When does article II apply
- Unless context otherwise requires Article 2 applies to transactions in goods
- Contract and agreement are limited to those relating to the present or future sale of goods
Contract for sale definition
present sale of goods and a contract to sell goods at a future time
Sale
Passing of title from seller to buyer
Present sale
Sale which is accomplished by the making of the contract
Goods
Defin = All things moveable at the time of identification to the contract for sale other than for money, investment securities, and things in action
- Must be existing and identified
- Inlcudes specially manufactured goods, unborn animals, growing crops, and other identified things attached to realty
Fungible Good
Goods that can be exchangeable because they are effectively identical and carry the same value (barrel of oil)
Goods to be severed from the land
- If removal would cause material damage it must be removed from the seller to be within A II
- If removal would not cause material damage it can be removed by either seller or buyer
- Before moved it is a future sale
Hybrid Transaction Def & 3 approaches
Defin = a contract with both goods & services
1) Predominant Purpose Test
2) Gravamen Test
3) Bifurcation Approach
Predominant Purpose Test:
(1) the contract language,
(2) the nature of the supplier’s business,
(3) the contract’s purpose, and
(4) the respective amounts paid for goods and services
Gravamen Test
Minority of courts
1) The court looks at the basis of the complaint rather than the overall nature of the transaction
2) If the plaintiff is complaining about the goods component, Article 2 applies
3) If the plaintiff is complaining about the service component, Article 2 is inapplicable.
Bifurcation Approach
Court applies UCC to goods portion & contract law to the services portion of the K
Merchant Defintion
A person who deals in goods of the kind
or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction
2 step merchant analysis
1) Does he deal with the goods or deliver the services
2) If no – does he hold himself out as his occupation of having knowledge/skill regarding
Entrustment Rule
1) merchant who receives goods may pass good title to goods that were entrusted
2) Has to be a merchant of that particular good to which you have entrusted your belongings to
Lease vs Sale
i. If at the end of the lease period the lessee becomes the owner of the property for little or no consideration, a secured transaction and not a lease has been created
ii. If the contract contains a clause that permits the lessee to terminate the lease at any time and return the leased goods (the so-called walk away test), a true lease has resulted
1) Such a right of termination is not an attribute of a sale of goods
iii. If the lease is for the entire economic life of the leased goods, with or without renewal, a disguised sale has occurred
Battle of the Forms
CL - mirror image
UCC 2-207 - If merchants involved, a counter offer doesn’t negate a contract
Finance Lease
true lease which “consists of an overall three-party transaction in which: (1) the lessor does not select, manufacture, or supply the goods, (2) the lessor did not own the goods before the lease was arranged, and (3) the lessee either approves the purchase contract or receives specified warranty and supplier information before signing the lease agreement
- Hell or high water clauses are acceptable
- Lessees may raise defenses including lack of acceptance and unconscionability to avoid the terms
