Chapter 23 E-Contracts

1. Chapter 23 E-Contracts

2. §1: Online Contract Formation • B2C-Business to Consumer E-Contracts • B2B-Business to Business E-Contracts • Online Offers Should Include: • Conspicuous and Obvious Terms • Remedies available (including Seller’s Refund) • Statutes of Limitation • Dispute Settlement Provisions • Disclaimers of Liability • How information will be used by Seller.

3. Forming Contracts Online • Online Acceptances: • Click-On (Click-Wrap) Agreements • Online version of “shrink-wrap” agreements • Acceptance by clicking on an “I Accept” button on the website • Shrink-Wrap Agreements-Enforceable Terms • Shrink Wrap Agreements-Additional Terms (not all terms are enforceable) • “Browse-Wrap” License

4. §2: Linking and Framing • Linking to Other’s Web Pages • Linking is legal to another website and does not generally require permission. • However, “deep linking” (more than a few levels deep in the website) may require 3rd party permission. • Framing • Trademark issues • Usually requires owner’s consent

5. §3: E-Signatures • Many contracts require a writing and a signature to be enforceable. • With E-Contracts, signatures have changed. Signatures can be: • Digital (with Cybernotary) • Signature Dynamics • Smart Cards, Personal Identification • A Mouse Click (attribution problems)

6. Laws Governing E-Signatures • Some states have e-signature legislation but it is not uniform. • Federal Law • E-Signatures (E-SIGN Act) • E-Documents • Parties must agree to use electronic signatures.

7. §4: Partnering Agreements • Sellers and Buyers who frequently do business agree on the terms and conditions of doing business electronically. • Digital Signatures • Identification Codes • Mode of Transmission

8. §5: UCITA • UCC governs the sale of goods (tangible and movable) • UCITA governs the license of information (intangible good) • Scope and Applicability of UCITA • Applies to Computer Information • May apply to all or part of a “sale” • Parties can “opt out”

9. UCITA • Highlights of UCITA • Mass-Market Licenses • E-Contract presented with a package of computer information in the form of a click on license. • Warranties • Authentication and Attribution • Access Contracts (internet access) • Electronic Self Help

10. §6: UETA • Uniform Electronic Transactions Act (Federal E-SIGN Act is similar) • Creates framework for Electronic Transactions and E-Commerce • UETA provides: • Formation of contracts by e-agents • Does not apply unless parties agree to use e-commerce in transactions.

11. Case 23.1: Mortenson v. Timberline(Shrink-Wrap Agreements) • FACTS: • Mortenson bought upgraded software from Timberline Software to analyze project requirements and coordinate bid information. • On each disk’s pouch and the in­side cover of the instruction manuals, and as the first screen each time the program was used, the software included a liability limit. The upgrade had a bug, of which Timberline was aware but didn’t tell Mortenson. • The software caused the contractor to lose nearly $2 million and Morton sued Timberline. Timberline argued the shrink-wrap limitation of liability was enforceable.

12. Case 23.1: Mortenson v. Timberline(Shrink-Wrap Agreements) • HELD: FOR TIMBERLINE. • Under UCC 2–204, the shrink-wrap license that accompanied Timberline’s software was enforceable. • The parties had dealt with each other for years, and the terms of the license, which was similar to those used throughout the software industry, were set forth in several locations. • It was not necessary for Mortenson to actually read the terms.

13. Case 23.2: Klocek v. Gateway(Shrink-Wrap Agreements) • FACTS: • Gateway includes a copy of its “Standard Terms and Conditions Agreement” in the box. • This form tells the customer, “By keeping your Gateway 2000 computer system beyond five (5) days after the date of delivery, you accept these Terms,” which included an arbitration clause. • Klocek, a dissatisfied customer, sued Gateway alleging breach of contract. Klocek argued that the shrink-wrap arbitration clause was not part of the contract.

14. Case 23.2: Klocek v. Gateway(Shrink-Wrap Agreements) • HELD: FOR KLOCEK. • The court denied Gateway’s motion. Klocek was a consumer, not a merchant. • Gateway did not show, as required under UCC 2–207, that it told Klocek its acceptance of the deal was conditioned on his agreeing to the terms inside the box or that he agreed to them. • However, Klocek’s complaint was dismissed on other grounds.

15. Case 23.3: Caspi v. MSN(Click On Agreements) • FACTS: • Microsoft Network, LLC (MSN), is an online computer service. • As a condition of becoming an MSN member, a subscriber is prompted by MSN software to view multiple computer screens of information, including a membership agreement that contains a forum-selection clause. • This clause calls for any claims against MSN to be litigated in the state of Washington.

16. Case 23.3: Caspi v. MSN(Click On Agreements) • FACTS (cont’d) • MSN’s membership agreement appears on the computer screen in a scrollable window next to blocks providing the choices “I Agree” and “I Don’t Agree.” • Prospective members have the option to click “I Agree” or “I Don’t Agree” at any point while scrolling through the agreement. Registration proceeds only after the potential subscriber has the opportunity to view, and assents to, the membership agreement. No charges are incurred until a subscriber clicks on “I Agree.”

17. Case 23.3: Caspi v. MSN(Click On Agreements) • FACTS (cont’d) • Steven Caspi, a subscriber, alleged MSN rolled over his membership into a more expensive plan without notice, • Caspi sued MSN on behalf of 1.5 million other members. • MSN filed a motion to dismiss on the ground that the forum-selection clause called for the suit to be heard in the state of Washington. The court granted the motion. Plaintiffs appealed.

18. Case 23.3: Caspi v. MSN(Click On Agreements) • HELD: FOR MSN. • Case dismissed. • Plaintiffs argued that they did not have adequate notice of the clause and therefore it was not part of their contracts. • The forum-selection clause was valid and enforceable. • The court reasoned that “[t]o conclude that plaintiffs are not bound by that clause would be equivalent to holding that they were bound by no other clause either, since all provisions were identically presented.”

19. Case 23.4: Specht v. Netscape(Browse Wrap Agreements) • FACTS: • Netscape’s “SmartDownload” software makes it easier for users to download files from the Internet without losing progress if they pause to do some other task or their Internet connection is interrupted. • Netscape offers SmartDownload free of charge on its Web site to those who indicate, by clicking their mouse in a designated box, that they wish to obtain it. • John Gibson clicked in the box and downloaded the software. On the Web site’s download page is a reference to a license agreement that is visible only by scrolling to the next screen.

20. Case 23.4: Specht v. Netscape(Browse Wrap Agreements) • FACTS (cont’d) • Assent to the agreement is not required to download the software. The agreement provides that any disputes arising from use of the software are to be submitted to arbitration in California. • Believing that the use of SmartDownload transmits private information about its users, Gibson and others filed a suit in a federal district court in New York against Netscape, alleging violations of federal law. • Netscape asked the court to order the parties to arbitration in California, according to the license agreement.

21. Case 23.4: Specht v. Netscape(Browse Wrap Agreements) • HELD: FOR GIBSON. • The court denied the motion to compel arbitration. • The users of SmartDownload did not agree to the terms of the contract because they did not have to “click through” to download it. • The court characterized Netscape’s license in this case as a browse-wrap license which does not require a user’s assent to the terms of the associated license. • The court pointed out that “the individual obtaining SmartDownload is not made aware that he is entering into a contract and so is not subject to the arbitration clause.