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COMMERCIAL LAW

Chapter 14: Formation of Sales and Lease Contracts.

I. UNIFORM STATE LAWS. In the last half of the 19th Century, with the improvement of transportation and communications, businesses began marketing on a regional or national scale and began expanding production operations into two or more different states. In doing this, they experienced the reality of federalism. Each state had adopted or modified the common law to meet the particular local needs of the state. Business were faced with the very real possibility of conflicting laws whenever disputes arose regarding commercial transactions. Early attempts to resolve these problems lead to the Uniform Sales Act and the Uniform Negotiable Instruments Act.

The American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL) with representatives from each of the States, have been drafting model uniform laws on a wide variety of areas.

In 1944, the ALI and NCCUSL began to prepare a single, comprehensive commercial code to modernize and replace the multitude of conflicting state laws. The first draft was finished in 1950 and the official text was published in 1952. In 1953, Pennsylvania was the first state to enact the UCC. Over the next twenty six years, modified official texts were published. The UCC has been adopted, with some slight modifications, by 49 states, the District of Columbia, and the Virgin Islands. Even Louisiana has adopted parts of the UCC.

The UCC covers the following areas of commercial law:

1. Article 2: Sales

2. Article 2A: Leases

3. Article 3: Commercial Paper

4. Article 4: Bank Deposits and Collections

5. Article 5: Letters of Credit

6. Article 6: Bulk Transfers

7. Article 7: Documents of Title

8. Article 8: Investment Securities

9. Article 9: Secured Transactions

In addition to the UCC, other attempts to encourage uniformity among state laws include:

1. Uniform Aeronautics Act (UAA)

2. Uniform Anatomical Gift Act (UAGA)

3. Uniform Arbitration Act

4. Uniform Consumer Credit Code (UCCC)

5. Uniform Consumer Sales Practices Act

6. Uniform Crime Victims Reparations Act

7. Uniform Deceptive Trade Practices Act

8. Uniform Disposition of Unclaimed Property Act

9. Uniform Durable Power of Attorney Act (UDPAA)

10. Uniform Fiduciaries Act

11. Uniform Gifts to Minors Act (UGMA)

12. Uniform Limited Partnership Act (ULPA)

13. Uniform Partnership Act (UPA)

14. Uniform Probate Code (UPC)

15. Uniform Residential Landlord and Tenant Act (URLTA)

16. Uniform Securities Act

17. Uniform Simultaneous Death Act

18. Uniform Trade Secrets Act

19. Uniform Transfers to Minors Act (UTMA)

 

II. ARTICLE 2 - SALES. In addition to the goal of uniformity among state law, the UCC was drafted to achieve a commercially desirable result:

(1.) gives the parties the maximum latitude in fixing terms,

(2.) requires the parties will act in good faith

(a.) honesty in fact in the conduct or transaction

(b.) for merchants, the observance of reasonable commercial standards of fair dealing in the trade.

(c.) good faith cannot be waived or excluded in the sales contract.

 

1. Definition: A sale involves the passing of title to goods from seller to buyer for a price. The price may be payable in money, other goods, services, or even real property.

 

2. Goods are tangible and moveable personal property.

 

3. Sales contract formation:

a. parties intended to make a contract

b. a reasonable certain basis exists for the court to grant

an appropriate remedy. Usually this means that the

(1) description of the goods

(2) quantity of the goods

c. If description and quantity can be determined from the evidence that establishes the parties intended to enter into a contract, the UCC provisions will provide all of the other essential terms of the contract, including:

price

time of delivery

place of delivery

time of payment

acceptance

rejection

revocation of acceptance

transfer of title

transfer of risk of loss

 

4. Mirror image rule abolished

 

5. Additional or different terms

a. A merchant is

(1) a person who deals in goods of the kind involved in the sales contract:

(2) a person who, by occupation, holds themselves out as having knowledge and skill particular to the practices or goods involved in the transaction; or

(3) a person who employs a merchant as their agent.

b. Between merchants, addition terms contained in the

(1) they materially alter the original offer,

(2) the offer expressly states that no terms other

(3) the offeror timely objects to modified terms.

(4) Different (conflicting) terms do not become part of the contract unless specifically accepted by the offeror.

c. In one of the parties to the sales contract is not a merchant, additional terms in the acceptance will be mere proposals.

6. Consideration for modifications of sales contract.

7. Statute of Frauds - relaxed standards.

 

a. Value

b. Writing, signed by the party against whom relief is sought.

c. Between merchants

d. Exceptions

 

(1) specially manufactured goods

(2) contract admitted in pleadings, discovery or testimony

(3) oral contracts enforceable to extent of payment.

8. Parol evidence rule relaxed

a. consistent additional terms

b. course of dealings

c. usage of trade

d. course of performance