The sale of goods is governed by Article 2 of the Uniform Commercial Code (UCC), a form of which has been adopted by every state. Goods, which is the subject matter of a sale, mean anything movable at the time it is identified as the subject of the transaction. The subject matter may not be:
- investment securities, such as stocks and bonds, the sale of which is regulated by Article 8 of the UCC;
- choses in action, such as insurance policies and promissory notes, because they are assigned or negotiated rather than sold, or which, because of their personal nature, are not transferable in any case; or
- real estate, such as a house, land, factory, or farm.
Most goods are tangible and solid, such as an automobile or a chair. But goods may also be fluid, such as oil or gasoline. Goods may also be intangible, such as natural gas and electricity. The UCC is applicable to both new and used goods.
Goods that are physically existing and owned by the seller at the time of the transaction are called existing goods. All other goods are called future goods. Future goods include both goods that are physically existing but not owned by the seller and goods that have not yet been produced
A person can make a contract to sell goods at a future date. However, no sale can be made of future goods. Because the “seller” does not have any title to future goods, there can be no transfer of that title now, and therefore no sale. For example, suppose a farmer tried to transfer the title today to a future crop. He would have a contractual duty to transfer the crop when it came into existence. However, the contract itself would not pass the title to the crop.
A contract for services is an ordinary contract and is not a sale of goods. Therefore, such a contract would be covered by general contract law. However, what if the contract involved both goods and services? If a contract calls for both the rendering of services and the supplying of materials (goods) to be used in performing the services, the contract is classified according to its dominant element. If the sale of goods is dominant, it is a sales contract covered by Article 2 of the UCC. If the service element is dominant, it is a service contract and not covered by the UCC but is covered by general contract law. For example, a contract with someone who repaired bicycles is a contract for services, even if parts are supplied to perform the repairs. The supplying of the parts is not regarded as a sale but is merely incidental to the primary contract of making repairs. In contrast, the purchase of a television set, with the incidental service of installation, is a sale of goods because the purchase of the set is the dominant element.