Frix v. Integrity Medical Systems, Inc.
ORDER GRANTING PLAINTIFFS 28 MOTION FOR PARTIAL SUMMARY JUDGMENT. Signed by Chief Judge S. Thomas Anderson on 9/20/17. (mbm)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
CAREY W. FRIX, M.D.,
ORDER GRANTING PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT
Like many others before it, this case arises from a soured business transaction. Plaintiff
Carey W. Frix, M.D., a Tennessee physician, moves the Court for entry of summary judgment
against Defendant Integrity Medical Systems, Inc., a Florida-based dealer of medical imaging
equipment, on the sole issue of liability for breach of contract. Plaintiff’s Motion presents the
Court with a number of issues that range from questions of conflicts of law to those of contracts.
And all of these issues fundamentally lead toward answering a single question: do the terms of
the Purchase Agreement control the contract at the center of the parties’ dispute? Plaintiff,
having neither seen nor signed the Purchase Agreement, appeals to common sense and argues
that they do not. But Defendant comes to the Court bearing the thicket that is the Uniform
Commercial Code and asks the Court to wade into the tangled brambles of the Code’s provisions
that favor contract formation over clarity. To resolve this case, the Court must so wade.
For the reasons set forth below, Plaintiff’s Motion for Partial Summary Judgment is
Plaintiff, as the owner and operator of several medical clinics throughout west Tennessee,
wanted to expand the services at his clinics to include mammography. In order to do so, Plaintiff
specifically sought to place a 64-slice CT scanner, then located at his Henderson clinic, inside a
mobile trailer with the new mammography equipment. Plaintiff owned the mobile trailer, but it
was currently occupied by a 4-slice CT scanner. Plaintiff sought to solve all of these issues at
once and solicited bids from three medical equipment companies (1) to uninstall and remove the
four-slice CT scanner from his trailer, (2) to transport and install the 64-slice CT scanner inside
that same trailer, and (3) for new mammography equipment that would also be installed in the
trailer. Defendant ultimately submitted the lowest bid to Plaintiff. Though the parties disagree
on the legal results of what occurred next, they do not dispute that informal discussions took
place. Nor do they dispute that the discussions eventually resulted in a contract between the
parties (the “Contract”). Plaintiff alleges he simply accepted Defendant’s bid and e-mailed
David Denholtz, owner of Defendant, to confirm the terms of the deal:
To confirm –
65k for [the mammography equipment], installed
17.5k to install [the 64-slice CT scanner]
25k trade in on [the four-slice CT scanner]
End result 57.5 plus [the four-slice CT scanner] to you, [the 64-slice CT scanner]
and [the mammography equipment] installed in my trailer[.]
Is that correct? Do you have a timeframe to complete?
The following facts are not disputed by the parties unless otherwise noted. See
Statement of Undisputed Material Facts in Supp. of Pl.’s Motion for Partial Summ. J., Mar. 15,
2017, ECF No. 28-3 [hereinafter “Pl.’s Statement of Facts”]; Def. Integrity Medical Systems,
Inc.’s Resp. to Pl.’s Statement of Undisputed Material Facts and Statement of Additional Facts in
Opp’n to Pl.’s Motion for Summ. J., Aug. 4, 2017, ECF No. 49 [hereinafter “Def’s Statement of
Pl.’s Statement of Facts, ¶ 12 (quoting Exhibit 1 – Decl. of Carey W. Frix, M.D., Ex. A, Mar. 15,
2017, ECF No. 28-4 [hereinafter “Frix Decl.”]). To which Denholtz replied: “Yes, correct.” Id.
¶ 13 (quoting Frix Decl., Ex. B). While Defendant admits the content of these e-mails, it alleges
that Plaintiff accepted the terms of a Purchase Agreement that Defendant faxed to Plaintiff
shortly after their e-mail correspondence (the “Purchase Agreement”). Def.’s Statement of
Facts, ¶¶ 12–13 (citing Decl. of David Denholtz, Ex. C, Aug. 4, 2017, ECF No. 49-1 [hereinafter
“Denholtz Decl.”]; Decl. of Rhonda Johnson, ¶¶ 5–10, Aug. 4, 2017, ECF No. 49-2 [hereinafter
“Johnson Decl.”]). Defendant further denies that any meeting of the minds between the parties
occurred regarding the terms set forth in the e-mails. Id.
Plaintiff sent Defendant a $14,375 deposit on May 17, 2016. A week later, Plaintiff sent
Defendant an additional payment of $37,375. The payments totaled up to $51,750. A number of
details, such as who knew what and when regarding an issue of cable length and what happened
with a potential replacement engineer after the original engineer went back to South Carolina,
are contested by the parties. See Def.’s Statement of Facts, ¶¶ 20–33. While the original
engineer eventually returned and concluded the installation, the parties dispute whether the
installation was successful. Id. ¶¶ 37–38. They further dispute the condition of the 4-slice CT
scanner that was removed and taken by Defendant for credited value under the terms of the
Id. ¶¶ 39–40.
Defendant canceled the project by e-mail in June 2016.
cancelation still involved finishing the installation of the 64-slice CT scanner as best as
Defendant could and refunding any remaining money to Plaintiff. Although the parties agree
that no money was refunded to Plaintiff, Defendant claims that this is because the funds paid by
Plaintiff did not cover the work performed and the parts required for that work. See id. ¶ 44
(citing Denholtz Decl., ¶ 15; Decl. of Ralph “Scooter” Childs, ¶ 35, Aug. 4, 2017, ECF No. 49-3
[hereinafter “Childs Decl.”]). In response to Defendant’s cancellation, Plaintiff’s counsel sent
Defendant a demand letter of disputed admissibility. Pl.’s Statement of Additional Undisputed
Material Facts, ¶ 4, Aug. 25, 2017, ECF No. 52-2. The letter stated as follows:
Please be advised that I represent Dr. Carey Frix in Henderson, Tennessee. You
have informed Dr. Frix that you do not intend to complete a portion of the
contract that calls for exchange of a [4-slice CT scanner] for a mammogram
machine. You have the claim that the [4-slice CT scanner] does not live up to the
specifications in the contract. However, your own installer inspected the [4-slice
CT scanner] and verified that the machine was in good working order and met the
specifications of the contract.
However, it appears that you and Dr. Frix both desire to end this contractual
relationship as soon as possible. Therefore Dr. Frix agrees to your offer to amend
the contract. He will arrange for shipping of his machine. However you will be
responsible for the appropriate loading of the [4-slice CT scanner] and preparing
it for long haul transport. Since your employee thoroughly inspected the machine,
we expect to receive it back in the same condition. Since you refuse to ship the
machine back to Dr. Frix, we expect the sum of $ 32,370.00 to be delivered
immediately to Dr. Frix via wire transfer of funds.
Denholtz Decl., Ex. C. Defendant sent the Purchase Agreement to Plaintiff, but Plaintiff did not
see or sign it. See Def.’s Statement of Facts, ¶ 45.
