Summary. Almost every business buys and sells goods, and almost none read the default rules that govern when their paperwork runs out. This article covers scope and the goods-versus-services distinction, then formation: merchant rules, the statute of frauds, firm offers, and the battle of the forms under § 2-207. It works through express and implied warranties and the exact language needed to disclaim them, limitations of remedy and failure of essential purpose, then performance, perfect tender and cure, rejection and revocation, risk of loss and delivery terms, excuse by impracticability, and the remedy structures on both sides.

A commercial bakery orders a $210,000 industrial oven. It sends a purchase order with its standard terms: a two-year warranty, consequential damages recoverable, disputes in the bakery's home state.

The manufacturer sends an acknowledgment with its standard terms: a 90-day warranty, all implied warranties disclaimed, remedies limited to repair or replacement, consequential damages excluded, arbitration in the manufacturer's home state.

Nobody signs anything. The oven ships, the bakery pays, and eleven months later a control failure spoils $340,000 of product and shuts the line for nine days.

Which terms govern?

The answer is not "the last document sent," which is what most people assume. It is a subsection-by-subsection walk through UCC § 2-207, and the likely outcome is that a contract was formed, the conflicting terms knock each other out, and the gaps are filled by the Code's own default rules — which include a four-year limitations period, an implied warranty of merchantability, and consequential damages recoverable under § 2-715. The manufacturer's disclaimers, never agreed to, may not be in the contract at all.

Article 2 is the most consequential body of commercial law that most businesspeople have never read. It governs by default, it fills every gap, and it rewards the party that understood the defaults when the forms were designed.

The short answer

Scope. Article 2 applies to transactions in goods, § 2-102. "Goods" means things movable at the time of identification to the contract, § 2-105 — which includes manufactured items, equipment, inventory, crops, and specially manufactured goods, and excludes real property, services, and intangibles.

Merchants get different rules. A merchant is one who deals in goods of the kind or otherwise holds themselves out as having knowledge or skill peculiar to the practices or goods involved, § 2-104. Several rules apply only between merchants.

The Code fills gaps. Where the parties are silent on price, delivery, time, or place, Article 2 supplies terms, §§ 2-305 to 2-310. A contract does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for a remedy, § 2-204(3).

Three doctrines cause most litigation: the battle of the forms (§ 2-207), warranty disclaimers and remedy limitations (§§ 2-316, 2-719), and the perfect tender rule with its cure and revocation machinery (§§ 2-601 to 2-608).

Note on revisions. A 2003 amendment to Article 2 was withdrawn and adopted by no state; the operative text remains the pre-2003 official text as enacted with state variations. The 2022 amendments addressed digital assets in a new Article 12 and made conforming changes elsewhere, and adoption is proceeding state by state.

Scope: goods, services, and hybrid contracts

The threshold question is whether Article 2 applies at all, because the alternative — common law contract doctrine — differs on formation, modification, warranties, and remedies.

Pure services are outside Article 2. Consulting, design, transportation, and construction services are governed by common law.

Hybrid transactions — goods plus services — are the hard case, and courts apply one of two approaches:

  • The predominant purpose test, the majority rule from Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974): is the contract predominantly for goods with services incidental, or predominantly for services with goods incidental? Courts consider the language of the agreement, the nature of the supplier's business, the relative value of goods and services, and how the contract is priced. Article 2 then governs the entire contract.
  • The gravamen test, a minority approach: Article 2 applies to the portion of the transaction from which the complaint arises.

Recurring classifications. An installed HVAC system in a building under construction is usually services. A machine delivered with installation and training is usually goods. Custom-manufactured components are goods, § 2-105, even though labor predominates in producing them.

Software is the persistent difficulty. Prepackaged software sold on media has generally been treated as goods; a license of software delivered electronically, and software as a service, are more often analyzed under common law or by analogy to Article 2. The attempt to resolve this by a uniform act failed, and courts continue to reach inconsistent results, which is one reason software agreements should state their own warranty, remedy, and limitations terms rather than relying on any default.

