In re Kiddle

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Touro College *

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MISC

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Law

Date

Feb 20, 2024

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docx

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2

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Elmore, Anderson & Reed Attorneys at Law 3722 Page Park Rd Bradley Center, Franklin 33092 489-555-7108 MEMORANDUM September 11, 2023 To : Marla Reed Re : Kiddie-Gym Systems, inc. Question 1: As between KGS and Cornet, which bears the risk of loss for playground equipment destroyed in the fire at Cornet’s Bradley Center shopping mall? Answer : Under the Franklin Commercial Code, Cornet will bear the risk of loss for the playground equipment destroyed in the fire at Cornet’s Bradley Center shopping mall. Explanation : The first issue we must address to determine if KGS is liable for the damaged play equipment is whether the contract between them and Cornet was a service or good contract. If it was a goods contract, it would fall under the jurisdiction of the Franklin Commercial Code. This can be seen under FCC 2102, which states that the FCC only governs transactions in goods. In a case called Coakley Inc v Washington Plate Glass Co. the court introduced the predominant factor test. This test states that if a mixed contract involves both sale of goods and a service, it will only be deemed a goods contract if the value of the goods being furnished under the contract exceeds one half of the total contract price. Then it falls under the scope of the FCC. In our case, KGS and Cornet had a mixed service contract to supply and install playground gyms. The cost of each gym was $25000 while the installation was $40000. Here, the goods are higher than half the price of the service contract. Therefore KGS’s contract fall under the FCC. Under FCC 2104(1)(2), both parties will be considered merchants. They both deal with goods involved in the transaction and have skill and knowledge of merchants. KGS has shown this from their expertise of installing playground equipment, a task that requires a certain level of skill and expertise. Cornet is a large developer and therefore can be classified as a merchant as well. This classification is important as FCC 2509 states that the risk of loss in the absence of a breach passes from the seller to the buyer, once the buyer has accepted the goods. Therefore we can determine that KGS would not be liable for the risk of loss since they delivered the goods and both parties are sellers. Furthermore, in the case Hughes v Al Green, Inc , the court followed this rule in ruling that risk of loss passes once the delivery has been made, and not on the transfer of title. In our case KGS delivered and installed the play equipment to Cornet’s mall. Therefore the risk of loss should transfer to the buyer in this case. However, Cornet will try to counter argue that FCC
2509 and Hughes both rule that a contract term may modify the transfer of risk to a different time. In the contract we see that KGS and Cornet agreed that the risk of loss will transfer once KGS performs the final tune up. In our case, KGS installed the playground but did not complete the final tune up. Nonetheless KGS should still not be liable. This is because Hughes argues that if the buyer took possession of the good, and used the good, this transfers risk of loss to the buyer, even if the contract terms state otherwise or the transaction is still incomplete. In our case, Cornet allowed children to play on the playground equipment knowing that KGS had not performed the final tune up. The court will most likely rule that possession and use of the good by Cornet shows that they considered the good to be theirs. Therefore the risk of loss should be on Cornet and not on KGS. Question 2: Is KGS obligated to pay the shipping and handling charges billed by Poly-Cast? Answer : Under the Franklin Commercial Code and relevant case law, KGS is not obligated to pay the shipping costs billed by Poly-Cast. Explanation : Poly-Cast will argue that under FCC 2207(1) any changes to the original contract are included in the original contract if its reasonably added and no objection has been made. They will claim the acknowledgement of the order added the shipping cost to the original contract because it stated all orders are subject to shipping costs on the bottom. Since KGS signed the document, and did not express their objection, they are obligated to pay it since it was added as a modified term to the original contract. However FCC 2207(2)(b) states that the additional terms can be removed, and are not added if they are considered to have materially altered the original contract. Here, KGS claims that they will lose their entire profit on the Corvent contract if they pay the shipping costs. It is evident that KGS would not have entered the contract had they needed to pay the shipping costs. Therefore the additional terms materially alter the contract and should not be added. This is further seen in Album Graphics, Inc. v Craig Adhesive Company . The court stated that a surprise or hardship would be considered a material alteration. KGS is a for profit company and would not purchase equipment to install at a site, and take loss on the job due to shipping costs. Also, as stated above all parties are merchants and therefore all of these rules under the FCC would apply to this case. In conclusion, KGS will not be liable for the shipping costs billed by Poly-Cast.
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