Company Bound by Click-Wrap License Agreement Even Though Click-Accepted by Vendor

04 March 2009 Publication
Authors: Chanley T. Howell

Legal News Alert: Information Technology & Outsourcing

A federal court recently held that a company was bound by unfavorable terms in a click-wrap license agreement, even though an employee of the software vendor installed the software and click-accepted the license agreement. (Via Viente Taiwan LP v. United Parcel Service Inc., E.D. Tex., No. 08-301, 2/17/09). Accordingly, the forum selection clause in the license agreement was enforceable, and the customer-licensee was required to litigate in the vendor’s preferred location of Atlanta, rather than Texas, where the customer brought the suit.

For parties to enter into a valid contract, the following elements must be present: (1) an offer; (2) acceptance; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. The customer-licensee argued there was no meeting of the minds because it was never able to review, and thus agree to, the terms of the license agreement. Rather, an employee of UPS installed the software and click-accepted the license agreement.

The court agreed with UPS, finding the licensee was bound by the click-wrap agreement for three reasons:

  1. The requirement of a “click-through set up process that included terms of service would hardly be a surprise to anyone who has ever installed software on a computer, much less the employees of a sophisticated company which boasts international operations.” Thus, the customer should have been aware that terms of service would be presented upon the installation of the software.
  2. The customer likely supervised the UPS employee during the installation process and, thus, would have been at least generally aware that use of the software required acceptance of the license agreement.
  3. Most importantly, the customer used the software to conduct its business, thereby keeping the benefit of the bargain. To allow the customer to benefit from portions of the contract while allowing it to disavow others would be inequitable.

Companies should be careful that they do not inadvertently become bound to a vendor click-wrap agreement with unfavorable terms such as limitations of liability, disclaimers of warranties, waiver of rights and remedies, forum selection clauses, and so forth. This case demonstrates that companies can be bound by licensor click-wrap agreements even when they neither read nor click-accept the agreement. To avoid this outcome, customers should negotiate and enter into separate license agreements with fair terms and conditions, including language that the terms and conditions of the separately negotiated license agreement supersede and replace any click-wrap agreement associated with the software.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Chanley T. Howell
Jacksonville, Florida