Commercial Law - Robert A. Weber, Jr.

• Jurisdiction: United States,Federal
• Publication year: 1996
• Citation: Vol. 48 No. 1

Commercial Lawby Robert A. Weber, Jr.^*

Commercial law is "the whole body of substantive jurisprudence . . . applicable to the rights, intercourse, and relations of persons engaged in commerce, trade, or mercantile pursuits."¹ Of course, an article on commercial law that used this statement to define its coverage would be completely unsuitable for a survey. The Author instead relied on Georgia's Commercial Code to determine the body of law to review in this Article and, accordingly, structured it in a similar fashion.

This Article covers case law and statutory amendments from June 1, 1994, through May 31, 1996. The review of Article 9 caselaw includes decisions by federal bankruptcy courts in Georgia as well as those decided by Georgia's state courts. Most notably, however, is what is not covered by this Article. The Georgia General Assembly recently adopted complete revisions of Articles 3 and 4. Because of considerations unique to that massive undertaking, it has been dealt with in a separate article by Professor Michael Sabbath, who served as the Official Reporter for the revision's consideration by the General Assembly. In next year's survey, Articles 3 and 4 will again be dealt with in this Article.

I. Sales

A. Scope

Determining the coverage of Article 2 is not merely an academic endeavor. For example, contracts within the scope of Article 2 are subject to a four-year statute of limitations,² whereas the limitations period for simple contracts in writing that are not within Article 2 is six years.³ This distinction, and the necessity of conducting a scope inquiry, was demonstrated by a recent decision of the court of appeals. In Southern Tank Equipment Co. v. Zartic⁴ practitioners were provided with a definitive test for deciding whether a hybrid contract—one involving both the sale of goods and the provision of labor—falls within the scope of Article 2. That test is as follows:

When the predominant element of a contract is the sale of goods, the contract is viewed as a sales contract and the UCC applies even though a substantial amount of service is to be rendered in installing the goods. When, on the other hand, the predominant element of a contract is the furnishing of services, the contract is viewed as a service contract and the UCC does not apply. As it is said: A contract for services and labor with an incidental furnishing of equipment and materials is not a transaction involving the sale of goods and is not controlled by the UCC. Factors to be considered in determining the predominant element of a contract include the proportion of the total contract cost allocated to the goods and whether the price of the goods are segregated from the price for services. A smaller proportion of the total price assignable to services, or a failure to state a separate price for services rendered, suggest a contract for the sale of goods with services merely incidental.⁵

Applying this test, the court found the transaction in Zartic to be for the sale of goods.⁶ Over half of the purchase price was for one piece of equipment, with the remainder of the purchase price representing goods and services. In addition, the sale of the piece of equipment was arranged first, and only thereafter did the parties add the other materials and service. Accordingly, Article 2's four-year limitations period applied to preclude plaintiff's recovery.⁷

Article 2 coverage determines not only the appropriate limitations period, but also the existence of certain remedies. In Keaton v. A.B.C. Drug Co.,⁸ plaintiff pulled a bottle of bleach from a top shelf in defendant's store. The bottle's cap was loose and bleach spilled into plaintiff's eye when, in the course of removing the bottle from the shelf, plaintiff tipped the bottle towards her.⁹ In assessing the validity of plaintiff's claim for breach of the implied warranty of merchantability,¹⁰ Judge Beasley's concurrence in the court of appeals decision astutely noted that at the point plaintiff removed the bleach from the shelf, no "sale" had taken place.¹¹ Because "the UCC warranties can only be made by a seller of goods, and those warranties can only be extended either to the buyer or to those who have a specified relationship with the buyer" Judge Beasley concluded that the warranty provisions of Article 2 did not apply.¹² The supreme court disagreed, however, finding that plaintiff's "actions of grasping the product and beginning to take the product from the shelf with the intent to purchase it sufficiently constituted 'possession' of the product, establishing privity between [plaintiff] and [defendant]."¹³

