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Uniform Commercial Code and Contract Law: Some Selected Problems

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Uniform Commercial Code and Contract Law: Some Selected Problems THE UNIFORM COMMERCIAL CODE AND CONTRACT LAW: SOME SELECTED PROBLEMS TABLE OF CONTENTS Page INTRODUCTION ............................................................. 837 PART I. FORMATION OF A CONTRACT-AccEPTANCE ........................... 839 Acceptance by the Seller ..................................... 839 Acceptance Which Varies From the Offer .................... 850 Conclusion .................................................. 864 PART II. TENDER OF NONCONFORMING GOODS-BuYER's DUTIES UPON RIGHT- FUL REJECTION .............................................. 864 Buyer's Preliminary Duties Upon Rejection ................... 865 Duties of a Merchant Buyer ................................ 866 Merchant Buyer's Duties as to Perishable Goods ................ 869 Exceptions and Special Cases ................................ 872 Conclusion .................................................. 880 PART III. PERFORMANcE-THE DOCTRINE OF IMPOSSIBILITY .................... 880 Adjusting a Disrupted Deal: Excusing the Seller Because of Supervening Facts ......................................... 881 Excuse: Failure of Presupposed Conditions .................... 885 Selected Problems Involving Impracticability ................... 890 Procedure Upon Claim of Excuse .............................. 900 Buyer's Excuse When Contract Has Lost Its Ultimate Value: Frustration ................................................ 904 Conclusion ................................................... 905 PART IV. TRAFFIC IN CONTRACT RIGHTS AND DUTIES-ASSIGNMENT AND DELEGATION ................................................. 906 Assignment of Rights ....................................... 907 Substituted Performance-Delegation of Duties ................ 913 Modification of Assigned Contracts ............................ 918 Conclusion ................................................... 920 BEYOND THE CODE: APPLICATION AND ANALOGY .............................. 921 (836) 1957] INTRODUCTION * The Uniform Commercial Code,' a product of long and arduous effort by a large task force of legal scholars and practicing attorneys,2 attempts an exhaustive re-evaluation of commercial dealings. All phases of the com- mercial law are treated so as to give effect, more completely than did previous statutes and common law, to tlhe reasonable expectations of those whose relations are established in the market place rather than in the court- room. The result is the establishment of a statutory basis for the entire spectrum of commercial transactions-from sales of goods to security financing arrangements. In the course of this broad endeavor, and at least partially to avoid the interference of rigorous common-law doctrines tangential to the com- mercial dealings which the code seeks to control,3 several sections are devoted to a reformulation of some of the principles of contract law. From problems of contract formation through those of remedies, the draftsmen selected the important features of the contract law governing the sale of goods and codified the doctrine deemed most desirable in each instance. At times the code provision is merely a restatement of prior law; in many instances the common law rules are modified or completely abandoned.4 For example, one section permits firm offers without consideration , an- * The Law Review wishes to express its appreciation to the following companies which were kind enough to furnish copies of their business forms: Aluminum Com- pany of America, Futorian-Stratford Furniture Company, Midvale-Heppenstall Com- pany, Serv-Agen Corporation. 1. PA. STAT. ANN. tit. 12A (Purdon 1954) (hereinafter cited as UCC). The comments to the code sections are those in the 1952 Official Draft. 2. The code was evolved and nurtured by the American Law Institute and the Commissioners on Uniform State Laws. Chief and Associate Chief Reporters were Karl Llewellyn and Soia Mentschikoff. The sales article was given final approval at a joint meeting in May 1951. Pennsylvania is the first and only state to adopt the code, approving it April 6, 1953, effective July 1, 1954. Since then the New York Law Revision Commission, after detailed study of the effect of the provisions of the code upon the law of the state, recommended its disapproval of the code as it was then written. See Law Revision Commission of the State of New York, Report to the Legislature Relating to the Uniform Comwrcial Code, LwG. Doc. No. 65(A) (1956). 