Can You Agree To An EULA You Never Saw?

from the probably-not dept

Slashdot points us to an interesting article about a guy involved in a legal fight with computer maker Gateway over whether or not he agreed to an arbitration clause in an end user license agreement (EULA) for his new computer. In this case, the guy claims his computer never worked properly, so he couldn’t even see the on-screen license agreement that apparently included an arbitration clause, saying that he would agree to arbitrate any dispute, rather than take it to court. He then sued Gateway over problems with the machine. The case here doesn’t have anything to do with whether or not that lawsuit has merit, but whether or not it could even go to court at all. Gateway contends that the guy shouldn’t be able to take them to court because of the arbitration clause. But, of course, the guy claims he couldn’t read the license agreement, so he certainly never agreed to it. The court found that the guy made a compelling enough case that he had not seen the license agreement, and therefore can not be forced to go to arbitration (even as some experts suggest that he actually would be better off going to arbitration, rather than through the courts). However, it also raises the question (not answered here) over what does constitute an official agreement. I’ve been told by lawyers that such arbitration clauses aren’t even enforceable in California, but either way, with plenty of evidence that most people never read the EULAs they agree to, could they argue that the clauses don’t apply as well?

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Comments on “Can You Agree To An EULA You Never Saw?”

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College Kid says:

Re: It's a matter of choice

I totally agree. There was a case a while ago involving a college student buying XP and was sued by MS for selling it on E-Bay. They stated it was in the EULS but he never opened the software and had not been able to read let alone agree to the EULA. He won the case. I read it a while ago and can not find the link but if someone has it, it is an interesting read.

OMAC says:

Choice my ass...

It’s a matter of companies making EULAs so long and filled with corporate doublespeak that the average consumer can’t figure out what’s going on. Also, let’s not forget the EULAs that come with software. You know, by opening this package you agree to the following blah blah blah. The EULA is too long to print on the outside of the box, and you can’t return the software once opened…

Just look at the EULA that Sony BMG forced down peoples throats with their Rootkit DRM. According to it, you had to delete all your Sony BMG music if you ever declared bankruptcy or if your CDs were stolen. They also limited their own liability to $5 in case that software ever caused harm to your PC.

I would like to see EULAs limited to maybe 100 words and printed on the outside of the box, but I know that isn’t going to happen.

Anonymous Coward says:

Re: Choice my ass...

This may be an appeal to ridicule but your ending statement is similar to saying the Constitution should be limited to 100 words. You just can’t put a EULA, even in layman’s terms in 100 words.

Not to mention that EULAs are usually quite easy to understand, they’re just long.

SRNissen says:

Re: Choice my ass...

Bullshit. English is not my first language and I am not a lawyer, but I’ve understood pretty much every EULA I’ve ever read, which has been quite a few. Sure, that shit takes time (and preferably a hardcopy version of the license) but it’s not flippin’ rocket science, people.

Anonymous Coward says:

Re: Re: Choice my ass...

Bullshit. English is not my first language and I am not a lawyer, but I’ve understood pretty much every EULA I’ve ever read, which has been quite a few. Sure, that shit takes time (and preferably a hardcopy version of the license) but it’s not flippin’ rocket science, people.

If you aren’t a lawyer then how do you know that you’ve understood them and all their implications? Or is it just a case of ignorance is bliss?

scate says:

New case says Second Life EULA is unenforcable

Arbitration Clause in Second Life TOS Found Unconscionable

Contracts are supposed to have some measure of equality of between the parties. EULAs have none and Mandatory Arbitration agreements, especially when used by all similar companies in a field, are the unilateral declaration by a company that it is above the law and may not be sued. They are almost like owning your own judge, especially since at least one study found that repeat customers of arbitrators routinely come out on top in the arbitration decisions.

acquirer says:

How did he ever use the computer

Depending on when he bought this computer he would never have been able to use the computer and have the initial setup completed if he couldn’t see the EULA and point and click on the exact spot onscreen where he had to agree or not. His claim was the screen was so scrambled he couldn’t make anything out, yet he was somehow able to continue using that same computer for quite some time. Seems like an attorney looking for a loophole (like a judge not understanding how initial setups work).

