KANSAS COMMENT, 1996

1. Article 2 applies to all transactions in goods, whether involving merchants or consumers. But throughout Article 2, a merchant is held to a higher standard of good faith than a non-merchant. See 84-2-103(1)(b). In addition, some provisions of Article 2 apply only to merchants. See, e.g., 84-2-205 (irrevocable offers by merchants); 84-2-201(2) (merchants exception to statute of frauds); 84-2-314(1) (implied warranty of merchantability).

2. Subsection (1) defines "merchant" as a person who (1) deals in goods of the kind involved in the sale; or (2) who by occupation holds himself or herself out as having knowledge or skill peculiar to the practices or goods involved in the sale; or (3) to whom such knowledge or skill may be attributed by the employment of an agent or broker or similar person. See Decatur Coop. Ass'n v. Urban, 219 K. 171, 547 P.2d 323 (1976). Professionalism, special knowledge, and commercial experience are important considerations in determining whether a person is a merchant. Id.

3. Courts generally have had little difficulty in applying the definition of merchant. See, e.g., Smith v. Stewart, 233 K. 904, 667 P.2d 358 (1983) (casual sale of pleasure craft by owner not by a merchant); Powers v. Coffeyville Livestock Sales Co., 665 F.2d 311 (10 th Cir. 1981) (applying Kansas law) (auctioneer at livestock sales barn was merchant). The one exception involves farmers: Kansas courts have split on whether farmers are merchants as defined in Article 2. In Decatur Coop., supra, the court held that a wheat farmer was not a merchant for purposes of the merchants exception to the statute of frauds. Compare Busby, Inc. v. Smoky Valley Bean, Inc., 15 U.C.C. Rep. Serv. 2d 438 (D. Kan. 1991) (farmer of pinto beans held to be merchant for purposes of statute of frauds; court distinguished Decatur Coop. on ground that farmer engaged in substantial and sophisticated agricultural business). In Musil v. Hendrich, 6 K.A.2d 196, 627 P.2d 367 (1981), the court held that a hog farmer was a merchant for purposes of the implied warranty of merchantability. See 84-2-314. Perhaps these cases might be reconciled by the suggestion in Official Comment 2 that persons can be merchants for some purposes and not for others. Farmers are merchants when selling their product, but not when engaging in general business practices, unless they have extensive commercial experience. See Sam Brownback & James B. Wadley, Kansas Agricultural Law 229-30 (2d ed. 1994).

4. A "financing agency" is most likely to appear in documentary sales such as shipments under reservation. See, e.g., 84-2-505. For the rights of a financing agency that honors or pays a draft, see 84-2-506.

Law Review and Bar Journal References:

"Caveat Venditor—Strict Products Liability Under the Uniform Commercial Code," Norman E. Beal, 16 K.L.R. 285, 288 (1968).

"U.C.C.: The Farmer is Not a Merchant Under the U.C.C.—Promissory Estoppel to Avoid the Operation of the Statute of Frauds," Mark A. Buck, 16 W.L.J. 230, 231, 234-236 (1976).

The uniform commercial code, the statute of frauds, and the farmer, 25 K.L.R. 318, 320 (1977).

Subsection (2) mentioned in note on warranty violations in tripartite finance lease agreements, Winton A. Winter, Jr., 25 K.L.R. 573, 578 (1977).

"Survey of Kansas Law: Contracts," Mary Kathleen Babcock, 27 K.L.R. 215, 219 (1979).

"Uniform Commercial Code: Aspects of a Commercially Reasonable Sale of Repossessed Property," Jon D. Graves, 19 W.L.J. 123, 124 (1979).

"Housing Defects: Homeowner's Remedies—A Time for Legislative Action," William J. Fields, 21 W.L.J. 72 (1981).

"Agricultural Credit and The Uniform Commercial Code: A Need for Change?" Keith G. Meyer, 34 K.L.R. 469, 482 (1986).

"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 783, 788 (2003).

Attorney General's Opinions:

Sales; implied warranty of merchantability. 86-25.

CASE ANNOTATIONS

1. Court finding that both parties were "merchants" as defined hereunder mentioned. Southwest Engineering Co., Inc. v. Martin Tractor Co., Inc., 205 Kan. 684, 689, 473 P.2d 18.

2. Trial court ruling that farmer not merchant as defined hereunder for purpose of avoiding statute of frauds upheld. Decatur Cooperative Association v. Urban, 219 Kan. 171, 176, 547 P.2d 323.

3. The selling of feeder pigs was under the UCC, but plaintiff failed to produce sufficient evidence to support his claim. Musil v. Hendrich, 6 Kan. App. 2d 196, 201, 627 P.2d 367.

4. Seller of irrigation system with defective hose manufactured elsewhere liable under implied warranty of merchantability. Stair v. Gaylord, 232 Kan. 765, 771, 659 P.2d 178 (1983).

5. Owner of pleasure craft making casual sale is not merchant and no warranty of merchantability applies. Smith v. Stewart, 233 Kan. 904, 906, 907, 667 P.2d 358 (1983).

6. Cited; term merchant does not include finance lessor; nonliability for implied warranty of merchantability examined. Agristor Leasing v. Meuli, 634 F. Supp. 1208, 1220 (1986).

7. Cited; manufacturer selling assets (machinery) used in manufacturing "as is" not a merchant; no implied warranty. Olson v. U.S. Industries, Inc., 649 F. Supp. 1511, 1514 (1986).

8. Summary judgment precluded where genuine issue exists as to whether secondary packaging operation was "seller" or "merchant." Nature's Share, Inc. v. Kutter Products, Inc., 752 F. Supp. 371, 378 (1990).

9. Whether issue of breach of duty of good faith by supplier in negotiating final contract precluded summary judgment examined. Kansas Mun. Gas Agency v. Vesta Energy Co., Inc., 840 F. Supp. 814, 820 (1993).

10. Cited; whether demand for failure of supply provision in firm supply contract was reasonable commercial standard examined. Kansas Mun. Gas Agency v. Vesta Energy Co., Inc., 843 F. Supp. 1401, 1408 (1994).