Contracts - Ucc Article 2

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Goods

Back 1

Tangible, movable Items

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Hybrid Transactions

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1) Predominate Purpose (majority)
2) Gravamen Test (minority)

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Predominate Purpose Test

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predominate purpose is goods, then the whole thing is under article 2.

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Gravamen Test

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To the extent hybrid transaction is goods-related, article 2 applies. To the extent it's services, Common Law applies

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1-201(37) – Signed

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Using any symbol executed or adopted w/ present intention to adopt or accept a writing.
-Writing Printing, typewriting, or any other intentional reduction to tangible form
-Complete signature is not necessary

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1-201(19)(20) - Good Faith

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Old Article 1: Need subjective good faith, for merchants - also need objective reasonableness.
New Article 1: Need both

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1-305 - Remedies to Be Liberally Administered

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-Remedies put the aggrieved party in as good a position as if the other party had fully performed

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2-104 - Merchant

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Someone who deals in goods of the kind, or by occupation holds himself out as having knowledge peculiar to the goods involved in the transaction or to whom such knowledge may be attributed by his employment of an agent/intermediary who by his occupation holds himself out as having such knowledge/skill.

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2-201 - Formal Requirements; Statute of Frauds

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Need writing for
1. sale of goods $500 or more
2. Between merchants if w/in reasonable time, written confirmation is sent and received by party who has reason to know its contents, it satisfies writing unless party objects within 10 days after receipt.
3. If goods are specially manufactured & can't be sold to anyone else, then no writing required.
4. If there is admission in testimony that contract exists, then no writing needed for the quantity of goods admitted to.
5. For goods that have been accepted, paid for and accepted, no writing required.
6. Estoppel under 1-103: fraud, estoppel, misrepresentation, duress, coercion, mistake, bankruptcy

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2-204(3) - Contract Formation in General

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2-204(3) - Contract Formation in General
1. May be made in any manner to show agreement -conduct of parties.
2. Even if the moment of its making is undetermined.
3. Doesn't fail for indefiniteness even though 1 or more terms left out if parties intended to make a contract & there's reasonably certain basis for giving an appropriate remedy.

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2-205 - Firm Offer

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Offer by merchant to buy/sell goods in signed writing can't revoke for lack of consideration during stated time or for 3 months. If it's on the offeree's form, it must be separately signed by offeror

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2-206 - Offer & Acceptance in Formation of Contract

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-Unless unambiguously indicated by language/circumstances - offer to make contract construed as inviting acceptance by prompt promise to ship or shipment of conforming/nonconforming goods.
-Shipment of nonconforming goods NOT acceptance if seller notifies buyer that shipment is accommodation.
-Where beginning of performance is mode of acceptance, offeror who isn't notified of acceptance in reasonable time may treat the offer as having lapsed before acceptance

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2-207 - Additional/Different Tems in Acceptance or Confirmation
Battle of the Forms

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-If there's a proviso where seller says acceptance is conditional upon acceptance of the new/different terms & performs anyway - not a contract: knockout rule. Terms of contract are the ones where parties agree plus gap fillers.
-If it's a contract & both merchants: additional terms become part of contract unless it's materially altered or notification of objection has been given & received.
If not both merchants: need express acceptance/dissent to new terms.

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2-209 - Modification, Rescission, & Waiver

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1. Needs no consideration to be binding.
2. Exclusion of modification clause cannot be modified/rescinded except by signed writing, except as between merchants such requirement on a form supplied by the merchant must be separately signed by other party.
3. Statute of frauds must be satisfied if contract as modified is w/in its provisions. Does not include unilateral termination/cancellation

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2-305 -Open Price Term

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Price is at reasonable price @ the time for delivery if not settled if: Nothing's said as to price or Price is left to be agreed upon by parties and they don't agree or
Price is fixed in terms of agreed standard

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2-308 - Absence of Specified Place for Delivery

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Unless otherwise agreed:
1. Seller's place of business or residence
2. Exception: if at the time of contracting, goods are known by parties to be somewhere else, that is the place of delivery

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2-309 - Absence of Specific Time Provisions; Notice of Termination

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1. Time of shipment/delivery: reasonable time.
2. For Ks with successive performances, indefinite duration - valid for reasonable time but unless otherwise agreed may be terminated at any time by either party
3. Termination by 1 party except on agreed event requires reasonable notification. agreement dispensing w/ notification is invalid if it's unconscionable.

