Analyzing The Landscape Of Click-Wrap Agreements

These click-wrap agreements have become a common method for online platforms and software providers to establish legally binding agreements with their users. They serve the purpose of ensuring that users are fully aware of the terms and conditions and explicitly agree to them. While this approach is typically considered legally binding, courts may carefully examine click-wrap agreements to ensure they meet specific requirements, such as offering adequate notice, making the terms easily accessible, and allowing users the opportunity to review the terms before accepting them.

Typically, you'll find these agreements at the bottom or in a top corner of the screen, labeled as "Terms of Service," "Terms of Use," or "Terms and Conditions." These agreements represent mutually binding contracts between both parties (the companies and the users). Internet users have become accustomed to encountering screens displaying legal terms and requiring them to click an "I accept" or "I Agree" button before they can order goods, access services, or obtain information

• On Equitable Bargaining Power

In case of ^[1]LIC INDIA V. CONSUMER EDUCATION AND RESEARCH CENTRE, the Supreme Court of India deliberated on the degree to which it can intercede in a contract, particularly when the involved parties possess uneven negotiating leverage. The Supreme Court's ruling established that if a contract exhibits characteristics of an adhesion contract and the contracting parties do not possess equitable bargaining power, the Court has the authority to invalidate the contract on the grounds of being unfair or unreasonable. This judicial action is taken in accordance with Article 14 of the Indian Constitution (the state shall not deny any person equality before the law or the equal protection of the laws within the territory of India) which guarantees equal protection of the law to all its citizens.

• Enforceability Of Click-Wrap Agreements

The enforceability of click-wrap agreements can be subject to challenges and scrutiny in specific situations. This issue was discussed in the case of ^[2]CAPGEMINI BUSINESS SERVICES (INDIA) LTD. v. CIT, where the Income Tax Appellate Tribunal considered whether the statutory rights of software purchasers or users could be restricted by the terms of mass shrink-wrapped or click-wrapped licenses. In these so-called internet license agreements, end users are typically required to click an "I agree" icon, signifying their acceptance of the license terms. Notably, such agreements do not collect personal information like the user's name or address. Instead, the agreement is considered to be accepted by the computer on which the software is installed, as the identity of the user remains unidentified.

These software licenses often include mechanisms to prevent copyright infringement or misuse of the software. In cases where end users attempt to violate these terms, the software may become inoperative on their computer or even cause damage to other data and applications. However, the crucial challenge arises from the uncertainty of identifying the actual user or determining who has breached the agreement. For example, when a company's staff purchases a product for its regular business use and an employee, without explicit authorization, clicks the "I agree" button during software installation, questions arise about whether the agreement can be enforced against the company or if the company's directors can be held liable for any infringements. This uncertainty is exacerbated when the company's name is not mentioned in the agreement, and it is unclear who clicked the "I agree" button. Under these circumstances, the enforceability of such licenses becomes highly questionable.

• Unconscionable Or Unreasonable Bargain

In the case of ^[3]DDIT (IT) 3(1) MUMBAI VS. GUJARAT PIPAVAV PORT LTD., MUMBAI, on February 10, 2017, the Income Tax Appellate Tribunal in Mumbai ruled that mass contracts, such as Shrink-wrap and Click-wrap agreements, containing unconscionable or unreasonable terms, become unenforceable, even if they possess all the elements of a legally valid contract

The initial assessment of the validity of a click-wrap agreement occurred in the notable case of ^[4]Hotmail Corporation v. Van Money Pie Inc., 1998 WL 388389 (N.D.Cal.) which took place in 1998 in the Northern District of California. In this case, the court upheld that "the terms of the license were binding on the defendant because he indicated his consent by clicking on the box containing 'I agree.'"

Hotmail Corporation v. Van Money Pie Inc. involved a situation where the defendants used the plaintiff's "Hotmail" mark in the reply address of unsolicited spam. The court determined that this action was likely to cause confusion among the public, making them believe that the plaintiff was associated with sending unwanted spam.

The court's decision established that the defendants had indeed agreed to Hotmail's license terms. This case is noteworthy for being one of the earliest instances in which the validity of a Click Wrap Agreement was affirmed. Click-wrap agreements are contractual arrangements between a service provider and an online user, requiring the user to accept the service's terms and conditions. Nevertheless, it's important to note that courts in various countries, including the United States, have dealt with the issues surrounding the validity and enforceability of click-wrap contracts.

