Written by: Jeff Hinman
Researched by: Darci G. Van Duzer and Tom Borton
Edited by: Eric Wasik

Last month, a writer for an Italian website revealed that the end user license agreement (EULA) for the Windows version of Apple’s web browser, Safari, prohibited installation of the software on a PC. Much to the embarrassment of Apple, the attorneys who prepared the Safari-for-Windows EULA overlooked this term while adapting the agreement from the Mac-only version. Apple has since modified the “Mac-only clause” to allow installation and use on “each computer owned or controlled by you.” Apple may have fixed the problem for now, but this slip-up highlights the fact that very few people read EULAs — sometimes not even the attorneys who are paid to write them.

With the click of a mouse, EULAs that accompany software (called click-wrap agreements) can become binding contracts. That “I Accept” button might take away your right to a jury trial, your right to exclusive use of your own work, or even your right to criticize the product that you are downloading. Some EULAs exist just to protect the company offering the product. Users under 18 violate Google’s EULA whenever they use Google’s search engine or login to their Gmail.com accounts, a provision that’s included to protect Google from liability rather than actually prevent underage users. Other EULAs are created with teeth: World of Warcraft‘s EULA bans online gamers who violate it by using a program that automates gameplay to hasten “leveling-up” or to generate currency.

The Mac-only provision appears to be a quickly remedied oversight, but before anyone noticed Apple’s mistake, scores of PC users downloaded and installed Safari (as part of an Apple Software Update for iTunes) and were in violation of Apple’s explicit terms of use. If Apple’s Mac-only provision had been intentional, could they have enforced those original terms? In other words, is a click-wrap agreement a binding and enforceable contract?

Be Careful What You Click For

Click-wrap agreements are a fairly new form of contract, giving courts relatively few opportunities to examine them thus far. Most of the cases looking at these agreements have held that a properly completed click-wrap agreement is a binding contract, though in a few instances courts have refused to enforce them. While there are other potential barriers to enforcing Apple’s unusual Safari EULA, the two most common ways of invalidating click-wrap agreements are contract formation defects and unconscionability.

Courts usually key in on two potential problems when examining the formation of a click-wrap agreement: (1) whether the customer had reasonable notice of the terms and (2) whether that customer actively agreed to those terms. For notice, a court is satisfied if the customer had the opportunity to look over the terms of the agreement — even if he didn’t bother to read them. A company in 2005 demonstrated just how rarely people pay attention to the terms of EULAs by hiding a $1,000 cash giveaway in their license agreement. It took four months and several thousand downloads before some lucky user discovered the term and claimed the money.

Safari’s terms of use appear on the download screen in legible font and in plain view, and includes a warning that the customer is entering into an agreement. Common sense (as well as the courts) tells us that this gives a customer little room to argue that he didn’t have notice of the terms. Finally, courts treat the click box like a signature on a traditional contract. So long as it is accompanied by a conspicuous warning to the user, a “clicked” box is enough to show they have affirmatively agreed to the terms.

Apple’s lawyers “on Safari?” Unconscionable!

Since courts have signaled clear expectations for forming click-wrap agreements, companies have little difficulty in clearing the “reasonable notice” hurdle. Courts can still be wary, though, of enforcing the terms of click-wrap and other standard form contracts. Click-through contracts often defy the traditional assumption that a contract should represent a freely bargained agreement between two equals. In extreme cases, a court can choose not to enforce an otherwise validly formed contract on the grounds of “unconscionability.” Unconscionability comes in two flavors: procedural and substantive, and a contract (or term) needs to be both to wind up in trouble.

The first of the two requirements is looking to see if it’s procedurally unconscionable, which has the courts look into the fairness surrounding the process of entering the contract. When making this determination courts ask: Was there an imbalance of power between the parties entering the contract? Did the stronger party just dictate the terms of the agreement? Did the weaker party have an opportunity to get a similar product elsewhere under more favorable terms? Courts weigh these factors against the particular circumstances of each agreement to decide if procedural unconscionability is present. Arguably all click-wrap agreements contain most of these qualities, and Safari’s EULA is no exception.

In Apple’s case, there is clearly unequal bargaining power between the company and its customers. Apple is a multinational corporation with significant resources and a stable full of lawyers to draw on for legal advice. Apple drafted the Safari EULA, and the company offers the same terms to all customers downloading the program. In comparison, the average consumer of Apple’s products is an individual who will not seek legal advice prior to accepting the terms of use for a free software download. The terms of the EULA are not open to negotiation — it’s take-it-or-leave-it. The only mitigating factor for Apple is that Safari is obviously not the only web browser available, which means a customer who is unhappy with Apple’s strange Mac-only terms could simply go elsewhere. However, in California (where a suit against Apple would probably be filed), the existence of other options does not necessarily outweigh the other factors, and a court would likely find that Safari’s EULA was procedurally unconscionable.

In order to invalidate the Mac-only provision, the court would also need to find that the term itself was unconscionable. Substantive unconscionability exists when the effect of the agreement is so one-sided or overly harsh that the court cannot in fairness enforce it. A California court found a term requiring individual arbitration for all claims against PayPal unconscionable. Arbitration clauses alone are not unconscionable, but PayPal’s EULA prohibited customers from combining their claims and filing together in class-action arbitration. The court determined the result was too harsh because the customer’s costs to arbitrate individually would typically exceed their claims, which effectively meant they had no remedy at all.

The Balancing Act

While not allowing customers to use software created for Windows on their PCs is patently ridiculous, the court would still have to find that the Mac-only provision was one-sided or overly harsh. Paypal’s requirement to arbitrate was an excellent example of one-sidedness because it required all parties to give up their rights to join in a class-action suit. This provision would have only been useful to PayPal, not its users. In contrast, Safari’s Mac-only provision doesn’t really benefit anyone, so it would probably not raise suspicions of one-sidedness. The harshness of enforcing the provision depends on what sort of remedy Apple hopes to obtain. If Apple had included a monetary penalty for violating the EULA, or otherwise expected to recover damages, the outcome for the customer would seem extremely unfair. However, since Apple’s only remedy would likely be to force the offending PC owners to uninstall the software, a court would be hard-pressed to say this is too harsh of a result. Despite the likelihood that there is procedural unconscionability in Safari’s EULA, Apple could probably overcome a challenge to the agreement in California because of the apparent lack of substantive unconscionability in the terms.

The Safari incident is an important reminder to computer users everywhere that EULAs should be treated like any other contract — read them before signing. While individual users may not be able to ask for better terms, the company might change them in response to popular outcry. However, absent voluntary changes by the company, courts will enforce most EULAs, no matter how absurd users might find their terms.