Sale Distinguished From Other Transactions Sale of Goods

Sale Distinguished From Other Transactions Sale of Goods: Present transfer of title to movable property for a price LEASE (transfer of possession and use for a term) No transfer of title OPTION TO PURCHASE (only a power to make a contract to sell) No transfer of title BAILMENT (only possession is transferred to bailee) No transfer of title NO SALE GIFT (a free transfer of the title No price CONTRACT TO SELL (title to goods has not passed) No present transfer Chapter 25 1

UCC Rules for Additional Terms in Acceptance Nonmerchants Nonmerchant/Merchants Additional Terms Material Offer Is Limited Objection Contract with Additional Terms Contract without Additional Terms Chapter 25 2

Chapter 25 Summary Contracts for services and real estate are governed by the common law. Contracts for the sale of goods are governed by Article 2 of the UCC. Goods are defined as anything movable at the time it is identified as the subject of the transaction. Goods physically existing and owned by the seller at the time of the transaction are existing goods. Chapter 25 3

Chapter 25 Summary (cont. ) A sale of goods is the transfer of title to tangible personal property for a price. A bailment is a transfer of possession and not title and is therefore not a sale. A gift is not a sale because there is no price paid for the gift. A contract for services is an ordinary contract and is not governed by the UCC. If a contract calls for both the rendering of services and the supplying of goods, the contract is classified according to its dominant element. Chapter 25 4

Chapter 25 Summary (cont. ) The common law contract rules for intent to contract apply to formation of contracts under the UCC. However, several formation rules under the UCC differ from common law contract rules. A merchant’s firm offer is irrevocable without the payment of consideration. The UCC rules on additional terms in an acceptance permit the formation of a contract despite the changes. These proposals for new terms are not considered counteroffers under the UCC. Chapter 25 5

Chapter 25 Summary (cont. ) If the transaction is between nonmerchants, then a contract is formed without the additional terms, which the original offeror is free to accept or reject. If the transaction is between merchants, the additional terms become part of the contract if those terms do not materially alter the offer and no objection is made to them. Chapter 25 6

Chapter 25 Summary (cont. ) The same defenses available to formation under common law are incorporated in Article 2. In addition, the UCC recognizes unconscionability as a defense to formation. Chapter 25 7

Chapter 25 Summary (cont. ) The UCC does not require the parties to agree on every aspect of contract performance in order for the contract to be valid. Provisions in Article 2 will govern the parties’ relationship in the event their agreement does not cover all terms. The price term may be expressly fixed by the parties. Chapter 25 8

Chapter 25 Summary (cont. ) The parties may make no provision as to price, or they may indicate how the price should be determined later. In output or requirements contracts, the quantity that is to be sold or purchased is not specified, but such contracts are nevertheless valid. Chapter 25 9

Chapter 25 Summary (cont. ) A contract relating to a sale of goods may be modified even though the modification is not supported by consideration. The parole evidence rule applies to a sale of goods in much the same manner as to ordinary contracts that are not for the sale of goods. Chapter 25 10

Chapter 25 Summary (cont. ) There is the slight modification in that a writing is not presumed to represent the entire contract of the parties unless the court specifically decides that it does. The UCC permits the introduction of course of dealing and usage of trade as evidence for clarification of contract terms and performance. Chapter 25 11

Chapter 25 Summary (cont. ) The UCC’s statute of frauds provides that a sales contract for $500 or more must be evidenced by a writing. The UCC’s merchant’s confirmation memorandum allows two merchants to be bound to an otherwise oral agreement by a memo or letter signed by only one party that stands without objection for ten days. Several exceptions to the UCC statute of frauds exist: Chapter 25 12

Chapter 25 Summary (cont. ) when the goods are specially made or procured for the buyer and are nonresellable in the seller’s ordinary market, when the buyer has received and accepted the goods, when the buyer has made either full or partial payment, and when the party against whom enforcement is sought admits in court pleadings or testimony that a contract for sale was made. Chapter 25 13

Chapter 25 Summary (cont. ) Article 2 A of the UCC regulates consumer leases, commercial leases, finance leases, nonfinance leases, and subleases of tangible movable goods. A lease subject to Article 2 A must be in writing if the lease payments will total $1, 000 or more. Chapter 25 14

Chapter 25 Summary (cont. ) Uniform rules for international sales are applicable to contracts for sales between parties in countries that have ratified the CISG. Under the CISG, a contract for the sale of goods need not be in any particular form and can be proven by any means. Chapter 25 15