STANDARD OF LAW
Summary judgment is proper where the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law. Fed. R. Civ. P. 56. When deciding a motion for summary judgment, the Court
must review all the evidence and draw all reasonable inferences in favor of the nonmovant.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In reviewing a
motion for summary judgment, the Court views the evidence in the light most favorable to the
nonmoving party, and it “may not make credibility determinations or weigh the evidence.”
Laster v. City of Kalamazoo, 746 F.3d 714, 726 (6th Cir. 2014). When the motion is supported
by documentary proof such as depositions and affidavits, the nonmoving party may not rest on
his pleadings but, rather, must present some “specific facts showing that there is a genuine issue
for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Eastham v. Chesapeake
Appalachia, L.L.C., 754 F.3d 356, 360 (6th Cir. 2014). These facts must be more than a scintilla
of evidence and must meet the standard of whether a reasonable juror could find by a
preponderance of the evidence that the nonmoving party is entitled to a verdict in his favor.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The Court must enter summary
judgment “against a party who fails to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that party will bear the burden of proof at
trial.” Celotex Corp, 477 U.S. at 322.
In the instant Motion, Plaintiff seeks partial summary judgment on the single issue of
Defendant’s liability for breach of contract. Pl.’s Motion for Partial Summ. J., Mar. 15, 2017,
ECF No. 28. The amount of damages from Plaintiff’s breach of contract claim and Plaintiff’s
claim under the Tennessee Consumer Protection Act are not issues currently before the Court.
See Mem. in Supp. of Pl’s Motion for Partial Summ. J., at 7, Mar. 15, 2017, ECF No. 28-1
[hereinafter “Pl.’s Mem.”]. Plaintiff asserts that Defendant indisputably breached the Contract as
agreed to in their e-mail correspondence. The parties do not dispute the existence of the
Contract. Nor do they dispute that Defendant refused to perform. Defendant, however, claims
Plaintiff breached the terms of the Purchase Agreement, which governed the Contract in its view.
Def. Integrity Medical Systems, Inc.’s Mem. of Law in Opp’n to Pl.’s Motion for Summ. J., at
17–18, Aug. 4, 2017, ECF No. 49-4 [hereinafter “Def.’s Resp.”].
In Defendant’s view,
Plaintiff’s alleged breach excuses Defendant’s refusal to perform. Id. at 19–20. While this is
generally true as a matter of contract law, all of Defendant’s arguments to this point invoke the
Purchase Agreement. Thus, the main issue for the Court to resolve is whether the Purchase
Agreement governs the Contract. To put it simply for the purposes of this Motion: if the
Purchase Agreement controls, Defendant wins; if it does not, Plaintiff wins.
Disposition of Plaintiff’s Motion, however, requires resolution of several other issues,
some preliminary and others alternative. First, the parties raise the issue of what law governs
this dispute. Second, the Court must decide the applicability of the Uniform Commercial Code.
Then, the Court will reach the elements of Plaintiff’s breach of contract claim, addressing a
number of alternative arguments along the way.
It is in determining whether Defendant
breached the Contract where this case becomes bogged down. For the inquiry into whether the
Purchase Agreement controls the Contract runs straight into section 2-207, a provision perhaps
best likened to “an amphibious tank that was originally designed to fight in the swamps but was
sent to fight in the desert.” James J. White & Robert S. Summers, Uniform Commercial Code §
2-3 (6th ed. 2010). For the reasons articulated below, the Court finds as follows: (1) Tennessee
law governs this action; (2) the Contract is within the scope of Article 2 of the Uniform
Commercial Code; (3) the Purchase Agreement is not a part of the Contract; (4) Defendant
breached the Contract; and (5) Plaintiff suffered injury as the result of Defendant’s breach.
Accordingly, Plaintiff has established his breach of contract claim based upon the undisputed
facts of this case and is entitled to a judgment as a matter of law on that issue.
Whether Tennessee Law or Florida Law Applies
A federal court exercising diversity jurisdiction must apply the choice-of-law rules of the
state in which it sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). And it
must apply the law it believes the highest court of such state would apply. See McClusky v.
Century Bank, FSB, 598 F. App’x 383, 386 (6th Cir. 2015) (quoting Lutz v. Chesapeake
Appalachia, L.L.C., 717 F.3d 459, 464 (6th Cir. 2013)); Mahne v. Ford Motor Co., 900 F.2d 83,
85–86 (6th Cir. 1990). “Absent a contractual choice of law provision, Tennessee courts apply
the lex loci rule to contract causes of action.” In re Estate of Davis, 184 S.W.3d 231, 234 (Tenn.
Ct. App. 2004) (citing Solomon v. FloWarr Mgmt., 777 S.W.2d 701, 704–05 (Tenn. Ct. App.
1989)); see also Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465, 467 (Tenn. 1973)
(citation omitted) (“Tennessee conflict of laws rule [states that] . . . liability . . . under the
[contract] . . . was to be governed by the lex loci contractus . . . .”). The Tennessee Supreme
Court thought the rule to be well stated by the Sixth Circuit:
The Tennessee conflict of laws rule provides that rights and obligations under a
contract are governed by the law of that state with the view to which it is made
and that the intentions of the parties in this respect to be gathered from the terms
of the instruments and all of the attending circumstances control. . . . “[A]
contract is presumed to be made with reference to the law of the place where it
was entered into unless it appears it was entered into in good faith with reference
to the law of some other state.”
Ohio Cas. Ins. Co., 493 S.W.2d at 466–67 (quoting First Am. Nat’l Bank v. Automobile Ins. Co.,
252 F.2d 62, 64 (6th Cir. 1958)).
With the parties evidently corresponding across state
boundaries, it is not entirely clear to the Court in which state the Contract was entered into. But
an older line of cases from the Tennessee Supreme Court provides a helpful rule in this instance:
“If the contract is made in one place, and it is agreed to be performed in another place, the law of
the place of performance, instead of the lex loci contractus, will govern the contract.” Edgington
v. Edgington, 162 S.W.2d 1082, 1086 (Tenn. 1942) (quoting Hubble v. Morristown Land &
Improvement Co., 32 S.W. 965, 966 (Tenn. 1895)). Though the Tennessee Supreme Court has
not revisited the case recently, Edgington has been cited approvingly by both the Tennessee
Court of Appeals and U.S. District Courts in the intervening decades. See, e.g., Whittaker v.
Whittaker, 2009 U.S. Dist. LEXIS 43640, at *9 (E.D. Tenn. May 21, 2009); NGK Metals Corp v.
Nat’l Union Fire Ins. Co., 2005 U.S. Dist. LEXIS 40603, at *19–20 (E.D. Tenn. Apr. 29, 2005);
Blane v. American Investors Corp., 934 F. Supp. 903, 908 (M.D. Tenn. 1996); Solomon, 777
S.W.2d at 705 n.5. Because the Contract was for the sale of 64-slice CT scanner, mammography
equipment, and their installation in Tennessee, as well as the removal of a four-slice CT scanner
from a trailer in Tennessee, Tennessee is the place of performance. The Contract was either
made in Tennessee or Florida, and the Contract was to be performed on in Tennessee. It follows
that the Contract should be governed by Tennessee law either because it was made in Tennessee
or because it was made in Florida but to be performed on in Tennessee. Thus, the Court will
proceed as if Tennessee law governs the Contract—absent a valid choice-of-law provision.2
Applicability of Article 2 of the Uniform Commercial Code
Article 2 of the Uniform Commercial Code (the “UCC”) “applies to transactions in
goods.” Tenn. Code Ann. § 47-2-102. “’Goods’ means all things . . . which are movable at the
time of identification to the contract for sale other than the money in which the price is to be
paid, investment securities[,] . . . and things in action.”
