Assent in the modern transaction: boxes, clicks and forms

Madison, Wisconsin, nineteen ninety four. A man named Matthew Zeidenberg buys a box of software from a store. Five discs. A database of telephone listings compiled from more than three thousand directories. The company sells it to the public for about a hundred and fifty dollars, and to businesses for a great deal more. The difference is the licence. Inside the box, and on the screen every time the program runs, the licence says the consumer version is for personal use only.
Zeidenberg reads the licence and ignores it. He forms a company and puts the listings on the internet, where anyone can buy them for less than the software company charges its business customers. The company sues. So here is the question. He never signed anything. He paid his money at a counter and took the box home. Is he bound by terms he could only read after he opened it? Think about it before I go on.
The question I keep asking. What exactly did these people promise each other? The store took his money and gave him a box. The box said, on the outside, that the software came with restrictions stated in an enclosed licence. Did handing over a box with those words on it hand him an offer, and did keeping it and using it say yes?
First line for the board. We have spent two modules on offer and acceptance as a conversation between two people. Most modern transactions are not conversations. They are a box, a screen, a click, or two printed forms crossing in the mail. The rules do not change. What changes is that the offeror decides, in advance, what act will count as acceptance, and the question becomes whether the other party had reasonable notice of the terms and a real chance to refuse them.
Second line. Article Two says that a contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract. That sentence, from section two two oh four, is the hinge of today. Agreement can be shown by conduct. Keeping the goods after a chance to read the terms and send them back can be that conduct.
Third line, and it is the limit on the second. Conduct only counts as assent to terms the person had a fair chance to see. Terms buried where a reasonable user would not look do not bind a click. The law asks whether a reasonably prudent person in that position would have known the terms were there, and whether the act the offeror chose as acceptance actually signalled assent to them.
Now the case. ProCD against Zeidenberg, decided by the Seventh Circuit in nineteen ninety six, and written by Judge Easterbrook. The district court had held that the licence was not a contract, because it was inside the box rather than printed on the outside. The court of appeals reversed.
Here is how the court began. Must buyers of computer software obey the terms of shrinkwrap licenses? And here is its answer. Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general. The reasoning started from section two two oh four, and then said this. A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance.
And the application. ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. The box gave notice that terms were inside. The screen showed them before the program would run. A buyer who disagreed could return the box. Zeidenberg did none of that. He used the software, and by using it after reading the licence, he accepted it.
A year later the same court applied the rule to a computer ordered by telephone.  The Hills bought a Gateway computer.  Here is how the court described it.  Presently a box arrives, containing the computer and a list of terms, said to govern unless the customer returns the computer within thirty days.  One of the terms was an arbitration clause.  The Hills kept the computer more than thirty days before complaining.
The court held that by keeping the computer beyond thirty days, the Hills accepted Gateway's offer, including the arbitration clause.
Not every court agrees, and you should know that.  A federal court in Kansas, facing the same Gateway terms, went the other way.  It treated the customer as the offeror, the shipment as the acceptance, and the terms in the box as proposals for additional terms under section two two oh seven.  Because the customer was not a merchant, those terms did not become part of the deal unless he expressly agreed to them.
Keeping the computer past five days, the court said, was not enough.  Same box, two answers.  Which side you argue depends on who you say made the offer.
Now the screen. In two thousand two the Second Circuit decided Specht against Netscape. Netscape offered a free download. The page had a button that said download. The licence terms, which included an arbitration clause, sat on the same page, but below the button, where a user would have to scroll to find them. The users clicked download and never saw them.
Here is the court's conclusion. A reasonably prudent internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants' invitation to download the free software. And its statement of the principle. Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility. No notice, no assent, no arbitration clause.
Put the cases in a row. ProCD. Notice on the box, terms on the screen, a chance to return. Bound. Hill. Terms in the box, thirty days to send it back. Bound. Klocek. Same terms, but the court called the customer the offeror, so the terms were only proposals. Not bound. Specht. Terms below the button where nobody looks. Not bound. The rule is the same in all four. Notice, plus an act the offeror named as acceptance, plus a real chance to say no.
One more thing, in a single breath, because it belongs to module fifteen.  When two businesses exchange printed forms, a purchase order and an acknowledgment, and the forms do not match, the common law would say the second form is a counter offer.  Article Two says otherwise.  Under section two two oh seven, a definite and seasonable expression of acceptance operates as an acceptance even though it states additional terms, unless it is expressly made conditional on assent to those terms.
That is the battle of the forms, and we will spend a whole lecture on it later.
Now let's change one fact. The licence is inside the ProCD box, but the outside of the box says nothing about it. Zeidenberg opens the box, ignores the licence, and sells the listings. Bound? Choose an answer before I go on.
Most people say yes, because he still read the licence before using the software.  That is a fair argument, and the screen notice may carry it.  But look at what ProCD relied on.  The outside of the box gave notice that terms were inside, so the buyer knew what he was taking home.  Without that, the vendor's case is weaker, because the buyer paid for a box that promised nothing about terms.  The screen may still save it.
The point is that notice is a fact you have to prove, not a word you get to assume.
Change one fact again. Netscape puts the licence in a scroll box above the download button, with a button that says I agree, and the software will not download until it is clicked. A user clicks it without reading. Bound? Choose.
Most people say no, because he did not read it. But reading is not the test. Notice and a manifestation of assent are the test. The terms were reasonably conspicuous, they were in front of him, and clicking I agree is an unambiguous manifestation of assent. That is the clickwrap the Specht court contrasted with the hidden terms, and it binds. Not reading a contract you were plainly offered has never been a defence.
Change one fact a third time. Two businesses. The buyer sends a purchase order for widgets. The seller ships them with an acknowledgment that adds an arbitration clause. The buyer says nothing and uses the widgets. Is there a contract, and is the clause in it? Choose.
Most people say there is a contract, and they are right, because section two two oh seven says a definite acceptance with additional terms is still an acceptance.  Whether the clause is part of the contract is the harder question, and the honest answer today is, it depends.  It depends on whether the seller made its acceptance expressly conditional, on whether both are merchants, and on whether an arbitration clause materially alters the deal.
You will be able to answer all of that in module fifteen.  Today, be able to say why the common law answer, counter offer, is not the Article Two answer.
Here is what people get wrong here, and why it is tempting.  The first mistake is applying the mirror image rule to boxes and forms, because that is the rule you learned last week.  Article Two changed it.  The second mistake is treating every set of online terms as binding, because a company wrote them.  Specht says notice comes first.  The third mistake is the opposite, thinking that terms you did not read cannot bind you.
They can, if they were conspicuous and you did the act that signalled yes.
Here is the rule, in one breath. An offeror may name the act that counts as acceptance, and conduct after reasonable notice of the terms, keeping the goods, using the software, clicking the button, is assent, but terms a reasonably prudent person would not have seen bind nobody. Now, five questions.