Journal of the Michigan Dental Association (April 2018) –
Question: I recently replaced my electronic dental record system and purchased an electronic back up service from a well-known national dental supply company. Due to a local disaster all the dental records stored on the computer hardware in my office were destroyed and are not recoverable. When I contacted this company I purchased back up services from I was told that they had failed to back up my records as they promised. I was told that all I could recover from this company was three months of fees I paid for the backup service. My damages are significantly greater than this. How can this be?
Answer: A complete review of the contracts you entered into would be necessary to directly answer your question. The company you are doing business most likely included a provision limiting its liability to you for damages you incur related or connected with a failure of its product to perform as represented. The limitation provision is sometimes absolute (i.e. there is no obligation to compensate you under any circumstances). Other times, the amount of the obligation is limited to what would be an unacceptably low amount that bears no relationship to the actual amount of the damages you have incurred (e.g. three months of fees you paid for the backup service). Such a damages limitation is objectionable. A purchaser should reasonably be able to expect that when a product fails to produce as represented and causes foreseeable damages to be incurred that the seller will compensate the purchaser accordingly.
This company may have taken it a step further and included a provision where the it disclaimed any warranties in addition to the damages limitation. Such a provision states that the company makes no warranty (express or implied) that its product will function as it has been represented to function or even that it is free of defects. The company may have, in addition, included a provision that disclaims any warranty that would otherwise be provided by law and disclaimed liability for its own negligence or other actions or inactions. If a seller has so little faith that its product or service will do what it is represented to do that it expressly states it will not stand behind it, you should look for another seller.
The best way to avoid the situation you are in is to carefully review your contracts when purchasing equipment, software or services. You should be aware at the outset what the limitations on damages are and what, if any, warranties are being made regarding the performance and suitability of what it is you are purchasing.
Why would anyone purchase a product or service when the company selling it is unwilling to stand behind it with a warranty and/or is unwilling to make its customer whole in the event that the customer suffers damages resulting from the product or service to function as it was represented to function? The answer is likely that these damage limitation and warranty disclaimer provisions are buried in the fine print and that purchasers do not contemplate the meaning of the provisions until after a disaster, when it is too late.
You should have an attorney review your contracts and assess your position. You may have claims against the company you purchased backup services from based on your contracts and misrepresentation, fraud and other common law theories. In addition, the conduct of your backup service provider may constitute a deceptive trade practice and be actionable pursuant to the Michigan Consumer Protection Act (this law also allows the Michigan Attorney General and prosecuting attorneys to file lawsuits for deceptive trade practices).
Practice AreasHealth Care Law