"COVERED SOFTWARE IS PROVIDED UNDER THIS LICENSE ON AN AS IS BASIS, WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES THAT THE COVERED SOFTWARE IS FREE OF DEFECTS, MERCHANTABLE, FIT FOR A PARTICULAR PURPOSE OR NON-INFRINGING. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE COVERED SOFTWARE IS WITH YOU."
The points in question I have highlighted with bold text.
Under UK law (specifically the Sale of Goods Act 1979 (ammended 1994, 1995)) any product or service which is sold in the UK must be fit for purpose, it is one of the defining clauses of the legislation. It can exempt Business to Business as part of the contract but does cover Business to Consumer. So this in itself is a concern and the actual disclaimer would also fall foul of the Unfair Terms in Consumer Contracts Regulations (UTCCR) which disallows terms that would exempt the rights of consumers under common or any other law.
The second point of contention is the Non-Infringing part of the disclaimer. One might initially see this as Microsoft attempting to prevent liability for consumers infringing on other's rights, however, the way the disclaimer is worded would also allow Microsoft to infringe on the rights of the consumer. If for example, there was some form of intellectual property which Microsoft happen to take from your system during some phone home mechanism, or perhaps if the operating system was shut down under the Windows Genuine Advantage system effectively denying you to access your own intellectual property, this disclaimer would prevent the consumer from any course of litigious action in countries which do not have legislation for unfair contract terms.
The disclaimer is a serious concern for any consumer wishing to use the Vista operating system and effectively waves all the consumer's rights to anything which is located on a computer running the Vista OS. The disclaimer is short and sweet, but in being so is incredibly broad in its reach.
The non-infringing clause may also be subject to challenge under UTCCR as it would again impose restrictions on the legislative and common law rights of the consumer.
Businesses, as stated are not covered by such legislation, so one would be particularly concerned as an IT purchaser or IT policy maker within a company, particularly given the security implications of infringement of their rights. The question is however, how many company IT people have actually read the disclaimer and realised its implications?
So back to the question of whether the Windows Vista "contract" (read EULA) is legal under UK law? I am not a lawyer, but I would suggest the contract falls foul of UK legislation thus voiding itself in the process.