In the fourth part of this series on decoding EULAs, we move onto limitation of liability.  As discussed previously, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software.  To start with we will review a limitation of liability I recently saw in a custom software services agreement:

“Our maximum liability is the profit portion of the Fee we are paid by you.  You may not set-off against amounts due us.”

Software providers are protected by blanket limitation-of-liability clauses that make it difficult to transfer the risk of errors to them.  Typically, the limitation of liability is zero or aligns with the cost paid for the license itself, whether that is $5,000 or less.  During negotiations, companies are often willing to give a multiplying factor, such as 5 times the fees, not to exceed ‘x’ amount.  If you simply agree to the standard terms without negotiating, you could be agreeing to a limitation like the one listed above (or less) without consideration of the potential exposure if the software causes harm to your business.

If the contractor is using BIM software on a project, the risk should be allocated contractually at the start of the project.   General contractors and subcontractors should be wary of signing contracts allocating liability for their contribution of information to the BIM process.  The liability should belong to the party who takes responsibility for the BIM process or the consultants with expertise who choose the BIM technology.  The goal should be for the party controlling the process to bear the risk for technology errors that could have been avoided with vigilance.

This is the last in our four-part series deciphering the ultra-technical and tedious End User License Agreements used by software companies to license products.  At the end of the day, if you take away only one thing, I hope it is this…often software companies are willing to negotiate the terms of the EULA, one simply has to ask.   Involving your legal team before jumping on board with the standard form can help your company manage risk and allow for effective planning.

In the third part of decoding EULAs, we focus on support terms also known as updates or modifications.  As discussed previously, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software.  Below are examples, that have been included in recent software agreements:

“Company X will provide maintenance and updates for its software as part of the Agreement.  Company X retains the sole right to determine whether an update represents an enhancement of a previously purchased capability or a new capability for which the Customer will be charged.”

“Except as provided herein, should the program prove defective, licensee [user] assumes the entire cost of all necessary servicing, repair or correction, and of any incidental or consequential damages resulting therefrom.”

Often as part of a software program there is periodic maintenance.  The system is supported and bug fixes are provided intermittently.  A Help Desk may be made available for questions or errors encountered.  However, there are also more complex support systems available, including training, identified block of support staff time, etc.  These offers may be included in the base price or, more often, at an extra cost.  Being aware of the available support, training, and help desk availability will let you ‘get your money’s worth’ by using the available options or could cost you more when the invoice arrives after the work has been done.  Your staff and IT department need to know what is and isn’t available to them…that is found in the EULA.

Reviewing and understanding the support or updates/modifications language in the EULA allows a company to fully utilize the software to its best potential.

Up next: Part 4 – The Final Episode in Decoding Software Agreements – Limitation of Liability

In the previous blog update (Part 1), I promised to continue decoding densely worded End User License Agreements (EULA). As discussed in the prior blog, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software. In this blog, I address security. First, an excerpt from a standard form cloud services agreement:

“Company X shall notify Customer of any Unauthorized Access as soon as reasonably practical. In the event that any applicable law requires that any notice be given to Customer’s Service Users or clients, Company X acknowledges and agrees that Customer shall have control over the timing, content, and method of any required notification.”

Many companies Continue Reading Decoding (Mind-Numbing) Software Agreements: Part 2

Software has become an integral part of the construction world and its use is only growing. There are hundreds of software providers for project management systems, estimating, schedule tracking, BIM, accounting, project portal, dropbox, cloud service providers, the list goes on and on.

Typically, users of software are handed a lengthy agreement and asked to click their consent to the terms. We have all seen this type of agreement; anyone with a cell phone has likely absentmindedly agreed, with a click, to each software update. The writing is small.  The lines are spaced close together.  It goes on for page, after page, after page. The only distinguishing feature is occasionally the words are in all CAPS which feels bad-mannered and impolite.  Frankly, the first paragraph, if one gets that far, is enough to cure all insomniac tendencies one may have in a matter of seconds. These agreements are typically called End User License Agreements (EULA) and are the terms the user of a software program agrees to abide by in using the software.

There is a lot of important information hidden in all that small writing, such as: where a dispute is litigated (not always your home state); non-assignment without consent (i.e. if the software division or your company is purchased by another, you are required to update the terms of the agreement); indemnification; payment terms; termination; confidential information; etc.  That said, I believe there are the big four to be aware of:  1) scope of license; 2) support, aka updates/modifications; 3) security; and 4) limitation of liability.  This article and the three to follow will expand on these four concepts.  First, understanding the scope of your license and usage rights.

