Business Law Assignment 8 Question And One Discussion
Please answer the essay questions of following chapters in detail with citing:
Chapter 18 – assignment: Essay Questions 1,3,4,5 page 421-422
Chapter 19 – assignment: Essay Questions 1,3,4,5 page 448
Note: This case is presented here for the court’s explanation of its rationale to apply the UCC to a software license.
Facts: i.LAN Systems, Inc. (“i.LAN”) helps companies monitor their computer networks. NetScout Service Level Corp., formerly known as NextPoint Networks, Inc. (“NextPoint”), sells sophisticated software that monitors networks. In 1998, i.LAN and NextPoint signed a detailed Value Added Reseller (“VAR”)
agreement whereby i.LAN agreed to resell NextPoint’s software to customers. This dispute concerns a transaction that took place in 1999.
i.LAN claims that for $85,231.42 it purchased the unlimited right to use NextPoint’s software, replete with perpetual upgrades and support, whereby it effectively could rent, rather than sell, NextPoint’s software to customers. In support of its argument, i.LAN points to the purchase order associated with the transaction. NextPoint, in response, points to the 1998 VAR agreement and the clickwrap license agreement contained in the software itself to reach a different conclusion.
The parties continued their relationship for several months without confronting their conflicting interpretations of the 1999 purchase order, but eventually the disagreement erupted into litigation. i.LAN filed a complaint that alleges breach of contract. Both parties moved for summary judgment, i.LAN arguing that it should be awarded specific performance—perpetual upgrades of NextPoint’s software and unlimited support—and NextPoint arguing that even if i.LAN’s allegations were true, the clickwrap license agreement limits NextPoint’s liability to the price paid for the software: $85,231.42.
Issue: What law should the court apply to resolve this conflict over the terms of clickwrap license agreements for software?
Holding: The court held that it would interpret the clickwrap license pursuant to Article 2 of the UCC:
Two bodies of contract law might govern the clickwrap license agreement: Massachusetts common law and the UCC. Article 2 of the UCC applies to “transactions in goods.” The purchase of software might seem like an ordinary contract for the sale of goods, but in fact the purchaser merely obtains a license to use the software; never is there a “passing of title from the seller to the buyer for a price.” Despite Article 2’s requirement of a sale, courts in Massachusetts have assumed, without deciding, that Article 2 governs software licenses.
The Court will examine the license agreement through the lens of the UCC. The UCC technically does not govern software licenses, and very likely does not govern the 1998 VAR agreement, but with respect to the 1999 transaction, the UCC best fulfills the parties’ reasonable expectations.
In Massachusetts and across most of the nation, software licenses exist in a legislative void. Legal scholars, among them the Uniform Commissioners on State Laws, have tried to fill that void, but their efforts have not kept pace with the world of business. [The court discussed the unsuccessful attempts to address software licenses through a new UCC Article 2B and the Uniform Computer Information Transactions Act (“UCITA”).] Software licenses are entered into every day, and business persons reasonably expect that some law will govern them. For the time being, Article 2’s familiar provisions — which are the inspiration for UCITA — better fulfill those expectations than would the common law. Article 2 technically does not, and certainly will not in the future, govern software licenses, but for the time being, the Court will assume it does.
Question: What is the basis for i.LAN’s and NextPoint’s dispute?