Click Here If You Agree
Frederic M. Wilf
Online users do not love online agreements. Some users seem annoyed by them. Some users are hostile about them. So, why should a company interrupt a potential sale with a bunch of legal mumbo jumbo?
The answer is simple. Without a binding agreement, the law may imply default contractual terms whenever the parties don’t sign a contract. Any business that sells hard goods in the United States will be bound by provisions implied by the law, such as the implied warranties of the Uniform Commercial Code,1 unless the business and the customer have signed an agreement and expressly disclaim some or all of the implied provisions.2 So, a business may want a signed agreement to avoid any implied contractual provisions. Any business that is willing to live with the implied contractual provisions may decide not to use an online agreement.
An online agreement is mostly (but not entirely) as enforceable in most circumstances as an ink signature on hard copy. Congress passed the Electronic Signatures in Global and National Commerce Act (“E-SIGN”)3 and most states have passed the Uniform Electronic Transactions Act (“UETA”)4 to ensure that online agreements are enforceable (or at least, not denied enforceability)5 through the use of an online button that says “I Agree” or words or actions of similar import. E-SIGN and UETA each contain a number of exclusions, so it is important to review these statutes before drafting any online agreement.
There are a number of practices that will increase the likelihood that a court will enforce an online agreement.6
1. Active is better than passive.
Some online agreements require the user to click on a button or do some action, while other online agreements state that visiting or reviewing the web site binds the user. E-SIGN defines an electronic signature as a “sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”7 By contrast, UETA says that an “electronic signature is attributable to a person if it was the act of the person.”8 The better approach is to require each user to take some action to bind the user to the terms of the online agreement.
2. The terms should be accessible and legible to the user at all relevant times.
The user should have access to the terms of the agreement before, during and after agreeing to the terms. If the user cannot read the terms before agreeing, or while considering agreeing, or after being bound, the user may not know what she is getting into, or what she has agreed to, and may not be able to comply with the terms. In each case, the terms must be legible as extra small type continues to be a bad idea. The terms of the agreement will also need to comply with all laws and regulations that require a particular presentation or text, even if those laws and regulations were developed prior to the development of the Internet. Finally, the vendor should make it easy for the user to print or download the terms at any time.
3. Connect the dots.
Make sure the user associates the terms with the click. If the terms of the agreement are difficult to find, or are not clearly connected to the action of agreeing to the terms, then the user cannot be expected to be bound to the terms. In a decision written by a then-little-known appellate judge named Sonia Sotomayor, the Second Circuit Court of Appeals held that Netscape could not enforce an online agreement where a link to the terms was on one part of a web page, while the click that purportedly bound the user was on another part of the same web page.9 Either place the button or other action next to or in a box with the terms, or put a link to the terms very close to the button or other action.
4. “Yes” means yes, and “no” means no.
In addition to agreeing to the terms, the user should have the right to refuse the terms. Not every action by the user should be an assent, or else a court may reasonably assume that the user’s assent does not necessarily reflect the user’s choice. Moreover, if the user refuses to assent, then the user should be taken to another web page where the user’s refusal is confirmed. There’s nothing wrong with giving the user another opportunity to agree after refusing, but in any event the user should not get access to the goods or services, or otherwise be treated as agreeing to the terms of the agreement, if the user refuses the terms. Otherwise, why should the agreement bind any users?
5. Confirm the agreement.
Once the user does agree to terms, provide feedback by confirming that agreement has been reached and clearly stating the effect of the agreement. Where money changes hands, provide a receipt (or multiple receipts) that may be saved or printed.
6. Keep good records and an audit trail of the transaction, including available metadata.
The vendor should store all relevant information about the transaction, including the date and time, which version of the agreement was agreed to, and any available information that may help prove that the user was the contracting party, including metadata such as the user’s Internet Protocol (“IP”) address.
7. Be careful about changing the agreement.
Many vendor agreements permit unilateral modification of the terms of the agreement, such as by the vendor posting a new copy of the agreement to the vendor’s web site. Even if the user initially agreed to unilateral modification when the agreement was first signed, the user may later sue to prevent enforcement of subsequently-modified terms.10 A better approach is to notify each user of changes in the agreement and to clearly state that continued use of the service will constitute acceptance of the modified agreement. The best, approach, however, is to require the user to take some action to bind the user to the modified agreement, while suspending services to any user who fails to agree to the revised terms.
8. Remember that all offline laws and regulations probably apply to online agreements and business relationships.
Some vendors make the mistake of thinking that online agreements are not subject to laws and regulations originally designed for the offline world. For example, consumer protection laws tend to apply to consumer transactions both online and offline.
While online agreements do present particular challenges, careful drafting and the use of best practices will substantially increase the likelihood of enforceability.
Fred Wilf is of counsel in the Business and Finance Practice at Morgan, Lewis & Bockius LLP. Fred may be reached online at firstname.lastname@example.org. Copyright 2010. Morgan, Lewis & Bockius LLP. All Rights Reserved. This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.
1. See, e.g., Uniform Commercial Code (“UCC”) §§ 2-314, 2-315; NJSA §§ 12A:2-314, 12A:2-315.
2. UCC § 2-316; NJSA § 12A:2-316.
3. 15 U.S.C. § 7001 et seq.
4. See, e.g., NJSA § 12A:1-101 et seq.
5. E-SIGN, 15 U.S.C. § 7001(a).
6. See, generally, C. Kunz, M. Del Duca, H. Thayer & J. Debrow, Click-Through Agreements: Strategies for Avoiding Disputes on Validity of Assents, 57 Business Lawyer 401 (2001)
7. 15 U.S.C. § 7006(5).
8. NJSA 12A:12-9(a) (emphasis added).
9. Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002).
10. See, e.g., Douglas v. Talk America Inc., No. 06-75424 (9th Cir. June 7, 2007) (per curiam).