Originally published in the International IT and Outsourcing Newsletter.
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The use of agreements online has both driven and been driven by the enormous expansion of the Internet as an engine of commerce. In fact, if your business sells products or services online or has a public Web site, online agreements undoubtedly have commercial importance to your company. Yet the law concerning online contracting is still relatively nascent, with only a few jurisdictions having weighed in on precisely what contracting practices must be adhered to online to effect an enforceable online agreement.
Two ubiquitous types of online agreements are "click wraps" and "browse wraps." The distinguishing feature of a click-wrap agreement, also known as a "click-through" or "click-on" agreement, is that an Internet user must agree to specific terms before obtaining an associated product or service. Typically, the user must indicate assent to the terms by clicking on a button or icon labeled "I Agree" or "I Accept." In contrast, a browse-wrap or "click-free" agreement does not require a user to click a button or icon to indicate acceptance before the user accesses a product or service. Browse wraps are typically used in situations where commercial considerations make a "click" requirement undesirable. For example, the terms of use of many Web sites are provided in browse wrap instead of click wrap format in order to avoid discouraging users from visiting the sites and using the products and services provided there.
Despite the relative paucity of precedent on the topic, U.S. courts have made clear that two fundamental principles of contract law long applied to traditional agreements also drive evaluations of the enforceability of online agreements:
(1) The notice requirement (i.e., users must be given clear and conspicuous notice of the terms of a proposed agreement and how they may accept or reject those terms).
(2) The assent requirement (i.e., users must manifest their assent to those terms in a clear and unambiguous manner).1
This article provides several practical guidelines to improve the ability of click-wrap and browse-wrap agreements to withstand enforceability challenges. The following guidelines are based not only on the U.S. click-wrap and browse-wrap cases to date, but also on U.S. legal authorities such as the Uniform Electronic Transactions Act (UETA)2 and Uniform Computer Information Transactions Act (UCITA)3 model statutes, and the body of law that has evolved around "shrink-wrap" licenses, which share a close kinship to click wraps and browse wraps.4
It should be noted that the guidelines are based on trends demonstrated by U.S. legal precedents (and non-U.S. cases interpreting U.S. law), and do not address the law of any U.S. jurisdiction in particular. In addition, as the focus of the guidelines is the formation of online agreements under U.S. law, the guidelines may not be applicable to online contracting under international laws or the laws of countries other than the U.S. For example, Web sites which are directed at users in the European Union also need to comply with the provisions of the E.U. E-Commerce Directive (Directive 2000/31/EC) which require specific information to be provided relating to the contract process.
Make the Terms "Hard to Miss"
5The click-wrap or browse-wrap agreement terms must be conspicuous and readily accessible to users prior to acceptance. Perhaps the ideal strategy from a legal perspective would be to display the full text of the terms at the point of purchase such that goods or services cannot be accessed or ordered without confronting the terms.6 But the high degree of intrusiveness of this approach may render it impractical in many instances from a business perspective. Instead, the use of hyperlinks,7 or a conspicuous notice referring to the terms,8 is usually a more realistic alternative.Where links are used, the links should be formatted in the manner in which links are usually presented online (bold/blue/underline formatting or other similarly conspicuous formatting).9 The links also should be clearly marked as leading to the agreement terms, such as by activating the phrase "Click to Read the Agreement Terms" or a similarly clear phrase instructing the user how to obtain the terms of the agreement. In the case of a browse-wrap agreement, the noticeability and purpose of the link or notice is particularly important because users will not be required to click a button indicating their acceptance to its terms. Accordingly, the linked phrase or notice should be all the more clear and obvious, e.g., "BY USING [THE PRODUCT OR SERVICE], YOU AGREE TO ALL THE TERMS OF OUR USER AGREEMENT. CLICK HERE TO REVIEW THIS AGREEMENT. IF YOU DISAGREE WITH ANY OF THE TERMS, DO NOT USE [THE PRODUCT OR SERVICE]." Where links are used, care should be taken to ensure that clicking the applicable link leads directly and promptly—with a single click—to the agreement terms.10 In addition, all links should be checked regularly to ensure they are operational.
