Tuesday, January 5, 2010

UCC Article 2 Sale of Goods

I am reassured and horrified that the Article 2 scope disorder I've observed among my Contracts students is not just my problem. Thom Lambert at University of Missouri Law encountered a severe strain while grading his Contracts final exams and wrote about it on Truth on the Market.

UCC Article 2 governs contracts for the sale of goods. Apart from some interesting cases involving North Sea oil platforms, electricity, and software which push the envelope of 'goods,' it really couldn't be simpler. Yet, students every year write in the the final exam answer that Article 2 does or does not apply to a particular transaction because one or both of the parties is or is not a merchant.

Yes, some sections of Article 2 regulate the rights of certain professional sellers or buyers who participate in a sale of goods. But the scope of Article 2 is not merchant dependent. UCC Article 2 governs contracts for the sale of goods and it does not matter for purposes of its scope whether the parties are Exxon or rank amateurs picking up a broken leaf blower at a neighborhood garage sale.

Professor Lambert laments that every year his Contracts students screw this up on the exam, and the next year he increases the number of times he tells the class that UCC Article 2 governs all contracts for the sale of goods without regard to whether one of the parties is a merchant. Ad nauseum. I do the same. In every class session in which Article 2 is pertinent I say it: Goods -- not real estate, not services. Goods. Merchant schmerchant, I say. Goods. Do not take your eye off the goods. Where they are, Article 2 (or 2A if the deal is a lease) will be. Merchants come and go. Goods remain.

Let's review. UCC Article 2 applies to all contracts for the sale of goods. Any questions?

Professor Lambert speculates that this mistake may root in students' fixation with UCC 2-207 -- the "battle of the forms" which in part applies only "between merchants." 2-207 is the first foray into statutory interpretation for most students. Perhaps the battle of the forms triggers in some students a form of PTSD. When a simple scope question appears on the exam, students traumatized by 2-207 lose their grip and can see only merchant Viet Cong snaking through the rice. It's only a contract for the sale of goods, but in the heat and the darkness it looks like the enemy. Ah, the smell of merchants in the morning.

My friend and colleague Keith Elkin works with law students preparing for the bar exam. He told me that students make this mistake on practice bar exams even after watching the bar prep video heads say it over and over: UCC Article 2 applies to contracts for the sale of goods.

Next time I teach Contracts, I may give peace a chance and omit coverage of 2-207. If Lambert is right, the price of a really good immersion in a really badly drawn statute is too high.


David Hutchinson said...

I'm not sure I have this. Do you mean to say that UCC 2-207 (whatever that might be) is a good, a service, or some classification of merchant?

I feel somewhat good today because I remember understanding the distinction between the scope of Article 2 and the various ways in which certain specific provisions of the code (and the general tenor of the thing as well, given on point judicial decisions) take account of a party's sophistication, both absolutely and relevant to the other party.

I bet at least some of the apparent confusion you write about comes not from 2-207, but from students looking for a way to demonstrate they understand that a given situation may entail an imbalance of commerical sophistication relevant to the application, or not, of Article 2. And from their natural predisposition to want to extricate a novice party from the sophisticated clutches of the other.

A simple statement that Article 2 does not apply because B is not a merchant may have read, in a paragraph not formed in the absurd crucible of a law exam, as something much more nuanced and correct.

Anonymous said...

with respect, what in the world are you talking about D.H.? I have to say, as a law student, that the likely reason so many students use the UCC incorrectly when answering an exam is because they are a bit panicked and confused about UCC provisions generally. I think that the Professor who originally posted was dead on! The black and white "rules" of the UCC seem so simple after you have had a chance to digest it a little and spend a few semesters USING the UCC (2&2A). As a new student, however, the labyrinth of provisions and exceptions in Art. 2 & 2A are quite dizzying. The professors exasperation may be evidence of how difficult it is to remember what is was like to be introduced to the UCC for the first time -- "How on earth can a student NOT understand the relevance and implications of being a Merchant?!!" I am not a professor and I do appreciate the job that you have; but I a humble suggestion: When talking about the UCC (for the first few times), talk to us like we are on a jury. I was told once that the best litigators are ones who can explain complicated situations so that a 10 yr old could understand it. Of course this is not adequate comprehension for a lawyer - but try to remember that 1L's are not lawyers- yet. Even a JD candidate can benefit from taking baby step - at least in the beginning. A thorough understanding the UCC is important for lawyer, in my opinion - but many of my peers in law school detest (and avoid) any class that has to do with it after 1L contract. This is probably as result of the UCC-PTSD referred to earlier (so funny!). I say let us ease into it; even if professors feel they shouldn't have to hold a law students hand. Even experienced attorneys I know prefer not to get tangled up in the vague and convoluted provisions - so I say cut the grasshoppers some slack. Quiz them before the exam - Be Clear. Be Simple. Write on the board: You will use the UCC (2,2A) when answering a question about a sale of goods (or leases). When you (the student) buy a vaccum cleaner from the store - it applies. When you buy a vacuum cleaner from your neighbor - it applies. When Exxon buys cars from Toyota - it applies. you get the picture. Take a poll: "Show of hands - Who would refer to the UCC if your grandma bought some dentures from her doctor [who bought them from a manufacturer]? Who would refer to the UCC if Target bought a brand of their chips from some chip manufacturer in CA? Who would refer to the UCC if their husband bought a computer from a co-worker?" See what they say -- then you will know BEFORE the exam whether you need to clear it up - AGAIN. Trust me - They will thank you for it. P.S. there is nothing a law student loves more in the world than hypos. I think law schools should offer a class called "Hypos"; all semester would be spent quickly working out real world hypothetical prob. which require drawing on knowledge from all first yr classes. Or perhaps Hypo classes that will focus on categories of the law - real estate, UCC, or whatever... just a thought.