ECONIMIC LOSS UNDER THE UNIFORM COMMERCIAL CODE
citation exercise
DIRECTIONS
All the exercises follow the rules in the ALWD Citation Manual (3d ed.). Thus, any citation rules
for individual jurisdictions should not be used for any of these exercises.
The following exercise is from TWEN (The Thomson West Education Network). Read through
the following document and answer all the questions; there are 23 questions in total. All of the
questions are either multiple choice or true/false. Each time you see an accompanying
hyperlink in the memo below, please answer the related question at the bottom of the memo.
For ease of reference you can just click the links between the document and the questions. You
should have your ALWD Citation Manual with you as you complete the exercise.
Email the answers to LW2@pericles.ru as usual.
Memorandum
To:
From:
Date:
Re:
Senior Partner
Law Clerk
April 15, 2003
The Gilmore Group (File no. 0334); Potential claims against Williston Works
Question Presented
Can the The Gilmore Group pursue a remedy against Williston Works for its economic losses
caused by a defective software program that was part of a customized computer-assisted design system
purchased from and installed by Williston Works in 1994?
Short Answer
Probably not. Under Michigan's enactment of Article 2 of the Uniform Commercial Code and
relevant interpretive cases, a cause of action for economic loss must be brought within four years from
when the defective product was purchased for commercial purposes.
Facts
The Gilmore Group, Inc., our client, is an interior architecture firm doing business in the State of
Michigan. The Gilmore Group focuses exclusively on restaurant design. Williston Works, Inc., a
corporation also doing business in the State of Michigan, designs and installs customized computerassisted design systems for architectural firms specializing in interior architecture.
In January 1994, The Gilmore Group contracted with Williston Works for the design and
installation of a customized computer-assisted design system. As designed and installed, the system
allows an architect to sketch the basic design and dimensions of the restaurant on a special flat
computer screen. The system then transforms the sketches into high-quality blueprints for the
contractors. The system consists of the flat sketching screen, a stationary customized computer (hard
drive, screen, and keyboard), a customized printer, and software. The design and installation of the
system was completed in February of 1994, within the terms of the contract period, and the system
worked extremely well until January 2003.
In September 2002, The Gilmore Group was hired to remodel Karl's, a well-known and exclusive
restaurant with several small dining rooms. In October 2002, the design sketches for this remodeling
were completed, and the system designed and installed by Williston Works provided the blueprints.
Unfortunately, in early January 2003, The Gilmore Group discovered that these blueprints were "off" by
approximately two-and-three-quarters inches. As a result, Karl's has incurred substantially higher labor
costs and the restaurant will not reopen until September 15, 2003, rather than August 15, 2003, as
planned.
Williston Works has determined that the dimensional errors on the blueprints were caused by a
defect in the commercial software program that it sold to The Gilmore Group as part of the customized
computer-assisted design system. The defect was undetected until there was a project requiring the
design or remodeling of more than seven rooms for a particular job site. Karl's has seven small dining
rooms, three parlors, two offices, a large kitchen, and various compartmentalized areas for employees.
Williston Works has offered to repair the system free of charge.
The Gilmore Group has contacted us about its legal position. (Another law clerk is addressing
The Gilmore Group's potential liability to Karl's.) This Memorandum addresses whether The Gilmore
Group may pursue a remedy against Williston Works. The contract is attached as an Appendix.
Analysis
Article 2 of the Uniform Commercial Code Provides the Exclusive Remedy for an Economic Loss if the
Defective Product Was Purchased for Commercial Purposes.
Under these facts, The Gilmore Group is time-barred from pursuing a remedy against Williston
Works because the product was purchased for commercial purposes and Article 2 has a four-year
statute of limitations for breaches of warranty. Even if the contract were deemed to be predominantly
for services, The Gilmore Group would still be time-barred under the statute of limitations for breaches
of contract, which is six years. Moreover, an unintentional tort claim requires violation of a duty that
arises independently from the contractual obligations; thus, The Gilmore Group will likely be unable to
maintain a tort action.
