Technical Experts in Computer-Related Performance Litigation

Introduction

A company has purchased a new turnkey computer system from a vendor that is both a software developer and a hardware integrator. The buyer investigated its options very diligently and chose the vendor with equal care. The seller had been producing software for the buyer’s industry for many years. During the negotiations, the seller studied the buyer’s requirements and determined that the buyer could use the seller’s standard software that would be modified substantially to meet the buyer’s needs. Indeed, there was a match between the two parties. An agreement was concluded, and software development began. The buyer paid a large down payment for the system in advance. Next, design details were worked out between the parties with the buyer expanding its requirements constantly as discussions ensued. Finally, both parties agreed upon what was to be delivered. Later, when the promised delivery date came and went, the buyer became agitated. Apparently, the seller ran into snags in development and failed to inform the buyer of the schedule slippage. Several months later, both hardware and software were installed in the buyer’s facility. User training and data entry began. When the buyer began to use the system, it discovered that much of the functionality discussed and promised during negotiations was missing. The buyer felt that the system was not "user friendly." There were numerous errors and the buyer felt that the system did not work. The buyer demanded return of its money from the seller. The seller refused to take back the "defective" system and return the buyer’s money. The seller demanded that the buyer pay its outstanding balance. Letters from the buyer’s and the seller’s lawyer followed. The seller sued the buyer for non-payment and the buyer countered claiming that the seller breached its warranties, committed both common law fraud (fraud in the inducement) and consumer fraud as well as negligence torts. The buyer claimed consequential damages substantially in excess of the purchase price for the system.

The buyer argued that it had been cheated. Very few of the promises made by the seller during the sales cycle were ever kept. The buyer had been lied to. The seller failed to deliver a working system in a timely manner. The computer software did not function properly, and the buyer was unable to use what did work. Furthermore, even were the seller to fix all the defects, it was doubtful that the buyer would ever be able to use the system. The seller countered by saying that, during the negotiations, the buyer never allowed the system to be "cast in concrete." Specifications changed constantly. The buyer seemed not to know what it wanted. Therefore, it was the buyer’s fault that initial delivery was delayed. Ultimately, the seller delivered a fine working system. True, there were some bugs, but they were fixed as soon as the seller was informed of their existence. However, even after installation, the buyer kept changing requirements. Modification requests were incredibly numerous. Furthermore, the buyer’s personnel could not figure out how to use the system even after receiving more training time than was provided to the seller’s other customers. What made matters worse was that, seven months after delivery, the buyer had not even paid the seller enough money to cover its cost for the hardware. This was the first time that the seller had any problems dealing with a customer.

On the surface, the issues seem quite understandable. However, the underlying technology is so complex that the court is unable to decipher the details. Therefore, both sides hire experts with very impressive credentials. Theoretically, such competent individuals, having so much data processing experience, should be able to get together and figure out exactly what went wrong. Yet, that is not how the process works. The trial begins with these experts being set as the lynch pins of the presentations of both plaintiff and defendant. Each expert tells a different story. The trial is a battle between the two experts.

Does this case sound familiar? It should! Such a story is typical of many matters that wind up in the courts. What marks this situation is the degree to which litigation victory is dependent upon the testimony of experts.

Experts are used to bolster the position of both parties in a dispute of this nature. This article examines the role of technical experts in computer-related performance litigation. In order to understand how an expert should be used, it is important to understand user theories of liability in computer litigation as well as defenses commonly available to the vendor. Considering these theories and whether the expert is testifying on behalf of the buyer or the seller, the nature of the expert’s forensic investigation is determined.

Most computer acquisitions follow the same essential fact pattern. In a typical case, the user, sometimes with an independent consultant’s advice, surveys the marketplace to identify those vendors who might meet the user’s needs. After meeting with a few vendors, the user most often selects one vendor to deliver a "turnkey" computer system. A user may, instead, select more than one vendor -- perhaps, one vendor for the hardware and another for the software. In both instances, the vendor(s) typically sends the user a preprinted "form contract" that is calculated to lead the user to believe that the vendor is unwilling to negotiate any of its terms.

The typical computer vendor contract, whether for hardware and/or software, will routinely take away from the user certain rights accorded under the Uniform Commercial Code or by common law. More specifically, the typical vendor preprinted form contract will exclude all oral promises and representations made by the vendor’s representative. The contract will contain language disclaiming many, if not all of the warranties that the law has created. Finally, a vendor’s form contract ordinarily limits the user’s right, in the event of the vendor’s breach, to recover damages.

Many courts have enforced one or more of these provisions.(1) If a dispute should arise, a vendor of computer goods or services will rely upon these cases and others in establishing that its contractual obligation to its customer was narrowly circumscribed by the form contract language. As a result, it is important for an attorney counseling a user to recognize and understand the implications of these clauses and to appreciate their peril to a user when a computer system fails.

Does the Uniform Commercial Code Apply?

When an attorney receives the vendor’s form contract from his client, the initial inquiry is whether the transaction is a "sale of goods" within the purview of Article 2 of the Uniform Commercial Code (U.C.C.). The enforceability of the vendor’s preprinted form provisions often turns on this issue.

"Goods" are defined in U.C.C. §2-105 as:

All things (including specially manufactured goods) which are movable at the time of identification to the contact for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. ‘Goods’ also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from reality (Section 2-107).

The issue is, therefore, whether a computer transaction involves a contract for goods or a contract for services. Article 2 of the U.C.C. applies to goods. Service contracts are governed by the common law and other statutes.

Courts have consistently held that computer hardware is a "good" under the U.C.C. The more difficult issue is whether an agreement for software or programming services is covered by Article 2 of the U.C.C. It is well-established that a sale of an integrated or "turnkey" system, consisting of hardware and software, is a transaction governed by the Uniform Commercial Code.(2) It is now generally agreed that software, by itself, is a "good" and that the U.C.C. is applicable to a contract for the sale or license of software.(3)

The Integration Clause and the Parol Evidence Rule

Typically a computer vendor’s preprinted form contract will contain the following clause, often called an "integration" or "merger" clause:

This writing contains the entire agreement of the parties and there are no promises, understandings, or agreements of any kind pertaining to this contract other than stated herein.

An integration or merger clause simply states that the written agreement is intended to be the final, complete and exclusive agreement of the parties. Thus, under such a clause, the parties may not refer to any prior or contemporaneous representations, promises or statements, whether oral or written, to vary or add to the provisions of their written contract. U.C.C. §2-202 provides that a written agreement containing terms that are intended by the parties to be a final expression of their contract may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.

Click Here to View Relevant Portion of U.C.C. §2-202

As Section 2-202 provides, a written contract, which by its terms is intended to be a final expression of the parties’ contractual intent, may not be contradicted by evidence of a prior agreement or a contemporaneous oral agreement except in certain narrow instances. First, a contract, under the U.C.C., can be explained by evidence of a prior course of dealing between the parties or a commonly accepted trade custom. Second, the terms of a written agreement may be varied by the course of performance of the parties to the contract. Finally, a written agreement can be explained with evidence of consistent additional terms unless the court finds the written contract to have been intended to be the complete and exclusive statement of the terms of the contract. Section 2-202 of the U.C.C. is, therefore, merely a codification of the parol evidence rule in a commercial setting.

