K Final Outline for the UCC

Uniform Commercial Code
Used for sale of (tangible) goods – when the title of goods transfers from seller to buyer
(2-102)
– Sale = moving of title from seller to buyer (2-106)
– Goods = moveable objects (2-105)
1-103 – The UCC can be supplemented by Common Law or equity and any other Federal
Acts
2 tests: if transaction involves goods and services
 Predominant factor test – what is the majority? Look at terms, language, costs,
and the nature of the provider’s business.
 Gravamen Test – What is the source of the complaint?
I. What is a contract? 1-201 – the total legal obligation which results from the
parties’ agreement as affected by this Act and other applicable rules of law
a. Agreement – bargain in fact of the parties as shown by their words, CP,
CD, and TU


II. What must be proven in order to sue for breach of K?
a. Formation
b. Breach
i. What are the terms?
ii. Which terms were breached?
c. Damages
i. What are the injuries?
UCC
I. K Formation defined 2-204
a. (1) K can be formed in any reasonable way to show agreement, including
O and A and conduct by both parties which recognizes the existence of the
K (electronic agreements are treated the same)
b. (2) The exact moment of formation does not matter, as long as both parties
reach an agreement at the end
c. (3) Open terms will not defeat formation as long as (1) both parties
intended to enter K, and (2) there is a reasonably certain base for awarding
a remedy
d. 2-209: consideration is inferred/assumed for all UCC transactions
II. Offer Defined 2-206: An offer to make a K shall be construed as inviting
acceptance in any manner and by any reasonably way under circumstances. Offer
to buy goods for prompt/current shipment invites acceptance either by prompt
promise to ship or by prompt/current shipment of conforming or non-conforming
goods.
a. When is an ad an offer?
i. When it leaves nothing open for negotiation.
ii. When it is not “mere puffery” and a reasonable person would see it
as such.
b. 2-205 Firm Offer
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i. Offer by merchant to buy/sell, in signed writing, gives assurances
to be held open, is irrevocable within a reasonable time (max 3
months)
III. Acceptance Defined 2-207 Battle of the Forms (also see “Perfect Tender
Rule”)
2-206: If communication of acceptance is definite (willingness to commit to the
K) and seasonable (within specific/reasonable time frame), it does not have to
perfectly match the offer.
a. 2-207(1): An acceptance can contain terms that are additional or different
from the offer. It still operates as an acceptance unless the acceptance is
expressly made conditional on assent to the additional or different terms.
i. “Unless…” = proviso = counter-offer
b. 2-207(2) – First Shot Rule: Between merchants, the new terms are
proposals and become part of the K unless:
i. The offer is conditional;
ii. The new terms are a material alteration; or
1. Immaterial – collateral/side terms
iii. Objection by offeror to the new terms within reasonable time after
notice of them is received
c. 2-207(3): If writings do not establish K under 2-207(1) K can be formed
by conduct by both parties, as long as terms or K are (1) those on which
writings agree, and (2) Article II UCC gapfillers.
i. “Knock-out Rule” – when terms conflict, remove both and apply a
UCC gapfiller
d. Gapfillers
i. 2-308 – place of delivery
ii. 2-309 – shipment in reasonable time
iii. 2-310 – pay at receipt
iv. 2-313 – express warranty
v. 2-314 – IWM: a good comes with the implied warranty that it will
be fit for its ordinary purpose
vi. 2-315 – IWFPP
vii. 2-316 – disclaimers: can disclaim an IWM or IWFPP
viii. 1-303 – TU/CD/CP
IV. Communication of O and A – Uniform Electronic Transaction Act (UETA)
a. UETA §15 E-Record sent when…
i. A (1) it’s properly addressed and going through an info processing
system which the recipient is able to retrieve from
ii. A (2) it is on a form capable of being processed by recipient’s IPS
iii. A (3) it enters an IPS outside of the control of the sender
b. E-Record received when…
i. B (1) it enters recipient’s designated IPS
ii. B (2) it is in a form capable of being processed by recipient’s IPS
V. K Modification 2-209
a. K modification does not need new consideration to be binding.
