M.A. Mortenson v. Timberline Software

Citation: M.A. Mortensen Co. v. Timberline Software Corp., 93 Wash. App. 819, 970 P.2d 803 (1999), aff'd, 140 Wash. 2d 568, 998 P.2d 305 (2000).

Factual Background
Appellant, M.A. Mortenson Company (“Mortenson”), licensed specialized software from appellee, Timberline Software Corporation (“Timberline”). Timberline was in the business of distributing specialized programs to be utilized in the preparation of construction bids. Prior to 1993, Mortenson used the “Medallion Version” of Timberline’s bid analysis software, however, after being forced to upgrade its computer system, Mortenson was required to update the bid analysis software.

Mortenson contacted Timberline in the hopes of negotiating a discounted price on the latest version of Timberline’s bid analysis program. Timberline issued a quote to Mortenson in July 1993. The quote was accepted several days later and a purchase order confirming the purchase of eight copies of the new bid analysis software, Precision, was issued.

Timberline shipped all software diskettes in sealed envelopes that were placed inside white product boxes. The full text of Timberline’s license agreement was printed on the outside of each sealed envelope and, in addition, was also in the inside cover of the user manuals and referenced on the software introductory screen.

Several weeks after the purchase order was issued, Timberline delivered the Precision software directly to Mortenson’s office. Shortly after delivery, Timberline employee’s traveled to Mortenson’s office to install the software. Mortenson claims that Timberline employee’s unpackaged and installed the program in its entirety and no Mortenson worker ever saw any licenses or disclaimers pertaining to liability, warranties, or remedies. Additionally, Mortenson does not recall receiving any manuals with the software.

In December 1993, the Precision program was being used to submit a final bid for a project Mortenson hoped to win. While entering in various figures, Mortenson employees received an error message that read: “Abort: cannot find alternate. Press ‘enter’ to continue.” The employees pressed enter and the program rebooted and returned to the place where they had left off. Both employees assumed that the facts and figures were preserved and preceded with the bid. The program produced the error 5-7 times during the bid preparation process. Despite the issues, Mortenson submitted the bid. After the bid was submitted for evaluation, Mortenson learned that the figure generated by the Precision program was two million dollars under what it should have been.

As a result of the costly computer error, Mortenson filed suit against Timberline, alleging breach of express and/or implied warranties. Timberline motioned for summary judgment.

Trial Court Proceedings
At trial, the court granted the defendant’s motion for summary judgment. The trial court determined that the purchase order sent in July 1993 was not an integrated contract because it did not contain “many of the terms which were germane to the contractual relationship. Additionally, the license agreement displayed on the software’s envelopes and inside the user manuals were deemed to be conspicuous, not unconscionable. Therefore, the allegations asserted by Mortenson failed to raise a genuine issue of material fact and the motion for summary judgment in favor of Timberline was granted.

Appellate Court Proceedings
On appeal, the court affirmed the trial courts holding, granting summary judgment to Timberline. In arriving at this conclusion, the court looked at three questions: First, whether the purchase order constituted an integrated contract; Second, whether the License Terms were part of the contract, and; Third, whether the limitations of remedies clause was unconscionable.

In determining whether the purchase order constituted an integrated contract, the court of appeals looked at the circumstances surrounding the purchase of the Precision software. When doing so, they found that Mortenson’s purchase of the newer software was prompted by its need to upgrade an older version of the program it also licensed from Timberline. Therefore, it was reasonable to assume that Mortenson, who entered had entered into numerous software licensing agreements before, would understand that the use of software would be governed by licenses containing multiple terms.

Next, when analyzing whether the License Terms were an enforceable part of the contract, the court looked at whether or not express assent to the Terms was needed before issuing the purchase order. In arriving at its decision, the court determined that such assent was not needed. Mortenson’s installation and use of the software was enough to manifest assent to all of the terms of the present license. Additionally, the court determined that the terms of the license were in no way illegal or unconscionable, making the terms binding upon Mortenson.

Finally, the courts analysis of the “limitations of remedies” clause produced a finding that the terms were neither procedurally nor substantively unconscionable. Though the parties never specifically negotiated the limitations of remedies clause, Mortenson had ample opportunity to learn and understand the terms of the agreement since warnings were placed on the software packaging and introductory screens. The conspicuousness of the terms coupled with the widespread use of the limitation provisions in the computer industry was enough for the court to bind Mortenson to the terms and uphold the lower courts decision.

Therefore, Mortonson’s motion to vacate the trial courts motion and amend the holding was denied.