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DRAFT
FOR DISCUSSION ONLY
REVISION OF UNIFORM COMMERCIAL CODE
ARTICLE 2 - SALES
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
MAY 1, 1998
REVISION OF UNIFORM COMMERCIAL CODE ARTICLE 2 - SALES
WITH COMMENTS
COPYRIGHT© 1998
by
THE AMERICAN LAW INSTITUTE
and the
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
DRAFTING COMMITTEE TO REVISE UNIFORM COMMERCIAL CODE
ARTICLE 2 - SALES
LAWRENCE J. BUGGE, 313 Walnut Grove Drive, Madison, WI 53717-1228, Chair
JOHN FOX ARNOLD, 714 Locust Street, St. Louis, MO 63101
BORIS AUERBACH, 332 Ardon Lane, Wyoming, OH 45215
GERALD L. BEPKO, Indiana University, 355 N. Lansing Street, Indianapolis, IN 46202
AMELIA H. BOSS, Temple University, School of Law, 1719 N. Broad Street, Philadelphia, PA 19122, The American Law Institute Representative
BRUCE A. COGGESHALL, One Monument Square, Portland, ME 04101
CHRISTOPHER D. DINGELL, P.O. Box 30036, Room 910, Farnum Building, Lansing, MI 48909
HENRY DEEB GABRIEL, JR., Loyola University, School of Law, 526 Pine Street, New Orleans, LA 70118
BION M. GREGORY, Office of Legislative Counsel, State Capitol, Suite 3021, Sacramento, CA 95814-4996
WILLIAM H. HENNING, University of Missouri-Columbia, School of Law, 313 Hulston Hall, Columbia, MO 65211
PETER F. LANGROCK, P.O. Drawer 351, Middlebury, VT 05753
CURTIS R. REITZ, University of Pennsylvania, School of Law, 3400 Chestnut Street, Philadelphia, PA 19104
BYRON D. SHER, State Capitol, Suite 2054, Sacramento, CA 95814
JOHN A. SPANOGLE, George Washington University, National Law Center, 2000 H Street, N.W., Washington, DC 20052, The American Law Institute Representative
RICHARD E. SPEIDEL, Northwestern University, School of Law, 357 E. Chicago Avenue, Chicago, IL 60611, Reporter
LINDA J. RUSCH, Hamline University School of Law, 1536 Hewitt Avenue, St. Paul, MN 55104, Associate Reporter
GENE N. LEBRUN, P.O. Box 8250, 9th Floor, 909 St. Joseph Street, Rapid City, SD 57709, President
BARRY H. EVENCHICK, One Gateway Center, 8th Floor, Newark, NJ, 07102, Division Chair
AMERICAN BAR ASSOCIATION ADVISORS
DAVID JOEL FRISCH, 205 Walnut Ridge Lane, Chaddsforth, PA 19317, Advisor
KARL B. GRUBE, Pinellas County Court, Room 305, 150 5th Street, N., St. Petersburg, FL 33701, Judicial Administration Division, National Conference of Special Court Judges Section Advisor
THOMAS J. MCCARTHY, DuPont Legal, Barley Mill Plaza 17-2286, Wilmington, DE 19805, Business Law Section Advisor
EXECUTIVE DIRECTOR
FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road, Norman, OK 73019, Executive Director
WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104, Executive Director Emeritus
PART 1 GENERAL PROVISIONS 1
SECTION 2-101. SHORT TITLE 1
SECTION 2-102. DEFINITIONS 1
SECTION 2-103. SCOPE 10
SECTION 2-104. TRANSACTION SUBJECT TO OTHER LAW 11
SECTION 2-105. UNCONSCIONABLE CONTRACT OR TERM 12
SECTION 2-206. CONSUMER CONTRACTS; RECORDS. 15
SECTION 2-106. INTEREST AND PART INTEREST IN GOODS 16
SECTION 2-107. GOODS TO BE SEVERED FROM REAL PROPERTY; RECORDING 17
SECTION 2-108. EFFECT OF AGREEMENT 18
PART 2 FORM, FORMATION, TERMS, AND READJUSTMENT OF
CONTRACT 19
SECTION 2-201. FORMAL REQUIREMENTS 19
SECTION 2-202. PAROL OR EXTRINSIC EVIDENCE 22
SECTION 2-203. SEALS INOPERATIVE 23
SECTION 2-204. FORMATION IN GENERAL 24
SECTION 2-205. FIRM OFFERS. 25
SECTION 2-206. OFFER AND ACCEPTANCE 26
SECTION 2-207. EFFECT OF VARYING TERMS IN RECORDS. 28
SECTION 2-208. COURSE OF PERFORMANCE OR PRACTICAL
CONSTRUCTION 32
SECTION 2-209. MODIFICATION, RESCISSION, AND WAIVER 33
SECTION 2-210. LEGAL RECOGNITION OF ELECTRONIC RECORDS AND SIGNATURES 36
SECTION 2-211. ATTRIBUTION PROCEDURE 36
SECTION 2-212. ATTRIBUTION OF ELECTRONIC RECORD, MESSAGE, OR PERFORMANCE TO A PARTICULAR PERSON. 37
SECTION 2B-113. ATTRIBUTION PROCEDURE FOR DETECTION OF
CHANGES AND ERRORS; EFFECT OF USE 38
SECTION 2B-114. ELECTRONIC ERROR: CONSUMER DEFENSES 39
SECTION 2-215. AUTHENTICATION PROOF; ELECTRONIC AGENT OPERATIONS 40
SECTION 2-216. ELECTRONIC MESSAGES: TIMING OF CONTRACT; EFFECTIVENESS OF MESSAGE; ACKNOWLEDGING MESSAGES 40
PART 3 GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT 42
SECTION 2-301. HOW CONTRACT PRICE PAYABLE 42
SECTION 2-302. PERFORMANCE AT SINGLE TIME 43
SECTION 2-303. OPEN-PRICE TERM 44
SECTION 2-304. OUTPUT, REQUIREMENTS, AND EXCLUSIVE DEALING 45
SECTION 2-305. ABSENCE OF SPECIFICATION OF PLACE FOR DELIVERY 47
SECTION 2-306. TIME FOR PERFORMANCE NOT SPECIFIED 47
SECTION 2-307. OPTIONS AND COOPERATION RESPECTING
PERFORMANCE 48
SECTION 2-308. FAILURE TO PAY BY AGREED LETTER OF CREDIT. 50
SECTION 2-309. SHIPMENT TERMS; SOURCE OF MEANING 51
SECTION 2-310. TERMINATION; SURVIVAL OF OBLIGATIONS AND
TERMS 52
SECTION 2-311. TERMINATION; NOTIFICATION 53
SECTION 2-312. SALE BY AUCTION 54
PART 4 WARRANTIES 58
SECTION 2-401. DEFINITIONS 58
SECTION 2-402. WARRANTY OF TITLE AND AGAINST INFRINGEMENT; BUYER'S OBLIGATION AGAINST INFRINGEMENT 59
SECTION 2-403. EXPRESS WARRANTY TO IMMEDIATE BUYER 62
SECTION 2-404. IMPLIED WARRANTY OF MERCHANTABILITY; USAGE OF TRADE 66
SECTION 2-405. IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE 67
SECTION 2-406. DISCLAIMER OR MODIFICATION OF WARRANTY 68
SECTION 2-407. CUMULATION AND CONFLICT OF WARRANTIES 71
SECTION 2-408. EXPRESS WARRANTY OBLIGATION TO REMOTE BUYER AND TRANSFEREE 72
SECTION 2-409. EXTENSION OF EXPRESS OR IMPLIED WARRANTY 76
PART 5 TRANSFERS, IDENTIFICATION, CREDITORS, AND GOOD-FAITH PURCHASERS 79
SECTION 2-501. PASSING OF TITLE; RESERVATION FOR SECURITY 79
SECTION 2-502. INSURABLE INTEREST IN GOODS; MANNER OF IDENTIFICATION OF GOODS 81
SECTION 2-503. ASSIGNMENT OF RIGHTS; DELEGATION OF DUTIES 82
SECTION 2-504. POWER TO TRANSFER; GOOD-FAITH PURCHASE OF
GOODS 84
SECTION 2-505. RIGHTS OF SELLER'S CREDITORS AGAINST GOODS
SOLD 85
SECTION 2-506. SALE ON APPROVAL AND SALE OR RETURN; SPECIAL INCIDENTS 87
PART 6 PERFORMANCE 89
SECTION 2-601. GENERAL OBLIGATIONS 89
SECTION 2-602. SELLER'S TENDER OF DELIVERY 90
SECTION 2-603. SHIPMENT BY SELLER 95
SECTION 2-604. SELLER'S SHIPMENT UNDER RESERVATION 96
SECTION 2-605. RIGHTS OF FINANCING AGENCY 98
SECTION 2-606. EFFECT OF SELLER'S TENDER; DELIVERY ON
CONDITION 99
SECTION 2-607. TENDER OF PAYMENT BY BUYER; PAYMENT BY
CHECK 100
SECTION 2-608. PAYMENT BY BUYER BEFORE INSPECTION 101
SECTION 2-609. BUYER'S RIGHT TO INSPECT GOODS 102
SECTION 2-610. WHEN DOCUMENTS OF TITLE DELIVERABLE ON ACCEPTANCE OR PAYMENT 104
SECTION 2-611. OPEN TIME FOR PAYMENT OR RUNNING OF CREDIT; AUTHORITY TO SHIP UNDER RESERVATION 105
SECTION 2-612. RISK OF LOSS 106
PART 7 BREACH, REPUDIATION, AND EXCUSE 111
SECTION 2-701. BREACH OF CONTRACT GENERALLY; SUBSTANTIAL IMPAIRMENT 111
SECTION 2-702. WAIVER OF BREACH; PARTICULARIZATION OF NONCONFORMITY 113
SECTION 2-703. BUYER'S RIGHTS ON NONCONFORMING DELIVERY; RIGHTFUL REJECTION 117
SECTION 2-704. EFFECT OF EFFECTIVE RIGHTFUL REJECTION AND JUSTIFIABLE REVOCATION OF ACCEPTANCE 119
SECTION 2-705. MERCHANT BUYER'S DUTIES; BUYER'S OPTIONS AS TO SALVAGE 121
SECTION 2-706. WHAT CONSTITUTES ACCEPTANCE OF GOODS 123
SECTION 2-707. EFFECT OF ACCEPTANCE; NOTICE OF BREACH;
BURDEN OF ESTABLISHING BREACH AFTER ACCEPTANCE;
NOTICE OF CLAIM OR LITIGATION TO PERSON ANSWERABLE
OVER 124
SECTION 2-708. REVOCATION OF ACCEPTANCE 126
SECTION 2-709. CURE 127
SECTION 2-710. INSTALLMENT CONTRACT: BREACH 130
