Have you come across a Click Wrap Agreement before? If you download an application onto your phone, or install software onto your computer, you may come across a box of terms and conditions requesting you click “I Agree” to proceed. Often, these terms are in tiny print and are worded in overly complex legalese, which discourages most of us from even reading them. It is also possible that we as consumers have become accustomed with clicking “I Agree” without actually considering the legal impact of these legally binding contracts. So, what are these Agreements, and how can they be enforced?

When to use a Click Wrap Agreement

Also known as “shrink-wrap” contracts, these agreements are very commonly found when purchasing boxed software. By opening the packaging of the product, you are agreeing to the terms of the Agreement that are contained inside the box. In much the same way as opening the box constitutes accepting the terms and conditions in a Shrink Wrap Agreement, the clicking of “I Agree” is used as a form of acceptance when you’re buying products over the Internet. Although in Click Wrap Agreements the consumer has the opportunity to read the terms before accepting them, they, in most cases, will have already made the purchase of the online product or software. This means that there is no negotiating or amending of the terms of the Click Wrap Agreement prior to acceptance, as well as no requirement for an E-signature. In other words, it is a ‘take it or leave it’ scenario.

A Click Wrap Agreement serves many important functions and is often used in conjunction with Software Licences. The primary purpose of Click Wrap Agreements is to put the user of the software on notice as to the intellectual property rights of the software developer and the laws that protect these rights. While the Copyright Act 1968 (Cth) may cover a number of areas automatically, there are some grey areas when it comes to software, and the Click Wrap Agreement aims to give protection in this less certain areas of copyright law. Specifically, the Click Wrap Agreement aims to do the following:

  • To do away with ‘implied warranties’;
  • Limit the liability of the developer in connection with the product and the impact it may have on the user’s computer or the damage it may have incurred prior to use;
  • Reduce the remedies available to the user;
  • To communicate the relevant and governing legislation that applies to the software and protects the owners IP rights;
  • To give extra coverage for less certain intellectual aspects of the software, i.e. non-copyrighted elements of the software; and
  • To make other limitations on the type of permitted use, the things that the user can do with, and to, the software, and the number of installations that a single purchase is permitted.

Enforcing Click Wrap Agreements

There is much debate as to the enforceability of Click Wrap Agreements, both in Australia and overseas. In fact, the legal status of Click Wrap Agreements is still not well defined, especially in the United States. There is some judicial agreement over the preference of Click Wrap Agreements over Shrink Wrap Agreements, which is largely due to the fact that the user has no access to the Terms and Conditions until it is too late to return the product (if the terms seek to prevent this). This means that the consumer of the product is agreeing to something they cannot physically inspect and make a reasoned decision about.

In contrast, Click Wrap Agreements allow the user to read and inspect the terms and conditions prior to actually accepting, making it more likely to be enforceable. In the United States, a number of cases have asserted that Shrink Wrap Agreements are unenforceable, which has given more authority to Click Wrap Agreements. This reasoning may be influential if this matter was ever to be confronted by Australian courts. Despite that these agreements were originally tied to software licences, nowadays they are used for the majority of online purchases, especially online marketplace platforms, such as Ebay.

Conclusion

If you think that all terms and conditions of Click Wrap Agreements are the same, then you’re mistaken. Read these terms and conditions carefully to get an understanding of what your potential liability might be. If you’re looking to have a set of terms drafted or reviewed by a skilled IT lawyer, our team at LegalVision has extensive experience in Click Wrap Agreements and can certainly assist you with yours.

Lachlan McKnight

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