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CHAPTER 19 – STUDY GUIDE – INTRODUCTION TO SALES

UNIFORM COMMERCIAL CODE (UCC)  Code’s Purpose

◦ To simplify, clarify and modernize the law governing commercial transactions,

◦ To permit the continued expansion of commercial practices through custom, usage and agreement of the parties,

◦ To make uniform the law among the various jurisdictions. ARTICLE 2  Article 2

◦ UCC §2-102: Article 2 applies to the sale of goods, things that are movable, other than money and investment securities.  Article 2A

◦ Article 2A governs the leasing of goods.  Mixed involving sales and services:

◦ UCC will govern if the predominant purpose is the sale of goods.

◦ The will control if the predominant purpose is service. MERCHANTS  UCC §2-104: A merchant is someone who:

◦ routinely deals in the particular goods involved, or

◦ who appears to have special knowledge or skill in those goods, or

◦ who uses agents with special knowledge or skill in those goods  The UCC frequently holds a merchant to a higher standard of conduct than a non- merchant. GOOD FAITH AND  Good Faith

◦ The UCC imposes a duty of good faith in the performance of all contracts.

◦ For non-merchants, good faith means honesty-in-fact. 2

◦ For a merchant, good faith means honesty-in-fact, plus the exercise of reasonable commercial standards of fair dealing.  Unconscionability

◦ UCC §2-302: A may be unconscionable if it is shockingly one-sided and fundamentally unfair. CONTRACT FORMATION UNDER THE UCC  UCC §2-204 provides three important rules:

◦ The parties may make a contract in any manner that sufficiently shows that they reached an agreement.

◦ Knowing when the contract was formed is not critical.

◦ One or more terms may be left open. Commercially reasonable terms will be assumed by the .  UCC §2-201 () requires a writing for any sale for goods worth $500 or more.

◦ Writing Sufficient to Indicate a Contract  In general, the writing must be signed by the defendant.

◦ Incorrect or Omitted Terms  Under the UCC, a may enforce a bargain even though one or more terms were left open.

◦ Enforceable Only to Quality Stated  The Code will enforce the contract only up to the quality of goods stated in the writing.  MERCHANT EXCEPTION: When two merchants make an oral contract, and

◦ one sends a confirming memo to the other within a reasonable time, and

◦ the memo is sufficiently definite that it could be enforced against the sender, then

◦ the memo is also valid against the merchant who receives it, unless he objects in 10 days.  SPECIALTY GOODS EXCEPTION: An oral contract may be enforceable even without a written memorandum, if: 3

◦ The seller specially manufactures the goods for the buyer, or

◦ The defendant admits in court that there was a contract, or

◦ The goods have been delivered or they have been paid for.

ADDITIONAL AND DIFFERENT TERMS (SEE CHART ON INSTRUCTOR’S WEBSITE)  Additional: Terms that raise issues not covered in the offer.

◦ When both parties are merchants, additional terms generally become part of the bargain.  Different: Contradict terms in the offer.

◦ Cancel each other out; if there is no clear oral agreement, the Code supplies its own terms to prices, delivery dates and places, warranties, and other subjects. OPEN TERMS  Open Prices: Under §2-305(1), the parties may conclude a contract even though they have not settled the price.

◦ Under the Code, if the parties have not stated a price, it is to be a reasonable price at the time of delivery.  Output and Requirements Contracts

◦ UCC requires that the parties in an output or requirements contract make their demands in good faith. MODIFICATION  UCC §2-209: An agreement modifying a contract needs no to be binding.  The parties may agree to prohibit oral modification and insist that all modifications be in writing and signed.

◦ Between merchants, such a clause is valid.

◦ If either party is not a merchant, such a clause if valid only if the non-merchant separately signs it.