International sales. The United Nations Convention on Contracts for the International Sale of Goods (CISG) applies automatically to contracts for the sale of goods between parties with places of business in different contracting states, unless the parties expressly opt out. It differs from Article 2 in important ways: no statute of frauds, a different battle-of-the-forms rule closer to the mirror image rule, a fundamental breach standard rather than perfect tender, and no parol evidence rule. Many US practitioners opt out reflexively; the better practice is to decide, and if opting out, to say so expressly rather than by choosing "the law of New York," which includes the CISG as the law of the United States.

Formation

Offer and acceptance are flexible. A contract may be made in any manner sufficient to show agreement, including conduct recognizing its existence, § 2-204. An offer inviting prompt shipment may be accepted by a prompt promise to ship or by shipping, § 2-206.

Firm offers, § 2-205. A signed written offer by a merchant giving assurance it will be held open is irrevocable for the stated time, or a reasonable time if none is stated, but not exceeding three months — without consideration. This displaces the common law rule requiring an option contract to be supported by consideration.

Statute of frauds, § 2-201. A contract for the sale of goods for $500 or more is unenforceable unless there is a writing sufficient to indicate a contract, signed by the party against whom enforcement is sought, specifying a quantity. Note what the writing need not contain: price, delivery terms, or even accurate terms — but the contract is not enforceable beyond the quantity stated.

Four exceptions:

  1. Merchant confirmatory memo — between merchants, a written confirmation sufficient against the sender binds the recipient too, unless the recipient objects in writing within 10 days. This rule catches unwary merchants regularly.
  2. Specially manufactured goods not suitable for sale to others in the ordinary course, where the seller has substantially begun manufacture.
  3. Admission in pleadings, testimony, or otherwise in court.
  4. Part performance — goods for which payment has been made and accepted, or which have been received and accepted.

Modification, § 2-209. An agreement modifying a contract needs no consideration to be binding — a significant departure from common law. But a signed agreement excluding modification except by a signed writing is effective (with a separate signature required against a merchant's form when imposed on a non-merchant), and the modification must meet the statute of frauds if the contract as modified is within it. Modifications must be sought in good faith.

Open terms. Price, § 2-305 (a reasonable price at the time of delivery); place of delivery, § 2-308 (the seller's place of business); time, § 2-309 (a reasonable time); payment, § 2-310 (due at the time and place the buyer is to receive the goods).

Requirements and output contracts, § 2-306. Enforceable, measured by actual good-faith requirements or output, with no quantity unreasonably disproportionate to any stated estimate or to prior comparable requirements. A buyer that shuts a plant may reduce requirements to zero if done in good faith; a buyer that triples requirements to resell at a profit may not.

Unconscionability, § 2-302. The court may refuse to enforce an unconscionable contract or clause, limit its application, or strike it. Assessed as of the time of contracting, with procedural (bargaining process) and substantive (term itself) dimensions. Rarely successful between merchants; more available in consumer transactions.

The battle of the forms: § 2-207

The common law mirror image rule required acceptance to match the offer exactly; a response with different terms was a counteroffer, and performance meant the last form sent governed. Section 2-207 rejects that.

Subsection (1). A definite and seasonable expression of acceptance, or a written confirmation sent within a reasonable time, operates as an acceptance even though it states terms additional to or different from those offered — unless acceptance is expressly made conditional on assent to the additional or different terms.

The "expressly conditional" proviso is read narrowly. A form saying "this acceptance is expressly conditional on buyer's assent to the terms herein" may invoke it; boilerplate stating that the seller's terms "govern" generally does not.

Subsection (2). The additional terms are proposals for addition to the contract. Between merchants, they become part of the contract unless:

  • (a) the offer expressly limits acceptance to its own terms;
  • (b) they materially alter the contract; or
  • (c) notification of objection has been given or is given within a reasonable time.

