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Professor Robert Butkin

Selling and Leasing of Goods

Fall 2019

Assignments for August 26 and 28

Required Texts:

Keating, Sales: A Systems Approach (6th ed. 2016) (“Casebook”)

Mann, Warren, Westbrook, 2018 Comprehensive Commercial Law: Statutory

Supplement (“Statutory Supplement”).

Butkin, Selling and Leasing of Goods Supplemental Materials (“Butkin Materials”). You

will find these materials on the TWEN page.

Note: Previous editions of the Keating Casebook are not acceptable. The 2016 and

2017 editions of the Mann, Warren Westbrook Statutory Supplement are acceptable.

The 2019 edition of Mann, Warren Westbrook is acceptable if it has been published

and is available prior to the beginning of class.

Monday, August 26

Please make sure you have enrolled in the course on TWEN prior to the first day of class.

Make sure when enrolling that you use an email address that you will be checking

periodically each day, as I will be communicating with the class primarily through the

TWEN page. Please read the Course Description and Policy, and the Course Syllabus and

Learning Objectives prior to the first day of class as well. You are responsible for the

information contained in the course Description and Policy. You will find these

documents on TWEN. They will also be provided to you on the law school’s faculty

website prior to the beginning of class, and can be accessed at

http://lawfaculty.utulsa.edu/.

Introduction to Course

Please read Butkin, Selling and Leasing of Goods Supplemental Materials, pp. 1-12.

These materials are posted to Assignment folder on TWEN for August 26 and 28, and are

attached to the copies of this assignment found outside the Faculty Support Center.

Prepare the questions that you find in these materials.

Please scan, print out and bring with you to class the Table of Contents for the Uniform

Commercial Code, which you will also find attached to this assignment and which is also

posted to the Assignment folder on TWEN for August 26 and 28.

Scope of Article 2-Sales:

1. What are “transactions in goods?”

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This course will require the ability to closely analyze pertinent provisions

of a statute, the Uniform Commercial Code. Many times, the meaning of a given

Code section becomes clear only if read in connection with other sections of the

Code. The following problem is intended to provide an exercise in statutory

analysis, and at the same time assist us in determining when the UCC Article 2

applies to a given transaction. Please write down your answer to the problem, and

feel free to share it with me by email if you would like.

HYPO: Buyer and Seller enter into a written contract for the purchase of a

computer that was advertised in the Seller’s catalogue. The computer is to be

manufactured by Seller. The contract calls for a delivery date three months after

the date of the contract. Two days after the contract is signed, and before Seller

has commenced manufacture of the computer, Seller notifies buyer in writing that

Seller has decided to discontinue the computer model that Buyer ordered, and that

Seller is repudiating the contract.

QUESTION: Does this transaction fall within Article 2 of the Uniform

Commercial Code or not? If so, why? I strongly encourage you to write

out your answers. As you prepare your analysis, please consult the

following sections of the UCC, which you can find in our Mann, Warren

Westbrook Statutory Supplement. §§ 2-102, 2-105(1) 2-105 (2), 2-106(1),

2-401 (1), 2-401(2), 2-501(1), 2-610. Pay attention to how the individual

sections of Article 2 work together to provide an answer to the problem.

Wednesday, August 22

Scope of Article 2-Sales

2. The problem of “mixed” contracts involving both sales and services

The definition of merchant in Article 2

An introduction to the law of warranties

Please read:

Casebook, pp. 11-21 (beginning with note on scope of Article 2, page 11)

Simulados Software, Ltd. V. Photon Infotech Private, Ltd.

Cook v Downing

Please prepare to discuss Problems 1.3 and 1.4, Casebook, p. 22

Be sure to read the UCC sections referenced following each problem

Please read UCC § 2-104 (1) and Official Comments 1-3, and be prepared

to answer the following questions:

1. What is the difference between a “goods” merchant and a

“practices” merchant as defined in UCC §2-104(1)?

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2. Does the implied warranty of merchantability in UCC § 2-314

apply to “goods” merchants, “practices” merchants or both?

3. In the event that the implied warranty of merchantability applies

to a sales transaction, what are the minimum quality requirements

the goods must satisfy in order to comply with the warranty. See

UCC § 2-314 (2)

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Selling and Leasing of Goods

Supplemental Materials

Professor Robert Butkin

University of Tulsa College of Law

Revised: August 5, 2019

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Part I

Introduction

An understanding of the law of Selling and Leasing of Goods requires that

we determine the law that applies to a given case or problem. Obviously, we will

not be able to solve any problem involving this subject (or any legal problem)

unless we first can correctly identify the source of law that will provide the

applicable rules of decision.

