Butterfly Labs Forced "On Hold For Refund" for all my Single SC orders

[drlukacs]

Unfortunately, car dealerships do not use future contracts for goods that I can discern. They take deposits to reserve the car. They are still subject to the same terms however, and there are a lot of consumer protection laws that call out specifically what car dealerships may do. Tesla for instance took a $5000 deposit on their model S cars before production began.

A deposit is not the same as a contract of sale. In the present case, BFL has received full payment for the item(s) sold.

[drlukacs]

I would be hesitant to characterize the sale as a "forward contract". I would be inclined to characterize it as a sale of future goods (emphasis added):

Definitions--transferability--"goods"--"future" goods--"lot"--"commercial unit".

400.2-105. (1) "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (section 400.2-107).

(2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.

That is precisely what a "forward contract" is. It is a contract of sale between private parties for future goods at a fixed price. A "future contract" is a standardized forward contract offered by exchanges.
More about them here: http://www.investopedia.com/ask/answers/06/forwardsandfutures.asp

Forward contract or future contract is a term used in the context of investments/securities. The term used by UCC (which is what one wants to use before a judge) is a "contract for sale of future goods."

[Endlessa]

Customer goes to a car dealership, picks the car he wants but it isn't in stock, so he's told it will be delivered in 2 months, and he pays the current price for the car in full at that point in time. 2 months pass, and the car he ordered is delivered to the dealership. The dealership sees that he can sell the same car to a new buyer for 67% more. So he calls up the original customer and says, sorry, I changed my mind, you can't have that car after all, because I'd rather sell it to someone else for more money. Here's your money back.

Very good example.

Btw almost done with the discussion in the legal forum. drlukacs, do you want me to just start a thread in the legal section and point to it here?

I would add to this that in the case of the car purchase there would be an explicit contract with cancellation clauses and the details of that would regulate a situation.


Additionially the wording on the site at the time of the order:

http://web.archive.org/web/20120628113158/http://www.butterflylabs.com/order-form-bitforce-sc-single/

Explicitly states: "currently scheduled for October"

This wording in so vague and implies that the date will and can change. .. there is little room to say that they promised to deliver the products sooner and the buyer was unaware that it wasn't a risk factor

[drlukacs]

Btw almost done with the discussion in the legal forum. drlukacs, do you want me to just start a thread in the legal section and point to it here?

Sure.

I would add to this that in the case of the car purchase there would be an explicit contract with cancellation clauses and the details of that would regulate a situation.

I agree.

Additionially the wording on the site at the time of the order:

http://web.archive.org/web/20120628113158/http://www.butterflylabs.com/order-form-bitforce-sc-single/

Explicitly states: "currently scheduled for October"

This wording in so vague and implies that the date will and can change. .. there is little room to say that they promised to deliver the products sooner and the buyer was unaware that it wasn't a risk factor

Fortunately, drafters of the UCC thought even about this:

400.2-309. (1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.

A judge will be considering whether in light of an indicated delivery time of October 2012, non-delivery by May 2013 is "reasonable." All I can say that I would not want to be counsel for BFL at that hearing...

[Endlessa]

Btw almost done with the discussion in the legal forum. drlukacs, do you want me to just start a thread in the legal section and point to it here?

Sure.

I would add to this that in the case of the car purchase there would be an explicit contract with cancellation clauses and the details of that would regulate a situation.

I agree.

Additionially the wording on the site at the time of the order:

http://web.archive.org/web/20120628113158/http://www.butterflylabs.com/order-form-bitforce-sc-single/

Explicitly states: "currently scheduled for October"

This wording in so vague and implies that the date will and can change. .. there is little room to say that they promised to deliver the products sooner and the buyer was unaware that it wasn't a risk factor

Fortunately, drafters of the UCC thought even about this:

400.2-309. (1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.

A judge will be considering whether in light of an indicated delivery time of October 2012, non-delivery by May 2013 is "reasonable." All I can say that I would not want to be counsel for BFL at that hearing...

lol ya that would be one wicked debate. . .

[k9quaint]

I would be hesitant to characterize the sale as a "forward contract". I would be inclined to characterize it as a sale of future goods (emphasis added):

Definitions--transferability--"goods"--"future" goods--"lot"--"commercial unit".

400.2-105. (1) "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (section 400.2-107).

(2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.

That is precisely what a "forward contract" is. It is a contract of sale between private parties for future goods at a fixed price. A "future contract" is a standardized forward contract offered by exchanges.
More about them here: http://www.investopedia.com/ask/answers/06/forwardsandfutures.asp

Forward contract or future contract is a term used in the context of investments/securities. The term used by UCC (which is what one wants to use before a judge) is a "contract for sale of future goods."

A forward contract is precisely a "contract for sale of future goods." Xian bought a forward contract. Forward contracts need not specify an exact time in the future to be executed. The traditional measure of damages for a seller’s breach of contract is the difference between the market price and the contract price. The UCC retains this rule.

