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The Grain Purchase Contract 



or Grain Purchase Confirmation Memorandum 



- Which Approach to Use - 



Deciding which approach to use — a grain purchase contract or a confirmation 

 memorandum ~ when purchasing grain from producers depends upon the state in 

 which the firm does business and the type of customers with whom the company 

 deals. 



The reason? The Uniform Commercial Code and the definition of "merchant" 



Contracts are the basic foundation upon which all commercial transactions are 

 predicated. Confirmation memoranda are used to confirm the existence of oral 

 contracts. But transactions in goods such as grain are affected extensively by a 

 state's adopted version of the Uniform Commercial Code. The UCC is a body of law 

 governing commercial transactions that is adopted and utilized by every state except 

 Louisiana. While the intent of the UCC is to provide common terms for commercial 

 transactions, there are important differences that exist between states of which 

 commercial grain and feed firms need to be aware. 



First, there actually are three different official texts (1962, 1972 and 1978) of 

 the UCC. The UCC is not federal law. It was sponsored by the National Conference 

 of Commissioners on Uniform State Laws. Thus, the UCC only becomes law when 

 a state decides to enact it. In addition, states have added their own amendments to 

 the official texts to serve local interests, conditions or circumstances. 



Article 2 of the UCC, 'Transactions in Goods," applies to grain purchases from 

 producers. Under Section 2- 105 of the UCC, "goods" include harvested crops and 

 growing crops. Section 2-106 provides that a sale consists of the "passing of title" 

 from the seller to a buyer for a price. 



Also having an important bearing on grain transactions is the UCC's "Statute of 

 Frauds" provision. This provision generally requires that contracts involving the 

 sale or purchase of goods at a price of $500 or more be in writing and be signed by 

 the party against which enforcement of the contract terms is sought 



The Definition of 'Merchant' 



However, there are some important exceptions. Of greatest importance to grain 

 buyers is the UCC provision that governs transactions involving merchants, which 

 provides as follows: 



"Between merchants if within a reasonable time a writing in confirmation 

 of the contract and sufficient against the sender is received and the party 

 receiving it has reason to know of its contents, it satisfies the requirements of 



