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27 Cards in this Set

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Applicable Law
The UCC applies to all contracts for the sale of goods. Goods are movable, tangible, things at the time of identification to the contract. All other contracts are governed by common law.
In agreements that involve both goods and services the applicable law is determined by looking at what is the predominant purpose of the agreement.
Merchant
A merchant is one who has special knowledge in goods of the kind in the contract, or regularly deals in the goods.
Note: if the contract is governed by common-law there is no need to discuss or comment on merchant status.
Contract Formation
A contract is formed when both parties reach mutual assent, consisting of a valid offer being given and a valid acceptance supported by consideration.
Offer
And outward manifestation of present contractual intent communicated in clear and definitive terms to the offeree, in such a manner as to create in the offeree a reasonable expectation that the offer or intends to enter into a contract
The two essential elements of an offer are: 1) the intent to enter into a bargain and 2) definitiveness of terms.
Definitiveness of terms – Common Law
Under Common Law a contract offers sufficient certainty if it specifies: 1) price, 2) subject matter, 3) quantity, and 4) time of performance.
Definiteness of terms – UCC
The UCC only requires quantity; everything else can be supplied by the court (referred to gap fillers).
Gap Fillers
Gap Fillers: 1) Price – reasonable price at time of delivery 2) Place of delivery – delivery at seller's place of business (or the place where identified goods known to be in another place are located), 3) Time for shipment or delivery: due at the time and place where the buyer is to receive the goods, 4) Duration of contract – contract is valid for a reasonable time (but the parties may terminate the contract at any time unless otherwise agreed)
Revocation
The general rule is that the offeror may revoke their offer at anytime prior to acceptance, even if they have promised to hold the offer open for a stated period.

Exceptions to the general rule are: Option contract, Firm offer, Promissory Estoppel, and Unilateral contract when performance has begun.
Options Contract
Under common law and option contract is a separate contract in which the offeror agrees not to revoke her offer for a stated time in exchange for some valuable consideration.
Moderately, in many jurisdictions recital of consideration in the written document, even though not paid is sufficient.
Firm Offer
An offer in writing and signed by a merchant to keep an offer open for a specified time. The maximum time and offer can stay open is three months (90 days).
Unilateral Contract - Performance Begun
Once the offeree has begun to perform under a unilateral contract, the offeror's power to revoke is suspended for the amount of time reasonably necessary to complete the performance.
Exceptions to Gap Fillers
Requirements Contract - one in that offers to buy or sell "all needed amounts" by the buyer during the stated period.

Output Contract - one that offers to buy or sell "all output" produced by seller during a stated time.

Quantity for these contracts is the amount actually needed or produced, but not more than amounts reasonably proportionate to amounts previously needed or produced.
Rejection
An offeree may expressly reject an offer by indicating that he is unwilling to accept. (Note: rejection is implied by making a counter offer to a contract on terms materially different from the terms of the offer (refer to mirror image rule)
Mail Box Rule - Rejection
General rule is that rejections are effective only when they are received.
Death or Insanity
Death or insanity of either party to an offer automatically terminates the offer without notice.
Destruction of Subject Matter
If prior to acceptance of an offer, the subject matter of a proposed contract is destroyed without the knowledge or fault of either party, the offer is terminated.
Intervening Illegality
An offer is terminated if the performance of the contract it proposes becomes illegal before the offer is accepted.
Acceptance
Under contract law acceptance is unequivocal assent to the terms of the offer by the offer.

Acceptance must take place before revocation (refer to mail box rule).

If the contract requires acceptance by a specific means, that becomes a condition precedent and acceptance is not effective if not sent by the means required.
If a contract does not require acceptance by specific means, notice of acceptance is effective upon dispatch (mail box rule) if sent by the same means of transmission the offer was sent.

Acceptance is also effective if sent by a faster way then the offer was sent, whether the offeror gets it or not.
Mirror Image Rule - Common Law
Under common law the terms of acceptance by an offeree must be an unqualified assent to the terms of the offer. If the offeree's response is different from the terms of the offer it is considered a rejection and counter offer
Perfect Tender Rule - UCC
Under the UCC (2-601) a non-conforming shipment by the seller is a breach of contract by the seller.

Buyer must: 1) tell seller the shipment is non-conforming, 2) provide sufficient time for seller to cure breach.
Buyers Right to Reject Goods - Perfect Tender
If buyer receives non-conforming shipment, and the breach is not cured, the buyer can: 1) reject the whole shipment, 2) accept the whole shipment, 3) accept some commercial units and reject the rest.
If buyer accepts non-conforming shipment he can still sue for damages equal to difference between non-conforming and conforming goods.
Varying Terms - UCC
The UCC abandons the mirror image rule and under 2-207 allows varying terms, unless the acceptance demands assent to varying terms. If the offer is excepted with varying terms, the varying terms are excluded and do not become part of the contract (see proposals for modification) unless both parties are merchants and 1) offer did not expressly prohibit the addition of new terms, 2) the varying terms materially alter the contract, and 3) the offeror does not promptly reject to the new terms.
Materially Altered Terms - different price and quantity are always materially altering terms as is any term that reduces the legal rights of the offeror (waiver of merchantability, waiver of implied warranties, etc.).
Knockout Rule - UCC
If the varying terms are additional terms then they become proposals for modification or accepted if between merchants.

If however are different, i.e. conflicting terms then the knockout rule applies and they do not become part of the contract. Thus contract terms are only those to which both parties agreed and UCC implied terms (see proposals for modifications).
Proposals for Modification - UCC
Varying terms that do not become part of the contract (see knockout rule) are considered to be proposals for modifications and only become part of the contract if the other party agrees to the different terms.
Battle of the forms - often when forms get sent back and forth between parties, each containing different terms (proposals for modification) the "last shot" doctrine applies and means the last offer made determines the terms of the contract.
Mail Box Rule - Acceptance
The notice of acceptance by an offer may be effective as soon as it is dispatched (by e-mail, snail mail, overnight mail, fax, phone, etc.) as long as it is properly addressed.
Acceptance by Silence
As a general rule acceptance by silence does not show assent to an offer.

If however, the parties have and established course of dealings in which silence means acceptance and the offeree remains silent knowing the offeror would expect and objection if the offer is not acceptable then silence constitutes acceptance.
Acceptance by Shipment
Under the UCC any shipment or promise to ship is an acceptance of a buyers offer whether the shipment is conforming or not, unless the seller expressly states that the shipment is being sent as an accommodation. An accommodation shipment is an implied counter offer which the offeree can accept or reject.