Id. § 47-2-105(1).
Paragraph 13 of the Purchase Agreement contains a choice-of-law provision invoking
Florida law. Johnson Decl., Ex. C (emphasis added). Plaintiff argues that this provision does
not apply to the Contract because the Purchase Agreement is not part of the Contract. Pl.’s
Mem., at 7. Defendant asserts that the Purchase Agreement is part of the Contract and, therefore,
Florida law applies. See Def’s Resp., at 12.
appl[y] to transactions in goods but do not apply to construction contracts or
contracts for the rendition of services. . . . In many cases, a contract or transaction
may involve both the transaction of a sale and the rendition of services, presenting
a “mixed” or hybrid transaction or contract. To determine whether such “mixed”
or “hybrid” contracts are governed by Article 2, a court must examine the whole
transaction and look to the essence or main objective of the parties' agreement or
the primary or overall purpose of the transaction.
Audio Visual Artistry v. Tanzer, 403 S.W.3d 789, 796 (Tenn. Ct. App. 2012) (quoting 67 Am.
Jur. 2d Sales § 37). Under Tennessee law, courts are to apply the “predominant factor” or
“predominant purpose” test in resolving whether a contract is for goods or services. Hudson v.
Town & Country True Value Hardware, Inc., 666 S.W.2d 51, 53–54 (Tenn. 1984) (adopting the
predominant purpose test). The widely cited decision of the Eighth Circuit in Bonebrake v. Cox
described the predominant purpose test as follows:
The test for inclusion or exclusion is . . . whether their predominant factor, their
thrust, their purpose, reasonably stated, is the rendition of service, with goods
incidentally involved (e.g., contract with artist for painting) or is a transaction of
sale, with labor incidentally involved (e.g., installation of a water heater in a
499 F.2d 951, 960 (8th Cir. 1974) (citations omitted).
“In order to determine . . . the
predominant purpose of a mixed transaction. . . , we examine the language of the parties’
contract, the nature of the business of the supplier of the goods and services, the reason the
parties entered into the contract . . . , and the respective amounts charged . . . for goods and for
services.” Audio Visual Artistry, 403 S.W.3d at 798 (citation omitted).
Here, the Contract was for the sale of mammography equipment to Plaintiff, its
installation, the removal of a four-slice CT scanner, its sale to Defendant, and the transportation
and installation of a 64-slice CT scanner. Defendant argues that the UCC applies because this
transaction involved a sale of goods in excess of $500.00 that was between merchants. Def.’s
Resp., at 12. Led astray by Defendant’s own forgivable misstep while attempting to navigate the
UCC, Plaintiff only challenges the assertion that he qualifies as a merchant under the UCC.
Reply in Supp. of Pl.’s Motion for Summ. J., at 2–3 n.3, ECF No. 52 [hereinafter “Pl.’s Reply”].
But as discussed above, the Tennessee UCC requires only “transactions in goods.” Tenn. Code
Ann. § 47-2-102. Defendant conflates sections 672.102 (“[T]his chapter applies to transactions
in goods . . . .”), 672.201 (“[A] contract for the sale of goods for the price of $500 or more is not
enforceable . . . unless there is some writing sufficient to indicate that a contract for sale has been
made . . . .”), and 672.207 (“Between merchants such terms become part of the contract . . . .”) of
the Florida Statutes Annotated.
The parties are in agreement that Plaintiff solicited a bid for the installation of
mammography equipment, removal of the four-slice CT scanner, and transportation and
installation of the 64-slice CT scanner. See Def.’s Statement of Facts, ¶ 8. No description of
Defendant is provided in the parties’ respective statements of material facts.
Memorandum, Plaintiff merely describes Defendant as a “medical equipment compan[y].” Pl.’s
Mem., at 2. Defendant, in its own Memorandum, describes itself as “a provider of high-quality
new, used, and refurbished medical imaging equipment.” Def.’s Resp., at 1. The parties agree
that the reason they entered into the Contract was because Plaintiff wanted to expand his services
to include mammography. See Def.’s Statement of Facts, ¶ 7. The e-mail exchange between the
parties breaks down the prices as $65,000 for the purchase and installation of mammography
equipment, $17,500 for the installation of the 64-slice CT scanner, and $25,000 in credit to
Plaintiff for his four-slice CT scanner. Id. ¶ 12. On balance, this transaction is a sale of goods.
Plaintiff’s purchase of the mammography equipment appears to be the overwhelming purpose of
the Contract based upon the motivation to enter into the Contract and the costs respectively
ascribed to equipment and installation. Further, the $25,000 in credit Defendant offered to
Plaintiff for the 4-slice CT scanner is an additional transaction “in goods.” Therefore, the Court
finds that the Tennessee UCC is applicable to the Contract and assumes that it will control this
dispute absent a valid choice-of-law provision.
Whether the Purchase Agreement Governs the Contract
The elements of a claim for breach of contract are (1) the existence of a contract, (2)
breach of the contract, and (3) damages that flow from the breach. Life Care Ctrs. of Am., Inc. v.
Charles Town Assocs. Ltd. P’ship, 79 F.3d 496, 514 (6th Cir. 1996); Ingram v. Cendant Mobility
Fin. Corp., 215 S.W.3d 367, 374 (Tenn. Ct. App. 2006) (citation omitted). As previously stated,
the parties do not dispute the existence of an enforceable contract, and therefore, the first element
is at least nominally satisfied. Regarding the second element, Plaintiff alleges that Defendant
refused to perform its obligations under the Contract, constituting a breach. Pl.’s Mem, at 8.
Defendant responds with the charge that it was Plaintiff who breached the Contract by refusing
to pay costs that Plaintiff was contractually obligated to pay for under the Purchase Agreement,
which in turn entitled Defendant to cancel its performance. Def.’s Resp., at 17–20. Plaintiff
replies that it did not breach the Contract because the terms Defendant accuses Plaintiff of
breaching were not part of the Contract. Pl.’s Reply, at 1–2. Thus, the Court must address
whether the terms of the Purchase Agreement are part of the Contract before it can determine
whether either party breached the Contract.
“A contract for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a contract.” Tenn.
