The Law of Stuff Isn’t the Same As the Law of Services

You sign two identical contracts with two different suppliers, one to buy stuff and the other to buy services. If both of your suppliers default in the exact same way, your rights will be the same under each contract, right?

Probably not, because the law that applies to the sale of goods is not the same as the law that applies to the sale of services. There’s a lot of overlap, and most contract law principles apply to both, but the law isn’t the same.

The Common Law

For the most part, contract law in America is the province of each of the 50 states rather than the federal government. The foundational layer of contract law in each state (except Louisiana) is what is known as the common law. The common law isn’t enacted by legislatures, which is the way we normally think of laws being developed. (Remember the School House Rock bit “I’m Just a Bill”?) It’s the cumulative, collective wisdom of judges who have made decisions about legal questions over the years.

Also known as “case law,” the common law originated in England in the Middle Ages when judges traveled throughout the various circuits of the kingdom’s royal court system hearing cases and making judgments. As judges made determinations in cases, they established precedent to be followed in subsequent cases.

The common law was adopted by the various states in America through reception statutes, which established the common law as the default law. All 50 states except Louisiana have either enacted reception statutes or adopted the common law through judicial decisions.

To summarize, contract law is generally governed by the laws of the various states rather than the federal government, and the default law is judge-made case law. Statutes enacted by legislatures can change the default rules, but in the absence of specific legislation, the common law controls.

The UCC

Because the common law is developed bit by bit through judicial decisions in individual cases, it is different in every state. Judges in Illinois might consider what judges in Missouri have decided in similar cases, but the established rules of precedent don’t require the courts of one state to adopt the rulings of courts from other states. The differences in contract law from state to state are often minor, but they are sometimes very significant.

The Uniform Commercial Code, which is a joint project of the National Conference of Commissioners on Uniform State Laws and the National Law Institute, was drafted in order to promote uniformity among the states’ laws relating to commercial matters. Article 2 of the UCC governs the sale of goods. The UCC has been adopted by all 50 states, although Louisiana hasn’t adopted Article 2.

Although a principal purpose of the UCC is to ensure uniformity of state laws governing commercial transactions, several realities work against that purpose. State legislatures don’t enact the entire UCC verbatim; they make changes. Some of the variances are minor, but others are significant. Also, the UCC doesn’t address every aspect of commercial law, but it leaves the common law in place as the default with respect to numerous matters. Since the common law is different in every state, there are differences baked into the UCC framework. Finally, the same process that created the common law in the first place affects the UCC (as well as other statutes) as judges interpret the various provisions of the UCC in real-life situations. This causes further variances from state to state.

Stuff Law and Services Law Aren’t the Same

So let’s go back to our hypothetical identical contracts involving the purchase of stuff and services. The contract for goods will be governed by Article 2 of the UCC, but the contract for services will be governed by the default common law. The differences in the applicable law might not be significant, but the law that governs your rights won’t be the same because the law that applies to the sale of goods is not the same as the law that applies to the sale of services.