A software disclaimer is the software developer’s formal notice to the user of its software that the developer is denying any and all liability for any damages arising out of using the software as well as denying any implied warranties.
Software disclaimers are typically included in the End User License Agreement (“EULA”) that the buyer or user clicks to accept when installing the software.
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What is the Purpose of a Software Disclaimer?
In the U.S., a sale of goods automatically carries an implied warranty, as defined in the Uniform Commercial Code, unless that warranty is clearly disclaimed in the contract. At the same time, the Uniform Commercial Code permits a seller to disclaim warranties. Companies selling or manufacturing software use the disclaimer to disclaim responsibility for any claims that they are offering an error-free product, or that it will meet the needs of all of its users.
In addition to general and consequential damages, in a standard software disclaimer, companies often disclaim all economic and other losses and expenses, whether due to use of the software or as a result of inability to use the software. While the inclusion of such a disclaimer may at first blush seem unfair or harsh, the reality is that a purchaser after viewing the disclaimer can still choose to return the product and not accept the terms of a license agreement containing a disclaimer.
Requirements for a Valid Software Disclaimer?
In order to disclaim the implied warranty of merchantability a disclaimer must specifically mention the word “disclaimer” in the text of the disclaimer. In order to disclaim the implied warranty that the software is “fit for a particular purpose” (i.e. a representation that the software has a certain feature the purchaser needs), the disclaimer must be conspicuous. Generally, if the disclaimer is in LARGE CAPS it is considered sufficiently disclaimer. This explains why most software disclaimers are shown in large caps.
Why should your company have a software disclaimer?
If the software malfunctions either due to a programming error, misuse by the purchaser, or for some other reason, the purchaser could experience a complete interruption in its business operations resulting in substantial damages.
By using a software disclaimer, the software developer can protect itself from being subjected to such potentially substantial claims. Indeed, in one case, the customer experienced over $2 million in damages due to an error in the software program, but the software developer was able to successfully defend the action on the based upon the existence of a valid software disclaimer.
A thorough and well-written software disclaimer will serve to help protect a company from unanticipated and potential substantial liability in the event of a software malfunction or error.