This course is described as a “Code course” because the applicable law for

problems arising in this field is often found in the Uniform Commercial Code

(UCC), a body of laws enacted by state legislatures, or in the Convention on

Contracts for the International Sale of Goods (CISG), a treaty which binds those

countries that have ratified it and which provides the applicable law for

transactions falling within its scope. However, the course will also require

knowledge of basic principles of the common law of contracts—the principles that

we focused on in our first year Contract course.

There are two reasons for this. First, as discussed in Part II that follows,

unless the UCC has displaced the common law, the UCC itself provides that

common law principles supplement the statutory provisions of the UCC. In short,

the UCC itself does not “speak” to every issue that could arise in cases that fall

within the UCC’s scope, and in those cases, the UCC itself directs us to the

common law to find the applicable rules. Second, in many cases (for example,

UCC §2-207, the “Battle of the Forms”), the UCC dramatically differs from

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common law’s treatment of the same issue. In the latter situation, we will have a

better understanding of the UCC if we understand the perceived defect in the

common law that the UCC drafters were trying to address.

A full review of first year Contracts is not feasible within the scope of this

course. However, our studies in this course will be enhanced if we refresh our

understanding of certain common law principles, and the following materials are

intended to do that.

Part II

Choice of Applicable Law

Choice of law is the choice of legal rules under which a dispute will be

resolved. Thus, choice of law will always be the threshold step in any problem

involving contract analysis.

A. THE COMMON LAW

The common law refers to judge-made law, governing rules that can be

distilled from analysis of court decisions. The common law is to be distinguished

from statutory law, which refers to legislation passed by a state legislature or

Congress that provides an applicable rule of decision. When a state legislature

passes a statute that diverges from or codifies the common law, that statute will

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always prevail. For our purposes, common law will refer to the law that applies if

there is no legislation that would otherwise provide the rule of decision.

Many of you will remember studying the Restatements of Contracts as a

way of learning about the common law of contracts. A private organization, the

American Law Institute (ALI), consisting of judges, leading practitioners, and

leading scholars, has adopted Restatements covering a number of fields of law,

including contracts, torts, and restitution. There have been two Restatements of

Contracts. The Restatement (First) of Contracts was officially adopted by the ALI

in 1932; the Restatement (Second) of Contracts was officially adopted by the ALI

in 1979.

The Restatement (First) tended to emphasize “black letter rules” and

predictability, while the Restatement (Second) tended to provide for more

flexibility, accommodation of the law to developing commercial practices, and

judicial innovation. Please keep in mind that the Restatements themselves are

secondary authority, and are not “the Law.” However, courts will often give them

authoritative weight, and in a number of situations appellate courts have explicitly

adopted Restatement sections as the governing rules of law in their jurisdictions.

In such cases, the Restatement provision so adopted becomes the law of that

jurisdiction (until such time as the legislature passes a statute departing from that

rule, or such time as the appellate courts in that jurisdiction depart from the

principle of stare decisis and choose to apply a new rule), while those portions of a

Restatement not adopted by a court remain secondary authority. For the purposes

of this course, unless otherwise noted, we will apply the common law rules as set

forth in the Restatement (Second) Contracts. You will find the Restatement rules in

the supplement that was used in your first year Contracts class.

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B. THE UNIFORM COMMERCIAL CODE

Historically, much of the law of contracts in the Anglo-American system has

been common (judge-made) law. One significant and very notable exception to

this was the Statute of Frauds, enacted by the English Parliament in 1677. A

similar Statute of Frauds was subsequently adopted in virtually every American

state in early American history. The Statute of Frauds requires that certain types of

contracts be evidenced by a writing to be enforceable in court. But with the

exception of the Statute of Frauds, Anglo-American law traditionally consisted

largely of common law.

In the twentieth century, this began to change. The most important change to

the traditional common law nature of contract law was the adoption of the Uniform

Commercial Code (UCC) in legislatures throughout the fifty states and the District

of Columbia.

The UCC had its origins in a recognized need to bring greater uniformity

and predictability to a commercial system that was becoming increasingly modern

and national in the twentieth century. Two private organizations, the National

Conference on Commissioners of Uniform State Laws (NCCUSL), now known as

the Uniform Law Commission (ULC), and the American Law Institute (ALI),

came together to draft a uniform act for submission to the states. (In these

materials, I will refer to NCCUSL by its current name, the Uniform Law

Commission (ULC). The ULC was founded in 1892 and was responsible for the

drafting of a number of uniform laws that were enacted by the states prior to the

UCC. The ALI, discussed above, was founded in 1923 to address the need to

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provide a compilation of common law principles in certain subjects of law that

would be accessible in a single resource.

