Contracts OUTLINE Fall 2014
1) THE COMMON LAW AND THE UCC
a) Issue from CF: Is software a good?
b) Issue from CF: Is specially designed software a good?
c) UCC applies when something is a good according to the UCC 2-105:
i) UCC § 2-105:
(1) “Goods” means all things (including specially manufactured goods), which are movable at the time of
identification to the contract for sale…
(2) Goods must be both existing and identified at the time of the K before any interest in them can pass.
Goods, which are not both existing and identified, are “future” goods…
ii) Rules from cases:
(1) New Balance and Advent
(a) Tangible, existing and moveable at time of sale
(b) Broad definition of “good” to create uniformity balanced against fear that including one thing in the
definition will create a slippery slope towards including many other things
(i) How it was applied:
1. New Balance: (Electrical fire in NB factory) – Rule: sale of electricity not a good b/c of
already existing government regulation even though it is moveable, existing and tangible
(public policy argument) (argument that there should be some limits on the broad reading of
the rule – slippery slope argument)
2. Advent: (Sale of software by one Co. to another) – Rule: Sale of software on a disc is a good
b/c of the need for a broad meaning of good with uniformity across state lines. Intellectual
property implanted on a medium is tangible, moveable and available in the marketplace and
therefore a good. (Think recording of concert) ( argument for abroad reading of the rule)
d) Contracts with mixed goods and services –
i) If the predominant purpose of the contract is the sale of goods then the UCC applies
(1) How do you tell if the K is predominantly for the sale of goods?
(a) Factors – (From Gregory, System Designs and Advent)
1. Is there a good that is existing/fully developed at the time of the execution of the contract
2. Is it custom or is it generic? Is it specially designed custom software, which indicates service?
3. If there is not a transfer of ownership included in the K it is indicative of service
4. Is the K bargaining for the skill of the developer, which indicative of service?
5. Look at the cost break down between services and goods in the K.
6. Look at the language of the K, is it focused on the service or the good?
7. Is the payment made over time or in one lump sum? A lump sum indicates a good while
payment over time indicates a service
8. Electricity looks like a good but doesn’t count as one b/c it is so regulated by gov’t
a. Also don’t want to extend the law to include all utilities as a good
9. Simplify transactions – transactions
10. Create uniformity – possible argument for good
(b) Application to cases:
(i) Advent: (Co. selling software) –
1. The K was mostly for the sale of the actual software, it included training about how to use the
software, but that was a small part of the contract therefore goods predominated over
services.
2. The provision of training on how to use the software was a small part of the contractual
relationship
(ii) Gregory: (K for custom computer software) –
1. The K was a service K b/c creating a custom computer programing is an act, and
consequently a service.
2. Evidence of billing indicates rendition of service as opposed to the transaction of a sale
3. Billed over time and included service language like man days, development, time and design.
(iii) System Design:
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Contracts OUTLINE Fall 2014
1. Sale of software and tweaking of software for instillation was sale of good b/c the seller
retained the IP rights to software
2. The software was pre-packaged “off the shelf” product that only required minor modification
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