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Lecture 7 Advanced Contracts and
UCC Sales Welcome to lecture 

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seven of our Bar Prep Master 
Class. 

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This session marks the beginning
of Week 3, where we build upon 

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the foundational concepts from 
earlier contract law lectures 

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and pivot into more complex 
territory, including the Uniform

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Commercial Code UCC provisions 
that govern the sale of goods. 

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Understanding the distinctions 
between common law and UCC 

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Article 2 is essential for bar 
success. 

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This lecture will cover advanced
doctrines such as the parole 

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evidence rule, contract 
modifications, warranties, 

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performance breach, and remedies
under both systems. 

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Let us begin with the 
distinction between common law 

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contracts and contracts for the 
sale of goods under the UCC 

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common law versus UCC Article 2.
Contracts for services, real 

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estate, and employment are 
governed by the common law, 

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while contracts for the sale of 
goods are governed by UCC 

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Article 2. 
Goods are defined as tangible 

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movable items at the time of 
identification. 

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The UCC applies regardless of 
the price of the goods or the. 

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Party's sophistication. 
When a contract includes both 

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goods and services, courts use 
the predominant purpose test to 

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determine which legal framework 
applies. 

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Under this test, the court 
evaluates whether the primary 

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purpose of the contract is the 
sale of goods or the provision 

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of services. 
For instance, a contract to 

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install carpeting. 
A combination of sale and 

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service will be governed by the 
UCC if the value of the goods 

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predominates. 
If the transaction is more about

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the service, EG, hiring a 
contractor to renovate a house 

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whose supplies nails, drywall, 
and tools, common law applies. 

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Hybrid contracts, such as those 
involving computer software and 

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installation, often require 
nuanced analysis. 

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Additionally, UCC rules 
prioritize flexibility, speed of

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transactions, and the norms of 
business commerce. 

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Unlike common law, which 
emphasizes formality and 

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historical precedent, contract 
formation and modification. 

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Under common law, a valid 
contract modification requires 

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new consideration. 
This means both parties must 

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exchange something of legal 
value that was not already owed.

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If a builder agrees to build a 
house and later seeks more money

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without changing the scope of 
work, the promise to pay more is

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unenforceable absent new 
consideration under the UCC. 

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However, modifications do not 
require consideration if they 

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are made in good faith. 
This permits parties in an 

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ongoing commercial relationship 
to adapt to change circumstances

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without creating a new contract.
For example, if unforeseen 

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supply chain disruptions require
a seller to adjust delivery 

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schedules, the parties may 
modify their agreement without 

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exchanging new consideration, as
long as the change is reasonable

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and not coerced. 
The UCC also. 

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Permits contract formation even 
when terms are left open. 

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Section 22O four allows 
contracts to be formed in any 

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manner sufficient to show 
agreement, including conduct. 

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This reflects commercial 
realities where parties may act 

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without ironing out every 
detail. 

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Quantity, however, is typically 
required unless the contract 

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involves output or requirements 
terms. 

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In output contracts, the seller 
agrees to sell all it produces 

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to the buyer. 
In requirements contracts, the 

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buyer agrees to purchase all it 
needs from the seller. 

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Such contracts are enforceable 
so long as quantities are made 

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in good faith. 
The Peril Evidence Rule The 

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peril evidence rule is a rule of
substantive law that prevents 

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parties from introducing 
evidence of prior or 

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contemporaneous oral and 
sometimes written agreements to 

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contradict a final written 
expression. 

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The rule does not apply to 
subsequent modifications or to 

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agreements that are completely 
separate from the subject matter

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under the UCC. 
A partially integrated 

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agreement, one that does not 
include all the terms the 

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parties agreed to, may be 
supplemented with consistent 

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additional terms. 
A fully integrated agreement, 

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when intended as a complete and 
exclusive statement of the 

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terms, may not be contradicted 
by prior oral agreements. 

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However, it may still be 
explained by course of 

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performance how the parties 
acted under the current 

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contract. 
Course of dealing how the 

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parties acted in prior contracts
with one another. 

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Usage of trade practices 
commonly observed in a 

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particular industry. 
Additionally, parallel evidence 

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is always admissible to clarify 
ambiguity in language. 

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Prove that a writing was 
conditional upon the occurrence 

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of an event. 
Demonstrate that the agreement 

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was induced by fraud, mistake, 
or duress. 

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Demonstrate clerical error in 
transcription. 

