When does it matter whether or not the Buyer or Seller severed the goods?
Who severs goods only matters as it pertains to ** minerals or structures** or things attached to realty. Article 2 only applies if the Seller severs. It does NOT apply if the Buyer severs.
When it comes to crops, timber or anything movable, the contract is governed by Article 2 and it doesn’t matter if the Buyer or the Seller severs. As long as there is a contract to cut the timber first. It doesn’t matter if they are commercial crops or not.
Section 2-107
Is Radioactive isotopes suspended in solution for the purpose of nuclear imaging a “good” under Article 2?
Yes. Liquids including water are goods. The microscopic nature of the isotopes is not relevant
Is oxygen to fill oxygen tanks used by hospitals a good under Article 2?
Yes. Gases are goods because they move.
Is electricity a good under Article 2?
Maybe, the courts are split.
Is the following a good? A 1908 “Indian Eagle” $10 U.S. gold coin from a coin dealer, for a price of $1,500.
Yes. The gold coin is a good because the coin is the object of the transaction.
Is the following a good? 500 euros (ten 50-euro notes) from Bank for use on an upcoming vacation in Florence, Italy.
It depends who is viewing the Euros.
The bank likely thinks this is $, so it is NOT within Article 2.
The person probably things its a commodity or good, thus it is under Article 2 as long as it is a “good” and not a medium of payment
Is the following a good? A lottery ticket from the local convenience store
No, a lottery ticket is not a good. “Things in action” aka “things with contractual rights” is not a good. The issue is not the physical ticket but rather the rights created for the holder of the ticket.
Is the following a good? 1,000 shares of Microsoft stock, in certificated form. Bridget has possession of the certificate.
No. Shares of stock are investment securities and are therefore not goods.
After determining if goods fall under Article 2, the next step is to determine the applicability of Article 2 with hybrid transactions using the __________ Test which considers what?
Predominantly Sales or Services Test - factors include:
1. language of the contract
2. nature of the business of the supplier
3. cost of the materials involved ($)
What is the landmark case to cite to for the Predominantly Sales and Services Test and what did the court hold?
Pools v. Sheehan
The contract included express warranties that were provided in lieu of implied warranties. However, Maryland had a statute making unenforceable disclaimers of implied warranties in contracts for the sale of consumer goods.
The provisions of Article 2 dealing with implied warranties apply to consumer goods, even if the transaction is predominately one for the rendering of consumer services.
Carey, a physician, wanted to provide mammograms as part of the medical practice, contracted with Integrity Medical for Integrity to remove existing equipment intended as a trade-in and to provide and install the new mammogram equipment. The purchase price of $72,500 allocated $55,000 to the new equipment, $17,500 to installation and gave Carey $25,000 toward the purchase price as a credit for the old equipment trade-in. Later, a dispute developed over the installation and the condition of the equipment received as the trade-in and Carey brought suit for breach of contract.
What law likely applies to the transaction?
Article 2 applies to the dispute where Carey wanted mammography in her business, but did not have the equipment and the contract allocated only $17,500 to installation services.
Rule: Article 2 applies to transactions in goods, meaning things that are movable at the time of identification to the contract. In the case of mixed goods and services cases, which law applies is typically determined using the predominant purpose test. Whether the goods or services component predominates is a question of fact.
Analysis: In this case, the overwhelming purpose of the contract was for Carey to include mammography in her medical practice, so she needed the equipment. Moreover, the price of the contract indicates that goods (the new mammography equipment, as well as the trade-in equipment) predominated the contract, rather than the services.
A couple with computer programming jobs bought a 5-acre farm, with a house, a wooden barn, and an apple orchard. The purchase agreement also included machinery (snow blower, tractor, plow, and wagon) and appliances (washing machine, dryer, stove, dishwasher, refrigerator, and freezer). Does Article 2 cover the purchase of the barn, the machinery, and the appliances?
No, because the real estate is the predominant purpose of the transaction.
In this contract, the realty predominates the transaction in terms of the parties’ primary reason for the contract and the cost ratio for goods versus realty.
Carey, a physician, wanted to provide mammograms as part of the medical practice and contracted with Integrity Medical, a medical equipment supplier, for Integrity to remove existing equipment intended as a trade-in and to provide and install the new mammogram equipment. The purchase price of $72,500 allocated $55,000 to the new equipment, $17,500 to installation and gave Carey $25,000 toward the purchase price as a credit for the old equipment trade-in. Later, a dispute developed over the installation and the condition of the equipment received as the trade-in and Carey brought suit for breach of contract. Assume that Article 2 governs the transaction.
Is Carey a merchant under Article 2? Is Integrity Medical?
Yes, Carey is a merchant with respect to practices or goods involved in the transaction, but not goods of the kind.
Yes, Integrity Medical is a merchant with respect to goods of the kind and practices or goods involved in the transaction.
Pete enjoyed beekeeping as a hobby for thirty years. He harvested from about 50 hives. Pete set up a centrifuge in a shed near the house, with frames for the honey-laden honeycomb in the centrifuge, spun them, collected the honey at the bottom of the centrifuge, and put the honey in jars labeled “Pete’s Homegrown Honey.” Pete also packaged some of the honey still in its honeycomb. Over the years, Pete sold his honey products through friends. Pete retired from his “day job,” and also started selling at the local weekly farmer’s market, with a booth and an overhead sign saying “Pete’s Homegrown Honey.” Was Pete a “merchant”? If so, what kind?
Pete was a merchant as to both honey and business practices.
