When we buy a cd, we are agreeing to buy the cd + the accompanying license that allows us full personal use of that CD, but not the right to commercially produce more of those CD's to sell. We can do whatever we want with the CD, but we have not bought a license to sell new copies of it.

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Exactly where/how is that agreement made?

Because it varies by method, let’s say specifically picking up a CD at the local music store