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Performance Obligations The UCC 
imposes on sellers the duty to 

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tender conforming goods. 
The buyer has a right to a 

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perfect tender goods must 
conform in every respect to the 

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contract terms. 
This rule gives the buyer 

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substantial leverage, but is 
balanced by the seller's 

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opportunity to cure. 
If a buyer rejects non 

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conforming goods, the seller may
cure the defect if the time for 

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performance has not yet expired.
Notify the buyer of intent to 

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cure and deliver conforming 
goods within a reasonable time 

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if the seller had reasonable 
grounds to believe nonconforming

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goods would be acceptable. 
Buyers may revoke acceptance of 

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goods if the nonconformity 
substantially impairs the value 

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of the goods. 
The defect was not discovered 

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initially due to the difficulty 
of discovery or assurances by 

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the seller. 
In installment contracts, 

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rejection is more limited. 
A buyer may only reject an 

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installment if the nonconformity
substantially impairs the value 

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of that installment and cannot 
be cured. 

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If the nonconformity affects the
entire contract, the buyer may 

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cancel the whole agreement. 
Warranties under the UCC The UCC

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recognizes three types of 
warranties express implied by 

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merchandability. 
And implied. 

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By fitness for a particular use.
Express warranties arise when 

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the seller makes affirmations of
fact, promises or uses, 

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descriptions, or samples that 
become part of the basis of the 

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bargain. 
Puffery or sales talk does not 

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create a warranty. 
Implied warranty of 

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merchandability requires that 
goods be fit for their ordinary 

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purpose. 
This warranty arises 

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automatically when the seller is
a merchant dealing in goods of 

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that kind. 
Implied warranty of fitness for 

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a particular purpose applies 
when the seller knows the 

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buyer's specific use and the 
buyer relies on the seller's 

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skill or judgement. 
Disclaimers must be explicit. 

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To disclaim merchant ability, 
the seller must use the term 

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merchant ability and ensure the 
disclaimer is conspicuous. 

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For fitness, the disclaimer must
be written and conspicuous, 

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though it need not use specific 
language. 

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The phrase as is or with all 
faults conserved to exclude all 

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implied warranties. 
Risk of loss. 

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Risk of loss determines who 
bears the cost if goods are lost

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or destroyed through no fault of
either party. 

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This is especially important 
when delivery is delayed or 

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complicated. 
Factors influencing risk of loss

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include contract terms. 
Express contractual terms that 

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allocate risk of loss will 
control. 

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Courts enforce such terms 
strictly, especially when 

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parties are sophisticated or the
term is industry standard. 

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Common terms include shipping 
clauses such as FoB origin or 

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FoB destination shipment versus 
destination contracts. 

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A shipment contract or FoB 
seller city risk passes to the 

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buyer when the seller delivers 
the goods to the carrier. 

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This is the default rule under 
the UCC. 

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If the contract does not specify
destination contract or FoB 

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buyer city, risk of loss remains
with the seller until the goods 

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arrive at the specified 
destination and are tendered to 

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the buyer. 
Any damage during transit is the

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seller's responsibility in non 
carrier cases. 

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If the seller is a merchant, 
risk of loss passes to the buyer

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upon the buyer's actual receipt 
of the goods, ensuring the buyer

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is in control of possession 
before assuming risk. 

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If the seller is not a merchant,
risk of passes upon the seller's

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tender of delivery, meaning when
the seller places the goods at 

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the buyer's disposal and 
notifies the buyer that the 

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goods are available. 
Additional considerations 

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include if goods are damaged or 
destroyed before risk of loss 

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has passed, the seller bears the
loss. 

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If risk has passed, the buyer 
must still pay. 

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Risk of loss also factors into 
insurable interest. 

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Both parties may have an 
insurable interest in the goods 

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prior to delivery, depending on 
who holds title and the type of 

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transaction. 
In sales on approval or return 

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sale On approval. 
The buyer takes goods for trial.

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Risk of loss remains with the 
seller until the buyer signifies

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approval or retains the goods 
beyond a reasonable time. 

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Return can be made even if the 
goods are perfectly fine. 

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Sale or return? 
The buyer takes goods for resale

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with the right to return unsold 
items. 

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Risk of loss passes to the buyer
upon delivery and remains with 

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the buyer until the goods are 
returned to the seller. 

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This arrangement is often used 
in consignment transactions. 

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These distinctions are highly 
testable and often appear in MBE

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hypotheticals concerning damage 
or destruction of goods in 

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transit remedies. 
For. 

