Offer and Acceptance Online
Richard Warner
The Definition of an Offer

An offer is
 a manifestation of a willingness to enter
a bargain
 so made as to justify the offeree in
thinking his assent will conclude the
bargain.
Lefkowitz v. Great Minne. Surplus Store

Great Minneapolis Surplus Store ran the
following advertisement:


Saturday 9 a.m.
2 Brand New Pastel Mink 3-Skin Scarfs
Selling for $ 89.50
Out they go Saturday.
Each . . . . $ 1.00
1 Black Lapin Stole
Beautiful, worth $ 139.50 . . . $ 1.00
First Come, First Served
Lefkowtiz says “I accept” at 9 am.
Is the Ad an Offer?


What are you supposed to think when you
read the ad? This: “I have the power to get
these things by agreeing to buy them if I
show up in time.”
So the ad is
 a manifestation of a willingness to enter
a bargain
 so made as to justify the you in thinking
your assent will conclude the bargain.
No Secret Conditions


The store argues that there was an unstated
but implicit condition in the ad: “Women
only.”
The court: “while an advertiser has the right
at any time before acceptance to modify his
offer, he does not have the right, after
acceptance, to impose new or arbitrary
conditions not contained in the published
offer.”
ProCD v. Zeidenberg




ProCD sold a CD that contained every
phone number and address in every
telephone directory in the United States.
It sold it to businesses for $5,000.
The consumer price was around $150.
How do you prevent businesses from
buying the consumer version?
The solution: price discrimination by
contract.
Contractual Price Discrimination



The use of a CD ProCD sold to consumers
was governed by a license in which the
purchaser agreed not to use the CD for
commercial purposes.
The court: “Every box containing its
consumer product declares that the
software comes with restrictions stated in
an enclosed license.”
How is this not like “Women only”?
Standard Form Contracting



The practice flourished in the nineteenth
century shortly after the rise of mass
produced, standardized products.
But few read those contracts, and fewer
understand them, and they are often not even
available until after purchase.
So why are the terms not like “Women only”?
OK Because It Works?


It works well to allocate the risks and benefits
between buyers and sellers of a wide range
of other products and services.
From ProCD: “Transactions in which the
exchange of money precedes the
communication of detailed terms are
common. Consider the purchase of insurance
. . .”
One Clear Point


The standard form contract must be the offer.
This is the only way that the “one sized fits
all” approach will work.
Facts of ProCD v. Zeidenberg




Zeidenberg bought the consumer package
and ignored the license.
He made the information available on the
Internet; the price was less than the price
ProCD charged its commercial customers.
Zeidenberg claimed he never agreed to the
license in the box.
He claimed that the terms on the outside of
the box are the terms of the agreement.
Zeidenberg’s Position

“Zeidenberg's position therefore must be

that the printed terms on the outside of a
box are the parties' contract--except for
printed terms that refer to or incorporate
other terms.”
So like “Women only.”
Definition of an Offer


An offer is a manifestation of a willingness
to enter a bargain so made as to justify the
offeree in thinking his assent will conclude
the bargain.
Zeidenberg’s postion: The manifestation
consists of the terms on the outside of the
box—not the inaccessible terms on the
inside.
Easterbrook’s Response



“Notice on the outside, terms on the inside,
and a right to return the software for a refund
if the terms are unacceptable (a right that the
license expressly extends), may be a means
of doing business valuable to buyers and
sellers alike.”
Easterbrook’s argument for this claim is that
courts enforce standard form contracts.
But is not an explanation of why those
contracts meet the requirements of offer and
acceptance.
The UCC § 2-204(1) Argument



"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.“
But this does not tell us what is required to
form a contract. It assumes an answer to
that question.
But what is required for formation is exactly
the issue here.
UCC § 2-606 Argument

“A buyer accepts goods under § 2-606(1)(b)
when, after an opportunity to inspect, he fails
to make an effective rejection under § 2602(1). ProCD extended an opportunity to
reject if a buyer should find the license terms
unsatisfactory; Zeidenberg inspected the
package, tried out the software, learned of
the license, and did not reject the goods.”
UCC § 2-606 Argument

