Whether your game is sold to consumers in a box, downloaded through an online storefront, or accessed via browser, the era of the paper or shrink-wrap licence is long over. Modern end-user licence agreements are almost always online contracts that rely on a user clicking an "accept" button ("clickwrap" agreements), or agreements that rely on the user's mere navigation on a website ("browsewrap" agreements).
A lot depends on the validity of these agreements, since they contain key risk management and intellectual property clauses. Yet court decisions in the United States and Canada have shown that if online agreements are not implemented correctly, they might be invalid or unenforceable. While both clickwrap and browsewrap agreements are normally enforceable,1 particularly in business to business contexts,2 enforceability is not guaranteed. This bulletin examines why courts choose not to enforce these agreements, and how software developers can avoid these pitfalls.
Online Agreements in the United States
Huuuge did not require users to acknowledge or agree to its TOU before downloading or using its application. Nor was the TOU prominently displayed. To find the TOU before downloading the app, users had to click on an ambiguously-labelled button and scroll through multiple screens to locate the relevant paragraph; the court described the TOU as being "...buried twenty thousand leagues under the sea". Similarly, the court described accessing the TOU during gameplay as a "hide the ball exercise", since the "Terms & Policy" tab was buried amongst more-noticeable tabs. Even once a user located the TOU, it was unclear that it bound them.
A contract forms when "mutual assent" exists, which generally consists of offer and matching acceptance. With online agreements, the existence of mutual assent turns on whether the user has reasonable notice of the terms and accepts them. In Wilson v. Huuuge Inc., the court found the TOU to be unenforceable because users had no reasonable notice. Huuuge argued that the Plaintiff's use of the app placed him on constructive notice since it was likely he would stumble upon the TOU. The court countered that there was no reason to assume that users would find the TOU simply because it existed.
The Court's treatment of the TOU in Wilson v. Huuuge Inc. is consistent with broader US law's treatment of online agreements. In Register.com, Inc. v. Verio, Inc., 126 F. Supp. 2d 238 (S.D.N.Y. 2000), the court held that the act of using a website while aware of its conditions is the same as an acceptance.4 However, in Specht v. Netscape Communications Corp 206 F.3d 17 (S.D.N.Y. 2001), the existence of licence terms on a submerged screen was not sufficient to place consumers on constructive notice of those terms. 5
Online Agreements in Canada
From a contract law perspective, Canadian courts have largely treated online agreements in a similar manner to US courts, although Canada's rigorous consumer protection legislation can sometimes drive different results in the consumer context.
An enforceable browsewrap agreement should always give users full opportunity to read it.8 However, in Canada, without proper implementation, even if an online user agreement is contractually viable, it may be labelled unconscionable and unenforceable due to consumer protection legislation. For example, Quebec law requires the insertion of disclaimers in front of many common contractual clauses (like limitations of liability), warning consumers that these clauses do not apply in Quebec.9 Ontario has detailed rules governing disclosure in the context of internet contracts.10 And the Supreme Court has interpreted the Quebec Civil Code to create a "one click" enforceability rule for references to hyperlinked documents in consumer contracts.11
In contracts where the user can only accept or reject and has no input on terms, the drafting party has superior bargaining leverage because the user cannot negotiate the content of the contract, and can only accept or walk away. Providing sufficient notice and acting with procedural fairness are essential prerequisites to ensuring an enforceable contract in these circumstances, along with complying with consumer protection laws. This is especially true if the contract purports to limit consumers' potential remedies (e.g. arbitration clauses).
In both Canada and the United States, courts examine whether online agreements provide users with sufficient notice and facilitate mutual assent. Providers of software, apps, and websites that rely on browsewrap agreements are well-advised to use clickwrap agreements instead to ensure they have clear evidence of user acceptance.
For a browsewrap agreement to be binding, there must be a reasonable expectation that the user of the site saw it and there must be a positive action associated with agreement (such as initiating a download or accessing a website) that is sufficient to constitute acceptance. Without evidence of acceptance, or clear notice that use of a service is acceptance, a court will often presume that a user could not reasonably have been expected to know about the agreement and it will not be enforced.
Rudder v. Microsoft Corp. (1999), 1999 CanLII 14923 (ON SC), 106 O.T.C. 381, 2 C.P.R. (4th) 474 (Ont. S.C.J.), Winkler J. upheld a clickwrap agreement.
In Kanitz v. Rogers Cable Inc. (2002), 2002 CanLII 49415 (ON SC), 58 O.R. (3d) 299, 21 B.L.R. (3d) 104 (Ont. S.C.J.), the court held that notice of amendments was sufficient and that, pursuant to the agreement, continued use indicated consent.
I. Lan Systems, Inc. v. Netscout Service Level Corp., 183 F. Supp. 2d 328 (Dist. Court, D. Mass. 2002), the terms of the agreement appeared on the website after the purchase was made. The plaintiff was found to have consented to the agreement when it clicked the "I Agree" box.
Register.com, Inc. v. Verio, Inc., 126 F. Supp. 2d 238 (S.D.N.Y. 2000), aff'd 356 F.3d 393 (2d Cir. 2004) ("Register v. Verio") the court held that by taking the benefit of the information on Register.com, Verio accepted the browsewrap agreement.
 Register.com, Inc. v. Verio, Inc.
 Ibid, at para 131.
 Ibid, at para 108.
 Consumer Protection Act, CQLR c P-40.1, s 19.1.
 Consumer Protection Act, 2002, SO 2002, c 30, Sch A, ss 37-40; General, O Reg 17/05, ss 31-33.
 Dell Computer v Union des consommateurs, 2007 SCC 34 at para 101.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.