1 professor of law loyola law school, los angeles chapter 1 introduction
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NEWMARK v. GIMBEL'S INC. Supreme Court of New Jersey 258 A.2d 697, 54 N.J. 585, 6 UCC Rep.Serv. 1205 (1969) FRANCIS, J. This appeal involves the liability of a beauty parlor operator for injury to a patron's hair and scalp allegedly resulting from a product used in the giving of a permanent wave. The action was predicated upon charges of negligence and breach of express and implied warranty. Trial was had before the county district court and a jury. At the close of the proof, the court ruled as a matter of law that the warranty theory of liability was not maintainable because in giving a permanent wave a beauty parlor is engaged in rendering a service and not a sale; hence responsibility for injurious results could arise only from negligence. Consequently the court dismissed the warranty counts and submitted the issue of negligence for the jury's determination. Upon the return of a verdict for defendants, plaintiffs appealed. The Appellate Division reversed holding that a fact issue existed requiring jury decision as to whether there was an implied warranty of fitness of the lotion applied to Mrs. Newmark's hair and scalp for the purpose of producing the permanent wave. Thereafter we granted defendants' petition for certification. The defendants operated a number of beauty parlors where permanent waves were offered to the public for a consideration. For about a year and a half prior to the incident in question, Mrs. Newmark had been a patron of one of defendants' shops where she had a standing appointment every week to have her hair washed and set. She was usually attended by the same operator, one William Valante. During that period plaintiffs' brief asserts and defendants do not deny that she had purchased permanent waves there, at least one having been given by Valante, and she had not experienced any untoward results. On November 16, 1963, pursuant to an appointment, Mrs. Newmark went to the beauty parlor where she inquired of Valante about a permanent wave that was on special sale. He told her that her fine hair was not right for the special permanent and that she needed a “good” permanent wave. She agreed to accept the wave suggested by him. Valante conceded that the wave she received was given at his suggestion and that in accepting it she relied on his judgment as to what was good for her hair. Both Valante and Mrs. Newmark testified there was nothing wrong with her hair or scalp before the wave was given. Valante proceeded to cut and wash her hair after which he put her head under a dryer for about 10 minutes. The hair was then sectioned off, a permanent wave solution marketed under the name ”Helene Curtis Candle Wave” was applied with cotton and the hair was rolled section by section. Following this, more of the waving solution was put on by an applicator-bottle. Then a cream was placed along the hairline and covered with cotton. About three to five minutes after the last of the waving solution had been applied Mrs. Newmark experienced a burning sensation on the front part of her head. She complained to Valante who added more cream along the hairline. This gave some relief but after a few minutes she told him that it was burning again. The burning sensation continued but was alleviated when Valante brought her to a basin and rinsed her hair in lukewarm water. The curlers were then removed, a neutralizing solution was applied and allowed to remain for about seven minutes, and her hair was again rinsed. After this Valante set her hair and again put her under the dryer where she remained for about 25 minutes. The burning sensation returned and she promptly informed Valante who reduced the heat of the dryer thereby giving her partial relief. When the dryer operation was completed her hair was combed, and she left the parlor. That evening her head reddened, and during the following day her entire forehead was red and blistered. A large amount of hair fell out when it was combed. On November 19 she returned to defendants' place of business where Valante gave her, without charge, a conditioning treatment which he told her is given when the hair is dry. Mrs. Newmark testified that it made her hair feel singed at the hairline. Six days after the permanent wave Mrs. Newmark consulted a dermatologist who diagnosed her condition as contract dermatitis of the scalp and loss of hair resulting therefrom. On the basis of his experience, he concluded that the sole cause of her condition was the permanent wave solution. The redness and tenderness of the scalp diminished under his treatment. When he last saw her on December 13, 1963 the loss of hair on the top of her head was still present and he could not estimate the time it would take for replacement. In dismissing the cause of action based on warranty, the trial court expressed the view that the transaction with Mrs. Newmark was not a sale within the contemplation of the Uniform Commercial Code, UCC § 2-106(1), but rather an agreement for the rendition of services. Therefore, it was not accompanied by any warranty of fitness of products used in rendering the services, and the liability of the beauty parlor was limited to the claim of