Legal Issues

The Uniform Commercial Code (UCC) is a document that compiled in an effort to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America. It was first published in 1952 and its main purpose is to care of inter-state commercial transactions. The UCC therefore helps bring about uniformity in commercial laws and, at the same time, allows the states the flexibility to meet local situations. A Contract of Sale is defined as a formal agreement between two parties, a seller and a buyer, for the exchange of goods from the seller to the buyer for a price. It is required that this agreement be in writing.

Methodology
In this paper, I am going to analyze the key issues aspects of the Uniform Commercial Code (UCC) Article 2 which deals with the law of contract of sale. This paper will explain how a contract of sale is formed, what comprises it, how it ceases to be valid and the implications of this. The paper will also examine the mirror image law, its implication and application.

Background Information
This paper is compiled by reviewing the original UCC document and also looking at some of the amended adaptations by some states referring to the main source of reference Miller,R.L. and Jentz, G.L. (2010). The A tradition - Fundamental of Business Law.

Formation of Contracts
Article 2 of the UCC governs contracts for the sale of goods but does not deal with the sale of immovable or real estate, services or intangible property such as stocks and bonds. According to UCC, a sale is the passing of ownership from the seller to the buyer for a price. The price may be in cash or in goods or services (Miller,and  Jentz, 2010). When one of the parties to the contract puts an end to the contract for breach by the other, the contract is considered cancelled. This is tantamount to a termination although the canceling party is required to give compensations for any damages arising from the cancellation.

Formation of a Contract
Where the goods sold are worth than 500 or more, it is required that the contract, which must of necessity be signed by the buyer or vendor, or by his authorized agent, be in writing for it to be enforceable in a court of law. It is further required that the writing be sufficient to show that a contract exists between the two parties. Writing is deemed sufficient even if it leaves out or states wrongly a term agreed upon. However the contract cannot be enforced for a greater quantity of goods than indicated in the writing (Miller and Jentz, 2010).

Risk of Loss
Parties to sales and lease contracts often obtain protection against loss, damage or destruction of goods. Any party purchasing insurance must have sufficient interest in the item to obtain a valid policy. This sufficiency is determined by insurance and not the UCC.  The UCC however contains certain rules regarding insurable interests in goods (Miller,and  Jentz, 2010).

The Rights of a Creditor
The buyers right to recover the goods dictates upon the rights of the sellers unsecured creditors in relation to goods which have been identified to a contract for sale.

Implications of Breach
(1) If the seller fails to acknowledge rejection of the goods by the buyer according to the terms of the contract, the risk of loss remains with the seller until the matter is resolved.

(2) If the rightfully rejects the goods for deficiency, he may treat the risk of loss as the sellers right from the beginning and (3) If the contract is breached by the buyer before risk of their loss has passed to him, the seller may leave the risk of loss on the buyer for a commercially reasonable period of time (Miller,and  Jentz, 2010).

Sellers Shipment under Reservation
 Failure of shipment of the goods to meet the specifications stipulated in the sale contract signifies a breach of the contract for transportation. However this does not affect the rights of the buyer in relation to shipment and identification of the goods. (Miller,and  Jentz, 2010).

Shipment by Seller
If the place of delivery of the goods is not explicitly stated in the contract, then the seller may put the goods in the hands of a carrier and make a reasonable contract for the delivery of the same in relation of to the nature of the goods and other circumstances of the situation and pass to the buyer any document that the later may need in order to claim ownership of the goods in good time and notify the buyer appropriately. (Miller,and  Jentz, 2010).

Payment by Buyer before Inspection
If inspection of the goods is done after the buyer has already paid the seller and it happens that the goods fail to meet specifications, the buyer is not excused from paying, unless inspection is not done before the goods fail to agree with the specifications laid down in the contract. (Miller and Jentz, 2010).

Rightful Rejection
Rejection of goods must be done within a reasonable time after their delivery or tender. It takes effect only if the buyer notifies the seller appropriately.

