Chapter 1. Uniform Commercial Code — Revised Article 1. General Provisions

Editor’s Notes —

Section 44 of Chapter 506, Laws of 2010, effective July 1, 2010, repealed the sections formerly codified as Uniform Commercial Code Article 1, General Provisions [Chapter 1 of Title 75]. Section 3 of Chapter 506, Laws of 2010, enacted a revised Uniform Commercial Code Revised Article 1, General Provisions [Chapter 1 of Title 75], effective July 1, 2010.

The following tables of disposition list the provisions of UCC Article 1 as they existed prior to July 1, 2010, and the corresponding provisions in UCC Revised Article 1, effective July 1, 2010. These tables are intended to assist the user who is familiar with the former Article 1 in finding comparable new provisions in Revised Article 1. In addition, where appropriate, the Source lines from the former provisions have been retained in the new provisions.

Where appropriate, notes to judicial decisions have been moved from their location under former provisions to the comparable new provisions.

TABLE OF DISPOSITION OF SECTIONS IN FORMER ARTICLE 1

FORMER ARTICLE 1 REVISED ARTICLE 1 75-1-101 75-1-101 75-1-102(1), (2) 75-1-103 75-1-102(3), (4) 75-1-302 75-1-102(5) 75-1-106 75-1-103 75-1-103 75-1-104 75-1-104 75-1-105 75-1-301 75-1-106 75-1-305 75-1-107 75-1-306 75-1-108 75-1-105 75-1-109 75-1-107 75-1-110 None 75-1-201(1)-(20), (22)-(24), (28)-(30), 75-1-201 (32)-(36), (38)-(40), (42)-(43) and (45)-(46) 75-1-201(21) (“honor”), (41) (“telegram”) Omitted 75-1-201(25)-(27) 75-1-202 75-1-201(31) 75-1-206 75-1-201(37) 75-1-203 75-1-201(44) 75-1-204 75-1-202 75-1-307 75-1-203 75-1-304 75-1-204(1) 75-1-302(b) 75-1-204(2), (3) 75-1-205 75-1-205 75-1-303 75-1-206 None 75-1-207 75-1-308 75-1-208 75-1-309

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TABLE INDICATING SOURCES OR DERIVATIONS OF REVISED ARTICLE 1 SECTIONS

REVISED ARTICLE 1 FORMER ARTICLE 1 75-1-101 75-1-101 75-1-102 (New) No corresponding provision 75-1-103 75-1-102(1), (2) and 75-1-103 75-1-104 75-1-104 75-1-105 75-1-108 75-1-106 75-1-102(5) 75-1-107 75-1-109 75-1-108 (New) No corresponding provision 75-1-201 75-1-201(1)-(20), (22)-(24), (28)-(30), (32)-(36), (38)-(40), (42)-(43) and (45)-(46) 75-1-202 75-1-201 (25)-(27) 75-1-203 75-1-201(37) 75-1-204 75-1-201(44) 75-1-205 Derived from 75-1-204(2), (3) 75-1-206 75-1-201(31) 75-1-301 75-1-105 75-1-302 75-1-102(3), (4) 75-1-303 Integration of former 75-2-208 and 75-2A-207 into principles of former 75-1-205 75-1-304 75-1-203 75-1-305 75-1-106 75-1-306 75-1-107 75-1-307 75-1-202 75-1-308 75-1-207 75-1-309 75-1-208 75-1-310 No corresponding provision

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Part 1. General Provisions.

§ 75-1-101. Short title.

Chapters 1 through 10 of Title 75 shall be known and may be cited as the Uniform Commercial Code.

This chapter may be cited as Article 1 when referring to the general provisions of the Uniform Commercial Code or as Uniform Commercial Code - General Provisions.

Chapters 1 through 10 of Title 75 are numbered to correspond to the numbering of the articles of the Uniform Commercial Code and may be referred to as “Articles.”

HISTORY: Present §75-1-101 is derived from former §75-1-101 [Codes, 1942, § 41A:1-101; Laws, 1966, ch. 316, § 1-101, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Comparable Laws from other States —

Alabama: Code of Ala. §7-1-101 et seq.

Alaska: Alaska Stat. § 45.01.111 et seq.

Arizona: A.R.S. § 47-1101 et seq.

Arkansas: A.C.A. §4-1-101 et seq.

California: Cal U Com Code § 1101 et seq

Colorado: C.R.S. 4-1-101 et seq.

Connecticut: Conn. Gen. Stat. § 42a-1-101 et seq.

Delaware: 6 Del. C. § 1-101 et seq.

District of Columbia: D.C. Code § 28:1-101 et seq.

Florida: Fla. Stat. § 671.101 et seq.

Georgia: O.C.G.A. §11-1-101 et seq.

Hawaii: HRS § 490:1-101 et seq.

Idaho: Idaho Code §28-1-101 et seq.

Illinois: 810 ILCS 5/1-101 et seq.

Indiana: Burns Ind. Code Ann. §26-1-1-101 et seq.

Iowa: Iowa Code § 554.1101 et seq.

Kansas: K.S.A. §84-1-101 et seq.

Kentucky: KRS § 355.1-101 et seq

Louisiana: La. R.S. § 10:1-101 et seq.

Maine: 11 M.R.S. § 1-1101 et seq.

Maryland: Md. COMMERCIAL LAW Code Ann. § 1-101 et seq.

Massachusetts: ALM GL ch. 106, § 1-101 et seq.

Michigan: MCLS § 440.1101 et seq.

Minnesota: Minn. Stat. § 336.1-101 et seq.

Missouri: § 400.1-101 R.S.Mo. et seq.

Montana: 30-1-101, MCA et seq.

Nebraska: R.R.S. Neb. (U.C.C.) § 1-101 et seq.

Nevada: Nev. Rev. Stat. Ann. § 104.1101 et seq.

New Hampshire: RSA 382-A:1-101 et seq.

New Jersey: N.J. Stat. § 12A:1-101 et seq.

New Mexico: N.M. Stat. Ann. §55-1-101 et seq.

New York: NY CLS UCC § 1-101 et seq.

North Carolina: N.C. Gen. Stat. §25-1-101 et seq.

North Dakota: N.D. Cent. Code, §41-01-01 et seq.

Ohio: ORC Ann. 1301.101 et seq.

Oklahoma: 12A Okl. St. § 1-101 et seq.

Oregon: ORS § 71.1010 et seq.

Pennsylvania: 13 Pa.C.S. § 1101 et seq.

Rhode Island: R.I. Gen. Laws § 6A-1-101 et seq.

South Carolina: S.C. Code Ann. §36-1-101 et seq.

South Dakota: S.D. Codified Laws § 57A-1-101 et seq.

Tennessee: Tenn. Code Ann. §47-1-101 et seq.

Texas: Tex. Bus. & Com. Code § 1.101 et seq.

Utah: Utah Code Ann. § 70A-1a-101 et seq.

Vermont: 9A V.S.A. § 1-101 et seq.

Virgin Islands: 11A V.I.C. § 1-101 et seq.

Virginia: Va. Code Ann. § 8.1A-101 et seq.

Washington: Rev. Code Wash. (ARCW) § 62A.1-101 et seq.

West Virginia: W. Va. Code §46-1-101 et seq.

Wisconsin: Wis. Stat. § 401.101 et seq.

Wyoming: Wyo. Stat. § 34.1-1-101 et seq.

RESEARCH REFERENCES

Am. Jur.

15A Am. Jur. 2d, Commercial Code §§ 1-2, 4, 9, 10, 11, 15, 17, 24, 25, 30.

Law Reviews.

1979 Mississippi Supreme Court Review: Corporate & Commercial Law. 50 Miss. L. J. 741, December 1979.

Squillante, Uniform Commercial Code Bibliography. 89 Com. L. J. 280.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-5. Reserved for future use.

II. UNDER FORMER §75-1-101.

6. In general.

I. UNDER CURRENT LAW.

1.-5. Reserved for future use.

II. UNDER FORMER § 75-1-101.

6. In general.

Federal court made an Erie prediction that the Mississippi Supreme Court would extend the economic loss doctrine to sales transactions under the Uniform Commercial Code, as codified in Mississippi, Miss. Code Ann. §75-1-101 et seq., where there was no personal injury or property damage. Adcock v. S. Austin Marine, Inc., 2009 U.S. Dist. LEXIS 104264 (S.D. Miss. Oct. 30, 2009).

In a contract case, the Uniform Commercial Code did not apply because under the mixed-transactions test the dispute clearly concerned testing of a control system owned by a utilities commission, which was a service; additionally, the contract as a whole, as evidenced by a demonstration that 60 percent of the contract related to services, was for the specialized design of a turbine. Upchurch Plumbing, Inc. v. Greenwood Utils. Comm'n, 964 So. 2d 1100, 2007 Miss. LEXIS 495 (Miss. 2007).

The sales provision of the Code will be applied to situations involving other commercial contracts because although not controlled by the Code “the Code is persuasive here because it embodies the foremost modern legal thought concerning commercial transactions”. Vitex Mfg. Corp. v. Caribtex Corp., 377 F.2d 795, 6 V.I. 166, 1967 U.S. App. LEXIS 6611 (3d Cir. V.I. 1967).

Reference has been made to the Code in interpreting the effect of an “as is” sale of real estate, the court recognizing that the Code would not apply but pointing out that cases thereunder “by the process of reasoning by analogy are appropriate precedents to apply in an interpretation of the contract provision.” Tibbitts v. Openshaw, 425 P.2d 160, 18 Utah 2d 442, 1967 Utah LEXIS 684 (Utah 1967).

Because of the provision of UCC § 1-102(2) decisions in other states “are more than mere persuasive authority.” A. J. Armstrong Co. v. Janburt Embroidery Corp., 97 N.J. Super. 246, 234 A.2d 737, 1967 N.J. Super. LEXIS 429 (Law Div. 1967).

The court should seek to follow interpretations of the Code made in other states. A. J. Armstrong Co. v. Janburt Embroidery Corp., 97 N.J. Super. 246, 234 A.2d 737, 1967 N.J. Super. LEXIS 429 (Law Div. 1967).

The UCC is inapplicable to commercial events which took place before it became effective. Streeter v. Middlemas, 240 Md. 169, 213 A.2d 471, 1965 Md. LEXIS 435 (Md. 1965); Peachtree News Co. v. Macmillan Co., 112 Ga. App. 556, 145 S.E.2d 666, 1965 Ga. App. LEXIS 769 (Ga. Ct. App. 1965).

A lease of standing timber for the purpose of producing turpentine therefrom is a lease of an interest in land to which the Uniform Commercial Code has no application. Newton v. Allen, 220 Ga. 681, 141 S.E.2d 417, 1965 Ga. LEXIS 605 (Ga. 1965).

Moreover, notwithstanding that a transaction relating to the sale of goods was entered into after the enactment of the Uniform Commercial Code, the prior Uniform Sales Act governs where the transaction took place before the effective date of the Paramount Paper Products Co. v. Lynch, 182 Pa. Super. 504, 128 A.2d 157, 1956 Pa. Super. LEXIS 424 (Pa. Super. Ct. 1956).

An indictment made under a section of the Sales Act, which was repealed by the Uniform Commercial Code is valid where violation of a similar provision of the Uniform Commercial Code is punishable, since the legislature did not intend by the repeal of the Sales Act to grant a pardon to those committing offenses under it. Commonwealth v. Davis, 4 Pa. D. & C.2d 182, 1954 Pa. Dist. & Cnty. Dec. LEXIS 5 (Pa. C.P. 1954).

The Uniform Commercial Code, as specifically provided therein, is inapplicable to transaction arising prior to its effective date. Thomas v. First Nat’l Bank, 376 Pa. 181, 101 A.2d 910 (1954); Roller v. Jaffe, 387 Pa. 501, 128 A.2d 355 (1957); Hahn v. Andrews, 182 Pa. Super. 338, 126 A.2d 519 (1956); GFC Corp. v. Antrim, 2 Pa. D. & C.2d 377 (1953); In re Consorto Constr. Co., 212 F.2d 676 (3d Cir. Pa. 1954), cert. denied, 348 U.S. 833, 75 S. Ct. 57, 99 L. Ed. 657 (1954); Gould v. City Bank & Trust Co., 213 F.2d 314 (4th Cir. Md. 1954); First Trust & Sav. Bank v. Fidelity-Philadelphia Trust Co., 214 F.2d 320, 50 A.L.R.2d 1218 (3d Cir. Pa. 1954), cert denied, 348 U.S. 856, 75 S. Ct. 81, 99 L. Ed. 674 (1954); Durkin v. Siegel, 340 Mass. 445, 165 N.E.2d 81 (1960); A. Belanger & Sons v. United States, 275 F.2d 372, 39 CCH Lab. Cas. P 66294 (1st Cir. Mass. 1960); United States ex rel. National U.S. Radiator Corp. v. D.C. Loveys Co., 174 F. Supp. 44, 37 Lab. Cas. (CCH) P 65620 (D. Mass. 1958), aff’d, 275 F.2d 372, 39 Lab. Cas. (CCH) P 66294 (1st Cir. Mass. 1960).

§ 75-1-102. Scope of article.

Article 1 applies to a transaction to the extent that it is governed by another article of the Uniform Commercial Code.

HISTORY: Former §75-1-102 [Codes, 1942, § 41A:1-102; Laws, 1966, ch. 316, § 1-102, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions enacted at §§75-1-103,75-1-106 and75-1-302 by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010. Present §75-1-102 was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

§ 75-1-103. Construction of Uniform Commercial Code to promote its purposes and policies; applicability of supplemental principles of law.

The Uniform Commercial Code must be liberally construed and applied to promote its underlying purposes and policies, which are:

  1. To simplify, clarify, and modernize the law governing commercial transactions;
  2. To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
  3. To make uniform the law among the various jurisdictions.

Unless displaced by the particular provisions of the Uniform Commercial Code, 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, and other validating or invalidating cause supplement its provisions.

HISTORY: Present §75-1-103 is derived from former §§75-1-102(1), (2) [Codes, 1942, § 41A:1-102; Laws, 1966, ch. 316, § 1-102, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and75-1-103 [Codes, 1942, § 41A:1-103; Laws, 1966, ch. 316, § 1-103, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010], and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

ALR.

Custom or usage as affecting time within which buyer must make inspection, trial, or test to determine whether goods are of requisite quality. 52 A.L.R.2d 925.

Automobile or motorcycle as necessary for infant. 56 A.L.R.3d 1335.

What constitutes impairment of proposed intervenor’s interest to support intervention as matter of right under Rule 24(a)(2) of Federal Rules of Civil Procedure in actions involving bankruptcy. 82 A.L.R. Fed. 435.

Am. Jur.

15A Am. Jur. 2d, Commercial Code §§ 1, 2, 14, 16, 29, 79.

73 Am. Jur. 2d, Statutes §§ 70 et seq., 136, 144, 145, 170 et seq.

Instruction to jury; right to vary code provisions by agreement, 6 Am. Jur. Pl & Pr Forms (Rev), Bank Deposits and Collections, Form 4:33.

Instruction to jury; liberal administration of remedies, 6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:951.

Variation by agreement, 18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:11 et seq.

CJS.

15A C.J.S., Common Law § 1 et seq.

82 C.J.S., Statutes § 372-374.

Law Reviews.

1978 Mississippi Supreme Court Review: Commercial Law. 50 Miss. L. J. 41.

1979 Mississippi Supreme Court Review: Corporate & Commercial Law. 50 Miss. L. J. 741, December 1979.

1979 Mississippi Supreme Court Review: Miscellaneous. 50 Miss. L. J. 833, December 1979.

1987 Mississippi Supreme Court Review, Corporate, contract and commercial law. 57 Miss. L. J. 467.

Allen and Hillman, Evidentiary Problems In - And Solutions For - The Uniform Commercial Code. 1984 Duke L. J., February, 1984.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

2.-10. [Reserved for future use.]

II. UNDER FORMER §75-1-102.

11. In general.

12. Nature and purpose.

13. Construction.

14. —Reference to official comments.

15. Policy of uniformity.

II. UNDER FORMER §75-1-103.

16. In general.

17. Agency.

18. Contracts.

19. —Parol evidence rule.

20. Contribution and indemnity.

21. Equity.

22. —Constructive trust.

23. —Estoppel and waiver.

24. —Subrogation.

25. —Unjust enrichment.

26. Law merchant; commercial paper.

27. —Sales.

28. —Secured transactions.

29. Statute of limitations.

30. Torts.

I. UNDER CURRENT LAW.

2.-10. [Reserved for future use.]

II. UNDER FORMER § 75-1-102.

11. In general.

In action by insurer as subrogee of subcontractor for indemnification of claims settled by insurer, which claims arose out of fire in municipal filtration plant which started when spark from welding torch landed on defective plastic equipment supplied by defendant company to subcontractor for installation in plant, defense contention that policy of UCC § 1-102(2)(b) to permit continued expansion of commercial practices through custom, usage, and agreement of parties demonstrated legislative intent to allow “commercial-industrial specialists,” such as subcontractor and defendant in present case, to regulate relationships among themselves and determine liability for defective products by agreement, had no merit because party injured by defective product was remote user thereof. Potsdam Welding & Machine Co. v. Neptune Microfloc, Inc., 57 A.D.2d 993, 394 N.Y.S.2d 744, 1977 N.Y. App. Div. LEXIS 12286 (N.Y. App. Div. 3d Dep't 1977).

In action pursuant to UCC § 3-419 by co-payee of check for conversion of check by bank which cashed check with co-payee’s endorsement forged by other payee, co-payee, which was not a “customer” of bank within meaning of UCC §§ 4-104 and 4-406, was not equitably estopped by policy of commercial reasonableness under UCC §§ 1-102 and 1-203, notwithstanding that co-payee waited 10 months after it learned of forgery to inform bank, where (1) check, which was issued to co-payee “and” other payee, was properly payable under UCC § 3-116 only if it contained endorsement of both payees; (2) unauthorized endorsement was, in absence of ratification under UCC § 3-404, no endorsement under UCC §§ 3-202 and 3-404; (3) co-payee did not ratify unauthorized endorsement; and (4) bank’s failure to ascertain whether co-payee’s signature was authorized was not in accord with reasonable commercial standards of banking business under UCC § 3-419. Atlas Bldg. Supply Co. v. First Independent Bank, 15 Wn. App. 367, 550 P.2d 26, 1976 Wash. App. LEXIS 1408 (Wash. Ct. App. 1976).

Notwithstanding that agents of owner of counterfeit United States treasury bill inquired at bank as to genuineness of bill, such inquiry did not constitute notice under UCC § 1-201 (25, 26, 27) that bill was not genuine and bank, which took bill as negotiable instrument in bearer form under UCC § 8-105 as bona fide purchaser, was entitled under UCC § 8-306 to rely on owner’s warranties as principal that bill was genuine and was not materially altered, but recovery by bank under unjust enrichment was not permitted, since, under UCC §§ 1-102 and 1-103, specific warranties of UCC displaced remedy of unjust enrichment in regard to negotiation of securities in this case. Brannon v. First Nat'l Bank, 137 Ga. App. 275, 223 S.E.2d 473, 1976 Ga. App. LEXIS 2411 (Ga. Ct. App. 1976).

12. Nature and purpose.

Where plaintiff former employer sued defendant former employee for breach of the implied duty of good faith and fair dealing, the claim was not likely to succeed on the merits for purposes of a preliminary injunction because there was no employment contract and although the employer cited Miss. Code Ann. §75-1-203, under Miss. Code Ann. §75-1-102, that only applied to the sale of goods. Block Corp. v. Nunez, 2008 U.S. Dist. LEXIS 34374 (N.D. Miss. Apr. 25, 2008).

While the effort was not totally successful, one of the purposes of the draftsmen of the Uniform Commercial Code was to eliminate resort to the concept of title in resolving controversies arising out of commercial transactions. J.L. Teel Co. v. Houston United Sales, Inc., 491 So. 2d 851, 1986 Miss. LEXIS 2460 (Miss. 1986).

Provisions of Uniform Commercial Code could not be resorted to by students to support contention that university and its officers were bound by a standard of reasonableness in determining future tuition rates (see UCC § 1-102(2)). Eisele v. Ayers, 63 Ill. App. 3d 1039, 21 Ill. Dec. 86, 381 N.E.2d 21, 1978 Ill. App. LEXIS 3259 (Ill. App. Ct. 1st Dist. 1978).

UCC was designed to regulate commercial transactions, and legislature did not intend through Code to create contractual cause of action for wrongful death arising from breach of warranty. Geohagan v. General Motors Corp., 291 Ala. 167, 279 So. 2d 436, 1973 Ala. LEXIS 1078 (Ala. 1973).

Taking note of the Uniform Commercial Code’s purpose to “make uniform the law among the various jurisdictions”, an Indiana Appeals Court held that electricity qualified as “goods” under the Code, relying upon the authority of a Pennsylvania case holding that natural gas was “goods” within the Code. Helvey v. Wabash County REMC, 151 Ind. App. 176, 278 N.E.2d 608, 1972 Ind. App. LEXIS 823 (Ind. Ct. App. 1972).

In matter of first impression in state, where there is authority in other jurisdictions, court will look to comments and examples of drafters of legislation as guide to “promote its underlying purposes and policies”. In re Rivet, 299 F. Supp. 374, 1969 U.S. Dist. LEXIS 9465 (E.D. Mich. 1969).

The purpose of this act, to be liberally construed, is specified as the stipulation, clarification and modernization of the law governing commercial transactions to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and the statute mandates a liberal administration to the end that an aggrieved party may be put in as good a position as if the other party had fully performed without consequential, special, or penal damages unless specifically provided for. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

The UCC was designed to bring the body of commercial law into the contemporary world of business. In re United Thrift Stores, Inc., 363 F.2d 11, 1966 U.S. App. LEXIS 5586 (3d Cir. N.J. 1966).

The Massachusetts court regards the Uniform Commercial Code less as a novel enactment than as largely a restatement and clarification of existing law which has the approval of American scholars. Universal C.I.T. Credit Corp. v. Guaranty Bank & Trust Co., 161 F. Supp. 790, 1958 U.S. Dist. LEXIS 2425 (D. Mass. 1958).

The Pennsylvania Uniform Commercial Code was enacted to codify all existing laws on commercial transactions. Girard Trust Corn Exchange Bank v. Warren Lepley Ford, Inc., 13 Pa. D. & C.2d 119, 1957 Pa. Dist. & Cnty. Dec. LEXIS 64 (Pa. C.P. 1957).

13. Construction.

Exculpatory provision of assignment that conditional sale contract and judgment note assignor warranted compliance with all filing and recording requirements, agreeing that any filing or recording or renewals thereof which the assignee might undertake at assignor’s request, or otherwise, should be at assignor’s expense and without responsibility whatsoever on assignee’s part for any omission or invalid accomplishment thereof, whether through assignee’s failure, neglect, or for any other reason, and that such omission or invalid accomplishment should not relieve assignor of any responsibility to assignee, was void under UCC § 1-102(3). Congress Financial Corp. v. Sterling--Coin Op Machinery Corp., 456 F.2d 451, 1972 U.S. App. LEXIS 11516 (3d Cir. Pa. 1972).

The Article on letters of credit is to be liberally interpreted. The requirement of rigid adherence to material matters must strike a balance with the concept of reasonable flexibility as to minor matters in order to facilitate trade. Banco Espanol de Credito v. State Street Bank & Trust Co., 385 F.2d 230, 1967 U.S. App. LEXIS 4593 (1st Cir. Mass. 1967), cert. denied, 390 U.S. 1013, 88 S. Ct. 1263, 20 L. Ed. 2d 163, 1968 U.S. LEXIS 2028 (U.S. 1968).

A court should not seek to restrict the Code by interpretations which preserve former inconsistent rules or law. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

Where repurchase agreement executed by automobile dealer failed to establish the time for performance, evidence of custom and usage showing that bank must repossess and return car for purchase within 90 days after default was admissible to establish what was a reasonable time, and bank’s undue delay in repossession and demand precluded it from recovering from automobile dealer the amount due from the buyer under the contract less the amount received at the execution sale. Valley Nat'l Bank v. Babylon Chrysler-Plymouth, Inc., 53 Misc. 2d 1029, 280 N.Y.S.2d 786, 1967 N.Y. Misc. LEXIS 1452 (N.Y. Sup. Ct.), aff'd, 28 A.D.2d 1092, 284 N.Y.S.2d 849, 1967 N.Y. App. Div. LEXIS 7723 (N.Y. App. Div. 2d Dep't 1967).

A liberal construction is to be placed upon the Commercial Code even to the extent of ignoring the requirement of § 9-402 that a financing statement is to be signed by the debtor, at least during the period of transition between the application of former statutes and the present Code. Alloway v. Stuart, 385 S.W.2d 41, 1964 Ky. LEXIS 109 (Ky. 1964).

The Code is to be liberally construed to promote its purposes and policies. National Shawmut Bank v. Vera, 352 Mass. 11, 223 N.E.2d 515, 1967 Mass. LEXIS 752 (Mass. 1967); Annawan Mills, Inc. v. Northeastern Fibers Co., 26 Mass. App. Dec. 115.

A liberal construction must be given to the Uniform Commercial Code so as to secure a reasonable meaning and to effectuate the intention of its framers and make it workable and serviceable to the important business to which it relates. Universal Lightning Rod, Inc. v. Rischall Electric Co., 24 Conn. Supp. 399, 1 Conn. Cir. Ct. 623, 192 A.2d 50, 1963 Conn. Cir. LEXIS 204 (Conn. Cir. Ct. 1963).

The Uniform Commercial Code is an attempt to codify all existing law governing commercial transactions and reference should not be made to one section alone. The Code must be considered as a whole, and each section should be read in conjunction with others in order to ascertain the intent of the legislature. Girard Trust Corn Exchange Bank v. Warren Lepley Ford, Inc., 12 Pa. D. & C.2d 351, 1957 Pa. Dist. & Cnty. Dec. LEXIS 311 (Pa. C.P. 1957).

14. —Reference to official comments.

Where jury could reasonably have concluded that buyer’s revocation of acceptance of new 1970 Lincoln Continental automobile was timely and justifiable, buyer under UCC § 2-711(1) was entitled to recover amount of purchase price that he had already paid. Moreover, such recovery was not limited by warranty provision, incorporated in sales contract, that buyer was entitled only to repair and replacement of defective parts. The Uniform Commercial Code expressly declares in UCC § 1-102(1) that it is to be liberally construed, and it also recognizes in Official Comment 1 to UCC § 2-719 that the very essence of a sales contract is that minimum adequate remedies at least be available. In present case, however, limited remedy of warranty in sales contract failed to achieve its essential purpose, since even after numerous attempts at repairs, vehicle purchased by buyer did not operate as new automobile should operate. Conte v. Dwan Lincoln-Mercury, Inc., 172 Conn. 112, 374 A.2d 144, 1976 Conn. LEXIS 880 (Conn. 1976).

Official Comment in connection with UCC § 1-102(3) regarding variance by agreement notes the purpose to preserve freedom of contract and allow for the evolutionary growth of commercial practices; but it also notes that whether such variance by agreement may affect third parties depends on more specific provisions of UCC. Herington Livestock Auction Co. v. Verschoor, 179 N.W.2d 491, 1970 Iowa Sup. LEXIS 901 (Iowa 1970).

Because Code is becoming truly national law of commerce and therefore appropriate source of federal law, “official comments”, although not binding on federal court, are powerful dicta. In re Yale Express System, Inc., 370 F.2d 433, 1966 U.S. App. LEXIS 4000 (2d Cir. N.Y. 1966).

The official comments to the Code may be examined to determine the intent of the Code, but in case of conflict with the provisions of the Code, the latter prevails. Bafile v. Remchow & Ford Motor Co. (Pa. 1962).

15. Policy of uniformity.

Virginia case law holding that extrinsic evidence may not be received to explain or supplement a written contract unless the court finds the writing is ambiguous has been changed by the UCC provision that the Code shall be liberally construed and applied to promote its underlying purposes and policies which include the continued expansion of commercial practices through custom, usage and agreement of the parties, and a finding of ambiguity is not necessary for the admission of extrinsic evidence about the usages of the trade and the parties’ course of dealing. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971).

Policy of uniformity utilized by court in adhering to Pennsylvania statute of limitations construction in Ohio case of first impression. Val Decker Packing Co. v. Corn Products Sales Co., 411 F.2d 850, 23 Ohio Misc. 162, 50 Ohio Op. 2d 129, 1969 U.S. App. LEXIS 12039 (6th Cir. Ohio 1969).

In matter of first impression in state, where there is authority in other jurisdictions, court will look to comments and examples of drafters of legislation as guide to “promote its underlying purposes and policies”. In re Rivet, 299 F. Supp. 374, 1969 U.S. Dist. LEXIS 9465 (E.D. Mich. 1969).

In Franklin Nat. Bank v. Eurez Constr. Corp. (1969) 60 Misc 2d 499, 301 NYS2d 845, 6 UCCRS 634, directive of Code that it be liberally construed to promote its purposes and policies, one of which is “to make uniform the law among the various jurisdictions”, was utilized by court in relying on cases from other jurisdictions holding that one who is not holder in due course but takes accommodation paper for value before it is due may enforce it against the accommodation maker, and that want of consideration is no defense to accommodation maker. Franklin Nat'l Bank v. Eurez Constr. Corp., 60 Misc. 2d 499, 301 N.Y.S.2d 845, 1969 N.Y. Misc. LEXIS 1466 (N.Y. Sup. Ct. 1969).

Because policy of Code is uniformity, sister-state interpretations are more than mere persuasive authority. A. J. Armstrong Co. v. Janburt Embroidery Corp., 97 N.J. Super. 246, 234 A.2d 737, 1967 N.J. Super. LEXIS 429 (Law Div. 1967).

II. UNDER FORMER § 75-1-103.

16. In general.

Under principle that pre-UCC law is applicable unless displaced by particular provisions of Code, UCC statute of frauds, rather than general statute of frauds, applies to alleged oral agreement and subsequent confirmatory letter, where general statute of frauds and UCC provision are in conflict and mandate different results. H & W Industries, Inc. v. Formosa Plastics Corp., 860 F.2d 172, 1988 U.S. App. LEXIS 15357 (5th Cir. Miss. 1988).

Finding no UCC Article 2 guidance to determining lessor’s measure of recovery for lessee’s continued use of leased copier after revocation, court would turn to doctrine of quantum meruit, which was not replaced by UCC. J.L. Teel Co. v. Houston United Sales, Inc., 491 So. 2d 851, 1986 Miss. LEXIS 2460 (Miss. 1986).

Nowhere does the Uniform Commercial Code state in so many words that a bank, whether a collecting bank or payor bank, is liable for negligently paying an item. Hints, however abound in the Code. They start with § 1-103, providing that common-law rules of negligence still apply. Section 3-419(3) limits recovery against collecting banks for conversion only if they acted in good faith and followed “reasonable commercial standards.” Section 3-406 precludes assertion of a material alteration or unauthorized signature against the party whose negligence substantially contributed to the wrongdoing, but only if the payor is a holder in due course or paid “in good faith and in accordance with the reasonable commercial standards of the drawee’s or payor’s business.” A bank is prohibited from disclaiming “responsibility for its own lack of good faith or failure to exercise ordinary care” under § 4-103(1), apparently on the assumption that such duties exist. Finally, a bank’s lack of care shifts the burden for paying over a forged signature or a materially altered item from its customer, who was negligent in discovering the wrongdoing, back to the bank under § Bank of Southern Maryland v. Robertson's Crab House, Inc., 39 Md. App. 707, 389 A.2d 388, 1978 Md. App. LEXIS 241 (Md. Ct. Spec. App. 1978).

Since the Uniform Commercial Code does not deal with the attributes of ownership of a joint tenant in investment securities, the court under UCC § 1-103 may apply the applicable common-law principles that govern joint tenancies. Ogilvie v. Idaho Bank & Trust Co., 99 Idaho 361, 582 P.2d 215, 1978 Ida. LEXIS 428 (Idaho 1978).

Under UCC § 1-103, the provisions of the Uniform Commercial Code do not totally preempt the fields of law in which they speak. Rather, they are supplemented by all principles of law and equity that they do not specifically displace. S. S. Kresge Co. v. Port of Longview, 18 Wn. App. 805, 573 P.2d 1336, 1977 Wash. App. LEXIS 2069 (Wash. Ct. App. 1977), disapproved, American Nursery Products, Inc. v. Indian Wells Orchards, 115 Wn.2d 217, 797 P.2d 477, 1990 Wash. LEXIS 94 (Wash. 1990).

UCC § 1-103 is to be viewed as a general adoption of commonlaw principles to commercial transactions, where the Code provisions do not apply to replace them. Gorge Lumber Co. v. Brazier Lumber Co., 6 Wn. App. 327, 493 P.2d 782, 1972 Wash. App. LEXIS 1172 (Wash. Ct. App. 1972).

UCC § 1-103 explicitly provides that previously recognized principles of law and equity should supplement statute in those areas where Code is silent. Muir v. Jefferson Credit Corp., 108 N.J. Super. 586, 262 A.2d 33, 1970 N.J. Super. LEXIS 628 (Law Div. 1970).

The instant section affords a basis for regarding the Code as being supplemented by existing law outside the Code unless displaced by provisions of the Code itself. National Shawmut Bank v. Vera, 352 Mass. 11, 223 N.E.2d 515, 1967 Mass. LEXIS 752 (Mass. 1967).

The provisions of this section superimpose a general requirement of fundamental integrity on commercial transactions regulated by the Uniform Commercial Code. Skeels v. Universal C. I. T. Credit Corp., 335 F.2d 846, 1964 U.S. App. LEXIS 4515 (3d Cir. Pa. 1964).

17. Agency.

Although written notice of termination of authority to execute instruments would be desirable and even though checking account agreement between corporation and bank required revocation of signatory authority to be in form of written corporate resolution, controverted question of fact as to whether bank received oral notice of withdrawal of signatory authorization presented material issue of fact which would ordinarily preclude summary judgment, since under UCC § 4-103, no agreement can disclaim bank’s responsibility for its own lack of good faith or failure to exercise ordinary care, and since, under UCC § 1-103, general rule of principal and agent that notice of termination of agent’s authority can be given orally was applicable in absence of specific UCC provision on point. First Piedmont Bank & Trust Co. v. Doyle, 97 Idaho 700, 551 P.2d 1336, 1976 Ida. LEXIS 341 (Idaho 1976).

Case law rule that, if bank knows that deposits by debtor in his own name are in fact held by him in fiduciary capacity, then bank may not apply such funds to individual indebtedness of debtor, was not nullified by adoption of Uniform Commercial Code. South Cent. Livestock Dealers, Inc. v. Security State Bank, 551 F.2d 1346, 1977 U.S. App. LEXIS 13416 (5th Cir. Tex. 1977).

The rules of law governing the ratification of the acts of an agent are not altered by the In re Eton Furniture Co., 286 F.2d 93, 1961 U.S. App. LEXIS 5489 (3d Cir. Pa. 1961).

Whether a person is the agent of the seller so that he has authority to bind the seller by a warranty, charge the seller with notice of a particular purpose for which the goods are desired by the buyer, or charge the seller with notice of non-conformity of the goods, is a question of fact to be determined by the jury when the evidence is conflicting. Marble Card Elec. Corp. v. Maxwell Dynamometer Co. (Pa. 1961).

18. Contracts.

In an action arising out of an accommodation endorsement by a decedent on a negotiable instrument which represented a consolidation and renewal of two outstanding notes owed by his son, the finding of the chancellor that the decedent, although in poor health and suffering from very poor vision, had been competent when he endorsed the note two weeks before his death was supported by the evidence and was free from manifest error. Wilson v. Planters Bank of Tunica, 383 So. 2d 1089, 1980 Miss. LEXIS 1999 (Miss. 1980).

An infant may not disaffirm a contract for necessaries (UCC § 1-103, successor provision to Pers Prop L § 83). Even here, the phrase “necessaries” does not possess a fixed interpretation, but must be measured against both the infant’s standard of living and the ability and willingness of his guardian, if he has one, to supply the needed services or articles. Fisher v. Cattani, 53 Misc. 2d 221, 278 N.Y.S.2d 420, 1966 N.Y. Misc. LEXIS 1191 (N.Y. Dist. Ct. 1966).

A person is bound by a contract which he signs without reading it when there is no evidence that he could not have done so had he chosen. Garner v. Tomcavage (Pa. 1962).

The Code does not change the fundamental principle of contract law that where the parties have merely made a tentative agreement and in fact have not agreed upon any contract there is no binding obligation which the court can enforce. Arcuri v. Weiss, 198 Pa. Super. 506, 184 A.2d 24, 1962 Pa. Super. LEXIS 739 (Pa. Super. Ct. 1962).

19. —Parol evidence rule.

Since it was well established prior to enactment of Uniform Commercial Code that if fraud were alleged with respect to formation of written contract, parol evidence rule did not bar consideration of contemporaneous oral agreement, and since UCC § 1-103 expressly provides that common-law principles of fraud and misrepresentation supplement Uniform Commercial Code’s provisions, courts have continued to recognize pre-UCC fraud exception to parol evidence rule after adoption of parol evidence rule set forth in UCC § 2-202. Thus, in action by buyer of front-end loader to recover damages caused by fraudulent misrepresentations of seller’s employee, chancellor was required to consider testimony by buyer-even though parties’ written contract specifically declared that it was complete and exclusive statement of terms of their agreement (see UCC § 2-202(b) )-that loader, although represented as being 1973 model, was in fact manufactured in 1968. Franklin v. Lovitt Equipment Co., 420 So. 2d 1370, 1982 Miss. LEXIS 2249 (Miss. 1982).

Under Pennsylvania law where parties, without any fraud or mistake, have deliberately put their engagements in writing, the writing is not only the best, but the only, evidence of their agreement. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

As provided in § 1-103, it was settled law in Pennsylvania prior to enactment of the Uniform Commercial Code that where fraud, accident, or mistake are alleged with respect to the execution of a written contract, prior oral agreements between the parties are admissible. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

In action to determine priority of security interests of bank and seller of hardware store, where evidence showed that seller’s security interest in purchaser’s collateral was perfected by filing on July 20, 1972, and that bank’s interest in same collateral was perfected by filing on November 2, 1972; that bank, by subordination agreement entered into on July 12, 1972, had subordinated its claim against purchaser to claim of seller; and that on December 11, 1973, rider to subordination agreement executed by bank, seller, and purchaser provided that agreement should apply only to first $15,000 of purchaser’s indebtedness to seller and that priority of claims concerning remainder of such indebtedness should be determined in accordance with UCC Article 9, (1) provisions of UCC Article 1 applied to case, since subordination agreement and rider related to transactions covered by Uniform Commercial Code and rider specifically referred to Article 9; (2) under UCC § 1-103, dealing with application of supplementary principles of law and equity, non-UCC parol evidence rule applied to case; (3) under UCC § 1-205(4), non-UCC parol evidence rule barred parol evidence by bank that rider was intended to grant bank priority as to claims in excess of first $15,000 of purchaser’s indebtedness to seller, since such evidence was totally inconsistent with unambiguous terms of rider which were controlling; and (4) even if seller’s security interest should fail to meet test for special priority under UCC § 9-312(3), seller’s interest would still prevail under first-to-file rule of UCC § 9-312(5). People Bank & Trust v. Reiff, 256 N.W.2d 336, 1977 N.D. LEXIS 146 (N.D. 1977).

20. Contribution and indemnity.

In action for seller’s breach of contract to sell and install at buyer’s lumber plant two “super drying kilns” and two lumber-handling systems, where (1) contract contained performance guarantee that super kilns would reduce drying schedules for buyer’s lumber by 50 per cent and that if they did not do so, seller would provide adequate production capacity equal to that of four conventional dry kilns at no additional cost to buyer, (2) buyer paid down payment of $24,000, which was accepted by seller, (3) seller repudiated contract because it could not comply with performance guarantee, and (4) buyer thereafter purchased four conventional dry kilns and also a lumber “stacker-unstacker” from another seller, court held (1) that contract’s performance guarantee was sufficiently definite and certain, (2) that because contract was breached by seller before installation of super kilns, liquidated damages provision of performance guarantee was inapplicable to measure buyer’s damages and district court should have measured such damages under UCC §§ 2-712 and 2-713, (3) that regardless of whether district court, on remand of case, should apply cover provisions of UCC § 2-712 or contract-market price damages rule of UCC § 2-713 to case, court should base either cost of cover or market price of dry kilns on installed cost of conventional dry kilns with holding capacity twice that of the super kilns contracted for, since parties intended, by their performance guarantee, that super kilns’ productivity was to be equivalent of conventional dry kilns with twice the holding capacity of such kilns, (4) that under UCC § 2-711(1), buyer was entitled to recover its down payment, (5) that since the Uniform Commercial Code did not provide remedy for seller’s recovery of value of equipment shipped by seller to buyer before seller’s breach of contract, UCC § 1-103 was applicable and seller, under common-law and equitable principles, was entitled to recover value of equipment still in buyer’s possession, together with fair value of equipment that buyer had disposed of, and (6) that district court should compute under UCC § 2-713 damages caused buyer by seller’s failure to deliver and install the lumber-handling systems. Mann & Parker Lumber Co. v. Wel-Dri, 579 F.2d 973, 1978 U.S. App. LEXIS 10595 (6th Cir. Tenn. 1978).

Under UCC § 1-103, general law on contribution and indemnity continues to supplement provisions of UCC and was applicable in truck owner’s action for breach of warranty against dealer and manufacturer of truck to recover amount paid out in settlement of lawsuits arising out of collision between automobile and truck. Dodge Trucks, Inc. v. Wilson, 140 Ga. App. 743, 231 S.E.2d 818, 1976 Ga. App. LEXIS 1618 (Ga. Ct. App. 1976), aff'd, 238 Ga. 636, 235 S.E.2d 142, 1977 Ga. LEXIS 1144 (Ga. 1977).

By its terms, UCC § 1-103 permits reference to general equity principles only if they are not “displaced by the particular provisions of this Act”; the “Act” is the entire Code. Bowling Green, Inc. v. State Street Bank & Trust Co., 307 F. Supp. 648, 1969 U.S. Dist. LEXIS 9489 (D. Mass. 1969), aff'd, 425 F.2d 81, 1970 U.S. App. LEXIS 9379 (1st Cir. Mass. 1970), but see, Maine Family Fed. Credit Union v. Sun Life Assur. Co., 727 A.2d 335, 1999 Me. LEXIS 44 (Me. 1999).

21. Equity.

Notwithstanding Idaho statutory and common-law principles concerning gifts and the creation of joint tenancies, transfers of investment securities are governed by Article 8 of the Idaho Uniform Commercial Code (UCC § 8-101 et seq.). However, where Article 8 is silent as to the applicable law, the Idaho court’s disposition of a transfer of such securities, under Idaho UCC § 1-103, is governed by principles of law and equity that supplement the provisions of the Idaho Uniform Commercial Code. Ogilvie v. Idaho Bank & Trust Co., 99 Idaho 361, 582 P.2d 215, 1978 Ida. LEXIS 428 (Idaho 1978).

Equitable principles continued to apply to permit a seller to recover from a third party the sales price of automobiles as represented by checks issued by the purchaser with every intention that they would be paid upon presentment, and this despite the seller’s loss of the right of rescission, where it was the act of the third party which rendered the purchaser’s checks worthless to that party’s financial advantage. Greater Louisville Auto Auction, Inc. v. Ogle Buick, Inc., 387 S.W.2d 17, 1965 Ky. LEXIS 457 (Ky. 1965).

22. —Constructive trust.

Where (1) plaintiff and his wife purchased used mobile home, (2) plaintiff’s father-in-law cosigned security agreement and note as accommodation maker, (3) plaintiff defaulted on payments, (4) plaintiff’s father-in-law, with secured party’s consent, obtained possession of home, paid off balance due on note, and made repairs on home, (5) secured party obtained repossession title in its name, released security agreement, and transferred repossession title to plaintiff’s father-in-law without notifying plaintiff, who was in jail, of either the account delinquency or the subsequent transfer of title, and (6) after plaintiff’s release from jail, plaintiff’s father-in-law sold home with plaintiff’s consent, but did not give accounting of sale or proceeds therefrom to plaintiff, court held (1) that plaintiff did not waive right to notice of disposition of home under UCC § 9-504(3), since UCC § 9-501(3)(b) specifically states that such right cannot be waived; (2) plaintiff’s father-in-law, as accommodation maker of note, did not fall within scope of UCC § 9-504(5), dealing with transfers of collateral that are not sales and thus do not require notice to debtor; (3) UCC § 9-504(5) did not contemplate complete extinguishment of plaintiff’s right to home, as was done in present case by secured party’s transfer of repossession title to plaintiff’s father-in-law; and (4) under UCC § 9-507(1) and UCC § 1-103, plaintiff was entitled to damages for conversion of home on basis of benefit to defendant wrongdoers, rather than on basis of allowing full value of home as enhanced by wrongdoers. Western Nat'l Bank v. Harrison, 577 P.2d 635, 1978 Wyo. LEXIS 283 (Wyo. 1978) (stating, alternatively, that once plaintiff had established conversion of home and consequential right to nominal damages therefor, he became eligible for rule-of-thumb damages allowed by UCC § 9-507(1).

23. —Estoppel and waiver.

Failure of customer to give prior consent, as required by Florida UCC § 5-106(2), to extension of irrevocable letter of credit did not invalidate such extension where customer acquiesced in extended letter after its issuance. In such case customer, under general principles of equity incorporated into Florida Uniform Commercial Code by Florida UCC § 1-103, was estopped from denying that it was bound by the extended letter. Lewis State Bank v. Advance Mortg. Corp., 362 So. 2d 406, 1978 Fla. App. LEXIS 17204 (Fla. Dist. Ct. App. 1st Dist. 1978) (holding that letter of credit in suit remained irrevocable and unconditional within meaning of Florida UCC § 5-103(1)(a)).

Although UCC § 1-103 allows principle of estoppel to supplement UCC provisions, grain farmer was not estopped from asserting statute of frauds, UCC § 2-201, as defense to alleged oral contract for sale of 40,000 bushels of grain where there was no evidence of fraud, positive misrepresentation or unconscionable conduct akin to fraud chargeable to farmer. Farmers Coop. Ass'n v. Cole, 239 N.W.2d 808, 1976 N.D. LEXIS 191 (N.D. 1976).

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC § 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC § 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

In action by buyer to enforce oral contract for sale of 20,000 bushels of corn at $1.22 per bushel for future delivery, seller was barred from raising defense of statute of fraud, UCC § 2-201(1) by doctrine of equitable estoppel where buyer substantially changed its position in reliance on oral contract by selling 18,000 bushels of corn to two third parties in accordance with buyer’s general business practice, and where seller knew or should have known that buyer would rely on contract and would resell corn. Farmers Elevator Co. v. Lyle, 90 S.D. 86, 238 N.W.2d 290, 1976 S.D. LEXIS 183 (S.D. 1976).

Under Illinois law some “title” or “right” can be created by estoppel. Avco Delta Corp. Canada, Ltd. v. United States, 459 F.2d 436, 1972 U.S. App. LEXIS 10030 (7th Cir. Ill. 1972).

An agreement between an equipment manufacturer and a finance company to the effect that the finance company was under no responsibility to record or file security paper was deemed waived by the finance company’s retention of, and inaction upon, a letter from the manufacturer accompanying its transmittal of a conditional sales contract and judgment note requesting the finance company to record the paper, and the finance company’s failure to comply with the statute placed the burden of loss from the dissipation of the security upon its shoulders. Congress Financial Corp. v. Sterling--Coin Op Machinery Corp., 456 F.2d 451, 1972 U.S. App. LEXIS 11516 (3d Cir. Pa. 1972).

Defense of estoppel to ameliorate what would otherwise be an equitable result, a doctrine adopted and applied under New York decisional law, was properly raised as an affirmative defense in accordance with the Federal Rules, because of the directive of UCC § 1-103 for the preservation of principles of law and equity. Congress Factors v. Malden Mills, Inc., 332 F. Supp. 1384, 1971 U.S. Dist. LEXIS 11382 (D.N.J. 1971).

Bank’s action in converting a transaction which clearly contemplated insurance, into an assignment which would have the effect of depriving the buyer of the waiver of subrogation provision, was not “good faith” as defined by UCC. Integrity Ins. Co. v. Davis, 116 N.J. Super. 417, 282 A.2d 452, 1971 N.J. Super. LEXIS 800 (Cty. Ct. 1971).

No particular provision of Code displacing law of waiver, supplementary general principles of law were applicable in this regard under Code § 1-103. Clovis Nat'l Bank v. Thomas, 1967-NMSC-061, 77 N.M. 554, 425 P.2d 726, 1967 N.M. LEXIS 2673 (N.M. 1967) (premise of no Code displacement of law of waiver expressly disagreed with by United States v. Greenwich Mill & Elevator Co. (1968, ND Ohio) 291 F Supp 609, 17 Ohio Misc 71, 46 Ohio Ops 2d 102, 5 UCCRS 965 (applying Ohio law) and holding that Code § 9-306(2) codified doctrine of waiver).

When one of two innocent persons must suffer through the fraud of a third person the one who made it possible for the fraud to be perpetrated must bear the loss. General Motors Acceptance Corp. v. Manheim Auto Auction, 25 Pa. D. & C.2d 179, 1961 Pa. Dist. & Cnty. Dec. LEXIS 263 (Pa. C.P. 1961).

24. —Subrogation.

Where (1) purchaser of truck, who was in default on loan made by first secured creditor, borrowed money from second secured creditor to pay off first creditor’s loan, (2) first creditor’s lien on truck was then discharged of record, (3) second creditor, although it obtained note and security agreement covering truck, which instruments were executed on behalf of corporation of which debtor was officer, neglected (a) to effect transfer of truck’s title to debtor’s corporation, (b) to perfect security interest in truck by recording its lien on vehicle’s title document, and (c) to record such title document with Director of Motor Vehicles, (4) debtor’s corporation became insolvent, and receiver was appointed therefor, and (5) truck was sold at judicial sale, and receiver claimed that his interest in sale proceeds had priority over second secured creditor’s lien on truck, court held (1) that under UCC § 9-301(1)(b) and (3), providing that unperfected security interest is subordinate to rights of one who becomes “lien creditor” without knowledge of such security interest and before it is perfected, receiver of debtor’s corporation had apparent priority as a “lien creditor” because second creditor’s unperfected lien on truck would yield to receiver’s priority as “lien creditor” who had no knowledge of second creditor’s lien, in absence of any evidence that creditors represented by receiver had any such knowledge themselves, (2) that despite receiver’s apparent priority, the Uniform Commercial Code, under UCC § 1-103, is supplemented by principles of law and equity unless such principles are displaced by any provision of the code, (3) that no particular provision of UCC Article 9 had displaced the doctrine of equitable subrogation where such doctrine was properly invocable as a matter of substantive law, and (4) that under all circumstances of case, second creditor’s contention that it was entitled to be subrogated to first creditor’s recorded lien before such lien was discharged, on the ground that second creditor’s money was used to pay off such prior lien, should be sustained. Kaplan v. Walker, 164 N.J. Super. 130, 395 A.2d 897, 1978 N.J. Super. LEXIS 1194 (App.Div. 1978).

Terms of Uniform Commercial Code do not abrogate, modify, affect or abridge performing surety’s rights under equitable doctrine of subrogation, and subrogation claim thereunder does not lose its priority rank when it is not filed pursuant to requirements of Mid-Continent Casualty Co. v. First Nat'l Bank & Trust Co., 1975 OK 18, 531 P.2d 1370, 1975 Okla. LEXIS 326 (Okla. 1975).

Doctrine of equitable subrogation in suretyship cases has not been affected by adoption of Uniform Commercial Code. Mickelson v. Aetna Cas. & Sur. Co. (In re J.V. Gleason Co.), 452 F.2d 1219, 1971 U.S. App. LEXIS 6560 (8th Cir. Minn. 1971).

Silence of Uniform Commercial Code on subject of subrogation and equitable liens created thereby indicates an intentional recognition of and a desire to preserve the doctrine of equitable subrogation. Mickelson v. Aetna Cas. & Sur. Co. (In re J.V. Gleason Co.), 452 F.2d 1219, 1971 U.S. App. LEXIS 6560 (8th Cir. Minn. 1971).

Surety’s right of subrogation is not displaced by Article 9 of Code. National Shawmut Bank v. New Amsterdam Casualty Co., 411 F.2d 843, 1969 U.S. App. LEXIS 12522 (1st Cir. Mass. 1969).

Where there are two security interests in the same collateral and a third person pays the debt of the debtor to the holder of the prior interest, the third person, despite the fact that he did not take an assignment of the prior interest would, on principles of subrogation, succeed to the rights or the holder of the prior interest provided that the interest of the intervening lienor was not prejudicially affected. This principle of subrogation is not superseded by the Uniform Commercial Code which provides in the instant section that unless displaced by the particular provisions of the Code, the principles of law and equity “shall supplement its provisions” because no provision of the Code purports to affect the fundamental doctrine of subrogation. Jarrett v. Dillard, 167 So.3d 1207, 2014 Miss. App. LEXIS 380 (Miss. Ct. App. 2014), rev'd, 167 So.3d 1147, 2015 Miss. LEXIS 348 (Miss. 2015).

25. —Unjust enrichment.

Notwithstanding that agents of owner of counterfeit United States treasury bill inquired at bank as to genuineness of bill, such inquiry did not constitute notice under UCC § 1-201 (25, 26, 27) that bill was not genuine and bank, which took bill as negotiable instrument in bearer form under UCC § 8-105 as bona fide purchaser, was entitled under UCC § 8-306 to rely on owner’s warranties as principal that bill was genuine and was not materially altered, but recovery by bank under unjust enrichment was not permitted, since, under UCC §§ 1-102 and 1-103, specific warranties of UCC displaced remedy of unjust enrichment in regard to negotiation of securities in this case. Brannon v. First Nat'l Bank, 137 Ga. App. 275, 223 S.E.2d 473, 1976 Ga. App. LEXIS 2411 (Ga. Ct. App. 1976).

Equitable principles, which supplement Code’s provisions, demand that buyer seeking cancellation on grounds of misrepresentation should return what he has received. Melms v. Mitchell, 266 Ore. 208, 512 P.2d 1336, 1973 Ore. LEXIS 348 (Or. 1973).

26. Law merchant; commercial paper.

Where third person purchased money order for $286 from defendant bank, gave it to plaintiff to obtain release of automobile on which plaintiff had lien for towing and storage charges, immediately returned to defendant bank and ordered that payment be stopped on such money order, and was refunded purchase price thereof, bank in action by plaintiff was liable for face amount of such order, even though money orders are not specifically provided for in the Uniform Commercial Code. Under UCC § 1-103, court would apply law-merchant principle concerning money orders and enforce meaning given by merchants to such orders when issued by bank that person who purchases money order is authorized to bind bank’s credit to limit stated in order, and in present case money order issued by defendant stated that it was “not valid over $1,000.” Mirabile v. Udoh, 92 Misc. 2d 168, 399 N.Y.S.2d 869, 1977 N.Y. Misc. LEXIS 2522 (N.Y. Civ. Ct. 1977) (stating that phrase “not valid over $1,000” was concession by bank that purchaser of money order had authority to bind bank’s credit to that amount).

Pre-Code rule that one who receives before maturity note signed by maker for accommodation of another is not affected by mere fact that it was made without consideration, continues under Code. Franklin Nat'l Bank v. Eurez Constr. Corp., 60 Misc. 2d 499, 301 N.Y.S.2d 845, 1969 N.Y. Misc. LEXIS 1466 (N.Y. Sup. Ct. 1969).

A provision in commercial paper for costs and expenses if “legal proceedings be instituted,” is to be interpreted according to the general contract law principles as there is nothing in the Code which displaces such principles. Bryant v. Bowles, 108 N.H. 315, 234 A.2d 534, 1967 N.H. LEXIS 178 (N.H. 1967).

Whether a note is usurious is determined by general principles and statutes and not by the Code. Cooper v. Cherokee Village Development Co., 236 Ark. 37, 364 S.W.2d 158, 1963 Ark. LEXIS 572 (Ark. 1963); Pioneer Credit Corp. v. Radding, 149 Conn. 157, 176 A.2d 560, 1961 Conn. LEXIS 271 (Conn. 1961).

27. —Sales.

In action for breach of warranty and fraud on part of sellers in sale of bull, buyer’s remedies were not limited under UCC § 719(1)(b) by paragraph in sales agreement which provided for buyers’ remedy in event bull died, since (1) there was no provision that paragraph provided exclusive remedy and (2) contract clause limiting liability would not be applied in fraud action. Lamb v. Bangart, 525 P.2d 602, 1974 Utah LEXIS 586 (Utah 1974).

No particular provisions of the Uniform Commercial Code displaced statute [Massachusetts G.L. c. 259, § 6] making void certain sales of stock not owned by sellers. Colt v. Fradkin, 361 Mass. 447, 281 N.E.2d 213, 1972 Mass. LEXIS 908 (Mass. 1972).

The Uniform Commercial Code does not change the rule that a vendor cannot rescind and reclaim the goods as against an attachment or execution on a debt contracted subsequent to the alleged voidable sale. In re Kravitz, 278 F.2d 820, 1960 U.S. App. LEXIS 4652 (3d Cir. Pa. 1960).

28. —Secured transactions.

Although principles of estoppel and good faith underlie entire UCC, including provisions of Article 9, and lack of good faith on part of secured creditor may alter priorities which would otherwise be determined by Article 9 provisions, mere fact that secured party stood to gain from debtors’ wrongful conduct did not in and of itself show lack of good faith and fact that secured party authorized debtors to purchase grain on credit from third party did not constitute evidence of fraudulent scheme or conspiracy. Central Soya Co. v. Bundrick, 137 Ga. App. 63, 222 S.E.2d 852, 1975 Ga. App. LEXIS 1204 (Ga. Ct. App. 1975).

Where defendant bank made loan to debtor under name “Lee Anderson,” took security agreement on new automobile which was properly filed in county clerk’s office and indexed under name of “Lee Anderson,” but did not examine manufacturer’s statement of origin, issued earlier to James Anderson, and took no steps to assure itself that car’s title papers would be issued in name of Lee Anderson, where debtor applied for and received certificate of title in name of “James L. Anderson,” and where plaintiff bank also made loan to debtor, as “James L. Anderson,” taking and filing security agreement covering same automobile after checking with county clerk’s office and determining that no prior liens on automobile had been filed against James L. Anderson, defendant bank’s failure to file its lien in name shown on certificate of title was responsible for plaintiff bank’s later determination, justified by lien records of county clerk, that there was no prior lien on record against automobile owned by James L. Anderson, and thus plaintiff bank’s lien was entitled to priority over defendant bank’s lien, although defendant bank was guilty of no intentional wrong and did all that was required by applicable provisions of UCC in taking and filing its security agreement. Central Nat'l Bank & Trust Co. v. Community Bank & Trust Co., 1974 OK 141, 528 P.2d 710, 1974 Okla. LEXIS 439 (Okla. 1974).

Since Kentucky Commercial Code did not contain any provision defining the relative priorities of a creditor as against a reclaiming seller, the court would turn to relevant common law of Kentucky for the needed answer. In re Mel Golde Shoes, Inc., 403 F.2d 658, 1968 U.S. App. LEXIS 4652 (6th Cir. Ky. 1968).

The principle that a reclamation seller’s interest is subordinate to that of a lien creditor who extended credit subsequent to the sale is not displaced by the particular provisions of § 2-702. In re Kravitz, 278 F.2d 820, 1960 U.S. App. LEXIS 4652 (3d Cir. Pa. 1960).

29. Statute of limitations.

Since there is no special statute of limitations set forth in Commercial Code, three-year statute of limitations in Code of Civil Procedure was applicable to action for alleged conversion of negotiable instrument. Bank of America v. Security Pacific Nat'l Bank, 23 Cal. App. 3d 638, 100 Cal. Rptr. 438, 1972 Cal. App. LEXIS 1244 (Cal. App. 5th Dist. 1972).

30. Torts.

Bank is not liable for dishonored check, under either common law negligence theory or common law negligent misrepresentation theory, where check is presented to bank customer by buyer of customer’s business, during closing held on premises of bank, bank officer present at closing asks customer to step outside room for moment, asks customer what he thinks about check, customer responds that he knows nothing about check, banker states that check looks all right, and customer does not ask banker to have check verified nor does banker volunteer to do so. White v. Hancock Bank, 477 So. 2d 265, 1985 Miss. LEXIS 2246 (Miss. 1985).

Liability of port as bailee for common-law negligence, as codified by UCC § 7-204(1), for damage to bailor’s goods caused by collapse of roof of port’s warehouse was supplemented, under UCC § 1-103, by doctrine of strict vicarious liability in tort only to extent that port would be liable for acts of independent contractor over whom port had right of control. S. S. Kresge Co. v. Port of Longview, 18 Wn. App. 805, 573 P.2d 1336, 1977 Wash. App. LEXIS 2069 (Wash. Ct. App. 1977), disapproved, American Nursery Products, Inc. v. Indian Wells Orchards, 115 Wn.2d 217, 797 P.2d 477, 1990 Wash. LEXIS 94 (Wash. 1990).

§ 75-1-104. Construction against implied repeal.

The Uniform Commercial Code being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

HISTORY: Present §75-1-104 is derived from former §75-1-104 [Codes, 1942, § 41A:1-104; Laws, 1966, ch. 316, § 1-104, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Construction of statutes generally, see §1-3-1 et seq.

RESEARCH REFERENCES

ALR.

Applicability of constitutional requirement that repealing or amendatory statute refer to statute repealed or amended, to repeal or amendment by implication. 5 A.L.R.2d 1270.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 29, 79.

73 Am. Jur. 2d, Statutes § 279 et seq.

CJS.

82 C.J.S., Statutes § 283 et seq.

Law Reviews.

1979 Mississippi Supreme Court Review: Corporate & Commercial Law. 50 Miss. L. J. 741, December 1979.

§ 75-1-105. Severability.

If any provision or clause of the Uniform Commercial Code or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Uniform Commercial Code which can be given effect without the invalid provision or application, and to this end the provisions of the Uniform Commercial Code are severable.

HISTORY: Former §75-1-105 [Codes, 1942, § 41A:1-105; Laws, 1966, ch. 316, § 1-105; Laws, 1977, ch. 452, § 1; Laws, 1991, ch. 316, § 1; Laws, 1994, ch. 445, § 2; Laws, 1996, ch. 460, § 19; Laws, 1996, ch. 468, § 53; Laws, 2001, ch. 495, § 4, eff from and after Jan. 1, 2002; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions enacted at §75-1-301 by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-105 is derived from former §75-1-108 [Codes, 1942, § 41A:1-108; Laws, 1966, ch. 316, § 1-108, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 30.

73 Am. Jur. 2d, Statutes §§ 234, 262, 263.

§ 75-1-106. Use of singular and plural; gender.

In the Uniform Commercial Code, unless the statutory context otherwise requires:

  1. Words in the singular number include the plural, and those in the plural include the singular; and
  2. Words of any gender also refer to any other gender.

HISTORY: Former §75-1-106 [Codes, 1942, § 41A:1-106; Laws, 1966, ch. 316, § 1-106, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions enacted at §75-1-305 by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-106 is derived from former §75-1-102(b) [Codes, 1942, § 41A:1-102; Laws, 1966, ch. 316, § 1-102, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

§ 75-1-107. Section captions.

Section captions are part of the Uniform Commercial Code.

HISTORY: Former §75-1-107 [Codes, 1942, § 41A:1-107; Laws, 1966, ch. 316, § 1-107, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions enacted at §75-1-306 by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-107 is derived from former §75-1-109 [Codes, 1942, § 41A:1-109; Laws, 1966, ch. 316, § 1-109, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 20.

73 Am. Jur. 2d, Statutes §§ 43, 100.

§ 75-1-108. Relation to Electronic Signatures in Global and National Commerce Act.

This article modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 USC Section 7001 et seq., except that nothing in this article modifies, limits, or supersedes Section 7001(c) of that act or authorizes electronic delivery of any of the notices described in Section 7003(b) of that act.

HISTORY: Former §75-1-108 [Codes, 1942, § 41A:1-108; Laws, 1966, ch. 316, § 1-108, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions enacted at §75-1-105 by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-108 was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

§ 75-1-109. Repealed.

Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010.

§75-1-109. [Codes, 1942, § 41A:1-109; Laws, 1966, ch. 316, § 1-109, eff March 31, 1968]

Editor’s Notes —

Former §75-1-109 provided that section captions were parts of the code. For present similar provisions, see §75-1-107.

§ 75-1-110. Repealed.

Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010.

§75-1-110. [Laws, 1978, ch. 401, § 9, eff from and after April 1, 1978.]

Editor’s Notes —

Former §75-1-110 provided that section captions in the 1977 Cumulative Supplement to Title 75, Chapters through 11 were to be given the same interpretation as that intended by former §75-1-109.

Part 2. General Definitions and Principles of Interpretation.

§ 75-1-201. General definitions.

Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of the Uniform Commercial Code contained in other chapters of this title that apply to particular chapters or parts thereof, have the meanings stated.

Subject to definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof:

  1. “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity, and any other proceeding in which rights are determined.
  2. “Aggrieved party” means a party entitled to pursue a remedy.
  3. “Agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 75-1-303.
  4. “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.
  5. “Bearer” means a person in possession of a negotiable instrument, document of title, or certificated security that is payable to bearer or indorsed in blank.
  6. “Bill of lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods.
  7. “Branch” includes a separately incorporated foreign branch of a bank.
  8. “Burden of establishing a fact” means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.
  9. “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind.A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices.A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind.A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale.Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Article 2 may be a buyer in ordinary course of business.‘Buyer in ordinary course of business‘ does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
  10. “Conspicuous,” with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it.Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following:
  11. “Consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes.
  12. “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by the Uniform Commercial Code as supplemented by any other applicable laws.
  13. “Creditor” includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate.
  14. “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.
  15. “Delivery,” with respect to an instrument, document of title, or chattel paper, means voluntary transfer of possession.
  16. “Document of title” includes bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers.To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass.
  17. “Fault” means a default, breach, or wrongful act or omission.
  18. “Fungible goods” means:
  19. “Genuine” means free of forgery or counterfeiting.
  20. “Good faith,” except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
  21. “Holder” means:
  22. “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.
  23. “Insolvent” means:
  24. “Money” means a medium of exchange currently authorized or adopted by a domestic or foreign government.The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two (2) or more countries.
  25. “Organization” means a person other than an individual.
  26. “Party,” as distinguished from “third party,” means a person that has engaged in a transaction or made an agreement subject to the Uniform Commercial Code.
  27. “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.
  28. “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.
  29. “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.
  30. “Purchaser” means a person that takes by purchase.
  31. “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.
  32. “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.
  33. “Representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.
  34. “Right” includes remedy.
  35. “Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation.“Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9.“Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 75-2-401, but a buyer may also acquire a “security interest” by complying with Article 9.Except as otherwise provided in Section 75-2-505, the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a “security interest,” but a seller or lessor may also acquire a “security interest” by complying with Article 9.The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 75-2-401 is limited in effect to a reservation of a “security interest.”Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to Section 75-1-203.
  36. “Send” in connection with a writing, record, or notice means:
  37. “Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing.
  38. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
  39. “Surety” includes a guarantor or other secondary obligor.
  40. “Term” means a portion of an agreement that relates to a particular matter.
  41. “Unauthorized signature” means a signature made without actual, implied, or apparent authority.The term includes a forgery.
  42. “Warehouse receipt” means a receipt issued by a person engaged in the business of storing goods for hire.
  43. “Writing”’ includes printing, typewriting, or any other intentional reduction to tangible form.“Written” has a corresponding meaning.

A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or

Goods that by agreement are treated as equivalent.

The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; or

The person in possession of a document of title if the goods are deliverable either to bearer or to the order of the person in possession.

Having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;

Being unable to pay debts as they become due; or

Being insolvent within the meaning of federal bankruptcy law.

To deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or

In any other way to cause to be received any record or notice within the time it would have arrived if properly sent.

HISTORY: Former §75-1-201 [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions at §§75-1-201,75-1-202,75-1-203,75-1-204 and75-1-206 enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Former §75-1-201(21) and (41) were deleted by Laws, 2010, ch. 506, §§ 1 and 44, eff from and after July 1, 2010; Present § 75-1-201 is derived from former §75-1-201(1)-(20), (22)-(24), (28)-(30), (32)-(36), (38)-(40), (42)-(43), and (45-(46) [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Definition of “notice,” “knowledge,” see §75-1-202.

Definition of security interest, see §75-1-203.

Definition of “value,” see §75-1-204.

Definition of “presumption,” “presumed,” see §75-1-206.

Application of definition of “burden of establishing” a fact, defined in this section, see §75-4A-105.

Documents of title, see §75-7-101 et seq.

Assignments for benefit of creditors, see §85-1-1 et seq.

RESEARCH REFERENCES

ALR.

Signature by mark on certificate of acknowledgement. 25 A.L.R.2d 1124.

Validity of signature by mark. 81 A.L.R.2d 1020.

What is a “branch bank” within statutes regulating the establishment of branch banks. 23 A.L.R.3d 683.

Who is “buyer in ordinary course of business” under the Uniform Commercial Code. . 87 A.L.R.3d 11.

Construction and application of UCC § 2-201(3)(b) rendering contract of sale enforceable notwithstanding Statute of Frauds to extent it is admitted in pleading, testimoney, or otherwise in court. 88 A.L.R.3d 416.

Modern status of the Massachusetts or business trust. 76 A.L.R.2d 130.

Option to purchase real property as affected by optionor’s receipt of offer for or sale of, larger tract which includes the optioned parcel. 34 A.L.R.4th 1217.

What constituted “money” within the meaning of Uniform Commercial Code. 40 A.L.R.4th 346.

Duty of publisher with regard to distribution and promotion of book. 43 A.L.R.4th 1182.

Who is a “purchaser” within the meaning of § 2(a) of the Robinson-Patman Act ( 15 USCS § 13(a)), making it unlawful to discriminate in price between different purchasers of commodities. 60 A.L.R. Fed. 875.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 5- 8, 20. 60 A.L.R. Fed. 875.

73 Am. Jur. 2d, Statutes § 223.

6 Am. Jur. Pl & Pr Forms (Rev), Letters of Credit, Form 5:28 (Instruction to jury; rights as between competing good faith purchasers of drafts under nonnotation credit).

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Forms 1:27-1:32 (Definitions and principles of interpretation). 60 A.L.R. Fed. 875.

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:51 et seq. (Definition clauses).

21 Am. Jur. Proof of Acts, Sending and Receipt of Telegrams, §§ 10, 11 (Proof of delivery of telegram by telephone and proof of delay in delivery of telegram).

2 Am. Jur. Proof of Facts 2d, Status as “Buyer in Ordinary Course of Business,” § 12 et seq. (proof of status as “buyer in ordinary course”).

1983 Mississippi Supreme Court Revew: Subjective or objective standard of “good faith.” 54 Miss L.J. 110, March, 1984.

CJS.

82 C.J.S., Statutes §§ 207, 309.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-2. [Reserved for future use.]

3. Buyer in ordinary course of business.

4.-20. [Reserved for future use.]

II. UNDER FORMER §75-1-201.

21. Action.

22. Agreement.

23. Burden of establishing.

24. Buyer in ordinary course of business.

25. Conspicuous.

26. Contract.

27. Creditor.

28. Delivery.

29. Document of title.

30. Fault.

31. Fungible.

32. Genuine.

33. Good faith.

34. Holder.

35. Insolvency proceedings.

36. Insolvent.

37. Money.

38. Organization.

39. Party.

40. Person.

41. Purchase.

42. Purchaser.

43. Representative.

44. Rights.

45. Send.

46. Signature.

47. Surety.

48. Unauthorized signature or indorsement.

49. Warehouse receipt.

50. Writing.

I. UNDER CURRENT LAW.

1.-2. [Reserved for future use.]

3. Buyer in ordinary course of business.

Bank could not recover from the non-diverse grain terminals where the terminals had purchased the soybeans and corn from a company that purchased farm products from farmers, and as a result. they qualified as buyers in the ordinary course of business and had not bought farm products from a person engaged in farming operations. Guar. Bank & Trust Co. v. FGDI Div. of Agrex, Inc., — F. Supp. 3d —, 2014 U.S. Dist. LEXIS 41985 (N.D. Miss. Mar. 28, 2014).

4.-20. [Reserved for future use.]

II. UNDER FORMER § 75-1-201.

21. Action.

Although UCC § 1-201 defines “action” to include “any other proceedings in which rights are determined,” a full reading of the section requires the conclusion that the term is expressly limited to judicial proceedings; thus, arbitration proceedings were not barred by statute of limitations applicable to “actions.” Har-Mar, Inc. v. Thorsen & Thorshov, Inc., 300 Minn. 149, 218 N.W.2d 751, 1974 Minn. LEXIS 1322 (Minn. 1974).

22. Agreement.

Option granted to debtor to repurchase leased equipment at end of lease term was not “true lease,” but “lease intended for security,” where terms of agreement provided for repurchase of equipment at nominal sum, and where the debtor was required to acquire replacement equipment upon the condition of obsolescence or nonusefulness of original equipment. American Gen. Aircraft Corp. v. Washington County Economic Dev. Dist. (In re American Gen. Aircraft Corp.), 190 B.R. 275, 1995 Bankr. LEXIS 1896 (Bankr. N.D. Miss. 1995).

A lease agreement which provides the lessee, upon compliance with the terms of the lease, with an option to purchase the entire leased premises for a nominal consideration makes the lease one intended for security; in order to perfect a security interest in such an arrangement, appropriate financing statements must be filed. Peoples Bank & Trust Co. v. Applewhite, 152 B.R. 119, 1992 Bankr. LEXIS 2280 (Bankr. N.D. Miss. 1992).

Agreement between debtor and supplier of gasoline dispensing equipment and fuel was true consignment agreement, rather than security agreement, since supplier retained sole control over setting retail prices, debtor received commission rather than profit, and debtor was obligated to pay for gasoline when it was sold rather than when it was delivered. In re Sullivan, 103 B.R. 792, 1989 Bankr. LEXIS 1430 (Bankr. N.D. Miss. 1989).

Transaction involving truck was a true lease and not a sale in which “lease” was intended as security, where lease contained no language which would extend in any way possessory rights of lessee beyond stated term of lease. In re Loague, 25 B.R. 940, 1982 Bankr. LEXIS 5191 (Bankr. N.D. Miss. 1982).

Where depositor allegedly entered into oral agreement with bank concerning certain restrictions on his accounts and, pursuant to such agreement, sent letter to bank directing it not to pay any instruments drawn on his accounts unless instruments were on “printed checks of the bank”, and where bank merely acknowledged “receipt” of customer’s letter, such “receipt” could not be legally interpreted as general, unlimited lifetime “agreement,” but at best was receipt of notice of stop payment and, in accord with UCC § 4-403(b) unless renewed in writing, was effective for only six months; stop payment order was not extended beyond statutory limitation by virtue of alleged “oral agreement” simultaneously made with written stop payment order. Dinerman v. National Bank of North America, 89 Misc. 2d 164, 390 N.Y.S.2d 1002, 1977 N.Y. Misc. LEXIS 1854 (N.Y. Sup. Ct. 1977).

Under the Uniform Commercial Code, practical business people are not expected to govern their actions with reference to nice legal formalisms. Thus, when there is a basic agreement, however manifested and whether or not precise moment of such agreement can be determined, failure of parties to articulate agreement in precise legal language, with every difficulty and contingency considered and resolved, will not prevent formation of contract. However, if there is no basic agreement, the code will not imply one. And without an agreement, there can be no contract and without a contract, there can be no breach. This principle is explicitly recognized by UCC § 1-201(3) and (11), and UCC § 2-204(1) and (2). Kleinschmidt Div. of SCM Corp. v. Futuronics Corp., 41 N.Y.2d 972, 395 N.Y.S.2d 151, 363 N.E.2d 701, 1977 N.Y. LEXIS 2021 (N.Y. 1977).

Plaintiffs who had deposited one million dollars in United States treasury bills with clerk of tax court in order to stay assessment and collection of tax deficiency were not entitled to damages or interest on bills after they remained interest-free in treasury for one year following their maturity on theory that implied security agreement existed between parties under UCC § 1-201(3) and (37) and that federal government thus had duty to reinvest bills after their maturity or to notify plaintiffs of such maturity. Even assuming existence of implied security agreement between parties, duty of holder under UCC § 9-207(1) to preserve collateral does not include duty to make collateral produce income, and no decrease in bills’ value was even remotely possible. Cleveland Chair Co. v. United States, 557 F.2d 244, 214 Ct. Cl. 360, 1977 U.S. Ct. Cl. LEXIS 63 (Ct. Cl. 1977).

Under UCC §§ 2-204(1) and 1-201(3), buyer was not justified in terminating orders of submarine valves for alleged failure to meet delivery dates specified in contracts, notwithstanding alleged promise by seller to meet or improve upon delivery dates originally requested by buyer, where buyer requested certain delivery dates when it placed orders, seller clearly and unequivocally rejected buyer’s requested dates and promised delivery at later dates, buyer merely appealed to seller to conform to requested dates and later appealed to seller to expedite one shipment, and buyer gave no notice to seller that seller breached contract by failing to meet required delivery dates. Crane Co. v. Roberts Supply Co., 196 Neb. 67, 241 N.W.2d 516, 1976 Neb. LEXIS 743 (Neb. 1976).

Where letter sent by creditor to debtor set forth terms of loan agreement and letter was signed “agreed” by debtor, letter was “agreement” for repayment of the loan as the term “agreement” is defined in this section. In re Carmichael Enterprises, Inc., 334 F. Supp. 94, 1971 U.S. Dist. LEXIS 11695 (N.D. Ga. 1971), aff'd, 460 F.2d 1405, 1972 U.S. App. LEXIS 8793 (5th Cir. 1972).

Prior course of dealing between bank and decedent’s son, including decedent’s signing of hypothecation agreement from containing language to effect that securities in question would be collateral for present or future advances, provided ample evidence of agreement that stock which decedent had pledged to bank would serve as collateral for continuing advances by bank to decedent’s son. Estate of Beyer v. Bank of Pennsylvania, 449 Pa. 24, 295 A.2d 280, 1972 Pa. LEXIS 341 (Pa. 1972).

23. Burden of establishing.

Transammonia Export Corp. v. Conserv, Inc., 554 F.2d 719 (5th Cir. Fla. 1977); In adopting UCC § 1-201(8), Florida legislature apparently intended to establish burden of ultimate persuasion by preponderance of evidence. Century Appliance Co. v. Groff (Pa) (loan note left blank so that interest charge could be computed; application for loan showed principal and borrower’s coupon book which was accepted by borrower showed debt of amount of note).

A defendant does not meet the burden of establishing that a note signed by him in blank was completed improperly as to amount when other documents relevant to the same transaction show that the amount was authorized.

24. Buyer in ordinary course of business.

Where automobile dealer financed his used car inventory through floor plan arrangement with finance company and, under side arrangement with second automobile dealer, satisfied his obligations to finance company by assigning used cars to second dealer, who would then issue its note to finance company in release of first dealer’s note, but such cars were frequently left on first dealer’s lot and sold by him on commission basis, and where first automobile dealer then entered into agreement with credit corporation to finance his new car inventory and executed security agreement in favor of credit corporation covering his inventory, including, inter alia, his used car inventory: (1) Credit corporation acquired perfected security interest in first dealer’s used car inventory; (2) security interest was not waived by clause in security agreement providing that private sale of chattel to dealer in such types of chattels for amount originally paid by dealer for such chattel or at lesser fair price would be “commercially reasonable disposition thereof,” nor was it waived by fact that credit corporation treated dealer’s used car business as completely separate from his new car business which credit corporation was financing; (3) sales of used cars to second dealer, made at arm’s length, without fraud and at fair price, were sales in ordinary course of business, and, hence, second dealer acquired title to such cars free of security interest. Weidinger Chevrolet, Inc. v. Universal C.I.T. Credit Corp., 501 F.2d 459, 1974 U.S. App. LEXIS 7400 (8th Cir. Mo.), cert. denied, 419 U.S. 1033, 95 S. Ct. 516, 42 L. Ed. 2d 309, 1974 U.S. LEXIS 3473 (U.S. 1974).

Buyer who purchased three mobile homes from mobile home dealer was not buyer in “the ordinary course of business” and was not acting “in good faith and without knowledge” when he purchased mobile homes where buyer was fully aware that secured party had floor planned and financed homes and held security interest in each home and where buyer bought three homes from dealer because he had ascertained by his own investigation that he was buying them at unusually low price. Rex Financial Corp. v. Marshall, 406 F. Supp. 567, 1976 U.S. Dist. LEXIS 17285 (W.D. Ark. 1976).

Transaction on auction lot of third party in state in which neither buyer nor seller was doing business cannot be held to be transaction in “ordinary course of business.” Rhode Island Hospital Trust Co. v. Leo's Used Car Exchange, Inc., 314 F. Supp. 254, 1970 U.S. Dist. LEXIS 11550 (D. Mass. 1970).

One who qualifies as “buyer in ordinary course” must so qualify as to entire transaction; transaction cannot be “fractionalized” so as to make it part good and part bad. General Electric Credit Corp. v. R. A. Heintz Constr Co., 302 F. Supp. 958, 1969 U.S. Dist. LEXIS 9397 (D. Or. 1969).

In marital property-division proceeding, trial court had authority under UCC § 9-311, providing that debtor’s rights in collateral may be voluntarily or involuntarily transferred by judicial process, to direct husband to transfer title to bonds, which had been pledged as security for loan, to wife. However, any title that was involuntarily transferred by judicial order would be subject, under UCC § 9-306(2), to security interest created by the pledge, since wife, as party to suit in which such transfer was made, was not buyer in ordinary course of business under UCC §§ 1-201(9) and 9-307(1) who could take collateral (bonds) free of pledgee’s security interest therein. Goetz v. Goetz, 567 S.W.2d 892, 1978 Tex. App. LEXIS 3465 (Tex. Civ. App. Dallas 1978).

A buyer takes free of a security interest in goods created by a seller who is in the business of selling goods of that kind, even if the interest is perfected, if the buyer merely knows that there is a security interest which covers the goods, but takes subject to the interest if he knows, in addition, that the sale is in violation of some term in the security agreement not waived by the words or conduct of the secured party (Uniform Commercial Code, § 1-201(9); § 9-307(1)), although it is not incumbent upon the buyer to make a search for any possible security interests; and, a buyer who takes free of a perfected security interest takes free of an unperfected one as well. European-American Bank & Trust Co. v. Sheriff of County of Nassau, 97 Misc. 2d 549, 411 N.Y.S.2d 851, 1978 N.Y. Misc. LEXIS 2834 (N.Y. Sup. Ct. 1978).

In replevin action, where (1) plaintiff truck dealer “dropshipped” two of its trucks to another dealer for purpose of resale, (2) second dealer sold trucks to defendant cartage company but failed to give defendant full set of title papers, and (3) second dealer thereafter went out of business without paying plaintiff for trucks, plaintiff was not entitled to replevy trucks from defendant, who was buyer in ordinary course of business under UCC § 1-201(9) and § 2-403(2), since it was plaintiff which placed trucks into stream of commerce, being well aware that second dealer intended to sell them, and waited two and a half months before attempting to collect payment from second dealer. Coffman Truck Sales v. Sackley Cartage Co., 58 Ill. App. 3d 68, 15 Ill. Dec. 554, 373 N.E.2d 1026, 1978 Ill. App. LEXIS 2259 (Ill. App. Ct. 2d Dist. 1978).

Under UCC § 9-307(1) and § 1-201(9), buyer of collateral in ordinary course of business took free of security interest therein where secured party did not know that debtor was in business of selling goods of that kind, even though security interest was perfected by proper execution and filing of financing statement. Antigo Co-op Credit Union v. Miller, 86 Wis. 2d 90, 271 N.W.2d 642, 1978 Wisc. LEXIS 1238 (Wis. 1978).

Where savings and loan association entered into floor-plan agreement with mobile-home dealer under which association would pay manufacturer for each home delivered to dealer, retain invoice and certificate of origin of each delivered unit, and dealer would execute demand note and security interest in delivered unit to association which it would hold until it received payment from dealer; where buyers of mobile home from dealer subsequently executed instalment contract reciting payment of specified down payment, delivery and acceptance of home, and granting by buyers of security interest therein; and where dealer assigned such contract to corporation that assigned it to defendant bank, and money paid for contract by defendant bank was transmitted to dealer who breached his obligation to savings and loan association and absconded, in action by subrogee of rights of savings and loan association against defendant bank to determine priority of security interests in such home, (1) buyers of home were good-faith purchasers in ordinary course of business under UCC § 1-201(9) who took home under UCC § 9-307(1) free of subrogee’s security interest therein; (2) defendant bank’s security interest in home therefore had priority over subrogee’s security interest; and (3) subrogee’s security interest attached to proceeds of sale in hands of absconding dealer. Integrity Ins. Co. v. Marine Midland Bank-Western, 90 Misc. 2d 868, 396 N.Y.S.2d 319, 1977 N.Y. Misc. LEXIS 2174 (N.Y. Sup. Ct. 1977).

In bank’s suit to have security interest in used-car dealer’s inventory declared to be first and prior security interest as against interests of three persons to whom such inventory was transferred, where evidence showed that bank’s security interest was perfected by filing, covered future advances, and gave bank security interest in all present and after-acquired property and proceeds; that one transferee took trust receipts and titles to specific vehicles to secure loans made to dealer and entered into security agreement granting security interest in vehicles identified in trust receipts, which agreement was filed after filing of bank’s security agreement; that second transferee took trust receipts as security for loans made to dealer, but did not enter into security agreement with dealer; and that third transferee’s purchase for resale of over half of dealer’s inventory may have been financed by first transferee, (1) under UCC § 9-110, description of collateral in bank’s security agreement included all of dealer’s inventory and proceeds therefrom; (2) under UCC § 9-205, alleged failure of bank to supervise dealer’s inventory properly could not constitute basis for denying equitable relief to bank; (3) security interest of first transferee was junior to bank’s security interest because it was perfected after perfection of bank’s interest; (4) security interest of second transferee was junior to bank’s security interest because it was never perfected; and (5) security interest of third transferee was also subject to bank’s security interest because such transferee was bulk purchaser under UCC § 1-201(9) and not buyer in ordinary course of business under UCC § 9-307(1). Community Bank v. Jones, 278 Ore. 647, 566 P.2d 470, 1977 Ore. LEXIS 1016 (Or. 1977).

Where buyers purchased automobiles in good faith, without knowledge that sale was in violation of secured party’s security interest in automobile dealer’s inventory, from dealer who was in business of selling automobiles, for present value, i.e., cash or present exchange of other property, under UCC § 9-307(1) such buyers took free of secured party’s security interest. Cunningham v. Camelot Motors, Inc., 138 N.J. Super. 489, 351 A.2d 402, 1975 N.J. Super. LEXIS 525 (Ch.Div. 1975).

First buyer of wrecker truck entrusted truck to dealer under UCC § 2-403 so as to allow dealer to pass title to second buyer who was a “buyer in ordinary course of business” under UCC § 1-201 and who took possession of truck and extracted from dealer a transfer of registration and warranty of title, where first buyer left truck with dealer or dealer’s apparent agent after paying for it without taking possession. Simson v. Moon, 137 Ga. App. 82, 222 S.E.2d 873, 1975 Ga. App. LEXIS 1209 (Ga. Ct. App. 1975).

In action by bank against purchaser of sail boat for conversion of bank’s security interest in boat, evidence was sufficient to support finding that seller was dealer in boats where loan application showed that seller used business name, seller’s wife said he was in business of selling boats using that name, bank knew he had boats at another location, seller held himself out to general public as dealer at boat show and represented to witness that he was dealer, seller received proceeds in checks made out to business name, order form of boat manufacturer showed seller’s business as salesman, and manufacturer honored sale of boat by performing warranty work for purchaser; thus, purchaser was buyer in ordinary course of business pursuant to UCC § 1-201(9) and was entitled to protection of UCC § 9-307(1), which defeated bank’s claim. Kaw Valley State Bank v. Stanley, 514 S.W.2d 42, 1974 Mo. App. LEXIS 1474 (Mo. Ct. App. 1974).

Buyer of tractors was not entitled to protection from manufacturer’s security interest in equipment under UCC § 9-307, where buyer, who was experienced tractor dealer with knowledge of manufacturer’s practice of “floor-planning” its equipment and who purchased equipment for considerably less than its value, made no investigation of prior security interest, acquiesced in falsification of retail order form, and misrepresented particulars of transaction, did not qualify as good faith buyer in ordinary course of business under UCC §§ 1-201(9) and 1-201(19). International Harvester Co. v. Glendenning, 505 S.W.2d 320, 1974 Tex. App. LEXIS 2069 (Tex. Civ. App. Dallas 1974).

Where mobile home buyers signed agreement to purchase mobile home from dealer, but dealer, unable to deliver specified mobile home because it was damaged by rain, delivered substitute mobile home, which was subject to security interest held by corporation that financed dealer’s inventory, buyers were buyers of substituted mobile home in ordinary course of business under UCC § 1-201(9) and were protected under UCC § 9-307(1) against enforcement of corporation’s security interest. Black v. Schenectady Discount Corp., 31 Conn. Supp. 521, 324 A.2d 921, 1974 Conn. Super. LEXIS 300 (Conn. Super. Ct. 1974).

Where automobile dealer, who was indebted to purchaser for $10,000, gave purchaser check for $5,000 in partial satisfaction of such debt, and purchaser indorsed check back to dealer in payment for automobile, when dealer executed and delivered check to purchaser, it did not alter fact that dealer was still indebted to purchaser for $10,000 and when purchaser indorsed check back to dealer in payment for automobile, transaction constituted transfer of automobile for or in partial satisfaction of money debt and purchaser was not, therefore, “buyer in ordinary course of business” within meaning of UCC § 1-201(9), whether or not he acted in good faith and whether or not at time he received check he intended to exchange it for automobile. Chrysler Credit Corp. v. Malone, 502 S.W.2d 910, 1973 Tex. App. LEXIS 2691 (Tex. Civ. App. Fort Worth 1973).

Evidence supported finding that automobile leasing company was in business of selling used automobiles and that defendant, who had purchased 10 automobiles from leasing company over period of years, was buyer in ordinary course of business who was entitled to take automobile free of security interest created by leasing company. American Nat'l Bank & Trust Co. v. Mar-K-Z Motors & Leasing Co., 11 Ill. App. 3d 1046, 298 N.E.2d 209, 1973 Ill. App. LEXIS 2552 (Ill. App. Ct. 1st Dist. 1973), aff'd, 57 Ill. 2d 29, 309 N.E.2d 567, 1974 Ill. LEXIS 360 (Ill. 1974).

Where president and principal shareholder of automobile dealership purchases car from his own company, that sale will be considered to be sale “in ordinary course of business” if it is similar in all material respects to sale to any other retail customer; and where that is the case, lien held by bank which has security agreement covering dealership’s inventory is released by sale, and purchase money security interest prevails. Crystal State Bank v. Columbia Heights State Bank, 295 Minn. 181, 203 N.W.2d 389, 1973 Minn. LEXIS 1281 (Minn. 1973).

Pawnbroker could not have been buyer in ordinary course of business as defined in UCC § 1-201(9) where pledgor who pledged property to it was not “person in business of selling goods of that kind.” Kimbrell's Furniture Co. v. Friedman, 261 S.C. 172, 198 S.E.2d 803, 1973 S.C. LEXIS 235 (S.C. 1973).

Judgment creditor who bid in at farm auction sale conducted with consent of secured party, debtors, and judgment creditor was not buyer in “ordinary course of business.” South Omaha Production Credit Asso. v. Tyson's, Inc., 189 Neb. 702, 204 N.W.2d 806, 1973 Neb. LEXIS 872 (Neb. 1973).

Where vendee testified that at time he agreed to purchase automobile from vendor he knew vendor had obtained vehicle from another dealer, but had no knowledge vendor had not made payment therefor, and vendor testified that vendee did not know of agreed arrangement between vendor and other dealer that title papers to vehicle would accompany draft issued in payment therefor, vendee had no knowledge of arrangement between vendor and other dealer concerning payment for automobile such as would destroy his buyer in ordinary course of business status. Couch v. Cockroft, 490 S.W.2d 713, 1972 Tenn. App. LEXIS 317 (Tenn. Ct. App. 1972).

Failure of purchaser of automobile to obtain from seller certificate of title or other instrument showing compliance with Motor Vehicle Title and Registration laws does not in and of itself deny the purchaser status of buyer in ordinary course of business. Couch v. Cockroft, 490 S.W.2d 713, 1972 Tenn. App. LEXIS 317 (Tenn. Ct. App. 1972).

Where plaintiff sold two television sets and purchaser quickly resold them to defendant pawnshop and retail business, and any security interest in sets retained by plaintiff was never recorded and defendant had no knowledge of such interest, defendant, as transferee of goods in which plaintiff had security interest, could find no protection in UCC from plaintiff’s claim for conversion under UCC § 9-307, notwithstanding that subsection (a) of that section provides that a buyer in ordinary course of business takes free of a security interest, since UCC § 1-201(9) in defining “buyer in ordinary course of business” specifically excludes pawnbrokers from that class, and moreover requires that the transferor must be “in the business of selling” consumer goods such as those in question, and the record failed to sustain the conclusion that the purchaser was in the business of selling television sets. White-Sellie's Jewelry Co. v. Goodyear Tire & Rubber Co., 477 S.W.2d 658, 1972 Tex. App. LEXIS 2711 (Tex. Civ. App. Houston 14th Dist. 1972).

Where creditor received only a security interest for money debt, it was not a buyer in the ordinary course of business. International Harvester Credit Corp. v. Commercial Credit Equipment Corp., 125 Ga. App. 477, 188 S.E.2d 110, 1972 Ga. App. LEXIS 1377 (Ga. Ct. App. 1972).

One who buys boat from seller who is not in boat-selling business cannot qualify as “buyer in ordinary course of business”. Security Pacific Nat. Bank v. Goodman, 24 Cal. App. 3d 131, 100 Cal. Rptr. 763, 1972 Cal. App. LEXIS 1122 (Cal. App. 2d Dist. 1972).

A buyer in the ordinary course of business who takes free of a known and perfected security interest under UCC § 9-307(1) may be defined as one who purchases merchandise in the ordinary course of affairs from a merchant in the business of vending items of that nature within UCC § 1-201(9). Newton-Waltham Bank & Trust Co. v. Bergen Motors, Inc., 68 Misc. 2d 228, 327 N.Y.S.2d 77, 1971 N.Y. Misc. LEXIS 1191 (N.Y. Civ. Ct. 1971), aff'd, 75 Misc. 2d 103, 347 N.Y.S.2d 568, 1972 N.Y. Misc. LEXIS 2184 (N.Y. App. Term 1972).

Where automobile dealer sold two used cars to used car dealer but instructed him not to dispose of them until latter’s check cleared the bank, which transaction constituted an entrustment, and second dealer violated instructions and conveyed the cars to a third dealer in a transaction wherein the value of the cars was applied in partial satisfaction of second dealer’s pre-existing and running account, third dealer was not a buyer in the ordinary course of business within the code definition of the term which excludes a transaction by which payment is credited in total or partial satisfaction of a money debt and thus he did not take free of the instruction not to sell. Sherman v. Roger Kresge, Inc., 67 Misc. 2d 178, 323 N.Y.S.2d 804, 1971 N.Y. Misc. LEXIS 1389 (N.Y. County Ct. 1971), aff'd, 40 A.D.2d 766, 336 N.Y.S.2d 1015, 1972 N.Y. App. Div. LEXIS 6290 (N.Y. App. Div. 3d Dep't 1972).

Creditor to whom used car is sold to satisfy antecedent indebtedness is not “buyer in ordinary course of business.” Osborn v. First Nat'l Bank, 1970 OK 120, 472 P.2d 440, 1970 Okla. LEXIS 395 (Okla. 1970).