This ruling was subsequently affirmed and maintained in a series of decisions, such as:

• Groff v. America Online,
• Inc, Steven J. Caspi, et al v. the Microsoft Network LLC
• Et al and I lan Systems, Inc v. Netscout services Level corp.

In the case of ^[5] Nguyen v Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014) in the United States Court of Appeals, Ninth Circuit, online contracts typically fall into two main categories: "click-wrap" (or "click-through") agreements, where users must click an "I agree" box after being presented with a list of terms and conditions; and "browse-wrap" agreements, where a website's terms and conditions are generally accessible through a hyperlink at the bottom of the webpage.

Distinguishing from click-wrap agreements, a browse-wrap agreement doesn't mandate explicit user assent to the terms and conditions. Instead, users are considered to have agreed to the terms simply by using the website. In fact, in a pure-form browse-wrap agreement, the website contains a notice stating that users agree to the Terms of Use by merely using the website's services or accessing information, even though these terms are not directly displayed on the site but are available only through a hyperlink.

What characterizes browse-wrap agreements is that users can continue using the website and its services without having to visit the page hosting the browse-wrap agreement or even being aware of its existence. Since no active action is required from website users to accept the contract's terms other than using the website, the enforceability of a browse-wrap contract hinges on whether the user possesses real or implied awareness of the terms and conditions outlined on the website.

• Validity Of A Click-Wrap Agreement

In case of ^[6] Groff v. America Online, Inc., File No. C. A. No. PC 97-0331, 1998 W L 307001 (RI Superior Court, May 27, 1998), The court upheld the legitimacy of a click-wrap agreement that was entered into by America Online, Inc. ("AOL") and one of its customers. In its ruling, the court expressed its confidence twice in considering the plaintiff and defendant as parties to a legally binding agreement. The court conveyed this belief when it dismissed the plaintiff's argument that he was not bound by the forum selection clause because he was unaware of its inclusion in his agreement with AOL. In the cases of Hoffman v. Supplements Togo Mgmt. LLC and In re Zappos.com Inc., Customer Data Security Breach Litigation, the court stated that "in the absence of direct evidence that Plaintiffs clicked on the Terms of Use, we cannot conclude that Plaintiffs ever saw, let alone explicitly agreed to, the Terms of Use."

Also in case of ADP, LLC vs. LYNCH United States District Court for The District of New Jersey, Click-wrap agreements don't have to happen between companies and third parties. Some click-wrap agreements happen between employers and employees. DP filed a lawsuit against ex-workers who accepted positions with rival companies. ADP filed a lawsuit against ex-employees who joined rival companies, alleging a violation of contractual obligations related to stock option grants. The former employees countered by claiming insufficient notice of the contract terms, asserting that they were required to acknowledge their understanding by clicking a box before accepting the grants. The court ruled in favor of ADP's click-wrap being enforceable

Take note: Even though the language around the box didn't specifically state clicking meant agreeing, in this case the court said there was no difference

Ø Enforceability Of The Click-Wrap

In case of ^[7]Feldman vs. Google, Inc. – 513 F. Supp. 2d 229 (E.D. Pa. 2007), in affirming the validity of the Click-wrap Contract, the court emphasized the importance of providing "reasonable notice of the terms and manifested assent of the Contract." Despite the plaintiff's claim of not entering into a contract with the defendant, the court maintained that purchasing the "Adwords" program necessitated agreement to the terms and conditions of the Contract.

In India, the definition of a contract under the Indian Contract Act, 1872, does not encompass E-contracts or Click Wrap Contracts. The recognition of E-contracts is established by the Information Technology Act, 2000, specifically through section 10-A (effective from 27-11-2009) and the endorsement of electronic signatures by the United Nations United Nations Commission on International Trade Law's model for Electronic Commerce (UNCITRAL Model on E-commerce). However, terms such as "I agree," "I accept," or "Ok" are not explicitly covered by UNCITRAL. While Section 65-B of the Indian Evidence Act, 1872, outlines a procedure for presenting electronic documents, it has not been invoked in the context of Click Wrap Contracts. Consequently, Click Wrap Contracts cannot be classified as 'electronically signed' within the Indian legal framework. It's noteworthy that, as of now, the Supreme Court has not issued a ruling declaring Click Wrap Contracts as invalid in India.

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