Software license agreements often contain limited promises regarding the quality of the licensed software, and provide restricted remedies for the customer if the software is defective. Customers should understand those provisions and consider managing risk through other contractual rights and prudent business practices.

Software Quality Warranties

Software license agreements often contain limited promises (known as “warranties”) by the vendor regarding the quality of the licensed software. For example, software vendors typically promise that, for a specified period (known as a “warranty period”), the licensed software will conform substantially to the description in the applicable software documentation. Software quality warranties are usually subject to exceptions for software problems that are not caused by software defects or are otherwise beyond the vendor’s control.

Limited Remedies

Software license agreements usually provide the customer with limited, exclusive remedies if the software is defective. For example, the vendor will either remedy or replace the defective software (so that the software substantially conforms to the applicable documentation) or terminate the customer’s license to use the defective software and refund the license fee paid by the customer for the terminated license. The limited remedies are usually exhaustive and expressly preclude all other remedies, including financial compensation for loss and damage suffered by the customer as a result of the defective software.

Disclaimers

Software license agreements usually contain detailed provisions (known as “disclaimers”) that exclude all other promises regarding the quality of the software. For example, disclaimers usually provide that the express software quality warranties are in lieu of all other express or implied promises regarding the software, including promises regarding the software’s merchantability, durability and fitness for a particular purpose. In addition, disclaimers often specify that the customer is solely responsible for selecting the software and determining the software’s suitability for the customer’s particular purpose and warn that the software is provided “as is” and “with all faults” and that the customer uses the software at the customer’s own risk. Software license agreements also often supplement the disclaimers with a provision (known as an “entire agreement” or “integration clause”) that confirms that the written software license agreement supersedes and replaces all prior discussions, promises, understandings and agreements regarding the software. This provision is intended to prevent either party from relying on pre-contractual discussions or assurances (including statements in the vendor’s advertising and marketing materials and commitments made during sales presentations and negotiations) that are not expressly confirmed in the software license agreement.

Recommendations

Limited warranties and disclaimers limit the customer’s rights and remedies if licensed software is defective or otherwise fails to meet the customer’s specific requirements. When negotiating a software license agreement, a customer should ensure that the vendor’s software quality promises accurately reflect the commitments made by the vendor during sales presentations and negotiations and that the customer’s corresponding rights and remedies are reasonable and appropriate. The customer should also consider how to manage and mitigate risk through other contractual rights and prudent business practices.