Auto wholesaler who purchases used autos from auto leasing or rental company does not qualify as “buyer in ordinary course of business.” Hempstead Bank v. Andy's Car Rental System, Inc., 35 A.D.2d 35, 312 N.Y.S.2d 317, 1970 N.Y. App. Div. LEXIS 4129 (N.Y. App. Div. 2d Dep't 1970).

One who bought used car from one in business of selling used cars was “buyer in ordinary course of business.” Godfrey v. Gilsdorf, 86 Nev. 714, 476 P.2d 3 (1970) Hempstead Bank v. Andy's Car Rental System, Inc., 35 A.D.2d 35, 312 N.Y.S.2d 317, 1970 N.Y. App. Div. LEXIS 4129 (N.Y. App. Div. 2d Dep't 1970).

Where person purchases automobile in good faith and without knowledge of any title defect or security interest of third party from used car dealer who has been entrusted with its possession, he is “buyer in the ordinary course of business,” even though sale was made without transfer of certificate of title. Medico Leasing Co. v. Smith, 1969 OK 114, 457 P.2d 548, 1969 Okla. LEXIS 430 (Okla. 1969), but see, Mitchell Coach Mfg. Mitchell Coach Mfr. Co. v. Stephens, 19 F. Supp. 2d 1227, 1998 U.S. Dist. LEXIS 21099 (N.D. Okla. 1998).

Sale of Studebaker automobile by automobile repair business was not in ordinary course of business within Code § 1-201(9) where seller was not Studebaker dealer, did not have car dealers’ license, and had never before sold Studebaker cars. National Bank of Commerce v. First Nat'l Bank & Trust Co., 1968 OK 151, 446 P.2d 277, 1968 Okla. LEXIS 477 (Okla. 1968).

In selling automobiles for another, auctioneer was simply acting as vendor’s agent and was not buyer in ordinary course under Code § 1-201(9). Commercial Credit Corp. v. Joplin Auto. Auction Co. 430 S.W.2d 440 (Mo. Ct. App. 1968). National Bank of Commerce v. First Nat'l Bank & Trust Co., 1968 OK 151, 446 P.2d 277, 1968 Okla. LEXIS 477 (Okla. 1968).

Where plaintiff bought truck from a merchant in the ordinary course of business, without knowledge of a security agreement entered into by the seller and later assigned to a bank, in repossessing the truck after the sale, bank was liable for conversion and damages. Makransky v. Long Island Reo Truck Co., 58 Misc. 2d 338, 295 N.Y.S.2d 240, 1968 N.Y. Misc. LEXIS 1045 (N.Y. Sup. Ct. 1968).

The fact that title has not yet been transferred as between the dealer and the consumer does not prevent the latter from being regarded as a buyer in the ordinary course of business, insofar as the secured creditor of the dealer is concerned, where the transaction between the dealer and the consumer is ordinary or typical in the trade. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

An automobile buyer who makes a purchase on a printed form contract, knowingly signs a retail payment obligation, and trades in an old car must be deemed a buyer in the ordinary course of business without regard to the technicalities of when title is to pass pursuant to a collateral oral agreement. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

A licensed automobile wrecker and junk dealer who purchased a two-year-old station wagon from a thief for $900 by placing $300 down, and who sold the vehicle for $1200 that same day, although he never obtained a bill of sale or registration certificate, was liable to the two owners, since the car had not been entrusted to a merchant who dealt in used cars and the defendant had not demonstrated that he was a “buyer in ordinary course of business” or that he was a “good faith purchaser for value”. Atlas Auto Rental Corp. v. Weisberg, 54 Misc. 2d 168, 281 N.Y.S.2d 400, 1967 N.Y. Misc. LEXIS 1388 (N.Y. Civ. Ct. 1967), disapproved, Candela v. Port Motors, 208 A.D.2d 486, 617 N.Y.S.2d 49, 1994 N.Y. App. Div. LEXIS 9380 (N.Y. App. Div. 2d Dep't 1994).

One who in good faith and without knowledge that the sale to him was in violation of the security interest of another bought an automobile from a person in the business of selling automobiles was a “buyer in the ordinary course of business.” National Shawmut Bank v. Jones, 108 N.H. 386, 236 A.2d 484, 1967 N.H. LEXIS 198 (N.H. 1967).

One who purchases an automobile from a person who is not engaged in the business of selling automobiles cannot be a buyer in the ordinary course. First Nat'l Bank v. Stamper, 93 N.J. Super. 150, 225 A.2d 162, 1966 N.J. Super. LEXIS 456 (Law Div. 1966), overruled, IAC, Ltd. v. Princeton Porsche-Audi, 147 N.J. Super. 212, 371 A.2d 84, 1977 N.J. Super. LEXIS 674 (App.Div. 1977).

Whether a buyer buys in the ordinary course of business is determined by the circumstances as of the date of the purchase and the buyer’s subsequent conduct does not effect his status if in fact he acted in good faith and without knowledge of an outstanding interest. C. Jon Dev. Corp. v. Pand-Rorsche Corp., 69 Ill. App. 2d 469, 217 N.E.2d 416, 1966 Ill. App. LEXIS 1440 (Ill. App. Ct. 1st Dist. 1966).

One who conducts an automobile auction and trading business and purchases a substantially new car for resale many miles away from the place of business of the sellers and who has had experience with foreign security interests in automobiles, and makes such a purchase without any inquiry as to the possible existence of a security interest, cannot be regarded as a buyer in the ordinary course of business. Al Maroone Ford, Inc. v. Manheim Auto Auction, Inc., 205 Pa. Super. 154, 208 A.2d 290, 1965 Pa. Super. LEXIS 1042 (Pa. Super. Ct. 1965).

A discount house which purchased garden supplies from a dealer with knowledge of the provision in a trust receipt retained by the manufacturer that the goods were only to be resold to ultimate consumers was not a “buyer in ordinary course of business.” O. M. Scott Credit Corp. v. Apex Inc., 97 R.I. 442, 198 A.2d 673, 1964 R.I. LEXIS 107 (R.I. 1964).

One who purchased a used truck from a person in the business of selling used cars and trucks is a “buyer in the ordinary course of business” within the meaning of this section of the Pennsylvania Uniform Commercial Code, where the truck in question was entrusted to the possession of the seller by a third person for the purpose of selling it without any restrictions upon its sale that were evident to the buyer. Gricar v. Bairhalter, 11 Pa. D. & C.2d 723 105 Pitts. Legal J. 399 (1958).

25. Conspicuous.

The disclaimer of warranty on the label of a can of highly volatile wall tile adhesive, written in small print, in lower case except for the word “WARRANTY”, and without a border, is ineffective and does not constitute an affirmative defense to an action based on a fire in plaintiffs’ home allegedly caused by the adhesive since such disclaimer is not so “conspicuous” that “a reasonable person against whom it is to operate ought to have noticed it” (Uniform Commercial Code, § 2-316, subd [2]; § 1-201, subd [10]); capital letters, large print, contrasting type or color and black borders are proper methods of making a message “conspicuous” in a form or label. Victor v. Mammana, 101 Misc. 2d 954, 422 N.Y.S.2d 350, 1979 N.Y. Misc. LEXIS 2795 (N.Y. Sup. Ct. 1979).

The decision on whether a disclaimer of warranty is sufficiently “conspicuous” (Uniform Commercial Code, § 2-316, subd [2]) is to be made by the court (Uniform Commercial Code, § 1-201, subd [10]) and is not a question of fact for the jury at the time of trial and the court on a motion for summary judgment may, therefore, properly determine that the disclaimer of warranty on a can of highly volatile wall tile adhesive is an insufficient affirmative defense as a matter of law in an action based upon a fire in plaintiffs’ home allegedly caused by the adhesive; in addition, even if the disclaimer is deemed “conspicuous”, it is nonetheless an insufficient affirmative defense since a disclaimer is not effective against strangers to the contract who never saw it and defendant manufacturer failed to come forward with any evidence to rebut plaintiffs’ assertions that they were unfamiliar with the can of adhesive left in their home and had never read the label. Victor v. Mammana, 101 Misc. 2d 954, 422 N.Y.S.2d 350, 1979 N.Y. Misc. LEXIS 2795 (N.Y. Sup. Ct. 1979).

Where a seller of goods purports to exclude warranties by way of a writing, the disclaimer must be conspicuous (Uniform Commercial Code, § 2-316(2)), that is, the disclaimer must be so written that it calls the buyer’s attention to the exclusion (Uniform Commercial Code, § 1-201(10); § 2-316(3), par [a]); language in the body of a form is conspicuous if it is in larger or contrasting type or color; the issue of conspicuousness is to be determined by the court. Basic Adhesives, Inc. v. Robert Matzkin Co., 101 Misc. 2d 283 420 N.Y.S.2d 983 (1979), aff’d as modified.

Requirement of UCC § 2-316(2) and § 1-201(10) that language in warranty disclaimer be conspicuous was not satisfied where provisions of disclaimer were printed in type which was no larger than any other type on the entire page and actually was smaller than some of such other type. Nassau Suffolk White Trucks, Inc. v. Twin County Transit Mix Corp., 62 A.D.2d 982, 403 N.Y.S.2d 322, 1978 N.Y. App. Div. LEXIS 11018 (N.Y. App. Div. 2d Dep't 1978).

Where (1) disclaimer of both express warranties and implied warranties of merchantability and fitness for particular purpose, which was inserted in lease of electronic equipment, called lessee’s attention, on face of lease immediately above lessee’s signature, to fact that reverse side of lease contained additional terms, (2) reverse side of lease contained such disclaimer, which was printed in capital letters, and (3) remainder of text on reverse side of lease did not contain another sentence in capital letters, court held (1) that under express terms of UCC § 1-201(10), determination of whether disclaimer was conspicuous or not was to be made by trial court and not jury, (2) that disclaimer was conspicuous, within meaning of UCC § 1-201(10), because it written so that reasonable person against whom it was to operate should have noticed its provisions, and (3) that as a result, disclaimer complied with UCC § 2-316(2) and effectively prevented implied warranties of merchantability and fitness for particular purpose from attaching to leased equipment. Todd Equip. Leasing Co. v. Milligan, 395 A.2d 818 (Me. 1978). Disclaimer in seller’s acknowledgment of buyer’s purchase order was “conspicuous” within meaning of UCC § 1-201(10) where (1) it was on front side of acknowledgment, (2) was in large and readable type, (3) contained simple, direct, and easily understood language, (4) was typed in capital letters, (5) specifically mentioned “merchantability,” and (6) person against whom disclaimer operated was a sophisticated business entity. Gilbert & Bennett Mfg. Co. v. Westinghouse Electric Corp., 445 F. Supp. 537, 1977 U.S. Dist. LEXIS 13678 (D. Mass. 1977).

Disclaimer of implied warranties of merchantability and fitness contained in seller’s offer satisfied requirements of UCC § 2-316(2) and therefore was effective according to its terms, notwithstanding exclusionary provision was in standard print without indented margins, contrast print or other conspicuous aspect, where buyer was sophisticated business buyer experienced in commercial dealings, where buyer attached seller’s offer, including the exclusionary provision, to its purchase order separately initialed by buyer, along with rider stating additional terms and changing or deleting certain provisions which had been unacceptable to buyer, which were actions of buyer in equal bargaining position with seller and raised inference that change in specific terms resulted from detailed review of “terms and conditions” of seller’s offer, where buyer stated that he knew of warranty paragraphs, had read them, and was familiar with what they contained, and where provision in question was one of only 14 separate sections on single page, was only section dealing with warranty obligations, and was bold titled “ Fargo Machine & Tool Co. v. Kearney & Trecker Corp., 428 F. Supp. 364, 1977 U.S. Dist. LEXIS 17484 (E.D. Mich. 1977).

Question whether provision purporting to disclaim implied warranty of merchantability was “conspicuous” within meaning of UCC § 2-316(2) and UCC § 1-201(10) is question of law for court, and if purported disclaimer is part of record on appeal, appellate court is in as good position as trial court to determine such question. Pearson v. Franklin Labs., Inc., 254 N.W.2d 133, 1977 S.D. LEXIS 152 (S.D. 1977).

In action for damages by cattle ranchers against manufacturer of cattle vaccine for breach of implied warranty of fitness of vaccine for purpose for which it was to be used, purported disclaimer of liability that appeared on last page of pamphlet accompanying each bottle of such vaccine-in which defendant stated that since it had no control over conditions under which vaccine was used, it could not accept responsibility for results following its use-was not “conspicuous” within meaning of UCC § 2-316(2) and § 1-201(10), where such disclaimer was printed in same size of type, and on same page, as other language in pamphlet that extolled vaccine’s effectiveness. Such disclaimer was also ineffective under UCC § 2-316(3)(a) because of ambiguity, since it could be interpreted as disclaiming liability for (1) failure of vaccine to prevent disease it was intended to prevent, (2) illnesses caused by vaccine itself, or (3) both such possibilities. Pearson v. Franklin Labs., Inc., 254 N.W.2d 133, 1977 S.D. LEXIS 152 (S.D. 1977).

Provision on face of one page contract for sale of cabbage seed disclaiming warranties, express or implied, of merchantability and fitness for purpose and limiting seller’s liability for breach of warranty or contract to purchase price of seeds, which was set off from other provisions on form and appeared in boldface print, was conspicuous within meaning of UCC § 1-201(10) and was effective to disclaim implied warranty of merchantability under UCC § 2-316(2). Billings v. Joseph Harris Co., 27 N.C. App. 689, 220 S.E.2d 361 (1975), review allowed, 289 N.C. 296, 222 S.E.2d 695 (1976).

Attempted disclaimer of implied warranties was inoperative under UCC § 2-316(2) where purported disclaimer was not “conspicuous,” as defined in UCC § 1-201(10); conditional sales contract in question was seven legal-sized, double-spaced, typed pages in length and attempted disclaimer was buried in text of lengthy paragraph and was not “in larger or other contrasting type or color.” Cooley v. Salopian Industries, Ltd., 383 F. Supp. 1114, 1974 U.S. Dist. LEXIS 6028 (D.S.C. 1974).

In action by buyers of mobile home against seller to recover damages for breach of warranties, trial court erred in granting seller’s motion for summary judgment, notwithstanding contract of sale contained disclaimer provision which stated “buyer is buying the trailer ‘as is’ and no representations or statements have been made by seller except as herein stated, so that no warranty, express or implied, arises apart from this writing,” where purported disclaimer provision was written in same size and color type as balance of contract and was not otherwise distinguishable from balance of contract: (1) purported disclaimer was not “conspicuous” as defined in UCC § 1-201(10); (2) although subsection (3)(a) of UCC § 2-316, which specifies that words such as “as is” and “with all faults” can be used to exclude implied warranties, contains no requirement that such disclaimer be set forth in conspicuous manner, UCC contemplates that seller can disclaim implied warranties only if buyer reasonably understands this is being done and, in order for unsophisticated buyer to be forewarned, drafters of code intended disclaimer, however written, to be set forth in conspicuous manner, and, thus, “conspicuous” requirement of subsection (2) was applicable to “as is” disclaimer prescribed by subsection (3)(a) of UCC § 2-316. Osborne v. Genevie, 289 So. 2d 21, 1974 Fla. App. LEXIS 8052 (Fla. Dist. Ct. App. 2d Dist. 1974).

To be effective, clause limiting remedies pursuant to UCC § 2-719 must be “by a writing and conspicuous;” however, language in contract between buyer and seller of turbine generator was sufficiently conspicuous to bind buyer (and to exclude implied warranties of merchantability and fitness for purpose) where (1) limiting language was located on first page of contractual document titled “General Conditions”; (2) all of the type indicating such contractual conditions was large and readable (there was no fine print); (3) limiting language was simple, direct, and easily understood; (4) there was printed heading in capital letters which read: “Limitation of Liability”; (5) “person” against whom limiting language was to operate was prominent, sophisticated corporate entity. Avenell v. Westinghouse Electric Corp., 41 Ohio App. 2d 150, 70 Ohio Op. 2d 316, 324 N.E.2d 583, 1974 Ohio App. LEXIS 2692 (Ohio Ct. App., Cuyahoga County 1974).

In action against car dealer and manufacturer brought by buyer when engine failed to perform properly, statement by manufacturer warranting car to be free from defects in material and workmanship under normal use and service constituted express warranty under UCC § 2-313 and exclusion of, inter alia, implied warranty of fitness for particular purpose was ineffective where exclusions were not at any time called to buyer’s attention and were not sufficiently conspicuous under UCC § 1-201(10); while implied warranty of merchantability under UCC § 2-314 and implied warranty of fitness for particular purpose under UCC § 2-315 may both attend sale of automobile, where neither dealer nor manufacturer knew that buyer intended to use car for occasional drag racing prior to or at time of original sale, no issue was created as to implied warranty of fitness for particular purpose, either in connection with original car purchase or subsequent motor replacement. Jacobson v. Benson Motors, Inc., 216 N.W.2d 396, 1974 Iowa Sup. LEXIS 1285 (Iowa 1974).

Summary judgment was granted to seller for entire amount due in payment for certain air conditioning/heating units which allegedly did not comply with express warranties contained in advertising brochure, where front page of sales contract contained boldface disclaimer “Of Warranties, Express or Implied, of Merchantability or Fitness” not discussed by said contract, and where same page contained large bold print warning buyer to read contract. Pennsylvania Gas Co. v. Secord Bros., Inc., 73 Misc. 2d 1031, 343 N.Y.S.2d 256, 1973 N.Y. Misc. LEXIS 2154 (N.Y. Sup. Ct. 1973), aff'd, 44 A.D.2d 906, 357 N.Y.S.2d 702, 1974 N.Y. App. Div. LEXIS 4899 (N.Y. App. Div. 4th Dep't 1974).

Printed portion of retail instalment contract purporting to exclude warranties specifically mentioned “merchantability,” was of contrasting type and plainly visible, and was thus “conspicuous” within meaning of UCC, so that instrument contained valid exclusion of implied warranties of merchantability and of fitness. Pennsylvania Gas Co. v. Secord Bros., Inc., 73 Misc. 2d 1031, 343 N.Y.S.2d 256, 1973 N.Y. Misc. LEXIS 2154 (N.Y. Sup. Ct. 1973), aff'd, 44 A.D.2d 906, 357 N.Y.S.2d 702, 1974 N.Y. App. Div. LEXIS 4899 (N.Y. App. Div. 4th Dep't 1974).

Where both front and back page of lease agreement contained statement in bold capitalized lettering, “LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS WITH RESPECT TO SUCH LEASED PROPERTY AND HEREBY DISCLAIMS THE SAME,” which appeared not more than two inches above signature of officer who signed lease on behalf of defendant, disclaimer was sufficiently conspicuous, as defined in UCC § 1-201(10), and was properly worded so as to effectively exclude such warranties under UCC § 2-316. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

Seller of fabric was liable to buyer for breach of express warranties of merchantability and fitness for particular purpose, notwithstanding seller’s invoice contained statement “No refunds after 5 days. Check goods before cutting,” where buyer’s purchase order stated that fabric was to be used for swimwear and that all “colors, prints and bonding processes must meet swimwear specifications,” where buyer’s order was based on sample supplied by seller and, although another fabric was substituted for sample fabric, such modification was initiated by seller, where seller’s salesman assured buyer that substituted fabric would meet swimwear specifications, where fabric supplied and subsequently manufactured into swimsuits was defective and failed to meet minimum performance standards for colorfastness, and where buyer notified seller within 12 to 20 days after receipt of fabric that it had received substantial number of complaints with respect to colorfastness: (1) seller’s invoice and shipment of goods did not constitute both acceptance and counteroffer under UCC § 2-207, binding buyer to terms of invoice, since language used did not clearly condition acceptance on additional terms nor were such terms conspicuous as defined by UCC § 1-201(10); (2) express warranties of merchantability and fitness for particular purpose were established under UCC § 2-313 based on buyer’s order form, representations of seller’s salesman and samples supplied by seller; (3) there was no showing that warranties of merchantability and fitness had been excluded or modified under UCC § 2-316; and (4) buyer, having given reasonable notice to seller under UCC § 2-607, was entitled to damages for credits issued to customers (including profits lost and costs of production for returns and allowances) plus cost of production of unsaleable swimsuits under UCC §§ 2-714 and 2-715, and to deduct such damages from purchase price under UCC § 2-717. Rite Fabrics, Inc. v. Stafford--Higgins Co., 366 F. Supp. 1, 1973 U.S. Dist. LEXIS 11787 (S.D.N.Y. 1973).

Court could properly have found that purported exclusion or disclaimer of warranties which was located at extreme bottom of reverse or second page of contract, which page did not require nor contemplate signature by purchaser, was not sufficiently conspicuous to meet requirements of UCC; and, therefore, jury could have properly found that existence of implied warranty of fitness was not excluded by written contract executed by parties. Jerry Alderman Ford Sales, Inc. v. Bailey, 154 Ind. App. 632, 291 N.E.2d 92, 1972 Ind. App. LEXIS 944 (Ind. Ct. App. 1972), modified, 154 Ind. App. 632, 294 N.E.2d 617, 1973 Ind. App. LEXIS 1277 (Ind. Ct. App. 1973).

Line of print on face of stock certificate referring to transfer restrictions described on reverse side of certificate did not stand out and could not be considered conspicuous. Ling & Co. v. Trinity Sav. & Loan Ass'n, 482 S.W.2d 841, 1972 Tex. LEXIS 279 (Tex. 1972).

Disclaimer of express or implied warranties was not conspicuous where paragraph containing disclaimer was on reverse side of the sales contract, the paragraph was the tenth paragraph of twelve paragraphs single spaced on the reverse side of the contract, it was almost at the bottom of the page, the print was only slightly larger than the other print on the page, had only a slight slant when compared to the other print on the page, and was of the same color, though perhaps a shade darker. Salov v. Don Allen Chevrolet Co., 55 Pa. D. & C.2d 180 120 Pitts. Legal J. 138 (1971).

Where exclusionary language was not in “larger or other contrasting type or color” and was on back of instrument with nothing on front, except some words in ordinary type, to direct attention to it, exclusion was not “conspicuous” even though heading “warranty and agreement” was in large bold-face type. Massey-Ferguson, Inc. v. Utley, 439 S.W.2d 57, 1969 Ky. LEXIS 353 (Ky. 1969).

Exclusion of warranty of fitness, appearing in only print in paragraph form just before space for writing order, met Code “conspicuousness” requirement. Zicari v. Joseph Harris Co., 33 A.D.2d 17, 304 N.Y.S.2d 918, 1969 N.Y. App. Div. LEXIS 2923 (N.Y. App. Div. 4th Dep't 1969).

An attempted disclaimer is ineffective as a matter of law and fails of its purpose when it is in the body of an instrument and in type of the same size and color as other provisions. Mack Trucks of Arkansas, Inc. v. Jet Asphalt & Rock Co., 246 Ark. 101, 437 S.W.2d 459, 1969 Ark. LEXIS 1215 (Ark. 1969), but see, Cavette v. Ford Motor Credit Co., 260 Ark. 874, 545 S.W.2d 612, 1977 Ark. LEXIS 2191 (Ark. 1977).

Whether a warranty is conspicuous is for decision by the court. Marion Power Shovel Co. v. Huntsman, 246 Ark. 152, 437 S.W.2d 784, 1969 Ark. LEXIS 1222 (Ark. 1969).

Where a contract was in the form of a purchase order which was on a pad of paper containing several copies separated by carbon paper, and the front of the order called attention in boldface printing to terms and conditions “stated in this order” but did not point out that there were terms and conditions set forth on the reverse side of the order, an exclusion of warranties on the reverse side of the order, although printed in an adequate size and type, were not conspicuous, within the meaning of § 2-316(2) read with § 1-201(10) so as to make the exclusion effective, because of the failure of the provisions on the front of the order to make adequate reference to the provisions on the back thereof. Hunt v. Perkins Machinery Co., 352 Mass. 535, 226 N.E.2d 228, 1967 Mass. LEXIS 843 (Mass. 1967).

Section 2-316(2) relative to the exclusion of warranties by a conspicuous writing must be read with § 1-201(10) which sets forth the test of what is conspicuous as being whether “a reasonable person against whom...[the disclaimer] is to operate ought to have noticed it”. Hunt v. Perkins Machinery Co., 352 Mass. 535, 226 N.E.2d 228, 1967 Mass. LEXIS 843 (Mass. 1967).

Under § 2-316(2) when read with the last sentence of § 1-201(10), it is a question of law for the court whether a provision excluding warranties is conspicuous. Hunt v. Perkins Machinery Co., 352 Mass. 535, 226 N.E.2d 228, 1967 Mass. LEXIS 843 (Mass. 1967).

Words in the same color and size as the other type of a contract are not conspicuous. S. F. C. Acceptance Corp. v. Ferree, 39 Pa. D. & C.2d 225, 1966 Pa. Dist. & Cnty. Dec. LEXIS 293 (Pa. C.P. 1966).

A disclaimer of warranties set out in the body of a sales contract in type no larger than that in which the remainder of the instrument is printed is not “conspicuous” within the meaning of subsec (10) of this section and will not serve to exclude the implied warranty of merchantability of the equipment sold, particularly where the disclaimer failed to mention merchantability. S. F. C. Acceptance Corp. v. Ferree, 39 Pa. D. & C.2d 225, 1966 Pa. Dist. & Cnty. Dec. LEXIS 293 (Pa. C.P. 1966).

The test of conspicuousness is whether attention can reasonably be expected to be called to it. Sarnecki v. Al Johns Pontiac (Pa. 1966).

A new car warranty appearing on page 3 of the “owner’s booklet” which limited seller’s liability to replacement of defective parts, and was expressly stated to be in lieu of all other warranties, was not so conspicuous as to exclude an implied warranty of merchantability or fitness, even though it was printed in type which contrasted slightly with that used in the remainder of the booklet. Sarnecki v. Al Johns Pontiac (Pa. 1966).

Where the provisions of a contract relied on as disclaiming implied warranties were in the same color and size of type as that used for other provisions of the contract, such provisions were not conspicuous and failed in its purpose as a disclaimer. Boeing Airplane Co. v. O'Malley, 329 F.2d 585, 1964 U.S. App. LEXIS 5958 (8th Cir. Minn. 1964).

26. Contract.

Under the Uniform Commercial Code, practical business people are not expected to govern their actions with reference to nice legal formalisms. Thus, when there is a basic agreement, however manifested and whether or not precise moment of such agreement can be determined, failure of parties to articulate agreement in precise legal language, with every difficulty and contingency considered and resolved, will not prevent formation of contract. However, if there is no basic agreement, the code will not imply one. And without an agreement, there can be no contract and without a contract, there can be no breach. This principle is explicitly recognized by UCC § 1-201(3) and (11), and UCC § 2-204(1) and (2). Kleinschmidt Div. of SCM Corp. v. Futuronics Corp., 41 N.Y.2d 972, 395 N.Y.S.2d 151, 363 N.E.2d 701, 1977 N.Y. LEXIS 2021 (N.Y. 1977).

Under the objective theory of mutual assent followed in all jurisdictions, a contracting party is bound by the apparent intention he outwardly manifests to the other contracting party, and to the extent that his real, secret intention differs therefrom, it is entirely immaterial, and thus where the express language of a contract for the sale of a boat, failed to manifest an intention to make the sale conditioned on a survey of the boat, and the buyer failed to present evidence that the condition of a survey was implied under any section of the UCC or in the general law of contracts, an agreement between the parties was exclusive of a condition precedent for a survey of the boat. Cohn v. Fisher, 118 N.J. Super. 286, 287 A.2d 222, 1972 N.J. Super. LEXIS 540 (Law Div. 1972).

“Contract” as defined in UCC § 1-201(11) results when parol evidence of parties is considered as to one remaining term in dispute. Kohlmeyer & Co. v. Bowen, 126 Ga. App. 700, 192 S.E.2d 400, 1972 Ga. App. LEXIS 1255 (Ga. Ct. App. 1972).

Even in the absence of a written agreement with respect to every term of a contract, great weight attaches to the course of dealing of the parties, and where it appears from the conduct of the parties that their mode of calculating price, although not accepted formally by signature of a written instrument, was adhered to by both parties during an extensive course of dealing, during which the purchaser received, accepted, and paid for over $800,000 worth of merchandise, this course of dealing must be held applicable and governing with respect to remaining merchandise which was received, accepted, but not paid for. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

In a case where the issue is as to whether a buyer was in default under a contract of sale so as to give the seller a right to repossess the article sold, such issue involved the duties of the parties under the primary obligation and neither the validity nor the perfection of a security interest, as defined in the instant section, is involved. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

27. Creditor.

Purpose of Florida UCC bulk-transfer statutes (Florida UCC §§ 6-101 et seq.) is to protect ordinary trade creditors who have right to expect that their bills will be paid from assets of an ongoing business. Thus, although definition of creditor in Florida UCC § 1-201(12) is broad, legislature did not intend to include within protection of bulk-transfer statutes stockholder who dissented to bulk sale of his corporation’s assets. Furthermore, since under Florida UCC § 6-109, only creditors holding claims based on transactions occurring before a bulk transfer occurs are protected, stockholder who objected to bulk sale of his corporation’s assets occupied status of stockholder, and not creditor, until such sale was closed and therefore could not be a bulk-transfer creditor. Brown v. Superior Pontiac-GMC, Inc., 352 So. 2d 576, 1977 Fla. App. LEXIS 16807 (Fla. Dist. Ct. App. 2d Dist. 1977).

UCC § 1-201(12) defines creditor as including general as well as secured creditor and this definition is controlling as to Art 2 provision relating to consignment sales and rights of creditors. American Nat'l Bank v. First Nat'l Bank, 28 Colo. App. 486, 476 P.2d 304 (Colo. Ct. App. 1970).

Creditor as defined by Code § 1-201(12) means “an unsecured creditor” thus referring to persons holding liquidated claims rather than to assertions of potential liability for breach of contract. Aluminum Shapes, Inc. v. K-A-Liquidating Co., 290 F. Supp. 356, 1968 U.S. Dist. LEXIS 12244 (W.D. Pa. 1968).

Paragraph (12) of the instant section was referred to in a case involving the rights of creditors of a person to whom goods were delivered on sale or return under § 2-326, in connection with the proposition that it was conceded that if the creditors had rights under § 2-326, the assignee for the benefit of the person’s creditors could establish the claims. General Electric Co. v. Pettingell Supply Co., 347 Mass. 631, 199 N.E.2d 326, 1964 Mass. LEXIS 812 (Mass. 1964).

28. Delivery.

Where holder of promissory notes delivers such notes to bank with instructions that bank sell interests therein and issue certificates of participation in notes, there has been constructive delivery of such notes with bank acting as agent of original holder and making constructive delivery to purchasers to extent of their interests in notes. Corporacion Venezolana de Fomento v. Vintero Sales Corp., 452 F. Supp. 1108, 1978 U.S. Dist. LEXIS 18398 (S.D.N.Y. 1978).

Since UCC § 1-201(14) defines “delivery” as “voluntary transfer of possession” but does not specify whether it may be actual or constructive, court adopted former New York Negotiable Instruments Law, which defined “delivery” as “transfer of possession, actual or constructive, from one person to another,” in light of general case-law agreement that because Uniform Commercial Code did not prescribe any new definition of the term, former definition of “delivery” should be deemed to continue. Corporacion Venezolana de Fomento v. Vintero Sales Corp., 452 F. Supp. 1108, 1978 U.S. Dist. LEXIS 18398 (S.D.N.Y. 1978).

Seller neither tendered delivery nor delivered concrete forms to buyer pursuant to UCC §§ 1-201(14), 2-301 and 2-503(1), and seller breached express warranties under UCC § 2-313 that forms were free from incumberance and that seller would warrant and defend against demands of all other persons, where third party claimed storage lien on forms, refused to allow buyer to take possession, and seller was unsuccessful in securing release from third party of his claimed lien. 00018581 Goosic Constr. Co. v. City Nat’l Bank, 196 Neb. 86, 241 N.W.2d 521 (1976). Goosic Constr. Co. v. City Nat'l Bank, 196 Neb. 86, 241 N.W.2d 521, 1976 Neb. LEXIS 745 (Neb. 1976).

Trial court erred in finding that there was no valid transfer of corporate stock from share holder to his sons where testimony at trial supported conclusion that valid transfer took place and where plaintiffs did not challenge fact that father gave sons stock certificates, but only claimed that his action did not constitute delivery; fact that father had access to vault where certificates were kept after transfer did preclude effective transfer between parties to transaction. Brener v. Industrial Steel Container Co., 303 Minn. 275, 228 N.W.2d 115, 1975 Minn. LEXIS 1529 (Minn. 1975).

Evidence that mortgagor, after signing mortgage documents, transferred them to her ex-husband who placed them in escrow was sufficient evidence from which jury could find “delivery” of documents to escrow agent within Code § 1-201(14). Heller v. Levine, 7 Ariz. App. 231, 437 P.2d 983, 1968 Ariz. App. LEXIS 358 (Ariz. Ct. App. 1968).

The established definition of the term “delivery” would prevail, since the Uniform Commercial Code did not prescribe any new definition for the term. Snyder v. Town Hill Motors, Inc., 193 Pa. Super. 578, 165 A.2d 293, 1960 Pa. Super. LEXIS 704 (Pa. Super. Ct. 1960).

29. Document of title.

Drafts marked “non-negotiable”, which were issued to elevator company as seller-bailee by buyer and which evidenced sale of beans, constituted “documents of title” under UCC § 1-201(15) where drafts were addressed to bailee and purported to cover goods in bailee’s possession, which were fungible portion of identifiable mass, and where such drafts were treated as “documents of title” by parties themselves and were customarily so used in bean business in general. Midland Bean Co. v. Farmers State Bank, 37 Colo. App. 452, 552 P.2d 317 (Colo. Ct. App. 1976).

A motor vehicle certificate of title or manufacturer’s or importer’s certificate of origin is not “document” within meaning of UCC § 1-201(15), and security interest in motor vehicle can be perfected only by complying with procedure set forth in Certificate of Title Act. Levin v. Nielsen, 37 Ohio App. 2d 29, 66 Ohio Op. 2d 52, 306 N.E.2d 173, 1973 Ohio App. LEXIS 799 (Ohio Ct. App., Cuyahoga County 1973).

Warehouse receipt is document of title. Lofton v. Mooney, 452 S.W.2d 617, 1970 Ky. LEXIS 370 (Ky. 1970).

A forged delivery order is neither a “document of title” nor a warehouse receipt under the provisions of this section because it cannot be said to have been issued in the regular course of business or financing, nor can it be treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the good it covers. David Crystal, Inc. v. Cunard S.S. Co., 223 F. Supp. 273, 1963 U.S. Dist. LEXIS 7867 (S.D.N.Y. 1963), aff'd, 339 F.2d 295, 1964 U.S. App. LEXIS 3630 (2d Cir. N.Y. 1964).

30. Fault.

In a diversity action by a surety to recover funds paid out by it under a bond, it was held that the defendant employer corporation was not liable under U.C.C. where an employee, entrusted with the responsibility of handling securities, caused unauthorized issuance of corporate stock and made several unauthorized entries on defendant’s transfer books for his own independent purpose and not for the benefit of the defendant. Hartford Acci. & Indem. Co. v. Lisky, 323 F. Supp. 103, 1971 U.S. Dist. LEXIS 15079 (N.D. Ill. 1971).

31. Fungible.

Sugar in 100 pound bags fell within definition of fungible, UCC § 1-201(17); therefore, when delivery was tendered to warehousemen on behalf of buyer under UCC § 2-503(4), buyer acquired insurable interest in goods, title to goods, and at same time buyer bore risk of loss with respect to those goods, not withstanding warehousemen’s failure to segregate sugar. Henry Heide, Inc. v. Atlantic Mut. Ins. Co., 80 Misc. 2d 485, 363 N.Y.S.2d 515, 1975 N.Y. Misc. LEXIS 2200 (N.Y. Sup. Ct. 1975).

32. Genuine.

Even though stock certificates were admittedly issued without authority and were not manually signed and did not bear a transfer agent’s counter signature to the facsimile signatures, the certificates were neither forged nor counterfeit and thus were genuine within the definition of Code § 1-201(18). Henry Heide, Inc. v. Atlantic Mut. Ins. Co., 80 Misc. 2d 485, 363 N.Y.S.2d 515, 1975 N.Y. Misc. LEXIS 2200 (N.Y. Sup. Ct. 1975).

33. Good faith.

Duty of good faith and fair dealing between bank and borrower arose from Uniform Commercial Code (UCC), which applied to note that borrower had given to bank as part of deed of trust transaction. Merchants & Planters Bank v. Williamson, 691 So. 2d 398, 1997 Miss. LEXIS 91 (Miss. 1997).

In an action by the owner of a valuable painting to recover the painting or its value, the defense of equitable estoppel, which provides that an owner may be estopped from setting up his own title and the lack of title in the vendor as against a bona fide purchaser for value where the owner has clothed the vendor with possession and other indicia of title, is not available to an art dealer who purchased the painting from a delicatessen employee who was not the owner and had no authority to dispose of it although he had obtained the painting from a person who rightfully had possession of it pursuant to an agreement with the true owner since the owner had consigned the painting for display only and conferred no other indicia of ownership; moreover, the owner’s conduct did not in any way contribute to the deception practiced on the purchaser, and the purchaser was not a purchaser in good faith since he made no inquiry or investigation as to the true ownership of the painting. Porter v. Wertz, 68 A.D.2d 141, 416 N.Y.S.2d 254, 1979 N.Y. App. Div. LEXIS 10530 (N.Y. App. Div. 1st Dep't 1979), aff'd, 53 N.Y.2d 696, 439 N.Y.S.2d 105, 421 N.E.2d 500, 1981 N.Y. LEXIS 2344 (N.Y. 1981).

In an action by the owners of a valuable painting to recover the painting or its value, the defense of statutory estoppel (Uniform Commercial Code, § 2-403, subd [2], which provides that any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business) is not available to an art dealer who purchased the painting from a delicatessen employee who was not the owner of the painting and had no authority from the owner to dispose of it although he had obtained the painting from a person who rightfully had possession of it, since the art dealer was not a buyer in the ordinary course of business, defined as a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind (Uniform Commercial Code, § 1-201, subd [9]), inasmuch as the person from whom the dealer bought the painting was not an art dealer and never held himself out to be one and the dealer was not a person in good faith because he made no effort to verify whether the seller was the owner or authorized by the owner to sell the painting. Porter v. Wertz, 68 A.D.2d 141, 416 N.Y.S.2d 254, 1979 N.Y. App. Div. LEXIS 10530 (N.Y. App. Div. 1st Dep't 1979), aff'd, 53 N.Y.2d 696, 439 N.Y.S.2d 105, 421 N.E.2d 500, 1981 N.Y. LEXIS 2344 (N.Y. 1981).

Where there was no reason for brokerage firm to suspect that delivery agent had any interest in securities delivered for principals’ accounts, brokerage firm acted honestly in fact and therefore met good faith requirement of UCC § 1-201, subd 19, in crediting shares to principals’ accounts rather than making payment to agent. Colonial Secur., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 461 F. Supp. 1159, 1978 U.S. Dist. LEXIS 13844 (S.D.N.Y. 1978).

Where guarantor of promissory note attempts to assert defense of fraud in inducement, rights of purchasers of limited interest in note cannot be defeated on ground that they breached duty to inquire and thus failed to act in good faith because circumstances of which holders had knowledge did not rise to level indicating that failure to inquire revealed deliberate desire to evade knowledge. Corporacion Venezolana de Fomento v. Vintero Sales Corp., 452 F. Supp. 1108, 1978 U.S. Dist. LEXIS 18398 (S.D.N.Y. 1978).

The Uniform Commercial Code, in defining “good faith” as “honesty in fact in the conduct or transaction concerned” (UCC § 1-201(19), adopted a subjective standard for the good-faith test in UCC Article 3, which standard was generally applicable under the former Negotiable Instruments Law. Corporacion Venezolana de Fomento v. Vintero Sales Corp., 452 F. Supp. 1108, 1978 U.S. Dist. LEXIS 18398 (S.D.N.Y. 1978).

“Good faith” is defined by UCC § 1-201(19) as “honesty in fact in the conduct or transaction concerned.” Thus, a determination of whether a depositary bank acted in good faith in waiving its normal five-day waiting period and extending immediate credit on a check deposited with it involves a subjective inquiry as to whether the bank, at the time it extended such credit, had knowledge of facts suggesting that the check would eventually be dishonored. In such a case, however, whether or not the bank’s conduct conformed to a “standard of reasonableness” is immaterial, since the drafters of the Uniform Commercial Code expressly rejected the idea of including a concept of objective commercial reasonableness in the meaning of “good faith.” Frantz v. First Nat'l Bank, 584 P.2d 1125, 1978 Alas. LEXIS 575 (Alaska 1978).

In action by debtor against bank and its loan officer for conversion, trespass, false imprisonment, and malicious prosecution, where evidence showed that bank, which had made loan to debtor that was secured by automobile purchased with loan’s proceeds, (1) had concluded, even before due date of first installment payment on loan, that debtor had falsified loan application, (2) that as a result, bank had declared loan to be in default, accelerated the debt obligation, and entered on debtor’s property to repossess automobile, all without notice to debtor, (3) that bank’s loan officer had asked debtor to come to officer’s office to discuss the matter, (4) that when debtor arrived at bank, he was met by two FBI agents who interviewed him, and (5) that as a result of such interview, debtor was indicted, tried, and acquitted on federal charges of supplying false information to bank to obtain loan, it was error for trial court to grant summary judgment in favor of bank and loan officer on conversion and trespass claim, since issue of fact existed as to whether bank had acted in good faith under UCC § 1-208 and § 1-201(19) in deeming itself to be insecure with regard to debtor’s obligation. Ginn v. Citizens & Southern Nat'l Bank, 145 Ga. App. 175, 243 S.E.2d 528, 1978 Ga. App. LEXIS 1910 (Ga. Ct. App. 1978).

Frantz v. First Nat'l Bank, 584 P.2d 1125, 1978 Alas. LEXIS 575 (Alaska 1978).

“Good faith” under UCC § 1-201(19) requires honesty of intent in conduct or transaction concerned, rather than diligence or nonnegligence. Wendling v. Cundall, 568 P.2d 888, 23 U.C.C. Rep. Serv. 13 (Wyo. 1977) Wendling v. Cundall, 568 P.2d 888, 1977 Wyo. LEXIS 281 (Wyo. 1977) (action to recover under contract for exchange of realty in which court stated that definition of good faith in UCC § 1-201(19) applies to most commercial transactions outside the Uniform Commercial Code that are conducted by persons who owe no fiduciary or other special obligation to each other).

In replevin action by buyer against seller to obtain possession of supposedly used Ferrari sports car of limited availability that seller ordered for buyer from another dealer, where car on seller’s receipt thereof proved to be virtually new racing vehicle, not intended for highway use, that seller wished to retain for himself, and where parties were shown to have modified in writing prior oral agreement trial court, in finding absence of good faith by seller, did not err in employing unconscionability concept of UCC § 2-302 in interpreting contract, since court’s statement as to unconscionability was only dictum. Baker v. Ratzlaff, 1 Kan. App. 2d 285, 564 P.2d 153, 1977 Kan. App. LEXIS 158 (Kan. Ct. App. 1977).

Bank that took drafts drawn under letter of credit did not take drafts in good faith as defined by UCC § 1-201(19) and without notice, as defined in UCC § 1-201(25), of defenses against them, and thus bank did not qualify as holder in due course under UCC § 3-302(1), where, prior to time bank took draft, attorney gave bank notice by letter that letters of credit were issued pursuant to specific terms and conditions, conditions were explained, and letter warned that conditions had not and would not be fulfilled in foreseeable future; this constituted notice that any certification by beneficiary of letters of credit that payment was due thereunder might well be fraudulent; moreover, bank, having made substantial loans to beneficiary, could not have been unaware of beneficiary’s severe financial difficulties. Shaffer v. Brooklyn Park Garden Apartments, 311 Minn. 452, 250 N.W.2d 172, 1977 Minn. LEXIS 1651 (Minn. 1977).

Although buyer agreed to purchase from seller one “used” racing automobile, and such automobile was delivered with odometer registering 427 miles, seller refused to deliver automobile on grounds that such automobile was not, in fact, “used” but could be regarded by the parties as a new car; seller’s conduct in claiming that since such car was “new” it was not what buyer had ordered did not meet standards of good faith imposed by UCC § 1-201(19) and UCC § 2-103(1)(b); and when car was identified to contract buyer had right of replevin under UCC § 2-716(3), since he was unable to effect cover and there was no other way for him to protect himself against loss of this deposit on car. Tatum v. Richter, 280 Md. 332, 373 A.2d 923, 1977 Md. LEXIS 850 (Md. 1977).

“Good faith” under UCC § 1-201(19) requires honesty of intent rather than absence of circumstances that would put ordinarily prudent holder of instrument on inquiry as to defenses to instrument. Leininger v. Anderson, 255 N.W.2d 22, 1977 Minn. LEXIS 1513 (Minn. 1977).

“Honesty-in-fact” definition of good faith in UCC § 1-201(19) is to be distinguished from definition of good faith in UCC § 2-103(1)(b), since latter definition includes not only honesty in fact but also observance of reasonable commercial standards of fair dealing in trade. Leininger v. Anderson, 255 N.W.2d 22, 1977 Minn. LEXIS 1513 (Minn. 1977).

In action for fraud and conversion in sale of corporation by buyer against owner-seller and bank holding security interest in corporation’s assets, (1) where sale contract naming owner and bank as sellers was signed only by owner, although owner had promised buyer that bank would also be party to agreement; (2) where buyer gave owner two cashier’s checks, made out to both corporation and bank as copayees, as agreed down payment for corporation’s assets but received no bill of sale therefor; and (3) where bank indorsed such checks and, pursuant to owner’s instructions, applied most of proceeds thereof to satisfy two notes on which corporation was liable to bank and gave owner check payable to corporation for remaining proceeds which owner deposited in corporation’s account, bank in accepting buyer’s cashier’s checks and dealing with proceeds thereof did not violate good faith requirement of UCC § 3-302(1)(b)-and thus was holder in due course as to such checks and not liable to buyer for fraud and conversion in sale transaction-because (1) checks were valid cashier’s checks that showed no sign of alteration or irregularity; (2) although transaction was restructured from what buyer had expected by bank’s not becoming party to sale contract, buyer accepted such risk by turning over cashier’s checks to owner-seller; (3) there was nothing inherently irregular or suspicious in bank’s method of handling such checks and proceeds thereof; (4) bank was not aware of understanding between buyer and owner-seller and did not sign sale contract because bank had nothing to sell; and (5) both trial court’s findings and record on appeal did not support buyer’s contention that bank had failed to comply with definition of good faith in UCC § 1-201(19) by not being honest in fact in its conduct in sale transaction. Leininger v. Anderson, 255 N.W.2d 22, 1977 Minn. LEXIS 1513 (Minn. 1977).

Notwithstanding subsequent purchaser did not know that intermediate seller’s title was voidable due to intermediate seller’s obtaining truck on basis of check which was dishonored, subsequent purchaser did not have good title against original seller by status of “good faith purchaser for value” under UCC §§ 1-201(19), 1-201(44) and 2-403, where subsequent purchaser knew that intermediate seller was sophisticated about value of automotive equipment, subsequent purchaser had just received three dishonored checks from intermediate seller, subsequent purchaser had no reason to believe that intermediate seller would give equipment worth $13,500 or more to settle debt of $9,100, and subsequent purchaser let intermediate seller retain possession of truck. Graves Motors, Inc. v. Docar Sales, Inc., 414 F. Supp. 717, 1976 U.S. Dist. LEXIS 16238 (E.D. La. 1976).

In action by bank against makers of several notes pledged by third party as collateral for loan, trial court properly found that bank had taken notes in good faith and without notice of makers’ alleged defenses, pursuant to UCC § 3-302(1) and definitions contained in UCC § 1-201, subsecs. (19), (25) and (27), where officers and employees of bank who handled the transaction testified that they had no knowledge or information concerning any defenses, and described in detail the investigation which they made and information which they gathered to satisfy themselves that notes were valid and that parties with whom they dealt were reliable; where trial court’s findings described in some detail the investigations and inquiries made by bank; where trial court found those investigations were reasonable under the circumstances, and that the bank lacked knowledge to know or believe that alleged defenses existed; and where facts found by trial court established that the bank had no connection with transactions for which notes were given. Security Pacific Nat. Bank v. Chess, 58 Cal. App. 3d 555, 129 Cal. Rptr. 852, 1976 Cal. App. LEXIS 1540 (Cal. App. 2d Dist. 1976).

Buyer of tractors was not entitled to protection from manufacturer’s security interest in equipment under UCC § 9-307, where buyer, who was experienced tractor dealer with knowledge of manufacturer’s practice of “floor-planning” its equipment and who purchased equipment for considerably less than its value, made no investigation of prior security interest, acquiesced in falsification of retail order form, and misrepresented particulars of transaction, did not qualify as good faith buyer in ordinary course of business under UCC §§ 1-201(9) and 1-201(19). International Harvester Co. v. Glendenning, 505 S.W.2d 320, 1974 Tex. App. LEXIS 2069 (Tex. Civ. App. Dallas 1974).

Test for “good faith” was not diligence or negligence and it was immaterial that defendant may have had notice of such facts as would put a reasonable prudent person on inquiry, unless defendant had actual knowledge of facts and circumstances that amounted to bad faith. Richardson Co. v. First Nat’l Bank, 504 S.W.2d 812 (Tex. Civ. App. 1974), ref. n.r.e (Apr. 3, 1974).

In action by corporation against its bank, in which corporation sought to recover proceeds of series of checks drawn on corporation’s checking account, each in excess of $300 and each signed by corporation president alone in violation of agreement between corporation and bank that checks in amounts in excess of $300 should bear signature of two specified signatories, one-year statute of limitations contained in UCC § 4-406(4) attached to each separate check bearing unauthorized signature, and new one-year period began to run with each subsequent check at moment it was made available to customer. Neo-Tech Systems, Inc. v. Provident Bank, 43 Ohio Misc. 31, 72 Ohio Op. 2d 329, 335 N.E.2d 395, 1974 Ohio Misc. LEXIS 192 (Ohio C.P. 1974).

History of Code makes it rather clear that reasonable conduct standard was intentionally omitted from good faith requirement. Von Gohren v. Pacific Nat'l Bank, 8 Wn. App. 245, 505 P.2d 467, 1973 Wash. App. LEXIS 1426 (Wash. Ct. App. 1973).

Where record contained no evidence tending to show that collecting bank in accepting forged check for deposit and permitting withdrawal of funds from fictitious account connived with forger or had any reason to believe that check was not genuine, there was no evidence tending to establish bank’s lack of good faith, even if such conduct constituted failure to exercise ordinary care or even gross negligence. Aetna Life & Cas. Co. v. Hampton State Bank, 497 S.W.2d 80 (Tex. Civ. App. 1973), writ ref’d n.r.e., (Oct. 10, 1973).

Nothing in Code definition of “good faith” suggests that, in addition to being honest, holder of negotiable instrument must exercise due care to be in good faith; and bank did act in good faith, and was holder in due course, although it failed to exercise ordinary care by violating its own rule of management when its teller cashed checks in question without managerial approval. Industrial Nat'l Bank v. Leo's Used Car Exchange, Inc., 362 Mass. 797, 291 N.E.2d 603, 1973 Mass. LEXIS 363 (Mass. 1973).

Definition of “good faith” as used in § 3-302(1) does not require that, in addition to being honest, holder must exercise due care. Industrial Nat'l Bank v. Leo's Used Car Exchange, Inc., 362 Mass. 797, 291 N.E.2d 603, 1973 Mass. LEXIS 363 (Mass. 1973).

When the UCC intends to apply a concept of “good faith” beyond its definition in UCC § 1-201, subd 19 as “honesty in fact”, a broader definition is provided, e.g. UCC § 2-103, subd 1(b), which adds the words “observance of reasonable commercial standards of fair dealing in the trade” to the definition of “good faith” as between merchants. Industrial Nat'l Bank v. Leo's Used Car Exchange, Inc., 362 Mass. 797, 291 N.E.2d 603, 1973 Mass. LEXIS 363 (Mass. 1973).

The phrase “in good faith”, as used in UCC § 4-404 refers to the general definition of good faith contained in UCC § 1-201, subd, 19. Advanced Alloys, Inc. v. Sergeant Steel Corp., 72 Misc. 2d 614, 340 N.Y.S.2d 266, 1973 N.Y. Misc. LEXIS 2273 (N.Y. Civ. Ct.), rev'd, 79 Misc. 2d 149, 360 N.Y.S.2d 142, 1973 N.Y. Misc. LEXIS 1264 (N.Y. App. Term 1973).

Drawee bank’s payment of 14-month-old check without making inquiry of drawer was in good faith under UCC § 1-201, subd 19 and thus permissible under UCC § 4-404 where good faith of drawee bank was not disputed. Advanced Alloys, Inc. v. Sergeant Steel Corp., 72 Misc. 2d 614, 340 N.Y.S.2d 266, 1973 N.Y. Misc. LEXIS 2273 (N.Y. Civ. Ct.), rev'd, 79 Misc. 2d 149, 360 N.Y.S.2d 142, 1973 N.Y. Misc. LEXIS 1264 (N.Y. App. Term 1973).

Code definition of “good faith” established subjective standards, that is, whether particular purchaser believed he was in good faith, not whether anyone else would have held same belief. Balon v. Cadillac Auto. Co., 113 N.H. 108, 303 A.2d 194, 1973 N.H. LEXIS 212 (N.H. 1973).

Requirements for establishing one’s self as “good faith” buyer vary depending on commercial status of purchaser; and individual who purchases tractor for his own personal use is not held to same degree of sophistication in ascertaining existence of security interest on that tractor as is merchant who regularly deals in business of buying and selling tractors. Swift v. J. I. Case Co., 266 So. 2d 379, 1972 Fla. App. LEXIS 6314 (Fla. Dist. Ct. App. 1st Dist.), cert. denied, 271 So. 2d 147, 1972 Fla. LEXIS 3104 (Fla. 1972).

The burden resting on a party to prove that it took a check in good faith and without notice of any defense is met if the trier of fact is persuaded that the existence of these facts is more probable than their nonexistence under UCC § 1-201(8). Oklahoma Nat'l Bank v. Equitable Credit Finance Co., 1971 OK 104, 489 P.2d 1331, 1971 Okla. LEXIS 318 (Okla. 1971).

Bank’s action in converting a transaction which clearly contemplated insurance, into an assignment which would have the effect of depriving the buyer of the waiver of subrogation provision, was not “good faith” as defined by UCC. Integrity Ins. Co. v. Davis, 116 N.J. Super. 417, 282 A.2d 452, 1971 N.J. Super. LEXIS 800 (Cty. Ct. 1971).

In a change from the NIL, the UCC test of good faith and notice is whether, from all the circumstances and facts known at the time, there was actual knowledge. Suit & Wells Equipment Co. v. Citizens Nat'l Bank, 263 Md. 133, 282 A.2d 109, 1971 Md. LEXIS 679 (Md. 1971).

Owner of leased equipment did not show lack of “good faith”, where owner failed, before trial, to specifically claim security interest rather than proceeding under general terms of lease; held, record does not indicate that owner thus had any intention to mislead attaching creditor. Stanley v. Fabricators, 459 P.2d 467, 1969 Alas. LEXIS 162 (Alaska 1969).

To succinct Code definition of “good faith” as “honesty in fact”, drafters of Code in Official Comment added that phrase “means at least what is here stated”; held, in short, “good faith” as used in Code stands for “honesty” and perhaps more. Star Credit Corp. v. Molina, 59 Misc. 2d 290, 298 N.Y.S.2d 570, 1969 N.Y. Misc. LEXIS 1705 (N.Y. Civ. Ct. 1969).

The mere fact a holder bank permitted its depositor to draw checks against uncollected funds represented by drafts at a time when its account was otherwise low was not itself evidence that the bank had failed to act in good faith. Farmers & Merchants Nat'l Bank v. Boardwalk Nat'l Bank, 101 N.J. Super. 528, 245 A.2d 35, 1968 N.J. Super. LEXIS 555 (App.Div.), cert. denied, 52 N.J. 492, 246 A.2d 452, 1968 N.J. LEXIS 499 (N.J. 1968).

A buyer who acquires property from one who has a voidable title must show that he was a “good faith purchaser for value”, which requires “honesty in fact and the observance of reasonable commercial standards of fair dealing”. Atlas Auto Rental Corp. v. Weisberg, 54 Misc. 2d 168, 281 N.Y.S.2d 400, 1967 N.Y. Misc. LEXIS 1388 (N.Y. Civ. Ct. 1967), disapproved, Candela v. Port Motors, 208 A.D.2d 486, 617 N.Y.S.2d 49, 1994 N.Y. App. Div. LEXIS 9380 (N.Y. App. Div. 2d Dep't 1994).

The holder of a forged check who took it in good faith and for value without notice of any infirmity in the instrument or defect in the title of the person negotiating it cannot be held to act in bad faith in presenting it to the drawee bank for payment. Citizens Bank v. National Bank of Commerce, 334 F.2d 257, 1964 U.S. App. LEXIS 5059 (10th Cir. Okla. 1964).

The “good faith” concept of the Negotiable Instruments Act is not substantially changed by the Uniform Commercial Code, and, although this section of the Code defines good faith as being honesty in fact, the failure of the holder to make inquiry of the payee or the maker of a note as to the satisfactory completion of the contract giving rise to the obligation will not constitute a lack of good faith in the absence of evidence that such failure is a divergence from common banking or commercial practice. First Nat'l Bank v. Anderson, 7 Pa. D. & C.2d 661, 1956 Pa. Dist. & Cnty. Dec. LEXIS 251 (Pa. C.P. 1956).

34. Holder.

Under UCC § 1-201(20), “holder” means a person who is in possession of an instrument, such as a note. Life Ins. Co. v. Gar-Dal, Inc., 570 S.W.2d 378, 1978 Tex. LEXIS 379 (Tex. 1978) (holding that affidavit that plaintiff was “sole owner and holder” of note sued on was uncontroverted and properly supported judgment on note).

In order to show right to summary judgment in suit on promissory note in which the defendant has made a general denial, the plaintiff must establish that he is the present legal owner or holder of such note. Under UCC § 1-201(20), a “holder” is the person in possession of a note drawn, issued, or indorsed to him, or to his order or to bearer, or in blank. And under UCC § 3-301, even if the holder is not the owner of the note, he may still enforce payment thereof in his own name. First Nat'l Bank v. Anderson, 7 Pa. D. & C.2d 661, 1956 Pa. Dist. & Cnty. Dec. LEXIS 251 (Pa. C.P. 1956).

Under definition of holder in UCC § 1-201(20), use of term “holder” with reference to note means “holder in possession” of such note. Lazidis v. Goidl, 564 S.W.2d 453, 1978 Tex. App. LEXIS 3050 (Tex. Civ. App. Dallas 1978) (holding that plaintiff was holder of note in suit, although plaintiff’s agent had physical possession of note).

The assignee of a collateral interest in the proceeds of promissory notes, who is in possession of the notes, which, however, were never indorsed over to its order, is not a holder of the notes and, therefore, has no status to effect an acceleration of payment under a clause therein authorizing such an acceleration at the option of the holder of the notes. Lipkowitz & Plaut v. Affrunti, 95 Misc. 2d 849, 407 N.Y.S.2d 1010, 1978 N.Y. Misc. LEXIS 2612 (N.Y. Sup. Ct. 1978).

Where (1) debtor sold corporate stock on July 25, 1974 to defendants for $180,000, and defendants executed promissory notes under pledge agreement securing payment of stock’s purchase price and delivered notes to escrowee, which also received the purchased stock, (2) debtor on March 19, 1975, with knowledge and consent of defendants and escrowee, assigned notes to creditor as collateral to secure payment of prior $60,000 debt, indorsed them to creditor’s order, and delivered them to creditor which retained possession of them until August 24, 1976, a date following date on which debtor had fully debt due creditor, (3) on November 5, 1975, when defendants still owed debtor $135,000 on notes and notes were still in creditor’s possession as collateral for payment of $28,000 balance then owed by debtor to creditor, debtor entered into agreement with plaintiff law firm and its client under which payments on prior debt owed by debtor to such client were extended, prospective lawsuit was settled, sums thus due to client were collateralized by assignment of debtor’s interest in stock-payment notes, and notes themselves and pledge agreement securing them were also assigned to plaintiff on behalf of its client, subject to prior collateral assignment in favor of debtor’s first creditor, (4) first creditor on August 24, 1976 acknowledged to escrowee that debtor had fully discharged debt due it, delivered stock-payment notes in suit to plaintiff law firm, but never indorsed notes to plaintiff’s order, (5) on August 25, 1976, plaintiff, defendants (purchasers of debtor’s stock), debtor, and escrowee executed written acknowledgements of debtor’s assignment of notes and pledge agreement to plaintiff, and plaintiff requested that it be paid next installment on notes, which was due on October 1, 1976, (5) on April 5, 1976, IRS assessed delinquent income-tax liability against debtor and filed notice of tax lien on August 4, 1976, (6) on October 1, 1976, escrowee paid installment payment due on notes to IRS, and (7) on October 5, 1976, plaintiff after due notice declared default on notes (because of failure to receive October 1, 1976 installment payment thereon) and under acceleration clause in notes demanded full payment thereof, court held (1) that plaintiff, as nominee for its client, acquired valid collateral assignment of proceeds of notes to extent that proceeds were not required to satisfy first creditor’s prior security interest therein, (2) that under UCC § 3-202(3), debtor’s indorsement and negotiation of notes to first creditor merely created partial assignment of notes’ proceeds and did not divest debtor of ultimate right to all proceeds not required to satisfy debt owed to first creditor, (3) that debtor’s remaining interest in notes’ proceeds was the interest that debtor had assigned plaintiff as collateral on November 5, 1975, and that such assignment, under UCC § 9-204(1), gave plaintiff valid security interest in debtor’s residuary interest in notes’ proceeds, (4) that plaintiff’s security interest in notes’ proceeds was not perfected until August 24, 1976, when it became perfected under UCC § 9-305 by possession of notes following first creditor’s delivery thereof to plaintiff, (5) that IRS tax lien was not superior to plaintiff’s perfected security interest in notes, since neither plaintiff nor its client had received any notice of such lien until September 20, 1976, and (6) that neither plaintiff not its client could accelerate unpaid balance due on notes, since plaintiff, as nominee for its client, was merely holder of security interest in notes and was not “holder” of notes within meaning of UCC § 1-201(20) because of first creditor’s failure to indorse them to plaintiff’s order. Lipkowitz & Plaut v. Affrunti, 95 Misc. 2d 849, 407 N.Y.S.2d 1010, 1978 N.Y. Misc. LEXIS 2612 (N.Y. Sup. Ct. 1978).

The Uniform Commercial Code, under UCC § 8-105(1), treats investment securities as negotiable instruments. The code also, in UCC § 1-201(20), defines a “holder” as one who is “in possession” of an investment security that is drawn, issued, or indorsed to him or to his order, or to bearer or in blank. Under the code’s definition of a holder, therefore, possession is a significant factor, and the possessor of an instrument is a “holder” without regard to the legality or propriety of his possession. Stewart Becker, Ltd. v. Horowitz, 94 Misc. 2d 766, 405 N.Y.S.2d 571, 1978 N.Y. Misc. LEXIS 2360 (N.Y. Sup. Ct. 1978).

In action on note, plaintiff, who had merely attached photocopy of note to complaint and incorporated it therein by reference, failed to establish for summary judgment purposes that she was holder of instrument. This requirement could have been established by showing, in accordance with definition of “holder” in UCC § 1-201(20), that plaintiff was in possession of instrument and that it had been issued or indorsed to her, or to her order, or to bearer or in blank. This requirement must be satisfied to protect maker from possibility of multiple judgments against her on same instrument through no fault of her own. Liles v. Myers, 38 N.C. App. 525, 248 S.E.2d 385, 1978 N.C. App. LEXIS 2231 (N.C. Ct. App. 1978).

Under UCC § 3-301, “ownership” of notes is not indispensable to “holdership.” In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (N.C. Ct. App. 1978) (holding that original payees of two notes were holders under UCC § 1-201(20) because they still had possession of notes).

Where bank prior to death of husband drew check at husband’s request that was chargeable to joint account of husband and wife, made payable to another bank, and intended to be used in business transaction, and where because of husband’s death check was never used in such transaction but was returned to drawer bank, indorsed “not used for the purpose intended,” and placed in account of wife and wife’s brother because wife had closed out joint account of husband and wife, (1) fact that check was not made payable to deceased husband or otherwise indorsed to him prevented him from qualifying as holder thereof under UCC § 1-201(20); (2) payee bank also did not qualify as holder because it never obtained possession of such check; and (3) husband’s estate acquired no right to funds represented by such check because such funds never lost their character as jointly held funds of husband and wife. In re Estate of Silvian, 347 So. 2d 632, 1977 Fla. App. LEXIS 15643 (Fla. Dist. Ct. App. 4th Dist. 1977).

In suit to recover on two promissory notes in plaintiff’s possession, plaintiff was not “holder” of notes within meaning of UCC § 1-201(20) where notes were not drawn, issued, or indorsed to her or to her order, or to bearer or in blank, and trial court erred in according plaintiff rights of holder under UCC § 3-301. Smathers v. Smathers, 34 N.C. App. 724, 239 S.E.2d 637, 1977 N.C. App. LEXIS 1802 (N.C. Ct. App. 1977).

Where creditor bank, on date loan was due and after being informed by debtor that debtor would default, set off credit balances in debtor’s accounts against amount of debt; where remittance check of debtor’s customer, pursuant to prior agreement between debtor and bank, was taken by bank from debtor’s post-office lockbox and indorsed and deposited in debtor’s account; where after depositing such check, bank then exercised alleged right of setoff against it; and where customer then issued stop-payment order on check and bank sued customer for payment thereof, alleging that it had acquired holder-in-due-course status as to such check and that its right to receive payment was not affected by debtor’s alleged failure to discharge contractual obligations to customer, (1) bank acted prematurely in setting off deposits in debtor’s accounts on date loan was due; (2) although such premature setoff arguably became operative on following day, it did not determine issue as to whether bank was entitled to payment on check; (3) bank was mere holder of check under UCC § 1-201(20) and not holder in due course under UCC § 3-302(1), since it did not give value for check under UCC § 3-303(b) and UCC § 4-208(1); (4) failure to give value stemmed from fact that bank, after customer issued stop-payment order on check, reversed its provisional credit of check to debtor’s account and thus reinstated that part of debtor’s obligation against which such credit was set off; and (5) since bank did not give value for check and thus was not holder in due course, it could not recover on check. Smathers v. Smathers, 34 N.C. App. 724, 239 S.E.2d 637, 1977 N.C. App. LEXIS 1802 (N.C. Ct. App. 1977).

Possessor of promissory notes, which were made payable to payee with name different from name of possessor and which were unendorsed by named payee, was entitled to recover on notes pursuant to UCC § 3-301, even though possessor was not a holder under UCC § 1-201(20), where evidence at trial established that name of payee was former name of possessor Lawson v. Finance America Private Brands, Inc., 537 S.W.2d 483, 1976 Tex. App. LEXIS 2823 (Tex. Civ. App. El Paso 1976).

Document purporting to transfer and assign promissory note which was never attached to note did not serve as effective endorsement of note under UCC § 3-202(2); since note was not issued or endorsed to assignee, assignee was not holder of note as defined in UCC § 1-201(20) and, not being holder, assignee could not possibly be holder in due course and assignment of note was therefore subject to defense of failure of consideration. Billas v. Dwyer, 140 Ga. App. 774, 232 S.E.2d 102, 1976 Ga. App. LEXIS 1627 (Ga. Ct. App. 1976).

Payee had no interest in cashier’s check which had been typed and signed but which was cancelled when bank learned that drawer company was being placed in bankruptcy since, under UCC § 3-409, check itself did not operate as assignment of funds and payee, who never took possession of check, could not qualify as holder under UCC § 1-201(2). Rex Smith Propane, Inc. v. National Bank of Commerce, 372 F. Supp. 499, 1974 U.S. Dist. LEXIS 9521 (N.D. Tex. 1974).

Assignee of promissory note qualified as “holder” under UCC § 1-201(20), but provision that judgment could be confessed “at any time hereafter” rendered note non-negotiable under UCC § 3-112(d) and outside scope of Code. Shatz v. Dunn, 18 Ill. App. 3d 390, 309 N.E.2d 702, 1974 Ill. App. LEXIS 2827 (Ill. App. Ct. 5th Dist. 1974).

Plaintiff-assignee of facsimile copy of promissory note was entitled to maintain action on note against defendant-maker, although plaintiff did not have possession of note, where bank that held note returned it to maker, though it had not been paid, and then subsequently prepared facsimile and assigned it to plaintiff. Plaintiff was not holder of note under UCC § 1-201(20), since he was never in possession of note, but he was transferee of note, though bank did not deliver it to him, and, as such, he could maintain action on note since maker had possession of note and note was in evidence. Scheid v. Shields, 269 Ore. 236, 524 P.2d 1209, 1974 Ore. LEXIS 378 (Or. 1974).

Where person who presented check to collecting bank did not have authority to negotiate check, collecting bank could not become holder of check based upon unauthorized endorsement, and hence could not become holder in due course. Thieme v. Seattle-First Nat'l Bank, 7 Wn. App. 845, 502 P.2d 1240, 1972 Wash. App. LEXIS 1057 (Wash. Ct. App. 1972).

Presenting bank could not become holder of cashier’s check based upon unauthorized indorsement of one claiming to be agent of payee. Thieme v. Seattle-First Nat'l Bank, 7 Wn. App. 845, 502 P.2d 1240, 1972 Wash. App. LEXIS 1057 (Wash. Ct. App. 1972).

As a holder within the meaning of UCC § 1-201 subd 20, an escrow agent established a prima facie case on maker’s dishonored check under UCC 3-307, subd 2, and it was no defense either that escrow agent could not himself sue on the check, or that the principal had failed to perform under the escrow agreement, where maker had prevented principal’s performance, and where escrow agent, who had acknowledged the receipt of cash, could sue on check as trustee for principal, or as promisee of third party beneficiary contract under CPLR § 1004. Helman v. Dixon, 71 Misc. 2d 1057, 338 N.Y.S.2d 139, 1972 N.Y. Misc. LEXIS 1377 (N.Y. Civ. Ct. 1972).

An escrow agent to whom a house buyer delivered a check to secure principal’s performance of repairs to new house under escrow agreement was a “holder” under UCC § 1-201 subd 20 and entitled to sue on subsequently dishonored check under CPLR 1004 not only as the promisee of a third party beneficiary contract, but also as trustee for principal. Helman v. Dixon, 71 Misc. 2d 1057, 338 N.Y.S.2d 139, 1972 N.Y. Misc. LEXIS 1377 (N.Y. Civ. Ct. 1972).

Draft payable to two payees was deposited by one payee without endorsement of other; held, bank did not become “holder” of draft and thus could not become holder in due course. Federal Deposit Ins. Corp. v. Marine Nat'l Bank, 431 F.2d 341, 1970 U.S. App. LEXIS 7724 (5th Cir. Fla. 1970).

UCC § 1-201(20) codifies pre-Code law that one in possession is “holder” of check. Thieme v. Seattle-First Nat'l Bank, 7 Wn. App. 845, 502 P.2d 1240, 1972 Wash. App. LEXIS 1057 (Wash. Ct. App. 1972).

Plaintiff was asked by subcontractor to discount note; note was made out payable to subcontractor; plaintiff endorsed note over to plaintiff’s bank and executed promissory note to order of bank to secure bank against loss; plaintiff gave subcontractor part of amount of note; held, plaintiff was “holder” of note. O. P. Ganjo, Inc. v. Tri-Urban Realty Co., 108 N.J. Super. 517, 261 A.2d 722, 1969 N.J. Super. LEXIS 350 (Law Div. 1969).

Where, at time of transaction allegedly constituting payment of note, there had been no indorsement of note to finance company which had already taken note as collateral, finance company was not “holder” of note since note had not been “drawn, issued or indorsed to him or to his order or to bearer or in blank”; therefore finance company could not be holder in due course of note. Northside Bldg. & Inv. Co. v. Finance Co. of America, 119 Ga. App. 131, 166 S.E.2d 608, 1969 Ga. App. LEXIS 1013 (Ga. Ct. App. 1969).

Where a promissory note is made payable to one named therein as attorney for plaintiffs but not endorsed to them by the attorney, plaintiffs may enforce payment as holders of the note. Bennett v. Cannon, 114 Ga. App. 479, 151 S.E.2d 828, 1966 Ga. App. LEXIS 806 (Ga. Ct. App. 1966).

One who obtained possession of a negotiable bill of lading is not a holder with power to divert it in the absence of an actual endorsement of the bill to it. Koreska v. United Cargo Corp., 23 A.D.2d 37, 258 N.Y.S.2d 432, 1965 N.Y. App. Div. LEXIS 4531 (N.Y. App. Div. 1st Dep't), vacated, 23 A.D.2d 734, 1965 N.Y. App. Div. LEXIS 4441 (N.Y. App. Div. 1st Dep't 1965).

A bank which accepts a check for collection and, for that purpose, acts as its depositor’s agent is also a holder of the check, and the fact that it does not own the item is immaterial insofar as its status as a holder is concerned. Citizens Nat'l Bank v. Ft. Lee Sav. & Loan Asso., 89 N.J. Super. 43, 213 A.2d 315, 1965 N.J. Super. LEXIS 274 (Law Div. 1965).

Indorsee who surrendered possession of dishonored checks to his indorser cannot be regarded as a “holder” of the instruments. Citizens Nat'l Bank v. Ft. Lee Sav. & Loan Asso., 89 N.J. Super. 43, 213 A.2d 315, 1965 N.J. Super. LEXIS 274 (Law Div. 1965).

A bank accepting a check from the payee for a deposit, crediting the amount thereof to the payee’s account and permitting him to withdraw the full amount thereof prior to notice of dishonor is a holder of a check, taking for value, and entitled to recover from the drawer thereon. Pazol v. Citizens Nat'l Bank, 110 Ga. App. 319, 138 S.E.2d 442, 1964 Ga. App. LEXIS 617 (Ga. Ct. App. 1964).

The freedom from the defense of prior equities afforded to a holder in due course is an extraordinary protection, which, although having its origin in the law of merchant, is closely akin to similar protection given in other types of cases by courts of equity; and running through all the authorities dealing with holders in due course is a principle, not always stated, that he who seeks the protection given one in that position must have dealt fairly and honestly in acquiring the instrument in controversy and in regard to the rights of all prior parties, this is, the kind of good faith which the law demands, and the principle is closely analogous to the equitable doctrine of clean hands. Norman v. World Wide Distributors, Inc., 202 Pa. Super. 53, 195 A.2d 115, 1963 Pa. Super. LEXIS 503 (Pa. Super. Ct. 1963).

35. Insolvency proceedings.

A Chapter XI proceeding is, of course, designed and intended to rehabilitate the estate of the debtor and hence clearly comes within the UCC § 1-201(22) definition of “insolvency proceedings.” Morrison Steel Co. v. Gurtman, 113 N.J. Super. 474, 274 A.2d 306, 1971 N.J. Super. LEXIS 712 (App.Div. 1971).

36. Insolvent.

Where seller sought to reclaim goods it had shipped to buyer more than ten days before buyer filed petition for bankruptcy, mere fact that buyer gave seller two checks which were returned for insufficient funds (NSF) did not make buyer “insolvent” as defined by UCC § 1-201(23) nor did the two NSF checks constitute a misrepresentation of solvency “in writing” within three months of buyer’s receipt of shipment, entitling seller to reclaim goods under UCC § 2-702(2), where there was evidence to show that seller did not rely upon NSF checks as representations of solvency, but relied primarily, if not entirely, upon representation that payment for shipment would be made out of special escrow account In re Creative Bldgs., Inc., 498 F.2d 1, 1974 U.S. App. LEXIS 7980 (7th Cir. Ill. 1974).

Where the sellers of automobiles to a buyer who disposed of them through an auction company later found the checks received by them from the buyer in payment for the cars were dishonored because of the auction company’s actions in stopping payments on checks previously delivered to the buyer and by withholding from him the proceeds derived from the sales of the sellers’ cars, the sellers had a right of reclamation of their property had it remained in the buyer’s hands either under § 2-702 or § 2-507 since the auction company’s action had in effect rendered the car buyer insolvent, and although the cars had been resold at auction the sellers’ rights survived the resale and, on equitable principles, attached to the proceeds of the sales in the hands of the auction company. Greater Louisville Auto Auction, Inc. v. Ogle Buick, Inc., 387 S.W.2d 17, 1965 Ky. LEXIS 457 (Ky. 1965).

37. Money.

Federal reserve notes are money and therefore not within the scope of Article 3 of the Uniform Commercial Code. Commonwealth v. Saville, 353 Mass. 458, 233 N.E.2d 9, 1968 Mass. LEXIS 666 (Mass. 1967).

United States coins having a numismatic value in excess of the value expressed on their face and pledged as collateral to secure a bank loan are to be considered as “goods” within the meaning of the UCC, and not solely as a medium of exchange. In re Midas Coin Co., 264 F. Supp. 193, 1967 U.S. Dist. LEXIS 11603 (E.D. Mo. 1967), aff'd, 387 F.2d 118, 1968 U.S. App. LEXIS 8563 (8th Cir. Mo. 1968).

38. Organization.

In action to determine priority of right to farm equipment (collateral) as between bankruptcy trustee and assignee-creditor with allegedly perfected security interest, where (1) partnership-debtor bought farm equipment from seller on October 25, 1974, (2) seller filed financing statement in Tallahatchie County, Mississippi, instead of Sunflower County, Mississippi, where partnership’s property was located, (3) seller subsequently assigned sale contract and security agreement to plaintiff assignee-creditor, and (4) debtor thereafter became bankrupt, court held (1) that partnership can be debtor because (1) UCC § 9-105(1)(d) defines debtor as “person” who owes payment of secured obligation, (b) “person” under UCC § 1-201(30) includes “organization,” and (c) “organization” under UCC § 1-201(28) includes “partnership,” (2) that debtor-partnership’s residence under UCC § 9-401(6) was its place of business, which was in Sunflower County, Mississippi, and not Tallahatchie County, Mississippi, (3) that under UCC § 9-401(1)(a), plaintiff’s financing statement should have been filed in county of debtor’s residence (Sunflower County), and (4) that as a result, plaintiff’s security interest was unperfected because it was filed in wrong county. Loucks v. Albuquerque Nat'l Bank, 1966-NMSC-176, 76 N.M. 735, 418 P.2d 191, 1966 N.M. LEXIS 2731 (N.M. 1966).

The UCC expressly regards a partnership as a legal entity. Loucks v. Albuquerque Nat'l Bank, 1966-NMSC-176, 76 N.M. 735, 418 P.2d 191, 1966 N.M. LEXIS 2731 (N.M. 1966).

39. Party.

Neither lady acquiring full interest in mortgaged property nor her father acquiring security interest from her assumed or existing note or mortgage became guarantor on same; held, neither were “parties” to mortgage transaction and could not invoke defenses relating to impairment of collateral in foreclosure action. Lakeshore Commercial Finance Corp. v. Bradford Arms Corp., 45 Wis. 2d 313, 173 N.W.2d 165, 1970 Wisc. LEXIS 1121 (Wis. 1970).

40. Person.

The notation “Food for Love Acc’t” does not indicate the name of a “person” as defined in UCC § 1-201, but signifies an account and suggests a direction to the drawee rather than a notice to the payee alerting it to any representational capacity in which the signature was executed. Star Dairy, Inc. v. Roberts, 37 A.D.2d 1038, 326 N.Y.S.2d 85, 1971 N.Y. App. Div. LEXIS 2941 (N.Y. App. Div. 3d Dep't 1971).

41. Purchase.

In light of the definition of “purchase” in subsection (32), physical delivery of debentures was required in order to convert them into stock pursuant to a subscription agreement. First Southwest Corp. v. Lampton, 724 So. 2d 988, 1998 Miss. App. LEXIS 1060 (Miss. Ct. App. 1998).

The term “purchaser of a limited interest” in UCC § 3-302(4) does not refer only to holders of security interest in negotiable property, but comprehends those who become purchasers of such property by any of the means specified in UCC § 1-201(32). Corporacion Venezolana de Fomento v. Vintero Sales Corp., 452 F. Supp. 1108, 1978 U.S. Dist. LEXIS 18398 (S.D.N.Y. 1978).

In action for seller’s breach of warranty of good title to motor home purchased by plaintiff, where (1) original owner of home rented it for 13 days to thief who “drove off into the sunset” and was never again seen by owner, (2) thief thereafter obtained Alabama registration for home, and also Nebraska and Indiana certificates of title therefor, before trading it in to defendant dealer in Indiana as part payment for truck and trailer, (3) plaintiff purchased home from defendants, who gave plaintiff certificate of title thereto, (4) Indiana state police seized home from plaintiff and surrendered it to original owner’s insurer, (5) home’s serial number proved to have been stolen, and (6) such false identification number appeared on all documents respecting home that thief had obtained in Alabama, Nebraska, and Indiana, court held (1) that rental transaction between original owner and thief constituted a “purchase“ under UCC §§ 2-403(1) and § 1-201(32), since thief had acquired possessory interest in home by renting it, (2) thief did not transfer good title to defendant, as good-faith purchaser for value, since thief’s title to home was void and not voidable under UCC § 2-403(1); (4) since defendant had no good title to convey to plaintiff, defendant breached its warranty of title under UCC § 2-312(1) and (5) evidence supported damages awarded plaintiff under UCC § 2-714(2) and (3). McDonald's Chevrolet, Inc. v. Johnson, 176 Ind. App. 399, 376 N.E.2d 106, 1978 Ind. App. LEXIS 908 (Ind. Ct. App. 1978).

Under UCC § 1-201(32), “purchase” includes any voluntary transaction that creates an interest in property and does not necessarily require transfer of title. Bradley Grain Co. v. Peterson, 267 N.W.2d 836, 1978 S.D. LEXIS 183 (S.D. 1978).

Where seller, as supplier of goods on credit, demanded return of goods from buyer within ten days upon discovery of buyer’s insolvency pursuant to UCC § 2-702 and where bank had prior perfected security interest in all of buyer’s inventory, then owned or thereafter acquired, bank, under definition of UCC § 1-201(32,33) qualified as good faith purchaser making it exempt from seller’s right to reclaim under UCC § 2-702(3) and bank’s perfected security interest had priority over seller as seller failed to perfect its claim by filing as required by UCC § 9-312. House of Stainless, Inc. v. Marshall & Ilsley Bank, 75 Wis. 2d 264, 249 N.W.2d 561, 1977 Wisc. LEXIS 1419 (Wis. 1977).

Under UCC § 9-105(1)(i), a secured party under Article 9 is a “purchaser” within meaning of UCC § 1-201(33); thus, where credit corporation had prior valid security interest in automobile dealer’s inventory, where automobile wholesaler sold and delivered used cars and trucks to dealer with unencumbered certificates of title, but where dealer’s checks in payment for vehicles were dishonored, under UCC § 2-403, dealer could transfer good title to “good faith purchaser for value,” despite fact dealer tendered, for purchase of vehicles, checks which were subsequently dishonored, and, hence, credit corporation’s security interest in automobiles delivered to dealer was superior to wholesaler’s interest. Swets Motor Sales, Inc. v. Pruisner, 236 N.W.2d 299, 1975 Iowa Sup. LEXIS 1076 (Iowa 1975).

In action to recover value of stock certificates which were stolen from broker, accepted by bank as collateral for loan, and subsequently sold to satisfy debt, testimony by bank president that, inter alia, prospective borrower offered certificates as collateral for loan, that certificates were issued to and endorsed by broker with transferee’s name left blank, that borrower executed affidavit stating that he was rightful owner of certificates, that bank contacted issuing corporation and verified listing of stock in broker’s name, and that bank sent certificates with borrower’s name added as transferee to issuing corporation for issuance of new certificates in borrower’s name, which were issued and held by bank, established prima case that bank was bona fide purchaser of stock certificates under UCC § 8-302; bank became “purchaser for value” when it accepted stock certificates as collateral. Fidelity & Casualty Co. v. Key Biscayne Bank, 501 F.2d 1322, 1974 U.S. App. LEXIS 6614 (5th Cir. Fla. 1974).

In action between lender who held unperfected security interest in automobiles and car dealer who sold collateral to debtor, seller’s right to reclaim goods under UCC § 2-702(3), when buyer’s check for purchase price was dishonored by bank, did not have priority over lender’s unperfected security interest in automobiles which arose when lender, who qualified as “purchaser” under UCC § 1-201, acquired certificates of title; under UCC § 2-403(1), once certificates of title were delivered, debtor acquired voidable title and could convey enforceable right in automobiles to lender as good faith purchaser for value, even though debtor’s check to seller of automobiles was later dishonored. Guy Martin Buick, Inc. v. Colorado Springs Nat'l Bank, 32 Colo. App. 235, 511 P.2d 912 (Colo. Ct. App. 1973), aff'd, 184 Colo. 166, 519 P.2d 354 (Colo. 1974).

Agreement for rental of railroad station was clearly lease-purchase agreement intended for security, since railroad was to become owner of building at end of term of agreement for no additional consideration. In re New Hope & I. R. Co., 353 F. Supp. 608, 1973 U.S. Dist. LEXIS 15352 (E.D. Pa. 1973).

In action arising when vice-president of defendant bank who was authorized to sign bank’s serially numbered certificate of deposit forms acquired blank certificate of deposit, inserted his name as payee, signed instrument on behalf of defendant bank with name of another employee authorized to sign certificates of deposit, and then obtained $20,000 loan from plaintiff bank with certificate of deposit given as security for loan, certificate of deposit was investment security governed by UCC § 8-102 even though it also met requirements of UCC § 3-103, where certificate was issued in registered form, was one of series, and evidenced obligation of issuer by acknowledging obligation to pay depositor specified sum of money upon presentment at maturity; under UCC §§ 1-201 and 8-205, plaintiff bank was purchaser for value without notice of certificate of deposit and unauthorized signature was effective in its favor where vice-president was employee of issuer entrusted with responsible handling of security who placed unauthorized signature on security in course of its issue. Victory Nat'l Bank v. Oklahoma State Bank, 1973 OK 161, 520 P.2d 675, 1973 Okla. LEXIS 261 (Okla. 1973).

Defendant-bank was liable to plaintiff, as subrogee of true owner of federal home loan bond made payable to bearer, where bank took bond from depositor seven months after its maturity date, made immediate telephonic inquiry of Federal Reserve Bank to determine if bond could be redeemed, credited depositor’s account with face value of instrument, and obtained payment on bond: (1) in dealing with bond, defendant-bank became “purchaser” as defined by UCC § 1-201, was not acting merely as agent pursuant to instructions under UCC § 8-318, and was subject to plaintiff’s adverse claim unless it could show it was bona fide purchaser, i.e., purchaser for value in good faith and without notice of any adverse claim; (2) defendant-bank did not acquire rights of bona fide purchaser under “shelter” provision UCC § 8-301(1) since it failed to prove that its transferor was good faith purchaser for value; (3) and by acquiring bond after six months from its date of payment, defendant bank purchased with notice of adverse claim under UCC § 8-305 and therefore could not be bona fide purchaser, notwithstanding defendant’s claim that by making immediate inquiry of Federal Reserve Bank it discharged its burden as to presumed notice of existence of adverse claim created by staleness of instrument. Phoenix Ins. Co. v. National Bank & Trust Co., 366 F. Supp. 340, 1972 U.S. Dist. LEXIS 12799 (M.D. Pa. 1972), aff'd, 485 F.2d 681 (3d Cir. Pa. 1973).

Automobile dealer who obtained automobiles from seller in exchange for two uncollectible checks previously issued to dealer by seller was “purchaser for value” of automobiles. National Car Rental v. Fox, 18 Ariz. App. 160, 500 P.2d 1148, 1972 Ariz. App. LEXIS 809 (Ariz. Ct. App. 1972).

Under the definition of purchase in subsec. 32, the transaction must be a voluntary one, and a purchase by a judgment creditor at an execution sale to enforce his judgment does not qualify as such a voluntary transaction. National Shawmut Bank v. Vera, 352 Mass. 11, 223 N.E.2d 515, 1967 Mass. LEXIS 752 (Mass. 1967).

42. Purchaser.

Persons who purchase stock from corporate officer who had converted such stock are “purchasers” within meaning of UCC § 1-201. Green v. Carbaugh, 465 F. Supp. 372, 1979 U.S. Dist. LEXIS 15249 (E.D. Va. 1979).

43. Representative.

In action to recover on contract of guaranty on behalf of corporation in which guarantors were officers and thus “representatives” under UCC § 1-201(35), guarantors were personally liable on contract of guaranty under UCC § 3-403, notwithstanding their claims that they signed in representative capacity and that their intention at the time of signing guaranty was not to be bound in their individual capacities, (1) where guaranty did not name any person represented and (2) where there was evidence that bank officials explained to guarantors in detail that personal guaranty would be required of them and that bank relied on their personal obligation in making loan to corporation; burden of proof was on guarantors under UCC § 3-403 to “otherwise establish” that they were not personally liable. Southern Nat'l Bank v. Pocock, 29 N.C. App. 52, 223 S.E.2d 518, 1976 N.C. App. LEXIS 2376 (N.C. Ct. App.), cert. denied, 290 N.C. 94, 225 S.E.2d 324, 1976 N.C. LEXIS 1028 (N.C. 1976).

The definition of “representative” includes an officer of a corporation. Stone & Webster Engineering Corp. v. First Nat'l Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358, 1962 Mass. LEXIS 638 (Mass. 1962).

44. Rights.

Intendment of UCC notice definition would seem to be an attempt to prevent those dealing in the commercial world from obtaining various rights when, from a reasonable inquiry into the true facts, that person would have discovered a fact which prevented him from obtaining the rights which he was seeking. Winter & Hirsch, Inc. v. Passarelli, 122 Ill. App. 2d 372, 259 N.E.2d 312, 1970 Ill. App. LEXIS 1386 (Ill. App. Ct. 1st Dist. 1970).

Notice that a party intends to consider a contract at an end or terminated amounts to a revocation of acceptance, and preserved to the buyer the remedies afforded by § 2-711. Lanners v. Whitney, 247 Ore. 223, 428 P.2d 398, 1967 Ore. LEXIS 465 (Or. 1967).

45. Send.

In action for alleged breach by defendant airport board of one-year written agreement under which plaintiff was to serve as “fixed-base” operator of airport in return for use of airport terminal and other facilities, where (1) prior to end of agreement’s one-year term, plaintiff attended board meeting at which board approved motion not to renew parties’ agreement; and (2) during plaintiff’s subsequent out-of-state absence, board sent (a) certified letter containing notice of agreement’s termination to plaintiff’s business address, and (b) hand-delivered letter containing similar notice that was not accepted by employee at plaintiff’s business office, court held, on granting board’s motion for summary judgment, (1) that agreement in suit could be described as either “lease of real property” or “contract for services”; (2) that although neither type of contract was explicitly covered by Uniform Commercial Code, code nevertheless constituted persuasive authority with respect to agreements like that in suit; (3) that as a result, provisions of UCC § 1-201(26) and (27), which deal with giving of notice, and provisions of UCC § 1-201(38), which define term “send,” would be applied by analogy; (4) that under such provisions, fact that plaintiff was given copy of board meeting minutes that authorized termination of his contract was sufficient to terminate such agreement, even if court should adopt “actual-delivery-to-person” test urged by plaintiff; (5) that (a) mailing of registered letter to plaintiff’s business address was proper “sending” under UCC § 1-201(38), (b) act of mailing was “giving of notice” under UCC § 1-201(26), and (c) deposit of notice for delivery was proper “receipt” of notification under UCC § 1-201(26)(a); (6) that hand delivery of second letter containing notice of plaintiff’s termination, which was left on desk of plaintiff’s employee over her protest, constituted proper “giving” and “receipt” of notice under UCC § 1-201(26) and also proper “sending” under UCC § 1-201(38); and (7) that because plaintiff’s termination was authorized by board and notice of termination was properly given, board was not liable for breach of contract. Logan v. Corinth-Alcorn County Joint Airport Bd., 665 F. Supp. 506, 1987 U.S. Dist. LEXIS 6609 (N.D. Miss. 1987).

Notice that is received has been “sent”, even though notice is not written. Crest Inv. Trust, Inc. v. Alatzas, 264 Md. 571, 287 A.2d 261, 1972 Md. LEXIS 1172 (Md. 1972).

46. Signature.

A purchaser’s letter was a sufficient “writing in confirmation of the contract and sufficient against the sender” within the meaning of §75-2-201(2), in spite of the seller’s assertion that a confirmatory writing must be manually signed, where the letter was on the purchaser’s letterhead which bore his address, and the letter referred to and recited the contract terms, requested execution of the previously-delivered forward contract, and included the typewritten name of the sender on the line where a manual signature is usually made. Dawkins & Co. v. L & L Planting Co., 602 So. 2d 838, 1992 Miss. LEXIS 377 (Miss. 1992).

Where offer to purchase shares of stock and offeror’s transmittal letter expressly and unambiguously required signing of transmittal letter in order to effectuate proper acceptance of offer, offeree’s failure to sign letter resulted in nonacceptance of offer. In such case, moreover, mere presence of brokerage firm’s name in blank space for registered owner (offeree) in transmittal letter did not operate as owner’s signature under UCC § 1-201(39), where secretary who prepared letter testified that that was not her intent in inserting brokerage firm’s name in such space. Kroeze v. Chloride Group, Ltd., 572 F.2d 1099, 1978 U.S. App. LEXIS 11224 (5th Cir. Miss. 1978).

Employee’s typewritten and handwritten initials on documents contained in benefit file where employee designations of retirement plan beneficiary were contained, did not constitute signature of employee under provisions of UCC §§ 1-201(39) and Mohawk Airlines, Inc. v. Peach, 61 A.D.2d 346, 402 N.Y.S.2d 496, 1978 N.Y. App. Div. LEXIS 9744 (N.Y. App. Div. 4th Dep't 1978).

Where contract between supplier and contractor was orally modified and where supplier sent letter of confirmation to contractor who did not object thereto, claim for modified price of additional materials was not barred by UCC § 2-201; typewritten signature on letter of confirmation sent by supplier met definition of “signed” under UCC § 1-201(39). A & G Constr. Co. v. Reid Bros. Logging Co., 547 P.2d 1207, 1976 Alas. LEXIS 376 (Alaska 1976).

In action brought by buyer of automobile against seller auction company for breach of warranty of title to automobile, instrument revealing intention of auction company to make warranty of title was “signed” within meaning of UCC § 1-201(39) where bill of sale and warranty of title were printed with name under which sellers did business. Evans v. Moore, 131 Ga. App. 169, 205 S.E.2d 507, 1974 Ga. App. LEXIS 1359 (Ga. Ct. App. 1974).

Where plaintiff’s office manager generally made deposits for it at bank but instead of depositing 35 checks as she had been instructed to do, she drew cash on them and did not account to the plaintiff for such money, and each of the checks had affixed thereto the blank rubber stamp indorsement of the plaintiff, such blank indorsement constituted an authorized indorsement, and when bank delivered cash to the office manager instead of depositing the proceeds from the checks to plaintiff’s account, the bank was not guilty of conversion. Palmer & Ray Dental Supply, Inc. v. First Nat'l Bank, 477 S.W.2d 954, 1972 Tex. App. LEXIS 2071 (Tex. Civ. App. Eastland 1972).

Where as confirmation statement securities dealer took standard printed form containing its company symbol, address and other information in print at top and completed various labeled blank spaces or blocks with appropriate information regarding transaction in question, and addressed and mailed completed statement to customer, finding would have been authorized, if not demanded, that dealer adopted his printed name with present intention to authenticate writing and that writing was sufficient against dealer under UCC § 8-319(a). Kohlmeyer & Co. v. Bowen, 126 Ga. App. 700, 192 S.E.2d 400, 1972 Ga. App. LEXIS 1255 (Ga. Ct. App. 1972).

