K & M Joint Venture v. Smith International, Inc.

669 F.2d 1106, 33 U.C.C. Rep. Serv. (West) 1, 1982 U.S. App. LEXIS 22122

• Court: Court of Appeals for the Sixth Circuit
• Decided: February 3, 1982
• Docket: 79-3696
• Status: Published

Opinions

LIVELY, Circuit Judge.

In this diversity action the district court awarded damages of $1,492,230 to an Ohio purchaser of equipment from a California seller for breach of an implied warranty of merchantability. The plaintiff-appellee is K&M Joint Venture (K&M) which was formed for the purpose of bidding on a sewer project of the City of Cleveland. After being awarded the contract for the project a principal of K&M contacted an officer of the Calweld Division of defendant-appellant Smith International, Inc. (Calweld) by telephone to learn if he knew of a 12-foot diameter tunnel boring machine (TBM) which K&M might buy for the Cleveland project. K&M eventually bought a 12-foot TBM from Calweld and this lawsuit resulted from that transaction.

I.

The case was tried by the district court without a jury. The complaint sought damages for breach of contract and breach of both express and implied warranties. Cal-weld filed a motion for summary judgment supported by affidavits of several of its officers and by two documents which it claimed demonstrated that the TBM was sold in “as is” condition and without any warranties. The district court denied the motion for summary judgment, holding that the opposing affidavits of the parties showed the existence of genuine issues of material fact. Calweld then answered, denying generally the allegations of breach of contract and breach of warranty and pleading as affirmative defenses that the sale was made “as is” without warranties and that K&M had failed to notify Calweld promptly of K&M’s claim of breach.

There were conflicts in the evidence with respect to the terms under which the TBM was sold. During a series of telephone calls on November 9, 1973, Calweld offered to sell K&M a 12-foot TBM for $90,000.00. The district court found that Richard Wal-lers, an officer of Calweld, told Ed Kassouf and Emil Dodero, representatives of K&M, that the TBM which it offered for sale was new and fully warranted, but that some of the accessories were used and not warranted. The district court found that these representations were made to Kassouf in one of the telephone calls on November 9, 1973 and were repeated to him and Dodero when they visited the California plant of Calweld on November 28, 1973. The district court further found that an oral contract for sale of the TBM to K&M for $75,000 was made when Kassouf was again in California to view a test of the TBM with its power hooked up about December 17th. The district court found that there was no discussion of warranties during Kas-souf’s second trip to Calweld’s plant, but that there was a meeting of the minds on the basis of the representations made by Wallers during the first visit.

Between Kassouf’s two visits to California, Calweld sent a “quotation” to K&M which Kassouf saw. This document listed Item 1, priced at $75,000, “One (1) Calweld 12'0" Diameter Tunnel Boring Machine and Accessories including [listed accessories]. All Equipment is on Calweld stock and is offered in the ‘as is’ condition.” This quotation was dated November 30,1973. After the second visit to Kassouf, at about the time the TBM was shipped to Cleveland, Calweld sent K&M an invoice which described Item 1 as one used 12-foot TBM and contained the same statement that all equipment was offered in the “as is” condition. K&M did not question the language in either document and it paid for Item 1 without protest.

The TBM was delivered disassembled to K&M, F.O.B. Santa Fe Springs, California on January 18, 1974 and reached K&M in Cleveland on about January 30th. The TBM is a large machine, weighing approximately 30 tons. Upon being lowered into an excavation, it is positioned by means of its six legs against a wall of earth. The TBM then rotates “cutters” against the face of the wall and bores out a tunnel the size of the cutters. It was undisputed that Kassouf told Wallers that the TBM would be used to bore through shale of a kind Wallers was familiar with from an earlier Cleveland project where a Calweld TBM had been used. The 12-foot TBM was lowered into the shaft by K&M on June 25, 1974. The district court found that the TBM “malfunctioned repeatedly” from that date until it was removed for extensive repairs on January 8,1975. On January 23, 1975 K&M advised Calweld that it was required to rebuild the TBM completely and requested a full set of drawings for the machine. There were a number of discrepancies between the drawings and the TBM as actually constructed. Based on a series of conversations between representatives of K&M and Calweld after problems with the TBM began to appear the district court found that K&M had discharged its burden of proving that adequate notice of Cal-weld’s alleged breach was given within a reasonable time.

