Source: http://lawprofessor.org/publications/articles.html&articlename=akron
Timestamp: 2019-04-22 10:42:11+00:00

Document:
Copyright 1987 Akron Law Review. Reprinted by permission of the Akron Law Review.
A fundamental issue in resolving a contract dispute involving a software transaction is whether article 2 of the Uniform Commercial Code (hereinafter UCC) or the common law governs.(8) It has been recognized that whether article 2 applies to computer software contracts is very significant especially in the areas of warranties, consequential damages, and limitations on liability.(9) However, commentators have disagreed on the answer to this question.(10) This article categorizes and examines the judicial decisions that have confronted this question. An analysis of these decisions demonstrates that although only a limited number of courts have faced this question the courts usually apply article 2(11) and the decisions are generally consistent and reconcilable when viewed in the context of commercial transactions generally.
A contract for the purchase of software in Compu-Med Systems, Inc. v. Cincom Systems, Inc.,(16) resulted in an action for fraud and breach of contract against the seller when the software allegedly failed to perform as represented by the seller. In denying the seller's motion to dismiss the complaint or in the alternative to grant summary judgement the court relied upon two sections of article 2. The court found that the buyer had given the seller adequate notice of the alleged breach of contract, as required by section 2-607(3)(a),(17) and therefore the buyer was not barred from bringing the action. Additionally, the court found section 2-719(2)(18) applicable to the question of whether the contract provided an exclusive remedy that precluded the buyer's recovery of consequential, special, or indirect damages. The court applied article 2, under Ohio Law, to this transaction without addressing the threshold question of whether software was a good. Therefore, it must be assumed that the court viewed software as a good within the domain of article 2.
These three cases involved transactions to provide software without computer hardware. In both cases involving the sale of software article 2 was applied to the transaction. In Compu-Med Systems article 2 was applied without any discussion of whether software must be a good for article 2 to apply, the court applied article 2 without any discussion of whether it was a good. The cursory nature of these analyses indicates little judicial hesitancy with the conclusion that software is a good under article 2. In RRX Industries the main thrust of the court's analysis was its finding that the sale of software with accompanying services was within article 2. The court relied on the predominant feature test to reach its conclusion. Under this test a contract involving both sale and service aspects is classified according to which aspect predominates.(23) This approach is consistent with judicial treatment of commercial contracts in other contexts since the predominant feature test is the most frequently used test to evaluate whether a transaction involving both goods and services falls within article 2.(24) RRX Industries indicates, therefore, that conventional legal doctrine applicable generally to commercial contracts is still relevant and will be applied to the sale of software.
Additionally, as will be discussed infra, the type of software involved in the transaction is relevant.(27) Providing custom designed software(28) may be predominantly a service contract outside the scope of article 2 while providing standardized software may be within article 2. Consequently, uncertainty about the type of software provided in Harford Mutual Insurance may explain the court's deferral of its determination of whether article 2 applied to the transaction.
In Dreier Co., Inc. v. Unitronix Corp.,(29) the plaintiff Dreier entered into a written contract for the purchase of a computer system consisting of both hardware and custom programmed software. The software allegedly never operated properly and Dreier brought an action for fraud and for breach of warranty under article 2 of the UCC. The trial court found the action time-barred by the statute of limitations and granted summary judgment for Unitronix. However, the appellate court reversed and remanded for a determination of when tender of delivery occurred because tender controls when the statute of limitations starts to run under section 2-725(30) of article 2. The court confronted the question of whether article 2 applied to the transaction and concluded that general agreement exists that the sale of a computer system comprising both hardware and software is a sale of goods under article 2. However, the court's discussion indicates that the court viewed the providing of custom software, as in this case, as simply being an incidental service aspect of the overall transaction.
In United States Welding v. Burroughs Corp.,(45) dissatisfaction with the operation of a leased computer and operating software resulted in an action for negligent misrepresentation and breach of an implied warranty of fitness.(46) In denying the motion to dismiss the negligent misrepresentation claim the court held, under Colorado law, that the contemporaneous contract claim (the breach of warranty claim) did not preclude the negligent misrepresentation claim.(47) Additionally, the court simply presumed without any analysis that article 2 applied to the overall lease transaction under Colorado law.
