Category Archives: warranty

This Week on The Web 2009-09-13 (my birthday edition)

It happens to be my birthday weekend and between eating some great food, playing Guitar Hero with my wife and hanging with the family, these are the things that happened around the web this week – maybe you already read about them, maybe you need to again – there were some REALLY great discussions going on.  Come join the party on twitter (follow me here and you’ll join the conversation live.)

I also realized that many of you might have no idea what you’re seeing below.  Sorry.  These are “tweets”, 140 maximum character messages sent via Twitter.  Within the Twitterverse individual users follow others and have followers (think of it like overlapping Venn diagram circles).  To read a tweet, you have to wade through a bit of jargon used to make the most of the 140 character limitation.  “RT” for example, is shorthand for “Re-tweet” and the @____ is the username of some other individual on Twitter.  Combined together, then, “RT @_____” means that someone else wrote a tweet that I found important and I now want to forward along to my followers.  The URL’s are then also shortened by shortening services like to make the most of the character limitation, too.  Lastly, you might see “hash” identifiers “#______” which are ways to tag tweets of a particular flavor for easy searching later and “<” which means that I am commenting on what came before it.

On Acceptance Testing…

My car needed an oil change today.  It’s been about 5 months, 6,000 miles and while I know I can push it that far, it was finally time for me to get it done.  I thought about doing it myself and decided that Jiffy Lube would more efficiently meet my needs.  But I always feel a little weird about oil change places – they show a long list of things that they supposedly check… but unless I stand out there hovering in the bay, I don’t feel confident that they’ve actually completed the work.

Today I didn’t hover, I was reading e-mails.  When they called my name to pay, they quickly read off the list of things they checked and reviewing the computer screen, I asked the guy behind the counter: “Did you check the engine coolant level?”  With a slight hesitation, he replied “Yes.”

I paid, took my keys and walked out to my car.  Deciding to check the coolant level, I popped the hood and looked.  Sure enough, the fluid was below the line marked “Fill”.  I walked back inside and told the same employee that I thought that the fluid wasn’t checked and could he come confirm.  He looked a little shocked, walked out to the car and confirmed that the fluid was low.  He apologized and made some sort of excuse about the shop being busy and that my question during check-out didn’t raise any red flags – that he figured I’d asked them to check it and that his employees did (apparently, he was the manager).  I said it was no big deal, but that I would like it topped off.

[OK.  If you haven’t already figured it out, this story parallels many services-type engagements from the IT world.  You pick a provider when you realize you don’t want to do it yourself, you “order” a set of services… and at the end, you are presented with a completion check-list and asked to pay.  What services providers don’t want prior to payment is anything conceptually equivalent to an Acceptance Test.  They want payment first and then resolution of any “defects” under their services warranty provisions (if any).  This way, they have control of the money and can book the revenue as earned.

But don’t let their desire to avoid Acceptance Testing sway you… and don’t fall into the trap I did today and pay first.  What happened next was predictable and I should have seen it coming.]

The manager then said, “well, we normally charge for topping off the coolant.”

Oh.  Alright, I thought, whatever… just get my car finished and get me on my way. “How much does that cost?”, I asked.

“Five dollars.”

Thank god my negotiation-sense kicked back in … and I just stood there silent for a few beats too many.

“But because of the confusion, I’ll take care of it.”, he continued.

I smiled and said “Thank you.”

While he was retrieving the coolant I scanned the engine compartment and realized that the large rubber gasket between the hood and the firewall had completely come off and was just laying across the engine!  Holy cow.  I was really glad I popped the hood today – this piece of rubber, which probably came off during the oil change and was simply overlooked due to its matching blackness to everything else under the hood, could have gotten wound into various belts, heated and set afire or fallen down to the road and lost.  It was a no-brainer fix to simply push it back onto the car’s frame – but catching it was the biggie.

The same is true for many acceptance testing issues – the no-brainer is to look for them at the right time (preferably before payment).  Don’t get suckered into someone else’s process (they moved my Jeep out of the repair bay and into the parking lot (keys in it and running) as “customer service” perk.  But it’s meant also to get you off the lot before you notice anything wrong (where they can attempt to reasonably say that the problem happened outside their control).

One again, learn from my mistakes.  🙂

Warranty Elephant

Even if you have the Novatus Contracts system, warranties for your one-off hardware purchases (software, too) are not easy to remember.  Typically, you don’t even get more than the warranty card that comes in the box.  When your hardware breaks, do you know what the warranty will cover?  Probably not.

Neither did the creators of Warranty Elephant.  This simple (and free) service allows you to record your purchases along with their associated warranties.  No more forgotten warranties, no more misplaced warranty documentation.  Granted, this system was developed for personal use, but here are a few commercial uses I’d find valuable:

  • fleet warranty management (ie: if you have a bunch of vehicles, reminders about when the transmission is about to come off warranty is helpful)
  • one-off hardware or volume hardware that doesn’t come with a more robust specific warranty (such as TVs/monitors, laptops, Aeron chairs)
  • items you used to think were cheaper to simply replace than to monkey around with warranty info (keyboards and mice)

Customer Audits of Your Contracts

I was recently asked whether I would ever allow a customer to audit my contracts.  The simple answer is No!

Of course, the original question wasn’t this simple.  The person asking the question had some interesting constraints.  Specifically, they were licensing software on an exclusive basis, with exclusivity carved out by geographic region.  So a prospective customer wanted to review the vendor’s contracts to make sure that they weren’t getting into an overlap situation.  My answer was still No!

