Chapter 15: The Formation of Sales and Lease Contracts
The Scope of Article 2- Sales
A contract for the sale or lease of goods is formed and executed
. Article 2 and Article 2A of the UCC
provide rules governing all aspects of this transaction.
~Article 2 of the UCC governs sales contracts, or contracts fro the sale of goods. To facilitate commercial
transactions, Article 2 modifies some of the common law contract requirements. To the extent that is has
not been modified by the UCC, however, the common law of contracts also applies to sales contracts.
(When the UCC is silent, the common law governs.)
: a contract for the sale of goods under which the ownership of goods is transferred from a
seller to a buyer
: a test courts use to determine whether a contract is primarily for the sale of goods
or for the sale of services
If a court decides a mixed contract is primarily a goods contract,
dispute, even a dispute over
the services portion, will be decided under the UCC.
: a person who is engaged in the purchase and sale of goods. Under the UCC, a person who
deals in goods of the kind involved in the sales contract or who holds herself of himself out as having skill
or knowledge peculiar to the practices or goods being purchased or sold.
Who is a merchant?
A merchant is a person who
deals in good of the kind
involved in the sales contract. Thus, a
retailer, a wholesaler, or a manufacturer is a merchant of those gods sold in the business. A
merchant for one type of goods is not necessarily a merchant for another type.
A merchant is a person who, by occupation, holds himself or herself out as having knowledge and
skill unique to the practices or goods involved in the transaction. Note that this broad definition
may include banks or universities as merchants.
A person who
employs a merchant as a broker, agent, or other intermediary
has the status of
merchant in the transaction. Hence, if a “gentleman farmer” who ordinarily does not run the farm
hires a broker to purchase or sell livestock, the farmer is considered a merchant in the transaction.
~The UCC states that an agreement sufficient to constitute a contract can exist even if the moment of its
making is undetermined.
~Under the UCC, it is the actions of the parties that determine whether they intended to form a contract.
Open payment term
. When parties do not specify payment terms, payment is due at the time and
place at which the buyer is to receive the goods. If the seller demands payment in cash, however,
the buyer must be given a reasonable time to obtain it.
Example: Alex agreed to purchase hay from Wagner’s farm. Alex left his truck and trailer at the
farm for the seller to load the hay. Nothing was said about when payment was due, and the parties
were unaware of the UCC’s rules. When Alex came back to get the hay, a dispute broke out. Alex
claimed that he had been given less hay than he had ordered and argued that he did not have to pay