UCC - goods

Common law - services

UCC 2-105

Goods

The UCC will appy to the sale fo goods which are things moveable at the time of indentification to the K, other than monies for which the price is to be paid, security investments, or things in action. Goods also include timber, crops, and the unborn young of animals.

UCC 2-107

Goods to be severed from realty

K for minerals, oils, or gas, a structure or its materials to be removed from the realty is a K for the sale of goods if severed by the seller, except growing crops or timber attached to realty are goods if capable of severance without material harm to the land whether severed by the buyer or the seller.

Predominant Factor test

Bone Brake test

If the predominant purpose of the K is procurement of goods with incidental services, the UCC applies. If the predominant purpose of the K is to obtain services and goods are incidental, the common law applies.

UCC 2-104

Merchant

one who deals in the goods involved in the transaction, who holds himself out as having skill, or knowledge in those goods, or employs such a person.

A promise or set of promises for which the breech of which the law gives remedy, or for the performance of which the law in some way recognizes as a duty.

Restatement 22

Contract Formation

A K may be formed by conduct without identifiable mutual assent or formation.

UCC 2-204

Contract Formation

A K may be formed by any manner sufficient to show agreement, including conduct by both parties, even though its moment of making is undetermined it will not fail for uncertainty if both parties intended to make a K and there is a reasonable basis for an appropriate remedy.

Offer

Restatement 24

a manifestation of a willingness to enter into a bargain so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. The offeror's intent is measured by an objective standard: that is intent is measured by what a reasonable person in the position of the offeree would believe.

Restatement 33

Offer

An offer must contain sufficient detail and specificity to enable a court to later determine if the alleged K has been breeched and to provide a remedy. The more details contained, the more likely it would be considered an offer.

UCC 2-208

Hierarchy of implied terms

for GOODS only

Terms of the offer

1. express language of the K

2. course of performance - prior conduct of parties under disputed K

3. course of dealing - prior conduct of parties under earlier K's

4. usage of the trade - customary practices in the industry in that locale BUT customs existance must be proved AND the court interprets the written customs.

Gap Fillers

1. UCC 2-305

2. UCC 2-308

3. UCC 2-309

4. UCC 2-310

1. open price term - if K states no price, then reasonable price at delivery (market price)

2. place of delivery - if K states no place of delivery; pick up at seller's place of business, or if no place of business, at residence

3. time of delivery - if K states no time of delivery in a reasonable time.

4. time of payment - if K states no time for payment, payment on delivery.

Methods that terminate the power of acceptance

DRRCLA

Death/Incapacity

Rejection

Revocation

Counter offer

Lapse of time

Acceptance

Death/Incapacity

if it is not an option K, death or incapacity of either party will terminate an offer

Rejection

when the oferee communicates his intent to offeror not to accept, offeror entitled to rely on that rejection to make an offer to others

Revocation

Direct - an offeree's power of acceptance is terminated when the offeree recieves from the offeror a manifestation of intent not to enter into proposed K

Indirect - an offeree's power of acceptance is terminated when the offeror takes direct actions inconsistant with the intent to enter into the proposed K, and the offeree aquires reliable info. to the effect from a reliable 3rd party.

Counter Offer

a form of rejection of the original offer with the offeree proposing a different offer; offeror is then entitled to end dealing or may become counterofferee (they switch places). A minor change in terms is more likely a modification than a counter offer.

Lapse of time

an offer will lapse after the time stated or the time will be considered a reasonable time that is directed by the circumstances

Acceptance

an acceptance terminates an offer because it forms a binding contract

Sufficient Certainty

Restatement 33

1. Even if an offer is intended, it's no good unless the terms are reasonably certain

2. terms are reasonably certain if they define when a breech exists and provide a remedy for the breech

3. Uncertain terms may mean that the manifestation isn't rreally supposed to be an offer or an acceptance

Option K

An option is an agreement whereby the offeror relinquishes his right to revoke the offer for a stated period of time in exchange for consideration.

Traditional Option K

1. option K is enforceable against an estate

2. The consideration may be nominal (even 1.00), but a majority of courts will require that it be paid

3. The option period is bought and paid for and remains there, in effect, until it expires and the offeror does not have the power to revoke that offer

4. The mailbox rule does not apply to acceptance through exercise of an option. Such acceptances must be received to be effective.

Promissory Esstopel Option

Rest. 82(2)

An offer which the offeror should reasonably expect to induce action or forebearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forebearance, is binding as an option K to the extent necessary to avoid injustice. Don't have to commence performance; you just have to show offer was foreseeably and detrimentally relied on.

 - Reliance will substitute for consideration to support an option.

