Opinion ID: 779363
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Heading: The Reasonably Prudent Offeree of Downloadable Software

Text: 35 Defendants argue that plaintiffs must be held to a standard of reasonable prudence and that, because notice of the existence of SmartDownload license terms was on the next scrollable screen, plaintiffs were on inquiry notice of those terms. 14 We disagree with the proposition that a reasonably prudent offeree in plaintiffs' position would necessarily have known or learned of the existence of the SmartDownload license agreement prior to acting, so that plaintiffs may be held to have assented to that agreement with constructive notice of its terms. See Cal. Civ.Code § 1589 (A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.). It is true that [a] party cannot avoid the terms of a contract on the ground that he or she failed to read it before signing. Marin Storage & Trucking, 89 Cal.App.4th at 1049, 107 Cal. Rptr.2d at 651. But courts are quick to add: An exception to this general rule exists when the writing does not appear to be a contract and the terms are not called to the attention of the recipient. In such a case, no contract is formed with respect to the undisclosed term. Id.; cf. Cory v. Golden State Bank, 95 Cal.App.3d 360, 364, 157 Cal.Rptr. 538, 541 (1979) ([T]he provision in question is effectively hidden from the view of money order purchasers until after the transactions are completed.... Under these circumstances, it must be concluded that the Bank's money order purchasers are not chargeable with either actual or constructive notice of the service charge provision, and therefore cannot be deemed to have consented to the provision as part of their transaction with the Bank.). 36 Most of the cases cited by defendants in support of their inquiry-notice argument are drawn from the world of paper contracting. See, e.g., Taussig v. Bode & Haslett, 134 Cal. 260, 66 P. 259 (1901) (where party had opportunity to read leakage disclaimer printed on warehouse receipt, he had duty to do so); In re First Capital Life Ins. Co., 34 Cal.App.4th 1283, 1288, 40 Cal.Rptr.2d 816, 820 (1995) (purchase of insurance policy after opportunity to read and understand policy terms creates binding agreement); King v. Larsen Realty, Inc., 121 Cal.App.3d 349, 356, 175 Cal.Rptr. 226, 231 (1981) (where realtors' board manual specifying that party was required to arbitrate was readily available, party was on notice that he was agreeing to mandatory arbitration); Cal. State Auto. Ass'n Inter-Ins. Bureau v. Barrett Garages, Inc., 257 Cal.App.2d 71, 76, 64 Cal.Rptr. 699, 703 (1967) (recipient of airport parking claim check was bound by terms printed on claim check, because a ordinarily prudent person would have been alerted to the terms); Larrus v. First Nat'l Bank, 122 Cal.App.2d 884, 888, 266 P.2d 143, 147 (1954) (clearly printed statement on bank card stating that depositor agreed to bank's regulations provided sufficient notice to create agreement, where party had opportunity to view statement and to ask for full text of regulations, but did not do so); see also Hux v. Butler, 339 F.2d 696, 700 (6th Cir.1964) (constructive notice found where slightest inquiry would have disclosed relevant facts to offeree); Walker v. Carnival Cruise Lines, 63 F.Supp.2d 1083, 1089 (N.D.Cal.1999) (under California and federal law, conspicuous notice directing the attention of parties to existence of contract terms renders terms binding) (quotation marks omitted); Shacket v. Roger Smith Aircraft Sales, Inc., 651 F.Supp. 675, 691 (N.D.Ill. 1986) (constructive notice found where minimal investigation would have revealed facts to offeree). 37 As the foregoing cases suggest, receipt of a physical document containing contract terms or notice thereof is frequently deemed, in the world of paper transactions, a sufficient circumstance to place the offeree on inquiry notice of those terms. Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he might have learned such fact. Cal. Civ.Code § 19. These principles apply equally to the emergent world of online product delivery, pop-up screens, hyperlinked pages, clickwrap licensing, scrollable documents, and urgent admonitions to Download Now!. What plaintiffs saw when they were being invited by defendants to download this fast, free plug-in called SmartDownload was a screen containing praise for the product and, at the very bottom of the screen, a Download button. Defendants argue that under the principles set forth in the cases cited above, a fair and prudent person using ordinary care would have been on inquiry notice of SmartDownload's license terms. Shacket, 651 F.Supp. at 690. 38 We are not persuaded that a reasonably prudent offeree in these circumstances would have known of the existence of license terms. Plaintiffs were responding to an offer that did not carry an immediately visible notice of the existence of license terms or require unambiguous manifestation of assent to those terms. Thus, plaintiffs' apparent manifestation of ... consent was to terms contained in a document whose contractual nature [was] not obvious. Windsor Mills, 25 Cal.App.3d at 992, 101 Cal.Rptr. at 351. Moreover, the fact that, given the position of the scroll bar on their computer screens, plaintiffs may have been aware that an unexplored portion of the Netscape webpage remained below the download button does not mean that they reasonably should have concluded that this portion contained a notice of license terms. In their deposition testimony, plaintiffs variously stated that they used the scroll bar [o]nly if there is something that I feel I need to see that is on — that is off the page, or that the elevated position of the scroll bar suggested the presence of mere[ ] formalities, standard lower banner links or that the page is bigger than what I can see. Plaintiffs testified, and defendants did not refute, that plaintiffs were in fact unaware that defendants intended to attach license terms to the use of SmartDownload. 39 We conclude that in circumstances such as these, where consumers are urged to download free software at the immediate click of a button, a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms. 15 The SmartDownload webpage screen was printed in such a manner that it tended to conceal the fact that it was an express acceptance of [Netscape's] rules and regulations. Larrus, 266 P.2d at 147. Internet users may have, as defendants put it, as much time as they need[ ] to scroll through multiple screens on a webpage, but there is no reason to assume that viewers will scroll down to subsequent screens simply because screens are there. When products are free and users are invited to download them in the absence of reasonably conspicuous notice that they are about to bind themselves to contract terms, the transactional circumstances cannot be fully analogized to those in the paper world of arm's-length bargaining. In the next two sections, we discuss case law and other legal authorities that have addressed the circumstances of computer sales, software licensing, and online transacting. Those authorities tend strongly to support our conclusion that plaintiffs did not manifest assent to SmartDownload's license terms. 40