Martin Silver is a practicing attorney with offices in Hauppauge, N.Y. He was a flooring installer before and during the time he went to law school and has since represented numerous industry people and companies. To contact him, call 631-435-0700.
CONSTRUCTION CONTRACT- Sale of Goods or Sale of Services
In our past discussions, we've often crossed paths with something known as the "statute of limitations". This "statute" limits, to a specific period, the time within which one may be sued for something they did, or didn't do. This exact time period will depend upon the nature of the cause of action being sued upon and will vary from state to state for different types of actions. Each state, to a large extent, has its own limitation period for each type of cause of action which time period may be quite different from those of other states for the same action.
In N.Y for example, a lawsuit based upon a claim of negligence must be commenced within three years of the alleged negligent act. In California, on the other hand, if a claim of negligence is not sued upon within one year of the negligent act, it will be time barred by the California one year statute of limitations for negligence. In other states the negligence statute of limitations may provide for a period of two years, four years, or even 2 1/2 years.
There is very little uniformity in this area. One important exception is contained in the Uniform Commercial Code, basically the same in all states, which provides that a lawsuit based upon a breach of contract for the sale of goods must be commenced within four years from the time of delivery. This four year period, we must keep in mind, applies only to contracts for the sale of goods, other types of contracts will have differing periods that will vary form state to state. For example, the statute of limitations for contracts not for the sale of goods in New York is six years while California limits the time to three years.
Why is all this important? Most importantly, because if the applicable time period has expired you cannot sue, or be sued, for the cause of action covered by that time period. When this happens, a creative lawyer will most often look for a way around the applicable statutes. In New York, for example, a lawyer representing a buyer of goods that have gone bad five years after delivery may try to claim that the contract between the buyer he represents and the supplier of the goods wasn't really a contract for the sale of goods subject to the four year period, buy rather was a contract for something else. This something else, if true would give him the six year limitation for "general" contracts and so he would still be able to sue.
Let's say that you are working as a "consultant", "designer" or "decorator", a contractor approaches you and asks that you determine what his floor covering needs are for a particular job. You agree to do this and enter into an agreement which provides for you to design, provide, and install, appropriate floor covering for a price which includes the cost of the floor covering. You, in turn, make the shipping and installation arrangements with both the mill and the work room. They bill you directly for the material and labor and you, pursuant to your contract with him, are paid by the General Contractor.
Is your contract with the G.C, actually a sale of goods or is it primarily one for the sale of your design services with the goods being only an incidental part? If it's for goods you may be sued up to four years in New York, if for services you're exposed for six, unless of course these time periods are shortened by agreement.
This question does not have a simple answer. In one recent case, similar to the above example, in which the general contractor claimed that the goods did not properly perform, the designer attempted to get the lawsuit dismissed upon the ground that his contract with the general contractor was a sale of goods and so the lawsuit, started five years later, was timed barred.
The general contractor on the other hand claimed that it had six years to sue since the agreement was really a construction or services contract. This contract, according to the general contractor was only entered into because he needed the help of a "recognized specialist" to fulfill its design obligation to the end user. It did not need, it claimed in the lawsuit, some one to simply supply and install goods that it, the general contractor could just as easily have supplied on its own.
What did the judge have to say when presented with this issue? Not a whole lot. The judge decided that based upon the papers presented to him he could not determine "as a matter of law", what type of contract the parties had. Instead, he said, he could only leave the answer to this question to be decided as one of the factual determinations to be made at trial by the jury.
Since this decision does not give us a whole lot of guidance in this area we should try to avoid this problem altogether by stating in our contracts just exactly what it is we are contracting for, and possibly even stating what law, and what time periods, should be used in its interpretation.
Edited by Admin 7/27/2012