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Mortgage Plus, Inc. v. DocMagic, Inc., et al.

No. 03-2582-GTV-DJW (WHW) (D. Kan., August 23, 2004)

Plaintiff Entered Into Binding Online Contract By Clicking "Yes" Icon

Court holds that plaintiff entered into a valid agreement by clicking on an icon indicating its assent to be bound to displayed software license terms, and thereafter using defendant's software and services.  As a result, the Court, honoring a forum selection clause found in the parties' agreement, transferred the case before it from Kansas to California, the venue for suit designated in the forum selection clause.  In reaching this result, the Court rejected plaintiff's claim that it was not bound to the agreement because its assent had been given by an individual who lacked the authority to bind it to such an agreement.  The Court found that plaintiff had failed to establish this contention due to its failure to identify the individual(s) who give their assent.  In any event, plaintiff was bound because it had ratified its agent's acts by using the software and associated services for a period of six years.

Parties Entered Into Binding Contract

Plaintiff Mortgage Plus Inc. is a mortgage lender.  Seeking assistance in processing loan closing documents, plaintiff contacted defendant DocMagic, which markets a software product that aids in the preparation of such materials.  A customer uses DocMagic's software to input data which it transmits to DocMagic for insertion into the appropriate documents.  These documents are then transmitted by DocMagic to the customer via e-mail for its use.

At plaintiff's request, DocMagic sent plaintiff a CD-Rom containing its software, and started processing documents for plaintiff.  Claiming the documents DocMagic produced contained errors, plaintiff commenced suit in Kansas, where it does business.  In its suit, plaintiff claimed that DocMagic had, by its conduct, breached the parties' contract.  Plaintiff also asserted claims of breach of warranty and negligent misrepresentation.

To utilize defendant's software, it is necessary to install it on a computer.  At the outset of this process, a customer is presented with the terms and conditions of a software license governing its use of the DocMagic software, and asked to indicate his assent to be bound by clicking a "yes" icon.  If the customer does not wish to be bound, he is given the option of clicking a "no" icon, in which event the software will not load, and he will be unable to make use of it.

The Court held that by clicking the "yes" icon in these circumstances, plaintiff had entered into a valid and binding agreement.  Said the Court:

[I]t is undisputed . . .  that Mortgage Plus had to affirmatively click the "Yes" button in assenting to the Software Licensing Agreement as a prerequisite to installing the DocMagic software.  It further is undisputed that the software would not be installed if Mortgage Plus did not accept the terms and conditions of the Software Licensing Agreement.  Plaintiff had a choice as to whether to download the software and utilize the related services; thus, under the specific facts presented here, installation and use of the software with the attached license constituted an affirmative acceptance of the license terms by Mortgage Plus and the licensing agreement became effective upon this affirmative assent.  The Court finds the clickwrap agreement here is a valid contract

Plaintiff Bound Because It Ratified Its Agent's Acceptance Of Terms - Lack Of Authority Defense Rejected

In reaching this result, the Court rejected plaintiff's contention that the UCC applied to this transaction, holding that the contract at issue was predominantly one for the provision of document preparation services to which the UCC did not apply.

The Court also rejected plaintiff's claim that it was not bound to the software license because the individual who clicked the "yes" icon lacked the authority to bind it.  The Court held that plaintiff had failed to establish this contention because it did not identify the individual who clicked the "yes" icon, and therefore could not establish that he lacked the requisite authority.  In any event, plaintiff had ratified its agent's allegedly unauthorized action by continuing to use the DocMagic software for a period of six years after the agent first clicked the icon.  Said the Court:

It is well-settled that a party with knowledge of the facts can ratify an unauthorized act through conduct.  Ratification is the adoption on confirmation by a principal of an unauthorized act performed on its behalf by an agent.  One example of such ratification is election by the principal to treat the act as authorized, which includes attempting to enforce the contract or retain the benefits of the contract.

*          *          *

Here, on at least three occasions over the course of six years, an individual with the Mortgage Plus organization installed the DocMagic software and each time was required to assent to the Software Licensing Agreement in order to complete such installation.  While Mortgage Plus fails to identify the individual who accepted the terms and conditions of the Software Licensing Agreement before downloading the software, there is no dispute that for six years after such acceptance Mortgage Plus consistently utilized the loan document preparation services associated with the software.  The undisputed facts establish Mortgage Plus utilized the software to create and electronically submit literally hundreds of user worksheets to DocMagic for processing and preparation of final loan documents.  By doing so, Mortgage Plus obtained the benefits of the Agreement, and thereby ratified any unauthorized acceptance of its terms.

Court Transfers Case To Venue Specified In Forum Selection Clause

Finding the contract valid, the Court directed the transfer of the litigation to California in accordance with the forum selection clause in the parties' contract.  While not dispositive, such a clause was 'a significant factor' in the traditional balancing applicable to venue transfer motions.  Here, the Court held it outweighed any competing concern of inconvenience to plaintiff and its witnesses given Mortgage Plus' presence in Kansas.  In directing transfer of the entire case to California, the Court held that the language of the clause before it was broad enough to encompass both Plaintiff's contract and negligent misrepresentation claims.

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