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Second Circuit Takes a Step Toward Enforcement of Browsewrap Agreements

by Lee Gesmer

On the Internet, a “click-wrap agreement” requires the user to click a link or icon to indicate assent. A “browsewrap agreement” is an online agreement that appears on a web site, but does not require the user to take any action to express consent. The courts have been willing to enforce the former, but not the latter.

A recent decision by the influential U.S. Court of Appeals for the Second Circuit in New York puts a new spin on browsewrap agreements, and may be a significant step toward their enforceability. In this case, Register.com v. Verio, the court held that under certain conditions an online contract could be formed even if the terms are not disclosed until after the transaction has been completed and the party to be bound has not formally assented to the transaction, so long as the party to be bound was “aware” of the terms.

Register is an Internet registrar authorized to sell Internet domain names. Verio sells web site design and development services. Register accused Verio of using an automated software program to submit daily WHOIS queries to Register in order to collect information on new domain name registrants. Verio then solicited business from these new domain owners.

Register complained that Verio’s actions violated an online contract that was formed every time that Verio queried Register’s database over the Internet. Specifically, Register’s terms and conditions provided that a person submitting a query could not use the data for any form of commercial advertising or solicitations. However, the terms of use containing this restriction were provided only upon receipt of the WHOIS query results.

The timing of offer and acceptance has been critical to decisions regarding the formation of online contracts. Verio argued that because it was only told the terms of the proposed contract after the transaction had been completed, there was no mutual assent, and therefore no contract had been formed. Verio noted that this case did not involve a “clickwrap” license, since Register did not withhold access to the WHOIS information until after an end-user manifested assent by clicking on an icon or link.

Register argued that Verio’s course of conduct – repeatedly submitting queries while being aware of the proposed terms – objectively demonstrated Verio’s assent to be bound by Register’s terms. Verio responded that even though it knew the terms, it implicitly rejected them and never manifested assent.

The court analogized the facts of this case to a roadside fruit stand, where a visitor takes an apple and, after biting into it, turns around and sees a sign, “Apples, 50 cents.” The visitor then returns, every day, several times a day, and takes an apple without paying for it. When the fruit stand owner demands payment, the visitor states that on no occasion did he see the price until after he’d bitten into the apples. While this defense might be effective the first time, the visitor cannot continue to take apples for free, knowing full well that the fruit stand is offering them only in exchange for 50 cents in compensation.

The court held Verio’s situation to be much the same: Verio was repeatedly drawing on Register’s data, and each day, upon receiving the requested data, Verio received Register’s terms and conditions containing restrictions on solicitation. Verio was aware of these terms, and therefore it could no more deny that it was bound by them than the visitor to the fruit stand could claim that she was entitled to an unlimited supply of free apples.

TLB Comment: Until now, the enforceability of browsewrap agreements was in doubt. The few courts that had considered the issue had expressed significant reservations as to their enforceability. The Register case may be a significant step toward liberalizing the enforceability of these types of agreements. In the Second Circuit and in those states that choose to follow the holding of this influential court, browsewrap agreements will be held enforceable if the user is “aware” of the terms and conditions posted on the site. How far the courts will choose to take this principle — for example, under precisely what circumstances a user will be presumed to be aware of terms and conditions — remains to be seen.

Back to Technology Law Bulletin Spring 2004