A technology vendor sold
us a system that does not work. The vendor has tried, but failed,
to fix it and insists we pay the $2,500 per month owed under the
hardware lease, software license and maintenance agreement.
We never signed these three-year contracts, and we refuse to
pay. The vendor said that because we allowed the system to be
installed, we have an implied contract and must pay. Who is
right?
A: You are. You do not have to pay for any
hardware lease and associated agreements that you did not sign,
subject to the exception noted below.
The Statute of Frauds is the name of an old English law adopted
by all 50 states. It says that certain types of contracts must be
in writing and signed by the party against whom enforcement is
sought.
One type is an agreement for the sale of goods or equipment
where the price is more than $500. As far as I know, most states
have extended this law to include long-term leases of computer
hardware and associated agreements.
The Statute of Frauds also applies to contracts that cannot be
performed in less than a year. Therefore, your unsigned three-year
agreements are unenforceable against you.
However, even if the vendor could wriggle out of the Statute of
Frauds, the contract still would be unenforceable.
Although the contract undoubtedly contains the usual disclaimers
of liability for anything that goes wrong, no disclaimer can make
enforceable a contract for a computer system if the system doesn't
work at all.
Under the Uniform Commercial Code, the buyer or lessee of a
computer system can revoke acceptance of the system -- even after
installation -- if it utterly fails to fulfill its purpose and if
the buyer could not have known that fact before it was
installed.
The exception is this: If you first sign a contract that says
you do not have to sign later contracts or amendments, then your
refusal to sign after installation does not help you under the
Statute of Frauds.
For example, Worldspan has a "signature on file" agreement that
lets it sign certain agreements for you.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TWCrossroads Legal Ease forum. To contact Mark directly, e-mail him
at [email protected]