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b. No Oral Modification (NOM) Clause – parties agree that any binding K
modifications are to be done in signed writing
VI. Statute of Frauds 2-201
Defense to K formation
Certain kinds of promises must be evidenced by a signed writing by the party against
whom enforcement is being sought
– Party that wants out of K bears burden of proof
– (1) Is this the kind of promise covered by SOF? (2) Is there a writing
signed by party being charged? (3) Is there an applicable exception to
the SOF?
a. (1) 2-201 – a signed writing is required for sale of goods for $500.00 or
more
i. Writing must indicate the a K was formed and the quantity
b. “Writing” – a record that could be either a writing or stored electronically
and retrievable in perceivable form; reduction to a tangible medium
c. “Signed” – symbol made with the actual intent to adopt or accept writing
i. Letterhead can suffice
d. UETA – a record includes things that inscribed in a tangible medium, and
if not, stored electronically and retrievable in perceivable form
i. “Writing/record” – stored electronically and retrievable in
perceivable form
ii. “Signed” – electronic sound, symbol, or process associated with
record and executed/adopted with intent to sign the record
e. (2) Exceptions
i. 2-201(2) Merchant memos – both parties are merchants, seller
sends it/buyer receives it and doesn’t give a written objection in 10
days
1. Can have signature of either party to satisfy requirement
ii. 2-201(3a) Specially manufactured goods
iii. 2-201(3b) Admission of K – party against whom enforcement is
sought admits in court that K was formed
iv. 2-201(3c) Delivery of goods by seller or acceptance of goods by
buyer – buyer has window of time to reject goods
f. Can the content of an unsigned writing be used to supplement a signed
writing to satisfy SOF?
i. Williston view – the signed writing must incorporate by explicit
reference the unsigned writing
ii. Corbin view – there must be a sufficient connection between the
two writings to show that they refer to the same subject matter or
transaction
VII. Defenses – K was formed; defense negates K enforceability
a. Statute of Frauds 2-201
b. Unconscionability 2-302
i. (1) If the court finds as a matter of law that the K or any clause of
the K to have been unconscionable at the time it was made then the
court may refuse to enforce the K, or it may enforce the remainder
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of the K without the unconscionable clause, or it may so limit the
application of the unconscionable clause as to avoid any
unconscionable result
ii. (2) When it appears to the court that the K or any clause thereof
may be unconscionable the parties shall be afforded a reasonable
opportunity to present evidence as to its commercial setting,
purpose, and effect to aid the court in making the determination
c. 2 categories:
i. Procedural – bargaining naughtiness/how agreement is made
1. Unequal bargaining power
2. “Predatory lending”
ii. Substantive – what are the terms
1. No reasonable person would agree to such terms
2. “Shocks the conscience”
a. “Oppressive”
b. “An unfair surprise”
d. Test: there is an absence of meaningful choice on part of receiving party
coupled with terms that unreasonably favor one party
e. Federal Arbitration Act §2: agreements to arbitrate are “valid, irrevocable,
and enforceable” except on grounds in law and equity that revoke any K
i. Discover Rule: class action arbitration waivers in consumer Ks are
unconscionable
f. §151 Mistake – a belief that is not in accord with the facts
g. §152 Mutual Mistake – mistake by both parties
i. Mistake must relate to…
1. A basic assumption of the parties upon which the K was
made
2. And which materially effects the agreed performances of
the parties
a. To determine materiality, must take into account
any relief by way of reformation, restitution, or
otherwise
h. §153 Unilateral Mistake – mistake by one party
i. Requirements set forth in §152 and
ii. Enforcement of K would be unconscionable OR
iii. The other party had reason to know of mistake or his fault caused
the mistake
i. §154 Party bears mistake when…
i. Risk is allocated to him by terms of agreement
ii. He is aware of his limited knowledge as to the facts but believes
that is ok
iii. Risk is allocated to him by the court
j. §159 Misrepresentation – an assertion that is not in accordance with the
facts
i. §164 A party’s misrepresentation makes the K voidable if the
misrepresentation was fraudulent or material
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ii. §161 non-disclosure of a material fact is enough to constitute
misrepresentation
iii. §162 When is a misrepresentation fraudulent or material?