II.

A.

The TBM transaction was a sale of goods within the meaning of Article 2 of the Uniform Commercial Code (UCC) which was in effect in both Ohio and California. The district court found that the contract was made in California. It was performed there also since delivery was made to K&M F.O.B. Calweld’s plant. Further a document styled “Conditions and Terms of Sale” which accompanied the invoice provided, “this order is made and entered into in Los Angeles, California, and shall be construed in accordance with the laws of the State of California.”

B.

On appeal Calweld argues that the finding of the district court that the TBM was sold subject to an implied warranty of merchantability is clearly erroneous. It contends there is no support in the evidence for the district court’s finding that the parties intended “as is” merely to mean that Cal-weld was unwilling to incur further selling expenses by cleaning up some of the accessories and including additional parts requested by K&M. Calweld relies on a provision of UCC § 2-316 which states that use of expressions such as “as is” excludes all implied warranties. It maintains that even if Wallers and another Calweld representative, Uski, stated at the November 28th meeting that the TBM carried the full warranty of new equipment, this was modified by the quotation of November 30, 1973 and the invoice of January 1974. Since there was no discussion of terms of sale other than price at the December 17th meeting, the agreement made at that time was necessarily based on the “offer” contained in the November 30th document, according to Calweld. Calweld further contends that the invoice was not an attempt to change the previous agreement of the parties, as found by the district court. Rather, it was a confirmation of the fact that the TBM was sold in “as is” condition.

K&M responds that the district court merely resolved conflicts in the evidence and its finding that the TBM was sold with an implied warranty of merchantability is not clearly erroneous. Its representatives’ understanding that “as is” referred only to the used equipment and not to the new TBM was “entirely credible” and supported by the evidence, K&M asserts. Further, neither the quotation nor the invoice was effective as a disclaimer of the implied warranty. The finding that in this transaction the expression “as is” had a special meaning different from its use as a disclaimer of warranty was also supported by the evidence in the view of K&M. Thus, it contends, the quotation was not an offer which changed the terms of the previous discussions between the parties, but a mere confirmation of those terms. Finally, K&M agrees with the district court that even if the “as is” language in the invoice was intended to disclaim implied warranties it was ineffective for this purpose since it was written after the parties had agreed.

C.

Calweld also contends that K&M is barred from recovery by reason of its failure to give adequate and timely notice of Calweld’s alleged breach. Calweld argues that, as a matter of law, the communications from K&M concerning the malfunctioning of the TBM did not constitute notice of a breach. It points out that Kassouf called Wallers a number of times to report breakdowns of the TBM and to request advice, but that no demands were made that Calweld repair the machine at its expense or that it furnish replacement parts to K&M free of charge. Calweld further asserts that K&M’s conduct was inconsistent with its present claim of a breach of warranty of merchantability. Between June 1974 and January 1975, the period when K&M experienced many difficulties with the TBM, K&M purchased approximately $20,000 worth of repair and replacement parts for the TBM from Calweld. These parts were paid for without any protest. Many of the parts were the products of other manufacturers and could have been purchased directly from them rather than from Calweld. Calweld finds this continuation of the business relationship during this period, and particularly payment for the parts without protest or claim of set-off, inconsistent with the claim of breach of warranty.

K&M responds to this argument by asserting that it did everything possible to notify Calweld except to “mouth the magic words.” It relies on the language of an official comment to the UCC that notice to a seller that the product has proven “troublesome” is sufficient, and discusses factual differences between the present case and some of the decisions relied upon by Cal-weld. Primarily, however, K&M argues that notice is a question of fact and that the finding of the district court that K&M gave adequate and timely notice is not clearly erroneous.

III.

