Enforceability of E-commerce Contracts

When enforcing rights and obligations under a sales contract, the seller generally looks to the terms and conditions set forth in the written contract the parties signed.  But when companies sell products and services online to remote customers, the seller must often rely on terms and conditions that are listed only on the website.  This makes it critically important that such online terms and conditions be presented and evidenced in such a way that those terms and conditions are enforceable by the seller.  Several recent court cases have demonstrated the importance of giving adequate notice and documenting the customer’s acceptance of the terms and conditions.

E-Commerce contracts come in multiple variations including clickwraps, scrollwraps, browsewraps, sign-in wraps and more.  Each of these variations has its pros and cons.  Clickwraps are E-commerce conecommercetracts where the customer is required to click-on an “I AGREE” box after being presented the terms and conditions.  Scrollwraps are where customers are required to scroll through the terms and conditions and then click on an ACCEPT box before completing the transaction.  Browsewraps are E-commerce contracts where the customer agrees to the terms and conditions, sight unseen, simply by using the website.  Sign-in wraps are E-commerce contracts where the customer is informed that if the customer signs-in and proceeds with the next step in the process, the customer is subject to the terms and conditions which are available for review by hyperlink.

In recent cases, the courts have focused on whether the E-commerce customer had actual or constructive knowledge of the terms and conditions, or had in some manner affirmatively acknowledged or assented to the terms and conditions.

In one of the more recent cases, Berkson v. Gogo LLC, the court laid out the following four part inquiry to determine whether to enforce terms and conditions in an E-commerce contract against the customer: (1) is there substantial evidence the customer was aware of the terms and conditions based on a reasonable person standard; (2) whether the website design and content made the terms and conditions readily and obviously available; (3) whether the importance of the terms and conditions were obscured or minimized by the physical manifestation of assent; and (4) whether the site clearly drew the customers attention to the material terms and conditions that would alter what a reasonable customer would otherwise understand to be his or her default rights.

Browsewraps do not require the customer to click an “I AGREE” box, but instead rely on the customer’s use of the website and availability of a hyperlink containing the terms and conditions as constructive notice of such terms and conditions.  Enforcement of Browsewrap type E-commerce contracts against the customer appears problematic.   We believe that the courts will find that use of a Browsewrap type contract does not give customers adequate notice of the terms and conditions, and does not adequately demonstrate customer assent to such terms and conditions.

The Clickwrap contracts do require the customer to take an affirmative act by clicking on an “I AGREE” box after being presented with the terms and conditions.  We believe that the courts will generally enforce a clickwrap type contract against the customer.  The courts appear likely to find that the customer’s act of clicking on the I AGREE box is an adequate indication of the customer’s knowledge of, and consent to, the terms and conditions.

The Scrollwrap contracts also require the customer to take an affirmative act by clicking on an “ACCEPT” box after being required to scroll through the terms and conditions.  We believe that the courts will generally enforce a Scrollwrap type contract against the customer.  The courts will likely find that the customer’s act of clicking on the ACCEPT box after scrolling through the terms and conditions as an adequate indication of the customer’s knowledge of, and consent to, the terms and conditions.

The Sign-in wrap contracts, like Clickwrap and Scrollwrap contracts, require the customer to take an affirmative act.  But unlike the Clickwrap and Scrollwrap contracts, the customers are not presented with, or required to scroll through, the terms and conditions.  Rather the customer is informed that if the customer signs-in to the website, the customer will be subject to certain terms and conditions which are not presented but are available for review by hyperlink.  Enforcement of this type of E-commerce contract against the customer seems questionable.  The customer is not presented with the terms and conditions and is not clicking on an I AGREE or ACCEPT box to expressly indicate the customer assents to such terms and conditions.  Rather the customer is clicking on the SIGN-IN box to continue with the on-line transaction process.

The guidance in the recent court cases is not wholly consistent.  But the safest approach at this point, based on the most recent cases, appears to be to use a Scrollwrap type contract that requires the customer to click on the ACCEPT box after having been forced to scroll through the terms and conditions.  For more information or questions regarding enforceability of E-Commerce contracts, please contact Jeff Senney or Jessica Brockman at 937-223-1130 or JSenney@pselaw.com or JBrockman@pselaw.com.

AUTHOR: Jeff Senney
jsenney@pselaw.com