Join Date: Feb 2005
There was a post on the Official Vanguard boards some time back about EULAs (again), and whether or not they were real contract. I offered a little explanation on the history of EULAs and general contract law.
The standard disclaimer applies that this is not legal advice and is only offered for your viewing pleasure.
The law of contracts is the law of promises. Long before computers were invented, people were making promises. At some point, the law had to designate which promises it would enforce and which promises it would let slide. The former are called "contracts." That is, a contract is simply a legally enforceable promise.
To have a contract, you have to meet certain elements. I refer to the terminology of my professor and renown expert, John E. Murray, Jr., author of Murray on Contracts, a first year law student's bible on the matter. To have a contract, you must have 1) an offer, 2) an acceptance and 3) a validation device, most often, consideration.
The offer and acceptance parts are quite simple the vast majority of the time. Usually one party says "I will provide you with X if you provide me with Y," which qualifies as an offer. The other party says "I agree" and the deal is done. Consideration is sometimes a little bit tricky, but in order for a contract to be valid, there must be a bargained for exchange. Lack of consideration is why gift promises, even in writing, are not enforced. I say "I agree to give you $100 because I love you." We put it in writing signed by 10 nuns, each of which testify that I fully intended to give you $100. That is not a contract because there was no bargained for exchange of value. Promises to make gifts are simply not a type of promise that the law chooses to enforce.
Ok, so lets look at the typical EULA to see if it's a contract. The gaming company makes you and offer to play the game. In exchange for playing the game, you must agree to pay a fee each month and follow the EULA. That is the offer. You accept the offer by clicking "I Agree" when you log in. You technically do not need to do it each time that you log in, but most companies do this simply to remind the consumer that it is bound by the agreement (and to provide notice of any modifications). The promise is supported by consideration, namely the company permits you access to the service, and you pay the fees.
Tada, contract! So, what is all the fuss about? Well, you see there is good reason for confusion.
When software companies first started, it was easy. They had a product that they made. They wanted to license it to someone else to use, so they drew up an agreement, and said "sign on the dotted line." Those were the early EULAs and they were no doubt enforceable. But then software companies wanted to make its product easy to buy, so they threw it in a shiny box and popped it on a shelf. They certainly couldn't ask the clerk behind the counter to execute contracts for them, so they simply tucked it inside the shrink wrap and included "acceptance language" stating "by opening this box, you agree to these terms."
Wow, now wait a minute here?!? There is something messed up with the timing of the whole thing. It doesn't jive with standard contract formation process. So, I pay the fee, get the thing that I paid for home, open the box, and accept the offer before I see it? Hmm. Well that didn't make much sense, and judges weren't really familiar with how this whole thing worked, so cases came down that said these types of agreements, shrink-wrap "EULAs," are not enforceable. They aren't enforceable because they do not meet the elements of a contract.
But wait again! Some smart guy decides "this is great" and he goes and buys a piece of software that contains something like a telephone directory of the entire United States. He rips the contents off the CD and makes his own CD that does the same thing, and competes with the original company. The original company says "we will see about that" and the ProCD case is born. In that case the court determined that EULAs are enforceable because everyone knows what's in them, and everyone reasonably should expect to be bound by certain terms and conditions. Later cases came out, however that said EULAs are a special kind of contract that comes with certain restrictions. Companies that use EULAs must make sure they are "reasonable." There is a lot of case law defining what is reasonable. Some particularly hot topics are "choice of forum clauses," "indemnification provisions" and "liquidated damages provisions." All of these fall into the "it depends category." So, if you call a lawyer right now and say, are EULAs enforceable, he will likely get into the above and his final answer would be "it depends, but in some cases the only way to tell is to go to court."
Don't stop reading now! If you were paying attention above, you should have a few questions. Do you remember way at the top when I talked about how the first EULAs operated, via the traditional contract process in signed agreements. Well, does that exchange sound familiar to you? Of course it does. It is exactly what happens when you log in to play a mmog. You are presented with an EULA (more appropriately called a Terms of Service Agreement) before you pay for the service. You are alerted to the fact that the game is an online game subject to having a subscription on the outside of the box (which, incidentally, have been enforced even when the inclusive shrink wrap EULAs were not).
What does all of this mean? Well, I am sure you're bored by now, so I will summarize. If you ask an attorney about EULAs, he or she will likely say "they are enforceable, but there are some caveats." If you ask him about a terms of service agreement that you "sign" by clicking "I agree" each time you log into a service, he will likely say "that sounds pretty good to me." He will be right on both accounts. So, once again, true shrink wrap EULAs have been tested in most major jurisdictions and are valid contracts, subject to certain limitations. Terms of Service contracts, like the "EULA" found in MMOGs, are simply enforceable. There is a common perception that EULAs have not been tested in court. This is incorrect. They have been. In fact, very recently Blizzard's EULA was enforced in two separate cases and relief was granted based on the EULA's terms.
"EULAs" for mmogs meet the elements of contract formation, so even absent case law (which there is), they are the type of promise that we call a contract.
Does this solve the issue regarding virtual profiteers? Not entirely. It is not meant to. I simply want to clarify some misconceptions about EULAs themselves, and not any of the terms therein.