(HAPTTR 17

E-ffs#r*# *M ffi-ffi*ffiWwffi

C H A PTER OUTTINE

tE A Rl{II{G OB I E CT I V E S

LINE AFTER READINC CHAPTER. SHOULD ABLE CONTRACTS ON THIS YOU BE TO -FORMINC ANSWERFOLLOWING THE QUESTIONS: -E-SICNATURES ACREEMENTS I What are sorrreimportant clausesio include when -PARTNERINC rnaking offersto forrn electronic contracts, or UNIFORM ELECTRONIC -THE e-contracts? ACT TRANSACTIONS
2 How do shrink-wrapand click-on agreements differ from other contracts? How have traditional laws been appliedto these agreements? 5 What is an electronicsignature? Are electronic signatr-rres valid? 4 What is a partneringagreen'rent? What purpose doesit serve? 5 What is tl-reUniform Electronic Transactions Act (UETA)? What are some of its rnajor provisions?

models and

methods for
doing business have evolved to take advantage

ofthe speed, efficiencies, and
cost benefits of elechonic ! technologie5.!
Prefatory Note, Uniforrr 'l Act Ellectronic ransactions

quotation indicates,electronic technologyoffersbusinesses A-l , the chapter-opening ' - I several ir-rcluding speed, efficiency,and lower costs. the 1990s, advantages, In many argued that the developmeniof cyberspace was revolutionary. Therefore, new :,bservers or ,egaltheories,and new laws,would be neededto governe-contracts, contractsentered E-CONTRACT A contract that is formed To clate, however,most courtshavesimply adaptedtraditionalcontract rnto electronically. electronically. iari' principles and, when applicable, provisionsof the Uniform Commercial Code to et ,a 'e si n v olv ir r g c ont r a cd i s p rrte s . In the first part of this chapter,we look at how traditionallawsare being appliedto conracts formed online. We then exarninesome new lawsthat havebeen createdto apply in laws governing contractshave sometirnesbeen thotrght :ituations in which traditior-ral For example,traditional laws governingsignatureand writing requirements inadequate. are not easily adaptedto contractsformed in the online environmerit. Thr,rs,new laws theseissues. to havebeen created address

con\umerous contractsare formed online. Aithough the medium through which tl-rese has tractsare generated changed,the age-oldproblemsattendingcontractforrnationhave not. Dispuies concerning contractsformed online continue to center on contract terms assented thoseterns. to and whether the partiesvolur-rtarily

41;]EI1g6E E-C0NTRACTSAND E-SIGNAIURES

404 llNiIEEl

CONTRACTS

Note that onlir-iecontractsmay be formed not only for the sale of goodsand services generallyinvolvesa license,or a right to use Tl're "sale" of software bnt also for licensing. of ratherthan the passage title (ownershiprights)from the sellerto the buyer. the software, thal fEE XA M pt? rl C al l nrr w antsl o obtai n soFtu' are u' i l l al l ow her to uork on spr eadC GridMagic.During the transacShe goesonline and purchases sl-ieets her BlackBerry. on "l on-screen agree"boxesto indicatethat she understands tion, shehas to click on several and will not obtain any ownership only the right to use the sofhvare that she is purchasir-rg she can download the to rights.After she agrees these terms (the licensing agreernent), E to s o F l u a re l re r t' omptrter. j keep in rnind that although we typically refer you read through the following pages, As these parties the offeror and the offeree as a seller and a buyer, in many transactions to would be more accuratelydescribedas a licensorand a licensee.

0nline 0ffers
and contractdisputes against via doing business the Internet can protectthen-rselves Sellers out legalliability by creatingoffersthat clearll'spe11 the termsthat will govem their transacto and easy view. A11 offersare accepted. importanttermsshouldbe conspicuous tions if tl-re a ir-rclude hypertextiink to a Page Displaying the Offer The seller'sWeb site shor-rld coniaining the full contractso that potential buyersare made awareof the terms to whicl-r online in a readableformat, The contractgenerallymust be clisplayed they are assenting. rz: clear. lnexntvtpLe I All should be reasonably ,rr.h ,, a twelve-pointtypeface. provisions Netquip sellsa varieryof heavyequipment, such as trucks and trailers,online at its Web scheduleis very complex,the schedulemust be fully proNetquip'spricir-rg site. Because vided and explainedon the Web site. In addition, the terms of the sale (such as any warE rantiesand tl-rerefund policy) must be fully disclosed. Is an online contract enforceableif the offeror requiresan offeree to scroll down or and clear?That print the contractto reaclits terms,which are otherwisereadilyaccessible in wasthe question the followingcase.

229 F.SupP.2d (2oo7)' Districtof Pennsylvania,5lS Court,Eastern UnitedStatesDistrict

an has usingkeywords that an advertiser identified, ad the lf the userclickson it, Googlecharges advertiser. appears. i,-}ffi*1 and mid-l99os, page Larry terms before to an Googlerequires advertiser agreeto certain in graduate students computer University Brin,Stanford Sergey and seven placing ad.These terms-setout in a preamble an search enginecalled beganwork on an Internet science, paragraphs-are onlinein a windowwith a scrollbar. displayed term for "Google" "BackRubj' afterthe mathematical Renamed versionof the terms is at the top of A link to a printer-friendly in was madeavailable the by I followed l0o zeros, engine a without viewable At the bottom of the page, the window. major was the than a year, service acquiring 1998. less In I words,"Yes, agreeto the aboveterms and are scrolling, the beingincludedon many awards, achievement receiving clients, mustclickto and conditions." a box on whichan advertiser per "TopWebSite"lists, millions queries day' o{ and handling clauseprovides terms,a forum-selection Amongthe engine' proceed. search had becomethe world'slargest By 2000,Google in that any disputeoverthe programis to be "adjudicated its Inc.'s Web siteat wrruvv.google.com. to Coogle, According Feldman, lawyer, a Lawrence California." SantaClaraCounty, and the mission to organize world'sinformation makeit is key by participated the program selecting words,including in revenue The company's and useful. accessible universally "Celebrex," triggera showingof his ad "Bextra," to "Vioxx," and to targeted keywords. from advertising derives and suit In to potentialclients. a subsequent betweenFeldman Feldman in Pennsylvania, Incrs ln AAD BACKCROUilD FACTS Google, Adwords Googlein a federaldistrictcourt for on program, when an Internetusersearches wrnnrv.google.comclaimedthat at least20 percentof the clicks which he was

PR0FILEtnttre COMPAltlY

405 EIEEII
1 CASE 7 .l€ont inued between January 2005 and January 2006 Jrarged $100,000 Feldman fileda motionfor summary fraudulent.a r',ere
e. :eldman was allegingthat clickfroud had taken place.Clickfraud occurs with no interestin an such as a competitoror a prankster flren someone, on clicksrepeatedly an ad, drivingup the ad's n3,ertise/sgoodsor services, without generating sale. a ::s to the advertiser

E.CONTRACTS AND E-SICNATURES

judgment.Googleaskedthe courtto transfer caseto a the court in SantaClaraCounty, California.

. J.[Judg e ] WO R D S F THECOURT. . ctLE S , 0 l F{T H E
t***

t he h'pe of contractat issuehere is commonly referredto as a "clickwrap" agree- ;:it. -\ clickwrapagreement appears an Internetr,veb on pageand requires that a user -'..cnt any termsor conditions clicking on a dialogbox on the screenin orcler to by to Even though they are electronic, clickwrapagree.red with the Internettransaction. :*.*.i\ ctreconsidered be writingshecause they are printableand storable. to fErnphasis , i:i =d .: is courtspresentecl the with whethera clickwrapagreement enforce:rble, I r deterrnine ..-. applv traditional law principlesof contrerct and focuson whetherthe plaintiffshad - - ,: rn:rblenotice of anclrranifested:rssent the clickwrap agreenient. to Absenta showing ' --.;Ltd, clickwrapagreenrcnt, with any hinding contract, as to read dn enforceahle failure adcled.l cotnpliance with its /errns.l'Empirasis , .*':otexcuse did of Pl-rintifff Feldman] claims l-re not have notice or knowleclge tlie forr-rrlselection for :1ndthereforethat there was no "meeting of the mincls"recluirecl contract .,.::c-. ; : --:r.tti on * * x In orclerto activatean AclWords account,the userhaclto visit a Wcb pagcwhich .:l,rreclthe Agreementir-ia scrollable text box. * * x'l'l're user did not have to scroll : scrcenor click on a series hyperlinksto view the Agreement. of - ,,l to a sribrnergecl - ,:.ad. tcxt of the AdWordsAgreementwas immediatelyvisible to the user,as was a the terrnsarcl conclitions carefully, and with :. ::rincntadmonitionin boldfaceto reacl ' .::uctionto indicateassent the useragreed the terms. if to I hat the userwould I'iaveto scroll through the text box of the Agreerrent to reaclit in -. :ntiretl' doesnot defeatnotice becausc there was sufficientnotice of the Agreement '..,f and clicking "Yes"constituted to was assent all of the terms.'l'hepre:rmble, lvhicl-r ' :rcdiatclyvisible, assent the terrns to binding.'l'he Agreement alsomadeclearthat was long-not so long in .: cresented readablcIZ-pointfont. It wasonly sevenparagraphs . ,.: to render scrollingdown to vicw all of the terrnsinconvenientor irlpossible.A wasmade readilyavailable. Thc userhad antpletime full-screen version : -.rter-fliendl1,, " '.\ ie\'the document * * * The user * x x had to take affirmativeaction and ciick the "Yes,I agreeto the .-,re terms and conditions"button in order to proceed to the next step. Clicking 'u ntinue" withor-itclicking the "Yes"button woulcl have returned the user to the sane activatedhis "\:] page. If the user did not agreeto all of tl-reterms, he could not I'rave c l '- '='u Jl p lac ecads 'or inc trrre d h a rq e s ' of \ reasonably prudent Internet userwould haveknown of the exister-rce terms in the 'n-\brds Agreement.Plaintiff had to have had reasonable notice of the terms. By clickbutton, Plaintiffindicatedassent I :.. on "Yes, agreeto the abovetermsand conditions" - :he terms.

n C A S E1 7 . I - C o n t i n u e s e x t p a ge

4 06: m

CONTRACTS

C ASEl7.t-Co ntin ued

held "the rrre AND DECISION REMEDY court that
noticeof for contract reasonable of requirements an express Feldman and Google are termsand mutualassent satisfied." motion ThecourtdeniedFeldman's were boundto the terms. judgmentand granted motionto Google's for summary the transfer case.

