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This article is written by Shweta, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

As digital users, we all have entered into a Clickwrap contract with online platforms or software installation, online banking login, or any other kind of online registration. The chances are that we might enter into these kinds of contracts regularly.

If we have to define a Clickwrap Contracts or Click through Contracts it would be defined in Simple terms as a contract between a service provider and an online user, where before using any website or any software, the user has to agree with the terms and conditions of the Service provider. In the Clickwrap Contract, a user is required to click on a box or button before they can install software or use a website. The Clickwrap Contract derives its origin from Shrink-wrap Contracts where TOS comes along with the package and opening of the package is considered as entering into Shrinkwrap contract. In the present article, we will understand what exactly a Clickwrap contract is and what the best practices to use Clickwrap contracts are.

What are clickwrap contracts?

A clickwrap contract is a popular type of a digital contract. It is an agreement which is between a user and a company.A user must click a box or button before they download content, make a purchase, or use a website.

Salient features of Clickwrap Contracts

The Salient features of Clickwrap Contracts are:

  1. Clickwrap Contracts are unilateral Contracts. They contain standard terms and conditions which multiple users online agree on before using the websites or products.
  2. Unique identification of Clickwrap Contract are buttons like:
  • I accept
  • I agree
  • Ok
  • I consent

 3. Clickwrap Contracts usually relate to terms and conditions, usage, privacy related terms, or End-user license Contracts (EULS).

 4. Users can opt-out of the contract by clicking on the cancel button, I disagree, or by closing the sites.

Importance of Clickwrap Contracts

The Clickwrap Contracts hold a crucial role in today’s digital world for Companies. This kind of Contract is discernible in B2C business, thus a large amount of footfall for one specific product or website has led to the invention of the Clickwrap License. While Clickwrap Contracts are easier to put into motion and less time consuming, some of the other benefits of Clickwrap Contracts are:

  1. Clickwrap Contracts are embedded into websites so they can be directly looked into and are downloadable.
  2. Clickwrap Contract helps companies to have contracts with multiple users at one time without any negotiations.
  3. It helps Companies to save E-signatures and add any additional clauses without any pre-requisite of consulting the users.
  4. Besides their use in Software programs, they can be used in other kinds of Contracts.
  5. The Clickwrap Contracts can not only be used between the Companies and third parties but also between employer and employees (refer to case ADP v. Lynch, Civ. No. 2:16-01053).

Enforceability of Clickwrap Contracts

While such kinds of Contracts are being used widely on the internet on a day-to-day basis, often the question arises that: 

  • Are these Contracts enforceable in a court of law?
  • Whether all Clickwrap Contracts can be enforced in a Court of law? 
  • What is the stand of International law and Indian law on Clickwrap Contracts?

Many Legal cases have defined the parameters on which we can enforce Clickwrap Contracts but the following cases are key in defining their enforceability:

Feldman v. Google, Inc. – 513 F. Supp. 2d 229 (E.D. Pa. 2007)

While upholding the enforceability of the Clickwrap Contract court presented with “reasonable notice of the terms and manifested assent of the Contract.” While Plaintiff argued that he did not enter into any kind of contract with the defendant, the court held that there could be no purchase without agreeing to the terms and conditions of the Contract while purchasing the advertisement “Adwords” program.

Specht v. Netscape Communications Corporation, 306 F.3d 17 (2d Cir. 2002)

Court held in the present case that Clickwrap Contracts are enforceable only when they are clearly and conspicuously posted on the website whereas in the present case Netscape posted the Contract inconspicuously.

Bragg v Linden Research, Inc., 487 F. Supp. 2d 593 (E.D. Pa. 2007)

In this case, the court held that though the design of the Contract was right it was Linden Research who exploited the “exploited unequal bargaining power” by crafting oppressive, unconscionable terms.

Hotmail Corporation v. Van Money Pie, 1998 WL 388389 (N.D.Cal.)

In this case, the court held that clicking on the “I agree” button at the end of the terms and conditions leads to the enforceability of the Clickwrap contracts.

Above mentioned case outline that Clickwrap Contracts are internationally enforceable in a court of law.

Indian Scenario 

LIC India V. Consumer Education and Research Centre, 1995 AIR 1811

In this case, the Supreme Court of India commented on the scope of its intrusion in a contract where the parties to the contract had unequal bargaining power. The Court held that when a contract is of such a nature that it can be stated to be an adhesion contract and further when the parties to the contracts do not have equal bargaining power then in the light of Article 14 of the Constitution of India (guaranteeing equal protection of law to its citizens) the Supreme Court shall strike an unfair or unreasonable contract.

