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    Contract Formation - Governing Law - Merchants - Statute of Frauds

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    Tom Jones owns and operates Jones Goodtime Emporium, an adult entertainment establishment. Jones wants to create an adult Internet system for the Emporium that offers customers adult theme videos and "live" chat room programs using performers at the club. On May 10, Jones signed a work order authorizing Smith Consulting Group "to deliver a working prototype of a customer chat system, demonstrating the integration of live view, and the chatting in a Web browser." In exchange for creating the prototype, Jones agreed to pay Smith $64,697.
    On May 20, Jones signed an additional work order for $12,934 for Smith to install a customized firewall system. The work orders stated that Jones makes monthly installment payments to Smith, and both parties expected the work to finish by September.
    Due to unforeseen problems, largely attributable to system configuration and software incompatibility, the project required more time than anticipated. By the end of the summer, the Web site was still not ready, and Jones had fallen behind in the payments to Smith. Smith was threatening to cease work and file suit for breach of contract unless the bill was paid. Rather than make further payments, Jones wanted to abandon the Web site project.

    1) Is the court likely to decide that the transaction between Jones and Smith is covered by the Uniform Commercial Code (UCC)? Please explain why or why not?

    2) Would a court be likely to consider Jones a merchant under the UCC? Please explain why or why not?

    3) Did the parties have a valid contract under the UCC? Explain.

    4) Suppose that Jones and Smith meet in October in an attempt to resolve the problem. At that time, the parties reach an oral agreement that Smith continues to work without demanding full payment of the past-due amounts resulting in Jones paying Smith $5,000 per week. In this case, assume that the contract comes under the UCC. If this is true, is the oral agreement enforceable? Please explain why or why not?

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    Solution Preview

    Here is a brief explanation as to the questions presented.

    Feel free to submit another posting or further question regarding each call. I could elaborate more with a specific posting with proper credits.

    This deals with figuring out whether the parties are potentially contracting for the sale of goods (governed by the UCC) or it's a service contract/real property contract (governed by the common law.)

    - Here, they are dealing to create a website/chat room/ firewall. All of which require the service of creating the systems. There is not a ...

    Solution Summary

    The transaction between Jones and Smith with Uniform Commercial Code is discussed. The expert determines if the parties have a valid contract under the UCC.