In Jaskey Finance and Leasing v. Display Data Corp.,(48) the plaintiff, Jaskey, purchased a computer system, consisting of both hardware and software from Display Data. The transaction involved a contract covering the computer system and any accompanying programming and installation, and a separate maintenance contract for the computer system. Dissatisfaction with the operation of the system resulted in an action by Jaskey against Display Data for breach of express(49) and implied warranties.(50) In deciding a motion to dismiss, the court applied Maryland law and found any express warranties in the advertising or promotional material to be excluded under section 2-202(51) of article 2.(52) Additionally, the contract effectively disclaimed any express or implied warranties of fitness under section 2-316,(53) although any implied warranty of merchantability was not disclaimed under section 2-316.(54) The court applied article 2 to both contracts without discussion of the scope of article 2 or its application to the transactions involved.
In Aplications, Inc. v. Hewlett Packard Co.,(55) Aplications purchased a Hewlett Packard computer programmed with a Hewlett Packard computer language for resale to a third party. After Aplications installed the computer, it alleged the computer language did not perform as warranted and Aplications sued Hewlett Packard for breach of express(56) and implied warranty.(57) The court granted summary judgment for Hewlett Packard with regard to the breach of warranty claims because the court found, under California law, that any warranties had been effectively disclaimed under section 2-316.(58) The court applied article 2 in this case without any discussion of its applicability to the transaction involved.
In Kalil Bottling co. v. Burroughs Corp.,(59) Kalil signed a contract to purchase a computer and software on credit. Subsequent to the installation of the computer, Burroughs rejected Kalil's application for credit and a third party purchased the computer and software from Burroughs and leased it to Kalil. The computer did not operate properly and Burroughs failed to install all the software required in the original contract. Kalil sued Burroughs for breach of contract and breach of warranty.(60) The parties proceeded at trial and on appeal on the theory that a contract existed between Kalil and Burroughs and therefore the court decided the case under Arizona law based on this theory.(61) In reversing a jury award for Kalil and remanding for a new trial, the appellate court found an implied warranty exclusion valid under section 2-3165 (renumbered A.R.S. 44-2333 in Arizona).(62) Additionally, the court found any alleged representation made prior to executing the contract inadmissible due to section 2-202 (A.R.S. 44-2309 in Arizona).(63) Finally, a contract clause limiting damages and only requiring repair and replacement of any defective parts was found to be a nonexclusive remedy under section 2-719 (A-R.S. 44-2398 in Arizona).(64) Article 2 was applied in this case without any discussion of its scope or application to the transaction at issue.
In Neilson Business Equipment v. Monteleone,(91) a physician in private practice obtained a computer system consisting of hardware, software, and accompanying services via a sale/leaseback arrangement. The software filed to generate proper patient bills or maintain adequate records, and the physician thereafter terminated the computer system lease and sued for damages. The trial court awarded damages to the physician, under Delaware law, for breach of the warranties of merchantability(92) and fitness(93) under article 2 of the UCC. In affirming the trial court decision, the Delaware Supreme Court recognized that the central issue was whether the transaction involved goods(94) because article 2 is limited in its application to transactions in goods.(95) The court dismissed the argument that software is an intangible and therefore not a good by concluding that the computer hardware, software, and services were purchased as a package.(96) The court recognized that the transaction involved service aspects, but it upheld the trial court's application of the predominant feature test(97) because substantial evidence supported the conclusion that the transaction involved goods. The court was also not deterred from applying article 2 because the computer system was obtained via a lease. The court concluded that the sale/leaseback arrangement was the equivalent of a sale and that it was used merely to obtain favorable cash flow and tax treatment.
In Samuel Black the court was unsure whether the computer transaction was within the scope of article 2 of the UCC. Nevertheless, the court applied article 2 without resolving this scope question because it concluded that the outcome in this case was the same under both the common law and under article 2. In the remaining five cases that involved the sale of hardware and software under a single agreement, article 2 was applied to the transaction without discussion.
Although judicial decisions have found article 2 applicable to most sales of hardware and software under a single agreement, less consistent results exist when the computer hardware and software is leased rather than sold. In United States Welding a lease of computer hardware and software was subject to article 2 under Colorado law. However, in the Matter of Community Medical Center the court noted that a lease of computer hardware which included programming services was not covered by article 2 under New Jersey law.
