There is a lot of confusion and misinformation around the enforceability and legality of End User License Agreements. Still, when you examine this question in light of contract law, the answer is straightforward.
User agreements like EULAs are legally binding contracts between the software author and the end-user. End User License Agreements are enforceable as long as it is clear that it is a contract and both parties can understand the terms. Unlike a basic software license that sets user parameters for a finite engagement, the EULA gives the end-user conditions to use the software or hardware continually.
A basic understanding of contract law teaches that consumers have a responsibility to read and understand the agreement’s terms. And the default assumption should not be that the shrinkwrap nature of these contracts automatically makes them unenforceable.
In ProCD, Inc. v. Zeidenberg and Feldman v. Google, Inc. (2007). the US court reinforced this understanding. It deemed that both EULAs were enforceable, valid contracts between the software owners and the users. One, the users had enough time to read and understand the agreement. And two, they were required to click agree to download the software. That being said, there is precedent within the third circuit court to interpret some of these EULAs as unenforceable.
Reasons Why an End User License Agreement May Not Be Enforceable
The courts might not deem an EULA as enforceable if the user is not required to agree to the terms before purchase. An exception (as seen in Klocek v. Gateway and Brower v. Gateway) to this rule is that the EULA might still be enforceable if the user has a reasonable timeframe to return the product if they disagree. Many call the EULAs in these examples shrink-wrap or click-through agreements because consumers do not see them until they open the packaging or click through the product.
Another instance where a EULA will not be enforceable is where the terms are ridiculous or in conflict with the land’s prevailing laws. Under German laws, End User License Agreement could be categorized as AGB, meaning general terms and conditions, which are generally valid but not always enforceable.
The Enforceability of Clickwrap Agreements
In Feldman v. Google, Inc. (2007), the court held that a clickwrap agreement is enforceable when the user has the time to read it and understand it before accepting the terms.
Don’t let anyone fool you into thinking that all EULAs are archaic sneaky attempts to pull a fast one over consumers. These contracts exist to protect the rights and interests of the authors. They would not spend the time and resources to draft them if they were utterly ineffective.
Like with all contracts, some EULAs are unenforceable because terms are too complex and vague for any reasonable person to agree to them. Ultimately, software authors should take great care to make sure their terms are fair, concise, and easy to understand because EULA enforceability is determined on a case by case basis.
As an attorney who understands the nuance of the ever-changing precedent of enforceability, I can draft terms that protect software developers’ intellectual property and business interests. Book a free consultation to learn how my services can help.