Introduction to "Wrap Contracts: Foundations and Ramifications" by Nancy S. Kim

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1 Introduction

into a contract today?Or rather, how manycontracts have you entered into today? I you are like me,

you have agreed to the terms o a contract several times today. I entered into a con-tract with my bank when I went online to pay a bill. I entered into a contract withmy e-mail service provider when I sent an e-mail to a riend. I entered into a contract

when I purchased a song rom a digital music retailer. I entered into all o these con-

tracts without even uncapping a pen.My experience is not atypical, yet when I ask my law or business school students

whether they have entered into any contracts in the past week, ew raise their hands.When I ask those who do raise their hands what kind o contracts they have enteredinto, they usually tell me that they signed a lease or an apartment, or a loan agree-ment or a car, or some paperwork or a student loan. Occasionally, one o my busi-ness school students will have signed a commercial contract.

But when I ask whether they have checked their online banking account, ordownloaded sofware or music, or posted to their Facebook or witter accounts thatweek, nearly every hand in the room goes up.

Ten you have all entered into a contract, I say, pausing or dramatic effect.But have they really? And i so, how to explain this disconnect between per-

ception and reality? Is it possible or someone to enter into a contract and notknow it?

Source: "Wrap Contracts: Foundations and Ramifications" Nancy S. Kim, 2013. Published by Oxford University Press



Wrap Contracts: Foundations and Ramifications

Te answers to the first two questions are complicated, and this book devotes manyo its pages to them. Te answer to the third question is more straightorward: Yes.

As strange as it may seem, under contract law you can legally bind yoursel with-

out knowing it. Tis is especially true online. Sometimes online agreements requirethat a user click using a computer mouse on an I agree icon, but clicking doesntregister in many peoples minds the same way that signing on a dotted line does.Ofen, you dont even have to click to be bound. In many cases, you can be deemedto have entered into a contract simply by visiting a website.

How is that possible? And how did we get here?When most consumers think o contracts, they think o a multipage document

with fine print that they sign when they want to rent a car, apply or a credit card, orenroll in a cell phone plan. Tey may think that in order or a contract to be legallybinding, it needs to look like a legal document. In other words, a contract, in theirminds, should be typed, dated, and signed by both parties. It should contain legaleseand unnecessary words such as whereore and henceorth.

But they are wrong. A contract generally does not need to be signed by both par-ties in order to be legally enorceable. In act, barring a ew exceptions (e.g., personal

guaranties, contracts or the sale o goods $ or more, contracts or the sale o realproperty, and a ew others), a contract does not even need to be in writing in orderto be enorceable.

o be sure, many contracts are printed up on nice paper and signed by both par-ties and too many o them contain unnecessary words and legal mumbo jumbo.But ofen contracts, even when written, do not announce themselves on legal-size

paper, nor do they arrive under wax and seal. Sometimes they sneak into the trans-

action unnoticed, slipping into the consumers hands afer money has already beenexchanged. Sometimes they simply hang out on the edges o a website, outfittedin a modest hyperlink to mask the unsightly terms contained within. Even whenan agreement precedes the transaction, consumers eel powerless to negotiatestandard orm contract terms. o these consumers, it makes no difference whetherthe terms come beore or afer the transaction because the terms are offered ona take-it-or-leave-it basis. Tese contracts are known as contracts o adhesion.

Tis book is primarily concerned with a certain type o contract o adhesionwrapcontracts.

So what is a wrap contract anyway? Tis book uses wrap contract as a blanketterm to reer to a unilaterally imposed set o terms which the drafer purports to belegally binding and which is presented to the nondrafing party in a nontraditionalormat. Nontraditional in this context means that the contracting orm wasnt com-monly used prior to and includes electronic media and offl ine mediums. Te

single common characteristic is that the adhering party does not have to use a pen




Introduction

in order to accept the terms. (Under a ederal law, Electronic Signatures in Globaland National Commerce Act, known as ESIGN,1an electronic signature or contractcannot be denied legal effect simply because it is in electronic orm. In addition,

most states have adopted some version o the Uniorm Electronic ransactions Actknown as UEA which also permits electronic contracting).

Wrap contracts include shrinkwraps, clickwraps, and browsewraps. Shrinkwrapsare pieces o paper wrapped in plastic wrap that come with sofware compact discs.Clickwrap and browsewrap agreements are digital and can be ound on nearly every

website. A clickwrap requires clicking with a computer mouse on a box or icon thatsays, I agree, or something similar, whereas a browsewrap requires no affi rmative

act and is accessible via a hyperlink, typically located at the bottom o the home pageand identified with wording such as erms o Use. Other orms o wrap contractshave started to emerge. apwraps pop up on mobile devices such as smart phonesand require a tap o the finger rather than a click o the mouse to indicate accept-ance. Tis author recently encountered a ripwrap when her new laptop arrived ina plastic bag with legal terms on a sticker which were deemed accepted by tear-ing open the sticker (which was required to open the bag containing the laptop).

It seems there are as many ways to present contract terms as the imagination andtechnology allow.