Term “signed” as defined by UCC § 1-201(39) includes any symbol executed or adopted by party with present intention to authenticate writing; authentication may be printed, stamped or written, and may be on any part of document. Southwest Engineering Co. v. Martin Tractor Co., 205 Kan. 684, 473 P.2d 18, 1970 Kan. LEXIS 337 (Kan. 1970).

Where a creditor’s assistant treasurer intended to sign a financing statement but through inadvertence filed the statement without signing it, the typed words of the creditor’s name were not an intended use of a symbol as a signature and the financing statement was not “signed” within the Code § 1-201(39) definition nor within the Code § 9-402(1) requirement; even though a search of the town clerk’s records would have disclosed the unsigned financing statement and the name and address of the secured party as typed in the blank space, the “unsigned” statement did not “substantially comply” with the Code requirements under § Maine League Federal Credit Union v. Atlantic Motors, 250 A.2d 497, 1969 Me. LEXIS 243 (Me. 1969).

The act of typing the mortgagee’s name in the body of the financing statement, coupled with the mortgagee’s subsequent act or filing the statement, sufficiently indicated his intention to authenticate his statement and constitute a compliance with this subparagraph of the section despite the fact that the mortgagee did not subscribe the instrument. Benedict v. Lebowitz, 346 F.2d 120, 1965 U.S. App. LEXIS 5421 (2d Cir. Conn. 1965).

47. Surety.

Parties to note become sureties by guaranteeing payment of note. West Point Corp. v. New North Mississippi Federal Sav. & Loan Asso., 506 So. 2d 241, 1986 Miss. LEXIS 2854 (Miss. 1986).

Difference, if any, between “guaranty” and “surety” has been fused, at least for purposes of UCC, by § 1-201(40) which provides that “surety” includes “guarantor”. Kennedy v. Thruway Service City, Inc., 133 Ga. App. 858, 212 S.E.2d 492, 1975 Ga. App. LEXIS 2313 (Ga. Ct. App. 1975).

Defense of usury was available to guarantor of note where execution of guarantee was not separate transaction from loan and money would not have been loaned except for guarantee by guarantor to pay payee face amount of notes. Ammerman v. Miller, 488 F.2d 1285, 159 U.S. App. D.C. 385, 1973 U.S. App. LEXIS 7350 (D.C. Cir. 1973).

48. Unauthorized signature or indorsement.

Under UCC § 1-201(43), a forged indorsement is of necessity an unauthorized indorsement. Seattle-First Nat'l Bank v. Pacific Nat'l Bank, 22 Wn. App. 46, 587 P.2d 617, 1978 Wash. App. LEXIS 2759 (Wash. Ct. App. 1978).

Under UCC § 8-311(a), the true owner of an investment security, with certain exceptions, may assert the ineffectiveness of an “unauthorized indorsement” that appears on pledged securities against a bona-fide purchaser, unless the bona-fide purchaser has received new, reissued, or re-registered securities from the issuer. Under UCC § 1-201(43), the “unauthorized indorsement” referred to in UCC § 8-311 “means one made without actual, implied, or apparent authority and includes a forgery.” Ogilvie v. Idaho Bank & Trust Co., 99 Idaho 361, 582 P.2d 215, 1978 Ida. LEXIS 428 (Idaho 1978).

There was sufficient evidence to raise question of fact as to whether endorser had actual, apparent or implied authority to endorse three checks on behalf of corporate payee where, inter alia, endorser had authority to pick up checks from various customers of payee, including customer who drew checks in question, solicit jobs and make bids on contracts, sign his own name to business letters on payee’s stationary, and make deposits for payee in its bank account. W. R. Grimshaw Co. v. First Nat'l Bank & Trust Co., 1977 OK 28, 563 P.2d 117, 1977 Okla. LEXIS 470 (Okla. 1977).

Where three-man law partnership was dissolved when one partner left firm but other two partners continued practice under new partnership, where bank account of former partnership was kept open for purpose of depositing receivables of former firm, where check made payable to withdrawn partner and one of his former partners was received by new partnership, bookkeeper rubber-stamped check with indorsement of former partnership, bank deposited proceeds in former partnership account, and where new partnership subsequently withdrew money from former partnership account and withdrawn partner sued bank and former partner alleging conversion of check, judgment in favor of bank and former partner was upheld on two grounds: (1) Since indorsement may be made by agent under UCC § 3-403, and agent’s authority may be actual, implied or apparent under UCC § 1-201(43), there was sufficient evidence to support conclusion that apparent authority existed for affixing rubber stamp in lieu of withdrawn partner’s signature; (2) Record further supported defense by bank predicated upon UCC § 3-419(3), since there was expert testimony to effect that under circumstances handling of check was in accord with reasonable commercial standards and, although bank knew former partnership had dissolved, it was logical for its account to be kept open for purpose of depositing fees which were subsequently collected for services rendered by old firm. Keane v. Pan American Bank, 309 So. 2d 579, 1975 Fla. App. LEXIS 14420 (Fla. Dist. Ct. App. 2d Dist. 1975).

The term “unauthorized signature” includes a forgery. Gast v. American Casualty Co., 99 N.J. Super. 538, 240 A.2d 682, 1968 N.J. Super. LEXIS 675 (App.Div. 1968).

In a case where forged indorsements were placed upon a check, it was said that the forged indorsements were wholly inoperative as the signature of the payee under §§ 3-404(1) and 1-201(43), and that this was so both as to restrictive indorsements for deposit under § 3-205(c) and as to indorsements in blank under § Stone & Webster Engineering Corp. v. First Nat'l Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358, 1962 Mass. LEXIS 638 (Mass. 1962).

49. Warehouse receipt.

Warehouse receipt is document of title. Lofton v. Mooney, 452 S.W.2d 617, 1970 Ky. LEXIS 370 (Ky. 1970).

A forged delivery order is neither a “document of title” nor a warehouse receipt under the provisions of this section because it cannot be said to have been issued in the regular course of business or financing, nor can it be treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the good it covers. David Crystal, Inc. v. Cunard S.S. Co., 223 F. Supp. 273, 1963 U.S. Dist. LEXIS 7867 (S.D.N.Y. 1963), aff'd, 339 F.2d 295, 1964 U.S. App. LEXIS 3630 (2d Cir. N.Y. 1964).

50. Writing.

Where plaintiff entered into oral contracts with defendant cotton growers for sale of their cotton crops, each involving more than $500 worth of cotton: (1) under UCC §§ 2-105 and 2-107, sale of cotton was sale of goods and, under UCC § 1-201, was not enforceable unless there was writing sufficient to indicate contract for sale had been made, signed by party against whom enforcement was sought; (2) oral contracts between plaintiff and defendants did not come within agency or broker exception to statute of frauds where there were two separate, independent sets of contracts under which defendants agreed to sell to plaintiff, and plaintiff independently contracted to sell to mills; (3) although exception to statute of frauds exists under UCC § 2-201(3)(b) if party against whom enforcement is sought admits in his pleadings, testimony or otherwise in court that contracts for sale was made, such exception did not apply in present case since defendants denied under oath that agreement for sale was made with plaintiff and, although trial court made credibility determination adverse to defendants’ testimony, such finding did not constitute finding that ‘admission‘ exception applied; (4) defendants were not estopped to assert defense of statute of frauds merely because plaintiff had acted in reliance on oral agreement. Cox v. Cox, 292 Ala. 106, 289 So. 2d 609, 1974 Ala. LEXIS 1027 (Ala. 1974).

§ 75-1-202. Notice; knowledge.

Subject to subsection (f), a person has “notice” of a fact if the person:

  1. Has actual knowledge of it;
  2. Has received a notice or notification of it; or
  3. From all the facts and circumstances known to the person at the time in question, has reason to know that it exists.

“Knowledge” means actual knowledge.“Knows” has a corresponding meaning.

“Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know.

A person “notifies” or “gives” a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.

Subject to subsection (f), a person “receives” a notice or notification when:

It comes to that person’s attention; or

It is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.

Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual’s attention if the organization had exercised due diligence.An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines.Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual’s regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

HISTORY: Former §75-1-202 [Codes, 1942, § 41A:1-202; Laws, 1966, ch. 316, § 1-202, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions at §75-1-307 enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-202 is derived from former §75-1-201(25)-(27) [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Application of rules applicable to receipt of notice stated in this section to determination of time payment order is received, see §75-4A-106.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-201.

6. Notice.

7. Notifying or giving notice.

8. Notice received by organization.

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-201.

6. Notice.

In action for alleged breach by defendant airport board of one-year written agreement under which plaintiff was to serve as “fixed-base” operator of airport in return for use of airport terminal and other facilities, where (1) prior to end of agreement’s one-year term, plaintiff attended board meeting at which board approved motion not to renew parties’ agreement; and (2) during plaintiff’s subsequent out-of-state absence, board sent (a) certified letter containing notice of agreement’s termination to plaintiff’s business address, and (b) hand-delivered letter containing similar notice that was not accepted by employee at plaintiff’s business office, court held, on granting board’s motion for summary judgment, (1) that agreement in suit could be described as either “lease of real property” or “contract for services”; (2) that although neither type of contract was explicitly covered by Uniform Commercial Code, code nevertheless constituted persuasive authority with respect to agreements like that in suit; (3) that as a result, provisions of UCC §75-1-201(26) and (27), which deal with giving of notice, and provisions of UCC §75-1-201(38), which define term “send,” would be applied by analogy; (4) that under such provisions, fact that plaintiff was given copy of board meeting minutes that authorized termination of his contract was sufficient to terminate such agreement, even if court should adopt “actual-delivery-to-person” test urged by plaintiff; (5) that (a) mailing of registered letter to plaintiff’s business address was proper “sending” under UCC §75-1-201(38), (b) act of mailing was “giving of notice” under UCC §75-1-201(26), and (c) deposit of notice for delivery was proper “receipt” of notification under UCC §75-1-201(26)(a); (6) that hand delivery of second letter containing notice of plaintiff’s termination, which was left on desk of plaintiff’s employee over her protest, constituted proper “giving” and “receipt” of notice under UCC § 75-1-201(26) and also proper “sending” under UCC § 75-1-201(38); and (7) that because plaintiff’s termination was authorized by board and notice of termination was properly given, board was not liable for breach of contract. Logan v. Corinth-Alcorn County Joint Airport Bd., 665 F. Supp. 506, 1987 U.S. Dist. LEXIS 6609 (N.D. Miss. 1987).

Account debtor did not receive sufficient notice of assignment of account and therefore was authorized to continue making payments to assignor, under §75-9-318(3), where account debtor, who was farmer, was shown letter describing assignment while out in rice field without his reading glasses, and he signed it with understanding that it was routine account verification, where account debtor was not given copy of letter, where letter neither explicitly stated that account had been assigned nor identified which of account debtor’s corporate accounts with assignor was involved, and where, over course of one year or more, account debtor’s corporations paid over $50,000 to assignor by checks made payable solely to assignor, and assignee never complained during this period about way payments were made. Warrington v. Dawson, 798 F.2d 1533, 1986 U.S. App. LEXIS 29812 (5th Cir. Miss. 1986).

Under UCC § 9-504(3), requiring that notice of intended sale of collateral must be “sent” to debtor, and § 1-201(38), defining word “send,” notification of the sale must be in writing. Such written notice will be sufficient under UCC § 9-504(3) if it is either personally delivered to the debtor or sent by mail to the debtor’s address. In the latter case, whether or not the debtor receives it will not defeat its sufficiency. McKee v. Mississippi Bank & Trust Co., 366 So. 2d 234, 1979 Miss. LEXIS 2196 (Miss. 1979).

Under UCC §§ 8-304 and 1-201(25), either actual or constructive notice will prevent one from obtaining the status of a bona fide purchaser. Oscar Gruss & Son v. First State Bank, 582 F.2d 424, 1978 U.S. App. LEXIS 9592 (7th Cir. Ill. 1978).

Absent actual knowledge or reason to know (see UCC § 1-201(25)), a depositary bank has no affirmative duty to inquire whether a defense exists against a check deposited with it. Frantz v. First Nat'l Bank, 584 P.2d 1125, 1978 Alas. LEXIS 575 (Alaska 1978).

UCC § 9-401(2) requires knowledge of contents of the improperly filed financing statement-not knowledge of contents of creditor’s security agreement with debtor. Furthermore, under UCC § 1-201(25)(a), such knowledge must be actual knowledge. In re County Green Ltd. Partnership, 438 F. Supp. 693, 1977 U.S. Dist. LEXIS 14662 (W.D. Va. 1977).

In action by cashing bank to recover on check on which payment was subsequently stopped, where check was made payable to named payee as payment for cattle-feeding contract between payee and drawer, another bank holding perfected security interests in all of payee’s property called in secured loan to payee and directed payee to turn in all proceeds on payee’s accounts receivable and not to pay any of payee’s general creditors, payee cashed check in suit at still another bank and paid off certain general creditors, drawer of check stopped payment thereon at request of secured bank, and handwritten part of check stated that it was drawn for $13,430 but check imprinter inadvertently entered “$3,430” on check, cashing bank was holder in due course and entitled to recover under UCC § 3-302(1)(c) because (1) it had no notice under UCC § 1-201(25) of secured bank’s claim to check’s proceeds from mere publication in biweekly reporting service 17 months previously of secured bank’s filing of security agreements on payee’s property, even though cashing bank did subscribe to such reporting service; (2) check was negotiable on its face, since it was indorsed by payee and payee’s indorsement was not restrictive; (3) statement by payee’s wife to officer of cashing bank that check was being cashed to prevent secured bank from “grabbing it” occurred after check was cashed and thus was irrelevant under UCC § 3-304(6) to issue of notice; and (4) cashing bank took check in good faith under UCC § 3-302(1)(b), despite $10,000 error on face of check, since cashing bank had contacted drawee bank to ascertain correct amount of check and to discover whether sufficient funds were on deposit to cover it. McCook County Nat'l Bank v. Compton, 558 F.2d 871, 1977 U.S. App. LEXIS 12893 (8th Cir. S.D.), cert. denied, 434 U.S. 905, 98 S. Ct. 302, 54 L. Ed. 2d 191, 1977 U.S. LEXIS 3660 (U.S. 1977).

Letter by stockholder’s attorney several months after discovery that stock was missing from safe deposit box requesting that stockholder be advised in writing whether issuer showed any change in ownership status of stock did not constitute implied notice as defined under UCC § 1-201(25) that stock had been lost, apparently destroyed or wrongfully taken; thus, stockholder was precluded from taking any action against issuer under UCC § 8-405 when issue subsequently registered transfer of stock before receiving any such notice that stock had been lost, apparently destroyed or wrongfully taken. Exxon Corp. v. Raetzer, 533 S.W.2d 842 (Tex. Civ. App. 1976), writ ref’d n.r.e., (June 9, 1976).

Subsequent creditor had actual knowledge under UCC §§ 9-401(2) and 1-201(25) of contents of improperly filed financing statement, and thus financing was effective against subsequent creditor, where subsequent creditor was aware at time that debtor came to it for loan that, except for about $13,000, all of debtor’s $160,000 net worth was pledged for two prior bank loans and that pledge covered debtor’s equipment. Enark Industries, Inc. v. Bush, 86 Misc. 2d 985, 383 N.Y.S.2d 796, 1976 N.Y. Misc. LEXIS 2557 (N.Y. App. Term 1976).

Allegations that company which was transferred in exchange for note had never made profit was not sufficient to establish that transfer of note was not for value within meaning of UCC § 3-302, since no facts were alleged relating to worth of company’s assets, and allegations that holder of note required payment of substantial portion of note by transferor if maker defaulted, and further required that transferor’s terms of transfer be concealed from maker, were insufficient to show that holder had “notice of fraud” within meaning of UCC § 1-201(25). Ritz v. Karstenson, 39 Ill. App. 3d 877, 350 N.E.2d 870, 1976 Ill. App. LEXIS 2673 (Ill. App. Ct. 2d Dist. 1976).

Notwithstanding that agents of owner of counterfeit United States treasury bill inquired at bank as to genuineness of bill, such inquiry did not constitute notice under UCC § 1-201 (25, 26, 27) that bill was not genuine and bank, which took bill as negotiable instrument in bearer form under UCC § 8-105 as bona fide purchaser, was entitled under UCC § 8-306 to rely on owner’s warranties as principal that bill was genuine and was not materially altered, but recovery by bank under unjust enrichment was not permitted, since, under UCC §§ 1-102 and 1-103, specific warranties of UCC displaced remedy of unjust enrichment in regard to negotiation of securities in this case. Brannon v. First Nat'l Bank, 137 Ga. App. 275, 223 S.E.2d 473, 1976 Ga. App. LEXIS 2411 (Ga. Ct. App. 1976).

In action by bank against makers of several notes pledged by third party as collateral for loan, trial court properly found that bank had taken notes in good faith and without notice of makers’ alleged defenses, pursuant to UCC § 3-302(1) and definitions contained in UCC § 1-201, subsecs. (19), (25) and (27), where officers and employee of bank who handled the transaction testified that they had no knowledge or information concerning any defenses, and described in detail the investigation which they made and information which they gathered to satisfy themselves that notes were valid and that parties with whom they dealt were reliable; where trial court’s findings described in some detail the investigations and inquiries made by bank; where trial court found those investigations were reasonable under the circumstances, and that the bank lacked knowledge to know or believe that alleged defenses existed; and where facts found by trial court established that the bank had no connection with transactions for which notes were given. Security Pacific Nat. Bank v. Chess, 58 Cal. App. 3d 555, 129 Cal. Rptr. 852, 1976 Cal. App. LEXIS 1540 (Cal. App. 2d Dist. 1976).

Government’s perfected tax lien had priority over bank’s security interest in funds due taxpayer on construction project where bank failed to perfect its security interest by filing financing statement with secretary of state of taxpayer’s home state, as well as with county in which taxpayer had its place of business, as required by UCC § 9-401(1) and where government did not have notice or knowledge of bank’s interest in property. United States v. Ed Lusk Constr. Co., 504 F.2d 328, 1974 U.S. App. LEXIS 6389 (10th Cir. Okla. 1974).

Where trier of fact conceivable could find that purchaser of securities had constructive knowledge of adverse claim as contemplated by § 1-201(25)(c), by reason of substantial discount at which bonds were being offered, negligence of broker in failing to discover adverse claim to bonds could well be found to be proximate cause of injury to purchaser, which relied on broker’s verification in deciding to purchase bonds. Miriani v. Rodman & Renshaw, Inc., 358 F. Supp. 1011, 1973 U.S. Dist. LEXIS 14186 (N.D. Ill. 1973).

“Reason to know” method of notice is objective one, and would not require that taker have actual knowledge of adverse claim in order to be charged with notice of such claim, but would premise notice upon reasonable commercial standards. Von Gohren v. Pacific Nat'l Bank, 8 Wn. App. 245, 505 P.2d 467, 1973 Wash. App. LEXIS 1426 (Wash. Ct. App. 1973).

Secured creditor with security interest in crops grown during 1971 on two tracts of land, one owned by debtor and other leased by him, took priority over purported attaching creditor, claiming under writ of attachment issued November 11, 1971, with respect to proceeds from sale of crops, notwithstanding security agreement covering both tracts of land was not filed until November 12, 1971: (1) With respect to “leased” tract, where original financing statement covering crops growing or to be grown thereon was filed on July 5, 1966, security agreement covering 1971 crops on both “leased” and “owned” tracts was executed on February 18, 1971, and continuation statement was filed on June 28, 1971, security interest was perfected by filing of continuation statement prior to issuance of attaching creditor’s purported attachment and levy thereunder, and took priority over any rights acquired by attaching creditor; (2) with respect to “owned” land, although secured party’s security interest was not perfected by filing as of time of levy under attaching creditor’s purported attachment, evidence showed that attaching creditor either had actual notice of secured party’s interest in crops or could be charged with actual knowledge or duty to secure knowledge of secured party’s interest, and, thus, secured party’s unperfected security interest took priority over rights of attaching creditor. Gulf Oil Co. v. First Nat'l Bank, 503 S.W.2d 300, 1973 Tex. App. LEXIS 2687 (Tex. Civ. App. Amarillo 1973).

UCC § 6-104(3) [Repealed] does not render transfer ineffective unless transferee was shown to have had actual knowledge that list of creditors was incomplete; thus, in action by transferor’s customs bond surety against transferee in bulk to recover customs duties assessed against transferor and paid by surety, transferee was not personally liable, although neither surety nor United States were on list of creditors and no notice was given them, where transferee did not have actual knowledge or surety’s claim; fact that transferor was partly engaged in importing and transferee had constructive knowledge that some import duty might be due to United States did not render transfer ineffective. Federal Ins. Co. v. Pipeco Steel Corp., 125 N.J. Super. 563, 312 A.2d 510, 1973 N.J. Super. LEXIS 491 (App.Div. 1973).

In an action brought to recover for injuries sustained by plaintiff as a result of the unauthorized registration of stock owned by her in the two defendant companies, plaintiff notified each corporate issuer within a reasonable time after she had noticed that her shares had been transferred as a result of forgery as provided by UCC 8-404, where it appeared that plaintiff was a 94-year-old woman who, while a guest in a home, had allowed one of her hosts, whom she trusted, to handle her affairs over a 2 year period, and in light of plaintiff’s reliance on the perpetrator of the acts which deprived her of title to her securities and in light of her own age and decrepitude, plaintiff could not be charged with unreasonable action in not checking her accounts from time to time and consequently plaintiff did not have required statutory notice of host’s dishonesty until she left his residence. Weller v. American Tel. & Tel. Co., 290 A.2d 842, 1972 Del. Ch. LEXIS 121 (Del. Ch. 1972).

Notice that is received has been “sent”, even though notice is not written. Crest Inv. Trust, Inc. v. Alatzas, 264 Md. 571, 287 A.2d 261, 1972 Md. LEXIS 1172 (Md. 1972).

Intendment of UCC notice definition would seem to be an attempt to prevent those dealing in the commercial world from obtaining various rights when, from a reasonable inquiry into the true facts, that person would have discovered a fact which prevented him from obtaining the rights which he was seeking. Winter & Hirsch, Inc. v. Passarelli, 122 Ill. App. 2d 372, 259 N.E.2d 312, 1970 Ill. App. LEXIS 1386 (Ill. App. Ct. 1st Dist. 1970).

Common carrier who transported trailer coach sold in Virginia to Oklahoma was deemed to have notice, under Code § 1-201(25), of Virginia perfected security interest in coach, effective in Oklahoma under Code § 9-103(1). National Trailer Convoy Co. v. Mt. Vernon Nat'l Bank & Trust Co., 1966 OK 197, 420 P.2d 889, 1966 Okla. LEXIS 521 (Okla. 1966).

The filing of a lease contract, providing for a lien upon personal property of the lessee, in the real estate records, does not constitute notice of the existence of a lien as to personal property, for actual notice is required under the In re King Furniture City, Inc., 240 F. Supp. 453, 1965 U.S. Dist. LEXIS 6507 (E.D. Ark. 1965).

The insertion in a conditional sales contract of the purchaser’s name as “Excel Department Stores” instead of its correct corporate title of “Excel Stores, Inc.” is a minor error not seriously misleading and does not affect the validity of the instrument. In re Excel Stores, Inc., 341 F.2d 961, 1965 U.S. App. LEXIS 6569 (2d Cir. Conn. 1965).

Evidence that seller’s representatives had participated in attempts to make helicopter perform in an expected manner established that the seller had notice of breach of implied warranty of fitness. Boeing Airplane Co. v. O'Malley, 329 F.2d 585, 1964 U.S. App. LEXIS 5958 (8th Cir. Minn. 1964).

Evidence indicating that a credit equipment company financed the sale of machinery from the manufacturer to the seller, as well as the sale from the seller to the ultimate purchaser, is not sufficient to demand a finding that the credit equipment company had such a relationship with the manufacturer or seller as to impute to it knowledge of any defects or nondeliveries, and the fact that the credit equipment company was merely the financing agency which happened to have financed both transactions was not inconsistent with good faith. Commercial Credit Equipment Corp. v. Reeves, 110 Ga. App. 701, 139 S.E.2d 784, 1964 Ga. App. LEXIS 744 (Ga. Ct. App. 1964).

7. Notifying or giving notice.

In action for alleged breach by defendant airport board of one-year written agreement under which plaintiff was to serve as “fixed-base” operator of airport in return for use of airport terminal and other facilities, where (1) prior to end of agreement’s one-year term, plaintiff attended board meeting at which board approved motion not to renew parties’ agreement; and (2) during plaintiff’s subsequent out-of-state absence, board sent (a) certified letter containing notice of agreement’s termination to plaintiff’s business address, and (b) hand-delivered letter containing similar notice that was not accepted by employee at plaintiff’s business office, court held, on granting board’s motion for summary judgment, (1) that agreement in suit could be described as either “lease of real property” or “contract for services”; (2) that although neither type of contract was explicitly covered by Uniform Commercial Code, code nevertheless constituted persuasive authority with respect to agreements like that in suit; (3) that as a result, provisions of UCC §75-1-201(26) and (27), which deal with giving of notice, and provisions of UCC §75-1-201(38), which define term “send,” would be applied by analogy; (4) that under such provisions, fact that plaintiff was given copy of board meeting minutes that authorized termination of his contract was sufficient to terminate such agreement, even if court should adopt “actual-delivery-to-person” test urged by plaintiff; (5) that (a) mailing of registered letter to plaintiff’s business address was proper “sending” under UCC §75-1-201(38), (b) act of mailing was “giving of notice” under UCC §75-1-201(26), and (c) deposit of notice for delivery was proper “receipt” of notification under UCC §75-1-201(26)(a); (6) that hand delivery of second letter containing notice of plaintiff’s termination, which was left on desk of plaintiff’s employee over her protest, constituted proper “giving” and “receipt” of notice under UCC § 75-1-201(26) and also proper “sending” under UCC § 75-1-201(38); and (7) that because plaintiff’s termination was authorized by board and notice of termination was properly given, board was not liable for breach of contract. Logan v. Corinth-Alcorn County Joint Airport Bd., 665 F. Supp. 506, 1987 U.S. Dist. LEXIS 6609 (N.D. Miss. 1987).

UCC §§ 2-201(2) and 1-201(26) do not prescribe any particular method for proving the receipt of a confirmatory writing. However, to prove such receipt, the sending merchant can rely on the presumption that a correctly addressed letter, which was properly mailed and was not returned undelivered to the sender, was delivered to the addressee. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Where (1) certified letters were mailed to debtor and each guarantor advising them that collateral had been repossessed, that they had right of redemption, and that if such right were not exercised by specified date, collateral would be sold, and (2) where such letters were followed by other letters informing debtor and guarantors that collateral had been advertised for sale, court held that such notice of sale of collateral was commercially reasonable and sufficient under UCC § 9-504(3) and UCC § 1-201(26). Cessna Fin. Corp. v. Meyer, 575 P.2d 1048, 1978 Utah LEXIS 1233 (Utah 1978).

Notwithstanding that agents of owner of counterfeit United States treasury bill inquired at bank as to genuineness of bill, such inquiry did not constitute notice under UCC § 1-201 (25, 26, 27) that bill was not genuine and bank, which took bill as negotiable instrument in bearer form under UCC § 8-105 as bona fide purchaser, was entitled under UCC § 8-306 to rely on owner’s warranties as principal that bill was genuine and was not materially altered, but recovery by bank under unjust enrichment was not permitted, since, under UCC §§ 1-102 and 1-103, specific warranties of UCC displaced remedy of unjust enrichment in regard to negotiation of securities in this case. Brannon v. First Nat'l Bank, 137 Ga. App. 275, 223 S.E.2d 473, 1976 Ga. App. LEXIS 2411 (Ga. Ct. App. 1976).

Notice of assignment which was sent by registered mail and received by account debtor at its shipping dock was sufficient, although it never reached account debtor’s accounting department. Ertel v. Radio Corp. of America, 261 Ind. 573, 307 N.E.2d 471, 1974 Ind. LEXIS 370 (Ind. 1974).

Where debtor assigned accounts receivable to secure payment of note at maturity, and creditor notified account debtor by letter of assignment, account debtor was under duty to pay over to secured party amount due to debtor and was liable to secured party for payments subsequently made to debtor. Moab Nat'l Bank v. Keystone--Wallace Resources, 517 P.2d 1020, 30 Utah 2d 330, 1973 Utah LEXIS 713 (Utah 1973).

Notification by certified mail is reasonable, and actual knowledge by the person notified is unnecessary. Hudspeth Motors, Inc. v. Wilkinson, 238 Ark. 410, 382 S.W.2d 191, 1964 Ark. LEXIS 429 (Ark. 1964), overruled, Stimson Tractor Co. v. Heflin, 257 Ark. 263, 516 S.W.2d 379, 1974 Ark. LEXIS 1346 (Ark. 1974), but see, Stimson Tractor Co. v. Heflin, 257 Ark. 263, 516 S.W.2d 379, 1974 Ark. LEXIS 1346 (Ark. 1974).

8. Notice received by organization.

In action for alleged breach by defendant airport board of one-year written agreement under which plaintiff was to serve as “fixed-base” operator of airport in return for use of airport terminal and other facilities, where (1) prior to end of agreement’s one-year term, plaintiff attended board meeting at which board approved motion not to renew parties’ agreement; and (2) during plaintiff’s subsequent out-of-state absence, board sent (a) certified letter containing notice of agreement’s termination to plaintiff’s business address, and (b) hand-delivered letter containing similar notice that was not accepted by employee at plaintiff’s business office, court held, on granting board’s motion for summary judgment, (1) that agreement in suit could be described as either “lease of real property” or “contract for services”; (2) that although neither type of contract was explicitly covered by Uniform Commercial Code, code nevertheless constituted persuasive authority with respect to agreements like that in suit; (3) that as a result, provisions of UCC §75-1-201(26) and (27), which deal with giving of notice, and provisions of UCC §75-1-201(38), which define term “send,” would be applied by analogy; (4) that under such provisions, fact that plaintiff was given copy of board meeting minutes that authorized termination of his contract was sufficient to terminate such agreement, even if court should adopt “actual-delivery-to-person” test urged by plaintiff; (5) that (a) mailing of registered letter to plaintiff’s business address was proper “sending” under UCC §75-1-201(38), (b) act of mailing was “giving of notice” under UCC §75-1-201(26), and (c) deposit of notice for delivery was proper “receipt” of notification under UCC §75-1-201(26)(a); (6) that hand delivery of second letter containing notice of plaintiff’s termination, which was left on desk of plaintiff’s employee over her protest, constituted proper “giving” and “receipt” of notice under UCC § 75-1-201(26) and also proper “sending” under UCC § 75-1-201(38); and (7) that because plaintiff’s termination was authorized by board and notice of termination was properly given, board was not liable for breach of contract. Logan v. Corinth-Alcorn County Joint Airport Bd., 665 F. Supp. 506, 1987 U.S. Dist. LEXIS 6609 (N.D. Miss. 1987).

Lessee under contract with county airport board received sufficient written notice of termination of the contract under standards set by Miss Code §75-1-201(26), (27), and (38), where lessee was provided with copy of minutes authorizing termination, where registered letter was mailed to lessee, and where second letter was hand delivered to lessee’s offices, in spite of fact that receipt of both letters was refused. Logan v. Corinth-Alcorn County Joint Airport Bd., 665 F. Supp. 506, 1987 U.S. Dist. LEXIS 6609 (N.D. Miss. 1987).

In action by corporate depositor against drawee bank charging bank with improper disposition of money on deposit in corporation’s account in that bank credited corporate checks which were made payable to bank to private accounts of corporate employee and his associate, under UCC § 1-201 (27) evidence of information possessed by individual employees of bank relating to bank’s dealings with employee and his associate, tending to show that person who had knowledge of these facts would have had grounds for suspicion about financial activities of these two men, should be limited to that which jury could reasonably find would have come to attention of employees responsible for handling of these checks if bank had “exercised due diligence.” Transamerica Ins. Co. v. United States Nat'l Bank, 276 Ore. 945, 558 P.2d 328, 1976 Ore. LEXIS 717 (Or. 1976).

Notwithstanding that agents of owner of counterfeit United States treasury bill inquired at bank as to genuineness of bill, such inquiry did not constitute notice under UCC § 1-201 (25, 26, 27) that bill was not genuine and bank, which took bill as negotiable instrument in bearer form under UCC § 8-105 as bona fide purchaser, was entitled under UCC § 8-306 to rely on owner’s warranties as principal that bill was genuine and was not materially altered, but recovery by bank under unjust enrichment was not permitted, since, under UCC §§ 1-102 and 1-103, specific warranties of UCC displaced remedy of unjust enrichment in regard to negotiation of securities in this case. Brannon v. First Nat'l Bank, 137 Ga. App. 275, 223 S.E.2d 473, 1976 Ga. App. LEXIS 2411 (Ga. Ct. App. 1976).

In action by bank against makers of several notes pledged by third party as collateral for loan, trial court properly found that bank had taken notes in good faith and without notice of makers’ alleged defenses, pursuant to UCC § 3-302(1) and definitions contained in UCC § 1-201, subsecs. (19), (25) and (27), where officers and employees of bank who handled the transaction testified that they had no knowledge or information concerning any defenses, and described in detail the investigation which they made and information which they gathered to satisfy themselves that notes were valid and that parties with whom they dealt were reliable; where trial court’s findings described in some detail the investigations and inquiries made by bank; where trial court found those investigations were reasonable under the circumstances, and that the bank lacked knowledge to know or believe that alleged defenses existed; and where facts found by trial court established that the bank had no connection with transactions for which notes were given. Security Pacific Nat. Bank v. Chess, 58 Cal. App. 3d 555, 129 Cal. Rptr. 852, 1976 Cal. App. LEXIS 1540 (Cal. App. 2d Dist. 1976).

Bank was not bona fide purchaser within meaning of UCC § 8-302 and was liable for conversion of stolen treasury bills, where owner notified bank of loss but bank did not make reasonable efforts to advise its discount and collateral department of existence of lost securities file, and where bank subsequently took bills as collateral for loans. The test of sufficiency of notice is objective one under UCC § 1-201(27) and not whether or not individuals involved were in fact aware of notice. Morgan Guaranty Trust Co. v. Third Nat'l Bank, 529 F.2d 1141, 1976 U.S. App. LEXIS 13268 (1st Cir. Mass. 1976).

Account debtor did not receive notice of assignments made by its creditor to bank where, inter alia, notice was given to employee of debtor who was not in such position that notice to him could reasonably be construed to be notice to debtor. Bank of Salt Lake v. Corporation of President of Church of Jesus Christ of Latter-Day Saints, 534 P.2d 887, 1975 Utah LEXIS 676 (Utah 1975).

Notice to corporation president of private sale of repossessed equipment could not be imputed to corporate officers who were accommodation indorsers of note where president was also officer of repossessing equipment supplier, and where repossessor, although aware of this probability of conflict of interest, had not taken “such steps as may be reasonably required to inform the other party in the ordinary course”. T & W Ice Cream, Inc. v. Carriage Barn, Inc., 107 N.J. Super. 328, 258 A.2d 162, 1969 N.J. Super. LEXIS 661 (Cty. Ct. 1969).

§ 75-1-203. Lease distinguished from security interest.

Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.

A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:

  1. The original term of the lease is equal to or greater than the remaining economic life of the goods;
  2. The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
  3. The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
  4. The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
  5. The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
  6. The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

A transaction in the form of a lease does not create a security interest merely because:

The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

The lessee assumes risk of loss of the goods;

The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;

The lessee has an option to renew the lease or to become the owner of the goods;

Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised.Additional consideration is not nominal if:

When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or

When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.

The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.

HISTORY: Former §75-1-203 [Codes, 1942, 41A:1-203; Laws, 1966, ch. 316, § 1-203, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions at §75-1-304 enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-203 is derived from former §75-1-201(37) [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

ALR.

Equipment leases as security interest within Uniform Commercial Code § 1-201(37) [now 1-203]. 76 A.L.R.3d 11.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1. True lease.

2.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-201.

6. Security interests.

I. UNDER CURRENT LAW.

1. True lease.

As a result of the debtor’s failure to establish that the price of the purchase option in the Commercial Truck Rental Agreement was nominal or that he had the right to acquire equity in the truck, he failed to meet his burden in showing that the facts and circumstances of the transaction demonstrated that the truck rental company did not retain a meaningful reversionary interest in the truck at the end of the lease term; therefore, the Agreement was a “true” lease under Mississippi commercial law. In re Johnson, 2015 Bankr. LEXIS 971 (Bankr. S.D. Miss. Mar. 27, 2015).

2.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-201.

6. Security interests.

Where terms of bareboat charter-lease agreement and guaranty were unequivocal in defining and limiting rights of parties to agreement, contained nothing to indicate that agreement was intended to be anything other than a pure lease, and granted no right or option to lessee to purchase vessel leased, transaction could not be characterized under UCC § 1-201(37) as lease for security. WPL Marine Services, Inc. v. Woods-Tucker Aircraft & Marine Leasing Corp., 361 So. 2d 1304, 1978 La. App. LEXIS 3543 (La.App. 1 Cir.), cert. denied, 364 So. 2d 121, 1978 La. LEXIS 6859 (La. 1978), cert. denied, 364 So. 2d 122, 1978 La. LEXIS 6863 (La. 1978).

A surety’s right to earned progress payments under a construction contract that it has bonded is not an “interest in personal property” that is subject to the filing provisions of the Alaska UCC, since the surety in such a case has a right to complete the job and apply any earned funds against its costs. This right of the surety does not secure the payment or performance of an obligation as a “security interest,” as that term is defined by Alaska UCC § 1-201(37). Alaska State Bank v. General Ins. Co., 579 P.2d 1362, 1978 Alas. LEXIS 711 (Alaska 1978).

Under UCC § 9-102(1)(a) and (2) and UCC § 1-201(37), contract for lease of automobile was lease intended for security and not “pure lease” where it provided, among other things, (1) that on termination of agreement prior to expiration of fixed term, lessee was to return vehicle to lessor, (2) that lessor was then obligated to accept highest available cash offer at wholesale for vehicle and to notify lessee of any “gain or loss,” which was difference between wholesale price accepted for vehicle and its “termination value” as determined by formula contained in lease agreement, (3) that lessee would owe lessor “depreciation value” of vehicle, as offset by amount received from its disposition at wholesale, and would receive from lessor any “gain” over such “depreciation value,” (4) that lessee would have to pay all license fees and taxes, and (5) that lessee would also have to pay amounts specifically denominated as “sales tax” and “security deposit.” Bill Swad Leasing Co. v. Stikes, 571 F.2d 1361 (5th Cir. Ala. 1978) (applying Alabama and Ohio law; stating that termination formula of lease recognized lessee’s equity in leased vehicle, that required security deposit of $1,000 was equivalent of down payment on vehicle, and fact that lease agreement did not contain option to purchase was not controlling).

Where (1) first corporation obtained financing from Texas bank for purchase of five airplanes, which it intended to resell, and Texas bank, in November, 1972, filed separate chattel mortgage for each plane with Federal Aviation Administration pursuant to federal law, (2) second corporation purchased the five planes from the first corporation and borrowed $18,000 from Kentucky bank on unsecured note to finance purchase, (3) second corporation, on default in payment for planes, entered into new agreement with first corporation for purchase of only one plane and return of other four, and also agreed not to file bill of sale with Federal Aviation Administration for plane purchased, (4) second corporation gave Kentucky bank, which held second corporation’s unsecured note for $18,000, security agreement which secured repayment of note by encumbering single plane purchased, and bank, in exchange for such security agreement, agreed not to sue on note and filed both security agreement and bill of sale for plane with Federal Aviation Administration, (5) second corporation defaulted in making payments on plane, and first corporation foreclosed on plane and sold it at auction under authority of its November, 1972 security agreement with Texas bank, which security agreement had been assigned to first corporation on its repayment of amount that it owed Texas bank, and (6) second corporation’s financer (Kentucky bank) sued first corporation for wrongful interference with its collateral by not respecting bank’s lien on repossessed plane, court held (1) that Kentucky bank, under UCC § 1-201(44)(b), gave “value” when it took security interest in plane purchased by second corporation to secure bank’s preexisting claim against such corporation, (2) that by virtue of UCC § 9-204(1), Uniform Commercial Code does not require that “consideration” in strict-law sense be given as prerequisite for security interest to attach to collateral, (3) that Kentucky bank’s security interest attached at time it gave value and was duly and properly perfected when bank filed instruments with Federal Aviation Administration, (4) that first corporation, under UCC § 1-201(37), had no valid security interest in plane that it repossessed and sold, since first corporation, by discharge of obligation underlying its security interest, had extinguished such security interest, and (5) that first corporation’s foreclosure on, and sale of, plane was wrongful and in derogation of rights of plaintiff Kentucky bank, which held valid security interest in plane. Bank of Lexington v. Jack Adams Aircraft Sales, Inc., 570 F.2d 1220, 1978 U.S. App. LEXIS 11865 (5th Cir. Miss. 1978).

The Uniform Commercial Code has many provisions, especially in Article 9, that apply to “security interests.” Therefore, “security interest” is defined in UCC § 1-201(37) for the purpose of identifying the transactions to which those provisions apply. United States Fidelity & Guaranty Co. v. Thompson & Green Machinery Co., 568 S.W.2d 821 (Tenn. 1978).

When the holder of promissory notes assigned his interest therein as collateral to secure payment of a prior indebtedness, a sum less than the aggregate amount of the notes, and indorsed and delivered them to that creditor, he did not irrevocably divest himself of the ultimate right to all of the proceeds of the notes, but retained ownership of those proceeds not required to satisfy that indebtedness, and, therefore, the negotiation of all of the notes operated only as a partial assignment of the proceeds of the notes; the interest retained by him was capable of being transferred and, when it was transferred by another collateral assignment, the transferee acquired a valid security interest as to his residuary interest in the notes, which security interest was perfected by a subsequent delivery of the notes to it. Lipkowitz & Plaut v. Affrunti, 95 Misc. 2d 849, 407 N.Y.S.2d 1010, 1978 N.Y. Misc. LEXIS 2612 (N.Y. Sup. Ct. 1978).

Under UCC § 1-201(37), lease under which lessee had option of purchasing leased equipment for one dollar at end of lease term could be viewed as conditional sale of the equipment. Equilease Corp. v. D'Annolfo, 6 Mass. App. Ct. 919, 379 N.E.2d 1130, 1978 Mass. App. LEXIS 770 (Mass. App. Ct. 1978).

Lease of equipment purchased for installation in lessee’s motel was not true lease or bailment, but was lease intended for security purposes within meaning of UCC § 1-201(37), where (1) lessor was in finance business instead of equipment-leasing business, (2) lessee had option to purchase equipment at end of lease for its fair market value, which was estimated to be less than ten per cent of price lessor paid for equipment, (3) lease provided that lessee was liable for all taxes, fees, charges, and insurance premiums, (4) lessor was to be held harmless from all liability arising from ordering, delivery, or installation of equipment, (5) on lessee’s default, all remaining “rentals” could be accelerated at lessor’s option, and equipment could be repossessed at lessee’s expense, and (6) equipment was leased subject to exclusion of implied warranties of merchantability and fitness for intended purpose. Citizens & Southern Equipment Leasing, Inc. v. Atlanta Federal Sav. & Loan Asso., 144 Ga. App. 800, 243 S.E.2d 243, 1978 Ga. App. LEXIS 1792 (Ga. Ct. App. 1978).

Where (1) lessor of computer, after purchasing it from manufacturer, leased it to lessee for 72 months at fixed rental per month, (2) lease provided that lessee could renew lease for one year for sum that equalled amount of one monthly rent payment and that at end of such renewal, lessee would become owner of computer, (3) lessee’s obligation to pay rent was absolute and unconditional, and lease was not cancellable, (4) lessor disclaimed all warranties, express or implied, including implied warranties of merchantability and fitness for particular use, (5) computer did not function properly, and (6) lessee defended refusal to pay further rent on ground of failure of consideration, court held (1) that under UCC § 1-201(37), lease as a matter of law was actually intended as security agreement, especially since lessee could become owner of computer by paying amount that was equivalent to only one monthly rental, (2) that since lessor was to be viewed as conditional seller of computer, UCC § 9-206(2) applied with respect to effectiveness of lessor’s disclaimer of warranties, (3) that warranty disclaimer in lease clearly satisfied requirements of UCC § 2-316(2) for exclusion or modification of warranties, (4) that lessee’s remedy was solely against manufacturer of computer, instead of lessor, and (5) that under UCC § 9-501(1), lessor, with respect to lessee’s failure to pay rent, had rights and remedies provided in security agreement between the parties, which agreement provided that on lessee’s default and demand by lessor, lessee would pay amount equal to all unpaid rentals under the lease, plus interest at specified rate. Citicorp Leasing, Inc. v. Allied Institutional Distributors, Inc., 454 F. Supp. 511, 1977 U.S. Dist. LEXIS 12359 (W.D. Okla. 1977), dismissed, In re Greater Atlantic & Pacific Inv.Group, Inc., 88 B.R. 356, 1988 Bankr. LEXIS 1151 (Bankr. N.D. Okla. 1988).

Under UCC § 1-201(37), whether a lease is intended as security must be determined by the facts of each case. However, if the language of the agreement is clear and unambiguous, the intention of the parties is no longer a fact question on which testimony can be received, and the parol evidence rule requires that their intentions be found from the contract itself. In such a case, the matter becomes a question of law for the trial court. Citicorp Leasing, Inc. v. Allied Institutional Distributors, Inc., 454 F. Supp. 511, 1977 U.S. Dist. LEXIS 12359 (W.D. Okla. 1977), dismissed, In re Greater Atlantic & Pacific Inv.Group, Inc., 88 B.R. 356, 1988 Bankr. LEXIS 1151 (Bankr. N.D. Okla. 1988).

The factors involved in determining whether a lease is intended as a security agreement or a pure lease (see UCC § 1-201(37)) are as follows: (1) the facts in each case are controlling as to the intention of the parties to create a security interest; (2) reservation of title in a lease, or in an option to purchase that is appurtenant to the lease or included therein, does not by itself make the lease a security agreement; (3) a lease which permits the lessee to become the owner of the property at the end of the term for a nominal consideration or for no additional consideration is deemed as a matter of law to be intended as a security agreement; (4) the percentage that the option-purchase price bears to the list price of the leased property, especially if it is less than 25 percent, is to be considered as showing the intent of the parties to make a lease as security; (5) where the terms of the lease and option to purchase are such that the only sensible course for the lessee to follow at the end of the term is to exercise the option and become the owner of the goods, the lease is one intended to create a security interest; and (6) the character of a transaction as a true lease is indicated by (a) a provision specifying an option-purchase price that is approximately the market value of the leased property at the time of the exercise of the option, (b) rental charges indicating an intent to compensate the lessor for loss of value of the leased property over the term of the lease due to aging, wear, and obsolescence, (c) rentals that are not excessive and an option-purchase price that is not too low, and (d) facts showing that the lessee is acquiring no equity in the leased article during the term of the lease. Citicorp Leasing, Inc. v. Allied Institutional Distributors, Inc., 454 F. Supp. 511, 1977 U.S. Dist. LEXIS 12359 (W.D. Okla. 1977), dismissed, In re Greater Atlantic & Pacific Inv.Group, Inc., 88 B.R. 356, 1988 Bankr. LEXIS 1151 (Bankr. N.D. Okla. 1988).

Provision in security agreement executed on purchase of new automobile which provided that until indebtedness was fully paid, “seller has and shall retain title to and a security interest in the property” did not violate federal Truth-in-Lending Act and Regulation Z, since (1) Uniform Commercial Code, in UCC § 1-201(37), now provides universal definition of term “security interest,” (2) Uniform Commercial Code was designed to replace confusingly numerous security devices that prevailed under pre-Code practice, and (3) it would therefore be anomalous and counterproductive of UCC objectives to interpret Regulation Z, which requires disclosure of “type of any security interest held,” as requiring lender to specify particular security device employed. In such case, it was sufficient that security agreement in issue contained reference to a “security interest” in property described in the agreement that was enforceable under the Uniform Commercial Code, and statement in the agreement that seller retained “title” to such property, although unnecessary and irrelevant in light of UCC § 9-102(1) and (2) and § 9-302(3), did not make lender’s disclosure statement confusing or misleading. Drew v. Flagship First Nat'l Bank, 448 F. Supp. 434, 1977 U.S. Dist. LEXIS 12085 (M.D. Fla. 1977).

Under UCC § 1-201(37), leasing agreements which provided for rental of computer equipment for specified monthly rental for first five years and for higher monthly rental for remainder of lease period, and which also gave lessee option to purchase such equipment for 2.7 per cent of equipment’s total rental value, or 4 per cent of price lessor paid for equipment, were leases intended as security for payment by lessee of purchase price of equipment and thus were governed by National Equipment Rental, Ltd. v. Priority Electronics Corp., 435 F. Supp. 236, 1977 U.S. Dist. LEXIS 14719 (E.D.N.Y. 1977) (applying New York law, and noting the fact that total rentals under one lease exceeded cost of leased equipment by approximately 46 percent, and that total rentals under other lease exceeded cost of leased equipment by approximately 30 percent, also indicated that both leases were intended as security only and were not true leases).

Although UCC § 1-201(37) states that effect of lease is to be determined by facts of each case, the statute also provides that if there is a purchase option for a nominal consideration, the lease is then one that is intended for security. National Equipment Rental, Ltd. v. Priority Electronics Corp., 435 F. Supp. 236, 1977 U.S. Dist. LEXIS 14719 (E.D.N.Y. 1977).

Whether a transaction is characterized as a “sale” or a “lease” is not conclusive. Instead, it is the intention of the parties that is controlling, and this intention is to be determined by the facts of each case (see UCC § 1-201(37)). Indicative factors may include (1) whether the lessee is given an option to purchase the leased equipment and, if so, whether the option price is nominal (see UCC § 1-201(37)); (2) whether the lessee can acquire any equity in the equipment; (3) whether the lessee is required to bear the entire risk of loss; (4) whether the lessee is required to pay all charges and taxes imposed on ownership; (5) whether there is a provision for acceleration of rental payments; (6) whether the equipment was purchased specifically for lease to the lessee; and (7) whether the implied warranties of merchantability and fitness for a particular purpose are specifically excluded by the lease agreement. Lease Finance, Inc. v. Burger, 40 Colo. App. 107, 575 P.2d 857 (Colo. Ct. App. 1977) (holding that fact that “master lease” agreement did not grant lessee option to purchase leased equipment, plus other evidence which showed that both lessor and lessee apparently intended transaction to be lease, supported trial court’s determination that agreement was lease and not conditional sales contract).

Lease arrangement, under which owner sold equipment to a company whose only business was financing and not equipment maintenance, and company advanced funds to former owner’s creditors, leased equipment to former owner with an option to buy, recorded an Article 9 UCC financing statement, and assigned the agreement to a bank, constituted a secured loan arrangement. National Equipment Rental, Ltd. v. Hendrix, 565 F.2d 255, 1977 U.S. App. LEXIS 10778 (2d Cir. N.Y. 1977).

Where (1) buyer, under oral agreement to pay cash, bought used trencher and trailer from seller and accepted machinery on its delivery by seller, (2) seller listed buyer on seller’s books as debtor but did not have buyer execute any document, (3) bank made loan to buyer, and buyer executed security agreement and financing statement giving bank security interest in machinery bought from seller (4) bank perfected its security interest in machinery, (5) on buyer’s default, seller reclaimed machinery with buyer’s consent, but without bank’s consent or knowledge, and (6) bank sued seller for possession of machinery or value thereof, trial court properly held that seller’s interest in machinery was subordinate to interest of bank, since under UCC § 2-401(1) and § 1-201(37), seller’s reservation of title to machinery was limited in effect to reservation of security interest, and bank had perfected its security interest by filing financing statement, but seller had not filed such a statement. Peerless Equipment Co. v. Azle State Bank, 559 S.W.2d 114, 1977 Tex. App. LEXIS 3578 (Tex. Civ. App. Fort Worth 1977).

Lease of automobile was not contract of sale with retained security interest under UCC § 1-201(37)(b), where agreement designated capital cost of vehicle as $13,000, total rental due lessor was $14,256 over period of lease, and option-to-purchase price was $2,600, since option price was additional and sufficient consideration, and not nominal sum. Rebhun v. Executive Equipment Corp., 90 Misc. 2d 576, 394 N.Y.S.2d 792, 1977 N.Y. Misc. LEXIS 2115 (N.Y. Sup. Ct. 1977).

Under UCC § 9-102(1) and UCC § 1-201(37), Article 9 applies not only to any transaction that is intended to create security interest in chattel paper, accounts, or contract rights, but also to any sale of accounts, contract rights, or chattel paper. Ralston Purina Co. v. Detwiler, 173 Ind. App. 513, 364 N.E.2d 180, 1977 Ind. App. LEXIS 893 (Ind. Ct. App. 1977).

Under UCC § 1-201(37) and UCC § 9-102(2), purported five-year “lease” of printing equipment was actually instalment-sale contract which provided for an excessive rate of interest that rendered the contract void for usury where (1) lessor was finance company that was actually engaged in financing the sale of such printing equipment; (2) all risk of loss or damage to leased property was placed on lessee; (3) contract provided same remedies on lessee’s default in payment of rent, even at end of first month, that would be available to a conditional seller or a mortgagee on a similar delinquency; (4) contract expressly provided that lessee, at lessor’s request, would join lessor in executing financial statements pursuant to the Uniform Commercial Code; and (5) lessee, after all payments had been made under the purported “lease,” could acquire title to the leased property by paying lessor nominal sum therefor. Bell v. Itek Leasing Corp., 262 Ark. 22, 555 S.W.2d 1, 1977 Ark. LEXIS 1753 (Ark. 1977).

Although instrument under which corporation (engaged in business of financing lease agreements) leased new office machine, purchased by corporation from machine’s manufacturer, to real estate company was denominated a “lease,” transaction between parties was actually secured transaction under UCC § 1-201(37)(b), where such “lease” provided that lessee could purchase machine for nominal consideration; transaction was therefore subject to secured transactions provisions of UCC Article 9, and contract would be viewed as conditional sales contract under which the “lessee” was actually a “buyer.” Lectro Management v. Freeman, Everett & Co., 135 Vt. 213, 373 A.2d 544, 1977 Vt. LEXIS 589 (Vt. 1977).

As a result of the definition of “security interest” in UCC § 1-201(37) and the provisions of UCC § 9-102(2), only those consignments intended as security are directly subject to the provisions of UCC Art 9 concerning secured transactions, but all consignments, whether intended as security or not, are subject to the requirements of UCC § 2-326, which is in UCC Art 2 dealing with sales. General Elec. Credit Corp. v. Town & Country Mobile Homes, 117 Ariz. 562, 574 P.2d 50, 1977 Ariz. App. LEXIS 806 (Ariz. Ct. App. 1977).

Equipment lease agreement that permitted purchase at end of lease for approximately 10 per cent of list price, coupled with absence of option to terminate, created a security interest in lessor under UCC § 1-201(37) and since lessor’s security interest was not perfected, the lessor’s interest was junior to subsequently perfected liens against equipment. Percival Constr. Co. v. Miller & Miller Auctioneers, Inc., 532 F.2d 166, 1976 U.S. App. LEXIS 12180 (10th Cir. Okla. 1976).

Purported lease of computer equipment was intended as financing device and, thus, under UCC § 1-201(37), purported lessor’s interest in computers was security interest falling squarely within Article 9 of UCC, where (1) purported lease not only included option to purchase and agreement that lessee could become owner of property at end of lease term for nominal consideration, but also provided that if lessee defaulted in its monthly payments, lessee became immediately liable, not only for total amount of unpaid rent, but also for any deficiency resulting from sale of equipment not equaling estimated market value of equipment as defined by contract; (2) purported lessor acquired security interest not only in leased computers, but also in other computer equipment in possession of lessee; and (3) moreover, concurrent with lease, purported lessor filed financing statements with secretary of state and county recorder of deeds. Computer Sciences Corp. v. Sci-Tek, Inc., 367 A.2d 658, 1976 Del. Super. LEXIS 119 (Del. Super. Ct. 1976).

Notwithstanding language of “lease-purchase agreement,” it was clear that credit corporation and purported lessee of dump truck contemplated entering into secured transaction under UCC § 9-101 et seq. where financing statement listed credit corporation as secured party and purported lessee as debtor, and covered dump truck as secured item, where motor vehicle certificate of ownership listed purported lessee as owner and credit corporation as secured party and where purported lessee had option under “lease” to purchase truck for one dollar after making all installment payments. General Electric Credit Corp. v. Castiglione, 142 N.J. Super. 90, 360 A.2d 418, 1976 N.J. Super. LEXIS 776 (Law Div. 1976), disapproved, BJL Leasing Corp. v. Whittington, Singer, Davis & Co., 204 N.J. Super. 314, 498 A.2d 1262, 1985 N.J. Super. LEXIS 1439 (App.Div. 1985).

Filing of financing statement is not itself a factor in determining whether lease is intended as security. Rollins Communications, Inc. v. Georgia Institute of Real Estate, Inc., 140 Ga. App. 448, 231 S.E.2d 397, 1976 Ga. App. LEXIS 1517 (Ga. Ct. App. 1976).

Where purported lease agreement provided that lessors would turn over possession of 55 head of dairy cattle to lessees, that lessees would pay lessors $450 per month for five year term, and that at expiration of term, lessees had option to purchase cattle for $10, where market value of cattle was approximately $450 per head at time parties entered into their agreement, and where parties anticipated that market value of animals at end of five year period would be no less than $200 per head, lessees had option at expiration of “lease” term to purchase cattle for nominal consideration and, thus, under UCC § 1-201(37), agreement was one intended for security and lessors’ interest in cattle was security interest. Whitworth v. Krueger, 98 Idaho 65, 558 P.2d 1026, 1976 Ida. LEXIS 271 (Idaho 1976).

Bankruptcy judge was justified in holding that purported lease transaction was conditional sale, that contract executed by bankrupt and typewriter dealer whereby bankrupt agreed to pay $15.00 per month for 22 month term and was given option to purchase typewriter for $6.55 at end of term was security interest required by UCC to be filed, and that, in view of absence of filing, title to machine vested in bankruptcy trustee, where it was clear that transaction was understood to be sale by both bankrupt and by typewriter dealer’s employees who dealt with him; among other things, bankrupt came to dealer’s place of business to buy typewriter, dealer intended to sell him typewriter, and so-called “lease-ownership” contract was used because bankrupt preferred it. In re Shell, 390 F. Supp. 273, 1975 U.S. Dist. LEXIS 13694 (E.D. Ark. 1975).

Lessor’s subsequent offer to sell leased beauty shop equipment to lessee did not convert lease into unperfected security interest under UCC § 1-201(37). Leaseamerica Corp. v. Kleppe, 405 F. Supp. 39, 1975 U.S. Dist. LEXIS 14839 (N.D. Iowa 1975).

Purported lease of trade fixtures was not true lease, but was in fact installment loan, where, inter alia, although lease did not contain express option to purchase, renewal option was in fact purchase option, and where option price was 10 per cent of original price, or approximately 7.2 per cent of total rentals under lease, and thus appeared to be minimal. McGalliard v. Liberty Leasing Co., 534 P.2d 528, 1975 Alas. LEXIS 297 (Alaska 1975), overruled, Western Enters., Inc. v. Arctic Office Machs., Inc., 667 P.2d 1232, 1983 Alas. LEXIS 462 (Alaska 1983), but see, Western Enters., Inc. v. Arctic Office Machs., Inc., 667 P.2d 1232, 1983 Alas. LEXIS 462 (Alaska 1983).

Automobile “lease agreement” was, in fact, secured transaction within meaning of Article 9 of Uniform Commercial Code where agreement was of indefinite duration and, at its inception, passed all risks and indicia of ownership of vehicle to purported lessee, in that lessee not only insured against any loss to leasing company of its capitalized cost, but after 26 months was entitled to any surplus funds if and when car was sold, and where at end of 56 months, car would, at option of leasee, pass to her at no cost, since monthly installment payments would have equaled capitalized cost of vehicle. Right of debtor to receive notice of intended disposition of collateral after default may not be limited under UCC § 9-501(1) and (3)(b), and inasmuch as leasing company failed to comply with notice provision of UCC § 9-504(3) before selling repossessed vehicle, it was precluded from recovering deficiency judgment and could only recover sums owed to it prior to repossession as well as repossession charges. Avis Rent A Car System, Inc. v. Franklin, 82 Misc. 2d 66, 366 N.Y.S.2d 83, 1975 N.Y. Misc. LEXIS 2559 (N.Y. App. Term 1975), disapproved, Security Trust Co. v. Thomas, 59 A.D.2d 242, 399 N.Y.S.2d 511, 1977 N.Y. App. Div. LEXIS 13552 (N.Y. App. Div. 4th Dep't 1977).

Equipment lease transactions were security agreements under UCC § 1-201(37), and leasing corporation was “financing agency” and not seller of equipment under UCC § 2-104(2), where persons desirous of purchasing equipment or machinery applied to corporation for purchase money loan, corporation made commitments to advance money necessary for payment to manufacturer, plus sales tax, equipment was shipped by manufacturer directly to purchaser and invoice was sent to corporation, purchaser and corporation thereupon entered into security agreements in form of equipment leases with options to purchase at nominal extra charge, UCC financing statements were thereupon executed and delivered to purchaser and filed by corporation, corporation did not select or inspect any equipment, corporation did not maintain warehouse for storage of equipment or machinery, corporation did not carry leased property as assets on books or take any depreciation deductions, and corporation never took possession of any of leased equipment at end of leased term. In re Sherwood Diversified Services, Inc., 382 F. Supp. 1359, 1974 U.S. Dist. LEXIS 6442 (S.D.N.Y. 1974).

In suit by lessor against lessees and guarantor on agreement designated as lease covering certain irrigation equipment for recovery of deficiency after repossession and sale of equipment, evidence was insufficient to support implied findings and judgment based thereon that transaction was lease not subject to UCC requirements where, although lease did not contain option to purchase, letter which was sufficiently identified as being applicable to lease agreement extended option to purchase to lessee and UCC § 1-201(37) makes no requirement that option to purchase be in body of lease contract, and where no evidence was offered as to fair market value of equipment at time purchase option may be exercised nor evidence as to depreciation schedule and anticipated useful life of equipment nor evidence as to whether rental payments were indicative of customary rental rates for similar equipment or were indicative of acquisition of equity in equipment from which court could determine whether consideration for exercise of option was nominal or substantial or determine party’s intention as to whether purported lease agreement was to operate as security. Davis Bros. v. Misco Leasing, Inc., 508 S.W.2d 908, 1974 Tex. App. LEXIS 2176 (Tex. Civ. App. Amarillo 1974).

Lease of radio equipment for five years at agreed price, with title to property remaining in lessor and with possession of equipment to be returned to lessor at expiration of lease, did not constitute “security interest”; thus, Article 9 of Code did not apply and parties’ conduct was governed by terms of lease, which did not require sale of equipment upon default, nor crediting proceeds of sale against lessee’s indebtedness, but instead provided that upon default lessor could retain all payments made and recover full unpaid balance of term rental. McGuire v. Associates Capitol Services Corp., 133 Ga. App. 408, 210 S.E.2d 862, 1974 Ga. App. LEXIS 1089 (Ga. Ct. App. 1974).

Financing statement containing signatures of debtor and secured party, address of secured party, and containing description of collateral: “All Olivetti Corp. of America copying machines which have been delivered but not paid in full” met sufficiency test of description of collateral under UCC § 9-110 and formal requisites of financing statement under UCC § 9-402 and description reflected security interest under UCC § 1-201(37). First Nat'l Bank & Trust Co. v. Olivetti Corp. of America, 130 Ga. App. 896, 204 S.E.2d 781, 1974 Ga. App. LEXIS 1300 (Ga. Ct. App. 1974).

Lease was “one intended for security” and, hence, was security agreement as defined by UCC § 1-201(37), rather than true lease, where, inter alia, lessee had option to purchase, had right to apply 93% of rentals against purchase price of equipment, and was liable for full rental for entire minimum period though property was returned to lessor; since lessor did not file financing statement covering leased equipment, its rights were subordinate to those of creditors of lessee who obtained perfected security interest in equipment. Percival Constr. Co. v. Miller & Miller Auctioneers, Inc., 387 F. Supp. 882, 1973 U.S. Dist. LEXIS 11945 (W.D. Okla. 1973), aff'd, 532 F.2d 166, 1976 U.S. App. LEXIS 12180 (10th Cir. Okla. 1976).

Surety claiming under terms of performance bond application was not entitled to equitable lien proceeds from sale of contractor’s personal property, and did not have contract right but only security interest which it was required to file and perfect. Aetna Casualty & Surety Co. v. J. F. Brunken & Son, Inc., 357 F. Supp. 290, 1973 U.S. Dist. LEXIS 13938 (D.S.D. 1973).

Lessor of citrus packing equipment was entitled to return of its property from trustee in bankruptcy for lessee, where lease agreement contained no evidence of intent to reserve security interest and contained no provisions whereby lessee was to be entitled to purchase equipment at expiration of term. De Vita Fruit Co. v. FCA Leasing Corp., 473 F.2d 585, 71 Ohio Op. 2d 525, 1973 U.S. App. LEXIS 11656 (6th Cir. Ohio 1973).

Lease which provided defendant with option to renew for trifling yearly rental, which for all practical purposes amounted to making defendant owner of machine at end of lease for nominal consideration until total obsolescence, was intended for security within meaning of UCC § 1-210(37). Leasco Data Processing Equipment Corp. v. Starline Overseas Corp., 74 Misc. 2d 898, 346 N.Y.S.2d 288, 1973 N.Y. Misc. LEXIS 1764 (N.Y. App. Term 1973), aff'd, 45 A.D.2d 992, 360 N.Y.S.2d 199, 1974 N.Y. App. Div. LEXIS 7628 (N.Y. App. Div. 1st Dep't 1974).

Where consideration to be paid if option to purchase was exercised amounted to approximately 4 percent of total consideration payable under truck lease agreement, finding that lease was intended for security was correct. Crowder v. Allied Inv. Co., 190 Neb. 487, 209 N.W.2d 141, 1973 Neb. LEXIS 737 (Neb. 1973).

Where plaintiff and defendant entered into agreement which purported to be lease of accounting machine manufactured by third party, where agreement provided that defendant would make 60 monthly payments $150.05 to plaintiff and that at end of lease period, five years, defendant would have option to purchase machine for 10 percent of its initial cost, and where defendant defaulted after making nine payments, plaintiff replevied machine, sold it at private sale, and brought action against defendant to recover balance due under lease, trial court did not err in finding that transaction was lease, not security interest, that it was not subject to UCC Article 9, and that plaintiff was entitled to deficiency judgment, notwithstanding plaintiff failed to notify defendant of sale pursuant to UCC § 9-504(3); without evidence of market value of machine at termination of lease, it could not be said that option to purchase for 10 percent of original purchase price was option to purchase for “nominal consideration” within meaning of UCC § 1-201(37). Granite Equipment Leasing Corp. v. Acme Pump Co., 165 Conn. 364, 335 A.2d 294, 1973 Conn. LEXIS 744 (Conn. 1973).

Where party intended that seller’s retention of title to equipment would secure buyer’s payment of purchase price, retention of title was limited by Code § 2-401(1) to reservation of security interest, and contract created security interest as defined in Code § 1-201(3). Witmer v. Kleppe, 469 F.2d 1245, 1972 U.S. App. LEXIS 6384 (4th Cir. W. Va. 1972).

An option given to the lessee to purchase the leased property for a nominal consideration does not make the lease one intended for security. James Talcott, Inc. v. Franklin Nat'l Bank, 292 Minn. 277, 194 N.W.2d 775, 1972 Minn. LEXIS 1306 (Minn. 1972).

Words of UCC § 1-201(37) are unequivocal, namely that an option given to a lessee to purchase leased property for a nominal consideration does make the lease one intended for security, and hence, where options to buy construction equipment for the combined sum of $2, were nominal in amount when compared to the total rental of $73,000, security interests were created. James Talcott, Inc. v. Franklin Nat'l Bank, 292 Minn. 277, 194 N.W.2d 775, 1972 Minn. LEXIS 1306 (Minn. 1972).

Agreement providing that for a term of 36 months, a so-called lessee was required to pay what termed rental; that the lessee could extend the term for succeeding 12 months period at annual rentals; that at the end of the term, the lessee had an option to sell the equipment with any proceeds of the sale in excess of the present value of the payments provided for for the 36 months period and remaining unpaid going to the lessee; and that in event of default by lessee, he agreed to surrender possession of equipment to the lessor who might accept the equipment in final settlement or sell it and hold lessee for any deficiency of the amount due under the 36 months rental period, was a security agreement and not a lease. John Deere Co. v. Wonderland Realty Corp., 38 Mich. App. 88, 195 N.W.2d 871, 1972 Mich. App. LEXIS 1534 (Mich. Ct. App. 1972).

“Equipment lease” which required so-called lessee to pay what was termed rental in quarterly or annual increments over 36 month term which lessee could extend for succeeding 12 month period at additional annual rental, and which gave lessee option to sell equipment at end of term, to receive any proceeds of sale in excess of present value of rental payments remaining unpaid, to bid as high as necessary to become successful bidder at sale without paying more than rental payments remaining unpaid, and which gave lessor upon default right to accept equipment in final settlement or sell it and hold lessee for any deficiency of amount of rental payments due was security agreement and not lease. John Deere Co. v. Wonderland Realty Corp., 38 Mich. App. 88, 195 N.W.2d 871, 1972 Mich. App. LEXIS 1534 (Mich. Ct. App. 1972).

Where promissory note for unpaid balance of corporate stock remained unpaid, document constituted assignment of buyer’s interest in corporate stock and was security agreement within UCC § 1-201(37). Estate of Hinds, 10 Cal. App. 3d 1021, 89 Cal. Rptr. 341, 1970 Cal. App. LEXIS 1912 (Cal. App. 2d Dist. 1970).

Security agreement describing collateral but containing no indication of obligation for which collateral was security and containing no agreement to grant a security interest could not be considered “security agreement” within UCC § 1-201(37) definition. Needle v. Lasco Industries, Inc., 10 Cal. App. 3d 1105, 89 Cal. Rptr. 593, 1970 Cal. App. LEXIS 1921 (Cal. App. 2d Dist. 1970).

Where reservation of title to gasoline had no other purpose than to secure payment for gasoline delivered, such reservation of title constituted “security interest”. Mann v. Clark Oil & Refining Corp., 302 F. Supp. 1376, 1969 U.S. Dist. LEXIS 13456 (E.D. Mo. 1969), aff'd, 425 F.2d 736, 1970 U.S. App. LEXIS 9551 (8th Cir. Mo. 1970).

Although agreements were called leases, trial court was correct in finding that they were security agreements since they contained provisions conferring right to purchase equipment at any time during 60-month term of leases for some of $58,000 less 75 percent of all sums paid as rental at rate of $1,288 per month, indicating that purchase option available at end of term was for $40, which was “nominal consideration”, relative to $58,000. Stanley v. Fabricators, 459 P.2d 467, 1969 Alas. LEXIS 162 (Alaska 1969).

Where inclusion of option to purchase exists in lease only to protect lessee in case lessor ceases business activities, this factor alone will not make lease security interest. First Nat'l Bank & Trust Co. v. Smithloff, 119 Ga. App. 284, 167 S.E.2d 190, 1969 Ga. App. LEXIS 1076 (Ga. Ct. App. 1969).

A floor plan security agreement did not cover any cars owned by third persons which were merely in the temporary possession of the dealer, as an agent, for sale purposes in which the dealer’s only interest was in a commission in the event that a sale was consummated. Cosgriff v. Liberty Nat'l Bank & Trust Co., 58 Misc. 2d 884, 296 N.Y.S.2d 517, 1968 N.Y. Misc. LEXIS 1005 (N.Y. Sup. Ct. 1968).

A security interest is an interest in property which secures payment for the performance of an obligation. Under Article 9 the UCC does not adopt a title or lien theory of security interests, and rights and obligations and remedies are not determined by the location or the title, but rather on function, compliance with statutory requirements, and the nature of the transaction. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

Where an instrument is called a lease, does not contain any option to purchase, and provides merely for an option to renew upon continuing to make substantial payments, the relationship is in fact a lease and not a security agreement. Sanders v. National Acceptance Co., 383 F.2d 606, 1967 U.S. App. LEXIS 4987 (5th Cir. 1967).

An actual lease of personal property which does not give the lessee any right to acquire or purchase is not a security device and accordingly, the lessee’s rights after the lessor’s repossession upon his default are not determined by Article 9 of the Code. Franklin Nat'l Bank v. Katzel (N.Y. Sup. Ct.).

A lease intended as security is one which has the ultimate intent of a sale. In re Atlanta Times, Inc., 259 F. Supp. 820, 1966 U.S. Dist. LEXIS 10458 (N.D. Ga. 1966), aff'd, 383 F.2d 606, 1967 U.S. App. LEXIS 4987 (5th Cir. 1967).

A lease of newspaper composing room equipment specifically stating it contained the entire agreement between the parties, providing that lessee acquired no interest in leased property except that of use, and giving lessor right to demand and take possession of property on termination of lease or in event of default was a bona fide lease, and lessor was not required to file a financing statement to preserve its right of possession after default. In re Atlanta Times, Inc., 259 F. Supp. 820, 1966 U.S. Dist. LEXIS 10458 (N.D. Ga. 1966), aff'd, 383 F.2d 606, 1967 U.S. App. LEXIS 4987 (5th Cir. 1967).

A financing statement executed on behalf of corporate debtor by a duly authorized officer who failed to show the capacity in which he signed, which was indexed solely in the names of the corporate creditor and debtor, substantially complied with the provisions of § 9-402. Plemens v. Didde-Glaser, Inc., 244 Md. 556, 224 A.2d 464, 1966 Md. LEXIS 464 (Md. 1966).

A lease of a machine priced at over $8,000 which contained an option to purchase under which the lessee could apply the monthly rental payments up to 75 percent of the value of the machine against the ultimate purchase price is not a security interest because the requirement that 25 percent of the purchase price be paid in cash clearly indicated that title would not be transferred for “a nominal consideration.” In re Wheatland Electric Products Co., 237 F. Supp. 820, 1964 U.S. Dist. LEXIS 7662 (W.D. Pa. 1964).

Since state highway department’s obligation to a partner for his share of the work done by the partnership on a completed highway construction project was not a contract right but was an account, an absolute assignment of the contract right to a co-partner for the payment of a past due obligation was not a security transaction. Spurlin v. Sloan, 368 S.W.2d 314, 1963 Ky. LEXIS 41 (Ky. 1963).

A lease which provides that payments or parts of payments thereunder shall be applied to the payment of the purchase price creates a security interest since upon compliance with the terms of the lease the lessee shall become or has the option of becoming the owner of the property for no additional consideration or a nominal payment. United Rental Equipment Co. v. Potts & Callahan Contracting Co., 231 Md. 552, 191 A.2d 570, 1963 Md. LEXIS 484 (Md. 1963).

A lease purchase agreement is a “security interest created by contract” if it specifies that a stated percentage of the rental is to be applied to the purchase price of the property. United Rental Equipment Co. v. Potts & Callahan Contracting Co., 231 Md. 552, 191 A.2d 570, 1963 Md. LEXIS 484 (Md. 1963).

The fact that a debtor has the power to terminate the relationship by not making further payments does not preclude the relationship from being a security agreement where as long as the debtor makes the payments and otherwise complies with the terms of the agreement the relationship will continue and the debtor will ultimately obtain the title. United Rental Equipment Co. v. Potts & Callahan Contracting Co., 231 Md. 552, 191 A.2d 570, 1963 Md. LEXIS 484 (Md. 1963).

A transaction by which the purchaser of an automobile executed a security agreement to a bank and the president of the automobile seller executed a security note to the bank (the transaction appearing to be the obligation of the president individually) could be shown to have been a “dealer” transaction where the bank customarily dealt with the seller in this way and had no transactions with the president in his individual capacity, and the bank issued its check in the transaction to the seller and not the president and gave the seller the usual dealer’s discount. Provident Tradesmens Bank & Trust Co. v. Pemberton, 24 Pa. D. & C.2d 720, 1961 Pa. Dist. & Cnty. Dec. LEXIS 181 (Pa. C.P.), aff'd, 196 Pa. Super. 180, 173 A.2d 780, 1961 Pa. Super. LEXIS 452 (Pa. Super. Ct. 1961).

An automobile manufacturer who delivered automobiles to its authorized dealer with reservation of title until actual payment therefor has the status of a holder of a security interest, and, where it failed to perfect such security interest, its interest is subordinate to the receiver of the dealer, who, as a lien creditor, is without notice of such unperfected security interest. Girard Trust Corn Exchange Bank v. Warren Lepley Ford, Inc., 12 Pa. D. & C.2d 351, 1957 Pa. Dist. & Cnty. Dec. LEXIS 311 (Pa. C.P. 1957).

Where a bank, under its wholesale credit plan, financed the purchase of automobiles by a dealer, which for automobiles to be used in its business, executed installment sales contracts as both buyer and seller, the subsequent acceptance of an assignment of such installment sales contracts by the bank constituted a novation whereby financing under the installment contract was substituted for financing under the wholesale credit plan and the bank became the holder of a security interest in the vehicles within the meaning of § Girard Trust Corn Exchange Bank v. Warren Lepley Ford, Inc., 13 Pa. D. & C.2d 119, 1957 Pa. Dist. & Cnty. Dec. LEXIS 64 (Pa. C.P. 1957).

The clause of a real estate mortgage which extends the coverage of the mortgage to things which are used in the operation of the business on the mortgaged premises gives the mortgagee security but it is not security interest within the Code because it relates to a real estate mortgage which is expressly excluded from the Code, and it is not to be brought within the Code merely because it happens to contain provisions relating to attached personal property. In re Royer's Bakery (Pa).

A “security interest” is generally defined as “an interest in personal property or fixtures which secures payment or performance of an obligation.” In re Royer's Bakery (Pa).

§ 75-1-204. Value.

Except as otherwise provided in Articles 3, 4, and 5, a person gives value for rights if the person acquires them:

  1. In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;
  2. As security for, or in total or partial satisfaction of, a preexisting claim;
  3. By accepting delivery under a preexisting contract for purchase; or
  4. In return for any consideration sufficient to support a simple contract.

HISTORY: Former §75-1-204 [Codes, 1942, § 41A:1-204; Laws, 1966, ch. 316, § 1-204, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions at §§75-1-205 and75-1-302(b), enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-204 is derived from former §75-1-201(44) [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Editor’s Notes —

A former §75-1-204 [Codes, 1942, § 41A:1-204; Laws, 1966, ch. 316, § 1-204, eff March 31, 1968; Repealed, Laws, 2010, ch. 506, § 44, eff July 1, 2010] related to reasonable time and seasonableness. For present similar provisions, see §75-1-205.

Cross References —

When holder takes commercial instrument for value, see §75-3-303.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-201.

6. Value.

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-201.

6. Value.

A lender’s forbearance from bringing suit to recover for the borrower’s selling of vehicles out of trust so that the borrower could remain in business and repay the money that he owed to the lender constituted the giving of “value” for the purpose of attachment of the lender’s security interest. Ford Motor Credit Co. v. State Bank & Trust Co., 571 So. 2d 937, 1990 Miss. LEXIS 692 (Miss. 1990).

In action by unpaid credit seller of oil supplies to debtor against bank, which held perfected security interest in debtor’s oil inventory, for lack of good faith in disposing of part of such inventory, court held (1) that under UCC § 2-702(3), plaintiff’s right to reclaim oil supplies sold to debtor was subject to bank’s right to dispose of such supplies, which were collateral for bank’s loan to debtor, as good-faith purchaser for value under UCC § 2-403(1); (2) that under UCC § 1-201(44)(b), bank had given value for debtor’s oil inventory which bank obtained under after-acquired property clause in debtor’s security agreement; (3) that UCC definition of good-faith purchaser did not, expressly or impliedly, include as element of such definition lack of knowledge of third-party claims, since good faith is merely defined in UCC § 1-201(19) as “honesty in fact in transaction concerned”; and (4) that under circumstances of case, bank’s knowledge that plaintiff was unpaid credit seller to debtor did not impair bank’s good faith in disposing of debtor’s oil inventory (collateral) to satisfy debtor’s obligation to bank. Shell Oil Co. v. Mills Oil Co., 717 F.2d 208, 1983 U.S. App. LEXIS 16002 (5th Cir. Miss. 1983).

Where (1) first corporation obtained financing from Texas bank for purchase of five airplanes, which it intended to resell, and Texas bank, in November, 1972, filed separate chattel mortgage for each plane with Federal Aviation Administration pursuant to federal law, (2) second corporation purchased the five planes from the first corporation and borrowed $18,000 from Kentucky bank on unsecured note to finance purchase, (3) second corporation, on default in payment for planes, entered into new agreement with first corporation for purchase of only one plane and return of other four, and also agreed not to file bill of sale with Federal Aviation Administration for plane purchased, (4) second corporation gave Kentucky bank, which held second corporation’s unsecured note for $18,000, security agreement which secured repayment of note by encumbering single plane purchased, and bank, in exchange for such security agreement, agreed not to sue on note and filed both security agreement and bill of sale for plane with Federal Aviation Administration, (5) second corporation defaulted in making payments on plane, and first corporation foreclosed on plane and sold it at auction under authority of its November, 1972 security agreement with Texas bank, which security agreement had been assigned to first corporation on its repayment of amount that it owed Texas bank, and (6) second corporation’s financer (Kentucky bank) sued first corporation for wrongful interference with its collateral by not respecting bank’s lien on repossessed plane, court held (1) that Kentucky bank, under UCC § 1-201(44)(b), gave “value” when it took security interest in plane purchased by second corporation to secure bank’s preexisting claim against such corporation, (2) that by virtue of UCC § 9-204(1), Uniform Commercial Code does not require that “consideration” in strict-law sense be given as prerequisite for security interest to attach to collateral, (3) that Kentucky bank’s security interest attached at time it gave value and was duly and properly perfected when bank filed instruments with Federal Aviation Administration, (4) that first corporation, under UCC § 1-201(37), had no valid security interest in plane that it repossessed and sold, since first corporation, by discharge of obligation underlying its security interest, had extinguished such security interest, and (5) that first corporation’s foreclosure on, and sale of, plane was wrongful and in derogation of rights of plaintiff Kentucky bank, which held valid security interest in plane. Bank of Lexington v. Jack Adams Aircraft Sales, Inc., 570 F.2d 1220, 1978 U.S. App. LEXIS 11865 (5th Cir. Miss. 1978).

Brokerage firm which received stock for account of customer and promptly credited sales price to customer’s account acquired stock in partial satisfaction of pre-existing claim (UCC § 1-201, subd 44(b)), and thus for value within meaning of UCC § 8-302. Colonial Secur., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 461 F. Supp. 1159, 1978 U.S. Dist. LEXIS 13844 (S.D.N.Y. 1978).

In action by finance corporation against bank involving conflicting security interests in same automobile, where (1) dealer’s invoice recited sale of automobile to wife and provided that she would pay $1,400 down and finance balance with plaintiff, (2) wife and husband executed (a) promissory note evidencing loan in amount of $2,995 from defendant, of which $1,400 was used as down payment for automobile and balance represented preexisting debt owed to defendant, and (b) security agreement which designated automobile as security for such loan, (3) husband, on giving dealer $1,400 down payment for automobile, executed installment sale contract in husband’s name only in favor of dealer, which dealer assigned to plaintiff, (4) defendant on August 9, 1972 filed financing statement that designated both husband and wife as debtors, (5) plaintiff on August 10, 1972 filed financing statement that designated only husband as debtor, (6) husband defaulted on payments due plaintiff, and (7) both husband and wife defaulted on note given to defendant, court held (1) installment sale contract assigned to plaintiff served as security agreement under UCC § 9-203(1)(b) and plaintiff acquired valid security interest in automobile, (2) plaintiff’s security interest in automobile validly attached under UCC § 9-204(1), since husband had “right” in automobile as matter of law and could use it for collateral, even though wife was vehicle’s registered owner, (3) under UCC § 9-402(1) and § 9-105(1)(d) financing statement filed by plaintiff was defective, since it only listed husband as “debtor” and did not refer to wife who actually owned automobile, (4) defendant’s security interest validly attached when both husband and wife signed security agreement granting security interest in automobile to defendant, (5) defendant’s financing statement complied with UCC § 9-402(1), since it was signed by both husband and wife, and thus defendant’s security interest in automobile was perfected, and (6) since defendant gave “value” under UCC § 1-201(44)(b) by taking security interest in automobile to secure defendant’s preexisting claim, defendant’s perfected security interest in vehicle extended to entire amount of defendant’s loan to husband and wife, and such perfected security interest was superior to plaintiff’s unperfected security interest. General Motors Acceptance Corp. v. Washington Trust Co., 120 R.I. 197, 386 A.2d 1096, 1978 R.I. LEXIS 656 (R.I. 1978).

Notwithstanding subsequent purchaser did not know that intermediate seller’s title was voidable due to intermediate seller’s obtaining truck on basis of check which was dishonored, subsequent purchaser did not have good title against original seller by status of “good faith purchaser for value” under UCC §§ 1-201(19), 1-201(44) and 2-403, where subsequent purchaser knew that intermediate seller was sophisticated about value of automotive equipment, subsequent purchaser had just received three dishonored checks from intermediate seller, subsequent purchaser had no reason to believe that intermediate seller would give equipment worth $13,500 or more to settle debt of $9,100, and subsequent purchaser let intermediate seller retain possession of truck. Graves Motors, Inc. v. Docar Sales, Inc., 414 F. Supp. 717, 1976 U.S. Dist. LEXIS 16238 (E.D. La. 1976).

Where debtor delivered shares of stock to bank as security for various loans, but obtained possession of stock from bank under false pretenses and then transferred stock to his father-in-law for purpose of securing or indemnifying father-in-law against any loss which he might sustain as result of his having signed indemnity agreement on behalf of debtor: (1) under UCC § 1-201(44), value was given for transfer of stock when father-in-law accepted stock as security for pre-existing claim, i. e., debtor’s contingent liability to contribute if father-in-law paid more than his proportionate share of obligation under indemnity agreement; (2) father-in-law was bona fide purchaser under UCC § 8-302; and (3) under UCC § 8-301(2), he acquired stock free of bank’s adverse claim. Prisbrey v. Noble, 505 F.2d 170, 1974 U.S. App. LEXIS 6220 (10th Cir. Utah 1974).

In action to recover value of stock certificates which were stolen from broker, accepted by bank as collateral for loan, and subsequently sold to satisfy debt, testimony by bank president that, inter alia, prospective borrower offered certificates as collateral for loan, that certificates were issued to and endorsed by broker with transferee’s name left blank, that borrower executed affidavit stating that he was rightful owner of certificates, that bank contacted issuing corporation and verified listing of stock in broker’s name, and that bank sent certificates with borrower’s name added as transferee to issuing corporation for issuance of new certificates in borrower’s name, which were issued and held by bank, established prima case that bank was bona fide purchaser of stock certificates under UCC § 8-302; bank became “purchaser for value” when it accepted stock certificates as collateral. Fidelity & Casualty Co. v. Key Biscayne Bank, 501 F.2d 1322, 1974 U.S. App. LEXIS 6614 (5th Cir. Fla. 1974).

In transaction whereby sole shareholder of small corporation sold all his shares of stock to third person and corporation participated in transaction with purchaser as comaker of promissory note and written security agreement relating to corporate shares and various physical assets of corporation, corporation’s execution of promissory note and security agreement was supported by sufficient consideration since seller, as part of sale transaction, agreed to refrain from competition with corporation, granted corporation option to purchase building in which business was conducted, and promised to remain on corporation’s board of directors. Miller's Shoes & Clothing v. Hawkins Furniture & Appliances, Inc., 300 Minn. 460, 221 N.W.2d 113, 1974 Minn. LEXIS 1365 (Minn. 1974).

Section 1-201(44)(b) provides that an antecedent debt is sufficient consideration for the execution and giving of a security interest. United States v. Pirnie, 339 F. Supp. 702, 1972 U.S. Dist. LEXIS 15049 (D. Neb. 1972), aff'd, 472 F.2d 712, 1973 U.S. App. LEXIS 11880 (8th Cir. Neb. 1973).

Automobile dealer who obtained automobiles from seller in exchange for two uncollectible checks previously issued to dealer by seller was “purchaser for value” of automobiles. National Car Rental v. Fox, 18 Ariz. App. 160, 500 P.2d 1148, 1972 Ariz. App. LEXIS 809 (Ariz. Ct. App. 1972).

“Value” is given for rights if they are acquired as security for preexisting debt. United States v. Big Z Warehouse, 311 F. Supp. 283, 1970 U.S. Dist. LEXIS 12207 (S.D. Ga. 1970).

§ 75-1-205. Reasonable time; seasonableness.

Whether a time for taking an action required by the Uniform Commercial Code is reasonable depends on the nature, purpose, and circumstances of the action.

An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

HISTORY: Former §75-1-205 [Codes, 1942, § 41A:1-205; Laws, 1966, ch. 316, § 1-205, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] is now found in comparable provisions at §75-1-303, enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010; Present §75-1-205 is derived from former §75-1-204(2) and (3) [Codes, 1942, § 41A:1-204; Laws, 1966, ch. 316, § 1-204, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Editor’s Notes —

A former §75-1-205 [Codes, 1942, § 41A:1-205; Laws, 1966, ch. 316, § 1-205, eff March 31, 1968; Repealed, Laws, 2010, ch. 506, § 44, eff July 1, 2010] related to course of dealing and usage of trade. For present similar provisions, see §75-1-303.

RESEARCH REFERENCES

ALR.

Duty of collecting bank as to time of presentment with respect to draft or bill of exchange for acceptance. 39 A.L.R.2d 1296.

Time within which buyer of goods must give notice in order to recover damages for seller’s breach of express warranty. 41 A.L.R.2d 812.

Time, place and manner of buyer’s inspection of goods under UCC § 2-513. 36 A.L.R.4th 726.

Am. Jur.

11 Am. Jur. 2d, Bills and Notes § 293.

15A Am. Jur. 2d, Commercial Code § 25.

17A Am. Jur. 2d, Contracts §§ 466-468.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:156 (Instruction to jury; time for shipment or delivery in absence of agreement).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:61 et seq. (Time).

CJS.

13 C.J.S., Carriers §§ 396, 397, 437.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1-10. [Reserved for future use.]

II. UNDER FORMER §75-1-204.

11. In general.

12. Question of law or fact.

13. Express time provision.

14. —“Manifestly unreasonable.”

15. Particular acts; in general.

16. —Acceptance.

17. —Inspection.

18. —Negotiation.

19. —Rejection or revocation.

20. Particular circumstances; disability of party.

I. UNDER CURRENT LAW.

1-10. [Reserved for future use.]

II. UNDER FORMER § 75-1-204.

11. In general.

Reasonable time for taking any action is dependent on the nature, purpose and circumstances of the action. White Devon Farm v. Stahl, 88 Misc. 2d 961, 389 N.Y.S.2d 724, 1976 N.Y. Misc. LEXIS 2784 (N.Y. Sup. Ct. 1976).

12. Question of law or fact.

Where facts are not substantially in dispute, question of what is a reasonable time to inspect and reject goods that fail to conform to contract specifications is a matter to be resolved by the court. White Devon Farm v. Stahl, 88 Misc. 2d 961, 389 N.Y.S.2d 724, 1976 N.Y. Misc. LEXIS 2784 (N.Y. Sup. Ct. 1976).

Whether goods were substantially impaired by nonconformity under UCC § 2-608(1) and whether buyer’s revocation of acceptance under UCC § 2-608(2) was given within reasonable time are questions of fact for jury. Under UCC § 1-204(2), what is reasonable time for taking any action under the code depends on nature, purpose, and circumstances of such action. Conte v. Dwan Lincoln-Mercury, Inc., 172 Conn. 112, 374 A.2d 144, 1976 Conn. LEXIS 880 (Conn. 1976).

Reasonableness is primarily a question for the fact finder. Hane v. Exten, 255 Md. 668, 259 A.2d 290, 1969 Md. LEXIS 747 (Md. 1969).

13. Express time provision.

Where contract between manufacturer and distributor for sale of certain product was to run for “initial term,” defined to commence on date of execution and to “continue for a period of 12 months from the date of the first shipment” of specified product, and granted distributor right to renew for successive 12-month periods provided distributor maintained certain level of purchases, but where no such specified product was shipped or ordered prior to manufacturer’s repudiation of contract a little more than one year after execution of contract, “initial term,” and thus contract, did not expire one year after date of execution; question as to what constituted “reasonable time” for distributor’s performance under contract depended upon circumstances of transaction and course of performance and, in view of dispute which had arisen between parties, it was not unreasonable for distributor to refrain from ordering specified product until contract renegotiations were resolved. Copylease Corp. of America v. Memorex Corp., 403 F. Supp. 625, 1975 U.S. Dist. LEXIS 15329 (S.D.N.Y. 1975).

Where a sales contract expressly creates an unlimited express warranty of merchantability which in a separate clause purports to indirectly modify the warranty without expressly mentioning the word merchantability, the language creating the unlimited express warranty must prevail over the time limitation insofar as the latter modifies the warranty, and the express warranty of merchantability includes latent shading defects and defendants may claim for such defects not reasonably discoverable within the time limits established by the contract if plaintiff was notified of these defects within a reasonable time after they were or should have been discovered. Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398, 297 N.Y.S.2d 108, 244 N.E.2d 685, 1968 N.Y. LEXIS 924 (N.Y. 1968).

This section permits parties to a contract of sale and purchase to fix the time within which notice of defective goods must be given by seller to purchaser so long as the time is reasonable. Q. Vandenberg & Sons, N. V. v. Siter, 204 Pa. Super. 392, 204 A.2d 494, 1964 Pa. Super. LEXIS 600 (Pa. Super. Ct. 1964).

14. —“Manifestly unreasonable.”

Notwithstanding contract specified that buyer had thirty days to inspect fabricated pipe, which constituted goods within meaning of UCC § 2-105, trial court erred in holding buyer’s performance bond liable by reason of buyer’s failure to reject allegedly defective pipe within thirty days of delivery: (1) under UCC § 2-607, buyer was required to notify seller of breach of warranty within a reasonable time after actual or constructive discovery of defects; (2) UCC § 1-204 provides that whenever UCC requires action within reasonable time, any time which is not manifestly unreasonable may be fixed by agreement; (3) seller guaranteed workmanship and material in contract provided claim was made within one year from shipment; and (4) buyer made claim within one year following shipment. United States Fidelity & Guaranty Co. v. North American Steel Corp., 335 So. 2d 18, 1976 Fla. App. LEXIS 13850 (Fla. Dist. Ct. App. 2d Dist. 1976).

A time limitation providing that a buyer unqualifiedly accepts all material and waives all claims in respect thereto unless he gives notice of a claim within 15 days after delivery is “manifestly unreasonable” and invalid when applied to latent defects not discoverable on ordinary inspection within the 15-day time limitation. Neville Chemical Co. v. Union Carbide Corp., 294 F. Supp. 649, 1968 U.S. Dist. LEXIS 8017 (W.D. Pa. 1968), aff'd in part, vacated in part, 422 F.2d 1205, 1970 U.S. App. LEXIS 10811 (3d Cir. Pa. 1970).

15. Particular acts; in general.

Contract under which seller agreed to manufacture cooling systems for incorporation into electronic countermeasure (ECM) pods for United States Air Force was breached by buyer when it failed to furnish seller with source-control drawings for such systems within commercially reasonable time implied in contract by UCC § 2-309(1) and UCC § 1-204(2). Westinghouse Electric Corp. v. Garrett Corp., 437 F. Supp. 1301, 1977 U.S. Dist. LEXIS 14238 (D. Md. 1977), aff'd, 601 F.2d 155, 1979 U.S. App. LEXIS 13228 (4th Cir. Md. 1979).