The joint ULC/ALI project to draft a UCC began in 1945.1 The ALI and

ULC completed a final text of the proposed UCC in September 1951. After it was

debated and approved by the House of Delegates of the American Bar Association,

a text was issued in November 1951. After a number of revisions, particularly in

response to the criticisms and suggestions of the State of New York Law Revision

Commission (which held hearings on the text from 1952-1955), the ALI and ULC

approved a draft that was published as the “1957 Official Edition” of the UCC.

Several years later, after further revisions, these bodies adopted the 1962 Official

Text with Comments, and this became the draft enacted by the legislatures of the

50 states and the District of Columbia. 2

During the last 48 years, a number of articles were amended and several

additional articles were added. They are as follows:

Article 1-General Provisions. Revised by ULC and ALI in 2001. All fifty states,

as well as the District of Columbia have enacted into law revised Article 1. The

Revised Article 1 is the version that you will find in our Statutory Supplement used

for this course.

Article 2-Sales. Revised by ULC and ALI in 2003. To date, no state has enacted

revised article 2. In May, 2011, the ULC and the ALI officially withdrew their

1 I want to thank Professor Martin Frey of the College of Law faculty for the following summary of the history of the drafting and adoption of the UCC. 2 The State of Louisiana has not adopted Article 2.

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support of Revised Article 2. Most statutory supplements, including the one we

use in our course, now omit the 2003 revisions of Article 2.

Article 2A-Leases. In 1987, ULC and ALI adopted a proposed Article 2A,

entitled Leases. The 1987 version of Article 2A was subsequently amended in

1990. To date, 49 states and the District of Columbia have enacted the 1990

Article 2A. (Louisiana is the only exception) In 2003, ULC and ALI adopted a

revised Article 2A. To date, no state has enacted revised (2003) Article 2A, and in

May, 2011, the ULC and the ALI officially withdrew their support of Revised

Article 2A.

Article 3-Negotiable Instruments. Revised by ULC and ALI in 1990. Revised

Article 3 has been adopted in 48 states and the District of Columbia.

Article 4-Bank Deposits and Collections. Amended to conform to revised Article

3 in 1990. 48 states and the District of Columbia have enacted amended Article 4.

Article 4A-Funds Transfers. This new article was adopted by ULC/ALI in 1989.

It has been enacted in all 50 states and the District of Columbia.

Article 5- Letters of Credit. Revised in 1995. 50 states and the District of

Columbia have enacted Revised Article 5.

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Article 6-Bulk Transfers. Article 6 has been repealed in all fifty states.

Article 7-Documents of Title. Revised in 2003. As of this date, 36 states have

adopted Revised Article 7.

Article 8-Investment Securities-Revised in 1994. All 50 states have enacted

revised Article 8.

Article 9-Secured Transactions. Revised in 1998. All 50 states have approved

Revised Article 9. In 2010, the ULC and the ALI adopted amendments to Article

9, the most important of which involved changes to way the debtor’s name is

required to be identified in UCC-1 financing statements that are used to perfect a

security interest. As of the date of the preparation of these materials, all fifty

states, and the District of Columbia, have adopted the 2010 amendments. The text

of Article 9 that is included in our Statutory Supplement includes the 2010

amendments.

Please keep the following in mind when considering cases that may fall

within the scope of the UCC:

1) The Code is “uniform” only at the time that the Uniform Law

Commission (ULC) and the ALI approved it (or a revision) for submission to the

states. States have often made non-uniform amendments to Articles of the UCC

that have been adopted in those states. Thus, it will always be necessary to consult

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the law of your jurisdiction for the statutory text of the UCC in effect in that

jurisdiction. For the purposes of this course, we will assume that the “Official

Texts” as approved by ULC and ALI provide the applicable rules of statutory

decision for cases falling within the scope of the UCC.

2) As we noted above, over the last half century, a number of UCC Articles

have been amended or revised by the ULC and the ALI, and several new Articles

have been adopted that were not part of the original UCC, e.g. Article 2A-Leases.

Please make sure you monitor legislative developments in the jurisdiction in which

you are practicing to keep abreast of legislative adoptions of future revisions or

amendments to existing Articles. The Uniform Law Commission (ULC) website,

www.uniformlaws.org also provides a resource for researching new revisions or

articles that are being considered for adoption and presentation to the states.

PROBLEM II.1

(a) Go to the website for the Uniform Law Commission,

www.uniformlaws.org. From that website, find the link for either the

2001 revision to Article 1 of the UCC or the link to the 2010

amendments to Article 9 of the UCC. What information is provided to

you in each of those links?