What materially alters — meaning it would result in surprise or hardship if incorporated without express awareness. Comment 4 to § 2-207 lists examples: a disclaimer of the implied warranty of merchantability or fitness in circumstances where it would normally attach; a clause requiring complaints within an unreasonably short time; a clause requiring 90 or 100 percent delivery in a contract where the usage of trade allows greater leeway; and a clause reserving cancellation for any delinquency in payment. Comment 5 lists terms that generally do not materially alter: a clause fixing a reasonable time for complaints, a clause setting interest on overdue invoices, and a clause limiting remedy in a reasonable manner.

Different (as opposed to additional) terms. The Code's text addresses "additional" terms in subsection (2), and courts have split three ways on conflicting terms:

  • The knockout rule — the majority approach: conflicting terms cancel each other and § 2-207(3) gap-fillers supply the term.
  • Different terms treated as additional, and analyzed under subsection (2).
  • The offeror's terms control, because the offeree's different term simply drops out.

Subsection (3). Where the writings do not establish a contract but the parties' conduct recognizes one, the contract consists of the terms on which the writings agree, plus supplementary terms supplied by the Code. This is how the bakery scenario resolves.

Practical consequences.

  • Buyers: state in the purchase order that acceptance is expressly limited to the terms of the order, § 2-207(2)(a), which prevents additional terms from entering.
  • Sellers: make acceptance expressly conditional on assent to the seller's terms, and be prepared to actually treat a non-assenting response as no contract — which most sellers are not, commercially.
  • Both: recognize that the Code's default terms are what you get when the forms fight. Know what they are, and design forms accordingly.
  • The reliable fix is a negotiated master agreement with an integration clause and an express statement that purchase orders and acknowledgments serve only to identify quantity, price, and delivery.

Warranties

Express warranties, § 2-313, are created by:

  • an affirmation of fact or promise relating to the goods that becomes part of the basis of the bargain;
  • a description of the goods; or
  • a sample or model.

No formal words are required and no intent to warrant is necessary. But a statement of the value of the goods, or the seller's opinion or commendation — puffing — does not create a warranty. The line is between verifiable factual assertions ("this pump moves 400 gallons per minute") and sales talk ("this is the best pump on the market").

Implied warranty of merchantability, § 2-314, arises in a sale by a merchant with respect to goods of that kind. Merchantable goods must, among other things, pass without objection in the trade under the contract description, be of fair average quality, be fit for the ordinary purposes for which such goods are used, be adequately contained, packaged, and labeled, and conform to any promises on the label.

Implied warranty of fitness for a particular purpose, § 2-315, arises where the seller has reason to know the particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select suitable goods. It does not require the seller to be a merchant.

Warranty of title and against infringement, § 2-312 — the seller warrants good title, rightful transfer, and freedom from security interests of which the buyer has no knowledge; and a merchant regularly dealing in goods of the kind warrants they are delivered free of any rightful infringement claim, unless the buyer furnished specifications, in which case the buyer indemnifies the seller.

Privity. Section 2-318 offers states three alternatives extending warranty protection beyond the immediate buyer, ranging from household members and guests to any person who may reasonably be expected to use the goods. States have adopted different alternatives and some have varied them further, so the reach of a warranty to a downstream user is state-specific.

Disclaimers and limitations of remedy

Disclaiming implied warranties, § 2-316, requires precise language:

  • Merchantability — the disclaimer must mention merchantability, and if written, must be conspicuous.
  • Fitness for a particular purpose — the disclaimer must be in writing and conspicuous. It need not mention fitness; "There are no warranties which extend beyond the description on the face hereof" suffices.
  • "As is," "with all faults," or similar language calling the buyer's attention to the exclusion and making plain there is no implied warranty excludes all implied warranties, unless the circumstances indicate otherwise.
  • Examination — where the buyer has examined the goods, or a sample or model, as fully as desired, or has refused to examine, there is no implied warranty as to defects an examination ought to have revealed.
  • Course of dealing, course of performance, or usage of trade may also exclude or modify implied warranties.

