(a) Unless excluded disclaimed or modified, a warranty that the delivered computer program and physical medium are shall be merchantable is implied in a mass-market transaction if the licensor is a merchant with respect to computer programs of that kind.

(b) To be merchantable, a computer program and any physical medium on which it is delivered must:

(1) pass without objection in the trade under the contract description;

(2) be fit for the ordinary purposes for which it is distributed;

(3) in the case of multiple copies, consist of copies that are, within the variations permitted by the agreement, of even kind, quality, and quantity, within each unit and among all units involved; and

(4) be adequately contained, packaged, and labeled as the agreement may require; and

(5) conform to the promises or affirmations of fact made on the container or label, if any.

(c) In cases not governed by subsection (a), unless otherwise excluded disclaimed or modified, a licensor that is a merchant with respect to computer programs of that kind warrants to its licensee that:

(1) any physical medium on which the program is delivered is merchantable; and

(2) the delivered computer program will perform in substantial conformance with any promises or affirmations of fact contained in the documentation provided by the licensor at or before the delivery of the program.

(d) Whether a warranty arises under subsection (c)(2) with respect to documentation is determined in light of the standards of Section 2B-402(b). No warranty under subsection (c)(2) is created by an affirmation or prediction merely of the value of the information, a display or description of a portion of the information to illustrate the aesthetics or market appeal, or a statement purporting to be merely the licensor's opinion or commendation of the information.

(e) (e) Unless excluded disclaimed or modified, other implied warranties may arise from course of dealing or usage of trade.

(f) Warranties created under this section pertain to the functionality of a computer program, but do not pertain to informational content, including the subjective quality, aesthetics, market appeal, accuracy, or other characteristics of informational content, whether or not the content is included in or created by a computer program.

(a) Unless disclaimed or modified, a warranty that a delivered computer program and physical medium are merchantable is implied if the licensor is a merchant with respect to computer programs of that kind.

(b) To be merchantable, a computer program and any physical medium on which it is delivered must:

(1) pass without objection in the trade under the contract description;

(2) be fit for the ordinary purposes for which it is distributed;

(3) in the case of multiple copies, consist of copies that are, within the variations permitted by the agreement, of even kind, quality, and quantity, within each unit and among all units involved;

(4) be adequately contained, packaged, and labeled as the agreement may require; and

(5) conform to the promises or affirmations of fact made on the container or label, if any.

(c) Unless disclaimed or modified, other implied warranties may arise from course of dealing or usage of trade.

(d) Warranties created under this section pertain to the functionality of a computer program, but do not pertain to informational content, including the subjective quality, aesthetics, market appeal, accuracy, or other characteristics of informational content, whether or not the content is included in or created by a computer program.

"Agreement": Section 1-201. "Computer program": Section 2B-102. "Contract": Section 2B-102. "Delivery": Section 2B-102. "Information": Section 2B-102. "Informational content": Section 2B-102. "Licensee": Section 2B-102. "Licensor". Section 2B-102. "Mass-market transaction". Section 2B-102. "Merchant". Section 2B-102. "Software". Section 2B-102. "Value". Section 1-201.

a. Rejected a motion to add language warranting that the program will not damage ordinary configured systems because no "ordinary system" exists in modern licensing and the general premise is covered under the language of existing Article 2 as brought forward here.

b. Voted 10-2 to use "mass market" in this section, rather than "consumer." (Feb. 1997)

The Committee should consider the following replacement for the current Draft. The replacement eliminates the mass market distinction and focuses the terms of the warranty on criteria relevant to and useful in reference to software. It corresponds to the tradition in which the original merchantability warranty was developed.

(a) A merchant licensor of a computer program warrants to the end user that the computer program is reasonably fit for the ordinary purpose for which it is distributed.

(b) A merchant licensor of a computer program warrants to a retailer that

(1) the program is adequately packaged and labeled as the agreement or circumstances may require; and

(2) in the case of multiple copies, that the copies are, within the variations permitted by the agreement, of even kind, quality, and quantity, within each unit and among all the units involved.

(c) A warranty under this section does not pertain to the quality, aesthetics, market appeal, accuracy, or other characteristics of informational content whether or not the content is included within or created by a computer program or software.

1. Background and Policy. Article 2B warranties blend three different legal traditions. One stems from Article 2 and focuses on the quality of the product. This centers on the result delivered: a product that conforms to ordinary standards for products of that type. The second stems from common law, including cases on licenses, services contracts and information contracts. This tradition focuses on how a contract is performed, the process rather than the result. The transferor's obligations are to perform in a reasonably careful and workmanlike manner. See Data Processing Services, Inc. v. LH Smith Oil Corp., 492 N.E.2d 314 (Ind. Ct. App. 1986). The third comes from contracts for informational content and, in many states, services contracts. See, e.g., ; Snyder v. ISC Alloys, Ltd, 772 F.Supp. 244 (W. D. Pa. 1991); Daniel v. Dow Jones & Co., Inc., 520 N.Y.S.2d 334 (NY City Ct. 1987). It disallows implied warranties and implied obligations of accuracy in information transferred other than in a special relationship of reliance. See Milau Associates v. North Avenue Development Corp., 42 N.Y.2d 482, 398 N.Y.S.2d 882, 368 N.E.2d 1247 (N.Y. 1977)

Current case law selects the applicable rule in part based on a court's characterizations about whether a transaction involves goods or not. That distinction is not reliable. It is unnecessary and unworkable in Article 2B. In this and the following Section, Article 2B distinctions are drawn between computer programs, on the one hand, to which an implied warranty of result is applied, and information or services, on the other hand, to which a process warranty applies.

