Sales

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Subject Matter of Article 2

Back 1

deals with transactions in goods (all things tahta are movalbe when they are identified under the contract). It doese not apply to the slae of realty or intangibles.

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Goods Associated with Realty

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Goods associated with realty (timber, minerals, structures to be removed) fall under Article 2 if severance is to be made by the seller. Gorwoing crops fall under Article 2 regardless of who severs. Other things that can be removed from teh alnd withou material harm to the land are within article 2. Contracts involving the sale of things other than goods are generally governed by the common law rules of contracts.

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Merchants vs. nonmerchants

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a numer of the rules under article 2 differentiate between merchatnts and nonmerchants. A merchant is one who regularly deal in goods of the kind sold or who otherswise by his profession holds himself out as aving special knowledge of the goods sold.

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Formation of the contract

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a contract for the sale of goods may be maded in any manner sufficient to show agreement

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Merchants' Firm Offers

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common law offers are revocable unless consideration is given to keep the offer open. article 2 modifies the common law rule for certain offers made by merchants. A written offer signed by a merchant giving assurances that it will be held open will be irrevocable without consideration fro the state time perios or for a reasonable time if no period is expressly stated. The perios of irrevocabillity may not exceed three months.

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Methods of Acceptance

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An offer is construed as inviting acceptance in any reasonable manner and by any reasonable medium. Generally, an offer to buy goods for current shipment is construed as inviting acceptance either by a promise to ship or by prompt shipment of conforming or nonconforming goods.

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Mirror Image Rule Abandoned

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Article 2 has abandoned the common law mirror image rule for acceptance. Any acceptance or written confirmation that shows an intention to contract is effective. Whethr terms in teh acceptance that are different from or in addition to the offered terms will be included in the contract depends on whther both parties are merchants.

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Contracts involving nonmerchant

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if one of the parties to the contract is not a merchant, the contract will include only the terms of the offer.

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contracts involving merchants

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if both parties to the contract are merchants, additional terms automatically become part of the contract unless:
1. they materially alter the original contract
2. the offer expressly limits acceptance to the offer's temrs or
3. the offeror objects within a reasonable time

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open terms

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the fact taht one or more terms (including price) are left open does not prevent the formation of a contract if the parties intended such and ther is a reasonable basis for giving a remedy. The court can supply reasonable term for those that are missing.

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what if quantity is left open?

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the one term that is essential (the court won't supply) is quantity. A quantity term must be included to create a sales contract. Contracts for a seller's output or a buyer's requirements satisfy the quantity requirement because the terms usually can be objectively determined.

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auctions

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a sale y auction is complete when the auctioneer so announces by the fall of the hammer or in another customary manner. Auctions are with reserve unless explicityly offered without reserve.

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Defenses to statute of frauds

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1. statute of frauds
2. unconscionability

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Statute of frauds

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contracts fo the sale of goods at a price of $500 or more are not enforceable unless there is some writing that is signed by the party to be charged. A writing is sufficient even though it omits or incorrectly states a term, but a quantity must be stated becasue the contract is not enforceable beyone the quantity of goods showin in the writing.

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merchants- confirmatory memo rule

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in contracts between merchants, if one party, within a reasonable time after an oral understanding has been reached, sends a written confirmation thereof to the other party that binds teh sender, it will satisfy the statute of frauds requirements agains tthe recipient as well if he had reason to know of the confirmation's contents, unless he objects to its contents in writing within 10 days after it is received.

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When is a writing not required?

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1. if the goods are specially made for the buyer and not suitable for sale to others in the ordinary course of the seller's business, adn the seller has started making them or committed for their procurement
2. if the party admits in his pleadingor court testimony that a contract was made or
3. if the contract is perfromed (good are either received and accepted or paid for)

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unconscionability

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if a contract was unconscionable when made, the court may reguse to enforce it or limit it to avoid unconscionable results. The test for unconscionability is whether at the time of execution the contract or one of its provisions could result in unfair surprise and was oppressive to a disadvantaged party.

