Lemon Laws for Computers

Decades of consumer advocacy have built an impressive, if still inadequate, array of consumer guarantees in the common law, statutory allocations of rights to consumers — governmental and non-governmental — for consumer interests. It is unclear however, if the integrity and effectiveness of these norms and structures of consumer protection will continue in the digital age
Certainly electronic commerce is posing many challenges to conventional consumer protection arrangements. If a consumer in Denver purchases a software product over the internet and downloads it from a server based in Buffalo from a company based in Toronto, where did the transaction take place? Whose law applies? In what venue can a lawsuit be filed? Clicking on a button saying “I agree” that all disputes will be governed by the law in Toronto — may not seem important to the average consumer at purchase time — but, can become very important when a dispute arises. Even more troubling are shrinkwrap licenses — designed to bind the consumer to sale terms — just by opening a software package.

Computers can make many aspects of life easier, enabling people to do things they otherwise couldn’t do and perform a variety of tasks more quickly and effectively. But computers, and the accompanying software, only make our lives more difficult when they don’t work. The purchase and use of computer goods are enormously stressful for many people, because defects are common, repairs often short-lived, and warranties limited.

There is, however, a ready solution to this problem. A suitable model is already on the books. Starting with Connecticut in 1982, states across the nation enacted “lemon laws” to protect purchasers of automobiles. Under these laws, if an automobile must be repaired multiple times for the same problem within a specified time period, the consumer has the right to a full refund of the purchase price or replacement of his or her “lemon.”

Though lemon laws have proven successful, they have not been enacted with respect to most products. However, there is a compelling case for lemon laws in the area of computers and computer software. The situation facing software and computer consumers, resembles the situation facing consumers of automobiles.

As with automobiles, defects are common and recurring. So, too, manufacturers are often uncooperative when confronted with lemons. As with automobiles before the advent of lemon laws, remedies for defective computer goods are generally inadequate. And manufacturers have crafted an array of contract provisions that shift the risk of computer and software failure to the user. The typical terms specify “(i) that the contract (usually drafted by the vendor) is the exclusive statement of the parties’ agreement, (ii) that the vendor extends no warranties other than a narrow one stated in the contract and (iii) that the user’s remedies for breach are limited.”

Although computers and software are typically less expensive than automobiles, they are far too expensive for consumers to ignore when hardware or software is defective. And the market has not worked to ameliorate the sale of lemons. The recent successful anti-trust action against Microsoft belies any suggestion that competitive market conditions prevail in this industry.

In short, it is time for state legislators to start passing computer and software lemon laws that can help consumers deal with recalcitrant vendors.

Our associates at Essential Information and the Consumer Project on Technology have drafted a model computer and software lemon law that can be adopted by any state legislature.

The model law does the following:

• Requires a computer seller to correct any defect that substantially impairs the use or market value of a computer during the first two years after its purchase;

• Gives the consumer the choice between a replacement or refund if a manufacturer refuses to make repairs, or is unable to correct a substantial defect; and

• Mandates clear and conspicuous labeling listing the legal rights of the consumer to be displayed on each computer.

To obtain a copy of the model law write to Todd Main, Essential Information, P.O. Box 19405, Washington, D.C. 20036 or visit the following web page: http://www.essential.org