Sales and Leases Checklist

Sales

  1. Scope of Article 2
  2. 2-102 Transactions in Goods (Transactions Not Defined)
  3. 2-106 Sales—passing of title from seller to buyer for price
  4. 2-105 Goods—movable at the time of identification to the contract
  5. Sales-Service (Hybrid Transaction)
  6. Majority Rule—Predominate Purpose Test (Circumstances)
  7. Minority Rule—Gravamen Test (Complaint either for Goods or Service)
  8. Merchants
  9. Comments to 2-104
  10. Any merchant acting in mercantile capacity
  11. 2-201 Statute of Frauds and Exceptions
  12. 2-205 Firm Offers
  13. 2-207 Exchange of Forms as Acceptance
  14. Merchant with respect to goods of that kind
  15. 2-314 Implied Warranty of Merchantability
  16. Good Faith
  17. Honesty in Fact (1-201(19)) AND
  18. Observance of Reasonable Commercial Standards of Fair Dealing in the Trade (2-103)
  19. New Merchants
  20. Between Merchants (2-104)
  21. Non-Merchants
  22. Good Faith
  23. Honesty in Fact (1-201(19))
  1. Contract Formation
  2. Statute of Frauds (2-201) (One Party Denies Existence of Contract) (Does not Mean A Contract Exists—Only Means Aggrieved Party Gets Day in Court)
  3. Requirements
  4. Sale of goods for total price of $500 or more
  5. Writing Required—intentional reduction to tangible form (1-201(46))
  6. Sufficient to indicate existence of an agreement (objective evidence of agreement)
  7. Signed by party to be charged
  8. Any symbol with present intention to authenticate (1-201(39))
  9. Listing determinable quantity
  10. Exceptions
  11. Merchant Exception (2-201(2))
  12. Between Merchants
  13. Confirmatory Writing after Oral Agreement (objective guarantee that oral agreement rests on real transaction)
  14. Sufficient Against Sender
  15. Writing sufficient to indicate agreement was made, signed by sender indicating quantity
  16. Sent and Received W/I Reasonable Time
  17. Recipient Knows of its Contents (Sent to proper place)
  18. Objection of Recipient
  19. Written objection to the confirmatory memo ("We have no Contract") made W/I 10 days of receipt of confirmation
  20. Specially Manufactured Goods Exception (Where BUYER Denies Existence of Contract)
  21. Specially Manufactured Goods for the Buyer
  22. Not Suitable for Sale to Others in Seller's Ordinary Course of Business (Circumstances)
  23. Seller Substantially Began Manufacture OR Arranged for Procurement of Manufacture
  24. Before Buyer Notifies Seller of Repudiation
  25. Under Circumstances Reasonably Indicating the Goods are for the Buyer
  26. Admissions
  27. Once Party Admits Existence of Contract, SOF cannot be at issue
  28. Performance Exception
  29. Buyer Makes Payment AND Seller Accepts
  30. Seller Delivers, Buyer Receives, AND Buyer Accepts and Retains Goods
  31. Part Payment—enforceable to the extent paid
  32. More than One Item: Court Apportions Goods
  33. One Item: No Apportionment
  34. Formation in General (2-204)
  35. Contract made in any manner sufficient to show agreement including conduct whether or not moment of making is undetermined
  36. If terms left open, contract is sufficiently definite so long as a reasonably certain basis to determine remedies exists
  37. Firm Offers (2-205)
  38. Offer to buy or sell goods
  39. Offeror is any merchant under 2-104
  40. Signed Writing (If oral, must be supported by consideration)
  41. Assurance that offer is held open
  42. Offer revocable for time specified, not exceeding three (3) months
  43. Offer and Acceptance (2-206)
  44. UNLESS OTHERWISE UNAMBIGUOUSLY INDICATED, Offer to make a contract is construed as inviting acceptance in any reasonable manner