SECTION 2-711. RIGHT TO ADEQUATE ASSURANCE OF PERFORMANCE 132
SECTION 2-712. ANTICIPATORY REPUDIATION 134
SECTION 2-713. RETRACTION OF ANTICIPATORY REPUDIATION 135
SECTION 2-714. CASUALTY TO IDENTIFIED GOODS 136
SECTION 2-715. SUBSTITUTED PERFORMANCE 137
SECTION 2-716. EXCUSE BY FAILURE OF PRESUPPOSED CONDITIONS 138
SECTION 2-717. PROCEDURE ON NOTIFICATION CLAIMING EXCUSE 139
SECTION 2-718. PRESERVING EVIDENCE OF GOODS IN DISPUTE 141
PART 8 REMEDIES 141
SECTION 2-801. SUBJECT TO GENERAL LIMITATIONS 141
SECTION 2-802. BREACH OF CONTRACT; PROCEDURES 142
SECTION 2-803. REMEDIES IN GENERAL 143
SECTION 2-804. MEASUREMENT OF DAMAGES IN GENERAL 146
SECTION 2-805. INCIDENTAL DAMAGES 147
SECTION 2-806. CONSEQUENTIAL DAMAGES 148
SECTION 2-807. SPECIFIC PERFORMANCE 150
SECTION 2-808. CANCELLATION: EFFECT 151
SECTION 2-809. LIQUIDATION OF DAMAGES; DEPOSITS 153
SECTION 2-810. CONTRACTUAL MODIFICATION OF REMEDY 155
SECTION 2-811. REMEDIES FOR MISREPRESENTATION OR FRAUD 158
SECTION 2-812. PROOF OF MARKET PRICE 159
SECTION 2-813. LIABILITY OF THIRD PERSONS FOR INJURY TO GOODS 160
SECTION 2-814. STATUTE OF LIMITATIONS 161
SECTION 2-815. SELLER'S REMEDIES IN GENERAL 164
SECTION 2-816. SELLER'S RIGHT TO WITHHOLD DELIVERY OF GOODS
OR TO RECLAIM GOODS AFTER DELIVERY TO BUYER 165
SECTION 2-817. SELLER'S RIGHT TO IDENTIFY GOODS TO CONTRACT DESPITE BREACH OR TO SALVAGE UNFINISHED GOODS 167
SECTION 2-818. SELLER'S REFUSAL TO DELIVER BECAUSE OF BUYER'S INSOLVENCY; STOPPAGE IN TRANSIT OR OTHERWISE 168
SECTION 2-819. SELLER'S RESALE 170
SECTION 2-820. PERSON IN POSITION OF SELLER 172
SECTION 2-821. SELLER'S DAMAGES FOR NONACCEPTANCE, FAILURE
TO PAY, OR REPUDIATION 172
SECTION 2-822. ACTION FOR PRICE 174
SECTION 2-823. BUYER'S
REMEDIES IN GENERAL; BUYER'S SECURITY
INTEREST IN REJECTED GOODS 176
SECTION 2-824. PREPAYING BUYER'S RIGHT TO GOODS 177
SECTION 2-825. COVER; BUYER'S PURCHASE OF SUBSTITUTE GOODS 178
SECTION 2-826. BUYER'S DAMAGES FOR NONDELIVERY OR
REPUDIATION 179
SECTION 2-827. BUYER'S DAMAGES FOR BREACH REGARDING
ACCEPTED GOODS 180
SECTION 2-828. DEDUCTION OF DAMAGES FROM PRICE 181
SECTION 2-829. RECOVERY OF PRICE; BUYER'S SECURITY INTEREST IN REJECTED GOODS. 181
REVISED ARTICLE 2-SALES
______________________
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
______________________
May 1, 1998 Draft
_________________________________________________
PART 1
GENERAL PROVISIONS
SECTION 2-101. SHORT TITLE. This article may be cited as Uniform Commercial Code - Sales.
Source: Section 2-101.
Notes
The phrase "shall be known and" has been deleted from former 2-101 to conform to Revised Article 3, Revised Article 4, Article 4A, Article 5 and Article 8.
SECTION 2-102. DEFINITIONS.
(a) Unless the context otherwise requires, in this article:
(1) "Authenticate" means to sign, or to execute or adopt a symbol or sound, or encrypt a record in whole or in part, with intent to (i) identify the party; (ii) adopt or accept a record or term; or (iii) establish the authenticity of a record or term that contains the authentication or to which a record containing the authentication refers. Unless the circumstances indicate that a party intends less than all of these effects, authentication is intended to establish the party's identity, its adoption and acceptance of the record or term, and the authenticity of the record or term as of the time of the authentication.
[Source: 2B-102(a)(3) (December, 1997), further revised in 2B-102(a)(3) (March, 1998).]
(2) "Between merchants" means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.
[Source: Conforms to 2-104(3)]
(3) "Buyer" means a person that buys or contracts to buy goods.
[Source: 2-103(1)(a). "That" substituted for "who."]
(4) "Cancellation" occurs when either party puts an end to a contract for breach by the other party.
[Conforms to 2-106(4), first clause. See 2-808 (May, 1998) for when a party may cancel and the effect of cancellation.]
(5) "Commercial unit" means a unit of goods which by commercial usage is a single whole for purposes of sale and whose division materially impairs its character or value in the relevant market or in use. A commercial unit may be a single article, such as a machine; a set of articles, such as a suite of furniture or a line of machinery; a quantity, such as a gross or carload; or any other unit treated in use or in the relevant market as a single whole.
[Follows 2-105(6), with revisions to provide more definite references, such as "which by" rather than "as." The word "bale" is omitted to conform to 2A-103(1)(c). The word "relevant" in the first sentence is added to conform to usage in the second sentence.]
(6) "Conforming" goods or conduct, including any part of a performance, means goods or conduct that are in accordance with the obligations under the contract.
[Follows 2-106(2).]
(7) (A) "Conspicuous", with reference to a term or clause, means so written, displayed or presented that a reasonable person against whom it is to operate ought to have noticed it or, in the case of an electronic message intended to evoke a response without the need for review by an individual, in a form that would enable a reasonably configured electronic agent to take it into account or react to it without review of the message by an individual.
(B) In a written record:
(I) A heading is conspicuous if it is all capitals (as: NEGOTIABLE BILL OF LADING) equal to or greater in size than the surrounding text;
(ii) A term or clause in the body of a record or display is conspicuous if it is in larger or other contrasting type or color than other language;
(iii) Any term or clause in a telegram or other similar communication is conspicuous.
(C) In an electronic record or display a term or clause is conspicuous if it is so positioned that a party cannot proceed without taking some additional action with respect to the term or any prominent reference thereto.
1. The general definition of "conspicuous" in sub (A) conforms to the first sentence in 2B-102(a)(7) (Dec. 1997), as revised (March, 1998). Unlike current UCC 1-201(10), neither 2B nor revised 2 state that "whether a term or clause is 'conspicuous" or not is for decision by the court." Revised 1-201(11) (July, 1997) is in accord.
2. The Drafting Committee agreed that there should be a "safe harbor" for conspicuous and that the safe harbor should vary depending upon the medium used in the record. Thus, sub (B) proposes a safe harbor for a written record and sub (C) proposes a safe harbor for an electronic record. The safe harbor language is derived from but is somewhat narrower than UCC 2B-102(a)(8) (Dec. 1997), as revised (March, 1998).
Questions to be resolved: (1) Should the definition be the same for Articles 2, 2A and 2B? (2) If so, what is the better definition? (3) Should a common definition be in Article 1?
(8) "Consumer" means an individual who buys or contracts to buy goods that, at the time of contracting, are intended by the individual to be used primarily for personal, family, or household use.
[New. Follows the first sentence of 2B-102(a)(9) (Dec. 1997), as revised, March, 1998.]
(9) "Consumer contract" means a contract for sale between a [merchant] seller regularly engaged in the business of selling and a consumer. [New]
(10) "Contract for sale" means both a present sale of goods and a contract to sell existing or future goods at a future time.