The common law rule against the admission of parol evidence simply provides that, except in certain instances, the parties may not rely upon evidence to vary the terms of the written contract if such evidence pertains to matters outside the scope of the contract document itself. Under the common law rule, parol evidence may, however, be admissible for the following purposes:

A merger or integration clause and the parol evidence rule are most significant in computer cases when an aggrieved user seeks to rely upon oral representations and warranties or statements contained in proposals and advertising materials relating to the suitability of the computer system for the user’s particular purposes and its promised performance.

Limited Warranties and Remedies

All form contracts used by computer vendors contain provisions limiting the warranties and the contractual remedies available to the user in the event the computer system fails to operate as promised. In many cases, contracts negotiated by the parties at arm’s length still contain these pro-vendor protections. However, most computer transactions do not involve significant contract negotiation and these provisions, designed to protect the vendor at the expense of the user, are automatically incorporated into the written agreement.

The contract provisions contained in a vendor’s form contract normally respond to three different sections of the U.C.C. First, the vendor typically will provide an express warranty, as allowed by U.C.C. §3-313. For example, the vendor’s contract may provide:

Vendor warrants that there will be no defects in material or workmanship for a period of ninety (90) days after the date of installation.

The next clause contained in the typical computer vendor’s contract is a disclaimer or exclusion of warranty provision, as permitted by U.C.C. §2-316.

Click Here to View Relevant Portion of U.C.C. §2-316

Consistent with the requirements of §2-316 of the U.C.C., a vendor’s preprinted form will most likely contain the following provision in boldface print:

EXCEPT AS PROVIDED HEREIN, THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.

If this disclaimer is enforceable, then the express warranty contained in the contract (e.g., free of defects in materials and workmanship for ninety days) is the only warranty upon which the user may lawfully rely.

The next component in the vendor’s arsenal is a contract provision limiting the buyer’s remedy, usually to "replacement or repair, at seller’s option." The purpose of this contract limitation is to make certain that the buyer receives a computer system that works and to protect the vendor against expansive liability resulting from factors totally beyond its control. A provision limiting a user to "replacement or repair" or some other restricted remedy is specifically allowed by U.C.C. §2-719, which provides that the parties to an agreement are permitted to modify the remedies available in the event of a breach by providing remedies in addition to or in substitution for those otherwise accorded by the U.C.C. The only requirement for a limited remedy provision to be enforceable is that it expressly state that the limited remedy will be the sole and exclusive remedy in the event of a breach.

The last component of the vendor’s standard package of contract provisions is a clause limiting the buyer’s right to recover damages in the event of a breach. This provision is permitted by the U.C.C. §2-719 (3), which states that "consequential damages may be limited or excluded unless the limitation ... is unconscionable." A typical provision limiting the buyer’s right to recover consequential damages might read:

In no event shall seller be liable for consequential, incidental, direct or indirect damages of any kind, including but not limited to lost profits.

As noted earlier, such a provision has been upheld by courts. (11)

As noted above, a vendor’s preprinted form contract normally contains five different but interrelated provisions intended to reduce his scope of liability. Such a contract typically contains a provision setting forth a limited express warranty, a provision disclaiming all other warranties, a provision limiting the remedy, a provision restricting the user’s right to recover damages and a merger or integration clause. All five provisions will be enforceable provided they adhere to the requirements set forth in the Uniform Commercial Code. Rather than giving the buyer added protection, these contract provisions operate together to limit or restrict those rights and remedies otherwise available to a user under the Uniform Commercial Code. Depending upon the identity of the vendor and the economic power of the user, it may be possible for the user to negotiate these provisions to arrive at a computer contract which fairly and adequately protects the user’s (and the seller’s) legitimate interests.

Statute of Limitations

As noted earlier, most cases now hold that the acquisition of hardware and software, whether on a "turnkey" basis or separately, are transactions governed by Article 2 of the U.C.C. It is important to note that U.C.C. §2-725 contains its own period of limitation.

Click Here to View Relevant Portion of U.C.C. §2-725

The four year period of limitation set forth in U.C.C. §2-725 differs from the period of limitation for other breach of contract actions provided by general statutes of limitation (such as N.J.S.A. 2A:14-1, which is six years from the date of accrual of a cause of action). Thus, an attorney engaged to file suit on behalf of an aggrieved computer user must be aware of the four year period of limitation and not simply rely upon the normal six year statute generally applicable to breach of contract actions.

Moreover, U.C.C. §2-725 provides that the parties can agree to shorten the four year period, but not for less than one year.

Click Here to View Relevant Portion of U.C.C. §2-725

Computer vendors often insert in their form contracts provisions shortening the period of limitation. For example, a computer contract may provide that:

Any action hereunder for a breach or violation of any of the terms, conditions or covenants herein must be commenced within one year from the date hereof.

To an unwary lawyer, this provision may seem totally innocuous and fair to both parties. However, experience demonstrates that it often requires many months to determine whether a computer system conforms to the contract requirements. Moreover, it is not unusual for vendors to request and be granted significant additional time to correct the problems in the computer system. However, under the U.C.C., a breach of warranty occurs upon tender of delivery of the goods. As a result, a contract provision arbitrarily shortening the applicable period of limitation may have drastic consequences, since the limitations period could expire before the problem is identified. This, too, is a provision that may be negotiable, depending upon the nature and size of the particular transaction.(12)

In determining the availability of breach of warranty claims, a pivotal issue is whether the transaction in question is covered by Article 2 of the U.C.C. It is generally acknowledged that except for pure data processing service contracts, agreements for the sale or lease of hardware or software are "transactions in goods" and, therefore, governed by Article 2 of the U.C.C. As a result, this article focuses upon those contract and warranty claims available under the U.C.C. A pure service contract, not within Article 2 of the U.C.C., will be governed by ordinary common law contract principles.

Express Warranties

Breach of an express warranty is, perhaps, the most important claim asserted in computer product litigation. Section 2-313 of the U.C.C. provides that an express warranty will result from any affirmation of fact or promise, description of the goods, or sample or model which "becomes part of the basis of the bargain." The Code states specifically that an express warranty may be created without the sellers use of such words as "warrant" or "guarantee" or that the Seller specifically intends to make a warranty. See official Comment 3 to U.C.C. §2-313. The Code further provides that a statement purporting to be merely the seller’s opinion will not create such a warranty.

