Warranties and Disclaimers in the Electronic Age

Article excerpt

ABSTRACT

This article reports on software-licensor express warranty and disclaimer practices on the Internet. Our data show that virtually all of the websites and End User License Agreements (EULAs) we sampled include express warranties on the website and disclaimers of the warranties in the EULAs that may erase all or much of the quality protection. Next, the article reviews the reasons why consumers generally do not read their e-standard forms despite the prevalence of disclaimers and other adverse terms. We then argue that e-commerce exacerbates the problem of warranties and disclaimers and that lawmakers should address this issue. We contend that improved disclosure of disclaimers, including making them easily accessible on a website prior to any particular transaction and possibly even the subject of a pop-up window during a transaction, is the best of various imperfect solutions to the problem. Disclosure is inexpensive and, at minimum, creates the potential for more legitimate consumer assent to e-standard forms, including assent to disclaimers of warranty. Even if in the short term consumers do not read their forms, perhaps consumers will eventually learn of misleading warranties and disclaimers because the Internet creates communication possibilities and research tools unavailable to disgruntled purchasers in the paper world. The prospect of the word getting out that a licensor does not intend to stand behind its promises and representations may be sufficient to curtail the practice of misleading warranties and disclaimers.

TABLE OF CONTENTS

Introduction
I.   The Data
II.  The e-Standard Form Environment
III. The Parol Evidence Rule in the Electronic Age
IV.  Enforcement of e-Disclaimers
Conclusion
Appendix 1

INTRODUCTION

A software licensor expressly warrants the quality of its software on its website. A consumer reads the warranty and decides to acquire the software. (1) The consumer has no opportunity to inspect or test the software and therefore relies on the licensor's quality representations. For a host of reasons, both rational and irrational, the consumer fails to read the electronic standard form record (e-standard form) that governs the transaction, (2) no less negotiate with anyone, before clicking "I agree" to the license. (3) The e-standard form includes a disclaimer (e-disclaimer) of all express (and implied) warranties and a full integration clause. (4) If the consumer attempts to avail himself of an express warranty when something goes wrong with the product, the licensor can point to the e-disclaimer and integration clauses and claim that evidence of the express warranty is inadmissible under contract law's parol evidence rule. Even if the evidence is admissible, the licensor can claim that the e-disclaimer supersedes any quality representations or promises.

Lawmakers should focus on this scenario because this manner of presenting express warranties and disclaimers online is remarkably widespread and potentially problematic. Part I of this article presents empirical evidence of just how prominent the strategy is. In a sample of fifty-four software titles culled from the top one hundred best-selling software products in which the licensor made its End User License Agreement (EULA) available on its website without a purchase, fifty-three contain express warranties on the website and e-disclaimers in the EULAs that may erase all or much of this quality protection. (5) Of course, the problem of express warranties and disclaimers is not limited to e-commerce and is, in fact, common in the paper world too. But the online world magnifies the problem and presents new challenges for contract law. In this article, we analyze if and when express warranties on a licensor's website should trump e-disclaimers of those express warranties in the EULAs.

An important goal of contract law is to enforce a party's manifestation of assent to a contract made with full access to all pertinent information and with time to contemplate the terms. …