www.acpa.org Quarter 1, 2022 21 C O N S T R U C T I O N L A W continues on page 22 » ONE OF THE ISSUES THAT WE FREQUENTLY RUN into with our contractor clients is the lack of supply agreements. While getting subcontracts out for the companies performing the work is always a top priority, material supply agreements seem to fall through the cracks. Often times, our clients have simply signed the quote provided by the supplier. So, what happens when something goes wrong and there are limited contractual terms governing the issue? What happens if they technically supplied the material they were supposed to, but it was rejected by the engineer? The answer may be contained in the Uniform Commercial Code (UCC). While the history of the UCC is much more complex, it basically boils down to issues of agreements taking place across state lines once it became easier tomove across the country.The various laws could mean drastically different outcomes depending upon what state you were in, and the business and legal communities looked to change this. The UCC was eventually adopted to help bring more uniformity to agreements across the country. The UCC contains different parts which address various nationwide issues such as securities, leases, bank transactions, etc. We are concerned with Article 2, Sales. Article 2 of the UCC applies to the sale of goods: “Unless the context otherwise requires, this Article applies to transactions in goods” § 2-102. While the specific facts and legal precedent in your jurisdiction will determine if the UCC applies, the test is typically referred to as the “predominant purpose.” For public construction, we generally would say this means if they are supplying you material, it is a sale of goods and the UCC applies. If they are both supplying material and placing it on the jobsite, the predominant purpose is not the sales of goods and the UCC does not apply. When issues arise, there are certain warranties contained in the UCC that you should look towards.There are express warranties, and implied warranties. First, §2-313 creates express warranties based upon the description of goods: 1. Express warranties by the seller are created as follows: a. Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. b. Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. c. Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. 2. It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty. Second, if the seller is a merchant (defined elsewhere in the UCC) § 2-314 creates and implied warranty of merchantability: The Uniform Commercial Code and You By Thomas R. Olson & Rielly J. Lund
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