warranties

This page considers warranties for software, sites and other digital content.

It covers -

• introduction
• coverage
• software
• fine print
• enforcement
• studies

     introduction

Are online warranties worth the electronic paper they are written on?

A warranty is essentially a statement of commitment by a manufacturer, distributor, service provider or agent to address particular problems.

It is common for digital products (such as music CDs, software CDs and DVDs) to feature warranties - often as part of the shrinkwrap. Warranties frequently feature in B2C and B2B sites regarding sale or licencing of tangibles such as clothing or intangibles such as services and software, with consumers for example being expected to assent to conditions expressed in an online warranty as part of an initial download of software or installation of an online update.

They may feature in printed or online terms & condictions used by internet service providers (ISPs) and auction sites. They may also appear on sites that do not impose a fee for access, ie where there is no contractual relationship between the publisher/rights owner and the visitor to the particular site.

Warranties are thus encountered, directly or otherwise, by most people who have installed software, used a music CD or DVD, bought a product from an online retailer such as Amazon.com, paid for an airline ticket online or indeed bought products such as toasters, refrigerators and automobiles from an offline retailer.

They are significant part of national and provincial consumer protection regimes, with courts for example holding businesses to commitments and refusing to accept particular exclusions.

However they are frequently misunderstood or abused, reflecting factors such as misplaced consumer expectations, the opacity of particular statements ("the fine print") and community acceptance of exclusions that are so broad as to render the warranty of no value for some consumers.

The following paragraphs discuss particular issues, with an emphasis on software and services for Australian consumers.

     coverage

Consumer expectations are important and are conditioned by past experience. It is clear that Australians who grew up during the 1960s and thus experienced one of the golden ages of consumer protection have high expectations about the 'fitness for purpose' or 'marketability' of products such as toasters and woolly jumpers, whether purchased online or at a brick & mortar venue. Those expectations are broadly reflected in warranties and in Australian law.

Expectations about much digital content appear, however, to be different. Lower expectations about performance - or indeed non-performance - are implicit in many warranties and in much law. That law essentially gives consumers less protection for software than for a cheap toaster, although the software may be expensive to purchase and its use may result in significant economic damage or distress to the consumer.

Australian consumers purchasing goods and services from vendors within Australia are protected by the national Trade Practices Act 1974 (TPA). Australian online vendors must ensure that the terms and conditions of their on-line agreements comply with this Act. Part V of the TPA contains consumer protection provisions, including the prohibition in s 52of misleading and deceptive conduct in trade or commerce. A contract might also be illegal and contravene restrictive trade practices provisions where it is contrary to public policy (eg unreasonable restraint of trade). Jurisdictions outside Australia generally offer similar consumer protection, for example the New Zealand Consumer Guarantees Act 1993.

     software

As with statements regarding many products, software is typically provided with a limited warranty, one for a finite number of days (often 90 days after first sale or first installation).

Given that most software is licensed rather than sold outright, the warranty does not cover sale/lending to third parties.

It is often restricted to delivery of the content: scrutinise the boilerplate associated with software disks, for example, and you will usually find that the warranty relates to defects in the disk rather than whether the software performs as described.

Examples include wording such as -

• "the media on which the ... software is recorded to be free from defects in materials and workmanship under normal use for a period of ninety days"
• "the storage media in this product will be free from defect in materials and workmanship for 90 days"
• the developer "makes no warranty or representation, either express or implied, with respect to the software, documentation, quality, performance, usability, condition, compatibility, security, accuracy, merchantability, or fitness for a particular purpose".

If the disk is scratched or missing you can expect a refund; that is not necessarily the case if the software on that disk is buggy.

Few manufacturers and vendors offer meaningful undertakings about the performance of their software; it is a commonplace that major software developers use consumers as lab rats to debug early editions of their code. Many businesses warrant that their code will work "substantially" as described (a description that on close analysis is often quite vague) but seek to strongly exclude liability in relation to use of the software. That has been defended, with some plausibility, on the basis that IT systems are qualitatively different to toasters and that in practice it is difficult to determine what caused a particular outcome.

