UCC principles to sales contracts
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- Discussion Question: What are the UCC principles of good faith and reasonableness to sales contract?
- Discussion Question: According to UCC Article 2, can written agreements orally? Why or why not?
- Discussion Question: What are the similarities between common law contracts and contracts under the UCC Article 2?
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UCC principles of good faith and reasonableness to sales contract
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Discussion Question: What are the UCC principles of good faith and
reasonableness to sales contract?
Law of Sales
What is covered by Article 2? Article 2 covers transactions in goods, in other
words, televisions, clothes driers, corn and beans, and so on. Although in the vast
majority, it is easy to tell whether Article 2 applies, sometimes we have difficulty in
deciding, either because it is not clear whether the item is "goods" or because the
contract covers goods and services, or goods and something else. Case law helps us
determine how to proceed in these situations. Section 2-105 contains a definition of
goods as follows:
(1) "Goods" means all things (including specially manufactured goods) which
are movable at the time of identification to the contract for sale other than
the money in which the price is to be paid, investment securities (article
8) and things in action. "Goods" also includes the unborn young of animals
and growing crops and other identified things attached to realty as
described in the section on goods to be severed from realty.
UCC Contract Formation UCC Contract Formation begins with section 2-206 which
explains how a contract is made:
(1) Unless otherwise unambiguously indicated by the language or circumstances (a)
an offer to make a contract shall be construed as inviting acceptance in any manner
and by any medium reasonable in the circumstances;
In short, if someone makes an offer, you can convey your acceptance by any
reasonable means. The goal here is to prevent disputes over whether a contract has
been accepted, because the accepting party used the wrong method of
(b) an order or other offer to buy goods for prompt or current shipment shall be
construed as inviting acceptance either by a prompt promise to ship or by the
prompt or current shipment of conforming or nonconforming goods, but such a
shipment of nonconforming goods does not constitute an acceptance if the seller
seasonably notifies the buyer that the shipment is offered only as an accommodation
to the buyer.
In short, ordinarily, if you place an order, the seller can accept by shipping the
goods. He doesn't have to accept in writing, he can ship. However if the seller
responds by shipping non-conforming goods, the seller must notify the buyer within
a reasonable time that such shipment is as an accommodation only and the buyer
has the option to accept or reject the goods.
(2) Where the beginning of a requested performance is a reasonable mode of
acceptance an offeror who is not notified of acceptance within a reasonable time may
treat the offer as having lapsed before acceptance. If the buyer places an order, and
then nothing happens for an unreasonable length of time, his order lapses, and when
the shipment comes, buyer can reject the shipment taking the position that it is too
late to fill the order. Obviously, it is better practice for buyer to notify the seller that
the order is cancelled.
The uniform commercial code incorporates a more lenient rule on contract formation
designed to deal with the fact that merchants often put inconsistent minor terms in
their orders, invoices, and shipping documents. The drafters hoped to find a rule
which would be more consistent with real commercial practice. UCC 2-207 is the
(1) A definite and seasonable expression of acceptance or a written confirmation
which is sent within a reasonable time operates as an acceptance even though it
states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different
terms. If the buyer places an order on her standard form, and the seller sends a
confirmation (or ships with an invoice, containing different terms, there still is a
contract!!! The only exception occurs when the buyer's order form contains language
which says, "this order may be accepted only if you agree to all of these terms,
exactly," or words to that effect.
(2) The additional terms are to be construed as proposals for addition to the
contract. Between merchants such terms become part of the contract unless: (a) The
offer expressly limits acceptance to the terms of the offer; (b) They materially alter
it; or (c) Notification of objection to them has already been given or is given within a
reasonable time after notice of them is received. In other words, the seller's new or
different terms become "proposals for contract amendments." But if the buyer and
seller are merchants, that is people who buy or sell in goods of that kind, then the
new or different terms become part of the contract, except in the listed
(3) Conduct by both parties which recognizes the existence of a contract is sufficient
to establish a contract for sale although the writings of the parties do not otherwise
establish a contract. In such case the terms of the particular contract consist of those
terms on which the writings of the parties agree, together with any supplementary
terms incorporated under any other provisions of this chapter. In other words, a
contract can be created by conduct, even if the above rules don't make a contract.
Even if the shipping documents are materially different. Even if both parties include
standard language which rejects any alterations, a contract still exists, if the parties
behave as if they have a contract.
Discussion Question: According to UCC Article 2, can written agreements orally?
Why or why not?
Discussion Question: What are the similarities between common law contracts
and contracts under the UCC Article 2?