2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 2 - Sales › Part 1 - SHORT TITLE, GENERAL CONSTRUCTION AND SUBJECT MATTER › Section 55-2-102 - Scope; certain security and other transactions excluded from this article.

Unless the context otherwise requires, this article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or [a] present sale is intended to operate only as a security transaction nor does this article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
History:
1953 Comp., § 50A-2-102, enacted by Laws 1961, ch. 96, § 2-102.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
Prior uniform statutory provision.
— Section 75, Uniform Sales Act.
Changes.
— Section 75 has been rephrased.
Purposes
:
1. Subsection (3) makes it clear that this Article does not govern aspects of a transaction that, although in the form of a sale or contract to sell, create a security interest.
See
Sections 1-201(b)(35) [55-1-201 NMSA 1978]; 9-109(a)(1) [55-9-109 NMSA 1978]. Of course, this Article does apply to any sales aspects of such a transaction.
2. Many ordinary transactions involve both a sale of goods and the provision of services, a lease of other goods, or a sale, lease, or license of property other than goods. In its original formulation, Article 2 provided no guidance on whether or to what extent the Article applied to such a hybrid transaction, although by defining a "sale" as "the passing of title [to goods] from the seller to the buyer for a price," Section 1-206 [55-1-206 NMSA 1978] arguably regarded such transactions as sales. This section was substantially revised to address hybrid transactions pursuant to the Uniform Commercial Code Amendments (2022) (2022 Amendments).
See
Section 2-106(5) (defining "hybrid transaction").
In dealing with the issue of whether and to what extent, under the pre-2022 version of this section, Article 2 applied to hybrid transactions, most courts used some version of a "predominant purpose" test. Under those tests, Article 2 applied either in full or not at all, depending on whether the hybrid transaction, at its inception, was predominantly about the goods. In some cases, courts looked instead to the "gravamen of the claim," applying Article 2 to issues relating to the goods and applying other law to issues relating to other aspects of the transaction. Still other courts used what was sometimes referred to as the "bifurcation approach," under which Article 2 applied to the sale-of-goods aspect of a hybrid transaction and other law applied to the other aspects of the transaction. The bifurcation approach was similar to the gravamen of the claim, but instead of applying all of Article 2 to some, but not all, types of claims relating to a hybrid transaction, it distinguished the provisions in Article 2 that deal with the goods from those that deal with the transaction as a whole, and applied only the former in a hybrid transaction.
Subsection (2) codifies aspects of the predominant purpose test and the bifurcation approach, establishing a two-tiered test. If the sale-of-goods aspects of a hybrid transaction predominate, then Article 2 applies. If the other aspects of the hybrid transaction predominate, then the provisions of Article 2 which relate primarily to the sale of goods, as opposed to those that relate to the transaction as a whole, apply. This approach has the benefit, for example, of ensuring that a person acquiring ownership of goods in a transaction in which the sale-of-goods aspects do not predominate is a buyer that benefits from the warranty provisions of this Article and may have a right to recover the goods from the seller and thereby may qualify as a buyer in ordinary course of business under Section 1-201(b)(9) [55-1-201 NMSA 1978].
3. It is important to note that, in contrast to the frequent reference (under prior case law in many states) to the predominant purpose of a hybrid transaction, Subsection (2) focuses on which aspect of the transaction predominates without requiring a finding of the "purpose" of either or both parties (although that purpose, when evident, may be a relevant factor in deciding which aspect predominates). The determination of which aspect of a hybrid transaction predominates is left to the court, which should evaluate each transaction on a case-by-case basis without the necessity of applying any particular formula. Factors that may be relevant to that determination include, but are not limited to, the language of the agreement, the portion of the total price that is attributable to the sale of goods (as to which an agreed-upon allocation will ordinarily be binding on the parties), the purposes of the parties in entering into the transaction (when that is ascertainable), and the nature of the businesses of the parties (such as whether the seller is in the business of selling goods of that kind). Because the definition of "goods" expressly includes "specially manufactured goods," services involved in manufacturing goods are normally attributable to the sale-of-goods aspects of the transaction. Services in designing specially manufactured goods, however, would not normally be attributable to the sale-of-goods aspects of the transaction.
4. If the sale-of-goods aspects of a hybrid transaction predominate, then this Article applies to the transaction. However, the application of this Article to a hybrid transaction does not preclude the application of principles of law and equity to supplement the provisions of this Article,
see
Section 1-103(b) [55-1-103 NMSA 1978], nor does it preclude, in appropriate circumstances, the application of other law to the non-sale-of-goods aspects of the transaction. Whether it is appropriate to apply such other law will depend in part on what purposes the other law is designed to achieve and whether application of the other law would be likely to interfere with the application of this Article.