The text of the agreement itself should be as user-friendly as possible. The formatting (including font, type size, color, or other formatting features) should not render the agreement difficult to read, and the organization should be logical and aligned with any applicable contracting norms.11 A conservative approach to organization would include ensuring that provisions bearing on liability and the enforcement of rights, such as disclaimers, limitations of liability and choice of venue provisions, are given their own headings or sections.12 Emphasis (such as all-capitals text) should be used sparingly to ensure its efficacy. Emphasis is appropriate, for example, (a) to call attention to notices intended to satisfy the notice and assent requirements (see below) and (b) when dictated by applicable law or established industry practices.13
Make Terms Available before Delivering or Requiring Payment from Users
Online agreement terms should be made available to users (as per guideline (1), above) before providing users with the product or service, or obligating them to pay for it.14
Take Steps to Encourage Actual Review of the Terms by Users
Many cases point out that it is not necessary to demonstrate the actual review of online agreement terms by a user in order for the user to be bound.15 But evidence of actual review can be compelling, and, in the case of browse wrap agreements, may make all the difference.16
For click-wrap agreements, the "I Accept" or similar buttons or icons should be positioned at the end of the agreement terms so that users will be forced to pass the terms in order to accept (or reject) them.
For browse wraps, the agreement terms (or prominent hyperlinks to them, as per guideline (1), above) should be positioned as close as possible to each point of access to the applicable product or service (wherever the product or service may be obtained, or where instructions are provided for doing so).17 In addition, especially for browse wraps, it may be advisable to have a pop-up window containing the agreement terms appear on the user’s screen when the user requests an applicable product or service.18 This would require the user to close the pop-up window containing the terms before continuing, thus lending to the argument that the user must have recognized the content of the window and therefore was on notice of the terms.
For both click wraps and browse wraps, a scrollable window may be used to display the agreement terms to users,19 but using a full-screen scroll window is less likely to be challenged than a smaller scroll window and may further encourage actual review of the agreement terms. The scroll function may also be modified on the window containing the terms so that users must scroll at a slower-than-normal rate or page through the terms of the agreement by clicking a "next" or similar button at the end of each page so that the user is required to travel to the bottom of each page and click in order to move on to the succeeding page (and preventing the user from jumping directly to that "I Accept" button).
Do Not Limit Users’ Time for Reviewing the Terms
Although there are no precedents addressing online agreement terms that could be viewed only for a limited period of time, several courts have factored into their enforceability analysis a user’s ability to review an online agreement without time restrictions.20 Accordingly, you should take care not to impose restrictions on the time users have to review proposed online agreement terms before accepting or rejecting them.
5. Take Steps to Spell Out What Actions Users Must Take to Agree to the Terms, and What the Effect of Such Actions Will Be
For click-wrap agreements, use both acceptance and rejection buttons. The buttons should make perfectly clear the intent they represent—use "I Accept" or "I Agree" for the acceptance button and "I Don’t Agree" or "I Disagree" for the rejection button.21 The rejection button (not the acceptance button) should be made the default, such that users pressing the carriage return/enter button on their computer instead of clicking one of the acceptance or rejection buttons would be interpreted as rejecting the terms.22 In addition, a double-click (as opposed to a single-click) on the acceptance button should be required for acceptance. Although the use of single-click acceptance and rejection buttons apparently has not been challenged, requiring users to double-click on the acceptance button to accept the agreement terms is a good way to decrease the chances of errant single-clicks.
