Black-letter propositions
- 01
A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a contract, even though the moment of its making is undetermined.
- 02
Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
- 03
If the price is not settled, the price is a reasonable price at the time for delivery when nothing is said as to price, when the price is left to be agreed and the parties fail to agree, or when a price fixed by a market or standard set by a third person is not set.
- 04
A price to be fixed by the seller or the buyer means a price for that party to fix in good faith; if a price to be fixed otherwise than by agreement fails to be fixed through the fault of one party, the other may cancel or fix a reasonable price.
- 05
If the parties intend not to be bound unless the price is fixed or agreed and it is not, there is no contract, and the buyer must return goods received or pay their reasonable value at delivery.
- 06
Unless otherwise agreed, the place for delivery of goods is the seller's place of business or, if none, the seller's residence, but in a contract for identified goods known to the parties to be elsewhere, that place is the place for delivery.
- 07
The time for shipment, delivery or any other action, if not agreed, is a reasonable time.
- 08
A contract with successive performances that is indefinite in duration is valid for a reasonable time but, unless otherwise agreed, may be terminated at any time by either party, and termination other than on an agreed event requires reasonable notification received by the other party.
- 09
Unless otherwise agreed, payment is due at the time and place at which the buyer is to receive the goods.
- 10
An agreement that leaves particulars of performance to be specified by one party is not invalid for that reason, but the specification must be made in good faith and within limits set by commercial reasonableness.
- 11
Unless otherwise agreed, specifications relating to assortment of the goods are at the buyer's option and specifications relating to shipment are at the seller's option.
- 12
If a specification that would materially affect the other party's performance is not seasonably made, or cooperation necessary to the other party's performance is not seasonably forthcoming, the other party is excused for any resulting delay and may proceed to perform in any reasonable manner or, after the time for a material part of its own performance, treat the failure as a breach.
Use this attack sequence under time
Frame the issue
Ask whether the parties intended a contract and whether there is a reasonably certain basis for a remedy.
Resolve the next checkpoint
For a missing term, find the Article 2 gap filler for price, place, time or payment.
Resolve the next checkpoint
Check whether the parties intended not to be bound unless the open term is settled.
Finish the conclusion
If one party had to specify or cooperate, ask whether it did so in good faith and on time.
Common wrong turns
- Silence on price does not defeat a contract when the parties intended to be bound, because a reasonable price fills the gap.
- If the parties do not intend to be bound unless a price is agreed, there is no contract even though goods were delivered.
- A party that fixes the price must do so in good faith, so the price is not unlimited.
Worked example
A buyer and a seller agree to the sale of 500 tons of steel, delivery next month, and say nothing about the price. The seller delivers and the buyer refuses to pay any price.
The parties intended a contract, so the missing price does not defeat it, and the price is a reasonable price at the time for delivery under section 2-305.
Practice this topic
Formation with open terms
UCC section 2-204(1) provides that a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a contract, and section 2-204(2) provides that an agreement may be found even though the moment of its making is undetermined. Section 2-204(3) provides that even though one or more terms are left open, a contract does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
Section 2-305 allows the parties to conclude a contract even though the price is not settled, in which case the price is a reasonable price at the time for delivery when nothing is said, when the parties fail to agree, or when a price to be set by an outside standard is not set. Under section 2-305(4), where the parties intend not to be bound unless the price is fixed or agreed and it is not, there is no contract, and the buyer must return goods or pay their reasonable value.
Gap fillers for delivery, time, and payment
Section 2-308 provides that, unless otherwise agreed, the place for delivery is the seller's place of business or, if none, the seller's residence, and for identified goods known by the parties to be somewhere else, that place. Section 2-309 makes a reasonable time the time for shipment or delivery if not otherwise agreed, makes a successive-performance contract of indefinite duration valid for a reasonable time but terminable by either party, and requires reasonable notification of termination received by the other party.
Section 2-310 provides that unless otherwise agreed payment is due at the time and place at which the buyer is to receive the goods, even if the place of shipment is the place of delivery.
Specifications and cooperation
Section 2-311(1) provides that an agreement that is otherwise sufficiently definite is not invalid because it leaves particulars of performance to be specified by one party, and any specification must be made in good faith and within limits set by commercial reasonableness. Section 2-311(2) makes assortment specifications the buyer's option and shipment arrangements the seller's option unless otherwise agreed.
Section 2-311(3) provides that when a specification that would materially affect the other party's performance is not seasonably made, or when one party's cooperation necessary to the other's performance is not seasonably forthcoming, the other party is excused for any resulting delay and may perform in any reasonable manner or, after the time for a material part of its performance, treat the failure as a breach.
Frequently asked questions
What is the controlling rule for sales contracts with open terms: formation, price, delivery, time, and cooperation?+
State the open-term rule of section 2-204(3), identify the gap filler, then test good faith for any term left to one party and the excuse rules for failed cooperation.
Can a sales contract exist if the price is left open?+
Yes, if the parties intended a contract, in which case the price is a reasonable price at the time for delivery, under UCC section 2-305.
When is there no contract because of an open price?+
When the parties intend not to be bound unless the price is fixed or agreed and it is not, under section 2-305(4).
Where is delivery due if the contract does not say?+
At the seller's place of business or residence, or where identified goods are known to be, under section 2-308.
When may a party terminate a contract of indefinite duration?+
At any time, unless otherwise agreed, on reasonable notification received by the other party, under section 2-309(2) and (3).