Opinion ID: 2020509
Heading Depth: 2
Heading Rank: 3

Heading: Contact Claim Limitations Period

Text: Defendants argue that plaintiff's claim for breach of the dealer agreements was barred under the four-year statute of limitations contained in article 2 of the Uniform Commercial Code (UCC) (810 ILCS 5/2-725 (West 2000)). The trial court determined that the UCC did not apply, implicitly ruling that the 10-year limitations period for written contracts governed plaintiff's contract claim. See 735 ILCS 5/13-206 (West 2000). This ruling, together with the trial court's determination that the continuing violation rule governed plaintiff's statutory claim, resulted in the two claims being essentially co-extensive. Thus, the appellate court found it unnecessary to address defendants' argument that the contract claim was time-barred. The appellate court explained that because the jury found for plaintiff on both claims, and because the trial court ruled that the award on the breach-of-contract claim could be satisfied by a payment of the award on the statutory claim, it was unnecessary to rule on the statute-of-limitations defense on the breach-of-contract claim. 316 Ill.App.3d at 242, 250 Ill.Dec. 469, 738 N.E.2d 938. As discussed in section II, however, we have rejected application of the continuing violation rule to plaintiff's claim under the Act, and have limited plaintiff's recovery on that claim to the four-year period prior to the filing of the complaint on August 8, 1989. If the 10-year statute of limitations governs plaintiff's contract claim, then the statutory claim and the contract claim are no longer co-extensive, i.e., contract damages would be recoverable for several years in addition to those covered by plaintiff's statutory claim, and payment of the award on the statutory claim would not fully satisfy an award on the contract claim. Therefore, unlike the appellate court, we find it necessary to address defendants' argument and resolve whether plaintiff's contract claim was time-barred. We review this legal issue de novo. See Woods, 181 Ill.2d at 516, 230 Ill.Dec. 204, 693 N.E.2d 333. Plaintiff first alleged a breach of contract in its amended complaint filed January 30, 1991. The trial court ruled, however, that the contract claim related back to plaintiff's initial complaint filed August 8, 1989. Defendants have not challenged that ruling in this court. Thus, if the four-year UCC limitations period applies, contract claims arising prior to August 8, 1985, would be time-barred. Plaintiff's contract claim involved four successive dealer agreements, executed in 1980, 1986, 1987, and 1988. It is apparent that claims arising under the 1986, 1987, and 1988 agreements would not be barred by a four-year limitations period, i.e., claims under those three agreements could not have arisen prior to August 8, 1985, because the agreements were not executed and did not become effective until after that date. Only claims arising under the dealer agreement could be barred by a four-year limitations period. Thus, we confine our review to the 1980 agreement. The 1980 agreement contained a choice of law provision stating that California law governs. [3] Generally, choice of law provisions will be honored. Hofeld v. Nationwide Life Insurance Co., 59 Ill.2d 522, 528-29, 322 N.E.2d 454 (1975); see also Hartford v. Burns International Security Services, Inc., 172 Ill.App.3d 184, 187, 122 Ill.Dec. 204, 526 N.E.2d 463 (1988). As to procedural matters, however, the law of the forum controls. Marchlik v. Coronet Insurance Co., 40 Ill.2d 327, 329-30, 239 N.E.2d 799 (1968); see also Cox v. Kaufman, 212 Ill.App.3d 1056, 1062, 156 Ill.Dec. 1031, 571 N.E.2d 1011 (1991). Statutes of limitations are procedural, merely fixing the time in which the remedy for a wrong may be sought, and do not alter substantive rights. Fredman Brothers 109 Ill.2d at 209, 93 Ill.Dec. 360, 486 N.E.2d 893; see also Cox, 212 Ill.App.3d at 1062, 156 Ill.Dec. 1031, 571 N.E.2d 1011. Accordingly, Illinois law governs the timeliness of plaintiff's claim under the 1980 dealer agreement. The 10-year statute of limitations that generally governs claims on written contracts contains an express exception for actions governed by section 2-725 of the UCC. 735 ILCS 5/13-206 (West 2000). Section 2-725 of the UCC provides that [a]n action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued. 810 ILCS 5/2-725(1) (West 2000). A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. 810 ILCS 5/2-725(2) (West 2000). Only contracts which fall within the scope of article 2 of the UCC are subject to the four-year limitations period. Article 2 is limited to transactions in goods. 810 ILCS 5/2-102 (West 2000). Defendants argue that the 1980 dealer agreement was principally for the sale of goods and that the agreement therefore comes within the ambit of article 2. Plaintiff contends, however, that the dealer agreement is a personal services contract and is not governed by article 2. Where, as here, a contract provides both for the sale of goods and for the rendition of services, Illinois courts apply the predominant purpose test in determining whether the contract falls within article 2 of the UCC. See Zielinski v. Miller, 277 Ill.App.3d 735, 741, 214 Ill.Dec. 340, 660 N.E.2d 1289 (1995); Tivoli Enterprises, Inc. v. Brunswick Bowling & Billiards Corp., 269 Ill.App.3d 638, 646, 207 Ill.Dec. 109, 646 N.E.2d 943 (1995); Yorke v. B.F. Goodrich Co., 130 Ill.App.3d 220, 223, 85 Ill.Dec. 606, 474 N.E.2d 20 (1985); Executive Centers