For both click wraps and browse wraps, include a clear and conspicuous statement in the agreement (preferably both immediately proximate to the acceptance/rejection buttons and in the introduction to the agreement) stating in prose what action the user must take to accept or reject the terms, and what the effect of such acceptance or rejection will be.23 For example, in the case of a click-wrap agreement, such a statement might read as follows:
"BY CLICKING THE ‘I ACCEPT’ BUTTON, YOU ACCEPT, WITHOUT LIMITATION OR QUALIFICATION, ALL OF THE TERMS OF THIS AGREEMENT. TO REJECT THESE TERMS, CLICK "I DON’T AGREE." YOU WILL NOT BE GIVEN ACCESS TO [THE PRODUCT OR SERVICE] UNLESS YOU ACCEPT THE TERMS OF THIS AGREEMENT."24
In the case of a browse-wrap agreement, as noted above, such a statement might read as follows:
"BY USING [THE PRODUCT OR SERVICE], YOU AGREE TO ALL THE TERMS OF OUR USER AGREEMENT. CLICK HERE TO REVIEW THIS AGREEMENT. IF YOU DISAGREE WITH ANY OF THE TERMS, DO NOT USE [THE PRODUCT OR SERVICE]."25
Where practical for click-wrap agreements, once the user has clicked on the appropriate icon accepting the agreement terms, consider providing the user with a pop-up window or other screen requesting confirmation (or disavowal) of the user’s choice (such as the type of purchase order confirmation used by many online retailers).26 Although not practical in all situations, the use of such a confirmation would further cement the argument that notice and assent were given.
6. Permit Users’ Downloading and Printing of Terms
Do not inhibit (either knowingly or inadvertently) a user’s ability to download and/or print the terms of the agreement.27 In fact, it is advisable to enable users to do so using the most widely available technology possible (for example, using a right mouse click to select "print" option).287. Keep Records of User Acceptances
Keep records of user acceptances (including the date and time) as evidence that user assent has been obtained. Given that online agreements often are adjusted over time to reflect the changing needs of the business, keep accurate records of the form of the agreement in use at the time a particular user acceptance is received.
Where a browse-wrap agreement format is used that provides access to the terms through a link or on a discrete page of the Web site, consider maintaining a log of all users that access the link or page. Such a log would be useful for evidentiary purposes in the event users claim they were not aware of, and never accessed, the browse wrap terms.
8. Make the Terms of the Agreement Fair
It should be appreciated that, like other contracts, an online agreement will not be enforced if it is found to be unconscionable.29 This generally will be determined by weighing the fairness of the terms of the agreement in light of the fairness of the contracting process.30 As a result, that click wraps and browse wraps are by their nature offered to users on a take-it-or- leave-it basis magnifies the importance of ensuring the terms they contain are reasonable in light of the commercial circumstances. This is particularly true where the intended users are individual consumers.31
9. Ensure Other Company Statements are Not Inconsistent with the Terms
Take steps to avoid inconsistencies between the provisions of your online agreements and statements made elsewhere on your Web site, or even in other published corporate materials. Such inconsistencies may create disputes, and could jeopardize the enforceability of the online agreement.32
10. For Important Rights, Do Not Use a Browse Wrap
Browse wrap agreements are subject to the same contractual principles as click wrap or offline agreements. But on a practical level, these principles are more difficult to satisfy when using browse wraps. In addition, very few judicial decisions have been handed down thus far in the U.S. concerning the enforceability of browse wraps, and the existing cases were decided in only two jurisdictions (New York and California). Only one such decision holds a browse wrap to be enforceable, although a recent decision indicates that the browse wrap at issue in that later case also could be held enforceable.33 Two other decisions hold the respective agreements unenforceable, and a fifth case did not hold one way or the other, although the court expressed reservations concerning the agreement’s enforceability.34 Using browse wrap agreements is therefore risky, and at a minimum invites disputes as to enforceability. As a result, where important rights are at issue (e.g., access to your company’s trade secrets or other core intellectual property), alternatives to a browse wrap format should be pursued.