Code Ann. § 47-2-204(1). “An agreement sufficient to constitute a contract for sale may be
found even though the moment of its making is undetermined.” Id. § 47-2-204(2). “Unless
displaced by the particular provisions of [the UCC], the principles of law and equity . . .
supplement [the UCC].” Id. § 47-1-103(b). “Under general principles of contract law, a contract
‘must result from a meeting of the minds of the parties in mutual assent to the terms.’” Sweeten
v. Trade Envelopes, Inc., 938 S.W.2d 383, 386 (Tenn. 1996) (citation omitted).
determine mutuality of assent by assessing the parties’ manifestations according to an objective
standard.” Moody Realty Co. v. Huestis, 237 S.W.3d 666, 674 (Tenn. Ct. App. 2007) (citation
omitted). “[T]he meeting of the minds . . . [is] to be determined . . . not alone from the words
used, but also the situation, acts, and the conduct of the parties, and the attendant circumstances.”
In re Josephson, 2012 Tenn. App. LEXIS 629, at *6 (Tenn. Ct. App. Sept. 11, 2012) (quoting
Huestis, 237 S.W.2d at 675). “[W]hether a meeting of the minds occurred is a question of fact.
However, ‘when a trial court is called upon to make a finding of fact based on uncontroverted
evidence, its conclusion is one of law, and the appellate courts will review that finding as a
question of law.’” Wofford v. M. J. Edwards & Sons Funeral Home, Inc., 490 S.W.3d 800, 807
(Tenn. Ct. App. 2015) (citations omitted). Plaintiff asserts that the Purchase Agreement in this
case is not part of the Contract because Plaintiff did not see and did not sign the Purchase
Agreement until after he had initiated this action. Pl.’s Mem., at 7 (citing Pl.’s Statement of
Facts, ¶ 45).3 Plaintiff instead offers the content of the e-mails as sufficient evidence of the
terms of the Contract. Id. at 2–3 (citing Pl.’s Statement of Facts, ¶¶ 10–13).4 In support of its
contention that the Contract between the parties includes the Purchase Agreement, Defendant
Plaintiff’s Statement of Material Facts, in turn, cites to Frix Decl., ¶ 47, in support of
Plaintiff’s Statement of Material Facts, in turn, cites to Frix Decl., ¶¶ 13–15, in support
of these allegations.
claims it sent Plaintiff an unsigned copy of the sales quote that Plaintiff returned signed the next
day by fax. Def’s Resp., at 11 (citing Johnson Decl., ¶¶ 8–9). Defendant then sent Plaintiff the
Purchase Agreement. Id. (citing Johnson Decl., ¶ 9). Plaintiff argues that Defendant cannot
effectively counter the fact that Plaintiff never saw or signed the Purchase Agreement because it
lacks personal knowledge and failed to explore the issue in discovery. Pl.’s Reply, at 1–2.
Undaunted, Defendant advances a number of theories in support of its assertion that the Purchase
Agreement controls this dispute. The Court addresses each of Defendant’s arguments separately.
Defendant first argues that Plaintiff accepted the terms of the Purchase Agreement by
paying Defendant the sum of $14,375 pursuant to the terms of Paragraph 11 of the Purchase
Agreement. Def.’s Resp., at 12–13. The UCC has dispensed with the simpler but admittedly far
more rigid common law rules of contract formation. Its provisions instead favor ease in the
creation of a contract, even at the greater risk if not likelihood of ambiguity in a contract’s terms.
See Tenn. Code Ann. § 47-2-204(3) (“Even though one . . . or more terms are left open a contract
for sale does not fail for indefiniteness if the parties have intended to make a contract and there is
a reasonably certain basis for giving an appropriate remedy.”). As such and as mentioned above,
the UCC permits a contract to “be made in any manner sufficient to show agreement, including
conduct by both parties which recognizes the existence of such a contract.” Tenn. Code Ann. §
47-2-204(1) (emphasis added). Paragraph 11 of the Purchase Agreement states, in the relevant
part, as follows:
11. Payment/Acceptance. Buyer shall be deemed to have accepted the terms of
this offer by signing this agreement or by ordering the Equipment from Seller.
Deposits are non-refundable. At Seller’s discretion, deposits may be applied
toward future equipment or service purchases.
Def.’s Resp., at 12 (quoting Johnson Decl., Ex. C) (emphasis omitted). Defendant then recites
the UCC definition of a merchant and an official comment in support of the proposition that
partial performance may constitute acceptance under the UCC. Id. at 13. The Court accepts this
premise as uncontroversial but remains unconvinced of the concept’s applicability in this case.
See Carter v. Richards, 1990 Tenn. App. LEXIS 899, at *9 (Tenn. Ct. App. Dec. 21, 1990)
(citing Hutchinson v. Dobson-Bainbridge Realty, 217 S.W.2d 6 (Tenn. Ct. App. 1946)) (“The act
of beginning performance of the contract indicates . . . acceptance . . . .”). While it is undisputed
that Plaintiff paid Defendant a sum of money subsequent to the date that Defendant sent Plaintiff
a copy of the Purchase Agreement, such performance is only indicative of the existence of the
Contract and not that the Contract is governed by the Purchase Agreement. It is just as likely
that Plaintiff made payments in response to the parties’ other communications. Thus, Plaintiff’s
conduct after Defendant sent the Purchase Agreement is insufficient to constitute acceptance by
Course of Dealing
Defendant next raises the argument that the parties’ course of dealing demonstrates that
agreements similar to the Purchase Agreement always control their contracts for sale. Def.’s
Resp., at 10–11. Under the UCC, a “course of dealing between the parties . . . is relevant in
ascertaining the meaning of the parties’ agreement, may give particular meaning to specific
terms of the agreement, and may supplement or qualify the terms of the agreement.” Tenn. Code
Ann. § 47-1-303(d).
The UCC defines a “course of dealing” as “a sequence of conduct
concerning previous transactions between the parties to a particular transaction that is fairly to be
regarded as establishing a common basis of understanding for interpreting their expressions and
other conduct.” Id. § 47-1-303(b).
Plaintiff, however, argues that a course of dealing cannot
arise from a single transaction. Pl.’s Reply, at 2.
The Sixth Circuit does not appear to have resolved this issue. Inmon Truck Sales, Inc. v.
Peterbilt of Northwest Ohio, Inc., 1992 U.S. App. LEXIS 3471, at *6 (6th Cir. Feb. 24, 1992)
(“[W]e need not decide whether a single sale is adequate to establish a course of dealing.”). Nor,
as far as the Court can tell, has the Tennessee Supreme Court. Though no binding authority is
available, the Court notes that the Tennessee Court of Appeals sided with Plaintiff’s position in
Remco Equipment Sales, Inc. v. Manz.
See 952 S.W.2d 437, 439 (Tenn. Ct. App. 1997)
(citations omitted) (adopting the conclusion of many other courts that “a single transaction
cannot constitute a course of dealing”). While “course of dealing” is historically a legal term of
art, the Tennessee General Assembly has, in adopting the UCC, chosen to restrict that term to a
“sequence of conduct” within the UCC’s scope. Tenn. Code Ann. § 47-1-303(b). As it “must
presume that [the] legislature says in a statute what it means and means in a statute what it says
there,” the Court fails to grasp how a single point in time could be a “sequence” in any sense of
the word. See Sequence, New Oxford American Dictionary (3d ed. 2010) (defining “sequence”
as “a particular order in which related events, movements, or things follow each other” or “a set
of related events, movements, or things that follow each other in a particular order”). Based on
the persuasive authority of the Tennessee Court of Appeals’s decision in Remco Equipment Sales
and the UCC’s language in defining a “course of dealing,” the Court thinks it is likely that the
Tennessee Supreme Court would hold that a “course of dealing” requires a series of transactions
and is not satisfied by a lone transaction. The Court so holds and accordingly finds Defendant’s
argument to be without merit.
