Demystifying Clickwrap Agreements: Everything You Need to Know

Published On: 15th April, 2024

Authored By: Harsh Narayan Shrivastava
Chembur Karnataka College Of Law, University Of Mumbai

ABSTRACT:

This article aims to simplify the understanding of clickwrap agreements, which have become very common in the digital era, shaping numerous online interactions and transactions. It provides a detailed overview of what clickwrap agreements are, how they work, and what their legal implications are Starting with defining clickwrap agreements and their characteristics, the article explores their significance in online business, software licensing, and user agreements. It covers important aspects such as consent, visibility, and legal validity, citing relevant legal cases and recommended practices. Furthermore, it discusses the latest trends and challenges in enforcing clickwrap agreements, including concerns about accessibility, user understanding, and legal jurisdiction. By shedding light on the complexities of clickwrap agreements, the article helps readers navigate the digital world effectively, ensuring compliance with the law and safeguarding their rights.

INTRODUCTION:

A Clickwrap Agreement is a common type of digital contract that governs the interaction between a user and a company. Essentially, it requires users to click on a specified box or button before they can access content, make a purchase, or use services on a website. This click signifies the user’s agreement to the terms presented, similar to signing a traditional contract. The term “clickwrap” comes from the idea of “Shrink Wrap Agreements” often found with boxed software purchases. These agreements typically feature a notice indicating that by breaking the shrinkwrap seal, the user agrees to abide by the enclosed software terms[1]. In the digital world, instead of physically unwrapping, we click to agree. Clickwrap agreements give businesses a strong way to reduce risks while ensuring smooth transactions and good customer experiences. They make terms and conditions clear and transparent for using digital services or products. By asking users to actively agree to these terms with a simple click, companies create a legally binding agreement that safeguards their interests and defines users’ rights and duties. Essentially, clickwrap agreements are essential for building trust and making processes run smoothly in interactions in the digital landscape, ensuring that both businesses and users are informed and protected throughout their online engagements.

IMPORTANCE OF CLICKWRAP AGREEMENT:

Clickwrap contracts are essential for companies in today’s digital landscape. They are particularly noticeable in business-to-consumer (B2C) transactions, where high traffic to a particular product or website has prompted the development of clickwrap licenses. Compared to other types of contracts, clickwrap contracts are easier to implement and take less time. Some additional benefits of clickwrap contracts include

  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 between the Companies and third parties but also between employers and employees. [2]

ELEMENTS OF CLICKWRAP AGREEMENT:

Several key elements define the effectiveness and enforceability of clickwrap agreements:[3]

  1. Consent: Clickwrap agreements demand users to explicitly give their consent by clicking a confirmation button or checkbox. This guarantees that users recognize and agree to the terms outlined before they continue with their interaction or transaction. Obtaining explicit consent is vital for establishing a transparent understanding of the mutual obligations between the user and the company.
  2. Conspicuousness: The terms and conditions in clickwrap agreements need to be clearly visible and easily accessible to users before they agree to them. This ensures that the terms are presented in a way that users can easily see and understand them before giving their consent, making the terms conspicuous helps avoid misunderstandings and disagreements about the agreement’s terms.
  3. Enforceability: Clickwrap agreements are considered legally binding contracts, provided they meet certain criteria such as mutual assent, consideration, and capacity to contract. Mutual assent refers to both parties agreeing to the terms presented in the Consideration refers to the exchange of something of value, such as services or goods, as part of the agreement. Capacity to contract ensures that both parties have the legal capacity to enter into a contract, such as being of legal age and mentally competent.
  4. Accessibility: Clickwrap agreements need to be available to all users, including those with disabilities, to meet accessibility standards This involves offering alternative formats for users who might struggle with standard clickwrap interfaces. Ensuring accessibility encourages inclusivity and ensures that all users, regardless of their abilities, have equal access to digital services and products.

