UCC Article 2: Sale of Goods for the CP Exam

The Uniform Commercial Code (UCC) Article 2 governs the sale of goods. The CP exam tests your ability to distinguish between common law contract principles and UCC rules, and to apply UCC provisions to commercial transactions. This is one of the most frequently tested contract topics on the exam.

When Does Article 2 Apply?

Article 2 applies to transactions involving the sale of goods. Key distinctions:

Goods: Tangible, movable personal property (furniture, vehicles, equipment, crops at the time of sale)
Not Goods: Real estate, services, and intangible property are governed by common law, not Article 2
Mixed Transactions: When a contract involves both goods and services, courts apply the "predominant factor test." If the predominant purpose is the sale of goods, Article 2 applies; if services predominate, common law applies.

Formation Under Article 2

UCC Article 2 makes it easier to form contracts than common law:

Open Terms: A contract for sale does not fail for indefiniteness even if one or more terms are left open, as long as the parties intended to make a contract and there is a reasonably certain basis for giving a remedy (UCC 2-204)
Price Term: If the price is not specified, it will be a reasonable price at the time of delivery
Quantity Term: This is the one term that must be specified. Without a quantity, there is no enforceable contract (except in output and requirements contracts).

The Battle of the Forms (UCC 2-207)

This is one of the most tested UCC provisions. Under common law, the mirror image rule requires acceptance to match the offer exactly. UCC 2-207 changes this:

A definite expression of acceptance operates as an acceptance even if it contains additional or different terms
Between merchants, additional terms become part of the contract unless: (1) the offer expressly limits acceptance to its terms, (2) the additional terms materially alter the contract, or (3) the offeror objects within a reasonable time
If at least one party is not a merchant, additional terms are proposals for addition that must be separately accepted

Know the difference between additional terms and different terms. The UCC addresses additional terms explicitly but is less clear about different terms, which some courts handle under the "knockout rule" (conflicting terms cancel each other out and are replaced by UCC gap fillers).

The Firm Offer (UCC 2-205)

Under common law, an offer can be revoked at any time before acceptance unless supported by option consideration. The UCC creates an exception:

A signed, written offer by a merchant to buy or sell goods is irrevocable for the time stated, or if no time is stated, for a reasonable time not to exceed three months
No separate consideration is needed for this irrevocability
Both elements are required: the offeror must be a merchant, and the offer must be in a signed writing

Statute of Frauds (UCC 2-201)

Contracts for the sale of goods priced at \$500 or more must be evidenced by a writing. However, the UCC provides several exceptions:

Merchant Confirmation: If one merchant sends a written confirmation to another merchant, and the recipient does not object within 10 days, the confirmation satisfies the statute of frauds against both parties
Specially Manufactured Goods: If goods are specially made for the buyer and are not suitable for sale to others
Admission: If the party admits in pleading, testimony, or court that a contract was made
Partial Performance: The contract is enforceable to the extent of goods accepted or paid for

Perfect Tender Rule (UCC 2-601)

Under the perfect tender rule, if the goods or their delivery fail in any respect to conform to the contract, the buyer may:

Reject the entire shipment
Accept the entire shipment
Accept some units and reject the rest

This is stricter than the common law substantial performance doctrine. However, several exceptions soften the rule, including the seller's right to cure (UCC 2-508) and installment contracts (UCC 2-612).

Risk of Loss

Determining when the risk of loss passes from seller to buyer is frequently tested:

Shipment Contracts (FOB seller's place): Risk passes when goods are delivered to the carrier
Destination Contracts (FOB buyer's place): Risk passes when goods arrive at the destination
No Carrier Involved: If the seller is a merchant, risk passes when the buyer takes physical possession. If the seller is a non-merchant, risk passes on tender of delivery.
Breach: If the seller breaches, risk remains on the seller. If the buyer breaches after goods are identified, risk shifts to the buyer to the extent of any deficiency in the seller's insurance.

Warranties

Article 2 provides for several types of warranties:

Express Warranty (2-313): Created by affirmation of fact, promise, description, sample, or model
Implied Warranty of Merchantability (2-314): Goods must be fit for ordinary purposes. Only applies to merchants who deal in goods of that kind.
Implied Warranty of Fitness for a Particular Purpose (2-315): When the seller knows the buyer's particular purpose and the buyer relies on the seller's expertise

Warranties can be disclaimed, but specific language is required. Merchantability disclaimers must mention "merchantability." Fitness disclaimers must be in writing. "As is" disclaims all implied warranties.

Master UCC Article 2

UCC questions on the CP exam often present fact patterns requiring you to distinguish between common law and UCC rules. Practice identifying which body of law applies and how the results differ. Use our flashcards to test your knowledge of key UCC sections. Sign up free to get started.

UCC Article 2 Sales: What the CP Exam Tests