Conspicuous, § 1-201(b)(10), means so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it — larger type, contrasting type, color, or set off by symbols. A disclaimer buried in the same-size type on the back of a form is not conspicuous, and courts say so regularly.

Express warranties cannot be disclaimed in a way inconsistent with them, § 2-316(1). Words creating an express warranty and words disclaiming it are construed as consistent where reasonable, and where not, the disclaimer is inoperative. A seller cannot promise 400 gallons per minute on page one and disclaim it on page four.

Limitation of remedy, § 2-719:

  • The agreement may limit or alter remedies, including limiting the buyer to return and refund or to repair and replacement of nonconforming goods.
  • A remedy is optional unless expressly agreed to be exclusive. Say "sole and exclusive remedy."
  • Failure of essential purpose, § 2-719(2). Where an exclusive or limited remedy fails of its essential purpose, remedy may be had as provided in the Code. The paradigm is a repair-or-replace remedy where the seller cannot or will not fix the defect within a reasonable time — the buyer is then thrown back on the full remedy set.
  • Consequential damages may be limited or excluded unless unconscionable, § 2-719(3). Limitation of consequential damages for personal injury in the case of consumer goods is prima facie unconscionable; limitation where the loss is commercial is not.

The critical drafting point. Courts split on whether the failure of a limited repair remedy also voids a separate consequential damages exclusion. The majority view treats the two clauses as independent, so a well-drafted agreement states them separately and includes language providing that the consequential damages exclusion survives any failure of the limited remedy. Drafting them as a single integrated clause invites the minority result, in which everything falls together.

Magnuson-Moss. For consumer products, the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301-2312, restricts disclaimers: a supplier that gives a written warranty may not disclaim implied warranties at all (it may limit their duration to the written warranty's duration if the warranty is "limited" rather than "full" and the limitation is conscionable and conspicuous). It also requires pre-sale availability of warranty terms and prescribes full-versus-limited designations.

Performance, tender, and the perfect tender rule

The seller's obligation is to transfer and deliver conforming goods; the buyer's is to accept and pay, § 2-301.

The perfect tender rule, § 2-601. If the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may reject the whole, accept the whole, or accept any commercial unit and reject the rest. This is stricter than the common law's substantial performance standard.

Its severity is softened by four things:

Cure, § 2-508. Where the buyer rejects a nonconforming tender and the time for performance has not expired, the seller may seasonably notify the buyer of an intention to cure and make a conforming delivery within the contract time. Where the time has expired, the seller may still have a further reasonable time to substitute a conforming tender if it had reasonable grounds to believe the tender would be acceptable, with or without a money allowance.

Installment contracts, § 2-612, use a different standard: the buyer may reject an installment only if the nonconformity substantially impairs the value of that installment and cannot be cured, and may treat the whole contract as breached only if the nonconformity substantially impairs the value of the whole contract.

Good faith, § 1-304, which every party owes in performance and enforcement, and which limits pretextual rejection to escape a bad bargain.

Acceptance, § 2-606, occurs when the buyer, after a reasonable opportunity to inspect, signifies conformity or that it will take the goods despite nonconformity; fails to make an effective rejection; or does any act inconsistent with the seller's ownership. Once goods are accepted, the buyer must pay at the contract rate, § 2-607(1), and bears the burden of establishing breach.

Notice of breach after acceptance, § 2-607(3)(a): the buyer must notify the seller of the breach within a reasonable time after it discovers or should have discovered it, or be barred from any remedy. This provision ends more meritorious claims than any other in Article 2, because buyers negotiate informally for months and never send anything that qualifies as notice.

Rejection, § 2-602, must be within a reasonable time after delivery and requires seasonable notification. A merchant buyer in possession of rightfully rejected goods must follow the seller's reasonable instructions, and absent instructions must make reasonable efforts to sell perishables for the seller's account, § 2-603.

Revocation of acceptance, § 2-608, is available where a nonconformity substantially impairs the value of the goods to the buyer and the buyer accepted either on the reasonable assumption the nonconformity would be cured (and it was not seasonably cured), or without discovery of the nonconformity where acceptance was reasonably induced by the difficulty of discovery or by the seller's assurances. Revocation must occur within a reasonable time after discovery, before a substantial change in the goods' condition not caused by their own defects, and is not effective until the buyer notifies the seller.

