Applicable Law: Common Law vs. UCC Article 2 and Mixed Contracts

Why the Threshold Question Decides the Essay

The single most outcome-determinative move in any Contracts question is identifying the governing law. The Uniform Commercial Code (UCC) Article 2 governs transactions in goods (UCC 2-102), and 'goods' means all things movable and tangible that are identifiable to the contract at the time of sale (UCC 2-105). Everything that is NOT a sale of goods — services, real property, construction, employment, insurance, intangible rights, and the sale of a business's intangible assets — is governed by the common law of contracts, as refined by the Second Restatement.

The distinction is not academic. The two bodies of law diverge on core rules: the common law applies the mirror-image rule to acceptance, while the UCC applies 2-207. The common law requires new consideration to modify a contract (the preexisting-duty rule), while the UCC enforces good-faith modifications without new consideration (2-209). The common law has no implied warranty of merchantability; Article 2 does (2-314). State the governing law in your very first sentence, then carry it through every issue.

The Predominant-Purpose Test for Mixed Contracts

Many contracts mix goods and services: a contractor installs a custom furnace; a hospital supplies blood during surgery; a software firm licenses a program and provides training. Courts do NOT split the contract clause by clause. Instead, under the predominant-purpose (or 'predominant-factor') test, the court characterizes the contract as a WHOLE by its dominant element. If the predominant purpose is the sale of goods with services incidentally involved, the entire contract is governed by Article 2; if services predominate with goods incidentally involved, the common law governs the whole deal.

Courts weigh: (1) the language of the contract (does it speak of 'buyer/seller' or 'services rendered'?); (2) the nature of the business of the supplier; (3) the relative dollar value of the goods versus the labor; and (4) how the parties themselves described the transaction.

Classic Characterizations

A common MBE trap pairs a goods sale with significant labor and asks which body of law applies — choose the dominant element, never both.

Merchant Status and Gap-Filling

Merchant status under UCC 2-104 matters because several rules apply ONLY to merchants or only 'between merchants.' A merchant is a person who deals in goods of the kind or who by occupation holds themselves out as having knowledge or skill peculiar to the practice or goods involved. A casual seller of a used car is NOT a merchant; a car dealer is.

Merchant-only rules to remember:

• Firm offers (2-205): only a merchant can make an irrevocable offer without consideration via a signed writing.
• 2-207(2): additional terms become part of the contract automatically only 'between merchants' (subject to the three exceptions).
• Implied warranty of merchantability (2-314): arises only when the seller is a merchant with respect to goods of that kind.
• Statute of Frauds merchant confirmation (2-201(2)): a confirming memo binds the non-signing merchant who fails to object within 10 days.
• Entrustment (2-403(2)): entrusting goods to a merchant who deals in goods of that kind empowers them to transfer title to a buyer in the ordinary course.

Finally, UCC 1-103(b) keeps the common law alive as a gap-filler: doctrines of capacity, fraud, duress, mistake, estoppel, and the like supplement Article 2 unless displaced. So even in a pure goods case you may need to reach for a Restatement rule when the Code is silent.

Doctrinal Divergence Cheat-Sheet

Watch leases of goods (Article 2A) and the sale of a going business: the sale of inventory is goods, but the sale of goodwill, customer lists, and the business as a going concern is governed by the common law. A securities or investment sale is Article 8, not Article 2.