Question

Sam agrees to buy and Meranda agrees to sell 1000 lbs of bananas actually worth $5000, but they have not agreed on the price yet. Details are finalized, and part of their agreement is that the exact price of the bananas will be determined in the future. Later, they are unable to agree on a price.
a) Since this transaction is covered by the UCC, is there a contract for the sale and, if so, what would the court say is the price, and on what basis?

b) If the sale were not bananas but involved the agreement to repair several air conditioners in an apartment building, how would a court handle this agreement? Would it enforce it?

Answer 1

a. There is a contract for the sale of the bananas because UCC allows to keep certain terms open while contracting, which includes price. If the parties are not clear on the price or the price is to be set over time, the parties can fill the term later under UCC. Hence the agreement between Sam and Meranda for the sale of bananas constitutes a valid contract. If the parties are unable to determine the price, court will determine a reasonable price based on the fair market value or the intention of the parties while making the contract and by using the most reasonable method as per the business practices. Here 1000 lbs of bananas actually worth $5000. Hence the court may decide the price to be $5000 or determine the price by analyzing the intention of the parties while making the contract.

b. If the agreement was to repair several air conditioners in an apartment building, it does not come under UCC because UCC governs only contracts for sale of goods. Service contracts are governed by common law of contracts and price is necessary to form a valid contract. Hence the court will rule the contract as invalid and would not enforce the contract.