Right to inspect, § 2-513, before payment or acceptance, except in COD and documentary payment arrangements.

Assurances, § 2-609. Where reasonable grounds for insecurity arise, a party may demand adequate assurance of due performance in writing and may suspend its own performance. Failure to provide assurance within a reasonable time not exceeding 30 days is a repudiation. This is a genuinely useful and underused tool when a counterparty's financial condition deteriorates.

Anticipatory repudiation, § 2-610, permits the aggrieved party to await performance for a commercially reasonable time, resort to remedies, or suspend performance.

Risk of loss and delivery terms

Risk of loss with no breach, § 2-509:

  • Shipment by carrier, no destination specified (a shipment contract): risk passes to the buyer when the goods are duly delivered to the carrier.
  • Destination contract requiring delivery at a particular destination: risk passes when the goods are tendered at the destination.
  • Goods held by a bailee without being moved: risk passes on receipt of a negotiable document of title, acknowledgment by the bailee of the buyer's right, or receipt of a non-negotiable document.
  • Other cases: if the seller is a merchant, risk passes on the buyer's receipt of the goods; otherwise on tender of delivery.

Where there is a breach, § 2-510: a nonconforming tender leaves risk on the seller until cure or acceptance; a buyer's revocation of acceptance throws risk back on the seller to the extent of any deficiency in the buyer's insurance; and a buyer that repudiates conforming goods identified to the contract bears the risk for a commercially reasonable time to the extent of any deficiency in the seller's insurance.

Delivery terms. UCC §§ 2-319 through 2-324 define FOB, FAS, CIF, and C&F — but many states have deleted those sections on the view that commercial parties use Incoterms instead. Do not assume the Code defines your shipping term; state the applicable Incoterms edition expressly, or define the term in the contract. The recurring dispute is between FOB origin (risk passes at the seller's dock, buyer bears freight and loss in transit) and FOB destination (risk passes on arrival), and the parties frequently use the term without agreeing on which they mean.

Identification, § 2-501, gives the buyer a special property interest and, with insolvency of the seller, a right to recover the goods under § 2-502.

Excuse: impracticability and force majeure

Section 2-615 excuses a seller's delay or non-delivery where performance has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made, or by good-faith compliance with a governmental regulation or order. The seller must seasonably notify the buyer and, where the contingency affects only part of capacity, must allocate production among customers in a fair and reasonable manner.

The standard is demanding. Increased cost alone does not excuse performance unless the rise is due to an unforeseen contingency altering the essential nature of performance — a market shift, even a severe one, is the risk the contract allocates. Courts denied relief in the great majority of pandemic-era and supply-shock cases where the seller could still perform at a loss.

Contractual force majeure clauses frequently provide broader relief than § 2-615, and they are what most disputes actually turn on. Draft them with a specific event list plus a catchall, a causation standard (prevents, hinders, or delays), notice and mitigation obligations, an allocation mechanism, and a termination right if the event persists beyond a stated period.

Section 2-614 addresses substituted performance where the agreed berthing, loading, or delivery facilities or manner of delivery becomes commercially impracticable — a commercially reasonable substitute must be tendered and accepted.

Remedies

Seller's remedies on the buyer's breach, §§ 2-703 to 2-710:

  • Withhold delivery; stop delivery by a carrier or bailee, § 2-705.
  • Resell in good faith and in a commercially reasonable manner and recover the contract price minus resale price, plus incidental damages, less expenses saved, § 2-706. Notice of resale is required.
  • Market damages — the contract price minus market price at the time and place for tender, § 2-708(1).
  • Lost profits, § 2-708(2), where the measure above is inadequate to put the seller in as good a position as performance would have — the lost volume seller doctrine, available where the seller had the capacity to make both sales.
  • Action for the price, § 2-709, for goods accepted, for conforming goods lost or damaged after risk passed, and for goods identified to the contract that the seller cannot reasonably resell.
  • Incidental damages, § 2-710.