Click Here to View Relevant Portion of U.C.C. §2-313

Most computer law decisions addressing the issue hold that an express warranty may be created orally as well as in writing.(23) In most computer law cases, breach of express warranty claims are based upon written or oral statements made by the vendor concerning the performance specifications of the computer system.(24) Several cases hold that even general statements regarding the suitability or performance level of the computer system will give rise to actionable breach of express warranty claims.(25)

Express warranties relating to specific performance standards or to the general suitability of the computer system are often found in advertising brochures and literature, vendor’s proposals containing boilerplate provisions and, in addition, such express warranties are often created by the oral statements of overzealous salesmen, systems analysts and other vendor representatives. As a result, when examining whether a client has a claim for breach of express warranty, one must look beyond the four corners of the written contract and examine all of the written and oral communications occurring between the parties up to the execution of the contract.

Implied Warranties of Merchantability and Fitness for a Particular Purpose

As noted above, a computer transaction is often defined by the express warranties, whether oral or written, made by the vendor or its salesman. Most computer transactions also involve two implied warranties created under the U.C.C. -- the implied warranty of merchantability and the implied warranty of fitness for a particular purpose. U.C.C. §2-314 provides that in any transaction where the seller is a "merchant" with respect to the goods, the law will apply the existence of a warranty of merchantability. The warranty of merchantability essentially means that the goods will pass without objection in the trade and are fit for the ordinary purposes for which the goods are used. In a computer transaction, merchantability means that the computer system (or hardware or software if sold separately) will work in a reliable, trouble-free manner and that the computer system will produce data which is reliable and correct.

Click Here to View Relevant Portion of U.C.C. §2-314

The second implied warranty in most computer transactions is the implied warranty of fitness for a particular purpose. Section 2-315 of the U.C.C. provides that if the seller has reason to know the buyer’s particular requirement and that the buyer is relying upon the seller’s recommendation, an implied warranty will arise that the goods will be suitable for the buyer’s particular purposes.

Click Here to View Relevant Portion of U.C.C. §2-315

These U.C.C. implied warranties -- merchantability and fitness for a particular purpose -- thus serve two different purposes. The warranty of merchantability provides only that the computer system will serve the ordinary purpose for which it is used. In contrast, the warranty of fitness for a particular purpose ensures that a buyer, who reasonably relies upon the seller’s judgment in recommending a computer system, will be protected in the event the computer system fails to satisfy the buyer’s particular needs.

Few computer cases discuss the warranty of merchantability in detail. The reason for this is clear. If the requirements of U.C.C. §2-315 are satisfied such that a warranty of fitness for a particular purpose arises, or if an express warranty was breached, then it is unnecessary for the court to determine whether a warranty of merchantability has also been breached. Indeed, this was the case in Chatlos Systems v. National Cash Register Corporation(26) where the district court, in a computer breach of warranty/fraud case, noted that because it concluded "that NCR breached express warranty and the implied warranty of fitness for a particular purpose, it is unnecessary to discuss and rule upon whether there existed an implied warranty of merchantability and if so, whether it was breached."(27)

As noted above, most computer law decisions find liability on the basis of express warranties and the implied warranty of fitness for a particular purpose. The warranty of fitness is directed not to the general standard of a computer system’s performance, but rather to whether a system is suitable to a buyer’s particular needs. In Chatlos Systems v. National Cash Register Corporation, NCR held itself out to have expertise in the computer field. After the plaintiff made NCR’s salesman aware of its particular needs, the salesman recommended a particular computer system which, the salesman stated, would meet those needs. The court found that NCR was well aware that the plaintiff was relying upon its skill and judgment. As a result, the court concluded that an implied warranty of fitness under U.C.C. §2-315 arose.(28)

Choice of Law

Many form computer contracts contain a provision governing the applicable law. For example a contract might provide:

The validity, interpretation and construction of this contract shall be governed by the laws of the State of California.

In order for a contractual choice of law provision to be enforceable, the state’s law chosen by the parties must bear a "reasonable relation" to the transaction involved.(32) A court will not enforce a choice of law provision if the transaction has no nexus with the jurisdiction whose law is to apply. In a typical computer case, a court will find such a "reasonable relation" to exist if the vendor is domiciled in the state whose law is governed.

While a choice of law provision may seem innocuous, it can have a substantial effect on the parties’ rights. Admittedly, the U.C.C. has been adopted in substantially the same form by all jurisdictions. However, different courts have construed U.C.C. sections differently. Thus, whether a particular state’s law applies to a computer transaction may substantially affect the outcome of litigation. For example, in some states, limited remedy clauses and disclaimers of consequential damages are considered to be independent. Thus, in those states, if a "repair or replace" clause in the contract fails of its essential purpose, i.e., fails to give the buyer the benefit of the bargain, a disclaimer of consequential damages will remain valid under most circumstances. In other states, however, if a limited remedy clause fails of its essential purpose, a disclaimer of consequential damages clause will be voided, thus exposing the seller to any consequential damages the buyer can prove.

Disclaimers of Warranties

As noted earlier, if there are no exclusions or modifications in the contract, every sales contract governed by the U.C.C. contains an implied warranty of merchantability and, if the seller has reason to know of a particular purpose for which the goods are required, an implied warranty of fitness for a particular purpose. Express warranties are created if the seller makes an affirmation of fact or promise to the buyer and the affirmation or promise becomes part of the bargain between the parties.

Click Here to View Relevant Portion of U.C.C. §2-316

How does a vendor effectively exclude express and implied warranties? Most courts have held that it is nearly impossible to disclaim an express warranty.(33) However, in commercial, non-consumer sales the implied warranty of merchantability and fitness for a particular purpose may be easily disclaimed. Under U.C.C. §2-316, a disclaimer of the warranty of merchantability must mention "merchantability" and, if in writing, must be conspicuous. To exclude or modify an implied warranty of fitness, the exclusion must be by a writing and conspicuous. "Conspicuous" is defined in §1-201(10) of the U.C.C. as follows:

"A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. ... language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color. ..."

In Office Supply Co., Inc. v. Basic/Four Corp. (34), the district court held that the disclaimer of warranty provision was not conspicuous because the disclaimer was on the reverse side of the contract, it was not near the buyer’s signature line, and, although italicized, the provision only slightly contrasted with the remainder of the contract. However, the district court followed a line of cases which hold that if a buyer is actually aware of a warranty disclaimer, then the disclaimer is effective even if not conspicuous. In Office Supply Co., Inc., plaintiff’s representative had, in fact, read the disclaimer and it was, therefore, enforceable though not conspicuous.

Most vendor form contracts contain a provision excluding all implied warranties similar to the one previously noted. U.C.C. §2-316(4) also states that remedies for breach of warranty can be limited in accordance with the provisions of Sections 2-718 and 2-719 relating to limitations on the buyer’s damages and remedies. Thus, a vendor’s form contract typically contains two additional provisions. First, the agreement states that the remedy available to the buyer of a computer system is limited to replacement or repair of defective parts. Second, the contract often provides that the vendor shall have no liability for incidental or consequential damages. The importance of understanding these provisions cannot be overestimated.

