1 Scope Scope of the UCC: to provide a uniform and consistent set of rules to deal with all phases of commercial sales transactions. Scope of Art. II of the UCC: to govern contracts for the sale of goods.

2 §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.2

3 What is a Sale of Goods? Art. 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 or has special business expertise

4 Goods and Services Combined Courts must determine whether the contract is one for the sale of goods (governed by UCC-2) or for the sale of services (not governed by UCC). Courts use one of two tests: –Predominant Factor Test –Bifurcation

5 Who is a Merchant? In some cases, special standards apply to merchants. A merchant is: –A person who deals in goods of the kind involved in the contract. –A person who, by occupation, holds himself out as having special knowledge or skill relative to the transaction; or –A person who employs a merchant (as defined above).

6 §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).

7 §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. UCC modifies the common law of ks. Where UCC speaks, it preempts the common law. Where it is silent, the common law governs.

8 Open Quantity Term: Failure to specify the quantity of goods to be sold is fatal at common law. UCC recognizes two exceptions: 1.Requirements Contract: an agreement where buyer agrees to buy and seller agrees to sell whatever buyer requires. 2.Output Contract: an agreement where seller agrees to sell and buyer agrees to buy whatever seller can produce. Note: UCC imposes the good faith requirement.

9 Good Faith Requirement UCC imposes the good faith requirement on requirement and output contracts, such that the actual quantity purchased or sold cannot be unreasonably disproportionate to normal or comparable requirements or output.

10 Merchants 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.

11 Acceptance See Handout

12 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.

13 Consideration UCC requires considerationbut not for modificationsand modifications must be made in good faith. Modification must be in writing if required by Statute of Frauds.

14 Statute of Frauds Sale of goods over $500 must have a signed writing to be enforceable. Exceptions to this rule: –Specially manufactured goods. –Admissions by breaching party. –Partial performance. –Merchant doesnt object within 10 days. Oral agreement enforceable after written confirmation between merchants.