Judicial decisions exhibit similar conflicting results when hardware and software are obtained via sale/leaseback arrangements. In Neilson Business Equipment Center article 2 was applied to a sale/leaseback arrangement under Delaware law. In Kalil Bottling article 2 was applied to a sale/leaseback transaction under Arizona law. An analogous transaction was covered by article 2 under New Jersey law in Chatlos Systems. In Aubrey's R.V. Center, article 2 was applied under Washington law in a transaction involving both the direct sale of software and sale/leaseback of hardware and software. However, in O J & C application to a sale/leaseback transaction was unequivocally rejected under Texas law.
The Texas courts have consistently held that article 2 is limited in scope to sale transactions.(104) Therefore, the failure of the Texas court in O J & C to apply article 2 to a sale/leaseback transaction involving computer hardware and software is consistent with the Texas court's interpretation of the scope of article 2. In contrast to Texas, the Arizona courts have extended article 2 to lease transactions.(105) Therefore the application of article 2 to the sale/leaseback arrangement in Kalil Bottling is consistent with the Arizona court's interpretation of article 2. Likewise, Washington courts have concluded that article 2 covers leases and bailments.(106) Consequently, the application of article 2 to the transaction in Aubrey's R.V. Center is consistent with state law in Washington.
In Chatlos Systems a sales/lease back arrangement was used merely for financing purposes. In this case a computer manufacturer was unable to sell a computer system directly to a customer because the customer failed to meet the credit standards of the manufacturer. To prevent loss of the sale, the manufacturer sold the computer system to a bank which then leased it to the customer. Despite the use of a lease, the underlying purpose of the transaction was to accomplish a sale, and therefore the technical lease arrangement was really equivalent to a sale by the manufacturer to the customer.
In Community Medical Center, the court noted that some leasing arrangements are within the scope of article 2 when they are equivalent to sales. However, the court did not believe the lease arrangement in this case was equivalent or analogous to a sale and therefore article 2 was found inapplicable.
Finally, in United States Welding a federal court sitting in diversity, concluded, without analysis, that under Colorado law article 2 applied to a lease transaction despite a lack of Colorado precedents on this question.(109) Such a result is consistent with other jurisdictions which have extended articl3 2 to lease transactions.
A review of the caselaw indicates that the sale of computer hardware and software under a single agreement is treated as being within the scope of article 2 by most courts. However, when a lease transaction is involved, the courts are divided on whether article 2 applies. An examination of the treatment of leases generally under article 2 reveals that the courts are divided on the treatment of leases.(110) Therefore, the different state-to-state treatment of computer lease transactions is consistent with the varied treatment of leases in general.
A beer distributor contracted with Burroughs to buy a computer and for the right to use certain programs provided by Burroughs in Quad Cty. Distributing co. v. Burroughs, Corp.(131) The distributor also paid Burroughs $14,000 to have Burroughs develop software for the distributor. The programs to be developed never worked properly and the buyer covered by purchasing the programs elsewhere for $18,718.28 and sued for breach of contract under Illinois law. The court stated that the measure of damages for breach of a contract for the sale of personal property was the difference between the contract price and the market price at the time of the breach.(132) The court then found damages to be the difference between the contract price and the cost of cover.(133) The court failed to identify whether the common law or article 2 applied since the court noted the common law measure of damages in this case was the same as under the applicable article 2 provision (section 2-712).(134) It follows, however, from the court's analysis that it at least viewed software as personal property even though the court failed to explicitly determine whether the common law or article 2 controlled the transaction.
A total of six decisions involved transactions to provide computer systems in which a separate agreement was executed for the hardware and software segments of the system. Article 2 was consistently applied to contracts for the sale of software in W.R. Weaver and Hi Neighbor. However, the decisions are less consistent when custom software(146) is involved or the software is provided via a non-sale transaction such as a lease or license.
In Westfield Chemicals the court implied that a contract to provide custom software was governed by article 2. However in Quad Cty. Distributing, the application of article 2 to a similar custom software contract was left undecided because the outcome of the case was the same under the common law or article 2. Additionally, article 2 was found applicable to leased software in Office Supplies while H.M.O. Systems applied the common law to an agreement to license custom software.