U.C.C. §2-719 provides that the parties can contract for remedies in addition to or substitution for remedies provided in the U.C.C. However, any remedy contracted for -- such as replacement or repair -- will be deemed cumulative to all other U.C.C. remedies unless the parties expressly agree that the stated remedy shall be exclusive. If an exclusive remedy such as replacement and repair has been agreed to, then it will be the sole and exclusive recourse of the buyer in the event the computer system fails to operate.(35)

However, U.C.C. §2-719(2) provides that where an exclusive or limited remedy fails of its essential purpose, remedy may be had as provided by the U.C.C. When does an exclusive or limited remedy such as replacement or repair fail of its essential purpose? A limited remedy fails of its essential purpose when the warrantor fails to correct the defect promised within a reasonable period of time.(36)

As noted earlier, the U.C.C. also provides that an aggrieved buyer in most cases is entitled to recover his consequential damages, i.e., "any loss resulting from general or particular requirements or needs of which the seller at the time of contracting had reason to know. ... an injury to person or property proximately resulting from any breach of warranty."(37) Consequential damages includes all damages reasonably foreseeable from a breach at the time of contracting, including lost profits and unrealized but anticipated savings.(38) The U.C.C., however, expressly allows the parties to shift the risk of consequential loss to the Buyer. U.C.C. §2-719(3) states that "consequential damages may be limited or excluded unless the limitation for exclusion is unconscionable." Limitation of consequential damages for personal injury in the case of consumer goods is prima facie unconscionable, but limitation of damages where the loss is commercial is not. Thus, the Code recognizes that the limitation on recoverable damages is presumed to be valid in a commercial setting.

Even in a commercial setting, a limitation on the buyer’s right to recover consequential damages will be unenforceable if unconscionable. Among the factors relevant to determining unconscionability in a commercial setting are the length of the negotiation process, the length of time the buyer has to deliberate before signing the contract, the experience or astuteness of the parties, whether counsel reviewed the contract and whether the buyer was a reluctant purchaser. The commercial setting and the purpose and effect of the allegedly unconscionable limitation clause are also relevant as is the extent of the seller’s default in attempting to fulfill its obligations on a remedy to repair.(39) Most consequential damage limitations have been enforced.

Most computer cases have upheld the limitation of damages provision since it is difficult to prove unconscionability. However, it should be noted that in Consolidated Data Terminals v. Applied Digital Data Systems,(40) the court held that a consequential damages exclusion would be unenforceable where there was a design defect in the entire product line of computers.

Integration Clause

The parol evidence rule and U.C.C. §2-202 preclude the use of parol or extrinsic evidence to contradict the terms of the written agreement intended to be the final agreement of the parties. The court may consider evidence of consistent, additional terms unless it finds the writing to have been intended also as a complete and exclusive state of the terms of the agreement. To this end, a vendor’s form contract often will contain an integration or merger clause which is intended to demonstrate that the written agreement is the final agreement of the parties and that no prior or contemporaneous oral representations by a salesman should be admissible. A typical integration or merger clause will read as follows:

This Agreement constitutes the entire agreement, understanding, and representing, express or implied, between the parties with respect to any equipment or services provided hereunder. This Agreement supersedes all prior statements, whether written or oral, and all oral or written proposals.

An integration clause may present the vendor with a defense to claims that a computer salesman made additional oral or written representations and warranties regarding the suitability of the computer system. Some courts have found that an integration clause will not bar extrinsic evidence of such representations,(41) while other courts have held that an integration clause will effectively bar such evidence.(42)

Economic Losses in Tort

In Spring Motors Distributors, Inc. v. Ford Motor Co.,(43) the New Jersey Supreme Court held that at least in a non-consumer transaction, a buyer seeking damages for only economic loss must proceed under the U.C.C. against the parties in the chain of distribution and not under principles of strict liability or negligence. In Spring Motors Distributors, Inc., the New Jersey Supreme Court adopted the majority view that there can be no recovery of economic losses in a commercial setting.

Spring Motors Distributors, Inc. implicates computer cases as well. If an aggrieved purchaser of a computer system seeks to recover his economic losses, he may be limited to his rights under contract law and the U.C.C. A computer buyer suffering only economic losses may not rely upon negligence or strict liability.

Why would a buyer want to assert tort claims arising from the failure of a computer system? First, if the loss is purely economic (e.g., lost profits), a tort claim will be governed by New Jersey’s six year statute of limitations. In contrast, U.C.C. §2-725 provides that any action for breach of a contract of sale must be commenced within four years after the cause of action has accrued.

Additionally, an aggrieved buyer may assert a negligence or strict liability claim to avoid the form provisions typically contained in a vendor’s preprinted form contract; a clause excluding or limiting warranties, a clause providing an exclusive remedy of replacement or repair, and a clause limiting the buyer’s right to recover consequential damages. However, Spring Motors Distributors, Inc. suggests that allegations of negligence and strict liability, where the damages are economic only, may not permit a buyer to avoid the seller’s U.C.C. defenses.

Failure to Give Timely Notice of Breach

If a computer transaction is governed by Article 2 of the U.C.C., then those U.C.C. provisions governing acceptance and rejection of goods will also apply. U.C.C. §2-602 governs the manner in which the buyer must reject a computer system. The purchaser of a computer system must reject the goods within a reasonable time after their delivery or tender. U.C.C. §2-605 essentially provides that a buyer rejecting a computer system must particularize in writing defects which are ascertainable by a reasonable inspection. Failure to particularize these defects will preclude the buyer from relying on the unstated defects to justify his rejection or to establish the vendor’s breach where the vendor could have cured the defect if stated seasonably. §2-606 provides, inter alia, that acceptance of a computer system occurs when a buyer fails to make an effective rejection when he has had a reasonable opportunity to inspect the computer system.

Taken together, the foregoing U.C.C. sections provide that the purchaser of a computer system has the duty to inspect the system and to notify the seller of his rejection, if any, within a reasonable period of time. Failure to so notify the seller will constitute an acceptance of the computer system. Moreover, failure to accompany rejection with a particularization of observable defects may preclude the buyer from relying upon those defects and establishing his breach of warranty claim. These U.C.C. provisions, as well as those relating to the subsequent revocation of acceptance (U.C.C. §2-608), will apply to computer products covered by Article 2 of the U.C.C. As a result, a vendor may successfully argue that the buyer has waived his rights and accepted the goods where he has failed to seasonably reject the computer system or where, if properly rejected, the buyer has failed to particularize the defects.

Statute of Limitations

As noted earlier, U.C.C. §2-725 contains a four year statute of limitations applicable to all actions for breach of warranty brought under the provisions of Article 2. The parties by agreement may reduce the period of limitation to not less than one year but may not extend it. Under U.C.C. §2-725, a cause of action accrues "when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach." This lies in stark contrast to the various state statutes of limitations (e.g., N.J.S.A. 2A:14-1 which is New Jersey’s six year statute of limitations), and to the "discovery rule" exception created by the New Jersey courts.