- the remedy for breech may be limited as justice requires: anywhere from reliance to expectancy damages. 

Bilateral K

a promise offered in exchange for a promise. It can be accepted only by a promise to perform. If I say I offer to haul all of the beets, and you say I accept your offer. Niether one has done things they've promised yet. There is consideration because there was a promise made by both parties. The mutual promises constitute an offer, acceptance, and mutual consideration. The promise is binding.

a promise offered in exchange for a performance or forebearance to perform. It can be accepted only by the completion of the requested performance. Common law rule is that the offeree must have completed the performance before the offer is accepted.

Under the common law, notification of commencement of performance of a unilateral K is not required unless: - required by the offeror - the offeree knows that the offeror will not know the performance; then the offeree has a duty to use reasonable diligence to provide timely notice that the performance is being commenced.

UCC 2-205

Firm Offer

an offer made by a merchant to buy or sell goods in signed writing, which by its terms gives assurance that it will be held open. It is not revocable during the time stated or 3 mo. Any term that exceeds 3 mo. is revocable after that time.

is a communication by the offeree indicating an intent to assent to the terms of the offer and creates a binding K. The intent of the offeree is measured by the reasonable person objective standard. Unless otherwise indicated by language or circumstances an offer invites acceptance in any manner reasonable.

where the offer is such that the offeror would not actually see the commencement of performance the common law requires the offeree to provide timely notice to the offeror that performance has begun.

must return a promise

Ambiguity of the Offer

Rest. 32

where the terms of the offer are ambiguous as to the method of acceptance, the law will interpret the offer in the light that is most favorable to the offeree.

Rest. 62

Choice is given to offeree

when given a choice of either performance or promise, either mode of acceptance forms a bilateral K.

UCC 2-206

Offer and Acceptance to form a K

1. Unless ambiguously indicated by language or circumstances:

      a) an offer to make a K shall be construed as inviting acceptance in any manner and any medium reasonable under the circumstances;

     b) an order or offer to buy or sell goods for prompt or current shipment shall be construed as inviting acceptance either by prompt promise to ship or by prompt shipment of conforming or nonconforming goods, but such shipment of nonconforming goods doesn't constitute an acceptance if the seller seasonably notifies the buyer that they are for accomadation only.

2. Where the begining of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat offer as lapsed.

UCC 2-601

Perfect Tender Rule

if the goods or tender fail in any respect to conform to the K, the buyer may:

1) reject the whole;

2) accept the whole;

3) accept any commercial units and reject the rest.

Rejection Goods/

Non-Conformity

UCC 2-602/5

rejection of goods must be within a reasonable time after their delivery. If rejection because of non-conformity, must tell seller what is specifically wrong. It is ineffective unless the buyer seasonably notifies the seller. Must hold rejected goods for a reasonable time and use reasonable care to let seller take care of them.

Seller's Instructions

2-603/4

If rightfully rejected goods the recipient of the goods must follow any reasonable instructions from the seller as tot he disposition of the goods. If the seller provides no instructions within a reasonable time, the buyer may store goods at the seller's expense.

Acceptance of Goods Occurs

UCC 2-606

When the buyer:

a) after a reasonable opportunity to inspect signifies to the seller that the goods are conforming and that he will take or retain them despite their non-conformity

b)fails to make an effective rejection after a reasonable opportunity to inspect.

c) does any act inconsistant with the seller's ownership.

An acceptance must be the mirror of the offer; an unqualified acceptance, which varies, alters, or adds to the offer, is a rejection, which terminates the offer and may be a counter offer. However a mere request or inquiry will not defeat the acceptance.

Acceptance by silence

Rest. 69

silence does not usually constitute acceptance. However, exceptions will be generally recognized whenever we can say that a reasonable person in the positioin of the offeror would have thought that silence constituted acceptance. What is important in these silence cases is a history of past dealings that reasonably permits the offeror to believe that, as in the past silence is accepted. One incident is not sufficient. Offeree should notify offeror if not accepting.

Mailbox rule

Timing of Acceptance

acceptance is effective upon dispatch, everything else is upon receipt.

CA - everything is effective upon dispatch.

modern K law is based onthe bargain theory of consideration. Under this approach a K will not be held invalid for inadequacy of consideration as long as the stated consideration was freely bargained for.

peppercorn theory - any amount of consideration is sufficient to support a K as long as it was freely bargained for.

can be consideration if that is what is bargained for

the claimant needs only a good faith belief in the validity of the claim

Output/Requirement K

and Exclusive Dealings

UCC 2-306

1. A term which measures the quantity by the output of the seller or the requirement of the buyer means such actual output or requirement as may occur in good faith except that no quantity unreasonable disproportionate to any stated estimate to any comparable prior output or requirement may be ordered.

