ucc article 2 coverage and definitions

UCC Article 2 Coverage and Definitions

Overview of Article 2

  • Article 2 of the UCC applies exclusively to agreements related to the sale of goods.

  • Goods are defined as:

    1. Tangible: Must have a physical existence, e.g., a laptop computer.

    2. Movable: Can be transported from one place to another.

  • Non-applicable contracts: Does not include contracts for real estate or employment.

Mixed Contracts

  • Instances arise with contracts involving both the sale of goods and the provision of services.

  • Courts employ the predominant purpose test:

    • Determines the main intent of the contract:

      • Is it primarily for a service with the goods being secondary?

      • Or is the main purpose the sale of goods, with services being incidental?

Figure 13.3 Scope of Article 2

  • Article 2: UCC §2-102 governs the sale of goods (movable items excluding money and investment securities).

  • Article 2A: Specifically addresses the leasing of goods.

  • In mixed contracts:

    • Sale of Goods Predominant: UCC applies.

    • Provision of Services Predominant: Common law governs.

Merchant Transactions

  • Article 2 outlines specific provisions for transactions involving merchants.

  • Definition of Merchant:

    • Regularly engages in selling a particular type of good.

    • Includes brokers, agents, or intermediaries involved with a merchant.

  • Expectation of Knowledge: Merchants are assumed to have a higher level of commercial knowledge, allowing expedient transactions without standard consumer protections.

Example of Merchant Transaction

  • Scenario: Acme Equipment sells a lawn tractor to Sanjay for $600.

    • If Sanjay is a consumer, protections under UCC exist.

    • If Sanjay is a retailer (merchant), different business standards apply, expediting transactions.

Landmark Case 13.1: ProCD v. Zeidenberg

Fact Summary

  • ProCD created a searchable database from 3,000 telephone directories.

  • Offers database via expensive subscription for commercial clients and a cheaper retail version in CD-ROM.

  • The CD-ROM includes a shrinkwrap license prohibiting the resale of database contents.

  • Zeidenberg purchased the consumer version and resold the database, violating the license.

Synopsis of Decision and Opinion

  • District Court: Ruled the shrinkwrap license unenforceable as Zeidenberg did not consent to its terms before purchase.

  • Seventh Circuit Court of Appeals: Reversed this decision, ruling the database constituted a good and that shrinkwrap licenses are enforceable under the UCC in mass-market transactions.

Court's Reasoning

  • Contracts can be formed through various methods, including by conduct that indicates agreement (UCC §2-204(1)).

  • ProCD's approach was acceptable as it allowed acceptance through usage of the software after reviewing the license terms.

  • The UCC does not necessitate that sellers maximize buyer gains, ensuring normal commercial practices are validated.

Key Takeaway Concepts

  • Goods: Defined as tangible and movable property.

  • Merchant: A person regularly engaged in selling a specific good, including anyone acting as their broker, agent, or intermediary.