UCC § 2-207
Defendant then argues that Plaintiff accepted the terms of the Purchase Agreement when
he failed to provide Defendant with a written objection within ten days of receiving it. Def.’s
Resp., at 12. Defendant again tangles separate provisions of the UCC. Section 2-201 provides
that certain writings, between merchants, not objected to within ten days of receipt satisfy the
Statute of Frauds. Tenn. Code Ann. § 47-2-201(1)–(2). But Section 2-207, known as the “battle
of the forms” provision, provides for the inclusion of additional terms in an acceptance or written
confirmation in a contract even though the parties had not previously discussed those terms.
Tenn. Code Ann. § 47-2-207(1). This provision eased the old mirror-image rule, which required
“[a]n acceptance to be . . . identical with the offer and unconditional.” Canton Cotton Mills v.
Bowman Overall Co., 257 S.W. 398, 402 (Tenn. 1923) (citation omitted). Section 2-207 also
provides that, between merchants, the terms can become part of the contract unilaterally in
certain situations. Tenn. Code Ann. § 47-2-207(2). Thus, it appears to the Court that Defendant
means to argue that the Purchase Agreement constituted a written confirmation under section 2207.
No provision of the UCC, at least in Article 2, can match the battle of the forms provision
for opportunities to ensnare parties and even the occasional court. This Court has previously
invoked the Sixth Circuit’s description of section 2-207 as “a murky bit of prose” and “one of the
most . . . difficult [sections] in the entire [UCC], and well it may be said that the product as it
finally reads is not altogether satisfactory.” Dorton v. Collins & Aikman Corp., 453 F.2d 1161,
1165 (6th Cir. 1972). Yet this Court agrees that section 2-207 “establishes important legal
principles to be employed to resolve complex contract disputes arising from the exchange of
business forms.” Mead Corp. v. McNally-Pittsburgh Mfg. Corp., 654 F.2d 1197, 1206 (6th Cir.
1981) (citations omitted).
The relevant part of section 2-207 reads as follows:
A definite and seasonable expression of acceptance or a written confirmation
which is sent within a reasonable time operates as an acceptance even though it
states terms additional to or different from those offered or agreed upon . . . . The
additional terms are to be construed as proposals for addition to the contract.
Between merchants such terms become part of the contract unless . . . they
materially alter it; or . . . notification of objection to them . . . is given within a
reasonable time . . . .
Tenn. Code Ann. § 47-2-207(1)–(2). It appears from the available evidence of the parties’
correspondence that the Contract was formed before Defendant sent the Purchase Agreement;
either during informal discussion or at the very latest when Plaintiff returned the invoice for the
transaction to Defendant with his signature. See Frix Decl., Exs. A–B; Denholtz Decl., Ex. B.
Thus, the Purchase Agreement must constitute a written confirmation that was sent within a
reasonable time.5 On its face, the Purchase Agreement purports to be just that. Defendant
alleges that it faxed the Purchase Agreement with a cover letter dated May 12, 2016, which is
one day after it sent an invoice to Plaintiff and within the same week that the various e-mails
available to the Court were all sent. See Frix Decl., Exs. A–B; Denholtz Decl., Ex. C. The cover
letter begins with the statement that it “is to confirm in writing . . . .” Denholtz Decl., Ex. C. But
it appears to the Court that the invoice Defendant sent already satisfied this purpose. Does
section 2-207 permit the parties to repeatedly rewrite the terms of their deal under the pretext of
“confirmation” so long as the alterations are done in a reasonable time? The Tennessee courts
have not spoken on this issue. Nor has the Sixth Circuit, or, as far as the Court can tell, any
Circuit. To the Court’s surprise, only three district courts have addressed the issue, and one of
Treating the Purchase Agreement as a “definite and seasonable expression of
acceptance” rather than a written confirmation would not materially alter any analysis under
those courts had its decision overturned on different grounds.6 Naturally, the remaining two
courts are split on the issue. According to the United States District Court for the District of
New Jersey, “[s]ection 2-207 does not contemplate multiple written confirmations operating as
acceptance, with each confirmation having the capability of adding new or different terms.”
Rocheux Int'l of N.J., Inc. v. U.S. Merchs. Fin. Group, Inc., 741 F. Supp. 2d 651, 679 (D.N.J.
2010). The court reasoned that, because the first form was intended to act as an acceptance and
included additional terms, the subsequently sent invoices were irrelevant. Id. at 679–80. The
court also suggested that this was not really a battle of the forms since one party had sent both
forms. Id. at 679 n.17. The United States District Court for the District of Utah, however, found
that intervening correspondence does not preclude the addition of terms to an agreement between
merchants under section 2-207. Monarch Nutritional Labs v. Maximum Human Performance,
Inc., 2005 U.S. Dist. LEXIS 36000, at *13–14 (D. Utah July 18, 2005). The court pointed to the
UCC’s general preference to avoid identifying precise moments in formation. Id. at *14–15
(citing Waukesha Foundry, Inc. v. Indus. Eng’g, Inc., 91 F.3d 1002, 1007 (7th Cir. 1996). The
court also reasoned that the subsequent correspondence was sent in a reasonable time, which is
the only qualification of a written confirmation that the provision makes. See id. at *16–17. The
Court, however, need not resolve this issue today.
For section 2-207 to have the effect that Defendant desires upon the Contract—the
addition of the terms of the Purchase Agreement to the Contract despite the lack of evidence of
Plaintiff ever having seen or agreed to them—the Contract must be “between merchants.” Tenn.
Code Ann. § 47-2-207(2)(c). “Between merchants,” in the UCC, “means in any transaction with
respect to which both parties are chargeable with the knowledge or skill of merchants.” Id. § 476
See Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, 841 F. Supp. 2d
955, 961–65 (S.D.W.V. 2012), rev’d 514 F. App’x 365 (4th Cir. 2013).
2-104(3). Defendant relies on the statutory definition of merchant and Official Comment 1 to
this provision in its assertion that Plaintiff is a merchant under the UCC. Def.’s Resp., at 12 n.2
(citing Fla. Stat. Ann. § 672.104, cmt. 1) (“This Article assumes that transactions between
professionals in a given field require special and clear rules which may not apply to a casual or
inexperienced seller or buyer.”). Plaintiff argues that Defendant has offered no evidence that
Plaintiff is a merchant within the meaning of the statute. Indeed, Plaintiff points out that he does
not deal in medical equipment and lacks particular knowledge or skill with respect to such
equipment. Reply, at 2 n.3. Plaintiff relies on two Florida cases in support of his position. Id. at
2–3 n.3. Neither the Tennessee Supreme Court nor the Sixth Circuit has spoken to the issue of
whether a physician that purchases equipment for his practice constitutes a merchant under the
UCC. As there is no binding authority upon the Court as to this issue, it begins its analysis with
the statutory language of the definition.
