods sent as an
“accommodation” to buyer (UCC2-206).
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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 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:



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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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Parol Evidence
Terms of a written agreement intended to be the
final expression of parties’ intentions, cannot be
contradicted by prior or contemporaneous
agreements.
Exceptions: consistent terms, course of dealing
and trade.
Case 19:3: Puget Sound Financial LLC v.
Unisearch Inc. (1976).
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Unconscionability
Contract is one that is so unfair and one-sided it
is unreasonable to enforce it.
Court can: set it aside, refuse to enforce the
unconscionable provision, limit the contract.
Case 19:4: Jones v. Star Credit Corp. (1969).
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§5: International Sales
Applicability of the CISG.
Comparison of CISG and UCC.

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
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Mirror Image Rule.
Irrevocable Offers.
Statute of Frauds.
Necessity of a Price Term.
Time of Contract Formation.
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Special Provisions in
International Contracts
Language and legal differences create special
difficulties. Parties should agree to:




Choice of Language.
Choice of Forum (country).
Choice of Law.
Force Majeure Clause.
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Law on the Web
National Conference of Commissioners.
U. Penn Final Draft of Uniform Laws.
UCC at Cornell U.
Contracts for the Sale of International Goods at
Pace University Law School.
Legal Research Exercises on the Web.
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