This case presents the issue of whether a limitation on consequential damages enclosed in a "shrinkwrap license" accompanying computer software is enforceable against the purchaser of the licensed software. Petitioner M.A. Mortenson Company, Inc. (Mortenson), a general construction contractor, purchased licensed computer software from Timberline Software Corporation (Timberline) through Softworks Data Systems, Inc. (Softworks), Timberline's local authorized dealer. After Mortenson used the program to prepare a construction bid and discovered the bid was $1.95 million less than it should have been, Mortenson sued Timberline for breach of warranties alleging the software was defective. The trial court granted Timberline's motion for summary judgment. The Court of Appeals affirmed the order of summary judgment, holding (1) the purchase order between the parties was not an integrated contract; (2) the licensing agreement set forth in the software packaging and instruction manuals was part of the contract between Mortenson and Timberline; and (3) the provision limiting Mortenson's damages to recovery of the purchase price was not unconscionable. M.A. Mortenson Co. v. Timberline Software Corp., 93 Wn.App. 819, 826-37, 970 P.2d 803 (1999). We granted Mortenson's petition for review and affirm the Court of Appeals.
Petitioner Mortenson is a nationwide construction contractor with its corporate headquarters in Minnesota and numerous regional offices, including a northwest regional office in Bellevue, Washington. Respondent Timberline is a software developer located in Beaverton, Oregon. Respondent Softworks, an authorized dealer for Timberline, is located in Kirkland, Washington and provides computer-related services to contractors such as Mortenson.
Since at least 1990, Mortenson has used Timberline's Bid Analysis software to assist with its preparation of bids.
Mortenson wanted multiple copies of the new software for its offices, including copies for its corporate headquarters in Minnesota and its northwest regional office in Bellevue. Reich informed Mortenson he would place an order with Timberline and would deliver eight copies of the Precision software to the Bellevue office, after which Mortenson could distribute the copies among its offices.
After Reich provided Mortenson with a price quote, Mortenson issued a purchase order dated July 12, 1993, confirming the agreed upon purchase price, set up fee, delivery charges, and sales tax for eight copies of the software.
Clerk's Papers at 206. Below the signature line the following was stated: "ADVISE PURCHASING PROMPTLY IF UNABLE TO SHIP AS REQUIRED. EACH SHIPMENT MUST INCLUDE A PACKING LIST. SUBSTITUTIONS OF GOODS OR CHANGES IN COSTS REQUIRE OUR PRIOR APPROVAL." Clerk's Papers at 206.
Reich signed the purchase order and ordered the requested software from Timberline. When Reich received the software, he opened the three large shipping boxes and checked the contents against the packing invoice. Contained inside the shipping boxes were several smaller boxes, containing program diskettes in plastic pouches, installation instructions, and user manuals. One of the larger boxes also contained the sealed protection devices for the software.
All Timberline software is distributed to its users under license. Both Medallion and Precision Bid Analysis are licensed Timberline products. In the case of the Mortenson shipment, the full text of Timberline's license agreement was set forth on the outside of each diskette pouch and the inside cover of the instruction manuals. The first screen that appears each time the program is used also references the license and states, "[t]his software is licensed for exclusive use by: Timberline Use Only." Clerk's Papers at 302. Further, a license to use the protection device was wrapped around each of the devices shipped to Mortenson. The following warning preceded the terms of the license agreement:
Clerk's Papers at 305. Under a separate subheading, the license agreement limited Mortenson's remedies and provided:
NEITHER TIMBERLINE NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE CREATION, PRODUCTION OR DELIVERY OF THE PROGRAMS OR USER MANUALS
Clerk's Papers at 305.
Reich personally delivered the software to Mortenson's Bellevue office, and was asked to return at a later date for installation. The parties dispute what happened next. According to Neal Ruud (Ruud), Mortenson's chief estimator at its Bellevue office, when Reich arrived to install the software Reich personally opened the smaller product boxes contained within the large shipping boxes and also opened the diskette packaging. Reich inserted the diskettes into the computer, initiated the program, contacted Timberline to receive the activation codes, and wrote down the codes for Mortenson. Reich then started the programs and determined to the best of his knowledge they were operating properly. Ruud states that Mortenson never saw any of the licensing information described above, or any of the manuals that accompanied the software. Ruud adds that copies of the programs purchased for other Mortenson offices were forwarded to those offices.
