Chapter 8 provided us with an overview of Article 2’s rules and requirements for sales contracts. Attached is a case, Hill v. Gateway 2000, IncPreview the document., that is included in most every sales textbook. In law school, my sales professor spent a good bit of time examining this case. The case is decided by Judge Frank Easterbrook, a well-respected judge for the Seventh Circuit Court of Appeals. His opinion, however, has been criticized by some legal commentators as not following Article 2. For example, attached is an article by Daniel Keating in which he explains his disagreements with the Hill case.
Please read both the Hill case and Mr. Keating’s article and then, based on what you’ve learned about Article 2 and this reading, decide who you agree with. Did Judge Easterbrook correctly decide the Hill case, or do you, like Mr. Keating, disagree with the outcome in the Hill case? In your answer, be sure to articulate why you either agree or disagree with the Hill case.
Notes:
Sales, Licensing, and E-Commerce
Sales
-most businesses involve the purchase or sale of goods or licensing of software. Consequently, the principle discussed in this chapter are applicable to most all businesses.
-Uniform Commercial Code: Article 2 governs sales in the US (except Louisiana)
-Article 2 does not include provision of services or sale of land.
Sales and the internet
-article 2 was developed before the internet and this sis not account for special issues arising from online sales
-states are having to quickly enact legislation that protects consumers and businesses while at the same time encouraging electronic sales.
Software licensing
-software is a series of instructions to a computer that can be expressed in written form or as a series of electronic impulses.
-software program: not the instrument in which it is provided- is the value of the transaction
-software may be duplicated and easily shared for little or no cost.
-as such, software providers usually license software rather than sell the software.
-a license provides additional protections for software provider. In a sale, there is no continuing obligation imposed, but in a license, the purchaser has continuing obligations.
-most important, a license prohibits improperly duplicating the software and sub licensing, limits the number of computers upon which the software may be installed and used by third parties, and forbids modification of software code.
-UCC Article 2 does not expressly cover software licensing
-Uniform Computer Information Transactions Act created in 2003, but has not be adopted in TN (or most other states) because it is seen as too protective for software companies and not protective enough for consumers
-as a result, courts have tended to apply Article 2 principles- either directly or by analogy- to software licensing transactions.
-Article 2 has been applied on issues of
-contract formation: was license formed?
-battle of the forms: what are the terms of the license?
-warranties: is the warrant sufficient? Is the warrant disclaimed?
-remedies: what relief is available for a breach of the license?
Article 2- Goods
-Article 2 covers contracts for the sale of goods
-Good are: all things (including specifically manufactured goods) which are movable at the time of identification to the contract for sale.
-Whether a transaction is for sale of goods is not always cut and dry.
-Blood transfusions: is it a sale of blood or a provision of medical services>
-For public policy reasons, blood transfusions are deemed to be a provision of services and this, are not covered by Article 2.
-Fixtures: are items of personal property that are attached to land (real property) that cannot be easily removed. Is the fixture considered goods or land?
-Fixtures are generally considered to be land, not goods, and thus are not covered by Article 2.
Contract Formation
-Contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
-If the parties intent is for a binding contract, as opposed to being a proposal or negotiations, then a court will enforce the contract.
-if important terms are not agreed upon, the terms of the UCC will supply the missing terms.
-Article 2 does not define offer
-The common law contract principles discussed in the contracts lecture provide the rules for determining whether an offer was made.
-the UCC does clarify that invitations to bid, price quotes, and proposals subject to approval are not offers.
-article 2 likewise does not define acceptance
-Section 2-207 (I) provides:
-A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
-unless the person clearly specifies the manner in which his/her offer can be accepted, an offer may be accepted in any manner and form that is reasonable under the circumstances.
-response must be timely
-response must communicate acceptance rather than desire to continue negotiations.
