[UCC]

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[What is the UCC?] Uniform laws crafted by the American Law

Institute and the National Conference of Commissioners on Uniform State Laws

Purpose is to promote consistency in sales contracts in interstate commerce.

There are 9 chapters, called “Articles”, covering sales of goods, warranties, forms of payment, titles, leases and financing of goods.

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ARTICLE 1

[UCC]

[ARTICLE 1] Provides definitions and general overview of the

purpose and scope for all 9 Articles. Extends general contract law to cover

agreements made across state lines. [§ 1–103] “Agreement” distinguished from “contract,” to

include express terms and implied conditions based upon course of conduct & usage of trade. § 1 – 303.

Overall obligation to act in “good faith”: “honesty in fact and fair dealing. [§ 1–201(b)(20)]

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ARTICLE 2

[UCC]

[ARTICLE 2] Applies to transactions in goods;

Does not apply to security interests;

Regulates every phase of a transaction for the sale of goods and provides remedies for problems that may arise.

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[WHEN TO APPLY ARTICLE 2] GOODS: “All things movable and identified to the

contract of the sale. See § 2-105 of the UCC.

A good must be existing and one of the objects that is or will be exchanged. See §§ 2-106(1) & 2-501(1) of the UCC.

Article 2 regulates transactions between merchants and consumers and those solely between merchants are regulated by Part Two.

All transactions that are for more than $500 must be in writing. See § 2-201(1) of the UCC.

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[“HYBRID” GOODS COVERED?]

Majority rule: If the “predominant purpose” of the

whole transaction was the sale of goods, Article 2will be applied to the whole (if goods are involved,most courts apply Article 2)

Minority rule: Article 2 applies to the sale of goods

aspect of the transaction only (problems arise inapplying two different measures of damages)

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[ARTICLE 2 WARRANTIES]

Express Warranty

Implied Warranty of Merchantability

Implied Warranty of Fitness

for a Particular Purpose

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[ARTICLE 2 WARRANTIES]

Implied Warranty of Merchantability When a person purchases a product from a

merchant, the person can expect that the product is "merchantable" under UCC 2-314.

This warranty provides that goods are of a quality equal to that which is generally acceptable among those who deal in such goods AND are generally fit for the ordinary purpose for which such goods are used.

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[ARTICLE 2 WARRANTIES]

Implied Warranty of Fitness for a Particular Purpose

The seller knows, or has reason to know, that the buyer of the goods intends to use such goods for a particular purpose, and

The buyer relies upon the seller's skill in select or provide such goods.

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[CONTRACT ENFORCEMENT

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REMEDIES

[ARTICLE 2 REMEDIES] For breach when seller fails to deliver:

Direct economic loss, specific performance, replevin, refund

For breach when seller delivers non-conforming goods:

Incidental damages, consequential damages, warranty damages

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[ARTICLE 2 REMEDIES]LA3100L P 5

Incidental damages:

• Result from the seller's breach. • Include expenses reasonably incurred in

inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover,

• And any other reasonable expense incident to the delay or other breach.

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Consequential damages:• Include any loss resulting from general or

particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

• Injury to person or property proximately resulting from any breach of warranty.

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• Compensatory damages: Puts the nonbreaching party in the monetary position that the party would have been had no breach occurred and the contract had been fully performed.

• Equitable remedies: When monetary damages insufficiently remedy, specific performance can order the unique goods to be produced.

[ARTICLE 2 DEFENSES]

A manufacturer or merchant that sells a product may avoid liability, if circumstances exist for a valid defense:

Assumption of Risk Contributory Negligence Comparative Negligence

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ARTICLE 3

[UCC]

[ARTICLE 3]

Regulates "negotiable instruments"

An unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money . . .

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[ARTICLE 3]

Negotiable instruments are generally divided into two categories:

1. Instruments containing an order to pay (Ex: drafts and checks)

2. Instruments containing a promise to pay. (Ex. promissory notes and certificates of deposit)

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[ARTICLE 3]Definitions:

Draft: drawer orders the drawee to pay money to a payee.

Check: draft drawn upon a bank. An instrument stating "Pay to the order of”.

Promissory note: promise by the maker to make payment to the payee at a specified time in the future or upon demand by the maker.

Certificate of deposit: is a promissory note by a bank or other financial institution in which the institution acknowledges that it has received money from the depositor and that it will repay the money, plus interest, as a set time in the future.

All negotiable instruments are subject to a Statute of Frauds requirement.

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