The UCC defines “[m]erchant” as “a person who deals in goods of the kind or otherwise
by his occupation holds himself out as having knowledge or skill peculiar to the practices or
goods involved in the transaction . . . .”7 Tenn. Code Ann. § 47-2-104(1). No evidence before
the Court suggests that Plaintiff is a seller of CT scanners or mammography equipment, so it will
restrict its analysis to the latter portion of the definition. To discern whether Plaintiff is a
merchant under the UCC, the Court must decide whether Plaintiff is “a person who . . . by his
occupation holds himself out as having knowledge or skill peculiar to the practices or goods
involved in the transaction.” Id. Plaintiff insists that he does not hold himself out as having such
knowledge or skill. Pl.’s Reply, at 2 n.3. But that is not the relevant inquiry. The definition
The Court omitted the rest of the definition, which essentially makes the principal of an
agent that is a merchant also a merchant, because the undisputed facts of this case reveal no
involvement of an agent of Plaintiff. See Tenn. Code Ann. § 47-2-104(1).
does not require a person who holds himself out as having a particular knowledge or skill but
who does so “by his occupation.” Tenn. Code Ann. § 47-2-104(1) (emphasis added); see also
Loeb & Co. v. Schreiner, 321 So. 2d 199, 202 (Ala. 1975) (“[A] person cannot be considered a
‘merchant’ [under section 2-104] simply because he is a braggart or has a high opinion of his
knowledge in a particular area.”).
To Plaintiff’s credit, the Tennessee Court of Appeals has adopted an individualized
approach for farmers. Brooks Cotton Co. v. Williams, 381 S.W.3d 414 (Tenn. Ct. App. 2012).
The test adopted by the court provides a nonexhaustive list of four factors for use in determining
whether a particular farmer is a merchant based upon his own personal business sophistication.
Id. at 425. While the decisions of the Tennessee Court of Appeals are not binding upon this
Court, and this particular analysis seems applicable only to farmers, the departure in reasoning
between the Court of Appeals and this Court is worth highlighting nonetheless.
individualized approach stands in stark contrast to the occupation-based approach that the
language of the statute plainly calls for. The court seems to ultimately distinguish between a
regular farmer and an “experienced commercial farmer.” Id. at 427–28. The Tennessee Court
of Appeals was faced with persuasive authority that ranged from “It is inconceivable that the
drafters of the [UCC] intended to place the average farmer, who merely grows his yearly crop
and sells it to the local elevator, etc., on equal footing with the professional commodities dealer
whose sole business is the buying and selling of farm commodities,” Pierson v. Arnst, 534 F.
Supp. 360, 362 (D. Mont. 1982), to “This court does not believe that anyone in this day and age
looks upon any person or corporation who conducts a farming operation as a simple tiller of the
soil,” Rush Johnson Farms, Inc. v. Mo. Farmers Ass'n, 555 S.W.2d 64 (Mo. Ct. App. 1977).
Brooks Cotton Co., 381 S.W.3d at 423–26. The court ultimately adopted its test from the
Colorado Court of Appeals, which noted an evolution in the general sophistication of the farmer.
Id. at 425 (quoting Colo.-Kan. Grain Co. v. Reifschneider, 817 P.2d 637 (Colo. Ct. App. 1991)).
Unless experience and sophistication are capable of dividing farmers into distinguishable
occupations, however, this Court cannot reconcile an individualized test with the clear dictates of
the statute. According to section 47-2-104(1), the person must hold himself out with the peculiar
knowledge by his occupation rather than by his individual experience or level of sophistication.
A person’s occupation is his or her “usual or principal work or business, esp[ecially] as a means
of earning a living.” Occupation, The Random House Dictionary of the English Language (2d
unabridged ed. 1987).8 The novice that manages to make his living from the smallest patch of
earth may call himself a farmer as much as any agricultural corporate giant. Any distinction is
therefore immaterial to this Court’s analysis of section 47-2-104(1). What changes from case to
case are the goods or practices involved in transaction. Thus, the issue then becomes whether a
physician inherently holds himself out as having knowledge or skills peculiar to medical
equipment or the installation thereof.
This is of course a much narrower reading of “merchant” than Defendant argues for. But
Defendant’s apparent assertion that the UCC envisions merchants as encompassing all
professionals is inconsistent with the statutory language, which significantly restricts the
The Court here uses a 1987 English language dictionary for two reasons. First, the
English language dictionary is appropriate in this instance rather than a legal dictionary such as
Black’s Law Dictionary because without reason to believe that a legislature intended to use a
word in its technical sense, the courts are to look to “the common language of the people” to
determine its plain meaning. See Nix v. Hedden, 149 U.S. 304, 307 (1893) (rejecting the
botanical meaning of a tomato as fruit in favor of its common understanding of a vegetable when
deciding whether a tomato should be taxed under the Tariff Act of 1883, which levied a tenpercent duty on vegetables but not fruit). Second, Tennessee enacted the UCC’s definition of
merchant in an Act of 1963, and “[d]ictionaries tend to lag behind linguistic realities . . . .”
Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of Legal Texts 419, 423
(2012) (recommending this particular edition of The Random House Dictionary of the English
Language for 1951–2000).
knowledge or skill that would trigger the merchant provisions to such “knowledge or skill
peculiar to the practices or goods involved in the transaction. Tenn. Code Ann. § 47-2-104(1)
(emphasis added). The Tennessee General Assembly did not include the Official Comments in
the provisions of 47-2-104. United Foods, Inc. v. Hadley-Peoples Mfg. Co., 1994 Tenn. App.
LEXIS 277, at *13 (Tenn. Ct. App. May 20, 1994) (citing Tenn. Code Ann. § 47-2-207(2) &
cmt. 3) (rejecting the argument that the use by Official Comment 3 to section 47-2-207 of
“additional or different terms” was applicable when section 47-2-207(2) only called for
“additional terms” because ”the drafters could easily have included ‘or different’ in [section] 472-207(2) if they had so intended”). Defendant would perhaps be correct in relying on the
legislature’s use of “practices” in hopes that “practice” is meant in the sense of “the business of a
professional person.” Practice, The Random House Dictionary of the English Language (2d
unabridged ed. 1987). Defendant could then argue that Plaintiff, by virtue of being a doctor, is
charged with the requisite knowledge and skill peculiar to the practice of medicine, and this is
sufficient to constitute a merchant under the UCC. It is true that one such rule, known as the
last-reasonable-referent canon,9 provides that subsequent modifying language usually only
modifies the closest reasonable word. Carroll v. Sanders (In re Sanders), 551 F.3d 397, 399 (6th
Cir. 2008) (quoting Bryan A. Garner, Garner's Modern American Usage 523–24 (2003))
(“[W]hen a word . . . points back to a . . . referent, the true referent should generally be the
closest appropriate word.”); see also Lockhart v. United States, 136 S. Ct. 958, 962 (2016)
(citing Barnhart v. Thomas, 540 U.S. 20, 26 (2003); Rule of the last antecedent, Black’s Law
The last-reasonable-referent canon is often folded into the more commonly discussed
last-antecedent canon. Scalia & Garner, supra note 8, at 152 (“Strictly speaking, only pronouns
have antecedents, and the canon here under consideration also applies to adjectives, adverbs, and
adverbial or adjectival phrases—and it applies not just to words that precede the modifier, but
also to words that follow it.”).
