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TL;DR

Is the contract of sale, including binding arbitration, referenced on the packaging of Western Digital (WD) products legally binding?

To summarise the relevant facts:

  • This is a contract of sale between WD and the consumer, and the packaging of products from WD subsidiary SanDisk claim that WD is the seller of record. However, these products are available for sale from third parties, making it unclear who the actual seller is. Whether privity of contract would prevent WD from entering into such a contract is therefore unclear.
  • The existence of said contract is marked on the box, and the actual terms are available online and inside the box.
  • As worded, this is a contract of sale which takes effect at purchase time. It is not a "shrink wrap" contract or license agreement; the text of the contract does not contain a license to the drive's firmware or other copyrighted content.

On the retail packaging of a WD hard drive I recently purchased, I noticed text stating that the purchase is subject to terms and conditions listed on the WD website and inside the box, including binding arbitration (example). To clarify, this is not a license agreement; the contract does not contain a copyright or other IP license.

I understand that WD could refuse warranty service for a variety of valid reasons and shouldn't be liable for data loss due to failure, and it can place disclaimers on the product that are enforceable. However, what strikes me as legally questionable is the manufacturer's attempt to bind the buyer to a contract for a sale it is not involved in (see edit below). I only found this text on the bottom of the box after purchase and was never presented with a contract to sign at the time of the purchase that had WD as a party to it.

Given that the implied contract of sale is between the retailer and consumer, can a company impose conditions on the sale of products that it manufactured without being a party to said contract of sale? Under what circumstances, if any, is the arbitration agreement enforceable? Would the terms apply even if I never sought warranty service?

Indeed, does the manufacturer have any ownership or other rights (aside from intellectual property) on the physical products sold by a retailer? If so, does this enable the manufacturer to impose conditions of this sort? (For example, can an authorized retailer contract between the manufacturer and retailer allow or require the latter to execute such an agreement on behalf of the manufacturer without the consumer's knowledge?) Is there an exception to privity of contract that allows this?


On a routine trip to Best Buy, I found the following text on the packaging of a SanDisk product (WD acquired SanDisk in 2016):

Western Digital Technologies, Inc. is the seller of record and licensee in the Americas of SanDisk® products.

The verbiage here strongly suggests that despite the fact that I'm buying the product from a retailer, the actual owner of the product prior to its sale is WD.

If the owner is indeed WD, how am I able to enter into a contract of sale with the retailer to purchase the product? Am I missing something?

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    I believe this is the same as any other end user license agreement: By using the product, you accept the terms. Technically, if you do not agree when you first open the box and read the terms, you have the right to return it, but who knows whether retailers will actually honor that. – SegNerd Aug 29 '16 at 18:13
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    @SegNerd: Not too sure how this would apply here. This is a physical product whose actual ownership is transferred, not a piece of software which the developer retains rights to. – bwDraco Aug 29 '16 at 18:25
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    Well I guess you could buy a drive, stick it in a closet and never use it, and technically you own it and possibly aren't subject to the license agreement. But if you use the drive, you are executing the drive's firmware, which is copyrighted software, and you are accepting a contract between you and the manufacturer. – SegNerd Aug 29 '16 at 18:29
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    @SegNerd: I was thinking about that, but this isn't a license agreement stating what I can and cannot do with the drive firmware. The contract as written is tied to the product and its purchase, not the drive's firmware. It says "your purchase is subject to the terms..." and not "your use of this drive's firmware..." – bwDraco Aug 29 '16 at 18:31
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    Again, the contract does not mention firmware. The issue is whether the manufacturer can add restrictions to the sale of its product by a third party. I'm sure warranty service agreements can be subject to these kinds of contracts, but I have serious doubts the manufacturer can require a consumer to enter into an agreement with it in order to buy merchandise that the retailer owns (it's called privity of contract). Generally speaking, the manufacturer does not own physical product in a third-party retail store—the store itself does. – bwDraco Aug 29 '16 at 21:29
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The central question, as I now understand it, is about WD's position that they are the seller of record, and the contract is between them and you. The complication is that usually, you don't go to WD itself and buy their product, you buy from an authorized distributor / reseller. It would thus seem that you are buying from Big Buy, not WD, and whatever contract you have is with BB, not WD. In actuality, BB is merely in possession of the drive, but WD owns it, and BB acts as WDs agent in the transaction. (BB does not have to sell units back to WD, they return them). While the retail seller BB will collect taxes at the point of sale, WD will be legally responsible for those taxes.

The liability that BB has to the customer is not clear. Certain things such as the policy of return within N days, must retain original packaging, include receipt, are probably set by the agent BB, hence they are liable on those points. Also, if they re-package and re-sell returned items defectively (wrong cable, for instance), they are liable. Liability for manufacturing defecta, OTOH, would be the liability of the seller WD.

WD products are sold with no warranty, if not purchased from an authorized distributor (they have disclaimed any warranty). If you buy in an "authorized" manner, you are subject to the terms of their sales contract. It is legal to buy a drive from a neighbor (assuming that they own it). You have virtually no recourse against WD in that case: even if the drive is in the original box, unopened and unused, if it is a brick, you have to talk to the neighbor, and not WD (and the neighbor almost certainly has no liability). I leave open the possibility that there are statutory liability laws that would cover the case that the drive exploded and killed you, due to manufacturing defect.

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    While not implausible, I find this odd because the contract doesn't state that WD is licensing the copyrighted drive firmware subject to the terms in said contract. It is a contract of sale, not a license agreement. – bwDraco Oct 16 '17 at 16:46
  • I guess I don't understand which question you are asking. One thing you ask is about binding arbitration. Another is about attaching conditions that you only discover when you open the box ("surprise, contract inside!"). Then there is the question about privity, and implications about warranties; plus questions about agents and sellers of record. Maybe you can narrow the question to get at the core question, i.e. ask only one question. – user6726 Oct 16 '17 at 20:13
  • Added a TL;DR section to the top of the question for clarity. – bwDraco Oct 16 '17 at 21:08
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    Your description of the retailer as agent for the manufacturer may be true in this case, but I am skeptical, because that's not normally how retail works. Normally, the retailer purchases goods from a wholesaler, who purchased them from themanufacturer. The retailer then sells the goods. – phoog Oct 17 '17 at 3:20
  • Yes, it is not the norm for retail sales. – user6726 Oct 17 '17 at 4:53
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As a general rule, if you purchased something that had a notice (like yours) ON THE PACKAGE that its use was "subject to terms..." then you are legally deemed to have notice of such terms, as incorporated by reference. By continuing to use the product, once you have had access to such terms, you may certainly be deemed to have manifested your intent to be legally bound by them. The more interesting question arises when you had "no idea" there were other applicable terms at the time of purchase, and what rights or obligations you may have (if any) to return the product when you refuse to agree to those terms. What if you were to buy the unit second-hand, without packaging or document inserts?

  • Note that it doesn't say use subject to terms. It says purchase subject to terms. – bwDraco Sep 16 '17 at 11:41

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