Last year, the American Law Institute and the Uniform Law Commission approved amendments to the model Uniform Commercial Code (UCC). Among the new provisions of the model bill is a new rule for “hybrid transactions,” which are transactions involving both the sale of goods and the sale of services.
Articles 2 and 2A of the UCC apply only to the sale and lease of goods not to contracts for services. Therefore, in order for UCC provisions to apply to the transaction, a court must decide whether the transaction is predominantly a sale of services or a sale of goods. The line between these types of transactions is sometimes difficult to discern and could lead to unfair results.
For example, currently, UCC warranties would not apply to an air conditioning system that is installed in a building if the cost of that transaction is predominantly for labor rather than for the air conditioning equipment.
The 2022 amendments to the model UCC address this issue by including new language in sections 2-102 and 2-106, which provides that, absent the parties’ agreement otherwise, the UCC will apply to the portion of the transaction that relates to the goods sold. In the above example of a hybrid transaction, the air conditioning equipment would be subject to UCC warranties even if the labor component is the predominant cost of the transaction.
Since these amendments to the model UCC were approved by the American Law Institute and the Uniform Law Commission last year, several states have adopted the amended UCC model language for hybrid transactions. Other states, including Massachusetts,1 have proposed bills that, if passed, would adopt this language.
Barclay Damon will continue to monitor the status of Bill #H.2112 in the Massachusetts legislature.
If you have any questions regarding the content of this alert, please contact Mike Ferdman, partner, at mferdman@barclaydamon.com; Martine Wayne, associate, at mwayne@barclaydamon.com; or another member of the firm’s Commercial Litigation Practice Area.
1See Bill H.2112 (malegislature.gov).