Chapter 21

3 sources of laws that interpret sales contracts

state common law, Uniform Commercial Code (UCC), and state statutory law
-very little federal law that governs contracts for the buying and selling of items

Which groups created the Uniform Commercial Code (UCC)

-National Conference of Commissioners on Uniform State Laws (NCCUSL)
-American Law Institute (ALI)
-these groups work to revise the UCC as business practices change

Uniform Commercial Code (UCC)

created in 1952
-adopted by all 50 states
-once adopted this code becomes part of the law in that particular state
-divided into sections known as ARTICLES
-articles cover wide range from sales contracts to secured transactions
-Article 2 applies to only

Significance of the Uniform Commercial Code (UCC)

-clarifies sales law and makes this area of law more predictable for businesses that engage in transactions in more than one state
-facilitates commercial transactions
-does not pertain to all business transactions

UCC Artilce 2(A)

governs lease contracts

UCC Article 2

-contracts for the sale of goods
-when article 2 is silent on an issue, common law applies
-statutory laws supersedes common law
-adopted by every state except Louisiana
-pertains to anyone buying or selling goods
-distinguishes merchants form regular buy

3 categories the UCC divides items that can be bought and sold

-services (including intangible goods such as securities)

Article 2 of UCC "SALE

consists of the passing of title from the seller to the buyer for a price

Article 2 of UCC "GOODS

all tangible things which are movable at the time of identification to the contract for sale
-tangible if exist physically

Trade Fixtures

items attached to real estate that are used for business activities
-treated as goods under UCC

Mixed Sale

contract that combines a good with a service
-article 2 applies to mixed sales if goods are the main part of the transaction

Predominant-purpose test

-resolve issues in cases where a tangible good is mixed with something intangible
-to tell if the good was really the main objective in a transaction or was it the service

UCC Article 2 and Merchants

-distinguishes merchants from regular buyers and sellers
-merchant provisions
1. apply only to merchants
2. impose greater duties on merchants
-drafter of UCC say merchants have a greater ability to look out for themselves


person who deals in goods of the kind, or otherwise by his occupation, holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction
-or to home such knowledge or skill may be attributed by his employment of

Article 2A "LEASES

lease - transfer of the right to possession and use of goods for a term in return for consideration
- Lessor - person who transfers the right to possession and use of goods under a lease
- Lessee - person who acquires the right to possession and use of go

Consumer Lease

a lease that
1. has a value of $25,000 or less
2. exists between a lessor regularly engaged in the business of leasing or selling and a lessee who leases the goods primarily for a personal, family, or house hold purpose
-UCC offers protections to consumer

Finance Lease

-complicated by the addition of a third person - supplier or vendor who plays a separate role from that of a lessor
-lessors do not select, manufacture, or supply the goods
-rather the lessor acquires title to the goods or right to their possession and us

How does the court uphold a contract for the sale or lease of goods?

as long as the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy

UCC Open contract terms

-under UCC if certain terms are left open it is acceptable to fill them in
-generally creates firm offer when terms of a contract are left open

UCC Firm Offer

1. offer is made in writing
2. offer gives assurances that it will be irrevocable for up to three months despite a lack of consideration for the irrevocability
-if no time given, UCC assumes a three-month irrevocability period
-*** different from common l

Mirror-image rule

applies under common law but does not apply under the UCC
-common law states it as "an offeree's acceptance must be on the exact terms of the offer - if acceptance includes additional terms, the acceptance becomes a counteroffer
-Under the UCC additional


-sales and lease contracts require consideration
- Common law consideration - when a contract is modified, it must be supported by new consideration
-UCC eliminates this requirement for the modification of sales and lease contracts
-UCC requires only that

UCC and Common Law/Statue of Frauds

Common law - all material terms to a contract must be in writing
UCC - contracts for the sale of goods must be in writing if they are valued at $500 or more, lease contracts that require payments of $1000 or more must be in writing to be enforceable

UCC and Common Law/Writing

-Common law requires some kind of writing created or signed by the party who is contesting the enforceability of a contract
-UCC same rules apply unless the parties are merchants
-if two merchants have an oral agreement, written memo from either party to

UCC 3 exceptions to the statue of fraud's writing requirements

-exception for "specifically manufactured" goods
-if buyer or lessee has ordered goods made to meet her specific needs, buyer/lessee may not assert the statue of frauds if
1. goods are not suitable for sale or lease to others in the ordinary course of the

Parol Evidence Rule

a legal concept that aims to protect sales or lease contracts that the parties intended to be the final expression of their agreement
UCC- when a written agreement exists that is intended to be final expression, neither party can provide additional eviden

Courts allow parties to explain or supplement the written contract with either

1. additional terms that are consistent with the terms in the agreement
2. evidence that helps the court interpret the agreement, including previous conduct of the parties regarding the contract in question (course of performance), way parties have intera

4 factors courts look at to interpret sales and lease contracts

1. express terms
2. course of performance
3. course of dealing
4. usage of trade


contract or contract provision is unconscionable if it is so unfair that a court would be unreasonable if it enforced the contract
-courts can either refuse to enforce contract/lease or enforce the parts that are fair

United Nations Convention on Contracts for the International Sale of Goods (CISG)

offered as a treaty that countries could sign, indicating their willingness to allow this treaty to govern international business-to-business sales contracts
-legal structure for international sales

Significance of the CISG

if problem arises with an international sale and a party to the transaction initiates litigation, UCC does not provide guidance
-CISG preempts the UCC
-statue of fraud under CISG are more lenient than the UCC
-CISG does not require contracts to be in writ