The disagreement between the supreme court's decision and Judge Beasley's concurrence centered on the interpretation of an earlier decision, Fender v. Colonial Stores, Inc.¹⁴ The court in Fender analyzed the facts before it to decide whether there existed, in the terms of Article 2, "a present sale of goods [or] a contract to sell goods at a future time."¹⁵ If either existed, Article 2 applied.¹⁶ The plaintiff in Fender had "finished her shopping and was in the physical act of placing the bottles on the [check-out] counter for payment when the explosion occurred."¹⁷ More importantly, plaintiff said she was at the check-out counter to pay for her purchases. The court first concluded that "the retailer's act of placing the bottles on the shelf with the price stamped upon them manifested an intent to offer them for sale, the terms of the offer being that it would pass title to the customer when they were presented at the check-out counter and paid for."¹⁸ The court found that "plaintiff's act of taking physical possession of the goods with the intent to purchase them manifested an intent to accept the offer and a promise to take them to the check-out counter and to there pay for them."¹⁹

The supreme court's conclusion that Article 2 applied in A.B.C. Drug Co. was obviously premised on a finding that plaintiff had the "intent to purchase" the product when she removed it from the shelf. The supreme court did not specify what evidence supported a finding that the plaintiff in A.B.C. Drug Co. "intended to purchase" the bleach when she removed it from the shelf.²⁰ The opinions only indicate that plaintiff went to defendant's store to purchase laundry detergent and a half-gallon of Clorox bleach, that she already had a box of detergent under her arm, and that she reached above her head to grasp a half-gallon bottle of bleach.²¹ From these facts one could certainly infer that plaintiff intended to purchase the bottle of bleach.

The supreme court's decision should have more clearly stressed the necessity that a plaintiff bears the burden of establishing his or her "intent to purchase" a product when retrieved from a shelf.²² By failing to do so, the decision in A.B.C. Drug Co. suggests that every shopper is a purchaser for purposes of Article 2. If subsequent decisions gloss over this requirement as the supreme court did in A.B.C. Drug Co., Article 2 will be transformed into a tort statute in the consumer context.

B. Warranty Actions

1. Express Warranty. Section 11-2-313 of the Official Code of Georgia Annotated ("O.C.G.A.") sets forth the manner in which a seller may create express warranties, the breach of which may then serve as the basis for a buyer's cause of action. At times, sellers get ahead of themselves and use typical sales language, such as, "this is the best widget on the market," creating an express warranty that they subsequently regret. Whether such sales talk or "puffing" amounts to an express warranty is determined as follows:

The decisive test, in determining whether language used is a mere expression of opinion or a warranty, is whether it purported to state a fact upon which it may fairly be presumed the seller expected the buyer to rely and upon which a buyer would ordinarily rely. If the language used is of that character, the fact of reliance on the part of the buyer and the presumption of intent on the part of the seller which the law would raise in such a case would operate to create a warranty. No particular form of words is necessary to constitute a warranty .... [W]hether the words used amount to a warranty or not, is a question for the jury, under the rules of law applicable to the case.²³

Applying this test, the court of appeals in Moore v. Berry²⁴ concluded that a seller's representations that a tree stand was "probably the safest one on the market" and that "there is no way you can fall" were not mere sales talk or "puffery" and presented jury questions as to whether an express warranty to that effect had been created.²⁵ The court also disagreed with the trial court's assessment that the foregoing statements were "too vague" to create an express warranty, stating that "if this constitutes vague language, we can hardly imagine words which would be deemed specific."²⁶

In some circumstances, even though the existence of an express warranty is undisputed, the buyer's conduct can preclude his recovery. In Lane v. Corbitt Cypress Co.,²⁷ the court found that the express warranty given—that roofing shingles sold to plaintiff "were 'tidewater' cypress roofing shakes, or that they would last 45 years"—was predicated on the assumption that the shingles would be installed according to seller's instructions.²⁸ Thus, when the buyer failed to follow the seller's installation instructions, he was precluded from recovering on the basis of the express warranty.²⁹

Finally, there is the question of the disclaimer of express warranties. Although BMW received some assistance this year from the Supreme Court of the United States,³⁰ the Georgia Court of Appeals found that BMW's attempt to use separate provisions within its retail installment sales contract to disclaim express warranties also contained therein was ineffective.³¹ The sales contract in question described the car to be sold as "new;" however, the car's surface had been refinished in places to repair marring...