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This Contract May Cause You Unlimited Liability – Please Read It

Posted in Cyberspace Law, Legal Info

By Scott Plamondon

Most of us have become familiar with the terms and conditions printed on the back of the ticket that is obtained when parking our cars in public lots. We all are familiar with the caption at the top of the ticket proclaiming “This contract limits our liability, please read it.”  Having parked my car hundreds of times in public parking lots, each time receiving a small ticket informing me of this proclamation, I now scandalously admit that I have never read these terms. Yet, if a dispute were to ensue regarding the terms and conditions of my use of public parking, the dispute would likely center around the terms and conditions that I have carelessly ignored in cavalier fashion. While I’m not suggesting that we review, analyze, revise and negotiate the boilerplate terms thrust upon us in the context of public parking, I mention this frequently overlooked contract relationship to demonstrate that we often may enter into contracts with others, while giving little thought or consideration to the terms we have accepted.

 

One commonly overlooked occasion on which most people enter into a contract without even reading its terms is the so-called “click wrap” agreement. Click wrap agreements are generally formed between parties operating over the internet, or by a user accepting the terms of an agreement when installing software on their computer. You likely have encountered a click wrap agreement on-line when signing up for a new internet service, opening a bank account, or buying a subscription to on-line content. In similar fashion to leaving a car in public parking, most users simply click “I accept” without ever reading the (often lengthy) terms and conditions to which they have agreed. Some users believe that click wrap agreements are exactly like the “agreement” on the back of the public parking lot ticket, and assume that they are unenforceable. Other users just don’t care. Yet the terms and conditions contained in these click wrap agreements have often been held to be enforceable – even where the intent to be bound was manifest through a somewhat trivial act, such as clicking a check box or pressing a button.

The enforceability of click wrap agreements recently was addressed by the Second Circuit in Schnabel v. Trilegint Corp. In Schnabel, an internet user agreed to the terms of a click wrap agreement while signing up for an on-line service. The agreement required the user to click on a “YES” button in order to demonstrate the user’s agreement to the terms and conditions of the website. Those terms and conditions permitted the website to transmit the user’s personal credit card data. The website later emailed users a contract addendum containing a consumer arbitration provision. The court ruled that a contract was formed at the instant the user entered their information and clicked “YES.”  The court upheld the basic terms of the agreement, but found that the addendum was not binding because the user had no opportunity to click “YES” or otherwise agree.

Although legions of lawyers and internet users who apparently will agree to anything presented on a computer screen next to an “I accept” button have cried foul by asserting that click wrap agreements are contracts of adhesion, unconscionable, or otherwise unenforceable, courts generally have upheld the enforceability of click wrap agreements where the terms of those agreements were prominently displayed on the computer screen and the user was required to click the “I agree” button (or something similar) before being permitted to proceed. While the courts have overturned some click wrap agreements, most of these cases involve instances where the terms and conditions of the agreement were obscured or hidden from the user. For example, in Pollstar v. Gigmania Ltd. (U.S. District Court, E.D. Cal. 2000), the court found that users were not provided with reasonable notice of the terms of a click wrap agreement because the user was required to follow a hyperlink in order to review the terms. That particular link appeared in small, gray colored print on a gray background. These cases are somewhat rare, and most click wrap agreements are now prominently displayed, giving the user ample opportunity to review all of the terms.

Admit it, you don’t read the agreement.

Blindly accepting the terms and conditions of a click wrap agreement as though it were analogous to the relatively harmless disclaimer of liabilities contained in the back of a parking permit may come at great peril or expense. In a world which relies increasingly on electronic communications over the internet for human interaction, users may find themselves surprised by some of the terms contained in click wrap agreements. An on-line collaboration site between musicians could, for instance, claim ownership rights in the work product of musicians collaborating over that on-line system through an assignment provision in the click wrap agreement. Personal photographs uploaded to a “free” cloud storage site may be uploaded without knowledge that the user is granting a non-exclusive perpetual worldwide license to the website operator pursuant to the terms and conditions of an unread click wrap agreement. Although customary and typical contract defenses still apply, the implications of click wrap agreements may still be more significant than most users assume.