Sales Law Bar Review

Prof. Bill Long 2/14/06

Below is an outline and a framework for considering sales law questions in a bar examination. The next essay provides the question posed in the July 2005 Oregon Bar Examination. The third essay of this triad provides a complete answer to the question. I will post the third essay after 2/22/06.

A Sales Law Primer and Preparation for Bar Examination

Professor William R. Long
Willamette University College of Law

February 22, 2006

The purpose of this outline, series of questions and practice question is to guide you through the process of thinking you should pursue if there is a Sales law question on the Oregon State Bar Examination. Important for answering a question succinctly and accurately is to have a framework in mind about how to address a sales question. Though you do not have to master all section numbers in order to do well on the answer, you should know a few important sections (see below) which tend to be tested again and again.   I will divide this presentation into two sections: (1) the "flow" of the most important Code sections along with the questions that should guide you in analyzing a sales question; and (2) a consideration of a past examination question.

A.   The Role of Article One. Article One provides background principles for understanding every other Article of the UCC.   Often these principles lie deep in the background of transactions, but just as often they can be referred to in order to assist in making your argument. Among the most important are the "pro-trade" nature of the UCC (1-103(a)(2); the fact that the UCC displaces other similar or same-topic law, and the importance of trade terms (1-303).    Be sure to say that you are referring to new or revised Article 1, which is being more widely adopted each year.

B.   The Scope of Article 2. The 100 series of Article 2 addresses the issue of what constitutes a sales transaction.   It is a sale of goods, and goods are things that are movable at the time of identification to the contract.   Important issues have to do also with the difference between goods and realty, goods and services in a transaction and the fact that goods are to be distinguished from such things as securities and choses in action.  

Thus, the first question you ask is whether an Article 2 transaction is in view.

C.   The Formation of a Contract under Article 2.   The major point, considered in the 200 series of Article 2, is that the Code relaxes the strictness of the common law mirror image rule in favor of a more nuanced approach to formation.   Mutual assent is still required, but 2-204 tells us that such assent can happen "in any manner sufficient to show agreement."   The SoF (2-201) is a defense to the enforceability of a contract when there is no writing evidencing the contract.   The Parol Evidence Rule (2-202) is triggered when there is a writing and the court must determine whether the writing is a "final" version of the contract with respect to included terms or is a "complete and exclusive" agreement.   If it is the latter, it is a complete integration, and only trade terms can supplement its meaning.   If it is the former, consistent additional terms may be added to supplement meaning.   Formation   2-207 deals with the issue of differing forms between buyer and seller, while 2-209 emphasizes that modification of a contract may be made without additional consideration.

The next question you ask is whether a valid and enforceable contract has been formed or whether certain parts of it or the whole might be attacked on one of the foregoing grounds.

D. The terms of the agreement.   Once you have decided that there is an enforceable contract you need to ascertain what the terms of the contract are.   Often the terms will be clear, but a court might throw some of them out (or invalidate the entire contract) through an unconscionability analysis.   Often, "U" will only act to sever certain terms from the contract.   Because the UCC is a "pro-commerce" document, it will supply missing terms in a contract when those terms can be reasonably determined.   These additional terms are called "gap-fillers" and appear in the 300 series of Article 2.   But the most important sections in the 300 series have to do with the warranty provisions.   Warranties are express, implied or for a particular purpose, and warranties may be disclaimed if they are conspicuous and mention "merchantability" (old Article 2) or mention other specific ways that the seller is not responsible for the quality of the goods.  

The next question you ask is what the specific terms of the contract are.   Almost all sales questions will have a warranty provision in them, so take time to consider what kind of warranty is being described.   Often there is an attempt to disclaim the warranty, so you have to ask if it was effectively disclaimed.

E.   Performance of the Contract.   This is a large subject, covering most of the 500 and 600 series of Article 2.   It has to do with the important concepts of delivery, rejection, acceptance, cure, anticipatory repudiation and adequate assurance of performance of a contract.   That is, almost every contract which is litigated has something wrong with one of these categories of activities--all of which are dealt with in Article 2.  

The next question you need to ask is where the problems in performance of the contract arose.   Did the seller (or buyer) give signals that enabled the buyer (or seller) to raise the question of adequate assurance of performance?   Were the goods delivered in a damaged form?   Does the seller still have time to "cure" delivery?   Did the buyer reject the goods in a timely way?   Did the buyer accept them?   If the buyer accepted them, was there a chance for revocation of acceptance?

F.   The final section of Article 2, the 700 series, deals with remedies for buyer and seller when a contract of sales has been breached.   The two sections you need to study are 2-703 (index of seller's remedies) and 2-711 (index of buyer's remedies).   The "cover" remedy is often tested (2-712), and you should also know that incidental and consequential damages are available to a seller, but only incidental damages are available for the buyer.

The final series of questions you need to answer has to do with remedies available for all parties.   Frequently the fact pattern will ask you to discuss the remedies available for all the parties to the transaction, so you need to be familiar with buyer's and seller's remedies.   A question may also probe the legitimacy of a limitations of damages clause.    You will need to study 2-719 to approach that question.

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