Shrink, Click, Browse-Wrapped Agreements – What Does It All Mean?

The terms — “shrink-wrapped”, “click-wrapped”, and “browse-wrapped” — are in widespread use. They describe certain types of contracts, past and present. Originally, these agreements were used solely for the licensing of PC software. Now, they’re used for a wide range of online transactions.

What do these terms mean, and what’s their legal significance?

Manifestation of Assent

The key to understanding these terms is understanding a key term in contract law — “manifestation of assent”.

One of the elements of an enforceable contract is that an offer is made and accepted. Manifestation of assent refers to the event that indicates acceptance has occurred.

Traditionally, assent was manifested by signing a contract document. Beginning with the PC software world, manifestation of assent was defined by the seller to include events such as tearing open a product envelope, or installing software. Later, manifestation of assent morphed to reflect marketing requirements and advances in technology.

In the Beginning, There Were Only True Shrink-Wrapped Agreements

Way back in the early 80’s (in the days of 5 1/2 inch diskettes), the term “shrink-wrapped” agreement described the prevailing practice in the PC software marketplace of placing the license agreement between the product package and the clear shrink wrap that covered the package. I remember going into a PC software retailer and looking at the back side of the product package to see the license. You could read it clearly through the shrink wrap.

The theory was relatively simple — a consumer could review the license terms on the outside of the package, and if they were not acceptable, the consumer simply would not purchase. The act of purchasing was the manifestation of assent.

At this point the term “shrink-wrapped” license was truly descriptive of the process. This was before marketers increased their influence over the process.

Enter The Software Marketers

It wasn’t long before software marketers exerted their influence in the rapidly growing PC software marketplace. Marketers wanted to use the “real estate” on the back side of the product package to sell the product (to list features and benefits, add testimonials, etc.) So, the contract was simply relegated to the inside of the product package.

In most cases, the license was printed on an envelope containing the diskettes, so that it could be read before the envelope was opened. The message at the top of the envelope was essentially, “If you open me, you own me”, meaning that the act of opening the envelope inside the product package was the manifestation of assent.

This process continued to be referred to as a “shrink-wrapped” licensing process even though the license agreement was not presented behind the shrink wrap. And the process was generally held to result in an enforceable contract.

Enter The Click-Wrapped License

Next in the development of licensing schemes came the electronic equivalent of the shrink-wrapped license — the click-wrapped license. Here, the manifestation of assent shifted from purchasing a product or tearing open an enclosed envelope to a mouse click (and usually an additional action).

Click-Wrapped licenses differ slightly in terms of how the license agreement is presented. For example:

  • presentation prior to download — assent manifested by click, plus the act of downloading; and
  • presentation during installation — assent manifested by click, plus installation.

Click-wrapped agreements are usually presented to the purchaser in a scroll box configuration. Enforceability depends significantly on how the agreement is presented. This is a summary of the 5 tips for enforceability:

  1. Conspicuous presentation during registration process – the scroll box with the agreement should be presented conspicuously during the registration process;
  2. Reasonable notice of the existence of contract terms – this is the purpose of the text that is in all caps at the very top of the agreement (ABC COMPANY IS WILLING TO GRANT YOU RIGHTS TO ESTABLISH AND USE AN ACCOUNT WITH THIS SITE …);
  3. Unambiguous manifestation of assent – this is the purpose of the ACCEPT button – place both the ACCEPT and the DECLINE buttons on the scroll box just under the scrollable window – set the default to DECLINE – make sure that registration cannot be completed unless the ACCEPT button is clicked;
  4. Opportunity to review contract terms – the scrollable window should show some of the text of the agreement below the notice section without the requirement of scrolling to see it – the text should be in a legible font, clear, and readable – the scroll box should permit the user to review the contract terms easily at the user’s own pace, and the user should be able to navigate up and down through the entire text of the agreement in the scroll box; and
  5. Opportunity to print agreement – the scroll box presentation should clearly indicate an opportunity to print the agreement.

Finally — The Browse-Wrapped “Agreement”

Beginning in the late 90’s, this odd term was bandied about in the industry and later was referenced in case law (thereby legitimizing it as a term) — generally referring to an “agreement” that does not require a click to indicate assent. The classic example of a browse-wrapped “agreement” is a website’s Terms of Use. Essentially, it’s linked from the home page, and you may simply browse it (or not).

But that’s the catch — if there’s no click or other clear manifestation of assent, is there a binding contract? To date, case law indicates that browse-wrapped agreements are only enforceable in special circumstances indicating that the user had actual knowledge of the agreement followed by conduct of the user that indicated assent.

Conclusion

Beginning with the true shrink-wrapped software license agreement in the early 80’s, the licensing scheme that has served the PC software industry well has morphed to reflect the advances in technology.

Today, the click-wrapped agreement is the norm in the online world — significantly exceeding its original use for software licensing to now include SaaS, membership, subscription, and other customer agreements.

Copyright © 2008 Chip Cooper

For additional information, visit our SaaS Legal Resource.

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.

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