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PART II
Sale of Goods Under Article 2 of the Uniform Commercial Code
Part I (Chapters 1–7) developed the common law foundation for the law of contracts. Part II (Chapter 8) is
the second tier of our four tier legal structure. Part II is devoted exclusively to the sale of goods under
Article 2 of the Uniform Commercial Code (UCC) and provides not only a statutory contrast to the
common law but also demonstrates how state statutes preempt the state’s common law.
Students can find a guide to “How to Use the UCC” on the online Students’ Companion Site to
this text. “How to Use the UCC” is also on the Instructors’ Companion Site so you may see what your
students are reading.
Article 2 of the UCC uses the six-step road map that was developed for the common law. Unlike
the common law where each step of the road map had its own chapter, the six steps have been included in
one chapter (Chapter 8). Chapter 8 is a long chapter (52 pages).
Article 2 does not cover all the topics covered by the common law. The approach for analyzing a
breach of contract problem, however, is code first, common law second. If Article 2 does not apply or if
Article 2 applies but the issue is not found in Article 2, then UCC § 1-103(b) directs the analysis to the
common law. So the common law of contracts is alive and well, but not first in the analysis.
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CHAPTER 8
Contracts That Involve the Sale of Goods and Article 2 of

the Uniform Commercial Code
One objective of Chapter 8 is to have students understand the interrelationship between a state’s common
law and a state’s legislation, in this case the state’s version of Article 2 of the Uniform Commercial Code.
All states have enacted Article 2 with the exception of Louisiana.
• PROBLEM 8-1 asks students to read UCC § 1-103. Subsection (b) directs students to the common law
if the Code is inapplicable. Note that UCC § 1-103 is an Article 1 provision and therefore applies to all
Articles of the UCC.
• This text does not reproduce the UCC. Students are asked to consult www.law.cornell.edu/ucc/2 for
Article 2 of the UCC. They may also consult their own state’s version electronically. Students should
be asked how their state’s version of the UCC is cited.
• A search www.law.cornell.edu/ucc will provide all the Article of the UCC. Scrolling down the page
will provide links to individual state versions of the UCC.
Step One: Establishing the Method of Dispute Resolution, Selecting the

Venue, and Determining the Applicable Law Under Article 2 of the Uniform
Commercial Code
• The UCC leaves questions concerning the method of dispute resolution and venue to the common law.
This demonstrates right from the start that Article 2 of the UCC will not encompass all problems that
could arise under a contract for the sale of goods dispute.
• Article 2, however, does address three choice of law questions.
• Which state’s law applies in a multi-state transaction
• Whether Article 2 of the UCC or the common law governs the transaction
• Whether Articles 2 and 9 of the UCC (sale of goods and security interests in the goods) or Article
2A (lease of goods) governs the transaction
Students can use www.law.cornell.edu/uniform/ucc as the locator that links them to their state’s
version of the UCC (PowerPoint ch. 8-1).
Choice of Law Issues

Under Article 2 of the UCC
• Which state’s law applies in a multi-state transaction.

• Whether Article 2 of the UCC or the common law governs the transaction.
• Whether Articles 2 and 9 of the UCC (sale of goods and security interest in the goods) or Article 2A
(lease of goods) governs the transaction.
(PowerPoint ch. 8-1)
• Determining which state’s law applies in a multi-state transaction.

• UCC § 1-301(a) authorizes the contracting parties to select which state’s law applies from among
those states that have a reasonable relation to the transaction (EXAMPLE).
• If the parties have not selected a state with a reasonable relation to the transaction, UCC
§ 1-301(b) defers to the law of the venue state as the state with the applicable law so long as the
transaction bears an appropriate relation to that state (EXAMPLE).
• If the venue state determines that the transaction does not bear an appropriate relation to it, the
venue state will determine the state that does bear an appropriate relation to the transaction and
apply that state’s law (EXAMPLE).
• Determining whether Article 2 or the common law governs the transaction.
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• Article 2 applies to all “transactions (sale) in goods” and not just commercial transactions
(EXAMPLE).
• A few sections of Article 2 apply only if one or both parties are merchants.
• Different sections of Article 2 refer to different types of merchants (EXAMPLE). See UCC
§ 2-104(1) and Official Comment 2.
• The goods merchant. UCC § 2-314(1).
• The business practice merchant. Different sections require a different business practice so
someone could be a business practice merchant as to one business practice section but not
as to another. Therefore the business practice is different for UCC § 2-201(2) (Statute of
Frauds exception that involves a written confirmation) and UCC § 2-207(2)(b)
(additional term inclusion in the battle of the forms).
• The merchant as to either. UCC §§ 2-305(2) and 2-306(1) incorporates good faith defined
in UCC § 2-103(1)(b).
• If the transaction involves both a sale of goods and a sale of a service, Article 2 will apply if the
sale of goods is the “predominant factor.”
• PROBLEM 8-2 involves a contract that is both a sale of goods (roofing) and a sale of service
(installation of the roofing). Students could be asked what facts are important when applying
the predominant factor test.
• Determining whether Articles 2 and 9 (sale of the goods and security interest in those goods) or Article
2A (lease of the goods) govern the transaction (PowerPoint ch. 8-2).
Sale of Goods and Security Interest in the Goods
Article 9. The Secured Transaction
security interest in the goods

Debtor ------------------------------------- Secured Party
promise to permit repossession
in the event of default
Article 3 (optional). The Note (Promissory Note)

promise to pay $ to the order of
Maker ---------------------------------------Payee
Article 2. The Contract for the Sale of Goods
obligation to accept the goods and pay

