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Princess Cruises v. GE - 143 F.3d 828 (4th Cir. 1998)

Rule:

The test for inclusion or exclusion of the Uniform Commercial Code is not whether contracts 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 (for example, a contract with an artist for painting) or is a transaction of sale, with labor incidentally involved (for example, the installation of a water heater in a bathroom). The United States Court of Appeals for the Fourth Circuit deems the following factors significant in determining the nature of a contract: (1) the language of the contract, (2) the nature of the business of the supplier, and (3) the intrinsic worth of the materials. 

Facts:

A ship owned by plaintiff Princess Cruises, Inc. ("Princess"), was scheduled for routine inspection services and repairs. Princess requested that defendant General Electric Company ("GE"), the original manufacturer and contractor of the ship's main turbines, prepare an estimate for the inspection work to be performed. The parties each prepared estimates, however they did not agree in writing to each other's estimates, but GE performed services under the contract. Ultimately, Princess filed an action against GE in federal district court alleging negligence, breaches of express and implied warranty, and breach of contract in connection to services performed under the contract. Specifically, Princess alleged that GE's deficient performance caused substantial damage to Princess and the ship. GE filed a motion for summary judgment, which the district court granted as to Princess' tort claims only. After trial on the contract claims, a jury found GE liable for breach of contract and awarded Princess $ 4,577,743 in damages. On appeal, GE contended that the district court erred in denying its renewed motion for judgment as a matter of law, which requested that the court vacate the jury's award of incidental and consequential damages because the district court erroneously applied Uniform Commercial Code principles, rather than common law principles, to the parties' contract, which GE claimed, was one primarily for services. 

Issue:

Did the district court erroneously apply Uniform Commercial Code principles rather than common law principles for a contract of services?

Answer:

Yes.

Conclusion:

The appellate court noted that when the predominant purpose of a contract was the rendering of services, the Uniform Commercial Code was inapplicable, and courts had to draw on common law doctrines when interpreting the contract. As a matter of law, the court ruled, services rather than goods predominated the parties' contract. GE's final price quotation was a counteroffer rejecting Princess' purchase order, and the terms and conditions of the price quotation controlled liability and damages in the transaction. The jury could only award damages consistent with the terms and conditions of GE's price quotation and could not award incidental or consequential damages. The court reversed the order denying GE's motion for judgment as a matter of law and remanded the case for entry of judgment against GE in the amount of $ 231,925, with interest to accumulate from the date of the original judgment.

 

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