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Henry Peter Brougham
I. Teacher to Teacher Dialogue
standard of imputed knowledge about the usage and trade or norms within their respective areas
of commerce. I stress the need for having a uniformity of interpretation for commercial contracts
that crosses not only state lines but also international borders. I remind students that the UCC is
designed for the “fast track” of commerce by providing for maximum flexibility vis-à-vis
of light called a penumbra. When you begin to examine the Uniform Commercial Code (UCC) as
a specialized body of contract law, it appears to have eclipsed the common law of contracts,
although the light of the common law still shines on. The UCC is intended to cover a number of
areas of contract formerly resolved by common law, but the basic elements for both are the same.
light of commercial realities.
Early on, the Law Merchant of England set up special rules for commercial contracts with the
realization that the law should be written to foster and encourage commerce rather than encumber
it. The early faire courts were established by and for merchants. They were designed to have law
reflect the needs of commerce. Some of the principles that evolved included:
1. Holding merchants to a higher standard.
2. Providing for uniformity of interpretation for commercial contracts.
commercial contracts.
4. Retaining the common law essential ingredients of equity, fair play, good faith, and
conscionability in commercial dealings.
FORMATION OF SALES AND LEASE
CONTRACTS
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by the UCC beginning in 1952. The key authors of the UCC were Professor Karl Llewellyn,
whose hallmark was legal realism, and Soia Mentschikoff. The law should reflect the realities of
commerce that are working rather than impose unnecessary obstacles or impediments to business.
II. Chapter Objectives
1. Describe sales contracts governed by Article 2 of the Uniform Commercial Code (UCC).
2. Describe lease contracts governed by Article 2A of the Uniform Commercial Code (UCC).
III. Key Question Checklist
Is this contract covered by one or more of the provisions of Article 2 or 2A of the UCC?
What is the status of the parties entering into this agreement?
IV. Text Materials
Introduction to Formation of Sales and Lease Contracts
Most tangible items are considered goods. From early times, merchants developed their own set
of rules and customs that controlled contracts and disputes. In England, these evolved into the
Law Merchant courts that were eventually absorbed into the common law. Because of the
Uniform Commercial Code (UCC)
The UCC is a model act divided into articles, with each article establishing uniform rules for a
Landmark Law: Uniform Commercial Code (UCC)
The UCC is a model act drafted by the American Law Institute and the National Conference of
Formation of Sales and Lease Contracts
Article 2 (Sales)
All states except Louisiana have adopted some version of Article 2.
What Are Goods? – Goods are tangible moveable items. Article 2 establishes that money,
Goods versus Service – Services are not covered by Article 2, unless it is a mixed sale and the
Critical Legal Thinking – Particularly with the decline of state law in favor of federal law,
Case 18.1 Good or Service: Brandt v. Boston Scientific Corporation and Sarah Bush Lincoln
Health Center
204 Ill.2d 640, 792 N.E.2d 296, 2003 Ill. Lexis 785 (2003), Supreme Court of Illinois
Facts: Plaintiff, Brandt, in an operation performed at the defendant’s medical center, received a
ProteGen Sling manufactured by Boston Scientific. The sling was later recalled. Brandt suffered
complications and had the sling removed surgically. The plaintiff sued the defendants claiming
Issue: Was the transaction between Brandt and the Health Center predominantly the provision of
services or the sale of goods?
does not apply.
Reason: The primary function of the defendant was to provide medical services and the good was
incidental to providing those services. Therefore the contract’s predominant purpose was to
provide a service so it is a contract for the sale of a service.
Case Questions
would be bound by the warranty of merchantability.
Who Is a Merchant? – A merchant is a person who deals in the type of goods sold, or a person
who by their occupation or education holds themselves out as having special knowledge or skills
involve merchants or not.
Article 2A (Leases)
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Article 2A directly addresses personal property leases.
Finance Lease – This is a special lease involving three parties—a lessor, a lessee, and a vendor.
The lessee selects the good from a vendor, and the lessor acquires title through the terms of the
lease.
recognizing electronic contracting.
Formation of Sales and Lease Contracts: Offer
A sales and lease contract requires an offer and acceptance, the same as any other contract.
Open Price Term – This implies a reasonable price is implied at the time of delivery.