  45. Prompt Shipment or Promise to Ship means acceptance can be either
  46. Conforming goods shipped acts as acceptance
  47. Non-Conforming Goods shipped with timely and seasonable notification that the goods are accommodations IS NOT acceptance UNLESS buyer accepts the nonconforming goods
  48. Beginning of Performance acts as acceptance
  49. Notification of the beginning of performance must be sent to buyer
  50. Additional Terms Included in Acceptance (2-207(1))
  51. Definite and Seasonable Expression of Acceptance Including Different or Additional Terms Acts as an Acceptance
  52. Where Acceptance is "Expressly Made Conditional to Offeror's Assent to Different or Additional Terms," there is no Acceptance UNTIL Offeror Expressly Assents
  53. MUST STATE THESE EXACT WORDS
  1. Breach of the Contract
  2. First, Define the Contract Terms
  3. Parole Evidence Rule (2-202) (Parties Agree That There is A Contract BUT One Party Tries to Introduce or Rely on Term OUTSIDE the Writing)
  4. A non-integrated writing can be modified by parole evidence
  5. One Writing Signed By Both Parties
  6. Fully Integrated Writing (Under All Circumstances, writing is absolutely complete)
  7. Parole evidence is inadmissible. UOT COP COD can be used for limited purpose, namely, to explain or supplement the writing; it CANNOT contradict the writing
  8. Partially Integrated Writing (Under All Circumstances terms in writing are agreed to, but the contract is not complete)
  9. Agreed-to terms CANNOT be contradicted by the parole evidence
  10. However, consistent, additional evidence is admissible
  11. Where the contract is silent OR
  12. Parties have not yet agreed to that term
  13. UOT COP COD can also be used to explain or supplement the writing UNLESS Contradictory to the agreed-upon terms
  14. Confirmatory Memos Sent By Each Party
  15. Terms to Which Both Writings Agree CANNOT be contradicted by parole evidence
  16. Where One Writing is Silent OR Where the Writings do NOT Agree
  17. Consistent, additional evidence is admissible
  18. Party Relying on Terms Included in their Form (2-207(2) or (3))
  19. Oral Agreement Followed by Confirmatory Memorandum, terms determined by subsection (2)
  20. Between Merchants AND Additional Term
  21. Additional Term is part of the Contract UNLESS
  22. Material alteration (also, where offer limits acceptance to offeror's terms or offeror objects to any additional terms)
  23. Objective and subjective surprise OR
  24. Substantial Economic Hardship
  25. Disclaimer of warranties
  26. Knowingly and unilaterally imposing hardship on buyer
  27. Not Between Merchants and Additional Term
  28. Additional term is a proposal to the contract
  29. Different Terms
  30. Knockout Rule
  31. Master of Offer OR
  32. Reasonable
  33. Where the Exchange of Forms = Offer and Acceptance
  34. Definite and seasonable expression of acceptance = acceptance, Terms determined by subsection (2)
  35. Between Merchants AND Additional Term
  36. Additional Term is part of the Contract UNLESS
  37. Material alteration
  38. Objective and subjective surprise OR
  39. Substantial Economic Hardship
  40. Disclaimer of warranties
  41. Knowingly and unilaterally imposing hardship on buyer
  42. Not Between Merchants and Additional Term
  43. Additional term is a proposal to the contract
  44. Different Terms (Three Approaches)
  45. Knockout Rule
  46. Master of Offer OR
  47. Reasonable
  48. Acceptance Made Expressly Conditional to Buyer's Assent to Different or Additional Terms
  49. NO ACCEPTANCE UNLESS OFFEROR EXPRESSLY ASSENTS
  50. If offeror assents to additional terms, there is no issue
