Donald L. Woods, J.D., C.P.M.
Donald L. Woods, J.D., C.P.M., International Consulting & Contracting, Las Vegas, NV 89117, 702/254-6606, firstname.lastname@example.org
Prior to the enactment of the Uniform Commercial Code (UCC) the primary concept for enforcing agreements was "contract law", which was based upon what was known as the old English Common Law and sometimes referred to as case law. Rules for interpreting contracts flowed from rulings on prior cases as interpreted by appellate courts.
Contract law required specific elements to be present before a "contract" was enforceable in a court of law:
Subject matter of the contract must be legal.
Enforcers of contracts (attorneys, contract administrators, and procurement processionals) traditionally looked for specific items as evidence of the enforceability of a contract:
The results of applying these standards were not uniform throughout the nation, and starting in 1949, the states had the opportunity to replace "contract law" with the UCC which codified the rules by which merchants would deal with each other for the sale of goods.
Each attendee can verify the actual wording by reviewing the UCC in their state statutes, but universally, the following definitions apply:
"'Merchant' means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill." UCC § 2-104.
"'Goods' means all things (including specifically manufactured goods) which are movable at the time of identification to the contract for sale..." UCC 2-105.
Some of the other sections of the UCC that are applicable to purchasing professionals can be generally classified as follows:
UCC 2-200 = Form of the writing.
UCC 2-300 = Obligation of parties - consideration.
UCC 2-400 = Passing of title.
UCC 2-500 = Performance.
UCC 2-600 = Breach and excuse.
UCC 2-700 = Remedies.
The most important thing for us to remember is to ask ourselves the following question whenever an issue or problem arises:
Which law applies - UCC or contract law?
To better understand the importance of knowing the answer to the above question, let us walk through the following common problems Purchasing repeatedly encounters.
"Quantity 2000 bath towels at vendor's cost (no profit), per phone call to Suzie Q on March 30, 1999."
[UNSIGNED] "Ima Buyer"
Is there a valid and binding agreement?
Answers as discussed in the workshop:
"Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy." UCC 2-204(3).
"An agreement modifying a contract within this article needs no consideration to be binding." UCC 2-209(1).
"An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months. ..." UCC 2-205.
"Rejection of goods must be within a reasonable time after the delivery or tender." UCC 2-602(1).
"The buyer has no further obligation with regard to goods rightfully rejected." UCC 2-602(2)(c).
"Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects." UCC 2-608(2).
"Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may reasonably notify the buyer of his intention to cure and may then within the contract time make a confirming delivery. UCC 2-508(1).Most buyers would be successful if they carefully worded a Notice of Revocation based upon the above UCC 2.608(2).
Consulting is a service and falls under contract law, not the UCC. Because an amendment or modification to a contract is "an agreement to modify a contract" all elements of a contract must be present in this agreement, including consideration on both sides. Compare this to No. 2 above where the UCC applied.
Conclusion. As you can see from the varying results in the above discussions, it is important to know which law applies to your contract. It could be disastrous if decisions were based upon erroneous assumptions. Be able to spot the issues and then research the applicable law; and always contact your attorney early in a dispute that might cross over into either area. In addition to the applicable state statutes or Uniform Commercial Code, a good reference book is Miller, Roger LeRoy and Jentz, Gaylord A., "Business Law Today, The Essentials", West Publishing Company, 4th Ed., 1997.