Chip Monk has been in the business of supplying commercial Reasons Why a Legal Contract Does Not Exist Between Chip Monk and Polly Easter Paper
Chip Monk has been in the business of supplying commercial carpet to companies for several years. On 11/1 Polly Ester’s Supplies calls to purchase 100 yards of “Heather Blue, Industrial Grade” carpet. Chip offers the carpet at $37 per yard, with delivery on or before 12/31, payment on delivery. Polly accepts. On 11/3 Polly sends the following letter confirming the deal:
“As discussed and agreed, we hereby accept your offer for 100 yards of “Heather Blue, Industrial Grade” carpet at a price of $37 per yard, delivery on 12/31 or earlier, payment on delivery. We also reserve the right to purchase up to 500 yards more at the same price for a period of six months from this date (signed) Polly Ester (owner of Polly Ester’s Supplies.)
As of 11/21 Chip has not responded to Polly.
You have been asked by Chip to draft a memo indicating the following:
Is there a contract? If so, for what? What law applies here and why? CORE SKILL: this is a CONTRACT FORMATION problem under ARTICLE 2 of the UCC (goods — carpet is a good), and the analysis must proceed in a strict order: was there an offer, was there an acceptance, is there consideration, is there a writing requirement, and does the deal survive the Statute of Frauds?
STEP 1 — GOVERNING LAW: UCC Article 2 applies to transactions in GOODS (movable, tangible things). Common law governs services and real estate. Carpet is a good, so the UCC governs — and the UCC is significantly MORE FLEXIBLE about formation than the common law. Say this first; it determines everything downstream.
STEP 2 — OFFER: Chip’s offer of “Heather Blue, Industrial Grade” carpet at $37/yard, delivery on or before 12/31, on stated payment terms. Quantity, price, subject matter, and delivery are specified — this is a definite offer.
STEP 3 — ACCEPTANCE AND THE BATTLE OF THE FORMS: at COMMON LAW, the MIRROR IMAGE RULE requires acceptance to match the offer exactly; any variation is a COUNTEROFFER that REJECTS the original. THE UCC ABOLISHES THIS. Under §2-207, a definite and seasonable expression of acceptance operates as an ACCEPTANCE EVEN IF IT STATES ADDITIONAL OR DIFFERENT TERMS, unless acceptance is expressly made conditional on assent to those terms. BETWEEN MERCHANTS, the additional terms BECOME PART OF THE CONTRACT unless (a) the offer expressly limits acceptance to its terms, (b) the new terms MATERIALLY ALTER the deal, or (c) notification of objection has already been given or is given within a reasonable time. Knowing §2-207 cold is what this problem is for — it is the single most heavily tested UCC provision.
STEP 4 — THE MERCHANT’S FIRM OFFER (§2-205): an offer by a MERCHANT, in a SIGNED WRITING, giving assurance it will be held open, is IRREVOCABLE for the stated time (or a reasonable time, not exceeding three months) WITHOUT CONSIDERATION. This is a direct departure from the common law, where an option contract requires consideration. If Chip made a written, signed assurance to hold the price, he cannot revoke.
STEP 5 — THE STATUTE OF FRAUDS (§2-201): a contract for the sale of goods for $500 OR MORE must be evidenced by a WRITING signed by the party to be charged. 100 yards × $37 = $3,700, so YES, the Statute of Frauds applies. KNOW THE EXCEPTIONS, because they are where the problem’s twist usually lives: (a) the MERCHANT CONFIRMATORY MEMO rule — if between merchants, a written confirmation is sent within a reasonable time and the recipient DOES NOT OBJECT IN WRITING WITHIN 10 DAYS, the Statute of Frauds is satisfied AGAINST THE RECIPIENT even though they never signed anything (this is a favorite exam trap); (b) SPECIALLY MANUFACTURED goods not suitable for resale in the ordinary course; (c) admission in pleadings or testimony; (d) part performance — payment made and accepted, or goods received and accepted.
STEP 6 — MODIFICATION: under §2-209, a modification of a UCC contract needs NO CONSIDERATION to be binding (contrast the common law PRE-EXISTING DUTY RULE, which requires fresh consideration). Good faith is still required.
STEP 7 — BREACH AND REMEDIES: the PERFECT TENDER RULE (§2-601) — the buyer may reject goods that fail in ANY respect to conform. Buyer’s remedies: COVER (§2-712) or market-price damages (§2-713), plus incidental and consequential damages. Seller’s remedies: resale (§2-706), action for the price.
ANSWER IN IRAC, and identify which UCC section governs each step by number.
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