Warranties and Product Liability
The manufacturer or vendor of goods is required to compensate an injured buyer for injury caused by defective items that he or she has put in the market. When people are harmed by an unsafe product, they may take action against those who manufactured, sold, designed or furnished that product. Consumer protection litigation is seen by many consumers as a very appropriate tool for guarding consumers in the U.S. (Millerand Jentz, 2010).

Product Liability - Negligence
A manufacturer can be sued for negligence if he failed to exercise reasonable care in the production, design, or assembly of his product thereby causing harm to a consumer. It is the duty of everyone in the line of distribution, including a manufacturer to avoid being negligent. (Miller,and  Jentz, 2010).

Warranty
There are three ways in which a warranty can be created by confirmation of fact made by the vendor of the goods to the buyer relating to the goods, which becomes part of the contract by describing the goods, which is made part of the foundation of the contract and through a sample or model, which is made part of the basis of the contract. (Miller,and  Jentz, 2010).
Strict Liability
Cases make a seller responsible for all defective items that unreasonably pose danger to the personal safety of a consumer or the consumers property. This is expressed in the rule of strict liability as it is interpreted in product liability law for a seller who particularly engaged in trade. (Millerand Jentz, 2010).

The Mirror Image Rule
Under the common law, an effective acceptance was one in which the offer is accepted entirely and unconditionally, i.e. the acceptance had to be the mirror image of the offer. The acceptance is taken to a counter-offer if a term is added, removed or even slightly altered in the acceptance and hence not an acceptance.

The common law however gave rise to some problems in business transactions as illustrated in the following situation
A farmer in Kansas sends a Purchase Order to a grain supplier in Illinois on December 1, containing blanks which the farmer fills in by hand to indicate she wants 1,200 pounds of corn to be delivered on or before next May 16.  A clause in her Purchase Order is preprinted and states that delivery shall be made by U.P.S. The grain supplier sends out a preprinted form entitled Acceptance of Purchase Order upon receiving the Purchase Order. The owner fills in the blanks to indicate the grain company is promising to supply 1,200 pounds of corn to be delivered on or before February and promises to sell the corn at the same price quoted in the Purchase Order. However, clause 31 of the Acceptance is also pre-printed and says that delivery is to be made by any common carrier. When the Acceptance form arrives, the farmer just puts the document in her files. If Grain Company never delivers the corn, the fact is that no contract is breached because non existed. (Miller and Jentz, 2010)

Assess if there was a Contract
The first issue is whether the parties have a contract based on their exchanged writings. This is determined by judging their writings under the provisions of 2-207(1). The only function of 2-207(1) is to determine if the Purchase Order and Acknowledgment together constitute a binding offer and acceptance. This is done in two sub-steps

(1) Determining if the sellers acknowledgment is seasonable and

(2) Ascertain if in his acceptance, the buyer lays conditions on seller.

Once it is determined that a contract exists in writing under
207(1), i.e., it is determined that the buyer expressed acceptance reasonably. The proper analysis under 2-207(2) depends on whether the parties are merchants or not, that is, such terms do not automatically become part of the contract, and are treated as nothing more than suggestions of possible additions to the deal presented to the offeror. If Both Parties are Merchants, Offerees Terms Control Unless One of the Three
2-207(2) Exceptions Apply. 5.322.

Future Direction
As most of the states in the US have opted to make amendments to the UCC, discrepancies continue to arise in the law. This will come as a challenge as it will only make business between parties in different states more difficult. Attorneys in interstate trade cases will be required to be very conversant with the laws of the states involved.

Conclusion
The UCC has to a large extent helped in harmonizing sale transactions, though the discrepancies between the laws of the different states remain a challenge.

Recommendations
I would recommend that the various states review their laws to make sure that they do not deviate much from UCC and the laws of the rest of the states. I would also suggest that where the law of a particular state contradicts the UCC, the UCC to prevail in order to enhance uniformity.