LEGALITY AND ENFORCEABILITY:

Although click-wrap agreements are widely used, concerns emerge regarding their legal validity and enforceability. Before delving into this matter, it’s important to understand the basics of contract law and what constitutes a valid, enforceable contract. Essentially, a contract is an agreement between two or more parties, such as individuals or organizations, aimed at establishing a legally binding relationship. Under English law, for a contract to be valid and enforceable the following six elements must exist:[4]

  • an intention to create legal relations
  • an offer and acceptance of that offer
  • valuable consideration
  • legal capacity to enter an agreement
  • genuine consent to the agreement
  • legality of objects

Therefore, the parties with an interest in the contract must intend to be bound by it and act in the absence of mistake, fraud, misrepresentation, or other vitiating factors. The contract can only bind the parties who agree to the terms, and not third parties. The parties to a contract must manifest their intention to create a legally binding contract by words or conduct and this is done through an offer and acceptance of that offer;” wherein one party proposes (offers) by words or conduct and the other agrees (accepts) by words or conduct”.[5] There must also be valuable consideration (usually the payment of money). For a contract to be valid, the parties involved must possess the legal capacity to enter into it. This means they cannot be minors, mentally incapacitated, or under the influence of intoxicants. Essentially, all parties must comprehend that they are entering into a contract and must be authorized to do so. Otherwise, the contract may be either void or, more commonly, voidable. Genuine consent is crucial; one party cannot coerce another into a contract. Regarding consent, all parties must fully understand what they are agreeing to. Additionally, the object of the contract must be legal, meaning it cannot involve criminal activities, torts, or anything against public policy. While specific laws impose requirements for contracts in certain situations like wills, consumer credit, guarantees, mortgages, and land transfers, there’s no fundamental rule mandating contracts to be in writing or signed. Although it’s a common business practice to have contracts in written and signed forms, they can also be formed orally or through actions. Contracts can also be created electronically via email, electronic data exchange, websites, or a combination of these methods. Importantly, there’s no inherent barrier to forming legally binding contracts over the Internet, and they are equally enforceable as traditional contracts. The same principles of contract law apply to online contracts as they do to any other form of contract. However, not all electronic contracts are automatically enforceable, and the enforceability of a click-wrap agreement doesn’t imply that all such agreements are enforceable. Contracting parties still need to consider ordinary contract law principles to determine the enforceability of specific agreements.

A review of literature and case law from the US, Canada, and Scotland regarding click-wrap agreements suggests that courts recognize online contracting. They uphold that a legally binding contract can be formed by simply clicking a mouse. Courts have ruled that clicking the “I Agree” icon is akin to signing a clickwrap agreement, binding the consumer to its terms and conditions even if they claim not to have seen or read them consciously. Therefore, clicking “I Agree” significantly supports the enforceability of the terms. Australian courts are likely to acknowledge that clicking on a web page constitutes valid acceptance, even without specific case law. However, after resolving click-wrap legality, ordinary contract law principles apply. Click-wrap agreements meeting basic contract principles are likely enforceable. Unlike traditional contracts where parties bargain over terms, click-wrap agreements are standard-form, take-it-or-leave-it deals. While valid, they might be unenforceable if terms are unfair or not brought to the buyer’s attention. Sellers must ensure terms are visible before acceptance, usually through a clicking requirement. With few court cases on click-wrap agreements, vendors must align them with traditional contract law for validity and enforceability. As noted by Walter Effros, Professor of Law, at Washington College of Law, American University, “Often lost in this blizzard of technological and marketing advice are the basic principles of commercial law and intellectual property law.”[6]

In India, Clickwrap Agreements fall under E-contracts governed by section 10A of the IT Act. This section ensures the enforceability of contracts conducted electronically, without prejudice against their digital nature. Websites often opt for Clickwrap agreements because they explicitly secure user consent, protecting the website from potential disputes about agreement validity. Users aren’t automatically bound by the agreement but are allowed to understand its terms before deciding to proceed. This reduces disputes over user consent. Clickwrap agreements are also seen as flexible, concise, and cost-effective compared to other contracts. However, enforcing these contracts in court can be complex due to issues like unfair terms, power imbalances, and one-sided conditions. Sometimes, users may agree with most terms but disagree with specific ones. In such cases, users have little bargaining power and limited ability to negotiate terms. Courts scrutinize these agreements and may deem them unenforceable if they’re unfair or biased. Indian and international courts recognize the feature of Clickwrap agreements requiring express consent. They show little sympathy for claims of user negligence, such as not reading the terms or understanding their legal implications. However, courts also uphold principles of public policy, the Doctrine of Unconscionability, and legally protected consumer and commercial rights.

