I am in a business law class and my teacher handed out this question. I cannot find in my book exactly what the UCC is and what its stipulations are. The question is as follows:
David owns 1000 acres of land in Faulkner County, Arkansas. Dvid enters into a contract with Cushman Construction Company to sell Cushman 10,000 tons of gravel from a quarry located on the property for use as fill on a road project. Cushman is to remove the gravel. Next, David agrees to sell to Holsum Bread Company 400 acres of wheat growing on the property. David is obligated under the contract to harvest and deliver the wheat to Holsum. Then, David enters into an oil and gas lease with Texas Oil & Gas allowing them to drill a well on his farm and transport the gas in interstate commerce. Lastly, David agrees to sell the northeast 45 acres of the property with a standing corn crop in place to Allen Canning Company.
A. Which of these contracts, if any, fall under the Uniform Commercial Code?
Answers & Comments
Verified answer
The UCC is referenced below. It covers leases, purchases of movable goods and services. It does not cover real property transfers. Real property does not move. A cruise ship is chattel (movable property). A tree attached to the land is real property, until chopped down.
#1: Remove product from quarry: a real estate transaction: not covered. See the second link below.
#2: Sale of a product, wheat: covered by UCC
#3: Lease of gas rights: lease for removal of product, not a real estate contract: covered by UCC.
#4: sale of land: not covered by UCC
Without giving away the entire answer, I'll give you a hint: The pertinent code section is UCC 2-107. I reprinted it for you below.
U.C.C. Sect. 2-107 Goods to Be Severed From Realty; Recording
(1) A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this Article if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
(2) A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this Article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
(3) The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale.
You can look up UCC in a number of places. This isn't one of them.
And I prefer Bunny bread to Holsum.