1. If maker intends it to induce assent
2. Maker knows assertion is wrong
3. Maker doesn’t have implied confidence in assertion
4. Maker knows he doesn’t have proper knowledge to make
assertion
iv. §167 Misrepresentation is an inducing cause
k. §174 Duress – physical duress makes K voidable
l. §175 Threat of physical threat makes K voidable
i. Manifestation of assent is induced my improper threat
ii. Leaves victim with no reasonable alternative
m. §12 Capacity – must have legal capacity to K
i. Party is assumed to have capacity except…
1. Infants
2. Mentally ill
3. Intoxicated
ii. §14 Infancy – unless stated otherwise by statute, person cannot
enter into binding K until the beginning of the day before they turn
18 years old; except when…
1. K involves necessaries – not for pleasure; useful to the
mind/body (food, shelter, etc.)
2. Party is emancipated – if emancipated, party pays for
necessaries; if not emancipated, parents pay for necessaries
iii. §15 Mental Illness – K is voidable when party…
1. Lacks ability to understand nature of consequences
2. Is unable to act in reasonable way and other party has
reason to know
3. Test for Capacity
a. Cognitive – testimony of party claiming incapacity,
medical testimony, behavior of party claiming
incapacity, and normality of the transaction
b. Motivational – even if party understood agreement,
they could not control their behavior
iv. §16 Intoxication
n. §178 Public Policy
i. (1) Unenforceable if legislation says so or interest of its
enforcement is outweighed by interest of public policy
ii. (2) Factors for enforcement of K
1. Justified expectations of parties
2. Forfeiture that results from the unenforcement
3. Public interest in enforcement of K
iii. (3) Factors against enforcement of K
1. Strength of policy
2. Likelihood that refusal to enforce will enforce policy
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3. Seriousness of misconduct
4. Connection between misconduct and term
VIII. Content and Meaning of K
2 types of terms: express and implied
Express – lie within the “four corners” of the contract; can be ambiguous
Implied-In-Fact:
a. Courts hear both party’s understanding of the terms and determine if either
should have known or had reason to know of the other’s views
b. 1-303 Types of Extrinsic Evidence – CP, CD, TU
i. Course of Performance – series of K after K has been formed
ii. Course of Dealing – conduct in the between the 2 parties
iii. Trade Usage – what merchants do in the particular field
c. Hierarchy: (1) writing (2) CP (3) CD (4) TU
d. Frigaliment – “What is chicken?”
e. Fisher – Orthodox service and traditions
f. 2-305 Time and 2-309 Price
When can parties introduce extrinsic evidence?
General rule – when the writing is ambiguous (2+ meanings) as a matter of law, a
court can accept evidence to supplement the terms of the K with guidelines
Parol Evidence Rule 2-202
– If writing is ambiguous, what did the parties intend the writing to be?
a. “Final” – PE can explain and/or supplement but not contradict
i. Evidence can include CP, CD, TU, and consistent
additional terms
b. “Complete and exclusive” – PE can explain and/or supplement
but cannot contradict
i. Evidence can include CP, CD, and TU
ii. The only way to keep out above evidence is to say
agreement is complete (everything we’ve agreed to I here)
and exclusive (this is the only agreement that counts)
iii. Can also say “these written terms supersede all terms
previously agreed to, whether conflicting or additional”
Implied-In-Law:
– 2-313 Express Warranty
– 2-314 IWM
– 2-315 IWFPP
– 2-316 Disclaiming Warranties
a. CANNOT DISCLAIM EW, CAN DISCLAIM IW
– 1-304 Duty of Good Faith – implied duty of good faith in all Ks in
performance (not negotiations)
a. 1-201 – honesty in fact (subjective); compliance with reasonable
standards of fair dealing in trade (objective)
b. This is an immutable rule – always in place no matter what (rare
in K law)
c. Express Warranties are also immutable
IX. “Perfect Tender Rule” 2-601
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a. 2-601 – buyer has right to reject if goods or tender fail to conform in any
respect (buyer can walk away from K).
