What are the elements of a contract under common law? Explain what gaps in a contract can be filled by Article 2 of the UCC?
What is the difference between a shipment and a destination contract in Article 2 of the UCC?
Jason shipped a truckload of peaches from his orchard to Grocery using an independent trucker. In route, the truck broke down and the shipment was delayed three days. The peaches were spoiled when they arrived. The terms of the contract were F.O.B. Who bears the risk? Explain your answer
Under common law, there are several essential elements of a contract:
1. Offer and acceptance: There must be a clear offer made by one party and an acceptance of that offer by the other party. Both the offer and acceptance must be communicated between the parties involved.
2. Consideration: Both parties must provide something of value in exchange for the agreement. This could be money, goods, services, or promises to do or refrain from doing something.
3. Legal capacity: Both parties must have the legal capacity to enter into a contract. This means they must be of sound mind, not under the influence of drugs or alcohol, and not minors or otherwise legally incapacitated.
4. Legal purpose: The contract's objective must be legal and not against public policy or prohibited by law.
Article 2 of the Uniform Commercial Code (UCC) is specific to the sale of goods. It fills in gaps in contracts for the sale of goods that are not covered by the common law or specifically addressed by the parties. The UCC provides default rules and regulations for issues such as delivery, warranties, and remedies, among others.
In terms of a shipment and destination contract, Article 2 of the UCC provides different rules for when the risk of loss transfers from the seller to the buyer. In a shipment contract, the risk of loss transfers to the buyer when the goods are delivered to the carrier (e.g., a shipping company), while in a destination contract, the risk of loss stays with the seller until the goods reach the buyer's specified destination.
In the given scenario, the terms of the contract were F.O.B., which stands for "Free On Board." This term typically indicates a shipment contract, where the risk of loss transfers to the buyer upon delivery to the carrier. Therefore, Jason would bear the risk since the peaches were spoiled during transportation. The fact that the truck broke down and the shipment was delayed does not shift the risk to Grocery as long as the peaches were delivered to the carrier.