Additionally, the failure of H.M.O. Systems to apply article 2 may be due to the nature of the transaction. H.M.O. Systems involved a license to use software which is a non-sale transaction. As previously discussed, the treatment of non-sale transactions generally varies among different jurisdictions.(148) In Colorado no state court precedents exist with regard to the extension of article 2 to non-sale transactions.(149) Therefore, the failure to apply article 2 may indicate reluctance of the intermediate appellate court in H.M.O. Systems to apply article 2 to a non-sale transaction absent Colorado precedents.
The distinction between standardized software and custom made software with regard to the application of article 2 is analogous to the application of article 2, by some courts, in other commercial transactions. For example, in Art Metal Products Co. v. Royal Equipment Co.,(158) a contract to supply and install custom built athletic lockers was held to be outside the scope of article 2. The court reasoned that the main purpose or predominant feature of the contract was to install the custom lockers. The providing of the lockers, which are goods under article 2, was viewed as only an incidental aspect of the contract.(159) In reaching its conclusion, the court distinguished Anderson Construction Co. Inc. v. Lyon Metal Products, Inc.,(160) in which a contract to provide and install school lockers was held subject to article 2. In Anderson Construction, the lockers were standard lockers and therefore the court concluded the sale of the lockers was the predominant feature of the contract. Therefore, a determination that standard software is a good and that custom software is not a good under article 2 is reconcilable with at least some existing caselaw dealing with non-computer transactions.
In both Liberty Financial Mgmt. and Computer Servicenter, computer hardware and software were used to provide services to customers. In Liberty Financial Mgmt., reels of tape and other tangible things which are goods under article 2 were supplied to customers. In Computer Servicenter, data supplied by the customer was collected and analyzed. Presumably this data was reported to the customer in some tangible form which would also be a good under article 2. However, in both cases, article 2 was found inapplicable because the predominant feature or purpose of the transaction was found to be the providing of services with the goods only being incidental to the transaction. This result is consistent with the predominant feature test which has already been discussed.
The conclusion that article 2 was inapplicable in both Liberty Financial Mgmt. and Computer Servicenter, is also consistent with judicial decisions outside the computer area. A contract to supply blood(168) as well as contracts for the installation of glass,(169) flooring,(170) carpet,(171) and a sewer system(172) were all held to be service contracts outside the domain of article 2. In each of these cases the goods involved in the transaction were found to be incidental to the predominant service aspect of the transaction. The decisions in Liberty Financial Mgmt. and Computer Servicenter are therefore consistent with an existing body of judicial decisions.
An overview of these decisions and the accompanying analyses indicates that the majority of courts faced with transactions involving software have relied on the same analysis applied generally to commercial transactions. The predominant feature test was used to determine if a software transaction which includes services is a service contract outside article 2 or a contract for the sale of goods within article 2. Such an analysis is generally consistent with commercial decisions not involving computer hardware or software. Additionally, the judicial disagreement over whether article 2 applies to software transactions involving a lease or sale/leaseback arrangement is consistent with judicial decisions outside the computer area. Disagreement exists generally over whether article 2 is applicable only to pure sales or to non-sale transactions such as leases.
The different treatment of custom and standardized software is also consistent with decisions outside the area of computers. The conclusion that a contract to develop custom software is a service contract outside article 2 while the sale of standardized software is within article 2 is analogous to the same distinction made by many courts between custom and standard goods in general.
The judicial treatment of software is therefore consistent with judicial treatment of commercial transactions generally. Any inconsistencies or conflicting results with regard to the application of article 2 to different types of software transactions are a product of varying judicial treatment of commercial transactions generally rather than confusion over how to deal with software.
1. Article reprinted in 2 Software L.J. 77 (1987)(Software Law Journal subsequently merged into The John Marshal Journal of Computer & Information Law).
2. Visiting Assistant Professor of Law, The Claude W. Pettit College of Law, Ohio Northern University; B.S., Hofstra University, 1976; J.D., Western New England College School of Law, 1981; LL.M., Temple University School of Law, 1986.
