Contractual Validity of End User License Agreements

AuthorRenee Zmurchyk
57 APPEAL VOLUME 11 2006
Renée Zmurchyk
End User Licence Agreements (EULAs) specify the parameters
governing the use of a product and may be found on all software.
Originally, EULAs were created simply to limit product liability
and a manufacturer’s warranty on goods but have since evolved into
extremely elaborate contracts, often containing highly restrictive
terms. EULAs are typically formed with consumers who have no
bargaining power, where negotiation is nonexistent, and true
acceptance is frequently not required. The validity and enforceability
of EULAs and, more specifically, terms within EULAs, has
continued to perplex those in the software world. Even within the
courts there has been considerable controversy. An exploration of
the various forms in which EULAs may be presented, the terms
contained therein, as well as recent case law will provide insight into
the current state of these agreements.
Part I: Forms of EULAs
EULAs can take on many forms, some of which are typically known
as clickwrap, browsewrap and shrinkwrap agreements. These
agreements have in common a lack of negotiation, as the contract is
dictated by the producer and acceptanc e is indicated by some act
other than a written signature. This article provides a review of the
current stat e of EULAs and the various ways in which they may be
presented to the consumer.
58 APPEAL VOLUME 11 2006
Clickwrap Agreements
Clickwrap agreements require the user to scroll through the
agreement and confirm acceptance of the terms and conditions by
taking some form of positive action, such as clicking an “I accept”
button, prior to use of the program. The installation or use of the
software is conditional on the user accepting the agreement and
thereby consenting to abide by its terms.
The use of clickwrap agreements is growing. Today, there r emains no
doubt that legally binding contracts be tween users and manufacturers
may be formed online. The momentous case of Rudder v. Microsoft
Corporation, [Rudder]
established that clickwrap agreements are valid
and legally binding contractual agreements. In Rudder, Microsoft filed
for a permanent stay of procee dings, claiming that the plaintiffs
agreed online to the exclusive jurisdiction clause stating that the State
of Washington was the governing jurisdiction for any disputes. The
plaintiffs argued that the online agreement should not be enforced
because they did not receive specific notice of the clause and were
therefore unaware of its existence. In rejecting the plaintiffs’ claim, the
Court noted that the plaintiffs were required to click an “I agree”
button twice during the process and that the forum selection clause
was no more difficult to read than any other term. The Court
compared the online agreement to an agreement in writing, holding
that it must be given the same enforcement.
The recent 8th Circuit Court decision in Davidson & Associates, Inc. v.
Jung, [Davidson]
affirmed that clicking on an “I Agree” button at the
end of a EULA creates a binding agreement and will be enforceable
against the consumer. The Court took into account that the software
packaging contained notice on the outside of the box stating that it is
subject to a EULA, the defendants assented to the EULA by clicking
the “I agree” button, and then proceeded to install the game. Terms
of the EULA were disclosed prior to game installation and the
(1999), 2 C.P.R. (4th) 474 (Ont. Sup. Ct.) [Rudder].
Supra note 1 at para. 19.
422 F.3d 630 (8th Cir. 2005) [Davidson].

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