PART 1 – SCOPE OF LICENSE

Licenses come in all shapes and sizes.  The license can… Continue Reading Decoding (Mind-Numbing) Software Agreements: Part 1

The law of unintended consequences theorizes that the actions of people – especially government – often have effects that are surprising or unplanned. The idea of unintended consequences is generally traced back to English philosopher John Locke. In 1692, in a letter to Sir John Sommers, a member of England’s Parliament, Locke counseled the defeat of a parliamentary bill designed to regulate interest rates. Locke argued that instead of benefiting borrowers, as the bill intended, it would hurt them because creditors would find ways to circumvent the law, and those related costs would be borne by the borrowers, namely “widows, orphans and all those who have their estates in money.” John Locke, Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money (1691). Oregon House Bill 2661 (“HB 2661”) should be considered with unintended consequences in mind.

HB 2661’s goal is to curtail or reduce the spiraling costs of new residential construction in order to make housing more affordable. While that is an admirable and laudable goal, the key features of this bill remind me of Locke’s letter to Sommers and his concerns about that century’s old bill to regulate interest rates.

HB 2661’s key features include:

Continue Reading Oregon HB 2661 and Unintended Consequences

Project owners and contractors often face challenges when defective building materials are used during construction. Bad building products can throw an entire construction project off kilter and, of course, can lead to litigation. Questions for the lawyer can abound. Is the contractor to blame for using the bad product? What if the project owner or architect selected the product? What about the manufacturer? Isn’t it responsible? While these questions are important, it’s often the details that can confuse even the most seasoned lawyer. Smaller issues, such as the applicable statute of limitation or repose, can become major headaches, particularly when the product is manufactured outside of the state where the lawsuit has been filed. Thankfully, the Oregon Supreme Court recently ruled on that exact issue, providing welcome guidance for lawyers, construction professionals, and project owners.

In June, the Oregon Supreme Court issued its opinion in Miller v. Ford Motor Co., 363 Or 105 (2018). In Miller, the Court held that when a product liability action is properly filed in Oregon, and the case involves a product manufactured in a state that has no statute of repose for an equivalent action, then the Oregon claim is also not subject to a statute of repose.

Continue Reading A Long Time Ago, In a State Far, Far Away: How Does Another State’s Statute of Repose Affect a Product Liability Claim filed in Oregon?

Last month’s Oregon Supreme Court decision in Ransom v. Radiology Specialists of the Northwest, 363 Or 552 (2018) will likely have far-reaching impacts on how discovery is conducted in construction defect cases in Oregon. Ransom involved a plaintiff’s claim for alleged medical negligence case against two of the plaintiff’s former radiologists for alleged failure to properly read her imaging scans, which the plaintiff further alleged led to misdiagnosing her cancer as Stage II instead of Stage IV. Id. at 555-56. At issue on appeal was whether the plaintiff’s attorney could seek an answer from the radiologists about their current interpretation of the imaging scans for the plaintiff. Id. During the deposition the radiologists both testified that they did not have an independent memory of interpreting certain scans back at the time they reviewed such scans. Id. When the plaintiff’s attorney thereafter asked the radiologists to review those same scans during their deposition and answer questions about certain markings identified on the scan, defense counsel objected and instructed the radiologists not to answer on the grounds the questions impermissibly sought expert testimony and/or called for information protected by attorney-client privilege. Id. A trial court later concurred with the defense’s objection and prohibited the radiologists from answering the questions about the present-day interpretations of the scans. Id. at 557. On a writ of mandamus filed by the plaintiff, the Oregon Supreme Court reversed the trial court’s decision. Id. at 572-73.

After reviewing the history surrounding Oregon’s prohibition on expert discovery as discussed in two prior cases, Stevens v. Czerniak, 336 Or 393 (2004) and Gwin v. Lynn, 344 Or 65 (2008), the Supreme Court held that “under ORCP 36B, a participating expert can be asked any questions relevant to his or her direct involvement in the events at issue.” Ransom, 363 Or at 567. The Court further found that because the questions did not ask the radiologists to provide information regarding the content of any attorney-client privileged communications, evidentiary rules on attorney-client privilege did not apply. Id. at 572.

Continue Reading Recent Oregon Supreme Court Case Involving Medical Negligence May Have Far-Reaching Impact On Discovery In Construction and Design Defect Cases

Construction defects plague many buildings in Florida, leading to lawsuits against developers and contractors. Seasoned developers have tried placing limits on their liability in a variety of ways, including inserting provisions in associations’ governing documents to limit associations’ and owners’ ability to bring a lawsuit against the developer. While developers have been creative in coming up with ways to limit liability exposure, this article focuses on what developers may not include in the governing documents that govern homeowner and condominium associations.