2. a lawful agreement by either the seller or the buyer for exclusive dealings imposes an obligation by the seller to use best efforts to sell goods and the buyer uses their best efforts to sell.

provides that an agreement to do what one is already obligated to do cannot constitute valid consideration.

Exceptions to

Pre-existing Duty

Restatement 89

1. Unforeseen circumstances

2. Statute allows it

3. Promissory estoppel

A separate agreement to change the original K, which is a K in itself. An attempted modification violates the preexisting duty rule.

Common law - both parties must give new freely bargained for consideration

UCC - no consideration if agreed in good faith

Accord - an agreement between creditor and debtor to settle a claim by some other performance less than what is due.

Satisfaction - Actual Payment of the settled amount, taking it out of the control of the debtor.

a) unliquidated debt - parties disagree to the amount owed.

b) disputed debt - debtor denies that any debt is owed.

Elements

1. Disputed debt/unliquidated debt

2. tendered check "payment in full"

3. Seller accepts check

Promissory Estoppel

Restatement 90

a promise which the promissor should reasonably expect to induce action or forebearance on the part of the promisee, and which does induce such action or forebearance, is binding if injustice can only be avoided by enforcement of the promise.

Illusory Promise/

Lack of Mutuality

Promise conditional on something entirely within the control of the promissor; when one party has the right to do nothing and incur NO liability

Expectancy Damages

Common Law Remedy

the standard measure of damages in a breech of K is based on P's expectancy interest. Under this approach the P is given the "benefit of the bargain" by being placed in as good as a position as he would have been if the K had not been breeched.

Reliance Damages

Common Law Remedies

are based on the non-breeching parties costs and have the purpose of putting that party in the position they would have been had the K not been made.

Resale Remedies

Seller

UCC 2-706

contract price - resale price. If (a) good faith and (b) commercially reasonable manner

Seller

Market Price Remedy

UCC 2-708(1)

contract price - market price (no consequential damages)

Incidental Remedies

Seller

UCC 2-710

includes any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breech in connection with the return or resale of goods, or otherwise resulting from the breech.

Cover Remedy

Buyer

UCC 2-712

'cover' price - contract price. If (a) good faith and (b) without reasonable delay.

Buyer

Market Price Remedy

UCC 2-713

buyers damages=market price - contract price. No consequential damages if buyer could have bought undelivered goods elsewhere (cover)

Buyer

Incidental Remedy

UCC 2-715

commercially reasonable charges such as brokerage, storage and shipping

- traditional option contracts supported by consideration

- supported by promissory estoppel 87(2) or 45 Unilateral contracts

- there provided by statute (UCC 2-205, Firm offer rule)

Rest. 45

Option Contract created by part

performance or tender

Where an offer invites acceptance by rendering a performance and does not invte a promissory acceptance, an option K is created when the offeree begins the invited performance, or tenders a begining of it. The offeror's duty of performance in accordance with the terms of the K.

Modification, Recision, Waiver

Ucc 2-209

1. A agreement modifying a K within this article needs no consideration to be binding.

3. The requirements of the statute of frauds section of the article must be satisfied if the contract as modified is within its provisions.

Seals Inoperative

2-203

The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer.

Buyer

a person who buys or contracts to buy goods

in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade

of goods means taking physical possession of them

a person who sells of contracts to sell goods

1-204

Time, Reasonable Time, Seasonably

1. Whenever this act requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable my be fixed by agreement.

2. What is a reasonable time for taking any action depends on the nature, purpose, and circumstances of such action.

3. An action is taken at or within the time agreed or if no time is agreed at or within a reasonable time.

1-203

Obligation of good faith

Every K or duty within this act imposes an obligation of good faith in its performance or enforcement

1-201 (46)

written or writting

includes printing, typewritting or any other intentional reduction to tangible form

1-201 (30)

Person

includes an individual or person

1-201 (19)

Good Faith

honesty in fact in the conduct or transaction concerned

1-201 (11)

Contract

the total legal obligation which results from the parties agreement as affected by this act and any other applicable rules of law

1-201 (3)

Agreement

the bargain of the parties in fact as found in thier language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided by this act. Whether an agreement has legal consequences is determined by the provisions of this act, if applicable; otherwise by the law of Contracts.

1-106

Remedies to be Liberally Administered

The remedies provided by this act shall be liberally administered to the end that the agrieved party may be put in as good a position as if the other party had fully performed but niether consequential or special nor penal damages may be had except as specifically provided in this act or by other rule of law. Any right or obligation declared by this act is enforceable by action unless the provision declaring it specifies a different and limmited effect.

