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Software The Courts United Kingdom Technology

UK Court Finds Company Liable For Software Defects 205

normsky writes "A software company's stipulation that it couldn't be held accountable for the poor performance of its software was unfair and could not be enforced, the High Court has said. 'Pursuant to the Sale of Goods Act 1979, a term is to be implied into the contract that Entirety would be fit for the purpose for which it was bought, namely that the system would increase revenue and occupancy levels and would allow quicker check-in and check-out, including accurately processing groups and making changes to group reservations while preserving the accuracy of the system. I am satisfied that Entirety was not fit for the purpose for which it was sold,' his Honor Judge Toulmin wrote."
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UK Court Finds Company Liable For Software Defects

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  • by lukas84 ( 912874 ) on Thursday May 13, 2010 @03:29AM (#32190148) Homepage

    Not really. If you're doing something for free, many laws don't come into play. For example, this is about the "Sales of Goods Act". If you're not selling, you don't have to worry.

    Accountability for software sold is a good thing. Because right now, there is none.

  • by Patch86 ( 1465427 ) on Thursday May 13, 2010 @03:35AM (#32190184)

    I imagine you'd only be liable if you actually sell your product to someone, for money, promising them that it'll do something for them. If you just whacked a GPL programme on a website with a label "here is my programme, may or may not work, YMMV", I doubt you could be held accountable for what anyone does with it.

    The crux of the court case, if I read it rightly, is that in the UK you aren't allowed to promise your product can do things that you know it can't do and then sell it to someone on that basis. That's standard- what the court case tested is whether putting "(but it probably can't)" in the small print is enough to get you around that. Turns out its not.

    That's a good thing.

  • by Anonymous Coward on Thursday May 13, 2010 @04:05AM (#32190298)

    The 'Fit For Purpose' clause of that law only applies to stuff you have actually bought, so giving it away rather than selling it would bypass the Sale of Goods act.

    e.g. If I made something that didn't work and gave it away, that wouldn't constitute a sale so the law doesn't apply.

  • by somersault ( 912633 ) on Thursday May 13, 2010 @04:21AM (#32190360) Homepage Journal

    If someone has used freely avaialable open source code to control a dangerous machine or play the stock market, it sounds like it's their own fault rather than the fault of the original author (who may not have intended their source code to be put to such uses). As the GP said, selling someone something vs making it available as reference code for them to do what they like with it, are two completely different things.

  • by Neil_Brown ( 1568845 ) on Thursday May 13, 2010 @04:37AM (#32190424) Homepage

    Interestingly, the sale of goods act would cover open source software - even if the price was zero.

    I think that this would depend on exactly what you meant. Distribution of software alone (i.e. without embodiment in a physical object, be it a computer or a CD), may not meet the definition of a "good". Similarly, SoGA applies to "contracts of sale of goods"; in the case of open source software distribution, there are likely to be arguments as to whether:

    • there is a contract (since a licence is a bare permission, and not a contract - but not all documents claiming to be licences are necessarily licences, and may, in fact, be contracts)
    • there is a sale, since s2, SOGA77, provides that "A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price", and, if there is no exchange of money, it is questionable whethere there would be a "money consideration".
    • Similarly, in the case of a physical download, it is questionable whether there has been a "transfer [of] property".

    However, it is very likely that a developer could only be sued for GBP 0. The England & Wales and Scots Legal systems tend to support the little (or wee) man and wouldn't allow a huge writ to sue a hobbyist unless they were making buckets of money out of selling poor quality software.

    This is, perhaps, a risky statement, given that a contractual remedy should put the detrimented party in the position as if the contract had been properly performed, unless the measure of damages for a claim in tort, for which the remedy is the preservation of the status quo (i.e. putting the detrimented party in the position as if the tortious act had never happened).

    As such, the fact that the licensor has made very little from the software does not mean that the licensee could only receive very little in terms of compensation, unless the licensor has an enforceable limitation of liability clause - and, a judge may be more inclined to find that, where the product was distributed without charge, that such a limitation was reasonable. However, without a limitation of liability clause in the agreement, it might be harder to find grounds to limit recovery, where the loss suffered by the licensee, as a result of a contractual breach, was significant.