[Follows 2-106(1), with a clarification that "contract for sale" includes a contract to sell future goods.]
(11) "Delivery" means the transfer of physical possession or control of goods. [New.]
(12) "Electronic agent" means a computer program or other automated means used, selected, or programmed by a party to initiate or respond to electronic messages or performances in whole or in part without review by an individual.
[2B-102(a)(16)(Dec. 1997, revised 2B-102(a)(18) (March, 1998.]
(13) "Electronic" means [includes] electrical, digital, magnetic, optical, electromagnetic, or any other form of wave propagation, or by any other technology that entails capabilities similar to these technologies.
[2b-102(a)(15) (Dec. 1997), revised 2B-102(a)(17) (March, 1998).]
(14) "Electronic message" means a record that is stored, generated, or transmitted by electronic, optical, or similar means for purposes of communication to another person. The term includes electronic data interchange, electronic or voice mail, electronic display, facsimile, telex, telecopying, scanning, and similar communications.
[2B-102(a)(17) Dec. 1997, revised 2B-102(a)(19) (March, 1998).]
(15) "Electronic transaction" means a transaction formed by electronic messages in which the messages of one or both parties will not be reviewed by an individual as a routine step in forming the contract.
[2B-102(a)(18) Dec. 1997. Deleted from March, 1998 Draft of 2B).]
(16) "Financing agency" means a bank, finance company, or other person that, in the ordinary course of business, makes advances against goods or documents of title, or that by arrangement with either the seller or the buyer intervenes in the ordinary course of business to make or collect payment due or claimed under a contract for sale, as by purchasing or paying the seller's draft, making advances against it, or merely taking it for collection, whether or not documents of title accompany the draft. The term includes a bank or other person that similarly intervenes between persons in the position of seller and buyer with respect to the goods.
[Follows 2-104(2), with slight revisions in punctuation and style.]
(17) "Foreign exchange transaction" means a transaction in which one party agrees to deliver a quantity of a specified money or unit of account in consideration of the other party's agreement to deliver another quantity of different money or unit of account either currently or at a future date, if delivery is to be through funds transfer, book entry accounting, or other form of payment order, or other agreed means to transfer a credit balance. The term includes a transaction of this type involving multiple moneys and spot, forward, option, or other products derived from underlying moneys and any combination of these transactions. The term does not include a transaction involving multiple moneys in which one or both of the parties is obligated to make physical delivery, at the time of contracting or in the future, of banknotes, coins, or other form of legal tender or specie. [New.]
(18) "Future goods" means goods that are neither existing nor identified.
[Follows 2-105(2)]
(19) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
[Follows 3-103(a)(4). Accord: 2B-102(a)(21) (March, 1998).]
(20) "Goods" means all things, including specially manufactured goods, that are movable at the time of identification to a contract for sale and, unless the context otherwise requires, future goods. The term includes the unborn young of animals, growing crops, and other identified things to be severed from real property under Section 2-107. The term does not include money in which the price is to be paid, the subject of foreign exchange transactions, documents, letters of credit, information, instruments, investment property, accounts, chattel paper, deposit accounts, general intangibles, and payment intangibles.
[Follows 2-105(1), with revisions for greater clarity and to broaden the exclusion of various forms of Article 9 collateral. See 9-102(a)(29) (March, 1998)]
(21) "Letter of credit" means an irrevocable letter of credit as defined in Section 5-102(a)(10), issued by a financing agency of good repute and, if the shipment is overseas, of good international repute.
[Follows 2-325(3), first sentence. See 5-102(a)(10). The term "confirmed credit" is not defined in Revised Article 2.]
(22) "Lot" means a parcel or single article that is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
[Follows 2-105(5). See 2A-103(1)(s).]
(23) "Merchant" means a person that deals in goods of the kind involved in the transaction, a person that by occupation purports to have knowledge or skill peculiar to the practices or goods involved in the transaction, or a person to which knowledge or skill may be attributed by the person's employment of an agent or broker or other intermediary that purports to have the knowledge or skill.
[Follows 2-104(1), with minor revisions to neutralize gender and to achieve parallel structure. Accord: 2B-102(a)(32) (March, 1998).]
(24) "Present sale" means a sale that is accomplished by the making of a contract. [Follows 2-106(1)]
(25) "Receipt":
(A) with respect to goods, means to take delivery; and
(B) with respect to an electronic record, means when it enters an information processing or storage system or a part thereof in a form capable of being processed by or perceived from a system of that type, and the recipient uses, has designated or otherwise holds out that system or the part thereof as a place for the receipt of such communications. [In addition, a person receives a notice or notification when it comes to his attention."] "Receive" has an analogous meaning.
[Subsection (A) follows 2-103(1)(c) and supplements the definition of "receives" in 1-201(26). "Delivery" is defined in 2-102(a)(11). Subsection (B) follows 2b-102(a)(34) (Dec. 1997), which uses the word "receive" and states when a person receives notice or notification. But see 2B-102(a)(36) (March, 1998)]
(26) "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.
[5-102(a)(14), 2b-102(a)(37) (March, 1998).]
(27) "Sale" means the passing of title to goods from a seller to a buyer for a price. [Follows 2-106(1). "Means" is substituted for "consists in."]
(28) "Seller" means a person that sells or contracts to sell goods.
[Follows 2-103(1)(d). Gender changes.]
(29). "Termination" means to end a contract or a part thereof by an act by a party under a power created by agreement or law, or by operation of the terms of the agreement for a reason other than for breach by the other party. Terminate has a corresponding meaning.
[Source: 2-106(3). Follows 2B-102(a)(44) (Dec. 1997), with change to active voice, revised in 2B-102(a)(45).]
(b) Other definitions applying to this Article or to specified Parts thereof and the sections in which they appear are: [Conforms to 2-103(3).]
"Acceptance of goods." Section 2-706
"Agreed letter of credit." Section 2-308(a).
"Assignment." Section 2-503(a).
"Attribution." Sections 2-210(a), 2-211(a).
"Breach of contract." Sections 2-701(a), (b).
"Consequential damages." Section 2-806.
"Cover." Section 2-825(a).
"Delegation." Section 2-503(b).
"Entrusting." Section 2-504(c).
"Incidental damages." Section 2-805.
"Identification." Section 2-502.
"Immediate buyer." Section 2-401(a).
"Installment contract." Section 2-710(a).
"Insurable interest." Section 2-502.
"Person in position of seller." Section 2-604.
"Remote purchaser." Section 2-401(a).
"Repudiation." Section 2-712(b).
"Sale on approval." Section 2-506(a).
"Sale or return." Section 2-506(a).
"Substantial impairment." Section 2-701(c).
"Waiver." Sections 2-210, 2-702.
(c) The following definitions in other articles apply to this article:
"Check." Section 3-104(e).
"Computer program." 2B-102(a)(5).
"Dishonor." Section 3-502.
"Draft." Section 3-104(e).
"Information." Section 2B-102(a)(22) (Dec. 1997).
"Injunction against honor." Section 5-109(b).
"Letter of Credit." Section 5-102(a)(10).
(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article. [Conforms to 2-103 (4).]
SECTION 2-103. SCOPE.
(a) This article applies to transactions in goods.
(b) If a transaction involves a license, software contracts and goods, this article applies to the contract issues regarding the goods [the aspects of the transaction which involve standards of performance of or rights in the goods] other than the physical medium containing the information, its packaging, and its documentation. However, this article applies to a sale of a computer program that was not developed specifically for the transaction and that is embedded in goods, other than a copy of the program or an information processing system, if the program was not the subject of a separate license with the buyer.
(c) Except as otherwise provided in subsection (b), to the extent that another article of this [Act] applies to a transaction in goods, this article does not apply to the part of the transaction governed solely by the other article [the subject matter or related rights and remedies governed by the other article].
(d) This article does not apply to a foreign exchange transaction.
Notes
1. Subsection (a) follows the first clause of 2-102 except that the phrase "Unless the context otherwise requires," the meaning of which was unclear, is deleted. The second clause is treated in subsection (c).
The phrase "transactions in goods" means contracts for the sale of goods in sections where the word "contract" or the phrase "contract for sale" are used. In other settings, "transaction" could include a sale, a bailment or consignment or a contract where both goods and services are provided, such as a contract to deliver and install goods or an agreement to maintain, service and repair goods after installation. The May, 1998 Draft provides no guidance on when Article 2 should apply to these transactions: The issue is left for judicial inclusion or exclusion.
2. Subsection (b) is new and follows 2B-103(c), (d)(4) (December, 1997). Section 2B-103, however, was substantially revised in the March, 1998 Draft. Thus, subsection (b) tries to follow the line drawn in revised 2B-103 and provides some bracketed language for choice.
From the standpoint of Article 2B, disputes over goods are ceded to Article 2 even though information and services may predominate. Under Article 2, however, the "predominate purpose" test developed by the courts in mixed goods and services contracts still controls. Thus, if services predominate, the entire transaction is outside of Article 2 even though the gravaman of the dispute involves goods.
3. Subsection (c) is new and replaces the language after the colon in 2-102 up to the word "nor": "[I]t does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a secured transaction."
Subsection (c) follows an earlier version of 2B-103(b). The bracketed language is taken from the December, 1997 Draft of 2B. The final phrasing of subsection (c) will depend upon the final draft of Article 2B.
