Tuesday, February 14, 2023
Electricity! Good? No Good?
When I first started teaching Sales, I used the Whaley/McJohn casebook, and I loved it. It has fun problems, and there are clear answers. Is electricity a good? You might ask. Whaley/McJohn has an answer: the vast majority of courts have determined that electricity is moveable ("and how!"). Works for me. My current casebook is wise to the complexities of the world and refuses to take a position on whether electricity is a good. What would Ben say?
In the most recent case on the subject, PacifiCorp v. N.Pac. Canners & Packers, Inc., the Federal District Court for the District of Oregon answers the question decisively in the negative. The District Court was reviewing a decision of the bankruptcy court. The issue was whether electricity was a good for the purposes of Bankruptcy Code, 11 U.S.C. § 503(b)(9). The priority of PacifiCorp's claim turned on the answer. The Bankruptcy Code does not define "goods," and so the court turned to the UCC definition of a good: “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale” U.C.C. § 2-105(1).
The Bankruptcy Court reasoned as follows:
Electricity moves through the wire at near the speed of light and so by the time it is recorded by the meter, the electricity has already been consumed by the end user. As a result, the electricity “is not movable at the time of identification because it has already been used.”
Huh?
The District Court adds very little to this logic in upholding the decision:
Electricity is not “identified” until it has been recorded by the meter and, because of the speed that electricity moves through the wire and the comparative slowness of the meter, the electricity has been consumed by the time that identification occurs. The electricity is not, therefore, movable at the time of identification.
It's fast, so it doesn't move. Got it.
I read this with no small amount of perplexity. I shared my frustration with a colleague, who does criminal law. She had strong views that electricity was not a good. "Is wind a good? It moves." I am stumped. The CISG does the sensible thing and simply handles the matter with a definition: Electricity? Not a good, or at least not covered by the CISG (Art. 2(f)).
Works for me. Hey UCC revisers! A little help here?
https://lawprofessors.typepad.com/contractsprof_blog/2023/02/electricity-good-no-good.html
Comments
I agree with Sid. The court's analysis is, in my view, somewhat hollow because there is no discussion of policy. So what would a proper analysis look like. Well, I would start with the observation that Article 2 undoubtedly applies to sales of liquids and gases, as well as solids. Moreover, goods are often measured for sale not by number but by weight (e.g., gold), volume (e.g., gasoline), or area or length (lumber). So why not by kilowatt hour? On top of that, sales of goods by a regulated utility (e.g., water) are Article 2 transactions. So again, why not sales of electricity? It seems to me that these are the relevant questions to ask, not the physics questions the Bankruptcy and District Court indulged in. Article 2's contract formation rules would work fine for sales of goods, but they would also work for other types of contracts, so that proves little. Would it make sense to apply Article 2's rules on tender, warranty, and remedies? None of them jumps out to me as being inappropriate to a sale of electricity.
As for a fix by the drafters, let's put this in context. By my count, there are about a dozen cases on this issue, most in last 15 years. There's simply not enough at stake here for the Uniform Law Commission and the American Law Institute get involved. On top of that, all or almost all of the cases arise under section 503(b)(9) of the Bankruptcy Code. In other words, this is really not an issue that arises under the UCC, it is an issue under the Bankruptcy Code, and with respect to which other policies might be in play.
Posted by: Stephen Sepinuck | Feb 24, 2023 5:55:44 AM
Your "current" casebook? Please. We discussed electricity in every Sales class i taught. Electricity is the perfect issue to illustrate the primacy of policy reasoning over metaphysics in law. It is a trap to consider that physics has an answer to "is it a thing"? The last thing you want is a version of wave/particle theory to a question that should be answered from a pure policy perspective: Does it make sense to treat sales of electricity as sales of goods as opposed, e.g., to sales of services? Even courts fall into this trap. it is enough that people conceptualize sales of electricity as if they were sales of goods. And as a matter of physics, my students have persuaded me that electricity is not an object located somewhere in the circuit at a moment in time, as the court you quote seems to think.
Posted by: Sidney DeLong | Feb 17, 2023 4:42:43 PM