CYBERLAW UYL2612

TUTORIAL 7 (WEEK 8)

What is e-commerce? Briefly explain three common types of contract available in online
environment and Illustrate your answer with case(s), if any.

Define e-commerce

 buying and selling of goods and services, or the transmitting of funds or data, over an
electronic network, primarily the internet.

Types of Contracts available online

 Click-Wrap Agreement- Also known as a clickthrough agreement and clickwrap

license. A form of agreement used for software licensing,

websites, and other electronic media. It requires the user to agree to terms and conditions
before using a website or completing an installation or online purchase process. These
agreements typically present the terms and conditions followed by a check box with the
words "I agree" or "I accept" that the user must click.
 Feldman v Google- A case that involved Lawrence E. Feldman & Associates (Feldman)
who purchased advertising from Google’s “AdWords” Program.Feldman argued that he
was the victim of “click fraud”, which is when entities or persons, without any interest the
services being advertised, click repeatedly on ads. This has the result of driving up the
advertising cost. Feldman claimed that Google required him to pay for all clicks on his ads,
including those which were fraudulent. The subject that was at issue, in this case, was the
forum selection clause in their agreement — i.e., the clause that covered where any dispute
resolution would take place. The clause read: The Agreement must be construed as if both
parties jointly wrote it, governed by California law except for its conflicts of laws principles
and adjudicated in Santa Clara County, California. Feldman claimed that the Agreement
“was neither signed nor seen and negotiated by Feldman & Associates or anyone at his
firm“. Feldman was required to enter into an AdWords contract before placing any ads or
incurring any charges. At the top of the page displaying the AdWords contract, a notice in
bold print appeared and stated, “Carefully read the following terms and conditions. If you
 agree with these terms, indicate your assent below.” The terms and conditions then
appeared. The preamble (shown at the top of the Agreement), stated that by agreeing to the
terms listed in the Agreement, a binding agreement with Google would be formed. At the
bottom of the web page, viewable without scrolling down, was a box and the words, “Yes,
I agree to the above terms and conditions.” Feldman had to have clicked on this box in
order to proceed to the next step. As he had activated his account, placed ads, and incurred
charges, it was clear that he had clicked on this box. The Court cited Baer v. Chase 2006
to say:

Contracts are ‘express’ when the parties state their terms and ‘implied’ when the parties do
not state their terms. The distinction is based not on the contracts’ legal effect but on the
way the parties manifest their mutual assent. […] To determine whether a clickwrap
agreement is enforceable, courts presented with the issue apply traditional principles of
contract law and focus on whether the plaintiffs had reasonable notice of and manifested
assent to the clickwrap agreement.

In this case, the Court concluded that Feldman had reasonable notice of the terms, and
manifested assent to the agreement. The Judge noted: The user here [Feldman] had to take
affirmative action and click the “Yes, I agree to the above terms and conditions” button in
order to proceed to the next step. Clicking “Continue” without clicking the “Yes” button
would have returned the user to the same webpage. If the user did not agree to all of the
terms, he could not have activated his account, placed ads, or incurred charges. As a result,
the clickwrap agreement was upheld.

 Specht v Netscape Comms, Corp- set out that it’s not just the tick box or “I Agree” button
that’s important, it’s also that the terms need to be conspicuous, and it needs to be clear
that the tick box or button relates to the agreement to the terms (rather than something else).
Specht v Netscape was a case between a number of plaintiffs (including Mr Specht) (the
Plaintiffs) and Netscape Communications Corporation (Netscape). The Plaintiffs had all
installed a Netscape program called SmartDownload. SmartDownload transmitted
personal information to Netscape when the Plaintiffs used it to browse the Internet. The
Plaintiffs argued that this had invaded their privacy, and they brought a lawsuit against
Netscape. Netscape argued that the Plaintiffs had agreed to an arbitration clause in license
 terms that they had (allegedly) accepted when they downloaded SmartDownload. The
Court’s role was to determine whether the Plaintiffs had agreed to be bound by the
software’s license agreement. On the page to download SmartDownload, a “Download”
button was displayed with the text “Start Download”. Below the fold of the page, if the
Plaintiffs had scrolled down they would have seen a statement saying: Please review and
agree to the terms of the Netscape SmartDownload software license agreement before
downloading and using the software. The license agreement contained a clause stating: BY
CLICKING THE ACCEPTANCE BUTTON OR 10 INSTALLING OR USING
NETSCAPE COMMUNICATOR, NETSCAPE NAVIGATOR, OR NETSCAPE
SMARTDOWNLOAD SOFTWARE (THE “PRODUCT”), THE INDIVIDUAL OR
ENTITY LICENSING THE PRODUCT (“LICENSEE”) IS CONSENTING TO BE
BOUND BY AND IS BECOMING A PARTY TO THIS AGREEMENT. But this
statement was not displayed or indicated anywhere the “download” button for
SmartDownload. The Court concluded that: Although an onlooker observing the disputed
transactions in this case would have seen each of the user plaintiffs click on the
SmartDownload “Download” button […] a consumer’s clicking on a download button does
not communicate assent to contractual terms if the offer did not make clear to the consumer
that clicking on the download button would signify assent to those terms. […] California’s
common law is clear that “an offeree, regardless of apparent manifestation of his consent,
is not bound by inconspicuous contractual provisions of which he is unaware, contained in
a document whose contractual nature is not obvious.” As a result, the Plaintiffs were not
bound by the terms of the license agreement as the agreement was too inconspicuous. The
“Download” button was not sufficiently related to the terms of the agreement for the
Plaintiffs to be legally bound by it.
 Bragg v Linden Research Inc.- This case was between Linden Research, Inc (Linden), the
creators of the game Second Life, and Mr. Bragg, a Second Life player. Second Life is an
online virtual world game in which players can build objects, explore the world, and
interact with other players. Players can also purchase land with real life money. In
November 2003, Linden said that it would recognize participants’ full intellectual property
protection for the digital content they created or otherwise owned in Second Life, such as
“cars to homes to slot machines.” Players were also able to purchase “virtual land,” make
 improvements to that land, exclude other players from entering onto the land, rent the land,
or sell the land to other players for a profit. Bragg had purchased numerous parcels of land
in his Second Life, including a parcel of virtual land named “Taesot” for $300. Linden sent
Bragg an email advising him that Taesot had been improperly purchased through an
“exploit” and as a result Linden took Taesot away. It then froze Bragg’s account,
effectively confiscating all of the virtual property and currency that he maintained on his
account with Second Life. Like Specht v. Netscape, when Bragg sued Linden in Court,
Linden argued that their agreement required arbitration to occur. Before a person is
permitted to participate in Second Life, they must accept the Terms of Service of Second
Life by clicking a button indicating acceptance. Bragg conceded that he clicked the
“accept” button before accessing Second Life. Bragg resisted enforcement of the TOS’s
arbitration provision on the basis that it was “both procedurally and substantively
unconscionable”. The substantive component can be satisfied by showing overly harsh or
one-sided results that “shock the conscience.” The Court stated that a contract is
procedurally unconscionable if it is a contract of adhesion. A contract of adhesion is a
“standardized contract, which, imposed and drafted by the party of superior bargaining
strength, relegates to the subscribing party only the opportunity to adhere to the contract or
reject it.” In this case, the Second Life Terms of Service were a standardized contract which
only allowed the customer to agree to it or reject it.
 Browse-Wrap Agreement- An agreement on a website that binds the user (typically to
the terms of use for the website) by virtue of browsing the website. For a browsewrap
agreement to be enforceable, the website must give the user actual or constructive notice

