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Clickwrap Contracts and the Federal Government

posted by Adam Levitin

The government is a major player in the marketplace as a buyer of goods and services, but legal scholars seldom pay attention to the law governing federal acquisitions. As it turns out this nearly completely ignored branch of contract law is actually way ahead of the curve, at least on the question of shrinkwrap and clickwrap contracts.  Title 48 of the Code of Federal Regulations contains the Federal Acquisition Regulations promulgated by the General Services Administration. Among them is a true gem that was promulgated in 2013 that addresses contracts that purport to bind the government to indemnify the government contractor in violation of the Anti-Deficiency Act:

If the EULA, TOS, or similar legal instrument or agreement is invoked through an “I agree” click box or other comparable mechanism (e.g., “click-wrap” or “browse-wrap” agreements), execution does not bind the Government or any Government authorized end user to such clause.

If such a provision is good enough for Uncle Sam himself, shouldn't it be good enough for the taxpayers who would ultimately foot the bill? Contract law went off on a very bad trajectory when courts began to uphold clickwrap contracts based on arm-chair economics efficiency theories. It may well be that such contracts are efficient, at least in some cases, but contract law has never been solely about efficiency. Absent some meaningful evidence of a meeting of the minds between counterparties, it is hard to conclude that we are getting the mutual gains from trade we hope contracts produce, and a mere click isn't very good evidence of assent to particular terms. Hopefully the Restatement-in-Progress of the Law of Consumer Contracts will take note. 

Comments

In Baystate v Bowers the Federal Circuit upheld Mr. Bowers’ shrink-wrapped contract under state law so as to preempt lesser protection under federal copyright law. Mr. Bowers’ shrink-wrapped contract forbid reverse engineering his software interface to a public domain blueprint dimensioning scheme used in CAD software. Mr. Bowers’ intellectual property was almost entirely reflected in his software interface - how he stepped the user through the public domain dimensioning scheme. Once another developer saw how Bowers implemented the dimensioning scheme they could reverse engineer Bowers’ process. The infringer - Baystate acquired Mr. Bowers software, copied the interface in order to implement the dimensioning scheme, and then argued fair use under copyright law, which might have worked had the Federal Circuit not ruled that contract law preempts copyright law. The good professor George Kuney chronicled the case in his e-book - Bamboozled. I mention this case to promote awareness for an ever vigilant balance between the start-up entrepreneur and less than egalitarian forces in the economy.

If the Restatement were to go this way, it would have to go into the teeth of Scalia's anti-equity army.

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