Kevin S. Brady Writing Sample

Kutty & Associates 5300 Greenwich Boulevard

Valparaiso, IN 46383

FILE: Great Lakes Landscaping & Nursery, No. GL10-383 RE: Kris Sivorsky; contract dispute with King Construction Co.; whether mixed subcontract is for goods or services under the predominant thrust test TO: Eric Skwiat FROM: Kevin S. Brady DATE: February 20, 2015

STATEMENT OF FACTS

Our client, Kris Sivorsky, is the owner of Great Lakes Nursery & Landscaping, Inc.

(“Great Lakes Nursing”). Ms. Sivorsky graduated from Ball State University in 2008 with a

Bachelor of Arts in Landscape Architecture. Upon graduation, Ms. Sivorsky worked in Chicago

for a landscape architecture firm. Two years later, Ms. Sivorsky left the firm in order to oversee

Great Lakes Nursery, a business located in Valparaiso. Ms. Sivorsky’s late uncle bequeathed

Great Lakes Nursery to her.

Last fall, Lutheran Health Services, Inc. hired King Construction Company (“King

Construction”), a general contractor, to construct a new hospital. Valparaiso city council

approved public funding for the project. King Construction contacted Ms. Sivorsky and asked

her to place a bid for the landscaping portion of the project. Ms. Sivorsky and a King

Construction representative signed the bid pursuant to a “Subcontractor Agreement” dated

November 1, 2014. Ms. Sivorsky attached a specific list of professional services, construction

installation features, construction supplies, design fixtures, and nursery stock to the subcontract

(“Attachment A”).

On November 8, Simone Brothers Group (“Simone Brothers”) called Ms. Sivorsky.

Simone Brothers asked Ms. Sivorsky to complete the design and installation of landscaping for a

new mall. Ms. Sivorsky agreed and signed a contract with Simone Brothers. Later that day, Ms.

Sivorsky phoned Kristin Smith, a project manager for King Construction. Ms. Sivorsky notified

Ms. Smith that she was no longer interested in the hospital project. On November 24, Ms. Smith

informed Ms. Sivorsky that King Construction approved the subcontract. After being reminded

of the November 8 phone conversation, Ms. Smith threatened to sue Ms. Sivorsky and Great

Lakes Nursery. Ms. Sivorsky has asked our firm to determine whether she validly revoked the

subcontractor agreement with King Construction.

QUESTION PRESENTED

Under Indiana law, did Kris Sivorsky validly revoke her offer to King Construction

Company pursuant to a subcontractor agreement when the subcontract was in writing, signed,

open for acceptance, and provided for the sale of goods plus services?

BRIEF ANSWER

Probably yes. In Indiana, a court balances the four factors of the “predominant thrust”

test to determine if the main purpose of a “mixed” contract is for the sale of goods or

performance of services. On Sivorsky’s facts, an Indiana court is likely to rule that the sale of

supplies, fixtures, and stock are incidental to the design and installation of custom landscaping.

Therefore, Indiana common law governs the subcontract between Sivorsky and King

Construction Company. As a result, Sivorsky validly revoked her offer to King Construction

Company.

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DISCUSSION

Kris Sivorsky (“Sivorsky”), owner of Great Lakes Nursery & Landscaping, Inc. (“Great

Lakes Nursery”), agreed to a subcontract with King Construction Company (“King

Construction”) that will likely be governed by Indiana’s common law. In Indiana, a “mixed”

contract is a transaction between parties that involves services and goods. Insul-Mark Midwest v.

Modern Materials, 612 N.E.2d 550, 553-554 (Ind. 1993). If the main purpose of a mixed

contract is at issue, then an Indiana court balances four factors under the predominant thrust test.

Id. at 554-555. When the court determines that the “predominant factor” of the mixed contract is

for the performance of services, the Indiana common law applies. Id. at 554, 556. Alternatively,

the Uniform Commercial Code (“U.C.C.”) controls when the “thrust” of the mixed contract is for

the sale of goods. Id. at 554.

In this case, Sivorsky’s subcontractor agreement with King Construction is for services

and goods. Therefore, whether Sivorsky validly revoked the subcontract depends on what law

governs. The purpose of this memo is to determine the predominant thrust of Sivorsky’s

subcontractor agreement with King Construction and explain why an Indiana court is likely to

state that the balancing test favors Indiana common law rather than the U.C.C.

