PCCA Journal 1st Quarter 2014 - page 11

PCCA Journal|1
st
Quarter 2014
11
Legal Watch
Continued on page 12
A
rticle 2 of the Uniform
Commercial Code
(UCC) plays a perva-
sive role in governing
the sales of goods, yet
few business folks know of its sweeping
application or even its existence. A little
knowledge about Article 2 of the UCC
will help contractors and other industry
participants to identify and manage the
risks inherent in the sales of goods.
The UCC is a nationwide code that
seeks to standardize commercial transac-
tions into a single cohesive unit. First
published in 1952, the UCC was devel-
oped to remedy two primary concerns:
(1) the obstructions to doing business
caused by existing legal and contractual
formalities and (2) the innumerable dif-
ferences in state laws, making it difficult
for interstate transactions. The UCC has
been enacted in all 50 states, the District
of Columbia, and Puerto Rico.
The UCC is comprised of nine articles
governing everything from leases (Article
2A) to secured transactions (Article 9).
This article focuses on Article 2 (the sale
of goods) and underscores five facts that
form a good foundation for understand-
ing the scope and application of Article 2
of the UCC.
1. Article 2 of the UCC governs the
sale of goods.
Article 2 of the UCC applies to the sale
of
goods
. Under Section 2-105, “goods” is
broadly defined as “all things (including
specially manufactured goods) which are
movable...” Polyethylene gas pipe, HDPE
conduit, and crane mats are all “goods,”
and the sales of such goods are governed
by Article 2.
To the contrary, contracts for services,
real estate, insurance, intangible assets,
and employment are not governed by Ar-
ticle 2. These contracts are governed by
common law (law developed by judges
through decisions of courts). Common
law varies from state to state. Further,
determining which state’s common law
applies to such contracts is often the
subject of many disputes.
When contracts involve a mix of
goods
and
services, most courts apply
the “predominant purpose” test. This
test analyzes whether the contract is pre-
dominantly one for goods or one for ser-
vices. Relevant criteria for determining
whether the UCC will control a mixed
contract will include the contract lan-
guage, the nature of the seller’s business,
the reason for entering the contract, and
the amounts charged under the contract
for the goods and services.
2. Article 2 of the UCC supplies com-
mercial terms to a sale of goods.
Article 2 governs sales transactions
from contract formation through dispute
resolution, and it touches on an wide
array of legal and contractual concepts,
including offer and acceptance, price and
time terms, impracticability, rejection of
non-conforming goods, warranties, rem-
edies for seller and buyer, and damages
for non-conforming goods. To illustrate
the reach of Article 2, several provisions
are detailed below.
• Section 2-209 allows a contract to be
modified without additional consider-
ation (typically, compensation). Under
common law, a modification is only
enforceable when additional consider-
ation is present.
• Section 2-508 provides that “[w]here
any tender or delivery by the seller is
rejected because non-conforming and
the time for performance has not yet
expired, the seller may seasonably no-
tify the buyer of his intention to cure
and may then within the contract time
make a conforming delivery.”
• Section 2-511 establishes when pay-
ment is due: “Unless otherwise agreed
tender of payment is a condition to the
seller’s duty to tender and complete
any delivery.”
• Section 2-601 provides that if
the goods or the tender of delivery
fail in any respect to conform to the
contract, the buyer may reject the
whole, accept the whole, or accept
any commercial units or units and
reject the rest.
• Section 2-313 defines an express war-
ranty made by a seller to a buyer. Sec-
tion 2-314 establishes the implied war-
ranty of merchantability (reasonably
Five Facts to Know About Article 2
of the Uniform Commercial Code
By Matthew Straub
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