1. Is The Gilmore Group/Williston Works Contract for the Sale of Goods or Services?
Article 2 of the Uniform Commercial Code governs transactions in goods. (1, Q.1-2) Goods are
defined as ". . . all things (including specially manufactured goods) which are movable at the time of
identification to the contract for sale . . . ." (2, Q.3-4) Section 440.2725 provides a four-year statute of
limitations that begins to accrue "when the breach occurs, regardless of the aggrieved party's lack of
knowledge of the breach. A breach of warranty occurs when tender of delivery is made . . . ." (3, Q.5)
Contracts that are predominately for services are governed by Michigan's Revised Judicature
Act, which provides a six-year limitation "for all other actions to recover damages or sums due for
breach of contract." (4, Q.6) Some contracts, however, are mixed - i.e., they are for goods and
services. Consequently, a threshold question in these types of cases is whether the contract is for the
sale of goods or for services.
The leading case in Michigan is (5, Q.7-8). In Neibarger, the Michigan Supreme Court adopted
the "economic loss doctrine," which holds that Article 2 provides the exclusive remedy to recover for
economic losses caused by defective commercial goods. To determine whether a contract is for goods
or for services, and thus whether Article 2 or the common law governs, the Court adopted the "predominant factor" test. (6, Q.9-10) This test was explained in (7, Q.11-12). {Discussion of case and
test omitted.}
In the instant problem, The Gilmore Group/Williston Works contract involved the sale of a
computer-assisted design system, which, according to the contract, included the "design, delivery,
installation, equipment, and training." Similar contracts have been held to be for the sale of a good.
(8, Q.13-15) Thus, the claim would be time-barred.
Even if there were an argument that the contract was predominantly for services, and thus not
governed by Article 2, more than six years have elapsed. Consequently, The Gilmore Group cannot
pursue contractual remedies.
2. Can The Gilmore Group Pursue a Tort Action?
If the contract is for services, a question arises as to whether an aggrieved party may pursue a
tort claim to recover for the economic loss. The period of limitations for a products liability action is
three years. (9, Q.16) This limitation period begins to run when the plaintiff discovers or should
reasonably have discovered the possible cause of action. (10, Q.17) Thus, if The Gilmore Group only
discovered, and only could have discovered, the defect in the product when using it for a project with
more than seven rooms, then, arguably, and assuming the contract is predominantly for services, The
Gilmore Group could maintain an action in tort.
In (11, Q.18), the Michigan Court of Appeals ruled that a tort action for negligence, stemming
from an oral contract for services, could proceed. But this is an unpublished opinion and is not
binding. (12, Q.19) Moreover, Williams is inconsistent with the Michigan Supreme Court's ruling in
Rinaldo. (13, Q.20) In that case, the Court stated that to maintain a cause of action in tort where there
is a contract between the parties, there must be a violation of a duty that arises independently from the
contract. (14, Q.21)
More recently, the Michigan Court of Appeals, distinguishing Rinaldo, permitted a plaintiff to
pursue a tort claim because there was no contract - not for goods and not for services. (15, Q.22)
Additionally, a federal court applying Michigan law stated that "a tort claim cannot be based on the
same facts serving as a basis for a breach of contract action." Heidtman Steel Prods., Inc. v. Compuware
Corp., 168 F. Supp. 2d 743, 750 (N.D. Ohio 2001; (citing Hart v. Ludwig, 79 N.W.2d 895 (Mich. 1956)).
(16, Q.23)
In the instant facts, there is no duty independent from the contract. Consequently, The Gilmore
Group will not be able to maintain a cause of action in tort.
Conclusion
The Gilmore Group is time-barred from bringing contract claims and is precluded from bringing a
tort action under these facts.
There are two questions in this link.
1. You have identified four sources that all stand for this proposition. Select the best source to cite.
a. A law review article.
b. An opinion from the United States Supreme Court.
c. A treatise on the Uniform Commercial Code.
d. Michigan's enactment of Article 2.
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2. Because the official version of the code has not been published in a number of years, you have
decided to cite to an unofficial code in an online version. Select the correct citation format.
a. MCLA 440.2102.
b. Mich. Comp. Laws Ann. § 440.2102 (West 2000).
c. Mich. Comp. Laws Ann. § 440.2102 (Westlaw current through 2002 Legis.).
d. M.C.L.A. § 440.2102 (Westlaw current through 2002 Legis.).
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There are two questions in this link.