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Breach. 
The UCC offers a broad range of 

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remedies designed to put the non
breaching party in the position 

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they would have occupied had the
contract been performed. 

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Remedies are structured to 
promote fairness, prevent 

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economic waste, and uphold 
reasonable commercial 

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expectations. 
Seller's remedies. 

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Withhold delivery. 
If the buyer wrongfully rejects 

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or revokes acceptance of goods, 
fails to make a payment due on 

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or before delivery, or 
repudiates the contract, the 

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seller may withhold delivery of 
remaining goods. 

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Cancel the contract. 
If the buyer is in breach, the 

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seller may cancel the contract 
and sue for damages for the 

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portion not yet performed. 
Resell the goods. 

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The seller may resell the goods 
in a commercially reasonable 

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manner and recover the 
difference between the contract 

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price and the resale price, plus
incidental damages such as 

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storage and transportation 
costs. 

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Recover market damages If the 
seller does not resell or resell

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is not possible, they may 
recover damages based on the 

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market price at the time of 
tender minus the contract price 

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action for the price. 
If the buyer has accepted goods 

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but failed to pay, or if goods 
conforming to the contract are 

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lost or damaged after risk of 
loss has passed to the buyer, 

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the seller may sue for the full 
contract price. 

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Stop delivery. 
In certain circumstances, such 

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as when the buyer is insolvent, 
the seller may stop delivery of 

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goods in transit, especially if 
a large shipment is involved. 

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Buyer's Remedies. 
Cover. 

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The buyer may purchase 
substitute goods in good faith 

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and without unreasonable delay 
and recover the difference 

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between the contract price and 
the cover price. 

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Cover is optional, not 
mandatory. 

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Recover market damages. 
If the buyer chooses not to 

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cover or is unable to cover, 
they may instead recover the 

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difference between the market 
price at the time of breach and 

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the contract price. 
Specific performance. 

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This equitable remedy is 
available when goods are unique,

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such as art, custom items, or 
rare goods, or where cover is 

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impracticable. 
The buyer must show that 

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monetary damages are inadequate.
Replavent. 

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When the buyer has made partial 
or full payment for goods and 

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the seller refuses to deliver, 
the buyer may seek replavent to 

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recover the goods, especially 
when goods are identified to the

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contract and no suitable cover 
is available. 

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Revocation of acceptance The 
buyer may revoke acceptance of 

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goods if the non conformity 
substantially impairs their 

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value and was difficult to 
discover at the time of 

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acceptance. 
Consequential damages. 

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These are indirect damages that 
arise from special circumstances

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beyond the ordinary course of 
events. 

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Buyers can recover consequential
damages if the loss results from

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the sellers breach. 
The damages were foreseeable at 

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the time of contracting and 
buyer took reasonable steps to 

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mitigate the loss. 
Examples include loss profits 

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from the buyer's resell 
customers or losses due to 

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production downtime caused by 
defective goods. 

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These remedies are cumulative 
and may be asserted in the 

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alternative. 
The overarching goal is to 

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protect commercial expectations 
while promoting market 

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efficiency. 
The UCC Statute of Frauds 

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requires a writing for sales of 
goods priced at $500 or more. 

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The writing must indicate a 
contract has been made and 

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include a quantity term and be 
signed by the party to be 

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charged. 
Exceptions include merchants. 

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Confirmatory memo if both 
parties are merchants and one 

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sends a written confirmation 
that the other fails to object 

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to within 10 days. 
Specially manufactured goods. 

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Goods made specifically for the 
buyer that cannot be resold in 

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the ordinary course of business.
Admission in court. 

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00:14:58,040 --> 00:15:01,080
Party admits a contract existed.
Part. 

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Performance, payment made or 
goods received and accepted. 

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00:15:05,840 --> 00:15:10,200
In conclusion, today's lecture 
covered advanced doctrines in 

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contracts law and transitioned 
into the Ucc's governance of 

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00:15:14,920 --> 00:15:19,160
goods transactions. 
Understanding the UCC specific 

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00:15:19,160 --> 00:15:23,200
rules regarding performance 
warranties and remedies is 

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00:15:23,200 --> 00:15:26,560
critical to mastering contract 
law in the bar exam. 

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00:15:27,160 --> 00:15:30,880
In our next session, we will 
turn to business associations 

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00:15:31,040 --> 00:15:35,440
and fiduciary principles in 
corporate partnership an agency 

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00:15:35,440 --> 00:15:36,280
contacts.