Contracts: UCC

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What is the first element in contract analysis to be asked before analysis can begin?Why?

The first element of contract analysis is the question of whether or not the UCC applies. It is essential to begin analysis by asking this question because the application of the law differs significantly between the common law and the UCC. Many students forget this fact, particularly on exams.

What are goods?

Goods, as defined by the UCC, are all things movable at the time of identification. This also includes unborn animals, growing crops, and other identified things that can be severed from realty.

Is the obligation of good faith in the UCC an implied in fact condition or an implied in law condition?

Under the UCC, the obligation of good faith is an implied in law condition of every contract governed by the UCC. See UCC 1-203.

Who is a merchant under the UCC?

A merchant is a person who deals in goods of the kind, holds himself out as having knowledge or skills peculiar to the industry, or has employed someone who has such skills.See UCC 2-104.

After it is determined that a contract is to be governed by the UCC, what is the next determination that you must make and why?

If the UCC applies to a contract, then you must make an immediate determination of whether or not a party is a merchant.This is important as the law under the UCC differs between merchants and non-merchants in many areas.

Does the UCC address the Statute of Frauds?

Yes. See UCC 2-201.Under the UCC the rights of a party when applying the provisions under 2-201 differ between merchants and non-merchants. You should memorize the particulars of this section.

Under the UCC, only contracts that are for more than $500 must meet the requirements of UCC 2-201. Is this correct?

No. UCC 2-201 applies to contracts for the sale of goods for the price of $500 or more.

Under the UCC, can a contract within the Statute of Frauds only be enforced against the party or parties signing the agreement?

Yes. UCC 2-201 explicitly states:'...signed by the party against whom enforcement is sought or by his authorized agent or broker.'

Is a writing insufficient under UCC 2-201 because of omission, error, or lack of quantity?

No. A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the contract is not enforceable beyond the quantity of goods shown in such writing.

Are there any provisions under UCC 2-201 that apply to merchants only?

Yes. UCC 2-201 (2).Between merchants, a confirmatory memorandum is sufficient against a non-signing merchant unless written notice of objection to its contents is given within 10 days after receipt. This provision is known as a merchant's confirmatory memorandum. Such a memo takes the contract out of the Statute of Frauds.

Are there any exceptions under the UCC for contracts that do not meet the requirements of the Statute of Frauds?

Yes. UCC 2-201 (3).(a) Specially manufactured goods not suitable for sale.(b) If a party admits to the contract in pleading, testimony, or otherwise.(c) Goods for which payment has been made and accepted or which have been received and accepted.

Does the UCC address parol evidence and if so does it accept Corbin's or Williston's views?

Yes. See UCC 2-202.Course of dealing, usage of trade and course of performance are items that would naturally be left out of a contract dealing in goods particularly as between merchants. This is the majority view as expressed by Williston.

Does the UCC recognize implied in fact contracts?

Yes. See UCC 2-204 (1).A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

What is the rule regarding indefiniteness under the UCC?Is it necessary for contract formation under the UCC to have an exact moment of contract formation?

Even though one or more terms are left open, a contract for the sale of goods does not fail for indefiniteness if the parties intended to make a contract and if there is a reasonably certain basis for giving an appropriate remedy.It is not necessary to have an exact moment of contract formation under the UCC. See 2-204 (2).

Does a merchant's firm offer expire in 90 days?

A merchant's firm offer expires within the time stated or if no time is stated for a reasonable time, but in no event may such a period exceed three months.See UCC 2-205.

What are the basic requirements for a merchant to make a merchant's firm offer under UCC 2-205?

A merchant's firm offer can only be made by a merchant in a signed writing that gives assurances that it will be held open.

Can a merchant's firm offer under UCC 2-205 be made to a non-merchant or must it be made only between merchants?

The firm offer must be made by a merchant but there are no restrictions to whom it may be made. Both merchants and non-merchants may receive a merchant's firm offer.

Can an offer be accepted by a promise or actual performance under the UCC?Is the offeror still the master of his offer under the UCC?

