Common Law and Statutes
Contract law mostly comes from the common law, and the Nevada FLE tests common-law concepts first.
1. Common Law and Statutes
Much of contract law derives from the common law, and the Nevada Foundational Law Exam (FLE) tests primarily those concepts. However, statutes and regulations may modify common-law rules. The most important of those statutes is the Uniform Commercial Code (UCC). Portions of the UCC have been enacted in all 50 states and the District of Columbia, although some jurisdictions have adopted modifications of particular provisions.
- The UCC supersedes common-law rules whenever the UCC applies to the transaction and addresses the issue. Common-law principles apply when UCC provisions do not displace them.
- Article 2 of the UCC governs (a) contracts that are exclusively for the sale of goods, and (b) hybrid transactions when the sale of goods aspects predominate.
- The basic definition of “goods” under the UCC is things that are movable at the time of identification to the contract (but not including the money with which the price will be paid).
- The basic definition of “sale” under the UCC is the transfer of title from seller to buyer for a price.
- The UCC governs the sale of goods between “persons,” which means individuals, corporations, governments and government subdivisions, and any other legal or commercial entity.
- The UCC governs the sale of goods even if neither party is a merchant. The Code distinguishes merchants from other parties in some of its provisions (see concept 12 below), but contracts for sales of goods between non-merchants fall within the scope of the UCC.
- [Courts consider these factors to determine if the sale of goods aspects predominate: the language of the agreement, the portion of the total price attributable to the sale of goods, the purposes of the parties entering into the transaction, and the nature of the businesses of the parties.]
- The Nevada FLE does not test treatment of hybrid transactions when the sale of goods aspects of a transaction do not predominate.
- The Nevada FLE does not test special provisions refining the definition of “goods” in the UCC, such as provisions governing the treatment of investment securities, the unborn young of animals, and growing crops.
- The Nevada FLE does not test knowledge of statutes that modify the common law of contracts other than the UCC and statutes of frauds (concept 7). Test-takers may assume that, if those statutes do not govern a question, then the common law (as articulated in this list of concepts) applies.
- The Nevada FLE does not test changes to the scope of Article 2 made in the 2022 amendments.
Before any contract rule, settle the threshold question: does the common law or the UCC govern? The UCC controls a sale of goods or a goods-predominant hybrid; otherwise the common law applies. Pin the governing law first, then pick your rules.
Contract law mostly comes from the common law, and the Nevada FLE tests common-law concepts first. The big exception is a statute: the Uniform Commercial Code. So before you analyze any contract question, you have to answer a threshold question that decides everything downstream. Which body of law governs, the common law or the UCC? Get that wrong and every rule you reach for afterward is the wrong rule.
Here is the line. The UCC supersedes common-law rules whenever the UCC applies to the transaction and addresses the issue. Two parts. The UCC has to apply to the transaction in the first place, and then it has to actually address the issue in dispute. If the UCC does not displace a common-law principle, the common law still controls. So even in a UCC deal, if the Code is silent on a point, you fall back on common law for that point.
When does the UCC apply? Its sales article governs two kinds of deals. First, contracts that are exclusively for the sale of goods. Second, hybrid transactions, deals that mix goods with services, but only when the sale-of-goods aspects predominate. A goods deal is a sale, meaning a transfer of title from a seller to a buyer for a price. And goods are things that are movable at the time they are identified to the contract. Notice what that excludes. Real estate is not movable, so a land sale is not a goods sale. Services are not things at all. Intangibles like the right to a stream of payments are not movable things. And the money used to pay the price is expressly not goods. So a contract to sell a building, to paint a portrait, or to assign a debt is a common-law contract, not a UCC sale.
Two points that catch people. First, the UCC governs a sale of goods even if neither party is a merchant. The Code singles out merchants for special treatment in a few provisions, but merchant status is not what brings a deal inside the UCC in the first place. Two private individuals selling a used couch are governed by the law of sales just as much as two dealers are. Second, for a hybrid, you run a predominant-purpose test. Courts weigh the language of the agreement, how much of the total price is attributable to the goods, the purposes of the parties, and the nature of their businesses. If the goods side predominates, the UCC governs the whole contract. If the services side predominates, it does not, and that variety of hybrid sits outside what the FLE tests, so you will not be asked to call it the other way.
The classic error is applying the wrong body of law: treating a services, real-estate, or intangibles deal as a UCC sale, treating a goods-predominant hybrid as a common-law contract, demanding a merchant before the UCC can apply, or calling money goods.
governing law is the threshold question.
Before any rule, ask: is this a sale of goods (or a goods-predominant hybrid)?
If yes, UCC.
If not, common law.
Goods are movable things; real estate, services, and intangibles are not goods, and money is never goods.
the UCC needs no merchant. A goods sale between two non-merchants is still UCC
The UCC only displaces common law on issues it addresses; on issues it is silent about, common law still controls even inside a UCC deal
Hybrid?
