by Mwenda Tevin Gitonga and Mwangi Michael Mbuthia.
The vehicle of your dreams has finally arrived and you cannot wait to take it out on the road. It’s second hand but it is still your dream vehicle. On switching on the ignition key you get the surprise of your life. You paid for the vehicle but you never paid for the software. This was the situation a second-hand buyer of a Tesla vehicle found themselves in, after purchasing the vehicle and getting a message from Tesla informing them that they had not paid for the software features that come with the vehicle. Tesla, therefore, had remotely disabled the Software of the vehicle. The vehicle had been advertised by the third party as having the software features mainly the driver assistance features.
Vehicles are primarily relying on software to operate to an extent without software the vehicles cannot function. This reliance on software has created a situation as seen in the Tesla case where vehicle manufacturers are exacting control over their vehicles even after the vehicles are bought by second-hand buyers. In Kenya, statistics show that most vehicles that are bought are second hand. This, therefore, raises an interesting question as to what buyers of used vehicles will expect in the future under the Kenyan Sale of Goods Act.
Under the Sale of Goods Act, when one buys a second-hand vehicle, you expect it to come with all the features as advertised. The features make up an important component of a Vehicle Sale Agreement as they make up the conditions and warranties of the Agreement under the Sale of Goods Act. Another key feature of the contract is the Privity of Contract which limits the agreement to the buyer and seller.
Contracts for the sale of goods, require the Seller/Vendor to describe the vehicle and its current features. This will then be followed by a disclaimer that the purchaser has inspected the vehicle and will accept the same as it is. In this instance, the seller had put out a specific advertisement of the Tesla to include all features including the driver assistance software which was worth 8000 dollars under the contract, the seller is bound to hand over the vehicle to the purchaser as agreed. This action of binding oneself is contained in the conditions and warranties clause of an agreement.
The law also prohibits strangers to an agreement from interfering with the obligation of the parties to the agreement. This rule is known as Privity of Contract which states that “a contract cannot impose obligations or confer rights arising under it to any person who is not a party”. The question that arises is how will purchasers of second-hand vehicles get to use these essential features in the vehicle without the vehicle manufacturer remotely disabling them under the claim they did not pay for them. Tesla in its defense is entitled to its novel creation and protection of the same. This is achieved by registering intellectual property rights over its inventions. This only means that for the purchaser to enjoy the features like auto-pilot, they have to pay Tesla for its creation. However, even though the vehicle manufacturers are entitled to enjoy the economic benefits of their creation it creates a situation where second-hand buyers are left at a loss as they are forced to buy the vehicle at the price they were initially trying to avoid.
In future, we may see a rise in cases where manufacturers of the vehicles are also involved in the second-hand sales of their vehicles. This may happen through the creation of a Deed of Assignment signed between the second-hand seller and the manufacturer of the vehicle. This deed will assign the seller the rights to sell the vehicles with a guarantee that the vehicles will have the advertised features. However, the vehicle manufacturer will still retain the right to update or revoke the software license of the vehicles. This assignment may also guarantee the second-hand seller that they will get some portion of the income generated from selling the vehicle. However, when crafting this deed of assignments manufactures will have to bear in mind the exhaustion principles set out by the European Court of Justice in the Usedsoft case where the main principle they should keep in mind is that they will lose their right over the software if they grant a perpetual license for a reasonable consideration.
The vehicle manufacturer may also opt for a subscription licensing model for their software as in the mobile industry world. Thus it will not matter if one buys a second-hand vehicle. When they do, the seller must make it explicit in the contracts for sale that in order for the second-hand buyer to enjoy the software benefits of the vehicle they will need to subscribe and pay a certain fee to the manufacturer.
The world has become a global village and if Kenya wants to continue being an active member, the Sale of Goods Act needs to be amended so as to be aligned with the realities of the emerging current trend where manufacturers are privy to contracts between.
Tevin is a Lawyer with a keen interest in technology and the law, and currently a Researcher at KICTANET. He is also a writer and budding web developer.
Mbuthia is a Lawyer with a keen interest in Technology and the Law. He is also a Volunteer for Greenpeace Africa and an upcoming environmental awareness blogger.
