Transcript Richard Warner, Contracts II

Click Wrap Contracts
Richard Warner
Terms Of Use Contracts
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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.
Register.com v. Verio
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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.”
What Is The Point Of The Agreement?
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One point is to control competitor access.
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The WHOIS database is a client list
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Ordinarily, a business keeps this list secret
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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.
Nature Of The Contract
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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?
Did Verio Breach?
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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.
The Court’s Finding
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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.’ ”
First Restaurant Analogy
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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.
No Offer And Acceptance
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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
Second Restaurant Analogy
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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.
Specht v. Netscape
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The issue is the enforceability of an arbitration
clause in the license agreement governing the use of
Netscape’s SmartDownload program.
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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.
Relevant Facts
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“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.”
The Court’s Conclusion
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“[T]he individual obtaining SmartDownload
is not made aware that he is entering into a
contract.”
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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.”
Knowledge Of The Existence Of The
Contract
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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.
Evolving Custom And Practice
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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.
Custom And Practice
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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.
Another Difficulty
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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.”
What Counts As Acceptance?
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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?
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The parking log analogy: just entering onto the
lot is not acceptance, but parking leaving your car
in a space is.
Third Restaurant Analogy
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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.
A Limitation
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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.
More On Custom And Practice
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A look at “shrink wrap” contracts gives us
more insight to customs and practices relevant
to “click wrap” contracts.