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Arizona Retail Sys., Inc. v. The Software Link, Inc., 831 F. Supp. 759 (D. Ariz. 1993) (full-text).
Factual Background Edit
Plaintiff, Arizona Retail Systems (ARS) and defendant, The Software Link (TSL) entered into an agreement for the sale of a software operating system sold by TSL known as PC-MOS. A company representative for ARS, Allen Rude, ordered a copy of PC-MOS after much discussion with TSL employees.
The contents of the discussion are debated. TSL alleges that PC-MOS was discussed only in general terms; ARS contends that the employees assured Rude that the software would be compatible with DOS-based application programs and that the problems with the earlier version of PC-MOS had been corrected. In addition, ARS contends Rude informed TSL of the specific type of system ARS wanted to support with PC-MOS and that TSL representatives assured Rude that PC-MOS would work with that system.
When Rude received the software, the materials were wrapped in "shrink wrap" plastic, upon which was fixed a Limited Use License Agreement (license agreement), disclaiming all warranties and liabilities for damages caused by using the program. Rude admitted that he read the license agreement but thought that it was unenforceable and incapable of overriding the specific representations made to him by TSL employees.
ARS continued to purchase many copies of PC-MOS for their various clients from TSL over the next year. The software began having problems and many clients complained to ARS. In response to the complaints about performance speed and printing functions, TSL suggested that ARS purchase additional software to upgrade the PC-MOS system. In reliance on these representations, ARS purchased the upgrade packages. However, the system did not get better.
After several months, ARS abandoned its efforts to repair the problems and this suit for breach of contract followed. TLS claimed that it had disclaimed all implied warranties and alleged oral representations through provisions in a license agreement that accompanied each delivery of the software. TSL contended that the terms of the license agreement provided plaintiff's exclusive remedy as a matter of law.
District Court Proceedings Edit
Even though Arizona Retail was aware of the terms of The Software Link's shrinkwrap license based on its initial purchase, the court refused to enforce the license except on the sale of the initial copy. The court held that in the subsequent transactions contracts were formed at the time the parties agreed by telephone to order and ship the goods, before Arizona Retail in fact received the copies that contained the shrinkwrap licenses.
The court analyzed Arizona Retail's subsequent purchase under U.C.C. §2-209, as involving proposed modifications to contracts formed at the time each telephone order was placed. Since a proposed modification under U.C.C. §2-209 is effective only if given express assent by the other party, the court found that Arizona Retail was not bound by the terms of the shrinkwrap license for any purchases after the initial transaction. By contrast, the shrinkwrap license was held enforceable in the first sale because Arizona Retail had had an opportunity to review the agreement before breaking the seal on the "live" version and, by such conduct, agreed to the terms of the shrinkwrap license.