The legal weakness of Web "terms and conditions"

Lawyer Doug Isenberg explains how a recent court ruling will affect the legal relationship between Net surfers and every Web site they visit.

4 min read
Every one of us has signed a contract at some point without reading it.

Whether it's at a car rental agency or the doctor's office, sometimes we sign on the dotted line because we don't want to be bothered by reading the fine print--which isn't negotiable anyway, so why bother?

In some instances, we don't even get a chance to read the terms of a contract before we pay our due--such as with insurance policies and airplane tickets. The same holds true in the high-tech world, where off-the-shelf software comes packaged with "shrink-wrap" licenses--agreements printed inside the box or incorporated into the software itself.

These agreements, which we can't even see until we've bought the software, contain important terms about what users can--and can't--do with the software.

This may seem like a strange system, but U.S. courts generally have blessed these kinds of agreements. While "unconscionable" terms typically are not legally enforceable (such as a provision obligating a software licensee to name his first-born son after the chairman of Microsoft simply because he clicked "I agree"), the courts have, since at least 1996, found shrink-wrap or "click-wrap" agreements binding.

In other words, clicking "I agree" after being presented with a contract on the Internet or during a software installation means that you agree to the terms of the contract. It does not mean, "Because I'm not signing a paper document with a ballpoint pen, and because I'm eager to get on with this process and won't read these words on my screen, I'm not really entering into a contact and therefore am not legally bound by anything."

On the other hand, as a federal district in New York has clearly pointed out in an opinion on July 3, if the user can install the software without clicking, "I agree," then--no surprise here--the user hasn't agreed to anything at all. This simple judicial pronouncement could have tremendous legal implications for every commercial Web site.

In the New York case, a number of computer users sued Netscape Communications after they had downloaded and used the software company's "SmartDownload" software, which supposedly makes it easier to download other files.

The users alleged that the software transmitted to Netscape personal information about their file activity on the Internet, in violation of the Electronic Communications Privacy Act and the Computer Fraud and Abuse Act.

In response to the lawsuit, Netscape tried to force the users to arbitrate the case (perhaps because many arbitration proceedings, unlike courtroom battles, are not public). Netscape cited a provision in the SmartDownload license agreement that required users to arbitrate most disputes. But, the users argued that the license agreement did not apply because they had never agreed to its terms.

The court sides with users
The court sided with the SmartDownload users, primarily because the software engineer who created the download application was not very smart.

Instead of presenting the license agreement to users and requiring them to click on an "I agree" button before proceeding, the software only asked them to "please review and agree to the terms of the agreement"--but if the users did not do so, they could still download the software! This arrangement, the court said, created a "browse-wrap" agreement that "reads as a mere invitation, not as a condition."

"Because the user plaintiffs did not assent to the license agreement, they are not subject to the arbitration clause contained therein and cannot be compelled to arbitrate their claims against (Netscape)," the court wrote.

This case is incredibly significant not only to Netscape and others who have designed faulty software license interfaces, but to every Web site with "terms and conditions" (sometimes called "terms of use" or "terms of service").

I'm not sure where the trend started, but for years Web site publishers large and small have included various legal terms on their sites, usually on a page linked from the footer of most other pages.

Common terms include such things as: users agree not to hold the Web site publisher responsible for any misinformation on the site; users agree not to copy any information from a Web site without the site owner's permission; all software downloaded from a site contains no warranties; visitors won't use any trademarks claimed by the site owner "in any manner."

If these terms and conditions don't sound familiar, it's probably because you're either not a lawyer or because--like most people--you've never clicked on the "terms and conditions" link at the bottom of any Web page. The reason you've never done so is because very few sites require you to. In other words, the "terms and conditions" are merely a "browse-wrap" agreement.

But this should not come as a surprise. While including a "terms and conditions" link in the footer of Web pages is certainly standard practice in the industry, the Netscape dispute is not the first time a court has questioned the legal validity of these supposed agreements.

In March 2000, a California court wrote, in a dispute between Ticketmaster and Tickets.com: "It cannot be said that merely putting the terms and conditions in this fashion (without requiring visitors to click an 'agree' button before using a site) necessarily creates a contract with anyone using the Web site."

Although neither the Netscape case nor the Ticketmaster case expressly held that Web site "terms and conditions" are unenforceable, they should make Web publishers revisit this practice. If a company wants to impose legal obligations on visitors to its site, it would be wise to make sure the visitors really agree first.