Buyer's remedies, §§ 2-711 to 2-717:

  • Cover — purchase substitute goods in good faith, without unreasonable delay, and recover the cost of cover minus contract price, plus incidental and consequential damages, less expenses saved, § 2-712.
  • Market damages — the market price at the time the buyer learned of the breach minus contract price, § 2-713, where the buyer does not cover.
  • Damages for accepted goods, § 2-714 — the difference between the value of the goods as accepted and their value as warranted, plus incidental and consequential damages. This is the warranty measure.
  • Incidental damages, § 2-715(1) — inspection, receipt, transportation, care, custody, and cover-related expenses.
  • Consequential damages, § 2-715(2) — losses the seller had reason to know at contracting and that could not reasonably be prevented by cover, plus injury to person or property proximately resulting from breach of warranty. This is the Hadley v. Baxendale foreseeability rule codified.
  • Specific performance, § 2-716, where the goods are unique or in other proper circumstances, plus replevin for identified goods the buyer cannot cover for.
  • Deduction of damages from the price still due, on notice, § 2-717.

Liquidated damages, § 2-718, are enforceable in an amount reasonable in light of anticipated or actual harm, the difficulties of proof of loss, and the inconvenience of otherwise obtaining an adequate remedy. Unreasonably large amounts are void as a penalty.

Statute of limitations, § 2-725. Four years from when the cause of action accrues, which is when the breach occurs, regardless of the aggrieved party's lack of knowledge. A breach of warranty accrues on tender of delivery — except where the warranty explicitly extends to future performance of the goods and discovery must await that performance, in which case accrual is at discovery. The parties may shorten the period by original agreement to not less than one year, but may not extend it.

That final point is worth restating: a defect discovered in year five of a machine's life is generally time-barred, unless the warranty explicitly extended to future performance. Drafting a warranty that runs "for five years from installation" is not the same as one explicitly warranting future performance, and courts read the exception narrowly.

A worked example

Return to the bakery and the oven.

Formation. The purchase order is the offer. The acknowledgment is a definite expression of acceptance under § 2-207(1); it does not say acceptance is expressly conditional on assent, so a contract is formed on the purchase order's terms plus whatever survives subsection (2).

Additional terms. Both parties are merchants. The manufacturer's 90-day warranty, disclaimer of implied warranties, limitation to repair or replacement, and consequential damages exclusion are analyzed one by one. Disclaiming merchantability where it would normally attach is a classic material alteration under Comment 4 and does not enter. So, in most courts, does an arbitration clause imposing a distant forum.

Different terms. The warranty period conflicts (two years versus 90 days). Under the majority knockout rule, both drop and the Code supplies the default: an implied warranty of merchantability with the § 2-725 four-year limitations period running from tender.

Result. The bakery has an implied warranty of merchantability claim; the failure occurred at month 11, well within the period. Damages under § 2-714 are the difference in value plus consequential damages under § 2-715 — the spoiled product and the lost production — provided the manufacturer had reason to know of the bakery's requirements at contracting, which for an industrial bakery oven it plainly did.

What the manufacturer should have done. Made its acknowledgment expressly conditional on the buyer's assent, and refused to ship without a signed agreement. Or, far more practically, put a negotiated master supply agreement in place with a conspicuous disclaimer mentioning merchantability, a sole-and-exclusive repair-or-replace remedy, a separately stated consequential damages exclusion that survives failure of the limited remedy, and a contractual limitations period of one year.

What the bakery should have done. Included in its purchase order an express statement that acceptance is limited to the terms of the order, § 2-207(2)(a), which would have kept the manufacturer's terms out entirely rather than leaving the outcome to a knockout analysis.

