• Legal Wrap on Clickwrap, Browsewrap
  • August 26, 2003 | Author: Theodore F. Claypoole
  • Law Firms: Womble Carlyle Sandridge & Rice - Charlotte Office ; Womble Carlyle Sandridge & Rice - Winston-Salem Office
  • When you are surfing the Web, you probably have been confronted with "clickwrap" or "browsewrap" agreements. Clickwraps pop up onscreen and require the user affirmatively to consent to the terms before accessing the site or downloading a product (e.g., usually by clicking on an "I Agree" box). Browsewraps boldly state that the user, by staying to browse the website, consents to the terms which are available for online viewing at any time (e.g., in small print at the bottom of a welcome page or via a hyperlink). The terms clickwrap and browsewrap are electronic progeny of the "shrinkwrap" agreements found beneath the clear shrinkwrap on boxes of store-bought software (e.g., "By opening this box, you are bound by the terms and conditions of this License.").

    When you surf the web are you committing yourself to countless agreements? Could a contract that you didn't sign or that you didn't even read possibly be a valid and legally enforceable contract? As a website operator, are the interests of your business protected by your use of clickwrap or browsewrap agreements on your company's website? The answers to these questions are not simple. However, in recent months, a number of courts have addressed the enforceability of online clickwrap and browsewrap consumer agreements. These decisions provide some legal infrastructure to this region of e-commerce and offer some useful guidelines to you and your business.

    Website operators tend to construct their terms and conditions to include provisions that favor the operator over the user. Since some studies indicate that less than one percent of users actually stop and read such terms and conditions, webmasters have little concern that these one-sided agreements will deter potential customers.

    But even if a careless web surfer clicks his assent to an agreement, American law includes some theories that can protect the browser from himself. For example, some traditional contract limitations prevent businesses from using contract terms that are vague, indecipherable, or violate public policy. Also, in many circumstances courts oppose use of an unconscionable "contract of adhesion"-an unduly harsh and one-sided "take it or leave it" form agreement.

    While these broad policies may stop enforcement of a clickwrap agreement, the most recent court rulings have emerged out of disputes over smaller specific contract provisions contained within certain clickwrap and browsewrap agreements. The most common of such provisions are license agreements, forum selection clauses, arbitration clauses, disclaimers of express and implied warranties, and clauses limiting remedies and liability.

    A survey of court decisions on this issue reveals that standard clickwrap agreements are likely to be enforced by most courts while browsewrap agreements are not. The primary reason that browsewrap agreements run into trouble is that an enforceable contract requires "mutual assent" - both parties must knowingly agree to the terms. This is a bedrock of any legally enforceable agreement, whatever the form. Browsewrap agreements lack any formal indication that the web surfer read and agreed to the contract terms. The better proof of customer assent available to a contracting business, the better chance of a company being able to enforce the contract. Therefore, courts have been reluctant to say that a user has assented to anything just because she viewed a website and could see that there was a link at the bottom of a page inviting her to read an agreement.

    Taking an action - like clicking to the next screen - may be proof of assent to contract by some courts. However, such scanty evidence that a consumer read or specifically agreed to a contract, combined with a court's inherent suspicion of "take-it-or-leave-it" agreements, will often render that browsewrap contract unenforced.

    Two recent court decisions, however, buck this judicial trend. The U.S. District Court for the Central District of California ruled on March 7 that although the court preferred a rule of law that would require that contract formation could take place only when there was an explicit manifestation of assent, such as clicking on an "I agree" button presented with explicit terms, case law did not support such a rule. Instead, the court cited a U.S. Supreme Court case which held that a forum selection clause printed on the back of a cruise ship ticket was enforceable.1 The court held that a "contract can be formed by proceeding into the interior web pages after knowledge (or, in some cases, presumptive knowledge) of the conditions accepted when doing so."2 In addition, the California Court of Appeal, Second District, ruled on June 9 that a consumer contract containing a forum selection clause is not unenforceable merely by reason of the fact that the clause is disclosed to consumers via an internet hyperlink.3 Because of cases like this, no business or web user can assume that browsewrap agreements will not be enforced, but businesses who expect to enforce their online agreements should consider requiring some proof that its customer accepted the contract.

    For this reason, the legal landscape on clickwraps is a little more clear. In 2002, courts in the cases of Forrest v. Verizon Communications, Inc.4, Moore v. Microsoft Corp.5, and Comb v. Paypal6 recognized the legal enforceability of clauses and disclaimers contained in clickwrap agreements. However, many courts remain cautiously reluctant to enforce clickwrap contracts, as still not demonstrating sufficient consumer assent to agree.

    There has been an industry push to set uniform guidelines for shrinkwrap, clickwrap, and browsewrap licenses. The National Conference of Commissioners on Uniform State Laws has drafted and proposed the Uniform Computer Information Transaction Act ("UCITA") which would standardize the treatment of such agreements. However, this effort has received intense criticism for being too deferential to the software industry and injurious to consumers. Only Virginia and Maryland have enacted UCITA and the momentum of the legislation appears to have slowed.

    Without a national standard and given the sometimes disparate results of the courts, online businesses must keep in mind three underlying principles regarding the enforceability of clickwrap and browsewrap agreements. First, agreements that are clear, conspicuous, and require some proof of acceptance by the user are more likely to be enforced by the courts. Second, browsewraps and clickwraps potentially face challenges on two separate grounds: procedural challenges based on the manner in which the mutual assent is made, and substantive challenges as to the terms of the agreement itself. Thus, even if the agreement is enforceable overall, particular terms might not be enforceable. Finally, the enforcement of the clickwraps and browsewraps will differ depending on the contract law in the jurisdiction where the contract is construed.

    1 Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).

    2 Ticketmaster Corp. v. Tickets.com Inc., 2002 WL 21397701 (C.D. Cal. 2003).

    3 Net2Phone Inc. v. L.A. County Super. Ct., 109 Cal.App.4th 583 (Cal. Ct. App. 2003).

    4 Forrest v. Verizon Communications, Inc., 805 A.2d 1007 (D.C. 2002).

    5 Moore v. Microsoft Corp., 293 A.D.2d 587 (N.Y. App. Div. 2002).

    6 Comb v. Paypal, Inc., 218 F.Supp.2d 1165 (N.D. Cal. 2002).