Juridische aspecten internet

The concept of traditional contract law understands that for a party to be bound by the terms of the contract, a party must have first agreed to it’s terms and consequently signed it.

door: David Callan

How click-wrap contracts benefit over shrink-wrap contracts

Since the 1980’s PC use has continued to grow by phenomenal amounts in both business and residential environments. It’s hardly surprising that software has been released at a similar pace to run on all these PC’s, more recently with the advent of the Internet software is easily available for direct download to the end-users machine.

Software companies need to protect themselves from damages claims stemming from damage caused by improper and proper use of their software by end users and profits lost by users making illegal copies of their software among other things. This is done through a contract.

It would be virtually impossible and very impractical to have the buyer of a software package to sign a traditional paper based contract relating to the software prior to purchasing it as in the IT industry software is rarely sold directly in person by the publishing company to the end-users. Thus there needed to be some mechanism whereby the purchaser agrees to the terms of the license without actually signing on the dotted line. Enter shrink-wrap and click-wrap contracts.

Shrink-wrap contracts, the earlier of the two are the terms and conditions that accompany software distributed in a retail computer store. Shrink-wrap contracts usually read something like “By opening the packaging on this box you agree to the terms and conditions of the license.” The terms and conditions of the license are more often than not located inside the box.

Click-wrap contracts were developed in response to the massive growth of the Internet and Internet technology. A party enters into a click-wrap contract when they click the “I agree” or “I accept” button which are preceded by terms and conditions. Examples of where click-wrap contracts can be regularly seen include before you download software, before you book an airline ticket online, before you download music and many more.

Both shrink-wrap and click-wrap contracts have their advantages and disadvantages for the consumer and the company offering the terms and conditions themselves. This report focuses however on the advantages of click-wrap contracts over shrink-wrap contracts and hence I will now continue to discuss this.

The main advantage of click-wrap contracts over shrink-wrap contracts to me seems to be the fact that with click-wrap contracts you’re given a clear opportunity to read through the terms and conditions of the contract before you agree to them. With shrink-wrap contracts the fundamental problem is that the consumer doesn’t get to know the key terms of the contract until they open the box, by which point it is often too late to get the money back for the software product.

In traditional contract law, the parties have to come to a ‘meeting of the minds’ over key terms of the contract agreement. With this in mind Mark Lemley an intellectual property professor at the University of Texas school of law said: “software licences change that assumption by saying that when you take the software home and you take it out of the box, you agree to a whole host of other terms that you didn’t agree to at the store.” Should these “other terms” as Lemley puts it be allowed to extend the contract between the consumer and the retailer? or do these extra terms in fact create a whole new contract altogether in which case the question of does breaking open a box containing software have the same legal force as a written signature on a negotiated document? has to be raised. Well it is these questions that bring us to another advantage of click-wrap contracts over shrink-wrap contracts.

Click-wrap contracts are more enforceable than shrink-wrap contracts thus offering the software company more peace of mind. Shrink-wrap contracts have questionable enforceability. Although it is true to say that shrink-wrap contracts are gaining wide acceptance, this lack of full legal acceptance is seen as a worrying fact for software companies that want to precisely control the terms and conditions for use, limitation of liabilities and warranties and warranty disclaimers of software for their protection.

Click-wrap contracts on the other hand have gained almost universal acceptance as law binding contracts. The reason behind this is that with click-wrap contracts you cannot proceed unless you click the “I agree” or “I accept” button, if you don’t acknowledge your agreement to the terms and conditions set in front of you by pressing one of these buttons then you cannot proceed to use the downloaded software, downloaded music, you cannot book that €18 flight to Glasgow for the Celtic match with ryanair.com or can’t do or use any other of the things you might expect to be protected by a click-wrap contract.

If on the other hand you do agree with the terms and conditions and click on the appropriate button, the law will say that you had time to read the contract, the chance to reject the contract but you clearly have agreed to it and so are legally bound by the same.

It’s not all rosy for click-wrap contracts though as along with shrink-wrap contracts, they are often referred to as adhesion contracts, whereby one party has no ability to bargain with the other. This can lead to terms and conditions, which seem very restrictive and unfair to the consumer. However it is these restrictive terms and conditions which enable software to be sold at comparatively cheap prices as if software companies had to assume the risk of the possible consequences that end-users might face, they would have to charge far greater amounts for their products in order to make the assumption of that risk financially prudent.

