Intellectual Property Law

Enter the Hyperwrap Agreement: Turning the Page in Online Contracts

By Harry Boadwee

Software and internet contracts for years have been created by means of “shrinkwrap,” “clickwrap” and even “browsewrap” agreements (although the enforceability of “browsewrap” agreements is somewhat doubtful).

Two recent cases from Illinois courts now recognize a type of contract called a “hyperwrap” agreement.  For the business implications, you can scroll to the bottom of this posting.

As everyone knows, contracts for software and web sites can be very long, with pages and pages of text.  These contracts are often displayed where space is at a premium - e.g., on order forms or web site registration pages.  In the past, many of these pages used a “scroll box” which displays the text of the  contract in a separate window with a scroll bar. The user had to move the scroll bar up and down to see the entire text of the contract.  Scroll boxes require programming to develop and maintain.  By contrast, it is much simpler to use a hyperlink to a second web page with the contract terms.

The issue facing the courts in these cases was whether displaying a hyperlink to the terms on another page was conspicuous enough.  In other words, were the contract terms hidden from the user (similar to terms hidden in extremely small ?mouse? type), or were they visible enough that the party should have seen and read them?   The courts held that the terms were visible enough because a hyperlink is like turning the page of a paper contract.

In both cases, although the hyperlink was repeated several times to the customer before acceptance, this was not the deciding factor.

Instead, both courts focused on the fact that the blue hyperlink could be easily distinguished from the background text.

In the leading case, Hubbert v. Dell Corp., 359 Ill. App. 3d 976 (5th Dist. 2005), the court stated that “[t]he blue hyperlinks … should be treated the same as a multipage written paper contract. The blue hyperlink simply takes a person to another page of the contract, similar to turning the page of a written paper contract. ? [T]he hyperlink’s contrasting blue type makes it conspicuous. Common sense dictates that because the plaintiffs were purchasing computers online, they were not novices when using computers. A person using a computer quickly learns that more information is available by clicking on a blue hyperlink.”

The recent case, PDC Laboratories Inc. v. Hach Co., No. 09-1110 (C.D. Ill., Aug. 25, 2009) hailed Hubbert as ?the leading authority in ?hyperwrap? cases.? It went on to state: “this contrasting text is sufficient to be considered conspicuous … because it is not the repetition of the display of a term that is determinative but the contrast of a term.”

The courts explicitly recognized the metaphor that clicking on a hyperlink is like turning a page. Thomas O’Toole, in the Ecommerce and Tech Law Blog observed that “if you embrace the metaphor that hyperlinks are the customary way of ‘turning a page’ online, then it doesn’t seem unfair at all to expect parties to ‘turn’ each ‘page’ of their online contracts.”

In other words, good user interface design actually aligns with the right legal result.

Hubbert and PDC leave open a question concerning acceptance.  Under these cases, hyperwrap agreements lie on a spectrum between browsewrap agreements (which have no separate acceptance mechanism), and clickwrap agreements (which have a separate and explicit mechanism for acceptance, such as checking a box or pressing an ?I Accept? button).   The PDC court expressly distinguished the clickwrap cases.  However, in both Hubbert and PDC there was a mechanism to highlight to the customer that the terms would be binding.  In Hubbert, most of the order forms in dispute had a separate notice that ?All sales are subject to Dell’s Term[s] and Conditions of Sale.?  In PDC, the terms were specifically referenced in the final step of the order process which said, ?STEP 4 of 4:  Review terms, add any comments, and submit order.?

What these cases mean for business people:

• It is acceptable to place contract terms on a separate page if they can be easily found via a hyperlink.

• The hyperlink needs to be obvious in a customary way, like a paper page-turn.  A standard blue hyperlink appears to be acceptable.  However, some creative designers prefer other hyperlink designs, and those alternative designs may not be acceptable.  Better to use the standard hyperlinking display conventions.  Keep this in mind also with paper documents that use hyperlinks to incorporate terms.

• For acceptance, it is best to use a ?clickwrap? mechanism, such as checking a box or pressing an ?I Accept? button.  However, it appears that courts are becoming receptive to other methods of bringing the terms and conditions to the attention of the other party, particularly if they are emphasized in the proper place in the contracting process.

Full post as published by AS-IS Blog on September 11, 2009 (boomark / email).