  51. IF NO ASSENT, Writings do not establish the contract
  52. Where writings do not establish the existence of a contract, but Subsequent Performance Indicates Agreement (2-207(3))
  53. Terms consists of those terms to which the parties agreed AND
  54. Gap fillers in the code
  55. Gap Fillers
  56. 2-305 Open Price Term
  57. Reasonable Price @ time of delivery IF price not included, left to be agreed upon and fail to agree, or parties let market decide the price
  58. 2-311 Allocation of Quantity
  59. Specifics left to one party
  60. Specifications must be done in good faith within commercial reasonableness
  61. Where party refuses to set specifications
  62. Other party may treat the refusal as a breach and be excused from performance OR
  63. May proceed to set specifications himself in a reasonable manner
  64. Other presumptions: Unless otherwise agreed
  65. Entire K is to be delivered at one time. UCC 2-307
  66. Tender of delivery is at seller's place of business. UCC 2-308
  67. Time for Delivery is a reasonable time. 2-309(1)
  68. Payment is due at the time and place of delivery upon receipt of goods 2-310(a)
  69. Warranties
  70. Warranty of Title (2-312)
  71. Created in the sale of goods
  72. Extent
  73. Good Title Conveyed (2-403)
  74. Void Title—involuntarily giving up goods
  75. Voidable Title—voluntarily giving up goods
  76. GFPV—good faith standards; voluntary transfer of interests, for value (sale)
  77. Transfer Rightful
  78. GFPV has power to transfer good title, but not the right (True owner has the right to transfer)
  79. No security interests or liens to which buyer does NOT actually know
  80. If BUYER furnishes specifications to seller, buyer must hold seller harmless from any claim arising from the specifications
  81. Breach
  82. Good Title not conveyed
  83. Transfer is not rightful
  84. Seller fails to disclose security interest
  85. If BUYER requires specifications and specifications give rise to claim against seller, the buyer has breached the warranty of title
  86. Proximate Causation
  87. Buyer's Damages (2-714 and 2-715)
  88. Difference between value of goods as promised and goods as transferred (FMV)
  89. Actual costs of litigation if buyer must defend cloud on title
  90. Incidental and consequential damages
  91. Vouching In under 2-607
  92. Disclaimer (2-312)
  93. Specific language OR
  94. Circumstances
  95. Express Warranties (2-313)
  96. Created
  97. Affirmation of Fact, Promise, Description, Sample, Model
  98. Extent (TEST)
  99. Representations
  100. Made by seller to buyer
  101. Relating to the goods
  102. Form the basis of the bargain
  103. No reliance required BUT
  104. Seller rebuts by showing buyer did not rely
  105. Breach
  106. Goods do NOT conform to representations made by seller
  107. Proximate Causation
  108. Damages (2-714 and 2-715)
  109. Difference between the value of the goods as promised and the value of the goods as transferred
  110. Incidental or consequential damages
  111. Disclaimer (2-316)
  112. Where Language of the contract both creates express warranties AND limits express warranties, court construes as consistent
  113. If inconsistent, the disclaimer of express warranties drops out
  114. Attempt to Disclaim
  115. Seller must assure that the writing is fully integrated or integrated with respect to disclaimer of warranty term
  116. Seller should add a "lack of authority" clause if salespersons are used
  117. Seller should have buyer sign the disclaimer separately to prevent unbargained-for disclaimer and surprise
  118. Implied Warranty of Merchantability (2-314)
