Shrink Wrap Agreements

A Shrink Wrap Contract is a license agreement or other terms and conditions of a contractual nature which can only be read and accepted by the consumer after opening the product. In short, a Shrink Wrap Contract is a contract found in the box of a product after you buy it. A Shrink Wrap Agreement creates a limited, non-exclusive license between the software producer and the end user that allows the user to the software in the manner described by the producer.

Generally, the agreement does not need to be executed by the end user to be enforceable. The consumer has no opportunity to review the contract before the purchase and not many options to change the terms after opening the packaging. Further, generally Shrink Wrap Agreements state that once the outside packaging is opened by the consumer the producer is no longer liable for any defects in the product. This is a problem because the consumer is unable to read the Agreement until the packaging is opened. Usually, these contracts are found in the software industry, but it certainly is not limited to that industry alone.

Generally, the main problem with Shrink Wrap Agreements is the fact that the terms of the agreement cannot be read until the consumer has paid and accepted the package, and has opened the product by taking off the shrink wrap, which then states that opening will constitute acceptance of the terms. A similar problem exists with on-line purchases in what are known as “click wrap agreements.” Most often used when a consumer buys software online, the terms and conditions are not given the consumer until after the purchase. With click wrap agreements, it is more common today that the terms and conditions are provided before purchase but they generally appear on a pop up page or are very hard to read.

The enforceability of Shrink Wrap Agreements is unclear. One line of Court cases states that held that Shrink Wrap Agreements are enforceable and another holds that are enforceable. The cases are split on the question of consent. One Court case looked at the enforceability of Shrink Wrap Agreements where the Agreement was inside a box and the consumer had no opportunity to review the contract. The Court held the Agreement was unenforceable. Another Court upheld an on-line click wrap agreement because the consumer was given an opportunity to review the Contract before purchasing the product. It is because of this split of authority that with on-line agreements, most vendors now make its consumers check an “I agree” to the terms and conditions button.