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San Diego Clickwrap Agreements

San Diego, California has been a “high tech” city for many years. In the age of online commerce, “signing on the dotted line” has for many transactions evolved into “clicking on the ‘I agree’ box.” Many companies in San Diego use these methods for business transactions. The San Diego Superior Court website can be used to assist in finding cases in which this issue has been litigated.

The resulting “clickwrap” agreement may be just as enforceable in court as if the parties had solemnly written their signatures at the end of a paper contract. As with so many twists on conventional legal concepts that have been ushered in with the Internet, courts are having to adapt time-tested principles on formation of a contract to the computer age.

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In one case, a company paid thousands of dollars for sophisticated software. The company claimed that it was entitled not only to use the software but also to receive perpetual upgrades and support. As evidence of such a bargain, the company pointed to the purchase order for the transaction. The seller of the software countered by relying on a later clickwrap license agreement in the software itself that limited its liability to the price paid for the software.

The court ruled that the language in the clickwrap agreement that limited the seller’s liability was binding. The buyer clearly had given its assent by clicking “I agree,” just as if its representative had signed a standard contract. The only issue, according to the court, was whether clickwrap license agreements are an appropriate way to form contracts, and the court held that they are.

The court was aware of and sympathetic to the context in which most clickwrap agreements are created. The typical consumer, having paid a substantial sum for software, rushes it into the computer, clicks on “install” and scrolls past the fine print in the license agreement. Arriving at the “I agree” box, the customer clicks on it with hardly a thought. The lesson from this case is that the click of a mouse is the equivalent of the stroke of a pen.

Clickwrap agreements are no less enforceable than conventional contracts, but neither will they be recognized by courts if the basic elements of offer and acceptance are absent. From the early common law of England to American law today, promises become binding only when there is a meeting of the minds. As another court faced with a disputed clickwrap agreement put it, “[a]ssent may be registered by a signature, a handshake, or a click of a computer mouse transmitted across the invisible ether of the Internet.”

That court had to resolve a dispute between visitors to a website who obtained a free software program that makes it easier to download files from the Internet. Someone wishing to download the free program would see at first only a “download” box but no reference to a license agreement. Only on the second screen was there an invitation to review and agree to a license agreement. A click on that invitation led to an unequivocal statement that the user must agree to the terms in the agreement before installing the software, and another click revealed the agreement in full. In short, visitors to the website were not required to indicate affirmatively their assent to the license agreement, or even to view the agreement, before downloading the software.

Individuals who had downloaded the software sued the provider because they believed that using the software caused private information about their Internet activity to be transmitted to the software provider, which was a violation of federal law. The court ruled that they were not bound by a clause tucked away in the license agreement that required arbitration of disputes in a specific location. From the user’s vantage point, the software was like a free neighborhood newspaper at a supermarket counter, there simply for the taking. The provider of the “newspaper” could not impose contract terms on its taking without clearly requiring assent to the terms before a customer could take the paper.

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