Trimex International FZE v. Vedanta Aluminium Limited 

In this case, the court upheld that if the terms of a Contract had been discussed over the email, such emails constituted to be a valid contract and hence were enforceable.

Ddit(lt) Mumbai v. Gujarat Pipavav Port ltd: 

 In this case, the Income tax tribunal held that Unconscionable or unreasonable bargain (contract adhesion) in Mass contracts like Shrinkwrap and Clickwraps makes them unenforceable even though they have all the components of a valid contract.

In India, under the Indian Contract act, 1872, the definition of Contract doesn’t cover any kind of E-contracts or the Clickwrap Contracts. In India, we have the Information Technology Act, 2000 under which E-contracts are given recognition by section 10-A (w.e.f 27-11-2009) and also through United Nation Commission on International Trade Law (UNCITRAL Model on E-commerce) validates electronic signature but doesn’t cover under its ambit terms as I agree, I accept or Ok. Whereas Section 65-B of the Indian Evidence Act, 1872provides a procedure for furnishing electronic documents but this provision has nowhere been used in the context of Clickwrap or another kind of such Contract. Therefore Clickwrap Contracts cannot be said to be ‘electronically signed’ in the Indian context. But so far no Supreme Court ruling has held that Clickwrap Contracts are not valid in India.

The above-mentioned case laws very well outline that Clickwrap contracts are enforceable in the court of law but their enforceability depends majorly upon the question of whether the consent was taken freely and actively or not. While all the Clickwrap contracts can be enforced in court if they tick all the essentials of a valid contract, it can be seen that this kind of contract has got more sanctions internationally than in the Indian Scenario.

How to Design Best Clickwrap Contracts

From various international litigations, we can draw some of the best practices we can use to make the Clickwrap Contracts enforceable:

  1. Active consent by the user: It is one of the best practices that the user can follow. The user must click on ‘I agree’, ‘Ok’ or ‘I accept’ button or ‘click on it’. The websites should not pre-check the box as the assent from the user must come actively. 
  2. Screen Design of the terms and condition: It is best practice to keep the layout of the screen before designing a Click Wrap Contract :
  • Simple and uncluttered.
  • The entire screen shall be seen at one time.
  • Use language which is easily understandable by the user.
  • Never use a contrasting color.
  1. Give reasonable notice before termination of services: The user should be informed about the TOS in clear words like Terms and Conditions, Privacy Policy, User Contract must be written in a font that is understandable by the user. Clear notice of the Contract makes the Contract enforceable in a Court of law.
  2. Contracts should be easily understood by laymen: The websites or software providers should remember that not every person will understand the legal terms of the Contract. Once clickwrap Contracts need to be written in a way that someone without a background in privacy can read, comprehend, and give informed consent to. The site should clearly tell its users to read the TOS to its users.
  3. Revised Conditions should be rechecked: The TOS of the Clickwrap Contract if revised should be made to agree by the user again so that the user is aware of the new terms of services.
  4. Specific Consent should be highlighted from the rest of the documents: I think to remember the service provider is that if they ask for permission for things like using users personal information, use it for marketing purposes, in such cases the TOS for such should be distinguishable.
  5. Documentation: One of the most important parts of enforcing the Clickwrap Contract is managing the record as to when the consent was taken and on what version the consent was given. Unless we are unable to prove who accepted the Contracts and which version(s) of the Contract was accepted, then the Clickwrap Contract is not likely to be enforceable. 

Conclusion

The legal validity of Clickwrap Contracts can be seen worldwide and countries like the United States, United Kingdom, and countries in Europe have statutes specifically dealing with them but its legal validity is yet to be discussed in the Indian context. With the growing use of such Contracts online, Indian laws have fallen short in governing these Contracts. Inclusion of these Contracts in our Present Information Technology act or introducing appropriate statutes related to these online software contracts will be helpful for online users. A statutory sanction not only makes it valid but also avoids exploitation that in this case would unconscionable bargain power (contracts of adhesion) by the service provider.

Contracts like Clickwrap, Shrinkwrap, and Browsewrap are the future of the digital contracts but amongst them, Clickwrap Contracts are the best as these contracts ask for the active consent of the user whereas in other contracts the implied use of a website or software is considered valid consent. At present the internet is seeing increasing use of Clickwrap Contracts, it is better to use such kinds of contracts with their best practices so that these contracts can be enforced in court. 

References

  1. https://ironcladapp.com/journal/contract-management/6-components-of-clickwrap-enforceability/
  2. https://www.upcounsel.com/clickwrap
  3. http://www.internetlibrary.com/cases/lib_case21.cfm
  4. https://indiankanoon.org/doc/115941294/
  5. https://uk.practicallaw.thomsonreuters.com/

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