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Mastering the Uniform Commercial Code Basics

Learn the fundamentals of the Uniform Commercial Code in sales transactions, including UCC basics, good faith, unconscionability, and statute of frauds. Understand how to navigate contracts, terms, and modifications effectively.

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Mastering the Uniform Commercial Code Basics

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  1. CHAPTER 18 Introduction to Sales

  2. Click your mouse anywhere on the screen when you are ready to advance the text within each slide. After the starburst appears behind the blue triangles, the slide is completely shown. You may click one of the blue triangles to move to the next slide or the previous slide.

  3. Quote of the Day “A commodity appears at first sight an extremely obvious, trivial thing. But its analysis brings out that it is a very strange thing, abounding in metaphysical subtleties and theological niceties.” Karl Marx, German political philosopher

  4. The Uniform Commercial Code (UCC) • The UCC is the single most important source of law for commerce and contracts. • The UCC is “ancient in origin, contemporary in usage, admirable in purpose, and flawed in application.” Click here to view the text of the UCC on the internet.

  5. UCC Basics • Code’s Purpose • To simplify, clarify and modernize the law governing commercial transactions, • To permit the continued expansion of commercial practices through custom, usage and agreement of the parties, • To make uniform the law among the various jurisdictions.

  6. Scope • Article 2 • UCC §2-102: Article 2 applies to the sale of goods, things that are movable, other than money and investment securities. • Article 2A • Article 2A governs the leasing of goods. • In a mixed contract involving sales and services, the UCC will govern if the predominant purpose is the sale of goods, but the common law will control if the predominant purpose is service.

  7. Merchants • UCC §2-104: A merchant is someone who routinely deals in the particular goods involved, or who appears to have special knowledge or skill in those goods, or who uses agents with special knowledge or skill in those goods. • The UCC frequently holds a merchant to a higher standard of conduct than a non-merchant.

  8. Good Faith & Unconscionability • Good Faith • The UCC imposes a duty of good faith in the performance of all contracts. • For non-merchants, good faith means honesty-in-fact. • For a merchant, good faith means honesty-in-fact, plus the exercise of reasonable commercial standards of fair dealing. • Unconscionability • UCC §2-302: A contract may be unconscionable if it is shockingly one-sided and fundamentally unfair.

  9. Statute of Frauds • UCC §2-201 requires a writing for any sale for goods worth more than $500. • Contracts for Goods over $500 • Writing Sufficient to Indicate a Contract • In general, the writing must be signed by the defendant. • Incorrect or Omitted Terms • Under the UCC, a court may enforce a bargain even though one or more terms were left open. • Enforceable Only to Quality Stated • The Code will enforce the contract only up to the quality of goods stated in the writing.

  10. Merchant Exception • When two merchants make an oral contract, and • one sends a confirming memo to the other within a reasonable time, and • the memo is sufficiently definite that it could be enforced against the sender herself, then • the memo is also valid against the merchant who receives it, unless • he objects in 10 days.

  11. Added Terms: Section 2-207 • Under §2-207, an acceptance that adds or alters terms will often create a contract. Click once to start self-building graphic. Offeree does NOT intend to accept Offeree intends to accept OFFER Accepts terms Adds terms Changes terms Accepts IF offerer accepts new terms NO CONTRACT Usually forms a contract Usually forms a contract Contract NO contract (is a new offer)

  12. Additional or Different Terms • Additional: those that raise issues not covered in the offer. • When both parties are merchants, additional terms generally become part of the bargain. • Different: contradict terms in the offer. • Cancel each other out; if there is no clear oral agreement, the Code supplies its own terms to cover prices, delivery dates and places, warranties, and other subjects.

  13. Open Terms: § 2-305 & 2-306 • Open Prices: Under §2-305, the parties may conclude a contract even though they have not settled the price. • Under the Code, if the parties have not stated a price, it is to be a reasonable price at the time of delivery. • Output and Requirements Contracts • The UCC requires that the parties in an output or requirements contract make their demands in good faith.

  14. Modification • UCC §2-209: An agreement modifying a contract needs no consideration to be binding. • The parties may agree to prohibit oral modification and insist that all modifications be in writing and signed. • Between merchants, such a clause is valid. • If either party is not a merchant, such a clause if valid only if the non-merchant separately signs it.

  15. “The Uniform Commercial Code enables merchants to form contracts more quickly and easily. But along with this increased facility goes greater responsibility, since informal discussions may suddenly turn into… a contract.”

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