We have arrived
at our last, and in some ways, most interesting element of ‘agreement’. To
fully appreciate this last element, let’s return for a moment to the precise
language used in the definition:
"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 1-303. Section 1-201(b)(3). [Emphasis added].
Upon a review of the language of Section
1-201(b)(3), it is immediately apparent that ‘course of performance, course of
dealing and usage of trade' are illustrative of ‘other circumstances’ from which
inferences may be drawn, not the only ones. This expansive reading literally
opens up a universe of possibilities from which a creative advocate can draw.
One
circumstance that I always look at in connection with UCC cases is the market
at the time any dispute might have arisen.
Did a particular buyer microscopically inspect goods to find defects
because the price at which he had contracted to buy the goods is now 40% above
the market price for the same goods? What about personal circumstances? Would a dramatic increase in lifestyle be of
any relevance when a party to a contract states that business has become so bad
that he can’t supply your clients’ needs?
I have not seen Section 1-201(b)(3) used in that manner, nor have I had
the opportunity to do so, but I would not hesitate to do so. In any event, it is a provision which opens options
for a creative attorney. The interpretation suggested would also provide a
statutory basis for a wide range of questions during discovery.
With
the addition of ‘other circumstances’, we have completed all the elements of
agreement. The initial impact of this
information is explained in Section 1-303(d):
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….. Section 1-303(d). [Emphasis added].
That language is extremely powerful, and
should be read very carefully. We saw the impact of trade usage in the In re
Cotton Yarn Antitrust litigation. The other
elements of agreement can have the same dramatic impact.
There is a
hierarchy of the weight given to course of performance, course of dealing and
usage of trade. This is stated in Section 1-303(e):
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: (1) express terms prevail over course of performance, course of
dealing, and usage of trade; (2) course of performance prevails over course of
dealing and usage of trade; and (3) course of dealing prevails over usage of
trade.
With all of the elements of
agreement in place, relevance established, relative weight in place, we return
to the definition of ‘contract’ for it is here that the legal effect of the
agreement is determined:
‘Contract’ means the total legal obligation that
results from the parties’ agreement as determined by the Act and other
applicable rules of law. Section 1-201(b)(12).
Thus,
we have returned to our initial inquiry as to what a contract means under the
UCC, after a journey through the definition of agreement and the sections
connected to agreement. Once the parties ‘agreement’ is in place, there are two
steps required to determine the legal impact of that agreement. First, the application of the text of the Uniform
Commercial Code to the facts determined; second, ‘other applicable rules of
law’ which impact the agreement—Section 1-103(b).
As of this
point, we have discussed the following Code sections:
1. 1-102;
2. 1-103(a)(1)
3. 1-103(a)(2)
4. 1-103(a)(3);
5. 1-103(b);
6. 1-201(b)(12);
7. 1-201(b)(3);
8. 1-302
9. 1-303(a);
10. 1-303(b);
11. 1-303(c);
12. 1-303(d);
13. 1-303(e)
Learning Suggestion: For those who are learning the Uniform
Commercial Code, the best step at this point would be to go over each of the
Code sections as many times as necessary to be certain the text of each section
is fully understood. Each time you go
over the material, those patterns continue to get stronger in the brain. Eventually, it will be automatic
analysis. In reviewing these sections,
remember that this basic contract analysis will apply to contracts throughout
out the UCC.
For more information on the author and book, please visit ucc-madeeasy.com.
For more information on the author and book, please visit ucc-madeeasy.com.
No comments:
Post a Comment