A F 0 RCRI T t CA tNA t Y S I S - T e ch n o l o g i ca
Cons i deration focts underwhatdifferent might
the court hove held thot the plointiff did not hove reasonoble noticeof the terms of the agreementond thus did not ossent to them?

tr
n'rindis that the offerorcontrolsthe Provisionsto Include An irnportant rule to keep ir-r the thereforear-rticipate tenns he contract.Tl're seller shor-rld the resr,rlting offer anclthus ir"r include in a contractand providefor then-r the offer. In some instances. or shewantsto form may suffice.At a minimr-rm,an online offer should include cor-rtract a standardized the followingprovisions: agreementto the ternls oi I A clausethat clearly indicateswhat constitntesthe br-ryer's "l accept" that the bttyer can click on to the offer, such as a box containing the worcls irl inclicateacceptance.(Mechanisms for accepting onlir-reoffers will be discussecl detail later in the chapter.) applicable taxes 2 A provision specif,ing how payment for the goods (inclucling ar-ry ' mustbe made. 5 A statementof the seller'srefuncland retttrn policies. For exarlple,an ortliueselleroi of 4 Disclairners liability for certainusesof the goods. for not acceptresponsibility that the sellercloes forms may aclda disclaimer business aclvice. on on the buyer'sreliar-rce the forms rather tl.r:ru au attoruey's are availableto the buyer if the goocls forrnclto be the ren-reclies 5 A provisionspeci$,ing shoulclbe Any limitation of reureclies or clefective if the contractis otherwisebreachecl. out. clearlyspellecl aboutthe buyer. how the sellerwill usethe informationgatherecl inclicating 6 A staten-rent such as an arbitratiol clattse,a choice-oflau' relating to disputesettlement, 7 Provisions (cliscr-rssed next). clatLse (seeChapter 46),or a fonLm-selection clarrse to Dispute-Settlement Provisions Online offels frequenily inclucle provisionsrelatir-rg arbitratiou clartsespecifying disputesettlement.For example,the offer might include ar-r fortttn. the arisingr-rncler contract will be arbitratedin a designated that any dispr-rte a Many online contractsalsocor-rtain forum-selectionclause (indicatingthe forttm, or CLAUsE FORUM.SETECTION designating location, for the resolution of any clisputearising uircler the contract). As clisctrssed in in A provision a contract jurisdiction, tribunal that or the court, jr-rrisdictional are may occur when parties at a greatdistance, issues Chapter3, significant arising will decideany disputes clausewill they form contractsvia the Internet.A forunr-selection as they often ate wl-ren underthe contract. the problemsanclalsohelp to enstlretl-rat sellerwill not help to avertfuture jurisclictional state. be required to appearin cottrt in a clistant ts itfoirto hold online purchaserstoterms and conditionsthatthey do not read?The purand the a constitutes contractbetweenthe purchaser chaseof a ticketfor a cruiseobviously peopleare Increasingly, clause. includes forum-selection a usually cruise line.Sucha contract online,but when they do, they oftendo not read ship accommodations theircruise booking clause. the that includes forum-selection the "fineprint"of the contract

407 EIIUHilE
America after Holland a suit passengers brought class-action against who To theirdismay, learned that failingto readthe details offeredby that company ill becoming duringa cruise of the contractcould force them to bring their suit in anotherstate.In this case,the actual clauseprintedon them in had the forum-selection received paperticketsthat the passengers online did not who had bookedtheir accommodations but passengers all capitalletters, who did not like At their ticketsuntil just beforethe cruise. that point,any passengers receive the their fares.Nonetheless, court held that the without forfeiting the clausecould not cancel had because passengers ampletime to readthe the clause was enforceable forum-selection terms of the contracton the cruiseline'sWeb site.Fairor not, the disputehad to be litigated clauseon the cruisetickets.l in Stateas specified the forum-selection in Washington

AND E-SICNATURES E-CONTRACTS

m
Acceptances 0nline
(Second) Contracts-a cornpilation of common law coutract princiof The Restatement ples-states that partiesmay agreeto a contract "by written or spokenwords or by other sales The Uniform ComrnercialCode (UCC), which governs to action or by faih-rre act."2 that any contract for 2-204 of the UCC states has corrtracts, a similar provision.Section the sale of goods"may be rnade in any manner sufficient to show agreement,including of the by condr-rct both partieswhich recognizes existence such a contract." have used theseprovisionsto couclude that a bindClick-On Agreements The cor-rrts by contractcan be created conduct,includingthe aci of clicking ou a box indicating ir-rg "l accept" or "l agree"to accept an online offer. When an online buyer indicateshis or prompt, a to her assent be bound by the terrnsof the offer by clicking on sorte on-screen AGREEMENT or click-wrapagreement) CLICK.ON to referrecl as a click-onlicense click-on agreement (sometir-nes when a that An agreement arises agreementthat accornis fornred.Exhibit l7-l on page409 showsa portion of a click-on on in buyer, engaging a transaction rnarketedby Microsoft. rnadear-rd paniesa packageof software to assent be a computer, indicates boundby the termsof an offerby Generally,the law doesnot require that all of the partiesto a contract rnust actually for on clicking a buttonthat says, a button Lrave read all of its terms for the contract to be effective.Therefore, clicking on "l sometimes example, agree"; "l agree"to certain terms can be enough. The terms may be contained or box that states or to referred as a click-onlicense a click-wrap agrcement. or on a Web site through which the buyer is obtaining goodsor services, ihey may appear on a conputer screenwhen softwareis loaded frorn a CD-ROM or DVD or clownloaded frorn the Internet. tl-re In the following case,the court considered enforceabilityof a click-on (click-wrap) clause. that includeda forum-selection licensingagreement software
N.V, 120Cal.App.'lth552, l6 Cal.Rph.3d5 (2004) HollandAmerica, L schlessingert. (Second) Section19. ofContracts, 2. Restatement

'r'l
United StatesDistrict Court, District of Kansas, F,Supp.2d (2004).

Al'lD BACKCR0UND FACTS to be loadedonto a computer.Beforethe softwarecould be
Plus, Inc., a In l99Z Mortgage Inc.,a California askedDocMagic, mortgagelenderin Kansas, to firm, for software prepareand manageloan documents, sent DocMagic services. and for document-preparation which had the containing software, Plusa CD-ROM Mortgage

and User a installed, window displayed "softwareLicense a "Do you asked, The Agreement" the screen. agreement on lf Agreement? you License acceptall terms of the preceding A chooseNo, Setupwill close." clickon a "Yes"button was next C A S E7.2-C onti nues P a ge |

408 llNirilu

CONTRACTS

C ASE 2- Cont inue d 17. a alsoincluded clause The to needed continue. agreement of for the resolution any as California the venue designating asked for the software loan documents, To disputes. prepare The to create worksheet. a which it used information, certain the which completed to was e-mailed DocMagic, worksheet the nextsix Over them via e-mail. and returned documents Plus loansfrom Mortgage peoplewho had obtained years, which it the filed claims against firm,charging with mistakes, Plusfiled a suit in a federal MortSage costgl50,oooto resolve. failed that its sofhruare alleging DocMagic, district courtagainst legalrequirements. meeting certain documents to produce the The defendant filed a motionto transfer suitto a federal in basedon the clause the click-on courtin California agreement.

Magistrater. . 0f f N TtfE I'U0RDS THEC0URT . . wAXSE, [Judge]
is Plus arguesthe purported lice'ise agreemer.rt invalicl, as it i'rproperl,v ;:r;;. agreeto atternpts supplementand/or modift the terrnsof the parties'original contractr-ral rnaintains that prior to the subject rnelit. In support of this argument, Mortgage Plr-rs and ancl DocMagic r-regotiatecl enteredinto a contract MortgagePh-rs licenseagreement, for MortgagePlus agreedto pay specificantoulitsto DocMagic ii'r excl-range docwl'rereby MortgagePlus submitstl'ratwhen DocMagic shippedthe softservices. tumentpreparation that into a binclingcontract:rnc1 the theseservices, partiesenterecl to ware necess:rry r-rtilize a discuss r-ror the resultingagreemcntdicl tl'repzrrties in r-reitl'rer during thesenegotiations partieswoulcl haveto be filed and resolvecl. betweentl-re *"*".*{r.;t" a potential clispute * * x Mortgagc Plus :rrguesit is not bound by the SoftwareLiccnsirtg Agreemcttt becausethe license was not an ":igrccd-to"ilodification of the original agreernetlt by persuaclecl this:rrgttrnent. Court is r-rot betweenthe parties.'l'he of existettce the phanto F irst,MortgagePlushasfailecl prcselt evidenccto establish thc "original contrerct," the incluclingbut not linriteclto the cl:rte contractw:rsfortnecl, tor-n mcrnorializitig of terms and conclitior.rs the contract(other than pricing) or clocrturents irtrpropcrlr licensirtgagrecrueut find the softw:rre tfie lgreement. 'l'he Court cani.rot :rgteetleut rvheu there is rlo ternrsancl conclitionsof the original contractr.ral altereclthe agreetleut ever existcd. contr:ictuzrl .ut$.l.: that an origir-ral itsinlof thatevenin the absence :rn origilal agrccnlent, nextcontencls PL-rs Mortgage of tlie Software Licensing ply was not aware of ancl never accepteclany versiou * * * a click-wrap :rgreeAgreernent.In support of its coltentiorl, Mortgage Plus states priclrto "softwareLicensingAgreemerlt" appearirlg nent colsistingof a window entitlecl * * * cannot be construedas a legally binding contract t"rptlr,i"tl of software to on A licenseis a form of contractand is objectionable groundsapplicable contracts with the in general.By the termsof the licensehere, installationand use of the software of acceptance the licenseterms,The license was "br-rndlecl" licinse attached constitr.Lted usersto acceptthe ternls requirecl meaning tl'ratthe softlvare with the DocMagic software, install and subsequer-rtly before they could access by clicking throLrgha seriesof scree,rs This type of license is known as a "click-wrap" license agreement.Such the softwa"re. The softwarePrograms. .temt are agreemenrs conrron on Web sitesthat seli or distribr-rte which are "ilick-wrap" agreement borrowed the idea of "shrink-wrapagreements," is from placed inside the cellophane"shrink-wrap"of computer sofigeneral

liceise agreements '*orn oncethe "shrink-wrap"is opened.Courts effective born, that, by their terms,become x * x valid and enforceable. of havefound both types licenses fEmpfiasisaddecl.]

