Contract Law

Chapter 8 Lecture Notes

The Uniform Commercial Code

The purpose of this chapter is to detail very specific provisions of the Uniform Commercial Code that have a direct impact on contract law.  The Chapter Overview indicates the three main areas of the Code that will be discussed in the chapter:  Article I, General Provisions; Article II, Sales; and Article IX, Secured Transactions.  This chapter deals directly with contract provisions and, therefore, provides a basis for exercises in contract drafting.                     
A General Background of the history of the Code is provided at the beginning of the chapter.  The General Background specifies the state, as opposed to the federal, basis of the UCC.  Many students who have heard of the Code assume it is a nationwide federal law, and this introduction is used to help direct the student to the version adopted in each particular jurisdiction.
The first article discussed, Article I, deals with the General Provisions of the Code and is used to establish the parameters of the basic obligations and rights imposed by the statute.  Specific attention should be drawn to the provisions establishing good faith and custom and usage as a statutory, as opposed to common law, requirement.
The heart of this chapter really begins with the discussion of Article II, Sales.  Because most commercial contracts are governed by UCC provisions, particular attention is drawn to the nature of contract covered by the Code.  Good areas for discussion would be the difference between goods and service contracts, and the purpose and implication of warranties in creating contracts and instigating litigation.  This last topic is further highlighted by the Case Summaries provided at the end of the chapter.
Specific contractual provisions dealing with the risk of loss and transference of title are detailed, and the specific remedies available under the UCC are discussed.  These remedies should be borne in mind later on when discussing Chapter 11, Remedies, to see how the Code affects persons who come within its provisions and allows remedies that are different than those available under common law. 
Article IX, Secured Transactions, highlights two important areas of paralegal work.  First, the text discusses the requirement for creating a security interest, and attention should be drawn to drafting an appropriate security interest clause in contracts.  Some examples are given here, later in the chapter, and in contracts appearing in the Appendix to the book.  The chapter then goes on to discuss the problems of perfecting a security interest, and because paralegals are typically the ones who must arrange for the search and file for perfected interests, the practical implication of this section should be stressed.  The instructor can also point out the use of services in searching and filing security interests.        Sample Clauses are provided that exemplify the text discussion, and each clause is followed by a short analysis.  The student can discuss how these clauses can be incorporated into the body of a contract.
The Chapter Summary provides a quick review of all the material discussed in the chapter and is intended to reinforce the concepts learned.  The summary also includes a Synopsis of the material in outline form, which can be used as a basis of lecture notes.

A section of Key Terms is included to reiterate the specific meanings of the terms used in the chapter.  Especially with reference to the Code, where definitions are so important, special emphasis should be placed on this section.  Additionally, it can be pointed out to the student that the easiest way to get a client out of a Code problem is to determine that the client’s situation fails to meet the requisite definition as used by the Code.
Chapter 8 also has six Exercise problems.  The first three questions involve a basic understanding of the chapter material.  The fourth and fifth questions are of a more practical nature:  finding your own state’s offices for filing financing statements.  The last question requires the student to analyze his or her state’s version of the UCC.  These exercises give practical experience to the student, both in contract work and basic research.

Two cases for analysis are reprinted for classroom discussion. The first case, Jacq Wilson v. Brawn of California, Inc., highlights the concepts of the risk of loss and sales on approval when purchasing items through an internet catalogue. The second decision, Demarco California Fabrics, Inc. v. Nygard International, Ltd., underscores the problems encountered with a battle of the forms.
The Suggested Case References afford the student the opportunity to do some outside research into his or her own state’s version of the UCC, and includes additional judicial analysis of warranties and security agreements. These cases can be assigned as homework or used as the basis of classroom discussion. The Suggested Case References also provide the opportunity for a take-home exam.
Ethical Considerations discusses ABA Rule 4.1, requiring an attorney and all persons working under that attorney to be truthful, and that rule’s implication for drafting warranties for clients.