An Economic Assessment of UCITA

The Uniform Computer Information Transactions Act (UCITA) is a model contract law developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Once adopted by a state, it would provide a distinct uniform contract law for 'computer information' products including computer software, multimedia products, computer databases, and online information. This paper reviews the potential economic benefits and costs of adopting UCITA, and in particular, its implications for consumer transactions. The likely benefits include lower transaction costs and improved contract interpretation. We consider several sources of benefits linked to the coordination of state laws: reduced costs due to reduced inconsistency in statutes, reduced costs of information collection and analysis, reduced costs associated with contract negotiation under uniform law, and reduced costs associated with litigation. By contrast, the potential burdens associated with adopting UCITA appear to be minimal. While some critics argue that state-level statutes allow for more innovation in lawmaking, on close examination, independent action apparently holds little promise. States have had two decades to develop specialized law for software licensed at retail, but have not done so. And in any event, individual states adopting UCITA do retain some flexibility to modify the statute's provisions. Thus, while there is no practical way to quantify the potential benefits and costs of UCITA, we conclude that economic well-being would almost surely be enhanced by its adoption since the costs are likely to be small. The argument for adoption is also buttressed by the lack of compelling alternatives. If states do nothing, both producers and consumers will be forced to cope with the uncertainties associated with ongoing inconsistencies in state-level commercial contract law. If the states develop their own regulations for computer information contracts, the lack of uniformity will create burdens. Moreover, there is no good reason to expect their design to be superior to UCITA.Health and Safety, Technology and Industry, Regulatory Reform