The policy holds that qualitative warranties focused on the result and on merchantability concepts are appropriate for information that most closely resemble functional products - in this case, computer programs. Within that category of information products, a further distinction is drawn between mass-market and other types of computer programs.

The two standards give assurances of quality, but focus on different reference points. Merchantability asks what are normal characteristics of ordinary products of this type, while the documentation warranty focuses on the manuals, help screens, and contours of the particular product. For mass market programs, implied qualitative assurances can be based on a reference to ordinary programs of the same type since, by hypothesis, in the mass market such comparisons can be established. In non-mass-market programs, a similar reference is often meaningless and impossible to draw. There exists too much variation to meaningfully ask about average or ordinary products of like type. In part for this reason, the merchantability warranty is routinely disclaimed. This Section contains a conformance to documentation warranty that reflects ordinary commercial practice as to the warranty actually given and provides a basis for comparing the quality to which the program should adhere.

2. Expanded Application. Since this Section applies to all computer programs provided to a licensee by a merchant with reference to the particular type of program, it expands the scope of the quality warranty by including cases where under current law the transaction is a services contract with no warranties or with warranties limited to making a reasonable effort. See, e.g.,, Micro-Managers, Inc. v. Gregory, 147 Wis.2d 500, 434 N.W.2d 97 (Wisc. App. 1988); Data Processing Services, Inc. v. LH Smith Oil Corp., 492 N.E.2d 314 (Ind. Ct. App. 1986).

The warranty does not apply, however, where the contract is form processing, analysis or other services in which the licensor merely uses a computer program to conduct its own activities with respect to the data. It deals with cases where the program itself is the subject matter of the agreement.

Illustration 1: Party A reaches a license with Party B. Party A will transfer its data to B's computer for processing there. B agrees to return various reports and summaries to A. The 2B-403 warranty does not apply since the contract is for use of B's facility. Under current law, this is a services contract containing at most a warranty of workmanlike conduct; it is governed here under Section 2B-404.

3. Dual Application. The implied warranty in this Section and the warranty in Section 2B-404 may both apply to the same transaction and the same information product (e.g., an encyclopedia). The one would apply to the program and its functions, while the other would apply to the accuracy of data provided to the end user.

Illustration 2: Party A contracts to transfer software to Party B that will allow B to process its accounts receivable. Whether the transfer is by diskette or by electronic conveyance into B's computer, the implied warranty in this section applies. Under current law, this would be a transaction in goods with an implied warranty attached to the performance of the product.

Illustration 3: Party A licenses B to use a copy of the Marvel Encyclopedia. This Section applies to the computer program and diskette, while Section 2B-404 applies to the content of the encyclopedia. Under current law, this would be an information contract with no warranty of accuracy of the information.

4. Merchantability. Mass-market transactions in computer programs involving a licensor who is a merchant in programs of the type contain an implied warranty of merchantability. In the mass market, the idea of comparing a particular program to other mass market programs of similar type. The merchantability warranty corresponds to Article 2, except where the difference between software and goods requires a difference in the formulation of the definition.

Most modern agreements (mass-market and other) disclaim the warranty of merchantability. Reflecting this fact, there are very few reported cases involving merchantability in any industry, including the software industry. Merchantability measures performance obligations by reference to other like products, while the documentation warranty measures performance by what the licensor says about its product in documentation even though the licensee may not be aware of the terms of the documentation and it may not become part of the "basis of the bargain."

This Section follows existing Article 2 and limits the implied warranty to cases of programs provided by a merchant in computer programs of the kind. This is not a warranty made by the casual provider of computer programs.

5. Conformance to Documentation. For non-mass-market programs, the implied warranty is that the program will substantially conform to documentation. This warranty measures the program by reference to what is said about it in the documentation; it differs from an express warranty in that it does not require that the details of documentation become part of the basis of the bargain or, even, that the licensee is aware of the documented features.

This warranty derives from commercial practice where it is often used in replacement for a specifically disclaimed merchantability warranty. The tendency to rely on a conformance to documentation warranty reflects the wide range of variations involved in the non-mass-market. Given that variation, the reference point postulated by the merchantability approach often does not exist. There may be no "ordinary" data compression program as to performance features, except as the most very basic level (e.g., it reduces the memory demanded for storing particular data). Given that fact, merchantability is not a relevant standard and often not protective of a licensee in cases where programs are often relatively unique. For example, assume a commercial computer program that provides data compression functions on an ABC computer with an XYZ operating system. Merchantability would ask whether that product passes without objection among all data compression products of all types (e.g., mass market, Windows-based, Apple systems, etc.) even though the particular environment, approach and capabilities of this product may be unique. How that standard protects the licensee is not clear and in fact it may set out standards well below what the documentation provides.

Subsection (d) clarifies that the documentation creates a warranty, but not as to language that consists of mere puffery.