Indiana Law Journal
Copyright (c) 2000 Trustees of Indiana University

Fall, 2000;  75 Ind. L.J. 1125


Humans, Computers, and Binding Commitment
Addison C. Harris Lecture,  October 26, 1999
 

Margaret Jane Radin
(William Benjamin Scott & Luna M. Scott Professor of Law and Co-Director of the Program in Law, Science & Technology, Stanford Law School.)

Copyright 2000 by Margaret Jane Radin. Permission is hereby granted to reproduce and distribute this Article in whole or in part for personal, professional or educational purposes, provided such copies are disseminated at or below cost, provided that each copy bears this notice, and provided that the Indiana Law Journal is credited as the original published source.


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A. Precursors of "Click-Wrap" Contracts

Website presentation of terms is analogous in certain significant respects to what  [*1134]  is known as a shrink-wrap license, usually used in software distribution. (That, of course, is where the term "click-wrap" comes from.) There are two different species of shrink-wrap license. In the first kind, the terms are presented before purchase of the software, on the box or plastic shrink-wrap that covers the box. The seller maintains (and hopes) that when you break the shrink-wrap, it signifies that you have agreed to the terms and a license contract is formed. In the second kind of shrink- wrap license, the terms are not presented to you before you buy; instead, the outside of the box informs you that there are terms inside that you will see later (perhaps on the screen when you run the software) and that you will be bound to them if you use the software. The contract-as-product model describes both procedures, especially the second.

Primarily because courts remain committed to the ordinary language view of contract-as-consent, the legal validity of shrink-wrap licenses-that is, whether or not presentation of terms in this way causes a contract to be formed-remains in doubt.  n20 ProCD, Inc. v. Zeidenberg,  n21 written by an economist judge who is friendly to the contract-as-product model, has become well-known for validating a shrink-wrap license of the second kind. In that case, ProCD's product was a CD containing a telephone-number database. A purported contract that appeared on the screen when the program was run prohibited users from copying the database. If valid, this was a contractual extension of ProCD's rights under copyright law, since, under U.S. copyright law, databases are not protected if they are "unoriginal."  n22 Zeidenberg, the defendant, relied on copyright law to copy the database; ProCD relied on contract law to argue that he could not.

Although the terms were not seen by the buyer before he purchased the product, Judge Easterbrook held that the contract was validly formed as long as two conditions were met: (1) something on the outside of the box warned the consumer that terms were inside, and (2) the consumer could return the product for a refund after seeing the additional terms.  n23 Although ProCD has become an influential case, especially among software publishers, another judge in another jurisdiction might have held otherwise in this case (as some have in other cases);  n24 and what will happen in future cases, if the matter is left up to the courts, is by no means certain.

A website that shows you its terms and says, "If you click in this box you have agreed to my terms," under circumstances in which the website is programmed so that you will not be allowed to use the site if you do not, is somewhat analogous to a shrink-wrap license of the first kind. The website is programmed so that the click signifying "agreement" is required before you can use the site; similarly, you will not get to use shrink-wrapped software if you do not signify "agreement" by breaking the shrink-wrap. Some websites, such as eBay, are presenting their terms this way. Although they are somewhat analogous to shrink-wrap of the first kind, the analogy does not go all the way. For one thing, it is no doubt easier to read terms that  [*1135]  are presented to you on your computer screen than to read the terms on a shrink- wrapped package while you are in the store deciding whether to purchase it. Also, it will be easier for you to retain a copy of the terms from the website, since you can copy them and print them out, whereas if the terms are actually on the shrink-wrap, they will be hard to read after you break it.

A website that says on the home page nothing more than "Terms of Use" might be somewhat analogous to a shrink-wrap contract of the second kind. That kind of shrink- wrap tells you on the outside only that there are binding terms inside. Beyond.com's home page link says only "Terms of Use," and there are many websites that do this.  n25 A website like this is analogous to shrink-wrap of the second kind only if we interpret its silence as saying to the user, "By continuing to use this site you are bound to a set of terms which you will only see if you choose to click on them." Under this interpretation it is analogous to becoming bound to further terms inside the box (or on the first screen). But the interpretation stretches things; silence is in fact not the same thing as alerting you that further terms await you inside. Also detracting from the analogy is the fact that with software purchase the terms usually show themselves to you, and in the website case you must affirmatively do something in order to see them. Recall also that even in ProCD, where the judge was quite sympathetic to the shrink-wrap procedure, a condition for its validity was that the user be able to unwind the deal after viewing the terms (for example, by returning the product for a refund).  n26 For many digital contracts of this type it is rather difficult for the consumer to return the product after viewing the terms. (A group of Linux users who tried to return the Windows software (or operating system) found that out.  n27)

We should keep in mind the real world and the prevalence of the contract-as- product model in practice, even if many of us have not quite admitted that to ourselves in our ordinary discourse about contract. In the offline world there are a great many contracts in which the buyer does not see many of the terms until after buying the product. We purchase a large range of items (including shrink-wrapped software) over the telephone and have no opportunity to see the fine print until shipment is received. Consumer product warranties are often inside the box. In some classes of these contracts, such as the fine-print inserts that come with my credit card bill once in awhile, new terms are imposed at the seller's will from time to time. In all of these contracts, it appears that the promisor must at least be given the option of declining after the fact to be bound, by unwinding his or her initial acceptance of the product (for example, ceasing to use the credit card). It does not appear, though, that the option in practice is anything more than theoretically possible. Even though I am a lawyer, and actually once in awhile look at fine print (though not that often), I have  [*1136]  never packed up and sent back something I bought over the telephone because I did not like the fine print on the back of the invoice when it came. Do you know anyone who has?

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FOOTNOTES:

n20 See, e.g., Mark A. Lemley, Intellectual Property and Shrinkwrap Licenses, 68 S. Cal. L. Rev. 1239 (1996).
n21 ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).
n22 See Feist Publications, Inc. v. Rural Tel. Serv., 499 U.S. 340 (1991).
n23 See ProCD, 86 F.3d at 1450.
n24 See, e.g., Step-Saver Data Sys., Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991).
n25 See, e.g., Stanford Home Page (visited Feb. 2, 2000) <http://www.stanford.edu>.
n26 See ProCD, 86 F.3d at 1456.
n27 The Windows license told users that if they did not like the terms when they saw them, they should return the software for a refund. A group of Linux users divested their computers of Windows and attempted to obtain a refund. Neither the store that sold them the software nor Microsoft thought it was the appropriate party to fulfill the terms. Finally, the Linux users had a demonstration outside Microsoft's office in the Bay Area. Reports said it was a civilized demonstration in which Microsoft employees came out and served them coffee and doughnuts. See, e.g., Wired News, Linux Users Shut Their Windows ( v i s i t e d F e b . 9 , 2 0 0 0 ) < h t t p : //www.wired.com/news/technology/0,1282,17926.00.html>.