No argument that EULA’s are way over the top, but I have a hard time understanding how this case could go forward.

scate says:

“Depending on when he bought this computer he would never have been able to use the computer and have the initial setup completed if he couldn’t see the EULA and point and click on the exact spot onscreen where he had to agree or not. “

The court found otherwise based on the evidence presented. Gateway could not prove that he had accepted the agreement and found his testimony convincing. Perhaps the **trial transcript** would be a better way to judge the nuances.

claire rand (user link) says:

Re: Re:

I like to see that one played out in a court…

Mind you i was told by one uk retailer when i asked for a clean widows install disc (and was told it was against company policy), then informed them i would be partioning the main drive and installing a clean windows anyway, even if i had to buy it seperatly. that doing so would void the warranty. though the sales drone walked off when i asked why?

I guess there was some similar agreement hidden away that binds the buyer to all manor of rubbish.

[kossori hana.] says:

They don't want you to read it.

i’ve always been one to read everything i come across, especially things i must sign or agree to accept. most eulas are filled with junk – lots and lots of filler one must sort through in order to find anything significant like these clauses. it’s intended to lull the eu into a false sense of security that things look in order or harmless after the first few sections. this gets most people to agree prematurely. i’m not saying the eu’s action is justified – it is not, but i sure wish i could take back those days i’ve cumulatively spent reading that crap.

a side note on a similar subject:
i went to fill a prescription for iron pills at walmart. at the pos, i was prompted to sign to acknowledge i had recieved a copy of some walmart privacy policy. i had not. the pharmacy tech insisted i just sign it. i refused until i received what i was supposed to have already received. he didn’t even know where to find the policy, and made a big deal about me holding things up. upon asking the pharmacist, it turned out to be in the bag he wouldn’t give me until i signed. i refused to sign until he gave up. i received the policy, signed, and went happily about my day knowing i taught this guy and the people in line a lesson about reading what you sign. (those in line were appreciative. the tech was not.)

Buzz says:

my 2 cents

If EULAs can be enforced in a courtroom then no company should be allowed to write up a EULA and sell a product with one until that company has had a legal authority overview it and verify its practicality. This obviously wouldn’t solve everything, but it’d be a step in the right direction. What’s to stop a EULA from saying “you will pay us $1000 per day”? Where’s the line? What powers do EULAs entail?

Jamie says:

What happens if you don't agree?

What happens if you don’t agree, but still want to use the item you payed money for?
It seems to me that a EULA, you don’t get to see until after you have already purchased the item, can’t really be enforceable. Once you own the item, you should be allowed to completely disregard the EULA if you want to. You have already payed for it, so it is yours.
I really don’t understand how you can be forced to abide by an agreement you were not apprised of before the purchase.

John Perkins (user link) says:

Re: What happens if you don't agree?

“What happens if you don’t agree, but still want to use the item you payed money for?
It seems to me that a EULA, you don’t get to see until after you have already purchased the item, can’t really be enforceable. Once you own the item, you should be allowed to completely disregard the EULA if you want to. You have already payed for it, so it is yours.
I really don’t understand how you can be forced to abide by an agreement you were not apprised of before the purchase.”

Well, it’s a contract of adhesion which generally doesn’t hold up in court. You can not be held to a EULA which you can not read before accepting. It is simply not a binding contract.

Heidi (profile) says:

Re: Re: What happens if you don't agree?

I actually wrote a paper on this last year. There’s a couple of legal theories that can either support or deny EULA enforceability. It all depends on the judge. There were a couple of cases that happened at roughly the same time that are very similar to this one. In those cases, the plaintiffs had ordered computers to be delivered to their homes. They came in normal shipping boxes with shipping labels slapped everywhere. Apparently, under the labels their was a notice that by opening the box, you agreed to the EULA (which was packaged in the box, of course).

One judge ruled for the plaintiffs, while another judge in a different part of the country ruled again. It’s still really unclear as to what makes a EULA enforceable or not.

Anonymous Coward says:

Re: What happens if you don't agree?

Then you have a very expensive paper weight. If you bought, say, a laptop computer that won’t activate the OS until you’ve agreed to a license, you have in fact paid for two seperate things: (1) A laptop and (2) an OS license. If you don’t agree with the license terms, you’ve still bought a laptop, you just can’t use the preinstalled OS.

Darkcoven06 says:

Re: What happens if you don't agree?

“What happens if you don’t agree, but still want to use the item you payed money for?
It seems to me that a EULA, you don’t get to see until after you have already purchased the item, can’t really be enforceable. Once you own the item, you should be allowed to completely disregard the EULA if you want to. You have already payed for it, so it is yours.”

