## Facts

- Gared Holdings, LLC manufactured basketball goal systems and sought pulleys used to raise and lower backboards.
- Gared contacted Best Bolt Products, Inc. to supply pulleys and provided sample pulleys it had been using, while also reporting that those pulleys had problems and field failures.
- Gared did not provide detailed specifications for the pulleys and did not expressly request a lubricated bushing (a component reducing friction between wheel and axle).
- Best Bolt, a distributor that did not manufacture pulleys, arranged for another company to produce pulleys and provided samples to Gared.
- Gared’s engineering manager did not dismantle or fully test the sample pulleys and assumed a lubricated bushing would be included as an industry standard feature.
- The pulleys delivered lacked a lubricated bushing, contributing to pulleys seizing shortly after the goals were sold.
- After failures occurred, Gared sought return acceptance and compensation from Best Bolt; Best Bolt refused.
- Gared refused to pay for a second pulley order and for an order of clevis pins, leading Best Bolt to assert a counterclaim for the unpaid goods.
- The trial court rejected Gared’s contract and implied warranty claims (fitness and merchantability) and entered judgment for Best Bolt on its counterclaim.

## Issues

1. Whether the parties’ agreement required Best Bolt to replicate Gared’s sample pulleys (including a lubricated bushing), such that supplying different pulleys breached the contract.
2. Whether an implied warranty of fitness for a particular purpose arose and was breached, given the requirement that the buyer rely on the seller’s skill or judgment.
3. Whether an implied warranty of merchantability arose, specifically whether Best Bolt was a “merchant with respect to goods of that kind,” and if so whether the pulleys were merchantable.
4. Whether Best Bolt was entitled to recover on its counterclaim for the unpaid second order of pulleys and the clevis pins that Gared refused to accept.

## Decision

- Affirmed the judgment against Gared on the contract claim; the contract did not require duplication of the sample pulleys.
- Affirmed the judgment against Gared on the implied warranty of fitness for a particular purpose; Gared failed to prove reliance on Best Bolt’s skill or judgment.
- Reversed in part and remanded on the implied warranty of merchantability; the trial court used an incorrect basis for rejecting merchant status and had to reconsider merchant status under the UCC definition and, if applicable, merchantability.
- Largely affirmed judgment for Best Bolt on its counterclaim for payment for the second pulley order and clevis pins, subject to any adjustment based on the merchantability determination on remand.

## Legal Principles

- A contract to supply goods is not necessarily a promise to duplicate a buyer-provided sample where surrounding communications indicate the buyer did not want duplicates of the sample design.
- Implied warranty of fitness for a particular purpose requires proof that the buyer actually relied on the seller’s skill or judgment to select or furnish suitable goods; an uncommunicated assumption by the buyer does not satisfy reliance.
- Merchantability under the UCC turns on whether the seller is a “merchant” with respect to the goods, which may be shown by dealing in goods of the kind or holding oneself out as having relevant knowledge or skill; distributor status and limited prior sales are not dispositive.
- Where a trial court rejects a merchantability claim based on an improper view of merchant status, remand is appropriate to apply the statutory definition and then assess merchantability (including fitness for ordinary purposes).

## Conclusion

The court held that Best Bolt neither breached the contract nor incurred fitness-warranty liability because Gared did not show a contractual duty to replicate the sample pulleys and did not prove reliance on Best Bolt’s skill or judgment. It remanded for a correct determination of Best Bolt’s merchant status and any resulting merchantability liability, while otherwise leaving in place Best Bolt’s recovery for unpaid goods.


Gared Holdings, LLC v. Best Bolt Prods., Inc., 991 N.E.2d 1005 (Ind. Ct. App. 2013)