409@E
u CASE .2- Cont inued * * x It is undisputedbetweenthe partiesin this casethat MortgagePh,rs had to affir"Yes"button in assenting the Sofhvare LicensingAgreementasa preto :.-rtivelyclick the the :.quisite to installir-rg DocMagic software.It further is undisputedthat the sofhvare ,-ruld not be installed if Mortgage PIus did not accept the terms and conditions of the >, rhrare LicensingAgreement.Plaintiff had a choice as to whether to downloadthe softhere, instalthus, under the specificfactspresented ,-rre and r-rtilize relatedservices; the license constituted an affirmative -;ion and use of the software with the attached of .::ceptance the licensetermsby MortgagePlus and the licensingagreementbecame The Court finds the click-wrapagreementhere is a :frctive upon this affirrnativeassent. contract. -:1id

E-SICNATU RE5 AND E.CONTRACTS

that rne concluded the ANDREMEDY court DEClSl0N
a was a valid contractbecause agreement :oftwarelicensing the softwarecould be had to agreeto its terms before -rser ,nstalled clause was thus and used.The forum-selection to suit to be transferred and enforceable, the court orderedthe courtin California. district a federal

DIFFEREN T ? FACTS ERE W IF W HAT THE
that the individuol who clickedon the "Yes" Suppose buttonand installed the softwore was not outhorizedto do this. Would the resulthove been different?Why or why not?

@
are Shrink-Wrap Agreements In rnany ways,click-on agreements the Internet equiva- SHRINK.WRAP ACREEMENT whosetermsare An agreement (or as agreements shrink-wraplicenses, they are sotnetimescalled).A ..nts of shrink-wrap located in expressed a document in which inside a box shrink-wrapagreementis an agreementwhoseterms are expressecl insidea box in whichgoods(usually the box.) (The term shrink-wraprefersto the plastic that covers :ie goodsare packaged. sometimes software) packaged; are I- ,ually, tl-re calleda shrink-wrap license. to party wl-roopensthe box is told that she or he agrees the terrnsby keeping

'[his exhibitillustrates online offer to form a contract. acceptthe offer,the user simply scrolls To an iown the page and clickson the ?ccepf box. M€diaPlsyerI Sedesfor Mac FOR SOFTV{ARE AG*EEMENT MICRO$OTT UCENSg END-US€g Thi* CAREFU|LY: Microsoft [nd-User LicsnseA$re€rnent t"EUl-A"] is a lessl HPORTA$T*RSAO b€t$re*n you (eith*r sfi individuelor a siHgls€ntity) 8fid Micfosott CorFofarion ereement rsftware iddntified above, which includescomputer software and m*y {;Mhrosoft*} for ttl€ Miffo$o-ft. ircfude dspciated m*dia, printed material$,and "online" or atec$onic documcntati6ft (collectivdy, you Ay "SOfTl4aARe"). iilstallirs, copyrng,or otherwis€ utifig th€ SOFTWAXE, asfe€ tc b* b'ornd by the tefm$ df this EULA.lf you do not egr*e t$ the teffie of this zuLA, da not install, copy, or otherwi$eu$e the $GfTliYARE" UCENSS SOFTWARE le!*s ard int€rnation€l cspyrigtuttrestis$, e$wsll a$ oth$r i$ The SOFTWARE protect€d by copyrig{Nt ls intell€ctualprqf4rty l*ws end tr€atie&. Th€ SOrTWARS. licensed' not $sld. Thie EUL* gr**t$ yau ths tdlowiltg liftited, nofi-exct*siverkht$i l. G,RANT UCEN$E. OF . Installrtisrlandu$e. !; soFTwARf. Y*u rnay insta|' rnd use a r*aeon*btefiufnber of copiesof the $ofTwARE on to*1sut€rs at your p(sffli$+3. F-, r*t*ir ti*s and all syvnsrshiprights:o th* SOFTW*R€" . Res€ryedRighte.Mic{osofr *nd its $uppfi€rs t" j! AB.ights aat expr*$ly granted ar* r**eled to irictoioft.

f, +

f--Pr-t"t- ) f $ar.Ar* l

f

Dea'"e*l

f-Accept

*l

4IO EiIEil

CONTRACTS

he Package, or she whateveris in the box. Sinilarly, when the purchaseroPensa software licenseagreement. lirnited to agrees abide by the terms of tl-re " ordersa new conputer fion'ra national company'which shipsthe ud Jol-rn liExAtr,lplE .orr]ut"ito hirJ Along with the computer, the box contains an agreementsettingforth are the Llns of tl-resale,iircluding what ren-redies available.The docrrment also states as for longer than thirty dayswill be constrr'red an that John'sretention of the computer E a c c e p ta rrco f tl re terms. e agreementis not betweena retailer and a buyer, but a ln most instances, sl-rrink-wrap of and the ultirnate buyer-user the of betweentl'remanr-rfactlrer the lirtd.rr" or software associated ar-rd other issues remedies, concernwarranties, The terms generally procluct. with the use of the product. the Shrink-Wrap Agreemenk and EnforceableContractTerms' In many cases, _coLlrts asthe terms of ot]rer in agreements the sameway iraveenforcedt[e terms of s]rrink-wrap the with the prodr-rct, contracts.Some courts have reasoneJttrat Uy including the tern-rs product after havir-rg tl-re a seller proposecl contract that the buyer could acceptby using,r. oppori,rrrityto read the terms. 'l'l-rus,a buyer'sfailure to object to terms contained constitrttean acceptanceof the terms br softwarepackagen-ray withiri a shrir-rt-wrappecl point of view to enclosea fr'rll stateAlso, it see,ls practical from a business's cor-rduct.l over ment of the legal terms of a salewith the product rather than to read tl-restaten'ient the pl'rone,for example,wl'rena brtyer calls to order the product' the Shrink-Wrap Temrc That May Not Be Enforced. Nevertheless, courts have not consideration One importar.rt agreements. in ir-rcluded sl"rrink-wrap all of the tern-rs elforced the is wl'ietherthe partiesform their contr:rctbeforeor afterthe sellercommunicates terms Ierms after If tlre slrrink-*inp ,gr..,.,',.r'rt to the br-ryer. a buyer le:rrneclof the sl'rrink-wrap of for that a irlto cor.rtract, court rnaycor.rclude thosetermswereproposals er-rterecl ar the parties to agreed then-r. the r-rnless buyer expressly of terrls anclwere not pzrrt the cor.rtract aclclitional
TERMS BROWSE-WRAP of and conditions usethat Terms userat to are presented an Internet suchas the time certain Products, are software, beingdownloaded to but that neednot be agreed for "l (by clicking agree," examPle) beforethe useris ableto installor usethe product.

can terms_ Browse-WrapTerms Like the terms of a ciick-on agreement,_browse'wraP holrover the Internet. Unlike a click-on ergreement, occur in :r transactionconcluctecl to terrls clonot require an Interuet ttserto erssent the tetms before,sarever,browse-wr:rp In other rvords,a personcan install the software or clownloacling using certain softwarc. terms generOfferorsof browse-wraP wit|out clicking "l agree"to tl.reterrnsof a licer-rse. activeconsent. without the user's that the termsare binding ally asscrt they clonot satis{i because Critics contend that browse-wrrpt.trt-n are not enforceable Sornearguethat a user must at leastbe prethe basicelementsof contractformation. irr seltecl with the terms before indicating ;rgreernent order to form a valid online conterrn, this would require that a user navigatepast it tract. With respectto a browse-rvrap arrd agreeto it beforebeing able to obtain whateveris being sold' the enforceabilityof a clause in an agreementthat the T|"e followlng caseir'rvolued l i cerl se. as c o u rt c l l a n l c te ri zcd I brow se-w t.ap
S6b.'3d1417(7th cir. 1996) sec caseon this issue, ProCD, lnc. v. Zeidenherg, 3. For a leacling

306 F.3d SecondCircuit, UnitedStatesCourtof Appeals,

if AND BACKGROUND FACTS progress they pauseto do some othertaskor if their Internet communications i--"M.-"i Netscape for "smartDownload" softwaremakesit easier Corporation's downloadfilesfrom the lnternetwithout losing usersto free offersSmartDownload Netscape is connection interrupted. on by who indicate, clicking on of charge its Web siteto those to obtainit. Johncibson box, a designated that theywish

4 il@ n
1 C ASE 7 .3- Cont inued the on clickedon the box and downloaded so{tware. the Web to agreement that site'sdownloadpageis a reference a license Affirmatively to is visibleonly by scrolling the next screen. is to to indicating assent the agreement not required download provides anydisputes that arising The the software. agreement to in are from use of the software to be submitted arbitration

AND E-SIGNATURES E.CONTRACTS

transmits that California. Believing the useof SmartDownload private fileda information Cibson and others aboutits users, Netscape, suit in a federaldistrictcourt in New Yorkagainst the of law.Netscape asked courtto alleging violations federal to in according the orderthe parties arbitration California, to license agreement.

. circuitJudge. 0F lN THEWORDS THECOURT . . soroMAYER.
*(**t<

Whether govcrnedby the cornmon law or by Article 2 of the Uniforrn Cornn-rcrcial of in requires rnanifestation agreea Code ("UCC"), a transaction, ordcr to be a contract, whetherhy written or spoken between the parties.Mutual manifestationof assent, n.rent the disof word or by conduct,is the touchstone contracf.Although an onlooker observing havc secn each of the user plaintiffs click on the transactions this casewor-rlcl in puted "Downlo:rd" br:tton, a consuner's ciicking on a download br-rtton cloes Sn'rartDownlo:rcl to communicate assent conhactual terms if the offer clid not rn:rkeclear to tl-rcconnot * * * surner that clicking on the download button would signify assentto those terurs. added.l f Emphasis t' 'l' * It is truc that a partycannotavoidthe terms of a contracton the ground thert or he urhc'n But * * * an e.rceptionto tlrisgeneralrule exj.sts shefailec]to rcad itbefore sigting. the writing doesnot appearto be a contractand the ternrsare not calledto the attentionof tern. to no In the*recipient. such a case, contractis forrled witl'rrespect the unclisclosecl * x x Plaintilfs were responcling an offer that did not carry an irrrn'rediately visible to manifestatiot-i assent of licenseterms or requireunan-rbiguous of notice of the existence of t' " {cconsentwasto terms conto thoseterms.Thus, plaintiffs'apparentmanifestation not Morcover,the fact that, naturewers obvious. tainedin a docurrentwhosecontractual bar on tlieir cornptrterscreens, plaintiffs niay have been given the position of tl-rescroll renained belowthe download webpage portionof the Netscape that an unexplored an'are have concluded ttrat this portion conreasonabiy shor-rld button doesnot mean that they * * taineda noticeof licenseterms.x * x * In circumstances of to such as these,* * * a reference the existence license olr * * x notice of those screenis not sufficientto place consllners terrnson a submergecl that it tencled screen wasprinted in such a Drallner webpage terms.'fhe Sn'rartDownload Netscape's rulesand regulations. acceptance of to concealthe fact that it wasan express Internet users may have, as defendantsput it, "as rruch tin-reas they need" to scroll that vielvers will but there is no reasonto assutne on througl'rrnultiple screens a webpage, screens tl'rere. are simply becar-rse screens to scroll dowr-r subsequent

court Appeals of for rne AND DECISION REIYIEDY u.s.
the affirmed judgmentof the lowercourt. Circuit the Second had courtheldthat the plaintiffs not received Theappellate to termsand had not agreed noticeof the license reasonable the to on thosetermsbeforeacting the invitation download were not subjectto the arbitration Thus,the plaintiffs software. clause.