If action is commenced more than four years after the date on which delivery of the computer system was promised, the vendor will undoubtedly assert that the claim is barred by the U.C.C.’s own four year statute of limitations.(44)

The "Moving Target" Defense

As previously stated, an integration clause in a standard form contract for the purchase of a computer system normally represents the vendor’s intention to narrowly define the conditions of sale. Any agreement so conceived must in fact be integrated. To that end, vendors often provide for specifications and proposals to be made as part of the agreement. However, in cases where software analysis and design begin after execution of the agreement, the exact nature of the system is often not defined at time of execution. The time and effort required for development depends upon the amount of code to be developed and tested, and the quantity of such code depends upon the system design. In cases where the system lacks definition, it is impossible for the vendor to promise a precise delivery date or a fixed price. Yet, vendors typically lock themselves in to exact delivery dates and prices. It often happens that the computer system is never defined. Given the opportunity, users will continually add features to the system as long as the vendor is willing to accommodate. Sometimes, the vendor begins development of the software before the specifications are approved by the buyer. Then, during the coding phase, the design changes due to shifting customer requirements. The customer is said to be a "moving target."

Georgetown School of Science and Arts, Ltd. v. Microsystems Engineering Corp. and Everett Karels (45) is just such a case. In this matter, Plaintiff Georgetown and Defendants Microsystems and Karels entered into alleged written and oral agreements whereby the Defendants would provide a computer based business management system to the Plaintiff. The written agreement between the parties contained no definition of the software. Yet, the contract stated: "The price of the customized system is $23,500." One of the provisions of the agreement was that the Defendants were to provide the Plaintiff programming for business and management functions that were to be defined by the Plaintiff. Subsequently, the Defendant provided some software to the Plaintiff. As the Defendant would complete software development on several programs, the Plaintiff would add new requirements for additional functionality. Eventually, the Defendant stopped all development activities on the project.

At trial, the court found that the Plaintiff treated its agreement with the Defendants as open ended and permitted its personnel to request new programs, requirements and refinements. Defendant Karels testified:

"If the requirements continually shift and you are in a state of turmoil to shift the programs around to meet ever changing requirements, it is very difficult to get a handle on just what it is you are supposed to do and it is very hard to separate actions that are oriented towards the requirements and actions that are just bad programming."

The court decided that the parties should have incorporated detailed specifications into the contract. Accordingly, it found that "no contract was ever formed between Georgetown and Microsystems with reference to the software programming since the parties never came to a meeting of the minds as to its essential terms. Thus, ... the appropriate course of action is for the Magistrate to leave the parties where he found them, ... and to enter judgment for the defendants thereon."

Since source code analysis can be the most expensive aspect of an expert’s investigation, the attorney may wish to limit the scope of what the expert needs to examine to relevant portions of source code, if possible.

The Expert Was Engaged By The Buyer’s Attorney

In this case, the attorney should present certain objectives to the expert. Either the transaction was a sale of goods covered under Article 2 of the Uniform Commercial Code or it was a contract for services governed by an agreement and subject to common law. As mentioned previously, non-U.C.C. transactions offer certain opportunities regarding statute of limitations and various torts. In either case, the expert should examine whether or not negligence or strict liability exists from a technical viewpoint. Assuming the transaction to be typical in that it is probably regarded as a sale of goods covered by Article 2 of the U.C.C., with respect to the following:

Express Warranties:

The expert should extract and catalog all promises made by the vendor during the sales cycle whether written or oral or implied during a demonstration or by the buyer’s examination of a model. Vendor proposals, literature and specifications are particularly relevant. The expert should determine whether the promises made by the vendor were kept. The attorney should explain the various provisions of the purchase agreement to the expert. The expert should then ascertain whether or not the technical requirements of the agreement were met. The expert should determine the sufficiency of the delivery and whether the system operated in a manner consistent with standards in the data processing industry. He should examine the system performance characteristics with regard to reasonability in meeting industry standards. In some cases, delivery was delayed and the vendor asked the buyer to afford it more time to complete the system. Where such an extension was refused, it might be useful if the expert were to analyze how long it would have taken to complete delivery and what effort would have been required by the vendor.

Fraud and Misrepresentation:

The expert should examine all statements reported to have been made by the vendor. Based upon his knowledge and experience, the expert should determine whether the vendor knowingly made a false statement to the buyer prior to sale with the expectation that the buyer rely upon it. An example of such a statement might have been: "We have many customers in the field that have as many as six-hundred simultaneous users of the system with absolutely no degradation in performance." In addition, the expert should ascertain whether the vendor deliberately failed to disclose a material fact that, had the buyer been aware of prior to sale, may have influenced the purchase. An example of this might have been that the buyer was the first to use the system or that the software was being "beta" tested by the buyer.

The Implied Warranty of Fitness for a Particular Purpose:

Based upon reading the vendor proposals and buyer requests for proposal as well as correspondence between the vendor and buyer, and upon interviews with witnesses, the expert should be able to determine whether or not the vendor knew and understood what uses the buyer had for the system. Whether or not the vendor actually promised that the system would meet the buyer’s needs, he should treat the vendor’s knowledge of such needs as though a promise had been made. From that point on, the expert should perform the same investigation as he would do for express warranties. An example of this would be where the vendor knew that the buyer needed the computer system to operate beyond the turn of the century. The implied warranty of fitness would apply to Y2K compliance of the system as well as to timely delivery of the system so as to meet the customer’s needs to integrate with its other systems. Where system analysis and design began after the buyer purchased the system, the expert may be able to show that the vendor was unwilling to design the computer system to meet the specific needs of the buyer.

The Implied Warranty of Merchantability:

It is possible for the system to comply with all express warranties as well as with the implied warranty of fitness for a particular purpose and still not be merchantable. Most data processing contracts warrant that the system will be free of defects in materials and workmanship. This is an express warranty. However, assuming that such a clause is absent, and the system is usable in certain respects but not usable in others, the merchantability issue could be relevant. To be merchantable, a system must be fit for the ordinary purposes for which it was intended. (Contrast this with fitness for particular purposes.) Here, the expert should examine whether defects exist across an entire product line rather than just in the buyer’s system.

Generally, for a computer system to be merchantable, it must operate in a trouble free manner. However, it is well known that it is virtually impossible to produce a large computer software program that is entirely bug free. Therefore, in order not to label every computer system unmerchantable, standards for merchantability of software must exist. IBM released the O/S 360 operating system with 11,000 known bugs. (46) Windows 3.1, Windows 95 and Windows 98 have had annoying crashes and anomalies. Yet, users of these systems would be extremely angry were they to be denied the right to use them even with all their faults. Even though errors exist, these systems are merchantable. Therefore, merchantability is a generally accepted standard of usability by the majority of the user community. Consequently, in order to determine whether or not a computer system is merchantable, one must examine its flaws from a user’s point of view.

There is no single definition of error severity in the data processing industry. This is especially true when trying to examine errors from a user’s point of view. However, a generally accepted standard is one developed by AT&T during the early 1980’s. (47) This standard has been used extensively by a large number of computer companies. The severity of the error is expressed as a number between one and four, and is defined as follows:

1 - An error which causes a program or system interrupt or which causes program execution to abort. AT&T and BELL System personnel refer to this type of error as a "show stopper". This error has the highest severity rating.

