Sales Outline - Sales

Sales Outline Fall 2020

1. Scope

Article 2: Limits to certain types of transactions

2-102 Transactions in goods

“Transactions” no definition in the UCC, but synonymous with “Sale”

2-106(1) “Sale” passing title from seller to buyer for a price (some consideration) (“passing title” not in UCC, think bundle of sticks)

2-103(1)(d) Seller:

Sells or contracts to sell

2-103(1)(a) Buyer:

Buys or contracts to buy

2-304(1) Price:

Payable in money or otherwise (trade, barter)

1-201(b)(24) Money: Any medium of exchange authorized by a sovereign (any government entity with power to issue currency)

2-105(1) Good

All things including specially manufactured goods which are moveable at time of identifications of contract

EXCEPT:

1. Money solely as a medium of exchange, money is not a good unless purchasing collectable money or trading currency

2. Investment Securities (Article 8, don’t need to know)

3. Things or Choses in Action

Something that derives its value SOLELY from your ability to enforce it in court, like insurance policy, abstract concept, the piece of paper does not have any value, but bought the right to enforce it in court, think hunting license

Specially Manufactured: to avoid any combination with service

Movable: Not in the code, but must be capable of physical movement

Meant to exclude abstracts:

Services

Real Property Transactions

At time of Identification of Contract: moment that thing is identified to contract (identified to contract once specific to contract)

1: Unique item identified at the time of contract formation, like a contract for a specific painting

2. For fungible goods that are interchangeable (500k blue pens) become IDENTIFIED when specific to contract- when you address them for shipping they are identified.

3. Car any Volvo Xc… choose which Volvo off the lot and then assess the moveability, if a VIN is assigned at contract then it is identified

2 Hybrid Types of Transactions

1. Hybrid Mixture of Goods and Services: (not foreseen by code drafters)

Court crafted rule to find if service or code agreement

Hair Cut and Color- the price is for the service of the cut and the good of the color

Predominant Purpose Test (is it more like code or common law) (factors test, consider all factors and weigh them, they do not all need to be present)

1. Language of the contract, what have parties said

a. “provider” usually indicates service

“buyer/ Seller” usually indicates goods

2. Nature of business/ supplier- whoever performing services (salon- primary goal to get service) or selling goods (advanced auto parts, primary goods, but they will put wipers on for you)

3. Allocation of value, is the value in the purchase attached to the goods portion or the services portion (hospital bill- there are medications on there (good) but the primary expense is the doctor (service)

2. Hybrid Mixture of Goods and Real Property (foreseen by code drafters as 2-107 (1) & (2))

1 and 2 together decide whether more real property or goods, if severance would cause material harm to real property then transaction is NOT goods UNLESS seller is going to sever (remove the thing from property)

Hypo 1: Sell a loose diamond- goods- code

Hypo 2: I’ll sell you all the diamonds that can be found on blackacre and I’ll do all the severing, so bag of diamonds- goods- code

Hypo 3: I’ll sell you all the diamonds on blackacre, but you have to do severing (have to figure out access restrictions to property, ect) not a good-

EXCEPTION: Standing Timber is ALWAYS a goods transaction

2. Formation and Terms

1. Proof of Terms

Parole Evidence Rule

First under the common law, then under the code, code only changes two things from common law

Common Law PER:

Protect the terms of an INTEGRATED agreement

Rule of Evidence under certain circumstances will prohibit admission of extrinsic evidence for certain purposes

Can never make it admissible, but can make it inadmissible, if violates PER, cannot be admitted

Certain circumstances: for integrated agreements (reduced to a writing), cannot apply to purely oral agreement

Extrinsic Evidence: outside the 4 corners of the writing

Certain Purposes: never prohibits effect, prohibits types of purposes, what are you trying to prove with it

Completely Integrated: Writing was intended to be a final expression of parties agreement

If completely integrated, legal effect of decision is parties are prohibited from introducing extrinsic evidence for the purpose of contradicting or supplementing

Terms of integration are not what we agreed to, can introduce if has effect of contradicting but NOT if that’s the sole purpose

