M.A. Mortenson Co., Inc. v. Timberline Software Corp.

M. A. Mortenson Co., Inc. (Mortenson) (plaintiff), a construction contractor, purchased software for preparing construction bids from Timberline Software Corp. (Timberline) (defendant), which distributed its software as licensed products. Mortenson purchased the software through Timberline’s authorized dealer, Softworks (defendant). Mortenson began using an early version of the software in 1990. In 1993 Mark Reich, president of Softworks, informed Mortenson that it should upgrade to a newer version. Reich placed an order for Mortenson for eight copies of the software, to be used at Mortenson’s regional offices. Mortenson sent a purchase order confirming the price and other terms. Reich received large boxes containing diskettes in plastic pouches, installation instructions, and user manuals. Timberline’s licensing agreement was attached to the outside pouches of the diskettes and the inside cover of the instruction manuals. Additionally, the licensing agreement came up when the program was run for the first time. The licensing agreement contained a warranty excluding recovery for consequential damages. Mortenson maintained that it never saw any of the licensing information on the manuals or attached to the diskettes, because Reich came into the office to help set up the software. In December 1993, Mortenson used the software to prepare a bid for a large construction project. While using the software, Mortenson employees repeatedly encountered an error message. Despite this, Mortenson managed to submit its bid. After being awarded the project, Mortenson learned that its bid had come in approximately $1.95 million lower than intended. Subsequent disclosures revealed that Timberline employees were aware of a defect in the software. Mortenson filed an action seeking consequential damages, arguing that the limitation on damages constituted a request to add additional or different terms, which had not been assented to. Timberline moved for summary judgment on the ground that its licensing agreement barred the recovery sought by Mortenson. A trial court granted Timberline’s motion, finding that the licensing agreement was part of the contract. Mortenson appealed. A court of appeals affirmed. Mortenson appealed again.