2 - A severe error which causes a program not to perform properly or to produce unreliable results. Normally, the user cannot find an appropriate "workaround" for this type of error.

3 - An error for which, while not minor, a "workaround" solution can be found for the user.

4 - A minor error, a cosmetic change, or an enhancement.

It is the policy of AT&T and the BELL System that, once a severity "1" error is discovered, programmers and developers must work around-the-clock until the error is corrected. Software can never be released to customers with any severity "1" or "2" errors. Occasionally, a software release with some severity "3" errors will be permitted. However, these errors are documented along with the actions to be taken by users when encountering them. Normally, severity "4" errors would not delay a software release.

A computer software system even with a large number of severity "4" errors would still be merchantable. Some severity "3" errors are tolerable. The standard for the number of such errors should be whether the system would be usable by the general population of users (not necessarily on the buyer’s staff). Severity "1" and "2" errors are not tolerable because they prevent the user from accessing or using portions of the system. However, even here, the system can still be merchantable if users want to use the system regardless of such errors. An example of this would be Netscape v 2.0 and v 4.0. These programs exhibit a number of severity "2" errors when operating in a Windows environment. Yet, users like this program regardless. Nonetheless, where programs possess severity "1" and "2" errors, the standard of acceptability should be determined not only by the general user population but also by the buyer.

An expert should be able to determine whether or not the system is merchantable by examining the "bug" or error reports submitted by the buyer to the vendor and by testing the system himself. Every error that is discovered should be categorized using the AT&T system. More than two or three severity "1" or "2" errors would make the system unmerchantable. Sometimes, even one of these errors might make the system unmerchantable. This would depend upon the exact nature of the error. For example, if a single error prevents the buyer from using the system at all, than the system is unmerchantable. An inordinate number of severity "3" errors would make the system unmerchantable. The exact number of severity "3" errors required to classify a computer system as unmerchantable is subjective. Remember the large number of errors in IBM’s O/S 360. This was clearly not an unmerchantable software system. Severity "4" errors to not contribute to the concept of unmerchantability.

Negligence:

The expert should examine the standard of care used by the vendor in producing the system. This should be based upon data processing industry standards. In addition, the expert should attempt to determine whether or not the vendor knew or should have known that the care taken in producing the system would damage the buyer.

Statute of Limitations:

In those cases where the vendor affirmatively asserts its rights under a statute of limitations clause, certain circumstances might provide an opportunity for expert investigation. Most states enforce statute of limitation clauses in agreements either that are consistent with the one-to-four year U.C.C. provision or that might be governed by state statutes in ordinary contracts. The clock on the statute of limitations normally accrues on the date of initial delivery of the system whether or not the buyer was aware of the defects. However, there are notable exceptions. In Dreier v. Unitronix, (48) the New Jersey Appellate Court ruled that while it is irrelevant whether or not the buyer is aware of the defects in determining when the statute of limitations accrues; nonetheless, the statute of limitations does not accrue until all of the elements for the buyer to be able to be aware of the defects have been delivered. In Dreier, the defendant never delivered a complete system. Therefore, it can be argued that the statute’s clock has not yet begun to tick.

In cases where there is an express or implied warranty of future performance, U.C.C. §2-725 provides that accrual of the statute of limitations is extended until such time as discovery of the defects is possible.

Click Here to View Relevant Portion of U.C.C. §2-725

Integration:

As noted above, most data processing contracts contain an integration clause. One way to "end around" the parol evidence rule is to show that the contract is not actually integrated. Here, an expert can be very useful. The attorney and the expert should examine the contract and all its attachments very carefully. The expert should be able to determine from a technical perspective whether or not the agreement defines the purchased item in sufficient detail so that the buyer knows what it is purchasing.

Where the vendor claims that the buyer was a "moving target," (see below) the expert should determine whether or not agreement on system specifications was reached between the parties at any time during software development. If such an agreement was in place, then any modifications requested by the buyer should have resulted in a re-negotiation of the entire purchase agreement both in terms of price and delivery schedules. It was the vendor’s obligation not to unilaterally react to the buyer’s demands, thereby violating the terms of an agreement already in force, without negotiating a new agreement.

The Expert Was Engaged By The Vendor’s Attorney

Once again, the expert must have clear objectives. Also assuming in this case that the transaction is a sale of goods covered by Article 2 of the Uniform Commercial Code, while conducting his investigation, the expert should be concerned with the following:

The Buyer Failed to Particularize the System’s Defects in Writing and Failed to Afford the Buyer an Adequate Opportunity to Cure:

This is the most potent defense available to a vendor where litigation has already commenced and breach of warranty has been alleged. U.C.C. §2-605 and §2-608 provides that a buyer must provide the seller with a written particularization of the defects of the system and provide an adequate notice of breach to be able to reject or revoke acceptance of the system. Not only must the buyer particularize the defects in writing, but it must also afford the seller an adequate opportunity to cure the defects.

Most buyers do not adequately inform vendors of the defects in writing. "Bug" reports are normally incomplete and often incorrect. Many errors are never reported to the vendor in writing. According to the U.C.C., telephone or in-person complaints do not count. Often, the first time that the vendor sees a written particularization of the system defects is in the buyer’s legal complaint. Sometimes, it does not see such a writing until the expert issues a technical report. Most of the time, emotions run so strongly, that even where the defects were presented to the vendor in written form, the buyer terminated the vendor’s participation in installation of the software without affording it an adequate opportunity to cure the defects. According to the U.C.C., the buyer cannot rely upon those defects to prove breach of warranty in a lawsuit. Often, when presented with this defense, buyers offer to settle.

(Be careful! This could be a double edged sword. If the defects have been submitted to the vendor in terms of "bug" reports, and the vendor has taken an inordinate time to fix them, the courts can rule that the vendor was provided a more than adequate time to cure.)

The expert must investigate the history of the relationship between the parties in detail. "Bug" reports should be analyzed. From them and from the correspondence between the parties, the expert should be able to determine whether or not this defense can be used.

Failure to Give Timely Notice of Breach:

By examining the correspondence between the parties, the expert can determine whether or not timely notice was provided to the vendor. For example, defects may not have been reported to the vendor until the limited express warranty had expired.

The Moving Target Defense:

The expert needs to extract evidence to define a pattern of constantly changing system specifications ("scope creep"). It is also important that he show, from a technical viewpoint, that the agreement was actually integrated. In order to do this, he must be able to assert that, according to industry standards, the system was defined as much as it could be at contract execution. Therefore, a reasonable assumption would be that a buyer should not impede progress by refusing to agree to "cast the system in concrete." Studies have indicated that where the planning and analysis phase of software development exceeds 33% of the total time allotted to the project, software delivery will probably be late and the software will probably be defective. (49) Where the analysis and design phases begin after contract execution, data processing industry standards demand that work on these phases be completed within a reasonable time frame to enable the programming and test phases to begin. Failure of the buyer to define exactly what it wants to the vendor will make it impossible for the vendor to create and deliver a system.

