Lexplug logoLexplug

i.Lan Systems, Inc. v. Netscout Service Level Corp.

United States District Court, D. Massachusetts
183 F.Supp.2d 328 (2002)
ELI5:

Rule of Law:

A clickwrap license agreement is an enforceable contract because a user's action of clicking an 'I agree' button manifests explicit assent to the terms presented, thereby forming a contract under UCC § 2-204.


Facts:

  • In 1998, i.LAN Systems, Inc. ('i.LAN'), a network monitoring services company, signed a Value Added Reseller (VAR) agreement with NetScout Service Level Corp. ('NextPoint'), a software developer.
  • The 1998 VAR agreement contained warranty disclaimers and limitation of liability clauses, and it incorporated NextPoint's standard end-user license agreement by reference.
  • In 1999, i.LAN submitted a purchase order to NextPoint for software licenses for $85,231.42, which i.LAN believed granted it perpetual rights and upgrades.
  • The 1999 purchase order was silent regarding warranties and limitations of liability.
  • During the software installation process for the 1999 transaction, as on previous occasions, i.LAN was required to accept the terms of a clickwrap license agreement by clicking an 'I agree' button.
  • This clickwrap agreement contained a clause limiting NextPoint's total liability for any cause of action to the license fees paid for the software.

Procedural Posture:

  • i.LAN Systems, Inc. filed a complaint against NetScout Service Level Corp. in the U.S. District Court for the District of Massachusetts, alleging breach of contract and other claims based on diversity jurisdiction.
  • i.LAN moved for summary judgment, seeking specific performance of the contract as it interpreted it.
  • The court heard oral arguments on i.LAN's motion and took the matter under advisement.
  • NextPoint then filed a cross-motion for partial summary judgment, arguing the clickwrap agreement's limitation of liability clause capped any potential damages.
  • The court heard oral arguments on NextPoint's cross-motion.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Is a clickwrap license agreement, which contains a limitation of liability clause and is presented during software installation, enforceable against a party who clicks 'I agree' to its terms?


Opinions:

Majority - Young, Chief Judge

Yes. A clickwrap license agreement is enforceable where a party explicitly assents by clicking 'I agree'. Applying the Uniform Commercial Code (UCC), the court found the agreement enforceable for two primary reasons. First, following the 'money now, terms later' approach established in ProCD, Inc. v. Zeidenberg, a contract is formed when the user accepts the terms after having an opportunity to review them. Clicking 'I agree' is an explicit manifestation of assent sufficient to form a contract under UCC § 2-204. Second, even if analyzed under the 'battle of the forms' provision of UCC § 2-207, the result is the same. The limitation of liability clause in the clickwrap agreement would be considered a proposed additional term. Between merchants, such a term becomes part of the contract unless it is a material alteration. Here, the limitation was not a material alteration because it did not result in unreasonable surprise or hardship to i.LAN, given that i.LAN had notice of nearly identical terms in the prior 1998 VAR agreement and had encountered the clickwrap license on numerous prior installations.



Analysis:

This decision solidifies the enforceability of clickwrap agreements, favoring the modern 'rolling contract' theory of ProCD over the more traditional 'battle of the forms' analysis of Step-Saver for software transactions. It establishes that an affirmative click constitutes explicit assent, making the terms binding at the time of installation. The ruling provides significant legal certainty for software vendors who rely on electronic license agreements to limit their liability. Furthermore, the court's alternative analysis under § 2-207 underscores how a prior course of dealing can prevent a party from later claiming that a standard term, like a limitation of liability, is a 'material alteration' causing unreasonable surprise.

🤖 Gunnerbot:
Query i.Lan Systems, Inc. v. Netscout Service Level Corp. (2002) directly. You can ask questions about any aspect of the case. If it's in the case, Gunnerbot will know.
Locked
Subscribe to Lexplug to chat with the Gunnerbot about this case.

Unlock the full brief for i.Lan Systems, Inc. v. Netscout Service Level Corp.