4. Subsection (d) is new. "Foreign exchange transaction" is defined in 2-102(a)(17).
SECTION 2-104. TRANSACTION SUBJECT TO OTHER LAW.
(a) A transaction subject to this article is also subject to:
(1) [list any certificate of title statutes covering automobiles, trailers, mobile homes, boats, farm tractors, or the like], except as to the rights of a buyer in the ordinary course of business under Section 2-504(c) whose rights arise before a certificate of title covering the goods is effective in the name of the buyer;
(2) any applicable law which establishes a different rule for consumers; or
(3) any other law of this State to which the subject matter of this article is subject, such as laws dealing with the sale of agricultural products, the transfer of blood, blood products, human tissues and organs, the consignment or transfer by artists of works of art or fine prints, distribution agreements, franchises and other relationships through which goods are sold, liability for products which cause injury to person or property, the making and disclaimer of warranties, the misbranding or adulteration of food products and drugs, and dealers in particular products, such as automobiles, motorized wheelchairs, agricultural equipment and hearing aids.
(b) Except for the rights of a buyer in the ordinary course of business in subsection (a)(1), in the case of a conflict between this article and any law referred to in subsection (a), that law governs.
(c) With respect to this Act, failure to comply with the laws referred to in subsection (a) has only the effect specified therein.
Notes
1. Subsection (a), which follows the form but not the substance of 2A-104(1), is new. See 2B-104 (March, 1998).
Subsection (a)(1) coordinates Article 2 with state certificate of title statutes.
Subsection (a(2) and subsection (a)(3) replace the language beginning with "nor" in 2-102: "[N]or does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers." Thus, (a)(2) cedes authority to "any applicable law" establishing a different rule for consumers and (a)(3) gives a complete but not exhaustive list of other possible state law that might provide different rules. Unless stated otherwise, "law" includes any statute, regulation, administrative ruling, judicial decision, etc., in the state.
2. Subsection (b), which is new, provides a rule of priority in cases of conflict. Subsection (c), on the other hand, states that failure to comply with an applicable law "has only the effect stated therein."
SECTION 2-105. UNCONSCIONABLE CONTRACT OR TERM.
(a) If a court as a matter of law finds the contract or any term of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable term, or it may so limit the application of any unconscionable term as to avoid any unconscionable result.
[(b) In a consumer contract [contract between and individual and a merchant], non-negotiable [non-negotiated] terms in a record which the [consumer] [individual] has authenticated or to which it has agreed by conduct are unconscionable if:
(1) the consumer [individual] had no knowledge of them; and
(2) the term:
(A) varies unreasonably from applicable industry standards or commercial practices;
(B) substantially conflicts with one or more negotiated terms in the agreement; or
(C) substantially conflicts with an essential purpose of the contract.
This subsection does not apply to a term disclaiming or modifying an implied warranty in accordance with another section of this article.]
(c) When it is claimed or appears to the court that the contract or any term of the contract may be unconscionable the parties must be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
Notes
1. Subsection (a) conforms to 2-302(1), except that the word "term," which is defined in 1-201, is substituted for the word "clause," which is not defined. But for this exception, subsection (a) conforms to 2B-110(a) (March, 1998). The Drafting Committee deleted the phrase "induced by unconscionable conduct," which was in the July, 1997 Draft of 2-105(a).
When may a court determine that a contract or a term is unconscionable? Comment 1 to 2-302 stated: "The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract." Further: "The principle is one of the prevention of oppression and unfair surprise...and not of disturbance of allocation of risks because of superior bargaining power." Finally, the determination is to be made after a hearing where the "parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination. 2-302(2).
2. Subsection (b), formerly 2-206 in the March, 1998 Draft, is new. The bracketed language raises the possibility that 2-105(b) might apply to a contract between a merchant and an individual rather than just to consumer contracts. Neither its content nor its insertion into 2-105 has been approved by the Drafting Committee. Former 2-206 has been bracketed for further discussion, see Note 4.
As the following analysis suggests, subsection (b) will clarify when a term is unconscionable and but, in the process, provide more protection than some courts have given under the standards of subsection (a) when interpreted to require oppression or extreme one-sidedness.
Analysis.
Subsection (b) states more clearly what terms are unconscionable without stating a rule that applies in every case. A case by case approach will still be required.
Although not specifically so limited, the subsection will be invoked most frequently where a consumer [individual] has assented to a record containing terms that are either "boilerplate" and not specifically disclosed through negotiation or are non-negotiable, i.e., offered on a take it or leave it basis. The phrase "non-negotiable" is consistent with the content of unfair surprise under 2-302 and is easier to understand than the phrase "non-negotiated." What does it mean to negotiate a term? Even if the concept includes a simple discussion of the term by the parties, that surely would give the other party "knowledge" of the term and foreclose the application of subsection (b).
Under this subsection, the consumer [individual] will be bound to terms in the record to which it agreed unless three conditions are satisfied:
(1) The term is not negotiable. This is a core element of the so-called contract of adhesion and signals the potential absence of meaningful choice. A negotiable term is not likely to be contained in the fine print. Presumably it will be easier to determine whether a term in a record is non-negotiable than whether the term has been negotiated.
(2) The consumer [individual] had no knowledge of the term. This minimal disclosure requirement is intended to protect against unfair surprise. The requisite lack of knowledge is most likely to occur when a non-negotiable term is buried in the fine print of a form. Disclosure is satisfied, however, if the consumer [individual] has actual knowledge of the term. It is enough that the consumer [individual] knows about the arbitration clause in the record even though he or she does not understand what arbitration is or does. The downside is that knowledge of the term is just one factor considered by courts in determining whether there was unfair surprise. For example, courts typically consider the capacity of the consumer [individual] (age, education, intelligence, experience), the relative bargaining power of the parties and the comprehendability of the terms as well as knowledge. See NEC Technologies, Inc. v. Wilson, 478 S.E.2d 769, 771 (Ga. 1996).
(3) If the consumer [individual] has no knowledge of the non-negotiable term, the term is unconscionable if it fails to conform to the requirements of subsection (b)(2), even though it would survive under subsection (a). In short, if there is procedural unconscionability because the consumer [individual] has no knowledge of the term, a term which shocks the conscience as defined in subsection (b)(2) will not be enforceable. However, if a consumer [individual] has knowledge of the term in a record to which it has agreed, the term is enforceable under 2-105(b) even though it is harsh, or substantially conflicts with negotiated terms, or eliminates the essential purpose of the contract. The downside of this is that the term of which the consumer [individual] has knowledge may survive even though it materially varied the usual default rules in a commercially unreasonable manner, unless it is otherwise unconscionable under subsection (a).
The additional requirement in the March, 1998 Draft of 2-206 that a reasonably consumer would not reasonably expect to find the term in the record is deleted.
Subsection (b) does not apply where a term excluding or modifying an implied warranty satisfies the requirements of 2-406. Even if 2-406 is satisfied, however, the broader requirements of subsection (a) may still be applicable, especially where questions of meaningful choice still remain. See Martin v. Joseph Harris Co., Inc., 767 F.2d 296 (6th Cir. 1985).
3. Subsection (c) follows 2-302(2). See 2B-110(b) (March, 1998).
4. Subsection 2-206 of the March, 1998 draft is stated below:
[SECTION 2-206. CONSUMER CONTRACTS; RECORDS.
Alternative A
(a) In a consumer contract, if a consumer agrees to a record, any non-negotiated term that a reasonable consumer in a transaction of this type would not reasonably expect to be in the record is excluded from the contract, unless the consumer had knowledge of the term before agreeing to the record.
(b) Before deciding whether to exclude a term under subsection (a), the court, on motion of a party or its own motion, shall afford the parties a reasonable and expeditious opportunity to present evidence on whether the term should be included or excluded from the contract. The court may exclude a term under this section only if it finds that the term is bizarre or oppressive [harsh or "one-sided] by industry standards or commercial practices, abrogates or substantially conflicts with other negotiated terms, eliminates the dominate purpose of the contract, or conflicts with other consumer protection laws.
(c) This section shall not operate to exclude an otherwise enforceable term disclaiming or modifying an implied warranty.
Alternative B
(a) In a consumer contract, a consumer adopts the terms of a [standard form] record by manifesting assent to the record [2B-112] after having an opportunity to review. [2B-113]. However, a term does not become part of the contract if it is unconscionable or conflicts with any negotiated term of the agreement between the parties. [2B-208(a)]
(b) This section shall not operate to exclude an otherwise enforceable term disclaiming or modifying an implied warranty.]
SECTION 2-106. INTEREST AND PART INTEREST IN GOODS.
(a) Goods must be both existing and identified before an interest in them may be transferred.
(b) A part interest in existing, identified goods may be sold.
(c) A purported present sale of or an interest in future goods is a contract to sell.
(d) An undivided share in an identified bulk of fungible goods is sufficiently described to be sold even if the quantity of the bulk is not determined. Any proportion of the bulk or quantity agreed upon by number, weight, or other measure, may, to the extent of the seller's interest in the bulk, be sold to the buyer, who then becomes an owner in common.
1. Subsection (a) follows 2-105(2), first sentence. The underlined phrase "can pass" is somewhat dated and is replaced by the phrase "may be transferred."
2. Subsection (b) follows 2-105(3), and is stated in the active voice.
3. Subsection (c) follows 2-105(a)(2), the last sentence. The phrase is revised to clarify the referent and to replace "operates as" with "is." "Future goods" are defined in 2-102(a)(18).
