Contracts I, Pages 381–391

Specht v. Netscape

United States Court of Appeals, Second Circuit, 2002

Facts:

Plaintiff installed Netscape's programs Communicator and SmartDownload. Netscape stored cookies. SmartDownload created a unique identification key, which it transmitted to Netscape along with the URL of any file downloaded when Communicator sent such a download to SmartDownload. Plaintiffs claim these processes constituted unlawful electronic surveillance of their online activities.

While downloading Communicator required clicking "Yes" to whether one accepted the license, SmartDownload only had a link to the license below the download link and did not mention the license in the actual program. The licenses required virtually all disputes to be settled by arbitration.

Procedural History:

District court denied defendants' motion to compel arbitration and to stay court proceedings.

Issue:

Whether plaintiffs, by acting upon defendants' invitation to download free software made available on defendants' webpage, agreed to be bound by the software's license terms, including arbitration clause, even though plaintiffs could not have learned of those terms unless they scrolled down to a screen below the download button.

Rule:

An offeree is not bound by his apparent manifestation of assent if he does not know or have reason to know of the terms.

Reasoning:

A user did not have a reason to scroll down as they could already see the large "Download Now!" button, so their existence could not be reasonably known by plaintiffs.

Holding:

A reasonably prudent Internet user in such circumstances would not have known or learned of the existence of the license terms and that therefore defendants did not provide reasonable notice of the license terms. Affirmed.

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