Cross-Jurisdictional Variation in Internet Contract Regulation Is There a Viable Path to Globally Uniform Internet Contracting Laws?

• Author: Brendon Beheshti
• Pages: 49-70

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Brendon Beheshti

brendon202@gmail.com

Abstract: The internet has b ecome a pervasive and establi shed part of modern life

and along with it legal frameworks for establishment and enforcement of consum er

contracts ha ve and continue to develop. Regulation and enforce ment of internet contracts

varies geographicall y. Generally, there are two primary legal approaches to internet

contract enforcement: The United States model that relies on basic notice requirements to

establish and enforce terms; and the European Union model that focuses on fundamental

fairness in transactions between businesses and co nsumers. T his paper examines common

issues surrounding internet contracts a nd their application. The differences in the United

States and European Union philosophy and approach to internet contracts are illustrated and

compared. Finally, the potential for development of a unified legal framework for internet

contracts is considered.

1. Introduction

The internet has become a pervasive and established part of modern life. People use the internet for

instant communication, electronic mail, obtaining the ne ws, investing, ba nking, forming social networks,

finding romance, and even learning the law through a Virtual Learning Environment. Yet, while the

internet itself – the network a nd technical communication protocols that make it all po ssible – is based on

public sta ndards,

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a nd as such function s a s an electronic co mmons, the services that make the internet

valuable are provided by private parties – each of whom seeks to deal under its own terms.

Today, it has become commonplace for most websites and internet services to publish their own terms

and condition for viewing content or maintaining an account. Few consumers read these terms and

conditions. Yet, these terms and conditions can b e contractually binding. As s uch, internet contracts are

formed between parties across geographic and jurisdictional boundar ies.

To date, different jurisdictions have established their own laws and regulations regarding internet

contracts. The two primary nexus of legal develop ment have been the United States – where the law has

developed through litigation and favours freedom o f contract – and the European Union – where the law

has developed through regulation and favours consumer protection. Of course, as the reach of the

internet, and the relationships it fosters, flow sea mlessly across jurisdictional boundaries, the prospect

compels examination of the viability of a unified approach to regulation o f internet contracts.

This paper examines co mmon issues surrounding internet contracts and their application. The

difference in the United States and European Union philosophy and appr oach to internet contracts is

illustrated and compared. Finally, the potential for development of a u nified legal framework for internet

contracts is considered.

1

The internet is the outgrowth of ARPANET, a US military program initiated in 1969 to create a resilient and

dispersed network of computers. See Reno v. American Civil Liberties Union, 521 U.S. 844 (1997).

Brendon Beheshti

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2. What are internet contracts?

The internet provides the ability for people and organizations around the globe to communicate a nd

engage in tra nsactions where, typically, “there is not enough at issue to justify protracted negotiations.”

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As such, websites on the internet seek to establish the terms of the transactions in which they engage

through unilateral contracts; these can include, for e xample, terms of service and end-user software

licenses.

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2.1 Terminology of internet contracts

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The development of the internet has created new terms for contracts, depending on how and when assent

to the unilateral contract is manifested by the consumer. T hese terms include shrink-wrap, click-wrap and

browser-wrap.

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2.1.1 Shrink-wrap agreements

In a seminal case that upheld the validity of such agreements in t he United States, Judge Frank

Easterbrook

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explained: “The ‘shrink-wrap license’ gets its name from the fact that retail software

packages are co vered in plastic or cellophane ‘shrink-wrap,’ and some vendors . . . have written lice nses

that become effective as soon as the customer tears t he wrapping from the package.”

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Under this scheme,

the consumer is not aware of all of the terms at the time of purchase; however, the decision to keep the

product after receiving notice of the unilateral terms is held to constitute asse nt.

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2.1.2 Click-wrap agreements

In contrast to the shrink-wrap approach, ‘click-wrap’ refers to a scheme whereby the consumer is shown

the terms and is required to manifest assent by clicking on a button or link that states ‘I agree.’

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This

approach is typical with service providers that require establishment o f an account.

2.1.3 Browse-wrap agreements

Under the browse-wrap scheme, terms of service are located so mewhere on a website, and the consumer’s

use of the website services is construed as assent to a unilateral contract.

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For example, a consumer that

uses the Google™ website is considered by the firm to have bound themselves to certain contractual

terms which ca n be found b y navigating two links away from t he home p age.

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The terms of service

state:

Your use of Google’s products, software, services and web sites (referre d to collectively

as the “Services” . . .) is subject to the terms of a legal agreement between you and

Google. . . . I n order to use the Services, you must first agree to the Terms. You may

not use the Services if you do not accept the Terms.

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2

Ian C. Ballon, E-Commerce and Internet Law: Treatise with Forms, 2d Ed (West 2010), Ch 14.02.

3

Id.

4

Gregory E. Maggs, Regulating Electronic Commerce, 50 Am. J. Comp. L. 665, 670 (Fall2002).

5

Now Chief Judge of the United States Court of Appeals for the Seventh Circuit and professor of law at the

University of Chicago. Biographical Directory of Federal Judges, available at

http://www.fjc.gov/servlet/nGetInfo?jid=678 (last visited Apr. 3, 2011).

6

ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1449 (7th Cir. 1996).

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See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7

th

Cir. 1996).

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Margaret J. Radin, Humans, Computers, and Binding Commitment, 75 Ind. L.J. 1125, 1134 (Fall 2000).

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Woodrow Hartzog, The New Price To Play: Are Passive Online Media Users Bound By Terms Of Use?, 15 Comm.

L. & Pol'y 405, 406 (Fall 2010).

10

See Google Terms of Service, available at http://www.google.com/accounts/TOS (last visited Apr. 4, 2011).

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Id. at sections 1.1 and 2.1.