User Incompetence:

It is essential that the expert do everything to assure himself that the system worked according to reasonable data processing standards and that the vendor performed adequately. Once having done this, the expert should review correspondence between the parties and interview witnesses. In particular, it is important for the expert to interview developers, maintenance engineers, installers and trainers. Armed with this information, the expert can determine whether the computer system was indeed defective (from the vendor’s perspective) or whether performance failures were due to user incompetence. Should he be able to demonstrate user shortcomings, he should also investigate whether user training by the vendor was adequate.

Expert Reports

Technical experts normally produce two types of report:

1. technical report,

2. damage report.

A technical report can be either primary or rebuttal and either preliminary or supplemental. Experts’ technical reports are rarely presented as evidence during trial. They are required for discovery so that the opposition can understand in advance of taking expert testimony, what opinions the expert will present at trial and the basis for such opinions. The only requirements for the technical report is that the expert present his opinions, the basis for his opinions and his qualifications as a technical expert. It is sufficient for the expert to develop a report that meets these minimum requirements but still contains the complete basis of the expert’s opinions. This is what most attorneys demand. Lengthy treatises can be very costly to the client. After all, the primary reason for production of a report is to prepare opposing counsel for trial. Once the minimum (or short report) is issued, the expert is then deposed. At deposition, opposing counsel extracts details not contained in the report. This is done to prevent surprises at trial. However, what if opposing counsel fails to ask the right questions. It is for this reason that most attorneys ask experts to produce short reports.

Another strategy comes to mind. Most lawsuits settle before trial. Approximately 97% of all cases settle. This settlement figure is also approximately the same for computer cases. Therefore, the expert’s short report will most likely be useless. On the other hand, a well written document (or long report) that proves the technical issues for the expert’s side can be used to induce a settlement. However, when the expert generates his long report, he must take care not to reveal any "secret" strategies that the attorney intends to use in case the matter goes to trial. Generation of a long report requires much greater interaction between the expert and the attorney.

Unlike an expert’s technical report, a damage report is neither intentionally long nor short. It represents a computation of damages presented in an accounting format. Often, spreadsheets are used. A damage report can be generated either by an accountant (usually a CPA) or by a computer expert. An expert damages report prepared by a partner in a large CPA firm has the most credibility with a jury. However, an accountant does not have the technical understanding of a computer expert. A damages report prepared by a computer technical expert who has vast background and experience in preparing such reports can be just as credible.

The Technical Report

An expert’s technical report should consist of the following elements:

1. Introduction - This should identify the legal matter, briefly discuss the expert’s forensic investigation, and state a general overall basis for his conclusions. A statement similar to the following should always be included:

Accordingly, I have examined all documents that are in the possession of counsel relating to this matter with the exception of those that are attorney-client privileged and that are labeled "attorney eyes only." These documents include, but are not limited to: ...

In addition, I have (examined design documents, source code, etc.) and (tested the system, etc.), and I have interviewed several employee and non-employee witnesses.

2. List of Abbreviations

3. Background - This section should be a carefully prepared narrative describing:

a. the relationship between the parties;

(1) the pre-sale relationship;

(2) the agreement(s);

(3) the post sale relationship;

b. technical matters relating to the litigation;

(1) the complaints

(2) the counterclaims

The purpose of this section is to present a series of opinions in narrative forms regarding the history of the relationship between the parties.

4. Findings and Conclusions - This section presents a numbered list of opinions with an extremely brief description of the basis for each opinion.

5. Resume or Curriculum Vitae of the Expert

The long report should contain an expanded technical section, while the short report should not contain such a section.

The Damages Report

The following damage categories should be computed and included in the damage report:

1. See, e.g., Office Supply Co. v. Basic/Four Corp., 538 F. Supp. 776 (E.D. Wisc. 1982); Bakal v. Burroughs Corp., 343 N.Y.S.2d 541 (Sup. Ct. 1972).

2. Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737 (2d Cir. 1979); Chatlos Systems, Inc. v. National Cash Register Corporation, 479 F. Supp. 738 (D.N.J. 1979), aff’d and remanded 635 F.2d 1081 (3rd Cir. 1980), appeal after remand 670 F.2d 1304 (1982), certiorari dismissed 102 S.Ct. 2918,457 U.S. 1112, 73 L.Ed.2d 1323 (2982).

3. See RRX Industries v. Lab-Con, Inc., 772 F.2d 543 (9th Cir. 1985); Austin’s of Monroe, Inc. v. Brown, 474 So. 2d 1383 (La. Ct. App. 1985); Data Processing Services, Inc. v.L.H. Smith Oil Corp., 492 N.E.2d 314 (Ind. Ct. App. 1986). See also "Computer Programs as Goods under the U.C.C.," 77 Mich. L. Rev. 1149 (1979).

4. Gerhart v. Henry Disston & Sons, Inc., 290 F.2d 778 (3rd Cir. 1961); Papago Tribal Utility Authority v. Federal Energy Regulatory Commission, 610 F.2d 914, 929 n.16 (D.C. Cir. 1979)

5. Battery S.S. Corp. v. Refineria Panama, S.A., 513 F.2d 735 (2d Cir. 1975)

6. Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, (3d Cir. 1966); Glenn Dick Equip. Co. v.Caley Constr., Inc., 97 Idaho 216, 541 P.2d 1184 (1975); Centronics Financial Corp. v. El Conquistador Hotel Corp., 573 F.2d 779 (2d Cir. 1978).

7. Cf. Berk v. Gordon Johnson Co., 232 F. Supp. 682 (E.D. Mich. 1964).

8. Champlin v. Transport Motor Co., 177 Wash. 659, 33 P.2d 82 (1934).

9. Otto v. Cities Service Co., 415 F. Supp. 837 (W.D. La. 1976).

10. Manning v. Metal Stamping Corp., 396 F. Supp. 1376 (D. Ill. 1975), aff’d 530 F.2d 980 (7th Cir. 1976)

11. See Chatlos Systems, Inc. v. National Cash Register Corp., 479 F. Supp. 738 (D.N.J. 1979), aff’d 635 F.2d 1081 (3rd Cir. 1980).

12. For a more complete discussion of the statute of limitations, see Dreier Co., Inc. v. Unitronix Corp., 218 N.J. Super. 260 (App. Div. 1986).

13 Glovatorium v. NCR Corporation, 684 F.2d 658 (9th Cir. 1982).

14 Clements Auto Company v. Service Bureau Corp., 444 F.2d 169 (8th Cir. 1971); See also U.C.C. §2-721 (stating "Remedies for material misrepresentation on fraud include all remedies available under this Article for non-fraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy").

15 Thomas v. Duralite Co., 386 F. Supp. 698 (D.N.J. 1974) aff’d in part, vacated in part 524 F.2d 577 (3rd Cir. 1975).

16 Weintraub v. Krobatsch, 64 N.J. 445 (1974); Indiana Ins. Co. v. Meeker-Magner Ins. Brokers and Consultants, Inc., 594 F. Supp. 262 (N.D. Ill. 1984).