(b) From the Uniform Law Commission website, find a list of the

revisions and amendments to the UCC, if any, that are to be considered

this year in the state in which you plan to practice.

3) The role of the courts in deciding cases that fall within the scope of the

UCC is narrower than their role in deciding cases that do not fall within the scope

of a statute. The task of a court in deciding a case that falls within the scope of a

statute is one of statutory interpretation: it may not substitute a common law rule in

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cases where the legislature has enacted a statute that speaks to the issue under

consideration.

4) While one of the statutory goals of the UCC is to promote uniformity in

commercial law among the different states (see UCC § 1-103 (a) (3)) each state’s

judiciary has flexibility in how it interprets UCC provisions that have been enacted

in that state. The UCC is state law. There is no “UCC Supreme Court” with final

authority to resolve differences among the states when states have interpreted UCC

provisions differently. Courts in each state may decide how much deference, if

any, to accord to court decisions in other states that have addressed the same or

similar issues.

5) The Uniform Commercial Code, despite its name, does not cover, within

the scope of any of its articles, the full range of transactions that we would think of

as “commercial.” Thus, sales and leases of real property, and contracts for

personal services, are not included within its scope. Conversely, many transactions

that one would not think of primarily as “commercial” fall within the scope of the

UCC. A sale of 50 Boeing 787 jets would fall within the scope of Article 2- Sales,

as would the sale, at a garage sale, of a used Barbie Doll.

The Relationship between the UCC and the Common

Law

Article 1-General Provisions, applies to all other Articles in the UCC. UCC

§ 1-103(b) states:

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Unless displaced by the particular provisions of [the UCC], the principles of

law and equity, including the law merchant and the law relative to capacity

to contract, principal and agent, estoppel, fraud, misrepresentation, duress,

coercion, mistake, bankruptcy, and other validating or invalidating cause

supplement its provisions.

This Section, and the Official Comments thereto, make clear that principles

of the common law and equity apply to disputes falling within the scope of the

UCC unless those principles have been displaced by the UCC’s language or by its

underlying purposes and policies. See Official Comments 2, 3, and 4. What

happens if state legislatures have codified specific common law rules, as is the

situation in a number of states including Oklahoma and California? In such

situations, the fact that a principle of common law or equity has been stated in

statutory form would not alter a court’s analysis of whether that principle should be

used to supplement the UCC in a given case. Official Comment 3.

Under what circumstances will courts draw on principles of law and equity

to supplement the UCC? While this is not an exhaustive list, one might consider

three circumstances where common law would supplement the UCC. One

situation arises when the UCC does not provide any definition of terms used within

the UCC when those terms had their origin within the common law. For example,

the terms “offer” and “acceptance,” which describe traditional requirements of

common law contract formation, are used within the UCC but given no precise

definition within the UCC itself. See, e.g. §§ 2-205, 2-206, and 2-207. The courts,

on the other hand, in the development of the common law, have developed well-

accepted definitions of these terms as well as robust case law applying those terms

to specific cases involving issues of contract formation. Similarly, the UCC does

not contain a provision addressing issues such as revocation, rejection, and

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counteroffer. Section 1-103 would direct us to the common law for the applicable

rule in those cases. The common law mailbox rule, under which an acceptance of

an offer by mail is effective at the moment of dispatch, rather than receipt, is

another example of a common law rule which is incorporated into the UCC

through UCC § 1-103 (b).

A second situation arises where the UCC is silent on available defenses to

the enforcement of contracts that are available under the common law. These

would include:

1. Common law rules making contracts voidable due to status (e.g. when the

party seeking to void a contractual duty was younger than 18 years old at the

time of the making of the contract);

2. Common law rules making contracts voidable due to lack of capacity (e.g.

when a person is unable to understand the nature of his contractual

obligation due to mental illness or defect, or intoxication);

3. Common law rules making contracts unenforceable due to duress, mistake,

fraud, misrepresentation, or grounds of public policy.

A third situation arises where both the UCC and the common law contain

identical rules, but neither the UCC nor the common law has precisely defined

those rules, nor may be capable of precisely prescribing how those rules will be

applied in a given case. One example of this may be the discretion that the UCC

provides courts to refuse to enforce contracts, or portions of contracts, that courts

find “unconscionable.” UCC §2-302. Courts applying the common law have also

applied the doctrine of unconscionability to hold unenforceable contracts or

portions thereof. Such determinations are made on a case-by-case basis; the law of

unconscionability is evolving. Courts considering whether contracts within the

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scope of the UCC are unconscionable may wish to draw on analyses made by

common law courts, and vice versa.