------------------------------------->
Buyer Seller
<--------------------------------------
obligation to transfer and deliver
______________________________________________________________________________________
Lease of Goods
Article 2A. The Contract for the Lease of Goods
obligation to pay and to return at

the end of the lease term
----------------------------------->
Lessee Lessor
<---------------------------------
obligation to give the lessee possession
for the term of the lease
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• The text uses bankruptcy to illustrate why the distinction is important (EXAMPLES). Avoid getting
bogged down in the EXAMPLES. They are included to make the point that the issue can be
important. In a sale and security interest, the seller has only a security in the goods and can repossess
if the buyer defaults (fails to pay). In most cases after repossession, the secured party must resell and
can retain as much of the resale price up to the amount owed. In a lease, the lessor retains ownership
of the goods and reclaims the goods upon the expiration or termination of the lease.
Step Two: Contract Formation—The Impact of Article 2 on Offer, Post-

Offer/Pre-Acceptance, and Acceptance
• UCC § 2-301 states the general obligations of the buyer and seller and is the core for everything that is
to follow. The seller promises to transfer and deliver the goods, and the buyer promises to accept and
pay for them in accordance with the contract.
• In contrast to the common law, Article 2 emphasizes the intent of the parties so terms may be omitted
from the transaction without their omission affecting the creation or performance of the contract
(EXAMPLE).
• PROBLEM 8-3 illustrates the intent of the parties to contract by the use of course of dealing.
• Offer
• Article 2 leaves most questions of offer to the common law.
• UCC § 2-328, by codifying the common law’s general rule that an auction “with reserve” is
the norm, makes the bidder the offeror.
• Events between offer and acceptance
• Article 2 leaves the issues involving revocation, rejection, and death or incapacity to the common
law.
• Article 2 only references lapse when acceptance can be implied from performance. UCC
§ 2-206(2) and EXAMPLE.
• Article 2 does not deal with either express or implied option contracts so the common law rules
apply. UCC § 2-205 does, however, modify the common law rule where the promise not to revoke
the main contract offer lacks consideration. This section is limited to a merchant buyer or seller
(EXAMPLES).
• Acceptance
• In many cases, the question of acceptance is not in issue (e.g., single writing, mirror image
response, or performance that implies the promise).
• Article 2 modifies the common law mirror image rule in three situations. These situations are
discussed in UCC §§ 2-207(1), (3) (PowerPoint ch. 8-3).
Acceptance Under Article 2
Two writings with the bargained-for terms agreeing.

UCC § 2-207(1)
Common law Oral or written contract with written confirmation.

(mirror image) UCC § 2-207(1)
Two writings with the bargained-for terms not

agreeing but the conduct of the parties evidences a
contract. UCC § 2-207(3)
The discussion here focuses on whether there is an acceptance and not on the terms of the contract.
The terms issue will be discussed later in this chapter.
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• The attempted written acceptance is not the mirror image of the written offer (often when the
buyer and seller exchange preprinted forms).
• If the bargained-for terms of the writings (e.g., price, quantity, subject matter) are mirror
image, the attempted acceptance is the acceptance (UCC § 2-207(1)) (EXAMPLE).
• In PROBLEM 8-4 Santa’s purchase order is the offer (PowerPoint ch. 8-4).
Problem 8-4
_____|____________________|___________________|____________|____
| |
Santa’s purchase Music Box’s Music Box Santa’s
order acknowledgment ships rejects
form delivery
• Bargained-for • Bargained-for
terms agree terms agree
• Nonbargained-for • Nonbargained-for
terms do not agree terms do not agree
• FOB buyer’s place • FOB seller’s place
The Music Box’s acknowledgment form, although not a mirror image due to the
difference between the FOB terms, is the acceptance under UCC § 2-207(1). The
bargained-for terms agree. The FOB terms are in the boilerplate (nonbargained-for
terms) and therefore are irrelevant as far as contract formation is concerned.
The Music Box’s acknowledgment form does not contain an “unless acceptance
is expressly conditional” clause (see UCC § 2-207(1)) so the analysis of contract
formation ends with the mirror image of the bargained-for terms.
Under the common law, The Music Box’s acknowledgment form would be a
rejection and counteroffer (not a mirror image of Santa’s purchase order). The Music
Box’s shipping cannot be a performance that implies a promise because The Music
Box cannot be both offeror and offeree. Santa’s rejection of the shipment is a
performance that implies the rejection of the offer. Therefore, a contract has not been
formed under common law.
• When an existing “contract” was formed by oral or written communications and one or
both parties send written memoranda that are not the mirror image of the “contract”
(UCC § 2-207(1).
• The EXAMPLE involves an oral contract followed by a written confirmation (by
Santa’s, the buyer) (PowerPoint ch. 8-5).
EXAMPLE
_____|____________________|__________________|____________|_____
| |
Oral contract Santa’s Music Box Santa’s
written ships rejects
confirmation delivery
• FOB seller’s place • FOB buyer’s place

The written confirmation acts as an acceptance. Because of the way UCC § 2-207(1)
is drafted, the “definite and seasonable expression of acceptance” (i.e., the second
form) requires the distinction between bargained-for and nonbargained-for terms.
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The “written confirmation which is sent within a reasonable time” requires no such
distinction. The written confirmation will act as an acceptance and whether a term is
in or not in the contract will work itself out when the terms are evaluated (i.e., in the
first and not in the second, additional, different).
• PROBLEM 8-5 builds upon the EXAMPLE by adding a second written confirmation
(by The Music Box, the seller) (PowerPoint ch. 8-6).
Problem 8-5
_____|_____________|_________________|___________|_________|____
| | |
Oral contract Santa’s Music Box’s Music Box Santa’s
written written ships rejects
confirmation confirmation delivery
• FOB seller’s • FOB buyer’s • FOB seller’s

