(a) Except for published informational content, a warranty to a licensee extends to persons for whose benefit the licensor intends to supply the information and that rightfully use the information in a transaction or application of a kind in which the licensor intends the information to be used.

(b) For purposes of subsection (a), a licensor in a consumer transaction is deemed to have intended to supply the information to all individuals in the immediate family or household of the licensee if it was reasonable to expect that the individual would rightfully use the information.

(c) A disclaimer or modification of a warranty, rights, or remedies which that is effective against the licensee is effective against any third party under this section.

(d) A licensor's expressed intent to exclude or limit third-party beneficiaries excludes any contractual obligation or liability to the third persons arties other than persons described in subsection (b).

"Consumer". Section 2B-102. "Consumer transaction". Section 2B-102. "Copy". Section 2B-102. "Information". Section 2B-102. "Informational content". Section 2B-102. "Licensee". Section 2B-102. "Licensor". Section 2B-102. "Party". Section 1-201. "Person". Section 1-201. "Published informational content". Section 2B-102. "Rights": Section 1-201.

a. Rejected a motion to bar disclaimer of consequential damage for personal injury. Vote: 2 - 8.

b. Reviewed without substantive comment or change.

1. Focus and Policy. This section defines third-party beneficiary concepts under contract law. It adopts an approach based on the contract law theory of "intended beneficiary" and on the Restatement (Second) of Torts § 552 dealing with the scope of liability exposure to third parties undertaken by a provider of information. It expands both concepts as applied to household uses. For a modern discussion of beneficiary issues see Artwear, Inc. v. Hughes, 615 N.Y.S.2d 689 (1994).

Dealing with an information product, the California Supreme Court adopted the Restatement concept and, in Bily v. Arthur Young & Co., 3 Cal. 4th 370, 11 Cal. Rptr. 2d 51, 834 P2d 745 (1992), commented:

By confining what might otherwise be unlimited liability to those persons whom the engagement is designed to benefit, the Restatement rule requires that the supplier of information have notice of potential third party claims, thereby allowing it to ascertain the potential scope of its liability and make rational decisions regarding the undertaking.

The basic theme is that, in dealing with information, to impose liability under contract-related theories, the information provider must have known of and clearly intended to have an effect on the third parties before the liability can be imposed. This in effect requires a conscious assumption of risk or responsibility for particular third parties. Even within that scope, courts are not aggressive in finding the requisite intention. Thus, for example, an Illinois appellate court recently held that the supplier of information to a commodities exchange for use in investor trading had no obligation under the Restatement or otherwise to the investors with respect to the accuracy of the furnished information.

All of this relates to the unique role of information in our culture and to the uniquely difficult nature of proving a causal connection between a release of information and harmful conduct. The cases and this section also reflect a sensitivity to not placing excessive liability exposure on information providers without their expressly undertaking that risk for fear of chilling the willingness of those providers to disseminate information.

2. Product Liability Law. This Section does not deal with products liability issues. It thus neither expands nor restricts tort concepts that might apply for third party risk in reference to information. Products liability is outside the scope of this Article; it is governed by tort law. In the absence of prior law creating third party liability for information, Article 2B declines to create such law leaves development of any appropriate doctrine to common law courts.

As a matter of fact, unlike in goods distributions, few courts impose third party liability in information. The Restatement (Third) on Products Liability recognizes this; it notes that informational content is not a product for purposes of that law. The only reported cases that impose product liability on information involve air flight charts. The cases analogized the technical charts to a compass or similar, physical instrument. These cases have not been followed in any other context.

Most courts specifically decline to treat information content as a product, including the Ninth Circuit, which decided two of the air flight chart cases, but later commented that public policy accepts the idea that information once placed in public moves freely and that the originator does not owe obligations to those remote parties who obtain it. See Winter v. G. P. Putnam's Sons, 938 F.2d 1033 (9th Cir. 1991); Fairbanks, Morse & Co. v. Consolidated Fisheries Co., 190 F.2d 817, 824 (3rd Cir. 1951); Berkert v. Petrol Plus of Naugatuck, 216 Conn. 65, 579 A.2d 26 (Conn. 1990) ("[The] imposition of liability against a trademark licensor under [tort law] is appropriate only when the licensor is significantly involved in the manufacturing, marketing or distribution of the defective product"); Porter v. LSB Industries, Inc., 1993 WL 264153 (N.Y.A.D. 4 Dept. 1993); E.H. Harmon v. National Automotive Parts, 720 F. Supp. 79 (N. D. Miss. 1989); Snyder v. ISC Alloys, Ltd, 772 F Supp. 244 (W. D. Pa. 1991); Jones v. Clark, 36 N. C. App. 327, 244 S.E.2d 183 (N. C. App. 1978).

3. Embedded Software. While there may be a different policy for software embedded in tangible products, this Article does not deal with embedded software. See Section 2B-103. Tort law and contract privity issues regarding, for example, the software that operates the brakes in an automobile falls within Article 2. In general, however, no reported cases place products liability on software products that are not embedded in hardware products.

4. Restatement (Second) of Torts § 552. The Restatement establishes limited third party liability for persons who provide information to guide others in business decisions. It limits liability to pecuniary loss suffered by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction." In most states, no liability arises under this theory unless a "special relationship" exists between the information provider and the injured party. Modern case law widely adopts the Restatement. See Bily v. Arthur Young & Co., 3 Cal. 4th 370, 11 Cal. Rptr. 2d 51, 834 P2d 745 (1992).

5. Intended Effect Required. Subsection (a) derives from and should be interpreted in light of both the contract law concept of "intended beneficiary" and the concept in the Restatement (Second) of Torts § 552. In both instances, contract-based liability is restricted to intended third parties and those in a special relationship with the information provider. The liability extends to transactions that the provider of information intended to influence. This Section incorporates these concepts.

The section also must be considered in light of the scope of warranties under this Article which create no implied warranty of accuracy pertaining to published informational content.

Illustration 1: Clanc contracts for publication of his text on chemical interactions. Publisher obtains an express warranty that Clanc exercised reasonable care in researching. Publisher distributes the text to the general public. Some data are incorrect. Neither Publisher (which makes no warranty for published information), nor Clanc (excluded under (a) makes a warranty to a general buyer of the book.

6. Family Effects. Subsection (b) modifies beneficiary concepts to include the family of a licensee. This goes beyond the relevant alternative in current Article 2-318 which limits that extension to personal injury claims. The extension here covers both personal injury and economic losses.

7. Limitation by Contract. The policy framework for contract liability adopted here focuses on the information provider's original intention with respect to third parties to be impacted by the information that it released. Subsection (c) flows from the fact that the basis of this section lies in beneficiary status, rather than product liability. A disclaimer or a statement excluding intent to effect third parties excludes liability under this section. This follows current law applicable to information liability. See, e.g., Rosenstein v. Standard and Poor's Corp., 1993 WL 176532 (Ill. App. May 26, 1993) (license for use of information by commodities exchange created no liability for inaccuracy by persons conducting trades where license disclaimed warranties).