## Facts

- Analysts International Corporation (AIC), a computer consulting and systems-development firm, agreed to design and implement a custom computerized inventory reordering system for Recycled Paper Products, Inc. (RPP).
- The parties’ agreement was largely oral; the only writing referenced a delivery date.
- The system was not completed by the agreed date.
- After implementation, the system allegedly did not perform its intended functions and failed to operate as required by RPP.
- AIC attempted to correct the system; during this period, RPP continued to pay AIC’s invoices.
- RPP’s auditors concluded the system was so deficient that it would need to be completely redone.
- RPP refused to pay an outstanding invoice.
- AIC sued for breach of contract and fraud; RPP counterclaimed, including for breach of the implied warranties of merchantability and fitness for a particular purpose under UCC §§ 2-314 and 2-315.
- AIC moved for summary judgment on the UCC implied-warranty counterclaims, arguing the transaction was a services contract outside UCC Article 2.

## Issues

1. Whether a contract to design, develop, and implement a custom computerized system can constitute a “transaction in goods” governed by UCC Article 2, permitting implied-warranty claims under UCC §§ 2-314 and 2-315.
2. Whether, for a mixed transaction involving both programming/implementation services and delivery of a functioning system, the goods component could predominate such that Article 2 may apply.

## Decision

- The court denied AIC’s motion for summary judgment on RPP’s implied-warranty counterclaims.
- The court concluded that the transaction could fall within UCC Article 2, so the implied warranties of merchantability and fitness for a particular purpose were not barred as a matter of law.
- The denial reflected, at minimum, that the record did not permit dismissal of the Article 2 warranty theories at the summary-judgment stage.

## Legal Principles

- UCC Article 2 may apply to a mixed contract involving both services and a deliverable product when the transaction is, in substance, for delivery of a functioning system rather than merely professional services.
- In classifying mixed goods-and-services transactions for Article 2 purposes, courts commonly consider the transaction’s predominant purpose to determine whether Article 2 governs.
- If Article 2 applies, UCC § 2-314 may imply a warranty of merchantability, requiring that the goods be fit for their ordinary purposes.
- If Article 2 applies, UCC § 2-315 may imply a warranty of fitness for a particular purpose where the seller knows the buyer’s particular purpose and the buyer relies on the seller’s skill or judgment to furnish suitable goods.
- Summary judgment is inappropriate where the evidentiary record permits a reasonable finding that the transaction is within Article 2 and that implied-warranty elements could be satisfied.

## Conclusion

The court allowed UCC implied-warranty counterclaims to proceed by holding that a custom computerized system could be treated as “goods” under Article 2, and that the mixed nature of the software-development arrangement did not justify dismissing merchantability and fitness warranty theories at summary judgment.


Analysts Int’l Corp. v. Recycled Paper Prods., Inc., No. 86 C 8100, 1987 WL 12917 (N.D. Ill. June 22, 1987)