1-103

Supplementary General

Principles of Law Applicable

UCC 1-102

Purposes, Rules of construction,

Variation by agreement

1. This act shall be liberally construed and applied to promote its underlying purposes and policies.

2. Underlying purposes and policies of this act are

    a. to simplify, clarify and modernize the law governing commercial transaction;

    b. to permit the continued expansion of commercial practices through custom, usage and agreement of the parties;

    c. to make uniform the law among the various jurisdictions.

3. The effect of provisions of this act may be varied by agreement, except as otherwise provided in this act and except that the obligations of good faith, diligence, reasonableness and care prescribed by this act may not be disclaimed byb agreement but the parties may be by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

4. The presence in certain provisions of this act of the words "unless otherwise agreed" or words of similar import does not imply that the effect of other provisions may not be varried by agreement under subsection 3.

5. In this act unless otherwise requires.

     a. words in the singular number include the plural, and in the plural include the singular;

     b. words of the masculine gender include the feminine and the neutral, and when the sense so indicates words of the neutral gender may refer to any gender.

1-205

(see 2-208)

Course of Dealing and Usage of Trade

(1)

A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

1-205

Course of Dealing and Usage of Trade

(2)

A usage of trade in any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existance and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing for the court.

1-205

Course of Dealing and Usage of Trade

(3)

A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement. 

1-205

Course of Dealing and Usage of Trade

(4)

The express term of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistant with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.

1-205

Course of Dealing and Usage of Trade

(5)

An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.

1-205

Course of Dealing and Usage of Trade

(6)

Evidence of a relevant usage of trade offered by one party is not admissable unless and until he has given the other party such notice as the court finds sufficient to prevent unfair suprise to the latter.

UCC 2-207

Additional Terms in acceptance or Confirmation

(Battle of the Forms)

Dragon

Determines whether contract is by documents or by conduct and resolves ensuing disputes:

1. An acceptance (based on the objective standard) or a written confirmation of a verbal agreement forms a binding contract even if it does not mirror the offer (unlike common law) UNLESS the offeree makes clear his acceptance is a counteroffer and conditional on the offeror's express assent to the new terms.

2. When there is a dispute in a contract based on documents existing as of 2-207(1):

  When not both merchants, the offeror's rules prevail and the offeree's additional terms are only proposal's for changes, not a rejection/counteroffer; which is why offeree's use "acceptance expressly conditional on assent" to the additional terms. (initial offer's terms only)

  When both merchants, the additional terms become part of the contract unless:

     a) the offer requires mirror image (initial offer's terms only)

     b) the offeree's terms are materially-altering (arbitration due to admissible evidence, price, but not including changing interest rate)

UCC 2-714

Breech of Warranty Damages

value as warranted - value as accepted

Here buyer has possession of defective goods, but 2-712 and 2-713, assume buyer does not have possession, so buyer keeps the defective goods and also gets compensation for defects (so he must prove the price he paid and the value as warranted)

promise condition by promisor's performance; is not consideration unless each of the alternatives would be consideration of its own 

provisions that allow a promisor to end duties/rights

- Illusory promise if promisor can do so at-will -- if any notice of termination is required then it's a contract

- Not Illusory if termination is conditional on event's beyond promissor's control, even with "at-will"

- Not illusory if time limit on an at-will termination (cancel before shipping) as opportunity existed on both sides to terminate

Contracts violating the law are invalid, even if freely bargained for (ex. ticket scalping) statutes overrule contract laws

UCC 2-302

Unconscionable Contract

A court can refuse to enforce unconscionable provisions or the entire contract, must be both proceedurally and substantively unconscionable

Substantive - theunfair clause itself; exorbinant price alone is not enough

Procedural - unfair suprise or oppression; an unfair shifting of risk allocation

     unfair suprise - (tricked) extent to which the agreed on terms are hidden in the contract

     oppression - (forced) gross inequality of bargaining power, absence of meaningful choice

Also unconscionable individually: fraud through non-disclosure when there is a duty/relationship; fraud/over-reaching

A contract provision excusing a party from liability (typically from own negligence) is generally valid but may be voided if it negatively affects the public interest as determined through the Trunkl Criteria:

1. the business is a type generally thought suitable for public regulation

2. the party seeking exculpation is performing a service of great public service and practical necessity to some

3. party held itself out as willing to perform for any member of the seeking public, or any with certain established standards

4. due to services essential nature, party seeking excupation has decisive bargaining strength and buyer cannot realistically walk away

5. (oppression) party uses a standard adhesion contract with no meaningful opportunity to negotiate

6. (substantive) buyer is under seller's control, subject to risk of seller's carelessness

UCC 2-201

Statute of Frauds

for goods over $500

1. unless otherwise provided in this section, a contract for the sale of goods > $500 is not enforceable without sufficient writing. Writing is not insufficient if it omits or incorrectly states terms, but is not enforceable beyond the quantity of goods in the writing. Writing must: identify parties by name (not who is the buyer or seller), identify goods, identify the quantity of goods, be signed by pary to be charged.

