Due to the increased efficiency of the e-commerce era, there has been a notable surge in the number of online contracts being used by businesses around the world. This raises the question of whether the rules change when a contract is online, and what an online contract needs to look like for it to be legally effective. So what determines legal enforceability of these online contracts, and how can businesses ensure they do not fall into the trap of using unenforceable agreements.
There are two notable methods of accepting terms and conditions online. These options are a Click Wrap Agreement or a Browse Wrap Agreement.
Click Wrap Agreement
A Click Wrap Agreement is an electronic means of contracting with the end user of a product. The terms and conditions of Click Wrap Agreements are found on the same page as the “I Agree” box. In general, to agree to the terms and conditions, consumers of the product need to scroll all the way through the terms and conditions before accepting them by clicking the “I Agree” box. This requires the user to take positive steps, which enables the Click Wrap Agreement to be enforceable in a Court.
Issues when using a Click Wrap Agreement
Consideration needs to be given to several issues, even when using a typically reliable Click Wrap Agreement, including:
- When does formation of the contract take place? Has the business made an offer capable of being accepted? It is important that Click Wrap Agreements be appropriately drafted so that it is clear and unambiguous who is making the offer to whom;
- The Click Wrap must compile all the terms and conditions at the time of acceptance. Pressing “I Agree” will only bind the user for the terms and conditions to which they initially agree;
- Certain restrictions on supplying the goods should be included in the event that the seller wishes to reserve the right not to provide the goods to the buyer (for a lawful purpose);
- Make sure the Click Wrap Agreement covers ‘consumer guarantees’ such as refunds and returns, and that these terms are compliant with the Australian Consumer Law (ACL).
Browse Wrap Agreement
Unlike a Click Wrap Agreement, a Browse Wrap Agreement has the terms and conditions on a separate page, usually accessible via a hyperlink that appears on the same page. In general, the consumer or end user does not need to review the terms, or take positive steps suggesting that these terms have been reviewed, before being able to accept the contract. Given that the user is not required to do anything extra that might suggest notice of the terms and conditions, the Browse Wrap Agreement is more difficult to enforce.
In general, contract law will not change simply because the mode through which the parties contract is different. Paper contracts are enforceable in the same way e-contracts are enforceable. Two landmark cases should be considered in light of the above:
L’Estrange v Graucob and Thornton v Shoe Lane Parking
In the first case, it was decided that, absent fraud or misrepresentation (or other factors), a signature would connote acceptance of the terms and conditions of the entire contract.
Unfortunately, it is still uncertain whether e-signatures hold the same weight, which is why it is important for business owners to have a contract lawyer draft the terms and conditions of these online contracts to ensure their enforceability. To do this, business owners will need to provide users with reasonable notice of the contract prior to its formation, which was the rule expressed in Thornton v Shoe Lane Parking.
How to ensure enforceability
It is important to take appropriate steps to make sure that the way the terms and conditions and the “I Agree” button are arranged suggests an intention for the terms and conditions to form part of a legally binding contract with the consumer. Here are some tips to ensure your online contracts are enforceable:
- Reasonable notice of the agreement’s terms and conditions can only be established by requiring the customer to scroll through a scroll box, for example, to then be able to proceed to accept the terms;
- To reinforce the above notice requirement, the “I Agree” box should appear on the same page as the terms and conditions;
- Any terms and conditions that may be viewed as unreasonable or overly favouring the business should be in bold to draw the consumer attention to them; and
- The inclusion of a box that reads “I have read the terms and conditions” will need to be blank as a default, so that the user is required to tick the box before being allowed to click the “I Agree” box. This act constitutes a visible mark and supports the user’s acceptance and awareness of the terms.
It is obviously less effective to use a Browse Wrap Agreement than a Click Wrap Agreement, as it does not provide the consumer with as much notice of the terms.
At LegalVision, we provide clients with advice regarding e-commerce contracts and their enforceability on a regular basis. To arrange an obligation-free review of your contract terms, or for assistance in drafting them from scratch, contact LegalVision’s contract lawyers on 1300 544 755.
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