Click-Wrap Agreements

There have been several threads on rec.gambling.poker (“RGP,” which is an online discussion group concerning poker) questioning the effectiveness of the agreements we all make virtually (pun intended) every day by clicking “I Accept,” or the like on various websites.

This article discusses the legal climate for “click-wrap” agreements in the United States and the means of implementing enforceable agreements.  (The term derives from the previously-coined “shrink-wrap” agreements, which limit the scope of a buyer’s legal use of items purchased in plastic-wrapped packages, such as computer software, music CDs and the like.)  Click-wrap agreements state the terms and conditions under which a user has the right to access a Web site and what duties and obligations the site imposes on an accepting user.

The situation involved on RGP concerned the obligation of a player at an online cardroom to comply with certain terms and conditions set forth on the cardroom’s website.  Here are what appear to be the facts, although the player appears to have changed his recitation of the facts as the discussions have progressed.

1. Player, a resident of Florida, signed a click-wrap “terms of service” “End-User License Agreement” when he initially installed the Cardroom’s software on his computer.  That agreement did not require Player to abide by any stated general or specific rules of play.  The terms of service did allow Cardroom to unilaterally amend those terms, which became effective and binding on Player when posted on Cardroom’s website.
2. Player participated in a satellite held as part of a special satellite tournament series for which he paid an entry fee and won one of several entries to play in the $10,000 buy-in Championship Event at the 2004 World Series of Poker.  The amounts for the buy-ins to the WSOP all came out of the entry fees in the satellite, but the prize won also included approximately $1,000 of additional value contributed by Cardroom, such as paid-for hotel accommodations for eight nights in Las Vegas.
3. On announcing the special series, Cardroom posted terms and conditions on its website and included a link to the full terms and conditions on its tournament lobby page. 
4. Among other things, the terms required: “By participating in a satellite of any kind on [Cardroom], or in either of the Events, you grant [Cardroom] the right to use your name and likeness for promotional purposes without further compensation.  You agree to wear logo gear provided to you by [Cardroom] throughout the Events. You further agree to help promote [Cardroom] and act as a [Cardroom] spokesman during and after the Events, including, but not limited to, meeting with press and participating in other events conducted by [Cardroom].”
5. Immediately after Player earned his WSOP seat, Cardroom sent him an e-mail reminding him of the terms and conditions and notifying Player that he would have to manually sign a copy at the WSOP.
6. Player refused to sign the terms and conditions and refused to abide by them during his play in the Championship Event.

Click-wrap Agreements in General

The basic law on shrink-wrap agreements is in ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (C.A.7 (Wis.), 1996).  With unusual clarity and brevity the 7th Circuit stated the issue and its conclusions: “Must buyers of computer software obey the terms of shrinkwrap licenses? The district court held not, …[because] they are not contracts because the licenses are inside the box rather than printed on the outside… 908 F.Supp. 640 (W.D.Wis.1996). The parties and numerous amici curiae have briefed many other issues, but [this is]…the only [one] that matters--and we disagree with the district judge's conclusion…  Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).”

The 7th Circuit judges noted that there are many business transactions where the details of the “deal” come only after payment for the goods or services has been made—not just software, music CDs and the like, but also airline tickets, insurance contracts and the like.

In general, the only remedy is to return the goods or services if the terms are not agreeable to the purchaser.  In the context of the facts confronting Player, he was legally bound to accept the terms and conditions presented to him by e-mail after he had earned his WSOP seat, unless the terms violated a law or the term was unconscionable.  It does not seem that either of the latter “outs” is available to Player.  The alternative, returning the seat and the ancillary benefits that went with it, would not appear to make economic sense.  However, if Player was offered a better deal to play in the WSOP Championship Event, he was certainly free to reject the $10,000 paid entry and the ancillary benefits and demand a refund of his original entry fee.

