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BMC Indus. v. Barth Indus. - 160 F.3d 1322 (11th Cir. 1998)

Rule:

Although courts generally do not find any single factor determinative in classifying a hybrid contract as one for goods or services, courts find several aspects of a contract particularly significant. First, the language of the contract itself provides insight into whether the parties believed the goods or services were the more important element of their agreement. Contractual language that refers to the transaction as a "purchase," for example, or identifies the parties as the "buyer" and "seller," indicates that the transaction is for goods rather than services. Courts also examine the manner in which the transaction was billed; when the contract price does not include the cost of services, or the charge for goods exceeds that for services, the contract is more likely to be for goods. Movable goods is another hallmark of a contract for goods rather than services.

Facts:

BMC Industries, Inc. (“BMC”), and Barth Industries, Inc. (“Barth”) entered into a contract for the design, manufacture, and installation of equipment to automate BMC’s production line for unfinished eyeglass lenses. Eighteen months after the delivery date set out in the contract had passed, BMC filed suit against Barth for breach of contract. BMC’s suit also included a claim against Berth’s parent company, Nesco, Inc. (“Nesco”). According to BMC, Nesco had orally promised to ensure Barth’s completion of the contract, and therefore was liable under the theory of promissory estoppel for Barth’s non-performance. As a defense, Berth and Nesco asserted that BMC waived the contract term, and therefore, breached the contract by refusing to accept delivery.  At the pretrial conference, the district court concluded that the contract was predominantly a transaction in services rather than goods, and therefore, Article 2 of the Uniform Commercial Code (“UCC”) did not apply. Instead, Florida common law would govern the contract.  Under the Florida law, waiver of a contract term was not recognized unless the waiver was supported by detrimental reliance or consideration. The jury, and consequently, the district court ruled in favor of BMC. Barth and Nesco appealed, contending that the district court erred when it concluded that the UCC did not apply to the contract, and thus, did not govern the waiver issue. According to Barth and Nesco, had the district court applied the UCC, it would have concluded that BMC waived the contract delivery date, and thereby, breached the contract by refusing to accept delivery.

Issue:

Did Article 2 of the Uniform Commercial Code apply in the case at bar?

Answer:

Yes.

Conclusion:

The United States Court of Appeals held that pursuant to the contractual language, the surrounding circumstances, and nature of the goods, the contract in question was predominantly a transaction in goods; therefore, Article 2 of the Uniform Commercial Code applied. After holding that waiver under the UCC did not require detrimental reliance, the Court concluded that BMC waived the delivery date as a matter of law. Consequently, the Court vacated the judgment of the district court but remanded as to the issue of whether Barth’s tender of the goods was within a reasonable time.

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