Enforceable Browse Wrap Contracts

With the growth in its popularity, and the evolving sophistication of technology to offer and execute it, e-commerce is increasingly automated. In the past, Internet sites used terms of use agreements that include an Internet mechanism to affirm consent to be bound by the agreement (“click-wrap”).

But more often than ever, browse-wrap agreements are replacing click-wrap agreements. Enforceable browse-wrap agreements have two factors in common:

1. They include sufficient notice of the terms; and
2. The actions of the Internet user clearly manifest the user's acceptance of the terms.

Keep in mind that sufficient notice is not a bright-line test for browse-wrap agreement enforceability; rather, it has been used on a case-by-case basis. For instance, in Specht v. Netscape Communications Corp. , 306 F.3d 17 (2d Cir. 2002), the dispute was whether users of Netscape's software, who downloaded it from Netscape's Web site, were bound by an agreement to arbitrate disputes with Netscape in instances in which Netscape had posted the terms of its offer of the software (including the obligation to arbitrate disputes) on the Web site from which users downloaded the software.

The court ruled against Netscape because the users would not have seen the terms Netscape exacted without scrolling down through the graphics and other materials displayed on their computer screens, and there was no reason for them to do so. Had plaintiffs scrolled down instead of acting on defendants' invitation to click on the Download button, they would have encountered the following invitation: “Please review and agree to the terms of the Netscape Smart-Download software license agreement before downloading and using the software.”

The court found that the evidence did not demonstrate that a person who had downloaded Netscape's software had necessarily seen the terms of its offer, and so, the court ruled that the agreement was unenforceable.

As a result of this case, it has become widespread discussion that the icon for the terms of use agreement be placed in the upper left-hand quadrant of the home page and that all visitors be channeled through the home page. The reason for this suggestion is that the court will take judicial notice of the fact that all Internet pages open from the upper left-hand quadrant, thus the defendant must overcome the presumption that the icon was viewed. Without this presumption, the plaintiff has the burden of proving that the defendant did see the icon.

Not All on The Same Page

But not so fast ' and not so simple, either.

The Second Circuit, for example, reached a different result in Register.com, Inc. v. Verio, Inc. , 356 F.3d 393 (2nd Cir. 2004), in which it was undisputed that the users of a Web site had actual knowledge of the terms and conditions posted on the site. Register sells Internet domain names and Verio designs and develops Web sites. Register was contractually required to make its customers' contact information available for free to the public for any lawful purpose. An entity making a query through Register's Internet site would receive a reply furnishing the requested information, captioned by a legend devised by Register, which stated: “By submitting a WHOIS query, you agree that you will use this data only for lawful purposes and that under no circumstances will you use this data to ' support the transmission of mass unsolicited, commercial advertising or solicitation via [e-]mail.”

Despite this posted information, Verio devised an automated robot to retrieve the information and use it for marketing purposes on a regular basis. The District Court granted Register's preliminary injunction, which the Second Circuit upheld.

On appeal, Verio had conceded that it was aware of the restrictions Register placed on the use of the contact information, and that by using such information for its own marketing opportunities, it was violating those restrictions. Nevertheless, Verio argued that it never became contractually bound to the conditions imposed by the legend because the legend did not appear on the screen until after Verio had made a query and received the desired information from Register.

Verio claimed that it did not receive legally enforceable notice of the terms of use. The court, noting that Verio had actual knowledge of the terms, stated, “It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree.” The court made a point to distinguish the facts at issue there from those in Specht. The two cases were “crucially different,” the court found, because in Specht, “[t]here was no basis for imputing to the downloaders of Netscape's software knowledge of the terms on which the software was offered,” whereas Verio had “admitted that, in entering Register's computers to get the data, it was fully aware of the terms on which Register offered the access.”

The Viero court relied on basic contract law, stating:

While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract. It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree. See, e.g., Restatement (Second) of Contracts '69(1)(a) (1981) ('[S]ilence and inaction operate as an acceptance ' [w]here an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.'); 2 Richard A. Lord, Williston on Contracts Section 6:9 (4th ed. 1991).

One Trend Toward Enforcement

Some fairly recent cases, on the other hand, demonstrate a trend toward enforcing browse-wrap licenses, as long as Web sites provide proper notice of the license (see, Ticketmaster Corp. v. Tickets.com, Inc., 2000 WL 1887522 (C.D.Cal. Aug. 10, 2000) and Southwest Airlines Co. v. BoardFirst, L.L.C., 2007 WL 4823761 N.D. Tex (2007)).

One plausible reading of these cases is that courts in browse-wrap litigation allow greater solicitude to consumers than they do to businesses, and that they will enforce browse-wraps primarily in business-to-business (“B2B”) transactions, rather than in business-to-consumer (“B2C”) transactions, and perhaps only in repeat transactions, as was the case in Verio. Courts may be willing to overlook the absence of assent only when there are reasons to believe that the defendant is aware of the plaintiff's terms. That awareness may be more likely with corporations than with individuals, perhaps because corporations are repeat players, because they themselves employ terms of use and, therefore, should expect that others will, or because some evidence in each individual case suggests they are, in fact, more aware of those terms. See, 91 MNLR 459, Terms of Use, December, 2006.

It should be noted that while courts will, in general, enforce browse-wrap agreements ' that is, provided that those agreements include sufficient notice of the terms and the Internet user's actions clearly manifest acceptance of the terms, there are, however, numerous exceptions to the general rule. In particular, courts often refuse to enforce specific Internet terms of use against consumers, particularly where those terms involve class-action waivers, arbitration requirements and inconvenient-forum choices.

The bottom e-commerce line: Yes, the buyer must beware in B2C and in B2B transactions, and particularly in the terms of use and browser-wrap agreements governing them, but the provider ' the merchant, if you will ' must also beware. Preparation, review and diligence can ensure smooth B2B and B2C online relations where terms-of-use and browse-wrap contracts are concerned.