b. Buyer can…
i. 2-602 Reject if…
1. Goods are non-conforming (not perfect tender)
2. Buyer rejects goods within a reasonable time after delivery
3. If Buyer rejects, seller has “right to cure” (2-508):
a. Up to time of performance
b. After time of performance if seller reasonable
believed goods would conform
ii. 2-606 Accept if…
1. Buyer tells seller goods are ok to accept despite nonconformity
2. Buyer fails to reject
3. Buyer acts in ways inconsistent with seller’s ownership
iii. 2-607 Buyer’s duties if he accepts are…
1. Buyer must pay K rate
2. Buyer cannot reject
3. Buyer must prove non-conformity (has burden of proof if
sues)
iv. 2-608 Revoke Acceptance in Whole or in Part when…
1. Non-conformity substantially impairs goods’ value to buyer
a. Buyer bears burden of proof of “substantial
impairment”
2. Buyer reasonably assumed/believed that the nonconformity would be seasonably cured
3. Buyer does not discover non-conformity because
acceptance was reasonably induced either difficulty of
discovery or by seller’s assurances
4. Buyer revokes in a reasonable time after discovery and
before any substantial changes occur to the goods not due
to the non-conformity
5. Buyer has same rights and duties as if he had rejected
goods
X. Damages
a. Overview
i. Damages do not have to be exact, they just have to be reasonably
certain
ii. Money damages are the usual kind of remedy  Expectation
Damages
iii. Expectation Damages = Direct Loss + Indirect Loss – Costs
Avoided
1. Direct Loss = value promised – value received
2. Indirect loss = incidental + consequential
3. Costs avoided = mitigation (costs saved)
iv. Damages must equal “benefit of the bargain”
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v. Exceptions: equity – reliance, restitution, specific performance
vi. Limitations: foreseeability, reasonably certain, mitigation
vii. No punitive damages awarded in K law
b. Expectation Damages (general rule) – put non-breaching party in
position that full performance would have
i. Direct damages – difference between what buyer thought he was
getting and what buyer actually got
ii. Indirect damages
1. 2-715(1) Incidental damages – damages, resulting from the
seller’s breach, reasonably incurred from inspection,
transportation, cover, etc.
a. Closely associated with the breach
2. 2-715(2) Consequential damages – any loss resulting from
requirements/needs that seller had reason to know about
and which buyer was unable to prevent (mitigate)
a. Lost profit, lost business/production volume,
personal injury, property damage
iii. Costs avoided – acts by non-breaching party that reduces the value
of the overall losses
1. Injured party is obligated to look for reasonable alternatives
to mitigate losses
2. Injured party is not obligated to pursue/accept different or
inferior alternatives
c. Expectation Damages (exception) – diminution of value
i. When cost of completion/replacement (general rule) is “grossly and
unfairly” out of proportion to the goods attained
1. “Gross” = big
2. “Unfair” = breaching party substantially performed; breach
was innocent and trivial
ii. When general rule for expectation damages would cause “economic
waste”
d. Exceptions – for equity
i. Reliance
1. Compensation even though no K formed
2. Returns non-breaching party to position before K
3. Most likely to be seen in promissory estoppel
ii. Restitution
1. Compensation even though no K formed
2. Used when breaching party benefits
a. Returns breaching party to position before K
b. “Ill-gotten gains”/unjust enrichment
iii. Specific Performance
1. Usually used in regards to land or unique goods
e. Limitations on damages
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i. Foreseeability (Hadley) – loss must flow naturally from breach OR
there were special circumstances that breaching party knew of (or
had reason to know of) – the mill crank
ii. Reasonable certainty (Redgrave) – must be reasonably certain that
the breach caused the losses; not just “speculative” – actress with
Israeli-Palestinian controversial views
iii. Mitigation (Parker) – injured party has a duty to mitigate damages
with reasonable efforts but is not obligated to pursue or accept
different or inferior options – lead movie role cancelled and then
offered inferior/different lead movie role
Rules for forming a K under the UCC:
A K is the total legal obligation the results from the parties’ agreement. The
agreement is the bargain in fact of the parties as shown by their words, course of
performance, course of dealings, and trade usage (1-201). A K can be formed under 2-
204 in any reasonable way that shows agreement, including conduct that constitutes
offer and acceptance. Consideration is assumed for all transactions (2-209). An offer
is simply inviting acceptance in any reasonable way under the circumstances (2-206).
The acceptance is definite and seasonable then it does not have to perfectly match the
offer (2-206). 2-207 allows for additional terms under certain circumstances. The
buyer can reject (2-602), accept (2-606), or revoke acceptance (2-608) if the goods
fail to conform in any respect (2-601). Upon rejection, the seller has the right to cure
the goods (2-508).

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