The
Uniform Commercial Code (UCC): Functions and Performance
UCC is a body of codified law drafted by
the National Conference of Commissioners on Uniform State Laws working together
with the American Law Institute. Almost all states have adopted the UCC either
wholly or in substantial part (Emanuel, 2006). The aim as well as the function
of the UCC was to bring a level of uniformity to the laws of the different
states in the covered areas. One can also see them as model laws on which
states were to fashion their own laws. This is because the UCC do not have the
force of law in any state unless that state has adopted it. This has happened
with some states adopting them with a level of modification. Of much
significance, however, is the fact that the drafters of the UCC saw the outcome
as representing the state of law in the various states of the U.S.
Formation
of a Contract under Article 2 of the UCC
Fact
Scenario
On May 10 this year, John who runs a
chain of restaurants in Sacramento city reports learns that Gadwall Corp., is
selling one of the ingredients mostly used in John’s restaurants. John places a
call to the Gadwall Corp and the conversation between John and the person at
the other end goes something like this. John: “How much would you be willing to sell one
tone of ingredient P if one was to be buying the same quantity every month for
the next 6 months?” To this, the person on the other end replied that a tone of
‘P’ goes for $1,000 but the company would give a decent discount to a customer
who places an order of the same quantity every month for at least 6 months. John
then proceeded to indicate that he would like to place an initial order of 1
tonn at a maximum price of $900. To this, the representative of Gadwall told
John that their company will go with that price.
Analysis
Coming out of the facts are three
important elements of a contract under UCC. U.C.C. § 1-201(3), provides to the effect that
mutual assent expressed through offer and acceptance constitutes essential
elements of a contract (Twomey & Jennings, 2011). Although used a number of
times in article 2 of UCC, the code does not provide a definition of an offer. This
has seen courts resort to the common law definition. That definition simply
construes an offer as a promise for future action or inaction. U.C.C. § 2-204(3)
departs from the strict insistence on definiteness demanded by the common law.
Thus, the statement by John that he would like to place an initial order of 1
tonn at $ 900 suffices as an offer. This
would not have been the case under common law as the date of delivery and other
terms are still missing.
Under UCC §2-207, acceptance need not
meet the common law mirror image rule (Twomey&Jennings, 2011). Thus, an
acceptance that introduces new terms may, nevertheless, constitute a valid
acceptance. Under this provision, the most important thing is whether the
parties believe that they have an agreement. Thus, John and Gadwall Corp would
still have been held to have a valid contract even if Gadwall had stated that a
price of $ 910 was preferable.
Lastly, each of party
to a contract must give something for the bargain of the other. This is what is
called consideration. Unlike the common law, the UCC does not require
consideration in all agreements (Emanuel, 2006). Thus, an agreement to modify a
lease does not require new consideration. In the case of John and Gadwall the
consideration is the $900 on the part of John and the ingredient ‘P’ on the
part of Gadwall.
Fact
scenario 2
Assuming that John and Gadwall did not
make any note of their telephone conversations, then the Statute of Frauds may
act to make their agreement unenforceable. Under that statute, contracts for
the sale of goods costing more than $ 500 must be in writing (Buck, 2009). In
addition, the Parol Evidence Rule is against the admission of oral evidence
that contradicts a written contract. Thus, both John and Gadwall cannot rely on
their telephone conversations to contradict a written contract.
References
Buck,S.J.(2009).Movie Therapy for Law Students: And Pre-Law,Paralegals and other
Related Majors.Bloomington,IN:AuthorHouse.
Emanuel,S.L.(2006).Contracts,8th Edition. New York: Aspen Publishers.
Twomey,D.P. & Jennings,M.M.(2011).Anderson’s Business Law and the Legal
Environment,21st Edition.Mason,OH:South-Western
Cengage.
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