3. The ellipsis at the beginning of the quotation is proper because it denotes that the quoted material
is a fragment.
a. True
b. False
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4. The quoted language is from code section 440.2105(1). The correct short citation format is:
a. 440.2105(1).
b. Id. at § 440.2105(1).
c. Id. § 440.2105(1).
d. Supra at 440.2105(1).
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5. Another short citation is needed even though the section referenced is clearly identified in the text
of the sentence.
a. True.
b. False
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6. You would need to provide a citation here. This Act is published in Michigan Compiled Laws
Annotated. This citation may be in short form.
a. True.
b. False.
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There are two questions in this link.
7. The case caption from Westlaw contains the following information:
Darwin E. NEIBARGER and wife, Patricia L. Neibarger, Plaintiffs-Appellants, v. UNIVERSAL
COOPERATIVES, INC., a foreign corporation, and Charles Brinker, individually and d/b/a Brinker
Refrigeration Service, Defendants-Appellees. Charles F. HOUGHTON and Jeanette Houghton,
Plaintiffs-Appellants, v. ALFA-LAVAL, INC., a foreign corporation, and Howard's Dairy System, Inc., a
Michigan corporation, Defendants-Appellees.
The correct way to cite the parties is:
a. The Neibargers v. Universal Coop., et al,
b. Neibarger v. Universal Cooperatives, Inc.,
c. Neibargers v. Universal Coop., Inc.; Houghtons v. Alfa-Laval, Inc.,
d. Neibarger v. Universal Coops., Inc.,
e. Neibarger v. Universal Cooperatives,
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8. The remainder of the citation would be as follows:
a. 439 Mich. 512 (1992).
b. 486 N.W.2d 612 (1992).
c. 486 N.W.2d 612 (MI 1992).
d. 486 N.W.2d 612 (Mich. 1992).
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There are two questions in this link.
9. The correct citation is:
a. Id.
b. Id. at 621.
c. Id. 621.
d. Neibarger at 621.
e. Neibarger, 486 N.W. 2d at 621.
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10. Capitalizing the word "Court" in this last sentence is incorrect.
a. True.
b. False.
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There are two questions in this link.
11. The plaintiff was Bonebrake. The defendant was Cox. The case was decided by the Court of
Appeals for the Eighth Circuit in 1974. The volume number of the reporter in which the opinion is
published is 499. The page on which the opinion begins is 951. The test was explained on page 960.
The correct citation is:
a. Bonebrake v. Cox, 499 F.2d 951, 960 (CA 8 1974).
b. Bonebrake v. Cox, 499 F.2d 951 at 960 (8th Cir. 1974).
c. Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir. 1974).
d. Bonebrake v. Cox, 499 F.2d 951, 960 (8th Circ. 1974).
e. Bonebrake v. Cox, 499 F. Supp. 2d 951, 960 (8th Cir. 1974).
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12. The Eighth Circuit's opinions are not binding on the Michigan Supreme Court on issues of state
law, but the Sixth Circuit's opinions are.
a. True.
b. False
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There are three questions in this link.
13. You want to provide an example and have decided to use a signal. The appropriate signal is:
a. See generally
b. See, e.g.,
c. See, e.g.,
d. See
e. See e.g.
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14. In your example, you want to cite to a case decided by the United States District Court for the
Eastern District of Michigan. Which citation is correct?
a. Dennis A. Dahlmann v. Sulcus Hospitality Technologies, Corp., 63 F. Supp. 2d 772 (Mich. 1999).
b. Dahlmann v. Sulcus Hospitality Techs., Corp., 63 F. Supp. 2d 772 (E.D. Mich. 1999).
c. Dahlmann v. Sulcus Hospitality Techs., Corp., 63 F.2d 772 (E.D. Mich. 1999).
d. Dennis A. Dahlmann v. Sulcus Hospitality Technologies, Corp., 63 F. Supp. 2d 772 (E.D. Mich.
1999).
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15. Because you have used a signal, the citation could be improved by providing an explanatory
parenthetical to help the reader understand the value of the authority.
a. True.
b. False.
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16. This statute of limitations is from Michigan's Revised Judicature Act, Section 600.5805(13). You
know that you may provide a short citation form. The correct short citation format is:
a. Id.
b. Id. at 600.5805(13).
c. Mich. Comp. Laws. Ann. § 600.5805(13).
d. MCLA § 600.5805(13).
