Arkansas Court Clarifies Law on Hybrid Contracts and UCC Statute of Limitations

Case: Church on the Rock – Texarkana v. Ace Signs of Arkansas, LLC,   2025 Ark. App. 35

Trial Court: Pulaski County Circuit Court (Judge Pierce) 

Issue: Is a written contract for the sale and installation of a new sign and lighting on a church a contract for the sale of goods governed by the Uniform Commercial Code (UCC) governed by a four-year statute of limitations or a service contract for which a five-year statute of limitations controls? And how is that determination made.

Holding: The “predominant factor” test in use in other jurisdictions is the appropriate way to analyze such cases. Under the facts of this case, the contract is for the sale of goods. Because the complaint was filed four years after the installation of the signage and lighting, the court held the suit untimely and upheld the dismissal on statute of limitations grounds.

Summary: In September 2015, Church of the Rock – Texarkana (“COTR”) entered into an approximately $173,000 contract with Ace Signs of Arkansas, LLC (“Ace”) installation of a sign at the church. The contract set out the components of the job as follows:

• Manufacture and install double sided 9′ x 18′ new lit top cabinet with peaked top. To include removal of existing cabinet.
• Manufacture and install double sided 9′ x 16′ 10mm full color LED display To include removal of existing cabinet, software, training, wireless communication and five year warranty.
• Manufacture and install pole shroud with steel framing and aluminum exterior.
• Manufacture and install double sided 6′ illuminated cross.

The bulk of the contract was allocated to the LED display, which was listed at $138,913.20.

COTR alleged various issues with the tiles and panels, claiming that Ace failed to fix them. COTR filed suit in August 2020—almost five years after the contract was executed. Ace moved for summary judgment, arguing that the suit was untimely because the UCC’s four-year statute of limitations applied, rather than the five-year limit for service contracts.

The Predominant Factor Test

The court identified this as a hybrid contract involving both goods and services. Courts often use the predominant factor test to determine if such contracts fall under the UCC.

• Definition: The test assesses whether the predominant purpose is the sale of goods with incidental services or vice versa.
• Factors Considered:
  • Contract language
  • Billing method
  • Mobility of goods

Analysis of Factors

1. Contract Language
   The court found the language ambiguous. The contract referred to a “project” and identified Ace as an “independent contractor,” indicating a service contract. However, the term “customer” suggested a transaction in goods.Relevant Cases:
   • Frommert v. Bobson Constr. Co., 558 N.W.2d 239 (Mich. Ct. App. 1996)
   • Bailey v. Montgomery Ward & Co., 690 P.2d 1280 (Colo App. 1984)
2. Billing Method
   The contract did not separate the costs for goods and services. Payment was structured for finished products, suggesting a transaction in goods:

   “The lack of a price breakdown, where the plaintiff pays for the finished products and not separately for services, strongly indicates a sale of goods.”

3. Mobility of Goods
   The court found that the goods were movable at the time they were identified in the contract, despite their eventual installation.

   “Mobility is measured as of the time the goods are identified to the contract.” (BMC Indus., Inc. v. Barth Indus., Inc., 160 F.3d 1322 (11th Cir. 1998))

Court’s Conclusion

The court ruled that the contract was predominantly for the sale of goods. Therefore, the UCC’s four-year statute of limitations applied.

Key Takeaways

1. Hybrid Contracts and UCC Compliance:
   The case provides a roadmap for determining whether contracts involving both goods and services fall under the UCC. Drafting contracts with clear language and structure can help steer them toward or away from UCC governance.
2. Statute of Limitations Awareness:
   Parties should be cautious about waiting too long before filing suit. While pre-suit negotiations are common, delaying litigation can risk losing the right to sue due to statute of limitations constraints.

Contact a Pine Bluff Civil Litigation Lawyer

If you have a commercial litigation or business litigation issue, please do not hesitate to contact the Law Office of Geoffrey D. Kearney, PLLC, your experienced Pine Bluff civil litigation attorneys. We can guide you through complex legal matters and help protect your business interests.

The UCC (Uniform Commercial Code) is a set of model laws governing commercial transactions, designed to create a consistent legal framework across states.