Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 6

FACTS Jane Pittsley contracted with Donald Houser, who was doing business as Hilton Contract Co. (Hilton), to install carpet in her home. The total contract price was $4,402. From this sum, Hilton paid the installers $700 to put the carpet in Pittsley's home. Following installation, Pittsley complained to Hilton that the installation was defective in several respects. Hilton attempted to fix the installation but was unable to satisfy Pittsley. Eventually, Pittsley refused any further efforts to fix the carpet. She sued for rescission of the contract and return of the $3,500 she had previously paid on the contract plus incidental damages. Hilton counterclaimed for the balance due on the contract. The magistrate determined that the breach was not so material as to justify rescission of the contract and awarded Pittsley $250 in repair costs plus $150 in expenses. The magistrate also awarded Hilton the balance of $902 remaining on the contract. Pittsley appealed to the district court, which reversed and remanded the case to the magistrate for additional findings of fact and to apply the Uniform Commercial Code (UCC) to the transaction. Hilton appeals this ruling, asserting that application of the UCC is inappropriate because the only defects alleged were in the installation of the carpet, not in the carpet itself.
DECISION The judgment of the magistrate is vacated and the case remanded.
OPINION Swanstrom, J. The single question upon which this appeal depends is whether the UCC is applicable to the subject transaction. If the underlying transaction involved the sale of ''goods,'' then the UCC would apply. If the transaction did not involve goods, but rather was for services, then application of the UCC would be erroneous.
Idaho Code § 2-105(l) defines ''goods'' as ''all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale. ***'' Although there is little dispute that carpets are ''goods,'' the transaction in this case also involved installation, a service. Such hybrid transactions, involving both goods and services, raise difficult questions about the applicability of the UCC. Two lines of authority have emerged to deal with such situations.
The first line of authority, and the majority position, utilizes the ''predominant factor'' test. The Ninth Circuit, applying the Idaho Uniform Commercial Code to the subject transaction, restated the predominant factor test as:
The test for inclusion or exclusion is not whether they are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom).
[Citations.] This test essentially involves consideration of the contract in its entirety, applying the UCC to the entire contract or not at all.
The second line of authority, which Hilton urges us to adopt, allows the contract to be severed into different parts, applying the UCC to the goods involved in the contract, but not to the nongoods involved, including services as well as other nongoods assets and property. Thus, an action focusing on defects or problems with the goods themselves would be covered by the UCC, while a suit based on the service provided or some other nongoods aspect would not be covered by the UCC. ***
We believe the predominant factor test is the more prudent rule. Severing contracts into various parts, attempting to label each as goods or nongoods and applying different law to each separate part clearly contravenes the UCC's declared purpose ''to simplify, clarify and modernize the law governing commercial transactions.'' § 1-102(2)(a). As the Supreme Court of Tennessee suggested in [citation], such a rule would, in many contexts, present ''difficult and in some instances insurmountable problems of proof in segregating assets and determining their respective values at the time of the original contract and at the time of resale, in order to apply two different measures of damages.''
Applying the predominant factor test to the case before us, we conclude that the UCC was applicable to the subject transaction. The record indicates that the contract between the parties called for ''165 yds Masterpiece No. 2122-Installed'' for a price of $4319.50. There was an additional charge for removing the existing carpet. The record indicates that Hilton paid the installers $700 for the work done in laying Pittsley's carpet. It appears that Pittsley entered into this contract for the purpose of obtaining carpet of a certain quality and color. It does not appear that the installation, either who would provide it or the nature of the work, was a factor in inducing Pittsley to choose Hilton as the carpet supplier. On these facts, we conclude that the sale of the carpet was the predominant factor in the contract, with the installation being merely incidental to the purchase. Therefore, in failing to consider the UCC, the magistrate did not apply the correct legal principles to the facts as found.
INTERPRETATION If the predominant purpose of the whole transaction is a sale of goods, then Article 2 applies to the whole transaction; if the predominant purpose is the nongood or service component, then Article 2 does not apply.
CRITICAL THINKING QUESTION Which test do you prefer? Explain.