Dictionary 1532–33 (10th ed. 2014); Scalia & Garner, supra note 8, at 144) (“The rule provides
that ‘a limiting clause or phrase . . . should ordinarily be read as modifying only the noun or
phrase that it immediately follows.’”). Under that rule, it would not be unreasonable to suggest
that the modifier “involved in the transaction” modifies the word “goods” but not “practices.”
But the rule of the last reasonable referent “can assuredly be overcome by other indicia of
meaning.” Barnhart, 540 U.S. at 26. For example, “the . . . rule does not generally apply . . .
when ‘[t]he modifying clause appear[s] . . . at the end of a single, integrated list.’” Lockhart, 136
S. Ct. at 970 (Kagan, J., dissenting) (quoting Jama v. Immigration and Customs Enforcement,
543 U.S. 335, 344 n.4 (2005)). “’When there is a straightforward, parallel construction that
involves all nouns or verbs in a series,’ a modifier at the end of the list ‘normally applies to the
entire series.’” Id. (quoting Scalia & Garner, supra note 8, at 147). Here, the phrase “the
practices or goods” is written in a parallel construction. Both words are plural, and the definite
article “the” is carried over to both words. See Scalia & Garner, supra note 8, at 147 (citations
omitted) (“The typical way in which syntax would suggest no carryover modification is that a
determiner (a, the, some, etc.) will be repeated before the second element.”). Thus, “involved in
the transaction” modifies both “practices” and “goods,” restricting the meaning of practices in
the instant case to the “business of a professional person” involved in the sale or installation of
medical equipment. The Court now turns to resolving whether a physician inherently holds
himself out as having knowledge or skills peculiar to medical equipment or the installation
In response to Defendant’s assertion that Plaintiff is a merchant under the UCC, Plaintiff
cites two cases: first, Czarnecki v. Roller, 726 F. Supp. 832, 843 (S.D. Fla. 1989), for the
proposition that a “a party who engages in only a handful of transactions with respect to a
particular good is not a ‘merchant’”; and, second, Porter v. Rosenberg, 650 So. 2d 79, 81–82
(Fla. Dist. Ct. App. 1995), for the proposition that physicians are “more akin to the consumer or
user of the product, especially where the product is not transferred to the patient but utilized
incidental [sic] to the provision of medical services.” Pl.’s Reply, at 2–3. The Court finds the
first case irrelevant to its analysis. How often a person engages in the sales for a particular good
goes to whether he is a “deal[er] in goods of the kind,” a portion of the definition that clearly
does not apply to Plaintiff. See Tenn. Code Ann. § 47-2-104(1). A person’s occupation can
present that person to the world as having certain knowledge regardless of how many times they
actually enter into a transaction so long as the knowledge is distinctive to the practices or goods
involved in the disputed transaction. See id. The proposition Plaintiff draws from the second
case certainly makes a lot of sense, but it speaks more to a common understanding of merchant
rather than the UCC’s definition. Common sense and understanding, however, are what must
finally decide this dispute lest the Court and the parties remain forever more entangled in the
A physician, put simply, is “a person qualified to practice medicine.”
Physician, New Oxford American Dictionary (3d ed. 2010). And medicine is “the science or
practice of the diagnosis, treatment, or prevention of disease.” Medicine, supra. This practice
necessarily includes the ability to use various types of medical equipment, but the ability to use a
machine is not a skill peculiar to one’s practice.
Physicians, like hospitals, are providers of medical services. The physician's
expertise lies in the diagnosis, treatment and cure of illness, not in the research or
development of prosthetics or devices used to aid medical diagnosis or
treatment. . . . Products . . . case are supplied and utilized only as needed to
deliver the professional medical service. They are incidental, or integral, to a
physician's service, but they are not the focus of the physician's delivery of health
Porter v. Rosenberg, 650 So. 2d 79, 81–82 (Pa. Super. Ct. 1995) (discussing health care
providers in a strict liability context). Yes, the physician is more like the consumer in these
transactions. But the reason that physicians are not merchants under the UCC is that physicians
are not experts in the equipment itself. There is nothing peculiar about being able to use a
machine for its intended purpose. And there is no indication that physicians generally know how
to take apart, put back together, install, or repair complicated pieces of machinery. Nor is there
an indication that physicians can converse easily about the market for medical equipment. Cf.
Brooks Cotton Co. v. Williams, 381 S.W.3d 414, 424–25 (Tenn. Ct. App. 2012) (holding that
farmers could constitute merchants under the UCC because of their “extensive knowledge and
sophistication regarding the purchase and sale of crops on the various agricultural markets”).
The Court finds that a physician, by mere virtue of being a physician, does not hold himself out
as having skills or knowledge peculiar to the sale or installation of medical equipment.
Accordingly, the Court must conclude that Plaintiff is not a merchant under the UCC, and,
therefore, the Purchase Agreement cannot be part of the Contract under section 2-207.
Finally, Defendant maintains that a demand letter sent by Plaintiff’s counsel that
referenced “specifications in the contract” amounts to admission of the validity of the Purchase
Agreement. Def’s Resp., at 14. Plaintiff, however, asserts that the demand letter is inadmissible
under Fed. R. Evid. 408. Even if the letter was admissible, Plaintiff claims that his counsel was
referencing e-mails from Defendant’s agents during their discussions that gave rise to the
Contract and not the Purchase Agreement. Assuming arguendo that the letter is admissible, the
Court is not persuaded that it amounts to an admission of the validity of the Purchase Agreement.
It is clear to the Court that Plaintiff’s counsel was referencing the Contract and not the Purchase
Agreement. See Denholtz Decl., Ex. C. A contract is not a piece of paper; it is the agreement
between the parties.
See Patterson v. McClean Credit Union, 491 U.S. 164, 221 (1989)
(Brennan, J., dissenting) (“A contract is not just a piece of paper. Just as a single word is the
skin of a living thought, so is a contract evidence of a vital, ongoing relationship between human
beings.”). Furthermore, when Plaintiff’s counsel said “specifications in the contract,” he was
setting up his own replies by first speaking in the role of Defendant’s agents. See Denholtz
Decl., Ex. C. Therefore, the Court finds this argument to be without merit.
With no meritorious argument before it as to why the Purchase Agreement should govern
the Contract, the Court concludes that the Purchase Agreement does not govern the Contract.
Because the choice-of-law provision contained within the Purchase Agreement does not apply,
the Court now holds what it had previously only assumed:
the Contract is governed by
Tennessee law and the UCC.
Breach of the Contract
Having identified the terms of the Contract, the Court now turns to whether Defendant
breached the Contract. “A breach of contract takes place when a party fails to perform according
to the agreement.” In re Gatlinburg Motel Enterprises, 127 B.R. 814, 819 (Bankr. E.D. Tenn.
