Click-Wrap Agreements

18th December 2015

Companies are increasingly looking for and turning to efficient methods of concluding contracts, whether it is the use of counterparts exchanged online or ‘click to accept’ boxes on their websites. Common law requires only four elements for a valid contract to be entered into: offer, acceptance, consideration and intention to create legal relations. As long as these elements are present, concluding contracts using digital signatures should be seen as a natural evolution and perfectly effective method of contracting in the digital age.

Click-wrap agreements

A click-wrap agreement or licence is a common type of online contract that confirms a user’s consent to a company’s terms and conditions when purchasing or using a product or service. Generally, such agreements require the end-user or customer to click an “ok” or “I agree” button or to tick a box on a pop-up window or dialog box to be bound by the terms and conditions. On the other hand, the customer can indicate a rejection of the terms by clicking on the “cancel” button or closing the relevant window, which will indicate his refusal to enter into a contract with the provider of the goods or services.

Benefits of using them

Contractual Certainty

Click-wrap agreements offer companies selling goods and/or services over the internet protections beyond those afforded by whatever intellectual property rights the company has in the goods or service. The agreements are commonly used when companies wish to ensure that their preferred position in respect of implied warranties, limitations on financial liability or the remedies available for breach of contract and/or governing law and jurisdiction prevail in their relationship with the other party.

Practicality and Convenience

It is impractical for many companies to have separately negotiated agreements with each customer. With the volume of traffic commercial websites hope to obtain, companies generally do not want the burden of separately coming to an agreement with every customer.

On the other hand, the vast majority of customers prefer convenience and ease when using the internet, not wanting or expecting to have to spend time and effort negotiating terms of use before purchasing or using goods and/or services.

Increased Bargaining Power

Using click-wrap agreements tends to discourage even large purchasers from insisting on individually negotiated terms and conditions. In practice, this has the effect of increasing the bargaining position of the company providing the goods and/or service vis-a-vis the customer.

Enforceability of click-wrap agreements

The key issue in the UK is the proper incorporation of the terms and conditions in the resulting contract. A company’s standard terms will only be incorporated into the contract, and, therefore, be legally binding on the customer, if the terms are brought to the customer’s attention before the contract is made. It is therefore imperative that the customer is able to access, read, scroll through and even download the terms before he or she agrees to the terms and conditions (i.e. by clicking an “I agree” button or ticking a box).

In a business-to-consumer context, a company should also be aware that if any of its terms and conditions contain any information that the company is required to provide consumers pre-contractually under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, those terms should be easily accessible through a prominent link from the company’s general web and product pages. In The consumer should not be made to go through the order process to access them.

Authority to contract

This potential problem generally appears in a business-to-business (B2B) context. In this scenario, the online merchant must be careful to ensure that the individual clicking to accept the terms and conditions has the authority to act on behalf of the company using or purchasing the goods and/or the service. This could be achieved by including a specific reference in bold warning the customer that if he or she is contracting on behalf of a company, by clicking the “I agree” button or ticking the relevant box, the customer is confirming that they are authorised by the company to enter into the relevant agreement.

Practical tips to rely on ‘click to accept’

• As stated above, the terms and conditions should be brought to the attention of the customer before the contract is concluded. The customer should be allowed a reasonable opportunity to review the terms and print or save a copy of the terms before the conclusion of the contract.
• Specifically in relation to jurisdiction clauses, the Court of Justice for the European Union has recently held [1] that, in a B2B agreement, a method that makes it possible to print and save the text of the terms and conditions before the conclusion of the contract will contain a valid jurisdiction clause.
• The customer should be allowed an opportunity to reject the terms at all times by selecting ‘Cancel’ or closing the relevant window. The option to decline the terms should be just as prominent as the option to confirm acceptance of the terms.
• The terms should be easily navigable and be in an easily readable typeface.
• Some form of positive acceptance of the terms should be included i.e. by clicking a button saying “I agree to the terms and conditions”. Such a declaration should not state that the customer has “read and understood” the terms and conditions pursuant to guidance issued by the Office of Fair Trading as, in practice, most customers do not read, and, therefore, rarely understand, the terms they are agreeing to.
• Important, unexpected, unusual or onerous terms should be clearly highlighted by the use of bold and/or capital letters. Typical such clauses include: limitations of liability; disclaimers; and indemnities.
• Where transactions have the potential to be international, consideration should be given as to whether the terms and conditions are applicable and enforceable in that country.
• The terms and conditions should be easy to locate online after the agreement has been concluded i.e. a link to the terms and conditions page should be available from the homepage.
• If you are using or are considering using click wrap agreements or other forms of digital signatures and want to ensure that your contracts are enforceable, please do not hesitate to contact the author.

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[1] El Majdoub v CarsOnTheWeb.Deutschland GmbH (C-322/14) EU:C:2015:334; [2015] I.L.Pr 32.