Contracts for the Sale of Goods
Under Article 2, it's easy to form a sales contract. Article 2 states that a contract for sale of goods may be made in any manner sufficient to show agreement. Generally, this means that one party must make an offer and another party must accept that offer. However, the means for making or accepting an offer can vary.
For example, let's say that Shelly is in charge of ordering stock for the shoe store. She wants to buy 20 pairs of a particular type of sneaker. Seth is a supplier and offers to sell Shelly 20 pairs of sneakers for $20 a pair. Shelly accepts Seth's offer. This is a sales contract. Seth is now obligated to supply Shelly with the sneakers, and Shelly is obligated to pay Seth, even if the two never spoke in person or signed a written contract.
This is a common scenario. The majority of business agreements are made without the use of a written and signed contract. Many businesses rely on oral contracts, purchase orders and electronic communications. Article 2 contemplates the many different ways offer and acceptance can be achieved in contracts for the sale of goods.
Acceptance
Let's take a closer look at what constitutes acceptance under the UCC's Article 2. Article 2 states that a party can accept an offer in any manner and by any medium reasonable in the circumstances. Courts define 'reasonable' in a lot of different ways. It's a broad definition that's determined by the type of contract and the parties' circumstances.
In general, acceptance can occur in a variety of ways. However, acceptance must fall under at least one of these categories:
- The buyer signifies that the goods are conforming after a reasonable opportunity to inspect them
- The buyer signifies that he or she will retain the goods even if they are nonconforming
- The buyer has a reasonable opportunity to inspect the goods and fails to reject the goods
- The buyer treats the goods in a way that is inconsistent with the seller's ownership
Note that, in each of these categories, acceptance of any part of a commercial unit constitutes acceptance of that entire unit. In other words, the buyer must accept or reject the entire order. If a buyer accepts part of the order, then the buyer has accepted the entire order.
Let's explore each of these categories.
Let's say that Shelly orders 20 pairs of sneakers from Seth. She orders pairs of blue sneakers and pairs of red sneakers Seth ships the sneakers to Shelly. A week later, Seth calls Shelly to confirm she received the shipment and that she likes the shoes. She tells Seth she received the sneakers and can't wait to put them out on the shelves.
Shelly had a reasonable amount of time to open the boxes and inspect the shoes. Her conversation with Seth signified that she's pleased with the goods and that they conform to her order. Shelly therefore accepted the goods and is obligated to pay Seth.
Now let's say Shelly opens the boxes and discovers that the sneakers are all blue. That's not what Shelly ordered. When Seth calls a week later, Shelly tells him about the mistake but tells him she's still excited about the sneakers. She says she'll still put them out on her shelves.
Shelly had a reasonable amount of time to open the boxes and inspect the shoes. Her conversation with Seth signified that the sneakers don't conform to her order. However, she signified that she'll keep them anyway. Shelly therefore accepted the goods and is obligated to pay Seth.
Rejection and Treatment
Let's look at another scenario. Let's say Shelly receives her shipment, and again, the sneakers are all blue. Shelly pushes the boxes to the back of her storeroom until she decides what to do with the sneakers. A month later, Seth sends Shelly a bill.
Shelly had a reasonable amount of time to open the boxes and inspect the shoes. Though the goods don't conform to Shelly's order, she failed to notify Seth and reject the shoes. Shelly therefore accepted the goods and is obligated to pay Seth.
Lastly, let's say Shelly receives her shipment, and again, the sneakers are all blue. Shelly doesn't contact Seth. Instead, she puts all of the sneakers out on her shelves.
Though the goods don't conform to Shelly's order, she treated the shoes as if she owned them. Her actions are inconsistent with Seth's ownership of the shoes. Shelly therefore accepted the goods and is obligated to pay Seth.
Keep in mind, however, that this last scenario has an exception. If Shelly acts as if she owns the shoes, and this act is wrongful or unjustified, then Shelly hasn't legally accepted the goods. For example, let's say Shelly orders 20 pairs of sneakers, but Seth accidentally mixes up his orders. Seth, instead, sends Shelly 20 pairs of very expensive dress shoes. Shelly can't put the shoes on her shelves and assume she's properly accepted the goods.
However, if Seth learns of the mistake and doesn't act to correct the mistake, then Shelly can treat the goods as if they are hers. Seth can ratify Shelly's actions. Seth's ratification allows Shelly to keep the goods.
Lesson Summary
Let's review. The Uniform Commercial Code, or UCC, is a uniform act that covers sales and other commercial transactions. The UCC's Article 2 is entitled 'Sales' and addresses contracts for the sale of goods. This includes what constitutes a buyer's acceptance.
Under Article 2, acceptance can occur in any manner and by any medium reasonable in the circumstances. Acceptance can occur in a variety of ways but must fall under at least one of these categories:
- The buyer signifies that the goods are conforming after a reasonable opportunity to inspect them
- The buyer signifies that he or she will retain the goods even if they are nonconforming
- The buyer has a reasonable opportunity to inspect the goods and fails to reject the goods
- The buyer treats the goods in a way that is inconsistent with the seller's ownership
Learning Outcomes
You will have the ability to do the following after watching this video lesson:
- Explain what Article 2 of the Uniform Commercial Code (UCC) covers
- Define acceptance according to the UCC
- Identify the categories of acceptance under the UCC
