An air traffic controller, relying on information from his computer console, directs two Boeing 747s onto intersecting paths. The jets collide, burst into flame, and all aboard perish.

A hospital minicomputer, monitoring a patient recovering from surgery, fails to alert hospital staff that the patient is having a stroke. The patient dies.

A company discovers that its computer has mangled valuable and sensitive information beyond recovery. The loss gravely weakens the company's market position.

In each instance, investigators trace the fault to errors in the computer programs that directed the operations.

"Those examples aren't fanciful," says Susan Nycum, a San Francisco attorney who serves as vice-chairman of the American Bar Association's Computer Law Section and is a co-director of the Computer Law Association, "they illustrate the problem."

The problem is whether people harmed as a result of computer error can recover damages.

By virtue of their increasing strength and sophistication, computers now touch nearly every fact of society. Computers regulate automated machinery, help co-ordinate railroad transportation, and manipulate billions of dollars worth of information each day. Programming errors in these computers can cause significant personal injury, property damage, and financial loss.

"The computer is now so pervasive in both business and government that it increasingly has a direct impact on people's lives. There is now greater exposure for personal harm and economic loss caused by computer" says Nycum.

However the legal framework to remedy such harms is uncertain.Questions of computer negligence and liability fall into the shadowy gray areas of the law and the judicial system has yet to come to grips with them.

"Determining the proper judicial course will be extremely difficult," asserts Nycum. "No fact patterns have emerged, no precedents have been set, and the whole area is very complex.

"We really don't know the extent to which a software company can be held liable for harms their computer programs create!"

Part of the difficulty arises from the cloudy status of computer programs and software in the eyes of the law. For tax purposes, computer programs are considered to be services. Yet many lawyers and computer industry people believe that computer programs should be considered products.

"It's difficult and unwise to classify software with one word (products) that's normally used in another context and put it into a common law pigeonhole," says Milton Wessel, a law professor at New York University.

The courts have not yet decided whether computer programs are goods for services. The distinction has a number of legal ramifications.

In the realm of contract law, should programs be deemed goods, then the Uniform Commercial Code, a code of general business and contract law that has been adopted by virtually every state, would apply. Contractual disputes could be argued under that body of law.

If programs are declared to be services, then the U.C.C. does not apply and the contract law of the state would be in force.

However, U.C.C. permits a greater degree of flexibility for recovery of damages than now exists in many states. Furthermore, if computer programs are held to be goods, it is possible for third parties harmed by an erroneously programmed computer to sue the software company that developed the program.

In the area of tort law, the question hinges on negligence.

Did the software company do or fail to do something that contributed to the resulting harm? If this can be established, the next question is whether the action or ommission violated a standard or care owed to the customer using the computer program.

Nycan and others argue that computer programmers and software development companies should be held to professional standards. So far no professional standards exist for programmers software companies - although computer industry people are trying to establish professional certification standards.

Furthermore, this problem is exacerbated by the fact that it is next to impossible to establish the corrections of a given computer program.

Nycum and Wessel, among others, agree that it would extraordinarily difficult to establish legal standards of care for computer programs because of their inherent complexity and their comparative newness. However, Nycam feels that many types of computer programs have been around long enough so that certain standards of care should be legally established.

Perhaps the critical aspects of liability arise in the case of third parties harmed by erroneously programmed computers.

Take the hypothetical example of an air traffic controller, who, solely because of computer error, mistakenly causes two planes to collide and their occupants to perish.

Would the families of the passengers and crew be entitled to sue the developers of the defective computer program?

Nycam believes the resolution to that question will be a judical tight-rope walk between the MacPherson and Ultrameres decisions, bothe written by Justice Cardozo.

In the MacPherson case, the court held that a manufacturer of a defective automobile was liable to the injured plaintiff-owner despite the lack of a direct contractual relationship.

However, the Ultramares decision asserted that accounts owe no liability for negligence to creditors and investors who relied on their certification.

Legal observers feel that the courts might accord computer programmers the same legal protection as accountants and thus effectively absolve them from negligence.

Yet the doctrine of Ultramares has been weakening as the trend of the law to protect the ultimate consumer has kept accelerating.

Clearly, the answer to the hypothetical question is shrouded in uncertainty.

But professor Wessel does not see the question as so obscure. "I don't believe there's a difference between the liability for software and any other product," he says.

In fact, legal observers feel that if computer programs are held to be services then the protections provided by product liability would be analyzed into the service area.

But a spokesman for IMB says "As with all our products, should an error occur, we are not responsible for consequential damage." IBM declined to comment whether they had ever settled out of court on a situation of this nature.

A major fear of the computer industry is, if the courts should hold software developers liable for harms caused by defective programs, program development in this country would be seriously crippled.

One computer lawyer points to the time when he advised an Illinois software developer not to design an intensive care unit monitoring program because of the potential liability involved.

Another consideration is the possible effect on electronic funds transfer. Recent Congressional action has limited bank customer lossses to $50 in case of computer error. However, it is left up to the bank and the systems designer to determine who bears the cost of the misplaced funds. If the software developer is held libel for the loss this would discourage development of EFT technology as the risk of loss might be too great.

Richard Bernacchi, a Los Angeles lawyer who is the West Coast vice president of the Computer Law Association, asserts that "most software houses couldn't afford financially to put themselves in the position to assume liability."

Bernacchi feels that policy questions will enter into any decision handed down on the liability of computer programmers.

"In cases such as these, the courts often look to who is best able to assume responsibility," says Bernacchi. "The courts will look very hard at the question before coming out with a negative opinion against software developers."

Already, computer software houses are taking out insurance to cover possible damages that their programs might cause and both Bernacchi and Nycam detect a greater awareness of the problems conjured up by liability when the negotiate contracts for computer companies.