in rhe IMP0RTANT? rutins WHYlS THISCASE
this caseis significantbecauseit marks on opplication of troditionol controctprincifles to a type of disputethat can arise only in the online context.ln the case,the court clearly applied a long-standingprinciple of contractlow: a person will not be bound to on ogreementto which he or she did not ossenf.

tr

4t2 lM

CONTRACTS

it a In many instances, contract cannot be enforcedLlnless is signedby the party against signed not whorn enforcementis sougirt.In the dayswhen many people cor-rld write, tl-rey becamecommon, followedby typed documentswith an "X." Then handwrittensignatures that are transmitted and, most recently,cligital signatures prir-rted signahlres, signatures, of technology,the c1-restion what the electronically.Thror-rgl-rout evolution of sigr-rature a cor-rstitutes valid signaturehas arisenagain and again,and with gooclreason-without ancllegal work could lessbusiness a on some consensus what cor-istitutes valid signature, can or In be accomplislred. this section,we look at how electronicsignatures, e-signatures, as on and verifiecl e-contracts, well ashow the partiescair enter into agreements be createcl concerninge-signatures. disputes tl'ratprever-rt

Technologies E-signature
E-SIGNATURE As definedbv the UniformElectronic Act, Transactions "an electronic attached or sound, symbol, process with associated a to or logically by or recordand executed adopted with the intentto signthe a person recordi'

CYBERNOTARY that authority recognized A legally of the can certify validity digital signatures.

has An to allow electronicdocun-rents be signecl. e-signature Today,numeroustechnologies associated to attacl-red or logically been definedas "an electronicsound,syrnbol,or process T'htts, the by or with a recordand executed adoptecl a personwith the intent to sigr-r record."+ at the ends nalnes(intendedassignatures) digitalsignatures, include er-icrypted e-signatures ancl of e-mailmessages, "clicks" on a Web pageif tlie click includesthe identificationof tl're generallyfall into one of hvo categories, e-signatnres for person.The technologies creatir.rg A digital signatures. digand digitized handwritten signahLres public-keyinfrastntctttre-based a Llsing th:rt is often created signatttre is:r itized signature graphicalimageof a hanclwritten the For digital pen and pacl,such as an ePad,anclspecialsoftware. securityreasons, strokes the to by can sign:rture be measurecl sofhvare authenticate personsignirtg(this of a persor-r's dynamics). signature is referredto zts two (sucl'ras an dsymmetric cryptosysfenz), ntatheuratiIrr :r ptrblic-key ir-rfrastructure cally linkecl btrt clifferentkeysare generatecl-a priv:rtesigning key ancl a ptrblic valiclawhen the signer ttsesthe private key to create a tion key. A digital signatureis createcl enablesthe recipient unique rnark on an electronicdocun'ient.The appropriatesofhvare the ptrblic key to verify the iclentityof tl-iesigner.A cybernotary, of the clocumentto Llse the the or legallyrecognizedcertificationauthority,issrres key pair, iclentifies owner of the as keys,ancl certifiesthe validity of the public key. 'l'he cybernotaryaiso serves a rePository for public keys.

El S t a t ea w sGo ve tn in gSig n a tu te s
The problem is that the state e-sigttature Most stateshave laws governing e-signatures. not uniform. Somestates-Californiais a notableexanple-do not allow rrany lawsare are wheteasother st:rtes lttore perrnistypesof documentsto be signedwitl-re-signatLrres,

^l

?6ddgirTz€'rhi$t"'gteitgrutrir;3".$'lidl'-u'hi1e.'otbers'o ;f"J -khtiniai

Related Interests

;tlilrdind3tatdf

nrit other typesof e-sigrtahrres. Laws,in an attemptto The Naiio,ral Conierence of Co''unissionerson Uniforn-rState the. lJr-rifonn Electronic create more r-rnifon-nityalnong tl're states, promr-rlgatecl at leastin part, Act (UETA) in 199i. To date,the UETA has been adopted, Transactions in their versionof provision have also includecla sin-rilar Mosi states by forty-eightstates. rnay not be denied that a.signature Among other things, the UETA provicles the UCC. of (Other aspects the lesal effect or enforceabilityioiely becauseii is in electronicforn-i' shortly.) UETA will be cliscussed
later in this chapter' Act, Transactious which will be discussed d"ft-,i"" tr fim the Uniform Electronic

;Tll"

gl[EEE 415

AND E-SICNATURES E-CONTRACTS

res law Federal on E - S i g n a t ua n dE ' D o c um e n ts
in the enacted ElectronicSignatures Global and NationalCommerce In 2000.Consress may be "deniedlegal record,or signature that no contract, \ct (tr-SIGNict)5 to provicle form. In other words,under this law, an eleceffect" solelybecauseit is in an electroiric is tropic signatr,rre as valid as a signatureon paper,and an electronicdocrtment can be as as enforceabie a paperone. the For an electronicsignatureto be enforceable, contractingpartiesmust haveagreed For to use e-signatures. an electronicdocument to be valid, it must be in a form that can and be retair-red accuratelyreprodr-rced. ar-rd however.Cor-rtracts docThe E-SIGN Act doesnot apply to all typesof docurnents, decrees,evictions,foreclosures, that are exempt inciude court papers,divorce rurnents ar-id prenuptialagreements, wills.Also,the only agreements termiirations, health-ilsurance by by governed the UCC that fall under this law are thosecoverecl Articles 2 and 2A and the E-SIGN Act greatlyexpartded ['CC t-iOZ and I-206. Despitethese]irnitations,the laws and e-cotntnerce The ePodlnk is on eledronic of for possibilities contractingonline. For a discussion e-signature page. featttreon the r-rext BeyondOur Borders worldwide,seethis chapter's issrres signature pad thot con be used to
inserthandwriften signaturesinto electronic documents. What type of e-signature technology does this device utilize? Whot procedure is used to verify the outhenticity of o signoture created using this ePod? Electronics) (Photo of Courtesy lnterlink

in One way that online sellersand buyers can prevent disputesover signattrres their is contracts, to fonr of over the terms and conclitions those as e-cor-itracts, well as disputes oartlering agreenents.In a partnering agreement,a seller and a buyer who frequently that or-r with each other agreein aclvance the terus anclconditior-rs will apply do busir-reis cau agreeuretlt The partnering conductedelectronically. subsequently io all transactions when trans- PARTNERINGAGREEMENT the parties codesto be usedby and identification access special alsoestablish a between sellerand An agreement electronically. actingbr-rsiness do a buyerwho frequently business ariseunder the couwill agreementreducestl-relikelihood that disputes A partr-rering the with eachotherconcerning advanceto the terms and conditions tl-re tractbecause buyer and the sellerhaveagreedir-r that termsand conditions will apply formedelectronic that will accompanyeach sale.Furthermore,if a disputedoesarise,a court or arbitratior-r to all subsequently contracts. the parties' rorum will be able to refer to the partnering agreementwhen detern'rining Of contracts. course,even with a partneringagreernent intent with respectto subsequent access designated a person uses purchaser's If a rraudrernains possibility. an unauthorized is discovered.o code,it may be sometime beforethe problern lumber and identification and use Preventingunar-rthorized of passwords identification codesis one of the goalsof an electrorriccommunicationspolicy. Seethe Application featureat the end of this cl-rapsuch a policy') on ter for suggestions establishing vuhoare contemplating an extended contractual relationship Businesspersons with another party should enter into a partnering agreement-particularly if any aspect of the contract involves foreign parties or international deliveries. partnering agreements offer an efficient way to establish the standards between contracting parties by addressing what type of e-signature will be acceptable, who will be authorized to sign or modify the contract on behalf of the parties, and what security methods will be used. The contract should also outline the parties' understanding as to the effect of any errots, indicate which state's or nation's laws will apPly, and specify how any disputes that arise will be resolved.

tr
s 5. l5 U. S . C .S e c t i o n7 0 0 1e t szq . LLC, 5. See,for exanple,A-ET,Inc.t. C5 Communications, F.Supp2d (S D Tex 2007)

4t{l!ilIluEt

CONTRACTS

International and Use Regulation Internet ofthe
Today, much of the e-commerce conducted a on worldwidebasisinvolves buyers, sellers, and enablers from the UnitedStates. The preeminence U.S. of law i n thi s areai s l i kel y be chal l enged the fu t ur e, to in however, Internet as use continues expand to worldwide. Already, several international organizations havecreated their own regulations globalInternet for transactions. Forexample, 2005 the UnitedNations in Convention the Useof Electronic on Communications International in Contracts completed. majorgoalof the convention was A is to improve commercial certainty determining Internet by an user's location legal for Theconvention alsoestablishes for creating standards functional equivalence PurPoses. between electronic communciations paperdocuments. convention and The alsoprovides that e-signatures treated the equivalent signatures paperdocuments. be as of on Another2005 treatythat will help to fosterinternational tradeis the Convention on the Choice CourtAgreements. of Although this convention doesnot specifically address e-commerce applies and only to business-to-business transactions, business-tonot consumer transactions, will providemore certainty jurisdiction it regarding and recognition judgments other nations' of by courts. Suchmatters important both are to offlineand onlinetransactions, the convention so shouldenhance e-commerce well. as Stepsare beingtakento combatcybercrime(seeChapter on an international 6) basis. The Council Europerecently of created Cyber-Crime the Convention, which has been signedby thirty nations, including UnitedStates. the Thistreatyprovides mechanisms international for cooperation the battleagainst in Internet-related crime.lt prohibits unauthorized access an lnternetcomputer to system, unauthorized interception of Internet data,lnternet fraud and forgery, and copyright infringement the Internet. via

F0R CRITICAtANALYSISThere obout hundred ore two sovereign notions in the worldtodoy, only seventeen signedthe Electronic but have Communicotions
Convention, and thirty hove signed the Cyber-Crime Convention.Why do you think so mony notions' governmentsare reluctont to be bound by internotionol conventions?

nEconD According the UniformElectronic to Transactions information Act, that is either inscribed a tangible on medium stored an electronic or in or othermediumand is retrievable.