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2-310 - Open Time for Payment

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Unless otherwise agreed Payment: due @ time & place at which buyer is to receive goods

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2-311 - Options & Cooperation Respecting Performance

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(Agreeing to Agree) Agreement otherwise definite to be contract: not invalid by leaving out particulars of performance to be specified by one of the parties.
Must be made in good faith, commercially reasonable.
1. Assortment of goods: buyer's option
2. Shipping arrangements: Seller's option
3. If specification/cooperation isn't made seasonably for other party to perform, other party can:
-seek remedy
-delay performance
-can perform in reasonable manner (not wait)
-After the time for his own performance, treat it as a breach.

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2-313 - Express Warranties

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Any affirmation of fact/promise made by seller to buyer which relates to goods & becomes basis of bargin.
-description of goods
-sample
-model
Burden of proof on seller that affirmation was not made.
Cannot disclaim.

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2-314 - Implied Warranty of Merchantability

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-Warranty that are goods are merchantable: fit for ordinary purpose of which such goods are used.
-Seller must be merchant of goods of the kind.
-Created by selling the goods--always given unless disclaimed.
-Does not have to plead/prove reliance.
-For goods except serving for value of food/drink to be consumed either on premises or elsewhere

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2-315 - Warranty of Fitness For Particular Purpose

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-Seller does not have to be merchant
-If seller has reason to know particular purpose for which goods are required and buyer is relying on seller's judgment to select suitable goods.
-Buyer must plead/prove reliance:
-seller had reason to know buyer's purpose
-know that buyer was relying on seller's skill/judgment
-buyer actually relied on seller's skill or judgment

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2-316 - Exclusion or Modification of Warranty
Disclaiming Liability

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Express: if you create inconsistency, it's held against you.
Implied Merchantability: must have word merchantability, be conspicuous.
Implied Fitness For Particular Purpose: Must be in Writing, conspicuous.
Implied Limitations: words like "as is" implicitly excludes implied warranties.
Can be excluded/modified by course of dealing, course of performance, usage of trade.

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2-503 - Seller's Tender of Delivery

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-Seller holds goods, makes them available to buyer, & notifies him.
-Must be at reasonable time & must be made available to buyer for reasonable period of time.
-Buyer must furnish reasonable facilities suited for receipt of goods.

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2-504 - Shipment Contract

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-Seller must get goods to carrier in reasonable way
-Deliver/tender documents to enable buyer to get the goods
-Promptly notify the buyer of shipment

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2-508 - Cure by Seller of Improper Tender or Delivery; Replacement

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-If time for performance has not yet expired & goods are rejected, seller may seasonably notify buyer of intention to cure & w/in contract time make conforming delivery.
-If buyer rejects goods where seller had reasonable grounds to believe would be acceptable, seller, if he seasonably notifies buyer, may have further reasonable time to cure

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2-509 - Risk of Loss in the Absence of Breach

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1. If it's a shipment contract FOB place of shipment, risk of loss passes to buyer when goods are duly delivered to carrier.
-If it's a Destination contract FOB buyer's place, risk of loss passes to buyer when the goods are tendered
2. If goods are in possession of bailee, risk of loss passes to buyer when he receives document of title or directions to deliver, when bailee acknowledges buyers rights to the goods
3. For non-carrier delivery, if seller is a merchant, risk of loss passes to buyer on receipt of goods. If seller is not a merchant, risk of loss passes to buyer on tender of delivery

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2-510 - Effect of Breach on Risk of Loss
Seller's Breach

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1. If buyer has right to reject, risk of loss shifts to seller until cure or acceptance
2. If buyer rightfully revokes, he can treat risk of loss having been on seller the whole time. If buyer is insured, seller is off the hook. Seller is responsible for deficiency in buyer's insurance.

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2-510 - Effect of Breach on Risk of Loss
Buyer's Breach

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1. If buyer accepted goods, buyer already had risk of loss @ time of breach--buyer is responsible.
2. If buyer breaches before risk of loss passes to him, buyer is responsible for deficiency in seller's insurance

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2-601 - Buyer's Rights on Improper Delivery

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-Can reject the whole, accept the whole, or accept any commercial unit/units and reject the rest if goods fail in any respect to conform to the contract.

