Contracts

The nature of a transaction determines the type of contract law that applies. General contract law described above applies to such transactions as service agreements and sales of real property. Contracts for the sale of goods, however, are governed by Article 2 of the UCC, which has been adopted, at least in part, in every state. The UCC defines "goods" as all things that are movable at the time of the sale.

The drafters of the UCC adhered to a more liberal view of contracts, so some of its provisions differ significantly from those that are found in general contract law. A contract for the sale of goods may be made in any manner that is sufficient to show agreement, and courts may consider the conduct of the parties when making this determination. An offer to sell goods may be made in any manner that invites acceptance. Courts also may consider the COURSE OF PERFORMANCE between the parties when determining whether a contract for the sale of goods exists.

The UCC provides for, and recognizes, certain warranties that relate to the goods being sold. For example, an affirmation of fact or a promise made by the seller to the buyer creates an express warranty. Sales also create implied warranties, such as the implied warranties of merchantability and fitness for a particular purpose. Remedies and other damages for breach of a sale-of-goods contract are also governed by the UCC. In addition to monetary damages, buyers and sellers may take several actions when the other party breaches a sales contract. For example, a seller who has been injured by a breach of contract may withhold delivery of the goods; resell the goods that are subject to the contract; or recover monetary damages. A buyer may seek to "cover" by making a good-faith purchase of substitute goods from a different seller, and then may recover from the original seller any difference between the substitute contract and the original contract.