Warranties and Disclaimers in the Electronic Age

This paper 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 paper 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.