## Facts

- Simulados Software, Ltd., a Texas software company, owned “Certify Teacher,” a test-simulation program for teacher-certification exams.
- Photon Infotech Private, Ltd., a software-development and consulting company based in San Jose, California, contracted with Simulados in 2009 to (i) create a Mac-compatible version of the program, (ii) develop a web application to deliver it online, and (iii) provide related coding, testing, support, and download authentication.
- The contract price was about $23,560; Simulados paid $18,848, with the final installment tied to delivery of a workable product.
- Simulados alleged Photon represented it had expertise in the REALbasic platform, that REALbasic was suitable for the project, and that Photon could deliver a stable multi-platform application.
- Photon delivered a trial web application after about three months; Simulados alleged it had major defects and never achieved the promised functionality despite additional time to cure.
- Simulados sued for breach of contract, fraud, and statutory/UCC-based claims; the case was transferred to the Northern District of California under a forum and choice-of-law clause selecting California.
- Photon moved to dismiss the UCC-based causes of action, arguing the transaction was a services contract governed by California law rather than a sale of goods governed by the UCC.

## Issues

1. Whether the contract’s California choice-of-law clause was enforceable so that California law governed the dispute.
2. Whether the transaction was predominantly for services or for goods, determining whether the UCC applied to Simulados’s UCC-based claims.

## Decision

- The court enforced the California choice-of-law clause and applied California law.
- The court held the agreement was predominantly a services contract for modifying/customizing existing software, not a sale of goods.
- The court ruled the UCC did not govern the transaction and dismissed Simulados’s UCC-based causes of action.
- The court allowed Simulados’s non-UCC claims (including breach of contract and fraud) to proceed.

## Legal Principles

- A contractual choice-of-law clause is enforceable where the chosen state has a substantial relationship to the parties or transaction and the clause is not procedurally or substantively unconscionable.
- For mixed transactions involving goods and services, courts apply a “predominant purpose” test to determine whether the UCC governs.
- Custom software-development and modification engagements may be treated as services contracts where the buyer primarily bargains for professional labor (coding, customization, integration, and support) rather than acquisition of a stand-alone product as a separate good.

## Conclusion

The court applied California law under the parties’ contract and treated the custom software-development engagement as a services agreement, excluding the UCC and eliminating UCC-based causes of action while leaving contract and fraud theories for further adjudication.


Simulados Software, Ltd. v. Photon Infotech Private, Ltd., 40 F. Supp. 3d 1191 (N.D. Cal. 2014)