1991) (citations omitted); see also Restatement (Second) of Contracts § 235(2) (“When
performance of a duty under a contract is due any non-performance is a breach.”). A refusal to
perform constitutes a breach if the non-breaching party treats it as such. Ault v. Dustin, 45 S.W.
981, 985 (Tenn. 1897). Under the UCC, when one party refuses to perform, the aggrieved party
may resort to any remedy for breach under its provisions and suspend its own performance.
Tenn. Code Ann. § 47-2-610. As previously stated, Plaintiff asserts that there can be no genuine
dispute as to breach because the parties agree that Defendant refused to perform by informing
Plaintiff that it would not be delivering the mammography equipment.
Pl.’s Mem., at 8.
Defendant argues that it was no longer obligated to perform because Plaintiff had first breached
the Contract by violating the terms of the Purchase Agreement. Def.’s Resp., at 17–20. But
Defendant’s arguments to this effect are defeated by the Court’s finding that the terms of the
Purchase Agreement are not part of the Contract.10
One argument that Defendant makes,
however, is worth examining outside of the context of the Purchase Agreement.
Defendant claims that Plaintiff made misrepresentations of material facts regarding the
trade-in on the 4-slice CT scanner. Def.’s Resp., at 17. According to Defendant, Plaintiff
represented that the scanner “was in good working and operation condition and was still in use
immediately prior to the transaction.” Denholtz Decl., ¶ 14. According to Defendant, however,
the scanner was in a mobile trailer that “was dirty dusty, and . . . [had] the presence of mildew
or mold. . . . [T]he air condition[er] did not work[.] [T]here were dead insects[,] . . . used
syringes . . . , and . . . other trash and medical waste throughout the trailer.” Childs Decl., ¶ 20.
“It was obvious to [the engineer] that the mobile trailer and the . . . Scanner . . . had been
switched off and without power for quite some time.” Id. ¶ 21. Defendant adds that Plaintiff has
refused to ship the cable set for this scanner. Def.’s Resp, at 17. Plaintiff states that this
allegation “came as a surprise” because Defendant’s “own contractor had inspected the scanner
before shipping it to [Defendant] in Florida, and the scanner was in good working order when it
was being used to scan patients . . . immediately before this project began.” Frix Decl., ¶ 42.
“The terms of the purchase agreement govern the transaction between the parties,” .
Def.’s Mem., at 10, ECF No. 49-4, “The terms of the purchase agreement did not include a
‘turnkey’ sale and installation of equipment,” Id. at 15, “Plaintiff breached the terms of the
Purchase Agreement,” Id. at 17, and “Following Plaintiff’s breach [Defendant] was entitled to
retain the deposit to cover the costs Plaintiff agreed to pay under the Purchase Agreement and to
cancel its performance regarding the sale of the mammography equipment,” Id. at 19.
Defendant’s subsequent argument is not entirely clear because it then implies that this
misrepresentation was a violation of a good faith obligation under the terms of the Purchase
Misrepresentations of material facts and breach of the duty of good faith and fair dealing
are distinct concepts. While the Purchase Agreement is irrelevant here, a duty of good faith and
fair dealing is implied in every contract. Dick Broad. Co. v. Oak Ridge FM, Inc., 395 S.W.3d
653, 660 (Tenn. 2013) (citation omitted). This duty, however, “does not apply to the formation
of a contract.” Wallace v. Nat'l Bank of Commerce, 938 S.W.2d 684, 687 (Tenn. 1996) (citation
omitted). The UCC does change this principle of contract law. Tenn. Code Ann. § 47-1-304
(“Every contract or duty within [the scope of the UCC] imposes an obligation of good faith in its
performance and enforcement.”). Any statement by Plaintiff as to the condition of the scanner
that Defendant relied on in offering credited value for the scanner would have been made in the
formation of the Contract.11 Therefore, the duty of good faith is inapplicable.
Misrepresentation, on the other hand, is a species of fraud that is based in tort. See, e.g.,
Stanfill v. Mountain, 301 S.W.3d 179, 187–88 (Tenn. 2009) (quoting Walker v. Sunrise PontiacGMC Truck, Inc., 249 S.W.3d 301, 311 (Tenn. 2008)). As such, it is most appropriately raised
as a counter-claim rather than a defense to breach.
When raised in contract law,
misrepresentation goes to formation of the contract and can preclude a finding of the meeting of
the minds. See, e.g., Scruggs v. Roach, 1993 Tenn. App. LEXIS 257, at *9–10 (Tenn. Ct. App.
Mar. 31, 1993) (citation omitted). Defendant, however, does not dispute the existence of the
Contract. Defendant argues that this misrepresentation is a breach of the Contract, which it
Defendant does not raise the issue, but the Court would also point out that, because
Plaintiff is not a merchant, the sale of the 4-slice CT scanner to Defendant does not include the
implied warranty of merchantability. See Tenn. Code Ann. § 47-2-314(1).
cannot be because the terms of the contract do not speak to the condition of the CT scanner.
Further, Defendant’s allegations stem from statements made before the formation of the Contract
rather than from Plaintiff’s performance. Therefore, misrepresentation is also inapplicable in this
As Defendant’s arguments to the contrary are without merit, the Court finds that
Defendant breached the Contract.
Damages Flowing from the Breach
Plaintiff argues that he has suffered damages as the result of Defendant’s breach,
specifically identifying Defendant’s failure to either return his money or the four-slice CT
Scanner. Pl.’s Mem., at . Defendant makes no argument in its brief on this point. In Tennessee,
“[u]pon breach of a valid and binding contract, the law infers some damages . . . .” Morristown
Lincoln-Mercury, Inc. v. Roy N. Lotspeich Publishing Co., 298 S.W.2d 788, 795 (Tenn. Ct. App.
1956) (citation omitted). This inference recognizes that, at the very least, the nonbreaching party
has suffered an infringement of its legal rights. See Womack v. Ward, 186 S.W.2d 619, 620
(Tenn. Ct. App. 1944). Therefore, without determining the nature and scope of the damages
suffered by Plaintiff, the Court finds that this third and final element of a breach of contract
claim has been established.
Accordingly, the Court concludes that Plaintiff has carried his burden under Rule 56. In
response, Defendant has failed to present a dispute of material fact necessary to bring into
question or otherwise negate an essential element of Plaintiff’s breach of contract claim.
Plaintiff has therefore demonstrated that he is entitled to judgment as a matter of law on the
single issue of Defendant’s liability for breach of contract. For these reasons, the Court finds
that summary judgment is appropriate.
Because the parties do not dispute the existence of the Contract, that Defendant refused to
perform under the Contract, or that Plaintiff suffered damages as a result of this refusal, and
because Defendant’s arguments in justification of its refusal to perform lack merit in light of the
Court’s holding that the Purchase Agreement is inapplicable to the Contract, Plaintiff’s Motion
for Partial Summary Judgment is hereby GRANTED.
It is so ORDERED.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
CHIEF UNITED STATES DISTRICT JUDGE
Date: September 20, 2017.
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