This memo addresses the effectiveness of Terms of Use Agreements and disclaimers on websites. Because the Internet is in its legal infancy, the laws regulating Internet activity are still forming. In general, courts have attempted to analogize Internet contracting to traditional paper contracting, with varying results. This memo proceeds by providing background on the two main types of Internet contracts, clickwrap and browsewrap agreements. It then discusses case law that has laid the foundation for determining the effectiveness of these agreements.

Clickwrap and Browsewrap Agreements

There are two basic forms of online contracts that are recognized by the law—clickwrap and browsewrap agreements. Clickwrap agreements require the user to click on an icon appearing on the user’s computer screen to consent to certain terms before the website performs its side of the contract. After the user assents to the terms, the website permits the user to enter the website, download files from the website, or perform some other activity associated with the website. Courts are more willing to enforce clickwrap agreements because they require the user to consent to the terms before proceeding. In particular, Massachusetts courts have upheld clickwrap agreements as enforceable contracts. See, e.g., Hughes v. McMenamon, 204 F. Supp. 2d 178, 181 (D. Mass. 2002) (finding “clickwrap” agreements have been upheld as valid and enforceable and citing numerous cases).


Browsewrap agreements allow Internet users to view the contract’s “terms and conditions” by clicking on a hyperlink. However, these agreements do not require the users to click on the hyperlink before forming the contract. The advantage of using a browsewrap agreement as opposed to a clickwrap agreement is the fluidity with which users can view a website. The drawback of browsewrap agreements is that users who fail to click on the hyperlink to view the terms may not even realize that they are contracting with the website owner. Courts have, therefore, been reluctant to enforce browsewrap agreements. 

Case Law

Case law concerning clickwrap and browsewrap agreements is relatively sparse. The most authoritative cases come from the United States Court of Appeals for the Second Circuit. The first, Specht v. Netscape Communications Corp., is perhaps one of the most cited cases involving browsewrap agreements. 306 F.3d 17 (2d Cir. 2002). The second, Register.com, Inc. v. Verio. Inc., is a more recent case that further defines the precedent set forth in Specht. 356 F.3d 393 (2d Cir. 2004).
 
In Specht, the plaintiffs sought to download free “SmartDownload” software from Netscape’s website. To download the software, the plaintiffs were required to click on a “Start Download” button. The only reference to SmartDownload’s license terms was located in text visible only if they scrolled down the screen to text located below the download button’s location. The court determined that there could be no mutual assent when a notice of the existence of license terms governing the use of software was visible to Internet users only if they scrolled down the screen after being invited to download the software. The court noted that unlike in the paper world where users are expected to read all the pages they are given, there is no reason to assume the viewers will scroll down to subsequent screens simply because the screens are there. However, a plaintiff who has “reasonably conspicuous notice” of the existence of binding terms can be bound by those terms.
 
In Register.com, the plaintiff sold Internet domain names, and the defendant designed and developed websites. Register’s website permitted users to search an online database for previously registered domain names. The browsewrap agreement for Register’s website disclosed the terms of the agreement to the user after the user had conducted the search. The defendant, Verio, used automated software to perform daily searches of the database and solicit business from registrants. Verio admitted knowledge of the browsewrap terms after receiving the results of its first search. The Second Circuit easily distinguished its decision in Specht because the users there had no reason to possess knowledge of the browsewrap terms in a onetime download. The court noted that it might have found for Verio “if its queries addressed to Register’s computers had been sporadic and infrequent.” However, by taking the benefit with full knowledge of the terms upon which the benefit was offered, Verio accepted the terms, which accordingly became binding on the offeree.

In a recent Texas state court case, Hotels.com. L.P. v. Canales, a Texas Court of Appeals found an agreement enforceable where a user is required to click a box stating “I Agree to the Terms and Conditions” even though the user was not required to open and view the User Agreement containing the terms and conditions. 195 S.W.3d 147 (Tex. Civ. App. 2006). The court began by examining the Second Circuit cases for the leading principles on browsewrap agreements. Unlike in Specht, the user of Hotels.com was required to click a box manifesting assent to the terms and conditions. However, unlike in the Register.com case the user did not necessarily know what those terms contained because he was not required to actually open and view the terms. Nevertheless, the court found that by clicking the “I Agree to the Terms and Conditions” box, the user was aware of the additional terms and conditions and their availability.

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