place place place
Under UCC § 2-207(1), the first written confirmation (by Santa’s) now acts as the
offer and the second written confirmation (by The Music Box) acts as the
acceptance.
• PROBLEM 8-6 builds upon PROBLEM 8-5 by adding to the second confirmation
(by The Music Box) an “expressly conditional” clause (PowerPoint ch. 8-7).
Problem 8-6
_____|_____________|_________________|___________|__________|___
| | |
Oral contract Santa’s Music Box’s Music Box Santa’s
written written ships rejects
confirmation confirmation delivery
with a “this is
not an acceptance
clause”
• FOB seller’s • FOB buyer’s • FOB seller’s

place place place
This turns the second confirmation into the offer and the accent to this offer the
acceptance. Santa’s accepts by accepting the shipment.
Under the common law, the contract would have been formed with the oral
contract. The confirmations would have been after contract formation.
• The writings of the parties do not establish a contract but the parties by their conduct
recognize the existence of a contract (UCC § 2-207(3), sentence 1).
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Problem 8-7
_____|____________________|___________________|___________|_____
| |
Santa’s purchase Music Box’s Music Box Santa’s
order acknowledgment ships rejects
form delivery
• Bargained-for • Bargained-for
term terms do not
agree
• FOB buyer’s place • FOB seller’s place
Therefore, the bargained-form terms do not mirror, and the writings do not form a
contract. The Music Box ships and Santa’s accepts the shipment thereby creating a
contract under UCC § 2-207(3), sentence 1.
Under the common law, Santa’s purchase order would have been the offer, The
Music Box’s acknowledgment form would have been a rejection and counteroffer.
Santa’s accepting the shipment would have been the performance that implies the
promise and therefore the acceptance of The Music Box’s counteroffer and contract.
Step Three: Contract Enforceability Under Article 2

• Article 2 leaves most of the contract enforceability problems to the common law with the exception of
unconscionability and Statute of Frauds.
• Protecting One Contracting Party from the Overreaching of Another—Unconscionability.
• Unconscionability, UCC § 2-302(1), is not defined in the Code. The courts rely on the common
law definition expressed in Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir.
1965). The definition is two-sided—absence of meaningful choice as to one of the parties coupled
with the other party taking advantage of this one-sidedness by imposing an unreasonably favorable
contract or clause.
• The first EXAMPLE illustrates a party, who did not lack a meaningful choice, attempting to
assert unconscionability. He was not limited as to where he could purchase the ring and could
have purchased the ring elsewhere for a reasonable price.
• The second EXAMPLE illustrates a party who does lack a meaningful choice, but the other
party did not take advantage of the situation by imposing an unreasonably favorable term.
• Early unconscionability cases were often reversed because the trial court refused a hearing on
the unconscionability issue. UCC § 2-302(2) requires the court to grant a hearing if the
unconscionability issue is raised. The determination of unconscionability is made by the judge
and not by a jury.
• UCC § 2-302(1) limits the remedies that the court may impose if a contract or a clause is
found to be unconscionable.
• The court may refuse to enforce the contract.
• The court may enforce the contract but delete the unconscionable clause.
• The court may reform the unconscionable contract or clause so it will no longer be
unconscionable. [When price is an issue, courts have reformed the price to the amount
paid. See Jones v. Star Credit Corp., 298 N.Y.S.2d 264 (Sup. Ct. 1969).]
• In PROBLEM 8-8, the court must hold a hearing on the unconscionability issue (UCC
§ 2-302(2)) and should find the price term unconscionable due to the high pressure and
deceptive sales practices (absence of meaningful choice—inequality of bargaining power and
lack of understanding of the price term) and that seller took advantage of this absence of
meaningful choice to impose an unreasonable high price on the vehicle. The court will reform
the price to the price paid.
63
• Protecting the Judicial System from Potential Abuse—The Statute of Frauds
• Only if the contract for the sale of goods has a price of $500 or more, must it be in writing. UCC
§ 2-201(1). The dollar amount is “$500 or more” and not “more than $500.” Therefore a contract
for $500 must be in writing.
• What must be in the writing?
• The writing must indicated that a contract for the sale of goods has been made. [What if the
only writing is the offer? At that point, the contract has not been made.]
• The writing must have a quantity term even though the quantity is in error. The court will not
enforce the contract above the stated quantity. The writing need not contain a price term. If
the price is omitted, the gap fillers of Article 2 will supply the price. See UCC § 2-305.
• The writing must be signed by the party “against whom enforcement is sought.” When only
one party signs a writing, the contract may not be enforceable against the other unless it
comes within one of the exceptions.
• UCC § 2-201 spells out four exceptions to the writing requirement of subsection 1.
• UCC § 2-201(2) applies when both parties are merchants (business practice merchants where
the practice is that described in UCC § 2-201(2)). This section requires the sending of a
written confirmation by the party who will ultimately seek the enforcement of the contract
(PROBLEM 8-9).
• UCC § 2-201(3)(a) applies to specially manufactured goods (EXAMPLE).
• UCC § 2-201(3)(b) applies when a party admits in pleadings, testimony, or otherwise in court
that the contract for sale has been made (EXAMPLE).
• UCC § 2-201(3)(c) applies when the seller has delivered the goods and the buyer has received
and accepted them. In the first EXAMPLE, payment was tendered and accepted. In the second
EXAMPLE, the goods were delivered and accepted.
• Does the common law concept of reliance apply to circumvent this Statute of Frauds even
though UCC § 2-201(1) states “Except as otherwise provided in this section . . .” courts are
divided. PROBLEM 8-10 illustrates when this issue could arise. The contract was for $500 or
more so a writing was required. The facts do not fit within any of the UCC § 2-201
exceptions. The question posed opens the discussion to the class so they can weight the pros
and cons of the policy behind the Statute of Frauds (cautionary and evidentiary) and the
statutory mandate of UCC § 2-201(1). Could the language of UCC § 1-103(b) be used to
support the argument that the use of common law reliance to circumvent the Statute of Frauds
has been displaced by the language of UCC § 2-201(1)?
Step Four: The Plaintiff’s Allegation That the Defendant Breached the
Contract Under Article 2
• Because Article 2 is limited to contracts for the sale of goods, the plaintiff may only be a buyer or a
seller of goods. This eliminates the broad range of parties that arise under the common law.
• The obligation of the seller is to transfer and deliver the goods in accordance with the contract.
UCC § 2-301.
• The obligation of the buyer is to accept and pay for the goods in accordance with the contracts.
UCC § 2-301.
• Buyer versus seller
• The seller’s obligation is “to transfer and deliver . . . in accordance with the contract.” UCC § 2-
301. The buyer may allege that the seller has breached this contractual obligation by:
• anticipatory repudiation
• nonperformance
• a nonconforming delivery (PowerPoint ch. 8-9).
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Allegations of Breach
anticipatory repudiation
___|__________________X_________________________|________
contract notice of no future full performance due
formation performance
nonperformance
___|__________________________________________ X
contract full performance due
formation but no performance
nonconforming delivery
___|____________________________________ ______X
contract full performance due and
formation performance occurred but
performance nonconforming
• Breach by anticipatory repudiation

