The main issue at hand is whether the terms of the License Agreement are part of the contract between Ah Siong and UcanB007, as this will impact Ah Siong’s ability to enforce these terms in a potential lawsuit seeking damages related to the contract.
There is a dispute about when the contract was formed due to the fact that it is a shrink-wrap license agreement. This impacts the inclusion of the terms and their legal effectiveness. The purchase of the product at a retail store satisfies the requirements for forming a contract. The offer occurs when Ah Siong brings the product (hardware and software) to the cashier for payment, and the acceptance happens upon receiving the price.
The act of receiving the item by Ah Siong and receiving payment by UcanB007 would imply the execution of consideration. As this transaction is of a commercial nature, it can be reasonably assumed that there is the necessary intention to create a legally binding agreement. Another way in which a contract can be formed is through the act of opening the installation disk envelope. In this case, the offer would be the promise of a non-exclusive right to use the UcanB2007 software, and the acceptance would be the act of opening the envelope.
The acceptance of the software license occurs when the purchaser has the choice to reject it if the terms are unsatisfactory, functioning as an “accept-reject” license. By returning the product[1], there was an opportunity to decline the offer. However, since Ah Siong did not do so, he is now obliged to comply with the software licensing contract or License Agreement. Nonetheless, whether these terms are legally binding will be investigated separately at a later time. This reasoning suggests that there are two distinct contracts at different moments.
Firstly, the hardware and software components of the product at the retail shop are both subject to a purchasing contract. However, only the software component is also subject to a separate software licensing contract that must adhere to the terms specified in the Licence Agreement. This raises questions about the specific terms outlined in the Licence Agreement and focuses specifically on the software licensing contract.
This conclusion is important because if the license agreement terms are based on the first contract, it would violate the rule of contemporaneity. This would make the License Agreement useless without considering any other factors. It is noted that in the commercial side of software sales, licenses for other software packages have similar characteristics. These include disclaimed warranties, limited remedies, and the inclusion of choice of law and forum selection clauses.
Here, the terms of the contract, like any other software package, are listed numerically within the written license agreement. The statements are considered terms because they are an integral aspect of the contract, covering aspects of contractual obligations such as ownership of software & copy right restrictions in general, protecting the legitimate interests of UcanB007 for the period of allowing Ah Siong the benefits of the software. Notably, this license agreement has been drafted by only UcanB007, hence it tends to favor the party that drafted it.
However, the majority of the express terms in this agreement, except for the warranty and exclusion of liability clause, are already implied by statute. This suggests that regardless, the statute would take precedence over the listed provisions of the agreement and they are actually legally acceptable. These terms are deemed as conditions because they are crucial statements of facts that directly impact the essence of the contract. They explicitly prohibit the usage of the software in any manner that would violate copyrights. Whether these terms are considered part of the contract is contingent upon their incorporation.
The issue of contemporaneity and sufficient notice arises. Firstly, based on previous reasoning, the agreement’s terms (attached and stated to be read before opening the package, leading to the formation of the software licensing contract) would have been noticed prior to contract formation. Therefore, contemporaneity is satisfied. However, secondly, it is insufficient how the notice was brought to the attention of the purchaser, Ah Siong.
UcanB007 may argue that the bolding and capitalization of the word “attention” was meant to draw the user’s notice to the agreement. However, this notice contradicts Lord Denning MR’s statement in Thornton v Shoe Lane Parking Ltd. about sufficient notice. Additionally, the license agreement is hidden within the fold of the envelope that holds the installation disks. A reasonable person would not expect to find contractual terms in that particular location.
One could argue that vendors are unable to disclose complete legal terms with their products due to practical reasons. However, it is important to note that no other reasonable attempts were made to inform the purchaser that software usage was subject to the Licence Agreement. This includes placing the notice on the cover of the box or by the retail staff. Therefore, since Ah Siong did not have the opportunity to read and consider the terms in their entirety when initially forming the contract, it can be concluded that there is a lack of reasonable sufficiency in notifying contract terms, despite attaching the terms as a note outside the package.
The shrink-wrap contract terms cannot be included in any future legal proceedings related to this case because they are not considered as part of the software licensing contract. This is consistent with the idea that individuals are not required to read or agree to any information or packaging included with a product. Otherwise, it would unfairly burden individuals who may not be aware of the terms and conditions, such as visually impaired individuals or those unfamiliar with the language used.