17 Allstate Ins. Co. v. A.M. Pugh Associates, Inc., 604 F. Supp 85 (M.D. Pa. 1984).

18 Applications, Inc. v. Hewlett-Packard Co., 501 F. Supp. 129 (S.D.N.Y. 1980), aff’d 672 F.2d 1076 (2d Cir. 1982); The Glovatorium, Inc. v. NCR Corp., 684 F.2d 658 (9th Cir. 1982).

19 Accusystems, Inc. v. Honeywell Information Systems, 580 F. Supp. 474 (S.D.N.Y. 1984); Computer Systems Engineering, Inc. v. Quantel Corp., 740 F.2d 59 (1st Cir. 1984).

20 Invacare Corp. v. Sperry Corp., 612 F. Supp. 448 (N.D. Ohio 1984); Clements Auto Co. v. Service Bureau Corp., 444 F.2d 169 (8th Cir. 1971); Burroughs v. Hall Affiliates, Inc., 423 So.2d 1348 (Ala. 1982); Dunn Appraisal Co. v. Honeywell Information Systems, Inc., 687 F.2d 877 (6th Cir. 1982).

21 Office Supply v. Basic/Four Corp., 538 F. Supp. 776 (E.D. Wisc. 1982); Jaskey Finance & Leasing v. Display Data Corp., 564 F. Supp. 160 (E.D. Pa. 1983). Accord Spring Motors Distributors v. Ford Motor Co., 98 N.J. 555 (1985). Compare Invacare Corp. v. Sperry Corp., 612 F. Supp. 448, 454 (N.D. Ohio 1984), where the court held that "negligence in a business setting is clearly actionable."

22 See Chatlos Systems, Inc. v. National Cash Register Corp., 479 F. Supp. 738, 741 n.1 (D.N.J. 1979), aff’d 635 F.2d 1081 (3rd Cir. 1980); Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 745 (2d Cir. 1979). But see Data Processing Services, Inc. v. L.H. Smith Oil Corp., 492 N.E.2d 314 (Ct. App. Ind. 1986)

23 See Chatlos Systems, Inc. v. National Cash Register Corp., 479 F. Supp. 738, 741 n.1 (D.N.J. 1979), aff’d and remanded 635 F.2d 1081 (3rd Cir. 1980), appeal after remand 670 F.2d 1304 (1982), certiorari dismissed 102 S.Ct. 2918, 457 U.S. 1112, 73 L.Ed.2d 1323 (1982); Acme Pump Company, Inc. v. National Cash Register Corp., 337 A.2d 672 (Ct. Com. Pl. Conn. 1974).

24 See e.g., Consolidated Data Terminal Co. v. Applied Digital systems, Inc., 708 F.2d 385 (9th Cir. 1983).

25 See Bruffey Contracting Co. v. Burroughs Corp., 522 F. Supp. 769 (D. Md. 1981).

26 Chatlos Systems, Inc. v. National Cash Register Corp., 479 F. Supp. 738, 741 n.1 (D.N.J. 1979), aff’d and remanded 635 F.2d 1081 (3rd Cir. 1980), appeal after remand 670 F.2d 1304 (1982), certiorari dismissed 102 S.Ct. 2918, 457 U.S. 1112, 73 L.Ed.2d 1323 (1982).

27 479 F. Supp. at 743 n.2.

28 See also, Computerized Radiological Service v. Syntex, 595 F. Supp. 1495 (E.D.N.Y. 1984).

29 See, e.g., Entre Computer Centers v. FMG of Kansas City, 819 F.2d 1279 (4th Cir. 1987).

30 See, e.g., Tandy v. Marymac, 213 U.S.P.Q. (BNA) 702 (S.D. Tex. 1981).

31 See, e.g., Hundred East Credit Corp. v. Eric Shuster, 212 N.J. Super. 350 (App. Div. 1986), which held that the New Jersey Consumer Fraud Act applied to the sale to a corporation of a business computer.

32. See Doyle v. Northrop Corp., 455 F. Supp. 1318, 1326 (D.N.J. 1978); In re Lea Fabrics, Inc., 226 F. Supp. 232, 236 (D.N.J. 1964).

33. See Gladden v. Cadillac Motor Car Division, 83 N.J. 320, 330 (1980).

34. Office Supply Co. Inc. v. Basic/Four Corp., 538 F. Supp. 776 (E.D. Wisc. 1982).

35. See Garden State Food Co. v. Sperry Rand Corp., 512 F. Supp. 975 (D.N.J. 1981); Chatlos Systems, Inc. v. NCR Corporation, 479 F. Supp. 738, 745 (D.N.J. 1979), aff’d and remanded, 635 F.2d 1081 (3rd Cir. 1980).

36. Beal v. General Motors, 354 F. Supp. 423, 426 (D. Del. 1973); Riley v. Ford Motor Company, 442 F.2d (5th Cir. 1971); Chatlos Systems, Inc. v. National Cash Register Corporation, 635 F.2d 1081 (3rd Cir. 1980).

37. U.C.C. §2-715(2).

38. Teamsters Security Fund v. Sperry Rand Corp., 6 C.L.R.S. 951 (N.D. Cal. 1971).

39. Office Supply Co. Inc. v. Basic/Four Corp., 538 F. Supp. 776 (E.D. Wisc. 1982).

40. Consolidated Data Terminals v. Applied Digital Data Systems, 708 F.2d 385 (9th Cir. 1983).

41. See Chatlos Systems v. National Cash Register Corp., supra; Acme Pump Company, Inc. v. National Cash Register Co., 337 A.2d 672 (Ct. Com. Pl. Conn. 1974).

42. See Bakal v. Burroughs Corporation, 43 N.Y.S.2d 541 (Sup. Ct. 1972).

43. Spring Motors Distributors, Inc. v. Ford Motor Co., 98 N.J. 555 (1985).

44. Triangle Underwriters, Inc. v. Honeywell, Inc., 457 F. Supp. 765 (E.D.N.Y. 1978).

45. Georgetown School of Science and Arts, Ltd. v. Microsystems Engineering Corp. and Everett Karels, No. 81-0422 (D. D.C., Feb. 29, 1984).

46. Brooks, Fredrick P., Jr., The Mythical Man-Month, Addison Wesley, Reading, Massachusetts, 1982, 0650, ISBN 0-201-00650-2, YZAABB-AL-8987, Library of Congress Catalog Card No. 74-4714

47. Kremen, Stanley H., Error Severity and Debugging, Computer Forensics Online, Vol. 2-No. 1, November 1998, http://www.shk-dplc.com/cfo

48. The Dreier Company, Inc. v. Unitronix Corporation and Andrew Yasenchak, 218 N.J. Super. 260 (App. Div. 1986)

49. Brooks, Fredrick P., Jr., The Mythical Man-Month, Addison Wesley, Reading, Massachusetts, 1982, 0650, ISBN 0-201-00650-2, YZAABB-AL-8987, Library of Congress Catalog Card No. 74-4714