An offer under the UCC may be accepted in any manner and by any medium reasonable under the circumstances. See UCC 2-206(a).Yes. As stated in UCC 2-206(1), 'Unless otherwise unambiguously indicated by the language or circumstances.' This means that the offeror is still the master of his offer under the UCC.

Is the shipment of nonconforming goods under the UCC an acceptance of an offer?

Yes. See UCC 2-206 (1) (b).However, if the seller seasonably notifies the buyer that the nonconforming shipment is offered only as an accommodation it does not constitute an acceptance.

If an offeree accepts a contract under the UCC by beginning performance, when must the offeror be notified of this acceptance?

Under such circumstances, the offeror has to be notified within a reasonable time. If he is not notified within a reasonable time, he may treat the offer as having lapsed before acceptance.See UCC 2-206 (2).

Does the Mirror Image Rule apply to contracts under the UCC?

The common law Mirror Image Rule does not apply to contracts governed by the UCC. See UCC 2-207. This is the most tested item regarding differences between common law and the UCC.

Does the Mirror Image Rule apply to contracts under the UCC that do not make acceptance expressly conditional on assent to additional or different terms?

No. The Mirror Image Rules does not apply even under circumstances requiring express assent because conduct by both parties which recognizes the existence of a contract is sufficient even if the writings of the parties do not agree. See UCC 2-207 (3).

What happens to additional or different terms as between merchants under UCC 2-207?

Between merchants such terms become part of the contract unless:(a) The offer expressly limits acceptance to the terms of the offer;(b) They materially alter it; or(c) Notification of objection to them has already been given or is given within a reasonable time after received.

What happens to additional terms if a non-merchant is involved in a contract under UCC 2-207?

For a non-merchant, the additional terms are to be construed as proposals to the contract. See UCC 2-207 (2).

If the writings of the parties under the UCC do not conform or otherwise establish a contract, is the contract unenforceable?

No.Conduct by the parties is sufficient to establish a contract for the sale of goods even though the writings of the parties do not agree. See UCC 2-207 (3).

If a contract is found to be established from the conduct of the parties, how are the terms and conditions determined?What happens to the different or additional terms not incorporated?

In such a case, the terms of the contract consist of those terms on which the parties agree, together with any supplementary terms incorporated under any other provisions of the UCC.See UCC 2-207 (3).Different or additional terms are discarded.See UCC 2-208 (1).

Define the term 'course of performance' as used under the UCC.

Course of performance is where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other.See UCC 1-205 (1).

What is the meaning of the term 'course of dealing' under the UCC?

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.See UCC 1-205 (2).

Define the term 'usage of trade' as used in the UCC.

A usage of trade is 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.

Under the UCC, how do course of performance, usage of trade, and course of dealing relate to each other?

They shall be construed as reasonably consistent with each other, but if such a construction is unreasonable course of performance shall control course of dealing and usage of trade, and course of dealing shall control usage of trade. See UCC 2-208(2) and UCC 1-205 (4).

Does a modification of a contract under the UCC need consideration?

No. See UCC 2-209 (1).An agreement modifying a contract within the UCC needs no consideration to be binding. Note: Do not under any circumstances use this provision if consideration was given for the modification. This is a substitute for consideration when it is not present.

Does a modification of a contract under the UCC need to satisfy the requirements of the Statue of Frauds UCC 2-201?

Yes. See UCC 2-209 (3).The Statute of Frauds requirement in 2-201 must be satisfied if the contract as modified is within its provisions

What is the effect if a modification to a contract needs to satisfy and does not satisfy the requirements of UCC 2-201?

See UCC 2-209 (4).The modification can operate as a waiver.

Under a delegation of duties within the UCC, does the delegation of performance relieve the party delegating of any duty to perform or any liability for breach?

See UCC 2-210.No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

Are there any restrictions concerning a delegation of duties under the UCC?

Yes. See UCC 2-210.A delegation is invalid if the other party has a substantial interest in having his original promisor perform or control the acts required by the contract.

