Sales Part 1

Contract Formation

100

“Firm offers” (§ 2–205)

A seller promises to keep an offer open in a signed writing, it is not revocable during the time stated. If no time is stated, it must be held open for a reasonable time, but not more than three months.

200

General contract formation (§ 2–204)

A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties.

There is still contract even if the moment of the making of the K is undetermined. 

If the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy, then a contract for sale does not fail for indefiniteness merely because one or more terms are left open. 

300

Acceptance by promise or conduct (§ 2–206)

(1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;

(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

400

UCC approach to the “battle of the forms” (§ 2–207)

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. 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 notice of them is received.
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• (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

500

What is the rule under Battle of the Forms that applies only to transactions between merchants?

The additional terms are to be construed as proposals for addition to the contract. 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 notice of them is received.

Content of the K

100

A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if: (§ 1-303)

(1) the agreement of the parties involves repeated occasions for performance by a party; and

(2) the other party accepts the performance or acquiesces in it without objection.

200

A "course of dealing" is . . . (§ 1-303)

a sequence of conduct concerning previous transactions between the parties that is to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(AKA they work a lot together)

300

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. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

400

Course of performance, dealing, and trade are all used to determine the meaning of certain terms in an agreement or supplement them. They must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:

• (1) express terms prevail over course of performance, course of dealing, and usage of trade;
• (2) course of performance prevails over course of dealing and usage of trade; and
• (3) course of dealing prevails over usage of trade.

500

Other exceptions to performance, dealing, trade...

 a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.

(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

Content of K

100

Which provisions of the UCC are mandatory? (§ 1-302, 1-201(b)(20))

The obligations of good faith, diligence, reasonableness, and care

200

Which provisions of the UCC are default? (§ 1-302, 1-201(b)(20))

Any provision containing "unless otherwise agreed", or words of similar import

300

What are the Good Faith provisions?

• § 1-201 (b)(20) "Good faith," except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
• Good Faith (§ 1-304): Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement.

400

Open Price Terms (§ 2-305)

Parties are allowed to not specify a price of goods at the time of contracting so long as it is a reasonable price at delivery. The price is reasonable at delivery if nothing is said about the price, the parties fail to agree on price, or the price is market price/some other standard set by a third party. 

If parties agree to let the price be fixed by one of the parties, and the party fails to fix the price, then the other party may cancel the K or fix a reasonable price himself. 

But if both parties refuse to be bound unless the price is fixed, and it never is fixed, then there is no K- Buyer must return any goods already received or pay their reasonable value at the time of delivery.

500

Output and Requirement Contracts (§ 2-306)

Output contracts (where quantity is based on what the seller can make)

• The amount you buy/sell is determined by the seller’s actual output, or by the buyer’s needs, but it has to be honest and fair (in “good faith”).
• You can’t demand or tender amounts that are wildly out of proportion to what was stated as an estimate, or to what you’ve produced or needed before. If there’s a stated estimate, follow that. If there’s no estimate, base it on normal or prior output/requirements.
• Exclusive-dealing contracts
• If the contract gives one party exclusive rights to sell or buy the goods, both sides have to try reasonably hard to make the arrangement work.
• The seller should use reasonable efforts to supply the goods; the buyer should use reasonable efforts to promote or sell them (unless the contract says otherwise).

Battle of Forms/Enforcement/Warranties

100

general rule 2-207

• (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
• (2) The additional terms are to be construed as proposals for addition to the contract. 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 notice of them is received.
• (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

200

Parol Evidence Rule § 2-202

• Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
• (a) by course of dealing or usage of trade ( Section 1-205) or by course of performance ( Section 2-208); and
• (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

300

Statute of Frauds § 2-201

• (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
• (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
• (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
• (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
• (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
• (c) with respect to goods for which payment has been made and accepted or which have been received and accepted ( Sec. 2-606).

400

Implied warranty of merchantability by merchant seller (§ 2–314)

• Warranty of merchantability is implied in contracts for the sale of goods by merchants who deal in goods of that kind.
• Goods to be merchantable must be at least such as (a) pass without objection in the trade under the contract description; and (b) in the case of fungible goods, are of fair average quality within the description; and (c) are fit for the ordinary purposes for which such goods are used; and (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promise or affirmations of fact made on the container or label if any.

500

Implied warranty of fitness for the buyer’s particular purpose (§ 2–315)

Where 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 seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

Warranties

100

Implied warranty of title and against infringement (§ 2–312)

In every contract for sale there is an implied warranty by that seller that the title conveyed is good and free from any security interest/lien/encumbrance that buyer is unaware of. This can only be modified by specific language or circumstances that indicate seller is incapable of transferring title (lying). Unless otherwise agreed between the parties, a merchant seller dealing in goods of the kind warrants that the goods are free from the rightful claim of any third party. And a buyer who gives specifications to seller is responsible for any infringement claim that thereafter may arise as a result of their specifications.

200

Express warranties arising from seller’s words and conduct (§ 2–313)

• If a seller makes a promise concerning the goods that becomes the basis of the bargain, then that creates an express warranty by the seller that the goods will conform to seller’s promise. The same is for description of goods and samples of goods. There is no need for formal language, but a mere affirmation of value of goods or seller’s opinion of goods will not create a warranty.

300

Seller’s disclaimer of warranties (§ 2–316)

If the seller says or does something that creates a warranty (a promise about the goods) and also says or does something that tries to limit that warranty, the promise/limits are usually read together in a reasonable way. But parol evidence (extrinsic evidence) can override a vague or unreasonable limitation (looking at context).

• To exclude or limit the implied warranty of merchantability, the language must mention merchantability and, if it’s in writing, be conspicuous (clear/evident).
• To exclude or modify the implied warranty of fitness for a particular purpose, the exclusion has to be in writing and conspicuous.
• A common way to say you’re excluding all implied warranties of fitness is something like: “There are no warranties which extend beyond the description on the face hereof.”
• Exceptions:
• The following still exclude or modify implied warranties:
• If nothing about the situation indicates otherwise, phrases like “as is,” “with all faults,” or other language that clearly tells the buyer warranties are excluded will usually do the job.
• If the buyer had the chance to inspect the goods or a sample/model and did so (or refused to inspect), there’s no implied warranty for defects that the inspection should have revealed.
• Implied warranties can also be excluded or changed by how the seller and buyer have dealt with each other over time (course of dealing, course of performance) or by typical industry practices (usage of trade).
•  Damages and remedies: The amount and type of remedies for a warranty breach can be limited by contract, under separate rules about damages and how remedies can be replaced or narrowed.

400

Rights of third parties to warranty protections made by sellers to buyers (§ 2–318)

If someone who lives with you (a family member or someone living in your home) or a guest in your home is injured by a defective product you bought, they may have a direct warranty claim against the seller, even if they didn’t buy the product themselves. This applies whether the warranty was express or implied, and it cannot be easily waived by the seller.

500

Cumulation and Conflict of Warranties Express or Implied 2–317

• Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:
• (a) Exact or technical specifications displace an inconsistent sample or model or general language of description.
• (b) A sample from an existing bulk displaces inconsistent general language of description.
• (c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.