4. Subsection (d) follows 2-105(4). For clarity, the reporters substituted "described" for "identified" and deleted the word "agreed".
SECTION 2-107. GOODS TO BE SEVERED FROM REAL PROPERTY; RECORDING.
(a) A contract for the sale of minerals, oil, gas, or similar things to be extracted, or a structure or its materials to be removed, from real property, is a contract for the sale of goods if they are to be severed by the seller. Until severance, a purported present sale of those things, other than a sale that is effective as a transfer of an interest in the real property, is only a contract to sell future goods.
(b) A contract for the sale, apart from an interest in real property, of growing crops, timber to be cut, or other things attached to real property and capable of severance without material harm to the real property other than the things described in subsection (a), is a contract for the sale of goods, whether the thing is to be severed by the buyer or seller and even if it forms part of the real property at the time of contracting. The parties may effect a present sale before severance by identification of the goods.
(c) The rights of a buyer and seller under this section are subject to rights of third parties under the laws relating to records of real property. A contract for sale may be executed and recorded as a document transferring an interest in real property. The recording constitutes notice to third parties of the buyer's rights under the contract for sale.
Notes
Section 2-107 of Revised Article 2 follows former 2-107. The phrase "real property" has been substituted for words like "realty" and "land" for consistency. Other revisions in style, grammar and punctuation are for clarity.
SECTION 2-108. EFFECT OF AGREEMENT.
(a) Except as otherwise provided in Section 1-102(3) and this article, the effect of any provision may be varied by agreement.
(b) The absence of a phrase such as "unless otherwise agreed" does not by itself preclude the parties from varying the provision by agreement.
(c) Where this article allocates a risk or imposes a burden between the parties, an agreement may shift the allocation and also apportion the risk or burden.
1. Subsection (a) restates the principle of variance by agreement contained in 1-103(3)
and is subject to the limitations stated in that subsection. The principle is also subject to any specific exceptions stated in Article 2 but, unlike 2B-106(a)(1) (March, 1998), those exceptions are not stated in the statute.
Unlike Article 6 of CISG, this section does not state that the parties can contract out of Article 2 when it applies. Nor does it state that the parties can contract into Article 2 when it does not apply. Presumably the parties have some power to contract in or contract out, but the limitations of that power are not clear. See 2B-107(a) (March, 1998), providing broad validation to choice of law agreements.
2. Subsection (b) states affirmatively the "unless otherwise agreed" principle in 1-102(4): The "absence" of such a phrase does not by itself preclude variance by agreement.
3. Subsection (c) follows 2-303 and is repositioned in 2-108, which deals with the effect of an agreement. . The phrase "unless otherwise agreed" is deleted from the original 2-303 because Revised Article 2 does not use that phrase. See 2B-107(a) (March, 1998), in accord.
SECTION 2-201. FORMAL REQUIREMENTS.
(a) A contract for sale for the price of $5,000 or more is not enforceable by way of action or defense against a person that denies that a contract for sale was made, unless there is a record authenticated by the party against which enforcement is sought or its authorized agent as the record of that person and which is sufficient to indicate that a contract has been made between the parties. A record is not insufficient merely because it omits or incorrectly states a term agreed upon, including a quantity term. If the record contains a quantity term, however, the contract is not enforceable beyond that quantity.
(b) If within a reasonable time a record in confirmation of the contract and sufficient against the sender under subsection (a) is received by a merchant party and the merchant has reason to know of its contents, the confirmation satisfies the requirements of subsection (a) against the merchant unless notice in a record objecting to the contents of the confirmation is sent within 10 days after it is received.
(c) An otherwise valid contract that does not satisfy the requirements of subsection (a) is nevertheless enforceable if:
(1) the goods are to be specially manufactured or processed for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or processing or commitments for their procurement;
(2) the conduct of both parties in performing the agreement recognizes that a contract was formed; or
(3) the party against whom enforcement is sought admits in pleading or testimony in court or otherwise under oath that a contract for sale was made.
(d) An enforceable contract under this section is not made unenforceable on the ground that it is not capable of being performed within one year or any other applicable period after its making.
SOURCE: Section 2-201.
1. The PEB Study Group recommended that the statute of frauds should be either repealed or revised. See Executive Summary, 46 Bus. Lawyer 1874 (1991). Early drafts of revised Article 2 repealed the statute and motions to restore it were defeated at the 1995 and 1996 annual meetings of the Conference. The statute of frauds, however, was restored by the Drafting Committee at the January, 1997 meeting and a revised version, which made the statute easier to satisfy, was prepared. At the May, 1997 annual meeting of the ALI a motion to retain the statute passed but a motion to delete subsection (d), repealing the one-year clause, was defeated. More recently, the Drafting Committee again agreed that Article 2 should have a statute of frauds.
2. Subsection (a) follows original 2-201(1), with some substantive differences:
First, the floor amount favored by a plurality of the Drafting Committee is $5,000 rather than $500.
Second, the March, 1998 Draft stated in brackets that the defense cannot be raised unless the person against whom a claim or defense is asserted denies that an agreement was made. At the March, 1998 meeting of the Drafting Committee, it was agreed that the defendant must deny "facts from which an agreement can be found."
Third, an authenticated record is not insufficient simply because it omits a quantity term. Although there is no Article 2 "gap filler" for quantity, the term may be established by relevant evidence, including trade usage and course of dealing. If, however, a quantity term is included in the record the claims is not enforceable beyond the quantity stated. This follows the recommendation of the PEB Study Group. Similarly, there is no longer a quantity restriction where there is conduct by both parties establishing an agreement or facts from which a contract can be found are admitted in court or under oath. See subsection (c).
3. Subsection (b) retains the confirmation principle in 2-201(2),but the text now states that only the recipient of the confirmation must be a merchant. The text does not say whether a merchant may or may not be a farmer. The conclusion that farmers can never be a merchant, however, is rejected. See 2-201 (1995), comment 2, paragraph 2, which states that the merchant concept under 2-201(2) rests "on normal business practices which are or ought to be typical of and familiar to any person in business."
4. Subsection (c) states when a claim under a contract barred under subsection (a) is "nevertheless" enforceable.
Subsection (c)(1) follows §2-201(3)(a).
Subsection (c)(2) expands the "part performance" exception in 2-201(3)(c). Conduct by both parties, including part performance, takes the case out of the statute and proof of agreed quantity is not limited to the quantity represented by part performance. This follows the theory of subsection (a).
Subsection (c)(3) of the July, 1997 Draft, which recognized that reliance on representations or an agreement by one party "may estop" the other from raising the statute of frauds defense, is deleted. The comments will state that revised 2-201 does not preclude the estoppel defense, which depends upon principles of law outside of this Act. See Revised 1-102(b) (April 1997). Presumably, the court will be guided by Restatement (Second) Contracts § 139, one factor of which is the extent to which the reliance "corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence." See Subsection (2)(c). By stating some exceptions to subsection (a), there is no intention to foreclose the estoppel exception in appropriate cases.
Subsection (c)(4) follows former UCC 2-201(3)(b), with two changes: the admission (1) may be made by testimony in court or "otherwise under oath", and (2) an admission that a contract was made removes the statute of frauds bar and permits evidence of the agreed quantity even though the quantity was not admitted. This subsection was approved at the March, 1998 meeting of the Drafting Committee.
5. Subsection (d), which is new, survived a motion to delete at the ALI meeting in May, 1997. The phrase "any other applicable period" recognizes that some state statutes apply to periods longer than one year. The confused and contradictory interpretations under the so-called "one year" clause are illustrated in C.R. Klewin, Inc. v. Flagship Properties, Inc., 600 A.2d 772 (Conn. 1991) (Peters, J).
6. CISG. There is no statute of frauds in CISG. Article 11 provides: "A contract for sale need not be concluded in or evidenced by a writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses." The United States did not make the declaration permitted under Article 12, which would have preserved the statute of frauds.
SECTION 2-202. PAROL OR EXTRINSIC EVIDENCE. Terms on which the confirmatory records of the parties agree, or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to the included terms, may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. However, terms in such a record may be explained by credible evidence and, in addition, may be supplemented by evidence of:
(1) non-contradictory additional terms unless the court finds that:
(A) the record was intended as a complete and exclusive statement of the terms of the agreement; or
(B) the terms if agreed upon by the parties would certainly have been included in the record; and
(2) course of performance, usage of trade, or course of dealing.
SOURCE: Sales, Section 2-202.
Notes
1. Section 2-202 follows former §2-202 with the following exceptions.
First, the text has been revised to state that terms in an integrated record, whether partial or total, may be explained by any credible evidence, including evidence from a course of performance, usage or trade or course of dealing, and may be supplemented to the extent permitted in 2-202(1). This phrase is intended to moderate the so-called "plain meaning" rule in interpretation cases where the extrinsic evidence comes from sources other than trade usage or prior course of dealing. The comments should state that when the court holds a preliminary hearing on the admissibility of evidence for purposes of interpretation the court should follow the interpretation process set forth in Section 212 and Sections 200-203 of the Restatement, Second, of Contracts. See Winet v. Price, 6 Cal. Rptr.2d 554, 557 (Cal. App. 1992), where the court said:
The decision whether to admit parol evidence [to interpret a term] involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine "ambiguity," i.e., whether the language is "reasonably susceptible" to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is "reasonably susceptible" to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step--interpreting the contract.