11. Re-Apply Guidelines (1)–(10) When the Online Agreement Terms Change
Online agreements may need to be updated from time to time to meet business needs. As with the implementation of the original agreement, care must be taken to ensure that the legal requirements of notice and assent are met with respect to the changed terms. For click wrap agreements, one way to accomplish this is to require users again to click-through the updated terms and accept them. For browse wraps, a hard-to-miss notice should be used to apprise users that the terms have changed and direct their attention to the updated agreement (preferably drawing attention to the changes). In the event of any update to online terms, the principles of guidelines (1)–(10) above should be applied.
Brian R. Suffredini (New York)
35Endnotes
1 See, e.g., Forrest v. Verizon Comms., Inc., 805 A.2d 1007, 1011 (D.C. App. 2002) ("A contract is no less a contract simply because it is entered into via a computer"); Specht, et al. v. Netscape Comms. Corp., et al., 150 F. Supp.2d 585, 587 (S.D.N.Y. 2001), aff ’d 306 F.3d 17, 25 (2d Cir. 2002) ("Promises become binding when there is a meeting of the minds and consideration is exchanged. So it was at King’s Bench in common law England; so it was under the common law in the American colonies; so it was through more than two centuries of jurisprudence in this country; and so it is today."). Although the consideration requirement also applies to online agreements, it has not frequently been a disputed issue in cases to date. But see Specht, 150 F. Supp.2d at 591 n.8 ("The apparent failure of consideration on Plaintiff’s side—put simply, Plaintiff’s obtaining SmartDownload without giving anything in return—might support a finding that no contract exists. However, because I rely on other grounds to find that the parties did not enter into a contract…. I need not decide this issue.").
2 As of early 2003, 41 states had adopted versions of UETA and several others were considering it for adoption.
3 As of early 2003, only 2 states (Maryland and Virginia) had adopted versions of UCITA, although several others were considering it for adoption.
4 The shrink wrap agreement "gets its name from the fact that retail software packages are covered in plastic or cellophane ‘shrinkwrap,’" ProCD, Inc. v. Zeidenberg, et al., 86 F.3d 1447, 1449 (7th Cir. 1996), and accompanies computer software or hardware but generally is not viewable by the customer at the point of sale. Shrink wrap agreements have been the subject of considerable litigation, judicial decisions from which have led the way in deciding controversies involving the enforceability of click wrap and browse wrap agreements.
5 See Ticketmaster Corp. v. Tickets.com, Inc., 2000 U.S. Dist. LEXIS 4553, at *8 (C.D. Ca. 2000) ("Ticketmaster II") (holding browse wrap terms positioned below the fold at the bottom of the home page of Web site not enforceable, and distinguishing shrink wrap licenses, in which terms are "open and obvious and in fact hard to miss"). See also Ticketmaster Corp. v. Tickets.com, Inc., 2003 WL 21406289, at *2 (C.D. Ca-2003) ("Ticketmaster II") (holding that contract could have been formed where notice of browse wrap terms was placed in prominent position above the fold on the home page of Web site where it admittedly "could not be missed").
6 See In re RealNetworks, Inc. Privacy Litigation, 2000 U.S. Dist. LEXIS 6584, at *2, *15 (N.D. Ill. 2000) (holding that where click wrap terms appeared on the user’s screen prior to the software installation process, the click wrap was not procedurally unconscionable for failure to provide fair notice of its contents); ProCD, 86 F.3d at 1452 (holding shrink wrap agreement enforceable where agreement terms were "splashed" on the computer screen during the installation process); Register.com, Inc. v. Verio, Inc., 126 F. Supp.2d 238, 245, 246 (S.D.N.Y. 2000) (holding browse wrap agreement enforceable where terms were located on the home page of the service provider’s Web site). See also UETA at § 14(2) cmt. 2; UCITA at § 211(1)(A-B) & cmt. 3.