Click-wrap agreements have been upheld and even more readily accepted by the courts because of the prior availability of the text of the terms and conditions and because making the user click an “I Accept” check box is proof that the terms and conditions were actually called to his attention.   Caspi, v. The Microsoft Network, 1999 WL 462175, 323 NJ Super. 118 (NJ App. Div., July 2, 1999); Groff v. America Online, Inc., File No. C. A. No. PC 97-0331, 1998 W L 307001 (RI Superior Court, May 27, 1998).  There was no "I Accept" box here.  There was no "in your face" notice that the terms and conditions existed before a contestant paid for and played in a special satellite.  These omissions by Cardroom showed poor planning and were wielded as offensive weapons by Player.

Click-wrap Agreements by Knowledge

Compare the following situation to that involved between Player and Cardroom.  Verio harvested WHOIS information from the website of the official registrar of that information, Register.com, Inc.  Verio used the information for commercial purposes in contravention of the terms of use of the site prohibiting commercial exploitation of the information.

Verio sought to justify its acts because it had not signed, electronically or otherwise, any agreement to refrain from commercial use of the harvested information.  It also argued that Register.com’s pop-up admonitions that commercial use violated the terms and conditions of the registrar’s license did not come prior to the actual harvesting of the data.  The U.S. 2nd Circuit Court of Appeals ruled against those arguments, essentially holding that evidence Verio knew the use of the information for commercial purposes violated the license was sufficient to prevent the commercial uses, even if the knowledge was acquired out of the most logical or best order.  Register.Com, Inc. v. Verio, Inc., No. 00-9596 (2nd Cir. 1/23/2004) (2nd Cir., 2004).

That sounds an awful lot like the 7th Circuit’s conclusion in ProCD.  In addition, consider these three strikes against Player:

1. The terms and conditions for the special satellite series were posted on Cardroom’s website.  If Player did not know what they said, he could have read them.
2. In a post on RGP Player implicitly admits he was in fact aware of the terms and conditions before he played in the event in which he earned his WSOP Championship Event Seat and the available extras that went with it.  He posted:  “I never once said I was unaware of the T and Cs I told him [the Marketing Manager of Cardroom] I never noticed them before I played the event that I won my seat in…”
3. The pattern and practice of Cardroom was to send an e-mail repeating the full text of the terms and conditions immediately after a player earned a seat.  There is evidence that this pattern and practice was carried out in general and Cardroom’s representative says it was in fact carried out in the case of Player.

Improvements in Cardroom's Clock-Wrap Practices

While Cardroom is able to rely on the legal doctrines that have evolved to effectively impute available knowledge to Player, it would be better to improve its click-wrap practices.

First of all, Cardroom should revise its basic “terms of service” “End-User License Agreement” to include a more specific statement that users are bound by the published rules of play and terms and conditions of all contests posted on the site, and that those rules, terms and conditions may be changed, modified or added to from time to time.

Second, Cardroom should add to the "frequently asked questions" section of its website 1) more precise rules of play for tournament and ring-game play and 2) a section where it posts the terms and conditions applicable to all special events as they are offered to users.

Third, Cardroom should utilize the "splash" screen that appears each time a user logs on to the website to give notice that it has posted new rules of play and terms and conditions for special events.  It is not absolutely necessary to secure an affirmative "click-wrap" consent to these matters.  The important thing is to give more prominent notice.  It would be good, if it is feasible, but not legally mandatory, to get an actual one-time affirmative "click-wrap" acknowledgment from tournament players with accounts opened before the new language is added to the "terms of service" agreement that they are aware they are bound by both the rules of play and the terms and conditions of special events, as posted from time to time.  It may be possible to secure that acknowledgement by incorporating a one-time pop-up click-wrap "I Accept" box in conjunction with the "splash" screen that appears before the start of each tournament notifying players that there is no all-in protection.  Presumably it is possible to have that pop-up box appear only for accounts that have not previously accepted the agreement.  In any event, that splash screen can certainly be modified to contain an ongoing notice that players should read these rules, terms and conditions that bind them.

Conclusion

Cardroom’s click-wrap practices were sloppy at best and need to be revamped.

Player’s attempt to cut a corner, however, is to no avail.  Based on the current state of the law, his failure to reject benefits from his online win in a timely manner after he became aware of the conditions imposed  means that he is legally saddled with those terms and conditions.