What section of the UCC governs the agreement?
The case scenario is covered under section 2 of the UCC, which involves the sale of goods. For an agreement to be defined as a sale of goods, it has to involve two merchants, one who is a buyer and the other is a seller.
Are they “merchants?”
Both Hasbro and Cloud Corporation are merchants. According to Section 2(1) of the UCC, a merchant involves an individual who deals in goods. Given that Cloud Corporation supplies the powder to Hasbro, it indicates the company deals in goods. Hasbro does not deal with the powder but has the knowledge and skill of using the powder for manufacturing kids’ toys. Section (2)1 of the UCC also defines a person with such knowledge and skills as a merchant.
Is this oral agreement considered a contract?
In the business world, it is always advisable to put any form of agreement between parties in agreement. However, many times people engage in contracts informally in the form of an oral agreement. Oral agreements are therefore acceptable under common law. A challenge only arises when the parties to the agreement fail to play their part or conduct their obligations. In that case, the parties may require the court to intervene. The courts cannot intervene if there is no formal writing of the contract. The UCC is not a law but a basis for enabling business among parties. The UCC recognizes an oral agreement as a contract but provides certain instances where a contract needs to be in written form. Section 2-209(1) of the UCC requires that contacts whose value exceeds $500 should be in writing if they are to be enforced by a court of law. Otherwise, contracts whose value is less than $500 can still take place under an oral agreement.
What are Cloud’s possible arguments?
In case of a challenge, Cloud Corporation can defend itself using various provisions under the UCC. Under section 2-204(1), the conduct of the agreeing parties can point to a contract. This includes if the contract for sale is arrived at in a way suggesting the existence of a contract. Section 2-204(1) indicates that should one or more items not be covered in a contract for sale. The contract is not discarded if the parties intended to make a contract for which they rationally believe an appropriate remedy is required. In this case, the conduct of Hasbro can be seen to suggest an existence of a contract. Even though there was no written agreement, Hasbro and Cloud Corporation had a clear intention of making a contract.
Cloud Corporation can also argue that there was acceptance of goods. According to section 2-606 of the UCC, the buyer is presumed to have accepted goods if the acceptance of goods arises under three key circumstances. One, under section 2-606(1) (a), the buyer has taken reasonable time to inspect the goods. The seller, therefore, assumes that the goods conform to the buyer’s standards or that the buyer will take or keep the goods notwithstanding their non-conformity. Two, under section 2-606(1) (b), the buyer is considered to have accepted the goods if they do not reject the goods within a reasonable time after they have been tendered or delivered (section 2-602(1)). The buyer can also reject the goods by notifying the seller in good time. Three, under section 2-606(1) (c), the buyer acts in a way that goes against the seller’s ownership. Hasbro received the powder delivered by Cloud Corporation without making any objection to it.
In addition, there was no termination or cancellation of the contract. According to section 2-106(3), a party can invoke powers outlined in the contract to end the contract, which could lead to a breach of contract. Therefore, each party’s duties are liquidated unless there was a pending breach or performance. Further, section 2-106(3) outlines that there must be cancellation that can be exercised by any party to end the contract; however, in this case, no party enjoys any rights for remedy, breach, or performance of prior undertakings.
Lastly, as a rule, offer and acceptance are crucial elements of a contract. According to section 2-206(1) (a) an offer to enter into a contract can be understood as welcoming acceptance in whichever form or through any medium considered rational under the circumstances. Cloud Corporation could have interpreted the need to change the formula as an offer from Hasbro even though it was not written down.
In general, the UCC provides a foundational platform upon which parties can engage and collaborate. The framework provides guidance on various business engagements. Cloud Corporation can learn from the UCC and apply various elements as discussed above if Hasbro fails to honor its end of the bargain. The UCC has many components that support good business practices and has been resourceful around the country. The UCC is applied across many states that use it as a guide for establishing more laws to guide businesses appropriately.