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In this era of online businesses, companies have taken their contracts online as well. For an online business, there is no need to ask a customer to sign a contract with wet ink. Instead, terms and conditions can be accepted with the click of a button. However, the rigour of reading through a contract on paper and signing it at the end is lost when a customer is accepting terms and conditions online. Two common ways of presenting terms and conditions online are with click wrap agreements and browse wrap agreements. This article will discuss the difference between the two and highlight some issues with online contracts.

Click Wrap Agreements

A click wrap agreement is an agreement a customer will need to accept before purchasing goods or services online. The ‘agreement’ as a whole encompasses a summary of:

  • what your customer is purchasing (i.e., the goods or services); and
  • the terms and conditions. 

The terms and conditions you ask customers to accept may not change from customer to customer, but what they are ordering or purchasing will change. 

Customers accept this agreement by taking an active step, such as ticking a box or clicking an “I Agree” button. 

Examples of when customers may accept a click wrap agreement are before:

If you are a business which sells goods or services online, you will want the sign-up process to be as streamlined and efficient as possible. However, your customers must know what they are agreeing to first. This is particularly important when it comes to a dispute because your terms and conditions will outline significant things your customer needs to know, such as:

  • the payment terms;
  • how intellectual property ownership works; and 
  • how to terminate the agreement.

Further, some customers may try to argue that they were not given a chance to read your terms and conditions. If customers can show that they were not provided with terms and conditions before signing up, the contract may be unenforceable.

Browse Wrap Agreements

Browse wrap agreements are agreements which a user or customer accepts simply by accessing or using a website. Website terms of use are a common example of a browse wrap agreement. Terms of use are usually accessed via a link in the footer of a website. Some websites may have text similar to the following in the footer.

For example, “Use of this website is subject to our Website Terms of Use, available here.” (with a link to the document).

Clearly, no active step is required on behalf of the user to accept the terms of use. You will not be able to show that the user has reviewed the terms. 

Browse wrap agreements are not appropriate when you are selling goods or services to customers. When selling goods or services online, you will need to use a click wrap agreement, such as:

  • terms and conditions;
  • sale of goods terms;
  • software as a service terms; or 
  • marketplace terms.

You need to do this so that:

  • your customer is prompted to read your terms before acceptance and understand your contractual relationship; and
  • if there is a dispute, for example, about who owns the intellectual property in new materials you create for your customer, you can point to the terms to find the answer.

How to Effectively Use a Click Wrap Agreement

Your customer will need to accept your terms and conditions at the time they are purchasing your goods or services. If you are selling goods, you should set out:

  • a summary of all the items the customer is purchasing;
  • the total price; and 
  • a statement such as “by pressing ‘Place Order’ I accept the terms and conditions” next to a box which the customer must tick to place their order.

If you ask a customer to tick a box, this box must be un-ticked by default.

You can give your customer reasonable notice of your terms and conditions by requiring them to scroll through the terms before they are able to click to accept.  

If you update your terms and conditions, you must notify any current customers, such as those of an ongoing subscription service, of the change. You can do this by:

  • emailing customers letting them know about the change; or
  • a notification in their account.

If the change is significant, customers may need the option to terminate their ongoing service. There should be a provision for this in your terms and conditions.

You should record each customer’s acceptance of your terms and conditions and the date of the acceptance. This way, if it came to a dispute, you can demonstrate your customers’ acceptance of the terms.

Key Takeaways

Click wrap agreements are becoming one of the most common types of contracts that people enter into. Due to the swift nature of purchasing goods and services online, the contract formation process can be overlooked by businesses and customers alike. It is therefore important to use the appropriate type of agreement for your online business. A browse wrap agreement may be suitable for simply providing notice to your users, such as in the context of website terms of use. However, browse wrap agreements do not provide much notice to consumers, and may be more difficult to enforce than click wrap agreements. 

At LegalVision, we provide clients with advice regarding e-commerce contracts and their enforceability on a regular basis. Our clients love their LVConnect membership where they are able to have unlimited 30 minute calls with our lawyers to discuss their business contracts, and access discounted pricing for any fixed-fee work required. Sign up to LVConnect or call 1300 544 755 to discuss the e-commerce legal assistance you need.

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