Nature of the Case
This was an appeal from the order denying grant of an injunction to ProCd (P) on the basis that its license was void because it was contained within packaged software.
Issues
- Is a contract in which the exchange of money precedes the communication of detailed terms valid?
- Is a software shrinkwrap license valid?
Holding and Rule of Law
- Yes. A contract in which the exchange of money precedes the communication of detailed terms is valid.
- Yes. A software shrinkwrap license is valid.
A contract includes only the terms on which the parties have agreed. We treat the licenses as ordinary contracts accompanying the sale of products and therefore this transaction is governed by the UCC and the common law of contracts.
Zeidenberg argues that placing the package on display in a store constitutes an offer that the customer accepts by paying the asking price and leaving the store with the goods.
The trial judge and Zeidenberg concluded that a party cannot agree to hidden terms. But one of the terms that Zeidenberg agreed to in purchasing the product was that it was subject to a license.
We do not agree with Zeidenberg’s position that this license must be printed on the outside of the box. The only way that the entire terms of the license could have been put on this box would have been with microscopic type.
Transactions in which the exchange of money precedes the communications of the detailed terms are common. What has occurred under these facts is quite a common transaction wherein the money is paid and then the terms and conditions of the contract are delivered with an option for the buyer to rescind. This type of transaction is the common method of purchase for many items including insurance policies, airline tickets, and concert tickets.
Zeidenberg contends that the information inside the box is irrelevant and to extend this analogy to consumer goods, then the warranty in the box of a consumer good is irrelevant. But so far as we are aware no state disregards such hidden documents in such transactions.
Even in the software industry, only a minority of sales actually occur over the counter with most occurring over the phone. Increasingly the transaction is done by ESD (Electronic Software Distribution) in which only the information itself is transferred by modem.
If Zeidenberg’s arguments were applied to all sales, then even these unboxed sales would be unfettered by terms and the seller would be deemed to have made a broad warranty and thus must pay consequential damages for any shortfalls.
Under the concept proffered by the district court, the UCC does not countenance the sequence of money now and terms later. We cannot find any cases involving sales contracts for consumer goods that address such a proposition.
A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties, which recognizes the existence of such a contract.
A vendor is master of his offer and he may invite acceptance in by conduct and may propose limitations on the kind of conduct that constitutes acceptance.
Under UCC 2-204(1), ProCd proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at his leisure. Zeidenberg did this.
Under Section 2-606 a buyer accepts goods when after he has had an opportunity to inspect, he fails to make an effective rejection under 2-606(1).
ProCd extended Zeidenberg an opportunity to reject if he found the license unsatisfactory. Zeidenberg inspected the product, tried out the software and learned about the license and decided not to reject the goods.
Zeidenberg in fact had no choice because the license splashed on the screen and would not let him proceed without indicating acceptance.
ProCd proposed and Zeidenberg accepted and under 2-206(1) and (1)(b) a buyer accepts goods when after an opportunity to inspect, he fails to make an effective rejection.
Zeidenberg got the package, used the goods and did not reject the goods.
The license called for an opportunity to return if not satisfied with the license. The UCC does impose additional requirements on the way parties agree to terms (see 2-316(2), 2-205, 2-209(2)) in certain instances.
Zeidenberg has not located any cases in this state or in any other holding that the UCC requires special prominence for the terms of shrinkwrap licenses.