Chapter 15 Formation of Sales and Lease Contracts - SCOPE...

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SCOPE OF UCC ARTICLE 2 Article 2 of the UCC governs sales and contracts for the sale of goods , pursuant to which a seller transfers to a buyer (1) title (formal right of ownership) to (2) goods (including growing crops and timber to be harvested; fixtures capable of severance without harming the real property to which they are attached; and subsurface oil, gas, and other minerals, and structures attached to realty, that the seller removes) (3) in exchange for money or other value. Article 2 governs only tangible personal property , which has inherent physical value and can be moved from place to place . Article 2 does not govern contracts for services , real property , or intangible personal property ( e.g. , intellectual property, stocks and bonds). Ch. 15: The Formation of Sales and Lease Contracts - No. 1 Business Law Today: Standard Edition (9th ed.)
“MIXED” CONTRACTS A large number of disputes involving goods also involve services, real property, or intangible or immovable personal property – none of which are within Article 2’s scope. In most such cases, courts decide whether to apply Article 2 using the predominant purpose test, which hinges on the buyer’s primary objective in buying the goods and non- goods. If the buyer’s primary purpose was to acquire the goods , then Article 2 applies to the whole transaction (including the non-goods part of it). If the buyer’s primary purpose was to acquire the non- goods , then Article 2 does not apply to any part of the transaction . A minority of courts will apply the gravamen of the action test, which hinges on what part of the underlying transaction gives rise to the dispute. If the buyer is complaining about the goods , Article 2 applies to the dispute (even if her predominant purpose was to buy non-goods). Ch. 15: The Formation of Sales and Lease Contracts - No. 2 Business Law Today: Standard Edition (9th ed.)
If the buyer is complaining about the non-goods , Article 2 does not apply to the dispute (even if her predominant purpose was to buy goods). Ch. 15: The Formation of Sales and Lease Contracts - No. 3 Business Law Today: Standard Edition (9th ed.)
MERCHANTS Merchant: A person who (1) regularly deals in goods of the kind involved in the sales or lease contract, (2) holds herself out as having unique knowledge and skill , or (3) employs a merchant as a broker, agent, or other intermediary. No Effect on Article 2’s Applicability: Whether or not a party is a merchant does not , contrary to what many students, lawyers, and even a few judges think, determine whether UCC Article 2 governs a transaction. Special Rules for Merchants: Article 2 includes a number of provisions that apply only to merchants or hold merchants to a different standard of conduct than non- merchants ( e.g. , the merchant’s firm offer rule).

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