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ROGER LeROY MILLER Institute for University Studies Arlington, Texas GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin Summarized Cases, 8 th Ed., and Excerpted Cases, 2 nd Ed.
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Fundamentals of Business Fundamentals of Business LawLaw
Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.
ROGER LeROY MILLERInstitute for University Studies
Arlington, Texas
GAYLORD A. JENTZHerbert D. Kelleher Emeritus Professor in Business Law
University of Texas at Austin
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Learning ObjectivesLearning Objectives• How do Article 2 and 2A of the UCC differ? What
types of transactions does each article cover?• What is a merchant’s firm offer?• If an offeree includes additional or different
terms in an acceptance, will a contract result?• Article 2 and Article 2A of the UCC both define
several exceptions to the writing requirements of the Statute of Frauds. What are those exceptions?
• What law governs the international sale of goods?
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Scope of UCC Article 2--Scope of UCC Article 2--SalesSales
• Facilitates commercial transactions.
• UCC Article 2: – Governs contracts
for sale of goods.– UCC 2 preempts
common law.– Where UCC2 is
silent, common law governs.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Common vs. UCC LawCommon vs. UCC Law
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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What is a “Sale”?What is a “Sale”?• UCC Article 2 applies to the “sale of
goods.”A “sale” is the passing of title of “goods” to/from
a “merchant” (seller or buyer) for a price (money, goods, services,etc).
– “Goods” are tangible and movable.– A “merchant” has special business expertise
and is not a casual buyer/seller.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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What are “Goods”?What are “Goods”?• A good is both tangible and movable.• “Predominant Test” with goods and
services combined.– CASE 14.1 Jannusch v. Naffziger (Illinois,
2008). • UCC does not apply to real estate unless
there is a “good” that can be severed by the Seller. If the good is severed by the Buyer, then UCC does not apply.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Who is a “Merchant”?Who is a “Merchant”?• Generally UCC 2 applies to all buyers of
sellers of goods.• In some instances, sales by/for a merchant
imposes special duties. • A Merchant:
– Deals in goods of the kind being sold.– Holds himself out with special knowledge or skills.– Is employed as a broker or agent in a transaction.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Scope of Article 2A-Scope of Article 2A-LeasesLeases
• Contract for lease of personal goods between a lessor and a lessee.
• Consumer Leases (primarily for family or personal use).
• Finance Leases (involves a 3rd party-supplier).
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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• At common law once a valid offer is unequivocally accepted, a binding contract is formed.
• UCC is more flexible, and allows for open pricing, payment, and delivery terms.
Common Law vs. UCCCommon Law vs. UCC
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Open TermsOpen Terms• Article 2-204: even if terms of uncertain,
a contract may still exist.• Open Terms: “Indefiniteness” is OK as
long as the parties intended to make a contract and there is a reasonable basis for a court to grant a remedy. – Open Price Terms: “reasonable price” at time
of contract.– Open Payment: Payment due at time-place
Buyer receives goods.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Open TermsOpen Terms• Open Terms:
– Open Delivery: Buyer takes delivery at Seller’s place of business.
– Open Duration: Either party can terminate with reasonable notice.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Open TermsOpen Terms• “Open Quantity” (UCC2-306): generally
courts will NOT impose a quantity, UNLESS: – Requirements Contract: buyer agrees to
purchase what the buyer needs or requires.– Output Contract: buyer agrees to buy all of
seller’s production or output.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Merchant’s Firm OfferMerchant’s Firm Offer• Common law: An offer could be
revoked any time prior to acceptance, unless there was some consideration.
• Article 2: An offer made by a merchant is irrevocable for reasonable period of time if a written assurance is given. No consideration necessary.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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AcceptanceAcceptance• ‘Any reasonable means’ under the
circumstances is permissible.• Promise to ship or prompt shipment is
acceptance.– Shipment of non-conforming goods is both an
acceptance and a breach unless goods sent as an “accommodation” to buyer.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Additional TermsAdditional Terms• If either party is a non-merchant, the
contract is formed according to original terms of the offer.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Additional TermsAdditional Terms• If both parties are merchants, the contract
incorporates new terms unless: (1) original offer expressly limits terms or (2) material alteration or (3) offeror objects within reasonable time. – CASE 14.2 Sun Coast Merchandise Corp. v
Myron Corp. (New Jersey, 2007).• Additional terms may be stricken if both
parties acted inconsistent with the terms
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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ConsiderationConsideration• Article 2 requires consideration and
modifications must be made in good faith.
• Modification must be in writing if required by Statute of Frauds.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Statute of FraudsStatute of Frauds• Sale of goods over $500 must have a
signed writing to be enforceable ($1,000 in leased goods).
• Exceptions to this rule:– Contracts between Merchants (no objection
with 10 days). – Specially manufactured goods.– Admissions by breaching party.– Partial performance.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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Parol EvidenceParol Evidence• Terms of a written agreement intended
to be the final expression of parties’ intentions, cannot be contradicted by prior or contemporaneous agreements.
• Exceptions: consistent terms, course of dealing and trade.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
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UnconscionabilityUnconscionability• Contract is one that is so unfair and
one-sided it is unreasonable to enforce it.
• Court can: set it aside, refuse to enforce the unconscionable provision, limit the contract.
• CASE 14.3 Jones v. Star Credit Corp. (1969).