Anderson 19th Ed. 2005

1
Chapter 23NATURE AND FORM OF SALES
2
Introduction

• Contracts for the sale of services and real
  estate are governed by the common law.
• Contracts for the sale of goods (new or used
  tangible personal property) are governed by
  Article 2 of the Uniform Commercial Code (UCC).
• The UCC does not apply to securities or
  intellectual property.

3
Nature and Legality

• A sale of goods is a present transfer of title of
  tangible personal property for a price.
• The following are NOT Sales
• A bailment is a transfer of possession and not
  title and is therefore not a sale.
• A gift is not a sale because there is no price
  paid.
• A contract for services is an ordinary contract
  and is not governed by the UCC.

4
Nature and Legality

• A contract consisting of both services and goods
  is classified according to its dominant element.
  If a service, then common law governs. If a sale,
  then UCC 2 governs.

5
Formation of Sales Contracts

• Subject matter and quantity are required
  elements other terms may be left open as long as
  the intent to contract is clear.
• Requirements for merchants vs. non-merchants.
• A merchants firm offer is irrevocable for a
  reasonable time period.
• Acceptance must be in a reasonable manner and
  time.

6
Additional Terms

• Mirror Image Rule. Additional terms
• Non-Merchant(s) additional terms constitute
  counter offer.
• Merchants Battle of the Forms additional terms
  become part of the contract, as long as they do
  not materially change the duties and the other
  party does not object in a timely manner.

7
UCC Rules for Additional Terms in Acceptance
8
Defenses to Formation

• The same defenses available to formation under
  common law are incorporated in Article 2,
  including illegality.
• In addition, the UCC recognizes unconscionability
  as a defense to formation.

9
Open Terms

• The UCC does not require every term to be stated
  for a contract to be valid.
• Article 2 provides for missing terms.
• Price may be open, stating a formula for how the
  price would be figured later.
• Some open terms are interpreted by past patterns
  in their course of dealing.
• Modifications are binding if they are voluntary.

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Output Requirements Contracts

• In output or requirements contracts, the quantity
  is not specified, but are valid contracts if
  entered in good faith.
• Output Contracts.
• A contract for the entire product produced by a
  seller in a given time period.
• Requirements Contracts.
• A contract for the seller to sell whatever
  quantity the buyer needs.

11
Form of Sales Contract

• Statute of frauds provides that a sales contract
  for 500 or more must be evidenced by a writing.
• Confirmation memorandum allows two merchants to
  be bound after an oral agreement with a memo or
  letter signed by only one party without objection
  for ten days.

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Exceptions To Writing Requirement

• Several exceptions to the UCC statute of frauds
  exist
• Specially Manufactured Goods for Buyer.
• Receipt and Acceptance of Goods by Buyer.
• Full or Partial Payment by Buyer.
• Admission by Party against whom enforcement is
  sought.

13
Uniform Law for International Sales

• Uniform rules for international sales are
  applicable to contracts for sales between parties
  in countries that have ratified the United
  Nations Convention on Contracts for the
  International Sales of Goods (CISG).
• Under the CISG, a contract for the sale of goods
  need not be in any particular form and can be
  proven by any means.

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Leases of Goods

• Article 2A of the UCC regulates consumer leases,
  commercial leases, finance leases, nonfinance
  leases, and subleases of tangible movable goods.
• A lease subject to Article 2A must be in writing
  if the lease payments will total 1,000 or more.
• A commercial finance lease is irrevocable.

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Leases of Goods

• Warranties. Supplier makes express warranties to
  Lessor, who in turn passes them to the Lessee.
• Financier-Lessor does not make implied
  warranties.
• Irrevocable Promises Commercial Finance Leases.
• Lessee must perform even if hell or high water
  occurs.
• Default.