Summary of a Recent
Judicial
Development in
Commercial Transactions
Sale of Animal Feeds is Exclusively Governed by UCC
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In Rector v. Karlstad Farmers Elevator, No. A07-0693, 2008 WL 3287910 (Minn. Ct. App. Aug. 12, 2008), the Court of Appeals of Minnesota held that Uniform Commercial Code (UCC) Article 2 exclusively governed the sale of animal feeds, and therefore barred a common-law breach-of-contract claim.
Background
The Rectors operated an equine farm and purchased grain for the horses from Karlstad Farmers Elevator. Id. at *1. After several horses became sick and died, the Rectors brought an action against Karlstad for selling contaminated grain, alleging breach of contract, breach of warranty, negligence and strict liability. Id. The jury apportioned Karlstad's fault at 51% and the Rectors' fault at 49%, and awarded $1,400,000 in damages to the Rectors, and Karlstad appealed. Id.
Arguments
Karlstad argued that the district court should not have submitted to the jury the breach-of-contract claim because the contracts between the parties were for the sale of goods; therefore, the UCC controlled and provided the exclusive remedy for breach-of-warranty. Id. at *2.
The Rectors argued that Karlstad failed to preserve the UCC preemption issue for appellate review, so the common-law breach-of-contract claim had become the law of the case. Id. at *3.
Analysis and Holdings
The court agreed that UCC Article 2 did govern the parties' contracts because the grain was "goods" for UCC purposes and held that, because Minnesota courts had interpreted and applied the UCC as a bar to common-law claims arising from the sale of goods, the district court had erred by submitting the common-law breach-of-contract claim to the jury. Id. at *2. The court also found that Karlstad had properly preserved the UCC preemption argument for appeal, and therefore reversed the district court's holding as to the common-law breach-of-contract claim. Id. at *3. The court also ordered that the Rectors' judgment be reduced by 49% to reflect their degree of fault. Id.
The case was decided on August 12, 2008.