-but additional or deferent terms does not mean that a response is a counteroffer (ex: a desire to continue negotiations)
-unlike common law contract principles, the offer and acceptance do not have to mirror one another for a contract for sale of goods to exist.
-under the UCC, once a contract is formed, you can then decide what the terms of the contract are.
UCC 2-207
-A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms assertional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
-the additional terms are to be constructed as proposals for addition to the contract. Between merchants such terms because part of the contract unless
1-the offer expressly limits acceptance to the terms of the offer
2-they materially alter it
3-notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
-conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of the act.
What are the terms?
-Battle of the forms
-Arises when the parties agree to the essential terms of agreement, such as price and quantity, but do not discuss minor terms, such as arbitration and warranty, yet rely upon boiler plate forms that have prewritten favorable terms.
-section 2-207 addresses this instance and abolishes the common law mirror image rule.
-missed some info here.between 32-37 minute mark.
-But what about if there are different terms?
-different terms are the same as additional terms in that a contract may still be formed.
-section 2-207 does not address the effect of different terms like it does additional terms. Courts, therefore, have set forth 3 approaches:
Apply the knockout rule (majority approach) in which conflicting terms are eliminated and UCC provisions apply.
Ignore the different terms and offerors terms control (middle approach)
The offers terms control over the different terms in the acceptance only if the [acceptances terms] are materially different. (Minority approach)
Conditional response:
-assume, however, that Bills makes acceptance expressly contingent upon offerors agreement to Bulls additional/different terms.
-2-207 (I) scenario
-UCCs suggested language Acceptance is expressly made conditional on assent to the additional or different terms.
-No contract unless ABC expressly agrees to Bulls additional/ different terms.
-2-207 (2), therefore, provides that the additional terms are considered to be a proposal (ex: a counter offer).
What about if there is no contract, but the parties perform as if there is a contract?
-assume that Bills acknowledgement expressly required ABC to consent to additional terms, but ABC never consented. Under section 2-207 (I), there is no contract. However, Bills delivers the 5 cars to ABC and ABC pays for them.
-what happens now?
-Section 2-207 (3) provides that a contract exists.
-the terms of the contract will be those that the parties agreed upon and then the UCC will provide any missing terms.
Statute of Frauds
-UCC has a statute of frauds in which a contract for the sale of goods of $500 or more must be partly in writing or otherwise is unenforceable.
-to be enforceable:
-there must be some writing sufficient to indicate that a contract for sale has been made between the parties
-the writing must be signed by the party against whom enforcement is sought or by his authorized agent or broker
-writing must identify the quantity of goods sold.
-writing requirement is very lenient
-comment even states that the price, time, and place of payment or delivery, the general quality of the goods, or any particular warranties may all be omitted.
-only clear requirement is that quantity be written so that court can have bassi to determine money damages.
-if no quantity is states, the contract is enforceable only if:
-the goods were specifically made for the buyer and cannot readily be sold in the ordinary course of business.
-the defendant admits to an agreement, or
-payment was made and accepted or the goods were received and accepted.
-the writing must be signed unless:
-there is a confirmation that the contract was received.
-the party receiving it should know the contents; and
-that party does not object in writing within 10 days of the confirmation.
Statute of frauds and e-commerce
-majority of courts treat contracts executed electronically with same force and affect as traditional paper contracts.
-uniform electronic transaction act- majority rule
-electronic signature is enforceable
-electronic contract is enforceable
-electronic record counts as being written
-electronic signature is valid
-E-sign act
-federal law that requires that electronic signature/contract is valid and enforceable
-preempts state law if contrary
-however, using or accepting electronic signatures records/signatures is voluntary.
-and records that are to be provided in writing may only be provided electronically if person gives informed consent first.
Warranties
-when goods are delivered that do not meet expectations, the buyer may sue the seller for breaching an express or implied warranty.
-the UCC provided 3 types of warranties:
1-express warranty
2-implied warranty of merchantability
3-implied warranty of fitness for a particular duty
