Carbolic Smokeballs and software salesmen.

I’m continuing the law related ramblings, but some of you will be pleased to know I’ll rest the privacy stuff for a while.

Vinnie Mirchandani is normally a vociferous supporter of all things free-market, and the arch enemy of compliance. His dislike of the  Sarbanes-Oxley Act is legendary.

I was  surprised to read his call for stronger software industry regulation. Please read his post in full, then pop back here.

I won’t go into a discussion here on whether all regulations he suggests make sense or not, I’d like to pick up on them another day.

In part, I agree with Vinnie.  It amazes me how little direct regulation our industry has. Toys, insurance, cars, hairdriers and maps  all need testing before you can buy them, but any old idiot can set up a software company and try and sell stuff.  There is stricter certification for wiring a plug or installing toilet roll holders for a living than there is for coding software.  One of my earliest posts looks at this.

As the digital world becomes more and more vital to our personalities, our jobs, friendships, thoughts, politics and  beliefs should the web and the vast databases of information about us be determined solely by short term shareholder value?  

As software does more and more important stuff on our behalf, it is likely that it will face greater regulation. This may be no bad thing, but let’s tread cautiously.  Regulations, like technology, often bump into the law of unintended consequences. This can be a good thing in software, as may lead to Accidental Awesomeness. In law though, it tends to hurt folks it was supposed to protect, or protect things that ought to be protected. 

I will take on one of Vinnie’s points though:

Require systems integrators to be truthful

This was amplified by Nitin’s comment about outlandish sales claims.

Another one comes to my mind as a honorable mention as well:
– Regulate the advertising or hold vendors accountable for what they claim regarding profitability and efficiency. Vendors claim the moon – I cannot see any other industry where there is so much FUD and bogus claim

Software salespeople don’t live in a vacuum, and there is very little new under the sun when it comes to contract law, advertising and sales promises. To assert that software salespeople and marketeers are somehow more devious than their peers  is a tad insulting to the ‘ingenuity’ and avariciousness  of the generations of sales people that have gone before them.

Let’s head back to Victorian England. .

image

Contract – Offer by Advertisement – Performance of Condition in Advertisement – Notification of Acceptance of Offer – Wager – Insurance – 8 9 Vict. c. 109 – 14 Geo. 3, c. 48, s. 2.

The defendants, the proprietors of a medical preparation called “The Carbolic Smoke Ball,” issued an advertisement in which they offered to pay 100 to any person who contracted the influenza after having used one of their smoke balls in a specified manner and for a specified period. The plaintiff on the faith of the advertisement bought one of the balls, and used it in the manner and for the period specified, but nevertheless contracted the influenza:-

Held, affirming the decision of Hawkins, J., that the above facts established a contract by the defendants to pay the plaintiff 100 in the event which had happened; that such contract was neither a contract by way of wagering within 8 9 Vict. c. 109, nor a policy within 14 Geo. 3, c. 48, s. 2; and that the plaintiff was entitled to recover.

Read the full case here.

One supposes that this case could be seen as an early example of vapourware.

The law to hold “hold vendors accountable” or “systems integrators to be truthful” has been in contract law well before even the venerable Geeklawyer started out in practice.  

In my presales days  one of my best demo sessions was when the prospect videoed the complete presentation and workshop. 

The law has been clever enough to have a proper term for outlandish sales and marketing  bullsh*t. It  calls it “mere puffery.”  The presence of  video camera does tend to reduce the desire to engage in such puffery though.

Contract law and supporting legislation has developed over literally thousands of years, and courts have been largely successful at picking up unfairness in whatever happens to being bought or sold.

In UK law for instance, the practice of limited liability in IT contracts was struck down in the St Alban’s  DC v ICL case. They were able to claim damages for the cost of incorrectly calculated taxes, which were far higher than the costs of the solution. Harry Small, one of the UK’s leading computer lawyers, wrote up the facts of the case here. 

Software does create challenges for contract law, sure, as other innovations in the past have done too.  (I will return to  goods vs services  another day)

To those that argue that software and IT are a special case in contract that require unique regulation, I’d suggest that they read the classic 1996 Esterbrook Speech, Cyberspace and the Law of the Horse. Contract law has done remarkably well at protecting buyer and sellers for 1000s of years, and I’m not sure that commercial buyers of software need significantly more hand holding than the buyers of smokeballs had 120 years ago.  (Consumers do though)

I’m not a free-market zealot, but contract law is one of humankind’s most impressive creations.  

9 thoughts on “Carbolic Smokeballs and software salesmen.

  1. Thoasm, do not want regulation, but want the threat of it to energize the tech industry (not just sw). I see what govt regulation does a la Sarbox or in opposite when it protects incumbents more than regulates. In another post I pointed out the FCC defines US broadband availability as 1 house per zip code (which average 2750 houses each) and 200 kbps as broadband when in Japan 61 Mbps is available. That kind of regulation offers zip protection to consumers…

  2. Thomas,

    You quoted my comment on Vinnie’s Blog. I agree that the contract law is there for protection. Also agree that this is not a “new” problem that we see with Software sales force.

    I would still say that software sales continues to amaze me for:
    – The kind of sales claims that are made in a business to business scenario. It is a different issue to peddle smokeballs to gullible people on the street while you have multi million contracts being vetted by committees in software sales. Sadly the advertising is the same in spirit and letter.
    – You would expect “new and improved” on a toilet soap more than on software products, but the situation is more or less the same.
    – The industry standards or certifications are no differentiators as everyone seems to have them, and all the benchmarks are “adapted” to suit sales situations.

    The law is not a solution, and maybe it exists already. However, this misrepresentation is really an issue from what I see on a daily basis.

    Thanks,
    Nitin

  3. Thomas,
    Ok. The law is there to support those wronged by suppliers. This law should also act as a deterrent to vendors from making tall, false claims. Why do we have them doing it then?
    Thanks,
    Nitin

  4. Nitin,
    The law is only any good if people use it. Law will not rid the world of “mere puffery”,nor should it, but lying about a material term is a different matter.

    If vendors lie, then they should feel the full force of the law. That is what is there for, and if buyers don’t know this, then they shouldn’t be in a job buying stuff.

    Thomas

  5. This is a fair discussion ONLY if applied to areas of SW technical performance or SaaS functional performance claims in my opinion. However since there is a partnership involved between SW vendor and buyer, which requires a lot of value to be added by a buyer, it is much more difficult to assess whether the sales claims were “puffery” or not. Most of Enterprise software implementation initiatives do not result in expected ROI, but I could hardly blaim software vendors for that. In most if not all cases the initiatives were mishandled by the companies.

    “Management by objectives works if you first think through your objectives. Ninety percent of the time you haven’t”.

    Peter Drucker

    Disclaimer – I do not sell any software, but I have bought it (B2B) many times, and often failed to achieve promised results.

  6. Pingback: Regulated IT

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