of America, Inc. v. Bannon, 62 Ill.App.3d 738, 742, 19 Ill.Dec. 700, 379 N.E.2d 364 (1978); see also Ill. Ann. Stat., ch. 26, § 2-102, Illinois Code Comment, at 45 (Smith-Hurd 1992 Supp.) (Illinois reviewing courts have taken what may be called a `dominant purpose' view). Under this test, if the contract is predominantly for the sale of goods, with services being incidental thereto, the contract will be governed by article 2. Conversely, if the contract is predominantly for services, with the sale of goods being incidental thereto, the contract will not fall within article 2. See Zielinski, 277 Ill.App.3d at 741, 214 Ill.Dec. 340, 660 N.E.2d 1289; Tivoli Enterprises, 269 Ill.App.3d at 646-47, 207 Ill.Dec. 109, 646 N.E.2d 943. Numerous jurisdictions have held that distributor and dealer agreements, including automobile dealer agreements, are predominantly for the sale of goods and are thus governed by the UCC. See Sally Beauty Co. v. Nexxus Products Co., 801 F.2d 1001, 1005-06 (7th Cir. 1986) (collecting cases); Old Country Toyota Corp. v. Toyota Motor Distributors, Inc., 966 F. Supp. 167 (E.D.N.Y. 1997) (holding that Toyota dealer agreement was governed by the UCC); Paulson, Inc. v. Bromar, Inc., 775 F. Supp. 1329, 1333 nn. 1 through 16 (D. Haw. 1991) (collecting cases); Kirby v. Chrysler Corp., 554 F. Supp. 743, 749-50 (D.Md.1982) (collecting cases and holding that direct dealer agreement with Chrysler was governed by UCC). Significantly, in Old Country Toyota, a federal district court analyzed the provisions of a Toyota dealer agreement executed during the 1980s which, if not identical, is strikingly similar to the one at issue here. The federal court concluded that the dealer agreement was predominantly for the sale of goods and was thus governed by article 2. Old Country Toyota, 966 F.Supp. at 170. The federal court noted the prominence of the word sales in the agreement's title, Toyota Dealer Sales and Service Agreement, and stated that the heart of the agreement concerned the Sales of Toyota Products to Dealers (section VI), and Promoting and Selling Toyota Products (section X). Old Country Toyota, 966 F. Supp. at 169. Most of the agreement, according to the federal court, reflected the intent to secure a continuum of sales-first from Toyota to the dealer, then on to the public-and the fact that the dispute concerned Toyota's allocation of vehicles to be purchased by the dealer underscored that intent. Old Country Toyota, 966 F. Supp. at 169. The federal court determined that the unit allocation provision in the agreement contained the core attributes of a requirements contract (see 810 ILCS 5/2-306 (West 2000)), under which Toyota agreed to supply vehicles to the dealer in the quantities and types ordered, subject to available supply. Old Country Toyota, 966 F. Supp. at 169. Finally, the federal court determined that the service and other provisions in the agreement were collateral to the primary purpose of facilitating sales between Toyota and the dealer. The court stated: Other than sales and sales promotions, the Agreement's substantive provisions concern premises maintenance, accounting methods, maintenance of net working capital, service, and display of Toyota marks. The premises maintenance and accounting provisions are housekeeping matters with little bearing on the Court's analysis. The Agreement does not actually address the only substantive matter not related to sales-the maintenance of net working capital-at all; the parties are directed to address that issue in a separate Working Capital Agreement. The trademark provision merely grants Old Country [the dealer] the right to use the Toyota mark, and then only in connection with `selling' or `offering for sale' Toyota products. [Citation.] Though the service provisions are substantial, their overarching purpose is to `protect the interests' [citation] and `secur[e] and maintain[ ] the goodwill' [citation] of the buying public. Again, this is at bottom the language of sales. Old Country Toyota, 966 F. Supp. at 170. We agree with the analysis of the federal court and similarly conclude that the 1980 dealer agreement at issue in this litigation is governed by article 2 of the UCC. Accordingly, the four-year limitations period set forth in section 2-725 applies to plaintiff's contract claim. In an attempt to avoid the effect of a four-year limitations period, plaintiff argues that defendants' wrongful allocations under the 1980 agreement should be considered one breach that did not become actionable until the contract expired in 1986. In effect, plaintiff advocates the application of a continuous breach rule, not unlike the continuing violation rule on which it also relied. The only authority cited by plaintiff is Berg & Associates, Inc. v. Nelsen Steel & Wire Co., 221 Ill.App.3d 526, 532, 162 Ill.Dec. 779, 580 N.E.2d 1198 (1991). Berg, however, stands only for the proposition that construction contracts are typically considered a single endeavor and that the statute of limitations for claims under the contract does not begin to run until the endeavor is complete, rather than on the date the monetary installments are due on the contract. Berg, 221 Ill.App.3d at 532, 162 Ill.Dec. 779, 580. N.E.2d 1198. The instant case does not involve a construction contract. Based on the foregoing, we conclude that any breach of the 1980 agreement occurring outside the four-year UCC limitations period was time-barred, and the trial court erred by permitting evidence of claims outside the four-year period.