Making History: For First Time Ever, a New York Appeals Court Holds That an Interior Design Contract is One for Services, Not the Sale of Goods
Those of us who practice breach of contract law know that in New York the statute of limitations for breach of contract is 6 years, right? Not always. Under the Uniform Commercial Code (UCC), the statute of limitations for breach of contract for the sale of goods is only 4 years, not 6 years. However, breach of contract for services has a 6-year limitations period.
The facts: I have an interior designer client. She was hired (by way of a written contract) by a wealthy couple to redecorate a number of their homes, including a mansion in Tuxedo Park. She comes and goes and performs the work over a 3-year period. Her work involves creating design and color schemes for each room, buying hand-picked and/or custom-ordered furniture, fixtures, wallpaper, etc. Those are “goods”, and she then re-sells the goods to the couple at 10%, 15%, 20%, mark-ups. These mark-ups are the only way she gets paid for her work. She does not charge a separate design fee.
The couple makes some payments, but at the end of the project, they decide they are not going to pay my client roughly $53,000 in invoices.
My client does not reach out to me until after 4 years have passed since the couple stopped making payments (the time the breach occurred). After attempts to settle the case, I file suit for breach of contract. The defendants bring a pre-answer motion to dismiss on statute of limitations grounds. They argue plaintiff’s contract was “predominantly” for the sale of goods, not the provision of services, meaning a 4-year limitations period, and the case was not timely. In opposition, I say that, while the plaintiff did provide/re-sell goods to the couple, her contract was predominantly for services—her creative design services—and the goods were merely “incidental” to those services. That means a 6-year limitations period, and the case was timely filed.
The defendants win in the lower court. At oral argument, the judge holds up the $53,000 in invoices and says these are invoices for goods; that means the contract was for goods, not services, and your case is dismissed. I was shocked. I was sure I was right on the law. I did not expect to lose the motion.
I appeal to the First Department, making the same arguments, citing the same cases. On February 23, 2017, the First Department issues a decision, reversing the lower court, reinstating the breach of contract claim; holding that the contract was predominantly for services, and, thus, the case was timely.
The decision is unusually detailed and lengthy, and here is why (in my opinion): this was the first time a New York appeals court has ever held that an interior design contract was a contract for services. There was no precedent in New York, on these facts, in an interior design context. The decision even notes this, considering all the interior design work that goes on:
The closest reported case, anywhere, that I could find was a decision by the New Mexico Supreme Court, which I relied on heavily, and which the First Department also cited: Kirkpatrick v. Introspect Healthcare Corp., 845 P.2d 800, 114 N.M. 706 (1992). That case also held that an interior designer’s contract was predominantly for services. Of course, that case was not binding on the First Department.
The leading case on hybrid goods/services contracts in New York is a 1954 Court of Appeals case, Perlmutter v. Beth David Hospital, 308 N.Y. 100 (1954). In that case, the plaintiff got a blood transfusion from a hospital, became sick, then sued the hospital. The Court of Appeals’ analysis went like this: well, she paid for blood and she paid for medical services. But what was the essence of why she went to the hospital? To get medical treatment, not to buy blood. Thus, services.
And if you dig into Perlmutter, you see the Court favorably cites a short 1935 case, Racklin-Fagin Constr. Corp. v. Villar, 156 Misc. 220, 281 N.Y. Supp. 426 (App. T. 1st Dep’t 1935). In Racklin-Fagin, the court held that where someone hired a painter to paint a picture, the customer was essentially paying for the painter’s services; the completed painting (a good, a thing), was merely incidental to the services.
I was hoping for some Perlmutter and Racklin-Fagin love in the First Department’s decision, but sadly did not get it. In any event, this office prevailed, and I am happy for my client. History was made. On these issues, in an interior designer context, Hagman v. Swenson is now the controlling case in the State of New York, and I am proud.
The facts: I have an interior designer client. She was hired (by way of a written contract) by a wealthy couple to redecorate a number of their homes, including a mansion in Tuxedo Park. She comes and goes and performs the work over a 3-year period. Her work involves creating design and color schemes for each room, buying hand-picked and/or custom-ordered furniture, fixtures, wallpaper, etc. Those are “goods”, and she then re-sells the goods to the couple at 10%, 15%, 20%, mark-ups. These mark-ups are the only way she gets paid for her work. She does not charge a separate design fee.
The couple makes some payments, but at the end of the project, they decide they are not going to pay my client roughly $53,000 in invoices.
My client does not reach out to me until after 4 years have passed since the couple stopped making payments (the time the breach occurred). After attempts to settle the case, I file suit for breach of contract. The defendants bring a pre-answer motion to dismiss on statute of limitations grounds. They argue plaintiff’s contract was “predominantly” for the sale of goods, not the provision of services, meaning a 4-year limitations period, and the case was not timely. In opposition, I say that, while the plaintiff did provide/re-sell goods to the couple, her contract was predominantly for services—her creative design services—and the goods were merely “incidental” to those services. That means a 6-year limitations period, and the case was timely filed.
The defendants win in the lower court. At oral argument, the judge holds up the $53,000 in invoices and says these are invoices for goods; that means the contract was for goods, not services, and your case is dismissed. I was shocked. I was sure I was right on the law. I did not expect to lose the motion.
I appeal to the First Department, making the same arguments, citing the same cases. On February 23, 2017, the First Department issues a decision, reversing the lower court, reinstating the breach of contract claim; holding that the contract was predominantly for services, and, thus, the case was timely.
The decision is unusually detailed and lengthy, and here is why (in my opinion): this was the first time a New York appeals court has ever held that an interior design contract was a contract for services. There was no precedent in New York, on these facts, in an interior design context. The decision even notes this, considering all the interior design work that goes on:
Interestingly, notwithstanding that interior design services are apparently in much demand in New York, to our knowledge, there are no published opinions on this issue in this state.
The closest reported case, anywhere, that I could find was a decision by the New Mexico Supreme Court, which I relied on heavily, and which the First Department also cited: Kirkpatrick v. Introspect Healthcare Corp., 845 P.2d 800, 114 N.M. 706 (1992). That case also held that an interior designer’s contract was predominantly for services. Of course, that case was not binding on the First Department.
The leading case on hybrid goods/services contracts in New York is a 1954 Court of Appeals case, Perlmutter v. Beth David Hospital, 308 N.Y. 100 (1954). In that case, the plaintiff got a blood transfusion from a hospital, became sick, then sued the hospital. The Court of Appeals’ analysis went like this: well, she paid for blood and she paid for medical services. But what was the essence of why she went to the hospital? To get medical treatment, not to buy blood. Thus, services.
And if you dig into Perlmutter, you see the Court favorably cites a short 1935 case, Racklin-Fagin Constr. Corp. v. Villar, 156 Misc. 220, 281 N.Y. Supp. 426 (App. T. 1st Dep’t 1935). In Racklin-Fagin, the court held that where someone hired a painter to paint a picture, the customer was essentially paying for the painter’s services; the completed painting (a good, a thing), was merely incidental to the services.
I was hoping for some Perlmutter and Racklin-Fagin love in the First Department’s decision, but sadly did not get it. In any event, this office prevailed, and I am happy for my client. History was made. On these issues, in an interior designer context, Hagman v. Swenson is now the controlling case in the State of New York, and I am proud.
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