How To Create A Shrinkwrap Agreement

Posted on April 13, 2009 by Sam Conforti

 

Last year, April 19, 2008, I posted an article entitled Is a Clickwrap Agreement Enforceable?. The article defined the terms and gave a general understanding of where we encounter these types of agreements. My editorial comment dealt with my “natural aversion” to the non-negotiability of such agreements. Based on the number of hits the article receives, it is easy to discern the interest in the topic and it seems appropriate at this time to augment the article with a “How To” approach. During the course of my research, a colleague of mine from my days at SAP, Patricia A. Dalki, discussed her views on the subject. Patricia has done the heavy lifting on researching the “How To” approach when drafting  such an agreement and has kindly shared her thoughts on the subject with me. Her research included an article by David L. Hayes of Fenwick & West LLP entitled, The Enforceability of Shrinkwrap License Agreements On-Line and Off-Line and she also cited an article I had included in my original posting mentioned above by Jason Haislmaier entitled, How Do I Build an Enforceable Online Agreement? – Not (Always) the Way SalesForce.com or Google Would.

With the kind permission of my friend and colleague, Patricia A. Dalki, here are some tips how to create an enforceable on-line agreement:

 1.  Record Evidence of User Acceptance

  • Record evidence of user acceptance and the formation of each on-line agreement using a consistent, auditable process.
  • By procedure – maintain evidence that the only way to access the service or product being offered is to scroll through terms and click “I accept” – user must have accepted.
  • To the extent possible, keep records of time, date, and source of acceptance.

2.  Require Acceptance Before Delivery of Services or Payment

  • Require acceptance before payment or delivery of the services.

3.  Make Rejection Clear and Simple

  • Provide a clear, simple method for customers to reject the contract.
  • Allow users to exit the process at any time.
  • Do not require the customer to take additional steps or expend effort/money to reject the product or service.

4.  Make Assent Unambiguous

  • Secure an affirmative, unambiguous manifestation of assent to the agreement from the customer.
  • The more the customer has to do, the better.
  • Examples include:

a.         Mouse click “I accept” or “I agree” button;
b.        Type “I agree” and submit (speed-bump for users, but more deliberate);
c.        “I accept” checkbox next to each provision, especially with an unusual or onerous provision; and
d.        Offer alternative “I don’t agree” option with an explanation that the user cannot use or access the product or service.

5.  Condition Use on Acceptance (covered in the introductory paragraph)

  • Expressly state the user’s access to or use of the product or service is subject to these terms.
  • Expressly state that you will not provide the product or service except pursuant to these terms.

6.  Provide Notice of All Terms

  •  Draw attention to the on-line agreement.
  •  Make sure the customer sees it, e.g. no “below the fold,” small print, or hidden text.
  •  Place the “Accept” option at the end of all terms.
  •  Require the user to scroll though all terms before making the acceptance action.
  •  Consider requiring the user to check an “ I accept” box for each provision, especially for an unusual or onerous provision.
  • No link to terms or scroll boxes
  • Advise user to print and keep a copy of the agreement.

 

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Is a Clickwrap Agreement Enforceable?

Posted on April 19, 2008 by Sam Conforti

 

Before we discuss the enforceability (or lack thereof) of such agreements, it is probably best that we at least define our terms so we all know exactly what type of agreement we will be examining. Wikipedia has the following definition:


A clickwrap agreement (also known as a "clickthrough" agreement or clickwrap license) is a common type of agreement (often used in connection with software licenses). Such forms of agreement are mostly found on the Internet, as part of the installation process of many software packages, or in other circumstances where agreement is sought using electronic media. The name "clickwrap" came from the use of "shrink wrap contracts" in boxed software purchases, which "contain a notice that by tearing open the shrinkwrap, the user assents to the software terms enclosed within".


Click-wrap is the electronic equivalent of the shrink-wrap method which allows users to read the terms of the agreement before accepting them.


The content and form of clickwrap agreements vary widely. Most clickwrap agreements require the end user to manifest his or her assent by clicking an "ok" or "agree" button on a dialog box or pop-up window. A user indicates rejection by clicking cancel or closing the window. Upon rejection, the user can no longer use or purchase the product or service. Classically, such a take-it-or-leave-it contract was described as a "contract of adhesion, which is a contract that lacks bargaining power, forcing one party to be favored over the other". The terms of service or license do not always appear on the same webpage or window, but they are always accessible before acceptance.


As a contract negotiator by inclination, I have a natural aversion to such forms of agreements. Simply put, one cannot negotiate such agreements. I’m grateful that Wikipedia acknowledges that such forms of agreements in the past were called ‘contracts of adhesion’. Please note that in the past these types of agreements lacked the bargaining element; however these forms of agreements are evolving. The law has a term that may be applied to a vast number of these clickwrap agreements, Caveat Emptor, Buyer Beware.



Jason Haislmaier in his blog ThinkingOpen addresses the necessary elements for the ever-present “click-to-accept” contracts that many of us often face in his article How Do I Build an Enforceable Online Agreement? — Not (Always) the Way SalesForce.com or Google Would. I strongly recommend Haislmaier’s article. In it he discusses the American Bar Association’s Committee on Cyberspace Law and its year-long study regarding such agreements. Haislmaier discusses in depth the committee’s “bottom line” steps required in order to have an enforceable online agreement and adds some anecdotal evidence when online vendors might fall short of these steps. The four “bottom line” steps as espoused by the ABA’s Committee on Cyberspace Law are as follows:


1. The user must have adequate notice that the proposed terms exist;


2. The user must have a meaningful opportunity to review the terms;


3. The user must have adequate notice that taking a specified, optional action manifests assent to the terms; and


4. The user must, in fact, take that action.



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