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RIO GRANDE BM 27403 - Scope of ucc Article 2

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MODIFICATIONSCOPE OF UCC ARTICLE 2 Article 2 of the UCC governs contracts for the sale ofgoods, pursuant to which(1) title (formal right of ownership) to(2) goods (tangible, movable property) is transferred fromthe seller to the buyer(3) in exchange for money. Article 2 governs only contracts for the sale oftangible, movable property – that is, property that(a) has inherent physical value and(b) can be moved from place to place. Article 2 does not govern:(a) barter contracts, where goods or services areexchanged for other goods or services, or(b) contracts for the sale of services, real property,or intangible personal property (e.g., intellectualproperty, stocks and bonds).Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 1Business Law Today: The Essentials (7th ed.)“MIXED” CONTRACTS A large number of disputes involving goods also involveservices, real property, or intangible or immovable personalproperty – none of which are within the scope of Article 2.In such cases, courts decide whether to apply Article 2 tothe dispute using one of two tests: Predominant Purpose: What was the predominantpurpose of the underlying transaction; that is, whatwas the buyer most interested in buying? If goods, then Article 2 applies to the wholetransaction (including the non-goods part of it). If non-goods, then Article 2 does not apply toany part of the transaction. “Gravamen of the Action”: What part of theunderlying transaction gives rise to the dispute? If goods, then Article 2 applies to the dispute,even if the predominant purpose of thetransaction was to sell or buy non-goods.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 2Business Law Today: The Essentials (7th ed.) If non-goods, then Article 2 does not apply tothe dispute, even if the predominant purpose ofthe transaction was to sell or buy goods.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 3Business Law Today: The Essentials (7th ed.)MERCHANTS Merchant: A person who(1) regularly deals in goods of the kind involved in thesales or lease contract,(2) holds herself out as having unique knowledge andskill, or(3) employs a merchant as a broker, agent, or otherintermediary.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 4Business Law Today: The Essentials (7th ed.)SCOPE OF UCC ARTICLE 2A Article 2A of the UCC governs contracts for the lease ofgoods, the sale of which would be governed by Article 2.Namely, an agreement whereby(1) one person (the lessor)(2) transfers the rights of possession and use of tangible,movable property(3) to another person (the lessee)(4) in exchange for rental payments.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 5Business Law Today: The Essentials (7th ed.)TYPES OF LEASES Consumer Lease: A lease involving(1) a lessor who regularly engages in the business ofleasing or selling goods, (2) a lessee who leases the goods primarily for personal,family, or household use, and(3) total lease payments less than a statutory cap. Finance Lease: A special leasing arrangement involving:(1) a supplier of the leased goods,(2) a finance lessor, who buys or leases the goods fromthe supplier, and then leases them to(3) the finance lessee, who pays the finance lessor to usethe goods. The finance lessee’s obligation to pay the financelessor is generally unaffected by whether the financelessor keeps its bargain with the supplier and whetherthe supplier’s goods satisfy any relevant warranty orotherwise conform to the lessee’s requirements.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 6Business Law Today: The Essentials (7th ed.)OFFER: OPEN TERMS - PT. I A sale or lease contract is sufficiently definite, even if oneor more terms remain open, provided that(1) the parties intended to be bound, and(2) there is a reasonably certain basis for a remedy. Open Price Term: As a general rule, if the parties have notagreed on a price, the court will determine a reasonableprice at the time of delivery. However, if one of the parties is permitted to set the price, shemust do so in good faith; or if the parties have not agreed on the price due to thefault of one of the parties, the party not at fault cantreat the contract as canceled or fix a reasonableprice.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 7Business Law Today: The Essentials (7th ed.)OFFER: OPEN TERMS - PT. II Open Payment Term: As a general rule, if the parties donot specify otherwise, payment is due at the time and theplace that the buyer receives the goods. Moreover, The buyer can tender payment using anycommercially acceptable means; however If the seller demands payment in cash, the buyer mustbe given a reasonable time to obtain it. Open Delivery Term: As a general rule, if the parties donot specify(1) the place of delivery, the buyer will take delivery atthe seller’s place of business, or (if none exists) at theseller’s residence; or(2) the time of delivery, the seller will deliver within areasonable period of time. Open Duration Term: If a contract does not indicate howlong the parties are to deal with one another, either partymay terminate with reasonable notification.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 8Business Law Today: The Essentials (7th ed.)OFFER: OPEN TERMS - PT. III Assorted Goods: If the terms specifying what mixture ofassorted goods are to be delivered, the buyer may specifythe assortment. Open Quantity Term: Failure to specify the quantity ofgoods to be bought and sold is fatal at common law.However, the UCC recognizes two exceptions: Requirements Contract: An agreement by which thebuyer agrees to purchase and the seller agrees to sellall or up to a stated amount of what the buyer needsor requires. Output Contract: An agreement by which the selleragrees to sell all or up to a stated amount of what theseller produces. The UCC imposes a good faith requirement onrequirements and output contracts, such that the actualquantity purchased or sold cannot be unreasonablydisproportionate to normal or comparablerequirements or output.Ch. 11: Sales and Leases: Formation, Title, and Risk - No. 9Business Law Today: The Essentials (7th ed.)MERCHANT’S FIRM OFFER


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