• The buyer may allege that seller gave notice that there would be no delivery and the potential
loss from this repudiation will “substantially impair the value of the contract” to the buyer
(EXAMPLE).
• PROBLEM 8-11 illustrates that the notice may not come directly from the seller and may
only raise questions as to future performance.
• If the buyer has “reasonable grounds for insecurity,” the buyer may use UCC § 2-609 to
suspend its own performance and inquire in writing whether the seller will perform
(PROBLEM 8-12).
• Breach by nonperformance
• The buyer may allege that seller’s obligation as to deliver was clear under UCC §§ 2-301 and
2-711(1) (EXAMPLE).
• Breach by a nonconforming delivery
• The buyer may allege that seller made a nonconforming delivery.
• A breach of an express contractual promise when the promise is clearly identifiable may be a
nonconforming delivery. The EXAMPLE uses quantity as the illustration.
• Some contractual promises are more difficult to identify.
• The discussion comes back to offers, counteroffers, and the last shot doctrine (the
acceptance in the form of a performance that implies the promise).
• UCC § 2-207 was discussed under Step Two: Contract Formation. The discussion
returns to UCC § 2-207 to focus on if the contract was formed under UCC § 2-
207(1), which terms are in the contract.
• First, identify which of the three types of terms is in issue (PowerPoint ch. 8-10)
(EXHIBIT 8-1).
65
EXHIBIT 8-1 Nonbargained-for Terms (Boilerplate Terms)
Buyer’s Purchase Order Seller’s Acknowledgment Form

