Ucc and shrinkwrap licenses

ProCD appealed. Issue: Are shrinkwrap licenses enforceable upon software buyers? Rule: Shrinkwrap licenses are just as enforceable as contracts in general. Analysis: The court starts with the proposition that licenses are covered by the UCC and common law just like ordinary contracts. The court finds that one of the terms that the consumer agrees to upon purchase of this software is assent to a license.

Bayer Corp. The distinction is important. If the proper analysis is pursuant to UCC section , the analysis is simple: i. LAN manifested assent to the clickwrap license agreement when it clicked on the box stating "I agree," so the agreement is enforceable. See Specht v. Netscape Communications Corp. If the proper analysis is pursuant to UCC section , the analysis is more complicated.

See generally 1 James J. UCC section creates two forks in the road for the facts of this case. The first fork is whether or not the clickwrap license agreement is a counteroffer an acceptance to i. The second fork is whether i. LAN accepted the additional terms either explicitly, implicitly, or by default. Clicking on "I agree" could be seen as explicit acceptance. Between merchants, if a party never objects to the additional terms, and the additional terms are not "material," then the UCC deems the party to have accepted the additional terms implicitly, for lack of a better description.

Adell Plastics, Inc. The comment to UCC section suggests that the test for "materiality" is whether the terms in question would result in unreasonable surprise or hardship to the party if incorporated without the party's express awareness. Finally, if the additional terms are not accepted either explicitly or implicitly, but the conduct of the parties shows recognition of a contract, then the gap-filler provisions of Article 2 kick in to fill the void with default terms.

Elmwood Sensors, Inc. The first fork only has importance, however, if the parties disagree over the additional terms. In this case, i. LAN's purchase order was silent on the issue of liability, so NextPoint proposed additional terms which, to be extra cautious, NextPoint characterized as a counteroffer. In such a case, if the original offer is silent on the issue of the additional terms, and no objection ever is made to them, then it should not matter whether the additional terms are part of a counteroffer or a proposal.

All that should matter in this case, then, is whether i. LAN accepted the additional terms. Article 2 does not limit liability by default, so if i. LAN accepted the clickwrap license agreement it must have done so either explicitly, by clicking on "I agree," or implicitly, as provided in UCC section 2. The case to which i.

Wyse Technology, F. Step-Saver considered shrinkwrap license agreements, where the agreement is printed somewhere on or in the box of software, rather than clickwrap license agreements, where the agreement appears on the computer before the software is installed, but otherwise the facts of Step-Saver are similar to the facts before this Court: i a reseller telephoned a software manufacturer and asked for a shipment of software, which the manufacturer verbally agreed to provide, ii the reseller then sent a written purchase order specifying quantity, price, and shipping and payment information, and iii the manufacturer then shipped the software along with an invoice matching the purchase order.

On the box containing the software, however, was a shrinkwrap license agreement which contained a provision limiting the manufacturer's liability to the price paid for the shipment. The question for the court was whether to enforce the provision of the shrinkwrap license agreement limiting the manufacturer's liability.

The court held that the limitation of liability was not enforceable because it was merely a proposed agreement under UCC section to which the reseller never agreed; the court refused to imply assent because the limitation of liability was material and UCC section 2 b does not allow material terms to be added by implication.

This holding was fully adopted in a later case against the same software manufacturer, Arizona Retail Systems, Inc. The Software Link, Inc. Step-Saver once was the leading case on shrinkwrap agreements.

Zeidenberg, 86 F. The holding of ProCD is best summarized as follows: "terms inside a box of software bind consumers who use the software after an opportunity to read the terms and to reject them by returning the product. Gateway , Inc. Instead, ProCD applied only UCC section and concluded that the absence of a timely rejection was sufficient to show assent.

Gateway, Inc. Mortenson Co. Timberline Software Corp. If the purchase order is the contract, UCC section applies and material terms cannot be added to the contract without explicit assent. If the contract is not formed until after the purchaser sees the shrinkwrap license agreement, UCC section applies and the act of keeping the software implicitly shows assent.

The Court will enforce NextPoint's clickwrap license agreement for two reasons. First and foremost, the Court agrees with those cases embracing the theory of ProCD. ICode, Inc. The UCC "shall be liberally construed and applied to promote its underlying purposes and policies," which include "the continued expansion of commercial practices through custom, usage and agreement of the parties.

If ProCD was correct to enforce a shrinkwrap license agreement, where any assent is implicit, then it must also be correct to enforce a clickwrap license agreement, where the assent is explicit. To be sure, shrinkwrap and clickwrap license agreements share the defect of any standardized contract they are susceptible to the inclusion of terms that border on the unconscionable but that is not the issue in this case. The only issue before the Court is whether clickwrap license agreements are an appropriate way to form contracts, and the Court holds they are.

In short, i. LAN explicitly accepted the clickwrap license agreement when it clicked on the box stating "I agree. Second, even if the Court were to agree with i. In other words, there can be no unreasonable surprise or hardship to i. LAN from enforcing the limitation of liability. To understand this holding requires a bit of background. When NextPoint and i. LAN first formed their relationship, i. LAN signed the VAR agreement, which contains warranty disclaimers and limitations of liability nearly identical to those found in the clickwrap license agreement.

LAN had installed the software on many occasions before the transaction in , and each time i. LAN necessarily ran across the clickwrap license agreement. In short, NextPoint consistently included a warranty disclaimer and limitation of liability in every contract it made. Every contract, that is, except the purchase order. That contract contains a price, a quantity, and five specific terms, but is silent with respect to warranties and potential liability. Thus, i. LAN argues that NextPoint's "contrived attempt to supersede the [ purchase order] with directly contradicting terms or a standardized click license, a license that was neither referenced in the [ purchase order] nor even mentioned during negotiations, is absurd.

To the contrary, it would be absurd to allow silence to destroy the detailed private ordering created by the VAR and clickwrap license agreements. Indeed, the clickwrap license agreement specifically was intended to fill any gaps left by the purchase order.

See supra p. Charities Trust v. Engelhard Corp. The only sensible interpretation of the purchase order is that it did not affect the limitations of liability found in the parties' prior and subsequent agreements. For the reasons set forth above, NextPoint's cross-motion for partial summary judgment [Docket No. Furthermore, the Court held that if i. Accordingly, the retail software industry adopted shrinkwrap licenses. While shrinkwrap licenses have become more sophisticated over time, and have been modified in most cases so that a user 's assent to the license is based on more than merely tearing open the shrinkwrap on a box of software , the enforceability of shrinkwrap licenses has remained in doubt.

In Vault Corp. Quaid Software, Ltd. Two subsequent cases Arizona Retail Sys. Software Link, Inc. Wyse Technology [7] held that shrinkwrap licenses were unenforceable, since the contract had been completed before the licensee was made aware of the initial terms. However, other cases have upheld the enforceability of shrinkwrap licenses.

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