Your Customer Agreement (often called a Subscription Agreement, Membership Agreement, or SaaS Agreement) is a so-called "click-wrapped" agreement because your customer indicates agreement by clicking on an I AGREE button. For this reason, click-wrapped agreements are usually legally enforceable provided they are presented correctly.

Your website's Terms of Use govern all visitors to your site -- both casual visitors and registered customers. Terms of Use are typically referred to as "browse-wrapped" agreements because there is no requirement to click an I AGREE button. So, the question I'm often asked is... since the Terms of Use do not require a click, are they legally enforceable? And if not, why have them on the site?

So, the question is... since the Terms of Use do not involve an affirmative action such as a click to indicate agreement, are they legally enforceable? And if not, why have them on the site?

A recent case involving a bot's repeated access to Southwest Airline's site provides some insight into the answer to the first question -- are browse-wrapped agreements enforceable?

The Airline "Bot" Case

In the case of Southwest Airlines v. BoardFirst, LLC, No. 3:06-cv-00891 (N.D. Tex. Sept. 12, 2007), Defendant BoardFirst utilized a software "bot" to assist passengers of Southwest Airlines to book the popular "A" group boarding passes.

The BoardFirst.com site utilized the "bot" software to book Southwest's customers for a fee, despite Southwest's Terms posted on its site that "use of the Southwest websites constitutes acceptance of our Terms and Conditions". Clicking on the Terms And Conditions link sends the user to Terms which authorized use of Southwest's site "only for personal, non-commercial purposes". Southwest's Terms did not require a click on an "ACCEPT" or "I AGREE" button -- hence, the Terms were of the browse- wrapped variety.

Southwest sent two cease and desist letters to BoardFirst, citing its Terms and demanding that BoardFirst cease its activities in breach of the Terms. BoardFirst continued its actions, and Southwest sued.

Were Southwest's Browse-Wrapped Terms Enforceable?

The Court noted that the validity of a browse-wrapped license turns on whether a website user has actual or constructive notice of the site's terms and conditions prior to using the site. There was no dispute that BoardFirst had actual knowledge after receipt of Southwest's two cease and desist letters. The Court ruled that Southwest's Terms were enforceable against BoardFirst.

Conclusion

Note that the Court's ruling stands for the proposition that browse-wrapped agreements are enforceable only if there is actual or constructive notice of the terms. This ruling is consistent with prior cases involving similar facts. Because few if any ecommerce websites provide actual or constructive notice prior to use, it follows from this reasoning that most are not enforceable as contracts.

I'm often asked -- if Terms of Use are not legally enforceable in the absence of specific evidence of actual or constructive notice, what is their value?

One compelling reason for Terms of Use in ecommerce websites is that they usually provide various legal notices that are required by law for which agreement is not required. For example, if your site uses a blog, in order to qualify for the "safe harbor" from copyright liabiity, a specific notice is required, and a good place for it is in the Terms of Use.

Other notices that you must have on your site are certain legal disclaimers for which no agreement is necessary. Again, your Terms of Use is a good place for these disclaimers.

So, even though Terms of Use as typically used are not enforceable as a binding contract, they do provide a place for essential legal notices. And for this reason, Terms of Use serve an indispensable function on your ecommerce website.