A look at UCC 1-103(b) through the lens of Article 2: A practice of liberal supplementation or exclusion?

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1 A look at UCC 1-103(b) through the lens of Article 2: A practice of liberal supplementation or exclusion? American Bar Association Business Law Section April 15, 2011 Professor Jennifer Martin St. Thomas University School of Law Miami Gardens, FL

2 Supplementary General Principles of Law Applicable. (b) Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, Bankruptcy, or other validating or invalidating cause shall supplement its provisions. How have the courts used this provision?

3 Cases: Rector v. Elevator, A , 2008 Minn. App. LEXIS 952 (Minn. Ct. App. August 12, 2008)(contaminated grain); Dunleavey v. Paris Ceramics USA, Inc., CV S, 2005 Conn. Super. LEXIS 970, at *1 (Conn. Super. Ct. April 20, 2005)(ceramic antique french stone); Terry's Floor Fashions, Inc. v. Georgia Pacific Corp., No. 5:97-CV-683-BR(2), 1998 U.S. Dist. LEXIS 15392, at *1 (E.D.N.C. July 23, 1998)(defective plywood). Common Law Contract Claims Generally precluded by Article 2 UCC Article 2 is exclusive remedy for breach of sales agreement Other related claims, such as those arising under unfair trade practices acts may survive

4 Contract Formation - General Straightforward approach with little controversy Common law understandings of contract doctrine, such as offer apply An offer at common law in a battle of the forms scenario then turns back to the code to resolve issues under s any manner sufficient to show agreement includes doctrine such as implied in fact contracts. Cases: Home Basket Co., LLC v. The Pampered Chef Ltd., No WEB, 2005 U.S. Dist. LEXIS 513, at *1 (D. Kan. January 12, 2005)(offer); Oakley Fertilizer, Inc. v. Continental Ins. Co., 276 S.W. 3d 342 (Mo. Ct. App. 2009) (offer, 2-207); Iverson Indus. v. Metal Mgmt. Ohio, Inc., 525 F. Supp. 2d 911 (E.D. Mich. 2007)(scrap metal renewal); J.D. Fields & Co. v. United States Steel Int'l, Inc., 690 F. Supp. 2d 487 (S.D. Tex. 2009)(common law price

5 Contract Formation Promissory Estoppel Ordinary promissory estoppel claims are available Cases: J.D. Fields & Co. v. United States Steel Int'l, Inc., 690 F. Supp. 2d 487 (S.D. Tex. 2009)(promissory estoppel consistent with Art. 2); Columbus Trade Exchange, Inc. v. AMCA Int'l Corp., 763 F. Supp. 946 (S.D. Ohio 1991)(estoppel available in proper case); Potter v. Hatter Farms, Inc., 56 Ore. App. 254 (Or. Ct. App. 1982).

6 Default Terms Party agreements displace gap filling contract terms provided in Article 2 [P]arties will often contract expressly as to quality, quantity, price, and some aspects of delivery and payment. In general, their agreement without more will be sufficient to displace any otherwise applicable Code provisions." 1 James J. White & Robert S. Summers, Uniform Commercial Code 3-2, at 131 (3d ed. 1988) Ordinary concept of mutual assent control to determine if parties have agreed to deal terms Some courts have held that when parties exercise mutual assent to agree to a term (i.e. by telephone conversation) then does not come into play relative to that specifically agreed to term.

7 Extrinsic Evidence Imposing a requirement of ambiguity (PER) prior to the admission of extrinsic evidence regarding an agreed delivery date would contradict s rejection of an ambiguity requirement in comment 1. Case: Blesi-Evans Co. v. Western Mechanical Service, Inc., 72 U.C.C. Rep. Serv. 2d (Callaghan) 115 (W.D.S.D. 2010).

8 Breach Common law of breach applies where code does not speak. Not all tort claims are precluded by Article 2, but the presumption of consistency is narrow Economic Loss Rule UCC Commercial losses arising out of the defective performance of contracts for the sale of goods, though, may not combine with negligent misrepresentation arising out of the quality, durability, fitness or merchantability of goods because those remedies are seen as presumptively inconsistent with the remedies afforded by the Uniform Commercial Code Cases: Santoro, Inc. v. A.H. Harris & Sons, 2004 Conn. Super. LEXIS 2821, at *1 (Conn. Super. Ct. 2004)(negligent misrepresentation not available as separate claim based on same facts); Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 709 A.2d 1075 (1998)(same).; Mydlach v. DaimlerChrysler Corp., 226 Ill. 2d 307 (Ill. 2007)(when non-warranty breach occurs)

9 Other rules Assignments While addresses assignment and delegation it leaves to common law the particular form or manner to effect such assignments. Modifications While allows modifications even when not in writing, any waiver under (4) must satisfy common law Case: Hefley v. Jones, 687 F. 2d 1383 (10 th Cir. 1982)(assignments); Valspar Refinish, Inc. v. Gaylord's, Inc., 764 N.W.2d 359 (Minn. 2009)(modifications).