Bargained-for Terms Bargained-for Terms
price, quantity, price, quantity,
subject matter subject matter
----------------------------------- -----------------------------------
Nonbargained- Nonbargained-
for Terms for Terms
FOB buyer’s factory [no FOB term]
[no dispute resolution term] mandatory arbitration
reservation of all disclaimer of all
express and implied express and implied
warranties warranties
• FOB buyer’s factory is a term in the first writing and not in the second.
• Mandatory arbitration is a term in the second writing and not in the first (i.e., an additional term).
• Reservation of all express and implied warranties/disclaimer of all express and implied warranties are
terms concerning warranties that conflict between the two writings (i.e., different terms).
• If the term is in the offer but not in the acceptance, the term is in the
contract. The offeree had an opportunity to contest this term and did not.
Therefore the offeree assented.
• If the term is in the acceptance but not in the offer, the additional term must
be analyzed under UCC § 2-207(2). Under the first sentence of UCC § 2-
207(2), a sentence that applies to merchants and non-merchants alike, the
additional term becomes a proposal for addition to the contract and this
proposal will probably not be accepted. The second sentence UCC § 2-
207(2) applies only to merchants. Both buyer and seller must be merchants.
The additional term becomes a part of the contract unless (a), (b), or (c)
applies. Comments 4 and 5 develop the subsection (2)(b) concept of
“material alteration” and requires an investigation of the industry.
• If the terms conflict (different terms), the courts have not developed a
consistent approach.
• Some courts refer to UCC § 2-207, comment 3, that states use UCC §
2-207(2).
• Some courts use UCC § 2-207, comment 6, by analogy, and knockout
both terms and use the gap fillers of Article 2.
• Some courts drop the second term, thus leaving the first term standing.
• PROBLEMS 8-13 and the EXAMPLES illustrate the UCC § 2-207 approach.
• Identifying which terms are in the contract works differently depending on whether
the contract was formed under UCC §§ 2-207(1) or 2-207(3), sentence 1. Under UCC
§ 2-207(3), sentence 1, if the bargained-for terms of the writing did not mirror, the
66
contract was formed by the conduct of the parties (i.e., seller delivered and buyer
accepted and paid). UCC § 2-207(3), sentence 2, provides that the writings are
compared and all the terms that do not correspond between the two are not terms of the
contract. This includes terms in the first document and not in the second, terms in the
second and not in the first, and different terms. The designation “bargained-for” terms
and “nonbargained-for” terms are irrelevant. The additional term section, UCC § 2-
207(2) only applies to the UCC § 2-207(1) contract. The terms in a UCC § 2-207(3),
sentence 1, contract are determined by employing UCC § 2-207(3), sentence 2.
Terms in the Article 2 gap fillers complete the contract terms (EXAMPLE).
• Terms may also enter the contract through course of performance, course of dealing,
and usage of trade (EXAMPLES).
• Terms may also enter the contract through the Article 2 gap fillers (e.g., open price
term, unspecified place for delivery, absence of specific time provisions, open time
and place for payment, and risk of loss). PROBLEM 8-14 illustrates the use of the
gap fillers for open price term and the time and place for payment.
• The parol evidence rule also applies when a contract has been integrated (final
writing) and a party contends that a parol term is in the contract although not in the
integration. UCC § 2-202 and the EXAMPLE.
• Goods that fail to conform to a warranty leads to a discussion of UCC §§ 2-314 and
2-315. Care must be taken to sort through these implied warranties.
• UCC §§ 2-314(1) & (2) deal with an implied warranty of merchantability. The
seller must be a merchant with respect to the goods under UCC § 2-314(1) for
an implied warranty of merchantability to apply. A range of implied warranties
of merchantability are listed in UCC § 2-314(2). UCC § 2-314(2)(c), “fit for the
ordinary purpose for which the goods are used,” is the most used warranty.
Attention should be called to the other implied warranties of merchantability
found in UCC § 2-314(2).
• UCC § 2-314(3) has implied warranties that arise through course of dealing and
usage of trade. These warranties are not implied warranties of merchantability
and therefore independent of UCC §§ 2-314(1) & (2).
• The implied warranty of fitness for a particular purpose is found in UCC § 2-
315. This is a warranty whereby the buyer relies on the seller to sell the
appropriate goods (EXAMPLE).
• The implied warranties may be expressly modified or excluded. UCC § 2-316
and the EXAMPLE.
• Seller may also make express warranties. UCC § 2-313.
• Seller versus buyer
• The buyer has two obligations. One is “to accept [the delivery] . . . in accordance with the
contract” and the other is “to pay in accordance with the contract.” UCC § 2-301. The seller may
allege that the buyer has breached one or both of these obligations by:
• anticipatory repudiation
• nonperformance
• nonconforming performance
• The seller alleges the buyer breach its obligation to accept the goods in accordance with the
contract.
• Breach by anticipatory repudiation. UCC § 2-610.
• The seller may allege that prior to the date of performance, the buyer notified the seller
not to deliver the goods (EXAMPLE). PROBLEM 8-15 explores whether the seller has
grounds for insecurity. UCC § 2-609.
• The seller may allege that the buyer wrongfully rejected the goods (EXAMPLE).
• The seller may allege that the buyer wrongfully revoked acceptance of the goods. UCC §
2-608(1) and PROBLEM 8-19.
• Breach by a nonconforming performance
• The seller may allege that buyer failed to give the seller an opportunity to cure. UCC § 2-
508(1). See PROBLEMS 8-16, 8-17, and 8-18.
67
• The seller alleges the buyer breach its obligation to pay in accordance with the contract.
• Breach by anticipatory repudiation
• The buyer’s notification of the seller that payment would not be forthcoming is not
considered a breach by anticipatory repudiation. The seller suffers no injury because the
money is not yet due.
• Buyer did not pay when payment was due.
• Breach by a nonconforming performance
• Buyer paid but not in accordance with the contract.
Step Five: The Defendant’s Response to the Plaintiff’s Allegation of Breach