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2-602 - Manner & Effect of Rightful Rejection

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-Buyer must notify seller w/in reasonable time after delivery that he rejects.
-Can't use the goods/show ownership of the goods.
-If he holds them, he has no obligation to them but has to hold w/ reasonable care.

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2-605 - Waiver of Buyer's Objections by Failure to Particularize

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-Must notify seller of curable defects detectable by reasonable inspection.
-If he doesn't or if he waives the defects, then he waives right to rejection or to establish breach.

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2-606 - What Constitutes Acceptance of Goods

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1. After opportunity to inspect, buyer indicates to seller that goods are conforming or that he will take/keep them in spite of non-conformity
2. Fails to make effective rejection
3. Acts inconsistently with seller's ownership
4. Accepts any part of commercial unit (it's acceptance of the entire unit)

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2-607 - Effect of Acceptance

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If the buyer doesn't object to problem with the goods, he waives the right to reject.
In the revocation phase the buyer has the burden of proof and must communicate notice of the breach and list problems to the seller.
1.Keep the goods and sue for damages of the value promised minus the value received
2.Continue with Revocation – buyer has burden of proof and must prove substantial impairment (subjective impairment – recognizes the uniqueness of the impairment to the buyer.)

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2-608 - Revocation of Acceptance in Whole or in Part

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-Can revoke lot or unit whose non-conformity substantially impairs its value to him if seller said there would be cure and there was none, latent defect.
-REvocation must occur w/in reasonable time after buyer discovers/should've discovered ground for it & before any substantial change in condition of the goods not caused by their own defects. Not effective until buyer notifies seller.
-Has same rights/duties to the goods as if he rejected them.

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2-609 - Right to Adequate Assurance of Performance

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1. When reasonable grounds for insecurity arises regarding performance of either party, the other may in writing demand adequate assurance of performance and until he gets it, may if commercially reasonable, suspend his own performance.
2. Between merchants, reasonableness of grounds for insecurity & adequacy of assurance - according to commercial standards
3. Can still demand assurance for future performance even if you accept improper delivery/payment
4. After receipt of justified demand, failure to give assurances w/in reasonable time not exceeding 30 days, then you've repudiated the contract.

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2-610 - Anticipatory Repudiation

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-When either party repudiates performance not yet due, the loss of which will substantially impair the value of the contract to the other, aggrieved party may:
1. for commercially reasonable time wait for performance
2. resort to remedy for breach even if he said he'd wait for performance
3. suspend his own performance or identify goods to the contract or try to salvage unfinished goods.

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2-611 - Retraction of Anticipatory Repudiation

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1. Until repudiating party's next performance is due, he can retract unless aggrieved party has since repudiation canceled, materially changed his position, or said that repudiation is final.
2. Retraction - can be any way that clearly indicates to the aggrieved party that you intend to perform, but must include assurance demanded
3. Retraction reinstates the repudiating party's rights under the contract.

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2-612 - Installment Contract; Breach

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-Installment contract: requires/authorizes delivery of goods in separate lots to be separately accepted
-Can reject any non-conforming installment if there's substantial impairment of value of that installment & can't be cured.
-If seller gives assurance of cure, buyer must accept the installment.
-If non-conformity with respect to 1 or more installments substantially impairs value of the whole contract--then there's breach of the whole.
-Aggrieved party reinstates contract if he accepts non-conforming installment w/out seasonably notifying of cancellation or brings an action for only past installments, or demands performance as to future installments.

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2-704 - Seller's Right to Identify Goods to the Contract Notwithstanding Breach or to Salvage Unfinished Goods

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Aggrieved seller can:
1. identify to the contract conforming goods not already identified if at time he learned of breach they are in his possession/control
2. treat as subject of resale goods even though goods are unfinished
3. Use reasonable commercial judgment to avoid loss and finish the goods or cease manufacturing and resell for scrap/salvage value or proceed in any other reasonable manner.

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2-703 - Seller's Remedies in General

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-Withhold delivery
-Stop delivery
proceed under next section respecting goods unidentified to the contract
-Resell & recover damages
-Recover damages for Non-acceptance or the Price
-Cancel

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2-706 -Seller's Resale Including Contract for Resale

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-Must be in good faith, commercially reasonable resale.
-If it's a private sale, must give buyer reasonable notification of intention to sell
-Can recover difference between resale price & contract price minus expenses saved by buyer's breach plus incidental damages

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2-708 - Seller's Damages for Non-acceptance or Repudiation

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1. Recover difference between market price @ time & place for tender & the unpaid contract price plus incidental damages minus expenses saved by buyer's breach.
2. If inadequate (could've sold 2 but only sold 1), then recover lost profits seller would've made from full performance of buyer plus incidental damages.

