Article 2 Uniform Commercial Code

What is article 2 of the Uniform Commercial Code?

Article 2 of the Uniform Commercial Code is comprised of the following titles:

PART 1. SHORT TITLE, GENERAL CONSTRUCTION AND SUBJECT MATTER
PART 2. FORM, FORMATION AND READJUSTMENT OF CONTRACT
PART 3. GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT
PART 4. TITLE, CREDITORS AND GOOD FAITH PURCHASERS
PART 5. PERFORMANCE
PART 6. BREACH, REPUDIATION AND EXCUSE
PART 7. REMEDIES

You can download a PDF of Article 2 of the uniform commercial code by clicking on the link provided here Uniform Commercial Code – Article 2.

Arguably one of the most important articles in the whole legislation, article 2 sets out standard contractual terms in commercial dealings which have been implemented all accross the United States.

The first major issue which this article deals with that of Contract formation:

1. Firm offers (offers by a merchant to buy or sell goods and promising to keep the offer open for a period of time) are valid without consideration if signed by the offeror, and are irrevocable for the time stated (but no longer than 3 months), or, if no time is stated, for a reasonable time.[5]
Offer to buy goods for “prompt shipment” invites acceptance by either prompt shipment or a prompt promise to ship. Therefore, this offer is not strictly unilateral. However, this “acceptance by performance” does not even have to be by conforming goods §2-206

2. Consideration — modifications without consideration may be acceptable in a contract for the sale of goods. §2-209

3. Failure to state price — In a contract for the sale of goods, the failure to state a price will not prevent the formation of a contract if the parties’ original intent was to form a contract. A reasonable price will be determined by the court.

4. Assignments — a requirements contract can be assigned, provided the quantity required by the assignee is not unreasonably disproportionate to original quantity. §2-306

Contract repudiation and breach

5. Nonconforming goods—If non-conforming goods are sent with a note of accommodation, such tender is construed as a counteroffer, and if accepted, forms a new contract and binds buyer at previous contract price. If seller refuses to conform and buyer does not accept, the buyer can sell the goods at public or private auction and credit the proceeds to amount owed.

6. Perfect tender—The buyer however does have a right of “perfect tender” and can accept all, reject all, or accept conforming goods and reject the rest, within a reasonable time after delivery but before acceptance, he must notify the seller of the rejection. If the buyer does not give a specific reason (defect), he cannot rely on the reason later, in legal proceedings. (akin to the cure before cover rationale). Also, the contract is not breached per se if the seller delivered the non-conforming goods, however offensive, before the date of performance has hit.

7. “Reasonable time/good faith” standard—Such standard is required from a party to a contract indefinite as to time, or made indefinite by waiver of original provisions.

8. Requirements/Output contracts—The UCC provides protection against disproportionate demands, but must meet the “good faith” requirement.

9. Reasonable grounds for insecurity—In a situation with a threat of non-performance, the other part may suspend its own performance and demand assurances in writing. If assurance not provided “within a reasonable time not exceeding 30 days,” the contract is repudiated.

There are a number of other issues which are dealt with in article 2 of the Uniform Commercial code, however, if you would like to explore these issues in detail, we recommend that you obtain the services of a legal professional, perhaps by posing your legal question to a lawyer using the question box on the above right.

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