    However, the presence of a bug, or the failure of a piece of software to perform in a particular manner, is not necessarily a contractual breach - it would depends on the terms of the contract.

    Section 14 in the Sale of Goods act determines quality

    However, s14 only applies to business-consumer contracts ("Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality."), and so one would need to assess whether the hobbyist distributing code a business - merely charging for an item does not make one a "business".

    In other words, it depends; there are likely to be situations in which SoGA does apply to open source software (or, to my mind, a physical item embodying open source software, which might then give rise to claims against the software embodied in that product directly), but also many situations in which is does not.

    (IAAL, who does a lot of work with Free software, but, these are just my personal views)

  • Re:it's about time (Score:1, Informative)

    by neuroxmurf ( 314717 ) on Thursday May 13, 2010 @04:39AM (#32190428)

    I can tell you've never read the "warranty" that comes with your car or your washing machine. They say precisely that.

  • by new500 ( 128819 ) on Thursday May 13, 2010 @05:03AM (#32190538) Journal

    They are most informative, for those above crying about imaginary worries that this decision causes liability which did not exist before for free / OSS developers. It doesn't make even things harder for commercial developers, provided they're not a bunch of conniving idiots.

    Here's the crux, on which the claim relies and the defense fails . .

    in para 66 Toulmin finds: "*Red Sky's advertising materials for Entirety make specific claims for Entirety*. They include, among its other advantages, that Entirety "dramatically increases revenue and occupancy levels, allows quicker check in and check out service to paying guests. "This is the essence of the service Red Sky was claiming to provide for Kingsway. "

    But the real fun is to read how Red Sky's case collapsed . .

    some choice quotes from the findings, no particular oder, edited for brevity:

    "Mr Benson was ill prepared when he came to give evidence. . . He said in his CV that he had been employed for seven years immediately preceeding his employment at Kingsway. This turned out to be untrue. . . His witness statements gave the impression that he was responsible for IT contracts . . In oral evidence he had to admit that, on the contrary, he was employed by Ramesys as a technical installer . ."

    "Mr Edwards was at all material times the Managing Director of Red Sky. He said in oral evidence that he understood the business side but not the actual detail as to how the software was used. "

    "Ms Howard found herself in the uncomfortable position of having to defend the Action on behalf of her superiors . . " (they left it to their junior to defend the court proceedings against them! Wow!)

    "Reverting to Ms Howard, there appeared to be times when she was covering loyally for the inadequacies of Mr Frost, to whom she reported, and others at Red Sky. Her witness statements contained important and glaring inaccuracies."

    so in summary, the vendor lied outragously both about their product capability (not thinking to find some choice disclaimer either in their ad - copy nor in other material representations to the original sale which might have gotten them off the hook) and stumbled into court still telling a pack of lies.


    Frankly, it's just an silly workaday case, short in findings, and frankly rather fun to read.

    Says plenty about the journalists who highlighted this that they could write more words than obviously they cared to scan - read even from the source.

    As to the case itself, meh, nothing to see here, but gotta feel sorry for Ms Howard.

    Or very very happy if you're her employment attorney, depending how you look at it . .

  • Re:it's about time (Score:5, Informative)

    by Chris Newton ( 1711450 ) on Thursday May 13, 2010 @05:06AM (#32190552)

    Imagine if a car or a washing machine came with an agreement like that

    I had a hybrid version: an automated car wash at a petrol station did serious damage to my car after it collided with it.

    The immediate reaction from the staff on site was to deny everything, point at some weasel words on a sign full of disclaimers, and claim that my car wasn't suitable for their machine (even though they could see it when they sold me the token to put in the machine, and it had been through the same machine without incident on several previous occasions).

    However, when it reached their central "customer care" people at head office, they immediately arranged to pay out a substantial sum of money to cover the cost of repairs on a reasonable basis (asked me to provide two quotes from reputable local repair shops).

    I later discovered that there had previously been at least one similar case that had gone to court, where the car wash operators pretty much got torn a new one. I imagine the "customer care" people were aware of this, or at least their legal team was.

    So much for "good enough" software

    On the contrary, it seems this ruling says precisely that software must be good enough. Unless there's something in the actual ruling that is completely missing from TFA, this doesn't require all sold software to be perfect or bug-free, just that it be fit for purpose and of merchantable quality.