3. The computer industry has been one of the fastest growth industries in the United States with companies in this field having average annual growth rates of 11.1% for the twenty-five year period ending in 1980. Note, U.C.C. Section 2-719 as Applied to Computer Contracts-Unconscionable Exclusions of Remedy?: Chatlos Systems, Inc. v. National Cash Register Corp., 14 Conn. L. Rev. 71, 93 n.100 (1981). See also Samuelson, Our Computerized Society, Newsweek, Sept. 9, 1985 at 73 (estimated that 10 million small home computers will be in use by 1990); Reed, Decades Top Jobs-Where to Write for Details on 20 Fastest-Growing Careers, N.Y. Times, Oct. 13, 1985 at 17J (during next decade the number of computers in use is expected to increase by a factor of ten).
4. One computer vendor had approximately 165 suits brought against it relating to their line of small business computers. Another major computer seller had a $2.7 million judgment awarded against them. Zammit, Computers, Software, and the Law, 68 A.B.A.J. 970 (1982). See also, Holmes, Application of Article Two of the Uniform Commercial Code to Computer System Acquisitions, 9 Rutgers Computer & Tech. L.J. 1, 4, n.10 (1982) (one major computer manufacturer had more than two hundred and fifty lawsuits brought against them by dissatisfied purchasers of their computers).
Additionally, controversy has existed over whether computer software is taxable, admissible as evidence, or eligible for patent or copyright protection. Note, Computer Programs as Goods Under the UCC, 77 Mich. L. Rev. 1149 (1979). See also Rodau, Protecting Computer Software: After Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d Cir. 1983), Does Copyright Provide the Best Protection?, 57 Temple L.Q. 527 (1984) (discusses the application of patent and copyright law to computer software).
5. Computer software, also called a program, is defined as "a set of instructions arranged in proper sequence for directing the computer in performing a desired operation, such as the solution of a mathematical problem or the sorting of data." The Illustrated dictionary of Microcomputers 236 (2nd ed. 1986) (see "program" definition). For a description of how software is produced see Rodau, computer Software: Does Article 2 of the Uniform Commercial Code Apply?, 35 Emory L.J. 853, 868 n.57 (1986).
Computer software should be distinguished from computer hardware which is the actual physical machinery that comprises a computer system. See Rodau, supra note 3, at 871-72, n.66, for a description of the various types of computer hardware elements that comprise a computer system.
6. See Zammit, supra note 2 (discusses potential contract and tort causes of action that are available when a computer system fails to operate properly). See also Conley, Tort Theories of Recovery Against Venders of Defective Software, 13 Rutgers Computer & Tech. L.J. 1 (1987); Brenneman, Computer Malfunctions: What Damages May Be Recovered in a Tort Product Liability Action, 2 Santa Clara Computer & High-Tech L.J. 271 (1986).
7. One commentator predicts that the bulk of future computer litigation will involve software. Zammit, supra note 2, at 970.
8. Conley, supra note 4, at 2.
9. McGonigal, Application of Uniform Commercial Code to Software Contracts, 2 Computer L. Serv. Rep. (Callaghan) 117 (1978). See also Conley, supra note 4, at 2-3 (article 2 more liberal than common law with regard to admissibility of parol evidence, formalities required to form a contract, and the power of a court to supply missing contract terms).
10. See Rodau, supra note 3, at 855-56 n.9. See also Conley, supra note 4, at 3 (argues article 2 should not apply to software).
11. Conley, supra note 4, at 4 (courts will apply UCC to software transactions).
12. 772 F.2d 543 (9th Cir. 1985).
13. UCC section 2-105(1) states that "'[g]oods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action."
14. 772 F.2d at 546.
16. Unpublished decision, No. 83 Civ. 8729 (S.D.N.Y. Aug. 30, 1984) (available on Lexis, Genfed Library, Dist. file).
17. UCC section 2-607(3)(a) states that where the tender of goods has been accepted the buyer is barred from any remedy for breach if the buyer fails to notify the seller of the breach within a reasonable time after buyer discovers or should have discovered the breach.
18. UCC section 2-719(2) states "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had a provided in this Act."
19. 579 F. Supp. 135 (D. Md. 1984).
20. UCC section 2-313 (express warranty), section 2-314 (implied warranty of merchantability), and section 2-315 (implied warranty of fitness for particular purpose).
23. Note, The Goods/Services Dichotomy and the U.C.C.: Unweaving the Tangled Web, 59 Notre Dame L. Rev. 717, 719 (1984).
24. G. Wallach, The Law of Sales Under the Uniform Commercial Code 11.05 at 11-28 (1981). See also Freeman v. Shannon Constr., Inc., 560 S.W.2d 732 (Tex. Civ. App. 1977).
