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Chapter 20 - The Formation of Sales Contracts

Terms in this set (45)

article 2 of the UCC (as adopted by state statutes) governs sales contracts, or contracts for the sale of goods. to facilitate commercial transactions, article 2 modifies some of the common law contract requirements that were discussed in previous chapters.

The common law requirements for a valid contract-agreement, consideration, capacity, and legality-that were discussed in previous chapters are also applicable to sales contracts. if the UCC is silent, the common law governs.

Two points in mind regarding article 2:

1. Article 2 deals with the sale of goods. it does not deal with real property (real estate), services, or intangible property such as stocks and bonds. thus, if the subject matter of a dispute is goods, the UCC governs. if it is real estate or services, the common law applies.

2. In some situations, the rules can vary depending on whether the buyer or the seller is a merchant.

PN: this govern sales and the contract of sale of goods. when a seller transfers to a buyer title (ownership) to goods (includes: growing crops, timber to be harvested, fixtures like things of fixed to realty that can be removed without harm ex: chairs, oil, gas, and other minerals beneath, structures attached to realty) in exchange for money or other value. Article 2 governs the sale of stuff. it has to have inherent physical value and can be moved from place to place.; only tangible personal property

does not govern contacts for svcs or real property, and intangible personal property (IP, stocks, bonds) Ex: UNLV blding is not.

Land uses common law.
section 2-104 sets forth three ways in which merchant status can arise:

1. A merchant is a person who deals in goods of the kind involved in the sales contract. thus, a retailer, a wholesaler, or a manufacturer is a merchant of the goods sold in his or her business. a merchant for one type of good is not necessarily a merchant for another type. for instance, a sporting goods retailer is a merchant when selling tennis rackets but not when selling a used computer.

2. A merchant is a person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction. this broad definition may include banks or universities as merchants.

3. A person who employs a merchant as a broker, agent, or other intermediary has the status of merchant in that transaction. hence, if an art collector hires a broker to purchase or sell art for her, the collector is considered a merchant in the transaction.

In summary, a person is a merchant when she or he, acting in a mercantile capacity, possesses or uses and expertise specifically related to the goods being sold.

PN: merchant have special status. merchant will have higher requirements.
a merchant is a person who regulatory deals with goods of the kind. or holds themselves in having unique knowledge and skill or a person employed as a broker, intermediary, etc.
whether a merchant or not has not effect on the applicability of article 2. if it's about the sale of goods article 2 is applied. if the person is a merchant there may be stricter enforcement. they're held to a stricter standard of contact than non-merchants.
a firm offer arises when a merchant offer gives assurances in a signed writing that the offer will remain open. the merchants firm offer is irrevocable without the necessity of consideration for the stated period or, if no definite period is stated, a reasonable period (Neither to exceed three months).

PN: second exception. Written signed offer by a merchant is irrevocable without the separate consideration (paying/ putting a deposit).

open for the stated period of time
if there's no period stated- it's open for a reasonable amount of time
it cannot be held open for more than three months regardless if it's stated or not.

acceptance- is done by any method that is reasonable. what is a reasonable way to accept an offer to buy goods? promise to ship to the buyer (bilateral), or ship the conforming goods (unilateral). It has to be conforming (meet the description asked for) goods.

If you choose to accept by just shipping, you have to notify the buyer. "I shipped the goods". that way her can't revoke.

Non-conforming goods (making an accomodation): a prompt shipment of non-conforming goods constitutes both an acceptance and a breach by the seller, unless the seller notify's the buyer the that goods are in accommodation not an acceptance. ex: I want 10 computers, seller can promise to ship or just ship the computers. but seller sends better comps because he doesn't have the originally requested comps and notify's the buyer that he's shipping better comps. Now it's not a breach because it becomes a counter offer and once the buyer receives the comps, she can decide if she wants to keep them (which creates a new contract for the better comps) or she returns them.

the offeree's failure to communicate in a reasonable time allows the offeror to consider the offer lapsed.

Under the UCC, even if the acceptance differs from the offer, we will have a contract; it will depend if the parties are merchants or non-merchants
If one of the parties is a non-merchant, there is a contract on the original offer and the additional terms drop out

Don't have to have the mirror image

Two parties are merchants, the additional or different terms become part of the contract unless (1) the offer expressly limits the acceptance of the terms, (2) the offeror timely objects to the new very terms, (3) acceptance of the very terms materially alters the contract

Counteroffer- a rejection coupled with a new offer; purported acceptance that is conditioned to additional terms
The ECC defines three exceptions to the writing requirements of the statute of frauds.an oral contract will be enforceable despite the absence of a writing in the circumstances:

ANSWER YOUR MAIL RULE: if one party received a contract agreement and if it's not objected in 10 days in writing by that party, then it's a contract.

Specialty manufactured goods- an oral contract for the sale or lease of custom-made goods will be enforceable if:

1. The goods are specifically manufactured for a particular buyer or specially manufactured or obtained for a particular leasee. oral contract will be enforaceable.

Judicial Admission

2. The goods are not suitable for resale or lease to others in the ordinary course of the sellers or leaser's business.

3. The seller or leaser has substantially started to manufacture the goods or has made commitments for the manufacturer or procurement of the goods.

In these situations, once the seller or leaser has taken action, the buyer or leasee cannot repudiate the agreement claiming the statute of frauds as a defense.

UCC doesn't require the mirror images.

for non-merchant, a contract is formed to the orignal contract, any additional terms drop out. Guy (car salesman) is offered a price on a car from buyer, but Guy adds to the offer. buyer is non-merchant and agrees, but the rest drops out. Doesn't apply.

two merchants in the party: if both are merchant the addition terms become part of the contract. Unless,
1. the offer expressly limits the acceptance to the terms. ex: guys sell car and that's all that's on the table, you can only accept my offer no other terms.

2. the offeror timely objects to the new varied terms.

3. the acceptance of the varied terms materially alters the contract. ex: offer to sell x, I will buy x but it has to be on Saturday, for y dollars, and has to have full tank of gas, etc.
I offer x but we're going to arbitrate if we have a disagreement. this materially alters the contract.

proported acceptance (like a counter offer)- it's conditioned to different and additional terms. yeah I accept but you have to do all this offer stuff, this is a counter offer. where the offer is materially altered.

Satute of Fraud under UCC: sale of goods more than $500 in writing, must indicate agreei, signed, state qty of goods to be sold.