Question

Why does the UCC distinguish between merchants and nonmerchants by holding merchants to a higher standard in some instances?

What does it mean to require parties to act in "good faith" in the performance of a sales contract? Explain and provide an example.

Answer 1

The UCC holds merchants to a higher standard than the non merchants as it requires a higher level of responsibility from the merchants it serves.

A merchant is someone who deals in goods of the kind regularly. Many sections of the code offer two rules - one for merchants and one for everyone else. UCC governs the contract for sale of goods. As merchants regularly deal in the sale of goods, they have a higher level of responsibility and need to understand every legal aspects of their contracts and agreements.

It is the duty of the parties to a contract to perform all the contracts in good faith. For non merchants, good faith means honesty in facts. Whereas, for merchants, good faith means true and fair dealings and dealing as per the prevalent commercial standards of the industry along with honesty in facts. For example, a merchant shall be acting in bad faith if he negotiates with its party by lying or presenting misleading facts.