I. The predominant thrust of the mixed subcontract between Sivorsky and King Construction is likely for the performance of services rather than the sale of goods.

A contract classifies as “mixed” when it involves the rendition of services and sale of

goods. Id. at 553-554. In Insul-Mark, the contract between Kor-It and Modern Materials

accounted for coating material and the application of the coating material to Kor-It’s screws. Id.

at 554. The court stated that the coating material was a good while the application of coating

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was a service. Id. Because of this, the court determined that a mixed contract existed between

Kor-It and Modern Materials. Id.

Sivorsky’s subcontractor agreement with King Construction is similar. Under

“Attachment A” of the subcontract, the agreement required Sivorsky and Great Lakes Nursery to

perform professional services (“management”) plus construction installation. In addition, King

Construction agreed to compensate Sivorsky for construction supplies, design fixtures, and

nursery stock. An Indiana court will conclude that management and construction installation

constitute as services while King Construction’s purchase of supplies, fixtures, and stock indicate

a sale of goods. Because of this, the subcontractor agreement between Sivorsky and King

Construction is mixed.

Next, an Indiana court applies the predominant thrust test when a dispute arises as to

whether the common law or U.C.C. governs a mixed contract. Id. Under the predominant thrust

test, the court balances the following four factors to determine whether the main purpose of the

mixed contract is for the rendition of services or sale of goods: (1) final product bargained for;

(2) primary reason for entering into the contract; (3) language used to describe the surrounding

circumstances and relationship between the parties; and (4) costs. Id. If the test concludes that a

contract is primarily for services, then common law applies. On the other hand, the U.C.C.

governs if the sale of goods is the main purpose behind the contract. Id. Because the first factor

does not favor Sivorsky, this memo will discuss it first.

A. The final product bargained for between Sivorsky and King Construction is evidence of a subcontract for goods.

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Under the first factor, the court considers the final product bargained for between the

parties to the contract. Id. at 555. A final product consisting of the assembly and installation of

tangible products capable of being removed from real property is evidence of a contract

predominantly for the sale of goods. Ogden Martin Systems of Indianapolis, Inc. v. Whiting

Corp., 179 F.3d 523, 525, 530-531 (7th Cir. 1999). In Ogden, Ogden Martin and Whiting

entered into a mixed contract in which Whiting constructed, delivered, and assembled two

overhead cranes for Ogden Martin’s plant. Id. at 525. Ogden Martin discovered defects in the

cranes after an accident occurred. Id. During its civil action, Ogden Martin argued that the

contract with Whiting was predominantly for the performance of services. Id. at 525-526. The

court held that the purpose of the contract between Ogden Martin and Whiting was for the sale of

goods. Id. at 530. The court reasoned that the final product bargained for by Ogden Martin were

cranes. Id. In addition, the court disagreed with Ogden Martin’s argument that the cranes were

incapable of being removed from its plant. Id. at 525. The Court responded to such a

suggestion: “an object such as a crane is capable of being delivered and yet incapable of being

moved approaches an oxymoron.” Id. at 529.

Here, Sivorsky’s role aligns with Whiting. Sivorsky offered to install landscaping for the

new hospital owned by Lutheran Health Services, Inc. (“Lutheran Health”). The landscaping

consisted of unique design features such as park benches, stones and a statute. In addition,

Sivorsky was to plant flowers, shrubs, trees, and grass seed. Each of the aforementioned items

were tangible, capable of being delivered and removed from the new hospital. Therefore, the

court will likely conclude that viewed together as a whole, the supplies, fixtures, and stock

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comprised the final product bargained for and, thus, is evidence of a subcontract predominantly

for the sale of goods.

B. Sivorsky agreed to design and install landscaping unique to Lutheran Health’s new hospital.

Secondly, an Indiana court examines the primary reason for the contract. Insul-Mark,

612 N.E.2d at 555. If a party agrees to customize a design for a single, private consumer, then

the main purpose of the contract is for the performance of services. Conwell v. Gray Loon

Outdoor Marketing, 906 N.E.2d 805, 812 (Ind. 2009). In Conwell, Piece of America (“POA”)

hired Gray Loon Marketing (“Gray Loon”) to customize its business website. Id. at 808. Soon

after Gray Loon completed POA’s design, POA requested changes. Id. Even though Gray Loon

amended POA’s website, POA disapproved of its implementation and failed to provide Gray

Loon proper payment for the completed work. Id. The court held that the arrangement between

POA and Gray Loon was governed by Indiana common law. Id. at 812. Specifically, the court

reasoned that Gray Loon created a website tailored for POA’s business. Id. The court further

reasoned that Gray Loon indeed used a computer hard drive, a good, but information gathered to

implement POA’s website does not necessarily qualify as goods. Id.

