American Law Institute approves the Principles of the Law of Software Contracts

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5 Responses

  1. Ken Arromdee says:

    As we have already said, the section simply memorializes existing law.

    If it simply memorializes existing law you wouldn’t have any reason to put it in. Usually “this memorializes existing law” really means “we have one interpretation of existing law. This is there to ensure that our interpretation of existing law is accepted by the courts and others aren’t.

    I noticed you haven’t bothered to mention the objections by the Linux Foundation. Undisclaimable warranties could destroy free software. Also, the joint Linux Foundation/Microsoft letter suggests that the principles are not as in accordance with existing law as you might want us to believe.

  2. Sean Hogle says:

    The decision to apply the common law principle in question (namely, the principle that requires the contracting party to disclose material facts if they are under the party’s control and the other party cannot reasonably be expected to learn of those facts) to the licensing of software is a decision the reporters made with very little if any actual caselaw support. To that extent the reporters are in fact attempting to create new law. This type of decision is one that only a legislative body should make after careful factual investigation as to the nature of software and how it is developed.

  3. Sean Hogle says:

    Further to this, I’m recommending to all of my clients that they insert into their operative software license agreements the following or something close to it in the choice of law clause: “This Agreement and all related disputes shall be governed by the laws of _______, without regard to the United Nations Convention on Contracts for the International Sale of Goods or the American Law Institute’s Principles of the Law of Software Contracts (“Principles”). The parties agree that (i) the Principles shall have no application whatsoever to the interpretation or enforcement of this Agreement, and (ii) neither party shall invoke the Principles in whole or in part in any judicial or arbitral proceeding relating to this Agreement.”
    But, aren’t many of the rules stated in the Principles, especially the controversial ones like the implied warranty of no hidden material defects and the implied indemnification obligation, not excludable or disclaimable, or disclaimable only with specific prescribed language?
    Well, that’s what the Principles say. The Principles dictate, for example, that the newly-discovered warranty of no hidden defects cannot be excluded or disclaimed.
    Here’s the thing: the Prinicples have no force of law whatsoever. They have persuasive authority only. They are not the equivalent of a statute or judicial decision. If the parties agree in their contract that the Principles will have no effect, why would a court feel free to disregard that?
    For example, if a famous law review article written by a highly regarded law professor advocated for a specific interpretation of common contract language, and this interpretation would benefit one side over the other, there’s no reason why the parties could not simply agree that this professor’s article will be disregarded in any legal proceeding.
    The same should hold true for the Principles.