Well the thing that the company conveniently forgets to tell you is that it sells only a license to use the product not the actual product and that realistically they can suspend use of the product at any time cause its still technically theirs this is why they can encode the product so as you cant “recreate” the product using their code and sell it under your name

It was initially Bill Gate’s things to sell only the license of his software to the user and thats really where the EULA started.

Anonymous Coward says:

Re: By the way...

…if you actually have to indicate assent to it, that makes it a contract, not a licence.

I believe that EULA stands for End User License AGREEMENT, as in you are agreeing to their licensing terms in order to gain the license. Hence, you have to “indicate assent” or you have no license.

arbulus says:

Another one

Record companies seem to believe that we agree to EULA by buying music CDs. They have this idea that music follows the same rules as software and that we have somehow agreed to that restriction. There has never been a EULA attached to music CDs (with Sony’s rootkit fiasco being the only exception, and we saw how that went), and no declaration anywhere that music does follow software’s rules. So the record companies make the case that digital music has to follow the same guidelines as software, but no one has signed a EULA agreeing to such a case.

This is what needs to happen in the music industry: if the record companies want to continue the way they are suing people over music sharing, then they need to include a EULA with each and every CD and digital download that you must agree to or the music won’t work. Otherwise, they don’t have a leg to stand on in all of their lawsuits, because no one has agreed to anything.

Oscar says:

If you were never able to see it, then you can’t agree with it, this guys case will most likely be won by him, and yea, reading/understanding the EULA’s aren’t difficult, just boring.

Have you seen some of the EULAs? You can’t resell your OS, that YOU PAID FOR, Hell, in World Of Warcraft the EULA states that blizzard can use spyware to make sure your not hacking.

The EULA needs to be replaced with something less legal, as it stands it’s just a way for the company to cover their asses( Oh It’s in the EULA, I’m safe…)

PopeRatzo says:

When you realize that EULA’s are made for corporations to gain advantage over their very customers, you realize just how little the supposed “Free Market” does for people. Oh, it’ helps the big corporations immensely, but this supposed “Free Market” sucks for consumers.

And there’s absolutely no balance between the customers and the corporations. Transactions are no longer about satisfying a customer, but giving advantage to the corporation. There’s absolutely no doubt that in this relationship, it’s the corporation that’s making out and the consumer is being used. The Number One political battle of the coming decades is going to be the consumer vs. corporations. Considering that the laws of all capitalist countries are designed to give all advantage to the corporations, you can bet it’s going to be ugly for our side. There’s going to be an anti-corporate backlash that will be much greater than the one that occurred in the first half of the 20th century, when labor unions and trust-busters were trying to teach the corporations some manners. To paraphrase the piece of scum Michael Ledeen, “Every so often the consumers have to take some corporation and slam them up against a wall…”

We are now the consumables.

Intrepid says:

US Court of Appeals 7th Cir - Summary of Decision

For full decision, see:

In the
United States Court of Appeals
For the Seventh Circuit

No. 96-3294

RICH HILL and ENZA HILL, on behalf
of a class of persons similarly situated,





Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 C 4086–Suzanne B. Conlon, Judge.


EASTERBROOK, Circuit Judges.

–>> A customer picks up the phone, orders a computer, and gives a credit card number. Presently a box arrives, containing the computer and a list of terms, said to govern unless the customer returns the computer within 30 days. Are these terms effective as the parties’ contract, or is the contract term- free because the order-taker did not read any terms over the phone and elicit the customer’s assent?

One of the terms in the box containing a Gateway 2000 system was an arbitration clause. Rich and Enza Hill, the customers, kept the computer more than 30 days before complaining about its components and performance. They filed suit in federal court arguing, among other things, that the product’s shortcomings make Gateway a racketeer (mail and wire fraud are said to be the predicate offenses), leading to treble damages under RICO for the Hills and a class of all other purchasers. Gateway asked the district court to enforce the arbitration clause; the judge refused, writing that “[t]he present record is insufficient to support a finding of a valid arbitration agreement between the parties or that the plaintiffs were given adequate notice of the arbitration clause.” Gateway took an immediate appeal, as is its right. 9 U.S.C. § 16(a)(1)(A).

