For some years in legal circles - both in England and Wales, and elsewhere - there's been debate as to whether software is 'goods' or 'services'.
The difference is important, because it affects the answers to the problems and puzzles which arise when a user complains that software does not satisfy his requirements.
Note that even where a contract has exclusion or limitation clauses which appear to restrict or limit liability, those clauses will not necessarily be enforceable in a particular situation - and where they are not, we have to fall back on the general law in this area for answers.
Since the case of Saphena Computing v Allied Collection Agencies (1989), it has been accepted by the Courts as a general principle that of its very nature, software will rarely be 'bug-free', at least when first delivered.
In that case it was said:
'...it is important to remember that software is not necessarily a commodity which is handed over or delivered once and for all at one time. It may well have to be tested and modified as necessary. It would not be a breach of contract at all to deliver software in the first instance with a defect in it....it was part of the contract that the suppliers in this case should have the right and the duty to test and modify as necessary the software they supplied. No doubt there was a time limit for that purpose -- a reasonable time is that which the law would ordinarily supply.'
If software were 'goods' then, until 1995, contracts relating to software would have been subject to it would be subject to terms implied by the Sales of Goods Act 1979 to the effect that it would be of 'merchantable quality' and of 'fitness for purpose'. The Sale and Supply of Goods Act 1994 changed that implied term to one that the goods would be of 'satisfactory quality'.
If software were services, then it would be subject to an implied condition under the Supply of Goods and Services Act 1992 to the effect that 'reasonable care and skill' had been exercised in the supply of the services.
The two tests are different, Liability for goods is strict, and independent of fault on the part of the supplier - the end result is effectively guaranteed. For services on the other hand, reasonable care and skill is sufficient - the end result is not guaranteed.
In St Albans DC v ICL (1996), it was said by one of the judges in the Court of Appeal that:
'In the absence of any express term as to quality or fitness for purpose, or of any term to the contrary, (a contract for the transfer into a computer of a program intended by both parties to instruct or enable the computer to achieve specified functions) is subject to an implied term that the program will be reasonably fit for, ie reasonably capable of achieving the intended purpose.'
Effectively, the issue of whether software is goods or services has therefore been side-stepped - and the stricter liability of what might be regarded as a guarantee that the software will achieve its purpose will apply.
How does this relate to millennium issues? Well, we need to consider what at the time of making the contract would have been considered by the parties to be the time element of the 'intended purpose' of the software. In my view, this comes down to whether or not it would have been reasonably foreseeable at the time the contract was made that the software would still be in use at the time when dates later then 31st December 1999 would be used by it. If it was so reasonably foreseeable, then the implied term is likely to extend to require millennium compliance. It's also my view that the Courts in general are more likely to come down on the side of the user that on that of the supplier in this.
In summary:
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
This page was last updated 26 January, 1997.
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© Roger Sinclair and Egos Ltd - roger@egos.co.uk 1997 - All rights reserved - see full copyright details
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