Wednesday, March 11, 2009

If Peter Piper picked a peck of pickled peppers . . .

Well maybe this post is not about Peter Piper from the old Mother Goose nursery rhyme, but it is about peppers. Co-blogger Robyn Meadows and I just finished the Sales Survey for the ABA's Business Lawyer that will be out in August 2009. And, it contains a wonderful case about, of course, peppers. The case, Florists’ Mutual Insurance Co. v. Lewis Taylor Farms, Inc., 2008 U.S. Dist. Lexis 24445 (M.D. Ga. 2008), raises classic issues about the scope of Article 2.

Lewis Taylor Farms, Inc. (LTF) is a “greenhouse” that grows seeds (some of which are provided by farmers) to seedling plants and then sells the seedlings to farmers. LTF contracted with DL&B Enterprises, Inc. (DL&B) for some pepper plants for the fall. DL&B supplied some of the seeds for one variety of pepper and LTF supplied the seeds for two other pepper varieties. The contract required DL&B to pay LTF per transplant seedling with the cost per seedling being higher for the pepper varieties that LTF provided both seeds and growing to reflect the cost of the seeds. Although the LTF invoice did not itemize the cost of the seeds separately from the cost of raising the seed to transplant, the cost of the seeds themselves was less than 30% of the contract price.

After the DL&B received diseased seedlings from LTF, DL&B filed suit claiming breach of the warranty of merchantability. LTF moved for summary judgment, asking the court to rule that Article 2's warranties did not apply. The trial court used the “predominant” purpose test to hold that where DL&B provided most of the seeds, the cost of the seeds and the services were divisible even though not segregated in the invoice and the context indicated that DL&B emphasized the growing of the plants in conversations, the contract was one predominantly for services, not goods. Therefore, common law outlined the scope of damages.

Overall, this case seems correct, perhaps for reasons peculiar to the industry or at least the arrangements here. I have my doubts, though, about what DL&B really thought they were getting. That is, what really was the purpose of the contract? Thinking about my own purchases of pepper plants for my summer gardens, how do you really divide the growing from the product when it comes to vegetables? A fun case for sure, which I will be sure to pitch to my students the next time I teach sales.


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