Wachter Management Co. v. Dexter & Chaney, No. 95,102.
| Decision Date | 27 October 2006 |
| Docket Number | No. 95,102. |
| Citation | 144 P.3d 747 |
| Parties | WACHTER MANAGEMENT COMPANY, Appellee, v. DEXTER & CHANEY, INC., Appellant. |
| Court | Kansas Supreme Court |
Leonard L. Wagner, of Husch & Eppenberger, LLC, of Kansas City, Missouri, argued the cause, and Michael S. Hargens, of the same firm, was on the briefs, for the appellant.
Leslie A. Bailey, of Moore & Hennessy, P.C., of Kansas City, Missouri, argued the cause, and was on the brief, for the appellee.
Wachter Management Company (Wachter) filed an action for breach of contract, breach of warranty, and fraudulent inducement against Dexter & Chaney, Inc. (DCI). DCI filed a motion to dismiss the action based on improper venue. The district court denied DCI's motion, holding that a choice of venue provision contained in a "shrinkwrap" software licensing agreement was not enforceable. DCI brings this interlocutory appeal pursuant to K.S.A. 60-2102(b).
Wachter is a construction management company incorporated in Missouri with its principal place of business in Lenexa, Kansas. DCI is a software services company that develops, markets, and supports construction software, project management software, service management software, and document imaging software for construction companies like Wachter. DCI is incorporated in Washington with its principal place of business in Seattle.
Beginning in April 2002, DCI approached Wachter for the purpose of marketing its software to Wachter. 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. The proposal included installation of the software, a full year of maintenance, and a training and consulting package. The proposal did not contain an integration clause or any provision indicating that it was the final and complete agreement of the parties, nor did the proposal contain any provision indicating that additional terms might be required. An agent for Wachter signed DCI's proposal at Wachter's Lenexa office on October 17, 2003.
Thereafter, 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, which provided:
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.
In February 2005, after encountering problems with the software, Wachter sued DCI in Johnson County, Kansas, for breach of contract, breach of warranty, and fraudulent inducement, seeking damages in excess of $350,000. DCI moved to dismiss Wachter's petition, alleging improper venue based on the provision of the software licensing agreement which provided that King County, Washington, was the proper venue. In response, Wachter argued that the software licensing agreement was an unenforceable addition to the parties' original contract.
The district court denied DCI's motion, finding that the parties entered into a contract when Wachter signed DCI's proposal and concluding that the software license agreement contained additional terms that Wachter had not bargained for or accepted. The district court certified its ruling for an interlocutory appeal, and the Court of Appeals granted DCI's request for interlocutory appeal. We transferred the matter to this court on our own motion pursuant to K.S.A. 20-3018(c).
We review the district court's decision on a motion to dismiss using a de novo standard of review. Kluin v. American Suzuki Motor Corp., 274 Kan. 888, 893, 56 P.3d 829 (2002). Because DCI's motion to dismiss was decided before trial on the basis of the pleadings, the petition, affidavits, and other written materials, we must consider as true the allegations in Wachter's petition and the factual assertions in Wachter's affidavits to the extent they are uncontroverted by DCI's affidavits. If the parties present conflicting affidavits, we will resolve all factual disputes in Wachter's favor. See Kluin, 274 Kan. at 893, 56 P.3d 829.
DCI argues that the district court erred when it refused to recognize the applicability of "shrinkwrap" license agreements. DCI raises four arguments. First, DCI contends that Wachter accepted the terms of the license agreement by opening and using the software. Second, DCI argues that other courts have upheld the terms of shrinkwrap agreements. Third, DCI claims that the district court's refusal to apply the licensing agreement provides Wachter with an undeserved windfall because its use of the software was unfettered by any license terms. Fourth, DCI asserts that the venue clause in its license agreement is applicable to noncontract claims that are related to or limited by the contract.
Wachter counters by arguing that DCI's license agreement is a unilateral alteration of the contract created when Wachter accepted DCI's proposal. Disputing DCI's contention that it assented to the additional terms by opening, installing, and using the software, Wachter claims that it received no independent consideration for the amendments to the contract. Wachter further argues that the Uniform Commercial Code (UCC), K.S.A. 84-1-101 et seq., precludes unilateral alterations to contract terms.
We must begin our analysis with a determination of whether the UCC applies. K.S.A. 84-1-103 (); Moritz Implement Co., Inc. v. Matthews, 265 Kan. 179, 959 P.2d 886 (1998) (). The UCC applies to transactions involving goods. K.S.A. 84-2-102. Goods are defined as "all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article 8) and things in action." K.S.A. 84-2-105.
Computer software is considered to be goods subject to the UCC even though incidental services are provided along with the sale of the software. Systems Design v. Kansas City P.O. Employees Credit Union, 14 Kan.App.2d 266, 272, 788 P.2d 878 (1990). The Systems Design court noted that modifications and corrections to the computer programs for improving the system operation were incidental to the sale of the software because, without the purchase of the software, the services would have been unnecessary. 14 Kan.App.2d at 272, 788 P.2d 878. But see Mortgage Plus, Inc. v. DocMagic, Inc., 2004 WL 2331918 (D.Kan.2004) (unpublished opinion) ().
The Systems Design analysis applies to the facts in this case. Although DCI's proposal included maintenance, training, and consulting services, these services would not have been necessary if Wachter had not purchased DCI's software. Because the services were incidental to Wachter's purchase of computer software, we conclude that the software at issue in this case qualifies under the definition of goods, and the UCC applies.
Pursuant to K.S.A. 84-2-204, a contract for the sale of goods is formed "in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. K.S.A. 84-2-206(1)(a). The Kansas Comment to 84-2-206 provides that the offeror is the master of the offer and may require a specific manner of acceptance if it is unambiguously conveyed in the language of the offer or other circumstances. K.S.A. 84-2-206, Kansas Comment 2, 1996.
In this case, DCI issued a written proposal to Wachter containing an itemized list of the software to be purchased, the quantity to be purchased, the price of the software, the time period for execution, and the cost for the incidental maintenance, training, and consulting services. DCI's proposal requested Wachter to accept its offer to sell Wachter software by signing the proposal above the words "[p]lease ship the software listed above." Accordingly, Wachter accepted DCI's offer to sell the software to it by signing the proposal at Wachter's office in Lenexa. Thus, a contract was formed when Wachter accepted DCI's offer to sell it the software, indicating agreement between the parties. See K.S.A. 84-2-204.
K.S.A. 84-2-201 requires contracts for the sale of goods over...
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