Cameron Miranda
The sale of goods is governed by either the Uniform Commercial Code (UCC) or common law of contracts (CLC). The UCC is a model code that establishes rules for a contract for the sale of goods, while the CLC is typically a child of the courts, created by judges to govern intrastate commerce. The applicability of either common law or the UCC depends on whether the transaction involves the procurement of services and labour or the purchase and sale of goods across state lines.
| Characteristics | Values |
|---|---|
| Governing body | Uniform Commercial Code (UCC) or Common Law of Contracts (CLC) |
| Applicability | UCC: Sale of goods across state lines. CLC: Intrastate commerce and services. |
| Definition of "goods" | UCC: Movable at the time of sale (excluding vehicles, boats, food, and drugs). |
| Contract formation | UCC and CLC have different rules for contract formation, warranties, remedies, and disclaimers. |
| Offer | UCC: An offer can be left indefinite. Common law: An offer must be definite with essential terms. |
| Acceptance | Common law: Offeror can specify a method of acceptance. UCC: Broadens this rule, allowing any reasonable method of communication. |
| Firm offers | UCC: Creates an exception for firm offers to sell or lease goods by a merchant. |
| Revocation | Common law: An offer may be revoked before acceptance. Exception: Option contract where offeree pays for an open offer. |
| Open quantity term | Common law: Failure to specify quantity is fatal. UCC: Recognizes exceptions like requirements and output contracts. |
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What You'll Learn
Common law vs. Uniform Commercial Code (UCC)
The Uniform Commercial Code (UCC) and Common Law Contracts (CLC) govern almost every purchase and sale of "goods" or "services" in the United States. The UCC is a statute enacted by 49 out of 50 states and territories in the 1950s to facilitate interstate commerce. Louisiana adopted the UCC in 1990, and it has since been accepted in whole or in part by every state. The CLC, on the other hand, dates back to the English and Germanic laws of the 1600s or earlier and is typically created by judges within states to govern intrastate commerce.
The UCC defines "goods" as all things movable at the time of sale (excluding vehicles, boats, food, and drugs). It governs most things purchased by consumers and companies, including specially manufactured goods. For example, the UCC would govern a contract in which a lumber supplier agrees to provide lumber to a framer constructing a building. The contract for the labour to frame the structure, however, would be a contract for services governed primarily by the CLC and case law rather than the UCC.
The CLC applies to the procurement of "services" and labour, generally provided within a specific state or locale, rather than the purchase and sale of "goods" across state lines. Transactions governed by the CLC are considered intrastate because "services" are typically provided in the state or locale of the purchaser. However, it is now common for written contracts governing the provision of "services" to require the application of laws outside the purchaser's state or locale, leading to the expansion of an area known as "conflict of laws".
The UCC and CLC have significant differences in how they govern contract formation, implied warranties, available remedies, disclaimers, consideration, and other factors. For instance, a promise to keep a deal open is an option contract under the CLC and requires consideration. In contrast, the UCC calls this a firm offer and requires it to be made by a merchant in writing. The UCC also specifies that only the quantity is a mandatory term in its contracts, while the CLC requires a description of the quantity, price, performance time, nature of work, and identity of an offer for a valid contract.
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UCC definition of 'goods'
The Uniform Commercial Code (UCC) is a set of business laws that regulate commercial business services in the United States. It is not legally binding but serves as a guide for business owners. The UCC defines "goods" as all things that are movable at the time of identification to the contract for sale. This includes specially manufactured goods, growing crops, the unborn young of animals, and identified things attached to realty, such as minerals, that are to be severed and sold separately. Goods must be both existing and identified before any interest can pass, and they do not include real estate, services, intangible assets, money used as payment, investment securities, or things in action.
The UCC applies to contracts for the sale of commercial goods and can include merchants, commercial purchasers, manufacturers, and consumers in some cases. It covers the sale of goods, which is the transfer of title from seller to buyer for a price. The goods involved in a sale must be movable at the time of the contract, existing and identifiable. The sale can include partial interest in the goods, and an undivided share of goods can be sold without calculating the quantity.
Certain transactions may fall outside the scope of the UCC, such as those involving software, fixtures, or mixed sales (goods + services). For example, only software sold on a physical medium may qualify as a good, while downloadable software or licenses generally do not fall under the UCC unless embedded in a tangible product. In mixed transactions involving both goods and services, courts apply the "predominant factor test" to determine whether the contract primarily concerns goods or services. If the contract cannot be classified as a sale of goods, it may be governed by common law principles instead.