  119. Created
  120. Sale of goods
  121. Seller is a merchant with respect to goods of that kind
  122. "Goods of that kind" interpreted broadly or narrowly depending on type of contract (Consumer = broad interpretation)
  123. Extent
  124. Goods Fit for its ORDINARY purpose
  125. Food warranties
  126. Reasonable anticipation test
  127. Allergic reaction
  128. Seller has reason to know the reaction was possible in some "appreciable" class of consumers (Circumstances)
  129. Breach
  130. Goods not fit for ordinary purpose
  131. Proximate Causation
  132. Damages (2-714 and 2-715)
  133. Difference between the value of the goods as promised and the value of the goods as transferred AND
  134. Incidental or consequential damages
  135. Disclaimers (2-316)
  136. General Rule
  137. Must contain the word "merchantability" AND
  138. Must be conspicuous (reasonable person ought to have noticed it)
  139. Some courts allow "actual" knowledge to supplant conspicuousness although it is not in the code
  140. Exceptions: Alternatives
  141. Conspicuous "As is" or "with all faults" language
  142. Seller demands inspection by buyer and buyer should have found the defect
  143. UOT COP COD
  144. Implied Warranty of Fitness for Particular Purpose (2-315)
  145. Created
  146. Seller knows or has reason to know of the buyer's needs
  147. Seller knows or has reason to know the buyer is relying on seller to select or furnish suitable goods
  148. Seller actually selects or furnishes goods
  149. Buyer actually relies on seller's skill or judgment to select or furnish the goods
  150. ALL at time of contracting
  151. Extent
  152. Goods are fit for buyer's particular purpose
  153. Breach
  154. Goods are not fit for buyer's particular purpose
  155. Proximate Causation
  156. Damages (2-714 and 2-715)
  157. Difference between the value of the goods as promised and the value of the goods as transferred
  158. Incidental or consequential damages
  159. Disclaimer (2-316)
  160. General Rule
  161. Must be in writing AND
  162. Conspicuous
  163. Need not be specific language (no implied warranties in this sale)
  164. Exceptions: Alternatives
  165. Conspicuous "As is" or "with all faults" language
  166. Seller demands inspection by buyer and buyer should have found the defect
  167. UOT COP COD
  168. Beneficiaries of Warranties 2-318
  169. Alternative A (Narrow) (PA)
  170. Natural persons
  171. In family or household OR
  172. Guests in home
  173. Reasonably expected to use, consume, or be affected by the goods
  174. May recover for personal injury resulting from breach of warranty
  175. Alternative B (Moderate)
  176. Natural Persons
  177. Reasonably expected to use, consume, or be affected by the goods
  178. May recover for personal injury resulting from breach of warranty
  179. Alternative C (Broad)
  180. Any person, including corporations
  181. Reasonably expected to use, consume, or be affected by the goods
  182. May recover for ANY injury (personal and property) for breach of warranty
  183. Seller's Defense to Breach of Warranty Claim 2-607
  184. Buyer MUST NOTIFY seller of the breach of warranty under all circumstances
  185. Within a reasonable time
  186. To ensure negotiations, give seller opportunity to cure and allow seller to inspect before curing
  187. Content of notice need not be specific but must inform the seller that the transaction is "troublesome and needs to be watched"
  188. Limitation of Warranties (2-719)
  189. Remedy Limited to Repair or Replace
  190. IF Parties expressly agreed that the repair or replace remedy would be exclusive (code presumes that it is in addition to other warranties, so parties must expressly agree that it is exclusive) AND