• The defendant’s four responses to the plaintiff’s allegation of breach that are applicable under common
law are applicable under Article 2 of the UCC.
• No breach, compliance
• No breach, excuse
• No breach, justification
• No breach, duty discharged.
• The buyer has alleged that the seller has breached its obligation “to transfer and deliver [the goods] . . .
in accordance with the contract.” UCC § 2-301.
• The seller may respond “no breach, compliance.” The seller asserts that its performance is
progressing in accordance with the terms of the contract. EXHIBIT 8-4.
• The seller’s challenge may be based on what terms are in the contract, how these terms are
interpreted, or how these terms are applied to the facts (EXAMPLES).
• The seller may respond “no breach, excuse.” The seller admits nonperformance but asserts that its
nonperformance was excused by an external event that occurred after contract formation and
before the time for delivery that made delivery impracticable. UCC § 2-615. EXHIBIT 8-5.
The “no breach, excuse” response under Article 2 parallels the common law’s “no breach,
excuse” response.
• What external event occurred after contract formation and before the time the seller was to
deliver?
• Did this event make the seller’s delivery impossible?
• If not impossible, did this event make the seller’s delivery impracticable (e.g., unreasonably
difficult or unreasonably expensive)?
• Was the risk of the occurrence of the external event allocated expressly by contract or by
custom?
• Should the seller’s failure to deliver be considered a breach or should the seller’s failure to
deliver be excused? [Is the failure to allocate an allocation, if so, on the seller or the buyer?]
• The EXAMPLE uses Civil War as the external event. Would Civil War by itself be enough or
would students like more facts and why?
• The seller may respond “no breach, justification.” The seller admits nonperformance but asserts
that its nonperformance was justified by the defendant’s breach, either not accepting the goods or
not paying in accordance with the contract. EXHIBIT 8-6.
• Whether the seller was justified requires the same four questions as used at common law
except that some of the questions are answered by reference to Article 2 of the UCC.
• Was the seller’s obligation to deliver the goods related to the buyer’s obligation to accept and
pay? UCC § 2-301.
• Was the buyer’s payment a condition precedent to the seller’s delivery of the goods? Under
UCC § 2-507(1). The obligation to tender the goods is a condition precedent to the buyer’s
obligation to pay unless the parties have agreed otherwise. If the parties have agreed that
payment would precede delivery, the analysis continues.
• Did the buyer fail to pay according to their agreement? If the buyer has not paid as agreed
upon, the analysis continues.
• Was the buyer’s failure to pay as agreed upon sufficient to justify the seller in not delivering
the goods? (EXAMPLE and UCC §§ 2-511, 2-703(a), (b), 2-705.)
68
• The seller may respond “no breach, duty discharged.” The seller admits nonperformance but
asserts that its obligation to perform was discharged. The text lists a number of ways the seller’s
obligation could be discharged:
• Waiver
• Modification
• Rescission
• Accord and satisfaction
• Delegation where the delegatee has performed the delegator’s obligation
• Assignment so the promisor is no longer obligated to the original promisee
• Statute of limitations (EXAMPLE). PROBLEM 8-20 asks student to check their own state’s
version of UCC § 2-725 for deviations from the Official Draft’s version of the Statute of
Limitations. Oklahoma, for example, has extended the Statute of Limitations from four to five
years.
• The seller has alleged that the buyer has breached either its obligation to accept the goods in
accordance with the contract or to pay in accordance with the contract. UCC § 2-301.
• The buyer may respond “no breach, compliance.” The buyer is asserting that its performance, the
acceptance of the goods, is progressing in accordance with the terms of the contract. EXHIBIT 8-7.
• The buyer’s response may range from which terms are in the contract to an interpretation or
application of the term. The EXAMPLES involve the time for payment (when was payment
due when the contract involves the battle of the forms or parol evidence rule).
• The buyer may respond “no breach, excuse.” The buyer is asserting that its performance, not
accepting the goods, was excused by an external event that occurred after contract formation and
before the time for acceptance of the goods that made performance impracticable. EXHIBIT 8-8.
• UCC § 2-615, by stating “Except so far as a seller may have assumed a greater obligation”
provides sellers and not buyers with an excuse. Therefore, the buyer should consult the
common law’s “no breach, excuse” response.
• What external event occurred after contract formation and before the time the buyer was to
accept the goods or to pay?
• Did this event make the buyer’s performance impossible?
• If not impossible, did this event make the buyer’s performance impracticable (e.g.,
unreasonably difficult or unreasonably expensive)?
• Was the risk of the occurrence of the external event allocated expressly by contract or by
custom?
• Should the buyer’s failure to perform be considered a breach or should the buyer’s failure to
perform be excused? [Is the failure to allocate itself an allocation and, if so, should the
allocation be on the seller or the buyer?]
• The EXAMPLE uses terrorism that closes the banks as the external event. Would the closing
of the banks by itself be enough or would students like more facts and why?
• The buyer may respond “no breach, justification.” The buyer is admitting nonperformance but
asserting that its nonperformance was justified by the seller’s breach. The seller alleges the buyer
breached by either not accepting the goods, and the buyer responds by admitting the
nonperformance but asserting that the nonperformance was justified by the seller’s breach, not
delivering the goods. EXHIBIT 8-9.
• The analysis can become more complicated if multiple deliveries or multiple deliveries and
payments are involved.
• Whether the seller was justified requires the same four questions as used at common law
except that some of the questions are answered by reference to Article 2 of the UCC.
• Was the seller’s obligation to deliver the goods related to the buyer’s obligation to accept and
pay? UCC § 2-301.
• Was the buyer’s payment a condition precedent to the seller’s delivery of the goods? Under
UCC § 2-507(1). The obligation to tender the goods is a condition precedent to the buyer’s
obligation to pay unless the parties have agreed otherwise. If the parties have agreed that
payment would precede delivery, the analysis continues.
• Did the buyer fail to pay according to their agreement? If the buyer has not paid as agreed
upon, the analysis continues.
69
• Was the buyer’s failure to pay as agreed upon sufficient to justify the seller in not delivering
the goods? (EXAMPLE and UCC §§ 2-511, 2-703(a), (b), 2-705.)
• The buyer may respond “no breach, duty discharged.” The seller is admitting nonperformance
but asserting that its obligation to performance was discharged. The text lists a number of
ways the buyer’s obligation could be discharged:
• Waiver
• Modification
• Rescission
• Accord and satisfaction
• Delegation where the delegatee has performed the delegator’s obligation
• Assignment so the promisor is no longer obligated to the original promisee
• Statute of limitations (EXAMPLE). PROBLEM 8-20 asks student to check their own state’s
version of UCC § 2-725 for deviations from the Official Draft’s version of the Statute of
Limitations. Oklahoma, for example, has extended the Statute of Limitations from four to five
years.
• In an action buyer versus seller, the buyer would allege that seller breached its obligation to transfer
and deliver under UCC § 2-301. If the seller successfully responds with a “no breach, justification”
response, the breach of contract action comes to judgment for the seller. The buyer, however, may
have conferred a benefit (some payment) on the seller (who was justified in withholding delivery),
UCC § 2-718(2) authorizes a restitution cause of action in the buyer’s favor for the price already paid
less the seller’s damages by the buyer’s breach (EXAMPLE).
Step Six: The Plaintiff’s Remedies for the Defendant’s Breach

