## Facts

- A homeowner, Stephen Tanzer, retained Audio Visual Artistry (AVA), a general partnership, to provide a “smart home” system integrating home theater, multi-room audio/video, lighting controls, phone/intercom, and related network wiring.
- AVA provided a written proposal for components, parts, and installation totaling $78,567.13; the project later expanded substantially in scope and cost.
- The parties’ agreement was styled as a “Systems Sale and Installation Contract” involving significant equipment and associated installation work.
- AVA worked on the system over roughly fifteen months and continued attempting to correct operational problems; during this period, lightning damaged components.
- After continuing problems, Tanzer terminated AVA and refused to pay the remaining balance.
- AVA sued to recover the unpaid balance for equipment and installation; Tanzer counterclaimed for costs to hire another company (Marquis Home Solutions) to repair/replace the system and asserted claims under the Tennessee Consumer Protection Act (TCPA).
- The trial court treated the agreement as predominantly a sale of goods governed by UCC Article 2, awarded AVA damages with offsets for items Tanzer properly rejected, declined to award Tanzer the full Marquis invoice as damages, and rejected the TCPA claims.
- Tanzer appealed, challenging (1) UCC applicability, (2) the damages/offsets calculation, and (3) dismissal of the TCPA claim.

## Issues

1. Whether the parties’ hybrid “sale and installation” agreement was predominantly for the sale of goods such that UCC Article 2 governed.
2. Whether the trial court erred in calculating damages and offsets under Article 2, including denial of the full third-party repair/replacement costs and excluding losses tied to a later lightning event.
3. Whether the evidence supported liability under the Tennessee Consumer Protection Act rather than only a breach-of-contract dispute.

## Decision

- The Court of Appeals affirmed the judgment in all respects.
- It held the contract was predominantly for the sale of goods, so UCC Article 2 applied.
- It upheld the trial court’s offsets for goods Tanzer properly rejected and its net award to AVA on the unpaid balance.
- It affirmed the refusal to shift the full Marquis repair/replacement invoice to AVA, finding the claimed costs not shown to be reasonable and directly attributable to AVA’s breach, including because the work included upgrades not separately documented.
- It affirmed the finding that AVA was not responsible for damages from a later, separate lightning strike that shut down the system.
- It affirmed dismissal of the TCPA claim for failure to prove unfair or deceptive acts.

## Legal Principles

- For mixed goods-and-services contracts, Tennessee applies a predominant purpose test to determine whether UCC Article 2 governs, considering contract language, the parties’ transaction objective, and the relative allocation of price between goods and labor.
- When Article 2 applies, a buyer who properly rejects nonconforming goods may obtain appropriate offsets, but claimed damages must be proven with causation and reasonableness.
- Third-party repair or replacement costs are not recoverable as consequential damages absent proof they were reasonably incurred to cure the breach and were directly attributable to the seller’s nonconformance rather than upgrades or other independent choices.
- Losses caused by an intervening, independent event are not chargeable to the alleged breaching party absent proof linking the losses to the breach.
- A breach-of-contract or performance dispute does not establish TCPA liability without evidence of unfair or deceptive acts within the statute.

## Conclusion

The appellate court upheld treating the smart-home agreement as a goods-dominant contract governed by UCC Article 2, sustained offsets for properly rejected components while limiting the buyer’s claimed repair-related damages to those proven reasonable and caused by the seller’s breach, and affirmed dismissal of the TCPA claims for lack of proof of unfair or deceptive conduct.


Audio Visual Artistry v. Tanzer, 403 S.W.3d 789 (Tenn. Ct. App. 2012)