REG · Business Law · 6 practice questions
UCC Statute of Frauds: Specially Manufactured Goods
An oral order for goods unsuitable for ordinary resale can be enforceable in full after a substantial manufacturing start or procurement commitments before cancellation notice. Below, sort independent changes to one carton order by whether this exception protects the entire quantity.
Try one first
Hint
Identify the UCC writing rule first, then look for the specific exception supported by the facts given.
Answer A. This is a sale of goods for more than $500, so the UCC Statute of Frauds applies. The specially manufactured goods exception renders an oral contract enforceable when the goods are specially made for the buyer, are not suitable for sale to others in the seller's ordinary course of business, and the seller substantially began manufacture (or made commitments) before repudiation. The facts state customized cartons unsuitable for resale and a substantial beginning of production before cancellation, so the primary issue is whether that exception applies.
Why not B: Receipt and acceptance can create an exception to the Statute of Frauds, but that exception requires delivery and buyer acceptance. The stem does not say the cartons were delivered or accepted, so this is not the primary issue supported by the facts.
Why not C: Part payment can sometimes be relevant to enforceability, but the fact pattern gives no information about any payment. The stem instead supplies the classic facts for the specially manufactured goods exception.
Why not D: A common mistake is to look for extra consideration, but a contract for the sale of goods has consideration in the bargain itself. The real legal obstacle here is the writing requirement and whether a Statute of Frauds exception applies, not the absence of extra consideration.
Sort it
Buyer-specific goods are unsuitable for ordinary resale, and substantial manufacture or procurement commitments precede cancellation notice.
Ordinary resale is possible, or neither substantial manufacture nor procurement commitments occurred before cancellation notice.
| Item | Goes to |
|---|---|
| Maker orally agrees to sell Buyer 2,000 logo cartons for $6,000. The cartons are unsuitable for sale to others in Maker's ordinary business. Maker substantially begins printing before receiving cancellation notice. The contract is otherwise valid. No signed writing exists, and no other exception applies. Is the entire order enforceable? | Entire order enforceableThe cartons are unsuitable for ordinary resale, and Maker substantially began manufacture before cancellation notice. |
| Same facts, except the cartons are standard stock suitable for sale to others in Maker's ordinary business. Is the entire order enforceable? | Exception not metSubstantial manufacture does not satisfy this exception when the goods are suitable for ordinary resale. |
| Same facts, except Maker has not begun production but made a binding commitment for buyer-specific materials before cancellation notice. Is the entire order enforceable? | Entire order enforceableA qualifying procurement commitment before cancellation notice can protect the entire order without production having begun. |
| Same facts, except Maker only discussed designs and made no production start or procurement commitments before cancellation notice. Is the entire order enforceable? | Exception not metDesign discussions alone satisfy neither the substantial-manufacture test nor the procurement-commitment test. |
| Same facts, except only 100 cartons are printed, which is stipulated to be a substantial beginning. Is the entire order enforceable? | Entire order enforceableThe 100-carton figure does not cap enforcement; a qualifying substantial beginning protects all 2,000 cartons. |
| Same facts, except Maker first begins printing after cancellation notice and made no earlier procurement commitments. Is the entire order enforceable? | Exception not metWork begun after cancellation notice cannot supply the required substantial beginning before notice. |
| Same facts, except Maker substantially began manufacture by cutting buyer-specific carton blanks before cancellation notice, without printing any cartons. Is the entire order enforceable? | Entire order enforceableFinished or printed cartons are unnecessary; a substantial manufacturing start before notice is enough. |
| Same facts, except Buyer's logo is removable and the cartons are suitable for ordinary resale after removal. Is the entire order enforceable? | Exception not metA custom logo does not establish the exception when the cartons remain suitable for ordinary resale. |
| Same facts, except Maker only requested supplier quotes before cancellation notice, without beginning manufacture or committing to purchases. Is the entire order enforceable? | Exception not metRequesting quotes is not a procurement commitment, and Maker has not substantially begun manufacture. |
| Same facts, except Maker made its first procurement commitment after cancellation notice and never began production. Is the entire order enforceable? | Exception not metThe commitment came too late, and no substantial manufacturing start preceded cancellation notice. |
Key points
- Remember: A substantial start or procurement commitment can protect the entire custom order, not just completed units.
- The cartons must be unsuitable for sale to others in Maker's ordinary business.
- Measure Maker's progress before cancellation notice, not after it.
- Design discussions and supplier quotes alone are not substantial manufacture or procurement commitments.
How the exam traps you
- Limiting enforcement to the cartons already printed. A qualifying substantial start can support enforcement of the entire order.
- Treating a logo as enough to trigger the exception. Check whether Maker can sell the cartons to others in its ordinary business.
- Counting work or procurement commitments made after cancellation notice. The qualifying start or commitment must precede the notice.
Question 2
Hint
Separate the goods-sale issue from the installation service and recall which Article 2 exception can remove the writing requirement after delivery and acceptance.
Answer C. UCC §2-201(1) generally requires a signed writing for the sale of goods priced at $500 or more, but §2-201(3)(c) removes the writing requirement "to the extent that the goods have been received and accepted." Because Delta received, used, and accepted the delivered oven, the seller can enforce the oral agreement as to the $18,000 goods price despite the lack of a signed writing; that exception does not necessarily apply to the separate installation service.
Why not A: Tempting because the $500 threshold is the baseline rule that brings the sale within the statute of frauds, but this only explains when a writing is ordinarily required. It doesn't explain why the defense fails, acceptance of the delivered goods invokes the §2-201(3)(c) exception that permits enforcement without a signed writing.