7 Courts have upheld the enforceability of online agreements that used hyperlinks to present the agreement terms. See, e.g., DeJohn v. The .TV Corp. Int’l, et al., 2003 WL 356181, at *2, *4 (Jan. 16, 2003); Groff v. America Online, Inc., 1998 WL307001, at *5 (R.I. Super. 1998). See also Pollstar v. Gigmania Ltd., 170 F. Supp.2d 974, 982 (E.D. Ca. 2000) (leaving open possibility that sufficient notice of browse wrap terms may be supplied to users via hyperlinks on the appropriate page or pages of the site, if such links are sufficiently clear and conspicuous). See also UCITA § 211(1)(A-B) & cmt. 3 (approving of links drawing attention to and permitting users to view agreement terms).
8 See endnote 5, above.
9 Cf. Pollstar, 170 F. Supp.2d at 981 (court expressed reservations concerning enforceability where notice linking to agreement was provided in gray-on-gray text which was not clearly hyperlinked, and other homepage text (not hyperlinked) was in small blue font).
10 A recent Massachusetts case provides an example of the possible consequences of not doing so. Williams, et al. v. America Online, Inc., 2001 Mass. Super. LEXIS 11, at *8 (Mass. Super. Ct. 2001) (holding that requiring users to click "read now" on two successive Web pages to obtain a copy of the license terms, where the "I Agree" and "OK, I Agree" options on those pages were set as the default response, was insufficient to meet the notice requirement). Compare UCITA § 112 cmt. 5 (illustration 1) (indicating that Groff-type format would provide sufficient notice, provided that the link is formatted as a link and "promptly displays" the agreement terms).
11 See Forrest, 805 A.2d at 1010-11 (2002) (holding that forum selection clause challenged (unsuccessfully) on grounds that it was located in "General Provisions" section of agreement instead of "Limitations of Liability and Remedies" section); RealNetworks, 2000 U.S. Dist. LEXIS 6584, at *15-17 (plaintiff argued, unsuccessfully, that RealNetworks’ click wrap terms were "buried in a maze of fine print"); Caspi, et al. v. The Microsoft Network, L.L.C., et al., 732 A.2d 528, 532 (N.J. Super. Ct. App. Div. 1999), cert. denied, 743 A.2d 851 (N.J. 1999) (plaintiff unsuccessfully challenged forum selection clause for its size and placement in the last paragraph of the document).
12 Although unsuccessful, several challenges have been made to online agreement provisions on the grounds that they were buried in the agreement. Forrest, 805 A.2d at 1010-11; RealNetworks, 2000 U.S. Dist. LEXIS 6584, at *15-*17; Caspi, 732 A.2d at 532.
13 See, e.g., UCC § 2-316(2) (disclaimers of implied warranty of merchantability must be "conspicuous"); Cal. Bus. & Prof. Code § 17538 (applicable to information concerning return and refund policies and other consumer information).
14 See Williams, 2001 Mass. Super. LEXIS 11, at *6-*7 (denying online service provider’s motion to enforce venue provision of click wrap agreement where software download and damage to users’ computers occurred before users assented to the online agreement terms); UCITA § 211(1).
15 See Specht, 306 F.3d at 30, 31; Caspi, 732 A.2d at 532; Groff, 1998 WL 307001, at *5; Rudder, et al. v. Microsoft Corp., 1999 A.C.W.S.J. LEXIS 51625, at *4 (Ont. Sup. Ct. J. 1999). See also UCITA § 211 cmt. 3 ("It is sufficient that the terms be available upon request.").
16 Ticketmaster II, at *2 (denying defendant’s motion for summary judgment of unenforceability where evidence showed that defendant "was fully familiar with the conditions" of the browse wrap).
17 See UCITA § 211(1).
18 See Specht, 150 F. Supp.2d at 594 (approving, in dicta, of Netscape click wrap agreements where "when a user attempts to obtain Netscape’s Communicator or Navigator, a Web page appears containing the full text of the Communicator/Navigator license agreement").
19 See Rudder, et al. v. Microsoft Corp., 1999 A.C.W.S.J. LEXIS 51625, at *9–*10 (Ont. Sup. Ct. J. 1999); Caspi, 732 A.2d at 530, 532.
