A Contractual Acceptance Period is a Vendor’s Best Friend

by Lee Gesmer on October 15, 2014

I’ve often advised vendor-clients that one of the best ways to protect themselves is to include an acceptance clause in their agreements. This can be accomplished either through an explicit acceptance clause or a short warranty period, which can function as a de facto acceptance clause. For some reason, many customers seem to forget about the acceptance clause, giving the vendor a strong defense to a claim of breach.

This is what happened in Samia v. MRI Software, decided by Massachusetts federal district court judge Nathaniel Gorton on October 9, 2014.

Samia purchased computer software, consulting and technical support from MRI. The License and Services Agreement provided for a 30 day warranty period, during which Samia could notify MRI of any non-conformities and trigger a “repair-and-replacement” clause. This was, in effect, a 30 day acceptance period – Samia had 30 days to vet the software and notify MRI of any defects. This was the sole and exclusive remedy, and all other remedies were disclaimed.

The contract contained a separate provision addressing defects related to custom work authorizations. Here, Samia had a 30 day acceptance period during which it could “test any project elements … and notify [MRI] of all potential deficiencies relative to the applicable specification for such work.”

To make a long story short, Samia claimed to have found non-conformities and deficiencies, but it failed to given written notice to MRI during the 30 day period following delivery. On this basis, the court allowed MRI’s motion for summary judgment on most of its claims, leaving alive only a claim of negligent misrepresentation based on oral promises allegedly made to Samia. However, little is left of Samia’s case at this point.

If you are a vendor, do your best to include an acceptance clause (or a short warranty period) in your agreements. If you are a customer, challenge this, but if you are forced to accept it, be sure to rigorously test any deliveries in a timely manner, to avoid the defense that defeated Samia in this case.

Samia Companies LLC v. MRI Software LLC (D. Mass. Oct. 9, 2014)

 

 

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