K Final Outline for the UCC PDF

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Final outline for the UCC...

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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.

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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 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) 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 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 K Modification 2-209 a. K modification does not need new consideration to be binding.

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 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” Test: there is an absence of meaningful choice on part of receiving party coupled with terms that unreasonably favor one party 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 §151 Mistake – a belief that is not in accord with the facts §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 §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 §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 §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 §174 Duress – physical duress makes K voidable §175 Threat of physical threat makes K voidable i. Manifestation of assent is induced my improper threat ii. Leaves victim with no reasonable alternative §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 §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 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 “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 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 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 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” 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 Limitations on damages

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 2204 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)....