Answers to Case Problems with Sample Answer

Answers to Case Problems with Sample Answer

for The Legal Environment Today

Fifth Edition

To Be Posted on Web Site

[Both question and answer to be posted for each chapter.]

10–7.Case Problem with Sample Answer

Propulsion Technologies, Inc., a Louisiana firm doing business as PowerTech Marine Propellers, markets small steel boat propellers that are made by a unique tooling technique. Attwood Corp., a Michigan firm, operated a foundry (a place where metal is cast) in Mexico. In 1996, Attwood offered to produce castings of the propellers. Attwood promised to maintain quality, warrant the castings against defects, and obtain insurance to cover liability. In January 1997, the parties signed a letter that expressed these and other terms—Attwood was to be paid per casting and twelve months’ notice was required to terminate the deal—but the letter did not state a quantity. PowerTech provided the tooling. Attwood produced rough castings, which PowerTech refined by checking each propeller’s pitch, machining its interior, grinding, balancing, polishing, and adding serial numbers and a rubber clutch. In October, Attwood told PowerTech that the foundry was closing. PowerTech filed a suit in a federal district court against Attwood, alleging in part breach of contract. One of the issues was whether their deal was subject to Article 2 of the UCC. What type of transactions does Article 2 cover? Does the arrangement between PowerTech and Attwood qualify? Explain. [Propulsion Technologies, Inc. v. Attwood Corp., 369 F.3d 896 (5th Cir. 2004)]

10–7. Answer

The court held that the UCC did not apply, reasoning that the contract was a hybrid contract for both services and goods, and that its predominant purpose was the provision of services. On both parties’ appeals, the U.S. Court of Appeals for the Fifth Circuit reversed this ruling and issued a judgment in Attwood’s favor. The appellate court stated, “Manufacture always involves some services, such as engineering, design, fabrication and inspection. Services . . . always play an important role in the use of goods, whether it is the service of transforming the raw materials into some usable product or the service of distributing the usable product to a point where it can easily be obtained by the consumer.” In this case, what “the seller agreed to sell and the purchaser agreed to buy was not services but goods as defined in the U.C.C.” The court added “that, under the hybrid analysis, the evidence conclusively establishes that the dominant factor of this contract was a sale of goods. . . . This contract would have to be much more service oriented for its ‘essence’ or ‘dominant’ factor to be the furnishing of services.” Also, “[t]he unfinished aspect is not dispositive. The U.C.C. makes no exception for goods that require servicing before they can be used. Even natural resources and raw materials are considered ‘goods.’ ” The court noted that the propellers were moveable.