Similarly, Sivorsky submitted a landscaping design for Lutheran Health’s approval.

Furthermore, like POA, King Construction initiated contact with Sivorsky in order to hire a

subcontractor for specific landscaping design and installation. A court will probably conclude

that King Construction, on behalf of a private company, sought a subcontractor to customize a

landscaping design.

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However, Sivorsky will likely have to defeat the argument from King Construction that

POA used private money. Here, Valparaiso city council approved Lutheran Health for public

funding. In addition, unlike the agreement in Conwell, the subcontract between Sivorsky and

King Construction did not require a continual business relationship.

Despite such arguments, Sivorsky’s expertise is landscaping design, which is presumably

why King Construction contacted Sivorsky. Also, the funding source for such work does not

alter the agreement between Sivorsky and King Construction. Therefore, an Indiana court will

likely conclude that Sivorsky and King Construction agreed to a custom landscaping design, a

service pursuant to the second factor of the predominant thrust test.

C. The language used by Sivorsky and King Construction describes a contractual relationship for services.

Under the third factor, an Indiana court reviews the language of the contract, specifically

noting the terms used to describe the performance and relationship of the parties. Insul-Mark,

612 N.E.2d at 555. Plain language used in mixed contracts clearly identifies whether the

predominant purpose of the contract is for the performance of services or sale of goods. Audio

Visual Artistry v. Tanzer, 403 S.W.3d 789, 800 (Tenn. Ct. App. 2012). In Audio Visual Artistry,

Tanzer, a homeowner, contracted with Audio Visual Artistry, a “residential entertainment and

communications firm specializing in custom design projects.” Id. at 791. Tanzer purchased the

design and installation of a home theatre system. Id. at 792. However, Tanzer’s home theatre

system experienced significant problems. Id. at 793. As a result, Tanzer fired Audio Visual

Artistry. Id. The Tennessee Court of Appeals held that the contract between Tanzer and Audio

Visual Artistry was for the sale of goods. Id. at 804. The court noted specific terms used by the

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parties as evidence of a mixed contract predominantly for the sale of goods: purchaser,

equipment, delivery, product, goods, and hardware. Id. at 800.

Similarly, terms written in Sivorsky’s subcontract with King Construction clarifies the

main purpose of the transaction. Sivorsky and King Construction agreed to use the following

words and phrases in the subcontract: “installation,” “completion of the work,” “performance,”

“properly licensed to perform all work,” and “our services.” In addition, the subcontract noted

the specific job to be completed: landscaping. Plus, the parties recognized insurance

requirements, worker’s compensation, and OSHA safety standards. Because of such written

evidence, an Indiana court will most likely conclude that the language used in the mixed

subcontract by Sivorsky and King Construction favored one predominantly for services.

King Construction will probably reference the specific goods in “Attachment A” of the

subcontract and, therefore, argue that the language factor does not balance in favor of services.

However, this argument is weak because the subcontract does not mention the actual purchase of

construction supplies, design fixtures, or nursery stock. The subcontract required Sivorsky to

provide such materials and equipment for the “completion of the work.” Therefore, the phrases

and words used by Sivorsky and King Construction favored a subcontract predominantly for

services.

D. Costs do not affect the predominant thrust analysis of Sivorsky’s subcontract with King Construction.

Lastly, the final factor the court evaluates is the amount of costs for both goods and

services. Insul-Mark, 612 N.E.2d at 555. If the cost of goods is more than services, then it is

likely the sale of goods predominates the mixed contract. Id. For example, in Insul-Mark,

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Modern Materials charged Kor-It by the coating material application instead of the coating

material itself. Id. As a result, the Court ruled that pricing showed a transaction predominantly

for services. Id.

Sivorsky’s situation is unique because the cost factor is neutral. The design and

installation comprised half of the subcontract amount while the cost of supplies and nursery

accounted for the remaining portion. Therefore, because the costs of the subcontract between

Sivorsky and King Construction reflect equal amounts for goods and services, a court will

conclude that the costs factor does not alter the predominant thrust test.

