A special set of laws govern the buying and selling of goods, everything from purchasing a candy bar at a convenience store to the delivery of off-shore drilling rigs. It covers off-the-shelf goods, and specially made goods. It even (for some bizarre reason) sometimes covers software. It, thus, governs your relationship with your suppliers, your distributors, your retailers and your manufacturers.
You’ll hardly believe this: it was designed to be conform to the way business people do business. The idea was that you shouldn’t have to run to a lawyer just to carry out the day-to-day functions of placing and filling purchase orders.
The law—known as “Article 2” of the Uniform Commercial Code—is primarily designed to ensure that almost every sales transaction is backed by an enforceable contract, even if there are no negotiations and details are sketchy. That’s the good news. The bad news is that you can find yourself on the wrong end of a bad sales transaction, with no easy way to get out of the contract. Unless you’ve reached a specific agreement with your counterpart, Article 2, and not your preferred desires, will govern such crucial terms as:
- delivery date,
- F.O.B. terms,
- delivery conditions,
- the inspection and return of goods,
- warranties (including intellectual-property warranties),
- the scope of damages should you fail to perform—
- even price and
- (more rarely) quantity!
In addition, there are fairly complex rules for when the sales agreement must be in writing (and what the writing should contain), and what happens when the terms in the buyer’s purchase order don’t match the terms of the seller’s quote or invoice (the so-called “battle of the forms”).
When a dispute arises involving the sale of goods, you must look for any possible agreements regarding the terms of the transaction, and figure out which, if any, is enforceable. Alas, too often the answer is: “None,” or “More than one,” or “Here’s one (that maybe is enforceable?)” or “We definitely agreed on it, but I didn’t follow up with any confirmation.” Where there isn’t agreement, you look to Article 2’s “gap-fillers,” but those can be a little zen-like: “reasonable price,” “delivered in a reasonable time,” or the classic “in accordance with prevailing business practices.” Article 2 is meant to be “uniform,” but small yet significant differences have developed from state to state, which can become an issue for interstate transactions.
The best practice is never be in a position to rely on Article 2’s gap fillers, and to make sure you actually know what you’ve agreed to. This involves learning about Article 2 and instituting procedures for disciplined yet flexible sales and purchases. If you do find yourself in a dispute—and you’ll be in good company if you do—you’ll need to consider your litigation options. For more about litigation (and its discontents), we have prepared this handy primer.
Article 2 law is the lifeblood of commerce, but we don’t blog about it as much as intellectual-property law because it’s not very controversial, doesn’t change that much, and is (frankly) a trifle boring. You can read about an exception here, and see if you agree. Nevertheless, it’s something that Rick Sanders Law focuses on, and we’d love to help you resolve your dispute—or prevent the next one! Contact us now to see if we can help you do just that.