Typical language thus includes statements such as "in no event" will the software developer or its agent "be liable to you for any consequential, incidental or special damages, including any lost profits or lost savings" and that the developer

does not warrant the functions contained in the software will meet your requirements or that the operation of the software will be uninterrupted or error free. The entire risk as to the quality and performance of the software is with you.

Critics have commented that assertions that software is sold 'as is', with the consumer accepting any defects and non-performance, are problematical. Debora Halbert for example comments that a claim

that the quality and performance of a product is not the responsibility of the manufacturer, would make little sense in any other field. Can you imagine the same warranty attached to a Firestone tire? Or a baby crib? However, this software agreement, which must be accepted in order to use the program, contracts away liability on the part of the manufacturer for a defective product.

She notes that a software licence is different to buying damaged furniture 'as is', because the software vendor typically is not selling used goods and has made "assertions about how the product will work in the advertising associated with the product and the packaging surrounding the product".

     fine print

Warranties are typically written with litigation in mind, ie they are written for courts rather than for ordinary consumers. Subject to restrictions imposed by statute or common law they are also typically written to protect the manufacturer, service provider or vendor rather than the consumer.

As a result they are frequently expressed in a legalese ('boilerplate') that non-specialists have difficulty understanding, whether because the vocabulary is wholly unfamiliar or because the meaning of particular terms is different to that in ordinary use. Problems with comprehension may be especially significant if the legalese derives from another jurisdiction. Australians, for example, have encountered difficulty in making sense of warranties written for Japan or the US.

Comprehension may also be inhibited by the poor readability of a warranty, by difficulties facing a consumer who cannot find the warranty online or by impediments to making a hardcopy of the warranty.

Discussion elsewhere on this site regarding readability, online design, accessibility and privacy statements has highlighted questions about the presentation of print and online legal statements from financial institutions, government agencies, software developers, retailers and other entities. It is common to encounter statements that use a small font size, that only use upper case letters with inadequate spacing between lines and paragraphs, and that are presented in a 'keyhole' format that allows the reader to view only a few lines at a time and does not feature clear navigation points.

That experience is not restricted to online content: most people have encountered multi-page warranties accompanying Japanese or Chinese electronic products in "microscopic print that only my 14 year old nephew can read". The US Privacy Rights Clearinghouse offered a scathing view of statements in its Lost in the Fine Print: Readability of Financial Privacy Notices report, endorsed by the Federal Trade Commission.

As yet there is no significant Australian and New Zealand case law regarding the readability of online warranties.

     studies

For the US see Joseph Wang's 1997 'ProCD, Inc. v. Zeidenberg and Article 2B: Finally, the Validation of Shrink-Wrap Licenses' in 16 John Marshall Journal of Computer & Information Law 439, Darren Baker's 1997 'ProCD v. Zeidenberg: Commercial Reality, Flexibility in Contract Formation, and Notions of Manifested Assent in the Arena of Shrinkwrap Licenses' in 91 Northwestern University Law Review 379, Lorin Brennan's 1999 'The Public Policy of Information Licensing' in 36 Houston Law Review 61, Robert Gomulkiewicz' 1997 'The Implied Warranty of Merchantability in Software Contracts: A Warranty No One Dares to Give and How to Change That' in 16 John Marshall Journal of Computer and Information Law 393, Mark Lemley's 1999 'Beyond Preemption: The Law and Policy of Intellectual Property Licensing' in 87 California Law Review, Daniel Perlman's 1998 'Who Pays the Price of Computer Software Failure?' in 24 Rutgers Computer & Technology Law Journal 383 and the transcripts of the Federal Trade Commission 2000 symposium on Warranty Protection for High-Tech Products and Services.

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