negligence. Having in mind the nature of a permanent wave operation, we find that the distinction between a sale and the rendition of services is a highly artificial one. If the permanent wave lotion were sold to Mrs. Newmark by defendants for home consumption or application or to enable her to give herself the permanent wave, unquestionably an implied warranty of fitness for that purpose would have been an integral incident of the sale. Basically defendants argue that if, in addition to recommending the use of a lotion or other product and supplying it for use, they applied it, such fact (the application) would have the effect of lessening their liability to the patron by eliminating warranty and by limiting their responsibility to the issue of negligence. There is no just reason why it should. On the contrary by taking on the administration of the product in addition to recommending and supplying it, they might increase the scope of their liability, if the method of administration were improper (a result not suggested on this appeal because the jury found no negligence). The transaction, in our judgment, is a hybrid partaking of incidents of a sale and a service. It is really partly the rendering of service, and partly the supplying of goods for a consideration. Accordingly, we agree with the Appellate Division that an implied warranty of fitness of the products used in giving the permanent wave exists with no less force than it would have in the case of a simple sale. Obviously in permanent wave operations the product is taken into consideration in fixing the price of the service. The no-separate-charge argument puts excessive emphasis on form and downgrades the overall substance of the transaction. If the beauty parlor operator bought and applied the permanent wave solution to her own hair and suffered injury thereby, her action in warranty or strict liability in tort against the manufacturer-seller of the product clearly would be maintainable because the basic transaction would have arisen from a conventional type of sale. It does not accord with logic to deny a similar right to a patron against the beauty parlor operator or the manufacturer when the purchase and sale were made in anticipation of and for the purpose of use of the product on the patron who would be charged for its use. Common sense demands that such patron be deemed a consumer as to both manufacturer and beauty parlor operator. A beauty parlor operator in soliciting patronage assures the public that he or she possesses adequate knowledge and skill to do the things and to apply the solution necessary to produce the permanent wave in the hair of the customer. When a patron responds to the solicitation she does so confident that any product used in the shop has come from a reliable origin and can be trusted not to injure her. She places herself in the hands of the operator relying upon his or her expertise both in the selection of the products to be used on her and in the method of using them. The ministrations and the products employed on her are under the control and selection of the operator; the patron is a mere passive recipient. The oft quoted statement that in the modern commercial world the liability of a manufacturer or a retail seller of a product should not be made to depend strictly upon the intricacies of the law of sales is most pertinent here. It was not the intention of the framers of the Uniform Commercial Code to limit the birth of implied warranties to transactions which technically meet its definition of a sale. The comment to UCC § 2-313 makes this clear by saying: Although this section is limited in its scope and direct purpose to warranties made by the seller to the buyer as part of a contract for sale, the warranty sections of this Article are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined either to sales contracts or to the direct parties to such a contract. They may arise in other appropriate circumstances such as in the case of bailments for hire, whether such bailment is itself the main contract or is merely a supplying of containers under a contract for the sale of their contents. This Court has already said there is no sound reason for restricting implied warranties of fitness to conventional sales of goods, treating as a sale the serving of food for value by a restaurateur for consumption on or off the premises, and subjecting the transaction to an implied warranty of fitness. It seems to us that the policy reasons for imposing warranty liability in the case of ordinary sales are equally applicable to a commercial transaction such as that existing in this case between a beauty parlor operator and a patron. Although the policy reasons which generate the responsibility are essentially the same, practical administration suggests that the principle of liability be expressed in terms of strict liability in tort thus enabling it to be applied in practice unconfined by the narrow conceptualism associated with the technical niceties of sales and implied warranties. One, who in the regular course of a business sells or applies a product (in the sense of the sales-service hybrid transaction involved in the present case) which is in such a dangerously defective condition as to cause physical harm to the consumer-patron, is liable for the harm. Consumption in this connection includes all ultimate uses for which the product is intended. 