Are there any restrictions to an assignment of rights under the UCC?

Yes. See UCC 2-210(2).Restrictions are prohibited if the assignment would materially change the duty of the other party, or materially increase the burden of risk, or materially impair his chance of obtaining return performance.

Is unconscionability tested at formation or upon execution of a contract?

Unconscionability is tested at formation.See UCC 2-302: 'contract to have been unconscionable at the time it was made'.

If a contract is found to unconscionable, what are the options of the court under the UCC?

See UCC 2-302.The court may refuse to enforce the contract or it may enforce the remainder of the contract without the unconscionable clause.

Is a contract valid under the UCC even if the price has not been agreed to?

See UCC 2-305 (1).Yes. If the parties so intend to conclude a contract even though the price is not settled, a reasonable price will be implied.

How is the standard of performance regulated in output and requirement contracts under the UCC?

See UCC 2-306 (1).Performance is regulated by the actual output or requirements as may occur in good faith, but no quantity unreasonably disproportionate to stated estimates or comparable output or requirement may be tendered or demanded.

Does the UCC impose any conditions upon parties to an exclusive dealings contract?

Yes. See UCC 2-306 (2).There is an obligation by the buyer to use his best efforts unless otherwise agreed.

Must all goods delivered under the UCC be tendered in a single delivery with payment due upon delivery?

No. See UCC 2-307 and UCC 2-310 (a).Single delivery is assumed unless otherwise agreed, and unless otherwise agreed payment is due at the time of delivery.

If no place of delivery is called for in a contract, does the UCC make provisions for determining such a location?

Yes. See UCC 2-308.Unless otherwise agreed the place of delivery of goods it the seller's place of business, or, if he has none, his residence.

Is a contract valid under the UCC in the absence of a specific time provision for performance?

Yes. See UCC 2-309 (1).Any times not agreed upon shall be construed as a reasonable time.

Under the UCC, what are the rules concerning payment?

See UCC 2-310.Payment is due on delivery unless otherwise specified.

Does the UCC address agreements to agree, and if so by what standard are they enforced?

Yes. See UCC 2-311 (1).Any such specifications must be made in good faith and within the limits set by commercial reasonableness.

How are express warranties created under the UCC?

See UCC 2-313.Express warranties are created by affirmation, promise, description, or sample.

Does the UCC require the use of special words such as 'warrant' or 'guarantee' for the creation of an express warranty?

No. See UCC 2-313 (2).It is not necessary to use special words or even have a specific intention to make a warranty in order to create an express warranty.

Does an affirmation of goods or statements concerning a seller's opinions create a warranty under the UCC?

No. See UCC 2-313 (2).A seller's opinion or a commendation of the goods does not create a warranty.

Is an implied warranty for the merchantability of goods valid against a non-merchant seller?

No. See UCC 2-314 (1).Such warranties are implied only when the seller is a merchant with respect to goods of that kind.

Under what conditions is an implied warranty of merchantability imposed under the UCC?

See UCC 2-314 (1).Unless excluded or modified, a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to the goods.

Does the UCC consider the selling of food and drink for value to be a sale?

Yes. See UCC 2-314 (1).The selling for value of food or drink to be consumed either on the premises or elsewhere is a sale.

What is meant by the term 'merchantable' under the UCC?

See UCC 2-314 (2) (a-f).a) pass without objection;b) are of fair and average quality;c) are fit for ordinary purposes;d) have acceptable variations;e) are administratively correct, and packaged; andf) conform to the promises or affirmations.

Under the UCC can implied warranties arise from the course of dealing or usage of trade?

Yes. See UCC 2-314 (3).Unless excluded or modified, implied warranties may arise from course of dealing or usage of trade.

How is an implied warranty for fitness for a particular purpose created under the UCC?

It is created when the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the skill or judgment of the seller to select or furnish the goods.See UCC 2-315.

What is the effect under the UCC to an implied warranty when words such as 'as is' or 'with all faults' are used in a contract?

