4.
Commutative: the good sold is considered to be the equivalent of the price, and vice versa
5.
Nominate: this type of contract has a special designation (i.e., sale)
6.
Principal: the validity does not depend upon the existence of other contracts
Sources of Law for Sales Contracts
Only in very limited circumstances (such as in the buying and selling of stocks) does federal law govern sales
contracts. Until the 1950s, there were two main sources of law for sales contracts: state common law and state
statutory law. Thus, the laws governing sales contracts differed from state to state. As interstate commercial
activity grew in importance, there was a need for a uniform law for sales transactions that would harmonize
rules across the states. Therefore, in 1952, the Uniform Commercial Code (UCC)was created to govern
business transactions. All 50 states have adopted the Code, but each has the power to modify it, in line with
the wishes of the state legislature.
The Uniform Commercial Code
The UCC categorizes items that can be bought or sold into three types:
1.
Goods are defined in Section 2-105 of the UCC as tangible items “which are movable at the time of
identification to the contract for sale.” Therefore, the primary features of goods are that they are movable
and tangible. Refrigerators, paper, and furniture are all examples of goods.
2.
Services are items that are movable but not tangible. Accounting is an example of a service.
3.
Realty describes non-good items that are tangible but not movable. Under this definition, commercial
and residential property are classed as realty.
These definitions have created some grey areas that have been clarified by the courts in their interpretation of
the UCC. In the 2008 case Crown Castle Inc. et al. v. Fred Nudd Corporation et al., a case in which the
telecommunications company Crown Castle sued a cell phone tower installation firm for the construction of
faulty towers, the courts had to determine whether cell phone towers (monopoles) should be classified as
movable (and hence goods) or non-movable (and therefore realty). Ultimately, it was determined that
monopoles are goods. Items that are attached to realty (e.g. a counter or a bar) and that are used for business
activities are described as trade fixtures and treated as goods. Software licenses are not tangible, but they are
also not movable, and have been treated in different ways: as goods, a mixed sale (a tangible item tied to an
intangible item), and pure services. Items such as soil and clay may be treated as goods even if they are part of
immovable land because they can be extracted and moved. Crops that are sold while they are still growing on
the land are also considered to be goods even though they are technically immovable while growing.
Article 2 of the UCC specifically pertains to sales contracts of goods. It defines a sale as a transaction that
involves “the passing of title from the seller to the buyer for a price.” However, merchants are classified as a
separate entity under the terms of the UCC. This distinction is important because the Code contains provisions
that specifically apply to merchants and place greater duties on merchants to protect private citizens. There
are four ways in which an entity can be classified as a merchant:
Classification
Examples
Table 8.1
86
Chapter 8 Sales Contracts
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