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17. The correct citation for the case you will cite for this proposition is:
a. Moll v. Abbott Labs., 506 N.W.2d 816, 824 (Mich. 1993).
b. Moll v. Abbott Laboratories, 444 Mich. 1, 24; 506 N.W.2d 816 (1993).
c. Moll v. Abbott Laboratories, 506 N.W.2d 816 (1993).
d. Moll v. Abbott Laboratories, 506 N.W.2d 816, 824 (Mich. 1993).
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18. You have located an unpublished opinion available on Westlaw and you wish to provide an
embedded citation to it. The correct format is:
a. Williams v. JAMA, Inc., 1998 WL 2016623 (Mich. App. Mar. 17, 1998) (per curiam),
b. Williams v. JAMA, Inc., No. 201293, 1998 WL 2016623 (Mich. Ct. App. Mar. 17, 1998) (per
curiam),
c. Williams v. JAMA, Inc., No. 201293, 1998 WL 2016623 (Mich. App. Mar. 17, 1998) (per curiam),
d. It is never appropriate to cite to an unpublished opinion.
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19. You want to cite to the appropriate authority as support, which is Michigan Court Rule 7.215(C)(1).
The correct citation for this authority is:
a. Mich. Rules of Court 7.215(C)(1).
b. Mich. Ct. R. 7.215(C)(1).
c. MICH. CT. R. 7.215(C)(1).
d. Mich. Ct. Rule. 7.215(C)(1).
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20. It is not necessary to provide a citation the first time a case is named if you are going to explain
the case later and then cite to it.
a. True.
b. False.
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21. The proper citation for this proposition is:
a. Id. at 657-58 (citing Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956)).
b. Id. at 657-58 (citing Hart v. Ludwig, 79 N.W.2d 895 (Mich. 1956)).
c. Rinaldo at 657-58 (citing Hart v. Ludwig, 79 N.W.2d 895 (Mich. 1956)).
d. Rinaldo, 559 N.W.2d 647, 657-58 (citing Hart v. Ludwig, 79 N.W.2d 895 (Mich. 1956)).
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22. In this case, Quest Diagnostics, Inc. was the plaintiff, and MCI Worldcom, Inc. and Corby Energy
Services, Inc. were the defendants. The case was released for publication on February 20, 2003. It was
reported in Michigan Appeals Reports, which is the official version of the opinion. And it was
published in North Western Reporter, Second Series. Based on this information, the correct citation is:
a. Quest Diagnostics, Inc. v. MCI Worldcom, Inc., 254 Mich. Ct. App. 372 (2003).
b. Quest Diagnostics, Inc. v. MCI Worldcom, Inc., 254 Mich. App. Rep. 372 (2003).
c. Quest Diagnostics, Inc. v. MCI Worldcom, Inc., 656 N.W.2d 858 (Mich. Ct. App. 2003).
d. Quest Diagnostics, Inc. v. MCI Worldcom, Inc., 656 N.W.2d 858 (Mich. App. 2003).
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23. This citation is correct except that:
a. The case names are not italicized.
b. The word "Products" should not be abbreviated.
c. The pinpoint citation is not necessary.
d. The explanatory parenthetical is unnecessary because it has no relevance to the reader.
e. Both a and b are correct.
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Williston Works
PURCHASE ORDER
Parties:
The Gilmore Group, Inc., Buyer
71 Restatement Road
Common Way, Michigan
Williston Works, Inc., Seller
25 Langdell Lane
White-Summers, Michigan
Seller’s Obligations:
1. Seller agrees to design and install a computer-assisted design system for Buyer that
will provide professional quality blueprints from architectural renderings.
2. Seller agrees to begin installation on February 14, 1994 and to complete installation
on February 17, 1994.
3. Seller agrees to provide ten (10) hours of training for Buyer’s designers in the use
and maintenance of the installed computer-assisted design system from February 18,
1994 through February 19, 1994.
Buyer’s Obligations:
4. Buyer agrees to pay Seller 15 thousand dollars ($15,000.00) as follows:
7 thousand dollars ($7,000.00) upon signing this Agreement; and
8 thousand dollars ($8,000.00) on February 17, 1994.
This price includes design, delivery, installation, equipment, and training.
[The purchase order was signed by the parties. There were no disclaimers as to
warranties.]
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