25. See infra notes 98-101 and accompanying text.
26. Harford Mutual Insurance involved a federal court sitting in diversity and applying South Carolina law. Under South Carolina law leases for automobiles and refrigeration equipment have been held to be within article 2 when the lessee has an option to purchase the goods at the end of the lease term. See White v. State, 263 S.C. 110, 208 S.E.2d 31 (1974); Hones Leasing Inc. v. Gene Phillips & Assoc., 282 S.C. 327, 318 S.E.2d 31 (1984). However, it is unclear if South Carolina courts will extend article 2 to other non-sale transactions such as licenses.
27. See infra notes 155-158 and accompanying text.
28. See infra note 149 and accompanying text.
29. Unpublished decision, No. A-1593, 85T5, Slip Op. (N.J. Super. Nov. 10, 1986).
30. UCC section 2-725(1) states that unless the parties have agreed otherwise, an action for breach of contact must be commenced within four years of the tender of delivery.
31. 140 Ill. App. 3d 741, 489 N.E.2d 380 (1986).
32. UCC section 2-313(1) states that express warranties result from the seller's affirmations of fact or promises, descriptions of the goods, or by providing a sample or model which becomes a basis of the bargain.
(1) The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance of by the seller's assurances.
34. 457 F. Supp. 765 (E.D.N.Y. 1978), modified, 604 F.2d 737 (2d Cir. 1979) (reversed in part because district court improperly applied statute of limitations).
36. See supra note 28.
37. 457 F. Supp. at 769.
38. 78 A.D.2d 983, 433 N.Y.S.2d 888 (1980).
39. See supra note 28.
40. 433 N.Y.S.2d at 889.
42. 33 U.C.C. Rep. 964 (D. Mass. 1981).
45. 587 F. Supp. 49 (D. Colo. 1984).
46. See UCC section 2-315.
47. 587 F. Supp. at 51.
48. 564 F. Supp. 160 (E.D. Pa. 1983).
49. See supra note 30.
50. See UCC section 2-315 (implied warranty of fitness for particular purpose).
51. UCC section 2-202 governs the admission of parol evidence with regard to transactions covered by article 2.
52. 564 F. Supp. at 164.
53. UCC section 2-316 allows the parties, by agreement, to exclude or modify warranties created by sections 2-313, 2-314 and 2-315.
54. 564 F. Supp. at 164.
55. 501 F. Supp. 129 (S.D.N.Y. 1980), aff'd. 672 F.2d 1076 (2d Cir. 1982).
56. See supra note 30.
57. UCC section 2-314 (implied warranty of merchantability) and section 2-315 (implied warranty of fitness for a particular purpose).
58. 501 F. Supp. at 133.
59. 127 Ariz. 278, 619 P.2d 1055 (1980).
60. See supra note 18.
61. 619 P.2d at 1058.
62. See supra note 51.
63. See supra note 49.
(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had a provided in this act.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
65. 479 F. Supp. 738 (D. N.J. 1979), aff'd. 635 F.2d 1081 (3d Cir. 1980) (remanded for recomputation of damages), 670 F.2d 1304 (3d Cir. 1982) (liability upheld after remand).
66. See UCC section 2-313.
67. See UCC section 2-315.
69. 479 F. Supp. at 742.
70. 361 F. Supp. 325 (E.D. Pa. 1973), aff'd without opinion, 493 F.2d 1400 (3d Cir. 1974).
71. See Rodau, supra note 3, at 873 (explanation of bundled transaction).
72. 361 F. Supp. at 330.
Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonable notifies the seller.
(b) recover damages for non-delivery as provided in this Article (Section 2-713).
76. UCC section 2-712 provides that if the buyer covers, the buyer can recover damages equal to the difference between the cost of cover and the contract price plus any incidental or consequential damages.
77. UCC section 2-715 allows the buyer to recover incidental damages and to recovery consequential damages in certain situations.
78. 578 S.W.2d 877 (Tex. Civ. App. 1979).
79. UCC section 2-302 allows a court to refuse to enforce all or part of a contract if the court finds the contract to be unconscionable as a matter of law.
80. 578 S.W.2d at 878.
82. 623 F.2d 864 (3d Cir. 1980).
