Chapter 17 Formation of Sales and Lease Contracts

1. Chapter 17Formation of Salesand Lease Contracts

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

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

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

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

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

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

8. Agreement • Additional Terms • Common Law: terms must be the same for contract or battle of the forms. • UCC: 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.

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

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

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