Where contract between manufacturer and distributor for sale of certain product was to run for “initial term,” defined to commence on date of execution and to “continue for a period of 12 months from the date of the first shipment” of specified product, and granted distributor right to renew for successive 12-month periods provided distributor maintained certain level of purchases, but where no such specified product was shipped or ordered prior to manufacturer’s repudiation of contract a little more than one year after execution of contract, “initial term,” and thus contract, did not expire one year after date of execution; question as to what constituted “reasonable time” for distributor’s performance under contract depended upon circumstances of transaction and course of performance and, in view of dispute which had arisen between parties, it was not unreasonable for distributor to refrain from ordering specified product until contract renegotiations were resolved. Copylease Corp. of America v. Memorex Corp., 403 F. Supp. 625, 1975 U.S. Dist. LEXIS 15329 (S.D.N.Y. 1975).

Where default occurred in payment of an automobile retail instalment contract in August of 1965 but the security holder did not make demand upon the dealer for performance of its repurchase agreement until October of 1966, and it was the custom and usage that the lending institution is required to repossess and return the vehicle for repurchase within a reasonable time after default and that 90 days is regarded as a reasonable time, the security holder could not enforce the repurchase agreement which contained no provision inconsistent with the custom and usage. Valley Nat'l Bank v. Babylon Chrysler-Plymouth, Inc., 53 Misc. 2d 1029, 280 N.Y.S.2d 786, 1967 N.Y. Misc. LEXIS 1452 (N.Y. Sup. Ct.), aff'd, 28 A.D.2d 1092, 284 N.Y.S.2d 849, 1967 N.Y. App. Div. LEXIS 7723 (N.Y. App. Div. 2d Dep't 1967).

16. —Acceptance.

Where contract for sale of tractor was not complete until defendant accepted by picking up tractor, and defendant did not inform seller that he had picked up tractor until approximately two to four weeks after he had done so, evidence would support finding that defendant failed to give notice of his acceptance within reasonable time, permitting seller to treat offer as having lapsed under Code § 2-206(2). Petersen v. Thompson, 264 Ore. 516, 506 P.2d 697, 1973 Ore. LEXIS 484 (Or. 1973).

17. —Inspection.

There is no inflexible rule that the time to inspect goods to determine their conformance with contract specifications must coincide with passage of title. White Devon Farm v. Stahl, 88 Misc. 2d 961, 389 N.Y.S.2d 724, 1976 N.Y. Misc. LEXIS 2784 (N.Y. Sup. Ct. 1976).

18. —Negotiation.

Where letter of credit provided that drafts issued against it must be negotiated by specified date and that the credit was subject to the Uniform Customs And Practice for Documentary Credits (1962 revision), and where provision of Uniform Customs And Practice for Documentary Credits stated only that documents must be presented within “reasonable time” after issuance, court, in holding that timeliness of presentment of draft was issue of material fact, would take note of UCC § 1-204(2), dealing with reasonableness of time for taking any action, and UCC § 3-503(2), dealing with time for presenting commercial paper. Flagship Cruises, Ltd. v. New England Merchants Nat'l Bank, 569 F.2d 699, 1978 U.S. App. LEXIS 12950 (1st Cir. Mass. 1978).

19. —Rejection or revocation.

In proceeding based on seller’s alleged breach of contract to sell buyer 4,150 tons of Class I steel, which matter was submitted to arbitration governed by Uniform Commercial Code, where arbitrators found that such steel was received for buyer’s inspection on November 8, 1974, that buyer did not accept steel because it did not conform to contract of sale, and that buyer orally rejected steel on December 4, 1974, and gave seller written notice of such rejection on December 12, 1974, buyer’s rejection was proper and seller received timely notification thereof under UCC § 2-602(1) and UCC § 1-204(2). North American Steel Corp. v. Siderius, Inc., 75 Mich. App. 391, 254 N.W.2d 899, 1977 Mich. App. LEXIS 1115 (Mich. Ct. App. 1977).

In action arising out of auction sale of mare described in sales catalog as “barren,” but which subsequently “slipped” a dead foal, buyer made effective revocation within reasonable time under UCC §§ 1-204 and 2-608 where buyer wrote letters five days after mare “slipped” to seller and to sales director of organization which conducted sale indicating that the sale should be “null and void” on basis of misrepresentation of mare in sales catalog. Keck v. Wacker, 413 F. Supp. 1377, 1976 U.S. Dist. LEXIS 14786 (E.D. Ky. 1976).

Trial court properly submitted to jury issue of whether buyer revoked acceptance of cattle herd within reasonable time under UCC §§ 1-204 and 2-608 and buyer failed to persuade jury that his revocation occurred within reasonable time, notwithstanding cattle were nonconforming, value of herd was substantially impaired and buyer gave notice of nonconformity 17 days after delivery, where, prior to notice of revocation given 15 months later after failure of adjustment negotiations, herd was underfed, herd suffered weight and death loss, and introduction of bulls into herd caused pretermission of registration. Sylvester v. Watkins, 538 S.W.2d 827 (Tex. Civ. App. 1976), ref. n.r.e. (Nov. 10, 1976).

Mere fact that because of seller’s action the passing of title to stud horse was accelerated by some six months did not affect timing of obligation to inspect horse to determine its fitness for breeding purposes or decision to accept or reject the horse since, pursuant to agreement, it was only in the two-month period prior to stated date for passing of title and after end of racing season that seller was to have horse tested to determine his fitness for breeding purposes, actual inspection took place during such time and horse sustained no serious bodily injury during last months of racing; inspection and rejection in month before title would have passed absent acceleration was timely. White Devon Farm v. Stahl, 88 Misc. 2d 961, 389 N.Y.S.2d 724, 1976 N.Y. Misc. LEXIS 2784 (N.Y. Sup. Ct. 1976).

Whether goods were substantially impaired by nonconformity under UCC § 2-608(1) and whether buyer’s revocation of acceptance under UCC § 2-608(2) was given within reasonable time are questions of fact for jury. Under UCC § 1-204(2), what is reasonable time for taking any action under the code depends on nature, purpose, and circumstances of such action. Conte v. Dwan Lincoln-Mercury, Inc., 172 Conn. 112, 374 A.2d 144, 1976 Conn. LEXIS 880 (Conn. 1976).

In action between purchaser of nonconforming mobile home and assignee of security agreement, purchaser’s revocation of acceptance occurred within reasonable time under UCC §§ 2-608 and 1-204(2) where purchaser relied on dealer’s promises to make corrections while retaining option of cancellation; under UCC § 2-711(1) and (3) purchaser retained security interest in price paid and was allowed to recover so much of price as had been paid. Frontier Mobile Home Sales, Inc. v. Trigleth, 256 Ark. 101, 505 S.W.2d 516, 1974 Ark. LEXIS 1391 (Ark. 1974).

Buyers’ revocation of acceptance of automobile 9 months after sale of automobile and 7 months after filing of suit for rescission of sale contract was within “reasonable time” when balanced against obligation of automobile dealer under contract. Moore v. Howard Pontiac-American, Inc., 492 S.W.2d 227, 1972 Tenn. App. LEXIS 309 (Tenn. Ct. App. 1972).

A reasonable time in which to make a rescission depends on the facts and circumstances of a particular case. Reece v. Yeager Ford Sales, 155 W. Va. 453, 184 S.E.2d 722, 1971 W. Va. LEXIS 215 (W. Va. 1971).

Where goods are effectively rejected for breach of warranty, the burden of proving they conform presumably remains on the seller, whereas upon acceptance the buyer has the burden to establish any breach. Miron v. Yonkers Raceway, Inc., 400 F.2d 112, 1968 U.S. App. LEXIS 5807 (2d Cir. N.Y. 1968).

20. Particular circumstances; disability of party.

In an action brought to recover for injuries sustained by plaintiff as a result of the unauthorized registration of stock owned by her in the two defendant companies, plaintiff notified each corporate issuer within a reasonable time after she had noticed that her shares had been transferred as a result of forgery as provided by UCC 8-4-4, where it appeared that plaintiff was a 94-year-old woman who, while a guest in a home, had allowed one of her hosts, whom she trusted, to handle her affairs over a 2 year period, and in light of plaintiff’s reliance on the perpetrator of the acts which deprived her of title to her securities and in light of her own age and decrepitude, plaintiff could not be charged with unreasonable action in not checking her accounts from time to time and consequently plaintiff did not have required statutory notice of host’s dishonesty until she left his residence. Weller v. American Tel. & Tel. Co., 290 A.2d 842, 1972 Del. Ch. LEXIS 121 (Del. Ch. 1972).

§ 75-1-206. Presumptions.

Whenever the Uniform Commercial Code creates a “presumption” with respect to a fact, or provides that a fact is “presumed,” the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.

HISTORY: Former §75-1-206 [Codes, 1942, § 41A:1-206; Laws, 1966, ch. 316, § 1-206; Laws, 1996, ch. 468, § 54, eff from and after July 1, 1996] was repealed by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010. Present75-1-206 is derived from former §75-1-201(31) [Codes, 1942, § 41A:1-201; Laws, 1966, ch. 316, § 1-201; Laws, 1977, ch. 452, § 2; Laws, 1990, ch. 384, § 45; Laws, 1992, ch. 420, § 69; Laws, 1994, ch. 445, § 3; Laws, 2001, ch. 495, § 5; Laws, 2006, ch. 527, § 41; Laws, 2007, ch. 355, § 34; Laws, 2007, ch. 381, § 34, eff from and after passage (approved Mar. 15, 2007); Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

ALR.

Applicablility and application, in civil case, of presumption of addressee’s receipt of telegram. 24 A.L.R.3d 1434.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II UNDER FORMER §75-1-201.

6. Presumption or presumed.

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II UNDER FORMER § 75-1-201.

6. Presumption or presumed.

In action to enforce guarantor’s liability on promissory note, trial court did not err in instructing jury that sole question was whether or not defendant had signed guarantee agreement where, inter alia, defendant did not raise issue of effectiveness of her signature, where jury was presented with guarantee agreement which contained what appeared to be defendant’s signature, raising presumption of genuineness under UCC § 3-307, and where, under UCC § 3-416, guarantee agreement obligated defendant to repay loan, interest, and attorneys’ fees. Wolfe v. Madison Nat'l Bank, 30 Md. App. 525, 352 A.2d 914, 1976 Md. App. LEXIS 571 (Md. Ct. Spec. App. 1976).

Blanket denials failed to overcome presumption of receipt of goods supported by receipted freight bill, check for freight charges, letter of notification, and actual delivery of merchandise. Eazor Express, Inc. v. Lanza, 60 Misc. 2d 686, 303 N.Y.S.2d 571, 1969 N.Y. Misc. LEXIS 1288 (N.Y. County Ct. 1969).

§ 75-1-207. Repealed.

Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010.

§75-1-207. [Codes, 1942, § 41A:1-207; Laws, 1966, ch. 316, § 1-207; Laws, 1992, ch. 420, § 70, eff from and after January 1, 1993].

Editor’s Notes —

Former §75-1-207 related to performance or acceptance under reservation of rights. Present §75-1-308 is derived from and contains identical provisions to those found in former §75-1-207.

§ 75-1-208. Repealed.

Repealed by Laws of 2010, ch. 506, § 44, effective from and after July 1, 2010.

§75-1-208. [Codes, 1942, § 41A:1-208; Laws, 1966, ch. 316, § 1-208, eff March 31, 1968]

Editor’s Notes —

Former §75-1-208 [Codes, 1942, § 41A:1-208; Laws, 1966, ch. 316, § 1-208, eff March 31, 1968], which related to the option to accelerate at will, was repealed by Laws of 2010, ch 506, § 44, effective July 1, 2010. Present75-1-309 was derived from former75-1-208.

Part 3. Territorial Applicability and General Rules.

§ 75-1-301. Territorial application of the code; parties’ power to choose applicable law.

Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.Failing such agreement, the Uniform Commercial Code applies to transactions bearing an appropriate relation to this state.However, the law of the State of Mississippi shall always govern the rights and duties of the parties in regard to disclaimers of implied warranties of merchantability or fitness, limitations of remedies for breaches of implied warranties of merchantability or fitness, or the necessity for privity of contract to maintain a civil action for breach of implied warranties of merchantability or fitness notwithstanding any agreement by the parties that the laws of some other state or nation shall govern the rights and duties of the parties.

Where one (1) of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:

Rights of creditors against sold goods (Section 75-2-402).

Applicability of the Article on Leases (Sections 75-2A-105 and 75-2A-106).

Applicability of the Article on Bank Deposits and Collections (Section 75-4-102).

Governing law in the Article on Funds Transfers (Section 75-4A-507). Letters of credit (Section 75-5-116).

Applicability of the Article on Investment Securities (Section 75-8-110).

Law governing perfection, the effect of perfection or nonperfection, and the priority of security interests and agricultural liens (Sections 75-9-301 through 75-9-307).

HISTORY: Present §75-1-301 is derived from former §75-1-105 [Codes, 1942, § 41A:1-105; Laws, 1966, ch. 316, § 1-105; Laws, 1977, ch. 452, § 1; Laws, 1991, ch. 316, § 1; Laws, 1994, ch. 445, § 2; Laws, 1996, ch. 460, § 19; Laws, 1996, ch. 468, § 53; Laws, 2001, ch. 495, § 4, eff from and after Jan. 1, 2002; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

RESEARCH REFERENCES

ALR.

Conflict of laws as to conditional sales. 13 A.L.R.2d 1312.

Conflict of laws as to elements and measure of damages recoverable for breach of contract. 50 A.L.R.2d 227.

What law governs liability of manufacturer or seller for injury caused by product sold. 76 A.L.R.2d 130.

What constitutes “reasonable” or “appropriate” relation to a transaction within the meaning of Uniform Commercial Code § 1-105(1). 63 A.L.R.3d 341.

Validity and effect of stipulation in contract to effect that it shall be governed by law of particular state which is neither place where contract is made nor place where it is to be performed. 16 A.L.R.4th 967.

Unconscionability, under UCC § 2-302 or § 2-719(3), of disclaimer of warranties or limitation or exclusion of damages in contract subject to UCC Article 2 (Sales). 38 A.L.R.4th 25.38 A.L.R.4th 25.

Products liability: liability of manufacturer or seller as affected by failure of subsequent party in distribution chain to remedy or warn against defect of which he knew. 45 A.L.R.4th 777.

Am. Jur.

4 Am. Jur. 2d, Alteration of Instruments § 2.

15A Am. Jur. 2d, Commercial Code § 11.

16 Am. Jur. 2d, Conflict of Laws §§ 2, 55.

38 Am. Jur. 2d, Guaranty § 8.

43 Am. Jur. 2d, Insurance § 335.

Answer; defense; choice of law clause void; no reasonable relation to designated state, 6 Am. Jur. Pl & Pr Forms, (Rev) General Provisions, Form 1:1.

5 Am. Jur. Legal Forms 2d, Conflict of Laws § 65:11 et seq. (contractual provisions specifying governing law).

Choice of law, 18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:31 et seq.

3 Am. Jur. Proof of Facts, Conflict of Laws, Proof Nos. 1, 2 (testimony as to laws of foreign jurisdiction).

21 Am. Jur. Proof of Facts 2d, Law of Foreign Jurisdiction, § 19 et seq. (proof of law of foreign country).

4 Am Law Prod Liab 3d, What Law Governs § 46:20.

CJS.

17 C.J.S., Contracts § 13 et seq.

Law Reviews.

McMurtray, A Constitutional Analysis of the Mississippi Commercial Code’s Conflict of Laws Provision. 53 Miss. L. J. 619.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1. Choice of applicable law by agreement.

2.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-105.

6. In general.

7. Choice of applicable law by agreement.

8. —Reasonable relation.

9. Choice of applicable law in absence of agreement.

10. —Appropriate relation.

I. UNDER CURRENT LAW.

1. Choice of applicable law by agreement.

Asset purchase agreement (APA), which included a non-competition provision, was sufficiently connected to New York to satisfy the reasonable relation test, Miss. Code Ann. §75-1-30, and, as such, New York contract law applied because the APA contained a choice of law provision naming New York, most of the negotiations over the APA took place in New York, the APA was drafted by law firms in New York, and the buyer’s board of directors approved the APA and the subsequent purchase at a meeting in New York; thus, any alleged oral modification of the APA was barred by N.Y. Gen. Oblig. Law § 15-301(1). Asbury MS Gray-Daniels, L.L.C. v. Daniels, 812 F. Supp. 2d 771, 2011 U.S. Dist. LEXIS 93716 (S.D. Miss. 2011).

2.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-105.

6. In general.

In suit by hospital cashier who was injured while operating cash register manufactured by defendant manufacturer-seller after it had been delivered by buyer to hospital, court held, with respect to plaintiff’s breach-of-implied-warranty claims, (1) that under Mississippi UCC § 1-105(1), which sets forth specific conflict-of-laws rule for warranty claims, Mississippi law governed the rights and duties of parties with regard to (a) disclaimers of implied warranties of merchantability or fitness, (b) limitation of remedies for breach of such warranties, and (c) necessity of privity of contract to maintain action for breach of warranty; (2) that rule of Mississippi UCC § 1-105(1), as expressly stated therein, applied notwithstanding agreement by parties that laws of another state or of foreign nation governed parties’ rights and duties; (3) that under Mississippi UCC § 1-105(1), application of Mississippi substantive law on privity of contract, warranty disclaimers, and limitation of remedies in warranty action was authorized only if transaction that gave rise to warranty claim bore some reasonable and appropriate relation to Mississippi; (4) that facts of case showed that transactions that gave rise to plaintiff’s warranty claim did not bear any relation to Mississippi and did not warrant application of Mississippi substantive law; (5) that under conflict-of-law “center-of-gravity” doctrine, Alabama had most significant relation to transactions in suit; (6) that since Alabama’s breach-of-warranty statute of limitations (see Alabama UCC § 2-725(1) and (2)) would be regarded as procedural, Mississippi’s breach-of-warranty statute of limitations (see Mississippi UCC § 2-725(1) and (2)) governed case; and (7) that under Mississippi UCC § 2-725(1) and (2), plaintiff’s warranty claim was barred because tender of delivery of cash register that caused plaintiff’s injuries had occurred more than six years before accrual of plaintiff’s cause of action. Jackson v. National Semi-Conductor Data Checker/DTS, Inc., 660 F. Supp. 65, 1986 U.S. Dist. LEXIS 17685 (S.D. Miss. 1986).

In action by buyer of computer system for damages for system’s failure to function properly, court held (1) that parties’ designation under UCC § 1-105(1) of Massachusetts law to govern any claims of breach of their sales contract was immaterial, since such claims were governed by limitation period contained in UCC § 2-725(1), which was adopted by both New York and Massachusetts; (2) that contract in suit was not one for performance of services, as alleged by the buyer, but was one for purchase of goods within meaning of UCC § 2-106(1); (3) that action for breach of contract was not timely commenced by buyer, since breach occurred in January, 1971, and buyer did not commence suit until August 14, 1975, which was more than four years after cause of action accrued; (4) that action for fraud in the inducement was timely commenced, since the applicable statute of limitations under New Yorklaw for such action is either six years from commission of the fraud, or two years from discovery; (5) that UCC § 2-725(2), which deals with warranty that explicitly extends to future performance and provides that discovery of breach must await such performance, did not apply, since warranty under UCC § 2-725(2) must expressly refer to the future and implied warranty alleged by buyer, by its very nature, did not do so; and (6) that seller’s attempts to repair computer system did not toll running of statute of limitations prescribed by UCC § 2-725(1). Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

In action by buyer of computer system for damages for system’s failure to function properly, court held (1) that parties’ designation under UCC § 1-105(1) of Massachusetts law to govern their sales contract was immaterial, since buyer’s breach-of-contract claims were governed by limitation period contained in UCC § 2-725(1), which had been adopted by both New York and Massachusetts; (2) that contract in suit was not one for performance of services, as alleged by buyer, but was one for purchase of goods within meaning of UCC § 2-106(1); (3) that action was not timely commenced by buyer, since breach had occurred in January, 1971 and buyer did not commence suit until August 14, 1975, which was more than four years after cause of action accrued; (4) that UCC § 2-725(2), which deals with warranty that explicitly extends to future performance and provides that discovery of breach must await such performance, did not apply, since warranty under UCC § 2-725(2) must expressly refer to the future and implied warranty alleged by buyer, by its very nature, did not do so; and (5) that seller’s attempts to repair computer system did not toll running of statute of limitations prescribed by UCC § 2-725(1). Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765, 1978 U.S. Dist. LEXIS 15483 (E.D.N.Y. 1978), aff'd in part and rev'd in part, 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

In debtor’s action to enjoin creditor from enforcing two security agreements against collateral therefor, where evidence showed (1) that debtor and creditor had entered into such security agreements and that one of them had been perfected in several states, including New Jersey, (2) that second security agreement had in no way diminished validity of first security agreement, (3) that debtor’s reason for seeking injunction against enforcement of such security agreements was creditor’s alleged oral agreement to refrain from foreclosing on any debts due it in order to allow debtor to attain a healthy operating condition, (4) that creditor, after concluding that debtor could not attain a healthy operating condition, formally declared debtor to be in default under such security agreements and to owe creditor over $27 million in principal debts and (5) that creditor had then accelerated maturity of all of debtor’s term obligations and demanded payment of all principal and interest on debtor’s demand obligations, court held (1) that debtor’s claim of alleged oral agreement to refrain from foreclosure was unsupported by the evidence, (2) that under (a) UCC § 1-105(1), dealing with power of parties to choose law applicable to their transactions, (b) UCC § 9-102(1), which intends that substantive law of place where collateral is located governs without regard to possible contracts in other jurisdictions, and (c) UCC § 9-103, which lays down numerous choice-of-law rules regarding creation, perfection, and priorities in multistate security-agreement transactions, law of New Jersey governed security agreements in suit, (3) that security interests created by security agreements in suit were valid, (4) that debtor had failed to show any reason for granting injunctive relief against their enforcement and (5) that on debtor’s default, creditor under UCC § 9-501(1), as adopted in New Jersey, had right to reduce its claim to judgment and to foreclose on the collateral. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1978 U.S. Dist. LEXIS 17909 (D.N.J. 1978).

Under UCC § 1-105(1), the parties are free to choose the law that they wish to govern the transaction. However, the provisions of Article 9 of the Uniform Commercial Code contain several conflict-of-law rules. Among these rules are transactions to which UCC §§ 9-102(1) and 9-103 apply. In these circumstances, regardless of UCC § 1-105(1), the law governing the transaction will be the mandatory provisions that are stated in UCC §§ 9-102(1) and 9-103. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1978 U.S. Dist. LEXIS 17909 (D.N.J. 1978).

As to sale made in Pennsylvania, Pennsylvania law is controlling as to whether there is a warranty. Duckworth v. Ford Motor Co., 211 F. Supp. 888, 1962 U.S. Dist. LEXIS 4630 (E.D. Pa. 1962), aff'd in part and rev'd in part, 320 F.2d 130, 1963 U.S. App. LEXIS 4572 (3d Cir. Pa. 1963).

The Uniform Commercial Code does not determine what law governs a claim for damages for tort. Folk v. York-Shipley, Inc., 239 A.2d 236, 1968 Del. LEXIS 205 (Del. 1968).

UCC Sec 1-105 has been cited as illustrative of the modern flexible approach to the selection of the applicable law where the question was whether the law of the state where the tort was committed should govern. Casey v. Manson Constr. & Engineering Co., 247 Ore. 274, 428 P.2d 898, 1967 Ore. LEXIS 474 (Or. 1967).

7. Choice of applicable law by agreement.

The court enforced a forum-selection clause in a contract that called for the application of Louisiana law, notwithstanding the contention that the enforcement of the forum-selection clause would violate the public policy of Mississippi because it would violate the statute, as the Mississippi party to the contract assented to and agreed to sign a form contract printed by the Louisiana party to the contract and made no objections to the contract. Tel-Com Mgmt., Inc. v. Waveland Resort Inns, Inc., 782 So. 2d 149, 2001 Miss. LEXIS 20 (Miss. 2001).

Under Uniform Commercial Code, parties’ contractual choice of law will be upheld unless transaction lacks normal connection with state whose law was selected; thus, only when it is shown that contact did not occur in normal course of transaction, but was contrived to validate parties’ choice of law, will relationship be held unreasonable. IHP Indus. v. Permalert, Esp., 947 F. Supp. 257, 1996 U.S. Dist. LEXIS 17744 (S.D. Miss. 1996).

It is established principle under UCC § 1-105, that parties to contract may consent, in absence of strong countervailing public policy of state, to law to be applied with respect to contract. Nederlandse Draadindustrie NDI B.V. v. Grand Pre-Stressed Corp., 466 F. Supp. 846, 1979 U.S. Dist. LEXIS 14015 (E.D.N.Y.), aff'd, 614 F.2d 1289, 1979 U.S. App. LEXIS 10715 (2d Cir. N.Y. 1979).

Under UCC § 1-105(1), the parties are free to choose the law that they wish to govern the transaction. However, the provisions of Article 9 of the Uniform Commercial Code contain several conflict-of-law rules. Among these rules are transactions to which UCC §§ 9-102(1) and 9-103 apply. In these circumstances, regardless of UCC § 1-105(1), the law governing the transaction will be the mandatory provisions that are stated in UCC §§ 9-102(1) and 9-103. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1978 U.S. Dist. LEXIS 17909 (D.N.J. 1978).

UCC § 1-105(1) affirmatively states the right of the parties to a multistate transaction, or a transaction involving foreign trade, to choose their own law. This right is subject to the firm rules stated in the six UCC sections referred to in UCC § 1-105(2) and is limited to jurisdictions to which the transaction bears a “reasonable relation.” Under the test of what is a “reasonable relation,” the law chosen is generally that of a jurisdiction wherein a sufficiently significant part of the making or performance of the contract occurred or will occur. However, an agreement as to choice of law will sometimes take effect as a shorthand expression of the intent of the parties concerning matters governed by their agreement, even though the transaction has no significant contact with the jurisdiction chosen. National Equipment Rental, Ltd. v. Taylor, 225 Kan. 58, 587 P.2d 870, 1978 Kan. LEXIS 410 (Kan. 1978).

Where (1) Navajo Indian purchased pick-up truck from Arizona seller whose place of business was located outside boundaries of Navajo Reservation, (2) purchase price of truck was financed by installment-sale security agreement which provided that validity and construction of agreement would be governed by Arizona law and that secured party should have all rights and remedies for default provided by Arizona Uniform Commercial Code, and (3) seller, on buyer’s default in making payments, effected self-help repossession of truck pursuant to UCC § 9-503 within boundaries of Navajo Reservation and without breach of the peace, under UCC § 1-105(1) parties by their contractual choice of Arizona law to govern transaction excluded any possibility that transaction would be affected by provisions of Navajo Tribal Code which prescribed civil penalty for repossessing personal property of Navajo Indians on land subject to jurisdiction of Navajo Tribe where such repossession was not effected with written consent of purchaser at time of repossession. Brown v. Babbitt Ford, 117 Ariz. 192, 571 P.2d 689, 1977 Ariz. App. LEXIS 724 (Ariz. Ct. App. 1977) (holding that since seller had right under Arizona law to do exactly what it did in effecting repossession, no liability therefor attached to seller).

Under Georgia UCC § 1-105(1), Georgia allows contracting parties to make their own choice of the applicable state law. Crompton-Richmond Co. v. Briggs, 560 F.2d 1195, 1977 U.S. App. LEXIS 11232 (5th Cir. 1977).

Paragraph of contract for sale of computer core memories which provided that agreement would be construed under laws of California was valid under UCC § 1-105. Three-Seventy Leasing Corp. v. Ampex Corp., 528 F.2d 993, 1976 U.S. App. LEXIS 12319 (5th Cir. Tex. 1976).

In action by corporation headquartered in Pennsylvania, as lessee of Swiss hotel, seeking to enjoin Pennsylvania bank from honoring lessor’s draft under letter of credit issued pursuant to lease agreement, Pennsylvania Uniform Commercial Code was applicable law, although each of the three parties had, by agreement, assumed obligations to the others, and each agreement specified different controlling law (i.e. lease agreement provided it would be governed by law of Switzerland, letter of credit agreement specified it would be construed in accordance with Pennsylvania law, and letter of credit itself stated that its engagement was subject to Uniform Customs and Practice for Documentary Credits), since it was clear that law of Switzerland did not apply to question whether bank should be enjoined from honoring draft and since Uniform Customs and Practice for Documentary Credits did not purport to offer rules governing issuance of injunction against honor of draft. Intraworld Industries, Inc. v. Girard Trust Bank, 461 Pa. 343, 336 A.2d 316, 1975 Pa. LEXIS 777 (Pa. 1975).

Member of Navaho Nation residing on Navaho Reservation in New Mexico who purchased pickup truck in New Mexico and finance company that financed purchase were free under UCC § 1-105 to choose whether law of state of New Mexico or that of Navaho Tribe was applicable to transaction. Jim v. CIT Fin. Servs. Corp., 1975-NMSC-019, 87 N.M. 362, 533 P.2d 751, 1975 N.M. LEXIS 806 (N.M. 1975).

Where contract between two Delaware corporations for design and construction of tanker contained provision that contract should be governed by laws of United States and State of New York, court would recognize this choice of law provision. Falcon Tankers, Inc. v. Litton Systems, Inc., 300 A.2d 231, 1972 Del. Super. LEXIS 172 (Del. Super. Ct. 1972).

While as between themselves the parties to a security interest transaction may lawfully agree as to the governing law, where the rights of third party creditors in the property of one of the parties are in question, the law of the state of the domicil or place of business of the contracting party in question is controlling. Industrial Packaging Products Co. v. Ft. Pitt Packaging International, Inc., 399 Pa. 643, 161 A.2d 19, 1960 Pa. LEXIS 501 (Pa. 1960).

8. —Reasonable relation.

Contract between Illinois pipe seller and Missouri buyer, which was qualified to do business in Mississippi, bore reasonable relation to Mississippi and therefore Mississippi’s conflict of law rule for warranty claims applied, requiring application of Mississippi’s substantive law to implied warranty claims, notwithstanding any choice of law provision to the contrary; seller entered into contract to be performed in Mississippi, seller shipped its product to Mississippi, and seller sent field technician to aid in installation of pipes in IHP Indus. v. Permalert, Esp., 947 F. Supp. 257, 1996 U.S. Dist. LEXIS 17744 (S.D. Miss. 1996).

UCC § 1-105(1) expressly provides that “the parties may agree that the law of either this state or of such other state or nation shall govern their rights and duties.” The one requirement, however, is that the law of the state which the parties have chosen must bear a “reasonable relation” to the transaction involved. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1978 U.S. Dist. LEXIS 17909 (D.N.J. 1978).

UCC § 1-105(1) requires a reasonable relation between the transaction and the state whose law is chosen to apply to it. U. S. Manganese Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 576 F.2d 153, 1978 U.S. App. LEXIS 11015 (8th Cir. 1978).

In action by English pipe manufacturer against American corporations for breach of contract for sale and distribution of plaintiff’s pipes in United States, applicable law was that of England where contract contained explicit choice-of-law clause specifying that contract would be covered by English law; defendants’ purchase in England of plaintiff’s pipes provided “reasonable relation” between transaction and England, thus validating clause under UCC § 1-105(1). L. Orlik, Ltd. v. Helme Products, Inc., 427 F. Supp. 771, 1977 U.S. Dist. LEXIS 17262 (S.D.N.Y. 1977).

Reasonable relationship test was met where whiskey distributorship contracts between English exporters and New York importers provided that they were to be governed by English law and where contracts were executed in United Kingdom, exporters were incorporated in United Kingdom, performance by exporters occurred in United Kingdom, and payment was made and title to goods passed in United Kingdom. Fleischmann Distilling Corp. v. Distillers Co., 395 F. Supp. 221, 1975 U.S. Dist. LEXIS 12394 (S.D.N.Y. 1975).

Corporate notes issued by Delaware corporation which stated that they would be governed by and construed in accordance with law of New York, but which bore no reasonable relationship to New York, bore reasonable relationship to Delaware, and its law controlled whether holder was owner of negotiable instrument. Where corporate note stated that it had been made and delivered in California and would be governed by laws of California, issuance of note to holders bore reasonable relationship to California and issue of negotiability of instrument would be determined by California law. Third corporate note which was issued and paid for in New York and which incorporated agreement making note subject to laws of state of New York bore reasonable relationship to New York so as to make its laws determinative of its negotiability. Baker v. Gotz, 387 F. Supp. 1381, 1975 U.S. Dist. LEXIS 14203 (D. Del.), aff'd, 523 F.2d 1050 (3d Cir. Del. 1975).

Choice of law provision in brokerage agreement was valid and Usury Law of New York would be applied, where brokerage arrangements between parties bore “reasonable relationship” to New York, and “significant enough portion” of performance occurred there. Mell v. Goodbody & Co., 10 Ill. App. 3d 809, 295 N.E.2d 97, 1973 Ill. App. LEXIS 2718 (Ill. App. Ct. 1st Dist. 1973).

In a diversity action concerning, among other issues, “transactions in goods” within the scope of the U.C.C.’s article on sales, which were purchased by plaintiff, a New York corporation, from defendant, an Ohio corporation, the court, pursuant to the conflict of law rules of New York, the forum state, held that since New York was “appropriately related” to the transaction herein involved and Ohio was “reasonably related” to the “transaction,” Ohio law governed insofar as the parties had agreed to let the law of Ohio govern the validity, interpretation and performance of the contract. County Asphalt, Inc. v. Lewis Welding & Engineering Corp., 444 F.2d 372, 1971 U.S. App. LEXIS 9632 (2d Cir. N.Y.), cert. denied, 404 U.S. 939, 92 S. Ct. 272, 30 L. Ed. 2d 252, 1971 U.S. LEXIS 548 (U.S. 1971).

Subsection (1) of this section constitutes legislative recognition of the wisdom of permitting parties to give added certainty to a contract by expressly stipulating reasonably the governing law. Maxwell Shapiro Woolen Co. v. Amerotron Corp., 339 Mass. 252, 158 N.E.2d 875, 1959 Mass. LEXIS 795 (Mass. 1959).

9. Choice of applicable law in absence of agreement.

Section 75-1-105 authorizes application of Mississippi substantive law on privity, disclaimers and limitations of remedies in warranty action only when transaction giving rise to warranty claim bears some reasonable and appropriate relationship to Mississippi, and in absence of such relation, application of Mississippi substantive warranty law violates constitutional guarantees. Price v. International Tel. & Tel. Corp., 651 F. Supp. 706, 1986 U.S. Dist. LEXIS 17192 (S.D. Miss. 1986).

In debtor’s action to enjoin creditor from enforcing two security agreements against collateral therefor, where evidence showed (1) that debtor and creditor had entered into such security agreements and that one of them had been perfected in several states, including New Jersey, (2) that second security agreement had in no way diminished validity of first security agreement, (3) that debtor’s reason for seeking injunction against enforcement of such security agreements was creditor’s alleged oral agreement to refrain from foreclosing on any debts due it in order to allow debtor to attain a healthy operating condition, (4) that creditor, after concluding that debtor could not attain a healthy operating condition, formally declared debtor to be in default under such security agreements and to owe creditor over $27 million in principal debt, and (5) that creditor had then accelerated maturity of all of debtor’s term obligations and demanded payment of all principal and interest on debtor’s demand obligations, court held (1) that debtor’s claim of alleged oral agreement to refrain from foreclosure was unsupported by the evidence, (2) that under (a) UCC § 1-105(1), dealing with power of parties to choose law applicable to their transactions, (b) UCC § 9-102(1), which intends that substantive law of place where collateral is located governs without regard to possible contracts in other jurisdictions, and (c) UCC § 9-103, which lays down numerous choice-of-law rules regarding creation, perfection, and priorities in multistate security-agreement transactions, law of New Jersey governed security agreements in suit, (3) that security interests created by security agreements in suit were valid, (4) that debtor had failed to show any reason for granting injunctive relief against their enforcement, and (5) that on debtor’s default, creditor under UCC § 9-501(1), as adopted in New Jersey, had right to reduce its claim to judgment and to foreclose on the collateral. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1978 U.S. Dist. LEXIS 17909 (D.N.J. 1978).

In action by Rhode Island bank to recover on 2 checks drawn on Massachusetts bank by Massachusetts corporation which had stopped payment, Massachusetts law applied, absent any evidence that parties agreed that a particular state’s law would apply. Industrial Nat'l Bank v. Leo's Used Car Exchange, Inc., 362 Mass. 797, 291 N.E.2d 603, 1973 Mass. LEXIS 363 (Mass. 1973).

In determining what law governs, traditional contract conflict rules must give way to the requirements of the UCC, as interpreted, though by way of dictum by the Pennsylvania Supreme Court as adopting the “grouping of contacts” rule. Tucker v. Capitol Machine, Inc., 307 F. Supp. 291, 1969 U.S. Dist. LEXIS 8663 (M.D. Pa. 1969).

Where contract for construction of a boat was made in New York, and payment and delivery were to be made in that state, the New York version of the UCC was applicable to the transaction. Silver v. Sloop Silver Cloud, 259 F. Supp. 187, 1966 U.S. Dist. LEXIS 7397 (S.D.N.Y. 1966).

Diversity action based on breach of warranty brought against grenade manufacturer by army enlisted man; enlisted man was Georgia citizen, was injured in Georgia, brought suit in Georgia federal district court against defendants alleged to be doing business in Georgia pursuant to Georgia statute concerning jurisdiction over non-residents; held, Georgia law applies to warranty question according to conflicts rule stated in UCC § 1-105. Whitaker v. Harvell-Kilgore Corp., 418 F.2d 1010, 1969 U.S. App. LEXIS 9840 (5th Cir. 1969).

Arkansas law governs the enforcement of a conditional sales contract executed in that state in connection with the purchase of an automobile there, where the contract provides that the seller’s Arkansas office is the only designated place of payment; and the fact that at the time of the contract’s execution the vendee was a resident of Tennessee and the contract was assigned to a Tennessee bank is immaterial in the absence of an agreement between the parties that Tennessee law would govern. Lyles v. Union Planters Nat'l Bank, 239 Ark. 738, 393 S.W.2d 867, 1965 Ark. LEXIS 1070 (Ark. 1965).

The fact that a buyer went to another state merely to take possession of a truck was only incidental to the transaction involving the vehicle’s sale and purchase where both buyer and seller were residents of Wyoming and the truck was brought there by the purchaser, and Wyoming law applied to the transaction between the parties. Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

Where contracts for the sublease of lands and the conditional sale of a roadside diner located in New Hampshire were entered into in Massachusetts by residents of that state, they are to be interpreted and enforced in accordance with Massachusetts law. Conte v. Styli, 26 Mass. App. Dec. 73.

The application of Pennsylvania law was warranted where Delaware residents purchased a boat in Delaware, agreeing to pay the remainder of the purchase price in monthly instalments, and gave what amounted to a purchase money security interest to a Pennsylvania company, the assignee of an agreement executed by the buyers and sellers, called a Pennsylvania equipment lease, and agreement was not filed anywhere and did not contain a provision as to the application of the law of any specific state, but called for performance in Pennsylvania, and after repossession in Delaware, the boat was brought to Pennsylvania and sold. Atlas Credit Corp. v. Dolbow, 193 Pa. Super. 649, 165 A.2d 704, 1960 Pa. Super. LEXIS 716 (Pa. Super. Ct. 1960).

10. —Appropriate relation.

Where no appropriate relation to Mississippi exists in case, center of gravity doctrine applies, and §75-1-105 requires application of significant contacts analysis, and 1978 amendment to §75-1-105 did not abrogate this requirement. Price v. International Tel. & Tel. Corp., 651 F. Supp. 706, 1986 U.S. Dist. LEXIS 17192 (S.D. Miss. 1986).

In wrongful death action involving claims based on breach of both express warranties and implied warranty of merchantability attaching to defendant’s sale of radial tires to plaintiff and her deceased husband, court held (1) that under UCC § 1-105(1), since significant part of transaction, including sale, service, and use of the tires, had occurred in Florida, plaintiff’s cause of action arose in Florida and was guaranteed by Florida Wrongful Death Act, (2) that plaintiffs’ theory of recovery was governed by Florida’s interpretation of Florida Uniform Commercial Code provisions governing actions for breach of express and implied warranties, and (3) that under Florida law, contributory negligence, assumption of the risk, and misuse were available defenses to action for breach of warranty. Westerman v. Sears, Roebuck & Co., 577 F.2d 873, 1978 U.S. App. LEXIS 9853 (5th Cir. Fla. 1978).

In action by employees under third-party-beneficiary-of-warranty provisions in Alabama version of UCC § 2-318 for breach of warranties made in connection with sale of sandblasting hoods and respirators, evidence that such items were sold to Alabama company for resale in Alabama, that items were to be used in Alabama, and that warranties made in connection with items were to be performed in Alabama was sufficient to establish appropriate relationship necessary under UCC § 1-105(1) to apply Alabama law to controversy. Simmons v. American Mut. Liability Ins. Co., 433 F. Supp. 747, 1976 U.S. Dist. LEXIS 12738 (S.D. Ala. 1976), aff'd, 560 F.2d 1021 (5th Cir. Ala. 1977), aff'd, 560 F.2d 1022 (5th Cir. Ala. 1977), disapproved, Morris v. SSE, Inc., 912 F.2d 1392, 1990 U.S. App. LEXIS 16911 (11th Cir. Ala. 1990).

In diversity action in which damages were sought for destruction of logging machine on theory of breach of implied warranties that machine was safe and proper for intended use and was of good and merchantable quality, where plaintiff was Pennsylvania corporation that purchased machine from Georgia distributor, delivery was made in Georgia, warranty repairs and servicing were performed in Georgia, and machine was used solely in Georgia by one of plaintiff’s corporate divisions until it was destroyed by fire caused by defect in machine, (1) since entire transaction was centered in Georgia and did not bear sufficiently appropriate relation to Pennsylvania within meaning of Pennsylvania UCC § 1-105(1), Georgia law would be applied to case and not law of Pennsylvania; and (2) under Georgia law, in absence of privity, consumer could not recover from manufacturer for breach of implied warranty if consumer had not purchased goods directly from manufacturer. Armstrong Cork Co. v. Drott Mfg. Co., 433 F. Supp. 413, 1977 U.S. Dist. LEXIS 17741 (E.D. Pa. 1977).

Under UCC § 1-105(1) providing that law of forum (i.e., Texas) should govern cause of action based on breach of contract and warranty if disputed transaction bore “appropriate relation to this state,” Oklahoma, and not Texas, law would be applied where contracts for sale of railroad tank cars were executed in Oklahoma, cars were manufactured in Ohio, and delivered in Pennsylvania, Ohio and Texas, where at time of performance under contract neither party had its principal place of business in Texas, and where only other link between forum state and transactions was that portion of repairs to tank cars occurred in Texas. Continental Oil Co. v. General American Transp. Corp., 409 F. Supp. 288, 1976 U.S. Dist. LEXIS 16720 (S.D. Tex. 1976).

In action by manufacturer to recover termination charges on valves which were either completed or partially completed pursuant to two purchase orders placed by buyer, under UCC § 1-105 transaction bore appropriate relation to forum state where buyer was forum state corporation located within forum. Crane Co. v. Roberts Supply Co., 196 Neb. 67, 241 N.W.2d 516, 1976 Neb. LEXIS 743 (Neb. 1976).

In diversity action by Florida carpet dealer against Pennsylvania manufacturer for damages arising out of manufacturer’s alleged breach of express and implied warranties in connection with sale of defective carpet, federal district court correctly applied Florida law; transaction had “appropriate relation” to Florida under UCC § 1-105(1) where, inter alia, manufacturer and dealer both knew that carpet was to be installed in Florida and where alleged injury occurred solely in Florida. Aldon Industries, Inc. v. Don Myers & Associates, Inc., 517 F.2d 188, 1975 U.S. App. LEXIS 13251 (5th Cir. Fla. 1975).

Where contract for sale of used automobile was formed in Florida and was to be performed in Ohio, where there was no specific agreement between parties respecting which state’s law should govern transaction, but contract of sale noted, “Not tax, out of state,” and where, furthermore, automobile and certificate of title were to be delivered in Ohio and automobile was to be driven, serviced and maintained in Ohio, transaction bore “an appropriate relation” to Ohio, and therefore Ohio law was applicable with respect to buyer’s action against seller for rescission of contract. Lloyd v. Classic Motor Coaches, Inc., 388 F. Supp. 785, 74 Ohio Op. 2d 493, 1974 U.S. Dist. LEXIS 11928 (N.D. Ohio 1974).

Fact that injury occurred in New Hampshire gives that state appropriate and significant relationship to transaction so that, in absence of express declaration of applicable choice of law, New Hampshire law was applicable. Stephan v. Sears, Roebuck & Co., 110 N.H. 248, 266 A.2d 855, 1970 N.H. LEXIS 143 (N.H. 1970).

Oklahoma Code Comment to UCC § 1-105 indicates that Code provision providing that UCC applies to transactions bearing an “appropriate relation” to Oklahoma is new, and probably changes law in Oklahoma. Williams v. Texas Kenworth Co., 307 F. Supp. 748, 1969 U.S. Dist. LEXIS 8710 (W.D. Okla. 1969).

“Appropriate relation” means same thing as more common phrase “significant contacts”; where dump trucks in question were located in Colorado at time of transaction, where seller’s place of business was in Colorado and sales agreement was reached there, and where only payment by mail and later delivery of trucks took place in Oregon, under Oregon decisions, Colorado law must be applied. General Electric Credit Corp. v. R. A. Heintz Constr Co., 302 F. Supp. 958, 1969 U.S. Dist. LEXIS 9397 (D. Or. 1969).

The concept of appropriate relationship should be applied even before the effective date of the Code as that rule is more flexible and better adapted to deal with modern problems. Baffin Land Corp. v. Monticello Motor Inn, Inc., 70 Wn.2d 893, 425 P.2d 623, 1967 Wash. LEXIS 1136 (Wash. 1967).

In a case involving the automobile guest statute and a question of conflict of laws the Wisconsin court observed that this section recognizes an “appropriate relations” test for determining applicable law and that the official comments on the UCC refer to a transaction’s “significant context” as being factors in the choice of applicable law. Wilcox v. Wilcox, 26 Wis. 2d 617, 133 N.W.2d 408, 1965 Wisc. LEXIS 1020 (Wis. 1965).

In a case where the issue was as to whether plaintiff had been guilty of a breach of contract in making instalment payments on the purchase of an airplane so as to give the seller a right to repossess the plane, the question as to whether Massachusetts law applied to the transaction was to be determined under subsection (1) of § 1-105 of the instant chapter, and not under subsection (2) of said section and the reference therein to §§ 9-102 and 9-103 applicable to secured transactions because the issues in such case involved the duties of the parties under the primary obligation, and because the validity of perfection of the security interest was not involved. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

Where a written agreement bore an appropriate relation to Massachusetts so as to be governed by Massachusetts law, under the instant section, an oral modification of such contract would similarly be governed by Massachusetts law in the absence of proof as to where the oral modification was made and in the absence of proof that the oral modification did not bear an appropriate relation to Massachusetts. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

Where a contract for the purchase of an airplane was executed in Massachusetts between a Connecticut individual and a Massachusetts corporation having a principal place of business in Massachusetts, and the plane was delivered in Massachusetts, the transaction bore an appropriate relation to Massachusetts within the meaning of the instant section, and in the absence of an agreement of the parties that Connecticut law should apply, the law of Massachusetts would govern the transaction. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

§ 75-1-302. Variation by agreement.

Except as otherwise provided in subsection (b) or elsewhere in the Uniform Commercial Code, the effect of provisions of the Uniform Commercial Code may be varied by agreement.

The obligations of good faith, diligence, reasonableness, and care prescribed by the Uniform Commercial Code may not be disclaimed by agreement.The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable.Whenever the Uniform Commercial Code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.

The presence in certain provisions of the Uniform Commercial Code of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.

HISTORY: Present §75-1-302 is derived from former §75-1-102(3) and (4) [Codes, 1942, § 41A:1-102; Laws, 1966, ch. 316, § 1-102, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-102.

6. Effect of agreements.

7. —Particular agreements.

I. UNDER CURRENT LAW.

1.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-102.

6. Effect of agreements.

Warranties of §§75-3-414,75-4-207 may be modified or waived by agreement of parties in accordance with §§75-1-102,75-4-103; nothing in Uniform Commercial Code suggests that warranties may be waived or lost by violation of duties imposed under §§75-4-202,75-4-204. White v. Hancock Bank, 477 So. 2d 265, 1985 Miss. LEXIS 2246 (Miss. 1985).

Portions of Uniform Commercial Code relating to course of dealings or trade usage were not intended to be applied in manner to defeat Code’s statute of frauds requirements and, at best, evidence of custom or usage in trade could be used to explain ambiguous portions of an agreement; thus, potato farmer could not introduce evidence of usage or course of dealings within trade to substantiate oral agreement with potato buyer. Dangerfield v. Markel, 222 N.W.2d 373, 1974 N.D. LEXIS 159 (N.D. 1974).

Obligations of reasonableness and care may not be disclaimed by agreement, but the parties may agree to the standards to be applied if they are not manifestly unreasonable. Steelman v. Associates Discount Corp., 121 Ga. App. 649, 175 S.E.2d 62, 1970 Ga. App. LEXIS 1295 (Ga. Ct. App. 1970).

7. —Particular agreements.

Both UCC § 1-102(3) and § 4-103(a) prevented a bank from contracting away its obligation to use ordinary care in the handling of depositors’ funds. Bank of Southern Maryland v. Robertson's Crab House, Inc., 39 Md. App. 707, 389 A.2d 388, 1978 Md. App. LEXIS 241 (Md. Ct. Spec. App. 1978).

When a contractor damaged a utilities commission’s equipment in the process of testing a control system the contractor installed, the UCC did not apply to the resulting dispute because that dispute involved the service of testing the system. Upchurch Plumbing, Inc. v. Greenwood Utils. Comm'n, 2007 Miss. LEXIS 225 (Miss. Apr. 19, 2007), op. withdrawn, sub. op., 964 So. 2d 1100, 2007 Miss. LEXIS 495 (Miss. 2007).

Bank’s conduct in blindly treating commercial paper made payable to its order as bearer paper, for sole reason that both drawer and bearer were known to bank, was manifestly unreasonable, and bank could not establish reasonableness of its conduct on any theory of implied contract in light of UCC § 1-102(3) and § 4-103(a), which prevent banks from contracting away their obligation to use ordinary care in handling depositors’ funds. Bank of Southern Maryland v. Robertson's Crab House, Inc., 39 Md. App. 707, 389 A.2d 388, 1978 Md. App. LEXIS 241 (Md. Ct. Spec. App. 1978).

An agreement between an equipment manufacturer and a finance company to the effect that the finance company was under no responsibility to record or file security paper was deemed waived by the finance company’s retention of, and inaction upon, a letter from the manufacturer accompanying its transmittal of a conditional sales contract and judgment note requesting the finance company to record the paper, and the finance company’s failure to comply with the statute placed the burden of loss from the dissipation of the security upon its shoulders. Congress Financial Corp. v. Sterling--Coin Op Machinery Corp., 456 F.2d 451, 1972 U.S. App. LEXIS 11516 (3d Cir. Pa. 1972).

Provisions of Act may be varied by agreement only when it is not otherwise expressly provided in Act; and any agreement concerning passage of title, whether oral or written, is subject to provision in § 2-401 limiting retention of title by seller in goods delivered to buyer to reservation of security interest. First Nat'l Bank v. Smoker, 153 Ind. App. 71, 286 N.E.2d 203, 287 N.E.2d 788 (3d Dist. 1972).

The UCC recognizes that there may be times when parties to an instrument may choose to alter the general provisions of the UCC to meet their particular purposes. Etelson v. Suburban Trust Co., 263 Md. 376, 283 A.2d 408, 1971 Md. LEXIS 700 (Md. 1971) (further holding that individual indorsers on a corporate note who consented to any modification of the terms of the note or the release or exchange of any collateral without notice by the lenders, limited the protection to which they might have otherwise been entitled under the UCC.).

§ 75-1-303. Course of performance, course of dealing, and usage of trade.

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 aparty; and
  2. 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.
  3. Course of dealing prevails over usage of trade.

A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

A “usage of trade” is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question.The existence and scope of such a usage must be proved as facts.If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in 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.A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.

Except as otherwise provided in subsection (f), 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 a construction is unreasonable:

Express terms prevail over course of performance, course of dealing, and usage of trade;

Course of performance prevails over course of dealing and usage of trade; and

Subject to Section 75-2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.

Evidence of a relevant usage of trade offered by one (1) party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

HISTORY: Present §75-1-303 is an integration of former §§75-2-208 [Codes, 1942, § 41A:2-208; Laws, 1966, ch. 316, § 2-208, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 45, eff from and after July 1, 2010] and75-2A-207 [Laws, 994, ch. 445, § 1, eff from and after July 1, 1994; Repealed by Laws, 2010, ch. 506, § 46, eff from and after July 1, 2010] into the principles of former §75-1-205 [Codes, 1942, § 41A:1-205; Laws, 1966, ch. 316, § 1-205, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Variation by agreement, see §75-1-302.

Obligation of good faith, see §75-1-304.

Merchant as one having knowledge of practices involved in transaction, see §75-2-104.

Statute of frauds, see §75-2-201.

Course of dealing or usage of trade to explain or supplement agreement, see §75-2-202.

Formation of sales contract generally, see §75-2-204.

When course of performance is relevant in determining meaning of agreement, see §75-2-208.

Unconscionable contract or clause, see §75-2-302.

RESEARCH REFERENCES

ALR.

Admissibility, in negligence action against bank by depositor, of evidence as to custom of banks in locality in handling and dealing with checks and other items involved. 8 A.L.R.2d 446.

Duties of collecting bank with respect to presenting draft or bill of exchange for acceptance; reasonable time as affected by bank customs. 39 A.L.R.2d 1299.

Custom or usage as affecting time within which buyer must make inspection, trial, or test to determine whether goods are of requisite quality. Venturi, Inc. v. Adkisson, 261 Ark. 855, 552 S.W.2d 643, 1977 Ark. LEXIS 2163 (Ark. 1977).

Am. Jur.

15A Am. Jur. 2d, Commercial Code §§ 27, 29.

21 Am. Jur. 2d, Customs and Usages § 4 et seq.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:21 (Complaint, petition, or declaration; allegation; application of trade usages).

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:33 (Instruction to jury; ‘course of dealing‘ defined; effect on construction of agreement).

6 Am. Jur. Pl & Pr Forms (Rev), Sales Form 2:311 (Instruction to jury; creation of implied warranty from course of dealing or usage of trade).

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:33 (Instruction to jury; ‘course of dealing‘ defined; effect on construction of agreement).

6 Am. Jur. Pl & Pr Forms (Rev), Sales Form 2:311 (Instruction to jury; creation of implied warranty from course of dealing or usage of trade).

7 Am. Jur. Legal Forms 2d, Customs and Usages § 81:1 et seq.

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:81 et seq. (Course of dealings and usage of trade).

5 Am. Jur. Proof of Facts, Habit and Custom, Proof No. 2 (proof of business custom as to mailing and receipt of letter).

26 Am. Jur. Proof of Facts 2d, Meaning of Abbreviation, Word, or Phrase According to Usage of Trade, § 16 et seq. (Proofs of meanings of particular written terms according to usages of trade).

CJS.

17A C.J.S., Contracts §§ 338-340.

25 C.J.S., Customs and Usages §§ 1, 14 et seq.

Law Reviews.

1979 Mississippi Supreme Court Review: Miscellaneous. 50 Miss. L. J. 833.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-10. [Reserved for future use.]

II. UNDER FORMER §75-1-205.

11. In general.

12. Scope.

13. Course of dealing.

14. —Price.

15. —Variance in quality or quantity.

16. Usage of trade.

17. —Livestock.

18. —Negotiable instruments.

19. —Risk of loss.

20. —Variation in quality or quantity.

21. Modification or waiver; express agreements.

22. —Express agreement; secured transactions.

23. —Implied warranties.

24. —Statute of frauds.

25. Evidence and burden of proof.

26. —Admissibility.

27. —Presumptions.

III. UNDER FORMER §75-2-208.

28. In general.

I. UNDER CURRENT LAW.

1.-10. [Reserved for future use.]

II. UNDER FORMER § 75-1-205.

11. In general.

In action for seller’s breach of contract to sell investment securities that buyer had contracted to resell to third person, which breach caused buyer to make “cover” purchase of other securities to effect such resale, court held (1) that although UCC Art 8 contains no provision for buyer’s remedies against seller for breach of contract to purchase securities, and although UCC § 2-105(1) expressly excludes investment securities from definition of “goods” for purposes of UCC Art 2, nevertheless, as indicated by Official Comment 1 to UCC § 2-105, buyer’s remedies in Art 2 for breach of contract also apply by analogy to investment security transactions; (2) that under UCC § 2-712(2), buyer was entitled to recover as damages difference between cost of cover and contract price of securities in suit, plus incidental and consequential damages; and (3) that benefits that had accrued to buyer as result of its trading of its interest in securities in suit before seller’s breach were not relevant to buyer’s measure of damages for such breach. G. A. Thompson & Co. v. Wendell J. Miller Mortg. Co., 457 F. Supp. 996, 1978 U.S. Dist. LEXIS 14990 (S.D.N.Y. 1978).

Purpose of UCC § 1-205(1) was to assist court by allowing evidence as to those matters in which basic contract was lacking or as to which basic contract was ambiguous. Cargill, Inc. v. Kavanaugh, 228 N.W.2d 133, 1975 N.D. LEXIS 191 (N.D. 1975).

12. Scope.

Since Uniform Commercial Code does not apply to contract to excavate boot-pit area for rice dryer, provisions of code did not govern admissibility of evidence of custom and usage of trade to explain basis for paying for such excavation work. Venturi, Inc. v. Adkisson, 261 Ark. 855, 552 S.W.2d 643, 1977 Ark. LEXIS 2163 (Ark. 1977).

Although the “course of dealing between parties” and “any usage of trade” may be competent to explain ambiguities in a contract, this does not mean that a course of dealing or trade usage may be used to make a contract between parties, and evidence of a seller’s dealings with other customers, the discounts granted them, and their names and addresses was not competent in an action in which the purchaser alleged that the seller had agreed to give him a ten percent discount on the price of merchandise purchased. Martin v. Ben P. Eubank Lumber Co., 395 S.W.2d 385, 1965 Ky. LEXIS 146 (Ky. 1965).

In Carpenters & Millwrights Local Union v. Riggs-Distler & Co. (1962) 73 NJ Super 253, 179 A2d 564, revd on other grounds 40 NJ 97, 190 A2d 844, the court stated that the wider scope given to customs of trade by Code § 1-205(a) should be followed in a labor hiring controversy although “hiring labor may or may not be regarded as a commercial practice.” Carpenters & Millwrights Local Union v. Riggs-Distler & Co., 73 N.J. Super. 253, 179 A.2d 564, 1962 N.J. Super. LEXIS 631 (Law Div. 1962), rev'd, 40 N.J. 97, 190 A.2d 844, 1963 N.J. LEXIS 164 (N.J. 1963).

13. Course of dealing.

Collecting bank, which held for 52 days after presentment for payment three sight drafts drawn by bank’s customer on third-party buyer of goods from bank’s customer and such buyer’s bank before giving customer notice of drafts’ dishonor, acted “seasonably” within meaning of UCC § 4-202(2), since (1) prior course of dealing can establish seasonableness of party’s action under UCC §§ 1-205(1) and 3-503; and (2) in present case, bank’s collection of payment on three prior drafts of customer had been delayed for 48 days, and in seven other prior transactions, bank had experienced delays of nine to 45 days before obtaining payment of customer’s drafts. Southern Cotton Oil Co. v. Merchants Nat'l Bank, 670 F.2d 548, 1982 U.S. App. LEXIS 21007 (5th Cir. Miss. 1982).

In action for defendant’s breach of contract to repurchase cars used in plaintiff’s car-rental business, where (1) plaintiff purchased business from independent owner thereof, (2) owner of business, prior to its sale to plaintiff, had agreed with defendant that cars purchased from defendant for use in such business would be repurchased by defendant if they had not been used more than 6,000 miles, and (3) plaintiff’s written contract with defendant, covering purchase and repurchase of vehicles used in plaintiff’s business and executed after plaintiff had purchased business from prior owner, did not specify number of miles vehicles could be used before repurchase by defendant, but merely provided that after 9,000 miles, “time left in service” of vehicle would “be negotiated,” court held (1) that evidence did not show that written contract between plaintiff and defendant had been modified, with respect to defendant’s repurchase of vehicles, by prior course of dealing between same parties within meaning of UCC § 1-205(1), but showed that person involved in such prior course of dealing with defendant was seller of business to plaintiff; (2) purchaser of business does not adopt, in absence of evidence to the contrary, seller’s prior course of dealing with third parties; and (3) provision in contract between plaintiff and defendant concerning “time left in service” of vehicle did not impose absolute mileage limitation, but was agreement to negotiate “continued use” of vehicle after it had been used for 9,000 miles. Budget Systems, Inc. v. Seifert Pontiac, Inc., 40 Colo. App. 406, 579 P.2d 87 (Colo. Ct. App. 1978) (stating that on retrial of case, if evidence should establish a prior course of dealing between plaintiff and defendant that included a mileage limitation, such evidence would be admissible under UCC § 2-202(a) since it would not directly contradict terms of parties’ written agreement, but would supplement it).

Where (1) buyer’s purchase order to steel supplier provided that shipments of steel were to be made “as directed” by buyer, (2) buyer did not direct any steel shipments to be made until about one year after contract was entered into, (3) seller, at time of receiving such directions, informed buyer that it could no longer furnish steel at contract price, and (4) seller’s officers testified that seller had expected that buyer would start to request deliveries about three months after contract was made, based on seller’s performance of prior contracts with buyer, court held (1) that since such prior contracts had concerned smaller construction projects, testimony about them was not a sufficient basis to enable jury to find that parties’ prior course of dealing gave to words “as directed” in parties’ present contract the meaning-namely, a three-months’ delivery time-that seller placed on such words, and (2) that trial court therefore had no reason under UCC § 1-205(1), dealing with effect of prior course of dealing between parties, to submit seller’s interpretation of such words to jury. Capital Steel Co. v. Foster & Creighton Co., 264 Ark. 683, 574 S.W.2d 256, 1978 Ark. LEXIS 2172 (Ark. 1978).

The term “course of dealing” refers to previous conduct between the parties indicating a common basis for interpreting expressions used by them, and proof of such conduct is limited to objective facts as distinguished from oral statements of agreements. Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F. Supp. 987, 1968 U.S. Dist. LEXIS 12344 (S.D.N.Y. 1968).

Where a used bulldozer was sold under a written contract which made no provision for the assumption by the seller of any part of the cost of future repairs, the fact that the seller subsequently assumed 50 percent of the cost of repairs on two separate occasions was not sufficient to establish a course of dealing between the parties by which the seller was obligated to pay half the cost of any or all of the repairs thereafter made to the machine. Clyde Everett Equipment Co. v. Brockton Perforating Machine Co., 27 Mass. App. Dec. 66 (1963).

14. —Price.

Testimony by one corporate officer as to his company’s practices in pricing resin used for PVC pipes is insufficient to establish pattern or “regularity of observance” and therefore such testimony should not be admitted as evidence of course of dealing or usage of trade. H & W Industries, Inc. v. Occidental Chemical Corp., 911 F.2d 1118, 1990 U.S. App. LEXIS 16402 (5th Cir. Miss. 1990).

Even in the absence of a written agreement with respect to every term of a contract, great weight attaches to the course of dealing of the parties, and where it appears from the conduct of the parties that their mode of calculating price, although not accepted formally by signature of a written instrument, was adhered to by both parties during an extensive course of dealing, during which the purchaser received, accepted, and paid for over $800,000 worth of merchandise, this course of dealing must be held applicable and governing with respect to remaining merchandise which was received, accepted, but not paid for. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 236 F. Supp. 879, 1965 U.S. Dist. LEXIS 6206 (W.D. Pa.), vacated, 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

15. —Variance in quality or quantity.

Letter from seller to buyer, confirming that buyer was “committed to take’ lawn mowers, established parties’ intent to contract and contained all prerequisites for enforceable contact under Mississippi law, despite purported expert’s opinion that trade usage definition of ”committed to take’ was “forecast’ or ”estimate’; expert’s construction was unreasonable, and buyer produced no evidence that expert’s definition was embodied in any written trade code or similar writing. Yazoo Mfg. Co. v. Lowe's Cos., 976 F. Supp. 430, 1997 U.S. Dist. LEXIS 13366 (S.D. Miss. 1997).

Shipping instructions issued by buyer calling for delivery of 10,000 tons of fertilizer during first 25 working days of month, freight prepaid, to places other than buyer’s plant, did not constitute anticipatory repudiation of contract under which seller agreed to sell and ship, and buyer agreed to buy and receive at its plant, 10,000 tons of fertilizer within eight-month period of time where (1) quantity requested in shipping instructions did not exceed quantity specified in contract; (2) evidence established that prepayment of freight and shipping to place other than buyer’s plant were in accord with course of dealing between parties and, even without course of dealing, there was nothing in language of contract repugnant to place or manner of shipment specified in shipping instructions; (3) seller failed to demonstrate that buyer’s demanding entire season’s supply in one month was commercially unreasonable and not made in good faith as required by UCC § 2-311(1). Neal-Cooper Grain Co. v. Texas Gulf Sulphur Co., 508 F.2d 283, 1974 U.S. App. LEXIS 5606 (7th Cir. Ill. 1974).

In action by buyer alleging that breed of turkeys delivered by seller did not conform to their agreement, evidence established that contract, whether oral or written, was reached in context of well established course of dealing and that supplying cross-breed turkeys did not constitute material change from past practice. Amerine Nat'l Corp. v. Denver Feed Co., 493 F.2d 1275, 1974 U.S. App. LEXIS 10007 (10th Cir. Colo. 1974).

Description of cotton covered by contracts for sale of future cotton crop, i.e., purchase of cotton grown on specified approximate acreage, was not so vague as to render contracts unenforceable under Code where it appeared, by contracts in question, that each seller intended to sell his entire cotton crop for the year to buyer. R. N. Kelly Cotton Merchant, Inc. v. York, 379 F. Supp. 1075, 1973 U.S. Dist. LEXIS 11445 (M.D. Ga. 1973), aff'd, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Where writings of parties to contract for sale of sand failed to supply any definition of term “truck measure,” but buyer accepted and paid for large quantity of sand at price which had been computed in accordance with seller’s understanding of disputed phrase, buyer’s course of performance could be viewed as complete acquiescence in seller’s interpretation of phrase “truck measure.” Blue Rock Industries v. Raymond International, Inc., 325 A.2d 66, 1974 Me. LEXIS 337 (Me. 1974).

16. Usage of trade.

Trade usages are not automatically binding on all persons. Under UCC § 1-205(3), the party sought to be bound by a trade usage will not be bound if he was not in a position where he should have been aware of the usage. United States use of Union Bldg. Materials Corp. v. Haas & Haynie Corp., 577 F.2d 568, 1978 U.S. App. LEXIS 10510 (9th Cir. Haw. 1978).

Regardless of what usage of trade might be under UCC § 1-205(2), secured party could not enforce collection of unaccrued finance charges on debtor’s obligation after maturity date of such obligation had been accelerated by creditor under acceleration clause following debtor’s default. Credit Alliance Corp. v. Adams Constr. Corp., 570 S.W.2d 283, 1978 Ky. LEXIS 389 (Ky. 1978).

Under UCC § 1-205(2), a custom or usage, to become binding on the parties, must have antiquity as well as uniformity and universality and must have continued for such a length of time that the parties must have contracted with respect to it. Riemer Bros., Inc. v. Marlis Constr. Co., 64 Ill. App. 3d 80, 20 Ill. Dec. 951, 380 N.E.2d 1160, 1978 Ill. App. LEXIS 3272 (Ill. App. Ct. 2d Dist. 1978).

In accordance with usage of trade, foundry was not required to deliver patterns to customer before receiving payment therefor. Cooper Alloy Corp. v. E. B. V. Sys., 111 R.I. 756, 306 A.2d 837, 1973 R.I. LEXIS 1274 (R.I. 1973).

The term “usage of trade” refers to evidence of generalized industry practice or similar recognized custom, as distinguished from particular conversations or correspondence between the parties with respect to the terms of the agreement. Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F. Supp. 987, 1968 U.S. Dist. LEXIS 12344 (S.D.N.Y. 1968).

Where default occurred in payment of an automobile retail instalment contract in August of 1965 but the security holder did not make demand upon the dealer for performance of its repurchase agreement until October of 1966, and it was the custom and usage that the lending institution is required to repossess and return the vehicle for repurchase within a reasonable time after default and that 90 days is regarded as a reasonable time, the security holder could not enforce the repurchase agreement which contained no provision inconsistent with the custom and usage. Valley Nat'l Bank v. Babylon Chrysler-Plymouth, Inc., 53 Misc. 2d 1029, 280 N.Y.S.2d 786, 1967 N.Y. Misc. LEXIS 1452 (N.Y. Sup. Ct.), aff'd, 28 A.D.2d 1092, 284 N.Y.S.2d 849, 1967 N.Y. App. Div. LEXIS 7723 (N.Y. App. Div. 2d Dep't 1967).

17. —Livestock.

In action arising out of auction sale of mare described in sales catalog as “barren,” but which subsequently “slipped” a dead foal, buyer who effectively revoked sale had right under UCC §§ 2-601 and 2-608 to reject mare after acceptance and burden under UCC § 2-607 upon buyer to show breach did not apply. Since acceptance was revoked, burden was on seller to show mare’s conformity with catalog description but seller did not meet that burden where he failed to prove that mare was either barren or that, pursuant to usage of trade under UCC § 1-205, mare pronounced in foal and later found empty without evidence of abortion could be described as barren. Keck v. Wacker, 413 F. Supp. 1377, 1976 U.S. Dist. LEXIS 14786 (E.D. Ky. 1976).

In action arising out of sale of bull, seller’s answer; which alleged, inter alia, that by custom of trade in breeding animals there was no implied warranty of fitness for particular purpose in sale of bull, was sufficient under UCC § 1-205(6) to put buyers on notice of defense of exclusion under UCC § 2-316 of implied warranty of fitness under UCC § 2-315. Torstenson v. Melcher, 195 Neb. 764, 241 N.W.2d 103, 1976 Neb. LEXIS 998 (Neb. 1976).

18. —Negotiable instruments.

Issuer bank which refused to pay beneficiary under letter of credit because letter required delivery of goods to place other than place to which beneficiary had shipped goods, and which thereby extricated itself from precarious financial position because customer for whom letter was issued appeared incapable of reimbursing issuer, (1) was not required by good-faith obligation imposed by UCC § 1-203 to amend letter at instance of beneficiary and issuer’s customer, so as to permit delivery at place to which goods were actually shipped, and (2) also was not required to amend letter by UCC § 1-205(2), dealing with issuer’s obligation to act in accordance with banking custom and usage, since issuer, in issuing letters of credit, relied on written trade code entitled “Uniform Customs and Practice for Documentary Credits (UCP)” to establish banking practice, and UCP expressly declared that irrevocable letter of credit could not be amended or cancelled without agreement of all parties thereto, namely, beneficiary, customer, and issuer itself. AMF Head Sports Wear, Inc. v. Ray Scott's All-American Sports Club, Inc., 448 F. Supp. 222, 1978 U.S. Dist. LEXIS 18600 (D. Ariz. 1978) (construing Arizona law; holding issuer not liable for refusing payment to beneficiary).

19. —Risk of loss.

In action for damages for sale of negligently manufactured film, (1) evidence was sufficient to support jury finding that at time of sale of film to plaintiff, trade usage existed, within meaning of UCC § 1-205(2), which limited commercial buyer’s remedy to replacement of negligently manufactured film; (2) evidence also was sufficient to support finding that replacement of negligently manufactured film constituted plaintiff’s sole remedy under UCC § 2-719(1)(b); (3) such limited remedy did not fail of its essential purpose under UCC § 2-719(2); and (4) such limited remedy also did not operate in unconscionable manner within meaning of UCC § 2-719(3) because it was reasonably adapted to general commercial background and needs of film industry. Posttape Associates v. Eastman Kodak Co., 450 F. Supp. 407, 1978 U.S. Dist. LEXIS 18799 (E.D. Pa. 1978).

In action by diamond wholesaler against retailer to recover price of goods shipped under “all-risk” memorandum, custom and usage of industry established liability of consignee for full memorandum price of merchandise stolen while in his possession. Lipschutz v. Gordon Jewelry Corp., 373 F. Supp. 375, 1974 U.S. Dist. LEXIS 12147 (S.D. Tex. 1974).

20. —Variation in quality or quantity.

In action by purchaser of air conditioners to recover damages from manufacturer for repudiation of contract to supply airconditioners, where manufacturer had submitted bid to supply airconditioners in accord with buyer’s specifications, where, although specifications provided that “[c]apacities shall not be less than indicated,” airconditioners had approximate six per cent deficiency in capacity to remove heat, and where manufacturer refused to supply airconditioners in literal compliance with bid, trial court erred (1) in excluding evidence as to customs and usage in air conditioning industry to effect that reasonable variations in cooling capacity are considered to comply with specifications, and (b) in refusing to permit jury to consider such customs and usage if they would vary terms of written agreement. Modine Mfg. Co. v. North E. Indep. Sch. Dist., 503 S.W.2d 833 (Tex. Civ. App. 1973), ref. n.r.e (Apr. 17, 1974).

21. Modification or waiver; express agreements.

UCC § 9-306(2) codifies the common-law waiver. However, although prior course of dealing, without more, is not sufficient to waive written agreement to the contrary in light of UCC § 1-205(4), any course of performance or other conduct subsequently to the agreement can amount to a waiver. Southwest Washington Production Credit Asso. v. Seattle-First Nat'l Bank, 19 Wn. App. 397, 577 P.2d 589, 1978 Wash. App. LEXIS 2111 (Wash. Ct. App. 1978), rev'd, 92 Wn.2d 30, 593 P.2d 167, 1979 Wash. LEXIS 1191 (Wash. 1979).

In action for breach of contract to construct mechanical loading platforms for use in distribution center building, letter sent to defendant after it became clear that defendant would not perform which cancelled contract “without charge” could not as matter of law amount to waiver or renunciation of claim arising out of breach under UCC §§ 1-107 and 2-720; under UCC § 1-205, meaning to be given phrase “without charge” would require consideration of any course of dealing between parties and any applicable trade usage. National Cash Register Co. v. UNARCO Industries, Inc., 490 F.2d 285, 1974 U.S. App. LEXIS 10731 (7th Cir. Ill. 1974).

Express terms of agreement should be construed where reasonable as consistent with custom of trade or course of dealing evidenced by previous conduct of parties. Gindy Mfg. Corp. v. Cardinale Trucking Corp., 111 N.J. Super. 383, 268 A.2d 345, 1970 N.J. Super. LEXIS 439 (Law Div. 1970), overruled, Ramirez v. Autosport, 88 N.J. 277, 440 A.2d 1345, 1982 N.J. LEXIS 1875 (N.J. 1982).

When custom and usage are inconsistent with the express terms of an agreement, the agreement terms control. Valley Nat'l Bank v. Babylon Chrysler-Plymouth, Inc., 53 Misc. 2d 1029, 280 N.Y.S.2d 786, 1967 N.Y. Misc. LEXIS 1452 (N.Y. Sup. Ct.), aff'd, 28 A.D.2d 1092, 284 N.Y.S.2d 849, 1967 N.Y. App. Div. LEXIS 7723 (N.Y. App. Div. 2d Dep't 1967).

22. —Express agreement; secured transactions.

In suit by lender against auctioneer for conversion of cattle constituting lender’s collateral by sales in which proceeds were remitted only to debtor, (1) provisions in security agreement specifically authorizing debtor to sell cattle and other collateral with lender’s prior written consent, or with payment made jointly to debtor and lender, did not violate UCC § 1-205(4) or § 9-306(2), and did not constitute either express waiver of lender’s security interest in cattle or express consent to sales complained of; (2) lender under UCC § 1-205(4) did not impliedly consent to such cattle sales, and thus impliedly waive its security interest, by its course of conduct in allowing debtor to sell other collateral in debtor’s name, receive payment therefor, and remit proceeds to lender without admonishing debtor for his violation of security agreement’s provisions; (3) lender’s statement to debtor, however, that he could sell cattle “providing he applied the proceeds from that sale” constituted express consent to sell cattle in manner not designated in parties’ security agreement; and (4) defendant auctioneer, as debtor’s agent, acquired same right to sell that debtor possessed, thus rendering auctioneer not liable for conversion. North Cent. Kansas Production Credit Asso. v. Washington Sales Co., 223 Kan. 689, 577 P.2d 35, 1978 Kan. LEXIS 271 (Kan. 1978).

Where bank had perfected security interest in cattle under agreement which prohibited sale of collateral without bank’s prior written approval and where farmer sold cattle without such approval, security interest survived sale pursuant to UCC § 9-306(2) and buyers were liable for conversion, even though in prior transactions with debtor bank had not objected to such sales of collateral, as UCC § 1-205(4) provides that course of dealings may be used to interpret terms of agreement but not to contradict them. Wabasso State Bank v. Caldwell Packing Co., 308 Minn. 349, 251 N.W.2d 321, 1976 Minn. LEXIS 1605 (Minn. 1976).

Although security agreement covering livestock expressly prohibited debtor from selling collateral without written consent of secured party, debtor had implied authority to sell collateral free from security interest under UCC § 9-306(2) where, from beginning of secured party’s relationship with debtor, sales of livestock pledged as collateral were made to various livestock dealers, and where secured party had knowledge of this, raised no objection, accepted checks from these sales for credit to debtor’s account, and clearly relied on debtor’s honesty to properly account for proceeds; this established course of dealing which constituted authority to sell livestock free from security interest, notwithstanding claim that, under UCC § 1-205(4), express terms of security agreement prohibiting sale controlled. Hedrick Sav. Bank v. Myers, 229 N.W.2d 252, 1975 Iowa Sup. LEXIS 1102 (Iowa 1975).

An agreement between an equipment manufacturer and a finance company to the effect that the finance company was under no responsibility to record or file security paper was deemed waived by the finance company’s retention of, and inaction upon, a letter from the manufacturer accompanying its transmittal of a conditional sales contract and judgment note requesting the finance company to record the paper, and the finance company’s failure to comply with the statute placed the burden of loss from the dissipation of the security upon its shoulders. Congress Financial Corp. v. Sterling--Coin Op Machinery Corp., 456 F.2d 451, 1972 U.S. App. LEXIS 11516 (3d Cir. Pa. 1972).

Security agreement provision that debtor would not sell or otherwise dispose of collateral without prior written consent of secured party controlled course of dealing of parties and usage of trade in determining whether sale of collateral was impliedly authorized by inclusion of proceeds as collateral. United States v. E. W. Savage & Son, Inc., 343 F. Supp. 123, 1972 U.S. Dist. LEXIS 13560 (D.S.D. 1972), aff'd, 475 F.2d 305, 1973 U.S. App. LEXIS 11172 (8th Cir. S.D. 1973).

Course of dealing or trade usage, within meaning of Code, is used as factor to determine commercial meaning of agreement which parties made, and, under facts established by pleadings, would not cause lender and holder of security agreement on corn to waive or be estopped to assert its security interest in corn purchased by grain elevator operator from borrower. Vermilion Cnty. Prod. Credit Ass'n v. Izzard, 111 Ill. App. 2d 190, 249 N.E.2d 352, 1969 Ill. App. LEXIS 1269 (Ill. App. Ct. 4th Dist. 1969).

Written agreements between a finance company and an automobile dealer could be explained or supplemented by a course of dealing or usage or by a course of performance. Skeels v. Universal C. I. T. Credit Corp., 222 F. Supp. 696, 1963 U.S. Dist. LEXIS 6645 (W.D. Pa. 1963), vacated, 335 F.2d 846, 1964 U.S. App. LEXIS 4515 (3d Cir. Pa. 1964).

Where, according to the usage of the trade, “cotton waste” and “cotton linters” are entirely different articles, a financing statement which describes cotton waste cannot be interpreted to impose a security interest on cotton linters. Annawan Mills, Inc. v. Northeastern Fibers Co., 26 Mass. App. Dec. 115.

23. —Implied warranties.

An implied warranty may be excluded or modified by a course of dealing (Uniform Commercial Code, § 2-316, subd [3], par [c]; § 1-205, subd [1]); however, there is no exclusion where proof of such a course of dealing between plaintiff and third-party defendant is inconclusive and where the third-party defendant asserting the exclusion had notice and aided in the completion of a written agreement which contained an assignment of plaintiff’s rights for breach of warranty against the third-party defendant. United States Leasing Corp. v. Comerald Associates, Inc., 101 Misc. 2d 773, 421 N.Y.S.2d 1003, 1979 N.Y. Misc. LEXIS 2760 (N.Y. Civ. Ct. 1979).

Discussions between president of corporate purchaser and seller of golf carts re warranties and filing of claim thereunder constituted course of dealing under UCC § 1-205(1) and thus could be basis for limitation of implied warranties. Country Clubs, Inc. v. Allis-Chalmers Mfg. Co., 430 F.2d 1394, 1970 U.S. App. LEXIS 7643 (6th Cir. Tenn. 1970).

Where buyer asserted unawareness of usage of trade as to exclusion of implied warranty of merchantability as to seeds, there was question of fact as to exclusion of warranty, precluding summary judgment for seller, even though written warranty exclusion was ineffective. Zicari v. Joseph Harris Co., 33 A.D.2d 17, 304 N.Y.S.2d 918, 1969 N.Y. App. Div. LEXIS 2923 (N.Y. App. Div. 4th Dep't 1969).

24. —Statute of frauds.

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC § 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC § 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

Portions of Uniform Commercial Code relating to course of dealings or trade usage were not intended to be applied in manner to defeat Code’s statute of frauds requirements and, at least, evidence of custom or usage in trade could be used to explain ambiguous portions of an agreement; thus, potato farmer could not introduce evidence of usage or course of dealings within trade to substantiate oral agreement with potato buyer. Dangerfield v. Markel, 222 N.W.2d 373, 1974 N.D. LEXIS 159 (N.D. 1974).

25. Evidence and burden of proof.

Evidence of “course of dealing” can have no probative value where parties have previously entered into written agreement setting forth their respective rights and duties, but where that agreement is not produced at time of trial nor any evidence of its terms. Family Provisioners, Inc. v. Columbia Acceptance Co., 274 Ore. 303, 545 P.2d 1379, 1976 Ore. LEXIS 873 (Or. 1976).

Where trade usage must be resorted to for interpretation of contract, such trade usage would have to be demonstrated by something more than oral argument. Cable--Wiedemer, Inc. v. A. Friederich & Sons Co., 71 Misc. 2d 443, 336 N.Y.S.2d 139, 1972 N.Y. Misc. LEXIS 1505 (N.Y. County Ct. 1972).

Notwithstanding that there was uncontradicted testimony that it was custom and usage of trade that second-hand or used airplanes were sold without warranty, where seller of aircraft failed to show scope of this custom, whether local or universal, seller failed to carry burden cast upon it on its motion for summary judgment in buyer’s action on alleged implied warranty as to merchantability. Georgia Timberlands, Inc. v. Southern Airways Co., 125 Ga. App. 404, 188 S.E.2d 108, 1972 Ga. App. LEXIS 1351 (Ga. Ct. App. 1972).

26. —Admissibility.

In action on open account, trial court erred in excluding evidence of prior dealings between parties because such dealings, under UCC § 1-205(1), would have been probative as to whether defendant had maintained account during particular year alleged by plaintiff and for which suit was brought. Deroller v. Powell, 144 Ga. App. 585, 241 S.E.2d 469, 1978 Ga. App. LEXIS 1694 (Ga. Ct. App. 1978).

In action to determine priority of security interests of bank and seller of hardware store, where evidence showed that seller’s security interest in purchaser’s collateral was perfected by filing on July 20, 1972, and that bank’s interest in same collateral was perfected by filing on November 2, 1972; that bank, by subordination agreement entered into on July 12, 1972, had subordinated its claim against purchaser to claim of seller; and that on December 11, 1973, rider to subordination agreement supplementary principles of law and equity, non-UCC parol evidence rule applied to case; (3) under UCC § 1-205(4), non-UCC parol evidence rule barred parol evidence by bank that rider was intended to grant bank priority as to claims in excess of first $15,000 of purchaser’s indebtedness to seller, since such evidence was totally inconsistent with unambiguous terms of rider which were controlling; and (4) even if seller’s security interest should fail to meet test for special priority under UCC § 9-312(3), executed by bank, seller, and purchaser provided that agreement should apply only to first $15,000 of purchaser’s indebtedness to seller and that priority of claims concerning remainder of such indebtedness should be determined in accordance with UCC Article 9, (1) provisions of UCC Article 1 applied to case, since subordination agreement and rider related to transactions covered by Uniform Commercial Code and rider specifically referred to Article 9; (2) under UCC § 1-103, dealing with application of seller’s interest would still prevail under first-to-file rule of UCC § 9-312(5). People Bank & Trust v. Reiff, 256 N.W.2d 336, 1977 N.D. LEXIS 146 (N.D. 1977).

In action by wholesaler against retailer for recovery of purchase price of two motorcycles, under UCC §§ 1-205, 2-202 and 2-326(4) trial court properly denied admissibility to defendant’s proposed parol evidence that agreement was actually consignment sale agreement under “sale or return” arrangement, where written sales agreement between parties was not ambiguous. Recreatives, Inc. v. Travel-On Motorcycles Co., 29 N.C. App. 727, 225 S.E.2d 637, 1976 N.C. App. LEXIS 2636 (N.C. Ct. App. 1976).

In action on contract to deliver 4,000 bushels of soybeans by buyer against farmer who as result of drought was able to deliver less than 2,000 bushels, his entire crop, rejection of buyer’s evidence relating to custom and usage of soybean trade was proper under UCC § 1-205(6) where offer of evidence came late in trial and probably would have denied seller opportunity to rebut it absent continuance or other disruption of trial. Paymaster Oil Mill Co. v. Mitchell, 319 So. 2d 652, 1975 Miss. LEXIS 1483 (Miss. 1975).

In action by car dealer against buyer to recover alleged unpaid balance due on sale of car, dealer was not entitled to offer parole testimony under UCC § 2-202(a) that buyer had agreed to deliver insurance check covering wrecked trade-in vehicle as part of consideration where insurance check was not mentioned in contract and contract was, by its own terms, complete and exclusive statement of terms of agreement; nor did evidence disclose course of dealing and usage of trade as defined by UCC § 2-205 or course of performance as defined by UCC § 2-208 which would permit introduction of such evidence. Noble v. Logan--Dees Chevrolet--Buick, Inc., 293 So. 2d 14, 1974 Miss. LEXIS 1774 (Miss. 1974).

Portions of Uniform Commercial Code relating to course of dealings or trade usage were not intended to be applied in manner to defeat Code’s statute of frauds requirements and, at best, evidence of custom or usage in trade could be used to explain ambiguous portions of an agreement; thus, potato farmer could not introduce evidence of usage or course of dealings within trade to substantiate oral agreement with potato buyer. Dangerfield v. Markel, 222 N.W.2d 373, 1974 N.D. LEXIS 159 (N.D. 1974).

When UCC § 2-202 expressly allowing evidence of course of dealing or usage of trade to explain or supplement terms intended by the parties as a final expression of their agreement, is read in light of UCC § 1-205(4), it is clear that the test of admissibility is not whether the contract appears on its face to be complete in every detail, but whether the proffered evidence of course of dealing and trade usage reasonably can be construed as consistent with the express terms of the agreement. Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 1971 U.S. App. LEXIS 7419 (4th Cir. 1971).

Evidence of course of dealing and usage of trade is admissible under UCC § 1-205 to amplify, supplement or qualify terms of an agreement, but it does not create an agreement where none previously existed. White Lumber Sales, Inc. v. C. Brinson Lamb & Sons Lumber Co., 121 Ga. App. 702, 175 S.E.2d 81, 1970 Ga. App. LEXIS 1322 (Ga. Ct. App. 1970).

Taken along with other relevant sections of the Uniform Commercial Code, the provision that an agreement may be supplemented by course of dealing or usage of trade tends to allow the use of parol testimony in a proper case. Holland Furnace Co. v. Heidrich, 7 Pa. D. & C.2d 204, 1955 Pa. Dist. & Cnty. Dec. LEXIS 27 (Pa. C.P. 1955).

27. —Presumptions.

Trade usages sanctioned by passage of time are presumed to be within knowledge of parties regularly engaged in business, in present case shipment and carriage of goods by sea, and all contracts are presumed made with reference to trade usages and practice. Du Pont de Nemours International S.A. v. S.S. Mormacvega, 367 F. Supp. 793, 1972 U.S. Dist. LEXIS 11784 (S.D.N.Y. 1972), aff'd, 493 F.2d 97, 1974 U.S. App. LEXIS 10697 (2d Cir. N.Y. 1974).

III. UNDER FORMER § 75-2-208.

28. In general.

Where in 1969 United States, through Bureau of Indian Affairs (“BIA”) on behalf of Indian tribe entered into timber sale contract with lumber company and, although contract was to have been fully performed before December 31, 1969, not all timber subject to contract was taken during 1969 and written extension of contract to December 31, 1970, was executed by lumber company and tribe with approval of BIA, where additional one-year extension was requested by lumber company in December, 1970, tribe agreed to extension and signed agreement was forwarded by BIA to lumber company on or about January 28, 1971, although extension was never executed by lumber company’s surety, and where in December, 1971, lumber company requested additional extension of contract to December 31, 1972, but where no logging took place under contract after September 15, 1969, evidence showed that tribe intended to grant and BIA to approve second extension agreement and, thus, under UCC §§ 2-208(3) and 2-209(4) such attempted modification of contract operated as waiver of requirement that lumber company fully perform during one-year extension of contract. In re Humboldt Fir, Inc., 426 F. Supp. 292, 1977 U.S. Dist. LEXIS 17916 (N.D. Cal. 1977), aff'd, 625 F.2d 330, 1980 U.S. App. LEXIS 19723 (9th Cir. 1980).

Under UCC § 2-208(2), an ambiguous contract can be construed by reference to course of performance, prior course of dealing, and usage of trade (holding that provision to “import, grade, and compact clay fill $2.75 cu yd.” was ambiguous, and that parol evidence was admissible to explain it). Riemer Bros., Inc. v. Marlis Constr. Co., 64 Ill. App. 3d 80, 20 Ill. Dec. 951, 380 N.E.2d 1160, 1978 Ill. App. LEXIS 3272 (Ill. App. Ct. 2d Dist. 1978).

Buyer purchased used truck “as is” and could not raise implied warranty claim against his seller where buyer insisted on closing sale without inspecting truck, although seller repeatedly advised buyer of risk he was taking by purchasing truck without inspection, and where buyer admitted that he purchased truck “as it was”; under UCC § 2-316(3)(c) implied warranty could be excluded or modified by course of performance and fact that exclusion in present case, raised by parties’ course of performance, was oral did not vitiate its utility or relevance; under UCC § 2-202(a) parol evidence was admissible to explain and supplement lease-purchase agreement and to establish oral waiver of implied warranties. Robinson v. Branch Moving & Storage Co., 28 N.C. App. 244, 221 S.E.2d 81, 1976 N.C. App. LEXIS 2657 (N.C. Ct. App. 1976).

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC §§ 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC §§ 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

Under UCC § 1-208, conditional vendor of automobile was justified in exercising its “insecurity clause” and accelerating payment of balance due under conditional sales contract where conditional purchaser was charged with illegally transporting controlled substances in violation of state law, thereby subjecting vehicle to possible forfeiture proceedings by state and federal governments. Blaine v. G.M.A.C., 82 Misc. 2d 653, 370 N.Y.S.2d 323, 1975 N.Y. Misc. LEXIS 2747 (N.Y. County Ct. 1975).

Mere fact that lender accepted late payments from automobile purchaser on five different occasions did not operate as waiver of conditional sales contract provisions relating to timeliness of installment payments, in view of contract language to effect that waiver or indulgence of any default or failure to exercise any right under contract would not be construed as agreement to modify terms of instrument or to operate as waiver of any subsequent default, and particularly in view of fact that on one occasion purchaser obtained written 90-day extension of due date of note from lender; contract provision in question was not rendered inoperative by UCC § 2-209(2), even though contract provision was not separately set out and separately executed by borrower, since UCC provision applies only to merchants and there was no evidence in record that automobile purchaser was “merchant” as defined in UCC § 2-104(1). Trust Co. of Georgia v. Montgomery, 136 Ga. App. 742, 222 S.E.2d 196, 1975 Ga. App. LEXIS 1478 (Ga. Ct. App. 1975).

Shipping instructions issued by buyer calling for delivery of 10,000 tons of fertilizer during first 25 working days of month, freight prepaid, to places other than buyer’s plant, did not constitute anticipatory repudiation of contract under which seller agreed to sell and ship, and buyer agreed to buy and receive at its plant, 10,000 tons of fertilizer within eight-month period of time where (1) quantity requested in shipping instructions did not exceed quantity specified in contract; (2) evidence established that prepayment of freight and shipping to place other than buyer’s plant were in accord with course of dealing between parties and, even without course of dealing, there was nothing in language of contract repugnant to place or manner of shipment specified in shipping instructions; (3) seller failed to demonstrate that buyer’s demanding entire season’s supply in one month was commercially unreasonable and not made in good faith as required by UCC § 2-311(1). Neal-Cooper Grain Co. v. Texas Gulf Sulphur Co., 508 F.2d 283, 1974 U.S. App. LEXIS 5606 (7th Cir. Ill. 1974).

Under contract for delivery of peach brandy during 1968 and 1969 seasons, evidence supported finding that parties mutually terminated executory portion of contract for 1969 delivery, where both exchanged modification proposals eliminating this provision, both repeatedly referred to their “termination agreement”, and seller neither offered to make nor made any brandy for buyer from 1969 peach crop. Pirrone v. Monarch Wine Co., 497 F.2d 25, 1974 U.S. App. LEXIS 7706 (5th Cir. 1974).

Description of cotton covered by contracts for sale of future cotton crop, i. e., purchase of cotton grown on specified approximate acreage, was not so vague as to render contracts unenforceable under Code where it appeared, by contracts in question, that each seller intended to sell his entire cotton crop for the year to buyer. R. N. Kelly Cotton Merchant, Inc. v. York, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

In action by car dealer against buyer to recover alleged unpaid balance due on sale of car, dealer was not entitled to offer parole testimony under UCC § 2-202(a) that buyer had agreed to deliver insurance check covering wrecked trade-in vehicle as part of consideration where insurance check was not mentioned in contract and contract was, by its own terms, complete and exclusive statement of terms of agreement; nor did evidence disclose course of dealing and usage of trade as defined by UCC § 2-205 or course of performance as defined by UCC § 2-208 which would permit introduction of such evidence. Noble v. Logan--Dees Chevrolet--Buick, Inc., 293 So. 2d 14, 1974 Miss. LEXIS 1774 (Miss. 1974).

In action by seller of rebuilt automobile parts against purchaser on open and stated account, trial court’s refusal to allow purchaser’s witness to testify as to seller’s “custom and practice” when goods were returned was not reversible error where, inter alia, court permitted witness to answer as to what was done when goods were returned and this effectively answered question and complied with requirements of UCC § 2-208(1) Curry Motor Co. v. Rebuilt Parts Warehouse, Inc., 53 Ala. App. 719, 304 So. 2d 221, 1974 Ala. Civ. App. LEXIS 514 (Ala. Civ. App. 1974).

Where writings of parties to contract for sale of sand failed to supply any definition of term “truck measure,” but buyer accepted and paid for large quantity of sand at price which had been computed in accordance with seller’s understanding of disputed phrase, buyer’s course of performance could be viewed as complete acquiescence in seller’s interpretation of phrase “truck measure.” Blue Rock Industries v. Raymond International, Inc., 325 A.2d 66, 1974 Me. LEXIS 337 (Me. 1974).

