For more than fifty years, Article 2 of the Uniform Commercial Code (UCC) has provided the default rules for how disputes over the sale of goods are handled in all 50 states. It’s a basic cornerstone of contract law. But a long and contentious effort to update Article 2 has produced an uneasy compromise and a set of revisions that no one seems to like very much. Yet, barring a last minute reprieve, revised UCC Article 2 could soon be on its way to state legislatures.

The revisions consist of a number of proposed amendments, but by far the most controversial is one that alters the scope of Article 2 by changing the definition of what goods it covers. For years the same software industry lobbyists who pushed for UCITA - the Uniform Computer Information Transactions Act – have argued that “computer information” should not be considered goods and therefore should be excluded from the scope of Article 2. Unwilling to go that far, the revised Article 2 drafting committee compromised with an amendment that excludes “information” from the definition of goods. What would this mean? To say the least, it’s very unclear.

The uncertainty this amendment would generate is in part deliberate. Official comments on the amendment suggest that downloaded software would be one type of “information” put outside the scope of Article 2. But courts have routinely applied Article 2 to cases involving software for want of a better law, and the official comments imply that it’s OK for them to continue to do so. Indeed, the whole compromise seems to be based on the idea of leaving things ambiguous enough that judges will be free to use their common sense.

Of course, UCITA opponents fear that some courts will see the information exclusion as an invitation to apply UCITA instead. There is also the concern that a state that adopts revised Article 2 might feel called upon to also enact UCITA to fill the “information” gap. It’s a sure bet that UCITA supporters will portray the change as a mandate for UCITA’s basic principles.

And then there’s the possibility that years of legal precedents and case law will be called into question and possibly require re-litigation to determine what is and is not “information.” There is no effective way to draw a line between information products and ordinary goods. All goods contain information of some sort, and increasingly most have or can have a software component. Open the tiniest crack to let Microsoft and friends exclude themselves from the law, and other industries will inevitably find ways to exploit the opening for their products as well.

The odd thing is that none of the many interest groups involved in revising UCC Article 2 seem very happy with the proposed amendments. In fact, consumer groups and manufacturer associations alike are calling for the existing Article 2 to be left as it is. (Some of their arguments can be read on the “Comments Submitted in Advance” page at http://www.ali.org including a letter from the AFFECT coalition detailing the concerns of UCITA opponents.)

Yet many observers think the changes are a done deal. All the compromises were worked out almost a year ago and have cleared every hurdle but one. Early next week, the American Law Institute (ALI) at its annual meeting is scheduled to briefly discuss and then vote on revised Article 2. If that body approves the amendments as they stand, revised UCC Article 2 could be in the hands of state legislatures by the end of the year.

Since the ALI’s leadership council approved the amendments earlier, some believe the vote at the ALI general meeting will be a rubber-stamping. But perhaps not. The ALI has a reputation for being less subject to the influence of special interests than some other organizations I could mention. In fact, it’s because of the ALI that UCITA is not itself part of the UCC. (Before 1999, UCITA was known as proposed UCC Article 2B, but strong opposition to it in ALI forced the downgrade to a proposed uniform state law.) So there is good reason to believe ALI members really will “check their clients at the door” and vote the way they think best serves the general interest. Keep your fingers crossed.