  191. Limitation fails of its essential purpose (what is the purpose)
  192. Limitation drops out and code remedies apply
  193. Limitation of Consequential Damages
  194. Limitation permitted unless unconscionable
  195. Limitation of damages for personal injury in consumer contract is prima facie unconscionable
  196. Limitation of damages for economic injury is not prima facie unconscionable
  197. Limitation of consequential damages where exclusive remedy is repair or replace (and remedy fails of its essential purpose)
  198. In consumer contracts, they both drop out and the code remedies come in
  199. In commercial contracts, the repair or replace clause ALONE drops out (limitation of consequential damages stays in)
  200. Unconscionability (2-302)
  201. Substantive (terms etc) AND Procedural (unfair process) unconscionability must be found by the court in order to refuse to enforce the contract or a clause thereof
  202. Next, Determine Performance Obligations
  203. General Obligations (2-301)
  204. Seller must tender conforming goods
  205. Buyer must accept conforming goods and tender payment
  206. General Rule—Payment is sufficient when made by any means or in any manner generally accepted in the business
  207. Exception—When seller demands payment in cash, seller must give buyer a reasonable time to procure cash, and buyer must act with due diligence
  208. Code contemplates a contemporaneous transfer, but 2-507 and 2-511 provide that seller's tender of conforming goods is conditioned upon buyer's payment, and vice versa, in the event of non-contemporaneous transfer
  209. Overview
  210. When buyer receives goods, buyer has reasonable time to inspect so as to assure the goods are conforming
  211. Buyer MUST accept OR reject based on whether the goods conform or not
  212. Whether goods conform depends on the contract terms
  213. "In accordance with the obligations under the contract" (2-106(2))
  214. IF the goods conform, buyer MUST accept
  215. IF the goods do NOT conform, buyer has right to reject
  216. Perfect tender rule in a single delivery contract OR
  217. Rejection in accordance with provisions for installment contracts
  218. Rejection
  219. Single Delivery Contracts (2-601)
  220. Buyer has Right to Reject IF
  221. Tender fails to conform in any respect with the TERMS OF THE CONTRACT (Perfect Tender Rule)
  222. Reject the whole
  223. Accept the whole
  224. Accept commercial unit(s) and reject the rest
  225. Procedure for Rejection (2-602) AFTER REASONABLE OPPORTUNITY TO INSPECT
  226. Buyer must seasonably notify the seller of rejection
  227. Buyer must refrain from exercising ownership of goods AND
  228. Hold goods for reasonable time and in a reasonable manner so seller can remove them
  229. Additional Obligations
  230. Merchant Buyers are under additional obligations under 2-603
  231. Buyer must reship goods (at seller's cost) IF
  232. Seller requests AND
  233. Seller has no place of business in the market
  234. If Goods are perishable
  235. Buyer must make reasonable attempts to resell without seller's demand, but buyer is entitled to commission
  236. Buyer must also state defects that could have been found upon reasonable inspection under 2-605 IF
  237. Seller could cure (2-508)
  238. Seller has absolute right to cure IF time for Seller's performance has not expired
  239. IF seller has reasonable grounds to believe that the goods or tender are acceptable, seller has right to cure within a reasonable time after rejection (not forever)