2 Restatement, Torts 2d, § 402A, p. 347 (1965) adopts this view. Obviously the ultimate use of the Helene Curtis permanent wave solution intended by both manufacturer and beauty parlor operator was its application to the hair of a patron. And as Comment 1 to the Restatement section says, 'the customer in a beauty shop to whose hair a permanent wave solution is applied by the shop is a consumer.' 2 Restatement, supra, at p. 354. Defendants claim that to hold them to strict liability would be contrary to Magrine v. Krasnica, 94 N.J.Super. 228, 227 A.2d 539 (Cty.Ct.1967), aff's sub nom. Magrine v. Spector, 100 N.J.Super. 223, 241 A.2d 637 (App.Div.1968), aff'd 53 N.J. 259, 250 A.2d 129 (1969). We cannot agree. Magrine, a patient of the defendant-dentist, was injured when a hypodermic needle being used, concededly with due care, to administer a local anesthetic broke off in his gum or jaw. The parties agreed that the break resulted from a latent defect in the needle. It was held that the strict liability in tort doctrine was not applicable to the professional man, such as a dentist, because the essence of the relationship with his patient was the furnishing of professional skill and services. We accepted the view that a dentist's bill for services should be considered as representing pay for that alone. The use of instruments, or the administration of medicines or the providing of medicines for the patient's home consumption cannot give the ministrations the cast of a commercial transaction. Accordingly the liability of the dentist in cases involving the ordinary relationship of doctor and patient must be tested by principles of negligence, i.e., lack of due care and not by application of the doctrine of strict liability in tort. Defendants suggest that there is no doctrinal basis for distinguishing the services rendered by a beauty parlor operator from those rendered by a dentist or a doctor, and that consequently the liability of all three should be tested by the same principles. On the contrary there is a vast difference in the relationships. The beautician is engaged in a commercial enterprise; the dentist and doctor in a profession. The former caters publicly not to a need but to a form of aesthetic convenience or luxury, involving the rendition of non-professional services and the application of products for which a charge is made. The dentist or doctor does not and cannot advertise for patients; the demand for his services stems from a felt necessity of the patient. In response to such a call the doctor, and to a somewhat lesser degree the dentist, exercises his best judgment in diagnosing the patient's ailment or disability, prescribing and sometimes furnishing medicines or other methods of treatment which he believes, and in some measure hopes, will relieve or cure the condition. His performance is not mechanical or routine because each patient requires individual study and formulation of an informed judgment as to the physical or mental disability or condition presented, and the course of treatment needed. Neither medicine nor dentistry is an exact science; there is no implied warranty of cure or relief. There is no representation of infallibility and such professional men should not be held to such a degree of perfection. There is no guaranty that the diagnosis is correct. Such men are not producers or sellers of property in any reasonably acceptable sense of the term. In a primary sense they furnish services in the form of an opinion of the patient's condition based upon their experienced analysis of the objective and subjective complaints, and in the form of recommended and, at times, personally administered medicines and treatment. Practitioners of such callings, licensed by the State to practice after years of study and preparation, must be deemed to have a special and essential role in our society, that of studying our physical and mental ills and ways to alleviate or cure them, and that of applying their knowledge, empirical judgment and skill in an effort to diagnose and then to relieve or to cure the ailment of a particular patient. Thus their paramount function--the essence of their function--ought to be regarded as the furnishing of opinions and services. Their unique status and the rendition of these Sui generis services bear such a necessary and intimate relationship to public health and welfare that their obligation ought to be grounded and expressed in a duty to exercise reasonable competence and care toward their patients. In our judgment, the nature of the services, the utility of and the need for them, involving as they do, the health and even survival of many people, are so important to the general welfare as to outweigh in the policy scale any need for the imposition on dentists and doctors of the rules of strict liability in tort. Notes, Questions and Problems
