online contracts

Click to Accept the Terms. Are you Exposed?

You’ve drafted website terms and online contracts that protect your business. What if the way they were presented on the screen made them unenforceable?

What makes a contract binding?

An enforceable contract has two key components: “reasonable notice” of the terms and a “reasonable manifestation of assent” to them. In other words, the user must be shown the terms and indicate that they agree. For most contracts, this is easy; a party’s signature shows that they have read and accepted it. The laws of Massachusetts and many other states apply this standard to all contracts, whether signed in ink, signed electronically, or agreed by clicking a box. 

However, there are many ways to present contract terms online, and not all are effective. Companies are often only aware once the terms are challenged in court or during due diligence for a merger or sale. The results can range from a minor inconvenience to significant legal liability.

Wrong Turn Lands Uber in Court

Even Uber has run into trouble. In the 2021 case of Kauders v. Uber Technologies, Uber sought to enforce a mandatory arbitration clause in its terms. On appeal, the court found that Uber’s terms did not bind users because the company’s online registration process was inadequate. The Uber app permitted users to click “Done” without reviewing the terms. Nothing on this page told users they should read and agree to the extensive terms and conditions. The only statement encouraging users to open and review the terms was displayed less prominently than other information. The court held that the parties had not formed a binding contract. Uber was forced into court rather than a less costly (and likely confidential) arbitration proceeding. 

The lesson from this and similar cases is that your online terms must meet the standards for a binding contract — informing users of the terms and requiring users to show that they have agreed to them.

Avoid “Browsewrap”

Many companies rely on terms in their online contracts that state that users are automatically deemed to have accepted an agreement by using the company’s product, service, or website. 

These contracts, known as “browsewrap,” do not meet the second part of the enforceability test. The user does not have to demonstrate their consent. 

Two alternatives are: 

1. Scrollwrap is a process that compels users to interact with the terms before agreeing to them, usually by making them scroll a box containing the terms before proceeding. 

2. Clickwrap requires the users to expressly click or check a box stating that they agree to the terms and includes an easy step to view them before proceeding. 

Making changes to online agreements requires a similar approach. Users must agree to the changes for them to be binding. It is not enough to present a pop-up saying that the terms have changed and inviting users to read them. Unless the user is required to view the updated terms and affirmatively agree to them, a court may find them unenforceable.

Are You Exposed?

There are as many ways to implement website terms as web designers. But a few simple sign-up or sales process steps can help ensure your contract is enforceable. These include ensuring that the terms are communicated clearly and that the language accompanying a check box is clear that the user is entering into a contract. Also, the scope of the terms and how they are communicated should be consistent with the nature and size of the transaction. 

The West Hill Team can review how you have implemented your website terms and other online contracts and advise you on updates to help enforce them.