Example 1.
Owner hires Contractor to replace the roof on a structure. As part of the transaction, Contractor promises to remove the existing shingles and install new shingles, which Contractor is providing. The transaction is a hybrid transaction because it involves the passing of title to the new shingles and the provision of services. If the sale-of-goods aspects of the transaction predominate, this Article applies to the transaction.
Example 2.
Same facts as in Example 1. Even if the sale-of-goods aspects of the transaction predominate, other law might apply to the services aspects of the transaction. For example, if applicable law regulates the provision of roofing services, such as by requiring the roofer to be licensed, requiring specified disclosures, requiring or implying a warranty with respect to the quality of services, or giving the property owner a brief period of time to cancel the contract, such other law might apply.
Example 3.
In a single transaction, Seller agrees to sell a warehouse full of goods to Buyer. The transaction includes the goods contained in the warehouse, the warehouse itself, and the real property on which the warehouse is situated. Assume the goods aspects of the transaction predominate. The application of this Article to the transaction does not preclude the application of real property law to the real-property aspects of the transaction. Accordingly, whether the sale of the real property complies with the applicable requirements of real property law is determined by law other than this Article. Other law will also determine whether consummation of the sale of the real property is a condition to the parties' obligations to buy and sell the goods.
5. If the sale-of-goods aspects of a hybrid transaction do not predominate, under subsection (3), the provisions of this Article relating primarily to the sale of goods, as opposed to the transaction as a whole, apply. These provisions include those relating to warranties under Sections 2-212, 2-313, 2-314, 2-315, 2-316, 2-317, 2-318 [55-2-212, 55-2-313, 55-2-314, 55-2-315, 55-2-316, 55-2-317, 55-2-318 NMSA 1978, respectively]; tender of delivery and risk of loss under Sections 2-503, 2-504, 2-509, 2-510 [55-2-503, 55-2-504, 55-2-509, 55-2-510 NMSA 1978, respectively]; acceptance, rejection, and cure under Sections 2-508, 2-601, 2-602, 2-603, 2-604, 2-605, 2-606 [55-2-508, 55-2-601, 55-2-602, 55-2-603, 55-2-604, 55-2-605, 55-2-606 NMSA 1978, respectively]; and remedies for non delivery of the goods or for tender of nonconforming goods under Sections 2-711, 2-712, 2-713, 2-714, 2-715, 2-716 [55-2-711, 55-2-712, 55-2-713, 55-2-714, 55-2-715, 55-2-716 NMSA 1978, respectively]. In contrast, the provisions of this Article dealing with the transaction as a whole do not apply. These provisions include those relating to: the requirement of a signed record, Section 2-201 [55-2-201 NMSA 1978]; contract formation, Sections 2-204 through 2-207 [55-2-204 to 55-2-207 NMSA 1978]; and whether consideration is needed to modify the agreement, Section 2-209 [55-2-209 NMSA 1978].
Example 4.
Owner sends a purchase order to Contractor offering to enter into a contract with Contractor to replace the roof on a structure. The proposed transaction involves Contractor removing the existing shingles and installing new shingles, which Contractor is to provide. Contractor responds with a confirmation purporting to accept but containing additional and different terms. The transaction is a hybrid transaction because it involves the passing of title to the new shingles and the provision of services. If the sale-of-goods aspects of the transaction do not predominate, this Article does not apply to determine whether a contract was formed. That issue is governed by other law.
Example 5.
Under the facts of Example 1, assume that the sale-of-goods aspects of the transaction do not predominate. The agreement provides that the job will be completed by December 31. Due to unforeseen circumstances affecting the availability of supplies and labor, the job is not completed by the agreed-upon deadline. Whether Contractor's failure to perform on time is excused is determined by general contract law, rather than by this Article (Section 2-615) [55-2-615 NMSA 1978].
Example 6.
Under the facts of Example 1, assume that the sale-of-goods aspects of the transaction do not predominate. A dispute between the parties arises and during litigation one party seeks to admit evidence of usage of trade to supplement or explain the parties' written agreement. If the proffered evidence relates to the sale-of-goods aspects of the transaction, the parol evidence rule in this Article, Section 2-202 [55-2-202 NMSA 1978] applies. If the proffered evidence relates to the other aspects of the transaction or to the transaction as a whole, other law will govern the admissibility of the evidence.
Example 7.
Restaurateur hires Remodeler to remodel Restaurateur's kitchen. The transaction requires Remodeler to supply a new oven meeting detailed specifications, but the services aspects of the transaction predominate. The oven supplied does not meet a minor aspect of those specifications (but does substantially satisfy the specifications as a whole). Whether Restaurateur may reject the oven (or must retain it subject to price adjustment), whether Restaurateur has a right to cover by purchasing a substitute oven, and the measure of Restaurateur's damages for the oven's nonconformity to the specifications are determined by this Article.