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Contract modification by agreement of the parties

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at common law, contracts may not be modified without consideration. article 2 does not fllow this rule.
1. modification without consideration- contract modifications sought in good faith are bidning without consideration. contract modifications must meet the statute of frauds requirements if the contract as modified is within the statute.
2. writing prohibiting oral modification- a provision that a written contract cannot be modified or rescinded except by a signed writing is valid and binding.
3. waiver of writing requirement- an invalid oral modification may serve as a waiver of aprty's right to enforce the contradct as written if one of the parteis relied to her detriment on the modification

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contract modification by operation of law

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1. destruction or injury to identified goods
2. failure of agree upon method of transportation
3. failure of presupposed conditions- impracticability

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Destruction or injury to identified goods

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if a contract requires for its performance particular goods identified when the contract is made and before risk passes to the buyer, the goods are destroyed or damaged without the fault of either party, the contract is avoided. For damaged goods, teh bueyr may elect to take teh goods with a reduction in price. If the goods are destroyed or damaged after risk of loss has passed to the buyer, teh buyer will bear the loss.

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failure of agreed upon method of transportation

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if the agreed upon delivery facilities become unavailable or comercially impractiacal, any commercially reasonable transportion must be tendered and must be accepted.

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failure of presupposd conditions

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a seller will be discharged from performing a sales contract under the doctrine of impracticability if:
1. at the time the parties made their contract, a basic assumption of both parties was taht a certain circumstance taht woul make performance extremly more burdensome would not occur, and
2. the circumstance does occur
The seller is discharged only to the extent of the impracticability

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What has to happen for a contract to be excused?

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for performance under a contract to e excused, the unforeseen circumstances must have been unforeseen at the time the contract was made. If the change was reasonably foreseeable (price increas) it will not excuse performance.

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Seller's partial inability to perform

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a partial inability to peform (shortage of goods) does not excuse performance; the serrler must allocate teh available supply amoung his customers.

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Parole Evidence Rule

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Teh terms of a contract set forth th econfirmatory memoranda of the parties or in a writing intned as a final expression of the parties' agreement cannot be contradicted by evidence of any prior agreement or contemporaneous oral agreement. Such herms, however, may be explained or supplemented by(i) consistend additonal terms (ii) course of dealing (sequence of conduct conerning previous transactions between the parties to a transaction that may be regarded as establishing a common basis of understanding) (iii) usage of the trade or business (iv) course of performance (repeated occasions for performance and a party has opportunity to object ot performance; any performance acquiesced to is relevant in determinig the meaning of the contract)

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Seller's obligation of tender and deliver

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Teh extend of the seller's obligation depnds on how the goods are to be delivered.
1. Noncarrier cotracts
2. Carrier Contracts

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noncarrier contracts

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if the parties did not intend that the goods be moved by a cearrier, the seller must put and hold confoming goods at the buyer's dispositon for a time sufficient for the buyer to take possession. In the absence of agreement, the place of delivery is the seller's place of business, or if he has none, his residence.

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carrier contracts

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if the parties intend that a carrier be used to move the goods, the seller may be obliged to deliver the goods for shipment or to delver them to a particular destination.

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shipment contracts-seller has not agreed to tender at particular destination

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in a shipment contract, the seller need not see taht the goods reach teh buyer, but is only required to put the goods into the hands of a carrier, make a reasonable contract for their shipment, promptly tender required documents, and promptly notify the buyer of the shipment.
note: failure to make a contract for shipment or notify the buyer is a groudn for rejection of the goods by the buyer only if the falure results in a material loss or delay.

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destination contracts-seller has agreed to deliver to destination

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in a destination ontract, a seller is required to see taht the goods reach the buyer, and is required to put and hold conforming goods at the buyer's disposition for a time sufficient for th ebuery to take possession of the goods at teh destination.

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FOB contracts

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in contrats taht specify that delivery is FOB (free on board) a particular point, the FOB point is the delivery point. The deliver y point may be the seller's place of shipment of the goods' final distination. Depending on the type of contract (shipment or destination), the seller must tender delivery in the manner described either in a destination or shipment contract.

