Business Law: Analysis of Contract Case Study

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  • Topic: Contract, Contractual term, Sale of Goods Act 1979
  • Pages : 7 (2053 words )
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  • Published : October 28, 2009
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AB107 Business Law
Written Assignment

Advise whether the terms of the Licence Agreement apply and whether the Exclusion of Liability clause is valid and effective in protecting UcanB007 from liabilities.


The foremost issue pertaining to this case is that of whether the terms of the License Agreement are part of the contract between Ah Siong and UcanB007, and hence the enforceability of the terms should Ah Siong decide to sue UcanB007 in contract for his losses.

Due to the nature of this case being that of a shrink-wrap license agreement, there is contention regarding the point in time when the contract was formed, which clearly affects the incorporation of the terms and thus the term’s legal efficacy.

Adhering to the key elements required to form a contract, the purchase of product at the retail store fulfils the formation of a contract. The offer being made when Ah Siong brought the product (hardware and software) to the cashier for payment and the acceptance upon the receipt of the price. Consideration would have been executed since Ah Siong received the item and UcanB007 received payment. Since this is a commercial consumer transaction, there would be a general presumption that there is necessary intention to create legal intention.

Alternatively, the opening of the installation disk envelope could also fulfil the formation of a contract. The offer being the promise of un-exclusive right to use the UcanB2007 software, and the acceptance being the conduct of opening the envelope. The acceptance is deemed to be at that stage as the purchaser is still able to reject the software if the terms of the licence are unsatisfactory, due to its nature as an “accept-reject” licence. There was an opportunity to reject the offer by returning the product[1], but because Ah Siong did not do so, he is bound to the software licensing contract/the Licence Agreement; however, whether the terms are binding is another matter to be considered consequently.

Following the above lines of reasoning, the conclusion that there are two separate contracts at the two points in time. Firstly, at the retail shop, the formation of a purchasing contract that binds both the hardware and software components of the product. Secondly, the formation of a software licensing contract that binds only the software component of the product, adhering to the terms on the Licence Agreement.

Since there are two contracts formed, which of it applies in this context? Given that the question is referring to the terms of the Licence Agreement, it is alluding to the software licensing contract and thus focuses the scope of the discussion on it. This conclusion is crucial because, should the license agreement terms rely on the first contract, there would immediately be a violation of the rule of contemporaneity, rending the Licence Agreement ineffective without the need to even consider any subsequent factors.


“Commercial realities of software sales, licenses of other software packages are similar in that they came with the software, disclaimed warranties, limited remedies and included choice of law and forum selection clauses.[2]”

Here, the terms of the contract, like any other software package, are listed numerically within the written license agreement. The statements are considered terms because they are an integral aspect of the contract, covering aspects of contractual obligations such as ownership of software & copy right restrictions in general, protecting the legitimate interests of UcanB007 for the period of allowing Ah Siong the benefits of the software.

Notably, this licence agreement has been drafted by only UcanB007, hence it tends to favour the party that drafted it. However most of the express terms, with the exception of the warranty and the exclusion of liability clause, are already implied by statute[3], indicating that the statute would pre-empt the listed provisions of the agreement in any case and are in...
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