  240. Reasonable grounds determined by all circumstances including UOT COD COP
  241. Seller demands statement
  242. Where statement is required and not given, buyer CANNOT rely on those defects to show breach
  243. Installment Contracts (separate lots, separately accepted) (2-612)
  244. Buyer has Right to Reject IF AFTER REASONABLE OPPORTUNITY TO INSPECT
  245. Goods are non-conforming
  246. Non-conformity substantially impairs the value of the installment to the buyer
  247. Purpose of the goods, time, quantity, assortment, resale, damage
  248. Non-conformity cannot be cured by the seller
  249. Seller has absolute right to cure in installment contracts
  250. If seller cures, buyer MUST accept
  251. ANY PARTY has the right to reject the ENTIRE INSTALLMENT CONTRACT IF
  252. Seller's Nonconformity OR Buyer's Default
  253. Substantially impairs the value of the whole contract
  254. Cumulative effect of the nonconformity based on all the circumstances
  255. Purpose, price, good will, harm to other customers, reputation etc.
  256. Substantial impairment acts as a breach of the whole contract
  257. *PRESUMPTION IN COURT is that nonconformities do not substantially impair value to the parties—encourage performance of contracts
  258. Procedure
  259. Buyer MUST seasonable notify seller and give seller opportunity to cure
  260. Acceptance
  261. Generally
  262. Buyer must pay for accepted goods (2-607)
  263. Acceptance precludes rejection (2-607)
  264. Buyer bears the burden of proving any breach with respect to goods accepted (2-607)
  265. Acceptance (2-606)
  266. After reasonable opportunity to inspect
  267. Buyer makes an overt indication of acceptance to the seller
  268. Fails to make an effective rejection under 2-602
  269. Failure to seasonably notify seller of rejection within a reasonable time
  270. Exercise of ownership
  271. Fail to reasonably hold goods in reasonable manner so seller can retrieve the goods OR
  272. Does any act inconsistent with the seller's ownership
  273. Acceptance of any part of a commercial unit is acceptance of the entire unit
  274. Revocation of Acceptance (2-608)
  275. Right to Revoke Acceptance (2-608(1))
  276. Nonconformity BASED ON THE CONTRACT TERMS
  277. Regardless if seller knows of buyer's circumstances
  278. Nonconformity substantially impairs the value of goods to the buyer
  279. Subjective determination of THIS buyer's needs AND
  280. Objective determination of the value to a reasonable person with THIS buyer's needs
  281. AND BUYER
  282. Knowingly accepts goods with the nonconformity based on a reasonable assumption that the seller would cure OR
  283. Buyer was induced to accept because the defect was difficult to discover
  284. Procedure (2-608(2))
  285. Notification of revocation of acceptance must occur within a reasonable time after buyer discovers OR should have discovered the defect AND
  286. Before any substantial change in condition of goods not caused by the defect
  287. Once buyer rightfully revokes acceptance, buyer has the same rights and obligations as if he rejected the goods
  288. Cannot exercise of ownership
  289. Hold goods for reasonable time and with reasonable care so seller can retrieve them
  290. Merchant buyers may also have additional obligations (2-603)
  291. Other Matters
  292. Identification 2-501
  293. Generally
  294. Determines the exact goods seller will give to buyer
  295. Buyer obtains limited property interest and insurable interest at time of ID
  296. Comments suggest that all doubts should be resolved in favor of ID
  297. ABSENT EXPLICIT AGREEMENT
  298. Existing goods are identified at the time of contracting
  299. Identification of an undivided share in identified fungible bulk occurs at the time of contract
  300. Undivided share means ownership
  301. Identified fungible bulk means container of goods
  302. Fungible means identical equivalent
  303. Future goods are identified when
  304. Goods are shipped
  305. Marked OR
  306. Otherwise designated by the seller as goods to which the contract refers
  307. NEED NOT BE DELIVERABLE
  308. Crops or unborn young
  309. Identification occurs when crops are planted IF
  310. Harvested within the year OR
  311. At the end of the next normal harvesting season
  312. Whichever is longer
  313. Risk of Loss: NO BREACH AND NO AGREEMENT (2-509) (After Identification)
  314. 2-509(1): IN Shipment Contracts ROL shifts when goods are duly delivered to the carrier
  315. F.A.S. (2-319) is always a shipment contract
  316. Requires seller to deliver goods on the dock of the vessel
  317. Obtain negotiable bill of lading
  318. 2-504 also requires seller to
  319. Form a reasonable contract to ship with the carrier
  320. Obtain all necessary documents for shipment AND
  321. Promptly notify buyer of shipment
  322. C.I.F. (2-320) is always a shipment contract
  323. Requires seller to obtain a negotiable bill of lading
  324. Load the goods and obtain the receipt
  325. Obtain insurance for the goods
  326. 2-504 also requires seller to
  327. Form a reasonable contract to ship with the carrier
  328. Obtain all necessary documents for shipment AND
  329. Promptly notify buyer of shipment
  330. C & F (2-320) is always a shipment contract
  331. Same as C.I.F. except no insurance requirement (buyer has a blanket insurance policy for all goods)
  332. F.O.B. (2-319) CAN be a shipment contract if the named place is the seller's location
  333. Requires seller to put the goods in possession of the carrier
  334. 2-504 also requires seller to
  335. Form a reasonable contract to ship with the carrier
  336. Obtain all necessary documents for shipment AND
  337. Promptly notify buyer of shipment
  338. 2-509(1): IN Destination Contracts, ROL shifts when carrier tenders delivery at the particular destination
  339. Ex-Ship is always a destination contract
  340. Goods must be unloaded
  341. F.O.B.