One primary means of forming contracts on the internet are so-called "clickwrap" (or "click-through") agreements, in which website users typically click an "I agree" box after being presented with a list of terms and conditions of use. Overstock, 668 F. Supp. 2d at 366. Click-wrap agreements derive their name by analogy to "shrinkwrap" used in the licensing of tangible forms of software sold in packages. Specht v. Netscape Comm'ns Corp., 306 F.3d 17, 22 n.4 (2d Cir. 2002) (Sotomayor, J.). "Just as breaking the shrinkwrap seal and using the enclosed computer program after encountering notice of the existence of governing license terms has been deemed by some courts to constitute assent to those terms in the context of tangible software, . . . so clicking on a webpage's clickwrap button after receiving notice of the existence of license terms has been held by some courts to manifest an Internet user's assent to terms governing the use of downloadable intangible software. . . ." Id. (internal citation omitted).
In addition to clickwrap agreements, "browsewrap" agreements have arisen as another means of contracting on the internet. Overstock, 668 F. Supp. 2d at 366. In a browsewrap agreement, the terms and conditions of use for a website or other downloadable product are posted on the website typically as a hyperlink at the bottom of the screen. Id. Unlike a clickwrap agreement, where the user must manifest assent to the terms and conditions by clicking on an "I agree" box, a browsewrap agreement does not require this type of express manifestation of assent. Id. Rather, a party instead gives his or her assent by simply using the product - such as by entering the website or downloading software. See id. In ruling upon the validity of browsewrap agreements, courts primarily consider whether a website user has actual or constructive notice of the terms and conditions prior to using the website or other product. Id. (citing Specht, 306 F.3d at 20 (finding insufficient notice)). Elements of shrinkwrap, clickwrap and browsewrap agreements are at issue here.
In the seminal decision of Specht v. Netscape Comms. Corp.,7 the Second Circuit held that internet users did not have reasonable notice of the terms in an online browsewrap agreement and therefore did not assent to the agreement under the facts presented to the court. 306 F.3d at 20, 31. In Specht, users of a website were urged to click on a button to download free software. Id. at 23, 32. There was no visible indication that clicking on the button meant that the user agreed to the terms and conditions of a proposed contract that contained an arbitration clause. Id. The only reference to the terms was located in text visible if the users scrolled down to the next screen, which was "submerged." Id. at 23, 31-32. Even if a user did scroll down, the terms were not immediately displayed. Id. at 23. Users would have to clink on a hyperlink, which would take them to a separate webpage entitled "License & Support Agreements." Id. at 23-24. Only on that webpage was a user informed that the user must agree to the license terms before downloading a product. Id. at 24. The user would have to choose from a list of licensing agreements and again click on another hyperlink in order to see the applicable terms and conditions. Id. The Second Circuit concluded on these facts that there was not sufficient or reasonably conspicuous notice of the terms that the plaintiffs could have manifested assent to the terms under these conditions. Id. at 32, 35. The Second Circuit, however, was careful to distinguish the method just described from clickwrap agreements, which do provide sufficient notice. Id. at 22 n. 4, 32-33.
Significantly, in Register.com, Inc. v. Verio, 356 F.3d 393 (2d Cir. 2004), the Second Circuit distinguished Specht on the basis that the facts in Specht "did not compel the conclusion that its downloaders took the software subject to those terms because there was no way to determine that any downloader had seen the terms of the offer." Id. at 402. In Register.com, the facts were crucially distinguishable from Specht because the Register.com user saw the terms of the offer and admitted that it was aware of the terms of the offer. Id. The Second Circuit held that, where a plaintiff knew of the terms of the offer, there was no reason why enforceability of the terms should depend on whether the plaintiff was offered an "I agree" button to click. Id. at 403.
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