Corporate Code, Inc., sells business software—accounting and book-keeping progra
ID: 430758 • Letter: C
Question
Corporate Code, Inc., sells business software—accounting and book-keeping programs, blank business forms, inventory control functions, and the like—in different combinations, in different packages, at different prices. Each package includes a shrink-wrap agreement that limits warranties and remedies. Developmental Research Corporation (DRC) buys a Corporate Code package and uses the product. Later, DRC files a suit against the software seller, claiming that the product was flawed and that the flaws caused DRC to suffer business losses. DRC asks for relief that exceeds the limits in the shrink-wrap agreement.
What is a shrink-wrap agreement?
Are such agreements al-ways enforced?
Under what circumstances is a court likely to enforce this agree-ment?
Explanation / Answer
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Answer:-
A Shrink-wrap agreement refers to the terms and conditions that are often shrink-wrapper when a product, usually software is sold. In many cases, these terms and conditions are made available upon installation of the software package. This is called End User License Agreement (EULA). It acts as a contract between the seller and user of the software, which becomes effective upon installation of the software by the user. EULA covers the limitations of use and other rights and restrictions as granted by the owner or seller of the software.
Shrink wrapper contracts have been challenged by courts on multiple occasions, because the user does not get to see what's inside the package, before opening it. So in many occasions, many retailers and companies have been forced to accept the return of opened software packages.
Such contracts are not always enforceable. Courts have divided opinion on the legal status of shrink-wrap contracts. The reason is that the terms of the contract cannot be read by the user, before opening the package and as per the terms of shrink-wrap agreement, the opening of the package constitutes acceptance of the terms of the agreement.
However, courts can enforce this agreement, when the software is a standard package and is widely used. Furthermore if the terms of the agreement are conscionable, then the agreement is usually enforced.