Second, if the parties intend a partial integration, evidence of a non-contradictory term will be admitted to add to the agreement unless the court finds that the term, if agreed to, would certainly have been included in the agreement. See §2-202, Comment 3 (1995). Terms that "certainly" would have been included are not "consistent" additional terms, or would not naturally have been excluded from the record, or are not in "reasonable harmony" with the record. If the integration is total, however, even non-contradictory terms are excluded.
2. Although the Drafting Committee agrees that a merger clause is presumptive but not conclusive evidence of an intention to integrate, effect of a merger clause will be discussed in the comments rather than treated in the text. If both parties intend the record to be a final and exclusive statement of all terms, evidence of non-contradictory terms will be excluded but credible evidence relevant to interpretation will not.
3. Revised 2-202 still permits evidence from trade usage or prior course of dealing to supplement the terms of a totally integrated record unless the usage or course of dealing is "carefully negated" in the contract. See former §2-202, comment 2.
4. CISG. There is no comparable provision in CISG. See UPICC Art. 2.17 (effect of a merger clause). CISG Art. 8, however, provides standards for the interpretation of statements by and conduct of parties to a contract for sale.
Section 2-202 was not considered by the Drafting Committee at the March, 1998 meeting.
SECTION 2-203. SEALS INOPERATIVE. The affixing a seal to a record evidencing a contract for sale or to an offer to buy or sell goods does not make the record a sealed instrument. The law with respect to sealed instruments does not apply to the contract or offer.
Source: Sales 2-203.
SECTION 2-204. FORMATION IN GENERAL.
(a) A contract may be made in any manner sufficient to show agreement, including by offer and acceptance and conduct of both parties which recognizes the existence of a contract.
(b) If the parties so intend, an agreement sufficient to constitute a contract may be found even if the time of its making is undetermined, one or more terms are left open or to be agreed upon, the records of the parties do not otherwise establish a contract, or one party reserves the right to modify terms.
(c) Even if one or more terms are left open, a contract does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for an appropriate remedy.
(d) Conspicuous language in a record which expressly conditions the intention of the proposing party to contract upon agreement by the other party to terms proposed in the record prevents contract formation unless the required agreement is given.
[(e) Subject to Sections 2-207 and 2-209(a), if, after the buyer has become obligated to pay for or has taken delivery of the goods, the seller proposes terms in a record that vary those already disclosed or agreed to and to which the buyer agrees, the varying terms become part of the contract unless they are unconscionable under Section 2-105.]
SOURCE: Sales, Section 2-204; Article 2B.
Notes
1. Subsection (a) follows former §2-204(1), except that the phrase "offer and acceptance" is added. This makes explicit what is clearly intended in Part 2 and conforms with usage in the Restatement, Second, of Contracts and Part II of CISG. The word "offer", however, is not defined.
2. Subsection (b) is derived from but amplifies former §2-204(2). The phrase "even though the records do not establish a contract" is taken from former §2-207(3) and implements the decision to separate the treatment of contract formation from the question of "what are the terms.
3. Subsection (c) follows former 2-204(3).
4. Subsection (d) is derived from former §2-207(1), where contract formation was prevented if an apparent acceptance with terms that varied the offer was "expressly made conditional" on assent to the varying terms. The condition must be "express" and the language of condition must be conspicuous.
5. Subsection (e), which is new, adopts the "rolling contract" concept. See 2B-207, note 5 (March, 1998). The objective is to reduce the risk of unfair surprise when a buyer receives previously undisclosed terms after paying for or taking delivery of the goods. The question is whether they are unconscionable under 2-105. Further, if a contract is formed by conduct and both parties have records, terms upon which the records do not agree may be "knocked out" under 2-207.
Subsection (e) responds to the so-called "Gateway" problem, [Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997), cert. denied, 1997 WL 250455 (S.Ct. 1997)] and has not been approved by the Drafting Committee. The Drafting Committee favors some statutory solution, perhaps a solution adapted in part from 2B, but does not support a "mass market" concept for Article 2. See 2B-208 (March, 1998). Proposed subsection (e) provides a possible solution based the revised concept of unconscionability under 2-105 rather than the 2B model.
6. CISG. Articles 14 through 24 of CISG deal with formation of the contract. The primary formation model is offer and acceptance. There is no provision comparable to 2-203(a) in CISG, although Article 18(1) provides that "conduct of the offeree indicating assent to an offer is an acceptance."
SECTION 2-205. FIRM OFFERS.
(a) An offer by a merchant to buy or sell goods made in an authenticated record that by its terms gives assurance that the offer will be held open is not revocable for lack of consideration during the time stated. If a time is not stated, the offer is irrevocable for a reasonable time not exceeding 90 days. A term of assurance in a form record supplied by the offeree to the offeror is ineffective unless the term is conspicuous.
SOURCE: Sales, Section 2-203, 2-205.
Notes
1. Subsection (a) follows former §2-205, except that the word "conspicuous" replaces the phrase 'separately signed by the offeror". The word "form," which is used but not defined in §2-205, is retained. Other minor revisions for clarity are made.
"Conspicuous" is defined 2-102(a)(7).
Subsection (a) supplements rather than displaces other methods by which options contracts are created, such as by consideration or reliance.
2. CISG. Article 16(a) provides that an offer "cannot be revoked...if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable...or if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer."
SECTION 2-206. OFFER AND ACCEPTANCE.
(a) Unless otherwise unambiguously indicated by the language or circumstances:
(1) An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable under the circumstances. Subject to Section 2-204(d), a definite and seasonable expression of acceptance operates as an acceptance even though it contains terms that vary the offer.
(2) An order or other offer to buy goods for prompt or current shipment shall be construed to invite acceptance by either a prompt promise to ship or a prompt or current shipment of conforming goods. If under the circumstances the order or offer is construed to invite acceptance by the shipment of non-conforming goods, the non-conforming shipment is not an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation.
(b) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror that is not notified of acceptance within a reasonable time may treat the contract as discharged.
SOURCE: Sales, Section 2-206.
1. The second sentence in subsection (a)(1) follows former §2-207(1) up to the comma, except references to confirmations are deleted, see revised 2-207(c), and the phrase "terms that vary the offer" replaces "terms additional to or different from those offered." This change implements the decision to separate issues of contract formation from issues of what terms are in the contract. Note that an offeree can condition contract by formation under 2-204(d) by expressly conditioning in conspicuous language its willingness to deal unless the offeror agrees to the varying terms.
2. Subsection (a)(2) through the first sentence follows former 2-206(1)(b).
The second sentence changes the language in §2-206(1) after the comma. Former 2-206(1)(b) stated that an offer for prompt shipment could be accepted by the shipment of non-conforming goods unless the seller seasonably notified the buyer that the shipment was offered only as an accommodation. Comment 4 suggested that the non-conforming shipment is "normally to be understood as intended to close the bargain, even though it proves to have been at the same time a breach." The revision makes this rather bizarre result, conduct that is both an acceptance and a breach, depend upon the construction of the offer in the circumstances. Unless the offer is so construed, the normal rules apply, i.e., a shipment of non-conforming goods is a counteroffer.
3. Subsection (b) follows former §2-206(2) except that the offeror who is not promptly notified of acceptance by beginning performance may treat the contract formed as discharged rather than the offer as having lapsed. This is consistent with the Restatement, Second, of Contracts, which treats performance invited by the offeror as an acceptance by promise, §62, but treats the failure of the offeree to notify the offeror of the acceptance as a discharge of the offeror's contractual duty. §54(2).
4. CISG. Article 18(1) recognizes that an offer may be accepted by a "statement...or other conduct by the offeree indicating assent" to the offer. Subsection (2) states when an acceptance by a statement (promise) becomes effective and subsection (3) deals with when the offeree may "indicate assent by performing an act." In the former case, an acceptance by statement or promise is usually effective when received (there is no "mailbox"rule), and in the latter case the acceptance is effective when the act is performed if the offeror has indicated or the parties have agreed that notice to the offeror is not required. Apparently, an acceptance by an act is ineffective if notice to the offeror is not dispensed with.
SECTION 2-207. EFFECT OF VARYING TERMS IN RECORDS.
(a) This section is subject to Sections 2-202 and 2-105.
(b) If a contract is formed by offer and acceptance and the acceptance is by a record containing terms varying from the offer or by conduct of the parties that recognizes the existence of a contract but the records of the parties do not otherwise establish a contract for sale, the contract includes:
(1) terms in the records of the parties to the extent that the records agree;
(2) terms not in the records to which the parties have otherwise agreed;
(3) terms supplied or incorporated under any provision of this [Act]; and
(4) terms in a [form] record supplied by a party to which the other party has expressly agreed.
(c) If a contract is formed by any manner permitted under this article and either party or both parties confirms the agreement by a record, the contract includes:
(1) terms agreed to prior to the confirmation;
(2) terms in a confirming record that do not materially vary the prior agreement and are not seasonably objected to;
(3) terms in confirming records to the extent that they agree; and
(4) terms supplied or incorporated under any provision of this [Act].
Notes
1. Revised 2-207, which is derived from former §2-207, has a long and interesting drafting history. See Note 1, Drafting History (July, 1997). In essence, the revision helps to determine the terms of a contract that is formed under other sections. Put differently, revised 2-207 is limited to determining what the terms of an existing contract are regardless of how that contract was formed.