In closing I would have to say that neither shrink-wrap nor click-wrap contracts are fully ideal for either the consumer or for businesses wishing to sell software or other intangible products online. Of the two however click-wrap is the superior, this is due mainly to the ‘fairness’ it offers consumers in the ability to view the terms first and also because of the level of enforcement click-wrap contracts have achieved in the courts, albeit US based.

Sources: Mark Lemley – UT School of Law

The importance of St. Albans V ICL case.

The case of St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED of the mid Nineties set the precedent for subsequent cases involving the sale of software, both off the shelf and bespoke custom developed software. The case effectively shook the legal side of the software industry to its core and left companies in the industry rushing to their lawyers for advice.

Classification of software.

The problem with disputes brought to the courts related to the sale of and use of software prior to the St. Albans v ICL case was the presence of some very important questions: are suppliers of software systems supplying goods or services? Clearly computer hardware is "goods" but what about intangible software, what is the legal status of software - goods or services? The aforementioned questions are some of the most debated in computer law.

The St. Albans v ICL case answered these questions in a roundabout way. The court said that a program by itself would not be "goods" whereas software delivered on "hard media" was, i.e. a standard software system incorporating software was protected by the UK Sales of Goods Act 1979. The protection meant that in effect, packaged software should not contain any bugs which would render it unfit for its purpose. If the software was faulty, buyers could recover the cost of the system and any losses suffered as a result of the software failing.


The case itself arose after International Computers Limited, a UK hardware and software manufacturer company agreed to supply St. Albans City and District Council with a computer system of both hardware and software which the council needed order to administer and collect the Community Charge ( poll tax ) which was then to be introduced. The computer system would maintain a reliable database of the names entered on the community charge register, accurately count the names, and accurately retrieve and display the figures resulting from the count. It had to be reasonably fit for the purpose of maintaining and retrieving a reliable register. The system was to calculate and dispatch bills for the Community Charge.

In early November 1989 the UK government instructed all councils that they were required to make a return of the relevant population by the 8th of December.At an important meeting before the system was first used, ICL's project manager who was providing consultancy services to St. Albans assured representatives of the council that the figure to be returned to central government could be extracted from the transaction processing screen. At no point between then and the 8th of December was any indication given that the figures on the transaction screen could not be relied upon. This in fact was the case and in late February 1990 the council began to suspect the figure they had taken from the transaction screen and subsequently submitted to the government before the 8th of December of the previous year was incorrect

The number submitted by the council to the government was 97,385. In fact, the number should have been 94,419 and hence the number used overstated the population by 2,966. This overstatement of the population resulted in an undercharging of each chargeable resident; therefore the council suffered a total loss of £1,314,846.

St. Albans council therefore sued International Computers Limited for these losses along with costs on the grounds that the software did not meet its intended purpose and was inherently flawed. In the end St. Albans was awarded £1.3 million.


Another important element to emerge from the St. Albans v ICL case was the fact that ICL’s limitation of liability clause which set their liability to £100,000 at most was thrown out. The judge of the original case (an appeal was launched by ICL) Scott Baker J said that the defendant had not justified the figure of £100,000 which was small both in relation to the potential risk and the actual loss, noting also that the defendant was insured for £50 million worldwide. If the loss were to fall on the council it would ultimately be borne by the local population. He did not think it unreasonable that he who stood to make the profit, who had been well able to insure and in this case was insured, should carry the risk and therefore awarded damages to St. Albans well over £100,000. This decision by Baker J caused a reaction in the industry which saw suppliers reviewing their limitation clauses to make them as effective as possible.


In the last paragraph the issue of liability relating to the St. Albans case is discussed this however is not the most important aspect of the case. The real importance of the St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED is the fact that it demonstrates that software stored and installed from a physical storage ‘good’ can be classified as a good and hence protected under the UK Sales of Goods Act 1979 and other similar country specific acts. This caused a major review of standard terms and conditions of companies within the computer industry. Many cases have been interpreted on the precedent set in this case and hence St. ALBANS CITY & DISTRICT COUNCIL v INERNATIONAL COMPUTERS LIMITED is firmly a part of modern case law.


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