A noted earlier,the Uniforr-rElectrolic Transactions (UETA) wassetforth in 1999.It Act represents one of the first corr-rprel-iensive cfforts to create uniform laws pertainir-rg to e-colTImerce. 'I'he prirnarypurposeof the UET\ is to removebarriersto e-conrrnerce establishing by tl-rat electronicrecords ancisignatures havethe samelegaleffectaspaperdocunrents anclsignatures. n-reniioned As earlier,the UETA broadlydefinesat e-signctture "an electronic as sottnd,syrnbol,or process attachecl clr logicallyassociated to with a recordand executed or adoptedb)' , p.ttott witl-rthe intent to sign the record."7 record is "inforrration that is A inscribedon a tangiblemecliurrr that is storedin an electronicor other medium ancl is or re tri e v a b lic p e rcei rablle sualforrrr." q n vi l
7 UtrTAr02(8) 8.uE'rA r02(r 5)

4I5GIIEEilE

AND E-SICNATURES E-CONTRACTS

of and The Scope ApplicabilitytheUETA
that for The UETA doesnot createnew rr,rles electronic contractsbut rather establishes solelydue to their may not be denied enforceability and contracts signatures, records, but electronicforn'r.The UETA doesnot appiy to all writings and signatures only to elecA s relating to a transaction. transaclionis defined tronic recordsand electronicsignature to commercial, or govas an interaction between two or rlore people relatir-ig business, trustsor not apply to wills or testamentary The act specificallydoes <rnmental activities.9 (otl'rer byArticles 2 and 2A).tu than thosecovered by governed the UCC to transactions to of In addition,the provisions the UETA allow the states excludeits applicationto other passed E-SIGN Act in 2000,a yearafter the earlier,Congress of ereas law.As described issueis whether the UE'I-A was presentedto the statesfor adoption. T}.rus,a significar-rt as adoptedby the states. .rnd to what extentthe federal E-SIGN Act preemptsthe UETA

Act t-SlCll andtheUETA Federal The
that if a statehas explicitlyto the UETA and provides The E-SIGN Act of 20021lrefers enactedthe uniform version of the UETA, it is not preempted by the E-SIGN Act. In other words, if the staiehas enactedthe UETA withor,rtmodification, statelaw will govof l'rave enactednonuniform (modified) versions the ern. The problem is that many states L'ETA, largely for the purpose of excluding other areasof state law from the UETA's will terms.The E-SIGN Act specifiesthat those exch-rsions be preempted to the extent with the E-SICN Act'sprovisions. that they are incousistent The E-SIGN Act, however, explicitly allows the statesto enact alternativerequireTheWeb site of the Generally,however,the or rnentsfor tl'reuse of electronic recorcls electronic signatures. of NationalConference requirementsmust be consistentwith the provisionsof the E-SIGN Act, ancl the state Commissioners UniformState on Adclitior-rally, Lawsincludesan updatedlist of nrustnot give greaterlegai statusor effectto one specifictype of techr-rology. after the E-SIGN Act wasadopted,the state statesthat haveadoptedthe UEIA. iia statehasenactedalternativerequirements lan must specificallyrefer to the E-SIGN Act. The relationshipbetweenthe UE1'A and Go to ntm.ncsril.ryg. in the E-SIGN Act is illustrated Exhibit 77-2 ot the followingpage.

of HighlightstheUITA
is, \'e look next at selectedprovisionsof the UETA. Or-rrdiscussion of colrrse,basedon the act'suniform provisions.Keep in n'rind that the statestl-rathave enactedthe UETA versions. mav have adoptedslightly differer-rt The PartiesMust Agree to Conduct TransactionsElectronically The UETA will not partieshas previouslyagreedto conduct transaceach of tl-re apply to a transactionur-iless and it may be need not be explicit,however, The agreement tionsby electronicrneans. In circumstances.r/ the comand the surrounding of implied by the cor-rduct the parties to rnentsthat accompanythe UETA, the draftersstatedthat it may be reasonable infer on card with an e-maii address it has consentedto rvho givesout a business that a persor-r The electror-rically.l3 party'sagreementmay also be inferred from a lettransactbusiness verbal communication. Nothing in the UETA ter or other writing, as well as from son-re electronicallybe rnadeelectronically. to requiresthat the agreement conduct transactions to Note, however,that some courts have required that the parties'agreen'ient conduct electronicallybe clear and unambiguous. For example, in one Louisiana transactions
and 9.UEIA 2(12) 3. lo.UETA3(b). 7002(2)(A)(t) Section ll. I5 U.S.C. 12. uE-145(b), 48. 15. UETA5,Comment

4t8MISil

CONTRACTS

u"t1 firl-r todayuses Ig I I L l c om put er ar r r h i g h s l speecl Internet connections. Everycompanyalsohasfax nachines, landline telephones, pagers, copiers, and In l e r r r el r ds oF lw a a s s e ts , ar re cornputers and suchasthe contents storedon the company's Aclditionaliy, en-rployees rnay the cornpany's donain narr-les. cell and electronic messaging devices. uscall-in-or-re phones in Civen the ubiquityof electronic communications today's combusiness world,no firm shouldbe withoutan electronic rnunications policy.The poiicy shouldstatethat the employer communications resources shouldalso and ownsall electronic may do spellout what cr.nployees anclmay r-rot when using resources. these

Restrictions Public Forums onBlogs and 0nlnternet
in Damagingstatements madeby employees Internetpublic forurrs,suchaslist serves personal blogs, can create senand ousproblems. comprehensive A electronic comn-runications restrictions on policy shouldir-rclucle ernployer's the specific ir-r The ernployer employees'statements publicforums. from conficlential or shouldprohibit en'rployees disclosing proprietary informationelectronically. Adclitionally, elecan tronic communications policy shouldstatethat all employees n-ray auditedand rnonitored. doing this,the firm will be By to warn employees the etrployerwill haveaccess all nesthat files,anclother inforn'iation throughor sages, eitherprocessed resources. stored the firm'selectronic on communications

limiting Extent Employee the of Usage
In the past, employees usecl telepl-rone, toclay the but tl-rey write c-r.nails usetl'reh-rternet. asfirms in the pastcreatecl ancl Just rnoclern spe cific policies aboutpersonal of tl-re use telephone, firmsrnustspecily how rnuchincidental personal of the use firnr'selectronic corlmunications resources allowecl. is Incleecl, manyfirmscan siniplykeeptheirexisting policywith respect "anclany other electronic to the telephone ancladclthe irhrase cornmunications Lesource" the firrr's policy clocurnent. to (lM). messaging Sucha policyshoulcl explicitly coverinstant prohibitIM because detracts Many firmstoclay specificalll it from proch,rctivity, otherfinns havefound it usefuland but l-ravc IM for dcvclopecl networks communication arnongteani mernbers on working largeprojects. t*

AI{ C}IECKI.ISTCREATING IOR p0HCY EI"ECTR0ilrC C0MmUilrCAT|0NS
Indicate may clearly employees usethe firm's that electronic communications resources in only in accordance the guidelines with specified the policy. company's electronic communications Thepolicy should specifically thatanypersonal state mustbe useof the company's resources employees by limited andcannot normal business activities. affect policy Every communications should out set electronic requirements identification for codes passwords and them. andindicate employees to protect how are Thepolicy inform employees the comthat should panymaysystematically commonitor theirelectronic files. munications theircreation useof other and and

* This for Applicotion not meantto substitute the services an attorney is of who is licensed practice in your state. to law

browse-wrap terms410 click-on agreement 407 cybernotary 412

405 e-contract e-signature 412 forum-selection clause 406

partnering 415 agreement record414 409 shrink-wrap agreement

presented the Internet Thetermsof contract OnlineOffers offers via should asinclusive the termsin an be as (Seepages 4O4-4O7.) offermadein a written(paper) readable document. offershould displayed an easily The be in format andshould include somemechanism, asan "l accept" bywhichthe customer such boa

4t9ffi

AND E'SIGNAIURES E-CONTRACIS

OnlineOffersContinued Acceptances Online (See pages 407-411.)

jurisdictional the with onlinetransactions, issues frequently arise the Because may accept offer. clause. provisions, well as a forum-selection as dispute-settlement offershouldinclude 1. Click-onogreementis on completing transaction a computer, a created when a buyer, agreement a. Definition-An on to required indicate or his assent be boundby the termsof an offerby clicking a to her "l on may aPpear the Web termsof the agreement box that says, example, agreeJ'The for on goodsor services, they may appear a or sitethroughwhichthe buyeris obtaining when softwareis downloaded. computerscreen holdingthat by clickingon courtshaveenforcedclick-onagreements, b. Enforceability-fhe "l agree," offereehas indicated terms (termsin a by acceptance conduct.Browse-wrap the such the license that an Internet userdoesnot haveto readpriorto downloading product, however, may not be enforcedon the groundthat the useris not made aware as software), into a contract. that he or she is entering 2. Shrink-wropagreementinsidea box in whichthe goodsare agreement whosetermsare expressed a. Definition-An the that,by keeping goodsthat are in packaged. partywho opensthe box is informed The agreement. to the box,he or she agrees the termsof the shrink-wrap even if the agreements, courtshaveoften enforcedshrink-wrap b. Enforceability-The A purchaser-userthe goodsdid not readthe termsof the agreement. courtmay deem a of if however, the buyerlearnsof the shrink-wrap shrink-wrap agreement unenforceable, terms ofter the partiesenteredinto the agreement.

E-Signatures (Seepages 412-413.)

sound, as Transactions (UEfA)definesan e-signoture "an electronic Act The UniformElectronic or with a recordand executed adoptedby a to associated attached or logically symbol,or process personwith the intentto signthe recordl' of includedigitizedhandwritten hruo technologies-The main categories technology 1. E-signoture digitalsignatures. infrastructure-based signatures and public-key e-signatures. most stateshavelawsgoverning 2. Statelaws governinge-signotures-Although and for these laws are not uniform.The UEIAprovides the validityof e-signatures may createmore uniformityamong the statesin this respect. ultimately in Electronic Signatures Clobaland and e-documenfs-The 3. Federollow on e-signatures by Act Act) of 2000 gavevalidityto e-signatures providingthat NationalCommerce (E-SICN it solelybecause is in an may be "deniedlegaleffect" record, signature or no contract, form. electronic

Partnering Agreements page (See 413.)

do parties who frequently will that disputes ariseundertheire-contracts, To reduce likelihood the out agreement, setting the termsand with eachotheronlinemay form a partnering business may also The transactions. agreement electronic that conditions will applyto all theirsubsequent business when transacting codes be usedby the parties to access and identification establish electronically.

was createdby the TheUniformElectronic Thisuniformact,which has been adoptedat leastin part by most states, Act Transactions the rulesto support on of National Conference Commissioners UniformStateLawsto provide

(uErA)

(Seepages414-417.)

enteredinto online,as well as other of Underthe UEIA,contracts enforcement e-contracts. governed transactions The UEIAdoesnot applyto certain are to documents, presumed be valid. trusts. by the UCCor to wills or testamentary

Related Interests

liceise agreements '*orn oncethe "shrink-wrap"is opened.Courts effective born, that, by their terms,become x * x valid and enforceable. of havefound both types licenses fEmpfiasisaddecl.]

