Software & Web Licensing Corner: Enforceability of Clickwrap and Browsewrap Agreements

Clicking the "I Accept" Button-- No, Not THAT Button!

Three great unanswered questions of our times: 1) did multiple gunmen shoot President Kennedy in Dallas? 2) are government authorities hiding proof that UFOs are piloted by extraterrestrials? 3) can Facebook really change my Terms of Service and privacy settings just by posting an online notice?

Sorry, can’t help you with the first two questions, but for an answer to the third question, you have come to the right place.

As detailed in a recent Five Minute FAQ, it is possible to form a legally binding contract even in the absence of a physical piece of paper signed by both parties, as long as there are an effective offer, acceptance, and consideration.

Usually, the main issue in determining whether a website user is legally bound to the site’s terms of service (“TOS”) will focus on the validity of the acceptance, specifically whether the user clearly understood the TOS offered by the website owner, and clearly manifested his intent to accept those terms.

One of the first definitive answers came in a case from the federal Second Circuit Court of Appeals, Specht vs. Netscape. Visitors to the Netscape website were allowed to download free software by clicking on a download button. Netscape claimed that downloaders were subject to the terms of its software license, but the terms of the license were not on the same page as the download button. Instead, there was a link at the bottom of the download page, visible only after scrolling down from the download button, then users had to click on more links to reach the actual terms of the license agreement. The court ruled that the license was not binding on the software user, because he did not have a chance to manifest his acceptance– the terms of the offer (license agreement) were not plainly visible to the user, and the user was not required to click an “I Accept” button linked to those terms as a precondition to downloading and using the software.

Okay, fine Mr. Wizard, but how does that play out in the Real World?

Clickwrap Agreements
Clickwrap agreements are contractual terms presented with “I Accept/I Decline” buttons. Clicking “I Accept” could be a precondition to downloading software (in other words, what Netscape should have done), or to becoming a member of or subscriber to a website. Steps to ensure that the license/TOS are legally binding include: 1) full and clear presentation of the terms prior to the user’s gaining access to the software or service, via a scroll box or (preferably) full presentation of the terms on the webpage; 2) an opportunity for the user to clearly manifest his acceptance of the terms as a precondition to gaining access to the software or service, via “I Accept/I Decline” buttons or similar mechanisms; 3) an opportunity for the user to further review the terms of the agreement, via a “Print” button or similar mechanism.

Browsewrap Agreements
On much shakier legal ground are so-called “browsewrap agreements,” that is, terms or links to terms that are prominently posted on the homepage of the website with a notice to users that they accept those terms merely by browsing deeper into the site. Obviously, in light of the Specht decision, there are serious questions whether users are aware of and clearly manifest their acceptance of the TOS just by browsing beyond the landing page. However, if the site owner is not offering membership or access to restricted portions of the website, then it may not have the opportunity to require the browser to click an “I Accept” button, even though it still has a critical need to protect its rights and restrict its liabilities. Steps to increase the likelihood that browsewrap terms are legally binding include: 1) placement of the terms or a link to the terms that is so prominent that users are guaranteed to see them upon first entering the website; and 2) prominent placement of a message that taking further action (browsing, clicking, etc.) is an acceptance of such terms. It also helps if the terms are geared towards commercial users rather than consumers. For example, in a case involving deep-linking to pages in the website in violation of the browsewrap terms on Ticketmaster’s home page, the court ruled it would not dismiss the breach of contract claim solely because the TOS lacked an “I Accept” button. Its decision appears based in part on a belief that was a sophisticated user that would expect its activity to be subject to online terms and conditions.

What if a website user agreed via a valid clickwrap contract that the website owner could amend the TOS or license in significant ways just by the owner’s posting of the amendment on its website, without special notice to or agreement by the user? This very question was at the root of a recent controversy involving Facebook, which needed to amend its TOS, but with millions of users, found it impractical to notify and gather evidence of each user’s acceptance. Since the users agreed in the original TOS that Facebook could amend the TOS merely by posting the new terms, shouldn’t that be okay?

Several courts have held in similar factual scenarios that the amendment by posting procedure would not be legally binding. One used the rationale of ineffective acceptance (see Douglas v. Talk America Inc.), another used the rationale of ineffective consideration (see Harris v. Blockbuster Inc.), but both were clearly uncomfortable with the idea that users’ rights could be significantly altered without their knowledge, even if they had agreed in advance. However, both courts hinted at procedures that would more likely make online amendments effective: 1) giving users clear notice of the revised terms, via an e-mail to the user or a pop-up notice when the user next logs on to the site; 2) providing a meaningful grace period (e.g. 30 days) before the amended TOS go into effect; 3) not attempting to make the amendment retroactively effective, but only going forward; and 4) allowing the user the ability to opt out of the new TOS, for example by unsubscribing from the site.

Takeaway: providing full, prominent disclosure to users of offered terms, and opportunities for users to clearly manifest their acceptance of those terms, will result in legally binding licenses, terms of service, and other online agreements.

© 2010, Richard R. Bergovoy. All rights reserved.

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