2. Between merchants, if within reasonable time a writing confirming intent, and provable from sender is received, and party receiving has reason to know contents (not necessarily reads the contents but knows them) the writing satisfies the requirements of (1) against such party unless a notice of objection to the contents is given within 10 days of receipt.

2-201

Statute of Frauds

Exceptions

3. Part performance does not prove the argument, but allows the trial to prove it:

  a. goods are specially made for the buyer and not sold in sellers ordinary course of business and sell has substantially begun production or commitments made to produce the goods before the seller receives notice of repudiation.

  b. Not in CA: if D admits the contract was made then it is enforceable up to the quantity of goods admitted to.

  c. goods for which payment was made and accepted or which have been received and accepted

UCC 2-202

Parole Evidence Rule

Evidence is admissible unless it would certainly have been included in the integration (anything not essential is admissible if it could conceivably have been made as a separate agreement

Interpretation - evidence may be admitted to interpret ambiguous language in an agreement

Subsequent Arguments - admissible only as a modification contract

Exceptions - fraud, duress, mutual mistake, true-condition preceedant (when a contract will take effect only when X does/does not occur)

2-313

Express Warranty

is a statement of fact by any seller (oral or written) about the product, which is part of the basis of the bargain (the buyer relied on it for buying or using the product). If the product fail to conform and the non-conformity causes injury, the seller is liable for damages.

2-314

Implied Warranty of

Merchantability

a commercial sellers product must be fit for the ordinary purpose for which it was intended when leaving the manufacturer

2-315

Implied Warranty of Fitness

for a Particular Purpose

is formed whe a buyer communicates a specific need to the commercial seller, relies on the seller's expertise to fulfill that need, the product does not fulfill, and injury occurs.

Anticipatory Repudiation

An advance indication by one party that he will not perofrm as agreed. The repudiation is not the actual breech as it still may be retracted before the non-breeching party either: 1) detrimentally detrimentally changes position in reliance; or 2) communicates to the breeching party that he considers the repudiation final.

UCC 2-609

Right to an Adequate Assurance

of Performance

The suspecting party has the right to make a demand for some reasonably prompt assurance of fulfillment (common law similiar)

(1) A contract for sale imposes an obligation on each party that the other;s expectation of performance will not be impaired and allows defensive steps if there is a doubt performance will occur.

(2) A party with reasonable grounds for insecurity of the other's performance may demand additional security, and if commercially feasible, suspend own performance.

UCC 2-610

Anticipatory Repudiation

What protective rights does a party have if the other party has repudiated (common law identical)

UCC 2-611

Retraction of Anticipatory Repudiation

The repudiating party may retract that repudiation provided the other party has not changed his position in reliance on the repudiation (common law identicle)

When there is a huge disparity between consideration and consequential damages beyond D's foreseeability, P must prove D implicitly agreed to consequential damages and not just had knowledge of P's circumstances 

UCC 2-508

Cure by Seller of Improper

Tender or Delivery

(1) Seller has an opportunity to cure a defect if contract time has not expired, but if not cured, buyer may recind after telling seller of rejection and why

(2) Seller may argue for more time to conform if through prior dealings: late deliveries have been acceptable; or non-conforming goods have been acceptable with price adjustments

UCC 2-608

Revocation of Acceptance in

Whole or in Part

1. buyer may revoke acceptance (not offer) if defect substantially impairs the value to the buyer:

   (a) If the buyer reasonably assumed the non-conformity would be cured and it has seasonably not been

   (b) If the buyer's discovery of non-conformity was difficult to do before acceptance, or buyer was assured by seller

2. Revocation must be in a reasonable time after buyer discovers or should have discovered, and before goods have substantially changed, not by defect. Buyer must notify seller.

3. Buyer revoking goods has the same rights and duties as if he had rejected them.

UCC 2-718

If circumstances change since the time of formation and the liquidated damages specified in the contract is no longer reasonable at the time of breech, the court may also strike the clause, decline to enforce it, and just calculate the damage amount. (UCC allows retroactive adjustment of LD amount)