This is an appeal by a buyer from a grant of summary judgment in favor of the

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This is an appeal by a buyer from a grant of summary judgment in favor of the seller dismissing the buyer’s claim for incidental and consequential damages resulting from damage suffered by the goods during shipment. The district court found that any negligence that might have caused the damage was attributable to the carrier and not the seller. It therefore concluded that the buyer’s claim for incidental and consequential damages was barred by UCC §2–613, which precludes the award of such damages when the goods are damaged ‘‘without fault of either party.’’ We affirm, but in reliance on different provisions of the Code.

   Windows, Inc. (‘‘Windows’’ or ‘‘the seller’’) is a fabricator and seller of windows, based in South Dakota. Jordan Systems, Inc. (‘‘Jordan’’ or ‘‘the buyer’’) is a construction subcontractor, which contracted to install window wall panels at an air cargo facility at John F. Kennedy Airport in New York City. Jordan ordered custom-made windows from Windows. The purchase contract specified that the windows were to be shipped properly packaged for cross country motor freight transit and ‘‘delivered to New York City.’’ 

   Windows constructed the windows according to Jordan’s specifications. It arranged to have them shipped to Jordan by a common carrier, Consolidated Freightways Corp. (‘‘Consolidated’’ or ‘‘the carrier’’), and delivered them to Consolidated intact and properly packaged. During the course of shipment, however, the goods sustained extensive damage. Much of the glass was broken and many of the window frames were gouged and twisted. Jordan’s president signed a delivery receipt noting that approximately two-thirds of the shipment was damaged due to ‘‘load shift.’’ Jordan, seeking to stay on its contractor’s schedule, directed its employees to disassemble the window frames in an effort to salvage as much of the shipment as possible.

   Jordan made a claim with Consolidated for damages it had sustained as a result of the casualty, including labor costs from its salvage efforts and other costs from Jordan’s inability to perform its own contractual obligations on schedule. Jordan also ordered a new shipment from Windows, which was delivered without incident.

   Jordan did not pay Windows for either the first shipment of damaged windows or the second, intact shipment. Windows filed suit to recover payment from Jordan for both shipments in the Supreme Court of the State of New York, Suffolk County. Jordan counterclaimed, seeking incidental and consequential damages resulting from the damaged shipment. * * * Windows later withdrew its claims against Jordan. The only remaining claim is Jordan’s counterclaim against Windows for incidental and consequential damages.

   The district court granted Windows’ motion for summary judgment. * * * This appeal followed.

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  Jordan seeks to recover incidental and consequential damages pursuant to [the] UCC. Under that provision, Jordan’s entitlement to recover incidental and consequential damages depends on whether those damages ‘‘result[ed] from the seller’s breach.’’

   A destination contract is covered by §2–503(3); it arises where ‘‘the seller is required to deliver at a particular destination.’’ In contrast, a shipment contract arises where ‘‘the seller is required * * * to send the goods to the buyer and the contract does not require him to deliver them at a particular destination.’’ §2–504. Under a shipment contract, the seller must ‘‘put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case.’’ §2–504(a). * * *

   Where the terms of an agreement are ambiguous, there is a strong presumption under the UCC favoring shipment contracts. Unless the parties ‘‘expressly specify’’ that the contract requires the seller to deliver to a particular destination, the contract is generally construed as one for shipment. [Citations.]

   Jordan’s confirmation of its purchase order, by letter to Windows dated September 22, 1993, provided, ‘‘All windows to be shipped properly crated/packaged/boxed suitable for cross country motor freight transit and delivered to New York City.’’ We conclude that this was a shipment contract rather than a destination contract.

   To overcome the presumption favoring shipment contracts, the parties must have explicitly agreed to impose on Windows the obligation to effect delivery at a particular destination. The language of this contract does not do so. Nor did Jordan use any commonly recognized industry term indicating that a seller is obligated to deliver the goods to the buyer’s specified destination.

   Under the terms of its contract, Windows thus satisfied its obligations to Jordan when it put the goods, properly packaged, into the possession of the carrier for shipment. Upon Windows’ proper delivery to the carrier, Jordan assumed the risk of loss, and cannot recover incidental or consequential damages from the seller caused by the carrier’s negligence.

   This allocation of risk is confirmed by the terms of [the] UCC §2–509(1)(a), entitled ‘‘Risk of Loss in the Absence of Breach.’’ It provides that where the contract ‘‘does not require [the seller] to deliver [the goods] at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier.’’ UCC §2–509(1)(a). As noted earlier, Jordan does not contest the court’s finding that Windows duly delivered conforming goods to the carrier. Accordingly, as Windows had already fulfilled its contractual obligations at the time the goods were damaged and Jordan had assumed the risk of loss, there was no ‘‘seller’s breach’’ as is required for a buyer to claim incidental and consequential damages under §2–715.

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   The judgment of the district court is affirmed.

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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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