Assent Under the UCC

Assent Under the UCC

The common-law model asks a party to point to a proposal and an answer. Merchants who ship, receive, and pay for goods seldom behave that way, so a dispute that surfaces after the goods have moved leaves a court hunting for a tidy exchange of messages that never happened. Article 2 of the Uniform Commercial Code handles this for sales of goods by asking a more direct question: did the parties in fact reach agreement, as their words and conduct show?¹ This section teaches that approach through § 2-204. It begins with the reach of Article 2 and the common law behind it, then takes up conduct and the undetermined moment of making, and closes with the short link to open terms.

Goods and the Common-Law Backdrop

Article 2 applies to transactions in goods, and goods are movable things, from pencils to tractor trailers.² A sale of a used tractor therefore falls under the Code. A contract to repaint a house is a service and stays with the common law, although a court may borrow an Article 2 rule by analogy when the transaction is informal enough to resemble a sale of goods.³ Even inside Article 2, the Code is not a complete code of formation. Common-law principles continue to apply unless a Code provision displaces them, which is why the Code never defines an offer and leaves that concept to the common law.⁴

The Code's own rules are mostly default rules, meaning rules that apply only when the parties have not written their own, so the actual agreement of the parties comes first.⁵ The flexibility that follows is a deliberate reaction to an older style. Early twentieth-century common-law courts often required counsel to prove precisely which communication was the offer and precisely when and how it was accepted, and a deal could fail if the proof did not fit the pattern.⁶ The functional problem with that rigidity is easy to see: a party who regrets a deal can search the record for a gap in the formation story and walk away from an exchange both sides acted on. Article 2 closes that exit by directing attention to agreement in fact rather than to technical compliance.

Conduct Recognizing a Contract

Section 2-204(1) states that a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.⁸ Section 2-204(2) adds that an agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.⁹ The two subsections work together. The first says that conduct can carry the whole burden of showing agreement, and the second says a court need not fix the instant at which agreement occurred. Conduct by both parties is strong evidence because it is hard to explain without a deal: a seller does not usually ship, and a buyer does not usually keep and pay for goods, while still treating the terms as unsettled. The official comment makes the practical point that where goods have been shipped, accepted, and paid for before any dispute arises, there is no need to decide which act was the offer and which the acceptance, and the only live question is what terms the contract contains.¹⁰

The Jannusch decision shows the rule at work. The dispute concerned the sale of a food-concession business for $150,000. The buyers took possession of the items to be transferred, used them as their own, replaced equipment, reported income, paid taxes, and paid $10,000 toward the price, yet later argued they had only been pursuing a purchase.¹¹ The court held that a contract existed, reasoning that parties who are merely discussing a sale do not transfer goods and let them be retained for a substantial period.¹² The buyers could not recall making an oral agreement on any particular date, and that did not matter, because section 2-204(2) permits a finding of agreement even though the moment of making is undetermined.¹³ The court also stressed that an agreement to make an agreement is not an agreement, but that the facts showed far more than that, and that the expectation of a later formal writing did not prevent enforcement of a specific preliminary promise.¹⁴

The E.C. Styberg dispute comes out the other way on a different record, and the difference is the lesson. Eaton, the buyer, had placed two requests for 240 brake units, one of which was cancelled, and later claimed a contract for 13,000 units. The court observed that courts finding contracts from conduct have typically relied on repeated, ongoing dealing or an established course of dealing that the parties followed, and that two requests, one cancelled, came nowhere near the repeated dealing found in the decisions it cited.¹⁵ The parties had also departed from their usual routine, in which the buyer submitted a specific purchase order and the seller returned an acknowledgment form.¹⁶ Because the district court could reasonably have concluded that the orders were placed under the parties' earlier arrangement rather than a new contract, the finding that no contract for the larger quantity existed was not clearly erroneous.¹⁷ Both decisions rest on the same statute. In Jannusch the conduct was extensive, mutual, and consistent only with a completed sale, while in Styberg it was thin, partly withdrawn, and explainable by a different arrangement.

The same contrast can be run with invented facts. Suppose a nursery ships a pallet of shrubs, the landscaper unloads, plants them, and pays an installment. Neither side can say who made the first firm proposal, but both acted as though a contract existed, so § 2-204 supports a finding of agreement. Now suppose the landscaper and the nursery keep negotiating a season-long supply, and the only thing that happens is one small order that the landscaper later cancels. That conduct recognizes no larger contract, and the landscaper cannot be held to the season-long quantity merely because talks were underway.

Open Terms Link

Section 2-204(3) connects formation to open terms. Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.¹⁹ The hinge of the rule is intent to contract. Missing terms do not prevent that intent from existing, but when a dispute over material terms shows that the parties did not intend to contract yet, no contract results, and even under the Code's liberal approach a price list is not an offer.²⁰ The rule is workable because Article 2 supplies many missing terms itself, such as price, place of delivery, and time, so a court usually has a reasonably certain basis for a remedy.²¹

Two invented pairs show where the line falls. A buyer and seller agree on the goods, the quantity, and the price but say nothing about the delivery date, and both treat the deal as done. Intent to contract is present, and the Code's gap-filling rule can fix a reasonable time. If instead the parties say they will not be bound unless the price is agreed and they never agree on it, there is no contract, because they intended not to be bound without that term.²² The open term is the same in both pairs only in the sense that something is missing. What changes the answer is whether the parties manifested an intent to be bound despite the gap. The full treatment of open terms and gap-fillers comes in a later reading, so this section needs only the link: § 2-204(3) turns on intent and a basis for a remedy.