Uniform Law Source: Restatement (Second) of Torts 552.

"Informational content". Section 2B-102. "Licensee". Section 2B-102. "Merchant". Section 2B-102. "Party". Section 1-201. "Published informational content". Section 2B-102. "Value". Section 1-201.

Committee Actions: Reviewed several times without substantive change.

1. Scope and Effect. This section creates a new implied warranty for consulting, data processing, and informational content contracts. The warranty focuses on the accuracy of data and reports, but incorporates a concept from common law process-related obligations typically found in services contracts. The Section expands protection for licensees in many states.

The standard adopted for the warranty is consistent with the process-oriented rules that the common law courts that find any obligation typically apply in similar contexts. See, e.g., Restatement (Second) of Torts § 552 ("One who ... supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance on the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information."). The appropriate approach here is not an absolute liability standard for accuracy, but a protected assurance that no errors are caused by a failure of reasonable care. See Milau Associates v. North Avenue Development Corp., 42 N.Y.2d 482, 398 N.Y.S.2d 882, 368 N.E.2d 1247 (NY 1977) ( "[Those] who hire experts for the predominant purpose of rendering services, relying on their special skills, cannot expect infallibility. Reasonable expectations, not perfect results in the face of any and all contingencies, will be ensured under a traditional negligence standard of conduct ... unless the parties have contractually bound themselves to a higher standard of performance."); Micro-Managers, Inc. v. Gregory, 147 Wis.2d 500, 434 N.W.2d 97 (Wisc. App. 1988).

2. Terms and Existence of the Warranty.

a. Accuracy and Care. Subsection (a) gives a warranty that no inaccuracy exists due to the provider's lack of reasonable care. This does not imply assurances about aesthetics or marketability. These are subjective issues not appropriate for an implied warranty because they cannot reasonably be objectively measured. Assurances on these issues require express contract terms.

Accuracy relates to what the information purports to be. A license of a large mailing list of addresses does not create an implied warranty of 100% accuracy. A contract to estimate the number of end users in Houston does not imply an accurate estimate, but merely an estimate. An agreement to provide a stock index number does not necessarily warrant that the published number was correctly computed. Lockwood v. Standard & Poor's Corp., No. 1-95-3063, 1997 WL 323659 (Ill. App. June 13, 1997).

Inaccuracy does not, in itself, establish breach of warranty. An actionable inaccuracy is one caused by a lack of reasonable care. See Rosenstein v. Standard and Poor's Corp., 1993 WL 176532 (Ill. App. May 26, 1993) (liability disclaimed in this case).

b. Merchants. The warranty applies only to merchants in the particular information providing context. When dealing with a merchant, the licensee has a rightful expectation that errors are not created by lack of care. In dealing with persons who are not in the business of dealing with the particular type of information, however, that expectation is not implicitly reasonable; to exist, it must be made express.

c. Special Relationship of Reliance. The warranty arises only if the information is provided in context of a special relationship of reliance. This language follows the approach of most cases applying the Restatement standard. The warranty-creating transaction involves more than merely making information generally available. It does not require a fiduciary relationship, but does require indicia of special reliance. The case law under the Restatement provides applicable guidance. See A.T. Kearney v. IBM, -- F.3d - (9^th Cir. 1997); Daniel v. Dow Jones & Co., Inc., 520 N.Y.S.2d 334 (NY City Ct. 1987) (electronic news service like a newspaper; no liability).

This excludes information distributed to the public. That is made explicit in subsection (b)(2). "Published informational content" refers to information made available without being customized for a particular licensee and where no special relationship of reliance exists. This exclusion reflects the vast majority of cases under the Restatement. The policy stems from First Amendment and general social norms about the value of encouraging distribution of information.

Information systems analogous to newspapers, magazines, or books and are treated as such here for purposes of contract law. "Technology is rapidly transforming the information industry. A computerized database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard [enabling] liability [for] an electronic news distributor ... than that which is applied to a public library, book store, or newsstand would impose and undue burden on the free flow of information." Cubby, Inc. v. CompuServ, Inc., 3 CCH Computer Cases 46,547 (S.D.N.Y. 1991); Daniel v. Dow Jones & Co., Inc., 520 N.Y.S.2d 334 (NY City Ct. 1987).

3. Exclusions. Subsection (b) lists various exclusions from the warranty.

a. Aesthetics and Published Content. Subsection (b)(1) clarifies that this is not a warranty of aesthetic quality, but accuracy. Subsection (b)(2) exempts published informational content. Both points, although they could be inferred from the terms of the warranty itself and were added for clarity based on suggestions from a licensee involved with entertainment issues.

b. Conduits. Subsection (b)(3) states a principle that holds the publisher harmless from claims based on inaccuracies in third party materials merely distributed by it. Merely providing a conduit for third party data should not create an obligation to ensure the care exercised in reference to the data provided by the third party. On the related issue of tort liability, see Winter v. G.P. Putnam's Sons, 938 F.2d 1033 (9th Cir. 1991).