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2-709 - Action for the Price

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-When buyer doesn't pay & resale is impracticable, or goods are lost/damaged after risk of loss passes to buyer, he can sue for the price of the goods.
-Must hold for buyer any goods from the contract still in his control.
-If he resells, he has to credit net proceeds to the buyer

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2-710 - Seller's Incidental Damages

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commercially reasonable charges, expenses, commissions from stopping delivery, transportation, care, custody of goods after buyer's breach in connection with return or resale of goods or otherwise resulting from breach.

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2-711 - Buyer's Remedies in General; Buyer's Security Interest in Rejected Goods -Cover

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-Recover damages for non-delivery
-Recover identified goods
-Specific Performance
-Incidental & Consequential Damages

On rejection/revocation, buyer has security interest in goods in his possession/control for any payments made on their price & expense reasonably incurred in their inspection, receipt, transportation, care, custody, and may hold goods & resell them like an aggrieved seller.

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2-712 - Cover; Buyer's Procurement of Substitute Goods

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-Buyer may cover by making in good faith, witout unreasonable delay reasonable purchase/contract to purchase substitute goods
-May recover from seller difference between cost of cover & contract price plus incidental/consequentials minus expenses saved resulting from seller's breach.

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2-713 - Buyer's Damages for Non-Delivery or Repudiation

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-recover difference between market price @ the time when buyer learned of breach & contract price plus incidental/consequentials minus expenses saved from seller's breach.
-Market price determined as of place for tender or place of arrival

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2-714 - Buyer's Damages for Breach in Regard to Accepted Goods

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-May recover for non-conformity of tender the loss resulting in the ordinary cours of events from seller's breach in any reasonable manner.
-Difference between value of goods accepted and value they would've had if they'd been as warranted, plus incidental/consequentials

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2-714(2) - Buyer's Damages for Breach of Warranty

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Difference at the time & place of acceptance between the value of goods accepted & the value they would've had if they had been as warranted plus incidental/consequential damages

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2-715 - Buyer's Incidental & Consequential Damages

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-incidental: expenses reasonably incurred in inspection, receipt, transportation, care, custody of goods rightfully rejected.
commercially reasonable charges, expenses, commissions in connection with effecting cover other reasonable expense incident to delay/breach''
consequential: loss resulting from requirements/needs of which seller at the time of contracting had reason to know, could not be prevented by cover/otherwise and injury to person/property resulting from breach of warranty
If you could've covered but didn't, then no consequential damages for what you could've prevented by covering.

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2-716 - Buyer's Right to Specific Performance or Replevin

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-When goods are unique, rare, custom-made/other proper circumstances or
if buyer can't cover or it's not practical for him to cover

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2-718 - Liquidation or Limitation of Damages

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1. Damages may be liquidated only at amt. reasonable in light of anticipated or actual harm caused by breach, difficulties of proof of loss, inconvenience/nonfeasibility of otherwise obtaining adequate remedy. Term fixing unreasonably large liquidated damages is void as a penalty.
2. Where seller witholds delivery because buyer's breach, buyer is entitled to restitution of amt. by which the sum of his payment exceeds the amt. to which the seller is entitled by virtue of terms liquidating the seller's damages OR if no terms, 20% of value of total performance for which buyer is obligated OR $500, whichever is smaller.
3. Buyer's right to restitution under (2) is subjection to offset to the extent that seller establishes right to recover other damages & amt. or value of any benefits received by buyer by reason of the contract.
4. If seller received payment for resale, proceeds of resale are treated as payments under (2).

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2-719 - Contractual Modification or Limitation of Remedy

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-Parties can agree to remedies in addition to or instead of those provided by UCC. Once they agree to it, it's optional unless expressly agreed to be exclusive
If fails of essential purpose (doesn't give minimum adequate remedy), basic doe remedy applies.
Limitation of consequential damages: if (1) and (2) are read dependently, then don't have to prove exclusion was unconscionable to disregard exclusion of consequential damages.
If (1) and (2) are read independently, then you have to prove unconscionability to exclude consequential damages