BEST PRACTICES FOR CLICKWRAP AGREEMENT:

To maximize the effectiveness and compliance of clickwrap agreements, businesses should adhere to the following best practices:

  1. Clear and Concise Language: Using straightforward language and avoiding complex legal terms helps users understand clickwrap agreements better. By using clear language, businesses can improve user understanding and reduce confusion about their rights and
  2. Unambiguous Consent Mechanism: Creating a user-friendly interface for obtaining consent is crucial for making clickwrap agreements transparent and easy to understand. This might include using checkboxes or buttons with clear instructions on how users can give their consent. A straightforward consent process prevents misunderstandings and allows users to make informed decisions about agreeing to the terms.
  1. Regular Updates and Reviews: Regularly reviewing and updating clickwrap agreements is essential to keep pace with changes in laws, regulations, and industry As legal and industry standards evolve, businesses need to ensure that their agreements stay up-to-date and align with relevant requirements. Consistent updates and reviews help minimize legal risks and ensure that clickwrap agreements precisely reflect the terms and conditions of service.
  2. User Education: Businesses need to provide users with ample information and explanations about the terms of service and what they This empowers users to make informed decisions. Clear and accessible explanations of important terms and provisions within clickwrap agreements help users grasp their rights, obligations, and potential outcomes. Educating users promotes transparency and trust, improving the user experience and fostering positive relationships between businesses and users.

CASE LAWS:

1. LIC INDIA vs. CONSUMER EDUCATION AND RESEARCH CENTRE.

In this instance, the Supreme Court of India discussed its role in contracts where there is a significant power imbalance between the parties involved. The Court stated that when a contract is considered an adhesion contract, and when the parties don’t have equal bargaining power, the Court must examine it in light of Article 14 of the Constitution of India. This article ensures equal protection of the law for all citizens. The Supreme Court will intervene to invalidate unfair or unreasonable contracts under these circumstances.

2. DDIT(IT) MUMBAI GUJARAT PIPAVAV PORT ltd.

In this case, the Income-tax tribunal ruled that unconscionable or unreasonable agreements in mass contracts like Shrinkwrap and Clickwraps render them unenforceable, despite having the elements of a valid contract. In India, the Indian Contract Act of 1872 doesn’t explicitly cover E-contracts or Clickwrap Contracts. However, the Information Technology Act of 2000, particularly Section 10-A (effective from 27-11-2009), recognizes E-contracts. Additionally, the UNCITRAL Model on E-commerce validates electronic signatures but doesn’t encompass terms like “I agree” or “I accept”. Section 65-B of the Indian Evidence Act of 1872 outlines procedures for electronic documents but hasn’t been applied to Clickwrap Contracts. Consequently, Clickwrap Contracts aren’t considered ‘electronically signed’ in the Indian context. However, the Supreme Court hasn’t ruled Clickwrap Contracts invalid in India. Case laws indicate that Clickwrap contracts are enforceable in court, contingent upon whether consent was freely given. While Clickwrap contracts meeting the criteria of a valid contract can be enforced, they have more recognition internationally than in India.

3. FELDMAN vs. GOOGLE, Inc – 513 F. Supp. 2d 229 (E.D. Pa. 2007)

The court upheld the enforceability of the Clickwrap Contract, emphasizing the importance of “reasonable notice of the terms and manifested assent of the Contract.” Although the plaintiff claimed not to have entered into any contract with the defendant, the court ruled that purchasing the “Adwords” program necessitated agreeing to the terms and conditions of the Contract.

CONCLUSION:

The above examination serves as a cautionary reminder for those offering services online. Developers must ensure users explicitly consent to their terms, typically through an ‘I agree’ button. The contract’s nature should always be clear, with efforts made to ensure it’s not hidden. Users should have reasonable notice and a fair chance to review the terms. Terms must be drafted fairly, especially if the service is unique with no available substitutes. Clickwrap agreements are one of the most robust ways to obtain legal consent online, outperforming Browsewrap Agreements. However, there are many potential pitfalls to be mindful of when drafting a Clickwrap Agreement.

Reference(s):

[1] Murdoch University Electronic Journal Of Law.

[2] ADP vs. Lynch, Civ No 2:16-01053

[3] Indian Journal for Contemporary Legal and Social Issues.

[4] E-Business Law lecture notes, Professor Margaret Jackson, April 2001.

[5] Ferrera G.R., Lichtenstein S.D., Reder M.E.K., August R. and Schiano W.T., Cyberlaw: Text and Cases,2001, South-Western College Publishing.

[6] Effross, W.A., A Website Checklist: Consider ‘Click-Wrap’ Pages, Linkage Disclaimers, and Forum Policies, Legal Times 1 Mar 1999.

 

Leave a Comment

Your email address will not be published. Required fields are marked *