Deck 16: Sales of Personal Property

Question 1

Simulados Software, Ltd. (Simulados) developed PC software to prepare teachers for the Texas Examinations of Educator Standards. In order to serve the Apple Macintosh computer community, Simulados contracted with Photon Infotech Private, Ltd. (Photon) to develop a version compatible with Macintosh computers. Simulados and Photon entered into a detailed contract regarding the specific steps which needed to be taken, a time frame for completion, installment payments as various benchmarks were reached, and final delivery of a workable product. However, Photon never provided Simulados with a fully functioning application. Photon defended Simulados's subsequent lawsuit by claiming, among other things, that the UCC did not apply because the contract did not involve a sale of goods. Did it?

Answer 1

Personal property : all the movable property is referred as personal property. For example, food, pens, clothes interest on land are personal property. Personal property is sub-divided into tangible and intangible property.
Facts: PC software was developed by S. Ltd for preparing teachers of Texas. For serving A.M. computer community, S and P. ltd contracted for developing compatible version of computers. S and P agreed to the terms of contract in detail. But, later on P didn't provided S application for functioning. P defended law suit stating that UCC couldn't be applies as contract doesn't involve sale of goods
Outcome : As per uniform commercial code (UCC), the sales are associated with only movable personal property, thus real property and intangible property are not considered for the purpose of sale. Developing a compatible version for computer is not a personal property, rather it is an intangible property, and therefore P's claim is correct.

Question 2

In terms of the number of contracts as well as the dollar volume, what kind of contract constitutes the largest class of contracts in our economic system?

Answer 2

Contracts for the sale of moveable personal property, and goods, comprise the largest type of contracts in the American economic system both in terms of the total number and in terms of the dollar volume.

Question 3

Bruel Kjaer (B K) contracted to upgrade noise-monitoring and radar systems and provide an annual servicing agreement to the village of Bensenville. It agreed to deliver, assemble, install, test, and make fully operational the equipment and system. The contract referred to the parties as "buyer" and "seller" and stated, "Upon final payment [B K] shall deliver to [Bensenville] a Bill of Sale for the Equipment and System free and clear of any and all liens and encumbrances." An annual servicing agreement was required so B K would "provide all software adjustments necessary." B K developed custom software and provided site visits and engineering support during installation of the systems. After B K repeatedly billed Bensenville the $227,000 contract price, the village paid only $50,000. B K sued for breach of contract. Bensenville argued that the applicable statute of limitations was the four year sale of goods statute and that time had run. B K argued that the contract was not for the sale of goods but the provision of services and thus a ten-year statute of limitations, which had not yet run, applied. Was the contract for the sale of goods or the provision of services?

Answer 3

If the provision of goods is the predominant factor in a contract, and providing a service is incidental, the agreement is considered as the sale of goods. If the performance of a service is the predominant factor in a contract, and the sale of goods is incidental, the contract is a service contract.
As per the case, various contract terms indicates that the contract between BK and BV was for the sale of goods. The list is given below:
• A contract where BK was appointed as the seller and BV as the buyer. The agreement required a bill of sale for the equipment, free of any liens. A bill of sale is a written proof of title to tangible personal property.
• The agreement where BK was to deliver, install, test, and make the equipment and the system fully operational. Equipment and system are terms that indicate specific tangible goods.
• It also included contracts where BK was to perform annual servicing and provide support services. The annual servicing and support services were required for the equipment which was supplied by BK. If BK did not supply the equipment, the servicing and support would not have been required.Thus, the contract terms show that provision of goods is the predominant factor in the contract and providing services was incidental. This was a contract for the sale of goods.

Question 4

Under what circumstances may a party to a sales contract that does not meet the requirements of the UCC be unable to avoid the contract?

Question 5

Steve Atwell purchased the shell of a 1965 Dodge racecar specially manufactured for legendary drag racer Dave Strickler. Even though the car had been transferred through many owners, and substantial modifications had been made, Atwell received significant documentation regarding the vehicle's history, ownership, and even the original certificate of title Dave Strickler's name and address. Atwell spent more than ten years restoring the car, using as many original 1965 parts as possible. Atwell then undertook to sell the car, while loaning it to the Chrysler Museum for display. Nicholas Smith, a collector of classic cars, entered into a contract with Atwell to purchase the restored Strickler car. Smith then further altered the car according to his own preferences. At a classic car event, a car historian claimed that the body had been replaced and it was not the "real" Strickler car. Smith sued under Article 2 of the UCC, among other claims. Was the car a "good"?

Question 6

To what kind of property does the term "sale," as used in the UCC, apply? Give two examples of that kind of property.

Question 7

Dexter Chaney Inc. (DCI) contracted to sell to Wachter Management Company an accounting and project-management software system. The contract included installation of the software, a full year of maintenance, and a training and consulting package. DCI shipped the software and assisted Wachter in installing it. After encountering problems with the software, Wachter sued DCI for breach of contract. Was the contract one for the sale of goods so that the UCC applied?

Question 8

What is the difference between a sale and a contract to sell?
b. Why is it important to make a distinction between a sale and a contract to sell?

Question 9

Jim and Kathy Shafer formed Sunbelt Grain WKS, LLC (Sunbelt), which operated grain storage facilities, purchased grain from local farmers and resold it, and stored grain for farmers for a fee. Sunbelt had executed promissory notes to Security State Bank (SS B) and had a line of credit loan with it. The indebtedness was secured by mortgages. Sunbelt contracted to sell Whitham Farms Feedyard L.P. (Whitham) 100,000 bushel lots of corn. They executed Confirmation of Sale and Purchase (CSP) forms, which stated that Whitham would prepay for the corn. There was no record of how much corn Sunbelt had at that time. Whitham received no bills of sale or warehouse receipts for the corn it paid for and neither charged nor paid any storage fees to Sunbelt for the corn to be sold. Sunbelt was in default of the terms of its loans, so SS B closed its line of credit. A week later, SS B began foreclosure on Sunbelt's grain inventory, so Sunbelt had to stop delivering corn to Whitham. Sunbelt went into bankruptcy, and the court ordered its grain inventory sold. There was $3.875 million for creditors and SS B claimed $3.2 million and Whitham claimed $2.2 million. Whitham claimed it had constructive possession of the corn thus it should be paid from the sale of it. To have constructive possession, the court said the goods had to be identified to the contract. Were they identified in this case?

Question 10

What is the difference between an agreement to perform services and a sale of goods?

Question 11

Click2Boost Inc. (C2B) entered into an agreement with the New York Times Company (NYT) to solicit subscribers for home delivery of the New York Times newspaper by means of "pop up ads" at Internet websites with which C2B had an agreement. The agreement required NYT to pay C2B a commission for each home delivery subscription C2B submitted to NYT. NYT paid C2B more than $1.5 million in subscription submission fees and then terminated the agreement. In the lawsuit that followed, the court had to decide whether C2B's submissions were goods such that the UCC applied. Were the submissions goods?

Question 12

Is an offer to sell a specified amount of wheat at the Chicago market closing price on July 7 an acceptable offer?

Question 13

Is a bill of sale necessary to pass title?

Question 14

To what contracts does the United Nations Convention on Contracts for the International Sale of Goods apply?