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necessary elements of a contract pursuant to the UCC

Page history last edited by abogado 8 years, 11 months ago

necessary elements of a contract pursuant to the UCC - taken from the following website

http://www.legalfish.com/business-attorney/transactions-contracts.htm (no longer an active website)



Business transactions refer to any transfer of goods or services, made legal by an agreed upon contract between two or more parties. Goods and services can come in the form of many things, ranging from wholesale materials to stocks, and from commercial transportation to cleaning services. Because most business transaction law is not federally regulated, most states have adopted the Uniform Commercial Code, which regulates almost all facets of business transactions, including contracts. It is very important for large-scale entrepreneurs and small business owners alike to understand the law that governs business transactions.


Uniform Commercial Code

The Uniform Commercial Code is a uniform act that simplifies, clarifies, and modernizes the law of sales and commercial transactions. Almost every state has adopted the UCC. The UCC governs a large range of business transactions, including leasing, buying, selling, borrowing, investment securities, and transferring funds. Furthermore, the Code standardizes contracts that are made for the purpose of business transactions.



In general, it is important to create a written contract when conducting business transactions, although a written contract isn’t necessary for an agreement to be legally enforceable. An agreement exists when two or more parties agree on fundamental terms, with the intention of entering a legally binding contract. However, many problems may arise from an oral contract, so it is a good idea to put the agreement in writing. The contract should state that there is an agreement of exchange, what the exchange entails, and important provisions that relate to the transaction such as duration and termination.


Offer and Acceptance

When parties agree on fundamental terms with the intention of forming a contract, they have, in legal terms, completed an “offer and acceptance.” Offer and Acceptance is the primary principle used by the court system to determine whether or not a contract exists. An offer is made from one party, the “offeror,” to another, the “offeree,” and the second party has the option of accepting the offer or declining. The offeror makes the offer with the intention of creating a binding contract upon acceptance by the offeree.


Once the offer is made, the offeree has the option to accept or decline it. A common way an offer can be accepted is by signing a contract. Another is by recognizing the performance of the requested act by the offeror. An example of this would be a monetary offer to mow one’s lawn. Once the lawnmower accepts the money, the offer is accepted, and the offeree is contractually bound to mow the lawn.


There are certain rules that deal with acceptance that must be followed. The only person who can accept the offer is the offeree, and the offeree is not bound by the contract if an unauthorized agent accepts on the offeree’s behalf. If the offeror specifies that there must be a certain way to accept the offer, such as by signing a contract in person, than it must be accepted that way in order to be valid. Lastly, silence can never be a form of acceptance. For example, even if someone makes an offer and states that the offeree’s silence, or non-response, to the offer will qualify acceptance, a contract does not exist.


Furthermore, if an offer is made and the offeree modifies that offer, the original offer no longer exists. The modification creates a counter-offer, and the original offeree now becomes the offeror.


Unless otherwise stated in the offer, an offeree has “reasonable time” time to consider the offer and either accept or reject. Legally, reasonable time is the perceived amount of time that an ordinary person would deem rational. For example, if an offer of perishable goods for sale such as fruit is made, a reasonable time to accept would be within a few days or week. However, if the offer is for a condominium, reasonable time might be a few weeks or even months. Because the concept of reasonable time is vague, it is important to include a time period in which one can accept when making an offer.


Elements of a "Good" Contract


There are certain elements of a contract that are required in order to make that contract enforceable. They are as follows:


1. Identifying the parties involved:

The contract must state who is agreeing to the terms of the contract. This includes the names of the people involved, as well as the business’ names if applicable.


2. Identifying and explaining the agreement:

The contract must state the fact that there is an agreement to exchange promises, such as goods or services, and what this exchange entails. It should be specific, stating all material information relating to the transaction and be very clear. The consideration, which refers to what is done or promised to be done in return for the other party’s promise, must exist and have value.


3. Stating all key conditions and logistics:

All conditions, clauses, and certain logistics regarding the exchange should be indicated in the contract. This is an extension of the previous element, and is very important because courts will look at this to determine what is and what isn’t enforceable in a contract dispute. Certain elements such as quantity, price, transportation, dates of sale and delivery, dates of termination, and future options should be clearly stated.


4. Signatures of parties (in a written contract):

The contract must be signed and dated by the parties involved.

There are other elements that should be included in a contract in order to make it a “good” contract. These items should be included in order to provide protection for the parties involved and sometimes are considered key conditions and logistics, as mentioned above. They are as follows:


1. Dispute Provisions:

These provisions should be included in order to determine what will be done if a dispute arises. This can include ways to resolve the conflict, such as by mediation or arbitration, instead of business litigation, which can be very expensive and time-consuming. Settlement possibilities can also be stated.


2. Severability Clause:

When a court finds any part of a contract illegal, ineffective, or unenforceable, the default rule is to deem the entire contract void. A severability clause states that the rest of the contract is enforceable when any part of that contract is illegal, ineffective, or unenforceable. This protects the contracts’ parties from premature termination of the contract, and helps maintain the spirit of the contract.


3. Integration Clause:

An integration clause declares that the contract is the complete and final agreement between the parties. Thus, when included, any oral agreements made between parties will not be enforced. This prevents problems that can often arise when oral agreements are disputed.


4. Choice of Law Clause:

Because business transactions often occur between parties of different states, it is often important to declare what state’s laws to use in the event of a dispute. Different jurisdictions have different statutes regarding business transactions, so this clause will make it clear to all parties under which jurisdiction the contract falls.


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