A future contract is the security or investment you are referring to. Those are standardized forward contracts offered by licensed futures exchanges. They are marked to market daily and there are strict capital requirements that must be maintained. Moreover, the exchange is responsible for making sure there is no counterparty risk. Even if one party defaults on the future contract, the exchange makes the other party whole.

[drlukacs]

[A forward contract is precisely a "contract for sale of future goods." Xian bought a forward contract. Forward contracts need not specify an exact time in the future to be executed. The traditional measure of damages for a seller’s breach of contract is the difference between the market price and the contract price. The UCC retains this rule.

UCC broadens the damages, because it also allows incidental and consequential damages. It also explicitly allows for recovery of "cover" costs, that is, the purchase of a substitute item.

[Endlessa]

Btw almost done with the discussion in the legal forum. drlukacs, do you want me to just start a thread in the legal section and point to it here?

Sure.

I would add to this that in the case of the car purchase there would be an explicit contract with cancellation clauses and the details of that would regulate a situation.

I agree.

Additionially the wording on the site at the time of the order:

http://web.archive.org/web/20120628113158/http://www.butterflylabs.com/order-form-bitforce-sc-single/

Explicitly states: "currently scheduled for October"

This wording in so vague and implies that the date will and can change. .. there is little room to say that they promised to deliver the products sooner and the buyer was unaware that it wasn't a risk factor

Fortunately, drafters of the UCC thought even about this:

400.2-309. (1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.

A judge will be considering whether in light of an indicated delivery time of October 2012, non-delivery by May 2013 is "reasonable." All I can say that I would not want to be counsel for BFL at that hearing...

lol ya that would be one wicked debate. . .

drlukacs, one more thing I'm trying to understand, then I'm off to post. .. .

the word repudiate.  I didn't see anything in the definitions section that indicates anything that alters the common language definition

the one I found that seems most applicable is "to refuse to acknowledge and pay (a debt)".

http://dictionary.reference.com/browse/repudiate

In this case, It seems to me, that the debt that needs acknowledgement are the funds/payment being held by bfl for delivery. Since they refunded the funds, it seems reasonable to me to think they did not repudiate.  Am I thinking about this properly or is there some common legal ease that I'm missing here?

Of course, a lawsuit could still be filed by anybody, but it seems that repudiate is not an issue in this case.

So the point of contention/qualification is failure to deliver. This get complicated by the statement "currently scheduled for October", so the burden of proof would be: Was there a point that bfl said "It's definately coming out in two weeks"?. Am I following this correctly? Did I miss something?

You are correct that I would not want to be a responsible party as that tangled web of disparate information was untangled.

hehe ty again this is awesome info

[Endlessa]

Fortunately, drafters of the UCC thought even about this:

400.2-309. (1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.

A judge will be considering whether in light of an indicated delivery time of October 2012, non-delivery by May 2013 is "reasonable." All I can say that I would not want to be counsel for BFL at that hearing...

So it boils down to whether or not 7 months is a reasonable delay in the tech industry.  I've  seen so many delays in tech industry that were sooo much longer.  Is it even realistic to think that 7 months was a long time to wait for bleeding edge hardware development?  It's starting to seem to me that the only thing we can claim is that communication were bungled, and that's not necessarily illegal, just embarrassing.

[Schrankwand]

Fortunately, drafters of the UCC thought even about this:

400.2-309. (1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.

A judge will be considering whether in light of an indicated delivery time of October 2012, non-delivery by May 2013 is "reasonable." All I can say that I would not want to be counsel for BFL at that hearing...

So it boils down to whether or not 7 months is a reasonable delay in the tech industry.  I've  seen so many delays in tech industry that were sooo much longer.  Is it even realistic to think that 7 months was a long time to wait for bleeding edge hardware development?  It's starting to seem to me that the only thing we can claim is that communication were bungled, and that's not necessarily illegal, just embarrassing.

Uh, no it isn't. Actually, if this was B2B and I would be a company needing this, damages would probably immediately bankrupt the manufacturer company. Even one to two month delays can be incredibly costly in B2B.

[nottm28]

I know there are some in America who like litigation but don't you think you are just building up xian's hopes? Talk about kick a man while he's down...

[drlukacs]

the word repudiate.  I didn't see anything in the definitions section that indicates anything that alters the common language definition

I suggest that you look it up this term in Black's Law dictionary (page 1330 in the 8th edition).

In the context of contract law it means "to indicate an intention not to perform."

So the point of contention/qualification is failure to deliver. This get complicated by the statement "currently scheduled for October", so the burden of proof would be: Was there a point that bfl said "It's definately coming out in two weeks"?. Am I following this correctly? Did I miss something?

There are two issues:

(a) Did the seller indicate in any way (e.g., by issuing a refund with the buyer requesting so) refusal to perform? If yes, then it was repudiation.