At first reading the use of “as is” in the two documents appears to disclaim the existence of implied warranties in connection with the sale of the TBM. Both before and since the adoption of the UCC California has recognized that the use of “as is” may be effective to prevent representations of a seller from being treated as warranties. See Intrastate Credit Service, Inc. v. Pervo Paint Co., 236 Cal.App.2d 547, 46 Cal.Rptr. 182 (1965); Triple C. Leasing v. All-American Mobile Wash, 64 Cal.App.3d 244, 134 Cal.Rptr. 328 (1976). However, the use of “as is” does not automatically exclude implied warranties. The language of UCC § 2-316(3)(a) (Cal.Com.Code § 2316(3)(a)) makes this clear:

(3) Notwithstanding subdivision (2)

(a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty;

(Emphasis added). We read the district judge’s memorandum opinion to mean that he found that the circumstances of the present case indicated “otherwise”; that is, that the use of the words had a special meaning which was different from the usual disclaimer of warranty.

There was a sharp conflict in the testimony concerning representations with respect to the TBM at the November 28th meeting. The district court resolved this conflict in favor of K&M by finding that Wallers represented to Kassouf that the TBM was new and would be sold subject to full warranties. The court found that this was consistent with Wallers’ representations to Kassouf in a series of telephone conversations on November 9th. The district court further found that Calweld’s representatives excluded some of the accessory equipment from the scope of the warranties because the equipment had been used and had been exposed to the elements for a long time. There was evidence to support these findings, giving credit to the witnesses for K&M. Thus, the findings with respect to the November 28th meeting are not clearly erroneous.

The district court also found that an oral contract was entered into at the time of Kassouf’s second visit to Calweld’s plant and that it embodied the terms of the previous discussions. The written quotation which was sent between the two meetings used “as is” only to indicate that Calweld refused to incur any further expenses in consummating the sale of the new TBM or the used equipment according to the district court. This finding was based on Wallers’ testimony which was found to be consistent with the previous discussions of the parties and their subsequent agreement. Evidentiary support for this finding is much less clear than for the earlier one that Calweld agreed on November 28th that the TBM would be warranted. The written quotation could easily be construed as amending the original representation and offering the TBM and accessories on an unwarranted basis. However, the existence of a warranty is a question of fact. Calweld did not use its usual sales contract form which spelled out its warranties and their limitations in detail. See S. M. Wilson & Co. v. Smith International, Inc., 587 F.2d 1363, 1366—67 n. 2 (9th Cir. 1978). The district court found that Calweld’s usual warranties were not discussed with K&M’s representatives.

On the entire record we do not believe the district court erred in finding that the circumstances of this case indicated that “as is,” as used in the November 30th document, did not effectively disclaim an implied warranty of merchantability for the TBM. Also, given the court’s finding that there was a meeting of the minds on December 17th and that the agreement reached at that time included a new equipment warranty on the TBM, the court did not err in holding that the language in the January 1974 invoice was ineffective to negate the existence of an implied warranty.

IV.

A buyer who intends to seek recovery from a seller for a claimed breach of warranty must give the seller prompt notice of the claim. UCC § 2-607(3)(a) (Cal.Com. Code § 2607(3)(a)) provides in part:

(3) Where a tender has been accepted (a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; .. .

The district court held that this requirement had been complied with. Though Cal-weld pled lack of prompt and reasonable notice as an affirmative defense, the district court properly held that the burden of proof on this issue rests upon K&M. As we have noted, K&M takes the position that the findings of the district court with respect to notice are not clearly erroneous and that we are bound to accept them under Rule 52(a), Fed.R.Civ.P., and affirm the judgment. We view the matter differently. We agree that the question of whether any notice was given, and if so, what the notice consisted of and when it was given, is one of fact. However, the question of whether the notice satisfied the statutory requirement is one of law. Thus, the issue of notice in this case presents a mixed question of fact and law. In reviewing mixed findings we are not bound by the clearly erroneous standard. This was clearly stated in United States v. Weingarden, 473 F.2d 454, 460-61 (6th Cir. 1973):

In our opinion, the finding by the District Court that the sole purpose of the issuance of the summons is for criminal prosecution, is not a finding of fact. It is either a mixed finding of fact and conclusion of law, or it is a finding of the ultimate fact in the making of which is involved legal principles. It is subject to appellate review, and the clearly erroneous rule has no application.