Reich claims when he arrived at Mortenson's Bellevue office he noticed the software had been opened and had been placed on a desk, along with a manual and a protection device. Reich states he told Mortenson he would install the program at a single workstation and "then they would do the rest." Clerk's Papers at 176. Reich proceeded to install the software and a Mortenson employee attached the protection device. Reich claims he initiated and ran the program, and then observed as a Mortenson employee repeated the installation process on a second computer. An employee then told Reich that Mortenson would install the software at the remaining stations.
In December 1993, Mortenson utilized the Precision Bid Analysis software to prepare a bid for a project at Harborview Medical Center in Seattle. On the day of the bid, the software allegedly malfunctioned multiple times and gave the following message: "Abort: Cannot find alternate." Clerk's Papers at 60. Mortenson received this message 19 times that day. Nevertheless, Mortenson submitted a bid generated by the software. After Mortenson was awarded the Harborview Medical Center project, it learned its bid was approximately $1.95 million lower than intended.
Mortenson filed an action in King County Superior Court against Timberline and Softworks alleging breach of express and implied warranties. After the suit was filed, a Timberline internal memorandum surfaced, dated May 26, 1993. The memorandum stated, "[a] bug has been found [in the Precision software] ... that results in two rather obscure problems," and explained, "[t]hese problems only happen if the following [four] conditions are met." Clerk's Papers at 224. The memorandum concluded, "[g]iven the unusual criteria for this problem, it does not appear to be a major problem." Clerk's Papers at 224. Apparently, other Timberline customers had encountered the same problem and a newer version of the software was sent to some of these customers. After an extensive investigation, Timberline's lead programmer for Precision Bid Analysis acknowledged if the four steps identified in the memo were "reproduced as accurately as possible," Mortenson's error message could be replicated. Clerk's Papers at 248.
Timberline moved for summary judgment of dismissal in July 1997, arguing the limitation on consequential damages in the licensing agreement barred Mortenson's recovery. Mortenson countered that its entire
Mortenson appealed the summary judgment order to the Court of Appeals.
In reviewing an order of summary judgment, this court engages in the same inquiry as the trial court; summary judgment will be affirmed where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Hertog v. City of Seattle, 138 Wn.2d 265, 275, 979 P.2d 400 (1999) (citing Taggart v. State, 118 Wn.2d 195, 199, 822 P.2d 243 (1992); CR 56(c)). The facts and reasonable inferences from the facts are considered in the light most favorable to the nonmoving party. Hertog, 138 Wash.2d at 275, 979 P.2d 400 (citing Taggart, 118 Wash.2d at 199, 822 P.2d 243). Questions of law are reviewed de novo. Hertog, 138 Wash.2d at 275, 979 P.2d 400 (citing Sherman v. State, 128 Wn.2d 164, 183, 905 P.2d 355 (1995)).
Article 2 of the Uniform Commercial Code (U.C.C.), chapter 62A RCW, applies to transactions in goods. RCW 62A.2-102. The parties agree in their briefing that Article 2 applies to the licensing of software, and we accept this proposition. See, e.g., Aubrey's R.V. Ctr., Inc. v. Tandy Corp., 46 Wn.App. 595, 600, 731 P.2d 1124 (1987) (accepting agreement of parties that U.C.C. Article 2 applied to transaction involving defective software); Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 675-76 (3d Cir.1991) (holding that computer software falls within definition of a "good" under U.C.C. Article 2).
Integration of the Contract
Mortenson contends because the purchase order fulfilled the basic requirements of contracting under the U.C.C., it constituted a fully integrated contract. As a result, Mortenson argues the terms of the license, including the limitation of remedies clause, were not part of the contract and, thus, are not enforceable. Timberline counters that the parties did not intend the purchase order to be an exclusive recitation of the contract terms, and points to the absence from the purchase order of several key details of the agreement. Timberline argues, and the trial court and Court of Appeals agreed, that the purchase order did not prevent the terms of
Whether the parties intend a written document to be a final expression of the terms of the agreement is a question of fact. Emrich v. Connell, 105 Wn.2d 551, 556, 716 P.2d 863 (1986). In determining whether an agreement is integrated, "the court may consider evidence of negotiations and circumstances surrounding the formation of the contract." Denny's Restaurants, Inc. v. Security Union Title Ins. Co., 71 Wn.App. 194, 202, 859 P.2d 619 (1993) (citing Restatement (Second) of Contracts § 216 (1981)). "[I]f reasonable minds can reach but one conclusion" on an issue of fact, it may be determined on summary judgment. Allen v. State, 118 Wn.2d 753, 760, 826 P.2d 200 (1992).