• Under the common law, the plaintiff may seek an expectation, reliance or restitution remedy for breach
of contract. Under the UCC, the plaintiff is generally limited to an expectation remedy.
UCC § 1-305(a).
• Expectation remedies are based on the bargained-for exchange as encompassed in the offer for a
bilateral contract. The offeror promises to give something in exchange for the offeree’s promise to give
something. The expectation remedy moves the nonbreaching party to the point of full performance.
The nonbreaching party receives what the nonbreaching party was expecting to receive, and the
nonbreaching party gives what the nonbreaching party was expecting to give.
If the nonbreaching party was to receive the contract price, then under expectation the
nonbreaching party receives the contract price. If the nonbreaching party has received some of the
contract price, the nonbreaching party will receive only the balance of the contract price.
If the nonbreaching party was to receive goods, then under expectation the nonbreaching party
receives the goods, or at least the money equivalent of the goods. If the nonbreaching party has
received some of the goods, the nonbreaching party will receive only the money equivalent for the
remainder.
The various Article 2 damage formulas vary as to how the money equivalent for the goods is
calculated—cover price, resale price, market price, cost to manufacture (thereby leaving profits).
• Part 7 of Article 2, entitled “Remedies,” is conveniently divided between the seller’s remedies for the
buyer’s breach (UCC § 2-703) and the buyer’s remedies for the seller’s breach (UCC §§ 2-711 & 2-
714).
• The seller’s remedies for the buyer’s breach are organized in a “hub and spoke” arrangement. UCC §
2-703 is the hub, a shopping list of seller’s remedies.
• The seller has a right to withhold the delivery of the goods. UCC § 2-703(a).
• The seller has a right to stop delivery by a bailee. UCC § 2-703(b) to UCC § 2-705.
• The seller has a right to cancel. UCC § 2-703(e). Cancellation is discussed in UCC § 2-106(4) and
discharges all of the seller’s remedies that are still executory while retaining any remedy for the
buyer’s breach, including any breach that could occur for the unperformed balance of the contract.
EXHIBIT 8-11.
• The seller has a right to identify goods to the contract, assuming the goods have not yet been
identified to the contract, and to scrap or salvage. UCC § 2-703(c) to UCC § 2-704.
• The seller has a right to resale price and recover damages. UCC § 2-703(d) to UCC § 2-706.
EXHIBIT 8-12 demonstrates the formula of bringing the seller up to the full contract price. Under
70
UCC § 2-706, the seller still has the goods and is permitted to sell them to a third party. If the
seller resells for less than the contract price, the buyer must make up the difference between the
resale price and the contract price (EXAMPLE).
• The seller has a right to damages based on market price. UCC § 2-703(e) to UCC § 2-708(2).
Even if the seller has resold under UCC § 2-706, the seller is still entitled to use UCC § 2-708(1),
expectation damages based on the market price. EXHIBIT 8-13 demonstrates how, if the market
price is less than the contract price, the seller will be brought up to the contract price
(EXAMPLE).
• The seller has a right to damages based on lost volume sales. UCC § 2-703(e) to UCC § 2-708(2).
UCC § 2-708(2) may only be used if “the measure of damages provided in subsection (1) is
inadequate . . . .” (EXHIBIT 8-14). This section recognizes that some sellers have enough goods to
sell two buyers and make a profit on each sale. Therefore, when the goods are sold after the
buyer’s breach, the seller makes one sale and receives one profit instead of making two sales and
receiving two profits. UCC § 2-708(2) recognized two profits (EXAMPLE).
• The seller has a right to damages as measured by the unpaid contract price when the buyer fails to
pay. UCC § 2-703(e) to UCC § 2-709. EXHIBIT 8-15 and EXAMPLE.
• The buyer’s remedies for the seller’s breach are organized as to whether the buyer has accepted the
goods. UCC § 2-711(1) is a mini “hub and spoke” arrangement. UCC § 2-711(1) is the hub and begins
by listing the various ways the seller may breach (by failing to make delivery and by repudiation) and
the buyer may respond to a nonconforming delivery (by rightfully rejecting the goods and by
justifiably revoking acceptance of the goods). UCC § 2-711(1) continues with remedies that apply to
all four situations.
• The buyer has a right to cancel. UCC § 2-711(1).
• The buyer has a right to recover as much of the price as has been paid. UCC § 2-711(1).
• The buyer has a right to cover and recover damages. UCC § 2-711(1)(a) to UCC § 2-712
(EXHIBIT 8-16 and EXAMPLE).
• The buyer has a right to damages (market price) for nondelivery. UCC § 2-711(1)(b) to UCC § 2-
713 (EXHIBIT 8-17 and EXAMPLE).
If the seller has failed to delivery or repudiates, the buyer has, in special cases, several additional
remedies.
• The buyer has a special property right in the goods. UCC § 2-711(2)(a) to UCC § 2-502.
• The buyer has a right to specific performance or replevin. UCC § 2-211(2)(b) to UCC § 2-716
(EXAMPLE).
If the buyer rightfully rejects or justifiably revokes acceptance of the goods, the buyer has a
security interest in the goods and may resell them. UCC § 2-711(3).
If the buyer has accepted the goods and the goods are nonconforming, the buyer’s remedies are
found in UCC § 2-714 (EXHIBIT 8-18 and EXAMPLE).
• When parties negotiate a contract, they may realize in the event of breach, one party’s damages may be
extremely difficult to calculate and prove. The parties, therefore, may include a liquidated damage
provision in their contract. UCC § 2-718(1) and EXAMPLE.
Third-Parties Beneficiaries, Assignees, and Delegatees

