Contracts for the sale, lease and/or distribution of goods are primarily governed by state law. Specifically, most states have adopted the Uniform Commercial Code (UCC) with regard to these topics. A business and commercial law attorney from The Leo Law Firm in Chicago, Illinois, can assist you with your UCC questions.
Sale of goods
Sales involving goods are governed by Article 2 of the UCC. Section 2-106 of the UCC defines a “sale” as a transaction in which title to goods passes from the seller to the buyer for a price. Section 2-103 identifies “goods” as all things which are movable at the time of identification of the contract for sale. The UCC does not apply to any sale that is simply intended to operate as a secured transaction. In general, Article 2 is similar to the traditional common law of contracts. However, it does differ in some important aspects because it was tailored with modern commercial transactions in mind.
UCC Article 2 provides rules for all phases of a sales contract, including formation, modification and remedies upon breach. The leasing of goods is regulated by Article 2A. Detailed discussion of these topics are beyond the scope of this article. Contact an attorney for more detail.
An important part of Article 2 of the UCC pertains to warranties. Under the UCC there are four types of warranties:
- Warranty of title — Any seller of goods must warrant that the title of the goods that will be transferred is good. This means that there are no liens or encumbrances on the title of which the buyer is unaware.
- Implied warranty of merchantability — In any sale by a merchant who regularly deals in goods of the kind being sold, there is an implied warranty that the goods are merchantable. In essence, this means that the goods are “fit for sale.” The UCC specifies the qualities of a good that is “fit for sale” in section 2-314.
- Implied warranty of fitness for a particular purpose — In any sale of goods there is an implied warranty of fitness for a particular purpose. This warranty arises when a seller knows the particular purpose for which the goods are to be used and the buyer is relying on the seller’s judgment, skill and experience to select the goods that are best suited to that purpose. This rule is stated in UCC section 2-315.
- Express warranty — A seller of goods can also create an express warranty. According to UCC section 2-313 an express warranty is created by an affirmation of fact which relates to the goods and becomes part of the basis of the bargain. In addition, any description of the goods that is made as part of the basis of the bargain creates a warranty that the goods will conform to the description. Finally, any sample or model that is made part of the basis of the bargain creates a warranty that the whole of the goods is the same as the sample or model.
Duty of good faith
It should also be noted that there is a duty of “good faith” under UCC section 1-203 that is applicable to all UCC sections including the sales provisions. “Good faith” can be defined as the duty to make an honest and sincere effort to fulfill obligations under the contract. There can be no fraud or intentional seeking of unfair advantage.
Speak to a commercial law attorney
As discussed, the sale and lease of goods is primarily governed by the UCC. In general the UCC adopts much of the common law of contracts. However, there are important differences of which a seller, buyer, lessee or lessor of goods must be aware. Contact The Leo Law Firm in Chicago, Illinois, today to schedule a consultation with a business lawyer who can answer your questions about commercial transactions.
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