Governing Documents

To form a condominium or homeowners association, among other things, one must record a declaration in the respective county public records. Fla. Stat. § 718.104. “The declaration of condominium, which is the condominium’s ‘constitution,’ creates the condominium and ‘strictly governs the relationships among the condominium unit owners and the condominium association.’” Neuman, 861 So.2d at 496–97 (quoting Woodside Vill. Condo. Ass’n v. Jahren, 806 So.2d 452, 456 (Fla.2002)). The same applies to declarations for a homeowners association.

These declarations are binding documents and contain covenants, conditions, and restrictions for the community. Such covenants, conditions, and restrictions pertain to a range of topics including, but not limited to, whether pets are allowed; where to store garbage cans; regulation of TV antennas; and the operation of home businesses. The developer drafts these declarations and, while ambiguities are construed against the drafters,[1] developers are still given wide latitude in drafting declarations. Further, restrictions which may be found in a declaration of condominium are clothed with a very strong presumption of validity when challenged. See, e.g., Grove Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081, 1091 (Fla. Dist. Ct. App. 2014) (citing Woodside Vill. Condo. Ass’n, 806 So.2d at 457).

Continue Reading Effectiveness of Suit Limitations in Community Associations’ Governing Documents

As anyone who is taking the time to read this blog probably knows, the American Institute of Architects (AIA) construction contract forms are omnipresent. Which means you also probably know that in April 2017 the AIA released an update to its A201 general conditions form, last updated in 2007.

While many of the changes were discussed, researched, written and lectured about last summer, including by me, I’ve recently started to field a lot of questions about the 2017 changes to the AIA documents, A201 in particular. This is no surprise, I suppose. After the 2007 AIA forms were released, it took a year or two before the updated forms were used more frequently.

In light of these recent questions, now seems like a good time to summarize a few of the differences between A201-2007 and A201-2017.

§1.1.8 Initial Decision Maker

A201-2017 adds a sentence shielding the Initial Decision Maker (IDM) from liability for “interpretations or decisions rendered in good faith.” While this new sentence requires the IDM to act in good faith, it nevertheless appears to be a broad liability waiver for someone who could be making key decisions relating to cost, time and scope.

§ 1.2.1.1 Savings Clause

A “savings” clause has been added to A201-2017 – meaning that if a court finds that part of the agreement violates the law or is otherwise unenforceable, the remainder of the contract is nevertheless enforceable. Further, if a section is deemed unenforceable, the court may revise the section to make it legal rather than throwing out the entire section.

§1.6 Notice

Whenever “notice” is required by A201-2017, such notice is now required to be in writing. Continue Reading A201-2017: A Brief Summary of the Differences a Decade Makes

On April 3, 2018, Oregon Governor Kate Brown signed into law HB 4144, which eases licensing requirements for construction contractors, especially those in rural areas. Under the new Construction Contractors Board rules, an individual with at least eight years of experience in the construction industry may apply for a new residential contractor’s license without having to complete the previously required training. Applicants under the new rules must still pass the CCB licensing exam, and must also form a sole proprietorship through the Oregon Secretary of State. The CCB will waive the initial license fee for certain application types.

So, why the change? As is often the case when the State and the construction industry mix, the answer lies in the economy. According to the CCB, the Governer requested HB 4144 “to help turn wage earners into job creators/employers.” According to Governor Brown, the demand for rural jobs and affordable housing also warranted the changes. With increasing construction demand in rural areas, the state decided to loosen the requirements for new license holders to spur business ownership.

Notably, important changes to the rules are actually designed to encourage contractors to own their own companies. Under the new rules, an existing fund at Business Oregon (Oregon’s economic development agency) will be used to help first-time applicants with up-front costs such as insurance, bonding, and equipment purchases. The funds will be available only for use by contractors working on affordable, low, and moderate-income housing in rural Oregon. HB 4144 also directs the Oregon Higher Education Coordinating Commission to give grant funding to new, small contractors so as to recruit and hire Oregonians new to the construction workforce.

With the new rules going into effect January 1, 2019, contractors have time to consult with attorneys to discuss licensing and business formation issues. As always, and in light of the fact that contractor training requirements are being reduced, project owners should do their homework before hiring a contractor. A contractor’s license, bond, insurance, and complaint history can be accessed 24 hours a day through the CCB’s website: http://www.oregon.gov/CCB.