CHAPTER 20: Sales and Lease Contracts

What is the goal of the UCC

to streamline and simplify commercial transactions

Uniform Commerical Code

• sales law varied from state to state

• lack uniformity complicated the formation of multistate contracts

• in 1945, the NCCUSL began to work on the UCC

• Substantially accepted by almost every state in the nation

sales contract

a contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price

common law can apply to contracts to the extent that the UCC hasnt modified them

when there is a conflict between a common law contract rule and the state statutory law based on the UCC…

the UCC controls

when the UCC is silent, common law governs

Article 2 of the UCC does with the sale of goods, it does NOT deal with …

• real property (real estate)

• services

• intangible property such as stocks and bonds

sa

sale

the passing of title (evidence of ownership rights) from seller to a buyer for a price

what are goods

• property that is tangible and movable

  • intangible property has only conceptual existence, and thus does not come under A2 (e.g. copyright and licensing are not covered)

tangible property

property that has physical existence and can be distinguished by the senses of touch, sight, and so on

good ASSOCIATED with real estate often to fall within the scopr of A2 such as…

• a contract for the sale of minerals, oils, or gas qualifies if severance, or separation, is to be made by the seller

• a contract for the sale of growing crops or timber to be cut is a contract for the sale of goods regardless of who severs them from the land

predominant-factor test

used when there is a contract involving a combination of goods and services

a test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services

example: the cellphone + service contract case

merchant

a person who is engaged in the purchase and sale of goods

what are the three ways that merchant status can arise

1. a person who deals in goods of the kind involved in the sales contract

2. a person who, by occupation, holds themselves out as having knowledge and skill unique to the practices or goods involved in the transaction

3. a person who employs a merchant as a broker, agent, or other intermediary has the status of a merchant in that transaction

lease agreement

an agreement in which one person (the lessor) agrees to transfer the right to the possession and use of property to another person (the lessee) in exchange for rental payments

consumer leases elements

1. a lessor who regularly engages in the business of leasing or selling

2. a lessee (except and organization) who leases the goods “primarily for a personal, family, or household purpose”

3. total lease payments that are less than $25,000

finance leases

involves a lessor, lessee, and supplier (lessor buys from supplier, lessee subleases from lessor)

lessor simply finances the transaction

LESSEE MUST PERFORM AND CONTINUE TO MAKE LEASE PAYMENTS EVEN IF THE LEASED EQUIPMENT TURNS OUT TO BE DEFECTIVE

The UCC states that an agreement sufficient to constitute a contract can exist even if …

the moment of its making is undetermined

open terms

one or more terms being open is fine as long as

• the parties intended to make a contract

• there is a reasonably certain basis for the court to grant an appropriate remedy

missing terms in a contract

• providing existence of a contract is an indication that there is a contract (like purchase order)

• missing terms can be proved by evidence or a court can presume that the parties intended whatever is reasonable under the circumstances

when too many terms are left open, it can be concluded that they did not intend to form a conract

quantity of goods involved usually must be …

expressly stated in the contract

agreed upon price

if there is not agreed upon price, the court will determine a reasonabe price at the time for delivery

prices decided by either of the parties have to be made in good faith

if one of the parties fails to determine a reasonable price, the other can considered the contract cancelled or determine their own reasonable price

unspecified payment terms

payment is due at the time and place at which the buyer is to receive the goods

no delivery terms

the buyer normally takes delivery at the seller’s place of business. if no place of business, the seller’s residence is used

when goods are located at some other place and BOTH PARTIES KNOW, the delivery is made there

if there is no time for shipment or delivery, court will infer a reasonable time to perform

duration of an ongoing contract

if a single contract specifies successive performances but does not indicate how long the parties are required to deal with each other, either party may terminate the ongoing contractual relationship. reasonable notification is requires so the other party can find a substitute arrangement

options and cooperation w/ regard to performance

• contract contemplates shipment of goods but does not specify arrangements, seller can make those arrangements in good faith and REASONABLENESS

  • contract omits terms relating to assortment of goods, buyer can specify the assortment

open quantity terms

no quantity, no contracte

exception to open quantity terms rule

requirements contract

output contract

requirements contract

an agreement in which a buyer agrees to purchase and the seller agrees to sell all or up to a states amount of what the buyer needs or requires

good faith limitation, cannot be unreasonably disproportionate to what is normally produced in a production period

output contract

an agreement in which a seller agrees to sell and a buyer agrees to buy all or up to a states amount of what the seller produces

good faith limitation, cannot be unreasonably disproportionate to what is normally produced in a production period

merchants firm offer