Supply Chain World - Volume 7, Issue 3 - 18

CONTRACTS

the ordinary purposes for which
such goods are used," and "run,
within the variations permitted by
agreement, of even kind, quality
and quantity within each unit and
among all units involved." U.C.C. §
2-314(2)(a), (c), and (d). If the seller
at the time of contracting knows
that the goods are meant for a particular purpose and that the buyer is
relying on the seller's skill to select
suitable goods, Section 2-315 warrants that the goods selected will be
fit for that purpose.
Thus, merchants to a contract must
be careful not to default to certain terms
simply by leaving them out of a contract.
By doing so, the seller may "agree" to
sell its product at a "reasonable" price,
which happens to be too low for the seller to make profit; or may "agree" to deliver its product at a "reasonable" time,
which happens to be one that the seller
cannot actually meet. It is important
to know and understand how the UCC
(that state-adopted commercial code)
impacts sales transactions. Businesses
may be agreeing to terms they cannot
fulfill without even realizing it.

Supply Chain World VOLUME 7, ISSUE 3

The UCC also affects sales transactions in which two businesses
(that qualify as merchants) exchange
competing acknowledgments of the
agreement (such as a purchase order
and invoice) that have differing terms.
For example, the buyer may request a
shipment of crates, submitting a purchase order containing several terms
and conditions, including the quantity
and price of the crates.
The seller responds by sending an
invoice for payment in which the quantity and price on the invoice matches
the purchase order. But the seller also
includes its own terms and conditions,
some of which vary from those included in the buyer's purchase order and
some of which are additional.
Under traditional contract law, no
agreement is made - the acceptance did
not match the offer and thus did not
form a contract. But the UCC recognizes that the merchants intended to make
an agreement and thus treats them as
having done so.
Section 2-207 provides guidelines for
whether the additional terms are part
of the contract. It states that between
merchants, "additional terms become

part of the contract unless: (a) the
offer expressly limits acceptance to the
terms of the offer; (b) they materially
alter it; or (c) notification of the objection to them has already been given or
is given within a reasonable time after
notice of them is received."
Thus, the merchants cannot ignore
the terms and conditions that come
along with an invoice - they may be
bound by them.

Uncertainty Leads to Disputes
The UCC is helpful in filling in contractual terms that may have been missing
or reconciling additional terms, but it
does not terminate uncertainty. The
UCC generally adds default language
relying on what is reasonable.
Agreeing to a reasonable price or a
reasonable delivery date (e.g., U.C.C.
§§ 2-305, 2-309) leads to disputes as to
what is reasonable. Disputes often lead
to disintegrated business relationships
and, at times, costly litigation. Litigation
concerning what is reasonable is generally fact intensive, which increases the
likelihood of prolonged litigation.
Moreover, even though Section 2-207
provides guidelines for dealing with ad-

Supply Chain World - Volume 7, Issue 3

Table of Contents for the Digital Edition of Supply Chain World - Volume 7, Issue 3