NIM Plastics: The “Volkswagen” of Warranties

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Guest Post By Santa Clara University School of Law 1.5L, Sarina Jwo

NIM Plastics Corp. v. Standex International Corp. 

In the land of Contracts, there are two main building blocks of law: common law and the Uniform Commercial Code. They’re DIFFERENT. Which do you apply?

At a glance, it’s simple: if it’s a sale of goods → governed by UCC; if it’s a sale of services → governed by common law; but what about a mixed contract in which there is a contract for both goods and services? For example, you hire a guy to paint your house… the paint he supplies the job with is a good, but him painting is a service. This is an example of a mixed contract.

NIM Plastics is the introduction of the UCC’s application of law (spoiler alert: not really). The most important thing to come out of NIM is the court’s application of the predominant purpose test: If the contract’s primary purpose is the sale of goods (as defined by the U.C.C), then the entire contract is governed by the U.C.C. (Or in the alternative, if the contract’s primary purpose is the sale of a service, then the entire contract is governed by common law.)

In the case, the court found that the parties’ contract for Mold-Tech to provide a new matte surface for NIM’s roll was a service contract, not a good as defined by the UCC. The parties’ agreement was to result in a new surface on an existing roll, which is not considered as “movable” as required by U.C.C’s definition of ‘good’; the new surface is not an identifiable, movable thing as contemplated by U.C.C.

Key U.C.C definitions

U.C.C 2-105(1): good – “all things… movable at the time of identification to the contract for sale”

U.C.C 2-106(1): sale – “passing of title from the seller to the buyer for a price.”

Examples of goods: cars, furniture, books, food, etc.

NOT goods: land, real property, services

Takeaway: In an essay, before you do any other analysis of consideration/defense/etc., determine which law applies. The predominant purpose test is useful when there is a mixed contract involved, and you have to determine which is it more: a contract for goods, or a contract for services. Going back to my paint-job example, it’s probably a service, because you would be paying the guy to paint the house, not to get you paint. Therefore, apply common law.

Comments from Jess:

Can we talk about how exciting this case is and what a tragedy it was that we skipped over it in class!? As the title suggests, NIM Plastics is the “Volkswagen” of breach of warranty cases. If you understand this one, you understand warranties, the U.C.C, and quite frankly, the beauty of contract formation and lawyerly bullshit.

Imagine this, you’re the general counsel for Mold-Tech who royally FUBAR’d the matte finishing on one of NIM’s most precious “rolls.” (Think silicon wafer plating, though not the case here, very similar). Understandably, pissed off NIM Plastics contracts with Mold-Tech’s competitor to fix their mess. NIM then sues Mold-Tech (Standex International) for breach of contract and breach of implied warranty.

What do you do? Clearly, there exists a valid contract between your company and NIM, one in which your company SEVERELY breached with their poor performance. But is there really a breach of implied warranty?

Sophisticated lawyer senses tingling, you BRILLIANTLY realize that your only way around this mess is to argue that your client never provided NIM with a “good,” but instead, a “service” obliterating the U.C.C’s jurisdiction. You gracefully weave between the wording of the U.C.C’s definition of a “good” and motion to dismiss on the breach of implied warranty count. Beautiful.

I only wish I could have been a fly on the wall for that G.C meeting and the inevitable “WAIT JUST A MINUTE” moment brought on by probably a legal intern who scored a perfect on the reading comprehension section of their LSAT.

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A beautiful display of RTFM if you ask me (or perhaps RTFUCC?). Commence a lot of legal gymnastics as G.C proves that Mold-Tech’s finishing is not “moveable” and therefore not a good. Instead, Mold-Tech’s primary purpose of its piss-poor performance is really the rendition of service with goods incidentally involved, taking it fully out of the scope of the U.C.C.

The court rightfully grants Standex International’s motion to dismiss NIM’s breach of implied warranty claim. #wompwomp

 

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