RCW 62A.2-204(1) provides, "[a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Whether the purchase order qualifies as a contract at all does not resolve the issue of whether it is an integrated contract. Even if we assume the purchase order could, standing alone, constitute a complete contract under the U.C.C., such was not the case here. The language of the purchase order makes this clear.
For example, the purchase order sets an hourly rate for Timberline's provision of "software support," but does not specify how many hours of support Timberline would provide. The purchase order also states: "[a]t some future date should Timberline upgrade `Bid Day' to a windows version, M.A. Mortenson would be able to upgrade to this system with Timberline crediting existing software purchase toward that upgrade on a pro-rated basis to be determined later." Clerk's Papers at 206 (emphasis added). Finally, the purchase order does not contain an integration clause. The presence of an integration clause "strongly supports a conclusion that the parties' agreement was fully integrated...." Olsen Media v. Energy Sciences, Inc., 32 Wn.App. 579, 584, 648 P.2d 493 (1982). Here, the absence of such a clause further supports the conclusion that the purchase order was not the complete agreement between the parties. The trial court and the Court of Appeals correctly determined the purchase order did not constitute an integrated contract.
Terms of the Contract
Mortenson next argues even if the purchase order was not an integrated contract, Timberline's delivery of the license terms merely constituted a request to add additional or different terms, which were never agreed upon by the parties. Mortenson claims under RCW 62A.2-207
For its section 2-207 analysis, Mortenson relies on Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91 (3d Cir.1991).
First, Step-Saver did not involve the enforceability of a standard license agreement against an end user of the software, but instead involved its applicability to a value added retailer who simply included the software in an integrated system sold to the end user. In fact, in Step-Saver the party contesting applicability of the licensing agreement had been assured the license did not apply to it at all. Step-Saver, 939 F.2d at 102. Such is not the case here, as Mortenson was the end user of the Bid Analysis software and was never told the license agreement did not apply.
Further, in Step-Saver the seller of the program twice asked the buyer to sign an agreement comparable to their disputed license agreement. Both times the buyer refused, but the seller continued to make the software available. Step-Saver, 939 F.2d at 102-03. In contrast, Mortenson and Timberline had utilized a license agreement throughout Mortenson's use of the Medallion and Precision Bid Analysis software. Given these distinctions, we find Step-Saver to be inapplicable to the present case.
Although no Washington case specifically addresses the type of contract formation at issue in this case, a series of recent cases from other jurisdictions have analyzed shrinkwrap licenses under analogous statutes. See Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 250-51, 676 N.Y.S.2d 569 (1998); Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996).
In ProCD, which involved a retail purchase of software, the Seventh Circuit held software shrinkwrap license agreements are a valid form of contracting under Wisconsin's version of U.C.C. section 2-204, and such agreements are enforceable unless objectionable under general contract law such as the law of unconscionability. ProCD, 86 F.3d at 1449-52. The court stated, "[n]otice on the outside, terms on the inside, and a right to return the software for a refund if the
In Hill, the customer ordered a computer over the telephone and received the computer in the mail, accompanied by a list of terms to govern if the customer did not return the product within 30 days. Hill, 105 F.3d at 1148. Relying in part on ProCD, the court held the terms of the "accept-or-return" agreement were effective, stating, "[c]ompetent adults are bound by such documents, read or unread." Hill, 105 F.3d at 1149 (emphasis added). Elaborating on its holding in ProCD, the court continued:
Hill, 105 F.3d at 1150 (emphasis added).
