End User License Agreements/Terms of Service, Part of Everyday and Professional Life
If you’ve used a piece of new computer software or a new electronic device, there’s a good chance you have been confronted with a very large text document (called an End User License Agreement, or EULA) that you had to scroll through and acknowledge understanding to use it. EULAs are also called “shrink wrap”, referring to the traditional practice of a software maker considering the removal of shrink wrap from the packaging of a physical copy of software as acceptance of the license agreement.
If you have ever booked a venue for an event, like a wedding, conference or party, you may have had to sign a document that included Terms of Service (TOS). These cover basic business rules at a minimum, such as what happens in the cancellation of the service, how payments are made, and so on.
Both EULAs and TOS are commonplace in the commercial market, with EULAs being attached to almost every software program in use on your computer or other electronic device. If you read through the EULA or TOS, you may have seen some things that were interesting and possibly unexpected. If you’re an Apple iTunes/Music user, for example, you’re expressly prohibited from using that program to develop weapons of mass destruction. This post will talk about a more common issue.
The Clause: What It Does and Why
FAR 32.706-3 mandates inclusion in all solicitations and contracts. Commercial products and service providers are not in the business of modifying their products for commercial sales for specific purchasers unless compensated to do so. The clause gives the Government legal protection by declaring those banners/pop-ups to be unenforceable. Government users acknowledging commercial software EULAs does not bind the Government to them. The Government can and will legally use that product or service.
So is this clause about liability? To an extent. These EULAs often include what’s called “indemnification” language. Indemnification means that the agency or individual who agrees to the EULA or TOS will secure (pay for) any loss or damage use of the product or service causes. This language is most common to the average person in software products and devices. The Government does not have the ability to act as an insurer on behalf of a product manufacturer or service provider unless certain steps have been taken in accordance with that agency’s regulations and is done only when conditions of work are such that no outside insurer will insure. Indemnification is rare and approvals are at the highest level.
The main driver behind this clause has to do with funding. The Government cannot agree to pay for things without meeting the “time, purpose and amount” rule that shapes how the Government enters into obligations. The prevailing law is the Anti-Deficiency Act. To agree to pay for all damage that use of the product or service generates constitutes an obligation for an unknown amount of funding that doesn’t yet exist at an unknown time of need.
One final note: this clause doesn’t relieve the Government from the requirement to pay when the Government should pay. Requests for equitable adjustment and claims exist for that purpose.
