Common Law Contracts vs. UCC: Everything You Need To Know

Common law contracts vs. UCC is the difference between legal agreements governed by case law and those dictated by the Uniform Commercial Code. Some of the transactions governed by common law include employment, intangible assets, insurance, service provision, and real estate. Purchase of goods and other tangible objects is governed by the UCC. Regardless of what laws contracts fall under, they share the requirements to have an offer that is accepted by another person or entity in exchange for something of value, called consideration.

About the UCC

This code was published as an attempt to standardize the laws across all 50 U.S. states. Movable goods sales and purchases are covered by the UCC, including but not limited to crops, timber, minerals, and shipments of goods between companies and consumers.

Under the UCC, the buyer has the right to inspect the goods in question, accept or reject the offer, and revoke his or her acceptance. The inspection may happen after delivery and before the goods are paid for and can include a thorough examination as well as samples and lab tests. If a delivery does not meet established standards and the value is decreased as a result, it can be rejected. If the goods are not rejected within a reasonable amount of time they are considered to be accepted. This can be revoked if a defect is later discovered that substantially impairs value.

About Common Law

Some of the categories of contracts covered by common law include:

• Personal services.
• Professional work.
• Construction work.
• Trademarks.
• Copyrights.
• Software.
• Patents.
• Land sales.
• Real estate.

Modifying and Negotiating Contracts

Under common law, if an offer is changed, this constitutes a rejection and a counter-offer is considered a brand-new offer. On the other hand, the UCC allows a counter-offer to be considered part of the original offer and creates a binding contract depending on the specifics.

Consideration is required for contract modification under common law but not with the UCC. If you promise to keep a deal open under common law, this is considered an option contract and consideration is required. With the UCC, this must be in writing and made by a merchant as it is considered a firm offer.

With both types of contracts, the time in which you may sue for a breach varies by state and by whether a contract is spoken or in writing.

Primary Differences Between UCC and Common Law Contracts

• With common law, the offer, nature of work, price, quantity, and performance must be included in the contract, while the UCC only requires quantity to be included.
• Under the UCC, merchant offers can be non-revocable even without consideration.
• A contract can be definite under the UCC without a stated price, unlike under common law where price is required.
• The UCC carries express warranties based on representation or promises, implied warranty of fitness when seller's expertise is relied upon, and implied warranty of merchantability.
• Buyers can insist on exact performance under the UCC while common law provides more flexibility under the substantial performance doctrine.
• The UCC does not require consideration for good faith modifications.
• If the seller repudiates the contract, the buyer is eligible for damages equal to the difference between the contract price and the market price plus incidentals.
• Transactions over $500 require a memo.
• The requirements can be assigned as long as the assignor maintains a reasonably proportionate quantity of the order.
• Under the UCC, a firm's offer is irrevocable if it is made in writing.
• The statute of limitations is four years under the UCC and can range from four to six years under common law.
• Common law contracts can be discharged only if a party has died or the subject matter of the contract is destroyed. The UCC allows contract discharge only because of impracticability.
• Common law requires privity of contract to sue and the UCC does not.
• If fraud is committed, punitive damages are not allowed under common law. The UCC allows good title for a purchaser if fraud occurs.
• Common law is much stricter about contract acceptance than the UCC.
• When parties are communicating at a distance, common law follows the mailbox rule.

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