Overall, by balancing all four factors of the predominant thrust test, an Indiana court will

likely conclude that the main purpose of the mixed “Subcontractor Agreement” between

Sivorsky and King Construction was for the performance of services. As a result of this

determination, the court will rule that the subcontract was an option contract governed by

Indiana’s common law.

II. King Construction will probably argue that the predominant thrust of the subcontractor agreement with Sivorsky is for the sale of goods.

In Indiana, and unless context indicates otherwise, the sales chapter of the U.C.C.

“applies to transactions in goods” but not secured transactions. Ind. Code § 26-1-2-102 (2010).

For example, in Ogden, the court concluded that “the delivery and installation of two overhead

cranes constituted a transaction in goods governed by Indiana’s U.C.C.” Ogden, 179 F.3d at 531.

Here, King Construction may apply similar logic. It will likely argue that the main focus of the

subcontract was the purchased nursery stock and design fixtures for the new hospital landscaping

project. King Construction will further add that any service, such as design or installation, was

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incidental. If King Construction’s arguments are favorable, an Indiana court will hold, based on

the predominant thrust test, that the U.C.C. governs the mixed subcontract, an option contract.

An option contract in a goods transaction is known as a “firm offer” under the U.C.C.

Ind. Code § 26-1-2-205. To establish a firm offer, one must show (1) an offer by a merchant; (2)

to buy or sell goods; (3) in a signed writing; (4) that provides assurance that the offer will be held

open for a reasonable time if not otherwise stated and is irrevocable for lack of consideration. Id.

Thus, if King Construction establishes these four elements, an Indiana court will probably rule

that the subcontract is a firm offer governed by the U.C.C.

A merchant is a person “who deals in goods of the kind” or otherwise by his occupation

is known as having knowledge or skill peculiar to the practices or goods involved in the

transaction. § 26-1-2-104(1). In Ogden, Whiting possessed the knowledge to assemble two

cranes for Ogden Martin’s plant. Ogden, 179 F.3d at 529. Also, Whiting was identified as the

“seller” in the contract. Id. at 530. Likewise, Sivorsky sells nursery products used in the design

and installation of landscaping. Because of this, Sivorsky is a merchant.

“Goods” are all things movable at the time of identification to the contract for sale. Ind.

Code § 26-1-2-105(1). Ogden exemplifies this definition because the court agreed with the

district court that the two overhead cranes sold to Ogden Martin were identifiable and moveable

at the time of identification to the contract for sale. Ogden, 179 F.3d at 529. Here, Sivorsky

identified the following categories in “Attachment A” of the subcontractor agreement:

construction supplies, design fixtures, and nursery stock. Each item listed under the

aforementioned categories were capable of being moved at the time Sivorsky and King

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Construction signed the subcontract. Therefore, a court will conclude that the subcontract

included the sale of goods.

Next, under the U.C.C., a firm offer must be in a signed writing. Ind. Code § 26-1-2-205.

Here, Sivorsky, a merchant, signed the subcontractor agreement, a written document, on

November 1, 2014. Therefore, the third element is satisfied.

Finally, a firm offer must give assurance that it will remain open and not be revocable for

a reasonable time up to three months. Id. Here, the subcontractor agreement states that Sivorsky

promised to hold the “offer open and irrevocable for thirty (30) days.” Due to this language, a

court is likely to conclude that under the U.C.C., Sivorsky was unable to revoke the subcontract,

a firm offer, until December 1, 2014.

Therefore, by applying the U.C.C., a court will conclude that the subcontractor agreement

signed by Sivorsky was an irrevocable firm offer.

CONCLUSION & RECOMMENDATIONS

In summary, Ms. Sivorsky likely revoked the subcontract with King Construction

because the predominant thrust is for the performance of services. An Indiana court will

probably rule that the sale of supplies, fixtures, and stock are incidental to the design and

installation of custom landscaping. Therefore, Indiana common law governs Ms. Sivorsky’s

subcontract, an option contract capable of being revoked unless supported by consideration.

However, no consideration exists; thus, Ms. Sivorsky revoked the subcontract under Indiana

common law.

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I recommend conveying these findings to Ms. Sivorsky and consulting with her on how

to proceed in this matter. In my opinion, the best outcome is resolving this dispute prior to any

legal action initiated by King Construction against Ms. Sivorsky.

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