Which may lead you to wonder: Given that many o the problems pertaining towrap contracts also apply to other types o consumer contracts, is there any needto distinguish wrap rom other contracts? Is there a difference between online andoffl ine, traditional and nontraditional standard orm contracts? Negotiating orbargaining disparities exist with both wrap and other standard orm contracts.2

Consumers routinely accept the terms o both written and digital agreementswithout bothering to read their terms. Some commentators even speculate that theelectronic contracting environment may be a better one or consumers than the off-line one or several reasons. Tey argue that consumers have access to inormationabout a companys contract on its website.3Tey note that time pressures may be

Pub. L. No. -, Stat. () (codified at U.S.C. et seq.). Juliet Moringiello and William Reynolds, or example, argue that contract law is malleable enough to address

electronic contracting issues. See Juliet M. Moringiello & William L. Reynolds, From Lord Coke to InternetPrivacy: Te Past, Present and Future of Electronic Contracting, Md. L. Rev. ().

Christina L. Kunz, John E. Ottaviani, Elaine D. Ziff, Juliet M. Moringiello, Kathleen M. Porter, & Jennier

C. Debrow,Browse-Wrap Agreements: Validity of Implied Assent in Electronic Form Agreement, B. L, () (noting that in an electronic setting, a Web site can be designed to provide a customer with

detailed inormation about the contractual terms through the use o Frequently Asked uestions (FAQ) pages

or by providing a method o contacting the Web site provider with questions.).




Wrap Contracts: Foundations and Ramifications

diminished when the user is shopping rom home.4Te user can comparison shopand interrupt online transactions more readily than offl ine ones.5

Why then devote a book to the subject o wrap contracts in particular, rather than

mass consumer contracts generally?Wrap contracts are different rom paper contracts in both their orm and the envi-

ronment in which they are presented. Tis book explains how businesses, courts andtechnology create a coercive contracting environment where one-sided legal termsare imposed upon non-drafing parties who literally have no choice but to acceptthem i they wish to participate in modern society. It also explains how contractingorm (i.e. digital or paper) significantly alters the behavior o contracting parties,

which in turn creates seismic shifs in both methods o contracting and the sub-stance o the contract itsel. Wrap contracts are insidiously shaping the developmento online activity by, or example, legitimating privacy-eroding practices.6

Furthermore, what happens online doesnt stay online. As our online and offl ineworlds merge, and as products become more digital and less tangible, contractingpractices that were tolerable in the context in which they originated become muchmore ominous. As consumers become acclimated to clicking, they are made to do

so in physical spaces and or transactions which were ormerly ree o contracts. Aconsumer now can walk into an Apple store, have the Genius salesclerk charge hercredit card, and then be required to accept the terms o Apples agreement on hernew iPad beore being allowed to take possession o it. Perhaps even more troubling,offl ine and online contracting methods can be used in a way that aggravates cer-tain legal burdens on consumers. For example, one court held that a consumer wasbound by the terms o an online agreement because she had received a notice in the

mail that the terms were available online.7Te problem with wrap contracts is not solely their novel orms and their aggres-

sive terms; it is also the stale ormalism that rationalizes them. In a society wherecontracts are ubiquitous, do traditional doctrinal rules make sense? How can con-tract law balance the needs o an evolving marketplace with the realities o consumerbehavior?

Modern contracts beuddle critics who view them through the prism o traditional

contract doctrine. Others argue that mass consumer contracts are not contracts at all

Id. at . Id. Tis book examines many provisions rom actual contracts which were current as o the date indicated in the

associated ootnotes. But given the ease and requency with which digital contracts are updated, the terms othe cited contracts may have changed. Similarly, some o the associated issues in this ast moving area may have

changed due to legislative reorm efforts and regulatory action. Briceo v. Sprint Spectrum, So.d , (Fla. Dist. Ct. App. d Dist. ).




Introduction

because they lack a critical doctrinal requirement, such as consideration or offer andacceptance. Some argue that even i these contracts are validly ormed, they shouldnot be enorceable because they are contrary to public policy.

Wrap contracts have their deenders, too. Tey argue in avor o innovative con-tracting orms, such as browsewraps or clickwraps, sometimes on the grounds oautonomy but more ofen economic effi ciency. In doing so, these deenders narrowlyrivet their attention on ways that wrap contracts are similar to traditional contractsand blithely overlook the many ways in which they are not.

In this book, I explain why traditional contract law is insuffi cient to address mod-ern contracting needs. Te rigid rules o traditional contract law simply ignore the

reality o modern day transactions. Realizing the limits o playing by ormalisticrules, courts have twisted contract doctrine to uphold certain agreements that madesense given a particular business environment. Unortunately, they did not limit theapplicability o the doctrine to those business environments. Te result is undesir-able and harmul legal precedent that shifs the balance o power away rom con-sumers and toward businesses, which now have the ability to set and shape normsthrough their contracting methods.

In the dynamic online and mobile computing environment the aggressive prac-tices o businessesaccomplished in large part through wrap contractsthreatento reshape societal norms and values such as privacy and property ownership. Socialchange is inevitable and ofen desirable but process matters. Where the changeoccurs organically and through the desires o a population, it represents the progresso a civilization; on the other hand, where it is instigated by sel-interested businesses

without the approval or awareness o the massesthrough the vehicle o stealth

contractsit reects coercion and exploitation.Te first hal o this book explores the differences between wrap and other con-

tracts, lays out the oundations or wrap agreements, and traces their origin, rise,and inuence. Te second hal o this book ocuses on the social and legal ramifica-tions o using wrap contracts, and concludes that while a specialized body o law isunnecessary, doctrinal adjustments should be made to address the problem o wrapcontracts. Tese adjustments reallocate the balance o burdens on the parties by rec-

ognizing contracting realities such as the power o the drafer to present terms andthe utility o shopping or alternative terms.


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Introduction to "Wrap Contracts: Foundations and Ramifications" by Nancy S. Kim