cheeseman blaw8e ch18
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Chapter 18 Formation of Sales and Lease Contracts
Uniform Commercial Code (UCC)
Uniform Commercial Code: A model act that includes comprehensive laws that cover most aspects of commercial transactions
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-2
Article 2 (Sales)
Governs the sale of goods Sale: The passing of title from a seller to a buyer for a
price Goods: Tangible things that are movable at the time
of their identification to a contract Money and intangible items are not considered
tangible goods Real estate and services are not goods
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-3
Article 2 (Sales)
Services Contracts for the provision of services are not
covered by Article 2 Mixed sale: A sale that involves the provision of a
service and a good in the same transaction Article 2 applies to mixed sales only if the goods
are predominant part of the transaction
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-4
Case 18.1: Good or Service
Case Brandt v. Boston Scientific Corporation and Sarah
Bush Lincoln Health Center 204 Ill.2d 640, 792 N.E.2d 296, Web 2003 Ill. Lexis 785 Supreme Court of Illinois
Issue Is the transaction between Brandt and Health
Center predominantly the provision of services or the sale of goods?
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-5
Article 2 (Sales)
Merchant One who deals in the goods of the kind involved in
the transaction, or By his or her occupation holds himself or herself
out as having knowledge or skill peculiar to the goods involved in the transaction
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-6
Article 2A (Leases)
Governs leases of goods Lease: Transfer of right to possession and use of
named goods for a set term, in return for certain consideration
Lessor: Person who transfers right of possession and use of goods
Lessee: Person who acquires right to possession and use of goods
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-7
Exhibit 18.3: Finance Lease
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-8
Article 2A (Leases)
Finance Lease
Revised Article 2 (Sales): A revision of UCC Article 2 (Sales) that includes provisions that recognize changes in the commercial environment and the importance of electronic sales contracts
Revised Article 2A (Leases): A revision of UCC Article 2A (Leases) that includes provisions that recognize changes in the commercial environment and the importance of electronic lease contracts
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-9
Formation of Sales and Lease Contracts: Offer
Gap-filling rule: A rule that says an open term can be “read into” a contract
A contract does not fail because of indefiniteness if: the parties intended to make a contract there is a reasonably certain basis for giving an
appropriate remedy
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-10
Formation of Sales and Lease Contracts: Offer
Open terms Price Payment Delivery Time Assortment
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-11
Formation of Sales and Lease Contracts: Offer
Consideration Required for the formation of sales and lease
contracts Under the UCC, modifications to sales and lease
contracts require no consideration Different from common law rule Modification must be made in good faith
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-12
Formation of Sales and LeaseContracts: Acceptance
Contract created when offeree sends acceptance to the offeror, not when offeror receives it
The UCC permits acceptance by any reasonable manner or method of communication
In certain circumstances, the UCC permits an acceptance of a sales contract to contain additional terms and still to act as an acceptance
Does not act as a counteroffer
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-13
Formation of Sales and LeaseContracts: Acceptance
Accommodation Shipment Shipment that is offered to the buyer as
substitution for the originally ordered goods when they are not available
The accommodation is a counteroffer from the seller to the buyer
The buyer is free either to accept or to reject the counteroffer
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-14
UCC Statute of Frauds
The following contracts must be in writing: All contracts for the sale of goods costing $500 or
more All lease contracts involving payments of $1,000
or more Exceptions:
Specially manufactured goods Admissions in pleadings or court Part acceptance
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-15
UCC Statute of Frauds
Written Confirmation Rule: If both parties to an oral sales or lease contract are merchants, the Statute of Frauds writing requirement can be satisfied if:
one of the parties sends a written confirmation of the sale or lease within a reasonable time after contracting, and
the other merchant does not give written notice of an objection to the contract within ten days after receiving the confirmation
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-16
UCC Statute of Frauds
Parol Evidence Rule: When a sales or lease contract is evidenced by a writing that is intended to be a final expression of the parties’ agreement or confirmatory memorandum, the terms of the writing may not be contradicted by evidence of:
Prior oral or written agreement, or Contemporaneous oral agreement
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-17
UCC Statute of Frauds
If express terms are not clear on their face, reference may be made to certain outside sources: Course of performance Course of dealing Usage of trade
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-18
Electronic Sales and Lease Contracts
Revised Article 2 (Sales) and Revised Article 2A (Leases) contain provisions that recognize the importance of electronic contracting
New e-commerce definitions Electronic Electronic Agent Electronic Record Record
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-19
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 18-20
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