The Hills say that the arbitration clause did not stand out: they concede noticing the statement of terms but deny reading it closely enough to discover the agreement to arbitrate, and they ask us to conclude that they therefore may go to court. Yet an agreement to arbitrate must be enforced “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), holds that this provision of the Federal Arbitration Act is inconsistent with any requirement that an arbitration clause be prominent. A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. . . . Terms inside Gateway’s box stand or fall together. If they constitute the parties’ contract because the Hills had an opportunity to return the computer after reading them, then all must be enforced.

* * *

Marc says:

Brief of Decision

Brief of the decision:

Hill v. Gateway 2000, Inc.
105 F.3d 1147 (7th Cir. 1997)


The Hills ordered a computer from Gateway over the phone. During the call, they gave Gateway their credit card information, and that card was charged with the agreed price. When the computer arrived in boxes, one of the boxes contained terms not previously discussed between the parties. The terms stated that they were part of the contract between the parties unless the Hills shipped the computer back to Gateway within the 30-day period following delivery.

One of these new terms required any dispute to be arbitrated in Chicago. After the 30-day period had expired, the Hills invoked Gateway’s warranty regarding defects, and were not satisfied with Gateway’s response. They then initiated a class-action lawsuit in federal court seeking damages for violation of the federal civil RICO statute. Gateway responded with a request that the court not hear the matter, and instead refer it to arbitration.

Disposition Below:

The trial court ruled for the Hills. It found that the record was insufficient to support a finding that the parties had agreed to arbitration, or that the Hills were given adequate notice of the arbitration clause.

Questions Presented:

1. Was the arbitration term part of the contract between the Hills and Gateway, and thus binding on the Hills?

2. Under what theory of contract formation did the term become binding on the Hills?

Short Answers:

1. Yes

2. Unclear. The possible readings include:

a. The contract was formed as to all terms during the initial telephone call, and one of the terms was an option on the Hills part to rescind the transaction upon return of the computer during the first 30 days following delivery;

b. The contract was formed as to certain essential matters such as price and type of computer during the initial telephone call, and then the term sheet included with the delivery imposed additional terms on the Hills (that of requiring them to return the computer if they did not agree to the terms);

c. The contract was formed as to all terms at the conclusion of the 30 day period; until then, there were no binding promises between the parties;

d. There were two contracts: one as to the purchase and sale of the basic computer, and another as to the agreement to arbitrate. The contract for sale was concluded upon termination of the initial telephone call; the agreement to arbitrate was concluded by the failure of the Hills to return the computer within the 30 day period.


Buyers who pay in advance for goods knowing that the seller intends to include other terms in the deal are bound by those other terms if the seller offers to take back the goods and refund the price paid within a specified period of time after the buyer had the opportunity to examine the additional terms. The buyer’s actual consent to the additional terms is irrelevant.


The Hills argue that their assent to an arbitration term, or their actual notice of such a term, was necessary for those terms to be binding upon them. In this case, they assert that they never knew about the term, and that any notice and disclosure of such terms was inadequate to form a conclusion that such terms bound them.

Judge Easterbrook, speaking for the Seventh Circuit, rejects the Hills’ arguments. He first states that it is accepted law that people can pay in advance for a product or service without knowing all the terms of the transaction, yet nevertheless be bound by those unrevealed terms. He also states that a person’s subjective ignorance of acknowledged terms is not a bar to enforcement; by retaining the benefits of the transaction, the consumer assumes the risk of the provisions that are unread.

Specifically, Judge Easterbrook states that this case is governed by ProCD v. Zeidenberg. He states that ProCD holds “that terms inside a box of software bind consumers who use the software after an opportunity to read the terms and to reject them by returning the product.” In this case, says Judge Easterbrook, “Gateway shipped computers with the same sort of accept or return offer ProCD made to users of its software.”

Judge Easterbrook then rejects the Hills’ efforts to distinguish ProCD. First, the Hills point out that ProCD deals with software, not tangible goods. Judge Easterbrook declines to limit ProCD to software. He states that both ProCD and Gateway involve the law of contracts, and there is nothing special about software that would justify a separate rule. Moreover, this case does involve software (as there was software bundled with the computer), and thus the distinction does not even exist.

Second, the Hills wish to limit ProCD to executory contracts; that is, contracts in which the obligations of both sides are ongoing, and not yet completed. Judge Easterbrook also rejects this distinction, and also points out that even if he did accept this distinction, it is not present on these facts. There are many obligations on each side of this contract that remain to be performed and are ongoing (for example, the agreement to arbitrate disputes on the Hills’ side, and the lifetime warranties on Gateways’).