Interpreting the same licensing agreement at issue in Hill, the New York Supreme Court, Appellate Division concluded shrinkwrap license terms delivered following a mail order purchase were not proposed additions to the contract, but part of the original agreement between the parties. Brower, 246 A.D.2d at 250-51, 676 N.Y.S.2d 569. The court held U.C.C. section 2-207 did not apply because the contract was not formed until after the period to return the merchandise. Brower, 246 A.D.2d at 250, 676 N.Y.S.2d 569.
We find the approach of the ProCD, Hill, and Brower courts persuasive and adopt it to guide our analysis under RCW 62A.2-204. We conclude because RCW 62A.2-204 allows a contract to be formed "in any manner sufficient to show agreement ... even though the moment of its making is undetermined," it allows the formation of "layered contracts" similar to those envisioned by ProCD, Hill, and Brower. See ProCD, 86 F.3d at 1452-53 (holding shrinkwrap license agreement was a valid form of contracting under U.C.C. section 2-204). We, therefore, hold under RCW 62A.2-204 the terms of the license were part of the contract between Mortenson and Timberline, and Mortenson's use of the software constituted its assent to the agreement, including the license terms.
The terms of Timberline's license were either set forth explicitly or referenced in numerous locations. The terms were included within the shrinkwrap packaging of each copy of Precision Bid Analysis; they were present in the manuals accompanying the software; they were included with the protection devices for the software, without which the software could not be used. The fact the software was licensed was also noted on the introductory screen each time the software was used. Even accepting Mortenson's contention it never saw the terms of the license, as we must do on summary judgment, it was not necessary for Mortenson to actually read the agreement in order to be bound by it. See Yakima County Fire Protection Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 389, 858 P.2d 245 (1993) (citing Skagit State Bank v. Rasmussen, 109 Wn.2d 377, 381-84, 745 P.2d 37 (1987)); Hill, 105 F.3d at 1148; Kaczmarek v. Microsoft Corp., 39 F.Supp.2d 974, 977 (N.D.Ill. 1999).
As the license was part of the contract between Mortenson and Timberline, its terms are enforceable unless "objectionable on grounds applicable to contracts in general...." ProCD, 86 F.3d at 1449.
Enforceability of Limitation of Remedies Clause
Mortenson contends even if the limitation of remedies clause is part of its contract with Timberline, the clause is unconscionable and, therefore, unenforceable.
Limitations on consequential damages are generally valid under the U.C.C. unless they are unconscionable. RCW 62A.2-719(3). Whether a limitation on consequential damages is unconscionable is a question of law. RCW 62A.2-302(1); American Nursery Prods., Inc. v. Indian Wells Orchards, 115 Wn.2d 217, 222, 797 P.2d 477 (1990) (citing Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 262, 544 P.2d 20 (1975)). "Exclusionary clauses in purely commercial transactions ... are prima facie conscionable and the burden of establishing unconscionability is on the party attacking it." American Nursery Prods., 115 Wash.2d at 222, 797 P.2d 477. If there is no threshold showing of unconscionability, the issue may be determined on summary judgment. Nelson v. McGoldrick, 127 Wn.2d 124, 132-33, 896 P.2d 1258 (1995).
Washington recognizes two types of unconscionability —substantive and procedural— which we will now address in turn.
1. Substantive Unconscionability.
Mortenson asserts Timberline's failure to inform it of the "defect" in the software prior to its purchase renders the licensing agreement substantively unconscionable.
"`Substantive unconscionability involves those cases where a clause or term in the contract is alleged to be one-sided or overly harsh....'" Nelson, 127 Wash.2d at 131, 896 P.2d 1258 (quoting Schroeder, 86 Wash.2d at 260, 544 P.2d 20). "`Shocking to the conscience', `monstrously harsh', and `exceedingly calloused' are terms sometimes used to define substantive unconscionability." Nelson, 127 Wash.2d at 131, 896 P.2d 1258 (quoting Montgomery Ward & Co. v. Annuity Bd. of S. Baptist Convention, 16 Wn.App. 439, 444, 556 P.2d 552 (1976)).
