Glossary of Business Law: Nature and Form of Sales Ch 25
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- The sale of goods
- a present transfer of title to tangible property for a price (the payment of money, an exchange of other property, or the performance of services).
- Article 2 of the Uniform Commercial Code
- a source of contract law which applies to contracts for the sale of goods.
- Statute of Frauds
- the section of the UCC that establishes that a contract be made in writing (to be enforceable) for the sale of goods of $500 or more.
- When does Article 2 of the Uniform Commercial Code govern a contract for goods and services?
- when the goods make up the dominant element of the cost. If the service element is dominant, it is a service contract and is governed by common law.
- Are some sections of Article 2 of the UCC applicable only to merchants?
- Yes, Merchants are often subject to different standards and rules under the UCC as they are recognized to have more experience, special trade knowledge, and have a need for more flexibility and speed in their transactions.
- Does Article 2 of the UCC apply to transactions in goods by non-merchants?
- Yes, Article 2 applies to all transactions in goods and is applicable to sales by both merchants and non-merchants.
- Under common law, to what extent must an acceptance reflect an offer in order to form a contract
- Under common law an acceptance must be a mirror image of the offer in order for a contract to be formed.
- Additional terms that may conflict with what is in a contract are treated as?
- Additional terms are treated as separate from the original offer and do not reject the original offer.
- How are additional terms of acceptance by merchants treated differently. (Article 2)
- For Merchants the firm offer provision applies under Article 2. Under this provision, an offer made by a merchant cannot be revoked if it
1) expresses an intention that it will be kept open.
2) is in writing.
3) is signed by the merchant.
- Must a merchant receive consideration to keep an offer open?
- No, The firm offer provision applies under Article 2. An offer is effective regardless of whether the merchant receives consideration to keep the offer open
- Does a period of irrevocability exist in a merchants offer?
- Yes, The period of irrevocability in a merchants offer cannot exceed 3 months. After 3 months the parties then need to have consideration and an option contract is created.
- What is the boiler plate part of a contract? (between Merchants)
- Details found on a contract between merchants that are unoriginal and common to documents that merchants will often use. These details often conflict with the terms of agreement on the front of a contract and some degree of difference is acceptable in contracts between merchants without changing the performance terms.
- battle of the forms
- When boiler plate language or details on a contract do not match. Merchants will often add or subtract payment terms to invoice or purchase order, yet still have a meeting of the minds on the subject matter of the contract
- how will courts view a slight difference in the terms of performance in a transaction between merchants?
- Courts will determine if there is a meeting of the minds on the subject matter even if there is a slight difference in the terms of performance. If the additional terms do not materially alter an offer and the offeror does not object in a timely fashion, the additional terms become part of the contract.
- How will courts recognize an acceptance of additional terms to a contract that are constructed outside of the UCC provisions?
- Even without the UCC provisions on contract terms, courts will recognize an acceptance of additional terms, either orally or in writing, if the performance continues with knowledge that the term has been added by the offeree.
- When does the UCC recognize the formation of a contract?
- When the intention of the parties to contract is clear.
- What are the defenses available to formation of a contract?
- Article 2 incorporates common law defenses to formation of a contract. 1)As a defense a party may try to establish fraud, thereby canceling the contract.
2)Party may recover for loses that result from damages for goods already delivered/payment made.
- 1)Included in the UCC as a contract defense for parties to a sale contract
2)defined as "grossly unfair"
3)court may refuse to enforce sales contract deemed unconscionable.
4)court may refuse to enforce clauses or sections.
- At common law, a contract is void if the subject matter of the contract itself is illegal (contract for hire to murder someone). Under the UCC the contract for sale of something illegal would be void (sale of heroin).
- The Effect of Illegal Sale
- An illegal sale or contract to sell cannot be enforced. As a general rule, courts will not aid either party in recovering money or property transferred under an illegal agreement.
- A gratuitous (free) transfer of the title to property. because there is no price, gifts are not covered under Article 2
- Parol Evidence.
- extrinsic evidence beyond the face of the contract between the parties.
- How does the Parol Evidence Rule apply to the sale of goods?
- under the UCC, the parol evidence rule applies to the sale of goods, with the slight modification that a writing is not presumed to represent the entire contract of the parties unless the court specifically decides that it does. If the court so decides, parol evidence is not admissible to add to or contradict the terms of the writing.
- How do the courts use parol evidence?
- The parol evidence rule requires the parties to be certain that everything they want is in their agreement before they sign. The courts cannot referee disputes over collateral agreements the parties fail to put in writing.
- What if courts decide that the writing was not intended to represent the entire contract? (parol evidence rule)
- 1) The writing may be supplemented by additional extrinsic evidence, including the proof of additional terms, as long as these terms are not inconsistent with the written terms.
2) Parol evidence may be admitted to interpret contract terms or show what the parties meant by their words.
- To what party do the rules regarding a firm offer apply?
- What is a firm offer?
- Firm offers are:
1) in writing
2) signed by the merchant
3) have an expressed period of irrevocability that is enforcible if accepted.
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