Partially Integrated: not intended to be a final expression of parties agreement

Not prohibited for introducing extrinsic evidence for purpose of supplementing but they

are prohibited for purposes of contradicting

Will ALWAYS be judge who decides level of integration

At Common Law Never prohibited these for PER:

Condition Precedent

Rights in Equity

Explain: Not add or subtract, just explain integration, attempting to achieve what’s already there

@ common law first have to demonstrate ambiguity

Modify

Invalidity

Collateral Agreements

Parole Evidence Rule under the Code 2-202

Only 2 changes to common law, and can ONLY apply to Big 3 Evidence

If Big 3:

Exception 1: Not prohibited from admitting Extrinsic Big 3 Evidence for the purpose of supplemented even IF Completely Integrated agreement

Exception 2: Not Prohibited from admitted extrinsic evidence for purpose of explaining EVEN in the absence of an ambiguity

1-303 Also Known as Big 3 Evidence: (need repetition)

1. Course of performance: some behavior or conduct repetitiously adopted within THIS (the same) contract

2. Course of dealings: course of conduct or behavior parties have adopted in previous, independent agreements

3. Trade Usage Evidence: some conduct that is so readily observable in the location, vocation, or trade such that the parties SHOULD HAVE known it was part of the agreement (this is how we do it)

Has to be readily observable, vast majority, everybody knows or should know

Everyone in the locale does it this way

If fighting about contract for pens, can introduce contract for books to prove behavior in Charleston, irrespective of type of contract

Vocation: position itself (professor), Trade: whole industry (legal education)

1-303 Hierarchy

1. Course of performance

2. Course of dealings

3. Trade usage

Use if multiple types of inconsistent Big 3 evidence

2. Formation

Code sits on top of common law, there is not a code provision for everything, code speaks, common law fills gaps

At common Law:

Mutual Assent, offer and acceptance

Offer: Manifestation of intent to enter into a bargain so made as to justify a reasonable offeror to believe acceptance is invited and included

Manifestation: Party can make an offer through ANY medium, indicate to a reasonable person intent to enter into a bargain

Subjective intent: to make an offer, any manner

No further levels of approval or confirmation needed (finality), I will sell you this car for 60k (no other requirements needed)

Acceptance: Manifestation of assent to the terms of offer communicated to offeror in the manner invited (medium neutral, but has to be manner accepted if one is specified)

Consideration: reasonable something of value given by both parties that induces them to enter the agreement

o Must demonstrate compliance with two tests:

Benefit/detriment test – both parties must sustain a benefit and detriment

Bargain for exchanged test – whatever benefit the parties received must be what induced them into the transaction

-2-204 (Formation)

1. Existence of a contract by ANY means, meant to codify common law - Agreement can exist irrespective of medium or manner in which it was generated, medium neutral

2. Consistent with modern common law/ inconsistent with classical common law—contract can exist even if exact moment of its making cannot be determined (does not matter when contract “popped”

3. Consistent with modern common law/ inconsistent with classical common law

Classical: four terms needed for contract formation, parties, subject matter, price, and time for performance

Classic price is finite or subject to calculation, no filler for price term

Modern: Set of logical assumptions for price being a “reasonable price” look at market value

Won’t fail simply because some terms are omitted, still need minimum of PARTIES, SUBJECT MATTER, QUANTITY

-2-205 (Firm Offer)

At common law offeror is the “master” of the offer and could freely revoke at any point prior to acceptance

Exception was option contract, needed mutual existence and consideration (bought time) (hold contract open)

Code: Achieve result of option contract without consideration

Encumbers offerors right to revoke even without consideration

1. Offer *not defined in the Code. *1-103 = look to common law

*manifestation of intent to enter into a bargain so made as to justify a reasonable offeree in believing that acceptance is invited and will conclude it. *can be made by a buyer or a seller

2. Signed – any symbol 1-201(37)

3. Writing- any intentional reduction to tangible form 1-201 (43)

4. Merchant broad- in business and acting in business capacity

5. Gives assurances it will be held open for a reasonable time (any language)

- If a finite time period for it to be held open and that period does not EXCEED 3 months than that is the time it will be open

- If a finite time is OVER 3 months, it will be firm for 3 months, then converts to Common Law Offer (can be revoked prior to acceptance)

-If no finite time, will remain open for a reasonable time...