It should be emphasized that there are only a few specific express terms relevant in this situation, namely the warranty and the Liability clause. [pic] When evaluating the legitimacy and enforceability of a liability clause, four factors need to be considered. An exemption clause is incorporated into a contract either through signature or notice. In this particular case, as there is no contract signing involved, the clause can only be included by properly informing the injured party about the exemption clause.
Although Ah Siong cannot argue that he was not aware of the legal language used in the notice, he can claim that the notice given was not reasonable or sufficient enough. As mentioned earlier, this means that the exemption clause is not successfully included in the contract. Additionally, the effectiveness of the clause relies on how it is constructed.
The exclusion of liability clause has been carefully worded to avoid any confusion or uncertainty regarding the company’s liabilities. It is in compliance with the Contra Proferentum Rule. This clause does not compromise the primary objective of the contract, which is to provide non-exclusive use of the software. However, since it is not included in the contract itself, its effectiveness is diminished and it becomes invalid. Additionally, in this particular situation, the notion of unusual factors does not pertain.
The Unfair Contract Terms Act (UCTA) further supports the previous conclusion. UCTA is applicable in this case according to sections 3 and 6, as the agreement is considered a consumer transaction and involves the sale of goods. Section 6 of UCTA stipulates that “In relation to a person who deals as a consumer, liability for breach of the obligations arising from… cannot be excluded or limited by reference to any term of a contract.”, explicitly stating that a seller cannot avoid responsibility under the Sale of Goods Act by employing an exemption clause.
Furthermore, as the provision falls within 6-7 UCTA, section 11(2) UCTA necessitates the court to take into account the guidelines for deciding reasonableness as outlined in the Second Schedule. Given the circumstances of this case, UcanB007, being a corporation, possesses considerably greater bargaining power than Ah Siong, who is just a consumer. Hence, the clause is likely to be regarded as unreasonable.
Furthermore, Ah Siong lacked motivation to accept the clause and the product was not tailored for him. In addition, there was no clear indication of the exclusion of liability clause, indicating its unreasonableness. Considering the extent of unreasonableness, UcanB007 would face difficulties in arguing against it. Consequently, it is probable that the clause would be deemed non-compliant with the Unfair Contract Terms Act (UCTA).
According to section 5(1) of the Unfair Contract Terms Act (UCTA), it is stated that no contractual term can exempt liability if the damage to the goods is caused by negligence from those involved in their manufacture or distribution. This provision is applicable to UcanB007 as they have admitted that their product “Keep N Eye” is faulty. UcanB007 may try to dismiss the lawsuit by relying on a clause in the license which restricts claims for consequential damages. They claim that limitations on consequential damages in business transactions are generally deemed fair.
However, when compared to the UCTA, a Singapore statute, the argument based on native law is likely to be given more importance than that of foreign case laws. In brief, considering the aspects of validating the exemption of liability clause where the clause was not considered included, prohibited by the UCTA according to the specific law, and also due to being unreasonable, it can be concluded that the liability clause is not valid and will not effectively protect UcanB007 from liabilities concerning the performance (or lack thereof in this situation) and usage of the software.
Furthermore, since the terms of the Licence Agreement were not applicable due to insufficient notice, the Exclusion of Liability clause in the same agreement is also not valid. Additionally, the liability clause does not cover any hardware defects, so it will not protect UcanB007 from liabilities associated with the performance and usage of the hardware.
Considering UcanB007’s substantial lack of legal justification for avoiding responsibilities, it is highly probable that Ah Siong will be able to take legal action against UcanB007 based on the essential violation of the software license agreement. (Nevertheless, the question of whether Ah Siong can effectively seek compensation is not relevant to this matter.)
If UcanB007 argues that the product malfunctioned because Ah Siong did not follow the installation instructions, and therefore they are not responsible for the breach, it can be argued that the licensing contract did not require strict adherence to the installation instructions. Consequently, UcanB007 is still responsible. As a result, Ah Siong should be able to successfully claim damages for fundamental breach of the purchasing contract.
References
- ProCD Inc v Zeidenberg
- M. A Mortenson Company, Inc. v Timberline Software Corporation
- Copyright Act Chapter 63: s 39A
- Hill v Gateway 2000 Inc
- Interfoto v Stiletto
- Klocek v. Gateway, Inc
- Thompson v LM&S Railway Co.
- Assignment Appendix A.
- M. A Mortenson Company, Inc. v Timberline Software Corporation
