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The Uniform Commercial Code and Online Business

Article Two of the Uniform Commercial Code (UCC) applies to all contracts, both business-to-business and business-to-consumer, for the sale of goods, unless the parties agree to vary the terms of their agreement. Louisiana is the only state that has not adopted Article Two, and versions of Article Two vary from state to state. Further, unless otherwise agreed upon, if two parties are from countries that have joined the United Nations Convention on the International Sale of Goods (UNCISG), the UNCISG may have control over the UCC with regard to their transaction. Four general provisions are particularly important to online businesses: the writing requirement, contract formation, warranties, and remedies.

The writing requirement of Article Two requires that for the sale of goods over $500, there must be some writing sufficient to indicate a contract. For online businesses, it is likely sufficient for there to be an electronic record of the acceptance of the terms by the buyer or an indication of acceptance via e-mail. A typed name on the e-mail or the filling-in of the name on the online order is also likely to constitute sufficient signatures. (See UCC Section 1-201(39): “signed” includes any symbol that demonstrates the intention of a party. See also “Electronic and Digital Signatures” below.)

The requirement of contract formation requires that an offer can be accepted in any reasonable manner. An acceptance by e-mail is acceptable if the offer was by e-mail. If the offer was made by another medium, it is suggested that one first inquire if acceptance by e-mail is acceptable.

The warranty requirements of Article Two provide that there is an express warranty, implied warranty of merchantability, implied warranty of fitness for particular purpose, and implied warranty of title and noninfringement. Many online businesses limit these warranties through “clickwraps,” which are a set of contract terms that an online customer accepts by clicking on an “accept” or similar button, usually on a separate screen. Online businesses should allow the consumer to agree to the limitations before completing the transaction. Under the remedies requirement of Article Two, buyers may obtain from sellers after a breach of contract certain remedies, including actual damages, incidental damages, and consequential damages. Many online sellers limit the buyer’s remedy in the clickwraps to the damages of repair, refund, or replacement of the purchased goods. Consequential damages, however, may not be limited or excluded if “unconscionable.”

Inside The Uniform Commercial Code and Online Business