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UCC Contract Law: Requirements

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  • 0:05 UCC Article 2
  • 2:38 Offer
  • 4:15 Acceptance
  • 5:31 Additional or Different Terms
  • 8:27 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

The Uniform Commercial Code's Article 2 covers contracts for the sale of goods, including the necessary requirements to form a contract. This lesson explains offer and acceptance under the UCC.

UCC Article 2

Meet Polly. Polly is a seamstress. Polly makes and sells all kinds of pillows. For a business like Polly's, it's helpful to be familiar with the Uniform Commercial Code, or UCC. The UCC is a uniform act that covers sales and other commercial transactions.

The UCC isn't law. Instead, it's a model. It's a guide meant to encourage uniformity and consistency between state laws. While all 50 states have enacted at least portions of the UCC, state laws regarding commercial contracts still aren't exactly uniform. This is because different states have adopted different parts and sometimes even different versions.

The UCC is vast, so there's no practical way for Polly to know every provision. Instead, Polly will mostly want to be familiar with the UCC's Article 2. This article is, itself, extensive. It's entitled simply 'Sales' and specifically addresses contracts for the sale of goods, like Polly's pillows.

Generally, a sales contract is formed once a party makes an offer and another party accepts that offer. The UCC's rules are fairly lax because Article 2 is meant to facilitate, rather than impede, commercial contracts. Article 2 actually states that a contract for the sale of goods may be made in any manner sufficient to show agreement. For example, let's say Polly offers a particular purple pillow for $20, and Parker accepts that offer by purchasing the pillow. This constitutes a simple sales contract, even if Polly and Parker never spoke.

In reality, the majority of business agreements are made without the use of a written and signed contract. For example, oral contracts and purchase orders are commonplace. Among many other things, Article 2 covers the rules regarding the different ways offer and acceptance can be achieved in contracts for the sale of goods. Let's take a closer look.

Offer

Let's start by examining what constitutes an offer under Article 2. The UCC doesn't specifically define offer. Instead, the UCC follows common law and general contract principles that tell us an offer is a proposal intended to create a contract if the other party agrees to that proposal.

Let's say that Polly has a storefront where she sells her pillows. The purple pillow is at the store and has a price tag for $20. This is an offer to sell the pillow. An offer can be any sign of willingness to enter into an agreement, as long as another person would justifiably believe that he or she is invited to agree to the offer.

When Polly offers to sell the pillow for $20, the power to create the contract is placed in the hands of Parker. Once Parker accepts Polly's offer, the two have a legally binding contract. Polly can't take back her offer once Parker has accepted, though Parker can choose to reject her offer. If Parker rejects her offer, then Polly isn't obligated to sell the pillow for $20 or at all.

Let's say Parker walks out of the store without buying the pillow. Polly can change the price on the pillow to $30, making a new offer to sell the pillow. She's no longer obligated to sell the pillow for $20.

Acceptance

Now let's take a look at what constitutes acceptance under the UCC's Article 2. Like offers, the UCC treats acceptance very liberally. A party can accept an offer in any manner and by any medium reasonable in the circumstances. Let's say that Polly operates a website and sells her pillows online. Parker contacts Polly and offers to buy the purple pillow for $20. If Polly promptly ships the pillow to Parker, then Polly has accepted Parker's offer.

Under general contract principles, a valid acceptance must mirror, or specifically agree to the same terms as the offer. This isn't true under the UCC. Let's say Parker offers to buy the pillow and be billed for it at the end of the month. Polly ships the pillow with an invoice that requires payment within ten days. Though the terms don't mirror one another, the UCC still treats Polly's shipment as an acceptance of Parker's offer. Let's take a look at what happens when an acceptance contains additional or different terms.

Additional or Different Terms

A common scenario involves two merchants, or people who are in the same business. In our case, a merchant is someone who's in the pillow business. If the parties aren't merchants, then any additional or different terms are treated as proposals. They don't become part of the contract unless the other party specifically agrees to those terms.

However, if both parties are merchants, additional or different terms in the second document normally become a part of the contract. Under the UCC, these terms become a part of the contract unless:

  • The offer specifically prohibits additional or different terms.
  • The additional or different terms materially alter the offer.
  • A party notifies the other that he or she objects to the additional or different terms.

Let's say that Parker owns a pillow superstore, and wants to stock his store with Polly's pillows. Parker emails Polly a purchase order for 100 purple pillows. Parker's company uses a standard purchase order that contains boilerplate language. This is the typical small print contained in a commercial document. Parker's purchase order says that his company agrees to pay within 30 days of receiving the complete shipment. In response, Polly emails an acknowledgment of Parker's order. However, her boilerplate language says payment is due in full within 10 days.

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