All implied warranties are excluded by expressions like 'as is' or 'with all faults'.See UCC 2-316.

Can conduct negate, modify, or exclude a warranty under the UCC?

Yes. An implied warranty can also be excluded or modified by course of dealing, course of performance, or usage of trade.See UCC 2-316 (3) (c).

What are the rules to resolve conflicts between express and implied warranties under the UCC?

Express or implied warranties shall be construed as consistent, but if this is unreasonable the intentions of the parties shall dominate.See UCC 2-317 for the (pecking) order of intentions.

What are the three theories expressed under the UCC regarding third party beneficiaries to express or implied warranties?

See UCC 2-318.Alternative A: Extends to persons of close relations and guests.Alternative B: All persons reasonably expected to use the goods: no exclusions.Alternative C: Same as B but may not exclude injury to those individuals to whom the warranty extends.

What do the terms F.O.B., C.I.F., and C. & F. mean?

F.O.B.: Stands for Free on Board. See UCC 2-319.C.I.F.: Stands for Cost Insurance and Freight. See UCC 2-320.C.& F.: Stands for Cost and Freight. See UCC 2-320.

Does the term 'no arrival, no sale' mean that the seller may ship non-conforming goods and guarantee their arrival?

See UCC 2-324.The seller must ship conforming goods and tender them on arrival. If the goods are lost or deteriorated, the buyer may proceed as if there had been casualty to identified goods.

Under the UCC, does a sale with reserve allow the auctioneer to withdraw the goods at any time until he announces completion of the sale?

Yes. See UCC 2-328 (3).In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale.

Under the UCC, are all sales at auctions without reserve unless otherwise indicated?

No. See UCC 2-328 (3).A sale at auction is with reserve unless the goods are in explicit terms put up without reserve.

What are the rules concerning identification of goods under the UCC?

See UCC 2-501 (a-c).In the absence of an explicit agreement, identification occurs when the contract is made for goods in existence, for future goods when marked or designated for the contract, or for crops when they are planted.

When does identification occur under the UCC?

Identification can be made at any time and in any manner explicitly agreed to by the parties and in the absence of an explicit agreement as per paragraphs (a-c), UCC 2-501.

What is meant by tender of delivery under the UCC?

Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer reasonable notification to enable delivery.See UCC 2-503 (1).

What rights are created in the seller when he properly tenders delivery of goods under the UCC?

Tender entitles the seller to acceptance of the goods and payment according to the contract.See UCC 2-507 (1).

Under what conditions can a seller cure an improper tender of delivery under the UCC?

When the time for performance has not yet expired.See UCC 2-508 (1).

Does a seller have any rights under the UCC if a buyer rejects a non-conforming tender of goods?

Yes. If the seller had reasonable grounds to believe that the nonconforming goods would be acceptable, the seller may, if he seasonably notifies the buyer, have a further reasonable time to substitute a conforming tender. See UCC 2-508 (2).

Under the UCC, does the risk of loss pass at different times for a merchant and a non-merchant when no shipment or bailee is involved?

The risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant. Otherwise the risk passes to the buyer on tender of delivery.See UCC 2-509 (2).

When does risk of loss pass for non-conforming goods under the UCC?

If a tender or delivery of goods so fails to conform to the contract as to give a right of rejection, the risk of their loss remains on the seller until cure or acceptance.See UCC 2-510 (1).

If a buyer pays for goods before inspection, does this constitute acceptance or impair the buyer's rights to inspect or to any other remedies?

No. See UCC 2-512 (2).Payment does not constitute an acceptance of goods, nor impair the buyer's right to inspect or any of his remedies.

Who bears the expenses for inspection of goods under the UCC?

Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.See UCC 2-513 (2).

What are a buyer's rights under an improper delivery under the UCC?

The buyer may reject the whole lot, accept the whole lot, or accept any commercial unit or units and reject the rest.See UCC 2-601.

When must a buyer reject goods under the UCC?

Rejection of goods must be made within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.See UCC 2-602.

