Finding common ground in the world of electronic contracts: the consistency of legal reasoning in clickwrap cases.

AuthorDickens, Robert Lee

INTRODUCTION I. THE VALIDITY OF ELECTRONIC TRANSACTIONS AND THE REMAINING QUESTION OF ASSENT IN CLICKWRAP A. UETA and the Enforceability of Electronic Documents B. The Impersonal Nature of Clickwrap: A "Meeting of the Minds" in the Absence of Communication II. MUTUAL ASSENT IN CLICKWRAP: THE REQUIREMENT OF NOTICE AND THE RIGHT TO REVIEW AND REJECT A. The Validity of Online Clickwrap: Determining Conspicuous Notice and the Ability to Reject 1. Constructive Notice in Online Clickwrap 2. Requiring the Buyer to Click "I Agree": Distinguishing Clickwrap from Browsewrap 3. Deep Linking into Web Sites: The Ability to Bypass Terms Vacates a Finding of Assent 4. The Necessary Opportunity to Reject: Invalidating "Assent Now, Terms Later" Contracts 5. Confirming the Validity of Online Clickwrap B. The Enforceability of CD Clickwrap: Notice on the Outside, Terms on the Inside, and a Right to Return 1. Required Notice of Subsequent Terms and an Ability to Reject by Return 2. Unambiguous Assent: Establishing Proper Notice of Subsequent Terms 3. The Insufficiency of Notice Without the Ability to Reject and Return 4. Reconciling Disparity in CD Clickwrap 5. Clarifying Notice of Subsequent Terms and the Proper Period of Review a. Clarity of Notice b. Determining a Reasonable Length of Review 6. The Ability to Reject and Freedom to Contract III. CLICKWRAP AS A CONTRACT OF ADHESION: THE BENEFIT OF A STANDARDIZED CONTRACT VERSUS UNCONSCIONABLE TERMS A. Defining Clickwrap as an Adhesion Contract: Standardized Terms, No Negotiation, and Unequal Bargaining Power B. Validating Standardized Contracts: The Requirement of a "Reasonable Expectation" of Negotiation C. The Practical Benefit of Standardized Contracts D. Judicial Scrutiny and the Protection of Competition from Holdings of Unconscionable Terms E. Establishing Unconscionable Terms in the Absence of Competition 1. The Requirement to Prove Both Procedural and Substantive Unconscionability 2. Demonstrating Substantive Unconscionability F. The Lesson in Applying the Unconscionable Doctrine: Clickwrap Plays by the Same Rules as Any Other Contract IV. PRIOR WRITTEN AGREEMENTS: DOES THEIR EXISTENCE AUTOMATICALLY INVALIDATE A SUBSEQUENT CLICKWRAP CONTRACT? A. General Rules and the UCC: Determining Final Intent of the Parties Is a Question of Fact B. The Importance of Explicit Terms 1. Trumping Clickwrap with Unambiguous Agreements and Integration Clauses 2. Upholding Clickwrap: Filling the Void Left by Ambiguous Terms and a Prior Course of Conduct C. Notes of Caution While Reinforcing the Validity of Clickwrap CONCLUSION INTRODUCTION

With the technological advancements in global communications, contractual arrangements created by electronic transactions are becoming more commonplace. Electronic contractual arrangements have, however, raised complex legal issues unprecedented in the law. Courts must now confront worldwide access to agreements via Web pages, e-mails, and CD-ROMs, and legal doctrines must be consistently tested and reapplied to address the new forms of contracting stimulated by advancing technology.

Technology's impact on traditional contract law doctrine is readily apparent in the dilemmas generated by recent developments in computer software, hardware, and Internet transactions. In such transactions, sellers have increasingly begun utilizing clickwrap agreements, whereby standard terms and conditions are displayed on the computer screen when the user attempts to access the seller's services. In a clickwrap agreement, the seller's terms typically pop up before a purchased software disc can be installed (CD clickwrap) or while a service is being requested on the Internet. (1) The term "clickwrap" evolved from the use of "shrinkwrap" agreements, which are agreements wrapped in shrinkwrap cellophane within computer software packaging, and that, by their terms, become effective following the expiration of a predefined return period for the software (typically thirty days). (2) Because of such evolution, as well as the many similarities between shrinkwrap and clickwrap, courts addressing the enforceability of clickwrap agreements have relied upon the case law surrounding shrinkwrap cases in formulating their decisions. (3) Accordingly, any writing discussing the particulars of clickwrap agreements will be peppered with an occasional shrinkwrap case, and this Article proves no different.

