Wrap Trap

December 5, 2007

These days software supply options abound, but by far the most common choice remains an ‘off-the-shelf’ package with its take-it-or-leave-it licence. But before you accept those standard terms and conditions, have you ever stopped to wonder what the small print might actually mean?

Defining terms

First we need to be clear about what we mean when we talk about off-the-shelf software and the associated agreements.

‘Off-the-shelf’ refers to software that is ready-made and available for sale, lease or license to the general public. Such software is certainly not bespoke. The licensing agreements associated with this kind of software can vary according to how the product is supplied – ‘web-wrap’, ‘click-wrap’ and the more familiar ‘shrinkwrap’. Examples, all of which contain standard format licences of one type or another, include such familiars as Microsoft Windows XP or Flash Player 9 by Adobe.

Web-wrap licence agreements generally apply where software is sold and distributed electronically (often via the internet) rather than on physical media such as boxed DVDs. Often the customer/user must read and accept (with a click) an on-screen licence before being allowed to complete the order and/or download the software.

Click-wrap agreements are typically stored at the beginning of the software itself so that, regardless of whether the software is supplied on DVD-ROM or by electronic transfer, the terms and conditions (T&Cs) are the first thing that appears on-screen. They are then accepted either by clicking on an ‘accept’ button or by simply proceeding to full installation.

Shrink-wrap agreements govern the use of software normally sold on DVD and literally wrapped in transparent packaging; ideally the customer should be able to read a copy of the licence terms through the cellophane. A signature is not usually required and generally it has become standard practice for acceptance of the terms to be deemed at the point the packaging is opened.

These licence agreements, whether web-, click- or shrink-wrap, all seek to accomplish the same things covered by conventional, signed agreements: binding payment terms, usage restrictions and prohibitions on licence transfers. However, there remains a real problem with ‘wrap’ licences: because they are not signed, they are potentially more open to challenge due to their deemed acceptance method.

Open up!

The notion that merely opening a software package constitutes acceptance of the associated T&Cs is legally problematic. Actions cannot, in reality, equate to acceptance; as a general rule, a contract is valid only where there is offer, acceptance, consideration and to a certain extent a meeting of minds between the parties. Unfortunately there is not much guidance from the courts on this point, though a Scottish case (Beta Computers (Europe) v Adobe Systems (Europe) Ltd) has clarified the point that shrink-wrap licences are likely to be regarded as an integral part of the supply of software. It also indicated that the courts may seek to make these shrink-wrap licences more readily enforceable because of their common usage and because to do so would be in the interests of the industry as a whole. However the licences would still need to carry clear statements regarding: (i) what constitutes acceptance, and (ii) what the licensee is actually agreeing to.

In the Scottish case Adobe argued that the contract could not be completed until the user had seen and accepted the licence terms setting out the conditions under which the copyright owner permitted use of the software. Unfortunately the court did not consider the issue of Adobe’s ‘acceptance’ of the licence terms and no guidance was provided on how much time Adobe should have had to consider those terms.

Taking this case as our guide, it is clear that shrink-wrap licences should: (a) make clear statements as to what constitutes acceptance; and (b) state how long the user has in which to consider the terms.

Standard T&Cs


It would be highly unusual to be able to negotiate the terms of a licence for an off-the- shelf software product. Remember that this is not bespoke software. For reasons of certainty and enforcement, vendors generally insist that all users sign up to the same terms, so it is for the user to satisfy himself that those terms are acceptable. If, as a prospective purchaser, you are not happy with certain T&Cs then all you can do is choose to not buy the software and to seek similar functionality and better terms (to the extent that these exist) elsewhere.


For vendors, it is online software licensing that demands the closest consideration, as follows:

• End-users should be notified before download that they will be subject to an end-user licence agreement (and that the software is licensed, not sold).

• End-users should be required to read and scroll through the entire licence agreement before they can start to download the software – and it should be made absolutely clear what constitutes acceptance of the terms.

• If the end-user is given only a limited amount of time during which to enter payment details, etc, after which the screen times-out making the terms and conditions no longer available, then make this clear at the outset and consider whether it would not be preferable to make the conditions available in a form which allows the user to review them at their leisure.

• Give end-users the opportunity to print the terms or save them separately to their local computer system.

• Allow the end-user to exit the downloading process at any time.

• As with all agreements, use simple and plain English and clarify any difficult terms.

• If the end-user has to pay a licence fee, ensure that the registration and payment process is simple and reliable and that there is an appropriate privacy policy.

• For trials and demonstrations, be clear about what is being licensed and when the trial period ends.

Wrap up

So, if you are a vendor, make sure that your licence agreement terms are incorporated into a contract with the user, and ensure that they are clear, are presented to the user before the software is made available, and that the user must click to accept or reject those terms.

If, on the other hand, you are a purchaser you may not have any power to negotiate a shrink-wrap, click-wrap or web-wrap licences, but if you are unhappy with the main terms then at least you can vote with your feet and try to purchase similar functionality from a different source.

Vanessa de Froberville is a solicitor in the Commerce & Technology group of the Business & Finance department at Lawrence Graham: www.lg-legal.com. This article first appeared in Smart Law, published by Lawrence Graham