• Article 2 of the UCC deals with donee beneficiaries and the abrogation, in some cases, of horizontal
privity. UCC § 2-318. States are given the option of three alternatives, depending on how much
abrogation the state desires. A state may choose not to accept any of the three but to draft its own
abrogation provisions.
• EXHIBIT 8-19 illustrates a third-party horizontal donee beneficiary contract under Article 2
(EXAMPLE).
• PROBLEM 8-23 asks students to find their state’s version of UCC § 2-318 and compare it with
the three alternatives.
Article 2 does not abrogate vertical privity but leaves that to the state courts.
• The common law concepts of assignment and delegation are continued under Article 2. UCC § 2-210.
71
Suggested Answers to the Review Questions
Chapter 8
True/False
1. F Most of the drafting was done by the National Conference of Commissioners on
Uniform State Laws (NCCUSL).
2. F Article 2 only deals with contracts for the sale of goods.
3. F Each state made changes to the Official Draft.
4. F Article 2 was not enacted in Louisiana.
5. T The test is reasonable relation.
6. T This question is directed at dispelling the myth that Article 2 only applies to
commercial contracts. See UCC § 2-102.
7. F Three different types of merchants. See UCC § 2-104, comment 2.
8. F Article 2A applies to the lease of goods. Article 3 is Negotiable Instruments.
9. F UCC § 2-328.
10. T An example of when the mirror image would apply would be an oral offer
followed by an oral acceptance. Neither UCC §§ 2-207(1) nor (3) applies.
Therefore, UCC § 1-103(b) takes the analysis back to the common law.
11. T UCC § 2-207(1).
12. T UCC § 2-201(1).
13. T UCC § 2-609(1).
14. T UCC § 2-301.
15. F See UCC § 2-316.
16. T UCC § 2-314(3).
17. T UCC § 2-314(1).
18. T UCC § 2-317.
19. T The term is an additional term and whether an additional term is a term in the
contract is governed by UCC § 2-207(2).
20. T “Open price term” is a gap filler. UCC § 2-305.
21. T Whether a parol term is a term of the contract requires an application of the
parol evidence rule. UCC § 2-202.
22. F UCC § 2-610(1) says “When either party repudiates . . . .”
23. T UCC § 2-310(a).
24. T UCC § 2-612(1).
25. F See UCC § 2-608. Revocation of Acceptance.
26. F Once Buyer admits “breach,” Seller can maintain a breach of contract cause of
action. Buyer can admit “nonperformance” without admitting “breach” and this
admission, depending on its magnitude, may not entitle Seller to maintain a
breach of contract cause of action.
27. F Except for UCC § 2-718(3), Article 2 has no cause of action for restitution. See
UCC § 1-305(a). The statement refers to an expectation remedy for breach of
contract. See UCC §§ 2-711, 2-717.
28. T UCC §§ 2-706, 2-708(1). UCC § 2-708(1) makes no statement that limits its
application to where seller has not resold. Case law supports the seller’s choice.
72
29. F UCC § 2-318 only abrogates horizontal privity in some cases (i.e., those
enumerated in Alternative A, B, or C). See also UCC § 2-318, comment 2. Some
courts have also abrogated vertical privity but this is by judicial action and not
dictated by Article 2.
30. F The delegator retains the duty even though the duty is delegated.
Fill-in the Blank

1. National Conference of Commissioners on Uniform State Laws (NCCUSL)
2. Uniform Sales Act
3. Louisiana
4. Predominant factor
5. Appropriate
6. Business practice merchant
7. Goods merchant
8. Boilerplate
9. Additional
10. $500
11. Ten
12. Reliance
13. Unconscionability
14. Anticipatory repudiation
15. Gap filler
16. Parol evidence rule
17. Merchantability
18. Nonperformance
19. Cure
20. Impracticable
21. Cover
22. Lost profits
23. Other proper circumstances. UCC § 2-716(1)
24. Horizontal
25. Assignor
Multiple Choice
1. (b) The warranty term is in the first form (Buyer’s purchase order) and not in the
second form (Seller acknowledgment form) and therefore Seller impliedly
accepted the term.
2. (c) Additional term problem.
3. (b) Different term problem—courts use one of three approaches.
4. (d) No contract under UCC § 2-207(1) but contract under UCC § 2-207(3), sentence
1. Terms in the writings that do not match drop out. Gap filler terms in Article 2
are added to those terms in the writings that match.
5. (c) These facts involve only one delivery so UCC § 2-601 applies and is subject to
cure with additional time under UCC § 2-508(2).
6. (d) UCC §§ 2-612(2), (3)
7. (d) UCC §§ 2-612(2), (3)
73
8. (c) Seller is not limited to UCC § 2-706.
9. (b) No reliance in the facts and therefore no implied warranty of fitness for a
particular purpose.
10. (a)
74

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Essentials of Contract Law 2nd

Test Bank: https://testbankpack.com/p/test-bank-for-

Solution Manual: https://testbankpack.com/p/solution-

Sale of Goods Under Article 2 of the Uniform Commercial Code

Contracts That Involve the Sale of Goods and Article 2 of

Step One: Establishing the Method of Dispute Resolution, Selecting the

Choice of Law Issues

• Which state’s law applies in a multi-state transaction.

• Determining which state’s law applies in a multi-state transaction.

Sale of Goods and Security Interest in the Goods

Article 9. The Secured Transaction

security interest in the goods

Article 3 (optional). The Note (Promissory Note)

Article 2. The Contract for the Sale of Goods

obligation to accept the goods and pay

obligation to pay and to return at

(PowerPoint ch. 8-2)

Step Two: Contract Formation—The Impact of Article 2 on Offer, Post-

Acceptance Under Article 2

Two writings with the bargained-for terms agreeing.

Common law Oral or written contract with written confirmation.

Two writings with the bargained-for terms not

(PowerPoint ch. 8-3)

• FOB seller’s place • FOB buyer’s place

• FOB seller’s • FOB buyer’s • FOB seller’s

• FOB seller’s • FOB buyer’s • FOB seller’s

(PowerPoint ch. 8-8)

Step Three: Contract Enforceability Under Article 2

(PowerPoint ch. 8-9)

• Breach by anticipatory repudiation

Buyer’s Purchase Order Seller’s Acknowledgment Form

(PowerPoint ch. 8-10)

Step Five: The Defendant’s Response to the Plaintiff’s Allegation of Breach

Step Six: The Plaintiff’s Remedies for the Defendant’s Breach

Third-Parties Beneficiaries, Assignees, and Delegatees

Fill-in the Blank

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