South-Western Legal Studies in Business

Sale of Unfinished Goods Is Sale of Goods, Not Service, under the UCC
Description Appeals court held that the UCC governed a contract, not the common law, as the primary value in the contract was the provision of unfinished goods to be used by the buyer in its production. That is a sale of goods, not a service.
Topic Sales
Key Words Goods; Services; Statute of Frauds
C A S E   S U M M A R Y
Facts Attwood operated a foundry and produced rough castings of propellers used by PowerTech in making small steel boat propellers that used a unique "segmented blade" tooling technique. PowerTech sued Attwood for breach of contract. Attwood contended that the UCC governed the agreement and that its statute of frauds barred recovery because the contract lacked a written quantity term or a written specification that the buyer will purchases exclusively from the seller. The district court held for PowerTech, awarding over $7 million in damages. It held that the contract was for both goods and services and that services dominated the contract. Therefore, it fell under the common law, so the statute of frauds from § 2.201 of the USS did not apply. Attwood appealed.
Decision

Reversed and rendered. The contract to produce custom designed propeller castings was a contract for the sale of goods within the meaning of the UCC even though the castings were turned into finished goods by PowerTech. Unfinished products are goods under the UCC. This is not a service. The contract specifically referred to the propellers as a "product" and to the "production" of the propellers. Furthermore, the contract lacked any promise as to the quantity to be purchased even though it said the buyer would set a minimum order level that was suitable to both parties. Hence, the contract lacked consideration and mutuality. Since the UCC applies, its statute of limitations applies.

Citation Propulsion Technologies, Inc. v. Attwood Corp., 369 F.3d 896 (5th Cir., 2004)

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