409@E
u CASE .2- Cont inued * * x It is undisputedbetweenthe partiesin this casethat MortgagePh,rs had to affir"Yes"button in assenting the Sofhvare LicensingAgreementasa preto :.-rtivelyclick the the :.quisite to installir-rg DocMagic software.It further is undisputedthat the sofhvare ,-ruld not be installed if Mortgage PIus did not accept the terms and conditions of the >, rhrare LicensingAgreement.Plaintiff had a choice as to whether to downloadthe softhere, instalthus, under the specificfactspresented ,-rre and r-rtilize relatedservices; the license constituted an affirmative -;ion and use of the software with the attached of .::ceptance the licensetermsby MortgagePlus and the licensingagreementbecame The Court finds the click-wrapagreementhere is a :frctive upon this affirrnativeassent. contract. -:1id

E-SICNATU RE5 AND E.CONTRACTS

that rne concluded the ANDREMEDY court DEClSl0N
a was a valid contractbecause agreement :oftwarelicensing the softwarecould be had to agreeto its terms before -rser ,nstalled clause was thus and used.The forum-selection to suit to be transferred and enforceable, the court orderedthe courtin California. district a federal

DIFFEREN T ? FACTS ERE W IF W HAT THE
that the individuol who clickedon the "Yes" Suppose buttonand installed the softwore was not outhorizedto do this. Would the resulthove been different?Why or why not?

@
are Shrink-Wrap Agreements In rnany ways,click-on agreements the Internet equiva- SHRINK.WRAP ACREEMENT whosetermsare An agreement (or as agreements shrink-wraplicenses, they are sotnetimescalled).A ..nts of shrink-wrap located in expressed a document in which inside a box shrink-wrapagreementis an agreementwhoseterms are expressecl insidea box in whichgoods(usually the box.) (The term shrink-wraprefersto the plastic that covers :ie goodsare packaged. sometimes software) packaged; are I- ,ually, tl-re calleda shrink-wrap license. to party wl-roopensthe box is told that she or he agrees the terrnsby keeping

'[his exhibitillustrates online offer to form a contract. acceptthe offer,the user simply scrolls To an iown the page and clickson the ?ccepf box. M€diaPlsyerI Sedesfor Mac FOR SOFTV{ARE AG*EEMENT MICRO$OTT UCENSg END-US€g Thi* CAREFU|LY: Microsoft [nd-User LicsnseA$re€rnent t"EUl-A"] is a lessl HPORTA$T*RSAO b€t$re*n you (eith*r sfi individuelor a siHgls€ntity) 8fid Micfosott CorFofarion ereement rsftware iddntified above, which includescomputer software and m*y {;Mhrosoft*} for ttl€ Miffo$o-ft. ircfude dspciated m*dia, printed material$,and "online" or atec$onic documcntati6ft (collectivdy, you Ay "SOfTl4aARe"). iilstallirs, copyrng,or otherwis€ utifig th€ SOFTWAXE, asfe€ tc b* b'ornd by the tefm$ df this EULA.lf you do not egr*e t$ the teffie of this zuLA, da not install, copy, or otherwi$eu$e the $GfTliYARE" UCENSS SOFTWARE le!*s ard int€rnation€l cspyrigtuttrestis$, e$wsll a$ oth$r i$ The SOFTWARE protect€d by copyrig{Nt ls intell€ctualprqf4rty l*ws end tr€atie&. Th€ SOrTWARS. licensed' not $sld. Thie EUL* gr**t$ yau ths tdlowiltg liftited, nofi-exct*siverkht$i l. G,RANT UCEN$E. OF . Installrtisrlandu$e. !; soFTwARf. Y*u rnay insta|' rnd use a r*aeon*btefiufnber of copiesof the $ofTwARE on to*1sut€rs at your p(sffli$+3. F-, r*t*ir ti*s and all syvnsrshiprights:o th* SOFTW*R€" . Res€ryedRighte.Mic{osofr *nd its $uppfi€rs t" j! AB.ights aat expr*$ly granted ar* r**eled to irictoioft.

f, +

f--Pr-t"t- ) f $ar.Ar* l

f

Dea'"e*l

f-Accept

*l

4IO EiIEil

CONTRACTS

he Package, or she whateveris in the box. Sinilarly, when the purchaseroPensa software licenseagreement. lirnited to agrees abide by the terms of tl-re " ordersa new conputer fion'ra national company'which shipsthe ud Jol-rn liExAtr,lplE .orr]ut"ito hirJ Along with the computer, the box contains an agreementsettingforth are the Llns of tl-resale,iircluding what ren-redies available.The docrrment also states as for longer than thirty dayswill be constrr'red an that John'sretention of the computer E a c c e p ta rrco f tl re terms. e agreementis not betweena retailer and a buyer, but a ln most instances, sl-rrink-wrap of and the ultirnate buyer-user the of betweentl'remanr-rfactlrer the lirtd.rr" or software associated ar-rd other issues remedies, concernwarranties, The terms generally procluct. with the use of the product. the Shrink-Wrap Agreemenk and EnforceableContractTerms' In many cases, _coLlrts asthe terms of ot]rer in agreements the sameway iraveenforcedt[e terms of s]rrink-wrap the with the prodr-rct, contracts.Some courts have reasoneJttrat Uy including the tern-rs product after havir-rg tl-re a seller proposecl contract that the buyer could acceptby using,r. oppori,rrrityto read the terms. 'l'l-rus,a buyer'sfailure to object to terms contained constitrttean acceptanceof the terms br softwarepackagen-ray withiri a shrir-rt-wrappecl point of view to enclosea fr'rll stateAlso, it see,ls practical from a business's cor-rduct.l over ment of the legal terms of a salewith the product rather than to read tl-restaten'ient the pl'rone,for example,wl'rena brtyer calls to order the product' the Shrink-Wrap Temrc That May Not Be Enforced. Nevertheless, courts have not consideration One importar.rt agreements. in ir-rcluded sl"rrink-wrap all of the tern-rs elforced the is wl'ietherthe partiesform their contr:rctbeforeor afterthe sellercommunicates terms Ierms after If tlre slrrink-*inp ,gr..,.,',.r'rt to the br-ryer. a buyer le:rrneclof the sl'rrink-wrap of for that a irlto cor.rtract, court rnaycor.rclude thosetermswereproposals er-rterecl ar the parties to agreed then-r. the r-rnless buyer expressly of terrls anclwere not pzrrt the cor.rtract aclclitional
TERMS BROWSE-WRAP of and conditions usethat Terms userat to are presented an Internet suchas the time certain Products, are software, beingdownloaded to but that neednot be agreed for "l (by clicking agree," examPle) beforethe useris ableto installor usethe product.

can terms_ Browse-WrapTerms Like the terms of a ciick-on agreement,_browse'wraP holrover the Internet. Unlike a click-on ergreement, occur in :r transactionconcluctecl to terrls clonot require an Interuet ttserto erssent the tetms before,sarever,browse-wr:rp In other rvords,a personcan install the software or clownloacling using certain softwarc. terms generOfferorsof browse-wraP wit|out clicking "l agree"to tl.reterrnsof a licer-rse. activeconsent. without the user's that the termsare binding ally asscrt they clonot satis{i because Critics contend that browse-wrrpt.trt-n are not enforceable Sornearguethat a user must at leastbe prethe basicelementsof contractformation. irr seltecl with the terms before indicating ;rgreernent order to form a valid online conterrn, this would require that a user navigatepast it tract. With respectto a browse-rvrap arrd agreeto it beforebeing able to obtain whateveris being sold' the enforceabilityof a clause in an agreementthat the T|"e followlng caseir'rvolued l i cerl se. as c o u rt c l l a n l c te ri zcd I brow se-w t.ap
S6b.'3d1417(7th cir. 1996) sec caseon this issue, ProCD, lnc. v. Zeidenherg, 3. For a leacling

306 F.3d SecondCircuit, UnitedStatesCourtof Appeals,

if AND BACKGROUND FACTS progress they pauseto do some othertaskor if their Internet communications i--"M.-"i Netscape for "smartDownload" softwaremakesit easier Corporation's downloadfilesfrom the lnternetwithout losing usersto free offersSmartDownload Netscape is connection interrupted. on by who indicate, clicking on of charge its Web siteto those to obtainit. Johncibson box, a designated that theywish

4 il@ n
1 C ASE 7 .3- Cont inued the on clickedon the box and downloaded so{tware. the Web to agreement that site'sdownloadpageis a reference a license Affirmatively to is visibleonly by scrolling the next screen. is to to indicating assent the agreement not required download provides anydisputes that arising The the software. agreement to in are from use of the software to be submitted arbitration

AND E-SIGNATURES E.CONTRACTS

transmits that California. Believing the useof SmartDownload private fileda information Cibson and others aboutits users, Netscape, suit in a federaldistrictcourt in New Yorkagainst the of law.Netscape asked courtto alleging violations federal to in according the orderthe parties arbitration California, to license agreement.

