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


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


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?


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


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


Exhibit 18.3: Finance Lease


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


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



Open terms Price Payment Delivery Time Assortment



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


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


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


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



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



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



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


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


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