Business Law Contract Analysis U-Haul: Term Paper

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Independent dealers must sign a contract that sets forth the manner in which they will operate their rental centers. Often a small business owner will supplement their income be adding U-Hauls to their market mix. Independent contractors earn a commission on their sales.

Each division of AMERCO has it own president. All of them must report to a Board of Directors. The Chairman of the Board and overall President is Edward Shoen, descendent of the original founders of the company. Many members of the Shoen family still control much of the company (Google Finance). Little information is available about the company, aside from their financial statements. Although they have a Board of Directors, the company continues to operate as a family-style operation, with the family members occupying many positions in upper management. The company structure is simple and little is available beyond basic information.

Purchasing Contract Analysis and the UCC

The Uniform Commercial Code (UCC) regulates business transactions in all of the 50 states. Every state has adopted the UCC, or one of its revisions. Article 2 of the UCC regulates sales. U-haul uses a blank contract to govern all of its purchases from outside vendors. The specifics of the transaction are found in specifications that are drafted and approved before the sales contract is instituted. One of the keys to good contract management is to understand how the UCC applies to a specific contract. Some contracts may not be enforceable under the UCC due to the goods sold or if the terms of the contract do not meet the guidelines laid out by the UCC. The following will discuss UCC compliance and applicability to the general Purchase Contract used by U-Haul to secure outside vendors for parts and supplies.

Article 2:204 provides information on the general formation of a contract of sale. This contract lacks specific terms of sale and a specific start date. The contract indicates that these items are located in other documents, but these documents are never referenced properly, or indicated to be attached. However, this does not preclude the contract from falling under the auspices of UCC article 2. Article 2 states, "An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined" (UCC Article 2-204). Furthermore, section 2-204 states, "including conduct by both parties which recognizes the existence of such a contract." Although terms of the contract are not spelled out in the general contract, it does appear to qualify for jurisdiction under the UCC thus far.

The most important part of the contract under UCC is the intent by both parties to make a contract, even though it may fail for indefiniteness. Section 2-205 of the UCC states that "An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable." This section of the UCC opens almost any piece of paper up to be considered a form of sales contract if the merchant makes a firm offer in writing.

This leaves contract law wide open, as far as the form of the sales offer is concerned.

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However, this offer is not considered valid if the offer is not considered with a time period of three months (UCC 2-205). Companies are allowed to use their own forms for sales contracts. However, if the offer is not accepted within three months, the offer is no longer considered valid. As far as the U-Haul contract is concerned, this means that the terms set forth, although vague could still be considered an offer for sale under the UCC.

The latter sections of the UCC give specific information on various items that might be included in a sales contract. However, the purpose of this exercise was to determine if the blanket contract provided by U-Haul falls under the UCC. The UCC is lenient as far as terms of the sale are concerned than formal contract law. A formal contract is more enforceable under general contract law. However, this does not mean that a contract has to be formal in order to be enforceable under the UCC. This is an important concept to understand, as it applies to Bills of Sale, Purchase Orders, and even orders placed on the Internet, or over the phone. Any of these forms of agreement fall under the UCC and are enforceable as such.

Section 2-206 extends the acceptance of an offer for sale to other forms of media. The U-Haul contract examined lacks many of the formal parts necessary in formal contract law. Many of the terms of the contract are ambiguous and would not stand under contract law. However, the terms of the UCC are more lenient and allow many variations that are still considered to be a contract for sale. Therefore, although the U-Haul contract is weak under general contract law, it still appears to be a valid instrument of sale under the UCC.

There are several legal remedies available to both buyers and sellers. The main difference between formal contract law and sales that fall under the UCC is the amount and types of damages that can be awarded. In general, a breach of contract that is governed by the UCC, but is not a formal contract is limited to damages amounting to the actual costs incurred (UCC, Section 2-275). This may include any differences in price that have occurred from the time of purchase to the present. However, the damages typically cannot exceed the actual monetary values. There is a four-year statute of limitations to file for a breach of sales contract that is governed by the UCC (UCC, Section 2-275).

Under formal contract law, the remedies can often extend beyond the actual value of the goods or services tendered. For instance, where the actions of one party caused the other party to breach a contract with another party, the first party may be liable for any damages incurred from both contracts. Often the damage awards for breaches of formal contracts are higher than for those that fall under the UCC alone. Understanding the differences between formal contracts and sales agreements that fall under the UCC is an important part of understanding contract law.

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