Shrink Wrap Agreement

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Shrink Wrap Agreement

A Brief Introduction About the Shrink Wrap Agreement

A Shrink Wrap Agreement is a legal document that is created between an organization and a user. The most common application of such a contract can be found inside product packaging. Also known as Boilerplate Contracts, this is a small legal document, which outlines the exact specifications of the product along with all the information that the user needs to be made aware of.

In the formation of this legal contract, the first party is usually the company or organization who is manufacturing the product, and the second is the user who purchases the product to use the same.

The most important aspect to note about this contract is the fact that once the user buys the products along which this agreement comes packaged, he or she immediately agrees to its terms and conditions. No signature or formal notice is needed.

The term “Shrink Wrap Agreement” generally refers to the agreements that come with products that you have purchased. The name comes from the fact that these legal contracts are usually placed inside the product packaging itself, which is then wrapped using a plastic wrap.

Contents of a Shrink Wrap Agreement

While the contents of this agreement can vary from company to company, mentioned below are some of the most significant contents.

The license of use: This outlines the license terms that the manufacturer has agreed to and also contains instructions on how you should use the product and which manners are permitted under the law.
Rights of Use: Similar to the section outlining the licensing of the product, this section outlines the rights of the user who has purchased the product.
Fees and Payment: When manufacturing any product, the manufacturer has to pay certain fees to various authorities in order to have the legal rights of the manufacturing and distribution of the product. This section of the contract outlines the details of the same, and also the final price of the product, and its breakdown is given in this section.
Forum Clauses: This section is one of the most unique and also important things for this contract. This section of the contract outlines the exact geographical location where this contract was drawn, and therefore if there is a dispute, the same can be resolved only at this location.
Warranties: In this section of the contract, the manufacturer outlines the warranties they provide on the manufactured product.
Limitations of Liability: Under this section of the contract, the manufacturer outlines the limitations of the liability they will assume if the product fails to perform or causes harm to the user in any way.

Who Takes the Shrink Wrap Agreement? – People Involved

In the formation of this Agreement, there are usually two parties involved; the first being organization or the company who is manufacturing the product in context, also known as the first party, and the second being the user who buys the product from the company to use the same.

Purpose of the Shrink Wrap Agreement – Why Do You Need It?

The main purpose of this agreement is to establish a legal understanding between both the organizations and to make sure that the interests of the individual parties, along with the collective, are protected at all points in time.

One of the unique aspects of this agreement is the fact that the user who is purchasing the product has no way of reading its content, unless and until the purchase is complete. Additionally, once the purchase is complete, the contract becomes legally binding since it is assumed that the user has accepted its terms and conditions.

Another unique aspect of a Shrink Wrap Agreement is the delivery method that certain companies choose. While some might package it inside the product box, others, especially in the case of electronic downloads may collate it with a EULA or End User License Agreement, thus making it easy for the buyer to go through both of them and make a choice.

Contents of the Shrink Wrap Agreement – Inclusions

Parties Involved: In this legal agreement, there are usually two parties involved, the first being the company or organization which manufactures the product in context, also known as The Company, and the second being the user who purchases the manufactured product, also known as the User in legal terminologies.
Effective Date: This section of the agreement outlines the date from which this contract will stand legally binding and also the date on which the same can be dissolved.
Where does it Apply: This agreement is legally applicable within the boundaries of the state, city, or county where it was originally drawn at.

How to Draft the Shrink Wrap Agreement?

The formation of a Shrink Wrap Agreement is vastly different than most other legal contracts, as there is no need to arrange a meeting between both the stakeholders. All the work of drafting the contract happens from the end of the first party itself, in this case, the manufacturer of the product.

If you are the manufacturer of the product, follow the mentioned steps below to draft the Agreement.

Arrange a meeting with your legal counsel and discuss with them the terms and conditions, along with the rules and regulations that will be outlined in this contract. Mention the exact specifications and warnings that the user must be made aware of, along with the duties and limitations the user has to follow.

Once this has been discussed, ask your legal counsel to draft a Shrink Wrap Agreement for your organization, and then you print the same and distribute along with your product.

Another significant aspect that you need to take into account is the fact that the contents of this agreement vary from country to country depending on the local jurisdiction, and thus you need to make sure that you are following all the guidelines outlined in any geographical location.

Negotiation Strategy

While negotiating the formation of a Shrink Wrap Agreement, it must be taken care that the individual interests of both parties must be addressed along with the collective cause.

Benefits of the Shrink Wrap Agreement


The contract clearly outlines the individual responsibilities, duties, and limitations and therefore makes sure that both parties are well aware of them at all points in time.

This is document acts as legal proof and thus can be produced in court if there is a need in the future.

In the absence of a Shrink Wrap Agreement, neither of the parties have legal proof of an understanding taking place between two entities, and thus if the matter is ever brought to court, both parties stand to lose.

What Happens in Case of Violation?

In the case of violation of a Shrink Wrap Agreement, certain remedies come into effect, and in a few cases, the contract is dissolved, and a new set of terms and conditions are agreed upon.

The current status of this agreement is heavily under debate. There are several reported cases where courts have declined rights to the manufacturer even if they had a Shrink Wrap Agreement in place. The most common reason for this being, the user or the buyer of the product has no way of knowing its contents until he has purchased the product.

And once the packaging is opened, it is automatically assumed that the user has accepted the terms and conditions that have been outlined. In such a situation, a lot of people have argued over the fact that the consumer is rendered powerless, and thus, the state of Shrink Wrap Agreement and whether they will be accepted in a court of law is an ongoing debate.

A Shrink Wrap Agreement document is designed in such a way so that both the parties involved in the transaction and or understanding are mutually benefited at the same time. Since this contract is a legal document, the same is legally binding in court and is meant to protect both parties in the event of a dispute, violation, and or misunderstanding(1).

As mentioned in an earlier section, since the state of Shrink Wrap Agreements are uncertain and if they will be legally binding or not is heavily debatable, it is always advised to contact an experienced business attorney before you go ahead with drafting one for your organization. Because as it is, you are already prone to errors, and partnering with an inexperienced lawyer may lead to more harm than good.