In Cordovan Associates, Inc. v. Dayton Rubber Co., 290 F.2d 858, 860 (6th Cir. 1961), we held:

“Where a finding designated as a finding of fact is not in reality a finding of fact, but is a conclusion of law or a mixed finding of fact and conclusion of law, it is not binding on the appellate court. Bogardus v. Commissioner, 302 U.S. 34, 58 S.Ct. 61, 82 L.Ed. 32; Weible v. United States, 9 Cir., 1957, 244 F.2d 158; Chandler v. United States, 7 Cir., 1955, 226 F.2d 403. Where a finding is of an ultimate fact in the making of which is involved the application of legal principles, it is subject to review. Baumgartner v. United States, 322 U.S. 665, 64 S.Ct. 1240, 88 L.Ed. 1525.”

See also Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co., 477 F.2d 150, 154 (6th Cir. 1973); Glasson v. City of Louisville, 518 F.2d 899, 903 (6th Cir.), cert. denied, 423 U.S. 930, 96 S.Ct. 280, 46 L.Ed.2d 258 (1975).¹

In concluding that the notice given by K&M to Calweld was adequate and timely the district court relied heavily on portions of Official Comment 4 to § 2-607 of the UCC as shown by the following excerpt from its memorandum opinion:

The time of notification is to be determined by applying commercial standards to a merchant buyer. ‘A reasonable time’ for notification from a retail customer is to be judged by different standards so that in his case it will be extended, for the rule of requiring notification is designated to defeat commercial bad faith, not to deprive a good faith customer of his remedy.

The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched. There is no reason to require that the notification which saves the buyer’s rights under this section must include a clear statement of all the objections that will be relied on by the buyer, as under the section covering statements of defect upon rejection (Section 2-605). Nor is there reason for requiring the notification to be a claim for damages or of any threatened litigation or other resort to a remedy. The notification which saves the buyer’s rights under this Article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.

(Emphasis added by district court).

The district court erred in accepting the statement from Comment 4, “[t]he content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched [],” as controlling. In Eastern Air Lines, Inc. v. McDonnell Douglas Corp., 532 F.2d 957 (5th Cir. 1976), the court was required to apply California law in an action for breach of an agreement for delivery of 99 jet aircraft. The court of appeals found that the district court had erred in holding as a matter of law that the buyer had given adequate and timely notice of its claim of breach. In reaching this conclusion the court discussed the origins of UCC § 2-607 and its purpose. The critical question under both Section 49 of the Uniform Sales Act, from which UCC § 2-607 was derived, and § 2-607, was found to be “whether the seller had been informed that the buyer considered him to be in breach.” Id. at 972. The court determined that the basic policies underlying both uniform laws “of encouraging compromise and promoting good faith in commercial relations” are served by requiring prompt notice to the seller that the buyer considers him to be in breach. Id.

Given these undeniable purposes, it is not enough under section 2-607 that a seller has knowledge of the facts constituting a non-conforming tender; he must also be informed that the buyer considers him to be in breach of the contract.

Id. at 973.

The court specifically rejected the contention that the single quoted sentence from Comment 4 is controlling:

However, the fact that the Code has eliminated the technical rigors of the notice requirement under the Uniform Sales Act does not require the conclusion that any expression of discontent by a buyer always satisfies section 2-607. As Comment 4 indicates, a buyer’s conduct under section 2-607 must satisfy the Code’s standard of commercial good faith. Thus, while the buyer must inform the seller that the transaction is “still troublesome,” Comment 4 also requires that the notification “be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.”

Id. at 976. In summary the court held that the buyer’s conduct, “taken as a whole, must constitute timely notice that the transaction is claimed to involve a breach.” Id. at 978 (footnote omitted).

This court has had occasion recently to consider the adequacy of a notice of claimed breach of warranties. Standard Alliance Industries, Inc. v. Black Clawson Co., 587 F.2d 813 (6th Cir. 1978), cert. denied, 441 U.S. 923, 99 S.Ct. 2032, 60 L.Ed.2d 396 (1979). Applying Ohio law in a diversity case, we reached the same conclusions concerning the notice requirement of UCC § 2-607 as the court did in Eastern Air Lines, supra. Both California and Ohio adopted this section of the uniform code without change. In Black Clawson this court stated that the seller knew the buyer was experiencing difficulties with the goods and that a jury might have concluded the seller knew it was in breach of warranty to repair or replace. The critical issue, however, was whether the seller “had notice it was considered to be in breach.” 587 F.2d at 825. Rather than relying on the “troublesome” portion in Comment 4, this court emphasized the later statement in the same Comment, “The notification which saves the buyer’s rights under this Article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.” (Emphasis added).

