Step-Saver Data Systems, Inc. v. Wyse Technology

939 F.2d 91 (3d Cir. 1991)

Quick Summary

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Step-Saver Data Systems, Inc. (plaintiff) purchased software from The Software Link, Inc. (TSL) (defendant) for incorporation into a system Step-Saver sold to law and medical offices. The software had problems, and Step-Saver sued TSL for breach of warranties.

The district court held that the terms of the box-top license governed the parties’ agreement and granted TSL’s motion for a directed verdict. On appeal, the Court of Appeals reversed this decision, finding that the box-top license was not a complete and final expression of the agreement.

Facts of the Case

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Step-Saver Data Systems, Inc. (Step-Saver) (plaintiff), a value-added retailer for IBM products, developed a multi-user system using software from The Software Link, Inc. (TSL) (defendant) and Wyse Technology terminals (co-defendant).

Step-Saver marketed the system to law and medical offices but started experiencing problems with the software soon after installation. Step-Saver contacted TSL and Wyse for technical assistance, but the disputes among the three companies were not resolved, leading to twelve customers filing lawsuits against Step-Saver.

Step-Saver initially filed a complaint seeking indemnity from TSL or Wyse for any costs incurred in defending and resolving the customers’ lawsuits. After that complaint was dismissed as not ripe for judicial resolution, Step-Saver filed a second complaint alleging breach of warranties by both TSL and Wyse and intentional misrepresentation by TSL.

During the trial, the district court held that the terms of the box-top license printed on each package containing the software were the complete and exclusive agreement between Step-Saver and TSL. Based on this finding, the Court granted a directed verdict in favor of TSL on Step-Saver’s warranty claims.

The trial proceeded on Step-Saver’s breach of warranty claims against Wyse, and the jury returned a verdict in favor of Wyse on those claims.

Procedural Posture and History

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  1. Step-Saver filed a declaratory judgment suit seeking indemnity, which was dismissed.
  2. Step-Saver filed a second complaint alleging breach of warranties by TSL and Wyse and intentional misrepresentation by TSL.
  3. The trial court granted TSL a directed verdict on Step-Saver’s warranty claims based on the box-top license terms.
  4. The trial court also granted a directed verdict in favor of TSL on Step-Saver’s intentional misrepresentation claim.
  5. The trial court directed a verdict in favor of TSL on Step-Saver’s remaining warranty claims and dismissed TSL from the case.
  6. The trial proceeded on Step-Saver’s breach of warranties claims against Wyse, and the jury returned a verdict in favor of Wyse.

I.R.A.C. Format

Issue

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Whether the terms of the box-top license were incorporated into the parties’ agreement.

Rule of Law

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Under UCC Section 2-207, when a party receives a written confirmation with additional or different terms, those terms become part of the contract unless they materially alter it or the offer expressly limits acceptance to the terms.

Reasoning and Analysis

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The Court held that the box-top license should not be treated as a complete and final expression of the agreement. The terms in the box-top license materially altered the parties’ agreement and were not expressly accepted by Step-Saver.

The repeated sending of the box-top license by TSL did not establish a course of dealing that would incorporate its terms. Therefore, the disclaimer of warranties in the box-top license did not become part of the agreement.

Conclusion

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The Court concluded that the terms of the box-top license were not incorporated into the parties’ agreement, and thus, Step-Saver’s breach of warranty claims against TSL should be reconsidered.

Key Takeaways

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  1. The terms in a box-top license are not automatically incorporated into an agreement unless expressly accepted.
  2. Repeatedly sending a box-top license does not establish a course of dealing that incorporates its terms.
  3. Warranty disclaimers can be contested if they materially alter the parties’ agreement and are not explicitly agreed upon.

Relevant FAQs of this case

Why are material alterations in contract terms important?

Material alterations in contract terms are significant because they can affect the enforceability of the contract. All parties must explicitly accept such alterations to be valid and included in the contract.

  • For example: In a construction contract, if one party attempts to make a significant change to the project timeline without the other party’s agreement, it could be a material alteration that needs mutual consent.

What's the impact of a warranty disclaimer that materially alters the agreement?

When a warranty disclaimer significantly changes the parties’ obligations in a contract, it can lead to disputes and potential unenforceability. These disclaimers must be explicitly agreed upon to be considered part of the contract.

  • For example: In a car purchase contract, if the seller includes a warranty disclaimer that eliminates all responsibility for vehicle defects without the buyer’s consent, it may be a material alteration not binding on the buyer.

How does the Uniform Commercial Code (UCC) handle additional contract terms?

The UCC, under Section 2-207, states that additional terms in a contract become part of it unless they materially alter it or the offer explicitly limits acceptance to its terms without agreeing to the additional ones.

  • For example: In a sale of goods contract, if the buyer’s purchase order includes additional terms and the seller’s acceptance expressly limits acceptance to the buyer’s terms, the additional terms may not become part of the contract.

References

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