. circuitJudge. 0F lN THEWORDS THECOURT . . soroMAYER.
*(**t<

Whether govcrnedby the cornmon law or by Article 2 of the Uniforrn Cornn-rcrcial of in requires rnanifestation agreea Code ("UCC"), a transaction, ordcr to be a contract, whetherhy written or spoken between the parties.Mutual manifestationof assent, n.rent the disof word or by conduct,is the touchstone contracf.Although an onlooker observing havc secn each of the user plaintiffs click on the transactions this casewor-rlcl in puted "Downlo:rd" br:tton, a consuner's ciicking on a download br-rtton cloes Sn'rartDownlo:rcl to communicate assent conhactual terms if the offer clid not rn:rkeclear to tl-rcconnot * * * surner that clicking on the download button would signify assentto those terurs. added.l f Emphasis t' 'l' * It is truc that a partycannotavoidthe terms of a contracton the ground thert or he urhc'n But * * * an e.rceptionto tlrisgeneralrule exj.sts shefailec]to rcad itbefore sigting. the writing doesnot appearto be a contractand the ternrsare not calledto the attentionof tern. to no In the*recipient. such a case, contractis forrled witl'rrespect the unclisclosecl * x x Plaintilfs were responcling an offer that did not carry an irrrn'rediately visible to manifestatiot-i assent of licenseterms or requireunan-rbiguous of notice of the existence of t' " {cconsentwasto terms conto thoseterms.Thus, plaintiffs'apparentmanifestation not Morcover,the fact that, naturewers obvious. tainedin a docurrentwhosecontractual bar on tlieir cornptrterscreens, plaintiffs niay have been given the position of tl-rescroll renained belowthe download webpage portionof the Netscape that an unexplored an'are have concluded ttrat this portion conreasonabiy shor-rld button doesnot mean that they * * taineda noticeof licenseterms.x * x * In circumstances of to such as these,* * * a reference the existence license olr * * x notice of those screenis not sufficientto place consllners terrnson a submergecl that it tencled screen wasprinted in such a Drallner webpage terms.'fhe Sn'rartDownload Netscape's rulesand regulations. acceptance of to concealthe fact that it wasan express Internet users may have, as defendantsput it, "as rruch tin-reas they need" to scroll that vielvers will but there is no reasonto assutne on througl'rrnultiple screens a webpage, screens tl'rere. are simply becar-rse screens to scroll dowr-r subsequent

court Appeals of for rne AND DECISION REIYIEDY u.s.
the affirmed judgmentof the lowercourt. Circuit the Second had courtheldthat the plaintiffs not received Theappellate to termsand had not agreed noticeof the license reasonable the to on thosetermsbeforeacting the invitation download were not subjectto the arbitration Thus,the plaintiffs software. clause.

in rhe IMP0RTANT? rutins WHYlS THISCASE
this caseis significantbecauseit marks on opplication of troditionol controctprincifles to a type of disputethat can arise only in the online context.ln the case,the court clearly applied a long-standingprinciple of contractlow: a person will not be bound to on ogreementto which he or she did not ossenf.

tr

4t2 lM

CONTRACTS

it a In many instances, contract cannot be enforcedLlnless is signedby the party against signed not whorn enforcementis sougirt.In the dayswhen many people cor-rld write, tl-rey becamecommon, followedby typed documentswith an "X." Then handwrittensignatures that are transmitted and, most recently,cligital signatures prir-rted signahlres, signatures, of technology,the c1-restion what the electronically.Thror-rgl-rout evolution of sigr-rature a cor-rstitutes valid signaturehas arisenagain and again,and with gooclreason-without ancllegal work could lessbusiness a on some consensus what cor-istitutes valid signature, can or In be accomplislred. this section,we look at how electronicsignatures, e-signatures, as on and verifiecl e-contracts, well ashow the partiescair enter into agreements be createcl concerninge-signatures. disputes tl'ratprever-rt

Technologies E-signature
E-SIGNATURE As definedbv the UniformElectronic Act, Transactions "an electronic attached or sound, symbol, process with associated a to or logically by or recordand executed adopted with the intentto signthe a person recordi'

CYBERNOTARY that authority recognized A legally of the can certify validity digital signatures.

has An to allow electronicdocun-rents be signecl. e-signature Today,numeroustechnologies associated to attacl-red or logically been definedas "an electronicsound,syrnbol,or process T'htts, the by or with a recordand executed adoptecl a personwith the intent to sigr-r record."+ at the ends nalnes(intendedassignatures) digitalsignatures, include er-icrypted e-signatures ancl of e-mailmessages, "clicks" on a Web pageif tlie click includesthe identificationof tl're generallyfall into one of hvo categories, e-signatnres for person.The technologies creatir.rg A digital signatures. digand digitized handwritten signahLres public-keyinfrastntctttre-based a Llsing th:rt is often created signatttre is:r itized signature graphicalimageof a hanclwritten the For digital pen and pacl,such as an ePad,anclspecialsoftware. securityreasons, strokes the to by can sign:rture be measurecl sofhvare authenticate personsignirtg(this of a persor-r's dynamics). signature is referredto zts two (sucl'ras an dsymmetric cryptosysfenz), ntatheuratiIrr :r ptrblic-key ir-rfrastructure cally linkecl btrt clifferentkeysare generatecl-a priv:rtesigning key ancl a ptrblic valiclawhen the signer ttsesthe private key to create a tion key. A digital signatureis createcl enablesthe recipient unique rnark on an electronicdocun'ient.The appropriatesofhvare the ptrblic key to verify the iclentityof tl-iesigner.A cybernotary, of the clocumentto Llse the the or legallyrecognizedcertificationauthority,issrres key pair, iclentifies owner of the as keys,ancl certifiesthe validity of the public key. 'l'he cybernotaryaiso serves a rePository for public keys.

El S t a t ea w sGo ve tn in gSig n a tu te s
The problem is that the state e-sigttature Most stateshave laws governing e-signatures. not uniform. Somestates-Californiais a notableexanple-do not allow rrany lawsare are wheteasother st:rtes lttore perrnistypesof documentsto be signedwitl-re-signatLrres,

^l

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AND E-SICNATURES E-CONTRACTS

res law Federal on E - S i g n a t ua n dE ' D o c um e n ts
in the enacted ElectronicSignatures Global and NationalCommerce In 2000.Consress may be "deniedlegal record,or signature that no contract, \ct (tr-SIGNict)5 to provicle form. In other words,under this law, an eleceffect" solelybecauseit is in an electroiric is tropic signatr,rre as valid as a signatureon paper,and an electronicdocrtment can be as as enforceabie a paperone. the For an electronicsignatureto be enforceable, contractingpartiesmust haveagreed For to use e-signatures. an electronicdocument to be valid, it must be in a form that can and be retair-red accuratelyreprodr-rced. ar-rd however.Cor-rtracts docThe E-SIGN Act doesnot apply to all typesof docurnents, decrees,evictions,foreclosures, that are exempt inciude court papers,divorce rurnents ar-id prenuptialagreements, wills.Also,the only agreements termiirations, health-ilsurance by by governed the UCC that fall under this law are thosecoverecl Articles 2 and 2A and the E-SIGN Act greatlyexpartded ['CC t-iOZ and I-206. Despitethese]irnitations,the laws and e-cotntnerce The ePodlnk is on eledronic of for possibilities contractingonline. For a discussion e-signature page. featttreon the r-rext BeyondOur Borders worldwide,seethis chapter's issrres signature pad thot con be used to
inserthandwriften signaturesinto electronic documents. What type of e-signature technology does this device utilize? Whot procedure is used to verify the outhenticity of o signoture created using this ePod? Electronics) (Photo of Courtesy lnterlink

in One way that online sellersand buyers can prevent disputesover signattrres their is contracts, to fonr of over the terms and conclitions those as e-cor-itracts, well as disputes oartlering agreenents.In a partnering agreement,a seller and a buyer who frequently that or-r with each other agreein aclvance the terus anclconditior-rs will apply do busir-reis cau agreeuretlt The partnering conductedelectronically. subsequently io all transactions when trans- PARTNERINGAGREEMENT the parties codesto be usedby and identification access special alsoestablish a between sellerand An agreement electronically. actingbr-rsiness do a buyerwho frequently business ariseunder the couwill agreementreducestl-relikelihood that disputes A partr-rering the with eachotherconcerning advanceto the terms and conditions tl-re tractbecause buyer and the sellerhaveagreedir-r that termsand conditions will apply formedelectronic that will accompanyeach sale.Furthermore,if a disputedoesarise,a court or arbitratior-r to all subsequently contracts. the parties' rorum will be able to refer to the partnering agreementwhen detern'rining Of contracts. course,even with a partneringagreernent intent with respectto subsequent access designated a person uses purchaser's If a rraudrernains possibility. an unauthorized is discovered.o code,it may be sometime beforethe problern lumber and identification and use Preventingunar-rthorized of passwords identification codesis one of the goalsof an electrorriccommunicationspolicy. Seethe Application featureat the end of this cl-rapsuch a policy') on ter for suggestions establishing vuhoare contemplating an extended contractual relationship Businesspersons with another party should enter into a partnering agreement-particularly if any aspect of the contract involves foreign parties or international deliveries. partnering agreements offer an efficient way to establish the standards between contracting parties by addressing what type of e-signature will be acceptable, who will be authorized to sign or modify the contract on behalf of the parties, and what security methods will be used. The contract should also outline the parties' understanding as to the effect of any errots, indicate which state's or nation's laws will apPly, and specify how any disputes that arise will be resolved.

tr
s 5. l5 U. S . C .S e c t i o n7 0 0 1e t szq . LLC, 5. See,for exanple,A-ET,Inc.t. C5 Communications, F.Supp2d (S D Tex 2007)

4t{l!ilIluEt

CONTRACTS

International and Use Regulation Internet ofthe
Today, much of the e-commerce conducted a on worldwidebasisinvolves buyers, sellers, and enablers from the UnitedStates. The preeminence U.S. of law i n thi s areai s l i kel y be chal l enged the fu t ur e, to in however, Internet as use continues expand to worldwide. Already, several international organizations havecreated their own regulations globalInternet for transactions. Forexample, 2005 the UnitedNations in Convention the Useof Electronic on Communications International in Contracts completed. majorgoalof the convention was A is to improve commercial certainty determining Internet by an user's location legal for Theconvention alsoestablishes for creating standards functional equivalence PurPoses. between electronic communciations paperdocuments. convention and The alsoprovides that e-signatures treated the equivalent signatures paperdocuments. be as of on Another2005 treatythat will help to fosterinternational tradeis the Convention on the Choice CourtAgreements. of Although this convention doesnot specifically address e-commerce applies and only to business-to-business transactions, business-tonot consumer transactions, will providemore certainty jurisdiction it regarding and recognition judgments other nations' of by courts. Suchmatters important both are to offlineand onlinetransactions, the convention so shouldenhance e-commerce well. as Stepsare beingtakento combatcybercrime(seeChapter on an international 6) basis. The Council Europerecently of created Cyber-Crime the Convention, which has been signedby thirty nations, including UnitedStates. the Thistreatyprovides mechanisms international for cooperation the battleagainst in Internet-related crime.lt prohibits unauthorized access an lnternetcomputer to system, unauthorized interception of Internet data,lnternet fraud and forgery, and copyright infringement the Internet. via

F0R CRITICAtANALYSISThere obout hundred ore two sovereign notions in the worldtodoy, only seventeen signedthe Electronic but have Communicotions
Convention, and thirty hove signed the Cyber-Crime Convention.Why do you think so mony notions' governmentsare reluctont to be bound by internotionol conventions?

nEconD According the UniformElectronic to Transactions information Act, that is either inscribed a tangible on medium stored an electronic or in or othermediumand is retrievable.