Finding that the buyer’s communication to the seller failed to inform the seller that a breach was claimed, this court reversed a jury award for the buyer and held as a matter of law that the notice requirement of UCC § 2-607 had not been met. Black Clawson, supra. In reaching this result this court agreed with the Fifth Circuit on the underlying policies and purposes of the notice requirement. Both courts concluded that mere notice that a transaction is “troublesome” is not enough. Both also quoted from an opinion of Judge Learned Hand in a pre-UCC case:

The plaintiff replies that the buyer is not required to give notice of what the seller already knows, but this confuses two quite different things. The notice ‘of the breach’ required is not of the facts, which the seller presumably knows quite as well as, if not better than, the buyer, but of buyer’s claim that they constitute a breach. The purpose of the notice is to advise the seller that he must meet a claim for damages, as to which, rightly or wrongly, the law requires that he shall have early warning.

American Mfg. Co. v. United States Shipping Board E. F. Corp., 7 F.2d 565, 566 (2d Cir. 1925).

Eastern Air Lines, 532 F.2d at 972; Black Clawson, 587 F.2d at 825. The underpinning of UCC § 2-607 is a requirement of commercial good faith which is met by a prompt notice that the buyer is claiming a breach has occurred.

Considering the communications from K&M to Calweld in the light of the foregoing principles we conclude that the district court erred as a matter of law. K&M experienced problems with the TBM immediately after it was positioned in an excavation. It called Calweld the next day, June 26, 1974. Kassouf merely sought advice from Wallers in dealing with the problem. From this testimony, giving it the most favorable meaning to K&M, there was not the slightest hint of a claim of breach of warranty. The next problem occurred when the TBM tipped over while being re-positioned following repairs which had been suggested by Wallers. There was no testimony that this problem was even reported to Calweld. Then on July 9, 1974 some of the rolling cutters failed. Wallers was again called, and he advised K&M just to run the TBM as it was. Nevertheless, K&M bought a full set of cutters from another supplier and paid approximately $18,000 for them. These cutters were installed by K&M, but it never made any demand that Calweld replace the failed cutters or pay for the replacements. There was nothing in the contract concerning the cutters which would have given Calweld notice that K&M was claiming a breach.

On July 18,1974 the side legs of the TBM failed. Kassouf called Wallers to complain, but did not claim a breach. Calweld then offered to send a service representative to look at the TBM. The district court found that while this representative was in Cleveland, Kassouf told him that K&M “intended to hold Calweld responsible for the breakdowns.” This occurred on July 19th or 20th. It was not followed by any written notice or any statement to an officer of Calweld though Kassouf and Wallers were in frequent contact. K&M proceeded to make additional repairs on the TBM without any demands on Calweld for payment. On July 26, 1974 Kassouf called Wallers and “explained the situation to him.” The “explanation” was a description of a new problem being encountered. Again, Kassouf made no claim of breach of warranty. When Wallers’ suggested remedy failed to work, Kassouf again made no demand that Calweld repair the TBM or pay the cost of having it repaired.

In September 1974 Dodero went to the Calweld plant to discuss the problems K&M was having “over a set of blueprints.” There was no testimony that Dodero made any demand on Calweld or notified anyone there that K&M was claiming a breach of warranty. On January 8, 1975 the TBM was removed from the job. On January 23rd K&M advised Calweld that it planned to rebuild the TBM completely and requested a complete set of drawings. This was the only written communication from K&M during the entire period from June 1974 until this action was filed. During the rebuilding K&M discovered a number of discrepancies between the drawings and the actual construction of the TBM. Yet, even with this information, K&M never notified Calweld that it was claiming anything from Calweld. The first such notice came when this action was filed eleven months later, seventeen months after the first problems were experienced with the TBM. The fact that K&M continued to order repair and replacement parts from Calweld and to pay for them as billed without protest throughout the period when problems were being experienced is inconsistent with the claim that K&M considered Calweld liable. See Eastern Air Lines, supra, 532 F.2d at 978-79. This course of conduct is also inconsistent with the one statement made to Cal-weld by K&M which even remotely suggested an intent to claim a breach of warranty — the statement early in the period of problems with the TBM to Calweld’s service representative that K&M intended to hold Calweld responsible.