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FAS contracts

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if contracts taht specify that delviery is FAS (free alongside), the seller must deliver the goods alongside the vessel in teh manner usual in the port of deliver or on a dock designated by the buyer, adn obtain and tender a receipt for the goods.

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delivery and payment concurrent conditions

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in noncarrier cases, unless the contract provides otherwise, a sale is for cash and the price is due concurrently with tender of delivery. However, unless otherwise agreed, when goods are shipped by carrier, the price is due only at teh time and place at which teh buyer receives the goods.

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shipment under reservation--buyer pays prior to receipt of goods

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in cases where thre is no express provision as to paymnet or the contract specifies cash, and the contract is one for shipment by carrier, the seller may send the goods "under reservation" so that the buery will be unable to get the goods from teh carrier until he pays.

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Payment by check

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Tender of payment by check is sufficient unless teh seller demands legal tender and gives teh buyer the time reasonably necessary to get cash. When payment is by check, payment is not finaluntil the check is honored.

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installment contracts

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in an installment contract (goods are delivered in installments), the seller can demand payment for each installment if the price can be so apportioned, unless a contrary intent appears.

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buyer's right of inspection

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unless the contract provides otherwise, the buyer has a right to inspect the goods before she pays (except if the goods are sent COD or against documents taht indicate teh buyer has promised to way without inspecting goods).

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Identification

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a buyer obtains an interest in goods under a sales contract when goods can be identified. Identification is a designation of specific goods as the ones to be delivered under the contract of sale. It gives the bueyr an insurable interest in certain circumstances, the right to get the goods from the seller and the right to sue third parties for injury to them.

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Specific, Ascertained and Existing Goods

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Identification takes place at the time the contract is made if it calls for the sale of specific and ascertained goods currently existing

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Crops and Unborn Animals

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If a sale is of unborn animals or of crops to be harested within 12 months (or the next harvest season, identification takes place when teh young are concerivedor when the crops are planted.

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identification in other goods

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in other cases, identification takes place when the goods are shipped, marked, or otherwise designated by the selelr as teh goods to pass under contract.

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insurable interest

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the buyer has an insurable interest in identified goods and may procure insurance covering goods even before the risk of their loss has passed to her. The seller also has an insurable interest in th egoods as long as he has title to or a security interest in them

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risk of loss in teh absence of breach

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1. noncarrier cases- if the seller is a merchant, risk of loss passes to the bueyr oly upon the bueyr taking physical possession of the goods. if the seller is not a merchant, risk of loss passes to the bueyr upon tender of delivery (seller ahs ready to pick up)
2. carrier cases- in a shipment contract, risk of loss passes to the buyer when the goods are duly delivered to teh carrier. in a distination contract the risk of loss passes to the buyer when the goods are tendered to the bueyr at the destination.

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effect of breach on risk of loss

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1. defective goods- the risk of loss does not pass to the buyer until the defects are cured or she accepts the goods in spit of their defects. if the bueyr rightfully revokes acceptance, the risk of loss is treated as having rested on teh seller from the beginning for any losses not covered by the buyer's insurance.
2. breach by bueyr- wherer the seller ahs identified conforming goods to the contract and the buyer repudiates or otherwise breaches the contract before the risk of loss passes to her under the contract, any loss occurring within a commercially reasonable time after the seller learns of the breach falls on teh buyer ot the extent of any deficienty in the seller's insurance coverage.

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risk in "sale or return" and "sale on approval" contracts

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a sale or return contract (buyer takes goods fro resale buy may return them if he is unable to resell them) is an ordnary sale. if the goods are returend to the seller, the risk remains on the bueyr while the goods are in transity. in a sale on approval contract (the bueyr takes goods for use buy may return them even if they conform to the ocntract), the risk of loss does not pass to the buyer until he accepts. if the bueyer decides not to take the goods, return is at the seller's risk.