A drafting checklist

For sellers

  • A conspicuous disclaimer of implied warranties that mentions merchantability.
  • A sole and exclusive limited remedy, stated as such.
  • A separately stated consequential damages exclusion, with express language that it survives any failure of the limited remedy's essential purpose.
  • A contractual limitations period of one year (the § 2-725 floor).
  • A defined express warranty with scope, duration, and procedure, and a statement that it is in lieu of all others.
  • Acceptance expressly conditional on the buyer's assent — and the operational willingness to hold shipment if the buyer objects.
  • Clear delivery terms: name the Incoterms edition or define the term.
  • A force majeure clause with event list, causation standard, notice, allocation, and termination right.
  • Notice-of-defect requirement within a defined, reasonable period after delivery.
  • Price adjustment or index mechanism for long-term supply.

For buyers

  • Purchase order stating acceptance is expressly limited to its terms.
  • Express warranties capturing the seller's specific factual representations and specifications.
  • Rejection and revocation rights preserved, with an adequate inspection period.
  • Consequential damages preserved, or a negotiated cap that reflects actual exposure.
  • Remedies cumulative, not exclusive.
  • Assurance rights and a right to suspend on deteriorating creditworthiness.
  • Delivery term stated with the intended risk allocation.
  • Title, infringement, and compliance-with-law warranties.

For both

  • A master agreement with an integration clause and an express statement of what purchase orders and acknowledgments may and may not do.
  • A decision, stated expressly, on whether the CISG applies.
  • Governing law chosen deliberately, recognizing Article 2's state variations.

Frequently asked questions

Whose terms win when our purchase order meets their acknowledgment? Neither, usually. Under § 2-207 a contract forms, material alterations drop out, conflicting terms often knock each other out, and the Code fills the gaps. Design your form to control the outcome rather than assuming the last form sent governs.

Do we have a contract if nothing was signed? Very possibly. Article 2 recognizes contracts formed by conduct, and the statute of frauds has four exceptions including the merchant confirmatory memo.

How do we disclaim the implied warranty of merchantability? Conspicuously, and using the word "merchantability" — or with "as is" or "with all faults" language that makes plain there is no implied warranty.

Our contract limits the remedy to repair or replacement. Are we protected? Only while the remedy works. If it fails of its essential purpose under § 2-719(2), the buyer gets the Code's full remedy set — unless a separately stated consequential damages exclusion survives, which is a drafting question most courts resolve in favor of independence.

When does risk of loss pass? Under the delivery term. Absent one: on delivery to the carrier in a shipment contract, on tender at the destination in a destination contract, and on receipt where a merchant seller delivers without a carrier.

How long do we have to sue? Four years from tender of delivery for a warranty claim, unless the warranty explicitly extends to future performance. The parties may shorten it to one year by original agreement.

The buyer accepted the goods and now complains. Can they still sue? Only if they gave notice of breach within a reasonable time after discovering it, § 2-607(3)(a). Failure to notify bars all remedies.

Our supplier's costs tripled. Can they walk away? Under § 2-615, almost certainly not — increased cost alone is not impracticability. Whether a contractual force majeure clause helps depends entirely on how it was drafted.

Conclusion

Article 2 is a set of defaults written for parties who did not negotiate. Most commercial sales are conducted exactly that way — a purchase order, an acknowledgment, a shipment, an invoice — and the parties discover the defaults only when something breaks.

Three of them account for most of the surprise. The battle of the forms means the last document sent does not govern, and boilerplate disclaimers frequently never enter the contract at all. Failure of essential purpose means a limited repair remedy can evaporate, taking a carefully constructed liability structure with it unless the consequential damages exclusion was drafted to stand alone. And § 2-725 means the clock starts at delivery, not at discovery, so a latent defect in a long-lived machine is often time-barred before anyone knows it exists.

None of these are hard to address. They are addressed in the forms, before the first order, by someone who read the defaults.

Related articles

This article is provided for general informational purposes and does not constitute legal advice. Article 2 has been adopted with state-specific variations, several states have deleted the shipping term sections, and privity alternatives differ. Consult qualified commercial counsel when drafting supply terms or evaluating a warranty claim.