Clickwrap Contract Enforcement: Arbitration & Forum Selection Clauses
Recommended Reading: For lawyers seeking to understand the contest and enforceability of clickwrap agreements, an article written by Rachel Cormier Anderson and published by the Shidler Journal of Law
Link:
http://www.lctjournal.washington.edu/Vol3/a011Cormier.html
In three recent cases, courts have invalidated portions of consumer clickwrap agreements containing either forum selection or binding arbitration clauses. In the first case, the Washington State Court of Appeals invalidated a forum selection clause found in a clickwrap agreement because the clause was contrary to state consumer protection policies. In the second case, the California Court of Appeals rejected a clickwrap agreement calling for binding arbitration in a specified forum when the plaintiff sought to bring a class action claim. Finally, the U.S. Court of Appeals for the Fifth Circuit recently declared a binding arbitration clause because it was unconscionable. Although these cases address a relatively new form of contracting known as "clickwrap agreements," the essential issue in each case was not new. These cases suggest that courts are willing to accept the validity of clickwrap agreements in general, but have invalidated specific clauses based on traditional contract doctrines such as unconscionability and public policy. This Article examines these recent cases in light of existing precedent concerning the enforceability of clickwrap agreements
Clickwrap Contract Enforcement Often Depends on the Specific Facts and Jurisdiction
The legal status of shrink wrap contracts in the US is somewhat unclear. One line of cases follows ProCD v. Zeidenberg which held such contracts enforceable (see, e.g., Brower v. Gateway) and the other follows Klocek v. Gateway, Inc., which found the contracts at hand unenforceable (e.g., Specht v. Netscape Communications Corp.), but did not comment on shrink wrap contracts as a whole. These decisions are split on the question of consent, with the former holding that only objective manifestation of consent is required while the latter require at least the possibility of subjective consent.
In particular, the Netscape contract was rejected because it lacked an express indication of consent (no "I agree" button) and because the contract was not presented directly to the user (users were required to click on a link to access the terms). However, the court in this case did make it clear that "Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility." Specht, 356 F.3d 17. It may be worth noting that the user in the Zeidenberg case had purchased and opened the packages of multiple copies of the product, and therefore could not easily prove he remained ignorant of the contract/license; whereas in many cases, the so-called shrink-wrap "license" agreement has not been reviewed at the time of purchase (having been hidden inside the box), and therefore is arguably not part of the sale of the copy, and thus not enforceable by either party without further "manifestation of assent" to its terms. In general, a user is not obligated to read, let alone consent to any literature or envelope packaging that may be contained inside a product; otherwise such transactions would unduly burden users who have no notice of the terms and conditions of their possession of the object purchased, or the blind, or those unfamiliar with the language in which such terms are provided, etc.
Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009)
A federal court in Texas held the clickwrap agreement between United Parcel Service and one of its customers was binding. After plaintiff Via Viente sued UPS in Texas, UPS moved to transfer venue to the Northern District of Georgia, citing to a forum selection clause in a license agreement governing Via Viente’s use of a UPS-provided software Via Viente argued that the clickwrap agreement (and by extension the forum selection clause) was not binding because a UPS technician installed the application on a Via Viente computer, and therefore Via Viente never had a chance to agree to the terms. The court rejected that argument for the following three reasons:
• Via Viente was a sophisticated company and “should have been aware that terms of service were forthcoming” after having signed the general Carrier Agreement with UPS that required the use of the software;
• It was “difficult to believe” that Via Viente would have left the UPS technician installing the software unsupervised. Moreover, it was not UPS’s practice to install the software unsupervised;
• Via Viente had kept the benefit of the bargain (convenience and “palatable” shipping costs) so it would have been inequitable to allow it to disavow provisions it did not like.
After finding the clickwrap agreement to be binding, the court went on to find the forum selection clause enforceable, and transferred the matter to the Northern District of Georgia.