As an initial matter, it is questionable whether clauses excluding consequential damages in a commercial contract can ever be substantively unconscionable. See American Nursery Prods., 115 Wash.2d at 237-38, 797 P.2d 477 (Utter, J., concurring) (citing Tacoma Boatbuilding Co. v. Delta Fishing Co., 28 U.C.C. Rep. Serv. 26, 35 (W.D.Wash.1980)). Even if the doctrine is applicable, however, the clause here is conscionable because substantive unconscionability does not address latent defects discovered after the contracting process. RCWA 62A.2-302(1) & cmt. 1; American Nursery Prods., 115 Wash.2d at 237, 797 P.2d 477 (Utter, J., concurring).
In Tacoma Boatbuilding, the Western District of Washington considered whether a contractual clause limiting consequential damages was substantively unconscionable under Washington law, where mechanical problems developed in several boat engines after the contracting process. Like Mortenson,
Tacoma Boatbuilding, 28 U.C.C. Rep. Serv. at 35 (citation omitted).
We find the result in Tacoma Boatbuilding an accurate analysis of Washington's law of substantive unconscionability and adopt it here. In a purely commercial transaction, especially involving an innovative product such as software, the fact an unfortunate result occurs after the contracting process does not render an otherwise standard limitation of remedies clause substantively unconscionable.
An example of the proper focus of the substantive unconscionability doctrine is found in Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 254, 676 N.Y.S.2d 569 (1998). There, a shrinkwrap software license similar to the license in the present case included a mandatory arbitration clause, which required the use of a French arbitration company, payment of an advance fee of $4,000 (half which was nonrefundable), significant travel fees borne by the consumer, and payment of the loser's attorney fees. Brower, 246 A.D.2d at 249, 676 N.Y.S.2d 569. The Brower court found this clause substantively unconscionable. Brower, 246 A.D.2d at 254, 676 N.Y.S.2d 569.
In contrast, Timberline's consequential damages clause, when examined at the time the contract was formed, does not shock the conscience in the manner of the Brower mandatory arbitration clause; it is not substantively unconscionable.
2. Procedural Unconscionability.
Mortenson also contends the licensing agreement is procedurally unconscionable because "the license terms were never presented to Mortenson in a contractually-meaningful way." Supplemental Br. of Pet'r at 17.
Examining the contracting process between the parties based on the above factors, we hold the clause to be procedurally conscionable. The clause was not hidden in a maze of fine print. Nelson, 127 Wash.2d at 131, 896 P.2d 1258. The license was set forth in capital letters on each diskette pouch and on the inside cover of the instruction manuals. A license to use the protection device was wrapped around each such device. The license was also referenced in the opening screen of the software program. This gave Mortenson more than ample opportunity to read and understand the terms of the license. Mortenson is also not an inexperienced retail consumer, but a nationwide construction contractor that has purchased licensed software from Timberline in the past. See Northwest Acceptance Corp. v. Hesco Constr., Inc., 26 Wn.App. 823, 830-31, 614 P.2d 1302 (1980) (finding liquidated damages clause conscionable in part because parties were commercially experienced).
Mortenson has failed to set forth any material issues of fact on the issue of contract formation, and has also failed to make a threshold showing of unconscionability sufficient to avoid summary judgment.
We affirm the Court of Appeals, upholding the trial court's order of summary judgment of dismissal and denial of the motions to vacate and amend.
GUY, C.J., SMITH, MADSEN, TALMADGE, IRELAND, JJ., and BROWN, J.P.T., concur.
SANDERS, J. (dissenting).
Although the majority states "this is a case about contract formation, not contract alteration," Majority at 312, the majority abandons traditional contract principles governing offer and acceptance and relies on distinguishable cases with blind deference to software manufacturers' preferred method of conducting business. Instead of creating a new standard of contract formation—the majority's nebulous theory of "layered contracting"—I would look to the accepted principles of the Uniform Commercial Code (U.C.C.) and the common law to determine whether Timberline's licensing agreement is enforceable against Mortenson. Because the parties entered a binding and enforceable contract prior to the delivery of the software, I would treat Timberline's license agreement as a proposal to modify the contract requiring either express assent or conduct manifesting assent to those terms. Because this is a review of a summary judgment and we must view all facts and inferences in the light most favorable to Mortenson, I would remand to the trial court to determine whether Mortenson manifested assent to the terms of Timberline's license agreement.
Offeror is Master of the Offer
It is well established that the offeror is the master of his offer under traditional contract law principles.
