Goods and Services Combined. Dennis Dahlmann and Dahlmann Apartments, Ltd., entered into contracts with Sulchus Hospitality Technologies Corp and Hospitality Management Systems, Inc (HMS), to buy property management systems. The systems included

Question

computer hardware and software, as well as installation, training, and support services, for the Bell Tower Hotel and the Campus Inn in Ann Arbor, Michigan. The software controlled the central reservations systems at both hotels. When Dahlmann learned that the software was not Y2K compliant—that it could not be used to post reservations beyond December 31, 1999—he filed a suit against Sulchus and HMS, alleging in part breach of contract. The defendants filed a motion for summary judgment. One of the issues was whether the contracts were subject to Article 2 of the Uniform Commercial Code. Are they? Why or why not? Explain fully.

Answer 1

Goods and services combined
The court held that the contracts were subject to Article 2 of the UCC. The court applied the "predominant factor test" to determine whether the contracts primarily involved sales of goods, under the UCC, or sales of services, subject to the general principles of the common law of contracts. "If the purchaser's ultimate goal is to acquire a product, the contract should be considered a transaction in goods, even though service is incidentally required. Conversely, if the purchaser's ultimate goal is to procure a service, the contract is not governed by the U.C.C., even though goods are incidentally required in the provision of the service." The court acknowledged that "[t]he relationship in the instant case is a mixed goods and services contract." The court concluded, "[h]owever, the services are not substantially different from those generally accompanying computer system contracts, and therefore the agreements should be treated as involving the sale of ‘goods' under the U.C.C." The court explained that the "plaintiffs were attempting to acquire a ‘good,' specifically a reservation system for their two hotel properties. The provisions for installation, training, and technical support were incidental to the agreements for the system."