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Letter from 45 Professors of Contracts and Commercial Law to NCCUSL Objecting to UCC 2B
July 16, 1999
President Gene Lebrun and Other Commissioners
Dear President Lebrun and Other Commissioners: We understand that the Conference is scheduled to vote this month on final approval of the Uniform Computer Information Transactions Act (UCITA). This letter offers the perspective of 43 professors of contracts and commercial law. Our view is that UCITA's contracting rules give software manufacturers the power to impose form terms without meaningful assent by purchasers, to the disadvantage of business buyers as well as consumers. The aim of providing uniform rules for software contracts and other contracts involving copies of digital material and on-line services could be achieved by a much more limited project, providing a few specialized default rules for these transactions and otherwise using the contract rules of Revised Article 2. This would amount to the "Hub and Spoke" approach considered earlier in this project but prematurely rejected. UCITA is out of step with modern commercial contract law, which recognizes that many deals are made informally because of the fast pace of commerce and the high cost of customizing legal terms through negotiation and drafting. "Default rules," a balanced set of terms supplied by law and applicable unless the parties take the trouble to agree otherwise, are a good way to deal with this reality. UCC Article 2 uses this approach. Revised Article 2 strengthens it by clarifying that express agreement is needed for standard form terms to supplant default rules in deals made by informal conduct, such as the making and filling of an order. See Revised UCC Section 2-207(b)(3). UCITA uses a very different approach, making it very easy for a vendor to escape default rules without meaningful assent by the other party. Although UCITA Section 112 defining "manifesting assent" is unclear, judging from the Reporter's Notes, the intent seems to be that a business organization's employee who opened a shrinkwrap package or clicked through terms while installing software would "manifest assent" to the vendor's terms. See Reporter's Note 5 (Assent by Conduct) and Note 10 (Authority to Act) to Section 112. UCITA thus would make shrinkwrap and clickwrap terms enforceable unless the purchaser could afford to police incoming deliveries for undesirable terms. Even if a purchaser negotiated terms in advance of delivery, it would have to be concerned that those terms might be changed by shrinkwrap or clickwrap terms that came with the product. In addition to informal order and delivery, another common type of informality in commercial contracting occurs when parties orally agree to terms. Revised Article 2 recognizes the enforceability of non-standard terms to which the parties have agreed. Section 2-207(b)(2). Our respected colleague Joseph Perillo has recently written to you concerning the incompatibility of UCITA Section 307(g) with oral agreement to terms. This provision requires an authenticated record or a manifestation of assent to a record in order for parties to deviate from certain default rules which protect software manufacturers. For example, even if the parties orally agree that the software vendor will provide new versions of a program to a customer, this term is not enforceable without an authenticated record or a manifestation of assent to a record. See Section 307(d) and (g). The justification for different contract rules in Revised Article 2 and UCITA seems to rest on differences between goods and copies of software or other digital works. While it is true that the latter are more easily copied and are currently often marketed for a limited number of users per copy, default terms and other terms supplied by law can deal with these differences, without stretching contract law beyond recognition. Intellectual property law already supplies rules to limit copying after sale of a copy of a copyrighted work, while protecting the societal interest in free flow of information. Intellectual property law also lets a purchaser transfer its own copy. If anti-transfer terms buried in clickwrap become enforceable, it would be much more costly to sell a business. Extensive due diligence searches, often combined with payments to licensors, would be needed before an accountant could certify that the seller has the power to transfer software crucial to the business. UCITA itself provides a default term limiting use to "a number of users which is reasonable in light of the informational rights involved and the commercial circumstances." Section 307(c). Alternatively, industry could develop a set of use terms (one user, one machine, etc.) that could be easily specified in informal orders, without the need for long forms. In short, UCITA's contract rules are not needed to protect software makers against copying or to allow them to limit use in reasonable ways. Indeed, UCITA's contracting rules govern all terms, making it easy for publishers to get all the form terms they desire, for example excluding all warranties of quality, without meaningful assent by the other party. They also protect software vendors from having to honor oral agreements actually made. This one-sided approach even extends to permitting vendors to use a term in shrinkwrap or clickwrap to give themselves power to keep changing material terms unilaterally. UCITA Section 304. This section misuses the terms "modified" and "modification" to refer to unilaterally-dictated changes, rather than the usual meaning of modification, a change agreed to by both parties. Professor Perillo has it exactly right when he describes UCITA as a "command and control" regime. We urge you to reject UCITA and begin to think about a more reasonable and limited alternative.
Sincerely,
Mary Becker Hazel Glenn Beh Brian Bix Carl S. Bjerre Jean Braucher Carol L. Chomsky Donald F. Clifford William S. Dodge Jay M. Feinman Harry Flechtner Susan Freiwald Mark P. Gergen Michael Greenfield Robert W. Gordon Harold Greenberg Karen Gross Sheldon W. Halpern Karen Halverson Thomas Lee Hazen Howard O. Hunter Alan Hyde Howard I. Kalodner Peter Linzer Stewart Macaulay Alfred W. Meyer Francis J. Mootz III Margaret Moses John E. Murray, Jr. Suman Naresh Spencer Neth Deborah W. Post Dee Pridgen James R. Ratner R. J. Robertson, Jr. Keith A. Rowley Irma S. Russell Carol Sanger W. David Slawson Maura I. Strassberg Kurt A. Strasser Joseph R. Thome Michael P. Van Alstine Kathleen Waits Neil G. Williams Jane K. Winn
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