Express terms of agreement governed when evidence of course of dealing or performance is offered but is inconsistent with agreement. Division of Triple T Service, Inc. v. Mobil Oil Corp., 60 Misc. 2d 720, 304 N.Y.S.2d 191, 1969 N.Y. Misc. LEXIS 1877 (N.Y. Sup. Ct. 1969), aff'd, 34 A.D.2d 618, 311 N.Y.S.2d 961, 1970 N.Y. App. Div. LEXIS 6328 (N.Y. App. Div. 2d Dep't 1970).

Even in the absence of a written agreement with respect to every term of a contract, great weight attaches to the course of dealing of the parties, and where it appears from the conduct of the parties that their mode of calculating price, although not accepted formally by signature of a written instrument, was adhered to by both parties during an extensive course of dealing, during which the purchaser received, accepted, and paid for over $800,000 worth of merchandise, this course of dealing must be held applicable and governing with respect to remaining merchandise which was received, accepted, but not paid for. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 236 F. Supp. 879, 1965 U.S. Dist. LEXIS 6206 (W.D. Pa.), vacated, 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

§ 75-1-304. Obligation of good faith.

Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.

HISTORY: Present §75-1-304 is derived from former §75-1-203 [Codes, 1942, 41A:1-203; Laws, 1966, ch. 316, § 1-203, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Course of dealing and usage of trade, see §75-1-303.

Good faith acceleration of payment, see §75-1-309.

Cure by seller of improper tender or delivery, see §75-2-508.

Good faith of buyer in selling after rejection of goods, see §75-2-603.

Substituted performance, see §75-2-614.

Delay or nondelivery caused by compliance in good faith with governmental regulation or order, see §75-2-615.

RESEARCH REFERENCES

ALR.

Duty of publisher with regard to distribution and promotion of book. 43 A.L.R.4th 1182.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 20.

17 Am. Jur. 2d, Contracts § 380.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:24 (Answer; defense; absence of good faith on part of plaintiff in exercising option to require additional collateral)..

34 Am. Jur. Trials 343, Bad Faith Tort Remedy for Breach of Contract.

CJS.

17B C.J.S., Contracts § 561, 562.

Law Reviews.

1987 Mississippi Supreme Court Review: Lender liability in Mississippi: a survey, comparison, and comment. 57 Miss L. J. 1.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1.-10. [Reserved for future use].

II. UNDER FORMER §75-1-203.

11. In general.

12. Applicability to particular parties.

13. Commercial paper.

14. Letters of credit.

15. Sales.

16. Secured transactions.

17. Other commercial transactions.

I. UNDER CURRENT LAW.

1.-10. [Reserved for future use].

II. UNDER FORMER § 75-1-203.

11. In general.

Section 75-1-203, which provides that every contract imposes an obligation of good faith in its performance or enforcement, does not apply to employment contracts. Hartle v. Packard Elec., 626 So. 2d 106, 1993 Miss. LEXIS 485 (Miss. 1993).

The requirement of good faith of the Code is an overriding provision that applies to the termination provision. Tele-Controls, Inc. v. Ford Industries, Inc., 388 F.2d 48, 1967 U.S. App. LEXIS 4065 (7th Cir. Ill. 1967).

The provisions of this section superimpose a general requirement of fundamental integrity on commercial transactions regulated by the Uniform Commercial Code. Skeels v. Universal C. I. T. Credit Corp., 335 F.2d 846, 1964 U.S. App. LEXIS 4515 (3d Cir. Pa. 1964).

12. Applicability to particular parties.

Issues of material fact remained regarding whether defendants’ allegedly fraudulent actions during settlement negotiations arising out of an asbestos lawsuit amounted to a breach of good faith and fair dealing under contract law and Miss. Code Ann. §75-1-203. Ill. Cent. R.R. Co. v. Harried, 681 F. Supp. 2d 773, 2009 U.S. Dist. LEXIS 121309 (S.D. Miss. 2009).

In a reseller’s suit against a communications company, in which a claim for breach of the implied duty of good faith and fair dealing was asserted, a contractual damages limitation was subject to and enforceable under Georgia law, in accordance with the contract’s choice of law provision for contract claims, and was not subject to Mississippi law because such a claim was a contract claim under Miss. Code Ann. §75-1-203. Unity Communs., Inc. v. AT&T Mobility, LLC, 643 F. Supp. 2d 829, 2009 U.S. Dist. LEXIS 61349 (S.D. Miss. 2009), aff'd, 400 Fed. Appx. 944, 2010 U.S. App. LEXIS 23167 (5th Cir. Miss. 2010).

Where plaintiff former employer sued defendant former employee for breach of the implied duty of good faith and fair dealing, the claim was not likely to succeed on the merits for purposes of a preliminary injunction because there was no employment contract and although the employer cited Miss. Code Ann. §75-1-203, under Miss. Code Ann. §75-1-102, that only applied to the sale of goods. Block Corp. v. Nunez, 2008 U.S. Dist. LEXIS 34374 (N.D. Miss. Apr. 25, 2008).

Words “or duty” were added to section to make it clear that third parties as well as parties to a contract have an obligation of good faith. In re Davidoff, 351 F. Supp. 440, 1972 U.S. Dist. LEXIS 12105 (S.D.N.Y. 1972).

13. Commercial paper.

In action pursuant to UCC § 3-419 by co-payee of check for conversion of check by bank which cashed check with co-payee’s endorsement forged by other payee, co-payee, which was not a “customer” of bank within meaning of UCC §§ 4-104 and 4-406, was not equitably estopped by policy of commercial reasonableness under UCC §§ 1-102 and 1-203, notwithstanding that co-payee waited 10 months after it learned of forgery to inform bank, where (1) check, which was issued to co-payee “and” other payee, was properly payable under UCC § 3-116 only if it contained endorsement of both payees; (2) unauthorized endorsement was, in absence of ratification under UCC § 3-404, no endorsement under UCC §§ 3-202 and 3-404; (3) co-payee did not ratify unauthorized endorsement; and (4) bank’s failure to ascertain whether co-payee’s signature was authorized was not in accord with reasonable commercial standards of banking business under UCC § 3-419. Atlas Bldg. Supply Co. v. First Independent Bank, 15 Wn. App. 367, 550 P.2d 26, 1976 Wash. App. LEXIS 1408 (Wash. Ct. App. 1976).

Provision in loan agreement providing that borrower would not incur other indebtedness for borrowed money without consent of lender was not unconscionable under UCC § 2-302, since this § 2-302 is applicable only to sales transactions. Nor was clause a breach of obligation of good faith imposed by UCC § 1-203 where loan agreement was negotiated at arm’s length between sophisticated commercial parties. Interstate Sec. Police, Inc. v. Citizens & Southern Emory Bank, 237 Ga. 37, 226 S.E.2d 583, 1976 Ga. LEXIS 1138 (Ga. 1976).

14. Letters of credit.

Issuer bank which refused to pay beneficiary under letter of credit because letter required delivery of goods to place other than place to which beneficiary had shipped goods, and which thereby extricated itself from precarious financial position because customer for whom letter was issued appeared incapable of reimbursing issuer, (1) was not required by good-faith obligation imposed by UCC § 1-203 to amend letter at instance of beneficiary and issuer’s customer, so as to permit delivery at place to which goods were actually shipped, and (2) also was not required to amend letter by UCC § 1-205(2), dealing with issuer’s obligation to act in accordance with banking custom and usage, since issuer, in issuing letters of credit, relied on written trade code entitled “Uniform Customs and Practice for Documentary Credits (UCP)” to establish banking practice, and UCP expressly declared that irrevocable letter of credit could not be amended or cancelled without agreement of all parties thereto, namely, beneficiary, customer, and issuer itself. AMF Head Sports Wear, Inc. v. Ray Scott's All-American Sports Club, Inc., 448 F. Supp. 222, 1978 U.S. Dist. LEXIS 18600 (D. Ariz. 1978) (construing Arizona law; holding issuer not liable for refusing payment to beneficiary).

15. Sales.

In action by seller of upholstery fabrics against buyer for balance due on unpaid invoices, in which buyer admitted ordering fabrics but alleged that seller had overshipped fabrics to buyer, that buyer had revoked acceptance of overshipped goods and returned them to seller, that seller had allowed credit for returned goods, and that buyer had then paid balance of its account, court held (1) that no overshipments had occurred; (2) that seller had agreed that buyer could return fabrics that buyer could not dispose of at reduced price; (3) that seller never notified buyer that credit memorandum for major part of returned fabrics had been erroneously sent to buyer; (4) that since disputed shipments had conformed to oral orders placed by buyer, buyer’s revocation of its prior acceptance of goods under UCC § 2-608(1) was wrongful; (5) that seller was thereafter entitled to remedies provided by UCC § 2-703; (6) that seller’s postbreach conduct-which consisted of allowing discount on disputed fabrics, accepting great number of pieces returned to seller, and sending buyer memorandum allowing credit for returned fabrics with no qualification as to memorandum’s meaning-showed acquiescence in alleged agreement for return of goods and allowance of discount thereon; and (7) that seller, by failing to exercise diligence in enforcing its rights under the contract, had not exercised good faith required by UCC § 1-203, had seriously misled buyer, and thus was estopped to assert its abandoned rights. Castle Fabrics, Inc. v. Fortune Furniture Mfrs., Inc., 459 F. Supp. 409, 1978 U.S. Dist. LEXIS 14502 (N.D. Miss. 1978).

In buyer’s action for seller’s breach of written and oral warranties in sale of marine diesel engine, (1) where terms of sale contract were contained in seller’s letter to buyer, buyer’s written purchase order, and manufacturer’s written warranty which accompanied sale of engine; (2) where seller also orally warranted to buyer that engine would deliver specified standard of performance, that if it did not do so it could be removed from buyer’s boat at seller’s expense, and that it would be delivered in time to meet requirements of builder of buyer’s boat; (3) where such oral warranties were breached and buyer, within six-months period provided in written engine warranty for manufacturer’s repair or replacement of defective parts, refused to allow manufacturer’s mechanic to inspect defective engine; (4) where buyer, more than six months after date engine was put into operation, notified seller that he had removed engine from his boat, tendered engine back to seller, and demanded return of purchase price; and (5) where such tender and demand were refused by seller, (1) trial court properly found that all terms of sale contract had not been reduced to writing; (2) admission in evidence of oral warranties as part of sale contract did not violate parol evidence rule contained in UCC § 2-202; (3) such oral warranties did not constitute “sale or return” provision in contract under UCC § 2-326(1)(b), but were analogous to “sale on approval” provision under UCC § 2-326(1)(a) and thus were not required by UCC § 2-326(4) to be in writing; (4) buyer’s failure to allow seller to exercise right under UCC § 2-508(1) to inspect and repair engine negated warranty provisions of sale contract; (5) buyer accepted engine under UCC § 2-327(1)(b) by not seasonably notifying seller of buyer’s election to return engine; and (6) buyer’s delay of nearly six months in informing seller of buyer’s intention to revoke acceptance of engine was insufficient compliance with buyer’s good faith obligation under UCC § 1-203 and did not revoke such acceptance under UCC § 2-608. Peter Pan Seafoods, Inc. v. Olympic Foundry Co., 17 Wn. App. 761, 565 P.2d 819, 1977 Wash. App. LEXIS 1635 (Wash. Ct. App. 1977).

Where contract for sale of popcorn provided that buyer was to pay for shipments of popcorn when delivered and seller repudiated contract after delivering two shipments to buyer’s processing plant (for which shipments seller did not demand on-the-spot payment and buyer did not offer to pay at such place, since it customarily paid its obligations from its business office in another city), seller breached his obligation of good faith under UCC § 1-203 in performance of contract, as “good faith” is defined by UCC § 1-201(19), by failing to demand payment after delivery of each shipment and by hastily reselling undelivered part of popcorn crop to another buyer at nearly twice the contract price; trial court, in finding absence of good faith by seller, did not err in employing unconscionability concept of UCC § 2-302 in interpreting contract, since court’s statement as to unconscionability was only dictum. Baker v. Ratzlaff, 1 Kan. App. 2d 285, 564 P.2d 153, 1977 Kan. App. LEXIS 158 (Kan. Ct. App. 1977).

Wholesale parts distributor was not entitled to recover damages from manufacturer resulting from termination of distributorship contract where contract provided that either party could terminate at any time on written notice of 90 days, where, although distributor was required to carry “adequate” inventory of manufacturer’s parts, contract also gave manufacturer option to refuse to repurchase inventory upon termination, and where manufacturer terminated contract and refused to repurchase distributor’s inventory. Distributor failed to show that repurchase provision was unconscionable within meaning of UCC § 2-302 at time of formation of contract: there was no showing that manufacturer’s reasons for reserving repurchase option in its distributorship agreements were not reasonably related to business risks involved; it was not unreasonable per se for manufacturer to reserve right to refuse to repurchase at least portions of distributor’s inventory upon termination; and, although manufacturer may have had superior bargaining power, under Code, bona fide allocation of risks would not be disturbed merely because one party had superior bargaining position, particularly where both parties were sophisticated business people. Furthermore, repurchase provision was not unduly one-sided or oppressive; although provision appeared to be unqualified, on its face, any exercise of repurchase election by manufacturer was restricted by manufacturer’s obligation to act in good faith pursuant to UCC § 1-203, and, although proof that manner in which repurchase election was exercised at time of termination amounted to breach of manufacturer’s implied obligation of good faith and fair dealing would have been independent basis for recovery of damages, neither distributor’s complaint nor theory under which case was tried supported findings for distributor based on breach of implied covenant of good faith and fair dealing. W. L. May Co. v. Philco-Ford Corp., 273 Ore. 701, 543 P.2d 283, 1975 Ore. LEXIS 370 (Or. 1975).

Fact that party in default on contract for sale of wheat did not specifically disavow intention to perform obligation in default did not constitute breach of obligation of good faith imposed upon contracting parties under UCC § 1-203. Purpose of UCC § 1-205(1) was to assist court by allowing evidence as to those matters in which basic contract was lacking or as to which basic contract was ambiguous. Cargill, Inc. v. Kavanaugh, 228 N.W.2d 133, 1975 N.D. LEXIS 191 (N.D. 1975).

“Outputs” contract under which bakery agreed to sell all breadcrumbs produced by it to promisee did not carry with it implication that bakery was obligated to manufacture breadcrumbs for full term of contract; rather, good faith termination of production of breadcrumbs was permissible under contract. Thus, summary judgment could not be entered in favor of either party to suit for breach of contract where unresolved issues of fact remained as to whether bakery acted in good faith in ceasing production of crumbs because of alleged economic unfeasibility. Feld v. Henry S. Levy & Sons, Inc., 37 N.Y.2d 466, 373 N.Y.S.2d 102, 335 N.E.2d 320, 1975 N.Y. LEXIS 2047 (N.Y. 1975).

16. Secured transactions.

In suit by debtor’s receiver challenging bank’s priority as perfected security interest holder and its concomitant right to take possession and dispose of secured collateral, UCC § 9-402 did not require bank to give notice to debtor’s creditors that original security agreement was amended to increase amount of its loan and terms of repayment where increased loan was secured by same collateral originally described in financing statement. Heights v. Citizens Nat'l Bank, 463 Pa. 48, 342 A.2d 738, 1975 Pa. LEXIS 920 (Pa. 1975).

Secured party was not entitled to recover alleged deficiency due after sale of repossessed automobile since (1) three days’ notice of resale was not commercially reasonable under UCC § 9-504(3); (2) sale of automobile for only $50 was not in good faith, under UCC § 1-203, or in commercially reasonable manner under UCC § 9-504(3), although automobile was inoperable, where casual inspection would have revealed that automobile was missing spark plugs, points and air cleaner, and installation of these items would have made car operative and would only have required small expenditure; and (3) presumption that collateral was worth at least amount of debt, which arose as result of secured creditor’s failure to give sufficient notice of resale, was not overcome by creditor’s evidence. Franklin State Bank v. Parker, 136 N.J. Super. 476, 346 A.2d 632, 1975 N.J. Super. LEXIS 987 (Cty. Ct. 1975).

Although principles of estoppel and good faith underlie entire UCC, including provisions of Article 9, and lack of good faith on part of secured creditor may alter priorities which would otherwise be determined by Article 9 provisions, mere fact that secured party stood to gain from debtors’ wrongful conduct did not in and of itself show lack of good faith and fact that secured party authorized debtors to purchase grain on credit from third party did not constitute evidence of fraudulent scheme or conspiracy. Central Soya Co. v. Bundrick, 137 Ga. App. 63, 222 S.E.2d 852, 1975 Ga. App. LEXIS 1204 (Ga. Ct. App. 1975).

Code requirement of “good faith” prevented family corporation from enforcing security agreement as to mortgaged property of partnership, where security agreement had been granted in breach of partnership regulatory agreement provision that there would be no encumbrance of any mortgaged property without FHA approval and where both partnership and corporation were dominated by father of family. Thompson v. United States, 408 F.2d 1075, 1969 U.S. App. LEXIS 13491 (8th Cir. 1969).

17. Other commercial transactions.

While this particular agreement relating to a license transfer does not come within the UCC, it is a commercial transaction in the broad sense and the legislature has specifically declared in UCC § 1-203 that good faith is a basic obligation in all such transactions. Hardeman v. Liberty Mut. Ins. Co., 124 Ga. App. 710, 185 S.E.2d 789, 1971 Ga. App. LEXIS 1075 (Ga. Ct. App. 1971).

§ 75-1-305. Remedies to be liberally administered.

The remedies provided by the Uniform Commercial Code must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in the Uniform Commercial Code or by other rule of law.

Any right or obligation declared by the Uniform Commercial Code is enforceable by action unless the provision declaring it specifies a different and limited effect.

HISTORY: Present §75-1-305 is derived from former §75-1-106 [Codes, 1942, § 41A:1-106; Laws, 1966, ch. 316, § 1-106, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Liberal construction of code, see §75-1-103.

Supplementary general principles of law applicable, see §75-1-103.

Obligation of good faith, see §75-1-304.

Remedies respecting sales, see §75-2-701 et seq.

Incidental damages in case of resale by seller, see §75-2-706.

Recovery of incidental or consequential damages by buyer, see §75-2-712.

Specific performance of sale contract, see §75-2-716.

RESEARCH REFERENCES

ALR.

Actual damages as necessary predicate to exemplary damages. 17 A.L.R.2d 527.

Recovery of exemplary or punitive damages from municipal corporation. 19 A.L.R.2d 903.

Power of court of equity to award exemplary or punitive damages. 48 A.L.R.2d 947.

Action or claim for punitive damages as surviving death of wronged person. 63 A.L.R.2d 1327.

Right of principal to recover punitive damages for agent’s or broker’s breach of duty. 67 A.L.R.2d 952.

Sufficiency of showing of actual damages to support award of punitive damages — modern cases. 40 A.L.R.4th 11.

Punitive damages for interference with contract or business relationship. 44 A.L.R.4th 1078.

Standard of proof as to conduct underlying punitive damage awards – modern status. 58 A.L.R.4th 878.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 24.

16 Am. Jur. 2d, Conflict of Laws § 1 et seq.

22 Am. Jur. 2d, Damages §§ 23, 24, 28 et seq.

73 Am. Jur. 2d, Statutes § 311 et seq.

Instruction to jury; liberal administration of remedies, 6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:951.

CJS.

1A C.J.S., Actions §§ 10, 22, 23.

Law Reviews.

1978 Mississippi Supreme Court Review: Commercial Law. 50 Miss. L. J. 41.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1. Aggrieved party.

2.-5. [Reserved for future use.]

II. UNDER FORMER §75-1-106.

6. In general.

I. UNDER CURRENT LAW.

1. Aggrieved party.

Cattle feedlot business lacked a claim under the statute against a bank with regards to a bank customer’s alleged check kiting scheme because the negotiable instruments chapter did not contemplate extending liability to any party who bore any loss as a result of a depository bank’s negligence in regard to the handling of a negotiable instrument, and the feedlot was not an “aggrieved party” under this provision, nor was the feedlot a “party” to the negotiable instruments as defined in Miss. Code Ann. §75-3-103(a)(10). Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 2018 U.S. App. LEXIS 7670 (5th Cir. Miss. 2018).

2.-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-106.

6. In general.

Goal of cover remedy is to place buyer only in as good a position as he would have occupied had seller performed. Terex Corp. v. Ingalls Shipbuilding, 671 So. 2d 1316, 1996 Miss. LEXIS 129 (Miss. 1996).

The breach of a contract governed by the UCC, just as the breach of any other contract, in rare instances, may be attended by such conduct as to authorize the awarding an aggrieved party punitive damages in addition to damages for the contract’s breach; however, facts in present case did not justify punitive damage award. Fedders Corp. v. Boatright, 493 So. 2d 301, 1986 Miss. LEXIS 2478 (Miss. 1986).

In suit by buyer, who had purchased two irrevocable letters of credit from bank in favor of seller, to enjoin bank from paying any further drafts that seller might present against such letters and to recover damages for drafts that bank had wrongfully paid to seller, buyer did not establish right to injunctive relief by showing lack of adequate remedy at law. Although UCC Article 5 does not expressly provide measure of damages for wrongful honor of draft presented against letter of credit, UCC § 1-106(1) states that remedies provided by UCC shall be liberally administered to end that aggrieved party may be put in as good a position as if other party had fully performed. UCC § 1-106(1) is a general restatement of the common-law theory of contract damages. In present case, buyer’s damages for bank’s wrongful honoring of seller’s prior drafts would be amount of money that would put buyer in as good a position as if bank had fully performed or, in other words, the total of the two debits made against buyer’s account as a result of the two drafts that seller had presented to bank and bank had wrongfully paid. Interco, Inc. v. First Nat'l Bank, 560 F.2d 480, 1977 U.S. App. LEXIS 11962 (1st Cir. Mass. 1977) (construing Massachusetts law, but refusing to be definitive as to exact measure of buyer’s damages).

Although UCC does not explicitly allow punitive damages for commercially unreasonable sale, if that right exists outside Code, it is retained or permitted through UCC § 1-106, and since UCC permits recovery of damages in action for conversion of repossessed property, punitive damages are recoverable in such action where secured party’s acts are wanton, malicious, and intentional; thus, evidence that secured party permitted third person to borrow collateral belonging to debtor prior to default in order that third party could open competing business, that bank did not give proper notice of sale and on sale date did not even attempt sale, that secured party retained collateral after default for several months without crediting it against debtor’s note, and that final sale was made to third person for price less than one fourth of stipulated value of property at time of sale, was sufficient to support award of punitive damages. Davidson v. First Bank & Trust Co., 1976 OK 161, 609 P.2d 1259, 1976 Okla. LEXIS 689 (Okla. 1976).

In action by purchaser of new automobile against dealer seeking revocation of acceptance and damages, contract provision between dealer and purchaser to effect that there were no warranties express or implied made by either dealer or manufacturer, other than manufacturer’s warranty against defective materials, although sufficient to exclude all warranties by dealer except implied warranty of merchantability, did not eliminate implied warranty of merchantability in manner required by UCC § 2-316, and evidence that automobile battery was defective as result of poor materials or poor workmanship was sufficient to establish breach of warranty of merchantability; however, there was no evidence that such nonconformity substantially impaired value of car to purchaser as required by UCC § 2-608 before he could revoke his acceptance of automobile and recover price paid; thus, purchaser’s remedy was action for damages and, since purchaser failed to present evidence to support award based on proper measure of damages, i.e., value of automobile in its non-conforming condition at time and place of acceptance, purchaser was not entitled to recover damages. Bill McDavid Oldsmobile, Inc. v. Mulcahy, 533 S.W.2d 160, 1976 Tex. App. LEXIS 2450 (Tex. Civ. App. Houston 1st Dist. 1976).

That, absent contractual or statutory exclusion, manufacturer of defective product might properly be held accountable for any damages to buyer which flowed naturally from manufacturer’s breach of warranty comported fully with purposes of UCC to put aggrieved party in as good position as if other party had fully performed. Council Bros., Inc. v. Ray Burner Co., 473 F.2d 400, 1973 U.S. App. LEXIS 11836 (5th Cir. Fla. 1973).

Under UCC buyer cannot claim punitive damages on account of alleged fraud pertaining to sale of chattels. Waters v. Trenckmann, 503 P.2d 1187, 1972 Wyo. LEXIS 286 (Wyo. 1972).

Party aggrieved by breach of contract is entitled to be put in as good position as if other party had fully performed, and this includes right to recover for loss of prospective profits resulting from breach, which profits may be determined on basis of combination of past earnings records and expert testimony of president of aggrieved party. Matsushita Electric Corp. v. Sonus Corp., 362 Mass. 246, 284 N.E.2d 880, 1972 Mass. LEXIS 784 (Mass. 1972).

Attorneys’ fees incurred in action to recover loss of profits and incidental damages upon buyer’s repudiation of contract are not in nature of protective expenses contemplated by Code. Neri v. Retail Marine Corp., 30 N.Y.2d 393, 334 N.Y.S.2d 165, 285 N.E.2d 311, 1972 N.Y. LEXIS 1263 (N.Y. 1972).

The purpose of this act, to be liberally construed, is specified as the stipulation, clarification and modernization of the law governing commercial transactions to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and the statute mandates a liberal administration to the end that an aggrieved party may be put in as good a position as if the other party had fully performed without consequential, special, or penal damages unless specifically provided for. Chrysler Credit Corp. v. Sharp, 56 Misc. 2d 261, 288 N.Y.S.2d 525, 1968 N.Y. Misc. LEXIS 1867 (N.Y. Sup. Ct. 1968).

The instant section merely restates the doctrine that damages are limited to just compensation for the loss sustained by reason of the breach. First Pennsylvania Banking & Trust Co. v. Montgomery County Bank & Trust Co., 29 Pa. D. & C.2d 596, 1962 Pa. Dist. & Cnty. Dec. LEXIS 254 (Pa. C.P. 1962).

§ 75-1-306. Waiver or renunciation of claim or right after breach.

A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.

HISTORY: Present §75-1-306 is derived from former §75-1-107 [Codes, 1942, § 41A:1-107; Laws, 1966, ch. 316, § 1-107, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Obligation of good faith, see §75-1-304.

Statute of frauds, see §75-2-201.

Modification, rescission, and waiver, see §75-2-209.

Contractual modification or limitation of remedy, see §75-2-719.

RESEARCH REFERENCES

Am. Jur.

1 Am. Jur. 2d, Accord and Satisfaction §§ 6, 14, 27, 28, 54.

15A Am. Jur. 2d, Commercial Code § 4.

17A Am. Jur. 2d, Contracts § 635 et seq.

28 Am. Jur. 2d, Estoppel and Waiver § 187 et seq.

66 Am. Jur. 2d, Release § 6 et seq.

6 Am. Jur. Pl & Pr Forms, (Rev), General Provisions, Form 1:4 (Answer; defense; waiver of claim or right after breach of contract).

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:8 (Instruction to jury; effect of waiver or renunciation, without consideration, of claim or right after breach of contract).

8 Am. Jur. Legal Forms 2d, Estoppel and Waiver § 102:42 (waiver limited to particular breach).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:41 et seq. (Waiver or renunciation after breach).

CJS.

17B C.J.S., Contracts §§ 739-551.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER §75-1-107.

6. In general.

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-107.

6. In general.

In action for breach of contract to construct mechanical loading platforms for use in distribution center building, letter sent to defendant after it became clear that defendant would not perform which cancelled contract “without charge” could not as matter of law amount to waiver or renunciation of claim arising out of breach under UCC §§ 1-107 and 2-720; under UCC § 1-205, meaning to be given phrase “without charge” would require consideration of any course of dealing between parties and any applicable trade usage. National Cash Register Co. v. UNARCO Industries, Inc., 490 F.2d 285, 1974 U.S. App. LEXIS 10731 (7th Cir. Ill. 1974).

Where there was no written waiver, there was consequently no basis for discharge of breached contracts under UCC § 1-107. Gorge Lumber Co. v. Brazier Lumber Co., 6 Wn. App. 327, 493 P.2d 782, 1972 Wash. App. LEXIS 1172 (Wash. Ct. App. 1972).

§ 75-1-307. Prima facie evidence by third-party documents.

A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher’s or inspector’s certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

HISTORY: Present §75-1-307 is derived from former §75-1-202 [Codes, 1942, § 41A:1-202; Laws, 1966, ch. 316, § 1-202, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Evidence, generally, see §13-1-1 et seq.

RESEARCH REFERENCES

ALR.

Verification and authentication of slips, tickets, bills, invoices, etc., made in regular course of business, under the Uniform Business Records as Evidence Act, or under similar “Model Acts.” 21 A.L.R.2d 773.

Construction and effect of § 1-202 of the Uniform Commercial Code dealing with documents which are prima facie evidence of their own authenticity and genuineness. 72 A.L.R.3d 1243.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 31.

29 Am. Jur. 2d, Evidence §§ 834-913.

29 Am. Jur. 2d, Evidence §§ 928-932, 934-987, 990-1028.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:1221 (Notice; of intent to offer evidence of substitute market price).

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:1222 (Motion; evidence of substitute market price offered without notice inadmissible).

CJS.

32A C.J.S., Evidence §§ 1086, 1087, 1216.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER §75-1-202.

6. In general.

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-202.

6. In general.

In action by common carrier to recover freight charges, bill of lading would have been admissible under UCC § 1-202, if it had been offered into evidence. Braswell Motor Freight Lines, Inc. v. Tetens, 538 S.W.2d 224, 1976 Tex. App. LEXIS 2860 (Tex. Civ. App. Austin 1976).

Original bills of lading which plaintiff sought to introduce as its exhibits to prove alleged overcharges for real transportation were not admissible under § 1-202 where they did not involve third party. Atchison, T. & S. F. R. Co. v. Lone Star Steel Co., 498 S.W.2d 512, 1973 Tex. App. LEXIS 2073 (Tex. Civ. App. Texarkana 1973).

In action by purchaser of automobiles to recover certain rebates allegedly promised it as inducement to purchase from dealer letter of correspondence between automobile manufacturer and purchaser, stating that representative of manufacturer had contacted dealer who denied contractual agreement regarding rebates, was not self-authenticating document within meaning of Code § Thrifty Rent-A-Car System v. Chuck Ruwart Chevrolet, Inc., 500 P.2d 172 (Colo. Ct. App. 1972).

“Clean” bill of lading showing that goods, which were wrapped entirely in burlap covering, were “in apparent good order and condition” was prima facie evidence as to external conditions only. Plastileather Corp. v. Aetna Casualty & Surety Co., 361 Mass. 356, 280 N.E.2d 402, 1972 Mass. LEXIS 893 (Mass. 1972).

§ 75-1-308. Performance or acceptance under reservation of rights.

A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved.Such words as “without prejudice,” “under protest,” or the like are sufficient.

Subsection (a) does not apply to an accord and satisfaction.

HISTORY: Present §75-1-308 is derived from former §75-1-207 [Codes, 1942, § 41A:1-207; Laws, 1966, ch. 316, § 1-207; Laws, 1992, ch. 420, § 70, eff from and after January 1, 1993; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Effect of acceptance, etc., see §75-2-607.

Accord and satisfaction by use of instrument, see §75-3-311.

RESEARCH REFERENCES

ALR.

Application of UCC § 1-207 to avoid discharge of disputed claim upon qualified acceptance of check tendered as payment in full. 37 A.L.R.4th 358.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 32.

17A Am. Jur. 2d, Contracts §§ 189, 635, 636.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:34 (Instruction to jury; effect of explicit reservation of rights; what words are sufficient to protect reserved rights).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, § 253:111 et seq. (Performance or acceptance under reservation of rights).

27 Am. Jur. Proof of Facts 2d 559, Offeree’s Acceptance of Contract Offer.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER §75-1-207.

6. In general.

I. UNDER CURRENT LAW.

1-5. [Reserved for future use.]

II. UNDER FORMER § 75-1-207.

6. In general.

A stamped notation on the backs of checks purporting to reserve the seller’s rights (§75-1-207) [Repealed; similar provisions now found in §75-1-308], which was done in the ordinary course of business, did not preclude a finding that the seller waived enforcement of the floor pricing provision of the parties’ contract. Exxon Corp. v. Crosby-Mississippi Resources, 40 F.3d 1474, 1995 U.S. App. LEXIS 106 (5th Cir. Miss. 1995).

Where defendant agreed to pay reasonable counsel fees rendered by plaintiff to a third party, and forwarded a check to plaintiff in an amount almost $800 less than the itemized statement and bill submitted by plaintiff, stating that the charges were excessive and that the check would be considered full payment if accepted, there was a bona fide dispute of an unliquidated claim, and the cashing of the check by plaintiff resulted in an accord and satisfaction; the fact that plaintiff informed defendant that he did not regard the check as full payment did not preclude the making of an accord and satisfaction, since Section 1-207 of the Uniform Commercial Code, which deals with the explicit reservation of rights, is not applicable to the rendition of services. Blottner, Derrico, Weiss & Hoffman, P. C. v. Fier, 101 Misc. 2d 371, 420 N.Y.S.2d 999, 1979 N.Y. Misc. LEXIS 2686 (N.Y. Civ. Ct. 1979), disapproved, Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., 66 N.Y.2d 321, 497 N.Y.S.2d 310, 488 N.E.2d 56, 1985 N.Y. LEXIS 17607 (N.Y. 1985).

UCC § 1-207 precludes conclusion that payee of check, prior to its negotiation, must notify drawer that payee’s acceptance is under protest or reservation of rights. Miller v. Jung, 361 So. 2d 788, 1978 Fla. App. LEXIS 16050 (Fla. Dist. Ct. App. 2d Dist. 1978) (stating that UCC § 1-207 minimizes impediments to flow of commercial paper while reserving rights of immediate parties thereto).

UCC § 1-207 provides machinery for the continuation of performance along the lines contemplated by the contract, despite a pending dispute, by adopting the mercantile device of going ahead with delivery, acceptance, or payment “without prejudice,” “under protest,” “under reserve,” “with reservation of all our rights,” and the like. All of these phrases completely reserve all rights within the meaning of UCC § 1-207. Miller v. Jung, 361 So. 2d 788, 1978 Fla. App. LEXIS 16050 (Fla. Dist. Ct. App. 2d Dist. 1978).

Common-law rule that accord and satisfaction results where check tendered as payment in full for disputed amount is accepted by payee has been changed by UCC § 1-207. Under such section, if party indorses final-payment check with words “without prejudice and under protest,” party thus reserves right to demand balance alleged to be due, and negotiation of check does not effect an accord and satisfaction. Lange-Finn Constr. Co. v. Albany Steel & Iron Supply Co., 94 Misc. 2d 15, 403 N.Y.S.2d 1012, 1978 N.Y. Misc. LEXIS 2189 (N.Y. Sup. Ct. 1978).

Where (1) general contractor involved in payment dispute with steel supplier sent supplier check for certain sum as final payment of amount due and thereafter, in further effort to resolve dispute, sent supplier second check for slightly higher amount also as final payment of account, and (2) supplier, after first certifying both checks and holding them for several months, returned first check to general contractor, deposited second check with indorsement “without prejudice and under protest,” and thereafter advised general contractor that it was still asserting its claim for entire amount allegedly due, court held (1) that UCC § 1-207 was inapplicable because supplier had made no reservation of its rights at time it had second check certified, and (2) that trial court correctly concluded as a result that an accord and satisfaction had occurred as to amount in dispute on date second check was certified. Lange-Finn Constr. Co. v. Albany Steel & Iron Supply Co., 94 Misc. 2d 15, 403 N.Y.S.2d 1012, 1978 N.Y. Misc. LEXIS 2189 (N.Y. Sup. Ct. 1978).

Although the acceptance of a check tendered as final payment in full for a disputed amount with an indorsement stating that the negotiation of the check is “without prejudice” or “under protest” does not result in an accord and satisfaction (Uniform Commercial Code, § 1-207), defendant’s failure to expressly reserve its rights at the time it caused plaintiff’s check tendered as a final payment for materials supplied by defendant on a construction project to be certified resulted in an accord and satisfaction. Where a check is tendered as payment in full for a disputed amount and the payee causes the check to be certified, an accord and satisfaction results since certification is equivalent to acceptance by the payee. Defendant only advised plaintiff that it was still asserting its claim for the entire balance after it caused plaintiff’s check to be certified. Had defendant merely negotiated the check while reserving its rights, no accord and satisfaction would have occurred. Lange-Finn Constr. Co. v. Albany Steel & Iron Supply Co., 94 Misc. 2d 15, 403 N.Y.S.2d 1012, 1978 N.Y. Misc. LEXIS 2189 (N.Y. Sup. Ct. 1978).

Under UCC § 1-207, buyers of stock, by continuing to perform under contract, did not waive right to complain of sellers’ retention of dividends where, although buyers made no explicit reservation of right to dividends, buyers’ actions clearly indicated that they were not waiving any rights accruing to them. Deering Milliken, Inc. v. Clark Estates, Inc., 57 A.D.2d 773, 394 N.Y.S.2d 436, 1977 N.Y. App. Div. LEXIS 11936 (N.Y. App. Div. 1st Dep't 1977), aff'd, 43 N.Y.2d 545, 402 N.Y.S.2d 987, 373 N.E.2d 1212, 1978 N.Y. LEXIS 1768 (N.Y. 1978).

Rights which cotton sellers had, in event of reversal of their appeal from trial court judgment that certain written contracts between sellers and buyer were valid agreements, were fixed by statutes relating to reversal of judgments on appeal; UCC § 1-207 did not apply. Peek Planting Co. v. W. H. Kennedy & Sons, Inc., 257 Ark. 669, 519 S.W.2d 49, 1975 Ark. LEXIS 1846 (Ark. 1975).

Indorsement with explicit reservations is not acceptance in full payment but reservation of right to collect remainder of unpaid bill. Baillie Lumber Co. v. Kincaid Carolina Corp., 4 N.C. App. 342, 167 S.E.2d 85, 1969 N.C. App. LEXIS 1496 (N.C. Ct. App. 1969).

§ 75-1-309. Option to accelerate at will.

A term providing that one (1) party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired.The burden of establishing lack of good faith is on the party against which the power has been exercised.

HISTORY: Present §75-1-309 is derived from former §75-1-208 [Codes, 1942, § 41A:1-208; Laws, 1966, ch. 316, § 1-208, eff March 31, 1968; Repealed by Laws, 2010, ch. 506, § 44, eff from and after July 1, 2010] and was enacted by Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Cross References —

Obligation of good faith in performance or enforcement of contract or duty, see §75-1-304.

Reinstatement of accelerated debt secured by deed of trust or other lien upon payment of default before sale, see §89-1-59.

RESEARCH REFERENCES

ALR.

Provision for acceleration on death as affecting instrument’s character and validity as contract. 1 A.L.R.2d 1206.

What is essential to exercise of option to accelerate maturity of bill or note. 5 A.L.R.2d 968.

“Insecurity” acceleration or repossession clause as affecting question whether transferee of commercial paper given by purchaser of chattel and secured by conditional sale, retention of title, or chattel mortgage, as subject to defenses which chattel purchaser could assert against seller. 44 A.L.R.2d 84.

What constitutes “good faith” under Uniform Commercial Code § 1-208 dealing with “insecure” or “at will” acceleration clauses. 61 A.L.R.3d 244.

What constitutes “good faith” under UCC § 1-208 dealing with “insecure” or “at will” acceleration clauses. 85 A.L.R.4th 284.

Am. Jur.

11 Am. Jur. 2d, Bills and Notes §§ 92-93.

15A Am. Jur. 2d, Commercial Code § 33.

17A Am. Jur. 2d, Contracts § 480.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:22 (Complaint, petition, or declaration; allegation; acceleration of payment).

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:24 (Answer; defense; absence of good faith on part of plaintiff in exercising option to require additional collateral).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 1 – General Provisions, §§ 121-136 (Acceleration and additional collateral provisions).

3 Am. Jur. Proof of Facts, Credit, Proof Nos. 1, 2 (proof of impairment of credit).

Law Reviews.

1983 Mississippi Supreme Court Review: Subjective or objective standard of “good faith.” 54 Miss. L. J. 110.

1987 Mississippi Supreme Court Review: Lender liability in Mississippi: a survey, comparison, and comment. 57 Miss. L. J. 1.

Williamson and Redfern, Lender liability in Mississippi: Part II loan commitments and agreements. 59 Miss. L. J. 71.

JUDICIAL DECISIONS

I. UNDER CURRENT LAW.

1-10. [Reserved for future use.]

II. UNDER FORMER §75-1-208.

11. In general; necessity of express provision for acceleration.

12. Construction of acceleration clauses.

13. What constitutes good faith.

14. Circumstances justifying exercise of option.

15. What constitutes demand for additional collateral.

16. Presumptions.

17. Burden of proof.

I. UNDER CURRENT LAW.

1-10. [Reserved for future use.]

II. UNDER FORMER § 75-1-208.

11. In general; necessity of express provision for acceleration.

Section 75-1-208 is inapplicable to situations where a creditor, under the terms of its contract with the debtor, has accelerated its debtor’s outstanding obligations after the occurrence of an event that was in the complete control of the debtor-i.e., where the creditor accelerates indebtedness because the debtor fails to comply with the terms and conditions contained in the promissory note, deed of trust, or loan agreement. Peoples Bank & Trust Co. v. Cermack, 658 So. 2d 1352, 1995 Miss. LEXIS 266 (Miss. 1995).

Although UCC does recognize validity of acceleration clauses under certain circumstances, if such clause is expressly set forth in instrument, UCC makes no provision for automatic acceleration upon default of installment payments not yet due; thus, where so-called “lease-purchase” agreement did not contain acceleration clause, installment payments could not be accelerated upon default and creditor was limited to recovery of unpaid installments then actually accrued. General Electric Credit Corp. v. Castiglione, 142 N.J. Super. 90, 360 A.2d 418, 1976 N.J. Super. LEXIS 776 (Law Div. 1976), disapproved, BJL Leasing Corp. v. Whittington, Singer, Davis & Co., 204 N.J. Super. 314, 498 A.2d 1262, 1985 N.J. Super. LEXIS 1439 (App.Div. 1985).

There is no right to accelerate commercial paper in the absence of an express provision therefor. McDown v. Wilson, 426 S.W.2d 112, 1968 Mo. App. LEXIS 760 (Mo. Ct. App. 1968).

12. Construction of acceleration clauses.

An acceleration clause is not to be interpreted as exercisable only when the paper is given to an attorney for collection, even though the absence of punctuation in the note would appear to give the clause that meaning. Olsen v. Valley Nat'l Bank, 91 Ill. App. 2d 365, 234 N.E.2d 547, 1968 Ill. App. LEXIS 893 (Ill. App. Ct. 2d Dist. 1968).

13. What constitutes good faith.

In action by debtor against bank and its loan officer for conversion, trespass, false imprisonment, and malicious prosecution, where evidence showed that bank, which had made loan to debtor that was secured by automobile purchased with loan’s proceeds, (1) had concluded, even before due date of first installment payment on loan, that debtor had falsified loan application, (2) that as a result, bank had declared loan to be in default, accelerated the debt obligation, and entered on debtor’s property to repossess automobile, all without notice to debtor, (3) that bank’s loan officer had asked debtor to come to officer’s office to discuss the matter, (4) that when debtor arrived at bank, he was met by two FBI agents who interviewed him, and (5) that as a result of such interview, debtor was indicted, tried, and acquitted on federal charges of supplying false information to bank to obtain loan, it was error for trial court to grant summary judgment in favor of bank and loan officer on conversion and trespass claim, since issue of fact existed as to whether bank had acted in good faith under UCC § 1-208 and § 1-201(19) in deeming itself to be insecure with regard to debtor’s obligation. Ginn v. Citizens & Southern Nat'l Bank, 145 Ga. App. 175, 243 S.E.2d 528, 1978 Ga. App. LEXIS 1910 (Ga. Ct. App. 1978).

Ordinarily, the issue of whether the holder of an option to accelerate has or has not acted in good faith, within the meaning of UCC § 1-208, presents a question of fact for the jury and not a question of law for the court. Thus, under UCC § 1-208, the issue of good faith must ordinarily be submitted to the jury, unless the evidence relating to it is no more than a scintilla or lacks probative value having fitness to induce conviction in the minds of reasonable men. McKay v. Farmers & Stockmens Bank, 1978-NMCA-070, 92 N.M. 181, 585 P.2d 325, 1978 N.M. App. LEXIS 607 (N.M. Ct. App.), cert. denied, 92 N.M. 79, 582 P.2d 1292, 1978 N.M. LEXIS 1056 (N.M. 1978).

In action to foreclose security interest in both real and personal property of defendant mink ranchers pursuant to acceleration clause in security agreement, trial court’s findings in favor of plaintiff were sustained by evidence showing (1) that such acceleration clause provided that defendants would be in default if they did not pay any of three promissory notes when due, or did not perform any undertaking provided for in notes or security agreement, or if any part of collateral for notes should be lost, stolen, or damaged; and (2) that all notes were in default, that defendants had not cared for the mink (which were part of collateral) in husband-like manner, and that defendants claimed that mink pelts worth $25,000 had been stolen. In such case, defendants did not sustain their burden of proof under UCC § 1-208 to show lack of good faith on part of plaintiff in declaring notes in default and in accelerating payment thereof, since plaintiff genuinely believed that its prospects for payment had been impaired. State Bank of Lehi v. Woolsey, 565 P.2d 413, 1977 Utah LEXIS 1166 (Utah 1977).

In view of fact that promissory note was secured by second mortgage on farm property which defendant had purchased for $110,000, there could be little doubt that note would have been paid, principal and interest, notwithstanding fact that defendants were frequently late in making monthly installment payments on note, and thus holders of promissory note failed to show good faith belief that prospect of payment was impaired justifying acceleration of note under UCC § 1-208. Williamson v. Wanlass, 545 P.2d 1145, 1976 Utah LEXIS 746 (Utah 1976).

Even if UCC § 1-208 was applicable to contracts involving land, it imposes “good faith” standard on creditor where it is agreed that he may accelerate debt at his option, and thus did not apply to due-on-sale clause contained in deed of trust since right to accelerate was conditioned on occurrence of condition which was in control of debtor. Crockett v. First Federal Sav. & Loan Asso., 289 N.C. 620, 224 S.E.2d 580, 1976 N.C. LEXIS 1370 (N.C. 1976).

In action by trustee in bankruptcy to recover amount of funds bank had set off against bankrupt’s checking account, finding that bank had acted in good faith within meaning of UCC § 1-208 was not clearly erroneous where bank, which had perfected security interest in bankrupt’s cattle, discovered prior security interest in same cattle, deemed itself insecure, and, pursuant to clause contained in promissory notes executed by bankrupt in favor of bank, accelerated notes’ due date, notwithstanding that bank gave no notification of acceleration and setoff to bankrupt. Jensen v. State Bank of Allison, 518 F.2d 1, 1975 U.S. App. LEXIS 14349 (8th Cir. Iowa 1975).

Grain elevator cooperative failed to produce substantial evidence that bank was not in good faith in accelerating elevator’s promissory notes where, on contrary, there was evidence that elevator owed bank $272,000 and needed additional $50,000 within next 2 weeks, that elevator had more checks outstanding than its bank balance, that elevator had loss of $22,000 in fiscal year just completed and that elevator closed for 2 business days. Farmers Cooperative Elevator, Inc. v. State Bank, 236 N.W.2d 674, 1975 Iowa Sup. LEXIS 1073 (Iowa 1975).

Where security agreement, executed in connection with sale of truck, provided that secured party could not only accelerate payment thereunder but also repossess truck without demand or notice if secured party felt insecure, test as to whether secured party acted in “good faith” under UCC § 1-208 in repossessing truck was whether “reasonable man” under same set of facts or circumstances would have made same determination as to whether debt or collateral were insecure. Universal C. I. T. Credit Corp. v. Shepler, 164 Ind. App. 516, 329 N.E.2d 620, 1975 Ind. App. LEXIS 1180 (Ind. Ct. App. 1975).

Plaintiff, as an unsecured creditor, had to consider the overall financial stability of defendant corporation in order to determine the likelihood of payment being made on loans previously extended to corporation by plaintiff, and even if plaintiff was negligent in not checking to determine whether defendant had in fact been denied a loan by third party, negligence was irrelevant to good faith, the standard being what plaintiff actually knew, or believed he knew, not what he could or should have known, and because plaintiff believed defendant had been denied a loan, and acted in accordance with that belief, he acted in good faith in demanding payments of notes. Van Horn v. Van De Wol, Inc., 6 Wn. App. 959, 497 P.2d 252, 1972 Wash. App. LEXIS 1266 (Wash. Ct. App. 1972).

14. Circumstances justifying exercise of option.

Plaintiff bank is entitled to liquidate municipal bonds held as collateral for loans made to defendant securities dealer since plaintiff had adequate cause to “deem itself insecure”, a condition constituting default under the parties’ security agreement, where defendant had engaged in wash sales to postpone the effect of losses occasioned by the declining bond market. Bankers Trust Co. v. J. V. Dowler & Co., 47 N.Y.2d 128, 417 N.Y.S.2d 47, 390 N.E.2d 766, 1979 N.Y. LEXIS 1991 (N.Y. 1979).

Where creditor loaned debtor $250,000 for five-year period and loan was evidenced by one-year note that was renewable solely at debtor’s option if all interest payments were made during first year of loan; where collateral for loan was second mortgage on building and surety bond for $250,000 that only covered first year of loan; where debtor failed to make interest payments during first year and surety cured such default by paying all interest arrearages; where before start of second year of loan, creditor’s request that debtor obtain extension of its surety bond was not complied with; and where creditor then refused debtor’s request to renew note for second year and claimed that note was fully due and payable under acceleration clause therein, which was of type permitted by UCC § 1-208, because creditor deemed collateral insufficient to secure entire indebtedness, creditor’s demand for extension of debtor’s surety bond was not demand for “additional collateral” within meaning of note’s acceleration clause and UCC § 1-208, since right to demand “additional collateral” does not mean right to demand “temporal extension of same collateral” in case where parties expressly bargained for expiration of collateral (surety bond in present case) at precise date within term of principal debt and such agreed-on collateral currently covered debtor’s full indebtedness. Bank of New Jersey v. Brokers Financial Corp., 557 F.2d 365, 1977 U.S. App. LEXIS 12959 (3d Cir. N.J.), cert. denied, 434 U.S. 924, 98 S. Ct. 402, 54 L. Ed. 2d 281, 1977 U.S. LEXIS 3780 (U.S. 1977).

“Good faith” requirement of UCC § 1-208 is in harmony with equitable principle that acceleration of payment of instrument in harsh remedy that should be allowed only for some reasonable justification, such as good-faith belief that prospect of payment has been impaired. State Bank of Lehi v. Woolsey, 565 P.2d 413, 1977 Utah LEXIS 1166 (Utah 1977).

Under UCC § 1-208, conditional vendor of automobile was justified in exercising its “insecurity clause” and accelerating payment of balance due under conditional sales contract where conditional purchaser was charged with illegally transporting controlled substances in violation of state law, thereby subjecting vehicle to possible forfeiture proceedings by state and federal governments. Blaine v. G.M.A.C., 82 Misc. 2d 653, 370 N.Y.S.2d 323, 1975 N.Y. Misc. LEXIS 2747 (N.Y. County Ct. 1975).

A bank, in enforcing its security interest in a roadside diner was not guilty of abuse of process in so doing where the facts justified the institution in deeming itself insecure and, as a matter of law, it acted in good faith. Ft. Knox Nat'l Bank v. Gustafson, 385 S.W.2d 196, 1964 Ky. LEXIS 148 (Ky. 1964).

15. What constitutes demand for additional collateral.

Under language of retail instalment contract which provided that upon buyer’s default seller would have right, at its election, to declare unpaid portion of total payments to be immediately due and payable, entire indebtedness did not become due ipso facto upon default in making of instalment payment on due date thereof, and creditor could not effectively exercise option to declare whole principal due without communicating his decision to debtor by some outward affirmative act sufficient to constitute notice of his election. Chrysler Credit Corp. v. Barnes, 126 Ga. App. 444, 191 S.E.2d 121, 1972 Ga. App. LEXIS 1180 (Ga. Ct. App. 1972).

16. Presumptions.

Creditor exercising power to accelerate payment is presumed to have acted in good faith; trial court erroneously turned presumption around when it placed burden of proof on creditor. Sheppard Federal Credit Union v. Palmer, 408 F.2d 1369, 1969 U.S. App. LEXIS 8760 (5th Cir. Tex. 1969).

17. Burden of proof.

Under the last sentence of UCC § 1-208, the burden of establishing a lack of good faith is on the debtor. This burden applies to the quantum of evidence and sufficiency of proof as to the lack of good faith after all of the evidence is before the court. Such a burden, however, does not apply on a motion for summary judgment where the sole question before the court is whether a genuine issue of material fact exists; in such a case, the movant has the burden of proving the absence of a genuine issue of fact. McKay v. Farmers & Stockmens Bank, 1978-NMCA-070, 92 N.M. 181, 585 P.2d 325, 1978 N.M. App. LEXIS 607 (N.M. Ct. App.), cert. denied, 92 N.M. 79, 582 P.2d 1292, 1978 N.M. LEXIS 1056 (N.M. 1978).

Bank exercised good faith within meaning of UCC § 1-208 in accelerating payment date of note executed by debtor where debtor failed to sustain its burden of showing lack of good faith on bank’s part and bank’s evidence showed extent of debtor’s indebtedness to other creditors and degree to which debtor was in default on such other indebtedness. Custom Panel Systems, Inc. v. Bank of Hampton, 143 Ga. App. 681, 239 S.E.2d 558, 1977 Ga. App. LEXIS 2461 (Ga. Ct. App. 1977) (holding that under express terms of note executed by debtor, bank could appropriate without notice, for application on note, amount in debtor’s account with bank).

§ 75-1-310. Subordinated obligations.

An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated.Subordination does not create a security interest as against either the common debtor or a subordinated creditor.

HISTORY: Sources: Laws, 2010, ch. 506, § 3, eff from and after July 1, 2010.

Chapter 2. Uniform Commercial Code — Sales

Part 1. Short Title, General Construction and Subject Matter.

§ 75-2-101. Short title.

This chapter shall be known and may be cited as Uniform Commercial Code–Sales.

HISTORY: Codes, 1942, § 41A:2-101; Laws, 1966, ch. 316, § 2-101, eff March 31, 1968.

Comparable Laws from other States —

Alabama: Code of Ala. §7-1-101 et seq.

Alaska: Alaska Stat. § 45.01.111 et seq.

Arizona: A.R.S. § 47-1101 et seq.

Arkansas: A.C.A. §4-1-101 et seq.

California: Cal U Com Code § 1101 et seq.

Colorado: C.R.S. 4-1-101 et seq.

Connecticut: Conn. Gen. Stat. § 42a-1-101 et seq.

Delaware: 6 Del. C. § 1-101 et seq.

District of Columbia: D.C. Code § 28:1-101 et seq.

Florida: Fla. Stat. § 671.101 et seq. et seq.

Georgia: O.C.G.A. §11-1-101 et seq.

Hawaii: HRS § 490:1-101 et seq.

Idaho: Idaho Code §28-1-101 et seq.

Illinois: 810 ILCS 5/1-101 et seq.

Indiana: Burns Ind. Code Ann. §26-1-1-101 et seq.

Iowa: Iowa Code § 554.1101 et seq.

Kansas: K.S.A. §84-1-101 et seq.

Kentucky: KRS § 355.1-101 et seq

Louisiana: La. R.S. § 10:1-101 et seq.

Maine: 11 M.R.S. § 1-1101 et seq.

Maryland: Md. COMMERCIAL LAW Code Ann. § 1-101 et seq.

Massachusetts: ALM GL ch. 106, § 1-101 et seq..

Michigan: MCLS § 440.1101 et seq.

Minnesota: Minn. Stat. § 336.1-101 et seq.

Missouri: § 400.1-101 R.S.Mo. et seq.

Montana: 30-1-101, MCA et seq.

Nebraska: R.R.S. Neb. (U.C.C.) § 1-101 et seq.

Nevada: Nev. Rev. Stat. Ann. § 104.1101 et seq.

New Hampshire: RSA 382-A:1-101 et seq.

New Jersey: N.J. Stat. § 12A:1-101 et seq.

New Mexico: N.M. Stat. Ann. §55-1-101 et seq.

New York: NY CLS UCC § 1-101 et seq.

North Carolina: N.C. Gen. Stat. §25-1-101 et seq.

North Dakota: N.D. Cent. Code, §41-01-01 et seq.

Ohio: ORC Ann. 1301.101 et seq.

Oklahoma: 12A Okl. St. § 1-101 et seq.

Oregon: ORS § 71.1010 et seq.

Pennsylvania: 13 Pa.C.S. § 1101 et seq.

Rhode Island: R.I. Gen. Laws § 6A-1-101 et seq.

South Carolina: S.C. Code Ann. §36-1-101 et seq.

South Dakota: S.D. Codified Laws § 57A-1-101 et seq.

Tennessee: Tenn. Code Ann. §47-1-101 et seq.

Texas: Tex. Bus. & Com. Code § 1.101 et seq.

Utah: Utah Code Ann. § 70A-1a-101 et seq.

Vermont: 9A V.S.A. § 1-101 et seq.

Virgin Islands: 11A V.I.C. § 1-101 et seq.

Virginia: Va. Code Ann. § 8.1A-101 et seq.

Washington: Rev. Code Wash. (ARCW) § 62A.1-101 et seq.

West Virginia: W. Va. Code §46-1-101 et seq.

Wisconsin: Wis. Stat. § 401.101 et seq.

Wyoming: Wyo. Stat. § 34.1-1-101 et seq.

RESEARCH REFERENCES

ALR.

Construction and effect of UCC Art 2, dealing with sales. 17 A.L.R.3d 1010.

Farmers as “merchants” within provisions of UCC Article 2, dealing with sales. 95 A.L.R.3d 484.

Preemption of strict liability in tort by provisions of UCC Article 2. 15 ALR4th 791.

What Constitutes “Future Goods” Within Scope of U.C.C. Article 2. 48 A.L.R.6th 475.

Electricity, Gas, or Water Furnished by Public Utility or Alternative Supplier as “Goods” Within Provisions of Uniform Commercial Code, Article 2 on Sales. 97 A.L.R.6th 1.

Applicability of UCC Article 2 to Mixed Contracts for Sale of Consumer Goods and Services. 1 A.L.R.7th Art. 3

Applicability of UCC Article 2 to Mixed Contracts for Sale of Goods and Services: Distributorship, Franchise, and Similar Business Contracts. 8 A.L.R.7th Art. 4

Law Reviews.

Finding the Mississippi UCC Sales Contract Amid the RFQ, Quotes, Phone Calls, Emails, Purchase Order and Acknowledgement Forms, 30 Miss. C. L. Rev. 491, 2012.

JUDICIAL DECISIONS

1. In general.

2. Relation to federal law.

1. In general.

General contract law, rather than sales provisions in Uniform Commercial Code (UCC), governed dispute between general contractor and subcontractor arising from subcontractor’s refusal to dispose of cabinets that it tore out from public housing redevelopment site for purposes of installation of new cabinets; case did not concern cabinets manufactured, but rather subcontractor’s refusal to assume duties which general contractor obligated itself to perform pursuant to contract with public housing authority. J. O. Hooker & Sons v. Roberts Cabinet Co., 683 So. 2d 396, 1996 Miss. LEXIS 596 (Miss. 1996).

Whether contract involving mixed transaction of goods and services should be interpreted under Uniform Commercial Code (UCC) or general contract law should depend on nature of contract and on whether dispute primarily concerns goods furnished or services rendered under contract. J. O. Hooker & Sons v. Roberts Cabinet Co., 683 So. 2d 396, 1996 Miss. LEXIS 596 (Miss. 1996).

UCC Article 2 (UCC § 2-101 et seq.) did not apply in action for breach by employer of contractual provision providing that employer, on employee’s termination as golf professional at employer’s country club, would repurchase 20 golf carts that employee had been required to purchase on accepting employment, since predominant purpose of employee’s contract with employer was rendition of services and not sale of goods. Executive Centers of America, Inc. v. Bannon, 62 Ill. App. 3d 738, 19 Ill. Dec. 700, 379 N.E.2d 364, 1978 Ill. App. LEXIS 3063 (Ill. App. Ct. 3d Dist. 1978).

No conflict existed between Uniform Commercial Code provisions dealing with sales (UCC § 2-101 et seq.) and New Jersey Consumer Fraud Act, and regulations adopted under such act to govern sale of pet cats and dogs, since (1) Uniform Commercial Code provisions on sales are merely intended to give stability to law of commercial transactions and do not limit proper exercise of police power in public interest, and (2) UCC § 2-102 expressly declares that Article 2 of the code dealing with sales does not impair or repeal any statute regulating sales to consumers. Thus, regulations adopted under New Jersey Consumer Fraud Act to govern sales of pet cats and dogs were valid and not in conflict with sales provisions of Article 2 of Uniform Commercial Code merely because such regulations provided consumer with broader remedies than were available under the code. Pet Dealers Asso. v. Division of Consumer Affairs, Dep't of Law & Public Safety, 149 N.J. Super. 235, 373 A.2d 688, 1977 N.J. Super. LEXIS 855 (App.Div.), cert. denied, 75 N.J. 16, 379 A.2d 247, 1977 N.J. LEXIS 628 (N.J. 1977).

In action for recovery of purchase price of accounting machine and accounting system allegedly sold to plaintiff by defendant through its agent, trial court properly awarded damages to plaintiff based on breach of both express and implied warranties, notwithstanding defendant’s claims that trial court erred in finding it sold machine and system in question to plaintiff, when in fact it sold machine to leasing company which in turn leased it to plaintiff, and that transaction did not fall within scope of Article 2 of UCC and, accordingly, was barred by statute of limitations for oral contract actions. Leasing company was financing agency and, as such, held security interest in subject matter transaction, and defendant was seller based on fact that: (1) equipment was shipped and installed by defendants; (2) leasing company did not select or inspect equipment; (3) leasing company was not manufacturer or dealer in like equipment; (4) monthly payments under lease were calculated to return to leasing company purchase price, sales tax and interest; (5) it was not contemplated equipment would be returned to leasing company; and (6) renewal rental was for nominal amount and extended to period beyond usable life of equipment. Atlas Industries, Inc. v. National Cash Register Co., 216 Kan. 213, 531 P.2d 41, 1975 Kan. LEXIS 317 (Kan. 1975).

To determine which provisions of UCC Article 2 are applicable to lease transaction, court would look to commercial setting in which problem arises and contrast relevant common law with Article 2; court would use Article 2 as “a premise for reasoning only when the case involves the same consideration that gave rise to the Code provision and an analogy is not rebutted by additional antithetical circumstances.” Glenn Dick Equip. Co. v. Galey Constr., 97 Idaho 216, 541 P.2d 1184, 1975 Ida. LEXIS 351 (Idaho 1975).

Oral agreement between sub-contractor and contractor for installation of carpeting, whereby sub-contractor was to furnish material for installation other than carpeting, which was to be furnished by contractor, for which sub-contractor was to receive $1.00 per yard for installation, 35 cents per foot for metal and 75 cents per yard for padding, was service contract, not one for “goods,” and thus UCC was not applicable. Dionne v. Columbus Mills, Inc., 311 So. 2d 681, 1975 Fla. App. LEXIS 15063 (Fla. Dist. Ct. App. 2d Dist. 1975).

When gravamen of consumer suit against manufacturer or retailer for consequential personal injuries and property damage is defect in article, action will be considered as one founded in strict liability in tort, whether cause of action is pleaded in express or implied warranty, in strict liability or in any combination of these theories; this is not to say that injured consumer, who cannot prove or does not desire to rely entirely on defect, may not sue, solely or alternatively, under Uniform Commercial Code for casually related breach of pertinent express warranty. Realmuto v. Straub Motors, 65 N.J. 336, 322 A.2d 440, 1974 N.J. LEXIS 185 (N.J. 1974).

Contract for sale of two radio stations was not agreement for sale of “goods,” to which Article 2 of UCC would apply, where nature of transaction, intention of parties as reflected by writing, and lack of specific reference to designated assets rendered inescapable conclusion that letter agreement was one integrated contract for sale of businesses of two radio stations, including their tangible and intangible assets, as going concern. Field v. Golden Triangle Broadcasting, Inc., 451 Pa. 410, 305 A.2d 689, 1973 Pa. LEXIS 544 (Pa. 1973), cert. denied, 414 U.S. 1158, 94 S. Ct. 916, 39 L. Ed. 2d 110, 1974 U.S. LEXIS 1611 (U.S. 1974).

Bareboat charter for period of 18 months is not sale as defined in UCC, and is not kind of lease which has been held to come within Code as “analogous” to sale. Neubros Corp. v. Northwestern Nat'l Ins. Co., 359 F. Supp. 310, 1972 U.S. Dist. LEXIS 11540 (E.D.N.Y. 1972).

Uniform Commercial Code, effective Oct. 1, 1958 supersedes previous Sales Act formerly appearing in c 106. Nugent v. Popular Markets, Inc., 353 Mass. 45, 228 N.E.2d 91, 1967 Mass. LEXIS 683 (Mass. 1967).

A buyer’s right to recover under this Article after his revocation of acceptance of a sale is limited to the seller, and he has no right of recovery against the seller’s agent. Campbell v. Pollack, 101 R.I. 223, 221 A.2d 615, 1966 R.I. LEXIS 377 (R.I. 1966).

The sales provision of the Uniform Commercial Code have altered some of the formerly established doctrines of contract law in order to react more positively to the realistic needs of modern commerce. Bruce Lincoln-Mercury, Inc. v. Universal C.I.T. Credit Corp., 325 F.2d 2, 1963 U.S. App. LEXIS 3848 (3d Cir. Pa. 1963).

The Uniform Commercial Code virtually re-enacts the Uniform Sales Act. Bafile v. Remchow & Ford Motor Co. (Pa 1962).

In construing the Uniform Commercial Code, Article 2, the court may resort to decisions under comparable provisions of the Uniform Sales Act. Bafile v. Remchow & Ford Motor Co. (Pa. 1962).

2. Relation to federal law.

Although the Mississippi Motor Vehicle Warranty Enforcement Act does share some characteristics with the Magnuson-Moss Warranty Act, when the statutes as a whole are compared to the Magnuson-Moss Act, the Mississippi Uniform Commercial Code (UCC) is most analogous. Therefore, a trial court erred by finding that the claims filed by two vehicle purchasers were barred by the statute of limitations because a six-year limitations period under the UCC applied. Broome v. GM, LLC, 145 So.3d 645, 2014 Miss. LEXIS 408 (Miss. 2014).

§ 75-2-102. Scope; certain security and other transactions excluded from this chapter.

Unless the context otherwise requires, this chapter applies to transactions in goods; it 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 security transaction nor does this chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

HISTORY: Codes, 1942, § 41A:2-102; Laws, 1966, ch. 316, § 2-102, eff March 31, 1968.

Cross References —

General requirement that certain contracts be in writing, see §15-3-1.

Secured transactions, see §75-9-101 et seq.

Regulation of going out of business sales, see §§75-65-1 to75-65-17.

RESEARCH REFERENCES

ALR.

Construction and effect of UCC Art 2, dealing with sales. 17 A.L.R.3d 1010.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

Farmers as “merchants” within provisions of UCC Article 2, dealing with sales. 95 A.L.R.3d 484.

What constitutes a transaction, a contract for sale, or a sale within scope of UCC Article 2. 4 A.L.R.4th 85.

Applicability of UCC Article 2 to mixed contracts for sale of goods and services. 5 A.L.R.4th 501.

Preemption of strict liability in tort by provisions of UCC Article 2. 15 ALR4th 791.

Third-party beneficiaries of warranties under UCC § 2-318. 50 A.L.R.5th 327.

What Constitutes “Future Goods” Within Scope of U.C.C. Article 2. 48 A.L.R.6th 475.

Electricity, Gas, or Water Furnished by Public Utility or Alternative Supplier as “Goods” Within Provisions of Uniform Commercial Code, Article 2 on Sales. 97 A.L.R.6th 1.

Applicability of UCC Article 2 to Mixed Contracts for Sale of Consumer Goods and Services. 1 A.L.R.7th Art. 3

Applicability of UCC Article 2 to Mixed Contracts for Sale of Goods and Services: Distributorship, Franchise, and Similar Business Contracts. 8 A.L.R.7th Art. 4

Am. Jur.

67 Am. Jur. 2d, Sales §§ 30-38.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:3 (Answer; defense; contract for sale of investment securities not within Commercial Code provisions relating to sales).

CJS.

77A C.J.S., Sales § 10, 18, 19.

Law Reviews.

Note, Uniform Commercial Code – Should the U.C.C. Furnish Rules of Decision in Equipment Leasing Controversies? 7 Miss. C. L. Rev. 209.

Finding the Mississippi UCC Sales Contract Amid the RFQ, Quotes, Phone Calls, Emails, Purchase Order and Acknowledgement Forms, 30 Miss. C. L. Rev. 491, 2012.

1978 Mississippi Supreme Court Review: Commercial Law. 50 Miss. L. J. 41.

JUDICIAL DECISIONS

1. In general; relationship with other laws.

2. Transaction in goods.

3. —Sale.

4. Mixed transactions.

5. Secured transactions.

6. Specified classes of buyers.

7. What constitutes goods.

1. In general; relationship with other laws.

In seller’s action for buyer’s breach of contract to buy specified quantity of potatoes suitable for processing into potato chips, which potatoes were to be delivered to buyer “as needed,” trial court correctly concluded (1) that contract, pursuant to UCC § 1-102(3), varied normal rules for tender contained in Uniform Commercial Code in that contract required buyer to request delivery of quantity of potatoes, which buyer at no time did, before seller would become obligated to tender delivery, and (2) that as a result, seller’s failure to tender delivery of any potatoes at all during entire contract period did not relieve buyer of liability for payment under UCC § 2-301 and § 2-507(1). Halverson v. Pet, Inc., 261 N.W.2d 887, 1978 N.D. LEXIS 196 (N.D. 1978) (also holding that even if potatoes in seller’s warehouse were not suitable for buyer’s use throughout entire contract period, buyer still breached contract by not requesting any deliveries at all during such period).

No conflict existed between Uniform Commercial Code provisions dealing with sales (UCC § 2-101 et seq.) and New Jersey Consumer Fraud Act, and regulations adopted under such act to govern sale of pet cats and dogs, since (1) Uniform Commercial Code provisions on sales are merely intended to give stability to law of commercial transactions and do not limit proper exercise of police power in public interest, and (2) UCC § 2-102 expressly declares that Article 2 of the code dealing with sales does not impair or repeal any statute regulating sales to consumers. Thus, regulations adopted under New Jersey Consumer Fraud Act to govern sales of pet cats and dogs were valid and not in conflict with sales provisions of Article 2 of Uniform Commercial Code merely because such regulations provided consumer with broader remedies than were available under the code. Pet Dealers Asso. v. Division of Consumer Affairs, Dep't of Law & Public Safety, 149 N.J. Super. 235, 373 A.2d 688, 1977 N.J. Super. LEXIS 855 (App.Div.), cert. denied, 75 N.J. 16, 379 A.2d 247, 1977 N.J. LEXIS 628 (N.J. 1977).

Action for price of goods, wares and merchandise sold and delivered to buyer on open account was not time barred by the general statute of limitations of three years for oral contracts even though the purchases were incurred more than three but less than five years prior to filing of action, since, under UCC § 10-102 and 2-102, the five-year period of limitations of UCC § 2-725 superseded the pre-existing general statute and abrogated distinctions between oral and written sales contracts for purposes of statutes of limitations. Sesow v. Swearingen, 1976 OK 97, 552 P.2d 705, 1976 Okla. LEXIS 530 (Okla. 1976).

Six-year limitation period relating to contracts in general, rather than more restrictive four-year statute of limitations specified in UCC, applied to action for breach of implied warranties of merchantability and fitness for use in connection with rental of scaffold. Owens v. Patent Scaffolding Co., Div. of Harsco Corp., 50 A.D.2d 866, 376 N.Y.S.2d 948, 1975 N.Y. App. Div. LEXIS 11745 (N.Y. App. Div. 2d Dep't 1975).

Where (1) general contractor retained sum due under contract with subcontractor on ground that subcontractor’s work was poorly performed, and (2) subcontractor then assigned such sum to creditor, to whom subcontractor owed preexisting debt, without general contractor’s written consent, although such consent was required by contract between general contractor and subcontractor, court held that since assignment did not involve sale within the meaning of UCC § 2-102, prohibition against assignments in contract between general contractor and subcontractor was not rendered invalid by UCC Article 2 on sales or by any other provision of Uniform Commercial Code, including UCC § 9-104(f) which deals with inapplicability of Article 9 to assignment of accounts or contract rights for collection only. Bafile v. Remchow & Ford Motor Co. (Pa. 1962).

2. Transaction in goods.

Whether contract involving mixed transaction of goods and services should be interpreted under Uniform Commercial Code (UCC) or general contract law should depend on nature of contract and on whether dispute primarily concerns goods furnished or services rendered under contract. J. O. Hooker & Sons v. Roberts Cabinet Co., 683 So. 2d 396, 1996 Miss. LEXIS 596 (Miss. 1996).

Article 2 of the Mississippi UCC furnished analogous rules for determining controversies arising over a 2 party copier-equipment lease that conferred exclusive use and dominion to, and created obligations of maintenance and payment of taxes and insurance by, lessee, and which also contained renewal and purchase options, as well as an express warranty of freedom from defects of material and workmanship. J.L. Teel Co. v. Houston United Sales, Inc., 491 So. 2d 851, 1986 Miss. LEXIS 2460 (Miss. 1986).

As indicated in UCC § 2-102 and 2-106(1), the Uniform Commercial Code applies only to transactions in goods and not to service or repair contracts. Linscott v. Smith, 3 Kan. App. 2d 1, 587 P.2d 1271, 1978 Kan. App. LEXIS 235 (Kan. Ct. App. 1978).

UCC Article 2 applies only to transactions in goods and is inapplicable to construction contracts (see UCC § 2-102). Christiansen Bros., Inc. v. State, 90 Wn.2d 872, 586 P.2d 840, 1978 Wash. LEXIS 1140 (Wash. 1978).

Plumbing construction contract that involves both labor and materials is not a “transaction in goods” under UCC § 2-102. Cork Plumbing Co. v. Martin Bloom Associates, Inc., 573 S.W.2d 947, 1978 Mo. App. LEXIS 2325 (Mo. Ct. App. 1978).

If a contract is for services, the transaction is not a sale within the provisions of the Uniform Commercial Code. The code applies to transactions involving goods (see UCC § 2-102), and its provisions are not applicable to either service or construction contracts. Perlmutter v. Don's Ford, Inc., 96 Misc. 2d 719, 409 N.Y.S.2d 628, 1978 N.Y. Misc. LEXIS 2670 (N.Y. City Ct. 1978).

Action for breach by buyer of written installment agreement, executed by buyer after having defaulted on original contract of sale, is governed by four-year statute of limitations prescribed by UCC § 2-725(1) and not by 15-year, non-UCC statute of limitations for written contracts generally. In such case, installment agreement was subject to scope of UCC Article 2, even though it was not executed contemporaneously with original contract of sale, since under UCC § 2-102, provisions of Article 2 apply to “transactions in goods” and term “transaction,” as used in UCC § 2-102, encompasses a far wider activity than a “sale.” May Co. v. Trusnik, 54 Ohio App. 2d 71, 8 Ohio Op. 3d 97, 375 N.E.2d 72, 1977 Ohio App. LEXIS 7042 (Ohio Ct. App., Cuyahoga County 1977).

In action by assignee of computer-equipment lease for rent due under lease, (1) although applicable provisions of UCC Article 2 should be applied to equipment leases, entire article would not be applied on theory that equipment lease is transaction in goods under UCC § 2-102; (2) lease in issue was not unconscionable under UCC § 2-302, since it conferred rights and imposed duties on both lessor and lessee, and parties to lease had virtually equal bargaining power; (3) language in lease disclaiming implied warranties of merchantability and fitness were sufficiently conspicuous under UCC § 2-316(2); and (4) since defense that plaintiff was not assignee in good faith within meaning of UCC § 9-206(1) presented fact issue that could not be resolved solely as issue of law, trial court erred in dismissing defendant’s amended answer on ground that it raised insufficient defense as matter of law. Walter E. Heller & Co. v. Convalescent Home of First Church of Deliverance, 49 Ill. App. 3d 213, 8 Ill. Dec. 823, 365 N.E.2d 1285, 1977 Ill. App. LEXIS 2752 (Ill. App. Ct. 1st Dist. 1977).

A written agreement for the purchase and sale of an airplane and an oral modification thereof come within the phrase “transactions in goods” set forth in the instant section so as to make the instant article applicable thereto. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

3. —Sale.

The terms of a lease agreement between a motel owner and a television set supplier, including a nominal purchase price of $1 per television set at the expiration of the lease term, was evidence of a sale, sufficient to warrant application of the provisions of UCC Article 2. Patel v. Telerent Leasing Corp., 574 So. 2d 3, 1990 Miss. LEXIS 795 (Miss. 1990).

The sale of an automobile is a sale of “goods” that is governed by UCC Article 2 (see UCC § 2-102). Peckham v. Larsen Chevrolet-Buick-Oldsmobile, 99 Idaho 675, 587 P.2d 816, 1978 Ida. LEXIS 318 (Idaho 1978).

In action by purchasers of new homes against contractor who built homes and seller of bricks used therein for damages resulting from defective brick: (1) contracts between purchasers and contractor did not provide for “sale” as that term is used in UCC Article 2 and, thus, were not governed by four-year statute of limitations contained in § 2-725, but rather by general six-year limitations for breach of contract; (2) conversely, only relationship between purchasers and seller of bricks was that of buyers and seller, which was governed by UCC Article 2, and, since more than four years passed between respective purchases from seller and alleged breach of warranty, action was barred. De Matteo v. White, 233 Pa. Super. 339, 336 A.2d 355, 1975 Pa. Super. LEXIS 1463 (Pa. Super. Ct. 1975).

In action by hybrid seed corn processor against gas company for property damage resulting from gas explosion, allegations that gas company warranted fitness of its own equipment knowing that processor would rely upon warranty “and use the equipment for the purpose for which it was intended,” failed to state cause of action against gas company for breach of implied warranties under UCC, since implied warranties under UCC extend only to goods sold to a buyer and gas company’s meters and service lines were not sold to processor, and there was no allegation of breach of warranty with respect to gas which was sold to processor. Pioneer Hi-Bred Corn Co. v. Northern Illinois Gas Co., 61 Ill. 2d 6, 329 N.E.2d 228, 1975 Ill. LEXIS 239 (Ill. 1975).

In action arising when aluminum step-ladder which had been loaned to plaintiff collapsed, plaintiff could not recover for breach of implied warranty where application of code to “transactions in goods” under UCC § 2-102 was not extended to loan of goods which were sold before UCC became law and question of whether plaintiff was foreseeable user of goods under UCC § 2-318 was moot. Harvey v. Sears, Roebuck & Co., 315 A.2d 599, 1973 Del. Super. LEXIS 142 (Del. Super. Ct. 1973).

4. Mixed transactions.

Whether contract involving mixed transaction of goods and services should be interpreted under Uniform Commercial Code (UCC) or general contract law should depend on nature of contract and on whether dispute primarily concerns goods furnished or services rendered under contract. J. O. Hooker & Sons v. Roberts Cabinet Co., 683 So. 2d 396, 1996 Miss. LEXIS 596 (Miss. 1996).

General contract law, rather sales provisions in Uniform Commercial Code (UCC), governed dispute between general contractor and subcontractor arising from subcontractor’s refusal to dispose of cabinets that it tore out from public housing redevelopment site for purposes of installation of new cabinets; case did not concern cabinets manufactured, but rather subcontractor’s refusal to assume duties which general contractor obligated itself to perform pursuant to contract with public housing authority. J. O. Hooker & Sons v. Roberts Cabinet Co., 683 So. 2d 396, 1996 Miss. LEXIS 596 (Miss. 1996).

Even adopting lessee’s contention that truck-rental-and service contract, which provided that lessee would purchase rented trucks on cancellation of contract within first three years of contract’s operation, was actually a sale that was subject to provisions of the Uniform Commercial Code, lessee’s reliance on Uniform Commercial Code remedies was misplaced where evidence did not show proper and timely rejection of the goods under either UCC § 2-607(2) and (3)(a) or in the manner required by the contract itself. Furthermore, since lessee’s defenses, in action for deficiency arising out of lessee’s refusal to purchase rented trucks, related solely to alleged inadequacy of services provided by lessor and not to trucks themselves, and since remedies provided by Uniform Commercial Code apply only to sale of goods and not to sale of services (see UCC § 2-102), lessee could not avail itself of UCC remedies relating to nonconforming goods. Pepsico Truck Rental, Inc. v. Eastern Foods, Inc., 145 Ga. App. 410, 243 S.E.2d 662, 1978 Ga. App. LEXIS 2002 (Ga. Ct. App. 1978).

Contract between general contractor and subcontractor under which subcontractor was to complete cement construction work on apartment-tower project was transaction that, although calling for both labor and materials, had as its essence performance of services rather than sale and passage of title to goods (see UCC § 2-102) and thus was not governed by Uniform Commercial Code. Freeman v. Shannon Constr., Inc., 560 S.W.2d 732, 23 U.C.C. Rep. Serv. 867 (Tex. Civ. App. 1977), writ ref’d n.r.e., (June 14, 1978) (rejecting subcontractor’s contention that essence of agreement was sale of 4815 cubic yards of cement).

Contract for sale and installation of carpeting in large apartment complex was primarily for sale, rather than installation, of such carpeting and thus was subject to UCC Art 2 on sales. Snyder v. Herbert Greenbaum & Associates, Inc., 38 Md. App. 144, 380 A.2d 618, 1977 Md. App. LEXIS 359 (Md. Ct. Spec. App. 1977).

Test for determining whether UCC Art 2 on sales applies to mixed sale and services contract is not whether contract is mixed but, granting that it is mixed, whether its predominant purpose, reasonably stated, is rendition of services with goods being incidentally involved (for example, contract with artist for painting) or whether it is sale transaction with labor being incidentally involved (for example, installation of water heater in bathroom). Snyder v. Herbert Greenbaum & Associates, Inc., 38 Md. App. 144, 380 A.2d 618, 1977 Md. App. LEXIS 359 (Md. Ct. Spec. App. 1977).

Test as to whether mixed-goods-and-services contract comes under UCC Article 2 is whether predominant purpose of such contract, reasonably stated, is rendition of services with sale of goods being incidentally involved, or whether contract is primarily sales transaction with rendition of services being incidentally involved. Air Heaters v. Johnson Elec., 258 N.W.2d 649, 1977 N.D. LEXIS 205 (N.D. 1977).

Under UCC 2-102, engineering and construction contract that primarily involved rendition of services and not sale of goods is outside scope of UCC Article 2, even though such contract also involved furnishing of equipment. Lincoln Pulp & Paper Co. v. Dravo Corp., 436 F. Supp. 262, 1977 U.S. Dist. LEXIS 14559 (D. Me. 1977).

Contract for sale of trucks was not contract for sale of goods and, thus, was not governed by four-year statute of limitations contained in UCC § 2-725(1) where contract was executed simultaneously with contract for sale of truck manufacturing plant and where contract for sale of trucks was merely incidental and collateral to main object of effecting transfer of truck manufacturing plant. Dynamics Corp. of America v. International Harvester Co., 429 F. Supp. 341, 1977 U.S. Dist. LEXIS 16833 (S.D.N.Y. 1977).

Contract for sale of various bowling alley equipment, including, inter alia, lanes and ball returns, to be delivered and installed by seller, who warranted that lanes would be free from defects in workmanship and materials and that they would meet “all ABC specifications,” was a “transaction in goods” under UCC § 2-102 and came within Article 2 of Code, despite fact that contract involved substantial amounts of labor; items sold under contract were “goods” as defined in UCC § 2-105(1) since they were all items of tangible property, normally in flow of commerce, portable at time of contract; contract was not construction contract, outside Code coverage, nor was it excluded from coverage merely because it was “mixed” contract for goods and services. Bonebrake v. Cox, 499 F.2d 951, 1974 U.S. App. LEXIS 7831 (8th Cir. Iowa 1974).

Where the assets of a going concern are sold, Article 2 will apply to transfer with respect to the goods portion although not applicable to the non-goods portion of the transaction. Foster v. Colorado Radio Corp., 381 F.2d 222, 1967 U.S. App. LEXIS 5719 (10th Cir. N.M. 1967).

5. Secured transactions.

As secured transactions are not governed by the provisions of Article 2 it follows that the “unconscionable” section of the Code (§ 2-302) does not apply to a secured transaction and it is therefore no objection that the advantage that a creditor has under a secured transaction may appear inequitable or even unconscionable. In re Advance Printing & Litho Co., 277 F. Supp. 101, 1967 U.S. Dist. LEXIS 7809 (W.D. Pa.), aff'd, 387 F.2d 952, 1967 U.S. App. LEXIS 4354 (3d Cir. Pa. 1967).

6. Specified classes of buyers.

Even though contract for sale of used tractor to farmer contained complete disclaimer of warranties in accordance with UCC § 2-316, UCC § 2-102 states that Article 2 does not “impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers,” and hence disclaimer provision was void since it was in conflict with statute relating to purchase of tractors which made such disclaimers void; once disclaimer provision was voided, UCC § 2-314 injected implied warranty of merchantability into contract for sale of tractor. Hoffman Motors v. Enockson, 240 N.W.2d 353, 1976 N.D. LEXIS 203 (N.D. 1976).

7. What constitutes goods.

In borrowers’ suit alleging fraudulent loan transactions, the borrowers’ unconscionability claims were not viable, because the sale of insurance did not fit within the ambit of what could be considered “goods” as defined in the Uniform Commercial Code (UCC) and unconscionability under the UCC was applicable only within the context of a sale of goods. Ross v. First Family Fin. Servs., Inc., 2002 U.S. Dist. LEXIS 23212 (N.D. Miss. Aug. 26, 2002).

Carpeting is “goods” under UCC § 2-102. Trust Co. Bank v. Barrett Distributors, Inc., 459 F. Supp. 959, 1978 U.S. Dist. LEXIS 14469 (S.D. Ind. 1978).

Contract to publish, distribute, and sell book was not contract for sale of “goods” within meaning of UCC § 2-102. Mallin v. University of Miami, 354 So. 2d 1227, 1978 Fla. App. LEXIS 15227 (Fla. Dist. Ct. App. 3d Dist. 1978).

Term “goods” as employed in UCC § 2-102 applies to sale by merchant of used, as well as new, goods; thus, buyer of used truck was entitled to bring action against seller for breach of implied warranty of merchantability. Moore v. Burt Chevrolet, Inc., 39 Colo. App. 11, 563 P.2d 369 (Colo. Ct. App. 1977).

In action for damages for destruction of swimming pool, although there was no proof that pool was defective, there was proof that negligent installation of liner resulted in destruction of pool, and warranty provisions of UCC § 2-314 and 2-315 applied since sale was primarily one of goods as defined in UCC § 2-102 and services were necessary to insure that goods were merchantable and fit for particular purpose. Riffe v. Black, 548 S.W.2d 175, 1977 Ky. App. LEXIS 651 (Ky. Ct. App. 1977).

Where cotton farmer entered into contract with cotton merchants to sell cotton crop to be produced on 800 acres, where farmer was obligated by terms of lease to pay one-fourth of his cotton crop as rent, and where as result of flood conditions farmer was only able to plant 717 acres rather than expected 1066 acres, cotton merchants were entitled to whole crop and lessor’s remedies, if any, were against lessee; when read together UCC § 2-102, 2-105 and 2-107 indicated that forward contracts for sale of yet to be grown cotton fell within § 2-402(1) which subordinates rights of seller’s unsecured creditors in subject matter to those of buyer. Ralli-Coney, Inc. v. Gates, 528 F.2d 572, 1976 U.S. App. LEXIS 12420 (5th Cir. Miss. 1976).

Purchase of horse, apparently for recreational use, was covered by UCC Article 2 even though it was possibly casual sale. Key v. Bagen, 136 Ga. App. 373, 221 S.E.2d 234, 1975 Ga. App. LEXIS 1355 (Ga. Ct. App. 1975).

Contract to sell future cotton crop was sale of goods within scope of Article 2 of UCC. R. N. Kelly Cotton Merchant, Inc. v. York, 379 F. Supp. 1075, 1973 U.S. Dist. LEXIS 11445 (M.D. Ga. 1973), aff'd, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Sale of laundry and drycleaning business which was nothing more than sale of equipment, furniture, and other movables of business and which did not involve non-goods such as goodwill or real property, was a transaction in goods and came within scope of Article 2 of UCC; thus, where buyer breached contract to purchase laundry and drycleaning business and seller elected to resell business at private sale, but failed to give buyer notice of intention to resell, of time, place and manner of resale or of seller’s intention to sue buyer for difference between contract price and amount ultimately realized on resale, seller was not entitled to recover difference between resale price and contract price as provided in UCC § 2-706, but was entitled to measure of damages prescribed by UCC § 2-708(1). Miller v. Belk, 23 N.C. App. 1, 207 S.E.2d 792, 1974 N.C. App. LEXIS 1997 (N.C. Ct. App. 1974).

Except as limited by UCC § 2-102, provisions of sales of goods chapter of UCC are applicable to sale of motor vehicle and, under UCC § 2-312(1), dealer in motor vehicles warrants he will convey good title free from any security interest or other lien or encumbrance of which buyer is without knowledge when contract of sale is made; absent express contractual language or circumstances under which person buying motor vehicle knows or should have known that only limited warranty is intended in accord with UCC § 2-312(2) (but only to extent that such warranty can be limited), automobile dealer having authority to expose floor-planned cars for sale in ordinary course of business binds his mortgagee to deliver title to any vehicle so sold when payment is made to dealer and whether or not dealer remits proceeds to his mortgagee. Levin v. Nielsen, 37 Ohio App. 2d 29, 66 Ohio Op. 2d 52, 306 N.E.2d 173, 1973 Ohio App. LEXIS 799 (Ohio Ct. App., Cuyahoga County 1973).

Under New York law, Article 2 of the Uniform Commercial Code applies to the sale of securities. Bache & Co. v. International Controls Corp., 339 F. Supp. 341, 1972 U.S. Dist. LEXIS 15240 (S.D.N.Y.), aff'd, 469 F.2d 696, 1972 U.S. App. LEXIS 6259 (2d Cir. N.Y. 1972).

§ 75-2-103. Definitions and index of definitions.

  1. In this chapter unless the context otherwise requires:
    1. “Buyer” means a person that buys or contracts to buy goods.
    2. [Reserved]
    3. “Receipt” of goods means taking physical possession of them.
    4. “Seller” means a person who sells or contracts to sell goods.
  2. Other definitions applying to this chapter or to specified parts thereof, and the sections in which they appear are:

    “Acceptance” Section 75-2-606

    “Banker’s credit” Section 75-2-325

    “Between merchants” Section 75-2-104

    “Cancellation” Section 75-2-106(4)

    “Commercial unit” Section 75-2-105

    “Confirmed credit” Section 75-2-325

    “Conforming to contract” Section 75-2-106

    “Contract for sale” Section 75-2-106

    “Cover” Section 75-2-712

    “Entrusting” Section 75-2-403

    “Financing agency” Section 75-2-104

    “Future goods” Section 75-2-105

    “Goods” Section 75-2-105

    “Identification” Section 75-2-501

    “Installment contract” Section 75-2-612

    “Letter of Credit” Section 75-2-325

    “Lot” Section 75-2-105

    “Merchant” Section 75-2-104

    “Overseas” Section 75-2-323

    “Person in position of seller” Section 75-2-707

    “Present sale” Section 75-2-106

    “Sale” Section 75-2-106

    “Sale on approval” Section 75-2-326

    “Sale or return” Section 75-2-326

  3. The following definitions in other chapters apply to this chapter:

    “Check” Section 75-3-104

    “Consignee” Section 75-7-102

    “Consignor” Section 75-7-102

    “Consumer goods” Section 75-9-102

    “Control” Section 75-7-106

    “Dishonor” Section 75-3-502

    “Draft” Section 75-3-104

  4. In addition Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

HISTORY: Codes, 1942, § 41A:2-103; Laws, 1966, ch. 316, § 2-103; Laws, 2001, ch. 495, § 6; Laws, 2006, ch. 527, § 42; Laws, 2010, ch. 506, § 4, eff from and after July 1, 2010.

Amendment Notes —

The 2001 amendment, effective January 1, 2002, updated the section references in (2) and (3).

The 2006 amendment added the section reference for the definition of “Control” in (3).

The 2010 amendment made a stylistic change in (1)(a); and substituted “reserved” for former (1)(b), which was the definition for “good faith.”

Cross References —

General definitions, see §75-1-201.

Delegation of performance and assignment of rights, see §75-2-210.

RESEARCH REFERENCES

ALR.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

Products liability of endorser, trade association, certifier, or similar party who expresses approval of product. 1 A.L.R.5th 431.

Am. Jur.

15A Am. Jur. 2d, Commercial Code §§ 5, 6, 35.

67 Am. Jur. 2d, Sales § 9 et seq.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Forms 1:28-1:33. (Definitions and principles of interpretation).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 2-Sales, § 253:163 et seq. (Definitions).

Law Reviews.

1982 Mississippi Supreme Court Review: Contract, Corporation and Commercial Law. 53 Miss. L. J. 141, March 1983.

JUDICIAL DECISIONS

1. Buyer.

2. Consumer goods.

3. Good faith.

4. Goods.

5. Receipt.

6. Sale.

7. Seller.

1. Buyer.

Truck driver who obtained gasoline for his employer’s truck and charged gasoline to his employer was not in privity with service station that sold gasoline and, thus, could not maintain action for breach of warranty against service station for injuries sustained when his truck became disabled and was struck by another vehicle allegedly as result of water in gasoline; under UCC § 2-103(1)(a) truck driver was not “buyer” of gasoline, but mere agent of buyer to whom UCC sales warranties did not extend; under UCC § 2-314 employee of buyer was not in privity with seller. Weaver v. Ralston Motor Hotel, Inc., 135 Ga. App. 536, 218 S.E.2d 260, 1975 Ga. App. LEXIS 1726 (Ga. Ct. App. 1975).

A buyer who acquires property from one who has a voidable title must show that he was a “good faith purchaser for value”, which requires “honesty in fact and the observance of reasonable commercial standards of fair dealing”. Atlas Auto Rental Corp. v. Weisberg, 54 Misc. 2d 168, 281 N.Y.S.2d 400, 1967 N.Y. Misc. LEXIS 1388 (N.Y. Civ. Ct. 1967), disapproved, Candela v. Port Motors, 208 A.D.2d 486, 617 N.Y.S.2d 49, 1994 N.Y. App. Div. LEXIS 9380 (N.Y. App. Div. 2d Dep't 1994).

A licensed automobile wrecker and junk dealer who purchased a two-year-old station wagon from a thief for $900 by placing $300 down, and who sold the vehicle for $1200 that same day, although he never obtained a bill of sale or registration certificate, was liable to the two owners, since the car had not been entrusted to a merchant who dealt in used cars and the defendant had not demonstrated that he was a “buyer in ordinary course of business” or that he was a “good faith purchaser for value”. Atlas Auto Rental Corp. v. Weisberg, 54 Misc. 2d 168, 281 N.Y.S.2d 400, 1967 N.Y. Misc. LEXIS 1388 (N.Y. Civ. Ct. 1967), disapproved, Candela v. Port Motors, 208 A.D.2d 486, 617 N.Y.S.2d 49, 1994 N.Y. App. Div. LEXIS 9380 (N.Y. App. Div. 2d Dep't 1994).

A hotel manager who, on behalf of his employer, personally purchased from a state liquor store champagne intended for the use and consumption by guests of the hotel was a buyer as that term is defined in the instant section. Yentzer v. Taylor Wine Co., 414 Pa. 272, 199 A.2d 463, 1964 Pa. LEXIS 554 (Pa. 1964).