Why not B: Tempting because an unperformed installation could lead one to view the transaction as an incomplete, integrated agreement subject to the statute of frauds. However, the question isolates the oven sale (goods) governed by Article 2, and Delta's acceptance of the delivered oven makes that portion enforceable even if a separate installation service remains unfinished.
Why not D: Tempting because the specially manufactured-goods exception is another way an oral agreement can be enforced, so the absence of special manufacture seems unfavorable to the seller. But that only shows one exception doesn't apply; here the received-and-accepted exception (§2-201(3)(c)) independently makes the goods' price enforceable.
Question 3
Hint
Classify each agreement first: goods, services, or real property. Then ask whether a statute-of-frauds category applies and whether any stated exception saves the oral contract.
Answer D. This fits the UCC specially manufactured-goods exception to the statute of frauds. Although the price exceeds $500, the booths are specially made and not suitable for sale to others, and the manufacturer substantially began production before repudiation. Under the UCC, those facts make the oral contract enforceable despite the lack of a signed writing.
Why not A: This is a service contract with an 18-month term, which cannot be completed within one year of formation; under the common-law statute of frauds the one-year category requires a written agreement, so the oral contract is not enforceable.
Why not B: This is a sale of goods for more than $500, so the UCC statute of frauds requires a signed writing absent an applicable exception. No payment, delivery/acceptance, or merchant confirmatory memorandum is stated, so the oral deal is unenforceable.
Why not C: Contracts transferring an interest in land fall within the statute of frauds and require a written memorandum; a short closing date does not remove the writing requirement, so the oral land-sale is not enforceable.
Question 4
Hint
Start with the general UCC writing requirement, then ask whether the facts fit a specific exception based on the type of goods and the seller's actions.
Answer D. Under the UCC, contracts for the sale of goods priced at $500 or more generally must be in writing. An exception applies when the goods are specially manufactured for the buyer, are not suitable for sale to others in the seller's ordinary course of business, and the seller has made a substantial beginning of their manufacture or commitments for procurement before notice of repudiation. Those facts are present here, so the oral contract is enforceable despite the lack of a signed writing.
Why not A: This restates the general UCC statute-of-frauds rule and is tempting, but it ignores the well-established specially manufactured goods exception that applies when the seller has substantially begun performance on unique goods.
Why not B: This confuses the merchant-confirmation rule with the specially manufactured goods exception. The exception does not require both parties to be merchants; it depends on the nature of the goods and the seller's substantial beginning of performance.
Why not C: This distractor plays on the idea of partial performance. While payment/acceptance can sometimes limit enforcement under other doctrines, the specially manufactured goods exception makes the oral contract enforceable when its conditions are met; the facts indicate Delta made a substantial beginning, so the exception applies rather than limiting enforcement solely to completed units.
Question 5
Hint
Start with the general writing requirement for goods over $500, then ask whether the facts fit a specific UCC exception and whether that exception is limited to delivered or accepted goods.
Answer A. Under UCC 2-201, a sale of goods priced at $500 or more is generally within the statute of frauds, but §2-201(3)(a) creates an exception for goods to be specially manufactured for the buyer that are not suitable for sale to others and for which the seller, before notice of repudiation, has made a substantial beginning of manufacture or commitments for procurement. Here Beacon printed 200 jackets bearing Apex's unique design and made noncancelable procurement commitments, so the oral contract is enforceable for the full order despite the lack of a signed writing.
Why not B: This answer confuses the partial-performance concept with the specially manufactured goods exception. The UCC's specially manufactured-goods exception can make the entire oral contract enforceable when its requirements are met; it is not limited to completed units only.
Why not C: This restates the general statute-of-frauds rule for goods but ignores the facts that trigger a recognized exception: the jackets are specially manufactured and Beacon made a substantial beginning and noncancelable procurement commitments before repudiation.
Why not D: The merchant-confirmation rule is a valid exception when both parties are merchants, but it is not the only exception under §2-201. The specially manufactured-goods exception independently applies on these facts even without a confirmatory memo.
Question 6
Hint
Which statute-of-frauds exception can validate the entire contract quantity rather than only a portion tied to payment or acceptance? Consider whether the goods were made for a particular buyer and whether the seller took steps amounting to a substantial beginning.
Answer D. Under UCC §2-201(3)(a), an oral contract for specially manufactured goods is enforceable in its entirety if the goods are not suitable for sale to others in the ordinary course of the seller's business and the seller has made a substantial beginning of their manufacture or commitments for procurement. Here the panels were made only for the buyer's discontinued product line and the seller purchased unique dies and commenced manufacture, satisfying that exception. Other exceptions (payment accepted, merchant-confirmation, receipt/acceptance) either validate only the portion paid for or accepted or require both parties to be merchants, so they do not make the entire contract enforceable.
Why not A: Payment accepted can remove the statute-of-frauds barrier only to the extent of the goods paid for; a deposit does not render the entire 2,000-bottle contract enforceable.
Why not B: Receipt and acceptance validates an oral contract only as to the goods actually received and accepted; acceptance of 100 chairs does not make the remaining 900 enforceable.
Why not C: The merchant-confirmation exception binds an unobjecting recipient only where both parties are merchants; because the buyer here is an individual homeowner (not a merchant), the confirmation does not satisfy the statute of frauds for the whole contract.
Common questions
Are oral contracts for specially manufactured goods enforceable?
Yes, if the goods are unsuitable for sale to others in the seller's ordinary business and the seller substantially begins manufacture or makes procurement commitments before cancellation notice.
Does the specially manufactured goods exception cover the whole order?
Yes. Maker's substantial beginning can make the entire 2,000-carton order enforceable, not just the cartons already printed.
Do design discussions qualify for the specially manufactured goods exception?
Not by themselves. Maker needs a substantial manufacturing start or procurement commitments before cancellation notice, and the cartons must be unsuitable for ordinary resale.
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