Offer and Acceptance Online

1. Offer and Acceptance Online Richard Warner

2. The Definition of an Offer • An offer is • a manifestation of a willingness to enter a bargain • so made as to justify the offeree in thinking his assent will conclude the bargain.

4. Lefkowitz v. Great Minne. Surplus Store • Great Minneapolis Surplus Store ran the following advertisement: • Saturday 9 a.m. 2 Brand New Pastel Mink 3-Skin Scarfs Selling for $ 89.50 Out they go Saturday. Each . . . . $ 1.00 1 Black Lapin Stole Beautiful, worth $ 139.50 . . . $ 1.00 First Come, First Served • Lefkowtiz says “I accept” at 9 am.

5. Is the Ad an Offer? • What are you supposed to think when you read the ad? This: “I have the power to get these things by agreeing to buy them if I show up in time.” • So the ad is • a manifestation of a willingness to enter a bargain • so made as to justify the you in thinking your assent will conclude the bargain.

6. No Secret Conditions • The store argues that there was an unstated but implicit condition in the ad: “Women only.” • The court: “while an advertiser has the right at any time before acceptance to modify his offer, he does not have the right, after acceptance, to impose new or arbitrary conditions not contained in the published offer.”

7. ProCD v. Zeidenberg • ProCD sold a CD that contained every phone number and address in every telephone directory in the United States. • It sold it to businesses for $5,000. • The consumer price was around $150. How do you prevent businesses from buying the consumer version? • The solution: price discrimination by contract.

8. Contractual Price Discrimination • The use of a CD ProCD sold to consumers was governed by a license in which the purchaser agreed not to use the CD for commercial purposes. • The court: “Every box containing its consumer product declares that the software comes with restrictions stated in an enclosed license.” • How is this not like “Women only”?

9. Standard Form Contracting • The practice flourished in the nineteenth century shortly after the rise of mass produced, standardized products. • But few read those contracts, and fewer understand them, and they are often not even available until after purchase. • So why are the terms not like “Women only”?

10. OK Because It Works? • It works well to allocate the risks and benefits between buyers and sellers of a wide range of other products and services. • From ProCD: “Transactions in which the exchange of money precedes the communication of detailed terms are common. Consider the purchase of insurance . . .”

11. One Clear Point • The standard form contract must be the offer. • This is the only way that the “one sized fits all” approach will work.

12. Facts of ProCD v. Zeidenberg • Zeidenberg bought the consumer package and ignored the license. • He made the information available on the Internet; the price was less than the price ProCD charged its commercial customers. • Zeidenberg claimed he never agreed to the license in the box. • He claimed that the terms on the outside of the box are the terms of the agreement.

13. Zeidenberg’s Position • “Zeidenberg's position therefore must be that the printed terms on the outside of a box are the parties' contract--except for printed terms that refer to or incorporate other terms.” • So like “Women only.”

14. Definition of an Offer • An offer is a manifestation of a willingness to enter a bargain so made as to justify the offeree in thinking his assent will conclude the bargain. • Zeidenberg’s postion: The manifestation consists of the terms on the outside of the box—not the inaccessible terms on the inside.

15. Easterbrook’s Response • “Notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable (a right that the license expressly extends), may be a means of doing business valuable to buyers and sellers alike.” • Easterbrook’s argument for this claim is that courts enforce standard form contracts. • But is not an explanation of why those contracts meet the requirements of offer and acceptance.

16. The UCC § 2-204(1) Argument • "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.“ • But this does not tell us what is required to form a contract. It assumes an answer to that question. • But what is required for formation is exactly the issue here.

17. UCC § 2-606 Argument • “A buyer accepts goods under § 2-606(1)(b) when, after an opportunity to inspect, he fails to make an effective rejection under § 2-602(1). ProCD extended an opportunity to reject if a buyer should find the license terms unsatisfactory; Zeidenberg inspected the package, tried out the software, learned of the license, and did not reject the goods.”

18. UCC § 2-606 Argument • “We refer to § 2-606 only to show that the opportunity to return goods can be important; acceptance of an offer differs from acceptance of goods after delivery; but the UCC consistently permits the parties to structure their relations so that the buyer has a chance to make a final decision after a detailed review.”

19. Conclusion • Esterbrook has no good explanation of why the paper inside the box is an offer. • Similar issues arise for terms of use agreement.

20. Specht v. Netscape Browser with Smart Download plug in Website Communicator cookie SmarDownload key URL Netscape

21. Specht v. Netscape: Trial Court • “[T]he individual obtaining SmartDownload is not made aware that he is entering into a contract.” • “From the user’s vantage point, SmartDownload could be analogized to a free neighborhood newspaper, readily obtained from a sidewalk box or supermarket counter without any exchange with a seller or vender. It is there for the taking.”

22. Specht v. Netscape: Appellate Court • “We are asked to determine whether [plaintiffs] by acting upon defendants' invitation to download free software . . ., agreed to be bound by the software's license terms , , ,, even though plaintiffs could not have learned of . . . those terms unless . . . .[they] had scrolled down to . . . a screen located below the download button.” • A “consumer's clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assentto those terms,”

23. Sotomayor’s First Conclusion • “We are not persuaded that a reasonably prudent offeree in these circumstances would have known of the existence of license terms. Plaintiffs were responding to an offer that did not carry an immediately visible notice of the existence of license terms or require unambiguous manifestation of assent to those terms.” • But doesn’t his apply to standard form contracts generally?

24. Carnival Cruise Lines v. Shute • The Shute’s entered into a contract to take a cruise from Los Angeles to Puerto Vallarta. In international waters, Mrs. Shute slipped on a mat and fell. • She sued Carnival Cruise Lines in Washington State, where the Shutes lived. • The contract had a forum selection clause that required that suits be filed in Florida.

25. The Presentation of the Terms • The terms were printed on the back of the ticket, which were sent to the Shutes after they paid for the cruise. • “A careful reader will find the forum-selection clause in the 8th of the 25 numbered paragraphs.” Justice Stevens, dissenting.

26. Sotomayor’s Second Conclusion • “In circumstances such as these, where consumers are urged to download free software at the immediate click of a button, a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms. The SmartDownload webpage screen was “printed in such a manner that it tended to conceal the fact that it was an express acceptance of [Netscape's] rules and regulations.”

27. So What About CNN? This appears at the bottom of home page in small type.

28. Timing of Acceptance • “Insofar as the purchaser in ProCD was confronted with conspicuous, mandatory license terms every time he ran the software on his computer, that case actually undermines defendants' contention that downloading in the absence of conspicuous terms is an act that binds plaintiffs to those terms.” • Is this right?

29. Timing of Acceptance In ProCD • Easterbrook: “ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance.” • So acceptance occurs with use. What is use?

30. When Does Acceptance Occur? • Consider the sequence: • Purchase • Beginning of installation • Appearance of splash screen • Dismissal of splash screen • Use of software--for how long? • When should both parties be subject to the contractual conditions?

31. Terms of Use Agreements, Same Issue • When you go to CNN.com, data collection begins immediately. • This is governed by the privacy policy available at http://www.cnn.com/privacy.html. • So CNN must hold that acceptance occurs at the moment of the visit. • Is this correct?

32. Why Do We Care? • We are not particularly upset about the use of standard form contracts to sell toasters, hair dryers, microwaves, and so on. • So why do we care now about terms of use agreements and privacy policies? • Because of privacy concerns and intellectual property concerns.