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The Consumer Rights Act 2015: Considerations for software providers

View profile for Christopher Buck
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Nowadays, you will be used to having to click to agree that you have read and understood the terms of a software update or new application you have downloaded for your computer or mobile devices.

These terms you flick through very quickly govern how the software company you are using will use your data and of course how you will use their software. They are called 'End-User Licence Agreements' (EULAs) and allow the licensor (the software company) to licence the user to use certain types of software.

There are three forms of EULAs:

  • Click-wrap;
  • Browse-wrap; and
  • Shrink-wrap.

The purpose of most EULAs is to allow the copyright holder to sue both in contract and copyright should any such copyright be infringed by the consumer. Clauses, such as limitation or exclusion clauses, may also be found in EULAs. The Consumer Rights Act 2015 requires there to be a contract between the trader and the consumer in order to ensure protection under the Act. It has been questioned whether all forms of EULAs have the necessary characteristics to satisfy being a contract for such purposes.

Are the EULAs capable of satisfying the requirements of being a contract?

The characteristics required of the EULAs to be capable of being a contract are the usual necessary requirements of (1) offer, (2) consideration and (3) acceptance. It is necessary to consider whether each individual form of EULA is capable of being a contract.

Click-wrap:

A click-wrap agreement is a form of EULA used where an agreement to terms and conditions is required before electronic media or software is installed or purchased online. Participation is required of the user as they must indicate acceptance in clicking a box marked ‘I accept’ or ‘I agree’ after reading the terms and conditions. It can then be clearly identified that the terms and conditions read by the user are the terms offered by the trader. In reading the terms, the user considers them and then provides acceptance upon clicking the agreement box. The trader provides the licence in return for consideration, such as money or an agreement of how to act, provided by the user. The Law Commission has stated that these actions are likely to be found by the courts to constitute a contract. However, there is no English judicial guidance to confirm the same.

Browse-wrap:

A browse-wrap agreement is a form of EULA where the user is bound by an agreement as a result of browsing the website. As there is no agreement box as with click-wrap agreements, the browse-wrap agreement must be clear in its indication that it is an agreement and state clearly where its terms and conditions can be found. There is no obligation for the user to review the terms and conditions before an agreement is determined. A browse-wrap agreement is found to constitute a licence under copyright law, however, the Law Commission has stated that it would be unlikely for the courts to determine that the same is capable of being a contract.

Shrink-wrap:

A shrink-wrap agreement is a form of EULA that requires the removal, by the user, of the shrink-to fit wrapper on a product such as software. This removal indicates the user’s consent to any printed agreement on the product. There is no requirement for the agreement and any terms and conditions provided to be read by the user before purchase. Therefore, as an agreement is usually made upon consideration being provided and the trader accepting the user’s money, it can be argued that the user has agreed to using the product only and not to its terms and conditions. There is also the possibility of the user not being able to view the terms and conditions until after they have removed the shrink-to-fit wrapper, in which case it is impossible for them to have agreed to such terms when they gave consideration. The Law Commission has stated that it is very unlikely that shrink-wrap agreements will be found to constitute a contract.

Need some expert advice on this subject?

If you are a software company and would like to talk through your contractual terms, please feel free to contact me or any one of our Corporate Commercial team on  01908 660966.

Image courtesy of 123rf.com

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