Sale of Goods

The Uniform Commercial Code and Its Application

For most of history, contract law has been common law. Instead of having written statutes that set the rules, the laws have been handed down in opinions written by judges. In the mid-20th century, however, a panel of legal scholars put together and proposed a uniform law, known as the Uniform Commercial Code (the “UCC”), which included a specific section (Article 2) that set forth the laws governing contracts for the sale of goods. The UCC has been adopted in whole or in part by every state except Louisiana.

The definition of goods in the UCC is somewhat vague—goods are anything that is movable at the time they are identified in the contract, with some exceptions. Neither money nor investment securities are considered to be goods.

Article 2 contains specific provisions addressing the key issues related to contracts for the sale of goods, including:

• The form of the contract—As a general rule, under Article 2, contracts for the sale of goods must be in writing
• When a contract has been formed
• How a contract may be modified
• Any general contract obligations other than those stated by the parties in the document
• What constitutes “performance” in accordance with the terms of the contract
• What constitutes a “breach” of the duties set forth in the contract
• What remedies the parties may have in the event of breach

Article 2 imposes a duty of good faith on both parties to a contract for the sale of goods, with the duty applicable at all times. Article 2 sets forth some specific warranties regarding the sale of goods, and allows a party to refuse to perform if certain components are considered to be “unconscionable.”

Limitations Imposed by Federal Law

The U.S. Supreme Court has held that, where state law and federal law conflict, the federal law takes precedence. In the laws governing the sales of goods, there are only a few instances where a federal law supersedes the Uniform Commercial Code:

• The federal bankruptcy code (Title 11) establishes the rules for claims arising out of sales transactions in a bankruptcy proceeding
• The Magnuson-Moss Warranty Act regulates explicit and implied warranties on consumer products
• The Consumer Credit Protection Act provides protection to individuals entering into leases.