Does the Buyer have any duties after rejection for goods of which he is in physical possession?

Yes. See UCC 2-602 (2) (b).The buyer is under a duty to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them

Do the duties of a merchant buyer and a non-merchant buyer regarding rejection differ?

Yes. See UCC 2-603.When the seller has no presence in the market, the merchant buyer is under a duty to follow any reasonable instructions. In the absence of instructions, he is under a duty to sell the goods for the seller's account.

On rejection, if a buyer fails to state a particular defect which is ascertainable by reasonable inspection is he estopped from relying on the unstated defect to justify rejection or establish breach?

Yes. See UCC 2-605 (1).The failure to state a particular defect which is ascertainable by reasonable inspection precludes a buyer from relying on the unstated defect to justify rejection or to establish breach.

What constitutes an acceptance of goods under the UCC?

Acceptance is achieved by;(a) Express acceptance by the buyer after a reasonable opportunity to inspect;(b) Failure to make a rejection after a reasonable opportunity to inspect passes; or(c) The buyer doing any act that is inconsistent with the seller's ownership.

Who carries the burden to establish any breach with respect to goods accepted?

The burden is on the buyer to establish any breach with respect to the goods accepted.See UCC 2-607 (4).

Are there time limitations on the buyer to establish a breach after tender has been accepted?

Yes. See UCC 2-608 (2).Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the grounds for it, and before any substantial change in condition which is not caused by the defects.

When must revocation of acceptance occur?

Within a reasonable time as defined by UCC 2-608 (2).

What is the standard of revocation of acceptance for the buyer?

This is an objective standard of whether a reasonable buyer knew or should have known of a defect.It is defined by UCC 2-608 (2).

When may a party request adequate assurance of performance under the UCC?

When reasonable grounds for insecurity arise with respect to the performance of either party.See UCC 2-609 (1).

Does the UCC address anticipatory repudiation?

Yes. See UCC 2-610.'When either party repudiates the contract with respect to a performance not yet due; the loss of which will substantially impair the value of the contract to the other...'

What options does a party have under anticipatory repudiation under the UCC?

(a) Await performance for a commercially reasonable time.(b) Resort to any remedy for breach even if the repudiating party has been notified otherwise.(c) Suspend his own performance.See UCC 2-610 (a-c).

Can a repudiation be retracted under the UCC?

Yes. See UCC 2-611 (1).A repudiation can be retracted until the repudiating party's next performance is due unless the aggrieved party has cancelled or materially changed his position or indicates that the repudiation is final.

Under the UCC, what effect does casualty to identified goods have (without fault of either party and before risk of loss passes)?

If the loss is total, the contract is voided.If the loss is partial, treat the contract as voided or accept the goods with allowance for defects.

Under the UCC what are a seller's remedies on discovery of a buyer's insolvency?

A seller may refuse delivery except for cash including payment for all goods theretofore delivered under the contract and may stop delivery of goods in transit as per UCC 2-705. If the buyer has received goods on credit he may demand repatriation.See UCC 2-702 (1) (2).

What are a seller's remedies in general under the UCC for undelivered goods?

See UCC 2-703.(a) withhold delivery.(b) stop delivery.(c) proceed with identification of the goods.(d) resell and recover damages.(e) recover damages for non-acceptance or in proper cases for the price.(f) cancel.

If a breach by the seller occurs and the goods are unfinished, can the aggrieved seller do anything under the UCC to avoid loss?

No. See UCC 2-704 (2).However, he may complete manufacture to avoid loss, or cease manufacture and resell for scrap.

What are the qualifications that must be considered before a seller may stop delivery in transit?

See UCC 2-705 (1).The size of the shipment.The seller may stop delivery of carloads, truckloads, plane loads, or larger shipments of express freight.

Are there any qualifications to a seller's resale of goods as a remedy under the UCC?

Yes. See UCC 2-706 (1).The resale must be made in good faith and in a commercially reasonable manner.

What is the measure of damages under a seller's resale?