Kroeze v. Chloride Group Ltd., 572 F.2d 1099, 1105 (5th Cir.1978) (citations omitted); see also RCW 62A.2-206(1)(a) ("Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances."). Thus, under both the common law of contracts and the U.C.C., the offeror has the power to structure the terms of its offer as well as the mode of its acceptance.
In recognition of this basic tenet of contract law, every court that has considered the enforceability of a "shrinkwrap" license agreement
First, Step-Saver would telephone TSL and place an order. (Step-Saver would typically order twenty copies of the program at a time.) TSL would accept the order and promise, while on the telephone, to ship the goods promptly. After the telephone order, Step-Saver would send a purchase order, detailing the items to be purchased, their price, and shipping and payment terms. TSL would ship the order promptly, along with an invoice. The invoice would contain terms essentially identical with those on Step-Saver's purchase order: price, quantity, and shipping and payment terms. No reference was made during the telephone calls, or on either the purchase orders or the invoices with regard to a disclaimer of any warranties.
Id. at 95-96. Although TSL argued that the contract between it and Step-Saver did not come into existence until Step-Saver received the program, saw the terms of the license, and opened the program packaging, the court rejected this argument. Finding that TSL's shipment of the order and Step-Saver's payment and acceptance demonstrated the existence of the contract, the court held the dispute involved the terms of the contract. Id. at 98. The court resorted to U.C.C. § 2-207(3) to resolve this question:
Step-Saver, 939 F.2d at 98. Viewing the shrinkwrap license agreement as "a written confirmation containing additional terms," the court held the license was not part of the agreement because it would materially alter the parties' agreement. Id. at 105-06.
Step-Saver demonstrates that time of contract formation is crucial. The court there implicitly held that the contract was formed when TSL accepted Step-Saver's telephone offer with its promise to ship the software. Accordingly, the contract included terms relating to price, shipment, and payment because those were the terms agreed to in both the invoice and purchase order. But because the warranty disclaimers were not delivered until "after the contract [was] formed," id. at 105, they were not binding.
Arizona Retail Sys., Inc. v. Software Link, Inc., 831 F.Supp. 759 (D. Arizona 1993), a case not even mentioned by the majority, clearly illustrates considerations of offer and acceptance can be determinative with regard to the enforceability of a shrinkwrap license agreement. Arizona Retail Systems involved multiple transactions between a software vendor, TSL, and a value-added retailer, Arizona Retail Systems (ARS). After noting "the first contract entered into by the parties involves facts and circumstances materially different than the subsequent contracts," id. at 763, the court described the initial contract formation as follows:
Id. at 764 (alterations in original) (citation omitted) (emphasis added). Since TSL as the seller-offeror in the initial purchase set the terms of the offer, the court held that the offer contained the shrinkwrap license included by TSL. "[T]he contract was not formed when TSL shipped the goods but rather only after ARS opened the shrink wrap ... which ARS had notice would result in a contract being formed."
Id. (footnotes and citations omitted). Because ARS was the offeror in these purchases, it was in control of the offer. The court injected a bit of commercial reality into its discussion with the following observation: "Requiring the seller to discuss terms it considers essential before the seller ships the goods is not unfair; the seller can protect itself by not shipping until it obtains assent to those terms it considers essential." Id. at 766.
Despite numerous similarities between the transaction at issue here and that in Step-Saver, the majority found Step-Saver to be "inapplicable" and refused to follow its logic. Majority at 312. The majority distinguished Step-Saver from the instant case on three grounds: (1) Step-Saver was a value added retailer, not an end user (the party to which a license agreement typically applies); (2) Step-Saver twice refused to sign an agreement comparable to the license agreement, but the seller continued to provide the software; and (3) the contract in Step-Saver was "between merchants." See Majority at 311-312. While I agree these are notable factual distinctions, the majority does not explain why these distinctions warrant the outright dismissal of Step-Saver's logic given the strong similarities between the contract formation there and in the instant case. Further, the majority does not even mention Arizona Retail Sys., 831 F.Supp. 759. Arizona Retail Systems, like Step-Saver, also involved the applicability of a license agreement to a value added retailer (as opposed to an end user) and was "between merchants." But these details were apparently insignificant, as they did not change the court's determination that the license agreement applied to the parties' first transaction. The court did not focus on the parties, but rather looked to how the contract was formed in each instance to determine the enforceability of the license agreement.
