Great Expectations for $100K Are Nice, But You Should Still Put Them in the Contract

I probably like Article 2 of the Uniform Commercial Code more than most lawyers, but even I have to recognize its limitations. Article 2 governs sales of goods, from candy bars to billion-dollar offshore platforms. It even applies to custom-made goods. It’s designed to minimize the amount of drafting (and legal expense and bother) necessary for even complex purchase-and-sale agreements. Without it, commerce would be a lot slower, and might even grind to a halt. The way it does this is by “gap fillers.” You can think of them as default settings for a purchase-and-sale agreement: delivery times, delivery destination, FOB, warranties, even price, among a great man other “defaults.” Only quantity must be absolutely specified by the parties (and even then they can talk in terms “all I need” or “all you’ve got”). You can agree on different terms, of course, but you don’t have to go in that level of detail if you don’t want. It’s designed to be common-sensical to business folks (which may be why lawyers have such a hard time with it!).

Article 2 gets wonky when services are throw into the mix. You can have Article 2 governing your contract or regular (“common law”) contract law, but not both. If the main purpose of the contract is the sale of goods, Article 2 will govern. Which is fine, except you have to realize that there are no gap fillers for the services part. You really will need to negotiate those bits.

The attached opinion (which is just a bit long-winded) shows what happens if you don’t. In this case, a wealthy homeowner contracted with an A/V specialist for some a really nice A/V system in his home. About $100K nice. Much of the decision is an analysis of whether Article 2 or common law governs the contract, and to be sure, the buyer would have been much better off under common law. But it shouldn’t have come down to that. The mistake is that the parties never agreed on how well the system as a whole should operated. All the components that the homeowner bought appeared to work just fine, but he was dissatisfied with the system as a whole, i.e., with how the AV specialist installed and arranged the components. Without a clear benchmark for how well the system would work, the homeowner had a nearly impossible task of proving that the system breached the contract or that he’d been harmed. In the end, the homeowner was stuck paying for the components, as per contract. (His other mistake was not rejecting the components when he had the chance.)

Thanks for reading!

Rick Sanders

Rick is the litigation half of Aaron & Sanders, PLLC; and, from 2012 to 2014, an adjunct professor at Vanderbilt University Law School, where he was teaching Copyright Law. Vandy also happens to be where he got his law degree in 2000. After graduation, he practiced at a major intellectual-property law firm in Silicon Valley for a few years. He returned to Nashville in 2004, where he worked for a large Nashville firm, practicing as much intellectual-property law as he could, but also a lot of commercial law. He left that firm in 2011 to start Aaron & Sanders with Tara Aaron, so he could practice intellectual-property law full time and work with start-ups and other non-institutional clients.