Chapter 17 Formation of Sales and Lease Contracts

Chapter 17 Formation of Sales and Lease Contracts

Learning Objectives q How do Article 2 and 2 A of the UCC differ? q What is a merchant’s firm offer? q If an offeree includes additional/different terms in acceptance, what happens? q What are the 3 exceptions to the Statute of Frauds in Article 2 and 2 A? q What law governs the international sale of goods? 2

UCC Scope q. UCC üArticle 2/2 A—sale or lease of goods. üArticles 3 -5—negotiable instruments and banking. üArticle 6—bulk transfers üArticle 7—warehousing and shipping üArticle 8—securities üArticle 9—secured transactions 3

What is a ‘Sale of Goods’? q Article 2 governs “sale of goods. ” q “Sale”: passing of title from seller to buyer for a price. q “Goods”: must be tangible and movable (not land, services or intangibles). ü Goods Associated With Land ü Goods and Services Combined. q “Merchant”: deals in goods of the kind sold. 4

What is an Article 2 A—Lease? q. Lease Agreement between Lessor and Lessee. üLessor: sells the right to possession and use of goods. üLessee: acquires right to possess and use goods under a lease. q. Article 2 A: applies to all commercial and consumer lease/financing of goods. 5

Contract Formation: Offer q UCC modifies the common law of contracts. Where UCC speaks, it preempts the common law. Where it is silent, the common law governs. q A valid offer under UCC 2 may include “open” price, payment and delivery terms. ü Exception: Quantity—No contract, unless: • Requirements: Buyer purchase all he needs. • Output: Buyer agrees to purchase all Seller manufactures. ü Only tangible and movable (not land, services or intangibles) q Merchant’s Firm Offer 6

Contract Formation: Acceptance q. Acceptance üMethods of Acceptance: Seller can specify manner of acceptance. If not any reasonable means üPromise to Ship/Prompt Shipment of conforming goods. • Non-Conforming goods may be “accommodation. ” üNotice 7

Agreement q. Additional Terms üCommon Law: terms must be the same for contract or battle of the forms. üUCC: additional/different terms permitted, depending on the status of the parties: • Either Non-Merchant: only original terms accepted. • Both Merchants: additional terms form contract unless there is prohibition or new terms or terms materially alter contract, or the party objects. 8

Statute Of Frauds q Contracts for Sale of Goods over $500 or lease over $1, 000 must be in writing. ü Sufficiency of the Writing ü Written Confirmation Between Merchants • Written confirmation after oral agreement. q Exceptions: ü ü Specially Manufactured Goods Admissions Partial Performance Merchant fails to object within 10 days 9

Parol Evidence q. Generally, terms of a written agreement or memo cannot be contradicted by prior, extrinsic evidence, unless the evidence is: üConsistent, Additional Terms üA Course of Dealing and Usage üA course of Performance, or üRules of Construction or Interpretation 10

International Sale of Goods q. Contracts for the International Sale of Goods (CISG-1980). üBy 2002, signed by 57 countries, including U. S. Mexico and Canada. q. CISG Applicability üApplies to International sale of goods like UCC 2 applies to domestic sale of goods. q. Comparison between CISG and UCC 2. 11