Finally, the Hills state that there were no notices of additional terms on the outside of the shipping boxes, as was the case in the shrinkwrap license at issue in ProCD. Again, Judge Easterbrook states that this is a distinction without a difference; Gateway placed the approve-or-return terms so that competent adults would know of their presence.

Towards the end of the opinion (on page 29), Judge Easterbrook adverts in dicta to a “better argument” that could have been made had the Hills tried to return the goods but were dissuaded from doing so by the cost of shipping. Without saying whether this might be an exception to his holding, Judge Easterbrook then states that even had it been the case (had the shipping costs dissuaded the Hills from returning the computer because they disapproved of the terms), the fact that the Hills had knowledge that there were additional terms, but did not seek to discover them in advance, would have barred them from contesting the arbitration clause.

Brandon Watts (user link) says:

Mixed Feelings

My feelings on this are mixed. For one thing, as users, we’re required to read and understand the EULA that we’re agreeing to, but in all honesty, how many people actually take the time to fully read and meditate on what the license really means before they accept it?

It’s easier for most people just to act ignorant.

Brandon Watts
Criteo Evangelist

John says:

Things will only get worse...

The reality of the situation is that users have always been beholden to software companies. US law makes it so very easy for IP right holders to define how they feel you should use the content you have rightfully purchased. One major reason I’m attending law school for IP law is to fight this kind of shit. I know what current copyright, DRM, and other IP law states – and I believe it’s based on a history of incorrect and convoluted judicial decisions. I, like most American’s believe, that if I give you money, and you give me a product that I have the choice to do it what I want. If a company doesn’t approve of it, don’t sell it. I know some may think this is a simple and rather ignorant argument – but it would keep companies competitive, spend more time making products that work (instead of wasting time and adding additional expense to develop “activation” systems), and give consumers the rights, yes RIGHTS, they deserve. I don’t have to tell everyone here that this is a fight against software, music, and film organizations that will only end with one side winning and unfortunately for now it looks like the other side is winning.

SailorRipley says:

My two cents...

as long as the EULA is
– understandable for the average Joe (this means he can read and understand it correctly and completely without getting a headache or outside help)
– not longer than necessary

I would have no problem with the EULA being binding

IF everybody could read it before the actual purchase…

Let’s be serious, the effort, even for a wide range of EULAs, for Gateway (or anybody) to put EULAs on their website (and accept buttons or checkboxes) is minimal. The same even goes for software. And it could applied in retail-stores as well: people have to sign a hardcopy of the EULA before purchase.

If you then sign/agree without reading, you have nobody to blame but yourself.

If you have questions, those questions and answers should be documented and included as well, eliminating any discussion afterwards like: I didn’t know that clause meant x, they told me it meant y when I asked about it…

One has to wonder, as the effort/cost to implement a system where EULAs could be read/agreed to prior to the actual sale is so ridiculously small, why manufacturers are so reluctant to do so (a couple of people challenging in court they agreed to the EULA rapidly costs more)…
…could it be sales would go down because people, upon reading a EULA, will decide not to buy, whereas in the current situation, they don’t send received goods back because they don’t want to have to eat cost/hassle of the return-shipping?

mike rossiter (profile) says:


I think everyone just got slightly off the point a bit…

basically, Gateway sold this guy a PC that DID NOT WORK and refused to refund money/replace it so he sued..and he had ZERO usage of the machine….

I guess where this leads is…I’m upgrading my PC this week (I need a fairly powerful (read: expensive) PC for games etc)…and Gateway just shot down any chance of my ever buying anything from them. Oh and probably anyone I know since I’ll be mentioning their customer attitude to various friends/work colleagues when they ask my advice on what systems to get!

Matt says:


Most EULAs are harmless and basically state the obvious to protect both company and consumer. Because of this and also the sheer length of most agreements, most people simply click “I accept” without reading the agreement, and in most cases this is not to the detriment of the consumer. But this practice has left open a vulnerability to those looking to take advantage of their customers.

Credit card companies would be at the top of this list: signing up for online banking w/ online statement delivery (to be good to the environment, of course!) results in changes to the member agreements being sent via “email” (to your online banking account inbox). So the companies can sign you up under one deal, then send you a new agreement which by the terms of your accepting online statement delivery you automatically agree to after a certain period of time. These often add a multitude of penalty interest rates, fees, and other unpleasant additions (well, unpleasant to the cardholders at least!).

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