2. Consumer goods.

Sandblasting hoods and respirators used by employees in course of their employment are not consumer goods within meaning of UCC § 9-109(1) and UCC § 2-103(3). Simmons v. American Mut. Liability Ins. Co., 433 F. Supp. 747, 1976 U.S. Dist. LEXIS 12738 (S.D. Ala. 1976), aff'd, 560 F.2d 1021 (5th Cir. Ala. 1977), aff'd, 560 F.2d 1022 (5th Cir. Ala. 1977), disapproved, Morris v. SSE, Inc., 912 F.2d 1392, 1990 U.S. App. LEXIS 16911 (11th Cir. Ala. 1990).

3. Good faith.

Where buyer of natural gas under 19 output contracts with producer-seller, after discovering that charts measuring seller’s production and delivery of gas from wells involved in some of such contracts had been altered to show more protection and delivery of gas to buyer than was actually the case, stopped payments on all contracts entered into with seller, instead of only those affected by the altered charts, (1) buyer’s action constituted under UCC § 2-703 repudiation of whole of each contract that was not affected by altered charts, (2) buyer’s action did not constitute repudiation of contracts that were affected by altered charts, and (3) under UCC § 2-103(1)(b), buyer acted in commercially unreasonable manner with regard to all 19 contracts by insisting that it recover all excess payments made to seller, and also all amounts due on unpaid loans made by it to seller, before it would resume paying for seller’s deliveries of gas. Columbia Gas Transmission Corp. v. Larry H. Wright, Inc., 443 F. Supp. 14, 12 Ohio Op. 3d 95, 1977 U.S. Dist. LEXIS 16797 (S.D. Ohio 1977).

In replevin action by buyer against seller to obtain possession of supposedly used Ferrari sports car of limited availability that seller ordered for buyer from another dealer, where car on seller’s receipt thereof proved to be virtually new racing vehicle, not intended for highway use, that seller wished to retain for himself, and where parties were shown to have modified in writing prior oral agreement under which buyer was to be sold “used” car in suit, seller’s conduct in claiming that since such car was “new” it was not what buyer had ordered did not meet standards of good faith imposed by UCC § 1-201(19) and UCC § 2-103(1)(b); and when car was identified to contract buyer had right of replevin under UCC § 2-716(3), since he was unable to effect cover and there was no other way for him to protect himself against loss of his deposit on car. Tatum v. Richter, 280 Md. 332, 373 A.2d 923, 1977 Md. LEXIS 850 (Md. 1977).

“Honesty-in-fact” definition of good faith in UCC § 1-201(19) is to be distinguished from definition of good faith in UCC § 2-103(1)(b), since latter definition includes not only honesty in fact but also observance of reasonable commercial standards of fair dealing in trade. Leininger v. Anderson, 255 N.W.2d 22, 1977 Minn. LEXIS 1513 (Minn. 1977).

When the UCC intends to apply a concept of “good faith” beyond its definition in UCC § 1-201, subd 19 as “honesty in fact”, a broader definition is provided, e.g. UCC § 2-103, subd 1(b), which adds the words “observance of reasonable commercial standards of fair dealing in the trade” to the definition of “good faith” as between merchants. Advanced Alloys, Inc. v. Sergeant Steel Corp., 72 Misc. 2d 614, 340 N.Y.S.2d 266, 1973 N.Y. Misc. LEXIS 2273 (N.Y. Civ. Ct.), rev'd, 79 Misc. 2d 149, 360 N.Y.S.2d 142, 1973 N.Y. Misc. LEXIS 1264 (N.Y. App. Term 1973).

Section referred to a example of explicit requirement that party exercise more than “honesty in fact.” Industrial Nat'l Bank v. Leo's Used Car Exchange, Inc., 362 Mass. 797, 291 N.E.2d 603, 1973 Mass. LEXIS 363 (Mass. 1973).

It is unreasonable to conclude that the drafters of the Code intended the UCC § 2-103(1)(b) definition of good faith to be applied to merchant-buyers throughout the entire Code; this definition would not be applied to question of rights and obligations of buyer and secured creditor, one to the other, a transaction expressly controlled by Article 9, and more specifically by the good faith definition of UCC § 1-201(19). Sherrock v. Commercial Credit Corp., 290 A.2d 648, 1972 Del. LEXIS 251 (Del. 1972).

Requirements for establishing one’s self as “good faith” buyer vary depending on commercial status of purchaser; and individual who purchases tractor for his own personal use is not held to same degree of sophistication in ascertaining existence of security interest on that tractor as is merchant who regularly deals in business of buying and selling tractors. Swift v. J. I. Case Co., 266 So. 2d 379, 1972 Fla. App. LEXIS 6314 (Fla. Dist. Ct. App. 1st Dist.), cert. denied, 271 So. 2d 147, 1972 Fla. LEXIS 3104 (Fla. 1972).

Commercially prudent tractor merchant may not purchase tractor from another dealer and thereby acquire title free of any prior recorded security interests without first making good faith inquiry into existence of such previously perfected interests. Swift v. J. I. Case Co., 266 So. 2d 379, 1972 Fla. App. LEXIS 6314 (Fla. Dist. Ct. App. 1st Dist.), cert. denied, 271 So. 2d 147, 1972 Fla. LEXIS 3104 (Fla. 1972).

An oral agreement between property owners and a handyman whereby the handyman agreed to purchase a heating unit for owners and install it in the owners’ building did not create between the parties a relationship of buyer and seller, so as to entitle the owners to a recovery against the handyman on the ground of a breach of implied warranty of merchantability and of fitness for the purpose. Victor v. Barzaleski, 19 Pa. D. & C.2d 698, 1959 Pa. Dist. & Cnty. Dec. LEXIS 184 (Pa. C.P. 1959).

4. Goods.

A motor vehicle is “goods.” Park County Implement Co. v. Craig, 397 P.2d 800, 1964 Wyo. LEXIS 136 (Wyo. 1964).

5. Receipt.

Where (1) buyer paid for motorcycle in full, was given necessary registration and insurance papers, and registered machine and secured liability insurance for it prior to its theft from seller’s premises, although its license plates were never affixed, (2) seller agreed to hold machine on seller’s premises until buyer returned from vacation, and (3) machine was stolen from seller’s premises without negligence on seller’s part, court held (1) that evidence showed that buyer had never exercised dominion or control over motorcycle, and (2) that in such situation, seller must bear risk of loss under UCC § 2-509(3), which provides that risk of loss passes to buyer on his receipt of goods if seller is merchant, and UCC § 2-103(1)(c), which provides that “receipt” of goods means taking physical possession of them. Ramos v. Wheel Sports Center, 96 Misc. 2d 646, 409 N.Y.S.2d 505, 1978 N.Y. Misc. LEXIS 2658 (N.Y. Civ. Ct. 1978).

Regardless of whether the contract involves delivery at the seller’s place of business or at the situs of the goods, a merchant seller cannot transfer risk of loss and it remains on him, under UCC §§ 2-509(3) and 2-103(1)(c), until actual receipt by the buyer, even though full payment has been made and the buyer has been notified that the goods are at his disposal. The underlying theory is that a merchant who is to make physical delivery at his own place of business continues to control the goods in the meantime and can be expected to insure his interest in them. Ramos v. Wheel Sports Center, 96 Misc. 2d 646, 409 N.Y.S.2d 505, 1978 N.Y. Misc. LEXIS 2658 (N.Y. Civ. Ct. 1978).

Under UCC where goods are delivered to buyer under contract for sale and are physically received by him, they are in his possession. North Platte State Bank v. Production Credit Asso., 189 Neb. 44, 200 N.W.2d 1, 1972 Neb. LEXIS 655 (Neb. 1972).

A buyer receives goods when he takes physical possession of them. Tennessee-Virginia Constr. Co. v. Willingham, 117 Ga. App. 290, 160 S.E.2d 444, 1968 Ga. App. LEXIS 1067 (Ga. Ct. App. 1968).

6. Sale.

There is no “sale” to a beauty parlor customer of materials used in giving her treatments, for the materials used in the performance of such services are patently incidental to the treatment itself and do not constitute a purchase of an article by the customer. Epstein v. Giannattasio, 25 Conn. Supp. 109, 197 A.2d 342, 1963 Conn. Super. LEXIS 188 (Conn. Super. Ct. 1963).

7. Seller.

Purchaser of automobile battery who was injured when battery exploded could not recover under theory of implied warranty of merchantability from organization which allowed its name to be printed on battery because organization did not sell or contract to sell battery and was therefore not in position to make such warranty; organization was not liable for misrepresentation because no evidence was presented that plaintiff relied on name of organization in purchasing battery. Harmon v. National Automotive Parts Asso., 720 F. Supp. 79, 1989 U.S. Dist. LEXIS 10952 (N.D. Miss. 1989).

Action for breach of implied warranty of merchantability against manufacturer, as seller, may be maintained by buyer because manufacturer qualified as seller under UCC § 2-103(1)(d) as person who sells or contracts to sell goods, although motor home in question had not been purchased directly from manufacturer. Hargett v. Midas International Corp., 508 So. 2d 663, 1987 Miss. LEXIS 2550 (Miss. 1987).

An automobile manufacturer was a “seller” within the meaning of §75-2-103(1)(d), where the retailer’s sales contract accompanied by the manufacturer’s warranty were so closely linked both in time of delivery and subject matter that they blended into a single unit at the time of sale. Volkswagen of America, Inc. v. Novak, 418 So. 2d 801, 1982 Miss. LEXIS 2116 (Miss. 1982).

In action for breach of implied warranty of fitness of isomax reactor charge heater, where buyer contracted directly with defendant corporation to purchase a completed product (isomax unit and hydrogen plant) assembled by defendant, and where defendant assembled component parts into final completed product and maintained title thereto until product was sold to buyer, defendant was “seller” within meaning of UCC § 2-103(1)(d), and buyer could bring action against it for breach of the implied warranty. Signal Oil & Gas Co. v. Universal Oil Products, 572 S.W.2d 320, 1978 Tex. LEXIS 390 (Tex. 1978).

Since Uniform Commercial Code does not limit definition of “seller” contained in UCC § 2-103(1)(d) to immediate seller of product but defines seller as “person who sells or contracts to sell goods,” manufacturer of mobile homes which sold homes to retail buyers was “seller” under the code. Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 1977 Tex. LEXIS 279 (Tex. 1977).

In action by buyer of new 1970 Lincoln Continental automobile against dealer and manufacturer, in which buyer alleged seller’s breach of warranty and buyer’s justifiable revocation of acceptance of vehicle, manufacturer was not “seller” under UCC § 2-103(1)(d), on theory that dealer from whom buyer actually purchased vehicle was “agent” of manufacturer, where (1) sales contract expressly recited that buyer understood that no principal-and-agent relationship existed between dealer and manufacturer, (2) dealer’s franchise agreement with manufacturer also expressly stated that dealer was not manufacturer’s agent, and (3) no other evidence supported conclusion that dealer was manufacturer’s agent in sale of vehicle to buyer. Thus, manufacturer was entitled to directed verdict since buyer, to be entitled to remedy of revocation of acceptance under UCC § 2-608 as against manufacturer, was required to prove existence of buyer-seller relationship, and such proof was absent. Conte v. Dwan Lincoln-Mercury, Inc., 172 Conn. 112, 374 A.2d 144, 1976 Conn. LEXIS 880 (Conn. 1976) (also observing that ordinarily automobile dealer’s only attribute as agent of manufacturer is authority to extend manufacturer’s limited warranty to dealer’s purchasers).

In action for recovery of purchase price of accounting machine and accounting system allegedly sold to plaintiff by defendant through its agent, trial court properly awarded damages to plaintiff based on breach of both express and implied warranties, notwithstanding defendant’s claims that trial court erred in finding it sold machine and system in question to plaintiff, when in fact it sold machine to leasing company which in turn leased it to plaintiff, and that transaction did not fall within scope of Article 2 of UCC and, accordingly, was barred by statute of limitations for oral contract actions. Leasing company was financing agency and, as such, held security interest in subject matter transaction, and defendant was seller based on fact that: (1) equipment was shipped and installed by defendants; (2) leasing company did not select or inspect equipment; (3) leasing company was not manufacturer or dealer in like equipment; (4) monthly payments under lease were calculated to return to leasing company purchase price, sales tax and interest; (5) it was not contemplated equipment would be returned to leasing company; and (6) renewal rental was for nominal amount and extended to period beyond usable life of equipment. Atlas Industries, Inc. v. National Cash Register Co., 216 Kan. 213, 531 P.2d 41, 1975 Kan. LEXIS 317 (Kan. 1975).

Mechanical contracting firm that accepted order to supply custom cooling equipment which would conform to specifications supplied by buyer and that guaranteed its work for period of one year against defects was (1) “seller” as defined in UCC § 2-103(1)(d), and (2) “a merchant with respect to goods of that kind,” i.e., with respect to cooling system, as provided in UCC § 2-314(1). Frantz, Inc. v. Blue Grass Hams, Inc., 520 S.W.2d 313, 1974 Ky. LEXIS 7 (Ky. 1974).

Auto manufacturer who sold autos only to authorized dealers was not “seller” of auto to retail purchaser. Ford Motor Co. v. Pittman, 227 So. 2d 246, 1969 Fla. App. LEXIS 5069 (Fla. Dist. Ct. App. 1st Dist. 1969), cert. denied, 237 So. 2d 177, 1970 Fla. LEXIS 3210 (Fla. 1970).

An Illinois florist who receives interstate telegraphic orders for retail sales of flowers in Illinois is a seller, his sales are present sales made in the state whether the contract is unilateral or bilateral, and title to the flowers passes in Illinois, and the sale is not one for resale which would be true if the seller were the out-of-state florist who telegraphs the order; and the Illinois florist is subject to that state’s retailers’ occupational tax on such sales. O'Brien v. Isaacs, 32 Ill. 2d 105, 203 N.E.2d 890, 1965 Ill. LEXIS 303 (Ill. 1965).

§ 75-2-104. Definitions: “merchant”; “financing agency”; “between merchants.”

  1. “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
  2. “Financing agency” means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller’s draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. “Financing agency” includes also a bank or other person who similarly intervenes between persons that are in the position of seller and buyer in respect to the goods (Section 75-2-707).
  3. “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.

HISTORY: Codes, 1942, § 41A:2-104; Laws, 1966, ch. 316, § 2-104; Laws, 2006, ch. 527, § 43, eff from and after July 1, 2006.

Amendment Notes —

The 2006 amendment, in (2), inserted “or are associated with” preceding “the draft” near the end of the first sentence, and in the last sentence, substituted “that” for “who” following “between persons” and “(Section 75-2-707)” for “(Section 2-707).”

Cross References —

Purposes and rules of construction, see §75-1-103.

Obligation of good faith, see §75-1-304.

Implied warranties, see §§75-2-314,75-2-315.

Secured transactions, see §75-9-101 et seq.

RESEARCH REFERENCES

ALR.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

Farmers as “merchants” within provisions of UCC Article 2, dealing with sales, 95 A.L.R.3d 484.

Am. Jur.

10 Am. Jur. 2d, Banks and Financial Institutions §§ 646, 648.

67 Am. Jur. 2d, Sales §§ 58, 60, 62.

73 Am. Jur. 2d, Statutes §§ 58, 135.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:11. (Complaint, petition, or declaration; breach of contract between merchants; failure to repudiate written confirmation of oral contract).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 2 – Sales, § 253:174 et seq. (Merchant transactions).

Law Reviews.

1983 Mississippi Supreme Court Review: Farmer as merchant. 54 Miss. L. J. 113, March, 1984.

JUDICIAL DECISIONS

1. In general.

2. Applicability.

3. Merchants.

4. —Farmers as.

5. —Warranties.

6. Financing agency.

7. Between merchants.

1. In general.

Contract for sale of two radio stations was not agreement for sale of “goods,” to which Article 2 of UCC would apply, where nature of transaction, intention of parties as reflected by writing, and lack of specific reference to designated assets rendered inescapable conclusion that letter agreement was one integrated contract for sale of businesses of two radio stations, including their tangible and intangible assets, as going concern. Field v. Golden Triangle Broadcasting, Inc., 451 Pa. 410, 305 A.2d 689, 1973 Pa. LEXIS 544 (Pa. 1973), cert. denied, 414 U.S. 1158, 94 S. Ct. 916, 39 L. Ed. 2d 110, 1974 U.S. LEXIS 1611 (U.S. 1974).

A purchaser of a product under a trade or patent name receives no implied warranty of fitness of use for any particular purpose, but does receive an implied warranty that the goods are of merchantable quality. Montgomery Ward & Co. v. McKesson & Robbins, Inc., 55 Misc. 2d 529, 285 N.Y.S.2d 462, 1967 N.Y. Misc. LEXIS 995 (N.Y. Civ. Ct. 1967).

Even in the absence of a written agreement with respect to every term of a contract, great weight attaches to the course of dealing of the parties, and where it appears from the conduct of the parties that their mode of calculating price, although not accepted formally by signature of a written instrument, was adhered to by both parties during an extensive course of dealing, during which the purchaser received, accepted, and paid for over $800,000 worth of merchandise, this course of dealing must be held applicable and governing with respect to remaining merchandise which was received, accepted, but not paid for. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 236 F. Supp. 879, 1965 U.S. Dist. LEXIS 6206 (W.D. Pa.), vacated, 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

2. Applicability.

Summary judgment in favor of a seller was approved as the seller had not placed his truck up for sale before a buyer approached him and asked to buy it, and the seller did not represent that the truck would meet the buyer’s specific need. Lacy v. Morrison, 906 So. 2d 126, 2004 Miss. App. LEXIS 1121 (Miss. Ct. App. 2004).

3. Merchants.

Although, through training and years of experience, the plaintiff may have possessed or acquired special knowledge, skills, and expertise about tractors, this did not make him a “professional,” equal in the marketplace with a company that sold and repaired tractors. Davidson v. North Cent. Parts, 737 So. 2d 1015, 1998 Miss. App. LEXIS 980 (Miss. Ct. App. 1998).

In breach-of-warranty action for damages by buyer of allegedly defective dump trailers against manufacturer-seller, court held (l) that buyer and its ultimate Mexican customers were “merchants” within meaning of UCC § 2-104(l); (2) that seller was “merchant” within meaning of both UCC § 2-104(l) and § 2-314(l); (3) that telephoned order for 20 additional trailers was not enforceable under statute of frauds in UCC § 2-201(l) because it did not come within exceptions to such statute contained in UCC § 2-201(3); (4) that “specially manufactured goods” exception in UCC § 2-201(3)(a) applies only when seller, rather than buyer, seeks to escape statute-of-frauds defense; (5) that since three trailers purchased under valid written contract were put to improper use by buyer’s Mexican customers, rather than being used for their “ordinary purposes,” no breach of implied warranty of merchantability under UCC § 2-314(1) and (2)(c) occurred; (6) that use of trailers for improper purposes, rather than for their stated “particular purpose,” prevented recovery under implied warranty of fitness in UCC § 2-315; (7) that buyer could not recover for breach of express warranty under UCC § 2-313(1)(a) because it failed to prove that it had relied on statements in manufacturer-seller’s brochure either prior to or contemporaneously with making of parties’ contract; and (8) that since buyer had no right under UCC § 2-601(a) to reject two unused and undamaged trailers, manufacturer-seller was not required to retake them or to refund their purchase price to buyer. Global Truck & Equipment Co. v. Palmer Machine Works, Inc., 628 F. Supp. 641, 1986 U.S. Dist. LEXIS 29524 (N.D. Miss. 1986).

Where seller sold tractor and trailer units all over United States, selling about 1,000 trucks in good business year, and exported to countries, particularly Singapore, Malaysia, Mexico, and Central America, proof established that buyers and ultimate customers were likewise experienced in buying and selling dump-trailers and there utilization respectively, therefore seller, under 75-2-104 was merchant in that he customarily dealt in buying and selling of tractors. Global Truck & Equipment Co. v. Palmer Machine Works, Inc., 628 F. Supp. 641, 1986 U.S. Dist. LEXIS 29524 (N.D. Miss. 1986).

A provision in an agreement between plaintiff subcontractor and defendant general contractor set out in a letter sent by plaintiff to defendant whereby plaintiff, in confirming an oral agreement, stated that defendant would pay for all steel as billed in the event that defendant was not awarded a contract on a construction project, is, standing alone, a contract for the sale of goods. While defendant is not a steel merchant, since it is not in the business of buying and selling steel, defendant, like plaintiff, is nonetheless a “merchant” “having knowledge or skill peculiar to the practices or goods involved in the transaction” (Uniform Commercial Code, § 2-104, subd [1]) for purposes of the merchant exception to the Statute of Frauds, which makes an oral contract for the sale of goods between merchants enforceable against a party who receives written confirmation of the existing oral agreement and does not give “written notice of objection to its contents” within 10 days after it is received. (Uniform Commercial Code, § 2-201, subd [2].) Accordingly, based on all the evidence, defendant is bound by an oral agreement to purchase the steel from plaintiff. Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

In action for seller’s refusal to deliver corn and soybeans to buyer, evidence was sufficient to show that seller had held himself out, within meaning of UCC § 2-104(1), as having knowledge or skill peculiar to corn and soybeans, so as to constitute seller a “merchant” under exception to statute of frauds contained in UCC § 2-201(2). Currituck Grain, Inc. v. Powell, 38 N.C. App. 7, 246 S.E.2d 853, 1978 N.C. App. LEXIS 2072 (N.C. Ct. App. 1978).

Where buyer, on July 23, 1973, telephoned grain seller about buying wheat and seller said he might let buyer have 40,000 bushels, subject to buyer’s sending written confirmation of contract for seller’s approval; where such written confirmation, because of error by buyer, was sent to incorrect address and not received by seller until August 17, 1973; where seller, on July 31, 1973, informed buyer by phone that change should be made in contract, and buyer sent written confirmation of such change to incorrect address; and where seller, on August 21, 1973, wrote buyer that seller was repudiating contract because of provision in confirmation of contract giving buyer option to cancel, (1) buyer and seller were “merchants” under UCC § 2-104(1); (2) buyer’s written confirmation of contract, which seller did not receive until August 17, 1973, was not received within reasonable time under UCC § 2-201(2); (3) seller’s objection on August 21, 1973 to buyer’s confirmation of contract, because of clause giving buyer option to cancel agreement, was made within ten-day period prescribed by UCC § 2-201(2); and (4) seller never admitted existence of valid contract so as to permit its enforcement under UCC § 2-201(3)(b). Cargill, Inc. v. Stafford, 553 F.2d 1222, 1977 U.S. App. LEXIS 13658 (10th Cir. Colo. 1977).

Manufacturer which advertised in trade journals that it possessed expertise in field and would design conveyor-stacker equipment for use in a purchaser’s business was “merchant” under UCC § 2-104(1). Barney Machinery Co. v. Continental M.D.M., Inc., 434 F. Supp. 596, 1977 U.S. Dist. LEXIS 14903 (W.D. Pa. 1977).

Mere fact that lender accepted late payments from automobile purchaser on five different occasions did not operate as waiver of conditional sales contract provisions relating to timeliness of installment payments, in view of contract language to effect that waiver or indulgence of any default or failure to exercise any right under contract would not be construed as agreement to modify terms of instrument or to operate as waiver of any subsequent default, and particularly in view of fact that on one occasion purchaser obtained written 90-day extension of due date of note from lender; contract provision in question was not rendered inoperative by UCC § 2-209(2), even though contract provision was not separately set out and separately executed by borrower, since UCC provision applies only to merchants and there was no evidence in record that automobile purchaser was “merchant” as defined in UCC § 2-104(1). Trust Co. of Georgia v. Montgomery, 136 Ga. App. 742, 222 S.E.2d 196, 1975 Ga. App. LEXIS 1478 (Ga. Ct. App. 1975).

Lessor of car wash systems, which had handled over forty lease transactions within period of several months, was not “merchant” within meaning of UCC § 2-104, where it did not build, manufacture or sell any equipment or machines of kind involved in transaction, but rather was in business of purchasing or financing purchase of equipment specifically selected and specified by an approved lessee. All-States Leasing Co. v. Bass, 96 Idaho 873, 538 P.2d 1177, 1975 Ida. LEXIS 509 (Idaho 1975).

Where prior to sale in question defendants had sold all cattle they raised or fed to packers, sale to third defendant was first sale to non-packer and “was forced by financial difficulties,” and was dealing in different classification of stock than cow and calf for resale, defendants were not merchants under UCC, although third defendant, who was trader and bought and resold, and acted as agent for sales of cow and calf units, was well as steers, heifers, feeders, and other “goods,” was merchant. Fear Ranches, Inc. v. Berry, 470 F.2d 905, 1972 U.S. App. LEXIS 6252 (10th Cir. N.M. 1972).

One is not entitled to summary judgment as having bought goods free of any security interest because of purchase in ordinary course of business from merchant entrusted with goods under UCC §§ 2-403, 9-307, where status of seller as “merchant” has been assumed or concluded. Greater Southern Distributing Co. v. Usry, 124 Ga. App. 525, 184 S.E.2d 486, 1971 Ga. App. LEXIS 1004 (Ga. Ct. App. 1971).

Where plaintiff bought truck from a merchant in the ordinary course of business, without knowledge of a security agreement entered into by the seller and later assigned to a bank, in repossessing the truck after the sale, bank was liable for conversion and damages. Makransky v. Long Island Reo Truck Co., 58 Misc. 2d 338, 295 N.Y.S.2d 240, 1968 N.Y. Misc. LEXIS 1045 (N.Y. Sup. Ct. 1968).

When it is apparent from the record that both parties customarily dealt in the goods involved, it is clear that they are merchants. Reich v. Helen Harper, Inc. (N.Y. Civ. Ct. 1966).

A wholesaler and retailer, being clearly merchants as defined in this section, the requirement of subsection (2) is satisfied when the retailer receives invoices on the wholesaler’s letterhead stating the quantity and price terms of goods sold and sends no written objections within 10 days after their receipt. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

4. —Farmers as.

Court denied summary judgment on a Chapter 7 debtor’s claim that a creditor’s adversary proceeding alleging that the debtor owed a debt that was nondischargeable under 11 U.S.C.S. § 523 because he submitted a false financial statement to induce the creditor to extend credit was barred by the Mississippi Statute of Frauds, Miss. Code Ann. §75-2-201, because there were issues of fact concerning the question of whether the debtor, a farmer, was a “merchant” within the meaning of Miss. Code Ann. §75-2-104, and the amount of debt the debtor owed. In re Kent, 554 B.R. 131, 2016 Bankr. LEXIS 2626 (Bankr. N.D. Miss. 2016).

Farmers whose particular factual situation falls into the definition of merchant contained in §75-2-104 may be a merchant class. Vince v. Broome, 443 So. 2d 23, 1983 Miss. LEXIS 3054 (Miss. 1983).

The average farmer with no particular knowledge or experience in selling, buying, or dealing in future community transactions, who sells only the crops he raises to local elevators for cash or who places his grain in storage under one of the federal loan programs, is not a “merchant” within the meaning of the exception to the statute of frauds contained in UCC § 2-201(2). Although through training and years of experience, a farmer may well possess or acquire special knowledge, skill, and expertise in the production of grain crops, this does not make him a professional in business, within the meaning of UCC § 2-104(1) and Official Comments 1 and 2, who is equal in the marketplace with a grain-buying and selling company whose officers, agents, and employees are constantly conversant with the daily fluctuations in the commodity market, the many factors that affect that market, and its intricate practices and procedures. Terminal Grain Corp. v. Freeman, 270 N.W.2d 806, 1978 S.D. LEXIS 220 (S.D. 1978) (holding, in buyer’s action for farmer’s failure to deliver grain under oral contract of sale, that since farmer was not a “merchant” within meaning of exception to statute of frauds contained in UCC § 2-201(2) defense of statute of frauds set forth in UCC § 2-201(1) barred any recovery by buyer).

Farmer was merchant under UCC § 2-104 and thus came within “merchant exception” to UCC statute of frauds with respect to oral contract for delivery of soybeans where, inter alia, farmer had sold large quantities of corn, as well as smaller quantities of potatoes and soybeans under forward contracts for five or six years, where farmer had traded on Chicago Board Trade and kept up with market news, and where there was nothing to indicate that method of making forward contracts for corn differed in any respect from those for soybeans. Continental Grain Co. v. Harbach, 400 F. Supp. 695, 1975 U.S. Dist. LEXIS 16272 (N.D. Ill. 1975).

Sellers of soybeans, who breached oral agreement to deliver soybeans to plaintiff buyer, were “merchants” under UCC § 2-104(1) and were liable, under exception to statute of frauds contained in UCC § 2-201(2), for their breach of such oral agreement when they failed to object within ten days to buyer’s written confirmation of the oral contract where evidence showed that sellers, despite their contention that they were merely farmers and not merchants, (1) had acted in such a way as to cause others to believe that they had special knowledge and skill in grain dealing, (2) had advertised themselves as grain dealers, and (3) had, in addition to selling their own crops, bought crops of others and sold such crops to wholesalers. Cargill, Inc. v. Gaard, 84 Wis. 2d 138, 267 N.W.2d 22, 1978 Wisc. LEXIS 1077 (Wis. 1978).

In action for seller’s refusal to deliver corn and soybeans to buyer, evidence was sufficient to show that seller had held himself out, within meaning of UCC § 2-104(1), as having knowledge or skill peculiar to corn and soybeans, so as to constitute seller a “merchant” under exception to statute of frauds contained in UCC § 2-201(2). Currituck Grain, Inc. v. Powell, 38 N.C. App. 7, 246 S.E.2d 853, 1978 N.C. App. LEXIS 2072 (N.C. Ct. App. 1978).

Seller was not “merchant,” as defined by UCC § 2-104(1), with respect to sale of corn and therefore was not bound to oral contract under UCC § 2-201(2), even though buyer sent confirmation notice to seller following oral agreement, since seller was not in business of selling corn but, rather, conducted cattle feeding operation, growing grain for that purpose and selling grain only when it was surplus to cattle feeding needs. However, seller’s delivery of corn in approximate quantity called for in oral agreement, and its acceptance by buyer, constituted part performance under UCC § 2-201(3)(c) sufficient to take contract out of statute of frauds even though such conduct was consistent with making of spot sale at current market price. Gerner v. Vasby, 75 Wis. 2d 660, 250 N.W.2d 319, 1977 Wisc. LEXIS 1448 (Wis. 1977).

Where buyer of soybeans sent written confirmation of oral contract to farmer and where farmer sold no crops or livestock except those which he raised, had limited experience in selling crops and no other business experience, and had not done business previously with buyer, farmer-seller did not come within definition of merchant under UCC § 2-104 and thus was not subject to statute of frauds exception relating to transactions between merchants. Sand Seed Service, Inc. v. Poeckes, 249 N.W.2d 663, 1977 Iowa Sup. LEXIS 997 (Iowa 1977).

In action by grain buyer against farmer to recover damages for farmer’s failure to deliver corn and soybeans under alleged oral contract, farmer’s affidavit in support of his motion for summary judgment did not establish that he was casual or inexperienced seller in corn and soybeans, the “goods involved in the transaction,” thereby establishing that he was not a merchant and thus entitled to defense of statute of frauds, notwithstanding he received written confirmation of contract from buyer, where affidavit established farmer’s prior experience in trucking from 1960 to 1970, that he farmed during 1970, 1971 and 1974 and that one-half his gross income in 1971 and 1972 derived from livestock, but where affidavit did not establish whether farmer had ever negotiated with grain dealers prior to 1974, whether he had ever sold corn or soybeans previously, or whether he had knowledge of customs and practices peculiar to marketing of these grains. Currituck Grain, Inc. v. Powell, 28 N.C. App. 563, 222 S.E.2d 1, 1976 N.C. App. LEXIS 2756 (N.C. Ct. App. 1976).

Farmer who had been engaged in farming for 34 years, who had approximately 180 acres of corn and 150 acres of soybeans under cultivation, and who, for period of at least five years, had sold his crops to grain elevators both in “cash sales” and “future contracts” was “merchant” within meaning of UCC § 2-104(1); thus, written confirmations of two oral agreements for sale of soybeans, sent by buyers to farmer were sufficient under UCC § 2-201. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Written confirmation of oral contracts for sale of soybeans satisfied statute of frauds where experienced farmer who had sold grain for at least five years on both cash and future contracts bases was a merchant familiar with practices, customs, and usages of grain business and commodities market. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Oral contract for purchase and sale of cotton was unenforceable against cotton farmer under UCC § 2-201, notwithstanding farmer received written confirmation of contract from buyer and failed to make any objection thereto, since farmer was not “merchant” within meaning of UCC § 2-104; farmer does not solely by his occupation hold himself out as being professional cotton merchant within meaning of UCC § 2-104(2) and, although there was evidence that farmer was knowledgeable seller, there was no evidence that he ever sold anyone’s cotton but his own and this was not sufficient to make him dealer within meaning of UCC § 2-104(1). Loeb & Co. v. Schreiner, 294 Ala. 722, 321 So. 2d 199, 1975 Ala. LEXIS 1277 (Ala. 1975).

Farmers who regularly sold their crops to grain companies over period of several years were merchants within meaning of UCC § 2-104(1). Campbell v. Yokel, 20 Ill. App. 3d 702, 313 N.E.2d 628, 1974 Ill. App. LEXIS 2495 (Ill. App. Ct. 5th Dist. 1974).

A farmer is not a merchant as defined in subdivision (1) of this section; and the term “merchant” as there defined has its roots in the law merchant concept of a professional in business. Cook Grains, Inc. v. Fallis, 239 Ark. 962, 395 S.W.2d 555, 1965 Ark. LEXIS 1118 (Ark. 1965).

5. —Warranties.

Trial court erred in granting summary judgment in favor of a seller on the grounds that a seller was not a merchant, as a claim for a warranty of fitness did not require a merchant seller; appellate court affirmed the grant of summary judgment on other grounds however. Lacy v. Morrison, 906 So. 2d 126, 2004 Miss. App. LEXIS 1121 (Miss. Ct. App. 2004).

In action against sellers of used automobile and repairman to recover for personal injuries suffered by plaintiffs when they were struck by automobile while it was being driven by buyer, plaintiffs could not recover from sellers on theory that there was express warranty from sellers to buyer that automobile was free from defects, including defects from repair of automobile, since plaintiffs had no contract relation with sellers and were not within scope of UCC § 2-318; nor did they come within judicial exception to privity requirement inasmuch as sellers were neither merchants within meaning of UCC § 2-104(1), nor engaged in business of selling automobiles. Similarly, plaintiffs could not recover against repairman on breach of warranty theory, there being no privity of contract between plaintiff and repairman, and any warranties, express or implied, that repairman might have given sellers did not extend to plaintiffs. Lemley v. J & B Tire Co., 426 F. Supp. 1376, 1977 U.S. Dist. LEXIS 17140 (W.D. Pa. 1977).

Although seller was unfamiliar with “hoedads” (i.e., forestry tool used for planting seedling trees) and had not previously manufactured hoedad collars, seller did hold itself out, by operating foundry, as having skill in “practice” of casting iron and presumably in selection of materials to be used in manufacturing castings; inasmuch as transaction involved selection of type of metal appropriate for hoedad collars, seller was merchant within meaning of UCC § 2-104. Likewise, for purposes of UCC § 2-314, seller was merchant “with respect to goods of that kind,” i.e., castings, seller having in past assisted buyer in choosing particular type of metals to fulfil various tasks in its manufacture of castings. Furthermore, since ordinary purpose of custom-made castings depended on their designated use, since seller knew that castings were to join handle and blade in tree-planting impact tools which occasionally would strike rock but since castings were not fit for this purpose, warranty of merchantability was breached. Valley Iron & Steel Co. v. Thorin, 278 Ore. 103, 562 P.2d 1212, 1977 Ore. LEXIS 895 (Or. 1977).

Sale of repossessed boat by bank did not give rise to implied warranty of merchantability under UCC § 2-314 where there was no evidence that bank was “merchant” within meaning of UCC § 2-104(1), there being no evidence that bank dealt in kind of goods involved in transaction-boats-or that it held itself as having knowledge or skill peculiar to such goods, but rather record indicated sale of boat was no more than isolated transaction by bank; nor did sale give rise to implied warranty of fitness for particular purpose within UCC § 2-315, although buyer told bank officer he “was thinking about buying a boat to put into charter service” where there was no evidence that buyer relied upon bank’s skill or judgment, or that bank possessed such skill or judgment, that boat was fit for particular purpose of charter service use. Donald v. City Nat'l Bank, 295 Ala. 320, 329 So. 2d 92, 1976 Ala. LEXIS 1920 (Ala. 1976).

Manufacturer of blow-molded plastic products was “merchant” within meaning of UCC § 2-104(9) with respect to plastic wiglet cases, notwithstanding manufacturer produced variety of plastic goods, and wiglet cases produced by manufacturer were subject to implied warranty of merchantability. However, since allegedly defective handle housing walls were result of specifications supplied by distributor that ordered cases and since distributor, who was informed buyer who designed product in issue and held mechanical and design patents covering similar cases, examined 15 pre-production cases, inspecting handles and handle housing by lifting cases and shaking them, any implied warranty of merchantability with respect to handle housings was precluded. Blockhead, Inc. v. Plastic Forming Co., 402 F. Supp. 1017, 1975 U.S. Dist. LEXIS 15501 (D. Conn. 1975).

In action for breach of implied warranty of merchantability, brought against installer of home heating and air conditioning system for damages resulting from failure of condensate removal pump to function properly, jury question was presented on issue whether installer was “merchant” within meaning of UCC § 1-104 and UCC § 2-314; fact that installer testified knowledgeably about workings and installation of condensate pumps and that he had recommended that a particular pump be installed in system, supported inference that he had installed and sold other pumps during his years in heating and air conditioning business, but also supported inference that condensate pump sale in question was only one that he had ever made. Storey v. Day Heating & Air Conditioning Co., 56 Ala. App. 81, 319 So. 2d 279, 1975 Ala. Civ. App. LEXIS 485 (Ala. Civ. App. 1975).

Farmer was merchant within UCC § 2-104 definition in that he was professional in business of growing and selling crops he raised, his livelihood depended on expertise with which he sold, as well as raised, crops and to that end he stayed informed as to market prices and was knowledgeable in business of selling; thus, he was bound by oral contract for sale of wheat where he received written confirmation of contract from buyer and did not give written objection to any of its terms within ten days of receipt as provided by UCC § 2-201(2). Nelson v. Union Equity Coop. Exchange, 548 S.W.2d 352, 1977 Tex. LEXIS 221 (Tex. 1977).

Since seller of used airplane was not merchant as defined in Code § 2-104, there could be no implied warranties attributed to him in sale of airplane. Downs v. Shouse, 18 Ariz. App. 225, 501 P.2d 401, 1972 Ariz. App. LEXIS 832 (Ariz. Ct. App. 1972).

6. Financing agency.

Equipment lease transactions were security agreements under UCC § 1-201(37), and leasing corporation was “financing agency” and not seller of equipment under UCC § 2-104(2), where persons desirous of purchasing equipment or machinery applied to corporation for purchase money loan, corporation made commitments to advance money necessary for payment to manufacturer plus sales tax, equipment was shipped by manufacturer directly to purchaser and invoice was sent to corporation, purchaser and corporation thereupon entered into security agreements in form of equipment leases with options to purchase at nominal extra charge, UCC financing statements were thereupon executed and delivered to purchaser and filed by corporation, corporation did not select or inspect any equipment, corporation did not maintain warehouse for storage of equipment or machinery, corporation did not carry leased property as assets on books or take any depreciation deductions, and corporation never took possession of any of leased equipment at end of leased term. In re Sherwood Diversified Services, Inc., 382 F. Supp. 1359, 1974 U.S. Dist. LEXIS 6442 (S.D.N.Y. 1974).

7. Between merchants.

In action by subcontractor against general contractor based on oral agreement that defendant would be liable for steel purchased by plaintiff for construction project that ultimately was not awarded to defendant, court held (1) that while defendant was not a steel merchant because it was not in business of buying and selling steel, it nevertheless was a “merchant” under broad language of UCC § 2-104(1) and (3); and (2) that as a result, merchants’ exception in UCC § 2-201(2) to statute of frauds applied and removed oral contract sued on from operation of the statute, since plaintiff had sent letter to defendant confirming parties’ oral agreement, such letter was received by defendant, and defendant had failed to give plaintiff, within ten days of receipt of letter, written notice of defendant’s objection to letter’s contents, as required by UCC § 2-201(2). Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

Experienced farmer, who previously sold soy beans, kept abreast of soy bean market, and sold livestock and other farm products from time to time, was “chargeable with the knowledge or skill of merchants” referred to UCC § 2-104(3) in selling his current crop of soy beans; thus, where he offered to sell 1,500 bushels of soy beans for $5 per bushel in cash, and purchaser orally accepted offer and immediately sent him written confirmation, stating terms and standards to be met, and providing that failure to make timely correction was acknowledgement and acceptance of contract as stated, and farmer made no response but sold his soy beans to another, he was liable to purchaser for damages suffered from his breach of the contract. Ohio Grain Co. v. Swisshelm, 40 Ohio App. 2d 203, 69 Ohio Op. 2d 192, 318 N.E.2d 428, 1973 Ohio App. LEXIS 1486 (Ohio Ct. App., Greene County 1973).

Where plaintiff automobile dealer sold car to second dealer who in turn sold car to defendant buyer, who 15 years previously had had experience as automobile dealer, transaction was not “between merchants” as contemplated by Code § 2-104(3), so as to charge buyer with “knowledge or skill of merchants”; and, although buyer accepted automobile without instrument of title as required by Motor Vehicle Title and Registration Law, and accepted new automobile from non-franchised dealer without receiving manufacturer’s certificate of origin to that vehicle, buyer took title to car free from plaintiff dealer’s claim, under Code § 2-403(2) and (3). Couch v. Cockroft, 490 S.W.2d 713, 1972 Tenn. App. LEXIS 317 (Tenn. Ct. App. 1972).

§ 75-2-105. Definitions: transferability; “goods”; “future” goods; “lot”; “commercial unit.”

  1. “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Chapter 8) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107) [Section 75-2-107].
  2. Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.
  3. There may be a sale of a part interest in existing identified goods.
  4. An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof 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.
  5. “Lot” means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
  6. “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

HISTORY: Codes, 1942, § 41A:2-105; Laws, 1966, ch. 316, § 2-105, eff March 31, 1968.

Cross References —

General definitions, see §§75-1-201,75-1-202,75-41-203,75-1-204,75-1-206.

Goods to be severed from realty, see §75-2-107.

Statute of frauds, see §75-2-201.

Special property and insurable interest in existing and future goods, see §75-2-501.

Investment securities, see §75-8-101 et seq.

RESEARCH REFERENCES

ALR.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

What constitutes “goods” within scope of UCC Article 2. 4 A.L.R.4th 912.

Applicability of UCC Article 2 to mixed contracts for sale of goods and services. 5 A.L.R.4th 501.

Acceptance of some “commercial units” of goods purchased under UCC § 2-601(c). 41 A.L.R.4th 396.

Am. Jur.

67 Am. Jur. 2d, Sales §§ 27, 40, 57, 221 et seq.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:3. (Answer; defense; contract for sale of investment securities not within Commercial Code provisions relating to sales).

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:4. (Instruction to jury; “goods” as including growing crops).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 2 – Sales, § 253:194 et seq. (Goods and units).

2 Am Law Prod Liab 3d, Warranty Remedies § 18:15.

CJS.

77A C.J.S., Sales §§ 3, 11, 15, 19, 29

JUDICIAL DECISIONS

1. In general.

2. Goods.

3. Particular property as constituting goods.

4. —Aircraft and watercraft.

5. —Assets included in sale of business.

6. —Crops.

7. —Electricity.

8. —Mobile homes and modular home units.

9. Future goods.

10. Contracts for goods and services.

11. Commercial unit.

12. Insurance contracts.

1. In general.

Under the Uniform Commercial Code as adopted in Pennsylvania there is no requirement that a contract be evidenced by a single instrument, and if the parties wish, they may express their agreement in more than one writing, and in such circumstances the several documents are to be interpreted together, each one contributing, to the extent of its worth, to the ascertainment of the true intent of the parties, and this rule was held applicable to an agreement for the sale of securities. Stern & Co. v. State Loan & Finance Corp., 238 F. Supp. 901, 1965 U.S. Dist. LEXIS 9390 (D. Del. 1965).

The instant section was referred to in a case involving an agreement for the purchase and sale of an airplane and an oral modification of such contract, in connection with the proposition that both the original contract and the modifications would, by virtue of § 2-102 of the instant chapter be governed by article 2 thereof. Skinner v. Tober Foreign Motors, Inc., 345 Mass. 429, 187 N.E.2d 669, 1963 Mass. LEXIS 684 (Mass. 1963).

The sales article of the Commercial Code does not apply to an agreement for the purchase and sale of the capital stock of a corporation. In re Carter, 390 Pa. 365, 134 A.2d 908, 1957 Pa. LEXIS 291 (Pa. 1957).

2. Goods.

In borrowers’ suit alleging fraudulent loan transactions, the borrowers’ unconscionability claims were not viable, because the sale of insurance did not fit within the ambit of what could be considered “goods” as defined in the Uniform Commercial Code (UCC) and unconscionability under the UCC was applicable only within the context of a sale of goods. Ross v. First Family Fin. Servs., Inc., 2002 U.S. Dist. LEXIS 23212 (N.D. Miss. Aug. 26, 2002).

Since UCC does not distinguish between new and used goods, implied warranty of merchantability applies to sale of used motor vehicle. Beck Enterprises, Inc. v. Hester, 512 So. 2d 672, 1987 Miss. LEXIS 2712 (Miss. 1987).

Under UCC § 2-105(1), term “goods” has a very extensive meaning and embraces every species of property which is not real estate, choses in action, investment securities, or the like. Duffee v. Judson, 251 Pa. Super. 406, 380 A.2d 843, 1977 Pa. Super. LEXIS 2915 (Pa. Super. Ct. 1977).

Where materials manufactured by seller were sent from seller’s plant to dam site, materials constituted goods under definition of UCC § 2-105(1) in that they were movable at time of identification to contract; thus, transaction was governed by UCC article 2. Lakeside Bridge & Steel Co. v. Mountain State Constr. Co., 400 F. Supp. 273, 1975 U.S. Dist. LEXIS 16360 (E.D. Wis. 1975).

Statute relating to identification of specific goods before interest in goods passes does not by any means forbid sale of fungible goods without specific identification. Quality Fruit Buyers, Inc. v. Killarney Fruit Co., 269 So. 2d 424, 1972 Fla. App. LEXIS 5898 (Fla. Dist. Ct. App. 2d Dist. 1972).

Application of UCC is limited to all things which are movable or severable from realty; UCC does not apply to lumber, bricks, cement and other like building materials unless resultant structure remains personalty. Vernali v. Centrella, 28 Conn. Supp. 476, 266 A.2d 200, 1970 Conn. Super. LEXIS 114 (Conn. Super. Ct. 1970).

“Goods” has a very extensive meaning and embraces every species of property which is not real estate, except, perhaps, choses in action, investment securities, and the like. Buckley v. New York Post Corp., 260 F. Supp. 282, 1966 U.S. Dist. LEXIS 7312 (D. Conn. 1966), rev'd, 373 F.2d 175, 1967 U.S. App. LEXIS 7820 (2d Cir. Conn. 1967).

3. Particular property as constituting goods.

UCC applies to sales of natural gas, and therefore governs sales contract between oil company and royalty owners in certain Mississippi oil and gas leases; in action by royalty owners seeking unrecovered payments from oil company under leases, gas underground is future goods pursuant to §75-2-105, and thus no particular gas is sold until it is identified or brought to surface; accordingly, under §75-2-107(1), contracts are contracts to sell and only become effective as sales when gas is severed from land; where sales contract itself provides that title to gas passes when gas is delivered, gas was not sold until it was produced, and accordingly, basis of royalty should be market value at well at time of production and delivery. Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225, 1984 U.S. App. LEXIS 24696 (5th Cir. Miss. 1984), cert. denied, 471 U.S. 1005, 105 S. Ct. 1868, 85 L. Ed. 2d 161, 1985 U.S. LEXIS 244 (U.S. 1985).

Livestock are “goods” within the meaning of §75-2-105, and are covered under the law governing commercial transactions. Vince v. Broome, 443 So. 2d 23, 1983 Miss. LEXIS 3054 (Miss. 1983).

Timber, whether cut or to be cut, falls within the definition of “goods” contained in §75-2-105(1), and by virtue of §75-2-107(2), the Sales Article of the Mississippi Uniform Commercial Code expressly applies to timber sales. Bay Springs Forest Products, Inc. v. Wade, 435 So. 2d 690, 1983 Miss. LEXIS 2780 (Miss. 1983).

Computer hardware and softwear package agreement, under which defendant was to install completed system and train plaintiff’s employees in its use, whereupon plaintiff would take over complete supervision of system, was agreement for sale of “goods” rather than “services.” Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765, 1978 U.S. Dist. LEXIS 15483 (E.D.N.Y. 1978), aff'd in part and rev'd in part, 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

In action for seller’s breach of contract to sell investment securities that buyer had contracted to resell to third person, which breach caused buyer to make “cover” purchase of other securities to effect such resale, court held (1) that although UCC Art 8 contains no provision for buyer’s remedies against seller for breach of contract to purchase securities, and although UCC § 2-105(1) expressly excludes investment securities from definition of “goods” for purposes of UCC Art 2, nevertheless, as indicated by Official Comment 1 to UCC § 2-105, buyer’s remedies in Art 2 for breach of contract also apply by analogy to investment security transactions; (2) that under UCC § 2-712(2), buyer was entitled to recover as damages difference between cost of cover and contract price of securities in suit, plus incidental and consequential damages; and (3) that benefits that had accrued to buyer as result of its trading of its interest in securities in suit before seller’s breach were not relevant to buyer’s measure of damages for such breach. G. A. Thompson & Co. v. Wendell J. Miller Mortg. Co., 457 F. Supp. 996, 1978 U.S. Dist. LEXIS 14990 (S.D.N.Y. 1978).

In action to recover amount paid to travel bureau for arranging itinerary and supplying tour for African safari, which plaintiff was unable to take because of defendant’s failure to supply tour operator with plaintiff’s overseas address while plaintiff was on business trip prior to time tour was to start, defense contention that plaintiff had merely purchased tickets for trip, and that tickets were goods or “things” within meaning of UCC § 2-105(1), was not sustainable because plaintiff had actually contracted for trip and defendant’s services as travel agent, instead of only goods or things, and Uniform Commercial Code was therefore inapplicable. Rosen v. De Porter-Butterworth Tours, Inc., 62 Ill. App. 3d 762, 19 Ill. Dec. 743, 379 N.E.2d 407, 1978 Ill. App. LEXIS 3068 (Ill. App. Ct. 3d Dist. 1978).

Bridge design plans were not “goods” as defined in UCC § 2-105(1), and, thus, implied warranty provisions of Uniform Commercial Code §§ 2-314 and 2-315, did not apply to cause of action based on defect in plans. Department of Transp. v. Bethlehem Steel Corp., 28 Pa. Commw. 214, 368 A.2d 888, 1977 Pa. Commw. LEXIS 640 (Pa. Commw. Ct. 1977).

In action by feed company on installment sales contracts and security agreements providing for loan to enable defendant to purchase two hog-feeder houses from plaintiff’s alleged agent, where houses were defective because they caused pigs placed therein for fattening to become sick and to die, and where plaintiff claimed that it merely financed purchase of such houses and did not sell them to defendant, (1) evidence supported finding that plaintiff’s alleged agent was its agent in fact and that plaintiff was bound by agent’s acts, including agent’s sale of hog houses to defendant; (2) fact that plaintiff acted as financing agency in defendant’s purchase of such houses did not preclude finding that plaintiff was also seller of such houses; (3) houses were goods within meaning of UCC § 2-105(1); (4) defendant, by affirmative defense incorporated by reference in counterclaim, gave plaintiff notice of breach of implied warranty of fitness of goods for particular purpose, which notice was required by UCC § 2-607(3)(a); and (5) whether such implied warranty of fitness, which was in force at time of sale, was breached by plaintiff was question of fact to be determined by trial court on remand of case. Thompson Farms, Inc. v. Corno Feed Products, Div. of Nat'l Oats Co., 173 Ind. App. 682, 366 N.E.2d 3, 1977 Ind. App. LEXIS 921 (Ind. Ct. App. 1977).

Notwithstanding contract specified that buyer had thirty days to inspect fabricated pipe, which constituted goods within meaning of UCC § 2-105, trial court erred in holding buyer’s performance bond liable by reason of buyer’s failure to reject allegedly defective pipe within thirty days of delivery: (1) under UCC § 2-607, buyer was required to notify seller of breach of warranty within a reasonable time after actual or constructive discovery of defects; (2) UCC § 1-204 provides that whenever UCC requires action within reasonable time, any time which is not manifestly unreasonable may be fixed by agreement; (3) seller guaranteed workmanship and material in contract provided claim was made within one year from shipment; and (4) buyer made claim within one year following shipment. United States Fidelity & Guaranty Co. v. North American Steel Corp., 335 So. 2d 18, 1976 Fla. App. LEXIS 13850 (Fla. Dist. Ct. App. 2d Dist. 1976).

Plaintiff who contracted to compile, edit and publish pamphlets and other printed materials for defendants was entitled to benefit of four year statute of limitations under UCC § 2-725, since printed pamphlets and related materials were goods within meaning of UCC § 2-105(1) and since UCC statute of limitations prevailed over general statute of limitations in action based on contract for sale of goods. Lake Wales Publishing Co. v. Florida Visitor, Inc., 335 So. 2d 335, 1976 Fla. App. LEXIS 13871 (Fla. Dist. Ct. App. 2d Dist. 1976).

Question of law was presented on issue of whether water supplied to customer was “goods” within meaning of UCC. Moody v. City of Galveston, 524 S.W.2d 583 (Tex. Civ. App. 1975), ref. n.r.e (Nov. 5, 1975).

Installed sauna heater described in bill of sale as personal property remained “goods” within meaning of UCC § 2-105 where intention to make sauna heater a fixture constituting a permanent accession to real estate did not affirmatively and plainly appear. Centennial Ins. Co. v. Vic Tanny International, Inc., 46 Ohio App. 2d 137, 75 Ohio Op. 2d 115, 346 N.E.2d 330, 1975 Ohio App. LEXIS 5838 (Ohio Ct. App., Lucas County 1975).

Purchase of horse, apparently for recreational use, was covered by UCC Article 2 even though it was possibly casual sale. Key v. Bagen, 136 Ga. App. 373, 221 S.E.2d 234, 1975 Ga. App. LEXIS 1355 (Ga. Ct. App. 1975).

Definition of “goods” in UCC § 2-105(1) clearly excludes interests of oil and gas lessee. Casper v. Neubert, 489 F.2d 543, 1973 U.S. App. LEXIS 6391 (10th Cir. Okla. 1973).

Contract for sale of cordwood business, including hardwood stumpage growing on defendant’s land and certain equipment used in cutting and hauling wood, was transaction in “goods” governed by Sales Article of UCC, even though written contract was headed “Sale of Wood Business.” Melms v. Mitchell, 266 Ore. 208, 512 P.2d 1336, 1973 Ore. LEXIS 348 (Or. 1973).

Where plaintiff raised sod on several prior occasions and apparently treated it as commercial product, and sod owed its existence to annual maintenance and fertilization, sod was personalty, and sale of sod was within coverage of UCC. Barron v. Edwards, 45 Mich. App. 210, 206 N.W.2d 508, 1973 Mich. App. LEXIS 1077 (Mich. Ct. App. 1973).

Although UCC § 2-105(1) defines “goods” as excluding investment securities, the New York courts, nevertheless, have held that Article 2 applies to the sale of securities. Bache & Co. v. International Controls Corp., 339 F. Supp. 341, 1972 U.S. Dist. LEXIS 15240 (S.D.N.Y.), aff'd, 469 F.2d 696, 1972 U.S. App. LEXIS 6259 (2d Cir. N.Y. 1972).

Investment securities are expressly excluded from Sales Article of UCC. Lineberger v. Welsh, 290 A.2d 847, 1972 Del. Ch. LEXIS 123 (Del. Ch. 1972).

Bareboat charter for period of 18 months is not sale as defined in UCC, and is not kind of lease which has been held to come within Code as “analogous” to sale. Neubros Corp. v. Northwestern Nat'l Ins. Co., 359 F. Supp. 310, 1972 U.S. Dist. LEXIS 11540 (E.D.N.Y. 1972).

The sale of photographs is the sale of “goods” within UCC § 2-105. Carpel v. Saget Studios, Inc., 326 F. Supp. 1331, 1971 U.S. Dist. LEXIS 13509 (E.D. Pa. 1971).

Shares of cooperative stock relative to proprietary lease are “goods” within UCC § 2-105 definition. Silverman v. Alcoa Plaza Associates, 37 A.D.2d 166, 323 N.Y.S.2d 39, 1971 N.Y. App. Div. LEXIS 3573 (N.Y. App. Div. 1st Dep't 1971).

Milk comes within Code definition of “goods”. Spiering v. Fairmont Foods Co., 424 F.2d 337, 1970 U.S. App. LEXIS 10151 (7th Cir. Ill. 1970).

Compressor, included among sold chattels located on railroad premises, was within goods definition since “movable at the time of identification to the contract for sale.” National Compressor Corp. v. Carrow, 417 F.2d 97, 1969 U.S. App. LEXIS 10293 (8th Cir. Mo. 1969).

When a blood bank sells blood to a hospital for its use in treating patients there is a sale within Article 2 of the Code. Jackson v. Muhlenberg Hospital, 96 N.J. Super. 314, 232 A.2d 879, 1967 N.J. Super. LEXIS 491 (Law Div. 1967), rev'd, 53 N.J. 138, 249 A.2d 65, 1969 N.J. LEXIS 234 (N.J. 1969).

United States coins having a numismatic value in excess of the value expressed on their face and pledged as collateral to secure a bank loan are to be considered as “goods” within the meaning of the UCC, and not solely as a medium of exchange. In re Midas Coin Co., 264 F. Supp. 193, 1967 U.S. Dist. LEXIS 11603 (E.D. Mo. 1967), aff'd, 387 F.2d 118, 1968 U.S. App. LEXIS 8563 (8th Cir. Mo. 1968).

If the intent of the parties is to treat a diner as personal property it will be governed by Article 2 of the Code. Conte v. Styli, 26 Mass. App. Dec. 73.

4. —Aircraft and watercraft.

An aircraft is “goods” under UCC § 2-105(1). McCollum Aviation, Inc. v. CIM Associates, Inc., 446 F. Supp. 511, 1978 U.S. Dist. LEXIS 20034 (S.D. Fla. 1978).

Ships are “goods” within meaning of UCC § 2-105(1). Puamier v. Barge BT 1793, 395 F. Supp. 1019, 1974 U.S. Dist. LEXIS 5699 (E.D. Va. 1974).

Ships are “goods” within meaning of UCC § 2-105(1); thus, UCC § 2-401 governed passage of title in connection with sale of tugboat and barge where tugboat and barge were to be delivered at boatyard where they were moored and title passed under UCC § 2-401(3)(b) at time when contract for sale was made. Puamier v. Barge BT 1793, 395 F. Supp. 1019, 1974 U.S. Dist. LEXIS 5699 (E.D. Va. 1974).

Ships are “goods” within meaning of Sales Article of UCC. R. C. Craig, Ltd. v. Ships of the Sea, Inc., 345 F. Supp. 1066, 1972 U.S. Dist. LEXIS 12788 (S.D. Ga. 1972).

Aircraft is movable property and therefore subject to UCC Article 2 under UCC § 2-105 definition of goods. Kiecker v. Pacific Indem. Co., 5 Wn. App. 871, 491 P.2d 244, 1971 Wash. App. LEXIS 1136 (Wash. Ct. App. 1971).

5. —Assets included in sale of business.

Alleged contract for transfer of assets of automobile dealership including, inter alia, parts, work in progress, vehicles, receivables and contracts covering services, was sale of goods within meaning of UCC § 2-105, notwithstanding some of the assets to be transferred were not goods within meaning of that provision. De Filippo v. Ford Motor Co., 516 F.2d 1313, 1975 U.S. App. LEXIS 14762 (3d Cir. Pa.), cert. denied, 423 U.S. 912, 96 S. Ct. 216, 46 L. Ed. 2d 141, 1975 U.S. LEXIS 3044 (U.S. 1975).

Oral contract for sale of automobile dealership was unenforceable under UCC § 2-105 where its subject matter included goods worth more than $500; fact that seller substituted written offer to sell for signing by parties, instead of contract for sale, did not remove transaction from Statute of Frauds where seller did not intentionally fail to disclose that document buyers were signing had been changed to offer. De Filippo v. Ford Motor Co., 378 F. Supp. 456, 1974 U.S. Dist. LEXIS 8082 (E.D. Pa. 1974), rev'd, 516 F.2d 1313, 1975 U.S. App. LEXIS 14762 (3d Cir. Pa. 1975).

In action arising out of sale of sporting goods business, sale of inventory as part of transaction amounted to sale of “goods” under UCC § 2-105(1) and UCC § 2-607(3)(a) requirement that buyer must within reasonable time notify seller of breach, governed buyer’s claim, made 14 months after sale, that seller had fraudulently overstated inventory. Jarstad v. Tacoma Outdoor Recreation, Inc., 10 Wn. App. 551, 519 P.2d 278, 1974 Wash. App. LEXIS 1469 (Wash. Ct. App. 1974).

Sale of laundry and drycleaning business which was nothing more than sale of equipment, furniture, and other movables of business and which did not involve non-goods such as goodwill or real property, was a transaction in goods and came within scope of Article 2 of UCC; thus, where buyer breached contract to purchase laundry and drycleaning business and seller elected to resell business at private sale, but failed to give buyer notice of intention to resell, of time, place and manner of resale or of seller’s intention to sue buyer for difference between contract price and amount ultimately realized on resale, seller was not entitled to recover difference between resale price and contract price as provided in UCC § 2-706, but was entitled to measure of damages prescribed by UCC § 2-708(1). Miller v. Belk, 23 N.C. App. 1, 207 S.E.2d 792, 1974 N.C. App. LEXIS 1997 (N.C. Ct. App. 1974).

Office equipment and furniture of a radio station are goods governed by the Code even though the entire radio station and all of its assets are sold as a going concern. Foster v. Colorado Radio Corp., 381 F.2d 222, 1967 U.S. App. LEXIS 5719 (10th Cir. N.M. 1967).

The license, good will, real estate, studios, and transmission equipment of a radio station are not goods within Article 2. Foster v. Colorado Radio Corp., 381 F.2d 222, 1967 U.S. App. LEXIS 5719 (10th Cir. N.M. 1967).

6. —Crops.

Crops are included within definition of “goods” in UCC § 2-105(1). Kimball County Grain Cooperative v. Yung, 200 Neb. 233, 263 N.W.2d 818, 1978 Neb. LEXIS 676 (Neb. 1978).

Although statute of frauds under UCC § 2-201 was applicable to contract for sale of soybeans which constituted goods within meaning of UCC § 2-105 and also constituted under UCC § 2-107 growing crops capable of severance, seller was prohibited from asserting statute of frauds as defense in action on contract where seller admitted that contract was made. Cargill, Inc., Commodity Marketing Div. v. Hale, 537 S.W.2d 667, 1976 Mo. App. LEXIS 2079 (Mo. Ct. App. 1976).

Where plaintiff entered into oral contracts with defendant cotton growers for sale of their cotton crops, each involving more than $500 worth of cotton: (1) under UCC §§ 2-105 and 2-107, sale of cotton was sale of goods and, under UCC § 1-201, was not enforceable unless there was writing sufficient to indicate contract for sale had been made, signed by party against whom enforcement was sought; (2) oral contracts between plaintiff and defendants did not come within agency or broker exception to statute of frauds where there were two separate, independent sets of contracts under which defendants agreed to sell to plaintiff, and plaintiff independently contracted to sell to mills; (3) although exception to statute of frauds exists under UCC § 2-201(3)(b) if party against whom enforcement is sought admits in his pleadings, testimony or otherwise in court that contract for sale was made, such exception did not apply in present case since defendants denied under oath that agreement for sale was made with plaintiff and, although trial court made credibility determination adverse to defendants’ testimony, such finding did not constitute finding that “admission” exception applied; (4) defendants were not estopped to assert defense of statute of frauds merely because plaintiff had acted in reliance on oral agreement. Cox v. Cox, 292 Ala. 106, 289 So. 2d 609, 1974 Ala. LEXIS 1027 (Ala. 1974).

7. —Electricity.

Electricity is “goods”, so that 4-year limitations statute of UCC § 2-725 applies to action to recover for damages to electric appliances from supply of excessive voltage. Helvey v. Wabash County REMC, 151 Ind. App. 176, 278 N.E.2d 608, 1972 Ind. App. LEXIS 823 (Ind. Ct. App. 1972).

Electricity is not a “good” as defined by UCC § 2-105. Buckeye Union Fire Ins. Co. v. Detroit Edison Co., 38 Mich. App. 325, 196 N.W.2d 316, 1972 Mich. App. LEXIS 1652 (Mich. Ct. App. 1972).

8. —Mobile homes and modular home units.

Mobile home that was movable and not permanently affixed to foundation at time of its identification to contract of sale was included within definition of “goods” contained in UCC § 2-105(1). Duffee v. Judson, 251 Pa. Super. 406, 380 A.2d 843, 1977 Pa. Super. LEXIS 2915 (Pa. Super. Ct. 1977).

Acquisition of ownership of motor vehicle is governed by Ohio UCC Art 2 on sales, and not Ohio Certificate of Motor Vehicle Title Act, because motor vehicles and house trailers fall within definition of “goods” contained in Ohio UCC § 2-105(1). Fuqua Homes, Inc. v. Evanston Bldg. & Loan Co., 52 Ohio App. 2d 399, 6 Ohio Op. 3d 440, 370 N.E.2d 780, 1977 Ohio App. LEXIS 6968 (Ohio Ct. App., Hamilton County 1977) (observing that although perfection of security interest in motor vehicle is governed by Ohio UCC Art 9, plaintiff was asserting ownership interest, and not security interest, in trailer involved in suit).

Modular home units, which were movable at time of sale to buyer and until their subsequent assembly and installation on realty for use as house, were “goods” within meaning of Ohio UCC § 2-105(1). Fuqua Homes, Inc. v. Evanston Bldg. & Loan Co., 52 Ohio App. 2d 399, 6 Ohio Op. 3d 440, 370 N.E.2d 780, 1977 Ohio App. LEXIS 6968 (Ohio Ct. App., Hamilton County 1977).

In action by manufacturer of mobile home against dealer and purchaser of unit arising when dealer failed to pay manufacturer purchase price, mobile home fell within definition of “goods” under UCC § 2-105 and purchaser was entitled to protection from manufacturer’s claim under UCC § 9-307(a) where purchaser, who took title from merchant entrusted with goods under UCC §§ 2-401 and 2-403, qualified as buyer in ordinary course of business under UCC § 1-201(9), notwithstanding purchaser’s failure to request certificate of title of purchase. Apeco Corp. v. Bishop Mobile Homes, Inc., 506 S.W.2d 711 (Tex. Civ. App. 1974), writ ref’d n.r.e., (June 12, 1974).

The Special Term was in error in holding that a mobile home was consumer goods and not a motor vehicle within the meaning of UCC § 9-302, which requires that a financing statement must be filed to perfect a security interest therein. Recchio v. Manufacturers & Traders Trust Co., 35 A.D.2d 769, 316 N.Y.S.2d 915, 1970 N.Y. App. Div. LEXIS 3635 (N.Y. App. Div. 4th Dep't 1970).

9. Future goods.

In action by seller of one million gallon water tank against buyer for repudiation of sales contract, in which buyer counterclaimed for breach of contract, water tank constituted goods within meaning of UCC § 2-105(1) even though tank was not in existence when contract was executed. However, under sales contract which required payment 30 days after completion of tank, knowledge by seller that buyer had not completed loan negotiations were not “reasonable grounds for insecurity” within meaning of UCC § 2-609 justifying seller’s demand of buyer for personal guarantee or for escrow of entire purchase price. Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532 F.2d 572, 1976 U.S. App. LEXIS 12612 (7th Cir. Ill. 1976).

Where cotton farmer entered into contract with cotton merchants to sell cotton crop to be produced on 800 acres, where farmer was obligated by terms of lease to pay one-fourth of his cotton crop as rent, and where as result of flood conditions farmer was only able to plant 717 acres rather than expected 1066 acres, cotton merchants were entitled to whole crop and lessor’s remedies, if any, were against lessee; when read together UCC §§ 2-102, 2-105 and 2-107 indicated that forward contracts for sale of yet to be grown cotton fell within § 2-402(1) which subordinates rights of seller’s unsecured creditors in subject matter to those of buyer. Ralli-Coney, Inc. v. Gates, 528 F.2d 572, 1976 U.S. App. LEXIS 12420 (5th Cir. Miss. 1976).

Transactions in crops are within scope of UCC, and contracts for future delivery of crops, whether or not presently planted, are contemplated. R. N. Kelly Cotton Merchant, Inc. v. York, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Contract for sale of unplanted cotton crop was valid contract for sale of goods for future delivery under UCC § 2-105(2) notwithstanding goods were not in existence at time of execution of contract. Cone Mills Corp. v. A. G. Estes, Inc., 377 F. Supp. 222, 1974 U.S. Dist. LEXIS 9220 (N.D. Ga. 1974).

Contract to sell future cotton crop was sale of goods within scope of Article 2 of UCC. R. N. Kelly Cotton Merchant, Inc. v. York, 379 F. Supp. 1075, 1973 U.S. Dist. LEXIS 11445 (M.D. Ga. 1973), aff'd, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Contract for sale of crop was not invalid merely because contract was executed before crop in question was planted. Mitchell--Huntley Cotton Co. v. Lawson, 377 F. Supp. 661, 1973 U.S. Dist. LEXIS 10836 (M.D. Ga. 1973).

10. Contracts for goods and services.

In action to enforce oral agreement by subcontractor to provide and install school lockers, chalkboards and tack boards, where quoted price did not distinguish between cost of goods supplied and installation charges, subcontractor did not sustain his burden of proving that service aspect of contract was merely incidental to sale of goods aspect, as defined in UCC §§ 2-106(1) and 2-105, and, thus, he failed to sustain his burden of proving that UCC § 2-201 statute of frauds was applicable to contract and barred its enforcement. Glover School & Office Equipment Co. v. Dave Hall, Inc., 372 A.2d 221, 1977 Del. Super. LEXIS 99 (Del. Super. Ct. 1977).

Where contract for purchase and installation of prefabricated overhead doors charged lump sum for equipment and installation making it a nondivisible mixed contract, contract was for sale of goods as defined in UCC § 2-105 as service element did not dominate subject matter even though overhead doors were useless without performance of installation services; thus UCC statute of limitations governed. Meyers v. Henderson Constr. Co., 147 N.J. Super. 77, 370 A.2d 547, 1977 N.J. Super. LEXIS 662 (Law Div. 1977).

Sod, trees and shrubs sold by nurseryman were goods within meaning of UCC § 2-105(1); thus, contract for sale and installation of trees and shrubs and sale and placing of substantial amount of sod was contract for sale of goods governed by four-year statute of limitations contained in UCC § 2-725(1), notwithstanding contract in question also involved rendering of substantial amount of services. Burton v. Artery Co., 279 Md. 94, 367 A.2d 935, 1977 Md. LEXIS 886 (Md. 1977).

Where design services which steel supplier provided under contract were incidental to basic purpose of contract, which was provision of structural steel to be used in construction of container handling facility, essence of transaction was sale of goods and supplier’s action for breach of contract was barred by 4-year statute of limitations of UCC § 2-725; fact that specially designed product to fulfill needs of project was required did not negate characterization of transaction as sale of goods. Belmont Industries, Inc. v. Bechtel Corp., 425 F. Supp. 524, 1976 U.S. Dist. LEXIS 11909 (E.D. Pa. 1976).

Contract for sale of various bowling alley equipment, including, inter alia, lanes and ball returns, to be delivered and installed by seller, who warranted that lanes would be free from defects in workmanship and materials and that they would meet “all ABC specifications,” was a “transaction in goods” under UCC § 2-102 and came within Article 2 of Code, despite fact that contract involved substantial amounts of labor; items sold under contract were “goods” as defined in UCC § 2-105(1) since they were all items of tangible property, normally in flow of commerce, portable at time of contract; contract was not construction contract, outside Code coverage, nor was it excluded from coverage merely because it was “mixed” contract for goods and services. Bonebrake v. Cox, 499 F.2d 951, 1974 U.S. App. LEXIS 7831 (8th Cir. Iowa 1974).

There is no “sale” to a beauty parlor customer of materials used in giving her treatments, for the materials used in the performance of such services are patently incidental to the treatment itself and do not constitute a purchase of an article by the customer. Epstein v. Giannattasio, 25 Conn. Supp. 109, 197 A.2d 342, 1963 Conn. Super. LEXIS 188 (Conn. Super. Ct. 1963).

11. Commercial unit.

Where contract of sale stated quantity as all film at certain location and described it as approximately 250,000 pounds, and where agreed price was not lot price but 19 cents per pound, pound was “commercial unit” under UCC § 2-105(6) since it appeared to be unit used by parties and since evidence did not establish that division of material into such units would materially impair its character or value on market or in use. Askco Engineering Corp. v. Mobil Chemical Corp., 535 S.W.2d 893, 1976 Tex. App. LEXIS 2606 (Tex. Civ. App. Houston 1st Dist. 1976).

In action by feed company on installment sales contracts and security agreements providing for loan to enable defendant to purchase two hog-feeder houses from plaintiff’s alleged agent, where houses were defective because they caused pigs placed therein for fattening to become sick and to die, and where plaintiff claimed that it merely financed purchase of such houses and did not sell them to defendant, (1) evidence supported finding that plaintiff’s alleged agent was its agent in fact and that plaintiff was bound by agent’s acts, including agent’s sale of hog houses to defendant; (2) fact that plaintiff acted as financing agency in defendant’s purchase of such houses did not preclude finding that plaintiff was also seller of such houses; (3) houses were goods within meaning of UCC § 2-105(1); (4) defendant, by affirmative defense incorporated by reference in counterclaim, gave plaintiff notice of breach of implied warranty of fitness of goods for particular purpose, which notice was required by UCC § 2-607(3)(a); and (5) whether such implied warranty of fitness, which was in force at time of sale, was breached by plaintiff was question of fact to be determined by trial court on remand of case. Thompson Farms, Inc. v. Corno Feed Products, Div. of Nat'l Oats Co., 173 Ind. App. 682, 366 N.E.2d 3, 1977 Ind. App. LEXIS 921 (Ind. Ct. App. 1977).

Plaintiff who contracted to compile, edit and publish pamphlets and other printed materials for defendants was entitled to benefit of four year statute of limitations under UCC § 2-725, since printed pamphlets and related materials were goods within meaning of UCC § 2-105(1) and since UCC statute of limitations prevailed over general statute of limitations in action based on contract for sale of goods. Lake Wales Publishing Co. v. Florida Visitor, Inc., 335 So. 2d 335, 1976 Fla. App. LEXIS 13871 (Fla. Dist. Ct. App. 2d Dist. 1976).

12. Insurance contracts.

Insureds could not cannot prevail on their claim of unconscionability under the Uniform Commercial Code of Mississippi where the insurance contracts at issue were not goods as defined by Miss. Code Ann. §75-2-105. Ross v. Citifinancial, Inc., 2002 U.S. Dist. LEXIS 26733 (S.D. Miss. Mar. 18, 2002), amended, 2002 U.S. Dist. LEXIS 26740 (S.D. Miss. May 8, 2002), aff'd, 344 F.3d 458, 2003 U.S. App. LEXIS 18068 (5th Cir. Miss. 2003).

Insurance contracts are not goods as defined by Miss. Code Ann. §75-2-105. Ross v. Citifinancial, Inc., 2002 U.S. Dist. LEXIS 26733 (S.D. Miss. Mar. 18, 2002), amended, 2002 U.S. Dist. LEXIS 26740 (S.D. Miss. May 8, 2002), aff'd, 344 F.3d 458, 2003 U.S. App. LEXIS 18068 (5th Cir. Miss. 2003).

Insured claimants’ collateral protection insurance contracts were not goods as defined by Miss. Code Ann. §75-2-105 and accordingly, as a matter of law, their claim of unconscionability under the Uniform Commercial Code against individual agents failed. Howard v. CitiFinancial, Inc., 195 F. Supp. 2d 811, 2002 U.S. Dist. LEXIS 14056 (S.D. Miss. 2002), amended, 2002 U.S. Dist. LEXIS 15119 (S.D. Miss. May 8, 2002), aff'd, 344 F.3d 458, 2003 U.S. App. LEXIS 18068 (5th Cir. Miss. 2003).

§ 75-2-106. Definitions: “contract”; “agreement”; “contract for sale”; “sale”; “present sale”; “conforming to contract”; “termination”; “cancellation.”

  1. In this chapter unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (Section 2-401) [Section 75-2-401]. A “present sale” means a sale which is accomplished by the making of the contract.
  2. Goods or conduct including any part of a performance are “conforming” or conform to the contract when they are in accordance with the obligations under the contract.
  3. “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On “termination” all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.
  4. “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

HISTORY: Codes, 1942, § 41A:2-106; Laws, 1966, ch. 316, § 2-106, eff March 31, 1968.

Cross References —

Course of dealing and usage of trade, see §75-1-303.

Course of performance or practical construction, see §75-1-303.

Obligation of good faith, see §75-1-304.

Cure by seller of improper tender or delivery, see §75-2-508.

RESEARCH REFERENCES

ALR.

Contract for co-operative marketing as agency or sale. 12 A.L.R.2d 130.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

What constitutes a transaction, a contract for sale, or a sale within scope of UCC Article 2. 4 A.L.R.4th 85.

Applicability of UCC Article 2 to mixed contracts for sale of goods and services. 5 A.L.R.4th 501.

Am. Jur.

15A Am. Jur. 2d, Commercial Code §§ 35, 88.

50 Am. Jur. 2d, Letters of Credit § 2, 4, 8.

67 Am. Jur. 2d, Sales §§ 9, 73 et seq., 149, 150, 159.

68A Am. Jur. 2d, Secured Transactions §§ 11, 25, 95.

6 Am. Jur. Pl & Pr Forms (Rev), Secured Transactions, Form 9:91. (Instruction to jury; “sale” defined).

6 Am. Jur. Pl & Pr Forms (Rev), Secured Transactions, Form 9:92. (Instruction to jury; “contract for sale” defined).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 2 – Sales, § 253:214 et seq. (Existence and terms of agreement).

CJS.

77A C.J.S., Sales §§ 196-198.

Law Reviews.

Note, Uniform Commercial Code – Should the U.C.C. Furnish Rules of Decision in Equipment Leasing Controversies? 7 Miss. C. L. Rev. 209.

JUDICIAL DECISIONS

1. In general; contract for sale.

2. Sale.

3. Present sale.

4. Conforming to contract.

5. Termination or cancellation of contract.

6. Warranties.

1. In general; contract for sale.

Contract governing rental of video monitoring equipment for use in grocery store, evidenced by instrument entitled “lease agreement,” referring to parties as “lessor” and “lessee,” maintaining title in lessor, and disclaiming warranties, did not constitute buy and sell agreement or security agreement, and thus did not support allegations by lessee that inoperability of equipment amounted to breach of warranty and justified default in lease payments. Briscoe's Foodland, Inc. v. Capital Associates, Inc., 502 So. 2d 619, 1986 Miss. LEXIS 2384 (Miss. 1986).

With respect to a contract for the sale of a computer system, although the ideas or concepts involved in the custom-designed software remain the seller’s intellectual property, the buyer purchases the product of those concepts. Thus, although the product requires efforts to produce, it is nevertheless a product which, although intangible, is more readily characterized as “goods,” rather than “services,” since intangibles may be “goods” under UCC § 2-106(1). Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765, 1978 U.S. Dist. LEXIS 15483 (E.D.N.Y. 1978), aff'd in part and rev'd in part, 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

In action by buyer of computer system for damages for system’s failure to function properly, court held (1) that parties’ designation under UCC § 1-105(1) of Massachusetts law to govern their sales contract was immaterial, since buyer’s breach-of-contract claims were governed by limitation period contained in UCC § 2-725(1), which had been adopted by both New York and Massachusetts; (2) that contract in suit was not one for performance of services, as alleged by buyer, but was one for purchase of goods within meaning of UCC § 2-106(1); (3) that action was not timely commenced by buyer, since breach had occurred in January, 1971 and buyer did not commence suit until August 14, 1975, which was more than four years after cause of action accrued; (4) that UCC § 2-725(2), which deals with warranty that explicitly extends to future performance and provides that discovery of breach must await such performance, did not apply, since warranty under UCC § 2-725(2) must expressly refer to the future and implied warranty alleged by buyer, by its very nature, did not do so; and (5) that seller’s attempts to repair computer system did not toll running of statute of limitations prescribed by UCC § 2-725(1). Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765, 1978 U.S. Dist. LEXIS 15483 (E.D.N.Y. 1978), aff'd in part and rev'd in part, 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

As indicated in UCC §§ 2-102 and 2-106(1), the Uniform Commercial Code applies only to transactions in goods and not to service or repair contracts. Linscott v. Smith, 3 Kan. App. 2d 1, 587 P.2d 1271, 1978 Kan. App. LEXIS 235 (Kan. Ct. App. 1978).

Contract for sale of trucks was not contract for sale of goods and, thus, was not governed by four-year statute of limitations contained in UCC § 2-725(1) where contract was executed simultaneously with contract for sale of truck manufacturing plant and where contract for sale of trucks was merely incidental and collateral to main object of effecting transfer of truck manufacturing plant. Dynamics Corp. of America v. International Harvester Co., 429 F. Supp. 341, 1977 U.S. Dist. LEXIS 16833 (S.D.N.Y. 1977).

In action by materialman against property owner to recover for materials delivered to subcontractor where it was alleged that owner orally agreed to “guarantee” payment for materials previously delivered to subcontractor, in consideration for which materialman agreed to continue furnishing materials to job and to forebear from filing claim of lien against owner’s real property, enforcement of alleged oral “guarantee” contract was not barred by statute of frauds, UCC § 2-201; materials supplied at instance of owner after promise sued on were delivered pursuant to new agreement and were “received and accepted” within contemplation of UCC § 2-201(3)(c) and thus statute of frauds was inapplicable as to them; with respect to materials supplied before “guarantee” contract sued on, they were not delivered pursuant to “contract for sale” within definition thereof in UCC § 2-106 and statute was thus inapplicable as to them. Jim & Slim's Tool Supply, Inc. v. Metro Communities Corp., 328 So. 2d 213, 1976 Fla. App. LEXIS 14804 (Fla. Dist. Ct. App. 2d Dist. 1976).

Building subcontract for electrical work under which subcontractor had obligation to furnish exterior unit switchgear was not “contract for sale” within meaning of UCC § 2-106(1); thus, UCC § 2-209(1) was inapplicable and alleged modification for which no consideration was given was ineffective. J&R Elec. Div. of J. O. Mory Stores, Inc. v. Skoog Constr. Co., 38 Ill. App. 3d 747, 348 N.E.2d 474, 1976 Ill. App. LEXIS 2456 (Ill. App. Ct. 4th Dist. 1976).

Contract for construction of anhydrous ammonia plant was intended by parties as one for provision of services, exclusively, not contract of sale, where, inter alia, throughout contract plaintiff was denominated “Owner”, not buyer, and defendant was denominated “Contractor”, not seller, where contract placed ultimate control of purchasing decision in hands of plaintiff, not defendant, and where, under terms of contract that “title to all machinery and equipment and supplies for the work shall, as between Owner and Contractor, be in Owner,” defendant never had title to any component part of the plant, including defective converter. Nitrin, Inc. v. Bethlehem Steel Corp., 35 Ill. App. 3d 577, 342 N.E.2d 65, 1976 Ill. App. LEXIS 1902 (Ill. App. Ct. 1st Dist. 1976).

Contract to sell future cotton crop was sale of goods within scope of Article 2 of UCC. R. N. Kelly Cotton Merchant, Inc. v. York, 379 F. Supp. 1075, 1973 U.S. Dist. LEXIS 11445 (M.D. Ga. 1973), aff'd, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Customer’s contract with broker for purchase of stock was contract of agency, rather than contract for sale under UCC § 2-106, and UCC § 8-319 [Repealed] statute of frauds pertaining to contract for sale of securities was therefore inapplicable. Hutton v. Zaferson, 509 S.W.2d 950 (Tex. Civ. App. 1974), writ ref’d n.r.e., (Oct. 2, 1974).

Contract under which subcontractor was obligated to “furnish and erect” structural steel for construction of bridge was contract for rendition of services, a work, labor and materials contract, rather than contract for sale of goods, the steel beams involved. Schenectady Steel Co. v. Bruno Trimpoli General Constr. Co., 43 A.D.2d 234, 350 N.Y.S.2d 920, 1974 N.Y. App. Div. LEXIS 6029 (N.Y. App. Div. 3d Dep't), aff'd, 34 N.Y.2d 939, 359 N.Y.S.2d 560, 316 N.E.2d 875, 1974 N.Y. LEXIS 1400 (N.Y. 1974), disapproved, Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., 66 N.Y.2d 321, 497 N.Y.S.2d 310, 488 N.E.2d 56, 1985 N.Y. LEXIS 17607 (N.Y. 1985).

Agreement to furnish all concrete for slab and to furnish all labor to pour and finish was contract for sale within meaning of § 2-106, though including agreement for work and labor. Port City Constr. Co. v. Henderson, 48 Ala. App. 639, 266 So. 2d 896, 1972 Ala. Civ. App. LEXIS 413 (Ala. Civ. App. 1972).

Contract with interior decorator to refurnish room was contract for sale not service where price for new furniture “would include compensation for plaintiff’s interior decorating services,” and recitation in contract that these services would “be performed for a nominal fee” was mere surplusage. Norman Schuman Interiors, Inc. v. Sacks, 479 S.W.2d 200, 1972 Mo. App. LEXIS 919 (Mo. Ct. App. 1972).

Transaction between manufacturer of woolen cloth and supplier of card waste according to which manufacturer stored card waste until it was needed in its mill operation, and was billed only when goods were actually used, created no contract for sale by passage of title for price. Meinhard-Commercial Corp. v. Hargo Woolen Mills, 112 N.H. 500, 300 A.2d 321, 1972 N.H. LEXIS 251 (N.H. 1972).

Contract providing that upon satisfactory completion of machine meeting defendant’s specifications, defendant would purchase machine and plaintiff would sell both machine and exclusive right to use ideas and improvements involved therein; held, contract was one for sale of goods. Knisely v. Burke Concrete Accessories, Inc., 2 Wn. App. 533, 468 P.2d 717, 1970 Wash. App. LEXIS 1158 (Wash. Ct. App. 1970).

Agreement by which defendant was to pick up, advertise, and sell furniture owned by plaintiff was not in writing; amount involved was in excess of $500; relationship between plaintiff and defendant was that of principal-factor rather than buyer-seller; held, agreement was not “contract for sale of goods.” Blank v. Dubin, 258 Md. 678, 267 A.2d 165, 1970 Md. LEXIS 1043 (Md. 1970).

Alleged oral contract under which A had for over 30 years distributed and sold baked goods produced by B held to be contract for sale of goods within Article 2 so as to require reasonable notice before termination under Code § 2-309(3); contention that this was “sales distribution” arrangement rejected. Mastrian v. William Freihofer Baking Co., 45 Pa. D. & C.2d 237, 1968 Pa. Dist. & Cnty. Dec. LEXIS 191 (Pa. C.P. 1968).

2. Sale.

Computer hardware and softwear package agreement, under which defendant was to install completed system and train plaintiff’s employees in its use, whereupon plaintiff would take over complete supervision of system, was agreement for sale of “goods” rather than “services.” Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765, 1978 U.S. Dist. LEXIS 15483 (E.D.N.Y. 1978), aff'd in part and rev'd in part, 604 F.2d 737, 1979 U.S. App. LEXIS 13100 (2d Cir. N.Y. 1979).

In prosecution for peddling goods without a license, defendants’ contention that they were not guilty of “selling” goods because their activities had involved only giving of lollypops to passersby with simultaneous request for money, which was to be used on behalf of a church, could not be sustained in view of UCC § 2-106(1), which provides that a “sale” consists in passing of title to goods from seller to buyer on payment of a price. People v. Wood, 93 Misc. 2d 25, 402 N.Y.S.2d 726, 1978 N.Y. Misc. LEXIS 2048 (N.Y. J. Ct. 1978).

In action against lessee of two refrigerator display cases for accelerated rent allegedly due lessor for lessee’s breach of lease agreement, court held, on affirming judgment for lessee, (1) that transaction was sale within meaning of UCC § 2-106(1), since shipping order executed simultaneously with alleged “lease” gave lessee option to obtain, at no further cost, title to refrigerator cases at end of lease, (2) that waiver of any warranties of merchantability or fitness for particular purpose in lease agreement was not conspicuous under UCC § 2-316(2) and thus was ineffective, and (3) that lessee did not lose right to rescind sale agreement by failure to give lessor adequate opportunity to “cure” under UCC § 2-508(1), since replacement refrigerator cases purchased elsewhere by lessee were not installed until more than one month after lessor’s attempt to cure defective cases sold to lessee. Transcontinental Refrigeration Co. v. Figgins, 179 Mont. 12, 585 P.2d 1301, 1978 Mont. LEXIS 650 (Mont. 1978).

Where contract for purchase of burglar alarm system specifically stated that the materials were to remain the property of the “seller,” there was no sale within meaning of Uniform Commercial Code. Craig v. American Dist. Tel. Co., 91 Misc. 2d 1063, 399 N.Y.S.2d 164, 1977 N.Y. Misc. LEXIS 2481 (N.Y. Sup. Ct.), aff'd, 59 A.D.2d 1061, 399 N.Y.S.2d 830, 1977 N.Y. App. Div. LEXIS 14356 (N.Y. App. Div. 4th Dep't 1977).

To be buyer in ordinary course of business, so as to take free of security interest created by seller, there must be a sale which under UCC § 2-106(1) consists in passing of title from seller to buyer for a price. Moreover, under UCC § 2-401, title passes at time of physical delivery of goods to buyer, unless it is otherwise explicitly agreed. Integrity Ins. Co. v. Marine Midland Bank-Western, 90 Misc. 2d 868, 396 N.Y.S.2d 319, 1977 N.Y. Misc. LEXIS 2174 (N.Y. Sup. Ct. 1977).

In action to enforce oral agreement by subcontractor to provide and install school lockers, chalkboards and tack boards, where quoted price did not distinguish between cost of goods supplied and installation charges, subcontractor did not sustain his burden of proving that service aspect of contract was merely incidental to sale of goods aspect, as defined in UCC §§ 2-106(1) and 2-105, and, thus, he failed to sustain his burden of proving that UCC § 2-201 statute of frauds was applicable to contract and barred its enforcement. Glover School & Office Equipment Co. v. Dave Hall, Inc., 372 A.2d 221, 1977 Del. Super. LEXIS 99 (Del. Super. Ct. 1977).

Personal services to be rendered by plaintiff in developing defendant’s nursing home constituted “price” of stock agreed to be transferred by defendant in exchange for plaintiff’s services, so as to cause agreement to come with definition of “sale” in UCC § 2-106(1) as “passing of title from the seller to the buyer for a price.” Burns v. Gould, 172 Conn. 210, 374 A.2d 193, 1977 Conn. LEXIS 884 (Conn. 1977).

Reasonable interpretation of term “net sales value of production,” as used in business interruption insurance policy, did not require attributing to it technical definition of “sale” as that term is defined in UCC § 2-106(1). Travelers Indem. Co. v. Kassner, 322 So. 2d 80, 1975 Fla. App. LEXIS 18772 (Fla. Dist. Ct. App. 3d Dist. 1975), cert. denied, 333 So. 2d 41, 1976 Fla. LEXIS 6256 (Fla. 1976).

Furnishing of blood to patient by blood banks and hospital was adjunct to services performed by hospital in endeavor to restore patient’s health and thus was not “sale” giving rise to any warranty of fitness or merchantable quality. Consequently, actions for breach of warranty against blood banks and hospital were not maintainable. Jennings v. Roosevelt Hospital, 83 Misc. 2d 1, 372 N.Y.S.2d 277, 1975 N.Y. Misc. LEXIS 2789 (N.Y. Sup. Ct. 1975).

In action by purchasers of new homes against contractor who built homes and seller of bricks used therein for damages resulting from defective brick: (1) contracts between purchasers and contractor did not provide for “sale” as that term is used in UCC Article 2 and, thus, were not governed by four-year statute of limitations contained in § 2-725, but rather by general six-year limitations for breach of contract; (2) conversely, only relationship between purchasers and seller of bricks was that of buyers and seller, which was governed by UCC Article 2, and, since more than four years passed between respective purchases from seller and alleged breach of warranty, action was barred. De Matteo v. White, 233 Pa. Super. 339, 336 A.2d 355, 1975 Pa. Super. LEXIS 1463 (Pa. Super. Ct. 1975).

Contract to install, service and maintain vending machines on defendant’s premises did not effect passing of title, and was not “sale” to which UCC would apply. George F. Mueller & Sons, Inc. v. Northern Illinois Gas Co., 12 Ill. App. 3d 362, 299 N.E.2d 601, 1973 Ill. App. LEXIS 2248 (Ill. App. Ct. 1st Dist. 1973).

Sale of truck took place when buyer took possession of truck from seller, and title effectively passed to buyer, even though buyer did not have possession of certificate of title. Bunch v. Signal Oil & Gas Co., 505 P.2d 41 (Colo. Ct. App. 1972).

Where plaintiff obtained wrinkle cream, which was subject of breach of warranty action, as result of purchasing $5 of cosmetics, transaction was sale rather than gift. Sheppard v. Revlon, Inc., 267 So. 2d 662, 1972 Fla. App. LEXIS 6164 (Fla. Dist. Ct. App. 3d Dist. 1972).

Blood transfusion was sale of “goods” so as to be subject to strict liability. Reilly v. King County Cent. Blood Bank, Inc., 6 Wn. App. 172, 492 P.2d 246, 1971 Wash. App. LEXIS 1249 (Wash. Ct. App. 1971), overruled, Howell v. Spokane & Inland Empire Blood Bank, 114 Wn.2d 42, 785 P.2d 815, 1990 Wash. LEXIS 10 (Wash. 1990) (note that transfusions in issue occurred prior to UCC amendment declaring that under certain circumstances blood transfusions are not covered by any implied warranty).

Seller of machinery and equipment shipped grinding machine to itself, in care of manufacturer of machine parts who was to demonstrate and sell machine to third-party buyer at fixed price with title to pass to latter on payment in full to seller with manufacturer to receive 10% of invoice price as commission; held, transaction was not a sale but a price-fixing consignment. Columbia International Corp. v. Kempler, 46 Wis. 2d 550, 175 N.W.2d 465, 1970 Wisc. LEXIS 1102 (Wis. 1970).

Shrimp, chicken, and loin ribs offered for sale and sold in buckets but fried or otherwise cooked after a customer places an order and after such frying or other cooking packaged or wrapped in the bucket container fall within the terms of subd 5 of § 193 of the Agriculture and Markets Law since according to the terms of subd 1 of the above statute a sale consists in the passing of title from the seller to the buyer for a price and according to the terms of § 2-401, subd 2, unless otherwise explicitly agreed title passes to the buyer at the time at which the seller completes his performance with reference to the physical delivery of the goods. Wickham v. Levine, 47 Misc. 2d 1, 261 N.Y.S.2d 702, 1965 N.Y. Misc. LEXIS 1669 (N.Y. Sup. Ct.), aff'd, 24 A.D.2d 1035, 264 N.Y.S.2d 785, 1965 N.Y. App. Div. LEXIS 2860 (N.Y. App. Div. 3d Dep't 1965).

