Sales Law
| Author | Jeffrey Lehman, Shirelle Phelps |
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The law relating to the transfer of ownership of property from one person to another for value, which is codified in Article 2 of the UNIFORM COMMERCIAL CODE (UCC), a body of law governing mercantile transactions adopted in whole or in part by the states.
The sale of a good, or an item that is moveable at the time of sale, is a transaction designed to benefit both buyer and seller. However, sales transactions can be complex, and they do not always proceed smoothly. Problems can arise at several phases of a sale, and at least one of the parties may suffer a loss. In recognition of these realities and of the basic importance of orderly commerce to society, legislatures and courts create laws governing sales of goods.
The most comprehensive set of laws on sales, the Uniform Commercial Code (UCC), is a collection of model laws on an assortment of commercial activities. The UCC itself does not have legal effect; it was written by the lawyers, judges, and professors in the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL). All states have adopted the UCC in whole or in part by enacting the model laws contained in its 11 articles.
Article 2 of the UCC deals with the sale of goods. All states with the exception of Louisiana have enacted at least some of the model laws in Article 2. Laws on the sale of real estate and the sale of services are different from laws on the sale of goods, and they are excluded from Article 2. A service contract may be covered by the provisions in Article 2 insofar as it involves the transfer of goods, and courts may use Article 2 as a reference for interpreting laws on the sale of services. Some contracts are a blend of the sale of goods and the sale of services and may be covered by Article 2. For example, the service of food by a restaurant may be considered, for some purposes, a contract for a sale of goods (U.C.C. § 2-314).
Article 2 covers sales by both private individuals and merchants. Merchants are persons engaged in the business of buying or selling goods. A small number of provisions apply only to merchants, but otherwise the provisions cover all sales.
A contract for the sale of goods can be made in any manner that shows agreement between the buyer and seller. A contract may be made orally or in writing or through any other conduct by both parties that acknowledges the existence of a contract.
To form a contract, one of the parties must make an offer, the other party must accept the offer, and consideration, or something of value, must be exchanged. An offer may be revoked without any loss to the offeror if the revocation is made before the other party accepts the offer and gives consideration. However, an offer may not be revoked for up to 90 days if it is (1) accompanied by an assurance that the offer will be kept open; (2) made by a merchant; and (3) in writing signed by the offering merchant (U.C.C. § 2-205).
If a party accepts an offer but in the process of accepting changes material terms of the offer, the acceptance may be considered a counteroffer. A counteroffer eliminates the first offer, and no contract is formed until the original offeror accepts the counteroffer and consideration is
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exchanged. In contracts between merchants, additional or different terms by the offeree become part of the contract unless (1) the offer expressly limits acceptance to the terms of the offer; (2) the new terms materially alter the contract; or (3) the offeror objects within a reasonable time.
Many basic principles of contract law also apply to the sale of goods. The STATUTE OF FRAUDS requires that an agreement to sell goods at $500 or more must be in writing or it cannot be enforced in court. The writing must be signed by the party to be charged, it must contain language indicating that a contract has been made, and it must identify the parties to the contract and the quantity of goods sold. There are a few exceptions to the Statute of Frauds.
A sales contract that is UNCONSCIONABLE may be struck down in whole or in part by a court. A sale is unconscionable if a person in a superior bargaining position dictates terms that are grossly unfair to the other party. A court will determine whether a sale is unconscionable by examining the circumstances at the time the contract was made. Courts rarely find unconscionability in sales between merchants because merchants generally are more sophisticated in sales negotiations than are non-merchants.
Parties to a sale sometimes do not include all the terms of the sale at the time the agreement is made. Such omissions will not destroy the agreement if the parties intend to add terms at a later date. If the parties wish to modify an existing sales contract, the modifications should be in writing if they increase the value of the sale to $500 or more.
Performance is the fulfillment of a promise in the contract. Many issues can arise in a sales contract after the contract is made and before a party's performance is required.
Sometimes performance may be made impracticable. If the goods are completely destroyed before the risk of loss has passed to the buyer, and the goods have not been destroyed through the fault of either party, the seller may be excused from performing. Risk of loss is responsibility for any damage or destruction of goods; the parties may decide in the contract when the risk of loss of the goods passes from the seller to the buyer. If the goods are only partially destroyed or have deteriorated, the buyer may demand to inspect the goods and either void the contract or accept the goods with a reduction in the contract price.
A seller may avoid performing only if the destroyed goods were specifically identified when the sale was made. For instance, if the sale is of a lamp handpicked by the buyer, the destruction of that particular lamp would excuse the seller's performance, and the seller would not be liable to the buyer for the loss. However, if the contract is simply for a lamp of a specific description, the...
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