Tuesday, April 19, 2011

Is it time consumers get tough on software warranties?

A recent Australian Federal Court ruling has imposed a $200k penalty on a hardware and software vendor for false and misleading warranty claims made to its customers.

Most software vendors have limited understanding of their obligations under the Trade Practices Act 1974 (section 52 and 53g). Section 53g states: "[A corporation shall not...] make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy."

Indeed, there are many clauses under the Trade Practices Act that software vendors should be aware of in relation to software quality, such as:
  • Section 68 - Application of provisions not to be excluded or modified
    "... purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying: ... (c) any liability of the corporation for breach of a condition or warranty implied by such a provision; or ... is void."

  • Section 70 - Supply by description
    "... there is an implied condition that the goods will correspond with the description..."

  • Section 72 - Implied undertakings as to quality or fitness
    "... there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality..."

  • Section 74D - Actions in respect of goods of unmerchantable quality
    "... the consumer suffers loss or damage by reason that the goods are not of merchantable quality; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction."

    "Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to:
    (a) any description applied to the goods by the corporation;
    (b) the price received by the corporation for the goods (if relevant); and
    (c) all the other relevant circumstances."
So what constitutes "merchantable quality" and "reasonable to expect" in the software industry? What testing prior to deployment is reasonable to expect? How do we ensure that the "goods will correspond with the description"? What will be the outcome when some of these clauses are tested in court?

I am not a laywer, but I believe that many vendors are likely short of their responsibilities in these areas. However, for many consumers and acquirers, they are not prepared to legally challenge for their entitlement to quality.

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