A noted earlier,the Uniforr-rElectrolic Transactions (UETA) wassetforth in 1999.It Act represents one of the first corr-rprel-iensive cfforts to create uniform laws pertainir-rg to e-colTImerce. 'I'he prirnarypurposeof the UET\ is to removebarriersto e-conrrnerce establishing by tl-rat electronicrecords ancisignatures havethe samelegaleffectaspaperdocunrents anclsignatures. n-reniioned As earlier,the UETA broadlydefinesat e-signctture "an electronic as sottnd,syrnbol,or process attachecl clr logicallyassociated to with a recordand executed or adoptedb)' , p.ttott witl-rthe intent to sign the record."7 record is "inforrration that is A inscribedon a tangiblemecliurrr that is storedin an electronicor other medium ancl is or re tri e v a b lic p e rcei rablle sualforrrr." q n vi l
7 UtrTAr02(8) 8.uE'rA r02(r 5)

4I5GIIEEilE

AND E-SICNATURES E-CONTRACTS

of and The Scope ApplicabilitytheUETA
that for The UETA doesnot createnew rr,rles electronic contractsbut rather establishes solelydue to their may not be denied enforceability and contracts signatures, records, but electronicforn'r.The UETA doesnot appiy to all writings and signatures only to elecA s relating to a transaction. transaclionis defined tronic recordsand electronicsignature to commercial, or govas an interaction between two or rlore people relatir-ig business, trustsor not apply to wills or testamentary The act specificallydoes <rnmental activities.9 (otl'rer byArticles 2 and 2A).tu than thosecovered by governed the UCC to transactions to of In addition,the provisions the UETA allow the states excludeits applicationto other passed E-SIGN Act in 2000,a yearafter the earlier,Congress of ereas law.As described issueis whether the UE'I-A was presentedto the statesfor adoption. T}.rus,a significar-rt as adoptedby the states. .rnd to what extentthe federal E-SIGN Act preemptsthe UETA

Act t-SlCll andtheUETA Federal The
that if a statehas explicitlyto the UETA and provides The E-SIGN Act of 20021lrefers enactedthe uniform version of the UETA, it is not preempted by the E-SIGN Act. In other words, if the staiehas enactedthe UETA withor,rtmodification, statelaw will govof l'rave enactednonuniform (modified) versions the ern. The problem is that many states L'ETA, largely for the purpose of excluding other areasof state law from the UETA's will terms.The E-SIGN Act specifiesthat those exch-rsions be preempted to the extent with the E-SICN Act'sprovisions. that they are incousistent The E-SIGN Act, however, explicitly allows the statesto enact alternativerequireTheWeb site of the Generally,however,the or rnentsfor tl'reuse of electronic recorcls electronic signatures. of NationalConference requirementsmust be consistentwith the provisionsof the E-SIGN Act, ancl the state Commissioners UniformState on Adclitior-rally, Lawsincludesan updatedlist of nrustnot give greaterlegai statusor effectto one specifictype of techr-rology. after the E-SIGN Act wasadopted,the state statesthat haveadoptedthe UEIA. iia statehasenactedalternativerequirements lan must specificallyrefer to the E-SIGN Act. The relationshipbetweenthe UE1'A and Go to ntm.ncsril.ryg. in the E-SIGN Act is illustrated Exhibit 77-2 ot the followingpage.

of HighlightstheUITA
is, \'e look next at selectedprovisionsof the UETA. Or-rrdiscussion of colrrse,basedon the act'suniform provisions.Keep in n'rind that the statestl-rathave enactedthe UETA versions. mav have adoptedslightly differer-rt The PartiesMust Agree to Conduct TransactionsElectronically The UETA will not partieshas previouslyagreedto conduct transaceach of tl-re apply to a transactionur-iless and it may be need not be explicit,however, The agreement tionsby electronicrneans. In circumstances.r/ the comand the surrounding of implied by the cor-rduct the parties to rnentsthat accompanythe UETA, the draftersstatedthat it may be reasonable infer on card with an e-maii address it has consentedto rvho givesout a business that a persor-r The electror-rically.l3 party'sagreementmay also be inferred from a lettransactbusiness verbal communication. Nothing in the UETA ter or other writing, as well as from son-re electronicallybe rnadeelectronically. to requiresthat the agreement conduct transactions to Note, however,that some courts have required that the parties'agreen'ient conduct electronicallybe clear and unambiguous. For example, in one Louisiana transactions
and 9.UEIA 2(12) 3. lo.UETA3(b). 7002(2)(A)(t) Section ll. I5 U.S.C. 12. uE-145(b), 48. 15. UETA5,Comment

4t8MISil

CONTRACTS

u"t1 firl-r todayuses Ig I I L l c om put er ar r r h i g h s l speecl Internet connections. Everycompanyalsohasfax nachines, landline telephones, pagers, copiers, and In l e r r r el r ds oF lw a a s s e ts , ar re cornputers and suchasthe contents storedon the company's Aclditionaliy, en-rployees rnay the cornpany's donain narr-les. cell and electronic messaging devices. uscall-in-or-re phones in Civen the ubiquityof electronic communications today's combusiness world,no firm shouldbe withoutan electronic rnunications policy.The poiicy shouldstatethat the employer communications resources shouldalso and ownsall electronic may do spellout what cr.nployees anclmay r-rot when using resources. these

Restrictions Public Forums onBlogs and 0nlnternet
in Damagingstatements madeby employees Internetpublic forurrs,suchaslist serves personal blogs, can create senand ousproblems. comprehensive A electronic comn-runications restrictions on policy shouldir-rclucle ernployer's the specific ir-r The ernployer employees'statements publicforums. from conficlential or shouldprohibit en'rployees disclosing proprietary informationelectronically. Adclitionally, elecan tronic communications policy shouldstatethat all employees n-ray auditedand rnonitored. doing this,the firm will be By to warn employees the etrployerwill haveaccess all nesthat files,anclother inforn'iation throughor sages, eitherprocessed resources. stored the firm'selectronic on communications

limiting Extent Employee the of Usage
In the past, employees usecl telepl-rone, toclay the but tl-rey write c-r.nails usetl'reh-rternet. asfirms in the pastcreatecl ancl Just rnoclern spe cific policies aboutpersonal of tl-re use telephone, firmsrnustspecily how rnuchincidental personal of the use firnr'selectronic corlmunications resources allowecl. is Incleecl, manyfirmscan siniplykeeptheirexisting policywith respect "anclany other electronic to the telephone ancladclthe irhrase cornmunications Lesource" the firrr's policy clocurnent. to (lM). messaging Sucha policyshoulcl explicitly coverinstant prohibitIM because detracts Many firmstoclay specificalll it from proch,rctivity, otherfinns havefound it usefuland but l-ravc IM for dcvclopecl networks communication arnongteani mernbers on working largeprojects. t*

AI{ C}IECKI.ISTCREATING IOR p0HCY EI"ECTR0ilrC C0MmUilrCAT|0NS
Indicate may clearly employees usethe firm's that electronic communications resources in only in accordance the guidelines with specified the policy. company's electronic communications Thepolicy should specifically thatanypersonal state mustbe useof the company's resources employees by limited andcannot normal business activities. affect policy Every communications should out set electronic requirements identification for codes passwords and them. andindicate employees to protect how are Thepolicy inform employees the comthat should panymaysystematically commonitor theirelectronic files. munications theircreation useof other and and

* This for Applicotion not meantto substitute the services an attorney is of who is licensed practice in your state. to law

browse-wrap terms410 click-on agreement 407 cybernotary 412

405 e-contract e-signature 412 forum-selection clause 406

partnering 415 agreement record414 409 shrink-wrap agreement

presented the Internet Thetermsof contract OnlineOffers offers via should asinclusive the termsin an be as (Seepages 4O4-4O7.) offermadein a written(paper) readable document. offershould displayed an easily The be in format andshould include somemechanism, asan "l accept" bywhichthe customer such boa

4t9ffi

AND E'SIGNAIURES E-CONTRACIS

OnlineOffersContinued Acceptances Online (See pages 407-411.)

jurisdictional the with onlinetransactions, issues frequently arise the Because may accept offer. clause. provisions, well as a forum-selection as dispute-settlement offershouldinclude 1. Click-onogreementis on completing transaction a computer, a created when a buyer, agreement a. Definition-An on to required indicate or his assent be boundby the termsof an offerby clicking a to her "l on may aPpear the Web termsof the agreement box that says, example, agreeJ'The for on goodsor services, they may appear a or sitethroughwhichthe buyeris obtaining when softwareis downloaded. computerscreen holdingthat by clickingon courtshaveenforcedclick-onagreements, b. Enforceability-fhe "l agree," offereehas indicated terms (termsin a by acceptance conduct.Browse-wrap the such the license that an Internet userdoesnot haveto readpriorto downloading product, however, may not be enforcedon the groundthat the useris not made aware as software), into a contract. that he or she is entering 2. Shrink-wropagreementinsidea box in whichthe goodsare agreement whosetermsare expressed a. Definition-An the that,by keeping goodsthat are in packaged. partywho opensthe box is informed The agreement. to the box,he or she agrees the termsof the shrink-wrap even if the agreements, courtshaveoften enforcedshrink-wrap b. Enforceability-The A purchaser-userthe goodsdid not readthe termsof the agreement. courtmay deem a of if however, the buyerlearnsof the shrink-wrap shrink-wrap agreement unenforceable, terms ofter the partiesenteredinto the agreement.

E-Signatures (Seepages 412-413.)

sound, as Transactions (UEfA)definesan e-signoture "an electronic Act The UniformElectronic or with a recordand executed adoptedby a to associated attached or logically symbol,or process personwith the intentto signthe recordl' of includedigitizedhandwritten hruo technologies-The main categories technology 1. E-signoture digitalsignatures. infrastructure-based signatures and public-key e-signatures. most stateshavelawsgoverning 2. Statelaws governinge-signotures-Although and for these laws are not uniform.The UEIAprovides the validityof e-signatures may createmore uniformityamong the statesin this respect. ultimately in Electronic Signatures Clobaland and e-documenfs-The 3. Federollow on e-signatures by Act Act) of 2000 gavevalidityto e-signatures providingthat NationalCommerce (E-SICN it solelybecause is in an may be "deniedlegaleffect" record, signature or no contract, form. electronic

Partnering Agreements page (See 413.)

do parties who frequently will that disputes ariseundertheire-contracts, To reduce likelihood the out agreement, setting the termsand with eachotheronlinemay form a partnering business may also The transactions. agreement electronic that conditions will applyto all theirsubsequent business when transacting codes be usedby the parties to access and identification establish electronically.

was createdby the TheUniformElectronic Thisuniformact,which has been adoptedat leastin part by most states, Act Transactions the rulesto support on of National Conference Commissioners UniformStateLawsto provide

(uErA)

(Seepages414-417.)

enteredinto online,as well as other of Underthe UEIA,contracts enforcement e-contracts. governed transactions The UEIAdoesnot applyto certain are to documents, presumed be valid. trusts. by the UCCor to wills or testamentary

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