Chapter 19 Law
CHAPTER 19
FORMATION AND TERMS OF SALES CONTRACTS
Outline
I. Introduction The Uniform Commercial Code was prepared to simplify and modernize the rules of law governing commercial transactions. A. Sale of Goods Article 2 applies to all contracts for the sale of goods. Some contracts are "mixed" (include both sale of goods and provision of services). In this case, the test is "which predominates." Example: Heart of Texas Dodge, Inc. v. Star Coach L.L.C.: The customization of a truck was found to be a sale of services rather than a sale of goods because the predominant feature was the furnishing of services and labor. B. Leases A lease of goods does not constitute ownership, but in most states, Article 2 and Article 9 of the UCC were applied by analogy. C. Higher Standards for Merchants UCC Article 2 differs from traditional contract law because it is more flexible and based on concepts of reasonableness and good faith. Some UCC sections apply a different standard to contracts between merchants.
II. Terms of Sales Contracts A. Gap Fillers The UCC contains "gap filler" provisions to fill in terms of contracts where the parties omitted such terms or stated them indefinitely. (quantity terms, delivery terms and time terms) B. Price Terms If the parties omitted a price term or left the price to be determined at a future date, the Code supplies a price term. C. Quantity Terms 1. Output/Requirement Contracts Contracts that obligate a buyer to purchase a seller’s output or all the buyer’s requirements are governed by the UCC. Example: Noble Roman’s, Inc. v. Pizza Boxes, Inc.: The court found that the letter from Rosenberg to Gilbert was a requirements contract. 2. Exclusive Dealing Contracts The Code says that unless the parties agree to the contrary, sellers have a duty to use their best efforts to supply their
FORMATION AND TERMS OF SALES CONTRACTS
Outline
I. Introduction The Uniform Commercial Code was prepared to simplify and modernize the rules of law governing commercial transactions. A. Sale of Goods Article 2 applies to all contracts for the sale of goods. Some contracts are "mixed" (include both sale of goods and provision of services). In this case, the test is "which predominates." Example: Heart of Texas Dodge, Inc. v. Star Coach L.L.C.: The customization of a truck was found to be a sale of services rather than a sale of goods because the predominant feature was the furnishing of services and labor. B. Leases A lease of goods does not constitute ownership, but in most states, Article 2 and Article 9 of the UCC were applied by analogy. C. Higher Standards for Merchants UCC Article 2 differs from traditional contract law because it is more flexible and based on concepts of reasonableness and good faith. Some UCC sections apply a different standard to contracts between merchants.
II. Terms of Sales Contracts A. Gap Fillers The UCC contains "gap filler" provisions to fill in terms of contracts where the parties omitted such terms or stated them indefinitely. (quantity terms, delivery terms and time terms) B. Price Terms If the parties omitted a price term or left the price to be determined at a future date, the Code supplies a price term. C. Quantity Terms 1. Output/Requirement Contracts Contracts that obligate a buyer to purchase a seller’s output or all the buyer’s requirements are governed by the UCC. Example: Noble Roman’s, Inc. v. Pizza Boxes, Inc.: The court found that the letter from Rosenberg to Gilbert was a requirements contract. 2. Exclusive Dealing Contracts The Code says that unless the parties agree to the contrary, sellers have a duty to use their best efforts to supply their