• James D. Lynch

Contract Tip – Merchants

Updated: Jul 18, 2019

In contracts for the sale of goods, the law has some special rules for merchants. What is considered a merchant?

A merchant is basically a person or entity that is in the business of selling a particular type of product. For example, if a hardware store enters into a contract to sell hammers, that hardware store is a merchant because hardware stores regularly deal in the sale of hammers. On the other hand, if the hardware store enters into a contract to sell its old delivery truck, that hardware store would not be a merchant for this contract because hardware stores are not in the business of selling old delivery trucks.

Merchants are held to a higher standard of good faith and the observance of reasonable commercial standards of fair dealing. In addition, many of the special merchant rules allow greater flexibility in enforcing contracts between business professionals, such as easing the restrictions on the Statute of Frauds, firm offers, and modification of contracts. Moreover, if the seller is held to be a merchant, the product will include an implied warranty of merchantability.