January 17, 2013
Teaching Sales, Issue 3: Distribution Agreements
Whether or not distributorship agreements should be covered under UCC Article 2 as contracts for the sale of goods seems to be a case very similar to that of software contracts. That is, some courts assume that such contracts are covered under Article 2 without looking very carefully to see whether the contract is predominantly one for the sale of goods. In the case of software contracts, as discussed yesterday, if the transactions are really about licenses, the assumption that Article 2 applies is not warranted unless the parties have stipulated that they want their agreement to be governed by Article 2, and according to this very helpful comment, they usually stipulate that they do not want the agreement to be governed by Article 2.
A distribution agreement is more likely to involve the sale of goods, and so it is more like the mixed contracts that we talked about on Tuesday. That is, a distributorship agreement will often entail both a service agreement and an agreement for the sale of goods. If so, then the court should analyze the contract under either the predominant purpose test or the gravamen of the action test as discussed in Tuesday's post, depending on the jurisdiction. But it seems that some courts do not do that, either mistaking precedents in which distributorship agreements are treated as governed by Article 2 as establishing a blanket rule or preferring a bright line rule in which all distributorships are governed by Article 2.
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