Specht v. Netscape Communications Corporation

United States Court of Appeals for the Second Circuit · 2002 · Contracts

ContractsOnline contract formationArbitrationAssentNoticebrowsewrapclickwraparbitration clause

Facts

Netscape offered free software downloads on its website, including SmartDownload, a plug-in program, and Communicator, a browser program. The user plaintiffs clicked a "Download" button to obtain SmartDownload, but the only reference to SmartDownload's license terms was below the download button on a lower screen that users would see only by scrolling down; no clickwrap assent was required for SmartDownload, though Communicator did require users to click "Yes" to accept its separate license. Plaintiffs alleged SmartDownload transmitted information about their file downloads to Netscape. Plaintiff Specht never downloaded SmartDownload but operated a website from which users could download files, and Netscape argued he indirectly benefited from users' use of SmartDownload.

Issue

Whether users who downloaded SmartDownload were bound by its arbitration clause when notice of the license terms appeared only on a submerged screen below the download button and users were not required to click assent. Whether the separate Communicator license agreement compelled arbitration of claims concerning SmartDownload, and whether Specht could be required to arbitrate as a nonsignatory who allegedly received a direct benefit.

Rule

Under California contract law, a party is not bound by online contractual terms unless the offeree has reasonably conspicuous notice of the existence of those terms and unambiguously manifests assent to them. A consumer's clicking on a download button does not communicate assent to contractual terms if the offer does not make clear that clicking signifies assent. Even a broad arbitration clause does not reach disputes that are clearly collateral to the contract and present no issue of contract construction or of the parties' rights and obligations under it. A nonsignatory may be compelled to arbitrate only when it receives a sufficiently direct benefit under the contract containing the arbitration clause.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Rowan Pike visited the website of Cascade Harbor Software to download a free photo organizer. The page showed product praise and a large "Get It Free" button near the bottom of the visible screen; a sentence stating "Use subject to License Terms" appeared only if the user scrolled below the button, and no later screen asked Rowan to click "I agree."

If Cascade Harbor moves to compel arbitration under the hidden license terms, what is the strongest argument against enforcement?

Explanation. The majority rule requires reasonably conspicuous notice of the existence of terms and an unambiguous manifestation of assent. Where terms are only visible by scrolling below the download button and the interface does not tell the user that clicking signifies agreement, downloading does not communicate assent. The case does not hold that free products cannot be contracted for, nor that arbitration clauses require handwritten signatures.