Taken as a whole, K&M’s conduct did not constitute timely or adequate notification that the transaction was claimed to involve a breach. We find no support in the record for findings of the district court that K&M gave unequivocal notice of its intent to hold Calweld responsible for failure of the TBM to perform satisfactorily and that Calweld failed to take advantage of opportunities for settlement and real negotiations initiated by K&M.

The district court also held that K&M is not a “merchant,” and therefore should be held to no higher standard than an ordinary consumer with respect to the adequacy of notice under UCC § 2-607. This determination was based on a finding that K&M had no “specialized knowledge as to the goods,” one test set forth in Official Comment 2 to UCC § 2-104 which defines “merchant.”² However, specialized knowledge of the goods is not the only test in Comment 2. A merchant is also one who has “specialized knowledge as to business practices.” It is undisputed that both parties to the K&M joint venture were experienced sewer contractors. The Kassouf Company, one of the joint venturers, had excavated eight tunnels using boring machines before the joint venture was formed. When the Calweld TBM failed, K&M “completely rebuilt” it. Moreover, K&M purchased a new TBM from another supplier during the course of the Cleveland sewer project. In a case applying California law both a contractor and its supplier of specialized equipment were found to be merchants within the meaning of the UCC. See C. R. Fedrick, Inc. v. Borg-Warner Corp., 552 F.2d 852, 855 (9th Cir. 1977). Given K&M’s experience in purchasing and operating TBM’s on a number of occasions it was error for the district court not to hold it to the stricter requirement of notice under § 2-607 which applies to merchants. Eastern Air Lines, supra, 532 F.2d at 977; Black Clawson, supra, 587 F.2d at 827.

CONCLUSION

At first glance the result in this case may appear harsh, given the undenied problems which K&M experienced with the Calweld TBM. However, K&M was a joint venture composed of experienced contractors who routinely dealt with suppliers of specialized machinery. This was a transaction between two large enterprises, not one in which an individual consumer dealt in a single transaction with a large manufacturer or seller of goods. If Kassouf or someone else acting for K&M had notified Calweld early on that a breach of warranty was claimed Cal-weld would have had an opportunity to offer to undertake repairs itself, to furnish replacement parts from its stock, or even to negotiate a settlement. If K&M had followed through on Kassouf’s July 1974 statement to the Calweld service representative by billing Calweld for the cost of the repairs to that date or by claiming the right to offset its expenses- against Calweld’s charges for repair and replacement parts, there might be some basis for holding that Calweld was notified of the nature of K&M’s claim. But K&M did none of these things. Instead, it continued to attempt to make its bargain TBM ³ work satisfactorily and then when the job was completed filed this action seeking over $3,000,000 in damages from Calweld. K&M, an experienced party, chose to follow a course of conduct which failed to inform Calweld that it was claiming a breach of warranty. Under these circumstances, there is no inequity in requiring it to bear the consequences of its decision. Cf. Delta Air Lines, Inc. v. Douglas Aircraft Co., 238 Cal.App.2d 95, 47 Cal.Rptr. 518 (1966).

The judgment of the district court is reversed with directions to dismiss the complaint. The defendant-appellant will recover its costs on appeal.

1 . The dissent is concerned that we have not dealt properly with the findings of the district court on the issue of the adequacy and timeliness of notice. After careful examination of the record on appeal, the majority concludes that even if the findings with respect to notice were purely factual, it would be necessary to reverse them under the “clearly erroneous” standard of Rule 52(a). This is a case where we are “left with the definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948).

2 . UCC § 2-104 provides in part:

“Merchant” means 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 or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

3 . Kassouf knew the 12-foot TBM had been built approximately four years prior to his seeing it and that it had been sitting outside the Calweld plant. K&M paid $75,000 for the TBM, though Kassouf was told that similar equipment ordinarily cost about $300,000 to $325,000. During the course of the contract K&M purchased another TBM from another supplier as a “cover.” The cost was $219,000.