Did you know that how you present your terms and conditions to your clients and customers online can have a significant impact on whether or not they have actually accepted and agreed to those T&Cs? Simply placing them on your website may not be enough.
There has been much debate seen in the courts concerning how a person or a corporation can agree to the terms and conditions of a contract electronically. An ‘electronic contract’ refers to any contract completed through any form of electronic communications, for example, email, SMS, webpages, social media, facsimile, etc.
Using these forms of electronic communication, there are four primary types of ‘electronic contracts’, and these are as follows:
- An “email contract” which is an agreement formed by an exchange of emails. These email contracts are often seen in negotiating commercial agreements, and can be a combination of written and verbal communications, which makes the contract both written and partly oral.
- A “clickwrap” contract where a person indicates their agreement to be bound by the terms and conditions of the contract where the terms and conditions are displayed, or a person has to scroll through them to reveal the acceptance button. You would have come across a clickwrap agreement. It is that checkbox style tool where you have to click the “I agree” or “I accept” button. This is the most common style of electronic contract acceptance seen in the online marketplace.
- A “sign-in wrap” is a contract formed when a person is required to sign into an online service or create an account with a merchant. This generally only occurs when the person signs in for the first time. It is a hybrid “clickwrap” style contract, but instead of clicking accept, the deal is formed when the person continues to sign in and, by doing so, agrees with the terms and conditions. Sign-in wrap agreements are standard in the software application space; and
- A “browsewrap” contract adopts the “clickwrap” style as well. Instead of displaying the terms and conditions (or having the person scroll through them), the terms and conditions are hyperlinked or otherwise accessible from the webpage. A browsewrap agreement usually only mentions the terms and conditions and seeks the person to accept them (assuming the person has actually accessed the link to an additional pop up or page and read them).
Enforceable or not?
- Email Contract – yes, but any oral component of such agreements can be difficult to prove. So, it’s best to formalise all contracts into a written agreement signed correctly by all parties, or limit the contract to what is contained in the email exchange only.
- Clickwrap – yes, they are currently the most reliable form of online acceptance. You should keep in mind a couple of things:
- Further terms and conditions cannot be added once the person clicks “I Agree” unless you have provided for a mechanism within your terms and conditions which allows for this without notice to the person (a risk in any case).
- Unusual or significant terms, particularly regarding hidden fees or refund policies, should be brought to the attention of the customer, or enforcing those provisions may be challenging.[1]
- Customers should have a reasonable time frame to read the terms and conditions.
- Sign-in Wrap – yes, but to a lesser degree. It is essential that businesses using ‘sign in wrap’ are actively displaying their terms and conditions and ensuring that these T&Cs are adequately worded to allow for this ‘passive’ style of acceptance.
- Browsewrap – not recommended and challenging to enforce.
Takeaways for your business
Terms and conditions are best presented online or on electronic devices using a clickwrap style approach with a scroll feature (i.e. the agreement which requires active scrolling and review of the T&Cs before a person can accept).
As a rule of thumb, the higher the interaction a person has with the terms and conditions, then the higher the likelihood that it will be legally enforceable. However, there are many other factors to consider when it comes to your terms and conditions, such as:
- making sure there are no unfair contract terms
- complying with the Australian Consumer Laws
- setting your jurisdiction for any legal action in your preferred state, and
- ensuring that they are written in plain English.
It is crucial that you consider using clickwrap and drafting or reviewing your terms and conditions to ensure that they are transparent, compliant and correctly tailored to your business.
As always, the dollars or risks involved in the transaction should influence which method is used.
If you have questions regarding terms and conditions or require yours to be reviewed, get in touch with the experienced Bolter squad.
Note: [1]eBay International AG v Creative Festival Industries Pty Ltd [2006] FCA 1768 [52].