The enforceability of clickwrap terms, which are often not known to the user until after payment, has become a subject of much debate in the courts. (4) Because many of the clickwrap cases have been fact-based decisions with seemingly contradictory conclusions, various scholarly and academic writings have pointed out the need for a heightened degree of clarity and certainty concerning the enforceability of clickwrap agreements. (5) Some scholars contend, for instance, that even the federal appellate circuits (6) are split on whether clickwrap agreements are enforceable. (7)

The aim of this Article is to provide clarity to the clickwrap debate and to argue that the legal reasoning behind the various clickwrap decisions has, in fact, been relatively consistent. More importantly, this Article illustrates that clickwrap agreements are a legitimate form of contracting, and that objections to clickwrap are substantially no different than objections to most other forms of contracts.

In analyzing clickwrap cases, one can easily become entangled in various disputes, such as the applicability of prevailing Uniform Commercial Code (UCC) provisions or whether the UCC applies at all. This Article endeavors to slice through such entanglements and identifies four critical issues at the heart of the clickwrap debate: (1) the requirement for notice of contractual terms, (2) the necessary opportunity to review and reject the terms, (3) the impact of adhesion doctrines on standardized contracts, and (4) the effect of prior written agreements on clickwrap. The first two issues, "notice of terms" and "review and rejection," are, of course, necessary ingredients in establishing a manifestation of contractual assent. (8) Accordingly, Parts I and II of this Article are dedicated to questions of whether a meeting of the minds can be formulated in a purely electronic agreement. Specifically, Part I of this Article will briefly discuss the general legality of electronic transactions and the reason that buyer assent to clickwrap remains an issue. Part II provides an in-depth discussion of mutual assent in clickwrap, specifically the above mentioned requirements of notice and the requisite ability to review and reject. In exploring the issues of notice and the ability to reject, Part II will necessarily consider the impact of such factors on both online and CD clickwrap. Next, Part III will assess the contract of adhesion questions that are inherent in clickwrap agreements, and Part IV will follow with a discussion concerning the impact on clickwrap of prior written agreements.

  1. THE VALIDITY OF ELECTRONIC TRANSACTIONS AND THE REMAINING QUESTION OF ASSENT IN CLICKWRAP

    1. UETA and the Enforceability of Electronic Documents

      The enforceability of a written provision in downloadable electronic form has been settled by the passage and adoption of the Uniform Electronic Transaction Act (UETA) (9) and the Electronic Signatures in Global and National Commerce Act (E-Sign Act). (10) The E-Sign Act provides that "a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form." (11) The UETA, which is of similar purpose as the E-Sign Act, was passed by the National Conference of Commissioners on Uniform State Laws in July 1999, (12) and it has been adopted by all but four states. (13) The UETA reiterates the E-Sign Act by stating that a "contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation." (14) It is of some importance to note that the E-Sign Act preempts state law only in those states that have not enacted sections 1 through 16 of the UETA. (15)

      Neither the E-Sign Act nor the UETA is intended to displace existing contract law doctrines. (16) Consequently, both acts leave the determination as to whether mutual assent has occurred in an electronic transaction to general contract law. (17) Notably, the official comment to the UETA cites section 3 of the Restatement (Second) of Contracts that an agreement cannot be established without a manifestation of mutual assent and that a determination of such assent is to be made in the context of the specific circumstances. (18)

    2. The Impersonal Nature of Clickwrap: A "Meeting of the Minds" in the Absence of Communication

      The debate on the enforceability of clickwrap has predominantly occurred with regard to the doctrine of assent. The mutuality of assent or a meeting of the minds is essential to the formation of an enforceable contract. (19) Whether it is executed electronically or via a physical document, a transaction, in order to be a contract, requires a manifestation of agreement between the parties. (20) The impersonal nature of clickwrap agreements, however, raises substantive questions with regard to contractual assent. In a clickwrap agreement, the same terms are presented to all users, and "the parties do not meet face-to- face or personally communicate." (21) Considering such an impersonal method of contracting, can there be assurances that a meeting of the minds has actually occurred? (22) To phrase the question more precisely, do clickwrap agreements represent a meeting of the minds under traditional contract law?

  2. MUTUAL ASSENT IN CLICKWRAP: THE REQUIREMENT OF NOTICE AND THE RIGHT TO REVIEW AND REJECT

    1. The Validity of Online Clickwrap: Determining Conspicuous Notice and the Ability to Reject

      1. Constructive Notice in Online Clickwrap

        The seminal case regarding assent in Internet-based...

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