20 See RealNetworks, 2000 U.S. Dist. LEXIS 6584, at *10; Caspi, 732 A.2d at 532.
21 Several courts have held enforceable click wrap agreements using the phrase "I Agree" on the acceptance button, paired with "I Don’t Agree" or "I Disagree" on the rejection button or icon. See Caspi, 732 A.2d at 530, 532 ("I Agree" block paired with an "I Don’t Agree" block); Groff, 1998 WL 307001, at*5 ("I agree" button paired with an "I disagree" button). Accord i.LAN Systems, 183 F. Supp.2d at 338 ("I agree" button and option to disagree); Rudder, 1999 A.C.W.S.J. LEXIS 51625, at *10 ("I Agree" button and an option to disagree).
22 See Williams, 2001 Mass. Super. LEXIS 11, at *7 (denying online service provider’s motion to dismiss and holding that plaintiffs could reasonably claim inadequate notice in part on grounds that the "Accept" button was set as the default response).
23 The user cannot assent to terms unless the service provider clearly communicates how to do so. Specht, et al. v. Netscape Comms. Corp., et al., 306 F.3d 17, 25 (2d Cir. 2002) ("a consumer’s clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assent to those terms").
24 See, e.g., Rudder, 1999 A.C.W.S.J. LEXIS 51625, at *10; i.LAN Systems, 183 F. Supp.2d at 334; UETA § 14(2).
25 See Register.com, 126 F. Supp.2d at 243, 248 (enforceable browse wrap agreement located on home page of Web site contained notice stating that "[b]y submitting this query [of the Register.com WHOIS database], you agree to abide by these terms").
26 See UCITA§ 112(d) & cmt. 5 (encouraging use of double assent procedures). See also Rudder, 1999 A.C.W.S.J. LEXIS 51625, at *10 (court found persuasive that users were presented with click wrap terms twice and were required to accept both times).
27 See UETA§ 8(c) (inhibiting the storage or print ability of the electronic record of the agreement by the user will render the electronic record unenforceable against the user); UCITA § 211(2) (user will be deemed to have had sufficient opportunity to review agreement terms, provided that service provider meets certain requirements including not taking affirmative acts to prevent printing or storage of the agreement terms for archival or review by the user).
28 See UETA (draft comment (3) to § 8) (it is the service provider’s obligation to ensure that the means provided for retention are compatible with the capabilities of the user’s systems.)
29 See Comb, et al. v. PayPal, Inc., 218 F. Supp.2d 1165, 1177 (N.D. Ca. 2002); i.LAN Systems, 183 F. Supp.2d at 338.
30 See, e.g., Comb, 218 F. Supp.2d at 1177.
31 See generally Goodman, Note: Honey, I Shrink-Wrapped the Consumer: The Shrink-Wrap Agreement as an Adhesion Contract, 21 Cardozo L. Rev. 319 (1999).
32 See Scott, et al. v. Bell Atlantic Corp. n/k/a Verizon Communications, Inc., et al., 282 A.D.2d 180, 181 (Sup. Ct. N.Y., App. Div. 2001) (click wrap agreement challenged based on statements made in the same Web site as the agreement contradicting the agreement’s warranty disclaimers).
33 See Register.com, 126 F. Supp.2d at 246, 248 (holding browse wrap enforceable); Ticketmaster II, at *2 (denying defendant’s motion for summary judgment of unenforceability).
34 See Specht, 306 F.3d at 30 (holding browse wrap agreement unenforceable); Tickets.com, 2000 U.S. Dist. LEXIS 4553, at *8 (same); Pollstar, 170 F. Supp.2d at 182 (denying defendant’s motion to dismiss, but expressing concerns regarding whether browse wrap at issue satisfied the notice requirement).
35 Special thanks to Nigel L. Howard and David M. Hudanish, Partners in the New York office, for their valuable insights and assistance in developing this article.
Please click here to view this and the following articles in full, originally published in Mayer Brown Rowe and Mawe LLP's International IT and Outsourcing Newsletter
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