menuSales, Leases, and Warranties under the UCC

Chapter 9: Sales, Leases, and Warranties under the UCC

Learning Objectives

  1. Determine when UCC Article 2 (sales) or Article 2A (leases) applies instead of the common law, including mixed contracts for goods and services.
  2. Explain the UCC's more flexible rules for contract formation, including open terms, firm offers, the battle of the forms under §2-207, and the merchant's exception to the Statute of Frauds.
  3. Determine when title and risk of loss pass, including under common shipping terms.
  4. Describe the obligations of sellers and buyers, including the perfect tender rule and its exceptions, and the remedies each side has after a breach.
  5. Distinguish express warranties, the implied warranties of merchantability and fitness for a particular purpose, and warranty disclaimers.

Week 9. Chapter content to be written. The description below sets out what the chapter will cover.

Most business-to-business and consumer transactions involve the sale of goods, and those sales are governed by Article 2 of the Uniform Commercial Code rather than by common-law contract rules alone. This chapter builds on the three contract chapters and points out where the UCC changes the rules, usually to make transactions between merchants faster and more flexible.

9.1 Planned Sections

Scope of Article 2 and 2A. What counts as "goods," who counts as a "merchant," the predominant-factor test for mixed contracts, and the coverage of leases under Article 2A. Software and digital goods as a gray area.

Formation Under the UCC. Open price, payment, delivery, and quantity terms; requirements and output contracts; merchants' firm offers; acceptance by promise or shipment; additional terms and the battle of the forms; modifications without consideration; and the UCC Statute of Frauds and its exceptions.

Title and Risk of Loss. Identification of goods, shipment and destination contracts, delivery without movement, the effect of breach on risk of loss, insurable interest, and voidable title and entrustment. Common shipping terms (F.O.B., C.I.F.) and Incoterms.

Performance and Remedies. Good faith and commercial reasonableness. The seller's duty of tender and the perfect tender rule, and exceptions for cure, installment contracts, and commercial impracticability. The buyer's duties to inspect, accept, and pay. Anticipatory repudiation and adequate assurance. The seller's remedies (withholding delivery, resale, recovering the price or damages) and the buyer's remedies (cover, replevin, specific performance, rejection and revocation of acceptance). Limitation of remedies.

Warranties. Warranties of title; express warranties and puffery; implied warranties of merchantability and fitness for a particular purpose; implied warranties from course of dealing; disclaimers (including "as is" sales and the conspicuousness requirement); and the Magnuson-Moss Warranty Act for consumer products.

Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997). The Hills ordered a computer by phone. The box arrived with printed terms, including an arbitration clause, stating that keeping the computer for more than 30 days meant accepting the terms. When the Hills later sued, Gateway moved to compel arbitration. Judge Easterbrook held that the terms were part of the contract. A seller may invite acceptance by conduct, and the Hills accepted by keeping the computer past the return period.

Why this case: It applies UCC formation rules (§2-204 and the debate over §2-207) to a transaction every student recognizes: buying something and finding the terms inside the box. Today's "terms apply" checkout pages and app licenses descend from it.

Discussion question: Is "money now, terms later" fair to consumers? How does this case compare with Specht v. Netscape from Chapter 6?

9.2.1 Short Case Summaries

9.3 Planned Features