Beekeeping may have started out as a hobby for Pete, but once Pete started selling each week at the farmer’s market with an established booth and a sign, Pete definitely crossed over the line from a hobbyist to a merchant, both as to business practices and as to honey (goods). Pete indicated to the public, especially at the farmer’s market, as having a honey business. And Pete was “dealing” in honey at the farmer’s market. See § 2-104 and its comments. (For that reason, we do not have to resolve whether Pete was a merchant when selling the labeled jars to and through friends.)
Buypro Steel, LP (“Buypro”) provided specifications for steel connectors that it wanted Designpro Tube Co. (“Designpro”) to fabricate on June 1. The next day, Designpro advised Buypro that it was able to make the connectors. Buypro sent a purchase order to Designpro on June 5.
For purposes of this question only, presume that Designpro could not make steel connectors, but shipped titanium connectors to Buypro on June 15, which Buypro received on June 20.
When was the contract formed and why?
The parties formed a contract on June 15, whether or not Designpro shipped conforming goods.
Section 2-206 permits a party to accept an offer “in any manner and by any medium reasonable in the circumstances.” Moreover, an offer invites acceptance by either a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods. In this case, Designpro shipped the goods on June 15, but the goods were nonconforming. Despite the nonconformity, the prompt shipment results in the parties formed a contract on June 15.
(Tip: Always look to see if there was a promise for a prompt shipment, or if there was one to see if there is contract formation)
What is a firm offer?
A firm offer is an offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
Section 2-205
In a single transaction, Seller agrees to sell a warehouse full of goods to Buyer. The transaction includes the goods contained in the warehouse, the warehouse itself, and the real property on which the warehouse is situated. Assume the goods aspects of the transaction predominate. What does this not preclude?
The application of this Article to the transaction does not preclude the application of real property law to the real-property aspects of the transaction. Accordingly, whether the sale of the real property complies with the applicable requirements of real property law is determined by law other than this Article. Other law will also determine whether consummation of the sale of the real property is a condition to the parties’ obligations to buy and sell the goods.
A Robotics Manufacturer contracts to design, build, and sell customized robotics to Car Maker If the sale of goods aspects predominate, can the parties agree that Article 2 does not govern the services aspect of the transaction?
Yes, but CANNOT say that Article 2 doesn’t relate to the transaction as a whole, such as contract formation and enforceability.
Speedy Offset Co. contracted to print and bind 500 copies of an art book written and designed by Botticelli. Botticelli claims that Speedy Offset failed to print the books pursuant to the contract’s specifications and industry standards, and failed to properly bind the books. Does Article 2 apply to those claims under the Predominant Test? Under the Gravamen Test?
Predominant Test: the court found that the purpose of the contract was the service of printing and binding the copies of the art book.
Gravamen Test: The court found that the gravamen of the complaint was lack of quality service caused by the failure to follow instructions in printing and binding the books.
Extra analysis for specially manufactured goods: “Because the definition of “goods” expressly includes “specially manufactured goods”, _______________.
services involved in manufacturing goods are normally attributable to the sale of goods aspects of the transaction.
Simon offered to sell a 2015 Ford Explorer to Bethany. The parties agreed that Bethany would pay the amount listed for the vehicle in the Used Automotive Weekly circular. Unfortunately, it is later discovered that the circular is no longer in publication. Is there a contract for the sale of the Ford Explorer?
Yes, and the price for the vehicle is a reasonable price at the time of delivery.
Farmer agreed to supply Caterer’s monthly business requirements for organic eggs for a period of two years.
For purposes of this question only, presume that for the first 15 months, Caterer ordered 50 dozen eggs per month for the catering business. Caterer’s customers love the eggs and Caterer began taking orders for retail sales, in addition to catering jobs. In month 16, Caterer ordered 100 dozen eggs from Farmer.
If Farmer objects to the large order by Caterer, a court should rule in favor of:
Farmer because the 100 dozen egg order by Caterer was disproportionate to prior orders under the contract.
A construction company manager (Buyer) ordered roof trusses by phone from a construction supply company (Seller), which made an oral promise to deliver the roof trusses to the construction site that the manager specified, within 3 days. Three days later, the Seller sent the following email to Buyer:
Per our recent phone call, we’re getting 8 roof trusses (model # 6925) ready to deliver to 489 S. Randall, by March 30. We wanted to make sure that you knew that this transaction is governed by our standard terms, which are attached to this email, and no other terms are acceptable to us. We appreciate your business.
Attached to the email was a pdf of Seller’s “Standard Terms and Conditions,” including a disclaimer (in correct form) of the implied warranties of merchantability and fitness for a particular purpose, a clause stating that buyer would furnish the on-site equipment for unloading Seller’s truck, and a clause stating that payment was required upon delivery. At the same time, Buyer sent Seller the following email:
I just wanted to make sure we had our signals straight. We ordered 8 roof trusses, # 6925, to be delivered on March 30th to 489 S. Randall. We’ll have a crane there to unload the trusses and will pay within 30 days of receiving your invoice.
Did the disclaimer of implied warranties become part of the contract?
The parties formed the contract by phone. Seller’s subsequent email was a written confirmation sent within a reasonable of contract formation, per § 2-207(1), so it “operates as an acceptance” and is governed by § 2-207(2). Seller’s disclaimer of the implied warranties of merchantability and fitness for a particular purpose is an additional term. Both parties here are merchants as to business practices, so an additional term becomes part of the contract unless § 2-207(2)(a) or (b) or (c) is met. Under comment 4, (b) is met because a “material alteration” results if an additional term disclaims “such standard warranties as that of merchantability or fitness for a particular purpose . . . .” So, the disclaimer does not become part of the contract.
What is a Firm Offer?
An offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
