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This article is authored by Yamini Jain, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.

Introduction

Clickwrap/clickthrough Agreement is a form of online agreement, whose legal effect is an emerging area of law which has been accounted for via various judicial pronouncements. The concept of a clickwrap agreement was elucidated by the US Court of Appeals in the case of Specht v. Netscape Communications Corporation, declaring that it is the presentation of a message requiring the assent of a user by clicking on an icon which specifically reads as ‘I agree’, ‘Accept’, ‘OK’, ‘I agree to the terms and conditions’, and like expressions, provided that the terms and conditions are readily available on the screen in the affinity of such icon. It is commonly entered into between a computer software vendor that provides an application which the consumer assents to purchase or obtain a copy thereof. The consumer is, then, referred to as the end-user since the parties are bound by the terms of such legally enforceable agreement.

The elements of this sort of a complex agreement satisfy the prerequisites of a ‘contract of adhesion’ since it operates on a ‘take-it or leave-it’ basis, with no scope of negotiation on its terms. A contract of adhesion, or a “boilerplate / standard form” contract, is such an agreement whereby one party (with higher bargaining power)places all or most of the terms of the contract, whereas the other party (with less bargaining power) has negligible power to negotiate for reasonable terms. Hence, in a clickwrap agreement, a duty to be informed of the Terms of Use arises on the part of the user prior to clicking on the icon to convey its assent, the failure of which is not excusable for the compliance with its terms.

Benefits of a click-wrap agreement

Use of clickwrap agreements proves beneficial owing to the following factors:

  1. Contractual Certainty: Companies engaged in the online sale of goods are offered security by these agreements that are beyond the scope of the protection afforded by the company in respect of its intellectual property rights in such products. These agreements are generally employed by companies who are desirous of ensuring their upper-hand over the end-user, with reference to its implied warranties, limitation on financial liabilities, or the remedies available in the event of a breach, etc.
  2. Practicality: To ensure user traffic on their websites, a distinctly negotiated agreement by the company with each user is an impractical approach. The companies, hence, adopt this method in order to avoid coming on terms with each customer.
  3. Convenience: A significant number of customers/end-users prefer to surf through websites with ease, whilst not having to indulge in contractual technicalities or negotiations. The employment of clickwraps ensures convenience to both parties.
  4. Bargaining Power: A clickwrap approach has the tendency of discouraging purchasers to enter into individual negotiations prior to the purchase of a product sold by the company, which has the economic effect of contributing to its bargaining power/capacity as opposed to the end-user.

Enforceability of click-wrap agreement

Clickwrap Agreements are generally of a complex nature. The litigations that materialize from such agreements are mostly found to arise from the following specific terms:

  1. Clauses for Forum Selection;
  2. Governing Law Provisions;
  3. Arbitrable Agreements;
  4. Terms of Use of the Software;
  5. Terms of Service; or
  6. Limitations of Liability.

Such agreements have been held valid and enforceable by the Courts of law upon delving into the intricacies of each case. The prima facie principle operating behind its enforceability is that in consideration of the terms of an agreement, absent mistake/fraud, the user becomes bound by the contract if he signifies his assent to it whilst having an opportunity to be informed about its terms, thus, the fact that he actually does so or not is deemed immaterial.

This was highlighted in the case of Burcham v. Expedia, Inc., by observing that, “Failure to read an enforceable online agreement, as with any binding contract, will not excuse compliance with its terms. A customer on notice of contract terms available on the internet is bound by those terms.”

The test of ‘reasonable communicativeness’ has been employed by the Courts while scrutinizing standard form contracts, and as such, the enforceability of a clickwrap agreement is put to test by determining two important facets:

Reasonable Notice of the terms; and

Clicking through as manifestation of assent.

Difference between browsewrap agreement and click-wrap agreement

Clickwrap Agreement

Browsewrap Agreement

It is a license agreement to which a user agrees to digitally, generally through a clicking action.

When the user agrees to a license without actively affirming their agreement.

These require an overt action of signifying consent by the user.

No overt act is required to convey one’s consent.

The terms of use are manifestly available on the webpage, in the vicinity of the ‘I agree’ or like button.

 

These are generally enforceable owing to the overt act of clicking for signifying an active consent to the terms and conditions of such webpage.

The terms of use are posted on the webpage whilst the users are asked to not access the website unless they specifically agree to such terms.

The enforceability of such agreements is dependent on the prominence of the terms displayed.

Components of an Enforceable Clickwrap Agreement

Users must give active affirmative consent

An active affirmation to the terms of use must be conveyed by the user through clicking on the ‘I agree’ or like button before availing the benefits of their desired services. The website must be designed in such a manner so as to not permit its access to the user without accepting its terms, in order to enhance the agreement’s enforceability.

Give reasonable and prominent notice of your terms of service

The terms of service for a clickthrough agreement must be displayed with the utmost prominence. The end-users are obliged to inform themselves of such terms prior to clicking on the check-box for conveying their assent. In the event that the terms are prominently visible on the webpage, the user shall be presumed to have constructive knowledge of the same.

Clickwrap agreements should be digestible to the average person

Legalese and jargon should be kept to a bare minimum in the terms of service, so as to enable the user to decipher and thoroughly understand the intricacies of such requisite clauses which the user is ought to be informed of. This ensures that the aspects of contractual intention have been satisfied and met with, whilst enhancing the enforceability of such agreements.

Do not exploit unequal bargaining power

Owing to the fact that such agreements have been identified as contracts of adhesion, they operate on the ‘take-it or leave-it’ principle. This highlights the unequal bargaining power available with the company, since there exists no scope of individual negotiations whatsoever. However, ecommerce agreements of this type are enforceable even with the lack of bargaining power, provided that the terms of use are listed with clarity, and the user is not expected to sacrifice too much for availing its services.

Specific consents must be distinguishable from the rest of the document

Such terms that require the user to specifically assent for, must be displayed in addition to and distinctively from the general terms of use. An ill-drafted agreement with hidden clauses is a bane to the enforceability of such terms, and such a practice should be pragmatically discouraged.

Conclusion

Online Agreements are an emerging area of study in the purview of the law of contracts, specifically technological contracts. Clickwrap Agreements are one of the most commonly found and used methods of entering into a contract with multiple users without any difficulty. Such agreements have been generally found to be valid and enforceable, provided that reasonable notice of its terms has been provided to the customer with prominence.

However, as a known fact, most users fail to inform themselves of such terms and proceed with its transactions or services, thereby enabling such companies to enforce marginal terms. Moreover, since the precedents concerning original and modified clickwraps are distinctively clear on what constitutes reasonable notice and manifestation of assent, the companies have an upgraded field for ‘testing-the-waters’. Finally, despite the benefits of such agreements, they can be challenged in the Courts of law on the grounds of unconscionability, provided that a substantial presence of procedural as well as substantive unconscionability exists pertaining to its terms.

References

  • Specht v. Netscape Communications Corp., 150 F.Supp.2d 585, 45 UCC Rep.Serv.2d 1, 593-594 (S.D.N.Y 2001).
  • William J. Condon, Jr., Electronic Assent to Online Contracts: Do Courts Consistently Enforce Clickwrap Agreements?, 16 REGENT U.L. REV. 433, 436 (2003)
  • Davis, Nathan J. “Presumed Assent: The Judicial Acceptance of Clickwrap.” Berkeley Technology Law Journal, vol. 22, no. 1, 2007, pp. 577–598. JSTOR, www.jstor.org/stable/24118246. Accessed 10 June 2020.
  • Burcham v. Expedia, Inc., 2009 WL 586513, 2 (E.D.Mo. 2009).

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