Business_Ethics

Increasingly, B2B and B2C companies like Uber, AirBnB, and Amazon are defending their online terms in court. As more businesses move to the internet to take advantage of its speed and convenience, the contracts that govern their business relationships must also move online.

Courts routinely recognize that an electronic click of a button or checkbox indicates the acceptance of an online agreement. But while companies generally know this, they struggle to understand that the layout of the page and the language surrounding the checkbox or button also determines the validity and enforceability of the contract.

There are three main ways of forming online contracts:

  • Clickwrap agreements: When presented with the online agreement, the user indicates their acceptance by clicking a box or button surrounded by language that says, “I agree.”
  • Sign-in-wrap agreements: The user is made aware of an online agreement, and is advised that completing some action (e.g. signing up, registering) constitutes acceptance of the contract.
  • Browsewrap: A link at the foot of the page indicates the existence of the contract to the user, but the user is not required to accept the Terms.

Since first appearing in 2002, clickthrough litigation has skyrocketed 626%, indicating that many companies still have trouble understanding what makes their online contracts valid, what evidence they need to bring to court, and how to protect their business.

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Validity of Online Contracts

While two judges may rule entirely differently on a single clickthrough agreement, certain factors can increase its likelihood of enforceability. For instance, courts often rule in favor of online agreements with conspicuous design, explicit notice of its existence, and irrefutable proof of a user's acceptance.

Clickwrap agreements

When they are valid: Courts often rule in favor of the validity of clickwrap agreements, as it is explicitly clear that users are agreeing to the online terms when they click the button or checkbox that says, “I agree.” The courts in Zaltz v. JDate found JDate's terms to be enforceable, as users were required to check a box with text beside it saying, “I confirm that I have read and agreed to the Terms and Conditions of Service,” with “Terms and Conditions of Service” hyperlinked.

When they are not valid: On the other hand, courts have a harder time with clickwrap agreements that don't require the user to review the agreement before accepting them. In Applebaum v. Lyft, the court decided that because Lyft's hyperlinked Terms were in a light blue font on a white background, which was inconspicuous compared to the rest of the text on the screen, its clickwrap was invalid.

Sign-in-wrap Agreements

When they are valid: Courts generally rule in favor of sign-in-wraps that conspicuously present the agreement and make clear the result of clicking the button or checkbox. In Fagerstrom v. Amazon, the courts found Amazon's sign-in-wrap valid because the language and placement of the agreement notified the user that by clicking “Place your order,” they were entering into an agreement.

When it's not valid: Sign-in-wraps have the smallest chance of success when there is a lack of notice of the existence of the agreement and the consequence of clicking the button. In Sgouros v. TransUnion, the court ruled against TransUnion's sign-in-wrap, because the language around the button did not make it clear that clicking “Accept and Continue” created a contract between user and site owner.

Browsewrap Agreements

A browsewrap is a banner along the header or footer of a website that indicates the presence of a contract and states that using the website constitutes acceptance of the agreement. Because explicit acceptance isn't required, browsewraps are less enforceable.

When it is valid: If a company can prove (or a user admits) that the user had knowledge of the agreement, then their browsewrap is likely to be upheld. The court in Southwest Airlines v. BoardFirst, for example, found that BoardFirst had knowledge of Southwest's terms because Southwest sent BoardFirst a cease and desist letter.

When it's not valid: We've found that courts are more likely to find browsewrap agreements invalid if the company cannot prove that the user had actual or inquiry notice of the agreement.

Evidence Needed for Court

In our study, we found that the validity of agreements is most successfully proven using three main types of evidence: affidavits or declarations, back-end records of acceptance, and screenshots.

Screenshots provide a picture of the screen at the moment the contract was presented and the user accepted. Sixty-seven percent of the cases that depended on screenshots alone as evidence of user acceptance were successful, even more so when used with other types of evidence.

Affidavits/declarations are sworn statements from developers or other key employees about the company's recordkeeping abilities. This has a 78% chance of being successful when used alone.

Back-end records is data captured that indicates who signed the agreement, the version of the agreement that was live, and when the agreement was signed. This is perhaps the most compelling piece of evidence that can be provided in court. Sadly, not many clickthrough agreements are designed with this capability in mind.

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How to Ensure Your Business is Protected

It is impossible to avoid legal action. Rather, the best way to protect your business is excellent recordkeeping and compelling evidence about the user's notice and acceptance of your online agreements. Following clickthrough best practices also goes a long way in protecting your business.

A few tips for protecting your business:

  • Require the user to view the agreement prior to assenting. Hyperlink or provide the agreement in a scroll box that user must click or scroll through before clicking the checkbox or button.
  • Keep an electronic trail of record acceptance that includes the version of the contract, the date and time the contract was agreed to, what operating system and browser the user used, and what the screen looked like on that browser at the time of signing.
  • Design the page to make the existence of the agreement conspicuous
  • Perform an assessment of your system early and often to learn if you can (or how long it takes you to) provide court-ready documents.
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Brian Powers is the founder and CEO of PactSafe and a licensed attorney. As the CEO, Brian leads the strategic vision of the company's high-velocity contract acceptance platform. Prior to founding PactSafe, Brian's law practice focused primarily on representing the transactional needs of tech companies. Brian is a frequent speaker, instructor, and author on topics ranging from clickthrough contract acceptance to privacy-related consent management.