    That probably means that the more you pay for software and the more the advertising promises, the better the quality and functionality would need to be. A cute graphics demo that cost £1 on an app store for your mobile phone would not be expected to do the same things and with the same reliability as medical device control software you sold to a hospital at £100,000 per unit.

  • by Anonymous Coward on Thursday May 13, 2010 @05:09AM (#32190558)

    And in the real world, nobody would put Open Source software into enterprise use without any supporting company or internal evaluation. If someone started using like... GNU StockManager (made up) to manage their stock exchange, without any review or 3rd party support, then they would to some extent deserve what happens. This means that either you should count on external services (IBM, etc.) to evaluate the suitability of the product you want to use before putting it into practice, or have an in-house expert to do so. In the case of 3rd party commercial software, the seller is reasonably expected to do that. They have sales teams that promise the world. Open Source software usually doesn't. (Open Source software also usually realistically states its current features and limitations, instead of trying to sell at all costs, since there isn't much financial motivation to do so.)

  • Re:Hence why: (Score:1, Informative)

    by Anonymous Coward on Thursday May 13, 2010 @05:41AM (#32190678)

    Such clauses in licences and contracts mean nothing in Europe. Many commercial software houses put clauses like that in their legalese to intimidate people, but judges strike it out all the time. A contract (or licence, but in much of Europe there is no difference between contracts and licences) is subservient to the law. If the contract says X and the law says Y and you find yourself in court then Y will happen. The main reason free software programmers don't need to worry is that as long as you don't sell your stuff the fitness-for-purpose laws don't shift into gear.
    Let's do another example, not related to software but artistic material. Suppose a free licence stipulated that derivative works should come to fall under the same licence. However, the law of the land may state that you can only exercise your copyright on works if you potentially stand to make a profit from them. In a recent court case involving this, the judge did indeed follow the law and decided that since the artist had never shown any intention of making a profit from his work, he couldn't exercise his copyright on the work.
    Morale: you can't just read the software licence if you want to know what everyone's rights are. You have to know the law too, and remember that legally, you do know the law, in the most exquisite finest detail.

  • Re:ROFL (Score:5, Informative)

    by totally bogus dude ( 1040246 ) on Thursday May 13, 2010 @05:41AM (#32190682)

    That's kind of the point of why this is an interesting / important story. Everyone has those kinds of statements in the EULA, and this judge has ruled that if you're selling a product to do X, it better actually be capable of doing X because no amount of weasel-words gets you out of the fact that you sold someone a product that would do X.

  • Bad headline (Score:5, Informative)

    by jazman ( 9111 ) on Thursday May 13, 2010 @05:52AM (#32190708)

    I read this on the Register yesterday. The /. headline is wrong. The court *didn't* find the company liable for software defects, they found them liable for misselling the product; the customer relied on the claims made by the company and those claims were wrong. The software was not capable of doing the job the customer needed, but the company claimed that it was.

  • by pdabbadabba ( 720526 ) on Thursday May 13, 2010 @10:26AM (#32193054) Homepage

    Paranoid disclaimer: I am a law student, not a lawyer, and I am in no way certain that what I'm saying below is true. You certainly should get yourself a real lawyer and not rely on anything I've written.

    I don't know about UK law, but in the US, largely due to our federal system, the situation is quite complicated.

    In the U.S., the law is inconsistent in a variety of ways: the 7th and 8th circuits have held that the licensing of software is different from the sale of a good. But this is a minority view in the federal courts. State law also muddies the issue. Many states have specifically amended their implementations of the Uniform Commercial Code (USS) (sort of the U.S. equivalent of the UK's Sale of Goods Act) to specifically define licensed software as a good. Other states (so far, IIRC, only VA and MD) have adopted the Uniform Computer Information Transactions Act (UCITA) which is a law, analogous to the UCC, that is specially designed to cover things like software licensing. So, in these states you wouldn't say that a software license is a "good" but, for many purposes, the UCITA might impose analogous requirements. (Though, in many cases, it might not; the UCITA is widely criticized for being anti-consumer in ways the UCC is not.) In other jurisdictions, I imagine, a great deal on uncertainty remains.

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