3. UCC arts. 2 (Sales), 3 (Commercial Paper), 4 (Bank Deposits and Collec- tions), 5 (Documentary Letters of Credit), 6 (Bulk Transfers), 7 (Warehouse Re- ceipts, Bills of Lading and Other Documents of Title), 8 (Investment Securities), 9 (Secured Transactions; Sales of Accounts, Contract Rights and Chattel Paper). 4. E.g., UCC § 2-203. 5. UCC § 2-205. (837) 838 UNIVERSITY OF PENNSYLVANIA LAW REVIEW (Vol. 105 other modifies the traditional distinctions between acceptance and counter- offer.6 The common law refusal to allow the offeree free choice as to the medium of acceptance is dealt with summarily,7 and in a few words the often hazy differences between bilateral and unilateral agreements are further blurred.8 A new standard for enforcing indefinite agreements is adopted.9 The Statute of Frauds 10 and the parol evidence rule 11 are re- formulated and modernized. Several common law rules of assignment and delegation are codified, clarified and altered. 12 The code makes no pretense to complete codification, 13 nor does it attempt to restrict or affect case law in areas other than sale of goods.14 Whether the code effectuates or, perhaps, exceeds the draftsmen's' intentions can be determined only after a detailed investigation of some of the changes wrought by the code and their value to the businessman. The code has been part of the statutory law of Pennsylvania for almost two years; during that time litigation involving the code has arisen in only one case 15 and that not involving the contract provisions. Although analysis might therefore be uncertain and evaluation difficult, these prob- lems are offset to a large extent by the detail contained in the draftsmen's comments to each section. This Note will examine four problem areas in the law of contracts: formation of a contract, buyer's remedies upon rejec- tion, impossibility of performance, and assignment and delegation. In each the inquiry will be whether and to what extent the code is an effective regulator of relationships between the parties to a commercial transaction. Relevant provisions will be examined in light of the interests to be pro- tected in each instance, including the efficient functioning of business organizations, and the efficacy and suitability of the rules established to safeguard those interests. 6. UCC § 2-207(1). 7. UCC § 2-206(1) (a). 8. UGC §§ 2-206(1)(b), 2-206(2), (3). See also UNIVORM COMMERCIAL CODE §§ 2-206 (1) (b), (2) (official ed. 1957) (hereinafter cited as 1957 DRAET) and text and citations at note 32 infra. 9. UCC § 2-204(3). 10. UCC § 2-201. 11. UCC § 2-202. 12. E.g., UCC §§ 2-210, 9-318. 13. See, e.g., UCC §§ 2-206, comment 3; 2-210, comment 7. 14. See e.g., 1957 DRAET § 2-102; UCC §§ 2-204(1), 2-205, 2-206(1) (b). But cf. UCC §§ 2-206(1) (a), (3), 2-207. However, the definition is broad: "'Goods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. 'Goods' also include the unborn young of animals and growing crops and other identified things attached to realty and capable of severance without material harm thereto as described in the section on goods to be severed from realty .... " UCC § 2-105(1). 15. Denkin v. Sterner, 70 York Leg. Rec. 105 (York County, Pa. C.P. July 16, 1956), 105 U. PA. L. REv. 764 (1957). 1957] FORMATION OF A CONTRACT-ACCEPTANCE PART I. FORMATION OF A CONTRACT-ACCEPTANCE A btisinessman, upon receiving an offer to enter into a business trans- action which he finds agreeable, must determine what he may and should do in response. If he is the seller, he might ship the goods requested or he might choose to acknowledge the buyer's order; 16 as either seller or buyer, he might incorporate in his acceptance a condition not anticipated in the offer.17 Each of these possibilities merits separate treatment as a statutory and commercial problem. The businessman may have to know whether an acceptance which misstates a term of the offer or includes addi- tional conditions results in a binding contract; 18 if so, whether the operative terms are those included in the offer or in the acceptance. Furthermore, where the seller-offeree ships nonconforming goods, the consequences will depend upon whether the shipment was an accommodation to the buyer or was intended as an acceptance of the offer. 19 Part I will examine the impact of the code upon each of these situations. ACCEPTANCE BY THE SELLER Preventing the Offeror's Power of Revocation: Promise or Performance One of the recurring problems in the law of contract formation is that of ascertaining the point at which the offeror may no longer affect the offeree's power to consummate a contract. This may be illustrated by the following hypothetical. B, by letter dispatched on Friday, requests S to send 1000 widgets on the following Thursday. At this point, B became an "offeror"; he raised in S reasonable expectations that a sale of widgets to B might be concluded.20 Theoretical and practical legal problems
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