26.5 Interpretation of Contracts for the Sale of Goods
Library | Virginia Construction Law Deskbook (Virginia CLE) (2019 Ed.) |
26.5 INTERPRETATION OF CONTRACTS FOR THE SALE OF GOODS
26.501 Does the Uniform Commercial Code Apply? If the primary purpose of a transaction is the sale of goods, then Virginia's Uniform
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Commercial Code applies. 212 However, if a contract for the sale of goods also includes services, Virginia courts will look to the primary purpose of the contract to determine whether the Virginia UCC applies. 213 Whether the provision of materials or of labor predominates in a construction contract is a question of fact. 214 In making that determination, the courts will consider such factors as the language of the contract, the structure of the compensation, and the ratio of material supplied to labor expended. 215
In W.E. Brown, Inc. v. Pederson Construction & Tile Co., 216 the circuit court identified three principal factors for determining the nature of the contract:
(1) the language of the contract, (2) the principal business of the supplier, and (3) the intrinsic worth of the materials involved. 217
In Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 218 the federal district court determined that a contract to design, fabricate, and install a furnace was subject to Virginia's UCC based largely on the language of the contract:
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The only factor apparent on the present record is the language of the contract. While Waltz-Holst's quotation referred to services in the form of "design, fabrication] and install[ation]," it also described in detail the goods to be provided. Waltz-Holst referenced "sales and use taxes" and described itself as "manufacturers," as well as "engineers" and "contractors." Similarly, Fournier used contract language associated with the sale of goods. Fournier accepted Waltz-Holst's quotation on a form referring to Waltz-Holst as "vendor" and describing the purchase with reference to "quantity" and "unit price." The utilization of such sales language is a strong indication of the proper characterization of the agreement. 219
Similarly, in Leesburg S. Elec, Inc. v. Jones, 220 the circuit court looked at the language of the contract to furnish and install a generator in determining the predominant purpose of the contract. The court wrote, "[t]he contract provides a detailed listing of the various components of the generating unit to be furnished and installed at the home of the defendant. Plaintiff held itself out to the defendant as a business that could supply both installation services and the unit to be installed. The cost of the generator exceeded 50% of the contract price." 221 The court found the contract to be subject to the Uniform Commercial Code.
26.502 Additional Terms in Acceptance or Confirmation. As addressed earlier, at common law an acceptance must mirror the terms of the offer or the courts will not find a contract. In contrast, under Virginia's UCC, additional or different terms in an acceptance does not negate the formation of a contract unless acceptance is expressly made conditional on assent to the additional or different terms. 222
The additional terms are to be construed as proposals for additions to the contract. 223 Between merchants, such terms become part of the contract unless:
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1. | The offer expressly limits acceptance to the terms of the offer; | ||
2. | They materially alter it; or | ||
3. | Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. 224 |
26.503 Express Warranties. Under Virginia's UCC, any affirmation of fact or promise made by a seller to a buyer that relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise. 225 An affirmation of fact is presumed to be a part of the bargain, and any fact that would remove the affirmation from the agreement requires clear, affirmative proof. 226 Whether a particular affirmation of fact made by a seller constitutes an express warranty is generally a question of fact. 227 A buyer is not required to show reliance on the affirmation in order to recover under an express warranty claim. 228
Any description of the goods that becomes part of the basis of the bargain creates an express warranty that the goods will conform to the description. 229 In Kraft Foods of North America v. Banner Engineering & Sales, Inc., 230 the federal district court wrote: "[a] description need not be by words. Technical specifications, blueprints and the like can afford more exact description than mere language and if made the basis of the bargain goods
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must conform with them." 231 In Fournier Furniture, Inc. v. Waltz-Holst Blow Pipe Co., 232 the federal district court denied summary judgment, finding that the specifications for a furnace in the seller's quotation could qualify as express warranties. 233
In Pulte Home Corp. v. Parex, Inc. 234 the homebuilder, Pulte, filed suit for breach of express warranty against Parex, a manufacturer of an exterior insulation finish system (EIFS) that Pulte had used in the construction of a home. The circuit court granted Parex's demurrer to the cause of action, and the Virginia Supreme Court affirmed the circuit court's ruling on appeal, stating:
Pulte was left with the naked allegation in its cross-claim that its approval of the use of the EIFS was based upon the express oral or written warranties of Parex "by way of affirmations of fact, promises, descriptions, and/or use of samples and/or models regarding the appearance, durability, and/or water-resistance of [EIFS]." This allegation merely parroted the language of Code § 8.2-313, which sets forth several legal bases for the creation of express warranties, and amounted to no more than a legal conclusion. The cross-claim did not identify any "affirmations of fact, promises, descriptions, and/or use of samples and/or models" purportedly made by Parex. The allegations of the cross-claim were insufficient, therefore, to state a claim for breach of express warranty. 235
26.504 Implied Warranties.
A. In General. Under Virginia law, a contract can have both express and implied warranties. 236 The Virginia version of the UCC provides for an implied warranty of merchantability 237 and an implied warranty of
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fitness for a particular purpose. 238 Express warranties only preclude implied warranties where they contain the same subject matter and thus may conflict. 239
B. Merchantability. Section 8.2-314 of the Virginia Code states in pertinent part:
Implied warranty: Merchantability; usage of trade.
(1) | [A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. . . . | |||
(2) | Goods to be merchantable must be at least such as | |||
(a) | pass without objection in the trade under the contract description; and | |||
(b) | in the case of fungible goods, are of fair average quality within the description; and | |||
(c) | are fit for the ordinary purposes for which such goods are used; and | |||
(d) | run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and | |||
(e) | are adequately contained, packaged, and labeled as the agreement may require; and | |||
(f) | conform to the promises or affirmations of fact made on the container or label, if any. |
In essence, section 8.2-314 provides that in all sales of goods by a merchant, barring disclaimer or conflicting express warranties, a warranty is implied that the goods will be merchantable. 240
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In Bay Point Condo. Ass'n v. RML Corp., 241 the circuit court addressed Virginia's UCC implied warranty of merchantability in regard to the sale of "Outsulation," an exterior insulation finish system (EIFS), to a general contractor for installation as an exterior cladding in the construction of condominiums. The condominium association claimed damages against the general contractor due to structural defects caused by foreseeable water intrusion being unable to drain out of the EIFS clad walls. The general contractor cross-claimed against the EIFS manufacturer and filed a thirdparty motion for judgment against the EIFS distributor.
The circuit court first determined that there was a contract for the sale of the EIFS material between the distributor and the general contractor. 242 The court concluded it need not determine whether there was a contract between the general contractor and the EIFS manufacturer because of Virginia's anti-privity statute, section 8.2-318. 243 This statute provides:
Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer or seller of goods to recover damages for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the goods from the defendant, if the plaintiff was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods. . . . 244
The court considered it "patently obvious . . . that Dryvit, a manufacturer of a building product and Bishop, the distributor of that product, could anticipate that RML, a builder, was a person reasonably expected to use, consume, or be affected by [the product]." 245
The court further concluded that the EIFS material constituted a "good" under section 8.2-314:
A good is wholly defined as "all things (including specially manufactured goods) which are moveable at
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the time of identification to the contract for sale. . . ." The "goods" must be "existing and identified" before any interest in them passes to the buyer. "In the absence of explicit agreement identification occurs (a) when the contract is made. . . ."
In the instant case, at the time the Outsulation EIFS was sold to RML, it was identified to the implied sales contract between RML...
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