Problem 1 - If a doctor or hospital supplies a drug to a patient that results in an adverse reaction, should the patient be able to sue under UCC Article 2? See Batiste v. American Home Products Corp., 32 N.C. App. 1, 231 S.E.2d 269 (1977). Problem 2 – Assume a contract to build a swimming pool. The contractor provides labor and parts, including a diving board. In christening the new pool, the owner holds a pool party and is injured when he slips off the diving board and hits the side of the pool. The owner complains that the board did not have a proper surface that would prevent slipping. Would the lawsuit against the pool builder be covered by Article 2? See Anthony Pools v. Sheehan, 295 Md. 285, 455 A.2d 434, 35 UCC Rep. Serv. 408 (1983). Problem 3 - If a power surge through an electric utility line causes damage to one of the utility customer’s computer, should the customer be able to sue the utility under UCC Article 2? Compare Cincinnati Gas & Electric Co. v. Goebel, 28 Ohio Misc. 2d 4, 502 N.E.2d 713, 2 UCC Rep. Serv. 2d 1187 (1986) with New Balance Athletic Shoe, Inc. v. Boston Edison Co., 29 UCC Rep. Serv. 2d 397 (Mass. Super. Ct. 1996). Would the CISG ever apply to a sale of electricity? See CISG Article 2. If a customer of the local water company gets sick from consuming tainted water, should the customer be able to sue the water company? Compare Zepp v. Mayor & Council of Athens, 180 Ga. App. 72, 348 S.E.2d 673, 2 UCC Rep. Serv. 2d 1179 (1986) with Mattoon v. City of Pittsfield, 56 Mass. Ct. App. 124, 775 N.E.2d 770, 49 UCC Rep. Serv. 2d 52 (2002). Problem 4 - When consumers “purchase” computer software, most of the time they are not acquiring title to the software but are instead obtaining a “license” to use it, subject to the restrictions contained in the license. You have probably been required to click “I accept” when shown terms of the license when you have loaded software on the computer. If you do not accept, you cannot use the software. Should computer software transactions of the type described be subject to UCC Article 2? Should it matter if you acquire the software on a disk or download it over the internet? Under the proposed amendments to UCC Article 2 finalized in 2003, pure “information” transactions are excluded from the scope of Article 2. See amended UCC § 2-103(k) and the official comment to that subsection. “Information” is not a defined term, but the comment suggests that a transfer of a computer program over the internet would be an “information” transaction as would the sale of an architect’s plans on a disk. Sales of “smart goods” that contain imbedded computer programs, such as automobiles, would be covered under the amendments to Article 2 according to the official comment. Other cases are left to the courts. If Article 2 is not to be used in “information” transactions, what law should be used? The Uniform Computer Information Transactions Act (UCITA) has been promulgated by the National Conference of Commissioners on Uniform State Laws. UCITA would apply to many “information” transactions that have been excluded by the proposed amendments to Article 2. UCITA has been a very controversial proposal and at the time of this writing (Summer, 2005), versions of it have been adopted only by Maryland and Virginia. For more discussion of UCITA and licensing transactions, see Chapter __, infra. Problem 5 - Should a contract to write a book be subject to UCC Article 2? A contract to paint a painting? See National Historic Shrines Foundation v. Dali, 4 UCC Rep. Serv. 71 (N.Y. Sup. 1967). A contract to specially manufacture a chair? Should it matter if the chair is to be designed and manufactured by a world-renowned architect like Frank Gehry? Problem 6 – Contract for the sale of a hardware store. Included in the sale is the name of the store, the store inventory and equipment and an assignment of the lease for the store. Does Article 2 play any role in the transaction? See Miller v. Belk, 23 N.C. App. 1, 207 S.E.2d 792, 15 UCC Rep. Serv. 627 (1974). Problem 7 - Should a contract for the sale of minerals from land be subject to UCC Article 2? See UCC § 2-107(1). How about a contract for the sale of crops or timber? See UCC § 2-107(2).
Assuming that we have a contract for the sale of goods and assuming that the sale is international, meaning that the seller is located in one nation and the buyer in another, the next issue that must be analyzed is the choice of applicable sales law. Will the CISG, the UCC, some combination of the UCC and CISG or some other law apply to all or part of the transaction? The first thing that a court will do when an international case comes before it is look to its own choice of law rules. Restatement (Second) Conflict of Laws § 6. So, for example, if the case is being litigated in New York, the New York court will use New York choice of law rules. If the case is before an arbitrator, the arbitrator will be guided either by the parties’ choice of law under the contract or by conflict of law rules of the lex arbitri (the law governing arbitration, which may be the law governing arbitration at the place where the arbitration is conducted). Normally, the contract will indicate the rules for arbitration. For example, the contract may indicate that arbitration will be according to the UNCITRAL Arbitration Rules. Under the UNCITRAL Arbitration Rules, the arbitrator will look to the contract to see if the parties have designated a choice of law. For example, the contract may indicate that the domestic sales law of California will apply, in which case