The UCC is well-organized and uses simple terminology to define terms such as "buyer," "seller," "sale," and "goods." It is divided into nine articles, with Article 2 specifically covering sales and contracts to sell goods. Article 2 is further divided into seven parts, with the first part providing definitions of terms. The other parts cover contract formation and readjustment, interpreting obligations, title to goods and rights of creditors and third parties, performance, breach of contract, and remedies for breach.
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Common law principles
However, common law principles continue to apply to the sale of goods unless the UCC specifically displaces them. For example, the UCC firm offer rule requires that a merchant is involved, and if there is no merchant, then the common law "option must be supported by consideration" rule applies.
The UCC and CLC have significant differences in governing contract formation, implied warranties, available remedies, disclaimers, consideration, and multiple other factors that govern the transaction.
Courts implement the "predominant purpose test" (also known as the "dominant factor test") to determine whether common law or the UCC applies to mixed goods-services contracts. Under this test, the applicability of either common law or the UCC depends on whether the predominant purpose of the transaction requires the performance of services with goods incidentally involved, or the sale of goods with labour incidentally involved.
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Intrastate commerce
The sale of goods and services in the United States is governed by either the Uniform Commercial Code (UCC) or the common law of contracts (CLC). The UCC is a model code that establishes rules for sales contracts and has been adopted in whole or in part by every state. It defines "goods" as all things movable at the time of sale, excluding vehicles, boats, food, and drugs.
The CLC, on the other hand, has its roots in English and Germanic laws dating back to the 1600s or earlier. It applies to the procurement of "services" and labour, typically provided within a specific state, rather than the sale of "goods" across state lines. Transactions governed by the CLC are generally considered intrastate commerce.
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Contract formation
The sale of goods is governed by either the Uniform Commercial Code (UCC) or the common law of contracts (CLC). The UCC is a model code that establishes rules for a contract for the sale of goods, and it has been adopted in whole or in part by every state in the United States. The CLC, on the other hand, is typically a child of the courts, created by judges within all 50 states and territories to govern intrastate commerce.
The UCC and CLC have different scopes and applications when it comes to contract formation. The UCC governs contracts for the sale of "goods," which are defined as all things movable at the time of sale, excluding vehicles, boats, food, and drugs. This includes specially manufactured goods. The UCC also covers other interstate transactions, such as checks, transfer of funds, bank deposits, letters of credit, investment securities, and secured transactions.
The CLC, on the other hand, applies to the procurement of "services" and labour, typically provided within a specific state or locale. Services are generally considered intrastate transactions. However, it's important to note that written contracts for services may require the application of laws outside the state or locale of the purchaser, leading to an expansion of the "conflict of laws" area.
When it comes to contract formation, the UCC and CLC have some key differences. Under the UCC, a sale or lease contract does not need to include every term to be considered valid. The UCC allows for open terms, such as price, and quantity, to be determined later, and it provides exceptions for requirements contracts and output contracts. In contrast, common law requires that an offer must be definite enough for parties to understand its essential terms. At common law, an offer may be revoked at any time before its acceptance, unless it is an option contract where the offeree pays consideration for the offeror's promise to keep the offer open for a stated period.
In terms of acceptance, the UCC and CLC have different approaches. The UCC broadens the common-law rule by stating that when the offeror does not specify a method of acceptance, any reasonable method of communication can be used as long as it is received before the deadline. Under common law, an offeror can specify a particular method of acceptance, but any method of communicating acceptance is effective as long as it is received within the specified timeframe.
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Frequently asked questions
The Uniform Commercial Code is a set of rules that governs contracts for the sale of goods. It was created to streamline the rules that apply to contracts so that all parties have the same basic rules no matter what state they are from.
The UCC governs the sale of goods, while Common Law governs contracts for services. The UCC was created to harmonize the laws within all 50 states for interstate transactions, whereas Common Law is typically created by judges within individual states to govern intrastate commerce.
Common Law principles continue to apply to the sale of goods unless the UCC specifically displaces them. For example, if there is no merchant involved in the sale of goods, then the Common Law rule of consideration applies.
Common Law principles such as offer, acceptance, and consideration may apply to the sale of goods. For example, under Common Law, an offer must be definite enough for parties to ascertain its essential terms, whereas under the UCC, a sale contract is not fatally indefinite even if one or more terms are left open.
When a contract involves a mix of goods and services, courts implement the "predominant purpose test" to determine whether Common Law or the UCC applies. This test hinges on whether the predominant purpose of the transaction is the performance of services or the sale of goods.
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