of the agreement and the user must consent to the agreement. Unlike a
clickwrap agreement, a user does not need to take action to affirm his consent to be bound.
Instead, the agreement typically states that use of the website is deemed acceptance of the
agreement. However, courts are more likely to enforce clickwrap agreements than
browsewrap agreements. In Long v. Provide Commerce, Inc., the plaintiff alleged he had
purchased a floral arrangement depicted and advertised as a “completely assembled
product” on the ProFlowers.com website. When his purchase turned out to be a “do-it-
yourself” kit that required assembly by the recipient, the plaintiff asserted various
California statutory claims against the online retailer in a putative class action. The online
retailer sought to compel arbitration of the lawsuit, relying upon an arbitration provision
contained in the Terms of Use for ProFlowers.com. The plaintiff argued he had never
assented to the Terms of Use and was not bound by that browsewrap agreement. In its
analysis, the Court noted that for a browsewrap agreement to be enforceable, the user must
know of the terms of the contract. Absent actual knowledge (i.e. cases where the user claims
not to have read or known of the terms), the Court framed the issue as whether a
“reasonably prudent Internet consumer” would be on inquiry notice of the terms, given the
overall website design, including the placement and visibility of the hyperlinks to the terms.
As part of the analysis, the Court analyzed whether the hyperlinked terms on the
ProFlowers.com were “conspicuously” placed such as to put a user on notice. The Court
considered various website design elements present on the website, such as the placement
of the hyperlinks on the webpages, their size, proximity to other hyperlinks, and font colors
in relation to the webpage background colors, among other things. Ultimately, the Court
concluded that the ProFlowers.com hyperlinks and overall website design failed to provide
a user with constructive notice of the terms of use. The Court reached that conclusion even
though a hyperlink to the terms appeared several times throughout the company’s
“checkout flow” process for purchasing floral arrangements and was also included in a
confirmation email subsequently sent to the purchaser. The Court determined that the
browsewrap agreement was not valid and the arbitration provision contained in the “Terms
of Use” could not be enforced against the purchaser. The Court stated that placing a
hyperlink to the terms (even if the hyperlink itself is conspicuous) is by itself insufficient
to place a user on constructive notice. The Court reasoned that a “conspicuous textual
notice” should be added to the website (besides the hyperlink text) that notifies consumers
that the hyperlinked page contains binding contractual terms. Naming a conspicuous
hyperlink “Terms of Use” may not be enough, in the Court’s view, to put a user on
constructive notice of the terms.
 Shrink-Wrap Agreements- refers to the purchase agreements that are attached to shipped
products, usually bound by shrink wrap (plastic wrapping) that contain terms and
conditions.
 In the case of Vault Corp. v. Quaid Software Ltd., the district court stated without
explication that the shrinkwrap license at issue in that case was “a contract of adhesion
which could only be enforceable” if the provisions of a Louisiana statute—which explicitly
made such license agreements enforceable—were a valid statute that was not preempted
by federal law.
 Pro CD v. Zeidenberg affirmed the validity of shrink-wrap agreements. In ProCD, a federal
appeals court addressed the issue of whether a shrink-wrap license that is included with
computer software is an enforceable contract. The defendant purchased CD-ROMs from
ProCD, containing compilations of various telephone directories. These CD-ROMs were
packaged along with a user's manual in a box. Printed on the box was a notice that the
conditions of use of the CD-ROMs were defined by the terms in the user's manual. This
license, also encoded on the CD-ROM disks themselves, restricted the CD's use to non-
commercial purposes. The defendant published the directory information contained on the
CD-ROMs on the Internet and sold access to third parties, leading ProCD to bring suit for
breach of contract, among other causes.