(b) Did the seller fail to deliver within the timeframe set out in the contract, or in the absence of such a stipulation, with reasonable time?

[drlukacs]

I know there are some in America who like litigation but don't you think you are just building up xian's hopes? Talk about kick a man while he's down...

Litigation is a question of stamina and money. But if some state of federal consumer protection agency gets on Xian's side, then I think BFL is going to be very quickly in a very tight spot.

US is a place where law enforcement people have no sense of humor: they know that enforceability of contracts is vital for a functional economy.

[nottm28]

I know there are some in America who like litigation but don't you think you are just building up xian's hopes? Talk about kick a man while he's down...

Litigation is a question of stamina and money. But if some state of federal consumer protection agency gets on Xian's side, then I think BFL is going to be very quickly in a very tight spot.

US is a place where law enforcement people have no sense of humor: they know that enforceability of contracts is vital for a functional economy.

In the UK we used to see litigation as a last resort for the genuinely aggreived - but now we are becoming an 'ambulance chaser insurance claim litigation' society too I fear...

[drlukacs]

In the UK we used to see litigation as a last resort for the genuinely aggreived - but now we are becoming an 'ambulance chaser insurance claim litigation' society too I fear...

Do you believe that Xian is not genuinely aggrieved...?

If I were in BFL's place, I would apologize to Xian, and ship him his order ASAP, because of the bad publicity, and the possible damage that a lawsuit may cause to their reputation, and also due to the potential costs of a lawsuit. While Xian can take them to small claims court and be self-represented, BFL will need to retain a lawyer, because they are a corporation. 

[nottm28]

In the UK we used to see litigation as a last resort for the genuinely aggreived - but now we are becoming an 'ambulance chaser insurance claim litigation' society too I fear...

Do you believe that Xian is not genuinely aggrieved...?

If I were in BFL's place, I would apologize to Xian, and ship him his order ASAP, because of the bad publicity, and the possible damage that a lawsuit may cause to their reputation, and also due to the potential costs of a lawsuit. While Xian can take them to small claims court and be self-represented, BFL will need to retain a lawyer, because they are a corporation. 

Sigh - you came into the thread late too per chance?

[Endlessa]

the word repudiate.  I didn't see anything in the definitions section that indicates anything that alters the common language definition

I suggest that you look it up this term in Black's Law dictionary (page 1330 in the 8th edition).

In the context of contract law it means "to indicate an intention not to perform."

So the point of contention/qualification is failure to deliver. This get complicated by the statement "currently scheduled for October", so the burden of proof would be: Was there a point that bfl said "It's definately coming out in two weeks"?. Am I following this correctly? Did I miss something?

There are two issues:

(a) Did the seller indicate in any way (e.g., by issuing a refund with the buyer requesting so) refusal to perform? If yes, then it was repudiation.

(b) Did the seller fail to deliver within the timeframe set out in the contract, or in the absence of such a stipulation, with reasonable time?

Yay I can put that dictionary on my phone I've never seen that resource

Ok I'm typing up/posting what I've learned so far.  . . . I feel so educated now heheh

*bows to drlukacs*

[nottm28]

Hey xian, you really need this drlukacs on your side - he's an ace litigator and will get you back the potential $15k you lost due to your inability to hold back you tongue...

[k9quaint]

Hey xian, you really need this drlukacs on your side - he's an ace litigator and will get you back the potential $15k you lost due to your inability to hold back you tongue...

Actually, it was partially thanks to you. In 2012, BFL entered into a forward contract to provide future goods with Xian in exchange for capital upfront. This is a very common occurrence in agriculture for crops, fuel, equipement, seed, fertilizer, etc. It is also common in resource extraction industries like mining (how apropos).

As you noted, these contracts increased dramatically in value since they were first purchased in 2012. You also noted that Xian should have been able to sell another forward contract for the delivery of his units to a third party for a healthy profit. BFL unilaterally terminated the contract, but they did not compensate Xian for market value, only the original face value. BFL then sold the rights to Xian's units to someone else for a higher return. The whole point of a forward contract is to obtain future goods at a fixed price. If the seller could unilaterally change the price at their whim, no forward contract would ever be worth entering.

It should be quite trivial for Xian to obtain a remedy. The courts would probably not be involved unless BFL was unable to pay. It is possible I suppose, that BFL would fight it for pride's sake. I really can't see them winning. This is a clear case of breach of contract.

[drlukacs]

Hey xian, you really need this drlukacs on your side - he's an ace litigator and will get you back the potential $15k you lost due to your inability to hold back you tongue...

That is very kind of you to say, but I must confess that I am not a lawyer. I am a mathematician.

My legal experience is mainly is in the area of air passenger rights (which is an interesting mix of contract law, regulatory law, and administrative law):

http://www.economist.com/blogs/gulliver/2012/07/canadas-airline-industry