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Sales Outline

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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 1 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 goodEXCEPTION: Standing Timber is ALWAYS a goods transaction

2. Formation and Terms
A. 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 2 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)
(a) Course of performance: some behavior or conduct repetitiously adopted within
THIS (the same) contract
(b)Course of dealings: course of conduct or behavior parties have adopted in previous, independent agreements
(c) 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 3 2. Course of dealings

3. Trade usage
Use if multiple types of inconsistent Big 3 evidence

B. 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
4 -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 (no more than 3 months)
-Firm offer that appears on a form supplied by OFFEREE- firm offer is
UNENFORCABLE unless separately signed by offeror
No surprises, must use my form- have to acknowledge that provision
Nancy, a merchant, offers to sell Allyson 500 pens. Allyson alerts Nancy that, because of the business protocol her company observes, Allyson can only accept offers on a company form. Allyson then hands Nancy a copy of the form. The form requires that any offer completed on the form be "held open for fifteen (15) business days."
***Nancy is the offeror. Allyson is the offeree. The language generating the firm offer is
INEFFECTIVE, unless Nancy separately signs that provision.

-2-206 (Acceptance)
(1) Introductory clause for subparts a & b unless unambiguously indicate otherwise by language or circumstances (apply unless parties have changed these specifically)
(a) provides that an offer will be construed as inviting acceptance as in ANY
manner & through any medium as long as it is reasonable (unless otherwise explained)
(b) Provides narrow rule to above only in 1 factual circumstance
Order or other offer for prompt or current shipment a seller can accept by either promising to ship or instead by shipment
- if they ship non-conforming goods in response the action of shipping is an acceptance AND breech at the same time 5 - if want to avoid breech:
Ship with accommodation: notify of shipping an alternative good and if they don't want it, they can return it, SEASONABLY NOTIFY buyer of accommodation
(2) Lapse Provision: if performance is a reasonable means of acceptance and the seller has attempted to accept by performance seller MUST seasonably notify buyer of acceptance or buyer can assume lapse (communicate acceptance within reasonable time)
-2-207 (Battle of the Forms)
Destroy Common Law Rules
Mirror Image Rule: Offer and acceptance have to be the same, or it is a rejection and counteroffer
Last Shot Rule: Dialog of offers and counteroffers, whoever sends the last offer,
those will be the terms of contract if performance thereafter occurs 2-207 Get rid of the common law rule
Has formation occurred GO TO SUBPART 2:
(1) Definite and Seasonable expression of assent will constitute acceptance even if different or additional terms (won't stop formation) UNLESS (d) and (e)
a. Forms: Each party has its own boilerplate forms and the terms do not match b. Oral Agreement: Parties have achieved an oral agreement with a confirmatory memorandum and the terms of the memorandum diverge from the oral agreement i. My way or highway language in Confirmatory Memo will never prevent formation, oral contract already formed, not in acceptance c. Additional (for bar): Additional Dickered term appearing in an acceptance
GO TO SUBPART 2
Formation has not occurred: GO TO SUBPART 3 UNLESS explicitly and specifically assents to terms d. Proviso: statement that appears in a purported ACCEPTANCE, that makes assent conditional on agreement with its terms prevents formation (my way or highway in acceptance=no formation)
e. Different Dickered Terms: Negotiated to THIS transaction, no agreement if could not agree with basic contract terms
GO TO SUBPART 3
(2) Formation DID Occur:
a. If different terms, apply knockout rule (phrase of art), offer and acceptance speak to same subject matter BUT speak inconsistently, apply knockout rule, both terms knocked out b. If additional terms appear in ACCEPTANCE regarding subject matter not discussed in offer, does NOT prevent formation, if between merchants in the broad sense UNLESS (term does not enter contract)
6 1. Offer limits acceptance to the terms of the offer, not a proviso,
but prevents addition of terms

2. Adding terms is MATERIAL Alteration that would cause a hardship AND surprise (subjective and objective for BOTH)

3. Notice of objection to additional terms within a REASONABLE
time after receives acceptance c. IF NOT between merchants, additional terms are merely proposals for addition to the contract that will NEVER become more unless EXPLICITLY
and SPECIFICALLY assented to
(3) Formation DID NOT Occur, but parties commenced performance a. No agreement exists, court has to construct one, begin blank sheet of paper, look at both offers, pull out SAME terms into contract b. Terms that are missing use code Gap fillers (2-305, 2-309)

Terms
Warranties
Affirmative Warranties 2-313 Express Warranty
(1)Elements
(a) Internally disjunctive-- buyer can prove by affirmation of fact (can at some point be proven at time statement is made) or promise or a description (physical) or a sample (pulled from bulk) or a model (representation of good, usually smaller scale)
AND

(b)Related to goods- relationship with goods that are target of the transaction
AND

(c) Forms the basis of the bargain- presumption that what happened in (a)
formed basis of bargain so long as it occurred before OR
contemporaneous with full performance
- Assume buyers decision was based on (a), seller can attempt to rebut, has to prove that buyer would've bought anyways without (a)
(2)Ancillary matters- seller need not have any intention to give express warranty, seller intent is irrelevant, no specific words needed to give rise to express warranty
Implied Warranties (seller does not have to give rise to it)
2-312 Implied Warranty of Title (married to 2-403 (read these together))
- Automatic unless removed, protects buyer against false title
(1)Facets of warranty and what you get
(a) Seller will warrant title is good and transfer is rightful (these goods aren't stolen and I have the right to transfer)
(b)No leans, security interests or encumbrances of which buyer has no knowledge at the time of contract (collateral of goods against a debt,
loan on a car)
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