Berry v. Lucas
210 Or. App. 334, 150 P.3d 424, 61 U.C.C. Rep. Serv. 2d (West) 591 (2006)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the Uniform Commercial Code (UCC), when a merchant seller agrees to deliver and install goods, the risk of loss remains with the seller until they tender conforming goods ready for the buyer to take delivery, unless the contract explicitly and unambiguously shifts this risk to the buyer.
Facts:
- In September 2002, plaintiffs entered into a contract with By The Sea Homes, Inc. (defendant), a retail seller, to purchase a Redman manufactured home for $69,040.
- The contract stipulated that defendant would deliver and set up the manufactured home on plaintiffs' lot in Bandon, Oregon, with the understanding that plaintiffs would be receiving a home suitable for occupancy.
- Plaintiffs paid one-half of the purchase price to defendant in September 2002 and the remaining balance in early November 2002.
- On November 15, 2002, the manufactured home was delivered in two sections to plaintiffs' lot and placed on a concrete slab constructed by plaintiffs' contractor.
- About a month later, before the home was completed and ready for occupancy (e.g., carpet not laid, railings, sheetrock, and exterior siding not installed), it suffered severe storm damage.
- Defendant was contractually responsible for completing the remaining installation work, including the carpet, railings, sheetrock, and exterior siding.
- Neither plaintiffs nor defendant had insurance on the manufactured home as of the date of the storm damage.
- Plaintiffs subsequently paid a contractor $6,535 to repair the storm damage to the home.
Procedural Posture:
- Plaintiffs filed an action against By The Sea Homes, Inc. and its officer-shareholders (Carolyn and Jerry Lucas) in a trial court, alleging violations of the Unlawful Trade Practices Act (UTPA) and a contract claim.
- At the conclusion of a bench trial, the trial court found in favor of defendants on the UTPA claim.
- The trial court dismissed the claims against the individual defendants, Carolyn and Jerry Lucas.
- The trial court entered a money judgment in favor of plaintiffs against By The Sea Homes, Inc. on the contract claim, awarding $6,535 in damages.
- By The Sea Homes, Inc. (defendant/appellant) appealed the trial court's judgment regarding the contract claim.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the risk of loss for a manufactured home that requires delivery and setup by a merchant seller pass to the buyer before the home is fully installed and ready for occupancy, or does it remain with the seller until "conforming goods" are tendered?
Opinions:
Majority - Cramer, J. pro tempore
No, the risk of loss for a manufactured home delivered and requiring setup by a merchant seller does not pass to the buyer until the home is fully installed and "conforming goods" are tendered, meaning it is ready for the buyer to take delivery. The court first examined Paragraph 12 of the sales contract, which defendant argued shifted the risk of loss to plaintiffs. This paragraph, titled "INSURANCE," stated that the buyer was not covered by insurance until accepted by an insurance company and agreed to hold the dealer harmless. The court found this provision ambiguous, as its text focused on insurance coverage rather than explicitly addressing and shifting the risk of loss. Applying established maxims of contract construction—specifically that ambiguous language is construed against the drafter (defendant) and that an intent to reallocate the risk of loss contrary to the UCC must be expressed clearly and explicitly—the court concluded that Paragraph 12 did not vary the default UCC provisions for risk of loss. Turning to the UCC, the court determined that ORS 72.5090(1)(b) governs this transaction, as it required the seller (defendant) to deliver and set up the manufactured home at a particular destination. Under this provision, the risk of loss passes to the buyer only when the goods are "duly so tendered as to enable the buyer to take delivery." Further, ORS 72.5030(1) states that tender of delivery requires the seller to put and hold "conforming goods" at the buyer's disposition. "Conforming goods" are defined by ORS 72.1060(2) as goods in accordance with the obligations under the contract. Since plaintiffs contracted for a complete, habitable manufactured home, and at the time of the storm damage, the home was incomplete with significant setup work remaining, defendant had not tendered "conforming goods." Therefore, the risk of loss remained with defendant at the time the storm damaged the manufactured home. The court cited analogous cases from other jurisdictions, such as Moses v. Newman and Southland Mobile Home Corporation v. Chyrchel, which similarly held that the risk of loss remains with the seller until installation and setup obligations are complete and conforming goods are delivered.
Analysis:
This case significantly clarifies the moment of risk of loss transfer under the UCC for sales contracts that include both delivery and installation by a merchant seller. It reinforces that physical delivery alone is insufficient; rather, the seller must have tendered "conforming goods"—meaning the goods are fully installed and ready for the buyer's intended use—for the risk to shift. The decision also emphasizes the high bar for contract drafters seeking to deviate from the UCC's default risk allocation, requiring explicit and unambiguous language to effect such a change. This ruling provides important guidance for parties involved in similar integrated sales and service agreements, promoting consumer protection by assigning liability to the party best positioned to ensure the goods are complete and undamaged until fully performed upon.