Open Payment Term – If the contract is silent, payment is due at the time and place that goods
are received.
Open Time Term – If no time for performance is set in the contract, then performance must be
within a reasonable time.
Open Assortment Term – Buyer must make selection in good faith and within the limits of
commercial reasonableness.
Contemporary Environment: UCC Firm Offer Rule
Consideration – Sales and lease contracts require consideration, but under the UCC,
modifications of contracts need no additional consideration.
Formation of Sales and Lease Contracts: Acceptance
Formation of Sales and Lease Contracts
Method and Manner of Acceptance – The UCC permits acceptance by any manner or method.
Contemporary Environment: UCC Permits Additional Terms
The UCC allows additional terms or modified terms in an acceptance unless the acceptance is
modifications are considered proposed additions.
Accommodation Shipment – A shipment of nonconforming goods is not treated as an
Contemporary Environment: Battle of the Forms
UCC Statute of Frauds
All contracts for the sale of goods costing $500 or more and lease contracts of $1000 or more
must be in writing.
Exceptions to the Statute of Frauds – Contracts do not have to be in writing if they are specially
Contemporary Environment: UCC Written Conformation Rule
reason to know its contents.
When Written Modification Is Required – Oral modification will not be enforced if the parties
have agreed that modifications must be in writing or if they are in violation of the Statute of
Frauds.
Electronic Sales and Lease Contracts
Revised Article 2 (Sales) and Revised Article 2A (Leases) contain provisions that recognize the
importance of electronic contracting in sales and lease transactions.
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inscribed on a tangible medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
International Law: Letters of Credit Support International Trade
V. Key Terms and Concepts
Accommodation—A shipment that is offered to the buyer as a replacement for the original
counteroffer.
Article 2 (Sales)—An article of the UCC that governs sale of goods.
Article 2A (Leases)—An article of the UCC that governs leases of goods.
Article 5 (Letters of Credit)—An article of the UCC that governs letters of credit.
Battle of the forms—A UCC rule that states that if both parties are merchants, then additional
counteroffer rather than an acceptance.
Course of dealing—The conduct of the parties in prior transactions and contracts.
Course of performance—The previous conduct of the parties regarding the contract in
question.
Electronic—Electronic means relating to technology having electrical, digital, magnetic,
wireless, optical, electromagnetic, or similar capabilities.
stored by electronic means.
Finance lease—A three-party transaction consisting of the lessor, the lessee, and the supplier.
Firm offer rule—A UCC rule that says that a merchant who (1) makes an offer to buy, sell, or
lease goods and (2) assures the other party in a separate writing that the offer will be held
open cannot revoke the offer for the time stated or, if no time is stated, for a reasonable time.
Formation of Sales and Lease Contracts
Lessor—The person who transfers the right of possession and use of goods under the lease.
Letters of credit—A document that is issued by a bank on behalf of a buyer who purchases
goods on credit from a seller that guarantees that if the buyer does not pay for the goods, then
the bank will pay the seller.
the goods involved in the transaction.
Mirror image rule—Under common law’s mirror image rule, an offeree’s acceptance must be
on the same terms as the offer.
Mixed sale—A sale that involves the provision of a service and a good in the same
transaction.
that govern commercial transactions.
Open assortment term—If the assortment of goods to a sales contract is left open, the buyer is
given the option of choosing those goods.
Open delivery term—If the parties to a sales contract do not agree to the time, place, and
manner of delivery of the goods, the place for delivery is the seller’s place of business.
Open time term—If the parties to a sales contract do not set a specific time of performance
for any obligation under the contract, the contract must be performed within a reasonable
time.
Parol evidence rule—A rule that says if a written contract is a complete and final statement of
regarding a dispute over the contract.
Proposed additions—If one or both parties to a sales contract are nonmerchants, any
additional terms are considered proposed additions to the contract.
particular buyer.
Statute of Frauds—A rule that requires all contracts for the sale of goods costing $500 or
more and lease contracts involving payments of $1,000 or more to be in writing.
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most aspects of commercial transactions.
Uniform Customs and Practices for Documentary Credits—Many banks require that
international letters of credit be governed by the Uniform Customs and Practices for
Documentary Credits (UCP).
Uniform Sales Act—In 1906, the Uniform Sales Act was promulgated in the United States