KENTwool Company (Kentwool) is a textile company headquartered in Greenville, South Carolina that operates a state-of-the-art wool-based yarn spinning plant... serving a diversified international customer base. NetSuite, Inc. (NetSuite) is a software company and provider of Enterprise Resource Planning (ERP) software. On or about March 14, 2013, Kentwool and NetSuite entered into a Subscription Services Agreement pursuant to which NetSuite agreed to provide its ERP software to Kentwool over a one-year term from March 18, 2013 to March 17, 2014. Prior to the parties entering this agreement, NetSuite represented to Kentwool on numerous occasions that it had experience in the manufacturing industry and that its software could integrate the management of Kentwools manufacturing, inventory, purchasing, financial, sales, and shipping processes. At this time, NetSuite knew that the software lacked the functionality to perform as represented. The ERP software failed to operate as represented by NetSuite. Relying on NetSuites assurances that it could correct the problems with the software, Kentwool continued to pay for consulting services and technical support. Kentwool ultimately paid NetSuite $317,851.26significantly more than NetSuites original $245,784.65 estimate. Because [NetSuite] had failed to provide assurances that it would deliver a functional product and had indicated that implementation would involve additional time and expenditures, Kentwool provided notice of termination of its agreement with NetSuite and demanded a full refund. NetSuite did not agree to correct the issues with the software at its own expense or to provide a refund.

B. Discussion Implied Warranties

NetSuite argues that Kentwools [claims for] breach of an implied warranty of merchantability and breach of an implied warranty of fitness for a particular purpose, must be dismissed with prejudice [claiming that the Uniform Commercial Code (UCC) does not apply to the transaction at issue] because the services aspect of the transaction predominates over the provision of goods . The UCC applies to transactions in goods, defined as all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale. Because transactions involving software often combine elements of both goods and services and [b]ecause software packages vary depending on the needs of the individual consumer, we apply a case-by-case analysis to determine whether a software transaction is covered by the UCC. Courts look to the essence of the agreement to determine whether the predominant factor or purpose of the contract is rendition of services, with goods incidentally involved, or is rendition of goods, with labor incidentally involved. Courts have generally found that mass-produced, standardized, or generally available software, even with modifications and ancillary services included in the agreement, is a good that is covered by the UCC. Simulados Software, 2012 U.S. Dist. LEXIS 107356, 2014 WL 1728705. On the other hand, courts have reached varying conclusions concerning software adapted for specific customer needs. Here, Kentwools complaint states that the parties entered into an agreement that required Defendant to sell, customize, configure, and, implement its ERP Software for Kentwools specific needs and uses [and] to provide training and consulting services to enable Kentwool to utilize the Software in managing its business needs over a one year term. The Subscription Services Agreement states that NetSuite shall make the Service available to Customer, and explains that NetSuite shall host the Service and may update the functionality, user interface, usability and other user documentation, training and educational information of, and relating to the Service from time to time in its sole discretion. The agreement restricts Kentwool from outsourcing, renting, reselling, or sublicensing the software. The licensing agreement is for a term of twelve months, after which the license must be renewed. The Court concludes that in this particular case, the predominant purpose of the contract is the provision of services, and the UCC therefore does not apply. Kentwool did not purchase pre-existing software that it could download and retain indefinitely or transfer to others. Rather, it contracted to access an online service customized for its needs, subject to updates at any time, and available only for a fixed term. Because the UCC does not apply to this transaction, the implied warranty claims are dismissed without leave to amend.

Breach of Contract

A cause of action for breach of contract requires pleading of a contract, plaintiffs performance or excuse for failure to perform, defendants breach and damage to plaintiff resulting therefrom. [I]t is unnecessary for a plaintiff to allege the terms of the alleged contract with precision, but the Court must be able generally to discern at least what material obligation of the contract the defendant allegedly breached. Langan v. United Services. Auto. Assn. (N.D. Cal. Sept. 23, 2014). NetSuite argues that Kentwools claim for breach of contract must be dismissed because plaintiff has failed to (1) allege that it performed its obligations under the contract and (2) point to the terms of the contract that it claims were breached. The Court concludes that Kentwool has adequately pleaded its breach of contract claim. In the complaint, Kentwool states that Kentwool paid NetSuite $317,851.26, satisfying its obligations under the Agreement. NetSuite correctly points out the agreement between the parties allocates other responsibilities to Kentwool in addition to payment. Pleading that Kentwool paid is therefore not necessarily tantamount to pleading that Kentwool performed. However, the complaint includes the phrase, satisfying its obligations under the Agreement. Construing the pleadings in the light most favorable to Kentwool, the Court therefore finds that the complaint adequately alleges that Kentwool satisfied all of its obligations under the contract. The Court also finds that Kentwools complaint, which described a valid and existing contract for the purchase, customization, configuration, and implementation of NetSuites ERP software for Kentwools specific needs and uses, adequately alleged that NetSuite breached the contract by supplying defective and non-functional Software, and/or failing to properly configure and implement functional software. For the foregoing reasons, NetSuites motion to dismiss the breach of contract term is denied.

4. UCC sellers also make an implied warranty of fitness for a particular purpose when a buyer reasonably relies on the sellers assurance about the good. For example, if a homeowner goes to a hardware store and asks the owner to recommend paint for a storage shed in her backyard, it would be reasonable for the buyer to select the recommended paintunless it was clearly labeled for indoor use only. What made Kentwood Company rely on the sellers promises? Why does the court reject the claim that an implied warranty of fitness was breached?