Tag: Governing Law

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Q: Does California use the Predominant Factor Test?

A: Yes

See C9 Ventures v. SVC-West, L.P. (2012) 202 Cal.App.4th 1483, 1494 [136 Cal.Rptr.3d 550, 559][“We find no legal test to determine whether a hybrid transaction involving lease of a vessel and sale of its contents is a lease or transaction for the sale of goods. However, in deciding the somewhat analogous question whether a hybrid transaction for goods and services is predominantly a sale of goods governed by the Uniform Commercial Code, or predominantly a transaction for services governed by common law, courts have looked to the essence of the transaction. (Filmservice Laboratories, Inc. v. Harvey Bernhard Enterprises, Inc. (1989) 208 Cal.App.3d 1297, 1305, 256 Cal.Rptr. 735; Bonebrake v. Cox (8th Cir.1974) 499 F.2d 951, 960.) The court may compare the relative cost of the goods and services in the transaction and the purpose of the agreement in order to determine whether it is predominantly a sale of goods or transaction for services. (See Pittsley v. Houser (1994) 125 Idaho 820, 823, 875 P.2d 232, 235 [transaction for purchase and installation of carpet predominantly transaction for sale of goods].) “The test for inclusion or exclusion is not whether [goods and services] are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom).” (Bonebrake v. Cox, supra, 499 F.2d at p. 960, fns. omitted.)]

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Additional Predominant Factor Test resources

From The ABCs of the UCC (Revised) Article 2: Sales.

Excerpt from: SCOPE OF ARTICLE 2

This ambiguity concerning the meaning of “transactions in goods” leads to a problem under current law in another respect: whether Article 2 should be applied in a so-called “mixed” transaction. Contracts often involve both the sale of goods and the service or installation of the goods sold. When the transaction is mixed, the courts apply one of two tests: the predominate purpose test (majority view) or the gravamen test (minority view).

Under the predominate purpose test, the court determines whether the predominate purpose of the transaction is to sell the goods or to provide the service. If the predominate purpose is to sell the goods, Article 2 applies. If the predominate purpose is to provide the service, Article 2 does not apply. To determine whether the predominate purpose is to provide the goods or the service, courts generally look at the predominate component in the transaction. To determine what is the predominate component, courts examine many factors including the terminology of the contract, the objective of the parties in entering the contract, the ratio of the price of the goods to the whole price of the contract, the nature of the business of the supplier, and the intrinsic value of the goods without the service.

In contrast, under the gravamen test, the court looks at the basis of the complaint rather than the overall nature of the transaction. If the plaintiff is complaining about the goods component, Article 2 applies. If the plaintiff is complaining about the service component,Article 2 is inapplicable.

Introduction to UCC Article 2

A good discussion of predominant factor test versus gravamen.

Paper discussing the problems posed by software transactions

Installation Failure: How the Predominant Purpose Test Has Perpetuated Software’s Uncertain Legal Status Under the Uniform Commercial Code