“We refer to § 2-606 only to show that the
opportunity to return goods can be important;
acceptance of an offer differs from
acceptance of goods after delivery; but the
UCC consistently permits the parties to
structure their relations so that the buyer has
a chance to make a final decision after a
detailed review.”
Conclusion


Esterbrook has no good explanation of why
the paper inside the box is an offer.
Similar issues arise for terms of use
agreement.
Specht v. Netscape
Browser with
Smart
Download
plug in
Communicator cookie
SmarDownload key
URL
Netscape
Website
Specht v. Netscape: Trial Court


“[T]he individual obtaining SmartDownload is
not made aware that he is entering into a
contract.”
“From the user’s vantage point,
SmartDownload could be analogized to a free
neighborhood newspaper, readily obtained
from a sidewalk box or supermarket counter
without any exchange with a seller or vender.
It is there for the taking.”
Specht v. Netscape: Appellate Court


“We are asked to determine whether [plaintiffs]
by acting upon defendants' invitation to
download free software . . ., agreed to be bound
by the software's license terms , , ,, even though
plaintiffs could not have learned of . . . those
terms unless . . . .[they] had scrolled down to . .
. a screen located below the download button.”
A “consumer's clicking on a download button
does not communicate assent to contractual
terms if the offer did not make clear to the
consumer that clicking on the download button
would signify assent to those terms,”
Sotomayor’s First Conclusion


“We are not persuaded that a reasonably
prudent offeree in these circumstances would
have known of the existence of license terms.
Plaintiffs were responding to an offer that did
not carry an immediately visible notice of the
existence of license terms or require
unambiguous manifestation of assent to
those terms.”
But doesn’t his apply to standard form
contracts generally?
Carnival Cruise Lines v. Shute



The Shute’s entered into a contract to take a
cruise from Los Angeles to Puerto Vallarta.
In international waters, Mrs. Shute slipped on
a mat and fell.
She sued Carnival Cruise Lines in
Washington State, where the Shutes lived.
The contract had a forum selection clause
that required that suits be filed in Florida.
The Presentation of the Terms


The terms were printed on the back of the
ticket, which were sent to the Shutes after
they paid for the cruise.
“A careful reader will find the forum-selection
clause in the 8th of the 25 numbered
paragraphs.” Justice Stevens, dissenting.
Sotomayor’s Second Conclusion

“In circumstances such as these, where
consumers are urged to download free
software at the immediate click of a button, a
reference to the existence of license terms on
a submerged screen is not sufficient to place
consumers on inquiry or constructive notice
of those terms. The SmartDownload
webpage screen was “printed in such a
manner that it tended to conceal the fact that
it was an express acceptance of [Netscape's]
rules and regulations.”
So What About CNN?
This appears at the bottom of home page in small
type.
Timing of Acceptance


“Insofar as the purchaser in ProCD was
confronted with conspicuous, mandatory
license terms every time he ran the software
on his computer, that case actually
undermines defendants' contention that
downloading in the absence of conspicuous
terms is an act that binds plaintiffs to those
terms.”
Is this right?
Timing of Acceptance In ProCD


Easterbrook: “ProCD proposed a contract
that a buyer would accept by using the
software after having an opportunity to read
the license at leisure. This Zeidenberg did.
He had no choice, because the software
splashed the license on the screen and would
not let him proceed without indicating
acceptance.”
So acceptance occurs with use. What is
use?
When Does Acceptance Occur?

Consider the sequence:

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
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Purchase
Beginning of installation
Appearance of splash screen
Dismissal of splash screen
Use of software--for how long?
When should both parties be subject to the
contractual conditions?
Terms of Use Agreements, Same Issue

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When you go to CNN.com, data collection
begins immediately.
This is governed by the privacy policy
available at http://www.cnn.com/privacy.html.
So CNN must hold that acceptance occurs at
the moment of the visit.
Is this correct?
Why Do We Care?

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We are not particularly upset about the use of
standard form contracts to sell toasters, hair
dryers, microwaves, and so on.
So why do we care now about terms of use
agreements and privacy policies?
Because of privacy concerns and intellectual
property concerns.