Business Law CH20 S2025 LEW

Unit Overview Focuses on Domestic and International Sales and Lease Contracts. Reference: Business Law: Text and Cases, Fifteenth Edition by Clarkson/Miller.

Chapter Outline

• The Uniform Commercial Code (UCC)

• Scope of Articles 2 (Sales) and 2A (Leases)

• Formation of Sales and Lease Contracts

• International Sale of Goods Contracts

The Uniform Commercial Code (UCC)

• History of the UCCPrior variations in sales law among states.Complications in forming multistate contracts.1951: UCC proposed for uniformity.Aim to simplify and streamline commercial transactions.

• Comprehensive Coverage of the UCCTreats commercial transactions for sale and payment of goods as a single legal event.Articles of UCC:

  • Article 1: General provisions, definitions, and principles.

  • Article 2: Covers contracts for sale and lease of goods.

  • Articles 3, 4, & 5: Payment mechanisms (check, electronic transfers).

  • Article 7: Documents of title (e.g., bills of lading).

  • Article 9: Secured transactions.

Scope of Articles 2 and 2A

• Sales ContractsArticle 2 outlines the requirements, duties, and obligations in sales contracts.

• Lease ContractsArticle 2A addresses similar matters for leases.Parties can agree to different terms.

Common Law Contract Elements

• Agreement: Involves offer and acceptance.

• Consideration: Value exchanged to support the agreement.

• Capacity: Legal competency of parties.

• Legality: Legal purpose of the contract.

Article 2: Sale of Goods

• Definition of a Sale: Transfer of ownership from seller to buyer for a price.

• Characteristics of Goods: Goods must be tangible (physical existence) and movable (can be carried).Exclusions for intangible property and real estate (but can include associated goods). If contract for extraction where seller is extracting oil and gas or minerals from their own property, then it is considered a good. for crops and timber, a contract for extracting and selling makes it a good regardless of who extracts it.

• Mixed Contracts (goods and service) Determined using the predominant-factor test to ascertain if primarily a goods or service sale.

  • Leslie case

• Merchant Definition Merchant status can arise through:

  • Dealing in goods of a kind involved in the sales contract.

  • Holding expertise in particular goods or practices.

  • Employ merchant to act on their behalf

• Merchants are held to a higher standard in Article 2

Article 2A—Leases

• Covers lease agreements of goods, excluding real property leases.

• Lease Agreement DefinedAn agreement where a lessor transfers rights of property possession to a lessee for a period for rental payments.

Formation of Sales and Lease Contracts

• UCC modifies common law contract formation principles.

• Under common law an offer is only met with clear acceptance with a binding contract and there are more requirements and spelling out of the terms. mirror image rule

• Contract Formation Under UCCA binding contract can exist despite uncertainty in making details. Less definite

• Offer and Acceptance GuidelinesGeneral RulesUCC allows formation even with undefined terms if there is intent to contract and a reasonable basis for remedies.

  • Toll Processing Services: own and operate pickle line to process steal coil. Toll processing bought a pickle line and wanted to rebuild so toll said they could store it there until the construction was completed, ensuring that operations could continue without interruption. Castelon lost contact with toll processing, toll processing scrapped good, and Castelon filed a claim alleging breach of contract due to the disposal of materials that were supposedly under their care. ended up that the contract was too vague so there was no breach of contract.

• Open Price and Payment Terms Price can be determined in good faith if open; honesty, in fact, and reasonable commercial standards of fair dealing in the trade.

  • if fails set through the fault of one of the parties, the other party can treat the contract as canceled or determine a reasonable price.

• Open Payment Term: anu commerecially normal or accemtable means lke a credit card, but the seller must sprcificy and give the buyer reasonable time if they have to pay in cash

• Open Delivery and Quantity Terms Delivery occurs at seller's place unless specified; lack of quantity terms leads to no contract generally, with exceptions for requirements and output contracts.

• Open contract duration: specifies specific performance but does not indicate specific time, either party way terminate contract

• Shipping: if shipping is not specified the seller has the right to make arangements in good faith using commercial reasonableness

• assortment: buy can specify assortment when sales contracts omit details

• Open quanitity yerms: if parties do not specify quanityty, no contract is formed

  • Requirements contracts: agreements where a buyer agrees to purchase all of their requirements for a particular product from a seller, ensuring a steady supply and allowing the seller to plan production accordingly.

  • Output contracts:

• Merchant's Firm Offer: Irrevocable without consideration for up to three months, must be in writing and signed.

• Acceptance Criteria General Acceptance can occur in various reasonable manners, including shipment.

  • when nonconforming goods are shipped (the wrong goods). it will be acceptance as well as a breach of contract unless the seller notifies the buyer that the nonconforming shipment is offered only as an accomodation (out of blue pens, but provided black pens as an accomodation). since this is a favor this is not a breach of contract

• Additional Terms in AcceptanceDeviates from mirror image rule; additional terms may become part unless conditions exist.

• Consideration and Contract ModificationsModifications under UCC do not require new consideration, but need to be made in good faith.

• Statute of FraudsWritten RequirementsRequired for sales over $500 and leases over $1,000.

• Special Rules for MerchantsConfirmatory memo requirements; ten-day objection rule.

• Exceptions to Writing RequirementApplicable for specially manufactured goods, admissions, or partial performance.

Major Differences Between Contract Law and Sales Law

• Contract law requires material terms; UCC allows open terms.

• UCC does not apply mirror image rule like common law.

• Modifications under UCC do not require consideration; exceptions exist.

• Unconscionable contracts may be unenforceable in part or in full.

International Sale of Goods

• CISG OverviewGoverns international sales for ratified countries without other governing law agreements.Excludes consumer sales.

• Key Differences with UCCConflicting provisions favor the CISG; UCC requires written contracts for specified sales amounts while CISG does not.

• Special Provisions in International Contracts

  • Forum-Selection Clause: Chooses the court for disputes.

  • Choice-of-Law Clause: Governs the contract based on specific laws.

  • Force Majeure Clause: Provides for unforeseen event exceptions.

Leslie twwedie: former customers bought blackberries from at&t. got charges and decided to stop payiing and then the company that bought the company she was sent a bill 5 years later for her debt. They waited too long to sue. primarily a service not a good. it was under UCC whch time limit was 4 years rather than 10 yr.