Question

Michelle owned a building which she orally contracted to sell to Colleen, who was to remove it from its concrete foundation, put it on skids, and drag it away. Before removal, Michelle repudiated the deal. Michelle defends her action by asserting the statute of frauds. (The statute of frauds provisions specify which contracts must be in writing in order to be enforceable). Was this a contract for land or for a good? Does the statute of frauds section of Article 2 apply to this contract? See UCC § 2-105 and § 2-107(1).

Answer 1

Statute of Frauds under UCC §2-201

Section 2-201 only applies when there’s a contract for the sale of goods for the price of $500 or more and has many exceptions, such that many contracts can be concluded without a writing. Remember that Article 2 applies to all sales transactions, not just ones with merchants. Where applicable, §2-201 requires: (i) written evidence indicating that a contract for sale has been made; and (ii) the writing must be signed by the party against whom enforcement is sought. Under §2-201, though, a writing is not insufficient even if it omits or incorrectly states a term agreed upon by the parties. However, such an incorrect writing is not enforceable beyond the quantity of goods shown in the writing.

There are four exceptions to the writing requirement of UCC §2-201, including: (i) a confirmation between merchants that is not objected to within 10 days of receipt; (ii) specially manufactured goods that are not suitable for sale to others in the ordinary course of the seller’s business and the seller has either made a substantial beginning of the manufacturer or commitments for the procurement of the goods; (iii) admissions in pleadings that a contract for sale has been made; and (iv) contracts with respect to goods for which payment has been made and accepted or which have been received and accepted.

Section 2-105

"Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article 8) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (section 2-107).

Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.

Section 2-107.

(1) A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this article if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.

(2) A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.

(3) The provisions of this section are subject to any third-party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale.

• 1. Subsection (1). Notice that this subsection applies only if the minerals or structures "are to be severed by the seller". If the buyer is to sever as given in our case study such transactions are considered contracts affecting land and all problems of the statute of frauds and of the recording of land rights apply to them.

• 2. Subsection (2). "Things attached" to the realty which can be severed without material harm are goods within this article regardless of who is to effect the severance. The word "fixtures" has been avoided because of the diverse definitions of this term, the test of "severance without material harm" being substituted.