Contracts and the Uniform Commercial Code

Published 26 Jul 2016

Contracts form part of every person’s daily life. A person may not be aware of it but entering into contracts is not only indispensable but a necessary part of his existence. A contract need not be in writing. It suffices that there is an agreement or meeting of mind between two parties.

For instance, when a person buys food for lunch, a contract is thereby entered into between him and the restaurant whereby the restaurant engages that the food purchased is fit for consumption and the person who buys food engages that he will pay for the food he buys. When a person shops for equipment or a home appliance, a contract is thereby entered into by which the manufacturer engages that the equipment or home appliance is fit for the purpose it is intended while the buyer also engages that he will pay for his purchases. When a person rides a cab a contract is executed between the operator of the vehicle and the person whereby the operator of the taxi cab promises that it will take the person safely to his destination while the buyer engages that he will pay for the taxi fare.

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I have found that uniformity is essential in every business undertaking. Before the enactment of the Uniform Commercial Code (UCC), the parties to a contract who are in different states often had misunderstandings and conflicts insofar as the performance of the contractual obligation is concerned in view of the differences in state laws governing them. The UCC seeks to address this problem. The UCC has been very helpful in establishing standards that will reduce the legal and contractual requirements in doing business. It has also been indispensable in addressing the problem of differences in business laws among different states. With the uniform law, the parties to a contract may now enter into an agreement that their undertaking shall be governed by the provisions of the UCC thereby eliminating delays and ensuring compliance with their undertaking.

There is an article that appeared in the Florida Bar Journal. It was written by Gerald F. Richman and Mark A. Romance and entitled “Specific Performance of Real Estate Contracts: Legal Blackmail.” According to Richman and Romance, the sellers of real estate property are placed in a disadvantaged position in the event that a suit is filed for specific performance by the buyer of a real property. This is because the buyer may utilize the legal system to his advantage by preventing him from selling the property.

I agree with the argument of Richman and Romance that in the situations mentioned, the seller is prejudiced since he cannot dispose the property to third persons. In the case of disagreement between the buyer and the seller, the buyer may file a suit for specific performance regardless of the merits of his claim. When this happens, the buyer may tie up the seller’s property and legally prevent the seller from selling the property to third persons. Even if the lis pendens is subsequently removed from the title to the property, the seller can not still obtain title insurance that will enable him to sell the property to the third party until the lawsuit is over. Consequently, the seller is forced to either transfer the title to the buyer or to pay the buyer to settle his claim.

In this situation, one of the legal remedies that the seller may avail of is to stipulate in their contract of sale that any of the parties may file a suit for specific performance subject to the condition that either party must first open and deposit in an escrow account the full amount of the purchase price including an amount sufficient to reimburse the other party should he prevail in the suit.

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