Formation and Readjustment of Contracts under the Commercial Code

California’s Commercial Code, Division 2, Chapter 2, deals with form, formation, and readjustment of contracts in sales.

Section 2201 states that a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is a record sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by the party’s authorized agent or broker. A record is not insufficient because it omits or incorrectly states a term agreed upon, but the contract is not enforceable under this subdivision beyond the quantity of goods shown in the record.

A contract which does not satisfy the above requirements, but which is valid in other respects, is enforceable in three specified instances. The above requirement does not apply to a qualified financial contract if there is sufficient evidence to indicate that a contract has been made or the parties have agreed to be bound by the terms of the qualified financial contract from the time they reach agreement on those terms.

Section 2202 states that terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to the terms as are included may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented by two specified occurrences.

Section 2204 provides that a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. And, even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Section 2205 state that an offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable for lack of consideration during the time stated or if no time is stated for a reasonable time, but in no event may the period of irrevocability exceed three months.

Section 2206 specifies that, unless otherwise unambiguously indicated by the language or circumstances, an offer to make a contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. Also, an order or other offer to buy goods for prompt or current shipment must be construed as inviting acceptance by specified means. Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

Section 2207 states that a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. Also, the additional terms are to be construed as proposals for addition to the contract. Between merchants, these terms become part of the contract except in three specified instances.

Section 2209 says an agreement modifying a contract within this division does not need consideration to be binding. A signed agreement which excludes modification or rescission except by a signed writing or other signed record cannot be otherwise modified or rescinded. The requirements of the statute of frauds section must be satisfied if the contract as modified is within its provisions.

Section 2210 allows a party to perform his or her duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his or her original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

In addition, unless otherwise agreed, all rights of either the seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him or her by his or her contract, or impair materially his or her chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor’s due performance of his or her entire obligation can be assigned despite agreement otherwise.

Unless the circumstances indicate the contrary, a prohibition of assignment of “the contract” is to be construed as barring only the delegation to the assignee of the assignor’s performance. An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and, it is a delegation of performance of the duties of the assignor, and its acceptance by the assignee constitutes a promise by him or her to perform those duties.