When auctioneer sold automobile in customary manner by accepting buyer’s check and remitting to seller amount of sale price less commission, auctioneer was agent for seller until car was sold and did not “buy” car from seller and “resell” it to buyer; therefore auctioneer was not entitled to possession of automobile when buyer’s payment check was dishonored. Tulsa Auto Dealers Auction v. North Side State Bank, 1966 OK 248, 431 P.2d 408, 1966 Okla. LEXIS 587 (Okla. 1966).

Plaintiff’s purchase of stock from a named individual at the request of defendant would serve as consideration for defendant’s agreement to transfer common stock purchase warrants to the plaintiff; and the transaction between plaintiff and defendant constituted a “sale” within the meaning of the Uniform Commercial Code, which to be enforceable must be in writing. Mortimer B. Burnside & Co. v. Havener Sec. Corp., 25 A.D.2d 373, 269 N.Y.S.2d 724, 1966 N.Y. App. Div. LEXIS 4280 (N.Y. App. Div. 1st Dep't 1966).

There is no “sale” to a beauty parlor customer of materials used in giving her treatments, for the materials used in the performance of such services are patently incidental to the treatment itself and do not constitute a purchase of an article by the customer. Epstein v. Giannattasio, 25 Conn. Supp. 109, 197 A.2d 342, 1963 Conn. Super. LEXIS 188 (Conn. Super. Ct. 1963).

For the purpose of a criminal prosecution for selling narcotics, it is sufficient to show a participation in the commerce and it is not necessary to show that there was an actual transfer of title. State v. Weissman, 73 N.J. Super. 274, 179 A.2d 748, 1962 N.J. Super. LEXIS 633 (App.Div.), cert. denied, 37 N.J. 521, 181 A.2d 782, 1962 N.J. LEXIS 341 (N.J. 1962).

The transfer of title is an implicit element of a sale under the Code. State v. Weissman, 73 N.J. Super. 274, 179 A.2d 748, 1962 N.J. Super. LEXIS 633 (App.Div.), cert. denied, 37 N.J. 521, 181 A.2d 782, 1962 N.J. LEXIS 341 (N.J. 1962).

An oral agreement between property owners and a handyman whereby the handyman agreed to purchase a heating unit for owners and install it in the owners’ building did not create between the parties a relationship of buyer and seller, so as to entitle the owners to a recovery against the handyman on the ground of a breach of implied warranty of merchantability and of fitness for the purpose. Victor v. Barzaleski, 19 Pa. D. & C.2d 698, 1959 Pa. Dist. & Cnty. Dec. LEXIS 184 (Pa. C.P. 1959).

In National Dairy Products Corp. v. Gleeson (1958) 16 Pa D & C2d 390, the court, in determining whether there was a taxable sale at retail when motor vehicles owned by two corporations were transferred, as part of a plan of merger, to a third surviving corporation, quoted UCC § 2-106(1) defining a sale as “the passing of title from the seller to the buyer for a price.” National Dairy Products Corp. v. Gleeson, 16 Pa. D. & C.2d 390, 1958 Pa. Dist. & Cnty. Dec. LEXIS 204 (Pa. C.P. 1958).

This section made no substantial change in the definition of a sale of goods under the Uniform Sales Act, wherein it was stated that “A sale of goods is an agreement whereby the seller transfers the property in goods to the buyer for a consideration called the price.” E. I. Du Pont De Nemours & Co. v. Kaufman & Chernick, Inc., 337 Mass. 216, 148 N.E.2d 634, 1958 Mass. LEXIS 640 (Mass. 1958).

Sale of machines was consummated in Ohio, where the sales contract therefor was negotiated, acknowledged and accepted in Ohio by defendant’s sales agents, the machines were manufactured at defendant’s plant in that state, and shipped to purchaser in Michigan, F.O.B. city of manufacture. Welding Engineers, Inc. v. Aetna-Standard Engineering Co., 169 F. Supp. 146, 12 Ohio Op. 2d 70, 84 Ohio Law Abs. 283, 1958 U.S. Dist. LEXIS 3023 (D. Pa. 1958).

Transfer of title took place on delivery to the carrier where goods were manufactured by the seller and shipped F.O.B. from his city to the buyer’s city. Welding Engineers, Inc. v. Aetna-Standard Engineering Co., 169 F. Supp. 146, 12 Ohio Op. 2d 70, 84 Ohio Law Abs. 283, 1958 U.S. Dist. LEXIS 3023 (D. Pa. 1958).

The word “sales,” as used in the statute prescribing venue for an action for damages where sales infringe a patent, is to be given the same meaning as under the Uniform Commercial Code. Welding Engineers, Inc. v. Aetna-Standard Engineering Co., 169 F. Supp. 146, 12 Ohio Op. 2d 70, 84 Ohio Law Abs. 283, 1958 U.S. Dist. LEXIS 3023 (D. Pa. 1958).

The “passage of title” concepts of the Uniform Commercial Code have no application to zoning regulations, in determining whether a building is a warehouse or a store for retail sales on the premises. Sears, Roebuck & Co. v. Power, 390 Pa. 206, 134 A.2d 659, 1957 Pa. LEXIS 281 (Pa. 1957).

3. Present sale.

Contracts under which farmers delivered soybeans to warehouseman for storage and subsequent sale at price to be agreed on at later date, and pursuant to which weight tickets or statement sheets were issued as receipts with words “hold,” “stored,” or “on storage” appearing on such receipts together with name of individual farmer, were bailments and not present sales with price to be fixed in the future within meaning of UCC § 2-106(1), UCC § 2-204(3), and UCC § 2-305(1), since such code sections did not contemplate farmers’ right at their discretion to require a return of the same or equivalent fungible goods. NYTCO Services, Inc. v. Wilson, 351 So. 2d 875, 1977 Ala. LEXIS 2248 (Ala. 1977) (stating that fact that weight tickets and statement sheets issued as receipts had words indicating that soybeans were being stored also refuted contention that transactions were sales).

Transaction whereby seller, who was indebted to buyer, agreed to sell tractor to buyer in return for cancellation of seller’s indebtedness constituted present, binding and completed sale, and title to tractor passed to buyer at time of execution of contract of sale, notwithstanding sales agreement provided that tractor would remain on seller’s premises until needed by buyer and during that period of time seller would have right to sell tractor, and written agreement between seller and buyer was adequate as contract of sale under UCC since it contained date, identified buyer and seller and specified exactly model, make and serial number of tractor, listed amount and nature of consideration and was signed by agent of both parties. Ace Supply v. Rocky-Mountain Mach. Co., 96 Idaho 183, 525 P.2d 965, 1974 Ida. LEXIS 406 (Idaho 1974).

An Illinois florist who receives interstate telegraphic orders for retail sales of flowers in Illinois is a seller, his sales are present sales made in the state whether the contract is unilateral or bilateral, and title to the flowers passes in Illinois, and the sale is not one for resale which would be true if the seller were the out-of-state florist who telegraphs the order; and the Illinois florist is subject to that state’s retailers’ occupational tax on such sales. O'Brien v. Isaacs, 32 Ill. 2d 105, 203 N.E.2d 890, 1965 Ill. LEXIS 303 (Ill. 1965).

4. Conforming to contract.

In replevin action by buyer against seller to obtain possession of Ferrari sports car of limited availability ordered for buyer from another dealer, where order form and bill of sale identified car by name, year of manufacture, model number, and serial number, and stated that car was “used” car and that buyer had made $15,000 deposit on purchase price of $17,500; where half of such deposit was paid by buyer’s personal check (on which was written name of car, year of manufacture, and serial number) and other half by cashier’s check issued by bank making loan to buyer, which check was made payable to joint order of both buyer and seller and which contained restrictive indorsement requiring “payee” to record first lien on car in bank’s favor; where car, when received by seller from other dealer, proved to be virtually new racing vehicle, not intended for highway use, that seller wished to retain for himself; and where seller informed buyer that he would try to locate another Ferrari for him, sale was governed by UCC Art 2 and buyer was entitled to maintain replevin action, despite seller’s contention that since car was “new” it was not what buyer had ordered, since (1) under UCC § 2-209, parties had modified their prior oral agreement concerning sale of “used” car by entering into written agreement, evidenced by purchase order and bill of sale prepared by seller, which identified car sold by make, year of manufacture, model number, and serial number; (2) parties’ modification of prior oral agreement also was evidenced by seller’s acceptance of buyer’s personal check and by negotiation by both seller and buyer of bank cashier’s check bearing restrictive indorsement; (3) under UCC § 2-106(2), car delivered to seller conformed to modified contract; (4) buyer had right under UCC § 2-601(b) and § 2-606(1)(a) to accept car that did not conform to purchase order, had delivery been tendered by seller; and (5) since car was identified to contract by purchase order and bill of sale which were in buyer’s possession, title to car passed to buyer under UCC § 2-401(3)(a), even though seller retained vehicle. Tatum v. Richter, 280 Md. 332, 373 A.2d 923, 1977 Md. LEXIS 850 (Md. 1977).

Contract for sale of crop was not invalid merely because contract was executed before crop in question was planted. Mitchell--Huntley Cotton Co. v. Lawson, 377 F. Supp. 661, 1973 U.S. Dist. LEXIS 10836 (M.D. Ga. 1973).

The delivery of a generator to a job site, while identifying the goods to the contract, did not amount to a delivery of goods or the performance of obligations conforming to the contract, and could not constitute such a delivery and performance until the generator had been installed, started up, and field tests completed to the satisfaction of the government as was called for by the contract. Until then, risk of loss remained with the seller regardless of where title may have stood. William F. Wilke, Inc. v. Cummins Diesel Engines, Inc., 252 Md. 611, 250 A.2d 886, 1969 Md. LEXIS 1122 (Md. 1969).

5. Termination or cancellation of contract.

Right to cancel contract under UCC § 2-703(f) and § 2-106(4) differs from right to terminate under UCC § 2-106(3), and does not arise out of any termination provision in the agreement. Thus, where manufacturer of automobile air conditioners cancelled distributorship agreement with distributor because of distributor’s chronic overdue balances and failure to pay note, manufacturer did not have to resort to termination procedures in distributorship agreement, and distributor could not claim unlawful termination of such agreement. Frigiking, Inc. v. Century Tire & Sales Co., 452 F. Supp. 935, 1978 U.S. Dist. LEXIS 16599 (N.D. Tex. 1978).

A contract for the sale of from 10,000 to 50,000 tons of coal at a fixed price over a one-year period which provided that the seller might terminate the agreement by written notice, was effectively terminated by a letter in which the seller announced it would deliver no more than 10,000 tons, and seller was released from all future obligations thereunder. United States v. P. & D. Coal Mining Co., 251 F. Supp. 1005, 1964 U.S. Dist. LEXIS 7891 (W.D. Ky. 1964), aff'd, 358 F.2d 619, 1966 U.S. App. LEXIS 6725 (6th Cir. Ky. 1966).

6. Warranties.

A cause of action, which was based on breach of warranty and premised on the alleged sale by physicians of an unsafe drug to a decedent, alleges, notwithstanding the use of the term “sold”, that the drug was furnished to the decedent as an incidental part of the services rendered in the course of medical treatment and, under the circumstances, there was no sale within the meaning of the Uniform Commercial Code so as to give rise to any express or implied warranties. Accordingly, the cause of action was properly dismissed. Osborn v. Kelley, 61 A.D.2d 367, 402 N.Y.S.2d 463, 1978 N.Y. App. Div. LEXIS 9747 (N.Y. App. Div. 3d Dep't 1978).

In action against pharmacist and physician to recover damages for stroke allegedly suffered as result of oral contraceptive drug available only by prescription, implied warranties of merchantability under UCC § 2-314 and of fitness under UCC § 2-315 were not applicable to transaction with pharmacist, since pharmacist filled prescription as issued by physician. Furthermore, physician was not “seller” within meaning of UCC § 2-106(1) by virtue of issuing prescription for oral contraceptive drug and, thus, he was not subject to liability on theory of breach of implied warranties of merchantability under UCC § 2-314 and of fitness under UCC § 2-315. Batiste v. American Home Products Corp., 32 N.C. App. 1, 231 S.E.2d 269, 1977 N.C. App. LEXIS 1850 (N.C. Ct. App.), cert. denied, 292 N.C. 466, 233 S.E.2d 921, 1977 N.C. LEXIS 1110 (N.C. 1977).

In action by purchaser of new automobile against dealer seeking revocation of acceptance and damages, contract provision between dealer and purchaser to effect that there were no warranties express or implied made by either dealer or manufacturer, other than manufacturer’s warranty against defective materials, although sufficient to exclude all warranties by dealer except implied warranty of merchantability, did not eliminate implied warranty of merchantability in manner required by UCC § 2-316, and evidence that automobile battery was defective as result of poor materials or poor workmanship was sufficient to establish breach of warranty of merchantability; however, there was no evidence that such nonconformity substantially impaired value of car to purchaser as required by UCC § 2-608 before he could revoke his acceptance of automobile and recover price paid; thus, purchaser’s remedy was action for damages and, since purchaser failed to present evidence to support award based on proper measure of damages, i.e., value of automobile in its non-conforming condition at time and place of acceptance, purchaser was not entitled to recover damages. Bill McDavid Oldsmobile, Inc. v. Mulcahy, 533 S.W.2d 160, 1976 Tex. App. LEXIS 2450 (Tex. Civ. App. Houston 1st Dist. 1976).

In action by customer against self-service food store on theory of breach of warranty under UCC § 2-314, for injuries sustained when soft drink bottle exploded while customer was placing it on check-out counter, directed verdict in favor of store was erroneous where evidence established that store placed goods on shelves with specified price mark and customer removed bottle with intent to pay for it; such acts constituted a contract to sell within UCC § 2-106(1), giving rise to warranty protection, even though customer had not yet paid for goods and title had not yet passed. Fender v. Colonial Stores, Inc., 138 Ga. App. 31, 225 S.E.2d 691, 1976 Ga. App. LEXIS 2044 (Ga. Ct. App. 1976).

Contract documents under which refrigeration units were leased to defendant for term of four years, at specified monthly rental, and which gave defendant option to purchase equipment at termination of four-year lease upon payment of nominal sum (i.e., amount of sales tax on transaction), constituted contract for sale of goods subject to provisions of Uniform Commercial Code. Contract being one for sale of goods there was implied warranty of soundness by plaintiff-seller under UCC § 2-314 and defendant-purchaser was entitled to benefit thereof unless such implied warranty was excluded in accordance with provisions of UCC § 2-316. Repair clause which made lessee-purchaser responsible for necessary repairs, maintenance, operation and replacements, whatever its effect, was not effective to exclude implied warranty of fitness by seller. Mid-Continent Refrigerator Co. v. Way, 263 S.C. 101, 208 S.E.2d 31, 1974 S.C. LEXIS 209 (S.C. 1974).

Lease agreement leasing automobile for period of 24 months, though it placed burden of repairs, taxes, insurance, etc. upon lessee, was not sale as defined by UCC § 2-106, and provisions of UCC § 2-316 governing exclusion or modification of warranties did not apply; thus, provisions of lease agreement that eliminated any implied warranty of law and the right to recover particular damages claimed against owner-lessor or assignee were effective, notwithstanding lease agreement did meet requirements of UCC § 2-316. Mays v. Citizens & Southern Nat'l Bank, 132 Ga. App. 602, 208 S.E.2d 614, 1974 Ga. App. LEXIS 1759 (Ga. Ct. App. 1974), overruled, Mock v. Canterbury Realty Co., 152 Ga. App. 872, 264 S.E.2d 489, 1980 Ga. App. LEXIS 1639 (Ga. Ct. App. 1980).

In action by drug user seeking to recover damages for personal injuries resulting from bloodclot that allegedly developed as result of plaintiff’s use of defendant’s oral contraceptive, plaintiff failed to state cause of action against manufacturer under UCC § 2-715 for breach of warranty; since defendant gave allegedly defective product to plaintiff’s physician as free sample and there was no payment by physician to defendant, (1) there was no sale which would form basis of cause of action, and, furthermore, (2) there was no privity between the parties. Allen v. Ortho Pharmaceutical Corp., 387 F. Supp. 364, 1974 U.S. Dist. LEXIS 7905 (S.D. Tex. 1974).

In action by plaintiff to recover for breach of agreement termed a “lease,” under which defendant agreed to lease business machines from plaintiff for 60-month-term, with title to pass to defendant at end of term, implied warranties of merchantability and fitness under UCC §§ 2-314 and 2-315 were held applicable to transaction whether it was deemed lease or bailment agreement. Quality Acceptance Corp. v. Million & Albers, Inc., 367 F. Supp. 771, 1973 U.S. Dist. LEXIS 10797 (D. Wyo. 1973).

The express warranty provisions of UCC § 2-313 and the warranty of fitness implied by UCC § 2-315 are parts of Article 2 of the UCC, which is clearly limited to sales of goods, and which will not be applied, in action to recover for injuries caused by runaway golf cart, to bailment for hire. Bona v. Graefe, 264 Md. 69, 285 A.2d 607, 1972 Md. LEXIS 1123 (Md. 1972).

§ 75-2-107. Goods to be severed from realty; recording.

  1. A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this chapter if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
  2. A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this chapter whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
  3. The provisions of this section are subject to any third-party rights provided by the law relating to realty records, including the priority of previously recorded deeds of trust under Section 89-5-5, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer’s rights under the contract for sale.

HISTORY: Codes, 1942, § 41A:2-107; Laws, 1966, ch. 316, § 2-107; Laws, 1977, ch. 452, § 3; Laws, 2010, ch. 506, § 5, eff from and after July 1, 2010.

Amendment Notes —

The 2010 amendment inserted “including the priority of previously recorded deeds of trust under Section 89-5-5” in (3).

Cross References —

“Goods” as including identified things attached to realty, see §75-2-105.

Statute of frauds, see §75-2-201.

Secured transactions, see §75-9-101 et seq.

Recording of deeds and conveyances, generally, see §§89-5-1,89-5-3.

RESEARCH REFERENCES

ALR.

Size and kind of trees contemplated by contracts or deeds in relation to standing timber. 72 A.L.R.2d 727.

Validity, construction, and effect of contract between grower of vegetable or fruit crops, and purchasing processor, packers, or canner. 87 A.L.R.2d 732.

Electricity, gas, or water furnished by public utility as “goods” within provisions of Uniform Commercial Code, Article 2 on Sales. 48 A.L.R.3d 1060.

What constitutes “goods” within scope of UCC Article 2. 4 A.L.R.4th 912.

Oil and gas rights: rights of royalty owners to take-or-pay settlements. 57 A.L.R.5th 753.

Am. Jur.

21A Am. Jur. 2d, Crops §§ 7, 48.

52 Am. Jur. 2d, Logs and Timber §§ 57, 58.

53A Am. Jur. 2d, Mines and Minerals §§ 181, 182.

67 Am. Jur. 2d, Sales §§ 41, 221-225, 371.

6 Am. Jur. Pl & Pr Forms (Rev), General Provisions, Form 1:30. (Instruction to jury; “notice” and “knowledge” of a fact defined).

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:1. (Complaint, petition, or declaration; breach of contract in sale of growing timber; dead timber delivered to plaintiff’s mill).

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:4. (Instruction to jury; “goods” as including growing crops).

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Form 2:5. (Instruction to jury; “goods” as including timber to be cut).

12 Am. Jur. Legal Form 2d, Logs and Timber § 168:11 et seq. (contracts for sale of standing timber).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code; Article 2 – Sales, § 253:265 et seq. (Goods to be severed from realty).

2 Am Law Prod Liab 3d, Warranty Remedies § 18:26.

Law Reviews.

Ogletree, A primer concerning industrial timber litigation with emphasis upon Mississippi law. 59 Miss. L. J. 387.

JUDICIAL DECISIONS

1. In general.

2. Minerals or the like.

3. Structures.

4. Timber (prior to 1977 amendment).

5. Crops or timber.

6. Recording.

1. In general.

In Dean Vincent, Inc. v. Redisco, Inc. (1962) 232 Or 170, 373 P2d 995, it was stated that under the applicable law and under the thereafter applicable Uniform Commercial Code “the determination of the character of the goods sold as to whether real or personal property is left to the common law”; the conclusion reached was that wall to wall carpeting constitutes a fixture. Dean Vincent, Inc. v. Redisco, Inc., 232 Ore. 170, 373 P.2d 995, 1962 Ore. LEXIS 396 (Or. 1962).

2. Minerals or the like.

UCC applies to sales of natural gas, and therefore governs sales contract between oil company and royalty owners in certain Mississippi oil and gas leases; in action by royalty owners seeking unrecovered payments from oil company under leases, gas underground is future goods pursuant to §75-2-105, and thus no particular gas is sold until it is identified or brought to surface; accordingly, under §75-2-107(1), contracts are contracts to sell and only become effective as sales when gas is severed from land; where sales contract itself provides that title to gas passes when gas is delivered, gas was not sold until it was produced, and accordingly, basis of royalty should be market value at well at time of production and delivery. Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225, 1984 U.S. App. LEXIS 24696 (5th Cir. Miss. 1984), cert. denied, 471 U.S. 1005, 105 S. Ct. 1868, 85 L. Ed. 2d 161, 1985 U.S. LEXIS 244 (U.S. 1985).

In an action to recover the purchase price for the sale of borrow material from plaintiff seller’s land, the oral contract was not barred by the statute of frauds §75-2-107, where the oral contract constituted a revocable license to the purchaser which permitted it to remove the borrow material from the seller’s land for a stated consideration, where the seller did not revoke the license, and where the purchaser allegedly removed the borrow material but refused to pay for it. Bell v. Hill Bros. Constr. Co., 419 So. 2d 575, 1982 Miss. LEXIS 2142 (Miss. 1982).

Statute of frauds in UCC § 2-201(1) did not apply to oral contract under which buyer of “borrow material” (fill soil), instead of seller, was to remove such material from seller’s land, since UCC § 2-107(1)–which declares that contract for sale of “minerals or the like” is contract for sale of “goods” if such minerals are to be severed by seller–applies, as stated in Official Comment 1, only when minerals are to be severed by seller. As a result, oral contract for sale of “borrow material” in suit was governed by statute of frauds affecting realty. Bell v. Hill Bros. Constr. Co., 419 So. 2d 575, 1982 Miss. LEXIS 2142 (Miss. 1982).

UCC § 2-107(1) applies only if the minerals are to be severed by the seller. If the buyer is to sever, such transactions are considered to be contracts affecting land to which the statute-of-frauds section of the Uniform Commercial Code (UCC § 2-201) does not apply, although such contracts must conform to the statute of frauds that affects the transfer of interests in land. De Luca v. C. W. Blakeslee & Sons, Inc., 174 Conn. 535, 391 A.2d 170, 1978 Conn. LEXIS 867 (Conn. 1978) (holding that UCC § 2-107(1) did not apply to contract between landowner and highway contractor for sale of fill soil that was to be severed from seller’s land by contractor-buyer).

Contract for sale of natural gas was contract for sale of “goods” under Ohio version of UCC § 2-107(1), even though Ohio had not adopted 1972 amendment to UCC § 2-107(1) which adds phrase “including oil and gas” to statute’s language. Columbia Gas Transmission Corp. v. Larry H. Wright, Inc., 443 F. Supp. 14, 12 Ohio Op. 3d 95, 1977 U.S. Dist. LEXIS 16797 (S.D. Ohio 1977).

Seller’s remedies of UCC do not apply to vendors of oil and gas leases: (1) remedies provided in UCC §§ 2-703 and 2-706 are inapposite to protect seller of oil and gas lease, (2) definition of “goods” in UCC § 2-105(1) clearly excludes interests of oil and gas lessee, and (3) UCC § 2-107(1), dealing with goods to be severed from realty, provides that contract for sale of timber, minerals or like is contract for sale of goods within article 2, if they are to be severed by seller, but both Official Comment and Oklahoma Code Comment to § 2-107 recognize that Code applies only if timber, minerals, etc., are to be severed by seller. Casper v. Neubert, 489 F.2d 543, 1973 U.S. App. LEXIS 6391 (10th Cir. Okla. 1973).

3. Structures.

Under UCC § 2-107(1), oral agreement whereby buyer agreed to pay sellers $500 in exchange for which buyer or his agents would be permitted to enter upon sellers’ land for purpose of dismantling and carrying off structure was not contract for sale of goods since buyer rather than seller was to sever structure from land; thus, statute of frauds relating to interests in real property was applicable and alleged contract was unenforceable in absence of signed writing. Rosen v. Hummel, 47 A.D.2d 782, 365 N.Y.S.2d 79, 1975 N.Y. App. Div. LEXIS 9093 (N.Y. App. Div. 3d Dep't 1975).

Sale of structure to be removed from appropriated land is within purview of Code provision relating to goods to be severed from realty and therefore provisions of Code § 2-401 are not applicable. Jonus v. Taddio, 61 Misc. 2d 176, 305 N.Y.S.2d 99, 1969 N.Y. Misc. LEXIS 1170 (N.Y. J. Ct. 1969).

4. Timber (prior to 1977 amendment).

Contract for sale of cordwood business, including hardwood stumpage growing on defendant’s land and certain equipment used in cutting and hauling wood, was transaction in “goods” governed by Sales Article of UCC, even though written contract was headed “Sale of Wood Business.” Melms v. Mitchell, 266 Ore. 208, 512 P.2d 1336, 1973 Ore. LEXIS 348 (Or. 1973).

Agreement between seller and buyer for sale and purchase of standing timber did not involve sale of goods movable at time of identification to contract and sale aspect of transaction was not covered by Article 2 of Code. Barry v. Bank of New Hampshire, Nat'l Ass'n, 112 N.H. 226, 293 A.2d 755, 1972 N.H. LEXIS 182 (N.H. 1972).

5. Crops or timber.

Pursuant to Miss. Code Ann. §75-2-107(3), the bank had a perfected security interest in timber on land in which it held a deed of trust, and the rights of any subsequent purchasers of that timber were subordinate to the interest of the bank; the bank’s failure to perfect its interests under the UCC was irrelevant to its right to remain secure. Feliciana Bank & Trust v. Manuel & Sessions, L.L.C., 943 So. 2d 736, 2006 Miss. App. LEXIS 870 (Miss. Ct. App. 2006).

In action between timber companies wherein plaintiff charged that defendant fraudulently induced plaintiff to purchase certain property by orally promising that defendant, which had previously acquired timber rights to such property, would sell or trade timber to plaintiff after plaintiff subsequently purchased property, alleged promise to convey timber rights was contract for sale of “goods” subject to statute of frauds and sales provisions of UCC. T.K. Stanley, Inc. v. Scott Paper Co., 793 F. Supp. 707, 1992 U.S. Dist. LEXIS 9416 (S.D. Miss. 1992), aff'd, 5 F.3d 529, 1993 U.S. App. LEXIS 24816 (5th Cir. Miss. 1993).

Oral contract allegedly made between wood dealer and mill did not come within brokerage exception to statute of frauds because dealer actually acquired interest in wood; promissory estoppel is not available as exception to statute of frauds applicable to such an agreement. Futch v. James River-Norwalk, Inc., 722 F. Supp. 1395, 1989 U.S. Dist. LEXIS 12113 (S.D. Miss.), aff'd, 887 F.2d 1085, 1989 U.S. App. LEXIS 15434 (5th Cir. Miss. 1989).

Oral contract to supply timber to paper mill was contract for sale of timber not a brokerage contract and was therefore unenforceable due to lack of writing evidencing contract; agreement did not fall within any exceptions to UCC Statute of Frauds. Futch v. James River-Norwalk, Inc., 722 F. Supp. 1395, 1989 U.S. Dist. LEXIS 12113 (S.D. Miss.), aff'd, 887 F.2d 1085, 1989 U.S. App. LEXIS 15434 (5th Cir. Miss. 1989).

Timber, whether cut or to be cut, falls within the definition of “goods” contained in §75-2-105(1), and by virtue of §75-2-107(2), the Sales Article of the Mississippi Uniform Commercial Code expressly applies to timber sales. Bay Springs Forest Products, Inc. v. Wade, 435 So. 2d 690, 1983 Miss. LEXIS 2780 (Miss. 1983).

Although statute of frauds under UCC § 2-201 was applicable to contract for sale of soybeans which constituted goods within meaning of UCC § 2-105 and also constituted under UCC § 2-107 growing crops capable of severance, seller was prohibited from asserting statute of frauds as defense in action on contract where seller admitted that contract was made. Cargill, Inc., Commodity Marketing Div. v. Hale, 537 S.W.2d 667, 1976 Mo. App. LEXIS 2079 (Mo. Ct. App. 1976).

Where cotton farmer entered into contract with cotton merchants to sell cotton crop to be produced on 800 acres, where farmer was obligated by terms of lease to pay one-fourth of his cotton crop as rent, and where as result of flood conditions farmer was only able to plant 717 acres rather than expected 1066 acres, cotton merchants were entitled to whole crop and lessor’s remedies, if any, were against lessee; when read together UCC §§ 2-102, 2-105 and 2-107 indicated that forward contracts for sale of yet to be grown cotton fell within § 2-402(1) which subordinates rights of seller’s unsecured creditors in subject matter to those of buyer. Ralli-Coney, Inc. v. Gates, 528 F.2d 572, 1976 U.S. App. LEXIS 12420 (5th Cir. Miss. 1976).

Transactions in crops are within the scope of UCC, and contracts for future delivery of crops, whether or not presently planted, are contemplated. R. N. Kelly Cotton Merchant, Inc. v. York, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Where plaintiff entered into oral contracts with defendant cotton growers for sale of their cotton crops, each involving more than $500 worth of cotton: (1) under UCC §§ 2-105 and 2-107, sale of cotton was sale of goods and, under UCC § 1-201, was not enforceable unless there was writing sufficient to indicate contract for sale had been made, signed by party against whom enforcement was sought; (2) oral contracts between plaintiff and defendants did not come within agency or broker exception to statute of frauds where there were two separate, independent sets of contracts under which defendants agreed to sell to plaintiff, and plaintiff independently contracted to sell to mills; (3) although exception to statute of frauds exists under UCC § 2-201(3)(b) if party against whom enforcement is sought admits in his pleadings, testimony or otherwise in court that contract for sale was made, such exception did not apply in present case since defendants denied under oath that agreement for sale was made with plaintiff and, although trial court made credibility determination adverse to defendants’ testimony, such finding did not constitute finding that “admission” exception applied; (4) defendants were not estopped to assert defense of statute of frauds merely because plaintiff had acted in reliance on oral agreement. Cox v. Cox, 292 Ala. 106, 289 So. 2d 609, 1974 Ala. LEXIS 1027 (Ala. 1974).

Contract to sell future cotton crop was sale of goods within scope of Article 2 of UCC. R. N. Kelly Cotton Merchant, Inc. v. York, 379 F. Supp. 1075, 1973 U.S. Dist. LEXIS 11445 (M.D. Ga. 1973), aff'd, 494 F.2d 41, 1974 U.S. App. LEXIS 8552 (5th Cir. 1974).

Where plaintiff raised sod on several prior occasions and apparently treated it as commercial product, and sod owed its existence to annual maintenance and fertilization, sod was personalty, and sale of sod was within coverage of UCC. Barron v. Edwards, 45 Mich. App. 210, 206 N.W.2d 508, 1973 Mich. App. LEXIS 1077 (Mich. Ct. App. 1973).

6. Recording.

It was not necessary to record sale of citrus fruit in order to provide constructive notice to others of nature of buyer’s interest in crop; sale constituted constructive severance of crops from land, and creditor was not entitled to position of secured creditor as against buyer where he did not rely on public records in extending credit to seller. Exchange Nat'l Bank v. Alturas Packing Co., 269 So. 2d 733, 1972 Fla. App. LEXIS 5929 (Fla. Dist. Ct. App. 2d Dist. 1972).

Part 2. Form, Formation and Readjustment of Contract.

§ 75-2-201. Formal requirements; statute of frauds.

  1. Except as otherwise provided in this section, a contract for the sale of goods for the price of five hundred dollars ($500.00) or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
  2. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten (10) days after it is received.
  3. A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
    1. if the goods are to be specially manufactured 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 commitments for their procurement; or
    2. if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
    3. with respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2-606) [Section 75-2-606].

HISTORY: Codes, 1942, § 41A:2-201; Laws, 1966, ch. 316, § 2-201, eff March 31, 1968.

Cross References —

Statute of frauds, generally, see §15-3-1 et seq.

Parole or extrinsic evidence, see §75-2-202.

Terms of acceptance additional to or different from those offered or agreed upon, see §75-2-207.

Modification of written contract, see §75-2-209.

Price payable in money, goods, realty, or otherwise, see §75-2-304.

Application of section to “or return” term of contract, see §75-2-326.

Requirement of buyer’s signature in home solicitation sales, see §75-66-5.

OPINIONS OF THE ATTORNEY GENERAL

There is no statutory requirement that a bid to supply commodities to a county must be dated. Fortier, August 20, 1999, A.G. Op. #99-0413.

RESEARCH REFERENCES

ALR.

Check as payment within contemplation of statute of frauds. 8 A.L.R.2d 251.

Undelivered lease or contract (other than for sale of land), or undelivered memorandum thereof, as satisfying statute of frauds. 12 A.L.R.2d 508.

Construction and effect of exception making the statute of frauds provision inapplicable where goods are manufactured by seller for buyer. 25 A.L.R.2d 672.

Statute of frauds as applicable to seller’s oral warranty as to quality or condition of chattel. 40 A.L.R.2d 760.

Parol evidence to connect signed and unsigned documents relied upon as memorandum to satisfy statute of frauds. 81 A.L.R.2d 991.

Buyer’s note as payment within statute of frauds. 81 A.L.R.2d 1355.

Statute of frauds and conflict of laws. 47 A.L.R.3d 137.

Promissory estoppel as basis for avoidance of statute of frauds. 56 A.L.R.3d 1037.

Construction and application of UCC § 2-201(3)(b) rendering contract of sale enforceable notwithstanding Statute of Frauds to extent it is admitted in pleading, testimony, or otherwise in court. 88 A.L.R.3d 416.

Farmers as “merchants” within provisions of UCC Article 2, dealing with sales. 95 A.L.R.3d 484.

Construction and application of UCC § 2-201(3)(c) rendering contract of sale enforceable notwithstanding statute of frauds with respect to goods for which payment has been made and accepted or which have been received and accepted. 97 A.L.R.3d 908.

Promissory estoppel as basis for avoidance of UCC statute of frauds (UCC § 2-201). 29 A.L.R.4th 1006.

Sales: “specially manufactured goods” statute of frauds exception in UCC § 2-201(3)(a). 45 A.L.R.4th 1126.

Sales: construction of statute of frauds exception under UCC § 2-201(2) for confirmatory writing between merchants. 82 A.L.R.4th 709.

Satisfaction of statute of frauds by e-mail. 110 A.L.R.5th 277.

Who is “creditor” within meaning of § 103(f) of Truth in Lending Act (15 U.S.C.S. § 1602(f)). 157 A.L.R. Fed. 419.

Am. Jur.

15A Am. Jur. 2d, Commercial Code § 36.

67 Am. Jur. 2d, Sales § 48 et seq.

6 Am. Jur. Pl & Pr Forms (Rev), Sales, Forms 2:11-2:23. (Form, formation, and readjustment of contract; Statute of frauds).

18 Am. Jur. Legal Forms 2d, Uniform Commercial Code: Article 2 – Sales, § 253:285 et seq. (Statute of frauds).

CJS.

77A C.J.S., Sales §§ 20-22, 24, 26, 28, 106-111 et seq.

Law Reviews.

Bruckel, The Weed and the Web: Section 2-201’s Corruption of the Code’s Substantive Provisions – The Quantity Problem. 1983 U Ill L Rev 811, 1983.

1984 Mississippi Supreme Court Review: Property. 55 Miss. L. J. 135.

1978 Mississippi Supreme Court Review: Commercial Law. 50 Miss. L. J. 41.

1979 Mississippi Supreme Court Review: Miscellaneous. 50 Miss. L. J. 833.

JUDICIAL DECISIONS

A. In General.

1. Generally.

2. Relationship with other laws.

B. Scope.

3. In general.

4. Bulk transfers.

5. Farm goods.

6. Franchise agreements.

7. Lease or bailment.

8. Mixed sales and service.

9. Option or sale on approval.

10. Persons protected.

11. Real estate transactions.

12. Service contracts.

13. —Real estate salespersons.

14. Term of agreement.

C. Writing.

15. In general; necessity.

16. Modification of writing; oral.

17. —Written.

18. Sufficiency; specificity.

19. —Error or omission.

20. —Memoranda.

21. —Purchase orders or the like.

22. —Quantity.

23. —Quantity; “output” contracts.

24. Signature.

25. —Agent’s authority.

D. Confirmation as Between Merchants.

26. In general.

27. “Merchants.”

28. —Farmers; “merchants.”

29. —Farmers; not “merchants.”

30. Timeliness of confirmation.

31. Delivery and receipt of confirmation.

32. Failure to object.

33. —Seller.

34. —Buyer.

35. —Buyer; arbitration agreements.

36. Signature on confirmation.

37. Particular writings as confirmation.

38. —Letters.

39. —Telegrams.

E. Exceptions.

40. In general.

41. Specially manufactured goods.

42. Admissions by parties.

43. —In testimony.

44. —In pleadings.

45. —In discovery.

46. —Non-judicial admissions.

47. Partial performance.

48. —Extent of ratification; whole contract.

49. —Extent of ratification; part performed.

50. —Indivisible contracts.

51. —Payment; sufficient.

52. —Payment; insufficient.

53. —Receipt and acceptance.

54. Waiver and estoppel.

55. —Equitable estoppel.

56. —Promissory estoppel.

F. Procedural Matters.

57. In general; pleading.

58. Evidence and burden of proof.

59. Questions of law or fact.

60. Appellate review.

G. Decisions Under Former Statutes.

61. Construction and application, generally.

62. Delivery or receipt of property.

63. Payment of purchase price.

64. Note or memorandum.

A. In General.

1. Generally.

In action between timber companies wherein plaintiff charged that defendant fraudulently induced plaintiff to purchase certain property by orally promising that defendant, which had previously acquired timber rights to such property, would sell or trade timber to plaintiff after plaintiff subsequently purchased property, alleged promise to convey timber rights was contract for sale of “goods” subject to statute of frauds and sales provisions of UCC. T.K. Stanley, Inc. v. Scott Paper Co., 793 F. Supp. 707, 1992 U.S. Dist. LEXIS 9416 (S.D. Miss. 1992), aff'd, 5 F.3d 529, 1993 U.S. App. LEXIS 24816 (5th Cir. Miss. 1993).

A writing is required by the Code to give a claimant any rights in personal property of another having a value in excess of $500. Traska v. DeGennaro (Pa. 1958) [court rejected the claim that the plaintiff and defendant were partners as to certain equipment] .

2. Relationship with other laws.

In action by plaintiff timber company against defendant timber company alleging that defendant fraudulently induced plaintiff to purchase certain property by orally promising that defendant, which had previously acquired timber rights on such property, would sell or trade such timber to plaintiff after plaintiff subsequently purchased such property, plaintiff’s fraudulent inducement claim was barred even if it could have been raised under state’s general statute of frauds, because alleged promise to convey timber rights was contract for sale of “goods” subject to statute of frauds. T.K. Stanley, Inc. v. Scott Paper Co., 793 F. Supp. 707, 1992 U.S. Dist. LEXIS 9416 (S.D. Miss. 1992), aff'd, 5 F.3d 529, 1993 U.S. App. LEXIS 24816 (5th Cir. Miss. 1993).

Under principle that pre-UCC law is applicable unless displaced by particular provisions of Code, UCC statute of frauds, rather than general statute of frauds, applies to alleged oral agreement and subsequent confirmatory letter, where general statute of frauds and UCC provision are in conflict and mandate different results. H & W Industries, Inc. v. Formosa Plastics Corp., 860 F.2d 172, 1988 U.S. App. LEXIS 15357 (5th Cir. Miss. 1988).

Although UCC § 1-103 allows principle of estoppel to supplement UCC provisions, grain farmer was not estopped from asserting statute of frauds, UCC § 2-201, as defense to alleged oral contract for sale of 40,000 bushels of grain where there was no evidence of fraud, positive misrepresentation or unconscionable conduct akin to fraud chargeable to farmer. Farmers Coop. Ass'n v. Cole, 239 N.W.2d 808, 1976 N.D. LEXIS 191 (N.D. 1976).

Portions of Uniform Commercial Code relating to course of dealings or trade usage (1-205) were not intended to be applied in manner to defeat Code’s statute of frauds requirements and, at best, evidence of custom or usage in trade may be used to explain ambiguous portions of an agreement; thus, potato farmer could not introduce evidence of usage or course of dealings within trade to substantiate oral agreement with potato buyer. Dangerfield v. Markel, 222 N.W.2d 373, 1974 N.D. LEXIS 159 (N.D. 1974).

Statute of frauds requirement that written memorandum be “subscribed” which was not fulfilled by initials at top thereof should not be confused with Uniform Commercial Code requirement that writing be “signed.” Steinberg v. Universal Machinenfabrik GMBH, 24 A.D.2d 886, 264 N.Y.S.2d 757, 1965 N.Y. App. Div. LEXIS 3030 (N.Y. App. Div. 2d Dep't 1965), aff'd, 18 N.Y.2d 943, 277 N.Y.S.2d 142, 223 N.E.2d 567, 1966 N.Y. LEXIS 927 (N.Y. 1966), limited, Bollo v. Standard Aircraft Equipment Co., 67 A.D.2d 656, 1979 N.Y. App. Div. LEXIS 10224 (N.Y. App. Div. 1st Dep't 1979), limited, Felicie, Inc. v. Leibovitz, 67 A.D.2d 656, 412 N.Y.S.2d 625, 1979 N.Y. App. Div. LEXIS 10227 (N.Y. App. Div. 1st Dep't 1979).

B. Scope.

3. In general.

Availability of statute of frauds set forth in UCC § 2-201(1) is limited to cases in which contractual obligation is basis of recovery sought by plaintiff. Acuri v. Figliolli, 91 Misc. 2d 831, 398 N.Y.S.2d 923, 1977 N.Y. Misc. LEXIS 2424 (N.Y. Dist. Ct. 1977).

4. Bulk transfers.

Alleged agreement concerning sale of corporation could not be considered “contract for sale of goods” so as to be within coverage of UCC statute of frauds, although corporation may have owned “goods.” Olympic Junior, Inc. v. David Crystal, Inc., 463 F.2d 1141, 1972 U.S. App. LEXIS 8832 (3d Cir. N.J. 1972) (applying New York and New Jersey law, since similarity between laws of two states made it unnecessary to choose between them).

Trial court’s conclusion that writing existed which indicated contract for sale of business had been made, and manifestations that seller who was being charged with breach had authenticated writing, provided proper basis for finding that contract was outside Code § 2-201. Interstate United Corp. v. White, 388 F.2d 5, 1967 U.S. App. LEXIS 4458 (10th Cir. Okla. 1967).

5. Farm goods.

In an action to recover the purchase price for the sale of borrow material from the plaintiff seller’s land, the statute of frauds §75-2-201 did not apply to the oral contract, where the contract provided for the purchaser rather than the seller to sever the borrow material from the land. Bell v. Hill Bros. Constr. Co., 419 So. 2d 575, 1982 Miss. LEXIS 2142 (Miss. 1982).

Statute of frauds, UCC § 2-201, applied to contract for sale of corn crop for future delivery. Farmers Coop. Elevator Co. v. Johnson, 90 S.D. 36, 237 N.W.2d 671, 1976 S.D. LEXIS 177 (S.D. 1976).

The sale of a horse is governed by the Uniform Commercial Code covering sales of goods. Presti v. Wilson, 348 F. Supp. 543, 1972 U.S. Dist. LEXIS 11832 (E.D.N.Y. 1972).

6. Franchise agreements.

In action for breach of oral contract creating exclusive mobile home dealership, trial court erred in granting summary judgment for defendant on ground that contract was unenforceable under UCC § 2-201(1) because it was nothing more than contract for sale of goods worth $500 or more, since exclusive sales agency agreement is more than mere sales contract. Apache Trailer Sales v. Redman Indus., 117 Ariz. 504, 573 P.2d 904, 1977 Ariz. App. LEXIS 804 (Ariz. Ct. App. 1977) (also describing agreement in suit as one of continuation, rather than one of several separate buy-and-sell agreements).

7. Lease or bailment.

Contract was lease arrangement and was not covered by Uniform Commercial Code provisions relating to warranties where one party agreed to lease certain hens, known as “Parent Stock,” and eggs therefrom, known as “Hatching Eggs,” to other party for purpose of producing off-spring, where contract provided that first party retained title to “Parent Stock” and “Hatching Eggs” and other party was precluded from selling or otherwise disposing of same without express written consent of first party, and where contract additionally provided for termination by either party on written notice at least 30 days in advance. De Kalb Agresearch, Inc. v. Abbott, 391 F. Supp. 152, 1974 U.S. Dist. LEXIS 12406 (N.D. Ala. 1974), aff'd, 511 F.2d 1162, 1975 U.S. App. LEXIS 15111 (5th Cir. Ala. 1975).

8. Mixed sales and service.

Contractor’s breach of contract action against a subscontractor’s successor-in-interest and its owner did not fall under the statute of frauds because the owner was performing under the original contract, a fact that he explicitly discussed with the contractor’s president. Gecko Outdoor Prods. Corp. v. Casablanca Constr., Inc., 250 So.3d 508, 2018 Miss. App. LEXIS 313 (Miss. Ct. App. 2018).

Although a number of changes to contract involved acquisition of goods for installation in residence, all were related to overall construction project which was conceived by original contract; thus arrangement between homebuilders and contractor was for performance of service and did not fall within ambit of Mississippi statute of frauds provision applicable to sales transactions. In re Levingston, 119 B.R. 935, 1990 Bankr. LEXIS 2183 (Bankr. N.D. Miss. 1990).

Oral contract to supply timber to paper mill was contract for sale of timber not a brokerage contract and was therefore unenforceable due to lack of writing evidencing contract; agreement did not fall within any exceptions to UCC Statute of Frauds. Futch v. James River-Norwalk, Inc., 722 F. Supp. 1395, 1989 U.S. Dist. LEXIS 12113 (S.D. Miss.), aff'd, 887 F.2d 1085, 1989 U.S. App. LEXIS 15434 (5th Cir. Miss. 1989).

In contracts that involve both the sale of goods and the rendition of services, the predominant feature of the contract controls with respect to the applicability of the statute of frauds set forth in UCC § 2-201(1). Thus, where a contract for the sale of goods and the rendition of services is essentially one for the sale of goods, it is subject to the statute. Anderson Constr. Co. v. Lyon Metal Products, Inc., 370 So. 2d 935, 1979 Miss. LEXIS 2029 (Miss. 1979).

In action to enforce oral agreement by subcontractor to provide and install school lockers, chalkboards and tack boards, where quoted price did not distinguish between cost of goods supplied and installation charges, subcontractor did not sustain his burden of proving that service aspect of contract was merely incidental to sale of goods aspect, as defined in UCC §§ 2-106(1) and 2-105, and, thus, he failed to sustain his burden of proving that UCC § 2-201 statute of frauds was applicable to contract and barred its enforcement. Glover School & Office Equipment Co. v. Dave Hall, Inc., 372 A.2d 221, 1977 Del. Super. LEXIS 99 (Del. Super. Ct. 1977).

UCC § 2-201 statute of frauds provision was applicable to contract which contained element of service, i.e. collection of waste by plaintiff, where principal object of agreement was sale of waste by defendant to plaintiff. Huyler Paper Stock Co. v. Information Supplies Corp., 117 N.J. Super. 353, 284 A.2d 568, 1971 N.J. Super. LEXIS 425 (Law Div. 1971).

9. Option or sale on approval.

Transaction in which plaintiff purchased gems from company and received contemporaneous oral promise that he could return gems for complete refund at offices of company’s New York City franchisee is “sale on approval” under UCC § 2-326 since gems were delivered to plaintiff “primarily for use” and therefore, UCC § 2-201 is applicable to transaction. Kristinus v. H. Stern Com. E Ind. S.A., 466 F. Supp. 903, 1979 U.S. Dist. LEXIS 13953 (S.D.N.Y. 1979).

Option given to purchaser of car wash franchise which included equipment and accessories to make certain changes in times purportedly sold will not in itself make alleged contract unenforceable. Hankins v. American Pacific Sales Corp., 7 Wn. App. 316, 499 P.2d 214, 1972 Wash. App. LEXIS 977 (Wash. Ct. App. 1972).

10. Persons protected.

Auto rental agency brought detinue action against bank; bank had obtained autos in question upon foreclosure of chattel mortgages executed by used car dealer; held, UCC statute of frauds did not apply to used car dealer’s testimony, inasmuch as bank was not party to sales transaction, was not seeking to enforce contract, and had no rights controlled by contract. Blowers v. First Nat'l Bank, 45 Ala. App. 485, 232 So. 2d 666, 1970 Ala. Civ. App. LEXIS 491 (Ala. Civ. App. 1970).

11. Real estate transactions.

Statute of frauds in UCC § 2-201(1) did not apply to oral contract under which buyer of “borrow material” (fill soil), instead of seller, was to remove such material from seller’s land, since UCC § 2-107(1)–which declares that contract for sale of “minerals or the like” is contract for sale of “goods” if such minerals are to be severed by seller–applies, as stated in Official Comment 1, only when minerals are to be severed by seller. As a result, oral contract for sale of “borrow material” in suit was governed by statute of frauds affecting realty. Bell v. Hill Bros. Constr. Co., 419 So. 2d 575, 1982 Miss. LEXIS 2142 (Miss. 1982).

UCC § 2-107(1) applies only if the minerals are to be severed by the seller. If the buyer is to sever, such transactions are considered to be contracts affecting land to which the statute-of-frauds section of the Uniform Commercial Code (UCC § 2-201) does not apply, although such contracts must conform to the statute of frauds that affects the transfer of interests in land. De Luca v. C. W. Blakeslee & Sons, Inc., 174 Conn. 535, 391 A.2d 170, 1978 Conn. LEXIS 867 (Conn. 1978) (holding that UCC § 2-107(1) did not apply to contracts between landowner and highway contractor for sale of fill soil that was to be severed from seller’s land by contractor-buyer).

Where parties to contract for sale of realty and personalty of ranch orally agreed to constructively sever irrigation system motor and pump and to consider it as subject to oral agreement at buy and sell price of $7,500, transaction pertaining to pump and motor was not subject to statute of frauds. Martin v. McCaige, 261 Ore. 99, 492 P.2d 770, 1972 Ore. LEXIS 274 (Or. 1972).

12. Service contracts.

Contract to employ plaintiff to provide labor, material and equipment necessary to perform masonry work involved in construction of private hospital did not fall within provisions of UCC § 2-201(1). Lusalon, Inc. v. Thomas O'Connor & Co., 3 Mass. App. Ct. 734, 325 N.E.2d 599, 1975 Mass. App. LEXIS 761 (Mass. App. Ct. 1975).

13. —Real estate salespersons.

Agreement between real estate broker and dealer in modular homes was in nature of agreement for procuring purchaser of personal property, i.e. in nature of a finder’s agreement, and was not agreement for sale of goods; thus, UCC § 2-201(1) statute of frauds was not applicable. Selected Listings Co. v. Humiston, 135 Vt. 106, 370 A.2d 1297, 1977 Vt. LEXIS 567 (Vt. 1977).

This section is inapplicable to an oral contract between a housebuilder and an agent under which the latter was to receive a 5% commission on any building contracts he might obtain. Brown v. Lee, 242 Ark. 122, 412 S.W.2d 273, 1967 Ark. LEXIS 1212 (Ark. 1967).

14. Term of agreement.

Sale of gems and contemporaneous promise to repurchase them for complete refund at offices of New York City franchise is to be viewed as single contract and therefore UCC § 2-201 does not render that contract unenforceable since promise to repurchase by its term was to be performed within 1 year. Kristinus v. H. Stern Com. E Ind. S.A., 466 F. Supp. 903, 1979 U.S. Dist. LEXIS 13953 (S.D.N.Y. 1979).

C. Writing.

15. In general; necessity.

Chapter 13 debtor’s claim that he had an oral agreement with a creditor to sell the creditor a company he owned that manufactured and sold bird calls, in exchange for payment of $250,000 in five $50,000 increments over five years and the creditor’s promise to forgive debts the debtor owed under several promissory notes he signed, was barred by two Mississippi statutes of frauds: Miss. Code Ann. §§15-3-1 and75-2-201. Ziegler v. Hood (In re Hood), 2013 Bankr. LEXIS 3709 (Bankr. N.D. Miss. Sept. 3, 2013).

Writing must meet 3 requirements to satisfy statute of frauds: be sufficient to indicate that a contract for sale has been made between the parties, be signed by the party against whom enforcement is sought, and specify a quantity. Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1991 U.S. App. LEXIS 3139 (5th Cir. Miss. 1991).

In breach-of-warranty action for damages by buyer of allegedly defective dump trailers against manufacturer-seller, court held (l) that buyer and its ultimate Mexican customers were “merchants” within meaning of UCC § 2-104(l); (2) that seller was “merchant” within meaning of both UCC § 2-104(l) and § 2-314(l); (3) that telephoned order for 20 additional trailers was not enforceable under statute of frauds in UCC § 2-201(l) because it did not come within exceptions to such statute contained in UCC § 2-201(3); (4) that “specially manufactured goods” exception in UCC § 2-201(3)(a) applies only when seller, rather than buyer, seeks to escape statute-of-frauds defense; (5) that since three trailers purchased under valid written contract were put to improper use by buyer’s Mexican customers, rather than being used for their “ordinary purposes,” no breach of implied warranty of merchantability under UCC § 2-314(1) and (2)(c) occurred; (6) that use of trailers for improper purposes, rather than for their stated “particular purpose,” prevented recovery under implied warranty of fitness in UCC § 2-315; (7) that buyer could not recover for breach of express warranty under UCC § 2-313(1)(a) because it failed to prove that it had relied on statements in manufacturer-seller’s brochure either prior to or contemporaneously with making of parties’ contract; and (8) that since buyer had no right under UCC § 2-601(a) to reject two unused and undamaged trailers, manufacturer-seller was not required to retake them or to refund their purchase price to buyer. Global Truck & Equipment Co. v. Palmer Machine Works, Inc., 628 F. Supp. 641, 1986 U.S. Dist. LEXIS 29524 (N.D. Miss. 1986).

Alleged agreement by seller of cotton module builders that it would sell module trailers in combination with the module builders, even if such agreement could have been proved by buyer, would not have been enforceable where buyer produced no writing sufficient to satisfy statute-of-frauds requirement of UCC § 2-201(1). FMC Finance Corp. v. Reed, 592 F.2d 238, 1979 U.S. App. LEXIS 15810 (5th Cir. Miss. 1979).

In breach of contract action by subcontractor against both supplier and manufacturer of air compressors for failure to make delivery, where (1) on September 13, 1977, supplier gave subcontractor oral quotation of $89,000 for five compressors in issue, (2) on previous day (September 12), supplier had obtained both an oral quotation and an estimate sheet, signed by manufacturer’s agent, that listed price for two compressors, and agent orally stated that three more could be furnished at same unit price, so that total price for five compressors would be $80,000, (3) on September 13, 1977, subcontractor used supplier’s quotation of $89,000 to make successful bid for contract sought by it, (4) on September 26, 1977, manufacturer, after finding out that its competitors charged higher prices for compressors, issued revised price quotation to supplier and offered to sell five compressors in suit for $113,000, (5) on October 24, 1977, supplier, ignoring manufacturer’s revised quotation, issued purchase order to manufacturer for five compressors at manufacturer’s original quotation of $80,000, (6) on November 7, 1977, manufacturer advised supplier that it would not furnish compressors at its original quotation, (7) on October 6, 1977, at meeting between subcontractor and supplier, supplier told subcontractor that it could not sell compressors for $89,000, but subcontractor nevertheless gave supplier purchase order for compressors at such price, and (8) on supplier’s failure to deliver compressors, subcontractor purchased them elsewhere for $121,000 and sought to recover $32,000 as difference between supplier’s original quotation of $89,000 and subcontractor’s cover price, court held (1) that manufacturer was not liable to subcontractor on either theory of vicarious responsibility for supplier’s acts or theory that subcontractor was third-party beneficiary of contract between supplier and manufacturer, (2) that manufacturer’s answer to supplier’s cross claim did not contain unqualified admission of facts that, under exception to statute of frauds contained in UCC § 2-201(3)(b), would remove alleged oral contract between supplier and manufacturer from statute of frauds, (3) that manufacturer’s estimate sheet of September 12, 1977 was not, as claimed by supplier, writing sufficient to indicate that contract of sale had been made within meaning of statute of frauds in UCC § 2-201(1), but was at best mere offer that had been effectually revoked by manufacturer under UCC § 2-205 at time when manufacturer had right to revoke it, (4) that such revocation had occurred before supplier attempted to place purchase order for compressors with manufacturer, and (5) that as between subcontractor and supplier, there was no writing of any kind within meaning of statute of frauds in UCC § 2-201(1) on which subcontractor could rely to avoid the statute, and also no admission of facts by supplier that would constitute contract enforceable under admissions exception to the statute contained in UCC § 2-201(3)(b). Ivey's Plumbing & Electric Co. v. Petrochem Maintenance, Inc., 463 F. Supp. 543, 1978 U.S. Dist. LEXIS 7147 (N.D. Miss. 1978).

In action arising out of agreement to provide city with municipal personnel ordinance for fixed fee, necessary elements of valid, binding contract, whether in terms of services contract or one for sale of goods, were present where UCC § 2-201(1) requirement that there be writing sufficient to indicate that contract has been made was met and where plaintiff commenced performance of its obligations within reasonable time as required by UCC § 2-309. National Civil Service League v. Santa Fe, 370 F. Supp. 1128, 1973 U.S. Dist. LEXIS 10608 (D.N.M. 1973).

16. Modification of writing; oral.

Although UCC § 2-209(3) provides that statute of frauds (UCC § 2-201) must be satisfied if contract as modified is within its provisions, under UCC § 2-209(4) attempted oral modification may operate as waiver of statute of frauds and, once waived, there is no barrier to oral modification of terms of written contract; thus, trial court erred in granting summary judgment for defendant seller on ground that he had effectively terminated written sales agreement pursuant to cancellation provision where there was attempted oral modification of agreement to eliminate seller’s right of cancellation which raised material issues of fact as to (1) whether there was waiver of statute of frauds, (2) whether there was oral modification of agreement removing seller’s right of cancellation, and (3) whether seller’s purported retraction of waiver pursuant to UCC § 2-209(5) met notice requirements. Double--E Sportswear Corp. v. Girard Trust Bank, 488 F.2d 292, 1973 U.S. App. LEXIS 6945 (3d Cir. Pa. 1973).

In reclamation action by lessor to recover air conditioning units, trustee of bankrupt lessee should not have been permitted to introduce oral evidence, contradictory of unambiguous written lease agreement, suggesting that oral option had been granted to lessee to purchase units upon termination of lease, since effect of such evidence was “enforcement” of lessee’s right under alleged oral agreement, and as such was improper in absence of “some writing sufficient to indicate that contract for sale has been made between the parties.” In re Financial Computer Systems, Inc., 474 F.2d 1258, 1973 U.S. App. LEXIS 11847 (9th Cir. Cal. 1973).

Alleged oral truck franchise agreement was unenforceable against truck manufacturer under statute of frauds, where purchase order documents submitted by plaintiff were devoid of any terms which could serve as evidence of franchise relationship, and where standard form contracts allegedly signed by manufacturer contained series of conditions precedent which plaintiff had not shown to have been satisfied. Artman v. International Harvester Co., 355 F. Supp. 482, 1973 U.S. Dist. LEXIS 15019 (W.D. Pa. 1973).

Where a contract is required to be in writing, its terms cannot be modified orally. Edelstein v. Carole House Apartments, Inc., 220 Pa. Super. 298, 286 A.2d 658, 1971 Pa. Super. LEXIS 1158 (Pa. Super. Ct. 1971).

Where there was oral agreement, collateral and contemporaneous with written agreement, between parties as to manner of feeding yearling steers intended for future delivery, and where trial court found that written contract was not intended by parties as complete and exclusive statement of all terms of agreement, statute of frauds was no bar to admissibility of oral agreement. Conner v. May, 444 S.W.2d 948 (Tex. Civ. App. 1969), writ ref’d n.r.e., (Dec. 31, 1969).

17. —Written.

Under Uniform Commercial Code § 2-204 a liberal construction with respect to the formation of contracts of sale is mandated, and where the buyer of prepared meals signed a letter of intent containing price, time delivery, quantity, and quality terms; the conduct of the parties evidenced their contractual intention, notwithstanding the buyer’s addition of a paragraph indicating that a detailed contract containing complete specifications as to quality and quantity and protective provision in event the quality of the produce or service fell below established standards was to be completed in the future. Graulich Caterer, Inc. v. Hans Holterbosch, Inc., 101 N.J. Super. 61, 243 A.2d 253, 1968 N.J. Super. LEXIS 505 (App.Div. 1968).

A printed form which was otherwise complete and unambiguous is rendered ambiguous by the handwritten notation made by the salesman on one of the blank lines of the form of “thirty-day warranty.” Leveridge v. Notaras, 1967 OK 193, 433 P.2d 935, 1967 Okla. LEXIS 535 (Okla. 1967).

18. Sufficiency; specificity.

The parties entered into an enforceable contract where the dealer accepted the buyer’s downpayment on a car, and integration of the documents, some of which the parties executed jointly or individually, indicated an agreement on a specific car for sale, its retail price, the interest rate and various coverages, and thus was sufficient to meet the requirements of the statute of frauds. Fairley v. Turan-Foley Imports, 65 F.3d 475, 1995 U.S. App. LEXIS 27752 (5th Cir. Miss. 1995).

Statute of frauds can be met through the integration of several documents, each of which alone might not be sufficient to meet the statute’s 3 requirements for sufficiency. Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1991 U.S. App. LEXIS 3139 (5th Cir. Miss. 1991).

In order for a confirmatory writing under UCC § 2-201(2) to be “sufficient against the sender,” it must satisfy the requirements of UCC § 2-201(1). These requirements are: (1) the writing must evidence a contract, (2) it must be signed by the sender, and (3) it must specify a quantity. Perdue Farms, Inc. v. Motts, Inc. (applying Mississippi UCC; holding that writing sent in confirmation of oral contract for purchase of poultry qualified as confirmatory writing under UCC § 2-201(2).

Where (1) seller on August 3d orally offered to sell buyer 15,000 tons of fertilizer, which offer was valid until 2:00 p.m. on August 3d, (2) on morning of August 3d, as requested by buyer, seller sent buyer same offer by telex, (3) at 10:00 a.m. on August 3d, after seller had sent and relinquished control over its firm offer by telex, buyer allegedly accepted such offer orally, and (4) buyer thereafter sent seller responsive telex while seller’s firm offer was still valid and such telex included certain terms, including terms as to payment and loading, that were not in seller’s offer, court held (1) that inclusion in buyer’s telex of payment and loading provisions not mentioned in seller’s offer was not, under UCC § 2-207(1), necessarily fatal to buyer’s alleged acceptance, (2) that under UCC § 2-207(2), term “plus or minus 10 percent at buyer’s option,” although it might have materially altered the contract, did not by itself invalidate the alleged acceptance, (3) that on the other hand, since UCC § 2-207 does require definite expression of acceptance before its provisions can apply, it might be that buyer’s responsive telex, taken as a whole, did not represent agreement between the parties on even price and quantity of seller’s fertilizer, and (4) that if a contract had been formed, it was enforceable under statute of frauds set forth in UCC § 2-201(1) because document signed by seller as party to be charged was its firm offer in its August 3d telex and buyer’s oral acceptance of that written offer was responsive thereto, insofar as satisfying statute of frauds was concerned, and clearly showed that oral evidence offered by buyer rested on a real transaction. Ore & Chem. Corp. v. Howard Butcher Trading Corp., 455 F. Supp. 1150, 1978 U.S. Dist. LEXIS 15896 (E.D. Pa. 1978) (applying New York and Pennsylvania UCC; holding, on cross-motions for summary judgment, that validity of buyer’s acceptance depended on issues of fact to be resolved at the trial).

Where (1) buyer placed order for new Corvette on form furnished by dealer, (2) such form described car, listed its purchase price, provided for delivery to buyer as soon as possible, and also stated that order was not binding until accepted by dealer, (3) buyer, but not dealer, signed such order form and gave dealer check for $1,000 deposit on vehicle, (4) dealer on same day placed written order form, (3) that order form sent by dealer to manufacturer was sufficient memorandum of contract to satisfy statute of frauds set forth in UCC § 2-201(1), and (4) that even assuming absence of a sufficient memorandum under UCC § 2-201(1), buyer’s part payment on the indivisible contract operated under UCC § 2-201(3)(c) to take contract out of statute of frauds. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

Written agreement for sale of boat which was somewhat vague in many details, but which was signed by seller and buyer and referred to “Leisure Craft” boat that was “to be paid at terms below,” constituted a sufficient writing with respect to statute-of-frauds provisions of UCC § 2-201(1) & (2), and parol evidence was admissible to supply missing portions of such contract. Hatley v. Frey, 145 Ga. App. 658, 244 S.E.2d 604, 1978 Ga. App. LEXIS 2287 (Ga. Ct. App. 1978).

Transaction whereby seller, who was indebted to buyer, agreed to sell tractor to buyer in return for cancellation of seller’s indebtedness constituted present, binding and completed sale, and title to tractor passed to buyer at time of execution of contract of sale, notwithstanding sales agreement provided that tractor would remain on seller’s premises until needed by buyer and during that period of time seller would have right to sell tractor, and written agreement between seller and buyer was adequate as contract of sale under UCC since it contained date, identified buyer and seller and specified exactly model, make and serial number of tractor, listed amount and nature of consideration and was signed by agent of both parties. Ace Supply v. Rocky-Mountain Mach. Co., 96 Idaho 183, 525 P.2d 965, 1974 Ida. LEXIS 406 (Idaho 1974).

Documents that look toward some sale in the future do not constitute a sufficient writing to satisfy the statute of frauds provision especially with respect to the specificity with which the terms and conditions of all promises constituting the contract are set forth. In re Flying W Airways, Inc., 341 F. Supp. 26, 1972 U.S. Dist. LEXIS 15259 (E.D. Pa. 1972).

All that is required is that the writing afford a basis for believing that the offered oral evidence rests upon a real transaction. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

19. —Error or omission.

Where contract for sale of grain omitted delivery date, such omission did not involve statute of frauds problem as parties orally agreed that seller had option to deliver within 2 months period; where seller refused to deliver corn, buyer’s remedy for nondelivery under UCC § 2-711 was for damages, this being difference between contract price for corn and market price at date of breach. Cargill, Inc. v. Fickbohm, 252 N.W.2d 739, 1977 Iowa Sup. LEXIS 1036 (Iowa 1977).

Terms with respect to time and place of payment or delivery may be omitted from written instrument; in such event payment for goods sold is due at time and place of buyer’s receipt of goods, even though place of shipment is also place of delivery. Southwest Engineering Co. v. Martin Tractor Co., 205 Kan. 684, 473 P.2d 18, 1970 Kan. LEXIS 337 (Kan. 1970).

A sales order for cable signed by the purchaser’s employee containing the name of the seller, the name of the shipper, the quantity, description, and weight of the cable, and notations of the purchaser’s order number and the seller’s sales number is not violative of the statute of frauds for the reason that it failed to state the price and the price could be proved by parol. Julian C. Cohen Salvage Corp. v. Eastern Electric Sales Co., 205 Pa. Super. 26, 206 A.2d 331, 1965 Pa. Super. LEXIS 1017 (Pa. Super. Ct. 1965).

20. —Memoranda.

A (1) memorandum from vice president of retail sales of wristwatch-selling company showing that seller’s salesperson was authorized to offer buyer, a Mississippi corporation operating jewelry counters in department stores throughout southeast, a discounted price on certain wristwatches made by defendant, and (2) defendant’s order form, taken together with (2) internal memorandum from a clerical employee in the employ of the defendant in charge of inventory control, announcing that a new promotion code had been set up to cover “a special order from [the plaintiff]”, provided sufficient evidence to satisfy statute of frauds. Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1991 U.S. App. LEXIS 3139 (5th Cir. Miss. 1991).

Where a letter from a prospective seller to a prospective buyer adopted the position that no contract of sale had been formed, on the asserted basis that the seller’s employee expressed a condition precedent to acceptance of the offer, namely, procuring the approval of her superiors, and where the letter contained the statement made by that employee that “we will take care of it”, signifying acceptance on the part of the seller notwithstanding any secret intentions the seller’s employee failed to express, the letter constituted a memorandum or writing evidencing a contract for the sale of goods, which was signed by the party against whom enforcement was sought, and it specified a quantity; thus, under §75-2-201(1), the trial judge erred in sustaining the seller’s motion to dismiss on the basis of the statute of frauds. Franklin County Cooperative v. MFC Services (A.A.L.), 441 So. 2d 1376, 1983 Miss. LEXIS 3069 (Miss. 1983).

Where (1) buyer placed order for new Corvette on form furnished by dealer, (2) such form described car, listed its purchase price, provided for delivery to buyer as soon as possible, and also stated that order was not binding until accepted by dealer, (3) buyer, but not dealer, signed such order form and gave dealer check for $1,000 deposit on vehicle, (4) dealer on same day placed written order form, (3) that order form sent by dealer to manufacturer was sufficient memorandum of contract to satisfy statute of frauds set forth in UCC § 2-201(1), and (4) that even assuming absence of a sufficient memorandum under UCC § 2-201(1), buyer’s part payment on the indivisible contract operated under UCC § 2-201(3)(c) to take contract out of statute of frauds. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

UCC § 2-201(1) makes only three invariable requirements as to the memorandum: (1) it must evidence a contract for the sale of goods; (2) it must be “signed,” a word that includes any authentication that identifies the party to be charged; and (3) it must specify a quantity. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

In action for bank’s breach of contract to sell plaintiff a repossessed truck tractor, signed letter to plaintiff from bank’s vice president which stated that although bank would not extend credit to plaintiff, bank would sell tractor to plaintiff for $6,800 cash, constituted, in conjunction with plaintiff’s offer to bank of money order for $6,800, sufficient memorandum of alleged contract under UCC § 2-201(1). Veik v. Tilden Bank, 200 Neb. 705, 265 N.W.2d 214, 1978 Neb. LEXIS 620 (Neb. 1978) (where bank refused to sell tractor for sum originally agreed on).

UCC § 2-201(1) contains only three definite and invariable requirements as to the memorandum: (1) it must evidence a contract for the sale of goods; (2) it must be “signed,” which includes any authentication that identifies the party to be charged; and (3) it must specify a quantity. Veik v. Tilden Bank, 200 Neb. 705, 265 N.W.2d 214, 1978 Neb. LEXIS 620 (Neb. 1978).

Under UCC § 2-201(1), absence of memorandum in writing is merely defense to action to enforce executory contract for sale of goods; it is not basis for rescission of executed contract and completed sale. Vom Lehn v. Astor Art Galleries, Ltd., 86 Misc. 2d 1, 380 N.Y.S.2d 532, 1976 N.Y. Misc. LEXIS 2383 (N.Y. Sup. Ct. 1976).

Under UCC § 2-201, memorandum functions only as evidence of contract and need not contain every term. Kerner v. Hughes Tool Co., 56 Cal. App. 3d 924, 128 Cal. Rptr. 839, 1976 Cal. App. LEXIS 1417 (Cal. App. 2d Dist. 1976).

Oral agreement to extend credit entered into at time buyer purchased used car from seller, paid seller partial down payment, and executed partially completed bill of sale, but prior to time parties executed conditional sales contract, constituted valid and binding contract under statute of frauds: (1) bill of sale was sufficient written memorandum to take sale of car out of operation of statute under UCC § 2-201(1); (2) oral agreement to extend credit was collateral to sale and inducement for entire bargain; (3) terms of oral agreement to extend credit were consistent with and additional to written bill of sale under UCC § 2-202(b); and (4) conduct of parties indicated firm commitment to extend credit under UCC § 2-201(3)(c). Hardin v. Cliff Pettit Motors, Inc., 407 F. Supp. 297, 1976 U.S. Dist. LEXIS 16945 (E.D. Tenn. 1976).

21. —Purchase orders or the like.

In an action seeking to recover on unpaid invoices for the purchase of cattle, the defendant was not entitled to summary judgment where the codefendant alleged that the defendant and codefendant entered into a partnership agreement to purchase, raise and sell cattle for a profit; if such an arrangement existed, the receipt by the codefendant of invoices for the cattle would be sufficient to refute the defendant’s assertion of the statute of frauds. Mississippi Livestock Producers Ass'n v. Hood, 758 So. 2d 447, 2000 Miss. App. LEXIS 105 (Miss. Ct. App. 2000).

Subsection (2) of this section does not allow seller of wristwatches to reject an offer by buyer made within 10 days after seller received copy of buyer’s purchase order; subsection (2) provides merchants with a method of satisfying statute of frauds when an oral contract has been formed but signature of party to be charged is lacking, by contrast, subsection (2) cannot be invoked to excuse a breach of that contract in the present case, in which there were 2 writings signed by seller’s representatives which, together with the unsigned seller order form, were sufficient to establish written contract. Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1991 U.S. App. LEXIS 3139 (5th Cir. Miss. 1991).

In proceeding to stay arbitration, trial court did not err in refusing to instruct jury, as requested by seller, to effect that mere receipt of purchase order including arbitration clause, without returning it, did not constitute agreement to arbitrate, unless preceded by oral agreement. S. Kornblum Metals Co. v. Intsel Corp., 47 A.D.2d 523, 362 N.Y.S.2d 568, 1975 N.Y. App. Div. LEXIS 8580 (N.Y. App. Div. 2d Dep't 1975), aff'd, 38 N.Y.2d 376, 379 N.Y.S.2d 826, 342 N.E.2d 591, 1976 N.Y. LEXIS 2248 (N.Y. 1976).

Under UCC § 2-201, an agreement is enforceable only to the extent of the goods shown in the writing which is relied upon to establish the contract, and hence the purchase invoices, even if deemed to meet the statutory requirement of a writing, cannot support a claim for damages to future goods. Huyler Paper Stock Co. v. Information Supplies Corp., 117 N.J. Super. 353, 284 A.2d 568, 1971 N.J. Super. LEXIS 425 (Law Div. 1971).

22. —Quantity.

In action by supplier against subcontractor for latter’s alleged breach of contract to purchase limestone, which district court had ruled was contract to purchase specific quantity of limestone, court held (1) that contract was supported by consideration and thus was enforceable, (2) that contract satisfied statute-of-frauds requirement in UCC § 2-201(1) as to presence of “quantity term” in the agreement, since by incorporating certain bid documents by reference, it obligated supplier to furnish limestone “of a grade and quality to conform to specified requirements” in such bid documents, (3) that as a result of provisions in incorporated bid documents, the contract, instead of being agreement for fixed amount of limestone, was a requirements contract within meaning of UCC § 2-306(1), (4) that subcontractor did not breach such contract by directing supplier not to supply any limestone at all, since subcontractor had no requirements as result of decision by National Parks Service not to use limestone on project that subcontractor was working on, and (5) that although limiting language of UCC § 2-306(1) would seem to prevent subcontractor from reducing its requirements to zero, such language did not in fact preclude a good-faith reduction in a party’s requirements that was highly disproportionate to such party’s normal prior requirements or stated estimates. R. A. Weaver & Associates, Inc. v. Asphalt Constr., Inc., 587 F.2d 1315, 190 U.S. App. D.C. 418, 1978 U.S. App. LEXIS 8260 (D.C. Cir. 1978).

In order for a confirmatory writing under UCC § 2-201(2) to be “sufficient against the sender,” it must satisfy the requirements of UCC § 2-201(1). These requirements are: (1) the writing must evidence a contract, (2) it must be signed by the sender, and (3) it must specify a quantity. Perdue Farms, Inc. v. Motts, Inc. (applying Mississippi UCC; holding that writing sent in confirmation of oral contract for purchase of poultry qualified as confirmatory writing under UCC § 2-201(2).

One page form marketing agreement between association of independent fishermen and cannery was unenforceable under UCC § 2-201 where contract omitted any mention of quantity of fish to be purchased and where there was no quantity provision in any writing between parties to furnish basis for explanation by parol evidence. Alaska Independent Fishermen's Marketing Asso. v. New England Fish Co., 15 Wn. App. 154, 548 P.2d 348, 1976 Wash. App. LEXIS 1375 (Wash. Ct. App. 1976).

Enforcement of contract between hosiery manufacturer and buyer under which manufacturer agreed to accept returns of certain merchandise for credit in exchange for buyer’s promise to purchase sufficient amount of hosiery to exhaust such credits, was barred by statute of frauds, UCC § 2-201, although writings between parties evidenced ongoing buyer-seller relationship predicated on a “real transaction,” where writings failed to state quantity of hosiery necessary to exhaust credits and where it was impossible to determine total quantity necessary to exhaust credits, since amounts of credits and purchases varied with styles of hosiery returned and purchased. Doral Hosiery Corp. v. Sav--A--Stop, Inc., 377 F. Supp. 387, 1974 U.S. Dist. LEXIS 9267 (E.D. Pa. 1974).

In action by supplier against homeowners to recover unpaid balance for materials supplied to contractor in construction of home, documents signed by homeowners under which they agreed to accept liability for materials delivered to contractor, but which did not show any quantity of goods being sold, was not sufficient to satisfy UCC § 2-201. Lowe's Cos. v. Lipe, 20 N.C. App. 106, 201 S.E.2d 81, 1973 N.C. App. LEXIS 1485 (N.C. Ct. App. 1973).

Where it was obvious that reference to volume of four and one-half to five million feet was merely an estimate constituting “all” of hemlock logs in area known to defendant, there is no inconsistency between references to “all” and to specific amount in different portions of letter which would disqualify it as confirmation of oral contract under UCC § 2-201(2). Ft. Hill Lumber Co. v. Georgia-Pacific Corp., 261 Ore. 431, 493 P.2d 1366, 1972 Ore. LEXIS 314 (Or. 1972).

Agreement “to furnish all concrete for slab” was not insufficient as description of quantity to satisfy requirements of statute of frauds, since term “all the concrete for slab” meant in effect that quantity of concrete to be delivered and poured was that which was required for slab, and parol evidence ultimately produced undisputably indicated location and identity of slab referred to. Port City Constr. Co. v. Henderson, 48 Ala. App. 639, 266 So. 2d 896, 1972 Ala. Civ. App. LEXIS 413 (Ala. Civ. App. 1972).

In a dispute as to the existence of a contract to sell a valuable coin collection, a letter written by the defendant which failed to indicate the existence of a contract and the quantity of coins to be sold failed to satisfy the requirements of the Statute of Frauds. Oswald v. Allen, 285 F. Supp. 488, 1968 U.S. Dist. LEXIS 9191 (S.D.N.Y. 1968), aff'd, 417 F.2d 43, 1969 U.S. App. LEXIS 10422 (2d Cir. N.Y. 1969).

23. —Quantity; “output” contracts.

Where contracts for sale of cotton between buyer and cotton growers specified that buyer would purchase, and grower would sell, cotton grown during 1973 crop year on specified acreage, with projected yield of certain number of pounds of cotton per acre, quantity terms of contracts were not only sufficiently definite to satisfy UCC statute of frauds provision, § 2-201, but also were sufficient to meet standards of definiteness required by UCC § 2-204(3) for enforceability. Riegel Fiber Corp. v. Anderson Gin Co., 512 F.2d 784, 1975 U.S. App. LEXIS 14750 (5th Cir. Ala. 1975).

Contracts for sale of cotton under which buyer agreed to buy all cotton produced by seller on specified acreage at specified price for specified grades were “output” contracts, as defined in UCC § 2-306(1), for sale of all of farmers’ cotton produced by them during crop year 1973, were not vague and indefinite as to quantity and subject matter, and were sufficient to satisfy requirements of statute of frauds, UCC § 2-201(1). Furthermore, specific performance of contracts was available to buyers since parties stipulated that cotton involved was unique. R. L. Kimsey Cotton Co. v. Ferguson, 233 Ga. 962, 214 S.E.2d 360, 1975 Ga. LEXIS 1498 (Ga. 1975).

Contract for sale of growing cotton, which were “goods” within contemplation of UCC § 2-105(1), met requirements of statute of frauds provision of UCC § 2-201(1) where both parties signed writing, quantity was sufficiently shown for “output” contract for sale of all defendants’ cotton produced on their 825 acres under UCC § 2-306(1), and document indicated that agreement to sell had been made. Harris v. Hine, 232 Ga. 183, 205 S.E.2d 847, 1974 Ga. LEXIS 900 (Ga. 1974).

24. Signature.

In order for a confirmatory writing under UCC § 2-201(2) to be “sufficient against the sender,” it must satisfy the requirements of UCC § 2-201(1). These requirements are: (1) the writing must evidence a contract, (2) it must be signed by the sender, and (3) it must specify a quantity. Perdue Farms, Inc. v. Motts, Inc. (applying Mississippi UCC; holding that writing sent in confirmation of oral contract for purchase of poultry qualified as confirmatory writing under UCC § 2-201(2).

Where (1) seller on August 3d orally offered to sell buyer 15,000 tons of fertilizer, which offer was valid until 2:00 p.m. on August 3d, (2) on morning of August 3d, as requested by buyer, seller sent buyer same offer by telex, (3) at 10:00 a.m. on August 3d, after seller had sent and relinquished control over its firm offer by telex, buyer allegedly accepted such offer orally, and (4) buyer thereafter sent seller responsive telex while seller’s firm offer was still valid and such telex included certain terms, including terms as to payment and loading, that were not in seller’s offer, court held (1) that inclusion in buyer’s telex of payment and loading provisions not mentioned in seller’s offer was not, under UCC § 2-207(1), necessarily fatal to buyer’s alleged acceptance, (2) that under UCC § 2-207(2), term “plus or minus 10 percent at buyer’s option,” although it might have materially altered the contract, did not by itself invalidate the alleged acceptance, (3) that on the other hand, since UCC § 2-207 does require definite expression of acceptance before its provisions can apply, it might be that buyer’s responsive telex, taken as a whole, did not represent agreement between the parties on even price and quantity of seller’s fertilizer, and (4) that if a contract had been formed, it was enforceable under statute of frauds set forth in UCC § 2-201(1) because document signed by seller as party to be charged was its firm offer in its August 3d telex and buyer’s oral acceptance of that written offer was responsive thereto, insofar as satisfying statute of frauds was concerned, and clearly showed that oral evidence offered by buyer rested on a real transaction. Ore & Chem. Corp. v. Howard Butcher Trading Corp., 455 F. Supp. 1150, 1978 U.S. Dist. LEXIS 15896 (E.D. Pa. 1978) (applying New York and Pennsylvania UCC; holding, on cross-motions for summary judgment, that validity of buyer’s acceptance depended on issues of fact to be resolved at the trial).

Where contract between supplier and contractor was orally modified and where supplier sent letter of confirmation to contractor who did not object thereto, claim for modified price of additional materials was not barred by UCC § 2-201; typewritten signature on letter of confirmation sent by supplier met definition of “signed” under UCC § 1-201(39). A & G Constr. Co. v. Reid Bros. Logging Co., 547 P.2d 1207, 1976 Alas. LEXIS 376 (Alaska 1976).

Purchase order unsigned by party against whom it was sought to be enforced was not such writing as would satisfy statute of frauds. LTV Aerospace Corp. v. Bateman, 492 S.W.2d 703 (Tex. Civ. App. 1973), ref. n.r.e. (July 11, 1973).

There was no merit to defendant’s contention that a writing was unenforceable because it was not signed by plaintiff, since the statute requires only the signature of the party against whom enforcement is sought. Whirlpool Corp. v. Regis Leasing Corp., 29 A.D.2d 395, 288 N.Y.S.2d 337, 1968 N.Y. App. Div. LEXIS 4395 (N.Y. App. Div. 1st Dep't 1968).

Under this section, unsigned invoice describing goods and stating terms of payment, received following delivery of goods, was not enforceable. Evans Implement Co. v. Thomas Industries, Inc., 117 Ga. App. 279, 160 S.E.2d 462, 1968 Ga. App. LEXIS 1060 (Ga. Ct. App. 1968) (recognizing rule; invoice held admissible evidence in absence or raising of issue of statute of frauds by pleading or by objection).

It is immaterial whether the writing is signed by the party who is seeking enforcement of the contract. Fyre-Safety, Inc. v. Yerger Bros. (Pa. 1959).

The Code continues the requirement that there be a signed writing in order to validate certain sales. Traska v. DeGennaro (Pa. 1958).

25. —Agent’s authority.

In action for breach of alleged contract to sell store to plaintiff, where (1) only writing offered as note or memorandum of such contract was letter from plaintiff to defendant’s attorney containing certain terms of proposed sale, (2) letter did not mention any duties to be performed by plaintiff in return for right to purchase store, and (3) defendant’s president struck out words “consented to” at bottom of letter and wrote signed note on such letter to defendant’s attorney stating that terms in letter were subject to attorney’s legal advice, court held (1) that as matter of law, signature of defendant’s president on letter was not made with intent to authenticate letter as memorandum of preexisting oral contract or to bind defendant to terms contained in letter, and (2) letter therefore failed as matter of law to satisfy statute of frauds contained in UCC § 2-201(1). Cohn v. Geon Intercontinental Corp., 62 A.D.2d 1161, 404 N.Y.S.2d 206, 1978 N.Y. App. Div. LEXIS 11283 (N.Y. App. Div. 4th Dep't 1978).

Where plaintiff entered into oral contracts with defendant cotton growers for sale of their cotton crops, each involving more than $500 worth of cotton: (1) under UCC §§ 2-105 and 2-107, sale of cotton was sale of goods and, under UCC § 2-201, was not enforceable unless there was writing sufficient to indicate contract for sale had been made, signed by party against whom enforcement was sought; (2) oral contracts between plaintiff and defendants did not come within agency or broker exception to statute of frauds where there were two separate, independent sets of contracts under which defendants agreed to sell to plaintiff, and plaintiff independently contracted to sell to mills; (3) although exception to statute of frauds exists under UCC § 2-201(3)(b) if party against whom enforcement is sought admits in his pleadings, testimony or otherwise in court that contract for sale was made, such exception did not apply in present case since defendants denied under oath that agreement for sale was made with plaintiff and, although trial court made credibility determination adverse to defendants’ testimony, such finding did not constitute finding that “admission” except applied; (4) defendants were not estopped to assert defense of statute of frauds merely because plaintiff had acted in reliance on oral agreement. Cox v. Cox, 292 Ala. 106, 289 So. 2d 609, 1974 Ala. LEXIS 1027 (Ala. 1974).

In action on contract to furnish certain construction stone, evidence was sufficient to show that contract was enforceable under statute of frauds, where authorized office of buyer had sent to seller telegram which was writing sufficient to indicate that contract for sale had been made between parties and signed by party against whom enforcement was sought, and officer also admitted in his testimony that contract for sale was made. Providence Granite Co. v. Joseph Rugo, Inc., 362 Mass. 888, 291 N.E.2d 159, 1972 Mass. LEXIS 1101 (Mass. 1972).

Although owner-auctioneer of goods was under disability to sign memorandum of sale to gratify statute of frauds and bind buyer as party to be charged, this disability did not carry over to auctioneer’s agent who, by buyer’s bid made in open and regular course of auction, was authorized to sign buyer’s name to such memorandum. Romani v. Harris, 255 Md. 389, 258 A.2d 187, 1969 Md. LEXIS 716 (Md. 1969).

D. Confirmation as Between Merchants.

26. In general.

In seller’s action for buyer’s breach of contract to purchase seller’s product line of floor sweepers and also, on “pay-as-used basis,” inventory for such product line, (1) seller’s oral acceptance by telephone of buyer’s written offer, in conjunction with seller’s written confirmation of its acceptance and buyer’s failure to object in writing to contents of confirmation within ten days after it was received, satisfied exception to statute of frauds contained in UCC § 2-201(2) and rendered contract enforceable, (2) contract was binding, even though both parties expected that it would be reduced to formal writing by their attorneys, (3) seller was entitled to recover contract price under UCC § 2-709(1)(b) because seller, after buyer refused to perform, was unable to resell sweeper line at reasonable price to another person, and (4) buyer’s liability for sweeper-line inventory, which buyer had purchased on“pay-as-used basis,” was analogous to good-faith liability of a buyer under a requirements contract provided for in UCC § 2-306(1). Lambert Corp. v. Evans, 575 F.2d 132, 1978 U.S. App. LEXIS 11565 (7th Cir. Wis. 1978).

Before the merchant sending the confirmatory writing can invoke UCC § 2-201(2), he must show (1) that both parties are merchants; (2) that the writing was in confirmation of the contract and sufficient against the sender; (3) that the writing was received by the other merchant within a reasonable time after the contract was made; (4) that the merchant receiving the writing had reason to know its contents; and (5) that the merchant receiving the writing did not give written notice of objection within ten days after the date on which the writing was received. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

UCC § 2-201(2) is a new addition to the statute of frauds and provides merchants with an alternative method of satisfying the writing requirement of UCC § 2-201(1). Under UCC § 2-201(2), if the merchant sending the confirmatory writing has met the prerequisites of the subsection, and if the merchant receiving the writing has not given written notice of objection within ten days of its receipt, the confirmatory writing satisfies the statute of frauds set forth in UCC § 2-201(1), even through the receiving merchant did not sign it. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

To be effective, the written notice of objection required by UCC § 2-201(2) must be given by the receiving merchant within ten days of his receipt of the confirmatory writing. However, it is not necessary that the sending merchant receive such notice. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

UCC § 2-201(2) does not by itself transform a confirmation into a contract. Instead, a written confirmation which is followed by the recipient’s failure to respond within ten days after the confirmation is received merely negates, as between merchants, the defense of the statute of frauds, and the party who claims a contract must still prove it. McCubbin Seed Farm, Inc. v. Tri-Mor Sales, Inc., 257 N.W.2d 55, 1977 Iowa Sup. LEXIS 1124 (Iowa 1977) (holding in action for breach of contract to sell seed that defendant’s evidence raised material question of fact as to existence of such contract, so as to preclude granting of plaintiff’s motion for summary judgment).

As between merchants, subsection (2) significantly changes the former law by obviating the necessity of having a memorandum signed by the party sought to be charged. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

Subsection (2) requires (a) that, within a reasonable time, there be a writing in confirmation of the oral contract; (b) that the writing be sufficient to bind the sender; (c) that such writing be received; (d) that no reply has been made thereto although the recipient had reason to know of its contents. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

27. “Merchants.”

Before the merchant sending the confirmatory writing can invoke UCC § 2-201(2), he must show (1) that both parties are merchants; (2) that the writing was in confirmation of the contract and sufficient against the sender; (3) that the writing was received by the other merchant within a reasonable time after the contract was made; (4) that the merchant receiving the writing had reason to know its contents; and (5) that the merchant receiving the writing did not give written notice of objection within ten days after the date on which the writing was received. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

A provision in an agreement between plaintiff subcontractor and defendant general contractor set out in a letter sent by plaintiff to defendant whereby plaintiff, in confirming an oral agreement, stated that defendant would pay for all steel as billed in the event that defendant was not awarded a contract on a construction project, is, standing alone, a contract for the sale of goods. While defendant is not a steel merchant, since it is not in the business of buying and selling steel, defendant, like plaintiff, is nonetheless a “merchant” “having knowledge or skill peculiar to the practices or goods involved in the transaction” (Uniform Commercial Code, § 2-104, subd [1]) for purposes of the merchant exception to the Statute of Frauds, which makes an oral contract for the sale of goods between merchants enforceable against a party who receives written confirmation of the existing oral agreement and does not give “written notice of objection to its contents” within 10 days after it is received. (Uniform Commercial Code, § 2-201, subd [2].) Accordingly, based on all the evidence, defendant is bound by an oral agreement to purchase the steel from plaintiff. Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

In action for seller’s refusal to deliver corn and soybeans to buyer, evidence was sufficient to show that seller had held himself out, within meaning of UCC § 2-104(1), as having knowledge or skill peculiar to corn and soybeans, so as to constitute seller a “merchant” under exception to statute of frauds contained in UCC § 2-201(2). Currituck Grain, Inc. v. Powell, 38 N.C. App. 7, 246 S.E.2d 853, 1978 N.C. App. LEXIS 2072 (N.C. Ct. App. 1978).

In action by buyer against seller of soybeans who refused to deliver after price rose, seller was not entitled to rely on statute of frauds defense where evidence was sufficient to support finding that seller was “merchant” within meaning of UCC § 2-201(b), and where oral agreement had been confirmed by written correspondence from buyer to seller. Continental Grain Co. v. Martin, 536 F.2d 592, 1976 U.S. App. LEXIS 7722 (5th Cir. Tex.), cert. denied, 429 U.S. 1024, 97 S. Ct. 643, 50 L. Ed. 2d 625, 1976 U.S. LEXIS 3922 (U.S. 1976).

28. —Farmers; “merchants.”

Court denied summary judgment on a Chapter 7 debtor’s claim that a creditor’s adversary proceeding alleging that the debtor owed a debt that was nondischargeable under 11 U.S.C.S. § 523 because he submitted a false financial statement to induce the creditor to extend credit was barred by the Mississippi Statute of Frauds, Miss. Code Ann. §75-2-201, because there were issues of fact concerning the question of whether the debtor, a farmer, was a “merchant” within the meaning of Miss. Code Ann. §75-2-104, and the amount of debt the debtor owed. In re Kent, 554 B.R. 131, 2016 Bankr. LEXIS 2626 (Bankr. N.D. Miss. 2016).

Sellers of soybeans, who breached oral agreement to deliver soybeans to plaintiff buyer, were “merchants” under UCC § 2-104(1) and were liable, under exception to statute of frauds contained in UCC § 2-201(2), for their breach of such oral agreement when they failed to object within ten days to buyer’s written confirmation of the oral contract where evidence showed that sellers, despite their contention that they were merely farmers and not merchants, (1) had acted in such a way as to cause others to believe that they had special knowledge and skill in grain dealing, (2) had advertised themselves as grain dealers, and (3) had, in addition to selling their own crops, bought crops of others and sold such crops to wholesalers. Cargill, Inc. v. Gaard, 84 Wis. 2d 138, 267 N.W.2d 22, 1978 Wisc. LEXIS 1077 (Wis. 1978).

Farmer who was “merchant” under UCC § 2-201(2) could not recover for soybeans sold to defendant buyer where evidence showed that farmer and buyer had entered into contract for sale of 6,000 bushels of soybeans to buyer, that farmer had breached this contract by failing to deliver entire quantity of soybeans contracted for, and that amount that farmer sued for had been withheld by buyer as damages for loss sustained from farmer’s breach. In such case, since plaintiff farmer was “merchant” under UCC § 2-201(2), and since he had received from buyer written contract calling for sale of 6,000 bushels of soybeans but had thrown such contract away without objecting in writing, within ten-day period specified by UCC § 2-201(2), to provision in contract calling for sale of “6,000” bushels of soybeans, oral contract involved in case was not barred by statute of frauds set forth in UCC § 2-201(1), but could be proved and relied on by buyer as defense. Rush Johnson Farms, Inc. v. Missouri Farmers Asso., 555 S.W.2d 61, 1977 Mo. App. LEXIS 2132 (Mo. Ct. App. 1977).

Farmer was merchant within UCC § 2-104 definition in that he was professional in business of growing and selling crops he raised, his livelihood depended on expertise with which he sold, as well as raised, crops and to that end he stayed informed as to market prices and was knowledgeable in business of selling; thus, he was bound by oral contract for sale of wheat where he received written confirmation of contract from buyer and did not give written objection to any of its terms within ten days of receipt as provided by UCC § 2-201(2). Nelson v. Union Equity Coop. Exchange, 548 S.W.2d 352, 1977 Tex. LEXIS 221 (Tex. 1977).

