Chapter 17 Formation of Sales and Lease Contracts

2  How do Article 2 and 2A of the UCC differ?  What is a merchant’s firm offer?  If an offeree includes additional/different terms in acceptance, what happens?  What are the 3 exceptions to the Statute of Frauds in Article 2 and 2A?  What law governs the international sale of goods?  How do Article 2 and 2A of the UCC differ?  What is a merchant’s firm offer?  If an offeree includes additional/different terms in acceptance, what happens?  What are the 3 exceptions to the Statute of Frauds in Article 2 and 2A?  What law governs the international sale of goods? Learning Objectives

3 UCC Scope  UCC Article 2/2A—sale or lease of goods. Articles 3-5—negotiable instruments and banking. Article 6—bulk transfers Article 7—warehousing and shipping Article 8—securities Article 9—secured transactions  UCC Article 2/2A—sale or lease of goods. Articles 3-5—negotiable instruments and banking. Article 6—bulk transfers Article 7—warehousing and shipping Article 8—securities Article 9—secured transactions

4 What is a ‘Sale of Goods’?  Article 2 governs “sale of goods.”  “Sale”: passing of title from seller to buyer for a price.  “Goods”: must be tangible and movable (not land, services or intangibles). Goods Associated With Land Goods and Services Combined.  “Merchant”: deals in goods of the kind sold.  Article 2 governs “sale of goods.”  “Sale”: passing of title from seller to buyer for a price.  “Goods”: must be tangible and movable (not land, services or intangibles). Goods Associated With Land Goods and Services Combined.  “Merchant”: deals in goods of the kind sold.

5 What is an Article 2A—Lease?  Lease Agreement between Lessor and Lessee. Lessor: sells the right to possession and use of goods. Lessee: acquires right to possess and use goods under a lease.  Article 2A: applies to all commercial and consumer lease/financing of goods.  Lease Agreement between Lessor and Lessee. Lessor: sells the right to possession and use of goods. Lessee: acquires right to possess and use goods under a lease.  Article 2A: applies to all commercial and consumer lease/financing of goods.

6 Contract Formation: Offer  UCC modifies the common law of contracts. Where UCC speaks, it preempts the common law. Where it is silent, the common law governs.  A valid offer under UCC 2 may include “open” price, payment and delivery terms. Exception: Quantity—No contract, unless: Requirements: Buyer purchase all he needs. Output: Buyer agrees to purchase all Seller manufactures. Only tangible and movable (not land, services or intangibles)  Merchant’s Firm Offer  UCC modifies the common law of contracts. Where UCC speaks, it preempts the common law. Where it is silent, the common law governs.  A valid offer under UCC 2 may include “open” price, payment and delivery terms. Exception: Quantity—No contract, unless: Requirements: Buyer purchase all he needs. Output: Buyer agrees to purchase all Seller manufactures. Only tangible and movable (not land, services or intangibles)  Merchant’s Firm Offer

7 Contract Formation: Acceptance  Acceptance Methods of Acceptance: Seller can specify manner of acceptance. If not any reasonable means Promise to Ship/Prompt Shipment of conforming goods. Non-Conforming goods may be “accommodation.” Notice  Acceptance Methods of Acceptance: Seller can specify manner of acceptance. If not any reasonable means Promise to Ship/Prompt Shipment of conforming goods. Non-Conforming goods may be “accommodation.” Notice

8 Agreement  Additional Terms Common Law: terms must be the same for contract or battle of the forms. UCC: additional/different terms permitted, depending on the status of the parties: Either Non-Merchant: only original terms accepted. Both Merchants: additional terms form contract unless there is prohibition or new terms or terms materially alter contract, or the party objects.  Additional Terms Common Law: terms must be the same for contract or battle of the forms. UCC: additional/different terms permitted, depending on the status of the parties: Either Non-Merchant: only original terms accepted. Both Merchants: additional terms form contract unless there is prohibition or new terms or terms materially alter contract, or the party objects.

9 Statute Of Frauds  Contracts for Sale of Goods over $500 or lease over $1,000 must be in writing. Sufficiency of the Writing Written Confirmation Between Merchants Written confirmation after oral agreement.  Exceptions: Specially Manufactured Goods Admissions Partial Performance Merchant fails to object within 10 days  Contracts for Sale of Goods over $500 or lease over $1,000 must be in writing. Sufficiency of the Writing Written Confirmation Between Merchants Written confirmation after oral agreement.  Exceptions: Specially Manufactured Goods Admissions Partial Performance Merchant fails to object within 10 days

10 Parol Evidence  Generally, terms of a written agreement or memo cannot be contradicted by prior, extrinsic evidence, unless the evidence is: Consistent, Additional Terms A Course of Dealing and Usage A course of Performance, or Rules of Construction or Interpretation  Generally, terms of a written agreement or memo cannot be contradicted by prior, extrinsic evidence, unless the evidence is: Consistent, Additional Terms A Course of Dealing and Usage A course of Performance, or Rules of Construction or Interpretation

11 International Sale of Goods  Contracts for the International Sale of Goods (CISG-1980). By 2002, signed by 57 countries, including U.S. Mexico and Canada.  CISG Applicability Applies to International sale of goods like UCC 2 applies to domestic sale of goods.  Comparison between CISG and UCC 2.  Contracts for the International Sale of Goods (CISG-1980). By 2002, signed by 57 countries, including U.S. Mexico and Canada.  CISG Applicability Applies to International sale of goods like UCC 2 applies to domestic sale of goods.  Comparison between CISG and UCC 2.