Dreier Co., Inc. v. Unitronix Corp.
| Decision Date | 10 November 1986 |
| Citation | 218 N.J.Super. 260,527 A.2d 875 |
| Parties | , 90 A.L.R.4th 283, 3 UCC Rep.Serv.2d 1728 The DREIER COMPANY, INC., Plaintiff-Appellant, v. UNITRONIX CORPORATION, a New Jersey Corporation and Andrew Yasenchak, Defendants-Respondents. |
| Court | New Jersey Superior Court — Appellate Division |
Lawrence B. Sachs, East Brunswick, for plaintiff-appellant (Sapiro & Gottlieb, attorneys, Lawrence Sachs on the brief).
Vincent J. Dotoli, South Plainfield, for defendant-respondent Yasenchak (Vincent Dotoli, on the brief).
David R. Strickler, Somerville, for defendant-respondent Unitronix Corp. (Norris, McLaughlin & Marcus, attorneys; David Strickler, on the brief).
Before Judges KING, HAVEY and MUIR.
The opinion of the court was delivered by
HAVEY, J.A.D.
The primary issue raised by this appeal is when does a cause of action for breach of warranty in the sale of a computer system accrue for purposes of triggering the running of a one-year time-bar contained in the sales agreement. The Law Division judge determined that the cause of action accrued upon latest delivery of the computer hardware components. We hold that the action does not accrue until tender of delivery and installation of the entire system, including the customized software programs ordered by the vendee.
Plaintiff, The Dreier Company, Inc., appeals from an order of summary judgment dismissing its complaint against defendants Unitronix Corporation and Andrew Yasenchak. In the complaint, plaintiff contends that defendants breached express and implied warranties, violated the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et seq., and committed common-law fraud in the sale of an incomplete and defective computer system to it. It seeks compensatory damages, treble damages under the Consumer Fraud Act, and punitive damages for common-law fraud. In dismissing the complaint the Law Division judge concluded that plaintiff's action was time-barred by a one-year period of limitation contained in the written sales agreement.
We reverse and remand for further proceedings. Genuine issues of material fact exist as to when "tender of delivery" of the computer system occurred, see N.J.S.A. 12A:2-725(2), for purposes of establishing when plaintiff's cause of action for breach of warranty accrued. Fact issues also exist as to when plaintiff's cause of action accrued under the Consumer Fraud Act and for common-law fraud.
Plaintiff's submission of affidavits on the summary judgment motion disclosed the following facts which we accept as true. Unitronix sells, installs and maintains computer systems. During 1980 Stanley Dreier, president of plaintiff, discussed the purchase of a computer system with Yasenchak, a Unitronix salesman. Dreier informed Yasenchak that plaintiff was engaged in the sale and distribution of sporting goods and that the computer system would be utilized for customer billings, inventory control, and accounts receivable and payable. Dreier had no knowledge or expertise in the computer field and therefore relied upon Yasenchak and Unitronix to provide a system to meet plaintiff's particular needs. On December 22, 1980 a representative of Unitronix sent a written quotation of $20,000 for a computer system detailing various "hardware" components at a price of $14,000, and customized "software" at a price of $6,000.
On April 22, 1981 plaintiff and Unitronix entered into a written agreement under which plaintiff purchased a system consisting of hardware and "custom programmed software" for billing, accounts receivable and inventory control. The purchase price for the total system was $19,950. Paragraphs 4 and 5 of the agreement provided as follows:
4. During the 180 days following the Date of Installation, Seller will, upon request by Buyer, provide or cause to be provided at no cost to Buyer trained maintenance personnel within one business day to perform all maintenance, servicing and repair activities which can reasonably be performed at Buyer's premises. Maintenance, servicing and repair under this Section 4 will include replacements of components of Equipment. After the 180 day period following the Date of Installation, Buyer will be solely responsible for obtaining maintenance, service and repair.