Run the predominant-purpose test: language of the agreement, share of the price for the goods, purposes of the parties, nature of their businesses.
Goods predominate, UCC governs the whole deal.
Services predominate, it stays common law.
A landscaping company agrees with a homeowner to install a backyard irrigation system. The single written agreement says the company will supply the pipe, sprinkler heads, valves, and a controller, and will trench the yard, lay and connect the components, and program the system. Of the total price, the great majority is allocated to labor: the digging, installation, and programming. The homeowner later sues over a problem with the work and the parties dispute whether the law of sales of goods or the common law of contracts governs.
Suppose the same written agreement instead allocated the overwhelming majority of the price to a high-end controller and pre-fabricated components, with only a token charge for a quick hookup. Now the goods aspects predominate, and the UCC would govern the entire contract. Same hybrid label, opposite governing law, because the predominant purpose flipped. (Note: a services-predominant hybrid like the first version is not itself separately tested by the FLE; the point of the example is to show the test and which way it cuts.)
An option applies the law of sales of goods to a deal that is not a sale of movable goods (a land sale, a pure services contract, or an assignment of an intangible), or treats a goods-predominant hybrid as a common-law contract.
The sales article governs only sales of goods (movable things) or goods-predominant hybrids; land, services, and intangibles are not goods, and a hybrid is sorted by the predominant-purpose test.An option adds a merchant requirement to the governing-law test, says a non-merchant sale of goods falls under the common law, or treats money or an intangible as goods.
The law of sales of goods governs a sale of goods even if neither party is a merchant, and goods are movable things, expressly not including the money used to pay the price.An option reaches the correct body of law but for the wrong reason, for example resting the result on a party's occupation or merchant status rather than on whether the deal is a sale of goods.
Name the operative reason: the governing law turns on whether the subject is a sale of movable goods (or a goods-predominant hybrid), not on who the parties are.An absolute option, such as the UCC governing any transaction involving a product, the common law controlling every issue, or any service-bundled deal being a services contract.
The boundaries are real: the UCC governs only sales of goods and goods-predominant hybrids, it displaces the common law only on issues it addresses, and hybrids are decided by the predominant-purpose test, not by an absolute.A true-but-irrelevant fact offered as the reason for the governing law, such as the contract not being in writing or one party not being in business.
Those facts do not decide the governing-law question; the question is whether the deal is a sale of goods or a goods-predominant hybrid.the stem describes a deal and the dispute turns on which rules apply, or an answer choice names a body of law.
Look first at the subject of the contract.
Is it a transfer of title to movable things for a price (goods), a pure services or real-estate or intangibles deal (not goods), or a mix of goods and services (hybrid)?
The move: if it is exclusively a sale of goods, the UCC governs.
If it is not a sale of goods at all, the common law governs.
If it is a hybrid, run the predominant-purpose test (language of the agreement, share of the price for the goods, purposes of the parties, nature of their businesses) and let the predominant side decide; goods-predominant means the UCC governs the whole deal.
Throw out any option that demands a merchant before the UCC can apply, that calls money or an intangible a good, or that treats a goods-predominant hybrid as common law.
And remember the UCC only displaces the common law on issues it actually addresses; on a point the Code is silent about, common law still controls even in a sale of goods.
A homeowner hired a house painter to paint the interior and exterior of her home. The written agreement set a single price for the painter's labor, and the homeowner separately bought the paint herself from a hardware store. After the job, a dispute arose over the quality of the work, and the parties disagreed about which body of law governed their agreement.
Which body of law governs the painting agreement?
A retired teacher agreed to sell her used dining table and chairs to a graduate student for an agreed price. Neither person was in the business of buying or selling furniture; this was a one-time, private sale of household items between two individuals. A dispute later arose about the condition of the furniture, and the parties disagreed about whether the law governing the sale of goods applied to their deal.
Does the law governing the sale of goods apply to this transaction?
A restaurant owner contracted with an equipment dealer for a commercial walk-in refrigeration unit. The single written agreement provided that the dealer would supply the refrigeration unit and also deliver it and connect it on site. Almost the entire contract price was allocated to the unit itself, with only a small charge for the delivery and a brief hookup. A dispute later arose, and the parties disputed whether the law governing the sale of goods or the common law of contracts applied to the whole contract.
Which body of law governs the entire contract?
A software developer agreed to sell a parcel of vacant land she owned to a neighbor for an agreed price, with title to the land to be transferred at closing. A disagreement arose before closing, and the parties disputed whether the law governing the sale of goods applied to their agreement.
Does the law governing the sale of goods apply to this transaction?
A furniture store and a buyer formed a contract for the sale of a sofa, a transaction in movable goods. A dispute arose over a particular issue in their deal. The law governing the sale of goods contains a provision that directly addresses and resolves that exact issue, and that provision differs from the rule the common law of contracts would apply to the same issue.
Which rule governs that issue?