83. Id. at 868 n.4.
86. 46 Wash. App. 595, 731 P.2d 1124 (1987).
87. Wash. Rev. Code Ann. § 19.86 et. seq. (1978).
88. See supra note 31.
89. 731 P.2d at 1127.
91. 524 A.2d 1172 (Del. 1987).
94. 524 A.2d at 1174.
95. UCC section 2-102 states that "[u]nless the context otherwise requires, this Article applies to transactions in goods. . . ."
96. 524 A.2d at 1174.
97. See supra notes 21, 22 and accompanying text.
98. 457 F. Supp. at 769.
99. Dreier, No. A-1593, 85T5, Slip Op. at 8-9. Accord Neilson Business Equipment Center v. Monteleone, 524 A.2d 1172, 1174 (Del. 1987) (court relied on predominant feature test to apply Article 2 to transaction involving computer hardware, software and services).
100. Compare Hertz Commercial Leasing Corp. v. Joseph, 641 S.W.2d 752 (Ky. Ct. App. 1982) (article 2 applied to lease of a muffler pipe-bending machine) with Bona v. Graefe, 264 Md. 69, 285 A.2d 607 (1972) (article 2 limited to sales so lease of golf cart not covered).
101. See, e.g., Owens v. Patent Scaffolding Co., 77 Misc. 2d 992, 354 N.Y.S.2d 778 (N.Y. Sup. Ct. 1974), rev'd on other grounds, 50 A.D.2d 866, 376 N.Y.S. 2d 948 (1975); Capitol Assoc., Inc. v. Hudgens, 455 So. 2d 651 (Fla. Dist. Ct. App. 1984) (article 2 applies to lease that gave lessee no right to purchase or acquire title to the equipment).
102. See, e.g., Westmont Tractor Co. v. Viking Inc., 534 F. Supp. 1314, 1317 n.3 (D. Mont. 1982) (lease of equipment that gave lessee option to purchase equipment at end of lease was covered by article 2); Sawyer v. Pioneer Leasing Corp., 244 Ark. 943, 428 S.W.2d 46 (1968) (article 2 applicable to lease where lease analogous to sale); Hertz Commercial Leasing Corp. v. Transportation Credit Clearinghouse, Inc., 59 Misc. 2d 226, 298 (N.Y. Civ. Ct. 1969), rev'd on other grounds, 64 Misc. 2d 910, 316 N.Y.S.2d 585 (N.Y. App. Div. 1970) (article 2 applied to lease that was analogous to sale).
103. Dekalb A.G. Research, Inc. v. Abbott, 391 F. Supp. 152, 153-54 (D. Ala. 1974), aff'd per curiam, 511 F.2d 1162 (5th Cir. 1975) (lease of hens not covered by article 2 since article 2 applies to sales not leases).
104. See, e.g., U.S. Armament Corp. v. Charlie Thomas Leasing Co., 661 S.W.2d 197 (Tex. Ct. App. 1983).
105. Pacific American Leasing v. S.P.E. Bldg. Sys., Inc., 152 Ariz. 96, 730 P.2d 273 (1986) (article applied to lease of computer); Preston Motor Co., Inc. v. Palomares, 133 Ariz. 245, 650 P.2d 1227 (1982) (article 2 applied to automobile lease); Broadmont Corp. v. Fashion Floors, Inc. 124 Ariz. 282, 603 P.2d 553 (1979) (UCC applied to automobile lease).
106. Mieske v. Bartell Drugs Co., 92 Wash. 2d 40, 593 P.2d 1308 (1979) (en banc); Banker v. City of Seattle, 79 Wash. 2d 198, 484 P.2d 405 (1971) (en banc).
107. Cintrone v. Hertz Truck Leasing, 212 A.2d 769, 775-76 (N.J. 1965).
108. See supra note 100 and accompanying text.
109. See Neilson Business Equipment Center v. Monteleone, 524 A.2d 1172, 1175 (Del. 1987) (despite lack of state precedents Delaware Supreme Court applied article 2 to a sale/leaseback transaction based on persuasive authority from another jurisdiction).
110. The judicial disagreement over whether article 2 of the UCC applies to leases has resulted in the drafting of a new article for the UCC. Article 2A entitled "Leases" applies to all transactions that create a lease. 1A U.L.A. (West) 405-39 (1987 Supp.).
