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The Uniform Commercial Code (UCC) is a group of uniform acts — state laws proposed by a federal commission on the uniformity of laws — developed with the intention of streamlining the laws of commercial transactions between the various states of the United States of America (US). One of the most prominent sections of the UCC is UCC Article 2, which governs the sale of goods to consumers. This is differentiated from common law, which governs all other contracts between parties.
UCC Article 2 has been adopted by every state in the US aside from Louisiana, and governs the sale of goods. Goods are generally defined by this section as “all things that are movable,” and draws an explicit distinction between the sale of goods and the sale of realty or intangible property. Most other transactions are generally governed by common law rules of contracting between parties.
Different rules apply based on whether the seller of the good in question is considered a merchant under UCC Article 2. Merchants are generally defined as people who regularly deals in goods of the kind sold or otherwise by their profession holds themselves out as having special knowledge or skill about the goods involved. Deals between merchants and non-merchants afford more protection to the non-merchant with regard to the transaction. For instance, while in a contract between merchants, any additional terms articulated by the acceptor of an offer become automatically binding on the offering party unless they explicitly reject the additional terms. This is distinguished from a transaction involving at least one non-merchant party whereby only the terms clearly dictated in the original offer will be binding upon agreement unless the parties agree to the new terms as if it were a brand new agreement.
Under UCC article 2, there are four warranties: warranty of title, warranty against infringement, implied warranty of merchantability, and implied warranty of fitness for a particular purpose. While all four warranties apply to merchants, only two apply to non-merchant sellers. The warranty of title, which guarantees the buyer that the seller has good and legal title to all goods sold in the transaction, applies to all sellers. Additionally, the implied warranty of fitness for a particular purpose, which protects the buyer only if the seller knows the particular purpose the buyer has for the goods purchased and has particular knowledge of the goods with regard to that purpose, applies to all sellers.
The warranty against infringement and the implied warranty of merchantability apply only to merchant sellers under UCC Article 2. The warranty against infringement guarantees that the goods are free from infringement on the intellectual property of any third party. The implied warranty of merchantability guarantees that the goods will be fit to serve the purpose for which similar goods are generally used.
Intellectual property consists of patents, trademarks and copyrights. Infringement occurs when one person uses another person's intellectual property without the owner's permission. Some examples of infringement are downloading and sharing music on the internet, (i.e. Napster®) or most recently the battle between Samsung Galaxy® and Apple's iPhone®/ iPad® technology.
Infringement can result in Cease and Desist orders, long court battles and steep fines. Just ask Samsung®.
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