In addition to Step-Saver and Arizona Retail Systems, there are three other cases that have analyzed shrinkwrap license agreements and found them to be enforceable. See Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569 (1998); Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.), cert. denied, 522 U.S. 808, 118 S.Ct. 47, 139 L.Ed.2d 13 (1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996). Although the majority here found "the approach of the ProCD, Hill, and Brower courts persuasive" and adopted it as a means of enforcing the license agreement, Majority at 313, these cases are unquestionably distinguishable.
In ProCD, 86 F.3d 1447, the Seventh Circuit considered whether a consumer who purchased off-the-shelf software in a retail setting was bound by the shrinkwrap license agreement. The court first distinguished Step-Saver and Arizona Retail Systems on the grounds that "these are not consumer transactions." ProCD, 86 F.3d at 1452. The court further distinguished the decision in
Id. Under the traditional rules of contract formation, ProCD controlled the terms of the transaction and thus could dictate the mode of acceptance. See Corbin on Contracts § 88, at 136 (1952) ("The offeror creates the power of acceptance; and he has full control over the character and extent of the power that he creates.").
In Hill, 105 F.3d 1147, the Seventh Circuit extended the applicability of the ProCD decision from software to the computer itself. The court summarized the issue presented as follows:
Hill, 105 F.3d at 1148. After noting with approval the "vendor as master of the offer" language contained in ProCD, the court stated:
Hill, 105 F.3d at 1150 (emphasis added).
In Brower the court upheld the same licensing agreement at issue in Hill against a challenge brought by a class of retail consumers. Focusing on the formation of the contract, the court explained:
Brower, 246 A.D.2d at 251, 676 N.Y.S.2d 569. As the offeror, Gateway controlled the manner in which its offer was accepted. Because the consumers accepted Gateway's offer by retaining the computer for more than 30 days, the court held the disputed terms to be "simply one provision of the sole contract `proposed' between the parties." Id.
As all these cases make clear, the determinative inquiry in the instant case is which party—as offeror—dictated the mode of acceptance and the terms of the transaction? The record here is clear—Mortenson issued a purchase order which identified the parties,
As Timberline entered an enforceable agreement by agreeing to the terms of Mortenson's offer, Timberline's subsequent delivery of the license agreement constitutes a proposal to modify the contract pursuant to RCW 62A.2-209.
Arizona Retail Sys., 831 F.Supp. at 764; see also Restatement (Second) of Contracts § 19(1) (1981) (a party may manifest assent by written or spoken words, by other acts, or by failure to act). Mortenson asserts that Timberline's representative opened the boxes containing the software, opened the software packaging, and installed the program onto Mortenson's computers. As a result, Mortenson claims it never saw the licensing agreement purportedly attached to the software. Further, although the majority claims the parties had a course of dealing based on Mortenson's prior purchases from Timberline, majority at 314, it is not clear Mortenson ever previously consented to the terms contained in Timberline's license agreement. See Step-Saver, 939 F.2d at 104 ("[T]he repeated sending of a writing which contains certain standard terms, without any action with respect to the issues addressed by those terms, cannot constitute a course of dealing....").
The majority acknowledges we must accept "Mortenson's contention it never saw the terms of the license, as we must do on summary judgment...." Majority at 313. But because Mortenson did not expressly assent to the terms of Timberline's license agreement after a binding contract was made, I would reverse the trial court's summary judgement order and remand for a determination of whether Mortenson's conduct constituted assent. If Mortenson did not assent to Timberline's license agreement, the trial court should allow Mortenson to proceed to a trial on the merits.
Although the majority recognizes the purchase order is a "contract," Majority at 310-311, the majority ultimately disregards this binding and enforceable agreement and allows Timberline to unilaterally inject its own terms—without finding Mortenson even saw these terms—after the conclusion of the contract formation process. If Timberline's license was essential to its assent to the contract, Timberline should have countered Mortenson's offer and included the terms of its license agreement. "Requiring the
ALEXANDER, J., concurs.