111. 580 S.W.2d 76 (Tex. Ct. App. 1979).
112. See UCC section 2-313.
113. See UCC section 2-314 and 2-315.
114. 580 S.W.2d at 80.
115. See supra note 28.
116. See supra note 51.
117. 580 S.W.2d at 80-81.
119. 492 F. Supp. 823 (D. Fla. 1980).
120. UCC section 2-719 allows contracting parties, by agreement, to limit damages and remedies for breach of contract.
121. See supra note 51.
122. 492 F. Supp. at 826.
124. 538 F. Supp. 776 (D. Wis. 1982).
126. Wisconsin modified UCC section 2-725 so it provides a six year statute of limitations instead of a four year statue of limitations. Wis. Stat. Ann. § 402.725 (West Supp. 1986).
127. 538 F. Supp. at 781.
128. UCC section 2-316 provides that a written exclusion or modification of implied warranties under UCC sections 2-314 and 2-315 must be conspicuous.
129. 538 F. Supp. at 784, 789. See supra note 62.
130. Id. at 778 n.1.
131. 68 Ill. App. 3d 163, 385 N.E.2d 1108 (1979).
134. Id. See supra note 74.
135. 21 U.C.C. Rep. 1293 (Mass. Super. Ct. 1977).
137. UCC section 2-315 (implied warranty of fitness for particular purpose).
138. "The principle [of unconscionability] is one of the prevention of oppression and unfair surprise . . . and not of disturbance of allocation of risks because of superior bargaining power." 21 U.C.C. Rep. at 1296, quoting UCC section 2-302 official comment one.
139. See supra note 51.
140. 21 U.C.C. Rep. at 1295-96.
142. 665 P.2d 635 (Colo. Ct. App. 1983).
143. Article 9 of the UCC is applicable "to any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods. . . ." U.C.C. 9-102(1)(A).
144. 665 P.2d at 635.
146. See infra note 149.
147. See infra notes 153-155 and accompanying text.
148. See supra notes 98-108 and accompanying text.
149. But see United States Welding v. Burroughs Corp., 587 F. Supp. 49 (D. Colo. 1984) (federal court sitting in diversity found article 2 applicable to lease transaction under Colorado law).
150. 492 N.E.2d 314 (Ind. Ct. App. 1986), reg. denied, 493 N.E.2d 1272 (Ind. Ct. App. 1986).
151. Computer software can be classified as "canned" or "off the shelf" software or as "custom" software. Canned software is software that is suitable for many users without modification. Custom software is specially designed for the specific needs of the user and is not readily usable by other users. Measurex Systems, Inc. v. State Tax Assessor, 490 A.2d 1192, 1195 (Me. 1985). See also Rodau, supra note 3, at 861 n.31.
152. 492 N.E.2d at 318.
158. 670 S.W.2d 152 (Mo. Ct. App. 1984).
159. See id. at 155. But see Lake Wales Publishing Co., Inc. v. Florida Visitor, Inc., 335 So. 2d 335 (Fla. Dist. Ct. App. 1976) (contract to print specially manufactured pamphlets covered by article 2).
160. 370 So. 2d 935 (Miss. 1979).
161. 670 S.W.2d 40 (Mo. Ct. App. 1984).
162. See supra note 62.
163. 670 S.W.2d at 48.
165. 328 F. Supp. 653 (D.S.C. 1970), aff'd. 443 F.2d 906 (4th Cir. 1971).
166. UCC section 2-201 requires contracts for the sale of goods for $500 or more to be in writing to be enforceable.
167. 328 F. Supp. at 655.
168. Lovett v. Emory University, Inc., 116 Ga. App. 277, 156 S.E.2d 923 (1967).
169. Coakley and Williams, Inc. v. Shatterproof Glass Corp., 778 F.2d 196 (4th Cir. 1985), cert. denied, 106 S. Ct. 1640 (1986).
170. Ranger Construction Co. v. Dixie Floor Co., Inc., 433 F. Supp. 442 (D.S.C. 1977).
171. Dionne v. Columbus Mills, Inc., 311 So. 2d 681 (Fla. Dist. Ct. App. 1975).
172. Semier v. Knowing, 325 N.W.2d 395 (Iowa 1982).

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 19
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 402
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.