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THE CONTRACT AT ISSUE WAS NOT FOR THE “SALE OF GOODS” AND THEREFORE WAS NOT SUBJECT TO THE REQUIREMENTS OF THE UNIFORM COMMERCIAL CODE (UCC) (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the contract at issue was not for the “sale of goods” and therefore was not subject to the requirements of the Uniform Commercial Code (UCC):

Plaintiff and defendant signed a one-page “independent contractor and consultant” contract pursuant to which plaintiff agreed to sell certain minimum amounts of concrete on behalf of defendant (minimum) in return for monthly payments. During the term of the contract, defendant ceased making its monthly payments to plaintiff and terminated the contract, claiming that plaintiff had sold less than 10% of the minimum and failed to provide defendant with an adequate assurance that it could sell the remaining quantity by the end of the contract term. * * *

The dispositive issue before this Court is whether defendant was justified in demanding “adequate assurance of due performance” from plaintiff pursuant to UCC 2-609 (1). If article 2 of the UCC applies and if “adequate assurance is not forthcoming, repudiation is deemed confirmed, and the nonbreaching party is allowed to take reasonable actions as though a repudiation had occurred” … . Article 2 of the UCC applies only to agreements that are “predominantly . . . for the sale of goods, as opposed to the furnishing of services” … . “In determining whether a contract is for the sale of property or services the main objective sought to be accomplished by the contracting parties must be looked for” … .

Here, plaintiff met its initial burden on the motion of establishing that the contract was not predominately for the sale of goods. Pursuant to the contract, plaintiff agreed to provide services to defendant, i.e., to sell the concrete. The contract did not require plaintiff to purchase any products from defendant. Plaintiff therefore demonstrated that the UCC did not apply here, that defendant did not have the right to demand adequate assurance of performance … . Dreamco Dev. Corp. v Cranesville Block Co., Inc., 2024 NY Slip Op 03937, Fourth Dept 7-26-24

Practice Point: The first question to ask in a breach of contract action is whether the contract is for the “sale of goods.” If not, the UCC does not apply.

 

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