the arbitrator will use the California version of UCC Article 2. If no designation has been made, the arbitrator will use the choice of law rules the arbitrator deems appropriate in the arbitrator’s discretion. The arbitrator may then try to determine which jurisdiction has the most connection with the transaction. UNCITRAL Arbitration Rules Art. 33. If an international sales case were to be litigated before a court in any jurisdiction within the United States, Article 1 of the CISG would be relevant since the U.S. has adopted the CISG. Section 1-105 of the UCC (Revised UCC § 1-301) would also be relevant, since the sale of goods case would be within the UCC. If the international sales case were to be litigated outside the United States, Article 1 of the CISG would again be relevant if that nation has adopted the CISG. If not, then the tribunal would have to look to whatever choice of law rules apply in that jurisdiction. Examples of choice of law rules that might apply in some foreign nations are: the 1955 and 1986 Hague Conventions on the Law Applicable to International Sales of Goods,8 the 1980 Convention on the Law Applicable to Contractual Obligations (the “Rome Convention”), which has been acceded to by members of the European Union,9 and the 1994 Inter-American Convention on the Law Applicable to Contracts, which is a product of the Organization of American States.10 The issue can be made easier for the tribunal if the parties to the contract of sale have designated the appropriate law. The international conventions referred to above all generally permit party autonomy in selecting the law governing sales contracts, with exceptions for choices that violate the public policy of the forum states. CISG Article 6 permits parties to sales contracts to opt out of the application of the CISG or to limit its application to certain areas. UCC § 1-105 permits parties to select the law of a state if it bears a “reasonable relationship” to the transaction. If a state has adopted Revised UCC § 1-301, however, the parties have autonomy to select governing law in a non-consumer transaction unless the law selected would violate public policy of the forum state. In consumer transactions, Revised § 1-301, like § 1-105, requires that the state or nation selected must bear a reasonable relationship to the transaction. The Conventions listed above provide default choice of law rules in the event that the parties have not made a choice of law in their contract. The 1955 Hague Convention generally states that the law where the seller is located (or the branch office of the seller that took the order) governs. If, however, the agent for the seller took the order at the buyer’s location, then the law of the nation where the buyer is located applies (or the branch office of the buyer that placed the order). Under the Rome Convention, the “characteristic performance” of the sales contract must be determined for the governing law is that of the nation where that performance occurred. Should that performance be considered the shipment of the goods, the receipt of the goods or the payment for the goods? Or could it be something else?11 The 1994 Inter-American Convention applies the law of the nation with the “closest ties” to the contract. How should that be determined? In the event that the parties do not make a contractual choice of law and if the UCC applies, UCC § 1-105 states that the forum state’s version of the UCC will apply if the transaction bears an “appropriate relation” to the forum state. Revised UCC § 1-301, if adopted, states that general conflict of law principles of the forum state should be used to determine the applicable law. States may follow the “most significant relationship” test espoused by Restatement (Second) of Conflict of Laws § 188. Relevant factors would include the place of contracting, the place of performance and the place of domicile of both parties. The Restatement also provides that details of performance are to be determined under the law where performance is to take place. Restatement (Second) of Conflict of Laws § 206. If the court or arbitral tribunal determines that the CISG applies, is that the end of the inquiry? No. Article 4 of the CISG indicates its limited scope. According to that Article, the CISG only deals with questions of contract formation and the rights and duties of the parties arising out of the contract. It does not deal with issues of validity (e.g. mistake, lack of authority, unconscionability) or issues involving property rights in the goods sold. According to Article 7 of the CISG, these types of issues may be resolved according to the law applicable by virtue of the rules of private international law. So let us assume that in a sales contract between a buyer in the United States and a seller in France that the CISG applies. Let us assume that under applicable choice of law rules, French law also applies. To the extent that there are gaps in the CISG that cannot be resolved by looking at general principles upon which the CISG is based, we will look to French law. The following case, regarding a contract that was executed before the CISG came into force, demonstrates the application of UCC §1-105. Download 1.49 Mb. 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