Example 8.
Restaurateur hires Remodeler to remodel Restaurateur's kitchen by a specified completion date. The transaction requires Remodeler to supply a new oven, but the services aspects of the transaction predominate. Remodeler breaches by failing to complete the project by the specified date. The measure of Restaurateur's damages for Remodeler's failure to timely complete the project is not determined by this Article.
6. The rules of subsections (1) and (2) are essentially gap fillers that apply when the parties' agreement is silent on what legal rules govern the different aspects of their transaction. In general, parties are free to preclude the application of this Article to the aspects of their transaction that are not about the sale of goods.
Example 9.
Robotics Manufacturer contracts to design, build, and sell customized robotics to Car Maker. The transaction includes a sale of goods and the provision of services and is therefore a hybrid transaction. Assume that the sale-of-goods aspects predominate. The parties may, in their agreement, provide that Article 2 does not govern the services aspects of the transaction.
As Example 9 illustrates, parties may agree that Article 2 will not govern non-goods aspects of a hybrid transaction, even though the sale-of-goods aspects predominate. But, when sale-of-goods aspects predominate, the parties cannot agree that Article 2 does not govern matters that relate to the transaction as a whole, such as contract formation and enforceability. For example, in a situation such as Example 9, if the requirements of the Section 2-201 [55-2-201 NMSA 1978] statute of frauds are not satisfied, it would make little sense to hold that the services aspects of the transaction are enforceable when the provision of services is clearly dependent on the existence of the sale-of-goods aspects. Of course, even when this article applies, its provisions may be varied by agreement to the extent provided in Section 1-302 [55-1-302 NMSA 1978].
Cross reference.
— Article 9.
"Contract". Section 1-201.
"Contract for sale". Section 2-106.
"Present sale". Section 2-106.
"Sale". Section 2-106.
ANNOTATIONS
Scope of article.
— Court can find nothing in the pertinent Code provisions or comments to indicate that it is not to apply to all sales of goods.
Foster v. Colorado Radio Corp.
, 381 F.2d 222 (10th Cir. 1967).
Sale of crude oil by the producers is a sale of goods, and is thus governed by Article 2 of the Code.
Amoco Pipeline Co. v. Admiral Crude Oil Corp.
, 490 F.2d 114 (10th Cir. 1974).
A business may be sold in which all the assets aside from goodwill would be goods, and nonapplication of the Code to the sale of goods in such a case is contrary to the intention of the drafters.
Foster v. Colorado Radio Corp.
, 381 F.2d 222 (10th Cir. 1967).
Article inapplicable to mixed contract.
— This article was held inapplicable to a contract itemizing several dozen services to be performed by an interior designer in a health care facility despite the additional contemplation of purchasing and reselling of furnishings as goods between the parties, since the primary purpose of the contract, though mixed, was for the provisions of services.
Kirkpatrick v. Introspect Healthcare Corp.
, 1992-NMSC-070, 114 N.M. 706, 845 P.2d 800.
Inapplicable to sale of business.
— A sale involving the transfer of a business as a going concern is not a transaction in goods.
Stewart v. Lucero
, 1996-NMSC-027, 121 N.M. 722, 918 P.2d 1.
Law reviews.
— For comment, "Commercial Law - Uniform Commercial Code - Sale of Goods," see 8 Nat. Resources J. 176 (1968).
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 68A Am. Jur. 2d Secured Transactions §§ 13, 105, 184 et seq.
Validity and mutuality of agreement to buy where there is no express agreement to sell, 60 A.L.R. 215.
Violation of statute as to form of, or terms to be included in, conditional sale contract, as invalidating entire transaction or merely its effect to reserve title in vendor, 144 A.L.R. 1103.
Use of conditional sale contract to secure debt in addition to the purchase price, 148 A.L.R. 346.
Conflict of laws as to conditional sale of chattels, 148 A.L.R. 375, 13 A.L.R.2d 1312.
What amounts to conditional sale, 175 A.L.R. 1366.
Title to unknown valuables secreted in articles sold, 4 A.L.R.2d 318.
Validity, construction, and effect of contract between grower of vegetable or fruit crops, and purchasing processor, packer, or canner, 87 A.L.R.2d 732.
What constitutes a transaction, a contract for sale, or a sale within the scope of UCC Article 2, 4 A.L.R.4th 85.
Applicability of UCC Article 2 to mixed contracts for sale of goods and services, 5 A.L.R.4th 501.
77A C.J.S. Sales § 1 et seq.