2. Subsection (a) states that 2-207 is subjects to sections 2-202, the "parol evidence rule," and 2-105(b), consumer contracts.
3. Subsection (b) is the core of revised 2-207. If a contract has been formed under the circumstances stated in the language up to the colon, the terms of that contract are determined by the language after the colon. The two most important principles are in b(1), which excludes terms in the records of the parties to the extent that the records do not agree, and (b)(4), which includes terms in one party's form record otherwise excluded under (b)(1) to which the other party has expressly agreed. The phrases "form record" and "expressly agreed" are used without definition because in over 35 years of litigation under former 2-207 the courts have always been able to distinguish form contracts from others and to decide when a party has expressly agreed to a term in a form. See former 2-205 and 2-209(2) where the word "form" is used without definition and the comments to 2-207 where both "forms" and "expressly agreed" are used.
The operation of revised 2-207 does not depend upon whether one or both parties are merchants, whether terms that vary the offer are additional or different, or whether terms excluded under subsection (b)(1) materially alter the contract.
4. Subsection (c) follows language in former §2-207(a) and elaborates on the effect of a confirmation of a contract by a record.
5. CISG. The principle underlying revised 2-207 is rejected in Article 19 of CISG. In essence, a purported acceptance of an offer which contains additions, limitations or other modifications is a rejection and a counteroffer unless the reply contains "additional or different terms which do not materially alter the terms of the offer." Art. 19(2) Thus, the counteroffer is the offeree's "last shot" which can be accepted by "conduct...indicating assent" to the offer. Art. 18(1). CISG contains no protection against unfair surprise and provides no explicit method of determining what are the terms of a contract formed by mutual conduct.
Revised Section 2-207 was not considered by the Drafting Committee at the March, 1998 meeting.
Assume that some contract has been formed under Article 2, Part 2. What are its terms? Note that some of the terms will be agreed at the time of contract formation and other terms may be included later. Even though terms included later are modifications, Section 2-207 rather than Section 2-210(a) may provide the applicable principles for inclusion. In short, 2-207 and 2-209(a) must be read together.
(a) All terms are expressed in one record.
Section 2-207 does not apply here. The single record is probably integrated and subject to 2-202. For consumer contracts, see 2-105(b). For commercial contracts, the usual principles of agreement apply, subject to Section 2-105(a).
(b) No terms are expressed in a record.
Section 2-207 does not apply here. Since the agreement is oral, the statute of frauds probably applies. See 2-201. If not, the usual principles of agreement apply. If a confirmation is made in a record, however, 2-207(c) will apply.
(c) Some Terms in the Record of only one party.
Section 2-207(b) applies where the contract is formed by offer and acceptance.
For example, suppose the buyer makes an oral offer and the seller makes a definite acceptance in a record that contains terms that vary from the offer. A contract is formed, see 2-206(a)(1), and the varying terms are not part of the agreement.
Suppose, further, that the seller ships and the buyer accepts the goods. Does the buyer's conduct in accepting the goods equal agreement to the seller's varying terms? Under subsection (b)(4), the answer is no where there is a form record: The buyer must expressly agree to the term. As a practical matter, the courts have distinguished between negotiated and "boilerplate" terms and have required a higher quality of assent to incorporate the boilerplate.
Suppose, further, that the seller's offer is made in a record and the buyer accepts orally or by conduct and states other terms that vary from the offer. This is a highly unlikely version of the "first shot" problem and subsection (b)(4) applies. Again, terms in the seller's form record are not part of the contract unless the buyer has expressly agreed to them.
(d) Both parties exchange records.
Subsection (b) applies if the contract is created by offer and acceptance and both the offer and the acceptance are in records. Both the "first" and "last" shot are neutralized and ambiguous conduct does not bring excluded terms back into the agreement. There must be express agreement.
Subsection (b) also applies if the contract is formed by conduct rather than by offer and acceptance. Again, if terms in the records are excluded because the records do not agree in substance, those excluded terms are not brought into the agreement by ambiguous conduct.
Thus, if the seller seeks to include a term in its record and the buyer also has a record, the seller's term is out to the extent that the records do not agree. The would not agree unless both parties had a term on the same matter, e.g., notice time for breach of warranty, and the terms agreed in substance, e.g., 20 days vs. 18 days. This is the "knock out" rule in current 2-207(3) and Article 2.22 of the UNIDROIT Principles, except that the "knock out" does not depend upon standard terms. Hence, revised 2-207 deals with the "battle of the records." In these cases, the crucial question is how to treat the excluded terms. Can they still become part of the agreement? The answer is found in subsection (b)(4): If a form record is involved, the answer is yes if, after their initial exclusion, the parties expressly agree to them.
(e) Confirmations.
Section 2-207(c) deals specifically with records that confirm a contract previously made. Compare 2-201(b), dealing with confirmations for purposes of the statute of frauds.
Suppose Seller and Buyer conclude an oral contract not subject to the statute of frauds or a contract for sale through "informal" correspondence. Later, Seller sends a record confirming the agreement and containing terms that vary the contract. What is the effect of the varying terms?
Original 2-207(1) provided that a "written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those...agreed upon." Thus, the confirmation was treated as an acceptance rather than a proposal to modify the contract and the additional or different terms became part of the contract only if 2-207(2) was satisfied. The problem was complicated where an earlier oral agreement was unenforceable under the statute of frauds and the writing both satisfied the statute between merchants, see 2-202(2), and proposed additional or different terms. Furthermore, a confirmation proposing additional or different terms and expressly conditioning the contract upon agreement to them is probably a repudiation rather than an acceptance or a proposal for modification.
Under subsection (d), only terms in the confirmation that do not materially vary the contract and are not seasonably objected to become part of the contract. Terms which materially vary the contract are excluded unless there is a modification in good faith which satisfies Section 2-210(a). This analysis applies if either or both parties attempt to confirm the earlier agreement.
(f) "My way or no way."
Section 2-204(d) recognizes that a party may condition its willingness to contract upon the other party's agreement to terms proposed and states that states that conspicuous language in a record that will prevent the formation of a contract on the exchange of records with varying terms but will not prevent a contract if there is "conduct of both parties recognizing the existence of a contract." 2-204(a). In cases of mutual conduct, what is the effect of the "my way or no way" provision? If the drafter cannot claim there is no contract, can it claim that the contract (based upon conduct) is on the terms in its record?
The reporters believe that the default rule in 2-207(b) should prevail over the express condition. The "knockout" rule eliminate terms upon which the writings do not agree and the requirement of express agreement prevents terms that were excluded from being incorporated simply because the parties have performed part or all of the agreement.
How should this result be implemented in the statute? In principle a party who expressly conditions its willingness to contract on agreement to specific terms and then ships the goods or accepts the goods without first obtaining that agreement should be precluded from relying on the condition.
In essence, the primary reason for a 2-207 is to prevent unfair surprise and advantage taking by the use of forms in transactions where all of the terms are not contained in a single record. See UPICC Art. 2.18 - 2.22.
SECTION 2-208. COURSE OF PERFORMANCE OR PRACTICAL CONSTRUCTION.
(a) A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:
(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party;
(2) that party performs on one or more occasions; and
(3) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
(b) A course of performance between the parties is relevant to ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement [or qualify] the terms of the agreement.
(c) Except as otherwise provided in subsection (d), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such construction is unreasonable:
(1) express terms prevail over course of performance, course of dealing, and usage of trade;
(2) course of performance prevails over course of dealing and usage of trade; and
(3) course of dealing prevails over usage of trade.
(d) Subject to Section 2-209, course of performance is relevant to show a waiver or modification of a term inconsistent with the course of performance.
SOURCE: Sales, Section 2-208; Revised 1-304 (September, 1997).
Notes
Revised Section 2-208 is derived from former §2-208 and follows Revised 1-304. Ultimately, 2-208 will be deleted from Article 2 and appear only in Article 1.
SECTION 2-209. MODIFICATION, RESCISSION, AND WAIVER.
(a) An agreement made in good faith modifying a contract under this article needs no consideration to be binding.
(b) [Except in a consumer contract,] an authenticated record that excludes modification or rescission except by an authenticated record may not be otherwise modified or rescinded. Such an exclusion in a form record supplied by a merchant to a non-merchant must be conspicuous. However, a party whose language or conduct is inconsistent with the exclusion term is precluded from asserting it if the language or conduct induced the other party to change its position reasonably and in good faith.
(c) A condition in a contract may be waived by the party for whose benefit it was included. Language, conduct or a course of performance between the parties is relevant to show a waiver. A waiver affecting an executory portion of a contract, however, may be retracted by reasonable notification received by the other party that strict performance will be required of any term waived, unless the waiver induced the other party to change its position reasonably and in good faith.
SOURCE: Sales, Section 2-209.
1. Subsection (a) follows former §2-209(1), except that the requirement of a good faith modification, previously found in a comment 2, is explicitly stated in the statute. This follows the cases, see, e.g., Roth Steel Products v. Sharon Steel Corp., 705 F.2d 134 (6th Cir. 1983), and avoids the argument that a contract modification is neither the "performance or enforcement" of a contract under §1-203. See 2B-303(a), where the revision is rejected.
