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Wachter Mgmt. Co. v. Dexter & Chaney, Inc. - 282 Kan. 365, 144 P.3d 747 (2006)

Rule:

Computer software is considered to be goods subject to the Uniform Commercial Code, even though incidental services are provided along with the sale of the software.

Facts:

Appellant vendor DCI, a company incorporated in Washington, approached Missouri based company Wachter for the purpose of marketing its software to Wachter. Appellee Wachter expressed some interest in DCI's software but delayed negotiations to purchase the software until August 2003. After detailed negotiations, DCI issued a written proposal to Wachter on October 15, 2003, for the purchase of an accounting and project management software system. An agent for Wachter signed DCI's proposal at Wachter's Kansas office. DCI shipped the software and assisted Wachter in installing it on Wachter's computer system. Enclosed with the software, DCI included a software licensing agreement, also known as a "shrinkwrap" agreement. The software license agreement also contained a choice of law/venue provision providing that the agreement would be governed by the laws of the State of Washington and that any disputes would be resolved by the state courts in King County, Washington. After encountering problems with the purchased software, Wachter sued DCI, the foreign software seller, for breach of contract, breach of warranty, and fraudulent inducement. DCI moved to dismiss based on improper venue. The District Court denied the motion to dismiss, holding that a choice of venue provision contained in a "shrinkwrap" software licensing agreement was not enforceable. DCI appealed. On review, the seller contended the trial court erred when it refused to recognize the applicability of "shrinkwrap" license agreements. 

Issue:

Did the trial court err in refusing to recognize the applicability of "shrinkwrap" software license agreements and in refusing to enforce the vendor's forum/venue selection clause against the purchaser?

Answer:

No

Conclusion:

The Supreme Court of Kansas affirmed the trial court's denial of appellant seller's motion to dismiss. The Court found that the parties negotiated prior to entering into a contract for the sale of software. The seller's written proposal following the parties' negotiations constituted an offer to sell, and appellee buyer accepted that offer when it signed the proposal and requested shipment of the software. Thus, the contract was formed when the buyer accepted the seller's proposal. Because the contract was formed before the seller shipped the software with the enclosed license agreement, the software licensing agreement constituted a proposal to modify the contract's terms. There was no evidence that the buyer expressly agreed to the modified terms, and the buyer's actions in continuing the preexisting contract did not constitute express assent to the terms in the software licensing agreement. Thus, the forum selection clause in the software licensing agreement was not enforceable against the buyer.

As for the applicable standard of review, the Supreme Court of Kansas reviews a district court's decision on a motion to dismiss using a de novo standard of review. 

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