Chapter 2 – Sources of Contract Law

Common Law

• Law from judicial decisions
• Governs contract disputes involving real property, intangible property, and services

Uniform Commercial Code

• Developed in response to the need for a more modern, uniform body of law.
• Drafted to cover transactions that often have roots in different states, including the sale (and, in some states, lease) of moveable items (also called personal property, chattel, or goods).

Uniform Commercial Code

• UCC covers transactions involving the following:
  • Negotiable instruments
  • Banking
  • Documents of title
  • Investment securities
  • Bulk sales
  • Letters of credit

Goods

• Goods include items with a physical existence that are moveable at the time of identification to the contract.

Coverage of the UCC

• Article I:           Purposes of the law; rules of construction; definitions; general principles
• Article II:  Contracts for the sale of goods
• Article IIA:  Leases of goods (not adopted in every state)
• Article III:  Negotiable instruments
• Article IV:  Bank deposits and collections
• Article IVA:  Funds transfers (banking)
• Article V:  Letters of credit
• Article VI:  Bulk transfers (repealed in many states)
• Article VII:  Warehouse receipts, bills of lading and other documents of title
• Article VIII:  Investment securities (stock and other ownership interests)
• Article IX:  Secured transactions (an interest in personal property to secure performance of an obligation)

Good Faith

• The UCC definition of good faith:  as applied to merchant, means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

Review Materials for Chapter 2

• Commercial – Between or pertaining to businesses
• Consumer – Party to the contract who is not engaged in business, but has entered the contract for personal or family reasons
• Intellectual Property – Includes patents, trademarks, copyrights, trade secrets
• Good Faith – UCC definition: as applied to a merchant, means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade
• Uniform Commercial Code (UCC) – A uniform law, enacted as statutory law in all 50 states, in an attempt to harmonize the law of sales and other commercial transactions Code
• Real Estate – Also called real property or realty, consists of land and buildings
• Restatement – Secondary authority; a compilation of the “best” of the common law of contracts
• Personal Property – Also called chattel or goods; tangible, moveable items
• Intangible Property – Has no physical existence, such as debt
• Common law – Law from judicial decisions; governs contract disputes involving real property, intangible property, and services; also called precedent
• Merchants – Deal in goods of the kind involved in transaction or, by their occupations, hold themselves out as having knowledge or skills relating to the goods or practice