First, contracts are, even at a fundamental level, based on trust and honesty, and not based on a lack thereof.  If you don’t trust the person you’re contracting with, the contract isn’t going to help you too much.  In other words, you can’t contract trust.  It just doesn’t work that way.  So if the vendor in this situation was going to be dishonest in overlapping exclusivities, what would make the customer think that they would allow the customer to actually audit all of the agreements?  A dishonest vendor would simply hide a portion of the contracts that they didn’t want discovered.

Second, with minor exception (such as during due diligence in a M&A transaction), I would never allow anyone to review my contract files.  There’s too much confidential information – and general poking around to see what’s in them isn’t a narrow enough reason to go looking.  In fact, even if the looking was just at license grant language, I still think you’re potentially revealing too much information (exclusivities for geographic regions aren’t the only way to restrict licenses and perhaps you also license based on user counts – allowing others to see the full license grant can give them a sense of pricing, perhaps).

Third, there’s a better way to handle the situation:  provide a warranty and a specific remedy for breach of this particular warranty.  Warrant that you are providing an exclusive license in exchange for specific consideration (probably money, but perhaps something else).  If you (vendor) breach this warranty, the sole and exclusive remedy could be the repayment of the specific amount of consideration provided for the exclusivity.  So, imagine a situation where you license exclusively by country (perhaps your product handles some sort of sales-related transactions).  In exchange for an exclusive license, the customer pays you an extra $1,000,000 in license fees and that this also adds into the annual maintenance costs.  If you later decide to break a previously-licensed country into smaller bits, you simply would have to pay back the $1M plus the accrued/paid maintenance fees for the breach.

Now, this sounds like it may provide you with license to later break the agreement – no, I’m not suggesting that, I am however suggesting that you promise not to and a specific penalty for doing so.

Warranty Reminder

I had a conversation with a few folks the other day about warranties.

The end of the discussion was a reminder that just because a statement falls outside of the warranty section doesn’t mean that it’s not a warranty.

Warrants are promises. defines them as “something that serves to give reliable or formal assurance of something; guarantee, pledge, or security.”  The defintion goes even further “a written statement of good quality of merchandise, clear title to real estate or that a fact stated in a contract is true. An “express warranty” is a definite written statement and “implied warranty” is based on the circumstances surrounding the sale or the creation of the contract.”

Which means that sometimes you’ll see them called “covenants” or “obligations” … but whatever the title, they’re still warrants, even with no title at all.

“But wait!”, said one person.  “We use section headers to delimit our contracts – so warranties are clearly sectioned off from the rest of the agreement.”

Hmmm… good thought.  But don’t you probably also have a section of your agreement where you state that section headers are for reference only and that they shouldn’t be used to interpret the agreement?  Oops.

They’re not discouraged.  “Not only that, but our warranty remedy language says that our warranty remedies only apply to the warranties listed in this warranty section.”

OK… now they might be getting somewhere.  The warranty remedy language probably gives a few “extra” remedies in the event of a warranty breach.  Most likely something along the lines of time to repair or replace the warranted good/service and avoid termination of the agreement.  Who does that remedy language benefit?  I would argue that it benefits the service provider.  Because it gives them the opportunity to stop a breach of contract claim (and thus one for damages) as a result of a warranty problem that they can fix.

But that also means that any of the OTHER warranties provided throughout the agreement not in your warranty section aren’t covered by this remedy language – and thus the only available remedy to “fix” the problem is a breach of contract claim (and probable termination).

What the warranty section is thus really for is to call out special warranties that should have extra protection – and thus extra damages.  The problem I see most frequently is that the “extra damages” portion of the remedy language is missing.

“Um, what do you mean, extra damages?” says the crowd.

Well, I mean that an uncured breach of these warranties should result in something more than termination of the agreement and a modest amount of damages.  In fact, in most cases, I argue successfully that the types of things I have in my warranty section (such as warranties of title/license, 4-digit-year processing, etc) should entitle me to a full refund of all fees paid in the event that the provider isn’t able to fix the problem.

“Holy cow!” shout the providers.  “Are you friggin’ kidding us?  We’re not going to give a full refund.”

Why not?  I’m entering into this agreement under the color of the promises that you’re making to me pre-contract.  You fully expect me to live up to my end of the agreement (you included language for payment, invoicing and penalties for late-payment).  So why shouldn’t I get to rely fully on your promises?

Just a thought.

Software Licensing Education Series – 300s Track Now Available!

Designed for the busy or on-the-go professional, the Software Licensing Education Series (SLES) is video-based training on the complete gamut of software licensing topics. Presented in a college-course level format, with topics increasing in complexity and building upon prior lessons, the SLES allows an audio-visual learner another way to gain knowledge on licensing topics.  Each video is approximately 20-30 minutes in length, so each Track contains about 2 hours of expert instruction in core software licensing topics!

The 300 Track videos include:
SLES 301 – Warranties
SLES 302 – Indemnification
SLES 303 – Limitation of Liability
SLES 304 – Services Issues 1

(400s-500s Tracks are currently in production and will be released shortly!)

Videos are formatted for a computer or portable video player (such as an iPod) and consist of a slide-show format with voice-over instruction, so you can even learn just by listening!

As promised, purchasers of the Second Edition of the Software Licensing Handbook are eligible for a discount on the purchase of a Track from the SLES.  When redeeming your free Software License Risk Matrix, you’ll receive a coupon code for the SLES via e-mail.