Performance Risk, Form Contracts and UCITA

No scholarly commentator has suggested that the form contract rules provide a satisfactory answer to the commercial problem of performance risk. So, one might think that the dawn of the information economy would be a propitious time to implement a new doctrinal approach. Apparently not: the National Conference of Commissioners on Uniform State Laws (the Conference ) has promulgated a comprehensive commercial statute that fails to remedy or even modify the law of form contracts in purely commercial transactions. The Uniform Computer Information Transactions Act ( UCITA )--drafted to provide the background law for many of the most significant transactions in the information age--simply accepts as holy writ the duty to read tradition that has been handed down by our forefathers. Specifically, § 113 of UCITA provides that the Act\u27s default rules can be varied by agreement and §§ 112 and 208 provide that manifested assent to a standard form (by, for example, use of the product) constitutes assent to each term of that form. The Conference proclaims that the Act is a statute for our time; setting forth uniform legal principles applicable to computer information transactions. This article considers whether the several States should adopt the Act as drafted, when it continues a fiction that condones economic inefficiency and unfair resolution of disputes. Concluding that UCITA cannot profess to be a coherent contract law framework for analyzing a license ... the dominant contractual framework for commerce in computer information without a more uniform treatment of performance problems in form transactions, I propose an alternative treatment based on efficient risk management principles.[...] This Article is limited to UCITA\u27s treatment of performance problems in the context of form contracts used in transactions between commercial (i.e. non-consumer) parties. Part II will describe the scholarship regarding form contracts in particular-scholarship that apparently has been rejected or ignored by the Conference. Part II also analyzes whether shrinkwraps and clickwraps, as prototypical UCITA contracts, present any particular basis for rejecting scholarly analysis. Part III examines in detail the most relevant provisions of UCITA and the Official Comments supporting those provisions. True to its word, UCITA\u27s formalistic freedom of contract approach would enforce standardized contractual terms regarding performance obligations and remedies, despite any empirical basis for finding a meeting of the minds or any persuasive demonstration that presumed assent is consistent with public norms. Part IV explains an approach that focuses on risk bearing and spreading and demonstrates why that approach is more efficient and fair. I present a model statute that would implement such an approach. The statute breaks down the problem into five parts: definitions, specification of product performance standards, tests for determining whether those standards were met, remedies for performance failure, and a deferred effective date. I then apply UCITA and the model statute to the foregoing hypothetical cases to analyze the difference in outcomes and incentives. I conclude Part IV with a consideration of how the model statute would have applied if Y2K had lived up to its billings, and how it might affect innovation in information technology