The following language, to be added to the proposed Amendments to Article 2 (Sales) of the Uniform Commercial Code, was approved in July at the Annual Meeting of the National Conference of Commissioners on Uniform State Laws and will be considered by the ALI Council in October as part of its review of both Article 2 and Article 2A (Leases). For further information, see UCC Update.
Prefatory Note
The proposed change to Article 2 consists of a series of discrete amendments to the existing law rather than a complete revision. For the most part, these amendments update the Article to accommodate electronic commerce and to reflect development of business practices, changes in other law, and interpretive difficulties of practical significance. The amendments are substantive in nature, reflecting the Drafting Committee’s decision to avoid amending provisions that have not been a source of problems. Some interpretive clarifications of importance are reflected in the Preliminary Comments rather than the text of the amendments.
These amendments reflect the fact that, overall, Article 2 continues to serve well. This is largely a result of the approach of the Article, which relies to a large extent on the ability of the parties to adapt its provisions by agreement, including course of performance, course of dealing and usage of trade, and on the courts to apply its provisions sensibly. No change in the law is cost free; even changes intended merely to clarify the law impose educational costs and costs associated with unintended consequences. These amendments also reflect an inability to reach reasonable consensus on some issues. In these and other instances, the courts will continue to develop the law through cases that respond to the circumstances under which the issues are presented for resolution, and the fact that a particular issue is not addressed by these amendments does not necessarily reflect approval or disapproval of existing cases addressing that issue.
§ 2–103. Definitions and Index of Definitions.
(1) "Goods" means all things that are movable at the time of identification to a contract for sale. The term includes future goods, specially manufactured goods, the unborn young of animals, growing crops, and other identified things attached to realty as described in Section 2-107. The term does not include information, the money in which the price is to be paid, investment securities under Article 8, the subject matter of foreign exchange transactions, and choses in action.
Preliminary Comment
The definition of "goods" has been amended to exclude information not associated with goods. Thus Article 2 would not directly apply to an electronic transfer of information, such as the transaction involved in Specht v. Netscape, 150 F. Supp. 2d 585 (S.D.N.Y. 2001). However, transactions often include both goods and information: some are transactions in goods as that term is used in Section 2-102, and some are not. For example, the sale of "smart goods" such as an automobile is a transaction in goods fully within Article 2 even though the automobile contains many computer programs. On the other hand, an architect’s provision of architectural plans on a diskette would not be a transaction in goods. Where a transaction includes both the sale of goods and the transfer of rights in information, it is up to the courts to determine whether the transaction is entirely within or without Article 2, or whether or to what extent Article 2 should be applied to a portion of the transaction. While Article 2 may apply to a transaction including information, nothing in this Article alters, creates, or diminishes intellectual property rights.
The definition has also been amended to exclude the subject matter of "foreign exchange transactions." See Section 2-103(1)(j). Although a contract in which currency is the commodity exchanged is a sale of goods, an exchange in which delivery is "through funds transfer, book entry accounting, or other form of payment order, or other agreed means to transfer a credit balance" is not a sale of goods and is not governed by Article 2. In the latter case, Article 4A or other law applies. On the other hand, if the parties agree to a forward transaction where dollars are to be physically delivered in exchange for the delivery of Euros, the transaction is not within the "foreign exchange" exclusion and Article 2 applies.