Uniform Commercial Code ? Merchants and Terms

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 195-216

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UNIT 11: UCC MERCHANTS AND TERMS 195

Unit 11

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ALTERNATIVE REGIMES

Part Two

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Uniform Commercial Code – Merchants and Terms

FOCUS OF THIS UNIT

Article 2 of the Uniform Commercial Code applies to all sales of goods, even if

(for example) you sell your classmate a used comic book for one dollar. As to its

applicability, the UCC does not have a minimum price or any particular

qualifications for buyers or sellers. The transaction need only be one in which title to

goods passes from the seller to the buyer for a price. That being said, Article 2 does

contain several special rules that apply only to merchants. This unit will introduce

you to the concept and some of the implications of a there being a UCC “merchant”

on one or both sides of a sales transaction. We will also consider a topic that has been

the bane of generations of students (and professors) of American contract law—the

so-called “battle of the forms” under UCC § 2-207. Suffice it to say for now that section

2-207 throws out the “last shot rule” of common-law contract formation and replaces

it with . . . something different. It is a little bit complicated.

Merchants and Additional Standards. A recurring tension in American law—

not just in contract law—is the question of whether the law should treat all parties

the same regardless of their knowledge or sophistication. The question is frequently

resolved both ways. A healthy dose of equal treatment is embodied in Theodore

Roosevelt’s famous declaration that “no man is above the law and no man is below

it.” On the other hand, some situations seem to call for recognition that some parties

are in a position where holding them to a higher standard is reasonable, reflecting

the famous Biblical admonition that “to whom much is given, from him much will be

required.” Or, as football coach Tony Dungy put it, “I need to treat everybody fairly,

but fair doesn't always mean equal.”

Article 2 addresses this tension by creating a special category of buyers and

sellers known as “merchants,” essentially people or organizations who regularly deal

in the goods or practices of selling goods. For example, if law professor Snyder sells

his used car to law professor Burge, the transaction is governed by the UCC, but

neither party is a merchant. Snyder is not a car dealer and Burge does not buy cars

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196 CHAPTER IV: ALTERNATIVE REGIMES

except for personal use. If, however, Burge buys his vehicle off the lot at Snyder’s

Used Car Mart, Snyder in that case qualifies as a merchant while Burge does not.

Taking the facts one step further, suppose that Burge is actually a used car buyer for

the local auto auction. In that case, the sale occurred “between merchants” because

both sides both sides of the car sale qualify as merchants. UCC § 2-104 defines the

term “merchant” in subsection (1), while subsection (3) describes when a transaction

is “between merchants.” Both concepts will show up in the cases in this unit, so you

would do well to examine UCC § 2-104 briefly before continuing.

In this unit, we will see two of the instances where merchant status matters

under Article 2. The first is the creation of a warranty that goods sold by a merchant

are of a certain quality, a warranty known as the “implied warranty o f

merchantability,” contained in UCC § 2-314. A second place where merchants make

an appearance in this unit is in section 2-207, the other major topic in this unit.

Shattering the Mirror Image Rule. Section 2-207, it is fair to say, changes

everything that you think you know (and we just taught you) about the mirror-image

rule under the common-law of contracts. Indeed, one could fairly say that section 2-

207 smashes the mirror into thousands of shards capable of bloodying the hands that

touch them. Section 2-207 was drafted to deal with a real problem under the common

law. Because the mirror-image rule requires that contracting parties agree to the

exact same terms in order to form a contract, the last party to propose terms before

performance of the contract always controlled the terms of the deal. Because the last

party gets the upper hand in dictating contract terms in this situation, this mirror-

image requirement is also frequently referred to as the “last shot rule.” While that

was not necessarily a fair way to select among conflicting terms on which parties did

not agree, it at least has the virtue of being simple. Section 2-207, as you will see,

replaces mirror-image offer and acceptance with a regime where non-identical

responses to an offer are treated as acceptance of the offer, along with proposals to

modify the contract. At common law, of course, a non-identical acceptance would be

treated as a counter-offer. Section 2-207 has proved to be one of the most controversial

contract-law innovations in UCC Article 2, as well as one of the more challenging

concepts for students to understand.

As in the previous unit, we have edited citations to the Uniform Commercial

Code in the cases that follow so that they will refer you to the “Official” version of the

UCC found in many statutory supplements (or in online databases, including the free-

access Legal Information Institute: https://www.law.cornell.edu/ucc). We believe you

will find it helpful to see the statute separately, even where courts provide you with

a lengthy quotation. Doing so will enable you to see the larger context in which

particular sections of the code operate.

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