See UCC 2-706 (1).The seller may recover the difference between the resale price and the contract price with any incidental damages allowed but less expenses saved in consequence of the buyer's breach.

Are there any procedural restrictions upon a seller in exercising a seller's resale rights under the UCC?

Yes. See UCC 2-706 (2-4).Resale may be made at public or private sale. If it is made at private sale the seller must give the buyer reasonable notice. If it is made at public sale it must be made only with identified goods or marketable goods in a public location, and which the seller may buy.

Is a seller under the UCC seller's remedies of resale accountable to the buyer for a profit?

No. See UCC 2-706 (6).The seller is not accountable to the buyer for any profit made on resale.

What is the seller's measure of damages for non-acceptance or repudiation under the UCC?

See UCC 2-708 (1) (2).Market price: The difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages.

What is the definition of lost volume recovery?When is this remedy invoked and who may invoke it?

If the measure of damages is inadequate to put the seller in as good a position as performance, the measure of damages is the profit that the seller would have made plus incidental damages and reasonable overhead.See UCC 2-708 (2).

When may a seller under the UCC use Action for the Price as a remedy?

The seller may recover the price of the goods if the seller is unable to resell the goods after a commercially reasonable time, or if casualty to accepted or conforming goods occurs within a commercially reasonable time after risk of loss has passed to the buyer.See UCC 2-709 (a) (b).

What are a seller's incidental damages under the UCC?

See UCC 2-710.Incidental damages include any commercially reasonable charges incurred in stopping delivery, in the care and custody of the goods, or any other expenses resulting from breach.

What are the buyer's remedies in general for breach under the UCC?

The buyer may cancel.The buyer may cover.The buyer may, under proper circumstances, obtain specific performance.See UCC 2-711.

What is 'cover' as defined by the UCC?

See UCC 2-712 (1).Cover is the good faith and reasonable purchase of goods to replace the goods which the contracting seller has not delivered.

What is a buyer's measure of recovery under 'cover'?

See UCC 2-712 (2).The buyer may recover the difference between the cost of cover and the contract price together with any incidental or consequential damages, less expenses saved in consequence of the seller's breach.

What are a buyer's damages for non-delivery or repudiation under the UCC?

These damages are measured by the difference between the market price at the time and place when the buyer learned of the breach and the contract price together with any incidental and consequential damages less expenses saved in consequence of the seller's breach. See UCC 2-713 (1).

What are a buyer's measure of damages for breach of warranty?

See UCC 2-714 (2).This is the difference at the time and place of acceptance between the value of the goods accepted and what the value of the goods would have been had they been as warranted, unless special circumstances show proximate damages of a different amount.

What are a buyer's incidental damages under the UCC?

See UCC 2-715 (1).Incidental damages for the buyer include reasonable expenses for inspection, care and custody, commissions, and any other reasonable expense incident to the delay or breach.

What are a buyer's consequential damages under the UCC?

See UCC 2-715 (2).Consequential damages are any losses resulting from general or particular requirements and needs of the buyer of which the seller at the time of contracting has reason to know and could not be reasonably prevented by cover or otherwise. Such loss includes injury to person or property proximately resulting from any breach of warranty.

When may a buyer resort to specific performance under the UCC?

See UCC 2-716 (1).The buyer may resort to specific performance when the goods are unique or in other proper circumstances.

When does a buyer have the right of replevin under the UCC?

See UCC 2-716 (3).The buyer's right of replevin attaches as against goods identified to the contract if after a reasonable effort the buyer is not able to recover the goods or the circumstances reasonably indicate that such efforts would be wasted.

Is there a Statute of Limitations provision in the UCC?

Yes. See UCC 2-725.An action for breach must commence within four years after the cause of action has accrued. This may be reduced by agreement to not less than one year, but it may not be extended.

When does a cause of action accrue under the UCC for breach of contract?

See UCC 2-725 (2).A cause of action accrues for breach when the breach occurs, regardless of knowledge by the parties. Breach of warranty accrues from delivery.

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