This is not an uncommon problem among Volvos. It typically happens when someone tries to pull the exterior door handle at precisely the same instant that you try to open it electrically. This magic combination breaks a tiny piece of red plastic inside the latch mechanism.

The procedure to remove and repair/replace the latch may be found at the following site, but the URL only gets you to the front door. As you work your way down to the page you want, the URL does not change, so I will have to guide you to it. Each step opens a subsequent page.

1. Open this page: http://www.volvospeed.com/volvo_performance.php
2. Click on "Repairs and Maintenance".
3. Click inside the picture.
4. Scroll down to "Latches and Doors" and click on "Door Latch"

If you chose to replace the latch rather than conduct major surgery, it runs about $117 at your dealer's parts department. I just bought one yesterday.
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Dave in Virginia; 98 V70 T5(M): IPD MOTRONIC+ ECU Upgrade, Sport Muffler, IPD Strut Tower Brace; VDO Boost Gauge, IPD Anti-Sway Bars; 88 245 DL; 67 MGB