In action by grain buyer against farmer to recover damages for farmer’s failure to deliver corn and soybeans under alleged oral contract, farmer’s affidavit in support of his motion for summary judgment did not establish that he was casual or inexperienced seller in corn and soybeans, the “goods involved in the transaction,” thereby establishing that he was not a merchant and thus entitled to defense of statute of frauds, notwithstanding he received written confirmation of contract from buyer, where affidavit established farmer’s prior experience in trucking from 1960 to 1970, that he farmed during 1970, 1971 and 1974 and that one-half his gross income in 1971 and 1972 derived from livestock, but where affidavit did not establish whether farmer had ever negotiated with grain dealers prior to 1974, whether he had ever sold corn or soybeans previously, or whether he had knowledge of customs and practices peculiar to marketing of these grains. Currituck Grain, Inc. v. Powell, 28 N.C. App. 563, 222 S.E.2d 1, 1976 N.C. App. LEXIS 2756 (N.C. Ct. App. 1976).

Farmer was merchant under UCC § 2-104 and thus came within “merchant exception” to UCC statute of frauds with respect to oral contract for delivery of soybeans where, inter alia, farmer had sold large quantities of corn, as well as smaller quantities of potatoes and soybeans under forward contracts for five or six years, where farmer had traded on Chicago Board Trade and kept up with market news, and where there was nothing to indicate that method of making forward contracts for corn differed in any respect from those for soybeans. Continental Grain Co. v. Harbach, 400 F. Supp. 695, 1975 U.S. Dist. LEXIS 16272 (N.D. Ill. 1975).

Farmer who had been engaged in farming for 34 years, who had approximately 180 acres of corn and 150 acres of soybeans under cultivation, and who, for period of at least five years, had sold his crops to grain elevators both in “cash sales” and “future contracts” was “merchant” within meaning of UCC § 2-104(1); thus, written confirmations of two oral agreements for sale of soybeans, sent by buyers to farmer were sufficient under UCC § 2-201. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Written confirmation of oral contracts for sale of soybeans satisfied statute of frauds where experienced farmer who had sold grain for at least five years on both cash and future contracts bases was a merchant familiar with practices, customs, and usages of grain business and commodities market. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Farmers who regularly sold their crops to grain companies over period of several years were merchants within meaning of UCC § 2-104(1), and were barred from asserting statute of frauds in buyer’s action for breach of an alleged oral contract for sale of soybeans where buyer sent written confirmation pursuant to UCC § 2-201(2). Campbell v. Yokel, 20 Ill. App. 3d 702, 313 N.E.2d 628, 1974 Ill. App. LEXIS 2495 (Ill. App. Ct. 5th Dist. 1974).

Sellers of soybeans, who breached oral agreement to deliver soybeans to plaintiff buyer, were “merchants” under UCC § 2-104(1) and were liable, under exception to statute of frauds contained in UCC § 2-201(2), for their breach of such oral agreement when they failed to object within ten days to buyer’s written confirmation of the oral contract where evidence showed that sellers, despite their contention that they were merely farmers and not merchants, (1) had acted in such a way as to cause others to believe that they had special knowledge and skill in grain dealing, (2) had advertised themselves as grain dealers, and (3) had, in addition to selling their own crops, bought crops of others and sold such crops to wholesalers. Cargill, Inc. v. Gaard, 84 Wis. 2d 138, 267 N.W.2d 22, 1978 Wisc. LEXIS 1077 (Wis. 1978).

Farmer who was “merchant” under UCC § 2-201(2) could not recover for soybeans sold to defendant buyer where evidence showed that farmer and buyer had entered into contract for sale of 6,000 bushels of soybeans to buyer, that farmer had breached this contract by failing to deliver entire quantity of soybeans contracted for, and that amount that farmer sued for had been withheld by buyer as damages for loss sustained from farmer’s breach. In such case, since plaintiff farmer was “merchant” under UCC § 2-201(2), and since he had received from buyer written contract calling for sale of 6,000 bushels of soybeans but had thrown such contract away without objecting in writing, within ten-day period specified by UCC § 2-201(2), to provision in contract calling for sale of “6,000” bushels of soybeans, oral contract involved in case was not barred by statute of frauds set forth in UCC § 2-201(1), but could be proved and relied on by buyer as defense. Rush Johnson Farms, Inc. v. Missouri Farmers Asso., 555 S.W.2d 61, 1977 Mo. App. LEXIS 2132 (Mo. Ct. App. 1977).

Farmer was merchant within UCC § 2-104 definition in that he was professional in business of growing and selling crops he raised, his livelihood depended on expertise with which he sold, as well as raised, crops and to that end he stayed informed as to market prices and was knowledgeable in business of selling; thus, he was bound by oral contract for sale of wheat where he received written confirmation of contract from buyer and did not give written objection to any of its terms within ten days of receipt as provided by UCC § 2-201(2). Nelson v. Union Equity Coop. Exchange, 548 S.W.2d 352, 1977 Tex. LEXIS 221 (Tex. 1977).

In action by grain buyer against farmer to recover damages for farmer’s failure to deliver corn and soybeans under alleged oral contract, farmer’s affidavit in support of his motion for summary judgment did not establish that he was casual or inexperienced seller in corn and soybeans, the “goods involved in the transaction,” thereby establishing that he was not a merchant and thus entitled to defense of statute of frauds, notwithstanding he received written confirmation of contract from buyer, where affidavit established farmer’s prior experience in trucking from 1960 to 1970, that he farmed during 1970, 1971 and 1974 and that one-half his gross income in 1971 and 1972 derived from livestock, but where affidavit did not establish whether farmer had ever negotiated with grain dealers prior to 1974, whether he had ever sold corn or soybeans previously, or whether he had knowledge of customs and practices peculiar to marketing of these grains. Currituck Grain, Inc. v. Powell, 28 N.C. App. 563, 222 S.E.2d 1, 1976 N.C. App. LEXIS 2756 (N.C. Ct. App. 1976).

Farmer was merchant under UCC § 2-104 and thus came within “merchant exception” to UCC statute of frauds with respect to oral contract for delivery of soybeans where, inter alia, farmer had sold large quantities of corn, as well as smaller quantities of potatoes and soybeans under forward contracts for five or six years, where farmer had traded on Chicago Board Trade and kept up with market news, and where there was nothing to indicate that method of making forward contracts for corn differed in any respect from those for soybeans. Continental Grain Co. v. Harbach, 400 F. Supp. 695, 1975 U.S. Dist. LEXIS 16272 (N.D. Ill. 1975).

Farmer who had been engaged in farming for 34 years, who had approximately 180 acres of corn and 150 acres of soybeans under cultivation, and who, for period of at least five years, had sold his crops to grain elevators both in “cash sales” and “future contracts” was “merchant” within meaning of UCC § 2-104(1); thus, written confirmations of two oral agreements for sale of soybeans, sent by buyers to farmer were sufficient under UCC § 2-201. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Written confirmation of oral contracts for sale of soybeans satisfied statute of frauds where experienced farmer who had sold grain for at least five years on both cash and future contracts bases was a merchant familiar with practices, customs, and usages of grain business and commodities market. Sierens v. Clausen, 60 Ill. 2d 585, 328 N.E.2d 559, 1975 Ill. LEXIS 236 (Ill. 1975).

Farmers who regularly sold their crops to grain companies over period of several years were merchants within meaning of UCC § 2-104(1), and were barred from asserting statute of frauds in buyer’s action for breach of an alleged oral contract for sale of soybeans where buyer sent written confirmation pursuant to UCC § 2-201(2). Campbell v. Yokel, 20 Ill. App. 3d 702, 313 N.E.2d 628, 1974 Ill. App. LEXIS 2495 (Ill. App. Ct. 5th Dist. 1974).

29. —Farmers; not “merchants.”

The average farmer with no particular knowledge or experience in selling, buying, or dealing in future commodity transactions, who sells only the crops he raises to local elevators for cash or who places his grain in storage under one of the federal loan programs, is not a “merchant” within the meaning of the exception to the statute of frauds contained in UCC § 2-201(2). Although through training and years of experience, a farmer may well possess or acquire special knowledge, skill, and expertise in the production of grain crops, this does not make him a professional in business, within the meaning of UCC § 2-104(1) and Official Comments 1 and 2, who is equal in the marketplace with a grain-buying and selling company whose officers, agents, and employees are constantly conversant with the daily fluctuations in the commodity market, the many factors that affect that market, and its intricate practices and procedures. Terminal Grain Corp. v. Freeman, 270 N.W.2d 806, 1978 S.D. LEXIS 220 (S.D. 1978) (holding, in buyer’s action for farmer’s failure to deliver grain under oral contract of sale, that since farmer was not a “merchant” within meaning of exception to statute of frauds contained in UCC § 2-201(2) defense of statute of frauds set forth in UCC § 2-201(1) barred any recovery by buyer).

Where buyer of soybeans sent written confirmation of oral contract to farmer and where farmer sold no crops or livestock except those which he raised, had limited experience in selling crops and no other business experience, and had not done business previously with buyer, farmer-seller did not come within definition of merchant under UCC § 2-104 and thus was not subject to statute of frauds exception relating to transactions between merchants. Sand Seed Service, Inc. v. Poeckes, 249 N.W.2d 663, 1977 Iowa Sup. LEXIS 997 (Iowa 1977).

In action by grain broker against wheat farmer to enforce alleged oral contract for sale of wheat crop under UCC § 2-201(2): (1) farmer, who had been hay and grain farmer for 25 years, who did not buy and sell from or for anyone, other than what was produced on his own farm, and who did not maintain roadside stand or otherwise continuously offer his produce to public for sale, although he did keep conversant with market prices and each year negotiated and contracted to sell his crops to his best advantage, was not acting as “merchant” within meaning of UCC § 2-201(2); (2) however, even if it was assumed that he was “merchant,” grain broker did not give notice of confirmation of purchase of grain within reasonable time where 12 days elapsed before any indication of confirmation was given during which time price of grain increased about one dollar per bushel and there was no apparent explanation for delay. Lish v. Compton, 547 P.2d 223, 1976 Utah LEXIS 780 (Utah 1976).

Although farmer undoubtedly had special knowledge or skill in raising wheat, this factor, coupled with annual sales of wheat crops and purchases of seed wheat, did not qualify him as “merchant” with respect to sale of wheat where farmer sold only products he raised and there was no indication that any of these sales were other than cash sales to local grain elevators. Decatur Cooperative Asso. v. Urban, 219 Kan. 171, 547 P.2d 323, 1976 Kan. LEXIS 349 (Kan. 1976).

Oral contract for purchase and sale of cotton was unenforceable against cotton farmer under UCC § 2-201, notwithstanding farmer received written confirmation of contract from buyer and failed to make any objection thereto, since farmer was not “merchant” within meaning of UCC § 2-104; farmer does not solely by his occupation hold himself out as being professional cotton merchant within meaning of UCC § 2-104(2) and, although there was evidence that farmer was knowledgeable seller, there was no evidence that he ever sold anyone’s cotton but his own and this was not sufficient to make him dealer within meaning of UCC § 2-104(1). Loeb & Co. v. Schreiner, 294 Ala. 722, 321 So. 2d 199, 1975 Ala. LEXIS 1277 (Ala. 1975).

A farmer, not being a merchant as defined in subdivision (1) of section 2-104, cannot be bound under the provisions of subdivision (2) of this section for not returning to a grain company a proposed contract in writing which provided that the farmer sold to the company 5,000 bushels of soybeans. Cook Grains, Inc. v. Fallis, 239 Ark. 962, 395 S.W.2d 555, 1965 Ark. LEXIS 1118 (Ark. 1965).

The average farmer with no particular knowledge or experience in selling, buying, or dealing in future commodity transactions, who sells only the crops he raises to local elevators for cash or who places his grain in storage under one of the federal loan programs, is not a “merchant” within the meaning of the exception to the statute of frauds contained in UCC § 2-201(2). Although through training and years of experience, a farmer may well possess or acquire special knowledge, skill, and expertise in the production of grain crops, this does not make him a professional in business, within the meaning of UCC § 2-104(1) and Official Comments 1 and 2, who is equal in the marketplace with a grain-buying and selling company whose officers, agents, and employees are constantly conversant with the daily fluctuations in the commodity market, the many factors that affect that market, and its intricate practices and procedures. Terminal Grain Corp. v. Freeman, 270 N.W.2d 806, 1978 S.D. LEXIS 220 (S.D. 1978) (holding, in buyer’s action for farmer’s failure to deliver grain under oral contract of sale, that since farmer was not a “merchant” within meaning of exception to statute of frauds contained in UCC § 2-201(2) defense of statute of frauds set forth in UCC § 2-201(1) barred any recovery by buyer).

Where buyer of soybeans sent written confirmation of oral contract to farmer and where farmer sold no crops or livestock except those which he raised, had limited experience in selling crops and no other business experience, and had not done business previously with buyer, farmer-seller did not come within definition of merchant under UCC § 2-104 and thus was not subject to statute of frauds exception relating to transactions between merchants. Sand Seed Service, Inc. v. Poeckes, 249 N.W.2d 663, 1977 Iowa Sup. LEXIS 997 (Iowa 1977).

In action by grain broker against wheat farmer to enforce alleged oral contract for sale of wheat crop under UCC § 2-201(2): (1) farmer, who had been hay and grain farmer for 25 years, who did not buy and sell from or for anyone, other than what was produced on his own farm, and who did not maintain roadside stand or otherwise continuously offer his produce to public for sale, although he did keep conversant with market prices and each year negotiated and contracted to sell his crops to his best advantage, was not acting as “merchant” within meaning of UCC § 2-201(2); (2) however, even if it was assumed that he was “merchant,” grain broker did not give notice of confirmation of purchase of grain within reasonable time where 12 days elapsed before any indication of confirmation was given during which time price of grain increased about one dollar per bushel and there was no apparent explanation for delay. Lish v. Compton, 547 P.2d 223, 1976 Utah LEXIS 780 (Utah 1976).

In action by grain broker against wheat farmer to enforce alleged oral contract for sale of wheat crop under UCC § 2-201(2): (1) farmer, who had been hay and grain farmer for 25 years, who did not buy and sell from or for anyone, other than what was produced on his own farm, and who did not maintain roadside stand or otherwise continuously offer his produce to public for sale, although he did keep conversant with market prices and each year negotiated and contracted to sell his crops to his best advantage, was not acting as “merchant” within meaning of UCC § 2-201(2); (2) however, even if it was assumed that he was “merchant,” grain broker did not give notice of confirmation of purchase of grain within reasonable time where 12 days elapsed before any indication of confirmation was given during which time price of grain increased about one dollar per bushel and there was no apparent explanation for delay. Lish v. Compton, 547 P.2d 223, 1976 Utah LEXIS 780 (Utah 1976).

Although farmer undoubtedly had special knowledge or skill in raising wheat, this factor, coupled with annual sales of wheat crops and purchases of seed wheat, did not qualify him as “merchant” with respect to sale of wheat where farmer sold only products he raised and there was no indication that any of these sales were other than cash sales to local grain elevators. Decatur Cooperative Asso. v. Urban, 219 Kan. 171, 547 P.2d 323, 1976 Kan. LEXIS 349 (Kan. 1976).

Although farmer undoubtedly had special knowledge or skill in raising wheat, this factor, coupled with annual sales of wheat crops and purchases of seed wheat, did not qualify him as “merchant” with respect to sale of wheat where farmer sold only products he raised and there was no indication that any of these sales were other than cash sales to local grain elevators. Decatur Cooperative Asso. v. Urban, 219 Kan. 171, 547 P.2d 323, 1976 Kan. LEXIS 349 (Kan. 1976).

Oral contract for purchase and sale of cotton was unenforceable against cotton farmer under UCC § 2-201, notwithstanding farmer received written confirmation of contract from buyer and failed to make any objection thereto, since farmer was not “merchant” within meaning of UCC § 2-104; farmer does not solely by his occupation hold himself out as being professional cotton merchant within meaning of UCC § 2-104(2) and, although there was evidence that farmer was knowledgeable seller, there was no evidence that he ever sold anyone’s cotton but his own and this was not sufficient to make him dealer within meaning of UCC § 2-104(1). Loeb & Co. v. Schreiner, 294 Ala. 722, 321 So. 2d 199, 1975 Ala. LEXIS 1277 (Ala. 1975).

Oral contract for purchase and sale of cotton was unenforceable against cotton farmer under UCC § 2-201, notwithstanding farmer received written confirmation of contract from buyer and failed to make any objection thereto, since farmer was not “merchant” within meaning of UCC § 2-104; farmer does not solely by his occupation hold himself out as being professional cotton merchant within meaning of UCC § 2-104(2) and, although there was evidence that farmer was knowledgeable seller, there was no evidence that he ever sold anyone’s cotton but his own and this was not sufficient to make him dealer within meaning of UCC § 2-104(1). Loeb & Co. v. Schreiner, 294 Ala. 722, 321 So. 2d 199, 1975 Ala. LEXIS 1277 (Ala. 1975).

A farmer, not being a merchant as defined in subdivision (1) of section 2-104, cannot be bound under the provisions of subdivision (2) of this section for not returning to a grain company a proposed contract in writing which provided that the farmer sold to the company 5,000 bushels of soybeans. Cook Grains, Inc. v. Fallis, 239 Ark. 962, 395 S.W.2d 555, 1965 Ark. LEXIS 1118 (Ark. 1965).

30. Timeliness of confirmation.

Before the merchant sending the confirmatory writing can invoke UCC § 2-201(2), he must show (1) that both parties are merchants; (2) that the writing was in confirmation of the contract and sufficient against the sender; (3) that the writing was received by the other merchant within a reasonable time after the contract was made; (4) that the merchant receiving the writing had reason to know its contents; and (5) that the merchant receiving the writing did not give written notice of objection within ten days after the date on which the writing was received. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Where seller of poultry under oral contract admitted receiving writing confirming such contract within eight days after contract allegedly was made, such receipt occurred within reasonable time under UCC § 2-201(2). Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Receipt of written confirmation of oral contract for sale of wheat more than six months after contract was made, and only one day before last possible delivery date under such contract, was not, where there was no adequate excuse for such delay, receipt of confirmatory writing within reasonable time under UCC § 2-201(2), and contract was unenforceable under UCC § 2-201(1). Kimball County Grain Cooperative v. Yung, 200 Neb. 233, 263 N.W.2d 818, 1978 Neb. LEXIS 676 (Neb. 1978).

Where in telephone conversation on July 31, 1973, seller agreed to sell and buyer agreed to buy 26,000 bushels of wheat and buyer’s written confirmation of contract was received by seller on August 7, 1973; and where seller, on August 21, 1973, repudiated such contract (and also an earlier contract for sale of 40,000 bushels of wheat) because of clause in buyer’s confirmation giving buyer option to cancel agreement, (1) buyer’s confirmation of contract was received by seller within reasonable time under UCC § 2-201(2); (2) seller’s objection to confirmation of contract on August 21, 1973, was not made within ten-day period prescribed by UCC § 2-201(2); (3) provision in buyer’s confirmation giving buyer option to cancel was addition of material term to contract; and (4) since buyer’s confirmation of contract was not predicated on seller’s assent to such additional term, seller’s receipt of buyer’s confirmation within reasonable time constituted acceptance of contract under UCC § 2-207(1) and such additional term did not void contract, although seller was not bound by additional term. Cargill, Inc. v. Stafford, 553 F.2d 1222, 1977 U.S. App. LEXIS 13658 (10th Cir. Colo. 1977).

Provisions of UCC § 2-201(1) and (2) barred contractor’s action against pump supplier for breach of alleged oral bid or contract to supply and sell pumps at specified price which contractor used in submitting bid on construction project: (1) throughout their dealings concerning pumps, parties were “merchants” within meaning of that term as used in UCC § 2-201(2), and thus supplier’s telephonic bid in and of itself was subject to revocation by supplier during and awaiting a reasonable time for contractor’s writing in confirmation of contract; (2) subsequent dispute between parties over actual terms and exceptions in supplier’s telephonic bid, and especially supplier’s letter proposing modifications of telephonic bid, constituted clear and decisive communicated revocation of telephonic bid prior to any “writing” from contractor as permitted under UCC § 2-201(2); (3) however, assuming supplier’s telephonic bid or offer in and of itself remained outstanding, contractor’s subsequent letters fell short of constituting “confirmation of the contract” where letters spoke of future intended executed agreement incorporating “the price and terms of the bid you submitted;” (4) pump supplier was not estopped from relying on UCC § 2-201(1) merely because contractor relied on supplier’s oral offer in submitting his bid or on theory that supplier was unjustly enriched. C. R. Fedrick, Inc. v. Borg-Warner Corp., 552 F.2d 852, 1977 U.S. App. LEXIS 14647 (9th Cir. Cal. 1977).

Where record indicated that both parties to oral contract for purchase and sale of sod were merchants, and that confirmatory memorandum was sent by buyer to seller to which seller did not object within 10-day period, factual question was presented as to whether buyer sent memorandum within reasonable time. Barron v. Edwards, 45 Mich. App. 210, 206 N.W.2d 508, 1973 Mich. App. LEXIS 1077 (Mich. Ct. App. 1973).

31. Delivery and receipt of confirmation.

Before the merchant sending the confirmatory writing can invoke UCC § 2-201(2), he must show (1) that both parties are merchants; (2) that the writing was in confirmation of the contract and sufficient against the sender; (3) that the writing was received by the other merchant within a reasonable time after the contract was made; (4) that the merchant receiving the writing had reason to know its contents; and (5) that the merchant receiving the writing did not give written notice of objection within ten days after the date on which the writing was received. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

UCC § 2-201(2) is intended to allow merchants to use confirmatory writings to satisfy the statute of frauds and to encourage the business practice of sending writings to confirm the terms of oral contracts. To preclude use of the presumption of receipt by mailing, and to limit the manner of proving receipt of the confirmatory writing by requiring that a merchant show by direct evidence-such as mailing by registered mail with return receipt requested-that the confirmatory writing was actually received would seriously limit the utility of UCC § 2-201(2). Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

UCC §§ 2-201(2) and 1-201(26) do not prescribe any particular method for proving the receipt of a confirmatory writing. However, to prove such receipt, the sending merchant can rely on the presumption that a correctly addressed letter, which was properly mailed and was not returned undelivered to the sender, was delivered to the addressee. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

In action for balance due for sale of steel reinforcing bars, where (1) buyer alleged making of oral contract under which bars would be sold at fixed price of $5.90 per 100 pounds until December 31, 1972, and thereafter at price no higher than $6.35 throughout completion of buyer’s construction job, but (2) evidence did not sustain buyer’s claim that it had mailed letter confirming such contract and also comprehensive purchase order to seller, trial court did not err in holding that seller had not received any confirmation memoranda and that contract was therefore unenforceable under UCC § 2-201(1) and (2). Wholesale Materials Co. v. Magna Corp., 357 So. 2d 296, 1978 Miss. LEXIS 2498 (Miss.), cert. denied, 439 U.S. 864, 99 S. Ct. 188, 58 L. Ed. 2d 174, 1978 U.S. LEXIS 3099 (U.S. 1978).

Where buyer, on July 23, 1973, telephoned grain seller about buying wheat and seller said he might let buyer have 40,000 bushels, subject to buyer’s sending written confirmation of contract for seller’s approval; where such written confirmation, because of error by buyer, was sent to incorrect address and not received by seller until August 17, 1973; where seller, on July 31, 1973, informed buyer by phone that change should be made in contract, and buyer sent written confirmation of such change to incorrect address; and where seller, on August 21, 1973, wrote buyer that seller was repudiating contract because of provision in confirmation of contract giving buyer option to cancel, (1) buyer and seller were “merchants” under UCC § 2-104(1); (2) buyer’s written confirmation of contract, which seller did not receive until August 17, 1973, was not received within reasonable time under UCC § 2-201(2); (3) seller’s objection on August 21, 1973 to buyer’s confirmation of contract, because of clause giving buyer option to cancel agreement, was made within ten-day period prescribed by UCC § 2-201(2); and (4) seller never admitted existence of valid contract so as to permit its enforcement under UCC § 2-201(3)(b). Cargill, Inc. v. Stafford, 553 F.2d 1222, 1977 U.S. App. LEXIS 13658 (10th Cir. Colo. 1977).

Evidence established that seller received written confirmation of contract for sale of soybeans and, thus, that buyer satisfied statute of frauds under UCC § 2-201(2), notwithstanding buyer admitted it incorrectly addressed letter confirming contract and seller denied receiving letter, where letter was sent to small town about five miles from seller’s town and, although seller was known in small town to which letter was sent, letter was not returned to buyer even though its return address was on envelope. Pillsbury Co. v. Buchanan, 37 Ill. App. 3d 876, 346 N.E.2d 386, 1976 Ill. App. LEXIS 2270 (Ill. App. Ct. 4th Dist. 1976).

32. Failure to object.

Before the merchant sending the confirmatory writing can invoke UCC § 2-201(2), he must show (1) that both parties are merchants; (2) that the writing was in confirmation of the contract and sufficient against the sender; (3) that the writing was received by the other merchant within a reasonable time after the contract was made; (4) that the merchant receiving the writing had reason to know its contents; and (5) that the merchant receiving the writing did not give written notice of objection within ten days after the date on which the writing was received. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

UCC § 2-201(2) is a new addition to the statute of frauds and provides merchants with an alternative method of satisfying the writing requirement of UCC § 2-201(1). Under UCC § 2-201(2), if the merchant sending the confirmatory writing has met the prerequisites of the subsection, and if the merchant receiving the writing has not given written notice of objection within ten days of its receipt, the confirmatory writing satisfies the statute of frauds set forth in UCC § 2-201(1), even through the receiving merchant did not sign it. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

To be effective, the written notice of objection required by UCC § 2-201(2) must be given by the receiving merchant within ten days of his receipt of the confirmatory writing. However, it is not necessary that the sending merchant receive such notice. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

The merchant exception to the Statute of Frauds (Uniform Commercial Code, § 2-201, subd [2]) which makes an oral contract for the sale of goods between merchants enforceable against a party who signed nothing if that party received a written confirmation of the existing oral agreement and does not give “written notice of objection to its contents” within 10 days after it is received, merely deprives the recipient of the opportunity to raise the Statute of Frauds as a defense in the event of a failure to respond in writing within 10 days, and does not signify assent to the terms of the writing or mean that the terms of the writing are automatically accepted in the event of a failure to respond. It is up to the trier of facts to determine whether there was or was not an oral contract. Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

UCC § 2-201(2) merely makes an oral contract for the sale of goods enforceable against a party who has signed nothing, provided that such party has received a written confirmation of the existing oral agreement and failed to give written notice of objection to its contents within ten days after its receipt. Failure to object in writing within ten days does not signify assent to the terms of the writing; it merely deprives the recipient of the opportunity to raise the statute of frauds as a defense. Therefore, in such a case the trier of facts must determine whether or not there was an oral contract. Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

In action by subcontractor against general contractor based on oral agreement that defendant would be liable for steel purchased by plaintiff for construction project that ultimately was not awarded to defendant, court held (1) that while defendant was not a steel merchant because it was not in business of buying and selling steel, it nevertheless was a “merchant” under broad language of UCC § 2-104(1) and (3); and (2) that as a result, merchants’ exception in UCC § 2-201(2) to statute of frauds applied and removed oral contract sued on from operation of the statute, since plaintiff had sent letter to defendant confirming parties’ oral agreement, such letter was received by defendant, and defendant had failed to give plaintiff, within ten days of receipt of letter, written notice of defendant’s objection to letter’s contents, as required by UCC § 2-201(2). Pecker Iron Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 410 N.Y.S.2d 251, 1978 N.Y. Misc. LEXIS 2718 (N.Y. Civ. Ct. 1978).

Timely objection was given within UCC § 2-201(2) where notice of objection was mailed on tenth day. Tiffany, Inc. v. W. M. K. Transit Mix, 16 Ariz. App. 415, 493 P.2d 1220, 1972 Ariz. App. LEXIS 545 (Ariz. Ct. App. 1972).

Subsection (2) penalizes a party who fails to answer a written communication of a contract within ten days of the receipt of the writing by depriving such party of the defense of the statute of frauds. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

33. —Seller.

In action by lessee of crane for defendant-lessor’s refusal to sell crane to plaintiff under option in oral lease allegedly granting plaintiff right to purchase crane at “any time,” where jury could have found (1) that parties had entered into oral lease during telephone conversation; (2) that such lease had actually given plaintiff option to purchase crane during “first six months of lease”; (3) that although written confirmation of oral lease, which plaintiff drafted and sent to defendant, did provide that plaintiff had option to purchase at “any time,” defendant never signed confirmation document; and (4) that although defendant’s first rental invoice to plaintiff did refer to order number on confirmation document, such reference did not constitute consent by defendant to proposed modification in confirmation document of purchase option in oral lease, plaintiff was not entitled, under UCC § 2-201(2) and Comment 3 thereto, to ruling that defendant was liable as matter of law under provisions of confirmation document, even though defendant did not object to such provisions within ten days, since only effect of defendant’s failure to object was to be deprived of defense of statute of frauds, which he had not raised, and plaintiff’s burden of proving prior oral lease remained unaffected. Defendant was also not liable as matter of law under UCC § 2-207(2) because of plaintiff’s insertion in document confirming oral lease of provision giving plaintiff option to purchase crane at “any time,” since jury could have found that such provision constituted material alteration of option-to-purchase provision in oral lease. Willamette-Western Corp. v. Lowry, 279 Ore. 525, 568 P.2d 1339, 1977 Ore. LEXIS 858 (Or. 1977).

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC § 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC § 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

Oral contract between two elephant merchants for sale of elephant was enforceable under UCC § 2-201(2) where purchaser of elephant in writing confirmed terms of oral contract so as to bind himself and where seller of elephant never at any time made any written objection to letter. Miller v. Kaye, 545 P.2d 199, 1975 Utah LEXIS 654 (Utah 1975).

In action for breach of oral contract to deliver dried citrus pulp for use in manufacture of cattle feed, seller’s failure to respond to buyer’s “Confirmation of Purchase” deprived it of defense under statute of frauds, but did not relieve buyer of burden of establishing that oral contract was made under UCC § 2-201. I. S. Joseph Co. v. Citrus Feed Co., 490 F.2d 185, 1974 U.S. App. LEXIS 9986 (5th Cir. Fla. 1974).

In action by lessee of crane for defendant-lessor’s refusal to sell crane to plaintiff under option in oral lease allegedly granting plaintiff right to purchase crane at “any time,” where jury could have found (1) that parties had entered into oral lease during telephone conversation; (2) that such lease had actually given plaintiff option to purchase crane during “first six months of lease”; (3) that although written confirmation of oral lease, which plaintiff drafted and sent to defendant, did provide that plaintiff had option to purchase at “any time,” defendant never signed confirmation document; and (4) that although defendant’s first rental invoice to plaintiff did refer to order number on confirmation document, such reference did not constitute consent by defendant to proposed modification in confirmation document of purchase option in oral lease, plaintiff was not entitled, under UCC § 2-201(2) and Comment 3 thereto, to ruling that defendant was liable as matter of law under provisions of confirmation document, even though defendant did not object to such provisions within ten days, since only effect of defendant’s failure to object was to be deprived of defense of statute of frauds, which he had not raised, and plaintiff’s burden of proving prior oral lease remained unaffected. Defendant was also not liable as matter of law under UCC § 2-207(2) because of plaintiff’s insertion in document confirming oral lease of provision giving plaintiff option to purchase crane at “any time,” since jury could have found that such provision constituted material alteration of option-to-purchase provision in oral lease. Willamette-Western Corp. v. Lowry, 279 Ore. 525, 568 P.2d 1339, 1977 Ore. LEXIS 858 (Or. 1977).

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC § 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC § 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

Oral contract between two elephant merchants for sale of elephant was enforceable under UCC § 2-201(2) where purchaser of elephant in writing confirmed terms of oral contract so as to bind himself and where seller of elephant never at any time made any written objection to letter. Miller v. Kaye, 545 P.2d 199, 1975 Utah LEXIS 654 (Utah 1975).

In action for breach of oral contract to deliver dried citrus pulp for use in manufacture of cattle feed, seller’s failure to respond to buyer’s “Confirmation of Purchase” deprived it of defense under statute of frauds, but did not relieve buyer of burden of establishing that oral contract was made under UCC § 2-201. I. S. Joseph Co. v. Citrus Feed Co., 490 F.2d 185, 1974 U.S. App. LEXIS 9986 (5th Cir. Fla. 1974).

34. —Buyer.

Failure to object within ten days to erroneous prices in an invoice does not bind the buyer thereto as the “failure to object” concept is applicable to determining whether there is a contract initially although a writing would ordinarily be required by the statute of frauds provision. Duralon Industries, Inc. v. Petal Sales Co. (N.Y. Sup. Ct.).

Failure to object within ten days to erroneous prices in an invoice does not bind the buyer thereto as the “failure to object” concept is applicable to determining whether there is a contract initially although a writing would ordinarily be required by the statute of frauds provision. Duralon Industries, Inc. v. Petal Sales Co. (N.Y. Sup. Ct.).

35. —Buyer; arbitration agreements.

Where (1) buyer, after entering into oral contract for sale of fabrics, sent seller purchase order which did not provide for arbitration of contract disputes, (2) seller promptly sent buyer printed acknowledgement of order which contained provision for such arbitration, and (3) buyer, in suit concerning payments owed by it, contended that it had not agreed to arbitrate provision, court held (1) that case was governed by UCC § 2-207(2)(b), dealing with additional terms in acceptance or confirmation of a contract, instead of UCC § 2-201(2), since UCC § 2-201(2) deals only with question whether contract exists that is enforceable under statute of frauds and has no application to situation, such as that in instant case, where parties concede that contract does exist and dispute concerns only terms of such contract, and (2) since parties to instant dispute were merchants and arbitration clause was clearly a proposed additional term that materially altered contract within meaning of UCC § 2-207(2)(b), such clause did not become part of contract because of buyer’s failure to agree to it expressly. Marlene Industries Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239, 1978 N.Y. LEXIS 2145 (N.Y. 1978).

In view of common practice in textile industry to include arbitration provisions in written confirmations of all sales between merchants, it was incumbent upon textile buyers who received written confirmation to examine it and to make timely objection to allegedly unauthorized arbitration clause contained therein; thus, upon failure of buyers to make such objection within 10 days and upon receipt of goods in accordance with their instructions they were bound to arbitrate when they attempted to cancel balance of contract. C.M.I. Clothesmakers, Inc. v. A.S.K. Knits, Inc., 85 Misc. 2d 462, 380 N.Y.S.2d 447, 1975 N.Y. Misc. LEXIS 3311 (N.Y. Sup. Ct. 1975).

Where buyer and seller met and agreed to terms for sale of yarn, seller’s sales manager made written notes of terms agreed upon, such terms were later incorporated in written contract which also contained arbitration provision and which was mailed to buyer, and where contract form was not signed by buyer, but was retained by him until after goods were delivered, under UCC § 2-201(2), contract between parties was the instrument received by buyer, not written notes made by seller’s sales manager, and, thus, buyer was bound by arbitration provision contained therein. Loudon Mfg., Inc. v. American & Efird Mills, Inc., 46 A.D.2d 637, 360 N.Y.S.2d 250, 1974 N.Y. App. Div. LEXIS 6052 (N.Y. App. Div. 1st Dep't 1974).

Contract sent by seller to purchaser following oral orders stated that any controversy could be settled only by arbitration; held, this provision was binding where purchaser had not objected to contents of contract within ten days after receipt. Trafalgar Square, Ltd. v. Reeves Bros., Inc., 35 A.D.2d 194, 315 N.Y.S.2d 239, 1970 N.Y. App. Div. LEXIS 3556 (N.Y. App. Div. 1st Dep't 1970).

Where (1) buyer, after entering into oral contract for sale of fabrics, sent seller purchase order which did not provide for arbitration of contract disputes, (2) seller promptly sent buyer printed acknowledgement of order which contained provision for such arbitration, and (3) buyer, in suit concerning payments owed by it, contended that it had not agreed to arbitrate provision, court held (1) that case was governed by UCC § 2-207(2)(b), dealing with additional terms in acceptance or confirmation of a contract, instead of UCC § 2-201(2), since UCC § 2-201(2) deals only with question whether contract exists that is enforceable under statute of frauds and has no application to situation, such as that in instant case, where parties concede that contract does exist and dispute concerns only terms of such contract, and (2) since parties to instant dispute were merchants and arbitration clause was clearly a proposed additional term that materially altered contract within meaning of UCC § 2-207(2)(b), such clause did not become part of contract because of buyer’s failure to agree to it expressly. Marlene Industries Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239, 1978 N.Y. LEXIS 2145 (N.Y. 1978).

In view of common practice in textile industry to include arbitration provisions in written confirmations of all sales between merchants, it was incumbent upon textile buyers who received written confirmation to examine it and to make timely objection to allegedly unauthorized arbitration clause contained therein; thus, upon failure of buyers to make such objection within 10 days and upon receipt of goods in accordance with their instructions they were bound to arbitrate when they attempted to cancel balance of contract. C.M.I. Clothesmakers, Inc. v. A.S.K. Knits, Inc., 85 Misc. 2d 462, 380 N.Y.S.2d 447, 1975 N.Y. Misc. LEXIS 3311 (N.Y. Sup. Ct. 1975).

Where buyer and seller met and agreed to terms for sale of yarn, seller’s sales manager made written notes of terms agreed upon, such terms were later incorporated in written contract which also contained arbitration provision and which was mailed to buyer, and where contract form was not signed by buyer, but was retained by him until after goods were delivered, under UCC § 2-201(2), contract between parties was the instrument received by buyer, not written notes made by seller’s sales manager, and, thus, buyer was bound by arbitration provision contained therein. Loudon Mfg., Inc. v. American & Efird Mills, Inc., 46 A.D.2d 637, 360 N.Y.S.2d 250, 1974 N.Y. App. Div. LEXIS 6052 (N.Y. App. Div. 1st Dep't 1974).

Contract sent by seller to purchaser following oral orders stated that any controversy could be settled only by arbitration; held, this provision was binding where purchaser had not objected to contents of contract within ten days after receipt. Trafalgar Square, Ltd. v. Reeves Bros., Inc., 35 A.D.2d 194, 315 N.Y.S.2d 239, 1970 N.Y. App. Div. LEXIS 3556 (N.Y. App. Div. 1st Dep't 1970).

36. Signature on confirmation.

A purchaser’s letter was a sufficient “writing in confirmation of the contract and sufficient against the sender” within the meaning of §75-2-201(2), in spite of the seller’s assertion that a confirmatory writing must be manually signed, where the letter was on the purchaser’s letterhead which bore his address, and the letter referred to and recited the contract terms, requested execution of the previously-delivered forward contract, and included the typewritten name of the sender on the line where a manual signature is usually made. Dawkins & Co. v. L & L Planting Co., 602 So. 2d 838, 1992 Miss. LEXIS 377 (Miss. 1992).

Oral agreement between seller and buyer’s agent for sale of wheat was enforceable against seller where, following telephone call with seller, agent completed two written grain purchase contracts, which reflected terms of agreement, signed contracts as agent of buyer and signed seller’s name, where agent delivered copy of each contract a few days later to seller who noted terms of contracts and made no objections to them or to fact that his name had been signed by agent, and where seller within a few days thereafter asked for and received advance payment by check attached to memorandum which incorporated earlier contracts by referring specifically to their numbers; when seller accepted memorandum without objection to its contents and took further step of signing his name to check attached, he either signed sufficient memorandum of earlier oral contract, or he accepted offer made by buyer when its agent handed him written numbered contracts. Cargill, Inc. v. Wilson, 166 Mont. 346, 532 P.2d 988, 1975 Mont. LEXIS 639 (Mont. 1975).

37. Particular writings as confirmation.

UCC § 2-201(2) and the Official Comments thereto do not prescribe any particular form for a “writing in confirmation.” Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Where (1) seller on August 2nd orally offered to sell buyer 15,000 tons of fertilizer, which offer was valid until 2:00 p.m. on August 3rd, (2) on morning of August 3rd, as requested by buyer, seller sent buyer same offer by telex, (3) at 10:00 a.m. on August 3rd, after seller had sent and relinquished control over its firm offer by telex, buyer allegedly accepted such offer orally, and (4) buyer thereafter sent seller responsive telex while seller’s firm offer was still valid and such telex included certain terms, including terms as to payment and loading, that were not in seller’s offer, court held (1) that inclusion in buyer’s telex of payment and loading provisions not mentioned in seller’s offer was not, under UCC § 2-207(1), necessarily fatal to buyer’s alleged acceptance, (2) that under UCC § 2-207(2), term “plus or minus 10 percent at buyer’s option,” although it might have materially altered the contract, did not by itself invalidate the alleged acceptance, (3) that on the other hand, since UCC § 2-207 does require definite expression of acceptance before its provisions can apply, it might be that buyer’s responsive telex, taken as a whole, did not represent agreement between the parties on even price and quantity of seller’s fertilizer, and (4) that if a contract had been formed, it was enforceable under statute of frauds set forth in UCC § 2-201(1) because document signed by seller as party to be charged was its firm offer in its August 3 telex and buyer’s oral acceptance of that written offer was responsive thereto, insofar as satisfying statute of frauds was concerned, and clearly showed that oral evidence offered by buyer rested on a real transaction. Ore & Chem. Corp. v. Howard Butcher Trading Corp., 455 F. Supp. 1150, 1978 U.S. Dist. LEXIS 15896 (E.D. Pa. 1978) (applying New York and Pennsylvania UCC; holding, on cross-motions for summary judgment, that validity of buyer’s acceptance depended on issues of fact to be resolved at the trial).

In seller’s action against merchant buyer for damages for nonpayment of accounts due for furniture sold, trial court committed error in refusing to admit, on ground that it was barred by statute of frauds set forth in UCC § 2-201, seller’s evidence of goods ordered and delivered that consisted in part of signed check that buyer had sent to seller, which referred to specifically numbered invoice and had been accepted by seller and deposited in its bank account before being returned for insufficient funds, since check was sufficient under UCC § 2-201(3)(c) to take at least part of contract out of statute of frauds. Furthermore, seller’s proffered copies of acknowledgments that it had sent to buyer, to which buyer had raised no objections whatever, also removed contract from operation of statute of frauds under UCC § 2-201(2) and Official Comment 3. Lea Industries, Inc. v. Raelyn International, Inc., 363 So. 2d 49, 1978 Fla. App. LEXIS 16740 (Fla. Dist. Ct. App. 3d Dist. 1978).

Ordinarily, under UCC § 2-206(1)(a), an offer to make a contract invites acceptance in any manner that is reasonable under the circumstances. However, where (1) buyer’s purchase order for pumps expressly provided for seller’s acceptance in writing, (2) acceptance copy accompanying purchase order pointed out that order was not valid until buyer received acceptance copy from seller, and (3) purchase order did not invite acceptance by partial performance, trial court erred in holding that seller’s conduct in shipping some of the pumps ordered, more than a year after the date of the purchase order, amounted to acceptance. Furthermore, buyer’s purchase order was not a confirmatory memorandum within the meaning of UCC § 2-201(2), since evidence did not show that parties had entered into an oral contract. Nations Enterprises, Inc. v. Process Equipment Co., 40 Colo. App. 390, 579 P.2d 655 (Colo. Ct. App. 1978).

Document which appeared to be invoice on form containing letterhead and identification markings of seller and which seemed to demonstrate party to whom merchandise was sold, date of sale, quantities and description of items and price, could be sufficient as writing in confirmation of oral contract under UCC § 2-201(2), notwithstanding document did not contain formal signature of seller. Automotive Spares Corp. v. Archer Bearings Co., 382 F. Supp. 513, 1974 U.S. Dist. LEXIS 6636 (N.D. Ill. 1974).

Periodic accountings prepared by seller of 1500 tons of hay and sent to buyer within 2 1/2 months of oral agreement constituted confirming memoranda within UCC § 2-201(2) so as to remove oral contract from statute of frauds bar. Azevedo v. Minister, 86 Nev. 576, 471 P.2d 661, 1970 Nev. LEXIS 569 (Nev. 1970).

38. —Letters.

UCC §§ 2-201(2) and 1-201(26) do not prescribe any particular method for proving the receipt of a confirmatory writing. However, to prove such receipt, the sending merchant can rely on the presumption that a correctly addressed letter, which was properly mailed and was not returned undelivered to the sender, was delivered to the addressee. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Where seller’s salesman offered to sell buyer 756 pairs of boots and, after discussion of price, buyer’s president agreed to purchase, signed order which he prepared on his own order form and attached handwritten financial statements, where seller’s salesman annexed to buyer’s order inventory of boots which had been written on seller’s order form, where seller’s order form contained provision that all orders were subject to home office acceptance and credit approval but buyer’s president denied reading document and did not sign it, where seller refused to accept order because handwritten credit statement was not legible and forwarded letter to buyer acknowledging order by buyer’s order number and requesting new credit statement, and where sale of boots to buyer was never completed by seller, buyer’s cause of action for breach of contract was not barred by statute of frauds since buyer’s written order was sufficient under UCC § 2-201(2), in confirmation of alleged oral contract reached after negotiations on price; seller not only did not object to order as required by § 2-201(2), but its letter in response acknowledged order and took contract out of statute of frauds. GTP Leisure Products, Inc. v. B-W Footwear Co., 55 A.D.2d 1009, 391 N.Y.S.2d 489, 1977 N.Y. App. Div. LEXIS 10337 (N.Y. App. Div. 4th Dep't 1977).

Letter signed by president of plastics supplier which provided that supplier would maintain supply of certain plastics “in sufficient amounts to supply all of the plastic” for furniture manufacturer’s use, satisfied requirements of statute of frauds and was binding on supplier. Fortune Furniture Mfg. Co. v. Mid--South Plastic Fabric Co., 310 So. 2d 725, 1975 Miss. LEXIS 1913 (Miss. 1975).

The use of the term “order” by merchant-buyer in a letter sufficiently complied with subsection (2) to remove an oral contract for merchandise from the statute of frauds, particularly since use of that term contemplated a binding contract, at least, on part of the merchant-buyer, and should have been interpreted in like manner by the seller. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

UCC §§ 2-201(2) and 1-201(26) do not prescribe any particular method for proving the receipt of a confirmatory writing. However, to prove such receipt, the sending merchant can rely on the presumption that a correctly addressed letter, which was properly mailed and was not returned undelivered to the sender, was delivered to the addressee. Perdue Farms, Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 1978 U.S. Dist. LEXIS 18215 (N.D. Miss. 1978).

Where seller’s salesman offered to sell buyer 756 pairs of boots and, after discussion of price, buyer’s president agreed to purchase, signed order which he prepared on his own order form and attached handwritten financial statements, where seller’s salesman annexed to buyer’s order inventory of boots which had been written on seller’s order form, where seller’s order form contained provision that all orders were subject to home office acceptance and credit approval but buyer’s president denied reading document and did not sign it, where seller refused to accept order because handwritten credit statement was not legible and forwarded letter to buyer acknowledging order by buyer’s order number and requesting new credit statement, and where sale of boots to buyer was never completed by seller, buyer’s cause of action for breach of contract was not barred by statute of frauds since buyer’s written order was sufficient under UCC § 2-201(2), in confirmation of alleged oral contract reached after negotiations on price; seller not only did not object to order as required by § 2-201(2), but its letter in response acknowledged order and took contract out of statute of frauds. GTP Leisure Products, Inc. v. B-W Footwear Co., 55 A.D.2d 1009, 391 N.Y.S.2d 489, 1977 N.Y. App. Div. LEXIS 10337 (N.Y. App. Div. 4th Dep't 1977).

Letter signed by president of plastics supplier which provided that supplier would maintain supply of certain plastics “in sufficient amounts to supply all of the plastic” for furniture manufacturer’s use, satisfied requirements of statute of frauds and was binding on supplier. Fortune Furniture Mfg. Co. v. Mid--South Plastic Fabric Co., 310 So. 2d 725, 1975 Miss. LEXIS 1913 (Miss. 1975).

The use of the term “order” by merchant-buyer in a letter sufficiently complied with subsection (2) to remove an oral contract for merchandise from the statute of frauds, particularly since use of that term contemplated a binding contract, at least, on part of the merchant-buyer, and should have been interpreted in like manner by the seller. Harry Rubin & Sons, Inc. v. Consolidated Pipe Co., 396 Pa. 506, 153 A.2d 472, 1959 Pa. LEXIS 574 (Pa. 1959).

39. —Telegrams.

Handwritten contract signed by both parties served as signed contract and memorandum of agreement to outfit and sell large fiberglass hulls, and satisfied statute of frauds; and telegram sent by defendants and referring to all written and verbal agreements with plaintiff constituted signed memorandum. Ashland Oil, Inc. v. Pickard, 269 So. 2d 714, 1972 Fla. App. LEXIS 5927 (Fla. Dist. Ct. App. 3d Dist. 1972), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4176 (Fla. 1973), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4177 (Fla. 1973), cert. denied, 300 So. 2d 897, 1974 Fla. LEXIS 4779 (Fla. 1974).

In action to recover for lost profits for contractor’s refusal to accept deliveries of stone, a telegram sent by the contractor’s officer was a writing sufficient to indicate that a contract for sale had been made between the parties and signed by the party against whom enforcement was sought. Providence Granite Co. v. Joseph Rugo, Inc., 362 Mass. 888, 291 N.E.2d 159, 1972 Mass. LEXIS 1101 (Mass. 1972).

Handwritten contract signed by both parties served as signed contract and memorandum of agreement to outfit and sell large fiberglass hulls, and satisfied statute of frauds; and telegram sent by defendants and referring to all written and verbal agreements with plaintiff constituted signed memorandum. Ashland Oil, Inc. v. Pickard, 269 So. 2d 714, 1972 Fla. App. LEXIS 5927 (Fla. Dist. Ct. App. 3d Dist. 1972), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4176 (Fla. 1973), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4177 (Fla. 1973), cert. denied, 300 So. 2d 897, 1974 Fla. LEXIS 4779 (Fla. 1974).

Handwritten contract signed by both parties served as signed contract and memorandum of agreement to outfit and sell large fiberglass hulls, and satisfied statute of frauds; and telegram sent by defendants and referring to all written and verbal agreements with plaintiff constituted signed memorandum. Ashland Oil, Inc. v. Pickard, 269 So. 2d 714, 1972 Fla. App. LEXIS 5927 (Fla. Dist. Ct. App. 3d Dist. 1972), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4176 (Fla. 1973), cert. denied, 285 So. 2d 18, 1973 Fla. LEXIS 4177 (Fla. 1973), cert. denied, 300 So. 2d 897, 1974 Fla. LEXIS 4779 (Fla. 1974).

In action to recover for lost profits for contractor’s refusal to accept deliveries of stone, a telegram sent by the contractor’s officer was a writing sufficient to indicate that a contract for sale had been made between the parties and signed by the party against whom enforcement was sought. Providence Granite Co. v. Joseph Rugo, Inc., 362 Mass. 888, 291 N.E.2d 159, 1972 Mass. LEXIS 1101 (Mass. 1972).

E. Exceptions.

40. In general.

A farmer’s oral agreement to sell soybeans was enforceable, even though the farmer did not subsequently sign the contract form, where (1) the farmer had booked produce with the buyer on 4 previous occasions, 2 of which involved contracts which the farmer never signed, and (2) the farmer had canceled an earlier contract with the buyer and had inquired into the possibility of canceling the soybean contract, which indicated his knowledge of the course of performance for such bookings. Gooch v. Farmers Marketing Asso., 519 So. 2d 1214, 1988 Miss. LEXIS 46 (Miss. 1988).

Where there has been fully executed sale with elements of acceptance and receipt of subject matter by buyer and payment of purchase price and acceptance thereof by seller, transaction is outside statute of frauds. Hickman v. Bross, 58 Pa. D. & C.2d 137, 1972 Pa. Dist. & Cnty. Dec. LEXIS 187 (Pa. C.P. 1972).

41. Specially manufactured goods.

In breach-of-warranty action for damages by buyer of allegedly defective dump trailers against manufacturer-seller, court held (l) that buyer and its ultimate Mexican customers were “merchants” within meaning of UCC § 2-104(l); (2) that seller was “merchant” within meaning of both UCC § 2-104(l) and § 2-314(l); (3) that telephoned order for 20 additional trailers was not enforceable under statute of frauds in UCC § 2-201(l) because it did not come within exceptions to such statute contained in UCC § 2-201(3); (4) that “specially manufactured goods” exception in UCC § 2-201(3)(a) applies only when seller, rather than buyer, seeks to escape statute-of-frauds defense; (5) that since three trailers purchased under valid written contract were put to improper use by buyer’s Mexican customers, rather than being used for their “ordinary purposes,” no breach of implied warranty of merchantability under UCC § 2-314(1) and (2)(c) occurred; (6) that use of trailers for improper purposes, rather than for their stated “particular purpose,” prevented recovery under implied warranty of fitness in UCC § 2-315; (7) that buyer could not recover for breach of express warranty under UCC § 2-313(1)(a) because it failed to prove that it had relied on statements in manufacturer-seller’s brochure either prior to or contemporaneously with making of parties’ contract; and (8) that since buyer had no right under UCC § 2-601(a) to reject two unused and undamaged trailers, manufacturer-seller was not required to retake them or to refund their purchase price to buyer. Global Truck & Equipment Co. v. Palmer Machine Works, Inc., 628 F. Supp. 641, 1986 U.S. Dist. LEXIS 29524 (N.D. Miss. 1986).

Where shipping crates or containers were manufactured to detailed specifications required by purchaser, were to be used for shipping overseas all-terrain vehicle manufactured by purchaser, and were not suitable for sale to others in ordinary course of seller’s business, contract for purchase and sale of crates was not rendered unenforceable by statute of frauds. LTV Aerospace Corp. v. Bateman, 492 S.W.2d 703 (Tex. Civ. App. 1973), ref. n.r.e. (July 11, 1973).

Blacktop that has already been packed down and laid in place is goods which is manufactured specially for the buyer and for which this seller would be hard pressed to find a suitable sale in the ordinary course of business, so as to fall within statute of frauds exception. Rose Acre Farms, Inc. v. L. P. Cavett Co., 151 Ind. App. 268, 279 N.E.2d 280, 1972 Ind. App. LEXIS 831 (Ind. Ct. App. 1972).

Where there was a possibility that an oral agreement relating to sale of lacquered plate may fall within UCC § 2-201(3)(a) exception for specially manufactured goods, court below abused its discretion in failing to allow amendment of complaint to set forth such agreement. Pittsburgh Metal Lithographing Co. v. Sovereign Corp., 220 Pa. Super. 219, 283 A.2d 714, 1971 Pa. Super. LEXIS 1141 (Pa. Super. Ct. 1971).

A contract whereby plaintiff was to render sales promotional services to the defendant was not a contract for the sale of special order goods governed by the provisions of § Tradeways, Inc. v. Chrysler Corp., 342 F.2d 350, 1965 U.S. App. LEXIS 6380 (2d Cir. N.Y.), cert. denied, 382 U.S. 832, 86 S. Ct. 71, 15 L. Ed. 2d 75, 1965 U.S. LEXIS 687 (U.S. 1965).

42. Admissions by parties.

In action for breach of oral contract to sell hay, where (1) seller admitted in pleadings and testimony that there was a sales contract, but denied that it involved sale of all hay raised on his farm during season in question, (2) seller admitted that contract was for sale of first two cuttings of hay during season in question, and (3) performance of such contract involved delivery and receipt of payment for only first two cuttings of hay, court held that under UCC § 2-201(3)(b) and (c), contract was enforceable only as to quantity of hay (first two cuttings) admitted, which either had been received and accepted or concerning which payment had been made and accepted. Darrow v. Spencer, 1978 OK 107, 581 P.2d 1309, 1978 Okla. LEXIS 462 (Okla. 1978).

In suit on open account, buyer’s contention that requirement of writing under statute of frauds had not been met was eliminated under UCC § 2-201(3)(b) by buyer’s acknowledgement that alleged agent had ordered goods in dispute. Custom Radio Wholesalers, Inc. v. Hamilton/Avnet Electronics, 147 Ga. App. 110, 248 S.E.2d 187, 1978 Ga. App. LEXIS 2797 (Ga. Ct. App. 1978).

In sellers’ action to rescind written contract for sale of cotton on ground of mutual mistake, where buyer before execution of written contract informed sellers that oral negotiations between parties had contractually bound sellers to sell, but sellers consistently denied making any oral contract, case was governed by statute of frauds provision set forth in UCC § 2-201(3)(b), which provides that oral contract for sale of goods can be enforced provided that party against whom enforcement is sought has judicially admitted making such contract. In such case, moreover, buyer could not successfully contend that there was no evidence that parties were mistaken in their belief that sellers were contractually obligated to sell their cotton even before sellers executed the written contract. Plains Cotton Coop. Ass’n v. Wolf, 553 S.W.2d 800 (Tex. Civ. App. 1977), ref. n.r.e. (Jan. 11, 1978).

Where buyer, on July 23, 1973, telephoned grain seller about buying wheat and seller said he might let buyer have 40,000 bushels, subject to buyer’s sending written confirmation of contract for seller’s approval; where such written confirmation, because of error by buyer, was sent to incorrect address and not received by seller until August 17, 1973; where seller, on July 31, 1973, informed buyer by phone that change should be made in contract, and buyer sent written confirmation of such change to incorrect address; and where seller, on August 21, 1973, wrote buyer that seller was repudiating contract because of provision in confirmation of contract giving buyer option to cancel, (1) buyer and seller were “merchants” under UCC § 2-104(1); (2) buyer’s written confirmation of contract, which seller did not receive until August 17, 1973, was not received within reasonable time under UCC § 2-201(2); (3) seller’s objection on August 21, 1973 to buyer’s confirmation of contract, because of clause giving buyer option to cancel agreement, was made within ten-day period prescribed by UCC § 2-201(2); and (4) seller never admitted existence of valid contract so as to permit its enforcement under UCC § 2-201(3)(b). Cargill, Inc. v. Stafford, 553 F.2d 1222, 1977 U.S. App. LEXIS 13658 (10th Cir. Colo. 1977).

Where buyer of transformers admitted to making of oral contract with seller and where buyer accepted goods without giving seasonable notice of rejection as required by UCC § 2-602, oral contract for sale of goods was enforceable pursuant to UCC § 2-201(3)(b)(c). Carolina Transformer Co. v. Anderson, 341 So. 2d 1327, 1977 Miss. LEXIS 2303 (Miss. 1977).

If making of oral contract is admitted in court, either in written pleading, by stipulation, or by oral statement before the court, no additional writing is necessary for protection against fraud. Under UCC § 2-201(3)(b), it is no longer possible to admit an oral contract in court and still assert statute of frauds as defense. However, the contract is not thus conclusively established. The admission so made by a party is itself evidential against him of truth of facts admitted and nothing more, and as against the other party, it is not evidential at all. Packwood Elevator Co. v. Heisdorffer, 260 N.W.2d 543, 1977 Iowa Sup. LEXIS 971 (Iowa 1977).

Although statute of frauds under UCC § 2-201 was applicable to contract for sale of soybeans which constituted goods within meaning of UCC § 2-105 and also constituted under UCC § 2-107 growing crops capable of severance, seller was prohibited from asserting statute of frauds as defense in action on contract where seller admitted that contract was made. Cargill, Inc., Commodity Marketing Div. v. Hale, 537 S.W.2d 667, 1976 Mo. App. LEXIS 2079 (Mo. Ct. App. 1976).

In action based on two alleged oral agreements for sale of corn, action on first agreement was permitted under UCC § 2-201(3)(b) where defendant seller admitted existence of agreement and his incomplete performance, but action based on second agreement was barred by UCC § 2-201(1) statute of frauds since defendant seller denied existence of second agreement. Jurek v. Thompson, 308 Minn. 191, 241 N.W.2d 788, 1976 Minn. LEXIS 1742 (Minn. 1976).

In action by buyer against seller arising out of nondelivery of wheat under oral sales contract, original oral contract was not rendered unenforceable by UCC § 2-201 statute of frauds, where seller admitted existence of contract. Nor was oral modification of contract as to delivery date due to unavailability of elevator space rendered unenforceable by statute of frauds requirement under UCC §§ 2-209 and 2-201 where pursuant to UCC § 1-103 and 2-209, seller waived statute of frauds defense through his course of performance under UCC § 2-208 and 1-205 in delivering 36 truckloads of wheat well after original delivery date without making timely objection. Farmers Elevator Co. v. Anderson, 170 Mont. 175, 552 P.2d 63, 1976 Mont. LEXIS 589 (Mont. 1976).

An oral contract was valid and unforceable under UCC § 2-201(3)(b) where both parties admitted to it. Frances Hosiery Mills, Inc. v. Burlington Industries, Inc., 285 N.C. 344, 204 S.E.2d 834, 1974 N.C. LEXIS 976 (N.C. 1974).

It is the intent of paragraph (b) of subdivision (3) of this section that if, after the petition or cross action is filed based on an oral contract for the sale of goods of the value of more than $500, the person charged admits the contract in the case thus pending, the statute of frauds as a defense shall not be available to him, but on the contrary the case thus made shall be determined on the merits without reference to the statute of frauds; and it was further designed to prevent the statute of frauds itself from becoming an aid to fraud, by prohibiting one claiming the benefit of the statute who admits in the case the oral contract sued on. Garrison v. Piatt, 113 Ga. App. 94, 147 S.E.2d 374, 1966 Ga. App. LEXIS 981 (Ga. Ct. App. 1966).

43. —In testimony.

In action for seller’s breach of oral contract to sell soybeans, where seller admitted making contract during testimony as adverse witness, but testified that contract had expired by its own terms 14 days after date on which it was made, buyer testified that contract had provided for “usual 30-day delivery period,” and other testimony showed that market price of soybeans had risen after contract was made and that seller had sold his soybeans to another buyer for a higher price, (1) under UCC § 2-201(3)(b), defense of statute of frauds was not available to seller because of his testimonial admission that he had made contract; (2) after seller’s admission of agreement, buyer had burden of proving existence of agreement and its terms; (3) buyer’s manager was properly allowed to testify as to his understanding about alleged 30-day delivery term; and (4) there was substantial evidence in record on appeal to support trial court’s finding that delivery term provided for 30 days, rather than two weeks as contended by seller. Packwood Elevator Co. v. Heisdorffer, 260 N.W.2d 543, 1977 Iowa Sup. LEXIS 971 (Iowa 1977).

Verbal agreement for sale of heavy equipment and gravel pit was enforceable against buyer under UCC § 2-201(3)(b), notwithstanding contract involved sale of realty in addition to goods, where contract was “entire” contract and thus was not severable, where contract was predominantly one for sale of goods since gravel pit represented only about five per cent of total price agreed upon, and where buyer freely admitted in his testimony existence of oral agreement. Dehahn v. Innes, 356 A.2d 711, 1976 Me. LEXIS 436 (Me. 1976).

In action by wholesale gas and oil distributor against supplier for breach of oral contract, trial court erred in granting summary judgment in favor of supplier on ground that action was barred by UCC § 2-201, where supplier conceded it made some agreement for sale of petroleum products to distributor, where sales had actually been made and where, based on testimony, jury could find either that agreement by supplier was to furnish 50 million gallons to distributor within one year period or that agreement was one for “spot sales” with no firm commitment. Oskey Gasoline & Oil Co. v. Continental Oil Co., 534 F.2d 1281, 1976 U.S. App. LEXIS 11672 (8th Cir. Minn. 1976).

In action for breach of oral contract for sale of mobile home, Uniform Commercial Code statute of frauds was satisfied under UCC § 2-201(3)(b) where, although defendant denied existence of contract, he testified in court that he had agreed to pay seller’s price, a fact which established as matter of law that contract was formed. Lewis v. Hughes, 276 Md. 247, 346 A.2d 231, 1975 Md. LEXIS 726 (Md. 1975).

Admission in testimony of contractor’s officer that contract for sale of stone had been made was evidence that contract was enforceable under statute of frauds. Providence Granite Co. v. Joseph Rugo, Inc., 362 Mass. 888, 291 N.E.2d 159, 1972 Mass. LEXIS 1101 (Mass. 1972).

The contention that no written contract was entered into and, therefore, no valid contract could be possible because of the requirements of the statute of frauds is without merit since the seller admitted in his testimony that the contract of sale, as alleged in the plaintiff’s complaint, was made. Hale v. Higginbotham, 228 Ga. 823, 188 S.E.2d 515, 1972 Ga. LEXIS 945 (Ga. 1972).

Defendant-farmer’s testimony, both as adverse witness called by grain company and as witness in his own behalf, established evidence to bring claimed oral contract for sale of corn within statute of fraud’s exception relating to admission of contract by party against whom enforcement is sought. Quad County Grain, Inc. v. Poe, 202 N.W.2d 118, 1972 Iowa Sup. LEXIS 941 (Iowa 1972).

44. —In pleadings.

In action by buyer of automobile on oral contract with seller for money had and received when seller resold vehicle to third person, although contract in suit did not comply with UCC § 2-201(1), it was nevertheless enforceable under UCC § 2-201(3)(b), since seller’s pleadings admitted making of such contract. Acuri v. Figliolli, 91 Misc. 2d 831, 398 N.Y.S.2d 923, 1977 N.Y. Misc. LEXIS 2424 (N.Y. Dist. Ct. 1977).

Contract held enforceable under UCC § 2-201(3)(c) where complaint alleged, and affidavit admitted, possession of goods. Davis v. Aandewiel, 16 Ariz. App. 262, 492 P.2d 758, 1972 Ariz. App. LEXIS 501 (Ariz. Ct. App. 1972).

A verbal agreement to repurchase a certain number of generators may be enforced under UCC § 2-201(3)(b), notwithstanding the statute of frauds, where the existence of the verbal agreement is admitted in pleadings. Chrysler Corp. v. Majestic Marine, Inc., 35 Mich. App. 403, 192 N.W.2d 507, 1971 Mich. App. LEXIS 1478 (Mich. Ct. App. 1971).

UCC statute of frauds was not bar to action where affidavits of plaintiff and answer of defendant clearly show receipt, acceptance, and retention of goods by defendant. Rochester Iron & Metal Co. v. Capellupo, 62 Misc. 2d 264, 307 N.Y.S.2d 133, 1969 N.Y. Misc. LEXIS 948 (N.Y. County Ct. 1969).

45. —In discovery.

Admission by corporate agent in discovery deposition that contract had been made constituted judicial admission sufficient to permit plaintiff to enforce alleged oral contract under exception in Miss Code §75-2-201(3)(b). Babst v. FMC Corp., 661 F. Supp. 82, 1986 U.S. Dist. LEXIS 22171 (S.D. Miss. 1986).

Admission made in discovery deposition by party to be charged that such party had entered into oral contract sought to be enforced was in-court admission of such contract within meaning of UCC § 2-201(3)(b). URSA Farmers Cooperative Co. v. Trent, 58 Ill. App. 3d 930, 16 Ill. Dec. 348, 374 N.E.2d 1123, 1978 Ill. App. LEXIS 2413 (Ill. App. Ct. 4th Dist. 1978).

In seller’s action for buyer’s breach of alleged oral contract under which seller was to supply all potatoes required by buyer’s chain of restaurants, (1) contract was sufficiently definite in quantity to be enforceable under UCC § 2-306(1), but (2) since buyer in its pleading did not admit making of contract within meaning of UCC § 2-201(3)(b), and since deposition testimony of buyer’s former employees, which admitted existence of oral contract sued on, did not constitute binding admission against buyer under UCC § 2-201(3)(b) because of witnesses’ lack of authority at time depositions were taken, contract was unenforceable under statute of frauds set forth in UCC § 2-201(1). Miller v. Sirloin Stockade, 224 Kan. 32, 578 P.2d 247, 1978 Kan. LEXIS 336 (Kan. 1978).

46. —Non-judicial admissions.

In seller’s action to recover for 9,072 bushels of corn delivered to buyer under oral contract to sell 20,000 bushels to buyer, in which buyer counterclaimed for damages for seller’s failure to deliver remainder of corn contracted for, (1) seller was entitled under UCC § 2-201(3)(c) to payment for corn received and accepted by buyer, but (2) buyer was not entitled to recover for corn that seller did not deliver, since letter written by seller’s attorney to buyer discussing alleged oral contract did not satisfy requirements of UCC § 2-201(3)(b), dealing with enforceability of contract unenforceable under statute of frauds if making of contract is admitted by party to be charged in his “pleading, testimony, or otherwise in court.” Wilke v. Holdrege Cooperative Equity Exchange, 200 Neb. 803, 265 N.W.2d 672, 1978 Neb. LEXIS 729 (Neb. 1978).

Copy of buyer’s check stub for check allegedly sent to seller for purchase of horse and the assertion of plaintiff and his executive assistant who allegedly monitored phone call in which seller stated that he did not wish to complete the transaction until after the first of the year for tax reasons along with buyer’s assertions that seller retained check did not establish assent to the contract by the seller in view of the seller’s denials, and thus alleged contract was not removed from the operation of the statute of frauds. Presti v. Wilson, 348 F. Supp. 543, 1972 U.S. Dist. LEXIS 11832 (E.D.N.Y. 1972).

47. Partial performance.

The effect of part payment on a contract for the sale of an indivisible item is not specifically treated by the Uniform Commercial Code (see UCC § 2-201(3)(c)). Generally, however, such payment is construed to render an indivisible oral contract enforceable, notwithstanding the statute of frauds. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

Oral agreement by president of corporation to sell truck to corporation did not fall within any exception to statute of frauds for sale of goods contained in UCC § 2-201(3) where certificate of title to truck had not been transferred to corporation, corporation had not paid any part of purchase price to seller, entry of debt for payment of purchase price had not been made on corporation’s books, and truck had never been altered or used for corporation’s purposes. In such case, neither party could have enforced such contract unless other party admitted that contract had been made or that truck had been received and accepted. Keller Lorenz Co. v. Insurance Assocs. Corp., 98 Idaho 678, 570 P.2d 1366, 1977 Ida. LEXIS 444 (Idaho 1977).

The statute of frauds permits a party to welch on an oral bargain in order to avoid the risk that an oral contract may be proved by fraudulent testimony; the exceptions for part performance or payment and acceptance both involved mutual participation and not unilateral acts. Presti v. Wilson, 348 F. Supp. 543, 1972 U.S. Dist. LEXIS 11832 (E.D.N.Y. 1972).

Contract to supply milk at special discount price was terminated after 6 months by the giving of reasonable notice; held, this partial performance did not take the contract out of statute of frauds under UCC § 2-201(3)(c). Spiering v. Fairmont Foods Co., 424 F.2d 337, 1970 U.S. App. LEXIS 10151 (7th Cir. Ill. 1970).

A writing is not required under the Code when equipment sold by the seller is delivered and installed by him. Fyre-Safety, Inc. v. Yerger Bros. (Pa. 1959).

48. —Extent of ratification; whole contract.

Seller was not “merchant,” as defined by UCC § 2-104(1), with respect to sale of corn and therefore was not bound to oral contract under UCC § 2-201(2), even though buyer sent confirmation notice to seller following oral agreement, since seller was not in business of selling corn but, rather, conducted cattle feeding operation, growing grain for that purpose and selling grain only when it was surplus to cattle feeding needs. However, seller’s delivery of corn in approximate quantity called for in oral agreement, and its acceptance by buyer, constituted part performance under UCC § 2-201(3)(c) sufficient to take contract out of statute of frauds even though such conduct was consistent with making of spot sale at current market price. Gerner v. Vasby, 75 Wis. 2d 660, 250 N.W.2d 319, 1977 Wisc. LEXIS 1448 (Wis. 1977).

Under UCC §§ 2-201(1) and 2-309, oral contract to supply plastic pipe which did not include times for delivery was enforceable beyond extent to which it had been performed. Owens v. Clow Corp., 491 F.2d 101, 1974 U.S. App. LEXIS 9645 (5th Cir. Ala. 1974).

49. —Extent of ratification; part performed.

Oral contract to purchase 100 cattle for $50,000, under which buyer gave seller check for $1,000 as earnest money, was unenforceable under UCC § 2-201(1), except to extent that buyer’s check for $1,000 earnest money could constitute partial payment for cattle within meaning of UCC § 2-201(3)(c). Anthony v. Tidwell, 560 S.W.2d 908 (Tenn. 1977).

Trial court properly dismissed complaint alleging breach by defendants of oral contract to sell 7,000 bushels of soybeans to plaintiffs at $4.42 per bushel and further alleging partial performance of such contract; although UCC § 2-201(3)(c) provides exception for completely executed part of oral contract, existence of partial performance does not support cause of action for anything over that already performed. Lippold v. Beanblossom, 23 Ill. App. 3d 595, 319 N.E.2d 548, 1974 Ill. App. LEXIS 1896 (Ill. App. Ct. 4th Dist. 1974).

In action for purchase price of certain goods delivered to and accepted by plaintiff, UCC § 2-201(1) statute of frauds, vitiating plaintiff’s capacity to sue, could have been raised by demurrer but for fact that degree of performance alleged was sufficient to erase effect of language of statute of frauds and validate contract for goods allegedly accepted. Texas Truck Sleeper Co. v. Artman, 62 Pa. D. & C.2d 663 55 Wes. C.L.J. 13 (1973).

In action for purchase price of certain goods delivered to and accepted by plaintiff, UCC § 2-201(1) statute of frauds, vitiating plaintiff’s capacity to sue, could have been raised by demurrer but for fact that degree of performance alleged was sufficient to erase effect of language of statute of frauds and validate contract for goods allegedly accepted. Texas Truck Sleeper Co. v. Artman, 62 Pa. D. & C.2d 663 55 Wes. C.L.J. 13 (1973).

Under oral contract for sale of corn, buyer by making part payment, and seller by accepting that part payment, made enforceable contract only as to that quantity of corn that could have been purchased by that part payment. In re Augustin Bros. Co., 460 F.2d 376, 1972 U.S. App. LEXIS 9501 (8th Cir. Neb. 1972).

UCC parted company with old Sales Act in holding that partial performance of an agreement does not avoid the requirement of a writing under UCC § 2-201, but renders the agreement enforceable only with respect to the goods which have been delivered and accepted. Huyler Paper Stock Co. v. Information Supplies Corp., 117 N.J. Super. 353, 284 A.2d 568, 1971 N.J. Super. LEXIS 425 (Law Div. 1971).

50. —Indivisible contracts.

The effect of part payment on a contract for the sale of an indivisible item is not specifically treated by the Uniform Commercial Code (see UCC § 2-201(3)(c)). Generally, however, such payment is construed to render an indivisible oral contract enforceable, notwithstanding the statute of frauds. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

An order form for a specifically optioned automobile sent by the dealer to the manufacturer, either taken alone or when read in conjunction with the customer’s purchase order is a sufficient note or memorandum to satisfy the provisions of section 2-201 of the Uniform Commercial Code, since the order form evidences the existence of a contract, is signed by the party to be charged and implicitly specifies the quantity involved. However, assuming the absence of a sufficient writing, nevertheless the customer’s part payment of $1,000 on the indivisible contract operated to take the agreement out of the Statute of Frauds (§ 2-201, subd [3], par [c]). Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

Even if subparagraph (c) validates a divisible contract only for as much of the goods as have been paid for, it does not necessarily follow that such a rule invalidates an indivisible oral contract where some payment has been made and accepted; it is difficult to see how the contract for the purchase of an automobile, upon which the buyer paid $25, could have contemplated less than one automobile, assuming as the court did, that automobiles are indivisible. Any other conclusion would work an unconscionable result and would encourage rather than discourage fraud if the facts as pleaded were proven at the trial. Starr v. Freeport Dodge, Inc., 54 Misc. 2d 271, 282 N.Y.S.2d 58, 1967 N.Y. Misc. LEXIS 1409 (N.Y. Dist. Ct. 1967).

51. —Payment; sufficient.

In seller’s action against merchant buyer for damages for nonpayment of accounts due for furniture sold, trial court committed error in refusing to admit, on ground that it was barred by statute of frauds set forth in UCC § 2-201, seller’s evidence of goods ordered and delivered that consisted in part of signed check that buyer had sent to seller, which referred to specifically numbered invoice and had been accepted by seller and deposited in its bank account before being returned for insufficient funds, since check was sufficient under UCC § 2-201(3)(c) to take at least part of contract out of statute of frauds. Furthermore, seller’s proffered copies of acknowledgements that it had sent to buyer, to which buyer had raised no objections whatever, also removed contract from operation of statute of frauds under UCC § 2-201(2) and Official Comment 3. Lea Industries, Inc. v. Raelyn International, Inc., 363 So. 2d 49, 1978 Fla. App. LEXIS 16740 (Fla. Dist. Ct. App. 3d Dist. 1978).

Where (1) buyer placed order for new Corvette on form furnished by dealer, (2) such form described car, listed its purchase price, provided for delivery to buyer as soon as possible, and also stated that order was not binding until accepted by dealer, (3) buyer, but not dealer, signed such order form and gave dealer check for $1,000 deposit on vehicle, (4) dealer on same day placed written order with manufacturer for car ordered by buyer, (5) such order was signed by dealer, listed buyer as “customer,” and described order as “sold,” rather than “stock” for inventory, (6) dealer subsequently notified buyer by letter that “market conditions” had made buyer’s “offer” unacceptable and that dealer would refund buyer’s $1,000 deposit, and (7) car was ultimately manufactured, delivered to dealer, and sold to third party, court held (1) that under UCC § 2-204(1) and (2), dealing with making of contracts generally, contract was formed as matter of law no later than time when dealer, after taking and retaining buyer’s down payment, placed signed order for car with manufacturer which designated car as “sold” and listed buyer’s name as “customer,” (2) that dealer’s conduct was clearly sufficient to signify an acceptance, even though it did not sign its own order form, (3) that order form sent by dealer to manufacturer was sufficient memorandum of contract to satisfy statute of frauds set forth in UCC § 2-201(1), and (4) that even assuming absence of a sufficient memorandum under UCC § 2-201(1), buyer’s part payment on the indivisible contract operated under UCC § 2-201(3)(c) to take contract out of statute of frauds. Thomaier v. Hoffman Chevrolet, Inc., 64 A.D.2d 492, 410 N.Y.S.2d 645, 1978 N.Y. App. Div. LEXIS 12877 (N.Y. App. Div. 2d Dep't 1978).

In action by prospective buyer to enforce oral contract for sale of piece of construction equipment, question of fact was raised as to whether sellers had accepted payment, thus removing oral contract from statute of frauds under UCC § 2-201(3)(c) and precluding entry of summary judgment, where sellers received and retained buyer’s check, in amount alleged to be full purchase price of equipment, for 30 days before check was returned unendorsed to buyer. Kaufman v. Solomon, 524 F.2d 501, 1975 U.S. App. LEXIS 12267 (3d Cir. Pa. 1975).

A check for $2,325 bearing legend “deposit on aux. sloop, D’Arc Wind, full amount $4,650” would constitute partial performance sufficient to uphold entire contract calling for sale of this boat, as against statute of frauds objection. Cohn v. Fisher, 118 N.J. Super. 286, 287 A.2d 222, 1972 N.J. Super. LEXIS 540 (Law Div. 1972).

52. —Payment; insufficient.

In action on option contract to purchase airplane, where (1) defendants gave plaintiff written option to purchase on April 1, 1977, which by its terms would expire on April 11, 1977, (2) defendants issued sight draft on April 5, 1977, payable to order of defendants and listing plaintiff as drawee, which plaintiff’s bank received on April 8, 1977 together with partially executed bill of sale, (3) defendants on April 11, 1977 (expiration date of written option) gave plaintiff oral extension of option to purchase plane and (4) plaintiff on April 18, 1977 instructed his bank to pay sight draft, but defendants in the interim sold plane to another person, court held (1) that contract was required by UCC § 2-201(1) (statute of frauds) to be in writing; (2) that written option-offer was not accepted by plaintiff within time limit contained therein; (3) that expiration date of written option-offer was not superseded by oral extension of such date because parol evidence of extension was not admissible under UCC § 2-202 to vary material term of written option; (4) that if written option-offer, as claimed by plaintiff, was still only an offer at time of its oral modification, then acceptance tendered by plaintiff after original time limit of written option had expired was acceptance of different contract offer and contract thus formed was unenforceable under statute of frauds provision contained in UCC § 2-201(1); and (5) that such different contract was not removed from statute of frauds by part performance that allegedly occurred when defendants sent sight draft to plaintiff’s bank. McCollum Aviation, Inc. v. CIM Associates, Inc., 446 F. Supp. 511, 1978 U.S. Dist. LEXIS 20034 (S.D. Fla. 1978).

Evidence was conclusive that there was sale of automobile to buyer under UCC § 2-201(3) where seller delivered automobile to buyer at his home so buyer could drive it, where buyer drove automobile to seller’s place of business and informed seller that he had decided to buy it, giving seller check for whole purchase price of car and leaving his old car in possession of seller, although buyer left automobile in possession of seller for purpose of making minor repairs, and seller subsequently asked for additional payment and refused to deliver possession of automobile to buyer. Shipman v. Craig Ayers Chevrolet, Inc., 1975 OK CIV APP 58, 541 P.2d 876, 1975 Okla. Civ. App. LEXIS 174 (Okla. Ct. App. 1975).

Oral contract for sale of two conveyors for price in excess of $500 did not fall within payment and acceptance exceptions to statute of frauds set forth in UCC § 2-201(3)(c) where check given by purchaser as payment was not accepted by seller, but was returned uncashed, and where seller never consented to removal of equipment by buyer. Nelson v. Hy-Grade Constr. & Materials, Inc., 215 Kan. 631, 527 P.2d 1059, 1974 Kan. LEXIS 552 (Kan. 1974).

Payment without acceptance of the payment is not sufficient to establish part performance removing oral contract from statute of frauds; tender alone does not establish payment, and there must be some objective manifestation referable to payment and acceptance. Presti v. Wilson, 348 F. Supp. 543, 1972 U.S. Dist. LEXIS 11832 (E.D.N.Y. 1972).

Copy of check stub representing check allegedly mailed by buyer as payment for horse and affidavit of buyer’s executive assistant that he monitored telephone call in which seller allegedly indicated willingness to sell horse and desire not to consummate transaction until later date for tax reason and that he prepared and mailed bill of sale and check, along with buyer’s assertion that seller retained check was not evidence of an objective manifestation of assent to contract and did not constitute payment and acceptance taking oral contract out of statute of frauds. Presti v. Wilson, 348 F. Supp. 543, 1972 U.S. Dist. LEXIS 11832 (E.D.N.Y. 1972).

If the whole agreement (written and oral) require transfer of the stone stockpiles, and if they were not transferred, the provisions of UCC § 2-201(3)(c) are satisfied by payment of the whole consideration. Bridgewater Washed Sand & Stone Co. v. Bridgewater Materials, Inc., 361 Mass. 809, 282 N.E.2d 912, 1972 Mass. LEXIS 961 (Mass. 1972).

53. —Receipt and acceptance.

Contract for sale of pyrenone was enforceable under statute of frauds where (1) pyrenone was “received and accepted” by buyer under UCC § 2-201(3)(c), and (2) buyer’s attempt to reject pyrenone three months later was not effective under UCC § 2-606(1)(b) and § Pride Lab. v. Sentinel Butte Farmers Elevator Co., 268 N.W.2d 474, 1978 N.D. LEXIS 173 (N.D. 1978) (under circumstances of case, rejection three months after delivery was not attempted within reasonable time).

Contract between seller of footwear and wholesale grocery corporation with subsidiaries that serviced independently owned retail stores in two states, which allegedly provided that footwear ordered by such stores would be shipped directly to stores and that stores would be billed through corporation’s warehouse, was enforceable under UCC § 2-201(3)(c), since bar of statute of frauds contained in UCC § 2-201(1) does not apply to goods that have been received and accepted, and in present case stores ordering footwear from seller had received and accepted all goods contracted for. Pedi Bares, Inc. v. P & C Food Markets, Inc., 567 F.2d 933, 1977 U.S. App. LEXIS 5598 (10th Cir. Kan. 1977).

Where there was ample proof that contract for sale of sawmill existed and it was clear that purchasers received and accepted sawmill, under UCC § 2-201(3)(b), (c) it was necessary for trial court to determine what were provisions of sale, notwithstanding purchaser’s contention that their alleged assumption of notes was invalid because sale contract was over $500 and not in writing. Barnett v. Stewart Lumber Co., 547 S.W.2d 788, 1977 Ky. App. LEXIS 638 (Ky. Ct. App. 1977).

Seller was not “merchant,” as defined by UCC § 2-104(1), with respect to sale of corn and therefore was not bound to oral contract under UCC § 2-201(2), even though buyer sent confirmation notice to seller following oral agreement, since seller was not in business of selling corn but, rather, conducted cattle feeding operation, growing grain for that purpose and selling grain only when it was surplus to cattle feeding needs. However, seller’s delivery of corn in approximate quantity called for in oral agreement, and its acceptance by buyer, constituted part performance under UCC § 2-201(3)(c) sufficient to take contract out of statute of frauds even though such conduct was consistent with making of spot sale at current market price. Gerner v. Vasby, 75 Wis. 2d 660, 250 N.W.2d 319, 1977 Wisc. LEXIS 1448 (Wis. 1977).

Oral accord and satisfaction was enforceable under UCC § 2-201(3)(c), where evidence was presented that debtor performed by delivering potatoes to third party, that creditor allowed debtor to mistakenly believe that third party was associated with creditor, that creditor agreed to credit value of potatoes to debt, and that agreement to extinguish debt was executed when creditor credited potatoes to debt and accepted notes without demanding additional money that he subsequently contended was still owing. Smith v. Hornbuckle, 140 Ga. App. 871, 232 S.E.2d 149, 1977 Ga. App. LEXIS 2115 (Ga. Ct. App. 1977).

Oral agreement by cottonseed buyer that it would in all respects meet prices and rebates of its competition was enforceable under UCC § 2-201(3)(c) where seller delivered seed from time to time to buyer and buyer acknowledged and receipted delivery. Tennessee Valley Cotton Oil Mill v. Oakland Gin Co., 341 So. 2d 153, 1976 Ala. Civ. App. LEXIS 657 (Ala. Civ. App. 1976).

In action by materialman against property owner to recover for materials delivered to subcontractor where it was alleged that owner orally agreed to “guarantee” payment for materials previously delivered to subcontractor, in consideration for which materialman agreed to continue furnishing materials to job and to forebear from filing claim of lien against owner’s real property, enforcement of alleged oral “guarantee” contract was not barred by statute of frauds, UCC § 2-201; materials supplied at instance of owner after promise sued on were delivered pursuant to new agreement and were “received and accepted” within contemplation of UCC § 2-201(3)(c) and thus statute of frauds was inapplicable as to them; with respect to materials supplied before “guarantee” contract sued on, they were not delivered pursuant to “contract for sale” within definition thereof in UCC § 2-106 and statute was thus inapplicable as to them. Jim & Slim's Tool Supply, Inc. v. Metro Communities Corp., 328 So. 2d 213, 1976 Fla. App. LEXIS 14804 (Fla. Dist. Ct. App. 2d Dist. 1976).

Mortgage loan company was liable to pay purchase price of building materials delivered to third party where there was evidence that mortgage loan company entered into oral contract with lumber company to pay for building materials and where there was evidence that mortgage loan company designated employee of third party to sign invoices for receipt of materials; contract was enforceable under UCC § 2-201(3)(c), notwithstanding lack of a writing, since building materials had been received and accepted. Engel Mortg. Co. v. Triple K Lumber Co., 56 Ala. App. 337, 321 So. 2d 679, 1975 Ala. Civ. App. LEXIS 504 (Ala. Civ. App. 1975).

Oral contracts for sale of lettuce were enforceable under UCC § 2-201(3)(c), notwithstanding they were not in writing, where seller was transferred lettuce from its cooler to motor carrier for delivery for buyer; for purpose of satisfying UCC § 2-201(3)(c), lettuce was “received” by buyer when it was shipped in accordance with each invoice, and buyer would be deemed to have “accepted” lettuce, as defined in UCC § 2-606, since (1) transfer of lettuce to carrier was “an act inconsistent with the seller’s ownership,” and (2) buyer failed to make an effective rejection“ of lettuce after it was received. O'Day v. George Arakelian Farms, 24 Ariz. App. 578, 540 P.2d 197, 1975 Ariz. App. LEXIS 777 (Ariz. Ct. App. 1975).

Fact issue was presented on question whether oral contract for sale of house was enforceable under “received and accepted” exception found in UCC § 2-201(3)(c), where seller alleged that he had installed house on concrete blocks on the buyers’ land and buyers had accepted this labor and material. Wade v. Jones, 526 S.W.2d 160, 1975 Tex. App. LEXIS 2889 (Tex. Civ. App. Dallas 1975).

Contract for sale of cattle received by buyer was not required to be in writing under UCC § 1-206, since provision does not apply to contracts for sale of goods, nor by § 2-201, since written contract was not required with respect to goods which have been received or accepted. Clifton Cattle Co. v. Thompson, 43 Cal. App. 3d 11, 117 Cal. Rptr. 500, 1974 Cal. App. LEXIS 1294 (Cal. App. 2d Dist. 1974).

Where last purchase of goods as demonstrated by accounts occurred 20 days prior to commencement of action on accounts, difference between 2 dates represented reasonable time within which any inspection and rejection of goods should have been made, so that sales of goods represented by account were taken out of statute of frauds by receipt and acceptance of goods by defendant. Gardner & Beedon Co. v. Cooke, 267 Ore. 7, 513 P.2d 758, 1973 Ore. LEXIS 264 (Or. 1973).

Properly treating the indebtedness owned by respondent as representing money owned on a sale of goods the parties may show the terms of the oral agreement between respondent and testator relating to such indebtedness including price, terms of payment and dates for such payment, since complete delivery of the goods took the sale out of the statute. Cornelius v. Crea, 33 A.D.2d 887, 307 N.Y.S.2d 521, 1969 N.Y. App. Div. LEXIS 2646 (N.Y. App. Div. 4th Dep't 1969), rev'd, 27 N.Y.2d 339, 318 N.Y.S.2d 133, 266 N.E.2d 815, 1971 N.Y. LEXIS 1632 (N.Y. 1971).

Contractor received and accepted cabinets; contractor raised statute of frauds as defense to cabinet maker’s action for payment on contract to build cabinets; held, UCC § 2-201(3)(c) precluded this defense. Buxton v. Horn, 452 S.W.2d 250, 1970 Mo. App. LEXIS 663 (Mo. Ct. App. 1970).

Oral contract enforceable and statute of frauds inapplicable where truck in question had been received and accepted. Roe v. Flamegas Industrial Corp., 16 Mich. App. 210, 167 N.W.2d 835, 1969 Mich. App. LEXIS 1346 (Mich. Ct. App. 1969).

Where buyer and automobile dealer had agreed on a “trade”, buyer had turned over his old car to the dealer and had in turn received absolute and unconditional possession of the new vehicle, and nothing remained except for the title papers to be processed and the delivery to seller of a check for the cash payment, title to the new car passed to buyer at time of its delivery; and when the car was wrecked on the night the trade was made, buyer’s rather than seller’s insurer was liable. Motors Ins. Corp. v. Safeco Ins. Co., 412 S.W.2d 584, 1967 Ky. LEXIS 434 (Ky. 1967).

The seller’s contract sent to the buyer declared that it was binding when it was delivered to the buyer if no objection was made thereto or when the buyer accepted and paid for any goods thereunder, it was held that the buyer was bound by the contract when he made no objection thereto, and accepted part of the goods, and was therefore required to arbitrate any dispute as specified in the contract. Aaron Kamhi, Inc. v. Vanity Fabrics, Inc. (N.Y. Sup. Ct.).

Where goods are received and accepted by the purchaser, the transaction is without the statute of frauds. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 1965 U.S. App. LEXIS 3551 (3d Cir. Pa. 1965).

54. Waiver and estoppel.

UCC § 2-201, by its own terms, permits a party to waive the statute of frauds. Moreover, UCC § 2-201 does not by its terms operate as a bar to, or destroy, a plaintiff’s cause of action. Duffee v. Judson, 251 Pa. Super. 406, 380 A.2d 843, 1977 Pa. Super. LEXIS 2915 (Pa. Super. Ct. 1977) (holding that because UCC § 2-201 is waivable, it could only be raised, under Pennsylvania procedure, in new matter and not in preliminary objections).

In seller’s action for buyer’s breach of oral contract to purchase 17 million advertising “flyers” for insertion in national mail-sale literature, oral contract in suit was not voidable under written-memorandum requirement of UCC § 2-201(1) because such contract came under exception contained in UCC § 2-201(3)(a) concerning goods specially manufactured for buyer that are not suitable sale to others in ordinary course of seller’s business and seller, before receiving notice of buyer’s repudiation of contract, had made substantial commencement of goods’ manufacture by printing 62 per cent of 17 million flyers ordered. Perlmuter Printing Co. v. Strome, Inc., 436 F. Supp. 409, 1976 U.S. Dist. LEXIS 15440 (N.D. Ohio 1976), disapproved, Barnes Group, Inc. v. C & C Products, Inc., 716 F.2d 1023, 1983 U.S. App. LEXIS 24358 (4th Cir. S.C. 1983).

55. —Equitable estoppel.

In action by buyer to enforce oral contract for sale of 20,000 bushels of corn at $1.22 per bushel for future delivery, seller was barred from raising defense of statute of fraud, UCC § 2-201(1), by doctrine of equitable estoppel where buyer substantially changed its position in reliance on oral contract by selling 18,000 bushels of corn to two third parties in accordance with buyer’s general business practice, and where seller knew or should have known that buyer would rely on contract and would resell corn. Farmers Elevator Co. v. Lyle, 90 S.D. 86, 238 N.W.2d 290, 1976 S.D. LEXIS 183 (S.D. 1976).

Under UCC § 2-201, oral agreement regarding sale of goods may be enforced if admitted by other party to agreement. Furthermore, equitable estoppel may be applied to avoid statute of frauds provision regarding oral agreements for sale of goods if agreement is first established by competent evidence, where statute does not render such agreement void; thus, where one party, in reliance on representation or conduct of another, changes his position or otherwise suffers unjust or unconscionable injury or loss, or where one party has accepted performance for benefits to detriment of other, a party may be estopped to deny validity of oral agreement. Dangerfield v. Markel, 222 N.W.2d 373, 1974 N.D. LEXIS 159 (N.D. 1974).

56. —Promissory estoppel.

Oral contract allegedly made between wood dealer and mill did not come within brokerage exception to statute of frauds because dealer actually acquired interest in wood; promissory estoppel is not available as exception to statute of frauds applicable to such an agreement. Futch v. James River-Norwalk, Inc., 722 F. Supp. 1395, 1989 U.S. Dist. LEXIS 12113 (S.D. Miss.), aff'd, 887 F.2d 1085, 1989 U.S. App. LEXIS 15434 (5th Cir. Miss. 1989).

Alleged contract of farmers to sell cotton crop to buyer was not enforceable under UCC § 2-201(1) where there was no writing sufficient to indicate that such contract had been made and been signed by parties against whom enforcement was sought; although sellers failed to keep oral promise to sign and deliver written contract of sale that would comply with statute of frauds contained in UCC § 2-201(1), doctrine of promissory estoppel did not preclude sellers from asserting statute, since no complete agreement was ever reached by parties as to terms of written contract. H. Molsen & Co. v. Hicks, 550 S.W.2d 354 (Tex. Civ. App. 1977), writ ref’d n.r.e., (Sept. 27, 1977).

Doctrine of promissory estoppel was applicable so as to bind subcontractor to written bid which it submitted to general contractor notwithstanding subcontractor’s claim that, since bid included sale of materials valued in excess of $500 and did not specify any quantities, it was unenforceable under UCC § 2-201(1). Jenkins & Boller Co. v. Schmidt Iron Works, Inc., 36 Ill. App. 3d 1044, 344 N.E.2d 275, 1976 Ill. App. LEXIS 2123 (Ill. App. Ct. 2d Dist. 1976).

In action against farmer to obtain possession of wheat allegedly sold by him to cooperative grain elevator under oral contract, or alternatively, for damages for failure to deliver wheat: (1) defendant farmer was not “merchant” within meaning of UCC § 2-201(2) so as to render inoperative defense afforded by statute of frauds; but (2) sufficient facts were pleaded and presented to trial court to invoke doctrine of promissory estoppel so as to render oral promise enforceable despite statute of frauds, UCC § 2-201(1), and rendition of summary judgment in favor of defendant was improper. Deca