Warranties; Indemnities; Limitations on Warranties


A warranty is a promise. Perhaps the single most important promise the licensee should expect from the licensor is a guarantee that the licensor has the necessary rights and permissions to license the digital information to the licensee. If a licensor were to provide information that it did not have permission to license, the licensee could be exposed to significant liability to the actual holder of the rights to the information. Thus the licensor must accept full responsibility for any liability to third parties should this occur.

Where the digital information is provided on a physical medium, such as CD-ROM, DVD, or digital tape, the licensor should guarantee that the medium is free from defects for a reasonable time. In addition, the agreement should contain indemnities under which each party agrees to pay any damages and costs of litigation involved from a breach of its warranties. Most agreements will include affirmative duties owed to each in other in specific sections setting forth each party’s respective performance obligations.


Both parties should be willing to “pick up the tab” for problems to third parties caused by that party’s breach of its warranties in the license agreement. This “allocation of the risk of loss” from certain problems is set out in an indemnity clause. Be wary of indemnity clauses that do not impose equal burdens on both parties.

Limitations on Warranties

In addition to making (no) promises and stating who will pay for certain costs if they arise, many agreements address the amount and kind of damages the licensor will pay. If some claim or cause of action actually gets through the first line of defense (disclaiming all warranties), the licensor may further limit its liability by providing:

  • a monetary cap on damages,
  • that certain kinds of damages are excluded (special, incidental, consequential),
  • that certain harms are excluded (harms resulting from defects in, unavailability or use of the software or data).

Example Clauses

See also:

Last updated: April 25, 2012

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