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A Guide to IT Contracting by Michael R. Overly, Matthew A. Karlyn

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87
7
Click-Wrap, Shrink-Wrap, and
Web-Wrap Agreements
CHECKLIST
Wheres the Agreement?
Identify all relevant contract terms
Keep accurate copies of the agreements
Record the date of acceptance
Risks and Issues
Business assessment of risks posed
Understand as-is nature of soware or service
S No warranties
S No indemnities
S Very limited liability, if any, for the vendor
Customer has unlimited liability for both direct and consequen-
tial damages
Identify contractual provisions that could place customer intel-
lectual property at risk
S Feedback clauses
S Train personnel not to reveal or disclose proprietary infor-
mation or intellectual property
Avoid placing sensitive information at risk
S No condentiality protection
S No real liability for breaching condentiality
S No remedy for misuse of condential information
88  •  A Guide to IT Contracting: Checklists, Tools, and Techniques
Beware broad audit rights
S Abusive audits
S Contingent fee audits
S Access to company facilities and systems without adequate
contractual protections
S Access by undened third-party agents of vendor
Assess risks of use of resellers
S Additional contract to review
S Splitting of responsibility
S Potential nger pointing between vendor and reseller
Techniques
Blind acceptance
Knowing acceptance
S Identify all terms
S Conduct brief review and assessment
S Adequately document
Mitigation
S Process for review
S Development of form amendment
OVERVIEW
Click-wrap, shrink-wrap, and web-wrap agreements are the ne print you
see, among other things, when you click through terms and conditions in
accessing an online service (e.g., in connection with a cloud computing
service) or as part of the installation process for a piece of soware. ey
may also be encountered as part of the documentation provided with new
soware or a hardware component. ey may even be found, with some
searching, in a le entitled “license.txt” or similar name on the installa-
tion CD on which a new piece of soware is delivered. Companies seldom
read these terms in any detail, generally view them as non-negotiable, and
accept them as a necessary evil.
e fact is, these types of agreements can present signicant legal and
company issues. ey can place a company’s sensitive data at risk, expose
the company to liability, compromise the company’s ownership of its own
intellectual property, and cause the company to pay additional, unfore-
seen fees.
Click-Wrap, Shrink-Wrap, and Web-Wrap Agreements • 89
WHAT IS A “SHRINK-WRAP LICENSE?
e term “shrink-wrap” derives from the method by which soware was
distributed as a package of installation disks and associated documenta-
tion sealed inside shrink-wrap cellophane. e accompanying end user
license agreement was oen itself packaged in shrink-wrap cellophane
and placed on the outside of the package or included as the topmost item
in the package. Today, shrink-wrap agreements can take a variety of forms
and are found in both soware and hardware acquisitions. However, they
all have a common structure: essentially non-negotiable terms and condi-
tions that accompany the product. e terms may appear as part of the
documentation accompanying the product, as part of an online purchase
process whereby the terms are displayed (and the purchaser, potentially, is
required to armatively click an “accept” button as part of the process),
or presented to the purchaser on rst use of the application as part of the
installation process.
If the terms are displayed electronically, either online or in connection
with the installation process, they are oen referred to as “click-wrap”
terms. For purposes of this discussion, there is no dierence between
click-wrap and shrink-wrap terms.
Courts in the United States have almost uniformly found that these
types of agreements are enforceable (see, e.g., Conference America Inc. v.
Conexant Sys. Inc., M.D. Ala., No. 2:05-cv-01088, 9/10/07). In fact, courts
have held them enforceable even if the customer failed to read them (e.g.,
Druyan v. Jagger, S.D.N.Y., No. 06-cv-13729, 8/29/07).
PRODUCTS PURCHASED UNDER SHRINK-
WRAP AGREEMENTSCOMMON ELEMENTS
While there are no bright-line rules as to the specic types of products
that are made available under shrink-wrap agreements, the following are
common elements:
• e product typically has a relatively low cost per unit (e.g., less than
$20,000). While the cost per unit for a given product may be low, or
even trivial (e.g., less than $100), the total cost to the organization

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