5. ...Seller warrants that, for a period of 180 days, following the Date of Installation, the Equipment will be in good working order and Seller will, during the same 180 day period, at its expense (or at least the expense of DEC), keep the Equipment in good working order and repair as set forth in Section 4 hereof. Buyer acknowledges that the applications Buyer intends of the Equipment are of significant complexity and Buyer agrees that Seller's sole liability shall be to provide reasonable maintenance as set forth in Section 4 hereof, without cost to buyer.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
* * *
No action, regardless of form, arising out of the transactions under this agreement, may be brought by either party more than one year after the cause of action has accrued, except that an action for nonpayment may be brought within one year after the date of last payment. [Emphasis supplied].
Most of the system's hardware was delivered on or about April 22, 1981, the contract date. On July 23, 1981 Dreier, at Unitronix's advice, purchased two additional discs and on February 2, 1982 a modem was purchased to permit the "software people" at Unitronix to phone into the computer to resolve any problems which might arise. Some time after July 23, 1981 a simplified billing program was implemented. According to Dreier, the billing system was "fraught with problems" from the outset. Interest charges were not added into the statements; the system would not print more than one page per statement; salesmen's commissions were not computed, and all account totals were not computed properly.
In June 1982 plaintiff determined that the invoicing portion of the inventory control system was not written to plaintiff's specifications. Consequently, the system was not ready to be implemented until April 1983. In July 1983 it was discovered that the inventory program did not deduct correctly. On August 19, 1983 Dreier wrote to Unitronix advising that:
[W]e are now ready to complete our inventory control software which is not in order. Also, as you are aware, the accounts receivable program has never been complete.... Because this software is part of that original agreement we expect this service on a no charge basis.
In March 1984 Dreier again wrote to Unitronix complaining that the "software has not been put into a completely operative basis." Dreier complained that various aspects of the billing system were incomplete; two programs that were part of the inventory system, "RECUPD and POUPD" had never been activated and were not productive, and other aspects of the software had not been programmed in accordance with plaintiff's specifications. Despite assurances from Yasenchak, nothing was done by Unitronix. In July 1984 plaintiff scrapped the Unitronix system and on April 23, 1985 filed suit.
Unitronix and Yasenchak moved for summary judgment, arguing that plaintiff's action was time-barred by the contractual one-year limitation period; that the Consumer Fraud Act did not apply to the transaction because plaintiff was not a "consumer" and that defendant had not stated a cause of action for common-law fraud. The Law Division judge granted the motion, concluding that the entire action was time-barred by the one-year limitation period. In granting the motion, the judge analogized the sale of the computer system to the purchase of an automobile and concluded that the "very latest this complaint could have been filed was one year after [the] August 1982 delivery which would make it August of 1983." 1
Plaintiff contends on appeal that the Law Division judge erred in granting summary judgment since fact questions exist as to when its cause of action accrued. It argues that the cause of action could not have accrued until July 1984 when it was finally determined that the software could not be implemented.
The problem in this case, amply underscored by the judge's analogy to the sale of an automobile, is that the sale of a computer system is not simply the delivery and installation of tangible goods. It involves the sale of various hardware and software components as well as services rendered by the vendor in providing a customized program to the vendee. A computer system is a group of devices designed: (a) to receive various forms of data (input); (b) to process the data according to predesignated sets of instructions (programs), and (c) to produce the desired information (output). See Holmes, "Application of Article Two of the Uniform Commercial Code to Computer Systems Acquisitions," 9 Rutgers Computer & Technology Law Journal, 1, 4 (1982). The software is the medium employed for storing all of the input and output data as well as the computer programs. Ibid. Application or customized "software" refers to the logic and directions loaded into the machine that cause it to do certain things on command. United States v. Seidlitz, 589 F.2d 152, 154, n. 3 (4 Cir.1978). It is the computer component which is designed to solve a particular problem; for example, to maintain personnel files or to handle a company's payroll. See Deutsch, "Time Considerations and Computer Purchase Litigation", 115 New Jersey Lawyer 20 (May 1986).
A computer programmer must develop the customized application program to satisfy the vendee's specific needs in order for the system to be of any use or value to the vendee. Frequently, software is sold with the hardware as part of a "turn-key" system, able to be turned on and function immediately in place at the vendee's place of business. 9 Rutgers Computer &...
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