Quick Summary
Princess Cruises (plaintiff) hired General Electric (defendant) to perform inspection and repairs on their ship. GE’s recommended procedure damaged the ship’s rotor, leading to delays and canceled cruises.
Princess Cruises filed a lawsuit against GE, alleging breach of contract, breach of warranty, and negligence. The jury found GE liable for breach of contract and awarded Princess Cruises $4.5 million in damages.
GE appealed, arguing that incidental and consequential damages should be removed. The court agreed and held that the contract’s primary purpose was the provision of services, not the sale of goods, and therefore common law is applied. The court reversed the decision and remanded for modification of the judgment consistent with common law principles.
Facts of the Case
Princess Cruises (plaintiff) scheduled its ship “S.S. Sky Princess” for routine inspection and repairs in December 1994 and requested that General Electric (defendant), the original manufacturer of the ship’s main turbines, perform the services and provide necessary parts.
Princess issued a Purchase Order with a proposed price of $260,000. G.E. submitted a Fixed Price Quotation offering a more detailed description of the work and a lower price of $201,888. Later, GE sent a Final Price Quotation with an offering price of $231,925, which Princess accepted over the phone.
During the inspection and repair process, G.E. recommended taking the ship’s rotor ashore for cleaning and balancing.
However, during cleaning, good metal was removed from the rotor, resulting in an imbalance that caused delays and forced Princess to cancel two cruises. Princess paid G.E. the full contract amount of $231,925, and later filed a lawsuit against G.E.
Procedural History
- On April 22nd, 1996, Princess filed a complaint against GE alleging breach of contract, breach of express warranty, breach of implied maritime warranty, and negligence.
- The district court ruled in favor of G.E. on the negligence claim.
- The case went to trial.
- During the trial, Princess presented evidence before G.E.’s motion for judgment, which the court denied.
- After G.E. presented its evidence, the court again denied G.E.’s motion for judgment.
- The jury found G.E. liable for breach of contract and awarded Princess $4.5 million in damages.
- G.E. requested the court to nullify the incidental and consequential damages in a renewed motion.
- The district court held oral arguments on G.E.’s renewed motion.
- The court denied G.E.’s motion and explained its decision in an opinion.
- G.E. appealed the district court’s ruling to the Fourth Circuit Court of Appeals.
I.R.A.C. Format
Issue
Whether the jury’s award of incidental and consequential damages was consistent with the terms and conditions of the contract between General Electric and Princess Cruises, given that the contract was primarily for services.
Rule of Law
When determining whether the U.C.C. or common law applies, the court must first ascertain the predominant purpose of the contract. If the contract primarily involves services rather than the sale of goods, the common law applies.
Reasoning and Analysis
Upon reviewing the contract and the parties’ communications, it is evident that the contract’s primary purpose was the provision of services rather than the sale of goods.
Princess’s purchase order and GE’s final price quotation focused on providing and securing services through GE’s service engineering department. Any goods supplied by GE were incidental to the contract’s main purpose.
Furthermore, Princess agreed to the counter offer of GE. This means that G.E. offer terms now govern who is responsible and what compensation is due.
Therefore, Common Law principles should be applied instead of the U.C.C.
Conclusion
The district court erred in applying U.C.C. principles to a maritime contract predominantly for services. The appellate court reversed the decision and remanded for modification of the judgment consistent with the court’s reasoning.
Key Takeaways
- The U.C.C. does not automatically apply to mixed contracts for goods and services in the maritime context.
- Contracts primarily involving services rather than goods are interpreted using common law principles.
- Incidental and consequential damages may not be awarded in contracts where the predominant purpose is providing services.
Relevant FAQs of this case
How is the primary purpose of a contract determined, and what legal principles apply based on this determination?
The purpose of a contract is ascertained by focusing on the main intent of the parties involved. Common law principles are typically applied if a contract primarily involves services rather than goods.
What are the practical implications of opting for the U.C.C. or common law in contract disputes?
The choice between the U.C.C. and common law can significantly impact how a contract is interpreted and enforced. Depending on whether the contract mainly involves goods or services, the application of U.C.C. or common law principles can affect liability, remedies, and damages in contract disputes.
References
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- [justia] Princess Cruises, Incorporated, Plaintiff-appellee, v. General Electric Company, Defendant & Third Partyplaintiff-appellant, v. Norfolk Shipbuilding & Drydock Corporation, Third Party Defendant, 143 F.3d 828 (4th Cir. 1998)
- [google.scholar] PRINCESS CRUISES, INCORPORATED, Plaintiff-Appellee, v. GENERAL ELECTRIC COMPANY, Defendant & Third Party Plaintiff-Appellant, v. NORFOLK SHIPBUILDING & DRYDOCK CORPORATION, Third Party Defendant.