Click Wrap Contracts

1. Click Wrap Contracts Richard Warner

2. Terms Of Use Contracts • Web sites typically contain an agreement defining the terms on which the web site may be used. • In many cases, no affirmative act of assent is requested or required with respect to these agreements.

3. Register.com v. Verio • Register.com is a domain name registration service and also provides web site development and hosting. In the latter area, it competes directly against Verio. • As a registrar, Register is required to maintain an online, searchable WHOIS database containing the contact information for its customers. • Use of the database is governed by a “service agreement.”

4. What Is The Point Of The Agreement? • One point is to control competitor access. • The WHOIS database is a client list • Ordinarily, a business keeps this list secret • And it is legally protected by trade secret law • But Register’s agreement with ICANN requires that the database be publicly accessible. • So Register attempts to protect it by contract.

5. Nature Of The Contract • Users access the agreement by a small print link at the bottom of the home page. • The part of the agreement governing the use of the WHOIS prohibits use of the data for mass marketing by direct mail, telephone, or e-mail. • Verio used the information for mass marketing. • Did Verio breach the service agreement?

6. Did Verio Breach? • Verio breached the agreement only if it entered into the agreement with Register.com. • Verio argues it did not because it was not required to click on an “I agree” button (or anything similar). • To evaluate this argument, consider three hypothetical situations.

7. The Court’s Finding • The court disagrees: Verio cannot “argue that it has not assented to [the] terms of use [which] are clearly posted on the website. The conclusion of the terms paragraph states ‘by submitting this query you agree to abide by these terms.’ ”

8. First Restaurant Analogy • You walk into a restaurant and order dinner. When the bill is presented it includes a service charge of 50%. When you ask what is going on, the waiter produces a contract which says in part, “All guests agree to pay a service charge of 50%.” The contract was posted in the kitchen.

9. No Offer And Acceptance • You are not obligated to pay the charge. Why? No offer and acceptance. • A communication is an offer if it is a (1) manifestation of willingness to enter into a bargain (2) so made as to justify the recipient of the communication in understanding that his or her assent will conclude the bargain. • There is no manifestation of a willingness to enter into a bargain

10. Second Restaurant Analogy • The contract is posted on the door of the restaurant. But the contract is very small and easy to overlook. • There may been a offer by the restaurant. • But you did not accept. • You were unaware, and could not reasonable be expected to be aware, of the offer. • This is why it matters that Verio did not deny it was aware of the terms.

11. Specht v. Netscape • The issue is the enforceability of an arbitration clause in the license agreement governing the use of Netscape’s SmartDownload program. • The program that allows “users to download files from the Internet without losing their interim progress when they pause to engage in some other task, or if their Internet connection is severed.” • The question is whether those who download the software ever really agree to the terms of the license.

12. Relevant Facts • “By clicking on the box, a visitor initiates the download. The sole reference on this page to the License Agreement appears in text that is visible only if a visitor scrolls down through the page to the next screen [emphasis added]. • “If a visitor does so, he or she sees: “Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.” • “Visitors are not required affirmatively to indicate their assent to the License Agreement, or even to view the license agreement, before proceeding with a download of the software.”

13. The Court’s Conclusion • “[T]he individual obtaining SmartDownload is not made aware that he is entering into a contract.” • The court views the situation like the second restaurant analogy. • The court offers its own analogy: “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.”

14. Knowledge Of The Existence Of The Contract • It is essential here that the plaintiffs had no knowledge of the existence of the license agreement. • Compare Register.com and Tickets.com. In both cases, the defendants knew that there was a terms of use contract that applied to their use of the web site they accessed, and, given this knowledge, the court is willing to enforce the contract.

15. Evolving Custom And Practice • Experienced web users know that web sites often contain terms of use contracts behind hyperlinks located at the bottom of the home page or some other relevant page. • An established custom and practice about the existence and placement of these hyperlinks will make it more and more difficult for web site visitors to argue that they were unaware that they were being invited to enter into a contractual relationship.

16. Custom And Practice • Using web sites will not be like the “free neighborhood newspaper, readily obtained from a sidewalk box or supermarket counter without any exchange with a seller or vender.” • It will be like attendant-less parking lots.

17. Another Difficulty • Custom and practice will solve an other problem: namely, even if the agreement behind the hyperlink is an offer, it is unclear exactly what counts as acceptance. • “Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in manner invited or required by the offer.”

18. What Counts As Acceptance? • When does this happen? • Not when one first accesses the site as one has had no chance to read the offer. • So how much does one have to do to accept the offer? • The parking log analogy: just entering onto the lot is not acceptance, but parking leaving your car in a space is.

19. Third Restaurant Analogy • The menu says, “All orders are governed by our Terms of Sale contract. Please request a copy from your waiter and read it before ordering. Placing an order constitutes agreeing to the terms of this contract. Please read it carefully before ordering.” • To order is to accept the offer. • Web analogy: the hyperlink is prominent. attention is drawn to it, and the user is told that use of the site constitutes acceptance.

20. A Limitation • Even if there has been offer and acceptance, only certain terms will be enforceable. In cases of this sort, “[w]here the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the contract.” • In addition, unconscionability doctrine will further limit the enforceable terms.

21. More On Custom And Practice • A look at “shrink wrap” contracts gives us more insight to customs and practices relevant to “click wrap” contracts.