## Facts

- M.A. Mortenson Co., a large commercial construction contractor, purchased an updated version of Timberline’s construction estimating software through Timberline’s authorized dealer, Softworks.
- Mortenson issued a purchase order confirming basic terms such as the product and price.
- The software packaging and manuals contained a written license agreement, and the program also displayed the license on first use, requiring the user to indicate assent to proceed.
- The license characterized the transaction as a license, limited warranties, and excluded consequential damages, effectively capping recovery at the software’s purchase price.
- Softworks’ president installed and configured the software for Mortenson, and Mortenson claimed its personnel did not read or see the license terms.
- While preparing a bid for a large project, Mortenson encountered repeated error messages but completed and submitted the bid.
- After winning the contract, Mortenson discovered its bid was approximately $1.95 million lower than intended and attributed the underbid to a software defect allegedly known to Timberline.
- Mortenson sued Timberline and Softworks for consequential damages based on warranty theories and challenged the enforceability of the license’s damages limitation.
- The trial court granted summary judgment for defendants enforcing the license; the Court of Appeals affirmed; the Washington Supreme Court granted review.

## Issues

1. Whether the shrinkwrap/click-through license terms accompanying the software became part of the parties’ contract despite Mortenson’s earlier purchase order.
2. Whether Mortenson assented to the license terms by installing and using the software without objection.
3. Whether the exclusion of consequential damages and limitation of remedy to the purchase price was unenforceable as unconscionable or otherwise invalid under Washington’s UCC.

## Decision

- The Washington Supreme Court affirmed summary judgment for Timberline and Softworks.
- The Court held the contract included the license terms provided with the software packaging/manuals and displayed on screen at first use.
- The Court concluded Mortenson had adequate notice and manifested assent by using the software without rejecting the terms.
- The Court held the consequential-damages exclusion and purchase-price remedy limitation were not unconscionable and did not fail of their essential purpose.

## Legal Principles

- In software transactions, contract terms may be formed through a layered process: initial ordering documents can be supplemented by license terms furnished with the product and accepted by use when the buyer has notice and an opportunity to reject and return.
- A party may be bound by contract terms it had a reasonable opportunity to review, even if it did not actually read them, particularly in commercial settings.
- Under UCC-based Washington law, limitations of remedies and exclusions of consequential damages are generally enforceable unless unconscionable or if the limited remedy fails of its essential purpose.
- Unconscionability requires procedural unfairness (e.g., lack of meaningful choice or unfair surprise) and/or substantive unfairness (overly harsh, one-sided terms); commercial sophistication and market alternatives weigh against a finding of unconscionability.

## Conclusion

The Washington Supreme Court enforced Timberline’s shrinkwrap/click-through software license as part of the parties’ agreement and upheld the clause excluding consequential damages and limiting recovery to the purchase price, rejecting Mortenson’s unconscionability challenge and affirming summary judgment for the software vendor and dealer.


M.A. Mortenson Co. v. Timberline Software Corp., 140 Wn.2d 568, 998 P.2d 305 (Wash. 2000)