2. Second, subsection (3) of former 2-209 has been deleted. That subsection stated that the requirements of the statute of frauds "must be satisfied if the contract as modified is within its provisions." After the deletion it is clear that if the original agreement satisfies the statute the modification is enforceable even though it is within the statute and does not comply. It is less clear what happens if neither the original agreement nor the modification were in excess of $5,000 but together they are. Arguably, the phrase "contract for sale" in 2-201(a) is broad enough to include a contract as modified and the statute of frauds would apply.
3. Subsection (b) follows former §2-209(2), except as follows.
First, consumer contracts are excepted. The Drafting Committee should reconsider whether the consumer exception is needed in light of revised 2-105(b) and the estoppel or reliance exception.
Second, a NOM term in a form supplied by a merchant to a non-merchant must be conspicuous. This follows the last clause of former 2-209(2), but changes the requirement of "between merchant" and substitutes "conspicuous" for "separately signed." See 2-204(a).
Third, the party for whose benefit the NOM term was included is precluded from enforcing it if language or conduct inconsistent with the NOM clause have induced reasonable, good faith reliance by the other party on an oral modification. See Brookside Farms v. Mama Rizzo's, Inc., 873 F. Supp. 1029 (S.D. Tex. 1995).
3. The first sentence of subsection (c) draws upon former §2-208(3) and 2-209(4) to state a general principle of "election" waiver where conditions (other than the NOM condition) are involved. Express conditions for the benefit of one party, such as notice, may be waived by that party by failing to insist upon them after the condition fails. No reliance by the other party is necessary.
The second sentence of subsection (c) follows former §2-209(5), except that the reliance exception is revised to conform to subsection (b). In this so-called reliance waiver, the party for whose benefit a condition is included states that he will not insist upon the occurrence of a condition in the future. Here, however, the waiver may be retracted unless the other party has changed its position "reasonably and good faith." Subsection (c), last sentence.
In a third type of waiver not covered by revised 2-209, the court simply excuses the condition when its nonoccurrence would cause "disproportionate forfeiture" and the occurrence of the condition was not a "material part of the agreed exchange." Restatement, Second, Contracts §229. See Aetna Casualty and Surety Co. v. Murphy, 538 A.2d 219 (Conn. 1988)(burden on party seeking excuse to prove that condition was not a material part of exchange).
To illustrate, suppose the contract contains a NOM clause and a schedule for installment deliveries by the seller. The seller encounters production problems, misses a due date and requests an extension of delivery time from the buyer.
First, suppose the buyer states that it will not insist on the NOM condition and orally agrees to a time extension. The seller does not request a written modification and proceeds to deliver under the modified schedule. Later, the seller invokes the NOM clause and sues for damages caused by late delivery. Here, the NOM clause is waived under subsection (b) by language inconsistent with the term which induced reasonable, good faith reliance and the agreed modification of the delivery schedule is enforceable if in good faith under subsection (a).
Second, suppose the buyer does not insist on a written modification and simply accepts the late installment without objection. Later, the buyer invokes the NOM clause and sues the seller for damages arising from late delivery. Once again, the NOM clause is waived under Subsection (b). Whether accepting the late delivery without objection is a waiver of seller's breach is determined under 2-702.
[B. Electronic Contracts]
Prefatory Note: Sections 2-210 through 2-217, dealing with electronic contracts, are taken from the February, 1998 draft of Article 2B. Substantial changes were made in the March, 1998 draft of 2B and, presumably, further changes will be made before Article 2B is finally approved. At the same time, the drafting of a Uniform Electronic Transactions Act is underway and this statute also covers electronic contracting. See Draft, November, 1997.
In light of these ongoing developments, no revisions have been made in these sections for the May, 1998 draft of Article 2. Rather, Article 2 will wait until 2B and the ETA are final. At that point, the choices will be either to (1) follow 2B, (2) follow ETA, or (3) modify 2B in light of ETA for a blend best suited for contracts for sale.
SECTION 2-210. LEGAL RECOGNITION OF ELECTRONIC RECORDS AND SIGNATURES. A record or authentication may not be denied legal effect, validity, or enforceability solely on the ground that it is electronic.
Source: 2B-113 (Feb. 1998).
SECTION 2-211. ATTRIBUTION PROCEDURE.
(a) Except as otherwise provided in Section [2B-115 (a)], if a person requires use of a procedure that would be an attribution procedure if it were commercially reasonable and a loss to the other person occurs because the procedure was not commercially reasonable:
(1) The person that required use of the procedure bears the loss unless it disclosed the nature of the risk to the other person and offered reasonable alternatives that the other person rejected.
(2) The liability of the person that required use of the procedure does not include losses that could have been prevented by the exercise of reasonable care by the other person.
(b) The commercial reasonableness of an attribution procedure is determined by the court. In making that determination, the following rules apply:
(1) An attribution procedure established by law or regulation is commercially reasonable for the purposes for which it was established.
(2) Except as provided in subsection (b)(1), commercial reasonableness is determined in light of the purposes of the procedure and the commercial circumstances at the time the parties agree to or adopt the procedure.
(3) An attribution procedure may require the use of any security devices that are reasonable under the circumstances, such as algorithms or other codes, identifying words or numbers, encryption, callback procedures, or any other reasonable security device.
Source: 2B-114 (Feb. 1998)
SECTION 2-212. ATTRIBUTION OF ELECTRONIC RECORD, MESSAGE, OR PERFORMANCE TO A PARTICULAR PERSON.
(a) Subject to subsection (b), an electronic authentication, message, record, or performance is attributable to a person if:
(1) it was in fact the action of that person, a person authorized by it, or the person's electronic agent;
(2) the other party, using an attribution procedure for identifying a person, in good faith concluded that it was an act of the other person, a person authorized by it, or the person's electronic agent; or
(3) it resulted from acts of a person that obtained, from a source under the control of the person to whom it is attributed, access numbers, codes, computer programs, or the like the use of which created the appearance that it came from that person and
(A) occurred because of a failure to exercise reasonable care by that person; and
(B) caused the other party reasonably to rely to its detriment on the apparent source of the message or performance.
(b) Attribution under subsection (a) (2) creates a presumption that the authentication, message, record or performance was that of the person to which it is attributed.
(c) In a case governed by subsection (a)(3), the following rules apply:
(1) The relying party has the burden of proving reasonable reliance, and the alleged actor has the burden of proving reasonable care.
(2) Reliance that does not comply with an attribution procedure that exists between the parties is not reasonable unless authorized by an individual representing the other party.
(d) Except as provided subsection (a), if a loss occurs because a party relied on an electronic authentication, message, record, or performance as that of another party, as between the parties, the party who relied bears any loss caused by its reliance.
Source: 2B-115 (Feb. 1998)
SECTION 2-113. ATTRIBUTION PROCEDURE FOR DETECTION OF CHANGES AND ERRORS; EFFECT OF USE. If the parties use an attribution procedure to detect errors or changes in the content of an electronic record, between the parties the following rules apply:
(1) An electronic message, record or performance that the attribution procedure shows to have been unaltered since a point in time is presumed to have been unaltered since that time.
(2) An electronic message, record, or performance created or sent pursuant to the attribution procedure to detect error is presumed to have the content intended by the person creating or sending it as to portions to which the procedure applies.
(3) If the sender complied with the attribution procedure and the change or error would have been detected had the other party also complied, the sender is not bound by a change or error.
(4) If the sender receives a notice required by the attribution procedure which describes the content as received, the sender must review the notice and report any error detected by it in a commercially reasonable manner.
Source: 2B-116 (Feb. 1998)
[SECTION 2-114. ELECTRONIC ERROR: CONSUMER DEFENSES.
(a) In this section, "electronic error" means an error created by an information processing system, by electronic transmission of a record, or by an error of the consumer in an electronic system that did not reasonably allow for correction or avoidance of such errors.
(b) In an automated transaction with a consumer, the consumer is not responsible for an electronic message that the consumer did not intend and that was caused by an electronic error if:
(1) promptly on learning of the other party's reliance on the message, the consumer:
(A) in good faith notifies the other party of the error and that it did not intend the message received; and
(B) delivers all copies of any information received to the other party or, deliver or destroy all copies pursuant to any reasonable instructions received from the other party; and
(2) the consumer has not used or received value from the information or caused the information or value to be made available to a third party.]
Source: 2B-117 (Feb. 1998)
SECTION 2-215. AUTHENTICATION PROOF; ELECTRONIC AGENT OPERATIONS.
(a) Operations of an electronic agent constitute the authentication or manifestation of assent of a party if a party used, selected or programmed the electronic agent for the purpose of achieving results of that type.
(b) Compliance with an attribution procedure for authenticating a record authenticates the record as a matter of law. Otherwise, authentication may be proven in any manner including by showing that a procedure existed by which a party or an electronic agent must engaged in conduct or operations that authenticated the record in order to proceed further in the use it made of the information.
Source: 2B-118 (Feb. 1998)
SECTION 2-216. ELECTRONIC MESSAGES: TIMING OF CONTRACT; EFFECTIVENESS OF MESSAGE; ACKNOWLEDGING MESSAGES.
(a) Except as provided in subsection (b), an electronic message is effective when received even if no individual is aware of its receipt. If an electronic message initiated by a party or an electronic agent evokes an electronic message in response, a contract exists:
(1) a response signifying acceptance is received; or
(2) if the response consists of furnishing the information or access to the information, when the information or notice of access is received, unless the originating message prohibited that form of response.
(b) If the originator of an electronic message requests or has agreed with the addressee that receipt be acknowledged electronically, the following rules apply:
(1) A message expressly conditioned on receipt of an