Can a trader contract out of statutory rights and remedies under a digital content contract?
Section 47: Liability that cannot be excluded or restricted
224.This section prevents a trader “contracting out” of the provisions in sections 34, 35, 36, 37, and 41. A trader can exclude or restrict their liability arising under section 46 (remedy for damage to device or to other digital content) to the extent that any limitation or exclusion is fair. Any such exclusions would be subject to section 62 (requirement for contract terms and notices to be fair).
225.Many forms of digital content are supplied subject to an End User Licence Agreement ("EULA"). This is because when a consumer contracts for digital content - for example software - it is usually protected by intellectual property law and the consumer needs the intellectual property owner's permission, or licence, to use it. These EULAs may therefore set out the consumer's right to use the digital content. EULAs may also contain terms relating to the quality of the digital content or terms limiting the trader's liability for remedies for faulty digital content. The Law Commissions(27) suggest that some EULAs may have contractual status, for example the research suggests that a court would almost certainly find that those EULAs known as "click-wrap licences", where the consumer has to tick a box to agree terms and conditions before buying a download, were contractual. This may mean that where a consumer has bought digital content from a retailer, as well as having a contract with the retailer, they may have a separate contract with the intellectual property rights holder. As long as the consumer has paid for the digital content (see section 33), the digital content will be subject to the provisions of Chapter 3, and under section 47, the trader from whom the consumer bought the digital content cannot exclude or restrict liability for the rights in Chapter 3 - the consumer would always be able to enforce these rights against the trader from whom they bought the digital content. If there is a contract between the intellectual property rights holder and the consumer, for example the "click wrapped licence" in the example set out above, but the consumer paid no money to the licence holder directly, it is unlikely they could enforce their rights in Chapter 3 against the rights holder since the contracts would not fall within the scope of section 33. However, these contracts would be subject to Part 2 of the Act and any terms in them relating to limiting liability could be held to be unfair. This is also true of other types of EULA such as those known as "shrink-wrap" or "browse-wrap" licences which may not have contractual status but may alternatively be consumer notices. Such consumer notices would be subject to the provisions in Part 2, but the rights set out under Part 1 would not apply since there is no contract.
226.This section also provides that an agreement to submit disputes to arbitration is not covered by this bar on excluding or restricting liability. It should be noted however that paragraph 20 of Schedule 2 makes clear that a term requiring the consumer to take disputes exclusively to arbitration may be regarded as unfair. Furthermore, the Arbitration Act 1996 provides that a term which constitutes an arbitration agreement is automatically unfair under Part 2 of the Act (once in force) if the claim is for less than an amount specified in an Order made under section 91 of the Arbitration Act. This amount is currently set at £5000 in the Unfair Arbitration Agreements (Specified Amount) Order 1999 (SI 1999/2167). It is possible that this amount may change from time to time.