Available at: http://blog.internetcases.com/page/2/
Recommended Reading: For lawyers seeking to understand the contest and enforceability of clickwrap agreements, an article written by Rachel Cormier Anderson and published by the Shidler Journal of Law
Link:
http://www.lctjournal.washington.edu/Vol3/a011Cormier.html
In three recent cases, courts have invalidated portions of consumer clickwrap agreements containing either forum selection or binding arbitration clauses. In the first case, the Washington State Court of Appeals invalidated a forum selection clause found in a clickwrap agreement because the clause was contrary to state consumer protection policies. In the second case, the California Court of Appeals rejected a clickwrap agreement calling for binding arbitration in a specified forum when the plaintiff sought to bring a class action claim. Finally, the U.S. Court of Appeals for the Fifth Circuit recently declared a binding arbitration clause because it was unconscionable. Although these cases address a relatively new form of contracting known as "clickwrap agreements," the essential issue in each case was not new. These cases suggest that courts are willing to accept the validity of clickwrap agreements in general, but have invalidated specific clauses based on traditional contract doctrines such as unconscionability and public policy. This Article examines these recent cases in light of existing precedent concerning the enforceability of clickwrap agreements
Clickwrap Contract Enforcement Often Depends on the Specific Facts and Jurisdiction
The legal status of shrink wrap contracts in the US is somewhat unclear. One line of cases follows ProCD v. Zeidenberg which held such contracts enforceable (see, e.g., Brower v. Gateway) and the other follows Klocek v. Gateway, Inc., which found the contracts at hand unenforceable (e.g., Specht v. Netscape Communications Corp.), but did not comment on shrink wrap contracts as a whole. These decisions are split on the question of consent, with the former holding that only objective manifestation of consent is required while the latter require at least the possibility of subjective consent.
In particular, the Netscape contract was rejected because it lacked an express indication of consent (no "I agree" button) and because the contract was not presented directly to the user (users were required to click on a link to access the terms). However, the court in this case did make it clear that "Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility." Specht, 356 F.3d 17. It may be worth noting that the user in the Zeidenberg case had purchased and opened the packages of multiple copies of the product, and therefore could not easily prove he remained ignorant of the contract/license; whereas in many cases, the so-called shrink-wrap "license" agreement has not been reviewed at the time of purchase (having been hidden inside the box), and therefore is arguably not part of the sale of the copy, and thus not enforceable by either party without further "manifestation of assent" to its terms. In general, a user is not obligated to read, let alone consent to any literature or envelope packaging that may be contained inside a product; otherwise such transactions would unduly burden users who have no notice of the terms and conditions of their possession of the object purchased, or the blind, or those unfamiliar with the language in which such terms are provided, etc.
Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009)
A federal court in Texas held the clickwrap agreement between United Parcel Service and one of its customers was binding. After plaintiff Via Viente sued UPS in Texas, UPS moved to transfer venue to the Northern District of Georgia, citing to a forum selection clause in a license agreement governing Via Viente’s use of a UPS-provided software Via Viente argued that the clickwrap agreement (and by extension the forum selection clause) was not binding because a UPS technician installed the application on a Via Viente computer, and therefore Via Viente never had a chance to agree to the terms. The court rejected that argument for the following three reasons:
• Via Viente was a sophisticated company and “should have been aware that terms of service were forthcoming” after having signed the general Carrier Agreement with UPS that required the use of the software;
• It was “difficult to believe” that Via Viente would have left the UPS technician installing the software unsupervised. Moreover, it was not UPS’s practice to install the software unsupervised;
• Via Viente had kept the benefit of the bargain (convenience and “palatable” shipping costs) so it would have been inequitable to allow it to disavow provisions it did not like.
After finding the clickwrap agreement to be binding, the court went on to find the forum selection clause enforceable, and transferred the matter to the Northern District of Georgia.
Available at: http://blog.internetcases.com/page/2/
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